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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1993
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 0R 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-11402
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TELXON CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 74-1666060
------------------------------- ------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification
Incorporation or Organization) No.)
3330 West Market Street, Akron, Ohio 44333
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (216) 867-3700
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X . No .
--- ---
At December 31, 1993, there were 15,368,858 outstanding shares of the
registrant's Common Stock, $.01 par value per share ("Common Stock").
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<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<CAPTION>
Page No.
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<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1: Consolidated Financial Statements
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . 4
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . 6-8
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . . . . . . . 9-12
PART II. OTHER INFORMATION:
Item 6: Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . 13
</TABLE>
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
<CAPTION>
December 31, March 31,
1993 1993
------------ -------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $3,331
and $21,962) . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,638 $ 26,515
Short-term investments . . . . . . . . . . . . . . . . . . . . . . . 339 645
Accounts receivable, net of allowance for
doubtful accounts of $1,567 and $2,689 . . . . . . . . . . . . . 55,519 43,908
Notes and other accounts receivable . . . . . . . . . . . . . . . . . 2,051 1,603
Refundable income taxes . . . . . . . . . . . . . . . . . . . . . . . 3,173 4,803
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,047 51,340
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 9,307 9,132
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . 149,074 137,946
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . 38,949 31,337
Goodwill, net of amortization of $6,887 and
$3,408 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,455 25,156
Intangible and other assets, net . . . . . . . . . . . . . . . . . . 12,304 18,182
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $221,782 $212,621
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable, bank . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,435 $ --
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 27,801 16,650
Capital lease obligations due within one
year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 398 679
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . 3,597 2,521
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 28,037 33,358
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . 69,268 53,208
Capital lease obligations . . . . . . . . . . . . . . . . . . . . . . 555 196
Convertible subordinated debentures . . . . . . . . . . . . . . . . . 24,734 24,734
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . 3,111 6,264
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . 97,668 84,402
-------- --------
Stockholders' equity:
Preferred Stock, $1.00 par value per share;
500,000 shares authorized, none issued . . . . . . . . . . . . . -- --
Common Stock, $.01 par value per share;
50,000,000 shares authorized, 15,368,858
and 15,201,883 shares outstanding . . . . . . . . . . . . . . . 154 152
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . 75,035 73,370
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 53,920 57,612
Equity adjustment for foreign currency
translation . . . . . . . . . . . . . . . . . . . . . . . . . . (3,205) (2,115)
Unearned compensation relating to restricted
stock awards . . . . . . . . . . . . . . . . . . . . . . . . . . (1,790) (800)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . 124,114 128,219
-------- --------
Commitments and contingencies . . . . . . . . . . . . . . . . . . . . -- --
-------- --------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . $221,782 $212,621
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except shares and per share amounts)
(Unaudited)
<CAPTION>
Three Months Nine Months
Ended December 31, Ended December 31,
1993 1992 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues:
Product revenues . . . . . . . . . . . . . $65,569 $38,075 $164,219 $152,113
Customer service . . . . . . . . . . . . . 11,399 10,835 32,375 30,589
-------- -------- -------- --------
Total revenues . . . . . . . . . . . . 76,968 48,910 196,594 182,702
-------- -------- -------- --------
Costs and expenses:
Cost of revenues . . . . . . . . . . . . . 45,098 32,366 114,843 112,340
Selling expenses . . . . . . . . . . . . . 15,459 11,548 41,705 33,232
Product development and
engineering expenses . . . . . . . . . . . 7,265 4,191 19,346 11,805
General and administrative
expenses . . . . . . . . . . . . . . . . . 8,600 12,879 23,343 24,640
-------- -------- -------- --------
76,422 60,984 199,237 182,017
-------- -------- -------- --------
Income(loss) from
operations . . . . . . . . . . . . 546 (12,074) (2,643) 685
Interest income . . . . . . . . . . . . . . . . 99 499 512 1,547
Interest expense . . . . . . . . . . . . . . . (564) (543) (1,640) (1,647)
-------- -------- -------- --------
Income (loss) before income
taxes and cumulative
effect of an accounting
change . . . . . . . . . . . . . . 81 (12,118) (3,771) 585
Provision (benefit) for income
taxes . . . . . . . . . . . . . . . . . . . . 698 (2,991) (87) 1,836
-------- -------- -------- --------
Loss before cumulative
effect of an accounting
change . . . . . . . . . . . . . . . (617) (9,127) (3,684) (1,251)
Cumulative effect of a change in
accounting for income taxes . . . . . . . . -- -- -- (439)
-------- -------- -------- --------
Net loss . . . . . . . . . . . . . . . $ (617) $(9,127) $ (3,684) $ (1,690)
========== ========== ========== ==========
Earnings per common and common
equivalent share:
Loss before cumulative effect
of an accounting change . . . . . . . . $ (.04) $ (.63) $ (.24) $ (.09)
Cumulative effect of a change
in accounting for income
taxes . . . . . . . . . . . . . . . . . -- -- -- (.03)
-------- -------- -------- --------
Net loss per share . . . . . . . . . . $ (.04) $ (.63) $ (.24) $ (.12)
========== ========== ========== ==========
Average number of common and common
equivalent shares outstanding . . . . . . . 15,417,000 14,557,000 15,377,000 14,572,000
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
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<TABLE>
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<CAPTION>
Nine Months Ended December 31,
-------------------------------
1993 1992
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<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (3,684) $(1,690)
Adjustments to reconcile net loss to net
cash (used in) provided by operating
activities:
Depreciation and amortization . . . . . . . . . . . . . . . 15,413 10,110
Cumulative effect of an accounting
change . . . . . . . . . . . . . . . . . . . . . . . . . -- 439
Non-cash compensation related to
restricted stock awards . . . . . . . . . . . . . . . . . 592 709
Provision for doubtful accounts . . . . . . . . . . . . . . 547 1,214
Provision for inventory obsolescence . . . . . . . . . . . 3,675 6,347
Deferred income taxes . . . . . . . . . . . . . . . . . . . 954 (74)
Other non-cash restructuring charges . . . . . . . . . . . -- 2,431
Loss on disposal of fixed assets . . . . . . . . . . . . . 479 151
Changes in assets and liabilities:
Accounts and notes receivable . . . . . . . . . . . . . . (12,784) 4,505
Refundable income taxes . . . . . . . . . . . . . . . . . 1,875 (4,598)
Inventories . . . . . . . . . . . . . . . . . . . . . . . (23,524) (6,861)
Prepaid expenses and other . . . . . . . . . . . . . . . (644) 1,428
Intangible and other assets . . . . . . . . . . . . . . . 2,530 (1,162)
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . . . 8,992 (3,473)
Income taxes payable . . . . . . . . . . . . . . . . . . 1,076 1,624
Other long-term liabilities . . . . . . . . . . . . . . . (1,350) 112
-------- --------
Total adjustments . . . . . . . . . . . . . . . . . . . (2,171) 12,902
Net cash (used in) provided by operating
activities . . . . . . . . . . . . . . . . . . . . . . . . . (5,855) 11,212
Cash flows from investing activities:
Proceeds from disposal of fixed assets . . . . . . . . . . . . 750 --
Additions to property and equipment . . . . . . . . . . . . . . (16,414) (9,133)
Payments for, or related to, acquisitions . . . . . . . . . . . (4,996) (10,126)
Increase in notes receivable . . . . . . . . . . . . . . . . . -- (2,200)
Purchase of contract rights . . . . . . . . . . . . . . . . . . -- (2,800)
Short-term investments . . . . . . . . . . . . . . . . . . . . 306 12,165
Software investments . . . . . . . . . . . . . . . . . . . . . (126) (111)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . (295) --
-------- --------
Net cash used in investing activities . . . . . . . . . . . . . (20,775) (12,205)
Cash flows from financing activities:
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . 9,435 728
Principal payments on capital leases . . . . . . . . . . . . . (912) (745)
Proceeds from exercise of stock options
(includes tax benefit) . . . . . . . . . . . . . . . . . . . 77 734
-------- --------
Net cash provided by financing activities . . . . . . . . . . . 8,600 717
Effect of exchange rate changes on cash . . . . . . . . . . . . 153 1,056
-------- --------
Net (decrease) increase in cash and cash
equivalents . . . . . . . . . . . . . . . . . . . . . . . . (17,877) 780
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . . . . . . . . 26,515 17,374
-------- --------
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,638 $18,154
======== ========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Management Representation
The consolidated financial statements of Telxon Corporation and its
subsidiaries (the "Company") have been prepared without audit. In the
opinion of the Company, all adjustments, consisting of normal recurring
adjustments and other non-recurring adjustments, necessary for a fair
statement of results for the interim periods, have been made. The
statements, which do not include all of the information and notes
required by generally accepted accounting principles for complete
financial statements, should be read in conjunction with the audited
consolidated financial statements as contained in the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1993.
2. Restatement and Reclassification
Effective April 1, 1992, the Company adopted the provisions of SFAS No.
109, "Accounting for Income Taxes". The nine months ended December 31,
1992 have been restated to reflect the cumulative effect adjustment of
$439,000. Certain items in the 1992 financial statements have been
reclassified to conform to the 1993 presentation.
3. Earnings Per Share
Computations of earnings per common and common equivalent share of
common stock are based on the weighted average number of common shares
outstanding during the period increased by the net shares issuable on
the assumed exercise of stock options using the treasury stock method.
Common stock purchase rights outstanding under the Company's stockholder
rights plan, which potentially have a dilutive effect, have been
excluded from the weighted common shares computation as preconditions to
the exercisability of such rights were not satisfied.
4. Inventories
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1993
(Unaudited) March 31, 1993
------------------- --------------
<S> <C> <C>
Purchased components . . . . . . . . . . . . . . . $36,982 $30,250
Work-in-process. . . . . . . . . . . . . . . . . . 19,497 12,107
Finished goods . . . . . . . . . . . . . . . . . . 13,568 8,983
------- -------
$70,047 $51,340
======= =======
</TABLE>
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5. Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31, 1993
(Unaudited) March 31, 1993
------------------ ----------------
<S> <C> <C>
Current liability to former share-
holders of acquired companies . . . . . . . . . . $ 664 $ 3,541
Accrued payroll and other employee
compensation . . . . . . . . . . . . . . . . . . . 7,858 10,160
Accrued commissions . . . . . . . . . . . . . . . . . 1,693 1,522
Accrued taxes other than payroll
and income taxes . . . . . . . . . . . . . . . . . 2,560 1,930
Deferred customer service revenues . . . . . . . . . . 7,585 7,545
Other accrued liabilities . . . . . . . . . . . . . . 7,677 8,660
------- -------
$28,037 $33,358
======= =======
</TABLE>
6. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Nine Months Ended December 31,
1993 1992
------ ------
(Unaudited)
(In thousands)
<S> <C> <C>
Cash paid during the period for:
Interest $2,139 $2,021
Income taxes 1,286 2,958
</TABLE>
Capital lease additions or disposals are non-cash transactions and,
accordingly, $990 and $163 have been excluded from property and
equipment additions in the Statement of Cash Flows in 1993 and 1992,
respectively.
7. Litigation
In December 1992, four class action suits were filed in the United
States District Court, Northern District of Ohio, by certain alleged
stockholders of the Company on behalf of themselves and purported
classes consisting of Telxon stockholders, other than defendants and
their affiliates, who purchased the Company's common stock between May
20, 1992 and January 19, 1993. The named defendants are the Company,
former President and Chief Executive Officer Raymond D. Meyo, and
current President, Chief Operating Officer and Chief Financial Officer
Dan R. Wipff. On February 1, 1993, the Plaintiffs filed their Amended
and Consolidated Class Action Complaint related to the four actions,
alleging claims for fraud on the market and negligent misrepresentation,
arising from alleged misrepresentations and omissions with respect to
the Company's financial performance and prospects, and alleged trading
activities of the named individual defendants. The Amended Complaint
seeks certification of the purported class, unspecified compensatory
damages, the imposition of a constructive trust on certain of the
defendants' assets and other unspecified extraordinary equitable and/or
injunctive relief, interest, attorneys' fees and costs. The defendants,
including the Company, filed a Motion to Dismiss which was denied by the
court on June 3, 1993. On April 16, 1993, Plaintiffs
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filed their Motion for Class Certification. The defendants, including
the Company, filed their briefs in opposition to Class Certification on
October 13, 1993. On December 17, 1993, the District Court certified
the class, consisting of Telxon stockholders, other than defendants and
their affiliates, who purchased Telxon common stock between May 20, 1992
and December 14, 1992. The defendants intend to vigorously defend these
actions.
On September 21, 1993, a derivative Complaint was filed in the Court of
Chancery of the State of Delaware, in and for Newcastle County, by an
alleged stockholder of Telxon derivatively on behalf of Telxon. The
named defendants are the Company; Robert F. Meyerson, Chairman of the
Board and Chief Executive Officer; Dan R. Wipff, President, Chief
Operating Officer and Chief Financial Officer and director; Robert A.
Goodman, Corporate Secretary and outside director; Norton W. Rose,
outside director and Dr. Raj Reddy, outside director. The Complaint
alleges breach of fiduciary duty to the Company and waste of the
Company's assets in connection with certain transactions entered into by
Telxon and compensation amounts paid by the Company. The Complaint
seeks an accounting, injunction, rescission, attorneys' fees and costs.
On November 12, 1993, Telxon and the individual director defendants
filed a Motion to Dismiss. The Court has not ruled on that Motion to
date. The defendants intend to vigorously defend this action.
In the normal course of its operations, the Company is subject to
performance under contracts, and has various legal actions 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.
8. Short-Term Financing
Effective October 20, 1993, the Company entered into a revolving credit,
term loan and security agreement with a bank through March 31,
1996. The agreement calls for a credit limit of $25 million and bears
interest at the bank's prime lending rate plus 1% or LIBOR plus 2.5%.
Any loans will be secured by substantially all of the United States
assets of the Company. The agreement contains restrictive covenants,
certain of which require the Company to maintain specified levels of net
worth and working capital and to meet certain current ratios, debt to
net worth ratios, and fixed charge coverages At December 31, 1993, the
Company had $9.4 million outstanding under this agreement and was in
compliance with all restrictive covenants contained in the agreement.
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TELXON CORPORATION AND SUBSIDIARIES
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
REVENUES
Consolidated revenues for the quarter and nine months ended December
31, 1993 increased $28.1 million or 57.4% and $13.9 million or 7.6%,
respectively, as compared to the same periods in the previous fiscal
year. The acquisition of Itronix Corporation ("Itronix") in March,
1993 has contributed to these increases. Itronix product revenues
totaled $7.0 million and $17.1 million for the quarter and nine months
ended December 31, 1993, respectively. Product revenues for the
quarter and nine months ended December 31, 1993 increased $27.5
million or 72.2% and $12.1 million or 8.0%, respectively, as compared
to the same periods in the previous fiscal year. The product revenue
increase for the quarter ended December 31, 1993, as compared with the
same period in the previous fiscal year, was primarily due to an
increase in Portable Tele-Transaction Computer ("PTC") unit volume of
81.3% offset by a decrease in the average selling price per unit of
5.0%. The product revenue increase for the nine months ended
December 31, 1993 was due to a 4.1% increase in average selling price
per unit and a 3.7% increase in average selling price per unit. The
nine months ended December 31, 1992 included the shipment of a
significant number of units to Wal-Mart Stores, Inc. ("Wal-Mart") to
equip its stores with the Company's wireless spread spectrum systems
including PTC model 960 units and shipments of low-end units to a
single customer. Excluding Wal-Mart units and sales of low-end units
to a single customer from the nine months ended December 31, 1992, PTC
unit volume increased 35.0% and average price per unit decreased 2.6%.
Consolidated revenues for the quarter ended December 31, 1993 included
a small amount from new products. During the fourth quarter, the
Company anticipates a larger contribution from new products. This
trend is expected to continue in fiscal 1995.
Customer service revenues for the quarter and nine months ended
December 31, 1993 increased $.6 million or 5.2% and $1.8 million or
5.8%, respectively, as compared to the same periods in the previous
fiscal year. This revenue growth was due to the growth in the
installed base of the Company's products. The rate of customer
service revenue growth has slowed as compared to prior years,
reflecting an overall reduction of discretionary spending by customers
for servicing of the PTC installed base.
COSTS AND OPERATING EXPENSES
Cost of revenues as a percentage of revenues for the quarter ended
December 31, 1993 decreased to 58.6% from 66.2% for the same period in
the previous fiscal year. Cost of revenues as a percentage of
revenues for the nine months ended December 31, 1993 decreased to
58.4% from 61.5% for the same period in the previous fiscal year. The
decrease in the cost percentage for the three months and nine months
ended December 31, 1993 as compared with the same periods in the
previous
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year is primarily the result of a $3.1 million charge recorded in the
prior year, reflecting the write-down of used equipment inventory
values, additional inventory reserves and underabsorbed overhead
manufacturing expenses due to lower than expected volumes. No
comparable charge was experienced in the current fiscal year.
Additionally, the decrease in the cost percentage for the nine months
ended December 31, 1993, as compared to the same period in the
previous fiscal year, was due to significant shipments to a single
large customer at lower than normal margins in the previous fiscal
year.
Selling expenses increased $3.9 million or 33.9% for the quarter ended
December 31, 1993 as compared to the same period in the previous
fiscal year. Selling expenses as a percentage of revenues for the
quarter ended December 31, 1993 decreased to 20.1% from 23.6% for the
same period in the previous fiscal year. Selling expenses increased
$8.5 million or 25.5% for the nine months ended December 31, 1993 as
compared to the same period in the previous fiscal year. Selling
expenses for the nine months ended December 31, 1993 increased to
21.2% from 18.2% as a percentage of revenues for the same period in
the previous fiscal year. The decrease in the expense percentage for
the quarter as compared to the same period in the previous fiscal year
is primarily due to the increased revenues for the quarter and the
fixed nature of portions of the selling expenses. This was partially
offset by additional expenses related to the acquisitions made in the
fourth quarter of the previous fiscal year and expenses in the quarter
ended December 31, 1993 relating to the initial formation of the
Vertical Systems Group which will be selling in the healthcare,
transportation, factory automation and financial services markets in
the next fiscal year. The expenses relating to the Vertical Systems
Group will continue to increase gradually over the next two quarters.
Substantial increases in revenues in these new markets are not
expected to occur until the third and fourth quarters of the next
fiscal year. The increase in selling expenses for the nine months
ended December 31, 1992, as compared with the same period in the
previous year, was primarily due to increased selling and marketing
efforts related to acquisitions made in the fourth quarter of fiscal
1993, continued emphasis on the retail market and increases in
international marketing and selling expenses.
Product development expenses for the quarter and nine months ended
December 31, 1993 increased $3.1 million and $7.5 million or 73.3% and
63.9%, respectively, as compared to the same periods in the previous
fiscal year. These increases are primarily attributable to research
and development activities related to new product offerings.
General and administrative expenses for the quarter and nine months
ended December 31, 1993 decreased $4.3 million and $1.3 million or
33.2% and 5.3%, respectively, as compared to the same periods in the
previous fiscal year. General and administrative expense as a
percentage of revenues for the quarter and nine months ended December
31, 1993 decreased to 11.2% and 11.9% from 26.3% and 13.5%,
respectively. These decreases are primarily attributable to unusual
charges during the third quarter of the previous fiscal year
aggregating $6.6 million which consisted of severance and consulting
fees relating to the Company's former president and chief executive
officer, restricted stock awards, additional legal and consulting
fees, an increase in the bad debt provision relating to a single
customer,
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and other non-recurring charges. No comparable charges were
experienced in the current fiscal year. These decreases were
partially offset by increased expenses related to acquisitions made in
the fourth quarter of fiscal 1993.
INCOME TAXES
The Company's tax provision for the quarter ended December 31, 1993
was $.7 million and reflects income before taxes adjusted by
nondeductible goodwill amortization of $1.2 million, the sum of which
is multiplied by the United States statutory rate and increased by
international rate differentials equal to $.1 million and other items
aggregating $.2 million. The Company's tax provision for the nine
months ended December 31, 1993 was $(.1) million and reflects loss
before taxes adjusted by nondeductible goodwill amortization of $3.8
million, the sum of which is multiplied by the United States statutory
rate and increased by international rate differentials equal to $.4
million and decreased by other items aggregating $.5 million. On
August 10, 1993, the President signed into law the Omnibus Budget
Reconciliation Act of 1993 which contains certain provisions covering
the calculation of the corporate income tax liability. The impact of
these income tax law changes on the Company's income tax provision
will not have a significant effect.
LIQUIDITY
The Company had cash, cash equivalents and short-term investments of
$9.0 million at December 31, 1993, as compared to $27.2 million at
March 31, 1993. The current ratio was 2.2:1 and 2.6:1 at December 31,
1993 and March 31, 1993, respectively. This decrease was due to
increases in both current assets and current liabilities as described
below.
Current assets increased by $11.1 million which was caused primarily
by increases to inventories of $18.7 million and accounts receivable
of $12.1 million offset by decreases in cash, cash equivalents and
short-term investments of $18.1 million and refundable income taxes of
$1.6 million. Although the Company has increased its investment in
accounts receivable, days sales outstanding have decreased to 61 days
at December 31, 1993 from 73 days at March 31, 1993, respectively.
The Company has also increased its investment in inventories,
particularly in purchased components and work-in-process. The increase
in inventories related to purchased components for new products and
higher expected production volumes for the remainder of the fiscal
year. The increases in both accounts receivable and inventories are
expected to continue throughout the remainder of the fiscal year due
to increased revenues and new product offerings.
Current liabilities increased by approximately $16.1 million which was
caused primarily by increases in accounts payable of $11.2 million,
notes payable, bank of $9.4 million and income taxes payable of $1.1
million. These were offset by decreases in accruals and current
capital lease obligations aggregating $5.6 million. The increase in
accounts payable is primarily due to increased purchases of
inventories. The decrease in accrued liabilities reflects the payment
of purchase obligations to former shareholders of acquired companies.
The reduction in accrued payroll and other employee compensation
reflects the payment of fiscal 1993 bonuses.
11
<PAGE> 12
Effective October 20, 1993, the Company entered into a revolving
credit, term loan and security agreement with a bank for a term
through March 31, 1996. The agreement calls for a credit line of $25
million on a secured basis. At December 31, 1993 the Company had $9.4
million outstanding under this agreement. The proceeds from these
borrowings, during the quarter ended December 31, 1993, were used to
fund working capital requirements, primarily increased investment in
inventories and accounts receivable, as well as construction draws of
$2.6 million for the new manufacturing facilities in Houston, Texas.
Permanent mortgage financing is anticipated to be closed upon
completion of the manufacturing and customer service complex. The
Company anticipates the need for continued borrowings under the
agreement. The Company believes that its existing resources,
including internally generated funds and unused credit facilities,
will be sufficient to meet working capital requirements for the next
twelve months.
CASH FLOWS FROM OPERATING ACTIVITIES
Cash flows from operating activities were $(5.9) million and $11.2
million for the nine months ended December 31, 1993 and 1992,
respectively. Cash flows for the nine months ended December 31, 1993
as compared with the same period in the previous year were negatively
impacted by increases to the changes in accounts receivable of $17.3
million, inventories of $16.6 million and prepaids and other of $2.1
million. Other negative impacts included the absence of a
non-cash restructuring charge of $2.4 million, a reduction in the
provision for inventory obsolescence of $2.7 million, an increase to
the net loss of $2.0 million, a decrease in other long-term
liabilities of $1.5 million, and other of $1.8 million. These
negative impacts were partially offset by an increase in the change in
accounts payable of $12.5 million, an increase in the change in
refundable income taxes of $6.5 million, increased depreciation and
amortization of $5.3 million, an increase in the change in intangible
assets and other of $3.7 million and other positive cash flow impacts
of $1.3 million.
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows used in investing activities were $20.8 million and $12.2
million for the nine months ended December 31, 1993 and 1992,
respectively. The primary reasons for the increased cash usage of
$8.6 million were the increased utilization of short-term investments
of $11.9 million in order to satisfy immediate cash and working
capital requirements, increased investment in property and equipment
of $7.3 million, and other of $.3 million. These uses were partially
offset by decreased payments made for acquisitions of $5.1 million,
the absence of payments for contract rights of $2.8 million, a
decrease to notes receivable of $2.2 million and proceeds for the
disposal of fixed assets of $.8 million.
CASH FLOWS FROM FINANCING ACTIVITIES
Cash flows provided by financing activities were $8.6 million and $.7
million for the nine months ended December 31, 1993 and 1992,
respectively. The primary reason for the increased cash provided by
financing activities was the increased borrowing of $8.7 million
offset by decreased proceeds from the exercise of stock options of $.6
million and increased principal payments on capital leases of $.2
million.
12
<PAGE> 13
TELXON CORPORATION AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4.1 Portions of the Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to
Registrant's Annual Report on Form 10-K for the year ended March
31, 1993) pertaining to the rights of holders of Registrant's
Common Stock, par value $.01 per share.
4.2 Form of Certificate for the Registrant's Common Stock, par value
$.01 per share, incorporated herein by reference to Exhibit 4.2
to Registrant's Form 10-K filed for the year ended March 31,
1990.
4.3 Form of Rights Agreement between Registrant and AmeriTrust
Company National Association, as Rights Agent, dated as of August
25, 1987, incorporated herein by reference to Exhibit 2(c) to
Amendment No. 1, dated May 21, 1992, to Registrant's Registration
Statement on Form 8-A, filed December 19, 1983, with respect to
Registrant's Common Stock.
4.3.1 Form of Rights Certificate (included as Exhibit A to
the Rights Agreement included as Exhibit 4.3 to the
Annual Report on Form 10-K). Until the Distribution
Date (as defined in the Rights Agreement), the Rights
Agreement provides that the common stock purchase
rights created thereunder are evidenced by the
certificates for Registrant's Common Stock (the form of
which is included as Exhibit 4.3 to this Annual Report
on Form 10-K, which stock certificates are deemed also
to be certificates for such common stock purchase
rights) and not by separate Rights Certificates; as
soon as practicable after the Distribution Date, Rights
Certificates will be mailed to each holder of
Registrant's Common Stock as of the close of business
on the Distribution Date.
4.4 Form of Indenture by and between the Registrant and AmeriTrust
Company National Association, as Trustee, dated as of June 1,
1987, regarding Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by reference to Exhibit
4.2 to Registrant's Registration Statement on Form S-3,
Registration No. 33-14348, filed May 18, 1987.
13
<PAGE> 14
4.4.1 Form of the Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012 (set forth in the form of Indenture included
as Exhibit 4.4 to this Quarterly Report on Form 10-Q).
10.1 Compensation and Benefits Plans of the Registrant.
10.1.1 Amended and Restated Retirement and Uniform Matching
Profit-Sharing Plan of the Registrant, effective May
31, 1990, incorporated herein by reference to Exhibit
10.5 to the Registrant's Form 10-K filed for the year
ended March 31, 1990.
10.1.2 1988 Stock Option Plan of Registrant incorporated
herein by reference to Exhibit 19.i.1 to Registrant's
Form 10-Q filed for the quarter ended September 30,
1988.
10.1.2.a Amendment, dated January 31, 1990,
incorporated herein by reference to
Exhibit 10.1 to Registrant's Form 10-Q
filed for the quarter ended
December 31, 1989.
10.1.3 1990 Stock Option Plan of the Registrant, incorporated
by reference to Exhibit 10.1 to the Registrant's Form
10-K filed for the year ended March 31, 1993.
10.1.4 1990 Stock Option Plan of the Registrant for
non-employee directors, incorporated by reference to
Exhibit 10.1 to the Registrant's Form 10-K filed for
the year ended March 31, 1993.
10.1.5 Non-Qualified Stock Option Agreement between the
Registrant and Dan R. Wipff, dated October 17, 1988,
incorporated herein by reference to Exhibit 10.9 to
Registrant's Form 10-K filed for year ended March 31,
1989.
10.1.6 Non-Qualified Stock Option Agreement between the
Registrant and Raj Reddy, dated as of October 17, 1988,
incorporated herein by reference to Exhibit 10.13 to
the Registrant's Form 10-K filed for the year ended
March 31, 1989.
10.1.7 Description of compensation arrangements between the
Registrant and Robert F. Meyerson, an officer of
Registrant, incorporated herein by reference to Exhibit
10.14 to Registrant's Form 10-K filed for the year
ended March 31, 1990.
10.1.8 Employment Agreement between the Registrant and Dan R.
Wipff, dated as of April 1, 1991, incorporated herein
by reference to Exhibit 19.02 to Registrant's Form 10-Q
filed for the quarter ended September 30, 1991.
14
<PAGE> 15
10.1.9 Consulting Agreement between the Registrant and
Accipiter Corporation, dated March 6, 1992,
incorporated herein by reference to Exhibit 10.17 to
the Registrant's Form 10-K filed for the year ended
March 31, 1992.
10.1.10 Services and Non-Competition Agreement, dated as of
January 18, 1993, among Accipiter Corporation, Robert
F. Meyerson and the Registrant, incorporated herein by
reference to Exhibit 10.28 to the Registrant's Form
10-Q filed for the quarter ended December 31, 1992.
10.1.11 Employment Agreement between the Registrant and John H.
Cribb dated April 1, 1990, incorporated herein by
reference to Exhibit 10.27 to Registrant's Form 10-K
filed for the year ended March 31, 1991.
10.1.11.a Amendment Agreement, dated as of June 4,
1992, incorporated herein by reference to
Exhibit 10.20.a to the Registrant's Form
10-K filed for the year ended March 31,
1992.
10.1.12 Severance and Settlement Agreement, dated as of
December 23, 1992, between the Registrant and Raymond
D. Meyo, incorporated herein by reference to Exhibit
10.26 to the Registrant's Form 10-Q filed for the
quarter ended December 31, 1992.
10.1.13 Consulting Agreement, dated as of December 23, 1992,
between the Registrant and Raymond D. Meyo,
incorporated herein by reference to Exhibit 10.26 to
the Registrant's Form 10-Q filed for the quarter ended
December 31, 1992.
10.1.14 Employment Agreement between the Registrant and D.
Michael Grimes, dated as of February 25, 1993,
incorporated herein by reference to Exhibit 10.1 to the
Registrant's Form 10-K filed for the year ended March
31, 1993.
10.1.15 Employment Agreement between the Registrant and William
J. Murphy, dated as of March 12, 1993, incorporated
herein by reference to Exhibit 10.1 to the Registrant's
Form 10-K filed for the year ended March 31, 1993.
10.1.16 Employment Agreement between Itronix Corporation, a
wholly owned subsidiary of the Registrant, and Lawrence
L. Allman, dated as of April 1, 1993, incorporated
herein by reference to Exhibit 10.1 to the Registrant's
Form 10-K filed for the year ended March 31, 1993.
10.1.17 1992 Restricted Stock Plan of the Registrant, filed
herewith.
15
<PAGE> 16
10.1.17.a Amendment, dated December 7, 1993, filed
herewith.
10.2 Material Leases of the Registrant.
10.2.1 Lease between Registrant and 3330 W. Market Properties,
dated as of December 30, 1986, incorporated herein by
reference to Exhibit No. 10.01 to Registrant's Form
10-K filed for the year ended March 31, 1987.
10.2.2 Lease between Registrant and Southwest Business
Properties, Inc., dated as of September 11, 1986,
incorporated herein by reference to Exhibit No. 10.02
to Registrant's Form 10-K filed for the year ended
March 31, 1987.
10.2.2.a Amendment Agreements dated as of May
4, 1993, incorporated herein by
reference to Exhibit 10.2 to the
Registrant's Form 10-K filed for
the year ended March 31, 1993.
10.2.3 Lease between Itronix, a wholly-owned subsidiary of the
Registrant, and Hutton Settlement, Inc., dated as of
April 5, 1993, incorporated herein by reference to
Exhibit 10.2 to the Registrant's Form 10-K filed for
the year ended March 31, 1993.
10.3 Credit Agreements of the Registrant.
10.3.1 Revolving Credit, Term Loan and Security Agreement between the
Registrant and the Bank of New York Commercial Credit
Corporation dated as of October 20, 1993, incorporated by
reference to Exhibit 10.3 to the Registrant's Form 10-Q filed
for the quarter ended September 30, 1993.
10.4 Amended and Restated Agreement between the Registrant and Symbol
Technologies, Inc., dated as of September 30, 1992, incorporated
herein by reference to Exhibit 10.4 to Registrant's Form 10-K for
the year ended March 31, 1993.
10.5 Stock Purchase Agreement by and among the Registrant, Robert F.
Meyerson and members of the Meyerson family dated as of March 18,
1992, incorporated herein by reference to Exhibit 10.22 to the
Registrant's Form 10-K filed for the year ended March 31, 1992.
10.6 Stock Purchase Agreement, dated December 31, 1992, among the
Registrant, Robert F. Meyerson and certain members of Mr.
Meyerson's family, incorporated herein by reference to Exhibit
10.30 to the Registrant's Form 10-Q filed for the quarter ended
December 31, 1992.
10.7 Plan and Agreement of Merger, dated as of January 18, 1993, among
the Registrant, WSACO, Inc. and Teletransaction Corp.,
incorporated herein by reference to Exhibit 10.29 to the
Registrant's Form 10-Q filed for the quarter ended December 31,
1992.
16
<PAGE> 17
10.7.1 Notice of Termination by WSACO, Inc., as
contemplated by Section 5.7 of the Plan and
Agreement of Merger, of Amended and
Restated Consulting Agreement between
Accipiter Corporation and Teletransaction
Corp., incorporated herein by reference to
Exhibit 10.7.1 to Registrant's Form 10-K
for the year ended March 31, 1993.
10.8 Asset Purchase Agreement between the Registrant and Retail
Management Systems Corporation, dated as of April 3, 1992,
incorporated herein by reference to Exhibit 10.23 to the
Registrant's Form 10-K filed for the year ended March 31, 1992.
10.9 Stock Purchase Agreement among the Registrant and the
stockholders of Telesystems SLW Inc., dated as of April 10, 1992,
relating to the acquisition of all the capital stock of
Telesystems SLW Inc., incorporated herein by reference to Exhibit
10.24 to Registrant's Form 10-K filed for the year ended March
31, 1992.
10.10 Agreement of Merger among the Registrant, Itracquico Corporation
and Itronix Corporation dated as of March 22, 1993, incorporated
by reference to Exhibit 10.10 to Registrant's Form 10-K for the
year ended March 31, 1993.
10.11 Agreement for Sale and Licensing of Assets between AST Research,
Inc. and PenRight! Corporation, a wholly-owned subsidiary of the
Registrant, dated as of January 26, 1994, filed herewith.
11.01 Computation of Common Shares outstanding and earnings per share,
filed herewith.
(b) No Current Report on Form 8-K was filed by Registrant during
the fiscal quarter ended December 31, 1993 for which this
Quarterly Report on Form 10-Q is filed.
17
<PAGE> 18
TELXON CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: February 11, 1994
TELXON CORPORATION
------------------
(Registrant)
/s/ Dan R. Wipff
--------------------------------
Dan R. Wipff
President, Chief Operating Officer and
Chief Financial Officer
18
<PAGE> 19
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED DECEMBER 31, 1993
19
<PAGE> 20
INDEX TO EXHIBITS
Page
- -----
* 4.1 Portions of the Restated Certificate of Incorporation of the
Registrant (incorporated by reference to Exhibit 3.1 to
Registrant's Annual Report on Form 10-K for the year ended
March 31, 1993) pertaining to the rights of holders of
Registrant's Common Stock, par value $.01 per share.
* 4.2 Form of Certificate for the Registrant's Common Stock, par
value $.01 per share, incorporated herein by reference to
Exhibit 4.2 to Registrant's Form 10-K filed for the year ended
March 31, 1990.
* 4.3 Form of Rights Agreement between the Registrant and AmeriTrust
Company National Association, as Rights Agent, dated as of
August 25, 1987, incorporated herein by reference to Exhibit
2(c) to Amendment No. 1, dated May 21, 1992, to Registrant's
Registration Statement on Form 8-A, filed December 19, 1983,
with respect to Registrant's Common Stock.
* 4.3.1 Form of Rights Certificate (included as Exhibit A to
the Rights Agreement included as Exhibit 4.3 to the
Annual Report on Form 10-K). Until the Distribution
Date (as defined in the Rights Agreement), the Rights
Agreement provides that the common stock purchase
rights created thereunder are evidenced by the
certificates for Registrant's Common Stock (the form
of which is included as Exhibit 4.3 to this Annual
Report on Form 10-K, which stock certificates are
deemed also to be certificates for such common stock
purchase rights) and not by separate Rights
Certificates; as soon as practicable after the
Distribution Date, Rights Certificates will be mailed
to each holder of Registrant's Common Stock as of the
close of business on the Distribution Date.
* 4.4 Form of Indenture by and between the Registrant and AmeriTrust
Company National Association, as Trustee, dated as of June 1,
1987, regarding Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by reference to
Exhibit 4.2 to Registrant's Registration Statement on Form
S-3, Registration No. 33-14348, filed May 18, 1987.
* 4.4.1 Form of the Registrant's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set forth in the
form of Indenture included as Exhibit 4.4 to this
Quarterly Report on Form 10-Q).
* 10.1 Compensation and Benefits Plans of the Registrant.
20
<PAGE> 21
Page
- ----
* 10.1.1 Amended and Restated Retirement and Uniform Matching
Profit-Sharing Plan of Registrant, effective May 31, 1990,
incorporated herein by reference to Exhibit 10.5 to
Registrant's Form 10-K filed for the year ended March 31,
1990.
* 10.1.2 1988 Stock Option Plan of the Registrant incorporated herein
by reference to Exhibit 19.i.1 to the Registrant's Form 10-Q
filed for the quarter ended September 30, 1988.
* 10.1.2.a Amendment, dated January 31, 1990,
incorporated herein by reference to Exhibit
10.1 to Registrant's Form 10-Q filed for the
quarter ended December 31, 1989.
* 10.1.3 1990 Stock Option Plan of the Registrant, incorporated by
reference to Exhibit 10.1 to the Registrant's Form 10-K filed
for the year ended March 31, 1993.
* 10.1.4 1990 Stock Option Plan of the Registrant for non-employee
directors, incorporated by reference to Exhibit 10.1 to the
Registrant's Form 10-K filed for the year ended March 31,
1993.
* 10.1.5 Non-Qualified Stock Option Agreement between the Registrant
and Dan R. Wipff, dated October 17, 1988, incorporated herein
by reference to Exhibit 10.9 to Registrant's Form 10-K filed
for year ended March 31, 1989.
* 10.1.6 Non-Qualified Stock Option Agreement between the Registrant
and Raj Reddy, dated as of October 17, 1988, incorporated
herein by reference to Exhibit 10.13 to the Registrant's Form
10-K filed for the year ended March 31, 1989.
* 10.1.7 Description of compensation arrangements between the
Registrant and Robert F. Meyerson, an officer of Registrant,
incorporated herein by reference to Exhibit 10.14 to
Registrant's Form 10-K filed for the year ended March 31,
1990.
* 10.1.8 Employment Agreement between the Registrant and Dan R. Wipff,
dated as of April 1, 1991, incorporated herein by reference to
Exhibit 19.02 to Registrant's Form 10-Q filed for the quarter
ended September 30, 1991.
21
<PAGE> 22
Page
- ----
* 10.1.9 Consulting Agreement between the Registrant and Accipiter
Corporation, dated March 6, 1992, incorporated herein by
reference to Exhibit 10.17 to the Registrant's Form 10-K filed
for the year ended March 31, 1992.
* 10.1.10 Services and Non-Competition Agreement, dated as of January
18, 1993, among Accipiter Corporation, Robert F. Meyerson and
the Registrant, incorporated herein by reference to Exhibit
10.28 to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
* 10.1.11 Employment Agreement between the Registrant and John H. Cribb
dated April 1, 1990, incorporated herein by reference to
Exhibit 10.27 to Registrant's Form 10-K filed for the year
ended March 31, 1991.
* 10.1.11.a Amendment Agreement, dated as of June 4,
1992, incorporated herein by reference to
Exhibit 10.20.a to the Registrant's Form 10-K
filed for the year ended March 31, 1992.
* 10.1.12 Severance and Settlement Agreement, dated as of December 23,
1992, between the Registrant and Raymond D. Meyo, incorporated
herein by reference to Exhibit 10.25 of the Registrant's Form
10-Q filed for the quarter ended December 31, 1992.
* 10.1.13 Consulting Agreement, dated as of December 23, 1992, between
the Registrant and Raymond D. Meyo, incorporated herein by
reference to Exhibit 10.26 to the Registrant's Form 10-Q filed
for the quarter ended December 31, 1992.
* 10.1.14 Employment Agreement between the Registrant and D. Michael
Grimes, dated as of February 25, 1993, incorporated herein by
reference to Exhibit 10.1 to the Registrant's Form 10-K filed
for the year ended March 31, 1993.
* 10.1.15 Employment Agreement between the Registrant and William J.
Murphy, dated as of March 12, 1993, incorporated herein by
reference to Exhibit 10.01 to the registrant's Form 10-K filed
for the year ended March 31, 1993.
* 10.1.16 Employment Agreement between Itronix Corporation, a wholly
owned subsidiary of the Registrant, and Lawrence L. Allman,
dated as of April 1, 1993, incorporated herein by reference to
Exhibit 10.1 to the Registrant's Form 10-K filed for the year
ended March 31, 1993.
25 10.1.17 1992 Restricted Stock Plan of the Registrant, filed herewith.
22
<PAGE> 23
Page
- ----
33 10.1.17.a Amendment, dated December 7, 1993,
filed herewith.
* 10.2 Material Leases of the Registrant.
* 10.2.1 Lease between Registrant and 3330 W. Market
Properties, dated as of December 30, 1986,
incorporated herein by reference to Exhibit No. 10.01
to Registrant's Form 10-K filed for the year ended
March 31, 1987.
* 10.2.2 Lease between Registrant and Southwest Business
Properties, Inc., dated as of September 11, 1986,
incorporated herein by reference to Exhibit No. 10.02
to Registrant's Form 10-K filed for the year ended
March 31, 1987.
* 10.2.2.a Amendment Agreements dated as of May
4, 1993, filed herewith.
* 10.2.3 Lease between Itronix, a wholly-owned subsidiary of
the Registrant, and Hutton Settlement, Inc., dated as
of April 5, 1993, incorporated herein by reference to
Exhibit 10.2 to the Registrant's Form 10-K filed for
the year ended March 31, 1993.
* 10.3 Credit Agreements of the Registrant.
* 10.3.1 Revolving Credit, Term Loan and Security Agreement
between the Registrant and the Bank of New York
Commercial Credit Corporation dated as of October 20,
1993, incorporated by reference to Exhibit 10.3 to
the Registrant's Form 10-Q filed for the quarter
ended September 30, 1993.
* 10.4 Amended and Restated Agreement between the Registrant and
Symbol Technologies, Inc., dated as of September 30, 1992,
incorporated herein by reference to Exhibit 10.4 to
Registrant's Form 10-K for the year ended March 31, 1993.
* 10.5 Stock Purchase Agreement by and among the Registrant, Robert
F. Meyerson and members of the Meyerson family dated as of
March 18, 1992, incorporated herein by reference to Exhibit
10.22 to the Registrant's Form 10-K filed for the year ended
March 31, 1992.
* 10.6 Stock Purchase Agreement, dated December 31, 1992, among the
Registrant, Robert F. Meyerson and certain members of Mr.
Meyerson's family, incorporated herein by reference to Exhibit
10.30 to the Registrant's Form 10-Q filed for the quarter
ended December 31, 1992.
23
<PAGE> 24
Page
* 10.7 Plan and Agreement of Merger, dated as of January 18, 1993,
among the Registrant, WSACO, Inc. and Teletransaction Corp.,
incorporated herein by reference to Exhibit 10.29 to the
Registrant's Form 10-Q filed for the quarter ended December
31, 1992.
* 10.7.1 Notice of Termination by WSACO, Inc., as contemplated
by Section 5.7 of the Plan and Agreement of Merger,
of Amended and Restated Consulting Agreement between
Accipiter Corporation and Teletransaction Corp.,
incorporated herein by reference to Exhibit 10.7.1 to
Registrant's Form 10-K for the year ended March 31,
1993.
* 10.8 Asset Purchase Agreement between the Registrant and Retail
Management Systems Corporation, dated as of April 3, 1992,
incorporated herein by reference to Exhibit 10.23 to the
Registrant's Form 10-K filed for the year ended March 31,
1992.
* 10.9 Stock Purchase Agreement among the Registrant and the
stockholders of Telesystems SLW Inc., dated as of April 10,
1992, relating to the acquisition of all the capital stock of
Telesystems SLW Inc., incorporated herein by reference to
Exhibit 10.24 to Registrant's Form 10-K filed for the year
ended March 31, 1992.
* 10.10 Agreement of Merger among the Registrant, Itracquico
Corporation and Itronix Corporation dated as of March 22,
1993, incorporated by reference to Exhibit 10.10 to
Registrant's Form 10-K for the year ended March 31, 1993.
35 10.11 Agreement for Sale and Licensing of Assets between AST
Research, Inc. and PenRight! Corporation, a wholly-owned
subsidiary of the Registrant, dated as of January 26, 1994,
filed herewith.
47 11.01 Computation of Common Shares outstanding and earnings per
share, filed herewith.
___________________________________________
* Previously filed.
24
<PAGE> 1
EXHIBIT 10.1.17
TELXON CORPORATION
1992 RESTRICTED STOCK 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 Affiliates and
strengthen the mutuality of interest between such key employees and the
Company's stockholders by offering such key employees Awards of Restricted
Stock.
2. DEFINITIONS
In addition to other capitalized terms defined elsewhere in this Plan, the
following terms shall have the respective meanings set forth below:
2.01 "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
2.02 "Affiliate" means any entity in which the Company has a
substantial direct or indirect equity interest, as determined by the
Committee in its sole discretion.
2.03 "Award" means an award of Restricted Stock pursuant to Section 6
of the Plan.
2.04 "Restricted Stock Award Agreement" means the written agreement
evidencing an Award by and between the Company and the Awardee as required
by Sections 6.01 and 9.
2.05 "Awardee" means an Employee to whom an Award is made.
2.06 "Board" means the Board of Directors of the Company.
2.07 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
2.08 "Commission" means the United States Securities and Exchange
Commission.
2.09 "Committee" means the Committee appointed by the Board in
accordance with Section 4, if a Committee is appointed. If no Committee has
been appointed, any reference to the Committee shall be deemed a reference
to the Board.
2.10 "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 7.
2.11 "Company" means Telxon Corporation, a Delaware corporation or any
successor to substantially all of its business.
2.12 "Employee" means any person, including officers and directors who
are also employees, employed by the Company or any Subsidiary or Affiliate.
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 an "Employee" for
purposes of the Plan.
2.13 "Plan" means this TELXON CORPORATION 1992 RESTRICTED STOCK PLAN.
2.14 "Restricted Period" means a period set by the Committee
commencing with the date of an Award during which such Award is subject to
forfeiture.
2.15 "Restricted Stock" means Common Stock awarded by the Committee
under Section 6.
2.16 "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.
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2.17 "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.
2.18 "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; other
applicable Federal, State and foreign securities laws and regulations
promulgated thereunder, as adopted and amended from time to time; 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.
2.19 "Shares" means shares of Common Stock.
2.20 "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.
2.21 "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.
3. STOCK SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 7, the total number of Shares
available for Awards under the Plan shall be 250,000 Shares.
4. ADMINISTRATION OF THE PLAN
4.01 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 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 then 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. As to the
selection of and grants of Awards to Awardees who are not Section 16
Persons, the Committee may delegate any or all of its responsibilities to
members of the Company's management.
4.02 Powers of the Committee. To the extent not inconsistent with this
Plan, the Committee shall have the authority, in its sole discretion;
(a) To determine the eligibility of Employees to be granted Awards;
(b) To determine whether and to what extent Awards are to be
granted to eligible Employees;
(c) To determine the number of Shares of Restricted Stock to be
covered by each Award granted under the Plan;
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<PAGE> 3
(d) To determine the terms and conditions of any Awards (including,
but not limited to, the Share price, if any, and any restriction or
limitation, or any vesting acceleration or waiver of forfeiture or other
restrictions regarding any Award, including, without limitation, the
duration of the Restricted Period relating to any Award, and/or the
Shares relating thereto based in each case on such factors as the
Committee shall determine in its sole discretion);
(e) To determine whether, to what extent and under what
circumstances grants of Awards are to be made and operate on a tandem
basis with respect to other awards made outside of the Plan, or on a
cumulative, additive basis;
(f) To amend, subject to the provisions of Section 14, any Award.
The Committee shall have the authority 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.
4.03 Effect of Board ana 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.
4.04 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 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
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, a Subsidiary or an Affiliate.
6. RESTRICTED STOCK RULES AND CONDITIONS
The grant of Restricted Stock shall be upon the following rules and
conditions:
6.01 Restricted Stock Grants. Awards of Restricted Stock shall be
evidenced by Restricted Stock Agreements in accordance with the provisions
of Section 9. Such Agreements shall conform to the requirements of the Plan
and may contain such other provisions as the Committee shall deem
advisable.
6.02 Issuance of Restricted Stock. Upon determination of the number of
Shares of Restricted Stock to be granted to an Awardee, 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 or, at the election of the Committee, deposited by the Awardee,
together with a stock power endorsed in blank, with the Company.
6.03 Dividends and Voting Rights. During the Restricted Period, the
Awardee shall have the right to receive dividends from and to vote the
Shares of Restricted Stock unless the Committee shall at the time of the
making of the Award determine that the payment of dividends and the
exercise of voting rights shall be deferred until the lapse or termination
of restrictions on such Shares of Restricted Stock.
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6.04 Delivery. The Restricted Stock 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. At the end of the Restricted Period, the restrictions imposed
hereunder 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.
6.05 Dispositions During Restricted Period. Unless otherwise
determined by the Committee at the time of the Award, during the Restricted
Period applicable to any Restricted Stock, none of such Restricted Stock
may be sold, assigned, exchanged, transferred, pledged, hypothecated or
otherwise disposed of or encumbered.
7. ADJUSTMENTS
7.01 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 or Shares authorized by the Plan and any
adjustments to outstanding Awards, as it determines appropriate in the
circumstances, in its sole discretion, provided that the number of Shares
subject to any Award shall always be a whole number.
7.02 Disolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, all outstanding Awards 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, treat such event as a "change in
control" of the Company and adjust all outstanding Awards in accordance
with the provisions of Section 7.03.
7.03 Special Adjustments upon Change in Control.
(a) In the event of a "Change in Control" of the Company (as
defined in Paragraph (b) of this Section 7.03), unless otherwise
determined by the Board in its sole discretion prior to the occurrence
of such Change in Control, any Awards outstanding as of the date of such
Change in Control that are not yet fully vested on such date shall
become fully vested and all restrictions with respect thereto shall
lapse.
(b) Definition of "Change in Control." For purposes of this Section
7, 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) or 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
(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.
8. 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.
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9. RESTRICTED STOCK AWARD AGREEMENTS
As a condition to the effectiveness of each grant of an Award under this
Plan, the Awardee shall enter into a written Restricted Stock Award Agreement in
such form as may be prescribed by the Committee from time to time. Subject to
the provisions of Section 15.01, each such Restricted Stock 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 Restricted
Stock Award Agreement evidencing the grant of an Award to a Section 16 Person
shall also provide 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.
10. CONDITIONS UPON ISSUANCE OF SHARES
Shares shall not be issued with respect to an Award unless 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 issuance of Shares pursuant to an Award, the Company
may require the Awardee to whom such Shares are to be issued 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 acquired only for
investment and without any present intention to sell or distribute such Shares.
The Company shall not have any liability to any Awardee in respect of any
delay in the 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 issuance of such
Shares, or any failure to issue such Shares as to which such requisite authority
the Company is unable to obtain.
11. FORFEITURE OF AWARDS AND REALIZED BENEFITS
Loss of Awards. If an Awardee holding an outstanding Award, without the
written consent of the Company as authorized by the Committee, engages 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 or Affiliate and continuing
for so long as any portion of such Award remains subject to restrictions
outstanding (the "Grant Period"):
(a) 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 Affiliate, 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 or Affiliate;
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 Section 11(a);
(b) disclosing to anyone outside the Company or any Subsidiary or
Affliate, or use in other than the business of the Company or any
Subsidiary or Affiliate, any confidential or proprietary information
relating to the business of the Company or any Subsidiary or Affiliate,
acquired by the Awardee either during or after employment with the Company
or a Subsidiary or Affiliate;
(c) except as may otherwise be permitted by any agreement otherwise
made by the Company or a Subsidiary or Affiliate with the Awardee, failing
to disclose fully and promptly in
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writing and assign to the Company or to the Subsidiary or Affiliate 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 or Affiliate, relating
in any manner to the actual or contemplated business, research or
development work of the Company or such Subsidiary or Affiliate or to do
anything reasonably necessary to enable the Company or such Subsidiary or
Affiliate 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 or Affiliate may elect; or
(d) inducing or attempting to induce any customer or supplier of the
Company or a Subsidiary or Affiliate to breach any contract with the
Company or a Subsidiary or Affiliate or otherwise terminate its
relationship with the Company or a Subsidiary or Affiliate;
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 cancelled.
12. 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.
13. EFFECTIVENESS OF PLAN
This Plan was adopted by the Board on, and shall be effective as of, June
25, 1992; 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. 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) no Shares 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.
14. 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 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 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. ln exercising its authority under Section 4.02(f) 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 14, the consent of the Awardee
shall not be required with respect to an amendment to the Plan or to any
outstanding Award which is made in order to comply with Securities Law
Requirements.
15. GENERAL PROVISIONS
15.01 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
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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.
15.02 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.
15.03 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 15.03 shall not
apply to, and shall not extend the time for exercise of, any Award which is
terminated for Prohibited Conduct pursuant to Section 11.
15.04 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.
15.05 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.
15.06 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,
15.07 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
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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.
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EXHIBIT 10.1.17.a
AMENDMENT
OF
TELXON CORPORATION
1992 RESTRICTED STOCK PLAN
adopted by action of
the Board of Directors
on December 7, 1993
WHEREAS, under the terms of the Telxon Corporation 1992 Restricted Stock Plan
(the "Plan"), as adopted by the Board of Directors (the "Board") of Telxon
Corporation (the "Company") on June 25, 1992 and by the Company's stockholders
at the annual meeting thereof held August 19, 1992, 250,000 shares of the
Company's Common Stock are made available for award to key employees of the
Company and its subsidiaries and affiliates subject to such conditions as are
required by, or may be imposed in accordance with, the terms of the Plan.
NOW, THEREFORE, BE IT RESOLVED by the Board, pursuant to the authority
conferred upon it to amend the Plan as set forth in Section 14 thereof:
In the event and to the extent that the Shares which are the subject
of any Award granted under the Plan are forfeited back to or are
otherwise reacquired by the Company under the terms of the Plan or the
applicable Restricted Stock Award Agreement, such Shares shall again
be available for the granting of further Awards under the Plan, except
that such forfeited or reacquired Shares shall not become available
for such granting of further Awards under the Plan without the
approval thereof by the stockholders of the Company if and to the
extent that Rule 16b-3 or any other Securities Law Requirement deems
the Awardee whose Shares are forfeited or otherwise reacquired to have
received any benefits of ownership from such Shares (such as dividends
paid thereupon) or otherwise requires that stockholder approval
thereof be obtained.
That Section 6.03 of the Plan shall be and hereby is deleted in its
entirety and amended and restated to read as follows:
6.03 Dividends and Voting Rights. Except as otherwise
determined by the Committee and provided in the Restricted
Stock Award Agreement for an Award, during the Restricted
Period the Awardee shall have full right to vote the Shares of
Restricted Stock but shall not have the right to receive any
dividends of record thereof as of any date occurring within
the Restricted Period.
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That, except as amended by the foregoing, all of the provisions of the
Plan shall continue in full force and effect.
And that the officers of the Company are hereby authorized to restate
the Plan in its entirety to reflect the foregoing amendments thereto.
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EXHIBIT 10.11
AGREEMENT FOR SALE AND LICENSING OF ASSETS
THIS AGREEMENT FOR SALE AND LICENSING OF ASSETS ("Agreement") is
made and entered into as of this 26th day of January 1994, by and between AST
RESEARCH, INC., a Delaware corporation ("Seller") and PENRIGHT! CORPORATION, a
Delaware corporation ("Buyer").
R E C I T A L
Seller wishes to sell and license certain of its assets and Buyer
wishes to purchase and license such assets on the terms hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and subject to the terms hereinafter set forth, Buyer and Seller
hereby agree as follows:
ARTICLE 1.
SALE OF ASSETS; LICENSES
1.1 SALE OF ASSETS. Seller hereby agrees to sell, assign and
transfer to Buyer, and Buyer hereby agrees to purchase and acquire from Seller,
all right, title and interest of Seller in those Assets of Seller as defined
and set forth in Section 1.2 hereof.
1.2 DESCRIPTION OF ASSETS. The term "Assets" shall mean all
of those assets specifically related to (i) Seller's PenRight! software
business (the "PenRight! Business") and (ii) Seller's FieldNet software
business (the "FieldNet Business"), in each case as described on Exhibit A and
shall exclude the Patents to be licensed to Buyer hereunder as described in
Section 1.3. The Assets shall include:
(a) INVENTORY. All inventory held for sale in the
PenRight! Business (the "Inventory"), including the Inventory listed on Exhibit
A, except to the extent disposed of in the ordinary course of business after
the date hereof but prior to the Closing Date.
(b) OTHER PHYSICAL ASSETS. All other physical assets
set forth on Exhibit A.
(c) INTELLECTUAL PROPERTY RIGHTS. All of the
intangible and intellectual property associated with the (i) PenRight! Business
Runtime Modules ("PRMs") and Software Development Kits ("SDKs") (the PRMs and
the SDKs shall be known, collectively, as the "PenRight! Software") and (ii)
the software code associated with the FieldNet Business (the "FieldNet
Software") (including all trade secret information, vendor lists, molds,
designs, drawings, specifications, copyrights, trademarks, inventions and
processes, materials and technological know-how and other proprietary
information related thereto that Seller developed or acquired which
specifically relate to, and only to, either the PenRight! Business or the
FieldNet Business (collectively, the "Intellectual Property Rights") and to no
other business of Seller. The Intellectual Property Rights shall include, but
not be limited to, those relating to the technical information described on
Exhibit
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<PAGE> 2
A and the trademarks listed on Exhibit A. The parties hereby expressly
acknowledge that the Intellectual Property Rights defined herein shall not
include any patents, patent applications, divisions, continuations,
continuations-in-part, substitutions, reissues, extensions or foreign
counterparts thereof owned by Seller, irrespective of whether or not they
relate to the technical information listed on Exhibit A.
(d) CONTRACT RIGHTS. All rights and interests of
Seller to those pending or executory contracts listed on Exhibit C.
1.3 LICENSE TO BUYER. Effective upon the Closing Date, Seller
hereby grants to Buyer, upon the terms and conditions herein specified, a
world-wide, non-exclusive, fully-paid up, perpetual license under the patents
and patent applications listed on Exhibit B and foreign patents based thereon
solely for use in connection with the manufacture, use, sale, distribution and
marketing of PenRight! Software and FieldNet Software, as the case may be.
Except in accordance with Section 8.2 hereof, the licensed rights to use such
patents and patent applications listed on Exhibit B may not be transferred,
assigned or sublicensed, whether voluntarily or by operation of law, without
the prior written consent of Seller.
1.4 LICENSE TO SELLER. Effective upon the Closing Date, Buyer
hereby grants to Seller, upon the terms and conditions herein specified, a
world-wide, non-exclusive, fully-paid up, perpetual license for the PenRight!
Software in connection with the manufacture, use, sale, distribution and
marketing of any of Seller's products. Except in accordance with Section 8.2
hereof, Seller's license for the PenRight! Software may not be transferred,
assigned or sublicensed, whether voluntarily or by operation of law, without
the prior written consent of Buyer. Seller acknowledges that in the event that
after the Closing Date there are any Derivations (as defined in Section 2.3(a))
to the PenRight! Software, Buyer shall have exclusive rights to any and all
such Derivations; provided, however, Buyer agrees to promptly notify Seller of
the availability of any such Derivations and to license any and all such
Derivations to Seller at a rate, subject to applicable law, which is equal to
the price at which Buyer sells any such Derivations to its most favored
customer. Subject to applicable law, Buyer hereby agrees to grant to Seller a
license or licenses to the FieldNet Software, and any Derivations thereof, on
terms at least as favorable as that which Buyer sells or licenses the FieldNet
Software to its most favored customers on like terms and for like quantities.
In connection with the foregoing license, Buyer agrees to provide
Seller with one (1) master copy of the PenRight! Software, documentation and
user guide which may be reproduced by Seller; any additional copies of the
PenRight! Software documentation, and user guide shall be provided to Seller at
Buyer's cost.
The foregoing license shall not be construed to permit Seller to
sublicense the PenRight! Software or any Derivations thereof to other software
or hardware manufacturing companies or resellers but shall extend only to use
by end users of Seller's products.
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ARTICLE 2.
CONSIDERATION
2.1 PURCHASE PRICE. The aggregate purchase price (the
"Purchase Price") to be paid by Buyer to Seller as consideration for the Assets
shall be $200,000 plus the Agreed Upon Value of Physical Assets (as defined
hereinbelow in this Section 2.1). Buyer shall also pay royalties as set forth
in Section 2.3 below (the "Royalties"). The "Agreed Upon Value of Physical
Assets" shall mean an agreed upon dollar amount of the value of all physical
assets sold hereunder and listed on Exhibit A as computed by Seller, including
the book value of the Inventory on the Closing Date as computed by Seller
pursuant to the taking of a physical inventory as of the Closing Date and
delivered to Buyer at the Closing pursuant to Section 6.1 hereof.
2.2 PAYMENT OF PURCHASE PRICE. Buyer shall pay the Purchase
Price to Seller on the Closing Date by check or wire transfer.
2.3 ROYALTIES.
(a) PENRIGHT! ROYALTIES. In addition to the Purchase
Price, Buyer shall pay to Seller, pursuant to the terms hereof the aggregate of
(i) ten percent (10%) of the Net Sales (as defined in Section 2.3(d) below) of
all SDKs (including all upgrades, revisions, enhancements, new versions,
conversions and derivations thereof (collectively, the "Derivations")) sold,
licensed, leased or otherwise disposed of by Buyer and (ii) the greater of (a)
ten percent (10%) of the Net Sales of all PRMs and any Derivations thereof
sold, licensed, leased or otherwise disposed of by Buyer (not to exceed a
maximum of $5.00 for each PRM and any Derivation thereof) or (b) $2.50 for each
PRM and any Derivation thereof sold, licensed, leased or otherwise disposed of
by Buyer. Royalties shall be payable under this Section 2.3(a) from and after
the Closing until the total Royalties paid under this Section 2.3(a) have
aggregated $1,000,000 (the "Royalty Period"); provided, however, the parties
acknowledge that Royalties on Net Sales in the Territory of Asia (as defined in
this Section 2.3(a)) shall not be subject to or included in such $1,000,000
limitation but shall continue at the specified rate for a period of four (4)
full years following the Closing Date. Royalties shall be paid for Net Sales
of SDKs and PRMs, and any Derivations thereof, in the Territory of Asia to a
maximum of four years following the Closing Date. The Territory of Asia shall
include, without limitation, the following countries: Bhutan, Brunei, Hong
Kong, Indonesia, Japan, Kampuchea, Laos, Malaysia, Myanmar, Nepal, North Korea,
Peoples Republic of China, Philippines, Republic of China (Taiwan), Singapore,
South Korea, Thailand and Vietnam. All Royalties shall be paid based on the
location of the end-user of the SDK, PRM, or Derivation thereof, and (i)
end-user shall include a user that, for resale or otherwise, installs or
integrates the SDK, PRM, or Derivation thereof, into, or otherwise utilizes the
same as a component of, any other product or system, and (ii) the location of
the end-user shall be the location at which the SDK, PRM, or Derivation
thereof, is first utilized by the end-user in the manner that constitutes the
end use. Royalties shall be payable at the conclusion of each calendar quarter
in which Buyer has sold SDKs and any Derivations thereof or PRMs and any
Derivations thereof. All Royalties due and owing under this Section 2.3(a)
shall be separate and apart from, and in addition to, the Royalties due and
owing under Section 2.3(b).
(b) FIELDNET ROYALTIES. In addition to the Purchase
Price, Buyer shall pay to Seller pursuant to the terms hereof seven and
one-half percent (7 1/2%) of the Net Sales of all FieldNet Software and
any programs which incorporate FieldNet Software, including, all
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<PAGE> 4
Derivations thereof, sold, licensed, leased or otherwise disposed of by Buyer.
In the event Buyer uses the FieldNet Software or any Derivations thereof as the
basis for any products, or sells FieldNet Software or any Derivations thereof
(or portions thereof) in combination or for inclusion with products, the Net
Sales for purposes of the Royalties payable hereunder shall be allocated
between the FieldNet Software acquired hereunder and the products added by
Buyer based upon the relative value of the FieldNet Software as determined in
good faith between Buyer and Seller. In all cases such allocations shall be
set forth on the reports delivered pursuant to Section 2.3(c). Royalties shall
be payable under this Section 2.3(b) from and after the Closing until the total
Royalties paid under this Section 2.3(b) have aggregated $1,000,000. Royalties
shall be payable at the conclusion of each calendar quarter in which Buyer has
sold FieldNet Software or any products incorporating FieldNet Software, and any
Derivations thereof. All Royalties due and owing under this Section 2.3(b)
shall be separate and apart from, and in addition to, those Royalties due and
owing under Section 2.3(a).
(c) REPORTS AND PAYMENTS. Buyer shall keep complete
and accurate records of the Net Sales of all sales of SDKs, PRMs, FieldNet
Software and products incorporating FieldNet Software, and any Derivations
thereof with respect to which Royalties are due hereunder for a period of three
(3) years following the year in which the sales were made. Thirty (30) days
following the close of each calendar quarter, Buyer shall submit to Seller a
written report setting forth its sales of SDKs, PRMs, FieldNet Software and
products incorporating FieldNet Software, and any Derivations thereof, the Net
Sales of such products and a calculation of the amount of Royalties due Seller
for such calendar quarter. Each report shall be accompanied by a cash payment
of the Royalties then due. The report and payment for the first quarter for
which Royalties are due shall include any sales of SDKs, PRMs, FieldNet
Software and products incorporating FieldNet Software, and any Derivations
thereof, prior to such quarter. After each fiscal year in which Royalties are
due, Buyer shall provide to Seller a certification from Buyer's Chief Financial
Officer as to the Net Sales and Royalties for such year. Within ninety (90)
days of Seller's receipt of such certification, Seller may designate an
independent public accountant, to which Buyer has no reasonable objection, to
review the foregoing records to verify the accuracy of the Royalty payments
made with respect to such fiscal year. Such review shall be at Seller's
expense unless the review establishes underpayment of five percent (5%) or more
of amounts due to Seller, in which case Buyer shall reimburse Seller for the
costs of the review. If Seller does not designate an accountant, the
certification of Buyer's Chief Financial Officer shall be binding on Seller as
against Buyer except in the case of a knowing failure to pay Royalties by
Buyer.
(d) NET SALES. For purposes hereof, the term "Net
Sales" shall mean the gross amount actually invoiced by Buyer for SDKs and any
Derivations thereof, PRMs and any Derivations thereof or FieldNet Software and
any products incorporating FieldNet Software and any Derivations thereof, sold,
licensed, leased or otherwise disposed of by Buyer and shall not include (1)
transportation charges or allowances, if any, included in the price; (2) trade,
quantity or cash discounts and third-party broker's or agent's commissions, if
any, allowed or paid; (3) any tax (other than income tax), duty or other
governmental charge upon the production, sale, transportation, delivery or use
of the SDKs, PRMs or FieldNet Software and included in such amount. Net Sales
shall also include all fees, payments or revenues in any form derived by Buyer
(including fees that would previously have been payable by Buyer to Seller
under any prior agreements between such parties) from the rights and assets
transferred in this Agreement. All Net Sales pursuant to which Royalties shall
be payable under Section 2.3(a) shall be attributable to SDKs unless otherwise
expressly classified as attributable to PRMs.
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<PAGE> 5
In the event Buyer uses SDKs or any Derivations thereof or PRMs or
any Derivations thereof or the Intellectual Property Rights as the basis for
other products, or sells SDKs or any Derivations thereof or PRMs or any
Derivations thereof (or portions thereof) in combination or for inclusion with
other products, the Net Sales for purposes of the Royalties payable hereunder
shall be allocated between the SDKs and PRMs as acquired hereunder and the
other products added by Buyer based upon the relative value of the SDK or PRM
or Intellectual Property Rights as determined in good faith between Buyer and
Seller. In all cases such allocations shall be set forth on the reports
delivered under Section 2.3(c).
ARTICLE 3.
ASSUMPTION OF CONTRACTUAL OBLIGATIONS
As of the Closing Date, Buyer hereby assumes and agrees to perform
and discharge all of Seller's obligations, liabilities, commitments and
undertakings with respect to those contracts set forth on Exhibit C (the
"Assumed Contracts"). Specifically, and without limitation, Buyer hereby
agrees to perform all future activities required under the Assumed Contracts,
including warranty support for all PenRight! Software previously distributed by
Seller, Tandy or GRiD. Except with respect to the Assumed Contracts, it is
expressly understood and agreed that Buyer is not assuming and shall not assume
or be liable for any of the debts, obligations or liabilities of Seller or the
PenRight! Business or the FieldNet Business of any kind and nature whatsoever
for activities prior to the Closing Date, including, but not limited to, any
tax, warranty or product liabilities, liabilities to employees or former
employees of Seller, liabilities with respect to personal injury or property
damage claims, liabilities for patent infringement, or other claims arising out
of or in connection with any sale or other event. Buyer agrees to solicit and
use its best reasonable efforts to obtain the consent from all third parties,
as may be required, for Buyer's assumption of such Assumed Contracts and in any
case to perform or tender performance of all actions required under such
Assumed Contracts even should such consents not be obtained; provided, however,
in the event that Buyer is unable to obtain any such consents or tender any
such performance, Buyer shall act as agent of Seller (subject to the
limitations set forth in Section 7.3(c)) in performing all obligations of
Seller under such Assumed Contracts. Seller shall cooperate with Buyer at
Buyer's request in obtaining such consents.
ARTICLE 4.
CLOSING
4.1 CLOSING DATE. The closing of the transactions
contemplated by this Agreement shall be held at 1:00 p.m. on January 27, 1994
(the "Closing Date") at the offices of Stradling, Yocca, Carlson & Rauth at 660
Newport Center Drive, Suite 1600, Newport Beach, California 92660, or at such
other place, time or date as the parties hereto shall agree.
4.2 TRANSFER OF TITLE AND POSSESSION OF THE ASSETS. Title to
and physical possession of the Assets shall be transferred to Buyer, and
assumption of certain contractual obligations shall be undertaken by Buyer, on
the Closing Date, and shall be effectuated by execution and delivery of a Bill
of Sale substantially in the form attached hereto as Annex I and of an
Assumption of Liabilities substantially in the form attached hereto as Annex
II, and a Trademark Assignment attached hereto as Annex III.
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<PAGE> 6
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES
5.1 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller hereby
represents and warrants that:
(a) ORGANIZATION AND AUTHORITY OF SELLER. Seller is
a corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Seller has full corporate power and authority
to carry out and perform its undertakings and obligations as provided herein.
The execution and delivery by Seller of this Agreement and the consummation of
the transactions contemplated in this Agreement have been duly authorized by
all proper and requisite corporate proceedings, and will not contravene any
provision of law or conflict with or breach or constitute any default under any
indenture, agreement or instrument to which Seller is a party or by which it or
the Assets is bound, or require the consent, approval or authorization of any
governmental agency or any third party, except for the third parties party to
the Assumed Contracts.
(b) TITLE TO ASSETS. Seller has good and marketable
title to all of the Assets free and clear of any mortgage, lien, pledge, charge
or encumbrance and upon payment of the Purchase Price by Buyer, Buyer shall
take such Assets free and clear of any mortgage, lien, pledge, charge or
encumbrance except as may be created by Buyer and except as may be contained in
the Assumed Contracts. There exists no condition, restriction or reservation
known to Seller affecting the utility of the Assets which would prevent Buyer
from using the Assets, as previously used by Seller, except as has been
disclosed to Buyer by Seller.
Except as set forth in Section 5.1(b), Seller makes no
representations or warranties as to the Assets or the condition of the Assets
and Buyer acknowledges that the Assets will be transferred on an "as-is" basis.
SELLER EXPRESSLY DOES NOT WARRANT, AND DISCLAIMS, ANY AND ALL WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. SELLER EXPRESSLY DISCLAIMS
ANY WARRANTY OF NON-INFRINGEMENT. Except as has been disclosed to Buyer
otherwise, notwithstanding the foregoing, Seller represents and warrants to
Buyer that to the best of Seller's current actual knowledge, Seller is not
aware of any notice, oral or written, from any person claiming that the
PenRight! Software, the FieldNet Software or the other Assets infringe upon the
intellectual property rights of any other person; nor does Seller have actual
current knowledge of any basis for such claim. For purposes of the foregoing
representations, the parties hereby expressly acknowledge that the
qualification "to our current actual knowledge" is intended to indicate that no
information has come to the attention of those employees of Seller who have had
direct involvement in the negotiation and execution of this Agreement that
would give them current actual knowledge of the inaccuracy of such statement
Buyer hereby acknowledges that it has expertise in the field of computer
software, that it has inspected and evaluated and investigated the PenRight!
Software, and the FieldNet Software and makes this acquisition with full
knowledge of the risks of performance problems with the software and
infringement of third parties thereon.
(c) ASSUMED CONTRACTS. Seller represents and
warrants to Buyer that to the best of Seller's current actual knowledge none of
the parties to any of the Assumed Contracts has given Seller notice, oral or
written, that Seller is in default of its obligations under any of the Assumed
Contracts. To the best of Seller's current actual knowledge, information
and belief none of the
40
<PAGE> 7
parties to the Assumed Contracts, other than Seller, is in default of their
respective obligations thereunder. For purposes of the foregoing
representations, the parties hereby expressly acknowledge that the
qualification "to our current actual knowledge" is intended to indicate that no
information has come to the attention of those employees of Seller who have had
direct involvement in the negotiation and execution of this Agreement that
would give them current actual knowledge of the inaccuracy of such statement.
5.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby
represents and warrants that:
(a) ORGANIZATION AND AUTHORITY OF BUYER. Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Delaware. Buyer has full corporate power and authority to
carry out and perform its undertakings and obligations as provided herein. The
execution and delivery by Buyer of this Agreement and the consummation of the
transactions contemplated in this Agreement have been duly authorized by all
proper and requisite corporate proceedings, and will not contravene any
provision of law or conflict with or breach or constitute any default under any
indenture, agreement or instrument to which Buyer is a party or by which it is
bound, or require the consent, approval or authorization of any governmental
agency or any third party.
ARTICLE 6.
CLOSING CONDITIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER. All
obligations of Buyer in this Agreement are subject to and shall be conditioned
upon the satisfaction (or waiver in writing by Buyer), on or prior to the
Closing Date, of each of the following conditions:
(a) All representations and warranties by Seller in
this Agreement shall be true in all material respects on and as of the Closing
Date as though made at that time.
(b) Seller shall have performed in all material
respects all obligations and agreements contained herein to be performed or
complied with at or prior to the Closing Date.
(c) Seller shall have computed the Agreed Upon Value
of Physical Assets and delivered a certificate to Buyer setting forth the same.
(d) Buyer, and its representatives, shall have
concluded such due diligence investigations of Seller and the Assets as Buyer
deems reasonably appropriate and the results thereof shall have been acceptable
to Buyer.
(e) All Assets shall have been released from any
preexisting liens or security interests except as has been disclosed to and
approved by Buyer.
(f) Seller shall have entered into a confidentiality
agreement with respect to the PenRight! Software and FieldNet Software as shall
be reasonably acceptable to Buyer.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER. All
obligations of Seller in this Agreement are subject to and shall be conditioned
upon the satisfaction (or waiver in writing by Seller), on or prior to the
Closing Date, of each of the following conditions:
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<PAGE> 8
(a) All representations and warranties by Buyer in
this Agreement shall be true in all material respects on and as of the Closing
Date as though made at that time.
(b) Buyer shall have performed in all material
respects all obligations and agreements contained herein to be performed or
complied with at or prior to the Closing Date.
ARTICLE 7.
COVENANTS OF BUYER AND SELLER
7.1 ACCESS TO PROPERTIES. Seller agrees that Buyer, by
representatives designated by Buyer, shall have the right to examine the Assets
and the records and books of Seller insofar as they relate to the PenRight!
Business or the FieldNet Business, during normal business hours at anytime
prior to the Closing. Buyer agrees not to divulge or use any confidential
information that Buyer may become aware of during the course of such
examination except as permitted under this Agreement subsequent to Closing.
7.2 CONDUCT OF BUSINESS. Seller agrees that, during the
period from the date hereof to the Closing Date, Seller shall not transfer or
encumber or permit to be transferred or encumbered the Assets, except as has
been disclosed to and approved by Buyer.
7.3 INDEMNIFICATION; AGENCY.
(a) Seller shall indemnify, defend and hold harmless
Buyer against and in respect of any and all claims, demands, losses,
liabilities, costs, expenses, obligations and damages, including, without
limitation, interest, penalties and reasonable attorneys' fees, suffered or
incurred by Buyer which arise, result from or relate to any breach of, or
failure by Seller to perform, any of its representations, warranties, covenants
or agreements in this Agreement or in any exhibit or other instrument furnished
or to be furnished under this Agreement or which arise, result from or relate
to any liability or obligation of Seller for the conduct of the PenRight!
Business or the FieldNet Business prior to the Closing Date, including, but not
limited to, any tax, warranty or product liabilities, liabilities to employees
or former employees of Seller, liabilities with respect to personal injury or
property damage claims, liabilities for patent infringement or other claims
arising out of or in connection with any sale or other event.
(b) Buyer shall indemnify, defend and hold harmless
Seller against and in respect of any and all claims, demands, losses,
liabilities, costs, expenses, obligations and damages, including, without
limitation, interest, penalties and reasonable attorneys' fees, suffered or
incurred by Seller which arise, result from or relate to any breach of, or
failure by Buyer to perform, any of its representations, warranties, covenants,
including Buyer's obligation to assume and perform all of Seller's obligations
under the Assumed Contracts, or agreements in this Agreement or in any exhibit
or other instrument furnished or to be furnished under this Agreement or which
arise, result from or relate to any liability or obligation of Buyer for the
conduct of the PenRight! Business or the FieldNet Business after the Closing
Date, including, but not limited to, any tax, warranty or product liabilities,
liabilities to employees or former employees of Seller, liabilities with
respect to personal injury or property damage claims, liabilities for patent
infringement or other claims arising out of or in connection with any sale or
other event or for Buyer's obligations under Section 7.3(c) (except to the
extent such claim arises from the breach by Seller of any representation,
warranty, covenant or agreement herein).
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<PAGE> 9
(c) In the event that Buyer acts as agent of Seller
in the limited scope as set forth in Article 3 hereof, Buyer agrees that it
shall have no authority to assume or to create any debt, obligation or
liability in the name or on behalf of Seller, nor shall Buyer make any
representations of any kind or nature with respect to Seller. In this
connection, Buyer shall comply with all applicable laws, statutes, regulations
and treaties relating to the obligations of Seller under the Assumed Contracts
and the performance of its duties thereunder. Without obtaining Seller's prior
written consent, Buyer shall not (i) use Seller's trade names or trademarks or
any names or marks closely resembling the same as part of Buyer's corporate or
business name or in any other manner which Seller in its discretion may
consider misleading or otherwise objectionable; or (ii) cause the trade names
or trademarks of Seller to be listed in the telephone directory or in any other
general publication or on any stationery, calling cards or other material.
The parties agree that the relationship of Seller and Buyer is
that of principal and independent contractor and that Buyer shall be deemed at
all times during the term of this Agreement to be an independent contractor.
Nothing herein shall be deemed to create the relationship of partnership,
association, or joint venture of any nature whatsoever. Except as expressly
provided herein, this Agreement shall not confer to Buyer any right or
authority to obligate Seller in any way or to cause Seller to accept or deliver
any order.
7.4 SALES TAX. Buyer shall pay all sales taxes arising out of
the transfer of the Assets. Seller shall pay its portion, prorated as of the
Closing Date, of state and local personal property taxes relating to the
Assets.
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<PAGE> 10
ARTICLE 8.
MISCELLANEOUS
8.1 BEARING OF EXPENSES. Each party shall bear and pay all
legal, accounting and other expenses incurred by it in connection with the
transactions contemplated by this Agreement. Buyer and Seller represent to the
other that no broker's or finder's commission is payable to any person or
entity in connection with the transactions covered by this Agreement.
8.2 ASSIGNABILITY; PARTIES IN INTEREST. This Agreement is not
assignable by either party without the prior written consent of the other
party; provided, however, that either party may assign this Agreement to any
person or entity which controls, is controlled by or is under common control
with the assigning party, or to any corporation resulting from the merger or
consolidation with the assigning party, or to any person or entity which
acquires the assigning party or any division or subsidiary of the assigning
party to which this Agreement was previously assigned, and such assignee shall
assume, in full, the obligations of the assigning party under this Agreement.
The sale or transfer of the PenRight! Business or the FieldNet Business shall
be deemed an assignment hereunder. Subject to the foregoing, this Agreement
shall bind the parties and their respective successors and assigns. The
provisions contained herein are and shall be for the exclusive and sole benefit
of the parties hereto, and nothing herein, express or implied, is intended or
shall be construed to confer upon or to give any person, corporation or other
entity, other than the parties hereto (or any successor to any of such parties)
any right, remedy or claim, legal or equitable, under or by reason of this
Agreement.
8.3 FURTHER ACTION. After the Closing Date, the parties shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments, and take or cause to be taken all such other action as may be
reasonably necessary or desirable in order to more fully and effectively carry
out the purposes of this Agreement.
8.4 NOTICES. All notices and communications pursuant to this
Agreement by any of the parties hereto to the other parties shall be in
writing, and shall be deemed given three (3) days after being duly mailed by
registered mail, or on receipt if personally delivered or transmitted via
facsimile (with confirmation via mail), as follows:
(a) If to Seller:
AST Research, Inc.
16215 Alton Parkway
Irvine, California 92718
Attention: Mr. Bill King, Director of Contracts
Telephone: (714) 727-7778
Facsimile: (714) 727-8581
(b) If to Buyer:
PenRight! Corporation
3330 West Market Street
Akron, Ohio, 44333
Attention: President
Facsimile: (216) 869-2240
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<PAGE> 11
with a copy to:
Goodman Weiss Freedman
100 Erieview Plaza
Cleveland, Ohio 44114
Attention: John F. Ballard, Esq.
Facsimile: (216) 363-5835
or to such other address as the parties may have advised each other in writing.
8.5 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
8.6 GOVERNING LAW/JURISDICTION. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California.
8.7 ENTIRE AGREEMENT. This Agreement (including the Exhibits
hereto) constitutes the entire agreement between the parties with respect to
the matters described herein and supersedes any and all other agreements
between the parties with respect thereto.
8.8 AMENDMENT AND WAIVER. The parties hereto may by mutual
agreement amend this Agreement in any respect. Either party may extend the time
for the performance of any of the obligations of the other or waive any
representations, covenants or conditions obligating the other. The failure of
any party to require the performance of any provision shall in no manner waive
the right at a later time to enforce the same. No waiver by any party of any
condition, or of any breach of any term, covenant, representation, or warranty
contained in this Agreement, shall be construed as a further or continuing
waiver in other instances of any such condition or breach, or a waiver of any
other condition, or breach.
8.9 ARBITRATION. In the event of any dispute between the
parties hereby regarding any provision of this Agreement or any right of any
party hereto, such dispute shall be finally settled by binding arbitration in
accordance with the then-current Commercial Rules of the American Arbitration
Association. Each party shall select one (1) arbitrator and the arbitrators so
selected shall select a third arbitrator. The decision of a majority of the
arbitrators shall be final and binding upon the parties and may be enforced by
any court having jurisdiction. The party deemed by the arbitrators to have
prevailed shall be entitled to all costs and expenses, including reasonable
attorneys' fees, incurred by it, such costs and expenses to be paid by the
other party, who shall also pay the costs and expenses arising from the
arbitration.
8.10 CAPTIONS AND SUBHEADINGS. The captions and subheadings
contained in this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement.
8.11 SURVIVABILITY. All covenants of the parties hereto
which are expressly intended hereunder to be performed in whole or in part after
the Closing Date and all representations, warranties and indemnities by either
party to the other, shall survive the Closing Date and be binding upon and
inure to the benefit of the respective parties hereto and their respective
heirs, successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as of the date first above written.
"Buyer" "Seller"
PENRIGHT! CORPORATION AST RESEARCH, INC.
By: By:
--------------------------------------------
Its: Its:
-------------------------------------------
TELXON CORPORATION, a Delaware corporation, hereby expressly agrees to
guarantee and be fully liable for all obligations of Buyer under Articles 2 and
3 hereof.
TELXON CORPORATION
By:
--------------------------------------------
Its:
-------------------------------------------
46
<PAGE> 1
<TABLE>
EXHIBIT 11.01
EXHIBIT 11.01* TO REPORT ON FORM 10-Q
TELXON CORPORATION AND SUBSIDIARIES
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE
(Dollars in thousands except per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
December 31, December 31,
------------------------ ----------------------
1993 1992 1993 1992
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net loss applicable to
common shares $ (617) $(9,127) $(3,684) $(1,690)
======= ======= ======= =======
Weighted average common shares
outstanding for the period 15,417 14,557 15,377 14,572
======= ======= ======= =======
Loss per common share:
On the weighted average
common shares outstand-
ing for the year $ (.04) $ (.63) $ (.24) $ (.12)
Assuming issuance of shares
for dilutive stock
options** $ (.04) $ (.63) $ (.24) $ (.12)
<FN>
* Numbered in accordance with Item 601 of Regulation S-K.
** This calculation is submitted in accordance with Regulation S-K Item
601(b)(1) although not required for income statement presentation
because it results in dilution of less than three percent. The
Company's 7 1/2% Convertible Debentures were omitted from the fully
diluted calculation due to their antidilutive effect.
</TABLE>
47
