<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AIRONET WIRELESS COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C> <C>
DELAWARE 3577 34-1758180
(State or other (Primary Standard
jurisdiction of Industrial (I.R.S. Employer
incorporation or Classification Code
organization) Number) Identification No.)
</TABLE>
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3875 EMBASSY PARKWAY
AKRON, OH 44333
(330) 664-7900
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
------------------------
ROGER J. MURPHY, JR.
PRESIDENT & CHIEF EXECUTIVE OFFICER
3875 EMBASSY PARKWAY
AKRON, OH 44333
(330) 664-7900
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPIES TO:
<TABLE>
<S> <C>
JAY R. FAEGES, ESQ. TIMOTHY C. MAGUIRE, ESQ.
GOODMAN WEISS MILLER LLP TESTA, HURWITZ & THIBEAULT, LLP
100 ERIEVIEW PLAZA, 27TH FLOOR 125 HIGH STREET
CLEVELAND, OHIO 44122 BOSTON, MASSACHUSETTS 02110
TELEPHONE: (216) 696-3366 TELEPHONE (617) 248-7000
FAX: (216) 363-5835 FAX: (617) 248-7100
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
number for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) AGGREGATE OFFERING PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock, $.01 par value per share(3) 6,900,000 $75,900,000 $21,100.20
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</TABLE>
(1) Includes 900,000 shares to be sold upon exercise of over-allotment option
granted to our underwriters solely for purposes of calculating the
registration fee.
(2) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(o) of the Securities Act of 1933, as amended.
(3) Under the terms of the Rights Agreement, to be entered into prior to the
effective date of this Registration Statement, between the Registrant and
Harris Trust and Savings Bank, as Rights Agent, until the Distribution Date
(as defined therein), each share of common stock will also evidence one
common stock purchase right created under such Agreement. No registration
fee is required for the common stock purchase rights as they will be issued
for no additional consideration.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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<PAGE> 2
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE
MAY NOT SELL THESE SECURITIES UNTIL THE SECURITIES AND EXCHANGE COMMISSION
DECLARES OUR REGISTRATION STATEMENT EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED MAY 14, 1999
PROSPECTUS
6,000,000 SHARES
AIRONET LOGO
COMMON STOCK
This is an initial public offering of shares of common stock of Aironet
Wireless Communications, Inc. Of the 6,000,000 shares offered, we are selling
4,000,000 shares, and Telxon Corporation is selling 2,000,000 shares. We have
applied for admission for trading and quotation of our common stock on the
Nasdaq National Market under the symbol "AIRO." There is currently no public
market for these shares. We expect that the public offering price will be
between $9.00 and $11.00 per share.
------------------
PRICE $ PER SHARE
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<TABLE>
<CAPTION>
PER SHARE TOTAL
---------- --------
<S> <C> <C>
Public offering price....................................... $ $
Underwriting discounts and commissions...................... $ $
Proceeds, before expenses, to Aironet....................... $ $
Proceeds, before expenses, to Telxon........................ $ $
</TABLE>
The underwriters have a 30 day option to purchase up to 600,000 additional
shares of common stock from us and up to 300,000 additional shares of common
stock from Telxon to cover over-allotments, if any.
The underwriters expect to deliver the shares against payment in
Minneapolis, Minnesota, on , 1999.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
DAIN RAUSCHER WESSELS PRUDENTIAL SECURITIES
a division of Dain Rauscher
Incorporated
, 1999
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
PAGE
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<S> <C>
Prospectus Summary.............. 4
Risk Factors.................... 8
Use of Proceeds................. 21
Dividend Policy................. 21
Capitalization.................. 22
Dilution........................ 23
Selected Financial Data......... 24
Management's Discussion and
Analysis of Financial
Condition and Results of
Operations.................... 26
Business........................ 40
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Management...................... 56
Certain Transactions............ 64
Principal and Selling
Stockholders.................. 66
Description of Capital Stock.... 68
Shares Eligible for Future
Sale.......................... 72
Underwriting.................... 74
Legal Matters................... 76
Experts......................... 76
Additional Information.......... 76
Index to Financial Statements... F-1
</TABLE>
-------------------------
You should rely only on the information contained in this prospectus. We
have not, and the underwriters have not, authorized any other person to provide
you with different information. This prospectus is not an offer to sell, nor is
it seeking an offer to buy, these securities in any state where the offer or
sale is not permitted. The information in this prospectus is complete and
accurate as of the date on the front cover, but the information may have changed
since that date.
"Aironet," "Aironet Wireless Communications" and LOGOare our registered
trademarks, and AIRONET LOGO, 4800 Turbo DS, Microcellular Architecture,
AP4800-E, PC4800, LM4800, PCI4800, ISA4800, UC4800, MC4800, AP4500-E, AP4500-T,
PC4500, LM4500, PCI4500, ISA4500, UC4500, MC4500, AP3500-E, AP3500-T, PC3500,
LM3500, PCI3500, ISA3500, UC3500 and MC3500 are our trademarks. This prospectus
also contains the registered and unregistered trademarks of others.
Except as otherwise stated, the information in this prospectus assumes (i)
no exercise of the underwriters' over-allotment option, which entitles the
underwriters to purchase an additional 900,000 shares, of which we would issue
600,000 shares and (ii) no exercise of stock options or warrants outstanding as
of March 31, 1999 to purchase up to 2,404,904 shares.
3
<PAGE> 4
PROSPECTUS SUMMARY
This brief summary highlights selected information in this prospectus. It
is not complete and does not contain all of the information that is important to
you. You should read the entire prospectus carefully.
AIRONET
We are a leading provider of high speed, standards-based wireless local
area networking solutions designed to provide wireless network connectivity and
Internet access to personal computer users within a building or campus
environment. Our products utilize advanced radio frequency and data
communication technologies to wirelessly connect users to data networks ranging
in size and complexity from enterprise-wide LANs to home networks. In an
enterprise setting, our wireless LAN solutions are used as extensions to
existing enterprise networks, enabling personal computer users to maintain a
wireless network connection anywhere throughout a building or around a campus.
Our flagship wireless LAN solution, the 4800 Turbo DS series, is the first
commercially available wireless LAN product to operate at Ethernet-like speeds
of 11 Mbps in the unlicensed 2.4 GHz radio frequency band. The 4800 Turbo DS
series provides bandwidth sufficient for data-intensive applications and high
speed Internet access, as well as emerging applications such as streaming video
and Voice-over-IP.
We offer comprehensive solutions to our customers based on both Direct
Sequence and Frequency Hopping spread spectrum radio technologies. As a result,
we are able to offer our customers the wireless LAN solution best suited to
their specific environment and applications. Our broad product portfolio
includes PC Cards, PCI and ISA network interface cards, access points, bridges
and network management and device driver software. As a major contributor to,
and proponent of the Institute of Electrical and Electronic Engineers 802.11
industry standard for wireless LANs, we have designed our primary products to
interoperate with other standards-based products. Our IEEE 802.11 based products
operate in the unlicensed 2.4 GHz radio frequency band and support major network
operating systems, standard software and hardware interfaces and network
protocols, such as TCP/IP. As a result, our products can be interfaced easily
into existing network and Internet infrastructures.
Over the past several years, many organizations have benefitted from
wireless networking solutions. These solutions enable mobile computing, reduce
network infrastructure costs and improve overall operational efficiency.
Wireless LANs have been widely adopted in several vertical markets, such as the
retail, warehousing and distribution industries. Recent developments, including
the wide adoption of the IEEE 802.11 industry standard for wireless LANs, the
availability of faster data rates of at least 10 Mbps and the availability of
wireless single piece PC Card adapters, have collectively resulted in the
emergence and growth of wireless LAN solutions in broader networking markets.
Today, the desire for pervasive network and Internet connectivity, the
preference for mobile computing and the need to deploy and reconfigure networks
rapidly and cost-effectively, are all factors contributing to the increase in
market demand for wireless LAN solutions.
According to International Data Corporation, an information technology
research firm, worldwide wireless LAN product shipments are projected to
increase at a 30% compound annual growth rate from 866,000 units in 1997 to over
4,000,000 units by 2003. IDC projects wireless LAN revenues to reach $1.6
billion in 2003.
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<PAGE> 5
Our objective is to become a dominant worldwide developer and provider of
high speed wireless LAN products. We intend to achieve our objective by
implementing the following strategies:
- leveraging our leadership in 2.4 GHz spread spectrum, MAC chip, and
network architecture technologies to maintain our competitive advantage
in the areas of data rate and throughput, range and network management;
- strengthening brand awareness of our products by continuing to promote
the Aironet brand as synonymous with high speed, cost-effective wireless
LAN products that are standards-based, easily deployable and reliable;
- delivering solutions based on the IEEE 802.11 and other wireless LAN
standards, and actively participating in workgroups that define wireless
network standards to influence the direction of these standards; and
- expanding channel distribution by strengthening relationships with
existing channel partners and adding new channel partners, both in
domestic and international markets.
We market our wireless LAN products in the United States and abroad through
an indirect sales and marketing organization consisting primarily of
distributors, resellers and OEMs. Our U.S. distributors include Business Partner
Solutions, Inc., and we have recently added Ingram Micro, Inc. and Tech Data
Corporation as U.S. distributors.
OUR RELATIONSHIP WITH TELXON
At our incorporation in 1993, Telxon Corporation was our sole stockholder
and only customer. Since that time, Telxon has reduced its ownership to
approximately 76% of our issued and outstanding capital stock, which will be
reduced further to approximately 39% after this offering (approximately 35% if
the underwriters' over-allotment option is exercised in full). For the nine
month period ended December 31, 1998, sales to, and royalties from, Telxon
accounted for 39% of our total revenues. Telxon provides us with certain
administrative services, as well as employee benefit programs and insurance
coverage. Our headquarters and assembly facilities are leased from Telxon.
ABOUT US
We were incorporated in 1993 under the name Spider, Inc. Our operations
include Aironet Canada Limited (formerly Telesystems SLW Inc.). Our principal
offices are located at 3875 Embassy Parkway, Akron, Ohio 44333, and our
telephone number is (330) 664-7900. All references in this prospectus to
"Aironet," "we," "us" and "our" include our wholly owned subsidiaries.
5
<PAGE> 6
THE OFFERING
<TABLE>
<S> <C>
Common stock offered................. 6,000,000 shares, 4,000,000 by
Aironet and 2,000,000 by Telxon, the
selling stockholder.
Common stock to be outstanding after 13,566,348 shares, of which Telxon
this offering...................... will own 5,276,500 shares (equaling
38.89 percent).
Underwriters' over-allotment 900,000 shares, 600,000 from us and
option............................. 300,000 from Telxon.
Use of proceeds...................... We expect to use our proceeds for
general corporate purposes, including
working capital, and to repay
approximately $2.5 million of
indebtedness outstanding under our
existing working capital credit line.
See "Use of Proceeds."
Proposed Nasdaq National Market AIRO
symbol.............................
Rights Agreement..................... Under the terms of a Rights Agreement
to be implemented prior to this
offering, each share of common stock
will also evidence one common stock
purchase right. The purchase right
may only be exercised after specified
events related to third parties
acquiring our shares or the company
without the approval of our Board of
Directors. See "Rights Agreement."
</TABLE>
The number of shares of our common stock to be outstanding immediately
after the offering is calculated using the number of shares outstanding on March
31, 1999. This number does not take into account options and warrants
outstanding at March 31, 1999 to purchase 2,404,904 shares of our common stock.
6
<PAGE> 7
SUMMARY CONSOLIDATED FINANCIAL DATA
The following financial information was derived from our financial
statements. These tables highlight selected information, but they do not include
all the financial information that is important to you. You should read
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations," as well as our consolidated financial statements and the notes to
those statements, which are included later in this prospectus.
<TABLE>
<CAPTION>
FISCAL YEARS ENDED NINE MONTHS ENDED
MARCH 31, DECEMBER 31,
--------------------------- -----------------
1996 1997 1998 1997 1998
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS
DATA:
Revenues:
Non-affiliate................. $ 5,456 $14,484 $20,249 $14,991 $19,825
Affiliate product............. 38,867 46,844 19,104 17,478 6,525
Affiliate royalty............. -- -- 5,781 3,540 6,063
------- ------- ------- ------- -------
Total revenues........ 44,323 61,328 45,134 36,009 32,413
------- ------- ------- ------- -------
Gross profit:
Non-affiliate................. 2,499 6,096 8,535 6,363 6,378
Affiliate product............. 7,925 9,771 4,517 4,310 1,096
Affiliate royalty............. -- -- 5,781 3,540 6,063
------- ------- ------- ------- -------
Total gross profit.... 10,424 15,867 18,833 14,213 13,537
------- ------- ------- ------- -------
Total operating expenses........ 10,898 12,808 14,323 10,211 12,379
Income (loss) from operations... (474) 3,059 4,510 4,002 1,158
Net income (loss)............... $(2,628) $ 889 $ 2,501 $ 2,329 $ 433
Net income (loss) per common
share:
Basic......................... $ (0.33) $ 0.11 $ 0.31 $ 0.29 $ 0.05
Diluted....................... $ (0.33) $ 0.11 $ 0.30 $ 0.28 $ 0.04
Weighted average shares used in
calculating net income (loss)
per share:
Basic......................... 8,085 8,085 8,123 8,108 9,354
Diluted....................... 8,085 8,085 8,319 8,252 9,873
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
----------------- ------------------------
1997 1998 ACTUAL AS ADJUSTED(1)
------- ------- ------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............ $ 1,609 $ 2,864 $ 5,760 $39,442
Total assets......................... 19,201 23,633 26,549 60,231
Total stockholders' equity........... 5,342 11,598 13,629 49,829
</TABLE>
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(1) This information has been adjusted to give effect for the issuance of
4,000,000 shares by us as if the offering had taken place at December
31, 1998, at an assumed initial public offering price of $10 per share
and after deducting underwriting discounts and commissions and our
estimated offering expenses.
7
<PAGE> 8
RISK FACTORS
This offering involves a high degree of risk. You should carefully consider
the risks described below and the other information in this prospectus before
deciding to invest in shares of our common stock. The risks and uncertainties
described below are not the only ones we face. Additional risks and
uncertainties, including those not presently known to us or that we currently
deem immaterial, may also impair our business. If any of the following risks or
uncertainties actually occur, our business could be adversely affected. In that
event, the trading price of our common stock could decline, and you could lose
all or a part of your investment. This prospectus also contains forward-looking
statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result
of various risks and uncertainties, including those described below and
elsewhere in this prospectus.
WE FACE RISKS RELATING TO OUR RELATIONSHIP WITH TELXON
Until March 1997, we were a wholly owned subsidiary of Telxon Corporation
and until March 1998, Telxon owned 90% of our capital stock. Telxon currently
owns approximately 76% of our capital stock and, after this offering, will own
approximately 39% (approximately 35% if the underwriters' over-allotment option
is exercised in full). Our relationship with Telxon continues to be important to
our business. The risks of this relationship include the following:
- Ownership and Control. As a result of Telxon's significant ownership,
Telxon will continue to be able to exert substantial influence or
effective control over our management and affairs through matters
submitted to stockholder vote, such as the election or removal of
directors and any merger, consolidation or sale of assets or any takeover
attempts. This concentration of ownership may have the effect of
delaying, deferring or preventing a change in control, impede a merger,
takeover or other business combination or discourage a potential acquirer
from making a tender offer in which stockholders might receive a premium
over the prevailing market price for their shares or otherwise attempting
to obtain control, which in turn could have an adverse effect on the
market price of our common stock.
- Source of Revenues. Telxon is an important customer, and a substantial
portion of our total revenues have been and continue to be derived from
Telxon. For fiscal years 1996, 1997 and 1998, Telxon-related revenues
were 88%, 76% and 55% of our total revenues. For the nine month period
ended December 31, 1998, Telxon-related revenues were 39% of our total
revenues. We are dependent upon Telxon as a significant source of
revenues, and the loss of this source of revenues for any reason would
have an adverse effect on our business. We do not presently have a
significant backlog of orders from Telxon for our products, and Telxon
has not recently provided us with a forecast of future purchases of our
products.
- Board of Directors and Management. John W. Paxton, Sr. currently serves
on our Board of Directors and has been nominated to that position by
Telxon. Mr. Paxton is also President, Chief Executive Officer and
Chairman of the Board of Directors of Telxon. Our President and Chief
Executive Officer, Roger J. Murphy, Jr., is a former employee of Telxon
and began serving us as Chief Operating Officer when we were a wholly
owned subsidiary of Telxon.
8
<PAGE> 9
- Source of Services. Telxon provides us with a variety of important
general and administrative services. For example, Telxon provides us with
human resource services, our employees participate in a variety of
Telxon's benefit plans and we are covered by some of Telxon's insurance
policies. The provision of these services is currently governed by a
written agreement between Telxon and us executed in March 1998; however,
after this offering our employees will no longer be eligible to
participate in Telxon's benefit plans, and we will no longer be covered
by Telxon's insurance. We anticipate putting replacement programs and
insurance into place prior to that time.
Because of these factors, Telxon will continue to be an extremely important
part of our business and operations. We have limited control over our
relationship with Telxon and should this relationship change, our business and
operations could suffer a material adverse effect. Conflicts of interest may
arise between us and Telxon in a number of areas relating to our past and
ongoing relationship, including potential competitive business activities,
indemnity arrangements, tax and intellectual property matters, potential
acquisitions or financing transactions, sales or other dispositions by Telxon of
shares of our common stock held by it following this offering and the exercise
by Telxon of its ability to influence our management and affairs. We have not
established any formal procedures to address or resolve these potential
conflicts. There can be no assurance that any conflicts that may arise with
Telxon will be resolved in a manner that does not have a material adverse effect
on us.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY
Our quarterly and annual operating revenues, expenses and operating results
may fluctuate due to a number of factors including:
- the timing and cancellation of customer orders;
- market acceptance of our and our customers' products;
- the level of orders received which can be shipped in a quarter;
- the timing and provision of pricing protection and returns from our
distributors;
- cost and availability of components and subassemblies;
- finished product availability and quality;
- changes in product mix;
- our ability to introduce new products and technologies on a timely basis;
- introduction of products by our competitors;
- the timing of our investments in research and development;
- whether our customers buy from a distributor, an OEM or directly from us;
- competitive pressures on selling prices; and
- general economic conditions.
Historically, average selling prices of networking equipment have decreased
over the life of a product, and as a result, the average selling prices of our
products may decrease in the future. Decreases in the prices for our products
would adversely affect our operating results.
Our business is characterized by short-term orders and shipment schedules,
and customers can typically cancel or reschedule orders without significant
penalty. Because we do not have a substantial, noncancellable backlog, we
typically plan our production and
9
<PAGE> 10
inventory levels based on internal forecasts of customer demand, which are
highly unpredictable and can fluctuate substantially.
Because we are continuing to increase our operating expenses for personnel,
new product development and inventory in anticipation of increasing sales
levels, we must continue to generate increased sales to offset these increased
expenses. In addition, we have limited ability to reduce expenses quickly in
response to any revenue shortfalls. In response to anticipated long lead times
to obtain inventory and materials from our contract manufacturers and suppliers,
we may order in advance of anticipated customer demand, which might result in
excess inventory levels if the expected orders fail to materialize. As a result,
we cannot predict the timing and amount of sales to our customers, and any
significant downturn in customer demand for our products would reduce our
quarterly and annual operating results.
THE MARKET FOR WIRELESS NETWORKING IS AT AN EARLY STAGE OF DEVELOPMENT
The wireless networking market is at an early stage of development and is
rapidly evolving. As is typical for a new and rapidly evolving industry, demand
and market acceptance for recently introduced wireless networking products and
services are subject to a high level of uncertainty. Market acceptance of
particular products cannot be predicted; however, it is likely that new wireless
LAN products will not be generally accepted unless they operate at higher speeds
and are sold at lower prices. While the number of businesses recognizing the
increased value of wireless solutions is increasing, it is not known whether
this market will continue to develop such that sufficient demand for our
products will emerge and become sustainable. Our prospects must be evaluated due
to the risks encountered by a company in the early stages of marketing new
products or services, particularly in light of the uncertainties relating to the
new and evolving markets in which we operate. There can be no assurance that we
will succeed in addressing any or all of these risks, and the failure to do so
would have a material adverse effect on our business, financial condition and
operating results.
THERE IS INTENSE COMPETITION IN THE WIRELESS LAN MARKET
The market for our products is very competitive, and we expect that
competition will increase in the future, both with respect to our current
products and future products which we may develop. Within the wireless industry,
business is intensely competitive and is characterized by rapid technological
change, frequent introduction of new products and evolving industry standards.
Increased competition could adversely affect our revenues and profitability
through pricing pressure, loss of market share and other factors. We believe
that the principal competitive factors in the wireless LAN market include:
- expertise and familiarity with 2.4 GHz spread spectrum technology,
wireless data communication protocols and LAN technology;
- product performance, features, functionality and reliability;
- price/performance characteristics;
- timeliness of new product introductions;
- adoption of emerging industry standards;
- customer service and support;
- size and scope of distribution network; and
- brand name.
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<PAGE> 11
While we believe that we are competitive in these regards, there can be no
assurance that we will be able to successfully compete as to these or other
factors or that competitive pressures we face will not materially and adversely
affect our business and operating results. We also cannot assure you that these
will continue to be competitive factors in the wireless LAN market and, if not,
whether we will be able to successively identify future competitive factors or
be successful competing as to those factors.
Within the wireless LAN industry, our primary competitors are Lucent
Technologies, Proxim and BreezeCom. We also experience competition from a number
of smaller companies that provide wireless data communication products, and we
may encounter future competition from other companies, both that have and have
not announced their intentions to offer competitive products and solutions. In
addition, we could encounter future competition from larger computer and
networking equipment companies. We also face competition from our OEM customers
who have, or could acquire, their own wireless data communications research and
development capabilities.
We could also encounter future competition from companies that offer
products that replace or are alternatives to radio frequency wireless solutions
including, for example, products based on infra-red technology and systems that
utilize existing telephone wires within a building as a wired network backbone.
Many of our current and potential competitors have significantly greater
financial, marketing, technical and other resources than us and, as a result,
may be able to respond more quickly to new or emerging technologies or standards
and to changes in customer requirements, or to devote greater resources to the
development, promotion and sale of products or to deliver competitive products
at a lower end user price. Current and potential competitors have established or
may establish cooperative relationships among themselves or with third parties
to increase the ability of their products to address the needs of our existing
and prospective customers. Accordingly, it is possible that new competitors or
alliances among competitors may emerge and rapidly acquire significant market
share. Increased competition is likely to result in price reductions, reduced
operating margins and loss of market share, any of which could have a material
adverse effect on our business and operating results.
WE ARE DEPENDENT ON THE DEVELOPMENT OF NEW PRODUCTS AND FACE THE RISK OF PRODUCT
DEVELOPMENT DELAYS
We derive substantially all of our product revenues from sales of products
for wireless networking solutions. This market is characterized by:
- intense competition;
- rapid technological change;
- short product life cycles; and
- emerging industry standards.
The development of new wireless LAN products is highly complex. Our success
in developing and introducing new products depends on a number of factors,
including:
- accurate new product definition;
- timely completion and introduction of new product designs;
- achievement of cost efficiencies in design and manufacturing; and
- market acceptance of the new products.
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<PAGE> 12
We cannot guarantee that we will be successful in these efforts or that our
competitors will not be more successful, which, in either case, would have a
material adverse effect on our business and results of operations.
WE HAVE A LIMITED OPERATING HISTORY BY WHICH TO EVALUATE OUR BUSINESS AND
PROSPECTS
We were incorporated in 1993. As such, we have only a short operating
history for you to evaluate. Your evaluation of our business and results of
operations must take into account this short operating history, which may not be
indicative of future results. Moreover, as discussed above, we have historically
relied heavily on Telxon. For this reason, our early operating history must be
viewed as having been dependent on Telxon and, therefore, even less significant
in evaluating our future prospects. Only since March 1998 has our Board of
Directors and management operated our business without the full range of support
that Telxon previously provided to us.
During our limited operating history, we have experienced quarterly and
annual fluctuations in our operating results. From our incorporation in 1993
until March 1998, we were dependent on Telxon to provide us with funding for
operating deficits, and we no longer receive such funding from Telxon.
Our business and prospects should also be considered in light of the risks
frequently encountered by companies in their early stages of development in new
and rapidly evolving markets. The wireless networking market is at an early
stage of development and is rapidly evolving. As is typical for a new and
rapidly evolving industry, demand and market acceptance for recently introduced
wireless networking products and services, such as ours, are subject to a high
level of uncertainty.
Because of our short existence, our limited operating history as an
independent company, fluctuations in our past results, past operating deficits
and the early stage of development of our market, we cannot assure you that we
will sustain profitability.
OUR RELIANCE ON LIMITED SOURCES OF COMPONENTS COULD ADVERSELY AFFECT OUR
BUSINESS
Many of the key components necessary for the assembly of our products are
only available from a single supplier or from a limited number of suppliers. We
have experienced delays and shortages in the supply of components in the past
and could experience delays and shortages in the future. We generally do not
maintain a significant inventory of components and do not have long-term supply
contracts with our suppliers. Our reliance on sole or limited source suppliers
involves several risks, including:
- suppliers could increase component prices significantly, without notice
and with immediate effect;
- suppliers could discontinue the manufacture or supply of components or
delay delivery of components used in our products for reasons such as
inventory shortages, new product offerings, increased cost of materials,
destruction of manufacturing facilities, labor disputes and bankruptcy;
and
- in order to compensate for potential component shortages or
discontinuance, we may in the future hold more inventory than is
immediately required, resulting in increased inventory costs.
If our suppliers are unable to deliver or ration components to us, we could
experience interruptions and delays in manufacturing and sales which could
result in cancellation of
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<PAGE> 13
orders for our products or the need to modify our products. This may cause
substantial delays in our product shipments, increased manufacturing costs and
increased product prices. Further, we may not be able to develop alternative
sources for these components in a timely way, if at all, and may not be able to
modify our products to accommodate alternative components.
These factors could damage our relationships with current and prospective
customers lasting longer than any underlying shortage or discontinuance. Any of
these risks, if realized, could materially and adversely affect our business
operating results and financial condition.
WE FACE RISKS ASSOCIATED WITH CUSTOMER CONCENTRATION
Historically, a relatively small number of customers, especially Telxon,
have accounted for a significant portion of our total revenues in any particular
period. In the nine months ended December 31, 1998, Telxon accounted for 39% of
our total revenues, and our four largest non-affiliate customers accounted for
60% of our non-affiliate revenues or 37% of our total revenues. We have no
long-term volume purchase commitments from any of our customers. We anticipate
that sales of our products to relatively few customers will continue to account
for a significant portion of our total revenues, because our customers generally
resell our products to end users. Due to these factors, some of the following
may reduce our operating results:
- reduction, delay or cancellation of orders from one or more of our
significant customers;
- development by one or more of our significant customers of other,
competitive sources of supply;
- selection by one or more of our significant customers of equipment
manufactured by one of our competitors as a preferred solution;
- loss of one or more of our current customers or a disruption in our sales
and distribution channels; or
- failure of one of our significant customers to make timely payment of our
invoices.
We cannot be certain that our customers will continue to place orders with
us, that orders by existing customers will continue at the levels of previous
periods or that we will be able to obtain orders from new customers.
EXPANDING OUR DISTRIBUTION CHANNELS MIGHT ADVERSELY AFFECT OUR BUSINESS
To increase revenues, we believe we must increase the number of our
distribution partners. Our strategy includes an effort to reach a greater number
of end users through indirect channels. We are currently investing, and plan to
continue to invest, significant resources to develop these indirect channels.
This could adversely affect our operating results if these efforts do not
generate the revenues necessary to offset such investments. We will be dependent
upon the acceptance of our products by distributors and their active marketing
and sales efforts relating to our products. The distributors to whom we sell our
products are independent and are not obligated to deal with us exclusively or to
purchase any specified amount of our products. Because we do not generally
fulfill orders by end users of our products sold through distributors, we will
be dependent upon the ability of distributors to accurately forecast demand and
maintain appropriate levels of inventory.
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<PAGE> 14
We expect that our distributors will also sell competing products. These
distributors may not continue, or may not give a high priority to, marketing and
supporting our products. This and other channel conflicts could result in
diminished sales through the indirect channel and adversely affect our operating
results. Additionally, because lower prices are typically charged on sales made
through indirect channels, increased indirect sales could adversely affect our
average selling prices and result in lower gross margins.
THERE ARE RISKS ASSOCIATED WITH EXISTING IEEE 802.11 AND POTENTIAL INDUSTRY
STANDARDS
We have developed and continue to develop our products with a view to
compliance with existing industry standards and anticipated future standards. We
may not introduce on a timely basis products that comply with future industry
standards. In particular, we expend, and intend to continue to expend,
substantial resources in developing products and product features that are
designed to conform to the IEEE 802.11 wireless LAN standard, as well as to
other industry standards that have not yet been formally adopted. Further, our
high speed 4800 Turbo DS series of products is designed to conform with the
proposed high speed addition to the IEEE 802.11 standard, but we cannot assure
you that these products will conform to that standard as it might, if ever, be
finally adopted.
Our future success depends in part on broad market acceptance of these
wireless LAN standards and the following related risks:
- our products may not meet future applicable standards;
- the standards ultimately adopted by the industry may vary from those
anticipated by us, causing our products which were designed to meet
anticipated standards to fail to comply with the adopted standards;
- even if our products do comply with established standards, these
standards may not gain market acceptance, and consumers may prefer to
purchase products which do not comply with them, or which comply with new
or competing standards, or which are based on proprietary designs; and
- product standardization may have the effect of lowering barriers to entry
in the markets in which we seek to sell our products, by diminishing
product differentiation and thus causing competition to be based upon
criteria such as the relative size and marketing skills of competitors.
Two of our senior officers are members of the IEEE 802.11 Standards
Committee. Companies participating in the promulgation of the IEEE 802.11
standard have represented to the IEEE that they will grant licenses to their
patents on a fair and equitable basis if those patents are required to implement
products that comply with the standard. Our ability to market IEEE 802.11
compliant products may depend upon our ability to obtain these licenses. We
cannot assure you that, if required, we will be able to obtain them, or that
they can be obtained at a reasonable cost. Our failure to obtain any required
license at a commercially reasonable cost could have a material adverse effect
on our competitive position and results of operations.
OUR PRODUCTS ARE SUBJECT TO GOVERNMENT REGULATIONS
In the United States, our products are subject to various Federal
Communications Commission rules and regulations. Current FCC regulations permit
license-free operation in certain FCC-certified bands in the radio frequency
spectrum. FCC rules require compliance with administrative and technical
requirements as a condition to the operation or marketing of
14
<PAGE> 15
devices that emit radio frequency energy, such as our products. Our products
comply with Part 15 of the current FCC regulations permitting license-free
operation of radio devices in the 902-928 MHz and 2.4-2.4835 GHz radio frequency
bands. The Part 15 regulations are designed to minimize the probability of
interference to the other users of those frequency bands and accord Part 15
systems secondary status. In the event of interference between a primary user in
those band widths and a Part 15 user, the primary user can require the Part 15
user to curtail transmissions that create interference. Our products are also
subject to regulatory requirements in markets outside the United States, where
we have limited experience in gaining regulatory approval. The regulatory
environment in which we operate subjects us to several risks, including:
- if users must cease use of our products because their operation causes
interference to authorized users of the radio frequency spectrum, or
authorized users cause interference which must be accepted by users of
our products, market acceptance of our products and our results of
operations could be adversely affected;
- regulatory changes, including changes in the allocation of available
radio frequency spectrum or requirements for licensed operation, may
significantly impact our operations by rendering current products
non-compliant or restricting the applications and markets served by our
products; and
- we may not be able to comply with all applicable regulations in each of
the countries where our products are sold or proposed to be sold, and we
may need to modify our products to meet local regulations.
OUR SUCCESS DEPENDS ON OBTAINING AND PROTECTING INTELLECTUAL PROPERTY
Our success depends in part on our ability to obtain and preserve patent
and other intellectual property rights covering our products and development and
testing tools. The process of seeking patent protection can be time consuming
and expensive. We cannot assure you that:
- patents will issue from currently pending or future applications;
- our existing patents or any new patents will be sufficient in scope to
provide meaningful protection or any commercial advantage to us;
- foreign intellectual property laws will protect our intellectual property
rights; or
- others will not independently develop similar products, duplicate our
products or design around any patents issued to us.
Intellectual property rights are uncertain and involve complex legal and
factual questions. Though we are not aware of any third party intellectual
property rights that would prevent our use and sale of our products, we may
unknowingly infringe the proprietary rights of others. Any infringement could
result in significant liability to us. If we do infringe the proprietary rights
of others, we could be forced to either seek a license to such intellectual
property rights or alter our products so that they no longer infringe those
proprietary rights. A license could be very expensive to obtain or may not be
available at all. Similarly, changing our products or processes to avoid
infringing the rights of others may be costly or impractical.
Any dispute regarding intellectual property, whether ours or that of
another company, may result in legal proceedings. These types of proceedings may
be costly and time consuming for us, even if we eventually prevail. If we do not
prevail, we might be forced to
15
<PAGE> 16
pay significant damages, the prevailing party's litigation expenses and obtain a
license or stop making the subject product.
We also rely on trade secrets, proprietary know-how and confidentiality
provisions in agreements with employees and consultants to protect our
intellectual property. Other parties may not comply with the terms of their
agreements with us, and we may not be able to adequately enforce our rights
against these parties.
WE MAY NOT BE ABLE TO MANAGE OUR GROWTH
We have expanded our operations in recent years, and we anticipate that
further expansion will be required to address potential growth in our customer
base and market opportunities, as well as to provide corporate services
currently provided by Telxon. This expansion has placed, and future expansion is
expected to place, a significant strain on our management, technical,
operational, administrative and financial resources. We have recently hired new
employees, including a number of key managerial and operations personnel, who
have not yet been fully integrated into our operations.
Our current and planned expansion of personnel, systems, procedures and
controls may be inadequate to support our future operations. We may be unable to
attract, retain, motivate and manage required personnel, including finance,
administrative and operations staff, or to successfully identify, manage and
exploit existing and potential market opportunities because of inadequate
staffing. We may also be unable to manage further growth in our multiple
relationships with our OEMs, distributors and other third parties. If we are
unable to manage growth effectively, our business, financial condition and
results of operations could be adversely affected.
WE MAY FACE RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS AND SALES
Revenues from customers outside North America accounted for approximately
32% of our total revenues for the nine month period ended December 31, 1998. We
anticipate that revenues from customers outside North America will continue to
account for a significant portion of our total revenues for the foreseeable
future. Expansion of our international operations has required, and will
continue to require, significant management attention and resources. In
addition, we remain heavily dependent on distributors to market, sell and
support our products internationally. Our international operations are subject
to additional risks, including the following:
- difficulties of staffing and managing foreign operations;
- longer customer payment cycles and greater difficulties in collecting
accounts receivable;
- unexpected changes in regulatory requirements, exchange rates, trading
policies, tariffs and other barriers;
- uncertainties of laws and enforcement relating to the protection of
intellectual property;
- language barriers;
- potential adverse tax consequences; and
- political and economic instability.
We currently sell products to customers in Russia and Japan. These
countries have recently experienced significant problems with their economies,
which have adversely affected the value of their currency, availability of
credit and their ability to engage in foreign trade in general. In addition, we
are unable to determine the effect that recent economic downturns in
16
<PAGE> 17
Asia, particularly Japan, or the adoption and use of the Euro, the single
European currency introduced in January 1999, will have on our business. Any of
these factors could have a material adverse effect on our business, operating
results and financial condition.
Similarly, we cannot accurately predict the impact that any future
fluctuations in foreign currency exchange rates may have on our operating
results and financial condition.
WE MAY FACE RISKS RELATED TO YEAR 2000 ISSUES
Many existing computer systems and software products do not properly
recognize dates after December 31, 1999. This "Year 2000" problem could result
in miscalculations, data corruption, system failures or disruptions of
operations. These disruptions could include an inability to process
transactions, send invoices or engage in similar normal business activities. The
Year 2000 problem could also affect embedded systems such as building security
systems, machine controllers, telephone switches and other equipment. Our Year
2000 compliance program cannot guarantee that our systems will not suffer from
date related problems, and if so, we may need to upgrade or replace our computer
systems, software and other equipment, which could result in significant
expenditures.
Neither our current products nor our prior products utilize internal
calendars that are dependent upon the input of or reference to a specific date,
and we do not anticipate designing any products that are date dependent.
Nevertheless, there is no assurance that users of our products will not suffer
Year 2000 problems or that they will not seek damages against us in relation to
those problems. Furthermore, the purchasing patterns of our customers or
potential customers may be affected by Year 2000 issues as companies expend
significant resources to correct their current systems for Year 2000 compliance.
These expenditures may result in reduced funds available for network equipment
and other purchases, which could have a material adverse effect on our business,
operating results and financial condition.
We rely on numerous third parties that may not be Year 2000 compliant. This
includes our contract manufacturers, our sole and limited source component
suppliers and other vendors, and our distributors, resellers and OEMs. Failure
of any of these third parties to be Year 2000 complaint could require us to
incur significant unanticipated expenses to remedy any resulting problems or to
replace the affected third party. This could reduce our revenues and could have
a material adverse effect on our business, operating results and financial
condition. To date, we have not developed contingency plans for such
eventualities.
WE ARE DEPENDENT ON KEY PERSONNEL
There are a limited number of skilled design, process and testing engineers
and marketing professionals involved in the wireless data communication
industry. The competition for these employees is intense. It is not uncommon for
skilled professionals to move among the various competitors in this industry,
and we have taken steps to limit our employees from unfairly competing with us
or using our trade secrets. Our future growth depends in large part on retaining
our current employees and attracting new technical, marketing and management
personnel. The loss of key employees or failure to attract new key employees
could materially affect our business.
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<PAGE> 18
WE HAVE RECENTLY HIRED KEY EMPLOYEES
We have recently hired a number of our officers, including our Senior Vice
President and Chief Financial Officer (January 1999), Senior Vice President,
Sales and Marketing (August 1998) and Vice President, Marketing (January 1999).
These individuals have not previously worked together and are in the process of
integrating as a management team, together and with existing management. There
can be no assurances that they will be able to effectively work together or
successfully manage any growth we experience.
THERE MAY BE POTENTIAL HEALTH AND SAFETY RISKS RELATED TO OUR PRODUCTS
There has been recent public concern regarding electromagnetic emissions
and potential health and safety risks. Our wireless networking products emit
electromagnetic radiation, but we do not believe that our products pose a safety
concern. We cannot, however, assure you that safety and health issues concerning
our products will not arise in the future. If safety or health issues do arise,
they could have a material adverse effect on our business and results of
operations. Even when safety concerns ultimately prove to be without merit,
adverse publicity could have a material adverse effect on our ability to market
products.
OUR COMMON STOCK PRICE MAY BE VOLATILE
The stock market has experienced significant price and volume fluctuations,
and the market prices of technology companies have been highly volatile.
Investors may not be able to resell their shares at or above the initial public
offering price. In the past, following periods of volatility in the market price
of a company's securities, securities class action litigation has often been
instituted against that company. Such litigation could result in substantial
costs and diversion of management's attention.
THERE IS NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK, AND THE OFFERING PRICE MAY
NOT PREVAIL IN THE MARKET
There has not been a public market for our common stock. We cannot predict
the extent to which investor interest in Aironet will lead to the development of
a trading market or how liquid that market might become. The initial public
offering price for the shares is determined by negotiations between us and the
representatives of our underwriters and may not be indicative of the prices that
will prevail in the trading market.
INVESTORS WILL INCUR IMMEDIATE DILUTION, AND WE DO NOT ANTICIPATE THE PAYMENT OF
DIVIDENDS
The initial public offering price of our common stock is substantially
higher than the net tangible book value per share of the common stock
immediately after this offering. Therefore, if you purchase our common stock in
this offering, you will incur immediate and substantial dilution of
approximately $6.58 in the net tangible book value per share of common stock
from the price you pay for a share of common stock in the offering (based upon
an assumed initial public offering price of $10 per share). The exercise of
outstanding options and warrants may result in further dilution. We do not
currently anticipate paying cash dividends in the foreseeable future.
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<PAGE> 19
WE HAVE SUBSTANTIAL DISCRETION OVER THE USE OF PROCEEDS FROM THIS OFFERING
We will have broad discretion in how we use the net proceeds from the
offering. We expect to use the net proceeds from the offering for repayment of
bank debt and general corporate purposes, including working capital, product
development and expansion of our engineering, sales and marketing capabilities,
as well as our general and administrative functions. We may use a portion of the
proceeds to license or acquire complementary technologies. You will not have the
opportunity to evaluate the economic, financial or other information on which we
base our decisions on how to use the net proceeds.
DELAWARE LAW AND OUR CORPORATE DOCUMENTS INCLUDE ANTI-TAKEOVER PROVISIONS
Our corporate documents and applicable provisions of the Delaware General
Corporation Law could discourage, delay or prevent a third party or significant
stockholder from acquiring or gaining control of us. These provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. These provisions:
- authorize the issuance of "blank check" preferred stock (preferred stock
which our Board of Directors can create and issue without prior
stockholder approval) with rights senior to those of common stock;
- prohibit stockholder action by written consent;
- establish advance notice requirements for submitting nominations for
election to the Board of Directors and for proposing matters that can be
acted upon by stockholders at a meeting; and
- establish staggered terms for members of the Board of Directors.
In addition, we are a party to a Rights Agreement, pursuant to which each
share of our common stock includes a companion purchase right. Under
circumstances controlled by our Board of Directors, the purchase rights may
impose severe impediments to any person seeking to acquire us or gain control
over us. Any of these anti-takeover provisions could lower the market price of
the common stock and could deprive our stockholders of the opportunity to
receive a premium for their shares in the event that we are sold.
FUTURE SALES OF OUR COMMON STOCK COULD ADVERSELY AFFECT OUR STOCK PRICE
Immediately after the offering, the public market for the common stock will
include only the 6,000,000 (6,900,000 if the underwriters' over-allotment option
is exercised in full) shares that we and Telxon are selling in the offering. At
that time, there will be an additional 7,567,181 shares of common stock
outstanding, which includes 5,276,500 shares owned by Telxon. As described
below, the persons that hold those additional shares will be able to sell some
of them in the public market following the offering. If these stockholders sell
a large number of shares of our common stock, the market price of common stock
could decline dramatically. Moreover, the perception in the public market that
these stockholders might sell shares of common stock could depress the market
price of the common stock.
All of our officers, directors, stockholders (including Telxon), warrant
holders and certain of our option holders have agreed not to sell any shares of
common stock during the period ending 180 days after the date of this
prospectus.
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<PAGE> 20
As a result of contractual restrictions and the provisions of Rules 144 and
701, additional shares will be available for sale in the public market as
follows:
- no restricted shares will be eligible for immediate sale on the date of
this prospectus;
- approximately 9,041,313 restricted shares will be eligible for sale
beginning 180 days after the effective date of this offering upon
expiration of lock-up agreements, subject in some cases to compliance
with Rule 144; and
- the remainder of the restricted shares will be eligible for sale from
time to time thereafter, subject in some cases to compliance with Rule
144.
In addition, shares purchased pursuant to an employee stock option exercise
may become available for resale pursuant to the provisions of Rule 701, which
permits affiliates and non-affiliates to sell their Rule 701 shares without
having to comply with Rule 144's holding period restrictions, in each case
commencing 90 days after the date of this prospectus. In addition,
non-affiliates may sell Rule 701 shares without complying with the public
information, volume and notice provisions of Rule 144.
After the offering, we anticipate that we will register approximately
3,918,817 shares of common stock that we have issued or may issue under our
stock plans. Once we register these shares, they can be sold in the public
market upon issuance, subject to the "lock-up" agreements described above.
Sales of large numbers of shares of common stock could cause the price of
the common stock to decline. For more information, see "Shares Eligible for
Future Sale" and "Underwriting."
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS AND OTHER RISKS
This prospectus contains forward-looking statements relating to, among
other things, future results of operations, growth plans, sales, gross margin
and expense trends, capital requirements and general industry and business
conditions applicable to us. These forward-looking statements are based largely
on our current expectations and are subject to a number of risks and
uncertainties. When used in this prospectus, the words "anticipate," "believe,"
"estimate," "expect," "plans," "intends" and similar expressions are generally
intended to identify forward-looking statements. Actual results could differ
materially from these forward-looking statements. In addition to the other risks
described elsewhere in this "Risk Factors" discussion, important factors to
consider in evaluating such forward-looking statements include changes in
external competitive market factors, changes in our business strategy and our
ability to execute our strategy in response to unanticipated changes in the
wireless LAN industry or the economy in general and various other factors that
may prevent us from competing successfully in existing or future markets. In
light of these and other risks and uncertainties, there can be no assurance that
the forward-looking statements contained in this prospectus will in fact be
realized.
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USE OF PROCEEDS
We estimate that our net proceeds from the offering will be approximately
$36.2 million (approximately $41.8 million if the underwriter's over-allotment
option to purchase 600,000 from us is exercised in full) assuming an initial
public offering price of $10 per share, after deducting underwriting discounts
and commissions and estimated offering expenses that we will pay from the
proceeds. We will not receive any proceeds from the sale of shares offered by
Telxon, the selling stockholder. We intend to use the proceeds of this offering
in part to repay our outstanding debt under our $5.0 million working capital
credit line with Huntington National Bank, of approximately $2.5 million (as of
March 31, 1999); this debt currently bears interest at either the bank's rate or
LIBOR plus 2% annually; and the credit line expires on July 1, 2000 (this debt
was used for working capital and to repay amounts we owed Telxon for working
capital advances). We have not identified any other specific expenditures which
will be made with the net proceeds from this offering, but we expect to use the
proceeds for general corporate purposes, which may include:
- expansion of our engineering organization and product development
programs;
- expansion of our marketing and sales capabilities;
- expansion of our general and administrative functions;
- investment in complementary technology through licensing arrangements and
otherwise; and
- working capital.
Pending the uses described above, we intend to invest our net proceeds from
this offering in short-term, interest-bearing, investment grade securities.
DIVIDEND POLICY
We currently intend to retain all earnings to fund our development and
growth, and therefore do not anticipate paying any dividends in the foreseeable
future. Further, we have agreed under our working capital credit line not to pay
dividends. In April 1999, our Board of Directors declared a dividend of stock
purchase rights in connection with and subject to the adoption of our Rights
Agreement. In April 1997, we paid a one time dividend to Telxon of $1.1 million.
This dividend was paid in connection with a reorganization of our Canadian
subsidiaries and is the only cash dividend we have paid.
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<PAGE> 22
CAPITALIZATION
The following table provides a description of our capitalization as of
December 31, 1998 and as it would have appeared if the initial public offering
had been completed on that date. We have assumed that the shares of common stock
sold in this offering by us are sold at a public offering price of $10 per share
after deducting underwriting discounts, commissions and estimated offering
expenses. You should read this table in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations and our
consolidated financial statements and the notes to those statements, all of
which are included later in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents................................ $ 5,760 $39,442
======= =======
Line of credit........................................... $ 2,518 $ --
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value: no shares authorized.... -- --
Common Stock, $.01 par value: 15,000,000 shares
authorized actual, and 60,000,000 shares authorized pro
forma as adjusted; 9,566,348 shares issued and
outstanding actual, and 13,566,348 shares issued and
outstanding pro forma as adjusted...................... 96 136
Additional paid-in capital............................... 16,623 52,783
Accumulated other comprehensive loss..................... (727) (727)
Accumulated deficit...................................... (2,363) (2,363)
------- -------
Total stockholders' equity..................... 13,629 49,829
------- -------
Total capitalization........................... $16,147 $49,829
======= =======
</TABLE>
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DILUTION
Our net tangible book value as of December 31, 1998 was $10.2 million or
$1.07 per share. Net tangible book value per share is equal to our total
stockholders' equity, less goodwill and other intangible assets, divided by the
number of shares of our common stock outstanding as of December 31, 1998. After
giving effect to our issuance and sale of 4.0 million shares of common stock in
this offering at an assumed offering price of $10 per share, and after deducting
underwriting discounts and commissions and estimated offering expenses, our
consolidated net tangible book value as of December 31, 1998 on a pro forma
basis would have been $46.4 million or $3.42 per share. This represents an
immediate and substantial increase in net tangible book value to existing
stockholders of $2.35 per share and an immediate and substantial dilution of
$6.58 per share to new public investors purchasing shares in this offering. The
following table illustrates the per share dilution to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Net tangible book value per share as of December 31,
1998................................................... $1.07
Increase per share attributable to this offering.......... $2.35
-----
As adjusted net tangible book value per share after this
offering.................................................. $ 3.42
------
Dilution per share to new investors......................... $ 6.58
======
Dilution as a percentage of the offering price.............. 65.8%
======
</TABLE>
The following table summarizes the difference between the existing
stockholders and the new investors with respect to the number of shares of
common stock purchased from us, the total consideration paid and the average
price paid per share. These calculations are made before deducting estimated
underwriting discounts and commissions and estimated offering expenses.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
-------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders... 9,566,348 71% $16,718,423 29% $ 1.75
New investors........... 4,000,000 29% $40,000,000 71% $10.00
---------- --- ----------- ---
Total......... 13,566,348 100% $56,718,423 100%
========== === =========== ===
</TABLE>
The foregoing excludes the underwriters' over-allotment option, outstanding
employee stock options to purchase 965,500 shares of common stock at $1.86 per
share, 577,500 shares at $3.50 per share and 400,000 shares at $9.00 per share,
and warrants to purchase 461,904 shares at $3.50 per share. New investors will
experience further dilution if any of these options or warrants are exercised.
23
<PAGE> 24
SELECTED FINANCIAL DATA
The following table highlights selected financial information but does not
necessarily include all of the financial information that is important to you
when considering purchasing shares of our common stock. You should also read
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements and the notes to those
statements, all of which appear later in this prospectus. We derived the data
for the annual periods presented from our consolidated financial statements
audited by PricewaterhouseCoopers LLP (or its predecessor, Coopers & Lybrand
L.L.P.). Our unaudited financial statements have been prepared on the same basis
as our audited financial statements and, in the opinion of our management,
include all adjustments, consisting only of normal recurring adjustments
necessary for a fair presentation of the information set forth therein except
for certain stock based compensation transactions discussed in Note 9 to the
consolidated financial statements. Our historical results are not necessarily
indicative of our operating results to be expected in the future.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------------------------------- -----------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenues:
Non-affiliate.......................... $ 2,091 $ 2,637 $ 5,456 $14,484 $20,249 $14,991 $19,825
Affiliate product...................... 16,203 30,539 38,867 46,844 19,104 17,478 6,525
Affiliate royalty...................... -- -- -- -- 5,781 3,540 6,063
-------- -------- -------- ------- ------- ------- -------
Total revenues................... 18,294 33,176 44,323 61,328 45,134 36,009 32,413
-------- -------- -------- ------- ------- ------- -------
Cost of revenues:
Non-affiliate.......................... 1,123 1,959 2,957 8,388 11,714 8,628 13,447
Affiliate.............................. 12,058 21,634 30,942 37,073 14,587 13,168 5,429
-------- -------- -------- ------- ------- ------- -------
Total cost of revenues........... 13,181 23,593 33,899 45,461 26,301 21,796 18,876
-------- -------- -------- ------- ------- ------- -------
Gross profit:
Non-affiliate.......................... 968 678 2,499 6,096 8,535 6,363 6,378
Affiliate product...................... 4,145 8,905 7,925 9,771 4,517 4,310 1,096
Affiliate royalty...................... -- -- -- -- 5,781 3,540 6,063
-------- -------- -------- ------- ------- ------- -------
Total gross profit............... 5,113 9,583 10,424 15,867 18,833 14,213 13,537
-------- -------- -------- ------- ------- ------- -------
Operating expenses:
Sales and marketing.................... 375 990 1,358 3,084 4,470 3,530 4,419
Research and development............... 4,124 4,887 5,977 5,311 5,683 3,853 4,733
General and administrative............. 2,053 1,774 2,697 3,547 3,304 2,179 2,578
Goodwill amortization.................. 807 866 866 866 866 649 649
-------- -------- -------- ------- ------- ------- -------
Total operating expenses......... 7,359 8,517 10,898 12,808 14,323 10,211 12,379
-------- -------- -------- ------- ------- ------- -------
Income (loss) from operations............ (2,246) 1,066 (474) 3,059 4,510 4,002 1,158
Interest expense (income), net........... (20) (26) (42) 131 46 54 4
-------- -------- -------- ------- ------- ------- -------
Income (loss) before income taxes........ (2,226) 1,092 (432) 2,928 4,464 3,948 1,154
-------- -------- -------- ------- ------- ------- -------
Provision for income taxes............... 778 2,580 2,196 2,039 1,963 1,619 721
-------- -------- -------- ------- ------- ------- -------
Net income (loss)................ ($ 3,004) ($ 1,488) ($ 2,628) $ 889 $ 2,501 $ 2,329 $ 433
-------- -------- -------- ------- ------- ------- -------
Net income (loss) per common share:
Basic.................................. ($0.37) ($0.18) ($0.33) $ 0.11 $ 0.31 $ 0.29 $ 0.05
======== ======== ======== ======= ======= ======= =======
Diluted................................ ($0.37) ($0.18) ($0.33) $ 0.11 $ 0.30 $ 0.28 $ 0.04
======== ======== ======== ======= ======= ======= =======
Weighted average shares used in
calculating net income (loss) per
share:
Basic.................................. 8,085 8,085 8,085 8,085 8,123 8,108 9,354
Diluted................................ 8,085 8,085 8,085 8,085 8,319 8,252 9,873
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31, 1998
------------------------------------- ------------------------
1995 1996 1997 1998 ACTUAL AS ADJUSTED(1)
------- ------- ------- ------- ------- --------------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents..... $ 620 $ 198 $ 1,609 $ 2,864 $ 5,760 $ 39,442
Working capital (deficit)..... 802 (2,233) (2,711) 4,321 9,615 43,297
Total assets.................. 26,799 22,517 19,201 23,633 26,549 60,231
Total long-term liabilities... -- 119 71 -- 2,518 --
Total stockholders' equity.... 7,697 5,313 5,342 11,598 13,629 49,829
</TABLE>
- ---------------
(1) This information has been adjusted as if the 4.0 million shares to be
sold by us in the offering had taken place at December 31, 1998, at an
assumed initial public offering price of $10 per share and after
deducting underwriting discounts and commissions and estimated offering
expenses.
25
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion contains forward-looking statements, including
discussions of trends in our business, strategy, liquidity and capital
expenditures, the terms and conditions under which components will be acquired,
our ability to obtain credit and service debt, competitive pressures in the
wireless LAN industry, changing interest rates, Year 2000 readiness and
regulatory matters and general economic conditions. Our actual results may
differ materially from those suggested by the forward-looking statements for
various reasons, including those discussed under "Risk Factors." The following
discussion and analysis should be read in conjunction with the consolidated
financial statements and accompanying notes appearing later in this prospectus.
OVERVIEW
Aironet designs, develops and markets high speed, standards-based wireless
local area networking solutions. Our products utilize advanced radio frequency
and data communication technologies to connect users to computer networks
ranging in size and complexity from enterprise-wide LANs to home networks. Each
of our product families is designed around our Microcellular Architecture, a
distributed wireless network designed to support the unique requirements of
mobile computing. Our wireless LAN solutions are used as extensions of existing
enterprise networks, enabling personal computer users to maintain a wireless
network connection anywhere throughout a building or around a campus. In
addition, our LAN adapters are configurable as peer-to-peer wireless networks
for providing shared access to files, peripherals and the Internet in small
office/home office environments.
Telxon has historically accounted for a significant portion of our total
revenues. As a result of their importance as a customer and our close
affiliation with them, we report revenues attributable to Telxon separately from
revenues attributable to our other customers. In recent periods, revenues
attributable to Telxon have decreased both in absolute amounts and as a
percentage of our total revenues due to changes in the terms under which we sell
our products to Telxon and an increase in sales to other customers. As a
percentage of total revenues, revenues from Telxon decreased from 76% in fiscal
year 1997 to 55% in fiscal year 1998. During the nine month period ended
December 31, 1998, revenues attributable to Telxon accounted for 39% of our
total revenues.
Since our fiscal quarter ended September 30, 1997, revenues attributable to
Telxon have consisted of royalty payments and product sales. At that time Telxon
began to pay us royalties in exchange for the right to manufacture and sell
selected legacy products which prior to that time we manufactured and sold to
them. This agreement was formalized in our March 1998 License, Rights and Supply
Agreement. Under the agreement, Telxon paid royalties to us on a "per unit"
basis, subject to an annual cap, which we recognized when Telxon shipped
licensed products to its customers. At the same time, Telxon continued to
purchase products not covered under the licensing agreement (including our newer
IEEE 802.11 products), which we recognized as affiliate revenues when we shipped
the products.
In March 1999, our license agreement with Telxon was amended to provide for
Telxon to make fixed monthly royalty payments to us regardless of the unit
volume manufactured and shipped by Telxon. These fixed royalty payments will
total $11.5 million for the two year period beginning in April 1999 and ending
in March 2001. We are recognizing the $11.5 million royalties ratably over that
period. Telxon's fixed monthly royalty payment will
26
<PAGE> 27
total $6.5 million in fiscal year 2000, and will decline to $5.0 million in
fiscal year 2001. Beginning in fiscal year 2002, Telxon may elect to pay either
a $4.0 million annual royalty or a per unit royalty.
The March 1998 agreement grants Telxon the right to purchase other products
(including our IEEE 802.11 products) from us at prices that are based on a fixed
mark-up of our manufacturing costs. To date, the prices and gross margins from
product sales to Telxon are below those that we derive from product sales to our
other customers. Telxon's right to purchase products on these price terms ends
four years from the date of this offering, and must be renegotiated in good
faith prior to that time. The March 1998 agreement may not be terminated by
either party and may not be assigned by Telxon without our prior written
consent.
Over the past several years, product sales to customers other than Telxon,
which we report as non-affiliate product revenues, have increased significantly.
This increase reflects the market acceptance of our newer, standards-compliant
products and growth of our customer base. Despite this growth, we continue to
experience quarterly fluctuations in revenues and profitability, due primarily
to timing and size of individual customer orders. We also experience
fluctuations in revenues and profitability during periods of new product
introduction and as the result of price reductions. During a new product launch,
we generally experience an acceleration of revenues from new product shipments
and higher expenses reflecting greater engineering, manufacturing and marketing
costs. In addition, because our industry is highly competitive, we expect
further erosion of prices of existing products as we introduce new products.
Virtually all of our sales are made indirectly through a network of
distributors, resellers and OEMs. We recognize revenues from sales to resellers
and OEMs at the time we ship the products. Our distributors, however, have
certain rights to return products. We either reserve against revenues from our
sales to distributors or defer revenue recognition, depending on the nature and
scope of the distributor's return right. We also reserve against revenue for
price protections, if provided to distributors.
In fiscal year 1997, we derived 5% of our total revenues from sales to
customers outside the United States, compared to 15% of our total revenues in
fiscal year 1998. During the nine month period ended December 31, 1998, 32% of
our total revenues were from sales to customers outside the United States. This
increase was due primarily to shipments made to our Japanese distributor for
sale to a large OEM customer during the fiscal quarter ended December 31, 1998.
Our foreign sales are made in U.S. dollars and therefore the adoption of the
Euro should not have a direct impact on our foreign exchange.
We anticipate recording non-cash compensation expense of $0.9 million in
fiscal year 1999, $0.4 million in fiscal year 2000 and $0.2 million in fiscal
year 2001 as a result of a March 1999 amendment to our 1996 Stock Option Plan
relating to certain vesting schedules. Also in March 1999, we vested a number of
options held by non-employees and anticipate recording a non cash compensation
expense of $0.9 million in fiscal year 1999.
We recorded non-cash compensation expense of $0.3 million in fiscal year
1998, and $0.8 million in the nine months ended December 31, 1998, and we
anticipate recording a non-cash compensation expense of $0.3 million in the
quarter ending March 31, 1999, as a result of a February 1998 loan from us to
our President and Chief Executive Officer relating to his exercise of an option
to purchase 200,000 shares of our common stock.
27
<PAGE> 28
RESULTS OF OPERATIONS
The following table presents, for the periods indicated, our operating
results expressed as a percentage of our total revenues.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, DECEMBER 31,
-------------------- ------------
1996 1997 1998 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Non-affiliate............................ 12% 24% 45% 42% 61%
Affiliate product........................ 88 76 42 48 20
Affiliate royalty........................ - - 13 10 19
--- --- --- --- ---
Total revenues...................... 100 100 100 100 100
--- --- --- --- ---
Cost of revenues........................... 76 74 58 61 58
--- --- --- --- ---
Gross profit............................... 24 26 42 39 42
--- --- --- --- ---
Operating expenses:
Sales and marketing...................... 3 5 10 10 14
Research and development................. 14 9 13 11 15
General and administrative............... 6 6 7 6 8
Goodwill amortization.................... 2 1 2 2 2
--- --- --- --- ---
Total operating expenses............ 25 21 32 29 39
--- --- --- --- ---
Income (loss) from operations.............. (1) 5 10 10 3
Interest expense (income), net............. - - - - -
--- --- --- --- ---
Income (loss) before income taxes.......... (1) 5 10 10 3
--- --- --- --- ---
Provision for income taxes................. 5 3 4 4 2
--- --- --- --- ---
Net income (loss).......................... (6)% 2% 6% 6% 1%
=== === === === ===
</TABLE>
The following table presents, for the periods indicated, costs of revenues
and gross profits specifically as a percentage of non-affiliate, affiliate
product and affiliate royalty revenues.
<TABLE>
<CAPTION>
NINE MONTHS
FISCAL YEAR ENDED ENDED
MARCH 31, DECEMBER 31,
-------------------- ------------
1996 1997 1998 1997 1998
---- ---- ---- ---- ----
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cost of revenues:
Non-affiliate............................ 54% 58% 58% 58% 68%
Affiliate product........................ 80 79 76 75 83
Affiliate royalty........................ - - - - -
Gross profit:
Non-affiliate............................ 46% 42% 42% 42% 32%
Affiliate product........................ 20 21 24 25 17
Affiliate royalty........................ - - 100 100 100
</TABLE>
28
<PAGE> 29
NINE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO NINE MONTHS ENDED DECEMBER 31,
1997
Revenues
Revenues consist of non-affiliate and affiliate revenues. Affiliate
revenues are derived from Telxon and consist of affiliate product revenues and
affiliate royalty revenues.
Non-affiliate. Non-affiliate revenues grew 32% from $15.0 million in the
nine months ended December 31, 1997 to $19.8 million in the nine months ended
December 31, 1998. Gains in non-affiliate revenues resulted primarily from an
increase in unit shipments to customers of our new IEEE 802.11 compliant
products. International revenues grew 102% from $5.1 million in the nine months
ended December 31, 1997 to $10.3 million in the nine months ended December 31,
1998, due primarily to a sale made to our Japanese distributor in connection
with a large OEM contract.
As a percentage of total revenues, non-affiliate revenues increased from
42% in the nine months ended December 31, 1997 to 61% in the nine months ended
December 31, 1998 as a result of lower revenues from Telxon and higher
non-affiliate sales.
Affiliate Product. Product revenues attributable to Telxon decreased 63%
from $17.5 million in the nine months ended December 31, 1997 to $6.5 million in
the nine months ended December 31, 1998. In the fiscal quarter ended September
1997, Telxon began to pay us royalties for the right to manufacture and sell
certain legacy products. As a result, in the nine month period ending December
31, 1998, a significant portion of the unit sales that would have been
recognized as product revenues were instead recognized as royalty revenues. This
resulted in a decrease in our total product revenues for that period.
Affiliate Royalty. Telxon royalty payments grew 74% from $3.5 million in
the nine months ended December 31, 1997 to $6.1 million in the nine months ended
December 31, 1998, due primarily to the shorter period in 1997 during which
royalties were paid.
Total Revenues. Total revenues decreased 10%, from $36.0 million in the
nine months ended December 31, 1997 to $32.4 million in the nine months ended
December 31, 1998.
Gross Profit
Gross profit is derived by subtracting the cost of operations (the cost of
revenues) from revenues. The cost of revenues consists primarily of expenses to
purchase fabricated components and subassemblies manufactured to meet our design
specifications, salaries and employee benefits for personnel to inspect,
assemble, configure and test products and to manage operations, and related
facility overhead.
Non-affiliate. Non-affiliate gross profit of $6.4 million did not change
from the $6.4 million reported in the nine months ended December 31, 1997. In
the fiscal quarter ended March 31, 1998, we began to ship new generation IEEE
802.11 compliant products to customers. During this start-up period, we incurred
increased costs primarily in supplier start-up fees and rework charges. This
added cost, together with lower margin sales to three large volume customers and
other expenses, offset gains in gross profit resulting from increased unit
shipments. As a result, our gross margin from non-affiliates decreased from 42%
in the nine months ended December 31, 1997 to 32% in the nine months ended
December 31, 1998.
29
<PAGE> 30
Affiliate Product. Gross profit from shipments of products to Telxon
decreased 75% from $4.3 million in the nine months ended December 31, 1997 to
$1.1 million in the nine months ended December 31, 1998. This decrease resulted
primarily from our agreement with Telxon, under which Telxon began to pay us
royalties for the right to manufacture our legacy products and ceased purchasing
those products from us. This change and Telxon's purchases of our new generation
IEEE 802.11 compliant products with associated higher start-up costs, reduced
our gross margin from Telxon sales from 25% in the nine months ended December
31, 1997 to 17% in the nine months ended December 31, 1998.
Affiliate Royalty. Each dollar of royalty revenues results in an equivalent
gross profit because there is de minimus cost of revenues associated with
royalties. Royalty gross profit grew 74% from $3.5 million in the nine months
ended December 31, 1997 to $6.1 million in the nine months ended December 31,
1998, due to the increase of Telxon's licensed production of products previously
purchased from us. The expenses relating to technology transfer and training
were expensed as incurred.
Total Gross Profit. Our total gross profit decreased 5% from $14.2 million
in the nine months ended December 31, 1997 to $13.5 million in the nine months
ended December 31, 1998. Our total gross margin increased from 39% in the nine
months ended December 31, 1997 to 42% in the nine months ended December 31,
1998.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist primarily of
sales and marketing salaries, sales commissions, bad debt allowance, product
advertising and promotion, travel and facility occupancy costs. Our sales and
marketing expenses increased 26% from $3.5 million in the nine months ended
December 31, 1997 to $4.4 million in the nine months ended December 31, 1998.
This increase resulted primarily from additions to sales and marketing
management and staff, higher commissions commensurate with higher sales to
resellers and expanded promotional programs. This increase was partially offset
by lower expenditures for outside services and operating supplies.
As a percentage of total revenues, sales and marketing expenses increased
from 10% in the nine months ended December 31, 1997 to 13% in the nine months
ended December 31, 1998. We expect that sales and marketing expenses will
increase in absolute dollars as we expand our branding program and further
develop our sales channels.
Research and Development. Research and development expenses consist
primarily of salaries and employee benefits to our technical employees who
develop our products, as well as costs for prototype development, operating
supplies, depreciation of equipment and amortization of software utilized in
research and development efforts. Research and development expenses increased
21% from $3.9 million in the nine months ended December 31, 1997 to $4.7 million
in the nine months ended December 31, 1998. This increase resulted primarily
from additions to engineering personnel and related expenses supporting an
expanded new product development program, as well as increases in prototype
development, operating supplies and occupancy costs. This increase was partially
offset by a decrease in the use of outside support services.
As a percentage of total revenues, research and development expenses
increased from 10% in the nine months ended December 31, 1997 to 15% in the nine
months ended December 31, 1998. We expect that research and development expenses
will increase in absolute dollars as we expand our offering of high speed
networking solutions.
30
<PAGE> 31
General and Administrative. General and administrative expenses consist
primarily of administrative salaries and wages, employee benefits and
incentives, legal, audit and occupancy expenses. Our general and administrative
expenses increased 18% from $2.2 million in the nine months ended December 31,
1997 to $2.6 million in the nine months ended December 31, 1998. This increase
primarily resulted from non-cash compensation expense relating to a loan
provided to an officer to exercise stock options. This increase was partially
offset by cost reductions relating to the consolidation of our Canadian
operations and administrative functions to our Akron, Ohio facilities and
reduction in facility occupancy and support costs. This decrease was partially
offset by increases in salaries and wages and outside service expenses including
increased expenditures for audit and security.
Provision for Income Taxes
Our effective income tax rate exceeds the statutory rate primarily because
(1) amortization of goodwill incurred in the acquisition of our Canadian
subsidiary Aironet Canada Limited is non-deductible, (2) a portion of our income
paid to Aironet Canada Limited under an inter-company license agreement is
subject to a higher Canadian tax rate, and (3) compensation expense resulting
from the exercise of certain stock options paid for by a note to us in February
1998, is non-deductible. As a result, our effective tax rate increased from 41%
for the nine months ended December 31, 1997 to 62% for the nine months ended
December 31, 1998.
FISCAL YEAR ENDED MARCH 31, 1998 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1997
Revenues
Non-affiliate. Non-affiliate revenues grew 39% from $14.5 million in fiscal
year 1997 to $20.2 million in fiscal year 1998. Gains in non-affiliate revenues
resulted primarily from increases in unit shipments to existing and new
customers. As a percentage of total revenues, non-affiliate revenues increased
from 24% in fiscal year 1997 to 45% in fiscal year 1998 as a result of lower
revenues from Telxon and higher non-affiliate sales.
Affiliate Product. Product revenues attributable to Telxon decreased 59%
from $46.8 million in fiscal year 1997 to $19.1 million in fiscal year 1998.
This resulted from our licensing agreement with Telxon.
Affiliate Royalty. Telxon royalty revenues totaled $5.8 million in fiscal
year 1998, while none were earned in fiscal year 1997, a period prior to our
licensing agreement.
Total Revenues. Our total revenues decreased 26%, from $61.3 million in
fiscal year 1997 to $45.1 million in fiscal year 1998.
Gross Profit
Non-affiliate. Non-affiliate gross profit increased 40% from $6.1 million
in fiscal year 1997 to $8.5 million in fiscal year 1998 due primarily to
increased unit shipments to non-affiliate customers. Our non-affiliate gross
margin remained constant at 42% of non-affiliate revenues.
Affiliate Product. Gross profit from shipments of products to Telxon
decreased 54% from $9.8 million in fiscal year 1997 to $4.5 million in fiscal
year 1998, as a result of our licensing agreement with Telxon. Our gross margin
from Telxon sales increased from 21% in fiscal year 1997 to 24% in fiscal year
1998 due primarily to changes in product mix.
31
<PAGE> 32
Affiliate Royalty. Affiliate royalty gross profit totaled $5.8 million, as
compared to no royalty gross profit in fiscal year 1997.
Total Gross Profit. Our total gross profit increased 18% from $15.9 million
fiscal year 1997 to $18.8 million in fiscal year 1998. Our total gross margin
increased from 26% in fiscal year 1997 to 42% in fiscal year 1998.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses increased 45% from
$3.1 million in fiscal year 1997 to $4.5 million in fiscal year 1998. This
increase primarily resulted from an increase in sales and marketing hiring,
salaries and wages and relocation expenses as we grew our sales organization to
support expanding sales to non-affiliates. This increase was partially offset by
reductions in expenditures for public relations services, collateral materials,
bad debt allowance and commissions.
Research and Development. Our research and development expenses increased
7% from $5.3 million in fiscal year 1997 to $5.7 million in fiscal year 1998.
This increase primarily related to increases in prototype development expenses
and added equipment rental, engineering salaries and related expenses, and
depreciation of equipment and amortization of software utilized in research and
development efforts. This increase was partially offset by lower spending on
parts and supplies utilized in our product development programs.
General and Administrative. Our general and administrative expenses
decreased 7% from $3.5 million in fiscal year 1997 to $3.3 million in fiscal
year 1998. This decrease primarily resulted from a decrease in general and
administrative salaries and wages and outside services as we completed the
consolidation of our Canadian operations and administrative functions at our
Akron, Ohio facilities. This decrease was partially offset by increases in
facility related occupancy expenses in Akron.
Provision for Income Taxes
Our effective income tax rate was 44% for the fiscal year ended March 31,
1998, compared to 70% for the fiscal year ended March 31, 1997. This decrease in
effective rate was primarily the result of an intra-company dividend from our
Canadian subsidiaries in the fiscal year ended March 31, 1997, which increased
our tax provision by $0.4 million due to Canadian tax withholdings. Also
contributing to the decrease was the relocation of our Canadian operations to
Akron, Ohio in the fiscal year ended March 31, 1998, with a resulting shift in
taxable income from Canada to the United States, with its lower corporate tax
rate.
FISCAL YEAR ENDED MARCH 31, 1997 COMPARED TO FISCAL YEAR ENDED MARCH 31, 1996
Revenues
Non-affiliate. Non-affiliate revenues grew 164% from $5.5 million in fiscal
year 1996 to $14.5 million in fiscal year 1997. Gains in non-affiliate revenues
resulted primarily from increases in unit shipments to existing and new
customers. As a percentage of total revenues, non-affiliate revenues increased
from 12% in fiscal year 1996 to 24% in fiscal year 1997.
Affiliate Product. Product revenues attributable to Telxon increased 20%
from $38.9 million in fiscal year 1996 to $46.8 million in fiscal year 1997,
reflecting increased unit demand from Telxon.
32
<PAGE> 33
Total Revenues. Our total revenues increased 38%, from $44.3 million in
fiscal year 1996 to $61.3 million in fiscal year 1997.
Gross Profit
Non-affiliate. Non-affiliate gross profit increased 144% from $2.5 million
in fiscal year 1996 to $6.1 million in fiscal year 1997, due primarily to
increased unit shipments. Our non-affiliate gross margin declined from 46% of
non-affiliate revenues in fiscal year 1996 to 42% of non-affiliate revenues in
fiscal year 1997 due primarily to expenses relating to the consolidation of our
Canadian operations.
Affiliate Product. Gross profit from shipments of products to Telxon
increased 24% from $7.9 million in fiscal year 1996 to $9.8 million in fiscal
year 1997, as a result of increased unit shipments. Our gross margin from Telxon
sales increased from 20% in fiscal year 1996 to 21% in fiscal year 1997 due
primarily to changes in product mix.
Total Gross Profit. Our total gross profit increased 53% from $10.4 million
fiscal year 1996 to $15.9 million in fiscal year 1997. Our total gross margin as
a percentage of total revenues increased from 24% in fiscal year 1996 to 26% in
fiscal year 1997.
Operating Expenses
Sales and Marketing. Our sales and marketing expenses increased 121% from
$1.4 million in fiscal year 1996 to $3.1 million in fiscal year 1997. This
increase primarily resulted from increases in staffing and sales and marketing
salaries and wages and employee benefits, sales commissions and bad debt
reserves as we continued to invest in personnel.
Research and Development. Research and development expenses decreased 12%
from $6.0 million in fiscal year 1996 to $5.3 million in fiscal year 1997. This
decrease primarily resulted from decreases in amortization of goodwill related
to non-compete agreements and patents from our acquisition of Aironet Canada
Limited, occupancy expenses and recruiting and relocation costs. This decrease
was partially offset by an increase in engineering salaries and related benefits
and incentives, and depreciation.
General and Administrative. Our general and administrative expenses
increased 30% from $2.7 million in fiscal year 1996 to $3.5 million in fiscal
year 1997. This increase primarily resulted from increased use of outside
services and increased salaries and wages, legal and occupancy expenses. This
increase was partially offset by decreases in amortization of patents and
non-compete agreements and foreign exchange differentials.
Provision for Income Taxes
Our effective income tax rate was 70% for the fiscal year ended March 31,
1997, compared to 509% for the fiscal year ended March 31, 1996. The Company's
effective tax rate for fiscal year 1996 was greater than the statutory rate
primarily due to the fact the Company generated significant U.S. net operating
losses, the benefit of which could not be recognized, and non-deductible
goodwill amortization. The decrease in our effective income tax rate in fiscal
year 1997 was in part due to our ability to more fully recognize the benefit of
the fiscal 1997 U.S. net operating losses and the utilization of certain foreign
tax credits related to our Canadian operations.
33
<PAGE> 34
QUARTERLY RESULTS OF OPERATIONS
The following tables present our condensed quarterly operating information
for each of the eight quarters ending March 31, 1999. The information for each
of these quarters is unaudited. You should also read "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our
consolidated financial statements and the notes to those statements, all of
which appear later in this prospectus. Our unaudited financial statements have
been prepared on the same basis as our audited financial statements and, in the
opinion of our management, include all adjustments, consisting only of normal
recurring adjustments necessary for a fair presentation of the information set
forth therein; except for certain stock-based compensation transactions
discussed in Note 9 to the consolidated financial statements. Our historical
results are not necessarily indicative of our operating results to be expected
in the future.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------------------------------------------------------
JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31,
1997 1997 1997 1998 1998 1998 1998 1999
-------- ------------- ------------ --------- -------- ------------- ------------ ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS DATA:
Revenues:
Non-affiliate......... $ 4,629 $ 5,166 $ 5,195 $ 5,259 $ 6,162 $ 5,049 $ 8,614
Affiliate product..... 12,717 3,583 1,179 1,625 1,434 2,470 2,621
Affiliate royalty..... -- 1,176 2,363 2,242 1,881 2,460 1,722
------- ------- ------- ------- ------- ------- ------- -------
Total revenues.... 17,346 9,925 8,737 9,126 9,477 9,979 12,957
------- ------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Non-affiliate......... 2,357 3,071 3,200 3,086 3,908 3,541 5,998
Affiliate............. 9,176 3,034 958 1,419 1,214 2,072 2,143
------- ------- ------- ------- ------- ------- ------- -------
Total cost of
revenues........ 11,533 6,105 4,158 4,505 5,122 5,613 8,141
------- ------- ------- ------- ------- ------- ------- -------
Gross profit:
Non-affiliate......... 2,272 2,095 1,995 2,173 2,254 1,508 2,616
Affiliate product..... 3,541 549 221 206 220 398 478
Affiliate royalty..... -- 1,176 2,363 2,242 1,881 2,460 1,722
------- ------- ------- ------- ------- ------- ------- -------
Total gross
profit.......... 5,813 3,820 4,579 4,621 4,355 4,366 4,816
------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Sales and marketing... 1,018 1,167 1,346 939 1,482 1,274 1,663
Research and
development......... 1,234 1,266 1,352 1,831 1,624 1,527 1,582
General and
administrative...... 837 781 562 1,124 1,035 842 701
Goodwill
amortization........ 216 216 216 218 216 216 217
------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses........ 3,305 3,430 3,476 4,112 4,357 3,859 4,163
------- ------- ------- ------- ------- ------- ------- -------
Income from
operations............ 2,508 390 1,103 509 (2) 507 653
------- ------- ------- ------- ------- ------- ------- -------
Interest expense
(income), net......... 6 32 16 (8) (10) -- 14
------- ------- ------- ------- ------- ------- ------- -------
Income before income
taxes................. 2,502 358 1,087 517 8 507 639
------- ------- ------- ------- ------- ------- ------- -------
Provision for income
taxes................. 1,026 146 447 344 5 317 399
------- ------- ------- ------- ------- ------- ------- -------
Net income.............. $ 1,476 $ 212 $ 640 $ 173 $ 3 $ 190 $ 240
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
34
<PAGE> 35
Our revenues and operating results are subject to quarterly and other
fluctuations from a variety of factors, including the size, timing and
scheduling of orders and increased expenses to support expansion of our sales
channels. Additional factors which can affect our quarterly results include
changes in product mix; our ability to develop, introduce and market new
products in a timely and cost-effective manner; new product announcements and
introductions by our competitors; market acceptance of new products and
enhancements; the rate at which the market adopts new technologies and IEEE
802.11 and subsequent standards; changes in our pricing or that of our
competitors; variability of component and subassembly costs and availability,
especially with respect to sole-sourced components. As a result, quarter to
quarter comparisons are not necessarily meaningful and may not be a reliable
indicator of our future performance.
LIQUIDITY AND CAPITAL RESOURCES
During the periods presented, we have financed our operations primarily
through cash generated from operating activities, the sale of equity securities
and, prior to March 1998, through funds provided by Telxon in the form of
inter-company advances. Since March 1998, we ceased receiving funding from
Telxon. Telxon is not obligated to provide additional funds to finance our
operations.
At December 31, 1998, we had cash and cash equivalents of $5.8 million. At
that time, we had $2.5 million outstanding under a $5.0 million line of credit.
Amounts outstanding under this line of credit bear interest at LIBOR plus 2% or
the bank's prime rate. At December 31, 1998, the applicable rate was 7.06%.
Outstanding amounts are uncollateralized, and credit availability under the line
of credit is based upon a formula comprised of accounts receivable and
inventory. At December 31, 1998, an additional $2.5 million was available under
this line of credit, which expires in July 2000, subject to renewal provisions.
Operating Activities. In the nine months ended December 31, 1998,
operations provided $2.7 million of cash. In addition to net income of $0.4
million, contributions to the increase in cash included a reduction of accounts
and other receivables, offset by cash used to fund increases in receivables from
Telxon, increased inventory, and decreases of payables due Telxon. In the fiscal
year ended March 31, 1998, operations provided $0.1 million of cash primarily
due to increases in accounts and other receivables, decreases in accounts
payable and income taxes payable offset by cash from net income of $2.5 million.
In the fiscal year ended March 31, 1997, operations provided $12.4 million of
cash, primarily from net income of $0.9 million, decreases in receivables due
from Telxon, decreases in inventory, and increases in accounts payable and other
liabilities, which amounts were offset by increases in non-affiliate accounts
receivable. In the fiscal year ended March 31, 1996, operations provided $3.0
million of cash, primarily from decreases in receivables due from Telxon, offset
by a net loss of $2.6 million and cash used to fund increases in inventory and
increases in non-affiliate accounts receivable and other receivables. The
increase in non-affiliate accounts receivable was primarily due to growth in our
business. To the extent that we experience further growth in operations,
additional cash will be needed to fund increases in accounts receivables and
inventory.
Investment Activities. Investment activities totaled $0.9 million in the
nine months ended December 31, 1998, $1.7 million in the fiscal year ended March
31, 1998, $2.0 million in fiscal year 1997 and $1.9 million in fiscal year 1996.
Cash was used in each of these periods primarily to fund purchases of
engineering, product testing and laboratory equipment and software.
35
<PAGE> 36
Financing Activities. Financing activities provided $1.1 million in the
nine month period ended December 31, 1998, primarily as a result of our
borrowing $2.5 million under our line of credit. Financing activities provided
$2.9 million in fiscal year 1998, primarily as a result of $1.6 million in net
proceeds from the sale of common stock (including sales of stock on the exercise
of employee stock options) and an increase of $2.3 million in payables from
Telxon, offset in part by a $1.1 million dividend distribution to Telxon. The
Telxon payables increase and the dividend distribution to Telxon was paid in
connection with a reorganization of our Canadian subsidiaries, in which Telxon's
Canadian subsidiary redeemed its stock which had been owned by one of our
Canadian subsidiaries from a prior restructuring of Telxon's Canadian
subsidiaries. Financing activities utilized cash of $9.0 million in the fiscal
year ended March 31, 1997, and $1.6 million in the fiscal year ended March 31,
1996, as a result of reductions of accounts payable to Telxon.
We believe that cash and cash equivalents balances generated from
operations and the net proceeds of this offering will be sufficient to meet our
operating and capital expenditure requirements for at least the next twelve
months. To the extent necessary, we may also satisfy capital needs through bank
borrowings and capital leases if such resources are available on satisfactory
terms. We currently anticipate capital expenditures of $2 million in fiscal year
2000. We may also from time to time consider the acquisition of complementary
technologies, though we have no present commitments or agreements with respect
to any such acquisitions. Any such acquisitions could be of a size that would
require us to raise additional funds through the issuance of additional equity
or debt securities. There can be no assurance that such funds, if required,
would be available on terms acceptable to us, if at all.
YEAR 2000 READINESS DISCLOSURE
Year 2000 issues result from the fact that many computer programs were
written with date-sensitive codes that utilize only the last two digits of a
date (rather than all four digits) to refer to a particular year. As the year
2000 approaches, these computer programs may be unable to process accurately
date-dependent information, as a program might interpret the year 2000 as 1900.
The potential for Year 2000 issues arise primarily in three areas: (i) the
products we sell, which might be date dependent and, as a result, improperly
operate; (ii) our dependence on vendors and contract manufacturers for
components and subassemblies that might be impacted by the Year 2000 issues, and
their inability to provide us with goods on a timely basis and within
specifications due to their unresolved Year 2000 issues; and (iii) our internal
use of hardware or software computing resources which improperly recognize the
true date and which could cause us to, among other things, improperly process
customer orders or business information, and could result in failure of our
internal systems.
Readiness Assessment. In the fiscal quarter ended March 31,1999, we hired
an independent Year 2000 consultant to augment our internal efforts to complete
a plan for systematically assessing our Year 2000 exposure. That plan has been
completed, and we are now taking actions consistent with that plan.
Our Products. We found that our products are not date-dependent, and we
will be making no Year 2000 product revisions.
Vendors. We have begun, but have not yet completed, reviewing our vendors'
and contract manufacturers' Year 2000 readiness.
36
<PAGE> 37
Internal Systems. Our assessment of internal systems has revealed no
material Year 2000 issues; however, we continue to evaluate and test our
internal systems.
Cost of Remediation. We currently estimate that the our Year 2000
assessment efforts and correction of any internal Year 2000 issues identified
during our assessment, if any, will total less than $100,000; however, in the
event we discover a Year 2000 issue which was previously unanticipated, we could
incur costs far in excess of this amount which would have a material adverse
effect on our business and financial results.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 problems that could materially adversely affect our
business operations. However, we believe that it is not possible to determine
with complete certainty that all Year 2000 problems affecting us have been
identified or corrected. The number of devices and systems that could be
affected and the interactions among these devices and systems are too numerous
to address. In addition, no one can accurately predict which Year 2000 problem-
related failures will occur or the severity, timing, duration or financial
consequences of these potential failures. As a result, we believe that a
significant number of operational inconveniences and inefficiencies for us, our
contract manufacturers and our customers that will divert management's time and
attention, financial and human resources from ordinary business activity.
Contingency Plans. We are currently discussing contingency plans to be
implemented if our efforts to identify and correct Year 2000 problems are not
effective. We expect to formalize and test our contingency plans when our Year
2000 assessment is complete. Depending on the systems affected, these plans
could include:
- accelerated replacement of affected equipment or software;
- short to medium-term use of backup equipment and software or other
redundant systems;
- increased work hours for our personnel or the hiring of additional
information technology staff; and
- the use of contract personnel to correct, on an accelerated basis, any
Year 2000 problems that arise or to provide interim alternate solutions
for information system deficiencies.
Our implementation of any of these contingency plans could have a material
adverse effect on our business, financial condition and results of operations.
Disclaimer. This discussion of our efforts and expectations relating to
Year 2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance, and the level of incremental costs associated therewith, could
be adversely affected by, among other things, the availability and cost of
contract personnel and external resources, third-party suppliers' ability to
modify proprietary software and unanticipated problems not identified in the
ongoing compliance review.
EFFECTS OF RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes standards of
disclosure and financial statement display for reporting total comprehensive
income and its individual components. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The adoption of this statement in fiscal year
1999 had no effect on the consolidated financial
37
<PAGE> 38
statements presented elsewhere in this prospectus, except that foreign currency
translation adjustments during fiscal year 1996 would be an element of
comprehensive income (loss).
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued. SFAS No. 131 supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," and requires
companies to report financial and descriptive information about their reportable
operating segments. The financial information is required to be reported on the
same basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments. This statement is effective for
periods beginning after December 15, 1997, with interim information required for
the year following adoption. SFAS No. 131 will have no impact on our
consolidated financial position, results of operations or cash flows.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2 "Software Revenue
Recognition," which is effective for transactions entered into in fiscal years
beginning after December 15, 1997. SOP 97-2 revises certain standards for the
recognition of software revenue, and we do not expect it to have a material
effect on our financial reporting. The effect of SOP 97-2 on our future
operating results is dependent on the nature and terms of the individual
software licensing agreements that we entered into in fiscal year 1999 and those
that we enter into thereafter, if any.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 requires the
capitalization of certain expenditures for software that is purchased or
internally developed for use in the business. We believe that the prospective
implementation of SOP 98-1 in fiscal year 2000 is likely to result in some
additional capitalization of software expenditures in the future. However, the
amount of such additional capitalized software expenditures cannot be determined
at this time.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." The SOP provides guidance on financial reporting of costs
of start-up activities. SOP 98-5 requires such costs to be expensed instead of
being capitalized and amortized. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. We believe the implementation of SOP 98-5 in
fiscal year 2000 will not have a material impact on our financial reporting.
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. We
will adopt SFAS No. 133 in fiscal year 2000 and do not expect the impact of
adoption to be material.
MARKET RISK
We are exposed to the impact of interest rate changes and, to a lesser
extent, foreign currency fluctuations. We have not entered into interest rate or
foreign currency transactions for speculative purposes or otherwise. Our foreign
currency exposures were immaterial at December 31, 1998.
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<PAGE> 39
Our exposure to interest rate changes results from our variable-rate line
of credit and prior to March 31, 1998 from our interest-bearing advances from
Telxon. At December 31, 1998, we had $2.5 million due July 1, 2000 bearing
interest at either the bank's prime rate or LIBOR plus 2%. A one percentage
point change in the weighted average interest would not have a material impact
on our annual interest expense.
39
<PAGE> 40
BUSINESS
COMPANY OVERVIEW
We design, develop and market high speed, standards-based wireless local
area networking solutions. Our products utilize advanced radio frequency and
data communication technologies to connect users to computer networks ranging in
size and complexity from enterprise-wide LANs to home networks. Each of our
product families is designed around our Microcellular Architecture, a
distributed wireless network designed to support the unique requirements of
mobile computing. Our wireless LAN solutions are used as extensions to existing
enterprise networks, enabling personal computer users to maintain a wireless
network connection anywhere throughout a building or around a campus. In
addition, our LAN adapters can be configured as peer-to-peer wireless networks
for providing shared access to files, peripherals and the Internet in small
office/home office environments.
We offer comprehensive wireless LAN solutions to our customers through a
broad product portfolio, including PC Cards, PCI and ISA network interface
cards, access points, and network management and driver software. As a major
contributor to, and proponent of the IEEE 802.11 industry standard for wireless
LANs, we have designed our primary products to interoperate with other
standards-based products. Our IEEE 802.11 based products operate in the
unlicensed 2.4 GHz radio frequency band and use either our Direct Sequence or
Frequency Hopping spread spectrum radio technology. As a result, we are able to
offer our customers the wireless LAN solution best suited to their specific
environment and applications.
In December 1998, we introduced and began shipping our high speed wireless
LAN solution, the 4800 Turbo DS series, featuring a maximum data rate of 11
Mbps. This product line provides bandwidth sufficient for data-intensive
applications and high speed Internet access, as well as emerging applications
such as streaming video and Voice-over-IP. The 4800 Turbo DS series utilizes 2.4
GHz Direct Sequence spread spectrum radio technology and is designed to comply
with the proposed IEEE 802.11b High Rate Direct Sequence extension to the
industry's IEEE 802.11 wireless LAN standard. In April 1999, our 4800 Turbo DS
received Network Magazine's "Product of the Year" award in the wireless
networking category.
We also develop and market point-to-point and point-to-multipoint bridge
products for fixed wireless networking between buildings. Transmitting data at
rates up to 11 Mbps over line-of-site distances measured in miles, our wireless
bridge products provide users with a cost effective alternative to leased
wirelines for high speed network and Internet access. Our wireless bridges
utilize Direct Sequence spread spectrum radio technology and operate in the
unlicensed 2.4 GHz radio frequency band.
We sell our wireless LAN and bridge products in domestic and international
markets through an indirect channel of distributors, resellers and OEMs.
INDUSTRY BACKGROUND
Enterprise-wide computing has evolved in recent years from highly
centralized computing environments to widely distributed client/server networks
that frequently include multiple interconnected LANs. Local area networks offer
increased productivity and reduced systems costs by enabling users to share
information, applications and resources such as printers, file servers and
communication devices. Today, businesses and organizations are
40
<PAGE> 41
increasingly reliant upon LANs as the primary infrastructure for connecting PC
users to the enterprise network. Moreover, the Internet is redefining how
businesses, organizations and individuals communicate and transact business.
Modern enterprises are providing Internet access through enterprise networks to
LAN users for applications such as e-mail, e-commerce and information browsing.
These trends, coupled with pervasive computing through all levels of the
enterprise, are generating an increased dependence on local area network
connectivity.
Simultaneous with the growth of LANs and the Internet, there has been a
shift in demand for personal computer platforms from desktop to portable
computers. Recent advances in computer processing power, display and battery
technology and packaging size, combined with lower costs, have narrowed
performance disparities between desktop and notebook computers. As a result of
the improvements in portable computers and other mobile devices, workers are
able to carry their computer and communication resources with them as they move
around their work environment.
Today, most businesses and organizations that use local area networks
operate them over wired infrastructures, such as Ethernet, where the network
connection point is a fixed outlet, typically located along an office wall,
floor or cubicle. In these environments, PCs utilize LAN adapters with cables
tethered to the outlet to establish a physical connection to the network.
Movement of the client computer, whether a desktop or portable device, is
restricted to the length of the tethered cable or the location of alternative
outlets if the user wants to maintain communications with the enterprise
network. No matter how portable the computing device, connectivity to the
enterprise network is limited by the need for a cable.
Wireless local area networks provide flexible network connectivity, making
it possible for mobile workers to stay connected to their network or the
Internet as they move freely within a building or around a campus. By using
radio frequency and data communication technologies, wireless LAN solutions
eliminate the need for a tethered cable when connecting to the network. Although
well suited for mobile computing, wireless LANs also offer the added benefit of
reducing the costs of networking desktop and other computer devices in
environments where network configuration changes are frequent or the premises
are difficult to wire. Installing or reconfiguring a wired LAN can be
labor-intensive, time-consuming and disruptive. Users of wireless networks,
however, can quickly set up and subsequently reconfigure the workplace without
having to rewire existing networks, avoiding significant additional costs.
Over the past several years, many organizations have benefitted from
wireless networking solutions. These solutions enable mobile computing, reduce
network infrastructure costs and improve overall operational efficiency.
Wireless LANs have been widely adopted in several vertical markets, such as the
retail, warehousing and distribution industries. The use of portable wireless
devices, such as handheld and pen-based computers, allow mobile workers in these
industries to collect data, manage inventory, track assets and process
transactions in real time and with increased accuracy and convenience, thereby
improving productivity and customer satisfaction.
Widespread acceptance of wireless networks beyond existing vertical markets
has been limited to date. Until recently, wireless networks lacked the speed
required for data- and graphics-intensive applications to operate effectively.
In addition, early wireless LAN users implemented proprietary vendor solutions
due to a lack of standards within the industry, precluding interoperability
between products from different vendors. Moreover, early wireless LAN adapters
used proprietary form factors and unique hardware and software interfaces,
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<PAGE> 42
requiring manufacturers of portable computers to expend considerable time and
engineering resources to design-in an OEM product.
Recent developments, including the wide adoption of the Institute of
Electrical and Electronic Engineers 802.11 industry standard for wireless LANs,
the availability of faster data rates of at least 10 Mbps and the availability
of wireless PC Card adapters, have collectively resulted in the emergence and
growth of wireless LAN solutions in broader networking markets. These same
factors have also contributed to the growth of wireless networks in traditional
vertical markets, as well as new vertical markets such as healthcare and
education. Today, the desire for pervasive network and Internet connectivity,
the preference for mobile computing and the need to deploy and reconfigure
networks rapidly and cost-effectively are all factors contributing to the
increase in market demand for wireless LAN solutions.
According to International Data Corporation, an information technology
research firm, worldwide wireless LAN product shipments are projected to
increase at a 30% compound annual growth rate from 866,000 units in 1997 to over
4,000,000 units by 2003. IDC projects wireless LAN revenues to reach $1.6
billion in 2003.
THE AIRONET SOLUTION
We are a leading provider of high speed wireless LAN and bridge products.
Our wireless LAN products provide wireless network connectivity and Internet
access to personal computer users within a building or campus environment. Our
wireless point-to-point and point-to-multipoint bridge products provide fixed
wireless networking between buildings. We believe that our products offer the
following benefits:
High Speed. Aironet is the first to develop and ship wireless LAN and
bridge products operating at Ethernet-like speeds of 11 Mbps in the unlicensed
2.4 GHz radio frequency band. We accomplished this industry milestone by
combining our proprietary medium access controller, or MAC, technology with our
high performance 2.4 GHz Direct Sequence spread spectrum radio and offering it
in a PC Card (Type II) form factor. Both our high speed wireless LAN and bridge
products provide broadband support for data-intensive applications and Internet
access, as well as emerging applications such as streaming video and Voice-
over-IP.
Mobile Computing. Our products are designed around our Microcellular
Architecture, a distributed wireless network designed to support the unique
needs of mobile computing. Comprised of intelligent access points, repeaters,
bridges and a wide variety of client adapters, our Microcellular Architecture
provides a radio frequency coverage area throughout a building or campus
environment, in which portable computer users can move freely while maintaining
a seamless connection to the enterprise network and Internet. Special features
supporting mobile computing include seamless roaming, advanced power management,
mobile IP addressing and dynamic load balancing.
Adherence to Standards. Our primary wireless LAN products are designed to
comply with the IEEE 802.11 wireless LAN standard, as well as other industry
standard networking hardware and software interfaces. By adhering to industry
standards, we can provide our customers with products designed to interoperate
with other standards-based products. We are actively involved in standards
setting organizations and are participating in the effort to formulate future
additions to the IEEE 802.11 standard.
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<PAGE> 43
Ease of Use. We support major network operating systems, standard software
and hardware interfaces and network protocols, such as TCP/IP, allowing our
products to be integrated easily into existing network and Internet
infrastructures. Our wireless LAN adapters are designed with industry standard
hardware and software interfaces for ease of installation and use. Network
managers can install our plug-and-play wireless solutions to extend,
re-configure or re-deploy existing networks rapidly and economically. Our
network management software suite utilizes standard web-browsers, which allow
users to adjust client configurations, perform diagnostics and monitor wireless
network performance. In addition, network administrators can use their existing
enterprise network management tools to manage their Aironet wireless
infrastructure.
Comprehensive Solutions. We offer comprehensive solutions to our customers
through a broad product portfolio, which includes PC Cards, PCI and ISA network
interface cards, access points, bridges and network management and driver
software. We develop and sell wireless LAN product families with either the
Frequency Hopping or Direct Sequence spread spectrum radio technologies
specified in the IEEE 802.11 standard. As a result, we can provide the most
appropriate solutions to our customers based on their environments and
applications.
Lower Costs of Ownership. With the introduction of our high speed 4800
Turbo DS wireless LAN solution, our customers benefit from a substantial
price/performance improvement compared to earlier generations of our wireless
LAN products. In addition, this price/performance improvement makes our high
speed wireless LAN solution a compelling alternative for a growing base of
traditionally wired network applications. Our solutions also can provide total
cost savings over time compared to wired alternatives in environments where
network connections are frequently relocated.
STRATEGY
Our objective is to become the dominant worldwide developer and provider of
high speed wireless LAN products. We intend to achieve our objective by
implementing the following strategies:
Leverage Our Technology Leadership. We believe our Microcellular
Architecture, MAC chip and 2.4 GHz spread spectrum radio technologies provide us
with significant competitive advantages. As a result of these technologies, we
are the first company to provide 11 Mbps of bandwidth packaged in a single-piece
PC Card and operating in the unlicensed 2.4 GHz radio frequency band, enabling
users to maintain a wireless Ethernet-like connection anywhere throughout a
building or around a campus. We intend to devote substantial research and
development resources to maintain our technology leadership in the areas of
speed, throughput, range and network management software.
Strengthen Brand Awareness. We believe there are significant opportunities
to strengthen brand awareness of our products. We will continue to promote the
Aironet brand as synonymous with high speed, cost-effective wireless LAN
products that are standards-based, easily deployable and highly reliable. We
intend to strengthen brand awareness for our products through marketing
programs, trade advertising, participation in trade shows and public relations
activities. We believe that through building our brand, we can achieve increased
product acceptance, enhanced customer loyalty and sales growth.
Deliver Standards Based Solutions. We believe that the IEEE 802.11 wireless
LAN standard is a significant driver in the growth of the wireless LAN market.
We actively
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<PAGE> 44
participate in workgroups that define other wireless network standards to
influence the direction of these standards. We believe that widespread
acceptance of industry standards leads to broader market penetration through
improved ease of use, reduced market risk and lower product costs. We intend to
continue to invest in developing standards-based solutions across our product
lines.
Expand Channel Distribution. To better capitalize on market opportunities,
we intend to strengthen relationships with existing channel partners and add new
channel partners, both in domestic and international markets. We currently
market our products through an indirect channel of distributors, resellers and
OEMs. We believe that marketing our products through channel partners enables us
to rapidly penetrate our target markets and gain market share, while limiting
our sales, marketing and distribution costs. In addition, we are committed to
providing a high level of channel partner support and training.
WIRELESS LANS
Wireless LANs use radio frequency and data communication technologies to
provide wireless network connectivity and Internet access to personal computer
users within a building or campus environment. Our primary wireless LAN products
use our high performance 2.4 GHz spread spectrum radio and MAC chip technologies
to transmit and receive data over the airwaves.
Network Configurations
Our wireless LANs provide the functionality of wired LANs and can be
implemented as stand alone, peer-to-peer networks or as extensions to existing
wired enterprise networks. Our wireless LAN products allow users to install or
re-deploy PCs, handheld devices and peripherals anywhere in-building or on
campus.
The simplest wireless LAN
configuration is a
peer-to-peer network in which
PCs, peripherals and
communication devices
communicate with each other
through wireless client
adapters. Our client adapters
include PC Cards for portable
computers such as notebooks
and handheld computers and
ISA or PCI network interface
cards for desktop and server
PCs. These flexible
peer-to-peer networks require
little administration
and accommodate a variety of temporary or full-time workgroup configurations.
Our peer-to-peer wireless LANs can support many applications in the small
office/home office environment, such as multiple users sharing files, printers
and Internet access.
[INTERNET GRAPHIC]
A more complex configuration is the wireless extension of an existing wired
enterprise network. In such a configuration, physical connections to wired
Ethernet or Token Ring networks are provided by access points, which function as
links between the wired and wireless networks. These configurations provide
users wireless access to the network through
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client adapters which communicate with access points. Any wireless client
adapter within range of an access point can communicate with any other wireless
client adapter or any of the resources available on the enterprise network.
Each access point provides a wireless coverage area called a "microcell."
In an enterprise networking environment, wireless installations may have
multiple access points installed throughout the premises to provide continuous
coverage so that the entire facility is wirelessly enabled. When multiple
Aironet access points are used in the same system, mobile clients may "roam"
freely throughout the wireless RF coverage area with access points transparently
managing the hand-offs between microcells.
[DEVICE GRAPHIC]
IEEE 802.11 Wireless LAN Standard
We believe that the IEEE 802.11 wireless LAN standard is a significant
driver in the development of the wireless networking market. The IEEE 802.11
standard was ratified in June 1997 and was the first internationally recognized
standard for wireless LANs. This standard specifies a single medium access
control protocol and two types of 2.4 GHz spread spectrum radios, Direct
Sequence and Frequency Hopping, operating at data rates of 1 or 2 Mbps.
Similar to the IEEE 802.3 (Ethernet) and IEEE 802.5 (Token Ring) standards,
the IEEE 802.11 wireless LAN standard provides a framework for interoperability
and quality, enabling customers to mix equipment from different vendors in a
single wireless network. We believe that widespread acceptance of industry
standards leads to broader market penetration through improved ease of use,
reduced market risk and lower product costs.
The IEEE 802.11 wireless LAN organization is now working on higher speed
extensions to the IEEE 802.11 standard. The new High Rate Direct Sequence
standard, IEEE 802.11b, currently pending ratification, specifies data rates of
5.5 and 11 Mbps, in addition to the originally specified 1 and 2 Mbps, and
operation in the unlicensed 2.4 GHz band using a
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<PAGE> 46
Direct Sequence spread spectrum radio. In December 1998, we began shipping our
4800 Turbo DS series, which is designed to comply with the proposed IEEE 802.11b
standard and features an 11 Mbps data rate.
AIRONET TECHNOLOGY
We are dedicated to developing leading technology solutions for the
wireless networking market. Our technology leadership can be attributed to our
Microcellular Architecture, proprietary MAC chip, high performance 2.4 GHz
spread spectrum radios and networking software.
Aironet Microcellular Architecture
Each of our product families is designed around our Microcellular
Architecture, a distributed wireless network designed to support the unique
requirements of mobile computing, including value added features and services
that operate in conjunction with the IEEE 802.11 standard. This architecture
defines how wireless client adapters and access points interact to deliver
continuous network connections to mobile users and transparently integrates the
wireless LAN into existing enterprise networks.
Our Microcellular Architecture includes several important capabilities that
support a complex enterprise network infrastructure, including:
- Roaming. Our patented access point hand-off protocol enables mobile
clients to remain seamlessly and reliably connected to the network as
they move freely within a building or around a campus.
- Power Management. Our wireless PC Card client adapters are designed
specifically for battery-powered portable computers and allow a wireless
client to operate in a low-power mode to conserve battery life, while
maintaining a continuous connection to the network.
- Load Balancing. Our wireless client adapters include an algorithm to
identify the access point with the least load and to distribute network
bandwidth across multiple overlapping access points, thereby optimizing
network performance.
- Wireless Repeater. Our access points can be configured to communicate
wirelessly with other access points, further extending the radio
frequency coverage of the wireless network.
- Scalability. Multiple access points can be deployed to operate
simultaneously in overlapping coverage areas thereby increasing aggregate
network capacity.
- Wireless Bridging. Our building-to-building bridges can be configured to
operate as access points and wireless repeaters. This makes it possible
to connect remote sites into a single wireless network, enabling a user
to roam between buildings in a campus environment.
- Fault Tolerance. Our access points provide a redundant wireless backbone
by automatically identifying malfunctioning network links, removing
faulty links from the system and re-routing traffic to properly
functioning links.
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MAC Chip Technology
Our proprietary MAC chip is a custom Reduced Instruction Set Computer, or a
custom RISC protocol processor, that is optimized for high speed wireless packet
communications. This MAC chip controls the IEEE 802.11 protocol, our spread
spectrum radios and our host bus interfaces. It has separate hardware contexts
to support the real time processing of prioritized tasks within the protocol.
Our MAC chip architecture provides a faster interrupt response time than a
traditional microprocessor controller and is optimized for the real time
requirements of a wireless MAC protocol. The MAC chip architecture enables
changes that would normally require hardware implementation to be handled in
firmware. In addition, this architecture allows our MAC chip to run at lower
clock rates, improving power efficiency. By controlling the solution at this
level, we have the ability to implement value-added features in our wireless
client adapters. In addition, the power and programmability of our MAC chip
enables us to integrate a high level of functionality in the client adapter
resulting in higher throughput, greater driver efficiency and improved overall
performance.
Spread Spectrum Radio Technology
We have been designing high performance 2.4 GHz spread spectrum radios
since 1993. We were one of the first wireless LAN vendors to ship 2.4 GHz Direct
Sequence spread spectrum products in 1994, and we began shipping Frequency
Hopping spread spectrum products in the 2.4 GHz band in 1996. We continue to
design both Frequency Hopping and Direct Sequence spread spectrum products. In
March 1998, we received FCC approval for 11 Mbps Direct Sequence products
operating in the unlicensed 2.4 GHz band. In February 1999, we were the first to
receive FCC approval for 11 Mbps products using CCK modulation, the modulation
technique in the proposed IEEE 802.11b High Rate Direct Sequence extension to
the IEEE 802.11 standard.
Our spread spectrum technology implements and meets or exceeds interference
rejection, receiver sensitivity and noise tolerance specifications of the IEEE
802.11 standard. That ensures improved range and robust wireless operation for
our products in today's increasingly RF populated environment.
We design our products for worldwide use and have radio testing and
qualification expertise that has resulted in timely radio approvals in over 60
countries around the world.
Wireless Networking Software
Access Point Software. We have developed extensive software for our access
points. This software includes network bridging, routing and management
functions based on the TCP/IP protocol stack. Our access points include an HTTP
server that allows a network manager to upgrade firmware and manage access
points using a standard web browser.
Network Device Drivers. We develop our NDIS, ODI and packet driver software
for a majority of network protocols and operating systems. Operating system
support includes Microsoft Windows 95/98/NT, and Windows CE, DOS, Novell
NetWare, Macintosh O/S, Linux and other Unix variants. We have designed driver
extensions that improve the performance of wireless adapters in a Windows
environment, and that support our site survey, configuration and diagnostic
utilities.
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PRODUCTS
We offer comprehensive wireless LAN solutions to our customers through a
broad product portfolio including PC Cards, PCI and ISA network interface cards,
access points and network management and driver software.
Access Points
Our access points act as intelligent links between wired and wireless
networks and manage the wireless client traffic in their coverage area. Our
access points simultaneously support multiple clients and provide wireless
coverage with a typical indoor range of 125 to 350 feet, depending on the
environment and application. Access points allow wireless clients to appear to
be the same as wired clients to everyone on the network.
Our access points use a "store and forward" technique to enable wireless
clients to maintain a continuous network connection as they roam from one access
point coverage area to another, while they are in a power saving mode and if
they temporarily move outside the coverage area. Our patented access point
hand-off protocol enables mobile clients to remain seamlessly and reliably
connected to the network as they move freely around a building or a campus. Our
access points store network traffic for clients when they are unreachable, such
as when a portable computer is in power saving mode or temporarily outside the
coverage area. In addition, our access points can be configured to act as
wireless repeaters, further extending the RF coverage area. Our access points
also make it possible to connect remote wireless bridged sites into a single,
seamless network, allowing clients to roam between buildings in a campus
environment.
Our access points support industry standards and are designed to be easily
integrated into existing networks. In addition to supporting the IEEE 802.11
standard, our access points support standard network protocols such as TCP/IP,
including DHCP, for automatic IP address acquisition and SNMP, for managing
access points with existing enterprise network management tools, such as HP
OpenView. For more comprehensive management, our access points include an HTTP
server that allows a network manager to upgrade firmware, configure access
points, or monitor the wireless LAN infrastructure using standard web browsers.
To reduce downtime, our access points can provide fault tolerance through a
redundant wireless backbone which automatically identifies and re-routes traffic
in the event of a hardware failure.
Wireless LAN Adapters
We offer a comprehensive portfolio of plug-and-play wireless LAN adapters
which are designed to be easily integrated into most PC platforms and use
standard hardware and software interfaces. Our wireless client adapters include
PC Cards (Type II) for portable and notebook computers, ISA and PCI network
interface cards for desktop and server PCs and external client adapters
supporting Ethernet or serial connections. We offer a full suite of device
drivers for industry standard computing environments such as Windows 95/98/NT,
Windows CE, Novell Netware, SCO Unix and Linux.
IEEE 802.11 Wireless LAN Product Lines
We offer three comprehensive product series designed to comply with the
IEEE 802.11 standard and operate in the unlicensed 2.4 GHz radio frequency band.
Our suggested retail
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prices for our primary products range from $495 to $725 for client adapter cards
and from $1,595 to $2,095 for access points.
<TABLE>
<CAPTION>
4800 TURBO DS SERIES 4500 SERIES 3500 SERIES
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
SPREAD SPECTRUM TYPE: Direct Sequence Direct Sequence Frequency Hopping
- ---------------------------------------------------------------------------------------------------
DATA RATES: 1, 2, 5.5 and 11 Mbps 1 and 2 Mbps 1 and 2 Mbps
- ---------------------------------------------------------------------------------------------------
INDOOR RANGES: 125' - 350' 250' - 350' 150' - 250'
- ---------------------------------------------------------------------------------------------------
ACCESS POINTS: Ethernet Ethernet and Token Ring Ethernet and Token Ring
- ---------------------------------------------------------------------------------------------------
CLIENT ADAPTER CARDS: PC Card, PCI and ISA PC Card, PCI and ISA PC Card, PCI and ISA
- ---------------------------------------------------------------------------------------------------
INTRODUCTION DATE: December 1998 June 1998 October 1997
- ---------------------------------------------------------------------------------------------------
</TABLE>
4800 Turbo DS Series. In December 1998, we became the first company to
introduce and ship high speed 11 Mbps wireless LAN products based on 2.4 GHz
Direct Sequence spread spectrum radio technology. Our 4800 Turbo DS series fully
complies with the IEEE 802.11 standard performing at data rates of 1 and 2 Mbps,
and is designed to conform to the proposed IEEE 802.11b High Rate Direct
Sequence extension to the IEEE 802.11 standard performing at data rates of 5.5
and 11 Mbps. The 4800 Turbo DS series includes an Ethernet access point
(AP4800-E) and a family of client adapters: PC Cards (PC4800 & LM4800), PCI card
(PCI4800), ISA card (ISA4800), Universal Client adapter (UC4800) and MultiClient
adapter (MC4800).
4500 Series. In June 1998, we introduced the 4500 series product that
operates at 1 and 2 Mbps and complies with the Direct Sequence specification of
the IEEE 802.11 standard. The 4500 series includes Ethernet and Token Ring
access points (AP4500-E & AP4500-T) and a family of client adapters: PC Cards
(PC4500 & LM4500), PCI card (PCI4500), ISA card (ISA4500), Universal Client
adapter (UC4500) and MultiClient adapter (MC4500).
3500 Series. In October 1997, we introduced the 3500 series that operates
at 1 and 2 Mbps and complies with the Frequency Hopping specification of the
IEEE 802.11 standard. The 3500 series includes Ethernet and Token Ring access
points (AP3500-E & AP3500-T) and a family of client adapters: PC Cards (PC3500 &
LM3500), PCI card (PCI3500), ISA card (ISA3500), Universal Client adapter
(UC3500) and MultiClient adapter (MC3500).
3000 Series. In July 1996, we introduced the 3000 series, our first
Frequency Hopping spread spectrum product line, which operates at a data rate of
1 Mbps in the unlicensed 2.4 GHz radio frequency band and is based on an early
draft of the IEEE 802.11 standard. The 3000 series includes our first fully
integrated single-piece PCMCIA client adapter, as well as other client adapters
and access points. The 3000 series is currently offered on a limited basis.
Legacy Wireless LAN Product Lines
Prior to the introduction of our IEEE 802.11 based product lines, we
developed and marketed proprietary wireless LAN products, referred to as legacy
products, which operate in the 900 MHz and 2.4 GHz ISM radio frequency bands. We
have granted Telxon Corporation the right to manufacture some of these legacy
product lines under a royalty arrangement.
2000 Series. In July 1994, we began shipping the 2000 series, our first
product in the unlicensed 2.4 GHz band that operates at a maximum data rate of 2
Mbps. These products
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use our Direct Sequence spread spectrum radio technology and proprietary open
air protocol. The 2000 series includes access points and various client
adapters.
1000 Series. Our first products operated in the 900 MHz ISM band at a
maximum data rate of 860 Kbps. These products use our Direct Sequence spread
spectrum radio technology and proprietary open air protocol. The 1000 series
includes access points and various client adapters.
Wireless Bridge Products
Our wireless point-to-point or point-to-multipoint bridges connect networks
between locations, enabling separate networks to operate as a single network.
Our bridges provide broadband connectivity at data rates up to 11 Mbps over
line-of-site distances measured in miles -- up to 15 miles at 11 Mbps and 25
miles at 2 Mbps. Our wireless bridges utilize Direct Sequence spread spectrum
radio technology, operate in the unlicensed 2.4 GHz band and are offered at our
suggested retail prices of $1,895 to $2,395.
Our bridges provide a cost effective and flexible alternative to direct
cabled connections or dedicated telephone company lines. With throughput up to
the equivalent of five concurrent T1 lines, our wireless bridges achieve high
speed network connectivity at a fraction of the cost of a dedicated T1 line.
Wireless bridges are designed to interconnect networks in different buildings
and are well suited for campus settings. Our Internet Service Provider (ISP)
customers use our wireless bridges to offer cost effective, high speed Internet
access to homes and businesses.
[GRAPHIC]
SALES AND MARKETING
We sell our wireless LAN and bridge products in domestic and international
markets through an indirect channel of distributors, resellers and OEMs. Our
U.S. distributors include Business Partner Solutions, Inc., and we have recently
added Ingram Micro, Inc. and Tech Data Corporation as U.S. distributors.
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We actively promote end user demand for our products through a variety of
marketing programs, including trade advertising, participation in trade shows,
cooperative funding for promotional activities and public relations. We also
provide reseller development and product training programs to support our
channel. We have a field sales organization and an inside sales function that
support the sales efforts of our resellers and assist in responding to end user
inquiries.
We also sell our products to OEM customers for integration into their
wireless computing devices including handheld, pen-based and other portable
computers, as well as point-of-sale and other computing platforms. Our field
sales persons and support engineers sell our wireless LAN products to OEMS.
Internationally, we sell our products through distributors and resellers.
International sales comprised 15% of our total revenue in fiscal year 1998 and
33% in the nine months ended December 31, 1998.
We have expanded our sales organization to meet the demands of our current
customers and generate new demand for our products. We believe that growth of
our indirect channels is necessary to remain competitive. We plan to continue
our strategy of strengthening our relationships with existing channel partners
and adding new channel partners, both in domestic and international markets. We
intend to continue recruiting and hiring experienced sales and marketing
personnel to support our growth. As of March 31, 1999, we had 22 full time
employees in our sales and marketing organization.
CUSTOMERS
In fiscal year 1998, Telxon Corporation accounted for 55% of our total
revenues and in the nine months ended December 31, 1998, Telxon accounted for
39% of our total revenues. Telxon was our only customer during these periods
that accounted for more than 10% of our total revenues. Our four largest
non-affiliate customers represented approximately 60% of our non-affiliate
revenues, or 37% of total revenues, for the nine months ended December 31, 1998.
Although Telxon was our largest customer, other customers may purchase more of
any particular product. We have diversified our customer base in recent fiscal
periods and expect diversification to continue. Nevertheless, we expect that a
significant portion of our future revenues will continue to be generated from
sales and licensing royalties from Telxon. The loss of Telxon as a customer, or
any substantial reduction in orders by Telxon, would materially and adversely
affect our operating results.
BACKLOG
We generally do not maintain a significant backlog. Product shipments are
generally made within four weeks after receipt of orders, although some OEM
customers submit orders for scheduled deliveries over a longer period. Orders
may be canceled or rescheduled without penalty outside of applicable minimum
periods. For these reasons, management believes backlog is not necessarily an
indication of future revenues.
RESEARCH AND DEVELOPMENT
We invest significant resources in research and development. In general, we
have invested in new product development, major enhancements to our existing
products and cost reduction of products and manufacturing through product
engineering. A significant portion of our research and development efforts have
been focused on the development of IEEE
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802.11 compliant wireless LAN products, and development of our 4800 Turbo DS
series of products which conform with the proposed IEEE 802.11b standard for
high speed wireless networks.
We direct research and development efforts to develop and/or enhance:
- high performance 2.4 GHz Direct Sequence and Frequency Hopping spread
spectrum radios;
- proprietary ASICs, including our MAC processor and RF modem chips;
- wireless packet communication protocols; and
- network management and device driver software.
We believe that timely deployment of new and enhanced products and
technology are necessary to remain competitive in the marketplace. Accordingly,
we intend to continue recruiting and hiring experienced research and development
personnel. Our research and development expenses were $5.3 million in the fiscal
year ended March 31, 1997, $5.7 million in the fiscal year ended March 31, 1998,
and $4.7 million in the nine month fiscal period ended December 31, 1998. As of
March 31, 1999, our research and development department consisted of 50
full-time employees.
MANUFACTURING AND SUPPLIERS
We outsource manufacturing of our PC Card adapters and assembled printed
circuit boards to contract manufacturers. In order to reduce product costs, we
currently anticipate that manufacture of selected PC Card adapters and assembled
printed circuit boards will be moved to a contract manufacturer with facilities
located in Asia. Final assembly, configuration, test, quality assurance,
packaging and shipping are performed at our assembly facility in Akron, Ohio.
We have invested significant resources to develop quality control systems.
We can remotely access production information from our factories on a real time
basis, and we have developed proprietary automatic testing equipment for PC Card
adapters in order to reduce the dependency on skilled labor in the quality
assurance process and to increase testing capacity. Our products undergo
automated testing, comprehensive quality audits and functional testing to ensure
quality and reliability. Further, our contract manufacturers are ISO 9002
certified, and we are currently pursuing ISO 9002 certification.
Many of the key components necessary for the assembly of our products are
only available from a single supplier or from a limited number of suppliers. We
have experienced delays and shortages in the supply of components in the past
and could experience delays and shortages in the future. We generally do not
maintain an inventory of components and do not have long-term supply contracts
with our suppliers. If our suppliers are unable to deliver or ration components
to us, we could experience interruptions and delays in manufacturing and sales
which could result in cancellation of orders for our products or the need to
modify our products. This may cause substantial delays in our product shipments,
increased manufacturing costs and increased product prices. Further, we may not
be able to develop alternative sources for these components in a timely way, if
at all, and may not be able to modify our products to accommodate alternative
components. These factors could damage our relationships with current and
prospective customers lasting longer than any underlying shortage or
discontinuance. Any of these risks, if realized, could materially and adversely
affect our business, operating results and financial condition.
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COMPETITION
Within the wireless networking industry, business is intensely competitive
and is characterized by rapid technological change, frequent new product
development and evolving industry standards. We believe that the principal
competitive factors in this market include:
- expertise and familiarity with 2.4 GHz spread spectrum technology,
wireless data communication protocols and LAN technology;
- product performance, features, functionality and reliability;
- price/performance characteristics;
- timeliness of new product introductions;
- adoption of emerging industry standards;
- customer service and support;
- size and scope of distribution network; and
- brand name.
While we believe that our products are competitive with respect to these
factors, there can be no assurance that we will be able to successfully compete
as to these or other factors or that competitive pressures we face will not
materially and adversely affect our business and operating results. We also
cannot assure you that these factors will not change and, if so, whether we will
be able to successively compete.
Currently, within the wireless networking industry our primary competitors
are Lucent Technologies, Proxim and BreezeCom. We also experience competition
from a number of smaller companies who provide wireless data communication
products, and we may encounter future competition from other companies, both
that have and have not announced their intentions to offer competitive products
and solutions. In addition, we could encounter future competition from companies
that offer products that replace network adapters or alternative wireless data
communication solutions, or from larger computer and networking equipment
companies. We also face competition from our OEM customers who have, or could
acquire, their own wireless data communications research and development
capabilities.
Many of our current and potential competitors have significantly greater
financial, marketing, technical and other resources than we have and, as a
result, may be able to respond more quickly to new or emerging technologies or
standards and to changes in customer requirements, or to devote greater
resources to the development, promotion and sale of products, or to deliver
competitive products at a lower end user price. Current and potential
competitors have established or may establish cooperative relationships among
themselves or with third parties to increase the ability of their products to
address the needs of our existing and prospective customers. Accordingly, it is
possible that new competitors or alliances among competitors may emerge and
rapidly acquire significant market share. Increased competition is likely to
result in price reductions, reduced operating margins and loss of market share,
any of which could have a material adverse effect on our business and operating
results.
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GOVERNMENT REGULATION
Our products are generally regulated by governmental agencies both in the
United States and abroad. To reduce costs, we have designed our products to
minimize the modifications required to meet various international regulations.
United States. In the United States, our products are subject to FCC
regulations. Our products have been certified for unlicensed operation in the
2.4-2.4835 GHz and 920-928 MHz ISM radio frequency bands. Our products comply
with Part 15 of the current FCC regulations. For products which meet specific
technical requirements, Part 15 permits license-free operation of radio devices
in the 902-928 MHz and 2.4-2.4835 GHz radio frequency bands, which are known as
the Industrial, Scientific and Medical bands, or simply ISM. The Part 15
regulations are designed to minimize the probability of interference among users
of those frequency bands. Part 15 also permits use of the ISM bands by other
users who have priority over users of our products. In the event of interference
between a primary user in those bands and a user of our products, the primary
user can require a user of our products to curtail transmissions that create
interference. We have received no reports that our products have caused
interference with primary users in the ISM bands; however, we cannot assure you
that we will not have problems in the future and, if we do, these could cause
material adverse effects on our business and results of operations.
Foreign Regulation. In foreign countries our products are also regulated by
government agencies under their local rules and regulations. We have obtained
certifications or approval for unlicensed use of our products in over 60 foreign
countries, including those which rely on or reference certification requirements
of regulatory bodies such as the FCC and the European Telecommunications
Standards Institute or ETSI. Our products (including when they are designed into
an OEM product) must be certified or otherwise qualified for use in each country
where they will be sold. We cannot assure you that we will be able to comply
with the regulations of any particular country.
INTELLECTUAL PROPERTY
We rely on a combination of patents, copyrights, trademarks, trade secrets
and non-disclosure agreements to protect our proprietary rights. We generally
execute confidentiality and non-disclosure agreements with our employees and
with key vendors and suppliers. These efforts allow us to rely upon the
knowledge and experience of our management and technical personnel and our
ability to market our existing products and to develop new products. The
departure of any of our management and technical personnel, the breach of their
confidentiality and non-disclosure obligations to us or the failure to achieve
our intellectual property objectives may have a material adverse effect on our
business, financial condition and results of operations.
Currently, we have 4 United States patents issued and 20 United States and
6 foreign patent applications pending. In addition, our wholly owned Canadian
subsidiary has 5 patents issued, including the patent which relates to the
roaming feature of our microcellular technology. There can be no assurance that
any new patents will be issued, that we will continue to develop proprietary
products or technologies that are patentable, that any issued patent will
provide us with any competitive advantages or will not be challenged by third
parties, or that the patents of others will not have a material adverse effect
on our business and operating results.
Our ability to compete successfully and achieve future revenues growth will
depend, in part, on our ability to protect our proprietary technology and
operate without infringing upon
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the rights of others. There can be no assurance that these measures will
successfully protect our intellectual property or that our intellectual or
proprietary technology will not otherwise become known or be independently
developed by competitors. In addition, the laws of various countries in which
our products are or may be sold may not protect our products and intellectual
property rights to the same extent as the laws of the United States. Our
inability to protect our intellectual property and proprietary technology could
have a material adverse effect on our business, financial condition and results
of operations. As the number of patents, copyrights and other intellectual
property rights in the wireless network industry increases, and as the coverage
of these rights and the functionality of the products in the market further
overlap, wireless network companies may increasingly become subject of
infringement claims. In the future, we may be notified that we are infringing
patent or other intellectual property rights of others. Although there are no
pending or threatened intellectual property lawsuits against us, we may become
the subject of litigation or infringement claims in the future. Such claims
could result in substantial costs and diversion of resources and could have a
material adverse effect on our business, results of operations and financial
condition.
EMPLOYEES
As of March 31, 1999, we had 119 full-time employees and 2 temporary
employees, including 50 in research and development, 29 in sales, marketing and
customer support, 28 in manufacturing and service and 12 in finance and
administration. None of our employees are represented by a union. We believe
that our relations with employees are good.
HEADQUARTERS
Our headquarters are in Akron, Ohio, where we lease space in two separate
buildings. Our principal administrative, sales, marketing-and engineering
facilities occupy approximately 34,000 square feet under a sublease from Telxon
that expires August 31, 1999. We have an option to extend the sublease to
February 28, 2001, and we may terminate the sublease simultaneously with a
termination by Telxon of the lease for our assembly and service facilities. Our
assembly and service facilities occupy approximately 33,000 square feet under a
lease from Telxon that expires August 31, 1999. We have an option to extend the
lease to February 28, 2001, and Telxon has the right to terminate the lease on
12 months written notice. We believe that our current facilities will be
adequate to meet our needs for the foreseeable future.
LEGAL PROCEEDINGS
We are not aware of any material legal proceedings to which we are a party
and which would have a material adverse effect on our business, financial
condition or results of operations.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES
Our executive officers, directors and key employees are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Roger J. Murphy, Jr.(1)(2)........... 38 President, Chief Executive Officer and
Director
Ronald B. Willis(1).................. 41 Senior Vice President, Sales and Marketing
Donald I. Sloan(1)................... 46 Senior Vice President, Engineering
Richard G. Holmes(1)................. 52 Senior Vice President and Chief Financial
Officer
Harvey A. Ikeman(1).................. 50 Vice President, Manufacturing
Eric S. Erickson..................... 36 Vice President, Marketing
Philip H. Belanger................... 44 Vice President, Technical Marketing
William J. Brodnick.................. 39 Vice President, Finance and Treasurer
James H. Furneaux(2)................. 55 Director and Chairman of the Board
Samuel F. McKay(2)................... 59 Director
John W. Paxton, Sr.(2)............... 62 Director
</TABLE>
- ---------------
(1) Executive Officer
(2) Our Directors are designated pursuant to a Stockholders Agreement dated as
of March 31, 1998 among us and our stockholders, which will terminate upon
the closing of this offering.
Roger J. Murphy, Jr. joined Aironet in March 1994 as Chief Operating
Officer. In February 1995, he was appointed President and Chief Operating
Officer and in September 1995 was appointed President and Chief Executive
Officer. From January 1990 to February 1994, Mr. Murphy served in various
executive capacities at Telxon Corporation, most recently as Vice President of
Corporate Development. Mr. Murphy holds a B.S. in Business Management from
Babson College.
Ronald B. Willis joined Aironet in September 1998 as Senior Vice President,
Sales and Marketing. From July 1984 to August 1998, Mr. Willis worked at Digital
Equipment Corporation, where he held several sales and marketing management
positions, most recently as Vice President, Marketing, North America for the
North American Personal Systems Group. Mr. Willis holds a B.A. in Marketing from
Brigham Young University.
Donald I. Sloan joined Aironet in April 1994 as Vice President, Engineering
and in January 1995 was appointed Senior Vice President, Engineering. From
September 1988 to March 1994, Mr. Sloan worked for Telxon Corporation, where he
held several engineering management positions, most recently as Vice President
of RF Systems. Mr. Sloan holds a M.S. in Electrical Engineering from Illinois
Institute of Technology and a B.S. in Electrical Engineering from Youngstown
State University.
Richard G. Holmes joined Aironet in January 1999 as Senior Vice President
and Chief Financial Officer. From November 1997 to August 1998, Mr. Holmes
worked for Community Corrections Corporation as its Chief Financial Officer and
Vice President. From July 1995 to September 1997, Mr. Holmes worked for
Submicron Systems Corporation as its Chief Financial Officer, Treasurer and
Corporate Secretary. From July 1987 to July 1994, Mr. Holmes worked for Celgene
Corporation as Vice President Finance/Chief Financial
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Officer, Corporate Secretary and Treasurer. Mr. Holmes has an M.B.A. from
Harvard University Graduate School of Business and a B.S.I.E. from Lehigh
University.
Harvey A. Ikeman joined Aironet in January 1997 as Vice President,
Manufacturing. From August 1993 to December 1996, Mr. Ikeman served as Vice
President, Manufacturing of Aironet Canada Limited (then known as Telesystems
SLW Inc.), a wholly owned indirect subsidiary of Aironet. From February 1988 to
July 1994, Mr. Ikeman served as Director of Operations at Telesystems SLW Inc.
Mr. Ikeman holds a B.S. in Electrical Engineering from McGill University.
Eric S. Erickson joined Aironet in January 1999 as Vice President,
Marketing. From February 1991 to December 1998, Mr. Erickson worked at Pinacor,
Inc., a wholly owned subsidiary of MicroAge, Inc., where he held several
marketing management positions, most recently as Vice President, Product
Marketing for its Enterprise Technologies Group. Mr. Erickson attended Kansas
State University.
Philip H. Belanger joined Aironet in January 1996 as Vice President,
Wireless Systems and in January 1999 was appointed Vice President, Technical
Marketing. From March 1992 to December 1995, Mr. Belanger worked at Xircom,
Inc., most recently as Vice President of Wireless Development. Mr. Belanger
attended the University of California, Berkeley.
William J. Brodnick joined Aironet in June 1996 as Vice President, Finance
and Treasurer. From June 1987 to May 1996, Mr. Brodnick worked at
Pioneer-Standard Electronics, Inc. as Assistant Controller and Controller of
Accounting and Finance. Mr. Brodnick holds a B.A. in Accounting from Cleveland
State University and is a licensed C.P.A.
James H. Furneaux became a member of the Board of Directors in July 1996.
Since January 1995, Mr. Furneaux has been President of Furneaux & Company, LLC,
a venture investment and advisory services firm. From August 1992 to January
1995, Mr. Furneaux was Chief Executive Officer of Chrysalis Symbolic Design
Incorporated, an electronics design automation software company of which he was
co-founder. Mr. Furneaux is Chairman of Chrysalis-ITS, Inc., and a member of the
Boards of Clam Associates, Inc. and Intersense, Inc. Mr. Furneaux holds a B.A.
from Northeastern University and an M.B.A. from the Amos Tuck School of Business
Administration, Dartmouth College.
Samuel F. McKay became a member of the Board of Directors in March 1998.
Since April 1994, Mr. McKay has been a general partner of the Axiom Venture
Partners family of venture investment funds and Chief Executive officer of Axiom
Venture Associates. From 1987 until 1997, Mr. McKay managed Connecticut Seed
Ventures, a venture capital fund. Mr. McKay is a member of the Boards of
Directors of Anika Therapeutics, Inc., Open Solutions, Inc., CareCentric
Solutions, Inc. and Sabre Communications, Inc. Mr. McKay holds a B.A. in Physics
and an M.B.A. in Finance from the University of New Hampshire.
John W. Paxton, Sr. became a member of the Board of Directors in April
1999. Since March 1999, Mr. Paxton has served as President and Chief Executive
Officer of Telxon Corporation and serves on Telxon's Board of Directors as
Chairman of the Board. From December 1998 until March 1999, Mr. Paxton was
Chairman of Odyssey Industrial Technologies L.L.C., a joint venture with Odyssey
Investment Partners, a private equity fund. From March 1997 until November 1998,
Mr. Paxton was Executive Vice President of Paxar Corporation and, upon its
formation in June 1998, President of Paxar's Printing Solutions Group. He was
President and Chief Executive Officer of Monarch Marking Systems, Inc.
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<PAGE> 58
from October 1995 until Paxar combined newly acquired operations with its
existing Monarch operations to form the Paxar Printing Solutions Group. From
March 1994 until October 1995, Mr. Paxton was Corporate Executive Vice President
and Chief Operating Officer of The Industrial Automation Systems Group of
Western Atlas Inc. Mr. Paxton is a member of the Board of Directors of
TransDigm, Inc. Mr. Paxton holds a B.S. and M.S. in Business Administration from
LaSalle University.
BOARD COMMITTEES
Audit Committee. Currently, the Audit Committee consists of Messrs.
Furneaux and McKay. The Audit Committee meets with management and our
independent accountants to determine the adequacy of our internal controls and
financial reporting, recommends to the full Board the appointment of the
independent accountants and reviews our long-term financial plans and makes
recommendations to the full Board for approval and to authorize action. Prior to
April 1999, the functions of the Audit Committee were administered by the full
Board of Directors.
Compensation Committee. Currently, the Compensation Committee consists of
Messrs. Furneaux and McKay. The Compensation Committee reviews and makes
decisions regarding our compensation policies, and the amounts and forms of
compensation to be provided to executive officers, which generally include
annual salaries and bonuses, equity awards and other incentive compensation
arrangements. As part of the foregoing, the Compensation Committee administers
our various employee equity compensation plans. Prior to April 1999, the
functions of the Compensation Committee were administered by the full Board of
Directors.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of our executive officers serves as a member of the Board of Directors
or the compensation committee of any other company that has one or more of its
executive officers serving as a member of our Board of Directors or Compensation
Committee. None of our employees or current or former officers are members of
our Compensation Committee.
DIRECTOR COMPENSATION
Our non-employee Directors receive an annual director's fee of $12,000 and
are awarded stock options under our 1999 Stock Option Plan For Non-Employee
Directors. See "Benefit Plans -- Stock Option Plan For Non-Employee Directors."
Directors who are employees receive no additional compensation for their
services as directors. We reimburse Directors for all reasonable and documented
expenses incurred as a Director.
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<PAGE> 59
EXECUTIVE COMPENSATION
The following table shows compensation that we have paid or accrued for the
fiscal years indicated for our Chief Executive Officer and for our four
executive officers who received the highest combined salary and bonus
compensation in excess of $100,000 during fiscal year 1998 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL ------------
COMPENSATION AWARDS
---------------------- ------------
FISCAL YEAR SECURITIES
ENDING UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION MARCH 31, SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(*)
- --------------------------- ----------- --------- --------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Roger J. Murphy, Jr....... 1999... 200,000 (4) -- 5,000
President and 1998 200,000 75,000 -- 2,875
Chief Executive Officer 1997 210,000 75,000 240,000 7,202
Ronald B. Willis.......... 1999 160,000 (4) 100,000 --
Senior Vice President, 1998 -- -- -- --
Sales and Marketing(1)(3) 1997 -- -- -- --
Donald I. Sloan........... 1999 163,000 (4) 25,000 5,081
Senior Vice President, 1998 150,000 27,500 -- 4,750
Engineering 1997 145,000 22,500 70,000 4,787
Richard G. Holmes......... 1999 150,000 (4) 100,000 --
Senior Vice President, 1998 -- -- -- --
Chief Financial
Officer(2)(3) 1997 -- -- -- --
Harvey A. Ikeman.......... 1999 143,000 (4) 25,000 3,495
Vice President 1998 135,000 25,000 -- 1,688
Manufacturing 1997 21,000 20,250 60,000 --
</TABLE>
- ---------------
(*) Consists of amounts paid by Aironet to the Named Executive Officer's account
in Telxon Corporation's 401(k) Plan.
(1) Mr. Willis joined Aironet in August 1998.
(2) Mr. Holmes joined Aironet in January 1999.
(3) Salary is presented on an annualized basis and does not reflect compensation
actually paid or accrued during fiscal year 1999.
(4) Annual bonus for the fiscal year ended March 31, 1999, will be determined by
the President and Chief Executive Officer subject to approval by the
Compensation Committee (except that the Compensation Committee of the Board
of Directors will determine any bonus for the President and Chief Executive
Officer) at the time of approval of our audited consolidated financial
statements for that period, in accordance with our general policies.
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<PAGE> 60
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth selected information regarding the number,
terms and potential realizable value of stock options granted to the Named
Executive Officers during the fiscal year ended March 31, 1999.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE FOR OPTION TERM(2)
OPTIONS IN FISCAL PRICE($) EXPIRATION ---------------------
NAME GRANTED YEAR(1) PER SHARE DATE 5%($) 10%($)
- ---- ----------- ---------- ---------- ----------------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Roger J. Murphy,
Jr.................. -- -- -- -- -- --
Ronald B. Willis...... 100,000 19.80 3.50 August 10, 2008 220,113 557,810
Donald I. Sloan....... 25,000 4.95 9.00 February 16, 2009 141,501 358,592
Richard G. Holmes..... 100,000 19.80 9.00 February 16, 2009 566,005 1,434,368
Harvey A. Ikeman...... 25,000 4.95 9.00 February 16, 2009 141,501 358,592
</TABLE>
- ---------------
(1) In fiscal year 1999, we granted an aggregate of 505,000 options to our
employees.
(2) The potential realizable value is calculated based on the term of the option
at the time of grant (10 years). Stock price appreciation of 5% and 10%
compounded annually from the date an option is granted to its expiration
date. These are hypothetical gains determined pursuant to rules promulgated
by the Securities and Exchange Commission and does not represent our
prediction of our stock price performance. The actual gain, if any, on the
exercise of a stock option will depend on the future performance of our
common stock, the optionee's continued employment through the date on which
the options are exercised and the time at which the underlying shares are
sold.
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1999
AND FISCAL YEAR 1999 YEAR-END OPTION VALUES
The following table sets forth selected information regarding the number
and value of stock options held by the Named Executive Officers at March 31,
1999, and exercised during the fiscal year ended March 31, 1999. No Named
Executive Officers exercised options in fiscal year 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END(1)
---------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Roger J. Murphy, Jr................... 100,000 -- $814,000 --
Ronald B. Willis...................... -- 100,000 -- $650,000
Donald I. Sloan....................... 76,667 48,333 624,069 214,931
Richard G. Holmes..................... -- 100,000 -- 100,000
Harvey A. Ikeman...................... 55,000 45,000 447,700 187,800
</TABLE>
- ---------------
(1) Based on the product of (i) the assumed initial public offering price of $10
per share minus the exercise price and (ii) the number of shares underlying
the option.
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<PAGE> 61
EMPLOYMENT AGREEMENTS
Mr. Murphy serves as President and Chief Executive Officer pursuant to an
employment agreement which terminates October 31, 2000, at a base salary of
$200,000 per year. His employment agreement also provides for bonus compensation
for each fiscal year during the term as determined by the Board in its
discretion. Mr. Murphy or his estate is entitled under his employment agreement
to the same disability and death benefits as are extended by us to our executive
employees generally. If we terminate Mr. Murphy's employment for other than
"cause," we are obligated to pay him a severance benefit of 12 months base
salary. A resignation by Mr. Murphy following an assignment of him to serve in
any capacity other than his current offices or to perform tasks inconsistent
with such position will be deemed a termination by us without "cause" entitling
him to the severance pay. Mr. Murphy is also entitled to the severance benefit
if his employment agreement expires without renewal or extension.
Mr. Willis serves as Senior Vice President, Sales and Marketing pursuant to
an employment agreement with no definite term, at a current base salary of
$160,000 per year. Mr. Willis received a grant of options to purchase 100,000
shares of our common stock in accordance with the terms of his agreement. His
employment agreement also provides for bonus compensation for each fiscal year
of up to $90,000 for meeting performance criteria determined by the Compensation
Committee. Mr. Willis is also entitled to participate in our employee benefit
plans.
Mr. Holmes serves as Senior Vice President and Chief Financial Officer
pursuant to an employment agreement with no definite term, at a current base
salary of $150,000 per year. Mr. Holmes received a grant of options to purchase
100,000 shares of our common stock in accordance with the terms of his
agreement. His employment agreement also provides for bonus compensation for
each fiscal year of up to $50,000 for meeting performance criteria determined by
the Compensation Committee, and during his first year of employment, Mr. Holmes
is guaranteed a minimum bonus of $25,000, $10,000 of which was paid within his
first month of employment. If we terminate Mr. Holmes' employment for other than
"cause," we are obligated to pay him a severance benefit of six months base
salary. Mr. Holmes is also entitled to participate in our employee benefit
plans.
Mr. Ikeman serves as Vice President, Manufacturing pursuant to an
employment agreement with no definite term, at a current base salary of $142,000
per year. His employment agreement also provides for bonus compensation for each
fiscal year of up to 15% of his base salary for meeting performance criteria
determined by the Compensation Committee. Mr. Ikeman is also entitled to
participate in our employee benefit plans.
BENEFIT PLANS
1999 Omnibus Stock Incentive Plan. The 1999 Omnibus Stock Incentive Plan
was adopted and approved by our stockholders and Directors in April 1999. The
plan allows the granting of stock options, stock appreciation rights, restricted
stock and performance units ("Awards"). Any person serving us or our
subsidiaries as an employee or consultant, including officers and Directors who
also are employees, are eligible to receive Awards. The plan is administered by
the Compensation Committee of the Board of Directors. Grants are made within the
discretion of the Compensation Committee. 1,765,817 shares may be issued upon
the exercise of options and grant of restricted stock under the plan, and for
payment of SARs and performance units. 500,000 SARs and 200,000 performance
units may be awarded under the plan. Equity based options and SARs may not be
priced at below the fair market
61
<PAGE> 62
value of our common stock on the day prior to the day the award is granted, and
restricted stock must be priced at no less than par value. Awards, other than
performance units, have a term of up to ten years. Upon certain change in
control or sale of the company transactions, awardees have special vesting and
exercise rights. As of March 31, 1999, non-qualified options to purchase 400,000
shares of our common stock were outstanding under the plan.
Aironet Wireless Communications, Inc. 1996 Stock Option Plan. The 1996
Stock Option Plan was originally adopted and approved by our Directors in July
1996 and by our stockholder in September 1996. The plan was amended and restated
in March 1998, and was further amended in March 1999. Any person employed by or
an independent contractor of us or our affiliates, including officers and
Directors, are eligible grantees. Options granted under the original plan could
be exercised immediately upon vesting. Options granted after the 1998 amendment
and before the 1999 amendment could be exercised only if vested and we had our
initial public offering or a change of control. The 1999 amendment allows all
vested options under the plan to be exercised no later than March 31, 2001. An
aggregate of 2,223,000 shares may be issued upon the exercise of options granted
under the plan, subject to adjustment. The options may not be priced at below
the fair market value of our common stock at the time the option is granted. The
options have a term of up to ten years. Upon certain change in control or sale
of the company transactions, optionees have special vesting and exercise rights.
As of March 31, 1999, non-qualified options to purchase 1,543,000 shares were
outstanding under the plan. The plan was terminated in April 1999; however, the
termination does not effect outstanding options.
Aironet Wireless Communications, Inc. 1999 Stock Option Plan For
Non-Employee Directors. The Non-Employee Director Option Plan was adopted and
approved by our Directors in April 1999. Only non-employee Directors are
eligible grantees. Options to purchase 25,000 shares are granted upon a
grantee's initial election to the Board which vest annually in one-third
increments beginning one year from the grant date, and options to purchase 5,000
shares are granted automatically at the beginning of each year thereafter while
the grantee serves on the Board which vest if the grantee continues to serve on
the Board three years after the grant date. Additional options may be granted
within the discretion of the Board. The plan is administered by the Board's
Compensation Committee, except for the provisions which deal with discretionary
grants which are administered by the entire Board of Directors. 250,000 shares
may be issued upon the exercise of options granted under the plan, subject to
adjustment. Each option is priced at the fair market value of our common stock
at the time the option is granted. The options have a term of up to ten years.
Upon certain change in control or sale of the company transactions, optionees
have special vesting and exercise rights.
1999 Employee Stock Purchase Plan. The 1999 Employee Stock Purchase Plan
was adopted and approved by our stockholders and Directors in April 1999,
subject to completion of this offering. The plan is administered by the Board's
Compensation Committee. 500,000 shares may be issued under the plan. Subject to
restrictions, certain of our full-time and part-time employees and our
participating subsidiaries may participate in the plan. Employees contribute to
the plan through payroll deductions, which are accumulated until a fixed date,
at which time our shares are purchased at 85% of the lesser of (a) the closing
price of the common stock on the first trading day of the period, or (b) the
closing price of the common stock on the last trading day of the period. It is
our intention to have our Employee Stock Purchase Plan qualify as an "employee
stock purchase plan" under Section 423 of the Internal Revenue Code.
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<PAGE> 63
401(k) Plan. Since our incorporation, our employees have been entitled to
participate in Telxon Corporation's 401(k) Plan. In March 1998, we entered into
a Services Agreement with Telxon pursuant to which our employees are entitled to
participate in Telxon's 401(k) Plan until such time as Telxon no longer owns at
least 50% of our outstanding capital stock. We anticipate adopting a 401(k)
pension plan that will replicate, in all material respects, the Telxon 401(k)
Plan, prior to the closing of this offering. Our full-time employees who have
completed minimum service requirements may participate in the plan. Employee
contributions are limited to maximum amounts and we make 50% matching
contributions. Employee contributions are 100% vested and our contributions vest
60% after three years of service, 80% after four years of service, and 100%
after five years of service.
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<PAGE> 64
CERTAIN TRANSACTIONS
ARRANGEMENTS WITH TELXON
Telxon is a selling stockholder in this offering. Prior to this offering,
Telxon owned approximately 76% of our outstanding shares, and after the offering
will own approximately 39% (approximately 35% if the underwriters'
over-allotment option is exercised in full). In March 1998, in connection with
our private placement of 984,126 units consisting of one share of common stock
and a warrant to purchase three tenths of a share of common stock, we entered
into various agreements with Telxon, including a License, Rights and Supply
Agreement (as amended) under which Telxon has a royalty bearing license to
manufacture and sell certain of our legacy products. Under the agreement, as
originally executed, Telxon paid per unit royalties subject to a declining
annual cap. This agreement was amended in March 1999 to require Telxon to pay
fixed royalties for a minimum of two years, on the same declining basis as
previously applied to the royalty caps. Telxon is entitled to most favored
treatment on its royalty payments. Subject to certain conditions, Telxon's
license becomes fully paid after a change in control of Aironet. Telxon has the
right to purchase products from us at fixed percentages of our manufacturing
costs. Telxon's right to purchase our current products and its pricing agreement
terminates four years from this offering, and must be re-negotiated in good
faith prior to that time. The agreement may not be terminated by either party,
and may not be assigned by either party without the consent of the other. We
also entered into a Tax Benefit and Indemnification Agreement with Telxon in
March 1998 (when Telxon's ownership of Aironet fell below 80%), allocating our
tax benefits and obligations relating to the period prior to March 31, 1998
generally to Telxon and pursuant to which Telxon indemnifies us against tax
related liability relating to that period. We also entered into a Services
Agreement pursuant to which Telxon provides us with a variety of administrative
services. Costs for services are generally passed through by Telxon, or we pay
for the services at Telxon's cost. In addition, our employees may participate in
Telxon's employee benefit plans, and Telxon indemnifies us against most
multi-employer plan liability under the agreement. The Services Agreement became
terminable on six months notice in March 1999 and our employees will no longer
be eligible to participate in many of the services provided by Telxon after this
offering.
Pursuant to a sublease dated as of September 1, 1998, we sublease
approximately 34,000 square feet of space from Telxon for principal
administrative, sales, marketing and engineering facilities. The sublease
expires August 31, 1999. We have an option to extend the sublease to February
28, 2001, and we may terminate the sublease simultaneously with a termination by
Telxon of the lease of our assembly and service facilities. Our assembly and
service facilities occupy approximately 33,0000 square feet under a lease from
Telxon dated as of April 1, 1998, that expires August 31, 1999. We have an
option to extend the lease to February 28, 2001, and Telxon has the right to
terminate the lease on 12 months written notice.
On March 7, 1996, we made a Demand Revolving Promissory Note to the order
of Telxon to evidence cash advances by Telxon to us, with no greater principal
than $50 million. The advances bore interest at the London Interbank Offer Rate.
The obligations under this note were paid in full in July 1998 and this note was
canceled effective May 5, 1999.
We believe that the terms of these transactions with Telxon are at least as
fair to us as those which could have been obtained in transactions with
unaffiliated third parties.
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<PAGE> 65
PRIOR OFFERINGS
From March 1998 to December 1998, we issued an aggregate of 1,206,348 units
to private investors consisting of one share of common stock and warrants to
purchase three tenths of one share of common stock at $3.50 each, for aggregate
consideration of $4,222,218. Of this amount, we issued 857,142 units to Axiom
Venture Partners II Limited Partnership for $2,999,997. As a result of this
transaction, Axiom beneficially owns more than 5% of our outstanding shares. In
addition, Samuel F. McKay, who is one of our Directors, is a general partner of
Axiom. We also issued 120,635 units to Telantis Venture Partners V, Inc. for
$422,222. All outstanding stock of Telantis V is beneficially owned by Robert F.
Meyerson, who beneficially owns more than 5% of our outstanding shares. In
addition, Mr. Meyerson is the father-in-law of our President and Chief Executive
Officer, Roger J. Murphy, Jr. Telantis V participated in our 1998 private
offering on the same terms as unaffiliated third party investors.
ADVISOR FEES
In March 1998, we paid Furneaux & Company, LLC a fee of $125,000 in cash
for business and financial advisory services. As part of the same transaction,
we granted Furneaux & Company warrants to purchase 100,000 shares of our common
stock at $3.50 per share. The warrants become exercisable upon this offering and
may be exercised at any time until March 31, 2001. The warrants include
protections against dilution in the event of stock splits, stock dividends and
similar events. Prior to April 1, 1999, Furneaux & Company also served as an
advisor to Telxon Corporation. James H. Furneaux, Chairman of the Board of
Directors and a Director is the managing member of Furneaux & Company. We
believe that the terms under which Furneaux & Company rendered services to us
were at least as fair to us as those which could have been obtained in
transactions with unaffiliated third parties.
LOAN TO CHIEF EXECUTIVE OFFICER
In February 1998, we provided Mr. Murphy, our President and Chief Executive
Officer, with a loan of $372,000 which was used by him to acquire 200,000 shares
of our common stock through the exercise of stock options granted to him under
our 1996 Stock Option Plan. The loan was evidenced by a promissory note which
bears interest at prime plus 4% per annum. All principal and accrued but unpaid
interest is due on October 31, 2002. The note is collateralized by the stock
acquired with the loan. In May 1999, the note was amended to prohibit
prepayment.
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<PAGE> 66
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth selected ownership information with respect
to the beneficial ownership of our common stock as of April 30, 1999 (except as
otherwise noted), and as adjusted to reflect the sale of shares in this
offering, by (i) the selling stockholder, (ii) each Director of Aironet, (iii)
each of the Named Executive Officers, (iv) all Directors and executive officers
of Aironet as a group and (v) each person who is known by us to own beneficially
more than 5% of the common stock. Unless otherwise indicated, each person or
entity named in the table has sole voting power and investment power (or shares
such power with his or her spouse) with respect to all shares of capital stock
listed as owned by such person or entity. The address of each of our employees
and officers is c/o Aironet Wireless Communications, Inc., 3875 Embassy Parkway,
Akron, OH 44333.
The number of shares beneficially owned by each stockholder is determined
under rules issued by the Securities and Exchange Commission. The information is
not necessarily indicative of beneficial ownership for any other purpose. Under
these rules, beneficial ownership includes any shares as to which the individual
or entity has sole or shared voting power or investment power and any shares as
to which the individual or entity has the right to acquire beneficial ownership
within 60 days after April 30, 1999 through the exercise of any stock option or
other right.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO THE OFFERING SHARES TO BE THE OFFERING
---------------------- SOLD IN THE ----------------------
NAME NUMBER PERCENTAGE OFFERING NUMBER PERCENTAGE
- ---- --------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
Telxon Corporation(1) 7,276,500 76.06% 2,000,000 5,276,500 38.89%
3300 W. Market St.
Akron, OH 44334
Telantis Venture Partners V, 880,826 9.17 -- 880,826 6.48
Inc.(2)
12511 World Plaza Lane
Ft. Myers, FL 33097
Robert F. Meyerson(3) 904,826 9.42 -- 904,826 6.65
c/o 12511 World Plaza Lane
Ft. Myers, FL 33097
Axiom Venture Partners II 1,114,284 11.34 -- 1,114,284 8.06
Limited Partnership(4)
Cityplace II, 17th Floor
185 Asylum St.
Hartford, CT 06103
Roger J. Murphy, Jr.(5) 305,000 3.16 -- 305,000 2.20
Richard G. Holmes -- -- -- -- --
Donald I. Sloan(6) 76,667 * -- 76,667 *
Ronald B. Willis -- -- -- -- --
Harvey A. Ikeman(7) 55,000 * -- 55,000 *
James H. Furneaux(8) 120,000 1.24 -- 120,000 *
c/o 100 Main Street
Concord, MA 01742
Samuel F. McKay(9) 1,114,284 11.34 -- 1,114,284 8.06
c/o Cityplace II, 17th Floor
185 Asylum St.
Hartford, CT 06103
John W. Paxton, Sr.(10) -- -- -- -- --
c/o 3330 West Market Street
Akron, OH 44333
All executive officers and 1,670,951 16.42 -- 1,670,951 12.32
directors as a group (8
persons)
</TABLE>
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<PAGE> 67
- ---------------
(*) Less than 1%.
(1) Telxon has granted the underwriters an option, exercisable within 30 days
hereof, to purchase 300,000 shares at the price offered to the public less
underwriting discounts and commissions for the purpose of covering
over-allotments, if any.
(2) Includes 844,635 shares of common stock and warrants to purchase 36,191
shares of common stock which may be exercised within the next 60 days.
252,328 of the 844,635 shares and the warrants have been pledged to Telxon
as collateral for a loan, the proceeds of which were used to purchase the
shares and warrants.
(3) Includes 844,635 shares of common stock and warrants to purchase 36,191
shares of common stock which may be exercised within the next 60 days, all
of which are owned by Telantis Venture Partners V, Inc. Mr. Meyerson is the
100% owner of Telantis Venture Partners V, Inc. Also includes 21,000 shares
of common stock owned by Mr. Meyerson's minor grandchildren and 3,000
shares of common stock owned by Mr. Meyerson's adult grandchild, as to all
of which Mr. Meyerson disclaims beneficial ownership.
(4) Includes 857,142 shares of common stock and warrants to purchase 257,142
shares of common stock which may be exercised within the next 60 days.
(5) Includes 200,000 shares of common stock and options to purchase 100,000
shares of common stock which may be exercised within the next 60 days. Also
includes 5,000 shares of common stock owned by Mr. Murphy's spouse, as to
which Mr. Murphy disclaims beneficial ownership.
(6) Includes options to purchase 76,667 shares of common stock which may be
exercised within the next 60 days.
(7) Includes options to purchase 55,000 shares of common stock which may be
exercised within the next 60 days.
(8) Includes warrants to purchase 100,000 shares of common stock and options to
purchase 20,000 shares of common stock, all of which may be exercised
within the next 60 days and are owned by Furneaux & Company, LLC. Mr.
Furneaux is the managing member of Furneaux & Company, LLC and disclaims
beneficial ownership of such warrants and options, except to the extent of
his pecuniary interest in Furneaux & Company, LLC.
(9) Includes 857,142 shares of common stock and warrants to purchase 257,142
shares of common stock which may be exercised within the next 60 days and
are owned by Axiom Venture Partners II Limited Partnership. Mr. McKay is a
general partner of Axiom Venture Partners II Limited Partnership and
disclaims beneficial ownership of such shares and warrants, except to the
extent of his pecuniary interest in Axiom Venture Partners II Limited
Partnership.
(10) Does not include the 7,276,500 shares beneficially owned by Telxon
Corporation, of which Mr. Paxton is the President, Chief Executive Officer
and Chairman of the Board of Directors.
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<PAGE> 68
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
We are authorized by our Amended and Restated Certificate of Incorporation
to issue 500,000 shares of preferred stock, par value $.01 per share, and 60
million shares of common stock, par value $.01 per share. Immediately following
this offering, approximately 13,566,348 shares of common stock will be issued
and outstanding (14,166,348 shares if the underwriters' over-allotment option is
exercised in full).
COMMON STOCK
The holders of common stock are entitled to one vote for each share on all
matters voted on by stockholders, including elections of Directors, and, except
as otherwise required by law or provided in any resolution adopted by the Board
with respect to any series of preferred stock, the holders of such shares will
possess all voting power. Our certificate does not provide for cumulative voting
in the election of Directors. Subject to any preferential rights of any
outstanding series of preferred stock created by the Board from time to time,
the holders of common stock will be entitled to such dividends as may be
declared from time to time by the Board from funds legally available therefor,
and upon liquidation will be entitled to receive pro rata all of our assets
available for distribution to such holders. The holders of common stock have no
preemptive rights to purchase newly issued securities.
PREFERRED STOCK
Our certificate authorizes the Board to establish one or more series of
preferred stock and to determine, with respect to any series of preferred stock,
the terms and rights, preferences and limitations of such series. We believe
that the ability of the Board to issue one or more series of preferred stock
will provide us with flexibility in structuring possible future financings and
acquisitions and in meeting other corporate needs which might arise. The
authorized shares of preferred stock, as well as shares of common stock, will be
available for issuance without further action by our stockholders, unless such
action is required by applicable law or the rules of any stock exchange or
automated quotation system on which our securities may be listed or traded. If
the approval of our stockholders is not required for the issuance of shares of
preferred stock or common stock, the Board may determine not to seek stockholder
approval.
Although the Board has no intention at the present time of doing so, it
could issue a series of preferred stock that could, depending on the terms of
such series, impede the completion of a merger, tender offer or other takeover
attempt. The Board, in so acting, could issue preferred stock having terms that
could discourage an acquisition attempt through which an acquirer may be able to
change the composition of the Board, including a tender offer or other
transaction that some, or a majority, of our stockholders might believe to be in
their best interests or in which stockholders might receive a premium for their
stock over the then current market price of such stock. As of the closing of
this offering, no preferred stock has been designated or issued.
OPTIONS AND WARRANTS
As of March 31, 1999, we had granted employee stock options to purchase up
to 2,429,500 shares of common stock at exercise prices ranging from $1.86 to
$9.00, of which
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<PAGE> 69
1,141,531 were then exercisable. As of March 31, 1999, we had granted warrants
to purchase up to 461,904 shares of common stock with exercise prices of $3.50
per share, all of which are currently outstanding. The warrants will expire if
not exercised by March 31, 2001.
REGISTRATION RIGHTS
The holders of approximately 11,097,085 shares of our common stock
currently outstanding or issuable upon exercise of warrants of options, or their
transferees, are entitled, on a limited basis, to have their shares registered
under the Securities Act of 1933. These holders have the right, subject to
various restrictions, to require us to effect up to two registrations following
this offering. In addition, these holders possess certain rights to include
shares in any registration statement filed by us, subject to certain
restrictions and limitations.
ANTITAKEOVER EFFECTS OF CERTAIN PROVISIONS OF OUR CERTIFICATE AND BYLAWS
Board of Directors. Our certificate provides for our Board to be divided
into three classes of Directors, with each class as nearly equal in number as
possible, serving staggered three-year terms (other than Directors which may be
elected by holders of preferred stock). As a result, approximately one-third of
our Board will be elected each year. The classified Board provision will help to
assure the continuity and stability of our Board and our business strategies and
policies as determined by our Board. The classified Board provision could have
the effect of discouraging a third party from making an unsolicited tender offer
or otherwise attempting to obtain control of us without the approval of our
Board. In addition, the classified Board provision could delay stockholders who
do not like the policies of our Board from electing a majority of our Board for
two years.
No Stockholder Action by Written Consent; Special Meetings. Our certificate
and bylaws provide that any action required or permitted to be taken by our
stockholders must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing by such holders.
Special meetings of our stockholders for any purpose or purposes may be called
only by the Chairman, the President, any Senior Vice President, or by a majority
of the Board. No business other than that stated in the notice shall be
transacted at any special meeting. These provisions may have the effect of
delaying consideration of stockholder proposals until the next annual meeting of
stockholders.
Advance Notice Procedures. Our bylaws establish an advance notice procedure
for stockholders to make nominations of candidates for election as Directors and
to bring other business before an annual meeting of our stockholders. For notice
of stockholder nominations to be timely, such notice must be received by our
Secretary not later than the close of business on the 90th calendar day, nor
earlier than the close of business on the 120th calendar day, prior to the first
anniversary of the date of the preceding year's proxy statement in connection
with the last annual meeting. The notice procedure is modified for newly created
Board seats and for special meetings of the stockholders. In addition to these
procedures, a stockholder's notice proposing to nominate a person for election
as a Director or relating to the conduct of business other than the nomination
of Directors must contain specified information. Otherwise the chairman of a
meeting may determine that an individual was not nominated, or the other
business was not properly brought before the meeting.
Amendment. Our certificate provides that the affirmative vote of the
holders of at least 80% of the outstanding shares, voting together as a single
class, is required to amend
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<PAGE> 70
provisions of our certificate relating to stockholder action without a meeting;
the calling of special meetings; the number, election and term of the Directors;
the filling of vacancies; and the removal of Directors. Our certificate further
provides that the related bylaws described above (including the stockholder
notice procedure) may be amended only by the Board or by the affirmative vote of
the holders of at least 80% of the combined voting power outstanding.
RIGHTS AGREEMENT
In April 1999, our Board of Directors declared a dividend of one common
stock purchase right on each share of common stock outstanding at that time and
thereafter, pursuant to a Rights Agreement with Harris Trust and Savings Bank,
adopted and approved by the Board and our stockholders in April 1999 (the
"Rights Agreement"). Each purchase right, when exercisable, entitles the
registered holder to purchase one share of common stock at a price of $125 per
share, subject to adjustment. Unless they become exercisable upon the occurrence
of specified events as described below, or unless earlier redeemed by Aironet,
the rights will expire ten years from the date of the agreement.
If we are a party to a merger or other business combination transaction
(not approved by our incumbent Directors) in which we are not the surviving
corporation, or to which our common stock is changed or exchanged, or 50% or
more of our assets or earning power are sold, each holder of a purchase right
will have the right to receive shares of publicly traded common stock of the
acquiring company having a market value of two times the exercise price of the
purchase right.
If we are the surviving corporation in a merger and our common stock is not
changed or exchanged, or if an acquiring person engages in certain self-dealing
transactions specified in the Rights Agreement, or becomes the beneficial owner
of 15% or more of our outstanding common stock, each holder of a purchase right
(other than the acquiring person) will have the right to receive shares of our
common stock having a market value of two times the exercise price of the
purchase right.
At the time the Rights Agreement becomes effective, Telxon will own greater
than 15% of our outstanding common stock. Telxon's continued ownership will not
trigger the exercisability of the purchase rights. If Telxon acquires any
additional shares or, in some circumstances, if Telxon is itself acquired, then
the purchase rights could become exercisable.
The Rights Agreement discourages hostile takeovers by effectively allowing
our stockholders to purchase additional shares of our common stock at a discount
following a hostile acquisition of a large block of our outstanding common stock
and by increasing the value of consideration to be received by stockholders in
specified transactions following such an acquisition. The purchase rights may be
redeemed pursuant to the Rights Agreement. The terms of the purchase rights may
be amended by our Board of Directors without the consent of the holders of the
purchase rights.
DELAWARE BUSINESS COMBINATION STATUTE
Section 203 of the Delaware General Corporation Law provides that, subject
to certain exceptions specified therein, an "interested stockholder" of a
Delaware corporation shall not engage in any business combination, including
mergers or consolidations or acquisitions of additional shares of the
corporation, with the corporation for a three-year period following the date
that such stockholder becomes an interested stockholder unless (i) prior to such
date, the board of directors of the corporation approved either the business
combination or the
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<PAGE> 71
transaction which resulted in the stockholder becoming an interested
stockholder, (ii) upon consummation of the transaction which resulted in the
stockholder becoming an "interested stockholder," the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding certain shares), or (iii) on or
subsequent to such date, the business combination is approved by the board of
directors of the corporation and authorized at an annual or special meeting of
stockholders by the affirmative vote of at least 66 2/3% of the outstanding
voting stock which is not owned by the interested stockholder. Except as
otherwise specified in Section 203, an interested stockholder is defined to
include (x) any person that is the owner of 15% or more of the outstanding
voting stock of the corporation, or is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within three years immediately prior to the date of
determination and (y) the affiliates and associates of any such person.
Under certain circumstances, Section 203 makes it more difficult for a
person who would be an interested stockholder to effect various business
combinations with a corporation for a three-year period. We are subject to the
provisions of Section 203. However, Telxon and its affiliates are excluded from
the definition of "interested stockholder" pursuant to the terms of Section 203.
The provisions of Section 203 may encourage persons interested in acquiring us
to negotiate in advance with our Board, since the stockholder approval
requirement would be avoided if a majority of the Directors then in office
approves either the business combination or the transaction which results in any
such person becoming an interested stockholder. Such provisions also may have
the effect of preventing changes in our management. It is possible that such
provisions could make it more difficult to accomplish transactions which our
stockholders may otherwise deem to be in their best interests.
LIABILITY OF DIRECTORS; INDEMNIFICATION
We have included in our certificate and bylaws provisions to (i) eliminate
the personal liability of our Directors for monetary damages resulting from
breaches of their fiduciary duty to the extent permitted by the Delaware General
Corporation Law, and (ii) indemnify our Directors and officers to the fullest
extent permitted by Section 145 of the Delaware General Corporation Law,
including circumstances in which indemnification is otherwise discretionary. We
believe that these provisions are necessary to attract and retain qualified
persons as directors and officers.
TRANSFER AGENT AND REGISTRAR
Harris Trust and Savings Bank will be the transfer agent and registrar for
our common stock.
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<PAGE> 72
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. Future sales of substantial amounts of our common stock in the public
market could adversely affect prevailing market prices from time to time.
Furthermore, since no material amount of shares owned prior to this offering
will be available for sale shortly after this offering because of contractual
and legal restrictions on resale described below, sales of substantial amounts
of our common stock in the public market after these restrictions lapse could
adversely affect the prevailing market price and our ability to raise equity
capital in the future.
Upon completion of this offering, we will have outstanding an aggregate of
13,567,181 shares of common stock, assuming no exercise of any warrants or
options and no exercise of the underwriters' over-allotment option. Of these
shares, all of the 6,000,000 shares sold in this offering will be freely
tradeable without restriction or further registration under the Securities Act
of 1933, unless such shares are purchased by our "affiliates" as that term is
defined in Rule 144 under the Securities Act of 1933. The remaining 7,567,181
shares of common stock held by existing stockholders are "restricted securities"
as that term is defined in Rule 144 under the Securities Act of 1933 restricted
shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rule 144 or 701 promulgated under the
Securities Act of 1933, which rules are summarized below.
All of our officers, directors, stockholders (including Telxon), warrant
holders and certain of our option holders have agreed not to sell any shares of
common stock during the period ending 180 days after the date of this
prospectus, without the prior written consent of Dain Rauscher Wessels. Telxon
Corporation will sell two million of its 7,276,500 shares in this offering, and
will grant the underwriters an option to purchase an additional 300,000 shares
to cover underwriters' over-allotments. Dain Rauscher Wessels may in its sole
discretion choose to release a number of these shares from such restrictions
prior to the expiration of such 180 day period. In addition, under the terms of
a Stockholders Agreement with us dated March 31, 1998 certain additional option
holders have agreed with us not to sell any shares of common stock until 180
days after the offering.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person (or persons whose shares are aggregated)
who has beneficially owned restricted shares for at least one year (including
the holding period of any prior owner except an Affiliate) would be entitled to
sell within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the number of shares of common stock then outstanding
(which will equal approximately 135,671 shares immediately after this offering);
or (ii) the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of an notice
on Form 144 with respect to such sale. Sales under Rule 144 are also subject to
manner of sale provisions and notice requirements and to the availability of
current public information about us. Under Rule 144(k), a person who is not
deemed to have been our affiliate at any time during the 90 days preceding a
sale, and who has beneficially owned the shares proposed to be sold for at least
two years (including the holding period of any prior owner except an affiliate),
is entitled to sell such shares without complying with the manner of sale,
public information, volume limitation or notice provisions of Rule 144.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, employees, directors, officers, consultants or advisors may
rely on Rule 701 with respect to the resale of securities originally purchased
from us prior to this offering pursuant
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<PAGE> 73
to written compensatory benefit plans or written contracts relating to the
compensation of such persons. In addition, the Securities and Exchange
Commission has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements of
the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted securities
and, subject to the contractual restrictions described above, beginning 90 days
after the date of this prospectus, may be sold by persons other than affiliates
subject only to the manner of sale provisions of Rule 144, and by affiliates
under Rule 144 without compliance with its holding period requirements.
In addition, we intend to file registration statements on Form S-8 covering
(i) 250,000 shares of common stock reserved for issuance under the 1999 Stock
Option Plan For Non-Employee Directors, (ii) 1,765,817 shares of common stock
reserved for issuance under the 1999 Omnibus Stock Incentive Plan, (iii) 500,000
shares of common stock reserved for issuance under the 1999 Employee Stock
Purchase Plan, and (iv) 1,543,000 shares of common stock subject to outstanding
options under our 1996 Stock Option Plan, as amended and restated. We expect
that these registration statements will be filed and become effective as soon as
practicable after the effective date of this offering. Accordingly, shares
registered under such registration statements will, subject to Rule 144 volume
limitations applicable to affiliates, be available for sale in the open market,
beginning 181 days after the date of the prospectus, unless such shares are
subject to vesting restrictions with us.
As a result of contractual restrictions and the provisions of Rules 144 and
701, additional shares will be available for sale in the public market as
follows:
- no restricted shares will be eligible for immediate sale on the date of
this prospectus;
- approximately 9,041,313 restricted shares will be eligible for sale
beginning 180 days after the effective date of this offering upon
expiration of lock-up agreements, subject in some cases to compliance
with Rule 144; and
- the remainder of the restricted shares will be eligible for sale from
time to time thereafter, subject in some cases to compliance with Rule
144.
In addition, shares purchased pursuant to an employee stock option exercise
may become available for resale pursuant to the provisions of Rule 701, which
permits affiliates and non-affiliates to sell their Rule 701 shares without
having to comply with Rule 144's holding period restrictions, in each case
commencing 90 days after the date of this prospectus. In addition,
non-affiliates may sell Rule 701 shares without complying with the public
information, volume and notice provisions of Rule 144.
REGISTRATION RIGHTS
After this offering, the holders of approximately 9,097,085 shares of our
common stock currently outstanding or issuable upon exercise of warrants or
options, or their transferees, will be entitled to limited registration rights
with respect to such shares under the Securities Act of 1933. Registration of
such shares under the Securities Act of 1933 would result in such shares
becoming freely tradable without restriction under the Securities Act of 1933
(except for share purchases by affiliates) immediately upon the effectiveness of
such registration.
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<PAGE> 74
UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated , 1999, Aironet and Telxon agreed to sell to each of the
underwriters named below, and each of the underwriters, for whom Dain Rauscher
Wessels, a division of Dain Rauscher Incorporated and Prudential Securities
Incorporated are acting as representatives have severally agreed to purchase
from us and Telxon, the respective number of shares of common stock set forth
opposite the name of such Underwriter below:
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Dain Rauscher Wessels.......................................
Prudential Securities Incorporated..........................
---------
Total.................................................. 6,000,000
=========
</TABLE>
The underwriting agreement provides that the obligations of the
underwriters are subject to certain conditions precedent and that the
underwriters are committed to purchase all shares of common stock offered hereby
(other than those covered by the over-allotment option described below), if any
of such shares are purchased.
The underwriters propose to offer the shares of common stock, directly to
the public at the initial public offering price set forth on the cover page of
this prospectus and to certain dealers at a price minus a concession not in
excess of $ per share. The underwriters may allow, and such dealers may
reallow, a concession not in excess of $ per share to certain brokers and
dealers. After the shares of common stock are released for sale to the public,
the offering price and other selling terms may from time to time be varied by
the underwriters.
Aironet and Telxon have granted the underwriters an option, exercisable for
up to 30 days after the date of this prospectus, to purchase up to an aggregate
of 900,000 additional shares of common stock to cover over-allotments, if any.
If the underwriters exercise such over-allotments option, the underwriters have
severally agreed, subject to certain conditions, to purchase approximately the
same percentage thereof that the number of shares of common stock to be
purchased by each of them shown in the foregoing table hears to the total number
of shares of common stock offered hereby. The underwriters may exercise such
option only to cover over-allotments made in connection with the sale of shares
of common stock made hereby.
Aironet and Telxon have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act, and to
contribute to payments that the underwriters may be required to make in respect
thereof.
The underwriters have reserved for sale, at the initial public offering
price, up to 300,000 shares of the common stock for employees, directors and
selected other persons associated with us who have expressed an interest in
purchasing shares in the offering. The shares available for sale to the general
public will be reduced by the number of these which are actually purchased.
WA&H Investments LLC, one of our stockholders, is affiliated with Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated, one of the
representative underwriters. WA&H Investments LLC purchased 142,857 shares and
warrants to purchase an additional 42,857 shares, which will be exercisable
beginning at the offering.
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Aironet and its officers, directors and stock holders (including Telxon),
warrant holders and certain of its option holders have agreed not to offer,
sell, contract to sell or otherwise dispose of any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock or
any right to acquire shares of common stock owned by them for a period of 180
days after the date of this prospectus without the prior written consent (which
consent may be given without notice to us, the stockholders or by other public
announcement) of Dain Rauscher Wessels on behalf of the underwriters.
The representatives have advised Aironet that the underwriters do not
intend to confirm sales in excess of 5% of the shares of common stock offered
hereby to any accounts over which they exercise discretionary authority.
In order to facilitate the offering, the underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
common stock. Specifically, the underwriters may over-allot in connection with
the offering, creating a short position in the common stock for their own
account. In addition, to cover over-allotments or to stabilize the price of the
common stock, the underwriters may bid for, and purchase, shares of the common
stock in the open market. The underwriters may also reclaim selling concessions
allowed to an underwriter or a dealer for distributing the common stock in the
offering, if the underwriters repurchase previously distributed common stock in
transactions to cover their short positions, in stabilization transactions or
otherwise. Finally, the underwriters may bid for, and purchase, shares of the
common stock in market making transactions and impose penalty bids. These
activities may stabilize or maintain the market price of the common stock above
market levels that may otherwise prevail. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
Prior to the offering, there has been no public market for our capital
stock. Consequently, the initial-public offering price for the common stock will
be determined by negotiations among Aironet and the representatives. Among the
factors to be considered in such negotiations, in addition to prevailing market
conditions, will be our historical performance, estimates of our business
potential and earnings prospects, an assessment of our management and the
consideration of the above factors in relation to market valuation of companies
in related businesses. The estimated initial public offering price range set
forth on the cover page of this prospectus is subject to change as a result of
market conditions or other factors.
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LEGAL MATTERS
The validity of the common stock offered hereby and other legal matters
will be passed upon for us by Goodman Weiss Miller LLP, Cleveland, Ohio. Mr. Jay
R. Faeges, an attorney at Goodman Weiss Miller LLP, is also our Secretary.
Certain legal matters will be passed upon for the underwriters by Testa, Hurwitz
& Thibeault, LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements as of March 31, 1998 and 1997 and for
each of the three years in the period ended March 31, 1998 included in this
prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP (or its predecessor, Coopers & Lybrand L.L.P.),
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement on Form S-1 under the Securities Act of 1933, with respect to the
common stock offered hereby. This prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to us and our common
stock, you should read the Registration Statement and the exhibits and schedules
thereto. Statements contained in this prospectus as to the contents of any
contract or other document are not necessarily complete and, in each instance,
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference. A copy of the Registration Statement may be
inspected by anyone without charge at the Securities and Exchange Commission's
principal office in Washington, D.C., at the regional offices of the Securities
and Exchange Commission located at 7 World Trade Center, New York, New York
10048, and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661, and through the SEC's web site at http://www.sec.gov. Copies of
all or any part of the Registration Statement may be obtained from the Public
Reference Section of the Securities and Exchange Commission, Judiciary Plaza,
450 Fifth Street, N.W. Room 1024, Washington, D.C. 20549, upon payment of
certain fees prescribed by the Securities and Exchange Commission.
After this offering we will be subject to the informational requirements of
the Securities Exchange Act of 1934. We will fulfill our obligations with
respect to such requirements by filing periodic reports and other information
with the SEC. In addition, we intend to furnish to our stockholders annual
reports containing consolidated financial statements examined by an independent
public accounting firm.
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AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of March 31, 1997, 1998 and
December 31, 1998 (unaudited)............................. F-3
Consolidated Statements of Operations for the years ended
March 31, 1996, 1997 and 1998 and for the nine months
ended December 31, 1997 and 1998 (unaudited).............. F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended March 31, 1996, 1997 and 1998 and for
the nine months ended December 31, 1998 (unaudited)....... F-5
Consolidated Statements of Cash Flows for the years ended
March 31, 1996, 1997 and 1998 and for the nine months
ended December 31, 1997 and 1998 (unaudited).............. F-6
Notes to the Consolidated Financial Statements.............. F-7
</TABLE>
F-1
<PAGE> 78
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS
OF AIRONET WIRELESS COMMUNICATIONS, INC.
We have audited the accompanying consolidated balance sheets of Aironet
Wireless Communications, Inc. and Subsidiary (the "Company") as of March 31,
1997 and 1998 and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 1998. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Aironet Wireless Communications, Inc. and Subsidiary as of March 31, 1997 and
1998, and the consolidated results of their operations and their cash flows for
each of the three years in the period ended March 31, 1998, in conformity with
generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Akron, Ohio
June 12, 1998
F-2
<PAGE> 79
AIRONET WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------------- ------------
1997 1998 1998
----------- ----------- ------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,608,529 $ 2,864,072 $ 5,759,709
Accounts receivable trade, net of allowance for
doubtful accounts of $256,897, $187,038 and
$417,882 (unaudited), respectively............. 2,924,384 4,838,523 4,324,293
Other accounts receivable........................ 611,155 99,639 1,175,124
Receivable from sales of common stock............ -- 1,499,998 --
Receivable from affiliate........................ 1,444,352 1,500,210 3,296,370
Inventories...................................... 4,331,536 4,020,254 4,307,179
Deferred tax asset............................... 51,130 -- --
Prepaid expenses and other....................... 106,241 240,925 320,306
Income taxes receivable.......................... -- 1,292,520 833,633
----------- ----------- -----------
Total current assets........................ 11,077,327 16,356,141 20,016,614
Property and equipment, net........................... 2,520,619 2,655,502 2,491,046
Deferred tax asset.................................... 193,892 299,821 492,556
Intangible assets, net................................ 5,326,301 4,252,134 3,420,597
Other long-term assets................................ 82,683 69,595 127,833
----------- ----------- -----------
Total assets................................ $19,200,822.. $23,633,193 $26,548,646
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................. $ 5,939,062 $ 4,775,022 $ 4,756,078
Payable to affiliate............................. 1,353,131 4,940,710 2,610,542
Distribution to affiliate (Note 9)............... 1,100,000 -- --
Income taxes payable............................. 3,402,141 -- 323,888
Deferred tax liability........................... -- 93,190 42,036
Accrued liabilities.............................. 1,993,532 2,226,495 2,668,751
----------- ----------- -----------
Total current liabilities................... 13,787,866 12,035,417 10,401,295
Line of credit........................................ -- -- 2,518,301
Other long-term liabilities........................... 70,745 -- --
----------- ----------- -----------
Total liabilities........................... 13,858,611 12,035,417 12,919,596
Commitments and contingencies (Note 8)................ -- -- --
Stockholders' equity:
Common stock, $.01 par value per share;
15,000,000 shares authorized; 8,085,000,
9,339,126, and 9,566,348 (unaudited) shares
issued and outstanding, respectively........... 80,850 93,391 95,663
Additional paid-in capital....................... 11,284,282 15,026,661 16,622,760
Equity adjustment for foreign currency
translation.................................... (726,561) (726,561) (726,561)
Accumulated deficit.............................. (5,296,360) (2,795,715) (2,362,812)
----------- ----------- -----------
Total stockholders' equity.................. 5,342,211 11,597,776 13,629,050
----------- ----------- -----------
Total liabilities and stockholders'
equity.................................... $19,200,822 $23,633,193 $26,548,646
=========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 80
AIRONET WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, DECEMBER 31,
--------------------------------------- -------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Non-affiliate................ $ 5,455,737 $14,483,661 $20,249,057 $14,990,424 $19,825,203
Affiliate product............ 38,867,224 46,844,236 19,104,094 17,478,715 6,525,292
Affiliate royalty............ -- -- 5,781,244 3,539,740 6,063,164
----------- ----------- ----------- ----------- -----------
Total revenues....... 44,322,961 61,327,897 45,134,395 36,008,879 32,413,659
----------- ----------- ----------- ----------- -----------
Cost of revenues:
Non-affiliate................ 2,956,528 8,388,104 11,714,129 8,627,772 13,447,544
Affiliate.................... 30,942,140 37,073,058 14,586,967 13,168,337 5,429,311
----------- ----------- ----------- ----------- -----------
Total cost of
revenues........... 33,898,668 45,461,162 26,301,096 21,796,109 18,876,855
----------- ----------- ----------- ----------- -----------
Gross profit:
Non-affiliate................ 2,499,209 6,095,557 8,534,928 6,362,652 6,377,659
Affiliate product............ 7,925,084 9,771,178 4,517,127 4,310,378 1,095,981
Affiliate royalty............ -- -- 5,781,244 3,539,740 6,063,164
----------- ----------- ----------- ----------- -----------
Total gross profit... 10,424,293 15,866,735 18,833,299 14,212,770 13,536,804
----------- ----------- ----------- ----------- -----------
Operating expenses:
Sales and marketing.......... 1,358,787 3,083,188 4,469,832 3,530,471 4,418,475
Research and development..... 5,977,137 5,311,421 5,683,086 3,852,523 4,732,539
General and administrative... 2,696,447 3,547,827 3,304,738 2,179,424 2,578,407
Goodwill amortization........ 865,680 865,680 865,680 649,260 649,260
----------- ----------- ----------- ----------- -----------
Total operating
expenses........... 10,898,051 12,808,116 14,323,336 10,211,678 12,378,681
----------- ----------- ----------- ----------- -----------
Income (loss) from
operations................... (473,758) 3,058,619 4,509,963 4,001,092 1,158,123
Interest expense (income),
net.......................... (41,942) 130,435 45,815 53,852 4,162
----------- ----------- ----------- ----------- -----------
Income (loss) before income
taxes........................ (431,816) 2,928,184 4,464,148 3,947,240 1,153,961
Provision for income taxes..... 2,196,029 2,039,567 1,963,503 1,618,561 721,058
----------- ----------- ----------- ----------- -----------
Net income (loss).............. $(2,627,845) $ 888,617 $ 2,500,645 $ 2,328,679 $ 432,903
=========== =========== =========== =========== ===========
Net income (loss) per common share:
Basic........................ $ (0.33) $ 0.11 $ 0.31 $ 0.29 $ 0.05
=========== =========== =========== =========== ===========
Diluted...................... $ (0.33) $ 0.11 $ 0.30 $ 0.28 $ 0.04
=========== =========== =========== =========== ===========
Weighted average shares used in
calculating net income (loss)
per share:
Basic........................ 8,085,000 8,085,000 8,122,882 8,108,310 9,354,126
Diluted...................... 8,085,000 8,085,000 8,319,063 8,251,678 9,873,088
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 81
AIRONET WIRELESS COMMUNICATIONS, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
COMMON STOCK ADDITIONAL FOR FOREIGN TOTAL
-------------------- PAID-IN CURRENCY ACCUMULATED STOCKHOLDERS'
SHARES AMOUNTS CAPITAL TRANSLATION DEFICIT EQUITY
---------- ------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1995
(retroactively restated
for 1996 stock split
and reverse stock split
-- Note 9)............. 8,085,000 $80,850 $12,144,067 $(971,098) $(3,557,132) $ 7,696,687
Net loss................. -- -- -- -- (2,627,845) (2,627,845)
Adjustment for foreign
currency translation... -- -- -- 244,537 -- 244,537
---------- ------- ----------- --------- ----------- -----------
Balance at March 31,
1996................... 8,085,000 80,850 12,144,067 (726,561) (6,184,977) 5,313,379
---------- ------- ----------- --------- ----------- -----------
Distribution to
affiliate (Note
9).................. -- -- (1,100,000) -- -- (1,100,000)
Capital contribution... -- -- 240,215 -- -- 240,215
Net income............. -- -- -- -- 888,617 888,617
---------- ------- ----------- --------- ----------- -----------
Balance at March 31,
1997................... 8,085,000 80,850 11,284,282 (726,561) (5,296,360) 5,342,211
---------- ------- ----------- --------- ----------- -----------
Capital contribution --
affiliate (Note
9).................. -- -- 404,408 -- -- 404,408
Stock issuance (Note
9).................. 984,126 9,841 2,806,027 -- -- 2,815,868
Stock options exercised
(Note 9)............ 270,000 2,700 499,500 -- -- 502,200
Stock option
compensation expense
(Note 9)............ -- -- 404,444 -- -- 404,444
Note receivable from
shareholder (Note
9).................. -- -- (372,000) -- -- (372,000)
Net income............. -- -- -- -- 2,500,645 2,500,645
---------- ------- ----------- --------- ----------- -----------
Balance at March 31,
1998................... 9,339,126 93,391 15,026,661 (726,561) (2,795,715) 11,597,776
---------- ------- ----------- --------- ----------- -----------
Stock issuance
(unaudited) (Note
9).................. 222,222 2,222 775,555 -- -- 777,777
Stock options exercised
(unaudited)......... 5,000 50 12,284 -- -- 12,334
Stock option
compensation expense
(unaudited)......... -- -- 808,260 -- -- 808,260
Net income
(unaudited)......... -- -- -- -- 432,903 432,903
---------- ------- ----------- --------- ----------- -----------
Balance at December 31,
1998 including the
reclassification of
$726,561 to accumulated
other comprehensive
loss (unaudited)....... 9,566,348 $95,663 $16,622,760 $(726,561) $(2,362,812) $13,629,050
========== ======= =========== ========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 82
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR THE YEARS ENDED MARCH 31, DECEMBER 31,
--------------------------------------- -------------------------
1996 1997 1998 1997 1998
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss).................... $(2,627,845) $ 888,617 $ 2,500,645
----------- ----------- -----------
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation....................... 478,954 1,031,377 1,238,348
Amortization....................... 2,109,116 987,720 1,037,224
Provision for doubtful accounts.... 286,608 222,436 154,231
Provision for inventory
obsolescence..................... 787,925 1,024,167 (47,615)
Deferred income taxes.............. 68,361 (16,543) 38,391
Loss on disposal of equipment...... 30,663 -- 60,050
Stock compensation expense......... -- -- 404,444
Changes in other assets and
liabilities:
Accounts receivable, trade....... (1,193,812) (1,890,472) (2,068,370)
Other accounts receivable........ (448,862) 69,790 511,516
Receivable from affiliate........ 7,571,925 3,363,067 (55,858)
Inventories...................... (3,441,862) 2,484,804 358,897
Prepaid expenses and other
assets........................ (173,575) (364,109) (134,684)
Income taxes receivable.......... -- -- (1,292,520)
Other long-term assets........... -- -- 13,088
Accounts payable................. (314,335) 2,193,078 (1,164,040)
Income taxes payable............. (102,790) 934,475 (1,705,213)
Accrued liabilities.............. (55,565) 1,477,886 231,452
----------- ----------- -----------
Total adjustments............. 5,602,751 11,517,676 (2,420,659)
----------- ----------- -----------
Net cash provided by (used in)
operating activities........ 2,974,906 12,406,293 79,986 $(2,353,696) $ 2,747,791
----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Additions to property and
equipment.......................... (1,672,530) (1,409,717) (1,433,281) (1,158,970) (821,453)
Purchase of software................. (88,218) (275,621) (244,266) (264,578) (113,144)
Purchase of licenses................. (96,000) (272,237) -- -- --
----------- ----------- ----------- ----------- -----------
Net cash used in investing
activities.................. (1,856,748) (1,957,575) (1,677,547) (1,423,548) (934,597)
----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Payable to affiliate................. (1,479,127) (8,971,280) 2,295,059 3,320,681 (3,648,190)
Borrowings under line of credit...... -- -- -- -- 2,518,301
Book overdraft....................... -- -- -- 720,609 --
Net proceeds from sale of stock...... -- -- 1,597,079 -- 2,199,998
Stock options exercised.............. -- -- 130,200 -- 12,334
Distribution to affiliate............ -- -- (1,100,000) (1,100,000) --
Other................................ (80,897) (67,106) (69,234) (70,726) --
----------- ----------- ----------- ----------- -----------
Net cash provided by (used in)
financing activities........ (1,560,024) (9,038,386) 2,853,104 2,870,564 1,082,443
----------- ----------- ----------- ----------- -----------
Effect of exchange rate changes on
cash................................. 20,370 -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents..................... (421,496) 1,410,332 1,255,543 (906,680) 2,895,637
Cash and cash equivalents at beginning
of period............................ 619,693 198,197 1,608,529 1,608,529 2,864,072
----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of
period............................... $ 198,197 $ 1,608,529 $ 2,864,072 $ 701,849 $ 5,759,709
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 83
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- BUSINESS
Aironet Wireless Communications, Inc. (the "Company") was incorporated in
1993. The Company's operations were formed from one subsidiary and two units of
the Company's parent, Telxon Corporation ("Telxon"): Telesystems SLW Inc.
("Telesystems") -- a designer and manufacturer of wireless spread spectrum LAN
radios; Telxon's Radio and Wireless Network Engineering Group -- designers of
advanced spread spectrum technology radios and network software; and Telxon's RF
Software Engineering Group -- advanced software designers of universal wireless
connectivity systems for integration into other computer manufacturer's
networks. As of March 31, 1998, Telxon owned approximately 76 percent of the
Company. The Company designs, develops and markets high speed, standards-based
wireless local area networking ("LAN") solutions. The Company's products utilize
advanced radio frequency and data communication technologies to connect users to
computer networks ranging in size and complexity from enterprise-wide LANs to
home networks. The Company markets its products directly to Telxon and to
non-affiliates in North America and Europe through a network of value added
resellers ("VARs"), distributors, original equipment manufacturers ("OEMs"), and
to a lesser extent directly to end users.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements have been "carved-out" of Telxon's
consolidated financial statements and include the operations of the Company and
its wholly-owned subsidiary Aironet Canada Limited ("ACL"). All significant
intercompany transactions have been eliminated in consolidation.
The consolidated financial statements do not include the financial
statements of Aironet Canada, Inc. ("ACI"), a wholly owned, non-operating
subsidiary of the Company.
Unaudited Interim Financial Information
Interim condensed financial information as of December 31, 1998 and for the
nine months ended December 31, 1997 and 1998 is unaudited. The condensed
consolidated financial information of the Company has been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission ("SEC") and,
in the opinion of management, include all adjustments necessary for a fair
presentation of the consolidated financial position, results of operations, and
cash flows for each period shown. All adjustments are of a normal and recurring
nature except for certain stock-based compensation transactions discussed in
Note 9. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules and regulations.
Foreign Currency Translation
The financial statements of ACL prior to April 1, 1996, were translated
into U.S. dollars using the local currency as the functional currency in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation." Effective April 1, 1996, ACL changed its functional
currency from Canadian Dollars to U.S. Dollars to reflect changes in that
subsidiary's operating environment. Prior to April 1, 1996, all assets and
liabilities were translated at current rates of exchange, and operating
transactions were translated at weighted average rates during the respective
years. The translation gains and losses were accumulated as a separate component
of stockholders' equity until
F-7
<PAGE> 84
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
realized. There were no income taxes allocated to the translation adjustments.
Net foreign currency transaction losses were $265,930 in fiscal 1996. There were
no such losses or gains in fiscal 1997 and 1998.
Hedging Activities
In fiscal 1996, the Company's hedging activities primarily related to the
use of foreign exchange forward contracts to purchase U.S. dollars for payment
to Telxon. The aggregate amount of foreign exchange contracts outstanding at any
time during that year, as well as the aggregate amount of gains or losses
resulting from these transactions, were not material. In fiscal 1997 and 1998
there were no foreign exchange contracts outstanding at any time.
Cash and Cash Equivalents
The Company considers all highly liquid investments which are both readily
convertible to cash and have a maturity of three months or less when purchased
to be cash equivalents.
Fair Value of Financial Instruments
Financial instruments consist of cash and cash equivalents, notes
receivable and payable to affiliate. The carrying amounts reported in the
consolidated balance sheets for these items approximate their fair values.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market.
Income Taxes
The Company uses the liability method of accounting for income taxes.
Deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using enacted tax rates and laws that will be in effect when the differences are
expected to reverse. The effect on deferred taxes of a change in tax rates is
recognized in the period that includes the enactment date.
The Company was included in the consolidated tax filings of Telxon through
March 31, 1998. The Company calculated its current and deferred income taxes as
if it had filed separate tax returns. Amounts due or receivable for current
income taxes are indemnified by Telxon and therefore were recorded as
contributed capital or dividends (Note 9).
Property and Equipment
Property and equipment is recorded at historical cost and depreciated over
the estimated useful lives of the assets using the straight-line method for
financial reporting purposes. The ranges of the estimated useful lives are:
machinery and equipment, two to five years; furniture and fixtures, ten years;
customer service equipment and tooling, three years; and leasehold improvements,
over the shorter of the useful life of the asset or the life of the lease. Gains
and losses from the sale or retirement of property and equipment are included in
income.
F-8
<PAGE> 85
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
Intangible Assets, Net
The excess of the purchase cost over the fair value of net assets acquired
in an acquisition (goodwill) is included in intangible assets, net in the
accompanying consolidated balance sheets. Goodwill is amortized on a
straight-line basis over ten years. Non-compete agreements are amortized on a
straight-line basis over the life of the related contract.
Software costs are capitalized and amortized in accordance with Statement
of Financial Accounting Standards No. 86, "Accounting for the Cost of Computer
Software to Be Sold, Leased, or Otherwise Marketed." Product and software
license agreements are capitalized and amortized over the shorter of the license
period or estimated useful life. Purchased computer software is capitalized and
amortized using the straight-line method, over the expected useful life of the
software, generally from three to five years. Research and development costs are
expensed as incurred and include costs associated with new product development
and costs to significantly improve existing products.
All other assets included in intangible assets, net are recorded at cost
and are amortized on a straight-line basis over their expected useful lives.
The Company periodically reviews intangible and other long-lived assets to
assess recoverability, and impairments, if any, would be recognized in results
of operations if events or changes in circumstances indicate that the carrying
amount of the assets may not be recoverable.
Warranty Obligations
The Company provides various product warranties. The estimated obligation
to repair products or to replace components thereof is reviewed each accounting
period, based on experience trends and current cost per claim information, and
adjusted as necessary.
Revenue Recognition
The Company recognizes revenues from inventory sales at the time of
shipment. Revenues from customer service contracts are recognized ratably over
the maintenance contract period or as the services are performed. Revenues from
a royalty arrangement with Telxon are recognized when the respective units of
product are shipped, invoiced or transferred to Telxon's customers.
UNAUDITED: During the nine months ended December 31, 1998, the Company
granted certain distributors limited rights of return and price protection on
unsold products. Until such time as adequate historic information is available,
revenues in an amount equal to the gross profit on shipments with the right of
return are not recognized until the right of return has lapsed. A reserve for
price protection is established at the time the Company decides to reduce
prices.
Stock Based Compensation
The Company accounts for stock based compensation awards to employees
pursuant to Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees", and its related interpretations which prescribe the use of
the intrinsic value based method. Accordingly, compensation expense is
recognized if, at the measurement date, the grant price is less than the market
value. Compensation expense, if any, is recognized in a manner consistent with
the methodology prescribed by
F-9
<PAGE> 86
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
Financial Accounting Standards Board Interpretation No. 28, "Accounting for
Stock Appreciation Rights and Other Variable Stock Options or Award Plans."
The Company accounts for stock based compensation awards to non-employees
pursuant to Statement of Financial Accounting Standards ("SFAS") No. 123,
"Accounting for Stock Based Compensation" and has adopted the disclosure only
provisions of SFAS No. 123 for its employee stock based compensation awards.
SFAS No. 123 prescribes a fair value basis of accounting for stock options at
the measurement date. Compensation expense for non-employee stock options is
recognized on a straight-line basis.
Net Income (Loss) Per Common Share
Basic net income (loss) per common share is based on the weighted average
number of common shares outstanding during the period. Diluted net income (loss)
per common share is based on the weighted average number of common shares
outstanding during the period plus, if dilutive, the incremental number of
common shares issuable on a pro forma basis upon the exercise of employee and
non-employee stock options and stock purchase warrants, assuming the proceeds
are used to repurchase outstanding shares at the average market price during the
year. A reconciliation of the denominators of the basic and diluted per share
computations is provided below:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED MARCH 31, DECEMBER 31,
----------------------------------- --------------------------
1996 1997 1998 1997 1998
---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Common shares:
Weighted average shares
outstanding -- basic......... 8,085,000 8,085,000 8,122,882 8,108,310 9,354,126
Additional shares potentially
issuable for stock options
and stock purchase
warrants..................... -- -- 196,181 143,368 518,962
--------- --------- --------- --------- ---------
Weighted average shares
outstanding -- diluted....... 8,085,000 8,085,000 8,319,063 8,251,678 9,873,088
========= ========= ========= ========= =========
</TABLE>
The computations of net income (loss) per common share do not include the
effects of any dilutive incremental common shares related to stock options
granted or common stock warrants issued with exercise rights that are
contingent, so long as the contingency is not resolved (Note 9).
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
F-10
<PAGE> 87
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)
Contingencies
Contingencies are recorded as expenses when events giving rise to such
items are probable and the amounts are estimable in accordance with the
requirements of Statement of Financial Accounting Standards No. 5, "Accounting
for Contingencies."
Reclassifications
The Company has made certain reclassifications in the March 31, 1996, 1997
and 1998 consolidated financial statements.
NOTE 3 -- INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
MARCH 31,
------------------------ DECEMBER 31,
1997 1998 1998
---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C>
Purchased components......................... $2,985,151 $3,048,654 $3,223,341
Work-in-process.............................. 658,462 202,989 459,655
Finished goods............................... 687,923 768,611 624,183
---------- ---------- ----------
$4,331,536 $4,020,254 $4,307,179
========== ========== ==========
</TABLE>
NOTE 4 -- PROPERTY AND EQUIPMENT
Property and equipment, net as of March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Machinery and equipment................................... $4,500,099 $4,672,896
Tooling................................................... 219,292 330,446
Furniture and office equipment............................ 235,027 181,265
Leasehold improvements.................................... 121,200 199,078
---------- ----------
5,075,618 5,383,685
Less: Accumulated depreciation............................ (2,554,999) (2,728,183)
---------- ----------
$2,520,619 $2,655,502
========== ==========
</TABLE>
Depreciation expense, for the years ended March 31, 1996, 1997 and 1998
amounted to $478,954, $1,031,377 and $1,238,348, respectively.
F-11
<PAGE> 88
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 5 -- INTANGIBLE ASSETS, NET
Intangible assets, net as of March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Goodwill, net of accumulated amortization of $4,328,377
and $5,194,057.......................................... $4,328,312 $3,462,632
Product and software license agreements, net of
accumulated amortization of $31,999 and $110,658........ 455,203 624,537
Other..................................................... 542,786 164,965
---------- ----------
$5,326,301 $4,252,134
========== ==========
</TABLE>
As a result of an acquisition, the Company had non-compete agreements dated
April 10, 1992 with former stockholders at a gross cost of $4,788,152. The
related asset was amortized over the life of the agreements of four years.
During the year ended March 31, 1996, the non-compete agreements were fully
amortized.
Amortization expense for the years ended March 31 was as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------- -------- ----------
<S> <C> <C> <C>
Non-compete agreements......................... $1,196,535 $ -- $ --
Goodwill....................................... 865,680 865,680 865,680
Product and software license agreements........ -- 31,999 78,659
Other.......................................... 46,901 90,041 92,885
---------- -------- ----------
$2,109,116 $987,720 $1,037,224
========== ======== ==========
</TABLE>
NOTE 6 -- ACCRUED LIABILITIES
Accrued liabilities as of March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1998
---------- ----------
<S> <C> <C>
Accrued payroll and other employee compensation........... $1,129,230 $ 907,892
Accrued commissions....................................... 223,556 195,179
Other..................................................... 640,746 1,123,424
---------- ----------
$1,993,532 $2,226,495
========== ==========
</TABLE>
NOTE 7 -- INCOME TAXES
Components of income (loss) before income taxes for the years ended March
31 are as follows:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- ----------
<S> <C> <C> <C>
U.S. ....................................... $(4,347,410) $(2,864,462) $4,827,461
Foreign..................................... 3,915,594 5,792,646 (363,313)
----------- ----------- ----------
$ (431,816) $ 2,928,184 $4,464,148
=========== =========== ==========
</TABLE>
F-12
<PAGE> 89
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 7 -- INCOME TAXES, (CONTINUED)
Components of the provision for income taxes by taxing jurisdiction for the
years ended March 31 were as follows:
<TABLE>
<CAPTION>
1996 1997 1998
---------- ---------- ----------
<S> <C> <C> <C>
Currently payable:
U.S. ...................................... $ -- $ -- $1,590,649
Foreign.................................... 2,127,668 2,056,110 334,463
Deferred:
U.S. ...................................... -- -- 144,670
Foreign.................................... 68,361 (16,543) (106,279)
---------- ---------- ----------
Provision for income taxes................... $2,196,029 $2,039,567 $1,963,503
========== ========== ==========
</TABLE>
The reconciliation between the reported total income tax expense and the
amount computed by multiplying income (loss) before income taxes by the U.S.
federal statutory tax rate is as follows (Note 9):
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ----
<S> <C> <C> <C>
U.S. federal statutory tax rate........................... (35.0)% 35.0% 35.0%
Foreign tax rate differential............................. 121.5 17.6 1.2
Net operating losses which provide no current tax
benefit................................................. 352.0 -- --
Net operating loss benefit................................ -- (127.4) --
Taxation of foreign dividends (net of foreign tax
credits)................................................ -- 149.7 --
Goodwill amortization..................................... 70.1 10.3 6.8
Stock option compensation expense......................... -- -- 2.5
Canadian research and development credits................. -- (22.2) --
Other..................................................... -- 6.7 (1.5)
------ ------ ----
Effective income tax rate................................. 508.6% 69.7% 44.0%
====== ====== ====
</TABLE>
UNAUDITED: The Company's annual effective income tax rate estimated for the
nine months ended December 31, 1997 and 1998 is 41.0% and 62.5%, respectively.
The increase in the fiscal 1999 estimated rate results from the significance of
non-deductible goodwill amortization and stock option compensation expense for
tax purposes in relation to the amount of estimated pre-tax income for the year
ending March 31, 1999 (Note 17).
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The tax effects of
temporary differences that give rise to significant portions of the deferred tax
assets and liabilities as of March 31, are presented below:
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax assets:
Depreciation........................................... $ 50,709 $ 205,288
Reserves............................................... 51,130 --
AMT credit carryforwards............................... 240,215 240,215
</TABLE>
F-13
<PAGE> 90
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 7 -- INCOME TAXES, (CONTINUED)
<TABLE>
<CAPTION>
1997 1998
----------- -----------
<S> <C> <C>
Foreign tax and general business credits
carryforwards....................................... 4,458,144 4,373,962
State and local net operating loss carryforwards....... 327,450 125,520
Valuation allowance, foreign tax and general business
credits carryforwards............................... (4,458,144) (4,373,962)
Valuation allowance, state and local net operating loss
carryforwards....................................... (327,450) (125,520)
----------- -----------
Total deferred tax assets...................... 342,054 445,503
----------- -----------
Deferred tax liabilities:
Reserves............................................... -- (93,190)
Amortization........................................... (97,032) (145,682)
----------- -----------
Total deferred tax liabilities................. (97,032) (238,872)
----------- -----------
Net deferred tax assets.................................. $ 245,022 $ 206,631
=========== ===========
Current assets (liabilities)............................. $ 51,130 $ (93,190)
=========== ===========
Long-term assets......................................... $ 193,892 $ 299,821
=========== ===========
</TABLE>
ACL has claims for Canadian research and development credits for the years
ended March 31, 1996, 1997 and 1998 in the amounts of $246,267, $0, and $0,
respectively. If these claims are subsequently accepted, the benefit will be
recognized in the years allowed. However, per Canadian tax law there will be a
corresponding increase in the subsequent year's taxable income for the amount of
the claim recognized.
ACL recorded a benefit of $650,000 during fiscal 1997 for Canadian research
and development credits claimed during fiscal 1994, 1995, and 1996.
Income taxes paid in the years ended March 31, 1996, 1997 and 1998 were
$2,319,035, $1,398,760 and $4,923,512, respectively.
NOTE 8 -- COMMITMENTS AND CONTINGENCIES
In the normal course of its operations, the Company is subject to
performance under contracts, and has various legal actions and certain
contingencies pending. However, in management's opinion, any such outstanding
matters have been reflected in the consolidated financial statements, are
covered by insurance or would not have a material adverse effect on the
Company's consolidated financial position, results of operations or cash flows.
As of March 31, 1998, the Company had a Demand Revolving Promissory Note
(the "Note") with Telxon under which the Company must pay to Telxon, on demand,
the lesser of $50 million or amounts due under intercompany advances, plus
interest at the London Interbank Offer Rate at the beginning of the fiscal year
(6.34% at April 1, 1997). The Note, along with similar notes from other
principal subsidiaries of Telxon, was used as collateral for Telxon's $100
million unsecured credit agreement. Telxon's credit agreement expires March 8,
2001. As of March 31, 1998, Telxon had no borrowings
F-14
<PAGE> 91
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 8 -- COMMITMENTS AND CONTINGENCIES, (CONTINUED)
outstanding under this agreement and was in compliance with all restrictive
covenants (Notes 16 and 17).
UNAUDITED: During July 1998, the Company entered into a revolving credit
agreement with a bank that provides for borrowings up to $5 million, which
expires July 1, 2000. Borrowings under the revolving credit agreement are
limited to 80% of the balance of eligible accounts receivable and 50% of the
balance of eligible inventories and cash on deposit with the bank. The revolving
credit agreement carries a quarterly facility fee and a commitment fee on the
unused amount of the agreement. Borrowings under the agreement bear interest at
either the banks' prime rate (7.75% at December 31, 1998) or LIBOR plus 2%
(7.06% at December 31, 1998). The weighted average interest rate for the nine
months ended December 31, 1998 was 7.47%. The agreement contains certain
covenants including prohibiting the Company from paying cash dividends. In the
event Telxon reduces its ownership in the Company below 50%, the note will
become due at the discretion of the bank (Note 17). At December 31, 1998, $2.5
million was available under this agreement.
NOTE 9 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS
Effective June 20, 1996, Telxon authorized a one hundred ten thousand for
one share common stock split, increasing the number of $.01 par value shares of
common stock issued and outstanding to 11,000,000 shares.
Effective September 5, 1996, Telxon authorized an eight thousand
eighty-five for eleven thousand share reverse common stock split, reducing the
number of $.01 par value shares of common stock issued and outstanding to
8,085,000. The 1995 number of shares outstanding have been retroactively
restated for this reverse stock split.
On March 26, 1997, the Board of Directors authorized a $1,100,000 capital
distribution to Telxon. The authorization of the capital distribution in 1997
was a non cash transaction and, accordingly, was excluded from the accompanying
1997 consolidated statement of cash flows. The cash distribution was paid April
15, 1997.
On March 31, 1998, the Company issued 984,126 shares of common stock and
295,237 warrants to purchase common stock for $3,444,444. The Company recorded
$628,576 in related transaction costs resulting in net cash received of
$2,815,868. Sales proceeds of $1,499,998 were not received by the Company until
April 1998, thereby, representing a non-cash transaction for the year ending
March 31, 1998. In addition, the Company incurred as part of the transaction
costs a fee for advisory services of $125,000 along with the issuance of 100,000
warrants to purchase common stock, to a board member of the Company. The terms
of all the warrants issued contain an exercise price of $3.50 and entitle the
warrant holder to exercise the warrants at the earlier of a qualified initial
public offering, the entire sale of the Company, or a change of control or
spin-off, as defined. The warrants expire on March 31, 2001. No value was
assigned to the warrants by the Company at the dates of issuance.
On March 31, 1998, the date of the stock issuance, the Company entered into
a formal tax sharing/indemnification agreement with Telxon. This agreement
entitles Telxon to all income tax refunds which relate to the period prior to
the stock issuance and obligates Telxon for all taxes payable prior to the stock
issuance. In addition, Telxon has elected to forgive the Company's net payable
of $404,408 owed to Telxon related to taxes which has been reflected as an
additional non-cash capital contribution.
F-15
<PAGE> 92
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 9 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS, (CONTINUED)
UNAUDITED: During April 1998, the Company received $1,499,998 of proceeds
from issuances of common stock in March 1998. In addition, during the nine
months ended December 31, 1998, the Company issued 222,222 additional shares of
common stock and warrants to purchase 66,667 shares of common stock for $3.50
per share or aggregate proceeds of $777,777. The warrants issued are subject to
the same terms as previously issued warrants. At December 31, 1998, receivables
from affiliates include $77,777 due from these issuances.
In July 1996, the Company established the Aironet Wireless Communications,
Inc. 1996 Stock Option Plan which was amended and restated on March 30, 1998
("1996 Amended Plan"). The 1996 Amended Plan provides for the granting of
options to key employees of the Company and to certain employees of Telxon and
outside directors. The total number of shares for which the Company may grant
options under the 1996 Amended Plan cannot exceed 2,150,500. Options are awarded
at a price not less than the fair market value on the date the option is
granted. Options granted prior to March 30, 1998 have a term of ten years and
vest one-third on the date granted and one-third on each of the two successive
anniversary dates therefrom. Options granted on or after March 30,1998 have the
same terms except an option can be exercised only after the earlier of a change
in control or an initial public offering, as defined in the 1996 Amended Plan.
There was no compensation expense related to options granted to employees
for the years ended March 31, 1996, 1997 and 1998. Compensation expense was
$79,684 for the year ended March 31, 1998 related to options granted to Telxon
employees and outside directors prior to March 30, 1998.
The following is a summary of the activity in the Company's 1996 Amended
Plan during fiscal 1996, 1997, and 1998:
<TABLE>
<CAPTION>
STOCK OPTIONS
--------------------------
WEIGHTED
AVERAGE PRICE
SHARES PER SHARE
--------- -------------
<S> <C> <C>
March 31, 1996.............................................. 384,000 $1.86
Granted................................................... 1,040,500 1.86
Exercised................................................. -- --
Returned to pool due to employee terminations............. (167,500) 1.86
---------
March 31, 1997.............................................. 1,257,000 1.86
Granted................................................... 500,000 3.50
Exercised................................................. (270,000) 1.86
Returned to pool due to employee terminations............. (6,500) 1.86
---------
March 31, 1998.............................................. 1,480,500 2.41
=========
</TABLE>
At March 31, 1998, there were options outstanding under the 1996 Amended
Plan to purchase 1,480,500 shares of common stock, of which 426,851 are
currently exercisable at $1.86 per share.
In February 1998, an employee of the Company exercised 200,000 options with
a grant price and fair value of $1.86. At the date of grant the Company provided
the employee a loan of $372,000 which was applied to payment of the exercise
price of the options. The note bears interest at 6% per annum on amounts
outstanding through maturity, October 31, 2002, and at a prime rate plus 4% per
annum thereafter until paid. All unpaid principal and all accrued interest is
due in full on October 31, 2002.
F-16
<PAGE> 93
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 9 -- STOCKHOLDERS' EQUITY AND STOCK OPTIONS, (CONTINUED)
The 200,000 shares issued (or approved replacement collateral of equal value at
the employee's discretion) collateralizes the note. Any amounts paid on the note
shall be applied first to accrued but unpaid interest and then to unpaid
principal. The employee may at any time prepay the note without premium or
penalty in amounts of at least $25,000. Pursuant to Emerging Issues Task Force
("EITF") Issue No. 85-1, "Classifying Notes Received for Capital Stock" the note
has been recorded as a reduction of additional paid-in capital rather than as an
asset. In addition, pursuant to EITF No. 95-16, "Accounting for Stock
Compensation Arrangements with Employee Loan Features Under APB Opinion No. 25,"
the options have been accounted for as variable plan options from the note
issuance date until the note is settled or otherwise amended resulting in a
$324,760 non-cash charge being recorded in March 1998. UNAUDITED: The non-cash
charge for the nine months ended December 31, 1998 was $808,260.
For SFAS No. 123 purposes, the fair value of each option granted under the
1996 Amended Plan is estimated as of the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
stock options granted in fiscal 1997 and 1998, respectively: dividend yield of
0% and 0%, expected volatility of 56.22% and 56.00%, risk-free interest rates of
6.75% and 5.54%, and an expected life of five years for grants in both fiscal
1997 and 1998.
If the Company had elected to recognize the compensation cost of its 1996
Amended Plan based on the fair value of all awards under the plan in accordance
with SFAS No. 123, fiscal 1997 and 1998 net income amounts would have been
reduced to the pro forma amounts below:
<TABLE>
<CAPTION>
1997 1998
-------- ----------
<S> <C> <C> <C>
Net income: As reported........... $888,617 $2,500,645
Pro forma............. 680,440 2,212,447
Earnings per common share:
Basic: As reported........... $ 0.11 $ 0.31
Pro forma............. 0.08 0.27
Diluted: As reported........... $ 0.11 $ 0.30
Pro forma............. 0.08 0.27
</TABLE>
NOTE 10 -- LEASES
The Company leases office and manufacturing facilities and certain
equipment under noncancellable operating leases. Future minimum lease payments
for long-term noncancellable operating leases for years ending March 31, are as
follows:
<TABLE>
<S> <C>
1999........................................................ $330,608
2000........................................................ 21,914
2001........................................................ 860
--------
$353,382
========
</TABLE>
Rent expense for 1996, 1997 and 1998 amounted to $352,105, $508,912 and
$786,380, respectively. Rent expense in 1998 included $110,000 related to a
short-term lease with Telxon for the Company's manufacturing facilities.
F-17
<PAGE> 94
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 11 -- BUSINESS SEGMENT
The Company designs, develops, and markets high speed wireless local area
network equipment and software. The Company's business is a single segment. The
Company markets its products directly to Telxon and to non-affiliates in North
America and Europe through a network of VARs, distributors, OEMs and to a lesser
extent directly to end users.
NOTE 12 -- INTERNATIONAL OPERATIONS
The consolidated financial statements include the following with respect to
the revenues, net income (loss) and total assets of ACL during the years ended
March 31:
<TABLE>
<CAPTION>
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Revenues, net............................... $44,195,370 $53,521,905 $24,863,001
Net income (loss)........................... $ 1,719,565 $ 3,753,079 $ (591,497)
Total assets................................ $15,943,278 $13,109,586 $11,342,492
</TABLE>
NOTE 13 -- TRANSACTIONS WITH AFFILIATE
The Company supplies Telxon with its radio and wireless LAN products for
inclusion in Telxon's products and for resale as discrete products.
Approximately 88%, 76%, and 55%, respectively, of the Company's consolidated net
product revenues for each of the years ended March 31, 1996, 1997 and 1998 were
derived from Telxon.
Amounts receivable for the sale of such products to Telxon have been
recorded as amounts receivable from affiliate in the accompanying consolidated
balance sheets. Through March 31, 1998, Telxon supported the operations of the
Company's domestic engineering and general and administrative functions through
cash funding of working capital needs. Telxon's advances to the Company have
been included in amounts payable to affiliate in the accompanying consolidated
balance sheets. (See Notes 14 and 16).
NOTE 14 -- ALLOCATIONS OF COSTS AND EXPENSES
Pursuant to an agreement for services, Telxon provides the Company with
administrative services such as human resource and benefits services, tax
planning and return preparation, payroll processing, computer system services
and legal services. These services are invoiced to the Company monthly at fixed
amounts that were in part based on the Company's direct domestic operating
expenses in relation to the direct domestic operating expenses of Telxon. In
addition, costs associated with Telxon's and the Company's self-insurance health
plan are allocated to the Company based on a ratio of the Company's number of
domestic employees to Telxon's number of domestic employees. The costs to the
Company were $552,022, $549,836 and, $723,950 for the years ended March 31,
1996, 1997 and 1998, respectively. In addition, direct costs associated with the
Company's property and equipment and directors and officers insurance program
coverages and the Company's life, dental, disability and savings and retirement
plans are paid by Telxon and subsequently reimbursed by the Company.
Also, as discussed in Note 8, the Company incurred interest expense to
Telxon of $2,464, $231,507 and $113,448, respectively, for the years ended March
31, 1996, 1997 and 1998 and, as discussed in Note 10, incurred rent expense of
$110,000 to Telxon for the year ended March 31, 1998.
F-18
<PAGE> 95
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 14 -- ALLOCATIONS OF COSTS AND EXPENSES, (CONTINUED)
Management believes these allocations are reasonable, however, while
reasonable, they may not necessarily be indicative of the costs that would have
been incurred by the Company had it performed these functions itself or received
services as a stand-alone entity.
NOTE 15 -- RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards of
disclosure and financial statement display for reporting total comprehensive
income and its individual components. SFAS No. 130 is effective for fiscal years
beginning after December 15, 1997. The Company believes the adoption of SFAS No.
130 in fiscal 1999 will not have a material impact on its financial reporting.
UNAUDITED: The adoption of this statement in fiscal 1999 had no effect on the
consolidated financial statements presented herein, except that foreign currency
translation adjustments during fiscal 1996 would be an element of comprehensive
income (loss).
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise
and Related Information" was issued. SFAS No. 131 supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," and requires
companies to report financial and descriptive information about their reportable
operating segments. The financial information is required to be reported on the
same basis that is used internally for evaluating segment performance and
deciding how to allocate resources to segments. This statement is effective for
periods beginning after December 15, 1997, with interim information required for
the year following adoption. SFAS No. 131 will have no impact on the Company's
consolidated financial position, results of operations or cash flows.
In October 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 97-2 "Software Revenue
Recognition," which is effective for transactions entered into in fiscal years
beginning after December 15, 1997. SOP 97-2 revises certain standards for the
recognition of software revenue and is not expected to have a material effect on
the Company's financial reporting. The effect of SOP 97-2 on the future
operating results of the Company is dependent on the nature and terms of the
individual software licensing agreements entered into in fiscal year 1999 and
those that may be entered into thereafter, if any.
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, " which is effective
for fiscal years beginning after December 15, 1998. SOP 98-1 requires the
capitalization of certain expenditures for software that is purchased or
internally developed for use in the business. Company management believes that
the prospective implementation of SOP 98-1 in fiscal year 2000 is likely to
result in some additional capitalization of software expenditures in the future.
However, the amount of such additional capitalized software expenditures cannot
be determined at this time.
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of
Start-up Activities." The SOP provides guidance on financial reporting of costs
of start-up activities. SOP 98-5 requires such costs to be expensed instead of
being capitalized and amortized. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. The Company believes the implementation of
SOP 98-5 in fiscal year 2000 will not have a material impact on its financial
reporting.
F-19
<PAGE> 96
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 15 -- RECENTLY ISSUED ACCOUNTING STANDARDS, (CONTINUED)
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" was issued. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value. The
Company will adopt SFAS No. 133 in fiscal year 2000 and does not expect the
impact of adoption to be material.
NOTE 16 -- EVENTS SUBSEQUENT TO MARCH 31, 1998
In April and May 1998, the Company issued an additional 200,000 shares of
common stock and warrants to purchase 60,000 shares of common stock at $3.50 per
share for an aggregate amount of $700,000 . The terms of the warrants contain an
exercise price of $3.50 and the same conditions of previously issued warrants
(Note 9).
UNAUDITED: In December 1998, the Company issued 22,222 shares of common
stock and warrants to purchase 6,667 shares of common stock at $3.50 per share
for an aggregate amount of $77,777. The terms of the warrants contain an
exercise price of $3.50 and the same conditions of previously issued warrants
(Note 9).
During July 1998, the Company signed a Commitment Letter for a $5,000,000
two year revolving line of credit at LIBOR plus 2% or the bank's prime rate. The
intended use of the credit line is to support working capital and for general
corporate purposes. The credit line will be unsecured and limited to the sum of
80% of eligible accounts receivable, 50% of eligible inventory, and 100% of cash
on deposit with the lender. The line of credit expires on July 1, 2000. The line
of credit contains certain covenants, including limiting Telxon's ability to
reduce its ownership in the Company below 50% (Notes 8 and 17).
NOTE 17 -- UNAUDITED EVENTS SUBSEQUENT TO DECEMBER 31, 1998
License Agreement with Telxon
Effective March 1, 1999, the Company and Telxon amended the existing
License, Rights and Supply Agreement (the "Amended Agreement"), without
exchanging any cash consideration and without the right of waiver or amendment
pursuant to a mutual written agreement, in which the Company has granted Telxon
certain rights and licenses to accommodate changes in respective business plans.
The Amended Agreement eliminates the previous per unit royalty arrangement and
substitutes a fixed monthly royalty payment of $541,667 for the period March 1,
1999 to March 31, 2000, $416,667 for the period April 1, 2000 to March 31, 2001
and $333,333, thereafter. The Amended Agreement also enables Telxon the choice
of converting to a per unit royalty on April 1, 2001 or thereafter. Revenue of
$479,167 per month related to the Amended Agreement will be recognized by the
Company during the period March 1, 1999 through March 31, 2001 and $333,333 per
month thereafter, subject to conversion to a per unit basis by Telxon.
Initial Public Offering
In March 1999, the Company's Board of Directors authorized the filing of a
registration statement to register approximately 6.0 million shares of its
common stock with the SEC for an initial public
F-20
<PAGE> 97
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 17 -- UNAUDITED EVENTS SUBSEQUENT TO DECEMBER 31, 1998, (CONTINUED)
offering (the "Offering"). Effective with the Offering, the Company's
outstanding warrants and certain of the Company's vested options will become
exercisable (Note 9). Within twelve months after the effective date of the
Offering, the Company plans to eliminate the need to rely upon Telxon for
certain corporate functions and therefore eliminate the reimbursement for
administrative and other costs for such functions (Note 14) to Telxon. In
addition, if Telxon's ownership is reduced below 50% as a result of the
Offering, amounts owed under the Company's revolving credit agreement become due
and payable (Note 8). In April 1999, the revolving credit agreement was amended
to eliminate such requirement.
Stock Based Compensation
Effective March 31, 1999, the Company's Board of Directors and Stockholders
approved an amendment to the 1996 Amended Plan that permits vested options
granted under the 1996 Amended Plan to be exercised at any time after the
earlier of an initial public offering, a change in control, as defined, or March
31, 2001. In addition, the Company's Board of Directors accelerated the vesting
of certain options held by persons not employed by the Company. As a result of
the amendment to the 1996 Amended Plan and immediate vesting of certain
outstanding options, the Company will record non cash compensation expense
related to non-employees of $943,425 on March 31, 1999 and non cash compensation
expense related to employees of $932,539, $318,222 and $169,412 on March 30,
1999 and during the fiscal years ending March 31, 2000 and 2001, respectively,
in a manner consistent the methodology prescribed by FASB Interpretation No. 28,
"Accounting for Stock Appreciation Rights and Other Variable Stock Option or
Award Plans." The effect of these charges in the fourth quarter of fiscal 1999
is likely to result in the Company's annual effective tax rate being adjusted
from 62.5% to approximately (57.0%).
In April 1999, the Board of Directors terminated the 1996 Amended Plan. The
termination eliminates the Company's ability to grant further options under the
1996 Amended Plan but does not affect options outstanding under the 1996 Plan at
termination.
Effective April 12, 1999, the Company's Board of Directors and Stockholders
adopted and approved the Aironet Wireless Communications, Inc. 1999 Omnibus
Stock Incentive Plan (the "1999 Plan"). On February 16, 1999, the Company's
Board of Directors had approved, subject to shareholder approval (which was
determined to be perfunctory), the 1999 Plan and granted options to acquire
400,000 options under such plan. The 1999 Plan provides for the granting of
options, stock appreciation rights ("SARs"), restricted stock and performance
units, as defined, to certain officers and other key employees of the Company.
The total number of shares the Company may grant under the 1999 Plan cannot
exceed 1,765,817. Options granted under the 1999 Plan have a ten-year term and
must have an exercise price equal to or greater than the fair market value of
the Company's common stock on the date of grant. Options granted generally vest
over a three-year period on the first three anniversary dates after the date of
grant.
Effective April 27, 1999, the Company's Board of Directors and Stockholders
adopted and approved the Aironet Wireless Communications, Inc. 1999 Stock Option
Plan for Non-Employee Directors (the "1999 Non-Employee Directors Plan"). The
1999 Non-Employee Director Plan entitles each non-employee Director who is
sitting on the Company's Board on the first day that the Company's common stock
commences trading on NASDAQ subsequent to the Offering, options to purchase
25,000 shares of the Company's common stock. In addition, each non-employee
Director who continues to
F-21
<PAGE> 98
AIRONET WIRELESS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, (CONTINUED)
NOTE 17 -- UNAUDITED EVENTS SUBSEQUENT TO DECEMBER 31, 1998, (CONTINUED)
serve on the Company's Board will automatically be granted options to purchase
5,000 shares of the Company's common stock on each anniversary of his or her
election or re-election to the Board. The Board of Directors also retains the
right to grant additional options to non-employee Director at its sole
discretion. Options granted under the 1999 Non-Employee Directors Plan have a
ten-year term and must have an exercise price equal to or greater than the fair
market value of the Company's common stock on the date of grant. Options granted
immediately following the Offering vest ratably over a three-year period while
the options granted on the individual Director's anniversary dates vest three
years after they are granted.
Stock Purchase Plan
Effective April 12, 1999, the Company's Board of Directors approved the
Aironet Wireless Communications, Inc. 1999 Employee Stock Purchase Plan (the
"1999 Stock Purchase Plan"). The terms of the 1999 Stock Purchase Plan provide
the opportunity for eligible employees to purchase unrestricted common shares of
the Company, subjected to annual limitations, at a price per share equal to 85%
of the closing price (as defined in the agreement) of the Company's stock. The
total number of shares of common stock that may be purchased under the 1999
Stock Purchase Plan is 500,000 shares.
Stockholder Rights Agreement
On April 12, 1999, the Board of Directors adopted and approved a
stockholder "Rights Plan" and the Board declared a dividend of one common stock
purchase right on each share of common stock outstanding prior to the
effectiveness of the plan; thereafter, shares are issued pursuant to the plan
with a purchase right. The Rights Plan is designed to deter abusive market
manipulation or unfair takeover tactics and to prevent an acquiror from gaining
control of the Company without offering a fair price to all shareholders. Each
purchase right, when exercisable, entitles the registered holder to purchase one
share of common stock at a price of $125 per share, subject to adjustment. The
purchase rights become exercisable in the event the Company is a party to
certain merger or business combination transactions, as defined, or in the event
an "acquiring person," as defined, becomes a beneficial owner of 15% or more of
the Company's outstanding common stock. In these circumstances, each holder of a
share right (other than the acquiring person) will have the right to receive
shares of the acquiring company or the Company, as appropriate, having a market
value of two times the exercise price of the purchase right. The rights expire
ten years from the effective date of the plan unless earlier redeemed by the
Company. The rights can be redeemed at a price of $.001 per right.
Authorized Capital Stock
On April 12, 1999, the Company's Board of Directors approved and adopted an
amended and restated certificate of incorporation which increased the number of
authorized common shares of the Company from 15,000,000 shares to 60,000,000. In
addition, the amended and restated certificate authorized 500,000 shares of
undesignated preferred stock with a par value of $.01 per share.
Demand Revolving Promissory Note
Effective May 5, 1999, the Note with Telxon referred to in Note 8 has been
cancelled.
F-22
<PAGE> 99
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6,000,000 SHARES
AIRONET LOGO
COMMON STOCK
------------------
PRICE $ PER SHARE
------------------
DAIN RAUSCHER WESSELS PRUDENTIAL SECURITIES
a division of Dain Rauscher Incorporated
------------------
, 1999
------------------
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS
IN THESE SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION
TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 100
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered hereby, other than
underwriting discounts and commissions. All amounts are estimated except the
Securities and Exchange Commission registration fee, the National Association of
Securities Dealers, Inc. filing fee and the Nasdaq National Market listing fee.
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
----------- ------
<S> <C>
Securities and Exchange Commission registration fee....... $ 21,100.20
Nasdaq National Market listing fee and expenses........... $ 83,500.00
National Association of Securities Dealers, Inc. filing
fee..................................................... $ 8,090.00
Blue Sky fees and expenses (including related legal
fees)................................................... +
Printing and engraving expenses........................... +
Legal fees and expenses (other than Blue Sky)............. +
Accounting fees and expenses.............................. +
Transfer Agent and Registrar's fee........................ +
Miscellaneous............................................. +
-----------
Total........................................... $ +
===========
</TABLE>
- ---------------
+ To be completed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify Directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation, a
"derivative action") if they acted in good faith and in a manner they reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, if they had no reasonable
cause to believe their conduct was unlawful. A similar standard is applicable in
the case of derivative actions, except that indemnification only extends to
expenses (including attorneys' fees) incurred in connection with the defense or
settlement of such actions, and the statute requires court approval before there
can be any indemnification where the person seeking indemnification has been
found liable to the corporation. The statute provides that it is not exclusive
of other indemnification that may be granted by a corporation's bylaws,
disinterested Director vote, stockholder vote, agreement or otherwise.
Our Amended and Restated Certificate of Incorporation provides that each
person who was or is made a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was one of our
Directors or officers or is or was serving at our request as a Director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such
II-1
<PAGE> 101
proceeding is an alleged action in an official capacity as a Director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, will be indemnified and held harmless by us to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment
permits us to provide broader indemnification rights than the law permitted
prior to such amendment), against all expense, liability and loss reasonably
incurred or suffered by such person in connection therewith. Such right to
indemnification includes the right to have us pay the expenses incurred in
defending any such proceeding in advance of its final disposition, subject to
the provisions of the DGCL. Such rights are not exclusive of any other right
which any person may have or thereafter acquire under any statute, provision of
the certificate, bylaws, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of such provision will in any
way diminish or adversely affect the rights of any of our directors, officers,
employees or agents thereunder in respect of any occurrence or matter arising
prior to any such repeal or modification. The certificate also specifically
authorizes us to maintain insurance and to grant similar indemnification rights
to our employees or agents.
The DGCL permits a corporation to provide in its certificate of
incorporation that a director of the corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability for (i) any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) payments of unlawful dividends or unlawful stock
repurchases or redemptions, or (iv) any transaction from which the director
derived an improper personal benefit.
The certificate provides that our directors will not be personally liable
to us or our stockholders for monetary damages for breach of fiduciary duty as a
director, except, if required by the DGCL as amended from time to time, for
liability (i) for any breach of the director's duty of loyalty to us or our
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL, which concerns unlawful payments of dividends, stock purchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. Neither the amendment nor repeal of such provision
will eliminate or reduce the effect of such provision in respect of any matter
occurring, or any cause of action, suit or claim that, but for such provision,
would accrue or arise prior to such amendment or repeal.
The underwriting agreement for this offering provides for indemnification
by the underwriters of us, our directors and officers, and by the registrant of
the underwriters, for certain liabilities, including liabilities arising under
the Act, and affords certain rights of contribution with respect thereto.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following information is being furnished with regard to all securities
sold by us within the last three years that were not registered under the
Securities Act of 1933, except as follows:
(a) From March 1998 through December 1998, we issued and sold an aggregate
of 1,206,348 units, each consisting of one share of common stock and one warrant
to purchase three tenths of one share of common stock, for aggregate
consideration of $4,222,218.
II-2
<PAGE> 102
(b) In March 1998, we granted Furneaux & Company, LLC warrants to purchase
100,000 shares of our common stock at $3.50 per share, for business and
financial advisory services.
(c) In September 1996, we granted options to purchase an aggregate of
975,500 shares of common stock, at an exercise price of $1.86 per share. In
January 1997, we granted options to purchase an aggregate of 65,000 shares of
common stock, at an exercise price of $1.86 per share. In March 1998, we granted
options to purchase an aggregate of 500,000 shares of common stock, at an
exercise price of $3.50 per share. In July 1998, we granted options to purchase
an aggregate of 5,000 shares of common stock at an aggregate exercise price of
$3.50 per share and in August 1998, we granted options to purchase an aggregate
of 100,000 shares of common stock, at an exercise price of $3.50 per share. And,
in February 1999, we granted options to purchase an aggregate of 400,000 shares
of common stock, at an exercise price of $9.00 per share.
(d) From March 1996 through March 1999, we issued and sold an aggregate of
275,833 shares of common stock, for aggregate consideration of $513,049.38, upon
the exercise of employee stock options.
The sales of the above securities were deemed to be exempt from
registration under the Securities Act of 1933 in reliance on Section 4(2) or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b)
of the Securities Act of 1933, as transactions by an issuer not involving a
public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under such Rule 701. The
recipients of securities in each such transaction represented their intention to
acquire the securities for investment only and not with a view to, or for sale
in connection with, any distribution thereof, and appropriate legends were
affixed to share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationships with us, to
information about us.
II-3
<PAGE> 103
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1+ Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of
Aironet Wireless Communications, Inc. (to be effective
immediately prior to the closing of this offering)
3.2 Form of Second Amended and Restated Bylaws of Aironet
Wireless Communications, Inc. (to be effective immediately
prior to the closing of this offering)
4.1+ Specimen of certificate for shares of Aironet's common stock
4.2 Form of Rights Agreement between Aironet Wireless
Communications, Inc. and Harris Trust and Savings Bank, as
Rights Agent, dated as of , 1999, including
form of rights certificate
4.3 Warrant certificate issued to Furneaux & Company, LLC
5+ Opinion of Goodman Weiss Miller LLP
10.1 Aironet's Compensation and Benefits Plans
10.1.1 Aironet Wireless Communications, Inc. 1996 Stock
Option Plan
10.1.2 Amended and Restated Aironet Wireless
Communications, Inc. 1996 Stock Option Plan
10.1.3 First Amendment to Amended and Restated Aironet
Wireless Communications, Inc. 1996 Stock Option Plan
10.1.4 Aironet Wireless Communications, Inc. 1999 Employee
Stock Purchase Plan
10.1.5 Aironet Wireless Communications, Inc. 1999 Omnibus
Stock Incentive Plan
10.1.6 Aironet Wireless Communications, Inc. 1999 Stock
Option Plan for Non-Employee Directors
10.1.7 Employment Agreement between Aironet and Roger J.
Murphy, Jr.
10.1.8 Employment Letter Agreement between Aironet and
Richard G. Holmes
10.1.9 Employment Letter Agreement between Aironet and
Ronald B. Willis
10.1.10 Employment Letter Agreement between Aironet and
Harvey A. Ikeman
10.1.11 Promissory Note made by Roger J. Murphy, Jr. to the
order of Aironet in the principal amount of $372,000
10.1.11.1 Amendment to Promissory Note, included as Exhibit
10.1.11
10.1.12 Telxon's Retirement & Uniform Matching Profit
Sharing Plan, as amended (in which Aironet's employees
participate pursuant to the Services Agreement
included as Exhibit 10.7)
10.1.12.1 Supplemental Participation Agreement and
Certificate of Resolution to Telxon's Retirement & Uniform
Matching Profit Sharing Plan, as amended
10.1.13 Telxon 1995 Employee Stock Purchase Plan
10.2 Material Leases
10.2.1 Lease between Aironet and Telxon Corporation for 91
Springside Drive, Akron, Ohio, dated as of April 1, 1998
10.2.2 Sublease Agreement between Aironet and Telxon
Corporation for 3875 Embassy Parkway, Bath, Ohio dated as of
September 1, 1998
10.3 Loan Agreement between Aironet and The Huntington National
Bank, dated as of July 24, 1998
10.4 Subscription Agreement by and among Aironet and the
investors who executed the same, dated as of March 31, 1998
10.4.1 Form of warrant issued pursuant to the Subscription
Agreement included as Exhibit 10.4
</TABLE>
II-4
<PAGE> 104
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.4.2 Stockholders Agreement by and among Aironet and its
stockholders party thereto, dated as of March 31, 1998, in
connection with the transactions under the
Subscription Agreement included as Exhibit 10.4
10.4.2.1 Form of Addendum to Stockholders Agreement included
as Exhibit 10.4.2
10.4.3 Registration Rights Agreement by and among Aironet
and certain of its security holders, dated as of March 31,
1998
10.4.3.1 Form of Addendum to Registration Rights Agreement
included as Exhibit 10.4.3
10.4.3.2 Addendum by Telantis Venture Partners IV, Inc. to
Registration Rights Agreement included as Exhibit 10.4.3
10.5 License, Rights and Supply Agreement between Aironet and
Telxon Corporation, dated as of March 31, 1998
10.5.1 First Amendment to License, Rights and Supply
Agreement dated as of March 31, 1999
10.6 Tax Benefit and Indemnification Agreement between Aironet
and Telxon Corporation, dated as of March 31, 1998
10.6.1 Promissory Note made by Aironet to the order of
Telxon Corporation with the Tax Benefit and Indemnification
Agreement included as Exhibit 10.6
10.7 Services Agreement between Aironet and Telxon Corporation,
dated as of March 31, 1998
10.8 Assignment of Patent Applications made by Telxon Corporation
in favor of Aironet, dated as of March 30, 1998
10.9 Assignment of Patent Applications made by Aironet in favor
of Telxon Corporation, dated as of March 30, 1998
10.10 Cross Covenant Not to Sue between Aironet and Telxon
Corporation, dated as of March 31, 1998
10.11 AirAware Acknowledgment between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.12 LM3000 Software Agreement between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.13 Patent Continuation in Part Agreement between Aironet and
Telxon Corporation, dated as of March 30, 1998
10.14 Patent License Agreement between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.15 Nondisclosure Agreement between Aironet and Telxon
Corporation, dated as of March 31, 1998
21 Aironet's Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
23.2+ Consent of Goodman Weiss Miller LLP (included in Exhibit 5)
24.1 Power of Attorney (included on page II-7)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
</TABLE>
- ---------------
+ To be filed by amendment
II-5
<PAGE> 105
(b) FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants on Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
All other Schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission have been
omitted because they are not required under the related instructions, are not
applicable or the information has been provided in the Financial Statements or
the Notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing of this offering specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act of 1933 shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-6
<PAGE> 106
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Akron, Ohio, on the 14th
day of May, 1999.
AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ ROGER J. MURPHY, JR.
--------------------------------------
Roger J. Murphy, Jr., President and
Chief Executive Officer
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Roger J. Murphy, Jr. and Richard G. Holmes and each of
them, his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to sign any registration
statement for the same offering covered by this Registration Statement that is
to be effective upon filing pursuant to Rule 462(b) promulgated under the
Securities Act of 1933, and all post-effective amendments thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that each said
attorneys-in-fact and agents or any of them or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ ROGER J. MURPHY, JR. President and Chief Executive May 14, 1999
- ------------------------------------ Officer (principal executive
Roger J. Murphy, Jr. officer)
/s/ RICHARD G. HOLMES Senior Vice President and Chief May 14, 1999
- ------------------------------------ Financial Officer (principal
Richard G. Holmes financial and accounting
officer)
/s/ JAMES H. FURNEAUX Director, Chairman of the Board May 14, 1999
- ------------------------------------
James H. Furneaux
/s/ SAMUEL F. MCKAY Director May 14, 1999
- ------------------------------------
Samuel F. McKay
/s/ JOHN W. PAXTON, SR. Director May 14, 1999
- ------------------------------------
John W. Paxton, Sr.
</TABLE>
II-7
<PAGE> 107
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
TO THE BOARD OF DIRECTORS
OF AIRONET WIRELESS COMMUNICATIONS, INC.
Our audits of the consolidated financial statements referred to in our
report dated June 12, 1998 appearing in the prospectus also included an audit of
the financial statement schedule listed in Item 16 of the Form S-1. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
COOPERS & LYBRAND L.L.P.
Akron, Ohio
June 12, 1998
II-8
<PAGE> 108
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS DEDUCTIONS
----------------------- -------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF CHARGED TO OTHER WRITE-OFFS CREDITED TO END OF
DESCRIPTION FISCAL YEAR EXPENSE ACCOUNTS AND RETURNS EXPENSE FISCAL YEAR
- --------------------- ------------ ---------- ---------- ----------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
1996 $ 115 $ 287 $ -- $ 367 $ -- $ 35
1997 35 222 -- -- -- 257
1998 257 154 -- 224 -- 187
INVENTORY
OBSOLESCENCE
RESERVE
1996 $ 715 $ 788 $ -- $ 469 $ -- $1,034
1997 1,034 1,024 -- 1,181 -- 877
1998 877 (48) -- 390 -- 439
DEFERRED TAX ASSET
VALUATION ALLOWANCE
1996 $ 93 $ 144 $ -- $ -- $ -- $ 237
1997 237 4,549 -- -- -- 4,786
1998 4,786 67 -- -- 353 4,500
</TABLE>
II-9
<PAGE> 109
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
1+ Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation of
Aironet Wireless Communications, Inc. (to be effective
immediately prior to the closing of this offering)
3.2 Form of Second Amended and Restated Bylaws of Aironet
Wireless Communications, Inc. (to be effective immediately
prior to the closing of this offering)
4.1+ Specimen of certificate for shares of Aironet's common stock
4.2 Form of Rights Agreement between Aironet Wireless
Communications, Inc. and Harris Trust and Savings Bank, as
Rights Agent, dated as of , 1999, including
form of rights certificate
4.3 Warrant certificate issued to Furneaux & Company, LLC
5+ Opinion of Goodman Weiss Miller LLP
10.1 Aironet's Compensation and Benefits Plans
10.1.1 Aironet Wireless Communications, Inc. 1996 Stock
Option Plan
10.1.2 Amended and Restated Aironet Wireless
Communications, Inc. 1996 Stock Option Plan
10.1.3 First Amendment to Amended and Restated Aironet
Wireless Communications, Inc. 1996 Stock Option Plan
10.1.4 Aironet Wireless Communications, Inc. 1999 Employee
Stock Purchase Plan
10.1.5 Aironet Wireless Communications, Inc. 1999 Omnibus
Stock Incentive Plan
10.1.6 Aironet Wireless Communications, Inc. 1999 Stock
Option Plan for Non-Employee Directors
10.1.7 Employment Agreement between Aironet and Roger J.
Murphy, Jr.
10.1.8 Employment Letter Agreement between Aironet and
Richard G. Holmes
10.1.9 Employment Letter Agreement between Aironet and
Ronald B. Willis
10.1.10 Employment Letter Agreement between Aironet and
Harvey A. Ikeman
10.1.11 Promissory Note made by Roger J. Murphy, Jr. to the
order of Aironet in the principal amount of $372,000
10.1.11.1 Amendment to Promissory Note, included as Exhibit
10.1.11
10.1.12 Telxon's Retirement & Uniform Matching Profit
Sharing Plan, as amended (in which Aironet's employees
participate pursuant to the Services Agreement
included as Exhibit 10.7)
10.1.12.1 Supplemental Participation Agreement and
Certificate of Resolution to Telxon's Retirement & Uniform
Matching Profit Sharing Plan, as amended
10.1.13 Telxon 1995 Employee Stock Purchase Plan
10.2 Material Leases
10.2.1 Lease between Aironet and Telxon Corporation for 91
Springside Drive, Akron, Ohio, dated as of April 1, 1998
10.2.2 Sublease Agreement between Aironet and Telxon
Corporation for 3875 Embassy Parkway, Bath, Ohio dated as of
September 1, 1998
10.3 Loan Agreement between Aironet and The Huntington National
Bank, dated as of July 24, 1998
10.4 Subscription Agreement by and among Aironet and the
investors who executed the same, dated as of March 31, 1998
</TABLE>
II-10
<PAGE> 110
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
10.4.1 Form of warrant issued pursuant to the Subscription
Agreement included as Exhibit 10.4
10.4.2 Stockholders Agreement by and among Aironet and its
stockholders party thereto, dated as of March 31, 1998, in
connection with the transactions under the
Subscription Agreement included as Exhibit 10.4
10.4.2.1 Form of Addendum to Stockholders Agreement included
as Exhibit 10.4.2
10.4.3 Registration Rights Agreement by and among Aironet
and certain of its security holders, dated as of March 31,
1998
10.4.3.1 Form of Addendum to Registration Rights Agreement
included as Exhibit 10.4.3
10.4.3.2 Addendum by Telantis Venture Partners IV, Inc. to
Registration Rights Agreement included as Exhibit 10.4.3
10.5 License, Rights and Supply Agreement between Aironet and
Telxon Corporation, dated as of March 31, 1998
10.5.1 First Amendment to License, Rights and Supply
Agreement dated as of March 31, 1999
10.6 Tax Benefit and Indemnification Agreement between Aironet
and Telxon Corporation, dated as of March 31, 1998
10.6.1 Promissory Note made by Aironet to the order of
Telxon Corporation with the Tax Benefit and Indemnification
Agreement included as Exhibit 10.6
10.7 Services Agreement between Aironet and Telxon Corporation,
dated as of March 31, 1998
10.8 Assignment of Patent Applications made by Telxon Corporation
in favor of Aironet, dated as of March 30, 1998
10.9 Assignment of Patent Applications made by Aironet in favor
of Telxon Corporation, dated as of March 30, 1998
10.10 Cross Covenant Not to Sue between Aironet and Telxon
Corporation, dated as of March 31, 1998
10.11 AirAware Acknowledgment between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.12 LM3000 Software Agreement between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.13 Patent Continuation in Part Agreement between Aironet and
Telxon Corporation, dated as of March 30, 1998
10.14 Patent License Agreement between Aironet and Telxon
Corporation, dated as of March 30, 1998
10.15 Nondisclosure Agreement between Aironet and Telxon
Corporation, dated as of March 31, 1998
21 Aironet's Subsidiaries
23.1 Consent of PricewaterhouseCoopers LLP
23.2+ Consent of Goodman Weiss Miller LLP (included in Exhibit 5)
24.1 Power of Attorney (included on page II-7)
27.1 Financial Data Schedule
27.2 Financial Data Schedule
27.3 Financial Data Schedule
27.4 Financial Data Schedule
</TABLE>
- ---------------
+ To be filed by amendment
II-11
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
AIRONET WIRELESS COMMUNICATIONS, INC.
The name of the corporation (which is hereinafter referred to as the
"Corporation") is "Aironet Wireless Communications, Inc."
The original certificate of incorporation was filed with the Secretary
of State of the State of Delaware on August 25, 1993, under the name "Spider,
Inc." Such certificate of incorporation was amended on August 30, 1993, October
13, 1993, January 19, 1994, and June 20, 1996.
This Amended and Restated Certificate of Incorporation has been duly
approved and adopted by the Corporation's Board of Directors and stockholders,
and has been duly executed and acknowledged by the officers of the Corporation
in accordance with Sections 103, 242 and 245 of the General Corporation Law of
the State of Delaware.
The text of the Certificate of Incorporation of the Corporation is
hereby amended and restated to read in its entirety as follows:
ARTICLE I
---------
NAME
The name of the corporation (which is hereinafter referred to as the
"Corporation") is Aironet Wireless Communications, Inc.
ARTICLE II
----------
REGISTERED AGENT
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, City of Wilmington,
County of New Castle, Delaware 19801. The name of its registered agent at such
address is The Corporation Trust Company.
ARTICLE III
-----------
PURPOSE
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware as the same exists or may hereafter be amended
("Delaware Law").
<PAGE> 2
ARTICLE IV
----------
CAPITAL STOCK
SECTION 1. TOTAL NUMBER OF SHARES.
-----------------------
(a) The total number of shares of capital stock which the
Corporation shall have authority to issue is 60,500,000, consisting of
60,000,000 shares of Common Stock, par value of $0.01 per share (the
"Common Stock"), and 500,000 shares of Preferred Stock, par value of
$0.01 per share (the "Preferred Stock"). The Common Stock of the
Corporation shall be all of one class. The Preferred Stock may be
issued in one or more series having such designations as may be fixed
by the Board of Directors.
(b) The Board of Directors is expressly authorized to provide
for the issuance of all or any shares of the Common Stock and the
Preferred Stock, to determine the number of shares of each series and
to fix for each series of Common Stock and for any series of Preferred
Stock such voting powers, full or limited, or no voting powers, and
such designations, preferences and relative, participating, optional or
other special rights, and such qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the
resolution or resolutions adopted by the Board of Directors or a duly
authorized committee thereof providing for the issue of such series and
as may be permitted by Delaware Law.
(c) The number of authorized shares of any class or classes of
stock may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of a majority of the
Common Stock of the Corporation irrespective of the provisions of
Section 242(b)(2) of Delaware Law.
SECTION 2. COMMON STOCK.
-------------
(a) ISSUANCE AND CONSIDERATION. Any unissued or treasury
shares of the Common Stock may be issued for such consideration as may
be fixed in accordance with applicable law from time to time by the
Board of Directors.
(b) DIVIDENDS. Subject to the rights of holders of the
Preferred Stock, the holders of the Common Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of the
assets of the Corporation which are by law available therefor,
dividends payable either in cash, in property, or in shares of stock,
and the holders of the Preferred Stock shall not be entitled to
participate in any such dividends (unless otherwise provided by the
Board of Directors in any resolution providing for the issue of a
series of Preferred Stock).
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(c) POWERS, PREFERENCES. The following is a statement of the
powers, preferences and relative participating, optional or other
special rights and qualifications, limitations and restrictions of the
Common Stock of the Corporation:
(1) The powers, preferences and relative
participating, optional or other special rights and
qualifications, limitations or restrictions of the shares of
Common Stock shall be identical in all respects.
(2) Subject to the rights of the holders of Preferred
Stock, and subject to any other provisions of this Amended and
Restated Certificate of Incorporation ("Certificate of
Incorporation"), holders of Common Stock shall be entitled to
receive such dividends and other distributions in cash, stock
of any corporation (including the Common Stock of the
Corporation) or property of the Corporation as may be declared
thereon by the Board of Directors from time to time out of
assets or funds of the Corporation legally available therefor
and shall share equally on a per share basis in all such
dividends and other distributions.
(3) (A) At every meeting of the stockholders of the
Corporation, every holder of Common Stock shall be entitled to
one vote in person or by proxy for each share of Common Stock
standing in his name on the transfer books of the Corporation
in connection with the election of directors and all other
matters submitted to a vote of stockholders.
(B) Every reference in this Certificate of
Incorporation to a majority or other proportion of shares of
Common Stock shall refer to such majority or other proportion
of the votes to which such shares of Common Stock are
entitled.
(4) In the event of any dissolution, liquidation or
winding up of the affairs of the Corporation, whether
voluntary or involuntary, after payment in full of the amounts
required to be paid to the holders of Preferred Stock, the
remaining assets and funds of the Corporation shall be
distributed pro rata to the holders of Common Stock. For
purposes of this paragraph, the voluntary sale, conveyance,
lease, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all
of the assets of the Corporation or a consolidation or merger
of the Corporation with one or more other corporations
(whether or not the Corporation is the corporation surviving
such consolidation or merger) shall not be deemed to be a
liquidation, dissolution or winding up, voluntary or
involuntary.
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<PAGE> 4
SECTION 3. PREFERRED STOCK.
----------------
SERIES AND LIMITS OF VARIATIONS BETWEEN SERIES. Any unissued
or treasury shares of the Preferred Stock may be issued from time to
time in one or more series for such consideration as may be fixed from
time to time by the Board of Directors, and each share of a series
shall be identical in all respects with the other shares of such
series, except that, if the dividends thereon are cumulative, the date
from which they shall be cumulative may differ. Before any shares of
Preferred Stock of any particular series shall be issued, a certificate
shall be filed with the Secretary of State of Delaware setting forth
the designation, rights, privileges, restrictions and conditions to be
attached to the Preferred Stock of such series and such other matters
as may be required, and the Board of Directors shall fix and determine,
and is hereby expressly empowered to fix and determine, in the manner
provided by law, the particulars of the shares of such series (so far
as not inconsistent with the provisions of this Article IV applicable
to all series of Preferred Stock), including, but not limited to, the
following:
(a) the distinctive designation of such series and the number
of shares which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors in creating such series) or decreased (but not below
the number of shares thereof then outstanding) from time to
time by like action of the Board of Directors;
(b) the annual rate of dividends payable on shares of such
series, the conditions upon which such dividends shall be
payable and the date from which dividends shall be cumulative
in the event the Board of Directors determines that dividends
shall be cumulative;
(c) whether such series shall have voting rights, in addition
to the voting rights provided by law and, if so, the terms of
such voting rights;
(d) whether such series shall have conversion privileges and,
if so, the terms and conditions of such conversion privileges,
including, but not limited to, provision for adjustment of the
conversion rate upon such events and in such manner as the
Board of Directors shall determine;
(e) whether or not the shares of such series shall be
redeemable and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in
case of redemption, which amount may vary under different
conditions and at different redemption dates;
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(f) whether such series shall have a sinking fund for the
redemption or purchase of shares of that series and, if so,
the terms and amount of such sinking fund;
(g) the rights of the shares of such series in the event of
voluntary or involuntary liquidation, dissolution or winding
up of the Corporation, and the relative rights of priority, if
any, of payment of shares of that series; and
(h) any other relative rights, preferences and limitations of
or otherwise relating to such series.
SECTION 4. NO PREEMPTIVE RIGHTS. Except as otherwise set forth above in
this Article IV, no holder of shares of this Corporation of any class shall be
entitled, as such, as a matter of right, to subscribe for or purchase shares of
any class now or hereafter authorized, or to purchase or subscribe for
securities convertible into or exchangeable for shares of the Corporation or to
which there shall be attached or appertain any warrants or rights entitling the
holders thereof to purchase or subscribe for shares.
ARTICLE V
---------
BYLAWS AMENDMENT
SECTION 1. AMENDMENT OF BYLAWS BY DIRECTORS. In furtherance and not in
limitation of the powers conferred by statute, the Board of Directors is
expressly authorized to make, repeal, alter, amend and rescind the Bylaws of the
Corporation.
SECTION 2. AMENDMENT OF BYLAWS BY THE STOCKHOLDERS. The Bylaws shall
not be made, repealed, altered, amended or rescinded by the stockholders of the
Corporation except by the vote of not less than eighty percent (80%) of the
outstanding shares of the Corporation entitled to vote thereon. Any amendment to
this Certificate of Incorporation which shall contravene any bylaw in existence
on the record date of the stockholders meeting at which such amendment is to be
voted upon by the stockholders shall require the vote of not less than eighty
percent (80%) of the outstanding shares entitled to vote thereon.
ARTICLE VI
----------
BOARD OF DIRECTORS
SECTION 1. CLASSIFIED BOARD. The number of directors of the Corporation
(exclusive of directors to be elected by the holders of any one or more series
of Preferred Stock voting separately as a class or classes) shall be five (5) or
such other number as may be fixed from time to time by action of not less than a
majority of the members of the Board of Directors then in office but in no event
more than nine (9) or less than three (3). Nominations for directors shall
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<PAGE> 6
be made in accordance with the Bylaws. The Board of Directors (exclusive of
directors to be elected by the holders of any one or more series of Preferred
Stock voting separately as a class or classes) shall be divided into three
classes, Class A, Class B and Class C. The number of directors in each class
shall be the whole number contained in the quotient arrived at by dividing the
authorized number of directors by three, and if a fraction is also contained in
such quotient, then if such fraction is one-third, the extra director shall be a
member of Class A and if the fraction is two-thirds, one of the extra directors
shall be a member of Class A and the other shall be a member of Class B. Each
director shall serve for a term ending on the date of the third annual meeting
following the annual meeting at which such director was elected; provided,
however, that the directors first elected to Class A shall serve for a term
ending on the date of the annual meeting next following the end of the calendar
year 1999, the directors first elected to Class B shall serve for a term ending
on the date of the second annual meeting next following the end of the calendar
year 2000, and the directors first elected to Class C shall serve for a term
ending on the date of the third annual meeting next following the end of the
calendar year 2001. Notwithstanding the foregoing formula provisions, in the
event that, as a result of any change in the authorized number of directors, the
number of directors in any class would differ from the number allocated to that
class under the formula provided in this Article VI immediately prior to such
change, the following rules shall govern:
(a) each director then serving as such shall nevertheless
continue as a director of the class of which such director is a member
until the expiration of his current term, death, resignation or
removal;
(b) at each subsequent election of directors, even if the
number of directors in the class whose term of office then expires is
less than the number then allocated to that class under said formula,
the number of directors then elected for membership in that class shall
not be greater than the number of directors in that class whose term of
office then expires, unless and to the extent that the aggregate number
of directors then elected plus the number of directors in all classes
then duly continuing in office does not exceed the then authorized
number of directors of the Corporation;
(c) at each subsequent election of directors, if the number of
directors in the class whose term of office then expires exceeds the
number then allocated to that class under said formula, the Board of
Directors shall designate one or more of the directorships then being
elected as directors of another class or classes in which the number or
directors then serving is less than the number then allocated to such
other class or classes under said formula;
(d) in the event of the death, resignation or removal of any
director who is a member of a class in which the number of directors
serving immediately preceding the creation of such vacancy exceeded the
number then allocated to that class under said formula, the Board of
Directors shall designate the vacancy thus created as a vacancy in
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<PAGE> 7
another class in which the number of directors then serving is less
than the number then allocated to such other class under said formula;
(e) in the event of any increase in the authorized number of
directors, the newly created directorships resulting from such increase
shall be apportioned by the Board of Directors to such class or classes
as shall, so far as possible, bring the composition of each of the
classes into conformity with the formula in this Article VI, as it
applies to the number of directors authorized immediately following
such increase; and
(f) designation of directorships or vacancies into other
classes and apportionments of newly created directorships to classes by
the Board of Directors under the foregoing items (c), (d) and (e)
shall, so far as possible, be effected so that the class whose term of
office is due to expire next following such designation or
apportionment shall contain the full number of directors then allocated
to said class under said formula. Notwithstanding any of the foregoing
provisions of this Article VI, each director shall serve until his
successor is elected and qualified or until his death, resignation or
removal.
SECTION 2. ELECTION BY HOLDERS OF PREFERRED STOCK. During any period
when the holders of any Preferred Stock or any one or more series thereof,
voting as a class, shall be entitled to elect a specified number of directors,
by reason of dividend arrearages or other provisions giving them the right to do
so, then and during such time as such right continues (i) the then otherwise
authorized number of directors shall be increased by such specified number of
directors, and the holders of such Preferred Stock or such series thereof,
voting as a class, shall be entitled to elect the additional director(s) so
provided for, pursuant to the provisions of such Preferred Stock or series; (ii)
each such additional director shall serve for such term, and have such voting
powers, as shall be stated in the provisions pertaining to such Preferred Stock
or series; and (iii) whenever the holders of any such Preferred Stock or series
thereof are divested of such rights to elect a specified number of directors,
voting as a class, pursuant to the provisions of such Preferred Stock or series,
the terms of office of all directors elected by the holders of such Preferred
Stock or series, voting as a class pursuant to such provisions or elected to
fill any vacancies resulting from the death, resignation or removal of directors
so elected by the holders of such Preferred Stock or series, shall forthwith
terminate and the authorized number of directors shall be reduced accordingly.
SECTION 3. BALLOTS. Elections of directors at an annual or special
meeting of stockholders need not be by written ballot unless the bylaws of the
Corporation shall provide otherwise.
SECTION 4. INITIAL DIRECTORS. The directors of the Corporation shall,
at the date hereof, be:
(a) Class A Directors
(i) John W. Paxton
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(b) Class B Directors
(i) Samuel F. McKay
(ii) vacant (to be filled as a newly-created seat
under the Bylaws)
(c) Class C Directors
(i) Roger J. Murphy, Jr.
(ii) James H. Furneaux
ARTICLE VII
-----------
STOCKHOLDER ACTION
No action shall be taken by the stockholders except at a duly called
annual or special meeting of stockholders and may not be effected by any consent
in writing by such stockholders.
ARTICLE VIII
------------
ACQUISITION EVALUATION
The Board of Directors of the Corporation, when evaluating any offer of
another party to (i) make a tender or exchange offer for any equity security of
the Corporation; (ii) merge or consolidate the Corporation with another
corporation; or (iii) purchase or otherwise acquire all or substantially all of
the properties and assets of the Corporation, shall in connection with the
exercise of its judgment in determining what is in the best interests of the
Corporation and its stockholders, give due consideration to all relevant
factors, including without limitation the social and economic effects on the
employees, customers, suppliers and other constituents of the Corporation and
its subsidiaries and on the communities in which the Corporation and its
subsidiaries operate or are located.
ARTICLE IX
----------
REMOVAL OF DIRECTOR
Any director may be removed at any annual or special stockholders'
meeting upon the affirmative vote of not less than eighty percent (80%) of the
outstanding shares of voting stock of the Corporation at that time entitled to
vote thereon; provided, however, that such director may be removed only for
cause and shall receive a copy of the charges against him, delivered to him
personally or by mail at his last known address at least ten (10) days prior to
the date of the stockholders' meeting; AND PROVIDED FURTHER, that directors who
shall have been elected by the
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holders of a series or class of Preferred Stock, voting separately as a class,
shall be removed only pursuant to the provisions establishing the rights of such
series or class to elect such directors.
ARTICLE X
---------
AMENDMENT OF CERTIFICATE OF INCORPORATION
SECTION 1. AMENDMENT OF CERTAIN ARTICLES. The provisions set forth in
this Article X and in Articles V; VI, Sections 1 and 5; VII; VIII; IX; XI and
XII may not be amended, altered, changed or repealed in any respect unless such
amendment, alteration, change or repealer is approved by the affirmative vote of
not less than eighty percent (80%) of the outstanding shares of the Corporation
entitled to vote thereon; provided that with respect to any proposed amendment,
alteration or change to this Certificate of Incorporation, or repealing of any
provision of this Certificate of Incorporation, which would amend, alter or
change the powers, preferences or special rights of the shares of Common Stock
so as to affect them adversely, the affirmative vote of not less than eighty
percent (80%) of the outstanding shares affected by the proposed amendment,
voting as a separate class, shall be required in addition to the vote otherwise
required pursuant to this Article X; and PROVIDED, FURTHER, that with respect to
any amendment, alteration or change to, or repealing of, any provision of
Article XI, the affirmative vote of not less than eighty percent (80%) of the
outstanding shares of the Corporation entitled to vote thereon, other than and
excepting shares held by the Interested Person (as referred to and defined in
Article XI) (if any) seeking or proposing to effect any transaction involving
the Corporation or any subsidiary of the Corporation, shall be required in
addition to the vote otherwise required pursuant to this Article X.
SECTION 2. AMENDMENTS GENERALLY. Subject to the provisions of Section 1
of this Article X, the Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred on
stockholders herein are granted subject to this reservation.
ARTICLE XI
----------
BUSINESS COMBINATION
SECTION 1. DELAWARE LAW SECTION 203. This Article XI is in addition to,
not in limitation of, Delaware Law section 203.
SECTION 2. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. The
affirmative vote of not less than seventy-five percent (75%) of the outstanding
shares of "Voting Stock" (as hereinafter defined) held by stockholders other
than the "Interested Person" (as hereinafter defined) seeking to effect a
"Business Combination" (as hereinafter defined) shall be required for the
approval or authorization of any Business Combination with any Interested
Person.
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SECTION 3. DEFINITIONS. Certain words and terms as used in this Article
XI shall have the meanings given to them by the definitions and descriptions in
this Section.
(a) BUSINESS COMBINATION. The term "Business Combination"
shall mean (i) any merger or consolidation of the Corporation or a
subsidiary of the Corporation with or into an Interested Person; (ii)
any sale, lease, exchange, transfer or other disposition, including
without limitation, a mortgage or any other security device, of all or
any "Substantial Part" (as hereinafter defined) of the assets either of
the Corporation (including without limitation, any voting securities of
a subsidiary) or of a subsidiary of the Corporation to an Interested
Person; (iii) any merger or consolidation of an Interested Person with
or into the Corporation or a subsidiary of the Corporation; (iv) any
sale, lease, exchange, transfer or other disposition, including without
limitation, a mortgage or other security device, of all or any
Substantial Part of the assets of an Interested Person to the
Corporation or a subsidiary of the Corporation; (v) the issuance or
transfer by the Corporation or any subsidiary of the Corporation of any
securities of the Corporation or a subsidiary of the Corporation to an
Interested Person; (vi) any reclassification of securities,
recapitalization or other comparable transaction involving the
Corporation that would have the effect of increasing the voting power
of any Interested Person with respect to Voting Stock of the
Corporation; and (vii) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of
Business Combination.
(b) INTERESTED PERSON. The term "Interested Person" shall mean
and include any individual, corporation, partnership or other person or
entity which, together with its "Affiliates" and "Associates" (as
defined in Rule 12b-2 of the General Rules and Regulations under the
Securities Act of 1934 as in effect at the date of the adoption of this
Article XI by the stockholders of the Corporation), "Beneficially Owns"
(as defined in Rule 13d-3 of the General Rules and Regulations under
the Securities Exchange Act of 1934 as in effect at the date of the
adoption of this Article XI by the stockholders of the Corporation) in
the aggregate five percent (5%) or more of the outstanding Voting Stock
of the Corporation, and any Affiliate or Associate of any such
individual, corporation, partnership or other person or entity. Without
limitation, any share of Voting Stock of the Corporation that any
Interested Person has the right to acquire at any time (notwithstanding
that Rule 13d-3 deems such shares to be beneficially owned only if such
right may be exercised within sixty (60) days) pursuant to any
agreement, or upon exercise of conversion rights, warrants or options,
or otherwise, shall be deemed to be Beneficially Owned by the
Interested Person and to be outstanding for purposes of this
definition. An Interested Person shall be deemed to have acquired a
share of the Voting Stock of the Corporation at the time when such
Interested Person became the Beneficial Owner thereof. With respect to
the shares owned by Affiliates, Associates or other persons whose
ownership is attributed to an Interested Person under the foregoing
definition of Interested Person, if the price paid by such Interested
Person for such shares is not determinable by two-thirds of the
Continuing Directors, the price so paid shall be deemed to be the
higher of (i) the price paid upon the acquisition thereof by the
Affiliate, Associate or other person
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or (ii) the market price of the shares in question at the time when the
Interested Person became the Beneficial Owner thereof.
(c) VOTING STOCK. The term "Voting Stock" shall mean all of
the outstanding shares of Common Stock of the Corporation and any
outstanding shares of Preferred Stock entitled to vote on each matter
on which the holders of record of Common Stock shall be entitled to
vote, and each reference to a proportion of shares of Voting Stock
shall refer to such proportion of the votes entitled to be cast by all
of such shares.
(d) SUBSTANTIAL PART. The term "Substantial Part" shall mean
more than twenty percent (20%) of the fair market value of the total
consolidated assets of the Corporation and its subsidiaries taken as a
whole as of the end of its most recent fiscal year ended prior to the
time the determination is being made, and determined by a vote of
two-thirds of the Corporation's directors.
ARTICLE XII
-----------
RELATED PARTY TRANSACTIONS
SECTION 1. VALIDITY OF AGREEMENTS. No contract, agreement, arrangement
or transaction (or any amendment, modification or termination thereof) between
the Corporation and any Related Entity (as defined below) or between the
Corporation and one or more of the directors or officers of the Corporation or
any Related Entity, shall be void or voidable solely for the reason that any
Related Entity or any one or more of the officers or directors of the
Corporation or any Related Entity are parties thereto, or solely because any
such directors or officers are present at or participate in the meeting of the
Board of Directors or committee thereof which authorizes the contract,
agreement, arrangement, transaction, amendment, modification or termination or
solely because his or their votes are counted for such purpose, but any such
contract, agreement, arrangement or transaction (or any amendment, modification
or termination thereof) shall be governed by the provisions of this Certificate
of Incorporation, the Corporation's Bylaws, Delaware Law and other applicable
law. For purposes of this Article XII, (i) the term "Related Entity" means one
or more directors of this Corporation, or one or more corporations,
partnerships, associations or other organizations in which one or more of its
directors have a direct or indirect financial interest and (ii) the term
"Corporation" shall mean the Corporation and all corporations, partnerships,
joint ventures, associations and other entities in which the Corporation
beneficially owns (directly or indirectly) fifty percent (50%) or more of the
outstanding voting stock, voting power or similar voting interests.
SECTION 2. DUAL DIRECTORSHIPS. Directors of the Corporation who are
also directors or officers of any Related Entity may be counted in determining
the presence of a quorum at a meeting of the Board of Directors or of a
committee that authorizes or approves any such contract, agreement, arrangement
or transaction (or amendment, modification or termination thereof). Outstanding
Shares of Common Stock owned by any Related Entity may be counted in
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determining the presence of a quorum at a meeting of stockholders that
authorizes or approves any such contract, agreement, arrangement or transaction
(or amendment, modification or termination thereof).
SECTION 3. GOOD FAITH ACTIVITY. No officer or director of any Related
Entity shall be liable to the Corporation or its stockholders for breach of any
fiduciary duty or duty of loyalty or failure to act in (or not opposed to) the
best interests of the Corporation or the derivation of any improper personal
benefit by reason of the fact that an officer or director of such Related Entity
in good faith takes any action or exercises any rights or gives or withholds any
consent in connection with any agreement or contract between any Related Entity
and the Corporation. No vote cast or other action taken by any person who is an
officer, director or other representative of such Related Entity, which vote is
cast or action is taken by such person in his capacity as a director of the
Corporation, shall constitute an action of or the exercise of a right by or a
consent of such Related Entity for the purpose of any such agreement or
contract.
SECTION 4. NOTICE AND WAIVER. Any person or entity purchasing or
otherwise acquiring any interest in any shares of capital stock of the
Corporation shall be deemed to have notice of, to understand the ramifications
of, to have consented to the provisions of, and, to the fullest extent permitted
by Delaware Law, to have waived his right to contest this Article XII.
SECTION 5. ALTER EGO. For purposes of this Article XII, any contract,
agreement, arrangement or transaction with any corporation, partnership, joint
venture, association or other entity in which the Corporation beneficially owns
(directly or indirectly) fifty percent (50%) or more of the outstanding voting
stock, voting power or similar voting interests, or with any officer or director
thereof, shall be deemed to be a contract, agreement, arrangement or transaction
with the Corporation.
SECTION 6. EFFECTIVENESS. Neither the alteration, amendment, change or
repeal of any provision of this Article XII nor the adoption of any provision
inconsistent with any provision of this Article XII shall eliminate or reduce
the effect of this Article XII in respect of any matter occurring, or any cause
of action, suit or claim that, but for this Article XII, would accrue or arise,
prior to such alteration, amendment, change, repeal or adoption.
SECTION 7. NON-EXCLUSIVE PROVISIONS. The provisions of this Article XII
are in addition to the provisions of Article VI, Section 5.
ARTICLE XIII
------------
LIMITED LIABILITY; INDEMNIFICATION
SECTION 1. LIMITED LIABILITY OF DIRECTORS. A director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of
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fiduciary duty as a director, except, if required by Delaware Law, as amended
from time to time, for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders; (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law; (iii) under Section 174 of Delaware Law; or (iv) for any transaction from
which the director derived an improper personal benefit. Neither the amendment
nor repeal of Section 1 of this Article XIII shall eliminate or reduce the
effect of Section 1 of this Article XIII in respect of any matter occurring, or
any cause of action, suit or claim that, but for Section 1 of this Article XIII
would accrue or arise, prior to such amendment or repeal.
SECTION 2. INDEMNIFICATION AND INSURANCE.
------------------------------
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party to or is involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "Proceeding"), by reason of the fact that
such person, or a person of whom such person is the legal
representative, is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of a partnership,
joint venture, trust or other enterprise, including service with
respect to employee benefit plans, whether the basis of such proceeding
is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by Delaware Law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law
permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments,
fines, amounts paid or to be paid in settlement, and excise taxes or
penalties arising under the Employee Retirement Income Security Act of
1974, as in effect from time to time) reasonably incurred or suffered
by such person in connection therewith and such indemnification shall
continue as to a person who has ceased to be a director, officer,
employee or agent and shall inure to the benefit of such person's
heirs, executors and administrators; provided, however, that, except as
provided in paragraph (b) hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a proceeding (or
part thereof) initiated by such person only if such proceeding (or part
thereof) was authorized by the Board of Directors. The right to
indemnification conferred in this Section shall be a contract right and
shall include the right to have the Corporation pay the expenses
incurred in defending any such proceeding in advance of its final
disposition; any advance payments to be paid by the Corporation within
twenty (20) calendar days after the receipt by the Corporation of a
statement or statements from the claimant requesting such advance or
advances from time to time; provided, however, that, if and to the
extent Delaware law requires, the payment of such expenses incurred by
a director or officer in such person's capacity as a director or
officer (and not in any other capacity in which service was or is
rendered by such person while a director or officer, including, without
limitation, service
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to an employee benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such director or officer, to repay all
amounts so advanced if it shall ultimately be determined that such
director or officer is not entitled to be indemnified under this
Section or otherwise. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to
indemnification, and rights to have the Corporation pay the expenses
incurred in defending any proceeding in advance of its final
disposition, to any employee or agent of the Corporation to the fullest
extent of the provisions of this Article with respect to the
indemnification and advancement of expenses of directors and officers
of the Corporation.
(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under
paragraph (a) of this Section is not paid in full by the Corporation
within thirty (30) calendar days after a written claim has been
received by the Corporation, the claimant may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the
claim and, if successful in whole or in part, the claimant shall be
entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding in
advance of its final disposition where the required undertaking, if any
is required, has been tendered to the Corporation) that the claimant
has not met the standard of conduct which makes it permissible under
Delaware Law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) to
have made a determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because
the claimant has met the applicable standard of conduct set forth in
Delaware Law, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its stockholders)
that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification
and the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Section shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of
Incorporation, Bylaw, agreement, vote of stockholders or disinterested
directors or otherwise. No repeal or modification of this Article shall
in any way diminish or adversely affect the rights of any director,
officer, employee or agent of the Corporation hereunder in respect of
any occurrence or matter arising prior to any such repeal or
modification.
(d) INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any such expense,
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liability or loss, whether or not the Corporation would have the power
to indemnify such person against such expense, liability or loss under
Delaware Law.
(e) SEVERABILITY. If any provision or provisions of this
Article XIII shall be held to be invalid, illegal or unenforceable for
any reason whatsoever: (1) the validity, legality and enforceability of
the remaining provisions of this Article XIII (including, without
limitation, each portion of any paragraph of this Article XIII
containing any such provision held to be invalid, illegal or
unenforceable, that is not itself held to be invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby and
(2) to the fullest extent possible, the provisions of this Article XIII
(including, without limitation, each such portion of any paragraph of
this Article XIII containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or
unenforceable.
ARTICLE XIV
-----------
GENDER AND FORM
Whenever the context may require, any pronouns used in this Certificate
of Incorporation shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns, including capitalized terms
defined herein, shall include the plural and vice versa. "Including" and words
of similar import shall be construed as words of inclusion and not of limitation
such that matters described following such words of inclusion shall be regarded
as nonexclusive, noncharacterizing illustrations of the matters described prior
to such words of inclusion.
ARTICLE XV
----------
EFFECTIVE DATE
Upon the adoption of this Certificate of Incorporation by the
stockholders of the Corporation and its filing by the Secretary of State of
Delaware as required by applicable provisions of Delaware Law, this Certificate
of Incorporation shall become effective and shall supersede the existing
Certificate of Incorporation, as amended to date.
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IN WITNESS WHEREOF, this Certificate of Incorporation has been duly
adopted by the written consent of the stockholders of the Corporation in
accordance with the provisions of Sections 228, 242 and 245 of Delaware Law and
has been executed this _____ day of _______________________, 1999.
AIRONET WIRELESS COMMUNICATIONS, INC.
By:___________________________________
Name:_________________________________
Title:________________________________
Attest:
______________________________________
Secretary
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Exhibit 3.2
SECOND AMENDED AND RESTATED BYLAWS
OF
AIRONET WIRELESS COMMUNICATIONS, INC.
ARTICLE I
---------
Stockholders
1.01. ANNUAL MEETING. The annual meeting of the stockholders of this
Corporation, for the purpose of electing directors and transacting such other
business as may come before the meeting, shall be held on such date, at such
time and at such place as may be designated by the Board of Directors.
1.02. SPECIAL MEETINGS. Special Meetings of the stockholders may be
called at any time by the chairman of the board, or in case of the death,
absence or disability of the chairman of the board, the president, or in case of
the president's death, absence, or disability, a senior vice-president or a
majority of the Board of Directors acting with or without a meeting; provided
that if and to the extent that any Special Meeting of stockholders may be called
by any other person or persons specified in any provision of the certificate of
incorporation in effect from time to time (as amended, "Certificate of
Incorporation") or any amendment thereto or any certificate filed under Section
151(g) of the Delaware General Corporation Law (or its successor statute as in
effect from time to time) (the "Delaware Law"), then such Special Meeting may
also be called by the person or persons, in the manner, at the times and for the
purposes so specified; provided further, that the business transacted at any
Special Meeting of the stockholders shall be strictly limited to that identified
in the required notice calling such meeting and subject to the requirements of
Delaware Law, Certificate of Incorporation and these Bylaws.
1.03. PLACE OF SPECIAL MEETINGS. Special Meetings of stockholders shall
be held at such place as may be designated by the Board of Directors by notice
thereof.
1.04. NOTICE OF MEETINGS.
(a) Unless waived, a written, printed, or typewritten notice of each
annual or Special Meeting, stating the date, hour and place and the purpose or
purposes thereof shall be served upon or mailed to each stockholder of record
entitled to vote or entitled to notice, not more than sixty (60) days nor less
than ten (10) days before any such meeting. If mailed, such notice shall be
directed to a stockholder at his or her address as the same appears on the
records of the Corporation. If a meeting is adjourned to another time or place
and such adjournment is for thirty (30) days or less and no new record date is
fixed for the adjourned meeting, no further notice as to such adjourned meeting
need be given if the time and place to which it is adjourned are fixed and
announced at such meeting. In the event of a transfer of shares after notice has
been given and prior to the holding of the meeting, it shall not be necessary to
serve notice on the transferee. Such notice shall specify the place where the
stockholders list will be open for examination prior to the meeting if required
by Section 1.09 hereof. If the adjournment is for more than thirty (30) days, or
after the adjournment a new record
<PAGE> 2
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each stockholder of record entitled to vote at the meeting.
(b) A written waiver of any such notice signed by the person entitled
thereto, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
1.05. FIXING DATE FOR DETERMINATION OF STOCKHOLDERS OF RECORD. In order
that the Corporation may determine the stockholders entitled to notice of or to
vote at any meeting or to receive payment of any dividend or other distribution
or allotment of any rights, or otherwise entitled to exercise any rights in
respect of any other change, conversion or exchange of stock or for the purpose
of any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action.
If the Board of Directors shall not fix such a record date, (i) the
record date for determining stockholders entitled to notice of or to vote shall
be the close of business on the day next preceding the day on which notice is
given, or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and (ii) in any case involving
the determination of stockholders for any purpose other than notice of or
voting, the record date for determining stockholders for such purpose shall be
the close of business on the day on which the Board of Directors shall adopt the
resolution relating thereto. Determination of stockholders entitled to notice of
or to vote shall apply to any adjournment of such meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
1.06. ORGANIZATION. At each meeting of the stockholders, the president,
or, in his absence, the chairman of the Board of Directors, or in his absence,
any senior vice-president, shall act as chairman of the meeting, and the
secretary of the Corporation, or, if the secretary of the Corporation is not
present, the assistant secretary, or if the secretary and the assistant
secretary are not present, any person whom the chairman of the meeting shall
appoint, shall act as secretary of the meeting.
1.07. QUORUM. A stockholders' meeting duly called shall not be
organized for the transaction of business unless a quorum is present. Except as
otherwise expressly provided by law, the Certificate of Incorporation, these
Bylaws, or any certificate filed under Section 151(g) of the Delaware General
Corporation Law (or its successor statute as in effect from time to time), (i)
at any meeting called by the Board of Directors, the presence in person or by
proxy of holders of record entitling them to exercise at least one-third of the
voting power of the Corporation shall constitute a quorum for such meeting and
(ii) at any meeting called other than by the Board of Directors, the presence in
person or by proxy of holders of record entitling them to exercise at least a
majority of the voting power of the Corporation shall constitute a quorum for
such meeting. The stockholders present at a duly organized meeting can continue
to do business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum. If a meeting cannot be organized
because a quorum has not attended, a majority in voting interest of the
stockholders present may adjourn, or, in the absence of a decision by the
majority, any officer entitled to preside at such meeting may adjourn the
meeting to such time (not more than thirty (30) days after the previously
adjourned meeting) and place as they may determine, without notice other than by
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announcement at the meeting of the time and place of the adjourned meeting. At
any such adjourned meeting at which a quorum is present any business may be
transacted which might have been transacted at the meeting as originally called.
1.08. ORDER OF BUSINESS AND PROCEDURE. The order of business at all
meetings of the stockholders shall be determined by the chairman of the meeting.
Meetings shall be conducted in a manner designed to accomplish the business of
the meeting in a prompt and orderly fashion and to be fair and equitable to all
stockholders, but it shall not be necessary to follow any manual of
parliamentary procedure.
1.09. ADVANCE NOTICE OF STOCKHOLDER PROPOSALS. In order to properly
submit any business to an annual meeting of stockholders, a stockholder must
give timely notice in writing to the secretary of the Corporation. To be
considered timely, a stockholder's notice must be delivered either in person or
by first class United States, postage prepaid, and received at the principal
executive offices of the Corporation (a) not less than ninety (90) days nor more
than one hundred twenty (120) days (in the event that a different period of time
is required by any law, regulation or rule, then such different period of time
shall control) before the first anniversary date of the Corporation's proxy
statement (if no proxy is required then notice of meeting) in connection with
the last annual meeting of stockholders or (b) if no annual meeting was held in
the previous year or the date of the applicable annual meeting has been changed
by more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement (if no proxy statement is required then notice
of meeting), not less than a reasonable time, as determined by the Board of
Directors, prior to the date of the applicable annual meeting.
(b) The secretary of the Corporation shall deliver any stockholder
proposals received in a timely manner for review by the Board of Directors or a
committee designated by the Board of Directors.
(c) A stockholder's notice to submit business to an annual meeting of
stockholders shall set forth (i) the name and address of the stockholder; (ii)
the class and number of shares of stock beneficially owned by such stockholder;
(iii) the name in which such shares are registered on the stock transfer books
of the Corporation; (iv) a representation that the stockholder intends to appear
at the meeting in person or by proxy to submit the business specified in such
notice; (v) any material interest of the stockholder in the business to be
submitted; and (vi) a brief description of the business desired to be submitted
to the annual meeting, including the complete text of any resolutions to be
presented at the annual meeting, and the reasons for conducting such business at
the annual meeting. In addition, the stockholder making such proposal shall
promptly provide any other information reasonably requested by the Corporation.
This Subsection (c) shall not be interpreted to require the inclusion of
information about any such proposal in any proxy statement distributed by or on
behalf of the Board of Directors. Only business which the chairman of the
meeting determines was timely brought by advance notice in accordance with this
Section 1.09 shall be transacted at such meeting.
(d) Without limiting the foregoing provisions of this Section 1.09,
during any period in which the Corporation is a reporting company under the
Securities Exchange Act of 1934, as amended ("Exchange Act"), a stockholder who
seeks to have any proposal included in the corporation's proxy statement shall
comply with the requirements of Regulation 14A under the Exchange Act and all
other provisions of the Exchange Act and the rules and regulations promulgated
thereunder.
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1.10. VOTING.
(a) Each stockholder shall, at each meeting of the stockholders, be
entitled to vote in person or by proxy each share of the stock of the
Corporation having voting rights on the matter in question and which shall have
been held by him and registered in his name on the books of the Corporation on
the date fixed pursuant to Section 1.05 of these Bylaws as the record date for
the determination of stockholders entitled to notice of and to vote at such
meeting.
(b) Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares in such other corporation is held,
directly or indirectly, by the Corporation, shall neither be entitled to vote
nor be counted for quorum purposes.
(c) Any such voting rights may be exercised by the stockholder in
person or by his proxy appointed by an instrument in writing, subscribed by such
stockholder or by his attorney thereunto authorized and delivered to the
secretary of the meeting in sufficient time to permit the necessary examination
and tabulation thereof before the vote is taken; provided, however, that no
proxy shall be valid after the expiration of three (3) years after the date of
its execution, unless the stockholder executing it shall have specified therein
the length of time it is to continue in force. At any meeting of the
stockholders, all matters, except as otherwise provided in the Certificate of
Incorporation, in these Bylaws or by law, shall be decided by the vote of a
majority in voting interest of the stockholders present in person or by proxy
and voting thereon, a quorum being present. The vote at any meeting of the
stockholders on any question need not be by ballot, unless so directed by the
chairman of the meeting or required by the Certificate of Incorporation. On a
vote by ballot each ballot shall be signed by the stockholder voting, or by his
proxy, if there be such proxy, and it shall state the number of shares voted.
1.11. INSPECTORS. The Board of Directors, in advance of any meeting of
the stockholders, may appoint one or more inspectors to act at the meeting. If
inspectors are not so appointed, the person presiding at the meeting may appoint
one or more inspectors. If any person so appointed fails to appear or act, the
vacancy may be filled by appointment made by the Board of Directors in advance
of the meeting or at the meeting by the person presiding thereat. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at the meeting with strict
impartiality and according to the best of his ability. The inspectors so
appointed, if any, shall determine the number of shares outstanding, the shares
represented at the meeting, the existence of a quorum and the authenticity,
validity and effect of proxies and shall receive votes, ballots, waivers,
releases, or consents, hear and determine all challenges and questions arising
in connection with the right to vote, count and tabulate all votes, ballots,
waivers, releases, or consents, determine and announce the results and do such
acts as are proper to conduct the election or vote with fairness to all
stockholders. On request of the person presiding at the meeting, the inspectors
shall make a report in writing of any challenge, question or matter determined
by them and execute a certificate of any fact found by them. Any report or
certificate made by them shall be prima facie evidence of the facts stated and
of the vote as certified by them.
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ARTICLE II
----------
BOARD OF DIRECTORS
2.01. GENERAL POWERS OF BOARD. The powers of the Corporation shall be
exercised, its business and affairs conducted, and its property controlled by or
under the direction of the Board of Directors, except as otherwise provided by
Delaware Law or in the Certificate of Incorporation.
2.02. NUMBER OF DIRECTORS. The number of directors of the Corporation
(exclusive of directors to be elected by the holders of any one or more series
of Preferred Stock voting separately as a class or classes) shall be such number
as may be set from time to time within the limits set forth in the Certificate
of Incorporation by resolution adopted by affirmative vote of a majority of the
whole Board of Directors. As used in these Bylaws, the term "whole Board" means
the total number of directors which the Corporation would have if there were no
vacancies.
2.03. ELECTION OF DIRECTORS. At each meeting of the stockholders for
the election of directors, the persons receiving the greatest number of votes
shall be the directors. Directors need not be stockholders.
2.04. NOMINATIONS.
(a) Nomination of persons for election to the Board of Directors may be
made by the Board of Directors or any committee designated by the Board of
Directors or by any stockholder entitled to vote for the election of directors
at the applicable meeting of stockholders. However, nominations other than those
made by the Board of Directors or its designated committee must comply with the
procedures set forth in this Section 2.04, and no person shall be eligible for
election as a director unless nominated in accordance with the terms of this
Section 2.04.
(b) Notice of nominations which are proposed by the Board of Directors
shall be given on behalf of the Board of Directors by the chairman of the
meeting.
(c) In order to properly submit nominations of a person or persons for
election as director(s), a stockholder must give timely notice in writing to the
secretary of the Corporation. To be considered timely, a stockholder's notice
must be delivered either in person or by first class United States mail, postage
prepaid, and received at the principal executive offices of the Corporation not
less than (a) ninety (90) days nor more than one hundred twenty (120) days
(except that if a different period of time is required by any law, regulation or
rule applicable to the Corporation, then such different period of time shall
control) before the first anniversary date of the Corporation's proxy statement
(if no proxy is required then notice of meeting) in connection with the last
annual meeting of stockholders or (b) if no annual meeting was held in the
previous year or the date of the applicable annual meeting has been changed by
more than thirty (30) days from the date contemplated at the time of the
previous year's proxy statement (if no proxy statement is required then notice
of meeting), not less than a reasonable time, as determined by the Board of
Directors, prior to the date of the applicable annual meeting.
(d) A stockholder may nominate a person or persons for election to the
Board of Directors by giving written notice to the secretary of the Corporation
in accordance with the procedures set forth above. In addition to the timeliness
requirements set forth above for notice to the Corporation by a stockholder,
with respect to any Special Meeting of stockholders called for the
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election of directors, written notice must be delivered in the manner specified
above and not later than the close of business on the seventh day following the
date on which notice of such meeting is first given to stockholders.
(e) The secretary of the Corporation shall deliver any nominations
proposed by a shareholder and received in a timely manner for review by the
Board of Directors or a committee designated by the Board of Directors.
(f) A stockholder nomination of a person or persons for election to the
Board of Directors must also set forth, as to each person whom the stockholder
proposes to nominate for election as a director: (i) the name, age, business
address and, if known, residence address of such person; (ii) the principal
occupation or employment of such person; (iii) the class and number of shares of
stock of the Corporation which are beneficially owned by such person; (iv) any
other information relating to such person that is required to be disclosed in
solicitations of proxies for election of directors or is otherwise required by
the rules and regulations of the Securities and Exchange Commission promulgated
under the Exchange Act (regardless of whether the Corporation is a reporting
company under such Act); (v) the written consent of such person to be named in
the proxy statement (if applicable) as a nominee and to serve as a director if
elected; and (vi) a description of all arrangements or understandings between
such stockholder and each nominee and any other person or persons (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by such stockholder.
(g) Any person nominated for election as director by the Board of
Directors or any committee designated by the Board of Directors shall, upon the
request of the Board of Directors or such committee, furnish to the secretary of
the Corporation all such information pertaining to such person that is required
to be set forth in a stockholder's notice of nomination.
(h) The chairman of the meeting may, if the facts warrant, determine
and declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if the chairman should so determine, the chairman shall
so declare to the meeting and the defective nomination shall be disregarded.
(i) Subject to the foregoing provisions of this Section 2.04, during
any period in which the Corporation is a reporting company under the Exchange
Act, a stockholder who seeks to have any proposal included in the corporation's
proxy statement shall comply with the requirements of Regulation 14A under the
Exchange Act and all other provisions of the Exchange Act and the rules and
regulations promulgated thereunder.
2.05. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice to the chairman of the Board of Directors or the
secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
2.06. VACANCIES. In the event that any vacancy shall occur in the Board
of Directors, whether because of death, resignation, removal, newly created
directorships resulting from any increase in the authorized number of directors
(exclusive of increases resulting from the rights of holders of Preferred
Stock), the failure of the stockholders to elect the whole authorized number of
directors, or any other reason, such vacancy may be filled by the Board of
Directors by the
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affirmative vote of a majority of directors then in office, even though less
than a quorum. Any director elected by the Board of Directors to fill a vacancy
or newly created directorship shall hold office for the remainder of the full
term of the class of directors in which such directorship is part, and until
such director's successor is elected and qualified.
2.07. REMOVAL OF DIRECTORS. Directors may be removed only as provided
in the Certificate of Incorporation.
2.08. PLACE OF MEETING. The Board of Directors may hold any of its
meetings at the principal office of the Corporation or at such other place or
places as the Board of Directors (or the chairman in the absence of a
determination by the Board of Directors) may from time to time designate.
Directors may participate in any regular or Special Meeting of the Board of
Directors by means of conference telephone or similar communications equipment
pursuant to which all persons participating in the meeting of the Board of
Directors can hear each other and such participation shall constitute presence
in person at such meeting.
2.09. ANNUAL MEETING. A regular annual meeting of the Board of
Directors shall be held each year at the same place as and immediately after the
annual meeting of stockholders, or at such other place and time as determined by
the Board of Directors and notice thereof need not be given. At its regular
annual meeting the Board of Directors shall organize itself and elect the
officers of the Corporation for the ensuing year and may transact any other
business.
2.10. REGULAR MEETINGS. Regular Meetings of the Board of Directors may
be held at such intervals and such time as shall be determined by the Board of
Directors. After such determination and notice thereof has been once given to
each person then a member of the Board of Directors, Regular Meetings may be
held at such intervals, time and place without further notice being given.
2.11. SPECIAL MEETINGS. Special Meetings of the Board of Directors may
be called at any time by the Board of Directors or by the chairman or by a
majority of directors then in office, to be held on such day and at such time as
shall be specified by the person or persons calling the meeting.
2.12. NOTICE OF MEETINGS. Notice of each Special Meeting or, where
required, each Regular Meeting of the Board of Directors shall be given to each
director either by being mailed on at least the third day prior to the date of
the meeting or by being telegraphed, faxed or given personally or by telephone
on at least 24 hours notice prior to the date of the meeting. Such notice shall
specify the place, date and hour of the meeting and, if it is for a Special
Meeting, the purpose or purposes for which the meeting is called. At any meeting
of the Board of Directors at which every director shall be present, even though
without such notice, any business may be transacted. Any acts or proceedings
taken at a meeting of the Board of Directors not validly called or constituted
may be made valid and fully effective by ratification at a subsequent meeting
which shall be legally and validly called or constituted. Notice of any Regular
Meeting of the Board of Directors need not state the purpose of the meeting and,
at any Regular Meeting duly held, any business may be transacted. If the notice
of a Special Meeting shall state as a purpose of the meeting the transaction of
any business that may come before the meeting, then at the meeting any business
may be transacted, whether or not referred to in the notice thereof. A written
waiver of notice of a Special or Regular Meeting, signed by the person or
persons entitled to such notice whether before or after the time stated therein,
shall be deemed the equivalent of such notice, and attendance of a director at a
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meeting shall constitute a waiver of notice of such meeting except when the
director attends the meeting and prior to or at the commencement of such meeting
protests the lack of proper notice.
2.13. QUORUM AND VOTING. At all meetings of the Board of Directors, the
presence of a majority of the directors then in office shall constitute a quorum
for the transaction of business. Except as otherwise required by law, the
Certificate of Incorporation, or these Bylaws, the vote of a majority of the
directors present at any meeting at which a quorum is present shall be the act
of the Board of Directors. At all meetings of the Board of Directors, each
director shall have one vote.
2.14. COMMITTEES.
(a) The Board of Directors may appoint one or more committees of the
Board of Directors, to consist of one or more directors of the Corporation, and
may delegate to any such committee any of the authority of the Board of
Directors, however conferred, other than the power or authority in reference to
amending the Certificate of Incorporation, adopting an agreement of merger or
consolidation, recommending to the stockholders the sale, lease or exchange of
all or substantially all of the corporation's property and assets, recommending
to the stockholders a dissolution of the Corporation or a revocation of a
dissolution, or amending the Bylaws of the Corporation. No committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock unless the resolution creating such committee expressly so provides. Each
committee shall serve at the pleasure of the Board of Directors, shall act only
in the intervals between meetings of the Board of Directors and shall be subject
to the control and direction of the Board of Directors. Each committee may act
by a majority of its members at a meeting or by a writing or writings signed by
all of its members. Each committee shall keep written minutes of its meetings
and report the same to the Board of Directors at the next Regular Meeting of the
Board of Directors.
(b) The Board of Directors may from time to time appoint from among its
members, and may fill vacancies on, an Executive Committee to serve during the
pleasure of the Board, provided that each of the Chairman of the Board and the
Chief Executive Officer shall be a member of any such Executive Committee.
During the intervals between the meetings of the Board, the Executive Committee
shall possess and may exercise all of the powers of the Board in the management
of the business and affairs of the Corporation conferred by these Bylaws or
otherwise. The Executive Committee shall keep a record of all its proceedings
and report the same to the Board. A majority of the members of the Executive
Committee shall constitute a quorum. The act of a majority of the members of the
Executive Committee present at any meeting at which a quorum is present shall be
the act of the Executive Committee.
2.15. COMPENSATION. The Board of Directors or a committee thereof may,
by resolution passed by a majority of directors, fix the compensation of
directors for service in any capacity and may fix fees for attendance at
meetings and may authorize the Corporation to pay the traveling and other
expenses of directors incident to their attendance at meetings or may delegate
such authority to a committee of the Board of Directors.
2.16. ACTION BY CONSENT. Any action required or permitted to be taken
at any meeting of the Board of Directors or of any committee thereof may be
taken without a meeting if a written consent thereto is signed by all members of
the Board of Directors or of such committee, as the case
8
<PAGE> 9
may be, and such written consent is filed with the minutes of proceedings of the
Board of Directors or such committee.
ARTICLE III
-----------
OFFICERS
3.01. GENERAL PROVISIONS. The executive officers of the Corporation
shall be chosen by the Board of Directors, shall be the chairman of the Board
(who shall be a director), a vice-chairman of the Board (if such office is
created by the Board), a chief executive officer, a president, a chief operating
officer (if such office is created by the Board of Directors), such number of
senior vice-presidents and vice-presidents as the board may from time to time
determine, a chief financial officer, a secretary and a treasurer. Any person
may hold any two or more offices and perform the duties thereof, except the
offices of chairman of the Board of Directors and vice-chairman, or the offices
of president and senior vice-president or the offices of president and
secretary.
3.02. ELECTION, TERMS OF OFFICE, AND QUALIFICATION. The officers of the
Corporation named in Section 3.01 of this Article III shall be elected by the
Board of Directors and shall hold office until their respective successors are
chosen and qualify or, if appointed for a specific term, upon the expiration of
such term.
3.03. ADDITIONAL OFFICERS. In addition to the officers mentioned in
Section 3.01 of this Article III, the Corporation may have such other officers
or agents as the Board of Directors may deem necessary and may appoint, each of
whom shall hold office for such period, have such authority and perform such
duties as the Board of Directors may from time to time determine. The Board of
Directors may delegate to any officer the power to appoint any subordinate
officers or agents. In the absence of any officer of the Corporation, or for any
other reason the Board of Directors may deem sufficient, the Board of Directors
may delegate the powers and duties, or any of them, of such officer to any other
officer, or to any director.
3.04. REMOVAL. Except as set forth below, any officer of the
Corporation may be removed, either with or without cause, at any time, by
resolution adopted by the Board of Directors at any meeting, the notice (or
waivers of notice) of which shall have specified that such removal action was to
be considered. Any officer appointed not by the Board of Directors but by an
officer or committee to which the Board of Directors shall have delegated the
power of appointment may be removed, with or without cause, by the committee or
superior officer (including successors) who made the appointment, or by any
committee or officer upon whom such power of removal may be conferred by the
Board of Directors.
3.05. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Board of Directors, or to the chairman of the Board of
Directors, the president, or the secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, and unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
3.06. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification, or otherwise, shall be filled in the manner
prescribed in these Bylaws for regular appointments or elections to such office.
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<PAGE> 10
ARTICLE IV
----------
DUTIES OF THE OFFICERS
4.01. CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside at
all meetings of the Board of Directors of the Corporation and shall serve as
chairman of any Executive Committee appointed by the Board of Directors pursuant
to Section 2.14 of Article II. He shall have such other powers and perform such
other duties as are provided in these Bylaws and as may from time to time be
assigned to him by the Board of Directors.
4.02. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board shall
have such powers and perform such duties as may from time to time be delegated
to him by the Chairman of the Board and shall have such other powers and perform
such other duties as are provided in these Bylaws and as may from time to time
be assigned to him by the Board of Directors.
4.03. CHIEF EXECUTIVE OFFICER. The Chief Executive officer shall
preside at all meetings of stockholders and shall have general charge and
supervision of the business of the Corporation. In the absence of the Chairman
of the Board and the Vice Chairman of the Board, the Chief Executive Officer
shall preside at all meetings of the Board of Directors and shall serve as
chairman of any Executive Committee appointed by the Board of Directors pursuant
to Section 2.14 of Article II. He shall have such other powers and perform such
other duties as are provided in these Bylaws and as may from time to time be
assigned to him by the Board of Directors.
4.04. PRESIDENT. The President shall, in the absence, disability, or
inability to act of the Chief Executive Officer, exercise all powers and perform
all duties of the Chief Executive Officer (except such powers and duties as are
incident to the Chief Executive Officer's position or a member of the Board of
Directors or of any Executive Committee appointed by the Board of Directors
pursuant to Section 2.14 of Article II), and shall have such other powers and
perform such other duties as are provided by these Bylaws and as may from time
to time be assigned to him by the Board of Directors.
4.05. CHIEF OPERATING OFFICER. The Chief Operating Officer shall have
such powers and perform such duties as are provided in these Bylaws and as may
from time to time be assigned to him by the Board of Directors.
4.06. POWERS AND DUTIES OF VICE PRESIDENTS. Any Senior Vice President
or Vice President from time to time designated by the Board of Directors shall,
in the absence, disability, or inability to act of the President, exercise all
powers and perform all duties of the President. Each Senior Vice President shall
have such other powers and perform such other duties as may from time to time be
assigned to him by the Board of Directors, and each Vice President or Assistant
Vice President shall have such other powers and perform such other duties as may
from time to time be assigned to him by the Chief Executive Officer.
4.07. POWERS AND DUTIES OF TREASURER AND ASSISTANT TREASURERS.
(a) The Treasurer shall have the care and custody of all the funds and
securities of the Corporation except as may be otherwise ordered by the Board of
Directors, shall cause such funds to be deposited to the credit of the
Corporation in such banks or depositories as may be designated
10
<PAGE> 11
by the Board of Directors, the Chairman of the Board, the Chief Executive
Officer, or the Treasurer, and shall cause such securities, to be placed in
safekeeping in such manner as may be designated by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, or the Treasurer.
(b) The Treasurer or an Assistant Treasurer, or such other person or
persons as may be designated for such purpose by the Board of Directors, the
Chairman of the Board, the Chief Executive Officer, or the Treasurer, may
endorse in the name and on behalf of the Corporation all instruments for the
payment of money, bills of lading, warehouse receipts, insurance policies, and
other commercial documents requiring such endorsement and may sign all receipts
and vouchers for payments made to the Corporation.
(c) The Treasurer shall render a statement of the cash account of the
Corporation to the Board of Directors as often as it shall require the same and
shall enter or cause to be entered regularly in books to be kept by him for that
purpose full and accurate accounts of all moneys received and paid by him on
account of the Corporation and of all securities received and delivered by the
Corporation.
(d) The Treasurer shall have such other powers and perform such other
duties as are provided in these Bylaws and as may from time to time be assigned
to him by the Board of Directors. Each Assistant Treasurer shall have such
powers and perform such duties as may from time to time be assigned to him by
the Treasurer or by the Board of Directors. In the absence, disability or
inability to act of the Treasurer, any Assistant Treasurer may exercise any of
the powers and may perform any of the duties of the Treasurer.
4.08. POWERS AND DUTIES OF SECRETARY AND ASSISTANT SECRETARIES.
(a) The Secretary shall attend all meetings of the Board of Directors
and of the stockholders and shall keep the minutes of all proceedings of the
stockholders and the Board of Directors in proper books provided for that
purpose. The Secretary shall attend to the giving and serving of all notices of
the Corporation in accordance with the provisions of the Certificate of
Incorporation, these Bylaws, and the laws of the State of Delaware. The
Secretary may, with the Chief Executive Officer, the President, the Chief
Operating Officer, a Senior Vice President or other authorized officer of the
Corporation, sign contracts and other documents in the name of the Corporation.
(b) The Secretary shall have such other powers and perform such other
duties as are provided in these Bylaws and as may from time to time be assigned
to him by the Board of Directors and shall perform all other acts incident to
the office of Secretary. Each Assistant Secretary shall have such powers and
perform such duties as may from time to time be assigned to him by the Secretary
or by the Board of Directors. In the absence, disability, or inability to act of
the Secretary, any Assistant Secretary may exercise any of the powers and may
perform any of the duties of the Secretary.
(c) In no case shall the Secretary or any Assistant Secretary, without
the express written authorization and direction of the Board of Directors, have
any responsibility for, or any duty or authority with respect to, the
withholding or payment of any federal, state or local taxes of the Corporation
or the preparation or filing of any tax return.
11
<PAGE> 12
ARTICLE V
---------
INDEMNIFICATION OF DIRECTORS AND OFFICERS
5.01. INDEMNIFICATION. The provisions of the Corporation's Certificate
of Incorporation limiting liability of directors, officers and employees, and
providing for payment of legal fees, other costs and expenses, and
indemnification generally of directors, officers and employees, are incorporated
herein by this reference. Nothing in this Article V or in Article VIII herein
shall be construed to limit any provisions in the Corporation's Certificate of
Incorporation.
5.02. INSURANCE. The proper officers of the Corporation, without
further authorization by the Board of Directors, may in their discretion
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent for
another corporation, partnership, joint venture, trust or other enterprise,
against any liability.
5.03. ERISA. To assure indemnification under this Article V of all such
persons who are or were "fiduciaries" of an employee benefit plan governed by
the Act of Congress entitled "Employee Retirement Income Security Act of 1974",
as amended from time to time, the provisions of this Article V shall, for the
purposes hereof, be interpreted as follows: an "other enterprise" shall be
deemed to include an employee benefit plan; the Corporation shall be deemed to
have requested a person to serve as an employee of an employee benefit plan
where the performance by such person of his duties to the Corporation also
imposes duties on, or otherwise involves services by, such person to the plan or
participants or beneficiaries of the plan; excise taxes assessed on a person
with respect to an employee benefit plan pursuant to said Act of Congress shall
be deemed "fines"; and action taken or omitted by a person with respect to an
employee benefit plan in the performance of such person's duties for a purpose
reasonably believed by such person to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Corporation.
5.04. CONTRACTUAL NATURE. The foregoing provisions of this Article V
shall be deemed to be a contract between the Corporation and each director and
officer who serves in such capacity at any time while this Article is in effect.
Neither any repeal or modification of this Article or, to the fullest extent
permitted by the laws of Delaware, any repeal or modification of laws, shall
affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suit or proceeding theretofore
or thereafter brought based in whole or in part upon any such state of facts.
5.05 CONSTRUCTION. For the purposes of this Article V, references to
"the Corporation" include, in addition to the resulting Corporation, any
constituent Corporation (including any constituent of a constituent) absorbed in
a consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers and employees
or agents, so that any person who is or was a director or officer of such
constituent Corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise or as a member of any
committee or similar body shall stand in the same position under the provisions
of this Article with respect to the resulting or surviving corporation as such
person would have with respect to such constituent corporation if its separate
existence had continued.
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ARTICLE VI
----------
DEPOSITORIES, CONTRACTS AND OTHER INSTRUMENTS
6.01. DEPOSITORIES. The chairman of the Board of Directors, the chief
executive officer, the president, the treasurer and any vice-president of the
Corporation whom the Board of Directors authorizes to designate depositories for
the funds of the Corporation are each authorized to designate depositories for
the funds of the Corporation deposited in its name and the signatories and
conditions with respect thereto in each case, and from time to time, to change
such depositories, signatories and conditions, with the same force and effect as
if each such depository, the signatories and conditions with respect thereto and
changes therein had been specifically designated or authorized by the Board of
Directors; and each depository designated by the Board of Directors or by the
chairman of the Board of Directors, the chief executive officer, the president,
the treasurer, or any such senior vice president or vice-president of the
Corporation, shall be entitled to rely upon the certificate of the secretary or
any assistant secretary of the Corporation setting forth the fact of such
designation and of the appointment of the officers of the Corporation or of
other persons who are to be signatories with respect to the withdrawal of funds
deposited with such depository, or from time to time the fact of any change in
any depository or in the signatories with respect thereto.
6.02. EXECUTION OF INSTRUMENTS GENERALLY. In addition to the powers
conferred upon the chairman of the Board of Directors in Section 4.01 and except
as otherwise provided in Section 6.01 of this Article VI, all contracts and
other instruments entered into in the ordinary course of business requiring
execution by the Corporation may be executed and delivered by the chief
executive officer, the president, the treasurer or any senior vice president or
vice-president, and authority to sign any such contracts or instruments, which
may be general or confined to specific instances, may be conferred by the Board
of Directors upon any other person or persons. Any person having authority to
sign on behalf of the Corporation may delegate, from time to time, by instrument
in writing, all or any part of such authority to any person or persons if
authorized to do so by the Board of Directors.
6.03. STOCK OWNED BY THE CORPORATION. Unless otherwise ordered by the
Board of Directors, each of the Chief Executive Officer, President and any
Senior Vice President in person or by proxy or proxies appointed by him shall
have full power and authority on behalf of the Corporation to vote, act and
consent with respect to any shares issued by other corporations which the
Corporation may own, which may be held in the corporation's name or as to which
the Corporation may otherwise have the right to vote, act or consent.
ARTICLE VII
-----------
SHARES AND THEIR TRANSFER
7.01. CERTIFICATE FOR SHARES. Every owner of one or more shares in the
Corporation shall be entitled to a certificate, which shall be in such form as
the Board of Directors shall prescribe, certifying the number and class of
shares in the Corporation owned by him. When such certificate is counter-signed
by an incorporated transfer agent or registrar, the signature of any of said
officers may be facsimile, engraved, stamped or printed. The certificates for
the respective classes of such shares shall be numbered in the order in which
they shall be issued and shall be signed in the name of the Corporation by the
chairman of the Board of Directors, the chief executive officer or the president
or a senior vice president or vice-president, and by the secretary or an
assistant secretary
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<PAGE> 14
or the treasurer or an assistant treasurer. A record shall be kept of the name
of the person, firm or Corporation owning the shares represented by each such
certificate and the number of shares represented thereby, the date thereof, and
in case of cancellation, the date of cancellation. Every certificate surrendered
to the Corporation for exchange or transfer shall be canceled and no new
certificate or certificates shall be issued in exchange for any existing
certificates until such existing certificates shall have been so canceled.
7.02 LOST, DESTROYED AND MUTILATED CERTIFICATES. If any certificates
for shares in this Corporation become worn, defaced or mutilated but are still
substantially intact and recognizable, the directors or authorized officers,
upon production and surrender thereof, shall order the same canceled and shall
issue a new certificate in lieu of same. The holder of any shares in the
Corporation shall immediately notify the Corporation if a certificate therefor
shall be lost, destroyed, or mutilated beyond recognition, and the Corporation
may issue a new certificate in the place of any certificate theretofore issued
by it which is alleged to have been lost or destroyed, or mutilated beyond
recognition, and the Board of Directors may, in its discretion, require the
owner of the certificate which has been lost, destroyed or mutilated beyond
recognition, or his legal representative, to give the Corporation a bond in such
sum and with such surety or sureties as it may direct, not exceeding double the
value of the stock, to indemnify the Corporation against any claim that may be
made against it on account of the alleged loss, destruction, or mutilation of
any such certificate. The Board of Directors may, however, in its discretion,
refuse to issue any such new certificate except pursuant to legal proceedings,
under the laws of the State of Delaware in such case made and provided.
7.03. TRANSFERS OF SHARES. Transfers of shares in the Corporation shall
be made (in accordance with the Certificate of Incorporation) only on the books
of the Corporation by the registered holder thereof, his legal guardian,
executor or administrator, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the secretary of the Corporation or with a
transfer agent appointed by the Board of Directors, and on surrender of the
certificate or certificates for such shares properly endorsed or accompanied by
properly executed stock powers and evidence of the payment of all taxes imposed
upon such transfer. Unless otherwise stated in the Certificate of Incorporation,
the person in whose name shares stand on the books of the Corporation shall, to
the full extent permitted by law, be deemed the owner thereof for all purposes
as regards the Corporation.
7.04. REGULATIONS. The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws
concerning the issue, transfer, and registration of certificates for shares in
the Corporation. It may appoint one or more transfer agents or one or more
registrars, or both, and may require all certificates for shares to bear the
signature of either or both.
ARTICLE VIII
------------
LIMITED LIABILITY; INDEMNIFICATION
8.01. LIMITED LIABILITY OF DIRECTORS. A director of the Corporation
shall not be personally liable to the Corporation or its stockholders for
monetary damages for breach of his fiduciary duty as a director, except, if
required by Delaware law, as amended from time to time, for liability (i) for
any breach of the director's duty of loyalty to the Corporation or its
stockholders; (ii) for acts or
14
<PAGE> 15
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (iii) under Section 174 of Delaware law; or (iv) for any
transaction from which the director derived an improper personal benefit.
Neither the amendment nor repeal of this Section shall eliminate or reduce the
effect of this Section in respect of any matter occurring, or any cause of
action, suit or claim that, but for this Section would accrue or arise, prior to
such amendment or repeal.
8.02. INDEMNIFICATION AND INSURANCE.
(a) RIGHT TO INDEMNIFICATION. Each person who was or is made a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "Proceeding"), by reason of the fact that such person, or a
person of whom such person is the legal representative, is or was a director of
officer of the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to employee benefit plans, whether the basis of such Proceeding is
alleged action in an official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the fullest
extent authorized by Delaware law, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), against
all expense, liability and loss (including attorneys' fees, judgments, fines,
amounts paid or to be paid in settlement, and excise taxes or penalties arising
under the Employee Retirement Income Security Act of 1974, as in effect from
time to time) reasonably incurred or suffered by such person in connection
therewith and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
such person's heirs, executors and administrators; provided, however, that,
except as provided in paragraph (b) hereof, the Corporation shall indemnify any
such person seeking indemnification in connection with a Proceeding (or part
thereof) initiated by such person only if such Proceeding (or part thereof) was
authorized by the Board of Directors. The right to indemnification conferred in
this Section shall be a contract right and shall include the right to have the
Corporation pay the expenses incurred in defending any such Proceeding in
advance of its final disposition; any advance payments to be paid by the
Corporation within twenty (20) calendar days after the receipt by the
Corporation of a statement or statements from the claimant requesting such
advance or advances from time to time; provided, however, that, if and to the
extent Delaware law requires, the payment of such expenses incurred by a
director or officer in such person's capacity as a director or officer (and not
in any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, to the extent authorized from
time to time by the Board of Directors, grant rights to indemnification, and
rights to have the Corporation pay the expenses incurred in defending any
proceeding in advance of its final disposition, to any employee or agent of the
Corporation to the fullest extent of the provisions of this Article with respect
to the indemnification and advancement of expenses of directors and officers of
the Corporation.
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(b) RIGHT OF CLAIMANT TO BRING SUIT. If a claim under paragraph (a) of
this Section is not paid in full by the Corporation within thirty (30) calendar
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the claimant
shall be entitled to be paid also the expense of prosecuting such claim. It
shall be a defense to any such action (other than an action brought to enforce a
claim for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under Delaware law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of proving such
defense shall be on the Corporation. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because the claimant has met the applicable standard of conduct set forth in
Delaware law, nor an actual determination by the Corporation (including its
Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that the claimant has not met the applicable
standard of conduct.
(c) NON-EXCLUSIVITY OF RIGHTS. The right to indemnification and the
payment of expenses incurred in defending a proceeding in advance of its final
disposition conferred in this Section shall not be exclusive of any other right
which any person may have or hereafter acquire under any statute, provision of
the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or
disinterested directors or otherwise. No repeal or modification of this Article
shall in any way diminish or adversely affect the rights of any director,
officer, employee or agent of the Corporation hereunder in respect of any
occurrence or matter arising prior to any such repeal or modification.
(d) INSURANCE. The Corporation may maintain insurance, at its expense,
to protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust or other
enterprise against any such expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under Delaware law.
(e) SEVERABILITY. If any provision or provisions of this Article VIII
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(1) the validity, legality and enforceability of the remaining provisions of
this Article VIII (including, without limitation, each portion of any paragraph
of this Article VIII containing any such provision held to be invalid, illegal
or unenforceable, that is not itself held to be invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (2) to
the fullest extent possible, the provisions of this Article VIII (including,
without limitation, each such portion of any paragraph of this Article VIII
containing any such provision held to be invalid, illegal or unenforceable)
shall be construed so as to give effect to the intent manifested by the
provision held invalid, illegal or unenforceable.
ARTICLE IX
----------
SEAL
The Board of Directors may provide a corporate seal, which shall be
circular and contain the name of the Corporation engraved around the margin and
the words "corporate seal," the year of its organization, and the word
"Delaware."
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<PAGE> 1
Exhibit 4.2
- --------------------------------------------------------------------------------
AIRONET WIRELESS COMMUNICATIONS, INC.
and
HARRIS TRUST AND SAVINGS BANK
as
Rights Agent
-------------------------------
Rights Agreement
-------------------------------
Dated as of
___________________, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C> <C>
Section 1. Certain Definitions.............................................................................1
Section 2. Appointment of Rights Agent.....................................................................7
Section 3. Issuance of Rights Certificates.................................................................8
Section 4. Form of Rights Certificate.....................................................................11
Section 5. Countersignature and Registration..............................................................12
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.........................13
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..................................14
Section 8. Cancellation and Destruction of Rights Certificates............................................17
Section 9. Reservation and Availability of Common Stock...................................................18
Section 10. Common Stock Record Date.......................................................................20
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights...............................................................................21
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.....................................33
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...........................34
Section 14. Additional Covenants...........................................................................39
Section 15. Fractional Rights and Fractional Shares........................................................40
Section 16. Rights of Action...............................................................................42
Section 17. Agreement of Rights Holders....................................................................42
Section 18. Rights Certificate Holder Not Deemed a Stockholder.............................................44
Section 19. Concerning the Rights Agent....................................................................44
Section 20. Merger or Consolidation or Change of Name of Rights Agent......................................45
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Section 21. Duties of Rights Agent.........................................................................46
Section 22. Change of Rights Agent.........................................................................50
Section 23. Issuance of New Rights Certificates............................................................52
Section 24. Redemption and Termination.....................................................................53
Section 25. Notice of Certain Events.......................................................................54
Section 26. Notices........................................................................................55
Section 27. Supplements and Amendments.....................................................................56
Section 28. Successors.....................................................................................56
Section 29. Benefits of this Agreement.....................................................................57
Section 30. Severability...................................................................................57
Section 31. Governing Law..................................................................................58
Section 32. Counterparts...................................................................................58
Section 33. Descriptive Headings...........................................................................58
</TABLE>
ii
<PAGE> 4
Exhibit 4.2
RIGHTS AGREEMENT
This Agreement ("Agreement") is dated as of _______________, 1999
between Aironet Wireless Communications, Inc., a Delaware corporation (the
"Company"), and Harris Trust and Savings Bank, an Illinois banking corporation
(the "Rights Agent") and will become effective immediately upon the closing of
the Company's initial firm commitment public offering.
W I T N E S S E T H:
WHEREAS, on April 12, 1999, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as defined below)
for each share of Common Stock (as defined below) outstanding the date of this
Agreement (the "Record Date"), and contemplated the issuance of one Right for
each share of Common Stock issued between the Record Date and the earlier of the
Distribution Date and the Expiration Date (as such capitalized terms are defined
below) and certain shares of Common Stock issued after the Distribution Date,
each Right representing the right to purchase Common Stock upon the terms and
subject to the conditions set forth in this Agreement (the "Rights"); and
WHEREAS, the Board of Directors of the Company determined it advisable
and in the best interest of the Company and its stockholders to enter into this
Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth, the parties agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meaning indicated:
"Act" means the Securities Act of 1933, as amended.
"Acquiring Person" means any Person (as defined below) who or which
alone or, together with all Affiliates (as defined below) and Associates (as
defined below) of such Person, shall be the
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Beneficial Owner (as defined below) of fifteen percent (15%) or more of the
shares of Common Stock then outstanding or who was such a Beneficial Owner at
any time after the date of this Agreement, whether or not such Person continues
to be the Beneficial Owner of fifteen percent (15%) or more of the shares of
Common Stock outstanding from time to time, but does not include an Exempt
Person (as defined below).
"Acquisition Date" means the first date of public announcement (which
for purposes of this definition shall include, without limitation, a report
filed pursuant to Section 13(d) under the Exchange Act (as defined below)) by
the Company or by an Acquiring Person that an Acquiring Person has become such.
"Affiliate" and "Associate" have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act, as in effect on the date of this Agreement.
A "Person" shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such right
is exercisable immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing), or upon the
exercise of any conversion, exchange or purchase rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the "Beneficial
Owner" of, or to "beneficially own," (A) securities tendered pursuant to a
tender or exchange offer made by or on behalf of such Person or any of such
Person's Affiliates or Associates until such tendered securities are accepted
for payment or exchange; (B) securities issuable upon the exercise of Rights at
any time
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prior to the occurrence of a Triggering Event (as defined below); or (C)
securities issuable upon the exercise of Rights from and after the occurrence of
a Triggering Event, which Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date pursuant to
Section 23 (the "Original Rights") or pursuant to Section 11(i) in connection
with any adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or has
beneficial ownership of (as determined pursuant to Rule 13d-3 of the General
Rules and Regulations under the Exchange Act or any successor rule thereto),
including pursuant to any agreement, arrangement or understanding (whether or
not in writing); provided, however, that a Person shall not be deemed the
"Beneficial Owner" of, or to "beneficially own," any securities under this
Section 1(e)(ii) as a result of an agreement, arrangement or understanding to
vote such security which: (A) arises solely by reason of the grant of a
revocable proxy or consent to any Person who shall have obtained such proxy or
consent pursuant to and as a result of a public proxy or consent solicitation
subject to and conducted in accordance with the applicable provisions of the
Exchange Act and the applicable rules and regulations thereunder and (B) also is
not then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iii) which are "beneficially owned," directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding (whether or not in writing) for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy as described in
clause (A) of subparagraph (ii) of this Section 1(e)) or disposing of any
securities of the Company; provided,
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however, that nothing in this Section 1(e) shall cause a Person engaged in
business as an underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's participation
in good faith in a firm commitment underwriting until the expiration of forty
(40) days after the date of such acquisition.
"Board" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the States of Ohio or Illinois are authorized or
obligated by law or executive order to close.
"Close of Business" on any given date means 5:00 P.M., Cleveland, Ohio
time, on such date; provided, however, that if such date is not a Business Day
it means 5:00 P.M., Cleveland, Ohio time, on the next succeeding Business Day.
"Common Stock" means the common stock, presently having a par value of
$.01 per share, of the Company or any other shares of capital stock of the
Company into which such stock shall be reclassified or changed; provided,
however, that (i) "Common Stock," when used with reference to any Person other
than the Company organized in corporate form, means the capital stock or other
equity security with the greatest voting power, or the equity securities or
other equity interest having power to control or direct the management, of such
Person or, if such Person is a subsidiary of another Person, the Person which
ultimately controls such first-mentioned Person and which has issued any such
outstanding capital stock, equity securities or equity interests and (ii)
"Common Stock," when used with reference to any Person which shall not be
organized in corporate form, means units of beneficial interest which (A) shall
represent the right to participate generally in the profits and losses of such
Person (including, without limitation, any flow-through tax benefits
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resulting from an ownership interest in such Person) and (B) shall be entitled
to exercise the greatest voting power of such Person or, in the case of a
limited partnership, shall have the power to remove the general partner or
partners.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exempt Person" means: (i) the Company; (ii) any subsidiary of the
Company; (iii) any employee benefit plan of the Company or of any subsidiary of
the Company; (iv) any Person or entity organized, appointed or established by
the Company for or pursuant to the terms of any such plan; (v) any Person who
obtains the approval of the Board and is deemed by the Board not to be an
Acquiring Person prior to such Person otherwise becoming an Acquiring Person;
(vi) any Person who on the Record Date is the Beneficial Owner of fifteen
percent (15%) or more of the shares of Common Stock of the Company then
outstanding (a "Record Date Owner"), unless and until such time as the Record
Date Owner shall directly or indirectly purchase or otherwise become (as a
result of actions taken by the Record Date Owner or its Affiliates or
Associates) the Beneficial Owner of any additional shares of Common Stock of the
Company, or unless and until, directly or indirectly, (x) the Record Date Owner
shall consolidate or otherwise combine with, or merge with and into any other
Person and the Record Date Owner shall not be the continuing or surviving
corporation of such consolidation, combination or merger, (y) any Person shall
consolidate or otherwise combine with the Record Date Owner, or merge with and
into the Record Date Owner and the Record Date Owner shall be the continuing or
surviving corporation of such consolidation, combination or merger and, in
connection with such consolidation, combination or merger, all or part of the
shares of Common Stock of the Record Date Owner shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Record Date Owner shall sell, mortgage
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or otherwise transfer (or one or more of its subsidiaries shall sell, mortgage
or otherwise transfer), in one or more transactions, assets or earning power
aggregating more than fifty percent (50%) of the assets or earning power of the
Record Date Owner and its subsidiaries (taken as a whole) to any other Person
(upon any such event in this part (vi) the Exempt Person shall become an
Acquiring Person); (vii) any Person who, together with its Affiliates and
Associates, becomes the Beneficial Owner of fifteen percent (15%) or more of the
shares of Common Stock of the Company then outstanding solely as a result of a
reduction in the number of shares of Common Stock of the Company outstanding due
to the repurchase of shares of Common Stock of the Company by the Company,
unless and until such time as such Person shall purchase or otherwise become (as
a result of actions taken by such Person or its Affiliates or Associates) the
Beneficial Owner of additional shares of Common Stock of the Company
constituting one percent (1%) or more of the then outstanding shares of Common
Stock of the Company; or (viii) any Person whom the Board determines became an
Acquiring Person solely as a result of inadvertence, provided, however, that
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person, together with all Affiliates and Associates of
such Person, would no longer be the Beneficial Owner of fifteen percent (15%) or
more of the shares of Common Stock outstanding.
"Expiration Date" shall have the meaning set forth in Section 7(a) of
this Agreement.
"Final Expiration Date" shall have the meaning set forth in Section
7(a) of this Agreement.
"Person" means any individual, firm, corporation, partnership, trust,
limited liability company or other entity and shall include any successor (by
merger or otherwise) of such entity.
"Section 11(a)(ii) Event" shall have the meaning set forth in Section
11(a)(ii) of this Agreement.
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"Section 13 Event" shall have the meaning set forth in Section 13(a) of
this Agreement.
A "Subsidiary" of any Person means any corporation or other entity of
which a majority of the voting power of the voting equity securities or voting
interests is owned, directly or indirectly, by such Person, or which is
otherwise controlled by such Person.
"Tender Date" means the date (after the date of this Agreement and
prior to the issuance of the Rights Certificates) on which a tender offer or
exchange offer by any Person (other than the Company, any subsidiary of the
Company or any employee benefit plan sponsored or maintained by the Company or
any of its subsidiaries) is first published or sent or given within the meaning
of Rule 14d-2 of the General Rules and Regulations under the Exchange Act (or
any successor rule thereto), which shall not have been approved prior thereto by
the Board and which would, if successful, result in such Person becoming an
Acquiring Person.
"Triggering Event" means any Section 11(a)(ii) Event or any Section 13
Event.
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 of this Agreement, shall, prior to the Distribution
Date (or later in certain circumstances), also be the holders of the Common
Stock) in accordance with the terms and conditions of this Agreement, and the
Rights Agent hereby accepts such appointment. The Company may from time to time
appoint such Co-Rights Agents as it may deem necessary or desirable. In the
event the Company appoints one or more Co-Rights Agents, the respective duties
of such Co-Rights Agents shall be as the Company determines.
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Section 3. Issuance of Rights Certificates.
(a) At all times prior to the earlier of (i) the tenth (10th) Business
Day after the Acquisition Date (or such specified or unspecified later date as
may be determined by the Board prior to such tenth (10th) Business Day) and (ii)
the tenth (10th) Business Day after the Tender Date (or such specified or
unspecified later date as may be determined by the Board prior to such tenth
(10th) Business Day) (the earlier of such dates being referred to in this
Agreement as the "Distribution Date"), (x) the Rights will be evidenced (subject
to the provisions of paragraph (b) of this Section 3) by the certificates for
Common Stock registered in the names of the holders of the Common Stock (which
certificates for Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates and (y) the Rights (and the right to
receive certificates therefor) will be transferable only in connection with the
transfer of the underlying shares of Common Stock. As soon as practicable after
the Distribution Date, the Rights Agent will send, at the expense of the
Company, by first-class, insured, postage prepaid mail, to each record holder of
the Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, a certificate for
Rights, in substantially the form of Exhibit A hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided in this Agreement. As of and after the
Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
In certain circumstances provided in Section 23 of this Agreement,
Rights will be issued in respect of shares of Common Stock which are issued
(whether originally issued or delivered from the Company's treasury) after the
Distribution Date, and as soon as practicable after the issuance thereof, the
Rights Agent will so send Rights Certificates to the record holders of such
shares.
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(b) The Company shall send a copy of a Summary of Rights to Purchase
Common Stock, (the "Summary of Rights"), by first-class, postage prepaid mail,
to each record holder of the Common Stock as of the Close of Business on the
Record Date, at the address of such holder shown on the records of the Company.
With respect to certificates for the Common Stock outstanding as of the Record
Date, at all times from and after the Record Date until the Distribution Date
(or earlier redemption, expiration or termination of the Rights), the Rights are
evidenced by such certificates for Common Stock, with or without a copy of the
Summary of Rights attached thereto, and the registered holders of the Common
Stock also are the registered holders of the associated Rights. Until the
Distribution Date (or earlier redemption, expiration or termination of the
Rights), the surrender for transfer of any of the certificates for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights
attached thereto, also constitutes the transfer of the Rights associated with
the Common Stock represented by such certificate.
(c) Certificates for Common Stock issued (whether originally issued or
delivered from the Company's treasury) after the Record Date, but prior to the
earlier of the Distribution Date and the Expiration Date (as defined below),
shall also be deemed to be certificates for Rights and shall have impressed,
printed, stamped, written or otherwise affixed onto them either of the following
legends:
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement between
Aironet Wireless Communications, Inc. and Harris Trust and Savings Bank
(the "Rights Agent") dated as of ___________, 1999 (the "Rights
Agreement"), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of
Aironet Wireless Communications, Inc. Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may
expire, or may be evidenced by separate certificates and will no longer
be evidenced by this certificate. Aironet Wireless Communications, Inc.
will mail to the holder of this certificate a copy of the Rights
Agreement without charge within five (5) days after receipt of a
written
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request therefor. Under certain circumstances, Rights issued to
Acquiring Persons (as defined in the Rights Agreement) or certain
related persons and any subsequent holder of such Rights may become
null and void with respect to certain rights set forth in Section
11(a)(ii) of the Rights Agreement."
"This certificate also evidences and entitles the holder
hereof to certain Rights as set forth in the Rights Agreement between
Aironet Wireless Communications, Inc. and the Rights Agent, as the same
may be amended, restated, renewed or extended from time to time (the
"Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal offices of
Aironet Wireless Communications, Inc. Under certain circumstances, as
set forth in the Rights Agreement, such Rights may be redeemed, may
expire, or may be evidenced by separate certificates and will no longer
be evidenced by this certificate. Aironet Wireless Communications, Inc.
will mail to the holder of this certificate a copy of the Rights
Agreement without charge within five (5) business days after receipt of
a written request therefor. Under certain circumstances, Rights
beneficially owned (as such term is defined in the Rights Agreement) by
an Acquiring Person (as such term is defined in the Rights Agreement)
or certain related persons and any subsequent holder of such Rights,
may become null and void. The Rights shall not be exercisable, and
shall be void so long as held, by a holder in any jurisdiction where
the requisite qualification to the issuance to such holder, or the
exercise by such holder, of the Rights in such jurisdiction shall not
have been obtained or be obtainable."
With respect to such certificates containing either of the foregoing legends,
until the Distribution Date (or earlier redemption, expiration or termination of
the Rights), the Rights associated with the Common Stock represented by such
certificates are evidenced by such certificates alone, and the surrender for
transfer of any of such certificates shall also constitute the transfer of the
Rights associated with the Common Stock represented by such certificates.
Section 4. Form of Rights Certificate.
(a) The Rights Certificates (and the forms of election to purchase
shares and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not
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inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange or over-the-counter
market reporting system on which the Rights may from time to time be listed or
included, or to conform to common usage in the financial community. Subject to
the provisions of Section 11 and Section 23 of this Agreement, the Rights
Certificates, whenever distributed, shall be dated as of the Record Date and on
their face shall entitle the holders thereof to purchase such number of shares
of Common Stock as shall be set forth therein at the price per share set forth
therein (the "Purchase Price"), but the number of such shares and the Purchase
Price shall at all times after the distribution thereof be subject to adjustment
as provided in this Agreement.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
23 of this Agreement that represents Rights beneficially owned by an Acquiring
Person or an Associate or Affiliate thereof, any Rights Certificate issued at
any time upon the transfer of any Rights to such an Acquiring Person or any
Associate or Affiliate thereof or to any nominee of such Acquiring Person,
Associate or Affiliate, and any Rights Certificate issued pursuant to Section 6
or Section 11 upon transfer, exchange, replacement or adjustment of any other
Rights Certificate referred to in this sentence, shall contain the following
legend:
The Rights represented by this Rights Certificate were issued
to a Person who was an Acquiring Person or an Affiliate or an Associate
of an Acquiring Person. This Rights Certificate and the Rights
represented hereby may become void to the extent provided by, and under
certain circumstances as specified in, Section 7(e) of the Rights
Agreement.
The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Rights Certificate.
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Section 5. Countersignature and Registration. The Rights Certificates
shall be executed on behalf of the Company by its Chairman of the Board, any
Vice Chairman of the Board, its President or any Vice President and by its
Treasurer, its Secretary or any Assistant Secretary, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof. The Rights Certificates shall be countersigned by the Rights
Agent, either manually or by facsimile signature, and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Rights Certificates, nevertheless, may be countersigned by the
Rights Agent and issued and delivered by the Company with the same force and
effect as though the person who signed such Rights Certificates had not ceased
to be such officer of the Company; and any Rights Certificates may be signed on
behalf of the Company by any person who, at the actual date of execution of such
Rights Certificates, shall be a proper officer of the Company to sign such
Rights Certificates, although at the date of execution of this Agreement any
such person was not such an officer.
Following the Distribution Date, the Rights Agent will keep, or cause
to be kept, at its offices in Cleveland, Ohio, books for registration and
transfer of the Rights Certificates issued under this Agreement. Such books
shall show the names and addresses of the respective holders of the Rights
Certificates, the number of Rights evidenced on its face by each of the Rights
Certificates and the date of each of the Rights Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. Subject
to the provisions of Section 4(b), Section 7(e) and Section 15 of this
Agreement, at any time after the Close of Business on the
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Distribution Date, and on or prior to the Close of Business on the Expiration
Date, any Rights Certificate or Rights Certificates may be transferred, split
up, combined or exchanged for another Rights Certificate or Rights Certificates,
entitling the registered holder to purchase a like number of shares of Common
Stock (or, after a Triggering Event, other securities, cash or other assets, as
the case may be) as the Rights Certificate or Rights Certificates surrendered
then entitled such holder to purchase. Any registered holder desiring to
transfer, split up, combine or exchange any Rights Certificate or Rights
Certificates must make such request in writing delivered to the Rights Agent and
must surrender the Rights Certificate or Rights Certificates to be transferred,
split up, combined or exchanged at the principal office of the Rights Agent.
Thereupon, the Rights Agent shall countersign and deliver to the Person entitled
thereto a Rights Certificate or Rights Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a valid
Rights Certificate and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and upon reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental thereto, and upon
surrender to the Rights Agent and cancellation of the Rights Certificate if
mutilated, the Company will execute and deliver a new Rights Certificate of like
tenor to the Rights Agent for countersignature and delivery to the registered
owner in lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
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Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights.
(a) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Agreement,
including, without limitation the restrictions on exercisability set forth in
Section 7(e), Section 11(a)(ii) and Section 24(a)) in whole or in part at any
time after the Distribution Date upon presentation of the Rights Certificate,
with the appropriate form of election to purchase on the reverse side thereof
duly executed, to the Rights Agent at the principal office of the Rights Agent,
together with payment of the Purchase Price for each share of Common Stock (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) as to which such Rights are exercisable, at or prior to the earlier
of (i) the later of (A) ___________, 2009 and (B) the date two (2) years after
any Distribution Date occurring prior to ____________, 2009 (the later of such
dates described in clauses (i)(A) and (i)(B) above in this Section 7(a) being
referred to in this Agreement as the "Final Expiration Date") and (ii) the date
on which the Rights are redeemed as provided in Section 24 hereof (the earlier
of such dates described in clauses (i) and (ii) above in this Section 7(a) being
referred to in this Agreement as the "Expiration Date"). Notwithstanding any
other provision of this Agreement, any Person who prior to the Distribution Date
becomes a record holder of shares of Common Stock may exercise all of the rights
of a registered holder of a Rights Certificate with respect to the Rights
associated with such shares of Common Stock in accordance with and subject to
the provisions of this Agreement, including the provisions of Section 7(e)
hereof, as of the date such Person becomes a record holder of shares of Common
Stock, regardless of whether the legends provided for in Section 3(c) of this
Agreement are reflected on the certificate evidencing such Common Stock.
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(b) The Purchase Price for each share of Common Stock pursuant to the
exercise of a Right shall initially be One Hundred Twenty-Five Dollars
($125.00), shall be subject to adjustment from time to time as provided in
Sections 11 and 13 of this Agreement and shall be payable in lawful money of the
United States of America in accordance with paragraph (c) below.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights with the appropriate form of election to purchase duly executed,
accompanied by payment of the Purchase Price for the shares to be purchased and
an amount equal to any applicable transfer tax (as determined by the Rights
Agent) in cash, or by certified check or bank draft payable to the order of the
Company, the Rights Agent shall, subject to Section 7(f) and Section 21(k),
thereupon (i) promptly requisition from any transfer agent of the shares of
Common Stock (or make available, if the Rights Agent is the transfer agent)
certificates for the number of shares of Common Stock to be purchased, and the
Company hereby irrevocably authorizes its transfer agent to comply with all such
requests, (ii) when appropriate, requisition from the Company the amount of
cash, if any, to be paid in lieu of issuance of fractional shares in accordance
with Section 15, (iii) promptly after receipt of such certificates, cause the
same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt, promptly deliver such cash
to or upon the order of the registered holder of such Rights Certificate. In
addition, in the case of an exercise of the rights of a holder pursuant to
Section 11(a)(ii), the Rights Agent shall return such Rights Certificate to the
registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the Rights represented by such Rights Certificate no longer include
the rights provided by Section 11(a)(ii) of the Rights Agreement, and if less
than all the Rights represented by such Rights Certificate were so exercised,
the Rights
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Agent shall indicate that rights under Section 11(a)(ii) continue to the extent
the Rights were not previously exercised pursuant thereto.
(d) In case the registered holder of any Rights Certificate shall
exercise (except pursuant to Section 11(a)(ii)) less than all the Rights
evidenced thereby, a new Rights Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent and delivered
to the registered holder of such Rights Certificate or to his duly authorized
assigns, subject to the provisions of Section 15 of this Agreement.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of such Acquiring Person (or of any such Associate or
Affiliate) who becomes such a transferee after such Acquiring Person becomes
such or (iii) a transferee of such Acquiring Person (or of any such Associate or
Affiliate) who becomes such a transferee prior to or concurrently with such
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from such Acquiring Person (or any
such Associate or Affiliate) to holders of equity interests in such Acquiring
Person (or such Associate or Affiliate) or to any Person with whom such
Acquiring Person (or any such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board determines is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action, and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The Company
shall use all reasonable efforts to ensure that the provisions of this Section
7(e) and
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Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or its Affiliates,
Associates or transferees under this Agreement.
(f) Notwithstanding anything in this Agreement to the contrary, neither
the Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless the certificate contained in the appropriate
form of election to purchase set forth on the reverse side of the Rights
Certificate surrendered for such exercise shall have been completed and signed
by the registered holder thereof and the Company shall have been provided with
such additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company shall
reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in canceled form,
or if surrendered to the Rights Agent, shall be canceled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Rights Agreement. The Company shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Rights Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof. The Rights Agent shall deliver
all canceled Rights Certificates to the Company or shall, at the written request
of the Company, destroy such canceled Rights Certificates, and in such case
shall deliver a certificate of destruction thereof to the Company.
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Section 9. Reservation and Availability of Common Stock. The Company
covenants and agrees that it will cause to be reserved and kept available out of
its authorized and unissued shares of Common Stock, or any authorized and issued
shares of Common Stock held in its treasury, the number of shares of Common
Stock that will be sufficient to permit the exercise in full of all outstanding
Rights; provided, however, that the Company need not so reserve and keep
available shares of Common Stock which may be required to be issued upon
exercise of the Rights in accordance with Section 11(a)(ii) until the occurrence
of a Section 11(a)(ii) Event; and provided, further, that if pursuant to Section
11(a)(iii), the Company makes provision to substitute alternative consideration
for some or all of the shares of Common Stock which may be required to be issued
upon exercise of the Rights, the Company shall be required to reserve and keep
available only the number of shares of Common Stock, if any, that may then be
required to be issued upon exercise of the Rights.
So long as the shares of Common Stock issuable upon the exercise of the
Rights may be listed on any national securities exchange or included on any
over-the-counter market reporting system, the Company shall use its best efforts
to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed on such exchange or included on such
reporting system upon official notice of issuance upon such exercise.
The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Common Stock (and, following the
occurrence of a Triggering Event, any other equity securities) delivered upon
the exercise of Rights shall, at the time of delivery of the certificates for
such shares (or such other equity securities), subject to payment of the
Purchase Price, be duly and validly authorized, issued and fully paid and
nonassessable.
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<PAGE> 22
The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges which may be
payable in respect of the issuance or delivery of the Rights Certificates or of
any certificates for shares of Common Stock (or other securities, as the case
may be) upon the exercise of Rights. The Company shall not, however, be required
to pay any transfer tax which may be payable in respect of any transfer or
delivery of Rights Certificates to a person other than, or in respect of the
issuance or delivery of the shares of Common Stock (or other securities, as the
case may be) in a name other than that of, the registered holder of the Rights
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for shares of Common Stock (or other securities, as the case
may be) in a name other than that of the registered holder upon the exercise of
any Rights, until such tax shall have been paid (any such tax being payable by
the holder of such Rights Certificate at the time of surrender) or until it has
been established to the Company's satisfaction that no such tax is due.
The Company shall use its best efforts to (i) file, as soon as
practicable following the Distribution Date, a registration statement on an
appropriate form under the Act with respect to any securities purchasable upon
exercise of the Rights, (ii) cause such registration statement to become
effective as soon as practicable after such filing and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities and (B) the
Expiration Date. The Company shall also use its best efforts to qualify or
register the securities purchasable upon exercise of the Rights as may be
necessary or appropriate under the blue sky laws of the various states. The
Company may temporarily suspend, for a period of time not to exceed ninety (90)
days after the filing of a registration statement pursuant to clause (i) of the
first sentence of this paragraph,
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<PAGE> 23
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and shall issue a
public announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required in other circumstances or for additional or different securities
following the Distribution Date, the Company may similarly temporarily suspend
the exercisability of the Rights until such time as that registration statement
has been declared effective. Notwithstanding any provision of this Agreement to
the contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not otherwise be permitted under applicable law or a
registration statement shall not have been declared effective.
Section 10. Common Stock Record Date. Each Person in whose name any
certificate for shares of Common Stock (or other securities, as the case may be)
is issued upon the exercise of Rights shall for all purposes be deemed to have
become the holder of record of the shares of Common Stock (or other securities,
as the case may be) represented thereby on, and such certificate shall be dated,
the date upon which the Rights Certificate evidencing such Rights was duly
presented and payment of the Purchase Price (and any applicable transfer taxes)
was made; provided, however, that if the date of such presentation and payment
is a date upon which the transfer books for the Common Stock (or other
securities, as the case may be) of the Company are closed, such Person shall be
deemed to have become the record holder of such shares (or other securities, as
the case may be) on, and such certificate shall be dated, the next succeeding
Business Day on which such transfer books of the Company are open. Prior to the
exercise of the Rights evidenced thereby, the holder of a
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<PAGE> 24
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to the shares (or other securities, as the case may be) for
which the Rights shall be exercisable, including without limitation, where
applicable, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided in this Agreement.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Stock payable in shares of
Common Stock, (B) subdivide or split the outstanding Common Stock, (C) combine
or consolidate its outstanding Common Stock into a smaller number of shares or
(D) issue any shares of its capital stock in a reclassification of all of the
Common Stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a) and in Section
7(e), the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, split, combination,
consolidation or reclassification, and the number and kind of shares of capital
stock issuable on such date, shall be proportionately adjusted so that the
holder of any Right exercised after such time shall be entitled to receive, upon
the payment of the Purchase Price then in effect, the aggregate number and kind
of shares of capital stock which, if such Right had been exercised immediately
prior to such date and at a time when the Common Stock transfer books of the
Company were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, split,
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<PAGE> 25
combination, consolidation or reclassification, provided, however, that if the
record date for any such dividend, subdivision, combination or reclassification
shall occur prior to the Distribution Date, the Company shall make an
appropriate adjustment only to the Purchase Price (taking into account any
additional Rights which may be issued as a result of such dividend, subdivision,
combination or reclassification), in lieu of also adjusting (as described above)
the number of Common Shares (or other capital shares, as the case may be)
issuable upon exercise of the Rights. If an event occurs which would require an
adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).
(ii) In the event (a "Section 11(a)(ii) Event") that, at any
time after the date of this Agreement, any Person, alone or together with all
Affiliates and Associates of such Person, shall become the Beneficial Owner of
fifteen percent (15%) or more of the shares of Common Stock then outstanding or
a Record Date Owner is no longer an Exempt Person, then, promptly following the
occurrence of such Section 11(a)(ii) Event, proper provision shall be made so
that each holder of a Right, except as provided below and in Section 7(e) of
this Agreement, shall thereafter have the right to receive, upon exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, such number of shares of Common Stock of the Company as shall equal
the result obtained by dividing (x) the product obtained by multiplying (1) the
then current Purchase Price by (2) the number of shares of Common Stock for
which a Right is then exercisable by (y) fifty percent (50%) of the current
market price (as defined below) per share of the Common Stock (determined
pursuant to Section 11(d)) on the date of the occurrence of such 11(a)(ii) Event
(such number of shares being referred to as the "Adjustment Shares").
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<PAGE> 26
(iii) In lieu of issuing shares of Common Stock in accordance
with Section 11(a)(ii), the Company, acting by resolution of the Board, may, and
in the event that the number of shares of Common Stock which are authorized by
the Company's Amended and Restated Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Company, acting by resolution of the
Board, shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over (2) the
Purchase Price attributable to each Right (such excess being referred to as the
"Spread") and (B) with respect to all or a portion of each Right (subject to
Section 7(e) hereof), make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a reduction
in the Purchase Price, (3) equity securities of the Company other than Common
Stock (including, without limitation, shares, or units of shares, of preferred
stock which the Board has determined to have the same value as shares of Common
Stock (such securities being referred to as "Common Stock Equivalents")), (4)
debt securities of the Company, (5) other assets or (6) any combination of the
foregoing which, when added to any shares of Common Stock issued upon such
exercise, has an aggregate value equal to the Current Value, where such
aggregate value has been determined by the Board based upon the advice of a
nationally recognized investment banking firm selected by the Board which has
theretofore performed no services for the Company or any of its subsidiaries in
the immediately preceding five (5) years; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to clause (B)
above within thirty (30) Business Days following the later of (x) the occurrence
of a Section 11(a)(ii) Event and (y) the date on which the Company's right of
redemption pursuant to Section 24(a) expires (the later of (x)
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<PAGE> 27
and (y) being referred to herein as the "Section 11(a)(ii) Trigger Date"), then
the Company shall be obligated to deliver, upon the surrender for exercise of a
Right and without requiring payment of the Purchase Price, shares of Common
Stock (to the extent available) and then, if necessary, cash, which shares
and/or cash have an aggregate value equal to the Spread. If the Board shall
determine in good faith that it is likely that sufficient additional shares of
Common Stock could be authorized for issuance upon exercise in full of the
Rights, the period of thirty (30) Business Days set forth above may be extended
(such period, as it may be extended, the "Substitution Period") to the extent
necessary, but not more than ninety (90) Business Days after the Section
11(a)(ii) Trigger Date, in order that the Company may seek stockholder approval
for the authorization of such additional shares. To the extent that the Company
determines that some action need be taken pursuant to the first and/or second
sentences of this Section 11(a)(iii), the Company (x) shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all outstanding
Rights and (y) may suspend the exercisability of the Rights until the expiration
of the Substitution Period in order to seek any authorization of additional
shares and/or to decide the appropriate form of distribution to be made pursuant
to such first sentence and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended and a public
announcement at such time as the suspension is no longer in effect. For purposes
of this Section 11(a)(iii), the value of the Common Stock shall be the current
market price per share of the Common Stock on the Section 11(a)(ii) Trigger Date
and the value of any "Common Stock Equivalent" shall be deemed to have the same
value as the Common Stock of the Company on such date.
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<PAGE> 28
(b) If the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Common Stock entitling them (for a period
expiring within forty-five (45) calendar days after such record date) to
subscribe for or purchase shares of Common Stock or Common Stock Equivalent,
securities convertible into shares of Common Stock or a Common Stock Equivalent,
at a price per share of Common Stock or such Common Stock Equivalent (or having
a conversion price per share, if a security is convertible into shares of Common
Stock or such Common Stock Equivalent) that is less than the current market
price per share of Common Stock or such Common Stock Equivalent on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
date by a fraction, the numerator of which shall be (i) the number of shares of
Common Stock outstanding on such record date plus (ii) the number of additional
shares of Common Stock or such Common Stock Equivalent which the aggregate
offering price of the total number of shares of Common Stock to be offered (or
the average initial conversion price of the convertible securities to be
offered) would purchase at such current market price, and the denominator of
which shall be (i) the number of shares of Common Stock outstanding on such
record date plus (ii) the number of additional shares of Common Stock or such
Common Stock Equivalent to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible). In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be
determined by the Board reasonably and with good faith to the holders of Rights,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent and conclusive for all purposes.
Shares of Common Stock owned by or held for the account of the Company shall not
be deemed outstanding for the purpose of any
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<PAGE> 29
such computation. Such adjustment shall be made successively whenever such a
record date is fixed and, in the event that such rights or warrants are not so
issued, the Purchase Price shall be readjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) If the Company shall fix a record date for the making of a
distribution to all holders of Common Stock (including any such distribution
made in connection with a merger in which the Company is the continuing or
surviving corporation) of evidence of indebtedness, cash (other than a regular,
periodic cash dividend at a rate not in excess of one hundred twenty-five
percent (125%) of the rate of the last regular, periodic cash dividend
theretofore paid), assets (other than a dividend payable in Common Stock, but
including any dividend payable in stock other than Common Stock) or subscription
rights or warrants (excluding those referred to in Section 11(b)), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the current market price) per share of
Common Stock on such record date, less the fair market value (as determined by
the Board reasonably and with good faith to the holders of Rights, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and conclusive for all purposes) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants distributable in respect of one (1)
share of Common Stock, and the denominator of which shall be the current market
price per share of Common Stock. Such adjustments shall be made successively
whenever such a record date is fixed and, in the event that such distribution is
not so made, the Purchase Price shall be adjusted to be the Purchase Price which
would be in effect if such record date had not been fixed.
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<PAGE> 30
(d) Except as otherwise expressly provided in this Agreement, the
"current market price" per share of Common Stock on any date for the purpose of
any computation under this Agreement shall be deemed to be the average of the
daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days (as such term is defined below) immediately prior to
such date; provided, however, that in the event that current market price per
share of Common Stock is determined during the period following the announcement
by the issuer of such Common Stock of (i) a dividend or distribution on such
Common Stock payable in shares of such Common Stock or securities convertible
into shares of such Common Stock other than the Rights or (ii) any subdivision,
split, combination, consolidation or reclassification of such Common Stock, and
prior to the expiration of thirty (30) Trading Days after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
split, combination, consolidation or reclassification, then, and in each such
case, the "current market price" shall be equitably adjusted to take into
account ex-dividend trading or the effects of such subdivision, split,
combination, consolidation or reclassification, as the case may be. The closing
price for each day shall be the last sale price, regular way, or in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of such Common Stock
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
shares of such Common Stock are listed or admitted to trading or, if the shares
of such Common Stock are not listed or admitted to trading on any national
securities exchange, the closing sale price or the last quoted price or, if not
so quoted,
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<PAGE> 31
the average of the high bid and low asked prices in the over-the-counter market,
as reported by any market or quotation system of The Nasdaq Stock Market
("Nasdaq") or such other reporting system then in use, or, if on any such date
the shares of such Common Stock are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in such Common Stock selected by the Board. If on
any such date no market maker is making a market in such Common Stock, the fair
value of such shares on such date as determined by the Board reasonably and with
good faith to the holders of Rights shall be used and shall be binding on the
Rights Agent. The term "Trading Day" shall mean a day on which the principal
national securities exchange or over-the-counter market reporting system on
which the shares of such Common Stock are listed or admitted to trading or
included is open for or reports the transaction of business or, if the shares of
such Common Stock are not listed or admitted to trading on any national
securities exchange or included on any over-the-counter market reporting system,
a Business Day. If such Common Stock is not publicly held or not so listed or
traded, "current market price" per share shall mean the fair value per share
determined by the Board reasonably and with good faith to the holders of Rights,
whose determination shall be described in a statement filed with the Rights
Agent and shall be binding on the Rights Agent.
(e) Anything in this Agreement to the contrary notwithstanding, no
adjustment in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the Purchase
Price; provided, however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth (1/10,000th)
of a share of Common Stock, as the case
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may be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment and
(ii) the Expiration Date.
(f) If, as a result of any provision of Section 11(a) or Section 13(a),
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock of the Company other than Common Stock, thereafter
the number of such other shares so receivable upon exercise of any Right and the
Purchase Price thereof shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the shares of Common Stock contained in Sections 11(a), (b), (c),
(e), (g), (h), (i), (j), (k), (l) and (m), inclusive, and the provisions of
Sections 7, 9, 10, 13 and 15 of this Agreement with respect to the Common Stock
shall apply on like terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment or adjustments made to the Purchase Price under this Agreement shall
evidence the right to purchase, at the Purchase Price as theretofore adjusted,
the number of shares of Common Stock purchasable from time to time under this
Agreement upon exercise of the Rights, all subject to further adjustment as
provided in this Agreement.
(h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Section 11(b) and Section 11(c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to purchase, at the adjusted Purchase Price, that number of shares of
Common Stock (calculated to the nearest ten-thousandth (1/10,000th)) obtained by
(i) multiplying (x) the number of shares of Common Stock covered by a Right
immediately prior to such adjustment
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of the Purchase Price by (y) the Purchase Price in effect immediately prior to
such adjustment of the Purchase Price and (ii) dividing the product so obtained
by the Purchase Price in effect immediately after such adjustment of the
Purchase Price.
(i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights in lieu of making any adjustment
in the number of shares of Common Stock purchasable upon the exercise of a
Right. Each of the Rights outstanding after any such adjustment in the number of
Rights shall be exercisable for the number of shares of Common Stock for which a
Right was exercisable immediately prior to such adjustment. Each Right held of
record prior to any such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest ten-thousandth (1/10,000th))
obtained by dividing the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by the Purchase Price in effect immediately
after such adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment and, if known at the time, the amount of the
adjustment to be made. Such record date may be the date on which the Purchase
Price is adjusted or any day thereafter, but, if Rights Certificates have been
issued, such record date shall be at least ten (10) Business Days later than the
date of the public announcement. If Rights Certificates have theretofore been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be distributed,
to the holders of record of Rights Certificates on such record date, Rights
Certificates evidencing, subject to Section 15 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Rights Certificates
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held by such holders prior to the date of such adjustment, and upon surrender
thereof, if required by the Company, new Rights Certificates evidencing all the
Rights to which such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executed and countersigned in
the manner provided for in this Agreement (and may bear, at the option of the
Company, the Purchase Price as theretofore adjusted) and shall be registered in
the names of the holders of record of Rights Certificates on the record date
specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of shares of Common Stock issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Purchase Price per share and the number of shares which were
expressed in the initial Rights Certificates issued under this Agreement.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment of the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuing to the holder of any Right exercised after such record date
the shares of Common Stock and other capital stock or securities of the Company,
if any, issuable upon such exercise over and above the shares of Common Stock
and other capital stock or securities of the Company, if any, issuable upon such
exercise on the basis of the Purchase Price in effect prior to such adjustment;
provided, however, that the Company shall deliver to such holder a due bill or
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other appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such adjustment.
(m) Anything to the contrary in this Section 11 notwithstanding, the
Company by action of the Board shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this
Section 11, as and to the extent that the Board shall determine to be advisable
in order that any (i) consolidation or subdivision of the Common Stock, (ii)
issuance wholly for cash of any shares of Common Stock at less than the current
market price, (iii) issuance wholly for cash of shares of Common Stock or
securities which by their terms are convertible into or exchangeable for shares
of Common Stock, (iv) stock dividends or (v) issuance of rights, options or
warrants referred to above in this Section 11, hereafter made by the Company to
holders of its Common Stock shall not be taxable to such stockholders.
(n) The exercise of Rights under Section 11(a) (ii) shall only result
in the loss of rights under Section 11(a) (ii) to the extent so exercised and
shall not otherwise affect the rights represented by the Rights under this
Rights Agreement, including the rights under Section 13.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 and 13 of this
Agreement, the Company shall (a) promptly prepare a certificate setting forth
such adjustment and a brief statement of the facts accounting for such
adjustment, (b) promptly file with the Rights Agent and with each transfer agent
for the Common Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Rights Certificate in accordance with Section 26 of
this Agreement. Notwithstanding the foregoing sentence, the failure of the
Company to prepare such certificate or statement or make such filings or
mailings shall not affect the validity of, or the force or effect of, the
requirement for such
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adjustment. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained, and shall not be obligated
or responsible for calculating any adjustment nor shall it be deemed to have
knowledge of such adjustment unless and until it shall have received such
certificate.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earning Power.
(a) In the event (a "Section 13 Event") that, following the Acquisition
Date, directly or indirectly, (x) the Company shall consolidate or otherwise
combine with, or merge with and into, any other Person (other than a subsidiary
of the Company in one or more transactions each of which complies with Section
14(c)), and the Company shall not be the continuing or surviving corporation of
such consolidation, combination or merger, (y) any Person shall consolidate or
otherwise combine with the Company, or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such consolidation,
combination or merger and, in connection with such consolidation, combination or
merger, all or part of the shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell, mortgage or otherwise transfer (or one
or more of its subsidiaries shall sell, mortgage or otherwise transfer), in one
or more transactions, assets or earning power aggregating more than fifty
percent (50%) of the assets or earning power of the Company and its subsidiaries
(taken as a whole) to any other Person (other than to subsidiaries of the
Company in one or more transactions each of which complies with Section 14(c)),
provided, however, that this clause (z) of Section 13(a) shall not apply to the
pro rata distribution by the Company of assets (including securities) of the
Company or any of its subsidiaries to all holders of the Company's Common Stock;
then, and in each such case, proper provision shall be made so that (i) each
holder of a Right (except
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as provided in Section 7(e) hereof) shall thereafter have the right to receive,
upon the exercise thereof at the then current Purchase Price in accordance with
the terms of this Agreement, such number of validly authorized and issued, fully
paid, nonassessable and freely tradable shares of Common Stock of the Principal
Party (as defined below), not subject to any liens, encumbrances, rights of
call, rights of first refusal or other adverse claims, as shall be equal to the
result obtained by dividing (A) the product obtained by multiplying (1) the then
current Purchase Price by (2) the number of shares of Common Stock for which a
Right is then exercisable by (B) fifty percent (50%) of the current market price
per share of Common Stock of such Principal Party on the date of consummation of
such Section 13 Event; (ii) such Principal Party shall thereafter be liable for,
and shall assume by virtue of such Section 13 Event, all the obligations and
duties of the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply to such Principal
Party following the first occurrence of a Section 13 Event; and (iv) such
Principal Party shall take such steps (including but not limited to the
reservation of a sufficient number of shares of its Common Stock in accordance
with Section 9 of this Agreement) in connection with such consummation as may be
necessary to assure that the provisions of this Agreement shall thereafter be
applicable, as nearly as reasonably may be, in relation to shares of its Common
Stock thereafter deliverable upon the exercise of the Rights.
(b) "Principal Party" shall mean:
(i) In the case of any transaction described in clause (x) or
(y) of Section 13(a), the Person that is the issuer of any securities into which
shares of Common Stock of the Company are converted, changed or exchanged in
such merger, consolidation or combination or, if there is more than one issuer,
the issuer of the Common Stock having the greatest market value, or if no
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securities are so issued, the Person that is the other party to the merger (and
survives the merger), consolidation or combination (or, if there is more than
one such Person, the Person the Common Stock of which has the greatest value),
or if the other party to the merger does not survive the merger, the Person that
does survive the merger (including the Company, if it survives); and
(ii) In the case of any transaction described in clause (z) of
Section 13(a), the Person that is the party receiving the greatest portion of
the assets or earning power transferred pursuant to such transaction or
transactions; or, if each Person that is a party to such transaction or
transactions receives the same portion of the assets or earning power so
transferred or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Stock having the greatest market value; provided, however, that in any
such case, (A) if the Common Stock of such Person is not at such time, or has
not been continuously over the preceding 12-month period, registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
subsidiary of another Person, "Principal Party" shall refer to such other
Person; (B) in case such Person is a subsidiary, directly or indirectly, of more
than one Person, the Common Stocks of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value; and (C)
in case such Person is owned, directly or indirectly, by a joint venture formed
by two or more Persons that are not owned, directly or indirectly, by the same
Person, the rules set forth in clauses (A) and (B) immediately above shall apply
to each of the chains of ownership having an interest in such joint venture as
if such party were a subsidiary of both or all of such joint venturers, and the
Principal Parties in each such chain shall bear the obligations set forth
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in this Section 13 in the same ratio as their direct or indirect interests in
such Person bear to the total of such interests.
(c) The Company shall not consummate any such Section 13 Event unless
prior thereto the Company and each Principal Party and each other Person who may
become a Principal Party as a result of such Section 13 Event shall have
executed and delivered to the Rights Agent a supplemental agreement confirming
that the terms set forth in paragraphs (a) and (b) of this Section 13 shall
promptly be performed in accordance with their terms and that such Section 13
Event shall not result in a default by the Principal Party under this Agreement
as the same shall have been assumed by the Principal Party pursuant to Section
13(a) and Section 13(b) and further providing that, as soon as practicable after
the date of such Section 13 Event, the Principal Party at its own expense will:
(i) Prepare and file a registration statement on an
appropriate form under the Act with respect to the Rights and the securities
purchasable upon exercise of the Rights and will use its best efforts to cause
such registration statement to become effective as soon as practicable after
such filing and to remain effective (with a prospectus at all times meeting the
requirements of the Act) until the Expiration Date;
(ii) Use its best efforts to qualify or register the Rights
and the securities purchasable upon exercise of the Rights under the blue sky
laws of such jurisdictions as may be necessary or appropriate;
(iii) Use its best efforts to list or obtain quotation of (or
continue the listing or quotation of) the Rights and the securities purchasable
upon exercise of the Rights on a national securities exchange or automated
quotation service;
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(iv) Deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all material respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act; and
(v) Use its best efforts to obtain waivers of any rights of
first refusal or preemptive rights in respect of the shares of Common Stock or
other securities of the Principal Party subject to purchase upon exercise of
outstanding Rights.
(d) In the event that, following the Acquisition Date, directly or
indirectly, any of the transactions described in Section 13(a) shall be
consummated and, as a result of application of the rules set forth in Section
13(b), "Principal Party" shall mean a Person the Common Stock of which (i) is
not at such time, or has not been continuously over the preceding 12-month
period, registered under Section 12 of the Exchange Act or (ii) is not listed on
a national securities exchange or regularly quoted in the over-the-counter
market by one or more members of a national or affiliated securities
association, each holder of a Right shall have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, cash in an amount equal to the result obtained by multiplying
(A) the product obtained by multiplying (1) the then current Purchase Price by
(2) the number of shares of Common Stock for which a Right is then exercisable
by (B) two (2). In such event, clauses (ii) and (iii) of Section 13(a) shall
continue to apply.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers, consolidations, combinations, sales or other transfers. The
rights of a holder of a Right under this Section 13 shall be in addition to the
rights of such holder to exercise such Right pursuant to, and the
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adjustments required by, Section 11(a)(ii) and shall survive any exercise
thereof under Section 11(a)(ii).
Section 14. Additional Covenants.
(a) Notwithstanding any other provision of this Agreement, except as
permitted by Section 11(a)(iii), no adjustment to the Purchase Price, the number
and kind of shares (or fractions of a share) for which a Right is exercisable or
the number of Rights outstanding or any similar adjustment shall be made or be
effective if such adjustment would have the effect of reducing or limiting the
benefits the holders of the Rights would have had absent such adjustment,
including, without limitation, the benefits under Section 11(a) (ii) and Section
13.
(b) The Company covenants and agrees that it shall not at any time
after the Distribution Date, (i) consolidate or combine with any other Person
(other than a subsidiary of the Company in a transaction which complies with
Section 14(c)), (ii) merge with or into any other Person (other than a
subsidiary of the Company in a transaction which complies with Section 14(c)) or
(iii) sell or otherwise transfer, in one or more transactions, assets or earning
power aggregating more than fifty percent (50%) of the assets or earning power
of the Company and its subsidiaries taken as a whole to any other Person (other
than the Company and/or any of its subsidiaries in one or more transactions each
of which complies with Section 14(c)), if (x) at the time of or after such
consolidation, combination, merger, sale or other transfer, there are any
provisions effecting the Company's Amended and Restated Certificate of
Incorporation or Second Amended and Restated By-Laws or any rights, warrants or
other instruments outstanding or any other action has been taken which would
diminish or otherwise eliminate the benefits intended to be afforded by the
Rights or (y) prior to, simultaneously with or immediately after such
consolidation, combination, merger, sale or
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transfer, the stockholders of the Person who constitutes, or would constitute,
the "Principal Party" for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Company shall not consummate any such consolidation, merger,
sale or other transfer unless prior thereto the Company and such other Person
shall have executed and delivered to the Rights Agent a supplemental agreement
evidencing compliance with this Section 14(b).
(c) The Company covenants and agrees that, after the Distribution Date,
it will not, except as otherwise provided herein, take, or permit any of its
subsidiaries to take, any action, if at the time such action is taken it is
reasonably foreseeable that such action will diminish or otherwise eliminate the
benefits intended to be afforded by the Rights.
Section 15. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights or
to distribute Rights Certificates which evidence fractional Rights. If the
Company determines that fractional Rights will not be issued, then, in lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For the purposes of this Section 15(a), the current
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights for any day shall
be the last sale price, regular way, or, in case no such sale takes place on
such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange or,
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if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading, or, if the Rights are not
listed or admitted to trading on any national securities exchange, the closing
sale price or the last quoted price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by any
market or quotation system of Nasdaq or such other reporting system then in use,
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board. If on any such
date no such market maker is making a market in the Rights, the fair value of
the rights on such date as determined by the Board reasonably and with good
faith to the holders of Rights shall be used and shall be binding on the Rights
Agent.
(b) The Company shall not be required to issue fractions of shares of
Common Stock upon exercise of the Rights or to distribute certificates which
evidence fractional shares of Common Stock. If the Company determines that
fractional shares of Common Stock will not be issued, then, in lieu of such
fractional shares of Common Stock, the Company shall pay to the registered
holders of Rights Certificates at the time such Rights are exercised as provided
in this Agreement an amount in cash equal to the same fraction of the current
market price of a share of Common Stock. For purposes of this Section 15(b), the
current market price of a share of Common Stock shall be the closing price of a
share of Common Stock for the Trading Day immediately prior to the date of such
exercise.
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(c) By the acceptance of a Right, each holder of a Right expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right.
Section 16. Rights of Action. All rights of action in respect of this
Agreement, except the rights of action given to the Rights Agent under Section
19 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock). Any registered holder of any Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), without the consent of the Rights Agent
or of the holder of any other Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), may, in his own behalf and for his own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, such holder's right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged and agreed that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and shall be entitled to specific
performance of the obligations under this Agreement and injunctive relief
against actual or threatened violations of the obligations under this Agreement
of any Person subject to this Agreement. Holders of Rights shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
by them in any action to enforce the provisions of this Agreement.
Section 17. Agreement of Rights Holders. By accepting a Right, each
holder of a Right consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
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(a) Prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Common Stock;
(b) After the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the principal office of the Rights Agent, duly endorsed or accompanied by a
proper instrument of transfer;
(c) The Company and the Rights Agent may deem and treat the person in
whose name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary; and
(d) Notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 18. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the shares of Common Stock
or any other securities of the Company which may at any time
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be issuable on the exercise of the Right represented thereby, nor shall anything
contained in this Agreement or in any Rights Certificate be construed to confer
upon the holder of any Rights Certificate, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 25 of this
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions thereof.
Section 19. Concerning the Rights Agent. The Company agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it under
this Agreement and, from time to time on demand of the Rights Agent, its
reasonable expenses and counsel fees and disbursements and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties under this Agreement. The Company also agrees to
indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability or expense incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent and for anything done or omitted by
the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim of
liability arising therefrom, directly or indirectly. The costs and expenses of
enforcing this right of indemnification shall also be paid by the Company. The
indemnification provided for hereunder shall survive the expiration of the
Rights and termination of this Agreement.
The Rights Agent may conclusively rely upon and shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration
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of this Agreement in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons. Notwithstanding anything in this
Agreement to the contrary, in no event shall the Rights Agent be liable for
special, indirect or consequential loss or damage of any kind whatsoever
(including but not limited to lost profits), even if the Rights Agent has been
advised of the likelihood of such loss or damage and regardless of the form of
the action.
Section 20. Merger or Consolidation or Change of Name of Rights Agent.
Any corporation into which the Rights Agent or any successor Rights Agent may be
merged or with which it may be consolidated or combined, or any corporation
resulting from any merger or consolidation or combination to which the Rights
Agent or any successor Rights Agent shall be a party, or any corporation
succeeding to the shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties to this Agreement, provided that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 22 of this Agreement. In case at the time such successor
Rights Agent shall succeed to the agency created by this Agreement, any of the
Rights Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Rights Certificates either in the
name of the predecessor or in the name
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of the successor Rights Agent; and, in all such cases, such Rights Certificates
shall have the full force provided in the Rights Certificates and in this
Agreement.
In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and, in all such cases, such Rights Certificates shall have
the full force provided in the Rights Certificates and in this Agreement.
Section 21. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, and no implied duties or obligations shall be read into this
Agreement against the Rights Agent, by all of which the Company and the holders
of Rights Certificates, by their acceptance thereof, shall be bound:
(a) Before the Rights Agent acts or refrains from acting, the Rights
Agent may consult with legal counsel selected by it (who may be legal counsel
for the Company), and the opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
(b) Whenever, in the performance of its duties under this Agreement,
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of current market price) be proved or established by the Company
prior to taking or suffering any action under this Agreement, such fact or
matter (unless other evidence in respect thereof be specifically prescribed in
this Agreement) may be deemed to be
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conclusively proved and established by a certificate signed by the President,
any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action taken
or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable under this Agreement only for its
own gross negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Rights
Certificates (except as to the fact that it has countersigned the Rights
Certificates) or be required to verify the same, but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery of this
Agreement (except the due execution of this Agreement by the Rights Agent) or in
respect of the validity or execution of any Rights Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Sections 11 or 13 of this Agreement or responsible for
the manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Rights Certificates after actual notice
of any such adjustment); nor shall it be responsible for any determination by
the Board of current market value of the Rights or Common Stock pursuant to the
provisions of Section 15 of this Agreement; nor shall it by any act under this
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Agreement be deemed to make any representation or warranty as to the
authorization or reservation of any shares of Common Stock to be issued pursuant
to this Agreement or any Rights Certificate or as to whether any shares of
Common Stock will, when so issued, be validly authorized and issued, fully paid
and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions from the Chief Executive Officer, President, any Vice President,
the Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary
of the Company (the "Authorized Officers") with respect to the performance of
its duties under this Agreement and to accept certificates delivered pursuant to
any provision of this Agreement from any of the Authorized Officers and is
authorized to apply to such officers for advice or instructions in connection
with its duties, and it shall not be liable for any action taken or suffered to
be taken by it in good faith in accordance with the instructions of or
certificates delivered by any of the Authorized Officers. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Agreement and the date on or after which such
actions shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than ten Business
Days after the date any officer of the Company actually receives such
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application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application subject to the proposed action or
omission and/or specifying the action to take taken or omitted.
(h) The Rights Agent, and any stockholder, director, officer or
employee of the Rights Agent, may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or lend
money to the Company or otherwise act as fully and freely as though it were not
the Rights Agent under this Agreement. Nothing in this Agreement shall preclude
the Rights Agent from acting in any other capacity for the Company or for any
other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty under this Agreement either
itself or by or through its attorneys or agents, and the Rights Agent shall not
be answerable or accountable for any act, omission, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company or to
the holders of the Rights resulting from any such act, omission, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties under this Agreement or in the exercise of its
rights if there shall be reasonable grounds for believing that repayment of such
funds or adequate indemnification against such risk or liability is not
reasonably assured to it.
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(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
(l) The Rights Agent shall not be required to take notice or be deemed
to have any notice of any fact, event or determination (including, without
limitation, any dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be specifically notified in writing by
the Company of such fact, event or determination.
Section 22. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and, at the
expense of the Company, to each transfer agent of the Common Stock by registered
or certified mail and to holders of the Rights Certificates by first-class mail.
The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
by registered or certified mail and to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor
Rights Agent. If the Company shall fail to make such appointment within a period
of thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice,
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submit his Rights Certificate for inspection by the Company), then the
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States (or
of any state of the United States so long as such corporation is authorized to
do business as a banking institution in such state) in good standing, which is
authorized under such laws to exercise corporate trust powers and is subject to
supervision or examination by federal or state banking authorities and which has
at the time of its appointment as Rights Agent a combined capital and surplus of
at least Fifty Million Dollars ($50,000,000). After appointment, the successor
Rights Agent shall, without further act or deed, be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent, and the predecessor Rights Agent shall deliver and transfer to the
successor Rights Agent any property at the time held by it under this Agreement
and shall execute and deliver any further assurance, conveyance, act or deed
necessary for such purposes. Not later than the effective date of any such
appointment, the Company shall file a notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and mail a
notice thereof in writing to the registered holders of the Rights Certificates.
Failure to give any notice provided for in this Section 22 or any defect therein
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.
Section 23. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights Certificates to the contrary,
the Company may, at its option, issue new Rights Certificates evidencing Rights
in such form as may be approved by the Board to reflect
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any adjustment of or change in the Purchase Price per share and the number or
kind or class of shares or other securities or property purchasable under the
Rights Certificates made in accordance with the provisions of this Agreement. In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so issued
or sold pursuant to the exercise of stock options or stock appreciation rights
or under any employee plan or arrangement, or upon the exercise, conversion or
exchange of securities heretofore or hereafter granted, issued or sold by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by
the Board, issue Rights Certificates representing the appropriate number of
Rights in connection with the issuance or sale of such shares of Common Stock;
provided, however, that (i) no such Rights Certificate shall be issued if, and
to the extent that, the Company shall be advised by counsel that such issuance
would create a significant risk of material adverse tax consequences to the
Company or the Person to whom such Rights Certificate would be issued, and (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof.
Section 24. Redemption and Termination.
(a) The Board may, at its option, at any time prior to the earlier of
(x) the Close of Business on the tenth (10th) Business Day following the
Acquisition Date (or such specified or unspecified later date as may be
determined by the Board prior to the expiration of such ten (10) Business Day
period) and (y) the Final Expiration Date, redeem all, but not less than all, of
the then outstanding Rights at a redemption price of One One-Thousandth Dollar
($.001) per Right (payable in cash, shares of Common Stock (based on the current
market price of the Common Stock at the
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time of redemption) or any other form of consideration deemed appropriate by the
Board), as such amount may be appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date of this Agreement
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Triggering Event until
such time as the Company's right of redemption hereunder has expired.
(b) Immediately upon the action of the Board ordering the redemption of
the Rights, evidence of which shall have been filed with the Rights Agent, and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price for each Right so held. Promptly after
the action of the Board ordering the redemption of the Rights, the Company shall
give notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock of the Company. Any notice which is mailed in the manner herein
provided shall be deemed given whether or not the holder receives the notice.
Each such notice of redemption will state the method by which the payment of the
Redemption Price will be made.
Section 25. Notice of Certain Events. In case the Company shall propose
(a) to pay any dividend payable in stock of any class to the holders of Common
Stock or to make any other distribution to the holders of Common Stock (other
than a regular periodic cash dividend at a rate not in excess of one hundred
twenty-five percent (125%) of the rate of the last regular periodic cash
dividend theretofore paid), or (b) to offer to the holders of Common Stock
rights or warrants to
Page 52 of 65
<PAGE> 56
subscribe for or to purchase any additional shares of Common Stock or shares of
stock of any class or any other securities, rights or options, or (c) to effect
any reclassification of its Common Stock (other than a reclassification
involving only the subdivision or split of the outstanding shares of Common
Stock), or (d) to effect any consolidation, combination or merger with or into,
or to effect any sale or other transfer (or to permit one or more of its
subsidiaries to effect any sale or other transfer), in one or more transactions,
of more than fifty percent (50%) of the assets or earning power of the Company
and its subsidiaries, taken as a whole, to any other Person or (e) to effect the
liquidation, dissolution or winding up of the Company, then, in each such case,
the Company shall give to each holder of a Rights Certificate, in accordance
with Section 26 of this Agreement, a notice of such proposed action specifying
the record date for the purposes of such stock dividend or distribution of
rights or warrants, or the date on which such reclassification, consolidation,
combination, merger, sale, transfer, liquidation, dissolution or winding up is
to take place and the date of participation therein by the holders of Common
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action described in clause (a) or (b) above in this Section 25 at
least ten (10) Business Days prior to the record date for determining the
holders of Common Stock for purposes of such action, and in the case of any
other such action, at least ten (10) days prior to the date of the taking of
such proposed action or the date of participation therein by the holders of
Common Stock, whichever shall be earlier. Failure to give any such required
notice prior to the Distribution Date shall not affect the validity of any such
action.
In the case that any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
holder of a Rights Certificate, in accordance with
Page 53 of 65
<PAGE> 57
Section 26 of this Agreement, a notice of the occurrence of such event
specifying the event and the consequences of the event to holders of Rights
under Section 11(a)(ii) of this Agreement.
Section 26. Notices. Except as may be otherwise expressly required by
this Agreement, notices or demands authorized by this Agreement to be given or
made by the Rights Agent or by the holder of any Rights Certificate to or on the
Company shall be sufficiently given or made if sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
Aironet Wireless Communications, Inc.
3875 Embassy Parkway
Akron, Ohio 44334-8758
Attention: Treasurer
Subject to the provisions of Section 22 and except as may be otherwise expressly
required by this Agreement, notices or demands authorized by this Agreement to
be given or made by the Company or by the holder of any Rights Certificate to or
on the Rights Agent shall be sufficiently given or made if sent by registered or
certified mail and shall be deemed given upon receipt, addressed (until another
address is filed in writing with the Company) as follows:
Harris Trust and Savings Bank
311 West Monroe Street, 14th Floor
Chicago, Illinois 60606
Attn: Shareholder Services
Notices or demand authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate shall be
sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.
Page 54 of 65
<PAGE> 58
Section 27. Supplements and Amendments. The Company may from time to
time supplement or amend this Agreement without the approval of any holders of
Rights Certificates (and, prior to the Distribution Date, the registered holders
of the Common Stock) in order to cure any ambiguity, to correct or supplement
any provision contained in this Agreement which may be defective or inconsistent
with any other provisions in this Agreement, or to make any other provisions in
regard to matters or questions arising under this Agreement which the Company
may deem necessary or desirable and, as to any supplement or amendment made
after the Distribution Date, which shall not adversely affect the interests of
the holders of Rights Certificates; provided, however, that the Company shall
not amend or otherwise change the rights, duties and compensation of the Rights
Agent without its prior written consent.
Section 28. Successors. All of the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement, but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock).
Section 30. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
Page 55 of 65
<PAGE> 59
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board determines
in its good faith judgment that severing the invalid language from this
Agreement would adversely affect the purpose or effect of this Agreement, the
right of redemption set forth in Section 24 hereof shall be reinstated and shall
not expire until the Close of Business on the tenth (10th) Business Day
following the date of such determination by the Board.
Section 31. Governing Law. This Agreement, each Right and each Rights
Certificate issued under this Agreement shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be governed
by and construed in accordance with the laws of such State applicable to
contracts to be made and to be performed entirely within such State.
Section 32. Counterparts. This Agreement may be executed in any number
of counterparts; each of such counterparts shall for all purposes be deemed to
be an original; and all of such counterparts shall together constitute but one
and the same instrument.
Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions of this
Agreement.
Page 56 of 65
<PAGE> 60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: AIRONET WIRELESS COMMUNICATIONS,
INC.
By
- --------------------------- --------------------------------
Name: Name:
---------------------- -----------------------------
Title: Title:
--------------------- ----------------------------
Attest: HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By
- --------------------------- --------------------------------
Name: Name:
---------------------- -----------------------------
Title: Title:
--------------------- ----------------------------
Page 57 of 65
<PAGE> 61
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. R- Common Stock Purchase Rights
------------- ------
NOT EXERCISABLE AFTER THE LATER OF ___________, 2009 AND THE DATE TWO
YEARS AFTER ANY DISTRIBUTION DATE OCCURRING PRIOR TO ____________,
2009, OR EARLIER IF NOTICE OF REDEMPTION IS GIVEN. THE COMMON STOCK
PURCHASE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, AT $.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. THE RIGHTS SHALL NOT BE EXERCISABLE, AND SHALL BE VOID SO
LONG AS HELD, BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE
QUALIFICATION FOR THE ISSUANCE TO SUCH HOLDER, OR THE EXERCISE BY SUCH
HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED
OR BE OBTAINABLE. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND
VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE WERE ISSUED TO
A PERSON WHO WAS AN ACQUIRING PERSON OR AN AFFILIATE OR AN ASSOCIATE OF
AN ACQUIRING PERSON. THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME VOID TO THE EXTENT PROVIDED BY, AND UNDER CERTAIN
CIRCUMSTANCES SPECIFIED IN, SECTION 7(e) OF THE RIGHTS AGREEMENT.]*
- --------
* The portion of the legend in brackets shall be inserted only if applicable.
Page 58 of 65
<PAGE> 62
RIGHTS CERTIFICATE
AIRONET WIRELESS COMMUNICATIONS, INC.
This certifies that ______________________________________, or
registered assigns, is the registered owner of the number of Common Stock
Purchase Rights (the "Rights") set forth above, each of which entitles the owner
thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of ____________, 1999, (as amended, restated, renewed or
extended from time to time thereafter, the "Rights Agreement"), between Aironet
Wireless Communications, Inc., a Delaware corporation (the "Company"), and
Harris Trust and Savings Bank, an Illinois banking corporation (the "Rights
Agent") to purchase from the Company at any time after the Distribution Date (as
such term is defined in the Rights Agreement) and prior to 5:00 P.M. (Cleveland,
Ohio time) on ____________,2009 at the principal office of the Rights Agent in
Cleveland, Ohio, or its successors as Rights Agent, one fully paid,
nonassessable share of the Common Stock, par value $.01 per share, of the
Company (the "Common Stock"), at a purchase price of $125.00 per share (the
"Purchase Price"), upon presentation and surrender of this Rights Certificate
with the appropriate Form of Election to Purchase duly executed. The number of
Rights evidenced by this Rights Certificate (and the number of shares which may
be purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of
____________,1999, based on the Common Stock as constituted at such date. The
Company reserves the right to require prior to the occurrence of a Triggering
Event (as such term is defined in the Rights Agreement) that a number of Rights
be exercised so that only whole shares of Common Stock will be issued.
Page 59 of 65
<PAGE> 63
As provided in the Rights Agreement, the Purchase Price and the number
of shares of Common Stock which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Reference
is also made to the Rights Agreement for definitions of capitalized terms used
but not defined herein. Copies of the Rights Agreement are on file at the
principal office of the Company and are also available upon written request to
the Company.
This Rights Certificate, either alone or together with other Rights
Certificates, upon surrender at the principal office of the Rights Agent may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder
to purchase. If this Rights Certificate shall be exercised (other than pursuant
to Section 11(a)(ii) of the Rights Agreement) in part, the holder shall be
entitled to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised. If this Rights
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Rights
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.
Page 60 of 65
<PAGE> 64
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at its option at a redemption
price of $.001 per Right.
The Company is not required to issue fractional shares of Common Stock
upon the exercise of any Right or Rights evidenced hereby, but in lieu thereof a
cash payment shall be made as provided in the Rights Agreement.
No holder of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of shares of Common
Stock or of any other securities of the Company which may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
Page 61 of 65
<PAGE> 65
WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of ____________.
[Corporate Seal] AIRONET WIRELESS COMMUNICATIONS,
INC.
By
----------------------------------
Name:
-------------------------------
Title:
-----------------------------
By
----------------------------------
Name:
-------------------------------
Title:
-----------------------------
Countersigned:
HARRIS TRUST AND SAVINGS BANK,
as Rights Agent
By:
---------------------------------
Authorized Signature
Page 62 of 65
<PAGE> 66
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
FOR VALUE RECEIVED ______________________________________________ does
hereby sell, assign and transfer unto ______________________________________
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- -------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ___________________________
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.
Dated:__________________, 19__
-----------------------------------
Signature
Signature Guaranteed:
Page 63 of 65
<PAGE> 67
CERTIFICATE
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) This Rights Certificate [ ] is [ ] is not being exercised, sold,
assigned or transferred by or on behalf of a Person who is or was an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person (as such terms
are defined pursuant to the Rights Agreement); and
(2) After due inquiry and to the best knowledge of the undersigned, the
undersigned [ ] did [ ] did not acquire the rights evidenced by this Rights
Certificate from any Person who is, was or subsequently became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person.
Dated:________________, 19__
-----------------------------------
Signature
NOTICE
The signature to the foregoing Assignment must correspond to the name
as written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.
Page 64 of 65
<PAGE> 68
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires
to exercise the Rights represented
by the Rights Certificate.)
To: AIRONET WIRELESS COMMUNICATIONS, INC.
The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Rights Certificate to purchase the
shares of Common Stock issuable upon the exercise of the Rights and requests
that certificates for such shares be issued in the name of:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert Social Security or tax identification number:
__________________________
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert Social Security or tax identification number:
--------------------
Dated:_________________, 19__ ---------------------------------
Signature
Signature Guaranteed:
Page 65 of 65
<PAGE> 1
Exhibit 4.3
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF
THE WARRANTS EVIDENCED BY THIS CERTIFICATE, AND ANY SHARES ISSUED UPON THE
EXERCISE HEREOF, ARE SUBJECT TO RESTRICTIONS CONTAINED IN A STOCKHOLDERS
AGREEMENT DATED AND EFFECTIVE AS OF MARCH 31, 1998, BY AND AMONG THE CORPORATION
AND ITS STOCKHOLDERS (THE "STOCKHOLDERS AGREEMENT"), A COPY OF WHICH IS ON FILE
IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.
NEITHER THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR ANY SHARES ISSUABLE UPON
ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE LAWS") AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
REGISTERING THE WARRANTS AND/OR SHARES UNDER THE ACT AND STATE LAWS OR (ii) A
TRANSACTION PERMITTED BY RULE 144 OR RULE 145 UNDER THE ACT OR EQUIVALENT STATE
LAWS FOR WHICH THE ISSUER HAS RECEIVED REASONABLY SATISFACTORY EVIDENCE OF
COMPLIANCE WITH THE PROVISIONS OF SUCH APPLICABLE RULE OR (iii) AN OPINION OF
COUNSEL SATISFACTORY TO ISSUER THAT SUCH WARRANTS AND/OR SHARES ARE EXEMPT FROM
THE REGISTRATION PROVISIONS OF THE ACT AND STATE LAWS OR (iv) A NO-ACTION LETTER
FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION AND THE APPLICABLE
STATE DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
STATE LAWS.
Warrant Certificate No. 17 Warrants to Purchase 100,000 Shares of Common Stock
AIRONET WIRELESS COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that for value received, Furneaux & Company, L.L.C., or
any permitted transferee ("Holder"), is entitled to purchase from Aironet
Wireless Communications, Inc. ("Aironet") 100,000 shares (adjusted as provided
in Exhibit A, the "Warrant Shares") of Aironet's Common Stock, $.01 par value
("Common"), at Three and 50/100 Dollars ($3.50) per share (adjusted as provided
in Exhibit A, the "Warrant Price"), which equals an aggregate purchase price of
Three Hundred fifty Thousand Dollars ($350,000), at or after, and not before,
the consummation of the earlier of either (i) the first firm commitment
underwritten public offering of the Common (or units which include the Common as
an element) at a public offering price of not less than Eight Dollars ($8.00)
per share, pursuant to a Registration Statement, on Form S-1 or other
appropriate form, filed by Aironet under the Act, pursuant to which Aironet
receives proceeds, net of underwriting discounts, commissions and other expenses
of the offering, of not less than Eight Million Dollars ($8,000,000) ("IPO");
(ii) the sale of Aironet as an entirety, whether by merger, consolidation, stock
sale, asset sale, or otherwise, for the higher of a gross sale price of Seventy
Five Million Dollars ($75,000,000) or Eight Dollars ($8.00) per share ("Private
Sale"); (iii) a Change in Control (defined in Exhibit A); or (iv) a Spin-Off
(defined in Exhibit A) (the occurrence of an IPO, Private Sale, Change in
Control and/or Spin-Off is referred to herein as the "Exercise Event"). To the
extent remaining un-exercised, these Warrants shall terminate on March 31, 2001,
5:00 P.M., E.T., and thereafter shall entitle Holder to no rights. These
Warrants are subject to the terms and conditions set forth on the face of this
certificate and in Exhibit A attached hereto, which by this reference are
incorporated herein in their entirety.
Aironet Wireless Communications, Inc.
Date: March 31, 1998
/s/ Roger J. Murphy
----------------------------------
Roger J. Murphy, President
/s/ Jay R. Faeges
----------------------------------
Jay R. Faeges, Assistant Secretary
<PAGE> 2
EXHIBIT A
WARRANT TERMS AND CONDITIONS
AIRONET WIRELESS COMMUNICATIONS, INC.
1. TRANSFER. Transfer of the Warrants is restricted as set forth in the
restrictive legends set forth in the Warrant certificate to which this Exhibit A
is attached.
2. EXCHANGE OF WARRANT CERTIFICATE. Upon Holder's written request,
Aironet shall exchange the Warrant certificate for one or more certificates
entitling Holder to purchase a like aggregate number of Warrant Shares. At
Holder's request and upon delivery to Aironet of a Lost Warrant Affidavit and
surety bond reasonably acceptable to Aironet, Aironet will deliver to Holder
replacement Warrant certificates for mutilated, lost, stolen or destroyed
Warrant certificates.
3. EXERCISE OF AND PAYMENT FOR WARRANTS.
a. Exercise. The Warrants shall be deemed to have been
exercised automatically upon the consummation of a Private Sale for
which Aironet has provided the Holder at least fifteen (15) days prior
written notice, and upon Aironet's receipt of a Holder's written notice
of exercise provided to Aironet in the event of an IPO, Change in
Control or Spin-Off at any time prior to their termination as provided
on the face of the Warrant certificate to which this Exhibit A is
attached.
b. Payment of Warrant Price.
i. If the applicable Exercise Event is an IPO, Change
in Control or Spin-Off, then within ten (10) days of Holder's
receipt of written notice from Aironet of the event, Holder
shall pay the aggregate Warrant Price to Aironet by wire
transfer of immediately available funds, pursuant to wire
instructions provided to Holder by Aironet. Immediately upon
Holder's surrender of the Warrant certificate evidencing the
exercised Warrants and payment of the Warrant Price, Aironet
shall issue and deliver to Holder certificates for the Warrant
Shares then purchased. The Warrant Shares when paid for and
issued shall be fully paid and non-assessable, and shall be
deemed issued as of the date of surrender of the Warrant
certificate and payment of the aggregate Warrant Price.
ii. If the applicable Exercise Event is a Private
Sale, then Aironet shall provide Holder with at least fifteen
(15) days written notice prior to consummating such
transaction, and Holder shall receive, on a cashless exercise
basis, the kind and amount of consideration it would be
entitled to receive as if the Warrants had been duly exercised
in full prior to such event and as if Holder owned the number
of Warrant Shares that could be purchased with such
consideration, less the aggregate Warrant Price.
c. Payment of Taxes. Aironet will pay all documentary stamp
taxes, if any, attributable to the initial issuance and delivery of the
Warrant Shares, and Holder will pay all other taxes, if any.
d. Change in Control. A "Change in Control" is deemed to have
occurred upon (i) any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934 (as
amended, the "Exchange Act")), directly or indirectly, of fifteen
percent (15%) or more of the combined voting power of Telxon's Voting
Securities, or (ii) the holders of Telxon's securities entitled to vote
thereon approve, or there otherwise occurs or is commenced, a sale,
lease, exchange or other disposition of all or substantially all the
assets, or the dissolution or liquidation, of Telxon, or any merger,
consolidation or reorganization to which Telxon is a party and as the
result of which Telxon's stockholders prior to the transaction do not
own at least fifty percent (50%) of the voting power of the surviving
entity in the election of directors, or (iii) the Continuing Directors
cease for any reason to constitute at least a majority of the Telxon
Board of Directors, or (iv) any other event occurs which is of such a
nature that would be required to be reported as a change in control in
response to Item 1(a) of the Current Report on Form 8-K, as in effect
on the date hereof pursuant
A-1
<PAGE> 3
to Section 13 or 15(d) of the Exchange Act, or similar successor public
filing. "Continuing Directors" means and includes the persons
constituting Telxon's Board of Directors as of the date of this
Agreement as well as each person who becomes a director of Telxon
subsequent to the date of this Agreement whose election, or nomination
for election by Telxon's stockholders, was approved by an affirmative
vote of at least a majority of the then Continuing Directors (either by
a specific vote or by approval of the proxy statement of Telxon in
which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in
any such case without objection by any member of such approving
majority of the then Continuing Directors to the nomination of such
person or the naming of such person as a director nominee), for so long
as each such director shall remain in office. "Person" means and
includes any individual, corporation, partnership, group, association
or other "person", as such term is used in Section 14(d) of the
Exchange Act, but excluding Telxon or any employee benefit plan
sponsored by Telxon. "Voting Securities" means the Telxon Common Stock,
par value $0.01 per share, and any and all other then outstanding
Telxon securities ordinarily having the right to vote generally in the
election of the Telxon directors.
e. Spin-Off. "Spin-Off" shall mean any spin-off, dividend or
other distribution of Aironet Common by Telxon to its stockholders.
4. RESERVATION OF SHARES. Aironet represents and warrants that it has
reserved, and so long as the Warrants remain outstanding it will keep reserved,
the number of shares of Common which are subject to purchase under the Warrants
from time to time. Prior to its exercise or termination, Aironet will keep a
copy of this Warrant certificate on file with its transfer agent.
5. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. At the date of this Warrant certificate, each Warrant
entitles the Holder to purchase one (1) Warrant Share for the Warrant Price.
Hereafter, until their exercise or termination, the number of Warrant Shares
that may be purchased and the Warrant Price per Warrant Share may be adjusted
upward or downward as provided in this Section 5.
a. Adjustment in the Number of Warrant Shares. The
number of Warrant Shares that each Warrant entitles the Holder to
purchase shall be proportionately adjusted upward for any increase, or
downward for any decrease, in the number of issued and outstanding
shares of Common resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification effected without
receipt of consideration by Aironet, and in no other circumstance.
b. Adjustment in the Warrant Price. The Warrant Price
per Warrant Share shall be proportionately adjusted downward for any
increase, or upward for any decrease, in the number of issued and
outstanding shares of Common resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification effected
without receipt of consideration by Aironet, and in no other
circumstance.
c. Warrant Certificates. Upon any adjustments in the number of
Warrant Shares and Warrant Price, Aironet shall record such adjustments
on its stock transfer records, and the Holder may, but need not,
surrender this certificate to Aironet for replacement with Warrant
certificates that evidence the revised number of Warrant Shares and
Warrant Price.
6. FRACTIONAL INTERESTS. Aironet shall not be required to issue
fractional Warrant Shares on the exercise of the Warrants or upon any adjustment
pursuant to Section 5 in the number of Warrant Shares that each Warrant entitles
a Holder to purchase. Any fractional Warrant Shares that would otherwise result
from any such adjustments or exercise shall be eliminated either by rounding up
to the next higher whole number of Warrant Shares for fractions of one-half
(1/2) or more, or by rounding down to the next lower whole number of Warrant
Shares for fractions of less than one-half (1/2).
7. NO RIGHTS AS STOCKHOLDER. The Warrants do not confer upon Holder any
rights as a stockholder of Aironet prior to Holder's exercise of the Warrants.
Without limiting the generality of the foregoing, the Warrants do not entitle
Holder to vote, receive dividends, consent or receive notices as a stockholder
in respect of any meeting for the election of directors or any other matter;
provided, however, that transferability of the Warrants is restricted pursuant
A-2
<PAGE> 4
to the terms and conditions in the Stockholders Agreement among Aironet and its
Stockholders on the same basis as the Common and any other security which is
governed thereby.
8. MISCELLANEOUS.
a. These Warrants are issued in accordance with the laws
governing corporations organized under the laws of the State of
Delaware and securities issued in the State of Ohio, and shall be
construed under and governed by such laws without regards to conflict
or choice of laws, statutes, regulations, rules or principles. Any
action relating to theses Warrants or their issuance shall be brought
in the courts, state or federal, sitting in Summit County, Ohio, and
the Holder by taking delivery of this certificate consents to the
jurisdiction and venue of such courts, and agrees not to contest venue
on the grounds of forum non conveniens or otherwise.
b. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt, or if delivered or sent by facsimile
transmission, upon confirmation of transmission, or if sent by
overnight courier for next day delivery, the next business day after
deposit, to the Holder at its address as set forth in the stock records
of Aironet, and to Aironet at its principal place of business.
c. Subject to provisions herein regarding restrictions on
transferability, these Warrants shall inure to the benefit of Holder,
and its permitted successors and assigns.
d. The captions in this certificate are for convenience only
and shall not affect the construction or interpretation of any term or
provision hereof. The use in this certificate of the masculine,
feminine or neuter pronoun, shall include the others as the context may
require.
e. Any waiver or amendment of any provision, covenant or
condition of these Warrants must be in writing and executed by Aironet
and Holder. No delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right,
power or privilege.
(End of Exhibit A)
A-3
<PAGE> 1
Exhibit 10.1.1
AIRONET WIRELESS COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the Plan is to promote the best
interests of the Company and its stockholders by enabling the Company to attract
and retain highly qualified personnel through rewarding valued employees,
directors and advisors with the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other initially capitalized terms
as are defined elsewhere in this Plan, the following terms when used in this
Plan shall have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate number of
shares of Common Stock specified in Section 3(a) as being authorized
with respect to Options granted pursuant to the Plan, subject to
adjustment in accordance with Section 12 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means (i) if a committee is appointed, the
Committee appointed by the Board in accordance with Section 4(a), or
(ii) if no Committee has been appointed, the "Board."
(g) "Common Stock" means the voting Common Stock, par value
$.01 per share, of the Company.
(h) "Company" means Aironet Wireless Communications, Inc., a
Delaware corporation.
(i) "Continuous Employment" means with respect to any
Employee, the continued employment of such Employee by the Company or
service by such Employee to the Company, without interruption or
termination after the grant of an Option to such
<PAGE> 2
Employee. Continuous Employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence
approved by the Board (provided that such leave is for a period of not
more than ninety (90) days or re-employment upon the expiration of such
leave is mandated by contract or statute).
(j) "Employee" means any person, including officers, directors
and advisors who are, at the time of grant, serving the Company.
(k) "Fair Market Value" shall have the meaning as defined in
Section 7(b).
(l) "Option" means a right granted to an Employee pursuant to
the Plan to purchase a specified number of shares of Common Stock at a
specified price during a specified period and on such other terms and
conditions as may be specified pursuant to the Plan. Options may be
granted as Tax Qualified Options or as Options which do not qualify as
Tax Qualified Options.
(m) "Option Agreement" means the written agreement evidencing
an Option by and between the Company and the Optionee as required by
Section 14.
(n) "Option Price" shall have the meaning as defined in
Section 7(a).
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means an Employee who receives an Option.
(q) "Plan" means this Aironet Wireless Communications, Inc.
1996 Stock Option Plan.
(r) "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Act or any similar successor regulation exempting
certain transactions involving stock-based compensation arrangements
from the "short-swing" liability provisions of Section 16 of the Act,
as adopted and amended from time to time and as interpreted by formal
or informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission.
(s) "Section 16 Person" means an Employee who is subject to
Section 16 of the Act, as interpreted by the rules and regulations
promulgated by the Commission thereunder, as adopted and amended from
time to time, and by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission.
(t) "Securities Law Requirements" means the Act and the rules
and regulations promulgated by the Commission thereunder, as adopted
and amended from time to time, including but not limited to Rule 16b-3,
and as interpreted by formal or
2
<PAGE> 3
informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission, and the requirements
of any stock exchange, automated inter-dealer quotation system or other
recognized securities market on which the Common Stock is listed or
traded or in which the Common Stock is included, as adopted and amended
from time to time and as interpreted by formal or informal opinions of,
and other interpretive advice, provided by the representatives of such
stock exchange, quotation system or other securities market.
(u) "Shares" means the Common Stock as adjusted in accordance
with Section 12 of the Plan.
(v) "Successor" means the estate of an Optionee or a person
who succeeds by will or the laws of descent and distribution to an
Optionee's right to exercise an Option.
(w) "Tax Qualified Option" means an Option which is intended
at the time of grant to qualify for special tax treatment under Section
422A or other particular provisions of the Code and the regulations,
rulings and procedures promulgated, published or otherwise provided
thereunder, as adopted and amended from time to time.
3. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in
accordance with the provisions of Section 12 of the Plan, the maximum
aggregate number of Authorized Shares which may be issued and sold
under Options granted pursuant to the Plan is 1,617,000 shares of
Common Stock. The Shares issued and sold upon the exercise of Options
may be treasury Shares, Shares of original issue or a combination
thereof.
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time
under the Plan for the grant of Options, the number of Shares subject
to each Option granted pursuant to the Plan shall be provisionally
counted against the Authorized Shares from and after the grant of such
Option but only for so long as and to the extent that such Option shall
remain outstanding and unexercised. Upon the exercise, in whole or in
part, of an Option, the number of Shares issued upon such exercise
shall be permanently deducted from the Authorized Shares, provided that
no such permanent deduction shall be made, and the provisional
deduction against the Authorized Shares shall be reversed, to the
extent that the exercise price and/or the withholding taxes with
respect to such exercise are paid through the delivery to the Company
by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised.
The provisional deduction against the Authorized Shares shall likewise
be reversed to the extent of the unexercised portion of an Option upon
the expiration, lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by any
3
<PAGE> 4
such reversal of a provisional deduction against the Authorized Shares
shall immediately become available for the granting of new Options
under the Plan with respect thereto.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or
the Board may, in its discretion, appoint a Committee to administer the
Plan subject to such terms and conditions as the Board may prescribe;
provided that the terms upon which, including the time or times at or
within which, and the price or prices at which Shares may be purchased
upon the exercise of Options shall be approved or ratified by such
action of the Board or a committee duly designated by the Board from
its members as may be required by the Delaware General Corporation Act,
as amended from time to time; and provided further, that, unless
otherwise deemed, under all of the circumstances, to be in the best
interest of the Company, neither the Board nor any such Committee shall
make any decision concerning the Plan with respect to any Section 16
Person unless the Board or such Committee making such decision is
constituted so that such decision complies with the applicable
requirements of Rule 16b-3. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and may appoint
additional members thereof, remove members (with or without cause),
fill vacancies however caused and remove all members of the Committee
and thereafter directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the Delaware General
Corporation Act and the provisions of this Plan, the Committee shall
have the authority, in its sole discretion:
(i) To determine, in accordance with Section 7(b) of
the Plan, the Fair Market Value of the Shares;
(ii) To determine the Employees to whom, and the time
or times at which, Options shall be granted and the number of
Shares subject to purchase upon exercise of each Option (there
being no limit on the time following the adoption or approval
of this Plan within which Options may be granted under the
Plan so long as it remains in effect, on the number of Options
which may be granted to any one Employee or on the aggregate
number of Shares subject to purchase thereunder, except such
restrictions thereon as may be imposed by applicable tax laws
which will have to be observed if the Committee intends that a
particular Option qualify as a Tax Qualified Option);
(iii) To determine the terms and provisions of each
Option (which terms and provisions need not be identical),
including, but not limited to, the following:
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<PAGE> 5
(A) The Option Price subject to the
provisions of Section 7(a); and
(B) Whether Options shall become exercisable
over a period of time and when they shall be
partially or fully exercisable;
(iv) To accelerate the time as of which any Option
may be exercised;
(v) To amend any outstanding Option, subject to the
provisions of Section 19;
(vi) To authorize any person to prepare and execute
on behalf of the Company any instrument deemed by the
Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted thereunder or any
amendment to the Plan or any Option Agreement;
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating to
the Plan; and
(ix) To make all other determinations the Committee
may deem necessary or advisable in connection with the
administration of the Plan.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all
Employees, Optionees, and Successors and the respective legal
representatives, heirs, successors and assigns of all of the foregoing
and all other persons claiming under or through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or
the Committee, and no Employee or other agent acting on behalf of the
Board or the Committee, shall be personally liable for any decision,
determination or action made or taken, or failed to be made or taken,
with respect to this Plan or any Option granted hereunder, and the
Company shall fully protect each such person in respect of any such
decision, determination or action and shall indemnify each such person
against any and all claims, losses, damages, expenses and liabilities
arising from or in connection with any such decision, determination or
action.
5. ELIGIBILITY. Options may be granted only to Employees who, in the
sole judgment of the Committee, have contributed or will contribute to the
success and growth of the
5
<PAGE> 6
Company. An Employee to whom the Company has previously granted a stock option
pursuant to this Plan or otherwise may, if he is otherwise eligible, be granted
additional Options.
The existence of this Plan shall not create in any Employee any right
to be granted an Option hereunder, and neither the existence of this Plan nor
the granting of any Options to any Employee hereunder shall confer upon such
Employee any right with respect to continuation of the employment of such
Employee by the Company, or shall in any way interfere with or limit the right
which such Employee or the Company may otherwise have to terminate such
employment at any time with or without cause. Upon the termination of any
Employee's employment with the Company, the Company shall not have any liability
or obligation to such Employee under this Plan any Option Agreement or any
Options granted to such Employee hereunder except to issue the appropriate
number of Shares to such Employee upon the exercise of any Option granted to
such Employee under this Plan prior to such termination of employment, provided
that such exercise is duly and timely made in accordance with the provisions of
this Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected in
the Option Agreement evidencing such Option, the term of each Option shall be
ten (10) years from the date of grant thereof, provided that the Committee, if
it intends that a particular Option qualify as a Tax Qualified Option, will have
to observe such restrictions on the term of such Option as may be imposed by the
applicable tax laws in order for such Option so to qualify. Each Option shall
continue in effect in accordance with its terms notwithstanding that the Plan
may be terminated prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for
the Optioned Stock shall be such price as is determined by the
Committee at the time of grant of an Option and reflected in the Option
Agreement evidencing the same. Notwithstanding the foregoing, with
respect to any Tax Qualified Option, in no event shall such exercise
price per Share be less than the Fair Market Value per Share as of the
day prior to the date of grant of such Tax Qualified Option.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under
the Plan, "Fair Market Value" per Share shall be determined by the
Board in its sole discretion taking into consideration such data as the
Board shall in its sole discretion deem appropriate; provided that if
the Shares are included in the NASDAQ National Market System or listed
on a stock exchange on the date as of which the same is to be
determined, the Fair Market Value per Share shall be the closing price
on such quotation system or exchange which is the principal trading
market for the Shares on the date of determination or, if no sale price
was reported for the Shares on the date of determination, the closing
price on such principal trading market for the last trading day prior
to the date of determination for which a sale price was reported;
provided further,
6
<PAGE> 7
however, that if the foregoing method of determining Fair Market Value
is inconsistent with the then existing tax law requirements with
respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be
determined by the Committee in such manner as is required for such Tax
Qualified Option to qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing the Shares
being acquired through exercise of an Option will be issued to the Optionee, the
Optionee must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local withholding taxes, whether
domestic or foreign, required to be withheld in connection with the exercise of
an Option.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise
be specified by the Committee in its sole discretion at the time of
grant thereof and reflected in the Option Agreement evidencing such
Option, the following forms of consideration will be accepted in
payment of the exercise price for the Shares to be issued upon exercise
of an Option and of the taxes required to be withheld in connection
with such exercise: (i) cash, (ii) personal check, (iii) bank cashier's
check, (iv) already owned Shares (duly endorsed for transfer with
signature guaranteed), or (v) any combination of the foregoing. Except
as may otherwise be specified by the Committee in its sole discretion
at the time of grant thereof and reflected in the Option Agreement
evidencing such Option, Shares withheld from the Shares to be issued
upon exercise of the Option, either alone or in any combination with
any of the other acceptable forms of consideration recited in this
Paragraph (a), will also be an accepted form of consideration for
payment of the taxes required to be withheld in connection with the
exercise of an Option. In addition to the acceptable forms of
consideration hereinabove recited in this Paragraph (a), the Committee
may determine in its sole discretion at the time of grant of an Option,
and if the Committee so determines, shall provide in the Option
Agreement evidencing such Option, that one or both of the following
additional forms of consideration will be accepted, either alone or in
any combination with any of the other acceptable forms of consideration
recited in this Paragraph (a), in payment of the items specified: (vi)
in payment of the exercise price for the Shares to be issued upon
exercise of an Option, Shares withheld from the Shares to be issued
upon such exercise, and/or (vii) in payment of the exercise price for
the Shares to be issued upon exercise of an Option and the taxes
required to be withheld in connection with such exercise, a commitment
for the delivery to the Company of proceeds from the sale, pursuant to
a brokerage or similar arrangement approved in advance by the Committee
in its sole discretion, of Shares to be issued upon exercise of the
Option. The forms of consideration which will be accepted in payment of
the exercise price for an Option and related withholding taxes shall be
specified in the Option Agreement evidencing such Option, and the
person or persons entitled to exercise the Option shall be entitled to
elect from those so specified form(s) to be used in effecting payment
with respect to a
7
<PAGE> 8
particular exercise; provided that any election by a Section 16 Person
to use already owned Shares or have Shares withheld from those issuable
upon such exercise shall be effective only if made in accordance with
the applicable requirements of Rule 16b-3; and provided further that a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued
upon exercise of an Option will not be accepted from a Section 16
Person if under Securities Law Requirements such a sale would be
matched with such exercise to result in "short-swing" profit liability
under Section 16(b) of the Act on the part of such Section 16 Person
with respect to such transaction.
(b) WITHHOLDING TAX LOANS. In addition to any one or more of
the acceptable forms of consideration recited in Paragraph (a) of this
Section 9 which the Committee may permit in the Option Agreement to be
used for the payment of withholding taxes, the Committee may determine
in its discretion at the time of grant of an Option to permit the
Optionee (but not any Successor) to, and if the Committee so
determines, shall provide in the Option Agreement evidencing such
Option that such Optionee may, borrow from the Company an amount
sufficient to pay the taxes required to be withheld in connection with
the exercise of such an Option, with each such borrowing to be
evidenced by a promissory note of the Optionee payable to the order of
the Company. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing an Option, each such loan shall be for a
term of five (5) years at a rate of interest equal to the Company's
then primary domestic commercial lender's prime or base rate as in
effect from time to time, with payments of interest on such loan due
quarterly and payments toward the principal of such loan due, to the
extent of the net proceeds therefrom, within fifteen (15) days after
any disposition by the Optionee of any Shares acquired upon exercise of
any stock option granted by the Company to the Optionee pursuant to
this Plan or otherwise (excluding any disposition of such Shares by
gift or to the Company in payment of the exercise price of a stock
option granted by the Company to the Optionee pursuant to this Plan or
otherwise and/or any related withholding taxes), provided that the
entire unpaid principal balance shall be due at the earlier of (i) the
expiration of the five (5) year term, or (ii) the termination of the
Optionee's Continuous Employment (other than by reason of Optionee's
"disability" (as defined in Section 10(d)) or "retirement" (as defined
in Section 10(e))).
(c) COMPANY WITHHOLDING OF TAXES. If, upon being notified by
the Company of the amount of the taxes required to be withheld in
connection with an exercise of an Option, the Optionee fails promptly
to pay, or to make arrangements acceptable to the Company for the
payment of, such taxes, the Company shall have the right to elect (but
shall be under no obligation) to cover such taxes through:
(i) withholding Shares from those issuable upon such
exercise, provided that any such election so to withhold
Shares with respect to the exercise
8
<PAGE> 9
of an Option by a Section 16 Person shall be effective only if
made in accordance with the applicable requirements of Rule
16b-3; and/or
(ii) deducting such taxes from any amounts payable in
cash to the Optionee by the Company for any reason as of the
time of such exercise or any time thereafter.
(d) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price and/or related
withholding taxes, such Shares shall be valued (i) with respect to the
payment of the exercise price, at Fair Market Value as of the day
immediately preceding the date of exercise and (ii) with respect to the
payment of withholding taxes, at Fair Market Value as of the day
immediately preceding the date tax withholding is required to be made.
(e) OPTIONEE CERTIFICATION OF ALREADY OWNED SHARES. Already
owned Shares which were acquired through a previous exercise of a stock
option granted to an Optionee by the Company pursuant to this Plan or
otherwise may be used in payment of the exercise price of an Option
and/or related withholding taxes only if the previous exercise through
which such Shares were acquired was made as of a date not less than six
(6) months prior to the date of the exercise of the Option in
connection with which such Shares are being tendered as payment. A
tender of already owned Shares in payment of the exercise price of an
Option and/or related withholding taxes will not be accepted by the
Company unless accompanied by a written statement signed by the person
or persons entitled to exercise such Option certifying that either (i)
the Shares tendered in payment were acquired other than through the
exercise of a stock option granted by the Company or (ii) the Shares
tendered in payment were acquired through the exercise, on such date(s)
as shall be recited in such statement (which date(s) shall be not less
than six (6) months prior to the date of tender), of stock option(s)
granted by the Company.
(f) DELIVERY OF ALREADY OWNED SHARES. Where the person
exercising an Option elects to use already owned Shares in full or
partial payment of the exercise price and/or related withholding taxes,
the Committee may, in its sole discretion, accept, in lieu of physical
delivery of the stock certificates evidencing such Shares, such
constructive delivery of such Shares as may be satisfactory to the
Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Committee and as permitted under
the Plan. An Option may not be exercised for a fraction of a Share. In
order to exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company written notice of the number of Shares
with
9
<PAGE> 10
respect to which the Option is being exercised, accompanied by payment
in full of the aggregate exercise price for the Shares so to be
acquired. To constitute an effective exercise of an Option, such notice
and payment shall be addressed to the attention of the Treasurer of the
Company and must be received at the principal executive office of the
Company (i) with respect to an Option that is terminated for
"Misconduct" (as defined below) pursuant to Paragraph (b) of this
Section 10 or for "Prohibited Conduct" (as defined in Section 16(a))
pursuant to Section 16(a), prior to the time of the occurrence of the
event constituting such Misconduct or Prohibited Conduct or (ii) with
respect to any other Option, by 5:00 p.m., local time, on the date of
expiration or termination of the Option. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends nor any
other rights as a stockholder shall exist with respect to the Optioned
Stock notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in
Section 12.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under such
Option by the number of Shares as to which the Option is exercised,
including any Shares withheld from the Shares to be issued pursuant to
such exercise to cover the exercise price and/or related withholding
taxes.
(b) TERMINATION OF EMPLOYMENT. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option,
upon the termination of an Optionee's Continuous Employment (other than
by reason of the Optionee's death, disability or retirement), he may
exercise his Option (to the extent, if any, that he was entitled to
exercise it at the time of such termination of employment) until the
earlier of (i) the date thirty (30) days (or such longer period of time
as is determined by the Committee in its sole discretion at the time of
such termination of employment, provided that if the Committee intends
that a particular Option continue to qualify as a Tax Qualified Option,
the Committee will observe such restrictions as may be imposed by
applicable tax laws on the post-termination period within which a Tax
Qualified Option may be exercised if it wishes to ensure that any
posttermination exercise of such Option is made only within the period
permitted by such laws) after the effective date of the termination of
his employment or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates; provided, however,
that if the Optionee is terminated by the Company for Misconduct, then
such Option shall terminate effective as of the time of the conduct
constituting such Misconduct. As used in this Plan, "Misconduct" means
that the Optionee has engaged in Prohibited Conduct, committed an act
of embezzlement, fraud or theft with respect to the property or
business of the Company or any of its affiliates, or deliberately
disregarded the rules of the Company in such a manner as to cause
material loss, damage or injury to or otherwise endanger the property,
reputation,
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<PAGE> 11
employees or business prospects of the Company. The Committee shall
determine whether an Optionee's employment was terminated by reason of
Misconduct. In making such determination, the Committee may, but shall
not be required to, give the Optionee an opportunity to be heard and to
present evidence on his behalf.
(c) DEATH OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, upon the
death of an Optionee who is at the time of his death in the employ of
the Company and who shall have been in Continuous Employment since the
date of grant of the Option, the Option may be exercised (to the
extent, if any, the Optionee was entitled to do so as of the date of
his death) by his Successor until the earlier of (i) the date six (6)
months following the date of death (or, if the Committee intends that a
particular Option qualify as a Tax Qualified Option, such lesser period
of time following the date of the Optionee's death within which the
applicable tax laws may require that the Option be exercised in order
for such Option so to qualify) and (ii) the expiration date of such
Option, and the Option shall terminate on the earlier of such dates; or
(d) DISABILITY OF OPTIONEE. Except as may otherwise be
specified by the Committee in its sole discretion and reflected in the
Option Agreement evidencing such Option, if an Optionee's Continuous
Employment terminates due to his having become permanently and totally
disabled within the meaning of Section 22(e)(3) of the Code
("disability"), the Option may be exercised (to the extent, if any, the
Optionee was entitled to do so as of the effective date of the
termination of his employment by reason of such disability) until the
earlier of (i) the later of June 1, 1998 or the date one (1) year after
the effective date of such termination of employment and (ii) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
(e) RETIREMENT OF OPTIONEE. Except as may otherwise be
specified by the Committee in its sole discretion and reflected in the
Option Agreement evidencing such Option, if an Optionee's Continuous
Employment terminates by reason of (i) his retirement at any age
entitling him to benefits under the provisions of any retirement plan
of the Company in which such Optionee participates; or (ii) retirement
at any time after attaining age 65 (whichever circumstance is
applicable constituting "retirement"), the Option may be exercised (to
the extent the Optionee shall be entitled, if any, to do so as of the
effective date of the termination of his employment by reason of such
retirement) until the earlier of (A) the date three (3) months after
the effective date of the termination of his employment and (B) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner by the Optionee
except at death by will or by the laws of descent and distribution and may be
exercised during the life of the Optionee only by the Optionee. No lien,
obligation or liability of an Optionee or a Successor
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<PAGE> 12
shall attach to or otherwise encumber the right and interest of such Optionee or
Successor in and to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of
Paragraph (b) of this Section 12 and to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been
granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of a stock option under this Plan are
again available for grant, as well as the price per Share covered by
each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of Shares or any other similar increase
or decrease in the aggregate number of issued and outstanding Shares
effected without receipt of consideration by the Company; provided,
however, that neither the issuance of Shares pursuant to the conversion
or exchange of any securities of the Company convertible into or
exchangeable for Shares nor the issuance of Shares pursuant to any
antidilution agreement shall be deemed to have been "effected without
receipt of consideration." Any fractional Shares which would otherwise
result from any such adjustments shall be eliminated either by deleting
all fractional Shares or by appropriate rounding to the next higher
(fractions of one-half or more) or lower (fractions of less than
one-half) whole Share. All such adjustments shall be made by the Board
in its sole discretion. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into or exchangeable for shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made to, the
number of or exercise price for Shares subject to an Option.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into
another corporation, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board,
in the exercise of its sole discretion, determines that, in lieu of
such assumption or substitution, the Optionee shall have the right to
exercise the Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise then be
exercisable. If in the event of a merger, consolidation or sale of
assets the Board makes an Option fully exercisable in lieu of
assumption or substitution, the Company shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days
from the date of such notice, and the Option will terminate upon the
expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event
of a "Change in Control" of the Company (as defined in Paragraph (c) of
this Section 12),
12
<PAGE> 13
unless otherwise determined by the Board in its sole discretion prior
to the occurrence of such Change in Control, the following acceleration
and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such
Change in Control that are not yet fully vested on such date
shall become fully vested; and
(ii) The value of all outstanding Options, measured
by the excess of the "Change in Control Price" (as defined in
Paragraph (d) of this Section 12) over the exercise price,
shall be cashed out. The cash out proceeds shall be paid to
the Optionee or, in the event of death of an Optionee prior to
payment, to his Successor.
(c) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated by the Commission
under the Act, as adopted and amended from time to time and as
interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff
of the Commission), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities;
(ii) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated by the Commission
under the Act, as adopted and amended from time to time and as
interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff
of the Commission), directly or indirectly, of securities of
Telxon Corporation representing fifteen percent (15%) or more
of the combined voting power of Telxon Corporation's then
outstanding securities;
(iii) The consummation of a transaction requiring
stockholder approval and involving the sale of all or
substantially all of the assets of the Company or the merger
or consolidation of the Company with or into another
corporation.
(iv) For purposes of determining whether there has
been a Change In Control under Section 12(c)(i), neither: (A)
the Company; (B) any affiliates of the Company; (C) a Company
or affiliate employee benefit plan, including any trustee of
such a plan acting as trustee; nor (D) any trustee of a voting
trust for the benefit of one or more stockholders of the
Company (who himself is not a beneficial owner, directly or
indirectly (other than the securities in such voting
13
<PAGE> 14
trust), of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the
Company's then outstanding securities), acting as trustee;
shall be considered to be a person who has become the
beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of
this Section 12, "Change in Control Price" shall be: (i) the highest
price paid or offered, as determined by the Board, in any bona fide
transaction or bona fide offer related to the Change in Control at any
time within the sixty (60) day period immediately preceding the date of
the Change in Control (the "Sixty-Day Period") or if the Shares are
then traded on the NASDAQ National Market System, a stock exchange or
other recognized securities market, then, at the election of the Board,
(ii) the highest closing sale price of a Share, as reported by the
NASDAQ National Market System, any stock exchange on which the Shares
are listed or any other recognized securities market on which the
Shares are traded, at any time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option; provided, that the Committee may approve an earlier grant
date if required to ratify a prior promise by the Corporation to an Employee to
grant the Option. Notice of such determination shall be given to each Employee
to whom an Option is so granted within a reasonable time after the date of such
grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under this Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 20(a), each such Option Agreement
shall contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement evidencing an Option granted to a Section 16 Person shall also
provide for such minimum waiting period from the date of grant before the Option
may be exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such Shares must be
held before making any disposition of such Shares, as may be required by Rule
16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
14
<PAGE> 15
As a condition to the exercise of an Option or the issuance of Shares
upon exercise of an Option, the Company may require the person exercising such
Option to make such representations and warranties to the Company as may be
required, in the opinion of counsel for the Company, by any of the
aforementioned Securities Law Requirements and other laws, which may include,
without limitation, representations and warranties that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
The Company shall not have any liability to any Optionee in respect of
any delay in the sale or issuance of Shares hereunder until the Company is able
to obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain. In no event shall the
Company be required to take any action to make it possible to issue Shares
hereunder.
16. FORFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) LOSS OF UNEXERCISED OPTIONS. If an Optionee holding an
outstanding Option, without the written consent of the Company as
authorized by the Committee in its sole discretion, engages in any of
the following (any such conduct being referred to as "Prohibited
Conduct") at any time during the period beginning on the date the
Optionee first entered the employ of the Company and continuing for so
long as any portion of such Option remains outstanding and unexercised
(the "Grant Period"):
(i) rendering services for any organization or
engaging directly or indirectly in any business which, in the
sole judgment of the Committee, is or becomes competitive with
the Company, or where such rendering of services or engaging
in business, in the sole judgment of the Committee, is or
becomes otherwise prejudicial to or in conflict with the
interests of the Company; provided that the ownership of a not
more than ten percent (10%) equity interest in any
organization or business whose equity is listed on a
recognized securities exchange or traded over-the-counter
shall not constitute Prohibited Conduct within the meaning of
this Subparagraph (i);
(ii) disclosing to anyone outside the Company, or use
in other than the business of the Company, any confidential or
proprietary information relating to the business of the
Company, acquired by the Optionee either during or after
employment with the Company;
(iii) except as may otherwise be permitted by any
agreement otherwise made by the Company with the Optionee,
failing to disclose fully and promptly in writing and assign
to the Company by which the Optionee is or was employed all
right, title and interest in any discovery, invention,
process, method, improvement or idea, whether or not
patentable or subject to copyright protection
15
<PAGE> 16
and whether or not reduced to tangible form or reduced to
practice, made or conceived by such person during employment
by the Company, relating in any manner to the actual or
contemplated business, research or development work of the
Company or to do anything reasonably necessary to enable the
Company to secure a patent, copyright or similar protection in
the United States of America and/or in foreign countries as
the Company may elect; or
(iv) inducing or attempting to induce any customer or
supplier of the Company or any of its affiliates to breach any
contract with the Company or any of its affiliates or
otherwise terminate its relationship with the Company or any
of its affiliates;
then the Committee shall have the right, upon determining that the
Optionee has engaged in any Prohibited Conduct at any time during the
Grant Period (in making such determination, the Committee may, but
shall not be required to, give the Optionee an opportunity to be heard
and to present evidence on his behalf), to declare the Option forfeited
and cancelled effective as of the time of the conduct constituting such
Prohibited Conduct.
(b) OPTIONEE CERTIFICATION UPON EXERCISE. Each time an
Optionee exercises an Option, the Optionee shall be deemed to certify
to the Company that such Optionee did not, without the written consent
of the Company as authorized by the Committee in its sole discretion,
engage in any Prohibited Conduct at any time during the period
beginning on the date the Optionee first entered the employ of the
Company and ending on the date of such exercise (the "Pre-Exercise
Period").
(c) LOSS OF REALIZED BENEFITS. In the event that the Committee
determines with respect to a particular exercise of an Option that the
Optionee engaged in any Prohibited Conduct at any time during the
Pre-Exercise Period or within one (1) year after such exercise (in
making such determination, the Committee may, but shall not be required
to, give the Optionee an opportunity to be heard and to present
evidence on his behalf), such Optionee shall be liable to the Company
(i) to the extent such Optionee has, prior to his receipt of the
"Forfeiture Notice" (as defined below), disposed of the Shares acquired
through such exercise, for payment to the Company of an amount in cash
equal to the excess of (A) the net cash proceeds from such disposition
(or if such Shares were disposed of other than for cash, the aggregate
Fair Market Value of such Shares as of the date of disposition) over
(B) that portion of the sum of the cash and the aggregate Fair Market
Value as of the exercise date of any already owned Shares used by the
Optionee to pay the exercise price for such Shares (such sum being
referred to as the "Exercise Payment") which is allocable to the Shares
disposed of in the proportion that such number of Shares bears to the
total number of Shares issued pursuant to such Option exercise and (ii)
to the extent such Optionee still owns at the time he receives the
Forfeiture Notice the Shares acquired through such exercise, at the
option of the Committee, either (A) for the return of such Shares to
the Company in exchange for a
16
<PAGE> 17
cash refund from the Company to such Optionee in an amount equal to
that portion of the Exercise Payment which is allocable to the Shares
still owned in the proportion that such number of Shares bears to the
total number of Shares issued pursuant to such Option exercise (such
portion being referred to as the "Retained Shares Exercise Payment") or
(B) for payment to the Company of an amount in cash equal to the excess
of the aggregate Fair Market Value as of the exercise date of the
Shares still owned over the Retained Shares Exercise Payment. To
enforce such liability against such Optionee, the Committee shall
notify the Optionee thereof in writing within three (3) years of the
date of the affected Option exercise, which notice (the "Forfeiture
Notice") shall include a statement of the form of payment which the
Committee has elected to receive from the Optionee with respect to
Shares still owned by the Optionee. Within ten (10) days after
receiving the Forfeiture Notice, the Optionee shall make full payment
of such liability to the Company in cash, or to the extent such
Optionee still owns Shares acquired through the affected exercise and
the Committee elects in the Forfeiture Notice to receive such Shares,
stock certificates evidencing such Shares still owned by the Optionee
(duly endorsed for transfer with signature guaranteed). In the event
that the Committee elects to receive, and the Optionee returns, Shares,
the Company shall make the refund payment required to be made to the
Optionee with respect to such Shares upon the Company's receipt of such
Shares as hereinabove required.
(d) CUMULATIVE RIGHTS. The obligation of an Optionee under
this Section 16 to refrain from Prohibited Conduct is in addition to,
and does not in any way supersede or diminish, any other obligation of
such Optionee with respect to such matters which such Optionee may owe
to the Company or any other person under any agreement, applicable law
or otherwise (a "Similar Obligation"). Any action taken by the Company
or the Committee to enforce, compromise, settle or waive the provisions
of this Section 16 with respect to any particular event constituting
Prohibited Conduct shall not in any way affect the rights of the
Company, the Committee, or any other person against an Optionee with
respect to any other event constituting Prohibited Conduct or any
Similar Obligation, nor shall any action taken or failed to be taken by
the Company or any other person against an Optionee to enforce,
compromise, settle or waive any Similar Obligation have any effect on
the rights of the Company and the Committee under this Section 16.
17. NO AUTHORIZATION OR RESERVATION OF SHARES. As of the date of
adoption of the Plan, the Company may not have sufficient authorized Shares, and
has not reserved any Shares, to satisfy the requirements of the Plan. Prior to
any Options becoming exercisable for Shares, the Company shall cause sufficient
Shares to be authorized and shall reserve and thereafter keep available such
number of Shares as shall be sufficient to satisfy the requirements of the Plan.
18. EFFECTIVENESS OF PLAN. This Plan was duly adopted by the Board on
July 3, 1996, and on August 30, 1996, was duly approved by the unanimous written
consent of the Stockholders, as required by the Delaware General Corporation
Act. The Plan shall continue
17
<PAGE> 18
in full force and effect until (j) terminated by resolution of the Board or (ii)
both (A) all Options granted under the Plan have been exercised in full and (B)
no Authorized Shares remain available for the granting of additional Options.
The termination of the Plan shall not affect Options already granted, which
Options shall remain in full force and effect in accordance with their
respective terms and the terms hereof as if this Plan had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may,
in its sole discretion, amend the Plan from time to time, provided that any
amendment which Rule 16b-3 or any other Securities Law Requirement requires be
approved by the stockholders of the Company shall be made only with the approval
of such stockholders. Amendments to the Plan shall apply prospectively to all
Options then outstanding under the Plan, except in the case of any amendment
which is adverse to an Optionee, in which case the amendment shall apply with
respect to the outstanding Options held by the adversely affected Optionee only
upon the consent of such Optionee to such amendment. In exercising its authority
under Section 4(b)(v) to amend outstanding Options, the Committee likewise may
make an amendment which adversely affects the Optionee only upon the consent of
such Optionee to such amendment. Notwithstanding the provisions of this Section
19, the consent of the Optionee shall not be required with respect to an
amendment to the Plan or to any outstanding Option which is made in order to
comply with Securities Law Requirements or which causes a Tax Qualified Option
no longer to qualify as such.
20. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN EMPLOYEES. Notwithstanding any other
provision of this Plan to the contrary but subject to applicable
Securities Law Requirements and tax laws, to the extent deemed
necessary or appropriate by the Committee in its sole discretion in
order to further the purposes of the Plan with respect to Employees who
are foreign nationals and/or employed outside the United States of
America, an Option granted to any such Employee may be on terms and
conditions different from those specified in this Plan in recognition
of the differences in the laws, tax policies and customs applicable to
such an Employee, without the necessity of the Plan being amended to
provide for such different terms and conditions.
(b) NATURE OF BENEFITS. Benefits realized by an Optionee under
this Plan or any Option granted hereunder shall not be deemed a part of
such Optionee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay law of any country and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement
provided to such Optionee by the Company unless expressly so provided
by such other plan or arrangement, or except where the Committee
expressly determines in its sole discretion that an Option or portion
thereof should be so included in order accurately to reflect
competitive compensation practices or to recognize that an Option has
been granted in lieu of a portion of competitive annual cash
compensation.
18
<PAGE> 19
(c) DETERMINATION OF DEADLINES. If any day on or before which
action under this Plan or any Option granted hereunder must be taken
falls on a Saturday, Sunday or Company-recognized holiday, such action
may be taken on the next succeeding day which is not a Saturday, Sunday
or Company-recognized holiday; provided, however, that the provisions
of this Paragraph (c) shall not apply to, and shall not extend the time
for exercise of, any Option which is terminated for Misconduct pursuant
to Section 10(b) or for Prohibited Conduct pursuant to Section 16(a).
(d) GOVERNING LAW. To the extent that federal laws (such as
the Act or the Code) or the Delaware General Corporation Act do not
otherwise control, this Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Ohio and construed accordingly.
(e) GENDER AND NUMBER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
(f) CAPTIONS. The captions contained in this Plan are for
convenience of reference only and do not affect the meaning of any term
or provision hereof.
- end -
19
<PAGE> 1
Exhibit 10.1.2
AMENDED AND RESTATED
AIRONET WIRELESS COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the Plan (defined herein) is to
promote the best interests of the Company (defined herein) and its stockholders
by enabling the Company to attract and retain highly qualified personnel through
rewarding valued Employees (defined herein) and directors with the opportunity,
pursuant to Options (defined herein) granted hereunder, to acquire a proprietary
interest in the Company and thereby encourage them to put forth their maximum
efforts for the continued success and growth of the Company.
2. DEFINITIONS. In addition to other initially capitalized terms which
are defined elsewhere in the Plan, the following terms shall have the respective
meanings set forth in this Section 2:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate number of
shares of Common Stock specified in Section 3(a) as being authorized
and reserved for the granting of Options hereunder, subject to
adjustment in accordance with Section 12.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means (i) the Committee appointed by the Board
in accordance with Section 4(a), or (ii) if no Committee has been
appointed, the Board.
(g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Aironet Wireless Communications, Inc., a
Delaware corporation.
(i) "Continuous Employment" means the continued employment of
an Employee by the Company, the Parent or any Subsidiary, without
interruption or termination after the grant of an Option. Continuous
Employment shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the
Board (provided that such leave is for a period of not more than ninety
(90) days or re-employment upon the expiration of such leave is
mandated by contract or statute) or in the case of transfers
<PAGE> 2
between locations of the Company or between the Company, the Parent,
any Subsidiary or any of their respective successors.
(j) "Employee" means any person, including officers and
directors, who are, at the time of grant, employed by or independent
contractors of (or in the case of directors serving) the Company, the
Parent or any Subsidiary.
(k) "Fair Market Value" means fair market value as defined in
Section 7(b).
(l) "IPO" means an underwritten public offering by the Company
of the Common Stock (or units of which the Common Stock is a part) for
at least $8.00 per share, pursuant to a registration statement filed by
the Company under the Securities Act (other than a registration
statement on Form S-4 or a Form S-8 or any other special purpose
forms), and pursuant to which the Company receives net proceeds of not
less than $8,000,000.
(m) "Option" means a right granted to an Employee pursuant to
the Plan to purchase a specified number of shares of Common Stock at a
specified price during a specified period and on such other terms and
conditions as may be specified pursuant to the Plan. Options may be
granted as Tax Qualified Options or as Options which do not qualify as
Tax Qualified Options.
(n) "Option Agreement" means the written agreement evidencing
an Option by and between the Company and the Optionee as required by
Section 14.
(o) "Option Price" means the option price as defined in
Section 7(a).
(p) "Optioned Stock" means the Common Stock subject to an
Option.
(q) "Optionee" means an Employee who receives an Option.
(r) "Parent" means Telxon Corporation, a Delaware corporation,
and any successor thereto, or any other corporation which hereafter
owns not less than fifty percent (50%) of the then voting shares of the
Company.
(s) "Plan" means the Amended and Restated Aironet Wireless
Communications, Inc. 1996 Stock Option Plan.
(t) "Rule 16b -3" means Rule 16b -3 promulgated by the
Commission under the Act or any similar successor regulation exempting
certain transactions involving stock -based compensation arrangements
from the "short -swing" liability provisions of Section 16 of the Act,
as adopted and amended from time to time and as interpreted by formal
or informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission.
Page 2 of 19
<PAGE> 3
(u) "Section 16 Person" means, at such times as the Company is
a reporting company under the Act, if ever, an Employee who is subject
to Section 16 of the Act, as interpreted by the rules and regulations
promulgated by the Commission thereunder, as adopted and amended from
time to time, and by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission.
(v) "Securities Act" means the Securities Act of 1933, as
amended from time to time.
(w) "Securities Law Requirements" means the Act and the rules
and regulations promulgated by the Commission thereunder, as adopted
and amended from time to time, including but not limited to Rule 16b
-3, and as interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission, and the requirements of any stock exchange, automated inter
-dealer quotation system or other recognized securities market on which
the Common Stock is listed or traded or in which the Common Stock is
included, as adopted and amended from time to time and as interpreted
by formal or informal opinions of, and other interpretive advice,
provided by the representatives of such stock exchange, quotation
system or other securities market.
(x) "Shares" means the Common Stock as adjusted in accordance
with Section 12 of the Plan.
(y) "Staff" means the staff of the Commission.
(z) "Subsidiary" means a corporation of which not less than
fifty percent (50%) of the voting shares are owned by the Company, the
Parent or a Subsidiary of either the Company or the Parent, whether or
not such corporation now exists or is hereafter organized or acquired
by the Company, the Parent or a Subsidiary.
(aa) "Successor" means the estate of an Optionee or a person
who succeeds by will or the laws of descent and distribution to an
Optionee' s right to exercise an Option.
(bb) "Tax Qualified Option" means an Option which is intended
at the time of grant to qualify for special tax treatment under Section
422A or other particular provisions of the Code and the regulations,
rulings and procedures promulgated, published or otherwise provided
thereunder, as adopted and amended from time to time.
3. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in
accordance with Section 12, the maximum aggregate number of shares of
Common Stock which may be issued and sold under Options granted
pursuant to the Plan is 2,150,500. The Shares issued and sold upon the
exercise of Options may be treasury Shares, Shares of original issue or
a combination thereof.
Page 3 of 19
<PAGE> 4
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time
under the Plan for the grant of Options, the number of Shares subject
to each Option granted pursuant to the Plan shall be provisionally
counted against the Authorized Shares from and after the grant of such
Option but only for so long as and to the extent that such Option shall
remain outstanding and unexercised. Upon the exercise, in whole or in
part, of an Option, the number of Shares issued upon such exercise
shall be permanently deducted from the Authorized Shares, provided that
no such permanent deduction shall be made, and the provisional
deduction against the Authorized Shares shall be reversed, to the
extent that the exercise price and/or the withholding taxes with
respect to such exercise are paid through the delivery to the Company
by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised.
The provisional deduction against the Authorized Shares shall likewise
be reversed to the extent of the unexercised portion of an Option upon
the expiration, lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by any such reversal of
a provisional deduction against the Authorized Shares shall immediately
become available for the granting of new Options under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or
the Board may, in its discretion, appoint a Committee to administer the
Plan subject to such terms and conditions as the Board may prescribe;
provided, however, that the terms upon which, including the time or
times at or within which, and the price or prices at which Shares may
be purchased upon the exercise of Options shall be approved or ratified
by such action of the Board or a committee duly designated by the Board
from its members as may be required by the Delaware General Corporation
Law, as amended from time to time; and provided further, however, that,
unless otherwise deemed, under all of the circumstances, to be in the
best interest of the Company, neither the Board nor any such Committee
shall make any decision concerning the Plan with respect to any Section
16 Person unless the Board or such Committee making such decision is
constituted so that such decision complies with the applicable
requirements of Rule 16b -3. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and may appoint
additional members thereof, remove members (with or without cause),
fill vacancies however caused and remove all members of the Committee
and thereafter directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the Delaware General
Corporation Law and the provisions of the Plan, the Committee shall
have the authority, in its sole discretion:
(i) To determine in accordance with Section 7(b) the
Fair Market Value of the Shares;
(ii) To determine the Employees to whom, and the time
or times at which, Options shall be granted and the number of
Shares subject to purchase upon exercise
Page 4 of 19
<PAGE> 5
of each Option (there being no limit on the number of Options
which may be granted to any one Employee or on the aggregate
number of Shares subject to purchase thereunder, except such
restrictions thereon as may be imposed by applicable tax laws
which will have to be observed if the Committee intends that a
particular Option qualify as a Tax Qualified Option);
(iii) To determine the terms and provisions of each
Option (which terms and provisions need not be identical),
including, but not limited to, the following:
(A) The Option Price subject to the
provisions of Section 7(a); and
(B) Whether Options shall become exercisable
over a period of time and when they shall be
partially or fully exercisable;
(iv) To accelerate the time as of which any
Option may be exercised;
(v) To amend any outstanding Option, subject to
the provisions of Section 19;
(vi) To authorize any person to prepare and
execute on behalf of the Company any instrument deemed by the
Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted hereunder or any
amendment to the Plan or any Option Agreement;
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating to
the Plan; and
(ix) To make all other determinations the Committee
may deem necessary or advisable in connection with the
administration of the Plan.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all
Employees, Optionees, and Successors and the respective legal
representatives, heirs, and estates, and successors and assigns of all
of the foregoing and all other persons claiming under or through any of
them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or
the Committee, and no Employee or other agent acting on behalf of the
Board or the Committee, shall be personally liable for any decision,
determination or action made or taken, or failed to be made or taken,
with respect to the Plan or any Option granted hereunder, and the
Company shall fully protect each such person in respect of any such
decision, determination
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<PAGE> 6
or action and shall indemnify each such person against any and all
claims, losses, damages, expenses and liabilities arising from or in
connection with any such decision, determination or action.
5. ELIGIBILITY. Options may be granted only to Employees who, in the
sole judgment of the Committee, have contributed or will contribute to the
success and growth of the Company. An Employee to whom the Company has
previously granted a stock option pursuant to the Plan or otherwise may, if he
is otherwise eligible, be granted additional Options.
The existence of the Plan shall not create in any Employee any right to
be granted an Option hereunder, and neither the existence of the Plan nor the
granting of any Options to any Employee hereunder shall confer upon such
Employee any right with respect to continuation of the employment of such
Employee by the Company, the Parent or any Subsidiary or shall in any way
interfere with or limit the right which such Employee or the Company, the Parent
or any Subsidiary may otherwise have to terminate such employment at any time
with or without cause. Upon the termination of any Employee's employment with
the Company, the Parent or any Subsidiary, neither the Company nor the Parent or
any Subsidiary shall have any liability or obligation to such Employee under the
Plan any Option Agreement or any Options granted to such Employee hereunder
unless such Options are then currently exercisable in accordance with Section
10(a) hereof and, if so exercisable, the Company's sole obligation shall be to
issue the appropriate number of Shares to such Employee upon the exercise of any
Option granted to such Employee under the Plan prior to such termination of
employment, provided that such exercise is duly and timely made in accordance
with the provisions of the Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected in
the Option Agreement evidencing such Option, the term of each Option shall be
ten (10) years from the date of grant thereof, provided that the Committee, if
it intends that a particular Option qualify as a Tax Qualified Option, will have
to observe such restrictions on the term of such Option as may be imposed by the
applicable tax laws in order for such Option so to qualify. Each Option shall
continue in effect in accordance with its terms notwithstanding that the Plan
may be terminated prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for
the Optioned Stock shall be such price as is determined by the
Committee at the time of grant of an Option and reflected in the Option
Agreement evidencing the same. Notwithstanding the foregoing, in no
event shall such exercise price per Share be less than the Fair Market
Value per Share as of the day prior to the date of grant of such
Option.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under
the Plan, "Fair Market Value" per Share shall be determined by the
Board in its sole discretion taking into consideration such data as the
Board shall in its sole discretion deem appropriate; provided, however,
that if the Shares are included in the Nasdaq Stock Market National
Market System
Page 6 of 19
<PAGE> 7
or listed on a stock exchange on the date as of which the same is to be
determined, the Fair Market Value per Share shall be the closing price
on such quotation system or exchange which is the principal trading
market for the Shares on the date of determination or, if no sale price
was reported for the Shares on the date of determination, the closing
price on such principal trading market for the last trading day prior
to the date of determination for which a sale price was reported;
provided further, however, that if the foregoing method of determining
Fair Market Value is inconsistent with the then existing tax law
requirements with respect to any Option which the Committee intends to
qualify as a Tax Qualified Option, then the Fair Market Value per Share
shall be determined by the Committee in such manner as is required for
such Tax Qualified Option to qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing the Shares
being acquired through exercise of an Option will be issued to the Optionee, the
Optionee must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local withholding taxes, whether
domestic or foreign, required to be withheld in connection with the exercise of
an Option.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise
be specified by the Committee in its sole discretion at the time of
grant thereof and reflected in the Option Agreement evidencing such
Option, the following forms of consideration will be accepted in
payment of the exercise price for the Shares to be issued upon exercise
of an Option and of the taxes required to be withheld in connection
with such exercise: (i) cash, (ii) personal check, (iii) bank cashier's
check, (iv) already owned Shares (duly endorsed for transfer with
signature guaranteed), or (v) any combination of the foregoing. Except
as may otherwise be specified by the Committee in its sole discretion
at the time of grant thereof and reflected in the Option Agreement
evidencing such Option, Shares withheld from the Shares to be issued
upon exercise of the Option, either alone or in any combination with
any of the other acceptable forms of consideration recited in this
Paragraph (a), will also be an accepted form of consideration for
payment of the taxes required to be withheld in connection with the
exercise of an Option. In addition to the acceptable forms of
consideration hereinabove recited in this Paragraph (a), the Committee
may determine in its sole discretion at the time of grant of an Option,
and if the Committee so determines, shall provide in the Option
Agreement evidencing such Option, that one or both of the following
additional forms of consideration will be accepted, either alone or in
any combination with any of the other acceptable forms of consideration
recited in this Paragraph (a), in payment of the items specified: (vi)
in payment of the exercise price for the Shares to be issued upon
exercise of an Option, Shares withheld from the Shares to be issued
upon such exercise, and/or (vii) in payment of the exercise price for
the Shares to be issued upon exercise of an Option and the taxes
required to be withheld in connection with such exercise, a commitment
for the delivery to the Company of proceeds from the sale, pursuant to
a brokerage or similar arrangement approved in advance by the Committee
in its sole discretion, of Shares to be issued upon exercise of the
Option. The forms of consideration which will be accepted in payment of
the exercise price for an Option and related withholding taxes shall be
specified
Page 7 of 19
<PAGE> 8
in the Option Agreement evidencing such Option, and the person or
persons entitled to exercise the Option shall be entitled to elect from
those so specified form(s) to be used in effecting payment with respect
to a particular exercise; provided, however, that any election by a
Section 16 Person to use already owned Shares or have Shares withheld
from those issuable upon such exercise shall be effective only if made
in accordance with the applicable requirements of Rule 16b-3; and
provided further that a commitment for the delivery to the Company of
proceeds from the sale, pursuant to a brokerage or similar arrangement,
of Shares to be issued upon exercise of an Option will not be accepted
from a Section 16 Person if under Securities Law Requirements such a
sale would be matched with such exercise to result in "short-swing"
profit liability under Section 16(b) of the Act on the part of such
Section 16 Person with respect to such transaction.
(b) WITHHOLDING TAX LOANS. In addition to any one or more of
the acceptable forms of consideration recited in Paragraph (a) of this
Section 9 which the Committee may permit in the Option Agreement to be
used for the payment of withholding taxes, the Committee may determine
in its discretion at the time of grant of an Option to permit the
Optionee (but not any Successor) to, and if the Committee so
determines, shall provide in the Option Agreement evidencing such
Option that such Optionee may, borrow from the Company an amount
sufficient to pay the taxes required to be withheld in connection with
the exercise of such an Option, with each such borrowing to be
evidenced by a promissory note of the Optionee payable to the order of
the Company. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing an Option, each such loan shall be for a
term of five (5) years at a rate of interest equal to the Company's
then primary domestic commercial lender's prime or base rate as in
effect from time to time, with payments of interest on such loan due
quarterly and payments toward the principal of such loan due, to the
extent of the net proceeds therefrom, within fifteen (15) days after
any disposition by the Optionee of any Shares acquired upon exercise of
any stock option granted by the Company to the Optionee pursuant to the
Plan or otherwise (excluding any disposition of such Shares by gift or
to the Company in payment of the exercise price of a stock option
granted by the Company to the Optionee pursuant to the Plan or
otherwise and/or any related withholding taxes), provided that the
entire unpaid principal balance shall be due at the earlier of (i) the
expiration of the five (5) year term, or (ii) the termination of the
Optionee's Continuous Employment (other than by reason of Optionee's
"disability" (as defined in Section 10(d)) or "retirement" (as defined
in Section 10(e))).
(c) COMPANY WITHHOLDING OF TAXES. If, upon being notified by
the Company of the amount of the taxes required to be withheld in
connection with an exercise of an Option, the Optionee fails promptly
to pay, or to make arrangements acceptable to the Company for the
payment of, such taxes, the Company shall have the right to elect (but
shall be under no obligation) to cover such taxes through:
(i) withholding Shares from those issuable upon such
exercise, provided that any such election so to withhold
Shares with respect to the exercise of an Option
Page 8 of 19
<PAGE> 9
by a Section 16 Person shall be effective only if made in
accordance with the applicable requirements of Rule 16b -3;
and/or
(ii) deducting such taxes from any amounts payable in
cash to the Optionee by the Company for any reason as of the
time of such exercise or any time thereafter.
(d) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price and/or related
withholding taxes, such Shares shall be valued (i) with respect to the
payment of the exercise price, at Fair Market Value as of the day
immediately preceding the date of exercise and (ii) with respect to the
payment of withholding taxes, at Fair Market Value as of the day
immediately preceding the date tax withholding is required to be made.
(e) OPTIONEE CERTIFICATION OF ALREADY OWNED SHARES. Already
owned Shares which were acquired through a previous exercise of a stock
option granted to an Optionee by the Company pursuant to the Plan or
otherwise may be used in payment of the exercise price of an Option
and/or related withholding taxes only if the previous exercise through
which such Shares were acquired was made as of a date not less than six
(6) months prior to the date of the exercise of the Option in
connection with which such Shares are being tendered as payment. A
tender of already owned Shares in payment of the exercise price of an
Option and/or related withholding taxes will not be accepted by the
Company unless accompanied by a written statement signed by the person
or persons entitled to exercise such Option certifying that either (i)
the Shares tendered in payment were acquired other than through the
exercise of a stock option granted by the Company or (ii) the Shares
tendered in payment were acquired through the exercise, on such date(s)
as shall be recited in such statement (which date(s) shall be not less
than six (6) months prior to the date of tender), of stock option(s)
granted by the Company.
(f) DELIVERY OF ALREADY OWNED SHARES. Where the person
exercising an Option elects to use already owned Shares in full or
partial payment of the exercise price and/or related withholding taxes,
the Committee may, in its sole discretion, accept, in lieu of physical
delivery of the stock certificates evidencing such Shares, such
constructive delivery of such Shares as may be satisfactory to the
Committee.
10. METHOD OF EXERCISE.
(a) EXERCISE ELIGIBILITY. An Option may be exercised in
accordance with the terms hereof at any time after, and only after, one
or more of the following has occurred:
(i) a Change in Control (as defined in Paragraph
(c) of Section 12) or
(ii) an IPO.
Page 9 of 19
<PAGE> 10
In the event of any conflict or apparent conflict between the
provisions of this Section 10(a) and any other provision in the Plan,
the provisions of this Section 10(a) shall control.
(b) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Committee and as permitted under
the Plan. An Option may not be exercised for a fraction of a Share. In
order to exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company written notice of the number of Shares
with respect to which the Option is being exercised, accompanied by
payment in full of the aggregate exercise price for the Shares so to be
acquired. To constitute an effective exercise of an Option, such notice
and payment shall be addressed to the attention of the Treasurer of the
Company and must be received at the principal executive office of the
Company (i) with respect to an Option that is terminated for
"Misconduct" (as defined below) pursuant to Paragraph (b) of this
Section 10 or for "Prohibited Conduct" (as defined in Section 16(a))
pursuant to Section 16(a), prior to the time of the occurrence of the
event constituting such Misconduct or Prohibited Conduct or (ii) with
respect to any other Option, by 5:00 p.m., local time, on the date of
expiration or termination of the Option. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends nor any
other rights as a stockholder shall exist with respect to the Optioned
Stock notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in
Section 12.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under such
Option by the number of Shares as to which the Option is exercised,
including any Shares withheld from the Shares to be issued pursuant to
such exercise to cover the exercise price and/or related withholding
taxes.
(c) TERMINATION OF EMPLOYMENT. Subject to the limitations in
Section 10(a) on exercise prior to a Change in Control or an IPO, and
except as may otherwise be specified by the Committee in its sole
discretion at the time of grant thereof and reflected in the Option
Agreement evidencing such Option, upon the termination of an Optionee's
Continuous Employment (other than by reason of the Optionee's death,
disability or retirement), he may exercise his Option (to the extent,
if any, that he was entitled to exercise it at the time of such
termination of employment) until the earlier of (i) the date thirty
(30) days (or such longer period of time as is determined by the
Committee in its sole discretion at the time of such termination of
employment, provided that if the Committee intends that a particular
Option continue to qualify as a Tax Qualified Option, the Committee
will observe such restrictions as may be imposed by applicable tax laws
on the post-termination period within which a Tax Qualified Option may
be exercised if it wishes to ensure that any post-termination exercise
of such Option is made only within the period permitted by such laws)
after the effective date of the termination of his employment or (ii)
the expiration date of such Option, and the Option shall terminate on
the earlier of such dates; provided, however, that if the Optionee is
terminated by the Company for Misconduct, then such Option shall
terminate effective as
Page 10 of 19
<PAGE> 11
of the time of the conduct constituting such Misconduct. As used in the
Plan, "Misconduct" means that the Optionee has engaged in Prohibited
Conduct, committed an act of embezzlement, fraud or theft with respect
to the property or business of the Company or any of its affiliates, or
deliberately disregarded the rules of the Company in such a manner as
to cause material loss, damage or injury to or otherwise endanger the
property, reputation, employees or business prospects of the Company.
The Committee shall determine whether an Optionee's employment was
terminated by reason of Misconduct. In making such determination, the
Committee may, but shall not be required to, give the Optionee an
opportunity to be heard and to present evidence on his behalf.
(d) DEATH OF OPTIONEE. Subject to the limitations in Section
10(a) on exercise prior to a Change in Control or an IPO, and except as
may otherwise be specified by the Committee in its sole discretion at
the time of grant thereof and reflected in the Option Agreement
evidencing such Option, upon the death of an Optionee who is at the
time of his death in the employ of the Company or a Subsidiary and who
shall have been in Continuous Employment since the date of grant of the
Option, the Option may be exercised (to the extent, if any, the
Optionee was entitled to do so as of the date of his death) by his
Successor until the earlier of (i) the date six (6) months following
the date of death (or, if the Committee intends that a particular
Option qualify as a Tax Qualified Option, such lesser period of time
following the date of the Optionee's death within which the applicable
tax laws may require that the Option be exercised in order for such
Option so to qualify) and (ii) the expiration date of such Option, and
the Option shall terminate on the earlier of such dates.
(e) DISABILITY OF OPTIONEE. Subject to the limitations in
Section 10(a) on exercise prior to a Change in Control or an IPO, and
except as may otherwise be specified by the Committee in its sole
discretion and reflected in the Option Agreement evidencing such
Option, if an Optionee's Continuous Employment terminates due to his
having become permanently and totally disabled within the meaning of
Section 22(e)(3) of the Code ("disability"), the Option may be
exercised (to the extent, if any, the Optionee was entitled to do so as
of the effective date of the termination of his employment by reason of
such disability) until the earlier of (i) the later of June 1, 1998 or
the date one (1) year after the effective date of such termination of
employment and (ii) the expiration date of such Option, and the Option
shall terminate on the earlier of such dates.
(f) RETIREMENT OF OPTIONEE. Subject to the limitations in
Section 10(a) on exercise prior to a Change in Control or an IPO, and
except as may otherwise be specified by the Committee in its sole
discretion and reflected in the Option Agreement evidencing such
Option, if an Optionee's Continuous Employment terminates by reason of
(i) his retirement at any age entitling him to benefits under the
provisions of any retirement plan of the Company, the Parent, or any
Subsidiary in which such Optionee participates; or (ii) retirement at
any time after attaining age 65 (whichever circumstance is applicable
constituting "retirement"), the Option may be exercised (to the extent
the Optionee shall be entitled, if any, to do so as of the effective
date of the termination of his employment by reason of such retirement)
until the earlier of (A) the date three (3) months after the effective
Page 11 of 19
<PAGE> 12
date of the termination of his employment and (B) the expiration date
of such Option, and the Option shall terminate on the earlier of such
dates.
11. NON-TRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner by the Optionee
except at death by will or by the laws of descent and distribution and may be
exercised during the life of the Optionee only by the Optionee. No lien,
obligation or liability of an Optionee or a Successor shall attach to or
otherwise encumber the right and interest of such Optionee or Successor in and
to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of
Paragraph (b) of this Section 12 and to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been
granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of a stock option under the Plan are
again available for grant, as well as the price per Share covered by
each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of Shares or any other similar increase
or decrease in the aggregate number of issued and outstanding Shares
effected without receipt of consideration by the Company; provided,
however, that neither the issuance of Shares pursuant to the exercise,
conversion or exchange of any securities of the Company exercisable
for, convertible into or exchangeable for Shares nor the issuance of
Shares pursuant to any anti-dilution agreement shall be deemed to have
been "effected without receipt of consideration." Any fractional Shares
which would otherwise result from any such adjustments shall be
eliminated either by deleting all fractional Shares or by appropriate
rounding to the next higher (fractions of one-half or more) or lower
(fractions of less than one -half) whole Share. All such adjustments
shall be made by the Board in its sole discretion. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into or exchangeable for shares of
stock of any class, shall affect, and no adjustment by reason thereof
shall be made to, the number of or exercise price for Shares subject to
an Option.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the assets of the
Company, the sale of all issued and outstanding shares of the Company
to a single purchaser, or the merger or consolidation of the Company
with or into another corporation, each outstanding Option shall be
assumed, or an equivalent option shall be substituted, by such
successor corporation or a parent or subsidiary of such successor
corporation, unless the Board, in the exercise of its sole discretion,
determines that, in lieu of such assumption or substitution, the
Optionee shall have the right to exercise the Option as to all or any
part of the Optioned Stock, including Shares as to which the Option
would not otherwise then be exercisable. If in the event of a merger,
consolidation or sale of the Company by stock or asset sale, the Board
makes an Option fully exercisable in lieu
Page 12 of 19
<PAGE> 13
of assumption or substitution, the Company shall notify the Optionee
that the Option shall be fully exercisable for a period of thirty (30)
days from the date of such notice, and the Option will terminate upon
the expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event
of a "Change in Control" of the Company (as defined in Paragraph (c) of
this Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the
following acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such
Change in Control that are not yet fully vested on such date
shall become fully vested; and
(ii) The value of all outstanding Options, measured
by the excess of the "Change in Control Price" (as defined in
Paragraph (d) of this Section 12) over the exercise price,
shall be cashed out, and the Options so cashed out shall
terminate. The cash out proceeds shall be paid to the Optionee
or, in the event of death of an Optionee prior to payment, to
his Successor.
(c) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act becomes the "beneficial
owner" (as defined in Rule 13d-3 promulgated by the Commission
under the Act, as adopted and amended from time to time and as
interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff
of the Commission), directly or indirectly, of securities of
the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities;
(ii) The consummation of a transaction requiring
stockholder approval and involving the sale of all or
substantially all of the assets of the Company or the merger
or consolidation of the Company with or into another
corporation.
(iii) For purposes of determining whether there has
been a Change In Control under Section 12(c)(i), a Company or
affiliate employee benefit plan, including any trustee of such
a plan acting as trustee (who himself is not a beneficial
owner, directly or indirectly (other than the securities in
such trust), of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the
Company's then outstanding securities), acting as trustee
shall not be considered to be a person who has become the
beneficial owner, directly or indirectly, of securities of the
Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding
securities.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of
this Section 12, "Change in Control Price" shall be: (i) the highest
price paid or offered, as determined by the
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<PAGE> 14
Board, in any bona fide transaction or bona fide offer related to the
Change in Control at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period") or if the Shares are then traded on the Nasdaq Stock Market
National Market System, a stock exchange or other recognized securities
market, then, at the election of the Board, (ii) the highest closing
sale price of a Share, as reported by the Nasdaq Stock Market National
Market System, any stock exchange on which the Shares are listed or any
other recognized securities market on which the Shares are traded, at
any time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option; provided, however, that the Committee may approve an
earlier grant date if required to ratify a prior promise by the Corporation to
an Employee to grant the Option. Notice of such determination shall be given to
each Employee to whom an Option is so granted within a reasonable time after the
date of such grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under the Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 20(a), each such Option Agreement
shall contain such provisions as are required by the terms of the Plan and may
contain such additional provisions not inconsistent with the terms of the Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement evidencing an Option granted to a Section 16 Person shall also
provide for such minimum waiting period from the date of grant before the Option
may be exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such Shares must be
held before making any disposition of such Shares, as may be required by Rule
16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
As a condition to the grant or exercise of an Option or the issuance of
Shares upon exercise of an Option, the Company may require the person exercising
such Option to become a party to a stockholders agreement restricting
transferability of the Shares and to make such representations and warranties to
the Company as may be required by the Committee in its sole discretion,
including those which, in the opinion of counsel for the Company, are required
by any of the aforementioned Securities Law Requirements and other laws, which
may include, without limitation, representations and warranties that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares.
Page 14 of 19
<PAGE> 15
The Company shall not have any liability to any Optionee in respect of
any delay in the sale or issuance of Shares hereunder until the Company is able
to obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain. In no event shall the
Company be required to take any action to make it possible to issue Shares
hereunder.
16. FORFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) LOSS OF UNEXERCISED OPTIONS. If an Optionee holding an
outstanding Option, without the written consent of the Company as
authorized by the Committee in its sole discretion, engages in any of
the following (any such conduct being referred to as "Prohibited
Conduct") at any time during the period beginning on the date the
Optionee first entered the employ of the Company, the Parent or a
Subsidiary and continuing for so long as any portion of such Option
remains outstanding and unexercised (the "Grant Period"):
(i) rendering services for any organization or
engaging directly or indirectly in any business which, in the
sole judgment of the Committee, is or becomes competitive with
the Company, the Parent or a Subsidiary, or where such
rendering of services or engaging in business, in the sole
judgment of the Committee, is or becomes otherwise prejudicial
to or in conflict with the interests of the Company, the
Parent or a Subsidiary; provided, however, that the ownership
of a not more than ten percent (10%) equity interest in any
organization or business whose equity is listed on a
recognized securities exchange or traded over-the-counter
shall not constitute Prohibited Conduct within the meaning of
this Subparagraph (i);
(ii) disclosing to anyone outside the Company, the
Parent or any Subsidiary, or use in other than the business of
the Company, the Parent or any Subsidiary, any confidential or
proprietary information relating to the business of the
Company, the Parent or any Subsidiary, acquired by the
Optionee either during or after employment with the Company,
the Parent or a Subsidiary;
(iii) except as may otherwise be permitted by any
agreement otherwise made by the Company, the Parent or a
Subsidiary with the Optionee, failing to disclose fully and
promptly in writing and assign to the Company, the Parent or
to the Subsidiary by which the Optionee is or was employed all
right, title and interest in any discovery, invention,
process, method, improvement or idea, whether or not
patentable or subject to copyright protection and whether or
not reduced to tangible form or reduced to practice, made or
conceived by such person during employment by the Company, the
Parent or such Subsidiary, relating in any manner to the
actual or contemplated business, research or development work
of the Company, the Parent or such Subsidiary or to do
anything reasonably necessary to enable the Company, the
Parent or such Subsidiary to secure a patent, copyright or
similar protection in the
Page 15 of 19
<PAGE> 16
United States of America and/or in foreign countries as the
Company, the Parent or such Subsidiary may elect; or
(iv) inducing or attempting to induce any customer or
supplier of the Company , the Parent or a Subsidiary to breach
any contract with the Company , the Parent or a Subsidiary or
otherwise terminate its relationship with the Company, the
Parent or a Subsidiary; then the Committee shall have the
right, upon determining that the Optionee has engaged in any
Prohibited Conduct at any time during the Grant Period (in
making such determination, the Committee may, but shall not be
required to, give the Optionee an opportunity to be heard and
to present evidence on his behalf), to declare the Option
forfeited and canceled effective as of the time of the conduct
constituting such Prohibited Conduct.
(b) OPTIONEE CERTIFICATION UPON EXERCISE. Each time an
Optionee exercises an Option, the Optionee shall be deemed to certify
to the Company that such Optionee did not, without the written consent
of the Company as authorized by the Committee in its sole discretion,
engage in any Prohibited Conduct at any time during the period
beginning on the date the Optionee first entered the employ of the
Company, the Parent or a Subsidiary and ending on the date of such
exercise (the "Pre-Exercise Period").
(c) LOSS OF REALIZED BENEFITS. In the event that the Committee
determines with respect to a particular exercise of an Option that the
Optionee engaged in any Prohibited Conduct at any time during the
Pre-Exercise Period or within one (1) year after such exercise (in
making such determination, the Committee may, but shall not be required
to, give the Optionee an opportunity to be heard and to present
evidence on his behalf), such Optionee shall be liable to the Company
(i) to the extent such Optionee has, prior to his receipt of the
"Forfeiture Notice" (as defined below), disposed of the Shares acquired
through such exercise, for payment to the Company of an amount in cash
equal to the excess of (A) the net cash proceeds from such disposition
(or if such Shares were disposed of other than for cash, the aggregate
Fair Market Value of such Shares as of the date of disposition) over
(B) that portion of the sum of the cash and the aggregate Fair Market
Value as of the exercise date of any already owned Shares used by the
Optionee to pay the exercise price for such Shares (such sum being
referred to as the "Exercise Payment") which is allocable to the Shares
disposed of in the proportion that such number of Shares bears to the
total number of Shares issued pursuant to such Option exercise and (ii)
to the extent such Optionee still owns at the time he receives the
Forfeiture Notice the Shares acquired through such exercise, at the
option of the Committee, either (A) for the return of such Shares to
the Company in exchange for a cash refund from the Company to such
Optionee in an amount equal to that portion of the Exercise Payment
which is allocable to the Shares still owned in the proportion that
such number of Shares bears to the total number of Shares issued
pursuant to such Option exercise (such portion being referred to as the
"Retained Shares Exercise Payment") or (B) for payment to the Company
of an amount in cash equal to the excess of the aggregate Fair Market
Value as of the exercise date of the Shares still owned over the
Retained Shares Exercise Payment. To enforce such liability against
such Optionee, the Committee shall notify the Optionee thereof in
writing within three (3) years of the date of the affected Option
Page 16 of 19
<PAGE> 17
exercise, which notice (the "Forfeiture Notice") shall include a
statement of the form of payment which the Committee has elected to
receive from the Optionee with respect to Shares still owned by the
Optionee. Within ten (10) days after receiving the Forfeiture Notice,
the Optionee shall make full payment of such liability to the Company
in cash, or to the extent such Optionee still owns Shares acquired
through the affected exercise and the Committee elects in the
Forfeiture Notice to receive such Shares, stock certificates evidencing
such Shares still owned by the Optionee (duly endorsed for transfer
with signature guaranteed). In the event that the Committee elects to
receive, and the Optionee returns, Shares, the Company shall make the
refund payment required to be made to the Optionee with respect to such
Shares upon the Company's receipt of such Shares as hereinabove
required.
(d) CUMULATIVE RIGHTS. The obligation of an Optionee under
this Section 16 to refrain from Prohibited Conduct is in addition to,
and does not in any way supersede or diminish, any other obligation of
such Optionee with respect to such matters which such Optionee may owe
to the Company, the Parent, any Subsidiary or any other person under
any agreement, applicable law or otherwise (a "Similar Obligation").
Any action taken by the Company or the Committee to enforce,
compromise, settle or waive the provisions of this Section 16 with
respect to any particular event constituting Prohibited Conduct shall
not in any way affect the rights of the Company, the Committee, the
Parent, any Subsidiary or any other person against an Optionee with
respect to any other event constituting Prohibited Conduct or any
Similar Obligation, nor shall any action taken or failed to be taken by
the Company, the Parent, any Subsidiary or any other person against an
Optionee to enforce, compromise, settle or waive any Similar Obligation
have any effect on the rights of the Company and the Committee under
this Section 16.
17. RESERVATION OF SHARES. As of the date of adoption of the Plan, the
Company has sufficient authorized but unissued Shares to satisfy the
requirements of the Plan. The Company shall reserve and hereafter keep available
such number of Shares as shall be sufficient to satisfy the requirements of the
Plan.
18. EFFECTIVENESS OF PLAN. The Plan was duly adopted by the Board and
by the unanimous written consent of the Stockholders, as required by the
Delaware General Corporation Law. The Plan shall continue in full force and
effect until (i) terminated by resolution of the Board or (ii) both (A) all
Options granted under the Plan have been exercised in full and (B) no Authorized
Shares remain available for the granting of additional Options. The termination
of the Plan shall not affect Options already granted, which Options shall remain
in full force and effect in accordance with their respective terms and the terms
hereof as if the Plan had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may,
in its sole discretion, amend the Plan from time to time, provided that any
amendment which Rule 16b-3 or any other Securities Law Requirement requires be
approved by the stockholders of the Company shall be made only with the approval
of such stockholders. Amendments to the Plan shall apply prospectively to all
Options then outstanding under the Plan, except in the case of any amendment
which is adverse to an Optionee, in which case the amendment shall apply with
respect
Page 17 of 19
<PAGE> 18
to the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 4(b)(v) to amend outstanding Options, the Committee likewise may make an
amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 19,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
20. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN EMPLOYEES. Notwithstanding any other
provision of the Plan to the contrary but subject to applicable
Securities Law Requirements and tax laws, to the extent deemed
necessary or appropriate by the Committee in its sole discretion in
order to further the purposes of the Plan with respect to Employees who
are foreign nationals and/or employed outside the United States of
America, an Option granted to any such Employee may be on terms and
conditions different from those specified in the Plan in recognition of
the differences in the laws, tax policies and customs applicable to
such an Employee, without the necessity of the Plan being amended to
provide for such different terms and conditions.
(b) NATURE OF BENEFITS. Benefits realized by an Optionee under
the Plan or any Option granted hereunder shall not be deemed a part of
such Optionee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay law of any country and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement
provided to such Optionee by the Company unless expressly so provided
by such other plan or arrangement, or except where the Committee
expressly determines in its sole discretion that an Option or portion
thereof should be so included in order accurately to reflect
competitive compensation practices or to recognize that an Option has
been granted in lieu of a portion of competitive annual cash
compensation.
(c) DETERMINATION OF DEADLINES. If any day on or before which
action under the Plan or any Option granted hereunder must be taken
falls on a Saturday, Sunday or Company-recognized holiday, such action
may be taken on the next succeeding day which is not a Saturday, Sunday
or Company-recognized holiday; provided, however, that the provisions
of this Paragraph (c) shall not apply to, and shall not extend the time
for exercise of, any Option which is terminated for Misconduct pursuant
to Section 10(b) or for Prohibited Conduct pursuant to Section 16(a).
(d) GOVERNING LAW. To the extent that federal laws (such as
the Act or the Code) or the Delaware General Corporation Act do not
otherwise control, the Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Ohio and construed accordingly.
Page 18 of 19
<PAGE> 19
(e) GENDER AND NUMBER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
(f) CAPTIONS. The captions contained in the Plan are for
convenience of reference only and do not affect the meaning of any term
or provision hereof.
Page 19 of 19
<PAGE> 1
Exhibit 10.1.3
FIRST AMENDMENT TO
AMENDED AND RESTATED
AIRONET WIRELESS COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
BACKGROUND
A. The Amended and Restated Aironet Wireless Communications, Inc. 1996
Stock Option Plan (the "Plan") was adopted by the Board of Directors of Aironet
Wireless Communications, Inc. (the "Company") and approved by the stockholders
of the Company on March 30, 1998.
B. The Plan currently requires that certain conditions be satisfied
prior to the exercise of vested options (the "Exercise Conditions"). Subject to
stockholder approval, the Directors desire amend the Plan to remove the Exercise
Conditions by a date certain.
C. The maximum aggregate number of shares of Common Stock (as defined
in the Plan) which may be issued under the Plan is 2,150,500. Subject to
stockholder approval, the Directors desire to increase the number of shares of
Common Stock reserved under the Plan.
D. In accordance with the terms and conditions of the Plan, this
Amendment shall apply to previously issued Options without the consent of the
option holders, as this Amendment is favorable to such holders.
1. PLAN AMENDMENT.
Section 3(a) of the Plan captioned "NUMBER OF SHARES ISSUABLE" is
amended in its entirety to read as follows:
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in accordance
with Section 12, the maximum aggregate number of shares of Common Stock
which may be issued and sold under Options granted pursuant to the Plan
is 2,223,000 shares of Common Stock. The Shares issued and sold upon
the exercise of Options may be treasury Shares, Shares of original
issue or a combination thereof.
Section 10(a) of the Plan captioned "EXERCISE ELIGIBILITY" is
amended in its entirety to read as follows:
(a) EXERCISE ELIGIBILITY. An Option may be exercised in accordance
with the terms hereof at any time after, and only after, the earlier
of:
(i) a Change in Control (as defined in Paragraph (c) of
Section 12) or
(ii) an IPO; or
<PAGE> 2
(iii) March 31, 2001.
In the event of any conflict or apparent conflict between the
provisions of this Section 10(a) and any other provision in the Plan,
the provisions of this Section 10(a) shall control.
2. EFFECTIVENESS OF AMENDMENT. This Amendment was duly approved and
adopted by the Board of Directors and Stockholders of the Company effective
March 31, 1999.
3. Each initially capitalized term used but not defined in this
Amendment shall have the same meaning given to such term in the Plan.
4. Except as amended hereby, the provisions of the Plan shall remain
in full force and effect.
- END -
<PAGE> 1
Exhibit 10.1.4
AIRONET WIRELESS COMMUNICATIONS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE OF THE PLAN. The Plan is intended as an incentive to,
and to encourage stock ownership by, all Eligible Employees of the Company and
Participating Subsidiaries so that they may share in the fortunes of the Company
by acquiring or increasing their proprietary interest in the Company. The Plan
is designed to encourage Eligible Employees to remain in the employ of the
Company. It is intended that options granted pursuant to this Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Code.
2. DEFINITIONS. In addition to such other capitalized terms as
are defined elsewhere in this Plan, the following terms shall when used in this
Plan have the respective meanings set forth below:
"Business Day" means a day on which there is trading in the
Common Stock on the Principal Market.
"Base Compensation" means an employee's annual base salary, or
if not salaried, annualized amount of hourly pay (including any shift or other
compensatory premium which employee will regularly receive) based on the
employee's regular weekly or biweekly hours, for services rendered to the
Company and Participating Subsidiaries, including paid vacation and holidays and
before adjustment for salary reduction contributions to the Company's 401(k)
plan, health care or dependent care spending accounts and similar pre-tax plans
but excluding bonuses and commissions.
"Closing Price" means the closing price for one share of
Common Stock on the Principal Market.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Committee" means a committee of the Board of Directors
appointed by the Board to administer this Plan, or if no such committee is
established, then the Board of Directors.
"Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
"Company" means Aironet Wireless Communications, Inc., a
Delaware corporation.
"Covered Compensation" means an employee's Base Compensation
plus bonuses, commissions, overtime and other premium payments, sick pay, and
short-term disability payments but excluding severance pay and taxable fringe
benefits (such as club dues, excess life insurance and personal automobile use);
provided, however, that no more
Page 1 of 10
<PAGE> 2
than $150,000 in cumulative aggregate amount of all of the foregoing forms of
included compensation during any single Payment Period or two Payment Periods
together comprising a single calendar year may be counted as Covered
Compensation for purposes of any payroll deductions, stock purchases or other
computations under this Plan with respect to such Payment Period(s).
"Eligible Employees" shall have the meaning set forth in
Section 3.
"Option Price" means, in respect of each Payment Period, the
dollar amount (carried out to one one-thousandth of a cent ($0.00001)) equal to
85% of the lesser of (i) the Closing Price of the Common Stock on the first
Business Day of the Payment Period and (ii) the Closing Price of the Common
Stock on the last Business Day of the Payment Period.
"Participating Subsidiaries" means any majority-owned
subsidiary of the Company which is designated by the Committee to participate in
the Plan. The Committee shall have the power to make such designation before or
after the Plan is approved by the Company's stockholders.
"Payment Period" means the six month periods during which
payroll deductions will be accumulated under the Plan.
"Plan" means this Aironet Wireless Communications, Inc. 1999
Employee Stock Purchase Plan.
"Principal Market" means The Nasdaq Stock Market's National
Market or stock exchange which is then the principal trading market for the
Common Stock (or, if the Common Stock is traded on more than one market, that
market which the Committee determines to be the principal trading market).
"Securities Law Requirements" means the Securities Act of
1933, the Securities and Exchange Act of 1934 and the rules and regulations
promulgated by the Securities and Exchange Commission thereunder, including but
not limited to Rule 16b-3, as adopted and amended from time to time and as
interpreted by formal or informal opinions of and releases published or other
interpretative advice provided by the Staff of the Securities and Exchange
Commission, and the requirements of the Nasdaq Stock Market or any stock
exchange, automated interdealer quotation system or other recognized securities
market on which the Common Stock is listed or traded on in which the Common
Stock is included, as adopted and amended from time to time and as interpreted
by formal or informal opinions of, and other interpretative advice provided by,
the representatives of such stock exchange, quotation system or other securities
market.
3. ELIGIBLE EMPLOYEES. Each full-time employee of the Company or
any of its Participating Subsidiaries, and each part-time employee thereof
regularly working at least 20 hours per week or 40 hours every two weeks, who
has completed 12 months of continuous employment with the Company and/or one or
more of its Participating
Page 2 of 10
<PAGE> 3
Subsidiaries and whose Base Compensation does not exceed $150,000 shall be
eligible to receive options under this Plan to purchase Common Stock (except
employees in countries whose laws make participation impractical). Persons who
have been so employed for 12 months or more on the first day of a Payment Period
shall receive their options as of such day. The determination of an employee's
Plan eligibility with respect to the Base Compensation limitation will be made
only as of the beginning of each Payment Period, based on the rate of Base
Compensation he or she is then receiving, without regard to any changes in his
or her Base Compensation that may subsequently be made during that Payment
Period (including any changes given retroactive effect to a date prior to the
commencement of the Payment Period). Except as otherwise provided in Section 14,
all other eligibility requirements must be satisfied at all times throughout the
Payment Period until and including the third Friday of the last month of such
Payment Period or, in the case of the requirement that a participant be employed
by the Company or a Participating Subsidiary, up until and including the last
Business Day of such Payment Period (provided that, after the third Friday of
the last month of the Payment Period, satisfaction of said employment conditions
shall be determined without regard to the full-time and part-time minimum hour
requirements of the first sentence of this Section 3, which full-time and
part-time minimum shall apply for that Payment Period only through said third
Friday). All participating employees satisfying the eligibility requirements of
the Plan as of said third Friday or last Business Day of the Payment Period as
provided in the preceding sentence shall be entitled to purchase shares on the
last Business Day of such Payment Period as provided in this Plan. Any employee
eligible to and duly participating in the Plan as of the beginning of a Payment
Period but who at any time during that Payment Period loses his or her status as
an Eligible Employee will be deemed to have lost such status, and to have
withdrawn from participation in the Plan as described in Section 10, effective
as of the beginning of the regular payroll period during which he or she ceases
to satisfy any such requirement; provided, however, that if such ineligibility
is the result of the termination of his or her employment, the provisions of
Section 15 shall, subject to the provisions of Section 14, control over the
initial provisions of this sentence.
In no event may an employee be granted an option if such employee,
immediately after the option is granted, shall own stock representing 5% or more
of the total combined voting power or value of all classes of stock of the
Company. For purposes of determining stock ownership under this paragraph, the
rules of Section 425(d) of the Code shall apply, and stock which the employee
may purchase under outstanding options shall be treated as stock owned by the
employee.
4. STOCK SUBJECT TO THE PLAN. The total number of shares of
Common Stock that may be optioned under the Plan is 500,000 shares, which may
consist, in whole or in part, of unissued shares or treasury shares.
5. PAYMENT PERIODS AND GRANT OF OPTIONS. The six-month periods,
January 1 to June 30 and July 1 to December 31, are the Payment Periods during
which payroll deductions will be accumulated under the Plan.
Page 3 of 10
<PAGE> 4
On the first Business Day of each Payment Period (i.e., twice each
year), each Eligible Employee who is then a participant in the Plan will
automatically be granted by the Company an option to purchase, on the last
Business Day of such Payment Period and at the applicable Option Price, such
number of whole shares of the Common Stock reserved under this Plan as such
employee is entitled to purchase under this Plan with the payroll deductions
authorized and credited to his or her account during each Payment Period in
accordance with the terms hereof, up to that number of shares which does not
exceed 15% of the employee's Covered Compensation during the Payment Period
divided by the Option Price, provided that such employee remains eligible to
participate in the Plan as provided herein. The participant shall be entitled to
exercise such options as granted only to the extent of his or her unused payroll
deductions accumulated as of the third Friday of the last month of a Payment
Period. Deductions after the third Friday of the last month of a Payment Period
shall be included in the subsequent Payment Period.
No employee shall be granted an option which permits his or her rights
to purchase Common Stock under the Plan and any similar plans of the Company or
any parent or subsidiary corporations to accrue at a rate which exceeds $25,000
of fair market value of such stock (determined at the time such option is
granted) for each calendar year in which such option is outstanding at any time.
The purpose of the limitation in the preceding sentence is to comply with
Section 423(b)(8) of the Code.
6. EXERCISE OF OPTIONS. Each Eligible Employee who continues to
qualify as such as of the last Business Day of a Payment Period, or who would
have been a continuing participant in the Plan as of such date had he or she not
withdrawn, or been deemed to have withdrawn, from participation pursuant to
Section 10, shall be deemed by his or her payroll deduction contributions to the
Plan during such Payment Period to have irrevocably stated his or her intention
to exercise his or her option on the last Business Day of such Payment Period
and shall be deemed to have purchased from the Company such number of whole
shares of the Common Stock reserved for the purposes of the Plan as his or her
unused payroll deductions accumulated as of the third Friday of the last month
of such Payment Period will pay for at the Option Price. If a participant is not
an employee of the Company or any Participating Subsidiary on the last Business
Day of a Payment Period, he or she shall not be entitled to exercise his or her
option.
7. AUTHORIZATION FOR ENTERING PLAN. An employee may enter the
Plan by filling out, signing and delivering to the Company's Employee Services
Department a written "Authorization", in form and manner satisfactory to the
Company:
(a) stating the whole percentage of Covered Compensation to be
deducted regularly from his or her pay; and
(b) authorizing the purchase of stock for him or her in each
Payment Period in accordance with the terms of the Plan.
Page 4 of 10
<PAGE> 5
Such Authorization must be received by the Company's Employee Services
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
The Company will accumulate as a credit for the employee's account the
authorized deductions made from his or her pay. No interest will be paid on such
accumulated amounts.
8. AMOUNT OF PAYROLL DEDUCTIONS. An employee may authorize
payroll deductions in a whole percentage amount not less than 1% but not more
than 15% of his or her Covered Compensation received during the Payment Period.
Covered Compensation is considered received on the date a payroll check for, or
direct deposit of, the net amount thereof due employee is issued or made by the
Company (provided, however, that any commission or other advances are not
considered Covered Compensation received by such employee until the date any
such advanced amount has been actually earned and would have regularly been paid
had such amount not been advanced), and deductions therefrom authorized for
purchases of Common Stock under this Plan are considered made at the time of the
issuance or making of the related check or deposit and not as of the date as of
which the associated Covered Compensation was earned or accrued.
9. CHANGE IN PAYROLL DEDUCTIONS. An employee may increase or
decrease (including to zero) his or her rate of payroll deduction effective only
as of the beginning of a Payment Period and, except as otherwise provided in
Section 10, not as of any other time. A new written Authorization will be
required to effect any such change and must be received by the Company's
Employee Services Department no later than the third Friday of the last month of
a Payment Period in order to be effective for the following Payment Period.
10. WITHDRAWAL FROM PARTICIPATION. An employee may withdraw, at
any time, from participation in the Plan, in whole but not in part, by
delivering to the Company's Employee Services Department a written "Withdrawal",
in form and manner satisfactory to the Company, indicating such employee's
intent to withdraw. Deductions will be stopped as soon as practicable
thereafter, and deductions accumulated during such Payment Period prior to the
discontinuation of deductions will be applied to the purchase of stock as of the
end of the Payment Period. Once made, a Withdrawal is irrevocable for the
balance of that Payment Period, and no further contributions can be made during
that Payment Period.
An employee who withdraws or is deemed to have withdrawn from the Plan
as provided in this Section 10 will be treated (other than with respect to the
purchase of stock with his or her accumulated pre-withdrawal deductions) as an
employee who has never entered the Plan. To resume participation in the Plan in
any future Payment Period (which resumed participation will be effective only as
of the beginning of such Payment Period), he or she must file a new
Authorization by the third Friday of the last month of the preceding Payment
Period.
Page 5 of 10
<PAGE> 6
11. ESTABLISHMENT OF BROKERAGE ACCOUNT. By enrolling in the Plan,
each participating employee will be deemed to have (a) authorized the
establishment of a brokerage account in his or her name at such securities
brokerage firm as may be designated from time to time by the Committee, and (b)
consented to the sharing by such brokerage firm with the Company of information
regarding the disposition of shares from said brokerage account.
12. ISSUANCE OF STOCK. Stock purchased under the Plan will be
issued, or in the event the Committee establishes brokerage accounts pursuant to
Section 11, held in an account, in the name of the employee or, if his or her
Authorization so designates, in the name of the employee and another person of
legal age as joint tenants with rights of survivorship, unless prohibited by
state or local law. Stock will be issued to or for the account of a
participating employee or his or her designee as of the end of each Payment
Period in an amount equal to the number of shares calculated by dividing his or
her unused payroll deductions accumulated as of the third Friday of the last
month of such Payment Period by the Option Price, rounded down to the nearest
whole share. No fractional shares will be issued or accrued, but the excess of
an employee's accumulated payroll deductions over the aggregate Option Price for
the whole number of shares that can be purchased with such accumulated
deductions with respect to such Payment Period will be carried forward for the
employee's account under the Plan until applied to the purchase of shares in
future Payment Periods or refunded pursuant to the provisions of the Plan. The
Committee may establish a procedure for the refund of such carried-forward
balance to requesting employees who do not continue participation in the Plan
during the Payment Period (or number of Payment Periods specified by the
Committee) subsequent to the Payment Period with respect to which such excess
arises.
13. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An employee's
rights under the Plan are his or hers alone and may not be transferred,
assigned, or be availed of by any other person. Any option granted to an
employee may be exercised only by that employee.
14. SUSPENSION OF PARTICIPATION. An employee's leave of absence
(absence from active employment not involving authorized vacation, death,
retirement, resignation, discharge, reduction-in-force or layoff, such as due to
disability, illness, compensable or non-compensable injury, personal emergency
or other approved personal leave) shall not have any effect on his or her
eligibility to participate in the Plan, and if such employee was participating
in the Plan at the time such leave commenced, his or her deductions shall be
automatically suspended for the duration of such leave (which suspension shall
not constitute a withdrawal from the Plan subject to Section 10) and, upon such
employee's resumption of an eligible level of active employment, shall
automatically resume at the pre-suspension amount authorized by the employee
unless the employee has properly submitted a revised Authorization in the
interim; provided, that if the employee receives Covered Compensation, or
payments in lieu thereof, from the Company during any such leave of absence
(such as, for example, short-term disability benefits), the deduction rate
authorized by the employee prior to such leave (or if the employee has
Page 6 of 10
<PAGE> 7
properly submitted a revised Authorization, at the level specified therein)
shall be applied to all such amounts so paid during such leave of absence.
15. TERMINATION OF EMPLOYEE'S RIGHTS. Except as otherwise provided
in Section 14, an employee's rights under the Plan will terminate when he or she
is no longer employed by the Company or any Participating Subsidiary, whether
because of retirement, resignation, discharge, death, or for any other reason.
All accumulated payroll deductions not used to purchase stock as of the date of
such cessation of employment will be refunded to the former employee or, in the
event of an employee's death, to his or her estate as an adjustment to such
former employee's final paycheck.
16. TERMINATION OF AND AMENDMENTS TO THE PLAN. The Plan may be
terminated at any time by the Committee. It will terminate in any case when all
or substantially all of the shares of stock reserved for the purposes of the
Plan have been purchased. If at any time shares of stock reserved for the
purpose of the Plan remain available for purchase but not in sufficient number
to satisfy all then unfilled purchase requirements, the available shares shall
be apportioned among participants in proportion to their options, and the Plan
shall terminate. Upon such termination or any other termination of the Plan, all
payroll deductions not used to purchase stock will be refunded.
The Committee also has authority to amend the Plan from time to time in
any respect; provided, however, that no amendment shall be effective without
prior approval of the stockholders of the Company if such amendment would (a)
except as provided in Section 23, increase the number of shares of Common Stock
to be offered above, or (b) change the class of employees eligible to receive
options under the Plan.
17. LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN. The
Plan is intended to provide Common Stock for investment and not for resale. The
Company does not, however, intend to restrict or influence any employee in the
conduct of his or her own affairs. An employee may, therefore, sell or otherwise
dispose of stock purchased under the Plan at any time he or she chooses;
provided, however, that in order for the Company to be able to properly account
for the consequences that a disposition of shares purchased under the Plan under
the United States income tax laws, each employee agrees by his or her
participation in the Plan to (a) notify the Company in writing of both (i) any
withdrawal of shares from the brokerage account established pursuant to Section
11 and (ii) any related sale or other disposition of the withdrawn shares within
ten days thereof, (b) provide such further information, and otherwise fully
cooperate with the Company in taking such further steps (which may include the
legending of the withdrawn shares), as the Company may reasonably request to
enable it to properly account for such tax consequences of the transaction
described in the notification and any subsequent sale or other disposition of
the withdrawn stock, and (c) if the withdrawal does not involve a sale or other
disposition which is reported on an employee's initial notification (under
subsection (a), provide the Company with written notice of any subsequent sale
or other disposition of that withdrawn stock within ten days after the making
thereof. Each employee shall be obligated to provide such notices and
cooperation under the preceding sentence for any such withdrawal, sale or other
disposition which occurs within (i) two years after the date
Page 7 of 10
<PAGE> 8
of grant of the applicable option, or (ii) one year after the transfer of such
stock to such employee. The Company may waive such written notification
requirement to the extent that it is able to obtain the necessary information
from the brokerage firm designated and serving pursuant to Section 11. The
employee assumes the risk of all market fluctuations in the price of all stock
acquired hereunder.
18. PLAN EXPENSES. The Company will bear all costs of
administering and carrying out the Plan.
19. ADMINISTRATION OF THE PLAN. The Plan shall be administered by
the Committee. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.
The interpretation and construction of the Plan are entrusted to the
discretion of the Committee, and its interpretation and construction of any
provisions of the Plan or of any option granted under it shall be final. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem best. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it.
20. NO EMPLOYMENT RIGHTS. The existence of this Plan shall not
create in any employee any right to be granted an option or to purchase Common
Stock hereunder. Neither the existence of this Plan nor the granting of any
option hereunder to any employee shall confer upon such employee any right to
the continuation of his or her employment with the Company or any subsidiary
thereof or shall in any way interfere with or otherwise limit the right which
such employee, the Company or any subsidiary may otherwise have to terminate
such employment at any time with or without cause. Any benefits realized by an
employee under this Plan or any option granted hereunder shall not be deemed a
part of such employee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay laws of any jurisdiction and shall not
be included in, or have any effect on, the determination of benefits under any
such law or, except as otherwise expressly provided thereby or determined in the
discretion of the person or group authorized to administer the same, any other
employee benefit plan or similar arrangement in which an employee may otherwise
be eligible to participate.
21. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an option
to an employee nor the deductions from his or her pay shall constitute such
employee the owner of the shares covered by an option until such shares have
been purchased by him or her.
22. APPLICATION OF FUNDS. The proceeds received by the Company
from the sale of Common Stock pursuant to options granted under the Plan may be
used by the Company for any corporate purpose. The Company shall have no
obligation to segregate employees' payroll deductions from any other funds of
the Company or to hold funds representing the same pending the application
thereof in accordance with this Plan. No interest shall accrue or be part to any
employee on such employee's payroll deductions.
Page 8 of 10
<PAGE> 9
23. CHANGES IN CAPITAL. If the Common Stock subject to the Plan
shall at any time be changed or exchanged by declaration of a stock dividend,
stock split, combination of shares, recapitalization, merger, consolidation or
other corporate reorganization in which the Company is the surviving
corporation, the number and kind of shares subject to this Plan and the Option
Price shall be appropriately and equitably adjusted. In the event of a
dissolution or liquidation of the Company or a merger, consolidation, sale of
all or substantially all of its assets, or other corporate reorganization in
which the Company is not the surviving corporation, or any merger in which the
Company is the surviving corporation but the holders of its Common Stock receive
securities of another corporation, the then current Payment Period shall be
deemed to end as of the Business Day prior to the effective date of such
transaction such that all then accumulated payroll deductions shall be applied
to the purchase of Common Stock in accordance with the provisions hereof. Other
than giving effect to the provisions of this Section 23, the existence of the
Plan or options hereunder shall not in any way prevent any transaction described
herein, and no holder of an option shall have the right to prevent such
transaction.
24. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an Option unless the exercise of such Option and the issuance
and delivery of Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and local) securities laws and the rules and regulations promulgated
under any of such laws, and shall be further subject to the approval of counsel
for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares
upon exercise of an Option, the Company may require the person exercising such
Option to make such representations and warranties to the Company as may be
required, in the opinion of counsel for the Company, by any of the
aforementioned Securities Law Requirements and other laws, which may include,
without limitation, representations and warranties that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
The Company shall not have any liability to any Plan participant in
respect of any delay in the sale or issuance of Shares hereunder until the
Company is able to obtain governmental authority (domestic or foreign) or the
authority of a self-regulatory organization having jurisdiction over it, which
authority is deemed by the Company's counsel to be necessary to the lawful sale
and issuance of such Shares, or any failure to sell or issue such Shares as to
which such requisite authority the Company is unable to obtain.
25. GOVERNING LAW. To the extent the laws of the United States
(such as the Code) or the Delaware General Corporation Law do not otherwise
control, this Plan and all determinations made and actions taken pursuant hereto
shall be governed by the laws of the State of Ohio, without regard to principles
of conflicts of laws, and construed accordingly.
Page 9 of 10
<PAGE> 10
26. CAPTIONS. The captions contained in this Plan are for
convenience of reference only and shall not affect the meaning of any term or
provisions hereof.
27. APPROVAL OF STOCKHOLDERS; IMPLEMENTATION OF PLAN. This Plan
was adopted by the Company's Board of Directors subject to and to become
effective only upon, approval hereof by the Company's stockholders, which
approval was obtained by written consent on May 7, 1999. The Plan shall begin
operation using an initial transitional Payment Period beginning on the first
day of the first month following the month in which the Company's common stock
begins trading on the Nasdaq Stock Market's National Market System (the "First
Trading Day") and ending December 31, 1999, for the purposes of which initial
Payment Period the Closing Price on the First Trading Day shall be used as the
initial Closing Price called for by Section 2(j)(i) for purposes of determining
the Option Price, the First Trading Day shall be used as the date for measuring
employees' length of continuous service and Base Compensation for purposes of
determining their eligibility to participate in the Plan, and the First Trading
Day shall be used as the initial date as of which payroll deductions shall begin
to accumulate under the Plan. Except as specifically provided otherwise in this
Section 27, the Plan shall, during and with respect to said initial Payment
Period, be governed by and administered in accordance with the provisions of the
foregoing Sections 1 through 26 of this Plan. With respect to all Payment
periods beginning on or after January 1, 2000, the Payment Periods, related
determinations of the Option Price and employee eligibility and accumulation of
payroll deductions, and all other matters arising under the Plan shall be
governed by and administered in accordance with the provisions of this Plan
without regard to the transitional rules set forth for the initial
implementation of the Plan as set forth in this Section 27. Notwithstanding the
foregoing, in the event that the First Trading Day does not occur by September
1, 1999, then this Plan shall be void and of no effect.
Page 10 of 10
<PAGE> 1
Exhibit 10.1.5
AIRONET WIRELESS COMMUNICATIONS, INC.
1999 OMNIBUS STOCK INCENTIVE PLAN
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<S> <C>
1 PURPOSE OF THE PLAN......................................................................................1
2 DEFINITIONS..............................................................................................1
3 STOCK SUBJECT TO THE PLAN................................................................................6
3.1 SHARES..........................................................................................6
3.2 SARS............................................................................................6
3.3 UNITS...........................................................................................6
3.4 MAXIMUM ANNUAL AWARDS...........................................................................6
3.5 COMPUTATION.....................................................................................6
3.6 PERMANENT DEDUCTION.............................................................................6
3.7 REVERSAL........................................................................................7
4 ADMINISTRATION OF THE PLAN...............................................................................7
4.1 PROCEDURE.......................................................................................7
4.2 POWERS OF THE COMMITTEE.........................................................................7
4.3 EFFECT OF BOARD AND COMMITTEE DECISIONS.........................................................8
4.4 EXCULPATION AND INDEMNIFICATION.................................................................8
5 ELIGIBILITY..............................................................................................9
6 STOCK OPTION RULES AND CONDITIONS........................................................................9
6.1 OPTION GRANTS...................................................................................9
6.2 TERM OF OPTIONS................................................................................10
6.3 EXERCISE PRICE.................................................................................10
6.4 PAYMENT OF EXERCISE PRICE......................................................................10
6.4.1 ACCEPTABLE FORMS OF CONSIDERATION.....................................................10
6.4.2 WITHHOLDING TAX LOANS.................................................................10
6.4.3 COMPANY WITHHOLDING OF TAXES..........................................................11
6.4.4 VALUATION OF SHARES DELIVERED OR WITHHELD.............................................11
6.4.5 DELIVERY OF ALREADY OWNED SHARES......................................................12
6.5 METHOD OF EXERCISE.............................................................................12
6.5.1 PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER.......................................12
6.5.2 TERMINATION OF EMPLOYMENT.............................................................12
6.5.3 DEATH OF OPTIONEE.....................................................................13
6.6 DISABILITY OF OPTIONEE.........................................................................14
6.7 RETIREMENT OF OPTIONEE.........................................................................14
6.8 NONTRANSFERABILITY OF OPTIONS..................................................................14
7 STOCK APPRECIATION RIGHTS RULES AND CONDITIONS..........................................................15
7.1 STOCK APPRECIATION RIGHT GRANTS................................................................15
7.2 EXERCISE OF FREE-STANDING SARS.................................................................15
7.3 EXERCISE OF A TANDEM SAR.......................................................................15
7.4 EXPIRATION.....................................................................................16
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
8 RESTRICTED STOCK RULES AND CONDITIONS...................................................................16
8.1 RESTRICTED STOCK GRANTS........................................................................16
8.2 ISSUANCE OF RESTRICTED STOCK...................................................................16
8.3 RIGHTS.........................................................................................17
8.4 RESTRICTED PERIOD..............................................................................17
8.5 DELIVERY.......................................................................................17
9 [This section is reserved for use by future amendment]..................................................17
10 PERFORMANCE UNITS RULES AND CONDITIONS..................................................................17
10.1 PERFORMANCE UNITS GRANTS.......................................................................17
10.2 VESTING........................................................................................18
10.3 INITIAL VALUE..................................................................................18
10.4 PAYMENT........................................................................................18
10.5 LOSS OF AWARD..................................................................................19
10.6 CHANGE IN CONTROL..............................................................................19
10.7 SECTION 162(m) PERFORMANCE GOALS...............................................................19
11 ADJUSTMENTS.............................................................................................19
11.1 GENERAL ADJUSTMENTS............................................................................19
11.2 DISSOLUTION OR LIQUIDATION.....................................................................19
11.3 SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL.....................................................20
11.4 DEFINITION OF "CHANGE IN CONTROL"..............................................................20
11.5 DEFINITION OF "CHANGE IN CONTROL PRICE"........................................................21
12 TIMING OF GRANTING OF AWARDS............................................................................21
13 AWARD AGREEMENTS........................................................................................21
14 CONDITIONS UPON ISSUANCE OF SHARES .....................................................................21
15 FORFEITURE OF AWARDS AND REALIZED BENEFITS..............................................................22
15.1 LOSS OF UNEXERCISED OPTIONS OR OTHER AWARDS....................................................22
15.2 AWARDEE CERTIFICATION UPON EXERCISE............................................................23
15.3 LOSS OF REALIZED BENEFITS......................................................................23
15.4 CUMULATIVE RIGHTS..............................................................................24
16 RESERVATION OF SHARES...................................................................................25
17 EFFECTIVENESS OF PLAN...................................................................................25
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
18 AMENDMENT OF PLAN AND OUTSTANDING AWARDS................................................................25
19 GENERAL PROVISIONS......................................................................................26
19.1 GRANTS TO FOREIGN EMPLOYEES....................................................................26
19.2 NATURE OF BENEFITS.............................................................................26
19.3 DETERMINATION OF DEADLINES.....................................................................26
19.4 GOVERNING LAW..................................................................................26
19.5 GENDER AND NUMBER..............................................................................26
19.6 CAPTIONS.......................................................................................27
19.7 UNFUNDED OBLIGATIONS...........................................................................27
</TABLE>
<PAGE> 5
AIRONET WIRELESS COMMUNICATIONS, INC.
1999 OMNIBUS STOCK INCENTIVE PLAN
1 PURPOSE OF THE PLAN
The purpose of this Plan is to enable the Company to attract, retain
and reward key employees of the Company and its Subsidiaries and strengthen the
mutuality of interest between such key employees and the Company's stockholders
by offering such key employees Stock Options, Restricted Stock, Stock
Appreciation Rights and Performance Units.
2 DEFINITIONS
In addition to other capitalized terms defined elsewhere in this Plan,
the following terms shall have the respective meanings set forth below:
"ACT" means the Securities Exchange Act of 1934, as amended from time
to time.
"ADJUSTED VALUE" means the dollar amount value of Performance Units
determined as of a Valuation Date.
"AUTHORIZED SHARES" means the maximum aggregate number of shares of
Common Stock specified in Section 3 as being authorized for issuance and/or sale
under the Plan, subject to adjustment thereof in accordance with Section 11 of
the Plan.
"AWARD" means an award of Stock Options, Restricted Stock, Stock
Appreciation Rights and Performance under the Plan.
"AWARD AGREEMENT" means the written agreement evidencing an Award by
and between the Company and the Awardee as required by Section 13.
"AWARDEE" means an Employee to whom an Award is made.
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time to
time.
"COMMISSION" means the United States Securities and Exchange
Commission.
Page 1 of 27
<PAGE> 6
"COMMITTEE" means one or more committees appointed by the Board in
accordance with Section 4, if committees are appointed. If, with respect to any
individual Award under this Plan, any committee is not comprised solely of two
or more non-employee directors which would cause such committee not to satisfy
the disinterested administration requirement of Rule 16b-3, as then applicable
to the Company under the Act, or is comprised of any members which would cause
the committee not to meet the "outside director" administration requirement of
Code Section 162(m)(4)(C) and regulations thereunder, then in such event the
committee shall be comprised of the entire Board as to Rule 16b-3, or a
committee without such non-outside director member or members as to Section
162(m). If no Committee has been appointed, any reference to the Committee shall
be deemed a reference to the Board.
"COMMON STOCK" means the Common Stock, par value $.01 per share, of the
Company or such other class of equity securities or other securities as may be
applicable under Section 10.
"COMPANY" means Aironet Wireless Communications, Inc., a Delaware
corporation and any successor to substantially all of its business.
"CONTINUOUS EMPLOYMENT" means with respect to any Employee, the
continued employment of such Employee by the Company or any Subsidiary without
interruption or termination after the grant of an Award to such Employee.
Continuous Employment shall not be considered interrupted in the case of sick
leave, military leave or any other leave of absence approved by the Board
(provided that, in the case of a Tax Qualified Option intended to qualify under
Section 422A of the Code, such leave is for a period of not more than ninety
(90) days or re-employment upon the expiration of such leave is mandated by
contract or statute) or in the case of transfers between locations of the
Company or between the Company or any Subsidiary or any of their respective
successors.
"EMPLOYEE" means any person, including officers and directors who are
also officers, who is an employee or consultant of the Company or any
Subsidiary, but, however, in limitation of the foregoing, no person shall be an
Employee if that person is not an employee as defined in instruction A(1)(a) of
Form S-8. The payment of director's fees by the Company shall not be sufficient
to constitute a person an "Employee" of the Company. The Committee is empowered
to determine whether any person qualifies as a "Employee" for purposes of the
Plan.
"FAIR MARKET VALUE" means, unless otherwise determined by the Committee
in good faith, the closing price of the Common Stock on the day prior to the
relevant event as reported on the Nasdaq Stock Market National Market System or
other "System or Exchange" which is as of the date of determination is the
principal trading market for the
Page 2 of 27
<PAGE> 7
Shares. If no price was reported for the Shares on the date of determination,
the closing price for the last trading day prior to the date of determination
shall govern. Notwithstanding the foregoing, if this method of determining Fair
Market Value is inconsistent with the then existing requirements of the Code
with respect to any Tax Qualified Option, Award intended to qualify under
Section 162(m) of the Code or any Securities Requirement , then the Committee
may determine Fair Market Value in such manner as is required for such Tax
Qualified Option, Award intended to qualify under Section 162(m) or as required
to satisfy any Securities Requirement.
"OPTION" or "STOCK OPTION" means a right to purchase a specified number
of Shares awarded by the Committee under Section 6.
"OPTIONED STOCK" means the Common Stock subject to an Option.
"OPTIONEE" means an Awardee who receives an Option.
"PERFORMANCE CYCLE" means that period commencing with January 1 of each
year in which the grant of a Performance Unit is made and ending on December 31
of the third succeeding year, or such other time period as the Committee may
determine. The Committee, it its discretion, may initiate an overlapping
Performance Cycle that begins before an existing Performance Cycle has ended.
"PERFORMANCE GOALS" means one or more performance goals established by
the Committee for each Performance Period in writing. Such Performance Goals
shall be set no later than the commencement of the applicable Performance
Period, or such later date as may be permitted with respect to "performance-
based" compensation under Section 162(m) of the Code. Each Performance Goal
selected for a particular Performance Period shall be a relative or absolute
measure of any one or more of the following: Total Shareholder Return, operating
income, pre-tax profit, earnings per share, cash flow, return on capital, return
on equity, return on net assets, net income, debt reduction, safety, return on
investment or revenues. The foregoing terms shall have the same meaning as used
in the Company's financial statements, or if the terms are not used in the
Company's financial statements, they shall have the meaning generally applied
pursuant to general accepted accounting principles, or as used in the industry,
as applicable.
"PERFORMANCE PEER GROUP" means those publicly held companies selected
by the Committee prior to the commencement of a Performance Period, or such
later date provided by the Code, to form a comparative performance group in
applying Section 10.
Page 3 of 27
<PAGE> 8
"PERFORMANCE PERIOD" means that period of time during which Performance
Goals are measured to determine the vesting or granting of Performance Units, as
the Committee may determine.
"PERFORMANCE RANKING POSITION" means the relative placement of the
Company's Total Shareholder Return measured against the Total Shareholder Return
of the other companies in the Performance Peer Group for which purposes rank
shall be determined by quartile, with a ranking in the first (1st) quartile
(e.g., the Company's Total Shareholder Return is equal to or greater than the
Total Shareholder Return of at least seventy-five percent (75%) of the
Performance Peer Group) corresponding to the highest quartile of Total
Shareholder Return.
"PERFORMANCE UNIT" or "Units" means units of long-term incentive
compensation granted to an Awardee pursuant to Section 10 with respect to a
particular Performance Cycle.
"PLAN" means this Aironet Wireless Communications, Inc. 1999 Omnibus
Stock Incentive Plan.
"PREDECESSOR PLAN" means the Amended and Restated Aironet Wireless
Communications, Inc. 1996 Stock Option Plan, as amended.
"RESTRICTED STOCK" means Common Stock awarded by the Committee under
Section 8.
"RULE 16b-3" means Rule 16b-3 promulgated by the Commission under the
Act or any successor regulation exempting certain transactions involving
stock-based compensation arrangements from the liability provisions of Section
16 of the Act, as adopted and amended from time to time and as interpreted by
formal or informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission.
"SECTION 16 PERSON" means an Employee who at the time an Award is made
is subject to Section 16 of the Act, as interpreted by the rules and regulations
promulgated by the Commission thereunder, as adopted and amended from time to
time, and by formal or informal opinions of, and releases published or other
interpretive advice provided by, the Staff of the Commission.
"SECURITIES LAW REQUIREMENTS" means the Act and the rules and
regulations promulgated by the Commission thereunder, as adopted and amended
from time to time, including but not limited to Rule 16b-3, and as interpreted
by formal or informal opinions
Page 4 of 27
<PAGE> 9
of, and releases published or other interpretive advice provided by, the Staff
of the Commission; other applicable Federal, State and foreign securities laws
and regulations promulgated thereunder, as adopted and amended from time to
time; and the requirements of the Nasdaq Stock Market or any stock exchange,
automated inter-dealer quotation system or other recognized securities market on
which the Common Stock is listed or traded or in which the Common Stock is
included, as adopted and amended from time to time and as interpreted by formal
or informal opinions of, and other interpretive advice, provided by the
representatives of such stock exchange, quotation system or other securities
market.
"SHARES" means shares of Common Stock.
"STOCK APPRECIATION RIGHT" or "SAR" means rights awarded by the
Committee under Section 7.
"SUBSIDIARY" means any business association (including a corporation,
partnership or a joint venture, other than the Company) in an unbroken chain of
such associations beginning with the Company if each of the associations other
than the last association in the unbroken chain owns equity interests (including
stock or partnership or joint venture interests) possessing fifty percent (50%)
or more of the total combined voting power of all classes of equity interests in
one of the other associations in such chain.
"SUCCESSOR" means the estate of an Awardee or a person who succeeds by
will or the laws of descent and distribution to an Awardee's right to an Award.
"TAX QUALIFIED OPTION" means an Option which is intended at the time of
grant to qualify for special tax treatment under Section 422A or other
particular provisions of the Code and the regulations, rulings and procedures
promulgated, published or otherwise provided thereunder, as adopted and amended
from time to time.
"TOTAL SHAREHOLDER RETURN" means the sum of (i) the appreciation or
depreciation in the price of a share of a company's common stock, and (ii) the
dividends and other distributions paid during the applicable Performance Cycle,
expressed as a percentage basis of the Fair Market Value determined with
reference to the first day of the applicable Performance Cycle, as calculated in
a manner determined by the Committee.
"VALUATION DATE" means the date for determining the Adjusted Value of
vested Units that will be paid or credited to the Participant or Beneficiary in
accordance with Section 10. The Valuation Date shall occur on the last day of
the applicable Performance Cycle, or such other time as provided in this Plan,
or as the Committee may select. The Valuation Date for each Performance Cycle
shall be set forth in the grant of Performance Units and
Page 5 of 27
<PAGE> 10
shall be established no later than the date on which the Performance Goals for a
particular Performance Cycle are selected, except as otherwise specifically
provided herein.
3 STOCK SUBJECT TO THE PLAN
3.1 SHARES. Subject to adjustment as provided in Section 11, the total
number of Shares to be issued (i) upon (A) the exercise of Options granted under
the Plan or (B) grants of Restricted Stock, and (ii) issued in payment of SARs
and Performance Units shall not, in any such event, exceed 1,765,817 Shares (the
"Authorized Shares"). The Authorized Shares include 400,000 Shares to support
options which were granted under the Predecessor Plan, rescinded prior to
issuance, and are to be issued under this Plan.
3.2 SARS. Subject to adjustment as provided in Section 11, the number
of SARs granted under the Plan may not exceed 500,000 (the number of SARs
subject to any Award shall be determined with reference to a number of Shares).
3.3 UNITS. The number of Performance Units granted under the Plan may
not exceed 200,000.
3.4 MAXIMUM ANNUAL AWARDS. The maximum number of Shares with respect to
which Options, SARs and Restricted Stock Awards under this Plan may be granted,
or which may be issued upon settlement of Awards, to any Employee in any one
year shall not exceed five hundred thousand (500,000).
3.5 COMPUTATION. For purposes of computing the number of Authorized
Shares available from time to time for grants of Options and Restricted Stock,
and for payment of SARs and Performance Units, the number of Shares subject to
each Option and Restricted Stock Award shall be provisionally counted against
the Authorized Shares from grant until exercise of Options, lapse of
restrictions on Restricted Stock, or expiration, lapse, cancellation, surrender
or other forfeiture of the Options or Restricted Stock, as applicable. Likewise,
for purposes of computing the number of SARs and Performance Units available
from time to time for grant, the number of SARs and Performance Units granted
shall be provisionally counted against the total number authorized from grant
until exercise or expiration, lapse, cancellation, surrender or other
forfeiture, as applicable.
3.6 PERMANENT DEDUCTION. Upon exercise of Options, lapse of
restrictions on Restricted Stock, and issuance of Shares in payment of SARs and
Performance Units, the number of Shares issued upon such exercise or payment, or
that become vested upon such lapsing, shall be permanently deducted from the
Authorized Shares. Likewise, upon exercise of SARs and vesting of Performance
Units, the number of SARs and Performance Units exercised shall be permanently
deducted from the number authorized.
Page 6 of 27
<PAGE> 11
3.7 REVERSAL. Upon expiration without exercise, lapse, cancellation,
surrender or other forfeiture of any Options or Restricted Stock, the
provisional deduction against the Authorized Shares shall be reversed. Upon
expiration without exercise, lapse, cancellation, surrender or other forfeiture
of any of any SARs or Performance Units, the provisional deduction against the
number authorized shall be reversed. The Authorized Shares covered by any such
reversal of a provisional deduction shall immediately become available for the
granting and Payment of Awards, and the SARs and Performance Units covered by
any such reversal of a provisional deduction shall immediately become available
for grant. No permanent deduction shall be made, and provisional deductions
against Authorized Shares shall be reversed, to the extent that the exercise
price of Options and/or the withholding taxes with respect to the exercise of
any other Award are paid through the delivery to the Company of already owned
Shares and/or, as applicable, through the withholding by the Company of Shares
from the total number of Shares with respect to which the Options are exercised
or that are granted as Restricted Stock.
4 ADMINISTRATION OF THE PLAN
4.1 PROCEDURE. The Plan shall be administered by the Board or the Board
may, in its discretion, appoint one or more Committees to administer the Plan;
provided that no member of the Board or the Committee shall vote with respect to
the granting of Awards to himself.
4.1.1 The members of any Committee shall be appointed by the Board
for such term as the Board may determine. The Board may from time to
time remove members from, or add members to, a Committee. Vacancies on
a Committee, however caused, may only be filled by the Board.
4.1.2 With respect to Awards to Section 16 Persons, there
shall be a Committee constituted at all times solely of two or more
non-employee directors so as to meet the disinterested administration
requirements of Rule 16b-3, and with respect to the Company's officers
who are subject to Section 162(m), there shall be a Committee of
outside directors as required by Section 162(m), so long as any of the
Company's equity Securities are registered pursuant to Section 12(b) or
12(g) of the Exchange Act.
4.2 POWERS OF THE COMMITTEE. To the extent not inconsistent with this
Plan, the Committee shall have the authority, in its sole discretion:
4.2.1 Consistent with the definition of Fair Market Value, to
determine Fair Market Value;
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<PAGE> 12
4.2.2 To determine the eligibility of Employees to be granted
Awards;
4.2.3 To determine whether Awards will be granted, when Awards
will be granted and to whom Awards will be granted;
4.2.4 To determine the number of Shares to be covered by each
Option, and the number of Shares of Restricted Stock, SARs and
Performance Units, if any, to be granted in any Award.
4.2.5 To determine the terms and conditions of any Awards,
including, but not limited to, the Share or exercise price (provided
that Options shall have an exercise price of no less than Fair Market
Value at the time of grant and Restricted Stock shall have a purchase
price of no less than par value of the Shares) and any restrictions or
limitations, or any vesting, acceleration of vesting, extending of the
time within which an Award must be exercised (if applicable) or waiver
of forfeiture or other restrictions regarding any Award, and/or the
Shares relating thereto, based in each case on such factors as the
Committee shall determine in its sole discretion;
4.2.6 To determine whether, to what extent and under what
circumstances grants of Stock Options and/or other Awards are to be
made and operate on a tandem basis with respect to other Awards under
the Plan and/or cash awards made outside of the Plan, or on a
cumulative, additive basis; and
4.2.7 To adopt, alter and repeal such rules, guidelines and
practices governing the Plan as it shall from time to time deem
advisable; to interpret the terms and provisions of the Plan and any
Award issued under the Plan (and any agreements relating thereto); and
otherwise supervise the administration of the Plan.
4.3 EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection with the
construction, interpretation, administration, application, operation and
implementation of the Plan shall be final, conclusive and binding on the
Company, its stockholders and Subsidiaries, all Employees and Awardees and the
respective legal representatives, heirs, successors and assigns of all of the
foregoing and all other persons claiming under or through any of them.
4.4 EXCULPATION AND INDEMNIFICATION. No member of the Board or the
Committee, and no Employee or other agent acting on behalf of the Board or the
Committee, shall be personally liable for any decision, determination or action
made or taken, or failed to be made or taken, with respect to this Plan or any
Award granted hereunder, and the Company shall fully protect each such person in
respect of any such
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<PAGE> 13
decision, determination or action and shall indemnify each such person against
any and all claims, losses, damages, expenses and liabilities arising from or in
connection with any such decision, determination or action. The foregoing right
of indemnification shall not be exclusive of any other rights of indemnification
to which such persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, by contract, as a matter of law, or otherwise, or under
any power that the Company may have to indemnify them or hold them harmless.
5 ELIGIBILITY
Awards may be granted to any Employee who, in the sole judgment of the
Committee, has contributed or may contribute to the success and growth of the
Company or a Subsidiary. The existence of this Plan shall not create in any
Employee any right to be granted an Award hereunder, and neither the existence
of this Plan nor the granting of any Awards to any Employee hereunder shall
confer upon such Employee any right with respect to continuation of the
employment of such Employee by the Company or any Subsidiary or shall in any way
interfere with or limit the right which such Employee, the Company or any
Subsidiary may otherwise have to terminate such employment at any time with or
without cause. Upon the termination of any Employee's employment with the
Company or any Subsidiary, neither the Company nor any Subsidiary shall have any
liability or obligation to such Employee under this Plan or any Awards granted
to such Employee hereunder except to issue the appropriate number of Shares to
such Employee upon the exercise of any Award granted to such Employee under this
Plan prior to such termination of employment, provided that such exercise is
duly and timely made in accordance with the provisions of this Plan and such
Award.
6 STOCK OPTION RULES AND CONDITIONS
The grant of Stock Options shall be upon the following rules and
conditions:
6.1 OPTION GRANTS. Stock Options may be granted alone, in addition to,
or in tandem with SARs granted under the Plan and/or cash awards made outside
the Plan. Stock Options granted under the Plan shall be in such form as the
Committee may from time to time approve. Stock Options granted under the Plan
may be Tax Qualified Options or Options which are not Tax Qualified Options. The
Committee shall have the authority to grant Tax Qualified Options to any
eligible Employee who also meets any special eligibility requirements imposed by
applicable provisions of the Code. Stock Options granted under the Plan shall be
subject to all applicable terms and conditions contained in the Plan and such
other additional terms and conditions, not inconsistent with the terms of the
Plan, as the Committee shall deem desirable.
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<PAGE> 14
6.2 TERM OF OPTIONS. Except as otherwise specified by the Committee at
the time of grant and reflected in the Award Agreement evidencing such Option,
the term of each Option shall be ten (10) years from the date of grant, provided
that the Committee, if it intends that a particular Option qualify as a Tax
Qualified Option, shall observe such restrictions on the term of such Option as
may be imposed by the Code in order for such Option so to qualify. Each Option
shall continue in effect in accordance with its terms notwithstanding that the
Plan may be terminated prior to the expiration of the term of such Option.
6.3 EXERCISE PRICE. The exercise price for the Shares subject to an
Option shall be determined by the Committee at the time of grant of an Option
and reflected in the Award Agreement evidencing the same; provided that in no
event shall such exercise price be less than the Fair Market Value determined
with reference to the date of grant of such Option.
6.4 PAYMENT OF EXERCISE PRICE.
6.4.1 ACCEPTABLE FORMS OF CONSIDERATION. Except as otherwise
specified by the Committee at the time of grant and reflected in the
Award Agreement evidencing such Option, the following forms of
consideration will be accepted in payment of the exercise price for an
Option and of the taxes required to be withheld in connection with such
exercise: (i) cash, (ii) personal check, (iii) bank cashier's check,
(iv) already owned Shares (duly endorsed for transfer with signature
guaranteed if required by the Committee), (v) Shares withheld from the
Shares to be issued upon exercise of the Option, (vi) a commitment for
the delivery to the Company of proceeds from the sale, pursuant to a
brokerage or similar arrangement approved in advance by the Committee
in its sole discretion, of Shares to be issued upon exercise of the
Option, or (vii) any combination of the foregoing.
Any election by a Section 16 Person to use already owned
Shares, to have Shares withheld from those issuable upon such exercise
or to provide a commitment for the delivery to the Company of proceeds
from the sale, pursuant to a brokerage or similar arrangement, of
Shares to be issued upon exercise of an Option will not be accepted if
under Securities Law Requirements such a transaction would be matched
with such exercise to result in "short-swing" profit liability under
Section 16(b) of the Act on the part of such Section 16 Person with
respect to such transaction and must otherwise be in accordance with
the applicable requirements of Rule 16b-3.
6.4.2 WITHHOLDING TAX LOANS. The Committee may determine at
the time of grant of an Option to permit the Optionee to, and if the
Committee so determines
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<PAGE> 15
shall provide in the Award Agreement evidencing such Option that such
Optionee may, borrow from the Company an amount sufficient to pay the
taxes required to be withheld in connection with the exercise of such
an Option, with each such borrowing to be evidenced by a promissory
note of the Optionee payable to the order of the Company. Except as may
otherwise be specified by the Committee at the time of grant thereof
and reflected in the Award Agreement evidencing an Option, each such
loan shall be for a term of five (5) years at a rate of interest equal
to the rate which the Company's then primary domestic commercial lender
lends to the Company, with payments of interest on such loan due
quarterly and payments toward the principal of such loan due, to the
extent of the net proceeds therefrom, within fifteen (15) days after
any disposition by the Optionee of any Common Stock acquired upon
exercise of any stock option granted by the Company to the Optionee
pursuant to this Plan or otherwise (excluding any disposition of such
Common Stock by gift or to the Company in payment of the exercise price
of a stock option granted by the Company to the Optionee pursuant to
this Plan or otherwise and/or any related withholding taxes), provided
that the entire unpaid principal balance shall be due at the earlier of
(i) the expiration of the five (5) year term, or (ii) the termination
of the Optionee's Continuous Employment (other than by reason of
Optionee's "disability" (as defined in Section 6.6) or "retirement" (as
defined in Section 6.7).
6.4.3 COMPANY WITHHOLDING OF TAXES. If, upon being notified by
the Company of the amount of the taxes required to be withheld in
connection with an exercise of an Option, the Optionee fails promptly
to pay, or to make arrangements acceptable to the Company for the
payment of, such taxes, the Company shall have the right not to issue
the Shares or to elect (but shall be under no obligation) to cover such
taxes through:
6.4.3.1 withholding Shares from those issuable upon such exercise,
provided that any such election so to withhold Shares with respect to
the exercise of an Option by a Section 16 Person shall be effective
only if made in accordance with the applicable requirements of Rule
16b-3; and/or
6.4.3.2 deducting such taxes from any amounts payable in cash
to the Optionee by the Company for any reason as of the time of such
exercise or any time thereafter.
6.4.4 VALUATION OF SHARES DELIVERED OR WITHHELD. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price and/or related
withholding taxes, such Shares shall be valued at Fair Market Value
determined with reference to the date of exercise.
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<PAGE> 16
6.4.5 DELIVERY OF ALREADY OWNED SHARES. Where the person exercising
an Option elects to use already owned Shares in full or partial payment
of the exercise price and/or related withholding taxes, the Committee
may accept, in lieu of physical delivery of the certificates evidencing
such Shares, such constructive delivery of such Shares as may be
satisfactory to the Committee.
6.5 METHOD OF EXERCISE.
6.5.1 PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Options
shall be exercisable at such times and under such conditions as
determined by the Committee and as permitted under the Plan. In order
to exercise an Option, the Optionee shall deliver to the Company
written notice of the number of Shares with respect to which the Option
is being exercised, accompanied by payment in full of the aggregate
exercise price for the Shares so to be acquired. To constitute an
effective exercise of an Option, such notice and payment shall be
addressed to the attention of the Treasurer of the Company and must be
received at the principal executive office of the Company by 5:00 p.m.,
local time, on the date of expiration or termination of the Option.
6.5.1.1 Until the issuance (as evidenced by the appropriate entry
on the books of the Company or of a duly authorized transfer agent of
the Company) of the certificate evidencing such Shares, no right to
vote or receive dividends nor any other rights as a stockholder shall
exist with respect to the Optioned Stock notwithstanding the exercise
of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is
issued, except as provided in Section 11.
6.5.1.2 Exercise of an Option shall result in a decrease in the
number of Shares which thereafter shall be available for exercise under
such Option by the number of Shares as to which the Option is
exercised, including any Shares withheld from the Shares to be issued
pursuant to such exercise to cover the exercise price and/or related
withholding taxes.
6.5.2 TERMINATION OF EMPLOYMENT. Except as may otherwise be
specified by the Committee at the time of grant and reflected in the
Award Agreement evidencing such Option, upon the termination of an
Optionee's Continuous Employment (other than by reason of the
Optionee's death, disability or retirement), he may exercise his Option
(to the extent that he was entitled to exercise it at the time of such
termination of employment) until the earlier of (i) the date thirty
(30) days (or such longer period of time as is determined by the
Committee in its sole discretion at the time of such termination of
employment, provided that if the
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<PAGE> 17
Committee intends that a particular Option continue to qualify as a Tax
Qualified Option, the Committee shall observe such restrictions as may
be imposed by applicable tax laws on the post-termination period within
which a Tax Qualified Option may be exercised if it wishes to ensure
that any post-termination exercise of such Option is made only within
the period permitted by such laws) after the effective date of the
termination of his employment or (ii) the expiration date of such
Option, and the Option shall terminate on the earlier of such dates;
provided, however, that if the Optionee is terminated by the Company
for Misconduct, then such Option shall terminate effective as of the
time of the conduct constituting such Misconduct. As used in this Plan,
"Misconduct" means that the Optionee has engaged in Prohibited Conduct,
committed an act of embezzlement, fraud or theft with respect to the
property or business of the Company or a Subsidiary or deliberately
disregarded the rules of the Company or a Subsidiary in such a manner
as to cause material loss, damage or injury to or otherwise endanger
the property, reputation, employees or business prospects of the
Company or a Subsidiary. The Committee shall determine whether an
Optionee's employment was terminated by reason of Misconduct. In making
such determination, the Committee may, but shall not be required to,
give the Optionee an opportunity to be heard and to present evidence on
his behalf.
6.5.3 DEATH OF OPTIONEE. Except as may otherwise be specified by
the Committee at the time of grant and reflected in the Award Agreement
evidencing such Option, upon the death of an Optionee:
6.5.3.1 who is at the time of his death in the employ of the
Company or a Subsidiary and who shall have been in Continuous
Employment since the date of grant of the Option, the Option may be
exercised (to the extent the Optionee would have been entitled to do so
had he continued living and terminated employment six (6) months after
the date of death) by his Successor until the earlier of (A) the date
six (6) months (or, if the Committee intends that a particular Option
qualify as a Tax Qualified Option, such lesser period of time within
which the applicable tax laws may require that the Option be exercised
in order for such Option so to qualify) following the date of the
Optionee's death or (B) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates; or
6.5.3.2 within one (1) month after the termination of Continuous
Employment other than termination by the Company or a Subsidiary for
Misconduct or due to disability, the Option may be exercised (to the
extent the Optionee was entitled to do so at the date of termination of
Continuous Employment) by his Successor until the earlier of (A) the
date six (6) months following the date of the Optionee's death (or, if
the Committee intends that a particular Option qualify as a Tax
Qualified
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<PAGE> 18
Option, such lesser period of time within which the applicable tax laws
may require that the Option be exercised in order for such Option so to
qualify) or (B) the expiration date of such Option, and the Option
shall terminate on the earlier of such dates.
6.6 DISABILITY OF OPTIONEE. Except as may otherwise be specified by the
Committee at the time of grant and reflected in the Award Agreement evidencing
such Option, if an Optionee's Continuous Employment terminates due to his having
become permanently and totally disabled within the meaning of Section 22(e)(3)
of the Code ("disability"), the Option may be exercised (to the extent the
Optionee was entitled to do so as of the effective date of the termination of
his employment by reason of such disability) until the earlier of (i) the date
one (1) year after the effective date of such termination of his employment or
(ii) the expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
6.7 RETIREMENT OF OPTIONEE. Except as may otherwise be specified by the
Committee at the time of grant and reflected in the Award Agreement evidencing
such Option, if an Optionee's Continuous Employment terminates by reason of (A)
his retirement at any age entitling him to benefits under the provisions of any
retirement plan of the Company or any Subsidiary in which such Optionee
participates; or (B) retirement at any time after attaining age 65 (whichever
circumstance is applicable constituting "retirement"), the Option may be
exercised (to the extent the Optionee shall be entitled to do so as of the
effective date of the termination of his employment by reason of such
retirement) until the earlier of (i) one (1) year after the effective date of
the termination of his employment or (ii) the expiration date of such Option,
and the Option shall terminate on the earlier of such dates.
6.8 NONTRANSFERABILITY OF OPTIONS. Unless the Committee determines
otherwise at or after the date of grant, and further subject to the availability
of an exemption from registration or if the transferee is an employee as defined
in instruction A(1)(a) to Form S-8, Options may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner by the Optionee except at
death by will or by the laws of descent and distribution and may be exercised
during the life of the Optionee only by the Optionee. No lien, obligation or
liability of an Optionee or a Successor shall attach to or otherwise encumber
the right and interest of such Optionee or Successor in and to any Options
outstanding under the Plan.
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<PAGE> 19
7 STOCK APPRECIATION RIGHTS RULES AND CONDITIONS
The grant of SARs shall be subject to the following rules and
conditions:
7.1 STOCK APPRECIATION RIGHT GRANTS. SARs shall be evidenced by Award
Agreements. Such Agreements shall conform to the requirements of the Plan and
may contain such other provisions as the Committee shall deem advisable. The
Committee may grant SARs to eligible Employees separately ("Free-Standing SAR")
or in tandem with all or a portion of a grant of Stock Options under the Plan
("Tandem SAR"). SARs shall be subject to the terms and conditions of this
Section 7, the same terms and conditions applicable to the Plan generally and to
Stock Options as stated in Section 6, including, but not limited to, those
governing term, withholding taxes, termination, disability and death. Without
limiting the generality of the foregoing, no SAR shall be exercisable unless the
Awardee shall have completed a six (6) month period of Continuous Employment
immediately following the date on which the SAR is granted.
Tandem SARs shall cover the same Shares covered by the related Options
and shall, except as provided in this Section 7, be subject to the same terms
and conditions as the related Options. A Tandem SAR may be granted either at the
time of the grant of the Option with which it operates or at any time thereafter
during the term of the Option but shall be capable of being exercised only to
the extent that the related Stock Option is capable of being exercised.
7.2 EXERCISE OF FREE-STANDING SARS. Upon the exercise of a
Free-Standing SAR, the Awardee shall receive from the Company an amount equal to
the excess of the Fair Market Value of one share of Common Stock determined with
reference to the date the right is exercised over the Fair Market Value of one
share of Common Stock determined with reference to the grant date multiplied by
the number of Free-Standing SARs. Payment may be made in cash, or shares of
Common Stock or Restricted Stock (the number of Shares of Common Stock or
Restricted Stock shall be determined based on their Fair Market Value determined
with reference to the date the Free-Standing SAR is exercised), or in a
combination of the foregoing, at the discretion of the Committee.
7.3 EXERCISE OF A TANDEM SAR. An Awardee may elect to exercise either a
Tandem SAR or the related Option, but not both. Upon the exercise of a Tandem
SAR, the Awardee shall be deemed to have automatically surrendered to the
Company, unexercised, the related Option to the extent of the number of SARs
being exercised, and the Awardee shall receive from the Company an amount equal
to the excess of the Fair Market Value of one share of Common Stock determined
with reference to the date the right is exercised over the exercise price of the
surrendered Options multiplied times the number of Tandem SARs. Payment may be
made in cash, or shares of Common Stock or
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<PAGE> 20
Restricted Stock (the number of Shares shall be determined based on their Fair
Market Value determined with reference to the date the Free-Standing SAR is
exercised), or in a combination of the foregoing, at the discretion of the
Committee.
7.3.1 Upon the exercise of a Tandem SAR, the provisional reduction
in the number of Authorized Shares for the related Options surrendered,
shall be reversed.
7.3.2 If an Option related to a Tandem SAR is exercised, the
related Tandem SAR shall be deemed to have been automatically
surrendered to the Company, unexercised, and the provisional reduction
in the number of authorized SARs shall be reversed.
7.4 EXPIRATION. To the extent that a SAR has not been exercised or
surrendered prior to its expiration, the SAR will be exercised automatically and
if the SAR is a Tandem SAR, the related Options will be deemed to have been
automatically surrendered.
8 RESTRICTED STOCK RULES AND CONDITIONS
The grant of Restricted Stock shall be upon the following rules and
conditions:
8.1 RESTRICTED STOCK GRANTS. Grants of Restricted Stock shall be
evidenced by Award Agreements. Such Agreements shall conform to the requirements
of the Plan and may contain such other provisions and restrictions as the
Committee shall deem advisable. The Award Agreement shall specify the duration
of the restricted period and the performance and/or employment conditions under
which the Restricted Stock may be forfeited to the Company, including forfeiture
in accordance with Section 8.4. The Restricted Stock may be made subject to
Performance Goals.
8.2 ISSUANCE OF RESTRICTED STOCK. Upon determination of the number of
Shares of Restricted Stock to be granted to an Awardee and the payment by the
Awardee of the purchase price (which shall no less than par value), both of
which terms shall be set forth in the Award Agreement, the Committee shall
direct that a certificate representing the number of Shares of Common Stock be
issued to the Awardee with the Awardee as the registered owner. The certificate
representing such Shares shall either be legended as to sale, transfer,
assignment, pledge or other encumbrance during the restricted period and/or, at
the election of the Committee in its sole discretion as to any such Shares,
deposited by the Awardee, together with a stock power endorsed in blank, with
the Company.
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<PAGE> 21
8.3 RIGHTS. An awardee of Restricted Stock will generally have the
rights of a stockholder, however the Committee shall determine at the time of
Award, and the Award Agreement shall specify, whether during the restricted
period, the Awardee shall have the right to receive dividends from and to vote
the Shares of Restricted Stock during the restricted period. Shares of
Restricted Stock shall not be sold, transferred, pledged, assigned or otherwise
alienated or hypothecated until all of the restrictions imposed on such shares
have lapsed and the applicable restriction period has ended.
8.4 RESTRICTED PERIOD. If an Awardee terminates employment with the
Company or is terminated by the Company for any reason before the expiration of
the restricted period, all shares of Restricted Stock still subject to
restriction shall be forfeited (the Committee, in its discretion, may terminate
the restricted period and end all restrictions upon the Company's termination of
Awardee). In addition, in the event of any attempt by the Awardee to sell,
exchange, transfer, pledge or otherwise dispose of shares of Restricted Stock in
violation of the terms of the Plan, such shares shall be forfeited. The
restricted period for any Awardee shall be deemed to end and all restrictions on
shares of Restricted Stock shall lapse, upon the Participant's death, disability
(as defined in Section 6.6) or upon a Change in Control.
8.5 DELIVERY. At the end of the restricted period, the restrictions
imposed under this Section 8 and in the Award Agreement shall lapse with respect
to the number of Shares of Restricted Stock, as determined by the Committee, and
the legend shall be removed with the Shares delivered, as the case may be, with
respect to such number. The Committee may in its sole discretion modify or
accelerate the vesting of Shares of Restricted Stock. Any withholding taxes due
from the Awardee must paid to the Company when the same are due.
9 [This section is reserved for use by future amendment]
10 PERFORMANCE UNITS RULES AND CONDITIONS
The grant of Performance Units shall be upon the following rules and
conditions:
10.1 PERFORMANCE UNITS GRANTS. The Committee may grant Performance
Units to eligible Employees in such number as the Committee determines, taking
into account such factors as the Committee deems relevant. Normally, Performance
Units will be granted only at the beginning of each Performance Cycle except in
cases where a prorated grant may be made in mid-cycle to a newly eligible
Employee or an Employee whose job responsibilities have significantly changed
during the cycle. Each grant of Performance Units shall be evidenced by an Award
Agreement. The Award Agreement shall conform to the requirements of the Plan and
may contain such other provisions and restrictions as
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<PAGE> 22
the Committee shall deem advisable. The Award Agreement shall specify the
Performance Goals and vesting schedule applicable to the Award.
10.2 VESTING. The Committee shall adopt a vesting schedule for each
year of a Performance Cycle. Vesting of Performance Units for each year may (i)
occur automatically after an eligible Employee has completed the specified
period of Continuous Employment with the Company or any of its Subsidiaries from
the date of grant of such Performance Units, (ii) be contingent upon attaining
certain Performance Goals, or (iii) occur at such other times or subject to such
other criteria as the Committee may determine. The Committee may, in its
discretion, alter the vesting guidelines in the event of unusual circumstances
provided that to the extent applicable any such discretion shall be exercised in
a manner consistent with Section 162(m). Vesting of Performance Units with
respect to Participants who begin participation or receive an additional grant
of Performance Units during the Performance Cycle will be determined by the
Committee at the time of grant. Notwithstanding the foregoing vesting
provisions, all unvested Performance Units shall become fully vested on a pro
rata basis measured in the nearest whole year between the date of grant and the
date of a Change in Control. In the event of termination of the Awardee's
employment within two (2) years following a Change in Control for any reason
other than Prohibited Conduct, or by the Awardee after a demotion, pay cut or
relocation, all unvested Performance Units shall become fully vested on a pro
rata basis measured in the nearest whole year between the date of a Change in
Control and such termination.
10.3 INITIAL VALUE. Each Performance Unit shall have an initial value
of one hundred dollars ($100) as of the date of the grant. The initial value
shall be adjusted upward or downward as of any relevant Valuation Date based on
the Company's Performance Ranking Position for the applicable Performance Cycle
compared to the Performance Ranking Position of the Performance Peer Group,
based on the following schedule:
Company's Performance Adjusted
Ranking Position Value
--------------------- ----------
1st Quartile $150
2nd Quartile 100
3rd Quartile 50
4th Quartile 0
10.4 PAYMENT. The Committee shall certify in writing the Company's
Performance Ranking Position and the attainment of the applicable Performance
Goals prior to payment
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<PAGE> 23
of any Performance Units. In no event will an Award be payable under this
Section 10 if the Company's Performance Ranking Position is in the fourth (4th)
quartile. For each vested Performance Unit for which all Performance Goals have
been satisfied, the Awardee shall receive from the Company a payment equal to
the product of the Adjusted Value and the number of vested Performance Units.
Such payment shall be made as soon as practicable following the applicable
Valuation Date, subject to the payment of all withholding taxes. Payments may be
made, in the Committee's sole discretion, determined at the time of grant and
reflected in the Award Agreement, in cash, Shares or a combination thereof.
10.5 LOSS OF AWARD. Unvested Performance Units shall be canceled upon
an Awardees retirement, death, disability (as defined in Section 6.6), and upon
termination of employment by the Awardee or the Company. No payment shall be
made for such canceled Performance Vested Performance Units will be paid in to
an Awardee's Successor upon an Awardee's death.
10.6 CHANGE IN CONTROL. Notwithstanding any other provision of this
Section 10 to the contrary, upon a Change in Control, the current Performance
Cycle shall immediately end, all Performance Units shall vest and shall be paid
in cash to Awardees based on a value of one hundred fifty dollars ($150) per
Unit.
10.7 SECTION 162(m) PERFORMANCE GOALS. For purposes of qualifying
grants of Performance Units as "performance-based compensation" under section
162(m) of the Code, the Performance Goals shall be set by the Committee on or
before the latest date permissible to enable the Performance Units to qualify as
"performance-based compensation" under section 162(m) of the Code, and shall
follow any procedures necessary or appropriate to ensure qualification of the
Performance Units under section 162(m) of the Code.
11 ADJUSTMENTS
11.1 GENERAL ADJUSTMENTS. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation or any other change in the corporate structure of the Company
affecting the Common Stock, the Board shall make appropriate adjustment in the
number and kind of Authorized Shares, and any adjustments to outstanding Awards,
as it determines appropriate under the circumstances, in its sole discretion,
provided that the number of shares subject to any Award shall always be a whole
number.
11.2 DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Awards will terminate
immediately prior to the
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<PAGE> 24
consummation of such proposed action, unless otherwise provided by the Board.
The Board may, in the exercise of its sole discretion in such instances, treat
such event as a "change in control" and adjust all outstanding Awards in
accordance with the provisions of Section 11.3.
11.3 SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event of a
"Change in Control" of the Company (as defined in Section 11.4), unless
otherwise determined by the Board in its sole discretion prior to the occurrence
of such Change in Control, the following acceleration and valuation provisions
shall apply to Options and SARs (Restricted Stock and Performance Units having
been addressed elsewhere in this Plan):
11.3.1 Any Options or SARs outstanding as of the date of such
Change in Control that are not yet fully vested on such date shall
become fully vested; and
11.3.2 The value of all outstanding Options or SARs , measured by
the excess of the "Change in Control Price" (as defined in Section
11.5) over the exercise price of the Option or the Fair Market Value of
the Common Stock determined with reference to the grant date in the
case of Free-Standing SARs, shall be cashed out. The cash out proceeds
shall be paid to the Optionee or, in the event of death of an Optionee
prior to payment, to his Successor.
11.4 DEFINITION OF "CHANGE IN CONTROL". For purposes of this Section
11, a "Change in Control" means the happening of any of the following:
11.4.1 When any "person," as such term is used in Sections 13(d)
and 14(d) of the Act (other than the Company, a Subsidiary or a Company
or Subsidiary employee benefit plan, including any trustee of such a
plan acting as trustee) becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission), directly or indirectly, of
securities of the Company representing fifteen percent (15%) or more of
the combined voting power of the Company's then outstanding
securities(or in the case of any stockholder which is the beneficial
owner of such amount of securities at the effective date of this Plan,
becomes the beneficial owner, directly or indirectly, of any additional
securities of the Company representing any voting power); or
11.4.2 The consummation of a transaction requiring stockholder
approval and involving the sale of all or substantially all of the
assets of the Company or the merger or consolidation of the Company
with or into another corporation.
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<PAGE> 25
11.5 DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of this
Section 11, "Change in Control Price" shall be, as determined by the Board, (i)
the highest closing sale price of a Share, as reported by the Nasdaq Stock
Market's National Market System, any stock exchange on which the Shares are
listed or any other recognized securities market on which the Shares are traded,
at any time within the sixty (60) day period immediately preceding the date of
the Change in Control (the "Sixty-Day Period"), or (ii) the highest price paid
or offered, as determined by the Board, in any bona fide transaction or bona
fide offer related to the Change in Control, at any time within the Sixty-Day
Period.
12 TIMING OF GRANTING OF AWARDS
The date of grant of an Award shall, for all purposes, be the date on
which the Committee makes the determination granting such Award. Notice of such
determination shall be given to each Employee to whom an Award is granted within
a reasonable time after the date of such grant.
13 AWARD AGREEMENTS
As a condition to the effectiveness of each grant of an Award under
this Plan, the Awardee shall enter into a written Award Agreement in such form
as may be prescribed by the Committee from time to time with respect to Stock
Options, Restricted Stock, SARs and Performance Units. Subject to the provisions
of Section 18, each such Award Agreement shall contain such provisions as are
required to conform to the terms of the Plan and may contain such additional
provisions not inconsistent with the terms of the Plan as the Committee may from
time to time authorize. Each Award Agreement evidencing the grant of an Award to
a Section 16 Person shall also provide, if not otherwise exempt from the short
swing profit provisions of Section 16(b) of the Act under the provisions of Rule
16b-3, for such minimum holding period from the date of the grant of the Award
to the disposition of any Shares acquired pursuant to the Award as may be
required by Rule 16b- 3.
14 CONDITIONS UPON ISSUANCE OF SHARES
14.1 Shares shall not be issued with respect to any Award unless the
exercise of such Award and the issuance and delivery of such Shares pursuant
thereto shall comply with all applicable Securities Law Requirements and all
other applicable provisions of law, including, without limitation, any
applicable state "blue sky" laws and foreign (national and provincial)
securities laws and the rules and regulations promulgated under any of such
laws, and shall be further subject to the approval of counsel for the Company
with respect to such compliance.
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14.2 As a condition to the exercise of an Award or the issuance of
Shares upon exercise of an Award, the Company may require the person exercising
such Award to make such representations and warranties to the Company as may be
required, in the opinion of counsel for the Company, by any of the
aforementioned Securities Law Requirements and other laws, which may include,
without limitation, representations and warranties that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
14.3 The Company shall not have any liability to any Awardee in respect
of any delay in the sale or issuance of Shares hereunder until the Company is
able to obtain authority from any governmental authority (domestic or foreign)
or self-regulatory organization having jurisdiction thereover, which authority
is deemed by the Company's counsel to be necessary to the lawful sale and
issuance of such Shares, or any failure to sell or issue such Shares as to which
such requisite authority the Company is unable to obtain.
15 FORFEITURE OF AWARDS AND REALIZED BENEFITS
15.1 LOSS OF UNEXERCISED OPTIONS OR OTHER AWARDS. In addition to any
other similar provision of the Plan, if an Awardee holding an outstanding Award
engages, without the written consent of the Company as authorized by the
Committee, in any of the following conduct (any such conduct being referred to
as "Prohibited Conduct") at any time during the period beginning on the date the
Awardee first entered the employ of the Company or a Subsidiary and continuing
for so long as any portion of such Award remains outstanding or unexercised or
paid (the "Grant Period"):
15.1.1 rendering services for any organization or engaging
directly or indirectly in any business which, in the sole judgment of
the Committee, is or becomes competitive with the Company or a
Subsidiary, or where such rendering of services or engaging in
business, in the sole judgment of the Committee, is or becomes
otherwise prejudicial to or in conflict with the interests of the
Company or a Subsidiary; provided that the ownership (legal and/or
beneficial) of a not more than ten percent (10%) equity interest in any
organization or business whose equity is listed on a recognized
securities exchange or traded over-the-counter shall not constitute
Prohibited Conduct within the meaning of this Section 15;
15.1.2 disclosing to anyone outside the Company or any Subsidiary,
or use in other than the business of the Company or any Subsidiary, any
confidential or proprietary information relating to the business of the
Company or any Subsidiary, acquired by the Awardee either during or
after employment with the Company or a Subsidiary;
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<PAGE> 27
15.1.3 except as may otherwise be permitted by any agreement
otherwise made by the Company or a Subsidiary with the Awardee, failing
to disclose fully and promptly in writing and assign to the Company or
to the Subsidiary by which the Awardee is or was employed all right,
title and interest in any discovery, invention, process, method,
improvement or idea, whether or not patentable or subject to copyright
protection and whether or not reduced to tangible form or reduced to
practice, made or conceived by such person during employment by the
Company or such Subsidiary, relating in any manner to the actual or
contemplated business, research or development work of the Company or
such Subsidiary or to do anything reasonably necessary to enable the
Company or such Subsidiary to secure a patent, copyright or similar
protection in the United States of America and/or in foreign countries
as the Company or such Subsidiary may elect; or
15.1.4 inducing or attempting to induce any customer or supplier
of the Company or a Subsidiary to breach any contract with the Company
or a Subsidiary or otherwise terminate its relationship with the
Company or a Subsidiary;
then the Committee shall have the right, upon determining that the Awardee has
engaged in any Prohibited Conduct at any time during the Grant Period (in making
such determination, the Committee may, but shall not be required to, give the
Awardee an opportunity to be heard and to present evidence on his behalf), to
declare the Award forfeited and canceled effective as of the time of the conduct
constituting such Prohibited Conduct.
15.2 AWARDEE CERTIFICATION UPON EXERCISE. Each time an Award is
exercised or paid, the Awardee shall be deemed to certify to the Company that
such Awardee did not, without the written consent of the Company as authorized
by the Committee in its sole discretion, engage in any Prohibited Conduct at any
time during the period beginning on the date the Awardee first entered the
employ of the Company or a Subsidiary and ending on the date of such exercise
(the "Pre-Exercise Period").
15.3 LOSS OF REALIZED BENEFITS. In the event that the Committee
determines with respect to a particular exercise or payment of an Award that the
Awardee engaged in any Prohibited Conduct at any time during the Pre-Exercise
Period or within one (1) year after such exercise (in making such determination,
the Committee may, but shall not be required to, give the Awardee an opportunity
to be heard and to present evidence on his behalf), such Awardee shall be liable
to the Company to repay any cash proceeds received on an exercise or payment of
an Award and (i) to the extent such Awardee has, prior to his receipt of the
"Forfeiture Notice" (as defined below), disposed of any Shares acquired through
such exercise, for payment to the Company of an amount in cash equal to the
excess of (A) the net cash proceeds from such disposition (or if such Shares
were
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<PAGE> 28
disposed of other than for cash, the aggregate Fair Market Value of such Shares
determined with reference to the date of disposition) over (B) that portion of
the sum of the cash and the aggregate Fair Market Value determined with
reference to the exercise date of any already owned Shares used by the Awardee
to pay the exercise price for such Shares (such sum being referred to as the
"Exercise Payment") which is allocable to the Shares disposed of in the
proportion that such number of Shares bears to the total number of Shares issued
pursuant to such Award exercise or payment, and (ii) to the extent such Awardee
still owns, at the time he receives the Forfeiture Notice, any Shares acquired
through such exercise, at the option of the Committee, either (A) for the return
of such Shares to the Company in exchange for a cash refund from the Company to
such Awardee in an amount equal to that portion of the Exercise Payment which is
allocable to the Shares still owned in the proportion that such number of Shares
bears to the total number of Shares issued pursuant to such Award exercise (such
portion being referred to as the "Retained Shares Exercise Payment"), or (B) for
payment to the Company of an amount in cash equal to the excess of the aggregate
Fair Market Value determined with reference to the exercise date of the Shares
still owned over the Retained Shares Exercise Payment. To enforce such liability
against such Awardee, the Committee shall notify the Awardee thereof in writing
within three (3) years of the date of the affected Award exercise, which notice
(the "Forfeiture Notice") shall include a statement of the form of payment which
the Committee has elected to receive from the Awardee with respect to Shares
still owned by the Awardee. Within ten (10) days after receiving the Forfeiture
Notice, the Awardee shall make full payment of such liability to the Company in
cash or, to the extent such Awardee still owns Shares acquired through the
affected exercise and the Committee elects in the Forfeiture Notice to receive
such Shares, stock certificates evidencing such Shares still owned by the
Awardee (duly endorsed for transfer with signature guaranteed). In the event
that the Committee elects to receive, and the Awardee returns, Shares, the
Company shall make the refund payment required to be made to the Awardee with
respect to such Shares upon the Company's receipt of such Shares as hereinabove
required.
15.4 CUMULATIVE RIGHTS. The obligation of an Awardee under this Section
15 to refrain from Prohibited Conduct is in addition to, and does not in any way
supersede or diminish, any other obligation of such Awardee with respect to such
matters which such Awardee may owe to the Company, any Subsidiary or any other
person under any agreement, applicable law or otherwise (a "Similar
Obligation"). Any action taken by the Company or the Committee to enforce,
compromise, settle or waive the provisions of this Section 15 with respect to
any particular event constituting Prohibited Conduct shall not in any way affect
the rights of the Company, the Committee, any Subsidiary or any other person
against an Awardee with respect to any other event constituting, or any other
liability of an Awardee arising from such, Prohibited Conduct or any Similar
Obligation, nor shall any action taken or failed to be taken by the Company, any
Subsidiary or any other
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person against an Awardee to enforce, compromise, settle or waive any Similar
Obligation have any effect on the rights of the Company and the Committee under
this Section 15.
16 RESERVATION OF SHARES
The Company, during the term of this Plan, shall at all times reserve
and keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
17 EFFECTIVENESS OF PLAN
This Plan was adopted by the Board on, and shall be effective as of,
April 12, 1999; provided, however, that any Awards granted hereunder shall not
be exercisable unless and until, and this Plan and all such Awards shall
automatically terminate if the Plan is not, approved, within one (1) year of the
date of adoption of the Plan, by the holders of the outstanding Shares of the
Company present and voting, in person or by proxy, at a duly held meeting of the
Company's stockholders or any adjournment thereof and by such percentage of such
quorum of such stockholders as may be required by applicable Securities Law
Requirements or by written consent if permitted. Once so approved by the
stockholders of the Company, the Plan shall continue in full force and effect
until (i) terminated by resolution of the Board, or (ii) both (A) all Awards
granted under the Plan have been exercised in full, and (B) no Authorized
Shares, SARs or Performance Units remain available for the granting of
additional Awards. The termination of the Plan shall not affect Awards already
granted, which Awards shall remain in full force and effect in accordance with
their respective terms as if this Plan had not been terminated.
18 AMENDMENT OF PLAN AND OUTSTANDING AWARDS
The Board may, in its sole discretion, amend the Plan from time to
time, provided that any amendment which any other Securities Law Requirement or
Section 162(m) of Code requires be approved by the stockholders of the Company
shall be made only with the approval of such stockholders. Amendments to the
Plan shall apply prospectively to all Awards then outstanding under the Plan,
except in the case of any amendment which is adverse to an Awardee, in which
case the amendment shall apply with respect to the outstanding Awards held by
the adversely affected Awardee only upon the consent of such Awardee to such
amendment. In exercising its authority under this Section to amend outstanding
Awards, the Committee likewise may make an amendment which adversely affects the
Awardee only upon the consent of such Awardee to such amendment. Notwithstanding
the provisions of this Section 18, the consent of the Awardee shall not be
required with respect to an amendment to the Plan or to any outstanding Award
which is
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made in order to comply with Securities Law Requirements or Section 162(m) of
the Code, or which causes a Tax Qualified Option no longer to qualify as such.
19 GENERAL PROVISIONS
19.1 GRANTS TO FOREIGN EMPLOYEES. Notwithstanding any other provision
of this Plan to the contrary but subject to applicable Securities Law
Requirements and tax laws, to the extent deemed necessary or appropriate by the
Committee in its sole discretion in order to further the purposes of the Plan
with respect to Employees who are foreign nationals and/or employed outside the
United States of America, an Award granted to any such Employee may be on terms
and conditions different from those specified in this Plan in recognition of the
differences in the laws, tax policies and customs applicable to such an
Employee, without the necessity of the Plan being amended to provide for such
different terms and conditions.
19.2 NATURE OF BENEFITS. Benefits realized by an Awardee under this
Plan or any Award granted hereunder shall not be deemed a part of such Awardee's
regular, recurring compensation for purposes of the termination, indemnity or
severance pay law of any country and shall not be included in, nor have any
effect on, the determination of benefits under any other employee benefit plan
or similar arrangement provided to such Awardee by the Company or a Subsidiary
unless expressly so provided by such other plan or arrangement, or except where
the Committee expressly determines in its sole discretion that an Award or
portion thereof should be so included in order accurately to reflect competitive
compensation practices or to recognize that an Award has been granted in lieu of
a portion of competitive annual cash compensation.
19.3 DETERMINATION OF DEADLINES. If any day on or before which action
under this Plan or any Award granted hereunder must be taken falls on a
Saturday, Sunday or Company-recognized holiday, such action may be taken on the
next succeeding day which is not a Saturday, Sunday or Company-recognized
holiday; provided, however, that the provisions of this Section 19.3 shall not
apply to, and shall not extend the time for exercise of, any Award which is
terminated for Misconduct or for Prohibited Conduct.
19.4 GOVERNING LAW. To the extent that federal laws (such as the Act or
the Code) or the Delaware General Corporation Law do not otherwise control, this
Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio and construed accordingly.
19.5 GENDER AND NUMBER. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa.
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19.6 CAPTIONS. The captions contained in this Plan are for convenience
of reference only and do not affect the meaning of any term or provision hereof.
19.7 UNFUNDED OBLIGATIONS. Any amounts to be paid to Awardees pursuant
to the Plan are unfunded obligations. Neither the Company nor any Subsidiary is
required to segregate any monies from its general funds, to create any trusts or
to make any special deposits with respect to this obligation. Beneficial
ownership of any investments, including trust investments which the Company may
make to fulfill this obligation, shall at all times remain in the Company. Any
investments and the creation or maintenance of any trust or any Awardee account
shall not create or constitute a trust or a fiduciary relationship between the
Committee, the Company or any Subsidiary and an eligible Employee, or otherwise
create any vested or beneficial interest in any Awardee or the Awardee's
Beneficiary or the Awardee's creditors in any assets of the Company or its
Subsidiaries whatsoever. The Awardees shall have no claim against the Company
for any changes in the value of any assets which may be invested or reinvested
by the Company with respect to the Plan.
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<PAGE> 1
Exhibit 10.1.6
AIRONET WIRELESS COMMUNICATIONS, INC.
1999 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1 PURPOSE OF THE PLAN. The purpose of this Plan is to promote the
best interests of the Company and its stockholders by enabling the Company to
attract and retain the services of experienced and knowledgeable independent
directors by providing such directors the opportunity, pursuant to Options
granted under the Plan, to acquire a proprietary interest in the Company and
thereby enhance their understanding of the interests of the Company's
shareholders and encourage them to put forth their maximum efforts for the
continued success and growth of the Company.
2 DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this Plan
have the respective meanings set forth below:
"Act" means the Securities Exchange Act of 1934, as amended from time
to time.
"Authorized Shares" means the maximum aggregate number of shares of
Common Stock specified in Section 4.1 as being authorized for issuance and sale
under Options granted pursuant to the Plan, subject to adjustment thereof in
accordance with Section 12.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" means the United States Securities and Exchange
Commission.
"Committee" means the Committee appointed by the Board in accordance
with Section 5.1, if a Committee is appointed. The members of such Committee
shall be members of the Board. If no Committee has been appointed, any reference
to the "Committee" shall be deemed a reference to the Board. Any function of the
Committee may be exercised by the Board at any time.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Company.
"Company" means Aironet Wireless Communications, Inc., a Delaware
corporation.
"Director" means any person elected or duly appointed in accordance
with the certificate of incorporation or by-laws of the Company, or applicable
law, to serve on the Board.
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<PAGE> 2
"Employee" means any person, including officers and Directors who are
also officers, employed by the Company or any Subsidiary. The payment of
director's fees by the Company shall not be sufficient to constitute a person as
an Employee.
"Family Member" means (i) the spouse or any sibling of an Optionee or
any lineal descendant (including, but not limited to, adopted and step children)
of any of the foregoing, (ii) a trust for the exclusive benefit of the Optionee
and/or person(s) described in clause (i) herein, or the trustee of such a trust
in his, her or its capacity as such, (iii) a partnership, corporation, limited
liability company or similar entity the partners, stockholders or other owners
of which include only the Optionee and/or person(s) described herein.
"Non-Employee Director" means any person who, as of any given date, has
been elected or duly appointed in accordance with the certificate of
incorporation or by-laws of the Company, or applicable law, to serve on the
Board and is not an officer or Employee of the Company or any of its
subsidiaries.
"Non-Profit Organization" means any organization which is exempt from
United States income taxes under Section 501(c)(3), (4), (5), (6), (7), (8) or
(10) of the Code.
"Option" means a right granted to a Non-Employee Director pursuant to
the Plan to purchase a specified number of shares of Common Stock at a specified
price during a specified period and on such other terms and conditions as may be
specified pursuant to the Plan. Options may be granted as Tax Qualified Options
or as Options which do not qualify as Tax Qualified Options.
"Option Agreement" means the written agreement evidencing an Option by
and between the Company and the Optionee described in Section 14.
"Optioned Stock" means the Common Stock subject to an Option.
"Optionee" means a Non-Employee Director who receives an Option.
"Plan" means this Aironet Wireless Communications, Inc. 1999 Stock
Option Plan for Non-Employee Directors.
"Rule 16b-3" means Rule 16b-3 promulgated by the Commission under the
Act or any similar successor regulation exempting certain transactions involving
stock-based compensation arrangements from the liability provisions of Section
16 of the Act, as adopted and amended from time to time and as interpreted by
formal or informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission.
"Securities Law Requirements" means the Securities Act of 1933, as
amended from time to time, and the Act and the rules and regulations promulgated
by the Commission
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<PAGE> 3
under such laws, as such rules and regulations are adopted and amended from time
to time, including but not limited to Rule 16b-3, and as all such laws, rules
and regulations are interpreted by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the Commission,
and the requirements of any stock exchange, automated inter-dealer quotation
system or other recognized securities market on which the Common Stock is listed
or traded or in which the Common Stock is included, as adopted and amended from
time to time and as interpreted by formal or informal opinions of, and other
interpretive advice provided by, the representatives of such stock exchange,
quotation system or other securities market.
"Shares" means the Common Stock as adjusted in accordance with Section
12.
"Subsidiary" means a corporation of which not less than fifty percent
(50%) of the voting shares are owned by the Company or a Subsidiary, whether or
not such corporation now exists or is hereafter organized or acquired by the
Company or a Subsidiary.
"Successor" means the estate of an Optionee or a person who succeeds by
will or the laws of descent and distribution to an Optionee's right to exercise
an Option.
"Tax Qualified Option" means an Option which is intended at the time of
grant to qualify for special tax treatment under Section 422A or other
particular provisions of the Code and the regulations, rulings and procedures
promulgated, published or otherwise provided thereunder, as adopted and amended
from time to time.
3 QUALIFICATION OF PLAN. The Plan is intended to qualify for an
exemption from the operation of Section 16(b) of the Act, pursuant to Rule
16b-3. Insofar as transactions under this Plan are intended to comply with all
applicable conditions of Rule 16b-3, to the extent that any provision of the
Plan or action by the Board or the Committee fails to so comply, such provision
or action shall be deemed null and void to the extent permitted by law and
deemed advisable by the Board or, but only with respect to actions taken by it,
the Committee.
4 STOCK SUBJECT TO THE PLAN.
4.1 Number of Shares Issuable. Subject to adjustment in accordance with
the provisions of Section 12, the maximum aggregate number of Authorized Shares
which may be issued and sold under Options granted pursuant to the Plan is
200,000 shares of Common Stock. The Shares issued and sold upon the exercise of
Options may be treasury Shares, Shares of original issue or a combination
thereof.
4.2 Computation of Shares Available for Grant. For purposes of
computing the number of Authorized Shares available from time to time under the
Plan for the grant of Options, the number of Shares subject to each Option
granted pursuant to the Plan shall be provisionally counted against the
Authorized Shares from and after the grant of such Option but only for so long
as and to the extent that such Option shall remain outstanding
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<PAGE> 4
and unexercised. Upon the exercise, in whole or in part, of an Option, the
number of Shares issued upon such exercise shall be permanently deducted from
the Authorized Shares, provided that no such permanent deduction shall be made,
and the provisional deduction against the Authorized Shares shall be reversed to
the extent that the exercise price and/or the withholding taxes with respect to
such exercise are paid through (i) the delivery to the Company by the person
exercising the option of Shares already owned by such person and/or (ii) the
withholding by the Company of Shares from the total number of Shares with
respect to which the Option is exercised. The provisional deduction against the
Authorized Shares shall likewise be reversed to the extent of the unexercised
portion of an Option upon the expiration, lapse, cancellation, surrender,
forfeiture or other termination of such Option or portion thereof. The Shares
covered by any such reversal of a provisional deduction against the Authorized
Shares shall immediately become available for the granting of new Options under
the Plan with respect thereto.
5 ADMINISTRATION OF THE PLAN.
5.1 Procedure. The Plan shall be administered by the Board or the Board
may, in its discretion, appoint a Committee to administer the Plan, subject to
such terms and conditions as the Board may prescribe, which Committee, once
appointed, shall continue to serve until otherwise directed by the Board;
provided that the granting of Options under Section 6.3 and any action under the
Plan affecting the number of Shares covered thereby, the exercise price payable
thereunder or the times at which the same may be exercised (including, but not
limited to, the acceleration of the vesting thereof or any extension of the
period, subject to the maximum term fixed by Section 7.1, during which such an
Option may be exercised) shall not be taken by the Committee but shall lie
solely within the authority of the Board, subject to the abstention of the
Optionee from any decision regarding any Option held by such Optionee. Subject
to the provisions of the Plan, the Committee has authority to manage and control
the operation of the Plan, interpret the provisions of the Plan, and prescribe,
amend and rescind rules and regulations relating to the Plan. From time to time
the Board may increase or decrease the size of the Committee and may appoint
additional members thereof, remove members (with or without cause), fill
vacancies however caused and remove all members of the Committee and thereafter
directly administer the Plan.
5.2 Powers of the Committee. Subject to the provisions of this Plan,
the Committee shall have the authority, in its sole discretion:
5.2.1 To determine, upon review of relevant information in
accordance with Section 8.2 of the Plan, the "Fair Market Value" (as
defined in Section 8.2) of the Shares;
5.2.2 To determine the terms and provisions of each Option;
5.2.3 To amend any outstanding Option;
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<PAGE> 5
5.2.4 To authorize any person to prepare and execute on behalf
of the Company any instrument deemed by the Committee to be necessary
or advisable to evidence or effectuate the Plan, any Option granted
thereunder or any amendment to the Plan or any Option;
5.2.5 To interpret the Plan;
5.2.6 To prescribe, amend and rescind, if the Committee deems
it necessary or appropriate, any rules and regulations relating to the
Plan, to the extent not inconsistent with the Plan;
5.2.7 To make all other determinations the Committee may deem
necessary or advisable in connection with the administration of the
Plan; and
5.2.8 To accelerate the time when any Option shall vest and
may be exercised by the Optionee; provided, however, that no Optionee
shall participate in any decision regarding acceleration of vesting of
any Option held by such Optionee.
5.3 Effect of Board and Committee Decisions. All decisions,
determinations and actions of the Board and the Committee in connection with the
construction, interpretation, administration, application, operation and
implementation of the Plan shall be final, conclusive and binding on the
Company, its stockholders and Subsidiaries, all Directors and Optionees, their
respective legal representatives, heirs, successors and assigns, and all other
persons claiming under or through any of them.
5.4 Exculpation and Indemnification. No member of the Board or the
Committee, and no Employee or other agent acting on behalf of the Board or the
Committee, shall be personally liable for any decision, determination or action
made or taken, or failed to be made or taken, with respect to this Plan or any
Option granted hereunder, and the Company shall fully protect each such person
in respect of any such decision, determination or action and shall indemnify
each such person against any and all claims, losses, damages, expenses and
liabilities arising from or in connection with any such decision, determination
or action.
6 ELIGIBILITY; FORMULA GRANTS.
6.1 Eligibility. Each Director who is not an Employee shall be eligible
to receive grants of Options under the Plan.
6.2 Formula Grants.
6.2.1 Initial Grants. Each Non-Employee Director who is
sitting on the Board on the first day that the Company's Common Stock
commences trading on the Nasdaq Stock Market's National Market System
following the Company's initial
Page 5 of 15
<PAGE> 6
public offering (the "First Trading Day") and those who are newly
elected or appointed to the Board after the First Trading Day shall
automatically be granted an Option (the "Initial Grant") to purchase
25,000 Shares of Common Stock (subject to adjustment as provided in
Section 12) on the First Trading Day or the day he or she joins the
Board, as applicable.
6.2.2 Continuing Grants. Each Non-Employee Director shall
automatically be granted an Option (the "Continuing Grant") to purchase
5,000 Shares of Common Stock (subject to adjustment as provided in
Section 12) on each anniversary of his or her election or last
re-election to the Board so long as such Non-Employee Director is
continuing to serve on the Board on the date of such anniversary.
6.3 Discretionary Grants. In its sole discretion, the Board may at any
time and from time to time while the Plan is in effect grant to any one or more
of the Non-Employee Directors additional Options to purchase Shares on such
terms and subject to such provisions as the Board may determine (which terms and
provisions need not be identical to other Options granted under this Section 6),
including but not limited to, (i) the number of Shares subject to the Option,
(ii) the exercise price per Share (subject to the provisions of Section 8), and
(iii) whether the Option shall become exercisable over a period of time and when
it shall be fully exercisable. Any Options granted under this Section 6.3 shall
be in addition to those automatically granted under Section 6.2, and there shall
be no limit on the number of Options which may be granted to any eligible
Director or on the aggregate number of Shares subject to purchase thereunder,
subject to the limitation in Section 4.1.
7 TERM OF OPTIONS; VESTING.
7.1 Term of Options. Subject to the provisions of Section 6.3 as to
Options described therein, the term of each Option shall be ten (10) years from
the date of grant thereof provided that the Committee, if it intends that a
particular Option qualify as a Tax-Qualified Option, shall observe such
restrictions on the term of such Option as may be imposed by applicable tax laws
in order for such Option to so qualify. Each Option shall continue in effect in
accordance with its terms notwithstanding that the Plan may, thereafter be
terminated prior to the expiration of the term of such Option.
7.2 Vesting.
7.2.1 Initial Grants. Each Option constituting an Initial
Grant shall be exercisable (a) as to one-third of the Shares subject to
the Option, after the first anniversary of the grant date, (b) as to
two-thirds of the Shares subject to the Option, after the second
anniversary of the grant date, and (c) as to all or any part of the
Shares subject to the Option, after the third anniversary of the grant
date.
Page 6 of 15
<PAGE> 7
7.2.2 Continuing Grants. Each Option constituting a Continuing
Grant shall be exercisable as to all or any part of the Shares subject
to the Option after the third anniversary of the grant date.
7.3 Discretionary Grants. Each Option granted pursuant to Section 6.3
shall be exercisable at such times and as to all or any part of the Shares
subject to such Option as determined by the Board at the time of grant and
reflected in the Option Agreement evidencing the same.
8 EXERCISE PRICE.
8.1 Minimum Price Required. The per Share exercise price for the Shares
subject to an Option shall be (i) with respect to Options granted under Section
6.2, the Fair Market Value per Share as of the day prior to the date of grant of
such Option, and (ii) with respect to Options granted under Section 6.3, such
price per Share as the Board may determine at the time of grant and reflected in
the Option Agreement evidencing the same, but in no event less than the Fair
Market Value per Share as of the day prior to the date of grant.
8.2 Definition of "Fair Market Value". For all purposes under the Plan,
"Fair Market Value" per Share shall be determined by the Committee in its sole
discretion; provided that if the Shares are included in the Nasdaq Stock
Market's National Market System or listed on a stock exchange on the date as of
which the same is to be determined, the Fair Market Value per Share shall be the
closing price on such quotation system or exchange which is the principal
trading market for the Shares on the date of determination or, if no sale price
was reported for the Shares on the date of determination, the closing price on
such principal trading market for the last trading day prior to the date of
determination for which a sale price was reported; provided further, however,
that if the foregoing method of determining Fair Market Value is inconsistent
with the then existing tax law requirements with respect to any Option which the
Committee intends to qualify as a Tax Qualified Option, then the Fair Market
Value per Share shall be determined by the Committee in such manner as is
required for such Tax Qualified Option to qualify as such.
9 FORM OF PAYMENT.
9.1 Acceptable Forms of Consideration. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, the following
forms of consideration will be accepted in payment of the exercise price for the
Shares to be issued upon exercise of an Option: (i) cash, (ii) personal check,
(iii) bank cashier's check, (iv) already owned Shares (duly endorsed for
transfer with signature guaranteed), (v) Shares withheld from the Shares to be
issued upon such exercise, (vi) subject to compliance with applicable law, a
commitment for the delivery to the Company of proceeds from the sale, pursuant
to a brokerage or similar arrangement, of Shares to be issued upon exercise of
the Option, or (vii) any combination of the foregoing. The person entitled to
exercise the Option shall
Page 7 of 15
<PAGE> 8
be entitled to elect from the foregoing forms of consideration the form(s) to be
used in effecting payment with respect to a particular exercise; provided that
any election by an Optionee to use already owned Shares or have Shares withheld
from those issuable upon such exercise shall be effective only if made in
accordance with the applicable requirements of Rule 16b-3; and provided further
that a commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued upon
exercise of an Option will not be accepted from an Optionee if, under Securities
Law Requirements, such a sale would be matched with such exercise to result in
"short-swing" profit liability under Section 16(b) of the Act on the part of
such Optionee with respect to such transaction.
9.2 Valuation of Shares Delivered or Withheld. Where already owned
Shares, or Shares withheld from those issuable upon such exercise, are used in
payment of the exercise price, such Shares shall be valued at Fair Market Value
as of the day immediately preceding the date of exercise.
9.3 Delivery of Already Owned Shares. The Company shall not be
obligated to accept from an Optionee Shares he or she already owns as full or
partial payment of the exercise price of an Option unless payment by such shares
is not in violation of Section 16(b) of the Act, and the Company can require
that the tender be accompanied by a written statement of the Optionee certifying
that either (i) the Shares tendered in payment were acquired other than through
the exercise of a stock option granted by the Company, (ii) the Shares tendered
in payment were acquired through the exercise, on such date(s) as shall be
recited in such statement (any such Shares acquired through such an exercise
occurring less than six (6) months prior to the date of exercise of the Option
in respect of which such already owned Shares are tendered are ineligible for
use as payment toward such Option exercise), of stock option(s) granted by the
Company or (iii) that the Shares were acquired and the use thereof is in
accordance the provisions of Rule 16b-3. The Committee may, in its sole
discretion, accept, in lieu of physical delivery of the stock certificates
evidencing such Shares, such constructive delivery of such Shares as may be
satisfactory to the Committee.
10 METHOD OF EXERCISE.
10.1 Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times and under such conditions
as are determined by the Committee and as are permitted under the Plan. An
Option may not be exercised for a fraction of a Share. In order to exercise an
Option, the person or persons entitled to exercise it shall deliver to the
Company written notice of the number of Shares with respect to which the Option
is being exercised, accompanied by payment in full of the aggregate price for
the Shares so to be acquired. To constitute an effective exercise of an Option,
such notice and payment shall be addressed to the attention of the Treasurer of
the Company and must be received at the principal executive office of the
Company by 5:00 p.m., local time, on the date of expiration or termination of
the Option. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly
Page 8 of 15
<PAGE> 9
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends nor any other rights as a
stockholder shall exist with respect to the Optioned Stock notwithstanding the
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the stock certificate is issued,
except as provided in Section 12.
Exercise of an Option shall result in a decrease in the number of
Shares which thereafter shall be available for sale under such Option by the
number of Shares as to which the Option is exercised, including any Shares
withheld to cover the exercise price.
10.2 Termination of Service. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, in the event that an Optionee
shall cease to be a Director (other than by reason of the Optionee's death or
disability), such Optionee may exercise his Option (to the extent that he was
entitled to exercise it at the time he ceased to be a Director) until the
earlier of (i) the date twelve (12) months after the date Optionee ceased to be
a Director or (ii) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
10.3 Death of Optionee. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected in
the Option Agreement evidencing such Option, upon the death of an Optionee:
10.3.1 who is at the time of his or her death a Director of
the Company, the Option may be exercised (to the extent the Optionee
would have been entitled to do so had Optionee continued living and
terminated Optionee's directorship six (6) months after the date of
death) by Optionee's Successor until the earlier of (A) the date six
(6) months following the date of the Optionee's death (or, if the
Committee intends that a particular Option qualify as a Tax Qualified
Option, such lesser period of time within which the applicable tax laws
may require that the Option be exercised in order for such Option so to
qualify), or (B) the expiration date of such Option, and the Option
shall terminate on the earlier of such dates; or
10.3.2 within thirty (30) days after the termination of
Optionee's directorship (other than termination due to disability), the
Option may be exercised (to the extent the Optionee was entitled to do
so at the date of termination of his directorship) by his Successor
until the earlier of (A) the date six (6) months following the date of
the Optionee's death (or, if the Committee intends that a particular
Option qualify as a Tax Qualified Option, such lesser period of time
within which the applicable tax laws may require that the Option be
exercised in order for such Option so to qualify), or (B) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
10.4 Disability of Optionee. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and reflected
in the Option
Page 9 of 15
<PAGE> 10
Agreement evidencing such Option, if an Optionee's directorship terminates due
to Optionee becoming permanently and totally disabled within the meaning of
Section 23(e)(3) of the Code ("Disability"), the Option may be exercised (to the
extent the Optionee was entitled to do so as of the effective date of the
termination of Optionee's directorship by reason of such Disability) until the
earlier of (i) the date one (1) year after the effective date of such
termination or (ii) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
11 LIMITED TRANSFERABILITY OF OPTIONS.
11.1 Options granted under the Plan and any rights and privileges
appertaining thereto (i) may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner by the Optionee other than (1) by will
or the laws of descent and distribution, (2) pursuant to a "qualified domestic
relations order" as defined in Code Section 414(p)(1)(B) and satisfying the
requirements of Code Section 414(p)(1)(A), or (3) without the payment of any
cash or other economic consideration by the transferee to the transferor, to (A)
a Family Member, (B) a Non-Profit Organization, or (C) a charitable trust, and
(ii) shall not be subject to execution, attachment or similar process. A
transfer of an Option pursuant to clause (i) may relate to all or any part of
the Shares (but must be for whole Shares) which then continue to be subject to
such Option. Written evidence of any such transfer, accompanied by the
transferring Optionee's original copy of the Grant Agreement evidencing the
transferred Option, shall be promptly provided to the Company, in the case of
clauses (i)(1) and/or (2) upon the entry of the court order , or other judicial
authorization or direction effecting such transfer or, in the case of clause
(i)(3), upon the transferor's making of such transfer, which transfer must in
all cases comply with the requirements of Section 15 and otherwise be in form
and substance reasonably acceptable to the Company before the Company shall be
obligated to recognize such transfer. Upon its receipt of the foregoing, the
Company shall cancel the original Option Agreement and issue a replacement
Option Agreement to the transferee for the Option or portion thereof so
transferred and to the transferring Optionee for any balance of the Option he or
she retains after such transfer.
11.2 Upon the transfer of an Option in accordance with Section 11.1,
the transferee shall succeed to, and be entitled to exercise, all of the rights
and privileges of the transferring Optionee, provided that the Option in the
hands of the transferee shall continue to be subject to all of the terms,
conditions and restrictions under the Plan and the Option Agreement with respect
to such Option which would be applicable to the Option were it still held by the
Optionee to whom it was originally granted, including, without limitation, any
requirement for the continued exercisability or other effectiveness of the
Option based upon the life, employment or other status of the original Optionee.
11.3 The restrictions on transferability in Section 11.1 shall not be
construed to limit the ability of an Optionee to elect to pay all or any portion
of the exercise price using the form of consideration described in Section
9.1(iv).
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<PAGE> 11
12 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
12.1 Adjustments, in general. Subject to both the provisions of Section
12.2 and any required action by the stockholders of the Company, both the number
of Shares covered by each outstanding Option and the number of Shares which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of an Option under this Plan are again available
for grant, as well as the price per Share covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in the
number of issued and outstanding Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of Shares or any
other increase or decrease in the aggregate number of issued and outstanding
Shares effected without receipt of consideration by the Company; provided,
however, that the issuance of Shares pursuant to the conversion or exchange of
any securities of the Company convertible into or exchangeable for Shares shall
not be deemed to have been "effected without receipt of consideration." Any
fractional Shares which would otherwise result from any such adjustments shall
be eliminated, either by deleting all fractional Shares or by appropriate
rounding to the next higher (fractions of one-half or more) or lower (fractions
of less than one-half) whole Share. All such adjustments shall be made by the
Board in its sole discretion. Except as expressly provided herein, no issuance
by the Company of shares of stock of any class, or securities convertible into
or exchangeable for shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made to, the number of or exercise price
for Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the Company,
all outstanding Options will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise then be exercisable.
Subject to the provisions of Section 12.2, in the event of a sale of
all or substantially all of the assets of the Company or the merger or
consolidation of the Company with or into another corporation, each outstanding
Option shall be assumed (or an equivalent option shall be substituted) by such
successor corporation or a parent or subsidiary of such successor corporation
unless the Board, in the exercise of its sole discretion, determines that, in
lieu of such assumption or substitution, the Optionee shall have the right to
exercise the Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise then be exercisable. If, in
the event of a merger, consolidation or sale of assets, the Board makes an
Option fully exercisable in lieu of assumption or substitution, the Company
shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
Page 11 of 15
<PAGE> 12
12.2 Special Adjustments upon Change in Control. In the event of a
"Change in Control" of the Company (as defined in Section 12.3), unless
otherwise determined by the Board in its sole discretion prior to the occurrence
of such Change in Control, the following acceleration and valuation provisions
shall apply:
12.2.1 Any Options outstanding as of the date of such Change
in Control that are not yet fully vested on such date shall become
fully vested; and
12.2.2 The value of all outstanding Options, measured by the
excess of the "Change in Control Price" (as defined in Section 12.4)
over the exercise price, shall be cashed out. The cash out proceeds
shall be paid to the Optionee or, in the event of death of an Optionee
prior to payment, to his Successor.
12.3 Definition of "Change in Control". For purposes of this Section
12, a "Change in Control" means the happening of any of the following:
12.3.1 When any "person," as such term is used in Sections
13(d) and 14(d) of the Act (other than the Company, a Subsidiary or a
Company or Subsidiary employee benefit plan, including any trustee of
such a plan acting as trustee) becomes the "beneficial owner" (as
defined in Rule 13d-3 promulgated by the Commission under the Act, as
adopted and amended from time to time and as interpreted by formal or
informal opinions of, and releases published or other interpretive
advice provided by, the Staff of the Commission), directly or
indirectly, of securities of the Company representing fifty percent
(50%) or more of the combined voting power of the Company's then
outstanding securities; or
12.3.2 The consummation of a transaction requiring stockholder
approval and involving the sale of all or substantially all of the
assets of the Company or the merger or consolidation of the Company
with or into another corporation.
12.4 Definition of "Change in Control Price". For purposes of this
Section 12, "Change in Control Price" shall be, as determined by the Board,
either (i) the highest closing sale price of a Share, as reported by the NASDAQ
National Market, any stock exchange on which the Shares are listed or any other
recognized securities market on which the Shares are traded, at any time within
the sixty (60) day period immediately preceding the date of the Change in
Control (the "Sixty-Day Period"), or (ii) the highest price paid or offered, as
determined by members of the Board other than the Optionees, in any bona fide
transaction or bona fide offer related to the Change in Control, at any time
within the Sixty-Day Period.
13 TIME OF GRANTING OPTIONS. The grant date of an Option shall, for
all purposes, be (i) with respect to Options granted under Section 6.2, the
dates for automatic granting as specified in said Section 6.2, and (ii) with
respect to Options granted under Section 6.3, the date on which the Board makes
the determination to grant such Options.
Page 12 of 15
<PAGE> 13
14 OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under this Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 19.1, each such Option Agreement
shall contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time require. Each
Option Agreement shall also provide for such minimum waiting period from the
date of grant before the Option may be exercised, and such minimum holding
period from the date of the acquisition of Shares upon exercise of an Option for
which such Shares must be held before making any disposition of such Shares, as
may be required by Rule 16b-3.
15 CONDITIONS UPON ISSUANCE OF SHARES AND TRANSFERS OF OPTIONS.
Notwithstanding anything express or implied to the contrary in either the Plan
or any Option Agreement made hereunder:
15.1 No transfer of an Option pursuant to Section 11 shall be
effective, and no Shares shall be issued with respect to an Option unless in
each such case, as applicable, the transfer or exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
applicable Securities Law Requirements and all other applicable provisions of
law, including without limitation any applicable state "blue sky" laws and
foreign (national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and such actions shall further be subject to
the approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares
upon exercise of an Option, or to the transfer of an Option under Section 11,
the Company may require the person exercising such Option, or the transferee
with respect to any Section 11 transfers, to make such representations and
warranties to the Company as may be required, in the opinion of counsel for the
Company, by any of the aforementioned Securities Law Requirements and other
laws, which may include, without limitation, representations and warranties that
the Shares which are being or may be purchased thereunder are being or will be
acquired only for investment and without any present intention to sell or
distribute such Shares.
15.2 The Company shall not have any liability to any Optionee in
respect of any delay in the sale or issuance of Shares, or the transfer of an
Option, hereunder until the Company is able to obtain authority from any
governmental authority (domestic or foreign) or self-regulatory organization
having jurisdiction there over, which authority is deemed by the Company's
counsel to be necessary to the lawful sale, issuance or transfer of such Shares
or Option, as the case may be, or any failure to sell or issue such Shares, or
to effect any such Option transfer, as to which the Company is unable to obtain
such requisite authority.
Page 13 of 15
<PAGE> 14
15.3 The Company may, but shall be under no obligation to, effect or
obtain any registration or other qualification or approval of any Option granted
or transferred hereunder, or of any Shares issuable upon the exercise thereof,
under any applicable Securities Law Requirements or any other applicable
provisions of law, including without limitation any applicable state "blue sky"
laws and foreign (national and provincial) securities laws and the rules and
regulations promulgated under any of such laws, and in the event any such
registration, qualification or approval is not effected or obtained, such Option
or Shares, as the case may be, shall be subject to such transfer and/or other
restrictions (including, if so provided by such laws, rules and regulations, the
prohibition of a particular transaction) as may be imposed by such laws, rules
and regulations . By way of illustrating, but without limiting the generality
of, the foregoing provisions of this Section 15.3, Shares issuable upon the
exercise of an Option by a Director were covered by an effective registration
statement which the Company had prior to that date elected to file (consistent
with the discretion recognized in this Section 15.3) with the Commission on
Form S-8 and would be freely transferrable (subject to the filing of a Form 144
and the other applicable requirement of Rule 144 as then promulgated by the
Commission) by the Director, but unless the Company were to file (but in its
discretion, the Company has not elected to file) with the Commission a
registration statement with respect thereto on Form S-3 or other available Form,
Shares issuable to a transferee under Section 11 would not upon his or her
exercise thereof be freely transferable on the public securities markets for a
one year period as is further required by Rule 144 in the absence of an
applicable Form S-8 or other registration statement. In the event that any such
transfer and/or other restrictions shall apply, the Option Agreement evidencing
such Option or the Shares so issued, as the case may be, shall bear such legends
referencing such restrictions as the Company may reasonably require.
16 RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17 EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and
effective as of April 12, 1999; subject to the approval hereof by the vote of
the Company's stockholders required therefor by the Delaware General Corporation
Law and applicable Securities Law Requirements within one (1) year of such
adoption by the Board, which approval was obtained by Written Consent of such
stockholders on , 1999. The Plan shall continue in full force and effect
until (i) terminated by resolution of the Board or (ii) both (A) all Options
granted under the Plan have been exercised in full and (B) no Authorized Shares
remain available for the granting of additional Options. The termination of the
Plan shall not affect Options already granted, which Options shall remain in
full force and effect in accordance with their respective terms as if this Plan
had not been terminated.
18 AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its
sole discretion, amend the Plan from time to time, provided that any amendment
which Rule 16b-3 or any other Securities Law Requirement requires be approved by
the stockholders of the Company shall be made only with the approval of such
stockholders.
Page 14 of 15
<PAGE> 15
Amendments to the Plan shall apply prospectively to all Options then outstanding
under the Plan, except in the case of any amendment which is adverse to an
Optionee, in which case the amendment shall apply with respect to the
outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 5.2.3 to amend outstanding Options, the Committee likewise may make an
amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 18,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
19 GENERAL PROVISIONS.
19.1 Grants to Foreign Directors. Notwithstanding any other provision
of this Plan to the contrary, but subject to applicable Securities Law
Requirements and tax laws, to the extent deemed necessary or appropriate by the
Committee in its sole discretion in order to further the purposes of the Plan
with respect to Non-Employee Directors who are foreign nationals and/or employed
outside the United States of America, an Option granted to any such Non-Employee
Director may be on terms and conditions different from those specified in this
Plan in recognition of the differences in the laws, tax policies and customs
applicable to such Non-Employee Director, without the necessity of the Plan
being amended to provide for such different terms and conditions.
19.2 Determination of Deadlines. If any day on or before which action
under this Plan or any Option granted hereunder must be taken falls on a
Saturday, Sunday or Company-recognized holiday, such action may be taken on the
next succeeding day or preceding day, as applicable) which is not a Saturday,
Sunday or Company-recognized holiday.
19.3 Governing Law. To the extent that federal laws (such as the Act or
the Code) or the Delaware General Corporation Law do not otherwise control, this
Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio and construed accordingly.
19.4 Gender and Number. Whenever the context may require, any pronouns
used herein shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural and vice
versa.
19.5 Captions. The captions contained in this Plan are for convenience
of reference only and do not affect the meaning of any term or provision hereof.
Page 15 of 15
<PAGE> 1
Exhibit 10.1.7
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and effective as
of October 31, 1997 (the "Effective Date"), at Akron, Ohio, by and between
AIRONET WIRELESS COMMUNICATIONS, INC. ("Employer"), a Delaware corporation with
offices at 367 Ghent Road, Fairlawn, Ohio 44333, and ROGER J. MURPHY
("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee as President and Chief
Executive Officer of Employer, and Employee desires to be so employed, upon the
terms and conditions set forth herein; and
WHEREAS, Employer and Employee desire to have this Agreement supersede
any and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the mutual promises and agreements contained herein, the parties hereto agree
as follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee and Employee
agrees to serve Employer for the period (the "Employment Period") beginning on
the Effective Date and ending October 31, 1999. This Agreement may be terminated
earlier pursuant to section 4 hereof.
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to
serve Employer as its President and Chief Executive Officer, or in such
other capacity as Employer's Board of Directors (the "Board") shall
direct, in conformity with management policies, guidelines and
directions issued by Employer, and shall have general charge and
supervision of those functions and such other responsibilities as the
Board shall determine. Employee shall report to the Board.
b. Employee shall work exclusively for Employer on a
full-time basis in such capacity and shall carry on his employment at
such location as shall be required by the Board. During normal business
hours, Employee shall devote all of his time and attention to
Employer's business.
c. Employee shall perform his duties and
responsibilities hereunder diligently, faithfully and loyally in order
to cause the proper, efficient and successful operation of Employer's
business.
<PAGE> 2
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for
Employee's services, Employer shall pay to Employee during the
Employment Period a salary (the "Base Salary") at the annual rate of
$200,000 in fiscal year 1998, and at such higher rates of pay
thereafter as is determined by the Board in its discretion. All
payments will be in arrears, in equal installments every second Friday,
or at such other interval as the Board shall direct, but no less
frequently than twice each month. Employer shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee on
Employer's behalf during the Employment Period and which were approved
by the Board.
b. BONUS COMPENSATION. In addition to the Base
Salary, Employee shall be eligible to receive bonus compensation
("Bonus Compensation") during the Employment Period on a basis to be
agreed upon by Employee and the Board. Bonus compensation shall accrue
and be earned, if at all, and shall be paid at the end of the fiscal
year to which it relates.
c. STOCK OPTIONS. During the Employment Period,
subject to Board approval, Employee shall be eligible to receive grants
of option(s) pursuant to Employer's Employee Stock Option Plans. If at
any time during the Employment Period, the Board directs that Employee
serve in a capacity other than as Employer's President and Chief
Executive Officer or is assigned to perform services not consistent
with such position, and Employee resigns within fourteen (14) days
after either event, or if Employee is terminated other than for cause
or becomes deceased, then all options to purchase Employer's stock then
held by Employee shall immediately vest and be exercisable for the
balance of the term of such options.
d. RESTRICTED STOCK. During the Employment Period,
subject to Board approval, Employee shall be eligible to receive awards
of restricted stock pursuant to any restricted stock plans that may be
adopted by Employer. If at any time during the Employment Period, the
Board directs that Employee serve in a capacity other than as
Employer's President and Chief Executive Officer or is assigned to
perform services not consistent with such position, and Employee
resigns within fourteen (14) days of either event, or if Employee is
terminated other than for cause or becomes deceased, then all
restricted stock awarded by Employer to Employee shall immediately
vest.
e. VACATION. During the Employment Period, Employee
shall be entitled to take vacation time in accordance with Employer's
policies. In the event that all or any part of said vacation is not
taken for any reason during any year, there will be no compensation
paid in lieu thereof, and accrued and unused vacation time shall not be
carried over and added to the vacation time for the succeeding year in
accordance with such policy.
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<PAGE> 3
f. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS.
Employer shall provide Employee with the same health, disability,
retirement, death and other fringe benefits as are generally provided
to the executive employees of Employer in accordance with such terms,
conditions and eligibility requirements as may from time to time be
established or modified by Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon
Employee's death.
b. Employer may terminate Employee other than for
cause, or if Employee becomes permanently and completely disabled, at
any time upon no fewer than five (5) days prior written notice to
Employee. Permanent and complete disability shall be determined by
Employer according to the same standards as are applied under the
disability benefits referred to in paragraph 3(f). Any termination
based on disability shall be deemed to be a termination other than for
cause for purposes of paragraphs 3(c) and 3(d). If at any time during
the Employment Period, the Board directs that Employee serve in a
position other than as Employer's President and Chief Executive Officer
or assigns Employee to perform services not consistent with such
position, and Employee resigns his employment within fourteen (14) days
after any such event, then such resignation shall be deemed a
termination of Employee by Employer other than for cause for all
purposes hereunder. Employee may resign his position at any time upon
no fewer than fourteen (14) days prior written notice to Employer.
c. Employer shall have the right to terminate
Employee's employment under this Agreement at any time, immediately,
for "cause," which shall mean for behavior of Employee which is adverse
to Employer's interests, which means Employee's dishonesty, grossly
negligent misconduct, willful misconduct, disloyalty, acts of bad
faith, neglect of duty or material breach of this Agreement.
5. EFFECTS OF TERMINATION.
a. In the event of automatic termination by reason of
Employee's death pursuant to paragraph 4(a), or by Employer by reason
of Employee's permanent disability pursuant to paragraph 4(b), all of
Employer's obligations under this Agreement shall end except for
Employer's obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but unpaid to the
date of death or permanent disability. This paragraph 5(a) does not
limit paragraphs 3(c) or 3(d) regarding vesting of options or
restricted stock. Employee or his beneficiary shall have the right to
receive any payments under the death or disability benefits, as the
case may be, provided to Employee pursuant to paragraph 3(f), if any.
-3-
<PAGE> 4
b. In the event Employer exercises its right of
termination other than for cause pursuant to paragraph 4(b), or if this
Agreement expires, all of Employer's obligations under this Agreement
shall end except for Employer's obligations under paragraph 5(c) of
this Agreement and its obligations to pay Employee's Base Salary and
Bonus Compensation, if any, in each case earned and accrued but unpaid
to the date of termination (which, for purposes of this paragraph 5(b),
shall be five (5) days after the date on which notification is provided
by Employer to Employee pursuant to paragraph 4(b) or at the expiration
of this Agreement, whichever the case may be).
c. In the event Employer exercises its right of
termination other than for cause pursuant to paragraph 4(b), or if this
Agreement is not renewed by Employer when it expires, Employer shall be
obligated to pay Employee as severance pay for twelve (12) months
following the date of such termination or expiration, annualized
compensation at a rate equal to the Base Salary at that time. Such
payments shall be made in equal installments in such intervals as the
Base Salary was paid at the time of termination or expiration.
d. In the event Employer exercises its right of
termination pursuant to paragraph 4(c) for "cause," or Employee
otherwise leaves the employ of Employer prior to the expiration of this
Agreement and such resignation is not deemed to be a termination by
Employer other than for cause in accordance with paragraph 4(b) (for
the purposes of this paragraph 5(d) the date of termination shall the
date of termination or the date Employee otherwise leaves the employ of
Employer), all of Employer's obligations under this Agreement shall end
except for Employer's obligations to pay Employee's Base Salary, if
any, earned and accrued but unpaid to the date of termination.
6. COVENANT NOT TO COMPETE.
a. INDUCEMENT. This covenant between Employee and
Employer is being executed and delivered by Employee in consideration
of Employee's employment with Employer and Employer's obligations
hereunder (including, without limitation, the Base Salary, the Bonus
Compensation and other benefits and payments set forth herein).
Employee acknowledges that Employer's business and Employee's
responsibilities are international in scope. Employee further
acknowledges that the covenant not to compete with Employer contained
in this section 6 was and has been a condition of his employment since
Employee was originally employed by Employer.
b. RESTRICTED ACTIVITIES--DURATION. Except as
otherwise consented to or approved by the Board in writing, Employee
agrees that, in addition to being operative during the term of this
Agreement, the provisions of paragraph 6(b)(i) through (iii) hereof,
inclusive, shall be operative for a period of twelve (12) months after
Employee's termination of employment with Employer or the expiration of
this Agreement or the end of all severance payments made to Employee
under section 5 of this Agreement, whichever is greater,
-4-
<PAGE> 5
regardless of the time, manner or reasons for termination or
expiration. During such periods, Employee will not, directly or
indirectly, acting alone or as a member of a partnership or as an
owner, director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. engage in any business in competition with or
adverse to the business that is conducted by Employer, or,
without limiting the generality of the foregoing, engage in
any business which manufactures, sells, distributes, services
or supports products which are of type manufactured, sold,
marketed, serviced or supported by Employer, or which are in
the process of development in which Employee has participated
or has knowledge of, at the time of the termination of
Employee's employment with the Employer, in the United States,
Canada or any European, Asian, Pacific or other foreign
country in which Employer then or thereafter transacts
business or is making a bona fide attempt to do so;
ii. induce, request or attempt to influence any
customers or suppliers of Employer to curtail or cancel their
business or prospective business with Employer or in any way
interfere with Employer's business relationships; or
iii. induce, solicit, assist or facilitate the
inducement or solicitation by a third person of any employee,
officer, agent or representative of Employer, to terminate
their respective relationship with Employer or in any way
interfere with the Employer's employee, officer, agent or
representative relationships.
c. TOLLING; RELIEF OF OBLIGATIONS. In the event that
Employee breaches any provision of this section 6, such violation (1)
shall toll the running of the twelve (12) month period set forth in
paragraph 6(b) from the date of commencement of such violation until
such violation ceases, and (ii) shall relieve Employer of any
obligations to Employee under this Agreement.
d. "BLUE PENCILING" OR MODIFICATION. If either the
length of time, geographic area or scope of restricted business
activity set forth in paragraph 6(b) is deemed unreasonably restrictive
or unreasonable in any other respect in any court proceeding, Employee
and Employer agree and consent to such court's modifying or reducing
such restriction(s) to the extent deemed reasonable under the
circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential
Information" means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer or its parent or affiliated corporations and
which are not publicly disclosed or are only disclosed with
restrictions. Without limiting the generality of the foregoing,
"Confidential Information" includes strategic plans for
-5-
<PAGE> 6
carrying on business, other business plans, cost data, internal
financial information, customer lists, employee lists, vendor lists,
business partner or alliances lists manufacturing methods or processes,
product research or engineering data, drawings, designs, schematics,
flow charts, computer programs, program decks, routines, subroutines,
translators, compilers, operation systems, object and source codes,
specifications, inventions, calculations, discoveries and any letters,
papers, documents or instruments disclosing or reflecting any of the
foregoing, and all information revealed to, acquired or created by
Employee during Employee's employment by Employer relating to any of
the foregoing.
b. Employee acknowledges that the discharge of
Employee's duties under this Agreement will necessarily involve his
access to Confidential Information. Employee acknowledges that the
unauthorized use by him or disclosure by him of such Confidential
Information to third parties might cause irreparable damage to Employer
and Employer's business. Accordingly, Employee agrees that at all times
after the date hereof he will not copy, publish, disclose, divulge to
or discuss with any third party nor use for his own benefit or that of
others, without the prior express written consent of the Board, except
in the normal conduct of his duties under this Agreement, any
Confidential Information, it being understood and acknowledged by
Employee that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee by any
person while Employee is associated with Employer remains its exclusive
property.
c. Promptly upon termination of his employment,
irrespective of the time or manner thereof or reason therefor, Employee
agrees to return and surrender to Employer all Confidential Information
in any manner in his control or possession, as well as all other
Employer property.
8. REMEDIES INADEQUATE.
a. Employee acknowledges that the services to be
rendered by him to Employer as contemplated by this Agreement are
special, unique and of extraordinary character. Employee expressly
agrees and understand that the remedy at law for any breach by him of
section 6 or section 7 of this Agreement will be inadequate and that
the damages flowing from such breach are not readily susceptible to
being measured in monetary terms. Accordingly, upon adequate proof of
Employee's violation of any legally enforceable provision of section 6
or section 7 hereof, Employer shall be entitled to immediate injunctive
relief, including, without limitation, a temporary order restraining
any threatened or further breach. In the event any equitable
proceedings are brought to enforce the provisions of any of section 6,
section 7 or section 8 hereof, Employee agrees that he will not raise
in such proceedings any defense that there is an adequate remedy at
law, and Employee hereby waives any such defense. Nothing in this
Agreement shall be deemed to limit Employer's remedies at law or in
equity for any breach by Employee of any of the provisions of section 6
or section 7 hereof which may be pursued or availed of by
-6-
<PAGE> 7
Employer. Without limiting the generality of the immediately preceding
sentence, any covenant on Employee's part contained in section 6 or
section 7 hereof, which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for monetary
damages.
b. Employee has carefully considered, and has had
adequate time and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions upon him
and the rights and remedies conferred upon Employer under sections 6,
7, and 8 hereof, and hereby acknowledges and agrees that such
restrictions are reasonable in time, territory and scope, are designed
to eliminate competition which otherwise would be unfair to Employer,
do not stifle the inherent skill and experience of Employee, would not
operate as a bar to Employee's sole means of support, are fully
required to protect the legitimate interests of Employer and do not
confer a benefit upon Employer disproportionate to the detriment to
Employee.
c. The covenants and agreements made by Employee in
sections 6, 7, and 8 hereof shall survive full payment by Employer to
Employee of the amounts to which Employee is entitled under this
Agreement, the expiration of the Employment Period and this Agreement.
9. RIGHTS. Employee acknowledges and agrees that any procedure, design
feature, schematic, invention, improvement, development discovery, know how,
concept, idea or the like (whether or not patentable, registrable under
copyright or trademark laws, or otherwise protectable under similar laws) that
Employee may conceive of, suggest, make, invent, develop or implement, during
the course of his service pursuant to this Agreement (whether individually or
jointly with any other person or persons), relating in any way to the business
of Employer or to the general industry of which Employer is a part, as shall all
physical embodiments and manifestations thereof, and all patent rights,
copyrights, trademarks (or applications therefor) and similar protections
therein (all of the foregoing referred to as "Work Product"), shall be the sole,
exclusive and absolute property of Employer. All Work Product shall be deemed to
be works for hire, and to the extent that any Work Product may not constitute a
work for hire, Employee hereby assigns to Employer all right, title and interest
in, to and under such Work Product, including without limitation, the right to
obtain such patents, copyright registrations, trademark registrations or similar
protections as Employer may desire to obtain. Employee will immediately disclose
all Work Product to Employer and agrees, at any time, upon Employer's request
and without additional compensation, to execute any documents and otherwise to
cooperate with Employer respecting the perfection of its right, title and
interest in, to and under such Work Product, and in any litigation or
controversy in connection therewith, all expenses incident thereto to be borne
by Employer.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee or creditor
of Employee. Prior to the time of payment under this Agreement, neither Employee
nor his legal representative shall have any right
-7-
<PAGE> 8
by way of anticipation or otherwise to assign or otherwise dispose of any
interest under this Agreement.
11. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that may
be required to be funded under any benefit plan of Employer pursuant to law or
pursuant to other agreements and which are not for the sole benefit of Employee,
the obligations of Employer under this Agreement are not funded and Employer
shall not be required to set aside or deposit in escrow any monies in advance of
the due date for payment thereof to Employee.
12. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person, or if mailed to
Employee, by certified mail, postage prepaid, return receipt requested, at his
address last known on the records of Employer, and any notice to be given by
Employee to Employer shall be deemed to be given if delivered in person or by
mail, postage prepaid, return receipt requested, to the Chairman of Employer at
Employer's offices in Akron, Ohio, unless Employee or Employer shall have duly
notified the other parties in writing of a change of address. If mailed, such
notice shall be deemed to have been given when deposited in the mail as set
forth above.
13. AMENDMENTS. This Agreement shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the parties
hereto.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties. The parties are not relying on any other representation,
express or implied, oral or written. This Agreement supersedes any prior
employment agreement, written or oral, between Employee and Employer.
15. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any terms or
provisions hereof.
16. BINDING EFFECT. The rights and obligations of Employer hereunder
shall inure to the benefit of, and shall be binding upon, Employer and its
respective successors and assigns, and the rights and obligations of Employee
hereunder shall inure to the benefit of, and shall be binding upon, Employee and
his heirs, personal representatives and estate.
17. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions and any
partially enforceable provision shall be binding and enforceable to the extent
enforceable in any jurisdiction.
18. GOVERNING LAW AND VENUE. This Agreement shall be interpreted,
construed, and enforced in all respects in accordance with the laws of the State
of Ohio. Any and all actions brought arising out of, or based in whole or in
part upon this Agreement or the employment relationship, may be brought in
either a federal or state court sitting in Cuyahoga or Summit
-8-
<PAGE> 9
County, Ohio, and the parties consent to the jurisdiction thereof, and each
agrees not to contest the venue of such courts.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on the
day and year first above written, effective the Effective Date.
Aironet Wireless Communications, Inc.
By: /s/ James H. Furneaux
-------------------------------
James H. Furneaux, Chairman
/s/ Roger J. Murphy
-------------------------------
Roger J. Murphy
-9-
<PAGE> 1
EXHIBIT 10.1.8
[AIRONET WIRELESS COMMUNICATIONS LETTERHEAD]
January 14, 1999
Mr. R. G. Holmes
90 Woodland Avenue
Summit, New Jersey 07901
Dear Dale:
I am pleased to offer you the regular full-time exempt position of Senior Vice
President and Chief Financial Officer for Aironet Wireless Communications, Inc.
(a subsidiary of Telxon Corporation). The following are terms of the agreement
between you and Aironet Wireless Communications, Inc.:
1) Your base salary will be $5,769.25 biweekly, which equates to
$150,000.00 annualized.
2) You will report to the President and CEO. Your start date shall be on
or before January 25, 1999.
3) You will receive a grant of 100,000 Aironet employee stock options at
an exercise price to be determined and a vesting schedule of one-third
the grant each year over the three years: subject to Aironet's Board of
Director's approval.
4) You will be eligible to participate in Aironet's annual Incentive
Compensation Program, with bonus potential up to $50,000 based upon
meeting certain performance criteria to be outlined by the President
and CEO, and agreed upon between both parties. During the initial year
of your employment, you will be guaranteed a minimum bonus totaling
$25,000: of which $10,000 will be paid within 30 days of your start
date.
5) In the event Aironet terminates your employment for reasons other than
for cause, you shall receive a severance based upon your base salary
for a period of six months. Severance payments will be made bi-weekly
over the severance period.
Termination for "cause" shall mean behavior including, without
limitation, Employee's dishonesty, gross negligent misconduct, willful
misconduct, disloyalty, acts of bad faith, gross neglect of duty or
material breach of this Agreement.
6) You understand the position requires you to relocate to the Akron, Ohio
area. Aironet will reimburse your relocation expenses as outlined in
the enclosed Relocation Assistance and Moving Policy Summary.
Arrangements to move furnishings must be coordinated through ProSource
Properties, Ltd. Please contact Meg Pais in Telxon's Employee Services
department if you have any questions concerning your relocation. Please
sign the enclosed Relocation Agreement and return it to the Employee
Services Department.
<PAGE> 2
Mr. R. G. Holmes
January 14, 1999
Page 2
7) You are eligible to participate in Aironet's (through Telxon's)
insurance plans, including medical, dental, accident and life, upon
hire. You are also eligible to participate in Aironet's (through
Telxon's) profit sharing 401(k) plan upon completion of the eligibility
period.
8) You have discussed this position with me and understand the duties and
responsibilities associated with it. It is Aironet's intention and
expectation that you will fulfill those duties and responsibilities
without violating any legal obligations you may have to your former
employers.
9) As a condition of employment, you will be required to complete a
Pre-Employment Drug Screen Examination. The laboratory for the
examination is located at LabCorp/Akron, 3094 West Market Street,
Akron, Ohio 44333 and the phone number is (330) 869-9774. Please bring
the enclosed "Chain of Custody" form with you to the examination. Upon
acceptance of your offer, you will need to complete this examination
prior to or on your start date. This offer will be contingent upon
satisfactory completion of background and reference reviews and
successfully passing the pre-employment drug examination. In the event
you begin employment prior to Aironet receiving your drug screening
results, benefits packages outlined previously will not be activated
until successful results have been received.
10) It is a condition of employment with Aironet Wireless Communications,
Inc. that you sign the enclosed Employment Agreement and Statement of
Corporate Ethics, to be received by the Employee Services Department
prior to your start date. We agree that your ownership of up to one
percent (1%) of the stock in any publicly traded company which is a
supplier to Telxon or any of its subsidiaries shall not constitute a
conflict of interest within the meaning of the State of Corporate
Ethics. Except as set forth in the preceding sentence, nothing in this
letter supersedes or alters any of the provisions named in the
Employment Agreement and Statement of Corporate Ethics, including but
not limited to, the non-compete and at-will relationship. The
Employment Agreement, Statement of Corporate Ethics and this letter
constitute the entire terms and conditions of our agreement. You
acknowledge that there are no other verbal agreements or promises
regarding your employment.
11) If the offer is acceptable in its entirety, please sign and return by
January 20, 1999. If not accepted in writing by January 20, 1999, this
offer shall expire.
Please use the self-addressed, postage pre-paid envelope enclosed for your
convenience in returning the Employment Agreement, Statement of Corporate Ethics
and one copy of this offer letter indicating your acceptance and start date. If
you should have any questions concerning the Employment Agreement or Statement
of Corporate Ethics, please address this to me as soon as possible.
On your first day of employment, please bring your employment packet with you
and Candy Mackey will assist you in completing the appropriate forms.
<PAGE> 3
Mr. R. G. Holmes
January 14, 1999
Page 3
Dale, I am truly excited at the prospect of you joining Aironet Wireless
Communications, Inc. Should you have any questions or need additional
information, please contact me at (330) 664-7914.
Very truly yours,
/s/ ROGER J. MURPHY, JR.
Roger J. Murphy, Jr.
President & CEO
clm
Enclosures
cc: Ms. Margaret E. Pais, Telxon Employee Services
Mr. James J. O'Brien, Jr.
I accept the terms of this agreement and will start on 1/25/99.
Signature /s/ DALE HOLMES 1-19-99
------------------------
Dale Holmes
<PAGE> 1
EXHIBIT 10.1.9
[AIRONET WIRELESS COMMUNICATIONS LETTERHEAD]
August 18, 1998
Mr. Ronald B. Willis
13 Harris Farm Road
Bolton, MA 01740
Dear Ron:
I am pleased to offer you the regular full-time exempt position of Senior Vice
President Sales & Marketing for Aironet Wireless Communications, Inc. (a
subsidiary of Telxon Corporation). The following are terms of the agreement
between you and Aironet Wireless Communications, Inc.:
1) Your base salary will be $6,153.86 biweekly, which equates to
$160,000.00 annualized.
2) You will report to the President and CEO. Your start date shall not be
any later than September 14, 1998.
3) You will receive a grant of 100,000 Aironet employee stock options with
an exercise price of approximately $3.50 and a vesting schedule of
one-third the grant each year over three years.
4) You will be eligible to participate in Aironet's annual Incentive
Compensation Program, with bonus potential up to $90,000 based upon
meeting certain performance criteria to be outlined by the President
and CEO, and agreed upon between both parties.
5) You understand the position requires you to relocate to the Akron, Ohio
area. Aironet will reimburse your relocation expenses as outlined in
the enclosed Relocation Assistance and Moving Policy Summary.
Arrangements to move furnishings must be coordinated through ProSource
Properties, Ltd. Please contact Meg Pais in Telxon's Employee Services
department if you have any questions concerning your relocation. Please
sign the enclosed Relocation Agreement and return it to the Employee
Services Department.
6) You are eligible to participate in Aironet's (through Telxon's)
insurance plans, including medical, dental, accident and life, upon
hire. You are also eligible to participate in Aironet's (through
Telxon's) profit sharing 401(k) plan upon completion of the eligibility
period.
7) You have discussed this position with me and understand the duties and
responsibilities associated with it. It is Aironet's intention and
expectation that you will fulfill those duties and responsibilities
without violating any legal obligations you may have to your former
employers.
8) It is a condition of employment with Aironet Wireless Communications,
Inc. that you sign the enclosed Employment Agreement and Statement of
Corporate Ethics, to be received by the Employee Services Department
prior to your start date. We agree that your ownership of up to one
percent (1%) of the stock in any publicly traded company which is a
supplier to Telxon or any of its subsidiaries shall not constitute a
conflict of interest within the meaning of the State of Corporate
Ethics. Except as set forth in the preceding sentence, nothing in this
letter supersedes or alters any of the provisions named in the
Employment Agreement and Statement of Corporate Ethics, including but
not limited to, the non-compete and at-will relationship. The
Employment Agreement, Statement of Corporate Ethics and this letter
constitute the entire terms and conditions of our agreement. You
acknowledge that there are no other verbal agreements or promises
regarding your employment.
<PAGE> 2
Mr. Ronald B. Willis
August 18, 1998
Page 2
9) If the offer is acceptable in its entirety, please sign and return by
August 21st. If not accepted in writing by August 21, 1998, this offer
shall expire.
Please use the self-addressed, postage pre-paid envelope enclosed for your
convenience in returning the Employment Agreement, Statement of Corporate Ethics
and one copy of this offer letter indicating your acceptance and start date. If
you should have any questions concerning the Employment Agreement or Statement
of Corporate Ethics, please address this to me as soon as possible.
On your first day of employment, please bring your employment packet with you
and Candy Mackey will assist you in completing the appropriate forms.
Ron, I am truly excited at the prospect of you joining Aironet Wireless
Communications, Inc. Should you have any questions or need additional
information, please contact me at (330) 664-7914.
Very truly yours,
/s/ ROGER J. MURPHY, JR.
Roger J. Murphy, Jr.
President & CEO
clm
Enclosures
cc: Ms. Margaret E. Pais, Telxon Employee Services
Mr. James J. O'Brien, Jr.
I accept the terms of this agreement and will start on or before September 7,
1998.
Signature /s/ RONALD B. WILLIS
------------------------
Ronald B. Willis
<PAGE> 1
EXHIBIT 10.1.10
[AIRONET WIRELESS COMMUNICATIONS LETTERHEAD]
November 15, 1996
Mr. Harvey A. Ikeman
85 Huntington Park Drive
Thornhill, Ontario
Canada L3T 7C2
Dear Harvey:
I am pleased to offer you the regular full-time exempt position of Vice
President, Manufacturing for Aironet Wireless Communications, Inc. at our new
plant facility located in Akron, Ohio. The following are terms of the agreement
between you and Aironet Wireless Communications, Inc.:
1) Your base salary will be US$5,192.31 biweekly, which equates to
$135,000 annualized.
2) You will report to Roger J. Murphy, Jr., President and CEO. Your start
date shall be no later than January 31, 1997.
3) You will eligible to earn an annual bonus of up to 15% of your annual
base salary as a result of meeting certain performance criteria (to be
determined).
4) I understand you will be relocating from the Toronto, Ontario, Canada
area to the Akron, Ohio area. Aironet will reimburse your relocation
expenses as outlined in the enclosed Relocation Policy Summary.
Arrangements to move furnishings must be coordinated with Chuck Prather
in Telxon's Corporate Services Department (ext. 2824). Please contact
Meg Pais in Telxon's Employee Services department if you have any
questions concerning your relocation. Please sign the enclosed
Relocation Agreement and return it to the Employee Services Department.
5) Aironet will provide you the following assistance in relocating to
Akron:
a. Aironet will make available to you a bridge loan, not to exceed
$75,000, to purchase a new home in the Akron area. The loan shall be
repaid upon the sale of your Toronto home. If the proceeds from the
sale of the Toronto home are insufficient to repay the entire amount,
the remaining balance will be converted into a 3 year note secured by
your new Akron home and your Aironet stock options, and 50% of all
future bonuses will go to repaying the loan. Interest payments, at an
annual rate of prime plus one-percent (1%), will be due quarterly.
b. Aironet will reimburse you for legal fees involved in relocating you
and your family from Canada to the United States.
6) You are eligible to participate in Aironet's (through Telxon's)
insurance plans, including medical, dental, accident and life, upon
hire. You are also eligible to participate in Aironet's (through
Telxon's) profit sharing 401(k) plan upon completion of the eligibility
period.
<PAGE> 2
Mr. Harvey A. Ikeman
November 15, 1996
Page 2
7) You have discussed this position with me and understand the duties and
responsibilities associated with it. It is Aironet's intention and
expectation that you will fulfill those duties and responsibilities
without violating any legal obligations you may have to your former
employers.
8) As we discussed, it is a condition of employment with Aironet Wireless
Communications, Inc. and Telxon Corporation that you sign the enclosed
Employment Agreement and Statement of Corporate Ethics, to be received
by the Employee Services Department prior to your start date. We agree
that your ownership of up to one percent (1%) of the stock in any
publicly traded company which is a supplier to Telxon or any of its
subsidiaries shall not constitute a conflict of interest within the
meaning of the State of Corporate Ethics. Except as set forth in the
preceding sentence, nothing in this letter supersedes or alters any of
the provisions named in the Employment Agreement and Statement of
Corporate Ethics, including but not limited to, the non-compete and
at-will relationship. The Employment Agreement, Statement of Corporate
Ethics and this letter constitute the entire terms and conditions of
our agreement. You acknowledge that there are no other verbal
agreements or promises regarding your employment.
Please use the self-addressed, postage pre-paid envelope enclosed for your
convenience in returning the Employment Agreement, Statement of Corporate Ethics
and one copy of this offer letter indicating your acceptance and start date. If
you should have any questions concerning the Employment Agreement or Statement
of Corporate Ethics, please address this to me as soon as possible.
On your first day of employment, please report to the Employee Services
Department. Please bring your employment packet with you and Debbie Wuthrich,
Compensation/Benefits Coordinator, will assist you in completing the
appropriate forms.
Should you have any questions or need additional information, please contact me
at (800) 800-8016, ext. 7914.
Very truly yours,
/s/ ROGER J. MURPHY, JR.
Roger J. Murphy, Jr.
President & CEO
Aironet agrees to carryforward prior years of service from Aironet Canada.
RJM/clm
Enclosures
I accept the terms of this agreement and will start on Jan 31, 1997 or
earlier. 1/20/97
Signature /s/ HARVEY A. IKEMAN
------------------------
Harvey A. Ikeman
<PAGE> 1
Exhibit 10.1.11
PROMISSORY NOTE
$372,000
(Date) February 6, 1998
FOR VALUE RECEIVED, the undersigned, Roger J. Murphy ("Murphy"),
promises to pay to the order of Aironet Wireless Communications, Inc., a
Delaware corporation ("Aironet"), principal and interest as follows:
PURPOSE: Murphy has exercised options (the "Options") granted to him under the
Aironet Wireless Communications, Inc. 1996 Stock Option Plan to purchase two
hundred thousand shares of Aironet common stock (the "Aironet Shares") at an
exercise price of One and 86/100 Dollars ($1.86) per share. The fair market
value of the Aironet Shares at the time of grant and at the time of exercise was
One Dollar and 86/100 ($1.86) per share. Aironet has provided Murphy a loan (the
"Loan") in the principal amount of Three Hundred Seventy Two and 00/100 Dollars
and 00/100 ($372,000) (the "Principal"), which has been applied to payment of
the exercise price of the Options.
PRINCIPAL: The Principal sum advanced under the Loan.
INTEREST: The Principal outstanding from time to time shall bear interest at 6%
per annum through maturity, and at prime plus 4% per annum thereafter until
paid.
MATURITY: October 31, 2002.
PAYMENT: All unpaid Principal and all accrued but unpaid interest is due in full
at Maturity. If Aironet agrees in writing that Murphy may sell any of the
Collateral (defined herein) prior to his payment of the amounts due hereunder in
full, Murphy shall pay to Aironet the lesser of the proceeds from such sales or
the value of the Collateral sold (if such Collateral is the Aironet Shares then
the value shall be $1.86 per share, and if the Collateral is any other property
the value will be determined at the time of its deposit and not its release)
plus interest accrued but unpaid on the portion of Principal equal to the amount
so required to be paid to Aironet. All amounts paid hereunder shall be applied
first to accrued but unpaid interest and then to unpaid Principal.
VOLUNTARY PREPAYMENTS: Murphy may at any time prepay this Note, in whole or in
part, from time to time, without premium or penalty, provided that any
prepayment shall be in an aggregate amount of at least Twenty Five Thousand
Dollars ($25,000), or such lesser amount as is then outstanding.
PRESENTMENT: To the extent allowed by law, presentment, demand, protest, notice
of protest, diligence in collection, setoff, deduction, counterclaim, and the
benefit of any exemption under homestead exemption laws is hereby waived by
Murphy.
SECURITY: Murphy hereby grants to Aironet a security interest in the 200,000
Aironet Shares (with any substitute collateral, the "Collateral"). Murphy may
substitute from time to time all or a portion of the Collateral with other
collateral of equivalent value reasonably acceptable to the Aironet Board of
Directors. This security interest is to secure the payment of all amounts due
by,
$372,000 Murphy Note Page 1 of 2
<PAGE> 2
and the performance of all other obligations of, Murphy hereunder. Murphy will
deliver to Aironet share certificates and a stock power separate from
certificate endorsed in blank for any stock included in the Collateral. Murphy
shall take all other actions reasonably required by Aironet in order to perfect
Aironet's security interest in any Collateral. Aironet will release its security
interest in the Collateral pro-rata, based on Murphy' payment to Aironet of the
value of any Collateral to be released (if such Collateral is the Aironet Shares
then the value shall be $1.86 per share, and if the Collateral is any other
property then the value will be determined at the time of deposit and not
release) together with any interest accrued but unpaid on the portion of
Principal allocable to the Collateral to be released. Aironet shall return to
Murphy any Collateral for which substitute Collateral has been accepted. Murphy
shall retain all voting and dividend rights of any stock pledged hereunder,
except during the continuance of any Event of Default, in which case Aironet
will inure to such rights.
DEFAULT: Each of the following is an "Event of Default":
A. Murphy fails to cure any breach of this Note within 10 days of
such breach; or
B. Murphy becomes insolvent, files for bankruptcy protection or a
bankruptcy petition is filed against Murphy, or Murphy makes
an assignment for the benefit of creditors.
Upon any Event of Default described in A above at Aironet's written election, or
upon any Event of Default described in B above automatically, all Principal and
interest hereunder shall become immediately due and payable in full, and Aironet
may execute upon any collateral securing payment and/or performance of this
Note, including the Collateral. Aironet hereby acknowledges and agrees that it
may seek to satisfy amounts due hereunder from, and only from, the Collateral
and shall not look to Murphy or any other person or property to satisfy such
amounts.
MISCELLANEOUS: Any amendment of this Note or waiver of any right or remedy with
respect hereto shall be effective only if set forth in a writing signed by both
Aironet and Murphy. No waiver of any default shall affect Aironet's right to
exercise any right or remedy with respect to any different or subsequent
default. After an Event of Default, collection costs (including reasonable
attorneys' fees and expenses) shall be added to the Principal as they are
incurred. This Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Ohio without regard to conflict of
laws principles. Suit hereon may be brought in, and Murphy hereby irrevocably
consents and submits to the jurisdiction of, the courts, state and federal,
sitting in Cuyahoga and Summit Counties, Ohio and agrees not to contest the
venue of such courts.
IN WITNESS WHEREOF, Murphy has caused this Note to be executed as of
the date first above written.
/s/ Roger J. Murphy
--------------------
Roger J. Murphy
$372,000 Murphy Note Page 2 of 2
<PAGE> 1
Exhibit 10.1.11.1
AMENDMENT TO PROMISSORY NOTE
This Amendment to Promissory Note (this "Amendment") is made and
effective as of May 7, 1999, by and between Roger J. Murphy, Jr. ("Maker") and
Aironet Wireless Communications, Inc. ("Payee").
BACKGROUND
A. Maker borrowed $372,000 from Payee (the "Loan"), and used the
proceeds of the Loan to purchase 200,000 shares of Payee's common stock (the
"Shares"), on the exercise of stock options (the "Options").
B. The Loan is evidenced by the Promissory Noted dated February 6,
1998, which is non-recourse to Maker and secured by the Shares.
C. Pursuant to generally accepted accounting principals, the Options
are treated as variable options based on the terms and conditions of the
Original Note.
D. Maker and Payee each desire to amend the Original Note in order to
eliminate the variable treatment of the Options.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Maker and Payee agree as follows:
1. The section of the Original Note titled `Voluntary Prepayments" is
hereby deleted in its entirety, and neither the principal due under the Original
Note nor the interest accrued thereon may be paid, in whole or part, prior to
the maturity of the Original Note.
2. All other terms and conditions of the Original Note shall continue
in full force and effect.
3. This Amendment and the Original Note form a single integrated
instrument.
IN WITNESS WHEREOF, Maker has executed, and Payee has caused its duly
authorized officer to execute, this Amendment on the date first set forth above.
PAYEE: MAKER:
Aironet Wireless Communications, Inc.
By: /s/ Richard G. Holmes /s/ Roger J. Murphy, Jr.
---------------------------- -----------------------------
Roger J. Murphy, Jr.
Its: Senior V.P and Chief Financial Officer
---------------------------------------
<PAGE> 1
EXHIBIT 10.1.12
TELXON'S RETIREMENT & UNIFORM
MATCHING PROFIT SHARING PLAN
THIS AGREEMENT, hereby made and entered into this __________ day
of _________________________, 19____, by and between Teixon Corp. (herein
referred to as the "Employer") and Charles Schwab Trust Company (herein referred
to as the "Trustee").
W I T N E S S E T H:
WHEREAS, the Employer heretofore established a Profit Sharing Plan
and Trust effective April 1, 1985, (hereinafter called the "Effective Date")
known as Telxon's Retirement & Uniform Matching Profit Sharing Plan (herein
referred to as the "Plan") in recognition of the contribution made to its
successful operation by its employees and for the exclusive benefit of its
eligible employees; and
WHEREAS, under the terms of the Plan, the Employer has the ability
to amend the Plan, provided the Trustee joins in such amendment if the
provisions of the Plan affecting the Trustee are amended;
NOW, THEREFORE, effective January 1, 1993, except as otherwise
provided, the Employer and the Trustee in accordance with the provisions of the
Plan pertaining to amendments thereof, hereby amend the Plan in its entirety and
restate the Plan to provide as follows:
ARTICLE I
DEFINITIONS
1.1 "Act" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time.
1.2 "Administrator" means the person designated by the Employer pursuant
to Section 2.4 to administer the Plan on behalf of the Employer.
1.3 "Affiliated Employer" means any corporation which is a member of a
controlled group of corporations (as defined in Code Section 414(b)) which
includes the Employer; any trade or business (whether or not incorporated) which
is under common control (as defined in Code Section 414(c)) with the Employer;
any organization (whether or not incorporated) which is a member of an
affiliated service group (as defined in Code Section 414(m)) which includes the
Employer; and any other entity required to be aggregated with the Employer
pursuant to Regulations under Code Section 414(o).
1
<PAGE> 2
1.4 "Aggregate Account" means, with respect to each Participant, the
value of all accounts maintained on behalf of a Participant, whether
attributable to Employer or Employee contributions, subject to the provisions of
Section 2.2.
1.5 "Anniversary Date" means December 31st.
1.6 "Beneficiary" means the person to whom the share of a deceased
Participant's total account is payable, subject to the restrictions of Sections
6.2 and 6.6.
1.7 "Code" means the Internal Revenue Code of 1986, as amended or
replaced from time to time.
1.8 "Compensation" with respect to any Participant means such
Participant's wages, salaries, fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described in Regulation
1.62-2(c)) for a Plan Year.
Compensation shall exclude (a) (1) contributions made by the
Employer to a plan of deferred compensation to the extent that, the
contributions are not includible in the gross income of the Participant for the
taxable year in which contributed, (2) Employer contributions made on behalf of
an Employee to a simplified employee pension plan described in Code Section
408(k) to the extent such contributions are excludable from the Employee's
gross income, (3) any distributions from a plan of deferred compensation; (b)
amounts realized from the exercise of a non-qualified stock option, or when
restricted stock (or property) held by an Employee either becomes freely
transferable or is no longer subject to a substantial risk of forfeiture; (c)
amounts realized from the sale, exchange or other disposition of stock acquired
under a qualified stock option; and (d) other amounts which receive special tax
benefits, or contributions made by the Employer (whether or not under a salary
reduction agreement) towards the purchase of any annuity contract described in
Code Section 403(b) (whether or not the contributions are actually excludable
from the gross income of the Employee).
2
<PAGE> 3
For purposes of this Section, the determination of Compensation
shall be made by:
(a) excluding taxable fringe benefits, including any bonus
paid to an employee intended as a reimbursement for taxes paid by
the employee on any taxable fringe benefits.
(b) including amounts which are contributed by the Employer
pursuant to a salary reduction agreement and which are not
includible in the gross income of the Participant under Code
Sections 125, 402(a)(8), 402(h), 403(b) or 457, and Employee
contributions described in Code Section 414(h)(2) that are treated
as Employer contributions.
For a Participant's initial year of participation, Compensation
shall be recognized as of such Employee's effective date of participation
pursuant to Section 3.3.
Compensation in excess of $200,000 shall be disregarded. Such
amount shall be adjusted at the same time and in such manner as permitted under
Code Section 415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning with or within
such calendar year and the first adjustment to the $200,000 limitation shall be
effective on January 1, 1990. For any short Plan Year the Compensation limit
shall be an amount equal to the Compensation limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by dividing the
number of full months in the short Plan Year by twelve (12). In applying this
limitation, the family group of a Highly Compensated Participant who is subject
to the Family Member aggregation rules of Code Section 414(q) (6) because such
Participant is either a "five percent owner" of the Employer or one of the ten
(10) Highly Compensated Employees paid the greatest "415 Compensation" during
the year, shall be treated as a single Participant, except that for this purpose
Family Members shall include only the affected Participant's spouse and any
lineal descendants who have not attained age nineteen (19) before the close of
the year. If, as a result of the application of such rules the adjusted $200,000
limitation is exceeded, then the limitation shall be prorated among the affected
Family Members in proportion to each such Family Member's Compensation prior to
the application of this limitation, or the limitation shall be adjusted in
accordance with any other method permitted by Regulation.
3
<PAGE> 4
If, as a result of such rules, the maximum "annual addition" limit
of Section 4.9(a) would be exceeded for one or more of the affected Family
Members, the prorated Compensation of all affected Family Members shall be
adjusted to avoid or reduce any excess. The prorated Compensation of any
affected Family Member whose allocation would exceed the limit shall be adjusted
downward to the level needed to provide an allocation equal to such limit. The
prorated Compensation of affected Family Members not affected by such limit
shall then be adjusted upward on a pro rata basis not to exceed each such
affected Family Member's Compensation as determined prior to application of the
Family Member rule. The resulting allocation shall not exceed such individual's
maximum "annual addition" limit. If, after these adjustments, an "excess amount"
still results, such "excess amount" shall be disposed of in the manner described
in Section 4.10(a) pro rata among all affected Family Members.
For purposes of this Section, if the Plan is a plan described in Code
Section 413(c) or 414(f) (a plan maintained by more than one Employer), the
$200,000 limitation applies separately with respect to the Compensation of any
Participant from each Employer maintaining the Plan.
If, in connection with the adoption of this amendment and
restatement, the definition of Compensation has been modified, then, for Plan
Years prior to the Plan Year which includes the adoption date of this amendment
and restatement, Compensation means compensation determined pursuant to the Plan
then in effect.
For Plan Years beginning prior to January 1, 1989, the $200,000 limit
(without regard to Family Member aggregation) shall apply only for Top Heavy
Plan Years and shall not be adjusted.
1.9 "Contract" or "Policy" means any life insurance policy, retirement
income or annuity policy, or annuity contract (group or individual) issued
pursuant to the terms of the Plan.
1.10 "Deferred Compensation" with respect to any Participant means the
amount of the Participant's total Compensation which has been contributed to the
Plan in accordance with the Participant's deferral election pursuant to Section
4.2 excluding any such amounts distributed as excess "annual additions" pursuant
to Section 4.10(a).
4
<PAGE> 5
1.11 "Early Retirement Date" means the first day of the month (prior to
the Normal Retirement Date) coinciding with or following the date on which a
Participant or Former Participant attains age 55 and has completed at least 5
Years of Service with the Employer (Early Retirement Age). A Participant shall
become fully Vested upon satisfying this requirement if still employed at his
Early Retirement Age.
A Former Participant who terminates employment after satisfying
the service requirement for Early Retirement and who thereafter reaches the age
requirement contained herein shall be entitled to receive his benefits under
this Plan.
1.12 "Elective Contribution" means the Employer's contributions to the
Plan of Deferred Compensation excluding any such amounts distributed as excess
"annual additions" pursuant to Section 4.10(a). In addition, any Employer
Qualified Non-Elective Contribution made pursuant to Section 4.6 shall be
considered an Elective Contribution for purposes of the Plan. Any such
contributions deemed to be Elective Contributions shall be subject to the
requirements of Sections 4.2(b) and 4.2(c) and shall further be required to
satisfy the discrimination requirements of Regulation 1.401(k)-1(b)(5), the
provisions of which are specifically incorporated herein by reference.
1.13 "Eligible Employee" means any Employee.
Employees whose employment is governed by the terms of a collective
bargaining agreement between Employee representatives (within the meaning of
Code Section 7701(a)(46)) and the Employer under which retirement benefits were
the subject of good faith bargaining between the parties will not be eligible to
participate in this Plan unless such agreement expressly provides for coverage
in this Plan or two percent or less of the Employees of the Employer who are
covered pursuant to that agreement are professionals as defined in Regulation
1.410(b)-9.
Employees who are nonresident aliens (within the meaning of Code
Section 7701(b) (1) (B)) and who receive no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer which constitutes income from sources
within the United States (within the meaning of Code Section 861(a)(3)) shall
not be eligible to participate in this Plan.
Employees of Affiliated Employers shall not be eligible to
participate in this Plan unless such Affiliated Employers have specifically
adopted this Plan in writing.
5
<PAGE> 6
1.14 "Employee" means any person who is employed by the Employer or
Affiliated Employer, but excludes any person who is an independent contractor.
Employee shall include Leased Employees within the meaning of Code Sections
414(n)(2) and 414(0) (2) unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and such Leased Employees do not constitute
more than 20% of the recipient's non-highly compensated work force.
1.15 "Employer" means Teixon Corp. and any Participating Employer (as
defined in Section 10.1) which shall adopt this Plan; any successor which shall
maintain this Plan; and any predecessor which has maintained this Plan. The
Employer is a corporation, with principal offices in the State of Ohio.
1.16 "Excess Aggregate Contributions" means, with respect to any Plan
Year, the excess of the aggregate amount of the Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee contributions made pursuant
to Section 4.12, Excess Contributions recharacterized as voluntary Employee
contributions pursuant to Section 4.6(a) and any qualified non-elective
contributions or elective deferrals taken into account pursuant to Section
4.7(c) on behalf of Highly Compensated Participants for such Plan Year, over the
maximum amount of such contributions permitted under the limitations of Section
4.7(a).
1.17 "Excess Contributions" means, with respect to a Plan Year, the
excess of Elective Contributions made on behalf of Highly Compensated
Participants for the Plan Year over the maximum amount of such contributions
permitted under Section 4.5(a). Excess Contributions, including amounts
recharacterized pursuant to Section 4.6(a)(2), shall be treated as an "annual
addition" pursuant to Section 4.9(b).
1.18 "Excess Deferred Compensation" means, with respect to any taxable
year of a Participant, the excess of the aggregate amount of such Participant's
Deferred Compensation and the elective deferrals pursuant to Section 4.2(f)
actually made on behalf of such Participant for such taxable year, over the
dollar limitation provided for in Code Section 402(g), which is incorporated
herein by reference. Excess Deferred Compensation shall be treated as an "annual
addition" pursuant to Section 4.9(b) when contributed to the Plan unless
distributed to the affected Participant not later than the first April 15th
following the close of the Participant's taxable year. Additionally, for
purposes of Sections 2.2 and 4.4(g), Excess Deferred Compensation shall continue
to be treated as Employer contributions even if distributed pursuant to Section
4.2(f). However, Excess Deferred Compensation of Non-Highly Compensated
6
<PAGE> 7
Participants is not taken into account for purposes of Section 4.5(a) to the
extent such Excess Deferred Compensation occurs pursuant to Section 4.2(d).
1.19 "Family Member" means, with respect to an affected Participant, such
Participant's spouse, such Participant's lineal descendants and ascendants and
their spouses, all as described in Code Section 414(q)(6)(B).
1.20 "Fiduciary" means any person who (a) exercises any discretionary
authority or discretionary control respecting management of the Plan or
exercises any authority or control respecting management or disposition of its
assets, (b) renders investment advice for a fee or other compensation, direct or
indirect, with respect to any monies or other property of the Plan or has any
authority or responsibility to do so, or (c) has any discretionary authority or
discretionary responsibility in the administration of the Plan, including, but
not limited to, the Trustee, the Employer and its representative body, and the
Administrator.
1.21 "Fiscal Year" means the Employer's accounting year of 12 months
commencing on April 1st of each year and ending the following March 31st.
1.22 "Forfeiture" means that portion of a Participant's Account that is
not Vested, and occurs on the earlier of:
(a) the distribution of the entire Vested portion of a
Participant's Account, or
(b) the last day of the Plan Year in which the Participant
incurs five (5) consecutive 1-Year Breaks in Service.
Furthermore, for purposes of paragraph (a) above, in the case of a
Terminated Participant whose Vested benefit is zero, such Terminated Participant
shall be deemed to have received a distribution of his Vested benefit upon his
termination of employment. Restoration of such amounts shall occur pursuant to
Section 6.4(g)(2). In addition, the term Forfeiture shall also include amounts
deemed to be Forfeitures pursuant to any other provision of this Plan.
7
<PAGE> 8
1.23 "Former Participant" means a person who has been a Participant, but
who has ceased to be a Participant for any reason.
1.24 "415 Compensation" with respect to any Participant means such
Participant's wages, salaries, fees for professional services and other amounts
received (without regard to whether or not an amount is paid in cash) for
personal services actually rendered in the course of employment with the
Employer maintaining the Plan to the extent that the amounts are includible in
gross income (including, but not limited to, commissions paid salesmen,
compensation for services on the basis of a percentage of profits, commissions
on insurance premiums, tips, bonuses, fringe benefits, and reimbursements or
other expense allowances under a nonaccountable plan (as described in Regulation
1.62-2(c)) for a Plan Year.
"415 Compensation" shall exclude (a) (1) contributions made by the
Employer to a plan of deferred compensation to the extent that, the
contributions are not includible in the gross income of the Participant for the
taxable year in which contributed, (2) Employer contributions made on behalf of
an Employee to a simplified employee pension plan described in Code Section
408(k) to the extent such contributions are excludable from the Employee's gross
income, (3) any distributions from a plan of deferred compensation; (b) amounts
realized from the exercise of a non-qualified stock option, or when restricted
stock (or property) held by an Employee either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture; (c) amounts realized from
the sale, exchange or other disposition of stock acquired under a qualified
stock option; and (d) other amounts which receive special tax benefits, or
contributions made by the Employer (whether or not under a salary reduction
agreement) towards the purchase of any annuity contract described in Code
Section 403(b) (whether or not the contributions are actually excludable from
the gross income of the Employee).
If, in connection with the adoption of this amendment and
restatement, the definition of "415 Compensation" has been modified, then, for
Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "415 Compensation" means compensation determined
pursuant to the Plan then in effect.
8
<PAGE> 9
1.25 "414(s) Compensation" with respect to any Participant means such
Participant's Elective Contributions attributable to Deferred Compensation
recharacterized as voluntary Employee contributions pursuant to Section 4.6(a)
plus "415 Compensation" paid during a Plan Year. The amount of "414(s)
Compensation" with respect to any Participant shall include "414(s)
Compensation" for the entire twelve (12) month period ending on the last day of
such Plan Year, except that "414(s) Compensation" shall only be recognized for
that portion of the Plan Year during which an Employee was a Participant in the
Plan.
For purposes of this Section, the determination of "414(s)
Compensation" shall be made by including amounts which are contributed by the
Employer pursuant to a salary reduction agreement and which are not includible
in the gross income of the Participant under Code Sections 125, 402(a)(8),
402(h), 403(b) or 457, and Employee contributions described in Code Section
414(h) (2) that are treated as Employer contributions.
"414(s) Compensation" in excess of $200,000 shall be disregarded.
Such amount shall be adjusted at the same time and in such manner as permitted
under Code Section 415(d), except that the dollar increase in effect on January
1 of any calendar year shall be effective for the Plan Year beginning with or
within such calendar year and the first adjustment to the $200,000 limitation
shall be effective on January 1, 1990. For any short Plan Year the "414(s)
Compensation" limit shall be an amount equal to the "414(s) Compensation" limit
for the calendar year in which the Plan Year begins multiplied by the ratio
obtained by dividing the number of full months in the short Plan Year by twelve
(12). In applying this limitation, the family group of a Highly Compensated
Participant who is subject to the Family Member aggregation rules of Code
Section 414(q) (6) because such Participant is either a "five percent owner" of
the Employer or one of the ten (10) Highly Compensated Employees paid the
greatest "415 Compensation" during the year, shall be treated as a single
Participant, except that for this purpose Family Members shall include only the
affected Participant's spouse and any lineal descendants who have not attained
age nineteen (19) before the close of the year.
If, in connection with the adoption of this amendment and
restatement, the definition of "414(s) Compensation" has been modified, then,
for Plan Years prior to the Plan Year which includes the adoption date of this
amendment and restatement, "414(s) Compensation" means compensation determined
pursuant to the Plan then in effect.
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1.26 "Highly Compensated Employee" means an Employee described in Code
Section 414(q) and the Regulations thereunder, and generally means an Employee
who performed services for the Employer during the "determination year" and is
in one or more of the following groups:
(a) Employees who at any time during the "determination
year" or "look-back year" were "five percent owners" as defined in
Section 1.32(c).
(b) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $75,000.
(c) Employees who received "415 Compensation" during the
"look-back year" from the Employer in excess of $50,000 and were in
the Top Paid Group of Employees for the Plan Year.
(d) Employees who during the "look-back year" were
officers of the Employer (as that term is defined within the
meaning of the Regulations under Code Section 416) and received
"415 Compensation" during the "look-back year" from the Employer
greater than 50 percent of the limit in effect under Code Section
415(b) (1) (A) for any such Plan Year. The number of officers shall
be limited to the lesser of (i) 50 employees; or (ii) the greater
of 3 employees or 10 percent of all employees. For the purpose of
determining the number of officers, Employees described in Section
1.56(a), (b), (c) and (d) shall be excluded, but such Employees
shall still be considered for the purpose of identifying the
particular Employees who are officers. If the Employer does not
have at least one officer whose annual "415 Compensation" is in
excess of 50 percent of the Code Section 415(b) (1) (A) limit, then
the highest paid officer of the Employer will be treated as a
Highly Compensated Employee.
(e) Employees who are in the group consisting of the 100
Employees paid the greatest "415 Compensation" during the
"determination year" and are also described in (b) , (c) or (d)
above when these paragraphs are modified to substitute
"determination year" for "look-back year".
The "look-back year" shall be the calendar year ending with or
within the Plan Year for which testing is being performed, and the
"determination year" (if applicable) shall be
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the period of time, if any, which extends beyond the "look-back year" and ends
on the last day of the Plan Year for which testing is being performed (the "lag
period"). If the "lag period" is less than twelve months long, the dollar
threshold amounts specified in (b) , (c) and (d) above shall be prorated based
upon the number of months in the "lag period".
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer contributions
made pursuant to a salary reduction agreement, by including amounts that would
otherwise be excluded from a Participant's gross income by reason of the
application of Code Section 403(b). Additionally, the dollar threshold amounts
specified in (b) and (c) above shall be adjusted at such time and in such manner
as is provided in Regulations. In the case of such an adjustment, the dollar
limits which shall be applied are those for the calendar year in which the
"determination year" or "look-back year" begins.
In determining who is a Highly Compensated Employee, Employees who
are non-resident aliens and who received no earned income (within the meaning of
Code Section 911(d)(2)) from the Employer constituting United States source
income within the meaning of Code Section 861(a) (3) shall not be treated as
Employees. Additionally, all Affiliated Employers shall be taken into account as
a single employer and Leased Employees within the meaning of Code Sections
414(n)(2) and 414(o)(2) shall be considered Employees unless such Leased
Employees are covered by a plan described in Code Section 414(n) (5) and are not
covered in any qualified plan maintained by the Employer. The exclusion of
Leased Employees for this purpose shall be applied on a uniform and consistent
basis for all of the Employer's retirement plans. Highly Compensated Former
Employees shall be treated as Highly Compensated Employees without regard to
whether they performed services during the "determination year".
1.27 "Highly Compensated Former Employee" means a former Employee who had
a separation year prior to the "determination year" and was a Highly Compensated
Employee in the year of separation from service or in any "determination year"
after attaining age 55. Notwithstanding the foregoing, an Employee who separated
from service prior to 1987 will be treated as a Highly Compensated Former
Employee only if during the separation year (or year preceding the separation
year) or any year after the Employee attains age 55 (or the last year ending
before the Employee's 55th birthday), the Employee either received "415
Compensation" in excess of $50,000 or was a "five percent owner".
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For purposes of this Section, "determination year", "415 Compensation" and "five
percent owner" shall be determined in accordance with Section 1.26. Highly
Compensated Former Employees shall be treated as Highly Compensated Employees.
The method set forth in this Section for determining who is a "Highly
Compensated Former Employee" shall be applied on a uniform and consistent basis
for all purposes for which the Code Section 414(q) definition is applicable.
1.28 "Highly Compensated Participant" means any Highly Compensated
Employee who is eligible to participate in the Plan pursuant to Section 3.1.
1.29 "Hour of Service" means (1) each hour for which an Employee is
directly or indirectly compensated or entitled to compensation by the Employer
for the performance of duties during the applicable computation period; (2) each
hour for which an Employee is directly or indirectly compensated or entitled to
compensation by the Employer (irrespective of whether the employment
relationship has terminated) for reasons other than performance of duties (such
as vacation, holidays, sickness, jury duty, disability, lay-off, military duty
or leave of absence) during the applicable computation period; (3) each hour for
which back pay is awarded or agreed to by the Employer without regard to
mitigation of damages. These hours will be credited to the Employee for the
computation period or periods to which the award or agreement pertains rather
than the computation period in which the award, agreement or payment is made.
The same Hours of Service shall not be credited both under (1) or (2), as the
case may be, and under (3).
Notwithstanding the above, (i) no more than 501 Hours of Service are
required to be credited to an Employee on account of any single continuous
period during which the Employee performs no duties (whether or not such period
occurs in a single computation period); (ii) an hour for which an Employee is
directly or indirectly paid, or entitled to payment, on account of a period
during which no duties are performed is not required to be credited to the
Employee if such payment is made or due under a plan maintained solely for the
purpose of complying with applicable worker's compensation, or unemployment
compensation or disability insurance laws; and (iii) Hours of Service are not
required to be credited for a payment which solely reimburses an Employee for
medical or medically related expenses incurred by the Employee.
For purposes of this Section, a payment shall be deemed to be made
by or due from the Employer regardless of whether such payment is made by or due
from the Employer directly, or
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indirectly through, among others, a trust fund, or insurer, to which the
Employer contributes or pays premiums and regardless of whether contributions
made or due to the trust fund, insurer, or other entity are for the benefit of
particular Employees or are on behalf of a group of Employees in the aggregate.
An Hour of Service must be counted for the purpose of determining a
Year of Service, a year of participation for purposes of accrued benefits, a
1-Year Break in Service, and employment commencement date (or reemployment
commencement date). In addition, Hours of Service will be credited for
employment with other Affiliated Employers. The provisions of Department of
Labor regulations 2530.200b-2(b) and (c) are incorporated herein by reference.
1.30 "Income" means the income or losses allocable to "excess amounts"
which shall equal the allocable gain or loss for the "applicable computation
period". The income allocable to "excess amounts" for the "applicable
computation period" is determined by multiplying the income for the "applicable
computation period" by a fraction. The numerator of the fraction is the "excess
amount" for the "applicable computation period". The denominator of the fraction
is the total "account balance" attributable to "Employer contributions" as of
the end of the "applicable computation period", reduced by the gain allocable to
such total amount for the "applicable computation period" and increased by the
loss allocable to such total amount for the "applicable computation period". The
provisions of this Section shall be applied:
(a) For purposes of Section 4.2(f), by substituting:
(1) "Excess Deferred Compensation" for "excess amounts";
(2) "taxable year of the Participant" for "applicable
computation period";
(3) "Deferred Compensation" for "Employer contributions";
and
(4) "Participant's Elective Account" for "account balance".
(b) For purposes of Section 4.6(a), by substituting:
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<PAGE> 14
(1) "Excess Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation
period";
(3) "Elective Contributions" for "Employer contributions";
and
(4) "Participant's Elective Account" for "account balance".
(c) For purposes of Section 4.8(a), by substituting:
(1) "Excess Aggregate Contributions" for "excess amounts";
(2) "Plan Year" for "applicable computation period";
(3) "Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made
pursuant to Section 4.12 and any qualified non-elective
contributions or elective deferrals taken into account
pursuant to Section 4.7(c)" for "Employer contributions"; and
(4) "Participant's Account and Voluntary Contribution
Account" for "account balance".
Income allocable to any distribution of Excess Deferred Compensation
on or before the last day of the taxable year of the Participant shall be
calculated from the first day of the taxable year of the Participant to the date
on which the distribution is made pursuant to either the "fractional method" or
the "safe harbor method". Under such "safe harbor method", allocable Income for
such period shall be deemed to equal ten percent (10%) of the Income allocable
to such Excess Deferred Compensation multiplied by the number of calendar months
in such period. For purposes of determining the number of calendar months in
such period, a distribution occurring on or before the fifteenth day of the
month shall be treated as having been made on the last day of the preceding
month and a distribution occurring after such fifteenth day shall be treated as
having been made on the first day of the next subsequent month.
The Income allocable to Excess Aggregate Contributions resulting
from the recharacterization of Elective Contributions shall be determined and
distributed as if such recharacterized Elective Contributions had been
distributed as Excess
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Contributions.
Notwithstanding the above, for "applicable computation periods"
which began in 1987, Income during the "gap period" shall not be taken into
account.
1.31 "Investment Manager" means an entity that (a) has the power to
manage, acquire, or dispose of Plan assets and (b) acknowledges fiduciary
responsibility to the Plan in writing. Such entity must be a person, firm, or
corporation registered as an investment adviser under the Investment Advisers
Act of 1940, a bank, or an insurance company.
1.32 "Key Employee" means an Employee as defined in Code Section 416(i)
and the Regulations thereunder. Generally, any Employee or former Employee (as
well as each of his Beneficiaries) is considered a Key Employee if he, at any
time during the Plan Year that contains the "Determination Date" or any of the
preceding four (4) Plan Years, has been included in one of the following
categories:
(a) an officer of the Employer (as that term is defined
within the meaning of the Regulations under Code Section 416)
having annual "415 Compensation" greater than 50 percent of the
amount in effect under Code Section 415(b) (1) (A) for any such
Plan Year.
(b) one of the ten employees having annual "415
Compensation" from the Employer for a Plan Year greater than the
dollar limitation in effect under Code Section 415(c) (1) (A) for
the calendar year in which such Plan Year ends and owning (or
considered as owning within the meaning of Code Section 318) both
more than one-half percent interest and the largest interests in
the Employer.
(c) a "five percent owner" of the Employer. "Five percent
owner" means any person who owns (or is considered as owning
within the meaning of Code Section 318) more than five percent
(5%) of the outstanding stock of the Employer or stock possessing
more than five percent (5%) of the total combined voting power of
all stock of the Employer or, in the case of an unincorporated
business, any person who owns more than five percent (5%) of the
capital or profits interest in the Employer. In determining
percentage ownership hereunder, employers that would otherwise be
aggregated under Code Sections 414(b), (c), (m) and (o) shall be
treated as separate employers.
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<PAGE> 16
(d) a "one percent owner" of the Employer having an annual
"415 Compensation" from the Employer of more than $150,000. "One
percent owner" means any person who owns (or is considered as
owning within the meaning of Code Section 318) more than one
percent (1%) of the outstanding stock of the Employer or stock
possessing more than one percent (1%) of the total combined voting
power of all stock of the Employer or, in the case of an
unincorporated business, any person who owns more than one percent
(1%) of the capital or profits interest in the Employer. In
determining percentage ownership hereunder, employers that would
otherwise be aggregated under Code Sections 414(b), (c), (m) and
(o) shall be treated as separate employers. However, in
determining whether an individual has "415 Compensation" of more
than $150,000, "415 Compensation" from each employer required to
be aggregated under Code Sections 414(b), (c), (m) and (o) shall
be taken into account.
For purposes of this Section, the determination of "415
Compensation" shall be made by including amounts that would otherwise be
excluded from a Participant's gross income by reason of the application of Code
Sections 125, 402(a)(8), 402(h)(1)(B) and, in the case of Employer
contributions made pursuant to a salary reduction agreement, by including
amounts that would otherwise be excluded from a Participant's gross income by
reason of the application of Code Section 403(b).
1.33 "Late Retirement Date" means the first day of the month coinciding
with or next following a Participant's actual Retirement Date after having
reached his Normal Retirement Date.
1.34 "Leased Employee" means any person (other than an Employee of the
recipient) who pursuant to an agreement between the recipient and any other
person ("leasing organization") has performed services for the recipient (or for
the recipient and related persons determined in accordance with Code Section
414(n)(6)) on a substantially full time basis for a period of at least one year,
and such services are of a type historically performed by employees in the
business field of the recipient employer. Contributions or benefits provided a
Leased Employee by the leasing organization which are attributable to services
performed for the recipient employer shall be treated as provided by the
recipient employer. A Leased Employee shall not be considered an Employee of the
recipient:
(a) if such employee is covered by a money purchase pension
plan providing:
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(1) a non-integrated employer contribution rate of at least
10% of compensation, as defined in Code Section 415(c)(3),
but including amounts contributed pursuant to a salary
reduction agreement which are excludable from the employee's
gross income under Code Sections 125, 402(a) (8), 402(h) or
403(b);
(2) immediate participation; and (3) full and immediate
vesting; and
(b) if Leased Employees do not constitute more than 20% of
the recipient's non-highly compensated work force.
1.35 "Non-Elective Contribution" means the Employer's contributions to
the Plan excluding, however, contributions made pursuant to the Participant's
deferral election provided for in Section 4.2 and any Qualified Non-Elective
Contribution.
1.36 "Non-Highly Compensated Participant" means any Participant who is
neither a Highly Compensated Employee nor a Family Member.
1.37 "Non-Key Employee" means any Employee or former Employee (and his
Beneficiaries) who is not a Key Employee.
1.38 "Normal Retirement Age" means the Participant's 65th birthday. A
Participant shall become fully Vested in his Participant's Account upon
attaining his Normal Retirement Age.
1.39 "Normal Retirement Date" means the first day of the month coinciding
with or next following the Participant's Normal Retirement Age.
1.40 "1-Year Break in Service" means the applicable computation period
during which an Employee has not completed more than 500 Hours of Service with
the Employer. Further, solely for the purpose of determining whether a
Participant has incurred a 1-Year Break in Service, Hours of Service shall be
recognized for "authorized leaves of absence" and "maternity and paternity
leaves of absence." Years of Service and 1-Year Breaks in Service shall be
measured on the same computation period.
"Authorized leave of absence" means an unpaid, temporary cessation
from active employment with the Employer pursuant to an established
nondiscriminatory policy, whether occasioned by illness, military service, or
any other reason.
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A "maternity or paternity leave of absence" means, for Plan Years
beginning after December 31, 1984, an absence from work for any period by reason
of the Employee's pregnancy, birth of the Employee's child, placement of a child
with the Employee in connection with the adoption of such child, or any absence
for the purpose of caring for such child for a period immediately following such
birth or placement. For this purpose, Hours of Service shall be credited for the
computation period in which the absence from work begins, only if credit
therefore is necessary to prevent the Employee from incurring a 1-Year Break in
Service, or, in any other case, in the immediately following computation period.
The Hours of Service credited for a "maternity or paternity leave of absence"
shall be those which would normally have been credited but for such absence, or,
in any case in which the Administrator is unable to determine such hours
normally credited, eight (8) Hours of Service per day. The total Hours of
Service required to be credited for a "maternity or paternity leave of absence"
shall not exceed 501.
1.41 "Participant" means any Eligible Employee who participates in the
Plan as provided in Sections 3.2 and 3.3, and has not for any reason become
ineligible to participate further in the Plan.
1.42 "Participant's Account" means the account established and maintained
by the Administrator for each Participant with respect to his total interest in
the Plan and Trust resulting from the Employer's Non-Elective Contributions.
A separate accounting shall be maintained with respect to that
portion of the Participant's Account attributable to Employer matching
contributions made pursuant to Section 4.1(b) and Employer discretionary
contributions made pursuant to Section 4.1(c).
1.43 "Participant's Combined Account" means the total aggregate amount of
each Participant's Elective Account and Participant's Account.
1.44 "Participant's Elective Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan and Trust resulting from the Employer's Elective
Contributions. A separate accounting shall be maintained with respect to that
portion of the Participant's Elective Account attributable to Elective
Contributions pursuant to Section 4.2 and any Employer Qualified Non-Elective
Contributions.
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1.45 "Plan" means this instrument, including all amendments thereto.
1.46 "Plan Year" means the Plan's accounting year of twelve (12) months
commencing on January 1st of each year and ending the following December 31st.
1.47 "Pre-Retirement Survivor Annuity" is an immediate annuity for the
life of the Participant's spouse the payments under which must be equal to the
amount of benefit which can be purchased with the accounts of a Participant used
to provide the death benefit under the Plan.
1.48 "Qualified Non-Elective Contribution" means the Employer's
contributions to the Plan that are made pursuant to Section 4.6. Such
contributions shall be considered an Elective Contribution for the purposes of
the Plan and used to satisfy the "Actual Deferral Percentage" tests.
In addition, the Employer's contributions to the Plan that are made
pursuant to Section 4.8(h) which are used to satisfy the "Actual Contribution
Percentage" tests shall be considered Qualified Non-Elective Contributions and
be subject to the provisions of Sections 4.2(b) and 4.2(c).
1.49 "Regulation" means the Income Tax Regulations as promulgated by the
Secretary of the Treasury or his delegate, and as amended from time to time.
1.50 "Retired Participant" means a person who has been a Participant, but
who has become entitled to retirement benefits under the Plan.
1.51 "Retirement Date" means the date as of which a Participant retires
for reasons other than Total and Permanent Disability, whether such retirement
occurs on a Participant's Normal Retirement Date, Early or Late Retirement Date
(see Section 6.1).
1.52 "Super Top Heavy Plan" means a plan described in Section 2.2(b).
1.53 "Terminated Participant" means a person who has been a Participant,
but whose employment has been terminated other than by death, Total and
Permanent Disability or retirement.
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1.54 "Top Heavy Plan" means a plan described in Section 2.2(a).
1.55 "Top Heavy Plan Year" means a Plan Year during which the Plan is a
Top Heavy Plan.
1.56 "Top Paid Group" means the top 20 percent of Employees who performed
services for the Employer during the applicable year, ranked according to the
amount of "415 Compensation" (determined for this purpose in accordance with
Section 1.26) received from the Employer during such year. All Affiliated
Employers shall be taken into account as a single employer, and Leased Employees
within the meaning of Code Sections 414(n) (2) and 414(o) (2) shall be
considered Employees unless such Leased Employees are covered by a plan
described in Code Section 414(n)(5) and are not covered in any qualified plan
maintained by the Employer. Employees who are non-resident aliens and who
received no earned income (within the meaning of Code Section 911(d)(2)) from
the Employer constituting United States source income within the meaning of Code
Section 861(a) (3) shall not be treated as Employees. Additionally, for the
purpose of determining the number of active Employees in any year, the following
additional Employees shall also be excluded; however, such Employees shall still
be considered for the purpose of identifying the particular Employees in the Top
Paid Group:
(a) Employees with less than six (6) months of service;
(b) Employees who normally work less than 17 1/2 hours per
week;
(c) Employees who normally work less than six (6) months
during a year; and
(d) Employees who have not yet attained age 21.
In addition, if 90 percent or more of the Employees of the Employer
are covered under agreements the Secretary of Labor finds to be collective
bargaining agreements between Employee representatives and the Employer, and the
Plan covers only Employees who are not covered under such agreements, then
Employees covered by such agreements shall be excluded from both the total
number of active Employees as well as from the identification of particular
Employees in the Top Paid Group.
The foregoing exclusions set forth in this Section shall be applied
on a uniform and consistent basis for all purposes for which the Code Section
414(q) definition is applicable.
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1.57 "Total and Permanent Disability" means a physical or mental
condition of a Participant resulting from bodily injury, disease, or mental
disorder which renders him incapable of continuing his usual and customary
employment with the Employer. The disability of a Participant shall be
determined by a licensed physician chosen by the Administrator. The
determination shall be applied uniformly to all Participants.
1.58 "Trustee" means the person or entity named as trustee herein or in
any separate trust forming a part of this Plan, and any successors.
1.59 "Trust Fund" means the assets of the Plan and Trust as the same
shall exist from time to time.
1.60 "Vested" means the nonforfeitable portion of any account maintained
on behalf of a Participant.
1.61 "Voluntary Contribution Account" means the account established and
maintained by the Administrator for each Participant with respect to his total
interest in the Plan resulting from the Participant's nondeductible voluntary
contributions made pursuant to Section 4.12.
Amounts recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) shall remain subject to the limitations of Sections
4.2(b) and 4.2(c). Therefore, a separate accounting shall be maintained with
respect to that portion of the Voluntary Contribution Account attributable to
voluntary Employee contributions made pursuant to Section 4.12.
1.62 "Year of Service" means the computation period of twelve (12)
consecutive months, herein set forth, during which an Employee has at least 1000
Hours of Service.
For purposes of eligibility for participation, the initial
computation period shall begin with the date on which the Employee first
performs an Hour of Service. The participation computation period beginning
after a 1-Year Break in Service shall be measured from the date on which an
Employee again performs an Hour of Service. The participation computation period
shall shift to the Plan Year which includes the anniversary of the date on which
the Employee first performed an Hour of Service. An Employee who is credited
with the required Hours of Service in both the initial computation period (or
the computation period beginning after a 1-Year Break in Service) and the Plan
Year which includes the anniversary of the date on which the Employee first
performed an Hour of Service, shall be credited with two (2) Years of Service
for purposes of eligibility to participate.
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For vesting purposes, the computation period shall be the twelve
month period from the Participant's date of hire to the Anniversary of his or
her date of hire.
For all other purposes, the computation period shall be the Plan
Year.
Notwithstanding the foregoing, for any short Plan Year, the
determination of whether an Employee has completed a Year of Service shall be
made in accordance with Department of Labor regulation 2530.203-2(c). However,
in determining whether an Employee has completed a Year of Service for benefit
accrual purposes in the short Plan Year, the number of the Hours of Service
required shall be proportionately reduced based on the number of full months in
the short Plan Year.
Years of Service with any Affiliated Employer shall be recognized.
ARTICLE II
TOP HEAVY AND ADMINISTRATION
2.1 TOP HEAVY PLAN REQUIREMENTS
For any Top Heavy Plan Year, the Plan shall provide the special
vesting requirements of Code Section 416(b) pursuant to Section 6.4 of the Plan
and the special minimum allocation requirements of Code Section 416(c) pursuant
to Section 4.4 of the Plan.
2.2 DETERMINATION OF TOP HEAVY STATUS
(a) This Plan shall be a Top Heavy Plan for any Plan Year
in which, as of the Determination Date,
(1) the Present Value of Accrued Benefits of Key Employees and (2)
the sum of the Aggregate Accounts of Key Employees under this Plan
and all plans of an Aggregation Group, exceeds sixty percent (60%)
of the Present Value of Accrued Benefits and the Aggregate
Accounts of all Key and Non-Key Employees under this Plan and all
plans of an Aggregation Group.
If any Participant is a Non-Key Employee for any Plan
Year, but such Participant was a Key Employee for any prior Plan
Year, such Participant's Present Value of Accrued Benefit and/or
Aggregate Account balance shall not be taken into account for
purposes of determining whether this Plan is a Top Heavy or Super
Top Heavy Plan (or whether any Aggregation Group which
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includes this Plan is a Top Heavy Group). In addition , if a
Participant or Former Participant has not performed any services
for any Employer maintaining the Plan at any time during the five
year period ending on the Determination Date, any accrued benefit
for such Participant or Former Participant shall not be taken into
account for the purposes of determining whether this Plan is a Top
Heavy or Super Top Heavy Plan.
(b) This Plan shall be a Super Top Heavy Plan for any Plan
Year in which, as of the Determination Date, (1) the Present Value
of Accrued Benefits of Key Employees and (2) the sum of the
Aggregate Accounts of Key Employees under this Plan and all plans
of an Aggregation Group, exceeds ninety percent (90%) of the
Present Value of Accrued Benefits and the Aggregate Accounts of
all Key and Non-Key Employees under this Plan and all plans of an
Aggregation Group.
(c) Aggregate Account: A Participant's Aggregate Account as
of the Determination Date is the sum of:
(1) his Participant's Combined Account balance as of the
most recent valuation occurring within a twelve (12) month
period ending on the Determination Date;
(2) an adjustment for any contributions due as of the
Determination Date. Such adjustment shall be the amount of
any contributions actually made after the valuation date
but due on or before the Determination Date, except for the
first Plan Year when such adjustment shall also reflect the
amount of any contributions made after the Determination
Date that are allocated as of a date in that first Plan
Year.
(3) any Plan distributions made within the Plan Year that
includes the Determination Date or within the four (4)
preceding Plan Years. However, in the case of distributions
made after the valuation date and prior to the
Determination Date, such distributions are not included as
distributions for top heavy purposes to the extent that
such distributions are already included in the
Participant's Aggregate Account balance as of the valuation
date. Notwithstanding anything herein to the contrary, all
distributions, including distributions made prior
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to January 1, 1984, and distributions under a terminated
plan which if it had not been terminated would have been
required to be included in an Aggregation Group, will be
counted. Further, distributions from the Plan (including
the cash value of life insurance policies) of a
Participant's account balance because of death shall be
treated as a distribution for the purposes of this
paragraph.
(4) any Employee contributions, whether voluntary or
mandatory. However, amounts attributable to tax deductible
qualified voluntary employee contributions shall not be
considered to be a part of the Participant's Aggregate
Account balance.
(5) with respect to unrelated rollovers and plan-to-plan
transfers (ones which are both initiated by the Employee
and made from a plan maintained by one employer to a plan
maintained by another employer), if this Plan provides the
rollovers or plan-to-plan transfers, it shall always
consider such rollovers or plan-to-plan transfers as a
distribution for the purposes of this Section. If this Plan
is the plan accepting such rollovers or plan-to-plan
transfers, it shall not consider such rollovers or
plan-to-plan transfers as part of the Participant's
Aggregate Account balance.
(6) with respect to related rollovers and plan-to-plan
transfers (ones either not initiated by the Employee or
made to a plan maintained by the same employer), if this
Plan provides the rollover or plan-to-plan transfer, it
shall not be counted as a distribution for purposes of this
Section. If this Plan is the plan accepting such rollover
or plan-to-plan transfer, it shall consider such rollover
or plan-to-plan transfer as part of the Participant's
Aggregate Account balance, irrespective of the date on
which such rollover or plan-to-plan transfer is accepted.
(7) For the purposes of determining whether two employers
are to be treated as the same employer in (5) and (6)
above, all employers aggregated under Code Section 414(b),
(c), (m) and (o) are treated as the same employer.
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(d) "Aggregation Group" means either a Required
Aggregation Group or a Permissive Aggregation Group as hereinafter
determined.
(1) Required Aggregation Group: In determining a Required
Aggregation Group hereunder, each plan of the Employer in
which a Key Employee is a participant in the Plan Year
containing the Determination Date or any of the four
preceding Plan Years, and each other plan of the Employer
which enables any plan in which a Key Employee participates
to meet the requirements of Code Sections 401(a)(4) or 410,
will be required to be aggregated. Such group shall be
known as a Required Aggregation Group.
In the case of a Required Aggregation Group, each plan in
the group will be considered a Top Heavy Plan if the
Required Aggregation Group is a Top Heavy Group. No plan in
the Required Aggregation Group will be considered a Top
Heavy Plan if the Required Aggregation Group is not a Top
Heavy Group.
(2) Permissive Aggregation Group: The Employer may also
include any other plan not required to be included in the
Required Aggregation Group, provided the resulting group,
taken as a whole, would continue to satisfy the provisions
of Code Sections 401(a) (4) and 410. Such group shall be
known as a Permissive Aggregation Group.
In the case of a Permissive Aggregation Group, only a plan
that is part of the Required Aggregation Group will be
considered a Top Heavy Plan if the Permissive Aggregation
Group is a Top Heavy Group. No plan in the Permissive
Aggregation Group will be considered a Top Heavy Plan if
the Permissive Aggregation Group is not a Top Heavy Group.
(3) Only those plans of the Employer in which the
Determination Dates fall within the same calendar year
shall be aggregated in order to determine whether such
plans are Top Heavy Plans.
(4) An Aggregation Group shall include any terminated plan
of the Employer if it was maintained within the last five
(5) years ending on the Determination Date.
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(e) "Determination Date" means (a) the last day of the
preceding Plan Year, or (b) in the case of the first Plan
Year, the last day of such Plan Year.
(f) Present Value of Accrued Benefit: In the case of a
defined benefit plan, the Present Value of Accrued Benefit for a
Participant other than a Key Employee, shall be as determined
using the single accrual method used for all plans of the Employer
and Affiliated Employers, or if no such single method exists,
using a method which results in benefits accruing not more rapidly
than the slowest accrual rate permitted under Code Section 411(b)
(1) (C). The determination of the Present Value of Accrued Benefit
shall be determined as of the most recent valuation date that
falls within or ends with the 12-month period ending on the
Determination Date except as provided in Code Section 416 and the
Regulations thereunder for the first and second plan years of a
defined benefit plan.
(g) "Top Heavy Group" means an Aggregation Group in which,
as of the Determination Date, the sum of:
(1) the Present Value of Accrued Benefits of Key Employees
under all defined benefit plans included in the group, and
(2) the Aggregate Accounts of Key Employees under all
defined contribution plans included in the group,
exceeds sixty percent (60%) of a similar sum determined
for all Participants.
2.3 POWERS AND RESPONSIBILITIES OF THE EMPLOYER
(a) The Employer shall be empowered to appoint and remove
the Trustee and the Administrator from time to time as it deems
necessary for the proper administration of the Plan to assure that
the Plan is being operated for the exclusive benefit of the
Participants and their Beneficiaries in accordance with the terms
of the Plan, the Code, and the Act.
(b) The Employer shall establish a "funding policy and
method", i.e., it shall determine whether the Plan has a short run
need for liquidity (e.g., to pay benefits) or whether liquidity is
a long run goal and investment growth (and stability of same) is a
more
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current need, or shall appoint a qualified person to do so. The
Employer or its delegate shall communicate such needs and goals to
the Trustee, who shall coordinate such Plan needs with its
investment policy. The communication of such a "funding policy and
method" shall not, however, constitute a directive to the Trustee
as to investment of the Trust Funds. Such "funding policy and
method" shall be consistent with the objectives of this Plan and
with the requirements of Title I of the Act.
(c) The Employer shall periodically review the performance
of any Fiduciary or other person to whom duties have been
delegated or allocated by it under the provisions of this Plan or
pursuant to procedures established hereunder. This requirement may
be satisfied by formal periodic review by the Employer or by a
qualified person specifically designated by the Employer, through
day-to-day conduct and evaluation, or through other appropriate
ways.
(d) The Employer, may, in its discretion, appoint an
Investment Manager to manage all or a designated portion of the
assets of the Plan. In such event, the Trustee shall follow the
directive of the Investment Manager in investing the assets of the
Plan managed by the Investment Manager.
2.4 DESIGNATION OF ADMINISTRATIVE AUTHORITY
The Employer shall appoint one or more Administrators. Any
person, including, but not limited to, the Employees of the Employer, shall be
eligible to serve as an Administrator. Any person so appointed shall signify his
acceptance by filing written acceptance with the Employer. An Administrator may
resign by delivering his written resignation to the Employer or be removed by
the Employer by delivery of written notice of removal, to take effect at a date
specified therein, or upon delivery to the Administrator if no date is
specified.
The Employer, upon the resignation or removal of an
Administrator, shall promptly designate in writing a successor to this position.
If the Employer does not appoint an Administrator, the Employer will function as
the Administrator.
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2.5 ALLOCATION AND DELEGATION OF RESPONSIBILITIES
If more than one person is appointed as Administrator, the
responsibilities of each Administrator may be specified by the Employer and
accepted in writing by each Administrator. In the event that no such delegation
is made by the Employer, the Administrators may allocate the responsibilities
among themselves, in which event the Administrators shall notify the Employer
and the Trustee in writing of such action and specify the responsibilities of
each Administrator. The Trustee thereafter shall accept and rely upon any
documents executed by the appropriate Administrator until such time as the
Employer or the Administrators file with the Trustee a written revocation of
such designation.
2.6 POWERS AND DUTIES OF THE ADMINISTRATOR
The primary responsibility of the Administrator is to
administer the Plan for the exclusive benefit of the Participants and their
Beneficiaries, subject to the specific terms of the Plan. The Administrator
shall administer the Plan in accordance with its terms and shall have the power
and discretion to construe the terms of the Plan and to determine all questions
arising in connection with the administration, interpretation, and application
of the Plan. Any such determination by the Administrator shall be conclusive and
binding upon all persons. The Administrator may establish procedures, correct
any defect, supply any information, or reconcile any inconsistency in such
manner and to such extent as shall be deemed necessary or advisable to carry out
the purpose of the Plan; provided, however, that any procedure, discretionary
act, interpretation or construction shall be done in a nondiscriminatory manner
based upon uniform principles consistently applied and shall be consistent with
the intent that the Plan shall continue to be deemed a qualified plan under the
terms of Code Section 401(a), and shall comply with the terms of the Act and all
regulations issued pursuant thereto. The Administrator shall have all powers
necessary or appropriate to accomplish his duties under this Plan.
The Administrator shall be charged with the duties of the
general administration of the Plan, including, but not limited to, the
following:
(a) the discretion to determine all questions relating to
the eligibility of Employees to participate or remain a
Participant hereunder and to receive benefits under the Plan;
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<PAGE> 29
(b) to compute, certify, and direct the Trustee with
respect to the amount and the kind of benefits to which any
Participant shall be entitled hereunder;
(c) to authorize and direct the Trustee with respect to all
nondiscretionary or otherwise directed disbursements from the Trust;
(d) to maintain all necessary records for the
administration of the Plan;
(e) to interpret the provisions of the Plan and to make and
publish such rules for regulation of the Plan as are consistent
with the terms hereof;
(f) to determine the size and type of any Contract to be
purchased from any insurer, and to designate the insurer from
which such Contract shall be purchased;
(g) to compute and certify to the Employer and to the
Trustee from time to time the sums of money necessary or desirable
to be contributed to the Plan;
(h) to consult with the Employer and the Trustee regarding
the short and long-term liquidity needs of the Plan in order that
the Trustee can exercise any investment discretion in a manner
designed to accomplish specific objectives;
(i) to prepare and distribute to Employees a procedure for
notifying Participants and Beneficiaries of their rights to elect
joint and survivor annuities and Pre-Retirement Survivor Annuities
as required by the Act and Regulations thereunder;
(j) to prepare and implement a procedure to notify Eligible
Employees that they may elect to have a portion of their
Compensation deferred or paid to them in cash;
(k) to assist any Participant regarding his rights,
benefits, qr elections available under the Plan.
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2.7 RECORDS AND REPORTS
The Administrator shall keep a record of all actions taken and shall
keep all other books of account, records, and other data that may be necessary
for proper administration of the Plan and shall be responsible for supplying all
information and reports to the Internal Revenue Service, Department of Labor,
Participants, Beneficiaries and others as required by law.
2.8 APPOINTMENT OF ADVISERS
The Administrator, or the Trustee with the consent of the
Administrator, may appoint counsel, specialists, advisers, and other persons as
the Administrator or the Trustee deems necessary or desirable in connection with
the administration of this Plan.
2.9 INFORMATION FROM EMPLOYER
To enable the Administrator to perform his functions, the Employer
shall supply full and timely information to the Administrator on all matters
relating to the Compensation of all Participants, their Hours of Service, their
Years of Service, their retirement, death, disability, or termination of
employment, and such other pertinent facts as the Administrator may require; and
the Administrator shall advise the Trustee of such of the foregoing facts as may
be pertinent to the Trustee's duties under the Plan. The Administrator may rely
upon such information as is supplied by the Employer and shall have no duty or
responsibility to verify such information.
2.10 PAYMENT OF EXPENSES
All expenses of administration may be paid out of the Trust Fund
unless paid by the Employer. Such expenses shall include any expenses incident
to the functioning of the Administrator, including, but not limited to, fees of
accountants, counsel, and other specialists and their agents, and other costs of
administering the Plan. Until paid, the expenses shall constitute a liability of
the Trust Fund. However, the Employer may reimburse the Trust Fund for any
administration expense incurred.
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2.11 MAJORITY ACTIONS
Except where there has been an allocation and delegation of
administrative authority pursuant to Section 2.5, if there shall be more than
one Administrator, they shall act by a majority of their number, but may
authorize one or more of them to sign all papers on their behalf.
2.12 CLAIMS PROCEDURE
Claims for benefits under the Plan may be filed with the
Administrator on forms supplied by the Employer. Written notice of the
disposition of a claim shall be furnished to the claimant within 90 days after
the application is filed. In the event the claim is denied, the reasons for the
denial shall be specifically set forth in the notice in language calculated to
be understood by the claimant, pertinent provisions of the Plan shall be cited,
and, where appropriate, an explanation as to how the claimant can perfect the
claim will be provided. In addition, the claimant shall be furnished with an
explanation of the Plan's claims review procedure.
2.13 CLAIMS REVIEW PROCEDURE
Any Employee, former Employee, or Beneficiary of either, who has
been denied a benefit by a decision of the Administrator pursuant to Section
2.12 shall be entitled to request the Administrator to give further
consideration to his claim by filing with the Administrator (on a form which may
be obtained from the Administrator) a request for a hearing. Such request,
together with a written statement of the reasons why the claimant believes his
claim should be allowed, shall be filed with the Administrator no later than 60
days after receipt of the written notification provided for in Section 2.12. The
Administrator shall then conduct a hearing within the next 60 days, at which the
claimant may be represented by an attorney or any other representative of his
choosing and at which the claimant shall have an opportunity to submit written
and oral evidence and arguments in support of his claim. At the hearing (or
prior thereto upon 5 business days written notice to the Administrator) the
claimant or his representative shall have an opportunity to review all documents
in the possession of the Administrator which are pertinent to the claim at issue
and its disallowance. Either the claimant or the Administrator may cause a court
reporter to attend the hearing and record the proceedings. In such event, a
complete written transcript of the proceedings shall be furnished to both
parties by the court reporter. The full expense of any such court reporter and
such transcripts shall be borne by the party causing the court
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<PAGE> 32
reporter to attend the hearing. A final decision as to the allowance of the
claim shall be made by the Administrator within 60 days of receipt of the appeal
(unless there has been an extension of 60 days due to special circumstances,
provided the delay and the special circumstances occasioning it are communicated
to the claimant within the 60 day period). Such communication shall be written
in a manner calculated to be understood by the claimant and shall include
specific reasons for the decision and specific references to the pertinent Plan
provisions on which the decision is based.
ARTICLE III
ELIGIBILITY
3.1 CONDITIONS OF ELIGIBILITY
Effective October 1, 1993, exclusively for purposes of Section 4.2
of this Plan, any Eligible Employee shall be eligible to participate hereunder
as of his or her date of hire. For all other purposes, including eligibility for
Contributions described in Sections 4.1(b) and 4.1(c), and, prior to October 1,
1993, also for purposes of eligibility for Contributions described in Section
4.2, any Eligible Employee who has completed one (1) Year of Service shall be
eligible to participate hereunder as of the date he has satisfied such
requirements. However, any Employee who was a Participant in the Plan prior to
the effective date of this amendment and restatement shall continue to
participate in the Plan. The Employer shall give each prospective Eligible
Employee written notice of his eligibility to participate in the Plan prior to
the close of the Plan Year in which he first becomes an Eligible Employee.
3.2 APPLICATION FOR PARTICIPATION
In order to become a Participant hereunder, each Eligible Employee
shall make application to the Employer for participation in the Plan and agree
to the terms hereof. Upon the acceptance of any benefits under this Plan, such
Employee shall automatically be deemed to have made application and shall be
bound by the terms and conditions of the Plan and all amendments hereto.
3.3 EFFECTIVE DATE OF PARTICIPATION
An Eligible Employee shall become a Participant effective as of the
earlier of the April 1 or October 1 coinciding with or next following the date
such Employee met the eligibility requirements of Section 3.1, provided said
Employee was still employed as of such date (or if not employed on such date, as
of the date of rehire if a 1-Year Break in Service has not occurred).
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In the event an Employee who is not a member of an eligible class of
Employees becomes a member of an eligible class, such Employee will participate
immediately if such Employee has satisfied the minimum age and service
requirements and would have otherwise previously become a Participant.
3.4 DETERMINATION OF ELIGIBILITY
The Administrator shall determine the eligibility of each Employee
for participation in the Plan based upon information furnished by the Employer.
Such determination shall be conclusive and binding upon all persons, as long as
the same is made pursuant to the Plan and the Act. Such determination shall be
subject to review per Section 2.13.
3.5 TERMINATION OF ELIGIBILITY
(a) In the event a Participant shall go from a
classification of an Eligible Employee to an ineligible Employee,
such Former Participant shall continue to vest in his interest in
the Plan for each Year of Service completed while a noneligible
Employee, until such time as his Participant's Account shall be
forfeited or distributed pursuant to the terms of the Plan.
Additionally, his interest in the Plan shall continue to share in
the earnings of the Trust Fund.
(b) In the event a Participant is no longer a member of an
eligible class of Employees and becomes ineligible to participate
but has not incurred a 1-Year Break in Service, such Employee will
participate immediately upon returning to an eligible class of
Employees. If such Participant incurs a 1-Year Break in Service,
eligibility will be determined under the break in service rules of
the Plan.
3.6 OMISSION OF ELIGIBLE EMPLOYEE
If, in any Plan Year, any Employee who should be included as a
Participant in the Plan is erroneously omitted and discovery of such omission is
not made until after a contribution by his Employer for the year has been made,
the Employer shall make a subsequent contribution with respect to the omitted
Employee in the amount which the said Employer would have contributed with
respect to him had he not been omitted. Such contribution shall be made
regardless of whether or not it is deductible in whole or in part in any taxable
year under applicable provisions of the Code.
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3.7 INCLUSION OF INELIGIBLE EMPLOYEE
If, in any Plan Year, any person who should not have been included
as a Participant in the Plan is erroneously included and discovery of such
incorrect inclusion is not made until after a contribution for the year has been
made, the Employer shall not be entitled to recover the contribution made with
respect to the ineligible person regardless of whether or not a deduction is
allowable with respect to such contribution. In such event, the amount
contributed with respect to the ineligible person shall constitute a Forfeiture
(except for Deferred Compensation which shall be distributed to the ineligible
person) for the Plan Year in which the discovery is made.
3.8 ELECTION NOT TO PARTICIPATE
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate must
be communicated to the Employer, in writing, at least thirty (30) days before
the beginning of a Plan Year.
ARTICLE IV
CONTRIBUTION AND ALLOCATION
4.1 FORMULA FOR DETERMINING EMPLOYER'S CONTRIBUTION
For each Plan Year, the Employer shall contribute to the Plan:
(a) The amount of the total salary reduction elections of
all Participants made pursuant to Section 4.2(a), which amount
shall be deemed an Employer's Elective Contribution.
(b) On behalf of each Participant who is eligible to share
in matching contributions for the Plan Year, a discretionary
matching contribution equal to a percentage of each such
Participant's Deferred Compensation, the exact percentage to be
determined each year by the Employer, which amount shall be deemed
an Employer's Non-Elective Contribution. If a Participant's rate
of contribution changes during a Plan Year, the Employer Matching
Contribution percentage shall be applied to the percentage as in
effect from time to time rather than to the cumulative net
contribution of such Participant for the Plan Year.
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(c) A discretionary amount, which amount shall be deemed an
Employer's Non-Elective Contribution.
(d) Notwithstanding the foregoing, however, the Employer's
contributions for any Plan Year shall not exceed the maximum
amount allowable as a deduction to the Employer under the
provisions of Code Section 404. All contributions by the Employer
shall be made in cash or in such property as is acceptable to the
Trustee.
(e) Except, however, to the extent necessary to provide the
top heavy minimum allocations, the Employer shall make a
contribution even if it exceeds the amount which is deductible
under Code Section 404.
4.2 PARTICIPANT'S SALARY REDUCTION ELECTION
(a) Each Participant may elect to defer from 1% to 15% of
his Compensation which would have been received in the Plan Year,
but for the deferral election. A deferral election (or
modification of an earlier election) may not be made with respect
to Compensation which is currently available on or before the date
the Participant executed such election.
The amount by which Compensation is reduced shall be
that Participant's Deferred Compensation and be treated as an
Employer Elective Contribution and allocated to that Participant's
Elective Account.
(b) The balance in each Participant's Elective Account
shall be fully Vested at all times and shall not be subject to
Forfeiture for any reason.
(c) Amounts held in the Participant's Elective Account may
not be distributable earlier than:
(1) a Participant's termination of employment, Total and
Permanent Disability, or death;
(2) a Participant's attainment of age 59 1/2;
(3) the termination of the Plan without the establishment
or existence of a "successor plan", as that term is
described in Regulation 1.401(k)-1(d) (3);
(4) the date of disposition by the Employer to an entity
that is not an Affiliated Employer of
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substantially all of the assets (within the meaning of Code
Section 409(d)(2)) used in a trade or business of such
corporation if such corporation continues to maintain this
Plan after the disposition with respect to a Participant
who continues employment with the corporation acquiring
such assets;
(5) the date of disposition by the Employer or an
Affiliated Employer who maintains the Plan of its interest
in a subsidiary (within the meaning of Code Section
409(d)(3)) to an entity which is not an Affiliated Employer
but only with respect to a Participant who continues
employment with such subsidiary; or
(6) the proven financial hardship of a Participant, subject
to the limitations of Section 6.11.
(d) For each Plan Year beginning after December 31, 1987, a
Participant's Deferred Compensation made under this Plan and all
other plans, contracts or arrangements of the Employer maintaining
this Plan shall not exceed, during any taxable year of the
Participant, the limitation imposed by Code Section 402(g), as in
effect at the beginning of such taxable year. If such dollar
limitation is exceeded, a Participant will be deemed to have
notified the Administrator of such excess amount which shall be
distributed in a manner consistent with 4.2(f). The dollar
limitation shall be adjusted annually pursuant to the method
provided in Code Section 415(d) in accordance with Regulations.
(e) In the event a Participant has received a hardship
distribution from his Participant's Elective Account pursuant to
Section 6.11 or pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B)
from any other plan maintained by the Employer, then such
Participant shall not be permitted to elect to have Deferred
Compensation contributed to the Plan on his behalf for a period of
twelve (12) months following the receipt of the distribution.
Furthermore, the dollar limitation under Code Section 402(g) shall
be reduced, with respect to the Participant's taxable year
following the taxable year in which the hardship distribution was
made, by the amount of such Participant's Deferred Compensation,
if any, pursuant to this Plan (and any other plan
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<PAGE> 37
maintained by the Employer) for the taxable year of the hardship
distribution.
(f) If a Participant's Deferred Compensation under this
Plan together with any elective deferrals (as defined in
Regulation 1.402(g)-1(b)) under another qualified cash or deferred
arrangement (as defined in Code Section 401(k)), a simplified
employee pension (as defined in Code Section 408(k)), a salary
reduction arrangement (within the meaning of Code Section
3121(a)(5)(D)), a deferred compensation plan under Code Section
457, or a trust described in Code Section 501(c) (18) cumulatively
exceed the limitation imposed by Code Section 402(g) (as adjusted
annually in accordance with the method provided in Code Section
415(d) pursuant to Regulations) for such Participant's taxable
year, the Participant may, not later than March 1 following the
close of the Participant's taxable year, notify the Administrator
in writing of such excess and request that his Deferred
Compensation under this Plan be reduced by an amount specified by
the Participant. In such event, the Administrator may direct the
Trustee to distribute such excess amount (and any Income allocable
to such excess amount) to the Participant not later than the first
April 15th following the close of the Participant's taxable year.
Distributions in accordance with this paragraph may be made for
any taxable year of the Participant which begins after December
31, 1986. Any distribution of less than the entire amount of
Excess Deferred Compensation and Income shall be treated as a pro
rata distribution of Excess Deferred Compensation and Income. The
amount distributed shall not exceed the Participant's Deferred
Compensation under the Plan for the taxable year. Any distribution
on or before the last day of the Participant's taxable year must
satisfy each of the following conditions:
(1) the distribution must be made after the date on which
the Plan received the Excess Deferred Compensation;
(2) the Participant shall designate the distribution as
Excess Deferred Compensation; and
(3) the Plan must designate the distribution as a
distribution of Excess Deferred Compensation.
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Any distribution made pursuant to this Section 4.2(f)
shall be made simultaneously from Deferred Compensation and
matching contributions which relate to such Deferred Compensation
provided, however, that any such matching contributions which are
not Vested shall be forfeited in lieu of distribution.
(g) Notwithstanding Section 4.2(f) above, a Participant's
Excess Deferred Compensation shall be reduced, but not below zero,
by any distribution and/or recharacterization of Excess
Contributions pursuant to Section 4.6(a) for the Plan Year
beginning with or within the taxable year of the Participant.
(h) At Normal Retirement Date, or such other date when the
Participant shall be entitled to receive benefits, the fair market
value of the Participant's Elective Account shall be used to
provide additional benefits to the Participant or his Beneficiary.
(i) All amounts allocated to a Participant's Elective
Account may be treated as a Directed Investment Account pursuant to
Section 4.13.
(j) Employer Elective Contributions made pursuant to this
Section may be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short-term debt security acceptable to the
Trustee until such time as the allocations pursuant to Section 4.4
have been made.
(k) The Employer and the Administrator shall implement the
salary reduction elections provided for herein in accordance with
the following:
(1) A Participant may commence making elective deferrals to
the Plan only after first satisfying the eligibility and
participation requirements specified in Article III.
However, the Participant must make his initial salary
deferral election within a reasonable time, not to exceed
thirty (30) days, after entering the Plan pursuant to
Section 3.3. If the Participant fails to make an initial
salary deferral election within such time, then such
Participant may thereafter make an election in accordance
with the rules governing modifications. The
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Participant shall make such an election by entering into a
written salary reduction agreement with the Employer and
filing such agreement with the Administrator. Such election
shall initially be effective beginning with the pay period
following the acceptance of the salary reduction agreement
by the Administrator, shall not have retroactive effect and
shall remain in force until revoked.
(2) A Participant may modify a prior election on April 1 or
October 1 and concurrently make a new election by filing a
written notice with the Administrator within a reasonable
time before the pay period for which such modification is
to be effective. However, modifications to a salary
deferral election shall only be permitted semi-annually,
during election periods established by the Administrator
prior to the first day of a Plan Year and the first day of
the seventh month of a Plan Year. Any modification shall
not have retroactive effect and shall remain in force until
revoked.
(3) A Participant may elect to prospectively revoke his
salary reduction agreement in its entirety at any time
during the Plan Year by providing the Administrator with
thirty (30) days written notice of such revocation (or upon
such shorter notice period as may be acceptable to the
Administrator). Such revocation shall become effective as
of the beginning of the first pay period coiricident with
or next following the expiration of the notice period.
Furthermore, the termination of the Participant's
employment, or the cessation of participation for any
reason, shall be deemed to revoke any salary reduction
agreement then in effect, effective immediately following
the close of the pay period within which such termination
or cessation occurs.
4.3 TIME OF PAYMENT OF EMPLOYER'S CONTRIBUTION
The Employer shall generally pay to the Trustee its contribution to
the Plan for each Plan Year within the time prescribed by law, including
extensions of time, for the filing of the Employer's federal income tax return
for the Fiscal Year.
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However, Employer Elective Contributions accumulated through
payroll deductions shall be paid to the Trustee as of the earliest date on
which such contributions can reasonably be segregated from the Employer's
general assets, but in any event within ninety (90) days from the date on which
such amounts would otherwise have been payable to the Participant in cash. The
provisions of Department of Labor regulations 2510.3-102 are incorporated
herein by reference. Furthermore, any additional Employer contributions which
are allocable to the Participant's Elective Account for a Plan Year shall be
paid to the Plan no later than the twelve-month period immediately following
the close of such Plan Year.
4.4 ALLOCATION OF CONTRIBUTION, FORFEITURES AND EARNINGS
(a) The Administrator shall establish and maintain an
account in the name of each Participant to which the Administrator
shall credit as of each Anniversary Date all amounts allocated to
each such Participant as set forth herein.
(b) The Employer shall provide the Administrator with all
information required by the Administrator to make a proper
allocation of the Employer's contributions for each Plan Year.
Within a reasonable period of time after the date of receipt by
the Administrator of such information, the Administrator shall
allocate such contribution as follows:
(1) With respect to the Employer's Elective Contribution
made pursuant to Section 4.1(a), to each Participant's
Elective Account in an amount equal to each such
Participant's Deferred Compensation for the year.
(2) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(b), to each
Participant's Account in accordance with Section 4.1(b).
Any Participant actively employed during the Plan Year
shall be eligible to share in the matching contribution for
the Plan Year.
(3) With respect to the Employer's Non-Elective
Contribution made pursuant to Section 4.1(c), to each
Participant's Account in the same proportion that each such
Participant's Compensation for the year bears to the total
Compensation of all Participants for such year.
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<PAGE> 41
Only Participants who have completed a Year of Service
during the Plan Year shall be eligible to share in the
discretionary contribution for the year.
(c) As of each Anniversary Date any amounts which became
Forfeitures since the last Anniversary Date shall first be made
available to reinstate previously forfeited account balances of
Former Participants, if any, in accordance with Section 6.4(g)(2).
The remaining Forfeitures, if any, shall be allocated to
Participants' Accounts and used to reduce the contribution of the
Employer hereunder for the Plan Year in which such Forfeitures
occur in the following manner:
(1) Forfeitures attributable to Employer matching
contributions made pursuant to Section 4.1(b) shall be used
to reduce the Employer's contribution for the Plan Year in
which such Forfeitures occur.
(2) Forfeitures attributable to Employer discretionary
contributions made pursuant to Section 4.1(c) shall be
added to the Employer's discretionary contribution for the
Plan Year in which such Forfeitures occur and allocated
among the Participants' Accounts in the same manner as the
Employer's discretionary contributions.
Provided, however, that in the event the allocation of
Forfeitures provided herein shall cause the "annual addition" (as
defined in Section 4.9) to any Participant's Account to exceed the
amount allowable by the Code, the excess shall be reallocated in
accordance with Section 4.10.
(d) For any Top Heavy Plan Year, Employees not otherwise
eligible to share in the allocation of contributions and
Forfeitures as provided above, shall receive the minimum
allocation provided for in Section 4.4(g) if eligible pursuant to
the provisions of Section 4.4(i).
(e) Notwithstanding the foregoing, Participants who are not
actively employed on the last day of the Plan Year due to Retirement
(Early, Normal or Late) , Total and Permanent Disability or death
shall share in the allocation of contributions and Forfeitures for
that Plan Year.
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<PAGE> 42
(f) On each business day of the Plan Year, a daily
determination of unrealized and realized gains and losses,
interest and dividends will be calculated and allocated based on
the actual activity in each Participant's account. Activity
includes, but is not limited to, allocation of contribution and
forfeitures, and distributions.
Participants' transfers from other qualified plans and
voluntary contributions deposited in the general Trust Fund shall
share in any earnings and losses (net appreciation or net
depreciation) of the Trust Fund in the same manner provided above.
Each segregated account maintained on behalf of a Participant
shall be credited or charged with its separate earnings and
losses.
(g) Minimum Allocations Required for Top Heavy Plan Years:
Notwithstanding the foregoing, for any Top Heavy Plan Year, the
sum of the Employer's contributions and Forfeitures allocated to
the Participant's Combined Account of each Employee shall be equal
to at least three percent (3%) of such Employee's "415
Compensation" (reduced by contributions and forfeitures, if any,
allocated to each Employee in any defined contribution plan
included with this plan in a Required Aggregation Group). However,
if (1) the sum of the Employer's contributions and Forfeitures
allocated to the Participant's Combined Account of each Key
Employee for such Top Heavy Plan Year is less than three percent
(3%) of each Key Employee's "415 Compensation" and (2) this Plan
is not required to be included in an Aggregation Group to enable a
defined benefit plan to meet the requirements of Code Section
401(a) (4) or 410, the sum of the Employer's contributions and
Forfeitures allocated to the Participant's Combined Account of
each Employee shall be equal to the largest percentage allocated
to the Participant's Combined Account of any Key Employee.
However, in determining whether a Non-Key Employee has received
the required minimum allocation, such Non-Key Employee's Deferred
Compensation and matching contributions needed to satisfy the
"Actual Contribution Percentage" tests pursuant to Section 4.7(a)
shall not be taken into account.
However, no such minimum allocation shall be required in
this Plan for any Employee who participates in another defined
contribution plan subject to Code
42
<PAGE> 43
Section 412 providing such benefits included with this Plan in a
Required Aggregation Group.
(h) For purposes of the minimum allocations set forth
above, the percentage allocated to the Participant's Combined
Account of any Key Employee shall be equal to the ratio of the sum
of the Employer's contributions and Forfeitures allocated on
behalf of such Key Employee divided by the "415 Compensation" for
such Key Employee.
(i) For any Top Heavy Plan Year, the minimum allocations
set forth above shall be allocated to the Participant's Combined
Account of all Employees who are Participants and who are employed
by the Employer on the last day of the Plan Year, including
Employees who have (1) failed to complete a Year of Service; and
(2) declined to make mandatory contributions (if required) or, in
the case of a cash or deferred arrangement, elective contributions
to the Plan.
(j) For the purposes of this Section, "415 Compensation"
shall be limited to $200,000. Such amount shall be adjusted at the
same time and in the same manner as permitted under Code Section
415(d), except that the dollar increase in effect on January 1 of
any calendar year shall be effective for the Plan Year beginning
with or within such calendar year and the first adjustment to the
$200,000 limitation shall be effective on January 1, 1990. For any
short Plan Year the "415 Compensation" limit shall be an amount
equal to the "415 Compensation" limit for the calendar year in
which the Plan Year begins multiplied by the ratio obtained by
dividing the number of full months in the short Plan Year by
twelve (12). However, for Plan Years beginning prior to January 1,
1989, the $200,000 limit shall apply only for Top Heavy Plan Years
and shall not be adjusted.
(k) Notwithstanding anything herein to the contrary,
Participants who terminated employment for any reason during the
Plan Year shall share in the salary reduction contributions made
by the Employer for the year of termination without regard to the
Hours of Service credited.
(1) If a Former Participant is reemployed after five (5)
consecutive 1-Year Breaks in Service, then separate accounts shall
be maintained as follows:
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<PAGE> 44
(1) one account for nonforfeitable benefits attributable to
pre-break service; and
(2) one account representing his status in the Plan attributable
to post-break service.
(m) Notwithstanding anything to the contrary, for Plan Years
beginning after December 31, 1989, if this is a Plan that would otherwise
fail to meet the requirements of Code Sections 401(a)(26), 410(b)(l) or
410(b) (2) (A) (i) and the Regulations thereunder because Employer
contributions would not be allocated to a sufficient number or percentage
of Participants for a Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share in the Employer's
contribution and Forfeitures for the Plan Year shall be expanded
to include the minimum number of Participants who would not
otherwise be eligible as are necessary to satisfy the applicable
test specified above. The specific Participants who shall become
eligible under the terms of this paragraph shall be those who are
actively employed on the last day of the Plan Year and, when
compared to similarly situated Participants, have completed the
greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants
eligible to share in the Employer's contribution and Forfeitures
for the Plan Year shall be further expanded to include the minimum
number of Participants who are not actively employed on the last
day of the Plan Year as are necessary to satisfy the applicable
test. The specific Participants who shall become eligible to share
shall be those Participants, when compared to similarly situated
Participants, who have completed the greatest number of Hours of
Service in the Plan Year before terminating employment.
(3) Nothing in this Section shall permit the reduction of a
Participant's accrued benefit. Therefore any amounts that have
previously been allocated to Participants may not be reallocated
to satisfy these requirements. In such event, the Employer shall
make an additional contribution
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<PAGE> 45
equal to the amount such affected Participants would have received
had they been included in the allocations, even if it exceeds the
amount which would be deductible under Code Section 404. Any
adjustment to the allocations pursuant to this paragraph shall be
considered a retroactive amendment adopted by the last day of the
Plan Year.
(4) Notwithstanding the foregoing, for any Top Heavy Plan Year
beginning after December 31, 1992, if the portion of the Plan
which is not a Code Section 401(k) or 401(m) plan would fail to
satisfy Code Section 410(b) if the coverage tests were applied by
treating those Participants whose only allocation (under such
portion of the Plan) would otherwise be provided under the top
heavy formula as if they were not currently benefiting under the
Plan, then, for purposes of this Section 4.4(m), such Participants
shall be treated as not benefiting and shall therefore be eligible
to be included in the expanded class of Participants who will
share in the allocation provided under the Plan's non top heavy
formula.
4.5 ACTUAL DEFERRAL PERCENTAGE TESTS
(a) Maximum Annual Allocation: For each Plan Year beginning after
December 31, 1986, the annual allocation derived from Employer Elective
Contributions to a Participant's Elective Account shall satisfy one of
the following tests:
(1) The "Actual Deferral Percentage" for the Highly Compensated
Participant group shall not be more than the "Actual Deferral
Percentage" of the Non-Highly Compensated Participant group
multiplied by 1.25, or
(2) The excess of the "Actual Deferral Percentage" for the Highly
Compensated Participant group over the "Actual Deferral
Percentage" for the Non-Highly Compensated Participant group shall
not be more than two percentage points. Additionally, the "Actual
Deferral Percentage" for the Highly Compensated Participant group
shall not exceed the "Actual Deferral Percentage" for the
Non-Highly Compensated Participant group multiplied by 2.
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<PAGE> 46
The provisions of Code Section 401(k)(3) and Regulation
1.401(k)-1(b) are incorporated herein by reference.
However, for Plan Years beginning after December 31, 1988, in
order to prevent the multiple use of the alternative method
described in (2) above and in Code Section 401(m)(9)(A), any
Highly Compensated Participant eligible to make elective deferrals
pursuant to Section 4.2 and to make Employee contributions or to
receive matching contributions under this Plan or under any other
plan maintained by the Employer or an Affiliated Employer shall
have his actual contribution ratio reduced pursuant to Regulation
1.401(m)-2, the provisions of which are incorporated herein by
reference.
(b) For the purposes of this Section "Actual Deferral Percentage"
means, with respect to the Highly Compensated Participant group and
Non-Highly Compensated Participant group for a Plan Year, the average of
the ratios, calculated separately for each Participant in such group, of
the amount of Employer Elective Contributions allocated to each
Participant's Elective Account for such Plan Year, to such Participant's
"414(s) Compensation" for such Plan Year. The actual deferral ratio for
each Participant and the "Actual Deferral Percentage" for each group
shall be calculated to the nearest one-hundredth of one percent for Plan
Years beginning after December 31, 1988. Employer Elective Contributions
allocated to each Non-Highly Compensated Participant's Elective Account
shall be reduced by Excess Deferred Compensation to the extent such
excess amounts are made under this Plan or any other plan maintained by
the Employer.
(c) For the purpose of determining the actual deferral ratio of a
Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q) (6) because such Participant is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual deferral ratio for the family group (which
shall be treated as one Highly Compensated Participant) shall be
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<PAGE> 47
determined by aggregating Employer Elective Contributions and
"414(s) Compensation" of all eligible Family Members (including
Highly Compensated Participants). However, in applying the
$200,000 limit to "414(s) Compensation", for Plan Years beginning
after December 31, 1988, Family Members shall include only the
affected Employee's spouse and any lineal descendants who have not
attained age 19 before the close of the Plan Year. Notwithstanding
the foregoing, with respect to Plan Years beginning prior to
January 1, 1990, compliance with the Regulations then in effect
shall be deemed to be compliance with this paragraph.
(2) The Employer Elective Contributions and "414(s) Compensation"
of all Family Members shall be disregarded for purposes of
determining the "Actual Deferral Percentage" of the Non-Highly
Compensated Participant group except to the extent taken into
account in paragraph (1) above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1)
and (2) above.
(d) For the purposes of Sections 4.5(a) and 4.6, a Highly
Compensated Participant and a Non-Highly Compensated Participant shall
include any Employee eligible to make a deferral election pursuant to
Section 4.2, whether or not such deferral election was made or suspended
pursuant to Section 4.2.
(e) For the purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(k), if two or more plans which include cash or deferred
arrangements are considered one plan for the purposes of Code Section
401(a)(4) or 410(b) (other than Code Section 410(b)(2)(A)(ii)as in effect
for Plan Years beginning after December 31, 1988), the cash or deferred
arrangements included in such plans shall be treated as one arrangement.
In addition, two or more cash or deferred arrangements may be considered
as a single arrangement for purposes of determining whether or not such
arrangements satisfy Code Sections 401(a)(4), 410(b) and 401(k). In such
a case, the cash or deferred
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<PAGE> 48
arrangements included in such plans and the plans including such
arrangements shall be treated as one arrangement and as one plan for
purposes of this Section and Code Sections 401(a)(4), 410(b) and 401(k).
Plans may be aggregated under this paragraph (e) only if they have the
same plan year.
Notwithstanding the above, for Plan Years beginning after December
31, 1988, an employee stock ownership plan described in Code Section
4975(e)(7) or 409 may not be combined with this Plan for purposes of
determining whether the employee stock ownership plan or this Plan
satisfies this Section and Code Sections 401(a)(4), 410(b) and 401(k).
(f) For the purposes of this Section, if a Highly Compensated
Participant is a Participant under two or more cash or deferred
arrangements (other than a cash or deferred arrangement which is part of
an employee stock ownership plan as defined in Code Section 4975(e)(7) or
409 for Plan Years beginning after December 31, 1988) of the Employer or
an Affiliated Employer, all such cash or deferred arrangements shall be
treated as one cash or deferred arrangement for the purpose of
determining the actual deferral ratio with respect to such Highly
Compensated Participant. However, for Plan Years beginning after December
31, 1988, if the cash or deferred arrangements have different plan years,
this paragraph shall be applied by treating all cash or deferred
arrangements ending with or within the same calendar year as a single
arrangement.
4.6 ADJUSTMENT TO ACTUAL DEFERRAL PERCENTAGE TESTS
In the event that the initial allocations of the Employer's Elective
Contributions made pursuant to Section 4.4 do not satisfy one of the tests set
forth in Section 4.5(a) for Plan Years beginning after December 31, 1986, the
Administrator shall adjust Excess Contributions pursuant to the options set
forth below:
(a) On or before the fifteenth day of the third month following
the end of each Plan Year, the Highly Compensated Participant having the
highest actual deferral ratio shall have his portion of Excess
Contributions distributed to him and/or at his election recharacterized
as a voluntary Employee contribution pursuant to Section 4.12 until one
of the tests set
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<PAGE> 49
forth in Section 4.5(a) is satisfied, or until his actual deferral ratio
equals the actual deferral ratio of the Highly Compensated Participant
having the second highest actual deferral ratio. This process shall
continue until one of the tests set forth in Section 4.5(a) is satisfied.
For each Highly Compensated Participant, the amount of Excess
Contributions is equal to the Elective Contributions on behalf of such
Highly Compensated Participant (determined prior to the application of
this paragraph) minus the amount determined by multiplying the Highly
Compensated Participant's actual deferral ratio (determined after
application of this paragraph) by his "414(s) Compensation". However, in
determining the amount of Excess Contributions to be distributed and/or
recharacterized with respect to an affected Highly Compensated
Participant as determined herein, such amount shall be reduced by any
Excess Deferred Compensation previously distributed to such affected
Highly Compensated Participant for his taxable year ending with or within
such Plan Year.
(1) With respect to the distribution of Excess Contributions
pursuant to (a) above, such distribution:
(i) may be postponed but not later than the close of the
Plan Year following the Plan Year to which they are
allocable;
(ii) shall be made simultaneously from Deferred
Compensation and matching contributions which relate to
such Deferred Compensation provided, however, that any such
matching contributions which are not Vested shall be
forfeited in lieu of distribution;
(iii) shall be adjusted for Income; and
(iv) shall be designated by the Employer as a distribution
of Excess Contributions (and Income).
(2) With respect to the recharacterization of Excess Contributions
pursuant to (a) above, such recharacterized amounts:
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<PAGE> 50
(i) shall be deemed to have occurred on the date on which
the last of those Highly Compensated Participants with
Excess Contributions to be recharacterized is notified of
the recharacterization and the tax consequences of such
recharacterization;
(ii) shall not exceed the amount of Deferred Compensation
on behalf of any Highly Compensated Participant for any
Plan Year;
(iii) shall be treated as voluntary Employee contributions
for purposes of Code Section 401(a) (4) and Regulation
1.401(k)-1(b). However, for purposes of Sections 2.2 and
4.4(g), recharacterized Excess Contributions continue to be
treated as Employer contributions that are Deferred
Compensation. For Plan Years beginning after December 31,
1988, Excess Contributions recharacterized as voluntary
Employee contributions shall continue to be nonforfeitable
and subject to the same distribution rules provided for in
Section 4.2(c);
(iv) are not permitted if the amount recharacterized plus
voluntary Employee contributions actually made by such
Highly Compensated Participant, exceed the maximum amount
of voluntary Employee contributions (determined prior to
application of Section 4.7(a)) that such Highly Compensated
Participant is permitted to make under the Plan in the
absence of recharacterization; and
(v) shall be adjusted for Income.
(3) Any distribution and/or recharacterization of less than the
entire amount of Excess Contributions shall be treated as a pro
rata distribution and/or recharacterization of Excess
Contributions and Income.
(4) The determination and correction of Excess Contributions of a
Highly Compensated Participant whose actual deferral ratio is
determined under
50
<PAGE> 51
the family aggregation rules shall be accomplished by reducing the
actual deferral ratio as required herein, and the Excess
Contributions for the family unit shall then be allocated among
the Family Members in proportion to the Elective Contributions of
each Family Member that were combined to determine the group
actual deferral ratio. Notwithstanding the foregoing, with respect
to Plan Years beginning prior to January 1, 1990, compliance with
the Regulations then in effect shall be deemed to be compliance
with this paragraph.
(b) Within twelve (12) months after the end of the Plan Year, the
Employer may make a special Qualified Non-Elective Contribution on behalf
of Non-Highly Compensated Participants in an amount sufficient to satisfy
one of the tests set forth in Section 4.5(a). Such contribution shall be
allocated to the Participant's Elective Account of each Non-Highly
Compensated Participant in the same proportion that each Non-Highly
Compensated Participant's Compensation for the year bears to the total
Compensation of all Non-Highly Compensated Participants.
(c) If during a Plan Year the projected aggregate amount of
Elective Contributions to be allocated to all Highly Compensated
Participants under this Plan would, by virtue of the tests set forth in
Section 4.5(a), cause the Plan to fail such tests, then the Administrator
may automatically reduce proportionately or in the order provided in
Section 4.6(a) each affected Highly Compensated Participant's deferral
election made pursuant to Section 4.2 by an amount necessary to satisfy
one of the tests set forth in Section 4.5(a).
4.7 ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) The "Actual Contribution Percentage" for Plan Years beginning
after December 31, 1986 for the Highly Compensated Participant group
shall not exceed the greater of:
(1) 125 percent of such percentage for the Non-Highly Compensated
Participant group; or
(2) the lesser of 200 percent of such percentage for the
Non-Highly Compensated Participant group,
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<PAGE> 52
or such percentage for the Non-Highly Compensated Participant
group plus 2 percentage points. However, for Plan Years beginning
after December 31, 1988, to prevent the multiple use of the
alternative method described in this paragraph and Code Section
401(m)(9)(A), any Highly Compensated Participant eligible to make
elective deferrals pursuant to Section 4.2 or any other cash or
deferred arrangement maintained by the Employer or an Affiliated
Employer and to make Employee contributions or to receive matching
contributions under this Plan or under any other plan maintained
by the Employer or an Affiliated Employer shall have his actual
contribution ratio reduced pursuant to Regulation 1.401(m)-2. The
provisions of Code Section 401(m) and Regulations 1.401(m)-l(b)
and l.401(m)-2 are incorporated herein by reference.
(b) For the purposes of this Section and Section 4.8, "Actual
Contribution Percentage" for a Plan Year means, with respect to the
Highly Compensated Participant group and Non-Highly Compensated
Participant group, the average of the ratios (calculated separately for
each Participant in each group) of:
(1) the sum of Employer matching contributions made pursuant to
Section 4.1(b), voluntary Employee contributions made pursuant to
Section 4.12 and Excess Contributions recharacterized as voluntary
Employee contributions pursuant to Section 4.6(a) on behalf of
each such Participant for such Plan Year; to
(2) the Participant's "414(s) Compensation" for such Plan Year.
(c) For purposes of determining the "Actual Contribution
Percentage" and the amount of Excess Aggregate Contributions pursuant to
Section 4.8(d), only Employer matching contributions (excluding Employer
matching contributions forfeited or distributed pursuant to Sections
4.2(f) and 4.6(a)(1) or forfeited pursuant to Section 4.8(a)) contributed
to the Plan prior to the end of the succeeding Plan Year shall be
considered. In addition, the Administrator may elect to take into
account, with respect to Employees eligible to have Employer matching
contributions
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<PAGE> 53
pursuant to Section 4.1(b) or voluntary Employee contributions pursuant
to Section 4.12 allocated to their accounts, elective deferrals (as
defined in Regulation 1.402(g)-1(b)) and qualified non-elective
contributions (as defined in Code Section 401(m)(4)(C)) contributed to
any plan maintained by the Employer. Such elective deferrals and
qualified non-elective contributions shall be treated as Employer
matching contributions subject to Regulation 1.401(m)-1(b)(5) which is
incorporated herein by reference. However, for Plan Years beginning after
December 31, 1988, the Plan Year must be the same as the plan year of the
plan to which the elective deferrals and the qualified non-elective.
contributions are made.
(d) For the purpose of determining the actual contribution ratio
of a Highly Compensated Employee who is subject to the Family Member
aggregation rules of Code Section 414(q)(6) because such Employee is
either a "five percent owner" of the Employer or one of the ten (10)
Highly Compensated Employees paid the greatest "415 Compensation" during
the year, the following shall apply:
(1) The combined actual contribution ratio for the family group
(which shall be treated as one Highly Compensated Participant)
shall be determined by aggregating Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee contributions
made pursuant to Section 4.12, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 4.6(a) and "414(s) Compensation" of all eligible Family
Members (including Highly Compensated Participants). However, in
applying the $200,000 limit to "414(s) Compensation" for Plan
Years beginning after December 31, 1988, Family Members shall
include only the affected Employee's spouse and any lineal
descendants who have not attained age 19 before the close of the
Plan Year. Notwithstanding the foregoing, with respect to Plan
Years beginning prior to January 1, 1990, compliance with the
Regulations then in effect shall be deemed to be compliance with
this paragraph.
(2) The Employer matching contributions made pursuant to Section
4.1(b), voluntary Employee
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<PAGE> 54
contributions made pursuant to Section 4.12, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to
Section 4.6(a) and "414(s) Compensation" of all Family Members
shall be disregarded for purposes of determining the "Actual
Contribution Percentage" of the Non-Highly Compensated Participant
group except to the extent taken into account in paragraph (1)
above.
(3) If a Participant is required to be aggregated as a member of
more than one family group in a plan, all Participants who are
members of those family groups that include the Participant are
aggregated as one family group in accordance with paragraphs (1)
and (2) above.
(e) For purposes of this Section and Code Sections 401(a)(4),
410(b) and 401(m), if two or more plans of the Employer to which matching
contributions, Employee contributions, or both, are made are treated as
one plan for purposes of Code Sections 401(a) (4) or 410(b) (other than
the average benefits test under Code Section 410(b) (2) (A) (ii) as in
effect for Plan Years beginning after December 31, 1988), such plans
shall be treated as one plan. In addition, two or more plans of the
Employer to which matching contributions, Employee contributions, or
both, are made may be considered as a single plan for purposes of
determining whether or not such plans satisfy Code Sections 401(a)(4),
410(b) and 401(m). In such a case, the aggregated plans must satisfy this
Section and Code Sections 401(a)(4), 410(b) and 401(m) as though such
aggregated plans were a single plan. Plans may be aggregated under this
paragraph (e) for Plan Years beginning after December 31, 1988, only if
they have the same plan year.
Notwithstanding the above, for Plan Years beginning after
December 31, 1988, an employee stock ownership plan described in Code
Section 4975(e)(7) or 409 may not be aggregated with this Plan for
purposes of determining whether the employee stock ownership plan or this
Plan satisfies this Section and Code Sections 401(a)(4), 410(b) and
401(m).
(f) If a Highly Compensated Participant is a Participant under two
or more plans (other than an employee stock ownership plan as defined in
Code Section 4975(e) (7) or 409 for Plan Years beginning
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<PAGE> 55
after December 31, 1988) which are maintained by the Employer or an
Affiliated Employer to which matching contributions, Employee
contributions, or both, are made, all such contributions on behalf of
such Highly Compensated Participant shall be aggregated for purposes of
determining such Highly Compensated Participant's actual contribution
ratio. However, for Plan Years beginning after December 31, 1988, if the
plans have different plan years, this paragraph shall be applied by
treating all plans ending with or within the same calendar year as a
single plan.
(g) For purposes of Sections 4.7(a) and 4.8, a Highly Compensated
Participant and Non-Highly Compensated Participant shall include any
Employee eligible to have Employer matching contributions pursuant to
Section 4.1(b) (whether or not a deferral election was made or suspended
pursuant to Section 4.2(e)) or voluntary Employee contributions pursuant
to Section 4.12 (whether or not voluntary Employee contributioris are
made) allocated to his account for the Plan Year.
4.8 ADJUSTMENT TO ACTUAL CONTRIBUTION PERCENTAGE TESTS
(a) In the event that, for Plan Years beginning after December 31,
1986, the "Actual Contribution Percentage" for the Highly Compensated
Participant group exceeds the "Actual Contribution Percentage" for the
Non-Highly Compensated Participant group pursuant to Section 4.7(a), the
Administrator (on or before the fifteenth day of the third month
following the end of the Plan Year, but in no event later than the close
of the following Plan Year) shall direct the Trustee to distribute to the
Highly Compensated Participant having the highest actual contribution
ratio, his Vested portion of Excess Aggregate Contributions (and Income
allocable to such contributions) and, if forfeitable, forfeit such
non-Vested Excess Aggregate Contributions attributable to Employer
matching contributions (and Income allocable to such forfeitures) until
either one of the tests set forth in Section 4.7(a) is satisfied, or
until his actual contribution ratio equals the actual contribution ratio
of the Highly Compensated Participant having the second highest actual
contribution ratio. This process shall continue until one of the tests
set forth in Section 4.7(a) is satisfied. The distribution and/or
forfeiture of Excess Aggregate Contributions shall be made in the
following order:
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<PAGE> 56
(1) Voluntary Employee contributions including Excess
Contributions recharacterized as voluntary Employee contributions
pursuant to Section 4.6(a) (2);
(2) Employer matching contributions.
If the correction of Excess Aggregate Contributions
attributable to Employer matching contributions is not in proportion to
the Vested and non-Vested portion of such contributions, then the Vested
portion of the Participant's Account attributable to Employer matching
contributions after the correction shall be subject to Section 6.5(g).
(b) Any distribution and/or forfeiture of less than the entire
amount of Excess Aggregate Contributions (and Income) shall be treated as
a pro rata distribution and/or forfeiture of Excess Aggregate
Contributions and Income. Distribution of Excess Aggregate Contributions
shall be designated by the Employer as a distribution of Excess Aggregate
Contributions (and Income). Forfeitures of Excess Aggregate Contributions
shall be treated in accordance with Section 4.4.
(c) Excess Aggregate Contributions attributable to amounts other
than voluntary Employee contributions, including forfeited matching
contributions, shall be treated as Employer contributions for purposes of
Code Sections 404 and 415 even if distributed from the Plan.
Forfeited matching contributions that are reallocated to
Participants' Accounts for the Plan Year in which the forfeiture occurs
shall be treated as an "annual addition" pursuant to Section 4.9(b) for
the Participants to whose Accounts they are reallocated and for the
Participants from whose Accounts they are forfeited.
(d) For each Highly Compensated Participant, the amount of Excess
Aggregate Contributions is equal to the Employer matching contributions
made pursuant to Section 4.1(b), voluntary Employee contributions made
pursuant to Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6(a) and any
qualified non-elective contributions or elective deferrals taken into
account pursuant to Section 4.7(c) on behalf of
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the Highly Compensated Participant (determined prior to the application
of this paragraph) minus the amount determined by multiplying the Highly
Compensated Participant' 5 actual contribution ratio (determined after
application of this paragraph) by his "414(s) Compensation". The actual
contribution ratio must be rounded to the nearest one-hundredth of one
percent for Plan Years beginning after December 31, 1988. In no case
shall the amount of Excess Aggregate Contribution with respect to any
Highly Compensated Participant exceed the amount of Employer matching
contributions made pursuant to Section 4.1(b), voluntary Employee
contributions made pursuant to Section 4.12, Excess Contributions
recharacterized as voluntary Employee contributions pursuant to Section
4.6(a) and any qualified non-elective contributions or elective deferrals
taken into account pursuant to Section 4.7(c) on behalf of such Highly
Compensated Participant for such Plan Year.
(e) The determination of the amount of Excess Aggregate
Contributions with respect to any Plan Year shall be made after first
determining the Excess Contributions, if any, to be treated as voluntary
Employee contributions due to recharacterization for the plan year of any
other qualified cash or deferred arrangement (as defined in Code Section
401(k)) maintained by the Employer that ends with or within the Plan Year
or which are treated as voluntary Employee contributions due to
recharacterization pursuant to Section 4.6(a).
(f) If the determination and correction of Excess Aggregate
Contributions of a Highly Compensated Participant whose actual
contribution ratio is determined under the family aggregation rules, then
the actual contribution ratio shall be reduced and the Excess Aggregate
Contributions for the family unit shall be allocated among the Family
Members in proportion to the sum of Employer matching contributions made
pursuant to Section 4.1(b), voluntary Employee contributions made
pursuant to Section 4.12, Excess Contributions recharacterized as
voluntary Employee contributions pursuant to Section 4.6(a) and any
qualified non-elective contributions or elective deferrals taken into
account pursuant to Section 4.7(c) of each Family Member that were
combined to determine the group actual contribution ratio.
Notwithstanding the foregoing, with respect to Plan Years beginning prior
to January 1, 1990, compliance
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with the Regulations then in effect shall be deemed to be compliance with
this paragraph.
(g) If during a Plan Year the projected aggregate amount of
Employer matching contributions, voluntary Employee contributions and
Excess Contributions recharacterized as voluntary Employee contributions
to be allocated to all Highly Compensated Participants under this Plan
would, by virtue of the tests set forth in Section 4.7(a), cause the Plan
to fail such tests, then the Administrator may automatically reduce
proportionately or in the order provided in Section 4.8(a) each affected
Highly Compensated Participant's projected share of such contributions by
an amount necessary to satisfy one of the tests set forth in Section
4.7(a).
(h) Notwithstanding the above, within twelve (12) months after the
end of the Plan Year, the Employer may make a special Qualified
Non-Elective Contribution on behalf of Non-Highly Compensated
Participants in an amount sufficient to satisfy one of the tests set
forth in Section 4.7(a). Such contribution shall be allocated to the
Participant's Elective Account of each Non-Highly Compensated Participant
in the same proportion that each Non-Highly Compensated Participant's
Compensation for the year bears to the total Compensation of all
Non-Highly Compensated Participants. A separate accounting shall be
maintained for the purpose of excluding such contributions from the
"Actual Deferral Percentage" tests pursuant to Section 4.5(a).
4.9 MAXIMUM ANNUAL ADDITIONS
(a) Notwithstanding the foregoing, the maximum "annual additions"
credited to a Participant's accounts for any "limitation year" shall
equal the lesser of: (1) $30,000 (or, if greater, one-fourth of the
dollar limitation in effect under Code Section 415(b)(1)(A)) or (2)
twenty-five percent (25%) of the Participant's "415 Compensation" for
such "limitation year". For any short "limitation year", the dollar
limitation in (1) above shall be reduced by a fraction, the numerator of
which is the number of full months in the short "limitation year" and the
denominator of which is twelve (12).
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(b) For purposes of applying the limitations of Code Section 415,
"annual additions" means the sum credited to a Participant's accounts for
any "limitation year" of (1) Employer contributions, (2) Employee
contributions for "limitation years" beginning after December 31, 1986,
(3) forfeitures, (4) amounts allocated, after March 31, 1984, to an
individual medical account, as defined in Code Section 415(l)(2) which is
part of a pension or annuity plan maintained by the Employer and (5)
amounts derived from contributions paid or accrued after December 31,
1985, in taxable years ending after such date, which are attributable to
post-retirement medical benefits allocated to the separate account of a
key employee (as defined in Code Section 419A(d)(3)) under a welfare
benefit plan (as defined in Code Section 419(e)) maintained by the
Employer. Except, however, the "415 Compensation" percentage limitation
referred to in paragraph (a) (2) above shall not apply to: (1) any
contribution for medical benefits (within the meaning of Code Section
419A(f)(2)) after separation from service which is otherwise treated as
an "annual addition", or (2) any amount otherwise treated as an "annual
addition" under Code Section 415(1)(1).
(c) For purposes of applying the limitations of Code Section 415,
the transfer of funds from one qualified plan to another is not an
"annual addition". In addition, the following are not Employee
contributions for the purposes of Section 4.9(b)(2): (1) rollover
contributions (as defined in Code Sections 402(a)(5), 403(a)(4),
403(b)(8) and 408(d)(3)); (2) repayments of loans made to a Participant
from the Plan; (3) repayments of distributions received by an Employee
pursuant to Code Section 411(a) (7) (B) (cash-outs); (4) repayments of
distributions received by an Employee pursuant to Code Section 411(a) (3)
(D) (mandatory contributions); and (5) Employee contributions to a
simplified employee pension excludable from gross income under Code
Section 408(k) (6).
(d) For purposes of applying the limitations of Code Section 415,
the "limitation year" shall be the Plan Year.
(e) The dollar limitation under Code Section 415(b) (1) (A) stated
in paragraph (a) (1) above shall be adjusted annually as provided in Code
Section 415(d)
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pursuant to the Regulations. The adjusted limitation is effective as of
January 1st of each calendar year and is applicable to "limitation years"
ending with or within that calendar year.
(f) For the purpose of this Section, all qualified defined benefit
plans (whether terminated or not) ever maintained by the Employer shall
be treated as one defined benefit plan, and all qualified defined
contribution plans (whether terminated or not) ever maintained by the
Employer shall be treated as one defined contribution plan.
(g) For the purpose of this Section, if the Employer is a member
of a controlled group of corporations, trades or businesses under common
control (as defined by Code Section 1563(a) or Code Section 414(b) and
(c) as modified by Code Section 415(h)), is a member of an affiliated
service group (as defined by Code Section 414(m)), or is a member of a
group of entities required to be aggregated pursuant to Regulations under
Code Section 414 (0), all Employees of such Employers shall be considered
to be employed by a single Employer.
(h) For the purpose of this Section, if this Plan is a Code
Section 413(c) plan, all Employers of a Participant who maintain this
Plan will be considered to be a single Employer.
(i) (1) If a Participant participates in more than one defined
contribution plan maintained by the Employer which have different
Anniversary Dates, the maximum "annual additions" under this Plan shall
equal the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited to such Participant's accounts
during the "limitation year".
(2) If a Participant participates in both a defined contribution
plan subject to Code Section 412 and a defined contribution plan
not subject to Code Section 412 maintained by the Employer which
have the same Anniversary Date, "annual additions" will be
credited to the Participant's accounts under the defined
contribution plan subject to Code Section 412 prior to crediting
"annual additions" to the Participant's accounts under the defined
contribution plan not subject to Code Section 412.
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(3) If a Participant participates in more than one defined
contribution plan not subject to Code Section 412 maintained by
the Employer which have the same Anniversary Date, the maximum
"annual additions" under this Plan shall equal the product of (A)
the maximum "annual additions" for the "limitation year" minus any
"annual additions" previously credited under subparagraphs (1) or
(2) above, multiplied by (B) a fraction (i) the numerator of which
is the "annual additions" which would be credited to such
Participant's accounts under this Plan without regard to the
limitations of Code Section 415 and (ii) the denominator of which
is such "annual additions" for all plans described in this
subparagraph.
(j) If an Employee is (or has been) a Participant in one or more
defined benefit plans and one or more defined contribution plans
maintained by the Employer, the sum of the defined benefit plan fraction
and the defined contribution plan fraction for any "limitation year" may
not exceed 1.0.
(k) The defined benefit plan fraction for any "limitation year" is
a fraction, the numerator of which is the sum of the Participant's
projected annual benefits under all the defined benefit plans (whether or
not terminated) maintained by the Employer, and the denominator of which
is the lesser of 125 percent of the dollar limitation determined for the
"limitation year" under Code Sections 415(b) and (d) or 140 percent of
the highest average compensation, including any adjustments under Code
Section 415(b).
Notwithstanding the above, if the Participant was a
Participant as of the first day of the first "limitation year" beginning
after December 31, 1986, in one or more defined benefit plans maintained
by the Employer which were in existence on May 6, 1986, the denominator
of this fraction will not be less than 125 percent of the sum of the
annual benefits under such plans which the Participant had accrued as of
the close of the last "limitation year" beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the plan after
May 5, 1986. The preceding sentence applies only if the defined benefit
plans individually and in the aggregate satisfied the requirements of
Code Section 415 for all "limitation years" beginning before January 1,
1987.
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(1) The defined contribution plan fraction for any "limitation
year" is a fraction, the numerator of which is the sum of the annual
additions to the Participant's Account under all the defined contribution
plans (whether or not terminated) maintained by the Employer for the
current and all prior "limitation years" (including the annual additions
attributable to the Participant's nondeductible Employee contributions to
all defined benefit plans, whether or not terminated, maintained by the
Employer, and the annual additions attributable to all welfare benefit
funds, as defined in Code Section 419(e), and individual medical
accounts, as defined in Code Section 415(l)(2), maintained by the
Employer), and the denominator of which is the sum of the maximum
aggregate amounts for the current and all prior "limitation years" of
service with the Employer (regardless of whether a defined contribution
plan was maintained by the Employer). The maximum aggregate amount in any
"limitation year" is the lesser of 125 percent of the dollar limitation
determined under Code Sections 415(b) and (d) in effect under Code
Section 415(c) (1) (A) or 35 percent of the Participant's Compensation
for such year.
If the Employee was a Participant as of the end of the first
day of the first "limitation year" beginning after December 31, 1986, in
one or more defined contribution plans maintained by the Employer which
were in existence on May 6, 1986, the numerator of this fraction will be
adjusted if the sum of this fraction and the defined benefit fraction
would otherwise exceed 1.0 under the terms of this Plan. Under the
adjustment, an amount equal to the product of (1) the excess of the sum
of the fractions over 1.0 times (2) the denominator of this fraction,
will be permanently subtracted from the numerator of this fraction. The
adjustment is calculated using the fractions as they would be computed as
of the end of the last "limitation year" beginning before January 1,
1987, and disregarding any changes in the terms and conditions of the
Plan made after May 5, 1986, but using the Code Section 415 limitation
applicable to the first "limitation year" beginning on or after January
1, 1987. The annual addition for any "limitation year" beginning before
January 1, 1987 shall not be recomputed to treat all Employee
contributions as annual additions.
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(m) Notwithstanding the foregoing, for any "limitation year" in
which the Plan is a Top Heavy Plan, 100 percent shall be substituted for
125 percent in Sections 4.9(k) and 4.9(1) unless the extra minimum
allocation is being provided pursuant to Section 4.4. However, for any
"limitation year" in which the Plan is a Super Top Heavy Plan, 100
percent shall be substituted for 125 percent in any event.
(n) Notwithstanding anything contained in this Section to the
contrary, the limitations, adjustments and other requirements prescribed
in this Section shall at all times comply with the provisions of Code
Section 415 and the Regulations thereunder, the terms of which are
specifically incorporated herein by reference.
4.10 ADJUSTMENT FOR EXCESSIVE ANNUAL ADDITIONS
(a) If, as a result of the allocation of Forfeitures, a reasonable
error in estimating a Participant's Compensation, a reasonable error in
determining the amount of elective deferrals (within the meaning of Code
Section 402(g)(3)) that may be made with respect to any Participant under
the limits of Section 4.9 or other facts and circumstances to which
Regulation 1.415-6(b) (6) shall be applicable, the "annual additions"
under this Plan would cause the maximum "annual additions" to be exceeded
for any Participant, the Administrator shall (1) distribute any elective
deferrals (within the meaning of Code Section 402(g)(3)) or return any
voluntary Employee contributions credited for the "limitation year" to
the extent that the return would reduce the "excess amount" in the
Participant's accounts (2) hold any "excess amount" remaining after the
return of any elective deferrals or voluntary Employee contributions in a
"Section 415 suspense account" (3) use the "Section 415 suspense account"
in the next "limitation year" (and succeeding "limitation years" if
necessary) to reduce Employer contributions for that Participant if that
Participant is covered by the Plan as of the end of the "limitation
year", or if the Participant is not so covered, allocate and reallocate
the "Section 415 suspense account" in the next "limitation year" (and
succeeding "limitation years" if necessary) to all Participants in the
Plan before any Employer or Employee contributions which would constitute
"annual additions" are made to the Plan for such "limitation year" (4)
reduce Employer contributions to the Plan for
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such "limitation year" by the amount of the "Section 415 suspense
account" allocated and reallocated during such "limitation year".
(b) For purposes of this Article, "excess amount" for any
Participant for a "limitation year" shall mean the excess, if any, of (1)
the "annual additions" which would be credited to his account under the
terms of the Plan without regard to the limitations of Code Section 415
over (2) the maximum "annual additions" determined pursuant to Section
4.9.
(c) For purposes of this Section, "Section 415 suspense account"
shall mean an unallocated account equal to the sum of "excess amounts"
for all Participants in the Plan during the "limitation year". The
"Section 415 suspense account" shall not share in any earnings or losses
of the Trust Fund.
4.11 TRANSFERS FROM QUALIFIED PLANS
(a) With the consent of the Administrator, amounts may be
transferred from other qualified plans by Employees, provided that the
trust from which such funds are transferred permits the transfer to be
made and the transfer will not jeopardize the tax exempt status of the
Plan or Trust or create adverse tax consequences for the Employer. The
amounts transferred shall be set up in a separate account herein referred
to as a "Participant's Rollover Account". Such account shall be fully
Vested at all times and shall not be subject to Forfeiture for any
reason.
(b) Amounts in a Participant's Rollover Account shall be held by
the Trustee pursuant to the provisions of this Plan and may not be
withdrawn by, or distributed to the Participant, in whole or in part,
except as provided in paragraphs (c) and (d) of this Section.
(c) Except as permitted by Regulations (including Regulation
1.411(d)-4), amounts attributable to elective contributions (as defined
in Regulation 1.401(k)-1(g)(3)), including amounts treated as elective
contributions, which are transferred from another qualified plan in a
plan-to-plan transfer shall be subject to the distribution limitations
provided for in Regulation 1.401(k)-1(d).
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(d) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits, the
fair market value of the Participant's Rollover Account shall be used to
provide additional benefits to the Participant or his Beneficiary. Any
distributions of amounts held in a Participant's Rollover Account shall
be made in a manner which is consistent with and satisfies the provisions
of Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder. Furthermore, such amounts shall be considered as part of a
Participant's benefit in determining whether an involuntary cash-out of
benefits without Participant consent may be made.
(e) The Administrator may direct that employee transfers made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the Trustee
until such time as the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested as part of the
general Trust Fund, to be determined by the Administrator.
(f) All amounts allocated to a Participant's Rollover Account may
be treated as a Directed Investment Account pursuant to Section 4.13.
(g) For purposes of this Section, the term "qualified plan" shall
mean any tax qualified plan under Code Section 401(a). The term "amounts
transferred from other qualified plans" shall mean: (i) amounts
transferred to this Plan directly from another qualified plan; (ii)
lump-sum distributions received by an Employee from another qualified
plan which are eligible for tax free rollover to a qualified plan and
which are transferred by the Employee to this Plan within sixty (60) days
following his receipt thereof; (iii) amounts transferred to this Plan
from a conduit individual retirement account provided that the conduit
individual retirement account has no assets other than assets which (A)
were previously distributed to the Employee by another qualified plan as
a lump-sum distribution (B) were eligible for tax-free rollover to a
qualified plan and (C) were deposited in such conduit
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individual retirement account within sixty (60) days of receipt thereof
and other than earnings on said assets; and (iv) amounts distributed to
the Employee from a conduit individual retirement account meeting the
requirements of clause (iii) above, and transferred by the Employee to
this Plan within sixty (60) days of his receipt thereof from such conduit
individual retirement account.
(h) Prior to accepting any transfers to which this Section
applies, the Administrator may require the Employee to establish that the
amounts to be transferred to this Plan meet the requirements of this
Section and may also require the Employee to provide an opinion of
counsel satisfactory to the Employer that the amounts to be transferred
meet the requirements of this Section.
(i) Notwithstanding anything herein to the contrary, a transfer
directly to this Plan from another qualified plan (or a transaction
having the effect of such a transfer) shall only be permitted if it will
not result in the elimination or reduction of any "Section 411(d) (6)
protected benefit" as described in Section 8.1.
4.12 VOLUNTARY CONTRIBUTIONS
(a) In order to allow Participants the opportunity to increase
their retirement income, each Participant may, at the discretion of the
Administrator, elect to voluntarily contribute a portion of his
compensation earned while a Participant under this Plan. Such
contributions shall be made via payroll deduction. Such contributions
shall be paid to the Trustee within a reasonable period of time but in no
event later than ninety (90) days after the receipt of the contribution.
The balance in each Participant's Voluntary Contribution Account shall be
fully Vested at all times and shall not be subject to Forfeiture for any
reason.
(b) A Participant may elect to withdraw his voluntary
contributions from his voluntary Contribution Account and the actual
earnings thereon in a manner which is consistent with and satisfies the
provisions of Section 6.5, including, but not limited to, all notice and
consent requirements of Code Sections 417 and 411(a) (11) and the
Regulations thereunder. If the
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Administrator maintains sub-accounts with respect to voluntary
contributions (and earnings thereon) which were made on or before a
specified date, a Participant shall be permitted to designate which
sub-account shall be the source for his withdrawal.
In the event a Participant has received a hardship distribution
from his Participant's Elective Account pursuant to Section 6.11 or
pursuant to Regulation 1.401(k)-1(d)(2)(iv)(B) from any other plan
maintained by the Employer, then such Participant shall be barred from
making any voluntary contributions to the Trust Fund for a period of
twelve (12) months after receipt of the distribution.
(c) At Normal Retirement Date, or such other date when the
Participant or his Beneficiary shall be entitled to receive benefits, the
fair market value of the Voluntary Contribution Account shall be used to
provide additional benefits to the Participant or his Beneficiary.
(d) The Administrator may direct that voluntary contributions made
after a valuation date be segregated into a separate account for each
Participant in a federally insured savings account, certificate of
deposit in a bank or savings and loan association, money market
certificate, or other short term debt security acceptable to the Trustee
until such time as the allocations pursuant to this Plan have been made,
at which time they may remain segregated or be invested as part of the
general Trust Fund, to be determined by the Administrator.
(e) All amounts allocated to a Voluntary Contribution Account may
be treated as a Directed Investment Account pursuant to Section 4.13.
4.13 DIRECTED INVESTMENT ACCOUNT
(a) The Administrator, in his sole discretion, may determine that
all Participants be permitted to direct the Trustee as to the investment
of all or a portion of the interest in any one or more of their
individual account balances. If such authorization is given, Participants
may, subject to a procedure established by the Administrator and applied
in a uniform nondiscriminatory manner, direct the Trustee in writing to
invest any portion of their account in
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specific assets, specific funds or other investments permitted under the
Plan and the directed investment procedure. That portion of the account
of any Participant so directing will thereupon be considered a Directed
Investment Account, which shall not share in Trust Fund earnings.
(b) A separate Directed Investment Account shall be established
for each Participant who has directed an investment. Transfers between
the Participant's regular account and his Directed Investment Account
shall be charged and credited as the case may be to each account. The
Directed Investment Account shall not share in Trust Fund earnings, but
it shall be charged or credited as appropriate with the net earnings,
gains, losses and expenses as well as any appreciation or depreciation in
market value during each Plan Year attributable to such account.
ARTICLE V
VALUATIONS
5.1 VALUATION OF THE TRUST FUND
The Administrator shall direct the Trustee, as of each Anniversary Date,
and at such other date or dates deemed necessary by the Administrator, herein
called "valuation date", to determine the net worth of the assets comprising the
Trust Fund as it exists on the "valuation date." In determining such net worth,
the Trustee shall value the assets comprising the Trust Fund at their fair
market value as of the "valuation date" and shall deduct all expenses for which
the Trustee has not yet obtained reimbursement from the Employer or the Trust
Fund.
5.2 METHOD OF VALUATION
In determining the fair market value of securities held in the Trust Fund
which are listed on a registered stock exchange, the Administrator shall direct
the Trustee to value the same at the prices they were last traded on such
exchange preceding the close of business on the "valuation date". If such
securities were not traded on the "valuation date", or if the exchange on which
they are traded was not open for business on the "valuation date", then the
securities shall be valued at the prices at which they were last traded prior to
the "valuation date". Any unlisted security held in the Trust Fund shall be
valued at its bid price next preceding the close of business on the "valuation
date", which bid price shall be obtained from a registered broker or an
investment banker. In determining the
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fair market value of assets other than securities for which trading or bid
prices can be obtained, the Trustee may appraise such assets itself, or in its
discretion, employ one or more appraisers for that purpose and rely on the
values established by such appraiser or appraisers.
ARTICLE VI
DETERMINATION AND DISTRIBUTION OF BENEFITS
6.1 DETERMINATION OF BENEFITS UPON RETIREMENT
Every Participant may terminate his employment with the Employer and
retire for the purposes hereof on his Normal Retirement Date or Early Retirement
Date. However, a Participant may postpone the termination of his employment with
the Employer to a later date, in which event the participation of such
Participant in the Plan, including the right to receive allocations pursuant to
Section 4.4, shall continue until his Late Retirement Date. Upon a Participant's
Retirement Date or attainment of his Normal Retirement Date without termination
of employment with the Employer, or as soon thereafter as is practicable, the
Trustee shall distribute all amounts credited to such Participant's Combined
Account in accordance with Section 6.5.
6.2 DETERMINATION OF BENEFITS UPON DEATH
(a) Upon the death of a Participant before his Retirement Date or
other termination of his employment, all amounts credited to such
Participant's Combined Account shall become fully Vested. The
Administrator shall direct the Trustee, in accordance with the provisions
of Sections 6.6 and 6.7, to distribute the value of the deceased
Participant's accounts to the Participant's Beneficiary.
(b) Upon the death of a Former Participant, the Administrator
shall direct the Trustee, in accordance with the provisions of Sections
6.6 and 6.7, to distribute any remaining Vested amounts credited to the
accounts of a deceased Former Participant to such Former Participant's
Beneficiary.
(c) Any security interest held by the Plan by reason of an
outstanding loan to the Participant or Former Participant shall be taken
into account in determining the amount of the Pre-Retirement Survivor
Annuity.
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(d) The Administrator may require such proper proof of death and
such evidence of the right of any person to receive payment of the value
of the account of a deceased Participant or Former Participant as the
Administrator may deem desirable. The Administrator's determination of
death and of the right of any person to receive payment shall be
conclusive.
(e) Unless otherwise elected in the manner prescribed in Section
6.6, the Beneficiary of the death benefit shall be the Participant's
spouse, who shall receive such benefit in the form of a Pre-Retirement
Survivor Annuity pursuant to Section 6.6. Except, however, the
Participant may designate a Beneficiary other than his spouse if:
(1) the Participant and his spouse have validly waived the
Pre-Retirement Survivor Annuity in the manner prescribed in
Section 6.6, and the spouse has waived his or her right to be the
Participant's Beneficiary, or
(2) the Participant is legally separated or has been abandoned
(within the meaning of local law) and the Participant has a court
order to such effect (and there is no "qualified domestic
relations order" as defined in Code Section 414 (p) which provides
otherwise), or
(3) the Participant has no spouse, or
(4) the spouse cannot be located.
In such event, the designation of a Beneficiary shall be made
on a form satisfactory to the Administrator. A Participant may at any
time revoke his designation of a Beneficiary or change his Beneficiary by
filing written notice of such revocation or change with the
Administrator. However, the Participant's spouse must again consent in
writing to any change in Beneficiary unless the original consent
acknowledged that the spouse had the right to limit consent only to a
specific Beneficiary and that the spouse voluntarily elected to
relinquish such right. In the event no valid designation of Beneficiary
exists at the time of the Participant's death, the death benefit shall be
payable to his estate.
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6.3 DETERMINATION OF BENEFITS IN EVENT OF DISABILITY
In the event of a Participant's Total and Permanent Disability prior to
his Retirement Date or other termination of his employment, all amounts credited
to such Participant's Combined Account shall become fully Vested. In the event
of a Participant's Total and Permanent Disability, the Trustee, in accordance
with the provisions of Sections 6.5 and 6.7, shall distribute to such
Participant all amounts credited to such Participant's Combined Account as
though he had retired.
6.4 DETERMINATION OF BENEFITS UPON TERMINATION
(a) On or before the Anniversary Date coinciding with or
subsequent to the termination of a Participant's employment for any
reason other than death, Total and Permanent Disability or retirement,
the Administrator may direct the Trustee to segregate the amount of the
Vested portion of such Terminated Participant's Combined Account and
invest the aggregate amount thereof in a separate, federally insured
savings account, certificate of deposit, common or collective trust fund
of a bank or a deferred annuity. In the event the Vested portion of a
Participant's Combined Account is not segregated, the amount shall remain
in a separate account for the Terminated Participant and share in
allocations pursuant to Section 4.4 until such time as a distribution is
made to the Terminated Participant.
Distribution of the funds due to a Terminated Participant
shall be made on the occurrence of an event which would result in the
distribution had the Terminated Participant remained in the employ of the
Employer (upon the Participant's death, Total and Permanent Disability,
Early or Normal Retirement). However, at the election of the Participant,
the Administrator shall direct the Trustee to cause the entire Vested
portion of the Terminated Participant's Combined Account to be payable to
such Terminated Participant, as soon as administratively feasible. Any
distribution under this paragraph shall be made in a manner which is
consistent with and satisfies the provisions of Section 6.5, including,
but not limited to, all notice and consent requirements of Code Sections
417 and 411(a) (11) and the Regulations thereunder.
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<PAGE> 72
If the value of a Terminated Participant's Vested benefit
derived from Employer and Employee contributions does not exceed $3,500
and has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the Trustee to cause the entire Vested benefit
to be paid to such Participant in a single lump sum.
For purposes of this Section 6.4, if the value of a Terminated
Participant's Vested benefit is zero, the Terminated Participant shall be
deemed to have received a distribution of such Vested benefit.
(b) The Vested portion of any Participant's Account shall be a
percentage of the total amount credited to his Participant's Account
determined on the basis of the Participant's number of Years of Service
according to the following schedule:
Vesting Schedule
<TABLE>
<CAPTION>
Years of Service Percentage
<S> <C>
0-2 0%
3 60%
4 80%
5 100%
</TABLE>
For vesting purposes only, a Participant shall receive credit for the
number of years of service equal to the number of whole years of the
Participant's period of service from their date of hire. For purposes of the
foregoing, a Participant's nonconsecutive periods of service must be aggregated,
and any periods of service less than a whole year (whether of not aggregated)
must be aggregated on a basis such that 12 months of service (30 days are deemed
to equal a month) equals a whole year of service.
Furthermore, for vesting purposes only, if any employee severs from
service by reason of termination, discharge or retirement, and the employee then
performs an hour of service within twelve (12) months after the employee's
severance from service date, the employee shall not be deemed to have had a
break in service; provided however, that if the employee severs from service by
reason of termination, discharge or retirement during an absence from service of
twelve (12) months or less for any reason other than termination, discharge,
retirement of death, and then performs an hour of service within twelve (12)
months after the date on which the employee was first absent from service, the
employee shall not be deemed to have had a break in
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<PAGE> 73
service.
(c) Notwithstanding the vesting provided for in paragraph (b)
above, for any Top Heavy Plan Year, the Vested portion of the
Participant's Account of any Participant who has an Hour of Service after
the Plan becomes top heavy shall be a percentage of the total amount
credited to his Participant's Account determined on the basis of the
Participant's number of Years of Service according to the following
schedule:
Vesting Schedule
<TABLE>
<CAPTION>
Years of Service Percentage
<S> <C>
Less than 2 0%
2 20%
3 40%
4 60%
5 80%
6 100%
</TABLE>
If in any subsequent Plan Year, the Plan ceases to be a Top
Heavy Plan, the Administrator shall revert to the vesting schedule in
effect before this Plan became a Top Heavy Plan. Any such reversion shall
be treated as a Plan amendment pursuant to the terms of the Plan.
(d) Notwithstanding the vesting schedule above, the Vested
percentage of a Participant's Account shall not be less than the Vested
percentage attained as of the later of the effective date or adoption
date of this amendment and restatement.
(e) Notwithstanding the vesting schedule above, upon the complete
discontinuance of the Employer's contributions to the Plan or upon any
full or partial termination of the Plan, all amounts credited to the
account of any affected Participant shall become 100% Vested and shall
not thereafter be subject to Forfeiture.
(f) The computation of a Participant's nonforfeitable percentage
of his interest in the Plan shall not be reduced as the result of any
direct or indirect amendment to this Plan. For this purpose, the Plan
shall be treated as having been amended if the Plan provides for an
automatic change in vesting due to a change in top heavy status. In the
event that the
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<PAGE> 74
Plan is amended to change or modify any vesting schedule, a Participant
with at least three (3) Years of Service as of the expiration date of the
election period may elect to have his nonforfeitable percentage computed
under the Plan without regard to such amendment. If a Participant fails
to make such election, then such Participant shall be subject to the new
vesting schedule. The Participant's election period shall commence on the
adoption date of the amendment and shall end 60 days after the latest of:
(1) the adoption date of the amendment,
(2) the effective date of the amendment, or
(3) the date the Participant receives written notice of the
amendment from the Employer or Administrator.
(g) (1) If any Former Participant shall be reemployed by the
Employer before a 1-Year Break in Service occurs, he shall continue to
participate in the Plan in the same manner as if such termination had not
occurred.
(2) If any Former Participant shall be reemployed by the Employer
before five (5) consecutive 1-Year Breaks in Service, and such
Former Participant had received, or was deemed to have received, a
distribution of his entire Vested interest prior to his
reemployment, his forfeited account shall be reinstated only if he
repays the full amount distributed to him before the earlier of
five (5) years after the first date on which the Participant is
subsequently reemployed by the Employer or the close of the first
period of five (5) consecutive 1-Year Breaks in Service commencing
after the distribution, or in the event of a deemed distribution,
upon the reemployment of such Former Participant. In the event the
Former Participant does repay the full amount distributed to him,
or in the event of a deemed distribution, the undistributed
portion of the Participant's Account must be restored in full,
unadjusted by any gains or losses occurring subsequent to the
Anniversary Date or other valuation date coinciding with or
preceding his termination. The source for such reinstatement
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<PAGE> 75
shall first be any Forfeitures occurring during the year. If such
source is insufficient, then the Employer shall contribute an
amount which is sufficient to restore any such forfeited Accounts
provided, however, that if a discretionary contribution is made
for such year pursuant to Section 4.1(c), such contribution shall
first be applied to restore any such Accounts and the remainder
shall be allocated in accordance with Section 4.4.
(3) If any Former Participant is reemployed after a
1-Year Break in Service has occurred, Years of Service shall
include Years of Service prior to his 1-Year Break in
Service subject to the following rules:
(i) If a Former Participant has a 1-Year Break in
Service, his pre-break and post-break service shall be used
for computing Years of Service for eligibility and for
vesting purposes only after he has been employed for one (1)
Year of Service following the date of his reemployment with
the Employer;
(ii) Any Former Participant who under the Plan does not have
a nonforfeitable right to any interest in the Plan
resulting from Employer contributions shall lose credits
otherwise allowable under (i) above if his consecutive
1-Year Breaks in Service equal or exceed the greater of (A)
five (5) or (B) the aggregate number of his pre-break Years
of Service;
(iii) After five (5) consecutive 1-Year Breaks in
Service, a Former Participant's Vested Account balance
attributable to pre-break service shall not be increased as
a result of post-break service;
(iv) If a Former Participant who has not had his Years
of Service before a 1-Year Break in Service disregarded
pursuant to (ii) above completes one (1) Year of Service for
eligibility purposes following his reemployment with the
Employer, he shall participate in the Plan retroactively
from his date of reemployment;
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<PAGE> 76
(v) If a Former Participant who has not had his Years of Service
before a 1-Year Break in Service disregarded pursuant to (ii)
above completes a Year of Service (a 1-Year Break in Service
previously occurred, but employment had not terminated), he shall
participate in the Plan retroactively from the first day of the
Plan Year during which he completes one (1) Year of Service.
6.5 DISTRIBUTION OF BENEFITS
(a) (1) Unless otherwise elected as provided below, a Participant
who is married on the "annuity starting date" and who does not die before
the "annuity starting date" shall receive the value of all of his
benefits in the form of a joint and survivor annuity. The joint and
survivor annuity is an annuity that commences immediately and shall be
equal in value to a single life annuity. Such joint and survivor benefits
following the Participant's death shall continue to the spouse during the
spouse's lifetime at a rate equal to 50% of the rate at which such
benefits were payable to the Participant. This joint and 50% survivor
annuity shall be considered the designated qualified joint and survivor
annuity and automatic form of payment for the purposes of this Plan.
However, the Participant may elect to receive a smaller annuity benefit
with continuation of payments to the spouse at a rate of seventy-five
percent (75%) or one hundred percent (100%) of the rate payable to a
Participant during his lifetime, which alternative joint and survivor
annuity shall be equal in value to the automatic joint and 50% survivor
annuity. An unmarried Participant shall receive the value of his benefit
in the form of a life annuity. Such unmarried Participant, however, may
elect in writing to waive the life annuity. The election must comply with
the provisions of this Section as if it were an election to waive the
joint and survivor annuity by a married Participant, but without the
spousal consent requirement. The Participant may elect to have any
annuity provided for in this Section distributed upon the attainment of
the "earliest retirement age" under the Plan. The "earliest retirement
age" is the earliest date on which, under the Plan, the Participant could
elect to receive retirement benefits.
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<PAGE> 77
(2) Any election to waive the joint and survivor annuity must be
made by the Participant in writing during the election period and
be consented to by the Participant's spouse. If the spouse is
legally incompetent to give consent, the spouse's legal guardian,
even if such guardian is the Participant, may give consent. Such
election shall designate a Beneficiary (or a form of benefits)
that may not be changed without spousal consent (unless the
consent of the spouse expressly permits designations by the
Participant without the requirement of further consent by the
spouse). Such spouse's consent shall be irrevocable and must
acknowledge the effect of such election and be witnessed by a Plan
representative or a notary public. Such consent shall not be
required if it is established to the satisfaction of the
Administrator that the required consent cannot be obtained because
there is no spouse, the spouse cannot be located, or other
circumstances that may be prescribed by Regulations. The election
made by the Participant and consented to by his spouse may be
revoked by the Participant in writing without the consent of the
spouse at any time during the election period. The number of
revocations shall not be limited. Any new election must comply
with the requirements of this paragraph. A former spouse's waiver
shall not be binding on a new spouse.
(3) The election period to waive the joint and survivor annuity
shall be the 90 day period ending on the "annuity starting date."
(4) For purposes of this Section, the "annuity starting date"
means the first day of the first period for which an amount is
paid as an annuity, or, in the case of a benefit not payable in
the form of an annuity, the first day on which all events have
occurred which entitle the Participant to such benefit.
(5) With regard to the election, the Administrator shall provide
to the Participant no less than 30 days and no more than 90 days
before the "annuity starting date" a written explanation of:
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<PAGE> 78
(i) the terms and conditions of the joint and survivor
annuity, and
(ii) the Participant's right to make, and the effect of, an
election to waive the joint and survivor annuity, and
(iii) the right of the Participant's spouse to consent to
any election to waive the joint and survivor annuity, and
(iv) the right of the Participant to revoke such election,
and the effect of such revocation.
(b) In the event a married Participant duly elects pursuant to
paragraph (a) (2) above not to receive his benefit in the form of a joint
and survivor annuity, or if such Participant is not married, in the form
of a life annuity, the Administrator, pursuant to the election of the
Participant, shall direct the Trustee to distribute to a Participant or
his Beneficiary any amount to which he is entitled under the Plan in one
lump-sum payment in cash.
(c) The present value of a Participant's joint and survivor
annuity derived from Employer and Employee contributions may not be paid
without his written consent if the value exceeds, or has ever exceeded,
$3,500 at the time of any prior distribution. Further, the spouse of a
Participant must consent in writing to any immediate distribution. If the
value of the Participant's benefit derived from Employer and Employee
contributions does not exceed $3,500 and has never exceeded $3,500 at the
time of any prior distribution, the Administrator may immediately
distribute such benefit without such Participant's consent. No
distribution may be made under the preceding sentence after the "annuity
starting date" unless the Participant and his spouse consent in writing
to such distribution. Any written consent required under this paragraph
must be obtained not more than 90 days before commencement of the
distribution and shall be made in a manner consistent with Section 6.5
(a) 2.
(d) Any distribution to a Participant who has a benefit which
exceeds, or has ever exceeded, $3,500 at the time of any prior
distribution shall require such
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<PAGE> 79
Participant's consent if such distribution commences prior to the later
of his Normal Retirement Age or age 62. With regard to this required
consent:
(1) No consent shall be valid unless the Participant has received
a general description of the material features and an explanation
of the relative values of the optional forms of benefit available
under the Plan that would satisfy the notice requirements of Code
Section 417.
(2) The Participant must be informed of his right to defer receipt
of the distribution. If a Participant fails to consent, it shall
be deemed an election to defer the commencement of payment of any
benefit. However, any election to defer the receipt of benefits
shall not apply with respect to distributions which are required
under Section 6.5(e).
(3) Notice of the rights specified under this paragraph shall be
provided no less than 30 days and no more than 90 days before the
"annuity starting date".
(4) Written consent of the Participant to the distribution must
not be made before the Participant receives the notice and must
not be made more than 90 days before the "annuity starting date".
(5) No consent shall be valid if a significant detriment is
imposed under the Plan on any Participant who does not consent to
the distribution.
(e) Notwithstanding any provision in tha Plan to the contrary, the
distribution of a Participant's benefits, whether under the Plan or
through the purchase of an annuity contract, shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a) (9) and the Regulations thereunder (including Regulation
1.401(a)(9)-2), the provisions of which are incorporated herein by
reference:
(1) A Participant's benefits shall be distributed to him not later
than April 1st of the calendar year following the later of (i) the
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<PAGE> 80
calendar year in which the Participant attains age 70 1/2 or (ii)
the calendar year in which the Participant retires, provided,
however, that this clause (ii) shall not apply in the case of a
Participant who is a "five (5) percent owner" at any time during
the five (5) Plan Year period ending in the calendar year in which
he attains age 70 1/2 or, in the case of a Participant who becomes
a "five (5) percent owner" during any subsequent Plan Year, clause
(ii) shall no longer apply and the required beginning date shall
be the April 1st of the calendar year following the calendar year
in which such subsequent Plan Year ends. Alternatively, if the
distribution is to be in the form of a joint and survivor annuity
or single life annuity as provided in paragraph (a) (1) above,
then distributions must begin no later than the applicable April
1st as determined under the preceding sentence and must be made
over the life of the Participant (or the lives of the Participant
and the Participant's designated Beneficiary) in accordance with
Regulations. Notwithstanding the foregoing, clause (ii) above
shall not apply to any Participant unless the Participant had
attained age 70 1/2 before January 1, 1988 and was not a "five (5)
percent owner" at any time during the Plan Year ending with or
within the calendar year in which the Participant attained age 66
1/2 or any subsequent Plan Year.
(2) Distributions to a Participant and his Beneficiaries shall
only be made in accordance with the incidental death benefit
requirements of Code Section 401(a) (9) (G) and the Regulations
thereunder.
(f) All annuity Contracts under this Plan shall be
non-transferable when distributed. Furthermore, the terms of any annuity
Contract purchased and distributed to a Participant or spouse shall
comply with all of the requirements of the Plan.
(g) If a distribution is made at a time when a Participant is not
fully Vested in his Participant's Account (employment has not terminated)
and the Participant may increase the Vested percentage in such account:
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<PAGE> 81
(1) a separate account shall be established for the Participant's
interest in the Plan as of the time of the distribution; and
(2) at any relevant time, the Participant's Vested portion of the
separate account shall be equal to an amount ("X") determined by
the formula:
X equals P(AB plus (R x D)) - (R x D)
For purposes of applying the formula: P is the Vested percentage
at the relevant time, AB is the account balance at the relevant
time, D is the amount of distribution, and R is the ratio of the
account balance at the relevant time to the account balance after
distribution.
6.6 DISTRIBUTION OF BENEFITS UPON DEATH
(a) Unless otherwise elected as provided below, a Vested
Participant who dies before the annuity starting date and who has a
surviving spouse shall have his death benefit paid to his surviving
spouse in the form of a Pre-Retirement Survivor Annuity. The
Participant's spouse may direct that payment of the Pre-Retirement
Survivor Annuity commence within a reasonable period after the
Participant's death. If the spouse does not so direct, payment of such
benefit will commence at the time the Participant would have attained the
later of his Normal Retirement Age or age 62. However, the spouse may
elect a later commencement date. Any distribution to the Participant's
spouse shall be subject to the rules specified in Section 6.6(g).
(b) Any election to waive the Pre-Retirement Survivor Annuity
before the Participant's death must be made by the Participant in writing
during the election period and shall require the spouse's irrevocable
consent in the same manner provided for in Section 6.5(a)(2). Further,
the spouse's consent must acknowledge the specific nonspouse Beneficiary.
Notwithstanding the foregoing, the nonspouse Beneficiary need not be
acknowledged, provided the consent of the spouse acknowledges that the
spouse has the right to limit consent only to a specific Beneficiary and
that the spouse voluntarily elects to relinquish such right.
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<PAGE> 82
(c) The election period to waive the Pre-Retirement Survivor
Annuity shall begin on the first day of the Plan Year in which the
Participant attains age 35 and end on the date of the Participant's
death. An earlier waiver (with spousal consent) may be made provided a
written explanation of the Pre-Retirement Survivor Annuity is given to
the Participant and such waiver becomes invalid at the beginning of the
Plan Year in which the Participant turns age 35. In the event a Vested
Participant separates from service prior to the beginning of the election
period, the election period shall begin on the date of such separation
from service.
(d) With regard to the election, the Administrator shall provide
each Participant within the applicable period, with respect to such
Participant (and consistent with Regulations), a written explanation of
the Pre-Retirement Survivor Annuity containing comparable information to
that required pursuant to Section 6.5(a)(5). For the purposes of this
paragraph, the term "applicable period" means, with respect to a
Participant, whichever of the following periods ends last:
(1) The period beginning with the first day of the Plan Year in
which the Participant attains age 32 and ending with the close of
the Plan Year preceding the Plan Year in which the Participant
attains age 35;
(2) A reasonable period after the individual becomes a
Participant;
(3) A reasonable period ending after the Plan no longer fully
subsidizes the cost of the Pre-Retir~ement Survivor Annuity with
respect to the Participant;
(4) A reasonable period ending after Code Section 401(a)(11)
applies to the Participant; or
(5) A reasonable period after separation from service in the case
of a Participant who separates before attaining age 35. For this
purpose, the Administrator must provide the explanation beginning
one year before the separation from service and ending one year
after such separation. If such a Participant thereafter
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<PAGE> 83
returns to employment with the Employer, the applicable period for
such Participant shall be redetermined.
For purposes of applying this Section 6.6(d), a reasonable
period ending after the enumerated events described in paragraphs (2),
(3) and (4) is the end of the two year period beginning one year prior to
the date the applicable event occurs, and ending one year after that
date.
(e) If the present value of the Pre-Retirement Survivor Annuity
derived from Employer and Employee contributions does not exceed $3,500
and has never exceeded $3,500 at the time of any prior distribution, the
Administrator shall direct the immediate distribution of such amount to
the Participant's spouse. No distribution may be made under the preceding
sentence after the annuity starting date unless the spouse consents in
writing.
(f) In the event the death benefit is not paid in the form of a
Pre-Retirement Survivor Annuity, it shall be paid to the Participant's
Beneficiary in one lump sum in cash.
(g) Notwithstanding any provision in the Plan to the contrary,
distributions upon the death of a Participant shall be made in accordance
with the following requirements and shall otherwise comply with Code
Section 401(a) (9) and the Regulations thereunder. If the death benefit
is paid in the form of a Pre-Retirement Survivor Annuity, then
distributions to the Participant's surviving spouse must commence on or
before the later of: (1) December 31st of the calendar year immediately
following the calendar year in which the Participant died; or (2)
December 31st of the calendar year in which the Participant would have
attained age 70 1/2. If it is determined pursuant to Regulations that the
distribution of a Participant's interest has begun and the Participant
dies before his entire interest has been distributed to him, the
remaining portion of such interest shall be distributed at least as
rapidly as under the method of distribution selected pursuant to Section
6.5 as of his date of death. If a Participant dies before he has begun to
receive any distributions of his interest under the Plan or before
distributions are deemed to have begun pursuant to Regulations (and
distributions are not to
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<PAGE> 84
be made in the form of a Pre-Retirement Survivor Annuity), then his death
benefit shall be distributed to his Beneficiaries by December 31st of the
calendar year in which the fifth anniversary of his date of death occurs.
6.7 TIME OF SEGREGATION OR DISTRIBUTION
Except as limited by Sections 6.5 and 6.6, whenever the Trustee is to
make a distribution or to commence a series of payments on or as of an
Anniversary Date, the distribution may be made or begun on such date or as soon
thereafter as is practicable. However, unless a Former Participant elects in
writing to defer the receipt of benefits (such election may not result in a
death benefit that is more than incidental), the payment of benefits shall begin
not later than the 60th day after the close of the Plan Year in which the latest
of the following events occurs: (a) the date on which the Participant attains
the earlier of age 65 or the Normal Retirement Age specified herein; (b) the
10th anniversary of the year in which the Participant commenced participation in
the Plan; or (c) the date the Participant terminates his service with the
Employer.
6.8 DISTRIBUTION FOR MINOR BENEFICIARY
In the event a distribution is to be made to a minor, then the
Administrator may direct that such distribution be paid to the legal guardian,
or if none, to a parent of such Beneficiary or a responsible adult with whom the
Beneficiary maintains his residence, or to the custodian for such Beneficiary
under the Uniform Gift to Minors Act or Gift to Minors Act, if such is permitted
by the laws of the state in which said Beneficiary resides. Such a payment to
the legal guardian, custodian or parent of a minor Beneficiary shall fully
discharge the Trustee, Employer, and Plan from further liability on account
thereof.
6.9 LOCATION OF PARTICIPANT OR BENEFICIARY UNKNOWN
In the event that all, or any portion, of the distribution payable to a
Participant or his Beneficiary hereunder shall, at the later of the
Participant's attainment of age 62 or his Normal Retirement Age, remain unpaid
solely by reason of the inability of the Administrator, after sending a
registered letter, return receipt requested, to the last known address, and
after further diligent effort, to ascertain the whereabouts of such Participant
or his Beneficiary, the amount so distributable shall be treated as a Forfeiture
pursuant to the Plan. In the event a Participant or Beneficiary is located
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<PAGE> 85
subsequent to his benefit being reallocated, such benefit shall be restored.
6.10 PRE-RETIREMENT DISTRIBUTION
At such time as a Participant shall have attained the age of 59 1/2
years, the Administrator, at the election of the Participant, shall direct the
Trustee to distribute all or a portion of the amount then credited to the
accounts maintained on behalf of the Participant. However, no distribution from
the Participant's Account shall occur prior to 100% vesting. In the event that
the Administrator makes such a distribution, the Participant shall continue to
be eligible to participate in the Plan on the same basis as any other Employee.
Any distribution made pursuant to this Section shall be made in a manner
consistent with Section 6.5, including, but not limited to, all notice and
consent requirements of Code Sections 417 and 411 (a) (11) and the Regulations
thereunder.
Notwithstanding the above, pre-retirement distributions from a
Participant's Elective Account shall not be permitted prior to the Participant
attaining age 59 1/2 except as otherwise permitted under the terms of the Plan.
6.11 ADVANCE DISTRIBUTION FOR HARDSHIP
(a) The Administrator, at the election of the Participant, shall
direct the Trustee to distribute to any Participant in any one Plan Year
up to the lesser of 100% of his Participant's Elective Account and his
Participant's Account valued as of the last Anniversary Date or other
valuation date or the amount necessary to satisfy the immediate and heavy
financial need of the Participant. Any distribution made pursuant to this
Section shall be deemed to be made as of the first day of the Plan Year
or, if later, the valuation date immediately preceding the date of
distribution, and the Participant's Elective Account and his
Participant's Account shall be reduced accordingly. Withdrawal under this
Section shall be authorized only if the distribution is on account of:
(1) Expenses for medical care described in Code Section 213(d)
previously incurred by the Participant, his spouse, or any of his
dependents (as defined in Code Section 152) or necessary for these
persons to obtain medical care;
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<PAGE> 86
(2) The costs directly related to the purchase of a principal
residence for the Participant (excluding mortgage payments);
(3) Payment of tuition and related educational fees for the next
twelve (12) months of post-secondary education for the
Participant, his spouse, children, or dependents; or
(4) Payments necessary to prevent the eviction of the Participant
from his principal residence or foreclosure on the mortgage of the
Participant' 5 principal residence.
(b) No such distribution shall be made from the Participant's
Account until such Account has become fully Vested.
(c) No distribution shall be made pursuant to this Section unless
the Administrator, based upon the Participant's representation and such
other facts as are known to the Administrator, determines that all of the
following conditions are satisfied:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant. The amount
of the immediate and heavy financial need may include any amounts
necessary to pay any federal, state, or local income taxes or
penalties reasonably anticipated to result from the distribution;
(2) The Participant has obtained all distributions, other than
hardship distributions, and all nontaxable (at the time of the
loan) loans currently available under all plans maintained by the
Employer;
(3) The Plan, and all other plans maintained by the Employer,
provide that the Participant's elective deferrals and voluntary
Employee contributions will be suspended for at least twelve (12)
months after receipt of the hardship distribution or, the
Participant, pursuant to a legally enforceable agreement, will
suspend his elective deferrals and voluntary Employee
contributions to the Plan and all other plans maintained by the
Employer for at least twelve (12) months after receipt of the
hardship distribution; and
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<PAGE> 87
(4) The Plan, and all other plans maintained by the Employer,
provide that the Participant may not make elective deferrals for
the Participant's taxable year immediately following the taxable
year of the hardship distribution in excess of the applicable
limit under Code Section 402(g) for such next taxable year less
the amount of such Participant's elective deferrals for the
taxable year of the hardship distribution.
(d) Notwithstanding the above, for Plan Years beginning after
December 31, 1988, distributions from the Participant's Elective Account
pursuant to this Section shall be limited, as of the date of
distribution, to the Participant's Elective Account as of the end of the
last Plan Year ending before July 1, 1989, plus the total Participant's
Deferred Compensation after such date, reduced by the amount of any
previous distributions pursuant to this Section and Section 6.10.
(e) Any distribution made pursuant to this Section shall be made
in a manner which is consistent with and satisfies the provisions of
Section 6.5, including, but not limited to, all notice and consent
requirements of Code Sections 417 and 411(a)(11) and the Regulations
thereunder.
6.12 QUALIFIED DOMESTIC RELATIONS ORDER DISTRIBUTION
All rights and benefits, including elections, provided to a Participant
in this Plan shall be subject to the rights afforded to any "alternate payee"
under a "qualified domestic relations order." Furthermore, a distribution to an
"alternate payee" shall be permitted if such distribution is authorized by a
"qualified domestic relations order," even if the affected Participant has not
separated from service and has not reached the "earliest retirement age" under
the Plan. For the purposes of this Section, "alternate payee," "qualified
domestic relations order" and "earliest retirement age" shall have the meaning
set forth under Code Section 414(p).
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ARTICLE VII
TRUSTEE
7.1 BASIC RESPONSIBILITIES OF THE TRUSTEE
The Trustee shall have the following categories of responsibilities:
(a) Consistent with the "funding policy and method" determined by
the Employer, to invest, manage, and control the Plan assets subject,
however, to the direction of an Investment Manager if the Employer should
appoint such manager as to all or a portion of the assets of the Plan;
(b) At the direction of the Administrator, to pay benefits
required under the Plan to be paid to Participants, or, in the event of
their death, to their Beneficiaries;
(c) To maintain records of receipts and disbursements and furnish
to the Employer and/or Administrator for each Plan Year a written annual
report per Section 7.7; and
(d) If there shall be more than one Trustee, they shall act by a
majority of their number, but may authorize one or more of them to sign
papers on their behalf.
7.2 INVESTMENT POWERS AND DUTIES OF THE TRUSTEE
(a) The Trustee shall invest and reinvest the Trust Fund to keep
the Trust Fund invested without distinction between principal and income
and in such securities or property, real or personal, wherever situated,
as the Trustee shall deem advisable, including, but not limited to,
stocks, common or preferred, bonds and other evidences of indebtedness or
ownership, and real estate or any interest therein. The Trustee shall at
all times in making investments of the Trust Fund consider, among other
factors, the short and long-term financial needs of the Plan on the basis
of information furnished by the Employer. In making such investments, the
Trustee shall not be restricted to securities or other property of the
character expressly authorized by the applicable law for trust
investments; however, the Trustee shall give due regard to any
limitations imposed by the Code or the Act so that at
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all times the Plan may qualify as a qualified Profit Sharing Plan and
Trust.
(b) The Trustee may employ a bank or trust company pursuant to the
terms of its usual and customary bank agency agreement, under which the
duties of such bank or trust company shall be of a custodial, clerical
and record-keeping nature.
(c) The Trustee may from time to time with the consent of the
Employer transfer to a common, collective, or pooled trust fund
maintained by any corporate Trustee hereunder, all or such part of the
Trust Fund as the Trustee may deem advisable, and such part or all of the
Trust Fund so transferred shall be subject to all the terms and
provisions of the common, collective, or pooled trust fund which
contemplate the commingling for investment purposes of such trust assets
with trust assets of other trusts. The Trustee may, from time to taime
with the consent of the Employer, withdraw from such common, collective,
or pooled trust fund all or such part of the Trust Fund as the Trustee
may deem advisable.
(d) To the extent permitted under applicable laws, to invest in
deposits, long and short term debt instruments, stocks, and other
securities, including those of the Trustee, The Charles Schwab
Corporation (the "Public Company"), Charles Schwab and Company, Inc. (the
"Broker/Dealer"), their affiliates and subsidiaries.
7.3 OTHER POWERS OF THE TRUSTEE
The Trustee, in addition to all powers and authorities under common law,
statutory authority, including the Act, and other provisions of the Plan, shall
have the following powers and authorities, to be exercised in the Trustee's sole
discretion:
(a) To purchase, or subscribe for, any securities or other
property and to retain the same. In conjunction with the purchase of
securities, margin accounts may be opened and maintained;
(b) To sell, exchange, convey, transfer, grant options to
purchase, or otherwise dispose of any securities or other property held
by the Trustee, by private contract or at public auction. No person
dealing with the Trustee shall be bound to see to the
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application of the purchase money or to inquire into the validity,
expediency, or propriety of any such sale or other disposition, with or
without advertisement;
(c) To deliver to the Administrator, Employer, or the persons
identified by the Employer, proxies and powers of attorney and related
informational material, for any shares or other property held in the
Trust. The Employer shall have responsibility for voting such shares, by
proxy, or in person, except to the extent such responsibility is
delegated to another person, under the terms of the Plan or Trust
Agreement or under an agreement between the named fiduciary of the Plan
and an investment manager, in which case such persons shall have such
responsibility. The Trustee may use agents to effect such delivery to the
Employer or the person or persons identified by the Employer. In no event
shall the Trustee be responsible for the voting of shares of securities
held in the Trust or for ascertaining or monitoring whether, or how,
proxies are voted or whether the proper number of proxies is received;
(d) To cause any securities or other property to be registered in
the Trustee's own name or in the name of one or more of the Trustee's
nominees, and to hold any investments in bearer form, but the books and
records of the Trustee shall at all times show that all such investments
are part of the Trust Fund;
(e) To borrow or raise money for the purposes of the Plan in such
amount, and upon such terms and conditions, as the Trustee shall deem
advisable; and for any sum so borrowed, to issue a promissory note as
Trustee, and to secure the repayment thereof by pledging all, or any
part, of the Trust Fund; and no person lending money to the Trustee shall
be bound to see to the application of the money lent or to inquire into
the validity, expediency, or propriety of any borrowing;
(f) To keep such portion of the Trust Fund in cash or cash
balances as the Trustee may, from time to time, deem to be in the best
interests of the Plan, without liability for interest thereon;
(g) To accept and retain for such time as the Trustee may deem
advisable any securities or other property received or acquired as
Trustee hereunder,
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whether or not such securities or other property would normally be
purchased as investments hereunder;
(h) To make, execute, acknowledge, and deliver any and all
documents of transfer and conveyance and any and all other instruments
that may be necessary or appropriate to carry out the powers herein
granted;
(i) To settle, compromise, or submit to arbitration any claims,
debts, or damages due or owing to or from the Plan, to commence or defend
suits or legal or administrative proceedings, and to represent the Plan
in all suits and legal and administrative proceedings;
(j) To appoint agents as necessary or desirable, including legal
counsel who may be counsel for the Employer.
(k) To apply for and procure from responsible insurance companies,
to be selected by the Administrator, as an investment of the Trust Fund
such annuity, or other Contracts (on the life of any Participant) as the
Administrator shall deem proper; to exercise, at any time or from time to
time, whatever rights and privileges may be granted under such annuity,
or other Contracts; to collect, receive, and settle for the proceeds of
all such annuity or other Contracts as and when entitled to do so under
the provisions thereof;
(l) To invest funds of the Trust in time deposits or savings
accounts bearing a reasonable rate of interest in the Trustee's bank;
(m) To invest in Treasury Bills and other forms of United States
government obligations;
(n) To invest in shares of investment companies registered under
the Investment Company Act of 1940;
(o) To sell, purchase and acquire put or call options if the
options are traded on and purchased through a national securities
exchange registered under the Securities Exchange Act of 1934, as
amended, or, if the options are not traded on a national securities
exchange, are guaranteed by a member firm of the New York Stock Exchange;
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(p) To deposit monies in federally insured savings accounts or
certificates of deposit in banks or savings and loan associations;
(q) To pool all or any of the Trust Fund, from time to time, with
assets belonging to any other qualified employee pension benefit trust
created by the Employer or an affiliated company of the Employer, and to
commingle such assets and make joint or common investments and carry
joint accounts on behalf of this Plan and such other trust or trusts,
allocating undivided shares or interests in such investments or accounts
or any pooled assets of the two or more trusts in accordance with their
respective interests;
(r) To do all such acts and exercise all such rights and
privileges, although not specifically mentioned herein, as the Trustee
may deem necessary to carry out the purposes of the Plan.
(s) Directed Investment Account. The powers granted to the Trustee
shall be exercised in the sole fiduciary discretion of the Trustee.
However, if Participants are so empowered by the Administrator, each
Participant may direct the Trustee to separate and keep separate all or a
portion of his account; and further each Participant is authorized and
empowered, in his sole and absolute discretion, to give directions to the
Trustee pursuant to the procedure established by the Administrator and in
such form as the Trustee may require concerning the investment of the
Participant's Directed Investment Account. The Trustee shall comply as
promptly as practicable with directions given by the Participant
hereunder. The Trustee may refuse to comply with any direction from the
Participant in the event the Trustee, in its sole and absolute
discretion, deems such directions improper by virtue of applicable law.
The Trustee shall not be responsible or liable for any loss or expense
which may result from the Trustee's refusal or failure to comply with any
directions from the Participant. Any costs and expenses related to
compliance with the Participant's directions shall be borne by the
Participant's Directed Investment Account.
(t) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's
nominee, and to deposit securities aissued or guaranteed by the U.S.
government or any agency or instrumentality thereof,
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including securities evidenced by book entry rather than by certificate,
with the U.S. Department of the Treasury, a Federal Reserve Bank or other
appropriate custodial entity, in the same account as the Trustee's own
property, provided the Trustee's records and accounts show that such
securities are assets of the Trust Fund.
(u) To hold securities issued by a foreign government or business
entity at a foreign office of the Trustee or any of its affiliates, or to
deposit such securities with a foreign depository regulated by a
government agency or regulatory authority in the foreign jurisdiction,
and to permit the securities so deposited to be held in the nominee name
of the depository bank, provided that the Trustee's records and accounts
show that such securities belong to the Trust Fund.
(v) Any dispute under this Agreement shall be resolved by
submission of the issue to a member of the American Arbitration
Association who is chosen by the Employer and the Trustee. If the
Employer and the Trustee cannot agree on such a choice, each shall
nominate a member of the American Arbitration Association, and the two
nominees will then select an arbitrator. Expenses of the arbitration
shall be paid as decided by the arbitrator.
(w) The Trustee is authorized to tape record conversations between
the Trustee and persons acting on behalf of the Plan or a participant in
the Plan to verify data on transactions.
(x) As stated in Article Number 4.13 of the Plan Document, each
participant and/or beneficiary may have investment power over the account
maintained for him or her, and may direct the investment and reinvestment
of assets of the account among the options authorized by the
Administrator. Such direction shall be furnished to the Trustee in
writing or some other agreed upon format established under procedures
agreed to by the Trustee and Administrator. To the extent provided under
ERISA section 404(c), the Trustee shall not be liable for any loss, or by
the reason of any breach, which results from such participant's or
beneficiary's exercise of control. If a participant who has investment
authority under the terms of the Plan fails to provide such directions,
the Administrator shall direct the
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investment of the participant's account. The Administrator shall maintain
records showing the interest of each participant and/or beneficiary in
the Trust Fund. The Trustee shall have no duty or responsibility to
review or make recommendations regarding investments made at the
direction of the Administrator or participant and shall be reguired to
act only upon receipt of properly authorized directions. A participant or
beneficiary shall not have authority to direct the investment of assets
in his or her account in "collectibles" within the meaning of Code
section 408(m)(2).
7.4 LOANS TO PARTICIPANTS
(a) The Trustee may, in the Trustee's discretion, make loans to
Participants and Beneficiaries under the following circumstances: (1)
loans shall be made available to all Participants and Beneficiaries on a
reasonably equivalent basis; (2) loans shall not be made available to
Highly Compensated Employees in an amount greater than the amount made
available to other Participants and Beneficiaries; (3) loans shall bear a
reasonable rate of interest; (4) loans shall be adequately secured; and
(5) shall provide for repayment over a reasonable period of time.
(b) Loans made pursuant to this Section (when added to the
outstanding balance of all other loans made by the Plan to the
Participant) shall be limited to the lesser of:
(1) $50,000 reduced by the excess (if any) of the highest
outstanding balance of loans from the Plan to the Participant
during the one year period ending on the day before the date on
which such loan is made, over the outstanding balance of loans
from the Plan to the Participant on the date on which such loan
was made, or
(2) one-half (1/2) of the present value of the non-forfeitable
accrued benefit of the Participant under the Plan.
For purposes of this limit, all plans of the Employer shall be
considered one plan. Additionally, with respect to any loan made prior to
January 1, 1987, the $50,000 limit specified in (1) above shall be
unreduced.
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(c) Loans shall provide for level amortization with payments to be
made not less frequently than quarterly over a period not to exceed five
(5) years. However, loans used to acquire any dwelling unit which, within
a reasonable time, is to be used (determined at the time the loan is
made) as a principal residence of the Participant shall provide for
periodic repayment over a reasonable period of time that may exceed five
(5) years. Notwithstanding the foregoing, loans made prior to January 1,
1987 which are used to acquire, construct, reconstruct or substantially
rehabilitate any dwelling unit which, within a reasonable period of time
is to be used (determined at the time the loan is made) as a principal
residence of the Participant or a member of his family (within the
meaning of Code Section 267(c)(4)) may provide for periodic repayment
over a reasonable period of time that may exceed five (5) years.
Additionally, loans made prior to January 1, 1987, may provide for
periodic payments which are made less frequently than quarterly and which
do not necessarily result in level amortization.
(d) Any loan made pursuant to this Section after August 18, 1985
where the Vested interest of the Participant is used to secure such loan
shall require the written consent of the Participant's spouse in a manner
consistent with Section 6.5(a). Such written consent must be obtained
within the 90-day period prior to the date the loan is made. However, no
spousal consent shall be required under this paragraph if the total
accrued benefit subject to the security is not in excess of $3,500.
(e) Any loans granted or renewed on or after the last day of the
first Plan Year beginning after December 31, 1988 shall be made pursuant
to a Participant loan program. Such loan program shall be established in
writing and must include, but need not be limited to, the following:
(1) the identity of the person or positions authorized to
administer the Participant loan program;
(2) a procedure for applying for loans;
(3) the basis on which loans will be approved or denied;
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(4) limitations, if any, on the types and amounts of loans
offered;
(5) the procedure under the program for determining a reasonable
rate of interest;
(6) the types of collateral which may secure a Participant loan;
and
(7) the events constituting default and the steps that will be
taken to preserve Plan assets.
Such Participant loan program shall be contained in a separate
written document which, when properly executed, is hereby incorporated by
reference and made a part of the Plan. Furthermore, such Participant loan
program may be modified or amended in writing from time to time without
the necessity of amending this Section.
7.5 DUTIES OF THE TRUSTEE REGARDING PAYMENTS
At the direction of the Administrator, the Trustee shall, from
time to time, in accordance with the terms of the Plan, make payments out
of the Trust Fund. The Trustee shall not be responsible in any way for
the application of such payments.
7.6 TRUSTEE'S COMPENSATION AND EXPENSES AND TAXES
The Trustee shall be paid such reasonable compensation as shall
from time to time be agreed upon in writing by the Employer and the
Trustee. An individual serving as Trustee who already receives full-time
pay from the Employer shall not receive compensation from the Plan. In
addition, the Trustee shall be reimbursed for any reasonable expenses,
including reasonable counsel fees incurred by it as Trustee. Such
compensation and expenses shall be paid from the Trust Fund unless paid
or advanced by the Employer. All taxes of any kind and all kinds
whatsoever that may be levied or assessed under existing or future laws
upon, or in respect of, the Trust Fund or the income thereof, shall be
paid from the Trust Fund.
7.7 ANNUAL REPORT OF THE TRUSTEE
Within a reasonable period of time after the later of the
Anniversary Date or receipt of the Employer's contribution for each Plan
Year, the Trustee shall furnish to the Employer and Administrator a
written statement of account with respect to the Plan Year for which such
contribution was made setting forth:
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(a) the net income, or loss, of the Trust Fund;
(b) the gains, or losses, realized by the Trust Fund upon sales or
other disposition of the assets;
(c) the increase, or decrease, in the value of the Trust Fund;
(d) all payments and distributions made from the Trust Fund; and
(e) such further information as the Trustee and/or Administrator
deems appropriate. The Employer, forthwith upon its receipt of each such
statement of account, shall acknowledge receipt thereof in writing and
advise the Trustee and/or Administrator of its approval or disapproval
thereof. Failure by the Employer to disapprove any such statement of
account within thirty (30) days after its receipt thereof shall be deemed
an approval thereof. The approval by the Employer of any statement of
account shall be binding as to all matters embraced therein as between
the Employer and the Trustee to the same extent as if the account of the
Trustee had been settled by judgment or decree in an action for a
judicial settlement of its account in a court of competent jurisdiction
in which the Trustee, the Employer and all persons having or claiming an
interest in the Plan were parties; provided, however, that nothing herein
contained shall deprive the Trustee of its right to have its accounts
judicially settled if the Trustee so desires.
7.8 AUDIT
(a) If an audit of the Plan's records shall be required by the Act
and the regulations thereunder for any Plan Year, the Administrator shall
direct the Trustee to engage on behalf of all Participants an independent
qualified public accountant for that purpose. Such accountant shall,
after an audit of the books and records of the Plan in accordance with
generally accepted auditing standards, within a reasonable period after
the close of the Plan Year, furnish to the Administrator and the Trustee
a report of his audit setting forth his opinion as to whether any
statements, schedules or lists that are required by Act Section 103 or
the Secretary of Labor to be filed with the Plan's annual report, are
presented fairly in conformity with generally accepted accounting
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principles applied consistently. All auditing and accounting fees shall
be an expense of and may, at the election of the Administrator, be paid
from the Trust Fund.
(b) If some or all of the information necessary to enable the
Administrator to comply with Act Section 103 is maintained by a bank,
insurance company, or similar institution, regulated and supervised and
subject to periodic examination by a state or federal agency, it shall
transmit and certify the accuracy of that information to the
Administrator as provided in Act Section 103(b) within one hundred twenty
(120) days after the end of the Plan Year or by such other date as may be
prescribed under regulations of the Secretary of Labor.
7.9 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE
(a) The Trustee may resign at any time by delivering to the
Employer, at least thirty (30) days before its effective date, a written
notice of his resignation.
(b) The Employer may remove the Trustee by mailing by registered
or certified mail, addressed to such Trustee at his last known address,
at least thirty (30) days before its effective date, a written notice of
his removal.
(c) Upon the death, resignation, incapacity, or removal of any
Trustee, a successor may be appointed by the Employer; and such
successor, upon accepting such appointment in writing and delivering same
to the Employer, shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with
like respect as if he were originally named as a Trustee herein. Until
such a successor is appointed, the remaining Trustee or Trustees shall
have full authority to act under the terms of the Plan.
(d) The Employer may designate one or more successors prior to the
death, resignation, incapacity, or removal of a Trustee. In the event a
successor is so designated by the Employer and accepts such designation,
the successor shall, without further act, become vested with all the
estate, rights, powers, discretions, and duties of his predecessor with
the
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like effect as if he were originally named as Trustee herein immediately
upon the death, resignation, incapacity, or removal of his predecessor.
(e) Whenever any Trustee hereunder ceases to serve as such, he
shall furnish to the Employer and Administrator a written statement of
account with respect to the portion of the Plan Year during which he
served as Trustee. This statement shall be either (i) included as part of
the annual statement of account for the Plan Year required under Section
7.7 or (ii) set forth in a special statement. Any such special statement
of account should be rendered to the Employer no later than the due date
of the annual statement of account for the Plan Year. The procedures set
forth in Section 7.7 for the approval by the Employer of annual
statements of account shall apply to any special statement of account
rendered hereunder and approval by the Employer of any such special
statement in the manner provided in Section 7.7 shall have the same
effect upon the statement as the Employer's approval of an annual
statement of account. No successor to the Trustee shall have any duty or
responsibility to investigate the acts or transactions of any predecessor
who has rendered all statements of account required by Section 7.7 and
this subparagraph.
7.10 TRANSFER OF INTEREST
Notwithstanding any other provision contained in this Plan, the Trustee
at the direction of the Administrator shall transfer the Vested interest, if
any, of such Participant in his account to another trust forming part of a
pension, profit sharing or stock bonus plan maintained by such Participant's new
employer and represented by said employer in writing as meeting the requirements
of Code Section 401(a), provided that the trust to which such transfers are made
permits the transfer to be made.
7.11 DIRECT ROLLOVER
(a) This Section applies to distributions made on or after January
1, 1993. Notwithstanding any provision of the Plan to the contrary that
would otherwise limit a distributee's election under this Section, a
distributee may elect, at the time and in the manner prescribed by the
Plan Administrator, to have any portion of an eligible rollover
distribution paid directly to an eligible retirement plan specified by
the distributee in a direct rollover.
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(1) An eligible rollover distribution is any distribution of all
or any portion of the balance to the credit of the distributee,
except that an eligible rollover distribution does not include:
any distribution that is one of a series of substantially equal
periodic payments (not less frequently than annually) made for the
life (or life expectancy) of the distributee or the joint lives
(or joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a specified period of
ten years or more; any distribution to the extent such
distribution is required under section 401 (a) (9) of the Code;
and the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for net
unrealized appreciation with respect to employer securities).
(2) An eligible retirement plan is an individual retirement
account described in section 408(a) of the Code, an individual
retirement annuity described in section 408(b) of the Code, an
annuity plan described in section 403(a) of the Code, or a
qualified trust described in section 401(a) of the Code, that
accepts the distributee's eligible rollover distribution. However,
in the case of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual retirement
account or individual retirement annuity.
(3) A distributee includes an Employee or former Employee. In
addition, the Employee's or former Employee's surviving spouse and
the Employee's or former Employee's spouse or former spouse who is
the alternate payee under a qualified domestic relations order, as
defined in section 414(p) of the Code, are distributees with
regard to the interest of the spouse or former spouse.
(4) A direct rollover is a payment by the plan to the eligible
retirement plan specified by the distributee.
7.12 AFFILIATED COMPANY
(a) The Trustee is authorized to contact or make other arrangements with
The Charles Schwab Corporation (the
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"Public Company"), Charles Schwab and Co., Inc. (the "Broker/Dealer"),
their affiliates and subsidiaries, successors and assigns, and any other
organizations affiliated with or subsidiaries of the Trustee or related
entities, for the provision of services to the Trust or Plan, except
where such arrangements are prohibited by law or regulation.
(b) The Trustee is authorized to place securities orders, settle
securities trades, hold securities in custody, and other related
activities on behalf of the Trust through or by the Broker/Dealer
whenever possible, unless the Authorized Person specifically instructs
the use of another broker/dealer. Trades (and related activities)
conducted through the Broker/Dealer shall be subject to fees and
commissions established by the Broker/Dealer, which may be paid from the
Trust or netted from the proceeds of trades.
Trades shall not be executed through the Broker/Dealer unless the
Administrator and the Authorized Person have received disclosure
concerning the relationship of the Broker/Dealer to the Trustee, and fees
and commissions which may be paid to the Public Company, Broker/ Dealer,
the Trustee and/or affiliates or subsidiaries as a result of using the
Broker/Dealer's execution of other services.
The Trustee is authorized to disclose such information as is
necessary to the operation and administration of the Trust to the Public
Company or any of its affiliates, and to such other persons or
organizations that the Trustee determines have a legitimate business
purpose for obtaining such information.
(c) At the direction of the Administrator (or other Authorized Person),
the Trustee may purchase shares of regulated investment companies (or
other investment vehicles) advised by the Holding Company, Broker/Dealer
or the Trustee or any affiliate of any of them ("Schwab Funds") except to
the extent that such investment is prohibited by law or regulation.
Uninvested cash of the Trust may be invested in Schwab Funds
designated by the Administrator (of other Authorized Person) for that
purpose, unless the Administrator specifically instructs the use of
another fund or account, except to the extent prohibited by law
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or regulation.
Schwab Fund shares may not be purchased or held by the Trust
unless the Administrator has received disclosure concerning the Public
Company's, Broker/Dealer's, the Trustee's and/or their affiliate's or
subsidiary's relationship to the Funds, and any fees which may be paid to
the Public Company, Broker/Dealer, Trustee and/or their affiliates or
subsidiaries.
ARTICLE VIII
AMENDMENT, TERMINATION AND MERGERS
8.1 AMENDMENT
(a) The Employer shall have the right at any time to amend the
Plan, subject to the limitations of this Section. However, any amendment
which affects the rights, duties or responsibilities of the Trustee and
Administrator may only be made with the Trustee's and Administrator's
written consent. Any such amendment shall become effective as provided
therein upon its execution. The Trustee shall not be required to execute
any such amendment unless the Trust provisions contained herein are a
part of the Plan and the amendment affects the duties of the Trustee
hereunder.
(b) No amendment to the Plan shall be effective if it authorizes
or permits any part of the Trust Fund (other than such part as is
required to pay taxes and administration expenses) to be used for or
diverted to any purpose other than for the exclusive benefit of the
Participants or their Beneficiaries or estates; or causes any reduction
in the amount credited to the account of any Participant; or causes or
permits any portion of the Trust Fund to revert to or become property of
the Employer.
(c) Except as permitted by Regulations, no Plan amendment or
transaction having the effect of a Plan amendment (such as a merger, plan
transfer or similar transaction) shall be effective to the extent it
eliminates or reduces any "Section 411(d) (6) protected benefit" or adds
or modifies conditions relating to "Section 411(d) (6) protected
benefits" the result of which is a further restriction on such benefit
unless such protected benefits are preserved with respect to benefits
accrued as of the later of the adoption date or effective date of the
amendment. "Section 411(d) (6)
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protected benefits" are benefits described in Code Section 411(d)(6)(A),
early retirement benefits and retirement-type subsidies, and optional
forms of benefit.
8.2 TERMINATION
(a) The Employer shall have the right at any time to terminate the
Plan by delivering to the Trustee and Administrator written notice of
such termination. Upon any full or partial termination, all amounts
credited to the affected Participants' Combined Accounts shall become
100% Vested as provided in Section 6.4 and shall not thereafter be
subject to forfeiture, and all unallocated amounts shall be allocated to
the accounts of all Participants in accordance with the provisions
hereof.
(b) Upon the full termination of the Plan, the Employer shall
direct the distribution of the assets of the Trust Fund to Participants
in a manner which is consistent with and satisfies the provisions of
Section 6.5. Distributions to a Participant shall be made in cash or
through the purchase of irrevocable nontransferable deferred commitments
from an insurer. Except as permitted by Regulations, the termination of
the Plan shall not result in the reduction of "Section 411(d) (6)
protected benefits" in accordance with Section 8.1(c).
8.3 MERGER OR CONSOLIDATION
This Plan and Trust may be merged or consolidated with, or its assets
and/or liabilities may be transferred to any other plan and trust only if the
benefits which would be received by a Participant of this Plan, in the event of
a termination of the plan immediately after such transfer, merger or
consolidation, are at least equal to the benefits the Participant would have
received if the Plan had terminated immediately before the transfer, merger or
consolidation, and such transfer, merger or consolidation does not otherwise
result in the elimination or reduction of any "Section 411(d) (6) protected
benefits" in accordance with Section 8.1(c).
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ARTICLE IX
MISCELLANEOUS
9.1 PARTICIPANT'S RIGHTS
This Plan shall not be deemed to constitute a contract between the
Employer and any Participant or to be a consideration or an inducement for the
employment of any Participant or Employee. Nothing contained in this Plan shall
be deemed to give any Participant or Employee the right to be retained in the
service of the Employer or to interfere with the right of the Employer to
discharge any Participant or Employee at any time regardless of the effect which
such discharge shall have upon him as a Participant of this Plan.
9.2 ALIENATION
(a) Subject to the exceptions provided below, no benefit which
shall be payable out of the Trust Fund to any person (including a
Participant or his Beneficiary) shall be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, or charge, and any attempt to anticipate, alienate, sell,
transfer, assign, pledge, encumber, or charge the same shall be void; and
no such benefit shall in any manner be liable for, or subject to, the
debts, contracts, liabilities, engagements, or torts of any such person,
nor shall it be subject to attachment or legal process for or against
such person, and the same shall not be recognized by the Trustee, except
to such extent as may be required by law.
(b) This provision shall not apply to the extent a Participant or
Beneficiary is indebted to the Plan, as a result of a loan from the Plan.
At the time a distribution is to be made to or for a Participant's or
Beneficiary's benefit, such proportion of the amount distributed as shall
equal such loan indebtedness shall be paid by the Trustee to the Trustee
or the Administrator, at the direction of the Administrator, to apply
against or discharge such loan indebtedness. Prior to making a payment,
however, the Participant or Beneficiary must be given written notice by
the Administrator that such loan indebtedness is to be so paid in whole
or part from his Participant's Combined Account. If the Participant or
Beneficiary does not agree that the loan indebtedness is a valid claim
against his Vested Participant's Combined Account, he shall be entitled
to a review of the validity of the
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claim in accordance with procedures provided in Sections 2.12 and 2.13.
(c) This provision shall not apply to a "qualified domestic
relations order" defined in Code Section 414(p), and those other domestic
relations orders permitted to be so treated by the Administrator under
the provisions of the Retirement Equity Act of 1984. The Administrator
shall establish a written procedure to determine the qualified status of
domestic relations orders and to administer distributions under such
qualified orders. Further, to the extent provided under a "qualified
domestic relations order", a former spouse of a Participant shall be
treated as the spouse or surviving spouse for all purposes under the
Plan.
9.3 CONSTRUCTION OF PLAN
This Plan arid Trust shall be construed and enforced according to the Act
and the laws of the State of Ohio, other than its laws respecting choice of law,
to the extent not preempted by the Act.
9.4 GENDER AND NUMBER
Wherever any words are used herein in the masculine, feminine or neuter
gender, they shall be construed as though they were also used in another gender
in all cases where they would so apply, and whenever any words are used herein
in the singular or plural form, they shall be construed as though they were also
used in the other form in all cases where they would so apply.
9.5 LEGAL ACTION
In the event any claim, suit, or proceeding is brought regarding the
Trust and/or Plan established hereunder to which the Trustee or the
Administrator may be a party, and such claim, suit, or proceeding is resolved in
favor of the Trustee or Administrator, they shall be entitled to be reimbursed
from the Trust Fund for any and all costs, attorney's fees, and other expenses
pertaining thereto incurred by them for which they shall have become liable.
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9.6 PROHIBITION AGAINST DIVERSION OF FUNDS
(a) Except as provided below and otherwise specifically permitted
by law, it shall be impossible by operation of the Plan or of the Trust,
by termination of either, by power of revocation or amendment, by the
happening of any contingency, by collateral arrangement or by any other
means, for any part of the corpus or income of any trust fund maintained
pursuant to the Plan or any funds contributed thereto to be used for, or
diverted to, purposes other than the exclusive benefit of Participants,
Retired Participants, or their Beneficiaries.
(b) In the event the Employer shall make an excessive contribution
under a mistake of fact pursuant to Act Section 403(c)(2)(A), the
Employer may demand repayment of such excessive contribution at any time
within one (1) year following the time of payment and the Trustees shall
return such amount to the Employer within the one (1) year period.
Earnings of the Plan attributable to the excess contributions may not be
returned to the Employer but any losses attributable thereto must reduce
the amount so returned.
9.7 BONDING
Every Fiduciary, except a bank or an insurance company, unless exempted
by the Act and regulations thereunder, shall be bonded in an amount not less
than 10% of the amount of the funds such Fiduciary handles; provided, however,
that the minimum bond shall be $1,000 and the maximum bond, $500,000. The amount
of funds handled shall be determined at the beginning of each Plan Year by the
amount of funds handled by such person, group, or class to be covered and their
predecessors, if any, during the preceding Plan Year, or if there is no
preceding Plan Year, then by the amount of the funds to be handled during the
then current year. The bond shall provide protection to the Plan against any
loss by reason of acts of fraud or dishonesty by the Fiduciary alone or in
connivance with others. The surety shall be a corporate surety company (as such
term is used in Act Section 412(a)(2)), and the bond shall be in a form approved
by the Secretary of Labor. Notwithstanding anything in the Plan to the contrary,
the cost of such bonds shall be an expense of and may, at the election of the
Administrator, be paid from the Trust Fund or by the Employer.
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9.8 EMPLOYER'S AND TRUSTEE'S PROTECTIVE CLAUSE
Neither the Employer nor the Trustee, nor their successors, shall be
responsible for the validity of any Contract issued hereunder or for the failure
on the part of the insurer to make payments provided by any such Contract, or
for the action of any person which may delay payment or render a Contract null
and void or unenforceable in whole or in part.
9.9 INSURER'S PROTECTIVE CLAUSE
Any insurer who shall issue Contracts hereunder shall not have any
responsibility for the validity of this Plan or for the tax or legal aspects of
this Plan. The insurer shall be protected and held harmless in acting in
accordance with any written direction of the Trustee, and shall have no duty to
see to the application of any funds paid to the Trustee, nor be required to
question any actions directed by the Trustee. Regardless of any provision of
this Plan, the insurer shall not be required to take or permit any action or
allow any benefit or privilege contrary to the terms of any Contract which it
issues hereunder, or the rules of the insurer.
9.10 RECEIPT AND RELEASE FOR PAYMENTS
Any payment to any Participant, his legal representative, Beneficiary, or
to any guardian or committee appointed for such Participant or Beneficiary in
accordance with the provisions of the Plan, shall, to the extent thereof, be in
full satisfaction of all claims hereunder against the Trustee and the Employer,
either of whom may require such Participant, legal representative, Beneficiary,
guardian or committee, as a condition precedent to such payment, to execute a
receipt and release thereof in such form as shall be determined by the Trustee
or Employer.
9.11 ACTION BY THE EMPLOYER
Whenever the Employer under the terms of the Plan is permitted or
required to do or perform any act or matter or thing, it shall be done and
performed by a person duly authorized by its legally constituted authority.
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9.12 NAMED FIDUCIARIES AND ALLOCATION OF RESPONSIBILITY
The "named Fiduciaries" of this Plan are (1) the Employer, (2) the
Administrator and (3) the Trustee. The named Fiduciaries shall have only those
specific powers, duties, responsibilities, and obligations as are specifically
given them under the Plan. In general, the Employer shall have the sole
responsibility for making the contributions provided for under Section 4.1; and
shall have the sole authority to appoint and remove the Trustee and the
Administrator; to formulate the Plan's "funding policy and method"; and to amend
or terminate, in whole or in part, the Plan. The Administrator shall have the
sole responsibility for the administration of the Plan, which responsibility is
specifically described in the Plan. The Trustee shall have the sole
responsibility of management of the assets held under the Trust, except those
assets, the management of which has been assigned to an Investment Manager, who
shall be solely responsible for the management of the assets assigned to it, all
as specifically provided in the Plan. Each named Fiduciary warrants that any
directions given, information furnished, or action taken by it shall be in
accordance with the provisions of the Plan, authorizing or providing for such
direction, information or action. Furthermore, each named Fiduciary may rely
upon any such direction, information or action of another named Fiduciary as
being proper under the Plan, and is not required under the Plan to inquire into
the propriety of any such direction, information or action. It is intended under
the Plan that each named Fiduciary shall be responsible for the proper exercise
of its own powers, duties, responsibilities and obligations under the Plan. No
named Fiduciary shall guarantee the Trust Fund in any manner against investment
loss or depreciation in asset value. Any person or group may serve in more than
one Fiduciary capacity. In the furtherance of their responsibilities hereunder,
the "named Fiduciaries" shall be empowered to interpret the Plan and Trust and
to resolve ambiguities, inconsistencies and omissions, which findings shall be
binding, final and conclusive.
9.13 HEADINGS
The headings and subheadings of this Plan have been inserted for
convenience of reference and are to be ignored in any construction of the
provisions hereof.
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9.14 APPROVAL BY INTERNAL REVENUE SERVICE
(a) Notwithstanding anything herein to the contrary, contributions
to this Plan are conditioned upon the initial qualification of the Plan
under Code Section 401. If the Plan receives an adverse determination
with respect to its initial qualification, then the Plan may return such
contributions to the Employer within one year after such determination,
provided the application for the determination is made by the time
prescribed by law for filing the Employer's return for the taxable year
in which the Plan was adopted, or such later date as the Secretary of the
Treasury may prescribe.
(b) Notwithstanding any provisions to the contrary, except
Sections 3.6, 3.7, and 4.1(e), any contribution by the Employer to the
Trust Fund is conditioned upon the deductibility of the contribution by
the Employer under the Code and, to the extent any such deduction is
disallowed, the Employer may, within one (1) year following the
disallowance of the deduction, demand repayment of such disallowed
contribution and the Trustee shall return such contribution within one
(1) year following the disallowance. Earnings of the Plan attributable to
the excess contribution may not be returned to the Employer, but any
losses attributable thereto must reduce the amount so returned.
9.15 UNIFORMITY
All provisions of this Plan shall be interpreted and applied in a
uniform, nondiscriminatory manner. In the event of any conflict between the
terms of this Plan and any Contract purchased hereunder, the Plan provisions
shall control.
ARTICLE X
PARTICIPATING EMPLOYERS
10.1 ADOPTION BY OTHER EMPLOYERS
Notwithstanding anything herein to the contrary, with the consent of the
Employer and Trustee, any other corporation or entity, whether an affiliate or
subsidiary or not, may adopt this Plan and all of the provisions hereof, and
participate herein and be known as a Participating Employer, by a properly
executed document evidencing said intent and will of such Participating
Employer.
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10.2 REQUIREMENTS OF PARTICIPATING EMPLOYERS
(a) Each such Participating Employer shall be required to use the
same Trustee as provided in this Plan.
(b) The Trustee may, but shall not be required to, commingle, hold
and invest as one Trust Fund all contributions made by Participating
Employers, as well as all increments thereof. However, the assets of the
Plan shall, on an ongoing basis, be available to pay benefits to all
Participants and Beneficiaries under the Plan without regard to the
Employer or Participating Employer who contributed such assets.
(c) The transfer of any Participant from or to an Employer
participating in this Plan, whether he be an Employee of the Employer or
a Participating Employer, shall not affect such Participant's rights
under the Plan, and all amounts credited to such Participant's Combined
Account as well as his accumulated service time with the transferor or
predecessor, and his length of participation in the Plan, shall continue
to his credit.
(d) All rights and values forfeited by termination of employment
shall inure only to the benefit of the Participants of the Employer or
Participating Employer by which the forfeiting Participant was employed,
except if the Forfeiture is for an Employee whose Employer is an
Affiliated Employer, then said Forfeiture shall inure to the benefit of
the Participants of those Employers who are Affiliated Employers. Should
an Employee of one ("First") Employer be transferred to an associated
("Second") Employer which is an Affiliated Employer, such transfer shall
not cause his account balance (generated while an Employee of "First"
Employer) in any manner, or by any amount to be forfeited. Such
Employee's Participant Combined Account balance for all purposes of the
Plan, including length of service, shall be considered as though he had
always been employed by the "Second" Employer and as such had received
contributions, forfeitures, earnings or losses, and appreciation or
depreciation in value of assets totaling the amount so transferred.
(e) Any expenses of the Trust which are to be paid by the Employer
or borne by the Trust Fund shall
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be paid by each Participating Employer in the same proportion that the
total amount standing to the credit of all Participants employed by such
Employer bears to the total standing to the credit of all Participants.
10.3 DESIGNATION OF AGENT
Each Participating Employer shall be deemed to be a party to this Plan;
provided, however, that with respect to all of its relations with the Trustee
and Administrator for the purpose of this Plan, each Participating Employer
shall be deemed to have designated irrevocably the Employer as its agent. Unless
the context of the Plan clearly indicates the contrary, the word "Employer"
shall be deemed to include each Participating Employer as related to its
adoption of the Plan.
10.4 EMPLOYEE TRANSFERS
It is anticipated that an Employee may be transferred between
Participating Employers, and in the event of any such transfer, the Employee
involved shall carry with him his accumulated service and eligibility. No such
transfer shall effect a termination of employment hereunder, and the
Participating Employer to which the Employee is transferred shall thereupon
become obligated hereunder with respect to such Employee in the same manner as
was the Participating Employer from whom the Employee was transferred.
10.5 PARTICIPATING EMPLOYER'S CONTRIBUTION
Any contribution subject to allocation during each Plan Year shall be
allocated only among those Participants of the Employer or Participating
Employer making the contribution, except if the contribution is made by an
Affiliated Employer, in which event such contribution shall be allocated among
all Participants of all Participating Employers who are Affiliated Employers in
accordance with the provisions of this Plan. On the basis of the information
furnished by the Administrator, the Trustee shall keep separate books and
records concerning the affairs of each Participating Employer hereunder and as
to the accounts and credits of the Employees of each Participating Employer. The
Trustee may, but need not, register Contracts so as to evidence that a
particular Participating Employer is the interested Employer hereunder, but in
the event of an Employee transfer from one Participating Employer to another,
the employing Employer shall immediately notify the Trustee thereof.
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10.6 AMENDMENT
Amendment of this Plan by the Employer at any time when there shall be a
Participating Employer hereunder shall only be by the written action of each and
every Participating Employer and with the consent of the Trustee where such
consent is necessary in accordance with the terms of this Plan.
10.7 DISCONTINUANCE OF PARTICIPATION
Any Participating Employer shall be permitted to discontinue or revoke
its participation in the Plan. At the time of any such discontinuance or
revocation, satisfactory evidence thereof and of any applicable conditions
imposed shall be delivered to the Trustee. The Trustee shall thereafter
transfer, deliver and assign Contracts and other Trust Fund assets allocable to
the Participants of such Participating Employer to such new Trustee as shall
have been designated by such Participating Employer, in the event that it has
established a separate pension plan for its Employees provided, however, that no
such transfer shall be made if the result is the elimination or reduction of any
"Section 411(d) (6) protected benefits" in accordance with Section 8.1(c). If no
successor is designated, the Trustee shall retain such assets for the Employees
of said Participating Employer pursuant to the provisions of Article VII hereof.
In no such event shall any part of the corpus or income of the Trust as it
relates to such Participating Employer be used for or diverted to purposes other
than for the exclusive benefit of the Employees of such Participating Employer.
10.8 ADMINISTRATOR'S AUTHORITY
The Administrator shall have authority to make any and all necessary
rules or regulations, binding upon all Participating Employers and all
Participants, to effectuate the purpose of this Article.
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IN WITNESS WHEREOF, this Plan has been executed the day and year first
above written.
Signed, sealed, and delivered
in the presence of:
Telxon Corp.
By
- --------------------------- ---------------------------
EMPLOYER
- ---------------------------
WITNESSES AS TO EMPLOYER
Charles Schwab Trust Company
By
- --------------------------- ---------------------------
TRUSTEE
- ---------------------------
WITNESSES AS TO TRUSTEE
ATTEST
-----------------------
113
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TELXON'S RETIREMENT & UNIFORM MATCHING
PROFIT SHARING PLAN
PARTICIPANT LOAN PROGRAM
Telxon's Retirement & Uniform Matching Profit Sharing Plan permits loans
to be made to Participants and their beneficiaries. However, before any loan is
made, the Plan requires that a written loan program be established which sets
forth the rules and guidelines for making Participant loans. This document
shall serve as the required written loan program. In addition, the
Administrator may use this document to serve as, or supplement, any required
notice of the loan program to Participants and their beneficiaries. All
references to Participants in this loan program shall include Participants and
their Beneficiaries who are "parties in interest" as defined by Act Section
3(14).
1) The Administrator of the Plan is authorized to administer the
Participant loan program. All applications for loans shall be made by a
Participant to the Administrator on forms which the Administrator will
make available for such purpose.
2) All loan applications shall be considered by the Administrator
within a reasonable time after the Participant makes formal application.
The Participant shall also be required to provide such supporting
information deemed necessary by the Administrator. This may include a
financial statement, tax returns and such other financial information
which the Administrator may consider necessary and appropriate to
determine whether a loan should be granted. Furthermore, the Participant
shall authorize the Administrator to obtain a credit report on the
Participant.
3) The Administrator shall determine whether a Participant qualifies
for a loan, applying such criteria as a commercial lender of funds would
apply in like circumstances with respect to the Participant. Such
criteria shall include, but need not be limited to, the creditworthiness
of the Participant and his general ability to repay the loan, the period
of time such Participant has been employed by the Employer, whether
adequate security has been provided for the loan, and whether the
Participant agrees, as a condition for receiving the loan, to make
repayments through direct, after-tax payroll deduction.
4) With regard to any loan made pursuant to this program, the
following rule(s) and limitation(s) shall apply, in addition to such
other requirements set forth in the Plan:
(i) No loan in an amount less than $1,000 shall be granted to
any Participant.
(ii) All loans made pursuant to this program shall be
considered a directed investment from the account(s) of the
Participant maintained under the Plan. As such, all payments of
principal and interest made by the Participant shall be credited
only to the account(s) of such Participant.
(iii) Only one outstanding loan per participant will be
permitted.
(iv) All expenses associated with the establishment and
administration of the loan will be paid by or charged to the
Participant's account.
(v) All loans will be repaid through direct payroll deduction.
(vi) The maximum repayment period for all loans shall be five
years.
<PAGE> 115
5) Any loan granted or renewed under this program shall bear a
reasonable rate of interest. In determining such rate of interest, the
Plan shall require a rate of return commensurate with the prevailing
interest rate charged on similar commercial loans under like
circumstances by persons in the business of lending money. Such
prevailing interest rate standard shall permit the Administrator to
consider factors pertaining to the opportunity for gain and risk of loss
that a professional lender would consider on a similar arms-length
transaction, such as the creditworthiness of the Participant and the
security given for the loan. Therefore, in establishing the rate of
interest, the Administrator shall conduct a reasonable and prudent
inquiry with professional lenders in the same geographic locale where the
Participant and Employer reside to determine such prevailing interest
rate for loans under like circumstances.
6) The Plan shall require that adequate security be provided by the
Participant before a loan is granted. For this purpose, the Plan shall
consider a Participant's interest under the Plan to be adequate
security. However, in no event shall more than 50% of a Participant's
vested account balance (determined immediately after origination of the
loan) be used as security for the loan. Generally, it shall be the policy
of the Plan not to make loans which require security other than the
Participant's vested interest in the Plan. However, if additional
security is necessary to adequately secure the loan, then the
Administrator shall require that such security be provided before the
loan will be granted. For this purpose, the Participant's principal
residence may serve as additional security, if permitted by State law.
7) Generally, a default shall occur upon the failure of a Participant
to timely remit payments under the loan when due. In such event, the
Trustee shall take such reasonable actions which a prudent fiduciary in
like circumstances would take to protect and preserve Plan assets,
including foreclosing on any collateral and commencing such other legal
action for collection which the Trustee deems necessary and advisable.
However, the Trustee shall not be required to commence such actions
immediately upon a default. Instead, the Trustee may grant the
Participant reasonable rights to cure any default, provided such actions
would constitute a prudent and reasonable course of conduct for a
professional lender in like circumstances. In addition, if no risk of
loss of principal or income would result to the Plan, the Trustee may
choose, in its discretion, to defer enforcement proceedings. If the
qualified status of the Plan is not jeopardized, the Trustee and the
Administrator may treat a loan that has been defaulted upon and not cured
within a reasonable period of time as a deemed distribution from the
Plan.
8) In the event the Participant begins a leave of absence, without
pay, that is one year or less, or any periodic payment is not made in full
because of temporary reduction in the amount payable to the Participant
for a payroll period, the Administrator may waive any payments on the
loan during such leave of absence or may waive the full payment on the
loan for such payroll period and reamortize the loan over its remaining
term.
9) Upon satisfaction of the criteria established for granting a loan,
the Administrator shall inform the Trustee that the Participant has
qualified to receive a loan under the Plan's program. The Trustee shall
review the determination made by the Administrator (including the
prevailing interest rate which has been set for the loan) and, if it
determines that such loan would be a prudent investment for the Plan,
applying such fidiciary standards required by ERISA, the Trustee may
grant the loan request. In making such determination, the Trustee may
consider the liquidity of the Plan assets available for loans. The
Administrator shall then require that the Participant execute all
documents necessary to establish the loan, including a promissory note
and such other documents which will provide the Plan with adequate
security.
Adopted this 2 day of July, 1993. This loan program may be amended from time to
time.
<PAGE> 116
Employer: Fred L. Graf, Treasurer
------------------------
Trustee: [signature illegible]
-------------------------
Administrator:
-------------------
<PAGE> 117
AMENDMENT NUMBER ONE
TO TELXON'S RETIREMENT AND UNIFORM
MATCHING PROFIT SHARING PLAN
Effective date: January 1, 1993
Section 7.3, OTHER POWERS OF THE TRUSTEE of the Plan and Trust Document, has
been amended as follows:
(c) To deliver to the Administrator, Employer, or the person or persons
identified by the Employer, proxies and powers of attorney and related
informational material, for any shares or other property held in the Trust. The
Employer shall have responsibility for voting such shares, by proxy or in
person, except to the extent such responsibility is delegated to another person,
under the terms of the Plan or Trust Agreement or under an agreement between the
named fiduciary of the Plan and an investment manager, in which case such
persons shall have such responsibility. The Trustee may use agents to effect
such delivery to the Employer or the person or persons identified by the
Employer. In no event shall the Trustee be responsible for the voting of shares
of securities held in the Trust or for ascertaining or monitoring whether, or
how, proxies are voted or whether the proper number of proxies is received;
(j) To appoint agents as necessary or desirable, including legal counsel
who may be counsel for the Employer.
Section 7.3 of the Plan and Trust Document has been amended to add:
(s) To deposit securities in a security depository and permit the
securities so deposited to be held in the name of the depository's nominee, and
to deposit securities issued or guaranteed by the U.S. government or any agency
or instrumentality thereof, including securities evidenced by book entry rather
than by certificate, with the U.S. Department of the Treasury, a Federal Reserve
Bank or other appropriate custodial entity, in the same account as the Trustee's
own property, provided the Trustee's records and accounts show that such
securities are assets of the Trust Fund.
(t) To hold securities issued by a foreign government or business entity
at a foreign office of the Trustee or any of its affiliates, or to deposit such
securities with a foreign depository or bank regulated by a government agency or
regulatory authority in the foreign jurisdiction, and to permit the securities
so deposited to be held in the nominee name of the depository bank, provided
that the Trustee's records and accounts show that such securities belong to the
Trust Fund.
(u) Any dispute under this Agreement shall be resolved by submission of
the issue to a member of the American Arbitration Association who is chosen by
the Employer and the Trustee. If the Employer and the Trustee cannot agree on
such a choice, each shall nominate a member of the American Arbitration
Association, and the two nominees will then select an arbitrator. Expenses of
the arbitration shall be paid as decided by the arbitrator.
(v) The Trustee is authorized to tape record conversations between the
Trustee and persons acting on behalf of the Plan or a participant in the Plan to
verify data on transactions.
(w) As stated in Article Number 4.8 of the Plan Document, each
participant and/or beneficiary may have investment power over the account
maintained for him or her, and may direct the investment and reinvestment of
assets of the account among the options authorized by the Administrator. Such
direction shall be furnished to the Trustee in writing or some other agreed
upon format established under procedures agreed to by the Trustee and
Administrator. To the extent provided under ERISA section 404(c), the Trustee
shall not be liable for any loss, or by reason of any breach, which results from
such participant's or beneficiary's exercise of control. If a participant who
has investment authority under the terms of the Plan fails to provide such
directions, the Administrator shall direct the investment of the participant's
account. The Administrator shall maintain records showing the interest of each
participant and/or beneficiary in the Trust Fund. The Trustee shall have no duty
or responsibility to review or make recommendations regarding investments made
at the direction of the Administrator or participant and shall be required to
act only upon receipt of properly authorized directions. A participant or
beneficiary shall not have authority to direct the investment of assets in his
or her account in "collectibles" within the meaning of Code section 408(m)(2).
Section 7.2 of the Plan and Trust Document has been amended to add:
<PAGE> 118
(f) To the extent permitted under applicable laws, to invest in deposits,
long and short term debt instruments, stocks, and other securities, including
those of the Trustee, The Charles Schwab Corporation (the "Public Company"),
Charles Schwab and Company, Inc. (the "Broker/Dealer"), their affiliates and
subsidiaries.
The following Section has been added:
7.13 AFFILIATED COMPANY
(a) The Trustee is authorized to contract or make other arrangements with
The Charles Schwab Corporation (the "Public Company"), Charles Schwab and Co.,
Inc. (the "Broker/Dealer"), their affiliates and subsidiaries, successors and
assigns, and any other organizations affiliated with or subsidiaries of the
Trustee or related entities, for the provision of services to the Trust or Plan,
except where such arrangements are prohibited by law or regulation.
(b) The Trustee is authorized to place securities orders, settle
securities trades, hold securities in custody, and other related activities on
behalf of the Trust through or by the Broker/Dealer whenever possible, unless
the Authorized Person specifically instructs the use of another broker/dealer.
Trades (and related activities) conducted through the Broker/Dealer shall be
subject to fees and commissions established by the Broker/Dealer, which may be
paid from the Trust or netted from the proceeds of trades.
Trades shall not be executed through the Broker/Dealer unless the Administrator
and the Authorized Person have received disclosure concerning the relationship
of the Broker/Dealer to the Trustee, and fees and commissions which may be paid
to the Public Company, Broker/Dealer, the Trustee and/or affiliates or
subsidiaries as a result of using the Broker/Dealer's execution of other
services.
The Trustee is authorized to disclose such information as is necessary to the
operation and administration of the Trust to the Public Company or any of its
affiliates, and to such other persons or organizations that the Trustee
determines have a legitimate business purpose for obtaining such information.
(c) At the Direction of the Administrator (or other Authorized Person),
the Trustee may purchase shares of regulated investment companies (or other
investment vehicles) advised by the Holding Company, Broker/Dealer or the
Trustee or any affiliate of any of them ("Schwab Funds") except to the extent
that such investment is prohibited by law or regulation.
Uninvested cash of the Trust may be invested in Schwab Funds designated
by the Administrator (or other Authorized Person) for that purpose, unless the
Administrator specifically instructs the use of another fund or account, except
to the extent prohibited by law or regulation.
Schwab Fund shares may not be purchased or held by the Trust unless the
Administrator has received disclosure concerning the Public Company's,
Broker/Dealer's, the Trustee's and/or their affiliate's or subsidiary's
relationship to the Funds, and any fees which may be paid to the Public Company,
Broker/Dealer, Trustee and/or their affiliates or subsidiaries.
Executed by the Employer this 2nd day of July , 1993.
----- --------------
TELXON CORPORATION
Dan R. Wipff, President
- ------------------------------ ------------------------------
Witness as to Employer Employer
- ------------------------------ ------------------------------
Witness as to Trustee Trustee
(Charles Schwab Trust Company)
Date:
-------------------------
<PAGE> 119
AMENDMENT NUMBER TWO TO THE
TELXON'S RETIREMENT AND UNIFORM MATCH:ING PROFIT SHARING PLAN
Effective Date: April 1, 1994
Section 1.14, "EMPLOYEE" of the Plan and Trust Document, is hereby amended to
include the following provision:
Employee shall not include any person rendering service on a temporary
basis (as determined by the usual or historical categories of employment
as established by the Employer or any of its affiliates), or employees
classified as casual labor, or else a person serving solely as a director
of the Employer or any of the Employer's affiliates.
Participants in the above classification will no longer be eligible for
participation on or alter the above effective date.
Executed by the Employer on the 1st day of April 1994
---------- ----------------- -
TELXON CORPORATION
/s/ Margaret E. Pais By /s/ Dan R. Wipff, President
- --------------------------------- ------------------------------
Witness as to Employer Employer
MICRO OFFICE SYSTEM TECHNOLOGY
/s/ Margaret E. Pais By /s/ Dan R. Wipff, President
- --------------------------------- ------------------------------
Witness to Participating Employer Participating Employer
TELETRANSACTION
/s/ Margaret E. Pais By /s/ Yung Fu Chang
- --------------------------------- ------------------------------
Witness to Participating Employer Participating Employer
PTC AIRCO
/s/ Margaret E. Pais By /s/ Dan R. Wipff, President
- --------------------------------- ------------------------------
Witness as to Participating Employer Participating Employer
<PAGE> 120
Page Two, continued
Effective Date; April 1, 1994
AMENDMENT NUMBER TWO TO THE
TELXON'S RETIREMENT AND UNIFORM MATCHING PROFIT SHARING PLAN
RETAIL TECHNOLOGY GROUP
/s/ Margaret E. Pais By /s/ Dan R. Wipff
- --------------------------------- ------------------------------
Witness as to Participating Employer Participating Employer
AIRONET CORPORATION
/s/ Margaret E. Pais By /s/ Robert A. Eberle, Secretary
- --------------------------------- ------------------------------
Witness as to Participating Employer Participating Employer
PENRIGHT! CORPORATION
/s/ Margaret E. Pais By /s/ Robert A. Eberle, Secretary
- --------------------------------- -------------------------------
Witness as to Participating Employer Participating Employer
METANETICS CORPORMON
/s/ Margaret E. Pais By /s/ Robert A. Eberle, Secretary
- --------------------------------- -------------------------------
Witness as to Participating Employer Participating Employer
<PAGE> 121
AMENDMENT NUMBER THREE TO THE
TELXON'S RETIREMENT & UNIFORM MATCHING PROFIT SHARING PLAN
Effective Date: January 1, 1994
Section 1.8 "Compensation" has been amended to add:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
Section 1.25 "414(s) Compensation" has been amended to add:
In addition to other applicable limitations set forth in the Plan, and
notwithstanding any other provision of the Plan to the contrary, for Plan Years
beginning on or after January 1, 1994, the annual Compensation of each Employee
taken into account under the Plan shall not exceed the OBRA '93 annual
compensation limit. The OBRA '93 annual compensation limit is $150,000, as
adjusted by the Commissioner for increases in the cost of living in accordance
with Code Section 401(a)(17)(B). The cost of living adjustment in effect for a
calendar year applies to any period, not exceeding 12 months, over which
Compensation is determined (determination period) beginning in such calendar
year. If a determination period consists of fewer than 12 months, the OBRA '93
annual compensation limit will be multiplied by a fraction, the numerator of
which is the number of months in the determination period, and the denominator
of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under Code Section 401(a)(17) shall mean the OBRA
'93 annual compensation limit set forth in this provision.
If Compensation for any prior determination period is taken into account
in determining an Employee's benefits accruing in the current Plan Year, the
Compensation for that prior determination period is subject to the OBRA '93
annual compensation limit in effect for that prior determination period. For
this purpose, for determination periods beginning before the first day of the
first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual
compensation limit is $150,000.
IN WITNESS WHEREOF, this Amendment has been executed as of this 31st day of
December, 1994.
TELXON CORPORATION
/s/ David B. Swank
- ---------------------------
Employer
<PAGE> 1
EXHIBIT 10.1.12.1
SUPPLEMENTAL PARTICIPATION AGREEMENT
A Participation Agreement made and entered into this 25th day of March,
1997, between Aironet Corporation (hereinafter referred to as the
"Participating Employer"), Telxon Corporation (hereinafter referred to as the
"Employer"), and Charles Schwab Trust Company (hereinafter referred to as the
"Trustees").
WHEREAS, the Participating Employer desires to reward its employees for
faithful service, to establish a bond between employer and employee, to provide
an incentive for efficient and conscientious work, to provide a fund for
retirement, disability or death, and to retain high-calibre fellow employees;
and
WHEREAS, there exists a 401(k) Retirement Savings Plan entered into on
the _______ day of 19__ namely the Tekon Retirement and Uniform Matching Profit
Sharing Plan, called the "Plan", between the Employer and the Trustees (a copy
being attached hereto as Exhibit "A" and made a part hereof by reference); and
WHEREAS, the Plan provides that any other Participating Employer may,
with the consent of the Employer adopt the Plan and participate therein by a
properly executed document evidencing said intent of said Participating
Employer;
NOW, THEREFORE, the Participating Employer hereby becomes a party to the
Plan, effective the 7th day of January, 1994, and the Employer and the
Trustees hereby consent to such adoption and participation upon the following
terms:
(1) Wherever a right or obligation is imposed upon the Employer by
the terms of the Plan, the same shall extend to the Participating
Employer as the "Employer" under the Plan and shall be separate
and distinct from that imposed upon the Employer. It is the
intention of the parties that the Participating Employer shall be
a party to the Plan and treated in all respects as the Employer
thereunder, 'with its employees to be considered as the Employees
or Participants, as the case may be, thereunder. However, the
participation of the Participating Employer in the Plan shall in
no way diminish, augment, modify, or in any way affect the rights
and duties of the Employer, its Employees, or Participants, under
the Plan.
(2) The Trustees hereby agree to receive and allocate
contributions made to the Plan by the Employer and by the
Participating Employer, as well as to do and perform all acts that
are necessary to keep records and accounts of all fluids held for
Participants who are Employees of the respective employers.
(3) The execution of this Agreement by this Participating Employer
shall be construed as the adoption of the Plan in every respect as
if said Plan had this date been executed between the Participating
Employer and the Trustees, except as otherwise expressly provided
herein or in any amendment that may subsequently be adopted
hereto.
(4) All actions required by the Plan and Trust to be taken by the
Employer shall be effective 'with respect to the Participating
Employer, and the Participating Employer hereby irrevocably
designates the Employer as its agent for such purposes.
<PAGE> 2
IN WITNESS WHEREOF, the Participating Employer, the Employer and the
Trustees have caused this Supplemental Participation Agreement to be executed in
their respective names on the day and date first above written.
Signed, sealed, and delivered
in the presence of:
AIRONET CORPORATION
By /s/ Robert Eberle
- -------------------------------------- ------------------------------------
PARTICIPATING EMPLOYER
/s/ Margaret E. Pais
- --------------------------------------
Witnesses as to Participating Employer
TELXON CORPORATION
By /s/ Fred L. Graf, Treasurer
- -------------------------------------- ------------------------------------
EMPLOYER
/s/ Margaret E. Pais
- --------------------------------------
Witnesses as to Employer
CHARLES SCHWAB TRUST COMPANY
By /s/ [signature illegible]
- -------------------------------------- ------------------------------------
TRUSTEE
/s/ [signature illegible]
- --------------------------------------
Witnesses as to Trustee
<PAGE> 3
CERTIFICATE OF CORPORATE RESOLUTION
The undersigned secretary of Aironet Corporation hereby certities that
the following resolutions were duly adopted by the board of directors of the
Corporation on March 25, 1999, and that such resolutions have not been modified
or rescinded as of the date hereof:
RESOLVED, that the form of Supplemental Participation Agreement of
Aironet Corporation, a Participating Employer, which evidences the adoption of
the 401(k) Retirement Savings Plan sponsored by Telxon Corporation is hereby
approved and adopted and that the proper officers of the Corporation are hereby
authorized and directed to execute and deliver to the Trustee of the Plan one or
more counterparts of the Supplemental Participation Agreement.
RESOLVED, that for purposes of the limitations on contributions and
benefits under the Plan prescribed by Section 415 of the Internal Revenue Code,
the "limitation year" shall be the Plan Year.
RESOLVED, that not later than the due date (including extensions hereof)
of the Corporation's federal income tax return for each of its fiscal years
hereafter, the Corporation shall contribute to the Plan for each such fiscal
year such amount as shall be determined by the board of directors of the
Corporation and that the Treasurer of the Corporation is authorized and directed
to pay such contribution to the Trustee of the Plan in cash or property and to
designate to the Trustee the year for which such contribution is made.
RESOLVED, that the proper officers of the Corporation shall act as soon
as possible to notify the employees of the Corporation of the adoption of the
401(k) Plan by delivering to each employee a copy of the summary description of
the Plan in the form of the Summary Plan Description presented to this meeting,
which form is hereby approved.
The undersigned further certities that attached hereto as Exhibits A, B
and C, respectively, are true copies of the Telxon Retirement and Uniform
Matching Profit Sharing Plan, Summary Plan Description and Funding Policy and
Method approved and adopted in the foregoing resolutions.
/s/ Robert Eberle
-------------------------------
Secretary
3-25-94
-------------------------------
Date
<PAGE> 1
EXHIBIT 10.1.13
ENROLLMENT INFORMATION FOR PROSPECTIVE PARTICIPANTS
IN THE
[TELXON CORPORATION LOGO] CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
-------------------------------------
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. IN CONSIDERING WHETHER AND TO
WHAT EXTENT YOU WISH TO INVEST IN THE COMPANY'S COMMON STOCK THROUGH
PARTICIPATION IN THE TELXON CORPORATION 1995 EMPLOYEE STOCK PURCHASE PLAN, YOU
SHOULD READ AND UNDERSTAND THIS AND THE OTHER DOCUMENTS WHICH ARE ALSO PART OF
THAT PROSPECTUS, AS WELL AS THE INFORMATION CONCERNING THE COMPANY INCORPORATED
BY REFERENCE HEREIN. ANY QUESTIONS YOU MAY HAVE AFTER REVIEWING THE ABOVE
DOCUMENTS SHOULD BE DIRECTED TO THE COMPANY'S AKRON HUMAN RESOURCES DEPARTMENT
AT 1-800-800-8001.
-------------------------------------
NOVEMBER 23, 1998
<PAGE> 2
CONTENTS
Information Regarding the Plan............................................... 1
Information Regarding the Company............................................ 2
Available Information........................................................ 3
1995 Employee Stock Purchase Plan......................................Exhibit A
--------------------------
LIKE ANY OTHER INVESTMENT IN STOCK, ANY MONEYS YOU SPEND FOR THE PURCHASE OF
SHARES OF THE COMPANY'S COMMON STOCK THROUGH PAYROLL DEDUCTION CONTRIBUTIONS TO
THE PLAN WILL BE AT RISK. MARKET PRICES FOR ANY STOCK FLUCTUATE DAY-TO-DAY BASED
ON COMPANY PERFORMANCE, GENERAL BUSINESS CONDITIONS, NATIONAL AND INTERNATIONAL
ECONOMIC AND POLITICAL EVENTS AND OTHER FACTORS. IN PARTICULAR, THE MARKET PRICE
FOR THE COMPANY'S STOCK HAS BEEN VOLATILE; HISTORICALLY, CHANGES IN THE
COMPANY'S ACTUAL OR EXPECTED OPERATING RESULTS HAVE RESULTED IN SIGNIFICANT
CHANGES IN ITS STOCK PRICE.
--------------------------
NEITHER THIS DOCUMENT NOR ANY OTHER DOCUMENT PROVIDED TO EMPLOYEES IN CONNECTION
WITH THE OFFERING OF SECURITIES UNDER THE PLAN CONSTITUTES AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION.
--------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT AND ANY OTHER
DOCUMENTS CONSTITUTING A PART OF THE PROSPECTUS AND IN DOCUMENTS FILED BY THE
COMPANY WITH THE SEC WHICH ARE REFERRED TO IN THIS DOCUMENT. THE COMPANY HAS NOT
AUTHORIZED ANYONE TO PROVIDE YOU WITH ANY DIFFERENT OR ADDITIONAL INFORMATION.
IN RELYING ON SUCH INFORMATION, YOU SHOULD NOT ASSUME THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE OF THE DOCUMENT IN WHICH IT
IS CONTAINED OR ANY EARLIER DATE THERE INDICATED AS OF WHICH SUCH INFORMATION IS
PROVIDED.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL, STATE OR
FOREIGN SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY HAS APPROVED OR
DISAPPROVED OF THE SECURITIES OFFERED PURSUANT TO THE PLAN OR PASSED UPON THE OR
ADEQUACY OR ACCURACY OF THIS DOCUMENT OR ANY OTHER DOCUMENT CONSTITUTING A PART
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
<PAGE> 3
INFORMATION REGARDING THE PLAN
Through the Telxon Corporation 1995 Employee Stock Purchase Plan (the
"Plan"), you and other eligible employees of the Company and its participating
subsidiaries have the opportunity to purchase shares of the Common Stock, par
value $0.01 per share, of the Company through payroll deductions at a 15%
discount from market price. The Company's Common Stock is traded on The Nasdaq
National Market tier of The Nasdaq Stock Market (ticker symbol TLXN).
The Plan was established to promote the interests of the Company and its
stockholders by providing employees with additional incentive to continue in
their employment and encouraging them to make increased efforts to promote the
best interests of the Company. The Plan is neither qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended, nor subject to any of
the provisions of the Employee Retirement Income Security Act of 1974 (commonly
known as "ERISA").
The Plan is administered by the Option and Stock Committee (the
"Committee") of the Company's Board of Directors. The membership of the
Committee is annually appointed by the Board from among its members. The
Company's Board of Directors is classified into three classes, each of which
classes serves for a three year term, with one class being elected by the
Company's stockholders at each annual meeting. A Director is subject to removal
from the Board only for cause and only upon the affirmative vote of the holders
of at least 80% of the voting power of the stockholders entitled to elect the
Director.
A copy of the Plan is attached as Exhibit A. You should be carefully
study the Plan for a complete understanding of its terms and the respective
rights and obligations of the Company and employee participants thereunder.
1
<PAGE> 4
INFORMATION REGARDING THE COMPANY
As a publicly traded company, the Company is required to file periodic
reports, proxy and information statements and other information with the SEC. In
addition, the Company has filed a Registration Statement on Form S-8 with
respect to the Shares issuable under the Plan; as prepared in accordance with
the applicable SEC rules and regulations, the prospectus of which this document
is a part does not contain all of the information set forth in the Registration
Statement. You may read and copy the Registration Statement, as well as the
other reports, proxy and information statements and other information filed by
the Company with the SEC, at the SEC's Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549. For information on the operation of the
Public Reference Room, you can call the SEC at 1-800-SEC- 0330. In addition, the
SEC maintains an Internet site (web address - http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding the
Company. You can also access the SEC's database of the Company's filings through
the Company's Internet site (web address - http://www.telxon.com).
Because the following documents have already been or will be filed by the
Company with SEC, the information concerning the Company contained in these
filings is incorporated by reference into the prospectus of which this document
is a part in lieu of including that information directly in the prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, as amended by Amendments No.1 and 2 thereto, each
on Form 10-K/A (as so amended, the "Form 10-K"),
(b) The Company's Current Report on Form 8-K dated April 21, 1998,
(c) The Company's Current Report on Form 8-K dated May 8, 1998,
(d) The Company's Current Report on Form 8-K dated June 5, 1998,
(e) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998, as amended by Amendment No.1 thereto on Form 10-Q/A,
(f) The Company's Current Report on Form 8-K dated July 20, 1998,
(g) The Company's Current Report on Form 8-K dated August 26,
1998,
(h) The Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1998,
(i) The Company's Current Report on Form 8-K dated October 20,
1998,
(j) All other reports filed by the Company with the SEC pursuant
to Sections 13(a) or 15(d) of the Exchange Act subsequent to the Form
10-K and prior to the filing of a post-effective amendment indicating
that all of the Shares have been sold or deregistering all such Shares
then remaining unsold, and
2
<PAGE> 5
(k) The description of the Common Stock set forth under the
caption "Item 1. Description of Registrant's Securities to be Registered"
in the Registration Statement on Form 8-A filed by the Company with
respect to the Common Stock pursuant to Section 12(g) of the Exchange
Act, as amended by Amendment No.1 thereto filed under cover of a Form 8
and Amendment No. 2 thereto filed on Form 8-A/A.
AVAILABLE INFORMATION
You may request, orally or in writing, copies of the following
documents from the Company, which will be provided to you free of charge:
- all of the documents listed in (a) through (k) immediately
above (excluding any exhibits to such documents unless such
exhibits are specifically incorporated by reference into
the Registration Statement on Form S-8 which is filed with
the SEC with respect to the Common Stock issuable under the
Plan),
- all documents constituting part of the prospectus under the
Form S-8 Registration Statement, and
- all reports, proxy statements and other communications
distributed by the Company to its stockholders generally.
Of the above documents, a copy of the Company's Form 10-K for its most recent
fiscal year ended March 31, 1998 accompanies this document. You should direct
requests for copies of any of the above documents to Telxon Corporation, 3330
West Market Street, Akron, Ohio 44333, Attention: Vice President, Human
Resources/Administration; telephone 1-800-800-8001.
3
<PAGE> 6
EXHIBIT A
TELXON CORPORATION
1995 EMPLOYEE STOCK PURCHASE PLAN
(AS AMENDED THROUGH SEPTEMBER 26, 1995)
1. PURPOSE OF THE PLAN. The Plan is intended as an incentive to and to
encourage stock ownership by all Eligible Employees of the Company and
Participating Subsidiaries so that they may share in the fortunes of the
Company by acquiring or increasing their proprietary interest in the Company.
The Plan is designed to encourage Eligible Employees to remain in the employ of
the Company. It is intended that options granted pursuant to this Plan shall
constitute options issued pursuant to an "employee stock purchase plan" within
the meaning of Section 423 of the Code.
2. DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this Plan
have the respective meanings set forth below:
(a) "Business Day" means a day on which there is trading in the
Common Stock on the Principal Market
(b) "Base Compensation" means an employee's annual base salary, or
if not salaried, annualized amount of hourly pay (including any shift or
other compensatory premium which employee will regularly receive) based
on the employee's regular weekly or biweekly hours, for services rendered
to the Company and Participating Subsidiaries, including paid vacation
and holidays and before adjustment for salary reduction contributions to
the Company's 401(k) plan, health care or dependent care spending
accounts and similar pre-tax plans but excluding bonuses and commissions.
(c) "Closing Price" means the closing price for one share of
Common Stock on the Principal Market.
(d) "Code" means the Internal Revenue Code of 1986, as amended
ftom time to time.
(e) "Committee" means the Stock Option and Restricted Stock
Committee of the Board of Directors.
(f) "Common Stock" means the Common Stock, par value $.O1 per
share, of the Company.
(g) "Company" means Telxon Corporation, a Delaware corporation.
1
<PAGE> 7
(h) "Covered Compensation" means an employee's Base Compensation
plus bonuses, commissions, overtime and other premium payments, sick pay,
and short-term disability payments but excluding severance pay and
taxable fringe benefits (such as club dues, excess life insurance and
personal automobile use); provided, however, that no more than $150,000
in cumulative aggregate amount of all of the foregoing forms of included
compensation during any single Payment Period or two Payment Periods
together comprising a single calendar year may be counted as Covered
Compensation for purposes of any payroll deductions, stock purchases or
other computations under this Plan with respect to such Payment
Period(s).
(i) "Eligible Employees" shall have the meaning set forth in
Section 3.
(j) "Option Price" means, in respect of each Payment Period, the
dollar amount (carried out to one one-thousandth of a cent ($0.00001))
equal to 85% of the lesser of (i) the Closing Price of the Common Stock
on the first Business Day of the Payment Period and (ii) the Closing
Price of the Common Stock on the last Business Day of the Payment Period.
(k) "Participating Subsidiaries" means any majority-owned
subsidiary of the Company which is designated by the Committee to
participate in the Plan. The Committee shall have the power to make such
designation before or after the Plan is approved by the Company's
stockholders.
(l) "Payment Period" means the six month periods during which
payroll deductions will be accumulated under the Plan.
(m) "Plan" means this Telxon Corporation 1995 Employee Stock
Purchase Plan.
(n) "Principal Market" means The Nasdaq Stock Market's National
Market or stock exchange which is then the principal trading market for
the Common Stock (if the Common Stock is traded on more than one market,
that market which the Committee determines to be the principal trading
market).
(o) "Securities Law Requirements" means the Securities Act of
1933, the Securities and Exchange Act of 1934 and the rules and
regulations promulgated by the Securities and Exchange Commission
thereunder, including but not limited to Rule 16b-3, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of and releases published or other interpretative advice
provided by the Staff of the Securities and Exchange Commission. and the
requirements of any stock exchange, automated interdealer quotation
system or other recognized securities market on which the Common Stock is
listed or traded on in which the Common Stock is included, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and other interpretative advice provided by, the
representatives of such stock exchange, quotation system or other
securities market.
2
<PAGE> 8
3. ELIGIBLE EMPLOYEES. Each full-time employee of the Company or any of
its Participating Subsidiaries, and each part-time employee thereof regularly
working at least 20 hours per week or 40 hours every two weeks, who has
completed 12 months of continuous employment with the Company and/or one or more
of its Participating Subsidiaries and whose Base Compensation does not exceed
$150,000 shall be eligible to receive options under this Plan to purchase Common
Stock (except employees in countries whose laws make participation impractical).
Persons who have been so employed for 12 months or more on the first day of a
Payment Period shall receive their options as of such day. The determination of
an employee's Plan eligibility with respect to the Base Compensation limitation
will be made only as of the beginning of each Payment Period, based on the rate
of Base Compensation he or she is then receiving, without regard to any changes
in his or her Base Compensation that may subsequently be made during that
Payment Period (including any changes given retroactive effect to a date prior
to the commencement of the Payment Period). Except as otherwise provided in
Section 14, all other eligibility requirements must be satisfied at all times
throughout the Payment Period until and including the third Friday of the last
month of such Payment Period or, in the case of the requirement that a
participant be employed by the Company or a Participating Subsidiary, up until
and including the last Business Day of such Payment Period (provided that, after
the third Friday of the last month of the Payment Period, satisfaction of said
employment conditions shall be determined without regard to the full-time and
part-time minimum hour requirements of the first sentence of this Section 3,
which full-time and part-time minimum shall apply for that Payment Period only
through said third Friday). All participating employees satisfying the
eligibility requirements of the Plan as of said third Friday or last Business
Day of the Payment Period as provided in the preceding sentence shall be
entitled to purchase shares on the last Business Day of such Payment Period as
provided in this Plan. Any employee eligible to and duly participating in the
Plan as of the beginning of a Payment Period but who at any time during that
Payment Period loses his or her status as an Eligible Employee will be deemed to
have lost such status, and to have withdrawn from participation in the Plan as
described in Section 10, effective as of the beginning of the regular payroll
period during which he or she ceases to satisfy any such requirement; provided,
however, that if such ineligibility is the result of the termination of his or
her employment, the provisions of Section 15 shall, subject to the provisions of
Section 14, control over the foregoing provisions of this sentence.
In no event may an employee be granted an option if such employee,
immediately after the option is granted, owns stock representing 5% or more of
the total combined voting power or value of all classes of stock of the Company.
For purposes of determining stock ownership under this paragraph, the rules of
Section 425(d) of the Code shall apply, and stock which the employee may
purchase under outstanding options shall be treated as stock owned by the
employee.
4. STOCK SUBJECT TO THE PLAN. The total number of shares of Common Stock
that may be optioned under the Plan is 500,000 shares, which may consist, in
whole or in part, of unissued shares or treasury shares.
5. PAYMENT PERIODS AND GRANT OF OPTIONS. The six-month periods, January 1
to June 30 and July 1 to December 31, are the Payment Periods during which
payroll deductions will be accumulated under the Plan.
3
<PAGE> 9
Two times each year, on the first Business Day of each Payment Period,
each Eligible Employee who is then a participant in the Plan will automatically
be granted by the Company an option to purchase, on the last Business Day of
such Payment Period, at the applicable Option Price, such number of whole
shares of the Common Stock reserved under this Plan as such employee is
entitled to purchase under this Plan with the payroll deductions authorized and
credited to his or her account during each Payment Period in accordance with the
terms hereof; up to that number of shares which does not exceed 15% of the
employee's Covered Compensation during the Payment Period divided by the Option
Price, provided that such employee remains eligible to participate in the Plan
as provided herein. The participant shall be entitled to exercise such options
as granted only to the extent of his or her unused payroll deductions
accumulated as of the third Friday of the last month of a Payment Period.
Deductions after the third Friday of the last month of a Payment Period shall be
included in the subsequent Payment Period.
No employee shall be granted an option which permits his or her rights to
purchase Common Stock under the Plan and any similar plans of the Company or any
parent or subsidiary corporations to accrue at a rate which exceeds $25,000 of
fair market value of such stock (determined at the time such option is granted)
for each calendar year in which such option is outstanding at any time. The
purpose of the lImitation in the preceding sentence is to comply with Section
423(b)(8) of the Code.
6. EXERCISE OF OPTIONS. Each Eligible Employee who continues to qualify
as such as of the last Business Day of a Payment Period, or would have been a
continuing participant in the Plan as of such date had he or she not withdrawn,
or been deemed to have withdrawn, from participation pursuant to Section 10,
shall be deemed by his or her payroll deduction contributions to the Plan during
such Payment Period to have irrevocably stated his or her intention to exercise
his or her option on the last Business Day of such Payment Period and shall be
deemed to have purchased from the Company such number of whole SIres of the
Common Stock reserved for the purposes of the Plan as his or her unused payroll
deductions accumulated as of the third Friday of the last month of such Payment
Period will pay for at the Option Price. If a participant is not an employee of
the Company or any Participating Subsidiary on the last Business Day of a
Payment Period, he or she shall not be entitled to exercise his or her option.
7. AUTHORIZATION FOR ENTERING PLAN. An employee may enter the Plan by
filling out, signing and delivering to the Company's Human Resources Department
a written "Authorization", in form and manner satisfactory to the Company:
(a) stating the whole percentage of Covered Compensation to be deducted
regularly from his or her pay; and
(b) authorizing the purchase of stock for him or her in each Payment
Period in accordance with the terms of the Plan.
4
<PAGE> 10
Such Authorization must be received by the Company's Human Resources
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
The Company will accumulate as a credit for the employee's account the
authorized deductions made from his or her pay. No interest will be paid on such
accumulated amounts.
8. AMOUNT OF PAYROLL DEDUCTIONS. An employee may authorize payroll
deductions in a whole percentage amount not less than 1% but not more than 15%
of his or her Covered Compensation received during the Payment Period. Covered
Compensation is considered received on the date a payroll check for, or direct
deposit of; the net amount thereof due employee is issued or made by the Company
(provided, however, that any commission or other advances are not considered
Covered Compensation received until the date such advanced amount has been
actually earned and would have regularly been paid had such amount not been
advanced), and deductions therefrom authorized for purchases of Common Stock
under this Plan are considered made at the time of the issuance or making of the
related check or deposit and not as of the date as of which the associated
Covered Compensation was earned or accrued.
9. CHANGE IN PAYROLL DEDUCTIONS. An employee may increase or decrease
(including to zero) his or her rate of payroll deduction effective only as of
the beginning of a Payment Period and, except as otherwise provided in Section
10, not as of any other time. A new written Authorization will be required to
effect any such change and must be received by the Company's Human Resources
Department no later than the third Friday of the last month of a Payment Period
in order to be effective for the following Payment Period.
10. WITHDRAWAL FROM PARTICIPATION. An employee may withdraw from
participation in the Plan, in whole but not in part, at any time by delivering
to the Company's Human Resources Department a written "Withdrawal", in form and
manner satisfactory to the Company, indicating such employee's intent to
withdraw. Deductions will be stopped as soon as practicable, and deductions
accumulated during such Payment Period prior to the discontinuation of
deductions will be applied to the purchase of stock as of the end of the Payment
Period. Once made, a Withdrawal is irrevocable for the balance of that Payment
Period, and no further contributions can be made during that Payment Period.
An employee who withdraws or is deemed to have withdrawn from the Plan as
provided in this Section 10 will be treated (other than with respect to the
purchase of stock with his or her accumulated pre-withdrawal deductions) as an
employee who has never entered the Plan. To resume participation in the Plan in
any future Payment Period (which resumed participation will be effective only as
of the beginning of such Payment Period), he or she must file a new
Authorization by the third Friday of the last month of the preceding Payment
Period.
5
<PAGE> 11
11. ESTABLISHMENT OF BROKERAGE ACCOUNT. By enrolling in the Plan, each
participating employee will be deemed to have authorized the establishment of a
brokerage account in his or her name at such securities brokerage firm as may be
designated from time to time by the Committee and to have consented to the
sharing by such brokerage firm with the Company of information regarding the
disposition of shares from said brokerage account
12. ISSUANCE OF STOCK. Stock purchased under the Plan will be issued, or
in the event the Committee establishes brokerage accounts pursuant to Section
11, held in an account, in the name of the employee, or if his or her
Authorization so designates, in the name of the employee and another person of
legal age as joint tenants with rights of survivorship, unless prohibited by
state or local law. Stock will be issued to or for the account of a
participating employee or his or her designee as of the end of each Payment
Period in an amount equal to the number of shares calculated by dividing his or
her unused payroll deductions accumulated as of the third Friday of the last
month of such Payment Period by the Option Price, rounded down to the nearest
whole share. No fractional shares will be issued or accrued, but the excess of
an employee's accumulated payroll deductions over the aggregate Option Price for
the whole number of shares that can be purchased with such accumulated
deductions with respect to such Payment Period will be carried forward for the
employee's account under the Plan until applied to the purchase of shares in
future Payment Periods or refunded pursuant to the provisions of the Plan. The
Committee may establish a procedure for the refund of such carried-forward
balance to requesting employees who do not continue participation in the Plan
during the Payment Period (or number of Payment Periods specified by the
Committee) subsequent to the Payment Period with respect to which such excess
arises.
13. NO TRANSFER OR ASSIGNMENT OF EMPLOYEE'S RIGHTS. An employee's rights
under the Plan are his or hers alone and may not be transferred, assigned, or be
availed of by any other person. Any option granted to an employee may be
exercised only by him or her.
14. SUSPENSION OF PARTICIPATION. An employee's leave of absence (absence
from active employment not involving authorized vacation, death, retirement,
resignation, discharge, reduction-in-force or layoff, such as due to disability,
illness, compensable or non-compensable injury, personal emergency or other
approved personal leave) shall not have any effect on his or her eligibility to
participate in the Plan, and if such employee was participating in the Plan at
the time such leave commenced, his or her deductions shall be automatically
suspended for the duration of such leave (which suspension shall not constitute
a withdrawal from the Plan subject to Section 10) and, upon such employee's
resumption of an eligible level of active employment, shall automatically resume
at the pre-suspension amount authorized by the employee unless the employee has
properly submitted a revised Authorization in the interim; provided that if the
employee receives Covered Compensation, or payments in lieu thereof; from the
Company during any such leave of absence (such as, for example, short-term
disability benefits), the deduction rate authorized by the employee prior to
such leave (or if the employee has properly submitted a revised Authorization,
at the level specified therein) shall be applied to all such amounts so paid
during such leave of absence.
6
<PAGE> 12
15. TERMINATION OF EMPLOYEE'S RIGHTS. Except as otherwise provided in
Section 14, an employee's rights under the Plan will terminate when he or she is
no longer employed by the Company or any Participating Subsidiary, whether
because of retirement, resignation, discharge, death, or for any other reason.
All accumulated payroll deductions not used to purchase stock as of the date of
such cessation of employment will be refunded to the former employee or, in the
event of an employee's death, to his or her estate as an adjustment to such
former employee's final paycheck.
16. TERMINATION OF AND AMENDMENTS TO THE PLAN. The Plan may be terminated
at any time by the Committee. It will terminate in any case when all or
substantially all of the shares of stock reserved for the purposes of the Plan
have been purchased. If at any time shares of stock reserved for the purpose of
the Plan remain available for purchase but not in sufficient number to satisfy
all then unfilled purchase requirements, the available shares shall be
apportioned among participants in proportion to their options, and the Plan
shall terminate. Upon such termination or any other termination of the Plan, all
payroll deductions not used to purchase stock will be refunded.
The Committee also has authority to amend the Plan from time to time in
any respect; provided, however, that no amendment shall be effective without
prior approval of the stockholders of the Company, which would (a) except as
provided in Section 23, increase the number of shares of Common Stock to be
offered above, or (b) change the class of employees eligible to receive options
under the Plan.
17. LIMITATIONS ON SALE OF STOCK PURCHASED UNDER THE PLAN. The Plan is
intended to provide Common Stock for investment and not for resale. The Company
does not, however, intend to restrict or influence any employee in the conduct
of his or her own affairs. An employee may, therefore, sell or otherwise dispose
of stock purchased under the Plan at any time he or she chooses; provided,
however, so that the Company is able to properly account for the consequences
that a disposition of shares purchased under the Plan under the United States
income tax laws, each employee agrees by his or her participation in the Plan to
(a) notify the Company in writing of any withdrawal of shares from the brokerage
account established pursuant to Section 11 and any related sale or other
disposition of the withdrawn shares within ten days thereof, (b) provide such
further information. and otherwise cooperate with the Company in taking such
further steps (which may include the legending of the withdrawn shares), as the
Company may reasonably request to enable it to properly account for such tax
consequences of the transaction described in the notification and any subsequent
sale or other disposition of the withdrawn stock, and (c) if the withdrawal does
not involve a sale or other disposition which is reported on that initial
notification. provide the Company with written notice of any subsequent sale or
other disposition of that withdrawn stock within ten days after the making
thereof An employee shall be obligated to provide such notices and cooperation
under the preceding sentence where such withdrawal, sale or other disposition
occurs within (i) two years after the date of grant of the applicable option. or
(ii) one year after the transfer of such stock to such employee. The Company may
waive such written notification requirement to the extent that it is able to
obtain the necessary information from the brokerage firm designated and serving
pursuant to Section 11. The employee assumes the risk of all market fluctuations
in the price of all stock acquired hereunder.
7
<PAGE> 13
18. PLAN EXPENSES. The Company will bear all costs of administering and
carrying out the Plan.
19. ADMINISTRATION OF THE PLAN. The Plan shall be administered by the
Committee. Acts by a majority of the Committee, or acts reduced to or approved
in writing by a majority of the members of the Committee, shall be the valid
acts of the Committee.
The interpretation and construction of the Plan are antrusted to the
discretion of the Committee, and its interpretation and construction of any
provisions of the Plan or of any option granted under it shall be final. The
Committee may from time to time adopt such rules and regulations for carrying
out the Plan as it may deem best. No member of the Board of Directors or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any option granted under it
20. NO EMPLOYMENT RIGHTS. The existence of this Plan shall not create in
any employee any right to be granted an option or to purchase Common Stock
hereunder. Neither the existence of this Plan nor the granting of any option
hereunder to any employee shall confer upon such employee any right to the
continuation of his or her employment with the Company or any subsidiary thereof
or shall in any way interfere with or otherwise limit the right which such
employee, the Company or any subsidiary may otherwise have to terminate such
employment at any time with or without cause. Any benefits realized by an
employee under this Plan or any option granted hereunder shall not be deemed a
part of such employee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay laws of any jurisdiction and shall not
be included in, or have any effect on, the determination of benefits under any
such law or, except as otherwise expressly provided thereby or determined in the
discretion of the person or group authorized to administer the same, any other
employee benefit plan or similar arrangement in which an employee may otherwise
be eligible to participate.
21. OPTIONEES NOT STOCKHOLDERS. Neither the granting of an option to an
employee nor the deductions from his or her pay shall constitute such employee
the owner of the shares covered by an option until such shares have been
purchased by him or her.
22. APPLICATION OF FUNDS. The proceeds received by the Company from the
sale of Common Stock pursuant to options granted under the Plan may be used by
the Company for any corporate purpose. The Company shall have no obligation to
segregate employees' payroll deductions from any other funds of the Company or
to hold funds representing the same pending the application thereof in
accordance with this Plan.
8
<PAGE> 14
23. CHANGES IN CAPITAL. If the Common Stock subject to the Plan shall at
any time be changed or exchanged by declaration of a stock dividend, stock
split, combination of shares, recapitalization, merger, consolidation or other
corporate reorganization in which the Company is the surviving corporation, the
number and kind of shares subject to this Plan and the Option Price shall be
appropriately and equitably adjusted. In the event of a dissolution or
liquidation of the Company or a merger, consolidation, sale of all or
substantially all of its assets, or other corporate reorganization in which the
Company is not the surviving corporation, or any merger in which the Company is
the surviving corporation but the holders of its Common Stock receive securities
of another corporation, the then current Payment Period shall be deemed to end
as of the Business Day prior to the effective date of such transaction such that
all then accumulated payroll deductions shall be applied to the purchase of
Common Stock in accordance with the provisions hereof. Other than giving effect
to the provisions of this Section 23, the existence of the Plan or options
hereunder shall not in any way prevent any transaction described herein, and no
holder of an option shall have the right to prevent such transaction.
24. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of Shares pursuant thereto shall comply with all applicable Securities
Law Requirements and all other applicable provisions of law, including, without
limitation, any applicable state "blue sky" laws and foreign (national and
local) securities laws and the rules and regulations promulgated under any of
such laws, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares
upon exercise of an Option, the Company may require the person exercising such
Option to make such representations and warranties to the Company as may be
required, in the opinion of counsel for the Company, by any of the
aforementioned Securities Law Requirements and other laws, which may include,
without limitation, representations and warranties that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
The Company shall not have any liability to any Plan participant in
respect of any delay in the sale or issuance of Shares hereunder until the
Company is able to obtain governmental authority (domestic or foreign) or the
authority of a self-regulatory organization having jurisdiction over it, which
authority is deemed by the Company's counsel to be necessary to the lawful sale
and issuance of such Shares, or any failure to sell or issue such Shares as to
which such requisite authority the Company is unable to obtain.
25. GOVERNING LAW. To the extent the laws of the United States (such as
the Code) or the Delaware General Corporation Law do not otherwise control, this
Plan and all determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio, without regard to principles of
conflicts of laws, and construed accordingly.
26. CAPTIONS. The captions contained in this Plan are for convenience of
reference only and shall not affect the meaning of any term or provisions
hereof.
9
<PAGE> 15
27. APPROVAL OF STOCKHOLDERS; IMPLEMENTATION OF PLAN. This Plan was
adopted by the Company's Board of Directors subject to and to become effective
only upon approval hereof by the Company's stockholders, which approval was
obtained at the Annual Meeting of such stockholders held August31, 1995. The
Plan shall begin operation using an initial three month transitional Payment
Period ending December 31, 1995, for the purposes of which initial Payment
Period the Closing Price on September 1, 1995 shall be used as the initial
Closing Price called for by Section 2(j)(i) for purposes of determining the
Option Price, October 1, 1995 shall be used as the date for measuring employees'
length of continuous service and Base Compensation for purposes of determining
their eligibility to participate in the Plan, and October 20, 1995 shall be used
as the initial date as of which payroll deductions shall begin to accumulate
under the Plan. Except as specifically provided otherwise in this Section 27,
the Plan shall, during and with respect to said initial Payment Period, be
governed by and administered in accordance with the provisions of the foregoing
Sections 1 through 26 of this Plan. With respect to all Payment periods
beginning on or after January 1, 1996, the Payment Periods, related
determinations of the Option Price and employee eligibility and accumulation of
payroll deductions, and all other matters arising under the Plan shall be
governed by and administered in accordance with the provisions of this Plan
without regard to the transitional rules set forth for the initial
implementation of the Plan as set forth in this Section 27.
10
<PAGE> 1
Exhibit 10.2.1
AGREEMENT OF LEASE
by and between
TELXON CORPORATION
Landlord
and
AIRONET WIRELESS COMMUNICATIONS, INC.
Tenant
for
91 Springside Drive
Akron, Ohio 44333-2428
<PAGE> 2
BASIC LEASE INFORMATION
-----------------------
LANDLORD: Telxon Corporation
LANDLORD'S 3330 West Market Street
ADDRESS: Akron, Ohio 44333
TENANT: Aironet Wireless Communications, Inc.
TENANT'S 3875 Embassy parkway, Suite 350
ADDRESS: Akron, Ohio 44333
LEASED 91 Springside Drive
PREMISES: Akron, Ohio 44333-2428
PERMITTED USES: General office and light manufacturing
RENTABLE SQUARE
FEET 33,000
ANNUAL RENT: $165,000.00 ($13,750.00 per month) or Five Dollars
($5.00) per square foot, net of all operating costs
COMMENCEMENT DATE: April 1, 1998
<PAGE> 3
LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease") is entered into effective the 1st day of
April 1998 by and between TELXON CORPORATION, a Delaware corporation,
("Landlord") and AIRONET WIRELESS COMMUNICATIONS, INC., a Delaware corporation
("Tenant")
1. LEASED PREMISES.
Landlord, in consideration of the rents to be paid and covenants to be performed
by Tenant hereunder, hereby leases to Tenant for the term and subject to the
covenants and conditions hereinafter set forth, the premises located at 91
Springside Drive Akron, Ohio 44333 and consisting of approximately Thirty-three
Thousand (33,000) square feet (herein the "Premises").
2. TERM.
The term of this Lease will be commencing on the first (1st) day of April, 1998,
and ending on the thirty-first (31st) day of August, 1999. In the event Landlord
sells the Premises, Landlord may cancel the Lease by giving Tenant twelve (12)
months advance written notice of such cancellation. Upon receipt of such notice,
Tenant shall have the right to terminate the Sublease Agreement entered into
between Telxon Corporation and Aironet Wireless Communications, Inc. on
September 1, 1998, for the premises located at the Waterford Building, 3875
Embassy Parkway, Bath, Ohio, pursuant to Section 3.b. of such Sublease.
3. RENT.
Tenant will pay Landlord as rent for the Premises during the term of this Lease,
the annual sum of One hundred Sixty-five Thousand Dollars ($165,000.00), in
equal monthly installments of Thirteen Thousand Seven Hundred Fifty Dollars
($13,750.00), payable on or before the first day of each month of said Term. As
additional rent, Tenant shall pay all operating costs related to the Premises.
The above sums collectively referred to as "Rent".
4. OPTION TO RENEW.
Upon delivery of written notice by Tenant to Landlord, which delivery shall take
place no later than June 1, 1999, Tenant shall have an option to renew the Lease
for an eighteen (18) month term at an annual rent of One Hundred Seventy-three
Thousand Two Hundred Fifty Dollars ($173,250.00), in equal monthly installments
of Fourteen Thousand Four Hundred Thirty-seven and 50/100 Dollars ($14,437.50),
payable on or before the first day of each month of said Renewal Term, net of
all operating costs, and upon the same terms and conditions as contained herein.
5. USE OF PREMISES.
Tenant will use the Premises for offices for carrying on the business of Aironet
Wireless Communications, Inc. and any lawful use relevant thereto. Tenant will
not commit or suffer any waste in the Premises, use the Premises or permit them
to be used for any unlawful purpose or any dangerous, noxious or offensive
activity or cause or maintain any nuisance in the Premises. At the end of the
term of this Lease, Tenant will deliver up the Premises in as good an order and
condition as they now are, or may be put by Landlord or Tenant, reasonable use
and ordinary wear and tear thereof and damage by fire or other casualty
excepted. Tenant shall not store hazardous, flammable or dangerous materials on
the Premises or hazardous waste, as defined by the U.S. EPA or Ohio EPA.
<PAGE> 4
6. DAMAGE OR DESTRUCTION TO PREMISES.
This Lease is made on the condition that, if the Premises or any part thereof is
damaged or destroyed by fire or other casualty from any cause, so as to render
the Premises unfit for use and occupancy, a just and proportionate part of the
Rent, according to the nature and extent of the damage to the Premises, shall be
suspended or abated until such time as the Premises has been put in such
condition as it was immediately prior to such damage or destruction. If the
Premises are rendered untenantable by fire or other casualty, and are unable to
be repaired within a reasonable time Tenant will vacate the Premises within 10
business days and will pay no further rent following the damage or destruction
and Landlord will refund to Tenant the unearned portion of any rent paid in
advance prorated to the date of damage or destruction.
7. CONDITION OF PREMISES.
The Premises is leased AS IS and in the condition it is in at the time the Lease
commences. Tenant acknowledges that neither Landlord nor Landlord's agent has
made any representation or warranty as to the present or future suitability of
the Premises, and that no agreement or promise to repair or improve the
Premises, either before or after the execution hereof, not contained herein, has
been made by Landlord or Landlord's agent. No holding over by Tenant hereunder
shall constitute a renewal or extension of this Lease except upon written
consent of Landlord.
8. UTILITIES.
Tenant shall pay for all water, gas, heat, light, power, telephone and other
utilities and services supplied to the Premises, together with any taxes
thereon. If any such services are not separately metered to Lessee, Lessee shall
pay a reasonable proportion to be determined by Lessor of all charges jointly
metered with other Premises.
9. ASSIGNMENT AND SUBLEASE.
Tenant will not assign this Lease or sublet the Premises, or any part thereof,
without the prior written consent of Landlord.
10. MAINTENANCE OF THE LEASED PREMISES.
Tenant shall at all times keep the Leased Premises (including, without
limitation, the foundation, roof and exterior and structural portions of the
walls, the interior walls and all entrances and vestibules, the parking areas,
landscaping, roadways and sidewalks of the Leased Premises) and all partitions,
windows, ceilings, glass, doors, door openers, fixtures, equipment and
appurtenances thereof (including, without limitation, the lighting, heating,
electrical, plumbing, ventilating and air conditioning fixtures and systems and
other mechanical equipment and appurtenances) in good order, condition and
repair, including replacement, in clean, orderly, sanitary and safe condition.
Tenant's responsibility for maintaining the Leased Premises shall include, but
not be limited to, the following: general maintenance and repairs, painting,
paving/restriping, cleaning, sweeping and janitorial services; planting and
landscaping; lighting and other utilities; security; insurance; fire protection;
real and personal property taxes or payments in lieu thereof, and assessments on
the improvements and land comprising the Premises; equipment maintenance, repair
and rental; removal of snow and ice, trash, rubbish and other refuse; service
contracts; and any and all other expenses of any kind and nature paid in
connection with the operation of the Premises.
<PAGE> 5
11. EMINENT DOMAIN.
If all or any part of the Premises is taken by, or sold under threat of,
appropriation, this Lease will terminate as of the date of such taking or sale.
The entire award or compensation paid for the property taken or acquired, and
for damages to residue, if any, will belong entirely to Landlord and no amount
will be payable to Tenant except that Tenant shall be entitled to receive any
award allowed for trade fixtures and other personalty installed by Tenant and
any other amounts separately awarded to Tenant.
12. DEFAULT.
In the event that: a) the rent, or any part thereof, remains unpaid for ten (10)
business days after it becomes due; (b) Tenant's interest herein is sold under
execution or other legal process; (c) Tenant makes an assignment for the benefit
of creditors; (d) any proceeding in bankruptcy, an arrangement or
reorganization, or any other proceeding under any insolvency law, is instituted
by or against Tenant; (e) a receiver or trustee is appointed for the property of
Tenant; or (f) Tenant fails to keep any of the other covenants of this Lease, it
will be lawful for Landlord to reenter and repossess the Premises and thereupon
this Lease shall terminate.
13. TERMINATION.
If Landlord attempts to terminate this Lease for any default by tenant under
Section 12 of this Lease, Landlord must give Tenant written notice of
termination. Tenant shall then have ten (10) business days to cure any monetary
default and thirty (30) days to cure any non-monetary default. If Tenant fails
to cure said default in the applicable period, Tenant shall vacate the Premises
in no later than thirty (30) days from the expiration of the applicable cure
period.
14. QUIET ENJOYMENT.
Landlord agrees that if Tenant pays the rents and keeps and performs the
covenants of this Lease on the part of Tenant to be kept and performed, Tenant
will peaceably and quietly occupy the Premises during the term hereof without
any hindrance, ejection or molestation by Landlord or any person lawfully
claiming under Landlord.
15. BINDING EFFECT.
This Lease and the agreements of Landlord and Tenant contained herein shall be
binding upon and inure to the benefit of the successors and assigns of the
respective parties.
16. INSURANCE AND INDEMNITY.
Except to the extent resulting from Landlord's gross negligence or willful
misconduct, Tenant shall indemnify and hold harmless Landlord against any
liability or loss arising out of injury to any persons, or damages to any
property belonging to Tenant or to any other persons, occurring in or about the
Premises. Tenant at its own cost shall maintain comprehensive general liability
insurance for the benefit of Landlord and Tenant in an amount not less than
$1,000,000.00 for injury to any one person, and not less than $1,000,000.00 for
any one accident or occurrence. Tenant shall name Landlord as an additional
named insured. Landlord shall not be responsible for theft or damage to any of
Tenant's property on the Premises, except to the extent resulting from
Landlord's gross negligence or willful misconduct.
<PAGE> 6
17. ENTIRE AGREEMENT.
This Lease contains the entire agreement and understanding of the parties
regarding the Premises, and there are no oral agreements existing between the
parties regarding the subject matter hereof.
18. NOTICES.
All notices required or permitted under this Lease shall be deemed to be
properly given three (3) days after being deposited, postage prepaid, by
certified or registered mail to Landlord or Tenant, at the addresses set forth
in the basic Lease Information.
19. GOVERNING LAW.
This Lease shall be construed and governed by the laws of the State of Ohio.
Should any provision of this Lease be deemed illegal or unenforceable under the
laws of the State of Ohio, the Lease and its remaining provisions shall continue
in full force and effect and be binding upon the parties as though the said
unenforceable provision had not been included.
20. CORPORATE AUTHORITY.
Landlord and Tenant and each person executing this Lease on behalf of such
parties represents and warrants, as to themselves only, that (a) Landlord and
Tenant are duly incorporated and validly existing under the laws of its state of
incorporation; (b) Landlord and Tenant are qualified to do business in the State
of Ohio; (c) Landlord and Tenant have full corporate right and authority to
enter into this Lease and to perform all of Landlord's and Tenant's respective
obligations hereunder; and (d) each person signing this Lease on behalf of
Landlord and Tenant is duly and validly authorized to do so.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
effective as of the 1st day of April, 1998
Signed and acknowledged in presence of:
LANDLORD
WITNESSES TELXON CORPORATION
/s/ Lisa LeMasters By: /s/ Dennis K. Oleksuk
- ----------------------- -----------------------------
Name: Lisa LeMasters Name: Dennis K. Oleksuk
------------------- ---------------------------
/s/ Monica Jamison Title: Sr. Director, Corporate Services
- ----------------------- ----------------------------------
Name: Monica Jamison
------------------
<PAGE> 7
TENANT
WITNESSES AIRONET WIRELESS COMMUNICATIONS,
INC.
/s/ Candryth L. Mackey By: /s/ R.G. Holmes
- --------------------------- --------------------------
Name: Candryth L. Mackey Name: R.G. Holmes
----------------------- -------------------------
/s/ Diane Zielski Its: Sr. Vice President & CFO
- --------------------------- -------------------------
Name: Diane Zielski
-----------------------
<PAGE> 1
Exhibit 10.2.2
SUBLEASE AGREEMENT
for
WATERFORD
3875 EMBASSY PARKWAY
AKRON, OHIO 44333
By and Between
TELXON CORPORATION
Sublessor
and
AIRONET WIRELESS COMMUNICATIONS, INC.
Sublessee
Dated as of September 1, 1998
<PAGE> 2
BASIC SUBLEASE INFORMATION
SUBLESSOR: Telxon Corporation, a Delaware corporation.
SUBLESSOR'S 3330 West Market Street
ADDRESS: Akron, Ohio 44333
SUBLESSEE: Aironet Wireless Communications, Inc.
SUBLESSEE'S 3875 Embassy Parkway, Suite 350
ADDRESS: Akron, Ohio 44333
SUBLEASED 3875 Embassy Parkway
PREMISES: Akron, Ohio 44333
PERMITTED USES: General office use.
BASE RENT: $35,393.75 per month (annual rate of $12.50 per square
foot net of all operating costs).
RENTABLE
SQUARE FEET 33,978
LANDLORD: John D. Dellagnese III
LANDLORD'S 4000 Embassy Parkway, Suite 400
ADDRESS: Akron, Ohio 44333
COMMENCEMENT DATE: September 1, 1998
<PAGE> 3
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("the "Sublease") is entered into effective as
of the 1st day of September, 1998 by and between Telxon Corporation, a Delaware
corporation (the "Sublessor") and Aironet Wireless Communications, Inc., a
Delaware corporation (the "Sublessee").
THE PARTIES ENTER INTO THIS SUBLEASE on the basis of the following
facts, intentions and understandings:
A. Sublessor is a tenant in the building commonly known as the
Waterford Building, located in Akron, Ohio (the "Building") pursuant to that
certain lease between Sublessor as tenant and John D. Dellagnese III as landlord
(the "Landlord"), dated July 19, 1995, as amended, (the "Master Lease").
Sublessor represents and warrants that to the best of its knowledge, the Master
Lease is in full force and effect and that there are no current conditions that
presently constitute a default, by either party, under the terms of the Master
Lease. The Master Lease is attached hereto as Exhibit A.
B. On the terms and conditions set forth below, Sublessee desires to
sublet from Sublessor the premises Sublessor leases from Landlord.
NOW THEREFORE, IN CONSIDERATION of these premises and the mutual
covenants and promises of the parties set forth below, the parties agree as
follows:
<PAGE> 4
1. SUBLEASE. Sublessor subleases to Sublessee and Sublessee hires from
Sublessor the Subleased Premises, as defined in the Master Lease, (the
"Subleased Premises"). The Subleased Premises consisting of approximately Four
Thousand Thirty-eight (4,038) rentable square feet on the first floor and
Twenty-nine Thousand Nine Hundred Forty (29,940) rentable square feet on the
third floor are more particularly shown in Exhibit B attached hereto and
incorporated herein by reference.
2. TERM. The term of this Sublease shall be a twelve (12) month period
commencing on September 1, 1998. Upon delivery of written notice to do so, said
notice to be received no later than June 1, 1999, Sublessee shall have the right
to extend this Sublease for an additional eighteen (18) month period. In the
event Sublessee shall extend this Lease, it shall vacate the Subleased Premises
no later then February 28, 2001.
3. TERMINATION.
a. Upon Sublessor sending written notice to Sublessee to terminate
this Sublease for any default by Sublessee under the terms of the Sublease or
the Master Lease, prior to any such termination becoming effective, Sublessee
shall have ten (10) business days in which to cure any monetary default and
thirty (30) days in which to cure any non-monetary default. If Sublessee is
unable to cure any such default within the applicable cure period, Sublessee
shall vacate the Premises within thirty (30) days from effective date of such
termination.
b. Sublessee shall have the right to terminate this Sublease by
giving twelve (12) months written notice to Sublessor but such election to
terminate can only be exercised if during the term of this Sublease, Sublessor
sells its interest in the property located at 91
<PAGE> 5
Springside Drive, Akron, Ohio 44333 (the "Springside Property") and Sublessor
terminates the lease it currently has with Sublessee for said Springside
Property.
4. RENT.
A. BASE RENT. Sublessee agrees to pay to Sublessor for each month of
the Term the amount set forth in the Basic Sublease Information as Base Rent.
Sublessee's obligation to pay Base Rent shall begin on the Commencement Date.
Sublessee shall pay Base Rent to Sublessor in advance on or before the first day
of each calendar month during the Term. Sublessee shall pay all installments of
Rent (as defined below in Section 4.b.) at the offices of Sublessor at 3330 West
Market Street, Akron, Ohio 44333, Attention: Dennis Oleksuk, or at such other
place as may be designated in writing from time to time by Sublessor, in lawful
money of the United States and without prior notice, demand, deduction or offset
for any cause whatsoever.
b. ADDITIONAL CHARGES. As additional rent for the Subleased Premises
(the "Additional Charges"), Sublessee shall pay to Sublessor as and when due
under the Master Lease all amounts owed by Sublessor to Landlord pursuant to the
Master Lease. "Rent" when used in this Sublease shall mean Base Rent and
Additional Charges.
5. SUBLEASE SUBJECT TO MASTER LEASE. This Sublease shall be subject to
all of the terms and conditions of the Master Lease and Sublessee covenants to
perform all of the obligations of Sublessor as tenant under the Master Lease.
Sublessee shall not permit or cause to be permitted on the Subleased Premises or
the Building any act or omission which shall violate any term or condition of
the Master Lease. Sublessor and Landlord may alter the terms of the
<PAGE> 6
Master Lease without Sublessee's consent, provided that such changes do not
adversely affect Sublessee's rights and obligations under this Sublease.
6. DEFAULT BY SUBLESSOR. Sublessor has at all times, and, except as to
such obligations which Sublessee is obligated to abide, shall continue to,
comply with and perform all of its obligations under the Master Lease throughout
the term of the Sublease. In the event Sublessor defaults in keeping, observing
or performing any of the terms, provisions, covenants and conditions contained
in the Master Lease, and such default is not cured by Sublessor, Sublessee shall
have the right to remedy such default after it gives Sublessor written notice
thereof. If Sublessee shall incur any direct expenses in remedying such default,
Sublessee shall be entitled to off-set all such actual expenditures against the
next monthly installment or installments of Rent falling due hereunder.
Sublessor agrees to send to Sublessee a copy of any notice of default
immediately upon Sublessor's receipt of such.
7. QUIET ENJOYMENT. Sublessor agrees that if Sublessee pays the Rent
and keeps and performs all of the covenants contained in this Sublease and the
Master Lease, Sublessee will peaceably and quietly occupy the Premises during
the term hereof without any hindrance, ejection, or molestation by Sublessor or
any person lawfully claiming under Sublessor. However, Sublessee agrees that any
action allowed by this Sublease to be taken by Sublessor shall not be deemed a
breach of this Section 7.
8. INDEMNITY. Sublessor shall indemnify and hold Sublessee harmless
against any liability or loss arising out of injury to any persons or damage to
any property occurring on or
<PAGE> 7
about the Premises prior to the commencement date of this Sublease unless such
liability or loss is caused by acts of the Sublessee
9. INCORPORATION OF MASTER LEASE. All of the terms and conditions of
the Master Lease are incorporated herein as terms and conditions of this
Sublease, with references in the Master Lease to Landlord and Tenant to mean,
for purposes of this Sublease, Sublessor and Sublessee, respectively. Along with
the Sections set out in this Sublease Agreement, the incorporated portions of
the Master Lease shall be the complete terms and conditions of this Sublease.
Notwithstanding the incorporation of the Master Lease as described in this
Section 9, Sublessee acknowledges and agrees that all services and repairs
required in the Master Lease to be provided by Landlord will continue under this
Sublease to be provided by the Landlord under the Master Lease and not by
Sublessor. Sublessor agrees to cooperate with Sublessee as necessary to enforce
the rights of the Tenant under the Master Lease to receive the benefits of all
repair and service obligations of Landlord.
10. ENTIRE AGREEMENT. This Sublease represents the entire agreement
between the parties to this Sublease and supersedes all prior agreements between
the parties whether written or oral.
11. CONSENTS. With respect to any approvals called for under this
Sublease as the same incorporates the terms of the Master Lease, it shall be
deemed reasonable for Sublessor to withhold its consent if Landlord, for any
reason, has refused such consent when the same was requested of Landlord under
the Master Lease.
<PAGE> 8
12. CONDITION PRECEDENT. This Sublease is conditioned upon Landlord's
approval as required in the Master Lease.
13. BROKERAGE COMMISSION. Each party warrants and represents that it
has not engaged the services of or had contact with any real estate broker or
finder in connection with this transaction in a manner sufficient to provide any
real estate broker or finder with a basis for claiming the right to any
commission or other fee in connection with this Sublease. Each party shall
indemnify, defend with counsel of the indemnified party's choice, and hold the
other party harmless from and against all expense, loss, damage or claims
arising directly or indirectly from the indemnifying party's breach, or alleged
breach, of the foregoing representations and warranties.
14. CORPORATE AUTHORITY.
a. Sublessee and each person executing this Sublease on behalf of
Sublessee represents and warrants that (a) Sublessee is duly incorporated and
validly existing under the laws of its state of incorporation; (b) Sublessee is
qualified to do business in Ohio; (c) Sublessee has full corporate right and
authority to enter into this Sublease and to perform all of Sublessee's
obligations hereunder; and (d) each person signing this Sublease on behalf of
Sublessee is duly and validly authorized to do so.
b. Sublessor and each person executing this Sublease on behalf of
Sublessor represents and warrants that (a) Sublessor is duly incorporated and
validly existing under the laws of its state of incorporation; (b) Sublessor is
qualified to do business in Ohio; (c) Sublessor has
<PAGE> 9
full corporate right and authority to enter into this Sublease and to perform
all of Sublessor's obligations hereunder; and (d) each person signing this
Sublease on behalf of Sublessor is duly and validly authorized to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Sublease as
of the day first written above.
SUBLESSOR
WITNESSES TELXON CORPORATION
/s/ Lisa LeMasters By: /s/ Dennis K. Oleksuk
- -------------------------- -------------------------------------
Printed
Name: Lisa LeMasters Printed Name: Dennis K. Oleksuk
---------------------- ---------------------------
/s/ Monica Jamison Title: Sr. Director, Corporate Services
- -------------------------- ----------------------------------
Printed
Name: Monica Jamison
----------------------
SUBLESSEE
WITNESSES AIRONET WIRELESS COMMUNICATIONS, INC.
/s/ Candryth L. Mackey By: /s/ R.G. Holmes
- ------------------------- -------------------------------------
Printed
Name: Candryth L. Mackey Printed Name: R.G. Holmes
--------------------- ---------------------------
/s/ Diane Zielski Title: Sr. Vice President & CFO
- ------------------------- ----------------------------------
Printed
Name: Diane Zielski
---------------------
ACKNOWLEDGED AND AGREED:
LANDLORD
JOHN D. DELLAGNESE III
- ----------------------------
<PAGE> 1
Exhibit 10.3
LOAN AGREEMENT
DATED AS OF
JULY 24, 1998
BETWEEN
THE HUNTINGTON NATIONAL BANK
AND
AIRONET WIRELESS COMMUNICATIONS, INC.
A DELAWARE CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE #
<S> <C> <C>
1 The Loan.......................................................... 1
1.1 The Revolving Loan and Borrowing Base.................... 1
1.2 Pending Defaults......................................... 1
2 Eligibility....................................................... 1
2.1 Eligible Accounts........................................ 1
2.2 Eligible Inventory....................................... 3
3 Terms and Uses of Loan............................................ 3
3.1 Fees..................................................... 3
3.2 Interest Rates/Performance Pricing/Terms of Payment...... 3
3.3 Advances................................................. 3
3.4 Mandatory Prepayment or Reduction........................ 3
3.5 Collateral Audits........................................ 4
3.6 Use of Proceeds.......................................... 4
3.7 Maturity of Loan......................................... 4
3.8 Renewal of Revolving Loan Commitment..................... 4
3.9 Maximum Charges.......................................... 4
4 Property.......................................................... 4
4.1 Property Insurance....................................... 4
4.2 Books and Records........................................ 4
4.3 Preservation and Disposition of Property................. 5
5 Conditions Precedent.............................................. 5
5.1 Conditions Precedent to Initial Advance.................. 5
Conditions Precedent to Subsequent Advances.............. 6
6 Warranties and Representations.................................... 6
6.1 Corporate Organization and Authority..................... 6
6.2 Borrowing is Legal and Authorized........................ 6
6.3 Taxes.................................................... 7
6.4 Capital Structure........................................ 7
6.5 Compliance with Law...................................... 7
6.6 Financial Statements; Full Disclosure.................... 7
6.7 Litigation: Adverse Effects.............................. 8
6.8 Solvency................................................. 8
6.9 Government Consent....................................... 8
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
6.10 Title to Properties...................................... 8
6.11 No Defaults.............................................. 9
6.12 Environmental Protection................................. 9
6.13 Regarding the Accounts and Inventory..................... 10
6.14 Margin Loan.............................................. 10
7 Borrower Business Covenants....................................... 10
7.1 Payment of Taxes and Claims.............................. 10
7.2 Maintenance of Properties and Corporate Existence........ 11
7.3 Restriction on Fundamental Changes; Conduct of Business.. 11
7.4 Sale of Assets........................................... 11
7.5 Negative Pledge.......................................... 12
7.6 Indebtedness............................................. 12
7.7 Contingent Obligation.................................... 13
7.8 Investments.............................................. 13
7.9 Management............................................... 14
7.10 Compensation of Officers and Affiliated Persons.......... 14
7.11 Acquisition of Capital Stock............................. 14
7.12 Environmental Compliance and Indemnification............. 14
7.13 Maintenance of Accounts.................................. 14
8. Financial Information and Reporting............................... 14
9 Default........................................................... 15
9.1 Events of Default........................................ 15
9.2 Default Remedies......................................... 16
10 Miscellaneous..................................................... 16
10.1 Notices.................................................. 16
10.2 Access to Accountants. Intentionally deleted............. 17
10.3 Reproduction of Documents................................ 17
10.4 Costs and Expenses....................................... 17
10.5 Survival, Successors and Assigns......................... 18
10.6 Amendment and Waiver, Duplicate Originals................ 18
10.7 Accounting Treatment and Fiscal Year..................... 18
10.8 Enforceability and Governing Law......................... 18
10.9 Confidentiality.......................................... 19
10.10 Waiver of Right to Trial by Jury......................... 19
10.11 No Consequential Damages................................. 19
10.12 Indemnity................................................ 20
11 Definitions....................................................... 20
11.1 Uniform Commercial Code Terms............................ 20
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
11.2 Accounting Terms......................................... 20
11.3 Other Definitional Provisions............................ 20
11.4 Index of Definitions..................................... 21
</TABLE>
Exhibits
Exhibit A - Revolving Note
Exhibit B - Capital Structure
Exhibit C - Encumbrances
-iii-
<PAGE> 5
LOAN AGREEMENT
--------------
This Loan Agreement (this "Agreement") is entered into at Cleveland,
Ohio, by and between THE HUNTINGTON NATIONAL BANK (the "Bank"), and AIRONET
WIRELESS COMMUNICATIONS, INC., a Delaware corporation (hereinafter referred to
as "Borrower") as of the 24th day of July, 1998.
1 THE LOAN. The Bank, subject to the terms and conditions hereof, will extend
credit to the Borrower up to the aggregate principal sum of $5,000,000.00 (the
"Loan").
1.1 THE REVOLVING LOAN AND BORROWING BASE. The Bank will extend a revolving
credit facility to the Borrower under which the Bank shall make, subject to the
terms and conditions hereof, loans and advances on a revolving basis up to the
principal sum of $5,000,000.00 (the "Revolving Loan"). The principal balance of
the Revolving Loan shall not exceed an amount equal to up to the sum of: (i) 80%
of Eligible Accounts plus (ii) 50% of Eligible Inventory plus (iii) 100% of cash
on deposit with the Bank (collectively the "Borrowing Base"). The Bank, in its
reasonable discretion, reserves the right upon forty-five (45) days prior
written notice to the Borrower to increase or decrease the foregoing
percentages.
1.2 PENDING DEFAULTS. The Bank shall have no obligation to advance or readvance
any sums pursuant to the Revolving Loan, at any time when a set of facts or
circumstances exists, which, by itself, upon the giving of notice, the lapse of
time, or any one or more of the foregoing would constitute an Event of Default
under this Agreement (a "Pending Default").
1.3 LOAN TERMINATION. Borrower shall have the right, upon five (5) days prior
written notice to Bank, to terminate the Loan at any time prior to the maturity
date of July 1, 2000 without the imposition of any prepayment fee or premium.
The Bank shall have the right to terminate the Loan, upon at least thirty (30)
days prior written notice to Borrower, if and in the event Telxon Corporation
("Telxon") is acquired or merged into an otherwise unaffiliated entity and
Telxon, after such merger or consolidation, is not the surviving entity or if
the voting control of such merged or consolidated entity is not, in effect,
under the control of essentially the same group of shareholders and/or directors
as possessed such control as to Telxon prior to such merger or consolidation.
2 ELIGIBILITY.
-----------
2.1 ELIGIBLE ACCOUNTS. The term "Eligible Accounts" means the portion of the
Borrower's accounts arising in the ordinary course of the Borrower's business
from the sale of goods or services. An account shall not be deemed an "Eligible
Account" if such account is subject to any lien, encumbrance, or security
interest, and unless such account is evidenced by an invoice or other
documentary evidence satisfactory to the Bank, is unconditionally due and
payable in U.S.
<PAGE> 6
dollars to the Borrower from a party (the "Account Debtor") and conforms to the
warranties regarding the accounts contained in this Agreement. Without limiting
the generality of the foregoing, no account shall be an Eligible Account if:
(a) the account is due and unpaid more than 120 days from the original
invoice date;
(b) the account arises from uncompleted performance on the part of the
Borrower, constitutes a progress billing or advance billing, unless such account
arises from a contract which is subject to a 30 day cancellation clause, is a
"bill and hold," or, if involving a sale of goods, all such goods have not been
lawfully shipped and invoiced to the Account Debtor, (or if requested by the
Bank, copies of all invoices, together with all shipping documents and delivery
receipts evidencing such shipment have not been delivered to the Bank);
(c) the account arises from a contract with any government or agency
thereof;
(d) the account is subject to any prior assignment, claim, lien,
subrogation rights or security interest, or subject to any levy or setoff;
(e) the account is subject to any credit, contra account, allowance,
adjustment, return of goods, or discount (collectively a "Contra"), provided,
however, that unless the Account Debtor has asserted a Contra, if the amount of
the account exceeds the amount of the Contra, such excess shall be considered
for eligibility if such excess is not otherwise excluded by this Section 2.1;
(f) the account arises from an Affiliate, "Affiliate" shall mean any
individual, partnership, corporation, or other entity which, directly or
indirectly, is in control of, is controlled by, or is under common control with
the Borrower, or is a family member related by birth or marriage and "Control".
For the purposes of this definition,"control" of such entity shall mean the
power, directly or indirectly, to vote 5% or more of the securities, units or
other measures having ordinary voting power for the election of directors,
management committees, or similar committees of such entity, or the power to
direct or cause the direction of the management and policies of such entity,
whether by contract or otherwise;
(g) the account, when added to all other accounts of the Account Debtor
with the Borrower, produces an aggregate indebtedness from the Account Debtor of
more than 50% of the total of all the Borrower's Eligible Accounts;
(h) the Account Debtor is in bankruptcy, receivership or similar
proceedings or has been declared insolvent; or
-2-
<PAGE> 7
(i) the account is evidenced by any chattel paper, promissory note,
payment instrument or written agreement or arises from a consumer.
2.2 ELIGIBLE INVENTORY. The term "Eligible Inventory" means that portion of the
Borrower's inventory that the Bank determines from time to time, based on credit
policies, market conditions, the Borrower's business and other matters, is
eligible for use in calculating the Borrowing Base. For purposes of determining
the Borrowing Base, Eligible Inventory shall not include (a) work in process,
(b)obsolete or discontinued inventory, (c) supply items, packaging, or the
freight portion of raw materials, (d) inventory in the control of a third person
for processing, storage, or otherwise unless the Borrower shall have obtained
and delivered to the Bank, a bailee's waiver or secured party of bailee's
waiver, in form satisfactory to the Bank, the original documents or other
instruments evidencing such inventory, or such other agreements or other
documents the Bank shall require in its sole and absolute discretion, (e)
consigned inventory, (f) inventory in transit, (g) inventory associated with any
contract of which the Borrower has knowledge that the same may be subject to a
material adverse development, (h) inventory located outside the United States or
(i) inventory associated with any contract to the extent that progress or
advance payments are received from the Account Debtor to the extent such
inventory is identified to such contract. All inventory shall be valued at the
lesser of cost or market.
3 TERMS AND USES OF LOAN.
-----------------------
3.1 FEES. On the date hereof Borrower shall pay to Bank a Loan Fee equal to
$12,500.00. On a quarterly basis commencing June 30, 1998 Borrower shall pay to
Bank an unused commitment fee equal to 1/4 of 1% of the difference between
$5,000,000.00 and the daily outstanding principal balance of the Revolving Loan
during the preceding calendar quarter.
3.2 INTEREST RATES/PERFORMANCE PRICING/TERMS OF PAYMENT. The rate of interest on
the outstanding principal balances and terms of repayment are set forth in the
Revolving Note to be executed by Borrower the terms of which are incorporated
herein by reference. The form of said Revolving Note which will evidence the
Loan is attached hereto and marked EXHIBITS A.
3.3 ADVANCES. Each advance request under the Revolving Loan shall be accompanied
by a written communication from Borrower to Bank which shall set forth the
amount of the request.
3.4 MANDATORY PREPAYMENT OR REDUCTION. If the Borrower fails to maintain the
Borrowing Base which equals or exceeds the aggregate unpaid principal balance of
the Revolving Loan, then the Borrower shall immediately pay to the Bank the
difference between the aggregate unpaid principal balance of the Revolving Loan
and the Borrowing Base.
-3-
<PAGE> 8
3.5 COLLATERAL AUDITS. The Bank shall have the right, only upon an Event of
Default, to conduct collateral audits of the Borrower, and the Borrower will
provide reasonable access to all of its books and records and such other
information which the Bank deems necessary to evaluate the status of the Loan.
In connection therewith, the Borrower will pay to the Bank reasonable fees and
all out-of-pocket expenses of such auditors (collectively "Audit Fees and
Costs"). Such Audit Fees and Costs shall be payable by the Borrower upon demand;
provided, however, that Borrower shall not be responsible for payment of Audit
Fees and Costs for more than one audit in any one calendar year; provided,
further, that notwithstanding the foregoing.
3.6 USE OF PROCEEDS. The net proceeds of the Loan will be used to provide for
(i) working capital requirements of the Borrower and (ii) for any other lawful
business purpose in the Borrower's business.
3.7 MATURITY OF LOAN. July 1, 2000.
-----------------
3.8 RENEWAL OF REVOLVING LOAN COMMITMENT. The term of the Revolving Loan may be
extended for 1-year periods, as determined in Bank's sole discretion provided
that Borrower provides Bank with not less than 60 days' advance written notice
of its request to extend the Revolving Loan upon the expiration of the original
Revolving Loan or any extended term (the "Extension Notice"). Upon receipt of
the Extension Notice Bank shall have 30 days to respond and Bank's failure to
respond shall be deemed a determination not to renew the Revolving Note.
3.9 MAXIMUM CHARGES. In no event whatsoever shall the interest rate and other
charges hereunder exceed the highest rate permissible under law which a court of
competent jurisdiction shall, in a final determination, deem applicable hereto.
In the event such a court determines that the Bank has received interest or
other charges hereunder in excess of the highest rate applicable thereto, the
Bank shall promptly refund such excess amount to the Borrower, and the
provisions hereof shall be deemed amended to provide for such permissible rate.
4 PROPERTY
--------
4.1 PROPERTY INSURANCE. The Borrower shall have and maintain insurance at all
times with respect to all of its personal property which shall be in such
amounts as is normal and customary in Borrower's business.
4.2 BOOKS AND RECORDS. The Borrower shall (a) at all times keep accurate and
complete records of the Eligible Accounts and Eligible Inventory in accordance
with GAAP, including without limitation, complete and accurate stock records,
and at all reasonable times and upon an Event of Default shall allow the Bank,
by or through any of its officers, agents, attorneys or accountants, to examine,
inspect and make extracts from such books and records and to arrange
-4-
<PAGE> 9
for verification of the Eligible Accounts and to examine and inspect the
Eligible Inventory wherever located, and (b) upon request of the Bank, provide
the Bank with copies of agreements with, purchase orders from, and invoices to,
the Account Debtors, and copies of all shipping documents, delivery receipts,
and such other documentation and information relating to the Eligible Accounts
as the Bank may reasonably require.
4.3 PRESERVATION AND DISPOSITION OF PROPERTY. The Borrower shall (a) advise the
Bank promptly, in writing and in reasonable detail, (i) of any material
encumbrance or claim asserted against any of the Eligible Accounts or Eligible
Inventory; (ii) of any material change in the composition of the Eligible
Accounts or Eligible Inventory; and (iii) of the occurrence of any other event
that would have a material adverse effect upon the aggregate value of the
Eligible Accounts or Eligible Inventory; (b) not sell or otherwise dispose of
the Eligible Accounts or Eligible Inventory; except for the Inventory as
otherwise permitted by this Agreement; (c) keep the Eligible Accounts or
Eligible Inventory in good condition and shall not misuse, abuse, secrete, waste
or destroy any of the same; (d) not use the Eligible Accounts or Eligible
Inventory in violation of any statute, ordinance, regulation, rule, decree or
order; and (e) except for statutory liens paid in the ordinary course of
business before the imposition of late charges and penalties, not permit any
taxes, assessments, charges, encumbrances, whether voluntary or involuntary, or
levies to become liens or encumbrances upon the Eligible Accounts or Eligible
Inventory or in respect to the income or profits therefrom.
5 CONDITIONS PRECEDENT
--------------------
5.1 CONDITIONS PRECEDENT TO INITIAL ADVANCE. This Agreement shall become
effective, and the Bank shall be obligated to make the initial advance hereunder
only after the Bank shall have received each of following items in form and
substance satisfactory to the Bank, unless otherwise noted:
(a) Borrower shall provide to Bank a certified copy of its
Articles of Incorporation;
(b) Good Standing Certificate for Borrower issued by Secretary of
State of Ohio;
(c) Certified copy of Resolutions of Board of Directors of
Borrower authorizing this Loan Agreement and the transactions
contemplated hereunder; and
(d) this Agreement and the Revolving Note each duly executed where
appropriate and in form and substance satisfactory to the
Bank; and the fulfillment of all the conditions described
thereon and the delivery of such additional documentation as
the Bank may reasonably request.
-5-
<PAGE> 10
5.2 CONDITIONS PRECEDENT TO SUBSEQUENT ADVANCES. The Bank shall not be required
to make any disbursement or advance subsequent to the initial disbursement or
initial advance under the Loan, unless on the applicable date that each such
advance is to be made:
(a) WARRANTIES AND REPRESENTATIONS. The warranties and representations
set forth in Section 6 hereof and each of the representations and warranties
contained in any certificate, document or financial or other statement furnished
at any time pursuant to this Agreement or any related document shall be true and
correct on and as of such date with the same effect as though such warranty or
representation had been made on and as of such date, except to the extent that
such warranty or representation is stated to expressly relate solely to an
earlier date; and
(b) COMPLIANCE. The Borrower shall then be in compliance with all the
terms, covenants and conditions of this Agreement which are binding upon it, and
no Event of Default or Pending Default shall have occurred and be continuing on
such date or after giving effect to the advances requested to be made.
Each request for an advance or conversion or continuation of an advance
hereunder shall constitute a warranty and representation by the Borrower that
each of the conditions contained in Section 5.2 (a) and (b) have been satisfied.
6 WARRANTIES AND REPRESENTATIONS. In order to induce the Bank to enter into this
Agreement and to make the Loan and the other financial accommodations to the
Borrower, the Borrower represents and warrants to the Bank that each of the
following statements is true and correct:
6.1 CORPORATE ORGANIZATION AND AUTHORITY. The Borrower (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware; (b) has all requisite corporate power and authority and all necessary
licenses and permits to own and operate its properties and to carry on its
business as now conducted and as presently proposed to be conducted; and (c) is
not doing business or conducting any activity in any jurisdiction in which it is
not registered as a foreign corporation and the failure to so register will have
a material adverse effect on Borrower.
6.2 BORROWING IS LEGAL AND AUTHORIZED. (a) The Board of Directors of the
Borrower has duly authorized the execution and delivery of this Agreement and of
the notes and documents contemplated herein; this Agreement, the notes and other
documents executed in connection with this Agreement will constitute valid and
binding obligations enforceable in accordance with their respective terms; (b)
the execution of this Agreement and related notes and documents and the
compliance with all the provisions of this Agreement (i) are within the
corporate powers of the Borrower; and (ii) are legal and except for the liens
created hereby will not conflict with, result in any breach in any of the
provisions of, constitute a default under, or result in the creation of any
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<PAGE> 11
lien or encumbrance upon any property of the Borrower under the provisions of,
any agreement, charter instrument, bylaw, or other instrument to which the
Borrower is a party or by which it may be bound; (c) there are no limitations in
any indenture, contract, agreement, mortgage, deed of trust or other agreement
or instrument to which the Borrower is now a party or by which the Borrower may
be bound with respect to the payment of principal or interest on any
indebtedness, or the Borrower's ability to incur indebtedness including the
notes to be executed in connection with this Agreement.
6.3 TAXES. All tax returns required to be filed by the Borrower in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon the Borrower, or upon any of its properties, which are
due and payable have been paid. The Borrower does not know of any additional tax
assessment against it which it has not communicated to the Bank. The accruals
for taxes on the books of the Borrower for its current fiscal period are
adequate.
6.4 CAPITAL STRUCTURE. EXHIBIT B attached hereto accurately represents as of the
day hereof the following: (a) the classes of capital stock of the Borrower, all
as authorized by the Borrower's Articles of Incorporation , (b) the number of
shares of each such class of stock issued and outstanding, and (c) the
registered owner or holder (legally or beneficially) thereof.
6.5 COMPLIANCE WITH LAW. The Borrower (a) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, including
without limitation any laws, rulings or regulations relating to the Employee
Retirement Income Security Act of 1974 or Section 4975 of the Internal Revenue
Code and (b) has not failed to obtain any licenses, permits, franchises or other
governmental or environmental authorizations necessary to the ownership of its
properties or to the conduct of its business, which violation or failure might
have a Material Adverse Effect.
6.6 FINANCIAL STATEMENTS; FULL DISCLOSURE. The unaudited financial statements
for the fiscal year ending March 31, 1997, which have been supplied to the Bank,
have been prepared in accordance with GAAP and fairly represent the Borrower's
financial condition as of such date, and the unaudited draft financial
statements for the fiscal year ending March 31, 1998, which have been supplied
to the Bank, fairly represent the Borrower's financial condition as of such date
subject to final issuance of such statements. No material adverse change in the
Borrower's financial condition has occurred since such dates. The financial
statements referred to in this paragraph do not, nor does this Agreement or any
written statement furnished by the Borrower to the Bank in connection with
obtaining the Loan, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein or herein not
misleading. The Borrower has disclosed to the Bank in writing all facts,
including, without limitation, all pending litigation, administrative
proceedings, and arbitration proceedings, which materially affect the
properties, business, prospects, profits or condition (financial or otherwise)
of the Borrower or the ability of the Borrower to perform this Agreement.
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<PAGE> 12
6.7 LITIGATION: ADVERSE EFFECTS. There is no action, suit, audit, proceeding,
investigation or arbitration (or series of related actions, suits, proceedings,
investigations or arbitrations) pending before or by any governmental authority
or private arbitrator or, to the knowledge of the Borrower, threatened against
the Borrower or any property of the Borrower (i) challenging the validity or the
enforceability of any of this Agreement, or any loan document, agreement, or
instrument executed in connection herewith, or (ii) which has had, shall have or
is reasonably likely to have a Material Adverse Effect. The Borrower is not (A)
in violation of any applicable requirements of law which violation shall have or
is likely to result in a Material Adverse Effect, or (B) subject to or in
default with respect to any final judgment, writ, injunction, restraining order
or order of any nature, decree, rule or regulation of any court or governmental
authority, in each case which shall have or is likely to have a Material Adverse
Effect. "Material Adverse Effect" means a material adverse effect upon (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower, (b) the ability of the Borrower to
perform its obligations under this Agreement or any document, agreement,
guaranty, or instrument executed in connection herewith, or (c) the ability of
the Bank to enforce the terms of this Agreement, or any document, agreement,
guaranty, or instrument executed in connection herewith.
6.8 SOLVENCY. After giving effect to all indebtedness of the Borrower on the
date of the initial advance hereunder (including without limitation the Loan)
and such other dates as advances are requested under the Revolving Loan
hereunder, the Borrower (a) is able to pay its obligations as they become due
and payable; (b) has assets, the present fair saleable value of which exceeds
the amount that will be required to pay its probable liability on its
obligations, including, without limitation, contingent obligation, as the same
become absolute and matured; (c) has sufficient property, the sum of which at a
fair valuation exceeds all of its indebtedness; and (d) has sufficient capital
to engage in its business.
6.9 GOVERNMENT CONSENT. Neither the nature of the Borrower or of its business or
properties, nor any relationship between the Borrower and any other entity or
person, nor any circumstance in connection with the execution of this Agreement,
is such as to require a consent, approval or authorization of, or filing,
registration or qualification with, any governmental authority on the part of
the Borrower as a condition to the execution and delivery of this Agreement and
the notes and documents contemplated herein.
6.10 TITLE TO PROPERTIES. The Borrower (a) has good title to all the Eligible
Accounts and Eligible Inventory in which it has a property interest, free from
any liens and encumbrances, except as set forth on EXHIBIT C attached to this
Agreement, and (b) has not agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property whether
now owned or hereafter acquired to be subject to a lien or encumbrance except as
provided herein.
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<PAGE> 13
6.11 NO DEFAULTS. No event has occurred and no condition exists which would
constitute a Pending Default or an Event of Default pursuant to this Agreement.
The Borrower is not in violation in any material respect of any term of any
agreement, charter instrument, bylaw or other instrument to which it is a party
or by which it may be bound.
6.12 ENVIRONMENTAL PROTECTION. The Borrower (a) has no actual knowledge of the
permanent placement, burial or disposal of any Hazardous Substances (as
hereinafter defined) on any real property owned, leased, or used by the Borrower
(the "Premises"), of any spills, releases, discharges, leaks, or disposal of
Hazardous Substances that have occurred or are presently occurring on, under, or
onto the Premises, or of any spills, releases, discharges, leaks or disposal of
Hazardous Substances that have occurred or are occurring off the Premises as a
result of the improvement, operation, or use of the Premises which would result
in non-compliance with any of the Environmental Laws (as hereinafter defined);
(b) is and has been in compliance with all applicable Environmental Laws; (c)
knows of no pending or threatened environmental civil, criminal or
administrative proceedings against the Borrower relating to Hazardous
Substances; (d) knows of no facts or circumstances that would give rise to any
future civil, criminal or administrative proceeding against the Borrower
relating to Hazardous Substances; and (e) will not permit any of its employees,
agents, contractors, subcontractors, or any other person occupying or present on
the Premises to generate, manufacture, store, dispose or release on, about or
under the Premises any Hazardous Substances which would result in the Premises
not complying with the Environmental Laws.
As used herein, "Hazardous Substances" shall mean and include all
hazardous and toxic substances, wastes, materials, compounds, pollutants and
contaminants (including, without limitation, asbestos, polychlorinated
biphenyls, and petroleum products) which are included under or regulated by the
Comprehensive Environmental Response, Compensation and Liability Act, as amended
(42 U.S.C. section 9601, ET SEQ.), the Hazardous Materials Transportation Act,
as amended (49 U.S.C. section 1801, ET SEQ.), the Toxic Substances Control Act,
as amended (15 U.S.C. section 2601, ET SEQ.), the Resource Conservation and
Recovery Act, as amended (42 U.S.C. section 6901, ET SEQ.), the Water Quality
Act of 1987, as amended (33 U.S.C. section 1251, ET SEQ.), the Clean Water Act,
as amended (33 U.S.C. section 1321 ET SEQ.), the Federal Insecticide, Fungicide,
and Rodenticide Act, as amended (7 U.S.C. Sec. 136, ET SEQ.), the National
Environmental Policy Act of 1969, as amended (42 U.S.C. Sec. 4321, ET SEQ.), and
the Clean Air Act, as amended (42 U.S.C. section 7401, ET SEQ.), and any other
federal, state or local statute, ordinance, law, code, rule, regulation or order
regulating or imposing liability (including strict liability) or standards of
conduct regarding Hazardous Substances (hereinafter the "Environmental Laws"),
but does not include such substances as are permanently incorporated into a
structure or any part thereof in such a way as to preclude their subsequent
release into the environment, or the permanent or temporary storage or disposal
of household hazardous substances by tenants, and which are thereby exempt from
or do not give rise to any violation of any Environmental Laws.
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<PAGE> 14
6.13 REGARDING THE ACCOUNTS AND INVENTORY. (a) Each of the Accounts is based on
an actual bona fide, and genuine (i) sale and delivery of goods or (ii)
rendering or performance of services in the ordinary course of business, the
Account Debtors have accepted such goods or services and unconditionally owe and
are obligated to pay the full amounts reflected in the invoices according to the
terms thereof without any defense, offset or counterclaim; (b) all of the
shipping and delivery receipts and other documents to be given to the Bank with
respect to the Accounts are genuine; (c) to the best of the Borrower's
knowledge, pursuant to its customary credit investigation in the ordinary course
of business as of the date each account is created, each of the Account Debtors
is solvent and able to pay such account when due, or with respect to any Account
Debtors who are not solvent, the Borrower has set up on its books and in its
financial records bad debt reserves adequate to cover such accounts; (d) each of
the accounts referenced on the Borrower's most recent Borrowing Base Certificate
against which the Borrower has requested an advance under the Revolving Loan is
an Eligible Account; and (e) all of the inventory referenced on the Borrower's
most recent Borrowing Base Certificate against which the Borrower has requested
an advance under the Revolving Loan is Eligible Inventory.
6.14 MARGIN LOAN. None of the transactions contemplated in the Agreement will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto, including, without
limitation, Regulation U of the Board of Governors of the Federal Reserve
System, 12 C.F.R., Chapter II. The Borrower does not own or intend to carry or
purchase any "margin security" within the meaning of said Regulation U. None of
the proceeds of the Loan have been or will be used to purchase or refinance any
borrowing, the proceeds of which were used to purchase any "security" within the
meaning of the Securities Exchange Act of 1934, as amended.
7 BORROWER BUSINESS COVENANTS. The Borrower covenants that on and after the date
of this Agreement until terminated pursuant to the terms of this Agreement, or
so long as any of the indebtedness provided for herein remains unpaid:
7.1 PAYMENT OF TAXES AND CLAIMS. The Borrower will pay (a) all taxes, estimated
payments, assessments and governmental charges or levies imposed upon it or its
property or assets or in respect of any of its franchises, businesses, income or
property before any penalty or interest accrues thereon; and (b) all claims of
materialmen, mechanics, carriers, warehousemen, landlords, bailees and other
like persons, (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law have or may become a lien or encumbrance upon any of the Borrower's property
or assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; PROVIDED, HOWEVER, that no such taxes, assessments and
governmental charges referred to in clause (a) above or claims referred to in
CLAUSE (B) above are required to be paid if being contested in good faith by the
Borrower, by appropriate proceedings diligently instituted and conducted,
without danger of
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<PAGE> 15
any material risk to the Property or the Bank's interest therein, without any of
the same becoming a lien upon the Property, and if such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP,
shall have been made therefor.
7.2 MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Borrower shall (a)
maintain its property in good condition and make all renewals, replacements,
additions, betterments and improvements thereto which it deems necessary; (b)
maintain, with financially sound and reputable insurers, (i) insurance with
respect to its properties and business against such casualties and
contingencies, of such types (including but not limited to fire and casualty,
public liability, products liability, larceny, embezzlement or other criminal
misappropriation insurance) and in such amounts as is customary in the case of
entities of established reputations engaged in the same or a similar business
and similarly situated, in such amounts as is customary in the case of entities
of established reputations engaged in the same or a similar business and
similarly situated; (c) reflect in its financial statements adequate accruals
and appropriations to reserves and keep and maintain proper books of record and
account in which entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its businesses and activities, including,
without limitation, transactions and other dealings with respect to the
Property; (d) do or cause to be done all things necessary (i) to preserve and
keep in full force and effect its existence, rights and franchises, and (ii) to
maintain its status as a corporation duly organized and existing and in good
standing under the laws of the state of its incorporation; (e) conduct
continuously and operate actively its business; and (f) not be in violation of
any laws, ordinances, or governmental rules and regulations or fail to obtain
any licenses, permits, franchises or other governmental authorizations necessary
to the ownership of its properties or to the conduct of its business, which
violation or failure to obtain might have a Material Adverse Effect.
7.3 RESTRICTION ON FUNDAMENTAL CHANGES; CONDUCT OF BUSINESS. The Borrower shall
not (a) enter into any merger or consolidation where Borrower is not the
surviving entity, or liquidate, wind up or dissolve (or suffer any liquidation
or dissolution), or convey, lease, sell, transfer or otherwise dispose of, in
one transaction or a series of transactions, all or substantially all of the
Borrower's business or property, whether now or hereafter acquired, (b) without
the prior written consent of the Bank, which consent shall not be unreasonably
withheld, acquire all or substantially all of the assets or business of any
other company, person or entity where the value of the acquisition is equal to
or greater than $2,000,000.00 or and (c) create or acquire or permit to exist
any subsidiaries without the prior written consent of the Bank, which consent
shall not be unreasonably withheld. The Borrower shall not engage in any
business other than the businesses engaged in by the Borrower on the date hereof
and any business or activities which are substantially similar or related
thereto.
7.4 SALE OF ASSETS. Other than in the ordinary course of business, the Borrower
shall not sell, assign, lease, convey or otherwise dispose of any property,
whether now owned or hereafter acquired, or any income or profits therefrom, or
enter into any agreement to do so, except: (a) the
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<PAGE> 16
sale or transfer of Inventory in the ordinary course of business; or (b) the
disposition of equipment outside the ordinary course of business with the prior
written consent of and upon satisfaction of such conditions deemed necessary or
desirable by the Bank. Notwithstanding the foregoing, the Borrower shall not
sell, assign, or encumber, except to the Bank, any of its Accounts or notes
receivable and further shall not permit any of its Inventory to be sold or
transferred on consignment or acquire or possess any of its Inventory on
consignment.
7.5 NEGATIVE PLEDGE. The Borrower will not cause or permit or permit to exist or
agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of its Eligible Accounts or Eligible Inventory
whether now owned or hereafter acquired, to become subject to a lien or
encumbrance, except: (i) liens in connection with deposits required by workers'
compensation, unemployment insurance, social security and other like laws or
security deposits or liens arising by operation of law or liens granted
hereunder; (ii) taxes, assessments, reservations, exceptions, encroachments,
easements, rights of way, covenants, conditions, restrictions, leases and other
similar title exceptions or encumbrances affecting real property, PROVIDED they
do not in the aggregate materially detract from the value of said property or
materially interfere with its use in the ordinary conduct of business; (iii)
inchoate liens arising under ERISA to secure the contingent liability of the
Borrower; and (iv) purchase money liens (including the interest of a lessor
under a capitalized lease) securing Permitted Purchase Money Indebtedness,
provided that such liens shall apply only to the property of the Borrower that
is purchased under such Permitted Purchase Money Indebtedness or capitalized
lease or the proceeds thereof. In addition, the Borrower will not grant or agree
to provide in the future (upon the happening of a contingency or otherwise), a
"negative pledge" or other covenant or agreement similar to this Section 7.5 in
favor of any other lender, creditor or third party.
7.6 INDEBTEDNESS. The Borrower will not directly or indirectly create, incur,
assume or otherwise become or remain liable with respect to any Indebtedness,
except (a) the Loan; (b) secured or unsecured Purchase Money Indebtedness
(including capitalized leases) incurred by the Borrower to finance the
acquisition of fixed assets, if (i) such Indebtedness has a scheduled maturity
and is not due on demand, (ii) such Indebtedness does not exceed in the
aggregate outstanding at any time $500,000 per year, (iii) such Indebtedness
does not exceed the purchase price of the items being purchased, and (iv) such
Indebtedness is not secured by any property or assets other than the item or
items being purchased and proceeds thereof ("Permitted Purchase Money
Indebtedness"); (c) Indebtedness consisting of liabilities in respect of
litigation or similar proceedings which do not exceed in the aggregate,
$250,000.00. "INDEBTEDNESS," as applied to the Borrower or any other entity
shall mean, at any time, (a) all indebtedness, obligations or other liabilities
(other than accounts payable arising in the ordinary course of the Borrower's
business payable on terms customary in the trade) which in accordance with GAAP
should be classified upon the Borrower's balance sheet as liabilities,
including, without limitation (i) for borrowed money or evidenced by debt
securities, debentures, acceptances, notes or other similar instruments, and any
accrued interest, fees and charges relating thereto, (ii) under profit payment
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<PAGE> 17
agreements or in respect of obligations to redeem, repurchase or exchange any
securities or to pay dividends in respect of any stock; (iii) with respect to
letters of credit issued, (iv) to pay the deferred purchase price of property or
services, except accounts payable and accrued expenses arising in the ordinary
course of business, or (v) in respect of capital leases; (b) all indebtedness,
obligations or other liabilities secured by a lien on any property (except liens
arising by operation of law), whether or not such indebtedness, obligations or
liabilities are assumed by the owner of the same; (c) all indebtedness,
obligations or other liabilities in respect of interest rate contracts and
Currency Agreements, net of liabilities owed by the counterparties thereon,
provided, however, that the following shall be excluded from the definition of
Indebtedness: (a) indebtedness in the ordinary course of business and
substantially consistent with reasonable past practices of Borrower; (b)
indebtedness in respect of taxes, assessments, governmental charges and claims
for material, labor or supplies; and (c) indebtedness consisting of liabilities
in respect of litigation proceedings, provided that no final judgment which has
resulted in an Event of Default under Section 9.1(h) has been entered against
Borrower and (d) that certain loan from Telxon Corporation to Borrower of
$1,292,500.00 represented by a promissory note dated on or about July 15, 1998,
(such indebtedness under (a),(b), (c) and (d) hereinafter referred to as
"Excluded Indebtedness"); provided, further that in the event any such Excluded
Indebtedness becomes a liability evidenced by debt securities, debentures,
acceptances, notes or other similar instruments, and accrued interest, fees and
charges relating thereto, then such item of Excluded Indebtedness shall be
deemed to be Indebtedness for purposes of this Agreement.
7.7 CONTINGENT OBLIGATION. The Borrower shall not directly or indirectly create
or become liable with respect to any Contingent Obligation, except (a) recourse
obligations resulting from the indorsement of negotiable instruments for
collection in the ordinary course of business, (b) obligations, warranties and
indemnities not relating to Indebtedness, which have been or are undertaken or
made in the ordinary course of the Borrower's business, and (c) Contingent
Obligation with respect to surety, appeal and performance bonds obtained by the
Borrower. "Contingent Obligation" means any agreement, undertaking or
arrangement by which the Borrower assumes, guaranties, endorses, agrees to
provide funding, or otherwise becomes or is contingently liable upon the
obligation or liability of any other person, partnership, corporation, limited
liability company or other.
7.8 INVESTMENTS. Borrower shall not directly or indirectly make or own any
Investment except: (a) bonds or other obligations of the United States of
America, certificates of deposit issued by commercial banks, and commercial
paper rated at least A-1 or P-1 and having a maturity of not more than one year
and Eurodollar Deposits under $10,000,000.00; or (b) loans or advances to
employees of the Borrower, which loans and advances shall not in the aggregate
exceed $425,000.00 outstanding at any time; or (c) permitted bank accounts.
"Investment" means any loan, advance, extension of credit (other than accounts
receivable arising in the ordinary course of business on terms customary in the
trade), deposit account, contribution of capital to any other entity or any
investment in, or purchase or other acquisition of, the stock,
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<PAGE> 18
partnership interests, ownership interests in any limited liability company,
notes, debentures, or other securities of any other entity made by the Borrower.
7.9 MANAGEMENT. Borrower shall not permit a change in its ownership or capital
structure such that Telxon Corporation fails directly or indirectly to own
legally and beneficially more than 50% of the issued and outstanding voting
securities of Borrower.
7.10 COMPENSATION OF OFFICERS AND AFFILIATED PERSONS. Intentionally deleted.
7.11 ACQUISITION OF CAPITAL STOCK. Intentionally deleted.
7.12 ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. The Borrower hereby
indemnifies the Bank and holds the Bank harmless from and against any loss,
damage, cost, expense or liability (including strict liability) directly or
indirectly arising from or attributable to the generation, storage, release,
threatened release, discharge, disposal or presence (whether prior to or during
the term of the Loan) of Hazardous Substances on, under or about the Premises
(whether by the Borrower or any employees, agents, contractors or subcontractors
of the Borrower or any predecessor in title or any third persons occupying or
present on the Premises), or the breach of any of the representations and
warranties regarding the Premises, including, without limitation: (a) those
damages or expenses arising under the Environmental Laws; (b) the costs of any
repair, cleanup or detoxification of the Premises, including the soil and ground
water thereof, and the preparation and implementation of any closure, remedial
or other required plans; (c) damage to any natural resources; and (d) all
reasonable costs and expenses incurred by the Bank in connection with clauses
(a), (b) and (c) including, but not limited to reasonable attorneys' fees.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Bank, or (ii) relate to Hazardous
Substances placed or disposed of on the Premises after the Bank acquires title
to and/or control of the Premises through foreclosure or otherwise.
7.13 MAINTENANCE OF ACCOUNTS. The Borrower shall not maintain or have any
operating accounts or other accounts at any bank, depositary source or other
financial institution where money is deposited or maintained, other than
accounts currently maintained or acceptable to the Bank in its sole good faith
discretion.
8. FINANCIAL INFORMATION AND REPORTING. The Borrower shall deliver the following
to the Bank:
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(a) within 45 days after the end of each quarter, financial statements,
including a balance sheet and statements of income and surplus, and statements
of cash flows, certified by the president or chief financial officer of the
Borrower (a "Financial Officer") as fairly representing the Borrower's financial
condition as of the end of such period;
(b) within 45 days after the end of each quarter, statements signed by
a Financial Officer of the Borrower certifying the compliance of the Borrower
with the terms of this Agreement;
(c) within 45 days after the end of each quarter, a current borrowing
certificate, or other writings satisfactory to the Bank based on accounts
receivable of Borrower for the calculation of the Borrowing Base which sets
forth the number and dollar total of accounts receivable due and payable (i) not
more than 30 days from the date of the original invoice therefor, (ii) more than
30 days and not more than 60 days from the date of the original invoice
therefor, (iii) more than 60 days and not more than 90 days from the date of the
original invoice therefor, and (iv) more than 90 days from the date of the
original invoice therefor;
(d) within 120 days after the end of each fiscal year, audited
financial statements prepared in accordance with GAAP and certified by
independent public accountants reasonably satisfactory to the Bank, containing a
balance sheet, statements of income and surplus, statements of cash flows and
reconciliation of capital accounts, along with any management letters written by
such accountants;
(e) immediately upon becoming aware of the existence of any Pending
Default, Event of Default or breach of any term or conditions of this Agreement,
a written notice specifying the nature and period of existence thereof and what
action the Borrower is taking or proposes to take with respect thereto;
(f) at the request of the Bank, such other information as the Bank may
from time to time reasonably require.
9 DEFAULT.
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9.1 EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" hereunder: (a) the Borrower fails to make any payment of principal,
interest or any other sum due and payable under any note executed in connection
with this Agreement on or before 10 days after such payment is due; (b) the
Borrower fails to perform or observe any agreement, term, or covenant contained
in Sections 1, 3, 4, 6, or 7 of this Agreement; (c) the Borrower fails to comply
with any other provision of this Agreement, or fails to perform or observe any
covenant contained in any security agreement or other agreement in favor of the
Bank, and any such
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<PAGE> 20
failure continues for more than 30 days after Borrower's receipt of written
notice of such failure from Bank; (d) any warranty, representation or other
statement made or deemed to be made contained in this Agreement or in any
instrument furnished in compliance with or in reference to this Agreement is
false or misleading in any material respect; (e) the Borrower becomes insolvent
or makes an assignment for the benefit of creditors, or consents to the
appointment of a trustee, receiver or liquidator; (f) bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings are
instituted by the Borrower; (g) bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings are instituted against the Borrower and
such proceedings are not terminated within sixty (60) days hereafter; (h) a
final judgment or judgments for the payment of money aggregating in excess of
$200,000.00 is or are outstanding against the Borrower, and any such judgment or
judgments have not been discharged in full or stayed prior to the time a
judgment lien would attach to the assets of Borrower unless such judgment is not
covered by an insurance policy or other indemnification; provided, that if
insurance or other form of indemnification is available such judgment shall be
paid within 30 days of attachment of any such judgment lien; (i) the occurrence
of any event which allows the acceleration of the maturity of any indebtedness
of the Borrower to the Bank or any of the Bank's affiliates; (j) the occurrence
of any event which allows the acceleration of the maturity of any material
Indebtedness of the Borrower or constitutes a default or breach under any
material lease or material contract to any other person, corporation or entity
(other than the Bank) under any indenture, agreement or undertaking; or (k) the
Bank, in its sole good faith discretion, determines that a Material Adverse
Effect has occurred or that a material adverse change has occurred in the
financial condition, operations or business of the Borrower.
9.2 DEFAULT REMEDIES. Upon the occurrence of an Event of Default, the Bank may
immediately exercise any right, power or remedy permitted to the Bank by law or
any provision of this Agreement, and shall have, in particular, without limiting
the generality of the foregoing, the right to declare the entire principal, all
interest accrued, and all other charges accruing on the Loan, to be forthwith
due and payable, without any presentment, demand, protest or other notice of any
kind, all of which are hereby expressly waived by the Borrower.
10 MISCELLANEOUS.
-------------
10.1 NOTICES. (a) All communications under this Agreement or under the notes
executed pursuant hereto shall be in writing and shall be sent by facsimile or
by a nationally recognized overnight delivery service (1) if to the Bank, at the
following address, or at such other address as may have been furnished in
writing to the Borrower by the Bank:
The Huntington National Bank
917 Euclid Avenue
Cleveland, Ohio 44115
Attn: Timothy M. Ward, Assistant Vice President
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<PAGE> 21
(2) if to the Borrower, at the following address, or at such other address as
may have been furnished in writing to the Bank by the Borrower:
Aironet Wireless Communications, Inc.
367 Ghent Road, Suite 300
Fairlawn, Ohio 44334-0292
Attn: Roger J. Murphy, Jr., President and Chief Executive Officer
cc: Bill J. Brodnick
Telxon Corporation
3330 West Market Street
Akron, Ohio 44334
Attn: Harley R. Hill, Vice President
Robert A. Goodman
Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
(b) any notice so addressed and sent by telecopier shall be deemed to be given
when confirmed, and any notice sent by nationally recognized overnight delivery
service shall be deemed to be given the next day after the same is delivered to
such carrier.
10.2 ACCESS TO ACCOUNTANTS. Intentionally deleted.
10.3 REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by the Bank at the
closing or otherwise, and (c) financial statements, certificates and other
information previously or hereafter furnished to the Bank, may be reproduced by
the Bank by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process and the Bank may destroy any original
document so reproduced. The Borrower agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Bank in the
regular course of business) and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
10.4 COSTS AND EXPENSES. The Borrower agrees to pay service charges, analysis
fees, and all costs and expenses incidental to or in connection with this
Agreement or any service provided by the Bank, the enforcement of the Bank's
rights in connection therewith, any amendment or modification of this Agreement
or any other loan documents, any sale or attempted sale of any
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<PAGE> 22
interest herein to a participant or co-lender, any litigation, contest, dispute,
proceeding or action in any way relating to the Property or to this Agreement,
whether any of the foregoing are incurred prior to or after maturity, the
occurrence of an Event of Default, or the rendering of a judgment. Such costs
shall include, but not be limited to, reasonable fees and out-of-pocket expenses
of the Bank's counsel, recording fees, inspection fees, revenue stamps and note
and mortgage taxes.
10.5 SURVIVAL, SUCCESSORS AND ASSIGNS. All warranties, representations, and
covenants made by the Borrower herein or on any certificate or other instrument
delivered by it or on its behalf under this Agreement shall be considered to
have been relied upon by the Bank and shall survive the closing of the Loan
regardless of any investigation made by the Bank on its behalf. All statements
in any such certificate or other instrument shall constitute warranties and
representations by the Borrower. This Agreement shall inure to the benefit of
and be binding upon the heirs, successors and assigns of each of the parties.
10.6 AMENDMENT AND WAIVER, DUPLICATE ORIGINALS. All references to this Agreement
shall also include all amendments, extensions, renewals, modifications, and
substitutions thereto and thereof made in writing and executed by both the
Borrower and the Bank. This Agreement may be amended, and the observance of any
term of this Agreement may be waived, with (and only with) the written consent
of the Borrower and the Bank; PROVIDED HOWEVER THAT nothing herein shall change
the Bank's sole discretion (as set forth elsewhere in this Agreement) to make
advances, determinations, decisions or to take or refrain from taking other
actions. No delay or failure or other course of conduct by the Bank in the
exercise of any power or right shall operate as a waiver thereof; nor shall any
single or partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right. Two or more duplicate
originals of this Agreement may be signed by the parties, each of which shall be
an original but all of which together shall constitute one and the same
instrument.
10.7 ACCOUNTING TREATMENT AND FISCAL YEAR. Unless Borrower provides Bank with
ten (10) days prior written notice, the Borrower shall not change its fiscal
year for accounting or tax purposes from a period consisting of the twelve month
period ending on March 31 of each calendar year. The Borrower shall not make any
material (as defined in GAAP) change in accounting treatment and reporting
practices or tax reporting treatment, except as required by GAAP or law and
disclosed to the Bank.
10.8 ENFORCEABILITY AND GOVERNING LAW. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction, as to such jurisdiction, shall
be inapplicable or ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. No delay or
omission on the part of the Bank in exercising any right shall operate as a
waiver of such right or any other right. All
-18-
<PAGE> 23
of the Bank's rights and remedies, whether evidenced hereby or by any other
agreement or instrument, shall be cumulative and may be exercised singularly or
concurrently. This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio (without giving effect to the conflict of
laws rules thereof). The Borrower agrees that any legal suit, action or
proceeding arising out of or relating to this Agreement may be instituted in a
state or federal court of appropriate subject matter jurisdiction in the State
of Ohio, waives any objection which it may have now or hereafter to the venue of
any suit, action or proceeding, and irrevocably submits to the jurisdiction of
any such court in any such suit, action or proceeding.
10.9 CONFIDENTIALITY. The Bank shall hold all non-public information obtained
pursuant to the requirements hereof and identified as such by the Borrower in
accordance with the Bank's customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, and in any event may make disclosures reasonably required by a bona
fide Participant in connection with the contemplated participation, or as
required or requested by any governmental authority or any representative
thereof, or pursuant to any legal process (provided, however, that the Bank
shall use good faith efforts to notify the Borrower of and provide a copy to
Borrower of such legal process in order to provide Borrower with a reasonable
opportunity to seek appropriate protection from the applicable jurisdiction with
respect to any such disclosure), or to its accountants, lawyers and other
advisors.
10.10 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
10.11 NO CONSEQUENTIAL DAMAGES. No claim may be made by the Borrower, any
officers, directors, or agents against the Bank or its affiliates, directors,
officers, employees, attorneys or agents for any punitive, damages in respect of
any breach or wrongful conduct (whether the claim therefor is based in contract,
tort or duty imposed by law) in connection with, arising out of
-19-
<PAGE> 24
or in any way related to the transactions contemplated and relationship
established by this Agreement, or any act, omission or event occurring in
connection therewith, and the Borrower hereby waives, releases and agrees not to
sue upon any such claim for any such damages, whether or not accrued and whether
or not known or suspected to exist in its favor.
10.12 INDEMNITY. The Borrower shall indemnify the Bank from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses and disbursements of any kind or nature whatsoever
(including, without limitation, fees and disbursements of counsel) which may be
imposed on, incurred by, or asserted against the Bank in any litigation,
proceeding or investigation instituted or conducted by any governmental agency
or instrumentality or any other person or entity with respect to any aspect of,
or any transaction contemplated by, or referred to in, or any matter related to,
this Agreement, whether or not the Bank is a party thereto, except to the extent
that any of the foregoing arises out of the willful misconduct of the Bank, as
determined in a final, non-appealable judgment by a court of competent
jurisdiction.
11 DEFINITIONS
-----------
11.1 UNIFORM COMMERCIAL CODE TERMS. All terms defined in the Uniform Commercial
Code as adopted in the State of Ohio shall have the meanings given therein
unless otherwise defined herein.
11.2 ACCOUNTING TERMS. As used in this Agreement, and any promissory notes,
certificates, reports or other documents made or delivered pursuant hereto,
accounting terms not defined in this Agreement shall have the respective
meanings given to such terms under GAAP. "GAAP" means generally accepted
accounting principles consistently applied set forth in the opinions and
pronouncements of the Accounting Principles Board, the American Institute of
Certified Public Accountants and the Financial Accounting Standards Board as in
effect on the date hereof.
11.3 OTHER DEFINITIONAL PROVISIONS.
-----------------------------
(a) The words "hereof," "herein," and "hereunder," and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement;
(b) Whenever required by the context of this Agreement, the promissory
notes or other loan documents executed in connection herewith, the singular
shall include the plural, and vice versa and the masculine and feminine genders
shall include the neuter gender and vice versa.
-20-
<PAGE> 25
11.4 INDEX OF DEFINITIONS.
"Account Debtor" is defined in Section 2.1.
"Affiliate" is defined in Section 2.1(f)
"Agreement" is defined in the preamble.
"Bank" is defined in the preamble.
"Borrower" is defined in the preamble.
"Borrowing Base" is defined in Section 1.1.
"Contingent Obligations" is defined in Section 7.7.
"Contra" is defined in Section 2.1.
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Eligible Accounts" is defined in Section 2.1.
"Environmental Laws" is defined in Section 6.12.
"Event of Default" is defined in Section 9.1.
"Financial Officer" is defined in Section 8.
"GAAP" is defined in Section 11.2.
"Hazardous Substances" is defined in Section 6.12.
"Investments" is defined in Section 7.8.
"Loan" is defined in Section 1.
"Material Adverse Effect" is defined in Section 6.7.
"Pending Default" is defined in Section 1.2.
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<PAGE> 26
"Permitted Purchase Money Indebtedness" is defined in Section 7.6.
"Premises" is defined in Section 6.12.
"Revolving Loan" is defined in Section 1.1.
Each of the parties has signed this Agreement as of the date set forth
in the preamble above.
The Huntington National Bank
By: /s/ Timothy M. Ward, V.P.
------------------------------------------
Timothy M. Ward, Assistant Vice President
Aironet Wireless Communications, Inc.
By: /s/ Roger Murphy
------------------------------------------
Name: Roger Murphy
----------------------------------------
Title: President & CEO
---------------------------------------
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<PAGE> 27
EXHIBIT A
REVOLVING NOTE
$5,000.000.00 Cleveland, Ohio ______________, 1998
FOR VALUE RECEIVED, the undersigned Aironet Wireless Communications,
Inc., a Delaware corporation, promises to pay to the order of The Huntington
National Bank (hereinafter called the "Bank", which term shall include any
holder hereof) at such place as the Bank may designate or, in the absence of
such designation, at any of the Bank's offices, the sum of Five Million and
No/100 Dollars ($5,000,000.00), or so much thereof as shall have been advanced
by the Bank at any time and not hereafter repaid (hereinafter called the
"Principal Sum") together with interest as hereinafter provided, and payable at
the times and in the manner hereinafter set forth. The proceeds of the loan
evidenced hereby may be advanced, repaid and readvanced, in partial amounts,
during the term of this Note and prior to maturity, provided that no partial
advance of the Principal Sum shall be made hereon which would result in the
unpaid Principal Sum to exceed in the aggregate $5,000,000.00. Each such advance
shall be made to the undersigned upon receipt by the Bank of the undersigned's
application therefor and disbursement instructions, which shall be in such form
as the Bank shall from time to time prescribe. The Bank shall be entitled to
rely on any oral or telephonic communication requesting an advance and/or
providing disbursement instructions hereunder, which shall be received by it in
good faith from anyone reasonably believed by the Bank to be the undersigned's
authorized agent. The undersigned agrees that all advances made by the Bank will
be evidenced by entries made by the Bank into its electronic data processing
system and/or internal memoranda maintained by the Bank and that all advances
made by the Bank as Prime Commercial Rate Advances, or LIBOR Advances (and the
applicable interest rate(s) and maturity(ies)) and all payments by the
undersigned on such advances may also be evidenced by entries made by the Bank
on the Grid(s) attached hereto; provided, however, that the Bank's failure to
make such entries on the Grid(s) with respect to any advance or payment shall
not limit or otherwise affect the obligation of the undersigned to repay the
advances and accrued interest. The undersigned further agrees that the sum or
sums shown on the most recent printout from the Bank's electronic data
processing system and/or such memoranda shall be rebuttably presumptive evidence
of the amount of the Principal Sum, the amount of any accrued interest, any and
all payments, and the applicable interest rate(s) and maturity(ies) thereof.
Each request for an advance shall constitute a warranty and representation by
the undersigned that no Event of Default hereunder or under the related Loan
Agreement has occurred and is continuing and that no event or circumstance which
would constitute such an Event of Default, but for the requirement that notice
be given or time elapse or both, has occurred and is continuing.
This Note is executed and the advances contemplated hereunder are to be
made pursuant to the Loan Agreement by and between the undersigned and the Bank
dated as of the date hereof, as amended from time to time (the "Loan Agreement")
under which the Bank has indicated its willingness to extend credit from time to
time to the undersigned but is not obligated to do so.
<PAGE> 28
Terms not otherwise defined herein shall have the meanings ascribed to them as
set forth in the Loan Agreement.
INTEREST
- --------
The undersigned, at its option, may request a Prime Commercial Rate
Advance, or a LIBOR Advance under this Note. For the purposes of this Note the
following terms and conditions shall apply to the respective advances requested
by the undersigned.
PRIME COMMERCIAL RATE ADVANCES
- ------------------------------
Each request for a Prime Commercial Rate Advance shall be in any
available amount requested by the undersigned. Interest will accrue on the
unpaid balance of the Principal Sum of the advance until paid at a variable rate
of interest per annum, which shall change in the manner set forth below, based
on the applicable Prime Commercial Rate. All interest shall be calculated on the
basis of a 360 day year for the actual number of days the Principal Sum or any
part thereof remains unpaid.
As used herein, Prime Commercial Rate shall mean the rate established
by the Bank from time to time based on its consideration of economic, money
market, business and competitive factors, and it is not necessarily the Bank's
most favored rate. Subject to any maximum interest rate limitations specified by
applicable law, any variable rate of interest on the obligation evidenced hereby
shall change automatically without notice to the undersigned immediately with
each change in the Prime Commercial Rate effective as of the opening of business
on the day of the change.
MANNER OF PAYMENT
- -----------------
The Principal Sum advanced as Prime Commercial Rate Advances shall be
payable July 1, 2000. Accrued interest shall be due and payable monthly
beginning on the first day of the month following initial disbursement of a
Prime Commercial Advance, and at maturity, whether by demand, acceleration, or
otherwise. There shall be no penalty for prepayment and the amount of any
payment shall first be applied to the payment of accrued interest which is due.
LIBOR ADVANCES
- --------------
Each request for a LIBOR Advance, with the exception for the daily
LIBOR Advances, shall be in an amount of $100,000.00 and additional increments
of $100,000.00. Whenever the undersigned makes a request for a LIBOR Advance the
Bank shall quote the rate available based upon LIBOR and if not accepted
immediately the quoted rate shall expire. The Principal Sum advances as a LIBOR
Advance shall be for daily, 30, 60, 90 or 180 days as designated by the
undersigned and interest will accrue on the unpaid balance of such advance at a
rate of interest per annum equal to 2.00 percentage points in excess of the
quoted LIBOR for the period of time
-2-
<PAGE> 29
requested by the undersigned. All interest shall be calculated on the basis of a
360 day year for the actual number of days the LIBOR Advance remains unpaid.
As used herein, London Interbank Offered Rate ("LIBOR") shall mean, in
respect to any period referred to above, the rate of interest the Bank may quote
to the undersigned, from time to time and subject to change without notice,
determined on the basis of the Offered Rate for deposits in U.S. Dollars in an
amount comparable to the partial advance of the Principal Sum for a period equal
to the applicable maturity of said advance which appears on the Reuter Screen
LIBO Page as of 8:00 A.M., Columbus, Ohio time on the date that is two (2)
banking days of the Bank preceding the first day of the applicable borrowing
period requested by the undersigned except for the daily LIBOR which is the 30
day spot LIBOR Rate applicable for each day that the daily LIBOR Advance is
outstanding.
If two (2) or more Offered Rates appear on the Reuter Screen LIBO Page,
the Offered Rate will be averaged (rounded upward if necessary, to the nearest
one sixteenth of one percent (1/16th of 1%)) to determine the quoted rate. As
used herein, Reuter Screen LIBO Page means the display designated as page "LIBO"
on the Reuter Monitor Money Rates Service (or such other page as may replace the
LIBO Page on the service for the purpose of displaying London Interbank Offered
Rates of major banks).
Rates quoted by the Bank for LIBOR Advances shall mean the per annum
rate that is equal to the sum of LIBOR plus the rate representing the cost, if
any, of maintaining reserves against "Eurocurrency Liabilities" under Regulation
D of the Board of Governors of the Federal Reserve System. This provision is for
the benefit of the Bank and is not intended to increase the expected yield to
the Bank above the rate of interest provided for herein.
MANNER OF PAYMENT
- -----------------
Each Principal Sum LIBOR Advance and accrued interest shall be due and
payable on the last day of the measurement period elected by the undersigned for
the advance and at maturity, provided, that interest for LIBOR Advances of 180
days shall be due and payable on each three (3) month period during such Advance
and accrued interest on each daily LIBOR Advance shall be due and payable
monthly. The undersigned shall not be permitted to make any voluntary prepayment
during any measurement period. The term of each successive measurement period
applicable to a requested LIBOR Advance shall commence on the last day of the
next preceding measurement period. Whenever the measurement period would
otherwise end on any day that is not a general banking day the last day of the
measurement period shall automatically extend to the next Bank business day
unless such extended banking day would fall in another calendar month in which
case such maturity date shall be the next preceding banking day of the Bank. If
a LIBOR Advance is not paid on the last day of the measurement period or a
successive measurement period requested for the unpaid LIBOR Advance, and
accrued interest paid, the unpaid LIBOR Advance shall be converted to a Prime
Commercial Rate Advance.
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<PAGE> 30
The undersigned shall not have the option of electing a measurement
period for a LIBOR Advance which would end after July 1, 2000.
PREPAYMENT OF LIBOR ADVANCE
- ---------------------------
Borrower shall have the right at any time or from time to time to prepay all or
any part of the principal amount of this Note then outstanding as designated by
Borrower, plus interest accrued on the amount so prepaid to the date of such
prepayment. Borrower shall give Bank notice of prepayment of any Prime
Commercial Rate Advances by not later than 11:00 a.m. Cleveland time on the
Cleveland banking day such prepayment is to be made and written notice of the
prepayment of any LIBOR Advances not later than 1:00 p.m. Cleveland time two (2)
Cleveland banking days before the Cleveland banking day on which such prepayment
is to be made. Prepayments of Prime Commercial Rate Advances shall be without
any premium or penalty. In any case of prepayment of any LIBOR Advances,
Borrower agrees that if LIBOR as determined as of 11:00 a.m. Cleveland time, two
(2) Cleveland banking days prior to the date of prepayment of any LIBOR Advances
(hereinafter "Prepayment LIBOR") shall be lower than the last LIBOR previously
determined for those LIBOR Advances with respect to which prepayment is intended
to be made (hereinafter "Last LIBOR"), then Borrower shall, upon written notice
by Bank, promptly pay to Bank in immediately available funds, a prepayment
penalty equal to the product of (a) a rate (the "Prepayment Penalty Rate") which
shall be equal to the difference between the Last LIBOR and the Prepayment LIBOR
times (b) all or such part of the principal amounts of the Notes as relates to
the LIBOR Advances to be prepaid, times (c) the number of days in the period
commencing with the date on which such prepayment is to be made to that date
which coincides with the last day of the Interest Period previously established
when the LIBOR Advances, which are to be prepaid, were made divided by 360. In
addition, Borrower shall immediately pay directly to Bank, the amount claimed as
additional costs or expenses (including without limitation, cost of telex, wires
or cables) incurred in connection with the prepayment, upon Borrower's receipt
of a written statement from Bank. Each prepayment of a LIBOR Advance shall be in
the aggregate principal sum of not less than One Hundred Thousand Dollars
($100,000.00). In the event Borrower cancels a proposed LIBOR Advance subsequent
to the delivery to Bank of the notice of the proposed date, aggregate amount and
initial Interest Period of such Loan, but prior to the draw down of funds
thereunder, such cancellation shall be treated as a prepayment subject to the
aforementioned prepayment penalty. The foregoing paragraph does not apply to
daily LIBOR Advances.
SPECIAL LIBOR ADVANCE PROVISION
- -------------------------------
If it becomes illegal for the Bank to charge and accrue interest on the
Principal Sum based on LIBOR as a result of change after the date of this Note
in any applicable law, governmental regulation, guideline or order, or the
interpretation of any thereof, by any authority charged with the administration
thereof, then upon notice thereof by the Bank to the undersigned, the
undersigned (a) may not request or cause the Principal Sum to accrue interest at
a rate based on LIBOR for so long as accruing interest at a rate based on LIBOR
remains illegal, and (b) shall
-4-
<PAGE> 31
select another interest rate for the Principal Sum and pay to the Bank upon
written request such amount or amounts as in the reasonable judgment of the
Bank, calculated in good faith without manifest error by the Bank will
compensate the Bank for any loss, premium or penalty incurred by the Bank
because of such change in the interest rate.
If the effect of any change occurring after the date of this Note in
any applicable law, governmental regulation, guideline or order, or the
interpretation or application of any thereof, by any authority charged with the
administration thereof, is to increase the actual costs of the Bank for accruing
interest on the Principal Sum at a rate based on LIBOR, such as, but not limited
to, any reserve, special deposit or similar requirements against assets held by,
or deposits in or for the account, or loans by, or any other acquisition of
funds for loans by, the Bank, or to reduce the amount of any payment of
principal or of interest received by the Bank, (including any reduction for
withholding taxes), the undersigned will, after demand by the Bank, pay to the
Bank such additional amounts as will compensate the Bank for such additional
costs or reduction, such payments to be made on the next day when interest is
payable to the Bank. If subsequent to any such increase in costs or such
reduction the applicability of such change or such underlying law, governmental
regulation, guideline or order or the interpretation of any thereof is repealed,
annulled, withdrawn, reinterpreted, amended or otherwise modified so as to
eliminate or reduce such increase in costs or such reduction, then, effective as
of the time of such elimination of an increased cost or reduction is actually
effective, the benefits thereof (but only to the extent that the same are
actually received by the Bank) shall accrue to the undersigned and it shall be
paid over or credited to the undersigned to the extent of such additional
payments for which the undersigned has not been previously been reimbursed or
received credit. The undersigned shall have the option, upon being notified by
the Bank of any amount payable to the Bank under this paragraph to change the
interest rate on the Principal Sum with payment to the Bank upon written request
of such amount or amounts as in the reasonable judgment of the Bank, calculated
in good faith, without manifest error by the Bank, will compensate it for loss,
premium or penalty incurred by the Bank because of such change in interest rate.
PROVISIONS APPLICABLE TO ALL ADVANCES ON THIS NOTE
--------------------------------------------------
LATE CHARGE
- -----------
Any installment or other payment not made within 10 days of the date
such installment or payment is due shall be subject to a late charge equal to 5%
of the amount of the installment or payment.
EVENTS OF DEFAULT
- -----------------
Upon the occurrence and continuance of any of the following events:
-5-
<PAGE> 32
(1) if the undersigned fails to make any payment of the Principal Sum
of or interest on this Note when due and payable and such payment is not made
within ten (10) days after the same is due; or
(2) any other event occurs which constitutes an Event of Default under
the Loan Agreement; then the Bank may, at its option, without notice, terminate
the right to borrow on this Note and/or declare the indebtedness on this Note
immediately due and payable. In the event the Bank shall institute any action
for the enforcement or collection of the indebtedness evidenced hereby, the
undersigned agrees to pay all costs and expenses of such action, including
reasonable attorneys' fees, to the extent permitted by law.
GENERAL PROVISIONS
- ------------------
The undersigned hereby waives presentment, notice of dishonor, protest,
notice of protest, and diligence in bringing suit on this Note, and consents
that, without discharging the undersigned, the time of payment may be extended
an unlimited number of times before or after maturity without notice.
The obligations evidenced hereby may from time to time be evidenced by
another note or notes given in substitution, renewal or extension hereof.
The captions used herein are for reference only and shall not be deemed
a part of this Note. If any of the terms or provisions of this Note shall be
deemed unenforceable, the enforceability of the remaining terms and provisions
shall not be affected. This Note shall be governed by and construed in
accordance with the law of the State of Ohio.
WARRANT OF ATTORNEY
- -------------------
The undersigned authorizes any attorney at law to appear in any court
of record in the State of Ohio or in any other state or territory of the United
States of America after the above indebtedness becomes due, whether by
acceleration or otherwise, to waive the issuing and service of process, and to
confess judgment against the undersigned in favor of the Bank for the amount
then appearing due together with costs of suit, and thereupon to waive all
errors and all rights of appeal and stays of execution. The foregoing warrant of
attorney shall survive any judgment and should any judgement be vacated for any
reason, the warrant of attorney nevertheless may thereafter be used to obtain an
additional judgment or judgments against the undersigned.
This Note was executed in Cuyahoga County, Ohio.
-6-
<PAGE> 33
WAIVER OF RIGHT TO TRIAL BY JURY
- --------------------------------
THE UNDERSIGNED ACKNOWLEDGES THAT AS TO ANY AND ALL DISPUTES THAT MAY ARISE
BETWEEN THE UNDERSIGNED AND THE BANK, THE COMMERCIAL NATURE OF THE TRANSACTION
OUT OF WHICH THIS NOTE ARISES MAKES ANY SUCH DISPUTE UNSUITABLE FOR TRIAL BY
JURY. ACCORDINGLY, THE UNDERSIGNED HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY AS
TO ANY AND ALL DISPUTES THAT MAY ARISE RELATING TO THIS NOTE OR TO THE LOAN
AGREEMENT OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION HEREWITH.
BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU
DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR
KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS
OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS,
FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER
CAUSE.
Aironet Wireless Communications, Inc., a Delaware
corporation
By:______________________________________________
Its:_____________________________________________
-7-
<PAGE> 34
GRID
Date of Advance ("A")
Advance or Interest Maturity
Payment Payment ("P") Amount Rate Date
- --------------------------------------------------------------------------------
<PAGE> 35
As of July 24, 1998
AIRONET WIRELESS COMMUNICATIONS, INC.
SUMMARY OF SHARE HOLDINGS
Total shares issued and outstanding 9,539,126
<TABLE>
<CAPTION>
CURRENT % OF TOTAL
SHAREHOLDER SHARE HOLDINGS OUTSTANDING SHARES
----------- -------------- ------------------
<S> <C> <C>
Telantis Venture Partners IV, Inc. 808,500 8.4757%
Teixon Corporation 7,276,500 76.2806%
Roger J. Murphy 200,000 2.0966%
D. Michael Grimes 60,000 .6290%
Thomas G. Snow 10,000 .1048%
Axiom Venture Partners II Limited Partnership 857,142 8.9855%
W, A & H Investments LLC 142,857 1.4976%
McDonald & Company Securities, Inc.
c/fbo Frank B. Carr 28,571 .2995%
Clarion Capital Corporation 57,143 .5990%
Telantis Venture Partners V, Inc. 98,413 1.0317%
</TABLE>
EXHIBIT B
<PAGE> 36
EXHIBIT C
None
<PAGE> 1
Exhibit 10.4
SUBSCRIPTION AGREEMENT
----------------------
This Subscription Agreement (this "Agreement") is made as of March 31,
1998, by and among Aironet Wireless Communications, Inc., a Delaware corporation
with its principal place of business at 367 Ghent Road, Fairlawn, Ohio 44333
(the "Company"), and the parties identified in EXHIBIT A (each an "Investor" and
collectively the "Investors") whose states of organization and principal places
of business are identified opposite their names in EXHIBIT A.
BACKGROUND
----------
WHEREAS, on August 25, 1993, the Certificate of Incorporation of the
Company was filed by the Secretary of State for the State of Delaware (as
amended through the date of this Agreement, the "Certificate");
WHEREAS, under the Certificate, the authorized capital stock of the
Company consists solely of fifteen million (15,000,000) shares of Common Stock,
$.01 par value (the "Common"); and
WHEREAS, the Board of Directors of the Company has determined it to be
in the best interests of the Company and its stockholders for the Company to
sell, in a private placement, up to One Million Eight Hundred Forty One Thousand
Two Hundred Seventy (1,841,270) newly issued shares of the Common to the
Investors for an aggregate sale price of up to Six Million Four Hundred Forty
Four Thousand Four Hundred Forty Four Dollars ($6,444,444), with warrants to
purchase up to an aggregate of Five Hundred Fifty Two Thousand Three Hundred
Eighty One (552,381) shares of the Common, and the Investors desire to purchase
the shares and warrants on the terms and conditions set forth herein.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing premises, the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company, on the
one hand, and each of the Investors, severally and not jointly, on the other
hand, agree as follows:
I. PURCHASE AND SALE OF SHARES.
1.1. PURCHASE AND SALE. Subject to the terms and conditions, and in
reliance on the representations, warranties and covenants, set forth herein, at
the Closing (defined herein) the Company shall issue and sell to each of the
Investors, and each Investor shall purchase from the Company, the number of
shares of the Common set forth opposite the Investor's name in EXHIBIT A (each a
"Purchased Share" and collectively the "Purchased Shares") for the purchase
price of Three and 50/100 Dollars ($3.50) per Purchased Share.
1.2. WARRANTS. At Closing, in addition to the Purchased Shares, the
Company shall deliver to each Investor warrants to purchase shares of the Common
in the amount set forth opposite the Investors name in EXHIBIT A, on the terms
and conditions set forth in the form of warrant certificate
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<PAGE> 2
attached as EXHIBIT B (each a "Warrant" and collectively the "Warrants") (all
subsequent references in this Agreement to the Purchased Shares shall include
the associated Warrants ).
1.3. CLOSING. The sale, delivery and the purchase of the Purchased
Shares (the "Closing") shall take place at the offices of Telxon Corporation,
Akron, Ohio on March 31, 1998 at 10:00 A.M.(the "Closing Date"), subject to the
satisfaction or waiver of all of the conditions to Closing set forth herein. At
the Closing the purchase price for its Purchased Shares shall be paid by each
Investor, in the amount set forth opposite the Investor's name in EXHIBIT A, to
the Company by wire transfer in immediately available funds pursuant to the wire
instructions set forth in EXHIBIT C, and against such payment the Company shall
deliver to each Investor a certificate evidencing the Purchased Shares being
acquired by it.
II. REPRESENTATION AND WARRANTIES OF THE COMPANY.
2.1. REPRESENTATIONS AND WARRANTIES; QUALIFICATIONS. The Company makes
to the Investors the representations and warranties set forth in this Article
II. Each such representation and warranty is subject to and qualified by the
exceptions set forth (with reference to a specific Section of this Article II)
in the Company's disclosure schedule attached hereto (the "Company Disclosure
Schedule").
2.2. ORGANIZATION. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and is
duly qualified or registered to do business as a foreign corporation in each
jurisdiction in which the failure to be so qualified or registered would have a
Material Adverse Effect. As used in this Agreement, the term "Material Adverse
Effect" means any change or effect that is or could reasonably be expected to be
materially adverse to the properties, assets, business, prospects, financial or
other condition or results of operations of the Company and its subsidiaries
taken as a whole or that could reasonably be expected to impair the Company's
ability to perform its obligations hereunder.
2.3. CORPORATE POWER. The Company has all required corporate power and
authority to carry on its business as presently conducted, to enter into and
perform this Agreement and the agreements contemplated hereby to which it is a
party and to carry out the transactions contemplated hereby and thereby,
including the issuance of the Purchased Shares and the shares of the Common
issuable upon exercise of the Warrants (the "Warrant Shares"). The Company is
not in violation of any term of: (i) the Certificate; (ii) its bylaws (as
amended through the date of this Agreement, "Bylaws") or (iii) any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to the Company or to which the Company is a party or by which it is
bound, which, in the case of this clause (iii), could reasonably be expected to
have a Material Adverse Effect.
2.4. CORPORATE RECORDS. The corporate record books of the Company, as
made available for inspection by the Investors, accurately record all corporate
actions taken by its stockholders, board of directors and committees of its
board of directors. The Company has provided to the Investors true and correct
copies of the Certificate and Bylaws.
2
<PAGE> 3
2.5. INTER-COMPANY AGREEMENTS. The Company and its parent corporation,
Telxon Corporation ("Telxon"), are parties to a: License, Rights, and Supply
Agreement; Tax Benefit and Indemnification Agreement; and Services Agreement
("Inter-Company Agreements"), true and complete copies of which have been made
available for inspection by the Investors. Each of the Inter-Company Agreements
has been duly authorized by the Company and Telxon, has been duly executed by
each of them, and is the legal, valid, and binding obligation of each of them,
enforceable in accordance with its terms, and of which no defaults exist as of
the date hereof.
2.6. ENFORCEABLE AGREEMENT. This Agreement and all other documents
executed by the Company pursuant hereto are valid and binding obligations of the
Company, enforceable in accordance with their terms, except as limited by the
laws of general application relating to bankruptcy, insolvency and the relief of
debtors and rules and laws governing specific performance, injunctive relief and
other equitable remedies.
2.7. AUTHORIZATION. The execution, delivery and performance of this
Agreement, all agreements, documents and instruments contemplated hereby and the
issuance of the Purchased Shares and the Warrant Shares have been duly
authorized by all necessary action of the Company.
2.8. NON-CONTRAVENTION. The execution of this Agreement, the issuance
and delivery of the Purchased Shares and Warrant Shares and the performance of
the transactions contemplated hereby will not: (i) violate, conflict with or
result in a default under any material contract or obligation to which the
Company is a party or by which it or its assets are bound, or any provision of
the Certificate or its Bylaws, or cause the creation of any encumbrance upon any
of the material assets of the Company; (ii) violate or result in a violation of,
or constitute a material default (whether after the giving of notice, lapse of
time or both) under, any provision of any law, regulation or rule, or any order
of, or any restriction imposed by any court or other governmental agency
applicable to the Company; (iii) require from the Company any notice to,
declaration or filing with, or consent or approval of any governmental
authority; (iv) require from the Company any notice to, declaration or filing
with any third party, other than any governmental authority, if the failure to
provide such item could reasonably be expected to have a Material Adverse
Effect; or (v) accelerate any material obligation under, or give rise to a right
of termination of, any material agreement, permit, license or authorization to
which the Company is a party or by which the Company or its assets are bound.
2.9. CAPITALIZATION. The Company's authorized, issued and outstanding
securities consist solely of the amounts set forth in SECTION 2.9 OF THE COMPANY
DISCLOSURE SCHEDULE. SECTION 2.9 OF THE COMPANY DISCLOSURE SCHEDULE identifies
each of the Company's stockholders, option holders and warrant holders, as well
as the holders of any other outstanding securities of the Company, and sets
forth the type and amount of the securities owned by each holder, after giving
effect to the transactions contemplated herein. All outstanding securities of
the Company have been issued in compliance with applicable securities laws and
are fully paid, validly issued, and non-assessable.
2.10. OTHER SECURITIES. The Company has not issued or agreed to issue
any warrants, options or other rights to purchase or acquire any shares of its
capital stock, and there are no outstanding securities convertible into shares
of its capital stock, there are no preemptive rights,
3
<PAGE> 4
rights of first refusal, or to the Company's knowledge, any put or call rights
or obligations, subscriptions, arrangements or anti-dilution rights with
respect to the issuance, sale or redemption of shares of its capital stock,
other than the amounts set forth in SECTION 2.9 OF THE COMPANY DISCLOSURE
SCHEDULE, and the agreement between the Company and Telantis Venture Partners
IV, Inc. ("TVP") (fka Telantis Capital, Inc.) pursuant to which TVP has the
right to purchase shares of the Common sufficient to maintain a ten percent
(10%) ownership in the Company prior to an initial public offering of the stock
of the Company, and the rights set forth herein or in the Stockholders
Agreement (defined herein).
2.11. DUE ISSUANCE. At Closing and when paid for, the Purchased Shares
will be duly and validly issued, fully paid and nonassessable and will have been
offered, issued, sold and delivered in compliance with applicable federal and
state securities laws, and the Purchased Shares shall be transferred to the
Investors free and clear of any and all claims, liens or other encumbrances.
2.12. REGISTRATION RIGHTS. The Company has granted no rights to have
shares of its capital stock registered for sale to the public under the laws of
any jurisdiction, other than the rights set forth in the Registration Rights
Agreement (defined herein).
2.13. VOTING AGREEMENTS AND RESTRICTIONS ON TRANSFER. To the Company's
knowledge there are no agreements relating to the voting of the Company's voting
securities or restrictions on the transfer of the Company's capital stock, other
than this Agreement and the Stockholders Agreement.
2.14. SUBSIDIARIES; INVESTMENTS. The Company does not own or have any
direct or indirect interest in or control over any corporation, partnership,
joint venture or other entity of any kind. The term "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, whether through the
ownership of voting securities or by contract.
2.15. MERGERS. The Company is not party to any agreement regarding its
acquisition in whole or in part, whether by merger, consolidation, asset sale,
or otherwise, other than this Agreement.
2.16. FINANCIAL STATEMENTS. The Company has provided to the Investors
the Company's: (i) audited balance sheets as at March 31, 1996 and March 31,
1997, and the related statements of operations, changes in stockholders' equity,
and cash flows for the fiscal years ended March 31, 1995, March 31, 1996 and
March 31, 1997, certified by the independent certified public accountants of the
Company (the "Base Financial Statements") (the audited balance sheet is referred
to as the "Base Balance Sheet"); (ii) unaudited balance sheet (the "Most Recent
Balance Sheet") and related statements of operations, changes in stockholders'
equity, and cash flows for the period ended February 28, 1998, certified by the
Company's Chief Financial Officer (the "Most Recent Financial Statements"); and
(c) a complete and correct copy of the Report of Independent Accountant
addressed to the Company dated March 30, 1998. The Base Financial Statements and
the Most Recent Financial Statements were prepared in accordance with generally
accepted accounting principles (except that the Most Recent Financial Statements
do not include all of the information and notes required for complete financial
statements) consistently applied during the periods covered
4
<PAGE> 5
thereby and fairly present in all material respects the financial condition of
the Company on the dates of such statements and the results of its operations
and its cash flows for the periods covered thereby. Nothing has come to the
attention of the Company's management since such respective dates which would
indicate that such financial statements were not true and correct in all
material respects as of the date thereof.
2.17. PROJECTIONS. Projections for the Company's fiscal years ended
1999 and 2000 (the "Projections") have been made available for inspection by the
Investors. The Projections represent management's good faith estimates of the
future performance of the Company based upon assumptions which are set forth
therein and which, in the reasonable judgment of management, were reasonable
when made and continue to be reasonable as of the date hereof; PROVIDED,
HOWEVER, THAT THERE IS NO ASSURANCE THAT THE PROJECTED RESULTS WILL ACTUALLY BE
ACHIEVED. IN THAT REGARD, PROJECTIONS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE
OR ACHIEVEMENTS OF THE COMPANY, OR INDUSTRY RESULTS, TO BE MATERIALLY DIFFERENT
FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY
SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS: GENERAL
ECONOMIC AND BUSINESS CONDITIONS; INDUSTRY CAPACITY; DEMOGRAPHIC CHANGES;
COMPETITION; RAW MATERIAL COSTS AND AVAILABILITY; IMPORT PROTECTION AND
REGULATION; THE LOSS OF ANY SIGNIFICANT CUSTOMERS; CHANGES IN BUSINESS STRATEGY
OR DEVELOPMENT PLANS; QUALITY OF MANAGEMENT; AVAILABILITY, TERMS AND DEPLOYMENT
OF CAPITAL; BUSINESS ABILITIES AND JUDGMENT OF PERSONNEL; AVAILABILITY OF
QUALIFIED PERSONNEL; AND CHANGES IN OR THE FAILURE TO COMPLY WITH GOVERNMENT
REGULATIONS.
2.18. ABSENCE OF UNDISCLOSED LIABILITIES. As of the date of the Most
Recent Balance Sheet: (i) the Company did not have any material liabilities; and
(ii) the Company had no indebtedness, in either case, whether accrued, absolute
or contingent, asserted or unasserted, including without limitation, liabilities
as guarantor or otherwise with respect to obligations of others, or liabilities
for taxes due or then accrued or to become due, or contingent or potential
liabilities relating to activities of the Company or the conduct of its business
prior to the date of the Most Recent Balance Sheet, which were required to be
disclosed in the Most Recent Balance Sheet in accordance with generally accepted
accounting principles, except liabilities stated or adequately reserved against
or disclosed on the Most Recent Balance Sheet or the notes thereto.
2.19. ABSENCE OF CHANGES. Since the date of the Most Recent Balance
Sheet, except for entering into the Inter-Company Agreements, the Company has
conducted its business only in the ordinary course consistent with past
practice, and to the Company's knowledge there has not been:
(a) any material change in the financial or other condition,
properties, assets, liabilities, business, prospects or operations of
the Company, which change by itself or in conjunction with all other
such changes, whether or not arising in the ordinary course of
business, has had or could reasonably be expected to have a Material
Adverse Effect;
(b) any material contingent liability incurred by the Company
as guarantor or otherwise with respect to the obligations of others or
any cancellation of any debt or claim owing to, or waiver of any
material right of, the Company;
5
<PAGE> 6
(c) any material mortgage, encumbrance or lien placed on any
of the properties of the Company which remains in existence on the date
hereof or will remain on the Closing Date;
(d) any obligation or liability of any nature, whether
accrued, absolute or contingent, incurred by the Company other than
obligations and liabilities incurred in the ordinary course of business
or incurred as a result of or arising out of the transactions
contemplated by this Agreement;
(e) any purchase, sale or other disposition, or any agreement
or other arrangement for the purchase, sale or other disposition, of
any properties or assets of the Company other than in the ordinary
course of business;
(f) any damage, destruction or loss, whether or not covered by
insurance, which has had or could reasonably expected to have a
Material Adverse Effect;
(g) any declaration, setting aside or payment of any dividend
by the Company, or the making of any other distribution in respect of
the capital stock of the Company, or any direct or indirect redemption,
purchase or other acquisition by the Company of its own capital stock;
(h) any labor trouble or claim of unfair labor practices
involving the Company; any material change in the compensation payable
or to become payable by the Company to any of its officers, employees,
agents or independent contractors; or any bonus payment or arrangement
made to or with any of such officers, employees, agents or independent
contractors, other than normal merit increases in accordance with its
usual practices;
(i) any material change in the officers or management of the
Company;
(j) any payment or discharge of any lien or liability of the
Company which was not shown on the Base Balance Sheet or incurred in
the ordinary course of business thereafter;
(k) any obligation or liability incurred by the Company to any
of its officers, directors, stockholders or employees, or any loans or
advances made by the Company to any of its officers, directors,
stockholders or employees, except normal compensation and expense
allowances payable to officers or employees;
(l) any material change in accounting methods or practices,
credit practices or collection policies of the Company;
(m) any other material transaction entered into by the Company
other than transactions in the ordinary course of business;
6
<PAGE> 7
(n) any event or condition of any nature, which, either
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect; or
(o) any agreement or understanding whether in writing or
otherwise, for the Company to take any of the actions specified in
paragraphs (a) through (m) of this Section 2.19.
2.20. ACCOUNTS RECEIVABLE. Except to the extent reserved against in the
Most Recent Balance Sheet, all of the accounts receivable of the Company are
valid and enforceable claims, the Company has received no notice that such
claims are subject to set-off or counterclaim, and such claims, to the knowledge
of the Company, are collectable in the normal course of business, after
deducting the allowance for doubtful accounts stated in the Most Recent Balance
Sheet and adjusted since the date thereof in accordance with generally accepted
accounting principles consistently applied.
2.21. TAX MATTERS. The Company has filed all federal, state, local and
foreign tax returns required to be filed by it through the date hereof, and has
paid or caused to be paid all federal, state, local, foreign and other taxes,
including without limitation income taxes, estimated taxes, excise taxes, sales
taxes, use taxes, gross receipts taxes, franchise taxes, employment and
payroll-related taxes, withholding taxes, stamp taxes, transfer taxes and
property taxes, whether or not measured in whole or in part by net income
(collectively, "Taxes"), required to be paid by the Company through the date
hereof, except Taxes which have been disputed or have not yet accrued or
otherwise become due and payable, for which adequate provision has been made in
the pertinent financial statements.
2.22. TITLE TO PROPERTIES. The Company has good and marketable title to
all of its properties and assets, free of all mortgages, pledges, liens,
security interests, encumbrances, and other charges. There is no material
tangible or intangible property, including, without limitation, trademarks,
service marks, styles, trade names, copyrights, licenses, patents, and trade
secrets (including applications, certificates and registrations for or of any of
the foregoing), used by the Company in its business as presently conducted by it
which is not owned, leased or licensed by the Company. The Company's property is
sufficient for the conduct of the Company's business as presently conducted. All
material contracts, agreements, leases and instruments to which the Company is a
party or by which the Company is obligated are valid and are in full force and
effect and constitute legal, valid and binding obligations of the Company, and,
are enforceable in accordance with their respective terms, and copies of all
such agreements have been provided to Shipman & Goodwin LLP, special counsel for
the Investors. The Company has no knowledge of any threat to terminate or modify
any such agreements. Neither the Company nor, to the knowledge of the Company,
any other party to any material contract, agreement or instrument of the Company
is in default in complying with any provisions thereof. There is no loan, lease,
agreement or other continuing transaction between the Company and any Related
Party (as defined in the Stockholders agreement, which is defined herein). To
the Company's knowledge, neither the Company's business nor products or services
as presently conducted or sold infringe any Intellectual Property (defined
herein) of any third parties, and there are no claims to that effect pending or
threatened against the Company.
7
<PAGE> 8
2.23. LITIGATION. There is no litigation or governmental or
administrative proceeding or investigation pending or, to the Company's
knowledge, threatened against the Company.
2.24. INVESTMENT BANKING; BROKERAGE FEES. The Company has not incurred
or become liable for any broker's or finder's fee, banking fees or similar
compensation, relating to or in connection with the transactions contemplated
hereby.
2.25. FRANCHISES, LICENSES, TRADEMARKS, PATENTS AND OTHER RIGHTS.
(a) The Company owns or has the right to use all (i)
franchises, permits, licenses and other similar authority, (ii)
patents, patent applications, patent rights, service marks, trademarks,
trademark applications, trademark rights, trade names, trade name
rights and copyrights (whether registered or not), and (iii) know-how,
technology and trade secrets which have been used in the conduct of the
Company's business, or are necessary for the conduct of the Company's
business as now conducted or as presently planned to be conducted (the
"Intellectual Property"). The Intellectual Property is sufficient for
the conduct of the Company's business as presently conducted.
(b) The Company has all franchises, permits, licenses and
other similar authority, necessary for the conduct of its business as
now being conducted by it and has no reason to believe it will be
unable to obtain any similar authority necessary for the conduct of its
business as presently planned to be conducted, and it is not in
violation, nor will the transactions contemplated by this Agreement
cause a violation of the terms or provisions of any such franchise,
permit, license or other similar authority.
2.26 ISSUANCE TAXES. All taxes imposed by any state or other
jurisdiction in connection with the issuance, sale and delivery of the Purchased
Shares shall have been fully paid, and all laws imposing such taxes shall have
been fully complied with, prior to each Closing Date.
2.27 OFFERING. Within the past six (6) months, the Company has not,
either directly or through any agent, offered any of the Purchased Shares or any
security or securities similar to the Purchased Shares for sale to, or solicited
any offers to buy the Purchased Shares or any part thereof or any such similar
security or securities from, or otherwise approached or negotiated in respect
thereof with, any party or parties other than the Purchasers or institutional or
other sophisticated investors, each of which was offered all or a portion of the
Shares at private sale for investment. Subject in part to the truth and accuracy
of the Purchasers' representations set forth in this Agreement, the offer, sale
and issuance of the Shares as contemplated by this Agreement are exempt from the
registration requirements of the Securities Act, and all applicable state
securities laws, and neither the Company, Telxon nor anyone acting on behalf of
either of them will take any action hereafter that would cause the loss of such
exemption.
2.28 EMPLOYEES
(a) No employee of the Company is, or is now expected to be,
in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement,
8
<PAGE> 9
or any other contract or agreement with any prior employer or any other
person, corporation, or other entity or any restrictive covenant in
such an agreement, or any obligation imposed by common law or
otherwise, relating to the right of any such employee to be employed by
the Company or companies similarly situated because of the nature of
the business conducted or to be conducted by the Company, or companies
similarly situated or relating to the use of trade secrets or
proprietary information of others, and the continued employment of the
Company's employees and/or does not subject the Company or any
Purchaser to any material liability for any such violation.
(b) Each of the Company's present or former employees who has
had access to proprietary information of the Company has executed a
proprietary information and inventions agreement assigning inventions,
works for hire and work product to the Company. To the best of the
Company's knowledge and belief, no employee or former employee of the
Company is, or to the best of the Company's knowledge and belief is now
expected to be, in violation of the terms of the aforesaid agreement or
of any other obligation relating to the use of confidential or
proprietary information of the Company, except for such violations as
could not reasonably be expected to have a Material Adverse Effect.
Each of such Proprietary Information Agreements remains in full force
and effect.
(c) To the best knowledge of the Company, no officer or key
employee of the Company has any present intent of terminating such
officer's or key employee's employment with the Company.
(d) The Company is in substantial compliance with all
applicable laws regarding employment, wages, hours, equal opportunity,
collective bargaining and payment of Social Security and other taxes.
The Company is in compliance with all applicable foreign, federal,
state and local laws and regulations regarding occupational safety and
health standards and has received no complaints from any foreign,
federal, state or local agency or regulatory body alleging violations
of any such laws and regulations, except where non-compliance, or such
violation, could not reasonably be expected to have a Material Adverse
Effect.
(e) The Company has not experienced, nor does it know or have
reasonable grounds to know of any basis for, any strike, labor troubles
or strife, work stoppages, slow downs, or other interference with or
impairment of its business. The Company has not experienced, nor does
it know or have reasonable grounds to know of, any union or collective
bargaining organization efforts or negotiations, or requests for
negotiations, for any representation or any labor contract relating to
any employees of the Company.
2.29 BUSINESS OF THE COMPANY. The Company has no knowledge or belief
that (i) there is pending or threatened any claim or litigation against or
affecting the Company contesting its right to manufacture, sell or use any
product or service presently manufactured, sold or used or presently planned to
be manufactured, sold or used by the Company, (ii) there exists, or there is
pending or planned, any statute, rule, law, regulation, standard or code which
could not reasonably be expected to have a Material Adverse Effect or could
reasonably be expected to have a Material Adverse Effect.
9
<PAGE> 10
2.30 USE OF PROCEEDS. The Company will use the proceeds of the offering
of the Company Shares for working capital purposes in the manner set forth in
the Company Disclosure Schedule, and for the costs and expenses of the
transactions contemplated hereby. The Company presently expects that it will
obtain a commercial credit facility. If obtained, the credit facility will be
utilized to repay any then unpaid balance of the funding heretofore advanced by
Telxon to the Company (the "Inter-Company Debt"). In the event that the
Company's credit facility is not established by May 18, 1998, then Telxon may
set off up to twenty five percent (25%) of the amounts payable during any month
by Telxon to the Company under the Inter-Company Agreements against the
Inter-Company Debt, on mutually agreeable terms, including reasonable
forbearances, until such time as the InterCompany Debt is repaid.
2.31 APPLICABILITY OF, AND COMPLIANCE WITH, OTHER LAWS.
(a) With respect to pension plans, defined benefit plans or
defined contribution plans which are subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), in which employees
of the Company participate, the Company is in compliance with the
applicable provisions of ERISA. The Company has not incurred any
unremedied accumulated funding deficiency within the meaning of ERISA
or any unsatisfied liability to the Pension Benefit Guaranty
Corporation established under ERISA in connection with any employee
pension plan established or maintained by the Company under the
jurisdiction of ERISA. No Reportable Event or Prohibited Transaction
(as defined in Section 4043 of ERISA) has occurred with respect to any
plan administered by or on behalf of the Company.
(b) The Company's employment practices and policies are in
full compliance with (i) all applicable laws of the United States and
each applicable jurisdiction relating to equal employment opportunity,
and any rules, regulations, administrative orders and Executive Orders
relating thereto; and (ii) the applicable terms, relating to equal
opportunity, of any contract, agreement or grant the Company has with,
from or relating (by way of subcontract or otherwise) to any other
contract, agreement or grant of, any federal or state governmental
unit, except where non-compliance could not reasonably be expected to
have a Material Adverse Effect. To the Company's knowledge, the Company
has not been the subject of any charge of unfair labor practices,
employment discrimination made against it by the National Labor
Relations Board, the United States Equal Employment Opportunity
Commission or any other governmental unit, or is presently subject to
any formal or informal proceedings before, or investigations by, such
Commission or governmental unit. To the Company's knowledge, neither
the Company nor any employees of the Company, are presently under
investigation by any commission or governmental agency for purposes of
security clearance or otherwise.
(c) Neither the Company nor any property owned or occupied by
the Company is in violation of any Federal or State Environmental Law
of any sort or in violation of any Federal or State "OSHA" law,
so-called, except where such violations could not reasonably be
expected to have a Material Adverse Effect.
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2.32 CONDITION OF PROPERTIES. The facilities, machinery, equipment,
fixtures, vehicles and other properties which are used by the Company in its
business as presently conducted, are in good operating condition and repair, are
reasonably fit and usable for the purposes for which they are being used, are
adequate and sufficient for the Company's businesses and conform with all
applicable ordinances, regulations and laws, except where such failure to
conform could not reasonably be expected to have a Material Adverse Effect.
2.33 INSURANCE COVERAGE. The Company has heretofore been insured under
Telxon's insurance policies. The Company has no reason to believe that it will
be unable to obtain one or more policies of insurance issued by insurers of
recognized responsibility, to insure the Company, and its properties and
business against such losses and risks, and in such amounts, as are customary in
the case of corporations of established reputation engaged in the same or
similar business and similarly situated.
2.34 EXCEPTIONS AND QUALIFICATIONS. The exceptions and qualifications
to the representations and warranties of the Company in this Article II which
are based upon such exceptions and qualifications not being "material" or being
"in all material respects," or not having a "Material Adverse Effect" will not,
in the aggregate, have a Material Adverse Effect.
III. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
3.1. MAKING OF REPRESENTATIONS AND WARRANTIES. Each Investor, as to
itself, makes to the Company the representations and warranties set forth in
this Article III. Each such representation and warranty is subject to and
qualified by the other provisions of this Agreement, and the exceptions set
forth in each Investor's disclosure schedule attached hereto (the "Investor
Disclosure Schedule").
3.2. ORGANIZATION. The Investor is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization, and in each
jurisdiction in which the failure to be so qualified would have a material
adverse effect on the Investor. Investor has all requisite power and authority
to enter into this Agreement and to consummate the transactions contemplated
hereby.
3.3. POWER. The Investor has all required power and authority to enter
into and perform this Agreement and the agreements contemplated hereby to which
it is a party and to carry out the transactions contemplated hereby and thereby,
including the purchase of the Purchased Shares. To its knowledge, the Investor
is not in violation of any material term of: (i) its organizational instruments;
(ii) its Bylaws or similar governing regulations or (iii) any agreement,
instrument, judgment, decree, order, statute, rule or government regulation
applicable to the Investor or to which the Investor is a party, the violation of
which would have a material adverse effect on the Investors.
3.4. ENFORCEABLE AGREEMENT. This Agreement and all other documents
executed by the Investor pursuant hereto are valid and binding obligations of
the Investor, enforceable in accordance with their terms, except as limited by
the laws of general application relating to bankruptcy, insolvency and the
relief of debtors and rules and laws governing specific performance, injunctive
relief and other equitable remedies.
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<PAGE> 12
3.5. AUTHORIZATION. The execution, delivery and performance of this
Agreement, all agreements, documents and instruments contemplated hereby and the
purchase of the Purchased Shares have been duly authorized by all necessary
action of the Investor.
3.6. INVESTMENT EXPERIENCE; SECURITIES LAWS. The Investor has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of its investment in the Purchased Shares
contemplated by this Agreement and making an informed investment decision with
respect thereto. The Investor can bear the risk of its investment in the
Purchased Shares indefinitely and can bear a total loss of such investment
without materially impairing its financial condition. The Investor is an
"accredited investor" as such term is defined in Rule 501 under the Securities
Act of 1933, as amended (the "Securities Act"). The Investor understands, agrees
and acknowledges that the Purchased Shares have not been registered under the
Securities Act or under the "blue sky" laws of any jurisdiction and, subject to
the Registration Rights Agreement, that the Company has no intention of
registering the Purchased Shares. The Company is issuing the Purchased Shares in
reliance upon exemptions from registration based on, among other things, the
representations of such Investor contained in this Article III. Investor further
understands, acknowledges and agrees that unless and until the Purchased Shares
are registered by the Company, their resale is restricted by the Securities Act
and blue sky laws, and by restrictions in the Stockholders Agreement. Investor's
address as set forth in EXHIBIT A is the address of Investor's principal place
of business.
3.7. OPPORTUNITY TO ASK QUESTIONS. The Investor has made a due
diligence investigation of the Company, including an analysis of the Company's
business, assets, financial data and other material information, and it has read
and understands the risk factors disclosed by the Company in EXHIBIT D. The
attachment of EXHIBIT D to this Agreement, and the Investor's acknowledgment
that it has read and understands the same, shall not in any way limit the
Company's representations and warranties made in Article II, and EXHIBIT D does
not qualify or limit such representations and warranties. To its satisfaction,
the Investor has had an opportunity to discuss the Company's business,
management and financial affairs, the transactions contemplated hereunder, with
directors, officers and management of the Company and has had the opportunity to
review the Company's operations, facilities and the Inter-Company Agreements.
3.8. INVESTMENT INTENT. The Investor is acquiring the Purchased Shares
for its own account, for investment, and not with a present view to, or for
resale in connection with, any "distribution" thereof within the meaning of the
Securities Act. The Investor was not formed or organized for the purpose of
acquiring the Securities.
3.9. SHARE CERTIFICATE LEGENDS. The Investor understands that transfer
of the Purchased Shares is restricted, and each certificate representing the
Purchased Shares will bear the following restrictive legends or ones
substantially similar thereto, to provide third parties with notice of these
restrictions:
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT,
TRANSFER, OR OTHER DISPOSITION OF THE SHARES
EVIDENCED BY THIS CERTIFICATE, AND ANY SHARES
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<PAGE> 13
ISSUED IN LIEU THEREOF, ARE SUBJECT TO RESTRICTIONS
CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AND EFFECTIVE AS
OF MARCH ___, 1998, BY AND AMONG THE CORPORATION AND ITS
STOCKHOLDERS A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE
SECRETARY OF THE CORPORATION. A COPY OF THE STOCKHOLDERS
AGREEMENT AND THE CORPORATION'S BY-LAWS WILL BE MAILED BY THE
CORPORATION TO ANY STOCKHOLDER WITHOUT CHARGE WITHIN FIVE (5)
DAYS AFTER WRITTEN REQUEST THEREFOR.
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE LAWS") AND
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO (i) AN
EFFECTIVE REGISTRATION STATEMENT REGISTERING THE SHARES UNDER
THE ACT AND STATE LAWS OR (ii) A TRANSACTION PERMITTED BY RULE
144 OR RULE 145 UNDER THE ACT OR EQUIVALENT STATE LAWS FOR
WHICH THE ISSUER HAS RECEIVED REASONABLY SATISFACTORY EVIDENCE
OF COMPLIANCE WITH THE PROVISIONS OF SUCH APPLICABLE RULE OR
(iii) AN OPINION OF COUNSEL SATISFACTORY TO ISSUER THAT SUCH
SHARES ARE EXEMPT FROM THE REGISTRATION PROVISIONS OF THE ACT
AND STATE LAWS OR (iv) A NO-ACTION LETTER FROM THE STAFF OF
THE SECURITIES AND EXCHANGE COMMISSION AND THE APPLICABLE
STATE DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR STATE LAWS."
3.10. INVESTMENT BANKING; BROKERAGE FEES. No Investor has incurred or
become liable for any broker's or finder's fee, banking fees or similar
compensation relating to or in connection with the transactions contemplated
hereby.
IV. CONDITIONS.
4.1. CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS. The obligation of
each Investor to consummate the transactions contemplated by this Agreement is
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of the Company made in Article II shall
be true and correct in all respects when
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<PAGE> 14
made and shall be true and correct in all respects at the Closing as if
made on the Closing Date, and the Company shall, on or before the
Closing Date, have performed and satisfied all of its covenants and
agreements set forth herein which by the terms hereof are to be
performed and satisfied on or before the Closing Date.
(b) AUTHORIZATION. The Board of Directors and the stockholders
of the Company shall have duly adopted resolutions authorizing the
Company to consummate the transactions contemplated hereby in
accordance with the terms hereof.
(c) NO ACTIONS OR PROCEEDINGS. No action or proceeding by or
before any court, administrative body or governmental agency shall have
been instituted or threatened which seeks to enjoin, restrain or
prohibit, or might result in damages in respect of, this Agreement or
the consummation of the transactions contemplated by this Agreement,
and no law or regulation shall be in effect and no court order shall
have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the
consummation of the transactions contemplated by this Agreement.
(d) APPROVALS AND CONSENTS. The Company shall have made all
filings with and notifications of governmental authorities, regulatory
agencies and other entities then required to be made by them in
connection with the execution and delivery of this Agreement and the
performance by it of the transactions contemplated hereby.
(e) MATERIAL ADVERSE CHANGES. There shall not have been any
change or series of changes that have a Material Adverse Effect.
(f) INTER-COMPANY AGREEMENTS. The Inter-Company Agreements
shall be in full force and effect without amendment, and no default
shall exist or would result from consummation of the transactions
contemplated herein.
(g) STOCKHOLDERS AGREEMENT. The Company, the Investors and the
other stockholders of the Company shall have entered into a
Stockholders Agreement in substantially the form attached hereto as
EXHIBIT E (the "Stockholders Agreement").
(h) REGISTRATION RIGHTS AGREEMENT. The Company, the Investors
and the stockholders of the Company shall have entered into a
Registration Rights Agreement in substantially the form attached hereto
as EXHIBIT F (the "Registration Rights Agreement").
(i) BY-LAW AMENDMENTS. The By-Laws shall be amended to provide
for the rights and provisions set forth in the Stockholders Agreement.
(j) FULL EQUITY FUNDING. Each other Investor shall have paid
in full for the Purchased Shares set forth opposite to such Investor's
name on EXHIBIT A.
(k) DELIVERIES AND EXPENSES. The Company shall have made all
deliveries to the Investors required under Section 5.1, and the Company
shall have paid the reasonable
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<PAGE> 15
attorneys fees of Axiom Venture Partners II Limited Partnership, an
Investor, incurred on behalf of all Investors.
4.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment, prior to or at the Closing, of the following
conditions precedent:
(a) REPRESENTATIONS; WARRANTIES; COVENANTS. Each of the
representations and warranties of each Investor made in Article III
shall be true and correct in all material respects at the Closing as if
made on the Closing Date, and each Investor shall, on or before the
Closing Date, have performed and satisfied all of its covenants and
agreements set forth herein which by the terms hereof are to be
performed and satisfied on or before the Closing Date.
(b) NO ACTIONS OR PROCEEDINGS. No action or proceeding by or
before any court, administrative body or governmental agency shall have
been instituted or threatened which seeks to enjoin, restrain or
prohibit, or might result in damages in respect of, this Agreement or
the consummation of the transactions contemplated by this Agreement,
and no law or regulation shall be in effect and no court order shall
have been entered in any action or proceeding instituted by any party
which enjoins, restrains or prohibits this Agreement or the
consummation of the transactions contemplated by this Agreement.
(c) STOCKHOLDERS AGREEMENT. The Company, the Investors and the
other stockholders of the Company shall have entered into the
Stockholders Agreement.
(d) REGISTRATION RIGHTS AGREEMENT. The Company, the Investors
and the stockholders of the Company shall have entered into the
Registration Rights Agreement.
(e) FULL EQUITY FUNDING. Each of the Investors shall have paid
in full for Purchased Shares set forth opposite such Investor's name on
EXHIBIT A.
V. CLOSING DELIVERIES.
5.1. COMPANY. At or before Closing, the Company shall have duly
executed and delivered, or caused the delivery, to each Investor all items
required by this Agreement, including, without limitation:
(a) Certificates evidencing the Purchased Shares and the
Warrants;
(b) Certified copies of resolutions of the Board of Directors
of the Company authorizing the execution and delivery and performance
of this Agreement, the Stockholders Agreement, the Registration Rights
Agreement, the issuance of the Purchased Shares and the other
agreements and instruments contemplated herein;
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<PAGE> 16
(c) Certificates of recent date issued by (i) the Secretary of
State of the State of Delaware certifying that the Company is in good
standing; and (ii) the Secretary of State of the State of Ohio
certifying the Company has qualified to do business as a foreign
corporation and is in good standing in Ohio;
(d) A certificate of the Secretary or an Assistant Secretary
of the Company certifying the names of the officers of the Company
authorized to execute this Agreement, the certificates for the
Purchased Shares and the other documents, instruments or certificates
to be delivered pursuant to this Agreement by the Company.
(e) An opinion of counsel for the Company dated the Closing
Date, in the form attached hereto as EXHIBIT G.
(f) A certificate of an officer of the Company in the form
attached as EXHIBIT H, certifying that certain conditions to the
Investors' obligation to consummate the transactions contemplated
herein have been satisfied.
5.2. Investors. At or before Closing, each Investor shall have paid the
purchase price set forth in EXHIBIT A opposite its name, to the Company in
immediately available funds, by wire transfer pursuant to the wire instructions
set forth in EXHIBIT C.
VI. SURVIVAL; INDEMNIFICATION.
6.1. SURVIVAL. All representations and warranties made herein and in
any certificate delivered pursuant hereto, are made as of the Closing Date, and
shall survive the Closing for a period of two (2) years after the Closing Date.
6.2. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify,
defend and hold harmless each of the Investors, their affiliates and their
respective officers, directors, partners, members, employees and agents and each
person who controls any of them within the meaning of Section 15 of the
Securities Act or Section 20 of the Securities Exchange Act of 1934, as amended
(including any successor provision, the "Exchange Act") (individually, an
"Investor Indemnified Party" and collectively the "Investor Indemnified
Parties") from and against and in respect of all losses, liabilities,
obligations, damages, deficiencies, actions, suits, proceedings, demands,
assessments, orders, judgments, fines, penalties, costs and expenses (the
Company shall be responsible for reasonable fees, disbursements and expenses of
an attorney, accountant or consultant: (i) acting for the Investor Indemnified
Parties as a group; and (ii) acting for an Indemnified Party that
has a material conflict of interest with other Indemnified Parties which
prevents its inclusion in such group representation), of any kind or nature
whatsoever (whether or not arising out of third-party claims and including all
amounts paid in investigation, defense or settlement of the foregoing)
sustained, suffered or incurred by or made against any Investor Indemnified
Party (an "Investor Loss" or "Investor Losses") arising out of, based upon or in
connection with any breach by the Company of any of its representations,
warranties or covenants under this Agreement or by reason of any claim, action
or proceeding asserted or instituted arising out of any matter or thing covered
by any such representations or warranties ("Investor Indemnifiable Claims").
Indemnification under
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<PAGE> 17
this Section 6.2 shall be cumulative with other rights and remedies an Investor
may have, but no Indemnified Party shall be entitled to more than a single
recovery for the same damage, regardless of the theory under which such recovery
is made. Any action for indemnification for Investor Losses arising from
Investor Indemnifiable Claims must be commenced within the two (2) year period
commencing on the Closing Date, and any statute of limitations applicable
thereto is hereby superseded.
6.3. NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations set forth in Section 6.2 would apply, the
indemnified party shall give notice thereof in writing to the indemnifying
party. Such notice shall state the information then available regarding the
amount and nature of such claim, liability or expense and shall specify the
provision or provisions of this Agreement under which the liability or
obligation is asserted. If within twenty (20) days after receiving such notice
the indemnifying party gives written notice to the indemnified party stating
that (a) it would be liable under the provisions hereof for indemnity in the
amount of such claim if such claim were successful and (b) that it disputes and
intends to defend against such claim, liability or expense at its own cost and
expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party, which consent shall not
be unreasonably withheld or delayed), and the indemnified party shall not be
required to make any payment with respect to such claim, liability or expense as
long as the indemnifying party is conducting a good faith and diligent defense
at its own expense. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld or delayed, to settle all indemnifiable matters related to claims by
third parties which are susceptible to being settled, provided its obligation to
indemnify the indemnifying party therefor will be fully satisfied. The
indemnifying party shall keep the indemnified party apprized of the status of
the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. The indemnified party, at the indemnifying party's
expense, shall make available all information and assistance that the
indemnifying party may reasonably request and shall, at the indemnifying party's
expense, cooperate with the indemnifying party in any defense undertaken
pursuant to this Section 6.3, with any out of pocket expense incurred by the
indemnified party being born by the indemnifying party. Notwithstanding anything
herein to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, that if the named parties to the action or proceeding include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate under applicable standards of
professional conduct, the expense of separate counsel for the indemnified party
shall be paid by the indemnifying party. If no such notice of intent to dispute
and defend is given by the indemnifying party, or if such diligent good faith
defense is not being or ceases to be conducted, the indemnified party may, at
the expense of the indemnifying party, undertake the defense of (with counsel
selected by the indemnified party), and shall have the right to compromise or
settle (exercising reasonable business judgment), such claim, liability or
expense.
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<PAGE> 18
VII. MISCELLANEOUS.
7.1. GOVERNING LAW; JURISDICTION. This Agreement shall be construed
under and governed by the laws of the State of Ohio, without regard to conflict
or choice of laws, statutes, regulations, rules or principles. Any action
relating to the execution or performance of this Agreement shall be brought in
the courts, state or federal, sitting in Summit County, Ohio, and each party
hereto consents to the jurisdiction and venue of such courts, and agrees not to
contest venue on the grounds of forum non conveniens or otherwise.
7.2. NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt, or if delivered or sent by facsimile transmission, upon
confirmation of transmission, or if sent by overnight courier, the second day
after deposit, as follows:
TO THE INVESTORS: To the respective addresses on
EXHIBIT A attached hereto
TO THE COMPANY: Aironet Wireless Communications, Inc.
at the address set forth at the
beginning of this Agreement.
Attn: President
Fax Number: 330-664-7986
with a copy to: Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
Attn: Robert A. Goodman/Jay R. Faeges
Fax Number: 216-363-5835
or to such other address of which any party may notify the other parties
provided in accordance with this Section 7.2.
7.3. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
and contemporaneous understandings and agreements, written or oral, between or
among the parties relating to the subject matter hereof.
7.4. ASSIGNABILITY. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated (i) by the Company, or (ii) by an
Investor to a direct competitor of the Company, or a direct competitor of Telxon
so long as Telxon owns twenty percent (20%) or more of the Company's issued and
outstanding capital stock (either being a "Competitor"), and any such assignment
or delegation shall be void and of no effect. The merger, consolidation, asset
sale, change of control, or any other reorganization of an Investor with or into
a Competitor, or of a Competitor with or into a party, shall be deemed an
assignment under this Section 7.4. Subject to the foregoing, this Agreement
shall be binding upon and enforceable by, and shall inure to the benefit of, the
parties hereto and their respective successors and assigns. Nothing in this
Agreement is intended to give any
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<PAGE> 19
person not named herein the benefit of any legal or equitable right, remedy or
claim under this Agreement, except as expressly provided herein.
7.5. FEES AND EXPENSES. Except as expressly provided for in Section
4.1(k) of this Agreement, each party shall bear all of its fees and expenses
incurred in connection with or relating to or arising out of the negotiation and
preparation of this Agreement and the consummation of the transactions
contemplated hereby.
7.6. PUBLICITY AND DISCLOSURES. None of the parties hereto nor any of
their respective stockholders, subsidiaries, affiliates, officers, directors or
employees shall issue or cause the publication of any press release or other
announcement with respect to this Agreement or the other transactions
contemplated hereby without the prior written consent of the other parties
hereto, which consent shall not be unreasonably withheld or delayed, except to
the extent disclosure is required by any applicable law or regulation or by any
court or authorized administrative or governmental agency, and except that the
provisions of this Section 7.6 shall not prohibit any Investor from providing to
its partners or equity owners customary information with respect to the Company
and the Investor's investment in the Company.
7.7. CONFIDENTIALITY. All documents delivered by or for the Company
and/or Telxon to an Investor in connection with its investigation of the Company
and the transaction contemplated herein are privileged and confidential
information of the Company and/or Telxon ("Confidential Information"). Investors
shall not disseminate or disclose any Confidential Information, and shall use
the same degree of care to protect the Confidential Information in its
possession or control as it uses to protect its own confidential information,
but in no case less than reasonable care. Neither an Investor nor its officers,
directors, employees, attorneys, accountants, professional advisors or other
representatives may use or copy any Confidential Information for any purpose
other than for the purpose of evaluating the transactions contemplated herein.
Neither an Investor nor any of the above-described persons have any rights in
the Confidential Information, and shall not disclose, give, sell, license,
lease, or otherwise transfer or make available the Confidential Information to
any third person, organization or entity. In the event that the Closing does not
take place, all Confidential Information furnished to or for an Investor, and
any copies thereof made, and documents, analysis and other writings prepared
therefrom, by or for an Investor or any of the above-described persons shall be
returned to the Company, or destroyed at the Company's option, immediately after
receipt by the Investor of the Company's request and direction to do so.
7.8. CAPTIONS. The captions in this Agreement are for convenience only
and shall not affect the construction or interpretation of any term or provision
hereof.
7.9. NUMBER AND GENDER. The use in this Agreement of singular, plural,
masculine, feminine and neuter pronouns, shall include the others as the context
may require.
7.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same document. An executed
faxed counterpart of this Agreement shall be binding on the parties and for
evidentiary purposes, shall be deemed to be an original.
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<PAGE> 20
7.11. SEVERABILITY. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had been limited or modified
(consistent with its general intent) to the extent necessary to make it valid,
legal and enforceable, or if it shall not be possible to so limit or modify such
invalid, illegal or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or part of a provision had never been contained in this Agreement, so
long as to do so would not materially alter the rights or obligations of the
parties considered as a whole.
7.12. AMENDMENTS; WAIVERS. Any waiver by a party of any provision,
covenant or condition intended for its benefit must be in writing and executed
by that party; provided, however, that any waiver by the Investors holding fifty
percent (50%) or more of the Purchased Shares shall be deemed to be a waiver by
all Investors, provided that if a waiver treats any Investor differently from
other Investors, it must be consented to by such Investor. No delay on the part
of any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege preclude any further exercise thereof or the exercise
of any other such right, power or privilege. This Agreement may not be amended
as to any Investor except in writing executed by the Company and by the Investor
affected by such amendment; provided, however, that any amendment which has been
agreed to by the Investors holding fifty percent (50%) or more of the Purchased
Shares shall be deemed to have been agreed to by all Investors, unless such
amendment treats any Investor differently from other Investors.
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<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By: /s/ Samuel F. McKay
_____________________________________
Its:____________________________________
HAMBRECHT & QUIST
By:
_____________________________________
Its:____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
_____________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
_____________________________________
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
_____________________________________
Its:____________________________________
CLARION CAPITAL CORPORATION
By:
_____________________________________
Its:____________________________________
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
_____________________________________
Its:____________________________________
HAMBRECHT & QUIST
By:
_____________________________________
Its:____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
_____________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
_____________________________________
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
_____________________________________
Its:____________________________________
CLARION CAPITAL CORPORATION
By:
_____________________________________
Its:____________________________________
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
_____________________________________
Its:____________________________________
HAMBRECHT & QUIST
By:
_____________________________________
Its:____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By:
_____________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By: /s/ Ken J. Wessels
_____________________________________
Ken J. Wessels, CEO Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
_____________________________________
Its:____________________________________
CLARION CAPITAL CORPORATION
By:
_____________________________________
Its:____________________________________
<PAGE> 24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
_____________________________________
Its:____________________________________
HAMBRECHT & QUIST
By:
_____________________________________
Its:____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By:
_____________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
_____________________________________
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
_____________________________________
Its:____________________________________
CLARION CAPITAL CORPORATION
By: /s/ Morton Cohen
_____________________________________
Its: Chairman
____________________________________
<PAGE> 25
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Kenneth W. Haver
_________________________________
Kenneth W. Haver, Treasurer
INVESTORS, INDIVIDUALS: /s/ Frank B. Carr
____________________________________
FRANK B. CARR
<PAGE> 26
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:
_________________________________
Roger J. Murphy, President
INVESTORS, INDIVIDUALS: /s/ Frank B. Carr
____________________________________
FRANK B. CARR
<PAGE> 27
EXHIBIT A
---------
SUBSCRIPTION AGREEMENT
AIRONET WIRELESS COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Number
Purchased Shares
and
Number Aggregate
State and Type Principal Place Warrants Purchase
Investor of Organization of Business Price
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Axiom Venture Partners II Limited Connecticut Cityplace II, 17th Floor 714,285 shares $2,500,000.00
Partnership Limited Partnership 185 Asylum Street 214,285 warrants
Hartford, CT 06103
- ------------------------------------------------------------------------------------------------------------------------------------
Hambrecht & Quist ("H&Q") (1) One Bush Street 571,429 shares $2,000,000.00
San Francisco, CA 64104 171,429 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
Telantis Venture Delaware Corporation 12501 World Plaza Lane 104,762 shares $366,667.00
Partners V, Inc. ("TVP") (2) Ft. Myers, FL 33907 31,429 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
Telantis Venture Delaware Corporation 12501 World Plaza Lane 79,365 shares $277,777.50
Partners V, Inc. (3) Ft. Myers, FL 33907 23,810 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
W, A & H Investments LLC Minnesota 601 Second Avenue South 142,857 shares $500,000.00
Limited Liability Company Minneapolis, MN 55402-4314 42,857 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
McDonald & Company Securities, Ohio Corporation 800 Superior Avenue, Suite 2100 142,857 shares $500,000.00
Inc.("M&CS")(1) Cleveland, OH 44114-2603 42,857 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
Frank B. Carr an individual, residing in 800 Superior Avenue, Suite 2100 28,571 shares $100,000.00
Ohio Cleveland, OH 44114-2603 8,571 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
Clarion Capital Corporation Ohio 1801 East Ninth Street 57,143 shares $200,000.00
Corporation Cleveland, OH 44114 17,143 warrants
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) H&Q and M&CS will have until April 30, 1998 to execute agreements and to
purchase shares, if at all (if not then purchased Aironet may offer such shares
to the other listed investors)
(2) TVP purchased 79,365 shares with Axiom's tranche; 3,175 shares with Carr's
tranche; 15,873 shares with WA&H'S tranche; and 6,349 shares with Clarion's
tranche
(3) TVP to purchase an additional 63,492 shares if H&Q funds, and an additional
15,873 shares if M&CS funds (or a proportionate amount if Aironet offers such
shares to the other listed investors)
<PAGE> 28
EXHIBIT B
FORM OF WARRANTS
Attached
<PAGE> 29
EXHIBIT B
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF
THE WARRANTS EVIDENCED BY THIS CERTIFICATE, AND ANY SHARES ISSUED UPON THE
EXERCISE HEREOF, ARE SUBJECT TO RESTRICTIONS CONTAINED IN A STOCKHOLDERS
AGREEMENT DATED AND EFFECTIVE AS OF MARCH 31, 1998, BY AND AMONG THE CORPORATION
AND ITS STOCKHOLDERS (THE "STOCKHOLDERS AGREEMENT"), A COPY OF WHICH IS ON FILE
IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.
NEITHER THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR ANY SHARES ISSUABLE UPON
ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE LAWS") AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
REGISTERING THE WARRANTS AND/OR SHARES UNDER THE ACT AND STATE LAWS OR (ii) A
TRANSACTION PERMITTED BY RULE 144 OR RULE 145 UNDER THE ACT OR EQUIVALENT STATE
LAWS FOR WHICH THE ISSUER HAS RECEIVED REASONABLY SATISFACTORY EVIDENCE OF
COMPLIANCE WITH THE PROVISIONS OF SUCH APPLICABLE RULE OR (iii) AN OPINION OF
COUNSEL SATISFACTORY TO ISSUER THAT SUCH WARRANTS AND/OR SHARES ARE EXEMPT FROM
THE REGISTRATION PROVISIONS OF THE ACT AND STATE LAWS OR (iv) A NO-ACTION LETTER
FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION AND THE APPLICABLE
STATE DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
STATE LAWS.
Warrant Certificate No. __ Warrants to Purchase________ Shares of Common Stock
AIRONET WIRELESS COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that for value received, __________________, or any
permitted transferee ("Holder"), is entitled to purchase from Aironet Wireless
Communications, Inc. ("Aironet") _______ shares (adjusted as provided in Exhibit
A, the "Warrant Shares") of Aironet's Common Stock, $.01 par value ("Common"),
at Three and 50/100 Dollars ($3.50) per share (adjusted as provided in Exhibit
A, the "Warrant Price"), which equals an aggregate purchase price of
___________________________ Dollars ($_________), at or after, and not before,
the consummation of the earlier of either (i) the first firm commitment
underwritten public offering of the Common (or units which include the Common as
an element) at a public offering price of not less than Eight Dollars ($8.00)
per share, pursuant to a Registration Statement, on Form S-1 or other
appropriate form, filed by Aironet under the Act, pursuant to which Aironet
receives proceeds, net of underwriting discounts, commissions and other expenses
of the offering, of not less than Eight Million Dollars ($8,000,000) ("IPO");
(ii) the sale of Aironet as an entirety, whether by merger, consolidation, stock
sale, asset sale, or otherwise, for the higher of a gross sale price of Seventy
Five Million Dollars ($75,000,000) or Eight Dollars ($8.00) per share ("Private
Sale"); (iii) a Change in Control (defined in Exhibit A); or (iv) a Spin-Off
(defined in Exhibit A) (the occurrence of an IPO, Private Sale, Change in
Control and/or Spin-Off is referred to herein as the "Exercise Event"). To the
extent remaining un-exercised, these Warrants shall terminate on March 31, 2001,
5:00 P.M., E.T., and thereafter shall entitle Holder to no rights. These
Warrants are subject to the terms and conditions set forth on the face of this
certificate and in Exhibit A attached hereto, which by this reference are
incorporated herein in their entirety.
Aironet Wireless Communications, Inc.
Date:_________________
------------------------------------
Roger J. Murphy, President
------------------------------------
Jay R. Faeges, Assistant Secretary
<PAGE> 30
EXHIBIT A
WARRANT TERMS AND CONDITIONS
AIRONET WIRELESS COMMUNICATIONS, INC.
1. TRANSFER. Transfer of the Warrants is restricted as set forth in the
restrictive legends set forth in the Warrant certificate to which this Exhibit A
is attached.
2. EXCHANGE OF WARRANT CERTIFICATE. Upon Holder's written request,
Aironet shall exchange the Warrant certificate for one or more certificates
entitling Holder to purchase a like aggregate number of Warrant Shares. At
Holder's request and upon delivery to Aironet of a Lost Warrant Affidavit and
surety bond reasonably acceptable to Aironet, Aironet will deliver to Holder
replacement Warrant certificates for mutilated, lost, stolen or destroyed
Warrant certificates.
3. EXERCISE OF AND PAYMENT FOR WARRANTS.
a. Exercise. The Warrants shall be deemed to have been
exercised automatically upon the consummation of a Private Sale for
which Aironet has provided the Holder at least fifteen (15) days prior
written notice, and upon Aironet's receipt of a Holder's written notice
of exercise provided to Aironet in the event of an IPO, Change in
Control or Spin-Off at any time prior to their termination as provided
on the face of the Warrant certificate to which this Exhibit A is
attached.
b. Payment of Warrant Price.
i. If the applicable Exercise Event is an IPO, Change
in Control or Spin-Off, then within ten (10) days of Holder's
receipt of written notice from Aironet of the event, Holder
shall pay the aggregate Warrant Price to Aironet by wire
transfer of immediately available funds, pursuant to wire
instructions provided to Holder by Aironet. Immediately upon
Holder's surrender of the Warrant certificate evidencing the
exercised Warrants and payment of the Warrant Price, Aironet
shall issue and deliver to Holder certificates for the Warrant
Shares then purchased. The Warrant Shares when paid for and
issued shall be fully paid and non-assessable, and shall be
deemed issued as of the date of surrender of the Warrant
certificate and payment of the aggregate Warrant Price.
ii. If the applicable Exercise Event is a Private
Sale, then Aironet shall provide Holder with at least fifteen
(15) days written notice prior to consummating such
transaction, and Holder shall receive, on a cashless exercise
basis, the kind and amount of consideration it would be
entitled to receive as if the Warrants had been duly exercised
in full prior to such event and as if Holder owned the number
of Warrant Shares that could be purchased with such
consideration, less the aggregate Warrant Price.
c. Payment of Taxes. Aironet will pay all documentary stamp
taxes, if any, attributable to the initial issuance and delivery of the
Warrant Shares, and Holder will pay all other taxes, if any.
d. Change in Control. A "Change in Control" is deemed to have
occurred upon (i) any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934 (as
amended, the "Exchange Act")), directly or indirectly, of fifteen
percent (15%) or more of the combined voting power of Telxon's Voting
Securities, or (ii) the holders of Telxon's securities entitled to vote
thereon approve, or there otherwise occurs or is commenced, a sale,
lease, exchange or other disposition of all or substantially all the
assets, or the dissolution or liquidation, of Telxon, or any merger,
consolidation or reorganization to which Telxon is a party and as the
result of which Telxon's stockholders prior to the transaction do not
own at least fifty percent (50%) of the voting power of the surviving
entity in the election of directors, or (iii) the Continuing Directors
cease for any reason to constitute at least a majority of the Telxon
Board of Directors, or (iv) any other event occurs which is of such a
nature that would be required to be reported as a change in control in
response to Item 1(a) of the Current Report on Form 8-K, as in effect
on the date hereof pursuant
A-1
<PAGE> 31
to Section 13 or 15(d) of the Exchange Act, or similar successor
public filing. "Continuing Directors" means and includes the persons
constituting Telxon's Board of Directors as of the date of this
Agreement as well as each person who becomes a director of Telxon
subsequent to the date of this Agreement whose election, or nomination
for election by Telxon's stockholders, was approved by an affirmative
vote of at least a majority of the then Continuing Directors (either
by a specific vote or by approval of the proxy statement of Telxon in
which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in
any such case without objection by any member of such approving
majority of the then Continuing Directors to the nomination of such
person or the naming of such person as a director nominee), for so
long as each such director shall remain in office. "Person" means and
includes any individual, corporation, partnership, group, association
or other "person", as such term is used in Section 14(d) of the
Exchange Act, but excluding Telxon or any employee benefit plan
sponsored by Telxon. "Voting Securities" means the Telxon Common
Stock, par value $0.01 per share, and any and all other then
outstanding Telxon securities ordinarily having the right to vote
generally in the election of the Telxon directors.
e. Spin-Off. "Spin-Off" shall mean any spin-off,
dividend or other distribution of Aironet Common by Telxon to its
stockholders.
4. RESERVATION OF SHARES. Aironet represents and warrants that it has
reserved, and so long as the Warrants remain outstanding it will keep reserved,
the number of shares of Common which are subject to purchase under the Warrants
from time to time. Prior to its exercise or termination, Aironet will keep a
copy of this Warrant certificate on file with its transfer agent.
5. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC. At the date of this Warrant certificate, each Warrant
entitles the Holder to purchase one (1) Warrant Share for the Warrant Price.
Hereafter, until their exercise or termination, the number of Warrant Shares
that may be purchased and the Warrant Price per Warrant Share may be adjusted
upward or downward as provided in this Section 5.
a. Adjustment in the Number of Warrant Shares. The number of
Warrant Shares that each Warrant entitles the Holder to purchase shall
be proportionately adjusted upward for any increase, or downward for
any decrease, in the number of issued and outstanding shares of Common
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification effected without receipt of
consideration by Aironet, and in no other circumstance.
b. Adjustment in the Warrant Price. The Warrant Price
per Warrant Share shall be proportionately adjusted downward for any
increase, or upward for any decrease, in the number of issued and
outstanding shares of Common resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification effected
without receipt of consideration by Aironet, and in no other
circumstance.
c. Warrant Certificates. Upon any adjustments in the number of
Warrant Shares and Warrant Price, Aironet shall record such adjustments
on its stock transfer records, and the Holder may, but need not,
surrender this certificate to Aironet for replacement with Warrant
certificates that evidence the revised number of Warrant Shares and
Warrant Price.
6. FRACTIONAL INTERESTS. Aironet shall not be required to issue
fractional Warrant Shares on the exercise of the Warrants or upon any adjustment
pursuant to Section 5 in the number of Warrant Shares that each Warrant entitles
a Holder to purchase. Any fractional Warrant Shares that would otherwise result
from any such adjustments or exercise shall be eliminated either by rounding up
to the next higher whole number of Warrant Shares for fractions of one-half
(1/2) or more, or by rounding down to the next lower whole number of Warrant
Shares for fractions of less than one-half (1/2).
7. NO RIGHTS AS STOCKHOLDER. The Warrants do not confer upon Holder any
rights as a stockholder of Aironet prior to Holder's exercise of the Warrants.
Without limiting the generality of the foregoing, the Warrants do not
entitle Holder to vote, receive dividends, consent or receive notices as a
stockholder in respect of any meeting for the election of directors or any other
matter; provided, however, that transferability of the Warrants is restricted
pursuant
A-2
<PAGE> 32
to the terms and conditions in the Stockholders Agreement among Aironet and its
Stockholders on the same basis as the Common and any other security which is
governed thereby.
8. MISCELLANEOUS.
a. These Warrants are issued in accordance with the laws
governing corporations organized under the laws of the State of
Delaware and securities issued in the State of Ohio, and shall be
construed under and governed by such laws without regards to conflict
or choice of laws, statutes, regulations, rules or principles. Any
action relating to theses Warrants or their issuance shall be brought
in the courts, state or federal, sitting in Summit County, Ohio, and
the Holder by taking delivery of this certificate consents to the
jurisdiction and venue of such courts, and agrees not to contest venue
on the grounds of forum non conveniens or otherwise.
b. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt, or if delivered or sent by facsimile
transmission, upon confirmation of transmission, or if sent by
overnight courier for next day delivery, the next business day after
deposit, to the Holder at its address as set forth in the stock records
of Aironet, and to Aironet at its principal place of business.
c. Subject to provisions herein regarding restrictions on
transferability, these Warrants shall inure to the benefit of Holder,
and its permitted successors and assigns.
d. The captions in this certificate are for convenience only
and shall not affect the construction or interpretation of any term or
provision hereof. The use in this certificate of the masculine,
feminine or neuter pronoun, shall include the others as the context may
require.
e. Any waiver or amendment of any provision, covenant or
condition of these Warrants must be in writing and executed by Aironet
and Holder. No delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right,
power or privilege.
(End of Exhibit A)
A-3
<PAGE> 33
EXHIBIT C
WIRE TRANSFER INSTRUCTIONS
Bank information:
Address:
Bank One, NA
50 South Main Street
Akron, Ohio 44308-1888
Branch #001
Aironet Account #:617704499
ABA Routing #:044000037
<PAGE> 34
EXHIBIT D
SUBSCRIPTION AGREEMENT
AIRONET WIRELESS COMMUNICATIONS, INC.
RISK FACTORS
------------
Investment in the Common involves a high degree of risk. Investors
should consider all relevant factors, including the following and the other
information provided by the Company before making a decision to invest in the
Common and are encouraged to consult with their legal and financial advisors.
Discussions of documents herein are only summaries which are modified by, and
the Investors should read, such documents in their entirety.
FACTORS AFFECTING OPERATING RESULTS
The Company's results of operations are affected by a wide variety of
factors, including economic conditions specific to the industries in which it
competes, decreases in average selling price over the life of any particular
product, the timing and manufacturing complexity of new product introductions
(by the Company and its suppliers, as well as its competitors), the timely
implementation of new manufacturing technologies (by the Company and its
suppliers, as well as its competitors), the ability to safeguard patents and
other intellectual property in a rapidly evolving market, and the rapid increase
in demand for some products and the rapid decline in demand for others. Market
demand for the Company's products, particularly for those most recently
introduced, can be difficult to predict. This could lead to revenue volatility
if the Company were unable to provide sufficient quantities of specified
products or if demand for new products does not develop as anticipated.
The Company's shipments during any particular quarter generally
represent orders received either during that quarter or shortly before the
beginning of that quarter. Shipments of orders received in a fiscal quarter are
generally filled from products manufactured in that quarter. The Company
utilizes contractors to manufacture subassemblies used in the Company's
products; accordingly, the Company's ability to fill orders is dependent upon
the ability of its contract manufacturers to fill the orders of the Company.
There can be no assurance that, during any given quarter, the Company's contract
manufacturers will be able to accommodate any given order. Therefore, the
Company's financial performance in any given quarter is dependent to a
significant degree upon obtaining orders in that quarter which can be
manufactured and delivered to its customers in that quarter. Financial
performance for any given quarter cannot be known or fully assessed until near
the end of that quarter. Furthermore, any quarter's results are necessarily
indicative of annualized performance.
The Company has historically recognized product revenues evenly over
each quarter. A significant portion of the Company's expenses is relatively
fixed, and the timing of increases or decreases in such expenses is based in
large part on the Company's forecast of future revenues. As a result, the
Company may be unable to quickly adjust expenses to appropriate levels in the
event that the level of actual or potential business is greater or lesser than
that anticipated by the Company, which could have a material adverse affect on
the Company's results of operations.
<PAGE> 35
DEPENDENCE ON NEW PRODUCTS
The Company's future success depends in part on its ability to develop
and introduce on a timely basis new or enhanced products which will compete
effectively on the basis of price and performance. The success of new product
introductions is dependent upon several factors, including timely completion of
new product designs, the ability of the Company and its contract manufacture's
to manufacture new products and the Company's achievement of acceptable margins
and market acceptance.
There can be no assurance that the Company's research and development
activities will lead to the identification or successful introduction of new or
enhanced products or that the Company will not encounter delays or problems in
connection therewith. Furthermore, customers may defer purchases of existing
products in anticipation of new or enhanced products. Moreover, there can be no
assurance that there will not be delays in commencing volume production of such
products or that such products will ultimately be commercially successful.
In addition, the average selling prices for wireless data products
generally decrease over the products' lives. To mitigate such decreases, the
Company seeks to reduce manufacturing costs of existing products and to
introduce new products, functions and other price/performance-enhancing
features. To the extent that such cost reductions, product enhancements and new
product introductions do not occur in a timely manner or do not achieve market
acceptance, the Company's operating results could be materially adversely
affected.
PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE
Markets for the Company's products are characterized by rapid changes
in technology, short product life cycles and evolving industry standards. The
Company believes that its future success will depend, in part, upon its ability
to continue to improve its product architectures and develop new technologies in
order to remain competitive.
The Company has and continues to expend substantial resources in
developing products that are designed to conform to the recently adopted IEEE
802.11 wireless LAN standard. As the standard has only recently been adopted,
there can be no assurance that it will have a meaningful commercial impact in
the Company's marketplace, or what effect any resulting product standardization
may have on the Company's competitive position or profitability. Further, in
connection with the promulgation of the IEEE 802.11 standard, each member of the
Standards Committee represented to the Committee that, to the extent compliance
with the 802.11 standard requires a license of any patents owned by such member,
it would license those patents on a fair and equitable basis. The Company is
currently negotiating a cross license with Lucent Technologies, pursuant to
which the Company would license certain patents to Lucent and Lucent would
license certain patents to the Company, relating to compliance with the 802.11
standard. The Company's ability to market products that comply with the 802.11
standard may depend upon its ability to obtain the Lucent and similar licenses
from others, however, there is no assurance that, if required, the Company will
be able to obtain such licenses, or that they can be obtained at a reasonable
cost.
Exhibit D Page 2
<PAGE> 36
The Company's failure to obtain any required license at a commercially
reasonable cost could adversely impact the Company's profits.
The Company believes its future success is also dependent, in part,
upon its ability to continue to enhance and broaden its current line of products
through internal development and the acquisition of new technologies. There can
be no assurance that the Company will be able to identify or acquire
technologies or otherwise implement its growth strategy successfully. For the
Company to manage its growth, it must continue to improve operations and
financial and management information systems and effectively motivate and manage
employees. If the Company is unable to successfully pursue and manage such
growth, its business and results of operations could be materially adversely
affected.
INTELLECTUAL PROPERTY
The Company regards certain of its hardware and software products as
proprietary and relies on a combination of United States and foreign patent,
copyright, trademark and trade secret laws, as well as license and other
contractual confidentiality provisions, to protect its proprietary rights. There
can be no assurance that the Company's pending United States or foreign patent
applications will be approved or that its issued United States or foreign
patents or pending applications will not be challenged, invalidated or
circumvented by competitors, or that rights granted thereunder will provide
meaningful proprietary protection. Despite the Company's efforts to safeguard
and maintain its proprietary rights, there can be no assurance that the Company
will be successful in doing so or that the Company's competitors will not
independently develop, patent or license from others technologies that are
substantially equivalent or superior to the Company's technologies.
The Company's products also utilize hardware and software technologies
licensed from third parties, necessary for the Company's manufacture and sale of
certain of its products. An early termination of these license agreements could
have a material adverse affect on the Company's ability to market such products
and, hence, on its business, results of operations and financial condition.
The Company believes that its products, processes and trademarks do not
infringe the rights of third parties, but there can be no assurance that third
parties will not assert infringement or other related claims against the Company
or its licensors in the future, that any such assertions by third parties will
not result in litigation or that the Company and/or its licensors would prevail
in any such litigation or be able to license any valid and infringed patents or
other intellectual property from third parties on commercially reasonable terms.
Litigation, regardless of its outcome, could result in substantial cost to and
diversion of resources of the Company. Any infringement claim or related
litigation against the Company could materially adversely affect the Company's
ability to market its products and, hence, its business, financial condition and
results of operations.
CANADIAN CONTRACTS
From 1987 through 1992, the Company's subsidiary, Telesystems SLW Inc.
("Telesystems") (k.n.a. Aironet Canada Ltd.), acquired partial funding for the
development of early spread spectrum
Exhibit D Page 3
<PAGE> 37
technology from the Canadian Government Industrial Research Assistance Program,
the Defense Industrial Research Program and the Industrial And Regional
Development Program (the "Funding Contracts"). The technology developed by
Telesystems under these programs has been superseded by technology developed by
the Company. The Funding Contracts contain certain restrictions on manufacturing
products that incorporate the technology developed thereunder and licensing such
technology outside of Canada without the consent of the applicable governmental
funding agency. The Company recently moved its assembly and certain development
operations from Canada to the United States and believes that it and Telesystems
are in full compliance with the terms of the Funding Contracts and that the
restructuring of the Company's operations has not resulted in a breach of the
Funding Contracts; however, there can be no assurance that the Company's
position will not be challenged, and if challenged that the Company will
ultimately prevail in its position.
DEPENDENCE UPON KEY SUPPLIERS AND MANUFACTURING CAPABILITY
Sub-assemblies for the Company's products are assembled by contract
manufacturers. The Company does not believe that the loss of any one contract
manufacturer would have a material long-term adverse affect on its business,
though there could be short term adverse affects, including set-up costs and
delays, if the Company changes any single contract manufacturer.
Other than during new product ramp up, when the Company acquires
components which are in turn provided to the Company's contract manufacturers,
Aironet's contract manufacturers acquire components for the Company's products.
Some components are acquired from single source suppliers, and others from a
limited number of suppliers. The Company has in the past encountered, and may in
the future encounter, shortages and delays in deliveries of sub-assemblies and
components. Such shortages and delays could have a material adverse affect on
the Company's ability to ship its products.
The Company's sole assembly facility is located in Summit County, Ohio.
If the Company is unable to use this facility for any reason, the Company's
operations could be materially adversely affected until the Company could obtain
other assembly capability.
Many of the Company's current contract manufacturers are located
outside of the United States. International procurement and manufacturing are
subject to the risks inherent in foreign operations, such as protective tariffs,
trade disputes, export/import controls and transportation delays and
interruptions.
RISKS OF SALES OUTSIDE OF THE UNITED STATES
The Company receives revenues from sales to customers located outside
of the United States. The Company views greater sales outside of the United
States as a source of growth for the Company. To further the Company's goal of
increasing sales outside the United States, it established a commissioned sales
subsidiary, Aironet S.A., in Brussels, Belgium. Failure of the Company, either
directly or through Aironet S.A., to successfully market its products outside
the United States could have a material adverse affect on the future growth of
the Company.
Exhibit D Page 4
<PAGE> 38
The Company operates Aironet S.A. as a disclosed commission sales
subsidiary; however, there can be no assurance that the Belgian taxing
authorities will not seek to impose permanent establishment treatment on the
Company as a result of its Belgian subsidiary, which would result in increased
tax liabilities.
Sales outside of the United States carry a number of inherent risks,
including risks of currency exchange fluctuations, the need for export licenses,
tariffs and other potential trade barriers and regulations, transportation
delays and interruptions, reduced protection for intellectual property rights in
some countries, the impact of recessionary environments in economies outside the
United States and generally longer receivables collection periods. The Company's
business is also subject to the risks associated with changes in domestic or
foreign regulatory requirements and safety and quality standards. The Company
cannot predict whether quotas, duties, taxes or other charges or restrictions
will be imposed by the United States or other countries upon the importation or
exportation of the Company's products or supplies in the future or what, if any,
effect such actions would have on the Company's financial condition and results
of operations.
DEPENDENCE ON A LIMITED NUMBER OF OEM CUSTOMERS
Historically, a substantial portion of the Company's revenue has been
derived from a limited number of OEM customers. Sales to the Company's majority
stockholder, Telxon Corporation ("Telxon "), represented a significant
percentage of the Company's total revenue during fiscal 1998. The Company
expects that sales to a limited number of OEM customers will continue to account
for a substantial portion of its revenue during any period for the foreseeable
future. The Company also has experienced quarter to quarter variability in sales
to each of its major OEM customers and expects this pattern to continue in the
future. The loss of one or more of the Company's major OEM customers could have
a material adverse affect on the Company's results of operations.
Sales of many of the Company's wireless networking products depend in
significant part upon decisions of prospective OEM customers to develop and
market wireless solutions which incorporate the Company's wireless technology.
OEM customers' orders are affected by a variety of factors such as new product
introductions, regulatory approvals, end user demand for OEM customers' own
products, product life cycles, inventory levels, manufacturing strategy,
contract awards, competitive conditions and general economic conditions. Sales
of the Company's products generally involve a significant commitment of capital
and other resources by its customers, with the attendant delays associated with
such customers' internal procedures to approve such commitments. For these and
other reasons, the design-in cycle associated with the purchase of the Company's
wireless products by OEM customers generally ranges from 6 to 18 months, and is
subject to a number of significant risks, including customers' budgeting
constraints and internal acceptance that are beyond the Company's control. The
Company typically plans its production and inventory levels based on internal
forecasts of OEM customer demand, which is highly unpredictable and can
fluctuate substantially. In addition, the Company's agreements with OEM
customers typically do not require minimum purchase quantities, and a
significant reduction, delay
Exhibit D Page 5
<PAGE> 39
or cancellation of orders from any of these customers could have a material
adverse affect on the Company's results of operations. If revenue forecasted
from a specific customer for a particular quarter is not realized in that
quarter, the Company's operating results for that quarter could be materially
adversely affected. In addition, there can be no assurance that the Company will
become a qualified supplier for new OEM customers or that the Company will
remain a qualified supplier for existing OEM customers.
COMPETITION
The wireless LAN and bridge markets are intensely competitive and
characterized by rapidly changing technology, short product life cycles and
evolving industry standards. The Company's ability to compete in these markets
successfully depends on a variety of factors, including the ability to develop
new products and features, support industry standards such as the IEEE 802.11
wireless LAN standard, product performance and quality, price, distribution
channels and manufacturing capacity. In the wireless LAN market, the Company
competes primarily with Proxim, Lucent Technologies, IBM and Symbol
Technologies. In the wireless bridge market, the Company competes primarily with
Cylink, Persoft and Solectek. Many of the Company's current and potential
competitors have substantially greater financial, technical, manufacturing and
marketing resources than the Company. There can be no assurance that the Company
will be able to compete successfully against these competitors or that
competitive pressures faced by the Company will not adversely affect its
business or operating results.
MANAGEMENT OF GROWTH
The Company's growth to date has placed, and will continue to place,
significant demands on its managerial, operational, financial and other
resources. The Company's ability to manage its growth effectively will require
it to improve its operational and financial systems. These demands will require
the addition of new management personnel and the development of additional
expertise by existing management. The failure of the Company's management team
to effectively manage growth, should it occur, could have a material adverse
impact on the Company's results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future depends in large part on the continued service of
its key technical, marketing and management personnel and on its ability to
continue to attract and retain qualified employees, particularly those highly
skilled design, process and test engineers involved in the manufacture of
existing products and the development of new products and processes. The
competition for such personnel is extremely intense, and the loss of key
employees could have a material adverse affect on the Company's business,
financial condition and results of operations.
UNCERTAIN GOVERNMENT REGULATION
In the United States, the Company and its products are subject to
various FCC rules and regulations. Current FCC regulations permit license-free
operation in certain FCC-certified bands in the radio spectrum. Aironet's spread
spectrum wireless products are certified for unlicensed operation
Exhibit D Page 6
<PAGE> 40
in the 902-928 MHz and 2.4-2.4835 GHz frequency bands. Operation in these
frequency bands is governed by rules set forth in Part 15 of the FCC
regulations. The Part 15 rules are designed to minimize the probability of
interference to the other users of those frequency bands, and, thus, accord Part
15 systems secondary status. In the event that there is interference between a
primary user and a Part 15 user, a higher priority user can require the Part 15
user to curtail transmissions that create interference.
There can be no assurance that the occurrence of regulatory changes,
including changes in the allocation of the available frequency spectrum, would
not significantly impact the Company's operations by rendering current products
obsolete, restricting the applications and markets served by the Company's
products or increasing the opportunity for additional competition.
The Company's products are also subject to regulatory requirements in
international markets. To date, Aironet has obtained certifications for the
Company's products several countries and as well as approval for use in other
countries which rely on or reference certification requirements of regulatory
bodies such as the FCC and the European Telecommunications Standards Institute
("ETSI"). Each new Aironet product or OEM customer product must be certified or
otherwise qualified for use in each country. While there can be no assurance
that the Company will be able to comply with regulations in any particular
country, the Company has designed its products to minimize the design
modifications required to meet various international regulations. Changes in, or
the failure by the Company to comply with, applicable domestic and international
regulations could have a material adverse affect on the Company's business and
operating results. In addition, with respect to those countries that do not
follow FCC regulations, Aironet may need to modify its products to meet local
rules and regulations.
HEALTH AND SAFETY RISKS
There has been publicity regarding the potentially adverse affects of
electromagnetic emissions from cellular telephones. While the Company's wireless
networking products also emit electromagnetic radiation, the Company believes
its products pose no material safety concerns because of the low power output of
the Company's products and the distance typically maintained between the
Company's products and the end user in normal operation. There can be no
assurance, however, that safety issues relating to the Company's products will
not arise in the future. Any such safety issues could have a material adverse
affect on the Company's business. Even if such safety concerns prove to be
baseless, the resultant publicity could have a material adverse affect on the
Company's value and its ability to market its products.
VALUE OF COMPANY
The Company has established the price of the Common based on arms
length negotiations with the Investors, and such price is not necessarily
related to asset value, net worth or other established criteria of value. No
outside consultant or investment banker was engaged to render an opinion on the
price for the Common or the exercise price of the Warrants, or the fairness from
a financial point of view of such prices. No assurance is or can be given that
the value ascribed to the Common could be obtained if such interests were
transferable and a market existed for such interests.
Exhibit D Page 7
<PAGE> 41
FUNDING
If fully funded, the Company believes that the proceeds of the offering
will be sufficient for its short term working capital needs. The Company's
belief regarding adequate capitalization is based on certain assumptions
concerning revenues and working capital requirements which may not prove
accurate. If the Company does not have adequate funds to cover working capital
requirements, it will require debt and/or equity financing sources for
additional working capital. There is no assurance that a debt or equity
financing source will be available, or if available that the Company will elect
to acquire such debt or equity financing. Additional financing may be secured by
the Company's accounts receivable, inventory and other intangible and tangible
assets.
INITIAL PUBLIC OFFERING
The Company has expressed its desire to consummate an initial
underwritten public offering ("IPO") within the next eighteen (18) months. This
offering is not conditioned upon consummation of an IPO. There can be no
assurance that an IPO will take place within the eighteen (18) months, or at
all, and if an IPO does take place, there is no assurance that the Company's
underwriters will not restrict the number of shares owned by stockholders,
including the Investors, which may be included in that offering. In conjunction
with an IPO, the Company will be required to file a registration statement as
provided in the Securities Act of 1933 (the "Securities Act"). Any such
registration statement must be filed with and reviewed by the Securities and
Exchange Commission ("SEC"), and be declared effective at the time of sale of
any stock registered thereunder. There is no assurance that any registration
statement filed by the Company will be declared effective by the SEC, or if
declared effective that it will remain effective for a sufficient period of time
to allow the sale of all stock registered thereunder.
CORPORATE STRUCTURE
A portion of the operations of the Company have been and, to a lesser
extent, are currently conducted through subsidiaries which are separate and
distinct legal entities and have no obligation, contingent or otherwise, to pay
any amounts to the Company. Moreover, any right of the Company to receive assets
of its subsidiaries upon liquidation or reorganization (and the consequent right
of the holders of the Common to participate in those assets) is effectively
subordinated to the claims of that subsidiary's creditors (including trade
creditors), except to the extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims of the Company would still
be subordinate to any security interests in the assets of such subsidiary and
any indebtedness of such subsidiary senior to that held by the Company.
ABSENCE OF PUBLIC MARKET FOR THE COMMON; RESTRICTIONS ON TRANSFER
The Common is an illiquid investment subject to various restrictions on
transfer and is not easily reduced to cash. In that regard, there is no trading
market for the Common. Without the consummation of an IPO, it is not probable
that any market for the Common will develop or, if one does develop, that it
will be maintained. Without an active market for the Common being developed
Exhibit D Page 8
<PAGE> 42
or be sustained, with the resultant, continuing lack of liquidity, the value of
the Common could be materially adversely affected.
The Common has not been registered under any federal or state
securities laws and until and unless so registered, may not be offered or sold
except pursuant to an exemption from, or in a transaction not subject to,
registration under applicable federal or state securities laws. Additionally,
the Stockholders Agreement generally prohibits (with certain limited exceptions)
the transfer of the Common unless and until the Common has first been offered to
the Company and then to other holders of the Company's stock on the same terms
as the selling stockholder proposes to sell the Common to a third party, and
prohibits transfers of the Common to competitors of Aironet (other than Telxon
or its subsidiaries).
PROJECTIONS
Projections provided by the Company to the Investors contain certain
forward-looking statements and information relating to the Company that are
based on the beliefs of the Company's management as well as assumptions made by
and based on information currently available to the Company's management. When
used by the Company in any documents or discussions, the words "anticipate,"
"believe," "estimate" and "expect" and similar expressions, as they relate to
the Company or the Company's management, are intended to identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions, including these risk factors and any specific
assumptions described to Investors. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described to Investors as
anticipated, believed, estimated or expected. The Company does not intend to
update forward-looking statements.
LACK OF INDEPENDENT OPERATING HISTORY
Since its inception until 1997, Telxon was the Company's sole
stockholder, and Telxon continues to be the Company's majority stockholder and
largest customer. In fiscal 1998, sales by the Company to Telxon accounted a
material percentage of the Company's revenue. To the extent that revenues were
insufficient to fund the Company's operations, Telxon also provided the Company
with working capital. As at March 31, 1998, the Company was indebted to Telxon
for such funding. Telxon has also provided the Company with a variety of general
and administrative services, including tax, accounting, legal, human resource,
employee benefit, and banking services. After the Closing Date, Telxon will
cease funding the Company's operating deficits and the Company will repay its
debt to Telxon, and Telxon will begin to cease providing other services.
Notwithstanding the foregoing, the Company operates as an independent
corporation, with its own board of directors and management; however, the
Company has not yet engaged in business without the support of Telxon.
Accordingly, the Company has no independent business history to consider in
making an investment decision regarding the purchase of the Common. Therefore,
prospective investors must rely upon the skill and judgement of the Company's
management to
Exhibit D Page 9
<PAGE> 43
operate the Company without the full range of support that Telxon, as the
Company's controlling stockholder, previously provided to the Company.
POTENTIAL CONFLICTS OF INTEREST
Various conflicts of interest between the Company and Telxon could
arise during and following completion of the offering. These are discussed below
and should be carefully considered prior to making an investment in the Common.
Such discussion is qualified in its entirety by the Company's Stockholders
Agreement which should be read in its entirety.
CONSENT TO LIMITATIONS OF LIABILITY
The Stockholders Agreement provides: (i) that in the event a director,
officer or employee of the Company who is also a director, officer or employee
of Telxon or its subsidiaries acquires knowledge of a transaction or other
matter that may constitute a corporate opportunity of either or both the Company
and Telxon or its subsidiaries, such corporate opportunity may be allocated
either to the Company or Telxon or its subsidiaries as such director, officer or
employee deems appropriate under the circumstances; (ii) for regulating the
conduct of certain affairs of the Company as they may involve Telxon and its
subsidiaries, directors and officers; (iii) for limiting the liability of Telxon
and its subsidiaries for breach of fiduciary duty for actions taken or omitted
under certain intercompany agreements; and (iv) generally for eliminating the
liability of directors and officers of the Company with respect to certain
matters involving Telxon and its subsidiaries, including matters that may
constitute corporate opportunities of either or both of the Company and Telxon.
Such provisions were adopted in order to regulate the conduct and define the
obligations of the respective companies and their respective directors, officers
and employees to the extent that the Company and Telxon engage in similar lines
of business and enter into contracts and other arrangements with each other
during and after this offering. As a condition to their investment in the
Company, the Investors must agree to such provisions and, to the fullest extent
permitted under Delaware Law, must waive their rights relating to conflicts of
interest and corporate opportunities. Such agreement and waiver will restrict
such an Investor's ability to challenge transactions carried out in compliance
with such provisions.
CROSS-DIRECTORSHIPS AND STOCK OWNERSHIP
Cross-directorships, personal or business relationships, and ownership
interests of directors or officers of the Company in Common Stock of Telxon
could create or appear to create potential conflicts of interest when directors
and officers are faced with decisions that could have different implications for
the Company and Telxon. Nevertheless, the Company believes that such directors
will be able to discharge their fiduciary responsibilities.
Roger Murphy, President, Chief Executive Officer and a Director of the
Company, is the son-in-law of Robert F. Meyerson, the former Chief Executive
Officer and a former Director of Telxon; Frank E. Brick, a Director of the
Company, is also the President and Chief Executive Officer and a Director of
Telxon (under the Stockholders Agreement, Telxon may name a second director to
the Company's Board who may also be a Telxon "insider"); and James Furneaux, a
Director of the
Exhibit D Page 10
<PAGE> 44
Company, is a financial consultant to Telxon. Each of these Person's connection
to Telxon may result in conflicts of interest for them in connection with
dealings between the Company and Telxon.
COUNSEL
Goodman Weiss Miller LLP ("GWM") is general counsel to the Company,
including in connection with this offering, and is also general counsel to
Telxon. GWM has advised the Company and Telxon that GWM's representation of both
the Company and Telxon in any given matter may create a conflict of interest for
GWM, and that if any such conflict were to arise, GWM would take appropriate
action to obviate such conflict.
COMPETITION WITH TELXON
Telxon is an investor in and a customer of several companies that are
competitors of the Company. Telxon is not restricted in any manner from
competing with the Company, and there can be no assurance that Telxon will not
expand, through development of new lines of products or businesses, acquisitions
or otherwise, its operations in a manner that might compete with the Company's
businesses.
RELATIONSHIP WITH TELXON
CONTROL BY TELXON
Telxon is currently the majority stockholder of the Company. Upon
completion of this offering, Telxon shall remain the majority stockholder of the
Company. Pursuant to the Stockholders Agreement Telxon may designate a majority
of the directors sitting on the Company's Board.
Telxon has advised the Company that its current intent is to continue
to hold all of the Common currently owned by it. However, Telxon has no
agreement with the Company not to sell or distribute such shares. There can be
no assurance concerning the period of time during which Telxon will maintain its
ownership of the Common, and subject to restrictions on re-sale in the
Stockholders Agreement, Telxon's level of ownership can be reduced through sales
of the Common by it or by sales of newly issued shares of stock by the Company.
It is anticipated that for benefit plan purposes, the Company will
continue to be part of Telxon's controlled group, which includes Telxon and its
other subsidiaries. Under the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and federal income tax law, each member of the controlled
group is jointly and severally liable for funding and termination liabilities of
tax qualified defined benefit retirement plans as well as certain plan taxes.
Accordingly, during the period in which the Company is included in Telxon's
consolidated or controlled group, the Company could be liable under such
provisions in the event any such liability or tax is incurred, and not
discharged, by any other member of Telxon's consolidated or controlled group,
against which liability Telxon has agreed to indemnify the Company.
Exhibit D Page 11
<PAGE> 45
INTERCOMPANY AGREEMENTS
Telxon and the Company have entered into intercompany agreements,
including agreements pursuant to which Telxon has received intellectual property
licenses, manufacturing rights, and product and service supply rights from the
Company, and will provide the Company with various services that are material to
the conduct of the Company's business. With respect to matters covered by the
Services Agreement, the relationship between Telxon and the Company is intended
to continue in a manner generally consistent with past practices. Because of
Telxon's ownership of the Company, none of these agreements have resulted from
arm's-length negotiations, and therefore, the prices charged by the Company to
Telxon, and to the Company by Telxon, may be higher or lower than prices that
may be charged to or by third parties.
PENDING LITIGATION
On or about January 6, 1995, Aironet filed Applications, Serial Nos.
630,655 and 630,657, with the United States Patent and Trade Office for
registration of the trademarks (collectively, the "Marks") titled "Hurricane"
and "Aironet and Design," respectively, based on its bona fide intent to use the
Marks in interstate commerce. The Marks were published for opposition, and
thereafter, America On Line, Inc. ("AOL") obtained extensions of time in which
to file an opposition to registration of these Marks.
AOL has raised its concern that the Marks may cause confusion with an
AOL mark. The Company and AOL, through their respective counsel, engaged in
discussions concerning resolution of this matter; however, these discussions did
not result in a resolution.
On about April 29, 1996, AOL filed a Notice of Opposition (the
"Opposition") to Aironet's "Aironet and Design" mark in the United States
Department of Commerce, Patent and Trademark Office-Trademark Trial and Appeal
Board (the "TTAB"); however, no opposition to the "Hurricane" mark was filed by
AOL. On about July 11, 1996, Aironet filed its Answer to the Opposition. The
TTAB calendar for the case has been extended numerous times, and discovery in
this case has yet to be completed.
AOL has not alleged any trademark infringement by Aironet and, to date,
there is no outstanding claim for damages, and no suit for trademark
infringement has been threatened or filed against Aironet.
The Company believes that the Opposition is without merit and will
vigorously contest it, although there can be no assurance that Aironet will be
successful. Based on its knowledge of the foregoing matter and given the present
stage of such matter, the Company does not believe that the potential loss, if
any, which might result to it if the ultimate outcome in such matter was
unfavorable is likely to have a material adverse affect on it or its financial
position.
Exhibit D Page 12
<PAGE> 46
EXHIBIT E
FORM OF STOCKHOLDERS AGREEMENT
Attached
<PAGE> 47
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), is made and effective
as of March 31, 1998, by and among Aironet Wireless Communications, Inc., a
Delaware corporation (the "Corporation"), and each of the undersigned (together
with any person, partnership, association, trust, corporation, limited liability
company, or other entity acquiring any Shares (defined herein) in accordance
with the terms and conditions of this Agreement or otherwise, the
"Stockholders").
BACKGROUND
WHEREAS, on August 25, 1993, the Certificate of Incorporation of the
Corporation was filed by the Secretary of State for the State of Delaware (as
amended to date of this Agreement, the "Certificate");
WHEREAS, under the Certificate the authorized capital stock of the
Corporation consists solely of fifteen million (15,000,000) shares of Common
Stock, $.01 par value (the "Shares");
WHEREAS, as of the date hereof, the issued and outstanding Shares are
owned of record by the persons and in the amounts set forth in EXHIBIT A to this
Agreement; and
WHEREAS, this Agreement is a condition to the transactions contemplated
under the Subscription Agreement dated March 31, 1998, by and among the
Corporation and certain of the Stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally and equitably bound, agree as follows:
1. BOARD OF DIRECTORS.
(a) GENERAL. The Corporation shall have a Board of Directors comprised
of five (5) directors. Subject to applicable law governing the responsibilities
and liabilities of directors, which shall in any event take precedence, the
Board's power and authority shall be restricted such that it may take no action
which conflicts with the terms hereof or which is reserved to the Stockholders
hereunder or under applicable law. Subject to Section 1(b), each Stockholder
agrees that the Directors of the Corporation shall be the following persons (and
each Stockholder agrees to vote its Shares to effectuate the election of such
Directors) until their successors are designated in accordance with this Section
1:
Two Telxon Corporation ("Telxon") Inside Designees,
one of whom must be Telxon's Chief Executive Officer, and
who on the date hereof are Frank E. Brick and Kenneth W. Haver
One Outside Director,
<PAGE> 48
who shall be designated by Telxon,
who on the date hereof is James H. Furneaux
One Investor (defined herein) Designee,
who on the date hereof is Samuel F. McKay
and
The Chief Executive Officer of the Corporation,
who on the date hereof is Roger J. Murphy
In addition to the Investor (defined herein) designated Director, the Investors
as a group shall be entitled to designate a single observer (the "Investor
Observer") who shall not be a Director but shall receive all notices which
Directors are entitled to receive and shall be entitled to attend all, but not
to participate in, meetings of the Directors.
(b) DESIGNATION. For the purpose of the foregoing:
(i) the Telxon inside designees and the outside Director shall
be named by Telxon in its sole discretion so long as Telxon then owns
at least fifty percent (50%) of the then issued and outstanding Shares;
the Telxon inside designees, but not the outside Director, shall be
named by Telxon in its sole discretion so long as Telxon then owns at
least twenty percent (20%), but less than fifty percent (50%), of the
then issued and outstanding Shares; and a single Telxon inside designee
shall be named by Telxon in its sole discretion so long as Telxon then
owns at least five percent (5%), but less than twenty percent (20%) of
the then issued and outstanding Shares;
(ii) Following a Hostile Change in Control at any time, and
following any Change in Control occurring after April 30, 2001, the
directors which Telxon is then entitled to designate under Section
1(b)(i) shall thereafter be made by a majority in interest of Axiom
Venture Partners II Limited Partnership ("Axiom"), Hambrecht & Quist,
Telantis Venture Partners V, Inc. W, A & H Investments LLC, McDonald &
Company Securities, Inc., Frank B. Carr and Clarion Capital
Corporation, who acquired Shares pursuant to the Subscription Agreement
of even date and for so long as any such person or entity is then a
Stockholder (the "Investors"), provided that the Investors shall then,
and for so long as they thereafter continue to, own an aggregate of at
least five (5%) of the then issued and outstanding Shares.
(A) A "Change in Control" is deemed to have occurred
upon (i) any Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of
1934 (as amended, the "Exchange Act")), directly or
indirectly, of fifteen percent (15%) or more of the combined
voting power of Telxon's Voting Securities, or (ii) the
holders of Telxon's securities entitled to vote thereon
approve, or there otherwise occurs or is commenced, a sale,
lease, exchange or other disposition of all or substantially
all the assets, or the dissolution or liquidation, of Telxon,
or any merger, consolidation or reorganization to which Telxon
is a party and
2
<PAGE> 49
as the result of which Telxon's stockholders prior to the
transaction do not own at least fifty percent (50%) of the
voting power of the surviving entity in the election of
directors, or (iii) the Continuing Directors cease for any
reason to constitute at least a majority of the Telxon Board
of Directors, or (iv) any other event occurs which is of such
a nature that would be required to be reported as a change in
control in response to Item 1(a) of the Current Report on Form
8-K, as in effect on the date hereof pursuant to Section 13 or
15(d) of the Exchange Act, or similar successor public filing;
provided that any event described in the foregoing clauses
(i)-(iv) shall constitute a "Hostile Change in Control" if the
transaction causing such change in control shall not have been
approved by the affirmative vote of at least a majority of
Telxon's Board of Directors, which approving majority includes
a majority of the then Continuing Directors.
(B) "Continuing Directors" means and includes the
persons constituting Telxon's Board of Directors as of the
date of this Agreement as well as each person who becomes a
director of Telxon subsequent to the date of this Agreement
whose election, or nomination for election by Telxon's
stockholders, was approved by an affirmative vote of at least
a majority of the then Continuing Directors (either by a
specific vote or by approval of the proxy statement of Telxon
in which such person is named as a nominee for director or of
the inclusion of such person in such proxy statement as such a
nominee, in any such case without objection by any member of
such approving majority of the then Continuing Directors to
the nomination of such person or the naming of such person as
a director nominee), for so long as each such director shall
remain in office.
(C) "Person" means and includes any individual,
corporation, partnership, group, association or other
"person", as such term is used in Section 14(d) of the
Exchange Act, but excluding Telxon or any employee benefit
plan sponsored by Telxon.
(D) "Voting Securities" means the Telxon Common
Stock, par value $0.01 per share, and any and all other then
outstanding Telxon securities ordinarily having the right to
vote generally in the election of the Telxon directors.
and
(iii) the investor designee shall be named by Axiom so long as
it holds all of the Shares acquired by it pursuant to the Subscription
Agreement of even date, and otherwise by Investors holding no less than
seventy five percent (75%) of the Shares then held by the Investors (a
"Super Majority in Interest of the Investors"), so long as
any such Investor is then a Stockholder, and the observer shall be
named by a Super Majority in Interest of the Investors. The Investors
shall have the right to name the Investor Board designee so long as
they then own an aggregate of at least five (5%) of the then issued and
outstanding Shares, and the Investor Observer so long as they then own
an aggregate of at least ten percent (10%) of the then issued and
outstanding Shares. The person sitting from time to time as the Chief
Executive Officer of the Corporation shall automatically succeed as a
Director to his
3
<PAGE> 50
predecessor Chief Executive Officer (succeeding Chief
Executive Officers shall be deemed to be designees for the purposes
herein).
(c) METHOD. A designee may be named at any time, and from time to time,
by delivering written notice duly executed by the designator to the Secretary or
an Assistant Secretary of the Corporation for inclusion in the Corporation's
minute book. Upon receipt of a designation, the Secretary or an Assistant
Secretary of the Corporation shall circulate to the Stockholders an action by
written consent to effectuate the designation (and each Stockholder agrees to
vote its Shares to effectuate the designation).
(d) COMMITTEES. The Telxon designees and the Investor designee have the
right to sit on all committees established by the Board.
(e) VACANCIES. No vacancy of a Board seat designated and effectuated in
accordance with this Section 1 shall be filled other than in accordance with
this Section 1. At such time as a designator's shareholdings fall below the
percentage required to entitle it to designate Board members, that designator's
Board seat shall be deemed vacated and shall not be re-filled except by the vote
of the Stockholders in accordance with the Corporation's By-laws.
(f) BOARD EXPENSES. The Corporation agrees to reimburse each of the
directors elected to the Corporation's Board of Directors (and any Investor
Observer) for their reasonable out-of-pocket travel and lodging expenses
incurred attending Board of Directors' meetings and performing their respective
obligations and responsibilities to the Corporation.
2. GOVERNANCE.
(a) BY-LAWS. The Corporation's By-laws shall continue in full force and
effect from and after the effective date of this Agreement. To the extent that
the terms and conditions of this Agreement conflict with the Corporation's
By-laws, the terms and conditions of this Agreement shall control.
(b) BOARD MEETINGS. The Board of Directors shall conduct at least one
Board meeting during each fiscal quarter of the Corporation.
(c) STOCKHOLDER VOTES. Except as otherwise provided in this Agreement
or as required by applicable law, any vote, approval, authorization or other
action to be taken by the Stockholders shall be determined by a majority vote
based on the number of Shares then owned by them.
(d) ACTION BY WRITTEN CONSENT. Unless otherwise required by law, any
vote, approval, authorization or other action to be taken by the Stockholders or
Directors of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the number of Stockholders required to
pass such matter at a meeting of the Stockholders where all Stockholders
entitled to vote were present, or by all of the Directors, as the case may be.
Consents may be executed in several counterparts all of
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which when taken together shall constitute a single integrated consent. The
original (or copies if the originals are not available) of such consents shall
be entered in the Corporation's minute book.
(e) PUBLIC OFFERING AND SALE OF CORPORATION. During the period
commencing December 1, 1998, and ending September 30, 2000 (the "Stockholder
Approval Period"), or at any time after the occurrence of a Hostile Change in
Control, the Stockholders shall have sole authority to direct the Corporation to
take the following actions:
(i) to undertake any public offering of securities of the
Corporation; or
(ii) to sell the Corporation as an entirety, whether by
merger, consolidation, stock sale, asset sale, or otherwise.
During the Stockholder Approval Period, or at any time after the occurrence of a
Hostile Change in Control, in the event that the Investors then own ten percent
(10%) or more of the issued and outstanding Shares, and as a group they vote, by
majority vote of the Shares held by the Investors, in favor of either: (i) the
first firm commitment underwritten public offering of the Shares (or units which
include the Shares as an element) at a public offering price of not less than
Eight Dollars ($8.00) per Share, pursuant to a Registration Statement, on Form
S-1 or other appropriate form, filed by the Corporation under the Securities Act
of 1933, as amended, pursuant to which the Corporation receives proceeds, net of
underwriting discounts, commissions and other expenses of the offering, of not
less than Eight Million Dollars ($8,000,000) ("IPO"); or (ii) the sale of the
Corporation as an entirety, whether by merger, consolidation, stock sale, asset
sale, or otherwise ("Private Sale"), for the higher of a gross sale price of
Seventy Five Million Dollars ($75,000,000) or Eight Dollars ($8.00) per share,
then Telxon agrees to also vote its Shares in favor of, and to take all other
actions necessary to effectuate, such IPO or Private Sale, and agrees to cause
its Board designees to take all actions that are required by law to be taken by
a Delaware corporation's board of directors to effectuate any such transaction.
Without limiting the generality of Section 6(l), the parties hereby acknowledge
and confirm that the provisions of this Section 2(e) shall be binding upon
Telxon and any successor-in-interest thereto.
(f) NEWLY ISSUED SHARES. The Stockholders shall have sole authority to
determine whether the Corporation is permitted to issue any equity securities,
except in an IPO, or securities convertible into or exchangeable for equity
securities. Authority for the Corporation to issue such securities shall require
an affirmative vote of at least ninety two and one half percent (92.5%) of all
of the then issued and outstanding Shares.
(g) MERGERS, ASSET SALES ETC. Other than Private Sales approved
pursuant to Section 2(e), any merger, consolidation, reorganization,
reclassification or recapitalization involving the Corporation, or any sale,
lease, exchange or other disposition of all or substantially all of the assets,
or the dissolution or liquidation, of the Corporation, shall require the
affirmative vote of at least ninety two and one half percent (92.5%) of all of
the then issued and outstanding Shares.
(h) AGREEMENTS WITH TELXON CORPORATION. The Board of Directors shall
have sole authority, by the affirmative vote of Directors representing one
hundred percent (100%) of the total
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number of seats then constituting the full Board, to determine whether the
Corporation may authorize or approve any contract, agreement, arrangement or
transaction (or amendment, modification, assignment, termination or waiver
thereof) between Telxon Corporation and the Corporation, or to waive any failure
of performance by Telxon Corporation thereunder, other than any of the foregoing
which are done in the ordinary course of the Corporation's business.
3. TRANSFER OF SHARES.
(a) PROHIBITION ON TRANSFER. No Stockholder shall sell, exchange, give,
transfer, assign, pledge, encumber, hypothecate, or otherwise dispose of any
Shares, or any legal, beneficial or other interest in any Shares, whether now
owned or hereafter acquired, whether voluntarily, involuntarily, by operation of
law, or otherwise, including by way of intestacy, will, gift, bankruptcy,
execution, or seizure and sale by legal process (such events separately and
collectively are referred to as a "Transfer," and the transferee is referred to
as a "Transferee"), except as provided in this Agreement.
(b) CORPORATION RIGHT OF FIRST REFUSAL. In the event that a Stockholder
at any time desires to Transfer all or any portion of its Shares to any third
party (the "Offeror"), it must first offer to Transfer its Shares to the
Corporation. Such offer must be upon the same terms and conditions as it
proposes to Transfer such Shares to the Offeror, which terms and conditions
shall be set forth in a written notice of offer (the "Notice of Offer"). The
Notice of Offer shall state with particularity the terms upon which the Transfer
of the Shares is proposed to be made, including, without limitation, the
purchase price to be paid for the Shares, if any, the time and method of
payment, and if payment is to be made other than in cash, a description of the
non-cash consideration and the rate of interest, if any, to be paid on the
non-cash portion of said purchase price (collectively the "Offer Price and
Terms"). The Corporation shall have a period of fifteen (15) days after receipt
of the Notice of Offer within which to accept (as to all, but not less than all,
of the tendered Shares) or reject in writing the offer of Transfer. Should the
Corporation accept the offer, it shall, within ten (10) days of its acceptance,
acquire the tendered Shares at the Offer Price and Terms. Failure of the
Corporation to respond in writing to a Notice of Offer within the fifteen (15)
day period shall be deemed a rejection of said offer.
(c) STOCKHOLDER RIGHT OF FIRST REFUSAL. Should the subject Shares not
be acquired by the Corporation at the expiration of the period specified in
Section 3(b), the tendering Stockholder shall next offer to Transfer such Shares
to the Stockholders (excluding the tendering Stockholder), if any, pro-rata to
their Share interests, at the Offer Price and Terms, by providing the
Stockholders with a copy of the Notice of Offer. The Corporation shall provide
the tendering Stockholder with the then current Stockholder address list to
enable it to provide all required notices under this Section 3(c) and under
Section 3(d). The Stockholders shall have a period of fifteen (15) days after
receipt of the Notice of Offer within which to accept or reject in writing the
offer of Transfer. Should any Stockholder accept the offer, it shall, within ten
(10) days of its acceptance, acquire the tendered Shares at the Offer Price and
Terms. Failure of any Stockholder to respond in writing to a Notice of Offer
within such fifteen (15) day period shall be deemed a rejection of said offer.
In the event that Stockholder acceptances of the offer are, in the aggregate,
for fewer than all of the tendered Shares, then the tendering Stockholder shall
so notify the Stockholders who have elected to acquire tendered Shares, which
electing Stockholders shall have an additional seven (7) day period following
receipt
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of such notice to acquire the remaining Shares, pro rata to their Share
interests (as between themselves); provided that if the offer is not accepted by
Stockholders as to all of the tendered Shares, then none of the Stockholders
shall have any right to acquire any of the tendered Shares pursuant to this
Section 3(c).
(d) CO-SALE.
(i) No later than ten (10) days after the expiration of the
time periods specified in Section 3(c), the tendering Stockholder shall
notify the other Stockholders in writing whether the Corporation and
the Stockholders have failed to acquire all of the tendered Shares
pursuant to Sections 3(b) and (c) (the "Co-Sale Notice"). If all of the
tendered Shares have not been acquired pursuant to either Section 3(b)
or 3(c), then each Stockholder other than the tendering Stockholder
shall have the right to participate in the tendering Stockholder's sale
of Shares by selling a portion of its Shares on the terms set forth in
the Notice of Offer, in an amount equal to the product obtained by
multiplying (x) the aggregate number of Shares to be sold by the
tendering Stockholder by (y) the Ownership Percentage (defined herein)
of Shares owned by each Stockholder other than the tendering
Stockholder who elects to participate in the tendering Stockholder's
sale (each a "Participant," and collectively the "Participants"). The
Ownership Percentage for any Participant shall be the percentage figure
which expresses the ratio between (x) the number of Shares owned by
such Participant and (y) the aggregate of (A) the number of Shares
owned by all Participants and (B) the number of Shares owned by the
tendering Stockholder (excluding any Shares acquired pursuant to
Section 3(b) or 3(c)). Within five (5) days after its receipt of the
Co-Sale Notice, any Stockholder electing to participate in the
tendering Stockholder's Transfer shall notify the tendering Stockholder
in writing of the number of Shares held by it to be included in the
sale.
(ii) Each Participant shall enter into such agreements and
take such actions consistent with the Notice of Offer, and as otherwise
reasonably directed by the tendering Stockholder in order to effect the
subject Transfer. The proceeds of any Transfer under this Section 3(d)
shall be remitted directly to each Participant by the Offeror.
(iii) The provisions of this Section 3(d) shall not apply to
any Transfer permitted under Section 3(g).
(e) TRANSFER. Subject to Section 6(c), if all of the tendered Shares
are not acquired by either the Corporation and/or the Stockholders within the
time periods provided for in Sections 3(b) and (c), respectively, and provided
that the notice required under Section 3(c), if any, was provided within five
(5) days after the end of the time period provided for in Section 3(b), then the
tendering Stockholder and each Participant may Transfer its Shares to the
Offeror at Offer Price and Terms; provided, however, that such Transfer must be
completed within forty five (45) days from the expiration of all response
periods provided in Sections 3(b), (c) or (d), as applicable.
(f) ALTERATION OF TERMS. Each time the Offer Price and Terms are altered
in any way, including, but not limited to, changes in the identity of the
proposed Offeror or the consideration to be paid for the Shares to be
Transferred, or in the event that a Transfer is not completed within the
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time period provided for in Section 3(e), then the subject Shares shall be
re-offered to the Corporation and the Stockholders in accordance with Section
3(b) and (c), respectively, and a new Co-Sale Notice shall be given in
accordance with Section 3(d), as if a totally new transaction were proposed.
(g) PERMITTED TRANSFER.
(i) Subject to Section 6(c), a non-entity Stockholder is
permitted to Transfer his Shares during his life without first offering
his Shares to the Corporation or Stockholders in accordance with
Sections 3(b) and (c), respectively, if, but only if, the Transfer is to
Stockholder's spouse or lineal descendants, or any trust created for his
or their benefit, or to a corporation wholly owned by the Stockholder
and/or his spouse and lineal descendants. An estate, executor,
administrator or other personal representative of a deceased non-entity
Stockholder is permitted to hold and, subject to Section 6(c), Transfer
the deceased non-entity Stockholder's Shares to the deceased
Stockholder's devisees and heirs at law. Shares Transferred in
accordance with this Section 3(g) may not be further Transferred except
in accordance with the provisions of this Section 3.
(ii) Subject to Section 6(c), an entity Stockholder is
permitted to Transfer its Shares without first offering its Shares to
the Corporation or Stockholders in accordance with Section 3(b) and (c),
respectively, if, but only if: (i) the Transfer is to an entity of which
at least fifty-one percent (51%) is owned by the Stockholder or its
affiliates, or if at least fifty-one percent (51%) of the Stockholder is
owned by the Transferee or an affiliate of the Stockholder, and each
such Transferee may further Transfer such Shares to similarly controlled
or controlling affiliate entities; or (ii) the Transfer is a spin-off,
dividend or other distribution to the owners of the Stockholder, based
on such ownership interests.
(iii) In the event of a permitted Transfer under this Section
3(g), the Transferor shall promptly furnish written notice thereof to
the Corporation. Concurrently therewith, the Transferee shall execute a
written agreement to be bound by the terms and provisions of this
Agreement, as provided in this Section 3(g).
(h) CERTAIN PURCHASE MONEY LIENS. Notwithstanding anything in Section 3
to the contrary, neither the grant of nor the foreclosure or other realization
by the Company or by Telxon, as the case may be, on the security interest in
200,000 Shares granted by Roger J. Murphy to the Corporation to secure the
payment of $372,000, nor the security interest in 808,500 Shares granted by
Telantis Venture Partners IV, Inc. to Telxon to secure the payment of
$1,503,810, or the security interest in up to 120,635 Shares, and warrants to
purchase 12,064 Shares, granted by Telantis Venture Partners V, Inc. to Telxon
to secure the payment of up to $422,000 shall be a prohibited Transfer under
Section 3(a).
(i) SPECIAL UNDERWRITER REQUIREMENTS. Each Stockholder agrees, if
requested by the Corporation and an underwriter of Common (or other securities)
of the Corporation, not to sell or otherwise transfer or dispose of any Common
(or other securities) of the Corporation held by such Stockholder during the one
hundred eighty (180) day period following the effective date of a registration
statement of the Corporation filed under the Securities Act, provided that such
agreement
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only applies to the first such registration statement of the Corporation
including securities to be sold on its behalf to the public in an underwritten
offering. Such agreement shall be in writing in a form satisfactory to the
Corporation and such underwriter. The Corporation may impose stop-transfer
instructions with respect to the shares (or securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
(j) ADDENDUM. Before the holdings of any Transferee shall be honored by
the Corporation or accepted upon its stock register and before any right, title
or interest whatsoever therein shall vest in such Transferee, and before the
Corporation shall issue or agree to issue any previously unissued (or reissue or
agree to reissue, from treasury or otherwise) Shares of the Corporation, it
shall require, as a condition to the issuance of a stock certificate or other
instrument evidencing such stock, that said Transferee or the person or entity
to whom any such previously unissued (or reissued) Shares are to be issued, as
the case may be, execute and deliver to the Secretary of the Corporation an
Addendum to this Agreement in substantially the following form with appropriate
insertions:
ADDENDUM
Pursuant to the STOCKHOLDERS AGREEMENT (the "Agreement") dated
___, 1998 by and among Aironet Wireless Communications, Inc., a
Delaware corporation (the "Corporation"), and its Stockholders,
the undersigned, now the holder of __________ of the
Corporation evidenced by certificate(s) numbered __________,
does hereby become a party to the Agreement entitled to the
rights, and subject to the obligations, as set forth therein,
to the extent the undersigned is record holder of shares of the
Corporation's capital stock with the same force and effect as
though it had executed said Agreement as an initial
signatory party thereto. The undersigned acknowledges that he
has read the Agreement and is familiar with and understands its
terms.
Dated this _____ day of __________, 199__.
-------------------------------
(signature)
Whether or not such Addendum is executed, each Transferee or new holder of
Shares shall in any event be bound by, and shall perform the obligations imposed
by, this Agreement with the same force and effect as if such Transferee or new
holder had signed this instrument.
(k) HOLDERS OF OTHER SECURITIES. On the date of this Agreement, options
and warrants to purchase Shares are held by the persons identified in SCHEDULE
3(k). The Corporation shall use its best efforts to obtain from each such person
an Addendum similar to that provided for in Section 3(j) which in substance
provides that any Shares issued upon the exercise of such options and warrants,
and the holder thereof, shall be bound by the terms and conditions hereof and
shall then, but not before, be entitled to the rights afforded to the
Stockholders hereunder. Before the Corporation shall
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grant or issue, or agree to grant or issue, any securities convertible into or
exercisable or exchangeable for, stock of the Corporation, the Corporation shall
require, as a condition thereto, that the grantee or recipient of such
securities execute an Addendum of the type described in this Section 3(k),
except that no such Addendum shall be required with respect to securities which
may not be converted, exercised or exchanged into or for stock of the
Corporation prior to an IPO.
(l) PURCHASE OF INVESTOR SHARES UPON CERTAIN CHANGES IN CONTROL. On or
within ten (10) days after the date ninety (90) days after the consummation of a
Change in Control
(A) which is not a Hostile Change in Control,
(B) which occurs prior to May 1, 2001, and
(C) which occurs at a time when Telxon then owns at least
twenty percent (20%) of the issued and outstanding Shares,
the Person surviving such Change in Control shall give written notice to each of
the Investors that the surviving Person will purchase all Shares which such
Investor then owns at a price of Ten and 50/100 Dollars ($10.50) per Share in
cash. Each Investor must accept or reject such offer in writing within twenty
(20) after its receipt of the surviving Person's notice. If not timely rejected,
the surviving Person and each Investor that does not timely reject the surviving
Person's offer shall consummate the purchase of each such Investor's Shares by
the surviving Person on or before the date ten (10) days after the earlier of
(i) the date that the surviving Person receives the Investor's acceptance or
(ii) the expiration of the Investor's twenty (20) day rejection period. The
transactions under this Section 3(l) shall not be subject to any of the other
provisions of this Section 3, but the surviving Person and such purchased Shares
shall remain subject to this Agreement. Without limiting the generality of
Section 6(l), Telxon shall take all necessary actions to ensure that such a
surviving Person is obligated to take the actions required of it under this
Section 3(l).
4. CONFLICTS OF INTEREST
(a) As long as Telxon owns twenty percent (20%) or more of the issued
and outstanding Shares: (i) the Corporation's Chief Executive Officer shall not
be permitted to serve Telxon as an officer or director, and may not own five
percent (5%) or more of Telxon's issued and outstanding capital stock; and (ii)
no officer of Telxon may serve as an officer of Aironet (the prohibition in this
clause (ii) shall not commence until July 1, 1998).
(b) As Telxon remains a stockholder of the Corporation, and as the
Corporation and Telxon may engage in the same or similar activities or lines of
business and may have an interest in the same areas of corporate opportunity,
and in recognition of: (i) the benefits to be derived by the Corporation through
its continued contractual, corporate and business relations with Telxon
(including service of officers and Directors of Telxon as Directors of the
Corporation); and (ii) the difficulties and uncertainties attendant to any
Director, who desires and endeavors fully to satisfy such Director's fiduciary
duties, in determining the full scope of such duties in any particular
situation, the provisions of this Section 4 are set forth to regulate, define
and guide the conduct of
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certain affairs of the Corporation as they may involve Telxon and its officers
and Directors, and the powers, rights, duties, obligations and liabilities of
the Corporation and its officers, Directors and stockholders in connection
therewith.
(c) Except as Telxon may otherwise agree in writing:
(i) Except as may otherwise be set forth in any agreements
between the Corporation and Telxon, Telxon shall not have a duty to
refrain from engaging, directly or indirectly, in the same or similar
business activities or lines of business as the Corporation presently
engages in and in the future may engage in; and
(ii) neither Telxon nor any officer or Director thereof shall
be liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of any such activities of Telxon or of such
person's direct or indirect participation therein.
In the event that Telxon acquires knowledge of a potential transaction or matter
that may be a corporate opportunity for both Telxon and the Corporation, Telxon
shall have no duty to communicate or offer such corporate opportunity to the
Corporation and shall not be liable to the Corporation or its stockholders for
breach of any fiduciary duty as a stockholder of the Corporation or controlling
person by reason of the fact that Telxon pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or does not communicate information regarding, or offer, such corporate
opportunity to the Corporation.
(d) In the event that a Director, officer or employee of the Corporation
who is also a Director, officer or employee of Telxon acquires knowledge of a
potential transaction or matter that may be a corporate opportunity for the
Corporation and Telxon (whether such potential transaction or matter is proposed
by a third-party or is conceived of by such Director, officer or employee of the
Corporation), such Director, officer or employee shall be entitled to offer such
corporate opportunity to the Corporation or Telxon as such Director, officer or
employee deems appropriate under the circumstances in his sole and absolute
discretion, and no such Director, officer or employee shall be liable to the
Corporation or its stockholders for breach of any fiduciary duty or duty of
loyalty or failure to act in the best interests of the Corporation or the
derivation of any improper personal benefit by reason of the fact that: (i) such
Director, officer or employee offered such corporate opportunity to Telxon
(rather than the Corporation) or did not communicate information regarding such
corporate opportunity to the Corporation; or (ii) Telxon pursues or acquires
such corporate opportunity for itself or directs such corporate opportunity to
another person or does not communicate information regarding such corporate
opportunity to the Corporation. All information learned by any director of the
Corporation in the course of his service as a director is confidential
information of the Corporation, and notwithstanding any provision in this
Agreement to the contrary, no director may utilize such confidential information
except for the benefit of the Corporation, and may not disclose such
confidential information to any person or entity other than for the benefit of
the Corporation in the course of the director's service on the Corporation's
Board, or as an officer or employee of the Corporation.
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(e) Subject to Section 2(g), no contract, agreement, arrangement or
transaction (or any amendment, modification or termination thereof) between the
Corporation and Telxon or any Related Entity (defined herein) or between the
Corporation and one or more of the Directors or officers of the Corporation,
Telxon or any Related Entity, shall be void or voidable solely for the reason
that Telxon or any Related Entity or any one or more of the officers or
Directors of the Corporation, Telxon or any Related Entity are parties thereto,
or solely because any such Directors or officers are present at or participate
in the meeting of the Board of Directors or committee thereof which authorizes
the contract, agreement, arrangement, transaction, amendment, modification or
termination or solely because his or their votes are counted for such purpose,
but any such contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) shall be governed by the provisions of this
Agreement, the Certificate, the Corporation's By-laws, Delaware Law and other
applicable law. For purposes of this Section 4, the term "Related Entities"
means any Director of the Corporation, or any corporations, partnerships,
associations or other organizations in which one or more of its Directors have a
direct or indirect financial or non-financial interest.
(f) Subject to Section 2(g), Directors of the Corporation who are also
directors or officers of Telxon or any Related Entity may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof),
and may vote thereon. Outstanding Shares owned by Telxon and any Related
Entities may be counted in determining the presence of a quorum at a meeting of
stockholders that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof),
and may vote thereon.
(g) Neither Telxon nor any officer or Director thereof or any Related
Entity shall be liable to the Corporation or its stockholders for breach of any
fiduciary duty or duty of loyalty or failure to act in the best interests of the
Corporation or the derivation of any improper personal benefit by reason of the
fact that Telxon or an officer or Director thereof or such Related Entity in
good faith takes any action or exercises any rights or gives or withholds any
consent in connection with any agreement or contract between Telxon or of such
Related Entity and the Corporation. No vote cast or other action taken by any
person who is an officer, Director or other representative of Telxon or such
Related Entity, which vote is cast or action is taken by such person in his
capacity as a Director of the Corporation, shall constitute an action of or the
exercise of a right by or a consent of Telxon or such Related Entity for the
purpose of any such agreement or contract.
(h) Any person or entity purchasing or otherwise acquiring any interest
in any shares of capital stock of the Corporation shall, by virtue of the legend
required by Section 5(a) to be borne on certificates evidencing Shares, be
deemed to have notice of, to understand the ramifications of, to have consented
to the provisions of, and, to the fullest extent permitted by Delaware Law, to
have waived his right to contest this Section 4.
(i) For purposes of this Section 4, any contract, agreement, arrangement
or transaction with any corporation, partnership, joint venture, association or
other entity in which the Corporation beneficially owns (directly or indirectly)
fifty percent (50%) or more of the outstanding voting stock,
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voting power or similar voting interests, or with any officer or Director
thereof, shall be deemed to be a contract, agreement, arrangement or transaction
with the Corporation.
(j) For purposes of this Section 4 only: (i) the term "Corporation"
shall mean the Corporation and all corporations, partnerships, joint ventures,
associations and other entities in which the Corporation beneficially owns
(directly or indirectly) fifty percent (50%) or more of the outstanding voting
stock, voting power or similar voting interests; and (ii) the term "Telxon"
shall mean Telxon and all corporations, partnerships, joint ventures,
associations and other entities (other than the Corporation, defined in
accordance with clause (i)) in which Telxon beneficially owns (directly or
indirectly) fifty percent (50%) or more of the outstanding voting stock, voting
power or similar voting interests.
(k) Notwithstanding anything in this Agreement to the contrary, the
foregoing provisions of this Section 4 shall expire on the date that Telxon
ceases to own beneficially Shares representing at least twenty percent (20%) of
the issued and outstanding Shares, and no person who is a Director or officer of
the Corporation is also a Director or officer of Telxon. The provisions of this
Section 4 shall automatically terminate upon the consummation of a Hostile
Change in Control, except for the provisions of Section 4(a), which shall
survive such event. The alteration, amendment, change or repeal of any provision
of this Section 4 or the adoption of any provision inconsistent with this
Section 4, shall require the express written consent of Telxon, and will not
eliminate or reduce the effect of this Section 4 in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Section 4,
would accrue or arise prior to such alteration, amendment, repeal or adoption.
5. COVENANTS
(a) INSPECTIONS. Upon no less than five (5) days advance written notice,
the Corporation shall permit each Investor (or its designated representative) to
visit and inspect any of the properties of the Corporation, including its books
of account, and to discuss its affairs, finances and accounts with the
Corporation's officers and its independent public accountants. All such
inspections shall be conducted during the Corporation's business hours, and
shall not unreasonably interfere with the conduct of the Corporation's business.
(b) FINANCIAL REPORTING. The Corporation will furnish the following
reports to the Investors:
(i) As soon as practicable after the end of each fiscal year of
the Corporation, and in any event within ninety (90) days thereafter, a
consolidated balance sheet of the Corporation and its subsidiaries, if
any, as at the end of such fiscal year, and consolidated statements of
operations, accumulated earnings and cash flows of the Corporation and
its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, audited (without scope
limitations imposed by the Corporation) and certified by independent
public accountants of recognized national standing selected by the
Corporation.
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(ii) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the
Corporation, and in any event within forty-five (45) days thereafter, a
consolidated balance sheet of the Corporation and its subsidiaries, if
any, as of the end of each such quarterly period, and consolidated
statements of operations, accumulated earnings and cash flows of the
Corporation and its subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in accordance with generally
accepted accounting principles (provided that such statements will not
include all of the information and notes required for complete financial
statements) consistently applied and setting forth in comparative form
the figures for the corresponding periods of the previous fiscal year,
subject to changes resulting from year-end audit adjustments.
(iii) As soon as practicable after the last day of each month,
and in any event by the twentieth day of each month, a consolidated
balance sheet of the Corporation and its subsidiaries, if any, as of the
end of each such month, and consolidated statements of operations,
accumulated earnings and cash flows of the Corporation and its
subsidiaries, if any, for such period, prepared in accordance with
generally accepted accounting principles (provided that such statements
will not include all of the information and notes required for complete
financial statements) consistently applied.
(c) PROMPT PAYMENT OF TAXES, ETC. The Corporation will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Corporation; provided, however, that any
such tax, assessment, charge or levy need not be paid if the validity thereof
shall at the time be contested in good faith by appropriate proceedings, and
provided, further, that unless otherwise approved by the Corporation's Board of
Directors, the Corporation will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. Unless otherwise approved by the
Corporation's Board of Directors, the Corporation will promptly pay or cause to
be paid when due, or in conformance with customary trade terms, all other
obligations incident to its operations.
(d) MAINTENANCE OF PROPERTIES AND LEASES. The Corporation will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to time make all needful and proper, or legally
required, repairs, renewals, replacements, additions and improvements thereto;
and the Corporation will at all times comply with each provision of all leases
to which it is a party or under which it occupies, or has possession of,
property if the breach of such provision might have a material adverse effect on
the condition, financial or otherwise, or operations of the Corporation.
(e) INSURANCE. The Corporation will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, extended coverage and explosion in amounts sufficient to
prevent the Corporation from becoming a coinsurer and not in any event less than
eighty percent (80%) of the insurable value of the property insured. The
Corporation will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated. All such policies of insurance shall be occurrence
14
<PAGE> 61
policies with "tail coverage" so-called respecting all prior "claims made"
policies. The Corporation shall give immediate written notice to the Investors
and to insurers of loss or damage to the property and shall promptly file proof
of loss with insurers. The Corporation shall maintain, either itself or under
its Services Agreement with Telxon, directors and officers insurance in an
amount at least equal to that which it presently maintains.
(f) COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Corporation shall duly observe and conform to all valid requirements of
governmental authorities relating to the conduct of its businesses or to its
property or assets.
(g) MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Corporation shall
maintain in full force and effect its corporate existence, rights, government
approvals and franchises, and all licenses and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed by
it, which are deemed by the Corporation's Board of Directors to be necessary to
the conduct of its business.
(h) PROPRIETARY INFORMATION AGREEMENT AND KEY EMPLOYEE AGREEMENT.
(i) The Corporation and each person hereafter employed by it
with access to confidential information will enter into a proprietary
information agreement as approved by the Corporation's Board of
Directors.
(ii) The Corporation will require its employees to execute
non-competition agreements as approved by the Corporation's Board of
Directors.
(iii) The Corporation will cause all technological developments,
inventions, discoveries or improvements made by employees of the
Corporation to be fully documented in engineering notebooks in
accordance with the best prevailing industrial professional standards
and, where possible and appropriate, cause all employees to file and
prosecute United States and foreign patent applications relating to and
protecting such developments.
6. MISCELLANEOUS
(a) In order to effectuate the terms and restrictions of this Agreement,
each certificate of stock evidencing Shares owned by the Stockholders or issued
by the Corporation shall bear the following legend:
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, TRANSFER, OR OTHER
DISPOSITION OF THE SHARES EVIDENCED BY THIS CERTIFICATE, AND
ANY SHARES ISSUED IN LIEU THEREOF, ARE SUBJECT TO RESTRICTIONS
CONTAINED IN A STOCKHOLDERS AGREEMENT DATED AND EFFECTIVE AS OF
MARCH ___, 1998, BY AND AMONG THE CORPORATION AND ITS
STOCKHOLDERS A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE
SECRETARY OF
15
<PAGE> 62
THE CORPORATION. A COPY OF THE STOCKHOLDERS AGREEMENT AND THE
CORPORATION'S BY-LAWS WILL BE MAILED BY THE CORPORATION TO ANY
STOCKHOLDER WITHOUT CHARGE WITHIN FIVE (5) DAYS AFTER WRITTEN
REQUEST THEREFOR.
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") OR
APPLICABLE STATE SECURITIES LAWS ("STATE LAWS") AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT REGISTERING THE SHARES UNDER THE ACT AND STATE LAWS OR
(ii) A TRANSACTION PERMITTED BY RULE 144 OR RULE 145 UNDER THE ACT
OR EQUIVALENT STATE LAWS FOR WHICH THE ISSUER HAS RECEIVED
REASONABLY SATISFACTORY EVIDENCE OF COMPLIANCE WITH THE PROVISIONS
OF SUCH APPLICABLE RULE OR (iii) AN OPINION OF COUNSEL SATISFACTORY
TO ISSUER THAT SUCH SHARES ARE EXEMPT FROM THE REGISTRATION
PROVISIONS OF THE ACT AND STATE LAWS OR (iv) A NO-ACTION LETTER FROM
THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION AND THE
APPLICABLE STATE DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR STATE LAWS."
(b) If a Stockholder or its Transferee shall be in default under any of
the terms and conditions of this Agreement, or if any Shares are held in any
manner contrary to the terms and conditions of this Agreement, the Corporation
may avail itself of all remedies afforded at law or in equity, and in addition,
no dividends shall be paid upon the Shares with respect to which such default
exists, and the holder of such Shares shall not be entitled to vote.
(c) Notwithstanding any other provision in this Agreement to the
contrary, in order to protect the Corporation's trade secrets, no Shares may be
transferred to any person or entity, other than to or by Telxon, which directly
competes with the Corporation or, so long as Telxon shall own at least twenty
percent (20%) of the issued and outstanding Shares, Telxon, as such competitors
are determined by the Corporation or Telxon, respectively, in its reasonable
discretion. Any merger, consolidation, change of control or any other
reorganization of any Stockholder (other than Telxon) with or involving any such
competitor shall be deemed to be a transfer of Shares prohibited by the
preceding sentence. Failure of the Corporation or any Stockholders to acquire
Shares as to which notice has been given hereunder or for which a right to
acquire has become exercisable, and the Transfer of any Shares to any Transferee
or any subsequent Transferee, shall not be deemed to release said Shares from
any of the restrictions herein contained. All restrictions imposed in this
Agreement
16
<PAGE> 63
shall apply to any future Transfers of Shares, whether acquired through
voluntary acts or by operation of law. Any purported Transfer of Shares in
violation of this Agreement will not affect the beneficial ownership of such
Shares, nor shall such Transfer be recognized in the books and records of the
Corporation. The Stockholder, or its successor, making the purported Transfer
will retain the right to vote, the right to receive dividends and liquidation
proceeds upon, and any other rights under, its Shares. Neither the Corporation,
nor any Director or officer of the Corporation, nor any transfer agent shall be
liable for any refusal to Transfer any Shares or issue any new certificates when
it or he in good faith believes that such Transfer or issuance would be in
violation of this Agreement. Nothing in this Agreement does or shall be
interpreted as granting any Stockholder any preemptive rights.
(d) No entity Stockholder shall suffer or permit the transfer of any
ownership interest in such Stockholder, or any other transaction, the effect of
which would be to circumvent the Corporation's or any Stockholder's rights under
Sections 3(b), (c) and (d) or the prohibitions contained in Section 6(c).
(e) This Agreement shall terminate and the Shares shall cease to be
subject to this Agreement upon the (i) merger of the Corporation with or into
any other corporation in an arms length transaction, (ii) consolidation of the
Corporation with any other corporation in an arms length transaction, (iii) sale
of all of the issued and outstanding Shares of the Corporation to a single
purchaser, (iv) sale or other disposition or all or substantially all of the
Corporation's assets or (v) registration of the Corporation's then issued and
outstanding Shares pursuant to Section 12 of the Exchange Act or the Corporation
is obligated to file periodic reports with the Securities and Exchange
Commission pursuant Section 15(d) of the Exchange Act; provided, however, that
any claim for breach of this Agreement arising prior to any such termination
shall survive such termination.
(f) Section headings are not to be considered part of this Agreement;
they are included solely for convenience and are not intended to be full or
accurate descriptions of the contents hereof.
(g) All of the terms and words used in this Agreement, regardless of the
number and gender in which they are used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context of this Agreement or any section or clause
herein may require, the same as if such words had been fully and properly
written in the number and gender.
(h) This Agreement constitutes the entire agreement between the parties
with respect to the within subject matter and supersedes all prior and
contemporaneous agreements, written or oral, or understandings with respect
thereto. In addition to Telxon's written consent as specifically provided for
in, and required to amend, Section 4, (i) any waiver by a party of any
provision, covenant or condition hereof intended for its benefit must be in
writing and executed by that party; provided, however, that any waiver by the
Stockholders holding ninety five percent (95%) or more of the then issued and
outstanding Shares shall be deemed to be a waiver by all Stockholders, provided
that such waiver does not treat any Stockholder differently from other
Stockholders, (ii) no delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as
17
<PAGE> 64
a waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege preclude any further exercise thereof or the exercise
of any other such right, power or privilege, (iii) this Agreement may not be
amended unless the Corporation and the Stockholders holding ninety five percent
(95%) or more of the then issued and outstanding Shares have consented to the
amendment in writing, provided that any amendment that treats a Stockholder
differently than other Stockholders must be consented to by such Stockholder.
(i) All clauses of this Agreement are distinct and severable. If any
clause shall be held to be unenforceable or overly broad, a court of competent
jurisdiction is hereby authorized to modify such clause so as to render the
terms, provisions and restrictions hereof enforceable to the maximum extent
permitted by law.
(j) This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which, when taken together, shall
constitute one and the same instrument. Faxed signatures shall be deemed to be
originals for evidentiary purposes.
(k) Notices required hereunder shall be deemed to have been given when
mailed, by certified mail, addressed to the Stockholders as set forth in the
stock records of the Corporation, or as set forth in any notice of change of
address previously given in writing by the addressee to the addressor, and to
the Corporation at its principal offices, with a copy to Robert A Goodman, Esq.,
Goodman Weiss Miller LLP, 100 Erieview Plaza, 27th Floor, Cleveland, Ohio 44114,
or as set forth in any notice of change of address previously given in writing
by the addressee to the addressor.
(l) The terms, provisions and restrictions set forth in this Agreement
shall be binding upon the Stockholders of the Corporation and their respective
heirs, executors, administrators, personal representatives, successors and
assigns, and upon the Corporation and any successors-in-interest to the
Corporation.
(m) This Agreement shall be governed under, and in accordance with the
laws of the State of Delaware, without regards to conflict or choice of laws,
statutes, regulations, rules or principles. Any action relating to the execution
or performance of this Agreement may be brought in the courts, state or federal,
sitting in Cuyahoga or Summit County, Ohio, and each party hereto consents to
the jurisdiction and venue of such courts, and agrees not to contest venue on
the grounds of forum non conveniens or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
______________________________________
Its:_____________________________________
HAMBRECHT & QUIST
By:
______________________________________
Its:_____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By:
______________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By:Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
______________________________________
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
______________________________________
Its:_____________________________________
CLARION CAPITAL CORPORATION
By:
______________________________________
Its:_____________________________________
19
<PAGE> 66
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:
__________________________________
Roger J. Murphy, President
INVESTORS, INDIVIDUALS: __________________________________
FRANK B. CARR
20
<PAGE> 67
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:
__________________________________
Roger J. Murphy, President
TELXON: TELXON CORPORATION
By:
__________________________________
Kenneth W. Haver, Senior Vice President
and Chief Financial Officer
21
<PAGE> 68
EXHIBIT F
FORM OF REGISTRATION RIGHTS AGREEMENT
Attached
<PAGE> 69
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
March 31, 1998 by and among Aironet Wireless Communications, Inc., a Delaware
corporation with its principal offices at 367 Ghent Road, Fairlawn, Ohio 44333
(the "Company"), and each of the undersigned (the "Security Holders").
WHEREAS, certain of the Security Holders (the "Investors") and the
Company have entered into a Subscription Agreement dated March 31, 1998 (the
"Subscription Agreement"), pursuant to which the Investors have acquired shares
of the Company's Common Stock, par value $.01 per share ("Common"), and warrants
to purchase shares of Common ("Warrants"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Subscription Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act and the Exchange Act.
"CONTINUING DIRECTORS" shall mean and include the persons constituting
Telxon's Board of Directors as of the date of this Agreement as well as each
person who becomes a director of Telxon subsequent to the date of this Agreement
whose election, or nomination for election by Telxon's stockholders, was
approved by an affirmative vote of at least a majority of the then Continuing
Directors (either by a specific vote or by approval of the proxy statement of
Telxon in which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in any such
case without objection by any member of such approving majority of the then
Continuing Directors to the nomination of such person or the naming of such
person as a director nominee), for so long as each such director shall remain in
office.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" shall mean a record holder of Registrable Securities, and its
successors and assigns.
A "HOSTILE CHANGE IN CONTROL" is deemed to have occurred if the
transaction causing such Change in Control shall not have been approved by the
affirmative vote of at least a majority of Telxon's Board of Directors, which
approving majority includes a majority of the then Continuing Directors. A
"Change in Control" is deemed to have occurred upon (i) any Person is or becomes
the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of
<PAGE> 70
fifteen percent (15%) or more of the combined voting power of Voting Securities
of Telxon Corporation ("Telxon"), or (ii) the holders of Telxon's securities
entitled to vote thereon approve, or there otherwise occurs or is commenced, a
sale, lease, exchange or other disposition of all or substantially all the
assets, or the dissolution or liquidation, of Telxon, or any merger,
consolidation or reorganization to which Telxon is a party and as the result of
which Telxon's stockholders prior to the transaction do not own at least fifty
percent (50%) of the voting power of the surviving entity in the election of
directors, or (iii) the Continuing Directors cease for any reason to constitute
at least a majority of the Telxon Board of Directors, or (iv) any other event
occurs which is of such a nature that would be required to be reported as a
change in control in response to Item 1(a) of the Current Report on Form 8-K, as
in effect on the date hereof pursuant to Section 13 or 15(d) of the Exchange
Act, or similar successor public filing.
"IPO" shall mean the first firm commitment underwritten public offering
of the Common (or units which include the Common as an element) at a public
offering price of not less than Eight Dollars ($8.00) per share, pursuant to a
Registration Statement, on Form S-1 or other appropriate form, filed by the
Company under the Securities Act, pursuant to which the Company receives
proceeds, net of underwriting discounts, commissions and other expenses of the
offering, of not less than Eight Million Dollars ($8,000,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OPTIONS" shall mean options which have been granted on or prior to the
date hereof under the Aironet Wireless Communications, Inc. 1996 Employee Stock
Option Plan.
"PERSON" shall mean and include any individual, corporation,
partnership, group, association or other "person", as such term is used in
Section 14(d) of the Exchange Act, but excluding Telxon or any employee benefit
plan sponsored by Telxon.
"REGISTER" shall mean to register securities for offer and sale under
the Securities Act.
"REGISTRABLE SECURITIES" shall mean: (i) shares of the Common owned of
record on the date of this Agreement, whether by the Investors or any other
Holder; (ii) shares of the Common issued upon the exercise of the Options, or
upon the exercise of the Warrants owned of record on the date of this Agreement,
whether by the Investors or any other Holder; and (iii) any other securities
issued with respect to any shares described in clauses (i) and (ii) by way of a
stock dividend, stock split, distribution, reclassification, combination,
exchange, recapitalization, or otherwise; provided, however, that Registrable
Securities shall not include any securities which have previously been
Registered or which have previously been sold under Rule 144, and with respect
to an IPO, Registrable Securities shall not include any securities which are not
of a class then being offered for sale by the Company in the IPO.
"REGISTRATION" shall mean the registration of securities under the
Securities Act.
"REGISTRATION STATEMENT" shall mean a registration statement under the
Securities Act.
2
<PAGE> 71
"RULE 144" means Rule 144 promulgated under the Securities Act and any
successor or complementary rules thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or
any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SPIN-OFF" shall mean any spin-off, dividend or other distribution of
Registrable Securities by Telxon to its stockholders.
"VOTING SECURITIES" shall mean the Common Stock, par value $0.01 per
share, of Telxon and any and all other then outstanding Telxon securities
ordinarily having the right to vote generally in the election of the Telxon
directors.
2. DEMAND REGISTRATION.
2.1 After the earlier of (i) the first anniversary of the date of this
Agreement, (ii) the consummation of an IPO or (iii) a Spin-Off or Hostile Change
in Control at any time, Holders of at least fifty percent (50%) of all
Registrable Securities then held by parties to this Agreement (or in the case of
a Spin-Off the percentage of Registrable Securities equal to the proportion
which the majority of the number shares of Common acquired pursuant to the
Subscription Agreement bears to all Registrable Securities at the time of the
Spin-Off) may request the Company to Register any or all of their Registrable
Securities (a "Demand Notice"). Demand Notices shall be made in writing and
shall specify the Holders making the Demand Notice, the number and type of
Registrable Securities that each requests to be Registered, whether the
Registrable Securities will be sold through an underwriter, and if so, the
underwriters name, address, telephone number and contact person. The Company
will prepare and file a Registration Statement in accordance with Section 4 for
the Registrable Securities to be Registered pursuant to a valid Demand Notice;
provided that the Company shall not be required to prepare or file a
Registration Statement under this Section 2 more than once in any twelve (12)
month period, more than twice after an IPO or more than three (3) times in
total. Registrations pursuant to Demand Notices are subject to the further
limitations set forth in Section 2.3.
2.2 Within ten (10) days from its receipt of a valid Demand Notice, the
Company shall deliver written notice to all Holders that, pursuant to a Demand
Notice, the Company will prepare and file a Registration Statement. Any Holder
who was not a party to the Demand Notice may, within ten (10) days from receipt
of the Company's notice, request the Company to include the Holder's Registrable
Securities in the Registration Statement. If the Holders that initiated a Demand
Notice specify therein that they intend to distribute their Registrable
Securities through an underwriter, then each Holder that requests inclusion in
the Registration Statement must participate in such underwriting, and become
party to any required agreements, including, but not limited to, customary
underwriting and indemnification agreements. The Company shall have the right to
approve any underwriter, which approval shall not be unreasonably withheld. In
the event that the underwriter limits the number of Registrable Securities to be
included in the offering to fewer than the number that has been requested for
Registration, then each Holder's Registrable Securities shall
3
<PAGE> 72
be included in the underwriting pro rata, based on the total number of
Registrable Securities held by the participating Holders.
2.3 Registrations under this Section 2 are subject to the following
limitations: (i) the Company need not prepare or file a Registration Statement
pursuant to a Demand Notice within one hundred eighty (180) days after the
effective date of any Registration Statement filed by the Company in which the
Holders party to the Demand Notice could have included their Registrable
Securities; (ii) the Company may delay the effectiveness of a Demand Notice for
a period of not more than six months after receipt of a Demand Notice in any
12-month period if the Company furnishes a certificate signed by its president
stating that in the good faith judgment of the Company's board of directors it
would be detrimental to the Company for the Registration Statement to be
effected at such time; and (iii) the Company need not prepare or file a
Registration Statement pursuant to a Demand Notice if it is then preparing a
Registration Statement in connection with an underwritten public offering of
Company securities, and the Company may delay the effectiveness of such Demand
Notice until one hundred eighty (180) days after the effective date of such
Registration Statement.
3. INCIDENTAL REGISTRATION. Each time the Company determines to proceed
to Register any of its securities (other than a Registration pursuant to a
Demand Notice or on Forms S-4, S-8 or other limited purpose form), it will give
written notice of its intention to do so to each Holder. Upon the written
request of any Holder given within twenty (20) days after receipt by the Holder
of the Company's notice, the Company will use reasonable efforts to cause all
the Registrable Securities of the requesting Holders to be included in the
Registration Statement. If the Registration is for an underwritten offering,
then each Holder that requests inclusion in the Registration Statement must
participate in the underwriting if required by the Company and may participate
in the underwriting if the Holder timely requests in writing, and shall in
either such event become a party to any required agreements, including, but not
limited to, customary indemnification agreements. In the event that the
underwriter limits the number of Registrable Securities of requesting Holders as
a group to fewer than the number that has been requested for Registration
pursuant to this Section 3, then each Holder's Registrable Securities included
in the underwriting shall be reduced pro rata, based on the total number of
Registrable Securities held by the participating Holders. Notwithstanding the
foregoing, nothing in this Agreement to the contrary shall prevent the Company
from, at any time, abandoning or delaying a Registration Statement under this
Section 3.
4. REGISTRATION ON FORM S-2 OR FORM S-3.
4.1 The Company shall use its best efforts to qualify for the
use of Form S-2 and Form S-3 or any comparable or successor form or
forms of the Commission; and to that end the Company shall register
(whether or not required by law to do so) the Registrable Securities
under the Exchange Act, in accordance with the provisions of the
Exchange Act following the effective date of the first registration of
any securities of the Company on Form S-1. After the Company has
qualified for the use of either Form S-2 or Form S-3, or both, in
addition to the rights contained in the Sections 2 and 3, the Holders
shall have the right to request registrations on Form S-2 or Form S-3
(by written request stating the number of shares of Registrable
Securities to be disposed of and the intended method of disposition of
4
<PAGE> 73
such shares by such Holder or Holders).
4.2 Registrations under this Section 4 are subject to the
following limitations: (i) the Company need not prepare or file a
Registration Statement within ninety (90) days after the effective date
of any Registration Statement filed by the Company in which the Holders
requesting Registration under this Section 4 could have included all of
their Registrable Securities; (ii) the Company may delay the
effectiveness of a request for Registration under this Section 4 for a
period of not more than ninety (90) days after receipt of a Holder's
request for Registration, in any twelve (12) month period if the Company
furnishes a certificate signed by its president stating that in the good
faith judgment of the Company's board of directors it would be
detrimental to the Company for the Registration Statement to be effected
at such time; and (iii) the Company need not prepare or file a
Registration Statement pursuant to this Section 4 if it is then
preparing a Registration Statement in connection with an underwritten
public offering of Company securities, and the Company may delay the
effectiveness of a request for Registration under this Section 4 until
one ninety (90) days after the effective date of such Registration
Statement, if so required by the underwriter for such offering.
4.3 Upon a request for Registration under this Section 4, the
Company shall give notice to each Holder of its receipt of such request.
Upon the written request of any Holder given within twenty (20) days
after receipt by the Holder of the Company's notice, the Company will
use reasonable efforts to cause all the Registrable Securities of the
requesting Holders to be included in the Registration Statement. Subject
to the foregoing, the Company will use its best efforts to effect
promptly the registration of all shares of Registrable Securities on
Form S-2 or Form S-3 to the extent requested by the Holder or Holders
thereof for purposes of disposition.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
this Agreement to Register any Registrable Securities, the Company will:
5.1 use reasonable efforts to prepare and file with the Commission a
Registration Statement with respect to such securities and to cause such
registration statement to become and remain effective until completion of the
proposed offering, but no longer than nine (9) months;
5.2 prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus forming a part thereof as may
be necessary to keep the Registration Statement effective until completion of
the proposed offering, but no longer than nine (9) months;
5.3 furnish to each selling Holder and the underwriters, if any, a
reasonable number of copies of the Registration Statement, the preliminary
prospectus, prospectus and such other documents as may reasonably be required in
order to facilitate the public sale or other disposition of the securities owned
by such selling Holder;
5.4 use reasonable efforts to register or qualify the securities covered
by the Registration
5
<PAGE> 74
Statement under all state securities laws as each selling Holder reasonably
requests; provided, however, that the Company shall not be required to qualify
or register the securities, or take any other action, if to do so would require
the Company to qualify as a foreign corporation in any in which it is not then
qualified, or subject it to taxation or general service of process in any state
in which it is not then taxed or subject to service of process;
5.5 within a reasonable time before each filing with the Commission of a
Registration Statement or prospectus, or amendments or supplements thereto,
furnish to counsel selected by the selling Holders copies of such documents,
which shall be subject to the reasonable approval of such counsel, which if not
promptly objected to shall be deemed approved;
5.6 notify each selling Holder, promptly after it shall receive notice
thereof, of the time when the Registration Statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
5.7 notify each selling Holder promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or prospectus or
for additional information;
5.8 prepare and promptly file with the Commission, upon the request of a
selling Holder, any amendments or supplements to the Registration Statement or
prospectus which, in the opinion of counsel for the Company, is required under
the Securities Act to permit the distribution of the Registered securities by
the selling Holder(s);
5.9 prepare and promptly file with the Commission, and promptly notify
each selling Holder as to, such amendments and supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as a result of which the prospectus then in effect would include an untrue
statement of a material fact or fail to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
5.10 advise each selling Holder, promptly after the Company receives
notice or obtains knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or the
initiation or threat by the Commission of any proceeding for that purpose, and
the Company shall promptly use reasonable efforts to prevent the issuance of any
stop order, if such stop order should be issued, to obtain its withdrawal;
5.11 not file any amendment or supplement to such registration statement
or prospectus to which a selling Holder shall have reasonably objected in
writing on grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act, provided that the
Company has been furnished with a copy of the objection reasonably in advance of
the intended filing, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the Company
from any liabilities under any applicable federal or state law; and
6
<PAGE> 75
5.12 furnish to each selling Holder a legal opinion of counsel for the
Company, dated the effective date of the Registration Statement, and a "comfort"
letter from the independent public accountants who have certified the Company's
financial statements included in the Registration Statement, if reasonably
required by the selling Holder to sell the Registered securities.
6. LISTING. In connection with an IPO, the Company will use reasonable
efforts to cause the Registered securities to be listed on a securities exchange
or quoted on the Nasdaq Stock Market quotation system; and for all other
Registrable Securities which have been Registered under Section 2 or under
Section 3, if the Company's securities of the same type as the Registrable
Securities are listed on a securities exchange or quoted on the Nasdaq Stock
Market quotation system, then the Company will use reasonable efforts to cause
any Registrable Securities Registered under Section 2 or under Section 3 to also
be listed.
7. EXPENSES. The Company shall bear all fees, costs and expenses of any
Registration Statement prepared hereunder, including but not limited to all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, and all legal fees of the Company and
of one (1) attorney hired to represent the Holders as a group, and disbursements
and other expenses of the Company incurred in connection with its complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered or qualified, except that underwriting
discounts, commissions, transfer taxes and legal fees for the selling Holders
(other than a single attorney as set forth in this Section 7) shall be borne by
such Holder(s).
8. INDEMNIFICATION.
8.1 The Company will defend, indemnify and hold harmless each selling
Holder, each of its officers, directors and partners, and each person, if any,
who controls such selling Holder, and each underwriter (if any) from and against
any and all loss, damage, liability, cost and expense to which a selling Holder
or any such controlling person may become subject under the Securities Act or
otherwise, to the extent arising out of or based on any untrue statement (or
alleged untrue statement) of any material fact contained in a Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arising out of or are based upon the omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or omission so made
in conformity with information furnished to the Company by such selling Holder,
such a controlling person, or such underwriter, and stated to be specifically
for use therein.
8.2 Each selling Holder will defend, indemnify and hold harmless the
Company and each other selling Holder and each person, if any, who controls the
Company or a selling Holder from and against any and all loss, damage,
liability, cost and expense to which the Company or such selling Holder or
controlling person may become subject under the Securities Act or otherwise, to
the extent arising out of or based on any untrue statement (or alleged untrue
statement) of any material fact contained in a Registration Statement, any
prospectus contained therein or any amendment or
7
<PAGE> 76
supplement thereto, or arise out of or are based upon the omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, to the extent, but only to the extent, that any
such loss, damage, liability, cost or expense arises out of or is based upon an
untrue statement or omission made in reliance upon and in conformity with
written information furnished to the Company by the selling Holder. A Holder's
indemnification obligation under this Section 8.2 shall be limited to such
Holders proceeds from the sale of its Registrable Securities under the subject
Registration Statement.
8.3. NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an indemnified
party of notice of any claim, liability or expense to which the indemnification
obligations set forth in Sections 8.1 or 8.2 would apply, the indemnified party
shall give notice thereof in writing to the indemnifying party. Such notice
shall state the information then available regarding the amount and nature of
such claim, liability or expense. If within twenty (20) days after receiving
such notice the indemnifying party gives written notice to the indemnified party
stating that (a) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (b) that it disputes
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party, which consent shall not
be unreasonably withheld or delayed), and the indemnified party shall not be
required to make any payment with respect to such claim, liability or expense as
long as the indemnifying party is conducting a good faith and diligent defense
at its own expense. The indemnifying party shall have the right, with the
consent of the indemnified party, which consent shall not be unreasonably
withheld or delayed, to settle all indemnifiable matters related to claims by
third parties which are susceptible to being settled, provided its obligation to
indemnify the indemnifying party therefor will be fully satisfied. The
indemnifying party shall keep the indemnified party appraised of the status of
the claim, liability or expense and any resulting suit, proceeding or
enforcement action, shall furnish the indemnified party with all documents and
information that the indemnified party shall reasonably request and shall
consult with the indemnified party prior to acting on major matters, including
settlement discussions. The indemnified party shall make available to the
indemnifying party all information and assistance that the indemnifying party
may reasonably request and shall cooperate with the indemnifying party in any
defense undertaken by it pursuant to this Section 8. Notwithstanding anything
herein to the contrary, the indemnified party shall at all times have the right
to fully participate in such defense at its own expense directly or through
counsel; provided, however, if the named parties to the action or proceeding
include both the indemnifying party and the indemnified party and representation
of both parties by the same counsel would be inappropriate under applicable
standards of professional conduct, the expense of separate counsel for the
indemnified party shall be paid by the indemnifying party. If no such notice of
intent to dispute and defend is given by the indemnifying party, or if such
diligent good faith defense is not being or ceases to be conducted, the
indemnified party may, at the expense of the indemnifying party, undertake the
defense of (with counsel selected by the indemnified party), and shall have the
right to compromise or settle (exercising reasonable business judgment), such
claim, liability or expense.
9. COMPLIANCE WITH RULE 144. From the first date that the Company is
required to file any reports under Section 13 or 15(d) of the Exchange Act, and
until the Holders as a group shall
8
<PAGE> 77
own less than an aggregate of ten percent (10%) of any class or series of equity
securities of the Company, the Company shall comply with the public information
requirements which are conditions to the availability of Rule 144 for the sale
of Registrable Securities. Company shall cooperate with the Holders in supplying
such information as may be necessary for them to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144 with respect to the Holders and such
Registrable Securities.
10. AMENDMENTS; WAIVER. The provisions of this Agreement may be amended
and waived pursuant to a written agreement executed by the Company and Holders
holding ninety five percent (95%) or more of the then issued and outstanding
Registrable Securities, provided that any amendment or waiver that treats a
Holder differently than other Holders must be consented to by such Holders.
11. TRANSFERABILITY OF REGISTRATION RIGHTS. A transferee acquiring
Registrable Securities may succeed to the rights and obligations under this
Agreement appurtenant to the Registrable Securities if, but only if, such
transferee acquires a minimum of fifty thousand (50,000) shares of Registrable
Securities in a single transaction, is not a direct competitor of the Company or
of Telxon Corporation (if Telxon Corporation then owns twenty percent (20%) or
more of the issued and outstanding capital stock of the Company) and the
transferee becomes a signatory hereto. The original signatory and any immediate
or subsequent transferee which becomes a party hereto shall retain the rights
and obligations under this Agreement with respect to those Registrable
Securities which it remains record owner.
12. MISCELLANEOUS.
12.1 GOVERNING LAW; JURISDICTION. This Agreement shall be construed
under and governed by the laws of the State of Ohio, without regards to conflict
or choice of laws, statutes, regulations, rules or principles. Any action
relating to the execution or performance of this Agreement shall be brought in
the courts, state or federal, sitting in Cuyahoga or Summit County, Ohio, and
each party hereto consents to the jurisdiction and venue of such courts, and
agrees not to contest venue on the grounds of forum non conveniens or otherwise.
12.2 NOTICES. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been given upon receipt, or if delivered or sent by facsimile transmission, upon
confirmation of transmission, or if sent by overnight courier, the second day
after deposit, as follows:
TO THE HOLDERS: To the respective addresses set forth
in the stock records of the Company
with a copy to: A legal counsel designated by
a majority of the Holders
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<PAGE> 78
TO THE COMPANY Aironet Wireless Communications, Inc.
at the address set forth at the
beginning of this Agreement.
Attn: President
Fax Number: 330-664-7986
with a copy to: Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
Attn: Robert A. Goodman/Jay R. Faeges
Fax Number: 216-363-5835
or to such other address of which any party may notify the other parties
provided in accordance with this Section 12.2.
12.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior
and contemporaneous understandings and agreements, written or oral, between or
among the parties relating to the subject matter hereof.
12.4 ASSIGNABILITY. Except as set forth in Section 11, this Agreement
may not be assigned, and no right or obligation herein may be assigned or
delegated, without the written consent of the Company, and absent such consent
any such assignment or delegation shall be void and of no effect. Subject to the
foregoing, this Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective permitted
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
12.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine, feminine
or neuter pronoun, shall include the others as the context may require.
12.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties, and for
evidentiary purposes shall be deemed to be an original.
12.7 SEVERABILITY. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had been limited or modified
(consistent with its general intent) to the extent necessary to make it valid,
legal and enforceable, or if it shall not be possible to so limit or modify such
invalid, illegal or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or part of a provision had never been contained in this Agreement, so
long as to do so
10
<PAGE> 79
would not materially alter the rights or obligations of the parties taken as a
whole.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 80
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:______________________________________
Its:______________________________________
HAMBRECHT & QUIST
By:______________________________________
Its:______________________________________
TELANTIS VENTURE PARTNERS V, INC.
By:______________________________________
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:_______________________________________
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:______________________________________
Its:______________________________________
CLARION CAPITAL CORPORATION
By:______________________________________
Its:______________________________________
12
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:______________________________________
Roger J. Murphy, President
HOLDERS, INDIVIDUALS: __________________________________________
FRANK B. CARR
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<PAGE> 82
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:______________________________________
Roger J. Murphy, President
TELXON: TELXON CORPORATION
By:______________________________________
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
14
<PAGE> 83
EXHIBIT G
FORM OF LEGAL OPINION
Attached
<PAGE> 84
GOODMAN WEISS MILLER LLP
100 ERIEVIEW PLAZA, 27TH FLOOR
CLEVELAND, OHIO 44114
TELEPHONE 216-696-3366
FAX 216-363-5835
March 31, 1998
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
Ladies and Gentlemen:
We have acted as counsel to Aironet Wireless Communications, Inc.
("Aironet"), a Delaware corporation, in connection with the sale of shares of
Aironet Common Stock, $.01 par value ("Shares"), and warrants ("Warrants") to
purchase Shares ("Warrant Shares"), to the addressees (each an "Investor," and
collectively the "Investors") by Aironet pursuant to the Subscription Agreement
dated March 31, 1998 (the "Subscription Agreement"). We also represent, as its
general counsel, Telxon Corporation ("Telxon"), a Delaware corporation, which
contemporaneously with the closing of the Subscription Agreement entered into
the Services Agreement ("Services Agreement"), Tax Benefit and Indemnification
Agreement ("Tax Agreement"), the Cross Covenant Not to Sue ("Covenant"), Patent
Assignments from Telxon to Aironet, as well as Patent Assignments from Aironet
to Telxon (collectively, the "Patent Assignments"), and the License, Rights and
Supply Agreement ("Supply Agreement"). The Services Agreement, the Tax
Agreement, Covenant, Patent Assignments, and Supply Agreement, for purposes
hereof, are the "Intercompany Agreements." While this firm represents Aironet as
its general counsel, and represented Aironet in connection with the Subscription
Agreement and the sale of the Shares and Warrants to the Investors, in the
negotiation and preparation of the Intercompany Agreements, Aironet was
represented by other independent counsel, and this firm represented only Telxon.
This opinion is being furnished to you pursuant to Section 5.1(e) of the
Subscription Agreement. Capitalized terms used and not otherwise defined herein
shall have the meanings ascribed to such terms in the Investment Documents
(defined herein).
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Subscription
Agreement; (ii) the Registration Rights Agreement; (iii) the Stockholders
Agreement; (iv) the Warrants; (v) the Certificate of Incorporation of Aironet,
as currently in effect (the "Aironet Certificate"); (vi) the Certificate of
Incorporation of Telxon, as currently in effect (the "Telxon Certificate");
(vii) the By-laws of Aironet, as currently in effect (the "Aironet By-laws");
(viii) the By-laws of Telxon, as currently in effect (the "Telxon By-laws"),
(ix) the Intercompany Agreements; and (x) certain resolutions of the Board of
Directors
<PAGE> 85
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
March 31, 1998
Page 2
of each of Aironet and Telxon relating to the Subscription Agreement, the
Stockholders Agreement, the Registration Rights Agreement, the Warrants, the
Intercompany Agreements and the consummation of the various transactions
contemplated therein. We have also examined originals or copies, certified or
otherwise identified to our satisfaction, of such records of Aironet and Telxon
and such agreements, certificates of public officials, certificates of officers
or other representatives of Aironet, Telxon and others, and such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein. The Subscription Agreement, the
Stockholders Agreement, the Registration Rights Agreement, the Warrants, and
the Intercompany Agreements, are hereinafter collectively referred to as the
"Investment Documents."
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such latter documents. In making our
examination of documents executed by parties, we have assumed, except as may be
specifically stated with respect to Aironet and Telxon in certain of our
opinions set forth below, that such parties had the power, corporate or other,
to enter into and perform all obligations thereunder, and, except as to Aironet
and Telxon, we have also assumed the due authorization by all requisite action,
corporate or otherwise, and execution and delivery by such parties of such
documents and the validity and binding effect thereof. As to any facts material
to the opinions expressed herein which we did not independently establish or
verify, we have relied upon oral or written statements and representations of
officers and other representatives of Aironet, Telxon and others.
We have further assumed that each Investor has duly executed and
delivered each of the Investment Documents to which it is a party.
Our opinion is specifically limited to the matters to which we opine. In
rendering opinions set forth below, we express no opinion with respect to any of
the following:
(a) the Investor's title in the Shares, Warrants or Warrant
Shares.
(b) the application of, or the effect of, any failure to comply
with, federal or state antitrust and unfair competition laws and
regulations;
(c) the accuracy, completeness or fairness of any information
furnished to any Investor by Aironet, Telxon or any of their agents and
representatives; or
(d) the enforceability of the remedy of specific performance or
the submission
<PAGE> 86
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
March 31, 1998
Page 3
to jurisdiction relating to potential litigation.
Our opinions below are further qualified to the extent that they may be
subject to or affected by (i) applicable bankruptcy, insolvency, reorganization,
moratorium, usury, fraudulent conveyance or similar laws affecting the rights of
stockholders and creditors generally, (ii) statutory or decisional law
concerning recourse by creditors or stockholders to security in the absence of
notice or hearing, and (iii) duties and standards imposed on creditors or
stockholders, and parties to contracts, including, without limitation,
requirements of good faith, reasonableness and fair dealing. Furthermore, we
express no opinion as to the availability of any equitable or specific remedy,
or as to the successful assertion of any equitable defense, upon any breach of
any of the documents as to which we are opining herein or any of the agreements,
documents or obligations referred to therein, inasmuch as the availability of
such remedies or defenses may be subject to the discretion of a court. We
express no opinion as to the enforceability of any indemnity provision that
indemnifies any person or entity against damages arising from his (its) own
negligence or misconduct.
Members of our firm are admitted to the bar in the State of Ohio, and we
do not express any opinion as to the laws of any jurisdiction other than the
State of Ohio, the federal laws of the United States of America and the Delaware
General Corporation Law, all as in effect on the date hereof. Without limiting
the generality of the foregoing, any opinion expressed herein respecting the due
qualification or good standing of any corporation in any jurisdiction is based
solely on the certificates of state officials, copies of which have been
provided to each Investor, and telephonic confirmations thereof with such
officials.
Based upon and subject to the limitations, qualifications, exceptions
and assumptions set forth herein, we are of the opinion that:
1. Each of Aironet and Telxon is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware and each
is in good standing as a foreign corporation under the laws of the state of
Ohio. Aironet has all requisite corporate power and authority to own its
properties, to carry on its business as now being conducted, to execute and
deliver the Subscription Agreement, the Stockholders Agreement, the Warrants,
the Registration Rights Agreement, and the Intercompany Agreements
(collectively, the "Aironet Documents"), to perform its obligations thereunder
and to consummate the transactions contemplated therein. Telxon has all
requisite corporate power and authority to own its properties, to carry on its
business as now being conducted, to execute and deliver the Intercompany
Agreements, to perform its obligations thereunder and to consummate the
transactions contemplated therein.
<PAGE> 87
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
March 31, 1998
Page 4
2. The execution and delivery by Aironet of the Aironet Documents and
the consummation of the transactions contemplated therein have been duly
authorized by all required corporate action of Aironet.
3. The execution and delivery by Telxon of the Intercompany Agreements
and the consummation of the transactions contemplated therein have been duly
authorized by all required corporate action of Telxon.
4. Each of the Aironet Documents has been duly executed and delivered by
Aironet and constitutes the valid and binding obligation of Aironet, enforceable
against it in accordance with its respective terms.
5. Each of the Intercompany Agreements has been duly executed and
delivered by Telxon and constitutes the valid and binding obligation of Telxon,
enforceable against it in accordance with its respective terms.
6. Aironet has the right and power to issue, sell, and deliver the
Purchased Shares and Warrants under the Subscription Agreement.
7. When issued by Aironet to the Investors as provided in the
Subscription Agreement, and when paid for by the Investors as provided therein,
the Purchased Shares and Warrants will be validly issued, fully paid and
non-assessable, and if and when the Warrants are exercised in accordance with
their terms, and Aironet issues the Warrant Shares thereupon, and such Warrant
Shares are paid for, the Warrant Shares will be duly issued, fully paid and
non-assessable.
8. The execution, delivery and performance by Aironet of its obligations
under the Aironet Documents, and the consummation of the transactions
contemplated thereby, will not result in any violation of the Aironet
Certificate or the Aironet By-laws, or any applicable statute, law, regulation,
order or decree of any court or governmental authority, or, to the best of our
knowledge, after due inquiry and except as set forth in the Company Disclosure
Schedule, result in a breach or termination of, constitute a default under, or
result in the creation of any lien, charge, encumbrance or restriction on any of
the Purchased Shares, the Warrants or the Warrant Shares under any agreements or
other instruments to which Aironet is a party or by which Aironet is bound.
9. The execution, delivery and performance by Telxon of its obligations
under the Intercompany Agreements, and the consummation of the transactions
contemplated thereby, will not result in any violation of the Telxon Certificate
or the Telxon By-laws, or any applicable statute, law, regulation, order or
decree of any court or governmental authority, or, to the best of our knowledge,
<PAGE> 88
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
March 31, 1998
Page 5
after due inquiry result in a breach or termination of, constitute a default
under, or result in the creation of any lien, charge, encumbrance or restriction
on any of the Purchased Shares, Warrants or the Warrant Shares under any
agreements or other instruments to which Telxon is a party or by which Telxon is
bound.
10. To the best of our knowledge, after due inquiry, except as set forth
in the Company Disclosure Schedule, there is no action, proceeding, suit or
investigation pending or threatened against Aironet or Telxon which may have a
material adverse effect on Aironet's ability to perform its obligations under
the Aironet Documents or Telxon's ability to perform its obligations under the
Intercompany Agreements.
11. To the best of our knowledge, after due inquiry, except as set forth
in the Company Disclosure Schedule, no consent or approval by any governmental
authority or by any other person is required for the execution and delivery (i)
by Aironet of the Aironet Documents or any other documents to be executed and
delivered by Aironet pursuant thereto, or in connection with the consummation of
the transactions contemplated thereby, or (ii) by Telxon of the Intercompany
Agreements or any other documents to be executed and delivered by Telxon
pursuant thereto, or in connection with the consummation of the transactions
contemplated thereby.
12. Assuming the accuracy of the representations and warranties of the
Investors set forth in Article III of the Subscription Agreement, the issuance,
sale and delivery of the Shares and Warrants, and any Warrant Shares issuable
upon exercise of the Warrants, are exempt from the registration requirements of
the Securities Act.
13. The Shares necessary for issuance on exercise of the Warrants have
been duly and validly reserved (and are in addition to any other shares reserved
for any other purpose).
14. The authorized capital stock of Aironet consists of 15,000,000
Shares, of which 8,355,000 Shares are issued and outstanding. Immediately after
the consummation of the Closing in accordance with the terms of the Subscription
Agreement, 9,402,619 Shares will be issued and outstanding, and Warrants to
purchase 204,762 Shares will be issued and outstanding. Further, options to
purchase an aggregate of 1,250,500 Shares have been granted pursuant to the
Aironet Wireless Communications, Inc. 1996 Stock Option Plan and options to
purchase an aggregate of 500,000 Shares will have been granted pursuant to the
Amended and Restated Aironet Wireless Communications, Inc. 1996 Stock Option
Plan. To our knowledge, other than as stated in this Section 14 or as disclosed
by Aironet in the Company Disclosure Schedule, there are no outstanding options,
warrants, subscriptions, rights, convertible securities or other agreements or
plans under
<PAGE> 89
Axiom Venture Partners II Limited Partnership
Telantis Venture Partners V, Inc.
W, A & H Investments LLC
Frank B. Carr
Clarion Capital Corporation
March 31, 1998
Page 6
which Aironet may become obligated to issue, sell or transfer shares of its
capital stock or other securities, other than pursuant to or as contemplated by
the Subscription Agreement.
When in this opinion we have used the expression "to the best of our
knowledge, after due inquiry" or words of similar import, we have not made any
independent investigation of the applicable facts but have relied solely on (i)
the actual, conscious knowledge of Robert A. Goodman, Ronald I. Weiss or Jay R.
Faeges, the attorneys in this firm who are actively working on the transactions
contemplated by the Investment Documents, (ii) representations, warranties and
covenants made in the aforesaid documents and (iii) other verbal or written
representations made by agents and representatives of Aironet and Telxon to the
aforenamed attorneys.
We bring to your attention the fact that our legal opinions are an
expression of professional judgment only and are not a guarantee of a result.
This opinion speaks as of the date hereof, and we do not undertake to advise you
of matters which arise and/or may come to our attention subsequent to the date
hereof which may affect any of the legal opinions expressed herein.
This opinion is furnished to you solely for your benefit in connection
with the consummation of the transactions contemplated by the Investment
Documents and is not to be relied upon by any other person or entity or to be
used, circulated, quoted, in whole or in part, or otherwise referred to for any
other purpose; nor may copies of this opinion be provided to any other person or
entity, other than as is required by law, without our prior express written
permission.
GOODMAN WEISS MILLER LLP
<PAGE> 90
EXHIBIT H
FORM OF OFFICER'S CERTIFICATE
Attached
<PAGE> 91
AIRONET WIRELESS COMMUNICATIONS, INC.
-------------------------------------
CLOSING CERTIFICATE
-------------------
Aironet Wireless Communications, Inc. ("Aironet") is a party to the
Subscription Agreement dated March 31, 1998, by and among Aironet and the
parties identified in EXHIBIT A attached hereto (the "Investors") (the
"Subscription Agreement"). Pursuant to Section 5.1(f) of the Subscription
Agreement, Roger J. Murphy, President and Chief Executive Officer of Aironet,
hereby certifies to each of the Investors that all conditions set forth in
Sections 4.1 and 4.2(e) of the Subscription Agreement have been satisfied.
IN WITNESS WHEREOF, the undersigned has executed this Closing
Certificate at Akron, Ohio, on March 31, 1998.
--------------------------------------
Roger J. Murphy, President and Chief
Executive Officer of Aironet Wireless
Communications, Inc.
<PAGE> 92
TELXON CORPORATION
------------------
CLOSING CERTIFICATE
-------------------
Telxon Corporation ("Telxon") is a party to the Stockholders Agreement
and Registration Rights Agreement, each dated March 31, 1998, by and among
Aironet Wireless Communications, Inc. ("Aironet") and its stockholders, and
Telxon and Aironet have entered into a Services Agreement, Tax Benefit and
Indemnification Agreement, a Cross Covenant Not to Sue, Patent Assignments and a
License, Rights and Supply Agreement each dated as of March 31, 1998
(collectively the "Agreements"). In connection with Telxon's execution of the
Agreements, Telxon hereby represents and warrants to each of the parties
identified in EXHIBIT A attached hereto that:
1. Telxon is a corporation duly organized, validly existing and in good
standing under the laws of the state of Delaware and is in good standing as a
foreign corporation under the laws of the state of Ohio. Telxon has all
requisite corporate power and authority to own its properties, to carry on its
business as now being conducted, to execute and deliver the Agreements, to
perform its obligations thereunder and to consummate the transactions
contemplated therein.
2. The execution and delivery by Telxon of the Agreements and the
consummation of the transactions contemplated therein have been duly authorized
by all required corporate action of Telxon.
3. Each of the Agreements has been duly executed and delivered by Telxon
and constitutes the valid and binding obligation of Telxon, enforceable against
it in accordance with its respective terms; provided, however, that Telxon makes
no representation or warranty regarding the legal right or ability of a director
of Aironet to act as a director other than in accordance with the laws of the
state of Delaware.
4. The execution, delivery and performance by Telxon of its obligations
under the Agreements, and the consummation of the transactions contemplated
thereby, will not result in any violation of Telxon's Certificate of
Incorporation, as amended, or the Telxon By-laws, as amended, or any applicable
statute, law, regulation, order or decree of any court or governmental authority
(provided, however, that Telxon makes no representation or warranty regarding
the legal right or ability of a director of Aironet to act as a director other
than in accordance with the laws of the state of Delaware), and to the best of
our knowledge, after due inquiry, will not result in a breach or termination of,
constitute a default under, or result in the creation of any lien, charge,
encumbrance or restriction on (i) any shares of Aironet Common Stock, Warrants
or shares of Aironet Common Stock issued upon the exercise of any Warrants,
issued by Aironet pursuant to the Subscription Agreement dated as of March 31,
1998 by and among Aironet and the addressees of this certificate, or (ii) any
agreements or other instruments to which Telxon is a party or by which Telxon is
bound.
5. To the best of our knowledge, after due inquiry, except as disclosed
by Aironet in writing to the addressees of this certificate, there is no action,
proceeding, suit or investigation pending or threatened against Telxon which may
have a material adverse effect on Telxon's ability to perform its obligations
under the Agreements.
6. To the best of our knowledge, after due inquiry, except as disclosed
by Aironet in
<PAGE> 93
writing to the addressees of this certificate, no consent or approval by any
governmental authority or by any other person is required for the execution and
delivery by Telxon of the Agreements or any other documents to be executed and
delivered by Telxon pursuant thereto, or in connection with the consummation of
the transactions contemplated thereby.
IN WITNESS WHEREOF, the undersigned has executed this Closing
Certificate at Akron, Ohio, as of March 31, 1998.
_______________________________________________
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer of Telxon Corporation
<PAGE> 94
AIRONET WIRELESS COMMUNICATIONS, INC.
-------------------------------------
TELXON CORPORATION
------------------
OFFICER'S CERTIFICATE
---------------------
Glenn S. Hansen, Secretary of Aironet Wireless Communications, Inc., a
Delaware corporation ("Aironet"), and Vice President, Legal Administration and
Assistant Secretary of Telxon Corporation, a Delaware corporation ("Telxon"),
hereby certifies to each party identified in EXHIBIT A attached hereto that:
1. Attached as EXHIBIT B hereto are true and correct copies of
resolutions duly adopted by Telxon's Board of Directors at its meeting held on
March 29, 1998, none of which have been modified or rescinded and all of which
are in full force and effect on the date of this Officer's Certificate.
2. Attached as EXHIBIT C hereto are true and correct copies of
Resolutions duly adopted by Aironet's Board of Directors by written consent
dated March 30, 1998, none of which have been modified or rescinded and all of
which are in full force and effect on the date of this Officer's Certificate.
3. The individuals listed below are duly elected and qualified officers
of Aironet holding the offices indicated, and appearing next to each person's
name is his genuine signature:
<TABLE>
<CAPTION>
Office Name Specimen Signature
- ------ ---- ------------------
<S> <C> <C>
President and
Chief Executive Officer Roger J. Murphy -------------------------------
Treasurer Kenneth W. Haver -------------------------------
Assistant Secretary Jay R. Faeges -------------------------------
</TABLE>
4. The individuals listed below are duly elected and qualified officers
of Telxon holding the offices indicated, and appearing next to each person's
name is his genuine signature:
<TABLE>
<CAPTION>
Office Name Specimen Signature
- ------ ---- ------------------
<S> <C> <C>
Senior Vice President
Chief Financial Officer Kenneth W. Haver -------------------------------
</TABLE>
Page 1 of 2
<PAGE> 95
AIRONET WIRELESS COMMUNICATIONS, INC.
-------------------------------------
TELXON CORPORATION
------------------
OFFICER'S CERTIFICATE
---------------------
IN WITNESS WHEREOF, the undersigned has executed this Officer's Certificate at
Akron, Ohio, on March 31, 1998.
-----------------------------------------
Glenn S. Hansen, Vice President, Legal
Administration and Assistant Secretary
of Telxon Corporation and Secretary of
Aironet Wireless Communications, Inc.
Page 2 of 2
<PAGE> 96
AIRONET WIRELESS COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT COMPANY DISCLOSURE SCHEDULE
The following is the Company Disclosure Schedule called for in Article
II of the Subscription Agreement dated as of March 31, 1998, by and among
Aironet Wireless Communications, Inc. (the "Company") and various investors (the
"Agreement"). Any initially capitalized word which is not defined where first
used shall have the meaning as defined in the Agreement. Sections numbers used
herein refer to Sections in the Agreement.
2.4 The Company's corporate record book as provided to Investors' special
counsel has been updated with the Actions by Written Consent required
under Section 5.1.
2.9 The Company's Capitalization Table is attached to this Disclosure
Schedule.
2.10 The Company's Capitalization Table is attached to this Disclosure
Schedule.
Hambrecht & Quist, McDonald & Company Securities, Inc. and Telantis
Venture Partners V, Inc. each have a right to purchase shares of Common
under this Agreement (see Exhibit A to the Agreement).
2.12 and 2.13
The Stockholder Agreements between the Company and (i) D. Michael
Grimes, (ii) Roger J. Murphy and (iii) Thomas Snow restrict the transfer
of such stockholders' shares and provide that such stockholders may
become a party to agreements like the Stockholders Agreement and the
Registration Rights Agreement. The Stock Purchase Agreement among
Telxon, the Company and Telantis Venture Partners IV, Inc. ("TVP IV")
provides TVP IV with "registration rights" and provides that TVP IV may
become a party to agreements like the Stockholders Agreement and the
Registration Rights Agreement. The secured promissory note made by Roger
J. Murphy to the order of the Company and the secured promissory notes
made by TVP IV and by Telantis Venture Partners V, Inc. to the order of
Telxon each restricts the transferability of the shares secured thereby.
2.14 The Company directly or indirectly owns 100% of the issued and
outstanding stock of Aironet Canada Limited, Aironet Canada, Inc. and
Aironet S.A. (legal title to one share of Aironet SA is owned by the
Company's Chief Executive Officer to satisfy Belgium law).
2.18 The landlord for the Company's headquarters office facility leased at
Ghent Road, Fairlawn, Ohio, has notified the Company that it has failed
to pay the electrical utilities fee provided for under the lease. The
accumulated arrearage is approximately $33,000.
<PAGE> 97
AIRONET WIRELESS COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT COMPANY DISCLOSURE SCHEDULE
2.19(d)
The outstanding balance of the working capital advances made by Telxon
to the Company may fluctuate from day to day.
2.22 From time to time the Company enters into equipment leases and grants
purchase money security interests in the ordinary course of its
business, the amounts of which are not material to the Company or its
financial position.
See also the disclosure in Section 2.23.
2.23. On or about January 6, 1995, Aironet filed Applications, Serial Nos.
630,655 and 630,657, with the United States Patent and Trade Office for
registration of the trademarks (collectively, the "Marks") titled
"Hurricane" and "Aironet and Design," respectively, based on its bona
fide intent to use the Marks in interstate commerce. The Marks were
published for opposition, and thereafter, America On Line, Inc. ("AOL")
obtained extensions of time in which to file an opposition to
registration of these Marks.
AOL has raised its concern that the Marks may cause confusion with an
AOL mark. The Company and AOL, through their respective counsel, engaged
in discussions concerning resolution of this matter; however, these
discussions did not result in a resolution.
On about April 29, 1996, AOL filed a Notice of Opposition (the
"Opposition") to Aironet's "Aironet and Design" mark in the United
States Department of Commerce, Patent and Trademark Office-Trademark
Trial and Appeal Board (the "TTAB"); however, no opposition to the
"Hurricane" mark was filed by AOL, and it has now been registered. On
about July 11, 1996, Aironet filed its Answer to the Opposition. The
TTAB calendar for the case has been extended numerous times, and
discovery in this case has yet to be completed.
AOL has not alleged any trademark infringement by Aironet and, to date,
there is no outstanding claim for damages, and no suit for trademark
infringement has been threatened or filed against Aironet.
The Company believes that the Opposition is without merit and will
vigorously contest it, although there can be no assurance that Aironet
will be successful. Based on its knowledge of the foregoing matter and
given the present stage of such matter, the Company does not believe
that the potential loss, if any, which might result to it if the
ultimate outcome in such matter was unfavorable is likely to have a
material adverse affect on it or its financial position.
2 of 4
<PAGE> 98
AIRONET WIRELESS COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT COMPANY DISCLOSURE SCHEDULE
On April 3, 1998, Plaintiff James Edward Horton filed an action against
Aironet and others in the case styled JAMES EDWARD HORTON V. TELXON
CORPORATION, ET AL., Court of Common Pleas, Summit County, Ohio, Case No
CV 98 04 1356. Horton alleges that Aironet improperly terminated a
consulting contract that he had with Aironet. Horton alleges that he
"suffered contractual and extra-contractual damages." Horton seeks
unspecified compensatory damages, damages for "loss of reputation,
humiliation, embarrassment, emotional pain and suffering" in the amount
of $500,000, punitive damages in the amount of $1,000,000 and reasonable
attorneys fees against Aironet and the other defendants. Aironet and the
other defendants believe that there is no merit to the litigation and
will vigorously defend this suit. Based on its knowledge of the
foregoing matter and given the present stage of such matter, Aironet
does not believe that the potential loss, if any, which might result to
it if the ultimate outcome in such matter was unfavorable is likely to
have a material adverse affect on it or its financial position.
2.24 The Company will pay James H. Furneaux $125,000 and grant Mr. Furneaux
warrants to purchase 100,000 shares of the Company's common stock at
$3.50 per share as payment for, and in settlement of, all promises to
compensate Mr. Furneaux for services that have been rendered by him to
the Company in connection with this and other transactions.
2.25 In connection with the promulgation of the IEEE 802.11 standard, each
member of the Standards Committee represented to the Committee that, to
the extent compliance with the 802.11 standard requires a license of any
patents owned by such member, it would license the patents on a fair and
equitable basis. The Company is currently negotiating such a cross
license with Lucent Technologies (the "Cross License"), pursuant to
which the Company would license certain patents to Lucent, and Lucent
would license certain patents to the Company, relating to compliance
with the 802.11 standard. In addition, the Company currently anticipates
seeking similar licenses from Symbol Technologies and UNOVA
(Intermec/Norand). The Company has no reason to believe that it will not
obtain the Cross License, or other similar licenses, on fair and
equitable terms; however, the Company's failure to obtain such licenses
could have a material adverse affect on the Company and its business and
financial position.
See also the disclosure in Section 2.23.
2.30 The proceeds of the offering will be used as follows(1):
Working capital $6,097,082
(Day to day operating expenses)
(Equipment and facilities)
(Recruitment and employee related expenses)
(Research and development)
3 of 4
<PAGE> 99
AIRONET WIRELESS COMMUNICATIONS, INC.
SUBSCRIPTION AGREEMENT COMPANY DISCLOSURE SCHEDULE
(Trade payables other than to Telxon)
<TABLE>
<CAPTION>
<S> <C>
Estimated legal fees related to inter-company agreements $50,000 (Paul Weiss Rifkind)
Estimated Offering Costs
legal, accounting, printing and other $54,863 (Shipman & Goodwin)
$35,000 (Coopers & Lybrand)
$82,500(Goodman Weiss Miller)
Financial Consultant $125,000 (Furneaux)
</TABLE>
- ---------------
(1) This is only an estimate, and this assumes that the offering is fully
funded at $6,444,445. The actual use of proceeds may vary based on (i)
the actual amount of the gross proceeds, (ii) the future needs of the
Company, and (iii) the actual costs of the offering.
2.32 Depleted and obsolete property has been reserved for in the Most Recent
Financial Statement.
4 of 4
<PAGE> 100
SCHEDULE 2.9
CAPITALIZATION TABLE
<PAGE> 101
AIRONET WIRELESS COMMUNICATIONS, INC.
CAPITALIZATION TABLE
<TABLE>
<S> <C>
Authorized Shares 3/31/98 15,000,000
Shares Outstanding Pre-Investment
- ---------------------------------
Telxon Corporation 7,276,500
Telantis IV 808,500
Roger J. Murphy 200,000
Michael D. Grimes 60,000
Tom Snow 10,000
---------
Sub Total 8,355,000
Shares Outstanding Post-Investment(1)
- ----------------------------------
Telxon Corporation 7,276,500
Telantis IV 808,500
Roger J. Murphy 200,000
Michael D. Grimes 60,000
Tom Snow 10,000
Axiom Venture Partners II Limited Partnership 714,285
W, A & H Investments LLC 142,857
Telantis V 104,762
Frank B. Carr 28,571
Clarion Capital Corporation 57,143
---------
Sub Total 9,402,618
Options
- -------
1996 Stock Option Plan (Grants Outstanding)(2) 980,500
Amended & Restated 1996 Stock Option Plan (Grants Outstanding)(3) 500,000
---------
Sub Total 1,480,500
Warrants(4)
- --------
Axiom Venture Partners II Limited Partnership 214,285
W, A & H Investments LLC 42,857
Frank B. Carr 8,571
Clarion Capital Corporation 17,143
Telantis V 31,429
James Furneaux 100,000
---------
Sub Total 414,255
</TABLE>
(1) - H&Q and McDonald & Co. Securities will have the right to purchase 571,429
shares and 142,857 shares respectively, by April 30,1998 (to the extent
these shares are not purchased in full, Aironet may offer these shares to
the other listed investors) Telantis Venture Partners V to purchase an
additional 63,492 shares if H&Q funds and 15,873 shares if McDonald & Co.
Securities funds (or proportionate amounts of any unpurchased shares
offered to other listed investors)
(2) - See Attached List
(3) - See Attached List
(4) - H&Q to be issued 171,429 warrants with the purchase in 1 above
McDonald & Co. Securities to be issued 42,857 warrants with the purchase in 1
above Upon purchasing its proportionate allocation of shares, Telantis Venture
Partners V to be issued 19,048 warrants if H&Q funds and 4,762 warrants if
McDonald & Co. Securities funds or in proportion to purchases by other listed
investors of shares
Page 1
<PAGE> 102
AIRONET WIRELESS COMMUNICATIONS, INC.
OPTIONS OUTSTANDING
AS OF 4/3/98
<TABLE>
<CAPTION>
Options Options
Optionee Granted Outstanding
- ----------------------------------------------------------------
<S> <C> <C> <C>
Sloan, Don I 100,000 100,000 7.4%
Belanger, Phil H 100,000 100,000 7.4%
Murphy Jr., Roger J. 300,000 100,000(a) 7.4%
Ikeman, Harvey A 75,000 75,000 5.6%
Meyer, Steve 65,000 65,000 4.8%
Loadman, Dave 60,000 60,000 4.5%
Grimes, Michael D. 120,000 60,000(b) 4.5%
Weinreb, Pedro 40,000 40,000 3.0%
Furneaux, Jim 30,000 30,000 2.2%
Anderson, Fred 30,000 30,000 2.2%
Reddy, Dr. Raj 30,000 30,000 2.2%
Petako, David 25,000 25,000 1.9%
Friedman, James 25,000 25,000 1.9%
Brodnick, Bill J. 25,000 25,000 1.9%
Wall, Dan 20,000 20,000 1.5%
Alexander, Bruce 15,000 15,000 1.1%
Norman, Stuart 15,000 15,000 1.1%
Sojka, Marv 15,000 15,000 1.1%
Tyre, Mark 15,000 15,000 1.1%
Adams, Chris 15,000 15,000 1.1%
Frankel, Jesse 15,000 15,000 1.1%
Johnson, Gary 10,000 10,000 0.7%
Smith, Doug 10,000 10,000 0.7%
Trompower, Michael 7,500 7,500 0.6%
Smith, Jane 7,500 7,500 0.6%
Saliga, Steve 5,000 5,000 0.4%
Kiebau, Joe 5,000 5,000 0.4%
Porter, Jeff 5,000 5,000 0.4%
Griswold, Victor 5,000 5,000 0.4%
Stratigakis, John 5,000 5,000 0.4%
Amos, Jim 5,000 5,000 0.4%
Halasz, Dave 5,000 5,000 0.4%
Martin, Randy 5,000 5,000 0.4%
Lahey, Jim 5,000 5,000 0.4%
Napiorkowski, Vic 4,000 4,000 0.3%
Ciotti, Frank 4,000 4,000 0.3%
Batcher, Ken 2,500 2,500 0.2%
Case, David 2,500 2,500 0.2%
Cloud, Steve 2,500 2,500 0.2%
Casto, Brian 2,500 2,500 0.2%
Nassar, Ned 2,500 2,500 0.2%
Nahra, Jim 2,500 2,500 0.2%
Whelan, Bill 2,500 2,500 0.2%
Snow, Tom 15,000 0(c) 0.0%
1,255,500 980,500 72.8%
Total Available for grant 366,500 27.2%
------- ------
Total Options Outstanding 1,347,000 100.0%
========= =====
Total Options Exercised 270,000
---------
Total beginning available shares 1,617,000
=========
</TABLE>
(a) 200,000 exercised and shares issued
(b) 60,000 exercised and shares issued
(c) 10,000 exercised and shares issued
<PAGE> 103
AIRONET WIRELESS COMMUNICATIONS, INC.
NEW OPTION GRANTS
AS OF 3/31/98
<TABLE>
<CAPTION>
New
Optionholders: Grant
<S> <C> <C>
1 Taylor Jr., John 15,000
2 Rebo, Rick 15,000
3 Smedley, Michael 15,000
4 O'Hara, Richard 12,500
5 Whelan, Bill 12,500
6 Lahey, Jim 12,500
7 Meyer, Steve 10,000
8 DeLamatter, Donna 5,000
9 Isham, Jane 5,000
10 Greg Canda 5,000
11 Smith, Jane 5,000
12 Stager, Paul 5,000
13 Cisar, Jim 5,000
14 Hunter, Gary 5,000
15 Fishman, Ronald 5,000
16 Tyre, Mark 5,000
17 Friedman, James 5,000
18 Janke, Chris 3,500
19 Magilavy, Susan 3,500
20 Courtney, Michael 2,500
21 Sexton, Daniel 2,500
22 Dollard, Michael 2,500
23 Peroni, Vic 2,500
24 Staudt, Joseph 2,500
25 Batcher, Ken 2,500
26 Nahra, Jim 2,500
27 Casto, Brian 2,500
28 Niehaus, Fred 2,500
29 Ross, Larry 2,500
30 Dedonder, Johann 2,500
31 Cloud, Steve 2,500
32 Tomasheski, Mark 2,500
33 Halasz, Dave 2,500
34 Saliga, Steve 2,500
35 Trompower, Michael 2,500
36 Nyitray, John 2,000
37 Nassar, Ned 1,500
38 Mackey, Candryth 1,000
39 Kopper, Dennis 1,000
40 Wagner, Susan 1,000
41 Borah,Jeff 1,000
42 Fahrni, Mark 1,000
43 Lutman, Thomas 1,000
44 Weber, Ralph 1,000 Grant to Telxon Employees to be named
Total 200,000 300,000
</TABLE>
03/26/98 HIGHLY CONFIDENTIAL 1
<PAGE> 1
Exhibit 10.4.1
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT, TRANSFER, OR OTHER DISPOSITION OF
THE WARRANTS EVIDENCED BY THIS CERTIFICATE, AND ANY SHARES ISSUED UPON THE
EXERCISE HEREOF, ARE SUBJECT TO RESTRICTIONS CONTAINED IN A STOCKHOLDERS
AGREEMENT DATED AND EFFECTIVE AS OF MARCH 31, 1998, BY AND AMONG THE CORPORATION
AND ITS STOCKHOLDERS (THE "STOCKHOLDERS AGREEMENT"), A COPY OF WHICH IS ON FILE
IN THE OFFICE OF THE SECRETARY OF THE CORPORATION.
NEITHER THE WARRANTS EVIDENCED BY THIS CERTIFICATE NOR ANY SHARES ISSUABLE UPON
ITS EXERCISE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT") OR APPLICABLE STATE SECURITIES LAWS ("STATE LAWS") AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR
HYPOTHECATED EXCEPT PURSUANT TO (i) AN EFFECTIVE REGISTRATION STATEMENT
REGISTERING THE WARRANTS AND/OR SHARES UNDER THE ACT AND STATE LAWS OR (ii) A
TRANSACTION PERMITTED BY RULE 144 OR RULE 145 UNDER THE ACT OR EQUIVALENT STATE
LAWS FOR WHICH THE ISSUER HAS RECEIVED REASONABLY SATISFACTORY EVIDENCE OF
COMPLIANCE WITH THE PROVISIONS OF SUCH APPLICABLE RULE OR (iii) AN OPINION OF
COUNSEL SATISFACTORY TO ISSUER THAT SUCH WARRANTS AND/OR SHARES ARE EXEMPT FROM
THE REGISTRATION PROVISIONS OF THE ACT AND STATE LAWS OR (iv) A NO-ACTION LETTER
FROM THE STAFF OF THE SECURITIES AND EXCHANGE COMMISSION AND THE APPLICABLE
STATE DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT REQUIRED UNDER THE ACT OR
STATE LAWS.
Warrant Certificate No. __ Warrants to Purchase_____ Shares of Common Stock
AIRONET WIRELESS COMMUNICATIONS, INC.
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
This certifies that for value received, __________________, or any
permitted transferee ("Holder"), is entitled to purchase from Aironet Wireless
Communications, Inc. ("Aironet") _______ shares (adjusted as provided in Exhibit
A, the "Warrant Shares") of Aironet's Common Stock, $.01 par value ("Common"),
at Three and 50/100 Dollars ($3.50) per share (adjusted as provided in Exhibit
A, the "Warrant Price"), which equals an aggregate purchase price of
___________________________ Dollars ($_________), at or after, and not before,
the consummation of the earlier of either (i) the first firm commitment
underwritten public offering of the Common (or units which include the Common as
an element) at a public offering price of not less than Eight Dollars ($8.00)
per share, pursuant to a Registration Statement, on Form S-1 or other
appropriate form, filed by Aironet under the Act, pursuant to which Aironet
receives proceeds, net of underwriting discounts, commissions and other expenses
of the offering, of not less than Eight Million Dollars ($8,000,000) ("IPO");
(ii) the sale of Aironet as an entirety, whether by merger, consolidation, stock
sale, asset sale, or otherwise, for the higher of a gross sale price of Seventy
Five Million Dollars ($75,000,000) or Eight Dollars ($8.00) per share ("Private
Sale"); (iii) a Change in Control (defined in Exhibit A); or (iv) a Spin-Off
(defined in Exhibit A) (the occurrence of an IPO, Private Sale, Change in
Control and/or Spin-Off is referred to herein as the "Exercise Event"). To the
extent remaining un-exercised, these Warrants shall terminate on March 31, 2001,
5:00 P.M., E.T., and thereafter shall entitle Holder to no rights. These
Warrants are subject to the terms and conditions set forth on the face of this
certificate and in Exhibit A attached hereto, which by this reference are
incorporated herein in their entirety.
Aironet Wireless Communications, Inc.
Date:_________________
------------------------------------
Roger J. Murphy, President
------------------------------------
Jay R. Faeges, Assistant Secretary
<PAGE> 2
EXHIBIT A
WARRANT TERMS AND CONDITIONS
AIRONET WIRELESS COMMUNICATIONS, INC.
1. TRANSFER. Transfer of the Warrants is restricted as set forth in
the restrictive legends set forth in the Warrant certificate to which this
Exhibit A is attached.
2. EXCHANGE OF WARRANT CERTIFICATE. Upon Holder's written request,
Aironet shall exchange the Warrant certificate for one or more certificates
entitling Holder to purchase a like aggregate number of Warrant Shares. At
Holder's request and upon delivery to Aironet of a Lost Warrant Affidavit and
surety bond reasonably acceptable to Aironet, Aironet will deliver to Holder
replacement Warrant certificates for mutilated, lost, stolen or destroyed
Warrant certificates.
3. EXERCISE OF AND PAYMENT FOR WARRANTS.
a. Exercise. The Warrants shall be deemed to have
been exercised automatically upon the consummation of a Private Sale
for which Aironet has provided the Holder at least fifteen (15) days
prior written notice, and upon Aironet's receipt of a Holder's written
notice of exercise provided to Aironet in the event of an IPO, Change
in Control or Spin-Off at any time prior to their termination as
provided on the face of the Warrant certificate to which this Exhibit A
is attached.
b. Payment of Warrant Price.
i. If the applicable Exercise Event is an IPO,
Change in Control or Spin-Off, then within ten (10) days of
Holder's receipt of written notice from Aironet of the event,
Holder shall pay the aggregate Warrant Price to Aironet by
wire transfer of immediately available funds, pursuant to wire
instructions provided to Holder by Aironet. Immediately upon
Holder's surrender of the Warrant certificate evidencing the
exercised Warrants and payment of the Warrant Price, Aironet
shall issue and deliver to Holder certificates for the Warrant
Shares then purchased. The Warrant Shares when paid for and
issued shall be fully paid and non-assessable, and shall be
deemed issued as of the date of surrender of the Warrant
certificate and payment of the aggregate Warrant Price.
ii. If the applicable Exercise Event is a Private
Sale, then Aironet shall provide Holder with at least fifteen
(15) days written notice prior to consummating such
transaction, and Holder shall receive, on a cashless exercise
basis, the kind and amount of consideration it would be
entitled to receive as if the Warrants had been duly exercised
in full prior to such event and as if Holder owned the number
of Warrant Shares that could be purchased with such
consideration, less the aggregate Warrant Price.
c. Payment of Taxes. Aironet will pay all
documentary stamp taxes, if any, attributable to the initial issuance
and delivery of the Warrant Shares, and Holder will pay all other
taxes, if any.
d. Change in Control. A "Change in Control" is deemed to
have occurred upon (i) any Person is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Securities Exchange Act of 1934 (as
amended, the "Exchange Act")), directly or indirectly, of fifteen
percent (15%) or more of the combined voting power of Telxon's Voting
Securities, or (ii) the holders of Telxon's securities entitled to vote
thereon approve, or there otherwise occurs or is commenced, a sale,
lease, exchange or other disposition of all or substantially all the
assets, or the dissolution or liquidation, of Telxon, or any merger,
consolidation or reorganization to which Telxon is a party and as the
result of which Telxon's stockholders prior to the transaction do not
own at least fifty percent (50%) of the voting power of the surviving
entity in the election of directors, or (iii) the Continuing Directors
cease for any reason to constitute at least a majority of the Telxon
Board of Directors, or (iv) any other event occurs which is of such a
nature that would be required to be reported as a change in control in
response to Item 1(a) of the Current Report on Form 8-K, as in effect
on the date hereof pursuant
A-1
<PAGE> 3
to Section 13 or 15(d) of the Exchange Act, or similar successor public
filing. "Continuing Directors" means and includes the persons
constituting Telxon's Board of Directors as of the date of this
Agreement as well as each person who becomes a director of Telxon
subsequent to the date of this Agreement whose election, or nomination
for election by Telxon's stockholders, was approved by an affirmative
vote of at least a majority of the then Continuing Directors (either by
a specific vote or by approval of the proxy statement of Telxon in
which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in
any such case without objection by any member of such approving
majority of the then Continuing Directors to the nomination of such
person or the naming of such person as a director nominee), for so long
as each such director shall remain in office. "Person" means and
includes any individual, corporation, partnership, group, association
or other "person", as such term is used in Section 14(d) of the
Exchange Act, but excluding Telxon or any employee benefit plan
sponsored by Telxon. "Voting Securities" means the Telxon Common Stock,
par value $0.01 per share, and any and all other then outstanding
Telxon securities ordinarily having the right to vote generally in the
election of the Telxon directors.
e. Spin-Off. "Spin-Off" shall mean any spin-off, dividend or
other distribution of Aironet Common by Telxon to its stockholders.
4. RESERVATION OF SHARES. Aironet represents and warrants that it has
reserved, and so long as the Warrants remain outstanding it will keep reserved,
the number of shares of Common which are subject to purchase under the Warrants
from time to time. Prior to its exercise or termination, Aironet will keep a
copy of this Warrant certificate on file with its transfer agent.
5. PRESERVATION OF PURCHASE RIGHTS UPON RECLASSIFICATION,
CONSOLIDATION, ETC.At the date of this Warrant certificate, each Warrant
entitles the Holder to purchase one (1) Warrant Share for the Warrant Price.
Hereafter, until their exercise or termination, the number of Warrant Shares
that may be purchased and the Warrant Price per Warrant Share may be adjusted
upward or downward as provided in this Section 5.
a. Adjustment in the Number of Warrant Shares. The
number of Warrant Shares that each Warrant entitles the Holder to
purchase shall be proportionately adjusted upward for any increase, or
downward for any decrease, in the number of issued and outstanding
shares of Common resulting from a stock split, reverse stock split,
stock dividend, combination or reclassification effected without
receipt of consideration by Aironet, and in no other circumstance.
b. Adjustment in the Warrant Price. The Warrant
Price per Warrant Share shall be proportionately adjusted downward for
any increase, or upward for any decrease, in the number of issued and
outstanding shares of Common resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification effected
without receipt of consideration by Aironet, and in no other
circumstance.
c. Warrant Certificates. Upon any adjustments in
the number of Warrant Shares and Warrant Price, Aironet shall record
such adjustments on its stock transfer records, and the Holder may, but
need not, surrender this certificate to Aironet for replacement with
Warrant certificates that evidence the revised number of Warrant Shares
and Warrant Price.
6. FRACTIONAL INTERESTS. Aironet shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants or upon any
adjustment pursuant to Section 5 in the number of Warrant Shares that each
Warrant entitles a Holder to purchase. Any fractional Warrant Shares that would
otherwise result from any such adjustments or exercise shall be eliminated
either by rounding up to the next higher whole number of Warrant Shares for
fractions of one-half (1/2) or more, or by rounding down to the next lower whole
number of Warrant Shares for fractions of less than one-half (1/2).
7. NO RIGHTS AS STOCKHOLDER. The Warrants do not confer upon Holder
any rights as a stockholder of Aironet prior to Holder's exercise of the
Warrants. Without limiting the generality of the foregoing, the Warrants do not
entitle Holder to vote, receive dividends, consent or receive notices as a
stockholder in respect of any meeting for the election of directors or any other
matter; provided, however, that transferability of the Warrants is restricted
pursuant
A-2
<PAGE> 4
to the terms and conditions in the Stockholders Agreement among Aironet and its
Stockholders on the same basis as the Common and any other security which is
governed thereby.
8. MISCELLANEOUS.
a. These Warrants are issued in accordance with the laws
governing corporations organized under the laws of the State of
Delaware and securities issued in the State of Ohio, and shall be
construed under and governed by such laws without regards to conflict
or choice of laws, statutes, regulations, rules or principles. Any
action relating to theses Warrants or their issuance shall be brought
in the courts, state or federal, sitting in Summit County, Ohio, and
the Holder by taking delivery of this certificate consents to the
jurisdiction and venue of such courts, and agrees not to contest venue
on the grounds of forum non conveniens or otherwise.
b. Any notice, request, demand or other communication
required or permitted hereunder shall be in writing and shall be deemed
to have been given upon receipt, or if delivered or sent by facsimile
transmission, upon confirmation of transmission, or if sent by
overnight courier for next day delivery, the next business day after
deposit, to the Holder at its address as set forth in the stock records
of Aironet, and to Aironet at its principal place of business.
c. Subject to provisions herein regarding restrictions on
transferability, these Warrants shall inure to the benefit of Holder,
and its permitted successors and assigns.
d. The captions in this certificate are for convenience only
and shall not affect the construction or interpretation of any term or
provision hereof. The use in this certificate of the masculine,
feminine or neuter pronoun, shall include the others as the context may
require.
e. Any waiver or amendment of any provision, covenant or
condition of these Warrants must be in writing and executed by Aironet
and Holder. No delay in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, preclude
any further exercise thereof or the exercise of any other such right,
power or privilege.
(End of Exhibit A)
A-3
<PAGE> 1
Exhibit 10.4.2
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (this "Agreement"), is made and effective
as of March 31, 1998, by and among Aironet Wireless Communications, Inc., a
Delaware corporation (the "Corporation"), and each of the
undersigned (together with any person, partnership, association, trust,
corporation, limited liability company, or other entity acquiring any Shares
(defined herein) in accordance with the terms and conditions of
this Agreement or otherwise, the "Stockholders").
BACKGROUND
WHEREAS, on August 25, 1993, the Certificate of Incorporation of the
Corporation was filed by the Secretary of State for the State of Delaware (as
amended to date of this Agreement, the "Certificate");
WHEREAS, under the Certificate the authorized capital stock of the
Corporation consists solely of fifteen million (15,000,000) shares of Common
Stock, $.01 par value (the "Shares");
WHEREAS, as of the date hereof, the issued and outstanding Shares are
owned of record by the persons and in the amounts set forth in EXHIBIT A to this
Agreement; and
WHEREAS, this Agreement is a condition to the transactions contemplated
under the Subscription Agreement dated March 31, 1998, by and among the
Corporation and certain of the Stockholders.
AGREEMENT
NOW, THEREFORE, in consideration of these premises and the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally and equitably bound, agree as follows:
1. BOARD OF DIRECTORS.
-------------------
(a) GENERAL. The Corporation shall have a Board of Directors
comprised of five (5) directors. Subject to applicable law governing the
responsibilities and liabilities of directors, which shall in any event take
precedence, the Board's power and authority shall be restricted such that it may
take no action which conflicts with the terms hereof or which is reserved to the
Stockholders hereunder or under applicable law. Subject to Section 1(b), each
Stockholder agrees that the Directors of the Corporation shall be the following
persons (and each Stockholder agrees to vote its Shares to effectuate the
election of such Directors) until their successors are designated in accordance
with this Section 1:
<PAGE> 2
Two Telxon Corporation ("Telxon") Inside Designees,
one of whom must be Telxon's Chief Executive Officer, and
who on the date hereof are Frank E. Brick and Kenneth W. Haver
One Outside Director,
who shall be designated by Telxon,
who on the date hereof is James H. Furneaux
One Investor (defined herein) Designee,
who on the date hereof is Samuel F. McKay
and
The Chief Executive Officer of the Corporation,
who on the date hereof is Roger J. Murphy
In addition to the Investor (defined herein) designated Director, the Investors
as a group shall be entitled to designate a single observer (the "Investor
Observer") who shall not be a Director but shall receive all notices which
Directors are entitled to receive and shall be entitled to attend all, but not
to participate in, meetings of the Directors.
(b) DESIGNATION. For the purpose of the foregoing:
(i) the Telxon inside designees and the outside Director
shall be named by Telxon in its sole discretion so long as Telxon then
owns at least fifty percent (50%) of the then issued and outstanding
Shares; the Telxon inside designees, but not the outside Director,
shall be named by Telxon in its sole discretion so long as Telxon then
owns at least twenty percent (20%), but less than fifty percent (50%),
of the then issued and outstanding Shares; and a single Telxon inside
designee shall be named by Telxon in its sole discretion so long as
Telxon then owns at least five percent (5%), but less than twenty
percent (20%) of the then issued and outstanding Shares;
(ii) Following a Hostile Change in Control at any time, and
following any Change in Control occurring after April 30, 2001, the
directors which Telxon is then entitled to designate under Section
1(b)(i) shall thereafter be made by a majority in interest of Axiom
Venture Partners II Limited Partnership ("Axiom"), Hambrecht & Quist,
Telantis Venture Partners V, Inc. W, A & H Investments LLC, McDonald &
Company Securities, Inc., Frank B. Carr and Clarion Capital
Corporation, who acquired Shares pursuant to the Subscription Agreement
of even date and for so long as any such person or entity is then a
Stockholder (the "Investors"), provided that the Investors shall then,
and for so long as they thereafter continue to, own an aggregate of at
least five (5%) of the then issued and outstanding Shares.
2
<PAGE> 3
(A) A "Change in Control" is deemed to have
occurred upon (i) any Person is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange
Act of 1934 (as amended, the "Exchange Act")), directly or
indirectly, of fifteen percent (15%) or more of the combined
voting power of Telxon's Voting Securities, or (ii) the
holders of Telxon's securities entitled to vote thereon
approve, or there otherwise occurs or is commenced, a sale,
lease, exchange or other disposition of all or substantially
all the assets, or the dissolution or liquidation, of Telxon,
or any merger, consolidation or reorganization to which Telxon
is a party and as the result of which Telxon's stockholders
prior to the transaction do not own at least fifty percent
(50%) of the voting power of the surviving entity in the
election of directors, or (iii) the Continuing Directors cease
for any reason to constitute at least a majority of the Telxon
Board of Directors, or (iv) any other event occurs which is of
such a nature that would be required to be reported as a
change in control in response to Item 1(a) of the Current
Report on Form 8-K, as in effect on the date hereof pursuant
to Section 13 or 15(d) of the Exchange Act, or similar
successor public filing; provided that any event described in
the foregoing clauses (i)-(iv) shall constitute a "Hostile
Change in Control" if the transaction causing such change in
control shall not have been approved by the affirmative vote
of at least a majority of Telxon's Board of Directors, which
approving majority includes a majority of the then Continuing
Directors.
(B) "Continuing Directors" means and includes the
persons constituting Telxon's Board of Directors as of the
date of this Agreement as well as each person who becomes a
director of Telxon subsequent to the date of this Agreement
whose election, or nomination for election by Telxon's
stockholders, was approved by an affirmative vote of at least
a majority of the then Continuing Directors (either by a
specific vote or by approval of the proxy statement of Telxon
in which such person is named as a nominee for director or of
the inclusion of such person in such proxy statement as such a
nominee, in any such case without objection by any member of
such approving majority of the then Continuing Directors to
the nomination of such person or the naming of such person as
a director nominee), for so long as each such director shall
remain in office.
(C) "Person" means and includes any individual,
corporation, partnership, group, association or other
"person", as such term is used in Section 14(d) of the
Exchange Act, but excluding Telxon or any employee benefit
plan sponsored by Telxon.
(D) "Voting Securities" means the Telxon Common
Stock, par value $0.01 per share, and any and all other then
outstanding Telxon securities ordinarily having the right to
vote generally in the election of the Telxon directors.
and
3
<PAGE> 4
(iii) the investor designee shall be named by Axiom so long
as it holds all of the Shares acquired by it pursuant to the
Subscription Agreement of even date, and otherwise by Investors holding
no less than seventy five percent (75%) of the Shares then held by the
Investors (a "Super Majority in Interest of the Investors"), so long as
any such Investor is then a Stockholder, and the observer shall be
named by a Super Majority in Interest of the Investors. The Investors
shall have the right to name the Investor Board designee so long as
they then own an aggregate of at least five (5%) of the then issued and
outstanding Shares, and the Investor Observer so long as they then own
an aggregate of at least ten percent (10%) of the then issued and
outstanding Shares. The person sitting from time to time as the Chief
Executive Officer of the Corporation shall automatically succeed as a
Director to his predecessor Chief Executive Officer (succeeding Chief
Executive Officers shall be deemed to be designees for the purposes
herein).
(c) METHOD. A designee may be named at any time, and from time to
time, by delivering written notice duly executed by the designator to the
Secretary or an Assistant Secretary of the Corporation for inclusion in the
Corporation's minute book. Upon receipt of a designation, the Secretary or an
Assistant Secretary of the Corporation shall circulate to the Stockholders an
action by written consent to effectuate the designation (and each Stockholder
agrees to vote its Shares to effectuate the designation).
(d) COMMITTEES. The Telxon designees and the Investor designee have the
right to sit on all committees established by the Board.
(e) VACANCIES. No vacancy of a Board seat designated and effectuated
in accordance with this Section 1 shall be filled other than in accordance with
this Section 1. At such time as a designator's shareholdings fall below the
percentage required to entitle it to designate Board members, that designator's
Board seat shall be deemed vacated and shall not be re-filled except by the vote
of the Stockholders in accordance with the Corporation's By-laws.
(f) BOARD EXPENSES. The Corporation agrees to reimburse each of the
directors elected to the Corporation's Board of Directors (and any Investor
Observer) for their reasonable out-of-pocket travel and lodging expenses
incurred attending Board of Directors' meetings and performing their respective
obligations and responsibilities to the Corporation.
2. GOVERNANCE.
-----------
(a) BY-LAWS. The Corporation's By-laws shall continue in full force
and effect from and after the effective date of this Agreement. To the extent
that the terms and conditions of this Agreement conflict with the Corporation's
By-laws, the terms and conditions of this Agreement shall control.
(b) BOARD MEETINGS. The Board of Directors shall conduct at least one
Board meeting during each fiscal quarter of the Corporation.
4
<PAGE> 5
(c) STOCKHOLDER VOTES. Except as otherwise provided in this Agreement
or as required by applicable law, any vote, approval, authorization or other
action to be taken by the Stockholders shall be determined by a majority vote
based on the number of Shares then owned by them.
(d) ACTION BY WRITTEN CONSENT. Unless otherwise required by law, any
vote, approval, authorization or other action to be taken by the Stockholders or
Directors of the Corporation may be taken without a meeting, without prior
notice and without a vote, if a consent or consents in writing, setting forth
the action so taken, shall be signed by the number of Stockholders required to
pass such matter at a meeting of the Stockholders where all Stockholders
entitled to vote were present, or by all of the Directors, as the case may be.
Consents may be executed in several counterparts all of which when taken
together shall constitute a single integrated consent. The original (or copies
if the originals are not available) of such consents shall be entered in the
Corporation's minute book.
(e) PUBLIC OFFERING AND SALE OF CORPORATION. During the period
commencing December 1, 1998, and ending September 30, 2000 (the "Stockholder
Approval Period"), or at any time after the occurrence of a Hostile Change in
Control, the Stockholders shall have sole authority to direct the Corporation to
take the following actions:
(i) to undertake any public offering of securities of the
Corporation; or
(ii) to sell the Corporation as an entirety, whether by
merger, consolidation, stock sale, asset sale, or otherwise.
During the Stockholder Approval Period, or at any time after the occurrence of a
Hostile Change in Control, in the event that the Investors then own ten percent
(10%) or more of the issued and outstanding Shares, and as a group they vote, by
majority vote of the Shares held by the Investors, in favor of either: (i) the
first firm commitment underwritten public offering of the Shares (or units which
include the Shares as an element) at a public offering price of not less than
Eight Dollars ($8.00) per Share, pursuant to a Registration Statement, on Form
S-1 or other appropriate form, filed by the Corporation under the Securities Act
of 1933, as amended, pursuant to which the Corporation receives proceeds, net of
underwriting discounts, commissions and other expenses of the offering, of not
less than Eight Million Dollars ($8,000,000) ("IPO"); or (ii) the sale of the
Corporation as an entirety, whether by merger, consolidation, stock sale, asset
sale, or otherwise ("Private Sale"), for the higher of a gross sale price of
Seventy Five Million Dollars ($75,000,000) or Eight Dollars ($8.00) per share,
then Telxon agrees to also vote its Shares in favor of, and to take all other
actions necessary to effectuate, such IPO or Private Sale, and agrees to cause
its Board designees to take all actions that are required by law to be taken by
a Delaware corporation's board of directors to effectuate any such transaction.
Without limiting the generality of Section 6(l), the parties hereby acknowledge
and confirm that the provisions of this Section 2(e) shall be binding upon
Telxon and any successor-in-interest thereto.
5
<PAGE> 6
(f) NEWLY ISSUED SHARES. The Stockholders shall have sole authority
to determine whether the Corporation is permitted to issue any equity
securities, except in an IPO, or securities convertible into or exchangeable for
equity securities. Authority for the Corporation to issue such securities shall
require an affirmative vote of at least ninety two and one half percent (92.5%)
of all of the then issued and outstanding Shares.
(g) MERGERS, ASSET SALES ETC. Other than Private Sales approved
pursuant to Section 2(e), any merger, consolidation, reorganization,
reclassification or recapitalization involving the Corporation, or any sale,
lease, exchange or other disposition of all or substantially all of the assets,
or the dissolution or liquidation, of the Corporation, shall require the
affirmative vote of at least ninety two and one half percent (92.5%) of all of
the then issued and outstanding Shares.
(h) AGREEMENTS WITH TELXON CORPORATION. The Board of Directors shall
have sole authority, by the affirmative vote of Directors representing one
hundred percent (100%) of the total number of seats then constituting the full
Board, to determine whether the Corporation may authorize or approve any
contract, agreement, arrangement or transaction (or amendment, modification,
assignment, termination or waiver thereof) between Telxon Corporation and the
Corporation, or to waive any failure of performance by Telxon Corporation
thereunder, other than any of the foregoing which are done in the ordinary
course of the Corporation's business.
3. TRANSFER OF SHARES.
-------------------
(a) PROHIBITION ON TRANSFER. No Stockholder shall sell, exchange,
give, transfer, assign, pledge, encumber, hypothecate, or otherwise dispose of
any Shares, or any legal, beneficial or other interest in any Shares, whether
now owned or hereafter acquired, whether voluntarily, involuntarily, by
operation of law, or otherwise, including by way of intestacy, will, gift,
bankruptcy, execution, or seizure and sale by legal process (such events
separately and collectively are referred to as a "Transfer," and the transferee
is referred to as a "Transferee"), except as provided in this Agreement.
(b) CORPORATION RIGHT OF FIRST REFUSAL. In the event that a
Stockholder at any time desires to Transfer all or any portion of its Shares to
any third party (the "Offeror"), it must first offer to Transfer its Shares to
the Corporation. Such offer must be upon the same terms and conditions as it
proposes to Transfer such Shares to the Offeror, which terms and conditions
shall be set forth in a written notice of offer (the "Notice of Offer"). The
Notice of Offer shall state with particularity the terms upon which the Transfer
of the Shares is proposed to be made, including, without limitation, the
purchase price to be paid for the Shares, if any, the time and method of
payment, and if payment is to be made other than in cash, a description of the
non-cash consideration and the rate of interest, if any, to be paid on the
non-cash portion of said purchase price (collectively the "Offer Price and
Terms"). The Corporation shall have a period of fifteen (15) days after receipt
of the Notice of Offer within which to accept (as to all, but not less than all,
of the tendered Shares) or reject in writing the offer of Transfer. Should the
Corporation accept the offer, it shall, within ten (10) days of its acceptance,
acquire the tendered Shares at the Offer
6
<PAGE> 7
Price and Terms. Failure of the Corporation to respond in writing to a Notice of
Offer within the fifteen (15) day period shall be deemed a rejection of said
offer.
(c) STOCKHOLDER RIGHT OF FIRST REFUSAL. Should the subject Shares not
be acquired by the Corporation at the expiration of the period specified in
Section 3(b), the tendering Stockholder shall next offer to Transfer such Shares
to the Stockholders (excluding the tendering Stockholder), if any, pro-rata to
their Share interests, at the Offer Price and Terms, by providing the
Stockholders with a copy of the Notice of Offer. The Corporation shall provide
the tendering Stockholder with the then current Stockholder address list to
enable it to provide all required notices under this Section 3(c) and under
Section 3(d). The Stockholders shall have a period of fifteen (15) days after
receipt of the Notice of Offer within which to accept or reject in writing the
offer of Transfer. Should any Stockholder accept the offer, it shall, within ten
(10) days of its acceptance, acquire the tendered Shares at the Offer Price and
Terms. Failure of any Stockholder to respond in writing to a Notice of Offer
within such fifteen (15) day period shall be deemed a rejection of said offer.
In the event that Stockholder acceptances of the offer are, in the aggregate,
for fewer than all of the tendered Shares, then the tendering Stockholder shall
so notify the Stockholders who have elected to acquire tendered Shares, which
electing Stockholders shall have an additional seven (7) day period following
receipt of such notice to acquire the remaining Shares, pro rata to their Share
interests (as between themselves); provided that if the offer is not accepted by
Stockholders as to all of the tendered Shares, then none of the Stockholders
shall have any right to acquire any of the tendered Shares pursuant to this
Section 3(c).
(d) CO-SALE.
(i) No later than ten (10) days after the expiration of the
time periods specified in Section 3(c), the tendering Stockholder shall
notify the other Stockholders in writing whether the Corporation and
the Stockholders have failed to acquire all of the tendered Shares
pursuant to Sections 3(b) and (c) (the "Co-Sale Notice"). If all of the
tendered Shares have not been acquired pursuant to either Section 3(b)
or 3(c), then each Stockholder other than the tendering Stockholder
shall have the right to participate in the tendering Stockholder's sale
of Shares by selling a portion of its Shares on the terms set forth in
the Notice of Offer, in an amount equal to the product obtained by
multiplying (x) the aggregate number of Shares to be sold by the
tendering Stockholder by (y) the Ownership Percentage (defined herein)
of Shares owned by each Stockholder other than the tendering
Stockholder who elects to participate in the tendering Stockholder's
sale (each a "Participant," and collectively the "Participants"). The
Ownership Percentage for any Participant shall be the percentage figure
which expresses the ratio between (x) the number of Shares owned by
such Participant and (y) the aggregate of (A) the number of Shares
owned by all Participants and (B) the number of Shares owned by the
tendering Stockholder (excluding any Shares acquired pursuant to
Section 3(b) or 3(c)). Within five (5) days after its receipt of the
Co-Sale Notice, any Stockholder electing to participate in the
tendering Stockholder's Transfer shall notify the tendering Stockholder
in writing of the number of Shares held by it to be included in the
sale.
7
<PAGE> 8
(ii) Each Participant shall enter into such agreements and
take such actions consistent with the Notice of Offer, and as otherwise
reasonably directed by the tendering Stockholder in order to effect the
subject Transfer. The proceeds of any Transfer under this Section 3(d)
shall be remitted directly to each Participant by the Offeror.
(iii) The provisions of this Section 3(d) shall not apply to
any Transfer permitted under Section 3(g).
(e) TRANSFER. Subject to Section 6(c), if all of the tendered Shares
are not acquired by either the Corporation and/or the Stockholders within the
time periods provided for in Sections 3(b) and (c), respectively, and provided
that the notice required under Section 3(c), if any, was provided within five
(5) days after the end of the time period provided for in Section 3(b), then the
tendering Stockholder and each Participant may Transfer its Shares to the
Offeror at Offer Price and Terms; provided, however, that such Transfer must be
completed within forty five (45) days from the expiration of all response
periods provided in Sections 3(b), (c) or (d), as applicable.
(f) ALTERATION OF TERMS. Each time the Offer Price and Terms are
altered in any way, including, but not limited to, changes in the identity of
the proposed Offeror or the consideration to be paid for the Shares to be
Transferred, or in the event that a Transfer is not completed within the time
period provided for in Section 3(e), then the subject Shares shall be re-offered
to the Corporation and the Stockholders in accordance with Section 3(b) and (c),
respectively, and a new Co-Sale Notice shall be given in accordance with Section
3(d), as if a totally new transaction were proposed.
(g) PERMITTED TRANSFER.
(i) Subject to Section 6(c), a non-entity Stockholder is
permitted to Transfer his Shares during his life without first offering
his Shares to the Corporation or Stockholders in accordance with
Sections 3(b) and (c), respectively, if, but only if, the Transfer is
to Stockholder's spouse or lineal descendants, or any trust created for
his or their benefit, or to a corporation wholly owned by the
Stockholder and/or his spouse and lineal descendants. An estate,
executor, administrator or other personal representative of a deceased
non-entity Stockholder is permitted to hold and, subject to Section
6(c), Transfer the deceased non-entity Stockholder's Shares to the
deceased Stockholder's devisees and heirs at law. Shares Transferred in
accordance with this Section 3(g) may not be further Transferred except
in accordance with the provisions of this Section 3.
(ii) Subject to Section 6(c), an entity Stockholder is
permitted to Transfer its Shares without first offering its Shares to
the Corporation or Stockholders in accordance with Section 3(b) and
(c), respectively, if, but only if: (i) the Transfer is to an entity of
which at least fifty-one percent (51%) is owned by the Stockholder or
its affiliates, or if at least fifty-one percent (51%) of the
Stockholder is owned by the Transferee or an affiliate of the
Stockholder, and each such Transferee may further Transfer such Shares
to
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<PAGE> 9
similarly controlled or controlling affiliate entities; or (ii) the
Transfer is a spin-off, dividend or other distribution to the owners of
the Stockholder, based on such ownership interests.
(iii) In the event of a permitted Transfer under this
Section 3(g), the Transferor shall promptly furnish written notice
thereof to the Corporation. Concurrently therewith, the Transferee
shall execute a written agreement to be bound by the terms and
provisions of this Agreement, as provided in this Section 3(g).
(h) CERTAIN PURCHASE MONEY LIENS. Notwithstanding anything in Section
3 to the contrary, neither the grant of nor the foreclosure or other realization
by the Company or by Telxon, as the case may be, on the security interest in
200,000 Shares granted by Roger J. Murphy to the Corporation to secure the
payment of $372,000, nor the security interest in 808,500 Shares granted by
Telantis Venture Partners IV, Inc. to Telxon to secure the payment of
$1,503,810, or the security interest in up to 120,635 Shares, and warrants to
purchase 12,064 Shares, granted by Telantis Venture Partners V, Inc. to Telxon
to secure the payment of up to $422,000 shall be a prohibited Transfer under
Section 3(a).
(i) SPECIAL UNDERWRITER REQUIREMENTS. Each Stockholder agrees, if
requested by the Corporation and an underwriter of Common (or other securities)
of the Corporation, not to sell or otherwise transfer or dispose of any Common
(or other securities) of the Corporation held by such Stockholder during the one
hundred eighty (180) day period following the effective date of a registration
statement of the Corporation filed under the Securities Act, provided that such
agreement only applies to the first such registration statement of the
Corporation including securities to be sold on its behalf to the public in an
underwritten offering. Such agreement shall be in writing in a form satisfactory
to the Corporation and such underwriter. The Corporation may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of said one hundred eighty (180) day
period.
(j) ADDENDUM. Before the holdings of any Transferee shall be honored
by the Corporation or accepted upon its stock register and before any right,
title or interest whatsoever therein shall vest in such Transferee, and before
the Corporation shall issue or agree to issue any previously unissued (or
reissue or agree to reissue, from treasury or otherwise) Shares of the
Corporation, it shall require, as a condition to the issuance of a stock
certificate or other instrument evidencing such stock, that said Transferee or
the person or entity to whom any such previously unissued (or reissued) Shares
are to be issued, as the case may be, execute and deliver to the Secretary of
the Corporation an Addendum to this Agreement in substantially the following
form with appropriate insertions:
ADDENDUM
Pursuant to the STOCKHOLDERS AGREEMENT (the "Agreement") dated
___, 1998 by and among Aironet Wireless
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Communications, Inc., a Delaware corporation (the
"Corporation"), and its Stockholders, the undersigned, now the
holder of __________ of the Corporation evidenced by
certificate(s) numbered __________, does hereby become a party
to the Agreement entitled to the rights, and subject to the
obligations, as set forth therein, to the extent the
undersigned is record holder of shares of the Corporation's
capital stock with the same force and effect as though it had
executed said Agreement as an initial signatory party thereto.
The undersigned acknowledges that he has read the Agreement and
is familiar with and understands its terms.
Dated this _____ day of __________, 199__.
-------------------------------
(signature)
Whether or not such Addendum is executed, each Transferee or new holder of
Shares shall in any event be bound by, and shall perform the obligations imposed
by, this Agreement with the same force and effect as if such Transferee or new
holder had signed this instrument.
(k) HOLDERS OF OTHER SECURITIES. On the date of this Agreement,
options and warrants to purchase Shares are held by the persons identified in
SCHEDULE 3(K). The Corporation shall use its best efforts to obtain from each
such person an Addendum similar to that provided for in Section 3(j) which in
substance provides that any Shares issued upon the exercise of such options and
warrants, and the holder thereof, shall be bound by the terms and conditions
hereof and shall then, but not before, be entitled to the rights afforded to the
Stockholders hereunder. Before the Corporation shall grant or issue, or agree to
grant or issue, any securities convertible into or exercisable or exchangeable
for, stock of the Corporation, the Corporation shall require, as a condition
thereto, that the grantee or recipient of such securities execute an Addendum of
the type described in this Section 3(k), except that no such Addendum shall be
required with respect to securities which may not be converted, exercised or
exchanged into or for stock of the Corporation prior to an IPO.
(l) PURCHASE OF INVESTOR SHARES UPON CERTAIN CHANGES IN CONTROL. On or
within ten (10) days after the date ninety (90) days after the consummation of a
Change in Control
(A) which is not a Hostile Change in Control,
(B) which occurs prior to May 1, 2001, and
(C) which occurs at a time when Telxon then owns at least twenty
percent (20%) of the issued and outstanding Shares,
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<PAGE> 11
the Person surviving such Change in Control shall give written notice to each of
the Investors that the surviving Person will purchase all Shares which such
Investor then owns at a price of Ten and 50/100 Dollars ($10.50) per Share in
cash. Each Investor must accept or reject such offer in writing within twenty
(20) after its receipt of the surviving Person's notice. If not timely rejected,
the surviving Person and each Investor that does not timely reject the surviving
Person's offer shall consummate the purchase of each such Investor's Shares by
the surviving Person on or before the date ten (10) days after the earlier of
(i) the date that the surviving Person receives the Investor's acceptance or
(ii) the expiration of the Investor's twenty (20) day rejection period. The
transactions under this Section 3(l) shall not be subject to any of the other
provisions of this Section 3, but the surviving Person and such purchased Shares
shall remain subject to this Agreement. Without limiting the generality of
Section 6(l), Telxon shall take all necessary actions to ensure that such a
surviving Person is obligated to take the actions required of it under this
Section 3(l).
4. CONFLICTS OF INTEREST
---------------------
(a) As long as Telxon owns twenty percent (20%) or more of the issued
and outstanding Shares: (i) the Corporation's Chief Executive Officer shall not
be permitted to serve Telxon as an officer or director, and may not own five
percent (5%) or more of Telxon's issued and outstanding capital stock; and (ii)
no officer of Telxon may serve as an officer of Aironet (the prohibition in this
clause (ii) shall not commence until July 1, 1998).
(b) As Telxon remains a stockholder of the Corporation, and as the
Corporation and Telxon may engage in the same or similar activities or lines of
business and may have an interest in the same areas of corporate opportunity,
and in recognition of: (i) the benefits to be derived by the Corporation through
its continued contractual, corporate and business relations with Telxon
(including service of officers and Directors of Telxon as Directors of the
Corporation); and (ii) the difficulties and uncertainties attendant to any
Director, who desires and endeavors fully to satisfy such Director's fiduciary
duties, in determining the full scope of such duties in any particular
situation, the provisions of this Section 4 are set forth to regulate, define
and guide the conduct of certain affairs of the Corporation as they may involve
Telxon and its officers and Directors, and the powers, rights, duties,
obligations and liabilities of the Corporation and its officers, Directors and
stockholders in connection therewith.
(c) Except as Telxon may otherwise agree in writing:
(i) Except as may otherwise be set forth in any agreements between
the Corporation and Telxon, Telxon shall not have a duty to refrain from
engaging, directly or indirectly, in the same or similar business
activities or lines of business as the Corporation presently engages in
and in the future may engage in; and
(ii) neither Telxon nor any officer or Director thereof shall be
liable to the Corporation or its stockholders for breach of any
fiduciary duty by reason of any such activities of Telxon or of such
person's direct or indirect participation therein.
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<PAGE> 12
In the event that Telxon acquires knowledge of a potential transaction or matter
that may be a corporate opportunity for both Telxon and the Corporation, Telxon
shall have no duty to communicate or offer such corporate opportunity to the
Corporation and shall not be liable to the Corporation or its stockholders for
breach of any fiduciary duty as a stockholder of the Corporation or controlling
person by reason of the fact that Telxon pursues or acquires such corporate
opportunity for itself, directs such corporate opportunity to another person or
entity, or does not communicate information regarding, or offer, such corporate
opportunity to the Corporation.
(d) In the event that a Director, officer or employee of the
Corporation who is also a Director, officer or employee of Telxon acquires
knowledge of a potential transaction or matter that may be a corporate
opportunity for the Corporation and Telxon (whether such potential transaction
or matter is proposed by a third-party or is conceived of by such Director,
officer or employee of the Corporation), such Director, officer or employee
shall be entitled to offer such corporate opportunity to the Corporation or
Telxon as such Director, officer or employee deems appropriate under the
circumstances in his sole and absolute discretion, and no such Director, officer
or employee shall be liable to the Corporation or its stockholders for breach of
any fiduciary duty or duty of loyalty or failure to act in the best interests of
the Corporation or the derivation of any improper personal benefit by reason of
the fact that: (i) such Director, officer or employee offered such corporate
opportunity to Telxon (rather than the Corporation) or did not communicate
information regarding such corporate opportunity to the Corporation; or (ii)
Telxon pursues or acquires such corporate opportunity for itself or directs such
corporate opportunity to another person or does not communicate information
regarding such corporate opportunity to the Corporation. All information learned
by any director of the Corporation in the course of his service as a director is
confidential information of the Corporation, and notwithstanding any provision
in this Agreement to the contrary, no director may utilize such confidential
information except for the benefit of the Corporation, and may not disclose such
confidential information to any person or entity other than for the benefit of
the Corporation in the course of the director's service on the Corporation's
Board, or as an officer or employee of the Corporation.
(e) Subject to Section 2(g), no contract, agreement, arrangement or
transaction (or any amendment, modification or termination thereof) between the
Corporation and Telxon or any Related Entity (defined herein) or between the
Corporation and one or more of the Directors or officers of the Corporation,
Telxon or any Related Entity, shall be void or voidable solely for the reason
that Telxon or any Related Entity or any one or more of the officers or
Directors of the Corporation, Telxon or any Related Entity are parties thereto,
or solely because any such Directors or officers are present at or participate
in the meeting of the Board of Directors or committee thereof which authorizes
the contract, agreement, arrangement, transaction, amendment, modification or
termination or solely because his or their votes are counted for such purpose,
but any such contract, agreement, arrangement or transaction (or any amendment,
modification or termination thereof) shall be governed by the provisions of this
Agreement, the Certificate, the Corporation's By-laws, Delaware Law and other
applicable law. For purposes of this Section 4, the term "Related Entities"
means any Director of the Corporation, or any corporations,
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<PAGE> 13
partnerships, associations or other organizations in which one or more of its
Directors have a direct or indirect financial or non-financial interest.
(f) Subject to Section 2(g), Directors of the Corporation who are
also directors or officers of Telxon or any Related Entity may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof),
and may vote thereon. Outstanding Shares owned by Telxon and any Related
Entities may be counted in determining the presence of a quorum at a meeting of
stockholders that authorizes or approves any such contract, agreement,
arrangement or transaction (or amendment, modification or termination thereof),
and may vote thereon.
(g) Neither Telxon nor any officer or Director thereof or any Related
Entity shall be liable to the Corporation or its stockholders for breach of any
fiduciary duty or duty of loyalty or failure to act in the best interests of the
Corporation or the derivation of any improper personal benefit by reason of the
fact that Telxon or an officer or Director thereof or such Related Entity in
good faith takes any action or exercises any rights or gives or withholds any
consent in connection with any agreement or contract between Telxon or of such
Related Entity and the Corporation. No vote cast or other action taken by any
person who is an officer, Director or other representative of Telxon or such
Related Entity, which vote is cast or action is taken by such person in his
capacity as a Director of the Corporation, shall constitute an action of or the
exercise of a right by or a consent of Telxon or such Related Entity for the
purpose of any such agreement or contract.
(h) Any person or entity purchasing or otherwise acquiring any
interest in any shares of capital stock of the Corporation shall, by virtue of
the legend required by Section 5(a) to be borne on certificates evidencing
Shares, be deemed to have notice of, to understand the ramifications of, to have
consented to the provisions of, and, to the fullest extent permitted by Delaware
Law, to have waived his right to contest this Section 4.
(i) For purposes of this Section 4, any contract, agreement,
arrangement or transaction with any corporation, partnership, joint venture,
association or other entity in which the Corporation beneficially owns (directly
or indirectly) fifty percent (50%) or more of the outstanding voting stock,
voting power or similar voting interests, or with any officer or Director
thereof, shall be deemed to be a contract, agreement, arrangement or transaction
with the Corporation.
(j) For purposes of this Section 4 only: (i) the term "Corporation"
shall mean the Corporation and all corporations, partnerships, joint ventures,
associations and other entities in which the Corporation beneficially owns
(directly or indirectly) fifty percent (50%) or more of the outstanding voting
stock, voting power or similar voting interests; and (ii) the term "Telxon"
shall mean Telxon and all corporations, partnerships, joint ventures,
associations and other entities (other than the Corporation, defined in
accordance with clause (i)) in which Telxon beneficially
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<PAGE> 14
owns (directly or indirectly) fifty percent (50%) or more of the outstanding
voting stock, voting power or similar voting interests.
(k) Notwithstanding anything in this Agreement to the contrary, the
foregoing provisions of this Section 4 shall expire on the date that Telxon
ceases to own beneficially Shares representing at least twenty percent (20%) of
the issued and outstanding Shares, and no person who is a Director or officer of
the Corporation is also a Director or officer of Telxon. The provisions of this
Section 4 shall automatically terminate upon the consummation of a Hostile
Change in Control, except for the provisions of Section 4(a), which shall
survive such event. The alteration, amendment, change or repeal of any provision
of this Section 4 or the adoption of any provision inconsistent with this
Section 4, shall require the express written consent of Telxon, and will not
eliminate or reduce the effect of this Section 4 in respect of any matter
occurring, or any cause of action, suit or claim that, but for this Section 4,
would accrue or arise prior to such alteration, amendment, repeal or adoption.
5. COVENANTS
---------
(a) INSPECTIONS. Upon no less than five (5) days advance written
notice, the Corporation shall permit each Investor (or its designated
representative) to visit and inspect any of the properties of the Corporation,
including its books of account, and to discuss its affairs, finances and
accounts with the Corporation's officers and its independent public accountants.
All such inspections shall be conducted during the Corporation's business hours,
and shall not unreasonably interfere with the conduct of the Corporation's
business.
(b) FINANCIAL REPORTING. The Corporation will furnish the following
reports to the Investors:
(i) As soon as practicable after the end of each fiscal year
of the Corporation, and in any event within ninety (90) days
thereafter, a consolidated balance sheet of the Corporation and its
subsidiaries, if any, as at the end of such fiscal year, and
consolidated statements of operations, accumulated earnings and cash
flows of the Corporation and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail,
audited (without scope limitations imposed by the Corporation) and
certified by independent public accountants of recognized national
standing selected by the Corporation.
(ii) As soon as practicable after the end of the first, second
and third quarterly accounting periods in each fiscal year of the
Corporation, and in any event within forty-five (45) days thereafter, a
consolidated balance sheet of the Corporation and its subsidiaries, if
any, as of the end of each such quarterly period, and consolidated
statements of operations, accumulated earnings and cash flows of the
Corporation and its subsidiaries, if any, for such period and for the
current fiscal year to date, prepared in
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<PAGE> 15
accordance with generally accepted accounting principles (provided that
such statements will not include all of the information and notes
required for complete financial statements) consistently applied and
setting forth in comparative form the figures for the corresponding
periods of the previous fiscal year, subject to changes resulting from
year-end audit adjustments.
(iii) As soon as practicable after the last day of each month,
and in any event by the twentieth day of each month, a consolidated
balance sheet of the Corporation and its subsidiaries, if any, as of
the end of each such month, and consolidated statements of operations,
accumulated earnings and cash flows of the Corporation and its
subsidiaries, if any, for such period, prepared in accordance with
generally accepted accounting principles (provided that such statements
will not include all of the information and notes required for complete
financial statements) consistently applied.
(c) PROMPT PAYMENT OF TAXES, ETC. The Corporation will promptly pay
and discharge, or cause to be paid and discharged, when due and payable, all
lawful taxes, assessments and governmental charges or levies imposed upon the
income, profits, property or business of the Corporation; provided, however,
that any such tax, assessment, charge or levy need not be paid if the validity
thereof shall at the time be contested in good faith by appropriate proceedings,
and provided, further, that unless otherwise approved by the Corporation's Board
of Directors, the Corporation will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien
which may have attached as security therefor. Unless otherwise approved by the
Corporation's Board of Directors, the Corporation will promptly pay or cause to
be paid when due, or in conformance with customary trade terms, all other
obligations incident to its operations.
(d) MAINTENANCE OF PROPERTIES AND LEASES. The Corporation will keep
its properties in good repair, working order and condition, reasonable wear and
tear excepted, and from time to time make all needful and proper, or legally
required, repairs, renewals, replacements, additions and improvements thereto;
and the Corporation will at all times comply with each provision of all leases
to which it is a party or under which it occupies, or has possession of,
property if the breach of such provision might have a material adverse effect on
the condition, financial or otherwise, or operations of the Corporation.
(e) INSURANCE. The Corporation will keep its assets which are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, extended coverage and explosion in amounts sufficient to
prevent the Corporation from becoming a co-insurer and not in any event less
than eighty percent (80%) of the insurable value of the property insured. The
Corporation will maintain, with financially sound and reputable insurers,
insurance against other hazards and risks and liability to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated. All such policies of insurance shall be occurrence policies
with "tail coverage" so-called respecting all prior "claims made" policies. The
Corporation shall give immediate written notice to the Investors and to insurers
of loss or damage to the property and shall promptly file proof of loss with
insurers. The Corporation shall maintain, either itself or
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<PAGE> 16
under its Services Agreement with Telxon, directors and officers insurance in an
amount at least equal to that which it presently maintains.
(f) COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES. The
Corporation shall duly observe and conform to all valid requirements of
governmental authorities relating to the conduct of its businesses or to its
property or assets.
(g) MAINTENANCE OF CORPORATE EXISTENCE, ETC. The Corporation shall
maintain in full force and effect its corporate existence, rights, government
approvals and franchises, and all licenses and other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed by
it, which are deemed by the Corporation's Board of Directors to be necessary to
the conduct of its business.
(h) PROPRIETARY INFORMATION AGREEMENT AND KEY EMPLOYEE AGREEMENT.
(i) The Corporation and each person hereafter employed by it
with access to confidential information will enter into a proprietary
information agreement as approved by the Corporation's Board of
Directors.
(ii) The Corporation will require its employees to execute
non-competition agreements as approved by the Corporation's Board of
Directors.
(iii) The Corporation will cause all technological
developments, inventions, discoveries or improvements made by employees
of the Corporation to be fully documented in engineering notebooks in
accordance with the best prevailing industrial professional standards
and, where possible and appropriate, cause all employees to file and
prosecute United States and foreign patent applications relating to and
protecting such developments.
6. MISCELLANEOUS
-------------
(a) In order to effectuate the terms and restrictions of this
Agreement, each certificate of stock evidencing Shares owned by the Stockholders
or issued by the Corporation shall bear the following legend:
OWNERSHIP, ENCUMBRANCE, PLEDGE, ASSIGNMENT,
TRANSFER, OR OTHER DISPOSITION OF THE SHARES
EVIDENCED BY THIS CERTIFICATE, AND ANY SHARES
ISSUED IN LIEU THEREOF, ARE SUBJECT TO
RESTRICTIONS CONTAINED IN A STOCKHOLDERS AGREEMENT
DATED AND EFFECTIVE AS OF MARCH ___, 1998, BY AND
AMONG THE CORPORATION AND ITS STOCKHOLDERS A COPY
OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE CORPORATION. A
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COPY OF THE STOCKHOLDERS AGREEMENT AND THE
CORPORATION'S BY-LAWS WILL BE MAILED BY THE
CORPORATION TO ANY STOCKHOLDER WITHOUT CHARGE
WITHIN FIVE (5) DAYS AFTER WRITTEN REQUEST
THEREFOR.
THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT") OR APPLICABLE STATE
SECURITIES LAWS ("STATE LAWS") AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR HYPOTHECATED EXCEPT
PURSUANT TO (i) AN EFFECTIVE REGISTRATION
STATEMENT REGISTERING THE SHARES UNDER THE ACT AND
STATE LAWS OR (ii) A TRANSACTION PERMITTED BY RULE
144 OR RULE 145 UNDER THE ACT OR EQUIVALENT STATE
LAWS FOR WHICH THE ISSUER HAS RECEIVED REASONABLY
SATISFACTORY EVIDENCE OF COMPLIANCE WITH THE
PROVISIONS OF SUCH APPLICABLE RULE OR (iii) AN
OPINION OF COUNSEL SATISFACTORY TO ISSUER THAT
SUCH SHARES ARE EXEMPT FROM THE REGISTRATION
PROVISIONS OF THE ACT AND STATE LAWS OR (iv) A
NO-ACTION LETTER FROM THE STAFF OF THE SECURITIES
AND EXCHANGE COMMISSION AND THE APPLICABLE STATE
DIVISIONS OF SECURITIES THAT REGISTRATION IS NOT
REQUIRED UNDER THE ACT OR STATE LAWS."
(b) If a Stockholder or its Transferee shall be in default under any
of the terms and conditions of this Agreement, or if any Shares are held in any
manner contrary to the terms and conditions of this Agreement, the Corporation
may avail itself of all remedies afforded at law or in equity, and in addition,
no dividends shall be paid upon the Shares with respect to which such default
exists, and the holder of such Shares shall not be entitled to vote.
(c) Notwithstanding any other provision in this Agreement to the
contrary, in order to protect the Corporation's trade secrets, no Shares may be
transferred to any person or entity, other than to or by Telxon, which directly
competes with the Corporation or, so long as Telxon shall own at least twenty
percent (20%) of the issued and outstanding Shares, Telxon, as such competitors
are determined by the Corporation or Telxon, respectively, in its reasonable
discretion. Any merger, consolidation, change of control or any other
reorganization of any Stockholder (other than Telxon) with or involving any such
competitor shall be deemed to be a transfer of Shares prohibited by the
preceding sentence. Failure of the Corporation or any Stockholders to acquire
Shares as to which notice has been given hereunder or for which a right to
acquire has become
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<PAGE> 18
exercisable, and the Transfer of any Shares to any Transferee or any subsequent
Transferee, shall not be deemed to release said Shares from any of the
restrictions herein contained. All restrictions imposed in this Agreement shall
apply to any future Transfers of Shares, whether acquired through voluntary acts
or by operation of law. Any purported Transfer of Shares in violation of this
Agreement will not affect the beneficial ownership of such Shares, nor shall
such Transfer be recognized in the books and records of the Corporation. The
Stockholder, or its successor, making the purported Transfer will retain the
right to vote, the right to receive dividends and liquidation proceeds upon, and
any other rights under, its Shares. Neither the Corporation, nor any Director or
officer of the Corporation, nor any transfer agent shall be liable for any
refusal to Transfer any Shares or issue any new certificates when it or he in
good faith believes that such Transfer or issuance would be in violation of this
Agreement. Nothing in this Agreement does or shall be interpreted as granting
any Stockholder any preemptive rights.
(d) No entity Stockholder shall suffer or permit the transfer of any
ownership interest in such Stockholder, or any other transaction, the effect of
which would be to circumvent the Corporation's or any Stockholder's rights under
Sections 3(b), (c) and (d) or the prohibitions contained in Section 6(c).
(e) This Agreement shall terminate and the Shares shall cease to be
subject to this Agreement upon the (i) merger of the Corporation with or into
any other corporation in an arms length transaction, (ii) consolidation of the
Corporation with any other corporation in an arms length transaction, (iii) sale
of all of the issued and outstanding Shares of the Corporation to a single
purchaser, (iv) sale or other disposition or all or substantially all of the
Corporation's assets or (v) registration of the Corporation's then issued and
outstanding Shares pursuant to Section 12 of the Exchange Act or the Corporation
is obligated to file periodic reports with the Securities and Exchange
Commission pursuant Section 15(d) of the Exchange Act; provided, however, that
any claim for breach of this Agreement arising prior to any such termination
shall survive such termination.
(f) Section headings are not to be considered part of this Agreement;
they are included solely for convenience and are not intended to be full or
accurate descriptions of the contents hereof.
(g) All of the terms and words used in this Agreement, regardless of
the number and gender in which they are used, shall be deemed and construed to
include any other number, singular or plural, and any other gender, masculine,
feminine or neuter, as the context of this Agreement or any section or clause
herein may require, the same as if such words had been fully and properly
written in the number and gender.
(h) This Agreement constitutes the entire agreement between the
parties with respect to the within subject matter and supersedes all prior and
contemporaneous agreements, written or oral, or understandings with respect
thereto. In addition to Telxon's written consent as specifically provided for
in, and required to amend, Section 4, (i) any waiver by a party of any
provision,
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covenant or condition hereof intended for its benefit must be in writing and
executed by that party; provided, however, that any waiver by the Stockholders
holding ninety five percent (95%) or more of the then issued and outstanding
Shares shall be deemed to be a waiver by all Stockholders, provided that such
waiver does not treat any Stockholder differently from other Stockholders, (ii)
no delay on the part of any party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
any party of any such right, power or privilege preclude any further exercise
thereof or the exercise of any other such right, power or privilege, (iii) this
Agreement may not be amended unless the Corporation and the Stockholders holding
ninety five percent (95%) or more of the then issued and outstanding Shares have
consented to the amendment in writing, provided that any amendment that treats a
Stockholder differently than other Stockholders must be consented to by such
Stockholder.
(i) All clauses of this Agreement are distinct and severable. If any
clause shall be held to be unenforceable or overly broad, a court of competent
jurisdiction is hereby authorized to modify such clause so as to render the
terms, provisions and restrictions hereof enforceable to the maximum extent
permitted by law.
(j) This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, but all of which, when taken together, shall
constitute one and the same instrument. Faxed signatures shall be deemed to be
originals for evidentiary purposes.
(k) Notices required hereunder shall be deemed to have been given
when mailed, by certified mail, addressed to the Stockholders as set forth in
the stock records of the Corporation, or as set forth in any notice of change of
address previously given in writing by the addressee to the addressor, and to
the Corporation at its principal offices, with a copy to Robert A Goodman, Esq.,
Goodman Weiss Miller LLP, 100 Erieview Plaza, 27th Floor, Cleveland, Ohio 44114,
or as set forth in any notice of change of address previously given in writing
by the addressee to the addressor.
(l) The terms, provisions and restrictions set forth in this
Agreement shall be binding upon the Stockholders of the Corporation and their
respective heirs, executors, administrators, personal representatives,
successors and assigns, and upon the Corporation and any successors-in-interest
to the Corporation.
(m) This Agreement shall be governed under, and in accordance with
the laws of the State of Delaware, without regards to conflict or choice of
laws, statutes, regulations, rules or principles. Any action relating to the
execution or performance of this Agreement may be brought in the courts, state
or federal, sitting in Cuyahoga or Summit County, Ohio, and each party hereto
consents to the jurisdiction and venue of such courts, and agrees not to contest
venue on the grounds of forum non conveniens or otherwise.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE> 20
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By: /s/ Samuel F. McKay
--------------------------------------
Its:_____________________________________
HAMBRECHT & QUIST
By:______________________________________
Its:_____________________________________
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
--------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By: /s/ Ken J. Wessels
--------------------------------------
Ken J. Wessels, CEO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:______________________________________
Its:______________________________________
CLARION CAPITAL CORPORATION
By: /s/ Morton Cohen
--------------------------------------
Its: Chairman
--------------------------------------
<PAGE> 21
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
---------------------------------
Roger J. Murphy, President
HOLDERS, INDIVIDUALS: /s/ Frank B. Carr
---------------------------------
FRANK B. CARR
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
---------------------------------
Roger J. Murphy, President
TELXON: TELXON CORPORATION
By: /s/ Kenneth W. Haver
---------------------------------
Kenneth W. Haver, Senior Vice President
and Chief Financial Officer
<PAGE> 23
EXHIBIT A and SCHEDULE 3(k)
AIRONET WIRELESS COMMUNICATIONS, INC.
CAPITALIZATION TABLE
<TABLE>
<S> <C>
Authorized Shares 3/31/98 15,000,000
SHARES OUTSTANDING PRE-INVESTMENT
Telxon Corporation 7,276,500
Telantis IV 808,500
Roger J. Murphy 200,000
Michael D. Grimes 60,000
Tom Snow 10,000
---------
Sub Total 8,355,000
SHARES OUTSTANDING POST-INVESTMENT(1)
Telxon Corporation 7,276,500
Telantis IV 808,500
Roger J. Murphy 200,000
Michael D. Grimes 60,000
Tom Snow 10,000
Axiom Venture Partners II Limited Partnership 714,285
W, A & H Investments LLC 142,857
Telantis V 104,762
Frank B. Carr 28,571
Clarion Capital Corporation 57,143
---------
Sub Total 9,402,618
OPTIONS
1996 Stock Option Plan (Grants Outstanding)(2) 980,500
Amended & Restated 1996 Stock Option Plan (Grants Outstanding)(3) 500,000
---------
Sub Total 1,480,500
WARRANTS(4)
Axiom Venture Partners II Limited Partnership 214,285
W, A & H Investments LLC 42,857
Frank B. Carr 8,571
Clarion Capital Corporation 17,143
Telantis V 31,429
James Furneaux 100,000
---------
Sub Total 414,285
</TABLE>
(1) - H&Q and McDonald & Co. Securities will have the right to purchase 571,429
shares and 142,857 shares respectively, by April 30,1998 (to the extent
these shares are not purchased in full, Aironet may offer these shares to
the other listed investors) Telantis Venture Partners V to purchase an
additional 63,492 shares if H&Q funds and 15,873 shares if McDonald & Co.
Securities funds (or proportionate amounts of any unpurchased shares
offered to other listed investors)
(2) - See Attached List
(3) - See Attached List
(4) - H&Q to be issued 171,429 warrants with the purchase in 1 above McDonald &
Co. Securities to be issued 42,857 warrants with the purchase in 1 above
Upon purchasing its proportionate allocation of shares, Telantis Venture
Partners V to be issued 19,048 warrants if H&Q funds and 4,762 warrants if
McDonald & Co. Securities funds or in proportion to purchases by other
listed investors of shares
Page 1
<PAGE> 1
Exhibit 10.4.2.1
ADDENDUM TO STOCKHOLDERS AGREEMENT
THIS ADDENDUM TO STOCKHOLDERS AGREEMENT (this "Addendum"), is made and
effective as of ___________, by and among AIRONET WIRELESS COMMUNICATIONS, INC.,
a Delaware corporation (the "Corporation"), the undersigned and each of the
signatories to the Stockholder Agreement with reference to which this Addendum
is made:
Pursuant to the STOCKHOLDERS AGREEMENT (the "Agreement") dated as of
March 31, 1998 by and among Aironet Wireless Communications, Inc., a
Delaware corporation (the "Corporation") and its stockholders, the
undersigned, now the holder of _____ shares of Common Stock, with
$.01 par value, of the Corporation evidenced by certificate(s)
issued by the Corporation, does hereby become a party to the
Agreement entitled to the rights, and subject to the obligations, as
set forth therein, to the extent the undersigned is record holder of
shares of the Corporation's capital stock with the same force and
effect as though he had executed said Agreement as an initial
signatory party thereto. The undersigned acknowledges that he has
read said Agreement and is familiar with and understands its terms.
In witness whereof, this Addendum has been executed by the undersigned this
____ day of ____________, 1999.
-------------------------------
(Signature)
<PAGE> 1
Exhibit 10.4.3
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
March 31, 1998 by and among Aironet Wireless Communications, Inc., a Delaware
corporation with its principal offices at 367 Ghent Road, Fairlawn, Ohio 44333
(the "Company"), and each of the undersigned (the "Security Holders").
WHEREAS, certain of the Security Holders (the "Investors") and the
Company have entered into a Subscription Agreement dated March 31, 1998 (the
"Subscription Agreement"), pursuant to which the Investors have acquired shares
of the Company's Common Stock, par value $.01 per share ("Common"), and warrants
to purchase shares of Common ("Warrants"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Subscription Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act and the Exchange Act.
"CONTINUING DIRECTORS" shall mean and include the persons constituting
Telxon's Board of Directors as of the date of this Agreement as well as each
person who becomes a director of Telxon subsequent to the date of this Agreement
whose election, or nomination for election by Telxon's stockholders, was
approved by an affirmative vote of at least a majority of the then Continuing
Directors (either by a specific vote or by approval of the proxy statement of
Telxon in which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in any such
case without objection by any member of such approving majority of the then
Continuing Directors to the nomination of such person or the naming of such
person as a director nominee), for so long as each such director shall remain in
office.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" shall mean a record holder of Registrable Securities, and its
successors and assigns.
A "HOSTILE CHANGE IN CONTROL" is deemed to have occurred if the
transaction causing such Change in Control shall not have been approved by the
affirmative vote of at least a majority of Telxon's Board of Directors, which
approving majority includes a majority of the then Continuing
<PAGE> 2
Directors. A "Change in Control" is deemed to have occurred upon (i) any Person
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of fifteen percent (15%) or more of the
combined voting power of Voting Securities of Telxon Corporation ("Telxon"), or
(ii) the holders of Telxon's securities entitled to vote thereon approve, or
there otherwise occurs or is commenced, a sale, lease, exchange or other
disposition of all or substantially all the assets, or the dissolution or
liquidation, of Telxon, or any merger, consolidation or reorganization to which
Telxon is a party and as the result of which Telxon's stockholders prior to the
transaction do not own at least fifty percent (50%) of the voting power of the
surviving entity in the election of directors, or (iii) the Continuing Directors
cease for any reason to constitute at least a majority of the Telxon Board of
Directors, or (iv) any other event occurs which is of such a nature that would
be required to be reported as a change in control in response to Item 1(a) of
the Current Report on Form 8-K, as in effect on the date hereof pursuant to
Section 13 or 15(d) of the Exchange Act, or similar successor public filing.
"IPO" shall mean the first firm commitment underwritten public offering
of the Common (or units which include the Common as an element) at a public
offering price of not less than Eight Dollars ($8.00) per share, pursuant to a
Registration Statement, on Form S-1 or other appropriate form, filed by the
Company under the Securities Act, pursuant to which the Company receives
proceeds, net of underwriting discounts, commissions and other expenses of the
offering, of not less than Eight Million Dollars ($8,000,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OPTIONS" shall mean options which have been granted on or prior to
the date hereof under the Aironet Wireless Communications, Inc. 1996 Employee
Stock Option Plan.
"PERSON" shall mean and include any individual, corporation,
partnership, group, association or other "person", as such term is used in
Section 14(d) of the Exchange Act, but excluding Telxon or any employee benefit
plan sponsored by Telxon.
"REGISTER" shall mean to register securities for offer and sale under
the Securities Act.
"REGISTRABLE SECURITIES" shall mean: (i) shares of the Common owned of
record on the date of this Agreement, whether by the Investors or any other
Holder; (ii) shares of the Common issued upon the exercise of the Options, or
upon the exercise of the Warrants owned of record on the date of this Agreement,
whether by the Investors or any other Holder; and (iii) any other securities
issued with respect to any shares described in clauses (i) and (ii) by way of a
stock dividend, stock split, distribution, reclassification, combination,
exchange, recapitalization, or otherwise; provided, however, that Registrable
Securities shall not include any securities which have previously been
Registered or which have previously been sold under Rule 144, and with respect
to an IPO, Registrable Securities shall not include any securities which are not
of a class then being offered for sale by the Company in the IPO.
2
<PAGE> 3
"REGISTRATION" shall mean the registration of securities under the
Securities Act.
"REGISTRATION STATEMENT" shall mean a registration statement under the
Securities Act.
"RULE 144" means Rule 144 promulgated under the Securities Act and any
successor or complementary rules thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SPIN-OFF" shall mean any spin-off, dividend or other distribution of
Registrable Securities by Telxon to its stockholders.
"VOTING SECURITIES" shall mean the Common Stock, par value $0.01 per share,
of Telxon and any and all other then outstanding Telxon securities ordinarily
having the right to vote generally in the election of the Telxon directors.
2. DEMAND REGISTRATION.
2.1 After the earlier of (i) the first anniversary of the date of this
Agreement, (ii) the consummation of an IPO or (iii) a Spin-Off or Hostile Change
in Control at any time, Holders of at least fifty percent (50%) of all
Registrable Securities then held by parties to this Agreement (or in the case of
a Spin-Off the percentage of Registrable Securities equal to the proportion
which the majority of the number shares of Common acquired pursuant to the
Subscription Agreement bears to all Registrable Securities at the time of the
Spin-Off) may request the Company to Register any or all of their Registrable
Securities (a "Demand Notice"). Demand Notices shall be made in writing and
shall specify the Holders making the Demand Notice, the number and type of
Registrable Securities that each requests to be Registered, whether the
Registrable Securities will be sold through an underwriter, and if so, the
underwriters name, address, telephone number and contact person. The Company
will prepare and file a Registration Statement in accordance with Section 4 for
the Registrable Securities to be Registered pursuant to a valid Demand Notice;
provided that the Company shall not be required to prepare or file a
Registration Statement under this Section 2 more than once in any twelve (12)
month period, more than twice after an IPO or more than three (3) times in
total. Registrations pursuant to Demand Notices are subject to the further
limitations set forth in Section 2.3.
2.2 Within ten (10) days from its receipt of a valid Demand Notice, the
Company shall deliver written notice to all Holders that, pursuant to a Demand
Notice, the Company will prepare and file a Registration Statement. Any Holder
who was not a party to the Demand Notice may, within ten (10) days from receipt
of the Company's notice, request the Company to include the Holder's Registrable
Securities in the Registration Statement. If the Holders that initiated a Demand
Notice specify therein that they intend to distribute their Registrable
Securities through
3
<PAGE> 4
an underwriter, then each Holder that requests inclusion in the Registration
Statement must participate in such underwriting, and become party to any
required agreements, including, but not limited to, customary underwriting and
indemnification agreements. The Company shall have the right to approve any
underwriter, which approval shall not be unreasonably withheld. In the event
that the underwriter limits the number of Registrable Securities to be included
in the offering to fewer than the number that has been requested for
Registration, then each Holder's Registrable Securities shall be included in the
underwriting pro rata, based on the total number of Registrable Securities held
by the participating Holders.
2.3 Registrations under this Section 2 are subject to the following
limitations: (i) the Company need not prepare or file a Registration Statement
pursuant to a Demand Notice within one hundred eighty (180) days after the
effective date of any Registration Statement filed by the Company in which the
Holders party to the Demand Notice could have included their Registrable
Securities; (ii) the Company may delay the effectiveness of a Demand Notice for
a period of not more than six months after receipt of a Demand Notice in any
12-month period if the Company furnishes a certificate signed by its president
stating that in the good faith judgment of the Company's board of directors it
would be detrimental to the Company for the Registration Statement to be
effected at such time; and (iii) the Company need not prepare or file a
Registration Statement pursuant to a Demand Notice if it is then preparing a
Registration Statement in connection with an underwritten public offering of
Company securities, and the Company may delay the effectiveness of such Demand
Notice until one hundred eighty (180) days after the effective date of such
Registration Statement.
3. INCIDENTAL REGISTRATION. Each time the Company determines to proceed to
Register any of its securities (other than a Registration pursuant to a Demand
Notice or on Forms S-4, S-8 or other limited purpose form), it will give written
notice of its intention to do so to each Holder. Upon the written request of any
Holder given within twenty (20) days after receipt by the Holder of the
Company's notice, the Company will use reasonable efforts to cause all the
Registrable Securities of the requesting Holders to be included in the
Registration Statement. If the Registration is for an underwritten offering,
then each Holder that requests inclusion in the Registration Statement must
participate in the underwriting if required by the Company and may participate
in the underwriting if the Holder timely requests in writing, and shall in
either such event become a party to any required agreements, including, but not
limited to, customary indemnification agreements. In the event that the
underwriter limits the number of Registrable Securities of requesting Holders as
a group to fewer than the number that has been requested for Registration
pursuant to this Section 3, then each Holder's Registrable Securities included
in the underwriting shall be reduced pro rata, based on the total number of
Registrable Securities held by the participating Holders. Notwithstanding the
foregoing, nothing in this Agreement to the contrary shall prevent the Company
from, at any time, abandoning or delaying a Registration Statement under this
Section 3.
4. REGISTRATION ON FORM S-2 OR FORM S-3.
4
<PAGE> 5
4.1 The Company shall use its best efforts to qualify for the use of Form
S-2 and Form S-3 or any comparable or successor form or forms of the Commission;
and to that end the Company shall register (whether or not required by law to do
so) the Registrable Securities under the Exchange Act, in accordance with the
provisions of the Exchange Act following the effective date of the first
registration of any securities of the Company on Form S-1. After the Company has
qualified for the use of either Form S-2 or Form S-3, or both, in addition to
the rights contained in the Sections 2 and 3, the Holders shall have the right
to request registrations on Form S-2 or Form S-3 (by written request stating the
number of shares of Registrable Securities to be disposed of and the intended
method of disposition of such shares by such Holder or Holders).
4.2 Registrations under this Section 4 are subject to the following
limitations: (i) the Company need not prepare or file a Registration Statement
within ninety (90) days after the effective date of any Registration Statement
filed by the Company in which the Holders requesting Registration under this
Section 4 could have included all of their Registrable Securities; (ii) the
Company may delay the effectiveness of a request for Registration under this
Section 4 for a period of not more than ninety (90) days after receipt of a
Holder's request for Registration, in any twelve (12) month period if the
Company furnishes a certificate signed by its president stating that in the good
faith judgment of the Company's board of directors it would be detrimental to
the Company for the Registration Statement to be effected at such time; and
(iii) the Company need not prepare or file a Registration Statement pursuant to
this Section 4 if it is then preparing a Registration Statement in connection
with an underwritten public offering of Company securities, and the Company may
delay the effectiveness of a request for Registration under this Section 4 until
one ninety (90) days after the effective date of such Registration Statement, if
so required by the underwriter for such offering.
4.3 Upon a request for Registration under this Section 4, the Company shall
give notice to each Holder of its receipt of such request. Upon the written
request of any Holder given within twenty (20) days after receipt by the Holder
of the Company's notice, the Company will use reasonable efforts to cause all
the Registrable Securities of the requesting Holders to be included in the
Registration Statement. Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-2 or Form S-3 to the extent requested by the Holder or
Holders thereof for purposes of disposition.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by this
Agreement to Register any Registrable Securities, the Company will:
5.1 use reasonable efforts to prepare and file with the Commission a
Registration Statement with respect to such securities and to cause such
registration statement to become and remain effective until completion of the
proposed offering, but no longer than nine (9) months;
5
<PAGE> 6
5.2 prepare and file with the Commission such amendments and supplements to
the Registration Statement and the prospectus forming a part thereof as may be
necessary to keep the Registration Statement effective until completion of the
proposed offering, but no longer than nine (9) months;
5.3 furnish to each selling Holder and the underwriters, if any, a
reasonable number of copies of the Registration Statement, the preliminary
prospectus, prospectus and such other documents as may reasonably be required in
order to facilitate the public sale or other disposition of the securities owned
by such selling Holder;
5.4 use reasonable efforts to register or qualify the securities covered by
the Registration Statement under all state securities laws as each selling
Holder reasonably requests; provided, however, that the Company shall not be
required to qualify or register the securities, or take any other action, if to
do so would require the Company to qualify as a foreign corporation in any in
which it is not then qualified, or subject it to taxation or general service of
process in any state in which it is not then taxed or subject to service of
process;
5.5 within a reasonable time before each filing with the Commission of a
Registration Statement or prospectus, or amendments or supplements thereto,
furnish to counsel selected by the selling Holders copies of such documents,
which shall be subject to the reasonable approval of such counsel, which if not
promptly objected to shall be deemed approved;
5.6 notify each selling Holder, promptly after it shall receive notice
thereof, of the time when the Registration Statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
5.7 notify each selling Holder promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or prospectus or
for additional information;
5.8 prepare and promptly file with the Commission, upon the request of a
selling Holder, any amendments or supplements to the Registration Statement or
prospectus which, in the opinion of counsel for the Company, is required under
the Securities Act to permit the distribution of the Registered securities by
the selling Holder(s);
5.9 prepare and promptly file with the Commission, and promptly notify each
selling Holder as to, such amendments and supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as a result of which the prospectus then in effect would include an untrue
statement of a material fact or fail to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
6
<PAGE> 7
5.10 advise each selling Holder, promptly after the Company receives notice
or obtains knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or the
initiation or threat by the Commission of any proceeding for that purpose, and
the Company shall promptly use reasonable efforts to prevent the issuance of any
stop order, if such stop order should be issued, to obtain its withdrawal;
5.11 not file any amendment or supplement to such registration statement or
prospectus to which a selling Holder shall have reasonably objected in writing
on grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act, provided that the Company
has been furnished with a copy of the objection reasonably in advance of the
intended filing, unless in the opinion of counsel for the Company the filing of
such amendment or supplement is reasonably necessary to protect the Company from
any liabilities under any applicable federal or state law; and
5.12 furnish to each selling Holder a legal opinion of counsel for the
Company, dated the effective date of the Registration Statement, and a "comfort"
letter from the independent public accountants who have certified the Company's
financial statements included in the Registration Statement, if reasonably
required by the selling Holder to sell the Registered securities.
6. LISTING. In connection with an IPO, the Company will use reasonable
efforts to cause the Registered securities to be listed on a securities exchange
or quoted on the Nasdaq Stock Market quotation system; and for all other
Registrable Securities which have been Registered under Section 2 or under
Section 3, if the Company's securities of the same type as the Registrable
Securities are listed on a securities exchange or quoted on the Nasdaq Stock
Market quotation system, then the Company will use reasonable efforts to cause
any Registrable Securities Registered under Section 2 or under Section 3 to also
be listed.
7. EXPENSES. The Company shall bear all fees, costs and expenses of any
Registration Statement prepared hereunder, including but not limited to all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, and all legal fees of the Company and
of one (1) attorney hired to represent the Holders as a group, and disbursements
and other expenses of the Company incurred in connection with its complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered or qualified, except that underwriting
discounts, commissions, transfer taxes and legal fees for the selling Holders
(other than a single attorney as set forth in this Section 7) shall be borne by
such Holder(s).
7
<PAGE> 8
8. INDEMNIFICATION.
8.1 The Company will defend, indemnify and hold harmless each selling
Holder, each of its officers, directors and partners, and each person, if any,
who controls such selling Holder, and each underwriter (if any) from and against
any and all loss, damage, liability, cost and expense to which a selling Holder
or any such controlling person may become subject under the Securities Act or
otherwise, to the extent arising out of or based on any untrue statement (or
alleged untrue statement) of any material fact contained in a Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arising out of or are based upon the omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or omission so made
in conformity with information furnished to the Company by such selling Holder,
such a controlling person, or such underwriter, and stated to be specifically
for use therein.
8.2 Each selling Holder will defend, indemnify and hold harmless the
Company and each other selling Holder and each person, if any, who controls the
Company or a selling Holder from and against any and all loss, damage,
liability, cost and expense to which the Company or such selling Holder or
controlling person may become subject under the Securities Act or otherwise, to
the extent arising out of or based on any untrue statement (or alleged untrue
statement) of any material fact contained in a Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
to the extent, but only to the extent, that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by the selling Holder. A Holder's indemnification obligation under
this Section 8.2 shall be limited to such Holders proceeds from the sale of its
Registrable Securities under the subject Registration Statement.
8.3. NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an
indemnified party of notice of any claim, liability or expense to which the
indemnification obligations set forth in Sections 8.1 or 8.2 would apply, the
indemnified party shall give notice thereof in writing to the indemnifying
party. Such notice shall state the information then available regarding the
amount and nature of such claim, liability or expense. If within twenty (20)
days after receiving such notice the indemnifying party gives written notice to
the indemnified party stating that (a) it would be liable under the provisions
hereof for indemnity in the amount of such claim if such claim were successful
and (b) that it disputes and intends to defend against such claim, liability or
expense at its own cost and expense, then counsel for the defense shall be
selected by the indemnifying party (subject to the consent of the indemnified
party, which consent shall not be unreasonably withheld or delayed), and the
indemnified party shall not be required to make any payment with respect to
8
<PAGE> 9
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense. The indemnifying party
shall have the right, with the consent of the indemnified party, which consent
shall not be unreasonably withheld or delayed, to settle all indemnifiable
matters related to claims by third parties which are susceptible to being
settled, provided its obligation to indemnify the indemnifying party therefor
will be fully satisfied. The indemnifying party shall keep the indemnified party
appraised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. The indemnified party shall make
available to the indemnifying party all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in any defense undertaken by it pursuant to this Section 8.
Notwithstanding anything herein to the contrary, the indemnified party shall at
all times have the right to fully participate in such defense at its own expense
directly or through counsel; provided, however, if the named parties to the
action or proceeding include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party may, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense.
9. COMPLIANCE WITH RULE 144. From the first date that the Company is
required to file any reports under Section 13 or 15(d) of the Exchange Act, and
until the Holders as a group shall own less than an aggregate of ten percent
(10%) of any class or series of equity securities of the Company, the Company
shall comply with the public information requirements which are conditions to
the availability of Rule 144 for the sale of Registrable Securities. Company
shall cooperate with the Holders in supplying such information as may be
necessary for them to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144 with respect to the Holders and such Registrable
Securities.
10. AMENDMENTS; WAIVER. The provisions of this Agreement may be amended and
waived pursuant to a written agreement executed by the Company and Holders
holding ninety five percent (95%) or more of the then issued and outstanding
Registrable Securities, provided that any amendment or waiver that treats a
Holder differently than other Holders must be consented to by such Holders.
11. TRANSFERABILITY OF REGISTRATION RIGHTS. A transferee acquiring
Registrable Securities may succeed to the rights and obligations under this
Agreement appurtenant to the Registrable Securities if, but only if, such
transferee acquires a minimum of fifty thousand (50,000) shares of
9
<PAGE> 10
Registrable Securities in a single transaction, is not a direct competitor of
the Company or of Telxon Corporation (if Telxon Corporation then owns twenty
percent (20%) or more of the issued and outstanding capital stock of the
Company) and the transferee becomes a signatory hereto. The original signatory
and any immediate or subsequent transferee which becomes a party hereto shall
retain the rights and obligations under this Agreement with respect to those
Registrable Securities which it remains record owner.
12. MISCELLANEOUS.
12.1 GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and governed by the laws of the State of Ohio, without regards to conflict or
choice of laws, statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Agreement shall be brought in the
courts, state or federal, sitting in Cuyahoga or Summit County, Ohio, and each
party hereto consents to the jurisdiction and venue of such courts, and agrees
not to contest venue on the grounds of forum non conveniens or otherwise.
12.2 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given upon receipt, or if delivered or sent by facsimile transmission, upon
confirmation of transmission, or if sent by overnight courier, the second day
after deposit, as follows:
TO THE HOLDERS: To the respective addresses set forth
in the stock records of the Company
with a copy to: A legal counsel designated by
a majority of the Holders
TO THE COMPANY Aironet Wireless Communications, Inc.
at the address set forth at the
beginning of this Agreement.
Attn: President
Fax Number: 330-664-7986
with a copy to: Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
Attn: Robert A. Goodman/Jay R. Faeges
Fax Number: 216-363-5835
or to such other address of which any party may notify the other parties
provided in accordance with this Section 12.2.
12.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior and
10
<PAGE> 11
contemporaneous understandings and agreements, written or oral, between or among
the parties relating to the subject matter hereof.
12.4 ASSIGNABILITY. Except as set forth in Section 11, this Agreement may
not be assigned, and no right or obligation herein may be assigned or delegated,
without the written consent of the Company, and absent such consent any such
assignment or delegation shall be void and of no effect. Subject to the
foregoing, this Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective permitted
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
12.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine, feminine
or neuter pronoun, shall include the others as the context may require.
12.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties, and for
evidentiary purposes shall be deemed to be an original.
12.7 SEVERABILITY. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had been limited or modified
(consistent with its general intent) to the extent necessary to make it valid,
legal and enforceable, or if it shall not be possible to so limit or modify such
invalid, illegal or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or part of a provision had never been contained in this Agreement, so
long as to do so would not materially alter the rights or obligations of the
parties taken as a whole.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
- ------------------- PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
--------------------------------------
Its:
--------------------------------------
HAMBRECHT & QUIST
By:
--------------------------------------
Its:
--------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
--------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
--------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
--------------------------------------
Its:
--------------------------------------
CLARION CAPITAL CORPORATION
By:
--------------------------------------
Its:
--------------------------------------
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
- ------------------- PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
--------------------------------------
Its:
--------------------------------------
HAMBRECHT & QUIST
By:
--------------------------------------
Its:
--------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
--------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
--------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:______________________________________
Its:______________________________________
CLARION CAPITAL CORPORATION
By: _____________________________________
Its:______________________________________
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
- ------------------- PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
--------------------------------------
Its:
--------------------------------------
HAMBRECHT & QUIST
By:
--------------------------------------
Its:
--------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
--------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
/s/ Ken J. Wessels
--------------------------------------
Ken J. Wessels, CEO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:______________________________________
Its:______________________________________
CLARION CAPITAL CORPORATION
By: _____________________________________
Its:______________________________________
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED
- ------------------- PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
--------------------------------------
Its:
--------------------------------------
HAMBRECHT & QUIST
By:
--------------------------------------
Its:
--------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By:
--------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
--------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:______________________________________
Its:______________________________________
CLARION CAPITAL CORPORATION
By: /s/ Morton Cohen
---------------------------------------
Its: Chairman
---------------------------------------
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
- --------
By: /s/ Roger J. Murphy
--------------------------------
Roger J. Murphy, President
HOLDERS, INDIVIDUALS:
- --------------------- --------------------------------
FRANK B. CARR
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
- --------
By:
------------------------------------------
Roger J. Murphy, President
TELXON CORPORATION
INVESTORS, INDIVIDUALS: By: /s/ Frank B. Carr
- ----------------------- ------------------------------------------
FRANK B. CARR
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
- --------
By: /s/ Roger J. Murphy
------------------------------------------
Roger J. Murphy, President
TELXON: TELXON CORPORATION
- ------
By: /s/ Kenneth W. Haver
------------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 10.4.3.1
ADDENDUM TO REGISTRATION RIGHTS AGREEMENT
THIS ADDENDUM TO REGISTRATION RIGHTS AGREEMENT (this "Addendum"), is made
and effective as of____________, by and among AIRONET WIRELESS COMMUNICATIONS,
INC., a Delaware corporation (the "Corporation"), the undersigned and each of
the signatories to the Registration Rights Agreement with reference to which
this Addendum is made:
Pursuant to the REGISTRATION RIGHTS AGREEMENT (the "Agreement")
dated as of March 31, 1998 by and among Aironet Wireless
Communications, Inc., a Delaware corporation (the "Corporation") and
its stockholders, the undersigned, now the holder of _______ shares
of Common Stock, with $.01 par value, of the Corporation evidenced
by certificate(s) issued by the Corporation, does hereby become a
party to the Agreement entitled to the rights, and subject to the
obligations, as set forth therein, to the extent the undersigned is
record holder of shares of the Corporation's capital stock, with the
same force and effect as though he had executed said Agreement as an
initial signatory party thereto. The undersigned acknowledges that
he has read said Agreement and is familiar with and understands its
terms.
In witness whereof, this Addendum has been executed by the undersigned this
____ day of ____________, 1999.
------------------------------------------
(Signature)
<PAGE> 1
Exhibit 10.4.3.2
ADDENDUM
1. Aironet Wireless Communications, Inc., a Delaware corporation (the
"Corporation"), and certain of its Stockholders are parties to a REGISTRATION
RIGHTS AGREEMENT (the "Agreement") dated as of March 31, 1998, a copy of which
is attached hereto and the terms of which are incorporated herein by this
reference (any initially capitalized term used herein but which is not defined
where first used has the meaning defined in the Agreement).
2. The undersigned, now the holder of 808,500 shares of the Corporation's
common stock ("Shares"), is a party to the Stock Purchase Agreement dated March
31, 1997, by and between the Corporation and the undersigned (the "Prior
Agreement"), and it desires to become a party to the Agreement in consideration
of the rights granted to the Stockholders therein.
NOW, THEREFORE, the undersigned does hereby become a party to the Agreement
with the same force and effect as though it had executed the Agreement as an
initial signatory thereto. The Shares are hereby bound by the terms and
conditions of the Agreement and the undersigned is entitled to the rights and
subject to the obligations of the Stockholders thereunder. The undersigned
acknowledges that it has caused one of its officers to read the Agreement and he
is familiar with and understands its terms, and that the Agreement supersedes
any registration rights granted or referred to in Section 14 of the Prior
Agreement and the provisions of said section 14 are hereby satisfied.
Dated as of April 30, 1998.
Telantis Venture Partners IV, Inc.
By: /s/ Adam H. Meyerson
-------------------------------------
Adam H. Meyerson
Its: President
------------------------------------
Aironet Wireless Communications, Inc.
By /s/ Roger J. Murphy
-------------------------------------
Roger J. Murphy, President and
Chief Executive Officer
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
March 31, 1998 by and among Aironet Wireless Communications, Inc., a Delaware
corporation with its principal offices at 367 Ghent Road, Fairlawn, Ohio 44333
(the "Company"), and each of the undersigned (the "Security Holders").
WHEREAS, certain of the Security Holders (the "Investors") and the Company
have entered into a Subscription Agreement dated March 31, 1998 (the
"Subscription Agreement"), pursuant to which the Investors have acquired shares
of the Company's Common Stock, par value $.01 per share ("Common"), and warrants
to purchase shares of Common ("Warrants"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the transactions contemplated by the Subscription Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the following respective meanings:
"COMMISSION" shall mean the United States Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act and the Exchange Act.
"CONTINUING DIRECTORS" shall mean and include the persons constituting
Telxon's Board of Directors as of the date of this Agreement as well as each
person who becomes a director of Telxon subsequent to the date of this Agreement
whose election, or nomination for election by Telxon's stockholders, was
approved by an affirmative vote of at least a majority of the then Continuing
Directors (either by a specific vote or by approval of the proxy statement of
Telxon in which such person is named as a nominee for director or of the
inclusion of such person in such proxy statement as such a nominee, in any such
case without objection by any member of such approving majority of the then
Continuing Directors to the nomination of such person or the naming of such
person as a director nominee), for so long as each such director shall remain in
office.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended,
or any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"HOLDER" shall mean a record holder of Registrable Securities, and its
successors and assigns.
A "HOSTILE CHANGE IN CONTROL" is deemed to have occurred if the transaction
causing such Change in Control shall not have been approved by the affirmative
vote of at least a majority of Telxon's Board of Directors, which approving
majority includes a majority of the then Continuing
<PAGE> 3
Directors. A "Change in Control" is deemed to have occurred upon (i) any Person
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of fifteen percent (15%) or more of the
combined voting power of Voting Securities of Telxon Corporation ("Telxon"), or
(ii) the holders of Telxon's securities entitled to vote thereon approve, or
there otherwise occurs or is commenced, a sale, lease, exchange or other
disposition of all or substantially all the assets, or the dissolution or
liquidation, of Telxon, or any merger, consolidation or reorganization to which
Telxon is a party and as the result of which Telxon's stockholders prior to the
transaction do not own at least fifty percent (50%) of the voting power of the
surviving entity in the election of directors, or (iii) the Continuing Directors
cease for any reason to constitute at least a majority of the Telxon Board of
Directors, or (iv) any other event occurs which is of such a nature that would
be required to be reported as a change in control in response to Item 1(a) of
the Current Report on Form 8-K, as in effect on the date hereof pursuant to
Section 13 or 15(d) of the Exchange Act, or similar successor public filing.
"IPO" shall mean the first firm commitment underwritten public offering of
the Common (or units which include the Common as an element) at a public
offering price of not less than Eight Dollars ($8.00) per share, pursuant to a
Registration Statement, on Form S-1 or other appropriate form, filed by the
Company under the Securities Act, pursuant to which the Company receives
proceeds, net of underwriting discounts, commissions and other expenses of the
offering, of not less than Eight Million Dollars ($8,000,000).
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OPTIONS" shall mean options which have been granted on or prior to the
date hereof under the Aironet Wireless Communications, Inc. 1996 Employee Stock
Option Plan.
"PERSON" shall mean and include any individual, corporation, partnership,
group, association or other "person", as such term is used in Section 14(d) of
the Exchange Act, but excluding Telxon or any employee benefit plan sponsored by
Telxon.
"REGISTER" shall mean to register securities for offer and sale under the
Securities Act.
"REGISTRABLE SECURITIES" shall mean: (i) shares of the Common owned of
record on the date of this Agreement, whether by the Investors or any other
Holder; (ii) shares of the Common issued upon the exercise of the Options, or
upon the exercise of the Warrants owned of record on the date of this Agreement,
whether by the Investors or any other Holder; and (iii) any other securities
issued with respect to any shares described in clauses (i) and (ii) by way of a
stock dividend, stock split, distribution, reclassification, combination,
exchange, recapitalization, or otherwise; provided, however, that Registrable
Securities shall not include any securities which have previously been
Registered or which have previously been sold under Rule 144, and with respect
to an IPO, Registrable Securities shall not include any securities which are not
of a class then being offered for sale by the Company in the IPO.
2
<PAGE> 4
"REGISTRATION" shall mean the registration of securities under the
Securities Act.
"REGISTRATION STATEMENT" shall mean a registration statement under the
Securities Act.
"RULE 144" means Rule 144 promulgated under the Securities Act and any
successor or complementary rules thereto.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"SPIN-OFF" shall mean any spin-off, dividend or other distribution of
Registrable Securities by Telxon to its stockholders.
"VOTING SECURITIES" shall mean the Common Stock, par value $0.01 per share,
of Telxon and any and all other then outstanding Telxon securities ordinarily
having the right to vote generally in the election of the Telxon directors.
2. DEMAND REGISTRATION.
2.1 After the earlier of (i) the first anniversary of the date of this
Agreement, (ii) the consummation of an IPO or (iii) a Spin-Off or Hostile Change
in Control at any time, Holders of at least fifty percent (50%) of all
Registrable Securities then held by parties to this Agreement (or in the case of
a Spin-Off the percentage of Registrable Securities equal to the proportion
which the majority of the number shares of Common acquired pursuant to the
Subscription Agreement bears to all Registrable Securities at the time of the
Spin-Off) may request the Company to Register any or all of their Registrable
Securities (a "Demand Notice"). Demand Notices shall be made in writing and
shall specify the Holders making the Demand Notice, the number and type of
Registrable Securities that each requests to be Registered, whether the
Registrable Securities will be sold through an underwriter, and if so, the
underwriters name, address, telephone number and contact person. The Company
will prepare and file a Registration Statement in accordance with Section 4 for
the Registrable Securities to be Registered pursuant to a valid Demand Notice;
provided that the Company shall not be required to prepare or file a
Registration Statement under this Section 2 more than once in any twelve (12)
month period, more than twice after an IPO or more than three (3) times in
total. Registrations pursuant to Demand Notices are subject to the further
limitations set forth in Section 2.3.
2.2 Within ten (10) days from its receipt of a valid Demand Notice, the
Company shall deliver written notice to all Holders that, pursuant to a Demand
Notice, the Company will prepare and file a Registration Statement. Any Holder
who was not a party to the Demand Notice may, within ten (10) days from receipt
of the Company's notice, request the Company to include the Holder's Registrable
Securities in the Registration Statement. If the Holders that initiated a Demand
Notice specify therein that they intend to distribute their Registrable
Securities through
3
<PAGE> 5
an underwriter, then each Holder that requests inclusion in the Registration
Statement must participate in such underwriting, and become party to any
required agreements, including, but not limited to, customary underwriting and
indemnification agreements. The Company shall have the right to approve any
underwriter, which approval shall not be unreasonably withheld. In the event
that the underwriter limits the number of Registrable Securities to be included
in the offering to fewer than the number that has been requested for
Registration, then each Holder's Registrable Securities shall be included in the
underwriting pro rata, based on the total number of Registrable Securities held
by the participating Holders.
2.3 Registrations under this Section 2 are subject to the following
limitations: (i) the Company need not prepare or file a Registration Statement
pursuant to a Demand Notice within one hundred eighty (180) days after the
effective date of any Registration Statement filed by the Company in which the
Holders party to the Demand Notice could have included their Registrable
Securities; (ii) the Company may delay the effectiveness of a Demand Notice for
a period of not more than six months after receipt of a Demand Notice in any
12-month period if the Company furnishes a certificate signed by its president
stating that in the good faith judgment of the Company's board of directors it
would be detrimental to the Company for the Registration Statement to be
effected at such time; and (iii) the Company need not prepare or file a
Registration Statement pursuant to a Demand Notice if it is then preparing a
Registration Statement in connection with an underwritten public offering of
Company securities, and the Company may delay the effectiveness of such Demand
Notice until one hundred eighty (180) days after the effective date of such
Registration Statement.
3. INCIDENTAL REGISTRATION. Each time the Company determines to proceed to
Register any of its securities (other than a Registration pursuant to a Demand
Notice or on Forms S-4, S-8 or other limited purpose form), it will give written
notice of its intention to do so to each Holder. Upon the written request of any
Holder given within twenty (20) days after receipt by the Holder of the
Company's notice, the Company will use reasonable efforts to cause all the
Registrable Securities of the requesting Holders to be included in the
Registration Statement. If the Registration is for an underwritten offering,
then each Holder that requests inclusion in the Registration Statement must
participate in the underwriting if required by the Company and may participate
in the underwriting if the Holder timely requests in writing, and shall in
either such event become a party to any required agreements, including, but not
limited to, customary indemnification agreements. In the event that the
underwriter limits the number of Registrable Securities of requesting Holders as
a group to fewer than the number that has been requested for Registration
pursuant to this Section 3, then each Holder's Registrable Securities included
in the underwriting shall be reduced pro rata, based on the total number of
Registrable Securities held by the participating Holders. Notwithstanding the
foregoing, nothing in this Agreement to the contrary shall prevent the Company
from, at any time, abandoning or delaying a Registration Statement under this
Section 3.
4. REGISTRATION ON FORM S-2 OR FORM S-3.
4
<PAGE> 6
4.1 The Company shall use its best efforts to qualify for the use of
Form S-2 and Form S-3 or any comparable or successor form or forms of the
Commission; and to that end the Company shall register (whether or not
required by law to do so) the Registrable Securities under the Exchange
Act, in accordance with the provisions of the Exchange Act following the
effective date of the first registration of any securities of the Company
on Form S-1. After the Company has qualified for the use of either Form S-2
or Form S-3, or both, in addition to the rights contained in the Sections 2
and 3, the Holders shall have the right to request registrations on Form
S-2 or Form S-3 (by written request stating the number of shares of
Registrable Securities to be disposed of and the intended method of
disposition of such shares by such Holder or Holders).
4.2 Registrations under this Section 4 are subject to the following
limitations: (i) the Company need not prepare or file a Registration
Statement within ninety (90) days after the effective date of any
Registration Statement filed by the Company in which the Holders requesting
Registration under this Section 4 could have included all of their
Registrable Securities; (ii) the Company may delay the effectiveness of a
request for Registration under this Section 4 for a period of not more than
ninety (90) days after receipt of a Holder's request for Registration, in
any twelve (12) month period if the Company furnishes a certificate signed
by its president stating that in the good faith judgment of the Company's
board of directors it would be detrimental to the Company for the
Registration Statement to be effected at such time; and (iii) the Company
need not prepare or file a Registration Statement pursuant to this Section
4 if it is then preparing a Registration Statement in connection with an
underwritten public offering of Company securities, and the Company may
delay the effectiveness of a request for Registration under this Section 4
until one ninety (90) days after the effective date of such Registration
Statement, if so required by the underwriter for such offering.
4.3 Upon a request for Registration under this Section 4, the Company
shall give notice to each Holder of its receipt of such request. Upon the
written request of any Holder given within twenty (20) days after receipt
by the Holder of the Company's notice, the Company will use reasonable
efforts to cause all the Registrable Securities of the requesting Holders
to be included in the Registration Statement. Subject to the foregoing, the
Company will use its best efforts to effect promptly the registration of
all shares of Registrable Securities on Form S-2 or Form S-3 to the extent
requested by the Holder or Holders thereof for purposes of disposition.
5. REGISTRATION PROCEDURES. If and whenever the Company is required by
this Agreement to Register any Registrable Securities, the Company will:
5.1 use reasonable efforts to prepare and file with the Commission a
Registration Statement with respect to such securities and to cause such
registration statement to become and remain effective until completion of the
proposed offering, but no longer than nine (9) months;
5
<PAGE> 7
5.2 prepare and file with the Commission such amendments and supplements
to the Registration Statement and the prospectus forming a part thereof as may
be necessary to keep the Registration Statement effective until completion of
the proposed offering, but no longer than nine (9) months;
5.3 furnish to each selling Holder and the underwriters, if any, a
reasonable number of copies of the Registration Statement, the preliminary
prospectus, prospectus and such other documents as may reasonably be required in
order to facilitate the public sale or other disposition of the securities owned
by such selling Holder;
5.4 use reasonable efforts to register or qualify the securities covered
by the Registration Statement under all state securities laws as each selling
Holder reasonably requests; provided, however, that the Company shall not be
required to qualify or register the securities, or take any other action, if to
do so would require the Company to qualify as a foreign corporation in any in
which it is not then qualified, or subject it to taxation or general service of
process in any state in which it is not then taxed or subject to service of
process;
5.5 within a reasonable time before each filing with the Commission of a
Registration Statement or prospectus, or amendments or supplements thereto,
furnish to counsel selected by the selling Holders copies of such documents,
which shall be subject to the reasonable approval of such counsel, which if not
promptly objected to shall be deemed approved;
5.6 notify each selling Holder, promptly after it shall receive notice
thereof, of the time when the Registration Statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
5.7 notify each selling Holder promptly of any request by the Commission
for the amending or supplementing of the Registration Statement or prospectus or
for additional information;
5.8 prepare and promptly file with the Commission, upon the request of a
selling Holder, any amendments or supplements to the Registration Statement or
prospectus which, in the opinion of counsel for the Company, is required under
the Securities Act to permit the distribution of the Registered securities by
the selling Holder(s);
5.9 prepare and promptly file with the Commission, and promptly notify
each selling Holder as to, such amendments and supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as a result of which the prospectus then in effect would include an untrue
statement of a material fact or fail to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading;
6
<PAGE> 8
5.10 advise each selling Holder, promptly after the Company receives
notice or obtains knowledge thereof, of the issuance of any stop order by the
Commission suspending the effectiveness of the Registration Statement or the
initiation or threat by the Commission of any proceeding for that purpose, and
the Company shall promptly use reasonable efforts to prevent the issuance of any
stop order, if such stop order should be issued, to obtain its withdrawal;
5.11 not file any amendment or supplement to such registration statement
or prospectus to which a selling Holder shall have reasonably objected in
writing on grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act, provided that the
Company has been furnished with a copy of the objection reasonably in advance of
the intended filing, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the Company
from any liabilities under any applicable federal or state law; and
5.12 furnish to each selling Holder a legal opinion of counsel for the
Company, dated the effective date of the Registration Statement, and a "comfort"
letter from the independent public accountants who have certified the Company's
financial statements included in the Registration Statement, if reasonably
required by the selling Holder to sell the Registered securities.
6. LISTING. In connection with an IPO, the Company will use reasonable
efforts to cause the Registered securities to be listed on a securities exchange
or quoted on the Nasdaq Stock Market quotation system; and for all other
Registrable Securities which have been Registered under Section 2 or under
Section 3, if the Company's securities of the same type as the Registrable
Securities are listed on a securities exchange or quoted on the Nasdaq Stock
Market quotation system, then the Company will use reasonable efforts to cause
any Registrable Securities Registered under Section 2 or under Section 3 to also
be listed.
7. EXPENSES. The Company shall bear all fees, costs and expenses of any
Registration Statement prepared hereunder, including but not limited to all
registration, filing and NASD fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, and all legal fees of the Company and
of one (1) attorney hired to represent the Holders as a group, and disbursements
and other expenses of the Company incurred in connection with its complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered or qualified, except that underwriting
discounts, commissions, transfer taxes and legal fees for the selling Holders
(other than a single attorney as set forth in this Section 7) shall be borne by
such Holder(s).
7
<PAGE> 9
8. INDEMNIFICATION.
8.1 The Company will defend, indemnify and hold harmless each selling
Holder, each of its officers, directors and partners, and each person, if any,
who controls such selling Holder, and each underwriter (if any) from and against
any and all loss, damage, liability, cost and expense to which a selling Holder
or any such controlling person may become subject under the Securities Act or
otherwise, to the extent arising out of or based on any untrue statement (or
alleged untrue statement) of any material fact contained in a Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arising out of or are based upon the omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in which they were
made, not misleading; provided, however, that the Company will not be liable in
any such case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or omission so made
in conformity with information furnished to the Company by such selling Holder,
such a controlling person, or such underwriter, and stated to be specifically
for use therein.
8.2 Each selling Holder will defend, indemnify and hold harmless the
Company and each other selling Holder and each person, if any, who controls the
Company or a selling Holder from and against any and all loss, damage,
liability, cost and expense to which the Company or such selling Holder or
controlling person may become subject under the Securities Act or otherwise, to
the extent arising out of or based on any untrue statement (or alleged untrue
statement) of any material fact contained in a Registration Statement, any
prospectus contained therein or any amendment or supplement thereto, or arise
out of or are based upon the omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
to the extent, but only to the extent, that any such loss, damage, liability,
cost or expense arises out of or is based upon an untrue statement or omission
made in reliance upon and in conformity with written information furnished to
the Company by the selling Holder. A Holder's indemnification obligation under
this Section 8.2 shall be limited to such Holders proceeds from the sale of its
Registrable Securities under the subject Registration Statement.
8.3. NOTICE; DEFENSE OF CLAIMS. Promptly after receipt by an indemnified
party of notice of any claim, liability or expense to which the indemnification
obligations set forth in Sections 8.1 or 8.2 would apply, the indemnified party
shall give notice thereof in writing to the indemnifying party. Such notice
shall state the information then available regarding the amount and nature of
such claim, liability or expense. If within twenty (20) days after receiving
such notice the indemnifying party gives written notice to the indemnified party
stating that (a) it would be liable under the provisions hereof for indemnity in
the amount of such claim if such claim were successful and (b) that it disputes
and intends to defend against such claim, liability or expense at its own cost
and expense, then counsel for the defense shall be selected by the indemnifying
party (subject to the consent of the indemnified party, which consent shall not
be unreasonably withheld or delayed), and the indemnified party shall not be
required to make any payment with respect to
8
<PAGE> 10
such claim, liability or expense as long as the indemnifying party is conducting
a good faith and diligent defense at its own expense. The indemnifying party
shall have the right, with the consent of the indemnified party, which consent
shall not be unreasonably withheld or delayed, to settle all indemnifiable
matters related to claims by third parties which are susceptible to being
settled, provided its obligation to indemnify the indemnifying party therefor
will be fully satisfied. The indemnifying party shall keep the indemnified party
appraised of the status of the claim, liability or expense and any resulting
suit, proceeding or enforcement action, shall furnish the indemnified party with
all documents and information that the indemnified party shall reasonably
request and shall consult with the indemnified party prior to acting on major
matters, including settlement discussions. The indemnified party shall make
available to the indemnifying party all information and assistance that the
indemnifying party may reasonably request and shall cooperate with the
indemnifying party in any defense undertaken by it pursuant to this Section 8.
Notwithstanding anything herein to the contrary, the indemnified party shall at
all times have the right to fully participate in such defense at its own expense
directly or through counsel; provided, however, if the named parties to the
action or proceeding include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct, the expense of
separate counsel for the indemnified party shall be paid by the indemnifying
party. If no such notice of intent to dispute and defend is given by the
indemnifying party, or if such diligent good faith defense is not being or
ceases to be conducted, the indemnified party may, at the expense of the
indemnifying party, undertake the defense of (with counsel selected by the
indemnified party), and shall have the right to compromise or settle (exercising
reasonable business judgment), such claim, liability or expense.
9. COMPLIANCE WITH RULE 144. From the first date that the Company is
required to file any reports under Section 13 or 15(d) of the Exchange Act, and
until the Holders as a group shall own less than an aggregate of ten percent
(10%) of any class or series of equity securities of the Company, the Company
shall comply with the public information requirements which are conditions to
the availability of Rule 144 for the sale of Registrable Securities. Company
shall cooperate with the Holders in supplying such information as may be
necessary for them to complete and file any information reporting forms
presently or hereafter required by the Commission as a condition to the
availability of Rule 144 with respect to the Holders and such Registrable
Securities.
10. AMENDMENTS; WAIVER. The provisions of this Agreement may be amended
and waived pursuant to a written agreement executed by the Company and Holders
holding ninety five percent (95%) or more of the then issued and outstanding
Registrable Securities, provided that any amendment or waiver that treats a
Holder differently than other Holders must be consented to by such Holders.
11. TRANSFERABILITY OF REGISTRATION RIGHTS. A transferee acquiring
Registrable Securities may succeed to the rights and obligations under this
Agreement appurtenant to the Registrable Securities if, but only if, such
transferee acquires a minimum of fifty thousand (50,000) shares of
9
<PAGE> 11
Registrable Securities in a single transaction, is not a direct competitor of
the Company or of Telxon Corporation (if Telxon Corporation then owns twenty
percent (20%) or more of the issued and outstanding capital stock of the
Company) and the transferee becomes a signatory hereto. The original signatory
and any immediate or subsequent transferee which becomes a party hereto shall
retain the rights and obligations under this Agreement with respect to those
Registrable Securities which it remains record owner.
12. MISCELLANEOUS.
12.1 GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and governed by the laws of the State of Ohio, without regards to conflict or
choice of laws, statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Agreement shall be brought in the
courts, state or federal, sitting in Cuyahoga or Summit County, Ohio, and each
party hereto consents to the jurisdiction and venue of such courts, and agrees
not to contest venue on the grounds of forum non conveniens or otherwise.
12.2 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given upon receipt, or if delivered or sent by facsimile transmission, upon
confirmation of transmission, or if sent by overnight courier, the second day
after deposit, as follows:
TO THE HOLDERS: To the respective addresses set forth
in the stock records of the Company
with a copy to: A legal counsel designated by
a majority of the Holders
TO THE COMPANY Aironet Wireless Communications, Inc.
at the address set forth at the
beginning of this Agreement.
Attn: President
Fax Number: 330-664-7986
with a copy to: Goodman Weiss Miller LLP
100 Erieview Plaza, 27th Floor
Cleveland, Ohio 44114
Attn: Robert A. Goodman/Jay R. Faeges
Fax Number: 216-363-5835
or to such other address of which any party may notify the other parties
provided in accordance with this Section 12.2.
12.3 PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior and
10
<PAGE> 12
contemporaneous understandings and agreements, written or oral, between or among
the parties relating to the subject matter hereof.
12.4 ASSIGNABILITY. Except as set forth in Section 11, this Agreement may
not be assigned, and no right or obligation herein may be assigned or delegated,
without the written consent of the Company, and absent such consent any such
assignment or delegation shall be void and of no effect. Subject to the
foregoing, this Agreement shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective permitted
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
12.5 CAPTIONS AND GENDER. The captions in this Agreement are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Agreement of the masculine, feminine
or neuter pronoun, shall include the others as the context may require.
12.6 EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties, and for
evidentiary purposes shall be deemed to be an original.
12.7 SEVERABILITY. In case any of the provisions contained in this
Agreement shall for any reason be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Agreement, but this Agreement shall be construed as
if such invalid, illegal or unenforceable provision had been limited or modified
(consistent with its general intent) to the extent necessary to make it valid,
legal and enforceable, or if it shall not be possible to so limit or modify such
invalid, illegal or unenforceable provision or part of a provision, this
Agreement shall be construed as if such invalid, illegal or unenforceable
provision or part of a provision had never been contained in this Agreement, so
long as to do so would not materially alter the rights or obligations of the
parties taken as a whole.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
<PAGE> 13
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By: /s/ Samuel F. McKay
------------------------------------------
Its:
-----------------------------------------
HAMBRECHT & QUIST
By:
------------------------------------------
Its:
-----------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
------------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
------------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
------------------------------------------
Its:
-----------------------------------------
CLARION CAPITAL CORPORATION
By:
------------------------------------------
Its:
-----------------------------------------
<PAGE> 14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
------------------------------------------
Its:
-----------------------------------------
HAMBRECHT & QUIST
By:
------------------------------------------
Its:
-----------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By: /s/ Richard W. Dyer
------------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
------------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
------------------------------------------
Its:
-----------------------------------------
CLARION CAPITAL CORPORATION
By:
------------------------------------------
Its:
-----------------------------------------
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
------------------------------------------
Its:
-----------------------------------------
HAMBRECHT & QUIST
By:
------------------------------------------
Its:
-----------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By:
------------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By: /s/ Ken J. Wassels
------------------------------------------
Ken J. Wassels, CEO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
------------------------------------------
Its:
-----------------------------------------
CLARION CAPITAL CORPORATION
By:
------------------------------------------
Its:
-----------------------------------------
<PAGE> 16
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
INVESTORS, ENTITIES: AXIOM VENTURE PARTNERS II LIMITED PARTNERSHIP
By: Axiom Venture Associates II Limited
Liability Company, its General Partner
By:
------------------------------------------
Its:
-----------------------------------------
HAMBRECHT & QUIST
By:
------------------------------------------
Its:
-----------------------------------------
TELANTIS VENTURE PARTNERS V, INC.
By:
------------------------------------------
Richard W. Dyer, Treasurer
W, A & H INVESTMENTS LLC
By: Wessels, Arnold & Henderson Group, L.L.C.,
its managing member
By:
------------------------------------------
Thomas J. Brigl, CFO/Managing Director
McDONALD & COMPANY SECURITIES, INC.
By:
------------------------------------------
Its:
-----------------------------------------
CLARION CAPITAL CORPORATION
By: /s/ Illegible
------------------------------------------
Its: Chairman
-----------------------------------------
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
------------------------------------------
Roger J. Murphy, President
HOLDERS, INDIVIDUALS: ----------------------------------------------
FRANK B. CARR
<PAGE> 18
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By:
------------------------------------------
Roger J. Murphy, President
INVESTORS, INDIVIDUALS: By: /s/ Frank B. Carr
------------------------------------------
FRANK B. CARR
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first set forth above.
COMPANY: AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
------------------------------------------
Roger J. Murphy, President
TELXON: TELXON CORPORATION
By: /s/ Kenneth W. Haver
------------------------------------------
Kenneth W. Haver, Senior Vice President
and Chief Financial Officer
<PAGE> 1
Exhibit 10.5
LICENSE, RIGHTS, AND SUPPLY AGREEMENT
This License, Rights, and Supply Agreement ("Agreement") between Aironet
Wireless Communications, Inc., a Delaware corporation, with headquarters at 367
Ghent Road, Suite 300, Fairlawn, Ohio ("Aironet"), and Telxon Corporation, a
Delaware corporation, with headquarters at 3330 West Market Street, Akron, Ohio
("Telxon") is entered into as of March 31, 1998.
WHEREAS, Telxon acknowledges that Aironet is the owner of certain technology
relating to wireless communications products;
WHEREAS, Telxon is in the business of selling, installing, and servicing
wireless network solutions for its customers, including Aironet products;
WHEREAS, Aironet and Telxon have had a close working relationship since
Aironet's inception as a Telxon affiliate; and
WHEREAS, both parties desire to enter into a license agreement whereby Telxon
may continue to have access to Aironet products and technology in order to
satisfy the needs of its customers.
NOW, THEREFORE, based on the mutual rights, obligations, representations, and
warranties set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1 DEFINITIONS. The following terms shall have the meanings set forth in
this Article 1 throughout this Agreement.
1.1 "Access Point" shall mean a wireless network access point device that
utilizes Aironet Technology.
1.2 "Aironet Products" shall mean all products, subassemblies, and services
that are now or hereafter become available for purchase from Aironet,
but shall exclude products or subassemblies that are custom made for
individual Aironet customers.
1.3 "Aironet Technology" shall mean all Aironet patents, patent
applications, trade secrets, know-how, software, firmware,
documentation, copyrights, and other proprietary rights existing prior
to and as of the date hereof (and as to patents, that may issue after
the date hereof based on patents existing or patent applications
initially filed as of the date hereof, including, but not limited to,
continuations, continuations in part, divisions, reissues, additions,
or extensions) and necessary to exercise rights granted under the
License.
1.4 "Bridge Products" shall mean Aironet's wireless point-to-point and
multipoint bridge products.
<PAGE> 2
11.5 "Fully-Burdened Manufacturing Cost" shall mean all costs of
manufacturing a product, including labor, materials, and overhead, as
accounted for in the regular course of its business by the party
manufacturing that product, as timely adjusted for purchase price
variance.
1.6 "License" shall mean the licenses under the Aironet Technology (and all
intellectual property rights embodied therein) granted by Aironet to
Telxon in Articles 2 and 3, and under Aironet intellectual property
granted by Aironet to Telxon in Section 8.11.3.
1.7 "Legacy Products" shall mean the products listed in EXHIBIT A.
1.8 "Legacy Software" shall mean all current and prior source and object
code for the Legacy Products, including, but not limited to, the
software identified in EXHIBIT B under "Legacy Software."
1.9 "MAC" shall mean a media access control unit that utilizes Aironet
Technology.
1.10 "New Software" shall mean the object code only of Aironet's (i)
revised, upgraded and otherwise modified versions of the Legacy
Software and of the 802.11 Supported Access Point Software which
incorporate significant enhancements or significant added functionality
to such software and which together with such software constitutes a
single package of new software, (ii) ports of the Legacy Software and
the 802.11 Supported Access Point Software to microprocessors not
currently supported, (iii) access point software (which, without
limitation, supports 802.11) developed on a commercially available real
time operating system and (iv) wholly new software.
1.11 "PC Card" shall mean a wireless transceiver in the pc card format that
includes both a Radio and a MAC.
1.12 "Profit Margin" shall mean the increment above Aironet's Fully-Burdened
Manufacturing Cost in the price of Aironet Products supplied to Telxon
under Article 8.
1.13 "Radio" shall mean a wireless transceiver that does not include a MAC
and utilizes Aironet Technology.
1.14 "Telxon Derived Products" shall mean Telxon's improvements,
refinements, enhancements, modifications, adaptations, revisions, and
derivatives of Legacy Products, as a whole or any part.
1.15 "Telxon Derived Software" shall mean Telxon's improvements,
refinements, enhancements, modifications, adaptations, revisions, and
derivatives of Legacy Software and 802.11 Supported Access Point
Software.
2
<PAGE> 3
1.16 "Universal Client" shall mean a stand-alone (external) client, suitable
for connection to a networked device, that utilizes Aironet Technology.
1.17 "802.11" shall mean the IEEE wireless LAN MAC/PHY specification as
ratified in July 1997.
1.18 "802.11 Supported Access Point Software" shall mean Aironet's current
Access Point software that supports 802.11 identified in EXHIBIT B
under 802.11 Supported Access point Software.
2 LEGACY PRODUCTS AND DERIVATIVES.
2.1 LICENSE OF LEGACY PRODUCTS AND DERIVATIVES. Subject to the covenants
set forth in Section 2.7, and the other provisions of this Agreement,
Aironet hereby grants a perpetual, worldwide, non-exclusive License to
Telxon under the Aironet Technology, including all intellectual
property rights embodied therein, to:
2.1.1 LEGACY PRODUCTS. make, support, service, maintain, repair,
reconstruct, reconfigure, upgrade, prepare improvements,
refinements, enhancements, modifications, adaptations,
revisions and derivatives works, integrate, install, combine,
network, use, market, sell, offer for sale, lease, and
transfer Legacy Products;
2.1.2 LEGACY SOFTWARE. use, port, copy, compile, decompile,
assemble, disassemble, merge, integrate, combine, support,
service, maintain, repair, upgrade, and prepare improvements,
refinements, enhancements, modifications, adaptations,
revisions and derivatives works of the Legacy Software
(current and prior versions only of the Legacy Software), both
in source and object code forms and to network, install, link,
load, market, sell, offer for sale, lease, and transfer
copies, in object code form only, of the Legacy Software;
2.1.3 TELXON DERIVED PRODUCTS. make, support, service, maintain,
repair, reconstruct, reconfigure, upgrade, prepare
improvements, refinements, enhancements, modifications,
adaptations, revisions and derivatives works, integrate,
install, combine, network, use, market, sell, offer for sale,
lease, and transfer Telxon Derived Products; and
2.1.4 TELXON DERIVED SOFTWARE. use, port, copy, compile, decompile,
assemble, disassemble, merge, integrate, combine, support,
service, maintain, repair, upgrade, and prepare improvements,
refinements, enhancements, modifications, adaptations,
revisions and derivatives works of the Telxon Derived Software
(both in source and object code forms) and to network,
install, link, load, market, sell, offer for sale, lease, and
transfer copies, in object code form only, of the Telxon
Derived Software.
3
<PAGE> 4
2.2 ROYALTIES FOR LEGACY PRODUCTS AND DERIVATIVES. In consideration for the
rights granted and obligations undertaken pursuant to this Agreement,
Telxon hereby agrees to pay Aironet royalties for the Legacy Products,
Legacy Software, Telxon Derived Products and Telxon Derived Software
sold, or otherwise transferred or invoiced, by Telxon (or, as
applicable, its subsidiaries), at the rates set forth in SCHEDULE 5,
and subject to the provisions of Article 5 "Royalty Rates and
Accounting" and Article 9 "Most Favored Customer Protections." No
royalties for the use of the Aironet Technology, in accordance with the
License grants in this Article 2, shall be due other than as set forth
in Article 5 and SCHEDULE 5.
2.3 IMPLIED CUSTOMER LICENSE. Subject to the covenants set forth in Section
2.7, the restrictions imposed by Telxon and the other provisions of
this Agreement, Telxon's customers shall have an implied license under
the Aironet Technology limited to all customary uses (including, but
not limited to, resales) of the Legacy Products and Telxon Derived
Products, and any Legacy Software or Telxon Derived Software which is
loaded on or provided for hardware products offered by Telxon from time
to time, as originally transferred by Telxon.
2.4 CONTRACTORS. Telxon may have the Licensed activities performed by third
parties (subject to the terms of this Agreement) that are not direct
competitors of Aironet, but other than the implied rights of customers
set forth in Section 2.3, 3.5, 8.8 and 8.11.3.3, and the right to
establish source code escrows set forth in Section 2.5.3 and 3.73,
Telxon shall not otherwise have the right to sublicense the Aironet
Technology.
2.5 SOFTWARE LICENSE TERMS.
2.5.1 VERSIONS PROVIDED. Telxon's License rights under the Aironet
Technology is limited to the current and prior versions of the
Aironet Technology.
2.5.2 REVISIONS, UPDATES AND BUG FIXES. Notwithstanding Section
2.5.1, Aironet shall provide to Telxon, bug fixes, revisions,
updates, and other modifications in object code form only, as
well as corresponding changes to documentation (and in the
case of each bug fix, such additional technical documentation
as is necessary to enable Telxon to implement the bug fix and
to write its own source code therefor), for Legacy Software
and Legacy Product firmware, as and when they become
available, provided that all bug fixes, revisions, updates and
other modifications constituting or to New Software shall be
provided by Aironet to Telxon under Section 4.2. Bug fixes,
revisions, updates and other modifications provided under this
Section 2.5.2 shall constitute part of the software/firmware
to which they relate for all purposes of this Agreement and
shall not bear a separate royalty from that payable by Telxon
upon the original distribution of such underlying
software/firmware, and Telxon shall owe no other amounts with
respect thereto.
2.5.3 SOURCE CODE ESCROW. Notwithstanding that the License grants in
Section 2.1 restrict the transfer of software to copies of the
object code and the transfer restrictions of
4
<PAGE> 5
Sections 2.7.5 and 2.7.6, upon reasonable notice to Aironet,
and upon customary terms, Telxon shall be permitted to place
into escrow (with a reliable agent) source code with respect
to which it has rights under the License, if so requested by a
customer.
2.6 SUPPLIERS AND FOUNDRIES. Aironet shall authorize its suppliers and
foundries of custom integrated circuits to sell such components to
Telxon for incorporation into Legacy Products and Telxon Derived
Products. Should any such suppliers discontinue manufacture of any
custom integrated circuit necessary for Telxon to exercise its rights
under this Agreement, Aironet shall cooperate with Telxon in securing a
second source for such components.
2.7 EXERCISE OF TELXON RIGHTS. In addition to the restrictions set forth
elsewhere in this Agreement, Telxon shall not:
2.7.1 in its exercise of the License grants in Section 2.1 prepare
improvements, refinements, enhancements, modifications,
adaptations, revisions, and derivatives which (i) with respect
to Radios, change other than the form factor, (ii) with
respect to Access Points, change other than the backbone
interface daughter card(s) or (iii) are 802.11 client radio
adapters;
2.7.2 sell any subassemblies, which utilize Aironet Technology and
which are for Legacy Products or Telxon Derived Products,
unless they are integrated into such products or are sold as
repair or replacement parts for such products, either by
Telxon directly to an end user or indirectly through a Telxon
reseller, distributor, OEM, or other channel partner or
service or repair vendor;
2.7.3 sell Legacy Products or Telxon Derived Products through its
alternate distribution channels except to those partners which
are certified to sell complete Telxon integrated PTCs and
pen-based products;
2.7.4 sell Radios unless they are integrated into a Legacy Product,
Telxon Derived Product, other products offered by Telxon from
time to time, or Aironet Product (whether purchased from
Aironet or as licensed in Section 8.11.3), or are to replace
Radios in such products;
2.7.5 transfer copies of any Legacy Software or Telxon Derived
Software unless it is embedded in or transferred for loading
on a Legacy Product, Telxon Derived Product, other hardware
products offered by Telxon from time to time, or Aironet
Product (whether purchased from Aironet or as licensed in
Section 8.11.3); or
2.7.6 transfer copies of Aironet's client software included in the
Legacy Software unless it is embedded in or transferred for
loading on Legacy Products, Telxon Derived Products, Aironet
Products (whether purchased from Aironet or as licensed in
5
<PAGE> 6
Section 8.11.3), 900 MHz DSSS PC Card products or Aerocomm
2.4GHz radio adapters.
3 802.11 PRODUCTS.
3.1 PURCHASE OF 802.11 PRODUCTS. Telxon may purchase products which support
or comply with 802.11, including, but not limited to, Access Points and
PC Cards, from Aironet under Article 8 "Supply of Aironet Products."
3.2 LICENSE OF 802.11 SUPPORTED ACCESS POINT SOFTWARE. Subject to the
covenants set forth in this Article 3 and the other provisions of this
Agreement, Aironet hereby grants a perpetual, worldwide, non-exclusive
License to Telxon under the Aironet Technology, including all
intellectual property rights embodied therein, to use, port, copy,
compile, decompile, assemble, disassemble, merge, integrate, combine,
support, service, maintain, repair, upgrade, and prepare improvements,
refinements, enhancements, modifications, adaptations, revisions and
derivatives works of the 802.11 Supported Access Point Software
(current and prior versions only of the 802.11 Supported Access Point
Software, both in source and object code forms) and to network,
install, link, load, market, sell, offer for sale, lease, and transfer
copies, in object code form only, of the 802.11 Supported Access Point
Software.
3.3 ACCESS POINT HARDWARE. The License grants in Sections 2.1.1 and 2.1.3,
and the related rights and obligations in Article 2, apply to Access
Points on or with which 802.11 Supported Access Point Software or
Telxon Derived Software based thereon is to be installed or used.
Telxon and Aironet each acknowledges and confirms that Aironet's 802.11
PC Cards are not Legacy Products and, therefore, are not included
within the rights granted to Telxon under Article 2 or this Section
3.3.
3.4 ROYALTIES FOR 802.11 SUPPORTED ACCESS POINT SOFTWARE. In consideration
for the rights granted and obligations undertaken pursuant to this
Agreement, Telxon hereby agrees to pay Aironet royalties for the 802.11
Supported Access Point Software and the Telxon Derived Software based
thereon sold, or otherwise transferred or invoiced, by Telxon (or, as
applicable, its subsidiaries), at the rates set forth in SCHEDULE 5,
and subject to the provisions of Article 5 "Royalty Rates and
Accounting" and Article 9 "Most Favored Customer Protections." No
royalties for the use of the Aironet Technology, in accordance with the
License grants in this Article 3, shall be due other than as set forth
in Article 5 and SCHEDULE 5.
3.5 IMPLIED CUSTOMER LICENSE. Subject to the covenants set forth in this
Article 3, any restrictions imposed by Telxon and the other provisions
of this Agreement, Telxon's customers shall have an implied license
under the Aironet Technology limited to all customary uses (including,
but not limited to, resales) of the 802.11 Supported Access Point
Software or Telxon Derived Software based thereon, which is loaded on
or provided for hardware products offered by Telxon from time to time,
as originally transferred by Telxon.
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3.6 CONTRACTORS. Telxon may have the Licensed activities performed by third
parties (subject to the terms of this Agreement) that are not direct
competitors of Aironet, but other than the implied rights of customers
set forth in Section 2.3, 3.5, 8.8 and 8.11.3.3, and the right to
establish source code escrows set forth in Section 2.5.3 and 3.73,
Telxon shall not otherwise have the right to sublicense the Aironet
Technology.
3.7 SOFTWARE LICENSE TERMS.
3.7.1 VERSIONS PROVIDED. Telxon's License rights under the Aironet
Technology is limited to the current and prior versions of the
Aironet Technology.
3.7.2 REVISIONS, UPDATES AND BUG FIXES. Notwithstanding Section
3.7.1, Aironet shall provide to Telxon, bug fixes, revisions,
updates, and other modifications in object code form only, as
well as corresponding changes to documentation (and in the
case of each bug fix, such additional technical documentation
as is necessary to enable Telxon to implement the bug fix and
to write its own source code therefor), for the 802.11
Supported Access Point Software, and source and object code
for the foregoing which enable the 802.11 Supported Access
Point Software to support Aironet's PC 3500 and PC 4500 802.11
compliant pc cards, as and when they become available,
provided that all bug fixes, revisions, updates and other
modifications constituting or to New Software shall be
provided by Aironet to Telxon under Section 4.2. Bug fixes,
revisions, updates and other modifications provided under this
Section 3.7.2 shall constitute part of the software/firmware
to which they relate for all purposes of this Agreement and
shall not bear a separate royalty from that payable by Telxon
upon the original distribution of such underlying
software/firmware, and Telxon shall owe no other amounts with
respect thereto.
3.7.3 SOURCE CODE ESCROW. Notwithstanding that the License grant in
Section 3.2 restricts the transfer of software to copies of
the object code and the transfer restrictions of Section 3.8,
upon reasonable notice to Aironet, and upon customary terms,
Telxon shall be permitted to place into escrow (with a
reliable agent) source code with respect to which it has
rights under the License, if so requested by a customer.
3.8 EXERCISE OF TELXON RIGHTS. In addition to the restrictions set forth
elsewhere in this Agreement, Telxon shall not transfer copies of 802.11
Supported Access Point Software or Telxon Derived Software based
thereon unless it is embedded in or transferred for loading on a Legacy
Product, Telxon Derived Product, other hardware products offered by
Telxon from time to time, or Aironet Product (whether purchased from
Aironet or as licensed in Section 8.11.3).
4 NEW PRODUCTS.
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4.1 NEW HARDWARE. Telxon may purchase new Aironet Products from Aironet
under Article 8 "Supply of Aironet Products."
4.2 NEW SOFTWARE. New Software in object code form only shall be provided
by Aironet to Telxon at reasonable negotiated prices and terms, not to
exceed the prices charged, and on terms no less favorable than those
extended, to its most favored customers for similar works or
deliverables. Aironet will use its reasonable best efforts to (i) make
available under this Section 4.2 no later than March 31, 1999, fully
functional access point software in object code form only, which,
without limitation, supports 802.11, developed on a commercially
available real time operating system and (ii) assist Telxon in its
porting to the real time operating system referred to in clause (i) of
any improvements, additions, or modifications made by or for Telxon to
the 802.11 Supported Access Point Software, and Telxon shall pay
Aironet for such assistance at Aironet's cost plus fifty percent (50%).
5 ROYALTY RATES AND ACCOUNTING. The royalties payable by Telxon to
Aironet for the Legacy Products, Legacy Software, Telxon Derived
Products, Telxon Derived Software and 802.11 Supported Access Point
Software sold, or otherwise transferred or invoiced, by Telxon (or, as
applicable, its subsidiaries) are set forth in SCHEDULE 5. Telxon's
obligation to pay such royalties is subject to the provisions of this
Article 5 and Article 9. Only a single royalty shall be due with
respect to any individual unit of any product or individual copy of any
software, and neither the separate references to this Article 5 and
SCHEDULE 5 in Sections 2.2 and 3.4, nor any other provision of this
Agreement, shall be construed to give rise to any duplicative
royalties. No royalties for the use of the Aironet Technology, in
accordance with the License, shall be due other than as set forth in
this Article 5 and SCHEDULE 5.
5.1 Royalties shall be earned by Aironet upon the initial shipment or other
transfer to or invoicing of customers by Telxon (or, as applicable, its
subsidiaries) for any individual unit of any product or individual copy
of any software upon which a royalty is payable under this Article 5
and SCHEDULE 5.
5.2 Royalties shall not be payable with respect to products or software
transferred for promotional, "test and demo," maintenance or warranty
purposes or by Telxon to its subsidiaries until sold by such
subsidiaries, or for products sold to Aironet.
5.3 The royalties for each month shall be reported by Telxon to Aironet in
accordance with Section 13.1.
5.4 The royalties for each month shall be paid by Telxon to Aironet within
ten (10) business days after the last day of the month. Allowances for
returns shall be dealt with equitably by mutual agreement of the
parties.
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6 DELIVERY. To the extent not already in Telxon's possession, Aironet
shall promptly arrange for the delivery or transmission to Telxon of
all tangible forms of the Aironet Technology that may be necessary or
useful for Telxon to exercise its rights under the License, including,
for example, source and object code, documentation, procedures,
engineering drawings, manufacturing specifications, know how,
schematics, diagnostic programs, test procedures and specifications,
vendor and parts lists, technical bulletins, and the like, related to
Legacy Products, Legacy Software and 802.11 Supported Access Point
Software, and to utilize such items in exercising its License rights
under Articles 2 and 3 and Section 8.11.3.
7 PROPRIETARY RIGHTS.
7.1 RELATIVE OWNERSHIP RIGHTS. Neither Telxon nor Aironet shall acquire any
ownership interest in the other's intellectual property rights as a
result of this Agreement. Telxon acknowledges that the Aironet
Technology is Aironet's sole property, and that Telxon has no right,
title, or interest in or thereto except as granted in the License.
Aironet's and Telxon's intellectual property rights shall remain
separate property notwithstanding that they may both be embodied in the
same devices or software, and no such devices or software shall be, or
be deemed to be, a joint work, compilation, or any other type of work
of multiple authorship by reason of this Agreement.
7.2 TRADEMARKS. Telxon and Aironet each agree that their products shall not
carry any of trademarks of the other; provided, however, that Telxon's
current use of Aironet's trademarks may continue until the sooner of
(i) July 31, 1998 or (ii) at such time as Telxon's manufacturing
facility has retooled to discontinue its use thereof; provided,
however, that in the event that Telxon has used reasonable commercial
efforts and is nonetheless unable to discontinue its use of Aironet's
trademarks by July 31, 1998, Aironet will not unreasonably withhold its
consent to extend such deadline by an additional one hundred twenty
(120) days. To the extent either party distributes the products of the
other, that party may identify itself as an authorized distributor of
the other's products, and may utilize the other's trademarks in
connection with advertising such products, subject to the owner's
review and approval, if requested.
7.3 PROPRIETARY NOTICES. As Aironet may reasonably request, Telxon shall
mark all Licensed products with any proprietary rights notices required
either (a) by or in accordance with law or (b) to prevent prejudice to
the intellectual property rights embodied therein.
8 SUPPLY OF AIRONET PRODUCTS. At prices determined in accordance with the
formulas and terms set forth in SCHEDULE 8, Aironet shall sell Aironet
Products to Telxon on the terms and conditions set forth in this
Article 8 subject to the provisions of Article 9 "Most Favored Customer
Protection."
8.1 ORDERS.
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8.1.1 Each order by Telxon for Aironet Products must be in writing
and received by Aironet from Telxon's manufacturing division,
and not from Telxon's subsidiaries or customers.
8.1.2 In the event that demand for Aironet Products exceeds supply,
Aironet will allocate available supply to fulfill orders for
Telxon vis a vis its other customers on a first order in,
first order out basis.
8.1.3 This Agreement is a master agreement. As such, the terms of
this Agreement shall automatically be deemed incorporated into
any purchase order, order acknowledgment, invoice or similar
document (each an "Order Document") issued or given by either
party in connection with its purchase or sale of Aironet
Products or services. No term or condition of any Order
Document shall be of any force or effect whatsoever except to
provide or establish in accordance with this Agreement the:
(a) Product model number (including any options or
accessories) and quantity; (b) shipping date, ship-to address,
actual or estimated Shipping and Government Charges (as
defined below) and other delivery instructions; and (c) any
other special information required with respect to the order.
8.2 FORECASTS. Beginning on May 1, 1998, and on the first day of each month
thereafter, Telxon shall provide to Aironet a written forecast of
Telxon's estimated requirements of the Aironet Products to be purchased
during the twelve (12) month period next following (the "Forecast(s)").
Each Forecast made three (3) months prior to the date on which a Telxon
order is received by Aironet is referred to as a "Lead Time Forecast."
The Forecasts are for planning purposes only, and shall not constitute
a commitment by Telxon to purchase any of the Aironet Products;
provided, however, Telxon shall use its best efforts not to over or
under estimate its Lead Time Forecasts by more than fifteen percent
(15%).
8.3 LEAD TIME; POSTPONEMENTS AND CANCELLATIONS.
8.3.1 Aironet's minimum lead time for delivery to Telxon of any
order shall be ninety (90) days. If Telxon requires any
delivery on an expedited basis, Aironet shall use reasonable
commercial efforts to accommodate such requirement.
8.3.2 Telxon: (a) may not postpone delivery of its orders within the
thirty (30) day period prior to the originally scheduled
shipping date; (b) may postpone delivery for up to sixty (60)
days once within the period between thirty one (31) and ninety
(90) days prior to the scheduled shipping date; and (c) may
postpone delivery indefinitely at any time at least ninety one
(91) days prior to the scheduled shipping date.
8.3.3 Telxon may cancel its orders at any time at least ninety one
(91) days prior to the originally scheduled shipping date.
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8.4 PRICES. The prices that Aironet will charge Telxon for Aironet Products
shall be determined according to the formulas set forth in SCHEDULE 8,
subject to the provisions of this Article 8 and Article 9. In addition
to the prices due under this Article 8, Telxon shall pay the following
(collectively, "Shipping and Government Charges") with respect to all
Aironet Products purchased by it from Aironet: (i) all freight,
shipping and insurance and handling charges for the shipment of Aironet
Products from Aironet's shipping point within the United States (the
"Shipping Point") to Telxon's ship-to point; and (ii) any and all
applicable sales, use, excise, import, export, value-added or other
taxes or duties, customs, permit or license fees and similar charges of
any government or governmental authority incurred in connection with
shipment from the Shipping Point to Telxon's ship-to point.
8.4.1 Aironet shall provide not less than ninety (90) days prior
written notice to Telxon of any increase in the prices payable
under this Article 8. No increase in prices shall apply to
orders placed by Telxon within the notice period.
8.5 PAYMENT. Telxon's payment for orders hereunder and of the Shipping and
Government Charges with respect thereto (to the extent the actual
amounts thereof are not known prior to shipment, Aironet's reasonable
estimate of such charges) shall be made by Telxon to Aironet net thirty
(30) days from invoice date (which shall not be prior to the date of
shipment from the Shipping Point (the "Shipping Date")). Aironet may
assess late charges of up to one and one half percent (1.5%) per month
for past due payments. Telxon, at its election, shall receive a credit
or refund from Aironet for all overpayments by Telxon of Shipping and
Government Charges.
8.6 SHIPMENT.
8.6.1 The method of shipment of orders hereunder and carrier will be
chosen by Aironet unless Telxon provides Aironet with written
instructions otherwise.
8.6.2 Aironet will ship all orders to Telxon's manufacturing
facilities. Aironet will not unreasonably refuse to drop ship
orders to other addresses on an order by order basis.
8.6.3 Risk of loss and title to all Aironet Products sold to Telxon
shall pass to Telxon when the Aironet Products are tendered to
the carrier at Aironet*s Shipping Point.
8.7 PRODUCT WARRANTY.
8.7.1 Aironet warrants to Telxon that, effective as of July 1, 1997,
each Aironet Product purchased from Aironet will meet all
specifications and will be free from defects in materials and
workmanship under normal use and service for a period of one
(1) year from the Shipping Date. Telxon acknowledges that for
Aironet Products manufactured prior to July 1, 1997, the
warranty period was ninety (90) days.
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8.7.2 Aironet will deal and is liable only with and to Telxon, and
not with or to any customer of Telxon or other subsequent
transferee of any Aironet Product. Telxon shall return any
defective Aironet Product, freight and insurance collect, to
such service address as Aironet shall designate, in accordance
with reasonable material authorization procedures established
by Aironet.
8.7.3 From the time it is first notified, Aironet shall use its best
efforts to determine the cause of any Aironet Product failure
or defect on a continuous and expedited basis. If such failure
or defect is the result of a design defect, Aironet will
provide Telxon with replacement Aironet Products that
incorporate design corrections on a best- efforts basis after
such discovery. If a failure or defect of an Aironet Product
is the result of defects in material or workmanship, at
Aironet's option and expense, Aironet will repair or replace
the Aironet Product within fifteen (15) days of Aironet's
receipt of the defective unit. In the event that Aironet is
unable to correct a design defect or to repair the Aironet
Product or is unable to replace the defective Aironet Product
with a non-defective Aironet Product, then Aironet shall
refund Telxon's purchase price, reduced by an appropriate
amount for prior use. Replaced parts and products become the
property of Aironet.
8.7.4 Repaired or replaced units will be returned to Telxon freight
and insurance prepaid.
8.7.5 The warranty set forth in this Section 8.7 does not apply to
any Aironet Product to the extent the product's defect is
caused by: (a) use or operating or environmental conditions
not in compliance with Aironet specifications; (b) abuse,
misuse, damage, accident, alteration or neglect of
maintenance; (c) unauthorized repair; or (d) improper
installation.
8.7.6 Except as expressly set forth in this Section 8.7 and subject
to the provisions of Section 8.9, AIRONET MAKES NO WARRANTY OF
ANY KIND WITH RESPECT TO ANY AIRONET PRODUCTS SOLD TO TELXON,
WHETHER EXPRESS OR IMPLIED OR ARISING UNDER ANY STATUTE OR
FROM ANY COURSE OF DEALING, USAGE OF TRADE OR OTHERWISE,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR ANY
OTHER PROMISE OR REPRESENTATION WITH RESPECT TO THE AIRONET
PRODUCTS, INCLUDING, WITHOUT LIMITATION, THEIR CONDITION,
FREEDOM FROM ANY LATENT OR PATENT DEFECT OR CONFORMITY TO ANY
DESCRIPTION THEREOF.
8.7.7 This Section 8.7 and Section 8.9 are the sole basis for
liability on the part of Aironet respecting the condition,
quality, use, performance, repair and replacement of Aironet
Products.
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8.8 TELXON AND CUSTOMER RIGHTS. Telxon, as the purchaser of Aironet
Products under this Article 8 and the licensee of New Software, and,
subject to any restrictions imposed by Telxon, each person or entity to
whom Telxon transfers an Aironet Product or New Software which is
loaded on or provided for hardware products offered by Telxon from time
to time, as originally transferred by Telxon, shall have an implied,
non-exclusive, worldwide, perpetual, royalty-free license under the
Aironet Technology or other intellectual property embodied in such
products or software to use, support, service, maintain, repair,
integrate into other products, install, combine, network, market, sell,
offer for sale, lease, and transfer such products, but not such
software separate from the hardware products with which it is
transferred. Telxon agrees to utilize commercially reasonable licensing
terms with respect to copies of software integrated in Aironet Products
that Telxon transfers to its customers, but no less restrictive than
the terms utilized by Telxon in the sale of its own products to its
customers or, if more restrictive, those required under Section 8.12
with respect to third party software.
8.9. PATENT AND COPYRIGHT INDEMNIFICATION.
8.9.1 Aironet agrees to defend (with counsel of Aironet's choosing
which is reasonably acceptable to Telxon) or settle any claim
against Telxon that any Aironet Product infringes any United
States copyrights or patents of any third party and to pay all
costs and damages finally awarded by a court of competent
jurisdiction with respect to such claim, provided that: (a)
Telxon promptly notifies Aironet in writing of the assertion
of such claim; and (b) Telxon and any affected customer(s)
cooperate fully with Aironet in the defense of such claim and
any related settlement negotiations.
8.9.2 Aironet shall keep Telxon fully informed of the progress of
any litigation and settlement negotiations involving any
infringement claims. At Telxon's own cost, Telxon shall have
the right to enter its own defense.
8.9.3 In the event that any Aironet Product is likely in Aironet's
opinion to, or does, become the subject of an infringement
claim, Aironet shall have the right, at its option and
expense, to procure for the user the right to continue to use
the subject Aironet Product or to modify or replace such
Aironet Product to make it non- infringing; provided, however,
that if none of the foregoing options is available on
commercially reasonable terms, Aironet may require the return
of the Aironet Product in exchange for a refund of the amount
paid by Telxon for the Aironet Product, reduced by an
appropriate amount for prior use.
8.9.4 Aironet shall have no obligation under this Section 8.9 where
an otherwise non- infringing Aironet Product is made
infringing because the Aironet Product has been: (a) modified
by anyone other than Aironet; (b) interconnected or otherwise
combined or used in conjunction with any hardware, software or
other equipment or device
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which was neither made, furnished nor approved by Aironet; or
(c) used in a manner for which it was not designed or
otherwise contrary to its intended purpose.
8.9.5 This Section 8.9 states Aironet's entire liability with
respect to any infringements of copyrights and patents by any
Aironet Product.
8.10. NEW PRODUCTS; PRODUCT CHANGES.
8.10.1 Aironet shall provide Telxon with written notice of the
introduction of any new Aironet Product. Such notice shall be
provided promptly, when and as available.
8.10.2 Aironet shall give Telxon written notice at least ninety (90)
days prior to implementing any material changes to the form,
fit or function or any modification, enhancement, upgrade,
engineering change or the like of any Aironet Products except
for Radios, with respect to which Aironet shall give Telxon
written notice at least one hundred eighty (180) days prior to
implementing any material changes to the form, fit or
function.
8.10.3 Aironet shall fulfill Telxon's purchase orders placed during
the ninety (90) or one hundred eighty (180) day period
provided for in Section 8.10.2, as applicable, under the old
specifications, unless otherwise specified by Telxon.
8.11 DISCONTINUED PRODUCTS.
8.11.1 NOTICE. Aironet shall give Telxon written notice at least one
hundred eighty (180) days prior to discontinuing production of
any Aironet Product.
8.11.2 ORDERS. Aironet shall fulfill Telxon's purchase orders for the
discontinued product placed during the one hundred eighty
(180) day period provided for in Section 8.11.1.
8.11.3 MANUFACTURING RIGHTS. Subject to the covenants in Section
8.11.3.6 and the other provisions of this Agreement, Aironet
hereby grants a perpetual, worldwide, non- exclusive License
to Telxon under all Aironet intellectual property rights
necessary to make, copy, assemble, merge, link, load, support,
service, maintain, repair, integrate, install, combine,
network, use, market, sell, offer for sale, lease, and
transfer Aironet Products that (i) shall have been sold by
Telxon to any customer(s), (ii) are hereafter discontinued by
Aironet and (iii) are required for Telxon's continued support
of such customer(s). Such License is limited to the
discontinued Aironet Product in the form and having the
specifications that exist at the time of discontinuance,
without modification or enhancement.
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8.11.3.1 NO AIRONET CUSTOMER SUPPORT. Aironet assumes no responsibility
(such as warranty and end-user support) for any discontinued
Aironet Products made by or for Telxon pursuant to this
Section 8.11.3.
8.11.3.2 ROYALTIES. In consideration for the rights granted and
obligations undertaken pursuant to this Agreement, Telxon
hereby agrees to pay Aironet royalties for each unit of
discontinued Aironet Product sold, or otherwise transferred or
invoiced, by Telxon (or, as applicable, its subsidiaries), at
the rates set forth in SCHEDULE 8, and in accordance with the
principles in Article 5, and subject to the provisions of
Article 9 "Most Favored Customer Protection." Royalties shall
not be payable with respect to discontinued Aironet Products
transferred for promotional, "test and demo," maintenance or
warranty purposes or by Telxon to its subsidiaries until sold
by such subsidiaries, or for products sold to Aironet.
Allowances for returns shall be dealt with equitably by mutual
agreement of the parties. No royalties for discontinued
Aironet Products manufactured in accordance with the License
grant in Section 8.11.3 shall be due other than as set forth
in this Section 8.11.3.2 and SCHEDULE 8, and no other
provision of this Agreement shall be construed to give rise to
any duplicative royalties.
8.11.3.3 IMPLIED CUSTOMER LICENSE. Subject to any restrictions imposed
by Telxon, the covenants set forth in Section 8.11.3.6 and the
other provisions of this Agreement, Telxon's customers shall
have an implied license to all customary uses (including, but
not limited to, resales) of the discontinued Aironet Products
as originally transferred by Telxon.
8.11.3.4 CONTRACTORS. Telxon may have the Licensed activities performed
by third parties (subject to the terms of this Agreement) that
are not direct competitors of Aironet, but other than the
implied rights of customers set forth in Section 2.3, 3.5, 8.8
and 8.11.3.3, and the right to establish source code escrows
set forth in Section 2.5.3 and 3.73, Telxon shall not
otherwise have the right to sublicense Aironet's intellectual
property.
8.11.3.5 SUPPLIERS AND FOUNDRIES. Aironet shall authorize its suppliers
and foundries of custom integrated circuits to sell such
components to Telxon for incorporation into discontinued
Aironet Products Licensed under this Section 8.11.3. Should
any such suppliers discontinue manufacture of any custom
integrated circuit necessary for Telxon to exercise its rights
under this Agreement, Aironet shall cooperate with Telxon in
securing a second source for such components.
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8.11.3.6 EXERCISE OF TELXON RIGHTS. In addition to the restrictions set
forth elsewhere in this Agreement, Telxon shall not:
8.11.3.6.1 in its exercise of the License grant in Section
8.11.3 prepare improvements, refinements,
enhancements, modifications, adaptations, revisions,
or derivatives of the discontinued Aironet Products;
8.11.3.6.2 sell any subassemblies, which utilize Aironet
intellectual property and which are for discontinued
Aironet Products, unless they are integrated into
such products or are sold as repair or replacement
parts for such products, either by Telxon directly to
an end user or indirectly through a Telxon reseller,
distributor, OEM, or other channel partner or service
or repair vendor;
8.11.3.6.3 sell discontinued Aironet Products through its
alternate distribution channels except to those
partners which are certified to sell complete Telxon
integrated PTCs and pen- based products;
8.11.3.6.4 sell discontinued Aironet Products which are radios
unless they are integrated into a product offered by
Telxon from time to time, or are to replace radios in
such products; or
8.11.3.6.5 transfer copies of any software included in any
such discontinued Aironet Product unless it is
embedded in or transferred for loading on such
product.
8.12 THIRD PARTY SOFTWARE.
8.12.1 Aironet Products purchased by Telxon from Aironet may contain,
as embedded therein or otherwise pre-installed thereon, or be
accompanied by, third party software and firmware
(collectively, "Third Party Software"). The price for each
Aironet Product includes a non-exclusive, royalty-free license
to: (a) distribute the Third Party Software as embedded, but
only as embedded, with the Aironet Products; and (b) to use
the Third Party Software as embedded, but only as embedded,
with the Aironet Products. The Third Party Software may be
distributed only embedded in the Aironet Products, in the same
form such Third Party Software and Aironet Products were
provided to Telxon by Aironet.
8.12.2 Telxon's written or shrink wrap licenses shall contain
provisions similar to the following in order to protect the
Third Party Software: (a) an acknowledgment that
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a third party owns all title to the Third Party Software and
all patent, copyright and other intellectual property rights
relating thereto and that the Third Party Software is being
licensed (not sold) to such customer solely for and in
connection with its use of products in which it is imbedded or
with which it is accompanied; (b) an agreement not to adapt,
modify, prepare derivative works of, copy, reverse engineer,
disassemble, decompile, or "unlock" the code of the Third
Party Software; and (c) an agreement to bind any transferee of
the Third Party Software to an agreement at least as
restrictive as such agreements.
8.12.3 To the extent available to Aironet, Aironet shall provide
Telxon with updates and upgrades to the Third Party Software
on the same terms and conditions as such updates and upgrades
are available to Aironet.
8.13 IMPORTS AND EXPORTS. For Aironet Products sourced outside of the United
States customs territory with respect to the importation of which
Telxon requests that it be the importer of record, Aironet shall
provide Telxon with all documentation necessary to facilitate the
importation. Where Telxon is not the importer of record, then Aironet
shall provide Telxon with all import documentation and certificates
necessary for Telxon's duty drawback claims.
9 MOST FAVORED CUSTOMER PROTECTIONS. The royalty rates payable by Telxon
under Article 5 (and referred to in Sections 2.2 and 3.4) and Section
8.11.3, and the prices payable by Telxon under Article 8, shall be
subject to reduction as set forth in this Article 9.
9.1 The royalties payable by Telxon under Article 5 (and referred to in
Sections 2.2 and 3.4) and Section 8.11.3.2 shall not exceed the best
royalty rates charged, and the best non-pricing terms provided, by
Aironet to any of its licensees, excluding licensees from whom Aironet
earns materially greater annual aggregate royalties than those earned
from Telxon.
9.2 The prices payable by Telxon under Section 8.4, or any other amounts
payable by Telxon to Aironet for goods or services, shall not exceed
the best prices charged, and the best non- pricing terms provided, by
Aironet to any of its customers, excluding customers from whom Aironet
earns materially greater annual aggregate gross profit than that from
the Profit Margin and other business (which does not include the
royalties payable by Telxon under Article 5 [and referred to in
Sections 2.2 and 3.4] or Section 8.11.3.2) earned from Telxon, or any
promotional sales by Aironet.
9.3 Aironet shall report to Telxon on a timely basis any new, more
favorable royalty rates, prices or other charges or terms that apply to
Telxon under this Article 9.
10 IMAP FEES. Telxon shall be entitled to receive customer referral "IMAP
Fees" as set forth in this Article 10 at the rates and on the amounts
set forth in SCHEDULE 10.
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10.1 Subject to later adjustments and rebillings for returns and allowances,
IMAP Fees shall be earned upon Aironet's shipment of the Aironet
Products upon which the IMAP Fees are payable, and shall be paid no
later than the last day of the month immediately following the month of
such shipment.
11 INSTALLATION, SERVICE AND SUPPORT. Aironet shall provide a dedicated
sales representative to Telxon to service Telxon's purchase of Aironet
Products hereunder, and to make joint sales calls with Telxon to
Telxon's customers; provided, however, that Aironet shall not be
responsible to Telxon's customers for installation, service, support,
or warranty obligations with respect to Legacy Products, Telxon Derived
Products, or Aironet Products.
11.1 Aironet will provide Telxon with formal training on all Legacy Software
and 802.11 Supported Access Point Software and repair training on all
Legacy Products (and subassemblies thereof) at reasonable rates and for
reimbursement of reasonable expenses. A minimum of two (2) copies of
all course material will be provided to Telxon at the time of training.
Telxon will have the right to duplicate such material without
restriction for internal use only.
11.2 Aironet shall maintain a sufficient number of personnel dedicated to
Telxon to fulfill Aironet's obligations under this Article 11. Aironet
will also designate a key contact for Telxon within its software
development and/or support organization for resolution of software
(with respect to software for which only object code has been
provided), hardware, interoperability, product assembly, subassembly
and component-level support issues with respect to Telxon's
implementation of the Aironet Technology in Legacy Products, Legacy
Software, 802.11 Supported Access Point Software, Telxon Derived
Products, and Telxon Derived Software as well as for sales of Aironet
Products. The key contact will respond to problems in the following
time frames:
11.2.1 system down/end-user operations severely affected - within 8
hours;
11.2.2 unit down/end-user operational/part of operations down -
within 24 hours;
11.2.3 intermittent problem/end-user operational but inconvenienced -
within 24 hours; and
11.2.4 routine technical assistance calls/no operational impact -
within 5 days.
The Aironet key contact will be responsible for all Telxon-reported
support problems and will act as the Telxon advocate for all technical
issues referred to Aironet.
11.3 Aironet shall provide a dedicated support representative to Telxon to
assist Telxon in its development of Telxon Derived Products and Telxon
Derived Software (in general and based on 802.11 Supported Access Point
Software).
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<PAGE> 19
12 ENGINEERING SERVICES. Aironet shall provide reasonable engineering
services in support of requests by Telxon for assistance in its
manufacture of Legacy Products. All Aironet engineering services
provided pursuant to this Article 12 shall be paid by Telxon at
Aironet's cost plus fifty percent (50%).
13 REPORTS, BOOKS, AND RECORDS.
13.1 Within five (5) business days after the last day of each month, each
party shall report to the other, in writing, the sales, costs,
earnings, or other financial data relevant under any section of this
Agreement during such month. Each party shall accompany any payments to
the other with a written report setting forth all amounts owed for the
period covered by the payment, with supporting computations and
descriptions of transactions giving rise to the payment obligation.
Such reports shall be held by the recipient as Confidential Information
(defined in Section 18.3) and shall be used solely in connection with
this Agreement.
13.2 Each party shall prepare and maintain on a current basis complete and
accurate books and records, in accordance with generally accepted
accounting principles, sufficient to document compliance with this
Agreement. All such books and records shall be retained for at least
three (3) years from the date they are created.
13.3 At the request of Aironet and during the normal business hours of
Telxon, no more than once in any twelve (12) month period, Telxon shall
permit a "Big Six" firm of accountants, selected by Aironet, to have
access to such books, records and inventories as may be necessary to
determine the correctness of any report or payment made under this
Agreement. Such audits shall be conducted at the cost of Aironet,
except that if any such audit should reveal an underpayment of
royalties due hereunder of greater than fifteen percent (15%) for any
period audited, Telxon shall bear the cost of such audit, and promptly
pay such underpaid amount.
13.4 At the request of Telxon and during the normal business hours of
Aironet, no more than once in any twelve (12) month period, Aironet
shall permit a "Big Six" firm of accountants, selected by Telxon, to
have access to such books, records and inventories as may be necessary
to determine the correctness of any report or cost upon which Telxon
pays royalties, Profit Margins or IMAP Fees under this Agreement. Such
audits shall be conducted at the cost of Telxon, except that if any
such audit should reveal an overstatement of costs previously reported
to Telxon of greater than fifteen percent (15%) for any period audited,
Aironet shall bear the cost of such audit, and promptly repay any
amount overpaid by Telxon as a consequence of such overstatement.
13.5 Prior to allowing any audit permitted by Sections 13.3 and 13.4, a
party may require that the auditor agree in writing to only reveal to
its client such information as is required to verify compliance with
this Agreement, and not to reveal to its client any other details of
its audit
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<PAGE> 20
or any other information learned during its audit, and in no instance
will the auditors disclose any competitive information, including any
customer, pricing, or cost information.
14 PROTECTION FROM INFRINGEMENTS. Each Party shall promptly notify the
other Party if it becomes aware of any infringement or potential
infringement of intellectual property rights in the Aironet Technology.
Aironet shall have the right, at its discretion, to take such action as
it deems advisable for the protection of Aironet's rights in the
Aironet Technology, but except as set forth in Sections 8.9 and 18.4,
and subject to Section 18.5, it shall not have the obligation to do so.
At Aironet's request, Telxon agrees to cooperate reasonably in any such
action at Aironet's expense.
15 REPRESENTATIONS AND WARRANTIES.
15.1 Telxon hereby represents, warrants and agrees that it shall:
15.1.1 not reverse engineer, disassemble, or make derivative versions
of (a) any custom integrated circuits included in the Legacy
Products, (b) any software provided by Aironet to Telxon in
only object code form, or (c) any Aironet Products, to the
extent any such action would infringe any of Aironet's
proprietary rights not licensed hereunder;
15.1.2 at all times act to protect Aironet's intellectual property
rights in the Aironet Technology with the same level of
diligence and care that it takes to protect its own
intellectual property rights, but in no case less than a
reasonable degree of care;
15.1.3 maintain high standards of quality in Telxon Derived Products
that incorporate an Aironet Product, and in the installation,
service, and support of such Telxon Derived Products and of
Aironet Products;
15.1.4 comply in all material respects with all applicable laws,
rules, and regulations in its performance hereunder, and all
products licensed hereunder made by or for it shall be in
material compliance with all applicable laws, rules, and
regulations; and
15.1.5 not permit its customers to re-label or private label any
Aironet Products, except that this prohibition shall not apply
to sales of any Aironet Products by Telxon to IBM, re-labeled
with IBM's private label.
15.2 Aironet hereby represents, warrants and agrees that:
15.2.1 it has all rights necessary to grant the License;
15.2.2 all software provided pursuant to this Agreement shall
function in conformance with specifications for a period of
ninety (90) days after delivery;
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<PAGE> 21
15.2.3 Telxon's exercise, in accordance with the terms of this
Agreement, of the rights granted to it under the License shall
not infringe the United States intellectual property rights of
third parties;
15.2.4 it will perform all of its warranty, service, and support
obligations to Telxon in a professional manner, consistent
with current industry standards;
15.2.5 at the relevant time, it shall have obtained all regulatory
approvals that may be required for the sale or use of Legacy
Products, Legacy Software, 802.11 Supported Access Point
Software, New Software and Aironet Products;
15.2.6 its performance hereunder, the Aironet Products, Legacy
Software, 802.11 Supported Access Point Software, New Software
and Legacy Products (to the extent manufactured by or for
Telxon pursuant to the specifications provided hereunder),
shall be in material compliance with all applicable laws,
rules, and regulations; and
15.2.7 the design and functionality (hardware, firmware, and
software) of Legacy Products, Legacy Software, 802.11
Supported Access Point Software, New Software and Aironet
Products are and shall be "Year 2000" compliant.
16 DISCLAIMER. THE REPRESENTATIONS AND WARRANTIES SET FORTH IN ARTICLES 8
AND 15 ARE EXCLUSIVE. BOTH PARTIES HEREBY DISCLAIM ANY AND ALL OTHER
REPRESENTATIONS AND WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
17 TERMINATION. Neither party shall have the right to terminate this
Agreement for any reason. Both parties acknowledge that money damages
and/or injunctive relief are a sufficient remedy for any breach hereof.
All licenses granted by Aironet to Telxon herein are perpetual, which
for purposes of this Agreement shall mean the period of at least ninety
nine (99) years. Other than for equitable relief to enjoin or restrain
a breach hereof, which may be sought immediately, a non-breaching party
shall give the breaching party at least thirty (30) days written notice
of its intention to bring suit, prior to bringing suit, specifying the
claimed breach with sufficient specificity to allow the breaching party
to cure the alleged breach.
18 GENERAL PROVISIONS.
18.1 BANKRUPTCY. This Agreement is a license of Intellectual Property within
the meaning of Section 365(n) of the United States Bankruptcy Code.
Aironet is the licensor and Telxon is the licensee hereunder. If
Section 365(n) of the United States Bankruptcy Code (or any successor
provision) is applicable, and the trustee or debtor-in-possession has
rejected this Agreement and Telxon has elected to retain its rights
hereunder, then upon written request of Telxon, to the extent Telxon is
otherwise entitled hereunder, the trustee or debtor-in-
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<PAGE> 22
possession shall provide to Telxon any intellectual property (including
embodiments thereof) held by the trustee or debtor-in-possession.
Unless and until the trustee or debtor-in- possession rejects this
Agreement, on the written request of Telxon, to the extent Telxon is
otherwise entitled hereunder, the trustee or debtor-in-possession shall
provide to Telxon such intellectual property (including any embodiment
of such intellectual property to the extent protected by applicable
non-bankruptcy law) held by the trustee or debtor-in-possession.
18.2 ASSIGNMENT. Except as expressly permitted herein, this Agreement (and
the rights and obligations accruing hereunder) may not be assigned by
either party without the express written consent of the other party in
its sole discretion.
18.3 CONFIDENTIALITY.
18.3.1 Each party has developed a substantial amount of valuable
Confidential Information. For purposes of this Agreement,
"Confidential Information" shall mean this Agreement, as well
as any other agreement between Aironet and Telxon, the
documentation and any information and data marked as
confidential or which the receiving party knows, or has reason
to know given the circumstances in which it was disclosed, is
confidential, including but not limited to proprietary,
technical, developmental, specifications (including those set
forth on SCHEDULE 18.3.1), future product plans, financial,
pricing, marketing, sales, operating, performance, cost,
know-how, business and process information, computer
programming techniques, source and object codes, algorithms,
applications, operating system, data base, communication and
other computer software, and all record-bearing media
containing or disclosing such information and techniques which
are disclosed pursuant to this Agreement.
18.3.2 All Confidential Information of the other party in the
possession of a party, or delivered to it pursuant to this
Agreement: (a) shall not be distributed, disclosed, or
disseminated in any way or form by the recipient to anyone
except its own employees who have a reasonable need to know,
to its contractors in furtherance of its rights hereunder, and
pursuant to governmental or court order; (b) shall be treated
by the recipient with the same degree of care to avoid
disclosure to any third party as is used with respect to
recipient's own information of like importance which is to be
kept secret, but not less than reasonable care; and (c) shall
not be used by the recipient for its own purposes, except in
furtherance of the recipient's rights hereunder, without the
express prior written permission of the disclosing party.
18.3.3 For purposes of this Section 18.3, the following information
shall not be deemed Confidential Information: (a) information
of the other party which, at the time of disclosure is,
through no fault of the recipient, part of the public domain
(provided that any particular Confidential Information which
has not itself directly become a
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part of the public domain shall not be deemed to have become
public because it may be summarized, or otherwise referenced
without specific disclosure thereof, in a generalized
description made available to the public and that the public
disclosure of any feature(s) or component(s) of any
Confidential Information shall not be deemed to constitute any
other feature or component thereof not so disclosed); and (b)
information which, subsequent to disclosure, is obtained by
recipient without restriction as to confidential treatment
from a third party who is lawfully in possession of such
information and not in violation of any contractual, legal or
fiduciary obligation with respect to such information.
18.4 INDEMNITIES. Each party shall indemnify, defend, and hold harmless the
other party and its affiliates, officers, directors, employees, and
agents from and against any and all losses, liabilities, claims, and
expenses (including, without limitation, reasonable attorneys' fees)
which result from or arise in connection with any breach by the
indemnifying party of any of its representations, warranties, or
covenants made in this Agreement. The indemnified party shall promptly
notify the indemnifying party of any such indemnity obligation and the
latter shall have control of the payment, defense, and/or settlement of
any such loss, liability, claim, or expense, subject to the reasonable
consent of the indemnified party as to choice of counsel and
settlement.
18.5 LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR
ANY INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR PUNITIVE DAMAGES OR LOST
PROFITS ARISING OUT OF THIS AGREEMENT OR ANY TERMINATION OF THIS
AGREEMENT WHETHER LIABILITY IS ASSERTED IN CONTRACT OR TORT, AND
IRRESPECTIVE OF WHETHER IT HAS ADVISED OR HAS BEEN ADVISED OF THE
POSSIBILITY OF ANY SUCH DAMAGES.
18.6 NON-SOLICITATION. Neither party shall solicit for employment the
employees of the other party. Further, neither party may employ any
former employee of the other party until at least one year has elapsed
from the date of the former employee's separation from employment
service with the party, absent agreement by the parties to the
contrary.
18.7 NO PARTNERSHIP, JOINT VENTURE, OR AGENCY. This Agreement shall not be
construed to create a partnership, joint venture, agency relationship,
or any similar arrangement between the parties for any purpose
whatsoever.
18.8 FORCE MAJEURE. Neither party shall be liable for any loss or damage, or
be deemed to be in breach of this Agreement, to the extent that
performance of such party's obligations is delayed or prevented as a
result of any event or circumstance beyond its reasonable control.
18.9 SEVERABILITY; COUNTERPARTS. This Agreement is severable. Any
determination by a court of competent jurisdiction that a provision of
this Agreement is not enforceable shall not prevent enforcement of the
remaining provisions. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed and enforceable as an
original, and all of which together shall constitute one and the same
instrument.
18.10 GOVERNING LAW AND CHOICE OF FORUM. This Agreement shall be governed by
and construed under the laws of the State of Ohio, without regard to
the conflict of laws principles thereof. Subject the right of either
party to submit any dispute under this Agreement to arbitration as
provided in this Section 18.10, the Parties hereby consent to the
exclusive jurisdiction of the federal and state courts located in
Akron, Ohio with respect to the resolution of any disputes arising
under this Agreement and for the enforcement of any arbitration
findings issued in connection with the arbitration of any disputes
among the parties. The parties hereby waive any defenses based on
venue, forum non conveniens, lack of personal jurisdiction, or similar
grounds for any action or suit brought in these courts. As an
alternative to commencing litigation in court, a party may elect to
commence arbitration at the American Arbitration Association ("AAA")
office servicing Summit County, Ohio. Such arbitration shall be
conducted pursuant to the AAA commercial arbitration rules, and shall
be binding on the parties thereto. The arbitration shall be held before
three (3) arbitrators. Telxon shall have the right to appoint one
arbitrator, Aironet shall have the right to appoint the second
arbitrator; and the two (2) aforesaid arbitrators shall jointly select
the third arbitrator, who will preside over the arbitration proceeding.
The costs of the arbitration shall be divided equally between Telxon
and Aironet; provided, however, that each party shall bear its own
costs of counsel and of otherwise participating in any and all phases
of any arbitration. Notwithstanding that the commercial arbitration
rules of the AAA shall apply to any arbitration commenced under this
Section 18.10, the parties agree that the Federal Rules of Evidence
shall govern all evidentiary matters in such arbitration.
18.11 NOTICES. Any notices required or permitted to be given pursuant to this
Agreement shall be given in writing and delivered by confirmed fax
receipt, confirmed courier delivery, or confirmed postal delivery and
shall be deemed made upon confirmation of receipt. Such notices shall
be made to:
Attn: Chief Executive Officer Attn: Chief Executive Officer
Aironet Wireless Communications, Inc. Telxon Corporation
367 Ghent Road, Suite 300 3330 West Market Street
Fairlawn, Ohio 44333 Akron, Ohio 44333
18.12 MERGER. This Agreement, together with the Exhibits and Schedules
attached hereto, constitutes the entire agreement and understanding of
the parties with respect to the subject matter hereof, and supersedes
all prior and contemporaneous agreements, both oral and written. This
Agreement shall be construed as a whole according to its fair meaning
and not strictly for or against either party. This Agreement may not be
amended except pursuant to a written instrument executed by both
parties hereto, nor may any provision hereof be waived except pursuant
to a written instrument executed by the party granting such waiver.
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IN WITNESS WHEREOF, the authorized representatives of the parties hereby execute
this Agreement as of the date set forth in the first paragraph hereof.
AIRONET WIRELESS TELXON CORPORATION
COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy By: /s/ Kenneth W. Haver
------------------------------- --------------------------------------
Roger J. Murphy, President Kenneth W. Haver, Senior Vice President
and Chief Executive Officer and Chief Financial Officer
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EXHIBIT A
LEGACY PRODUCTS
<TABLE>
<CAPTION>
1000 SERIES 2000 SERIES
=========== ===========
<S> <C> <C>
900 MHz 2.4 GHz
DSSS DSSS
Proprietary Proprietary
- -----------------------------------------------------------------------------
RADIOS: R100 (095) R200 (025)
093
091
- -----------------------------------------------------------------------------
PC CARDS: PC1000 (690-900) PC2000 (690-2400)
- -----------------------------------------------------------------------------
ACCESS POINTS: AP1000E (630-900) AP2000E (630-2400)
AP1000T (631-900) AP2000T (631-2400)
AP1000L (632-900) AP2000L (632-2400)
- -----------------------------------------------------------------------------
UNIVERSAL CLIENTS: UC1000E UC2000E
UC1000S UC2000S
- -----------------------------------------------------------------------------
OTHERS: IC1000 (655-900) IC2000 (655-2400)
MC1000 (670-900) MC2000 (670-2400)
671-900 671-2400
672-900 672-2400
POSLAN 210-900 DS2415-2400
DS2410-900
DS2445
- -----------------------------------------------------------------------------
</TABLE>
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EXHIBIT B
CURRENT AIRONET SOFTWARE
LEGACY SOFTWARE
List of software with version numbers attached.
802.11 SUPPORTED ACCESS POINT SOFTWARE
List of software with version numbers attached.
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SCHEDULE 5
ROYALTY RATES
1 ACCESS POINT SOFTWARE. Telxon shall pay the following royalties for
each copy of Access Point software licensed under this Agreement which
is sold, or otherwise transferred or invoiced, by Telxon:
1.1 from April 1, 1998 through March 31, 1999, $80.
1.2 from April 1, 1999 through March 31, 2000, $70.
1.3 from April 1, 2000 through March 31, 2001, $60.
1.4 from April 1, 2001 through March 31, 2002, if the Access Point
on which the software is utilized is sold, transferred or
invoiced with an Aironet Product radio or pc card, $30;
otherwise, $50.
1.5 from April 1, 2002 through March 31, 2003, if the Access Point
on which the software is utilized is sold, transferred or
invoiced with an Aironet Product radio or pc card, $30;
otherwise, $40.
1.6 After March 31, 2003, $30.
The royalty under this Section 1 is in addition to the royalty due
under Section 3 or Section 4 of this SCHEDULE 5, if any.
2 CLIENT SOFTWARE AND RELATED CHIP SET. For the License of client
software included in the Legacy Software, Telxon shall pay Aironet a
royalty of $15 per unit up to 20,000 units per year (in aggregate), and
$10 per unit for each unit beyond 20,000 annually, for any Telxon
Derived Products sold, or otherwise transferred or invoiced, by Telxon
that are either (1) a 900 MHz DSSS PC Card product or (2) an Aerocomm
2.4GHz radio adapter, in either case that utilize the client software
included in the Legacy Software licensed under this Agreement. In the
case of Telxon Derived Products that are 900 MHz DSSS PC Card products
which utilize Aironet's proprietary chip set, Telxon shall, in addition
to the software royalty provided for above in this Section 2 pay a
royalty of $10 per unit. Other than the royalties due under this
Section 2, Telxon shall owe Aironet no royalty in respect of any 900
MHz DSSS PC Card product or an Aerocomm 2.4GHz radio adapter.
3 RADIOS. Telxon shall pay Aironet a royalty equal to 15% of Telxon's
Fully-Burdened Manufacturing Cost for each Radio sold, or otherwise
transferred or invoiced, by Telxon in or for use in any access point,
or 25% for each Radio sold, or otherwise transferred or invoiced, by
Telxon in or for use in any handheld client or other non-access point
device. If
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a royalty is due under Section 2 or 4 of this SCHEDULE 5, no royalty is
due under this Section 3.
4 PC CARDS. Telxon shall pay Aironet a royalty equal to 15% of Telxon's
Fully-Burdened Manufacturing Cost (which cost shall include the cost of
the Radio incorporated into such PC Card but shall not include the cost
of the radio incorporated therein if purchased from Aironet) for each
PC Card sold, or otherwise transferred or invoiced, by Telxon in or for
use in any access point, or 25% for each PC Card sold by, or otherwise
transferred or invoiced by Telxon in or for use in any handheld client
or other non-access device. If a royalty is due under Section 3 of this
SCHEDULE 5, no royalty is due under this Section 4.
5 UNIVERSAL CLIENTS. Telxon shall pay Aironet a royalty equal to 25% of
Telxon's Fully-burdened Manufacturing Cost (not including the cost of
the radio or pc card incorporated into such Universal Client; the
royalty under this Section 5 is in addition to the royalty due under
Sections 2, 3, or 4 of this SCHEDULE 5, if any) for each Legacy Product
Universal Client (listed on EXHIBIT A) or Telxon Derived Product
Universal Client sold, or otherwise transferred or invoiced, by Telxon.
5.1 In the case of any new version of a Universal Client
(i.e., not ethernet or serial), if Aironet does not develop
the interface daughter card, the cost of such card shall not
be included in calculating the corresponding royalty.
6 OTHER LEGACY AND TELXON DERIVED PRODUCTS. Telxon shall pay Aironet a
royalty equal to 25% of Telxon's Fully-Burdened Manufacturing Cost for
each unit of Telxon Derived Product or Legacy Product sold, or
transferred or otherwise invoiced, by Telxon, that is not an Access
Point, Universal Client, Radio, or PC Card.
7 TERMINATION OF ROYALTIES. Subject to the other provisions of this
SCHEDULE 5, in the event of a Change in Control of Aironet (defined in
Section 7.1 of this SCHEDULE 5), other than as a result of (i) a bona
fide, firm commitment, underwritten, public offering of Aironet stock,
or (ii) a spin-off, a dividend or any other distribution of Aironet
stock by Telxon to its stockholders:
7.0.1 royalties shall be payable with respect to Aironet Technology
Access Point software, Aironet Technology client software and
any related chip set (i) until the date that is four (4) years
after such event, (ii) until the date upon which total
royalties of Four Million Dollars ($4,000,000) shall have been
paid by Telxon following such event, or (iii) immediately if
such Change in Control is in a transaction with a competitor
of Telxon which derives twenty percent (20%) or more of its
annual operating revenue from business(es) representing twenty
percent (20%) or more of Telxon's annual operating revenues,
whichever of clauses (i), (ii) or (iii) comes first, at which
time all rights and licenses granted by Aironet to Telxon in
this Agreement with
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<PAGE> 30
respect to such software, and all royalties with respect to
such software, shall be deemed to be fully paid up and no
longer required to be paid; and
7.0.2 all rights and licenses granted by Aironet to Telxon in this
Agreement with respect to all Aironet Technology other than
the software and chip set described in Section 7.0.1 of this
SCHEDULE 5, and all royalties with respect to all Aironet
Technology other than the software and chip set described in
Section 7.0.1 of this SCHEDULE 5 shall be deemed to be fully
paid up and no longer required to be paid.
7.1 A "Change in Control" is deemed to have occurred if:
7.1.1 after the date hereof and prior to a bona fide, firm
commitment, underwritten, initial public offering of Aironet
stock, if any ("IPO"), (i) any Person other than the Investors
(defined herein) becomes the "beneficial owner" (as defined in
Rule 13d-3, as in effect on the date hereof, under the
Securities Exchange Act of 1934 (as amended, the "Exchange
Act")), directly or indirectly, of more than fifty percent
(50%) of the combined voting power of Aironet's Voting
Securities, or (ii) any Person other than the Investors
becomes entitled to elect or designate a majority of the
directors of Aironet's Board of Directors;
7.1.2 after an IPO, if (i) any Person becomes the beneficial owner,
directly or indirectly, of twenty percent (20%) or more of the
combined voting power of Aironet's Voting Securities,
provided, that if such event occurs as a result of a sale or
other transfer by Telxon (other than as a "Participant"
pursuant to section 3(d) of the Stockholders Agreement of even
date herewith, by and among Aironet and its stockholders (the
"Stockholders Agreement")) or a Telxon Group (defined herein)
of Voting Securities or an issuance by Aironet of Voting
Securities, then only if such securities are acquired for no
less than Ten Dollars and 50/100 Dollars ($10.50) per share
and if Axiom Venture Partners II Limited Partnership, Telantis
Venture Partners V, Inc., W, A & H Investments LLC, Clarion
Capital Corporation and Frank B. Carr, in the aggregate, do
not continue, upon the consummation of such transaction, to
own ten percent (10%) or more of the voting power of Aironet's
Voting Securities, or (ii) the Continuing Directors cease for
any reason to constitute at least a majority of the Aironet
Board of Directors, other than as a result of Telxon or a
Telxon Group (A) voting its Voting Securities to elect
directors other than, or failing to vote its Voting Securities
in favor of, those standing for election as part of the same
vote by Aironet's stockholders who were nominated by an
affirmative vote of at least a majority of the then Continuing
Directors (either by a specific vote or by approval of the
proxy statement of Aironet in which such person is named as a
nominee for director or of the inclusion of such person in
such proxy statement as such a nominee, in any such case
without objection by any member of such approving majority of
the then Continuing Directors to the nomination of such person
or the naming of such person as a director nominee), (B)
voting its Voting Securities to remove then
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Continuing Directors or otherwise causing the then Continuing
Directors to resign from Aironet's Board of Directors or (C)
voting its Voting Securities to decrease the number of
directors constituting the Aironet Board of Directors or to
fill any vacancies on the Aironet Board of Directors resulting
from an increase in the number of directors with persons other
than those standing for election to such vacancies as part of
the same vote by Aironet's stockholders who were nominated by
an affirmative vote of at least a majority of the then
Continuing Directors (as evidenced by vote, approval or
inclusion in the manner provided in subclause (A) of this
clause (ii)); and
7.1.3 at any time, there otherwise occurs a sale, lease, exchange or
other disposition to a Person of all or substantially all the
assets, or the dissolution or liquidation, of Aironet, or any
acquisition of stock by a Person, or any merger, consolidation
or reorganization to which Aironet and a Person are parties,
and as the result of which Aironet's stockholders prior to the
transaction do not after the transaction own at least fifty
percent (50%) of the voting power of Aironet or the surviving
entity, as applicable, in the election of directors,.
7.2 "Continuing Directors" means and includes the persons constituting
Aironet's Board of Directors as of the date of the IPO as well as each
person who becomes a director of Aironet subsequent to the date of the
IPO whose election, or nomination for election by Aironet's
stockholders, was approved by an affirmative vote of at least a
majority of the then Continuing Directors (either by a specific vote or
by approval of the proxy statement of Aironet in which such person is
named as a nominee for director or of the inclusion of such person in
such proxy statement as such a nominee, in any such case without
objection by any member of such approving majority of the then
Continuing Directors to the nomination of such person or the naming of
such person as a director nominee), for so long as each such director
shall remain in office.
7.3 "Person" means and includes any individual, corporation, partnership,
group, association or other "person", as such term is used in Section
14(d) of the Exchange Act, but excluding Telxon, any Telxon Group, any
affiliate (as defined in Rule 12b-2, as in effect on the date hereof,
under the Exchange Act) of Telxon, any member of a Telxon Group, or
Aironet, or any employee benefit plan sponsored by any of the
foregoing. For purposes of this Section 7, references to "Telxon" shall
include a Person which succeeds to Telxon's business or assets as a
whole, whether by purchase of the stock or assets of Telxon, merger or
otherwise. "Telxon Group" means one or more Persons that act or refrain
from acting at Telxon's direct or indirect request, alone or in concert
with each other, or with Telxon.
7.4 "Voting Securities" means the Aironet Common Stock, par value $0.01 per
share, and any and all other then outstanding Aironet securities
ordinarily having the right to vote generally in the election of
Aironet directors.
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7.5 All rights and licenses granted by Aironet to Telxon in this Agreement
with respect to all Aironet Technology other than the software or chip
set described in Section 7.0.1 of this SCHEDULE 5, and all royalties
with respect to all Aironet Technology other than the software or chip
set described in Section 7.0.1 of this SCHEDULE 5, shall be deemed to
be fully paid up and no longer required to be paid as of April 1, 2001,
unless Section 7.0.2. of this SCHEDULE 5 earlier applies.
7.6 In no event shall the aggregate royalties payable by Telxon to Aironet
pursuant to Article 5 of this Agreement and this SCHEDULE 5 and Section
8.11.3.2 of this Agreement and Section 4 of SCHEDULE 8 in respect of
the following periods exceed the respective maximum amounts indicated
in the following table, reduced as provided below:
Royalty Period Maximum Aggregate Royalties
April 1, 1998 - March 31, 1999 $7,000,000
April 1, 1999 - March 31, 2000 $6,500,000
April 1, 2000 - March 31, 2001 $5,000,000
Each April 1 - March 31 thereafter $4,000,000
The provisions of this Section 7.6 shall not apply to royalties for New
Software.
8 Upon the termination of software and related chip set royalties under
Section 7.0.1 of this SCHEDULE 5, Telxon shall commence to pay Aironet
for the software related services rendered by it to Telxon under
Article 11 of the Agreement, and upon the termination of royalties for
other than software or the related chip set under Sections 7.0.2 and/or
7.5 of this SCHEDULE 5, Telxon shall commence to pay Aironet for the
services rendered by it to Telxon under Article 11 of the Agreement
related to items other than software and the related chip set, and in
either case at Aironet's cost of rendering such services plus fifty
percent (50%).
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SCHEDULE 8
AIRONET PRODUCT PRICING
1 BRIDGE PRODUCTS. Telxon shall pay Aironet a price equal to 154% of
Aironet's Fully- Burdened Manufacturing Cost for each unit of any
Bridge Products purchased by Telxon.
2 ALL OTHER AIRONET PRODUCTS. Telxon shall pay Aironet a price equal to
133 1/3 % of Aironet's Fully-Burdened Manufacturing Costs for each unit
of any other Aironet Products purchased by Telxon.
3 RENEGOTIATION OF SUPPLY OBLIGATIONS. The Aironet Product supply
obligations provided for in Article 8 of the Agreement and the pricing
provided for in this SCHEDULE 8 are intended to be effective until the
date four (4) years after the first to occur of (i) Aironet becoming a
publicly traded company through an underwritten firm commitment initial
public offering in which the proceeds to Aironet are at least Eight
Million Dollars ($8,000,000), or (ii) a change in control of Aironet
which results from a merger, consolidation, sale of all of Aironet's
issued and outstanding stock to a single purchaser, or the sale or
other disposition of substantially all of Aironet's assets to a single
purchaser, in a single transaction or a series of transactions. Prior
to the expiration of such expiration date, the parties shall in good
faith renegotiate the original pricing and other terms of the supply
obligations, which shall cease to be effective at such date. This
Section 3 shall not affect the license granted in Section 8.11.3 of the
Agreement, which shall not expire or be subject to renegotiation under
this Section 3.
4 DISCONTINUED AIRONET PRODUCTS. Royalties shall be due from Telxon to
Aironet on discontinued Aironet Products in accordance with the
principles of Article 8 and this SCHEDULE 8, at a rate of thirty three
and one third percent (33 1/3%) of Telxon's Fully- Burdened
Manufacturing Cost, provided that all rights and licenses granted by
Aironet to Telxon in Section 8.11.3 of the Agreement with respect to a
particular discontinued Aironet Product, and all royalties with respect
thereto, shall be deemed to be fully paid up and not required to be
paid from and after the date five (5) years after the date (the
"Commencement Date") that Telxon first exercises rights under Section
8.11.3 with respect to that product.
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SCHEDULE 10
IMAP FEE RATES
1 For any Accepted Customer, Aironet agrees to pay Telxon an IMAP Fee,
based on a percentage of revenue earned by Aironet on sales by Aironet
to any "Accepted Customer" presented to Aironet by Telxon as follows:
AIRONET'S GROSS MARGIN IMAP FEE AS A PERCENT OF REVENUE
40% or more 10%
30% - 39% 5%
less than 30% 0%
2 IMAP Fees shall be payable from the first dollar, beginning upon
Aironet's acceptance of a customer and ending eighteen (18) months
after Aironet has accepted orders totaling $25,000 from that customer.
3 An "Accepted Customer" shall mean any customer of Telxon accepted by
Aironet in writing or to whom Aironet sells any goods or services as a
result of Telxon's introduction.
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SCHEDULE 18.3.1
SPECIFICATIONS; "GRANDFATHERED" CUSTOMERS
Except to the customers set forth in this SCHEDULE 18.3.1, Aironet shall not
market Aironet Products that are network-compatible with Legacy Products (i.e.,
the network ID's of Aironet Products shall differ from the current network ID's
used for Legacy Products). The parties consider such network ID's to be Telxon's
specifications for the purposes of Section 18.3.1.
The list of "grandfathered" customers is attached
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<PAGE> 1
Exhibit 10.5.1
FIRST AMENDMENT TO LICENSE, RIGHTS AND SUPPLY AGREEMENT
This First Amendment to License, Rights and Supply Agreement (this
"Amendment") is made March 30, 1999, by and between Telxon Corporation
("Telxon") and Aironet Wireless Communications, Inc. ("Aironet").
BACKGROUND
A. Telxon and Aironet are parties to a License, Rights and Supply
Agreement dated as of March 31, 1998 (together with all exhibits and schedules
thereto, the "Agreement"), pursuant to which Aironet has granted to Telxon
certain rights and licenses, and has agreed to supply Telxon with certain
products.
B. Aironet and Telxon each desires to amend the Agreement to modify
certain royalties payable by Telxon to Aironet under the Agreement, as set forth
in this Amendment.
AGREEMENT
Now, therefore, in consideration of the foregoing, the agreements made
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1 EFFECTIVE DATE. This Amendment is effective for royalties due for the
period beginning March 1, 1999 (the "Effective Date"), and each party shall take
all actions necessary to give this Amendment such effect.
2 INTEGRATION. This Amendment and the Agreement collectively set forth the
entire understanding and agreement between the parties with respect to the
subject matter hereof and thereof, and shall be read together as a single
integrated document. To the extent that the terms of the Agreement conflict with
the terms of this Amendment, the terms of this Amendment shall control.
3 DEFINITIONS. Any initially capitalized term which is not defined herein
shall have the meaning set forth in the Agreement.
4 ROYALTIES.
4.1 Notwithstanding any provision of the Agreement to the contrary and
subject to Section 6 of this Amendment, commencing on the Effective Date of this
Amendment Telxon shall pay to Aironet with respect to each month during the
periods set forth below, the following amounts as a fixed royalty for such month
under Article 5 of the Agreement, SCHEDULE 5 of the Agreement, Section 8.11.3.2
of the Agreement and Section 4 of SCHEDULE 8 of the Agreement (collectively the
"Per Unit Sections"):
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Royalty Period Monthly Royalty
March 1, 1999 - March 31, 2000 $541,667
April 1, 2000 - March 31, 2001 $416,667
Beginning April 1, 2001 and every month thereafter $333,333
The foregoing fixed monthly royalties are payable for the same purposes and
in lieu of the per unit of hardware and per copy of software royalties payable
by Telxon under the Per Unit Sections in respect of any period commencing on or
after the Effective Date of this Amendment, and the payment thereof is due
within ten business days after the last day of the month with respect to which
it is payable.
4.2 Telxon shall have the right to elect, with respect to the royalties
accruing at any time on or after the earlier of (i) April 1, 2001, or (ii) a
Change in Control as provided for in Section 7.1 of Schedule 5 of the Agreement,
to terminate the fixed royalties payable under Section 4.1 of this Amendment
and, in lieu thereof, to pay to Aironet the per unit of hardware and per copy of
software royalties under the Per Unit Sections, as modified by Section 5 of this
Amendment and, subject to the provisions of Section 4.3 of this Amendment,
otherwise on the terms and under the conditions set forth in the Agreement. Any
such termination election shall be made by written notice given to Aironet and
shall be effective, in the case of notice given pursuant to clause (i) of the
preceding sentence, as of the first day of the calendar month commencing on or
after the date ninety (90) days after the date such notice is given, and in the
case of notice given pursuant to clause (ii) of the preceding sentence, as of
the later of the date such notice is given or the date on which the subject
Change in Control occurs. In the case of a termination of the fixed royalties in
connection with the Change in Control, the amount of the fixed royalty due with
respect to the month in which the Change in Control occurs shall be prorated on
a per diem basis (assuming a thirty (30) day month) based on the number of days
elapsed during such month prior to the date of such Change in Control.
4.3 Section 7.6 of Schedule 5 of the Agreement is hereby deleted and shall
be of no further force or effect.
5 ROYALTY REDUCTION. In consideration of the agreements made in
Section 4.1 of this Amendment and elsewhere, in the event that at or after
April 1, 2001 or a Change in Control (as provided in Section 7.1 of SCHEDULE 5
of the Agreement), Telxon elects to terminate the fixed royalty payable under
Section 4.2 of this Amendment and return to a per unit and per copy royalty,
then Sections 3 and 4 of SCHEDULE 5 of the Agreement shall be deleted in their
entirety and replaced with the following:
3. RADIOS. Telxon shall pay Aironet no royalty for any Radio
sold, or otherwise transferred or invoiced, by Telxon in or for use in
any access point, and 15% for each Radio sold, or otherwise transferred
or invoiced, by Telxon in or for use in
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<PAGE> 3
any handheld client or other non-access point device. If a royalty is
due under Section 2 or 4 of this SCHEDULE 5, no royalty is due under
this Section 3.
4. PC CARDS. Telxon shall pay Aironet no royalty for any PC Card
sold, or otherwise transferred or invoiced, by Telxon in or for use in
any access point, and 15% for each PC Card sold by, or otherwise
transferred or invoiced by Telxon in or for use in any handheld client
or other non-access device. If a royalty is due under Section 3 of this
SCHEDULE 5, no royalty is due under this Section 4.
6 NEW SOFTWARE. Royalties for New Software shall remain on a per copy
basis in accordance with the terms of the Agreement.
7 GENERAL.
7.1 REPORTING. In addition to, but not in duplication of, any reporting
requirements in the Agreement, no later than the fifth business day of each
month, Telxon shall report to Aironet in writing, by model and unit volume, each
sale by Telxon for the previous month of any product purchased by Telxon under
the Agreement or upon which a royalty is payable by Telxon to Aironet under the
Agreement or this Amendment.
7.2 AMENDMENTS; WAIVER. The provisions of this Amendment may not be
amended or waived except pursuant to a written agreement executed by both
parties hereto. Section 17 of the Agreement provides that neither party shall
have the right to terminate the Agreement for any reason. Such provision applies
equally to this Amendment.
7.3 GOVERNING LAW; JURISDICTION. This Amendment shall be construed under
and governed by the laws of the State of Ohio, without regards to conflict or
choice of laws, statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Amendment shall be brought in the
courts, state or federal, sitting in Cuyahoga or Summit County, Ohio, and each
party hereto consents to the jurisdiction and venue of such courts, and agrees
not to contest venue on the grounds of forum non conveniens or otherwise.
7.4 NOTICES. Any notice, request, demand or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been
given upon receipt, or if delivered or sent by facsimile transmission, upon
confirmation of transmission, or if sent by overnight courier, the second day
after deposit, to the addresses set forth in the Agreement.
7.5 ASSIGNABILITY. This Amendment may not be assigned, and no right or
obligation herein may be assigned or delegated, separate or apart from the
Agreement, subject to all restrictions on assignment and delegation applicable
thereto, and any purported assignment or
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<PAGE> 4
delegation in violation thereof shall be void and of no effect. Subject to the
foregoing, this Amendment shall be binding upon and enforceable by, and shall
inure to the benefit of, the parties hereto and their respective permitted
successors and assigns.
7.6 CAPTIONS AND GENDER. The captions in this Amendment are for
convenience only and shall not affect the construction or interpretation of any
term or provision hereof. The use in this Amendment of the masculine, feminine
or neuter pronoun, shall include the others as the context may require.
7.7 EXECUTION IN COUNTERPARTS. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Amendment shall be binding on the parties, and for
evidentiary purposes shall be deemed to be an original.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the date first set forth above.
AIRONET WIRELESS COMMUNICATIONS, INC. TELXON CORPORATION
By: /s/ Roger J. Murphy By: /s/ Gerald J. Gabriel
-------------------------- --------------------------------
Roger J. Murphy, President Gerald J. Gabriel
Its: Senior Vice President,
-------------------------------
Financial Operations
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Exhibit 10.6
TAX BENEFIT AND INDEMNIFICATION AGREEMENT
TAX BENEFIT AND INDEMNIFICATION AGREEMENT (this "Agreement") is entered
into as of March 31, 1998, by and between AIRONET WIRELESS COMMUNICATIONS, INC.
("Aironet"), a Delaware corporation, and TELXON CORPORATION ("Telxon"), a
Delaware corporation.
BACKGROUND
WHEREAS, Telxon is the common parent of an affiliated group of
corporations (the "Telxon Group"), which includes Aironet and its subsidiaries
(the "Aironet Group"), within the meaning of Sections 1502 and 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the Telxon Group files consolidated federal income tax returns
as permitted by Section 1501 of the Code and files returns filed with local and
state taxing authorities ("Consolidated Returns"), pursuant to which Telxon and
one or more other members of the Telxon Group pay Taxes (defined herein) on a
consolidated basis ("Consolidated Taxes");
WHEREAS, simultaneously with the execution of this Agreement, Aironet
is selling shares of its common stock to investors in a private sale (such sale
is referred to herein as the "Offering"), as the result of which Telxon will own
less than 80% of the issued and outstanding capital stock of Aironet, and,
thereafter, the Aironet Group will no longer be members of the Telxon Group; and
WHEREAS, Telxon and Aironet desire to allocate Taxes and related
benefits and liabilities between them for all periods of time prior to and
ending at the Offering ("Pre-Offering Tax Period").
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally and equitably bound, agree as follows.
1. CERTAIN DEFINITIONS. In addition to terms defined elsewhere in this
Agreement, the following terms shall have the meanings set forth in this Section
1:
1.1 "Consolidated Group" or "consolidated group" means an affiliated
group of corporations filing Consolidated Returns, as defined in Treasury
Regulation Section 1.1502-1 (h).
1.2 "Proceeding" means any audit or other examination or judicial or
administrative proceeding relating to liability for or refunds or adjustments
with respect to Taxes.
1.3 "Refund" means any net operating loss, casualty loss, net capital
loss, investment tax credit, foreign tax credit, charitable deduction,
deductions and credits related to alternative minimum taxes or any other loss,
deduction, credit or tax attribute which reduce Taxes.
1.4 "Tax(es)" means all taxes, levies or other like assessments,
charges or fees, including,
<PAGE> 2
without limitation, any income, excise, real or personal property, gains, sales,
use, license, real estate or personal property transfer, net worth, stock
transfer, payroll, ad valorem and other governmental taxes and any withholding
obligation imposed by or payable to the United States, or any state, county,
local or foreign government or subdivision or agency thereof, and any interest
(whether paid or received), penalties or additions to tax attributable thereto.
1.5 "Taxing Authorities" means any governmental authority which imposes
or is responsible for the imposition or collection of a Tax.
2. EFFECTIVE DATE. This Agreement shall take effect automatically upon
consummation of the Offering.
3. RECORDS RETENTION, RETURNS, AND PAYMENT OF TAXES.
3.1 The Aironet Group hereby irrevocably designates Telxon as its agent
and attorney-in-fact to take any and all actions necessary or incidental to the
preparation of Consolidated Returns and the filing of such Consolidated Returns,
to make claims for Refunds, to respond to audits, and to take any action
specified in Treasury Regulation Section 1.1502-77(a) and any other action
related to Taxes of the Telxon Group relating to the Pre-Offering Tax Period.
3.2 Aironet will timely furnish Telxon with any and all information
reasonably requested by Telxon in order to carry out the terms of this Agreement
and, within ten (10) days of receipt thereof, copies of all correspondence and
notices received from the Internal Revenue Service or any other Taxing Authority
relating to the Pre-Offering Tax Period.
3.3 Aironet will not, nor will it cause or permit any member of the
Aironet Group to, make or change any tax election, change any accounting method,
amend any tax return or take any tax position on any tax return, take any other
action, omit to take any action or enter into any transaction that results in
any changes to any Taxes or any Refund of the Telxon Group or any member
thereof, in respect of any Pre-Offering Tax Period, without first obtaining the
written consent of an authorized representative of Telxon.
3.4 Telxon and Aironet shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with any Proceeding
relating to the Pre-Offering Tax Period. Such cooperation shall include, upon
the other party's request, the provision of records and information which are
reasonably relevant to any such Proceeding, as well as making employees
available on a mutually convenient basis to provide additional information and
explanation of any material provided hereunder.
3.5 Telxon and Aironet agree to retain all books and records with
respect to Taxes pertinent to the Telxon Group relating to the Pre-Offering Tax
Period, and to abide by all record retention agreements entered into by Telxon
with any Taxing Authority, and to give the other party reasonable written notice
prior to destroying or discarding any such books and records and, if the other
party so requests, to allow the other party to take possession of such books and
records. All such books and records shall be retained until the expiration of
the statute of limitations, or
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extensions thereof, applicable to any Pre-Offering Tax Period Tax or Refund,
plus three (3) years.
4. PRORATIONS. Taxes and Refunds for any partial tax period during the
Pre-Offering Tax Period shall be prorated as follows: Taxes based income,
whether federal, state, local or foreign, will be prorated on the same basis as
that used to prorate United States federal income Tax; all other taxes will be
prorated as of the Effective Date. All prorations shall be adjusted as of the
end of the relevant full Tax period, and in the event that a party has received
a benefit to which it is not entitled as a result of the proration, it shall
promptly repay to the other party the amount of the excess benefit.
5. PRE-OFFERING TAX PERIOD BENEFITS.
5.1 Without limiting the generality of Section 5.2, Telxon may elect,
and Aironet shall join Telxon's election if necessary, (i) to reattribute to
itself any or all Refunds of the Aironet Group pursuant to Treasury Regulations
Section 1.1502-20(g) and, if Telxon makes such election, Aironet shall comply
with the requirements of Treasury Regulations Section 1.1502-20(g)(5)) and (ii)
to ratably allocate items, other than extraordinary items, of the Aironet Group
in accordance with relevant provisions of the Treasury Regulations Section
1.1502-76.
5.2 The Telxon Group shall be entitled to utilize all Refunds generated
by the Telxon Group which relate to the Pre-Offering Tax Period, including those
generated by the Aironet Group. In the event that Telxon is not permitted under
applicable law, rules and regulations to directly utilize Refunds generated by
the Aironet Group which relate to the Pre-Offering Tax Period, Aironet agrees to
pay to Telxon the actual tax benefits received by the Aironet Group from such
Refunds, if and when such actual tax benefits are realized. Aironet's actual tax
benefits shall be considered to equal the excess of (x) the amount of Taxes that
would have been payable by the Aironet Group in any tax period in the absence of
its utilizing such Refunds over (y) the amount Taxes actually payable by the
Aironet Group. Aironet shall promptly pay to Telxon the actual tax benefits
realized by the Aironet Group after Aironet files any applicable tax return. If,
subsequent to the payment by Aironet to Telxon of any such amount, there shall
be a final determination by any Taxing Authority which results in a disallowance
or a reduction of the Refund so utilized by the Aironet Group, or a reduction in
the amount of the benefit realized by the Aironet Group, Telxon shall promptly
repay to Aironet the amount of the excess payment that was made by Aironet to
Telxon. Aironet shall utilize all Refunds relating to the Pre-Offering Tax
Periods at such times, and either on a carry back or carry forward basis, as
Telxon may direct, if at all. Aironet shall provide Telxon with prompt written
notice of, and shall fully communicate with Telxon regarding, all events
described in this Section 5.2.
5.3 Any payment ultimately due under any provision of this Agreement
from Telxon to Aironet resulting from a so-called "tax timing difference" (i.e.,
the determination of the appropriate tax period in which, for example, a
deduction, loss, credit or income item is to be recognized), which can
reasonably be expected to be wholly or partially reversed or otherwise offset by
payments flowing back from Aironet to Telxon in a later tax period(s), shall be
structured by the parties hereto with a view to minimizing to the greatest
extent practicable the aggregate Taxes to be paid by Telxon due to or arising
out of such tax timing difference.
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5.4 With respect to such tax timing differences and as a general
prescription but without limitation and subject to the exceptions noted below:
(i) any payment required to be made by Telxon to Aironet that would be a deemed
contribution to Aironet's capital account by Telxon under Reg. Section 83-6(d)
or otherwise shall be minimized; and (ii) any inter-company deemed dividend
arising from a payment required to be made by Aironet to Telxon in a later tax
period but arising as a result of such tax timing difference also shall be
minimized. In order to minimize Telxon's Taxes in those specific tax timing
difference circumstances where a payment is initially due from Telxon to Aironet
with the reasonable expectation that all or a portion of the monies paid will
later be required to be repaid (offset) by Aironet to Telxon relating to the
same tax timing difference ("Pay Back Amount"), the general rule to be followed
will be to minimize the amount of money actually or deemed to be transferred and
to treat the Pay Back Amount as a deemed loan from Aironet to Telxon, with
Telxon paying Aironet only the time value of money ("interest rate") applied to
the Pay Back Amount for the period of the deemed loan, i.e., the period
beginning with the date Telxon would be required to transfer funds to Aironet
relating to the tax timing difference to the date Aironet would be required to
transfer such funds back to Telxon due to the same tax timing difference, with
the interest rate determined to be Telxon's primary lending bank's so-called
prime rate as at the date Telxon would first be required, due to the tax timing
difference, to transfer the Pay Back Amount to Aironet. Any payment required to
be made hereunder shall be due and payable only one time per year on a date
within ninety (90) days after the end of the fiscal year of the party required
to make the subject payment.
5.5 Notwithstanding and as specific exceptions to Sections 5.3 and 5.4
(x) in the event that the parties hereto in good faith mutually determine that
for any relevant tax period the Pay Back Amount exceeds Two Hundred Fifty
Thousand Dollars ($250,000), Aironet may, at its option, notify and require
Telxon, and upon such notification Telxon agrees, to disregard the Pay Back
Amount convention and transfer all funds then owed by Telxon to Aironet arising
out of or otherwise due to a tax timing difference; provided that (y) Telxon
shall not be liable to Aironet hereunder for any single Tax, tax timing
difference item or other payment amount due hereunder ("tax item") in an amount
less than Ten Thousand Dollars ($10,000) unless and until the amount of such tax
items for any one tax period when aggregated exceeds One Hundred Thousand
Dollars ($100,000) ("tax item ceiling"), and in that case, the total of tax
timing difference items that exceed the tax item ceiling for any one tax period
shall be subject to the terms and conditions of this Agreement.
6. INDEMNIFICATION FOR TAXES AND RELATED EXPENSES.
6.1 Subject to Section 6.2, Telxon shall pay, defend, indemnify and
hold the Aironet Group and its officers and directors harmless against all
liabilities for all (i) Telxon Group Taxes paid or payable for any year or
partial year during the Pre-Offering Tax Period, regardless of when or how
determined, (ii) all costs and reasonable expenses incurred by Aironet in
connection with or as a result of any Proceeding related to such Telxon Group
Taxes and (iii) further Taxes due by Aironet as a result of payments made by
Telxon under this Section 6.1.
6.2 Telxon shall not be liable to Aironet for any special, indirect,
incidental or consequential damages. No payment shall be due from Telxon to
Aironet under Section 5.1 unless Aironet has then made all payments and
performed all of its other obligations required under this
4
<PAGE> 5
Agreement, and Telxon was given full control to contest, settle or compromise
such liability.
7. GENERAL PROVISIONS.
7.1 Neither this Agreement nor any right or obligation hereunder may be
assigned or delegated by Aironet to a direct competitor of Telxon (a
"Competitor"), and any such assignment or delegation shall be void and of no
effect. The merger, consolidation, asset sale, change of control, or any other
reorganization of Aironet with or into a Competitor, or of a Competitor with or
into Aironet, shall be deemed an assignment under this Section 7.1. Subject to
the foregoing, this Agreement shall be binding upon and enforceable by, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
7.2 The provisions of this Agreement shall remain in full force until
the longer of (i) all periods of limitation, including any extensions or waiver
periods, for all Pre-Offering Tax Periods of Telxon and Aironet have expired or
(ii) such time as Telxon may no longer make any claims with respect to Taxes or
Refunds for the Pre-Offering Tax Period, and Aironet shall not agree to any
extensions or waivers of any such period without Telxon's prior written consent.
7.3 Any notices, payments or other communications required by this
Agreement shall be made to the attention of the Chief Executive Officer and the
Chief Financial Officer of the recipient at its principal offices.
7.4 This Agreement shall be governed by and construed in accordance
with the laws of the State of Ohio without regards to conflict of laws
principles.
7.5 This Agreement (a) constitutes the entire agreement and supersedes
all prior agreement and understandings, both written and oral, among the parties
with respect to the subject matter of this Agreement and (b) is not intended to
confer upon any person other than the parties hereto any rights or remedies.
7.6 The headings of the sections of this Agreement are inserted for
convenience only and shall not constitute a part thereof or affect in any way
the meaning or interpretation of this Agreement.
7.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. For evidentiary purposes,
a faxed executed counterpart shall be deemed to be an original.
5
<PAGE> 6
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
AIRONET WIRELESS COMMUNICATIONS, INC.
For and on behalf of itself and all of its subsidiaries
By: /s/ Roger J. Murphy
-----------------------------------------
Roger J. Murphy,
President and Chief Executive Officer
TELXON CORPORATION
For an on behalf of itself and all of its subsidiaries
other than the Aironet Group
By: /s/ Kenneth W. Haver
-----------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
6
<PAGE> 1
Exhibit 10.6.1
PROMISSORY NOTE
---------------
July,___1998
Akron, Ohio
AIRONET WIRELESS COMMUNICATIONS, INC. ("Maker") and TELXON CORPORATION
("Payee"), are parties to a Tax Benefit and Indemnification Agreement dated as
of March 31, 1998 (the "Tax Agreement"). Any initially capitalized term used
herein which is not defined where first used has the meaning ascribed to such
term in the Tax Agreement. Subject to the other terms and conditions therein,
the Tax Agreement provides in part that:
[t]he Teixon Group shall be entitled to utilize all Refunds
generated by the Telxon Group which relate to the Pre-Offering Tax
Period, including those generated by the Aironet Group. In the
event that Telxon is not permitted under applicable law, rules and
regulations to directly utilize Refunds generated by the Aironet
Group which relate to the Pre-Offering Tax Period, Aironet agrees
to pay to Telxon the actual tax benefits received by the Aironet
Group from such Refunds, if and when such actual tax benefits are
realized. Aironet's actual tax benefits shall be considered to
equal the excess of (x) the amount of Taxes that would have been
payable by the Aironet Group in any tax period in the absence of
its utilizing such Refunds over (y) the amount Taxes actually
payable by the Aironet Group. Aironet shall promptly pay to Telxon
the actual tax benefits realized by the Aironet Group after Aironet
files any applicable tax return. If, subsequent to the payment by
Aironet to Telxon of any such amount, there shall be a final
determination by any Taxing Authority which results in a
disallowance or a reduction of the Refund so utilized by the
Aironet Group, or a reduction in the amount of the benefit realized
by the Aironet Group, Telxon shall promptly repay to Aironet the
amount of the excess payment that was made by Aironet to Telxon.
Aironet shall utilize all Refunds relating to the Pre-Offering Tax
Periods at such times, and either on a carry back or carry forward
basis, as Telxon may direct, if at all.
THEREFORE, FOR VALUE RECEIVED, Maker hereby promises to pay to the
order of Payee, in accordance with the terms and conditions of the Tax
Agreement, the amount of the actual tax benefits of any Refunds actually
received by the Aironet Group. As of the date of this Note, Maker anticipates
that it will receive $1,292,520 (U.S.D) in tax benefit from Refunds due to Maker
from Revenue Canada. Maker may prepay this Note, in whole or any part, at any
time and from time to time, without premium or penalty or prior notice. All
payments and any prepayments under this
Page 1 of 2
<PAGE> 2
Note shall be applied first to the accrued but unpaid interest and then to
principal. Maker to the extent it may lawfully do so, hereby walves presentment,
demand, notice of dishonor, protest, notice of protest and all other demands,
protests and notices in connection with the execution, delivery, performance,
collection and enforcement of this Note. If this Note is not paid when due and
is placed by the holder hereof with any attorney for collection, through legal
proceedings or otherwise, Maker agrees to pay such holder on demand its
reasonable attorneys' fees and reasonable costs and expenses of collection,
which amounts shall be added to the principal of this Note to the extent not so
paid.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF OHIO, WITHOUT REGARD TO PRINCIPLES OF
CONFLICT OF LAWS. MAKER HEREBY IRREVOCABLY CONSENTS AND SUBMITS TO THE
JURISDICTION OF ANY OF THE COURTS, STATE AND FEDERAL, SITTING IN CUYAHOGA AND
SUMMIT COUNTIES, OHIO OVER THE ENFORCEMENT OF THIS NOTE.
MAKER:
AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/Roger Murphy
-----------------------------------
Roger J. Murphy,
President and Chief Executive Officer
Page 2 of 2
<PAGE> 1
Exhibit 10.7
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is entered into as of March
31, 1998 (the "Effective Date"), by and between AIRONET WIRELESS COMMUNICATIONS,
INC. ("Aironet"), a Delaware corporation, and TELXON CORPORATION, a Delaware
corporation ("Telxon").
BACKGROUND
WHEREAS, as Aironet's principal stockholder, Telxon has heretofore
provided certain administrative, financial, management and other services to
Aironet;
WHEREAS, simultaneously with the execution of this Agreement, Aironet
is selling shares of its common stock to investors in a private sale (the
"Offering"); and
WHEREAS, in connection with the Offering, Telxon will in general cease
providing services to Aironet; however, Aironet desires to retain Telxon, and
Telxon desires to act, as an independent contractor to continue to provide
certain services to Aironet on the terms and subject to the conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Telxon and Aironet hereby agree as
follows:
1. SERVICES.
1.1 SALE AND PURCHASE. During the Term (defined herein), Telxon will
provide to (or procure for) Aironet, and Aironet will purchase from (or acquire
through) Telxon, the services, employee benefits and insurance described in
Schedules I and II attached hereto ("Services"). At Aironet's request, Telxon
will provide Services directly to Aironet's subsidiaries.
1.2 QUALITY. The Services shall be substantially similar in scope to
those provided by Telxon to Aironet prior to the Effective Date, and Telxon
shall use reasonable efforts to ensure that the nature and quality of the
Services provided to Aironet hereunder shall be undifferentiated from the nature
and quality of the Services that Telxon provides to itself and its subsidiaries.
Without limiting the generality of the foregoing, Telxon shall use reasonable
efforts to ensure that the nature and quality of Services provided to Aironet
employees under the Telxon Plans (defined herein), either by Telxon directly or
through administrators under contract, shall be undifferentiated from the nature
and quality of the Services provided to Telxon employees.
<PAGE> 2
2. EMPLOYEE BENEFIT PLANS.
2.1 PARTICIPATION. During the Term, eligible Aironet employees will
continue to participate in Telxon's employee welfare and benefit plans
identified in the Schedules (defined herein) ("Telxon Plans").
2.2 COOPERATION. Aironet agrees to cooperate with Telxon in the
administration and coordination of and compliance with regulatory and
administrative requirements associated with the Telxon Plans, including, but not
limited to: sharing payroll data for determination of highly compensated
employees; providing census information (including accrued benefits) for
purposes of performing discrimination tests; providing actuarial reports for
purposes of determining the funded status of any plan; review and coordination
of insurance and other independent third-party contracts; and providing for
review of all summary plan descriptions, requests for determination letters,
insurance contracts, Forms 5500, financial statement disclosures and plan
documents.
2.3 DELEGATION. Aironet hereby delegates to Telxon final, binding and
exclusive authority, responsibility and discretion to interpret and construe the
provisions of the Telxon Plans in which Aironet employees participate. Telxon
may further delegate such authority to plan administrators, including the
authority to:
(a) provide administrative and other services;
(b) reach factually supported conclusions regarding
claims, consistent with terms of the Telxon Plans; and
(c) make a full and fair review of each claim denial
or other decision relating to the provision of benefits provided or
arranged for under the Telxon Plans, in accordance with the
requirements of the Employee Retirement Income and Security Act
("ERISA"), where applicable.
3. FEES AND PAYMENT.
3.1 FEES AND COSTS. Schedules I and II (collectively, the "Schedules")
set forth the prices that Aironet will pay to Telxon for certain Services, and
whether the costs associated with other Services (including any contributions to
benefit plans, premiums for insurance and third-party expenses paid by Telxon in
connection with the Services) will be passed-through to Aironet or charged to
Aironet employees through payroll deductions. In addition, Aironet shall
reimburse Telxon in accordance with past practices for Telxon's expenses and
costs related to (i) participation by Aironet employees in any Telxon Plans,
(ii) coverage of Aironet's property, officers and directors under Telxon's
liability, property and casualty, and fiduciary insurance policies and (iii)
other third party costs and expenses incurred by Telxon in connection with the
provision of the Services to Aironet and its employees. Costs which are passed
through to Aironet will be equal to the third-party costs and expenses incurred
by Telxon on Aironet's behalf. If Telxon incurs costs or expenses on behalf of
both Aironet and businesses operated by Telxon, Telxon will allocate such costs
and expenses in good faith, in accordance with generally accepted accounting
principles, if applicable,
2
<PAGE> 3
among Aironet and the various other businesses. Aironet will pay the amounts
incurred in connection with Telxon's performing services for Aironet's
subsidiaries. The amounts payable by Aironet to Telxon hereunder, regardless of
whether they are fixed fees, passed-through costs, reimbursement of costs
incurred, deductions from payroll or otherwise, are referred to as "Service
Fees."
3.2 INVOICING AND SETTLEMENT OF FEES.
(a) Telxon will invoice Aironet for all Service Fees due and
payable for the prior month then ended, and Aironet will pay such
invoices within thirty (30) days after its receipt thereof.
(b) At Aironet's election: (i) Aironet will fund and administer all
wage and salary payments to Aironet employees, and all medical,
retirement and other benefits and claims payable to or on behalf of
Aironet employees and their dependents ("Employee Payments"); or (ii)
Telxon will administer Employee Payments and Aironet will establish
accounts against which Telxon may draw to make Employee Payments.
4. LIABILITY.
4.1 LIMITATION OF LIABILITY. Telxon, its subsidiaries and, to the
extent permitted by law, the Telxon Plans, and their respective directors,
officers, agents, and employees (each, a "Telxon Indemnified Person") shall have
no liability, direct or indirect, to Aironet or its employees for or in
connection with any Services performed by any Telxon Indemnified Person pursuant
to this Agreement, other than Telxon's liability for breach of this Agreement
and other than liability for damages caused to Aironet or its employees by a
Telxon Indemnified Person's gross negligence or willful misconduct. Aironet
acknowledges and agrees that the scope and availability of coverage for Aironet,
its property, directors, officers and employees under the Telxon Plans and under
Telxon's insurance policies may from time to time differ from that which was
available prior to or at the Effective Date.
4.2 INDEMNIFICATION. Aironet agrees to indemnify, defend and hold
harmless each Telxon Indemnified Person from and against any and all damages,
and to reimburse each Telxon Indemnified Person for all reasonable expenses as
they are incurred in investigating, preparing, pursuing or defending any claim,
action, suit, proceeding or investigation, arising out of or in connection with
Services performed by any Telxon Indemnified Person pursuant to this Agreement,
including but not limited to expenses incurred by Telxon under Section 6.3(c),
except to the extent that such damages and expenses result from a Telxon
Indemnified Person's gross negligence or willful misconduct.
4.3 MULTI-EMPLOYER PLANS. Telxon agrees to indemnify, defend and hold
harmless Aironet, its stockholders, directors, and officers from and against any
and all damages, costs and expenses which arise by operation of law merely by
virtue of the fact that Aironet employees participate in the Telxon Plans, and
which do not directly relate to or arise in connection with Aironet employees'
participation.
3
<PAGE> 4
4.4 FURTHER INDEMNIFICATION. To the extent that any third party has
agreed to indemnify any Telxon Indemnified Person or to hold a Telxon
Indemnified Person harmless in connection with the third party's performance of
Services, Telxon will use reasonable efforts to make the benefits of such
Agreement available to Aironet in the event that indemnification is required.
5. RECORDS.
5.1 GENERAL. Upon reasonable notice to Telxon, Aironet may inspect
Telxon's books and records which support invoices for Service Fees and any
related allocation of costs between Aironet and Telxon's businesses.
5.2 TELXON PLANS. Upon reasonable prior written request to Telxon,
Aironet may inspect, and Telxon shall provide Aironet with reports, relating to:
(i) benefits paid to or on behalf of Aironet employees under the Telxon Plans,
including but not limited to financial statements, claims history, and census
information; and (ii) other information relating to the Services that is
required to satisfy any reporting or disclosure requirement of ERISA or the
Internal Revenue Code of 1986, as amended. Telxon's costs to prepare such
reports may be charged to Aironet as a Service Fee.
6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement is the one (1) year period
commencing on the Effective Date and ending on March 31, 1998. The term will be
renewed automatically for successive one-year periods unless either Aironet or
Telxon elects not to renew this Agreement upon not less than six (6) months
prior written notice (the initial term and any renewal term, as either may be
terminated in accordance with Section 6.2, is referred to as the "Term").
6.2 TERMINATION.
(a) After the initial one-year term, Aironet or Telxon may
terminate this Agreement at any time upon not less than six (6) months
written notice.
(b) At any time after the Effective Date:
(i) Telxon may terminate any Service that Telxon ceases to
provide to itself and its subsidiaries (other than Aironet) upon
not less than six (6) months written notice, or a shorter period if
required under the terms of a terminated Telxon Plan.
(ii) Telxon may terminate any Service if Aironet fails to
perform any of its material obligations under this Agreement
relating to any such Service, upon not less than sixty (60) days
written notice, during which period Aironet may cure its failure.
(iii) Aironet may terminate any Service if Telxon fails to
perform any of its material obligations under this Agreement
relating to any such Service, upon not
4
<PAGE> 5
less than sixty (60) days written notice, during which period
Telxon may cure its failure.
(iv) Aironet may terminate any Service if Aironet elects in
writing to provide such Service itself and Telxon will not be
adversely affected by such termination, upon not less than sixty
(60) days written notice.
6.3 EFFECT OF TERMINATION.
(a) Upon the effective date of a termination of any Service or of
this Agreement, Telxon will have no further obligation to provide the
terminated Service and Aironet will have no obligation to pay any
Service Fees relating to such Services; provided, however, that
notwithstanding such termination: (i) Aironet shall remain liable to
Telxon for Service Fees for Services provided prior to the effective
date of the termination; (ii) Aironet shall be liable for Service Fees
relating to benefits paid to Aironet employees after, but incurred
prior, to the effective date of the termination; (iii) Aironet shall
remain liable for any Service Fees relating to any Services required by
law to be provided by Telxon after the effective date of the
termination; and (iv) the provisions of Sections 4 and 5 shall survive
the expiration or termination of the Term.
(b) Telxon and Aironet agree to cooperate with each other in order
to allow for an orderly transition of Services to Aironet upon the
expiration or termination of the Term. Without limiting the generality
of the foregoing, Telxon agrees promptly upon termination of this
Agreement to provide Aironet with copies of all records relating to
Aironet employee participation in the Telxon Plans and benefits to
Aironet Employees thereunder, and relating to Aironet employee
compensation and service records.
(c) Aironet and Telxon agree to cooperate with each other, both
during the Term and after its expiration or termination, in the event
that either is engaged in any civil or governmental actions,
proceedings or investigations relating to the Services.
7. MISCELLANEOUS.
7.1 PRIOR AGREEMENTS. This Agreement supersedes all prior and
contemporaneous agreements between the parties, whether oral or in writing,
relating to the subject matter hereof.
7.2 NO AGENCY. Nothing in this Agreement shall constitute or be deemed
to constitute a partnership or joint venture between the parties hereto, and,
except as expressly provided herein, neither party shall have authority or power
to bind the other or to contract in the name of, or create a liability against,
the other in any way or for any purpose.
7.3 SUBCONTRACTORS. Telxon may hire or engage one or more
subcontractors to perform all or any of the Services, provided that Telxon will
in all cases remain primarily responsible for all obligations undertaken by it
in this Agreement with respect to the scope, quality and nature of the Services
provided to Aironet.
5
<PAGE> 6
7.4 ASSIGNABILITY. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated by Aironet to a direct competitor of
Telxon (a "Competitor"), and any such assignment or delegation shall be void and
of no effect. The merger, consolidation, asset sale, change of control, or any
other reorganization of Aironet with or into a Competitor, or of a Competitor
with or into Aironet, shall be deemed an assignment under this Section 7.4.
Subject to the foregoing, this Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
7.5 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the state of Ohio without regards to conflict of
laws principles.
7.6 SEVERABILITY. If any provisions of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not render the
entire Agreement invalid. Rather, the Agreement shall be construed to the
greatest extent possible without striking the invalid or unenforceable provision
or, if required, as if not containing the particular invalid or unenforceable
provision, and the rights and obligations of each party shall be construed and
enforced accordingly, so long as to do so will not materially alter the rights
and responsibilities considered as a whole of the parties hereunder.
7.7 AMENDMENT. This Agreement may only be amended by a written
agreement executed by both parties hereto.
7.8 HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not constitute a part thereof or affect
in any way the meaning or interpretation of this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one agreement. For evidentiary purposes, faxed
executed counterparts shall be deemed to be originals.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first set forth
above.
AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
----------------------------------
Roger J. Murphy, President and
Chief Executive Officer
TELXON CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Kenneth W. Haver,
Senior Vice President and
Chief Financial Officer
7
<PAGE> 8
SERVICES AGREEMENT-SCHEDULE I
GENERAL CORPORATE SERVICES(1)
<TABLE>
<CAPTION>
SERVICE BILLING METHODOLOGY OR RATE
- ------- ---------------------------
<S> <C>
- - TAXES $2,000/month
- Tax return preparation (federal, state and sales)
- Tax planning services
- - HUMAN RESOURCES AND BENEFITS $5,833/month
- Benefit plan administration
- Maintenance of eligibility files upon Aironet's
notification of status changes
- Claim adjudication under the terms of applicable plans
- Maintenance of toll-free telephone lines for inquiries, etc.
- Support services (internal and external, including COBRA)
- Other benefit support services
- Audit, legal, actuarial fees and related recoveries
- benefits administration (insurance,
savings, other benefit plans and statutory requirements)
- Employee relations support
- New hire and termination processing services
- - PAYROLL PROCESSING $2,500/month
- - IN-HOUSE LEGAL SERVICES Pass-Through Billing
(capped at $3,000/month)
</TABLE>
- --------
(1) In each case, third-party costs incurred by Telxon on behalf of Aironet will
be passed through by Telxon to Aironet as a Service Fee.
8
<PAGE> 9
<TABLE>
<CAPTION>
SERVICE BILLING METHODOLOGY OR RATE
- ------- ---------------------------
<S> <C>
- - INSURANCE POLICIES (LIABILITY, PROPERTY, CASUALTY PASS-THROUGH BILLING
AND FIDUCIARY)
- - CORPORATE, ADMINISTRATIVE AND GENERAL OVERHEAD $4,000/month
- Non-inventory U.S. purchasing
- General real estate and facilities services,
including normal office relocations
- Travel services
- - CORPORATE AIRCRAFT SERVICES Pass-Through Billing
subject to Federal
Aviation Regulations
- - MIS SERVICES $8,333/month
- Telephone voice and data line installation
and maintenance.
- Personal computer and server installation,
maintenance, backup, recovery and upgrade
for systems utilized by Aironet
- Access to network and communications
lines for e mail, print services, other
- Access to Oracle financial software
- "Help Desk" user support
</TABLE>
9
<PAGE> 10
SERVICES AGREEMENT-SCHEDULE II
BENEFITS SERVICES
<TABLE>
<CAPTION>
SERVICE BILLING METHODOLOGY
- ------- -------------------
<S> <C>
MEDICAL/DENTAL PROGRAMS
BENEFITS/CLAIMS
- - Claims costs for Aironet employees Pass-Through Billing
participating in the following
Telxon plans and programs:
- Medical Plan (including prescription coverage)
- Short Term Disability Plan
- Dental Plan
PARTICIPANT CONTRIBUTIONS
- Participant contributions for above plans Payroll Deduction or Direct Bill
OTHER BENEFIT PLANS
LIFE INSURANCE
- Life insurance for Aironet employees Pass-Through Billing
(including Accidental Death and Dismemberment)
SAVINGS/RETIREMENT PLANS
- Company match/retirement contribution Pass-Through Billing
- Participant Contribution Payroll Deduction
LONG-TERM DISABILITY PLANS
- Employer contributions Pass-Through Billing
- Employee contributions Payroll Deduction
</TABLE>
10
<PAGE> 1
Exhibit 10.8
ASSIGNMENT
----------
OF
--
PATENT APPLICATIONS
-------------------
WHEREAS, TELXON CORPORATION, a Delaware corporation ("Assignor"),
having a place of business at 3330 West Market Street, Akron, Ohio 44333, is the
owner of the entire right, title and interest in and to the inventions, patents,
and patent applications appearing on Appendix A attached hereto, and the
inventions of said patents and patent applications; and
WHEREAS, AIRONET WIRELESS COMMUNICATIONS, INC, a Delaware corporation
("Assignee"), having a place of business at 367 Ghent Road, Suite 300, Fairlawn,
OH 44333, is desirous of acquiring the entire right, title and interest in and
to said inventions, patents and patent applications;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, said Assignor does hereby sell,
assign, transfer, grant and set over to said Assignee, its entire right, title
and interest in and to said inventions, patents and patent applications and all
Letters Patent to be obtained therefor on said patent applications or any
continuation, division, renewal, substitute, reissue thereof or patent term
extension therefor, for the full term or terms for which the same may be granted
or extended, and all Letters Patent and applications therefor throughout the
world, including all rights accruing by virtue of the International Convention
for the Protection of Industrial Property, the same to be held and enjoyed by
said Assignee for its
<PAGE> 2
own use and enjoyment and for the use and enjoyment of its successors or assigns
or other legal representatives, to the end of the term or terms for which said
Letters Patent are granted or may be reissued or extended, as fully and entirely
as the same would have been held and enjoyed by said Assignor if this Assignment
and sale had not been made; together with all claims for damages by reason of
past infringement of said Letters Patent, with the right to sue for, and collect
the same for its own use, and for the use of is successors, assigns or other
legal representatives.
Assignor hereby warrants that no assignment, sale, agreement or
encumbrance has been made or entered into, or license granted, which conflicts
with this Assignment and sale and covenants that no assignment, sale, agreement
or encumbrance will be made or entered into which would conflict with this
Assignment and sale;
Assignor further covenants that Assignee will, upon its request, be
provided promptly and all pertinent facts and documents relating to said
inventions, patents and patent applications as may be known and accessible to
Assignor and will testify as to the same in any interference or litigation
related thereto.
Assignor further covenants that Assignor will promptly execute and
deliver to Assignee or its legal representative confirmatory assignments
relating to said inventions, patents and patent applications prepared by
Assignee for recording by Assignee in the United States Patent and Trademark
Office and will promptly execute and deliver to the Assignee or its legal
representative any and all other papers, instruments or affidavits and take all
other actions required to apply for, obtain, maintain and enforce said
inventions, patents and patent applications which may be necessary or desirable
to carry out the purposes hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been duly executed as of March
30, 1998.
TELXON CORPORATION
By /s/ Glenn S. Hansen
---------------------------------
Glenn S. Hansen
Vice President,
Legal Administration
STATE OF OHIO )
)SS
COUNTY OF SUMMIT )
On the 30th day of March, 1998, before me personally appeared Glenn S.
Hansen, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to this instrument, and
acknowledged to me that he executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year of this certificate first above written.
/s/ Jay R. Faeges
-------------------------------
Notary Public
JAY R. FAEGES
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION HAS NO EXPIRATION DATE
SECTION 147.03 R.C
3
<PAGE> 4
<TABLE>
<CAPTION>
APPENDIX A
U.S. PATENT APPLICATIONS
Title Filing Date Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
Computer Peripheral Device with 06/26/96 08/670,610
Detachable Portion and Light Display
Universal Radio for use in Various 06/26/96 08/670,622
Cellular Communication System
Wireless Communication Method and 6/28/96 08/672,426
Device with Auxiliary Receiver for
Selecting Different Channels
Cellular System Hand-Off Protocol 6/28/96 08/672,751
Wireless Communication Method and 9/19/96 08/715,868
Device with Auxiliary Receiver for
Selecting Different Channels
Power Based Locator System 11/20/96 08/752,906
Power Based Locator System 12/6/96 08/761,120
Cellular System Hand-Off Protocol 12/11/96 08/763,420
Cellular Communication System with 12/18/96 08/769,214
Automated Power Level Adjust
PC Card Initialization for Microprocessor 1/8/97 08/779,809
Based Devices
EMI/RF Shielding Device for PC Card 1/13/97 08/782,953
Multi-Radio Bridge 1/28/97 08/789,999
Communication System Using Packets 2/13/97 08/800,254
Stuffed with Test Words for
Evaluating Data Transmission
Characteristics While Providing
Increased Data Throughput
</TABLE>
A-1
<PAGE> 5
<TABLE>
<CAPTION>
FOREIGN PATENT APPLICATIONS
Title Country Filing Date Serial Number
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computer Peripheral Device With PCT 6/19/97 *
Detachable Portion And Light Display
Cellular System Hand-Off Protocol PCT 6/19/97 **
<FN>
* This PCT application claiming priority to U.S. patent application
Serial Number 08/670,610 has not yet been assigned a corresponding PCT serial
number. The inventors on this application are Stephen M. Pressler and Brian W.
Casto.
** This PCT application claiming priority to U.S. patent application
Serial Number 08/672,751 has not yet been assigned a corresponding PCT serial
number. The inventors on this application are Michael L. Trompower, Philip H.
Belanger, Andrew J. Spry, and Nainesh P. Shah.
</TABLE>
(End of Appendix A)
<PAGE> 1
Exhibit 10.9
ASSIGNMENT
----------
OF
--
PATENT APPLICATIONS
-------------------
WHEREAS, AIRONET WIRELESS COMMUNICATIONS, INC, a Delaware corporation
("Assignor"), having a place of business at 367 Ghent Road, Suite 300, Fairlawn,
OH 44333, is the owner of the entire right, title and interest in and to the
inventions, patent, and patent applications appearing on Appendix A attached
hereto, and the inventions of said patents and patent applications; and
WHEREAS, TELXON CORPORATION, a Delaware corporation ("Assignee"),
having a place of business at 3330 West Market Street, Akron, Ohio 44333, is
desirous of acquiring the entire right, title and interest in and to said
inventions, patents and patent applications;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, sald Assignor does hereby sell,
assign, transfer, grant and set over to said Assignee, its entire right, title
and interest in and to said inventions, patents and patent applications and all
Letters Patent to be obtained therefor on said patent applications or any
continuation, division, renewal, substitute, reissue thereof or patent term
extension therefor, for the full term or terms for which the same may be granted
or extended, and all Letters Patent and applications therefor throughout the
world, including all rights accruing by virtue of the International Convention
for the Protection of Industrial Property, the same to be held and enjoyed by
said Assignee for its
<PAGE> 2
own use and enjoyment and for the use and enjoyment of its successors or assigns
or other legal representatives, to the end of the term or terms for which said
Letters Patent are granted or may be reissued or extended, as fully and entirely
as the same would have been held and enjoyed by said Assignor if this Assignment
and sale had not been made; together with all claims for damages by reason of
past infringement of said Letters Patent, with the right to sue for, and collect
the same for its own use, and for the use of is successors, assigns or other
legal representatives.
Assignor hereby warrants that no assignment, sale, agreement or
encumbrance has been made or entered into, or license granted, which conflicts
with this Assignment and sale and covenants that no assignment, sale, agreement
or encumbrance will be made or entered into which would conflict with this
Assignment and sale;
Assignor further covenants that Assignee will, upon its request, be
provided promptly and all pertinent facts and documents relating to said
inventions, patents and patent applications as may be known and accessible to
Assignor and will testify as to the same in any interference or litigation
related thereto.
Assignor further covenants that Assignor will promptly execute and
deliver to Assignee or its legal representative confirmatory assignments
relating to said inventions, patents and patent applications prepared by
Assignee for recording by Assignee in the United States Patent and Trademark
Office and will promptly execute and deliver to the Assignee or its legal
representative any and all other papers, instruments or affidavits and take all
other actions required to apply for, obtain, maintain and enforce said
inventions, patents and patent applications which may be necessary or desirable
to carry out the purposes hereof.
2
<PAGE> 3
IN WITNESS WHEREOF, this Assignment has been duly executed as of March
30, 1998
AIRONET WIRELESS
COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy, Jr.
-----------------------------
Roger J. Murphy, Jr.
President & CEO
STATE OF OHIO )
)SS
COUNTY OF SUMMIT )
On the 30th day of March, 1998, before me personally appeared Roger J.
Murphy, personally known to me or proved to me on the basis of satisfactory
evidence to be the person whose name is subscribed to this instrument, and
acknowledged to me that he executed it.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year of this certificate first above written.
/s/ Jay R. Faeges
-------------------------------
Notary Public
JAY R. FAEGES
NOTARY PUBLIC, STATE OF OHIO
MY COMMISSION HAS NO EXPIRATION DATE
SECTION 147.03 R.C.
3
<PAGE> 4
<TABLE>
<CAPTION>
APPENDIX A
U.S. PATENT APPLICATIONS
Title Filing Date Serial Number
- --------------------------------------------------------------------------------
<S> <C> <C>
Interactive Customer Information 12/29/95 08/580,666
Terminal
Cellular Communication System with 2/27/97 08/810,328
Dedicated Repeater Channels
</TABLE>
(End of Appendix A)
<PAGE> 1
Exhibit 10.10
CROSS COVENANT NOT TO SUE
THIS CROSS COVENANT NOT TO SUE (this "Agreement") is made and entered
into as of March 31, 1998, (the "Effective Date"), by and between Aironet
Wireless Communications, Inc., a Delaware corporation ("Aironet") and Telxon
Corporation, a Delaware corporation ("Telxon").
BACKGROUND
WHEREAS, Telxon has heretofore been the principal stockholder of
Aironet;
WHEREAS, simultaneously with the execution of this Agreement, Aironet
is selling shares of its common stock to investors in a private sale (the
"Offering"); and
WHEREAS, Telxon and Aironet desire to enter into this Agreement in
order to ensure that: (i) Aironet may continue to engage in its business as
conducted on the Effective Date without risk of suit for infringing any
intellectual property or trade secrets of Telxon; and (ii) Telxon may continue
to engage in its business as conducted on the Effective Date without risk of
suit for infringing any intellectual property or trade secrets or Aironet.
NOW, THEREFORE, in consideration of the foregoing and of the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
AGREEMENT
1. DEFINITIONS
Initially capitalized terms are defined in this Agreement where first
used, except that the following terms shall have the meanings specified in this
Section 1:
"AIRONET CONFIDENTIAL INFORMATION" means any and all of Aironet's
confidential information and trade secrets of any type or description, including
know how, existing at the Effective Date.
"AIRONET COPYRIGHTS" means any and all of Aironet's copyrights and mask
work rights throughout the world, whether or not registered, existing at the
Effective Date.
"AIRONET PATENTS" means any and all of Aironet's patents and patent
applications throughout the world existing at the Effective Date (together with
all continuations, continuations in part, divisions, reissues, additions or
extensions thereof).
"AIRONET PRODUCTS" means any and all of Aironet's products (and any
components and subassemblies of such products) which exist or which have been
publically announced by Aironet
<PAGE> 2
as a product offering (as evidenced by documents kept in the ordinary course of
Aironet's business) at or prior to the Effective Date.
"AIRONET PROPRIETARY RIGHTS" means any and all Aironet Patents, Aironet
Copyrights and Aironet Confidential Information.
"CURRENT AIRONET PRACTICES AND PRODUCTS" means Aironet's practice of
Telxon Proprietary Rights (including its practice of any method claimed in any
Telxon Patents) substantially in the manner as practiced by Aironet at or prior
to the Effective Date, and Aironet Products substantially in their form and
configuration at the Effective Date.
"CURRENT TELXON PRACTICES AND PRODUCTS" means Telxon's practice of
Aironet Proprietary Rights (including its practice of any method claimed in any
Aironet Patents) substantially in the manner as practiced by Telxon at or prior
to the Effective Date, and Telxon Products substantially in their form and
configuration at the Effective Date.
"TELXON CONFIDENTIAL INFORMATION" means any and all of Telxon's
confidential information and trade secrets of any type or description, including
know how, existing at the Effective Date.
"TELXON COPYRIGHTS" means any and all of Telxon's copyrights and mask
work rights throughout the world, whether or not registered, existing at the
Effective Date.
"TELXON PATENTS" means any and all of Telxon's patents and patent
applications throughout the world existing at the Effective Date (together with
all continuations, continuations in part, divisions, reissues, additions or
extensions thereof).
"TELXON PRODUCTS" means any and all of Telxon's products (and any
components and subassemblies of such products) which exist or which have been
publically announced by Telxon as a product offering (as evidenced by documents
kept in the ordinary course of Telxon's business) at or prior to the Effective
Date.
"TELXON PROPRIETARY RIGHTS" means any and all Telxon Patents, Telxon
Copyrights and Telxon Confidential Information.
2. AIRONET PROPRIETARY RIGHTS
2.1 Aironet agrees that it will not bring any action or suit under any
legal theory against Telxon or any transferees of Telxon Products that Current
Telxon Practices and Products infringe or violate any Aironet Proprietary
Rights.
2.2 Notwithstanding Section 2.1 to the contrary, Telxon acknowledges
and agrees that Aironet makes no agreement regarding suit or action, and no
right or license is granted by this
2
<PAGE> 3
Agreement, either expressly, by implication, estoppel or otherwise, to Telxon or
any other person or entity with respect to any Aironet Products.
2.3 Telxon shall have no right, either expressly or by implication, to
assign, license, re- license or sub-license, in whole or in part, any rights
granted to it hereunder without the written consent of Aironet.
3. TELXON PROPRIETARY RIGHTS
3.1 Telxon agrees that it will not bring any action or suit under any
legal theory against Aironet or any transferees of Aironet Products that Current
Aironet Practices and Products infringe or violate any Telxon Proprietary
Rights.
3.2 Notwithstanding Section 3.1 to the contrary, Aironet acknowledges
and agrees that Telxon makes no agreement regarding suit or action, and no right
or license is granted by this Agreement, either expressly, by implication,
estoppel or otherwise, to Aironet or any other person or entity with respect to
Telxon Products.
3.3 Aironet shall have no right, either expressly or by implication, to
assign, license, relicense or sub-license, in whole or in part, any rights
granted to it hereunder without the written consent of Telxon.
4. WARRANTY DISCLAIMER
AIRONET DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED, WITH RESPECT TO
THE AIRONET PROPRIETARY RIGHTS, AND TELXON DISCLAIMS ALL WARRANTIES, EXPRESSED
OR IMPLIED, WITH RESPECT TO THE TELXON PROPRIETARY RIGHTS, AND WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, NEITHER REPRESENTS OR WARRANTS: (A) THAT ANY
PATENTS WILL ISSUE UNDER ANY PATENT APPLICATIONS INCLUDED IN ITS PROPRIETARY
RIGHTS; (B) THE SCOPE, COVERAGE, VALIDITY OR ENFORCEABILITY OF ANY PROPRIETARY
RIGHTS; (C) THAT PRACTICE OF THE METHODS OR THE MAKING, SELLING OR USING OF
PRODUCTS COVERED BY ANY OF THE PROPRIETARY RIGHTS WILL NOT INFRINGE ANY OTHER
PARTY'S PROPRIETARY RIGHTS; OR (D) ANY OTHER MATTER WITH RESPECT TO THE
PROPRIETARY RIGHTS, WHETHER EXPRESS OR IMPLIED OR ARISING UNDER ANY STATUTE OR
FROM ANY COURSE OF DEALING, USAGE OF TRADE OR OTHERWISE, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
3
<PAGE> 4
5. TERM AND TERMINATION
5.1 The "Term" of this Agreement is the period commencing on the
Effective Date and ending upon the expiration of all legally enforceable rights
included in the Aironet Proprietary Rights and the Telxon Proprietary Rights.
5.2 In case of a breach of this Agreement, the non-breaching party
shall have shall have the right at law to seek damages and/or at equity to
enjoin the specific activity giving rise to the breach.
5.3 This Agreement may not be terminated prior to the expiration of the
Term except by the mutual agreement of the parties.
6. NOTICES
Except as otherwise set forth herein, all notices given in connection
with this Agreement shall be in writing and shall be delivered either by
personal delivery, by telegram, telex, telecopy or similar facsimile means, by
certified or registered mail, return receipt requested, or by express courier or
delivery service, addressed to the president of the addressee at its principal
place of business, or at such other address as such party shall have previously
designated by written notice given to the other party in the manner set forth in
this Section 6. Notices shall be deemed given when received if sent by
telegrams, telex, telecopy or similar facsimile means (confirmation of such
receipt by confirmed facsimile transmission being deemed receipt of
communications sent by telex, telecopy or other facsimile means); and when
delivered and receipted for (or upon the date of attempted deliver where
delivery is refused), if hand delivered, sent by express courier or delivery
service, or sent by certified or registered mail, return receipt requested.
7. MISCELLANEOUS
7.1 This Agreement constitutes the entire Agreement and understanding
between the parties as to their right to conduct their businesses without suit
by the other party, and supersedes and replaces all prior or contemporaneous
agreements, written or oral, as to the subject matter. This Agreement may be
altered only in a writing stating that it is an amendment or modification to
this Agreement, and signed by an authorized representative of each of the
parties.
7.2 Any term or provision of this Agreement which is invalid or
unenforceable or in conflict with the law of any jurisdiction, shall, as to such
jurisdiction, be ineffective to the extent of such invalidity or un-enforce
ability without affecting the validity of the remaining terms and provisions of
this Agreement or affecting the validity or enforce ability of any of the terms
and provisions of this Agreement in any other jurisdiction.
7.3 Neither this Agreement nor any provision hereof may be released,
discharged, waived, abandoned, or modified in any manner, except by an
instrument in writing. Any waiver
4
<PAGE> 5
of a default or condition hereof by either party shall not be deemed a
continuing waiver of such default or condition. Any delay or omission by either
party to exercise any right or remedy under this Agreement shall not be
construed to be a waiver of any such right or remedy or any right hereunder. All
of the rights and remedies of both parties hereto shall be cumulative and may be
exercised separately or concurrently.
7.4 This Agreement does not constitute a partnership, joint venture or
agency between the parties hereto, nor shall either of the parties hold itself
out as such, and neither party shall become bound or become liable because of
any representation, action or omission of the other.
7.5 This Agreement is binding upon and shall inure to the benefit of
the parties and their respective successors and assigns.
7.6 The heading of sections and other subdivisions hereof are inserted
only for the purpose of convenient reference and it is recognized that they may
not adequately or accurately describe the contents of the provisions which they
head. Such headings shall not be deemed to govern, limit, modify or in any other
manner affect the scope, meaning or intent of the provisions of this Agreement
or any part or portion thereof, nor shall they otherwise be given any legal
effect.
7.7 Where the context of this Agreement requires, singular terms shall
be considered plural, and plural terms shall be considered singular, and
feminine, masculine and neuter pronouns shall have equivalent meanings. All
exhibits attached hereto are incorporated herein by this reference.
7.8 This Agreement shall be governed by, performed under and construed
in accordance with the laws of the State of Ohio without giving effect to
conflict of laws principles.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
Aironet Wireless Communications, Inc. Telxon Corporation
By: /s/ Roger J. Murphy By: /s/ Kenneth W. Haver
------------------------ ------------------------
Name: Roger J. Murphy Name: Kenneth W. Haver
------------------------ ------------------------
Its: President & CEO Its: Senior Vice President
------------------------ ------------------------
Chief Financial Officer
5
<PAGE> 1
Exhibit 10.11
AIRAWARE ACKNOWLEDGMENT
This AirAware Acknowledgment (this "Acknowledgment") is made as of
March 30, 1998, by and between Aironet Wireless Communications, Inc., a Delaware
corporation ("Aironet"), and Telxon Corporation, a Delaware corporation
("Telxon").
BACKGROUND
WHEREAS, Telxon is the majority stockholder of Aironet;
WHEREAS, Telxon is the owner of all right, title and interest in, to
and under a family of products that it commonly refers to as "AirAware," and
which is more fully described in EXHIBIT A attached hereto; and
WHEREAS, Aironet is selling shares of its common stock in a private
placement (the "Offering"), and prior to the Offering Telxon and Aironet each
desires to enter into this Acknowledgment.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. ACKNOWLEDGMENT. Aironet hereby acknowledges that it has no right,
title or interest in, to or under AirAware, including, without limitation, any
patent rights, copyrights, mask work rights, trademark rights, trade secret
rights, or any other proprietary rights embodied in any of the tangible or
intangible products that comprise AirAware.
2. GOVERNING LAW; JURISDICTION. This Acknowledgment shall be construed
under and governed by the laws of the State of Ohio, without regard to conflict
or choice of law statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Acknowledgment shall be brought in the
courts, state or federal, sitting in Summit County, Ohio, and each party hereto
consents to the jurisdiction and venue of such courts, and agrees not to contest
venue on the grounds of forum non conveniens or otherwise.
3. PRIOR AGREEMENTS SUPERSEDED. This Acknowledgment supersedes all
prior and contemporaneous understandings and agreements, written or oral,
between the parties relating to the subject matter hereof.
4. EXECUTION IN COUNTERPARTS. This Acknowledgment may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same document. An executed
faxed counterpart of this Acknowledgment shall be binding on the parties and for
evidentiary purposes, shall be deemed to be an original.
<PAGE> 2
5. AMENDMENTS; WAIVERS. Amendments to and waivers of any term of this
Acknowledgment must be in writing and executed by both parties hereto.
6. ASSIGNABILITY. This Agreement is binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
IN WITNESS WHEREOF, each party has caused this Acknowledgment to be
executed by its duly authorized representative as of the date first set forth at
the beginning hereof.
Aironet Wireless Communications, Inc.
By: /s/ Roger J. Murphy
-----------------------------------------------
Roger J. Murphy, President
and Chief Executive Officer
Telxon Corporation
By: /s/ Kenneth W. Haver
-----------------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
2
<PAGE> 3
EXHIBIT A
TO
AIRAWARE ACKNOWLEDGMENT
Telxon's AirAware(TM) family of wireless communication software products is
generally described in the attached November 4, 1997 Telxon News Release. Also
attached, as examples of some of the products included in the AirAware family,
are data sheets for AirVU(TM) TRIPS, AirVU TN3270, AirVU TN5250 and AirVU ANSI
VT-220.
<PAGE> 4
[TELXON LOGO]
- --------------------------------------------------------------------------------
NEWS RELEASE
FOR IMMEDIATE RELEASE
TELXON INTRODUCES NEW FAMILY
OF WIRELESS COMMUNICATIONS SOFTWARE
NOVEMBER 4, 1997 - - CHICAGO, ILLINOIS - - A dynamic new wireless
communication software product line called AirAware(TM), was introduced at
Scan-Tech 97 by Telxon Corporation, a world leader in wireless and mobile
computing technologies.
Designed to provide the framework for streamlining the movement of data
in the rapidly expanding world of mobile information, the AirAware software
family is the first to provide users with options in system architecture. One
AirAware module, the AirVu(TM) product line, utilizes open system standards to
enable direct connection of mobile clients to the enterprise. Another module,
AirGate(TM), uses an application server as the gateway to the enterprise and is
based on contemporary three tier client-server architecture. The AirGate server
software is available for UNIX(R), Windowsr NT(TM), HP-UX, AIX, AS/400 and Sun
Solaris(R) platforms and can support up to 1,000 clients.
The third currently available module is the innovative AirBeam(TM) for
software distribution and version control. AirBeam allows the dynamic
configuration of mobile computers and application loading from the server.
Additional AirAware modules currently under development include AirVision(TM),
for SNMP based network management, and AirXon(TM), for remote diagnostics and
administrative services.
"AirAware is the mobile systems software for the next millennium," said
Dave Loadman, chief technical officer for Telxon Corporation. "It allows for
seamless and transparent mobile connectivity to existing applications without
requiring extensive modifications to those applications."
"In operation", Loadman said, "the AirGate application server is
inserted between multiple data sources on the enterprise network and the client,
who communicates only with the server. The server then interacts with the
enterprise systems on behalf of the mobile client and the majority of the
message traffic occurs over a high speed
Telxon Corporation/Corporate Communications Department
3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582/800-800-8001/
Fax (330) 664-2058
<PAGE> 5
enterprise network, instead of the slower or more costly mobile connection.
Communication traffic is thus optimized for maximum RF performance.
Loadman said the AirAware family of mobile information system software
was designed to minimize the customer's total cost of RF system ownership.
"With AirGate the requirements for mobile information processing
capabilities are minimized, reducing mobile computing hardware costs," Loadman
explained. "The useful life of mobile devices is also extended. Any expansion of
memory and CPU capabilities needed to support evolving applications can be
isolated to the server.
"With AirBeam, the software maintenance and distribution is also
greatly simplified," Loadman said, "because software revisions need only be
distributed to the server, and AirBeam will automatically handle any required
distribution and upgrades to the mobile clients."
The launching of AirAware represents the evolution of Telxon's
innovative Gateway Connectivity Systems(TM) software to the open server
environment. Planned future enhancements will support wide area network, remote
and batch communications.
"The bottom line for AirAware is that it reduces the total cost of
ownership and minimizes the risk of obsolescence," Loadman said.
Designed to be used today, AirAware is also Year 2000 compliant.
Telxon Corporation is a leading global designer and manufacturer of
wireless and mobile information systems for vertical markets. The company
integrates advanced mobile computing and wireless data communication technology
with a wide array of peripherals, application specific software and global
customer service for its customers in more than 60 countries around the world.
Telxon's World Wide Web site address is: www.telxon.com.
###
For more information:
Stew Skomra
Director, Product Marketing
Telxon Corporation
(281) 297-1870
<PAGE> 6
<TABLE>
<CAPTION>
[AIR WARE LOGO]
AIRVU(TM) TRIPS
TELXON RF INTERACTIVE
PROMPTING SYSTEM SOFTWARE
FOR MOBILE COMPUTERS
OVERVIEW PRODUCT POSITIONING RUNS AS AN APPLICATION
<S> <C> <C>
AirVU TRIPS (Telxon RF Interactive AirVU TRIPS is an ideal solution for: The AirVU TRIPS interpreter runs as
Prompting System ), a member of - Expanding wireless mobile an application on the mobile computer
Telxon's AirAware(TM) family of connectivi- computer functionality beyond and allows access to additional appli-
ty solutions for mobile computers, pro- basic emulation without requiring cations and functionality beyond emu-
vides quick, easy solutions for cus- development of custom mobile lation if desired.
tomers who want to build basic wire- computer resident code
less handheld access into their applica- - Providing TRIPS functionality over a YEAR 2000 COMPLIANT
tions without developing custom TCP/IP connection As with all members of the AirAware
handheld resident applications. software family. AirVU TRIPS is fully
year 2000 compliant.
AirVU TRIPS utilizes the industry KEY FEATURES
standard TCP/IP (Transmission Control AirVU TRIPS provides full TRIPS capa-
Protocol/Internet Protocol) to commu- bilities for Telnet sessions with host ADDITIONAL FEATURES
nicate to host systems connected to an computer (TN server) applications. - Supports 2.4GHz or 900MHz
Ethernet(TM) or Token Ring LAN. Direct Sequence, and 2.4 GHz
Frequency Hopping radios
The TRIPS system is based upon a OPEN SYSTEM CONNECTIVITY
set of commands sent from the host Wireless connectivity to the LAN is - Supports multiple mobile computer
system to the mobile computer for implemented through access points. screen sizes
execution. These commands tell the Each AirVU mobile computer has a - Local data validation commands
mobile computer to perform data pro- unique Internet Protocol (IP) address. - Programmable function keys
cessing functions (such as display mes- Data transmits over the wireless link to - Local printer (serial port) control
sages) or accept input through the the access point encapsulated in stan-
keyboard or barcode scanner. The dard TCP/IP frames. The access point SUPPORTED ENVIRONMENTS
commands execute locally on the acts as a wireless hub, and passively AirVU TRIPS supports the following
mobile computer, and responses are transfers messages between the wire- Telxon MS-DOS(R) spread spectrum RF
sent to the host system for interpreta- less network and wired LAN for mobile computers:
tion and appropriate action. exchange with a Telnet session on a - PTC-8601M
These commands are sent for LAN connected host system. Each - PTC-960RL
immediate execution or for storage wireless mobile computer in the sys- - PTC-960SL
and later execution upon demand. tem appears as a computer node on - PTC-960X
Stored commands are grouped together the LAN. These units require 256KB applica-
to create stored routines. Using this tion ROM and 1 MB RAM.
approach. RF applications allow the BARCODE INPUT ON DATA FIELDS
mobile computer to execute in batch - Provides automatic support of AirVU TRIPS requires the AirGO(TM)
mode and report results immediately barcode input on any field Kernal software in these devices and
upon completion of the activity. - Supports multiple types of scanning utilizes the TCP/IP kernel software
This allows for development of devices licensed from PTP Software. Inc.
powerful and dynamic applications - Supports all popular barcodes: included in the AirGO kernal.
unencumbered by terminal emulation U.P.C., EAN Code 11, 2 of 5,
limitations without developing custom Plessey, Code 39, Interleaved
mobile computer applications. So, 2 of 5, Codabar, Code 128, Code 93
although the mobile computer acts as - Autodiscrimination of up to 2
a wireless terminal, AirVU TRIPS pro- barcodes with support for
vides functionality beyond simple ter- dynamic reconfiguration
minal emulation.
</TABLE>
TELXON
Telxon Corporation / World Headquarters: 3330 West Market Street,
P.O. Box 5582, Akron, Ohio 44334-0582 / 800 800-8008
Telxon International/ Chaussee de La Hulpe 150/1, Brussels,
Belgium/ 32-2-663-1500
Internet Email Address: [email protected][]www.telxon.com
In our constant effort to improve products and systems, Telxon Corporation
reserves the right to change or modify features and specifications without
notice.
The TELXON logo is a registered trademark of Telxon Corporation. (C) Copyright
1998 Telxon Corporation
AirAware, AirVU, and AirGO are trademarks of Telxon Corporation. MS-DOS is
a registered trademark of Microsoft Corporation
All other product or trade references are the trademarks or registered
trademarks of their respective owners.
<PAGE> 7
<TABLE>
<CAPTION>
[AIRAWARE LOGO]
AIRVU(TM) TN3270/TN5250
TERMINAL EMULATION SOFTWARE
FOR MOBILE COMPUTERS
<S> <C> <C>
OVERVIEW acts as a wireless hub and passively ADDITIONAL FEATURES
AirVU TN3270 and AirVU TN5250 transfers messages between the wire- - Keyboard remapping
are members of Telxon's AirAware(TM) less network and wired LAN for - Popup keyboard for pen-based
family of connectivity solutions for exchange with a Telnet session on a units
mobile computers. AirVU products are LAN connected host system. Each - All standard key functions available
designed to provide quick, easy solu- wireless mobile computer in the sys- - Local printing support
tions for customers who want to add tem appears as a computer node on - Supports 2.4GHz or 900MHz
basic wireless mobile terminals to exist- the LAN. Direct Sequence, and 2.4GHz
ing host-based applications. With Frequency Hopping radios
AirVU this can be accomplished with- SCREEN MANAGEMENT
out developing custom software or - Access to full 25-line x 80-column SUPPORTED ENVIRONMENTS
modifying existing applications. screen through windowing AirVU TN3270 and AirVU TN5250
AirVU products utilize the industry - Screen movement options support the following Telxon MS-DOS(R)
standard TCP/IP (Transmission Control - Arrow keys move one character spread spectrum RF key-based mobile
Protocol/Internet Protocol) to commu- at a time computers:
nicate to host systems connected to an - Tab to next logical field - PTC-8601M
Ethernet(TM) or Token Ring LAN and - Scrolling - PTC-960RL
provide full terminal emulation func- - Automatic readjustment to actual - PTC-9605L
tionality for wireless key-based and mobile computer screen size - PTC-960x
pen-based mobile computers. These units require 256K8 applica-
tion RCM and 1 MB RAM.
BARCODE INPUT ON DATA FIELDS
- Automatic support of barcode AirVU TN3270 and AirVU TN5250
PRODUCT POSITIONING input on any field also support the following Telxon
- Supports multiple types of scanning MSDOS spread spectrum RF mobile
AirVU TN3270/TN5250 is an ideal devices computers:
solution for: - Support for all popular barcodes: - PTC-8701M
- - Providing basic wireless terminal U.P.C., EAN, Code 11, 2 of 5, - PTC-1134
access to host applications over a Plessey, Code 39, Interleaved 2 of 5, - PTC-1144
TCP/IP connection Codabar, Code 128, Code 93 - PTC-1184
- - Minimizing or eliminating local - Autodiscrimination of up to
SNA corrections to the mainframe 6 barcodes These units require 2MB application
while maximizing network ROM, 2MB application RAM, and 2MB
performance RUNS AS AN APPLICATION mass storage.
The AirVU TN3270/TN5250 emula-
KEY FEATURES tor runs as an application on the Both AirVU products require the
mobile computer to allow access to AirGO(TM) Kernal software in each PTC
- - 3270 Terminal Support (LU2) additional applications and functionality and utilize the TCP/IP kernel software
- - 5251 Terminal Support (LU7) beyond emulation, if desired. licensed from FTP Software, Inc.,
included in the AirGO kernal.
OPEN SYSTEM CONNECTIVITY
Wireless connectivity to the LAN is
implemented through access points. YEAR 2000 COMPLIANT
Each AirVU mobile computer has a As with all members of the AirAware
unique Internet Protocol (IP) address. software family. AirVU 5250 and AirVU
Data transmits over the wireless link to 3270 are fully year 2000 compliant.
the access paint encapsulated in stan-
dard TCP/IP frames. The access point
</TABLE>
TELXON
Telxon Corporation / World Headquarters: 3330 West Market Street,
P.O. Box 5582, Akron, Ohio 44334-0582 / 800 800-8008
Telxon International / Chaussee de La Hulpe 150/1, Brussels,
Belgium / 32-2-663-1500
Internet Email Address, [email protected][]www.telxon.com
In our constant effort to improve products and systems, Telxon Corporation
reserves the right to change or modify features and specifications without
notice.
The TELXON logo is a registered trademark of Telxon Corporation. (C) Copyright
1998 Telxon Corporation
AirAware, AirVU, and AirGO are trademarks of Telxon Corporation. MS-DOS is
a registered trademark of Microsoft Corporation
All other product or trade references are the trademarks or registered
trademarks of their respective owners.
<PAGE> 8
[AIRAWARE LOGO]
AIRVU(TM) ANSI VT-220
TERMINAL EMULATION
SOFTWARE FOR
MOBILE COMPUTERS
<TABLE>
<CAPTION>
<S> <C> <C>
OVERVIEW transfers messages between the wire- ADDITIONAL FEATURES
AirVU ANSI VT-220 is a member of less network and wired LAN for - Pop-up keyboard for pen-based
Telxon's AirAware(TM) family of connectivi- exchange with a Telnet session on a units
ty solutions for mobile computers. LAN connected host system. Each - Keyboard remapping and macro
AirVU products provide quick, easy wireless mobile computer in the system key support
solutions for adding wireless mobile appears as a computer node on the - All standard key functions available
computers to existing applications. LAN. - User-defined function keys
With AirVU this can be accomplished - Serial support pass-through can
without developing custom software SCREEN MANAGEMENT be controlled from host
or modifying existing applications. - Multiple screen sizes supported - Supports 2.4GHz or 900MHz
AirVU products utilize the industry - Access to full 25-line x 80 column Direct Sequence, and 2.4GHz
standard TCP/IP (Transmission Control screen through windowing Frequency Hopping radios
Pratocol/Internet Protocol) to commu- - Supports portrait or landscape
nicate to host systems connected to an mode on pen-based computers SUPPORTED ENVIRONMENTS
Ethernet(TM) or Token Ring LAN and pro- - Supports multiple point-size fonts AirVU ANSI supports the following
vide full terminal emulation functionality on pen-based computers Telxon MS-DOS(R) spread spectrum RF
for both wireless key-based and pen- key-based mobile computers:
based mobile computers. BARCODE INPUT ON DATA FIELDS - PTC-8601M
- Automatic support of barcode - PTC-960RL
PRODUCT POSITIONING input on any field - PTC-9605L
AirVU ANSI is an ideal solution for - Supports multiple types of - PTC-960X
providing basic wireless VT-220 mobile scanning devices These units require 256KB applica-
computer access to host applications - Programmable barcode parameters tion ROM and 1 MB RAM.
over a TCP/IP connection. - Support for all popular barcodes:
U.P.C., EAN, Code 11, 2 of 5, AirVU ANSI also supports the fol-
KEY FEATURES Plessey, Code 39, Interleaved 2 lowing Telxon MS-DOS spread spec-
- - Supports ANSI VT-220 terminal of 5, Codabar, Code 128, Code 93 trum RF mobile computers:
emulation - Autodiscrimination of up to 6 barcodes - PTC-8701M
- - VT-220 using 7- or 8-bit data controls - PTC-1134
- - VT-100 - PTC-1144
- - Supports ANSI escape sequences RUNS AS AN APPLICATION - PTC-1184
- - Supports special graphic characters The AirVU ANSI emulator runs as an These units require 2MB application
application on the mobile computer to ROM, 2MB application RAM, and 2MB
OPEN SYSTEM CONNECTIVITY allow access to additional applications mass storage.
Wireless connectivity to the LAN is and functionality beyond emulation, if
implemented through access points. desired. AirVU ANSI requires the AirGO(TM)
Each AirVU mobile computer has a Kernal software in these devices and
unique Internet Protocol (IP) address. YEAR 2000 COMPLIANT utilizes the TCP/IP kernel software
Data transmits over the wireless link to As with all members of the AirAware licensed from FTP Software. Inc.
the access point encapsulated in stan- software family. AirVU ANSI is fully year included in the AirGO kernal.
dard TCP/IP frames. The access point 2000 compliant.
acts as a wireless hub and passively
</TABLE>
TELXON
Telxon Corporation / World Headquarters: 3330 West Market Street
P.O. Box 5582, Akron, Ohio 44334-0582 / 800 800-8008
Telxon International / Chaussee de La Hulpe 150/1, Brussels,
Belgium / 32-2-663-1500
Internet Email Address: [email protected][]www.telxon.com
In our constant effort to improve products and systems, Telxon Corporation
reserves the right to change or modify features and specifications without
notice.
The TELXON logo is a registered trademark of Telxon Corporation. (C) Copyright
1998 Telxon Corporation
AirAware, AirVU, and AirGO are trademarks of Telxon Corporation. MS-DOS is
a registered trademark of Microsoft Corporation
All other product or trade references are the trademarks or registered
trademarks of their respective owners.
<PAGE> 1
Exhibit 10.12
LM3000 SOFTWARE AGREEMENT
This LM3000 Agreement (this "Agreement") is made as of March 30, 1998,
by and between Aironet Wireless Communications, Inc., a Delaware corporation
("Aironet"), and Telxon Corporation, a Delaware corporation ("Telxon").
BACKGROUND
WHEREAS, Telxon is the majority stockholder of Aironet;
WHEREAS, Telxon heretofore sold Aironet's LM3000 products to its
customers, and thereafter authored software upgrades for the LM3000 products to
make such products compatible with the IEEE 802.11 standard for wireless
computer networks (the "Upgrade"); and
WHEREAS, Aironet desires to receive from Telxon the right to utilize
the Upgrade.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. LICENSE. Telxon hereby grants a perpetual, royalty free, worldwide,
non-exclusive license to Aironet under Telxon's intellectual property rights
embodied in the Upgrade to make, port, copy, compile, decompile, assemble,
disassemble, merge and link the source code of the Upgrade, and to load,
support, service, maintain, repair, reconstruct, reconfigure and upgrade,
integrate, install, use, market, sell, offer for sale, lease and transfer copies
of the object code of the Upgrade. Aironet shall take the same steps to bind
transferees of copies of the Upgrade to a commercially reasonable software
license agreement, that Aironet takes with respect to its own software.
2. CONTRACTORS. Aironet may exercise the rights granted to it in
Section 1 either through its employees or through its contractors.
3. IMPLIED LICENSE. Subject to the restrictions imposed under the
software license agreement contemplated by Section 1, Aironet's customers shall
have an implied license to use and transfer copies of the object code of the
Upgrade, in the form delivered by Aironet to its immediate customer.
4. DELIVERY. Upon Aironet's execution of this Agreement, to the extent
that a copy is not already in Aironet's possession, Telxon shall deliver to
Aironet a copy of the source and object code of the Upgrade.
5. DISCLAIMER OF WARRANTY AND LIABILITY. TELXON IS PROVIDING THE
UPGRADE TO AIRONET "AS IS." TELXON MAKES NO REPRESENTATION OR WARRANTY OF ANY
KIND WITH RESPECT TO THE UPGRADE, WHETHER EXPRESS OR IMPLIED OR ARISING UNDER
ANY
<PAGE> 2
STATUTE OR FROM ANY COURSE OF DEALING, USAGE OF TRADE OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT. IN NO EVENT SHALL TELXON BE LIABLE FOR
ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING LOST PROFITS, LOST DATA OR
OTHERWISE, WHETHER OR NOT TELXON IS MADE AWARE OF THE POSSIBILITY OF SUCH
DAMAGES.
6. GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and governed by the laws of the State of Ohio, without regard to conflict or
choice of laws statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Agreement shall be brought in the
courts, state or federal, sitting in Summit County, Ohio, and each party hereto
consents to the jurisdiction and venue of such courts, and agrees not to contest
venue on the grounds of forum non conveniens or otherwise.
7. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior and
contemporaneous understandings and agreements, written or oral, between the
parties relating to the subject matter hereof.
8. ASSIGNABILITY. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated by Aironet to a direct competitor of
Telxon (a "Competitor"), and any such assignment or delegation shall be void and
of no effect. The merger, consolidation, asset sale, change of control, or any
other reorganization of Aironet with or into a Competitor, or of a Competitor
with or into Aironet, shall be deemed an assignment under this Section 7.4.
Subject to the foregoing, this Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
9. NUMBER AND GENDER. The use in this Agreement of singular, plural,
masculine, feminine and neuter nouns and pronouns, shall include the others as
the context may require.
10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties and for
evidentiary purposes, shall be deemed to be an original.
11. AMENDMENTS; WAIVERS. Amendments to and waivers of any term of this
Agreement must be in writing and executed by both parties hereto.
2
<PAGE> 3
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its duly authorized representative as of the date first set forth at the
beginning hereof.
Aironet Wireless Communications, Inc.
By: /s/ Roger J. Murphy
-------------------------------------------
Roger J. Murphy, President
and Chief Executive Officer
Telxon Corporation
By: /s/ Kenneth W. Haver
-------------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
3
<PAGE> 1
Exhibit 10.13
PATENT CONTINUATION IN PART AGREEMENT
This Patent Continuation In Part Agreement (this "Agreement") is made
as of March 30, 1998, by and between Aironet Wireless Communications, Inc., a
Delaware corporation ("Aironet"), and Telxon Corporation, a Delaware corporation
("Telxon").
BACKGROUND
WHEREAS, Telxon is the majority stockholder of Aironet;
WHEREAS, heretofore, United States Patent Application Number 08/789,999
(the "Application") was assigned by its inventor to Telxon;
WHEREAS, in connection with a private placement by Aironet of its
common stock, on the date hereof Telxon is assigning the Application to Aironet;
WHEREAS, pursuant to the applicable patent laws, the Application, and
any patents issued thereon, could be considered prior art to new patent
applications filed by Telxon; and
WHEREAS, Aironet and Telxon each desires to establish procedures that
will allow Telxon to file continuations in part in its own name based on claims
in the Application.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. COOPERATION. Upon Telxon's written request, at Telxon's cost and
expense, Aironet will cause its employee named as the inventor in the
Application to execute declarations and required assignment instruments, either
directly in favor of Telxon or in favor of Aironet, which in turn will execute
declarations and required assignment instruments in favor of Telxon, to effect
assignment of such inventor's or Aironet's rights, if any, in continuations in
part invented by or for Telxon. At Telxon's cost and expense, Aironet will
execute, and cause the inventor to execute, such other documents, and will take,
and cause the inventor to take, such other actions as are reasonably required by
Telxon in connection with effecting such continuations in part.
2. GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and governed by the laws of the State of Ohio, without regard to conflict or
choice of laws statutes, regulations, rules or principles, and by the patent
laws of the United States and any other jurisdiction which may apply. Any action
relating to the execution or performance of this Agreement shall be brought in
the courts, state or federal, sitting in Summit County, Ohio, and each party
hereto consents to the jurisdiction and venue of such courts, and agrees not to
contest venue on the grounds of forum non conveniens or otherwise.
<PAGE> 2
3. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior and
contemporaneous understandings and agreements, written or oral, between the
parties relating to the subject matter hereof.
4. NUMBER AND GENDER. The use in this Agreement of singular, plural,
masculine, feminine and neuter nouns and pronouns, shall include the others as
the context may require.
5. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties and for
evidentiary purposes, shall be deemed to be an original.
6. AMENDMENTS; WAIVERS. Amendments to and waivers of any term of this
Agreement must be in writing and executed by both parties hereto.
7. ASSIGNABILITY. This Agreement is binding upon and shall inure to the
benefit of the parties and their respective successors and assigns.
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its duly authorized representative as of the date first set forth at the
beginning hereof.
Aironet Wireless Communications, Inc.
By: /s/ Roger J. Murphy
-------------------------------------------
Roger J. Murphy, President
and Chief Executive Officer
Telxon Corporation
By: /s/ Kenneth W. Haver
-------------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
2
<PAGE> 1
Exhibit 10.14
PATENT LICENSE AGREEMENT
This Patent License Agreement (this "Agreement") is made as of March
30, 1998, by and between Aironet Wireless Communications, Inc., a Delaware
corporation ("Aironet"), and Telxon Corporation, a Delaware corporation
("Telxon").
BACKGROUND
WHEREAS, Telxon is the majority stockholder of Aironet;
WHEREAS, Telxon is the owner of patent applications 08/605,914
(Transceiver Control with Sleep Mode) and 08/619,797 (Transceiver Control with
Sleep Mode (CIP)) (together with all patents issued thereon, and all
continuations, continuations in part, divisions, reissues, additions, or
extensions thereof "Patents"); and
WHEREAS, Aironet desires to receive from Telxon a non-exclusive license
to utilize the Patents.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the
agreements made herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
1. LICENSE. Telxon hereby grants a perpetual, royalty free, worldwide,
non-exclusive license to Aironet to practice the methods of the claims made in
the Patents and to make, support, service, maintain, repair, reconstruct,
reconfigure and upgrade, integrate, install, use, market, sell, offer for sale,
lease and transfer any product which but for this license would infringe the
Patents. Aironet may not license, sublicense or otherwise relicense any of these
rights, provided that Aironet's immediate and subsequent transferees of products
shall have an implied license to utilize such products in the form originally
transferred by Aironet.
2. CONTRACTORS. Aironet may exercise the rights granted to it in
Section 1 either through its employees or through its contractors.
3. DISCLAIMER OF WARRANTY AND LIABILITY. TELXON MAKES NO REPRESENTATION
OR WARRANTY OF ANY KIND WITH RESPECT TO THE PATENTS, WHETHER EXPRESS OR IMPLIED
OR ARISING UNDER ANY STATUTE OR FROM ANY COURSE OF DEALING, USAGE OF TRADE OR
OTHERWISE, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NON-INFRINGEMENT. IN NO
EVENT SHALL TELXON BE LIABLE FOR ANY INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING LOST PROFITS, LOST DATA OR OTHERWISE, WHETHER OR NOT TELXON IS MADE
AWARE OF THE POSSIBILITY OF SUCH DAMAGES.
<PAGE> 2
4. GOVERNING LAW; JURISDICTION. This Agreement shall be construed under
and governed by the laws of the State of Ohio, without regard to conflict or
choice of laws statutes, regulations, rules or principles. Any action relating
to the execution or performance of this Agreement shall be brought in the
courts, state or federal, sitting in Summit County, Ohio, and each party hereto
consents to the jurisdiction and venue of such courts, and agrees not to contest
venue on the grounds of forum non conveniens or otherwise.
5. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes all prior and
contemporaneous understandings and agreements, written or oral, between the
parties relating to the subject matter hereof.
6. NUMBER AND GENDER. The use in this Agreement of singular, plural,
masculine, feminine and neuter nouns and pronouns, shall include the others as
the context may require.
7. EXECUTION IN COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same document. An executed faxed
counterpart of this Agreement shall be binding on the parties and for
evidentiary purposes, shall be deemed to be an original.
8. AMENDMENTS; WAIVERS. Amendments to and waivers of any term of this
Agreement must be in writing and executed by both parties hereto.
9. ASSIGNABILITY. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated by Aironet to a direct competitor of
Telxon (a "Competitor"), and any such assignment or delegation shall be void and
of no effect. The merger, consolidation, asset sale, change of control, or any
other reorganization of Aironet with or into a Competitor, or of a Competitor
with or into Aironet, shall be deemed an assignment under this Section 9.
Subject to the foregoing, this Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
2
<PAGE> 3
IN WITNESS WHEREOF, each party has caused this Agreement to be executed
by its duly authorized representative as of the date first set forth at the
beginning hereof.
Aironet Wireless Communications, Inc.
By: /s/ Roger J. Murphy
--------------------------------------------
Roger J. Murphy, President
and Chief Executive Officer
Telxon Corporation
By: /s/ Kenneth W. Haver
--------------------------------------------
Kenneth W. Haver, Senior Vice President and
Chief Financial Officer
3
<PAGE> 1
Exhibit 10.15
AIRONET CONFIDENTIAL PROPRIETARY
[AIRONET LOGO]
NONDISCLOSURE AGREEMENT
Agreement Date: March 31, 1998
--------------
This Non-Disclosure Agreement ("Agreement") is entered into and made effective
as of the date set forth above between Aironet Wireless Communications, Inc.
("Aironet") and the party as identified at the end of this Agreement
("Company").
The parties wish to disclose to each other confidential, proprietary, and/or
trade secret information (as more fully defined herein "Confidential
Information"). All information marked as "Confidential,"Proprietary," or with a
similar legend, will be deemed Confidential Information. To be considered
Confidential Information, verbal disclosures must be reduced to writing, marked
"Confidential," and delivered to the receiving party within (30) days. For
purposes of this Agreement, Aironet Confidential Information includes
information relating to Aironet's products, their functions and capabilities,
systems and designs, as well as peripherals and components ancillary or included
therewith, and any relevant business plans. Company Confidential Information
includes information relating to products and services information.
1. CONFIDENTIAL INFORMATION
------------------------
(A) "Confidential Information" means any information of the disclosing
party that the receiving party knew or should have known was confidential or a
trade secret, including all tangible embodiments thereof. Confidential
Information includes, without limitation, information relating to released or
unreleased disclosing party products, the marketing or promotion of any
disclosing party products, disclosing party business policies or practices,
and information received from others that the disclosing party is obligated to
treat as confidential. Confidential Information disclosed to the receiving
party by any disclosing party affiliate, agent and/or consultant is covered by
this Agreement.
(B) Confidential Information shall not include any information that can
be proven by tangible evidence and that: (i) is or subsequently becomes
publicly available without receiving party's breach of this or any obligation
owed to disclosing party; (ii) became known to receiving party from a source
other than disclosing party other than by breach of an obligation of
confidentiality owed to disclosing party; (iii) is rightfully provided to the
receiving party by a third party; or (iv) is independently developed by the
receiving party without breach of this Agreement.
2. RESTRICTIONS
------------
(A) The receiving party shall not use or disclose any Confidential
Information furnished in oral, visual, written and/or other tangible form to
third parties for three (3) years from the date of first receipt of such
information under this Agreement, except to receiving party's employees, agents,
and/or Consultants on a need-to-know basis as provided below. However,
receiving party may disclose Confidential Information in accordance with
judicial and other governmental order, provided receiving party first gives
disclosing party reasonable notice prior to such disclosure in order to permit
disclosing party to seek restraining orders, injunctions and generally to
protect the information's confidentiality.
(B) The receiving party shall take reasonable security precautions, at
least as great as the precautions it takes to protect its own Confidential
Information (but in no event less than reasonable care), to keep confidential
the Confidential Information received from disclosing party. In accordance,
receiving party may disclose Confidential Information only to those employees,
agents, and/or consultants who have a need-to-know. Receiving party will inform
its employees who handle such information that it is confidential and not to be
disclosed to others. Receiving party will have executed appropriate written
agreements at least as restrictive as this Agreement with its employees and
consultants sufficient to enable it to comply with the provisions of this
Agreement.
(C) The receiving party may not reverse engineer, decompile or
disassemble any software or hardware products disclosed to the receiving party.
The receiving party shall not use or permit others to use any Confidential
Information except for the benefit of the disclosing party in furtherance of the
purpose for which such Confidential Information was disclosed.
3. RIGHTS AND REMEDIES
-------------------
(A) Receiving party shall notify disclosing party immediately upon
discovery of any unauthorized use or disclosure of Confidential Information or
any other breach of this Agreement by receiving party, and will cooperate with
disclosing party in every reasonable
1
<PAGE> 2
way to help disclosing party regain possession of the Confidential Information
to prevent its further unauthorized use.
(B) Receiving party shall return all originals, copies, reproductions,
and summaries of Confidential Information at disclosing party's request or at
disclosing party's option certify destruction of the same.
(C) Disclosing party may visit receiving party's premises, with
reasonable prior notice and during normal business hours, to review receiving
party's compliance with the terms of this Agreement.
4. MISCELLANEOUS
-------------
(A) This Agreement shall govern disclosures between the parties for a
period of three (3) years from the Agreement Date first stated herein, unless
terminated earlier by written notice or otherwise amended in writing by the
parties. The receiving party agrees that the disclosing party's Confidential
Information is and shall at all times remain the property of the disclosing
party. No use of such Confidential Information is permitted except as otherwise
provided herein and no grant under any other disclosing party's intellectual
property rights is hereby given or intended including any license implied or
otherwise.
(B) Receiving party agrees that is does not intend nor will it directly
or indirectly, export or transmit any Confidential Information to any country to
which such export or transmission is restricted by regulation or statute,
without prior written consent of the Export Administration Office of the U.S.
Department of Commerce or such other governmental entity as may have
jurisdiction over such export or transmission.
(C) If any provision of this Agreement is held, by a court of competent
jurisdiction, to be illegal, invalid or unenforceable, the remaining provisions
shall remain in full force and effect.
(D) This Agreement may not be assigned by either party without the
prior written consent of the other and any such purported assignment shall be
void.
(E) Subject to the provisions of Rider A, this Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and merges all prior discussions between them as to Confidential
Information. It shall not be modified except by a written agreement dated
subsequent to the effective date of this Agreement, signed by both parties and
including a copy of this Agreement as an attachment. This Agreement shall be
construed and controlled in accordance with the laws of the State of Ohio,
without regard to conflict of laws principles, and each party herby consents to
the jurisdiction venue of the courts, state and federal, sitting in the State of
Ohio.
(F) All obligations created by this Agreement shall survive change or
termination of the parties' business relationship. Subject to the limitations
set forth herein, this Agreement shall inure to the benefit of and be binding
upon the parties, their successors and assigns.
IN WITNESS WHEREOF, the parties have executed this Nondisclosure Agreement
effective as of the Agreement Date stated at the beginning of the Agreement.
AIRONET WIRELESS COMMUNICATIONS, INC. Telxon Corporation
367 Ghent Road, Suite 300 3330 West Market Street
Fairlawn, Ohio 44333 Akron, Ohio 44333
/s/ Roger J. Murphy /s/ Kenneth W. Haver
- ------------------------------------- -----------------------------------
Signature Signature
Roger J. Murphy Kenneth W. Haver
- ------------------------------------- -----------------------------------
Printed Name Printed Name
President and Senior Vice President and
- ------------------------------------- -----------------------------------
Title Chief Executive Officer Title Chief Financial Officer
2
<PAGE> 3
RIDER A
to
NONDISCLOSURE AGREEMENT
between
AIRONET WIRELESS COMMUNICATIONS, INC.
And
TELXON CORPORATION
The parties respective rights and obligations under this Agreement are in
addition and supplemental to, and shall not be construed to limit or (except as
may there be expressly provided) to be limited by, the confidentiality
provisions of any written agreement herebefore or hereafter entered into between
the parties, provided that the provisions of this Agreement shall not be
interpreted or applied to limit or preclude such use or disclosure of
Confidential Information which any such other written agreement may expressly
authorize or permit or as a normal incident to the exercise of any rights or the
performance of any obligations thereunder or to any transactions contemplated
thereby.
<PAGE> 1
Exhibit 21
SUBSIDIARIES OF AIRONET WIRELESS COMMUNICATIONS, INC.
<TABLE>
<CAPTION>
Name Jurisdiction of Incorporation
---- -----------------------------
<S> <C>
Aironet Canada Inc. Ontario, Canada
Aironet Canada Limited Ontario, Canada
Aironet S.A. Belgium
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of our
reports dated June 12, 1998 relating to the consolidated financial statements
and financial statement schedule of Aironet Wireless Communications, Inc.,
which appear in such Registration Statement. We also consent to the references
to us under the headings "Experts" and "Selected Financial Data" in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
Cleveland, Ohio
May 14, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5,759,709
<SECURITIES> 0
<RECEIVABLES> 5,917,299
<ALLOWANCES> (417,882)
<INVENTORY> 4,307,179
<CURRENT-ASSETS> 20,016,614
<PP&E> 6,239,018
<DEPRECIATION> 3,747,972
<TOTAL-ASSETS> 26,548,646
<CURRENT-LIABILITIES> 10,401,295
<BONDS> 0
0
0
<COMMON> 95,663
<OTHER-SE> 13,533,387
<TOTAL-LIABILITY-AND-EQUITY> 26,548,646
<SALES> 26,350,495
<TOTAL-REVENUES> 32,413,659
<CGS> 18,876,855
<TOTAL-COSTS> 18,876,855
<OTHER-EXPENSES> 12,378,681
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 4,162
<INCOME-PRETAX> 1,153,961
<INCOME-TAX> 721,058
<INCOME-CONTINUING> 432,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 432,903
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.04
<FN>
<F1>$231,794 included in other costs and expenses
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 2,864,072
<SECURITIES> 0
<RECEIVABLES> 5,125,200
<ALLOWANCES> (187,038)
<INVENTORY> 4,020,254
<CURRENT-ASSETS> 16,356,141
<PP&E> 5,383,685
<DEPRECIATION> 2,728,183
<TOTAL-ASSETS> 23,633,193
<CURRENT-LIABILITIES> 11,140,386
<BONDS> 0
0
0
<COMMON> 93,391
<OTHER-SE> 11,504,385
<TOTAL-LIABILITY-AND-EQUITY> 23,633,193
<SALES> 39,353,151
<TOTAL-REVENUES> 45,134,395
<CGS> 26,301,096
<TOTAL-COSTS> 26,301,096
<OTHER-EXPENSES> 14,323,336
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 45,815
<INCOME-PRETAX> 4,464,148
<INCOME-TAX> 1,963,503
<INCOME-CONTINUING> 2,500,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,500,645
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.30
<FN>
<F1>$154,231 included in other costs and expenses
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,608,529
<SECURITIES> 0
<RECEIVABLES> 3,278,642
<ALLOWANCES> (256,897)
<INVENTORY> 4,331,536
<CURRENT-ASSETS> 11,077,327
<PP&E> 5,075,618
<DEPRECIATION> 2,554,999
<TOTAL-ASSETS> 19,200,822
<CURRENT-LIABILITIES> 13,787,866
<BONDS> 0
0
0
<COMMON> 80,850
<OTHER-SE> 5,261,361
<TOTAL-LIABILITY-AND-EQUITY> 19,200,822
<SALES> 61,327,897
<TOTAL-REVENUES> 61,327,897
<CGS> 45,461,162
<TOTAL-COSTS> 45,461,162
<OTHER-EXPENSES> 12,808,116
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 130,435
<INCOME-PRETAX> 2,928,184
<INCOME-TAX> 2,039,567
<INCOME-CONTINUING> 888,617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 888,617
<EPS-PRIMARY> 0.11
<EPS-DILUTED> 0.11
<FN>
<F1>$222,436 included in other costs and expenses
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 198,197
<SECURITIES> 0
<RECEIVABLES> 1,971,754
<ALLOWANCES> (34,461)
<INVENTORY> 7,840,507
<CURRENT-ASSETS> 14,850,671
<PP&E> 3,712,161
<DEPRECIATION> (1,569,882)
<TOTAL-ASSETS> 22,516,673
<CURRENT-LIABILITIES> 17,083,873
<BONDS> 0
0
0
<COMMON> 80,850
<OTHER-SE> 5,232,529
<TOTAL-LIABILITY-AND-EQUITY> 22,516,673
<SALES> 44,322,961
<TOTAL-REVENUES> 44,322,961
<CGS> 33,898,668
<TOTAL-COSTS> 33,898,668
<OTHER-EXPENSES> 10,898,051
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 41,942
<INCOME-PRETAX> (431,816)
<INCOME-TAX> 2,196,029
<INCOME-CONTINUING> (2,627,845)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,627,845)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> (0.33)
<FN>
<F1>$286,608 included in other costs and expenses
</FN>
</TABLE>
