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PROSPECTUS SUPPLEMENT Filed pursuant to Rules 424(b)(5) and (c)
To Prospectus Dated February 23, 1996 Registration No. 333-1189
$82,500,000
TELXON CORPORATION
5 3/4% Convertible Subordinated Notes Due 2003
and
Shares of
Common Stock
Issuable Upon Conversion Thereof
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This Prospectus Supplement ("Supplement") covers the resales by
Hambrecht & Quist LLC ("Hambrecht & Quist") (the "Selling Securityholder"), as
principal, of up to $2,800,000 aggregate principal amount of 5 3/4% Convertible
Subordinated Notes due 2003 (the "Notes") of Telxon Corporation, a Delaware
corporation (the "Company"). The Notes were issued in a private placement on
December 12, 1995 (the "Debt Offering") and subsequently registered, together
with up to 3,000,000 shares of the Common Stock, par value $.01 per share (the
"Common Stock"), of the Company which are initially issuable upon the conversion
of the Notes (the "Conversion Shares"), for resale from time to time by the
holders thereof pursuant to Registration No. 333-1189 (the "Registration
Statement"). This Supplement should be read in conjunction with the Prospectus,
dated February 23, 1996 (the "Prospectus"), to be delivered with this
Supplement. All capitalized terms used but not defined in this Supplement shall
have the meanings given them in the Prospectus.
Based on information provided to the Company, the total amount of Notes
that are owned and may be offered by Hambrecht & Quist is $3,500,000, of which
Hambrecht & Quist will sell $2,800,000 pursuant to this Supplement. Hambrecht &
Quist was an initial purchaser in the Debt Offering, pursuant to which Hambrecht
& Quist received customary compensation for its placement of the Notes.
Additional selling securityholders or other information concerning the Selling
Securityholder may be set forth from time to time in additional prospectus
supplements. The total outstanding aggregate principal amount of Notes is
$82,500,000.
The Notes are unsecured and subordinated to all existing and future
Senior Indebtedness and are effectively subordinated to all existing and future
indebtedness and other liabilities of subsidiaries of the Company. At June 30,
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1996, the Company had approximately $18.0 million of outstanding indebtedness
constituting Senior Indebtedness and the subsidiaries of the Company had
approximately $33.3 million of outstanding indebtedness and other liabilities
(excluding intercompany liabilities and approximately $3.0 million in
subsidiaries' notes and letters of credit guaranteed by the Company which are
included in the amount of Senior Indebtedness) to which the Notes were
effectively subordinated. The Indenture contains no limitations on the
incurrence of additional indebtedness or other liabilities by the Company and
its subsidiaries. See "Description of Notes - Subordination of Notes" in the
Prospectus. The Notes are convertible into Common Stock at the option of the
holder at any time after February 10, 1996 and at or before maturity, unless
previously redeemed, at a conversion price of $27.50 per share (equivalent to a
conversion rate of approximately 36.36 shares per $1,000 principal amount of
Notes), subject to adjustment in certain events. See "Description of
Notes-Conversion of Notes" in the Prospectus. The Notes are redeemable at the
Company's option at any time on or after January 5, 1999, as a whole or, from
time to time, in part, at prices (expressed as percentages of the principal
amount), together with accrued interest at prices ranging from 103.2857% during
1999 to 100.8214% during 2002. Additionally, in the event any Repurchase Event
(as defined) occurs, each holder of Notes may require the Company to repurchase
all or any part of the holder's Notes at 100% of the principal amount thereof
plus accrued interest to the repurchase date. See "Description of
Notes-Repurchase at Option of Holders Upon Repurchase Event" in the Prospectus.
Interest is payable semiannually on January 1 and July 1 of each year at 5 3/4%
per annum commencing July 1, 1996. See "Description of Notes-General" in the
Prospectus.
Following their original issuance by the Company, the Notes have been
resold by the initial and subsequent purchasers thereof to qualified
institutional buyers in transactions exempt from registration under Rule 144A
under the Securities Act. Prior to this offering, there has been no public
market for the Notes. However, the Notes are eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") Market.
Notes sold pursuant to the Registration Statement (including those covered by
this Supplement) will no longer be eligible for trading in the PORTAL Market.
The Conversion Shares have been authorized for listing on the NASDAQ National
Market ("NNM") upon official notice of issuance. The Company's Common Stock is
traded on the NNM under the symbol TLXN. On September 30, 1996, the Company had
16,099,952 shares of issued and outstanding Common Stock, and on October 14,
1996, the last reported sale price of the Common Stock on the NNM was $13.25 per
share.
Selling securityholders may offer Notes or Conversion Shares from time
to time to purchasers directly or through underwriters, dealers or agents. Such
Notes or Conversion Shares may be sold at market prices prevailing at the time
of sale or
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at negotiated prices. Each selling securityholder will be responsible for
payment of any and all commissions to brokers, which will be negotiated on an
individual basis.
The Company will not receive any of the proceeds from the sale of any
of the Notes or Conversion Shares by the Selling Securityholders. Expenses of
preparing and filing the Registration Statement, the Prospectus, this Supplement
and all other prospectus supplements are borne by the Company.
SEE "RISK FACTORS" BEGINNING ON PAGE 11 OF THE PROSPECTUS AND THE
COMPANY'S FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION SUBSEQUENT TO
THE DATE OF THE PROSPECTUS AND INCORPORATED BY REFERENCE THEREIN FOR A
DISCUSSION OF CERTAIN FACTORS WHICH PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR
TO AN INVESTMENT IN THE NOTES OR CONVERSION SHARES. ALSO, SEE THE COMPANY'S
CURRENT REPORTS ON FORM 8-K, DATED AUGUST 5, 1996 ("FIRST REPORT"), AND AUGUST
16, 1996, ("SECOND REPORT") FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
AUGUST 6, 1996, AND OCTOBER 15, 1996, RESPECTIVELY, WHICH ARE INCORPORATED
HEREIN BY REFERENCE FOR (I) RELATIVE TO THE FIRST REPORT, A DISCUSSION RELATING
TO THE AMENDMENT AND RESTATEMENT OF THE COMPANY'S STOCKHOLDER'S RIGHTS AGREEMENT
ORIGINALLY ADOPTED BY THE BOARD OF DIRECTORS ON AUGUST 25, 1987 AND AMENDED AND
RESTATED AS OF JULY 31, 1996; AND (II) RELATIVE TO THE SECOND REPORT, A
DISCUSSION RELATING TO AMENDMENTS TO THE COMPANY'S (A) PRIMARY CREDIT FACILITY
WITH THE BANK OF NEW YORK, AS AGENT FOR AN EIGHT-BANK LENDING GROUP, AND (B)
SUPPLEMENTAL CREDIT FACILITY WITH BANK ONE, AKRON, NA.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON
OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
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The date of this Prospectus Supplement is October 15, 1996
