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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 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
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TELXON CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 74-1666060
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(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3330 West Market Street, Akron, Ohio 44333
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (330) 664-1000
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Securities registered pursuant Name of each exchange
to Section 12(b) of the Act: on which registered:
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None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 Par Value
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(Title of class)
7-1/2% Convertible Subordinated Debentures Due 2012
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(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ]. No [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ].
The aggregate market value of registrant's Common Stock held by non-affiliates
as of May 30, 1997, based on the last reported sales price of the Common Stock
as reported on the Nasdaq National Market for such date, was $281,710,515.
At May 31, 1997, there were 15,429,636 outstanding shares of the registrant's
Common Stock.
Documents Incorporated by Reference
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The registrant's definitive proxy statement for its 1997 Annual Meeting of
Stockholders to be held on September 10, 1997, which the registrant intends to
file with the Securities and Exchange Commission within 120 days of the close of
its fiscal year ended March 31, 1997, is incorporated by reference in Part III
of this Annual Report on Form 10-K from the date of filing such document.
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PART I
ITEM 1. BUSINESS
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GENERAL
Description of Company's Business
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Telxon Corporation (including its subsidiaries, "Telxon" or the "Company")
designs, manufactures, integrates, markets and supports transaction-based
wireless workforce automation systems. The Company's mobile computing devices
and wireless local area network ("LAN") products are integrated with its
customers' host enterprise computer systems and third-party wide area networks
("WANs"), enabling mobile workers to process data on a real-time basis at the
point of transaction. Telxon customers' needs to reduce cycle times, improve
asset management and create new services drive their requirements for real-time
information throughout their organizations. Telxon's products are sold worldwide
for use in key supply chain vertical markets, including retail, manufacturing,
warehouse/distribution, transportation/logistics and route sales. The Company
also serves several segments of the emerging mobile services markets, such as
insurance/financial services.
Historical Overview
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The Company was incorporated in Delaware in 1969 as "Electronic Laboratories,
Inc.", as the successor to a business established in Texas in 1967. The
Company's name was changed to "Telxon Corporation" in 1974.
Telxon completed its initial public offering of 1,600,000 shares of common stock
in July 1983, a secondary offering of 1,150,000 common shares in July 1985, a
$46 million issue of 7-1/2% Convertible Subordinated Debentures due 2012 in June
1987, and an $82.5 million issue of 5-3/4% Convertible Subordinated Notes due
2003 in December 1995. During fiscal 1991, the Company purchased and retired
$21.3 million of the 7-1/2% Debentures.
For more than two decades, the Company has developed and marketed portable
handheld terminals to retailers and wholesalers in the grocery, drug, hardware,
mass merchandising, full-line department store and specialty retail chain
segments. An increasing number of markets outside retail are also adopting
mobile transaction-based systems, including manufacturing,
warehouse/distribution, transportation/logistics, route sales and
insurance/financial services.
Telxon pioneered the commercialization of spread spectrum radio frequency ("RF")
technology in LANs for vertical market applications. Telxon is the leading
supplier of RF-enabled devices, having shipped over 500,000 units to date.
The Company's core mobile computing and wireless data communication products
integrate a wide array of electronic and RF components and advanced data
collection technologies. Through a combination of propriety application-specific
integrated circuit ("ASIC") technology, data radio technology and
market-responsive packaging, the Company seeks to deliver cost-effective
products that meet the technical and ergonomic needs of the Company's targeted
markets. The Company's wireless data networks are
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designed to take advantage of Telxon's patented microcellular network
architecture to allow mobile devices to roam seamlessly through large buildings
and groups of buildings with uninterrupted data flow.
The Company competes in a highly competitive marketplace characterized by
rapidly evolving technology. Certain of the important factors, risks and
uncertainties affecting its business and results of operations are referenced in
the discussion of the Company's business that follows. For a more detailed
discussion of those and other such factors, risks and uncertainties, see
"FACTORS THAT MAY AFFECT FUTURE RESULTS" under "Item 7. "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION" below in this
Form 10-K, which discussion should be read in conjunction with the discussion
under this Item 1.
Implementation of New Business Model
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During the course of fiscal 1997, management implemented its new, three-phase
business model. The first phase consisted of reducing product costs and
improving gross margins. The Company implemented a number of programs aimed at
reducing the cost of its products through new design procedures, improved
sourcing and model consolidations.
The second phase centered on improving operating efficiencies and lowering the
overall cost of serving the Company's global markets. Key management changes
were made in sales, product marketing, product development, customer service and
operations to drive greater efficiencies throughout the Company's business
processes.
The final phase is focused on redesigning Telxon's infrastructure and logistics
systems to address changing market conditions more efficiently. As part of a
program of continuous improvement, all operations of the Company will be
subject to ongoing review. In addition, the Company will continue to
consider strategies through which the passive value of investments in its
technical subsidiaries can be better reflected in the Company's value.
Subsequent to March 31, 1997, the Company initiated plans to consolidate and
relocate certain of its engineering, product development and customer support
operations to Houston, Texas, in close proximity to its existing manufacturing
and National Service Center operations. This new centralized structure will
allow Telxon to realize the benefits of concurrent engineering and improve its
ability to integrate world-class technology and customer support capabilities.
The Company expects the consolidation to result in further reductions in its
overall operating costs, a significant reduction in its product development time
to market and an enhanced ability to support its customers on a world-wide
basis.
Global Sales and Marketing
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The Company's sales in the United States and Canada are made directly through
its own sales force as well as through selected distributors, VARs, system
integrators, OEMs and strategic partners.
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The Company's international sales are made through subsidiaries located in
Australia, Belgium, France, Germany, Italy, Japan, Spain and the United
Kingdom, and through distributors in Africa, Asia, Europe, Mexico, the Middle
East and South America. Distributor support offices are located in Belgium,
Brazil and Singapore. (For further information regarding geographical segments
and revenues from the Company's International Division, see Note 13 to the
consolidated financial statements and Item 7, "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION.")
No customer accounted for 10% or more of the Company's total revenues in fiscal
1997.
World Class Systems Integration with Vertical Market Focus
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Telxon delivers transaction-based wireless workforce automation systems to its
customers on a world-wide basis. The Company utilizes its global technical
resources to integrate its full line of mobile computing products with a wide
array of operating systems and application software, advanced data collection
technologies and wireless networking systems. The end result is a fully
integrated solution that seamlessly connects the customers' mobile workers with
its host enterprise system, providing them with real-time access to the
information they need. The Company has developed a full menu of system
integration services, including engineering site surveys and project management.
The Company's global technical resources are available in each of its targeted
vertical markets. Telxon employs marketing specialists with industry-specific
knowledge to partner with its direct sales representatives and systems
engineers, VARs and system integrators to provide industry specific solutions
for its customers.
Technical Subsidiaries
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In fiscal 1993, the Company began a program to accelerate advanced research,
technology and product development by forming or purchasing new product and
technology companies exhibiting entrepreneurial innovation and leadership. The
Company also increased its investment in its own research and product
development operations. The following products and technologies were identified
through this program:
o Ruggedized mobile computers with wide area radio capabilities
o Wireless pen-based workslates
o Advanced character recognition software
o Advanced 2D bar code encoding and autodiscriminating decode
software
o Advanced image processing
o Advanced 900 MHz and 2.4 GHz spread spectrum radios and
wireless networks
o Advanced CPU and ASIC design
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o Advanced speech recognition
The Company's technical subsidiaries have been structured to work together with
its advanced research and product development resources to design, develop and
produce leading-edge technology products for the future. The companies acquired
or formed through this program are detailed below.
Aironet Wireless Communications(TM), Inc.
In January 1994, the Company formed Aironet Wireless Communications,
Inc. ("Aironet"(R)) of Akron, Ohio, to continue development and
marketing of wireless LAN systems. Aironet was formed from one
subsidiary company and two units of the Company:
o Telesystems SLW, Inc. -- designer and manufacturer of wireless
spread spectrum LAN radios that was purchased by Telxon in
1992.
o Telxon's Radio and Wireless Network Engineering Group --
designers of advanced spread spectrum radio technology and
network software.
o Telxon's RF Software Engineering Group -- advanced software
designers of universal wireless connectivity systems for
integration to other computer manufacturers' networks.
Aironet developed one of the first commercial applications for spread
spectrum radio technology and currently designs and develops universal
modular LAN radio products and networks which it sells to Telxon, VARs
and OEMs.
Metanetics(R) Corporation
Metanetics Corporation ("Metanetics") was formed in January 1994 in
Fort Myers, Florida, in part from the acquisition of Metamedia
Corporation of Port Jefferson, New York.
Metanetics develops 2D bar code encoding and autodiscriminating decode
software and advanced image reading technology.
Teletransaction(TM), Inc.
In February 1993, the Company acquired Teletransaction, Inc.
("Teletransaction") of Akron, Ohio. Teletransaction is a developer of
advanced pen and touch-screen wireless mobile workslates for vertical
markets served by the Company.
PenRight!(R) Corporation
In February 1994, the Company acquired PenRight! Corporation
("PenRight!") of Fremont, California. PenRight! is a leading developer
of pen-based character recognition software. PenRight! Pro(R) software
acts as a DOS based software development tool for creating pen-based
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o Aironet is a registered trademark, and Aironet Wireless
Communications is a trademark, of Aironet Wireless
Communications, Inc.
o Metanetics is a registered trademark of Metanetics
Corporation.
o Teletransaction is a trademark of Teletransaction, Inc.
o PenRight! and PenRight! Pro are registered trademarks of
PenRight! Corporation.
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applications in Microsoft(R)"C." PenRight! Pro supports ten
international languages. The Company has developed a new version to
support 486 platforms and Pen for Windows(R).
Virtual Vision(R), Inc.
In July 1995, the Company acquired the assets and assumed certain
liabilities of Virtual Vision, Inc. ("Virtual Vision") of Redmond,
Washington. Virtual Vision is a leading developer of "augmented
reality" head-mounted systems technology.
In addition to their technological value, the Company's technical subsidiaries
are also a potential source of financial value. The Company sold its ruggedized
notebook computer subsidiary, Itronix Corporation, to Dynatech Corporation of
Burlington, Massachusetts in December 1996 for $65 million in cash. The Company
had acquired Itronix in March 1993 for $4 million.
Telxon's future growth will depend in part on the success of both its global
sales and marketing efforts and its systems integration and project management
services, as well as further penetration of its targeted vertical markets and
its ability to capitalize on the investment in its technical subsidiaries.
ADVANCED RESEARCH AND PRODUCT DEVELOPMENT
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The Company focuses on advanced hardware, software, and firmware designs that
utilize Telxon proprietary ASIC chips. The Company's product development
strategy is to enhance the functionality and improve the price and performance
of its hardware and software, and to improve the packaging of its mobile
computing devices to address the specific requirements of each targeted market.
Products and systems are designed for modularity and the ability to upgrade,
where possible.
There can be no assurance that the Company's research and development activities
will lead to the successful introduction of new or improved products or that the
Company will not encounter delays or problems in connection therewith.
Furthermore, customers may defer purchases of existing products in anticipation
of new or improved versions of those products. Although the Company contemplates
the introduction of new products in fiscal 1998, the majority are scheduled for
introductions in the second half of the year. There can be no assurance that
there will not be delays in commencing volume production of such products or
that such products will ultimately be commercially successful.
During fiscal 1997, 1996 and 1995, the Company spent approximately $44.4
million, $45.4 million and $33.7 million, respectively, for Company-sponsored
research, development and engineering. For further discussion, see "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION -
Operating Expenses."
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o Microsoft and Pen for Windows are registered trademarks of
Microsoft Corporation.
o Virtual Vision is a registered trademark of Virtual Vision,
Inc.
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VIII. Manufacturing and Product Maintenance
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* Manufacturing Operations
Manufacturing operations consist of the assembly, testing and quality
assurance of components, sub-assemblies and finished products. The
Company's products are built and configured for various memory sizes,
packaging, peripherals, keyboards and displays.
In 1994, the Company's principal manufacturing operations were
consolidated into a newly constructed, Company-owned 116,000 square
foot facility. The facility provides a more efficient plant layout and
an opportunity for expansion of manufacturing capacity in the future.
For information regarding subsidiaries' manufacturing operations, see
"PROPERTIES."
All component parts in the Company's products are purchased from
outside sources. Packaging, custom-integrated circuits, keyboards and
printed circuit boards are produced to the Company's specifications. A
number of peripheral products, including wands, laser scanners,
controllers and receivers, are purchased as completed assemblies and
attached to and staged with Telxon's own products before delivery. Some
products are produced by outside contract manufacturers.
Telxon's International Procurement Office ("IPO") located in Singapore
provides the Company with an opportunity to procure materials from
lower cost, Far East suppliers. As more commodities are procured by the
IPO staff, continued cost savings are expected.
The Company has in the past encountered, and may in the future
encounter, shortages of supplies and delays in deliveries of necessary
components. While such shortages and delays could have a material
adverse effect on the Company's ability to ship products, the Company
has not suffered any such effects as the result of past shortages and
delays. Additionally, the Company does not believe that the loss of any
one supplier or subassembly manufacturer would have a material
long-term adverse effect on its business, although set-up costs and
delays could occur if the Company changed any single source supplier.
* Product Maintenance Operations
The Company provides maintenance and repair services for Telxon
customers from its National Service Center in Houston, Texas. The
Company also services various third-party products, including personal
computers, printers and communication devices. During the first half of
fiscal 1998, the Company is relocating its product repair and
maintenance operations to a newly constructed leased facility in Ciudad
Juarez, Mexico.
The Company also maintains a number of customer specific service depots
to provide service to users with large concentrations of Telxon
products. The Company offers a broad array of repair services and
maintenance agreements ranging from time and material charges to
sophisticated plans, such as the "just in time" program that offers
spare Telxon equipment supplied on-site to the customer, virtually
eliminating any system downtime.
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PRODUCTS AND SYSTEMS
Handhelds, Workslates and Other Mobile Computing Devices
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The Company has developed a broad line of handheld devices, which range from
low-end batch terminals to highly integrated mobile computers incorporating
laser bar code readers and spread spectrum radios, including a variety of
pen-based and touch-screen workslate devices.
Wireless Data Communication Products, Network Systems and Software
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Telxon provides wireless data communication solutions for mobile, distributed
data processing application systems through computing devices equipped with
radios to transfer programs or data to and from other computers or peripheral
devices while remaining mobile. The four types of available radios are (1)
spread spectrum (both direct sequence and frequency hopping), (2) wide area, (3)
micro radios, and (4) narrow band FM radios. The Company uses industry standard
"open" system protocols to provide seamless connectivity across a wide range of
host computer systems, including SNA and TCP/IP and other manufacturers'
communication networks.
Through Aironet, the Company has developed a series of spread spectrum data
radios, access points, repeaters, routers and bridges. The current products use
the 900 MHz or 2.4 GHz frequency bands, available utilizing either direct
sequence or frequency hopping technology, at data rates ranging from 232Kbps up
to 2Mbps. These radio products are integrated with Telxon's Microcellular
Architecture ("TMA") software to build universal wireless networks.
The Company has been granted a number of patents for its spread spectrum
technology and was the first company in the wireless industry to receive FCC and
Canadian Department of Communication approval for its spread spectrum radios. In
June 1996, Aironet received approval from the United States Federal
Communication Commission ("FCC") for its new 2.4 Ghz frequency hopping family of
wireless LAN products, making Aironet the only company that currently designs
and manufactures 900 MHz and 2.4 Ghz direct sequence and 2.4 Ghz frequency
hopping spread spectrum radios. The designs of the Company's wireless LAN
systems and products are based upon the Institute of Electrical and Electronic
Engineer's (IEEE) 802.11 draft specification for RF protocol standards, and the
Company intends to bring its systems and products into compliance with the
final IEEE 802.11 standards, which were just recently ratified by the IEEE
Standards Activity Board on June 26, 1997.
Telxon's AirGate(TM) System provides 900MHz and 2.4GHz spread spectrum radio
technology for fast, robust wireless data communications. Spread spectrum
technology and the Company's Gateway Connectivity System(TM) ("GCS"(TM)) are
used to create a wireless interface between Telxon mobile devices and customers'
host computers. The Company's spread spectrum radios are designed to fit into
Telxon's mobile devices and a variety of personal computers (PCs), client
servers and other mobile devices.
The AirGate System creates one or more radio cells, with each cell supporting an
area of coverage. The TMA system allows mobile devices to move from cell to cell
while maintaining a wireless connection to the host computer. The system can be
expanded to provide coverage for over 4 million square feet.
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o AirGate, Gateway Connectivity System and GCS are trademarks of Telxon
Corporation.
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The Company makes a line of base station and client/server card transceivers
that interface portable wireless products with a client/server or mainframe. The
Company also offers customers optional built-in acoustic couplers or integrated
modems that allow data transmission from remote telecommunication locations into
a host computer and client servers.
Third-party wide area network radios are integrated with the Company's mobile
computing devices for access to the ARDIS(R) or RAM(R) wireless wide area packet
data networks.
"Micro radios" are small, low-power FM radios designed and manufactured by the
Company and integrated into Telxon mobile devices and peripherals to provide
cable-free data communications between system components.
Narrow band FM radios from major manufacturers have been provided by Telxon
since 1984. These radios operate in the 450 MHz band and require FCC site
licensing.
Peripherals
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The Company integrates a variety of peripheral products into or with its regular
product line. They include laser bar code readers (internal and external),
modular printers (24, 40 and 80 columns), chargers, cradles, modems and RS232
interfaces. Many of these products or components are purchased from outside
vendors.
Software Operating Systems, Languages and Applications
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The Company is transitioning to a new generation of modularly designed mobile
computers, which embrace thin-client, industry standard, open systems
architectures in order to offer its customers access to a multitude of
operating systems, including Windows NT(R), Windows CE(R), and Sun Microsystems'
JavaOS(TM) and HotJava(TM) Browser, as well as Telxon's proprietary TCOS(TM)
(Telxon Common Operating System) and TCAL(R) (Telxon Common Application
Language).
The Company develops, through its subsidiaries PenRight! and Metanetics,
advanced character recognition software, advanced image reading and 2D bar code
encoding and autodiscriminating decode software.
INTELLECTUAL PROPERTY
The Company regards certain of its hardware and software products as proprietary
and relies on a combination of United States and foreign patent, copyright,
trademark and trade secret laws and license and other contractual
confidentiality provisions to protect its proprietary rights. In addition, the
Company's products also utilize hardware and software
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o ARDIS is a registered trademark of IBM Corporation and Motorola
Corporation.
o RAM is a registered trademark of RAM Mobile Data, Inc.
o Windows NT and Windows CE are registered trademarks of Microsoft
Corporation.
o JavaOS and HotJava Browser are trademarks of Sun Microsystems, Inc.
o TCOS is a trademark, and TCAL is a registered trademark, of Telxon
Corporation.
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technologies licensed from third parties. Given the rapidly changing nature of
the industry's technology, however, the competence and creative ability of the
Company's development, engineering, programming, marketing and service personnel
may be as or more important to its competitive position as the legal protections
and rights afforded by patent and other owned or licensed intellectual property
rights. The Company believes that its products and trademarks do not infringe on
the rights of third parties, but there can be no assurance that third parties
will not assert infringement claims.
GOVERNMENT REGULATION
The Company believes that its products are in material compliance with current
government regulations; however, regulatory changes may require modifications to
Company products in order for the Company to continue to be able to manufacture
and market these products. There can be no assurances that more stringent
regulations in these or other areas will not be issued in the future which could
have an adverse effect on the business of the Company. In addition, sales of the
Company's products could be adversely affected if more stringent safety
standards are adopted by customers.
Certain Company products intentionally transmit radio signals as part of their
normal operation. These products are subject to regulatory approval by the FCC
and corresponding authorities in each country in which they are marketed. Such
approvals are typically valid for the life of the product unless and until the
circuitry of the product is altered in material respects, in which case a new
approval may be required.
BACKLOG
Backlog at any particular date is dependent on timing of receipt of orders and,
therefore, is not a reliable indicator of future sales over an extended period
of time.
Historically, shipments made by the Company during any particular quarter have
generally represented orders received either during that quarter or shortly
before the beginning of that quarter, and shipments for orders received in a
fiscal quarter have generally been filled from products manufactured in that
quarter. The Company maintains significant levels of raw materials to facilitate
meeting delivery requirements of its customers, but there can be no assurance
that during any given quarter, the Company has or can procure the appropriate
mix of raw materials in order to accommodate such orders. Therefore, the
Company's financial performance in any quarter has generally been dependent to a
significant degree upon obtaining orders in that quarter which can be
manufactured and delivered to its customers in that quarter. As a result,
financial performance for any given quarter cannot be known or fully assessed
until near the end of that quarter. However, the Company's product line
streamlining and standardization initiatives are intended, among other things,
to reduce its dependence on same quarter sales fulfillment through normalized
production levels. There can be no assurances that such initiatives will be
successfully implemented or produce the intended benefits.
COMPETITION
The computer industry, of which Telxon's mobile computing systems are a part, is
highly competitive and characterized by advances in technology which frequently
result in the introduction of new products with improved performance
characteristics. Failure to keep pace with product and technological advances
could negatively affect the Company's competitive position and prospects for
growth.
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The Company competes directly and indirectly with a number of companies in its
market segments. Frequent competitors include Symbol Technologies, Inc.,
Bohemia, New York, and the Intermec Division of Western Atlas Inc., Beverly
Hills, California, which acquired Norand Corporation in March 1997. In addition,
companies that are participants in the broader computer industry are potential
competitors. Some of the Company's competitors and potential competitors have
substantially greater financial, technical, intellectual property, marketing and
human resources than the Company.
EMPLOYEES
As of May 31, 1997, the Company employed approximately 1,600 full-time
personnel. The Company also employs temporary production and other personnel.
ITEM 2. PROPERTIES
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The Company's corporate offices are located in Akron, Ohio in a 100,000 square
foot office building constructed in 1979 and occupied under a lease expiring
December 31, 2001. The lease provides the Company with an option, exercisable on
September 1, 2001, to purchase the office building and the land on which it is
situated for its then current fair market value.
The Company leases approximately 103,700 square feet of office space at
locations within a three mile radius of its corporate offices pursuant to
leases expiring from February 28, 1999, through February 28, 2001. These
facilities have housed the Company's engineering and customer support functions
and the corporate offices of its Aironet subsidiary as well as the Company's
market research and product marketing, systems development and testing,
integration and product quality management groups and certain corporate
development and support functions. On May 30, 1997, the Company announced plans
to consolidate and relocate certain of those engineering, product development
and customer support operations over a 12 to 18 month period to a site to be
determined in Houston, Texas, so that those operations are in closer proximity
to the existing manufacturing and service facilities described below.
As also announced on May 30, 1997, the manufacturing operations and related
office functions of the Aironet subsidiary are being relocated during the second
quarter of fiscal 1998 to the one-story, 32,500 square foot facility owned by
the Company within approximately one mile from its corporate offices and
previously used for its Customer Support Center, Training Group and New Product
Support Department, which functions have been relocated to other Akron
locations. Those Aironet operations have been occupying approximately 14,400
square feet of leased space in Markham, Ontario, Canada.
The Company owns two buildings in Houston, Texas of concrete construction,
located on a 15 acre site. The first building is a 116,000 square foot
manufacturing facility that was completed in April 1994. That building houses
all Telxon manufacturing operations, as well as warehousing operations and
administrative and manufacturing engineering offices. The second building is the
Company's 36,000 square foot National Service Center, completed in November
1993, which houses its product repair and maintenance operations. The Company
maintains an additional 12,000 square feet of warehousing space at a separate
location in Houston leased through March 31, 1998.
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By the end of the second quarter of fiscal 1998, the Company will be relocating
its product repair and maintenance operations (other than its top-of-the-line
Depot Express maintenance program) to a new 50,000 square foot facility of
masonry construction being built for it in Ciudad Juarez, Chihuahua, Mexico
which is now in the final stages of completion. The facility will be leased for
an initial term of seven years, with two five-year renewal options; the Company
will have an option to purchase the facility at the end of the initial or any
renewal term for its then current fair market value. The Company is also leasing
20,000 square feet of warehouse space in El Paso, Texas as a companion
receiving, staging and parts-stocking facility for the Mexican operations for an
initial term of five years, with two five-year renewal options.
In addition to these principal locations, the Company maintains 56 locations in
the United Sates, Canada, Western Europe, Australia, Japan and Southeast Asia
which are used principally for sales and customer service offices, as well as
for executive and engineering offices for certain of its domestic and
international subsidiaries. These locations are generally leased for terms which
range from one to three years.
The Company believes that its existing and planned facilities will be adequate
for its reasonably foreseeable level of operations.
ITEM 3. LEGAL PROCEEDINGS
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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 Court granted each defendant
summary judgment on all counts, which the plaintiffs appealed to the United
States Sixth Circuit Court of Appeals. The appeal
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was heard on October 24, 1996, and the parties are awaiting the decision from
the Court of Appeals. The defendants intend to continue vigorously defending the
Consolidated Class Action. Though there can be no assurance that the Company's
summary judgment will be upheld on appeal on all counts or as to the ultimate
outcome of any portion of the case with respect to which the summary judgment
may be reversed, no provision has been made in the accompanying consolidated
financial statements for any liability that may result to the Company in such an
event.
On September 21, 1993, a derivative Complaint was filed in the Court of Chancery
of the State of Delaware, in and for Newcastle County, by an alleged stockholder
of Telxon derivatively on behalf of Telxon. The named defendants are the
Company; Robert F. Meyerson, 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.
The claims relating to breach of fiduciary duty survived the Motion to Dismiss
and are now the subject of discovery, which is continuing; no deadline for the
completion of the discovery has yet been set by the Court.
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. 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 various other
legal actions
13
<PAGE> 14
which have been reflected in the accompanying consolidated financial statements,
are covered by insurance or in management's opinion would not have a material
adverse effect on the Company's consolidated financial position, results of
operations or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
There were no matters submitted to a vote of security holders during the quarter
ended March 31, 1997.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
- ---------------------------------------------
The following are the executive officers of the Company, who have been either
elected by the Board of Directors of the Company or appointed by the Chief
Executive Officer and ratified and approved by the Board of Directors:
Frank E. Brick, age 48, has been President of the Company since June
1996 and the Company's Chief Executive Officer since February 1997. Mr.
Brick was Chief Operating Officer of the Company from June 1996 until
being named Chief Executive Officer. He had also previously served the
Company as President and Chief Operating Officer, Telxon International
from February 1995 to June 1996 and as Senior Executive Vice President
from October 1993 to February 1995. Mr. Brick was President of
Basicomputer Corporation (business computer sales, integration and
network services; "Basicomputer") from 1985 until it was acquired in
September 1993 by The Future Now, Inc. ("The Future Now", since
consolidated into Intelligent Electronics) and also served as Chief
Executive Officer and a director of Basicomputer from 1988 until the
acquisition. He has been a director of the Company since July 1996.
Kenneth W. Haver, age 38, has been Senior Vice President, Finance and
Administration, and Chief Financial Officer of the Company since March
1995. He has also served the Company as Treasurer from May 1994 to
October 1996 and as Vice President, Financial Planning from September
1993 to March 1995. Mr. Haver joined the Company from Basicomputer,
where he had served as a Vice President and Treasurer for more than
five years.
Leonard D. Abeita, age 49, has been Senior Vice President, Global
Professional Services of the Company since November 1996. Other
capacities in which Mr. Abeita has served the Company since joining it
in March 1985 include as Senior Vice President, Product Services from
November 1994 to November 1996 and as Vice President, Customer Service
from September 1989 to November 1994.
James G. Cleveland, age 45, has been President, North America of the
Company since May 1997. He has also served the Company as Senior Vice
President, North America from September 1996 to May 1997; Senior Vice
President, North American Sales from February 1996 to September 1996;
Senior Vice President, North American Sales and Operations from October
1995 to February 1996; Senior Vice President, Vertical Systems Group
from March 1995 to October 1995; and Vice President, Sales and
Marketing from September 1993 to March 1995. Mr. Cleveland joined the
14
<PAGE> 15
Company from Basicomputer, where he had served as Vice President, Sales
from January 1993 to August 1993 and as Area Vice President, Midwest
Operations from February 1992 to January 1993.
David D. Loadman, age 36, has been Senior Vice President, Global
Product and Systems Development of the Company since September 1996.
Other capacities in which Mr. Loadman has served the Company since
joining it in October 1988 include as Senior Vice President, Global
Wireless Systems and Advanced Research and Development from June 1996
to September 1996; Senior Vice President, Technical Operations from
August 1994 to June 1996; Vice President, Global Technology from May
1994 to August 1994; Vice President, Systems Engineering Group from
August 1993 to May 1994; Vice President, Systems Integration from
February 1993 to August 1993; Director, Communications Systems from
November 1992 to February 1993; Director, Software Communications
Systems from August 1992 to November 1992; and Product Manager,
Hardware from September 1991 to August 1992.
David W. Porter, age 39, has been Senior Vice President, Global
Operations of the Company since September 1996. He has also served the
Company as Vice President, Operations from July 1996 to September 1996
and as Vice President, Asset Management from May 1996 to July 1996. Mr.
Porter joined the Company from The Future Now, where he had served as
Vice President, Operations from the time of its acquisition of
Basicomputer to May 1996, and prior to that time he worked for
Basicomputer as Vice President, Operations from August 1989 to August
1993.
Dan R. Wipff, age 54, has been the President and Chief Executive
Officer of the Company's Telxon Products manufacturing division since
July 1994. He was President and Chief Operating Officer of the Company
from October 1992, and the Company's Chief Financial Officer from
December 1991, until July 1994. Mr. Wipff was Senior Executive Vice
President and Chief Operating Officer of the Company from October 1989
to October 1992. He also served as the Company's Chief Financial
Officer from October 1989 to July 1990 and from October 1990 to
September 1991. Mr. Wipff served as a director of the Company from
April 1974 until September 1979 and from September 1980 until January
1995.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
- -------------------------------------------------------------------------
MATTERS
-------
The Company's Common Stock has been publicly traded since July 21, 1983, in the
over-the-counter market under the symbol TLXN. The principal trading market for
the Company's Common Stock is The Nasdaq Stock Market's National Market ("NNM").
The following table sets forth, with respect to the past two fiscal years of the
Company, the range of high and low closing prices as reported in the NNM and
cash dividends paid. The Company has not paid other than nominal dividends. The
Company intends to follow a policy of retaining earnings in order to finance the
continued growth and development of its business. Payment of dividends is within
the discretion of the Company's Board of Directors and will depend on, among
other factors, earnings, capital requirements and the operating and financial
condition of the Company.
<TABLE>
<CAPTION>
Fiscal Quarter
----------------------------------------------------------
Year Ended March 31 First Second Third Fourth Year
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997
High............. $27.50 $14.00 $13.75 $17.75 $27.50
Low.............. 9.88 11.00 11.25 13.50 9.88
Dividends paid... -- -- -- .01 .01
1996
High............. $22.88 $24.88 $25.75 $23.25 $25.75
Low.............. 14.50 20.13 20.00 18.13 14.50
Dividends paid... -- -- -- .01 .01
</TABLE>
As of May 31, 1997, there were approximately 1,208 holders of record of the
Company's Common Stock.
Historically, variations in the Company's actual or expected results of
operations and changes in analysts' earnings estimates and investment
recommendations have resulted in significant changes in the market price of the
Company's Common Stock. As a result, the market price of the Company's Common
Stock, like that of other technology companies, has been subject to significant
volatility. The Company's stock may also be affected by broader market trends
unrelated to the Company's own performance involving Company competitors,
technology stocks in general or the economy as a whole.
While the Company does, from time to time, communicate with securities analysts,
any opinions, projections and forecasts contained in reports issued by
securities analysts have been prepared by each analyst based on his own judgment
and research and are not the responsibility of the Company. It should not be
assumed that the Company agrees with any report issued by any analyst.
16
<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------
Set forth below are selected financial data for the five years ended March 31,
1997, which have been derived from the Company's audited financial statements
for the periods indicated. The selected financial data should be read in
conjunction with the financial statements, including the notes thereto, for the
three years ended March 31, 1997, 1996 and 1995 as included in Item 8 herein.
For further details on 1997 results, also refer to Item 7.
<TABLE>
<CAPTION>
Income Statement Data: Year Ended March 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues:
Product, net $ 391,406 $ 417,725 $ 323,916 $ 252,341 $ 197,116
Customer service, net 74,606 68,744 55,603 43,652 41,298
--------- --------- --------- --------- ---------
Total net revenues 466,012 486,469 379,519 295,993 238,414
Costs and expenses:
Cost of product revenues 266,624 249,120 189,568 143,347 123,511
Cost of customer service revenues 47,248 39,016 32,455 31,958 29,956
Selling expenses 88,321 82,207 68,279 59,894 46,393
Product development and
engineering expenses 44,439 45,383 33,728 29,058 17,798
General and administrative expenses 53,230 39,415 34,583 31,854 36,113
--------- --------- --------- --------- ---------
Total costs and expenses 499,862 455,141 358,613 296,111 253,771
--------- --------- --------- --------- ---------
(Loss) income from operations (33,850) 31,328 20,906 (118) (15,357)
Interest income 1,489 760 658 653 1,947
Interest expense (8,056) (6,770) (4,354) (2,459) (2,271)
Gain on sale of subsidiary stock -- 1,116 -- -- --
Other non-operating income 34,726 401 -- -- --
--------- --------- --------- --------- ---------
(Loss) income before income
taxes and cumulative effect
of an accounting change (5,691) 26,835 17,210 (1,924) (15,681)
Provision (benefit) for income
taxes 1,368 10,314 8,192 875 (4,056)
--------- --------- --------- --------- ---------
(Loss) income before cumulative
effect of an accounting change (7,059) 16,521 9,018 (2,799) (11,625)
Cumulative effect of a change in
accounting for income taxes -- -- -- -- (439)
--------- --------- --------- --------- ---------
Net (loss) income $ (7,059) $ 16,521 $ 9,018 $ (2,799) $ (12,064)
========= ========= ========= ========= =========
Earnings per common and common
equivalent share:
(Loss) income before cumulative
effect of an accounting change $ (.44) $ 1.00 $ .57 $ (.18) $ (.83)
Cumulative effect of a change in
accounting for income taxes -- -- -- -- (.03)
--------- --------- --------- --------- ---------
Net (loss) income per share $ (.44) $ 1.00 $ .57 $ (.18) $ (.86)
========= ========= ========= ========= =========
Average number of common and common
equivalent shares outstanding 16,062 16,490 15,909 15,210 13,991
Cash dividends $ .01 $ .01 $ .01 $ .01 $ .01
</TABLE>
17
<PAGE> 18
ITEM 6. SELECTED FINANCIAL DATA (Continued)
- -------------------------------------------
Balance Sheet Data:
<TABLE>
<CAPTION>
March 31,
-------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(in thousands)
<S> <C> <C> <C> <C> <C>
Total assets $361,784 $389,209 $276,127 $259,968 $212,621
Notes payable, capital lease
and other obligations due
within one year 1,060 2,119 27,507 25,207 679
Total long-term debt and
capital lease obligations 108,192 110,537 32,209 27,534 24,930
Working capital 169,058 185,995 101,617 80,066 84,738
Stockholders' equity 146,701 161,190 138,578 124,715 128,219
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- -------------------------------------------------------------------------
FINANCIAL CONDITION
-------------------
SUMMARY
The following table sets forth for the periods indicated (1) certain expense and
income items expressed as a percentage of total revenues, and (2) the
percentage increase or decrease of such items as compared to the corresponding
prior period. This table and the textual discussion and analysis which follows
should be read in conjunction with the financial statements, including the notes
thereto, for the three years ended March 31, 1997, 1996 and 1995 as included in
Item 8 herein.
<TABLE>
<CAPTION>
Period to Period
Percentage of Total Revenues Increase (Decrease)
---------------------------- ----------------------
1997 1996
Year ended March 31, Compared Compared
1997 1996 1995 to 1996 to 1995
------ ------ ------ -------- --------
<S> <C> <C> <C> <C> <C>
Product revenues, net 84.0% 85.9% 85.3% (6.3)% 29.0%
Customer service revenues, net 16.0 14.1 14.7 8.5 23.6
----- ----- -----
Total net revenues 100.0 100.0 100.0 (4.2) 28.2
Cost of product revenues 57.2 51.2 49.9 7.0 31.4
Cost of customer service
revenues 10.1 8.0 8.6 21.1 20.2
Selling expenses 19.0 17.0 18.0 7.4 20.4
Product development and
engineering expenses 9.5 9.3 8.9 (2.1) 34.6
General and administrative
expenses 11.5 8.1 9.1 35.1 14.0
----- ----- -----
107.3 93.6 94.5 9.8 26.9
----- ----- -----
(Loss) income from
operations (7.3) 6.4 5.5 (208.1) 49.9
Interest income .3 .2 .1 95.9 15.5
Interest expense (1.7) (1.4) (1.1) 19.0 55.5
Gain on sale of subsidiary stock -- .2 -- N.M. N.M.
Other non-operating income 7.5 .1 -- N.M. N.M.
----- ----- -----
(Loss) income before
income taxes (1.2) 5.5 4.5 (121.2) 55.9
Provision for income taxes .3 2.1 2.1 (86.7) 25.9
----- ----- -----
Net (loss) income (1.5)% 3.4% 2.4% (142.7) 83.2
===== ===== =====
</TABLE>
18
<PAGE> 19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
- -------------------------------------------------------------------------
FINANCIAL CONDITION (Continued)
-------------------------------
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
CONCERNING CERTAIN TRENDS AND OTHER FORWARD-LOOKING INFORMATION 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-K ARE INHERENTLY SUBJECT TO RISKS AND
UNCERTAINTIES WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO DIFFER
MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS. SEE "FACTORS THAT MAY AFFECT
FUTURE RESULTS" BELOW AND CAUTIONARY STATEMENTS APPEARING UNDER "ITEM 1.
BUSINESS" AND ELSEWHERE IN THIS FORM 10-K FOR A DISCUSSION OF THE IMPORTANT
FACTORS AFFECTING THE REALIZATION OF THOSE RESULTS.
OVERVIEW
For fiscal 1997, the Company recorded a net loss (including a non-operating
gain from the disposition of a subsidiary and certain non-recurring charges
recorded during the fiscal year) of $7.1 million or $.44 per share. This
compares to a net income of $16.5 million or $1.00 per share for fiscal 1996.
Inflation has not had a significant impact on the Company's consolidated
results of operations.
During fiscal 1997, the Company continued to work towards its goal of
delivering profitable growth and increased stockholder value by developing a
new, three-phase business model. The three phases of the model, which focus on
cost reduction, increased operating efficiencies and infrastructure
improvements, have been substantially implemented as of March 31, 1997. The
Company will continue to review its implementation of these initiatives for
further opportunities for improvement. The Company expects that the fiscal 1998
results will benefit from such initiatives.
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-K, 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 risks and other important factors which may affect the Company's business,
operating results, and financial and other conditions include, without
limitation, the following:
The Company's results of operations are affected by a variety of factors,
including economic conditions generally (both domestic and foreign) as well as
those specific to the industry in which it competes, decreases in average
selling price over the life of any particular product, the timing,
manufacturing complexity and expense of new product introductions (both by the
Company and its competitors), the timely implementation of new manufacturing
technologies, the ability to safeguard
19
<PAGE> 20
patents and other intellectual property in a rapidly evolving market, the rapid
increase in demand for some products and the rapid decline in demand for others
and the Company's ability to anticipate and plan for that changing market
demand. Certain of these factors are beyond the Company's control.
The Company's expectations regarding future profitability resulting from the
streamlining of the Company's product lines and operations and the achievement
of greater manufacturing efficiencies are dependent upon the successful
identification and implementation of appropriate cost saving and operational
efficiency initiatives. To the extent that these measures are not fully and
successfully implemented and maintained or their implementation is delayed, the
Company's ability to realize such cost reductions and profitability may be
materially adversely affected.
Historically, the Company's shipments during any particular quarter generally
represent orders received either during that quarter or shortly before the
beginning of that quarter. The Company endeavors to maintain sufficient levels
of purchased components to meet the delivery requirements of its customers, but
there can be no assurance that during any given quarter, the Company has or can
procure the appropriate mix of purchased components to accommodate such orders.
Therefore, the Company's financial performance in any quarter is dependent to a
significant degree upon obtaining orders which can be manufactured and
delivered to its customers in that quarter. As a result, financial performance
for any given quarter cannot be known or fully assessed until near the end of
that quarter. The Company's product line streamlining and standardization
initiatives are intended, among other things, to reduce its dependence on same
quarter sales fulfillment through normalized production levels. However, there
can be no assurances that such initiatives will be successfully implemented or
produce the intended benefits.
The Company has also historically recognized a substantial portion of its
product revenues in the last month of each quarter. A significant portion of the
Company's expenses are relatively fixed, and timing of increases in such
expenses is based in large part on the Company's forecast of future revenues. As
a result, if revenues do not meet expectations, the Company may be unable to
quickly adjust expenses to levels appropriate to actual revenues, which could
have a materially adverse effect on the Company's results of operations.
The markets in which the Company competes are intensely competitive and
characterized by increasingly rapid technological change, introduction of new
products with improved performance characteristics, product obsolescence and
price erosion. Failure to keep pace with product and technological advances
could negatively affect the Company's competitive position and prospects for
growth. Customers' anticipation of new or enhanced product offerings by the
Company or a competitor may lead them to defer purchases of the Company's
existing products. In addition, companies that are participants in the broader
computer industry are potential competitors. Some of the Company's competitors
and potential competitors have substantially greater financial, technical,
intellectual property, marketing and human resources than the Company.
The Company's future success depends on its ability to develop and rapidly bring
to market technologically advanced products. From time to time the Company
invests in development stage and other entities who possess or who could
potentially possess strategically important technologies. Due to the nature of
these entities and their operations, there can be no assurance that these
investments will be realizable or will result in marketable and/or successful
products. There can be no assurance that the Company's research and development
activities will lead to the commercially successful introduction of new or
improved products or that the Company will not encounter delays or problems in
connection therewith. The cost of
20
<PAGE> 21
perfecting new and improved technologies to satisfy customer quality and
delivery expectations as they are brought to market cannot always be fully
anticipated and may adversely affect Company operating profits during such
introductions. In addition, the average selling prices for computer products
generally decrease over the products' lives. To mitigate such decreases, the
Company seeks to reduce manufacturing costs of existing products and to
introduce new products, functions and other price/performance-enhancing
features. To the extent that these product enhancements do not occur on a timely
basis or do not result in a sufficient increase in sales prices to end users,
the Company's operating results could be materially adversely affected.
To date, the Company's revenues have been concentrated in the retail industry,
historically representing over 50% of its total revenues. Among other factors,
the economic condition and prospects of current and prospective customers in
the markets which the Company serves may affect the Company's own financial
results. The Company's future growth depends, in part, on its ability to
successfully penetrate and expand its revenues in new markets as well as
increased penetration in the retail market. There can be no assurance that such
penetration and expansion into new and existing markets can be profitably
achieved.
The Company believes its future success is also dependent, in part, upon its
ability to continue to enhance its product offerings through internal
development and the acquisition of new businesses and technologies, but there
can be no assurance that the Company will be able to identify, acquire or
profitably operate new businesses or otherwise implement its growth strategy
successfully. For the Company to manage its growth and integrate any newly
acquired entities, it must continue to improve operations and financial and
management information systems and effectively motivate and manage employees. If
the Company is unable to successfully pursue and manage such growth, its
business and results of operations could be adversely affected. As in the case
of its recent disposition of its Itronix subsidiary, and in the event that, as
part of its efforts to improve its operating efficiencies or otherwise, the
Company elects to divest itself of a majority or greater interest in other of
its technical subsidiaries, the Company's revenues may be adversely affected.
The Company regards certain of its hardware and software technologies as
proprietary and relies on a combination of United States and foreign patent,
copyright, trademark and trade secret laws, as well as license and other
contractual confidentiality provisions, to protect its proprietary rights.
Despite the Company's efforts to safeguard its proprietary rights, there can be
no assurance that the Company will be successful in doing so or that the
Company's competitors will not independently develop or patent technologies that
are substantially equivalent or superior to or otherwise circumvent the
Company's technologies and proprietary rights.
The Company's products utilize hardware and software technologies licensed from
third parties. There can be no assurance that the Company will be able to
license needed technology in the future. An early termination of certain of
these license agreements (including patent rights licensed from Symbol
Technologies, Inc., one of its principal competitors, necessary for the
Company's manufacture and sale of its integrated laser scanning terminals which
account for a material portion of the Company's current sales) could have a
materially adverse effect on the Company's ability to market certain of its
products and, hence, on its business, results of operations and financial
condition. The Company believes that its products, processes and trademarks do
not infringe on the rights of third parties, but third parties have asserted,
and there can be no assurance that they will not in the future assert,
infringement or other related claims against the Company or its licensors. Any
infringement claim or
21
<PAGE> 22
related litigation against the Company, or any challenge to the validity of the
Company's own intellectual property rights, and the expense of defending the
same could materially adversely effect the Company's ability to market its
products and, hence, its business, results of operations and financial
condition.
Certain of the Company's products, sub-assemblies and components are procured
from single source suppliers, and others are procured from only a limited
number of suppliers. The Company has in the past encountered, and may in the
future encounter, shortages of supplies and delays in deliveries of necessary
components. Such shortages and delays could have a materially adverse effect on
the Company's ability to ship products.
As a substantial portion of the Company's total revenues, ranging from
approximately 25%-30% in recent years, is from customers located outside of the
United States, the Company's results could be negatively affected by global and
regional economic conditions, changes in foreign currency exchange rates, trade
protection measures, regulatory acceptance of the Company's products in foreign
countries, longer accounts receivable collection patterns and other
considerations peculiar to the conduct of international business. Additionally,
the Company is subject to similar risks in its procurement of certain of its
products, components and sub-assemblies outside the United States.
Certain of the Company's products intentionally transmit radio signals as part
of their normal operation. These products are subject to regulatory approval,
restrictions on the use of certain frequencies and the creation of interference,
and other requirements by the Federal Communications Commission and
corresponding authorities in each country in which they are marketed. Regulatory
changes could significantly impact the Company's operations by restricting the
Company's development efforts, making current products obsolete or increasing
the opportunity for additional competition. The intentional emission of
electromagnetic radiation has also been the subject of recent public concern
regarding possible health and safety risks, and though the Company believes that
the low power output and the distance typically maintained between a product and
the user means that its products do not pose material safety concerns, there can
be no assurance that such safety issues will not arise in the future and will
not have a materially adverse effect on the Company's business.
Among other things, the Company's future success depends in large part on the
continued service of its key technical, marketing and management personnel and
on its ability to continue to attract and retain qualified employees,
particularly those highly skilled design, process and test engineers involved in
the manufacture of existing products and the development of products and
processes. The competition for such personnel is intense, and the loss of key
employees could have a materially adverse effect on the Company's business,
financial condition and results of operations.
In addition to the factors discussed above and elsewhere in this Form 10-K which
may adversely affect the Company's conduct of its business and the results
thereof, the Company's financial condition is also subject to the possible
adverse effects of certain pending litigation and other contingencies discussed
above under "Item 3. LEGAL PROCEEDINGS", and in Note 18 to the financial
statements included below in Item 8 in this Form 10-K.
22
<PAGE> 23
RESULTS OF OPERATIONS
Revenues
- --------
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, Increase (Decrease)
-------------------------------------- ---------------------------------------
Net Revenues: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Product, net.................................... $ 391,406 $ 417,725 $ (26,319) (6.3)%
Customer service, net........................... 74,606 68,744 5,862 8.5%
----------------- ----------------- -----------------
Total net revenues.............................. $ 466,012 $ 486,469 $ (20,457) (4.2)%
================= ================= =================
</TABLE>
Product revenues include the sale of portable tele-transaction computers
("PTCs"), including rugged, wireless mobile computers; 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.
The decrease in consolidated product revenues in fiscal 1997 from fiscal 1996
levels was due primarily to the absence in fourth quarter of product revenues
from the Company's Itronix subsidiary as the result of the sale of that
subsidiary's business at December 31, 1996. During the fourth quarter of fiscal
1996, the former Itronix subsidiary recorded total product revenues of $30.8
million. The Company's fiscal 1997 and 1996 consolidated product revenues,
adjusted for the sale of Itronix by excluding the former Itronix subsidiary's
total product revenues of $62.6 million for the first nine months of fiscal
1997 and $61.5 million for the twelve months of fiscal 1996, amounted to $328.8
million and $356.2 million, respectively. In addition to the impact of the sale
of Itronix, the Company's fiscal 1997 product revenues were negatively impacted
by a decrease in PTC unit volume that was partially offset by an increase in
the average selling price per PTC unit. The increased average selling price per
PTC unit was primarily due to the increase in the Company's sales volume of
comprehensive wireless systems and other more complex and costly products (such
as pen-based and touch-screen workslates) as a percentage of total product
revenues.
The increase in consolidated customer service revenue in fiscal 1997 from
fiscal 1996 levels was due primarily to the continued increase in the installed
base of the Company's products.
Revenues from the Company's international operations (including Canada) were
$134.2 million and $123.5 million in fiscal 1997 and 1996, respectively. This
increase was primarily attributable to increased revenues recorded by the
Company's Australian subsidiary and certain of its Canadian operations as well
as increased sales to foreign distributors. The strengthening of the United
States Dollar against the local, functional currency of certain of the Company's
foreign subsidiaries negatively impacted international revenues by $3.3 million
or 3.4% during fiscal 1997 as compared to less than $.1 million or .3% in fiscal
1996.
The Company anticipates increased revenue levels in fiscal 1998 from continuing
operations.
23
<PAGE> 24
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- --------------------------------------
Net Revenues: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Product, net.................................... $ 417,725 $ 323,916 $ 93,809 29.0%
Customer service, net........................... 68,744 55,603 13,141 23.6%
----------------- ----------------- -----------------
Total net revenues.............................. $ 486,469 $ 379,519 $ 106,950 28.2%
================= ================= =================
</TABLE>
The increase in consolidated product revenues in fiscal 1996 from fiscal 1995
levels was due primarily to an increase in average selling price per PTC unit
supplemented by a moderate increase in PTC unit volume. Revenues from the
Company's Itronix subsidiary increased $39.4 million and also contributed to
the increase in the average selling price per PTC unit. Further contributing to
the increased average selling price per unit was the Company's movement towards
comprehensive wireless systems which are more complex and therefore more
costly, and increased volumes of pen-based and touch-screen workslates as a
percentage of total product revenues. The increase in product revenues was
aided by high levels of new account and market activity in industries such as
manufacturing, transportation and utilities.
The growth in consolidated customer service revenue in fiscal 1996 from fiscal
1995 levels was due primarily to the increase in the installed base of the
Company's products.
Revenues from the Company's international operations (including Canada) were
$123.5 million and $108.1 million in fiscal 1996 and 1995, respectively. This
increase was primarily attributable to increased European subsidiaries' revenues
resulting from an increased average selling price per unit. Changes in currency
exchange rates and intercompany hedging activities did not have a material
effect on the results of the Company's international operations.
Cost of Revenues
- ----------------
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- ---------------------------------------
Cost of Revenues: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Product......................................... $ 266,624 $ 249,120 $ 17,504 7.0%
Customer service................................ 47,248 39,016 8,232 21.1%
----------------- ----------------- -----------------
Total cost of revenues.......................... $ 313,872 $ 288,136 $ 25,736 8.9%
================= ================= =================
Cost of product revenues as a
percentage of product
revenues, net............................... 68.1% 59.6%
Cost of customer service
revenues as a percentage of
customer service revenues, net.............. 63.3% 56.8%
</TABLE>
The increase in the fiscal 1997 consolidated product revenues cost percentage
from fiscal 1996 levels was primarily due to non-recurring charges recorded
during the third quarter of fiscal 1997. These
24
<PAGE> 25
non-recurring items, which included provisions for the decreased carrying value
of the Company's inventories affected by the streamlining of its product lines
and charges related to the Company's workforce reduction and early retirement
initiatives, accounted for approximately $7.2 million and $1.8 million or 2.7%
and .7%, respectively, of the fiscal 1997 consolidated cost of product
revenues. In addition to the impact of these non-recurring charges, product
gross margins declined from fiscal 1996 levels due to an increase in the amount
of large-volume/low margin business and early stage rollouts of new products
during fiscal 1997. Included in the fiscal 1996 results were revenues related
to the sale of non-exclusive software licenses and manufacturing rights to a
third-party business partner which reduced the fiscal 1996 consolidated product
revenues cost percentage by approximately 1%.
The Company anticipates the fiscal 1998 consolidated cost of product revenues
percentage to decrease from fiscal 1997 levels as a result of the absence of the
aforementioned non-recurring charges as well as the continued benefit of the
Company's implementation of its cost reduction and efficiency initiatives.
The increase in the fiscal 1997 consolidated customer service cost percentage
from fiscal 1996 levels was primarily due to non-recurring charges recorded
during the third quarter of fiscal 1997 as well as the increased direct material
and labor costs required to repair the Company's more sophisticated and complex
products. These non-recurring items, which included provisions for the decreased
carrying value of the Company's service inventories affected by the streamlining
of its product lines and charges related to the consolidation of field service
operations, accounted for approximately $1.0 million or 2% of the fiscal 1997
consolidated cost of customer service revenues.
The Company anticipates the fiscal 1998 consolidated customer service cost
percentage to decrease from fiscal 1997 as a result of the absence of the
aforementioned non-recurring charges as well as the continued benefit of the
Company's implementation of its cost reduction and efficiency initiatives.
For the year ended March 31, 1997, inventory allowance accounts increased to
$16.0 million from $10.1 million at March 31, 1996. As a percentage of gross
inventories, inventory allowances increased to 16% at March 31, 1997, from 8%
at March 31, 1996. The increase in the inventory allowance accounts as well as
the increase in the allowance as a percentage of gross inventories reflects the
additional provisions recorded primarily during the third quarter of fiscal
1997 in conjunction with the Company's streamlining of its product lines. The
Company anticipates continuing to provide for inventory obsolescence resulting
from technological change.
25
<PAGE> 26
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- --------------------------------------
Cost of revenues: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Product......................................... $ 249,120 $ 189,568 $ 59,552 31.4%
Customer service................................ 39,016 32,455 6,561 20.2%
----------------- ----------------- -----------------
Total cost of revenues.......................... $ 288,136 $ 222,023 $ 66,113 29.8%
================= ================= =================
Cost of product revenues as a
percentage of product
revenues, net............................... 59.6% 58.5%
Cost of customer service
revenues as a percentage of
customer service revenues, net.............. 56.8% 58.4%
</TABLE>
The increase in the fiscal 1996 consolidated product cost percentage from fiscal
1995 levels was primarily due to pricing pressures on certain large accounts and
fulfillment of customer delivery commitments for volume shipments of new
products which required costly, rapid redesign and rework. Revenues related to
software and manufacturing rights agreements and distribution agreements, which
have little incremental cost, and reduced estimates for warranty costs combined
to decrease the cost of product revenues as a percentage of product revenues by
approximately 1%.
The decrease in the fiscal 1996 consolidated customer service cost percentage
from fiscal 1995 levels was primarily attributable to the fact that it was not
necessary to increase customer service personnel and related resources
proportionately with the increase in customer service revenues.
For the year ended March 31, 1996, inventory allowance accounts decreased to
$10.1 million from $10.9 million at March 31, 1995. This decrease was due to the
disposal of obsolete materials and other of $2.8 million offset by provisions
for inventory obsolescence of $2.0 million. As a percentage of gross
inventories, inventory allowances decreased to 8% at March 31, 1996 from 13%
at March 31, 1995.
Operating Expenses
- ------------------
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, Increase (Decrease)
-------------------------------------- --------------------------------------
Operating expenses: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Selling expenses................................ $ 88,321 $ 82,207 $ 6,114 7.4%
Product development and
engineering expenses......................... 44,439 45,383 (944) (2.1)%
General and administrative
expenses..................................... 53,230 39,415 13,815 35.1%
----------------- ----------------- -----------------
Total operating expenses........................ $ 185,990 $ 167,005 $ 18,985 11.4%
================= ================= =================
</TABLE>
Selling expenses as a percentage of total revenues were 19% in fiscal 1997 as
compared to 17% in fiscal 1996. The increase in the fiscal 1997 consolidated
selling expenses as a percentage of total revenues from fiscal 1996 levels was
26
<PAGE> 27
primarily due to non-recurring charges recorded during the third quarter of
fiscal 1997. These non-recurring items included charges related to the redesign
of the Company's worldwide distribution and logistics operations as well as
charges related to the Company's workforce reduction and early retirement
initiatives. In total, these non-recurring items accounted for approximately
$6.0 million or 7% of the selling expenses recorded during fiscal 1997. The
Company anticipates fiscal 1998 selling expenses as a percentage of total
revenues to decrease from fiscal 1997 levels as a result of the absence of the
aforementioned non-recurring charges and the continued benefit of the Company's
implementation of its cost reduction initiatives.
Product development and engineering expenses as a percentage of total revenues
were 10% in fiscal 1997 as compared to 9% in fiscal 1996. Included in the
Company's fiscal 1997 consolidated product development and engineering expenses
were non-recurring charges related to the Company's workforce reduction and
early retirement initiatives and the consolidation of certain product
development and engineering functions. These non-recurring charges, which were
recorded during the third quarter of fiscal 1997 and accounted for
approximately $2.2 million or 5% of the fiscal 1997 consolidated product
development and engineering expenses, were substantially offset by the absence
of fourth quarter product development and engineering expenses of the Company's
former Itronix subsidiary. During the fourth quarter of fiscal 1996, Itronix
recorded product development and engineering expenses of approximately $1.6
million. Included in the Company's consolidated fiscal 1997 results were
approximately $5.2 million of product development and engineering expenses
incurred by Itronix during the first nine months of fiscal 1997. The Company's
fiscal 1996 consolidated results included approximately $4.4 million of product
development and engineering expenses incurred by Itronix. Additionally,
Itronix's fiscal 1996 product development and engineering expenses included a
$1.0 million reimbursement from a customer for certain development expenses
incurred by Itronix during fiscal 1996 specific to that customer. Subsequent to
March 31, 1997, the Company initiated plans to consolidate and relocate certain
of its engineering and product development operations to Houston, Texas. Though
the relocation will entail certain expenditures in the near term, the
consolidation of engineering operations is expected to reduce operating costs
and product-development time as well as improve the Company's ability to
integrate new technologies through concurrent engineering.
During fiscal 1997, 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 $7.7 million. The
Company anticipates the dollar amount of internal software development costs to
be capitalized during fiscal 1998 to decrease from fiscal 1997 levels.
General and administrative expenses as a percentage of total revenues were 11%
in fiscal 1997 and 8% in fiscal 1996. The increase in the Company's fiscal 1997
consolidated general and administrative expenses from fiscal 1996 levels was
primarily due to non-recurring charges recorded during the third and fourth
quarters of fiscal 1997. The non-recurring third quarter items, which included
charges related to the Company's
27
<PAGE> 28
workforce reduction and early retirement initiatives, corporate information
systems, and certain consulting agreements, accounted for approximately $5.9
million or 11% of the fiscal 1997 consolidated general and administrative
expenses. During the fourth quarter of fiscal 1997, the Company recorded a
non-recurring charge of $5.5 million or 10% of the fiscal 1997 consolidated
general and administrative expenses related to the retirement of Robert F.
Meyerson, the Company's Chairman and CEO. The $5.5 million was comprised of
$2.5 million cash payment for the non-renewal of the Company's consulting
agreement with a company affiliated with Mr. Meyerson and a $3.0 million cash
retirement package. Included in the Company's fiscal 1997 consolidated results
were approximately $1.8 million of general and administrative expenses incurred
by Itronix for the first nine months of fiscal 1997. The Company's fiscal 1996
consolidated results included approximately $1.8 million of general and
administrative expenses incurred by Itronix. The Company anticipates general
and administrative expenses to decrease in fiscal 1998 from fiscal 1997 levels
as a result of the absence of the aforementioned third and fourth quarter
non-recurring charges, the continued benefit of the Company's implementation of
its cost reduction initiatives and the elimination of general and
administrative expenses related to its former Itronix subsidiary.
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- ---------------------------------------
Operating expenses: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Selling expenses................................ $ 82,207 $ 68,279 $ 13,928 20.4%
Product development and
engineering expense........................... 45,383 33,728 11,655 34.6%
General and administrative
expenses..................................... 39,415 34,583 4,832 14.0%
----------------- ----------------- -----------------
Total operating expenses........................ $ 167,005 $ 136,590 $ 30,415 22.3%
================= ================= =================
</TABLE>
Selling expenses as a percentage of total revenues were 17% in fiscal 1996 as
compared to 18% in fiscal 1995. The decrease in the fiscal 1996 consolidated
selling expenses as a percentage of total revenues was primarily attributable
to the leverage of fixed selling expenses over a greater revenue base.
Product development and engineering expenses were 9% of total revenues in both
fiscal 1996 and 1995. The increase in consolidated product development and
engineering expenses, net of capitalized software development costs, in fiscal
1996 as compared to fiscal 1995 was primarily attributable to research and
development activities related to new product development. These activities
included increased research and development costs associated with the further
development of wireless data communications and spread spectrum technology;
evolutionary development of pen-based technology; commercial development of
rugged, wireless mobile computers; pre-commercial research relating to
augmented reality hardware and software, advanced image reading and two
dimensional bar-code technology and improvements to existing PTC and other
products. During the first quarter of fiscal 1996, the Company recognized $1.0
million of development expense reimbursement funding relating to a large order
from a major Itronix customer. The expense reimbursement was offset against the
related development expenses incurred.
During the fourth quarter of fiscal 1996, the Company capitalized software
development costs in accordance with the requirements of SFAS No. 86 aggregating
$7.1 million on a pretax basis.
28
<PAGE> 29
General and administrative expenses as a percentage of total revenues were 8%
and 9% for fiscal years 1996 and 1995, respectively. The increase was primarily
attributable to increased legal expenses and corporate and international
administration necessary to support the Company's revenue growth. At March 31,
1996, there were no accrued amounts remaining from the fiscal 1993 restructuring
charges. All such remaining amounts were paid in fiscal 1996. There were no
material adjustments recorded in fiscal 1996 related to restructuring amounts
recorded in fiscal 1994 or fiscal 1993.
Interest Expense
- ----------------
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- --------------------------------------
Net interest expense: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Interest income................................. $ 1,489 $ 760 $ 729 95.9%
Interest expense................................ (8,056) (6,770) 1,286 19.0%
----------------- ----------------- -----------------
Net interest expense............................ $ (6,567) $ (6,010) $ 557 9.3%
================= ================= =================
</TABLE>
Net interest expense as a percentage of revenues was approximately 1% in both
fiscal 1997 and 1996. The increase in the Company's fiscal 1997 consolidated net
interest expense from fiscal 1996 was primarily due to the fact that the
Company's 5-3/4% convertible subordinated notes, which were issued during the
third quarter of fiscal 1996, were outstanding for the entire 1997 fiscal year.
The Company's cash requirements are discussed below in Cash Flows from Operating
and Investing Activities.
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- ---------------------------------------
Net interest expense: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Interest income................................. $ 760 $ 658 $ 102 15.5%
Interest expense................................ (6,770) (4,354) 2,416 55.5%
----------------- ----------------- -----------------
Net interest expense............................ $ (6,010) $ (3,696) $ 2,314 62.6%
================= ================= =================
</TABLE>
Net interest expense as a percentage of revenues was approximately 1% in both
fiscal 1996 and 1995. The increase in fiscal 1996 as compared to fiscal 1995
reflects the continued borrowing under the Company's credit facilities through
the end of the third quarter of fiscal 1996 and interest costs related to the
Company's 5-3/4% convertible subordinated notes issued during the third quarter
of fiscal 1996.
Income Taxes
- ------------
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, (Decrease)
-------------------------------------- ---------------------------------------
Income taxes: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Provision for income taxes...................... $ 1,368 $ 10,314 $ (8,946) (86.7)%
</TABLE>
The Company's consolidated effective tax rate was 28% in fiscal 1997 and 38% in
fiscal 1996. The consolidated effective tax rate for fiscal 1997 reflects income
before taxes multiplied by the United States federal
29
<PAGE> 30
statutory tax rate. The rate was increased by the net taxes on repatriated
foreign earnings, nondeductible goodwill amortization, international rate
differentials and separate company net operating loss benefits not currently
utilized. The effective tax rate was decreased by research and development
credits and the favorable tax treatment of the foreign sales corporation. The
credit for increasing research and development expenditures, which had expired
at June 30, 1995, was reinstated at July 1, 1996. There were no other
significant tax law changes during fiscal 1997 that had a significant effect on
the calculation of the income tax liability.
The consolidated effective tax rate for fiscal 1996 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. The increase in the consolidated effective
tax rate arising from the addition of nondeductible goodwill and international
tax rate differentials was partially offset by research and development credits
earned through the first quarter of fiscal 1996 and benefits from research and
development credit carryforwards from prior fiscal years.
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- ---------------------------------------
Income taxes: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Provision for income taxes...................... $ 10,314 $ 8,192 $ 2,122 25.9%
</TABLE>
The Company's consolidated effective tax rate was 38% in fiscal 1996 and 48% in
fiscal 1995. The consolidated effective tax rate for fiscal 1996 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. These increases were partially offset by
research and development credits earned through the first quarter of fiscal 1996
and benefits from research and development credit carryforwards from prior
fiscal years. The credit available for increasing research and development
expenditures expired at June 30, 1995. There were no other significant tax law
changes during fiscal 1996 that had a significant effect on the calculation of
the income tax liability.
The consolidated effective tax rate for fiscal 1995 reflects income before taxes
increased by nondeductible goodwill amortization, the sum of which was
multiplied by the United States federal statutory rate and increased by
international tax rate differentials. The increase in the consolidated effective
tax rate arising from the addition of nondeductible goodwill and international
tax rate differentials was partially offset by research and development credits.
NON-OPERATING INCOME
1997 vs. 1996
<TABLE>
<CAPTION>
Year ended March 31, Increase (Decrease)
-------------------------------------- --------------------------------------
Non-operating income: 1997 1996 Dollar Percentage
----------------- ----------------- ----------------- -----------------
(in thousands)
<S> <C> <C> <C> <C>
Gain on sale of subsidiary
stock................ $ -- $ 1,116 $ (1,116) N.M.
Other non-operating expense..................... 34,726 401 34,325 N.M.
----------------- ----------------- -----------------
Total non-operating income...................... $ 34,726 $ 1,517 $ 33,209 N.M.
================= ================= =================
</TABLE>
Effective December 31, 1996, the Company sold substantially all of the assets of
its Itronix Corporation subsidiary, with a net book value of
30
<PAGE> 31
$30.8 million, as well as all of the subsidiary's associated business, for $65.5
million in cash, plus the assumption by the buyer of certain specified
liabilities of the transferred business totaling $8.2 million. The transaction
resulted in a $32.7 million gain, net of transaction costs of $10.3 million,
which has been recorded as other non-operating income in the accompanying
consolidated statement of operations. The buyer is entitled to customary
indemnification from the Company with respect to retained liabilities and,
through March 31, 1998, to the Company's representations, warranties and
covenants in the sale agreement. Under the terms of the sale, the Company is
precluded from competing with the buyer in the manufacture and sale of
ruggedized notebook computers for a period of five years after the date of sale,
other than the Company's resale of products obtained from the buyer under a
mutual reseller agreement.
During fiscal 1997, the Company also engaged in certain transactions involving
the stock of its Aironet and Metanetics Subsidiaries, which transactions, as
further discussed in Note 16 of the accompanying consolidated financial
statements, had no net effect on the Company's consolidated non-operating
income. The Company anticipates potential sales of partial ownership interests
in certain of its technical subsidiaries and other operations in the future
through various transactions, which may include public offerings and/or private
placements.
1996 vs. 1995
<TABLE>
<CAPTION>
Year ended March 31, Increase
-------------------------------------- ---------------------------------------
Non-operating income: 1996 1995 Dollar Percentage
----------------- ----------------- ----------------- ------------------
(in thousands)
<S> <C> <C> <C> <C>
Gain on sale of subsidiary
stock......................................... $ 1,116 $ -- $ 1,116 N.M.
Other non-operating expense..................... 401 -- 401 N.M.
----------------- ----------------- -----------------
Total non-operating income...................... $ 1,517 $ -- $ 1,517 N.M.
================= ================= =================
</TABLE>
During fiscal 1996, the Company sold interests in its Metanetics subsidiary, a
licensor and developer of image reading technology, to certain key executives
and to third-parties. A total of 1.7 million shares of Metanetics' voting common
stock were sold at prices ranging from $.50 per share to $1.04 per share. Total
proceeds aggregated $1.4 million in cash and notes receivable. The resulting
pre-tax gain of $1.1 million, net of related transaction costs, was recorded as
non-operating income in the accompanying consolidated statement of operations.
Deferred taxes of $.5 million for the gain were included in the Company's
provision for income taxes. The Company's remaining percentage interest in the
voting common stock of Metanetics at March 31, 1996, was 49%.
Non-operating income in fiscal 1996 also included realized and unrealized gains
from transactions in trading securities amounting to $.4 million.
31
<PAGE> 32
FINANCIAL CONDITION
Liquidity
- ---------
1997 vs. 1996
<TABLE>
<CAPTION>
March 31, Dollar
------------------------------------------------ Increase
1997 1996 (Decrease)
---------------------- ---------------------- ---------------------
(in thousands except ratios)
<S> <C> <C> <C>
Cash and cash equivalents.............................. $ 45,386 $ 34,828 $ 10,558
Accounts and notes receivable.......................... 128,271 143,114 (14,843)
Inventories 84,499 111,132 (26,633)
Other.................................................. 11,956 10,841 1,115
---------------------- ---------------------- ---------------------
Total current assets................................... $ 270,112 $ 299,915 $ (29,803)
====================== ====================== =====================
Notes payable.......................................... $ 50 $ 66 $ (16)
Accounts payable....................................... 47,917 59,620 (11,703)
Income taxes payable................................... 3,077 7,029 (3,952)
Accrued liabilities.................................... 49,000 45,152 3,848
Other.................................................. 1,010 2,053 (1,043)
---------------------- ---------------------- ---------------------
Total current liabilities.............................. $ 101,054 $ 113,920 $ (12,866)
====================== ====================== =====================
Working capital (current assets less current
liabilities)....................................... $ 169,058 $ 185,995 $ (16,937)
====================== ====================== =====================
Current ratio (current assets divided by current
liabilities).......................................
2.7 2.6
</TABLE>
The decrease in the Company's working capital at March 31, 1997, from March 31,
1996, was primarily comprised of the decrease in accounts and notes receivable
and inventories and the increase in accrued liabilities, as detailed in the
preceding table. The decrease in accounts and notes receivable at March 31,
1997, from amounts recorded at March 31, 1996, was primarily due to the sale of
the trade receivables of the Company's former Itronix subsidiary. Included in
the Company's consolidated balance sheet at March 31, 1996, were accounts and
notes receivable totaling $8.8 million recorded by the former Itronix
subsidiary. Consolidated days sales outstanding, adjusted for the sale of
Itronix by excluding Itronix's results from both periods, decreased to 88 days
at March 31, 1997, from 95 days at March 31, 1996. The decrease in inventories
at March 31, 1997, from March 31, 1996, was primarily due to the sale of the
inventory of Itronix as well as the increase in the Company's inventory
allowance accounts. Included in the Company's consolidated balance sheet at
March 31, 1996, were inventories of $12.8 million recorded by Itronix. These
decreases in the Company's working capital were partially offset by the
increase in cash and cash equivalents and the decrease in accounts payable and
income taxes payable, as detailed in the preceding table. The increase in cash
and cash equivalents at March 31, 1997, from March 31, 1996, was primarily due
to the receipt of cash proceeds from the sale of Itronix. Similarly, the
decrease in accounts payable at March 31, 1997, from March 31, 1996, was
primarily the result of the buyer's assumption of the accounts payable of
Itronix. Included in
32
<PAGE> 33
the Company's consolidated balance sheet at March 31, 1996, were accounts
payable of $14.1 million recorded by Itronix.
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.
1996 vs. 1995
<TABLE>
<CAPTION>
March 31, Dollar
------------------------------------------------ Increase
1996 1995 (Decrease)
---------------------- ---------------------- ---------------------
(in thousands except ratios)
<S> <C> <C> <C>
Cash and cash equivalents.............................. $ 34,828 $ 31,364 $ 3,464
Accounts and notes receivable.......................... 143,114 90,724 52,390
Inventories............................................ 111,132 72,078 39,054
Other.................................................. 10,841 11,127 (286)
---------------------- ---------------------- ---------------------
Total current assets................................... $ 299,915 $ 205,293 $ 94,622
====================== ====================== =====================
Notes payable.......................................... $ 66 $ 25,395 $ (25,329)
Accounts payable....................................... 59,620 33,466 26,154
Income taxes payable................................... 7,029 8,315 (1,286)
Accrued liabilities.................................... 45,152 34,388 10,764
Other.................................................. 2,053 2,112 (59)
---------------------- ---------------------- ---------------------
Total current liabilities.............................. $ 113,920 $ 103,676 $ 10,244
====================== ====================== =====================
Working capital (current assets less current
liabilities) ...................................... $ 165,995 $ 101,617 $ 64,378
====================== ====================== =====================
Current ratio (current assets divided by current
liabilities) ......................................
2.6 2.0
</TABLE>
The increase in the Company's working capital at March 31, 1996, from March 31,
1995, was primarily comprised of the increase in cash and cash equivalents,
accounts and notes receivable and inventories as well as the decrease in notes
payable, as detailed in the preceding table. Days sales outstanding, including
Itronix's results, increased to 84 days at March 31, 1996, from 75 days at
March 31, 1995. This increase was primarily due to proportionately greater
revenues during the last month of fiscal 1996 as compared to fiscal 1995 and to
the increase in complex and lengthy installations of local and wide area
networks. The increase in inventories at March 31, 1996, from March 31, 1995,
was primarily due to the increase in the breadth of the Company's product
offerings and the related manufacturing safety stock levels, particularly at
the Company's Itronix subsidiary.
These increases in working capital were partially offset by the increase in
accrued liabilities of $10.8 million, as detailed in the preceding table.
33
<PAGE> 34
P
Cash Flows from Operations
- --------------------------
1997 vs. 1996
<TABLE>
<CAPTION>
Dollar Increase
Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
Cash Flows from Operations: 1997 1996 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Net (loss) income................................... $ (7,059) $ 16,521 $ (23,580)
Depreciation and amortization...................... 28,689 23,747 4,942
Provision for inventory obsolescence................ 11,521 2,026 9,495
Deferred income taxes............................... (947) 4,161 (5,108)
Gain on sale of assets.............................. (32,653) -- (32,653)
Accounts and notes receivable...................... 171 (54,103) 54,274
Inventories......................................... (131) (41,139) 41,008
Intangibles and other assets........................ (2,783) (2,416) (367)
Accounts payable and accrued liabilities............ (7,472) 38,238 (45,710)
Income taxes payable................................ (3,005) (2,302) (703)
Other............................................... 917 2,019 (1,102)
--------------------- --------------------- -------------------------
Net cash used in operating activities............... $ (12,752) $ (13,248) $ 496
===================== ===================== =========================
</TABLE>
The Company's fiscal 1997 cash flows from operations were positively impacted by
the change in the cash flow impact of the non-cash charge for depreciation and
amortization, the change in the cash flow impact of the non-cash provision for
inventory obsolescence, the change in the cash flow impact of accounts and notes
receivable and the change in the cash flow impact of inventories, as detailed in
the preceding table. These positive cash flow impacts were substantially offset
by the negative cash flow impact of the decrease in net income, the change in
the cash flow impact of the non-cash provision for income taxes, the change in
the cash flow impact of the gain on the sale of assets, the change in the cash
flow impact of accounts payable and accrued liabilities and the change in the
cash flow impact of other operating items, as detailed in the preceding table.
34
<PAGE> 35
1996 vs. 1995
<TABLE>
<CAPTION>
Dollar Increase
Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
Cash Flows from Operations: 1996 1995 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Net income.......................................... $ 16,521 $ 9,018 $ 7,503
Depreciation and amortization....................... 23,747 22,179 1,568
Provision for inventory obsolescence................ 2,026 7,407 (5,381)
Deferred income taxes............................... 4,161 (577) 4,738
Accounts and notes receivable....................... (54,103) (21,290) (32,813)
Inventories......................................... (41,139) (178) (40,961)
Intangibles and other assets........................ (2,416) 1,605 (4,021)
Accounts payable and accrued liabilities............ 38,238 (10,030) 48,268
Income taxes payable................................ (2,302) 6,153 (8,455)
Other............................................... 2,019 1,663 356
--------------------- --------------------- -------------------------
Net cash (used in) provided by
operating activities............................ $ (13,248) $ 15,950 $ (29,198)
===================== ===================== =========================
</TABLE>
The Company's fiscal 1996 cash flows from operations were positively impacted by
the increase in net income recorded, the increase in the cash flow impact of the
non-cash provision for income taxes, the change in the cash flow impact of
accounts payable and accrued liabilities and the positive cash flow impact of
other operating items. These positive cash flow impacts were offset by negative
cash flow impacts of the change in inventories, accounts and notes receivable,
income taxes payable, intangibles and other assets, the cash flow impact of the
provision for inventory obsolescence and other negative cash flow impacts.
35
<PAGE> 36
Investing Activities
- --------------------
1997 vs. 1996
<TABLE>
<CAPTION>
Dollar Increase
Cash Flows from Investing Activities: Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
1997 1996 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Proceeds from sale of assets...................... $ 65,674 $ -- $ 65,674
Additions to property and equipment............... (14,576) (22,749) 8,173
Other............................................. (16,422) (13,640) (2,782)
--------------------- --------------------- -------------------------
Net cash provided by (used
in) investing activities....................... $ 34,676 $ (36,389) $ 71,065
===================== ===================== =========================
</TABLE>
The increase in the Company's cash flows from investing activities in fiscal
1997 from fiscal 1996 was primarily due to the receipt of cash proceeds from
the sale of the Company's former Itronix subsidiary and the positive cash flow
impact of the decrease in additions to property and equipment, as detailed in
the preceding table. These positive cash flow impacts were partially offset by
the negative cash flow impact of other investing activity items, as detailed in
the preceding table.
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.
During fiscal 1997, the Company sold 808,500 shares of voting common stock of
its Aironet subsidiary, to a corporation owned by Mr. Meyerson at a price of
$1.86 per share in exchange for a secured promissory note in the amount of
approximately $1.5 million. This transaction resulted in the establishment of a
minority interest of approximately $.7 million which has been included in other
long-term liabilities in the consolidated balance sheet at March 31, 1997. At
March 31, 1997, the Company has deferred a gain a of $.8 million related to this
transaction as the criteria for the recognition of gain on the sale of
subsidiary stock had not been met. This sale of Aironet common stock has been
excluded from the accompanying accompanying consolidated statement of cash flows
as a non-cash transaction.
36
<PAGE> 37
1996 vs. 1995
<TABLE>
<CAPTION>
Dollar Increase
Cash Flows from Investing Activities: Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
1996 1995 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Additions to property and equipment................. $ (22,749) $ (15,224) $ (7,525)
Software investments................................ (9,025) (869) (8,156)
Purchase of non-marketable investments.............. (1,562) (150) (1,412)
Additions to long-term notes receivable............. (650) -- (650)
Payments for acquisitions, net of cash acquired..... (2,403) (970) (1,433)
Short-term investments.............................. -- 764 764
--------------------- --------------------- -------------------------
Net cash used in investing activities............... $ (36,389) $ (16,449) $ (19,940)
===================== ===================== =========================
</TABLE>
The decrease in the Company's cash flows from investing activities was
primarily caused by an increase in investments in capitalized software
reflecting the transition of software development projects to commercial
readiness, the increase in additions to property and equipment in fiscal 1996
from fiscal 1995 and the increase in payments for acquisitions, as detailed in
the preceding table.
Financing Activities
- --------------------
1997 vs. 1996
<TABLE>
<CAPTION>
Dollar Increase
Cash Flows from Financing Activities: Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
1997 1996 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Notes payable, net.................................. $ (16) $ (30,084) $ 30,068
Proceeds from convertible debt...................... -- 82,500 (82,500)
Purchase of treasury stock.......................... (9,328) -- (9,328)
Other............................................... (1,813) 1,156 (2,969)
--------------------- --------------------- -------------------------
Net cash (used in) provided
by financing activities.......................... $ (11,157) $ 53,572 $ (64,729)
===================== ===================== =========================
</TABLE>
The decrease in the Company's cash flows from financing activities was primarily
due to the cash flow impact of the absence in fiscal 1997 of proceeds from the
issuance of the 5-3/4% convertible subordinated notes in fiscal 1996 and the
Company's repurchase of 633,000 shares of common stock during fiscal 1997 under
its open market repurchase program, as detailed in the preceding table. These
negative cash flow impacts were partially offset by the positive change in the
cash flow impact of notes payable, as detailed in the preceding table.
37
<PAGE> 38
Effective August 6, 1996, the Company's $20 million business purpose revolving
promissory note was extended to August 5, 1997. Additionally, during August
1996, the Company's $100 million credit agreement and $20 million business
purpose revolving promissory note were amended to conditionally grant to the
lenders a security interest in certain assets of the Company which will only
become effective if the Company were to become in default under the credit
agreement and then only if the requisite lenders under that facility were to
direct that the security documents be filed. The Company had no amounts
outstanding under either agreement, and was in compliance with all restrictive
covenants, at March 31, 1997.
During fiscal 1997, the Company had a weighted average of $7.8 million
outstanding under its facilities with a weighted average interest cost of 7.0%.
1996 vs. 1995
<TABLE>
<CAPTION>
Dollar Increase
Cash Flows from Financing Activities Year ended March 31, (Decrease) in
---------------------------------------------- Cash Flow
1996 1995 Impact
--------------------- --------------------- -------------------------
(in thousands)
<S> <C> <C> <C>
Notes payable, net.................................. $ (30,084) $ 5,822 $ (35,906)
Proceeds from convertible debt...................... 82,500 -- 82,500
Other............................................... 1,156 1,111 45
--------------------- --------------------- -------------------------
Net cash provided by financing activities........... $ 53,572 $ 6,933 $ 46,639
===================== ===================== =========================
</TABLE>
The increase in the Company's cash flows from financing activities was primarily
due to proceeds from the Company's issuance of 5 3/4% convertible subordinated
notes, as detailed in the preceding table. This increase was partially offset by
the negative cash flow impact of the decrease in notes payable in fiscal 1996
from fiscal 1995, as detailed in the preceding table.
Effective March 8, 1996, the Company replaced its previous revolving credit,
term loan and security agreement with a new credit agreement with a group of
eight banks. The credit agreement, which expires on March 8, 2001, provides the
Company with a maximum credit facility of $100 million and permits the Company
to borrow funds as domestic or Eurodollar advances. Funds borrowed as domestic
advances bear interest at the greater of the agent bank's "Prime Commercial
Lending Rate" or the Federal Funds Rate plus .50% while Eurodollar advances bear
interest at the agent bank's Eurodollar rate plus .50% to 1.25% based on certain
capitalization levels. In addition, the credit agreement requires the Company to
pay a commitment fee of .15% to .375% per annum, based on certain capitalization
levels, on the unused portion of the revolving commitment amounts. The Company
is also required to pay a utilization fee of .125% to .25% per annum, based on
certain capitalization levels, on Eurodollar advances at certain borrowing
levels. The credit agreement also contains certain restrictive covenants which
requires the Company to maintain certain leverage, net worth and fixed charge
coverage ratios. The Company had no amounts outstanding under the credit
agreement, and was in compliance with all restrictive covenants, at March 31,
1996.
38
<PAGE> 39
Additionally, effective March 20, 1996, the Company entered into a business
purpose revolving promissory note with a bank. The note provides the Company
with a maximum credit facility of $20 million and bears interest at the bank's
"Money Market Rate" plus .50% to 1.25% per annum, based on certain
capitalization levels. The Company had no borrowings outstanding under this
note at March 31, 1996.
Effective December 12, 1995, the Company issued $82.5 million of 5-3/4%
convertible subordinated notes due January 1, 2003. The conversion price for the
notes is $27.50 per common share and is subject to adjustment in certain events.
Interest is payable on January 1 and July 1 in each year, commencing July 1,
1996. On or after January 5, 1999, the notes are redeemable at any time at the
option of the Company, in whole or in part, at the following prices for the
following calendar years: 1999, 103.286%; 2000, 102.464%; 2001, 101.643% and
2002, 100.812%.
During fiscal 1996, the Company had a weighted average of $25.3 million
outstanding under its previous revolving credit and term loan facility with a
weighted average interest cost of 8.9%.
New Accounting Standards
- ------------------------
During fiscal 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128").
SFAS No. 128 modifies the manner in which an entity computes, presents and
discloses its earning per share. The Company is required to adopt the provisions
of SFAS No. 128 for the quarter ended December 31, 1997, and will be required to
restate all prior-period earnings per share amounts presented for comparative
purposes. As the adoption of SFAS No. 128 will only modify the calculation of
earnings per share, there will be no effect on the Company's consolidated
financial position or results of operations or cash flows.
During fiscal 1997, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" ("SFAS No. 129"). SFAS No. 129 requires an entity to
disclose the rights and privileges of its outstanding securities, the
liquidation preference of its preferred stock and the redemption requirements
of its redeemable stock. The Company is required to adopt the provisions of
SFAS No. 129 for the fiscal year ended March 31, 1998. As the adoption of SFAS
No. 129 will only require additional disclosures, there will be no effect on
the Company's consolidated financial position or results of operations or
cash flows.
During fiscal 1997, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" ("SOP
96-1"). SOP 96-1 requires an entity to accrue a liability for environmental
remediation if (1) litigation against the entity has commenced or a claim or
assessment against the entity has been asserted, or commencement of litigation
or assertion of a claim or an assessment against the entity is probable, and (2)
the amount of the loss can be reasonably estimated. The Company is required to
adopt the provision of SOP 96-1 for the fiscal year ended March 31, 1998.
Management believes that the adoption of this pronouncement will not have a
material effect on the Company's consolidated financial position or results of
operations or cash flows.
39
<PAGE> 40
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Pages
-----
Financial Reports:
Report of Management........................................... 41
Report of Independent Accountants.............................. 42
Consolidated Financial Statements:
Consolidated Balance Sheet..................................... 43
Consolidated Statement of Operations........................... 44
Consolidated Statement of Cash Flows........................... 45
Consolidated Statement of Changes in Stockholders' Equity...... 46
Notes to Consolidated Financial Statements..................... 47 - 70
Financial Statement Schedule:
II - Valuation and Qualifying Accounts and Reserves.... 81
All other schedules are omitted because they are not applicable or the required
information is presented in the financial statements or the notes thereto.
40
<PAGE> 41
REPORT OF MANAGEMENT
--------------------
To the Board of Directors and Stockholders
of Telxon Corporation
The management of Telxon is responsible for the preparation, integrity and
objectivity of the financial statements and all other financial information
included in this report. Management believes that the financial statements have
been prepared in accordance with generally accepted accounting principles and
that any amounts included herein which are based on estimates of the expected
effects of events and transactions have been made with sound judgment and
approved by qualified personnel.
Telxon maintains an internal control structure to provide reasonable assurance
that assets are safeguarded and that transactions and events are recorded
properly. The internal control structure is regularly reviewed, evaluated and
revised as necessary by management. Additionally, the Telxon Statement of
Corporate Ethics requires every Company employee to maintain the highest level
of ethical standards in the conduct of all aspects of the Company's business,
and their compliance is regularly monitored.
The financial statements in this report have been audited by the independent
accounting firm of Coopers & Lybrand L.L.P. Their audits were conducted in
accordance with generally accepted auditing standards and included a study and
evaluation of our internal control structure as they considered necessary to
determine the extent of tests and audit procedures required for expressing an
opinion on the Company's financial statements.
The Audit Committee of the Board of Directors, of which all outside directors
are members, meets periodically with the independent auditors and management to
review accounting, auditing, internal control and financial reporting matters.
The external auditors have full and free access to the Audit Committee and its
individual members at any time.
/s/ Frank E. Brick
- -----------------------------------------
Frank E. Brick
President and Chief Executive Officer
/s/ Kenneth W. Haver
- -----------------------------------------
Kenneth W. Haver
Senior Vice President and Chief Financial
Officer
41
<PAGE> 42
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders
of Telxon Corporation
We have audited the consolidated financial statements and the financial
statement schedule of Telxon Corporation and Subsidiaries listed in the index on
page 40 of this Form 10-K. These financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Telxon
Corporation and Subsidiaries as of March 31, 1997 and 1996, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended March 31, 1997, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly, in all
material respects, the information required to be included therein.
/s/ COOPERS & LYBRAND L.L.P.
Akron, Ohio
June 27, 1997
42
<PAGE> 43
Telxon Corporation
and Subsidiaries
Consolidated Balance Sheet
- --------------------------
In Thousands (except per share amounts)
<TABLE>
<CAPTION>
March 31,
--------------------------------------------
ASSETS 1997 1996
--------------------- -------------------
<S> <C> <C>
Current assets:
Cash (including cash equivalents of $38,100 and
$23,411)........................................................... $ 45,386 $ 34,828
Trading securities..................................................... -- 902
Accounts receivable, net of allowance for
doubtful accounts of $1,596 and $1,731............................. 111,959 133,592
Notes and other accounts receivable.................................... 16,312 9,522
Inventories............................................................ 84,499 111,132
Prepaid expenses and other............................................. 11,956 9,939
--------------------- -------------------
Total current assets.......................................... 270,112 299,915
Property and equipment, net................................................. 45,578 54,673
Intangible and other assets, net............................................ 46,094 34,621
--------------------- -------------------
Total......................................................... $ 361,784 $ 389,209
===================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................................... $ 50 $ 66
Current portion of long-term debt...................................... 383 1,156
Capital lease obligations due within one year.......................... 627 897
Accounts payable....................................................... 47,917 59,620
Income taxes payable................................................... 3,077 7,029
Accrued liabilities.................................................... 49,000 45,152
--------------------- -------------------
Total current liabilities..................................... 101,054 113,920
Capital lease obligations................................................... 968 1,982
Convertible subordinated notes and debentures............................... 107,224 107,224
Long-term debt.............................................................. -- 1,331
Other long-term liabilities................................................. 5,837 3,562
--------------------- -------------------
Total liabilities............................................. 215,083 228,019
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, 16,186 and 16,096 shares issued................. 162 161
Additional paid-in capital............................................. 87,105 85,750
Retained earnings...................................................... 70,821 78,096
Equity adjustment for foreign currency translation..................... (2,643) (2,064)
Unearned compensation relating to restricted stock awards.............. (210) (753)
Treasury stock; 557 shares of common stock at cost..................... (8,534) --
--------------------- -------------------
Total stockholders' equity.................................... 146,701 161,190
--------------------- -------------------
Commitments and contingencies............................................... -- --
--------------------- -------------------
Total......................................................... $ 361,784 $ 389,209
===================== ===================
</TABLE>
See accompanying notes to
consolidated financial statements
43
<PAGE> 44
Telxon Corporation
and Subsidiaries
Consolidated Statement of Operations
- ------------------------------------
In Thousands (except per share amounts)
<TABLE>
<CAPTION>
Year ended March 31,
--------------------
1997 1996 1995
--------- --------- ---------
Revenues:
<S> <C> <C> <C>
Product, net ............................... $ 391,406 $ 417,725 $ 323,916
Customer service, net ...................... 74,606 68,744 55,603
--------- --------- ---------
Total net revenues ................... 466,012 486,469 379,519
--------- --------- ---------
Cost of revenues:
Product .................................... 266,624 249,120 189,568
Customer service ........................... 47,248 39,016 32,455
--------- --------- ---------
Total cost of revenues ............... 313,872 288,136 222,023
--------- --------- ---------
Gross profit ............................... 152,140 198,333 157,496
Operating expenses:
Selling expenses ........................... 88,321 82,207 68,279
Product development and
engineering expenses ..................... 44,439 45,383 33,728
General and administrative
expenses ................................. 53,230 39,415 34,583
--------- --------- ---------
Total operating expenses ............. 185,990 167,005 136,590
--------- --------- ---------
(Loss) income from operations ........ (33,850) 31,328 20,906
Interest income ................................ 1,489 760 658
Interest expense ............................... (8,056) (6,770) (4,354)
Gain on sale of subsidiary stock ............... -- 1,116 --
Other non-operating income ..................... 34,726 401 --
--------- --------- ---------
(Loss) income before income
taxes ............................ (5,691) 26,835 17,210
Provision for income taxes ..................... 1,368 10,314 8,192
--------- --------- ---------
Net (loss) income .................... $ (7,059) $ 16,521 $ 9,018
========= ========= =========
Earnings per common and common equivalent share:
Net (loss) income per share .......... $ (.44) $ 1.00 $ .57
========= ========= =========
Average number of common and common
equivalent shares outstanding 16,062 16,490 15,909
</TABLE>
See accompanying notes to
consolidated financial statements
44
<PAGE> 45
Telxon Corporation
and Subsidiaries
Consolidated Statement of Cash Flows
- ------------------------------------
<TABLE>
<CAPTION>
In Thousands Year ended March 31,
--------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) income .................................... $ (7,059) $ 16,521 $ 9,018
Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:
Depreciation and amortization .................... 28,570 22,945 21,397
Amortization of restricted stock awards, net ..... 119 802 782
Provision for doubtful accounts .................. 378 1,538 1,158
Provision for inventory obsolescence ............. 11,521 2,026 7,407
Deferred income taxes ............................ (947) 4,161 (577)
Gain on sale of assets ........................... (32,653) -- --
Trading securities, net .......................... 902 (902) --
Loss on disposal of assets ....................... 592 393 145
Changes in assets and liabilities:
Accounts and notes receivable ................ 171 (54,103) (21,290)
Refundable income taxes ...................... -- 935 913
Inventories .................................. (131) (41,139) (178)
Prepaid expenses and other ................... (2,561) (976) (372)
Intangibles and other assets ................. (2,783) (2,416) 1,605
Accounts payable and accrued liabilities ..... (7,472) 38,238 (10,030)
Income taxes payable ......................... (3,005) (2,302) 6,153
Other long-term liabilities .................. 1,606 1,031 (181)
-------- -------- --------
Total adjustments ................... (5,693) (29,769) 6,932
Net cash (used in) provided by operating activities ... (12,752) (13,248) 15,950
Cash flows from investing activities:
Proceeds from sale of assets .......................... 65,674 -- --
Additions to property and equipment ................... (14,576) (22,749) (15,224)
Software investments .................................. (7,731) (9,025) (869)
Purchase of non-marketable investments ................ (6,691) (1,562) (150)
Additions to long-term notes receivable ............... (2,000) (650) --
Payments for acquisitions, net of cash acquired ....... -- (2,403) (970)
Short-term investments ................................ -- -- 764
-------- -------- --------
Net cash provided by (used in) investing activities ... 34,676 (36,389) (16,449)
Cash flows from financing activities:
Notes payable, net .................................... (16) (30,084) 5,822
Principal payments on long-term financing agreement ... (2,104) (230) (247)
Principal payments on capital leases .................. (856) (968) (642)
Proceeds from convertible debt ........................ -- 82,500 --
Debt issue costs paid ................................. (306) (3,463) --
Proceeds from exercise of stock options ............... 1,615 5,977 2,155
Purchase of treasury stock ............................ (9,328) -- --
Payment of cash dividends ............................. (162) (160) (155)
-------- -------- --------
Net cash (used in) provided by financing activities ... (11,157) 53,572 6,933
Effect of exchange rate changes on cash ............... (209) (471) 889
-------- -------- --------
Net increase in cash and cash equivalents ............. 10,558 3,464 7,323
Cash and cash equivalents at beginning of year ........ 34,828 31,364 24,041
-------- -------- --------
Cash and cash equivalents at end of year .............. $ 45,386 $ 34,828 $ 31,364
======== ======== ========
</TABLE>
See accompanying notes to
consolidated financial statements
45
<PAGE> 46
Telxon Corporation
and Subsidiaries
<TABLE>
<CAPTION>
Consolidated Statement of
- -------------------------
Changes in Stockholders' Equity
- -------------------------------
In Thousands (except share and per share amounts)
Foreign Unearned
Additional Currency Compensation Treasury
Common Paid-in Retained Translation Restricted Stock at
Stock Capital Earnings Adjustment Stock Cost
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at March 31, 1994................. $ 153 $ 74,830 $ 54,653 $ (3,587) $ (1,334) $ --
Exercise of stock options, net of
tax..................................... 2 2,973 (247) -- -- --
Retirement of common stock (72,399
shares)................................. -- (258) (315) -- -- --
Stock issued under restricted stock plan,
net of amortization.................... 1 1,003 -- -- (221) --
Currency translation adjustment........... -- -- -- 2,062 -- --
Dividends paid ($.01 per share)........... -- -- (155) -- -- --
Net income for 1995....................... -- -- 9,018 -- -- --
----- -------- -------- -------- ------ --------
Balance at March 31, 1995................. 156 78,548 62,954 (1,525) (1,555) --
Exercise of stock options, net of
tax..................................... 5 7,260 (734) -- -- --
Retirement of common stock (80,206
shares)................................. -- (241) (485) -- -- --
Amortization of restricted stock.......... -- -- -- -- 802 --
Stock issued under employee stock
purchase plan (8,815 shares)........... -- 183 -- -- -- --
Currency translation adjustment........... -- -- -- (539) -- --
Dividends paid ($.01 per share)........... -- -- (160) -- -- --
Net income for 1996....................... -- -- 16,521 -- -- --
----- -------- -------- -------- ------ --------
Balance at March 31, 1996................. 161 85,750 78,096 (2,064) (753) --
Exercise of stock options, net of
tax..................................... 1 1,670 (51) -- -- --
Retirement of common stock (15,037
shares)................................. -- (2) (3) -- -- --
Amortization of restricted stock.......... -- -- -- -- 376 --
Forfeiture of restricted stock............ -- (424) -- -- 167 --
Repurchase of common stock (633,000
shares)................................ -- -- -- -- -- (9,328)
Reissue of treasury stock under employee
stock purchase plan (75,560 shares).... -- 111 -- -- -- 794
Currency translation adjustment........... -- -- -- (579) -- --
Dividends paid ($.01 per share)........... -- -- (162) -- -- --
Net loss for 1997......................... -- -- (7,059) -- -- --
----- -------- -------- -------- ------ --------
Balance at March 31, 1997................. $ 162 $ 87,105 $ 70,821 $ (2,643) $ (210) $ (8,534)
===== ======== ======== ======== ====== ========
</TABLE>
See accompanying notes to
consolidated financial statements
46
<PAGE> 47
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements
- ------------------------------------------
In Thousands (except per share amounts)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ----------------------------------------------------
Principles of Consolidation
- ---------------------------
The Company's consolidated financial statements include the financial statements
of the Company and its wholly-owned and majority-owned subsidiaries. All
significant intercompany transactions have been eliminated in consolidation.
Minority Interests
- ------------------
The difference between the proceeds from the sale of stock by a subsidiary and
the Company's carrying value of such stock is recorded as non-operating gains or
losses at the time of the sale, provided that the criteria for gain recognition
on the sale of subsidiary stock have been met. Minority interests then represent
the unaffiliated stockholders' interests in the cumulative earnings of the
subsidiary subsequent to the sale of stock.
At March 31, 1997, the Company has recorded minority interests of approximately
$669 in other long-term liabilities in the accompanying consolidated financial
statements related to the sale of common stock of its Aironet Wireless
Communications, Inc. ("Aironet") subsidiary. Refer to Note 16 -- Subsidiary
Stock Transactions for additional details on the sale of Aironet Wireless
common stock.
Foreign Currency Translation
- ----------------------------
The financial statements of foreign operations are translated into U.S. dollars
using the local currency as the functional currency in accordance with Statement
of Financial Accounting Standards No. 52, "Foreign Currency Translation".
Accordingly, all assets and liabilities are translated at current rates of
exchange, and operating transactions are translated at weighted average rates
during the year. The translation gains and losses are accumulated as a separate
component of stockholders' equity until realized. There were no income taxes
allocated to the translation adjustments and transfers to net income in 1997,
1996 and 1995. Net transaction gains or losses were not material in 1997, 1996
and 1995. For further detail by geographic areas, see Note 13 - Business
Segment.
Forward Foreign Currency Exchange Contracts
- -------------------------------------------
The Company enters into forward foreign currency exchange contracts, which
generally involve the exchange of one currency for a second currency at some
future date, to hedge against the impact of changes in foreign currency exchange
rates on specific foreign currency commitments. Unrealized gains and losses on
these forward foreign exchange contracts are deferred and realized upon
settlement of the commitment transaction. Refer to Note 11 -- Fair Value of
Financial Instruments for additional details on forward foreign currency
exchange contracts.
Cash and Cash Equivalents
- -------------------------
The Company considers all highly liquid investments which are both readily
convertible to cash and have a maturity of three months or less when purchased
to be cash equivalents. At March 31, 1997, the Company had cash
47
<PAGE> 48
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
of $500 held in escrow related to a Standstill Agreement with a third-party.
Trading Securities
- ------------------
Trading securities, which consist of marketable securities that the Company has
purchased with the intent of selling within the near term, have been stated at
fair value in accordance with Statement of Financial Accounting Standards No.
115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS
No. 115"). Under SFAS No. 115, the Company records all unrealized holding gains
and losses as non-operating income or loss.
During fiscal 1996, the Company recognized $339 of net unrealized holding gains
on trading securities.
Inventories
- -----------
Inventories are stated at the lower of cost (first-in, first-out) or market.
Property and Equipment
- ----------------------
Property and equipment are recorded at historical cost and depreciated over the
estimated useful lives of the assets using the straight-line method for
financial reporting purposes. The ranges of the estimated useful lives are:
buildings, 19 years; machinery and equipment, furniture and fixtures, and
transportation equipment, 3-10 years; marketing and customer service equipment
and tooling, 3 years; and leasehold improvements, over the shorter of the useful
life of the asset or the life of the lease. Gains and losses from the sale or
retirement of property and equipment are included in income. Fully depreciated
assets are written off against accumulated depreciation.
Software Costs, Intangibles and Other Assets
- --------------------------------------------
Software costs are capitalized in accordance with Statement of Financial
Accounting Standards No. 86, "Accounting for the Cost of Computer Software to Be
Sold, Leased, or Otherwise Marketed" and are included in intangible and other
assets in the accompanying consolidated balance sheets. Purchased computer
software is capitalized and amortized for both financial and tax reporting
purposes, using the straight-line method, over the expected useful life of the
software, generally from three to seven years. Similarly, internally developed
computer software for sale or lease is capitalized and amortized for financial
reporting purposes using the straight-line method over three years; for tax
purposes, these costs are generally expensed as incurred, though certain of
these costs have been capitalized and will be amortized using the straight-line
method over three years. Product development and engineering expenses are
expensed as incurred for both financial and tax reporting purposes.
The excess of the purchase cost over the fair value of net assets acquired in an
acquisition (goodwill) is included in intangible and other assets in the
accompanying consolidated balance sheets. Goodwill is amortized on a
straight-line basis over five to ten years. The Company periodically reviews
goodwill to assess recoverability, and impairments, if any, would
48
<PAGE> 49
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
be recognized in results of operations if a permanent reduction in value were to
occur.
Non-compete agreements, deferred financing costs, and license agreements have
also been included in intangible and other assets in the accompanying
consolidated balance sheets. Non-compete and license agreements are amortized on
a straight-line basis over the life of the related contract. Deferred financing
costs are amortized on a straight-line basis over the life of the related debt,
with accelerated amortization recorded on any indebtedness retired prior to its
scheduled maturity. All other assets included in intangible and other assets are
recorded at cost and are amortized on a straight-line basis over their expected
useful lives.
Revenue Recognition
- -------------------
Revenues from computer hardware sales and software licenses are recognized at
the time of shipment or at the time of title transfer if professional services
are also performed. Professional services revenues, which include system
integration and project management fees, are recognized as services are
performed. In accordance with Statement of Position 91-1, "Software Revenue
Recognition", revenues from custom application software sales are recognized
using a percentage-of-completion method. Revenues from customer service
contracts are recognized ratably over the maintenance contract period or as the
services are performed.
During fiscal 1997 and 1996, the Company entered into certain software license
agreements and manufacturing right contracts with third-parties. The sale of
these rights have been recorded as product revenue.
Product Development and Engineering Expenses
- --------------------------------------------
Expenditures for the development and engineering of products are expensed as
incurred in accordance with the requirements of Statement of Financial
Accounting Standards No. 2, "Accounting for Research and Development Costs".
During fiscal 1996, the Company was reimbursed $1,000 by a major customer for
product development and engineering costs incurred by the Company during the
year in connection with a product development agreement between the Company and
the customer. The reimbursement has been recorded as a reduction to the
Company's product development and engineering expenses.
Stock Option and Stock Purchase Plans
- -------------------------------------
Stock options, which are granted to employees and non-employee directors under
the Company's stock option plans at the quoted market price of the Company's
common stock as of the grant date, and stock purchased by eligible employees
under the Company's stock purchase plan are accounted for under Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB
25"). As the stock options are granted at the quoted market price of the
Company's common stock as of the grant date, no compensation expense has been
recorded in accordance with APB 25. The stock purchase plan meets the criteria
of a non-compensatory plan under APB 25.
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 (16,062 in 1997, 15,910 in 1996 and 15,484 in 1995), increased by the net
shares issuable on the assumed exercise of stock
49
<PAGE> 50
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
options using the treasury stock method (none in 1997, 580 in 1996 and 425 in
1995). All securities having an anti-dilutive 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.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Contingent and Unusual Items
- ----------------------------
Contingent and unusual items are expensed as incurred when events giving rise to
such items are probable and the amounts are estimable in accordance with the
requirements of Statement of Financial Accounting Standards No. 5, "Accounting
for Contingencies".
Reclassifications
- -----------------
Certain items in the 1996 and 1995 consolidated financial statements and notes
thereto have been reclassified to conform to the 1997 presentation.
NOTE 2 -- INVENTORIES
- ---------------------
Inventories at March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Purchased components........................... $ 29,983 $ 50,022
Work-in-process................................ 31,579 35,379
Finished goods................................. 22,937 25,731
-------- --------
$ 84,499 $111,132
======== ========
</TABLE>
50
<PAGE> 51
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
NOTE 3 -- PROPERTY AND EQUIPMENT
- --------------------------------
Property and equipment, at cost, at March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Machinery and equipment......................... $56,187 $55,809
Tooling......................................... 24,356 24,349
Furniture and office equipment.................. 19,104 18,098
Buildings, improvements and leasehold
interest............................... 12,242 12,097
Leasehold improvements.......................... 7,992 6,407
Capital lease assets and other.................. 4,553 7,107
Transportation equipment........................ 2,988 2,913
Land ........................................ 1,978 1,978
------- -------
129,400 128,758
Less-accumulated depreciation and
amortization........................... 83,822 74,085
------- -------
$45,578 $54,673
======= =======
</TABLE>
Depreciation expense for fiscal 1997, 1996 and 1995 amounted to $18,893,
$15,184 and $13,419, respectively.
Net capital lease additions (retirements) were $(1,008), $1,348 and $(2,001) in
fiscal 1997, 1996 and 1995, respectively. These additions or retirements are
non-cash transactions and, accordingly, have been excluded from property and
equipment additions in the accompanying consolidated statement of cash flows.
Amortization of capital lease assets has been included in depreciation expense.
Accumulated depreciation related to capital lease assets aggregated $1,177,
$1,680 and $741 in fiscal 1997, 1996 and 1995, respectively.
NOTE 4 -- INTANGIBLE AND OTHER ASSETS
- -------------------------------------
Intangible and other assets, net, consisted of the following at March 31:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Capitalized software, net of amortization
of $7,379 and $7,071........................ $11,451 $10,566
Long-term notes receivable......................... 9,855 650
Goodwill relating to acquisitions, net of
amortization of $16,889 and $13,907......... 8,962 14,775
Investments in non-traded, closely
held companies.............................. 8,403 1,712
Deferred financing costs, net of amortization
of $1,708 and $1,096........................ 3,542 3,848
Non-compete agreements with former share-
holders of acquisitions and others, net
of amortization of $2,880 and $2,280........ -- 600
Other, net of amortization of $95 and
$292........................................ 3,881 2,470
------- -------
$46,094 $34,621
======= =======
</TABLE>
51
<PAGE> 52
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
Amortization expense for the years ended March 31 was as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Goodwill........................... $4,126 $4,100 $3,748
Capitalized software............... 3,862 2,385 1,341
Deferred financing costs........... 612 164 32
Non-compete agreements............. 600 720 2,024
Licenses........................... -- 350 700
Other ............................ 127 42 133
------ ------ ------
$9,327 $7,761 $7,978
====== ====== ======
</TABLE>
During fiscal 1997, the Company sold the assets of certain retail application
software operations, including capitalized software with a net book value of
$2,545. Refer to Note 15 -- Divestitures for additional details on the sale.
During fiscal 1997, the Company sold substantially all of the assets of its
Itronix Corporation subsidiary, including capitalized software with a net book
value of $439. Additionally, the Company expensed $1,589 of unamortized goodwill
during fiscal 1997 related to the sale. Refer to Note 15 -- Divestitures for
additional details on the sale.
In connection with the acquisition of Teletransaction, Inc. in fiscal 1993, the
Company acquired the rights to consulting services (principally performed by
Robert F. Meyerson, then Chairman of the Board and Chief Executive Officer of
the Company) from Accipiter Corporation ("Accipiter"), a company owned by Mr.
Meyerson's wife, and also secured a non-competition covenant from Accipiter and
Mr. Meyerson. Aggregate payments for these rights were $3,600. The costs of
these rights were amortized over the five year terms of the agreements and are
fully amortized at March 31, 1997.
NOTE 5 -- SHORT-TERM FINANCING
- ------------------------------
Effective March 8, 1996, the Company replaced its previous revolving credit,
term loan, and security agreement with a new credit agreement with a group of
eight banks. The credit agreement, which expires on March 8, 2001, provides the
Company with a maximum credit facility of $100,000 and permits the Company to
borrow funds as domestic or Eurodollar advances. Funds borrowed as domestic
advances bear interest at the greater of the agent bank's "Prime Commercial
Lending Rate" or the Federal Funds rate plus .50% while Eurodollar advances bear
interest at the agent bank's Eurodollar rate plus .50% to 1.25% based on certain
capitalization levels. At March 31, 1997, the interest rate in effect under the
new credit agreement for domestic advances was 8.50% and 6.75% for Eurodollar
advances. In addition, the agreement requires the Company to pay a commitment
fee of .15% to .375% per annum, based on certain capitalization levels, on the
unused portion of the revolving commitment amount. The Company is also required
to pay a utilization fee of .125% to .25% per annum, based on certain
capitalization levels, on Eurodollar advances at certain borrowing levels. At
March 31, 1997, the commitment fee and utilization fee rates were .20% and .125%
per annum, respectively. The agreement also contains
52
<PAGE> 53
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
certain restrictive covenants which requires the Company to maintain certain
leverage, net worth and fixed charge coverage ratios. The Company had no
borrowings outstanding under the credit agreement at March 31, 1997, but has
accrued $50 at March 31, 1997, for utilization fees. At March 31, 1997, the
Company was in compliance with all restrictive covenants contained in the
credit agreement.
Effective March 20, 1996, the Company entered into a business purpose revolving
promissory note with a bank. The note provides the Company with a maximum credit
facility of $20,000 and bears interest at the lending bank's "Money Market Rate"
plus .50% to 1.25% per annum, based on certain capitalization levels. At March
31, 1997, the interest rate in effect under the note was 7.75%. Effective August
6, 1996, the note was extended to August 5, 1997. The Company had no borrowings
outstanding under the promissory note at March 31, 1997.
Both credit facilities were amended in August 1996 to conditionally grant to the
lenders a security interest in certain assets of the Company which will only
become effective if the Company were to become in default under the credit
agreement and then only if the requisite lenders under that facility were to
direct that the security documents be filed.
During fiscal 1997, the Company had a weighted average of $7,760 outstanding
under its $100,000 credit agreement and $20,000 promissory note with a weighted
average interest rate of 7.0% per annum. During fiscal 1996, the Company had a
weighted average of $25,354 outstanding under its previous credit facility with
a weighted average interest rate of 8.9% per annum.
NOTE 6 -- ACCRUED LIABILITIES
- -----------------------------
Accrued liabilities at March 31 consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------- --------
<S> <C> <C>
Accrued payroll and other employee compensation......... $15,799 $10,586
Deferred customer service revenues...................... 14,329 15,063
Accrued royalties....................................... 4,516 3,430
Accrued commissions..................................... 3,510 3,808
Accrued taxes other than payroll and income taxes....... 3,162 4,035
Accrued interest........................................ 1,847 2,136
Other accrued liabilities............................... 5,837 6,094
------- -------
$49,000 $45,152
======= =======
</TABLE>
NOTE 7 -- INCOME TAXES
Components of (loss) income before taxes:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Domestic operations ........................ $(19,589) $13,758 $ 7,384
International operations.................... 13,898 13,077 9,826
------- ------- -------
$ (5,691) $26,835 $17,210
======== ======= =======
</TABLE>
53
<PAGE> 54
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109").
Under SFAS No. 109, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that are currently in
effect.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Components of the provision for income taxes by taxing jurisdiction are as
follows:
<TABLE>
<CAPTION>
Currently payable (refundable): 1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
U.S...................................... $ (450) $ 3,796 $3,429
State and local.......................... 196 264 120
Foreign.................................. 5,090 4,727 3,400
------ ------- ------
4,836 8,787 6,949
------ ------- ------
Deferred:
U.S...................................... (2,900) 1,586 1,156
State and local.......................... (393) 178 87
Foreign.................................. (175) (237) --
------ ------- ------
......................................... (3,468) 1,527 1,243
------ ------- ------
U.S. and foreign taxes on
income before extraordinary credit....... $1,368 $10,314 $8,192
====== ======= ======
</TABLE>
The reconciliation between the reported total income tax expense and the amount
computed by multiplying income (loss) before income taxes by the U.S. federal
statutory tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
U.S. federal statutory tax rate ........................ (35.0)% 35.0% 35.0%
Net taxes on repatriated earnings....................... 41.8 -- --
Foreign tax rate differential........................... 7.8 1.7 2.4
Research and development credits ....................... (19.7) (2.2) (2.5)
Goodwill................................................ 25.5 5.6 8.3
Foreign sales corporation tax benefit................... (6.3) -- --
Net operating losses not currently utilized............. 7.4 -- --
Other................................................... 2.5 (1.7) 4.4
---- ---- ----
Consolidated effective income tax rate............... 24.0% 38.4% 47.6%
==== ==== ====
</TABLE>
54
<PAGE> 55
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at March 31 are presented below:
<TABLE>
<CAPTION>
1997 1996
------- -------
Deferred tax assets:
<S> <C> <C>
Foreign tax credit carryover........................................... $4,827 $ --
Allowance for doubtful accounts........................................ 1,195 701
Inventory obsolescence and capitalization.............................. 5,794 3,526
State and local income benefits........................................ 2,092 1,748
Net operating loss and research and development
and alternative minimum tax credit carryovers..................... 1,839 1,340
Warranty reserves...................................................... 1,374 1,068
Employee benefits and compensation..................................... 1,929 705
Other .............................................................. 1,816 827
------ ------
Total gross deferred tax assets............................... 20,866 9,915
Less valuation allowance...................................... (7,559) (2,384)
------ ------
Total deferred tax assets..................................... 13,307 7,531
------ ------
Deferred tax liabilities:
Depreciation and amortization.......................................... (5,191) (3,019)
Other .............................................................. (1,265) (1,094)
------ ------
Total gross deferred tax liabilities.......................... (6,456) (4,113)
------ ------
Net deferred tax asset........................................ $6,851 $3,418
====== ======
</TABLE>
The net change in the total valuation allowance for the years ended March 31,
1997 and 1996, was an increase of $5,175 and a decrease of $1,566, respectively.
The net deferred tax asset is deemed realizable and is classified in prepaid
expenses in the accompanying consolidated balance sheets.
Subsequently recognized tax benefits relating to the valuation allowance for
deferred tax assets as of March 31 will be allocated as follows:
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Income tax benefit that would be reported in the
consolidated statement of income............................................. $1,402 $1,444
Income tax benefit that would reduce goodwill and
other noncurrent intangible assets........................................... 6,157 940
------ ------
Total $7,559 $2,384
====== ======
</TABLE>
No provision for U.S. income taxes on $9,760 of undistributed earnings of
international subsidiaries at March 31, 1997, was made because these earnings
were indefinitely reinvested in the subsidiaries. Determination of the amount of
the unrecognized deferred tax liability for temporary differences related to
investment in foreign subsidiaries is not practicable.
Income taxes paid in fiscal 1997, 1996 and 1995 were $8,734, $6,340 and $1,804,
respectively. Income tax refunds received in fiscal 1997, 1996 and 1995
aggregated $604, $1,620 and $884, respectively.
55
<PAGE> 56
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
As of March 31, 1997, the Company had foreign operating loss carryovers of
$3,434 for both tax and financial reporting purposes. These foreign carryovers
expire at various dates through fiscal 2004.
As a result of acquisitions in prior years, the Company had domestic operating
loss carryovers and domestic research and development credit carryovers for tax
and financial reporting purposes in the amounts of $1,018 and $157,
respectively. These domestic carryovers expire at various dates through fiscal
2008. As of March 31, 1997, the Company had domestic alternative minimum tax
credit carryovers of $516. The domestic alternative minimum tax credit
carryforward period is indefinite.
As of March 31, 1997, the Company had foreign tax credit carryovers of $2,957.
The carryforward period is five years and expires in fiscal 2002.
There can be no assurance that foreign and domestic tax carryovers will be
utilized.
NOTE 8 -- STOCK OPTIONS AND RESTRICTED STOCK
- --------------------------------------------
The Company accounts for stock based compensation issued to its employees and
non-employee directors in accordance with APB 25 and has elected to adopt the
"disclosure-only" provisions of Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation" ("SFAS No. 123").
During the periods shown below, the Company had in effect three stock option
plans for the officers and other key employees of the Company - the Telxon
Corporation 1983 Stock Option Plan (the "1983 Plan"), the Telxon Corporation
1988 Stock Option Plan (the "1988 Plan") and the Telxon Corporation 1990 Stock
Option Plan (the "1990 Plan"). The options outstanding under the 1983 Plan, the
1988 Plan and the 1990 Plan generally vest in equal installments over a
three-year period on the first three anniversary dates after the date of grant.
The option price is equal to the market price for the Company's Common Stock at
the time of grant.
56
<PAGE> 57
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
The following is a summary of the activity in the Company's stock option plans
during fiscal 1995, 1996 and 1997:
<TABLE>
<CAPTION>
Stock Options
-----------------------
Average Price
Shares Per Share
------ ---------
<S> <C> <C>
March 31, 1994 ............................................... 1,752,700 $ 10.64
Granted ................................................. 971,500 14.73
Exercised ............................................... (325,245) 8.60
Returned to pool due to employee
terminations ......................................... (112,734) 10.84
----------
March 31, 1995 ............................................... 2,286,221 12.66
Granted ................................................. 1,184,626 19.10
Exercised ............................................... (513,927) 10.94
Returned to pool due to employee
terminations ......................................... (5,990) 12.28
----------
March 31, 1996 ............................................... 2,950,930 15.54
Granted ................................................. 956,500 14.89
Exercised ............................................... (127,337) 11.84
Returned to pool due to employee
terminations ......................................... (665,471) 16.27
----------
March 31, 1997 ............................................... 3,114,622 15.23
==========
</TABLE>
At March 31, 1997, there were 3,114,622 options outstanding under the 1990 Plan
at $8.75 to $23.00 per share.
During fiscal 1996, the Company's stockholders approved an amendment to the 1990
Plan that increased the number of shares available for issuance by 850,000
shares, to a total of 3,350,000 shares. Options available to be granted under
the 1990 Plan at March 31, 1997, were 6,406. No further options can be granted
under the 1983 Plan or the 1988 Plan.
The Company also has in effect a stock option plan for non-employee directors
(the "Director Plan"). During fiscal 1996, the Company's stockholders approved
an amendment to the Director Plan that increased the number of shares available
for issuance by 150,000 shares, to a total of 400,000 shares. During the fiscal
year ended March 31, 1997, 50,000 options were granted at an average price per
share of $12.24. At March 31, 1997, there were 260,000 options outstanding under
the Director Plan at $9.125 to $23.50 per share. At March 31, 1997, there were
106,667 options available to be granted under the Director Plan.
At March 31, 1997 and 1996, there were 6,000 options outstanding and exercisable
at $14.63 per share which were not granted under the Company's stock option
plans.
During fiscal 1993, the Company adopted a Restricted Stock Plan (the "Restricted
Stock Plan"), under which 250,000 shares may be issued. A committee of the Board
of Directors determines the time periods during which and the criteria upon
which the Restricted Stock is subject to
57
<PAGE> 58
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
forfeiture. At March 31, 1997, 163,000 shares granted under the Restricted Stock
Plan had vested, 60,000 shares were outstanding subject to forfeiture, and
27,000 shares were available to be granted as a result of shares forfeited
during fiscal 1997.
During fiscal 1996, the Company's stockholders approved the 1995 Employee Stock
Purchase Plan (the "1995 Stock Purchase Plan"), under which 500,000 shares of
authorized but unissued common stock or treasury stock were authorized for sale
to eligible employees at a 15% discount from market value. During fiscal 1997,
the Company re-issued 75,560 shares of its treasury stock in satisfaction of
purchases made under the 1995 Stock Purchase Plan. At March 31, 1997, a total of
84,375 shares had been issued and purchased under the 1995 Stock Purchase Plan
since its inception and 415,625 shares remained available for future purchases.
For SFAS No. 123 purposes, the fair value of each option granted under the 1990
and Director Plans is estimated as of the date of grant using the Black-Scholes
option pricing model with the following weighted average assumptions used for
stock options granted in fiscal 1997 and 1996, respectively: dividend yield of
.047% and .068%, expected volatility of 56.22% and 49.97%, risk-free interest
rates of 6.40% and 6.05%, and an expected life of five years for grants in both
fiscal 1997 and 1996.
The fair value of each right to purchase stock under the 1995 Stock Purchase
Plan is estimated as of the first day of each six-month payment period using the
Black-Scholes option pricing model with the following weighted average
assumptions used for each purchase right earned in fiscal 1997 and 1996,
respectively: dividend yield of .047% and .053%, expected volatility of 56.22%
and 54.36%, risk-free interest rates of 5.18% and 5.18%, and an expected life of
six and five months.
If the Company had elected to recognize the compensation cost of its stock
option and stock purchase plans based on the fair value of the awards under
those plans in accordance with SFAS No. 123, net income and earnings per share
would have been reduced to the pro forma amounts below:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Net (loss) income: As reported $ (7,059) $ 16,521
Pro forma (11,651) 14,309
Earnings per share As reported (.44) 1.00
Pro forma (.73) .87
</TABLE>
NOTE 9 -- LEASES
- ----------------
The Company leases certain equipment under capital leases generally for terms of
five years or less with renewal and purchase options. The present value of
future minimum lease payments for these capital lease obligations is reflected
in the consolidated balance sheet as current and noncurrent capital lease
obligations. In addition, the Company leases office
58
<PAGE> 59
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
facilities, customer service locations and certain equipment under noncancelable
operating leases.
Future minimum lease payments for years ending March 31, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Leases Leases
------ ------
<S> <C> <C>
1998............................................... $ 746 $ 8,004
1999............................................... 779 7,746
2000............................................... 222 6,158
2001............................................... 31 5,105
2002............................................... 10 2,861
2003 and thereafter................................ 5 3,054
----- -------
1,793 $32,928
=======
Amount representing interest....................... (198)
------
Present value of net minimum lease payments........ 1,595
Current portion ................................. (627)
------
Long-term portion .................................. $ 968
======
</TABLE>
The Company has an option to purchase the 100,000-square-foot facility currently
occupied by its corporate and engineering offices. The purchase option is
exercisable for a price equal to the fair market value of the premises as
determined by an independent appraisal prior to September 1, 2001.
Rent expense for fiscal 1997, 1996 and 1995 amounted to $12,296, $10,623 and
$11,212, respectively.
NOTE 10 -- CONVERTIBLE SUBORDINATED NOTES AND DEBENTURES
Convertible subordinated notes and debentures at March 31, 1997 and 1996,
consisted of $82,500 of 5-3/4% Convertible Subordinated Notes (the "5-3/4%
Notes") and $24,724 of 7-1/2% Convertible Subordinated Debentures (the "7-1/2%
Debentures").
The 5-3/4% Notes, which were issued December 12, 1995, are due January 1, 2003.
The conversion price for the 5-3/4% Notes is $27.50 per common share and is
subject to adjustment in certain events. Interest is payable on January 1 and
July 1 in each year, and commenced July 1, 1996. On or after January 5, 1999,
the 5-3/4% Notes are redeemable at any time at the option of the Company, in
whole or in part, at the following prices for the following calendar years:
1999, 103.286%; 2000, 102.464%; 2001, 101.643% and 2002, 100.821%.
The 7-1/2% Debentures, which were issued June 1, 1987, are due June 1, 2012. The
conversion price for the 7-1/2% Debentures of $26.75 is subject to adjustment in
certain events. Interest is payable on June 1 and December 1 in each year, and
commenced December 1, 1987. The Debentures are redeemable at any time at the
option of the Company, in whole or in part, at 102.25% of the principal amount
redeemed, declining annually to par on and after June 1, 1997. The sinking fund
requires mandatory annual payments of 5% of the original $46,000 principal
amount commencing June 1,
59
<PAGE> 60
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
1997, calculated to retire 75% of the issue prior to maturity. During fiscal
1991, the Company purchased and retired Debentures with a principal face amount
aggregating $21,266, which will be applied to the earliest of the Company's
sinking fund payment obligations.
Total interest paid by the Company in fiscal 1997, 1996 and 1995 was $8,368,
$5,046 and $4,392, respectively.
NOTE 11 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
- ----------------------------------------------
In accordance with Statement of Financial Accounting Standards No. 107,
"Disclosures about Fair Value Financial Instruments", the Company discloses the
fair value of its financial instruments for which it is practicable to estimate
fair value.
The following methods and assumptions were used by the Company in estimating the
fair value of the following financial instruments:
Cash and Cash Equivalents
The carrying amounts reported in the accompanying consolidated balance
sheets for cash and cash equivalents approximate fair value due to the
short-term nature of these instruments.
5-3/4% Notes
The fair value of the Company's 5-3/4% Notes is based on discounted cash
flow analysis. Refer to Note 10 -- Convertible Subordinated Notes and
Debentures for additional information concerning the 5-3/4% Notes.
7-1/2% Debentures
The fair value of the Company's publicly traded 7-1/2% Debentures is
based on quoted market prices. Refer to Note 10 -- Convertible
Subordinated Notes and Debentures for additional information concerning
the 7-1/2% Debentures.
<TABLE>
<CAPTION>
1997 1996
--------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------------------- ----------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $45,386 $45,386 $34,828 $34,828
5-3/4% Notes 82,500 79,314 82,500 80,503
7-1/2% Debentures 24,724 23,982 24,724 24,724
</TABLE>
Forward Foreign Currency Exchange Contracts
The fair value of forward foreign currency exchange contracts is
estimated based on quotes from currency brokers. At March 31, 1997, the
Company had forward foreign currency exchange contracts to purchase
British Pounds with an aggregate contract value of $7,127 and an
aggregate fair value of $7,214. At March 31, 1997, these contracts were
scheduled to mature in April 1997.
60
<PAGE> 61
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
Investments in Non-traded Companies
It was not practicable for the Company to estimate the fair value of its
investments in certain non-traded, closely held companies because of the
lack of quoted market prices for those investments and the inability to
estimate fair values without incurring excessive costs. These
investments, which the Company holds for purposes other than trading,
totaled $8,403 and $1,712 at March 31, 1997 and 1996, respectively, and
are carried at cost in intangible and other assets in the accompanying
consolidated balance sheets. Refer to Note 4 -- Intangible and Other
Assets for additional information concerning the Company's investments in
non-traded companies.
Long-term Notes Receivable
It was not practicable for the Company to estimate the fair value of its
long-term notes receivable from certain non-traded, closely held
companies because of the lack of quoted market prices for similar
financial instruments and the inability to estimate fair values without
incurring excessive costs. The notes, which the Company intends to hold
to maturity, bear interest at various fixed and variable rates and have
maturities ranging from one to four years. The long-term notes
receivable, which total $9,855 and $650 at March 31, 1997 and 1996,
respectively, are carried at cost in intangible and other assets in the
accompanying consolidated balance sheets. Refer to Note 4 -- Intangible
and Other Assets for additional information concerning long-term notes
receivable.
NOTE 12 -- STOCKHOLDERS' EQUITY
- -------------------------------
The exercise of non-qualified stock options results in state and federal income
tax benefits to the Company equal to the difference between the market price at
the date of exercise and the option price. During fiscal 1997, 1996 and 1995,
$353, $1,751 and $632, respectively, was credited to additional paid-in capital
as a result of such option exercises.
NOTE 13 -- BUSINESS SEGMENT
- ---------------------------
The Company designs, develops, manufactures, markets and services mobile and
wireless transaction systems and solutions for vertical markets. The Company's
business is a single segment. The Company does not believe that it is dependent
upon any one customer or group of customers. No customer accounted for 10% or
more of total revenues in fiscal 1997, 1996 or 1995.
The Company sells its products to customers in diversified industries, primarily
in North America and Europe. The Company realizes approximately one-half of its
revenues from customers in retail industries who are in widely diversified
geographic locations and markets. The Company performs ongoing credit
evaluations of its customers and generally does not require collateral. The
Company maintains reserves for potential credit losses, and such losses have
historically been within management's expectations.
61
<PAGE> 62
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
The Company has operations in the United States, Europe, Canada, Australia and
Asia. Information for fiscal 1997, 1996 and 1995 follows below.
Of the U.S. revenues from unaffiliated customers in fiscal 1997, 1996 and 1995,
$24,425, $20,070 and $16,293 were exports to Europe, Canada, South America,
Asia, Africa and the Middle East.
Transfers between geographic areas were at cost plus a negotiated mark-up.
Assets of geographic areas are identified with the operations of each area.
Corporate assets consist of property and equipment.
<TABLE>
<CAPTION>
United Adjustment &
1997 States Europe Other Elimination Consolidated
---- ------ ------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers..................................... $355,256 $65,292 $45,464 $ -- $466,012
Transfers between geo-
graphic areas................................. 70,251 463 43,874 (114,588) --
--------- ------- ------- --------- --------
Total revenues........................ $425,507 $65,755 $89,338 $(114,588) $466,012
======== ======= ======= ========= ========
Operating income............................... $ 17,105 $ 1,680 $22,036 $ (25,641) $ 15,180
======== ======= ======= =========
Interest expense, net.......................... (6,566)
Non-operating income........................... 34,726
Foreign currency transac-
tion gain (loss), net....................... (19) (387) (58) -- (464)
Corporate expenses, net........................ (48,567)
--------
Income before income
taxes......................................... $ (5,691)
========
Identifiable assets at
March 31, 1997........................ $287,644 $32,578 $27,157 $ -- $347,379
======== ======= ======= ========= ========
Corporate assets............................... 14,405
--------
Total assets at
March 31, 1997........................ $361,784
========
</TABLE>
62
<PAGE> 63
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
<TABLE>
<CAPTION>
United Adjustment &
1996 States Europe Other Elimination Consolidated
---- ------ ------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers..................................... $382,156 $69,588 $34,725 $ -- $486,469
Transfers between geo-
graphic areas................................. 45,508 896 38,603 (85,007) --
-------- ------- ------- -------- --------
Total revenues........................ $427,664 $70,484 $73,328 $(85,007) $486,469
======== ======= ======= ======== ========
Operating income............................... $ 50,935 $ 6,506 $ 5,759 $ 996 $ 64,196
======== ======= ======== ========
Interest expense, net.......................... (6,010)
Non-operating income........................... 1,517
Foreign currency transac-
tion gain (loss), net....................... (18) 115 (157) -- (60)
Corporate expenses, net........................ (32,808)
--------
Income before income
taxes......................................... $ 26,835
========
Identifiable assets at
March 31, 1996........................ $297,154 $43,142 $35,130 $ -- $375,426
======== ======= ======= ========
Corporate assets............................... 13,783
--------
Total assets at
March 31, 1996........................ $389,209
========
</TABLE>
<TABLE>
<CAPTION>
United Adjustment &
1995 States Europe Other Elimination Consolidated
---- ------ ------ ----- ----------- ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffiliated
customers..................................... $285,603 $62,679 $31,237 $ -- $379,519
Transfers between geo-
graphic areas................................. 36,254 443 28,973 (65,670) --
-------- ------- ------- -------- --------
Total revenues........................ $321,857 $63,122 $60,210 $(65,670) $379,519
======== ======= ======= ======== ========
Operating income............................... $ 40,676 $ 3,434 $ 6,658 $ (232) $ 50,536
======== ======= ======= ========
Interest expense, net.......................... (3,696)
Foreign currency transac-
tion gain, net ............................. -- 145 299 -- 444
Corporate expenses, net........................ (30,074)
-------
Income before income
taxes......................................... $ 17,210
========
Identifiable assets at
March 31, 1995........................ $193,077 $40,943 $30,575 $ -- $264,595
======== ======= ======= ========
Corporate assets............................... 11,532
--------
Total assets at
March 31, 1995........................ $276,127
========
</TABLE>
63
<PAGE> 64
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
NOTE 14 -- INTERNATIONAL OPERATIONS
The consolidated financial statements include the following with respect to the
net income and net assets of the Company's international subsidiaries and
branches during the three years ended March 31:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Net income ........................... $18,484 $ 7,695 $ 6,712
Net assets ........................... $36,727 $58,764 $49,913
</TABLE>
NOTE 15 -- DIVESTITURES
- -----------------------
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. 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 $6,600. The $7,000 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.
Effective December 31, 1996, the Company sold substantially all of the assets of
its Itronix Corporation subsidiary, with a net book value of $30,848, as well as
all of the subsidiary's associated business, in exchange for $65,524 in cash,
plus the buyer's assumption of certain specified liabilities of the transferred
business totaling $8,229. The transaction resulted in a $32,653 gain, net of
transaction costs of $10,252, which has been recorded as other non-operating
income in the accompanying consolidated statement of operations. The buyer is
entitled to customary indemnification from the Company with respect to retained
liabilities and, through March 31, 1998, to the Company's representations,
warranties and covenants in the sale agreement. Under the terms of the sale, the
Company is precluded from competing with the buyer in the manufacture and sale
of ruggedized notebook computers for a period of five years after the date of
sale, other than the Company's resale of products obtained from the buyer under
a mutual reseller agreement.
NOTE 16 -- SUBSIDIARY STOCK TRANSACTIONS
- ----------------------------------------
During fiscal 1997, the Company repurchased 432,558 shares of the voting common
stock of its Metanetics Corporation ("Metanetics") subsidiary, a licensor and
developer of image reading technology, from a former employee. The shares were
repurchased by the Company at a price of $1.04 per share and resulted in a $449
non-operating loss. The Company subsequently re-sold the repurchased shares
during fiscal 1997 to a corporation owned by Mr. Meyerson and his wife at a
price of $1.04 per share price, resulting in
64
<PAGE> 65
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
a non-operating gain of $449. The Company's remaining percentage interest in the
voting common stock of Metanetics at March 31, 1997, was 49%.
During fiscal 1997, the Company sold 808,500 shares of voting common stock of
its Aironet subsidiary, a developer, manufacturer, and marketer of wireless LAN
systems, to a corporation owned by Mr. Meyerson at a price of $1.86 per share in
exchange for a promissory note, secured by the purchased stock, in the amount of
$1,504. This transaction resulted in the establishment of a minority interest of
$669 which has been included in other long-term liabilities in the accompanying
consolidated balance sheets at March 31, 1997. At March 31, 1997, the Company
has deferred a gain of $835 related to this transaction as the criteria for the
recognition of gain on the sale of subsidiary stock had not been met. The
Company's remaining percentage interest in the voting common stock of Aironet at
March 31, 1997, was 90%. The sale of Aironet common stock has been excluded from
the accompanying consolidated statement of cash flows as a non-cash transaction.
NOTE 17 -- TREASURY STOCK TRANSACTIONS
- --------------------------------------
During fiscal 1997, the Company repurchased 633,000 shares of its common stock,
at a weighted average price of $14.74 per share, pursuant to its open market
repurchase program. Additionally, during fiscal 1997, the Company re-issued
75,560 shares of its treasury stock to satisfy purchases made by employees
through the 1995 Stock Purchase Plan at a weighted average price of $11.97 per
share. The remaining 557,440 shares of treasury stock have been accounted for at
cost plus brokerage fees under the caption of treasury stock in the accompanying
consolidated financial statements. The re-issuance of treasury stock in
satisfaction of the purchases made through the 1995 Stock Purchase Plan have
been excluded from the accompanying consolidated statement of cash flows as a
non-cash transaction.
NOTE 18 -- COMMITMENTS 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
65
<PAGE> 66
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
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 Court granted each defendant
summary judgment on all counts, which the plaintiffs appealed to the United
States Sixth Circuit Court of Appeals. The appeal was heard on October 24, 1996,
and the parties are awaiting the decision from the Court of Appeals. The
defendants intend to continue vigorously defending the Consolidated Class
Action. Though there can be no assurance that the Company's summary judgment
will be upheld on appeal on all counts or as to the ultimate outcome of any
portion of the case with respect to which the summary judgment may be reversed,
no provision has been made in the accompanying consolidated financial statements
for any liability that may result to the Company in such an event.
On September 21, 1993, a derivative Complaint was filed in the Court of Chancery
of the State of Delaware, in and for Newcastle County, by an alleged stockholder
of Telxon derivatively on behalf of Telxon. The named defendants are the
Company; Robert F. Meyerson, 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.
The claims relating to breach of fiduciary duty survived the Motion to Dismiss
and are now the subject of discovery, which is continuing; no deadline for the
completion of the discovery has yet been set by the Court.
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
66
<PAGE> 67
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
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. 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.
NOTE 19 -- NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS
- -------------------------------------------------
During fiscal 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128").
SFAS No. 128 modifies the manner in which an entity computes, presents and
discloses its earning per share. The Company is required to adopt the provisions
of SFAS No. 128 beginning with the third quarter ending December 31, 1997, as a
part of which the Company will be
67
<PAGE> 68
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
required to restate all prior-period earnings per share amounts presented for
comparative purposes. As the adoption of SFAS No. 128 will only modify the
calculation of earnings per share, there will be no effect on the Company's
consolidated financial position or results of operations or cash flows.
During fiscal 1997, the Financial Accounting Standards Board also issued
Statement of Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure" ("SFAS No. 129"). SFAS No. 129 requires an entity to
disclose the rights and privileges of its outstanding securities, the
liquidation preference of any preferred stock and the redemption requirements
of any redeemable stock. The Company is required to adopt the provisions of SFAS
No. 129 for the fiscal year ending March 31, 1998. As the adoption of SFAS No.
129 will only require additional disclosures, there will be no effect on the
Company's consolidated financial position or results of operations or cash
flows.
During fiscal 1997, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" ("SOP
96-1"). SOP 96-1 requires an entity to accrue a liability for environmental
remediation if (1) litigation against the entity has commenced or a claim or
assessment against the entity has been asserted, or commencement of litigation
or assertion of a claim or an assessment against the entity is probable, and (2)
the amount of the loss can be reasonably estimated. The Company is required to
adopt the provision of SOP 96-1 for the fiscal year ending March 31, 1998.
Management believes that the adoption of this pronouncement will not have a
material effect on the Company's consolidated financial position or results of
operations or cash flows.
NOTE 20 -- OTHER TRANSACTIONS
- -----------------------------
Due to the fiscal 1997 retirement of Mr. Meyerson, the Company's former Chairman
of the Board and Chief Executive Officer, the Company did not renew its
consulting agreement with Accipiter. Pursuant to the terms of the consulting
agreement regarding the effects of non-renewal, the Company paid Accipiter
$2,520 in cash. Additionally, the Company provided Mr. Meyerson with a cash
retirement package of $3,000. Both the non-renewal of the consulting agreement
and the retirement package are reflected in the accompanying consolidated
statement of operations.
NOTE 21 -- SUBSEQUENT EVENTS
- ----------------------------
Subsequent to March 31, 1997, the Company repurchased 215,700 shares of its
common stock, at a weighted average price of $15.09 per share, pursuant to its
open market repurchase program.
Subsequent to March 31, 1997, the Company repurchased 80,000 shares of
Metanetics voting common stock at a price of $1.04 per share from former
68
<PAGE> 69
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
key employees. This repurchase of shares resulted in an increase in the
Company's interest in Metanetics to 51%.
NOTE 22 -- QUARTERLY DATA (UNAUDITED)
- -------------------------------------
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------------------------
1997 First Second Third Fourth(a) Year(b)
- ---- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues ................................. $112,383 $108,314 $123,575 $121,740 $466,012
Gross profit.............................. 35,510 34,335 33,963 48,332 152,140
Net (loss) income......................... $ (4,797) $ (4,702) $ 2,135 $ 305 $ (7,059)
======== ======== ======== ======== ========
Earnings per common and common
equivalent share:
Net (loss) income per share .............. $(.29) $(.29) $ .13 $ .02 $ (.44)
======== ======== ======== ======== ========
</TABLE>
(a) Fourth quarter adjustments were not material to the quarterly results of
operations.
(b) The net (loss) income per share for the quarters does not equal net
(loss) per share for the year due to differentials in the impact of
quarterly and annual weighted new stock issuances on the weighted average
number of shares outstanding for each respective period.
<TABLE>
<CAPTION>
Quarter
------------------------------------------------------------------------
1996 First Second Third Fourth(a) Year(b)
- ---- --------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Revenues ................................... $103,541 $107,016 $131,030 $144,882 $486,469
Gross profit................................ 43,127 45,516 52,491 57,199 198,333
Net income.................................. $ 2,229 $ 2,811 $ 4,205 $ 7,276 $ 16,521
======== ======== ======== ======== ========
Earnings per common and common
equivalent share:
Net income per share ..... .................. $ .14 $ .17 $ .26 $ .45 $ 1.00
======== ======== ======== ======== ========
</TABLE>
(a) During the fourth quarter of fiscal 1996, the Company recorded
capitalized software costs, net of amortization, aggregating $7,075.
Offsetting the software capitalization were other unusual non-recurring
adjustments aggregating $4,255. After the related income tax impact,
the aggregate impact on fourth quarter earnings was $1,749 or $ .11 per
share.
The impact of such quarterly adjustments on the reported earnings
during the first three quarters of fiscal 1996 was not material.
Also during the fourth quarter, the Company refined its estimates for
inventory valuation based on previously unavailable information. As a
result, the Company's inventory valuation reserves for both
69
<PAGE> 70
Telxon Corporation
and Subsidiaries
Notes to Consolidated Financial Statements (Continued)
- ------------------------------------------------------
manufacturing and customer service inventories were reduced by $2,863.
After the related income tax benefit, the impact on fourth quarter
earnings was $1,775 or $ .11 per share.
(b) The net income per share for the quarters does not equal net income per
share for the year due to differentials in the impact of quarterly and
annual weighted new stock issuances on the weighted average number of
shares outstanding for each respective period.
70
<PAGE> 71
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
- --------------------------------------------------------------------
AND FINANCIAL DISCLOSURES
-------------------------
Not Applicable.
PART III
Except for certain information relating to the Company's executive officers
included in Part I of this Form 10-K, the information called for by this Part
III is not set forth herein but is incorporated by reference from the definitive
proxy statement which the Company intends to file with the Securities and
Exchange Commission within 120 days of the close of its fiscal year ended March
31, 1997, with respect to the 1997 Annual Meeting of the Company's stockholders
scheduled to be held September 10, 1997, or will otherwise be timely filed.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------
(a) List of documents filed as part of this Report:
(1) Consolidated Financial Statements: Reference is made to the
Index on page 40 herein.
(2) Financial Statement Schedule: Reference is made to the
Index on page 40 herein. All other schedules are omitted
because they are not applicable or the required information
is shown in the financial statements of the notes thereto.
(3) Exhibits required by Item 601 of Regulation S-K:
2 Asset Purchase Agreement by and among Dynatech
Corporation, IAQ Corporation, the Registrant and
Itronix Corporation, a wholly owned subsidiary of
the 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
71
<PAGE> 72
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, filed herewith.
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).
72
<PAGE> 73
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
73
<PAGE> 74
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, incorporated herein by reference to Exhibit 10.1.3
to Registrant's Form 10-Q for the quarter ended September
30, 1995.
10.1.3 1990 Stock Option Plan for Non-Employee Directors of
Registrant, as amended, incorporated herein by reference to
Exhibit 10.1.4 to Registrant's Form 10-Q for the quarter
ended September 30, 1995.
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.
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.
74
<PAGE> 75
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, filed herewith.
10.1.8 Non-Competition Agreement by and between Registrant and
Robert F. Meyerson, effective February 27, 1997, filed
herewith.
10.1.9 Employment Agreement between Registrant and Frank Brick,
effective as of October 15, 1993, incorporated herein by
reference to Exhibit 10.1.16 on Registrant's Form 10-Q for
the quarter ended September 30, 1994.
10.1.10 Employment Agreement between Registrant and Leonard D.
Abeita, effective as of April 1, 1997, filed herewith.
10.1.11 Employment Agreement between Registrant and James G.
Cleveland, effective as of April 1, 1997, filed herewith.
10.1.12 Employment Agreement between Registrant and Kenneth W.
Haver, effective as of April 1, 1997, filed herewith.
10.1.13 Employment Agreement between Registrant and David D.
Loadman, effective as of April 1, 1997, filed herewith.
10.1.14 Employment Agreement between Registrant and David W.
Porter, effective as of April 1, 1997, filed herewith.
10.1.15 Employment Agreement between Registrant and Dan R. Wipff,
effective as of April 1, 1997, filed herewith.
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, filed herewith.
10.2 Material Leases of Registrant.
75
<PAGE> 76
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.
10.3 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 the 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.
76
<PAGE> 77
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, NA, dated August 6, 1996 (in replacement of
the Note included as Exhibit 10.3.7 above),
incorporated herein by reference to
77
<PAGE> 78
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, NA, incorporated
herein by reference to Exhibit 10.3.8.a to
Registrant's Form 8-K dated August 16,
1996.
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 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.
78
<PAGE> 79
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, filed herewith.
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, filed herewith.
11. Computation of Common Shares outstanding and
earnings per share for the fiscal years ended March
31, 1997, 1996 and 1995, filed herewith.
21. Subsidiaries of Registrant, filed herewith.
23. Consent of Coopers & Lybrand L.L.P., filed herewith.
24. Power of Attorney executed by members of the Board
of Directors of Registrant, filed herewith.
27. Financial Data Schedule as of March 31, 1997, filed
herewith.
(b) Reports on Form 8-K
During the fiscal quarter ended December 31, 1996 for which
this Quarterly Report on Form 10-K is filed, Registrant filed
the following Current Reports on Form 8-K: (i) Current Report
dated December 16, 1996, reporting an amendment to
Registrant's primary credit facility with The Bank of New
York, as Agent for an eight-
79
<PAGE> 80
bank lending group; and (ii) Current Report dated December 31,
1996, reporting the sale by the Company of substantially all of
the assets and all the associated business of its wholly owned
Itronix Corporation subsidiary to IAQ Corporation, a wholly owned
subsidiary of Dynatech Corporation (the "Buyer"), for
approximately $65.5 million (included as Appendix A in the Form
8-K were (1) a pro forma condensed balance sheet as of September
30, 1996, giving effect to (A) the sale of substantially all of
the Itronix assets to, and the assumption of certain specified
Itronix liabilities by, the Buyer, and (B) related pro forma
adjustments, all as though the transaction occurred at September
30, 1996; and (2) unaudited pro forma condensed statements of
operations for the fiscal year ended March 31, 1996, and for the
six months ended September 30, 1996, giving effect to (A) the
elimination of the results of operations of the Registrant's
Itronix subsidiary, as described in Note (A) thereto, and (B)
related pro forma adjustments, all as though the transaction
occurred on April 1, 1995).
80
<PAGE> 81
TELXON CORPORATION AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Dollars in Thousands
<TABLE>
<CAPTION>
Balance at Additions Balance at
Beginning of Charged to End of
Description Period Costs and Expenses Deductions Period
- ----------- ------ ------------------ ---------- ------
Valuation account for accounts
receivable:
<S> <C> <C> <C> <C>
Year ended March 31, 1997: $ 1,731 $ 378 $ 513 (a) $ 1,596
Year ended March 31, 1996: $ 1,832 $ 1,538 $ 1,639 (a) $ 1,731
Year ended March 31, 1995: $ 1,635 $ 1,158 $ 961 (a) $ 1,832
Valuation account for inventory:
Year ended March 31, 1997: $ 10,063 $ 11,521 $ 5,601 (b) $ 15,983
Year ended March 31, 1996: $ 10,942 $ 2,026 $ 2,905 (b) $ 10,063
Year ended March 31, 1995: $ 9,850 $ 7,407 $ 6,315 (b) $ 10,942
</TABLE>
(a) Doubtful accounts charged off, net of recoveries.
(b) Write off of excess and/or obsolete material.
81
<PAGE> 82
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Annual Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TELXON CORPORATION
Date: June 30, 1997 By: /s/ Frank E. Brick
------------------
Frank E. Brick, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated. This report may be
signed in multiple counterparts, all of which taken together shall constitute a
single document.
<TABLE>
<CAPTION>
<S> <C> <C>
President,
/s/ Frank E. Brick Chief Executive Officer June 30, 1997
- ------------------------------------------------- (principal executive officer)
Frank E. Brick and Director
/s/ Kenneth W. Haver Senior Vice President and
- ------------------------------------------------- Chief Financial Officer June 30, 1997
Kenneth W. Haver (principal financial officer)
/s/ Gary L. Grand Corporate Controller
- ------------------------------------------------- (principal accounting June 30, 1997
Gary L. Grand officer)
* Dr. Raj Reddy Chairman of the Board June 30, 1997
- ------------------------------------------------- and Director
Dr. Raj Reddy
* John H. Cribb Vice Chairman of the Board June 30, 1997
- ------------------------------------------------- and Director
John H. Cribb
* Robert A. Goodman Director June 30, 1997
- -------------------------------------------------
Robert A. Goodman
* Norton W. Rose Director June 30, 1997
- -------------------------------------------------
Norton W. Rose
* Richard J. Bogomolny Director June 30, 1997
- -------------------------------------------------
Richard J. Bogomolny
</TABLE>
* The undersigned, by signing his name hereto, does sign and execute
this Annual Report on Form 10-K pursuant to the Power of Attorney filed with the
Securities and Exchange Commission as Exhibit 24 hereto on behalf of the
Directors named therein unless otherwise indicated by manual signature on this
Annual Report on Form 10-K.
Date: June 30, 1997 By: /s/ Kenneth W. Haver
--------------------
Kenneth W. Haver, Attorney-in-fact
82
<PAGE> 83
TELXON CORPORATION
EXHIBITS TO
FORM 10-K
FOR THE FISCAL YEAR ENDED MARCH 31, 1997
<PAGE> 84
INDEX TO EXHIBITS
-----------------
Where
Filed
* 2 Asset Purchase Agreement by and among Dynatech Corporation,
IAQ Corporation, the Registrant and Itronix Corporation, a
wholly owned subsidiary of the 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
<PAGE> 85
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, filed herewith.
* 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 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
<PAGE> 86
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, incorporated herein by reference to
Exhibit 10.1.3 to Registrant's Form 10-Q for the
quarter ended September 30, 1995.
* 10.1.3 1990 Stock Option Plan for Non-Employee Directors of
Registrant, as amended, incorporated herein by
reference to Exhibit 10.1.4 to Registrant's Form
10-Q for the quarter ended September 30, 1995.
* 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> 87
* 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, filed herewith.
** 10.1.8 Non-Competition Agreement by and between Registrant
and Robert F. Meyerson, effective February 27, 1997,
filed herewith.
* 10.1.9 Employment Agreement between Registrant and Frank
Brick, effective as of October 15, 1993,
incorporated herein by reference to Exhibit 10.1.16
on Registrant's Form 10-Q for the quarter ended
September 30, 1994.
<PAGE> 88
** 10.1.10 Employment Agreement between Registrant and Leonard
D. Abeita, effective as of April 1, 1997, filed
herewith.
** 10.1.11 Employment Agreement between Registrant and James
G. Cleveland, effective as of April 1, 1997, filed
herewith.
** 10.1.12 Employment Agreement between Registrant and Kenneth
W. Haver, effective as of April 1, 1997, filed
herewith.
** 10.1.13 Employment Agreement between Registrant and David
D. Loadman, effective as of April 1, 1997, filed
herewith.
** 10.1.14 Employment Agreement between Registrant and David
W. Porter, effective as of April 1, 1997, filed
herewith.
** 10.1.15 Employment Agreement between Registrant and Dan R.
Wipff, effective as of April 1, 1997, filed
herewith.
** 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, filed herewith.
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
<PAGE> 89
above, incorporated herein by reference to
Exhibit 10.2.4.b to Registrant's Form 10-K
for the year ended March 31, 1996.
10.3 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 the
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.
<PAGE> 90
* 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, NA, dated
August 6, 1996 (in replacement of the Note included as
Exhibit 10.3.7 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,
NA, incorporated herein by reference to Exhibit
10.3.8.a to Registrant's Form 8-K dated August 16,
1996.
* 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
<PAGE> 91
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, filed herewith.
<PAGE> 92
* 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, filed herewith.
** 11. Computation of Common Shares outstanding and earnings per share
for the fiscal years ended March 31, 1997, 1996 and 1995, filed
herewith.
** 21. Subsidiaries of Registrant, filed herewith.
** 23. Consent of Coopers & Lybrand L.L.P., filed herewith.
** 24. Power of Attorney executed by members of the Board of Directors of
Registrant, filed herewith.
** 27. Financial Data Schedule as of March 31, 1997, filed herewith.
- ------------------
* Previously filed
** Filed herewith
<PAGE> 1
Exhibit 4.3.2
[TELXON LOGO (R)]
June 11, 1997
Harris Trust and Savings Bank KeyBank National Association
600 Superior Avenue East, Suite 600 127 Public Square
Cleveland, Ohio 44114 Cleveland, Ohio 44114
Attn: Ms. Laura Kress Attn: Mr. James McGuire
KeyCorp Shareholder Services
Re: Appointment of Successor Rights Agent under Rights Agreement
between Telxon Corporation and AmeriTrust Company National
Association, as Rights Agent, dated August 25, 1987, as
amended and restated July 31, 1996 with KeyBank National
Association, as successor to AmeriTrust Company National
Association (the "Rights Agreement")
Ladies and Gentlemen:
As you are aware, in connection with the sale and cessation by KeyBank
National Association ("KeyBank") of the stock transfer/corporate trust
operations of its KeyCorp Shareholder Services ("KCSS") affiliate, Telxon has
appointed Harris Trust and Savings Bank ("Harris") to succeed KCSS as the
Company's Stock Transfer Agent and Registrar effective as of the open of
business June 16, 1997 (the "Effective Time"). That Telxon/KeyBank relationship
also included KeyBank serving as Rights Agent under the captioned Rights
Agreement, and it is appropriate that that function also simultaneously
transition to Harris.
The eligibility requirements for serving as a successor Rights Agent
are set forth in Section 22 of the Rights Agreement. Insofar as Harris is fully
capable of performing and discharging the responsibilities of the Rights Agent
under the Rights Agreement and in order that it may duly qualify to assume those
responsibilities, it is hereby agreed, by the parties' signatures below, that
TELXON CORPORATION
3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0852/
(330)664-1000/(800)800-8001/Fax (330)664-2220
Telxon's World Wide Web site address is: http://www.telxon.com
<PAGE> 2
Harris Trust and Savings Bank [TELXON LOGO (R)]
KeyBank National Association
June 11, 1997
Page 2
the eligibility requirements of said Section 22 shall be amended to add "State
of Illinois," immediately prior to each reference to "the State of Ohio" in
Section 22.
Giving effect to the foregoing amendment, this letter shall therefore
serve as the Company's formal appointment of Harris as successor Rights Agent
under the Rights Agreement and, by your respective countersignatures below,
Harris' acceptance of such appointment and KeyBank's consent and agreement to
its removal and replacement as such Rights Agent, which appointment KeyBank
resigns as of the Effective Time.
By its countersignature below, Harris also confirms that it has
received a copy of the Rights Agreement and has reviewed and hereby confirms
that it meets the qualifications required of a Rights Agent as set forth in the
sentence beginning at the end of the third last line on page 51 of the Rights
Agreement, as hereinabove amended.
Telxon assumes responsibility for any notification of this change in
the Rights Agent which the Rights Agreement may provide be given to holders of
Rights Certificates. The signatories hereto shall otherwise observe and perform
their respective obligations under Section 22 and any and all other applicable
provisions of the Rights Agreement.
From and after the Effective Time, any legend or other reference to the
Rights Agreement to appear in any Rights Certificate issuable under the Rights
Agreement or on any stock certificate or other instrument evidencing the same as
contemplated by the Rights Agreement may be amended or supplemented to reflect
Harris' succession of KeyBank as Rights Agent.
This letter shall become effective upon the execution hereof by Telxon,
KeyBank and Harris. Three counterpart originals of this letter as signed by
Telxon will initially be delivered by Telxon to Harris for its signature and
forwarding of all three copies to KeyBank for its signature. KeyBank should
retain one of the counterparts for its files and return the other two, fully
signed copies to Harris, who will in turn return one of those counterparts to
Telxon and retain the other counterpart for its files. Thank you.
Very truly yours,
TELXON CORPORATION
/s/ Glenn S. Hansen
Glenn S. Hansen
Vice President, Legal Administration
and Corporate Counsel
<PAGE> 3
Harris Trust and Savings Bank [TELXON LOGO (R)]
KeyBank National Association
June 11, 1997
Page 3
Acknowledged and Agreed effective as of the Effective Time.
HARRIS TRUST AND SAVINGS BANK KEYBANK NATIONAL ASSOCIATION
By /s/ Laura S. Kress By /s/ James J. McGuire
- ------------------------------- -------------------------------
Authorized Signature Authorized Signature
Laura S. Kress James J. McGuire
- ------------------------------- -------------------------------
Typed or Printed Name of Signer Typed or Printed Name of Signer
Assistant Vice President Executive Vice President
- ------------------------------- -------------------------------
Title of Signer Titled of Signer
<PAGE> 1
Exhibit 10.1.7
AIRONET WIRELESS COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN. The purpose of the Plan is to promote the best
interests of the Company and its stockholders by enabling the Company to attract
and retain highly qualified personnel through rewarding valued employees,
directors and advisors with the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other initially capitalized terms as
are defined elsewhere in this Plan, the following terms when used in this Plan
shall have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as amended from
time to time.
(b) "Authorized Shares" means the maximum aggregate number of shares
of Common Stock specified in Section 3(a) as being authorized with respect
to Options granted pursuant to the Plan, subject to adjustment in
accordance with Section 12 of the Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(e) "Commission" means the United States Securities and Exchange
Commission.
(f) "Committee" means (i) if a committee is appointed, the Committee
appointed by the Board in accordance with Section 4(a), or (ii) if no
Committee has been appointed, the "Board."
(g) "Common Stock" means the voting Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Aironet Wireless Communications, Inc., a
Delaware corporation.
(i) "Continuous Employment" means with respect to any Employee, the
continued employment of such Employee by the Company or service by such
Employee to the Company, without interruption or termination after the
grant of an Option to such
<PAGE> 2
Employee. Continuous Employment shall not be considered interrupted in
the case of sick leave, military leave or any other leave of absence
approved by the Board (provided that such leave is for a period of not
more than ninety (90) days or re-employment upon the expiration of such
leave is mandated by contract or statute).
(j) "Employee" means any person, including officers, directors and
advisors who are, at the time of grant, serving the Company.
(k) "Fair Market Value" shall have the meaning as defined in
Section 7(b).
(l) "Option" means a right granted to an Employee pursuant to the
Plan to purchase a specified number of shares of Common Stock at a
specified price during a specified period and on such other terms and
conditions as may be specified pursuant to the Plan. Options may be granted
as Tax Qualified Options or as Options which do not qualify as Tax
Qualified Options.
(m) "Option Agreement" means the written agreement evidencing an
Option by and between the Company and the Optionee as required by Section
14.
(n) "Option Price" shall have the meaning as defined in Section
7(a).
(o) "Optioned Stock" means the Common Stock subject to an Option.
(p) "Optionee" means an Employee who receives an Option.
(q) "Plan" means this Aironet Wireless Communications, Inc. 1996
Stock Option Plan.
(r) "Rule 16b-3" means Rule 16b-3 promulgated by the Commission
under the Act or any similar successor regulation exempting certain
transactions involving stock-based compensation arrangements from the
"short-swing" liability provisions of Section 16 of the Act, as adopted and
amended from time to time and as interpreted by formal or informal opinions
of, and releases published or other interpretive advice provided by, the
Staff of the Commission.
(s) "Section 16 Person" means an Employee who is subject to Section
16 of the Act, as interpreted by the rules and regulations promulgated by
the Commission thereunder, as adopted and amended from time to time, and by
formal or informal opinions of, and releases published or other
interpretive advice provided by, the Staff of the Commission.
(t) "Securities Law Requirements" means the Act and the rules and
regulations promulgated by the Commission thereunder, as adopted and
amended from time to time, including but not limited to Rule 16b-3, and as
interpreted by formal or
2
<PAGE> 3
informal opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission, and the requirements of any stock
exchange, automated inter-dealer quotation system or other recognized
securities market on which the Common Stock is listed or traded or in which
the Common Stock is included, as adopted and amended from time to time and
as interpreted by formal or informal opinions of, and other interpretive
advice, provided by the representatives of such stock exchange, quotation
system or other securities market.
(u) "Shares" means the Common Stock as adjusted in accordance with
Section 12 of the Plan.
(v) "Successor" means the estate of an Optionee or a person who
succeeds by will or the laws of descent and distribution to an Optionee's
right to exercise an Option.
(w) "Tax Qualified Option" means an Option which is intended at the
time of grant to qualify for special tax treatment under Section 422A or
other particular provisions of the Code and the regulations, rulings and
procedures promulgated, published or otherwise provided thereunder, as
adopted and amended from time to time.
3. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in accordance
with the provisions of Section 12 of the Plan, the maximum aggregate number
of Authorized Shares which may be issued and sold under Options granted
pursuant to the Plan is 1,617,000 shares of Common Stock. The Shares issued
and sold upon the exercise of Options may be treasury Shares, Shares of
original issue or a combination thereof.
(b) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time under
the Plan for the grant of Options, the number of Shares subject to each
Option granted pursuant to the Plan shall be provisionally counted against
the Authorized Shares from and after the grant of such Option but only for
so long as and to the extent that such Option shall remain outstanding and
unexercised. Upon the exercise, in whole or in part, of an Option, the
number of Shares issued upon such exercise shall be permanently deducted
from the Authorized Shares, provided that no such permanent deduction shall
be made, and the provisional deduction against the Authorized Shares shall
be reversed, to the extent that the exercise price and/or the withholding
taxes with respect to such exercise are paid through the delivery to the
Company by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised. The
provisional deduction against the Authorized Shares shall likewise be
reversed to the extent of the unexercised portion of an Option upon the
expiration, lapse, cancellation, surrender, forfeiture or other termination
of such Option. The Shares covered by any
3
<PAGE> 4
such reversal of a provisional deduction against the Authorized Shares
shall immediately become available for the granting of new Options under
the Plan with respect thereto.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or the
Board may, in its discretion, appoint a Committee to administer the Plan
subject to such terms and conditions as the Board may prescribe; provided
that the terms upon which, including the time or times at or within which,
and the price or prices at which Shares may be purchased upon the exercise
of Options shall be approved or ratified by such action of the Board or a
committee duly designated by the Board from its members as may be required
by the Delaware General Corporation Act, as amended from time to time; and
provided further, that, unless otherwise deemed, under all of the
circumstances, to be in the best interest of the Company, neither the Board
nor any such Committee shall make any decision concerning the Plan with
respect to any Section 16 Person unless the Board or such Committee making
such decision is constituted so that such decision complies with the
applicable requirements of Rule 16b-3. Once appointed, the Committee shall
continue to serve until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and may appoint additional
members thereof, remove members (with or without cause), fill vacancies
however caused and remove all members of the Committee and thereafter
directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the Delaware General
Corporation Act and the provisions of this Plan, the Committee shall have
the authority, in its sole discretion:
(i) To determine, in accordance with Section 7(b) of the Plan,
the Fair Market Value of the Shares;
(ii) To determine the Employees to whom, and the time or times
at which, Options shall be granted and the number of Shares subject to
purchase upon exercise of each Option (there being no limit on the
time following the adoption or approval of this Plan within which
Options may be granted under the Plan so long as it remains in effect,
on the number of Options which may be granted to any one Employee or
on the aggregate number of Shares subject to purchase thereunder,
except such restrictions thereon as may be imposed by applicable tax
laws which will have to be observed if the Committee intends that a
particular Option qualify as a Tax Qualified Option);
(iii) To determine the terms and provisions of each Option (which
terms and provisions need not be identical), including, but not
limited to, the following:
4
<PAGE> 5
(A) The Option Price subject to the provisions of Section
7(a); and
(B) Whether Options shall become exercisable over a period
of time and when they shall be partially or fully exercisable;
(iv) To accelerate the time as of which any Option may be
exercised;
(v) To amend any outstanding Option, subject to the provisions
of Section 19;
(vi) To authorize any person to prepare and execute on behalf
of the Company any instrument deemed by the Committee to be necessary
or advisable to evidence or effectuate the Plan, any Option granted
thereunder or any amendment to the Plan or any Option Agreement;
(vii) To interpret the Plan;
(viii) To prescribe, amend and rescind, if deemed necessary or
appropriate, rules and regulations relating to the Plan; and
(ix) To make all other determinations the Committee may deem
necessary or advisable in connection with the administration of the
Plan.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all Employees,
Optionees, and Successors and the respective legal representatives, heirs,
successors and assigns of all of the foregoing and all other persons
claiming under or through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or the
Committee, and no Employee or other agent acting on behalf of the Board or
the Committee, shall be personally liable for any decision, determination
or action made or taken, or failed to be made or taken, with respect to
this Plan or any Option granted hereunder, and the Company shall fully
protect each such person in respect of any such decision, determination or
action and shall indemnify each such person against any and all claims,
losses, damages, expenses and liabilities arising from or in connection
with any such decision, determination or action.
5. ELIGIBILITY. Options may be granted only to Employees who, in the sole
judgment of the Committee, have contributed or will contribute to the success
and growth of the
5
<PAGE> 6
Company. An Employee to whom the Company has previously granted a stock option
pursuant to this Plan or otherwise may, if he is otherwise eligible, be granted
additional Options.
The existence of this Plan shall not create in any Employee any right
to be granted an Option hereunder, and neither the existence of this Plan nor
the granting of any Options to any Employee hereunder shall confer upon such
Employee any right with respect to continuation of the employment of such
Employee by the Company, or shall in any way interfere with or limit the right
which such Employee or the Company may otherwise have to terminate such
employment at any time with or without cause. Upon the termination of any
Employee's employment with the Company, the Company shall not have any liability
or obligation to such Employee under this Plan any Option Agreement or any
Options granted to such Employee hereunder except to issue the appropriate
number of Shares to such Employee upon the exercise of any Option granted to
such Employee under this Plan prior to such termination of employment, provided
that such exercise is duly and timely made in accordance with the provisions of
this Plan and such Option.
6. TERM OF OPTIONS. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected in
the Option Agreement evidencing such Option, the term of each Option shall be
ten (10) years from the date of grant thereof, provided that the Committee, if
it intends that a particular Option qualify as a Tax Qualified Option, will have
to observe such restrictions on the term of such Option as may be imposed by the
applicable tax laws in order for such Option so to qualify. Each Option shall
continue in effect in accordance with its terms notwithstanding that the Plan
may be terminated prior to the expiration of the term of such Option.
7. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for the
Optioned Stock shall be such price as is determined by the Committee at the
time of grant of an Option and reflected in the Option Agreement evidencing
the same. Notwithstanding the foregoing, with respect to any Tax Qualified
Option, in no event shall such exercise price per Share be less than the
Fair Market Value per Share as of the day prior to the date of grant of
such Tax Qualified Option.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under the
Plan, "Fair Market Value" per Share shall be determined by the Board in its
sole discretion taking into consideration such data as the Board shall in
its sole discretion deem appropriate; provided that if the Shares are
included in the NASDAQ National Market System or listed on a stock exchange
on the date as of which the same is to be determined, the Fair Market Value
per Share shall be the closing price on such quotation system or exchange
which is the principal trading market for the Shares on the date of
determination or, if no sale price was reported for the Shares on the date
of determination, the closing price on such principal trading market for
the last trading day prior to the date of determination for which a sale
price was reported; provided further,
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however, that if the foregoing method of determining Fair Market Value is
inconsistent with the then existing tax law requirements with respect to
any Option which the Committee intends to qualify as a Tax Qualified
Option, then the Fair Market Value per Share shall be determined by the
Committee in such manner as is required for such Tax Qualified Option to
qualify as such.
8. WITHHOLDING TAXES. Before a stock certificate evidencing the Shares
being acquired through exercise of an Option will be issued to the Optionee, the
Optionee must pay, or make arrangements acceptable to the Company for the
payment of, any and all federal, state and local withholding taxes, whether
domestic or foreign, required to be withheld in connection with the exercise of
an Option.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option, the
following forms of consideration will be accepted in payment of the
exercise price for the Shares to be issued upon exercise of an Option and
of the taxes required to be withheld in connection with such exercise: (i)
cash, (ii) personal check, (iii) bank cashier's check, (iv) already owned
Shares (duly endorsed for transfer with signature guaranteed), or (v) any
combination of the foregoing. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, Shares withheld from the
Shares to be issued upon exercise of the Option, either alone or in any
combination with any of the other acceptable forms of consideration recited
in this Paragraph (a), will also be an accepted form of consideration for
payment of the taxes required to be withheld in connection with the
exercise of an Option. In addition to the acceptable forms of consideration
hereinabove recited in this Paragraph (a), the Committee may determine in
its sole discretion at the time of grant of an Option, and if the Committee
so determines, shall provide in the Option Agreement evidencing such
Option, that one or both of the following additional forms of consideration
will be accepted, either alone or in any combination with any of the other
acceptable forms of consideration recited in this Paragraph (a), in payment
of the items specified: (vi) in payment of the exercise price for the
Shares to be issued upon exercise of an Option, Shares withheld from the
Shares to be issued upon such exercise, and/or (vii) in payment of the
exercise price for the Shares to be issued upon exercise of an Option and
the taxes required to be withheld in connection with such exercise, a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement approved in advance by the
Committee in its sole discretion, of Shares to be issued upon exercise of
the Option. The forms of consideration which will be accepted in payment of
the exercise price for an Option and related withholding taxes shall be
specified in the Option Agreement evidencing such Option, and the person or
persons entitled to exercise the Option shall be entitled to elect from
those so specified form(s) to be used in effecting payment with respect to
a
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particular exercise; provided that any election by a Section 16 Person to
use already owned Shares or have Shares withheld from those issuable upon
such exercise shall be effective only if made in accordance with the
applicable requirements of Rule 16b-3; and provided further that a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued upon
exercise of an Option will not be accepted from a Section 16 Person if
under Securities Law Requirements such a sale would be matched with such
exercise to result in "short-swing" profit liability under Section 16(b) of
the Act on the part of such Section 16 Person with respect to such
transaction.
(b) WITHHOLDING TAX LOANS. In addition to any one or more of the
acceptable forms of consideration recited in Paragraph (a) of this Section
9 which the Committee may permit in the Option Agreement to be used for the
payment of withholding taxes, the Committee may determine in its discretion
at the time of grant of an Option to permit the Optionee (but not any
Successor) to, and if the Committee so determines, shall provide in the
Option Agreement evidencing such Option that such Optionee may, borrow from
the Company an amount sufficient to pay the taxes required to be withheld
in connection with the exercise of such an Option, with each such borrowing
to be evidenced by a promissory note of the Optionee payable to the order
of the Company. Except as may otherwise be specified by the Committee in
its sole discretion at the time of grant thereof and reflected in the
Option Agreement evidencing an Option, each such loan shall be for a term
of five (5) years at a rate of interest equal to the Company's then primary
domestic commercial lender's prime or base rate as in effect from time to
time, with payments of interest on such loan due quarterly and payments
toward the principal of such loan due, to the extent of the net proceeds
therefrom, within fifteen (15) days after any disposition by the Optionee
of any Shares acquired upon exercise of any stock option granted by the
Company to the Optionee pursuant to this Plan or otherwise (excluding any
disposition of such Shares by gift or to the Company in payment of the
exercise price of a stock option granted by the Company to the Optionee
pursuant to this Plan or otherwise and/or any related withholding taxes),
provided that the entire unpaid principal balance shall be due at the
earlier of (i) the expiration of the five (5) year term, or (ii) the
termination of the Optionee's Continuous Employment (other than by reason
of Optionee's "disability" (as defined in Section 10(d)) or "retirement"
(as defined in Section 10(e))).
(c) COMPANY WITHHOLDING OF TAXES. If, upon being notified by the
Company of the amount of the taxes required to be withheld in connection
with an exercise of an Option, the Optionee fails promptly to pay, or to
make arrangements acceptable to the Company for the payment of, such taxes,
the Company shall have the right to elect (but shall be under no
obligation) to cover such taxes through:
(i) withholding Shares from those issuable upon such exercise,
provided that any such election so to withhold Shares with respect to
the exercise
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<PAGE> 9
of an Option by a Section 16 Person shall be effective only if made in
accordance with the applicable requirements of Rule 16b-3; and/or
(ii) deducting such taxes from any amounts payable in cash to
the Optionee by the Company for any reason as of the time of such
exercise or any time thereafter.
(d) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already owned
Shares, or Shares withheld from those issuable upon such exercise, are used
in payment of the exercise price and/or related withholding taxes, such
Shares shall be valued (i) with respect to the payment of the exercise
price, at Fair Market Value as of the day immediately preceding the date of
exercise and (ii) with respect to the payment of withholding taxes, at Fair
Market Value as of the day immediately preceding the date tax withholding
is required to be made.
(e) OPTIONEE CERTIFICATION OF ALREADY OWNED SHARES. Already owned
Shares which were acquired through a previous exercise of a stock option
granted to an Optionee by the Company pursuant to this Plan or otherwise
may be used in payment of the exercise price of an Option and/or related
withholding taxes only if the previous exercise through which such Shares
were acquired was made as of a date not less than six (6) months prior to
the date of the exercise of the Option in connection with which such Shares
are being tendered as payment. A tender of already owned Shares in payment
of the exercise price of an Option and/or related withholding taxes will
not be accepted by the Company unless accompanied by a written statement
signed by the person or persons entitled to exercise such Option certifying
that either (i) the Shares tendered in payment were acquired other than
through the exercise of a stock option granted by the Company or (ii) the
Shares tendered in payment were acquired through the exercise, on such
date(s) as shall be recited in such statement (which date(s) shall be not
less than six (6) months prior to the date of tender), of stock option(s)
granted by the Company.
(f) DELIVERY OF ALREADY OWNED SHARES. Where the person exercising an
Option elects to use already owned Shares in full or partial payment of the
exercise price and/or related withholding taxes, the Committee may, in its
sole discretion, accept, in lieu of physical delivery of the stock
certificates evidencing such Shares, such constructive delivery of such
Shares as may be satisfactory to the Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as permitted under the Plan.
An Option may not be exercised for a fraction of a Share. In order to
exercise an Option, the person or persons entitled to exercise it shall
deliver to the Company written notice of the number of Shares with
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<PAGE> 10
respect to which the Option is being exercised, accompanied by payment in
full of the aggregate exercise price for the Shares so to be acquired. To
constitute an effective exercise of an Option, such notice and payment
shall be addressed to the attention of the Treasurer of the Company and
must be received at the principal executive office of the Company (i) with
respect to an Option that is terminated for "Misconduct" (as defined below)
pursuant to Paragraph (b) of this Section 10 or for "Prohibited Conduct"
(as defined in Section 16(a)) pursuant to Section 16(a), prior to the time
of the occurrence of the event constituting such Misconduct or Prohibited
Conduct or (ii) with respect to any other Option, by 5:00 p.m., local time,
on the date of expiration or termination of the Option. Until the issuance
(as evidenced by the appropriate entry on the books of the Company or of a
duly authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends nor any other
rights as a stockholder shall exist with respect to the Optioned Stock
notwithstanding the exercise of the Option. No adjustment will be made for
a dividend or other right for which the record date is prior to the date
the stock certificate is issued, except as provided in Section 12.
Exercise of an Option shall result in a decrease in the number of
Shares which thereafter shall be available for sale under such Option by
the number of Shares as to which the Option is exercised, including any
Shares withheld from the Shares to be issued pursuant to such exercise to
cover the exercise price and/or related withholding taxes.
(b) TERMINATION OF EMPLOYMENT. Except as may otherwise be specified
by the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, upon the
termination of an Optionee's Continuous Employment (other than by reason of
the Optionee's death, disability or retirement), he may exercise his Option
(to the extent, if any, that he was entitled to exercise it at the time of
such termination of employment) until the earlier of (i) the date thirty
(30) days (or such longer period of time as is determined by the Committee
in its sole discretion at the time of such termination of employment,
provided that if the Committee intends that a particular Option continue to
qualify as a Tax Qualified Option, the Committee will observe such
restrictions as may be imposed by applicable tax laws on the
post-termination period within which a Tax Qualified Option may be
exercised if it wishes to ensure that any post-termination exercise of such
Option is made only within the period permitted by such laws) after the
effective date of the termination of his employment or (ii) the expiration
date of such Option, and the Option shall terminate on the earlier of such
dates; provided, however, that if the Optionee is terminated by the Company
for Misconduct, then such Option shall terminate effective as of the time
of the conduct constituting such Misconduct. As used in this Plan,
"Misconduct" means that the Optionee has engaged in Prohibited Conduct,
committed an act of embezzlement, fraud or theft with respect to the
property or business of the Company or any of its affiliates, or
deliberately disregarded the rules of the Company in such a manner as to
cause material loss, damage or injury to or otherwise endanger the
property, reputation,
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employees or business prospects of the Company. The Committee shall
determine whether an Optionee's employment was terminated by reason of
Misconduct. In making such determination, the Committee may, but shall not
be required to, give the Optionee an opportunity to be heard and to
present evidence on his behalf.
(c) DEATH OF OPTIONEE. Except as may otherwise be specified by the
Committee in its sole discretion at the time of grant thereof and reflected
in the Option Agreement evidencing such Option, upon the death of an
Optionee who is at the time of his death in the employ of the Company and
who shall have been in Continuous Employment since the date of grant of the
Option, the Option may be exercised (to the extent, if any, the Optionee
was entitled to do so as of the date of his death) by his Successor until
the earlier of (i) the date six (6) months following the date of death (or,
if the Committee intends that a particular Option qualify as a Tax
Qualified Option, such lesser period of time following the date of the
Optionee's death within which the applicable tax laws may require that the
Option be exercised in order for such Option so to qualify) and (ii) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates; or
(d) DISABILITY OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion and reflected in the Option Agreement
evidencing such Option, if an Optionee's Continuous Employment terminates
due to his having become permanently and totally disabled within the
meaning of Section 22(e)(3) of the Code ("disability"), the Option may be
exercised (to the extent, if any, the Optionee was entitled to do so as of
the effective date of the termination of his employment by reason of such
disability) until the earlier of (i) the later of June 1, 1998 or the date
one (1) year after the effective date of such termination of employment and
(ii) the expiration date of such Option, and the Option shall terminate on
the earlier of such dates.
(e) RETIREMENT OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion and reflected in the Option Agreement
evidencing such Option, if an Optionee's Continuous Employment terminates
by reason of (i) his retirement at any age entitling him to benefits under
the provisions of any retirement plan of the Company in which such Optionee
participates; or (ii) retirement at any time after attaining age 65
(whichever circumstance is applicable constituting "retirement"), the
Option may be exercised (to the extent the Optionee shall be entitled, if
any, to do so as of the effective date of the termination of his employment
by reason of such retirement) until the earlier of (A) the date three (3)
months after the effective date of the termination of his employment and
(B) the expiration date of such Option, and the Option shall terminate on
the earlier of such dates.
11. NONTRANSFERABILITY OF OPTIONS. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner by the Optionee
except at death by will or by the laws of descent and distribution and may be
exercised during the life of the Optionee only by the Optionee. No lien,
obligation or liability of an Optionee or a Successor
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shall attach to or otherwise encumber the right and interest of such Optionee or
Successor in and to any Options outstanding under the Plan.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(a) ADJUSTMENTS, IN GENERAL. Subject to the provisions of Paragraph
(b) of this Section 12 and to any required action by the stockholders of
the Company, the number of Shares covered by each outstanding Option, and
the number of Shares which have been authorized for issuance under the Plan
but as to which no Options have yet been granted or which due to the
expiration, lapse, cancellation, surrender, forfeiture or other termination
of a stock option under this Plan are again available for grant, as well as
the price per Share covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued and outstanding Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of Shares or any
other similar increase or decrease in the aggregate number of issued and
outstanding Shares effected without receipt of consideration by the
Company; provided, however, that neither the issuance of Shares pursuant to
the conversion or exchange of any securities of the Company convertible
into or exchangeable for Shares nor the issuance of Shares pursuant to any
antidilution agreement shall be deemed to have been "effected without
receipt of consideration." Any fractional Shares which would otherwise
result from any such adjustments shall be eliminated either by deleting all
fractional Shares or by appropriate rounding to the next higher (fractions
of one-half or more) or lower (fractions of less than one-half) whole
Share. All such adjustments shall be made by the Board in its sole
discretion. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into or
exchangeable for shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made to, the number of or exercise
price for Shares subject to an Option.
Subject to the provisions of Paragraph (b) of this Section 12, in the
event of a sale of all or substantially all of the assets of the Company,
or the merger or consolidation of the Company with or into another
corporation, each outstanding Option shall be assumed or an equivalent
option shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the Board, in the exercise
of its sole discretion, determines that, in lieu of such assumption or
substitution, the Optionee shall have the right to exercise the Option as
to all or any part of the Optioned Stock, including Shares as to which the
Option would not otherwise then be exercisable. If in the event of a
merger, consolidation or sale of assets the Board makes an Option fully
exercisable in lieu of assumption or substitution, the Company shall notify
the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
(b) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event of a
"Change in Control" of the Company (as defined in Paragraph (c) of this
Section 12),
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unless otherwise determined by the Board in its sole discretion prior to the
occurrence of such Change in Control, the following acceleration and valuation
provisions shall apply:
(i) Any Options outstanding as of the date of such Change in
Control that are not yet fully vested on such date shall become fully
vested; and
(ii) The value of all outstanding Options, measured by the excess
of the "Change in Control Price" (as defined in Paragraph (d) of this
Section 12) over the exercise price, shall be cashed out. The cash out
proceeds shall be paid to the Optionee or, in the event of death of an
Optionee prior to payment, to his Successor.
(c) DEFINITION OF "CHANGE IN CONTROL". For purposes of this Section
12, a "Change in Control" means the happening of any of the following:
(i) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Act becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission), directly or indirectly, of
securities of the Company representing fifty percent (50%) or more of
the combined voting power of the Company's then outstanding
securities;
(ii) When any "person," as such term is used in Sections 13(d)
and 14(d) of the Act becomes the "beneficial owner" (as defined in
Rule 13d-3 promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission), directly or indirectly, of
securities of Telxon Corporation representing fifteen percent (15%) or
more of the combined voting power of Telxon Corporation's then
outstanding securities; or
(iii) The consummation of a transaction requiring stockholder
approval and involving the sale of all or substantially all of the
assets of the Company or the merger or consolidation of the Company
with or into another corporation.
For purposes of determining whether there has been a Change
In Control under Section 12(c)(i), neither: (A) the Company; (B) any
affiliates of the Company; (C) a Company or affiliate employee benefit
plan, including any trustee of such a plan acting as trustee; nor (D)
any trustee of a voting trust for the benefit of one or more
stockholders of the Company (who himself is not a beneficial owner,
directly or indirectly (other than the securities in such voting
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trust), of securities of the Company representing fifty percent (50%)
or more of the combined voting power of the Company's then outstanding
securities), acting as trustee; shall be considered to be a person who
has become the beneficial owner, directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the
combined voting power of the Company's then outstanding securities.
(d) DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of this
Section 12, "Change in Control Price" shall be: (i) the highest price paid
or offered, as determined by the Board, in any bona fide transaction or
bona fide offer related to the Change in Control at any time within the
sixty (60) day period immediately preceding the date of the Change in
Control (the "Sixty-Day Period") or if the Shares are then traded on the
NASDAQ National Market System, a stock exchange or other recognized
securities market, then, at the election of the Board, (ii) the highest
closing sale price of a Share, as reported by the NASDAQ National Market
System, any stock exchange on which the Shares are listed or any other
recognized securities market on which the Shares are traded, at any time
within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be the date on which the Committee makes the determination
granting such Option; provided, that the Committee may approve an earlier grant
date if required to ratify a prior promise by the Corporation to an Employee to
grant the Option. Notice of such determination shall be given to each Employee
to whom an Option is so granted within a reasonable time after the date of such
grant.
14. OPTION AGREEMENTS. As a condition to the effectiveness of each grant
of an Option under this Plan, the Optionee shall enter into a written Option
Agreement in such form as may be authorized by the Committee from time to time.
Subject to the provisions of Section 20(a), each such Option Agreement shall
contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement evidencing an Option granted to a Section 16 Person shall also
provide for such minimum waiting period from the date of grant before the Option
may be exercised, and such minimum holding period from the date of the
acquisition of Shares upon exercise of an Option for which such Shares must be
held before making any disposition of such Shares, as may be required by Rule
16b-3.
15. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued with
respect to an Option unless the exercise of such Option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
Securities Law Requirements and all other applicable provisions of law,
including, without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and shall be further subject to the approval
of counsel for the Company with respect to such compliance.
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As a condition to the exercise of an Option or the issuance of Shares upon
exercise of an Option, the Company may require the person exercising such Option
to make such representations and warranties to the Company as may be required,
in the opinion of counsel for the Company, by any of the aforementioned
Securities Law Requirements and other laws, which may include, without
limitation, representations and warranties that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares.
The Company shall not have any liability to any Optionee in respect of any
delay in the sale or issuance of Shares hereunder until the Company is able to
obtain authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which authority is
deemed by the Company's counsel to be necessary to the lawful sale and issuance
of such Shares, or any failure to sell or issue such Shares as to which such
requisite authority the Company is unable to obtain. In no event shall the
Company be required to take any action to make it possible to issue Shares
hereunder.
16. FORFEITURE OF OPTIONS AND REALIZED BENEFITS.
(a) LOSS OF UNEXERCISED OPTIONS. If an Optionee holding an
outstanding Option, without the written consent of the Company as
authorized by the Committee in its sole discretion, engages in any of the
following (any such conduct being referred to as "Prohibited Conduct") at
any time during the period beginning on the date the Optionee first entered
the employ of the Company and continuing for so long as any portion of such
Option remains outstanding and unexercised (the "Grant Period"):
(i) rendering services for any organization or engaging
directly or indirectly in any business which, in the sole judgment of
the Committee, is or becomes competitive with the Company, or where
such rendering of services or engaging in business, in the sole
judgment of the Committee, is or becomes otherwise prejudicial to or
in conflict with the interests of the Company; provided that the
ownership of a not more than ten percent (10%) equity interest in any
organization or business whose equity is listed on a recognized
securities exchange or traded over-the-counter shall not constitute
Prohibited Conduct within the meaning of this Subparagraph (i);
(ii) disclosing to anyone outside the Company, or use in other
than the business of the Company, any confidential or proprietary
information relating to the business of the Company, acquired by the
Optionee either during or after employment with the Company;
(iii) except as may otherwise be permitted by any agreement
otherwise made by the Company with the Optionee, failing to disclose
fully and promptly in writing and assign to the Company by which the
Optionee is or was employed all right, title and interest in any
discovery, invention, process, method, improvement or idea, whether or
not patentable or subject to copyright protection
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and whether or not reduced to tangible form or reduced to practice,
made or conceived by such person during employment by the Company,
relating in any manner to the actual or contemplated business,
research or development work of the Company or to do anything
reasonably necessary to enable the Company to secure a patent,
copyright or similar protection in the United States of America and/or
in foreign countries as the Company may elect; or
(iv) inducing or attempting to induce any customer or supplier of
the Company or any of its affiliates to breach any contract with the
Company or any of its affiliates or otherwise terminate its
relationship with the Company or any of its affiliates;
then the Committee shall have the right, upon determining that the Optionee
has engaged in any Prohibited Conduct at any time during the Grant Period
(in making such determination, the Committee may, but shall not be required
to, give the Optionee an opportunity to be heard and to present evidence on
his behalf), to declare the Option forfeited and cancelled effective as of
the time of the conduct constituting such Prohibited Conduct.
(b) OPTIONEE CERTIFICATION UPON EXERCISE. Each time an Optionee
exercises an Option, the Optionee shall be deemed to certify to the Company
that such Optionee did not, without the written consent of the Company as
authorized by the Committee in its sole discretion, engage in any
Prohibited Conduct at any time during the period beginning on the date the
Optionee first entered the employ of the Company and ending on the date of
such exercise (the "Pre-Exercise Period").
(c) LOSS OF REALIZED BENEFITS. In the event that the Committee
determines with respect to a particular exercise of an Option that the
Optionee engaged in any Prohibited Conduct at any time during the
Pre-Exercise Period or within one (1) year after such exercise (in making
such determination, the Committee may, but shall not be required to, give
the Optionee an opportunity to be heard and to present evidence on his
behalf), such Optionee shall be liable to the Company (i) to the extent
such Optionee has, prior to his receipt of the "Forfeiture Notice" (as
defined below), disposed of the Shares acquired through such exercise, for
payment to the Company of an amount in cash equal to the excess of (A) the
net cash proceeds from such disposition (or if such Shares were disposed of
other than for cash, the aggregate Fair Market Value of such Shares as of
the date of disposition) over (B) that portion of the sum of the cash and
the aggregate Fair Market Value as of the exercise date of any already
owned Shares used by the Optionee to pay the exercise price for such Shares
(such sum being referred to as the "Exercise Payment") which is allocable
to the Shares disposed of in the proportion that such number of Shares
bears to the total number of Shares issued pursuant to such Option exercise
and (ii) to the extent such Optionee still owns at the time he receives the
Forfeiture Notice the Shares acquired through such exercise, at the option
of the Committee, either (A) for the return of such Shares to the Company
in exchange for a
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cash refund from the Company to such Optionee in an amount equal to that
portion of the Exercise Payment which is allocable to the Shares still
owned in the proportion that such number of Shares bears to the total
number of Shares issued pursuant to such Option exercise (such portion
being referred to as the "Retained Shares Exercise Payment") or (B) for
payment to the Company of an amount in cash equal to the excess of the
aggregate Fair Market Value as of the exercise date of the Shares still
owned over the Retained Shares Exercise Payment. To enforce such liability
against such Optionee, the Committee shall notify the Optionee thereof in
writing within three (3) years of the date of the affected Option exercise,
which notice (the "Forfeiture Notice") shall include a statement of the
form of payment which the Committee has elected to receive from the
Optionee with respect to Shares still owned by the Optionee. Within ten
(10) days after receiving the Forfeiture Notice, the Optionee shall make
full payment of such liability to the Company in cash, or to the extent
such Optionee still owns Shares acquired through the affected exercise and
the Committee elects in the Forfeiture Notice to receive such Shares, stock
certificates evidencing such Shares still owned by the Optionee (duly
endorsed for transfer with signature guaranteed). In the event that the
Committee elects to receive, and the Optionee returns, Shares, the Company
shall make the refund payment required to be made to the Optionee with
respect to such Shares upon the Company's receipt of such Shares as
hereinabove required.
(d) CUMULATIVE RIGHTS. The obligation of an Optionee under this
Section 16 to refrain from Prohibited Conduct is in addition to, and does
not in any way supersede or diminish, any other obligation of such Optionee
with respect to such matters which such Optionee may owe to the Company or
any other person under any agreement, applicable law or otherwise (a
"Similar Obligation"). Any action taken by the Company or the Committee to
enforce, compromise, settle or waive the provisions of this Section 16 with
respect to any particular event constituting Prohibited Conduct shall not
in any way affect the rights of the Company, the Committee, or any other
person against an Optionee with respect to any other event constituting
Prohibited Conduct or any Similar Obligation, nor shall any action taken or
failed to be taken by the Company or any other person against an Optionee
to enforce, compromise, settle or waive any Similar Obligation have any
effect on the rights of the Company and the Committee under this Section
16.
17. NO AUTHORIZATION OR RESERVATION OF SHARES. As of the date of adoption
of the Plan, the Company may not have sufficient authorized Shares, and has not
reserved any Shares, to satisfy the requirements of the Plan. Prior to any
Options becoming exercisable for Shares, the Company shall cause sufficient
Shares to be authorized and shall reserve and thereafter keep available such
number of Shares as shall be sufficient to satisfy the requirements of the Plan.
18. EFFECTIVENESS OF PLAN. This Plan was duly adopted by the Board on July
3, 1996, and on August 30, 1996, was duly approved by the unanimous written
consent of the Stockholders, as required by the Delaware General Corporation
Act. The Plan shall continue
17
<PAGE> 18
in full force and effect until (i) terminated by resolution of the Board or (ii)
both (A) all Options granted under the Plan have been exercised in full and (B)
no Authorized Shares remain available for the granting of additional Options.
The termination of the Plan shall not affect Options already granted, which
Options shall remain in full force and effect in accordance with their
respective terms and the terms hereof as if this Plan had not been terminated.
19. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its sole
discretion, amend the Plan from time to time, provided that any amendment which
Rule 16b-3 or any other Securities Law Requirement requires be approved by the
stockholders of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to all Options
then outstanding under the Plan, except in the case of any amendment which is
adverse to an Optionee, in which case the amendment shall apply with respect to
the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 4(b)(v) to amend outstanding Options, the Committee likewise may make an
amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 19,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
20. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN EMPLOYEES. Notwithstanding any other provision
of this Plan to the contrary but subject to applicable Securities Law
Requirements and tax laws, to the extent deemed necessary or appropriate by
the Committee in its sole discretion in order to further the purposes of
the Plan with respect to Employees who are foreign nationals and/or
employed outside the United States of America, an Option granted to any
such Employee may be on terms and conditions different from those specified
in this Plan in recognition of the differences in the laws, tax policies
and customs applicable to such an Employee, without the necessity of the
Plan being amended to provide for such different terms and conditions.
(b) NATURE OF BENEFITS. Benefits realized by an Optionee under this
Plan or any Option granted hereunder shall not be deemed a part of such
Optionee's regular, recurring compensation for purposes of the termination,
indemnity or severance pay law of any country and shall not be included in,
nor have any effect on, the determination of benefits under any other
employee benefit plan or similar arrangement provided to such Optionee by
the Company unless expressly so provided by such other plan or arrangement,
or except where the Committee expressly determines in its sole discretion
that an Option or portion thereof should be so included in order accurately
to reflect competitive compensation practices or to recognize that an
Option has been granted in lieu of a portion of competitive annual cash
compensation.
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<PAGE> 19
(c) DETERMINATION OF DEADLINES. If any day on or before which action
under this Plan or any Option granted hereunder must be taken falls on a
Saturday, Sunday or Company-recognized holiday, such action may be taken on
the next succeeding day which is not a Saturday, Sunday or
Company-recognized holiday; provided, however, that the provisions of this
Paragraph (c) shall not apply to, and shall not extend the time for
exercise of, any Option which is terminated for Misconduct pursuant to
Section 10(b) or for Prohibited Conduct pursuant to Section 16(a).
(d) GOVERNING LAW. To the extent that federal laws (such as the Act
or the Code) or the Delaware General Corporation Act do not otherwise
control, this Plan and all determinations made and actions taken pursuant
hereto shall be governed by the laws of the State of Ohio and construed
accordingly.
(e) GENDER AND NUMBER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
(f) CAPTIONS. The captions contained in this Plan are for
convenience of reference only and do not affect the meaning of any term or
provision hereof.
19
<PAGE> 1
Exhibit 10.1.8
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (this "Agreement") is made effective
February 27, 1997 (the "Effective Date") by and between TELXON CORPORATION
("Telxon"), a Delaware corporation having its principal offices at 3330 West
Market Street, Akron, Ohio 44333, and ROBERT F. MEYERSON ("RFM"), a resident of
Florida.
RECITALS:
A. RFM has served Telxon in various capacities since its founding, and
most recently as its Chairman and Chief Executive Officer.
B. During his tenure with Telxon, certain consulting services for which
Telxon had contracted with Accipiter Corporation ("Accipiter"), most recently
under a Services and Non-Competition Agreement dated as of January 18, 1993 (the
"Prior Agreement"), were performed principally by RFM.
C. The Prior Agreement expired by its terms as of March 31, 1996, and
included a covenant by RFM and Accipiter restricting them from competing with
Telxon in certain limited respects, which covenant continues in effect following
such expiration for a period of time which is subject to various
interpretations.
D. As of February 26, 1997, RFM retired from Telxon.
E. In connection with such retirement, Telxon and RFM are desirous of
redefining the extent of the competitive restriction and of extending the period
thereof.
NOW, THEREFORE, the parties agree as follows:
1. TERM. This Agreement and the provisions thereof shall be effective
as of February 26, 1997, and extend to and ending on December 31, 2000, subject
to earlier termination as provided below.
2. NON-COMPETITION RESTRICTION.
a. During the term of this Agreement, RFM shall not directly
or indirectly, acting alone or through or with others by means of
partnership, corporation, joint venture or other arrangement, own more
than five percent (5%) of the stock of any company or entity which is a
direct competitor of the businesses of Telxon as of the Effective Date.
b. During the term of this Agreement, RFM shall not directly
or
<PAGE> 2
indirectly, acting alone or through or with others by means of
partnership, corporation, joint venture or other arrangement, be an
officer, director or employee, consultant or advisor to any business
entity competitive to Telxon which by definition shall include the
commercial wireless and portable teletransaction solution business
which itself includes Pen-Based and Hand-Held portable computers
including wireless networks and systems, services, and solutions that
Telxon sells to its core markets, including, as example, Retail,
Industrial, Transportation and others; but excluding consumer markets
and home and industrial security systems. For illustrative purposes,
RFM will additionally be prohibited from any dealings with Telxon's
main direct competitors (i.e., Symbol, Intermec, Norand, Teklogix,
Electromagnetic Services, Hand-Held Products, or other companies that
have similar product profiles that compete with Telxon). To further
facilitate the intent of this Agreement, RFM shall notify Telxon in
writing of any investment or service he provides to a company that
makes peripheral products, systems or services, that may become
involved in Telxon's marketplace. Telxon shall have thirty (30) days to
respond to such notification. If, in its opinion, it determines that
such transaction is a threat to Telxon's best interests, it will inform
RFM in writing to desist. If a transaction does not seem to pose a
threat to Telxon's business or best interests, Telxon shall not
unreasonably withhold approval from RFM entering into such a
transaction. As example, RFM currently has investments with Aironet,
Metanetics and plans to enter into a joint venture with a Chinese
company that could manufacture and distribute Metanetics products in
Asia.
c. During the term of this Agreement, RFM shall not directly
or indirectly, acting alone or through or with others by means of
partnership, corporation, joint venture or other arrangement, induce
any person who is an employee, officer, customer or supplier of Telxon
to terminate or reduce their relationship with Telxon.
d. During the term of this Agreement, RFM shall not directly
or indirectly, acting alone or through or with others by means of
partnership, corporation, joint venture or other arrangement, disclose,
divulge, discuss or otherwise use, cause or suffer to be used in any
manner any trade secret or other confidential or proprietary
information of Telxon, other than in a capacity in which he is directly
acting for or on behalf of Telxon, and as expressly approved in writing
by the Chief Executive Officer of Telxon.
3. REMEDIES. RFM acknowledges and agrees that the remedy at law for any
breach of Sections 2(a), (b), (c) and (d) above will be inadequate and that
damages as a result thereof are not readily susceptible to being measured in
monetary terms. Therefore, upon any violation of such Section(s), Telxon shall
be entitled to immediate injunctive relief and to a temporary restraining order
prohibiting any threatened or future breach, notwithstanding which Telxon shall
not in any manner be limited in entitlement to other equitable or legal
remedies.
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<PAGE> 3
4. CONSIDERATION. As good and sufficient agreed-upon consideration for
the covenants made by RFM in this Agreement, Telxon shall, contemporaneously
with the execution and delivery of this Agreement, advance to RFM or his
designee in immediately available funds the sum of Three Million Dollars
($3,000,000).
This Agreement shall automatically terminate if there shall at any time
occur an event which constitutes a "change in control" of Telxon which would be
required to be reported in response to Item 1(a) of a Current Report on Form 8-K
under Section 13 or 15(d) of the Exchange Act, each as in effect on the date of
the execution and delivery of this Agreement (including, without limitation, any
event as the result of which (i) any Person (for purposes hereof, defined as any
individual, corporation, partnership, group, association of other "person", as
such term is used in Section 14 (d) of the Exchange Act, other than Telxon or
any employee benefit plan sponsored by Telxon) is or becomes the beneficial
owner , directly or indirectly, of fifteen percent (15%) or more of the combined
voting power of Telxon's then outstanding securities having the right to vote
for the election of directors, or (ii) individuals who constitute the Board of
Directors of Telxon as of the date of the execution and delivery of this
Agreement (the "Continuing Directors", which term shall also include the
person(s) subsequently becoming directors of Telxon as hereinbelow provided),
and any person(s) becoming director(s) of Telxon subsequent to such date whose
election, or nomination for election by Telxon's stockholders, was approved by a
vote of at least a majority of the then Continuing Directors (either by a
specific vote or by approval of the proxy statement of Telxon in which such
person is named as a director nominee, without the objection by any member of
such approving majority of the then Continuing Directors to the nomination of
such nominee in said proxy statement), cease for any reason to constitute at
least a majority of such Board.
5. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
agreement between the parties and supersedes any prior agreements between the
parties and their respective affiliates, with respect to the subject matter
hereof. The parties are not relying on any other representations or
understandings, express or implied, oral or written. This Agreement shall not be
modified or discharged, in whole or in part, except by an agreement in writing
signed by the parties hereto and, in the case of Telxon, approved by its Board
of Directors.
6. BINDING EFFECT. The rights and obligations of the parties under this
Agreement shall inure to the benefit of, and shall be binding upon, Telxon and
RFM and their respective successors and assigns, provided that no assignment may
be made by either party without the prior written consent of the other, which
consent shall not be unreasonably withheld.
7. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and shall not affect the meaning of any term or
provision hereof.
8. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and
2
<PAGE> 4
if any one or more provisions are determined to be illegal or otherwise
unenforceable in any jurisdiction, in whole or in part, the remaining provisions
and any partially unenforceable provision shall be binding and enforceable to
the extent enforceable in such jurisdiction.
9. GOVERNING LAW AND VENUE. The validity, construction and performance
of this Agreement shall be governed by the laws of the State of Ohio without
regard to principles of conflict of laws. All actions brought by any party in
connection with this Agreement shall be brought in the courts, state or federal,
sitting in Cuyahoga or Summit Counties in the State of Ohio, and the parties
hereby consent to the jurisdiction of such courts.
IN WITNESS WHEREOF, the parties have made and delivered this Agreement
as of the Effective Date.
TELXON CORPORATION
By:/s/ Frank E. Brick /s/ Robert F. Meyerson
Frank E. Brick, President and Robert F. Meyerson
Chief Executive Officer
4
<PAGE> 1
Exhibit 10.1.10
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and LEONARD D. ABEITA ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as Senior Vice
President, Global Professional Services of Employer, and thereafter, in such
capacity as the Board of Directors of Employer shall direct, and Employee
desires to be so employed, upon the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and
Employee agrees to serve Employer, for the period beginning on
the Effective Date and ending March 31, 2000, subject to
earlier termination pursuant to paragraph 4 hereof (the
"Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to
serve as Senior Vice President, Global Professional
Services of Employer or in such other capacity as the
Board of Directors of Employer may at any time and
from time to time in its discretion direct, in
conformity with management policies, guidelines and
directions issued by Employer. Employee shall report
directly to Frank E. Brick, President and Chief
Executive Officer of Employer, or such other officer
of Employer as the Board of Directors shall direct
(the "Supervisor"), and shall have general charge and
supervision of those functions and such other
responsibilities as the Supervisor shall from time to
time determine in his discretion.
b. Employee shall work exclusively for Employer on a
full-time basis in such capacity as he is to serve
pursuant to paragraph 2(a), devoting all of his time
and attention during normal business hours to
Employer's business.
c. Employee shall perform his duties and
responsibilities hereunder diligently, faithfully and
loyally in order to cause the proper, efficient and
successful operation of Employer's business.
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for
Employee's services, Employer shall pay to Employee
during the Employment Period a salary (the "Base
Salary") at the annual rate of $250,000 for FY `98.
Any salary increases for future fiscal years will be
determined by the Board of Directors of Employer or
an appropriate committee thereof (the "Board") in its
discretion based upon the recommendation of
Employer's chief executive officer (the "Chief
Executive Officer"). Base salary will be payable in
arrears, in equal bi-weekly installments or at such
other interval as the Board or applicable Employer
policies shall direct. Employer shall reimburse
Employee for all reasonable out-of-pocket expenses
incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and
approved by the Supervisor or such other officer as
the Supervisor or applicable Employer policies shall
direct.
b. BONUS COMPENSATION. In addition to the Base Salary,
Employee shall, at the discretion of the Board, be
eligible to receive bonus compensation ("Bonus
Compensation") with respect to the Employment Period
on such basis as shall be approved by the Board. For
FY `98, Employee shall be eligible for a potential
bonus of up to $150,000 based upon achieving goals
and achievements agreed upon by Employee and
Employer's Chief Executive Officer, subject to such
approval thereof as may be required by the Board.
Bonus compensation for subsequent fiscal years will
be determined by the Board in its discretion based
upon the recommendation of the Chief Executive
Officer. The Bonus Compensation, if any, in respect
to each fiscal year during the Employment Period
shall be earned and shall accrue at, and Employee
shall have no entitlement thereto (on a pro rata or
any other basis) prior to, the end of the fiscal year
to which such Bonus Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee
shall be eligible to receive grants of stock
option(s) and other awards and benefits pursuant to
such employee stock option and other stock-based
employee benefit plans as Employer may maintain from
time to time during the Employment Period with
respect to Employer executives of like stature and
compensation, in such amounts as may be determined by
the Board in its discretion based upon the
recommendation of the Chief Executive Officer. In the
event that, during the Employment Period or at any
time thereafter, Employee is re-assigned by Employer
to a position carrying duties and responsibilities of
lesser stature than the position in which Employee
serves as of the time during the Employment Period
that any such options or other rights or benefits are
granted or awarded to or otherwise received by
Employee (other than a re-assignment occurring as the
result of or in connection with any change in control
of Employer, in which case the provisions of the
governing benefit plan applicable in such a
circumstance shall control), such options, rights and
benefits shall, to the extent unvested, unexercised
or otherwise unrealized as of the time of such
re-assignment, be subject to such reduction,
cancellation and/or forfeiture as may then be
determined to be appropriate by the Board in its
discretion.
d. VACATION. During the Employment Period, Employee
shall be entitled to vacation in accordance with
Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS.
Employer shall provide Employee with the same health,
disability, retirement and death and other fringe
benefits as are generally provided to the executive
employees of Employer in accordance with such terms,
conditions and eligibility requirements as may from
time to time be established by Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon
Employee's death.
b. Employer may terminate Employee's employment under
this Agreement at any time, upon five (5) days
written notice to Employee, if Employee becomes
permanently disabled. Permanent disability shall be
determined by Employer according to the same
standards applicable to the employees of Employer
generally under the disability benefits referred to
in paragraph 3(e) hereof.
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<PAGE> 3
c. Employer shall have the right to terminate Employee's
employment under this Agreement at any time (i) immediately
for "cause" (which shall mean for any action or inaction of
Employee which is adverse to Employer's interests, including,
without limitation, Employee's dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, act of bad faith,
neglect of duty or material breach of this Agreement or of any
Employer policy applicable to its employees generally), or
(ii) without cause upon five (5) days written notice to
Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of Employee's
death pursuant to paragraph 4(a), or by Employer by reason of
Employee's permanent disability pursuant to paragraph 4(b),
all of Employer's obligations under this Agreement shall end
except for Employer's obligations to pay Employee's Base
Salary and Bonus Compensation, if any, in each case earned and
accrued but unpaid to the date of death or permanent
disability. Employee shall also have the right to receive any
payments under the death or disability benefits, as the case
may be, provided to Employee pursuant to paragraph 3(e), if
any.
b. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), or upon the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but
unpaid to the date of termination (which, for purposes of this
paragraph 5(b) and paragraph 5(c) below, shall be five (5)
days after the date on which notification is provided by
Employer to Employee pursuant to paragraph 4(c)(ii)) or at the
expiration of the Employment Period, whichever the case may be
and, in the case of termination pursuant to paragraph
4(c)(ii), Employer's obligations under paragraph 5(c) of this
Agreement.
c. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), Employer shall
be obligated to pay Employee as severance pay, for the twelve
(12) month period following the date of such termination,
annualized compensation at a rate which shall be equal to the
Base Salary at such termination date. Such payments shall be
made in equal bi-weekly installments or at such other interval
as the Board or Employer's corresponding payroll policies
shall direct.
d. In the event Employer exercises its right of termination
pursuant to paragraph 4(c)(i) for cause, or Employee otherwise
leaves the employ of Employer prior to the expiration of the
Employment Period, all of Employer's obligations under this
Agreement shall end except for Employer's obligations to pay
Employee's Base Salary, if any, earned and accrued but unpaid
to the date of such termination or of the Employee otherwise
leaving Employer's employ.
6. COVENANT NOT TO COMPETE.
a. RESTRICTED ACTIVITIES--DURATION. Except as otherwise consented
to or approved by Employer's Board of Directors in writing,
Employee agrees that, in addition to being operative during
the Employment Period, the provisions of paragraphs 6(a)(i)
through (iii) hereof, inclusive, shall be operative for a
period of twelve (12) months after the later of (1) the date
Employee's employment with Employer (pursuant to this
Agreement or otherwise) is terminated or otherwise ceases, or
(2) the end of all severance payments, if any, which Employer
is obligated to make to Employee under paragraph 5(c) of this
Agreement or any other subsequent written agreement between
them, regardless of the time, manner or reason for the
termination or other cessation of such employment. During such
periods, Employee will not, directly or indirectly,
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<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services of
a type manufactured, sold, marketed, serviced or
supported, or in any other business in competition with or
adverse to the business that is conducted by Employer, or
which Employer is in the process of developing and in or
of which Employee participated or has knowledge, at the
time of the cessation of Employee's employment with the
Employer, in the United States, Canada or any European,
Asian, Pacific Rim or other foreign country in which
Employer then or thereafter transacts business or is
making a bona fide attempt to do so;
ii. induce, request or attempt to influence any customer
or supplier of Employer to curtail or cancel their
business or prospective business with Employer or in
any way interfere with Employer's business
relationships; or
iii. induce, solicit or assist or facilitate the inducement or
solicitation by any third person of any employee, officer,
agent or representative of Employer to terminate his
respective relationship with Employer or in any way
interfere with the Employer's employee, officer, agent or
representative relationships.
b. TOLLING; RELIEF OF OBLIGATIONS. In the event that Employee
breaches any provision of this paragraph 6, such violation (i)
shall toll the running of the twelve (12) month period set
forth in paragraph 6(a) from the date of commencement of such
violation until such violation ceases, and (ii) shall relieve
Employer of any obligations to Employee under this Agreement.
c. "BLUE PENCILING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business activity
set forth in paragraph 6(a) is deemed unreasonably restrictive
or unreasonable in any other respect in any proceeding before
a court of competent jurisdiction, Employee and Employer agree
and consent to such court's modifying or reducing such
restriction(s) with respect, but only with respect, to that
jurisdiction to the extent deemed reasonable under the
circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information"
means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer and which are not publicly disclosed
or are only disclosed with restrictions. Without limiting the
generality of the foregoing, Confidential Information
includes: strategic and other plans for carrying on business;
cost data and other financial information; lists of customers,
employees, vendors and business partners and alliances;
manufacturing methods and processes; product research and
engineering data, drawings, designs and schematics; computer
programs, flow charts, routines, subroutines, translators,
compilers, operating systems and object and source codes;
specifications, inventions, know-how, calculations and
discoveries; any letters, papers, documents and instruments
disclosing or reflecting any of the foregoing; and all
information revealed to or acquired or created by Employee
during Employee's employment by Employer relating to any of
the foregoing or otherwise to Employer's past, current or
future business.
b. Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to
Confidential Information. Employee acknowledges that the
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<PAGE> 5
unauthorized use by him or disclosure by him of such
Confidential Information to third parties might cause
irreparable damage to Employer and Employer's business.
Accordingly, Employee agrees that at all times after the date
hereof he will not, without the prior written consent of
Employer's Board of Directors, copy, publish, disclose,
divulge to or discuss with any third party, nor use for his
own benefit or that of others any Confidential Information,
except in the normal conduct of his duties under this
Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee by
any person while Employee is associated with Employer, is and
shall be and remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of
the time or manner thereof or reason therefor, Employee agrees
to return and surrender to Employer all Confidential
Information copies thereof in any form which is in any manner
in his control or possession, as well as all other Employer
property.
8. RIGHTS. Employee acknowledges and agrees that any procedure,
design feature, schematic, invention, improvement,
development, discovery, know-how, concept, idea or the like
(whether or not patentable, registrable under copyright or
trademark laws, or otherwise protectable under similar laws)
that Employee (whether individually or jointly with any other
person or persons) has since the inception of his employment
with Employer conceived of, suggested, made, invented,
developed or implemented, or may hereafter conceive of,
suggest, make, invent, develop or implement, during the course
of his service to Employer which relates in any way to the
business of Employer or to the general industry of which
Employer is a part, all physical embodiments and
manifestations thereof, and all patent rights, copyrights and
trademarks (and applications therefor) and similar protections
thereof (all of the foregoing referred to as "Work Product")
are and shall be the sole, exclusive and absolute property of
Employer. All Work Product shall be deemed to be works for
hire for the benefit of Employer, and to the extent that any
Work Product may not constitute a work for hire, Employee
hereby assigns to Employer all right, title and interest in,
to and under such Work Product, including, without limitation,
the right to obtain such patents, copyright registrations,
trademark registrations or similar protections as Employer may
desire to obtain. Employee will immediately disclose all Work
Product to Employer and agrees, at anytime, upon Employer's
request and without additional compensation, to execute any
documents and otherwise to cooperate with Employer (including,
without limitation, all lawful testimony and sworn statements
or other certifications as may be appropriate) respecting the
perfection of its right, title and interest in, to and under
such Work Product and in any litigation or administrative or
other proceeding or controversy in connection therewith, all
expenses incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed and
delivered by Employee in consideration of Employee's
employment with Employer and Employer's obligations hereunder
(including, without limitation, the Base Salary, the Bonus
Compensation and other benefits and payments provided for
herein). Employee further acknowledges that such covenants
were and have been conditions of his employment since the
inception of Employee's employment with Employer.
b. Employee has carefully considered, and has had adequate time
and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions
upon him, and the rights and remedies conferred upon Employer,
under paragraphs 6, 7 and 8 hereof, and hereby acknowledges
and agrees that such restrictions are reasonable in time,
territory and
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<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to
Employee's sole means of support, are fully required to
protect the legitimate interests of Employer and do not confer
a benefit upon Employer disproportionate to the detriment to
Employee.
c. Employee acknowledges that the services to be rendered by him
to Employer as contemplated by this Agreement are special,
unique and of extraordinary character. Employee expressly
agrees and understand that the remedy at law for any breach by
him of paragraph 6, 7 or 8 of this Agreement will be
inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.
Accordingly, upon adequate proof of Employee's violation of
any legally enforceable provision of paragraph 6, 7 or 8
hereof, Employer shall be entitled to immediate injunctive
relief, including, without limitation, a temporary order
restraining any threatened or further breach. In the event any
equitable proceedings are brought to enforce any provision of
paragraphs 6, 7 and 8 hereof, Employee agrees that he will not
raise in such proceedings any defense that Employer has an
adequate remedy at law, and Employee hereby waives any such
defense. Nothing in this Agreement shall be deemed to limit
Employer's remedies at law or in equity for any breach by
Employee of any of the provisions of paragraphs 6, 7 and 8
hereof which may be pursued or availed of by Employer. Without
limiting the generality of the immediately preceding sentence,
any covenant on Employee's part contained in paragraph 6, 7 or
8 hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this paragraph
9, the term "Employer" (other than with respect to the Board
of Directors) shall include, in addition to Employer, all
subsidiaries and other affiliates of Employer, whether so
related to Employer during Employee's employment with Employer
or at any time thereafter.
e. Subject only to such time limitations as may be expressly set
forth therein, the covenants and agreements made by Employee
in paragraphs 6, 7 and 8 hereof and this paragraph 9 shall
survive full payment by Employer to Employee of the amounts to
which Employee is entitled under this Agreement, the
expiration of the Employment Period and the expiration or
termination of this Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee
or creditor of Employee. Prior to the time provided for the making
of any payment under this Agreement, neither Employee nor his
legal representative shall have any right by way of anticipation
or otherwise to assign or otherwise dispose of any interest under
this Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims
for damages, liabilities or expenses which it may have against
Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that
may be required to be funded under any benefit plan of Employer
pursuant to law or under any other written agreement, the
obligations of Employer under this Agreement are not funded, and
Employer shall be not required to deposit in escrow or otherwise
set aside any moneys in advance of the due date for payment
thereof to Employee.
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<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to
Employee shall be deemed to be given if delivered to Employee
in person, or if mailed to Employee, by certified mail,
postage prepaid, return receipt requested, at his address last
shown on the records of Employer, and any notice to be given
by Employee to Employer shall be deemed to be given if
delivered in person or by mail, postage prepaid, return
receipt requested to the President and Chief Executive Officer
of Employer at Employer's principle executive office, unless
Employee or Employer shall have duly notified the other
parties in writing of a change of address. If mailed, notice
shall be deemed to have been given when deposited in the mail
as set forth above.
14. AMENDMENTS. This Agreement shall not be modified or
discharged, in whole or in part, except by an agreement in
writing signed by the parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties with respect to Employee's
employment by Employer from and after the Effective Date. The
parties are not relying on any other representation or
understanding with respect thereto, express or implied, oral
or written. This Agreement supersedes any prior employment
agreement, written or oral, between Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of
any terms or provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any
pronouns used herein shall include the corresponding
masculine, feminine and neuter forms, and the singular form of
any noun or pronoun, including any terms defined herein, shall
include the plural and vice versa.
18. BINDING EFFECT. The rights and obligations of Employer
hereunder shall inure to the benefit of, and shall be binding
upon, Employer and its respective successors and assigns, and
the rights and obligations of Employee hereunder shall inure
to the benefit of, and shall be binding upon, Employee and his
heirs, personal representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined
to be illegal or otherwise unenforceable in any jurisdiction,
in whole or in part, the remaining provisions and any
partially enforceable provision shall be binding and
enforceable to the extent enforceable in such jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed,
and enforced in all respects in accordance with the laws of
the State of Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
TELXON CORPORATION EMPLOYEE
By: /s/ Frank E. Brick /s/ Leonard D. Abeita
------------------------------------ --------------------------------
Frank E. Brick Leonard D. Abeita
President & Chief Executive Officer Senior Vice President,
Global Professional Services
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<PAGE> 1
Exhibit 10.1.11
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and JAMES G. CLEVELAND ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as President,
North America of Employer, and thereafter, in such capacity as the Board of
Directors of Employer shall direct, and Employee desires to be so employed, upon
the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and Employee
agrees to serve Employer, for the period beginning on the Effective
Date and ending March 31, 2000, subject to earlier termination
pursuant to paragraph 4 hereof (the "Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to serve as
President, North America of Employer or in such other capacity
as the Board of Directors of Employer may at any time and from
time to time in its discretion direct, in conformity with
management policies, guidelines and directions issued by
Employer. Employee shall report directly to Frank E. Brick,
President and Chief Executive Officer of Employer, or such
other officer of Employer as the Board of Directors shall
direct (the "Supervisor"), and shall have general charge and
supervision of those functions and such other responsibilities
as the Supervisor shall from time to time determine in his
discretion.
b. Employee shall work exclusively for Employer on a full-time
basis in such capacity as he is to serve pursuant to paragraph
2(a), devoting all of his time and attention during normal
business hours to Employer's business.
c. Employee shall perform his duties and responsibilities
hereunder diligently, faithfully and loyally in order to cause
the proper, efficient and successful operation of Employer's
business.
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for Employee's
services, Employer shall pay to Employee during the Employment
Period a salary (the "Base Salary") at the annual rate of
$275,000 for FY `98. Any salary increases for future fiscal
years will be determined by the Board of Directors of Employer
or an appropriate committee thereof (the "Board") in its
discretion based upon the recommendation of Employer's chief
executive officer (the "Chief Executive Officer"). Base salary
will be payable in arrears, in equal bi-weekly installments or
at such other interval as the Board or applicable Employer
policies shall direct. Employer shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and approved by
the Supervisor or such other officer as the Supervisor or
applicable Employer policies shall direct.
b. BONUS COMPENSATION. In addition to the Base Salary, Employee
shall, at the discretion of the Board, be eligible to receive
bonus compensation ("Bonus Compensation") with respect to the
Employment Period on such basis as shall be approved by the
Board. For FY `98, Employee shall be eligible for a potential
bonus of up to $200,000 based upon achieving goals and
achievements agreed upon by Employee and Employer's Chief
Executive Officer, subject to such approval thereof as may be
required by the Board. Bonus compensation for subsequent
fiscal years will be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
The Bonus Compensation, if any, in respect to each fiscal year
during the Employment Period shall be earned and shall accrue
at, and Employee shall have no entitlement thereto (on a pro
rata or any other basis) prior to, the end of the fiscal year
to which such Bonus Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee shall be
eligible to receive grants of stock option(s) and other awards
and benefits pursuant to such employee stock option and other
stock-based employee benefit plans as Employer may maintain
from time to time during the Employment Period with respect to
Employer executives of like stature and compensation, in such
amounts as may be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
In the event that, during the Employment Period or at any time
thereafter, Employee is re-assigned by Employer to a position
carrying duties and responsibilities of lesser stature than
the position in which Employee serves as of the time during
the Employment Period that any such options or other rights or
benefits are granted or awarded to or otherwise received by
Employee (other than a re-assignment occurring as the result
of or in connection with any change in control of Employer, in
which case the provisions of the governing benefit plan
applicable in such a circumstance shall control), such
options, rights and benefits shall, to the extent unvested,
unexercised or otherwise unrealized as of the time of such
re-assignment, be subject to such reduction, cancellation
and/or forfeiture as may then be determined to be appropriate
by the Board in its discretion.
d. VACATION. During the Employment Period, Employee shall be
entitled to vacation in accordance with Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Employer
shall provide Employee with the same health, disability,
retirement and death and other fringe benefits as are
generally provided to the executive employees of Employer in
accordance with such terms, conditions and eligibility
requirements as may from time to time be established by
Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon Employee's
death.
b. Employer may terminate Employee's employment under this
Agreement at any time, upon five (5) days written notice to
Employee, if Employee becomes permanently disabled. Permanent
disability shall be determined by Employer according to the
same standards applicable to the employees of Employer
generally under the disability benefits referred to in
paragraph 3(e) hereof.
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<PAGE> 3
c. Employer shall have the right to terminate Employee's
employment under this Agreement at any time (i) immediately
for "cause" (which shall mean for any action or inaction of
Employee which is adverse to Employer's interests, including,
without limitation, Employee's dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, act of bad faith,
neglect of duty or material breach of this Agreement or of any
Employer policy applicable to its employees generally), or
(ii) without cause upon five (5) days written notice to
Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of Employee's
death pursuant to paragraph 4(a), or by Employer by reason of
Employee's permanent disability pursuant to paragraph 4(b),
all of Employer's obligations under this Agreement shall end
except for Employer's obligations to pay Employee's Base
Salary and Bonus Compensation, if any, in each case earned and
accrued but unpaid to the date of death or permanent
disability. Employee shall also have the right to receive any
payments under the death or disability benefits, as the case
may be, provided to Employee pursuant to paragraph 3(e), if
any.
b. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), or upon the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but
unpaid to the date of termination (which, for purposes of this
paragraph 5(b) and paragraph 5(c) below, shall be five (5)
days after the date on which notification is provided by
Employer to Employee pursuant to paragraph 4(c)(ii)) or at the
expiration of the Employment Period, whichever the case may be
and, in the case of termination pursuant to paragraph
4(c)(ii), Employer's obligations under paragraph 5(c) of this
Agreement.
c. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), Employer shall
be obligated to pay Employee as severance pay, for the twelve
(12) month period following the date of such termination,
annualized compensation at a rate which shall be equal to the
Base Salary at such termination date. Such payments shall be
made in equal bi-weekly installments or at such other interval
as the Board or Employer's corresponding payroll policies
shall direct.
d. In the event Employer exercises its right of termination
pursuant to paragraph 4(c)(i) for cause, or Employee otherwise
leaves the employ of Employer prior to the expiration of the
Employment Period, all of Employer's obligations under this
Agreement shall end except for Employer's obligations to pay
Employee's Base Salary, if any, earned and accrued but unpaid
to the date of such termination or of the Employee otherwise
leaving Employer's employ.
6. COVENANT NOT TO COMPETE.
a. RESTRICTED ACTIVITIES--DURATION. Except as otherwise consented
to or approved by Employer's Board of Directors in writing,
Employee agrees that, in addition to being operative during
the Employment Period, the provisions of paragraphs 6(a)(i)
through (iii) hereof, inclusive, shall be operative for a
period of twelve (12) months after the later of (1) the date
Employee's employment with Employer (pursuant to this
Agreement or otherwise) is terminated or otherwise ceases, or
(2) the end of all severance payments, if any, which Employer
is obligated to make to Employee under paragraph 5(c) of this
Agreement or any other subsequent written agreement between
them, regardless of the time, manner or reason for the
termination or other cessation of such employment. During such
periods, Employee will not, directly or indirectly,
<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services of
a type manufactured, sold, marketed, serviced or
supported, or in any other business in competition with or
adverse to the business that is conducted by Employer, or
which Employer is in the process of developing and in or
of which Employee participated or has knowledge, at the
time of the cessation of Employee's employment with the
Employer, in the United States, Canada or any European,
Asian, Pacific Rim or other foreign country in which
Employer then or thereafter transacts business or is
making a bona fide attempt to do so;
ii. induce, request or attempt to influence any customer
or supplier of Employer to curtail or cancel their
business or prospective business with Employer or
in any way interfere with Employer's business
relationships; or
iii.induce, solicit or assist or facilitate the inducement or
solicitation by any third person of any employee, officer,
agent or representative of Employer to terminate his
respective relationship with Employer or in any way
interfere with the Employer's employee, officer, agent or
representative relationships.
b. TOLLING; RELIEF OF OBLIGATIONS. In the event that Employee
breaches any provision of this paragraph 6, such violation (i)
shall toll the running of the twelve (12) month period set
forth in paragraph 6(a) from the date of commencement of such
violation until such violation ceases, and (ii) shall relieve
Employer of any obligations to Employee under this Agreement.
c. "BLUE PENCILING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business activity
set forth in paragraph 6(a) is deemed unreasonably restrictive
or unreasonable in any other respect in any proceeding before
a court of competent jurisdiction, Employee and Employer agree
and consent to such court's modifying or reducing such
restriction(s) with respect, but only with respect, to that
jurisdiction to the extent deemed reasonable under the
circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information"
means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer and which are not publicly disclosed
or are only disclosed with restrictions. Without limiting the
generality of the foregoing, Confidential Information
includes: strategic and other plans for carrying on business;
cost data and other financial information; lists of customers,
employees, vendors and business partners and alliances;
manufacturing methods and processes; product research and
engineering data, drawings, designs and schematics; computer
programs, flow charts, routines, subroutines, translators,
compilers, operating systems and object and source codes;
specifications, inventions, know-how, calculations and
discoveries; any letters, papers, documents and instruments
disclosing or reflecting any of the foregoing; and all
information revealed to or acquired or created by Employee
during Employee's employment by Employer relating to any of
the foregoing or otherwise to Employer's past, current or
future business.
b. Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to
Confidential Information. Employee acknowledges that the
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<PAGE> 5
unauthorized use by him or disclosure by him of such
Confidential Information to third parties might cause
irreparable damage to Employer and Employer's business.
Accordingly, Employee agrees that at all times after the date
hereof he will not, without the prior written consent of
Employer's Board of Directors, copy, publish, disclose,
divulge to or discuss with any third party, nor use for his
own benefit or that of others any Confidential Information,
except in the normal conduct of his duties under this
Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee by
any person while Employee is associated with Employer, is and
shall be and remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of
the time or manner thereof or reason therefor, Employee agrees
to return and surrender to Employer all Confidential
Information copies thereof in any form which is in any manner
in his control or possession, as well as all other Employer
property.
8. RIGHTS. Employee acknowledges and agrees that any procedure, design
feature, schematic, invention, improvement, development, discovery,
know-how, concept, idea or the like (whether or not patentable,
registrable under copyright or trademark laws, or otherwise
protectable under similar laws) that Employee (whether individually
or jointly with any other person or persons) has since the inception
of his employment with Employer conceived of, suggested, made,
invented, developed or implemented, or may hereafter conceive of,
suggest, make, invent, develop or implement, during the course of
his service to Employer which relates in any way to the business of
Employer or to the general industry of which Employer is a part, all
physical embodiments and manifestations thereof, and all patent
rights, copyrights and trademarks (and applications therefor) and
similar protections thereof (all of the foregoing referred to as
"Work Product") are and shall be the sole, exclusive and absolute
property of Employer. All Work Product shall be deemed to be works
for hire for the benefit of Employer, and to the extent that any
Work Product may not constitute a work for hire, Employee hereby
assigns to Employer all right, title and interest in, to and under
such Work Product, including, without limitation, the right to
obtain such patents, copyright registrations, trademark
registrations or similar protections as Employer may desire to
obtain. Employee will immediately disclose all Work Product to
Employer and agrees, at anytime, upon Employer's request and without
additional compensation, to execute any documents and otherwise to
cooperate with Employer (including, without limitation, all lawful
testimony and sworn statements or other certifications as may be
appropriate) respecting the perfection of its right, title and
interest in, to and under such Work Product and in any litigation or
administrative or other proceeding or controversy in connection
therewith, all expenses incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed and
delivered by Employee in consideration of Employee's
employment with Employer and Employer's obligations hereunder
(including, without limitation, the Base Salary, the Bonus
Compensation and other benefits and payments provided for
herein). Employee further acknowledges that such covenants
were and have been conditions of his employment since the
inception of Employee's employment with Employer.
b. Employee has carefully considered, and has had adequate time
and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions
upon him, and the rights and remedies conferred upon Employer,
under paragraphs 6, 7 and 8 hereof, and hereby acknowledges
and agrees that such restrictions are reasonable in time,
territory and
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<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to
Employee's sole means of support, are fully required to
protect the legitimate interests of Employer and do not confer
a benefit upon Employer disproportionate to the detriment to
Employee.
c. Employee acknowledges that the services to be rendered by him
to Employer as contemplated by this Agreement are special,
unique and of extraordinary character. Employee expressly
agrees and understand that the remedy at law for any breach by
him of paragraph 6, 7 or 8 of this Agreement will be
inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.
Accordingly, upon adequate proof of Employee's violation of
any legally enforceable provision of paragraph 6, 7 or 8
hereof, Employer shall be entitled to immediate injunctive
relief, including, without limitation, a temporary order
restraining any threatened or further breach. In the event any
equitable proceedings are brought to enforce any provision of
paragraphs 6, 7 and 8 hereof, Employee agrees that he will not
raise in such proceedings any defense that Employer has an
adequate remedy at law, and Employee hereby waives any such
defense. Nothing in this Agreement shall be deemed to limit
Employer's remedies at law or in equity for any breach by
Employee of any of the provisions of paragraphs 6, 7 and 8
hereof which may be pursued or availed of by Employer. Without
limiting the generality of the immediately preceding sentence,
any covenant on Employee's part contained in paragraph 6, 7 or
8 hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this paragraph
9, the term "Employer" (other than with respect to the Board
of Directors) shall include, in addition to Employer, all
subsidiaries and other affiliates of Employer, whether so
related to Employer during Employee's employment with Employer
or at any time thereafter.
e. Subject only to such time limitations as may be expressly set
forth therein, the covenants and agreements made by Employee
in paragraphs 6, 7 and 8 hereof and this paragraph 9 shall
survive full payment by Employer to Employee of the amounts to
which Employee is entitled under this Agreement, the
expiration of the Employment Period and the expiration or
termination of this Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee
or creditor of Employee. Prior to the time provided for the making
of any payment under this Agreement, neither Employee nor his
legal representative shall have any right by way of anticipation
or otherwise to assign or otherwise dispose of any interest under
this Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims for
damages, liabilities or expenses which it may have against Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that may
be required to be funded under any benefit plan of Employer pursuant
to law or under any other written agreement, the obligations of
Employer under this Agreement are not funded, and Employer shall be
not required to deposit in escrow or otherwise set aside any moneys
in advance of the due date for payment thereof to Employee.
<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person, or
if mailed to Employee, by certified mail, postage prepaid, return
receipt requested, at his address last shown on the records of
Employer, and any notice to be given by Employee to Employer shall
be deemed to be given if delivered in person or by mail, postage
prepaid, return receipt requested to the President and Chief
Executive Officer of Employer at Employer's principle executive
office, unless Employee or Employer shall have duly notified the
other parties in writing of a change of address. If mailed, notice
shall be deemed to have been given when deposited in the mail as set
forth above.
14. AMENDMENTS. This Agreement shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the
parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to Employee's employment by
Employer from and after the Effective Date. The parties are not
relying on any other representation or understanding with respect
thereto, express or implied, oral or written. This Agreement
supersedes any prior employment agreement, written or oral, between
Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any
terms or provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any pronouns
used herein shall include the corresponding masculine, feminine and
neuter forms, and the singular form of any noun or pronoun,
including any terms defined herein, shall include the plural and
vice versa.
18. BINDING EFFECT. The rights and obligations of Employer hereunder
shall inure to the benefit of, and shall be binding upon, Employer
and its respective successors and assigns, and the rights and
obligations of Employee hereunder shall inure to the benefit of, and
shall be binding upon, Employee and his heirs, personal
representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be
illegal or otherwise unenforceable in any jurisdiction, in whole or
in part, the remaining provisions and any partially enforceable
provision shall be binding and enforceable to the extent enforceable
in such jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
TELXON CORPORATION EMPLOYEE
By: /S/ Frank E. Brick /S/ James G. Cleveland
------------------------------------- --------------------------
Frank E. Brick James G. Cleveland
President & Chief Executive Officer President, North America
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<PAGE> 1
Exhibit 10.1.12
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and KENNETH W. HAVER ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as Senior Vice
President and Chief Financial Officer of Employer, and thereafter, in such
capacity as the Board of Directors of Employer shall direct, and Employee
desires to be so employed, upon the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and Employee
agrees to serve Employer, for the period beginning on the Effective
Date and ending March 31, 2000, subject to earlier termination
pursuant to paragraph 4 hereof (the "Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to serve as
Senior Vice President and Chief Financial Officer of Employer or
in such other capacity as the Board of Directors of Employer may
at any time and from time to time in its discretion direct, in
conformity with management policies, guidelines and directions
issued by Employer. Employee shall report directly to Frank E.
Brick, President and Chief Executive Officer of Employer, or such
other officer of Employer as the Board of Directors shall direct
(the "Supervisor"), and shall have general charge and supervision
of those functions and such other responsibilities as the
Supervisor shall from time to time determine in his discretion.
b. Employee shall work exclusively for Employer on a full-time basis
in such capacity as he is to serve pursuant to paragraph 2(a),
devoting all of his time and attention during normal business
hours to Employer's business.
c. Employee shall perform his duties and responsibilities hereunder
diligently, faithfully and loyally in order to cause the proper,
efficient and successful operation of Employer's business.
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for Employee's
services, Employer shall pay to Employee during the
Employment Period a salary (the "Base Salary") at the annual
rate of $200,000 for FY `98. Any salary increases for future
fiscal years will be determined by the Board of Directors of
Employer or an appropriate committee thereof (the "Board")
in its discretion based upon the recommendation of
Employer's chief executive officer (the "Chief Executive
Officer"). Base salary will be payable in arrears, in equal
bi-weekly installments or at such other interval as the
Board or applicable Employer policies shall direct. Employer
shall reimburse Employee for all reasonable out-of-pocket
expenses incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and approved
by the Supervisor or such other officer as the Supervisor or
applicable Employer policies shall direct.
b. BONUS COMPENSATION. In addition to the Base Salary, Employee
shall, at the discretion of the Board, be eligible to
receive bonus compensation ("Bonus Compensation") with
respect to the Employment Period on such basis as shall be
approved by the Board. For FY `98, Employee shall be
eligible for a potential bonus of up to $150,000 based upon
achieving goals and achievements agreed upon by Employee and
Employer's Chief Executive Officer, subject to such approval
thereof as may be required by the Board. Bonus compensation
for subsequent fiscal years will be determined by the Board
in its discretion based upon the recommendation of the Chief
Executive Officer. The Bonus Compensation, if any, in
respect to each fiscal year during the Employment Period
shall be earned and shall accrue at, and Employee shall have
no entitlement thereto (on a pro rata or any other basis)
prior to, the end of the fiscal year to which such Bonus
Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee shall
be eligible to receive grants of stock option(s) and other
awards and benefits pursuant to such employee stock option
and other stock-based employee benefit plans as Employer may
maintain from time to time during the Employment Period with
respect to Employer executives of like stature and
compensation, in such amounts as may be determined by the
Board in its discretion based upon the recommendation of the
Chief Executive Officer. In the event that, during the
Employment Period or at any time thereafter, Employee is
re-assigned by Employer to a position carrying duties and
responsibilities of lesser stature than the position in
which Employee serves as of the time during the Employment
Period that any such options or other rights or benefits are
granted or awarded to or otherwise received by Employee
(other than a re-assignment occurring as the result of or in
connection with any change in control of Employer, in which
case the provisions of the governing benefit plan applicable
in such a circumstance shall control), such options, rights
and benefits shall, to the extent unvested, unexercised or
otherwise unrealized as of the time of such re-assignment,
be subject to such reduction, cancellation and/or forfeiture
as may then be determined to be appropriate by the Board in
its discretion.
d. VACATION. During the Employment Period, Employee shall be
entitled to vacation in accordance with Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Employer
shall provide Employee with the same health, disability,
retirement and death and other fringe benefits as are
generally provided to the executive employees of Employer in
accordance with such terms, conditions and eligibility
requirements as may from time to time be established by
Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon Employee's
death.
b. Employer may terminate Employee's employment under this
Agreement at any time, upon five (5) days written notice to
Employee, if Employee becomes permanently disabled.
Permanent disability shall be determined by Employer
according to the same standards applicable to the employees
of Employer generally under the disability benefits referred
to in paragraph 3(e) hereof.
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<PAGE> 3
c. Employer shall have the right to terminate Employee's
employment under this Agreement at any time (i) immediately
for "cause" (which shall mean for any action or inaction of
Employee which is adverse to Employer's interests,
including, without limitation, Employee's dishonesty,
grossly negligent misconduct, willful misconduct,
disloyalty, act of bad faith, neglect of duty or material
breach of this Agreement or of any Employer policy
applicable to its employees generally), or (ii) without
cause upon five (5) days written notice to Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of
Employee's death pursuant to paragraph 4(a), or by Employer
by reason of Employee's permanent disability pursuant to
paragraph 4(b), all of Employer's obligations under this
Agreement shall end except for Employer's obligations to pay
Employee's Base Salary and Bonus Compensation, if any, in
each case earned and accrued but unpaid to the date of death
or permanent disability. Employee shall also have the right
to receive any payments under the death or disability
benefits, as the case may be, provided to Employee pursuant
to paragraph 3(e), if any.
b. In the event Employer exercises its right of termination
other than for cause pursuant to paragraph 4(c)(ii), or upon
the expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but
unpaid to the date of termination (which, for purposes of
this paragraph 5(b) and paragraph 5(c) below, shall be five
(5) days after the date on which notification is provided by
Employer to Employee pursuant to paragraph 4(c)(ii)) or at
the expiration of the Employment Period, whichever the case
may be and, in the case of termination pursuant to paragraph
4(c)(ii), Employer's obligations under paragraph 5(c) of
this Agreement.
c. In the event Employer exercises its right of termination
other than for cause pursuant to paragraph 4(c)(ii),
Employer shall be obligated to pay Employee as severance
pay, for the twelve (12) month period following the date of
such termination, annualized compensation at a rate which
shall be equal to the Base Salary at such termination date.
Such payments shall be made in equal bi-weekly installments
or at such other interval as the Board or Employer's
corresponding payroll policies shall direct.
d. In the event Employer exercises its right of termination
pursuant to paragraph 4(c)(i) for cause, or Employee
otherwise leaves the employ of Employer prior to the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for
Employer's obligations to pay Employee's Base Salary, if
any, earned and accrued but unpaid to the date of such
termination or of the Employee otherwise leaving Employer's
employ.
6. COVENANT NOT TO COMPETE.
a. RESTRICTED ACTIVITIES--DURATION. Except as otherwise
consented to or approved by Employer's Board of Directors in
writing, Employee agrees that, in addition to being
operative during the Employment Period, the provisions of
paragraphs 6(a)(i) through (iii) hereof, inclusive, shall be
operative for a period of twelve (12) months after the later
of (1) the date Employee's employment with Employer
(pursuant to this Agreement or otherwise) is terminated or
otherwise ceases, or (2) the end of all severance payments,
if any, which Employer is obligated to make to Employee
under paragraph 5(c) of this Agreement or any other
subsequent written agreement between them, regardless of the
time, manner or reason for the termination or other
cessation of such employment. During such periods, Employee
will not, directly or indirectly,
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<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services
of a type manufactured, sold, marketed, serviced or
supported, or in any other business in competition with
or adverse to the business that is conducted by
Employer, or which Employer is in the process of
developing and in or of which Employee participated or
has knowledge, at the time of the cessation of
Employee's employment with the Employer, in the United
States, Canada or any European, Asian, Pacific Rim or
other foreign country in which Employer then or
thereafter transacts business or is making a bona fide
attempt to do so;
ii. induce, request or attempt to influence any customer or
supplier of Employer to curtail or cancel their
business or prospective business with Employer or in
any way interfere with Employer's business
relationships; or
iii.induce, solicit or assist or facilitate the inducement
or solicitation by any third person of any employee,
officer, agent or representative of Employer to
terminate his respective relationship with Employer or
in any way interfere with the Employer's employee,
officer, agent or representative relationships.
b. TOLLING; RELIEF OF OBLIGATIONS. In the event that Employee
breaches any provision of this paragraph 6, such violation
(i) shall toll the running of the twelve (12) month period
set forth in paragraph 6(a) from the date of commencement of
such violation until such violation ceases, and (ii) shall
relieve Employer of any obligations to Employee under this
Agreement.
c. "BLUE PENCILING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business
activity set forth in paragraph 6(a) is deemed unreasonably
restrictive or unreasonable in any other respect in any
proceeding before a court of competent jurisdiction,
Employee and Employer agree and consent to such court's
modifying or reducing such restriction(s) with respect, but
only with respect, to that jurisdiction to the extent deemed
reasonable under the circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information"
means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer and which are not publicly
disclosed or are only disclosed with restrictions. Without
limiting the generality of the foregoing, Confidential
Information includes: strategic and other plans for carrying
on business; cost data and other financial information;
lists of customers, employees, vendors and business partners
and alliances; manufacturing methods and processes; product
research and engineering data, drawings, designs and
schematics; computer programs, flow charts, routines,
subroutines, translators, compilers, operating systems and
object and source codes; specifications, inventions,
know-how, calculations and discoveries; any letters, papers,
documents and instruments disclosing or reflecting any of
the foregoing; and all information revealed to or acquired
or created by Employee during Employee's employment by
Employer relating to any of the foregoing or otherwise to
Employer's past, current or future business.
b. Employee acknowledges that the discharge of Employee's
duties under this Agreement will necessarily involve his
access to Confidential Information. Employee acknowledges
that the
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<PAGE> 5
unauthorized use by him or disclosure by him of such
Confidential Information to third parties might cause
irreparable damage to Employer and Employer's business.
Accordingly, Employee agrees that at all times after the
date hereof he will not, without the prior written consent
of Employer's Board of Directors, copy, publish, disclose,
divulge to or discuss with any third party, nor use for his
own benefit or that of others any Confidential Information,
except in the normal conduct of his duties under this
Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee
by any person while Employee is associated with Employer, is
and shall be and remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of
the time or manner thereof or reason therefor, Employee
agrees to return and surrender to Employer all Confidential
Information copies thereof in any form which is in any
manner in his control or possession, as well as all other
Employer property.
8. RIGHTS. Employee acknowledges and agrees that any procedure,
design feature, schematic, invention, improvement, development,
discovery, know-how, concept, idea or the like (whether or not
patentable, registrable under copyright or trademark laws, or
otherwise protectable under similar laws) that Employee (whether
individually or jointly with any other person or persons) has
since the inception of his employment with Employer conceived of,
suggested, made, invented, developed or implemented, or may
hereafter conceive of, suggest, make, invent, develop or
implement, during the course of his service to Employer which
relates in any way to the business of Employer or to the general
industry of which Employer is a part, all physical embodiments
and manifestations thereof, and all patent rights, copyrights and
trademarks (and applications therefor) and similar protections
thereof (all of the foregoing referred to as "Work Product") are
and shall be the sole, exclusive and absolute property of
Employer. All Work Product shall be deemed to be works for hire
for the benefit of Employer, and to the extent that any Work
Product may not constitute a work for hire, Employee hereby
assigns to Employer all right, title and interest in, to and
under such Work Product, including, without limitation, the right
to obtain such patents, copyright registrations, trademark
registrations or similar protections as Employer may desire to
obtain. Employee will immediately disclose all Work Product to
Employer and agrees, at anytime, upon Employer's request and
without additional compensation, to execute any documents and
otherwise to cooperate with Employer (including, without
limitation, all lawful testimony and sworn statements or other
certifications as may be appropriate) respecting the perfection
of its right, title and interest in, to and under such Work
Product and in any litigation or administrative or other
proceeding or controversy in connection therewith, all expenses
incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed
and delivered by Employee in consideration of Employee's
employment with Employer and Employer's obligations
hereunder (including, without limitation, the Base Salary,
the Bonus Compensation and other benefits and payments
provided for herein). Employee further acknowledges that
such covenants were and have been conditions of his
employment since the inception of Employee's employment with
Employer.
b. Employee has carefully considered, and has had adequate time
and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions
upon him, and the rights and remedies conferred upon
Employer, under paragraphs 6, 7 and 8 hereof, and hereby
acknowledges and agrees that such restrictions are
reasonable in time, territory and
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<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent
skill and experience of Employee, would not operate as a bar
to Employee's sole means of support, are fully required to
protect the legitimate interests of Employer and do not
confer a benefit upon Employer disproportionate to the
detriment to Employee.
c. Employee acknowledges that the services to be rendered by
him to Employer as contemplated by this Agreement are
special, unique and of extraordinary character. Employee
expressly agrees and understand that the remedy at law for
any breach by him of paragraph 6, 7 or 8 of this Agreement
will be inadequate and that the damages flowing from such
breach are not readily susceptible to being measured in
monetary terms. Accordingly, upon adequate proof of
Employee's violation of any legally enforceable provision of
paragraph 6, 7 or 8 hereof, Employer shall be entitled to
immediate injunctive relief, including, without limitation,
a temporary order restraining any threatened or further
breach. In the event any equitable proceedings are brought
to enforce any provision of paragraphs 6, 7 and 8 hereof,
Employee agrees that he will not raise in such proceedings
any defense that Employer has an adequate remedy at law, and
Employee hereby waives any such defense. Nothing in this
Agreement shall be deemed to limit Employer's remedies at
law or in equity for any breach by Employee of any of the
provisions of paragraphs 6, 7 and 8 hereof which may be
pursued or availed of by Employer. Without limiting the
generality of the immediately preceding sentence, any
covenant on Employee's part contained in paragraph 6, 7 or 8
hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action
for monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this
paragraph 9, the term "Employer" (other than with respect to
the Board of Directors) shall include, in addition to
Employer, all subsidiaries and other affiliates of Employer,
whether so related to Employer during Employee's employment
with Employer or at any time thereafter.
e. Subject only to such time limitations as may be expressly
set forth therein, the covenants and agreements made by
Employee in paragraphs 6, 7 and 8 hereof and this paragraph
9 shall survive full payment by Employer to Employee of the
amounts to which Employee is entitled under this Agreement,
the expiration of the Employment Period and the expiration
or termination of this Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any
assignee or creditor of Employee. Prior to the time provided for
the making of any payment under this Agreement, neither Employee
nor his legal representative shall have any right by way of
anticipation or otherwise to assign or otherwise dispose of any
interest under this Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims
for damages, liabilities or expenses which it may have against
Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that
may be required to be funded under any benefit plan of Employer
pursuant to law or under any other written agreement, the
obligations of Employer under this Agreement are not funded, and
Employer shall be not required to deposit in escrow or otherwise
set aside any moneys in advance of the due date for payment
thereof to Employee.
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<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person,
or if mailed to Employee, by certified mail, postage prepaid,
return receipt requested, at his address last shown on the
records of Employer, and any notice to be given by Employee to
Employer shall be deemed to be given if delivered in person or by
mail, postage prepaid, return receipt requested to the President
and Chief Executive Officer of Employer at Employer's principle
executive office, unless Employee or Employer shall have duly
notified the other parties in writing of a change of address. If
mailed, notice shall be deemed to have been given when deposited
in the mail as set forth above.
14. AMENDMENTS. This Agreement shall not be modified or discharged,
in whole or in part, except by an agreement in writing signed by
the parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to Employee's employment by
Employer from and after the Effective Date. The parties are not
relying on any other representation or understanding with respect
thereto, express or implied, oral or written. This Agreement
supersedes any prior employment agreement, written or oral,
between Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of
any terms or provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any pronouns
used herein shall include the corresponding masculine, feminine
and neuter forms, and the singular form of any noun or pronoun,
including any terms defined herein, shall include the plural and
vice versa.
18. BINDING EFFECT. The rights and obligations of Employer hereunder
shall inure to the benefit of, and shall be binding upon,
Employer and its respective successors and assigns, and the
rights and obligations of Employee hereunder shall inure to the
benefit of, and shall be binding upon, Employee and his heirs,
personal representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to
be illegal or otherwise unenforceable in any jurisdiction, in
whole or in part, the remaining provisions and any partially
enforceable provision shall be binding and enforceable to the
extent enforceable in such jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed,
and enforced in all respects in accordance with the laws of the
State of Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the Effective Date.
TELXON CORPORATION EMPLOYEE
By: /s/ Frank E. Brick /s/ Kenneth W. Haver
------------------ --------------------
Frank E. Brick Kenneth W. Haver
President & Chief Executive Officer Senior Vice President &
Chief Financial Officer
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<PAGE> 1
Exhibit 10.1.13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and DAVID D. LOADMAN ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as Senior Vice
President, Global Products & Systems Development of Employer, and thereafter, in
such capacity as the Board of Directors of Employer shall direct, and Employee
desires to be so employed, upon the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and Employee
agrees to serve Employer, for the period beginning on the Effective
Date and ending March 31, 2000, subject to earlier termination
pursuant to paragraph 4 hereof (the "Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to serve as
Senior Vice President, Global Products & Systems Development of
Employer or in such other capacity as the Board of Directors of
Employer may at any time and from time to time in its discretion
direct, in conformity with management policies, guidelines and
directions issued by Employer. Employee shall report directly to
Frank E. Brick, President and Chief Executive Officer of
Employer, or such other officer of Employer as the Board of
Directors shall direct (the "Supervisor"), and shall have general
charge and supervision of those functions and such other
responsibilities as the Supervisor shall from time to time
determine in his discretion.
b. Employee shall work exclusively for Employer on a full-time basis
in such capacity as he is to serve pursuant to paragraph 2(a),
devoting all of his time and attention during normal business
hours to Employer's business.
c. Employee shall perform his duties and responsibilities hereunder
diligently, faithfully and loyally in order to cause the proper,
efficient and successful operation of Employer's business.
3. COMPENSATION AND BENEFITS.
a. Base Salary and Expenses. As compensation for Employee's
services, Employer shall pay to Employee during the Employment
Period a salary (the "Base Salary") at the annual rate of
$225,000 for FY `98. Any salary increases for future fiscal years
will be determined by the Board of Directors of Employer or an
appropriate committee thereof (the "Board") in its discretion
based upon the recommendation of Employer's chief executive
officer (the "Chief Executive Officer"). Base salary will be
payable in arrears, in equal bi-weekly installments or at such
other interval as the Board or applicable Employer policies shall
direct. Employer shall reimburse Employee for all reasonable
out-of-pocket expenses incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and approved by
the Supervisor or such other officer as the Supervisor or
applicable Employer policies shall direct.
b. BONUS COMPENSATION. In addition to the Base Salary, Employee
shall, at the discretion of the Board, be eligible to receive
bonus compensation ("Bonus Compensation") with respect to the
Employment Period on such basis as shall be approved by the
Board. For FY `98, Employee shall be eligible for a potential
bonus of up to $125,000 based upon achieving goals and
achievements agreed upon by Employee and Employer's Chief
Executive Officer, subject to such approval thereof as may be
required by the Board. Bonus compensation for subsequent fiscal
years will be determined by the Board in its discretion based
upon the recommendation of the Chief Executive Officer. The Bonus
Compensation, if any, in respect to each fiscal year during the
Employment Period shall be earned and shall accrue at, and
Employee shall have no entitlement thereto (on a pro rata or any
other basis) prior to, the end of the fiscal year to which such
Bonus Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee shall be
eligible to receive grants of stock option(s) and other awards
and benefits pursuant to such employee stock option and other
stock-based employee benefit plans as Employer may maintain from
time to time during the Employment Period with respect to
Employer executives of like stature and compensation, in such
amounts as may be determined by the Board in its discretion based
upon the recommendation of the Chief Executive Officer. In the
event that, during the Employment Period or at any time
thereafter, Employee is re-assigned by Employer to a position
carrying duties and responsibilities of lesser stature than the
position in which Employee serves as of the time during the
Employment Period that any such options or other rights or
benefits are granted or awarded to or otherwise received by
Employee (other than a re-assignment occurring as the result of
or in connection with any change in control of Employer, in which
case the provisions of the governing benefit plan applicable in
such a circumstance shall control), such options, rights and
benefits shall, to the extent unvested, unexercised or otherwise
unrealized as of the time of such re-assignment, be subject to
such reduction, cancellation and/or forfeiture as may then be
determined to be appropriate by the Board in its discretion.
d. VACATION. During the Employment Period, Employee shall be
entitled to vacation in accordance with Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Employer shall
provide Employee with the same health, disability, retirement and
death and other fringe benefits as are generally provided to the
executive employees of Employer in accordance with such terms,
conditions and eligibility requirements as may from time to time
be established by Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon Employee's
death.
b. Employer may terminate Employee's employment under this Agreement
at any time, upon five (5) days written notice to Employee, if
Employee becomes permanently disabled. Permanent disability shall
be determined by Employer according to the same standards
applicable to the employees of Employer generally under the
disability benefits referred to in paragraph 3(e) hereof.
2
<PAGE> 3
c. Employer shall have the right to terminate Employee's employment
under this Agreement at any time (i) immediately for "cause"
(which shall mean for any action or inaction of Employee which is
adverse to Employer's interests, including, without limitation,
Employee's dishonesty, grossly negligent misconduct, willful
misconduct, disloyalty, act of bad faith, neglect of duty or
material breach of this Agreement or of any Employer policy
applicable to its employees generally), or (ii) without cause
upon five (5) days written notice to Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of Employee's
death pursuant to paragraph 4(a), or by Employer by reason of
Employee's permanent disability pursuant to paragraph 4(b), all
of Employer's obligations under this Agreement shall end except
for Employer's obligations to pay Employee's Base Salary and
Bonus Compensation, if any, in each case earned and accrued but
unpaid to the date of death or permanent disability. Employee
shall also have the right to receive any payments under the death
or disability benefits, as the case may be, provided to Employee
pursuant to paragraph 3(e), if any.
b. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), or upon the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus Compensation,
if any, in each case earned and accrued but unpaid to the date of
termination (which, for purposes of this paragraph 5(b) and
paragraph 5(c) below, shall be five (5) days after the date on
which notification is provided by Employer to Employee pursuant
to paragraph 4(c)(ii)) or at the expiration of the Employment
Period, whichever the case may be and, in the case of termination
pursuant to paragraph 4(c)(ii), Employer's obligations under
paragraph 5(c) of this Agreement.
c. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), Employer shall be
obligated to pay Employee as severance pay, for the twelve (12)
month period following the date of such termination, annualized
compensation at a rate which shall be equal to the Base Salary at
such termination date. Such payments shall be made in equal
bi-weekly installments or at such other interval as the Board or
Employer's corresponding payroll policies shall direct.
d. In the event Employer exercises its right of termination pursuant
to paragraph 4(c)(i) for cause, or Employee otherwise leaves the
employ of Employer prior to the expiration of the Employment
Period, all of Employer's obligations under this Agreement shall
end except for Employer's obligations to pay Employee's Base
Salary, if any, earned and accrued but unpaid to the date of such
termination or of the Employee otherwise leaving Employer's
employ.
6. COVENANT NOT TO COMPETE.
a. Restricted Activities--Duration. Except as otherwise consented to
or approved by Employer's Board of Directors in writing, Employee
agrees that, in addition to being operative during the Employment
Period, the provisions of paragraphs 6(a)(i) through (iii)
hereof, inclusive, shall be operative for a period of twelve (12)
months after the later of (1) the date Employee's employment with
Employer (pursuant to this Agreement or otherwise) is terminated
or otherwise ceases, or (2) the end of all severance payments, if
any, which Employer is obligated to make to Employee under
paragraph 5(c) of this Agreement or any other subsequent written
agreement between them, regardless of the time, manner or reason
for the termination or other cessation of such employment. During
such periods, Employee will not, directly or indirectly,
3
<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services of a
type manufactured, sold, marketed, serviced or supported, or
in any other business in competition with or adverse to the
business that is conducted by Employer, or which Employer is
in the process of developing and in or of which Employee
participated or has knowledge, at the time of the cessation
of Employee's employment with the Employer, in the United
States, Canada or any European, Asian, Pacific Rim or other
foreign country in which Employer then or thereafter
transacts business or is making a bona fide attempt to do
so;
ii. induce, request or attempt to influence any customer or
supplier of Employer to curtail or cancel their business or
prospective business with Employer or in any way interfere
with Employer's business relationships; or
iii. induce, solicit or assist or facilitate the inducement or
solicitation by any third person of any employee, officer,
agent or representative of Employer to terminate his
respective relationship with Employer or in any way
interfere with the Employer's employee, officer, agent or
representative relationships.
b. Tolling; Relief of Obligations. In the event that Employee
breaches any provision of this paragraph 6, such violation (i)
shall toll the running of the twelve (12) month period set forth
in paragraph 6(a) from the date of commencement of such violation
until such violation ceases, and (ii) shall relieve Employer of
any obligations to Employee under this Agreement.
c. "Blue Penciling" or Modification. If either the length of time,
geographic area or scope of restricted business activity set
forth in paragraph 6(a) is deemed unreasonably restrictive or
unreasonable in any other respect in any proceeding before a
court of competent jurisdiction, Employee and Employer agree and
consent to such court's modifying or reducing such restriction(s)
with respect, but only with respect, to that jurisdiction to the
extent deemed reasonable under the circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information" means
all information or trade secrets of any type or description
belonging to Employer which are proprietary and confidential to
Employer and which are not publicly disclosed or are only
disclosed with restrictions. Without limiting the generality of
the foregoing, Confidential Information includes: strategic and
other plans for carrying on business; cost data and other
financial information; lists of customers, employees, vendors and
business partners and alliances; manufacturing methods and
processes; product research and engineering data, drawings,
designs and schematics; computer programs, flow charts, routines,
subroutines, translators, compilers, operating systems and object
and source codes; specifications, inventions, know-how,
calculations and discoveries; any letters, papers, documents and
instruments disclosing or reflecting any of the foregoing; and
all information revealed to or acquired or created by Employee
during Employee's employment by Employer relating to any of the
foregoing or otherwise to Employer's past, current or future
business.
b. Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to
Confidential Information. Employee acknowledges that the
4
<PAGE> 5
unauthorized use by him or disclosure by him of such Confidential
Information to third parties might cause irreparable damage to
Employer and Employer's business. Accordingly, Employee agrees
that at all times after the date hereof he will not, without the
prior written consent of Employer's Board of Directors, copy,
publish, disclose, divulge to or discuss with any third party,
nor use for his own benefit or that of others any Confidential
Information, except in the normal conduct of his duties under
this Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or obtained
by Employee or Employer, or furnished to Employee by any person
while Employee is associated with Employer, is and shall be and
remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of the
time or manner thereof or reason therefor, Employee agrees to
return and surrender to Employer all Confidential Information
copies thereof in any form which is in any manner in his control
or possession, as well as all other Employer property.
8. RIGHTS. Employee acknowledges and agrees that any procedure, design
feature, schematic, invention, improvement, development, discovery,
know-how, concept, idea or the like (whether or not patentable,
registrable under copyright or trademark laws, or otherwise
protectable under similar laws) that Employee (whether individually or
jointly with any other person or persons) has since the inception of
his employment with Employer conceived of, suggested, made, invented,
developed or implemented, or may hereafter conceive of, suggest, make,
invent, develop or implement, during the course of his service to
Employer which relates in any way to the business of Employer or to
the general industry of which Employer is a part, all physical
embodiments and manifestations thereof, and all patent rights,
copyrights and trademarks (and applications therefor) and similar
protections thereof (all of the foregoing referred to as "Work
Product") are and shall be the sole, exclusive and absolute property
of Employer. All Work Product shall be deemed to be works for hire for
the benefit of Employer, and to the extent that any Work Product may
not constitute a work for hire, Employee hereby assigns to Employer
all right, title and interest in, to and under such Work Product,
including, without limitation, the right to obtain such patents,
copyright registrations, trademark registrations or similar
protections as Employer may desire to obtain. Employee will
immediately disclose all Work Product to Employer and agrees, at
anytime, upon Employer's request and without additional compensation,
to execute any documents and otherwise to cooperate with Employer
(including, without limitation, all lawful testimony and sworn
statements or other certifications as may be appropriate) respecting
the perfection of its right, title and interest in, to and under such
Work Product and in any litigation or administrative or other
proceeding or controversy in connection therewith, all expenses
incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed and
delivered by Employee in consideration of Employee's employment
with Employer and Employer's obligations hereunder (including,
without limitation, the Base Salary, the Bonus Compensation and
other benefits and payments provided for herein). Employee
further acknowledges that such covenants were and have been
conditions of his employment since the inception of Employee's
employment with Employer.
b. Employee has carefully considered, and has had adequate time and
opportunity to consult with his own counsel or other advisors
regarding the nature and extent of the restrictions upon him, and
the rights and remedies conferred upon Employer, under paragraphs
6, 7 and 8 hereof, and hereby acknowledges and agrees that such
restrictions are reasonable in time, territory and
5
<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent skill and
experience of Employee, would not operate as a bar to Employee's
sole means of support, are fully required to protect the
legitimate interests of Employer and do not confer a benefit upon
Employer disproportionate to the detriment to Employee.
c. Employee acknowledges that the services to be rendered by him to
Employer as contemplated by this Agreement are special, unique
and of extraordinary character. Employee expressly agrees and
understand that the remedy at law for any breach by him of
paragraph 6, 7 or 8 of this Agreement will be inadequate and that
the damages flowing from such breach are not readily susceptible
to being measured in monetary terms. Accordingly, upon adequate
proof of Employee's violation of any legally enforceable
provision of paragraph 6, 7 or 8 hereof, Employer shall be
entitled to immediate injunctive relief, including, without
limitation, a temporary order restraining any threatened or
further breach. In the event any equitable proceedings are
brought to enforce any provision of paragraphs 6, 7 and 8 hereof,
Employee agrees that he will not raise in such proceedings any
defense that Employer has an adequate remedy at law, and Employee
hereby waives any such defense. Nothing in this Agreement shall
be deemed to limit Employer's remedies at law or in equity for
any breach by Employee of any of the provisions of paragraphs 6,
7 and 8 hereof which may be pursued or availed of by Employer.
Without limiting the generality of the immediately preceding
sentence, any covenant on Employee's part contained in paragraph
6, 7 or 8 hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this paragraph 9,
the term "Employer" (other than with respect to the Board of
Directors) shall include, in addition to Employer, all
subsidiaries and other affiliates of Employer, whether so related
to Employer during Employee's employment with Employer or at any
time thereafter.
e. Subject only to such time limitations as may be expressly set
forth therein, the covenants and agreements made by Employee in
paragraphs 6, 7 and 8 hereof and this paragraph 9 shall survive
full payment by Employer to Employee of the amounts to which
Employee is entitled under this Agreement, the expiration of the
Employment Period and the expiration or termination of this
Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee or
creditor of Employee. Prior to the time provided for the making of any
payment under this Agreement, neither Employee nor his legal
representative shall have any right by way of anticipation or
otherwise to assign or otherwise dispose of any interest under this
Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims for
damages, liabilities or expenses which it may have against Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that may be
required to be funded under any benefit plan of Employer pursuant to
law or under any other written agreement, the obligations of Employer
under this Agreement are not funded, and Employer shall be not
required to deposit in escrow or otherwise set aside any moneys in
advance of the due date for payment thereof to Employee.
6
<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person, or if
mailed to Employee, by certified mail, postage prepaid, return receipt
requested, at his address last shown on the records of Employer, and
any notice to be given by Employee to Employer shall be deemed to be
given if delivered in person or by mail, postage prepaid, return
receipt requested to the President and Chief Executive Officer of
Employer at Employer's principle executive office, unless Employee or
Employer shall have duly notified the other parties in writing of a
change of address. If mailed, notice shall be deemed to have been
given when deposited in the mail as set forth above.
14. AMENDMENTS. This Agreement shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the
parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to Employee's employment by Employer
from and after the Effective Date. The parties are not relying on any
other representation or understanding with respect thereto, express or
implied, oral or written. This Agreement supersedes any prior
employment agreement, written or oral, between Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for convenience
of reference only and do not affect the meaning of any terms or
provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any pronouns used
herein shall include the corresponding masculine, feminine and neuter
forms, and the singular form of any noun or pronoun, including any
terms defined herein, shall include the plural and vice versa.
18. BINDING EFFECT. The rights and obligations of Employer hereunder shall
inure to the benefit of, and shall be binding upon, Employer and its
respective successors and assigns, and the rights and obligations of
Employee hereunder shall inure to the benefit of, and shall be binding
upon, Employee and his heirs, personal representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are severable,
and if any one or more provisions may be determined to be illegal or
otherwise unenforceable in any jurisdiction, in whole or in part, the
remaining provisions and any partially enforceable provision shall be
binding and enforceable to the extent enforceable in such
jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
TELXON CORPORATION EMPLOYEE
By: /s/ Frank E. Brick /s/ David D. Loadman
------------------------------ --------------------------
Frank E. Brick David D. Loadman
President & Chief Executive Officer Senior Vice President,
Global Products &
Systems Development
<PAGE> 1
Exhibit 10.1.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and DAVID W. PORTER ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as Senior Vice
President, Global Operations of Employer, and thereafter, in such capacity as
the Board of Directors of Employer shall direct, and Employee desires to be so
employed, upon the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and Employee
agrees to serve Employer, for the period beginning on the Effective
Date and ending March 31, 2000, subject to earlier termination
pursuant to paragraph 4 hereof (the "Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to serve as
Senior Vice President, Global Operations of Employer or in
such other capacity as the Board of Directors of Employer may
at any time and from time to time in its discretion direct, in
conformity with management policies, guidelines and directions
issued by Employer. Employee shall report directly to Frank E.
Brick, President and Chief Executive Officer of Employer, or
such other officer of Employer as the Board of Directors shall
direct (the "Supervisor"), and shall have general charge and
supervision of those functions and such other responsibilities
as the Supervisor shall from time to time determine in his
discretion.
b. Employee shall work exclusively for Employer on a full-time
basis in such capacity as he is to serve pursuant to paragraph
2(a), devoting all of his time and attention during normal
business hours to Employer's business.
c. Employee shall perform his duties and responsibilities
hereunder diligently, faithfully and loyally in order to cause
the proper, efficient and successful operation of Employer's
business.
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for Employee's
services, Employer shall pay to Employee during the Employment
Period a salary (the "Base Salary") at the annual rate of
$200,000 for FY `98. Any salary increases for future fiscal
years will be determined by the Board of Directors of Employer
or an appropriate committee thereof (the "Board") in its
discretion based upon the recommendation of Employer's chief
executive officer (the "Chief Executive Officer"). Base salary
will be payable in arrears, in equal bi-weekly installments or
at such other interval as the Board or applicable Employer
policies shall direct. Employer shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and approved by
the Supervisor or such other officer as the Supervisor or
applicable Employer policies shall direct.
b. BONUS COMPENSATION. In addition to the Base Salary, Employee
shall, at the discretion of the Board, be eligible to receive
bonus compensation ("Bonus Compensation") with respect to the
Employment Period on such basis as shall be approved by the
Board. For FY `98, Employee shall be eligible for a potential
bonus of up to $85,000 based upon achieving goals and
achievements agreed upon by Employee and Employer's Chief
Executive Officer, subject to such approval thereof as may be
required by the Board. Bonus compensation for subsequent
fiscal years will be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
The Bonus Compensation, if any, in respect to each fiscal year
during the Employment Period shall be earned and shall accrue
at, and Employee shall have no entitlement thereto (on a pro
rata or any other basis) prior to, the end of the fiscal year
to which such Bonus Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee shall be
eligible to receive grants of stock option(s) and other awards
and benefits pursuant to such employee stock option and other
stock-based employee benefit plans as Employer may maintain
from time to time during the Employment Period with respect to
Employer executives of like stature and compensation, in such
amounts as may be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
In the event that, during the Employment Period or at any time
thereafter, Employee is re-assigned by Employer to a position
carrying duties and responsibilities of lesser stature than
the position in which Employee serves as of the time during
the Employment Period that any such options or other rights or
benefits are granted or awarded to or otherwise received by
Employee (other than a re-assignment occurring as the result
of or in connection with any change in control of Employer, in
which case the provisions of the governing benefit plan
applicable in such a circumstance shall control), such
options, rights and benefits shall, to the extent unvested,
unexercised or otherwise unrealized as of the time of such
re-assignment, be subject to such reduction, cancellation
and/or forfeiture as may then be determined to be appropriate
by the Board in its discretion.
d. VACATION. During the Employment Period, Employee shall be
entitled to vacation in accordance with Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Employer
shall provide Employee with the same health, disability,
retirement and death and other fringe benefits as are
generally provided to the executive employees of Employer in
accordance with such terms, conditions and eligibility
requirements as may from time to time be established by
Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon Employee's
death.
b. Employer may terminate Employee's employment under this
Agreement at any time, upon five (5) days written notice to
Employee, if Employee becomes permanently disabled. Permanent
disability shall be determined by Employer according to the
same standards applicable to the employees of Employer
generally under the disability benefits referred to in
paragraph 3(e) hereof.
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<PAGE> 3
c. Employer shall have the right to terminate Employee's
employment under this Agreement at any time (i) immediately
for "cause" (which shall mean for any action or inaction of
Employee which is adverse to Employer's interests, including,
without limitation, Employee's dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, act of bad faith,
neglect of duty or material breach of this Agreement or of any
Employer policy applicable to its employees generally), or
(ii) without cause upon five (5) days written notice to
Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of Employee's
death pursuant to paragraph 4(a), or by Employer by reason of
Employee's permanent disability pursuant to paragraph 4(b),
all of Employer's obligations under this Agreement shall end
except for Employer's obligations to pay Employee's Base
Salary and Bonus Compensation, if any, in each case earned and
accrued but unpaid to the date of death or permanent
disability. Employee shall also have the right to receive any
payments under the death or disability benefits, as the case
may be, provided to Employee pursuant to paragraph 3(e), if
any.
b. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), or upon the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but
unpaid to the date of termination (which, for purposes of this
paragraph 5(b) and paragraph 5(c) below, shall be five (5)
days after the date on which notification is provided by
Employer to Employee pursuant to paragraph 4(c)(ii)) or at the
expiration of the Employment Period, whichever the case may be
and, in the case of termination pursuant to paragraph
4(c)(ii), Employer's obligations under paragraph 5(c) of this
Agreement.
c. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), Employer shall
be obligated to pay Employee as severance pay, for the twelve
(12) month period following the date of such termination,
annualized compensation at a rate which shall be equal to the
Base Salary at such termination date. Such payments shall be
made in equal bi-weekly installments or at such other interval
as the Board or Employer's corresponding payroll policies
shall direct.
d. In the event Employer exercises its right of termination
pursuant to paragraph 4(c)(i) for cause, or Employee otherwise
leaves the employ of Employer prior to the expiration of the
Employment Period, all of Employer's obligations under this
Agreement shall end except for Employer's obligations to pay
Employee's Base Salary, if any, earned and accrued but unpaid
to the date of such termination or of the Employee otherwise
leaving Employer's employ.
6. COVENANT NOT TO COMPETE.
a. RESTRICTED ACTIVITIES--DURATION. Except as otherwise consented
to or approved by Employer's Board of Directors in writing,
Employee agrees that, in addition to being operative during
the Employment Period, the provisions of paragraphs 6(a)(i)
through (iii) hereof, inclusive, shall be operative for a
period of twelve (12) months after the later of (1) the date
Employee's employment with Employer (pursuant to this
Agreement or otherwise) is terminated or otherwise ceases, or
(2) the end of all severance payments, if any, which Employer
is obligated to make to Employee under paragraph 5(c) of this
Agreement or any other subsequent written agreement between
them, regardless of the time, manner or reason for the
termination or other cessation of such employment. During such
periods, Employee will not, directly or indirectly,
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<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services
of a type manufactured, sold, marketed, serviced or
supported, or in any other business in competition with
or adverse to the business that is conducted by
Employer, or which Employer is in the process of
developing and in or of which Employee participated or
has knowledge, at the time of the cessation of
Employee's employment with the Employer, in the United
States, Canada or any European, Asian, Pacific Rim or
other foreign country in which Employer then or
thereafter transacts business or is making a bona fide
attempt to do so;
ii. induce, request or attempt to influence any customer or
supplier of Employer to curtail or cancel their business
or prospective business with Employer or in any way
interfere with Employer's business relationships; or
iii. induce, solicit or assist or facilitate the inducement
or solicitation by any third person of any employee,
officer, agent or representative of Employer to
terminate his respective relationship with Employer or
in any way interfere with the Employer's employee,
officer, agent or representative relationships.
b. TOLLING; RELIEF OF OBLIGATIONS. In the event that Employee
breaches any provision of this paragraph 6, such violation (i)
shall toll the running of the twelve (12) month period set
forth in paragraph 6(a) from the date of commencement of such
violation until such violation ceases, and (ii) shall relieve
Employer of any obligations to Employee under this Agreement.
c. "BLUE PENCILING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business activity
set forth in paragraph 6(a) is deemed unreasonably restrictive
or unreasonable in any other respect in any proceeding before
a court of competent jurisdiction, Employee and Employer agree
and consent to such court's modifying or reducing such
restriction(s) with respect, but only with respect, to that
jurisdiction to the extent deemed reasonable under the
circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information"
means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer and which are not publicly disclosed
or are only disclosed with restrictions. Without limiting the
generality of the foregoing, Confidential Information
includes: strategic and other plans for carrying on business;
cost data and other financial information; lists of customers,
employees, vendors and business partners and alliances;
manufacturing methods and processes; product research and
engineering data, drawings, designs and schematics; computer
programs, flow charts, routines, subroutines, translators,
compilers, operating systems and object and source codes;
specifications, inventions, know-how, calculations and
discoveries; any letters, papers, documents and instruments
disclosing or reflecting any of the foregoing; and all
information revealed to or acquired or created by Employee
during Employee's employment by Employer relating to any of
the foregoing or otherwise to Employer's past, current or
future business.
b. Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to
Confidential Information. Employee acknowledges that the
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<PAGE> 5
unauthorized use by him or disclosure by him of such
Confidential Information to third parties might cause
irreparable damage to Employer and Employer's business.
Accordingly, Employee agrees that at all times after the date
hereof he will not, without the prior written consent of
Employer's Board of Directors, copy, publish, disclose,
divulge to or discuss with any third party, nor use for his
own benefit or that of others any Confidential Information,
except in the normal conduct of his duties under this
Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee by
any person while Employee is associated with Employer, is and
shall be and remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of
the time or manner thereof or reason therefor, Employee agrees
to return and surrender to Employer all Confidential
Information copies thereof in any form which is in any manner
in his control or possession, as well as all other Employer
property.
8. RIGHTS. Employee acknowledges and agrees that any procedure, design
feature, schematic, invention, improvement, development, discovery,
know-how, concept, idea or the like (whether or not patentable,
registrable under copyright or trademark laws, or otherwise
protectable under similar laws) that Employee (whether individually
or jointly with any other person or persons) has since the inception
of his employment with Employer conceived of, suggested, made,
invented, developed or implemented, or may hereafter conceive of,
suggest, make, invent, develop or implement, during the course of
his service to Employer which relates in any way to the business of
Employer or to the general industry of which Employer is a part, all
physical embodiments and manifestations thereof, and all patent
rights, copyrights and trademarks (and applications therefor) and
similar protections thereof (all of the foregoing referred to as
"Work Product") are and shall be the sole, exclusive and absolute
property of Employer. All Work Product shall be deemed to be works
for hire for the benefit of Employer, and to the extent that any
Work Product may not constitute a work for hire, Employee hereby
assigns to Employer all right, title and interest in, to and under
such Work Product, including, without limitation, the right to
obtain such patents, copyright registrations, trademark
registrations or similar protections as Employer may desire to
obtain. Employee will immediately disclose all Work Product to
Employer and agrees, at anytime, upon Employer's request and without
additional compensation, to execute any documents and otherwise to
cooperate with Employer (including, without limitation, all lawful
testimony and sworn statements or other certifications as may be
appropriate) respecting the perfection of its right, title and
interest in, to and under such Work Product and in any litigation or
administrative or other proceeding or controversy in connection
therewith, all expenses incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed and
delivered by Employee in consideration of Employee's
employment with Employer and Employer's obligations hereunder
(including, without limitation, the Base Salary, the Bonus
Compensation and other benefits and payments provided for
herein). Employee further acknowledges that such covenants
were and have been conditions of his employment since the
inception of Employee's employment with Employer.
b. Employee has carefully considered, and has had adequate time
and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions
upon him, and the rights and remedies conferred upon Employer,
under paragraphs 6, 7 and 8 hereof, and hereby acknowledges
and agrees that such restrictions are reasonable in time,
territory and
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<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to
Employee's sole means of support, are fully required to
protect the legitimate interests of Employer and do not confer
a benefit upon Employer disproportionate to the detriment to
Employee.
c. Employee acknowledges that the services to be rendered by him
to Employer as contemplated by this Agreement are special,
unique and of extraordinary character. Employee expressly
agrees and understand that the remedy at law for any breach by
him of paragraph 6, 7 or 8 of this Agreement will be
inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.
Accordingly, upon adequate proof of Employee's violation of
any legally enforceable provision of paragraph 6, 7 or 8
hereof, Employer shall be entitled to immediate injunctive
relief, including, without limitation, a temporary order
restraining any threatened or further breach. In the event any
equitable proceedings are brought to enforce any provision of
paragraphs 6, 7 and 8 hereof, Employee agrees that he will not
raise in such proceedings any defense that Employer has an
adequate remedy at law, and Employee hereby waives any such
defense. Nothing in this Agreement shall be deemed to limit
Employer's remedies at law or in equity for any breach by
Employee of any of the provisions of paragraphs 6, 7 and 8
hereof which may be pursued or availed of by Employer. Without
limiting the generality of the immediately preceding sentence,
any covenant on Employee's part contained in paragraph 6, 7 or
8 hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this paragraph
9, the term "Employer" (other than with respect to the Board
of Directors) shall include, in addition to Employer, all
subsidiaries and other affiliates of Employer, whether so
related to Employer during Employee's employment with Employer
or at any time thereafter.
e. Subject only to such time limitations as may be expressly set
forth therein, the covenants and agreements made by Employee
in paragraphs 6, 7 and 8 hereof and this paragraph 9 shall
survive full payment by Employer to Employee of the amounts to
which Employee is entitled under this Agreement, the
expiration of the Employment Period and the expiration or
termination of this Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee
or creditor of Employee. Prior to the time provided for the making
of any payment under this Agreement, neither Employee nor his legal
representative shall have any right by way of anticipation or
otherwise to assign or otherwise dispose of any interest under this
Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims for
damages, liabilities or expenses which it may have against Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that may
be required to be funded under any benefit plan of Employer pursuant
to law or under any other written agreement, the obligations of
Employer under this Agreement are not funded, and Employer shall be
not required to deposit in escrow or otherwise set aside any moneys
in advance of the due date for payment thereof to Employee.
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<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person, or
if mailed to Employee, by certified mail, postage prepaid, return
receipt requested, at his address last shown on the records of
Employer, and any notice to be given by Employee to Employer shall
be deemed to be given if delivered in person or by mail, postage
prepaid, return receipt requested to the President and Chief
Executive Officer of Employer at Employer's principle executive
office, unless Employee or Employer shall have duly notified the
other parties in writing of a change of address. If mailed, notice
shall be deemed to have been given when deposited in the mail as set
forth above.
14. AMENDMENTS. This Agreement shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the
parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to Employee's employment by
Employer from and after the Effective Date. The parties are not
relying on any other representation or understanding with respect
thereto, express or implied, oral or written. This Agreement
supersedes any prior employment agreement, written or oral, between
Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any
terms or provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any pronouns
used herein shall include the corresponding masculine, feminine and
neuter forms, and the singular form of any noun or pronoun,
including any terms defined herein, shall include the plural and
vice versa.
18. BINDING EFFECT. The rights and obligations of Employer hereunder
shall inure to the benefit of, and shall be binding upon, Employer
and its respective successors and assigns, and the rights and
obligations of Employee hereunder shall inure to the benefit of, and
shall be binding upon, Employee and his heirs, personal
representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be
illegal or otherwise unenforceable in any jurisdiction, in whole or
in part, the remaining provisions and any partially enforceable
provision shall be binding and enforceable to the extent enforceable
in such jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
TELXON CORPORATION EMPLOYEE
By: /s/ Frank E. Brick /s/ David W. Porter
------------------ -------------------
Frank E. Brick David W. Porter
President & Chief Executive Officer Senior Vice President,
Global Operations
<PAGE> 1
Exhibit 10.1.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made as of April 1, 1997
(the "Effective Date") at Akron, Ohio between TELXON CORPORATION ("Employer"), a
Delaware corporation with offices at 3330 West Market Street, Akron, Ohio 44333,
and DAN R. WIPFF ("Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee initially as President &
Chief Executive Officer, Telxon Products of Employer, and thereafter, in such
capacity as the Board of Directors of Employer shall direct, and Employee
desires to be so employed, upon the terms and conditions herein contained; and
WHEREAS, Employer and Employee desire to have this Agreement supersede any
and all prior agreements, oral or written, relating to the employment of
Employee by Employer.
NOW, THEREFORE, in consideration of the foregoing and in consideration of
the mutual promises and agreements contained herein, the parties hereto agree as
follows:
1. EMPLOYMENT PERIOD. Employer agrees to employ Employee, and Employee
agrees to serve Employer, for the period beginning on the Effective
Date and ending March 31, 2000, subject to earlier termination
pursuant to paragraph 4 hereof (the "Employment Period").
2. NATURE OF DUTIES.
a. Employee's duties and responsibilities shall be to serve as
President & Chief Executive Officer, Telxon Products of
Employer or in such other capacity as the Board of Directors
of Employer may at any time and from time to time in its
discretion direct, in conformity with management policies,
guidelines and directions issued by Employer. Employee shall
report directly to Frank E. Brick, President and Chief
Executive Officer of Employer, or such other officer of
Employer as the Board of Directors shall direct (the
"Supervisor"), and shall have general charge and supervision
of those functions and such other responsibilities as the
Supervisor shall from time to time determine in his
discretion.
b. Employee shall work exclusively for Employer on a full-time
basis in such capacity as he is to serve pursuant to paragraph
2(a), devoting all of his time and attention during normal
business hours to Employer's business.
c. Employee shall perform his duties and responsibilities
hereunder diligently, faithfully and loyally in order to cause
the proper, efficient and successful operation of Employer's
business.
3. COMPENSATION AND BENEFITS.
a. BASE SALARY AND EXPENSES. As compensation for Employee's
services, Employer shall pay to Employee during the Employment
Period a salary (the "Base Salary") at the annual rate of
$275,000 for FY `98. Any salary increases for future fiscal
years will be determined by the Board of Directors of Employer
or an appropriate committee thereof (the "Board") in its
discretion based upon the recommendation of Employer's chief
executive officer (the "Chief Executive Officer"). Base salary
will be payable in arrears, in equal bi-weekly installments or
at such other interval as the Board or applicable Employer
policies shall direct. Employer shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee on
<PAGE> 2
Employer's behalf during the Employment Period and approved by
the Supervisor or such other officer as the Supervisor or
applicable Employer policies shall direct.
b. BONUS COMPENSATION. In addition to the Base Salary, Employee
shall, at the discretion of the Board, be eligible to receive
bonus compensation ("Bonus Compensation") with respect to the
Employment Period on such basis as shall be approved by the
Board. For FY `98, Employee shall be eligible for a potential
bonus of up to $100,000 based upon achieving goals and
achievements agreed upon by Employee and Employer's Chief
Executive Officer, subject to such approval thereof as may be
required by the Board. Bonus compensation for subsequent
fiscal years will be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
The Bonus Compensation, if any, in respect to each fiscal year
during the Employment Period shall be earned and shall accrue
at, and Employee shall have no entitlement thereto (on a pro
rata or any other basis) prior to, the end of the fiscal year
to which such Bonus Compensation relates.
c. STOCK OPTIONS. During the Employment Period, Employee shall be
eligible to receive grants of stock option(s) and other awards
and benefits pursuant to such employee stock option and other
stock-based employee benefit plans as Employer may maintain
from time to time during the Employment Period with respect to
Employer executives of like stature and compensation, in such
amounts as may be determined by the Board in its discretion
based upon the recommendation of the Chief Executive Officer.
In the event that, during the Employment Period or at any time
thereafter, Employee is re-assigned by Employer to a position
carrying duties and responsibilities of lesser stature than
the position in which Employee serves as of the time during
the Employment Period that any such options or other rights or
benefits are granted or awarded to or otherwise received by
Employee (other than a re-assignment occurring as the result
of or in connection with any change in control of Employer, in
which case the provisions of the governing benefit plan
applicable in such a circumstance shall control), such
options, rights and benefits shall, to the extent unvested,
unexercised or otherwise unrealized as of the time of such
re-assignment, be subject to such reduction, cancellation
and/or forfeiture as may then be determined to be appropriate
by the Board in its discretion.
d. VACATION. During the Employment Period, Employee shall be
entitled to vacation in accordance with Employer's policies.
e. HEALTH, DISABILITY, RETIREMENT AND DEATH BENEFITS. Employer
shall provide Employee with the same health, disability,
retirement and death and other fringe benefits as are
generally provided to the executive employees of Employer in
accordance with such terms, conditions and eligibility
requirements as may from time to time be established by
Employer.
4. TERMINATION.
a. This Agreement shall terminate automatically upon Employee's
death.
b. Employer may terminate Employee's employment under this
Agreement at any time, upon five (5) days written notice to
Employee, if Employee becomes permanently disabled. Permanent
disability shall be determined by Employer according to the
same standards applicable to the employees of Employer
generally under the disability benefits referred to in
paragraph 3(e) hereof.
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<PAGE> 3
c. Employer shall have the right to terminate Employee's
employment under this Agreement at any time (i) immediately
for "cause" (which shall mean for any action or inaction of
Employee which is adverse to Employer's interests, including,
without limitation, Employee's dishonesty, grossly negligent
misconduct, willful misconduct, disloyalty, act of bad faith,
neglect of duty or material breach of this Agreement or of any
Employer policy applicable to its employees generally), or
(ii) without cause upon five (5) days written notice to
Employee.
5. EFFECTS OF TERMINATION AND EXPIRATION.
a. In the event of automatic termination by reason of Employee's
death pursuant to paragraph 4(a), or by Employer by reason of
Employee's permanent disability pursuant to paragraph 4(b),
all of Employer's obligations under this Agreement shall end
except for Employer's obligations to pay Employee's Base
Salary and Bonus Compensation, if any, in each case earned and
accrued but unpaid to the date of death or permanent
disability. Employee shall also have the right to receive any
payments under the death or disability benefits, as the case
may be, provided to Employee pursuant to paragraph 3(e), if
any.
b. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), or upon the
expiration of the Employment Period, all of Employer's
obligations under this Agreement shall end except for its
obligations to pay Employee's Base Salary and Bonus
Compensation, if any, in each case earned and accrued but
unpaid to the date of termination (which, for purposes of this
paragraph 5(b) and paragraph 5(c) below, shall be five (5)
days after the date on which notification is provided by
Employer to Employee pursuant to paragraph 4(c)(ii)) or at the
expiration of the Employment Period, whichever the case may be
and, in the case of termination pursuant to paragraph
4(c)(ii), Employer's obligations under paragraph 5(c) of this
Agreement.
c. In the event Employer exercises its right of termination other
than for cause pursuant to paragraph 4(c)(ii), Employer shall
be obligated to pay Employee as severance pay, for the twelve
(12) month period following the date of such termination,
annualized compensation at a rate which shall be equal to the
Base Salary at such termination date. Such payments shall be
made in equal bi-weekly installments or at such other interval
as the Board or Employer's corresponding payroll policies
shall direct.
d. In the event Employer exercises its right of termination
pursuant to paragraph 4(c)(i) for cause, or Employee otherwise
leaves the employ of Employer prior to the expiration of the
Employment Period, all of Employer's obligations under this
Agreement shall end except for Employer's obligations to pay
Employee's Base Salary, if any, earned and accrued but unpaid
to the date of such termination or of the Employee otherwise
leaving Employer's employ.
6. COVENANT NOT TO COMPETE.
a. RESTRICTED ACTIVITIES--DURATION. Except as otherwise consented
to or approved by Employer's Board of Directors in writing,
Employee agrees that, in addition to being operative during
the Employment Period, the provisions of paragraphs 6(a)(i)
through (iii) hereof, inclusive, shall be operative for a
period of twelve (12) months after the later of (1) the date
Employee's employment with Employer (pursuant to this
Agreement or otherwise) is terminated or otherwise ceases, or
(2) the end of all severance payments, if any, which Employer
is obligated to make to Employee under paragraph 5(c) of this
Agreement or any other subsequent written agreement between
them, regardless of the time, manner or reason for the
termination or other cessation of such employment. During such
periods, Employee will not, directly or indirectly,
-3-
<PAGE> 4
acting alone or as a member of a partnership or as an owner,
director, officer, employee, manager, representative or
consultant of any corporation or other business entity:
i. Engage in any business which manufactures, sells,
distributes, services or supports products or services
of a type manufactured, sold, marketed, serviced or
supported, or in any other business in competition with
or adverse to the business that is conducted by
Employer, or which Employer is in the process of
developing and in or of which Employee participated or
has knowledge, at the time of the cessation of
Employee's employment with the Employer, in the United
States, Canada or any European, Asian, Pacific Rim or
other foreign country in which Employer then or
thereafter transacts business or is making a bona fide
attempt to do so;
ii. induce, request or attempt to influence any customer or
supplier of Employer to curtail or cancel their business
or prospective business with Employer or in any way
interfere with Employer's business relationships; or
iii. induce, solicit or assist or facilitate the inducement
or solicitation by any third person of any employee,
officer, agent or representative of Employer to
terminate his respective relationship with Employer or
in any way interfere with the Employer's employee,
officer, agent or representative relationships.
b. TOLLING; RELIEF OF OBLIGATIONS. In the event that Employee
breaches any provision of this paragraph 6, such violation (i)
shall toll the running of the twelve (12) month period set
forth in paragraph 6(a) from the date of commencement of such
violation until such violation ceases, and (ii) shall relieve
Employer of any obligations to Employee under this Agreement.
c. "BLUE PENCILING" OR MODIFICATION. If either the length of
time, geographic area or scope of restricted business activity
set forth in paragraph 6(a) is deemed unreasonably restrictive
or unreasonable in any other respect in any proceeding before
a court of competent jurisdiction, Employee and Employer agree
and consent to such court's modifying or reducing such
restriction(s) with respect, but only with respect, to that
jurisdiction to the extent deemed reasonable under the
circumstances then presented.
7. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
a. For purposes of this Agreement, "Confidential Information"
means all information or trade secrets of any type or
description belonging to Employer which are proprietary and
confidential to Employer and which are not publicly disclosed
or are only disclosed with restrictions. Without limiting the
generality of the foregoing, Confidential Information
includes: strategic and other plans for carrying on business;
cost data and other financial information; lists of customers,
employees, vendors and business partners and alliances;
manufacturing methods and processes; product research and
engineering data, drawings, designs and schematics; computer
programs, flow charts, routines, subroutines, translators,
compilers, operating systems and object and source codes;
specifications, inventions, know-how, calculations and
discoveries; any letters, papers, documents and instruments
disclosing or reflecting any of the foregoing; and all
information revealed to or acquired or created by Employee
during Employee's employment by Employer relating to any of
the foregoing or otherwise to Employer's past, current or
future business.
b. Employee acknowledges that the discharge of Employee's duties
under this Agreement will necessarily involve his access to
Confidential Information. Employee acknowledges that the
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<PAGE> 5
unauthorized use by him or disclosure by him of such
Confidential Information to third parties might cause
irreparable damage to Employer and Employer's business.
Accordingly, Employee agrees that at all times after the date
hereof he will not, without the prior written consent of
Employer's Board of Directors, copy, publish, disclose,
divulge to or discuss with any third party, nor use for his
own benefit or that of others any Confidential Information,
except in the normal conduct of his duties under this
Agreement, it being understood and acknowledged by Employee
that all Confidential Information created, compiled or
obtained by Employee or Employer, or furnished to Employee by
any person while Employee is associated with Employer, is and
shall be and remain Employer's exclusive property.
c. Promptly upon termination of his employment, irrespective of
the time or manner thereof or reason therefor, Employee agrees
to return and surrender to Employer all Confidential
Information copies thereof in any form which is in any manner
in his control or possession, as well as all other Employer
property.
8. RIGHTS. Employee acknowledges and agrees that any procedure, design
feature, schematic, invention, improvement, development, discovery,
know-how, concept, idea or the like (whether or not patentable,
registrable under copyright or trademark laws, or otherwise
protectable under similar laws) that Employee (whether individually
or jointly with any other person or persons) has since the inception
of his employment with Employer conceived of, suggested, made,
invented, developed or implemented, or may hereafter conceive of,
suggest, make, invent, develop or implement, during the course of
his service to Employer which relates in any way to the business of
Employer or to the general industry of which Employer is a part, all
physical embodiments and manifestations thereof, and all patent
rights, copyrights and trademarks (and applications therefor) and
similar protections thereof (all of the foregoing referred to as
"Work Product") are and shall be the sole, exclusive and absolute
property of Employer. All Work Product shall be deemed to be works
for hire for the benefit of Employer, and to the extent that any
Work Product may not constitute a work for hire, Employee hereby
assigns to Employer all right, title and interest in, to and under
such Work Product, including, without limitation, the right to
obtain such patents, copyright registrations, trademark
registrations or similar protections as Employer may desire to
obtain. Employee will immediately disclose all Work Product to
Employer and agrees, at anytime, upon Employer's request and without
additional compensation, to execute any documents and otherwise to
cooperate with Employer (including, without limitation, all lawful
testimony and sworn statements or other certifications as may be
appropriate) respecting the perfection of its right, title and
interest in, to and under such Work Product and in any litigation or
administrative or other proceeding or controversy in connection
therewith, all expenses incident thereto be borne by Employer.
9. INDUCEMENT; REMEDIES INADEQUATE.
a. The covenants made by Employee in favor of Employer under
paragraphs 6, 7 and 8 of this Agreement are being executed and
delivered by Employee in consideration of Employee's
employment with Employer and Employer's obligations hereunder
(including, without limitation, the Base Salary, the Bonus
Compensation and other benefits and payments provided for
herein). Employee further acknowledges that such covenants
were and have been conditions of his employment since the
inception of Employee's employment with Employer.
b. Employee has carefully considered, and has had adequate time
and opportunity to consult with his own counsel or other
advisors regarding the nature and extent of the restrictions
upon him, and the rights and remedies conferred upon Employer,
under paragraphs 6, 7 and 8 hereof, and hereby acknowledges
and agrees that such restrictions are reasonable in time,
territory and
-5-
<PAGE> 6
scope, are designed to eliminate competition which otherwise
would be unfair to Employer, do not stifle the inherent skill
and experience of Employee, would not operate as a bar to
Employee's sole means of support, are fully required to
protect the legitimate interests of Employer and do not confer
a benefit upon Employer disproportionate to the detriment to
Employee.
c. Employee acknowledges that the services to be rendered by him
to Employer as contemplated by this Agreement are special,
unique and of extraordinary character. Employee expressly
agrees and understand that the remedy at law for any breach by
him of paragraph 6, 7 or 8 of this Agreement will be
inadequate and that the damages flowing from such breach are
not readily susceptible to being measured in monetary terms.
Accordingly, upon adequate proof of Employee's violation of
any legally enforceable provision of paragraph 6, 7 or 8
hereof, Employer shall be entitled to immediate injunctive
relief, including, without limitation, a temporary order
restraining any threatened or further breach. In the event any
equitable proceedings are brought to enforce any provision of
paragraphs 6, 7 and 8 hereof, Employee agrees that he will not
raise in such proceedings any defense that Employer has an
adequate remedy at law, and Employee hereby waives any such
defense. Nothing in this Agreement shall be deemed to limit
Employer's remedies at law or in equity for any breach by
Employee of any of the provisions of paragraphs 6, 7 and 8
hereof which may be pursued or availed of by Employer. Without
limiting the generality of the immediately preceding sentence,
any covenant on Employee's part contained in paragraph 6, 7 or
8 hereof which may not be specifically enforceable shall
nevertheless, if breached, give rise to a cause of action for
monetary damages.
d. As used in paragraphs 6, 7 and 8 hereof and in this paragraph
9, the term "Employer" (other than with respect to the Board
of Directors) shall include, in addition to Employer, all
subsidiaries and other affiliates of Employer, whether so
related to Employer during Employee's employment with Employer
or at any time thereafter.
e. Subject only to such time limitations as may be expressly set
forth therein, the covenants and agreements made by Employee
in paragraphs 6, 7 and 8 hereof and this paragraph 9 shall
survive full payment by Employer to Employee of the amounts to
which Employee is entitled under this Agreement, the
expiration of the Employment Period and the expiration or
termination of this Agreement.
10. ASSIGNMENT OF EMPLOYEE'S RIGHTS. In no event shall Employer be
obligated to make any payment under this Agreement to any assignee
or creditor of Employee. Prior to the time provided for the making
of any payment under this Agreement, neither Employee nor his legal
representative shall have any right by way of anticipation or
otherwise to assign or otherwise dispose of any interest under this
Agreement.
11. RIGHT OF SET-OFF. Any payments to be made to Employee under this
Agreement shall be subject to offset by Employer for any claims for
damages, liabilities or expenses which it may have against Employee.
12. EMPLOYER'S OBLIGATIONS UNFUNDED. Except as to any benefits that may
be required to be funded under any benefit plan of Employer pursuant
to law or under any other written agreement, the obligations of
Employer under this Agreement are not funded, and Employer shall be
not required to deposit in escrow or otherwise set aside any moneys
in advance of the due date for payment thereof to Employee.
-6-
<PAGE> 7
13. NOTICES. Any notice to be given hereunder by Employer to Employee
shall be deemed to be given if delivered to Employee in person, or
if mailed to Employee, by certified mail, postage prepaid, return
receipt requested, at his address last shown on the records of
Employer, and any notice to be given by Employee to Employer shall
be deemed to be given if delivered in person or by mail, postage
prepaid, return receipt requested to the President and Chief
Executive Officer of Employer at Employer's principle executive
office, unless Employee or Employer shall have duly notified the
other parties in writing of a change of address. If mailed, notice
shall be deemed to have been given when deposited in the mail as set
forth above.
14. AMENDMENTS. This Agreement shall not be modified or discharged, in
whole or in part, except by an agreement in writing signed by the
parties hereto.
15. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to Employee's employment by
Employer from and after the Effective Date. The parties are not
relying on any other representation or understanding with respect
thereto, express or implied, oral or written. This Agreement
supersedes any prior employment agreement, written or oral, between
Employee and Employer.
16. CAPTIONS. The captions contained in this Agreement are for
convenience of reference only and do not affect the meaning of any
terms or provisions hereof.
17. GENDER AND NUMBER. Whenever the context may permit, any pronouns
used herein shall include the corresponding masculine, feminine and
neuter forms, and the singular form of any noun or pronoun,
including any terms defined herein, shall include the plural and
vice versa.
18. BINDING EFFECT. The rights and obligations of Employer hereunder
shall inure to the benefit of, and shall be binding upon, Employer
and its respective successors and assigns, and the rights and
obligations of Employee hereunder shall inure to the benefit of, and
shall be binding upon, Employee and his heirs, personal
representatives and estate.
19. SEVERABLE PROVISIONS. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be
illegal or otherwise unenforceable in any jurisdiction, in whole or
in part, the remaining provisions and any partially enforceable
provision shall be binding and enforceable to the extent enforceable
in such jurisdiction.
20. GOVERNING LAW. This Agreement shall be interpreted, construed, and
enforced in all respects in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
Effective Date.
TELXON CORPORATION EMPLOYEE
By: /s/ Frank E. Brick /s/ Dan R. Wipff
----------------------- ---------------------
Frank E. Brick Dan R. Wipff
President & Chief Executive Officer President & Chief Executive
Officer, Telxon Products
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<PAGE> 1
Exhibit 10.1.16
July 22, 1996
Norton Rose
19301 Shaker Boulevard
Shaker Heights, OH 44122
Dear Norton:
This will confirm the arrangements and the authorization of the
outside directors sitting as the Audit Committee of Telxon for you to act as
its delegate to the Management of Telxon in the following respects:
1. To work with senior management, including but not limited to Frank
Brick, Ken Haver and Gerry Gabriel, making available to them the experience you
bring as a former operating officer of and consultant to public, as well as
private, companies.
2. To analyze existing operating systems and processes with a view
toward assessing them for the Board and recommending improved systems and
processes, if necessary, to Management and the Board.
3. To assist Management in recruiting, training and integrating
additional operating Management personnel, if appropriate.
4. To provide the Audit Committee with meaningful and timely reports.
In this capacity, you will have no Management personnel reporting to
you, but Management will be requested to cooperate in every respect with you as
you pursue the above-recited goals and functions on behalf of the Audit
Committee.
You, in turn, will report only and directly to the Audit Committee and
the full Board.
In order to insure your complete independence, you are being engaged in
this role by the outside directors, again sitting as the Audit Committee, and
your compensation has been negotiated and agreed to by that Committee and is not
subject to any action by Management, other than to implement your compensation
payments as outlined below.
We are requesting that you set with Management the days and the times
for your involvement but that you agree to provide approximately sixty days per
annum, commencing July 1, 1996, through and terminating December 31, 1997, for a
total envisioned commitment of ninety working days on your part. In return, your
compensation would be at a rate of $3,500 per day, or a pro rata payment for
part days, together with any reasonable and approved expenses which you may
incur, including travel, telephone, fax, computer, automobile, etc. If any
Company benefits are available, this can be explored and mutually agreed upon,
such as health, accident, etc.
You have explained to us that in order to provide for the time,
commitment and scheduling which we are requesting, it will be necessary for you
to resign from or forego certain
<PAGE> 2
Norton Rose
July 22, 1996
Page -2-
other boards and consultative positions. As a consequence, and in recognition of
that as well as the importance which we place on this assignment, we are also
authorizing a severance package of $150,000 payable over a twelve month period
from January 1, 1998 through December 31, 1998.
If, for any reason, your services are terminated other than by reason
of your death, disability, voluntary withdrawal, or termination for cause
(generally defined as dishonesty, gross neglect or dereliction of
responsibilities), you will receive a lump sum payment of the remaining unpaid
balance of your engagement compensation, plus your one-year severance package.
All of the above functions and compensation are to be in addition to
and totally separate and distinct from your ongoing function and compensation as
a member of the Board of Directors and various Board committees of Telxon. In
this additional capacity, you of course will continue to be entitled to and
covered by all protections otherwise afforded you as a Telxon director,
including but not limited to appropriate corporate indemnification and insurance
coverage.
Hopefully, this recites sufficiently the essence of our agreement; if
so, will you please indicate such by signing and returning the copy enclosed for
that purpose.
THE TELXON CORPORATION
AUDIT COMMITTEE
/s/ Richard Bogomolny
---------------------------------
Richard Bogomolny, Chairman
/s/ Raj Reddy
---------------------------------
Raj Reddy
/s/ Robert A. Goodman
---------------------------------
Robert A. Goodman
Agreed to:
/s/ Norton Rose
---------------------------------
Norton Rose
July 23, 1996
<PAGE> 1
Exhibit 10.8
STOCK PURCHASE AGREEMENT
------------------------
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of this 30th day of March, 1996, by and among META HOLDING CORPORATION,
a Delaware corporation ("Meta"), and the individuals identified in the attached
EXHIBIT A hereto (individually a "Purchaser" and collectively the
"Purchasers").
WHEREAS, on September 22, 1995, the Certificate of Incorporation of
Metanetics Corporation ("Metanetics") (then known as New Meta Licensing
Corporation) was filed by the Secretary of State for the State of Delaware (the
"Certificate");
WHEREAS, pursuant to the Certificate the authorized capital stock of
Metanetics consists solely of Ten Million (10,000,000) shares of Voting Common
Stock $.01 par value (the "Voting Common"), Three Million (3,000,000) shares of
Non-Voting Common Stock $.01 par value and Three Million (3,000,000) shares of
Preferred Stock $.01 par value;
WHEREAS, the Purchasers are officers, directors or advisors of Meta or
Metanetics, or affiliate corporations of one or the other; and
WHEREAS, the Board of Directors of Meta has determined that it will be
in the best interests of Meta and its stockholders if Meta reduces its holdings
in Metanetics by selling a portion of its shares of Voting Common to the
Purchasers in the amounts set forth in EXHIBIT A.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants and agreements hereinafter
set forth, the parties, intending to be legally and equitably bound, hereby
agree as follows:
1. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions
hereof, Meta shall sell, transfer and assign to each Purchaser, and each
Purchaser shall purchase and acquire from Meta, the number of shares of Voting
Common indicated in EXHIBIT A (the "Purchased Shares"), for a purchase price of
$1.0386 per share (each Purchaser's aggregate purchase price is set forth in
EXHIBIT A and is referred to as the "Purchase Price"). The Purchase Price shall
be payable by each Purchaser to Meta at the Closing (as hereinafter defined)
through its delivery to Meta of good funds.
2. REPRESENTATIONS AND WARRANTIES.
(a) Meta hereby represents and warrants to each Purchaser (with
respect to and only with respect to the shares of Voting Common hereby being
sold by Meta to him), respectively, that:
<PAGE> 2
(i) The execution, delivery and performance of this Agreement
does not and will not violate, conflict with or result in the breach
of any provision of (a) any material contract, agreement or instrument
to which it is a party or by or to which it or its assets or
properties may be bound or subject; or (b) any order, judgment,
injunction, award, decree, statute, law, rule or regulation of any
jurisdiction applicable to it. Such execution, delivery and
performance will not result in the creation of any lien or encumbrance
on the Purchased Shares.
(ii) There are no outstanding orders, judgments, injunctions,
awards or decrees of any court, arbitrator or governmental or
regulatory body against it. There are no actions, suits or claims or
legal, administrative or arbitral proceedings or investigations
(whether or not the defense thereof or liabilities in respect thereof
are covered by insurance) pending or, to its knowledge, threatened,
against or involving it which could adversely effect its ability to
consummate the transactions contemplated hereby.
(iii) Upon its execution and delivery, this Agreement will be
the valid and binding obligation of Meta, enforceable in accordance
with its terms, except (A) as limited by applicable bankruptcy,
insolvency, organization, moratorium or other laws of general
application affecting enforcement of creditors' rights; and (B)
general principles of equity that restrict the availability of
equitable remedies.
(iv) It is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with all
requisite corporate power and lawful authority to own, lease and
operate its assets and properties and to carry on its business in the
manner presently conducted or contemplated by it.
(v) The execution, delivery and performance of this Agreement
does not and will not violate, conflict with or result in the breach
of any provision of its Certificate of Incorporation or By-laws, as
either may be amended.
(vi) No consent, action, approval, order or authorization, or
declaration of or registration or filing with, any federal, state,
local or governmental agency or authority is required to be obtained
or made by Meta in connection with (a) the execution, delivery or
performance by Meta of this Agreement and of the other instruments,
agreements and documents required or contemplated hereunder; and (b)
the consummation of the transactions contemplated hereby and thereby.
(vii) Metanetics is authorized to issue Ten Million
(10,000,000) shares of Voting Common Stock $.01 par value, Three
Million (3,000,000) shares of Non-Voting Common Stock $.01 par value
and Three Million (3,000,000) shares of Preferred Stock $.01 par
value, of which Four Million Eight Hundred Thirteen Thousand Nine
Hundred Fifty Three (4,813,953) shares of Voting Common Stock are
issued and outstanding as of the date hereof, immediately prior to the
consummation of the transactions hereunder. There are no other class
of capital stock authorized, issued or outstanding. The
2
<PAGE> 3
Purchased Shares shall when issued be validly issued, fully paid, and
nonassessable, and all such shares have been issued in compliance with
all applicable federal and state securities laws.
(b) Each Purchaser hereby severally represents and warrants as to
himself to Meta as follows:
(i) Purchaser has all necessary power and authority under all
applicable provisions of law to execute and deliver this Agreement and
to carry out Purchaser's obligations hereunder. All actions by
Purchaser required for the lawful execution and deliver of this
Agreement have been effectively taken prior to the Closing. Upon its
execution and delivery, this Agreement will be the valid and binding
obligation of Purchaser, enforceable in accordance with its terms,
except (A) as limited by applicable bankruptcy, insolvency,
organization, moratorium or other laws of general application
affecting enforcement of creditors' rights; and (B) general principles
of equity that restrict the availability of equitable remedies.
(ii) All consents, approvals, orders, authorizations,
registrations, qualifications, designations, declarations or filings
with any governmental or banking authority on the part of Purchaser or
his spouse required in connection with the consummation of the
transactions contemplated in this Agreement have been obtained prior
to and shall be effective as of the Closing.
(iii) Purchaser understands that the Purchased Shares
purchased by him hereunder have not been registered under the
Securities Act of 1993, as amended (the "Securities Act"). Purchaser
also understands that the shares are being offered and sold pursuant
to exemptions from registration contained in the Securities Act and
applicable state securities laws based in part upon Purchaser's
representations contained in this Agreement.
(iv) Purchaser understands and agrees that he bears the
economic risk of this investment indefinitely unless and until the
shares acquired hereunder are registered pursuant to the Securities
Act, or an exemption from registration is available. Purchaser
understands that Metanetics has no present intention of registering
the shares being sold hereunder or any shares of its capital stock.
Purchaser also understands that there is no assurance that any
exemption from registration under the Securities Act will be available
and that, even if available, such exemption may not allow Purchaser to
transfer all or any portion of such shares.
(v) Purchaser is acquiring the Purchased Shares for
Purchaser's own account for investment only, and not with a view
toward their distribution.
(vi) Purchaser represents that by reason of his business or
financial experience, Purchaser has the capacity to protect his own
interests in connection with the transactions contemplated in this
Agreement and can bear the risk of such investment without
3
<PAGE> 4
materially impairing his financial condition. Further, Purchaser is
aware of no publication of any advertisement in connection with the
transactions contemplated in this Agreement.
(vii) Purchaser, as an officer, director or advisor of
Metanetics, or of Metanetics' parent corporation, is fully aware of
all material information relating to Metanetics, including its
business and financial affairs, and has had full and free access to
all such information. Purchaser has had an opportunity to discuss
Metanetics' business, management and financial affairs with directors,
officers and management of Metanetics and has had the opportunity to
review Metanetics' operations and facilities. Purchaser also has had
the opportunity to ask questions of and receive answers from
Metanetics and its management regarding the transactions contemplated
hereby.
(viii) Purchaser is an "accredited investor" as that term is
defined in Regulation D under the Securities Act. Specifically,
Purchaser meets one or more of the following definitions of an
"accredited investor":
(A) A natural person whose net worth, either
individually or jointly with such person's spouse, at the
same time of the Closing, exceeds $1,000,000;
(B) A natural person who had an individual income in
excess of $200,000 or joint income with that person's spouse
in excess of $300,000 in 1994 and 1995, and reasonably
expects to have individual income reaching the same level in
1996;
(C) A director or executive officer of Metanetics;
(D) A trust, with total assets in excess of
$5,000,000, not formed for the specific purpose of acquiring
the shares, whose purchase is directed by a sophisticated
person who has such knowledge and experience in financial and
business matters that such person is capable of evaluating
the merits and risks involved in purchasing the shares
hereunder;
(E) A corporation, not formed for the specific
purpose of acquiring shares the Purchased Shares, with assets
in excess of $5,000,000.
For purposes of the above definitions of "accredited investor," the
term "net worth" means the excess of total assets over total
liabilities. In calculating net worth, Purchaser may include the
estimated fair market value of the Purchaser's principal residence as
an asset. In determining individual "income," Purchaser should add to
Purchaser's individual adjusted gross income (exclusive of any spousal
income) any amounts attributable to tax exempt income received, losses
claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to an IRA or Keogh retirement
plan, alimony payments, and any amount by which income from long-term
4
<PAGE> 5
capital gains has been reduced in arriving at adjusted gross income,
and should subtract any unrealized capital gain.
(ix) Purchaser's address as set forth on EXHIBIT A is the
address of Purchaser's primary residence. Purchaser's address as set
forth on EXHIBIT A is the same state in which Purchaser received an
offer of sale of the Purchased Shares and in which Purchaser is
entering into this Agreement.
3. CLOSING. The closing of the transactions contemplated hereunder
(the "Closing") shall be held at such times and places as the parties may
agree, and shall continue until all of the Purchasers have consummated such
transactions; provided that the Closing shall be consummated no later than
March 31, 1996.
4. INDEMNIFICATION. Notwithstanding anything to the contrary in this
Agreement, each of the Purchasers severally and Meta shall indemnify and hold
harmless the other against and from any and all losses, fees, costs, expenses,
damages, obligations, liabilities and claims (including, without limitation,
any and all fees, costs and expenses whatsoever reasonably incurred by it or
its counsel in investigating, preparing for, defending against, or providing
evidence, producing documents or taking any other action in respect of, any
threatened or asserted claim) arising directly or indirectly out of: (a) any
failure of any representation or warranty of such party to be correct and
complete when made, or (b) any failure by such party to perform and observe
fully all obligations and conditions to be performed or observed by that party
under this Agreement. Notwithstanding the foregoing or anything herein to the
contrary, no claim for indemnification may be asserted after March 30, 1997.
5. CONDITIONS TO EACH PURCHASER'S OBLIGATIONS. The obligation of each
Purchaser to purchase the Purchased Shares are subject to the satisfaction, at
or prior to the Closing, of the following conditions, any one or more of which
may be waived by such Purchaser:
(a) The representations and warranties made by Meta in
Section 2(a) hereof shall be true and correct in all material respects
at the Closing with the same force and effect as if they had been made
as of the date of the Closing, and Meta shall have performed all
obligations and conditions herein required to be performed or observed
by it on or prior to Closing.
(b) At the time of Closing, the sale of the Purchased Shares
shall be legally permitted by all laws and regulations to which the
Purchasers and Meta are subject.
(c) Meta shall have obtained any and all consents, permits,
and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement (except for such as
properly may be obtained subsequent to the Closing).
(d) Each Purchaser or his counsel has had the opportunity to
review copies of all corporate documents of Meta as the Purchaser
reasonably may have requested.
5
<PAGE> 6
(e) Meta shall have delivered to Purchaser a certificate,
executed by an officer of Meta, dated the date of Closing, to the
effect that the conditions specified in subparagraphs (a) through (c)
of this Section 5 have been satisfied.
(f) All corporate and other proceedings in connection with
the transactions contemplated at the Closing hereby and all documents
and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers, and the
Purchasers shall have received all such counterpart originals or
certified or other copies of such documents as they reasonably may
request.
6. CONDITIONS TO META'S OBLIGATIONS. Meta's obligation to sell the
Purchased Shares at Closing is subject to the satisfaction, on or prior to
Closing, of the following conditions, any one or more of which may be waived by
it:
(a) The representations and warranties made by each Purchaser
in Section 2(b) hereof shall be true and correct in all material
respects at the date of the Closing, with the same force and effect as
if they had been made on and as of said date, and each Purchaser shall
have performed all obligations and conditions herein required to be
performed or observed by him on or prior to Closing.
(b) At the time of Closing, the sale of the Purchased Shares
shall be legally permitted by all laws and regulations to which the
Purchasers and Meta are subject.
(c) Each Purchaser shall have obtained any and all consents,
permits, and waivers necessary or appropriate for consummation of the
transactions contemplated by this Agreement (except for such as
properly may be obtained subsequent to the Closing).
(d) Each Purchaser shall have performed and complied with all
agreements and conditions herein required to be performed or complied
with by each Purchaser on or before the Closing.
(e) Each Purchaser shall have delivered to Meta (i) a
certificate, executed by him, dated the date of Closing, to the effect
that the conditions specified in subparagraphs (a) through (d) of this
Section 6, and in subparagraph (d) of Section 5, have been satisfied
and (ii) an Investment Letter in the form attached hereto as EXHIBIT
B, executed by him.
7. [INTENTIONALLY OMITTED]
8. ENTIRE AGREEMENT. This Agreement and any other writing specifically
identified herein or specifically contemplated hereby, taken together, contain
the entire agreement among the parties hereto with respect to Meta's sale and
each Purchaser's acquisition of shares hereunder and supersedes all previous
written or oral negotiations, commitments and writings with respect thereto.
6
<PAGE> 7
9. HEADINGS. The paragraph headings used herein are for convenience of
reference only and do not form a part hereof and do not in any way modify,
interpret or set forth the intentions of the parties.
10. SURVIVAL. All agreements, obligations, warranties, and
representations under this Agreement shall survive the Closing and any
investigations made by the parties until March 30, 1997.
11. GENDER AND NUMBER. When permitted by the context, each pronoun
used in this Agreement includes the same pronoun in other genders or numbers,
and each noun used in this Agreement, including each capitalized term defined
herein, includes the same noun in other numbers.
12. SUCCESSORS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective heirs, personal
representatives, successors, and assigns of each party to this Agreement.
13. NO THIRD-PARTY BENEFIT. This Agreement is intended for the
exclusive benefit of the parties to this Agreement and their respective
successors and assigns, and nothing contained in this Agreement shall be
construed as creating any rights or benefits in or to any third party.
14. GOVERNING LAW. All questions concerning the validity or meaning of
this Agreement or relating to the rights and obligations of the parties with
respect to performance under this Agreement shall be construed and resolved
under the laws of the State of Ohio, without regard to conflict of laws
principals.
15. SEVERABILITY. The intention of the parties to this Agreement is to
comply fully with all laws and public policies, and this Agreement shall be
construed consistently with all laws and public policies to the extent
possible. If any court of competent jurisdiction determines it is impossible to
construe any provision of this Agreement consistently with any law or public
policy and consequently holds that provision to be invalid, such holding shall
in no way effect the validity of the other provisions of this Agreement, which
shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
7
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
META HOLDING CORPORATION
By: s/ David B. Swank
-------------------------------
Its: President
-------------------------------
8
<PAGE> 1
Exhibit 10.10
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is made and entered
into as of March 31, 1997 (the "Effective Date"), by and between TELXON
CORPORATION, a Delaware corporation ("Telxon"), and TELANTIS CAPITAL, INC., a
Florida corporation ("Purchaser").
WHEREAS, Robert F. Meyerson ("Meyerson") is the sole shareholder of
Purchaser.
WHEREAS, Meyerson has served Telxon in various capacities since its
founding, and most recently as its Chairman and Chief Executive Officer;
WHEREAS, on February 26, 1997, Meyerson announced his retirement from
Telxon;
WHEREAS, while serving as an officer of Telxon, Meyerson instituted an
aggressive program whereby Telxon invested in and acquired various technology
companies, in order to provide Telxon with a competitive technology base and to
enhance the value of Telxon through the appreciation of the value of these
subsidiaries and investments;
WHEREAS, one of these successful investments was Telesystems SLW Inc.,
which has become Telxon's wireless networking subsidiary, Aironet Wireless
Communications, Inc. ("Aironet");
WHEREAS, Telxon's outside Directors determined that it would be in the
best interests of Telxon to permit Meyerson, at his election, to acquire up to
ten percent (10%) of Telxon's holdings in Aironet, at a per share price equal
to the current fair market value of the purchased shares;
WHEREAS, Meyerson now desires to purchase, through Purchaser, such
shares of Aironet;
WHEREAS, there were and will be 8,085,000 shares of Aironet Voting
Common Stock issued and outstanding immediately prior to consummating the
transactions contemplated hereunder; and
WHEREAS, the last valuation of Aironet performed by an independent
third party investment banking firm, Houlihan Lokey Howard & Zukin, placed the
fair market value of Aironet's common shares at $1.86 per share.
NOW, THEREFORE, in consideration of the foregoing premises and the
respective representations, warranties, covenants and agreements hereinafter
set forth, the parties, intending to be legally and equitably bound, hereby
agree as follows:
1. SALE AND PURCHASE OF SHARES. Subject to the terms and conditions
hereof, Telxon shall sell, transfer and assign to Purchaser, at Purchaser's
Florida address, and Purchaser shall
<PAGE> 2
purchase and acquire from Telxon, 808,500 shares of Aironet Voting Common Stock
(the "Purchased Shares"), for a purchase price of $1.86 per share for an
aggregate purchase price of $1,503,810 (the "Purchase Price"). The Purchase
Price shall be payable by Purchaser through its delivery to Telxon of a
Promissory Note in the form attached hereto.
2. PURCHASER REPRESENTATIONS AND WARRANTIES.
2.1 Purchaser understands that the Purchased Shares have not
been registered under the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser also understands that the Purchased
Shares are being offered and sold pursuant to exemptions from
registration contained in the Securities Act and applicable state
securities laws based in part upon Purchaser's representations
contained in this Agreement.
2.2 Purchaser understands and agrees that it bears the
economic risk of this investment indefinitely unless and until the
Purchased Shares acquired hereunder are registered pursuant to the
Securities Act, or an exemption from registration is available.
Purchaser understands that Telxon has no present intention of
registering the shares being sold hereunder. Purchaser also
understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even
if available, such exemption may not allow Purchaser to transfer all
or any portion of such shares.
2.3 Purchaser is acquiring the Purchased Shares for
Purchaser's own account for investment only, and not with a view
toward their distribution.
2.4 Purchaser represents that by reason of Meyerson's
business or financial experience, Purchaser has the capacity to
protect its own interests in connection with the transactions
contemplated in this Agreement and can bear the risk of such
investment without materially impairing its or Meyerson's financial
condition. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in this
Agreement.
2.5 As the former Chairman and Chief Executive Officer of
Telxon, Aironet's parent corporation, Meyerson is fully aware of all
material information relating to Aironet, including its business and
financial affairs, and has had full and free access to all such
information. Meyerson has had an opportunity to discuss Aironet's
business, management and financial affairs with directors, officers
and management of Aironet and Telxon and has had the opportunity to
review Aironet's operations and facilities. Meyerson also has had the
opportunity to his satisfaction to ask questions of and receive
answers from Telxon and Aironet and its management regarding the
transactions contemplated hereby.
2.6 Purchaser is an "accredited investor" as that term is
defined in Regulation D under the Securities Act; Meyerson, its sole
shareholder is a natural person whose net worth, either individually
or jointly with his spouse, at the same time of the Closing (defined
below), exceeds $1,000,000, or is a natural person who had an
individual income in excess of $200,000 or joint income with his
spouse in excess of $300,000 in 1995 and 1996, and reasonably expects
to have individual income reaching the same level
2
<PAGE> 3
in 1997. In calculating net worth, Meyerson may include the estimated
fair market value of the Meyerson's principal residence as an asset.
In determining individual "income," Meyerson should add to Meyerson's
individual adjusted gross income (exclusive of any spousal income) any
amounts attributable to tax exempt income received, losses claimed as
a limited partner in any limited partnership, deductions claimed for
depletion, contributions to an IRA or Keogh retirement plan, alimony
payments, and any amount by which income from long-term capital gains
has been reduced in arriving at adjusted gross income, and should
subtract any unrealized capital gain.
3. CLOSING. The closing of the transactions contemplated hereunder
(the "Closing") shall be held at such time and place as the parties may agree.
4. CONDITIONS TO TELXON'S OBLIGATIONS. Telxon's obligation to sell the
Purchased Shares at Closing is subject to the satisfaction, on or prior to
Closing, of the following conditions, any one or more of which may be waived by
it:
4.1 The representations and warranties made by Purchaser in
Section 2 hereof shall be true and correct in all material respects at
the date of the Closing, with the same force and effect as if they had
been made on and as of said date, and Purchaser shall have performed
all obligations and conditions herein required to be performed or
observed by him on or prior to Closing; and
4.2 At the time of Closing, the sale of the Purchased Shares
shall be legally permitted by all laws and regulations to which
Purchaser and Telxon are subject.
5. ENTIRE AGREEMENT. This Agreement and any other writing specifically
identified herein or specifically contemplated hereby, taken together, contain
the entire agreement among the parties hereto with respect to Telxon's sale and
Purchaser's acquisition of shares hereunder and supersedes all previous written
or oral negotiations, commitments and writings with respect thereto.
6. HEADINGS. The paragraph headings used herein are for convenience of
reference only and do not form a part hereof and do not in any way modify,
interpret or set forth the intentions of the parties.
7. SURVIVAL. All agreements, obligations, warranties, and
representations under this Agreement shall survive the Closing and any
investigations made by the parties until March 31, 1998.
8. GENDER AND NUMBER. When permitted by the context, each pronoun used
in this Agreement includes the same pronoun in other genders or numbers, and
each noun used in this Agreement, including each capitalized term defined
herein, includes the same noun in other numbers.
9. SUCCESSORS. This Agreement shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective heirs, personal
representatives, successors, and
3
<PAGE> 4
assigns of each party to this Agreement. Notwithstanding the foregoing, this
Agreement may not be assigned by either party.
10. NO THIRD-PARTY BENEFIT. This Agreement is intended for the
exclusive benefit of the parties to this Agreement and their respective
successors and assigns, and nothing contained in this Agreement shall be
construed as creating any rights or benefits in or to any third party.
11. GOVERNING LAW. All questions concerning the validity or meaning of
this Agreement or relating to the rights and obligations of the parties with
respect to performance under this Agreement shall be construed and resolved
under the laws of the State of Ohio, without regard to conflict of laws
principles.
12. SEVERABILITY. The intention of the parties to this Agreement is to
comply fully with all laws and public policies, and this Agreement shall be
construed consistently with all laws and public policies to the extent
possible. If any court of competent jurisdiction determines that it is
impossible to construe any provision of this Agreement consistently with any
law or public policy and consequently holds that provision to be invalid, such
holding shall in no way effect the validity of the other provisions of this
Agreement, which shall remain in full force and effect.
13. COUNTERPARTS. This Agreement may be executed by the parties hereto
in separate counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one and the
same instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
14. STOCKHOLDERS AGREEMENT. At such time as Aironet and its
stockholders enter into a stockholders agreement, Purchaser will be made a
party to that agreement and the Purchased Shares will be made subject to that
agreement. Until such a stockholders agreement is entered into (but not after),
Purchaser has standard rights to have the Purchased Shares included in any
registration statement filed by Aironet under the Securities Act in connection
with its initial firm commitment underwritten public offering of its common
stock ("IPO"). Further, until an IPO, Purchaser may subscribe for and purchase,
at fair market value and on standard terms and conditions, newly issued shares
of Aironet stock from Aironet, in an amount that prevents Purchaser's holdings
in Aironet to fall below 10% of Aironet's issued and outstanding shares.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the day and year first above written.
Telxon Corporation
By: /s/ Kenneth W. Haver
----------------------------------
Its: Senior Vice President & Chief
Financial Officer
--------------------------------
Telantis Capital, Inc.
By: /s/ Adam Meyerson
----------------------------------
Its: President
--------------------------------
For the purposes of Section 14 only, Aironet has caused this Agreement
to be duly executed as of the day and year first above written.
Aironet Wireless Communications, Inc.
By: /s/ Kenneth W. Haver
----------------------------------
Its: Treasurer
--------------------------------
5
<PAGE> 1
Exhibit 11
----------
TELXON CORPORATION
COMPUTATION OF COMMON SHARES OUTSTANDING
AND EARNINGS PER SHARE
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net (loss) income applicable to common
shares $ (7,059) $ 16,521 $ 9,018
======== ======== ========
Weighted average common shares outstand-
ing for the year 16,062 16,490 15,909
======== ======== ========
(Loss) earnings per common share:
On the weighted average common
shares outstanding for the year* $ (.44) $ 1.00 $ .57
</TABLE>
* 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 Debentures were omitted from the fully
diluted calculation due to their anti-dilutive effect.
<PAGE> 1
<TABLE>
<CAPTION>
Exhibit 21
----------
SUBSIDIARIES OF THE REGISTRANT
------------------------------
Name Jurisdiction of Incorporation
- ---- -----------------------------
<S> <C>
Aironet Canada Inc. Ontario, Canada
Aironet Canada Limited Ontario, Canada
Aironet S.A. Belgium
Aironet International Limited United Kingdom
Aironet Wireless Communications, Inc. Delaware
Meta Holding Corporation Delaware
Metanetics Corporation Delaware
N.V. Telxon Belgium S.A. Belgium
PenRight! Corporation Delaware
Productos y Sevicios de Telxon, S.A. de C.V. Mexico
PTC Airco, Inc. Delaware
Teletransaction, Inc. Delaware
Telxon Australia Pty., Ltd. Australia
Telxon Canada Corporation Ltd. Ontario, Canada
Telxon Corporation Systems Espana, S.A. Spain
Telxon Data Systems A.G. Switzerland
Telxon France S.A. France
Telxon Foreign Sales Corporation U.S. Virgin Islands
Telxon International Procurement Services, Inc. Delaware
Telxon Italia S.r.l. Italy
Telxon Japan Ltd. Japan
Telxon Limited United Kingdom
Telxon mde GMBH Germany
Telxon Products, Inc. Delaware
Telxon Trading Co., Inc. Delaware
The Retail Technology Group, Inc. Delaware
TLXITX Corporation Washington
Virtual Vision, Inc. Delaware
</TABLE>
<PAGE> 1
Exhibit 23
----------
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We consent to the incorporation by reference in the Prospectus constituting part
of this Registration Statement of Telxon Corporation and Subsidiaries on Form
S-8 (Nos.33-16939, 33-32600, 33-43314, 33-43318, 33-56205, 33-62957, 333-00449,
333-01189) of our report, dated June 27, 1997, on our audits of the consolidated
financial statements and financial statement schedule of Telxon Corporation and
Subsidiaries, as of March 31, 1997 and 1996, and for each of the three years in
the period ended March 31, 1997, appearing on page 42 of the Form 10-K.
/s/ COOPERS & LYBRAND L.L.P.
Akron, Ohio
June 27, 1997
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
TELXON CORPORATION
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned Directors
of Telxon Corporation, a Delaware corporation (the "Company"), does hereby
make, constitute and appoint Frank E. Brick, Kenneth W. Haver, Gary L. Grand
and Glenn S. Hansen his true and lawful attorneys-in-fact and agents, each with
full power to act alone without any other and of substitution and
resubstitution, to prepare or cause to be prepared, to execute for and on his
behalf and in his name in his capacity as a Director of the Company, and to
deliver and file or cause to be delivered and filed with the Securities and
Exchange Commission (the "Commission") the Company's Annual Report on Form 10-K
for the fiscal year ended March 31, 1997, together with any amendments and any
exhibits and other documents in support thereof or supplemental thereto and any
and all other documents, reports and instruments which said attorneys-in-fact
and agents, or any of them, may deem necessary to enable the Company to comply
with the Securities Exchange Act of 1934, as amended, and the rules,
regulations and requirements of the Commission pursuant thereto, hereby
granting to said attorneys-in-fact and agents and each of them full power and
authority to do and perform each and every act and thing whatsoever as said
attorneys-in-fact and agents may deem necessary or advisable to carry out fully
the intent of the foregoing as the undersigned might or could do personally or
in the capacity as aforesaid, hereby ratifying and confirming all acts and
things which said attorneys-in-fact and agents may do or cause to be done by
virtue of these presents.
IN WITNESS WHEREOF, the undersigned have subscribed this instrument
effective as of June 22, 1997.
/s/ Richard J. Bogomolny /s/ Robert A. Goodman
----------------------------- ---------------------------
Richard J. Bogomolny, Director Robert A. Goodman, Director
/s/ Frank E. Brick /s/ Raj Reddy
----------------------------- ---------------------------
Frank E. Brick, Director Raj Reddy, Director
/s/ John H. Cribb /s/ Norton W. Rose
----------------------------- ---------------------------
John H. Cribb, Director Norton W. Rose, Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 45,386
<SECURITIES> 0
<RECEIVABLES> 129,867
<ALLOWANCES> 1,596
<INVENTORY> 84,499
<CURRENT-ASSETS> 270,112
<PP&E> 129,400
<DEPRECIATION> 83,822
<TOTAL-ASSETS> 361,784
<CURRENT-LIABILITIES> 101,054
<BONDS> 108,192
<COMMON> 162
0
0
<OTHER-SE> 146,539
<TOTAL-LIABILITY-AND-EQUITY> 361,784
<SALES> 391,406
<TOTAL-REVENUES> 466,012
<CGS> 266,624
<TOTAL-COSTS> 313,872
<OTHER-EXPENSES> 185,990
<LOSS-PROVISION> 378
<INTEREST-EXPENSE> 6,567
<INCOME-PRETAX> (5,691)
<INCOME-TAX> 1,368
<INCOME-CONTINUING> (7,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,059)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
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