<PAGE> 1
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 September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________to __________
Commission file number 0-11402
TELXON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74-1666060
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3330 West Market Street, Akron, Ohio 44333
- --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(330) 664-1000
----------------------------------------------------
(Registrant's telephone number, including area code)
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 September 30, 1997, there were 15,845,338 outstanding shares of the
registrant's Common Stock.
<PAGE> 2
TELXON CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page No.
--------
PART I. FINANCIAL INFORMATION:
<S> <C>
Item 1: Consolidated Financial Statements
Balance Sheet.................................................................. 3
Statement of Operations........................................................ 4
Statement of Cash Flows........................................................ 5
Notes to Consolidated Financial Statements..................................... 6-9
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................ 10-17
PART II. OTHER INFORMATION:
Item 1: Legal Proceedings......................................................................... 18
Item 4: Submission of Matters to a Vote of Security Holders....................................... 18
Item 6: Exhibits and Reports on Form 8-K.......................................................... 18-24
</TABLE>
All Items of Form 10-Q other than those listed above have been omitted as
inapplicable.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands except per share amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1997 1997
-------- ------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $8,500 and
$38,100) ............................................................................... $ 28,635 $ 45,386
Accounts receivable, net of allowance for
doubtful accounts of $1,790 and $1,596................................................... 104,934 111,959
Notes and other accounts receivable........................................................ 14,874 16,312
Inventories ............................................................................... 87,454 84,499
Prepaid expenses and other................................................................. 14,207 11,956
-------- --------
Total current assets.................................................................... 250,104 270,112
Property and equipment, net.................................................................. 50,232 45,578
Intangible and other assets, net............................................................. 44,895 46,094
-------- --------
Total ................................................................................ $345,231 $361,784
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.............................................................................. $ -- $ 50
Current portion of long-term debt.......................................................... 383 383
Capital lease obligations due within one year.............................................. 642 627
Accounts payable........................................................................... 36,050 47,917
Income taxes payable....................................................................... 1,708 3,077
Accrued liabilities........................................................................ 41,159 49,000
-------- --------
Total current liabilities............................................................... 79,942 101,054
Capital lease obligations.................................................................... 635 968
Convertible subordinated notes and debentures................................................ 107,224 107,224
Other long-term liabilities.................................................................. 5,620 5,837
-------- --------
Total liabilities....................................................................... 193,421 215,083
Stockholders' equity:
Preferred Stock, $1.00 par value per share; 500
shares authorized, none issued........................................................... -- --
Common Stock, $.01 par value per share; 50,000
shares authorized, 16,203 and 16,186 shares issued....................................... 162 162
Additional paid-in capital................................................................. 86,479 87,105
Retained earnings.......................................................................... 74,533 70,821
Equity adjustment for foreign currency translation......................................... (3,633) (2,643)
Unearned compensation relating to restricted stock awards.................................. (114) (210)
Treasury stock; 357 and 557 shares of common stock at cost................................. (5,617) (8,534)
-------- --------
Total stockholders' equity.............................................................. 151,810 146,701
-------- --------
Commitments and contingencies................................................................ -- --
-------- --------
Total ............................................................................... $345,231 $361,784
======== ========
</TABLE>
See accompanying notes to
consolidated financial statements
3
<PAGE> 4
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Product, net ............................. $ 91,138 $ 89,439 $ 177,829 $ 183,464
Customer service, net .................... 19,182 18,875 37,404 37,233
--------- --------- --------- ---------
Total net revenues .............. 110,320 108,314 215,233 220,697
Cost of revenues:
Product .................................. 54,276 62,445 106,836 128,270
Customer service ......................... 12,336 11,534 23,462 22,582
--------- --------- --------- ---------
Total cost of revenues .......... 66,612 73,979 130,298 150,852
--------- --------- --------- ---------
Gross profit ............................. 43,708 34,335 84,935 69,845
Operating expenses:
Selling expenses ......................... 18,677 21,037 36,776 42,220
Product development and engineering
expenses ............................ 9,525 10,096 18,651 21,204
General and administrative expenses ...... 9,843 10,548 19,547 21,711
--------- --------- --------- ---------
Total operating expenses ........ 38,045 41,681 74,974 85,135
--------- --------- --------- ---------
Income (loss) from operations ... 5,663 (7,346) 9,961 (15,290)
Interest income ............................... 420 136 917 351
Interest expense .............................. (1,811) (2,162) (3,602) (4,132)
Other non-operating (expense) income .......... (7) (32) (165) 73
--------- --------- --------- ---------
Income (loss) before income taxes 4,265 (9,404) 7,111 (18,998)
Provision (benefit) for income taxes .......... 1,877 (4,702) 3,129 (9,499)
--------- --------- --------- ---------
Net income (loss) ............... $ 2,388 $ (4,702) $ 3,982 $ (9,499)
========= ========= ========= =========
Earnings per common and common equivalent
share:
Net income (loss) per share ..... $ .15 $ (.29) $ .25 $ (.58)
========= ========= ========= =========
Average number of common and common
equivalent shares outstanding ........... 16,273 16,182 16,027 16,265
========= ========= ========= =========
</TABLE>
See accompanying notes to
consolidated financial statements
4
<PAGE> 5
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) .................................... $ 3,982 $ (9,499)
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation and amortization ............... 12,183 13,673
Amortization of restricted stock
awards, net ............................. 96 253
Provision for doubtful accounts ............. 395 180
Provision for inventory obsolescence ........ 3,548 5,972
Deferred income taxes ....................... 172 (1,025)
Loss on disposal of assets .................. 528 295
Trading securities, net ..................... -- 902
Changes in assets and liabilities:
Accounts and notes receivable .......... 7,597 18,038
Inventories ............................ (7,032) (1,732)
Prepaid expenses and other ............. (2,231) 55
Intangible and other assets ............ (1,748) (865)
Accounts payable and accrued liabilities (21,341) (46,431)
Other long-term liabilities ............ (217) 37
-------- --------
Total adjustments ............ (8,050) (10,648)
-------- --------
Net cash used in operating activities ................ (4,068) (20,147)
Cash flows from investing activities:
Additions to property and equipment .................. (12,212) (8,269)
Software investments ................................. (2,279) (3,477)
Proceeds from the sale of assets ..................... 866 150
Purchase of non-marketable investments ............... -- (400)
Additions to long-term notes receivable .............. (140) (600)
-------- --------
Net cash used in investing activities ................ (13,765) (12,596)
Cash flows from financing activities:
Notes payable, net ................................... (50) 17,269
Principal payments on capital leases ................. (318) (502)
Principal payments on long-term borrowing ............ -- (2,103)
Purchase of treasury stock ........................... (3,256) (1,051)
Debt issue costs paid ................................ -- (239)
Proceeds from exercise of stock options
(includes tax benefit) ........................... 4,863 652
-------- --------
Net cash provided by financing activities ............ 1,239 14,026
Effect of exchange rate changes on cash .............. (157) 17
-------- --------
Net decrease in cash and cash equivalents ............ (16,751) (18,700)
Cash and cash equivalents at beginning of period ..... 45,386 34,828
-------- --------
Cash and cash equivalents at end of period ........... $ 28,635 $ 16,128
======== ========
</TABLE>
See accompanying notes to
consolidated financial statements
5
<PAGE> 6
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
1. Management Representation
The consolidated financial statements of Telxon Corporation ("Telxon")
and its subsidiaries (collectively with Telxon, the "Company") have
been prepared without audit. In the opinion of the Company, all
adjustments, consisting of normal recurring adjustments necessary for a
fair statement of results for the interim period(s), have been made.
The statements, including the March 31, 1997, condensed balance sheet
data derived from audited financial statements, do not include all of
the information and notes required by generally accepted accounting
principles for complete financial statements and should be read in
conjunction with the audited consolidated financial statements as
contained in the Company's Annual Report on Form 10-K, as amended by
Amendment No. 1 on Form 10-K/A, for the fiscal year ended March 31,
1997.
2. 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.
All securities having an antidilutive effect on earnings per share have
been excluded from such computations. 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.
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings
Per Share" ("SFAS No. 128"). SFAS No. 128 revises the standards for
computing and presenting earnings per share. The Company is required to
adopt the provisions of SFAS No. 128 beginning with the third quarter
ending December 31, 1997, at which time all prior and interim period
earnings per share amounts will be restated. The Company has determined
that, once adopted, the restated basic and fully diluted earnings per
share amounts as computed under SFAS No. 128 for the quarter and six
months ended September 30, 1997, will not be materially different from
the earnings per share amounts presented in the accompanying
consolidated statement of operations.
3. Inventories
<TABLE>
<CAPTION>
Inventories consisted of the following:
September 30,
1997 March 31,
(Unaudited) 1997
------------ ---------
<S> <C> <C>
Purchased components......................................................... $28,279 $29,983
Work-in-process.............................................................. 37,657 31,579
Finished goods............................................................... 21,518 22,937
------- -------
$87,454 $84,499
======= =======
</TABLE>
4. Accrued Liabilities
<TABLE>
<CAPTION>
Accrued liabilities consisted of the following:
September 30,
1997 March 31,
(Unaudited) 1997
------------ ---------
<S> <C> <C>
Deferred customer service revenues........................................... $13,047 $14,329
Accrued payroll and other employee compensation.............................. 9,644 15,799
Other accrued liabilities.................................................... 18,468 18,872
------- -------
$41,159 $49,000
======= =======
</TABLE>
6
<PAGE> 7
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
5. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Six Months
Ended September 30,
-------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash paid during the period for:
Interest................................................. $3,674 $4,419
Income taxes............................................. 4,985 6,127
</TABLE>
Effective April 1, 1996, the Company sold the assets of certain retail
application software operations, with net assets of approximately
$5,000, to a third-party in exchange for $150 in cash and $7,000 in
secured promissory notes, including interest. The $7,000 of secured
promissory notes received in connection with the sale have been
excluded from the accompanying consolidated statement of cash flows as
a non-cash transaction.
The Company's re-issuances of treasury stock during the second quarter
of each of fiscal 1998 and 1997 to satisfy purchases made by employees
through the Telxon Corporation 1995 Employee Stock Purchase Plan have
been excluded from the accompanying consolidated statement of cash
flows as non-cash transactions. See Note 8 - Other Transactions for
further details of the second quarter fiscal 1998 re-issuance.
6. Litigation and Contingencies
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 then
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 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, the Plaintiffs 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.
Following the completion of discovery (other than of experts), each
defendant filed a Motion for Summary Judgment on May 19, 1995, all of
which were opposed by the plaintiffs. On September 14, 1995, the trial
court granted each defendant summary judgment on all counts, which the
plaintiffs appealed to the United States Sixth Circuit Court of
Appeals. On November 12, 1997, the Court of Appeals affirmed the
summary judgment as to all defendants. Though the plaintiffs have the
right to seek further appeal or other relief from the affirmance, the
Company would not expect that the trial court's disposition of the
case, as affirmed by the Court of Appeals, will be overturned;
accordingly, no provision has been made in the accompanying
consolidated financial statements for any liability that could result
to the Company with respect to the Consolidated Class Action.
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
7
<PAGE> 8
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
Telxon derivatively on behalf of Telxon. The named defendants are the
Company; Robert F. Meyerson, former Chairman of the Board, Chief
Executive Officer and director; Dan R. Wipff, then 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.
While the Company is nominally a defendant in this derivative action,
no monetary relief is sought by the plaintiff from the Company. On
November 12, 1993, Telxon and the individual director defendants filed
a Motion to Dismiss. The plaintiff filed his brief in opposition to the
Motion on May 2, 1994, and the defendants filed a final responsive
brief. The Motion was argued before the Court on March 29, 1995, and on
July 18, 1995, the Court issued its ruling. The Court dismissed all of
the claims relating to the plaintiff's allegations of corporate waste
but allowed the claims relating to breach of fiduciary duty to
continue.
On October 31, 1996, plaintiff's counsel filed a Motion to Intervene in
the derivative action on behalf of a new plaintiff stockholder. As part
of the Motion to Intervene, the intervening plaintiff asked that the
Court designate as operative for the action the intervening plaintiff's
proposed Complaint, which alleges that a series of transactions in
which the Company acquired certain technology from a corporation
affiliated with Mr. Meyerson was wrongful in that Telxon already owned
the technology by means of a pre-existing consulting agreement with
another affiliate of Mr. Meyerson; the intervenor's complaint also
names Raymond D. Meyo, President, Chief Executive Officer and director
at the time of the first acquisition transaction, as a new defendant.
The defendants opposed the Motion on grounds that the new claim alleged
in the proposed Complaint and the addition of Mr. Meyo were time-barred
by the statute of limitations and the intervening plaintiff did not
satisfy the standards for intervention. After taking legal briefs, the
Court ruled on June 13, 1997, to permit the intervention. Discovery is
continuing, and no deadline for its completion has yet been set by the
Court. The defendants believe that the post-intervention claims lack
merit, and they intend to continue vigorously defending this action.
While the ultimate outcome of this action cannot presently be
determined, the Company does not anticipate that this matter will have
a material adverse effect on the Company's consolidated financial
position, results of operations or cash flows and accordingly has not
made provisions for any loss or related insurance recovery in the
accompanying consolidated financial statements.
In the normal course of its operations, the Company is subject to
performance under contracts and assertions that technologies it
utilizes may infringe third party intellectual properties, and has
various legal actions and certain contingencies pending, including a
claim made by the owner of a manufacturing facility formerly leased by
the Company that the Company caused and should remediate soil
contamination at the facility and may be responsible for possible
diminution in the economic value of the premises allegedly resulting
from the contamination. The Company, with professional assistance, is
continuing to investigate the scope, nature and cause of the
contamination. Information necessary to support a reasonable estimate
of the scope of loss, if any, is not presently available and,
accordingly, no provision has been made in accompanying financial
statements. The Company, while not conceding denial of coverage, has
been advised by its insurers that coverage is not available concerning
this matter. While the Company, based on the information currently
available to it, continues to believe the matter's ultimate resolution
will not have a material adverse effect on the Company's business or
financial condition, if the Company were ultimately held responsible
for the alleged contamination, the associated loss could have a
material adverse effect on results of operations for one or more
quarters in which the associated charge(s) would be taken. In
management's opinion, all other such outstanding matters have either
been reflected in the consolidated financial statements, are covered by
insurance or would not have a material adverse effect on the Company's
business, consolidated financial position or results of operations or
cash flows.
7. Income Taxes
The Company's consolidated effective income tax rate reflects income
before taxes plus non-deductible goodwill amortization and the tax
effect of subsidiaries' net
8
<PAGE> 9
TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
operating loss benefits not currently utilized, which sum is multiplied
by the United States statutory rate and increased by foreign tax rate
differentials. The effective income tax rate was decreased by the
favorable tax treatment of the Company's foreign sales corporation.
The decrease in the Company's second quarter and first half of fiscal
1998 consolidated effective income tax rate from the rate experienced
during the second quarter and first half of fiscal 1997 was due
primarily to the decrease in non-deductible goodwill amortization and
an increase in consolidated pre-tax income without a corresponding
increase in non-deductible reconciling items.
8. Other Transactions
During the second quarter of fiscal 1998, the Company re-issued 200,272
shares of treasury stock to satisfy the stock options exercised under
the Company's stock option plans and another 36,140 shares of treasury
stock to satisfy purchases made by employees through the Telxon
Corporation 1995 Employee Stock Purchase Plan.
9. Subsequent Event
During October 1997, the Company re-issued 136,921 shares of treasury
stock to satisfy stock options exercised under the Company's stock
option plans.
10. Reclassifications
Certain items in the fiscal 1997 consolidated financial statements and
notes thereto have been reclassified to conform to the fiscal 1998
presentation.
9
<PAGE> 10
TELXON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
IN ADDITION TO DISCUSSING AND ANALYZING THE COMPANY'S RECENT HISTORICAL
FINANCIAL RESULTS AND CONDITION, THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDES STATEMENTS
REGARDING CERTAIN TRENDS OR OF OTHER FORWARD-LOOKING INFORMATION CONCERNING THE
COMPANY'S ANTICIPATED REVENUES, COSTS, FINANCIAL RESOURCES OR OTHERWISE
AFFECTING OR RELATING TO THE COMPANY WHICH ARE INTENDED TO QUALIFY FOR THE
PROTECTIONS AFFORDED "FORWARD-LOOKING STATEMENTS" UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, PUBLIC LAW 104-67. THE FORWARD-LOOKING STATEMENTS
MADE HEREIN AND ELSEWHERE IN THIS FORM 10-Q ARE INHERENTLY SUBJECT TO RISKS AND
UNCERTAINTIES WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS. THE SUMMARY OF CERTAIN OF THE
RISKS AND OTHER IMPORTANT FACTORS WHICH MAY AFFECT THE COMPANY'S BUSINESS,
OPERATING RESULTS AND FINANCIAL AND OTHER CONDITION UNDER "FACTORS THAT MAY
AFFECT FUTURE RESULTS" BELOW SHOULD BE READ IN CONJUNCTION WITH THE MORE
COMPLETE DISCUSSION OF THOSE AND OTHER RISKS AND IMPORTANT FACTORS AFFECTING THE
BUSINESS, OPERATING RESULTS AND CONDITION OF THE COMPANY UNDER "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION - FACTORS THAT MAY AFFECT FUTURE RESULTS" (WHICH IS INCORPORATED
HEREIN BY THIS REFERENCE), AND OTHER CAUTIONARY STATEMENTS APPEARING UNDER "ITEM
1. BUSINESS" AND ELSEWHERE, IN THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AS
AMENDED BY AMENDMENT NO. 1 ON FORM 10-K/A, FOR THE FISCAL YEAR ENDED MARCH 31,
1997.
OVERVIEW
The Company recorded net income of $2.4 million or $.15 per share and $4.0
million or $.25 per share for the second quarter and first half of fiscal 1998,
respectively. In comparison, the Company recorded net losses of $4.7 million or
$.29 per share and $9.5 million or $.58 per share for the second quarter and
first half of fiscal 1997, respectively.
The Company operates in a rapidly changing and dynamic market, and the Company's
strategies and plans are designed to adapt to changing market conditions where
and when possible. However, there can be no assurance that the Company's
management will identify the risks (especially those newly emerging from time to
time) affecting, and their impact on, the Company and its business, that the
Company's strategies and plans will take into account all market conditions and
changes thereto or that such strategies and plans will be successfully
implemented. Accordingly, neither the historical results presented in the
Company's consolidated financial statements and discussed herein, nor any
forward-looking statements in this Form 10-Q, are necessarily indicative of the
Company's future results. See "FACTORS THAT MAY AFFECT FUTURE RESULTS" for a
discussion of risk factors which may affect the Company's future results of
operations.
FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's business, operating results and financial and other condition may
be affected by a number of risks and other important factors, including, without
limitation, the following, some of which are inherently difficult to identify
and predict and/or are beyond the Company's control: general and
industry-specific economic conditions; the identification and implementation of
appropriate cost saving and operational efficiency initiatives; sales and
manufacturing cycles from quarter to quarter and within each quarter; serving
markets characterized by increasingly rapid technological change and associated
changes in market demand, product obsolescence and price erosion; intense
competition; concentration of revenues in the retail industry; ability to
penetrate and expand revenues in new and existing markets; risks associated with
foreign sales and operations; timely and efficient enhancement of appropriate
product offerings through internal development and acquisition of or investment
in new businesses and technologies; dependence on, and freedom from infringement
of, technologies and other proprietary rights of or by third parties; government
regulation of radio and other products and product health and safety concerns;
dependence on sole source, or limited number of, suppliers; and attracting and
retaining qualified employees. In addition to being subject to the foregoing
factors and other cautionary statements elsewhere in this Form 10-Q, the
Company's conduct of its business and the results and condition thereof are also
subject to the possible adverse effects of certain pending litigation and other
contingencies discussed in Note 6 to the accompanying consolidated financial
statements included in Item 1 above.
10
<PAGE> 11
RESULTS OF OPERATIONS
Revenues
1998 vs. 1997
<TABLE>
<CAPTION>
Quarter ended September 30, Increase
--------------------------- --------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Net Revenues:
Product, net...................................... $ 91,138 $ 89,439 $1,699 1.9%
Customer service, net............................. 19,182 18,875 307 1.6%
-------- -------- ------
Total net revenues................................ $110,320 $108,314 $2,006 1.9%
======== ======== ======
</TABLE>
<TABLE>
<CAPTION>
Six Months ended September 30, Increase (Decrease)
------------------------------ -------------------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Net Revenues:
Product, net...................................... $177,829 $183,464 $(5,635) (3.1)%
Customer service, net............................. 37,404 37,233 171 0.5 %
-------- -------- -------
Total net revenues................................ $215,233 $220,697 $(5,464) (2.5)%
======== ======== =======
</TABLE>
Product revenues include the sale of portable tele-transaction computers
("PTCs"), including rugged, wireless mobile computers and pen-based and
touch-screen workslates; hardware accessories; wireless data communication
products; custom application software and software licenses; and a variety of
professional services, including system integration and project management.
Consolidated product revenues from continuing operations, which exclude the
fiscal 1997 results of the Company's former Itronix subsidiary (which was sold
effective December 31, 1996), increased $22.6 million or 33.0% in the second
quarter of fiscal 1998 from second quarter fiscal 1997 levels. The consolidated
product revenues shown for the second quarter of fiscal 1997 include $20.9
million of product revenues from Itronix. The increase in consolidated product
revenues from continuing operations was due primarily to an increase in domestic
PTC unit volume while the average selling price per PTC unit remained
essentially constant.
Consolidated product revenues from continuing operations increased $35.7 million
or 25.1% in the first half of fiscal 1998 from first half fiscal 1997 levels.
The consolidated product revenues shown for the first half of fiscal 1997
include $41.4 million of product revenues from Itronix. The increase in
consolidated product revenues from continuing operations was due primarily to an
increase in domestic PTC unit volume that was partially offset by a slight
decrease in the average selling price per PTC unit.
Revenues from the Company's international operations increased $4.0 million or
14.8% in the second quarter of fiscal 1998 from second quarter fiscal 1997
levels. The increase in second quarter fiscal 1998 international revenues was
primarily attributable to an increase in the volume of PTC units sold to foreign
distributors, partially offset by a decrease in the average selling price per
PTC unit paid by the foreign distributors. The Company's revenues from
international operations increased $3.9 million or 6.8% in the first half of
fiscal 1998 from first half fiscal 1997 levels. This increase was primarily due
to the increase in the volume of PTC units sold to foreign distributors while
the average selling price per PTC unit paid by the foreign distributors remained
essentially constant. These revenues from international operations for the
quarters and six months ended September 30, 1997 and 1996, exclude the results
of the Canadian operations of the Company's Aironet subsidiary. The relocation
of these Aironet operations to Akron, Ohio, will be completed during the second
half of fiscal 1998, as a result of which their revenues will be included in the
Company's consolidated domestic results.
11
<PAGE> 12
Cost of Revenues
1998 vs. 1997
<TABLE>
<CAPTION>
Quarter ended September 30, Increase (Decrease)
--------------------------- -------------------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Cost of Revenues:
Product............................................ $54,276 $62,445 $(8,169) (13.1)%
Customer service................................... 12,336 11,534 802 7.0 %
------- ------- -------
Total cost of revenues............................. $66,612 $73,979 $(7,367) (10.0)%
======= ======= =======
Cost of product revenues as a
percentage of product revenues,
net ............................................ 59.6% 69.8%
Cost of customer service revenues
as a percentage of customer
service revenues, net............................ 64.3% 61.1%
</TABLE>
<TABLE>
<CAPTION>
Six Months ended September 30, Increase (Decrease)
------------------------------ -------------------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Cost of Revenues:
Product........................................... $106,836 $128,270 $(21,434) (16.7)%
Customer service.................................. 23,462 22,582 880 3.9 %
-------- -------- --------
Total cost of revenues............................ $130,298 $150,852 $(20,554) (13.6)%
======== ======== ========
Cost of product revenues as a
percentage of product revenues,
net ............................................ 60.1% 69.9%
Cost of customer service revenues
as a percentage of customer
service revenues, net........................... 62.7% 60.7%
</TABLE>
The decrease in the second quarter fiscal 1998 consolidated product cost
percentage from second quarter fiscal 1997 levels was due primarily to the
absence of certain non-recurring adjustments and a large-volume/low margin
contract with a single, large customer experienced by the Company during the
second quarter of fiscal 1997. The fiscal 1997 non-recurring adjustments
increased the inventory valuation and customer allowance provisions, which
negatively impacted the second quarter fiscal 1997 product cost percentage by 4%
and 2%, respectively. Additionally, the large-volume/low margin contract with a
single customer effectively reduced the second quarter fiscal 1997 product gross
margin percentage by 2%. Second quarter fiscal 1998 product gross margins were
also positively impacted by the benefit recognized during the quarter from the
Company's fiscal 1997 cost reduction and efficiency initiatives, workforce
reductions and early retirements.
The decrease in the first half of fiscal 1998 consolidated product cost
percentage from first half fiscal 1997 levels was due primarily to the absence
of certain non-recurring adjustments, large-volume/low margin business and new
product rollouts experienced by the Company during the first half of fiscal
1997. The non-recurring adjustments to increase the inventory valuation and
customer allowance provisions negatively impacted the first half fiscal 1997
product cost percentage by 2% and 1%, respectively, while the large-volume/low
margin contract with a single customer effectively reduced the first half fiscal
1997 product gross margin percentage by 1%. First half fiscal 1998 product gross
margins were also positively impacted by the benefit recognized during the
period from the Company's fiscal 1997 cost reduction and efficiency initiatives,
workforce reductions and early retirements.
The Company anticipates its second half of fiscal 1998 consolidated product cost
percentage to decrease from second half fiscal 1997 levels due to the absence of
non-recurring charges for inventory valuation, workforce reduction and early
retirement provisions recorded during the third quarter of fiscal 1997 as well
as the continued benefit of the Company's fiscal 1997 cost reduction and
efficiency initiatives, workforce reductions and early retirements.
The increase in the second quarter and first half of fiscal 1998 consolidated
customer service cost percentage from second quarter and first half fiscal 1997
levels was due primarily to the increased direct material and labor costs
required to repair the Company's more sophisticated and complex pen-based and
radio frequency units that comprise
12
<PAGE> 13
an increasing proportion of its installed customer base.
The Company anticipates its second half of fiscal 1998 consolidated customer
service cost percentage to decrease from second half fiscal 1997 levels due to
the absence of non-recurring charges for inventory valuation and customer
service consolidation provisions recorded during the third quarter of fiscal
1997 as well as the continued benefit of the Company's fiscal 1997 cost
reduction and efficiency initiatives.
At September 30, 1997, consolidated inventory allowance accounts increased to
$18.7 million from $16.0 million at March 31, 1997. As a percentage of
consolidated gross inventories, the Company's consolidated inventory allowances
increased to 17.4% at September 30, 1997, from 15.6% at March 31, 1997. The
Company anticipates continuing to provide for inventory obsolescence resulting
from technological change.
Operating Expenses
1998 vs. 1997
<TABLE>
<CAPTION>
Quarter ended September 30, (Decrease)
--------------------------- ----------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Operating Expenses:
Selling expenses.................................. $18,677 $21,037 $(2,360) (11.2)%
Product development and
engineering expenses............................ 9,525 10,096 (571) (5.7)%
General and administrative
expenses........................................ 9,843 10,548 (705) (6.7)%
------- ------- -------
Total operating expenses.......................... $38,045 $41,681 $(3,636) (8.7)%
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Six Months ended September 30, (Decrease)
------------------------------ ----------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Operating Expenses:
Selling expenses.................................. $36,776 $42,220 $ (5,444) (12.9)%
Product development and
engineering expenses............................ 18,651 21,204 (2,553) (12.0)%
General and administrative
expenses........................................ 19,547 21,711 (2,164) (10.0)%
------- ------- --------
Total operating expenses.......................... $74,974 $85,135 $(10,161) (11.9)%
======= ======= ========
</TABLE>
Consolidated selling expenses as a percentage of consolidated total revenues
decreased to 16.9% and 17.1%, respectively, in the second quarter and first half
of fiscal 1998 from 19.4% and 19.1%, respectively, in the second quarter and
first half of fiscal 1997. The decrease in selling expenses was due primarily to
the benefit recognized throughout the first half of fiscal 1998 from the
Company's fiscal 1997 workforce reductions and early retirements as well as the
absence of $.5 million of severance charges recorded during the second quarter
of fiscal 1997. The Company anticipates its second half of fiscal 1998
consolidated selling expenses as a percentage of consolidated total revenues to
decrease from second half fiscal 1997 levels due to the absence of non-recurring
charges related to the redesign of the Company's worldwide distribution and
logistics operations and the workforce reduction and early retirement
initiatives recorded during the third quarter of fiscal 1997 as well as the
continued benefit of the Company's fiscal 1997 workforce reduction and early
retirement initiatives.
The decrease in consolidated product development and engineering expenses in the
second quarter and first half of fiscal 1998 from second quarter and first half
fiscal 1997 levels was due primarily to the absence of such expenses for the
Company's former Itronix subsidiary. During the second quarter and first half of
fiscal 1997, Itronix recorded product development and engineering expenses of
$1.7 million and $3.3 million, respectively. These second quarter and first half
fiscal 1998 cost reductions were partially offset by $.4 million of costs
incurred by the Company during the second quarter of fiscal 1998 to begin
consolidating and relocating its engineering and development operations to
Houston, Texas. Product development and engineering expenses for the second half
of fiscal 1998 will include increased incremental costs to complete the
consolidation of the Company's engineering operations. The Company anticipates
that its overall second half of fiscal 1998 consolidated product development
and engineering expenses of its continuing operations will remain at
substantially the same level as the comparable second half fiscal 1997 levels,
representing a decrease from reported second half fiscal 1997 levels as a
result of the absence of engineering costs incurred by its former Itronix
subsidiary during the third quarter of fiscal 1997.
13
<PAGE> 14
During the second quarter and first half of fiscal 1998, the Company capitalized
internal software development costs in accordance with the requirements of
Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed" ("SFAS No. 86")
aggregating $.8 million and $1.5 million, respectively. The Company capitalized
$1.3 million and $2.6 million, respectively, of internal software development
costs during the second quarter and first half of fiscal 1997. The Company
anticipates the dollar amount of internal software development costs capitalized
during the second half of fiscal 1998 to decrease from second half fiscal 1997
levels.
The decrease in general and administrative expenses in the second quarter and
first half of fiscal 1998 from second quarter and first half fiscal 1997 levels
was due primarily to the benefits recognized from the Company's fiscal 1997
workforce reductions, early retirements and other cost reduction initiatives as
well as the absence of the general and administrative expenses of the Company's
former Itronix subsidiary. During the second quarter and first half of fiscal
1997, Itronix recorded general and administrative expenses of $.7 million and
$1.4 million, respectively. The Company anticipates its second half of fiscal
1998 consolidated general and administrative expenses to decrease from the
reported second half fiscal 1997 levels due to the absence of costs incurred by
its former Itronix subsidiary during the third quarter of fiscal 1997 and that
the second half of fiscal 1998 expenses of its continuing operations will
further reflect a decrease from the comparable second half fiscal 1997 levels
due to the absence of non-recurring charges related to the Company's workforce
reduction and early retirement initiatives, previously developed corporate
information systems and certain consulting agreements recorded during the third
quarter of fiscal 1997.
Income Taxes
1998 vs. 1997
<TABLE>
<CAPTION>
Quarter ended September 30, Increase
--------------------------- --------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Income Taxes:
Provision (benefit) for
income taxes................................... $1,877 $(4,702) $6,579 139.9%
</TABLE>
<TABLE>
<CAPTION>
Six Months ended September 30, Increase
------------------------------ --------
1997 1996 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Income Taxes:
Provision (benefit) for
income taxes................................... $3,129 $(9,499) $12,628 132.9%
</TABLE>
The Company's consolidated effective income tax rate was 44% in the second
quarter and first half of fiscal 1998 and 50% in the second quarter and first
half of fiscal 1997.
The consolidated effective income tax rate for the second quarter and first half
of fiscal 1998 reflects income before taxes multiplied by the United States
federal statutory tax rate. The tax rate was increased by nondeductible goodwill
amortization, international tax rate differentials and subsidiaries' net
operating loss benefits not currently utilized. The effective income tax rate
was decreased by the favorable tax treatment of the Company's foreign sales
corporation. No benefit was recorded for increasing research and development
expenditures during the second quarter and first half of fiscal 1998 due to the
expiration of the credit for research and development expenditures at June 1,
1997. There were no other significant tax law changes during the first half of
fiscal 1998 that had a significant effect on the calculation of the Company's
income tax liability.
The consolidated effective income tax rate for the second quarter and first half
of fiscal 1997 reflects income before taxes increased by nondeductible goodwill
amortization, the sum of which was multiplied by the United States federal
statutory tax rate and increased by international tax rate differentials and
subsidiaries' net operating loss benefits not currently utilized. These
increases in the consolidated effective income tax rate were partially offset by
the favorable tax treatment of the Company's foreign sales corporation.
14
<PAGE> 15
FINANCIAL CONDITION
Liquidity
1998 vs. 1997
<TABLE>
<CAPTION>
Dollar
September 30, March 31, Increase
1997 1997 (Decrease)
-------- -------- --------
(in thousands except ratios)
<S> <C> <C> <C>
Cash and cash equivalents............................................ $ 28,635 $ 45,386 $(16,751)
Accounts and notes receivable........................................ 119,808 128,271 (8,463)
Inventories.......................................................... 87,454 84,499 2,955
Other ............................................................... 14,207 11,956 2,251
-------- -------- --------
Total current assets................................................. $250,104 $270,112 $(20,008)
======== ======== ========
Notes payable........................................................ $ -- $ 50 $ (50)
Accounts payable..................................................... 36,050 47,917 (11,867)
Income taxes payable................................................. 1,708 3,077 (1,369)
Accrued liabilities.................................................. 41,159 49,000 (7,841)
Other ............................................................... 1,025 1,010 15
-------- -------- --------
Total current liabilities............................................ $ 79,942 $101,054 $(21,112)
======== ======== ========
Working capital (current assets
less current liabilities).......................................... $170,162 $169,058 $ 1,104
======== ======== ========
Current ratio (current assets divided
by current liabilities)............................................ 3.1 to 1 2.7 to 1
</TABLE>
The increase in the Company's consolidated working capital at September 30,
1997, from March 31, 1997, was due primarily to the decrease in accounts payable
and accrued liabilities, partially offset by decreases in cash and accounts and
notes receivable and increases in inventories and other current assets. The
decreases in accounts payable and accrued liabilities as well as the
corresponding decrease in cash at September 30, 1997, from amounts recorded at
March 31, 1997, were due primarily to the Company's increased payments to
vendors during the first half of fiscal 1998 for goods and services procured as
of March 31, 1997. Consolidated days sales outstanding decreased to 87 days at
September 30, 1997, from 88 days at March 31, 1997.
The Company believes its existing resources, including available cash and cash
equivalents, internally generated funds and bank credit facilities will be
sufficient to meet working capital requirements for the next twelve months.
Cash Flows from Operating Activities:
1998 vs. 1997
<TABLE>
<CAPTION>
Dollar
Increase
(Decrease)
Six Months ended September 30, in
------------------------------ Cash Flow
1997 1996 Impact
---- ---- ------
(in thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss).............................................. $ 3,982 $(9,499) $13,481
Depreciation and amortization.................................. 12,279 13,926 (1,647)
Provision for inventory obsolescence........................... 3,548 5,972 (2,424)
Deferred income taxes.......................................... 172 (1,025) 1,197
Accounts and notes receivable.................................. 7,597 18,038 (10,441)
Inventories.................................................... (7,032) (1,732) (5,300)
Prepaid expenses and other..................................... (2,231) 55 (2,286)
Accounts payable and accrued liabilities....................... (21,341) (46,431) 25,090
Other ......................................................... (1,042) 549 (1,591)
------- -------- -------
Net cash used in operating activities.......................... $(4,068) $(20,147) $16,079
======= ======== =======
</TABLE>
The reduction in the amount of cash used in the Company's consolidated operating
activities for the first half of fiscal 1998 from first half of fiscal 1997
levels was due primarily to the increase in net income between the two periods,
the change in the cash flow impact of accounts payable and accrued liabilities
and the absence of the net cash used
15
<PAGE> 16
in the operating activities of the Company's former Itronix subsidiary during
the first half of fiscal 1997. During the first half of fiscal 1997, Itronix
used approximately $9.3 million of cash in its operating activities that was
ultimately funded by Telxon. These positive cash flow items were partially
offset by decreased cash flows from accounts and notes receivable and increased
inventory purchases, as detailed in the preceding table.
Cash Flows From Investing Activities
1998 vs. 1997
<TABLE>
<CAPTION>
Dollar
Increase
(Decrease)
Six Months ended September 30, in
------------------------------ Cash Flow
1997 1996 Impact
---- ---- ------
(in thousands)
<S> <C> <C> <C>
Cash Flows from Investing Activities:
Additions to property and equipment.......................... $(12,212) $ (8,269) $(3,943)
Software investments......................................... (2,279) (3,477) 1,198
Proceeds from sale of assets................................. 866 150 716
Other ....................................................... (140) (1,000) 860
-------- -------- -------
Net cash used in investing activities........................ $(13,765) $(12,596) $(1,169)
======== ======== =======
</TABLE>
The increase in the amount of cash used in the Company's consolidated investing
activities for the first half of fiscal 1998 from first half of fiscal 1997
levels was due primarily to the capitalization of $3.5 million of expenditures
relating to the installation, commenced during the first half of fiscal 1998, of
new corporate-wide information systems designed to enhance management's
operational and information resources as well as address Year 2000 issues. This
negative cash flow item was partially offset by a reduction in software
investments and the proceeds from the sale-leaseback of certain office computer
equipment during the first half of fiscal 1998, as detailed in the preceding
table. The Company anticipates the capitalization of increased incremental costs
associated with its installation of new corporate-wide information systems
during the second half of fiscal 1998.
Effective April 1, 1996, the Company sold the assets of certain retail
application software operations, with net assets of approximately $5.0 million
to a third-party for approximately $.2 million in cash and $7.0 million in
secured promissory notes, including interest. In addition to the proceeds from
the sale, the Company also entered into a software license agreement with the
third-party purchaser. The agreement provides for the Company to receive, over
the next five years, license fees amounting to 20% of the revenue generated by
the purchased software, with minimum required payments aggregating $6.6 million.
The $7.0 million in promissory notes received in connection with the divestiture
have been excluded from the accompanying consolidated statement of cash flows as
a non-cash transaction.
Cash Flows From Financing Activities
1998 vs. 1997
<TABLE>
<CAPTION>
Dollar
Increase
(Decrease)
Six Months ended September 30, in
------------------------------ Cash Flow
1997 1996 Impact
---- ---- ------
(in thousands)
Cash Flows from Financing Activities:
<S> <C> <C> <C>
Notes payable, net........................................... $ (50) $17,269 $(17,319)
Purchase of treasury stock................................... (3,256) (1,051) (2,205)
Proceeds from exercise of stock options...................... 4,863 652 4,211
Principal payments on long-term borrowing.................... -- (2,103) 2,103
Other ....................................................... (318) (741) 423
------- ------- --------
Net cash provided by financing
activities................................................. $ 1,239 $14,026 $(12,787)
======= ======= ========
</TABLE>
The decrease in the amount of cash provided by the Company's consolidated
financing activities for the first half of fiscal 1998 from first half of fiscal
1997 levels was due primarily to the absence of borrowings against the Company's
credit facilities during the first half of fiscal 1998 and the Company's
repurchase of an additional 215,700 shares of its common stock during the first
quarter of fiscal 1998 under its open market repurchase program. The absence of
borrowings against the
16
<PAGE> 17
Company's credit facilities reflects the utilization of proceeds from the
December 31, 1996, sale of its former Itronix subsidiary to pay down amounts
borrowed and outstanding against the Company's credit facilities during fiscal
1997. These negative cash flow items were partially offset by the increase in
proceeds from the exercise of stock options, reflecting the increased exercise
activity by optionees in response to the increase in market price of the
Company's common stock, and the absence of principal payments on long-term
borrowings during the first half of fiscal 1998, as detailed in the preceding
table.
During the second quarter of fiscal 1998, the Company extended to August 4,
1998, the $20.0 million in bank credit which it maintains under its business
purpose revolving promissory note in addition to its ongoing $100.0 million
credit agreement.
OTHER TRANSACTIONS
During the second quarter of fiscal 1998, the Company re-issued 200,272 shares
of treasury stock to satisfy the stock options exercised under the Company's
stock option plans and another 36,140 shares of treasury stock to satisfy
purchases made by employees through the Telxon Corporation 1995 Employee Stock
Purchase Plan. The Company's re-issuance of treasury stock to satisfy purchases
made by employees through the Telxon Corporation 1995 Employee Stock Purchase
Plan has been excluded from the accompanying consolidated statement of cash
flows as a non-cash transaction.
SUBSEQUENT EVENT
During October 1997, the Company re-issued 136,921 shares of treasury stock to
satisfy stock options exercised under the Company's stock option plans.
17
<PAGE> 18
ITEM 1. LEGAL PROCEEDINGS
See Note 6 to the consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q for a discussion of the material pending legal
proceedings to which the Company is a party, which footnote discussion is
incorporated in this Part II by this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) Telxon held its Annual Meeting of Stockholders on September 10,
1997 (the "Annual Meeting").
(b) The matters voted upon by Telxon's stockholders at the Annual
Meeting included the election of three directors of the class to hold
office until the 2000 annual meeting of stockholders. Proxies for the
Annual Meeting were solicited pursuant to Regulation 14 under the
Securities Exchange Act of 1934, there was no solicitation in
opposition to management's nominees as listed in the proxy statement,
and all of such nominees were elected.
(c) The following three matters were voted upon by Telxon's
stockholders at the Annual Meeting:
(1) The election of three directors of the class to hold
office until the 2000 annual meeting of stockholders or until
their successors are elected and qualified. The following
votes were cast for each director nominee:
For the election of Frank E. Brick --
Votes for: 13,310,126
Votes withheld: 943,096,
For the election of Robert A. Goodman --
Votes for: 13,325,376
Votes withheld: 927,846, and
For the election of Dr. Raj Reddy --
Votes for: 13,328,399
Votes withheld: 924,823;
(2) The approval of amendments to the Telxon Corporation 1990
Stock Option Plan for employees. The following votes were
cast:
Votes for: 10,944,596
Votes against: 2,331,797
Votes abstained: 109,182
Broker non-votes: 867,647; and
(3) The approval of the Telxon Corporation 1997 Section 162(m)
Performance-Based Compensation Plan for the Chief Executive
Officer. The following votes were cast:
Votes for: 11,815,192
Votes against: 1,442,696
Votes abstained: 127,688
Broker non-votes: 867,646.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
2 Asset Purchase Agreement by and among Dynatech
Corporation, IAQ Corporation, Registrant and Itronix
Corporation, a wholly owned subsidiary of Registrant,
dated as of December 28, 1996, incorporated
18
<PAGE> 19
herein by reference to Exhibit 2 to Registrant's Form
8-K dated December 31, 1996.
3.1 Restated Certificate of Incorporation of Registrant,
incorporated herein by reference to Exhibit No. 3.1 to
Registrant's Form 10-K for the year ended March 31,
1993.
3.2 Amended and Restated By-Laws of Registrant, as
amended, incorporated herein by reference to Exhibit
No. 2(b) to Registrant's Registration Statement on
Form 8-A with respect to its Common Stock filed
pursuant to Section 12(g) of the Securities Exchange
Act, as amended by Amendment No. 1 thereto filed under
cover of a Form 8 and Amendment No. 2 thereto filed on
Form 8-A/A.
4.1 Portions of the Restated Certificate of Incorporation
of Registrant pertaining to the rights of holders of
Registrant's Common Stock, par value $.01 per share,
incorporated herein by reference to Exhibit 3.1 to
Registrant's Form 10-K for the year ended March 31,
1993.
4.2 Text of form of Certificate for Registrant's Common
Stock, par value $.01 per share, and description of
graphic and image material appearing thereon,
incorporated herein by reference to Exhibit 4.2 to
Registrant's Form 10-Q for the quarter ended June 30,
1995.
4.3 Rights Agreement between Registrant and KeyBank
National Association, as Rights Agent, dated as of
August 25, 1987, as amended and restated as of July
31, 1996, incorporated herein by reference to Exhibit
4 to Registrant's Form 8-K dated August 5, 1996.
4.3.1 Form of Rights Certificate (included as
Exhibit A to the Rights Agreement
included as Exhibit 4.3 above). 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 text of which and
description thereof is included as
Exhibit 4.2 above, 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.
4.3.2 Letter agreement among Registrant,
KeyBank National Association and Harris
Trust and Savings Bank, dated June 11,
1997, with respect to the appointment of
Harris Trust and Savings Bank as
successor Rights Agent under the Rights
Agreement included as Exhibit 4.3 above,
incorporated herein by reference to
Exhibit 4.3.2 to Registrant's Form 10-K
for the year ended March 31, 1997.
4.4 Indenture by and between 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 Registrant's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set
forth in the Indenture included as
Exhibit 4.4 above).
4.5 Indenture by and between Registrant and Bank One Trust
Company, N.A., as Trustee, dated as of December 1,
1995, regarding Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, incorporated herein by
19
<PAGE> 20
reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-3, Registration No. 333-1189,
filed February 23, 1996.
4.5.1 Form of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003 issued under
the Indenture included as Exhibit 4.5
above, incorporated herein by reference
to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3,
Registration No. 333-1189, filed February
23, 1996.
4.5.2 Registration Rights Agreement by and
among Registrant and Hambrecht & Quist
LLC and Prudential Securities
Incorporated, as the Initial Purchasers
of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, with respect
to the registration of said Notes under
applicable securities laws, incorporated
herein by reference to Exhibit 4.3 to
Registrant's Registration Statement on
Form S-3, Registration No. 333-1189,
filed February 23, 1996.
10.1 Compensation and Benefits Plans of Registrant.
10.1.1 Amended and Restated Retirement and
Uniform Matching Profit-Sharing Plan of
Registrant, effective July 1, 1993,
incorporated herein by reference to
Exhibit 10.1.1 to Registrant's Form 10-K
for the year ended March 31, 1994.
10.1.1.a Amendment, dated January
1, 1994, to the Plan
included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.a to Registrant's
Form 10-K for the year
ended March 31, 1994.
10.1.1.b Amendment, dated April
1, 1994, to the Plan
included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.b to Registrant's
Form 10-K for the year
ended March 31, 1994.
10.1.1.c Amendment, dated January
1, 1994, to the Plan
included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.c to Registrant's
Form 10-Q for the
quarter ended December
31, 1994.
10.1.2 1990 Stock Option Plan for employees of
Registrant, as amended, filed herewith.
10.1.3 1990 Stock Option Plan for Non-Employee
Directors of Registrant, as amended,
filed herewith.
10.1.4 Non-Qualified Stock Option Agreement
between Registrant and Raj Reddy, dated
as of October 17, 1988, incorporated
herein by reference to Exhibit 10.1.6 to
Registrant's Form 10-K for the year ended
March 31, 1994.
10.1.4.a Description of amendment
extending the term of
the Agreement included
as Exhibit 10.1.4 above,
incorporated herein by
reference to Exhibit
10.1.6.a to Registrant's
Form 10-Q for the
quarter ended September
30, 1994.
10.1.5 1992 Restricted Stock Plan of Registrant,
incorporated herein by reference to
Exhibit 10.1.17 to Registrant's Form 10-Q
for the quarter ended December 31, 1993.
20
<PAGE> 21
10.1.5.a Amendment, dated
December 7, 1993, to the
Plan included as Exhibit
10.1.5 above,
incorporated herein by
reference to Exhibit
10.1.17.a to
Registrant's Form 10-Q
for the quarter ended
December 31, 1993.
10.1.5.b Amendment, dated July
18, 1994, to the Plan
included as Exhibit
10.1.5 above,
incorporated herein by
reference to Exhibit
10.1.17.b to
Registrant's Form 10-Q
for the quarter ended
September 30, 1994.
10.1.6 1995 Employee Stock Purchase Plan of
Registrant, as amended, incorporated
herein by reference to Exhibit 10.1.7 to
Registrant's Form 10-Q for the quarter
ended September 30, 1995.
10.1.7 1996 Stock Option Plan for employees,
directors and advisors of Aironet
Wireless Communications, Inc., a
subsidiary of Registrant, incorporated
herein by reference to Exhibit 10.1.7 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.8 Non-Competition Agreement by and between
Registrant and Robert F. Meyerson,
effective February 27, 1997, incorporated
herein by reference to Exhibit 10.1.8 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.9 Description of terms of employment of
Frank E. Brick with Registrant for the
three fiscal years ending March 31, 2000,
incorporated herein by reference to
Exhibit 10.1.9 to Registrant's Form 10-Q
for the quarter ended June 30, 1997.
10.1.10 Employment Agreement between Registrant
and Leonard D. Abeita, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.10 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.11 Employment Agreement between Registrant
and James G. Cleveland, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.11 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.12 Employment Agreement between Registrant
and Kenneth W. Haver, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.12 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.13 Employment Agreement between Registrant
and David D. Loadman, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.13 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.14 Employment Agreement between Registrant
and David W. Porter, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.14 to
Registrant's Form 10-K for the year ended
March 31, 1997.
10.1.15 Employment Agreement between Registrant
and Dan R. Wipff, effective as of April
1, 1997, incorporated herein by reference
to Exhibit 10.1.15 to Registrant's Form
10-K for the year ended March 31, 1997.
10.1.16 Letter of the Audit Committee of
Registrant's Board of Directors, dated
July 22, 1996, engaging Norton Rose to
act as
21
<PAGE> 22
the Committee's delegate to advise and
assist Registrant's management,
incorporated herein by reference to
Exhibit 10.1.16 to Registrant's Form 10-K
for the year ended March 31, 1997.
10.2 Material Leases of Registrant.
10.2.1 Lease between Registrant and 3330 W.
Market Properties, dated as of December
30, 1986, incorporated herein by
reference to Exhibit 10.2.1 to
Registrant's Form 10-K for the year ended
March 31, 1994.
10.2.2 Standard Office Lease (Modified Net
Lease) between Registrant and John D.
Dellagnese III, dated as of July 19,
1995, including an Addendum thereto,
incorporated herein by reference to
Exhibit 10.2.4 to Registrant's Form 10-K
for the year ended March 31, 1996.
10.2.2.a Second Addendum, dated
as of October 5, 1995,
to the Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.4.a to Registrant's
Form 10-K for the year
ended March 31, 1996.
10.2.2.b Third Addendum, dated as
of March 1, 1996, to the
Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.4.b to Registrant's
Form 10-K for the year
ended March 31, 1996.
10.2.2.c Fourth Addendum, dated
as of April 16, 1996, to
the Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.2.c to Registrant's
Form 10-Q for the
quarter ended June 30,
1997.
10.2.2.d Fifth Addendum, dated as
of June 24, 1997, to the
Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.2.d to Registrant's
Form 10-Q for the
quarter ended June 30,
1997.
10.3 Credit Agreements of Registrant.
10.3.1 Credit Agreement by and among Registrant,
the lenders party thereto from time to
time and The Bank of New York, as letter
of credit issuer, swing line lender and
agent for the lenders, dated as of March
8, 1996, incorporated herein by reference
to Exhibit 10.3.2 to Registrant's Form
10-K for the year ended March 31, 1996.
10.3.1.a Amendment No. 1, dated
as of August 6, 1996, to
the Agreement included
as Exhibit 10.3.1 above,
incorporated herein by
reference to Exhibit
10.3.2.a to Registrant's
Form 8-K dated August
16, 1996.
10.3.1.b Security Agreement,
dated as of August 6,
1996, by and among
Registrant and The Bank
of New York, as Agent,
incorporated herein by
reference to Exhibit
10.3.2.b to Registrant's
Form 8-K dated August
16, 1996.
10.3.1.c Amendment No. 2, dated
as of December 16, 1996,
to the Agreement
included as Exhibit
10.3.1 above,
incorporated herein by
reference to Exhibit
22
<PAGE> 23
10.3.2.c to Registrant's
Form 8-K dated December
16, 1996.
10.3.2 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated September 8,
1995, and related Letter Agreement
between them of even date, incorporated
herein by reference to Exhibit 10.3.2 to
Registrant's Form 10-Q for the quarter
ended September 30, 1995.
10.3.3 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated November 24,
1995, and related Letter Agreement
between them dated November 22, 1995,
incorporated herein by reference to
Exhibit 10.3.3 to Registrant's Form 10-Q
for the quarter ended December 31, 1995.
10.3.4 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated January 31, 1996,
and related Letter Agreement between them
dated of even date, incorporated herein
by reference to Exhibit 10.3.4 to
Registrant's Form 10-Q for the quarter
ended December 31, 1995.
10.3.5 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated February 29,
1996, and related Letter Agreement
between them dated of even date,
incorporated herein by reference to
Exhibit 10.3.6 to Registrant's Form 10-K
for the year ended March 31, 1996.
10.3.6 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, Akron, N.A., dated
March 20, 1996, incorporated herein by
reference to Exhibit 10.3.7 to
Registrant's Form 10-K for the year ended
March 31, 1996.
10.3.7 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, Akron, N.A., dated
August 6, 1996 (in replacement of the
Note included as Exhibit 10.3.6 above),
incorporated herein by reference to
Exhibit 10.3.8 to Registrant's Form 8-K
dated August 16, 1996.
10.3.7.a Bank One Security
Agreement, dated as of
August 6, 1996, by and
among Registrant and
Bank One, Akron, N.A.,
incorporated herein by
reference to Exhibit
10.3.8.a to Registrant's
Form 8-K dated August
16, 1996.
10.3.8 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, NA (fka Bank One,
Akron, N.A.), dated August 5, 1997
(extending the credit facility evidenced
by the Note included as Exhibit 10.3.7
above), incorporated herein by reference
to Exhibit 10.3.8 to Registrant's Form
10-Q for the quarter ended June 30, 1997.
10.4 Amended and Restated Agreement between 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 Agreement of Purchase and Sale of Assets by and among
Vision Newco, Inc., a subsidiary of Registrant,
Virtual Vision, Inc., as debtor and debtor in
possession, and the Official Unsecured Creditors'
Committee, on behalf of the bankruptcy estate of
Virtual Vision, dated as of July 13, 1995,
incorporated herein by reference to Exhibit 10.8 to
Registrant's Form 10-Q for the quarter ended June 30,
1995.
10.6 Subscription Agreement by and among New Meta Licensing
Corporation, a
23
<PAGE> 24
subsidiary of Registrant, and certain officers of
Registrant as Purchasers, dated as of September 19,
1995, incorporated herein by reference to Exhibit 10.8
to Registrant's Form 10-Q for the quarter ended
September 30, 1995.
10.7 Shareholder Agreement by and among New Meta Licensing
Corporation, a subsidiary of Registrant, and its
Shareholders, including the officers of Registrant
party to the Agreement included as Exhibit 10.6 above,
dated as of September 29, 1995, incorporated herein by
reference to Exhibit 10.9 to Registrant's Form 10-Q
for the quarter ended September 30, 1995.
10.7.1 First Amendment, dated as of September
29, 1995, to the Agreement included as
Exhibit 10.7 above, incorporated herein
by reference to Exhibit 10.9.1 to
Registrant's Form 10-Q for the quarter
ended December 31, 1995.
10.7.2 Second Amendment, dated as of January,
1996, to the Agreement included as
Exhibit 10.7 above, incorporated herein
by reference to Exhibit 10.9.2 to
Registrant's Form 10-Q for the quarter
ended December 31, 1995.
10.7.3 Amended and Restated Shareholder
Agreement by and among Metanetics
Corporation (fka New Meta Licensing
Corporation) and its Shareholders, dated
as of March 28, 1996, superseding the
Agreement included as Exhibit 10.7 above,
as amended by the First and Second
Amendments thereto included as Exhibits
10.7.1 and 10.7.2 above, incorporated
herein by reference to Exhibit 10.9.3 to
Registrant's Form 10-K for the year ended
March 31, 1996.
10.7.4 First Amendment, dated as of March 30,
1996, to the Agreement included as
Exhibit 10.7.3 above, incorporated herein
by reference to Exhibit 10.9.4 to
Registrant's Form 10-K for the year ended
March 31, 1996.
10.8 Stock Purchase Agreement by and among Meta Holding
Corporation, a subsidiary of Registrant, and certain
officers of Registrant as Purchasers, dated as of
March 30, 1996, incorporated herein by reference to
Exhibit 10.8 to Registrant's Form 10-K for the year
ended March 31, 1997.
10.9 Stock Purchase Agreement by and between Metanetics
Corporation, a subsidiary of Registrant fka New Meta
Licensing Corporation, and Accipiter II, Inc., dated
as of September 30, 1996, incorporated herein by
reference to Exhibit 10.8 to Registrant's Form 10-Q
for the quarter ended September 30, 1996.
10.10 Stock Purchase Agreement by and between Registrant and
Telantis Capital, Inc., dated as of March 31, 1997,
incorporated herein by reference to Exhibit 10.10 to
Registrant's Form 10-K for the year ended March 31,
1997.
11. Computation of earnings per share for the quarters and
six months ended September 30, 1997 and 1996, filed
herewith.
27. Financial Data Schedule as of September 30, 1997,
filed herewith.
(b) Reports on Form 8-K
Registrant did not file any Current Reports on Form 8-K during the
fiscal quarter for which this Quarterly Report on Form 10-Q is filed.
24
<PAGE> 25
TELXON CORPORATION
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: November 14, 1997
TELXON CORPORATION
------------------------
(Registrant)
/s/ Kenneth W. Haver
------------------------
Kenneth W. Haver, Senior
Vice President and Chief
Financial Officer
<PAGE> 26
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1997
<PAGE> 27
INDEX TO EXHIBITS
Where
Filed
- -----
* 2 Asset Purchase Agreement by and among Dynatech
Corporation, IAQ Corporation, Registrant and Itronix
Corporation, a wholly owned subsidiary of Registrant,
dated as of December 28, 1996, incorporated herein by
reference to Exhibit 2 to Registrant's Form 8-K dated
December 31, 1996.
* 3.1 Restated Certificate of Incorporation of Registrant,
incorporated herein by reference to Exhibit No. 3.1 to
Registrant's Form 10-K for the year ended March 31,
1993.
* 3.2 Amended and Restated By-Laws of Registrant, as
amended, incorporated herein by reference to Exhibit
No. 2(b) to Registrant's Registration Statement on
Form 8-A with respect to its Common Stock filed
pursuant to Section 12(g) of the Securities Exchange
Act, as amended by Amendment No. 1 thereto filed under
cover of a Form 8 and Amendment No. 2 thereto filed on
Form 8-A/A.
* 4.1 Portions of the Restated Certificate of Incorporation
of Registrant pertaining to the rights of holders of
Registrant's Common Stock, par value $.01 per share,
incorporated herein by reference to Exhibit 3.1 to
Registrant's Form 10-K for the year ended March 31,
1993.
* 4.2 Text of form of Certificate for Registrant's Common
Stock, par value $.01 per share, and description of
graphic and image material appearing thereon,
incorporated herein by reference to Exhibit 4.2 to
Registrant's Form 10-Q for the quarter ended June 30,
1995.
* 4.3 Rights Agreement between Registrant and KeyBank
National Association, as Rights Agent, dated as of
August 25, 1987, as amended and restated as of July
31, 1996, incorporated herein by reference to Exhibit
4 to Registrant's Form 8-K dated August 5, 1996.
* 4.3.1 Form of Rights Certificate (included as
Exhibit A to the Rights Agreement
included as Exhibit 4.3 above). 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 text of which and
description thereof is included as
Exhibit 4.2 above, 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.
* 4.3.2 Letter agreement among Registrant,
KeyBank National Association and Harris
Trust and Savings Bank, dated June 11,
1997, with respect to the appointment of
Harris Trust and Savings Bank as
successor Rights Agent under the Rights
Agreement included as Exhibit 4.3 above,
incorporated herein by reference to
Exhibit 4.3.2 to Registrant's Form 10-K
for the year ended March 31, 1997.
* 4.4 Indenture by and between 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
<PAGE> 28
18, 1987.
* 4.4.1 Form of Registrant's 7-1/2% Convertible
Subordinated Debentures Due 2012 (set
forth in the Indenture included as
Exhibit 4.4 above).
* 4.5 Indenture by and between Registrant and Bank One Trust
Company, N.A., as Trustee, dated as of December 1,
1995, regarding Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, incorporated herein by
reference to Exhibit 4.1 to Registrant's Registration
Statement on Form S-3, Registration No. 333-1189,
filed February 23, 1996.
* 4.5.1 Form of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003 issued under
the Indenture included as Exhibit 4.5
above, incorporated herein by reference
to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3,
Registration No. 333-1189, filed February
23, 1996.
* 4.5.2 Registration Rights Agreement by and
among Registrant and Hambrecht & Quist
LLC and Prudential Securities
Incorporated, as the Initial Purchasers
of Registrant's 5-3/4% Convertible
Subordinated Notes due 2003, with respect
to the registration of said Notes under
applicable securities laws, incorporated
herein by reference to Exhibit 4.3 to
Registrant's Registration Statement on
Form S-3, Registration No. 333-1189,
filed February 23, 1996.
10.1 Compensation and Benefits Plans of Registrant.
* 10.1.1 Amended and Restated Retirement and
Uniform Matching Profit-Sharing Plan of
Registrant, effective July 1, 1993,
incorporated herein by reference to
Exhibit 10.1.1 to Registrant's Form 10-K
for the year ended March 31, 1994.
* 10.1.1.a Amendment, dated
January 1, 1994, to the
Plan included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.a to Registrant's
Form 10-K for the year
ended March 31, 1994.
* 10.1.1.b Amendment, dated
April 1, 1994, to the
Plan included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.b to Registrant's
Form 10-K for the year
ended March 31, 1994.
* 10.1.1.c Amendment, dated
January 1, 1994, to the
Plan included as Exhibit
10.1.1 above,
incorporated herein by
reference to Exhibit
10.1.1.c to Registrant's
Form 10-Q for the
quarter ended December
31, 1994.
** 10.1.2 1990 Stock Option Plan for employees of
Registrant, as amended, filed herewith.
** 10.1.3 1990 Stock Option Plan for Non-Employee
Directors of Registrant, as amended,
filed herewith.
* 10.1.4 Non-Qualified Stock Option Agreement
between Registrant and Raj Reddy, dated
as of October 17, 1988, incorporated
herein by reference to Exhibit 10.1.6 to
Registrant's Form 10-K for the year ended
March 31, 1994.
<PAGE> 29
* 10.1.4.a Description of amendment
extending the term of
the Agreement included
as Exhibit 10.1.4 above,
incorporated herein by
reference to Exhibit
10.1.6.a to Registrant's
Form 10-Q for the
quarter ended September
30, 1994.
* 10.1.5 1992 Restricted Stock Plan of Registrant,
incorporated herein by reference to
Exhibit 10.1.17 to Registrant's Form 10-Q
for the quarter ended December 31, 1993.
* 10.1.5.a Amendment, dated
December 7, 1993, to the
Plan included as Exhibit
10.1.5 above,
incorporated herein by
reference to Exhibit
10.1.17.a to
Registrant's Form 10-Q
for the quarter ended
December 31, 1993.
* 10.1.5.b Amendment, dated
July 18, 1994, to the
Plan included as Exhibit
10.1.5 above,
incorporated herein by
reference to Exhibit
10.1.17.b to
Registrant's Form 10-Q
for the quarter ended
September 30, 1994.
* 10.1.6 1995 Employee Stock Purchase Plan
of Registrant, as amended, incorporated
herein by reference to Exhibit 10.1.7 to
Registrant's Form 10-Q for the quarter
ended September 30, 1995.
* 10.1.7 1996 Stock Option Plan for employees,
directors and advisors of Aironet
Wireless Communications, Inc., a
subsidiary of Registrant, incorporated
herein by reference to Exhibit 10.1.7 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.8 Non-Competition Agreement by and between
Registrant and Robert F. Meyerson,
effective February 27, 1997, incorporated
herein by reference to Exhibit 10.1.8 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.9 Description of terms of employment of
Frank E. Brick with Registrant for the
three fiscal years ending March 31, 2000,
incorporated herein by reference to
Exhibit 10.1.9 to Registrant's Form 10-Q
for the quarter ended June 30, 1997.
* 10.1.10 Employment Agreement between Registrant
and Leonard D. Abeita, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.10 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.11 Employment Agreement between Registrant
and James G. Cleveland, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.11 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.12 Employment Agreement between Registrant
and Kenneth W. Haver, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.12 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.13 Employment Agreement between Registrant
and David D. Loadman, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.13 to
Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.14 Employment Agreement between Registrant
and David W. Porter, effective as of
April 1, 1997, incorporated herein by
reference to Exhibit 10.1.14 to
Registrant's Form 10-K for the year ended
<PAGE> 30
March 31, 1997.
* 10.1.15 Employment Agreement between Registrant
and Dan R. Wipff, effective as of April
1, 1997, incorporated herein by reference
to Exhibit 10.1.15 to Registrant's Form
10-K for the year ended March 31, 1997.
* 10.1.16 Letter of the Audit Committee of
Registrant's Board of Directors, dated
July 22, 1996, engaging Norton Rose to
act as the Committee's delegate to advise
and assist Registrant's management,
incorporated herein by reference to
Exhibit 10.1.16 to Registrant's Form 10-K
for the year ended March 31, 1997.
10.2 Material Leases of Registrant.
* 10.2.1 Lease between Registrant and 3330
W. Market Properties, dated as of
December 30, 1986, incorporated herein by
reference to Exhibit 10.2.1 to
Registrant's Form 10-K for the year ended
March 31, 1994.
* 10.2.2 Standard Office Lease (Modified Net
Lease) between Registrant and John D.
Dellagnese III, dated as of July 19,
1995, including an Addendum thereto,
incorporated herein by reference to
Exhibit 10.2.4 to Registrant's Form 10-K
for the year ended March 31, 1996.
* 10.2.2.a Second Addendum, dated
as of October 5, 1995,
to the Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.4.a to Registrant's
Form 10-K for the year
ended March 31, 1996.
* 10.2.2.b Third Addendum, dated as
of March 1, 1996, to the
Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.4.b to Registrant's
Form 10-K for the year
ended March 31, 1996.
* 10.2.2.c Fourth Addendum, dated
as of April 16, 1996, to
the Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.2.c to Registrant's
Form 10-Q for the
quarter ended June 30,
1997.
* 10.2.2.d Fifth Addendum, dated as
of June 24, 1997, to the
Lease included as
Exhibit 10.2.2 above,
incorporated herein by
reference to Exhibit
10.2.2.d to Registrant's
Form 10-Q for the
quarter ended June 30,
1997.
10.3 Credit Agreements of Registrant.
* 10.3.1 Credit Agreement by and among Registrant,
the lenders party thereto from time to
time and The Bank of New York, as letter
of credit issuer, swing line lender and
agent for the lenders, dated as of March
8, 1996, incorporated herein by reference
to Exhibit 10.3.2 to Registrant's Form
10-K for the year ended March 31, 1996.
* 10.3.1.a Amendment No. 1, dated
as of August 6, 1996, to
the Agreement included
as Exhibit 10.3.1 above,
incorporated herein by
reference to Exhibit
10.3.2.a to Registrant's
Form 8-K dated August
16, 1996.
<PAGE> 31
* 10.3.1.b Security Agreement,
dated as of August 6,
1996, by and among
Registrant and The Bank
of New York, as Agent,
incorporated herein by
reference to Exhibit
10.3.2.b to Registrant's
Form 8-K dated August
16, 1996.
* 10.3.1.c Amendment No. 2, dated
as of December 16, 1996,
to the Agreement
included as Exhibit
10.3.1 above,
incorporated herein by
reference to Exhibit
10.3.2.c to Registrant's
Form 8-K dated December
16, 1996.
* 10.3.2 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated September 8,
1995, and related Letter Agreement
between them of even date, incorporated
herein by reference to Exhibit 10.3.2 to
Registrant's Form 10-Q for the quarter
ended September 30, 1995.
* 10.3.3 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated November 24,
1995, and related Letter Agreement
between them dated November 22, 1995,
incorporated herein by reference to
Exhibit 10.3.3 to Registrant's Form 10-Q
for the quarter ended December 31, 1995.
* 10.3.4 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated January 31, 1996,
and related Letter Agreement between them
dated of even date, incorporated herein
by reference to Exhibit 10.3.4 to
Registrant's Form 10-Q for the quarter
ended December 31, 1995.
* 10.3.5 Business Purpose Revolving Promissory
Note made by Registrant in favor of Bank
One, Akron, N.A., dated February 29,
1996, and related Letter Agreement
between them dated of even date,
incorporated herein by reference to
Exhibit 10.3.6 to Registrant's Form 10-K
for the year ended March 31, 1996.
* 10.3.6 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, Akron, N.A., dated
March 20, 1996, incorporated herein by
reference to Exhibit 10.3.7 to
Registrant's Form 10-K for the year ended
March 31, 1996.
* 10.3.7 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, Akron, N.A., dated
August 6, 1996 (in replacement of the
Note included as Exhibit 10.3.6 above),
incorporated herein by reference to
Exhibit 10.3.8 to Registrant's Form 8-K
dated August 16, 1996.
* 10.3.7.a Bank One Security
Agreement, dated as of
August 6, 1996, by and
among Registrant and
Bank One, Akron, N.A.,
incorporated herein by
reference to Exhibit
10.3.8.a to Registrant's
Form 8-K dated August
16, 1996.
* 10.3.8 Business Purpose Revolving Promissory
Note (Swing Line) made by Registrant in
favor of Bank One, NA (fka Bank One,
Akron, N.A.), dated August 5, 1997
(extending the credit facility evidenced
by the Note included as Exhibit 10.3.7
above), incorporated herein by reference
to Exhibit 10.3.8 to Registrant's Form
10-Q for the quarter ended June 30, 1997.
* 10.4 Amended and Restated Agreement between 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.
<PAGE> 32
* 10.5 Agreement of Purchase and Sale of Assets by and among
Vision Newco, Inc., a subsidiary of Registrant,
Virtual Vision, Inc., as debtor and debtor in
possession, and the Official Unsecured Creditors'
Committee, on behalf of the bankruptcy estate of
Virtual Vision, dated as of July 13, 1995,
incorporated herein by reference to Exhibit 10.8 to
Registrant's Form 10-Q for the quarter ended June 30,
1995.
* 10.6 Subscription Agreement by and among New Meta Licensing
Corporation, a subsidiary of Registrant, and certain
officers of Registrant as Purchasers, dated as of
September 19, 1995, incorporated herein by reference
to Exhibit 10.8 to Registrant's Form 10-Q for the
quarter ended September 30, 1995.
* 10.7 Shareholder Agreement by and among New Meta Licensing
Corporation, a subsidiary of Registrant, and its
Shareholders, including the officers of Registrant
party to the Agreement included as Exhibit 10.6 above,
dated as of September 29, 1995, incorporated herein by
reference to Exhibit 10.9 to Registrant's Form 10-Q
for the quarter ended September 30, 1995.
* 10.7.1 First Amendment, dated as of
September 29, 1995, to the Agreement
included as Exhibit 10.7 above,
incorporated herein by reference to
Exhibit 10.9.1 to Registrant's Form 10-Q
for the quarter ended December 31, 1995.
* 10.7.2 Second Amendment, dated as of January,
1996, to the Agreement included as
Exhibit 10.7 above, incorporated herein
by reference to Exhibit 10.9.2 to
Registrant's Form 10-Q for the quarter
ended December 31, 1995.
* 10.7.3 Amended and Restated Shareholder
Agreement by and among Metanetics
Corporation (fka New Meta Licensing
Corporation) and its Shareholders, dated
as of March 28, 1996, superseding the
Agreement included as Exhibit 10.7 above,
as amended by the First and Second
Amendments thereto included as Exhibits
10.7.1 and 10.7.2 above, incorporated
herein by reference to Exhibit 10.9.3 to
Registrant's Form 10-K for the year ended
March 31, 1996.
* 10.7.4 First Amendment, dated as of March 30,
1996, to the Agreement included as
Exhibit 10.7.3 above, incorporated herein
by reference to Exhibit 10.9.4 to
Registrant's Form 10-K for the year ended
March 31, 1996.
* 10.8 Stock Purchase Agreement by and among Meta Holding
Corporation, a subsidiary of Registrant, and certain
officers of Registrant as Purchasers, dated as of
March 30, 1996, incorporated herein by reference to
Exhibit 10.8 to Registrant's Form 10-K for the year
ended March 31, 1997.
* 10.9 Stock Purchase Agreement by and between Metanetics
Corporation, a subsidiary of Registrant fka New Meta
Licensing Corporation, and Accipiter II, Inc., dated
as of September 30, 1996, incorporated herein by
reference to Exhibit 10.8 to Registrant's Form 10-Q
for the quarter ended September 30, 1996.
* 10.10 Stock Purchase Agreement by and between Registrant and
Telantis Capital, Inc., dated as of March 31, 1997,
incorporated herein by reference to Exhibit 10.10 to
Registrant's Form 10-K for the year ended March 31,
1997.
** 11. Computation of earnings per share for the quarters and
six months ended September 30, 1997 and 1996, filed
herewith.
<PAGE> 33
** 27. Financial Data Schedule as of September 30, 1997,
filed herewith.
- ---------------
* Previously filed
** Filed herewith
<PAGE> 1
Exhibit 10.1.2
RESTATED
TELXON CORPORATION
1990 STOCK OPTION PLAN
AS AMENDED THROUGH AND EFFECTIVE
AS OF SEPTEMBER 10, 1997
1. PURPOSE OF THE PLAN. The purpose of this Plan is to promote the
best interests of the Company and its stockholders by enabling the Company to
attract and retain highly qualified personnel through rewarding valued
employees with the opportunity, pursuant to Options granted under the Plan, to
acquire a proprietary interest in the Company and thereby encourage them to put
forth their maximum efforts for the continued success and growth of the
Company.
2. DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this
Plan have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate number of
shares of Common Stock specified in Section 3(a) as being authorized
for issuance and sale under Options granted pursuant to the Plan,
subject to adjustment thereof in accordance with Section 12 of the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means the Committee appointed by the Board in
accordance with Paragraph (a) of Section 4 of the Plan, if a Committee
is appointed. If, with respect to any individual grant of Options
under this Plan, any member or members of the Committee would cause
such Committee not to satisfy the disinterested administration
requirement of Rule 16b-3, as then applicable to the Company under the
Act, or the "outside director" administration requirement of Code
Section 162(m)(4)(C) and the regulations thereunder, then in such
event the Committee shall be comprised of the Committee without such
<PAGE> 2
member or members. If no Committee has been appointed, any reference
to the "Committee" shall be deemed a reference to the "Board".
(g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Telxon Corporation, a Delaware
corporation.
(i) "Continuous Employment" means with respect to any
Employee, the continued employment of such Employee by the Company or
any Subsidiary without interruption or termination after the grant of
an Option to such Employee. Continuous Employment shall not be
considered interrupted in the case of sick leave, military leave or
any other leave of absence approved by the Board (provided that such
leave is for a period of not more than ninety (90) days or
re-employment upon the expiration of such leave is mandated by
contract or statute) or in the case of transfers between locations of
the Company or between the Company, any Subsidiary or any of their
respective successors.
(j) "Employee" means any person, including officers and
directors who are also officers, employed by the Company or any
Subsidiary. The payment of director's fees by the Company shall not be
sufficient to constitute a person as an "Employee" of the Company.
(k) "Option" means a right granted to a non-Employee Director
pursuant to the Plan to purchase a specified number of shares of
Common Stock at a specified price during a specified period and on
such other terms and conditions as may be specified pursuant to the
Plan. Options may be granted as Tax Qualified Options or as Options
which do not qualify as Tax Qualified Options.
(l) "Option Agreement" means the written agreement evidencing
an Option by and between the Company and the Optionee as required by
Section 14.
(m) "Optioned Stock" means the Common Stock subject to an
Option.
(n) "Optionee" means an Employee who receives an Option.
(o) "Plan" means this 1990 Stock Option Plan, as amended from
time to time.
(p) "Predecessor Plan" means the Company's 1988 Stock Option
Plan, as amended.
(q) "Repricing Transaction" means any grant(s) of Option(s)
reasonably related to any prior or potential Option(s), whether by an
exchange of existing Options or Options with new terms or the grant of
new Options in tandem with previously granted Options that will
operate to cancel the previously granted Options upon exercise, which
adjusts or amends the exercise price of a previously granted Option,
or repricing of previously granted
2
<PAGE> 3
Options or any other grant which would be required to be reported as a
repricing under Item 402(i) of Regulation S-K as then in effect under
the Act; but excluding any repricing occurring through the operation
of the antidilution provisions of Section 12 of the Plan.
(r) "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Act or any similar successor regulation exempting
certain transactions involving stock-based compensation arrangements
from the liability provisions of Section 16 of the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission.
(s) "Section 16 Person" means an Employee who is subject to
Section 16 of the Act, as interpreted by the rules and regulations
promulgated by the Commission thereunder, as adopted and amended from
time to time, and by formal or informal opinions of, and releases
published or other interpretive advice provided by, the Staff of the
Commission.
(t) "Securities Law Requirements" means the Act and the rules
and regulations promulgated by the Commission thereunder, as adopted
and amended from time to time, including but not limited to Rule
16b-3, and as interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided by, the Staff
of the Commission, and the requirements of any stock exchange,
automated interdealer quotation system or other recognized securities
market on which the Common Stock is listed or traded or in which the
Common Stock is included, as adopted and amended from time to time and
as interpreted by formal or informal opinions of, and other
interpretive advice, provided by the representatives of such stock
exchange, quotation system or other securities market.
(u) "Shares" means the Common Stock as adjusted in accordance
with Section 12 of the Plan.
(v) "Subsidiary" means a corporation of which not less than
fifty percent (50%) of the voting shares are owned by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(w) "Successor" means the estate of an Optionee or a person
who succeeds by will or the laws of descent and distribution to an
Optionee's right to exercise an Option.
(x) "Tax Qualified Option" means an Option which is intended
at the time of grant to qualify for special tax treatment under
Section 422A or other particular provisions of the Code and the
regulations, rulings and procedures promulgated, published or
otherwise provided thereunder, as adopted and amended from time to
time.
3
<PAGE> 4
3. STOCK SUBJECT TO THE PLAN.
(a) Number of Shares Issuable. Subject to adjustment in
accordance with the provisions of Section 12 of the Plan, the maximum
aggregate number of Authorized Shares which may be issued and sold
under Options granted pursuant to the Plan is equal to the sum of the
following:
(i) Pre-1995 Authorized Shares. 2,500,000 shares of
Common Stock, plus such number of the 1,200,000 shares of
Common Stock authorized for issuance and sale under the
Predecessor Plan which (A) as of the October 18, 1990 date
this Plan was originally approved by the stockholders of the
Company, were not subject to grants (including conditional
grants) of stock options then outstanding under the
Predecessor Plan (from and after stockholder approval of this
Plan, no further grants shall be made under the Predecessor
Plan, but any grants (including conditional grants) of stock
options outstanding under the Predecessor Plan at the time of
such approval shall continue in full force and effect in
accordance with their respective terms) or (B) to the extent
grants (including conditional grants) outstanding under the
Predecessor Plan as of the date of original stockholder
approval of this Plan are not exercised in full, are, as of
any subsequent date, (x) issued pursuant to the exercise of a
stock option granted under the Predecessor Plan in an amount
equal to the number of Shares already owned by the person
exercising such stock option which are delivered by such
person to the Company in payment of the exercise price and/or
related withholding taxes, (y) withheld by the Company, in
payment of the withholding taxes with respect to the exercise
of a stock option granted under the Predecessor Plan, from the
total number of shares with respect to which such option is
exercised, or (z) no longer subject to grants under the
Predecessor Plan by reason of such grants having expired or
lapsed or having been canceled, surrendered, forfeited or
otherwise terminated; plus
(ii) 1995 Authorized Shares. 850,000 Shares of
Common Stock (the "1995 Authorized Shares"); and plus
(iii) 1997 Authorized Shares. 750,000 Shares of
Common Stock (the "1997 Authorized Shares").
The inclusion under this Plan of such shares reserved for issuance and
sale under the Predecessor Plan as hereinabove provided shall not be
affected by the expiration or other termination of the Predecessor
Plan. The Shares issued and sold upon the exercise of Options may be
treasury Shares, Shares of original issue or a combination thereof.
(b) Computation of Shares Available for Grant. For purposes of
computing the number of Authorized Shares available from time to time
under the Plan for the grant of Options, the number of Shares subject
to each Option granted pursuant to the Plan shall be provisionally
counted against the Authorized Shares from and after the grant of such
Option but only for so long as and to the extent that such Option shall
remain outstanding and unexercised. Upon the exercise, in whole or in
part, of an Option, the number of Shares
4
<PAGE> 5
issued upon such exercise shall be permanently deducted from the
Authorized Shares, provided that no such permanent deduction shall be
made, and the provisional deduction against the Authorized Shares
shall be reversed, to the extent that the exercise price and/or the
withholding taxes with respect to such exercise are paid through the
delivery to the Company by the person exercising the Option of Shares
already owned by such person and/or through the withholding by the
Company of Shares from the total number of Shares with respect to
which the Option is exercised. The provisional deduction against the
Authorized Shares shall likewise be reversed to the extent of the
unexercised portion of an Option upon the expiration, lapse,
cancellation, surrender, forfeiture or other termination of such
Option. The Shares covered by any such reversal of a provisional
deduction against the Authorized Shares shall immediately become
available for the granting of new Options under the Plan with respect
thereto; provided, however, that any Shares covered by any such
reversal which were 1995 Authorized Shares or 1997 Authorized Shares
shall be subject to the restrictions set forth in Section 4(c) of the
Plan.
4. ADMINISTRATION OF THE PLAN.
(a) Procedure. The Plan shall be administered by the Board or
the Board may, in its discretion, appoint a Committee to administer the
Plan subject to such terms and conditions as the Board may prescribe;
provided that the terms upon which, including the time or times at or
within which, and the price or prices at which Shares may be purchased
upon the exercise of Options shall be approved or ratified by such
action of the Board or a committee duly designated by the Board from
its members as may be required by the Delaware General Corporation Law,
as amended from time to time. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to
time the Board may increase the size of the Committee and may appoint
additional members thereof, remove members (with or without cause),
fill vacancies however caused and remove all members of the Committee
and thereafter directly administer the Plan.
(b) Powers of the Committee. Subject to the provisions of
this Plan, the Committee shall have the authority, in its sole
discretion:
(i) To determine, upon review of relevant
information in accordance with Section 7(b) of the Plan, the
"Fair Market Value" (as defined in said Section 7(b)) of the
Shares;
(ii) To determine the Employees to whom, and the
time or times at which, Options shall be granted and the
number of Shares (up to a maximum of 500,000 Shares with
respect to which Options may be granted to any individual in
any one fiscal year of the Company) subject to purchase upon
exercise of each Option (except as expressly set forth above
in this Section 4(b)(ii) and such restrictions thereon as may
be imposed by applicable tax laws which will have to be
observed if the Committee intends that a particular Option
qualify as a Tax Qualified Option, there is no limit on the
time following the adoption or approval of this Plan within
which Options may be granted under the Plan so long as it
5
<PAGE> 6
remains in effect, on the number of Options which may be
granted to any one Employee or on the aggregate number of
Shares subject to purchase thereunder);
(iii) To determine the terms and provisions of each
Option (which terms and provisions need not be identical),
including, but not limited to, the following;
(A) The exercise price per Share, subject
to the provisions of Section 7 of the Plan; and
(B) Whether Options shall become
exercisable over a period of time and when they
shall be fully exercisable;
(iv) To accelerate the time as of which any Option
may be exercised;
(v) To amend any outstanding Option, subject to
the provisions of Section 19 of the Plan;
(vi) To authorize any person to prepare and execute
on behalf of the Company any instrument deemed by the
Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted thereunder or any
amendment to the Plan or any Option;
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating to
the Plan, to the extent not inconsistent with the Plan; and
(ix) To make all other determinations the Committee
may deem necessary or advisable in connection with the
administration of the Plan.
(c) Certain Limitations Applicable to Options Granted With
Respect to 1995 Authorized Shares and 1997 Authorized Shares.
Notwithstanding any other provision of the Plan, neither the Committee
nor the Board shall, with respect to any Option granted under the Plan
with respect to any 1995 Authorized Shares or 1997 Authorized Shares,
provide for an "Option Term" (as defined in Section 6 of the Plan) of
greater than eight (8) years from the date of grant thereof or approve
any Repricing Transaction.
(d) Effect of Board and Committee Decisions. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all
Employees and Optionees 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.
6
<PAGE> 7
(e) Exculpation and Indemnification. No member of the Board
or the Committee, and no Employee or other agent acting on behalf of
the Board or the Committee, shall be personally liable for any
decision, determination or action made or taken, or failed to be made
or taken, with respect to this Plan or any Option granted hereunder,
and the Company shall fully protect each such person in respect of any
such decision, determination or action and shall indemnify each such
person against any and all claims, losses, damages, expenses and
liabilities arising from or in connection with any such decision,
determination or action.
5. ELIGIBILITY. Options may be granted only to Employees who, in the
sole judgment of the Committee, have contributed or will contribute to the
success and growth of the Company. An Employee to whom the Company has
previously granted a stock option pursuant to this Plan or otherwise may, if he
is otherwise eligible, be granted additional Options.
The existence of this Plan shall not create in any Employee any right
to be granted an Option hereunder, and neither the existence of this Plan nor
the granting of any Options to any Employee hereunder shall confer upon such
Employee any right with respect to continuation of the employment of such
Employee by the Company or 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 Options granted to such Employee hereunder
except to issue the appropriate number of Shares to such Employee upon the
exercise of any Option granted to such Employee under this Plan prior to such
termination of employment, provided that such exercise is duly and timely made
in accordance with the provisions of this Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected in
the Option Agreement evidencing such Option, the term at the end of which each
Option shall expire (the "Option Term") shall be ten (10) years (eight (8) years
in the case of Options with respect to 1995 Authorized Shares or 1997 Authorized
Shares) from the date of grant thereof, provided that the Committee, if it
intends that a particular Option qualify as a Tax Qualified Option, will have to
observe such restrictions on the term of such Option as may be imposed by the
applicable tax laws in order for such Option so to qualify. Each Option shall
continue in effect in accordance with its terms notwithstanding that the Plan
may be terminated prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) Minimum Price Required. The per Share exercise price for
the Shares subject to an Option shall be such price as is determined by
the Committee at the time of grant of an Option and reflected in the
Option Agreement evidencing the same; provided that in no event shall
such exercise price per Share be less than the Fair Market Value per
Share as of the day prior to the date of grant of such Option.
7
<PAGE> 8
(b) Definition of "Fair Market Value". For all purposes under
the Plan, "Fair Market Value" per Share shall be determined by the
Committee in its sole discretion; provided that if the Shares are
included in the NASDAQ National Market System or listed on a stock
exchange on the date as of which the same is to be determined, the Fair
Market Value per Share shall be the closing price on such quotation
system or exchange which is the principal trading market for the Shares
on the date of determination or, if no sale price was reported for the
Shares on the date of determination, the closing price on such
principal trading market for the last trading day prior to the date of
determination for which a sale price was reported; provided further,
however, that if the foregoing method of determining Fair Market Value
is inconsistent with the then existing tax law requirements with
respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be
determined by the Committee in such manner as is required for such Tax
Qualified Option to qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing the Shares
being acquired through exercise of an Option will be issued to the Optionee,
the Optionee must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local withholding taxes, whether
domestic or foreign, required to be withheld in connection with the exercise of
an Option.
9. FORM OF PAYMENT.
(a) Acceptable Forms of Consideration. Except as may
otherwise be specified by the Committee in its sole discretion at the
time of grant thereof and reflected in the Option Agreement evidencing
such Option, the following forms of consideration will be accepted in
payment of the exercise price for the Shares to be issued upon
exercise of an Option and of the taxes required to be withheld in
connection with such exercise: (i) cash, (ii) personal check, (iii)
bank cashier's check, (iv) already owned Shares (duly endorsed for
transfer with signature guaranteed), or (v) any combination of the
foregoing. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing such Option, Shares withheld from the
Shares to be issued upon exercise of the Option, either alone or in
any combination with any of the other acceptable forms of
consideration recited in this Paragraph (a), will also be an accepted
form of consideration for payment of the taxes required to be withheld
in connection with the exercise of an Option. In addition to the
acceptable forms of consideration hereinabove recited in this
Paragraph (a), the Committee may determine in its sole discretion at
the time of grant of an Option, and if the Committee so determines,
shall provide in the Option Agreement evidencing such Option, that one
or both of the following additional forms of consideration will be
accepted, either alone or in any combination with any of the other
acceptable forms of consideration recited in this Paragraph (a), in
payment of the items specified: (vi) in payment of the exercise price
for the Shares to be issued upon exercise of the Option, Shares
withheld from the Shares to be issued upon such exercise, and/or (vii)
in payment of the exercise price for the Shares to be issued upon
exercise of an Option and the taxes required to be withheld in
connection with such exercise, a commitment for the delivery to the
Company of proceeds from the sale, pursuant to a
8
<PAGE> 9
brokerage or similar arrangement approved in advance by the Committee
in its sole discretion, of Shares to be issued upon exercise of the
Option. The forms of consideration which will be accepted in payment
of the exercise price for an Option and related withholding taxes
shall be specified in the Option Agreement evidencing such Option, the
person or persons entitled to exercise the Option shall be entitled to
elect from those so specified the form(s) to be used in effecting
payment with respect to a particular exercise; provided that any
election by a Section 16 Person to use already owned Shares or have
Shares withheld from those issuable upon such exercise shall be
effective only if made in accordance with the applicable requirements
of Rule 16b-3; and provided further that a commitment for the delivery
to the Company of proceeds from the sale, pursuant to a brokerage or
similar arrangement, of Shares to be issued upon exercise of an Option
will not be accepted from a Section 16 Person if under Securities Law
Requirements such a sale would be matched with such exercise to result
in "short swing" profit liability under Section 16(b) of the Act on
the part of such Section 16 Person with respect to such transaction.
(b) Withholding Tax Loans. In addition to any one or more of
the acceptable forms of consideration recited in Paragraph (a) of this
Section 9 which the Committee may permit in the Option Agreement to be
used for the payment of withholding taxes, the Committee may determine
in its discretion at the time of grant of an Option to permit the
Optionee (but not any Successor) to, and if the Committee so
determines, shall provide in the Option Agreement evidencing such
Option that such Optionee may borrow from the Company an amount
sufficient to pay the taxes required to be withheld in connection with
the exercise of such an Option, with each such borrowing to be
evidenced by a promissory note of the Optionee payable to the order of
the Company. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing an Option, each such loan shall be for a
term of five (5) years at a rate of interest equal to the Company's
then primary domestic commercial lender's prime or base rate as in
effect from time to time, with payments of interest on such loan due
quarterly and payments toward the principal of such loan due, to the
extent of the net proceeds therefrom, within fifteen (15) days after
any disposition by the Optionee of any Shares acquired upon exercise of
any stock option granted by the Company to the Optionee pursuant to
this Plan or otherwise (excluding any disposition of such Shares by
gift or to the Company in payment of the exercise price of a stock
option granted by the Company to the Optionee pursuant to this Plan or
otherwise and/or any related withholding taxes), provided that the
entire unpaid principal balance shall be due at the earlier of (i) the
expiration of the five (5) year term, or (ii) the termination of the
Optionee's Continuous Employment (other than by reason of Optionee's
"disability" (as defined in Section 10(d)) or "retirement" (as defined
in Section 10(e)).
(c) Company Withholding of Taxes. If, upon being notified by
the Company of the amount of the taxes required to be withheld in
connection with an exercise of an Option, the Optionee fails promptly
to pay, or to make arrangements acceptable to the Company for the
payment of such taxes, the Company shall have the right to elect (but
shall be under no obligation) to cover such taxes through:
9
<PAGE> 10
(i) withholding Shares from those issuable upon
such exercise, provided that any such election so to withhold
Shares with respect to the exercise of an Option by a Section
16 Person shall be effective only if made in accordance with
the applicable requirements of Rule 16b-3; and/or
(ii) deducting such taxes from any amounts payable
in cash to the Optionee by the Company for any reason as of
the time of such exercise or any time thereafter.
(d) Valuation of Shares Delivered or Withheld. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price and/or related
withholding taxes, such Shares shall be valued at Fair Market Value as
of the day immediately preceding the date of exercise and (ii) with
respect to the payment of withholding taxes, at Fair Market Value as of
the day immediately preceding the date tax withholding is required to
be made.
(e) Optionee Certification of Already Owned Shares. Already
owned Shares which were acquired through a previous exercise of a stock
option granted to an Optionee by the Company pursuant to this Plan or
otherwise may be used in payment of the exercise price of an Option
and/or related withholding taxes only if the previous exercise through
which such Shares were acquired was made as of a date not less than six
(6) months prior to the date of the exercise of the Option in
connection with which such Shares are being tendered as payment. A
tender of already owned Shares in payment of the exercise price of an
Option and/or related withholding taxes will not be accepted by the
Company unless accompanied by a written statement signed by the person
or persons entitled to exercise such Option certifying that either (i)
the Shares tendered in payment were acquired other than through the
exercise of a stock option granted by the Company or (ii) the Shares
tendered in payment were acquired through the exercise, on such date(s)
as shall be recited in such statement (which date(s) shall be not less
than six (6) months prior to the date of tender), of stock option(s)
granted by the Company.
(f) Delivery of Already Owned Shares. Where the person
exercising an Option elects to use already owned Shares in full or
partial payment of the exercise price and/or related withholding taxes,
the Committee may, in its sole discretion, accept, in lieu of physical
delivery of the stock certificates evidencing such Shares, such
constructive delivery of such Shares as may be satisfactory to the
Committee.
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<PAGE> 11
10. METHOD OF EXERCISE.
(a) Procedure for Exercise; Rights as a Stockholder. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Committee and as permitted under
the Plan. An Option may not be exercised for a fraction of a Share. In
order to exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company written notice of the number of Shares
with respect to which the Option is being exercised, accompanied by
payment in full of the aggregate price for the Shares so to be
acquired. To constitute an effective exercise of an Option, such notice
and payment shall be addressed to the attention of the Treasurer of the
Company and must be received at the principal executive office of the
Company (i) with respect to an Option that is terminated for
"Misconduct" (as defined below) pursuant to Paragraph (b) of this
Section 10 or for "Prohibited Conduct" (as defined in Section 16(a))
pursuant to Section 16(a), prior to the time of the occurrence of the
event constituting such Misconduct or Prohibited Conduct or (ii) with
respect to any other Option, by 5:00 p.m., local time, on the date of
expiration or termination of the Option. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends nor any
other rights as a stockholder shall exist with respect to the Optioned
Stock notwithstanding the exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in
Section 12.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under such
Option by the number of Shares as to which the Option is exercised,
including any Shares withheld from the Shares to be issued pursuant to
such exercise to cover the exercise price and/or related withholding
taxes.
(b) Termination of Employment. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option,
upon the termination of an Optionee's Continuous Employment (other than
by reason of the Optionee's death, disability or retirement), he may
exercise his Option (to the extent that he was entitled to exercise it
at the time of such termination of employment) until the earlier of (i)
the date thirty (30) days (or such longer period of time as is
determined by the Committee in its sole discretion at the time of such
termination of employment, provided that if the Committee intends that
a particular Option continue to qualify as a Tax Qualified Option, the
Committee will have to observe such restrictions as may be imposed by
applicable tax laws on the post-termination period within which a Tax
Qualified Option may be exercised if it wishes to ensure that any
post-termination exercise of such Option is made only within the period
permitted by such laws) after the effective date of the termination of
his employment or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates; provided, however,
that if the Optionee is terminated by the Company for Misconduct, then
such Option shall terminate effective as of the time of the conduct
constituting such Misconduct. As used in this Plan, "Misconduct" means
that the Optionee has engaged in Prohibited Conduct,
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<PAGE> 12
committed an act of embezzlement, fraud or theft with respect to the
property or business of the Company or a Subsidiary or deliberately
disregarded the rules of the Company or a Subsidiary in such a manner
as to cause material loss, damage or injury to or otherwise endanger
the property, reputation, employees or business prospects of the
Company or a Subsidiary. The Committee shall determine whether an
Optionee's employment was terminated by reason of Misconduct. In
making such determination, the Committee may, but shall not be
required to, give the Optionee an opportunity to be heard and to
present evidence on his behalf.
(c) Death of Optionee. Except as may otherwise be specified
by the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, upon the
death of an Optionee:
(i) who is at the time of his death in the employ of
the Company or a Subsidiary and who shall have been in
Continuous Employment since the date of grant of the Option,
the Option may be exercised (to the extent the Optionee would
have been entitled to do so had he continued living and
terminated employment six (6) months after the date of death)
by his Successor until the earlier of (A) the date six (6)
months (or, if the Committee intends that a particular Option
qualify as a Tax Qualified Option, such lesser period of time
within which the applicable tax laws may require that the
Option be exercised in order for such Option so to qualify)
following the date of the Optionee's death or (B) the
expiration date of such Option, and the Option shall
terminate on the earlier of such dates; or
(ii) within one (1) month after the termination of
Continuous Employment other than termination by the Company or
a Subsidiary for Misconduct or due to disability, the Option
may be exercised (to the extent the Optionee was entitled to
do so at the date of termination of Continuous Employment) by
his Successor until the earlier of (A) the date six (6) months
following the date of the Optionee's death (or, if the
Committee intends that a particular Option qualify as a Tax
Qualified Option, such lesser period of time within which the
applicable tax laws may require that the Option be exercised
in order for such Option so to qualify) or (B) the expiration
date of such Option, and the Option shall terminate on the
earlier of such dates.
(d) Disability of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option,
if an Optionee's Continuous Employment terminates due to optionee
having become permanently and totally disabled within the meaning of
Section 23(e)(3) of the Code ("disability"), the Option may be
exercised (to the extent the Optionee was entitled to do so as of the
effective date of the termination of Optionee's directorship by reason
of such disability) until the earlier of (i) the date one (1) year
after the effective date of such termination of his employment or (ii)
the expiration date of such Option, and the Option shall terminate on
the earlier of such dates.
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<PAGE> 13
(e) Retirement of Optionee. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, if an Optionee's
Continuous Employment terminates by reason of (A) his retirement at any age
entitling him to benefits under the provisions of any retirement plan of the
Company or any Subsidiary in which such Optionee participates; or (B) retirement
at any time after attaining age 65 (whichever circumstance is applicable
constituting "retirement"), the Option may be exercised (to the extent the
Optionee shall be entitled to do so as of the effective date of the termination
of his employment by reason of such retirement) until the earlier of (i) the
date three (3) months after the effective date of the termination of his
employment or (ii) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner by the Optionee
except at death by will or by the laws of descent and distribution and may be
exercised during the life of the Optionee only by the Optionee. No lien,
obligation or liability of an Optionee or a Successor shall attach to or
otherwise encumber the right and interest of such Optionee or Successor in and
to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) Adjustments, in general. Subject to the provisions of
Paragraph (b) of this Section 12 and to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been
granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of a stock option under this Plan or
the Predecessor Plan are again available for grant, as well as the
price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued and outstanding Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of Shares
or any other increase or decrease in the aggregate number of issued and
outstanding Shares effected without receipt of consideration by the
Company; provided, however, that the issuance of Shares pursuant to the
conversion or exchange of any securities of the Company convertible
into or exchangeable for Shares shall not be deemed to have been
"effected without receipt of consideration." Any fractional Shares
which would otherwise result from any such adjustments shall be
eliminated either by deleting all fractional Shares or by appropriate
rounding to the next higher (fractions of one-half or more) or lower
(fractions of less than one-half) whole Share. All such adjustments
shall be made by the Board in its sole discretion. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into or exchangeable for shares of
stock of any class, shall affect, and no adjustment by reason thereof
shall be made to, the number of or exercise price for Shares subject to
an Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise
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<PAGE> 14
of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee
the right to exercise his Option as to all or any part of the Optioned
Stock, including Shares as to which the Option would not otherwise
then be exercisable.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into
another corporation, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board,
in the exercise of its sole discretion, determines that, in lieu of
such assumption or substitution, the Optionee shall have the right to
exercise the Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise then be
exercisable. If in the event of a merger, consolidation or sale of
assets the Board makes an Option fully exercisable in lieu of
assumption or substitution, the Company shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days
from the date of such notice, and the Option will terminate upon the
expiration of such period.
(b) Special Adjustments upon Change in Control. In the event
of a "Change in Control" of the Company (as defined in Paragraph (c) of
this Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the
following acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such
Change in Control that are not yet fully vested on such date
shall become fully vested; and
(ii) The value of all outstanding Options, measured
by the excess of the "Change in Control Price" (as defined in
Paragraph (d) of this Section 12) over the exercise price,
shall be cashed out. The cash out proceeds shall be paid to
the Optionee or, in the event of death of an Optionee prior to
payment, to his Successor.
(c) Definition of "Change in Control". For purposes of this
Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act (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
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<PAGE> 15
(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.
(d) Definition of "Change in Control Price". For purposes of
this Section 12, "Change in Control Price" shall be, as determined by
the Board, (i) the highest closing sale price of a Share, as reported
by the NASDAQ National Market, any stock exchange on which the Shares
are listed or any other recognized securities market on which the
Shares are traded, at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by
the Board, in any bona fide transaction or bona fide offer related to
the Change in Control, at any time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall,
for all purposes, be the date on which the Committee makes the determination
granting such Option. Notice of such determination shall be given to each
Employee to whom an Option is so granted within a reasonable time after the
date of such grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under this Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 20(a), each such Option Agreement
shall contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement evidencing an Option granted to a Section 16 Person shall also
provide for such minimum waiting period from the date of grant before the Option
may be exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such Shares must be
held before making any disposition of such Shares, as may be required by Rule
16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
with respect to an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option or the issuance of Shares
upon exercise of an Option, the Company may require the person exercising such
Option to make such representations and warranties to the Company as may be
required, in the opinion of counsel for the Company, by any of the
aforementioned Securities Law Requirements and other laws, which may include,
without limitation, representations and warranties that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares.
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<PAGE> 16
The Company shall not have any liability to any Optionee in respect of
any delay in the sale or issuance of Shares hereunder until the Company is able
to obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain.
16. FOREFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) Loss of Unexercised Options. If an Optionee holding an
outstanding Option, without the written consent of the Company as
authorized by the Committee in its sole discretion, engages in any of
the following conduct (any such conduct being referred to as
"Prohibited Conduct") at any time during the period beginning on the
date the Optionee first entered the employ of the Company or a
Subsidiary and continuing for so long as any portion of such Option
remains outstanding and unexercised (the "Grant Period"):
(i) rendering services for any organization or
engaging directly or indirectly in any business which, in the
sole judgment of the Committee, is or becomes competitive with
the Company or a Subsidiary, or where such rendering of
services or engaging in business, in the sole judgment of the
Committee, is or becomes otherwise prejudicial to or in
conflict with the interests of the Company or a Subsidiary;
provided that the ownership of a not more than ten percent
(10%) equity interest in any organization or business whose
equity is listed on a recognized securities exchange or traded
over-the-counter shall not constitute Prohibited Conduct
within the meaning of this Subparagraph (i);
(ii) disclosing to anyone outside the Company or any
Subsidiary, or use in other than the business of the Company
or any Subsidiary, any confidential or proprietary information
relating to the business of the Company or any Subsidiary,
acquired by the Optionee either during or after employment
with the Company or a Subsidiary;
(iii) except as may otherwise be permitted by any
agreement otherwise made by the Company or a Subsidiary with
the Optionee, failing to disclose fully and promptly in
writing and assign to the Company or to the Subsidiary by
which the Optionee is or was employed all right, title and
interest in any discovery, invention, process, method,
improvement or idea, whether or not patentable or subject to
copyright protection and whether or not reduced to tangible
form or reduced to practice, made or conceived by such person
during employment by the Company or such Subsidiary, relating
in any manner to the actual or contemplated business, research
or development work of the Company or such Subsidiary or to do
anything reasonably necessary to enable the Company or such
Subsidiary to secure a patent, copyright or similar protection
in the United States of America and/or in foreign countries as
the Company or such Subsidiary may elect; or
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<PAGE> 17
(iv) inducing or attempting to induce any customer
or supplier of the Company or a Subsidiary to breach any
contract with the Company or a Subsidiary or otherwise
terminate its relationship with the Company or a Subsidiary;
then the Committee shall have the right, upon determining that the
Optionee has engaged in any Prohibited Conduct at any time during the
Grant Period (in making such determination, the Committee may, but
shall not be required to, give the Optionee an opportunity to be heard
and to present evidence on his behalf), to declare the Option forfeited
and canceled effective as of the time of the conduct constituting such
Prohibited Conduct.
(b) Optionee Certification upon Exercise. Each time an
Optionee exercises an Option, the Optionee shall be deemed to certify
to the Company that such Optionee did not, without the written consent
of the Company as authorized by the Committee in its sole discretion,
engage in any Prohibited Conduct at any time during the period
beginning on the date the Optionee first entered the employ of the
Company or a Subsidiary and ending on the date of such exercise (the
"Pre-Exercise Period").
(c) Loss of Realized Benefits. In the event that the
Committee determines with respect to a particular exercise of an
Option that the Optionee engaged in any Prohibited Conduct at any time
during the Pre-Exercise Period or within one (1) year after such
exercise (in making such determination, the Committee may, but shall
not be required to, give the Optionee an opportunity to be heard and
to present evidence on his behalf), such Optionee shall be liable to
the Company (i) to the extent such Optionee has, prior to his receipt
of the "Forfeiture Notice" (as defined below), disposed of the Shares
acquired through such exercise, for payment to the Company of an
amount in cash equal to the excess of (A) the net cash proceeds from
such disposition (or if such Shares were disposed of other than for
cash, the aggregate Fair Market Value of such Shares as of the date of
disposition) over (B) that portion of the sum of the cash and the
aggregate Fair Market Value as of the exercise date of any already
owned Shares used by the Optionee to pay the exercise price for such
Shares (such sum being referred to as the "Exercise Payment") which is
allocable to the Shares disposed of in the proportion that such number
of Shares bears to the total number of Shares issued pursuant to such
Option exercise and (ii) to the extent such Optionee still owns at the
time he receives the Forfeiture Notice the Shares acquired through
such exercise, at the option of the Committee, either (A) for the
return of such Shares to the Company in exchange for a cash refund
from the Company to such Optionee in an amount equal to that portion
of the Exercise Payment which is allocable to the Shares still owned
in the proportion that such number of Shares bears to the total number
of Shares issued pursuant to such Option exercise (such portion being
referred to as the "Retained Shares Exercise Payment") or (B) for
payment to the Company of an amount in cash equal to the excess of the
aggregate Fair Market Value as of the exercise date of the Shares
still owned over the Retained Shares Exercise Payment. To enforce such
liability against such Optionee, the Committee shall notify the
Optionee thereof in writing within three (3) years of the date of the
affected Option exercise, which notice (the "Forfeiture Notice") shall
include a statement of the form of payment which the Committee has
elected to receive from the Optionee with respect to Shares still
owned by the Optionee. Within ten
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<PAGE> 18
(10) days after receiving the Forfeiture Notice, the Optionee shall
make full payment of such liability to the Company in cash, or to the
extent such Optionee still owns Shares acquired through the affected
exercise and the Committee elects in the Forfeiture Notice to receive
such Shares, stock certificates evidencing such Shares still owned by
the Optionee (duly endorsed for transfer with signature guaranteed).
In the event that the Committee elects to receive, and the Optionee
returns, Shares, the Company shall make the refund payment required to
be made to the Optionee with respect to such Shares upon the Company's
receipt of such Shares as hereinabove required.
(d) Cumulative Rights. The obligation of an Optionee under
this Section 16 to refrain from Prohibited Conduct is in addition to,
and does not in any way supersede or diminish, any other obligation of
such Optionee with respect to such matters which such Optionee may owe
to the Company, any Subsidiary or any other person under any agreement,
applicable law or otherwise (a "Similar Obligation"). Any action taken
by the Company or the Committee to enforce, compromise, settle or waive
the provisions of this Section 16 with respect to any particular event
constituting Prohibited Conduct shall not in any way affect the rights
of the Company, the Committee, any Subsidiary or any person against an
Optionee with respect to any other event constituting Prohibited
Conduct or any Similar Obligation, nor shall any action taken or failed
to be taken by the Company, any Subsidiary or any other person against
an Optionee to enforce, compromise, settle or waive any Similar
Obligation have any effect on the rights of the Company and the
Committee under this Section 16.
17. RESERVATION OF SHARES. 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.
18. EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and
shall be effective as of, August 27, 1990, subject to the approval hereof by the
vote of the Company's stockholders required therefor by the Delaware General
Corporation Law and applicable Securities Law Requirements within one (1) year
of the date of adoption by the Board, which approval was obtained at the Annual
Meeting of such stockholders held October 18, 1990. The Board has subsequently
approved increases in the number of Authorized Shares and, with respect to the
increases by the 1995 Authorized Shares and the 1997 Authorized Shares, certain
related amendments to this Plan subject to and which received such required
approval of the Company's stockholders at the Annual Meetings thereof held
August 19, 1992, August 19, 1994, August 31, 1995 and September 10, 1997. The
Plan shall continue in full force and effect until (i) terminated by resolution
of the Board or (ii) both (A) all Options granted under the Plan have been
exercised in full and (B) no Authorized Shares remain available for the granting
of additional Options. The termination of the Plan shall not affect Options
already granted, which Options shall remain in full force and effect in
accordance with their respective terms as if this Plan had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its
sole discretion, amend the Plan from time to time, provided that any amendment
which Rule 16b-3 or any other Securities Law Requirement requires be approved by
the stockholders of the
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<PAGE> 19
Company shall be made only with the approval of such stockholders. Amendments
to the Plan shall apply prospectively to all Options then outstanding under the
Plan, except in the case of any amendment which is adverse to an Optionee, in
which case the amendment shall apply with respect to the outstanding Options
held by the adversely affected Optionee only upon the consent of such Optionee
to such amendment. In exercising its authority under Section 4(b)(v) to amend
outstanding Options, the Committee likewise may make an amendment which
adversely affects the Optionee only upon the consent of such Optionee to such
amendment. Notwithstanding the provisions of this Section 19, the consent of
the Optionee shall not be required with respect to an amendment to the Plan or
to any outstanding Option which is made in order to comply with Securities Law
Requirements or which causes a Tax Qualified Option no longer to qualify as
such.
20. GENERAL PROVISIONS.
a. Grants to Foreign Employees. Notwithstanding any other
provision of this Plan to the contrary but subject to applicable
Securities Law Requirements and tax laws, to the extent deemed
necessary or appropriate by the Committee in its sole discretion in
order to further the purposes of the Plan with respect to Employees who
are foreign nationals and/or employed outside the United States of
America, an Option granted to any such Employee may be on terms and
conditions different from those specified in this Plan in recognition
of the differences in the laws, tax policies and customs applicable to
such an Employee, without the necessity of the Plan being amended to
provide for such different terms and conditions.
b. Nature of Benefits. Benefits realized by an Optionee under
this Plan or any Option granted hereunder shall not be deemed a part of
such Optionee's regular, recurring compensation for purposes of the
termination, indemnity or severance pay law of any country and shall
not be included in, nor have any effect on, the determination of
benefits under any other employee benefit plan or similar arrangement
provided to such Optionee by the Company 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
Option or portion thereof should be so included in order accurately to
reflect competitive compensation practices or to recognize that an
Option has been granted in lieu of a portion of competitive annual cash
compensation.
(c) Determination of Deadlines. If any day on or before which
action under this Plan or any Option granted hereunder must be taken
falls on a Saturday, Sunday or Company-recognized holiday, such action
may be taken on the next succeeding day which is not a Saturday, Sunday
or Company-recognized holiday; provided, however, that the provisions
of this Paragraph (c) shall not apply to, and shall not extend the time
for exercise of, any Option which is terminated for Misconduct pursuant
to Section 10(b) or for Prohibited Conduct pursuant to Section 16(a).
(d) Governing Law. To the extent that federal laws (such as
the Act or the Code) or the Delaware General Corporation Law do not
otherwise control, this Plan and all
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determinations made and actions taken pursuant hereto shall be
governed by the laws of the State of Ohio and construed accordingly.
(e) Gender and Number. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns
shall include the plural and vice versa.
(f) Captions. The captions contained in this Plan are for
convenience of reference only and do not affect the meaning of any term
or provision hereof.
20
<PAGE> 1
Exhibit 10.1.3
TELXON CORPORATION
1990 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED THROUGH AND EFFECTIVE
AS OF SEPTEMBER 10, 1997)
1. PURPOSE OF THE PLAN. The purpose of this Plan is to promote the best
interests of the Company and its stockholders by enabling the Company to attract
and retain the services of experienced and knowledgeable independent directors
by providing such directors the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this Plan
have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended
from time to time.
(b) "Authorized Shares" means the maximum aggregate number of
shares of Common Stock specified in Section 4(a) as being authorized
for issuance and sale under Options granted pursuant to the Plan,
subject to adjustment thereof in accordance with Section 12.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Commission" means the United States Securities and Exchange
Commission.
(f) "Committee" means the Committee appointed by the Board in
accordance with Section 5(a), if a Committee is appointed. The members
of such Committee shall be members of the Board. If no Committee has
been appointed, any reference to the "Committee" shall be deemed a
reference to the "Board."
<PAGE> 2
(g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Telxon Corporation, a Delaware corporation.
(i) "Director" means any person elected or duly appointed in
accordance with the certificate of incorporation or by-laws of the
Company, or applicable law, to serve on the Board.
(j) "Employee" means any person, including officers and
Directors who are also officers, employed by the Company or any
Subsidiary. The payment of director's fees by the Company shall not be
sufficient to constitute a person as an "Employee" of the Company.
(k) "Family Member" means (i) the spouse or any sibling of an
Optionee or any lineal descendant (including, but not limited to,
adopted and step children) of any of the foregoing, (ii) a trust for
the exclusive benefit of the Optionee and/or person(s) described in
clause (i) of this Section 2(k), or the trustee of such a trust in his,
her or its capacity as such, (iii) a partnership, corporation, limited
liability company or similar entity the partners, stockholders or other
owners of which include only the Optionee and/or person(s) described in
clause (i) of this Section 2(k).
(l) "Non-Profit Organization" means any organization which is
exempt from United States income taxes under Section 501(c)(3), (4),
(5), (6), (7), (8) or (10) of the Code.
(m) "Option" means a right granted to a non-Employee Director
pursuant to the Plan to purchase a specified number of shares of Common
Stock at a specified price during a specified period and on such other
terms and conditions as may be specified pursuant to the Plan. Options
may be granted as Tax Qualified Options or as Options which do not
qualify as Tax Qualified Options.
(n) "Option Agreement" means the written agreement evidencing an
Option by and between the Company and the Optionee as required by
Section 14.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means a non-Employee Director who receives an
Option.
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(q) "Plan" means this Telxon Corporation 1990 Stock Option Plan
for Non-Employee Directors.
(r) "Rule 16b-3" means Rule 16b-3 promulgated by the Commission
under the Act or any similar successor regulation exempting certain
transactions involving stock-based compensation arrangements from the
liability provisions of Section 16 of the Act, as adopted and amended
from time to time and as interpreted by formal or informal opinions of,
and releases published or other interpretive advice provided by, the
Staff of the Commission.
(s) "Securities Law Requirements" means the Securities Act of
1933, as amended from time to time, and the Act and the rules and
regulations promulgated by the Commission under such laws, as such
rules and regulations are adopted and amended from time to time,
including but not limited to Rule 16b-3, and as all such laws, rules
and regulations are interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided by, the Staff
of the Commission, and the requirements of any stock exchange,
automated inter-dealer quotation system or other recognized securities
market on which the Common Stock is listed or traded or in which the
Common Stock is included, as adopted and amended from time to time and
as interpreted by formal or informal opinions of, and other
interpretive advice provided by, the representatives of such stock
exchange, quotation system or other securities market.
(t) "Shares" means the Common Stock as adjusted in accordance
with Section 12.
(u) "Subsidiary" means a corporation of which not less than
fifty percent (50%) of the voting shares are owned by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(v) "Successor" means the estate of an Optionee or a person who
succeeds by will or the laws of descent and distribution to an
Optionee's right to exercise an Option.
(w) "Tax Qualified Option" means an Option which is intended at
the time of grant to qualify for special tax treatment under Section
422A or other particular provisions of the Code and the regulations,
rulings and procedures promulgated, published or otherwise provided
thereunder, as adopted and amended from time to time.
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3. QUALIFICATION OF PLAN. The Plan is intended to qualify for an
exemption from the operation of Section 16(b) of the Act, pursuant to Rule
16b-3. Further, with respect to Options granted hereunder prior to November 1,
1996, the Plan is structured to comply with the requirements of Rule
16b-3(c)(2)(ii) as then in effect regarding disinterested administration and
formula awards to ensure that Directors then receiving grants under the Plan
continue to be "disinterested persons," as that term is defined in Rule
16b-3(c)(2)(i) as in effect prior to November 1, 1996, for the purpose of
administering the Company's employee stock option plans under such Rule. Insofar
as transactions under this Plan are thus intended to comply with all applicable
conditions of Rule 16b-3, to the extent that any provision of the Plan or action
by the Board or the Committee fails to so comply, such provision or action shall
be deemed null and void to the extent permitted by law and deemed advisable by
the Board or, but only with respect to actions taken by it, the Committee.
4. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in
accordance with the provisions of Section 12, the maximum aggregate
number of Authorized Shares which may be issued and sold under Options
granted pursuant to the Plan is 400,000 shares of Common Stock. The
Shares issued and sold upon the exercise of Options may be treasury
Shares, Shares of original issue or a combination thereof.
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time
under the Plan for the grant of Options, the number of Shares subject
to each Option granted pursuant to the Plan shall be provisionally
counted against the Authorized Shares from and after the grant of such
Option but only for so long as and to the extent that such Option shall
remain outstanding and unexercised. Upon the exercise, in whole or in
part, of an Option, the number of Shares issued upon such exercise
shall be permanently deducted from the Authorized Shares, provided that
no such permanent deduction shall be made, and the provisional
deduction against the Authorized Shares shall be reversed, to the
extent that the exercise price and/or the withholding taxes with
respect to such exercise are paid through the delivery to the Company
by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised.
The provisional deduction against the Authorized Shares shall likewise
be reversed to the extent of the unexercised portion of an Option upon
the expiration, lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by any such reversal of
a provisional deduction against the Authorized Shares shall
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<PAGE> 5
immediately become available for the granting of new Options under the
Plan with respect thereto.
5. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or
the Board may, in its discretion, appoint a Committee to administer the
Plan, subject to such terms and conditions as the Board may prescribe,
which Committee, once appointed, shall continue to serve until
otherwise directed by the Board; provided that the granting of Options
under Section 6(c) and any action under the Plan affecting the number
of Shares covered thereby, the exercise price payable thereunder or the
times at which the same may be exercised (including, but not limited
to, the acceleration of the vesting thereof or any extension of the
period (subject to the maximum term fixed by Section 7(a)) during which
such an Option may be exercised) shall not be taken by the Committee
but shall lie solely within the authority of the full Board, subject to
the abstention of the Optionee from any decision regarding any Option
held by him or her. Subject to the provisions of the Plan, the
Committee has authority to manage and control the operation of the
Plan, interpret the provisions of the Plan, and prescribe, amend and
rescind rules and regulations relating to the Plan. From time to time
the Board may increase the size of the Committee and may appoint
additional members thereof, remove members (with or without cause),
fill vacancies however caused and remove all members of the Committee
and thereafter directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of this
Plan, the Committee shall have the authority, in its sole discretion:
(i) To determine, upon review of relevant information in
accordance with Section 8(b) of the Plan, the "Fair Market
Value" (as defined in said Section 8(b)) of the Shares;
(ii) To determine the terms and provisions of each Option;
(iii) To amend any outstanding Option;
(iv) To authorize any person to prepare and execute on
behalf of the Company any instrument deemed by the Committee to
be necessary or advisable to evidence or effectuate the Plan,
any Option granted thereunder or any amendment to the Plan or
any Option;
(v) To interpret the Plan;
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<PAGE> 6
(vi) To prescribe, amend and rescind, if deemed necessary
or appropriate, rules and regulations relating to the Plan, to
the extent not inconsistent with the Plan;
(vii) To make all other determinations the Committee may
deem necessary or advisable in connection with the
administration of the Plan; and
(viii) To accelerate the time as of which any Option shall
vest and may be exercised by the Optionee; provided, however,
that the Optionee shall not participate in any decision
regarding acceleration of vesting of any Option held by him or
her.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all
Directors and Optionees and the respective legal representatives,
heirs, successors and assigns of all of the foregoing and all other
persons claiming under or through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or
the Committee, and no Employee or other agent acting on behalf of the
Board or the Committee, shall be personally liable for any decision,
determination or action made or taken, or failed to be made or taken,
with respect to this Plan or any Option granted hereunder, and the
Company shall fully protect each such person in respect of any such
decision, determination or action and shall indemnify each such person
against any and all claims, losses, damages, expenses and liabilities
arising from or in connection with any such decision, determination or
action.
6. ELIGIBILITY; FORMULA GRANTS.
(a) ELIGIBILITY. Each Director who is not an Employee shall be
eligible to receive grants of Options under the Plan.
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<PAGE> 7
(b) FORMULA GRANTS.
(i) INITIAL GRANTS. Each non-Employee Director who is newly
elected or appointed to the Board after May 19, 1992 shall
automatically be granted an Option (the "Initial Grant") to
purchase 25,000 Shares of Common Stock (subject to adjustment as
provided in Section 12) on the day he or she joins the Board.
(ii) CONTINUING GRANTS. Each non-Employee Director shall
automatically be granted an Option (the "Continuing Grant") to
purchase 10,000 Shares of Common Stock (subject to adjustment as
provided in Section 12) on each anniversary of his or her
election or last re-election to the Board so long as such
Director is serving on the Board on the date of such
anniversary.
(c) DISCRETIONARY GRANTS. In its sole discretion, the Board may
at any time and from time to time while the Plan is in effect grant to
any one or more of the non-Employee Directors Options to purchase
Shares on such terms and subject to such provisions as the Board may,
and the Board is hereby authorized to, determine (which terms and
provisions need not be identical), including but not limited to, (i)
the number of Shares subject to the Option, (ii) the exercise price per
Share (subject to the provisions of Section 8), and (iii) whether the
Option shall become exercisable over a period of time and when it shall
be fully exercisable. Any Options granted under this Section 6(c) shall
be in addition to those automatically granted to eligible Directors
under Section 6(b) above, and there shall be no limit on the number of
Options which may be granted to any one eligible Director or on the
aggregate number of Shares subject to purchase thereunder.
7. TERM OF OPTIONS; VESTING.
(a) TERM OF OPTIONS. The term of each Option shall be seven (7)
years from the date of grant thereof provided that the Committee, if it
intends that a particular Option qualify as a Tax-Qualified Option,
shall observe such restrictions on the term of such Option as may be
imposed by applicable tax laws in order for such Option so to qualify.
Each Option shall continue in effect in accordance with its terms
notwithstanding that the Plan may be terminated prior to the expiration
of the term of such Option.
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<PAGE> 8
(b) VESTING.
(i) INITIAL GRANTS. Each Option constituting an Initial
Grant shall be exercisable as to one-third of the Shares subject
to the Option after the first anniversary of the grant date,
exercisable as to two-thirds of the Shares subject to the Option
after the second anniversary of the grant date, and exercisable
as to all or any part of the Shares subject to the Option after
the third anniversary of the grant date.
(ii) CONTINUING GRANTS. Each Option constituting a
Continuing Grant shall be exercisable as to all or any part of
the Shares subject to the Option after the third anniversary of
the grant date.
(iii) DISCRETIONARY GRANTS. Each Option granted pursuant to
Section 6(c) shall be exercisable at such times and as to all or
any part of the Shares subject to the Option as determined by
the Board at the time of grant and reflected in the Option
Agreement evidencing the same.
8. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for the
Shares subject to an Option shall be (i) with respect to Options
granted under Section 6(b), the Fair Market Value per Share as of the
day prior to the date of grant of such Option, and (ii) with respect to
Options granted under Section 6(c), such price per Share as the Board
may determine at the time of grant and reflected in the Option
Agreement evidencing the same, but in no event less than the Fair
Market Value per Share as of the day prior to the date of grant.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under
the Plan, "Fair Market Value" per Share shall be determined by the
Committee in its sole discretion; provided that if the Shares are
included in the NASDAQ National Market or listed on a stock exchange on
the date as of which the same is to be determined, the Fair Market
Value per Share shall be the closing price on such quotation system or
exchange which is the principal trading market for the Shares on the
date of determination or, if no sale price was reported for the Shares
on the date of determination, the closing price on such principal
trading market for the last trading day prior to the date of
determination for which a sale price was reported; provided further,
however, that if the foregoing method of determining Fair Market Value
is inconsistent with the then existing tax law requirements with
respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be
determined by the
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<PAGE> 9
Committee in such manner as is required for such Tax Qualified
Option to qualify as such.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise
be specified by the Committee in its sole discretion at the time of
grant thereof and reflected in the Option Agreement evidencing such
Option, the following forms of consideration will be accepted in
payment of the exercise price for the Shares to be issued upon exercise
of an Option: (i) cash, (ii) personal check, (iii) bank cashier's
check, (iv) already owned Shares (duly endorsed for transfer with
signature guaranteed), (v) Shares withheld from the Shares to be issued
upon such exercise, (vi) subject to compliance with applicable law, a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued
upon exercise of the Option, or (vii) any combination of the foregoing.
The person or persons entitled to exercise the Option shall be entitled
to elect from the foregoing forms of consideration the form(s) to be
used in effecting payment with respect to a particular exercise;
provided that any election by an Optionee to use already owned Shares
or have Shares withheld from those issuable upon such exercise shall be
effective only if made in accordance with the applicable requirements
of Rule 16b-3; and provided further that a commitment for the delivery
to the Company of proceeds from the sale, pursuant to a brokerage or
similar arrangement, of Shares to be issued upon exercise of an Option
will not be accepted from an Optionee if under Securities Law
Requirements such a sale would be matched with such exercise to result
in "short-swing" profit liability under Section 16(b) of the Act on the
part of such Optionee with respect to such transaction.
(b) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price, such Shares shall
be valued at Fair Market Value as of the day immediately preceding the
date of exercise.
(c) DELIVERY OF ALREADY OWNED SHARES. The Company shall not be
obligated to accept from an Optionee Shares he or she already owns as
full or partial payment of the exercise price of an Option unless such
tender is accompanied by a written statement of the Optionee certifying
that either (i) the Shares tendered in payment were acquired other than
through the exercise of a stock option granted by the Company, or (ii)
the Shares tendered in payment were acquired through the exercise, on
such date(s) as shall be recited in such statement (any such Shares
acquired through such an exercise occurring less than six (6)
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<PAGE> 10
months prior to the date of exercise of the Option in respect of which
such already owned Shares are tendered are ineligible for use as
payment toward such Option exercise), of stock option(s) granted by the
Company. The Committee may, in its sole discretion, accept, in lieu of
physical delivery of the stock certificates evidencing such Shares,
such constructive delivery of such Shares as may be satisfactory to the
Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as permitted under the
Plan. An Option may not be exercised for a fraction of a Share. In
order to exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company written notice of the number of Shares
with respect to which the Option is being exercised, accompanied by
payment in full of the aggregate price for the Shares so to be
acquired. To constitute an effective exercise of an Option, such notice
and payment shall be addressed to the attention of the Treasurer of the
Company and must be received at the principal executive office of the
Company by 5:00 p.m., local time, on the date of expiration or
termination of the Option. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends nor any other rights as a
stockholder shall exist with respect to the Optioned Stock
notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under such
Option by the number of Shares as to which the Option is exercised,
including any Shares withheld from the Shares to be issued pursuant to
such exercise to cover the exercise price.
(b) TERMINATION OF SERVICE. Except as may otherwise be specified
by the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, in the
event that an Optionee shall cease to be a Director (other than by
reason of the Optionee's death or disability), he may exercise his
Option (to the extent that he was entitled to exercise it at the time
he ceased to be a Director) until the earlier of (i) the date three (3)
months after the date Optionee ceased to be a Director or (ii) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
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(c) DEATH OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, upon the
death of an Optionee:
(i) who is at the time of his death a Director of the
Company, the Option may be exercised (to the extent the Optionee
would have been entitled to do so had he continued living and
terminated directorship six (6) months after the date of death)
by his Successor until the earlier of (A) the date six (6) months
(or, if the Committee intends that a particular Option qualify as
a Tax Qualified Option, such lesser period of time within which
the applicable tax laws may require that the Option be exercised
in order for such Option so to qualify) following the date of the
Optionee's death or (B) the expiration date of such Option, and
the Option shall terminate on the earlier of such dates; or
(ii) within thirty (30) days after the termination of
Optionee's directorship (other than termination due to
disability), the Option may be exercised (to the extent the
Optionee was entitled to do so at the date of termination of his
directorship) by his Successor until the earlier of (A) the date
six (6) months following the date of the Optionee's death (or, if
the Committee intends that a particular Option qualify as a Tax
Qualified Option, such lesser period of time within which the
applicable tax laws may require that the Option be exercised in
order for such Option so to qualify) or (B) the expiration date
of such Option, and the Option shall terminate on the earlier of
such dates.
(d) DISABILITY OF OPTIONEE. Except as may otherwise be specified
by the Committee in its sole discretion at the time of grant thereof
and reflected in the Option Agreement evidencing such Option, if an
Optionee's directorship terminates due to Optionee having become
permanently and totally disabled within the meaning of Section 23(e)(3)
of the Code ("disability"), the Option may be exercised (to the extent
the Optionee was entitled to do so as of the effective date of the
termination of Optionee's directorship by reason of such disability)
until the earlier of (i) the date one (1) year after the effective date
of such termination or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
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<PAGE> 12
11. LIMITED TRANSFERABILITY OF OPTIONS.
(a) Options granted under the Plan and any rights and privileges
appertaining thereto (i) may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner by the Optionee
other than (1) by will or the laws of descent and distribution, (2)
pursuant to a "qualified domestic relations order" as defined in Code
Section 414(p)(1)(B) and satisfying the requirements of Code Section
414(p)(1)(A), or (3) without the payment of any cash or other economic
consideration by the transferee to the transferor, to (A) a Family
Member, (B) a Non-Profit Organization, or (C) a charitable trust, and
(ii) shall not be subject to execution, attachment or similar process.
A transfer of an Option pursuant to one of the foregoing clauses
(i)(1)-(3) may relate to all or any part of the Shares (but must be for
whole Shares) which then continue to be subject to such Option. Written
evidence of any such transfer, accompanied by the transferring
Optionee's original copy of the Grant Agreement evidencing the
transferred Option, shall be promptly provided to the Company, in the
case of clauses (i)(1)-(2), upon the entry of the court order
effecting, or other judicial authorization or direction of, such
transfer or, in the case of clause (i)(3), upon the transferor's making
of such transfer, which transfer must in all cases comply with the
requirements of Section 15 and otherwise be in form and substance
reasonably acceptable to the Company before the Company shall be
obligated to recognize such transfer. Upon its receipt of the
foregoing, the Company shall cancel the original Option Agreement and
re-issue a replacement Option Agreement to the transferee for the
Option or portion thereof so transferred and to the transferring
Optionee for any balance of the Option he or she retains without
transfer.
(b) Upon the transfer of an Option in accordance with Section
11(a), the transferee shall succeed to, and be entitled to exercise,
all of the rights and privileges of the transferring Optionee, provided
that the Option in the hands of the transferee shall continue to be
subject to all of the terms, conditions and restrictions under the Plan
and the Option Agreement with respect to such Option which would be
applicable to the Option were it still held by the Optionee to whom it
was originally granted, including, without limitation, any requirement
for the continued exercisability or other effectiveness of the Option
based upon the life, employment or other status of the original
Optionee.
(c) The restrictions on transferability set forth in Section
11(a) shall not be construed to limit the ability of an Optionee to
elect to pay all or any portion of the exercise price using the form of
consideration described in clause (vi) of Section 9(a).
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12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of
Paragraph (b) of this Section 12 and to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been
granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of an Option under this Plan are again
available for grant, as well as the price per Share covered by each
such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of Shares or any other increase or
decrease in the aggregate number of issued and outstanding Shares
effected without receipt of consideration by the Company; provided,
however, that the issuance of Shares pursuant to the conversion or
exchange of any securities of the Company convertible into or
exchangeable for Shares shall not be deemed to have been "effected
without receipt of consideration." Any fractional Shares which would
otherwise result from any such adjustments shall be eliminated either
by deleting all fractional Shares or by appropriate rounding to the
next higher (fractions of one-half or more) or lower (fractions of less
than one-half) whole Share. All such adjustments shall be made by the
Board in its sole discretion. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into or exchangeable for shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made to, the
number of or exercise price for Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date
fixed by the Board and give each Optionee the right to exercise his
Option as to all or any part of the Optioned Stock, including Shares as
to which the Option would not otherwise then be exercisable.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into
another corporation, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board,
in the exercise of its sole discretion, determines that, in lieu of
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<PAGE> 14
such assumption or substitution, the Optionee shall have the right to
exercise the Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise then be
exercisable. If in the event of a merger, consolidation or sale of
assets the Board makes an Option fully exercisable in lieu of
assumption or substitution, the Company shall notify the Optionee that
the Option shall be fully exercisable for a period of thirty (30) days
from the date of such notice, and the Option will terminate upon the
expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event of
a "Change in Control" of the Company (as defined in Paragraph (c) of
this Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the
following acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such Change
in Control that are not yet fully vested on such date shall
become fully vested; and
(ii) The value of all outstanding Options, measured by the
excess of the "Change in Control Price" (as defined in Paragraph
(d) of this Section 12) over the exercise price, shall be cashed
out. The cash out proceeds shall be paid to the Optionee or, in
the event of death of an Optionee prior to payment, to his
Successor.
(c) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in Sections
13(d) and 14(d) of the Act (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
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<PAGE> 15
Company or the merger or consolidation of the Company with or
into another corporation.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of
this Section 12, "Change in Control Price" shall be, as determined by
the Board, (i) the highest closing sale price of a Share, as reported
by the NASDAQ National Market, any stock exchange on which the Shares
are listed or any other recognized securities market on which the
Shares are traded, at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by
members of the Board other than the Optionees, in any bona fide
transaction or bona fide offer related to the Change in Control, at any
time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be (i) with respect to Options granted under Section 6(b), the
dates for the automatic granting thereof as specified in said Section 6(b), and
(ii) with respect to Options granted under Section 6(c), the date on which the
Board makes the determination to grant such Options.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under this Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 19(a), each such Option Agreement
shall contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement shall also provide for such minimum waiting period from the
date of grant before the Option may be exercised, and such minimum holding
period from the date of the acquisition of Shares upon exercise of an Option for
which such Shares must be held before making any disposition of such Shares, as
may be required by Rule 16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES AND TRANSFERS OF OPTIONS.
Notwithstanding anything express or implied to the contrary in the Plan or any
Option Agreement made hereunder:
(a) No Shares shall be issued with respect to an Option unless
the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto, nor shall the transfer of an Option be
effective under Section 11 unless the same, 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
15
<PAGE> 16
and regulations promulgated under any of such laws, and shall be
further subject to the approval of counsel for the Company with respect
to such compliance. As a condition to the exercise of an Option or the
issuance of Shares upon exercise of an Option, or to the transfer of an
Option under Section 11, the Company may require the person exercising
such Option to make such representations and warranties to the Company
as may be required, in the opinion of counsel for the Company, by any
of the aforementioned Securities Law Requirements and other laws, which
may include, without limitation, representations and warranties that
the Shares which are being or may be purchased thereunder are being or
will be acquired only for investment and without any present intention
to sell or distribute such Shares.
(b) The Company shall not have any liability to any Optionee in
respect of any delay in the sale or issuance of Shares, or the transfer
of an Option, hereunder until the Company is able to obtain authority
from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which
authority is deemed by the Company's counsel to be necessary to the
lawful sale, issuance or transfer of such Shares or Option, as the case
may be, or any failure to sell or issue such Shares, or to effect any
such Option transfer, as to which the Company is unable to obtain such
requisite authority.
(c) The Company may, but shall be under no obligation to, effect
or obtain any registration or other qualification or approval of any
Option granted or transferred hereunder, or of any Shares issuable upon
the exercise thereof, under any applicable Securities Law Requirements
or any other applicable provisions of law, including without
limitation, any applicable state "blue sky" laws and foreign (national
and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and in the event any such
registration, qualification or approval is not effected or obtained,
such Option or Shares, as the case may be, shall be subject to such
transfer and/or other restrictions (including, if so provided by such
laws, rules and regulations, the prohibition of a particular
transaction) as may be imposed by such laws, rules and regulations
under such circumstances. By way of illustrating, but without limiting
the generality of, the foregoing provisions of this Section 14(c), as
of the time of the September 10, 1997 amendments to the Plan, the
Shares issuable upon the exercise of an Option by a Director were
covered by an effective registration statement which the Company had
prior to that date elected to file (consistent with the discretion
recognized in this Section 14(c)) with the Commission on Form S-8 and
would be freely tradable (subject to the filing of a Form 144 and the
other applicable requirement of Rule 144 as then promulgated by the
Commission) by the Director, but unless the Company were to file (but
in its discretion, the Company has not elected to file) with the
16
<PAGE> 17
Commission a registration statement with respect thereto on Form S-3 or
other available Form, the Shares issuable to a non-Director transferee
of such Option under Section 11 would not upon his or her exercise
thereof be able to dispose of such Shares on the public securities
markets for a one year period as is further required by Rule 144 in the
absence of an applicable Form S-8 or other registration statement. In
the event that any such transfer and/or other restrictions shall apply,
the Option Agreement evidencing such Option or the Shares so issued, as
the case may be, shall bear such legends referencing such restrictions
as the Company may reasonably require.
16. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
17. EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and
effective as of, October 18, 1990; subject to the approval hereof by the vote of
the Company's stockholders required therefor by the Delaware General Corporation
Law and applicable Securities Law Requirements within one (1) year of such
adoption by the Board, which approval was obtained at the Annual Meeting of such
stockholders held September 5, 1991. Amendments to this Plan changing the
frequency and amount of automatic grants and as to certain other matters were
adopted by the Board subject to the, and which received such, required approval
of the Company's stockholders at the Annual Meeting thereof held August 19,
1992. The Board also approved an increase in the number of Authorized Shares and
certain other amendments to this Plan subject to and which received such
required approval of the Company's stockholders at the Annual Meeting thereof
held August 31, 1995. On September 10, 1997, the Plan was further amended by the
Board, without the necessity of any stockholder action with respect to such
amendments, principally to permit discretionary grants of options in addition to
those automatically granted under the Plan and the limited transferability of
Options. The Plan shall continue in full force and effect until (i) terminated
by resolution of the Board or (ii) both (A) all Options granted under the Plan
have been exercised in full and (B) no Authorized Shares remain available for
the granting of additional Options. The termination of the Plan shall not affect
Options already granted, which Options shall remain in full force and effect in
accordance with their respective terms as if this Plan had not been terminated.
17
<PAGE> 18
18. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its
sole discretion, amend the Plan from time to time, provided that any amendment
which Rule 16b-3 or any other Securities Law Requirement requires be approved by
the stockholders of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to all Options
then outstanding under the Plan, except in the case of any amendment which is
adverse to an Optionee, in which case the amendment shall apply with respect to
the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 5(b)(vii) to amend outstanding Options, the Committee likewise may make
an amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 18,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
19. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN DIRECTORS. Notwithstanding any other
provision of this Plan to the contrary but subject to applicable
Securities Law Requirements and tax laws, to the extent deemed
necessary or appropriate by the Committee in its sole discretion in
order to further the purposes of the Plan with respect to Directors who
are foreign nationals and/or employed outside the United States of
America, an Option granted to any such Director may be on terms and
conditions different from those specified in this Plan in recognition
of the differences in the laws, tax policies and customs applicable to
such a Director, without the necessity of the Plan being amended to
provide for such different terms and conditions.
(b) DETERMINATION OF DEADLINES. If any day on or before which
action under this Plan or any Option granted hereunder must be taken
falls on a Saturday, Sunday or Company-recognized holiday, such action
may be taken on the next succeeding day which is not a Saturday, Sunday
or Company-recognized holiday.
(c) 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.
(d) GENDER AND NUMBER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or
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<PAGE> 19
neuter forms, and the singular form of nouns and pronouns shall include
the plural and vice versa.
(e) CAPTIONS. The captions contained in this Plan are for
convenience of reference only and do not affect the meaning of any term
or provision hereof.
19
<PAGE> 1
EXHIBIT 11
----------
TELXON CORPORATION
COMPUTATION OF EARNINGS PER SHARE
(In Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1997 1996 1997 1996
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Net income (loss) applicable to
common shares $2,388 $(4,702) $3,982 $(9,499)
====== ======= ====== =======
Weighted average common shares outstanding
for the period 16,273 16,182 16,027 16,265
====== ====== ====== ======
Earnings (loss) per common share:
On the weighted average common
shares outstanding for the period * $.15 $(.29) $.25 $(.58)
==== ===== ==== =====
<FN>
* 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 5-3/4% Convertible Subordinated Notes and 7-1/2% Convertible
Subordinated Debentures were omitted from the fully diluted calculation
due to their antidilutive effect.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 28,635
<SECURITIES> 0
<RECEIVABLES> 121,598
<ALLOWANCES> 1,790
<INVENTORY> 87,454
<CURRENT-ASSETS> 250,104
<PP&E> 139,210
<DEPRECIATION> 88,978
<TOTAL-ASSETS> 345,231
<CURRENT-LIABILITIES> 79,942
<BONDS> 107,859
0
0
<COMMON> 162
<OTHER-SE> 151,648
<TOTAL-LIABILITY-AND-EQUITY> 345,231
<SALES> 177,829
<TOTAL-REVENUES> 215,233
<CGS> 106,836
<TOTAL-COSTS> 130,298
<OTHER-EXPENSES> 74,974
<LOSS-PROVISION> 395
<INTEREST-EXPENSE> 2,685
<INCOME-PRETAX> 7,111
<INCOME-TAX> 3,129
<INCOME-CONTINUING> 3,982
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,982
<EPS-PRIMARY> .25
<EPS-DILUTED> .25
</TABLE>
