<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
for the transition period from __________to __________
Commission file number 0-11402
TELXON CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 74-1666060
- - ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
3330 West Market Street, Akron, Ohio 44333
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(330) 664-1000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ]. No [ ].
At September 30, 1998, there were 16,124,297 outstanding shares of the
Registrant's $.01 par value Common Stock.
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TELXON CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1: Consolidated Financial Statements
Balance Sheet.................................................................. 3
Statement of Operations........................................................ 4
Statement of Cash Flows........................................................ 5
Notes to Consolidated Financial Statements..................................... 6-10
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................ 11-19
PART II. OTHER INFORMATION:
Item 1: Legal Proceedings......................................................................... 20
Item 4: Submission of Matters to a Vote of Security Holders....................................... 20
Item 6: Exhibits and Reports on Form 8-K.......................................................... 20-27
</TABLE>
All Items of Form 10-Q other than those listed above have been omitted as
inapplicable.
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1: CONSOLIDATED FINANCIAL STATEMENTS
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands except per share amounts)
<TABLE>
<CAPTION>
September 30, March 31,
1998 1998
------------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash (including cash equivalents of $12,000 and
$6,778) ................................................ $ 37,586 $ 27,500
Accounts receivable, net of allowance for
doubtful accounts of $1,203 and $1,142 ................. 114,140 125,739
Notes and other accounts receivable ...................... 18,970 22,949
Inventories .............................................. 104,336 108,178
Prepaid expenses and other ............................... 14,337 11,307
--------- ---------
Total current assets .................................. 289,369 295,673
Property and equipment, net ................................ 62,936 52,108
Intangibles and other assets, net .......................... 47,563 42,758
--------- ---------
Total ................................................. $ 399,868 $ 390,539
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable ............................................ $ 17,580 $ 3,000
Capital lease obligations due within one year ............ 855 968
Accounts payable ......................................... 50,726 58,634
Income taxes payable ..................................... 2,623 3,390
Accrued liabilities ...................................... 39,720 41,034
--------- ---------
Total current liabilities ............................. 111,504 107,026
Capital lease obligations .................................. 1,923 1,876
Convertible subordinated notes and debentures .............. 106,913 107,224
Other long-term liabilities ................................ 6,942 6,897
--------- ---------
Total liabilities ..................................... 227,282 223,023
Minority interest .......................................... 2,811 2,791
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, 16,234 and 16,219 shares issued ..... 162 162
Additional paid-in capital ............................... 88,369 87,994
Retained earnings ........................................ 87,712 85,053
Equity adjustment for foreign currency translation ....... (4,294) (4,929)
Unearned compensation relating to restricted stock awards (344) (493)
Treasury stock; 110 and 162 shares of common stock at cost (1,830) (3,062)
--------- ---------
Total stockholders' equity ............................ 169,775 164,725
--------- ---------
Commitments and contingencies .............................. -- --
--------- ---------
Total ................................................. $ 399,868 $ 390,539
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
3
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TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended September 30, Ended September 30,
1998 1997 1998 1997
--------- --------- --------- --------
<S> <C> <C> <C> <C>
Revenues:
Product, net .............................. $ 103,133 $ 91,138 $ 197,210 $ 177,829
Customer service, net ..................... 21,236 19,182 42,206 37,404
--------- --------- --------- ---------
Total net revenues ............... 124,369 110,320 239,416 215,233
Cost of revenues:
Product ................................... 62,411 54,276 119,722 106,836
Customer service .......................... 13,502 12,336 26,327 23,462
--------- --------- --------- ---------
Total cost of revenues ........... 75,913 66,612 146,049 130,298
--------- --------- --------- ---------
Gross profit .............................. 48,456 43,708 93,367 84,935
Operating expenses:
Selling expenses .......................... 20,317 18,677 41,678 36,776
Product development and engineering
expenses ............................. 9,261 9,525 18,191 18,651
General and administrative expenses ....... 10,425 9,843 19,862 19,547
--------- --------- --------- ---------
Total operating expenses before
other operating items............ 40,003 38,045 79,731 74,974
--------- --------- --------- ---------
Other operating items:
Take-over defense costs ................... 1,830 -- 3,579 --
Charge related to transaction with business
partner ................................... -- -- 1,950 --
--------- --------- --------- ---------
Total other operating items ...... 1,830 -- 5,529 --
--------- --------- --------- ---------
Income from operations ........... 6,623 5,663 8,107 9,961
Interest income ................................ 164 420 343 917
Interest expense ............................... (2,617) (1,811) (4,329) (3,602)
Other non-operating (expense) income, net ...... -- (7) 460 (165)
--------- --------- --------- ---------
Income before income taxes ....... 4,170 4,265 4,581 7,111
Provision for income taxes ..................... 1,672 1,877 1,837 3,129
--------- --------- --------- ---------
Net income ....................... $ 2,498 $ 2,388 $ 2,744 $ 3,982
========= ========= ========= =========
Net income per common share:
Basic ............... $ .16 $ .15 $ .17 $ .25
========= ========= ========= =========
Diluted ............. $ .15 $ .15 $ .16 $ .25
========= ========= ========= =========
Average number of common shares outstanding:
Basic ............... 16,065 15,772 16,095 15,646
========= ========= ========= =========
Diluted ............. 16,559 16,278 16,764 16,042
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
TELXON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended September 30,
------------------------------
1998 1997
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................... $ 2,744 $ 3,982
Adjustments to reconcile net income to
net cash provided by (used in) operating activities:
Depreciation and amortization ............... 12,534 12,183
Amortization of restricted stock
awards, net ............................. 149 96
Provision for doubtful accounts ............. 369 395
Provision for inventory obsolescence ........ 4,086 3,548
Deferred income taxes ....................... 3 172
Loss on disposal of property and equipment... 238 528
Minority interest ........................... 20 8
Changes in assets and liabilities:
Accounts and notes receivable .......... 8,989 7,597
Inventories ............................ (280) (7,032)
Prepaid expenses and other ............. (2,318) (2,231)
Intangibles and other assets ........... 531 (1,748)
Accounts payable and accrued liabilities (9,381) (21,341)
Other long-term liabilities ............ 44 (225)
-------- --------
Total adjustments ............ 14,984 (8,050)
-------- --------
Net cash provided by (used in) operating activities .. 17,728 (4,068)
Cash flows from investing activities:
Additions to property and equipment .................. (18,848) (12,212)
Software and other investments ....................... (2,939) (2,279)
Proceeds from the sale of property and equipment ..... -- 866
Additions to long-term notes receivable .............. (608) (140)
-------- --------
Net cash used in investing activities ................ (22,395) (13,765)
Cash flows from financing activities:
Borrowings (repayments) on notes payable, net ........ 14,580 (50)
Principal payments on capital leases ................. (343) (318)
Purchase of treasury stock ........................... (488) (3,256)
Proceeds from exercise of stock options
(includes tax benefit) ........................... 1,222 4,863
-------- --------
Net cash provided by financing activities ............ 14,971 1,239
Effect of exchange rate changes on cash .............. (218) (157)
-------- --------
Net increase (decrease) in cash and cash equivalents . 10,086 (16,751)
Cash and cash equivalents at beginning of period ..... 27,500 45,386
-------- --------
Cash and cash equivalents at end of period ........... $ 37,586 $ 28,635
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
5
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TELXON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except share and per share amounts)
1. Management Representation
The consolidated financial statements of Telxon Corporation ("Telxon")
and its subsidiaries (collectively with Telxon, the "Company") have
been prepared without audit and in accordance with the instructions to
Form 10-Q. In the opinion of the Company, all adjustments, consisting
of normal recurring adjustments necessary for a fair statement of
results for the interim periods, have been made. The operating results
for the six months ended September 30, 1998, are not necessarily
indicative of the results that may be achieved for the year ending
March 31, 1999. The statements, including the March 31, 1998, balance
sheet data derived from audited financial statements, do not include
all of the information and notes required by generally accepted
accounting principles for complete financial statements and should be
read in conjunction with the audited consolidated financial statements
as contained in the Company's Annual Report on Form 10-K, as amended by
Amendments No. 1 and No. 2 on Form 10-K/A, for the fiscal year ended
March 31, 1998.
2. Earnings Per Share
Computations of basic and diluted earnings per share of common stock
have been made in accordance with the Financial Accounting Standards
Board's (FASB) Statement of Financial Accounting Standards No. 128,
"Earnings Per Share". 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.
Reconciliation of Numerators and Denominators
Of the Basic and Diluted EPS Computations
(Dollars in thousands except per-share amounts)
In the following table, net income represents the numerator and the shares
represent the denominator in the Earnings per Share Calculation.
<TABLE>
<CAPTION>
For the Quarter ended For the Quarter ended
September 30, 1998 September 30, 1997
---------------------------------- -----------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net income $2,498 $2,388
BASIC EPS
Income available to
Common stockholders $2,498 16,065 $0.16 $2,388 15,772 $0.15
===== =====
EFFECT OF DILUTIVE SECURITIES
Options 494 506
------ -----
DILUTED EPS
Income available to
Stockholders of common shares
and common stock equivalents $2,498 16,559 $0.15 $2,388 16,278 $0.15
====== ====== ===== ====== ====== =====
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
For the Six Months ended For the Six Months ended
September 30, 1998 September 30, 1997
---------------------------------- -----------------------------------
Per-Share Per-Share
Income Shares Amount Income Shares Amount
------ ------ --------- ------ ------ ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Net income $2,744 $3,982
BASIC EPS
Income available to
Common stockholders $2,744 16,095 $0.17 $3,982 15,646 $0.25
===== =====
EFFECT OF DILUTIVE SECURITIES
Options 669 396
------ ------
DILUTED EPS
Income available to
Stockholders of common shares
and common stock equivalents $2,744 16,764 $0.16 $3,982 16,042 $0.25
====== ====== ===== ====== ====== =====
</TABLE>
Options to purchase 35,000 shares of common stock at a weighted average
exercise price of $30.88 per share were outstanding at September 30,
1998, but were not included in the computation of diluted earnings per
share because the options' exercise price was greater that the average
market price for the common shares during fiscal 1999 to date. The
shares issuable upon conversion of Telxon's 5-3/4% Convertible
Subordinated Notes and 7-1/2% Convertible Subordinated Debentures were
omitted from the diluted earnings per share calculations because their
inclusion at September 30, 1998 and 1997, would have had an
anti-dilutive effect on earnings.
3. Comprehensive Income
Beginning with the first quarter of fiscal 1999, the Company was
required to adopt the provisions of the FASB's Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
No. 130"). SFAS No. 130 establishes standards for reporting
comprehensive income, which has been defined as the change in equity of
an entity during a period from transactions and other events and
circumstances from nonowner sources. SFAS No. 130 requires the
Company's foreign currency translation adjustment to be included in
other comprehensive income. Refer to the "Consolidated Statement of
Operations" for details on the components of net income.
Total comprehensive income consisted of the following:
<TABLE>
<CAPTION>
Six Months
Ended September 30,
-------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Net income $2,744 $3,982
Other comprehensive income:
Foreign Currency Translation Adjustment 635 (990)
------ ------
Total comprehensive income $3,379 $2,992
====== ======
</TABLE>
7
<PAGE> 8
4. Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 30,
1998 March 31,
(Unaudited) 1998
------------- ---------
<S> <C> <C>
Purchased components $47,770 $ 49,514
Work-in-process 33,979 37,375
Finished goods 22,587 21,289
-------- --------
$104,336 $108,178
======== ========
</TABLE>
5. Accrued Liabilities
Accrued liabilities consisted of the following:
<TABLE>
<CAPTION>
September 30,
1998 March 31,
(Unaudited) 1998
------------- ---------
<S> <C> <C>
Deferred customer service revenues $14,195 $13,448
Accrued payroll and other employee compensation 10,326 12,353
Other accrued liabilities 15,199 15,233
------- -------
$39,720 $41,034
======= =======
</TABLE>
6. Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Six Months
Ended September 30,
-------------------------
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
Cash paid during the period for:
Interest $4,676 $ 3,674
Income taxes 3,009 4,985
</TABLE>
Capital lease additions of $276 for manufacturing equipment in fiscal
1999 have been excluded from the accompanying consolidated statement of
cash flows as a non-cash transaction.
The Company's re-issuance of treasury stock during the first half of
fiscal 1999 to satisfy exercises of stock options under the Company's
stock option plans has been excluded from the accompanying consolidated
statement of cash flows as non-cash transactions. See Note 10 - Other
Debt and Equity Transactions for further details of the first half of
fiscal 1999 re-issuances.
The Company's re-issuances of treasury stock during the second quarter
of fiscal 1999 and 1998 to satisfy purchases made by employees through
the Telxon Corporation 1995 Employee Stock Purchase Plan have been
excluded from the accompanying consolidated statement of cash flows
as non-cash transactions. See Note - Other Debt and Equity
Transactions for further details of the second quarter fiscal 1999
re-issuances.
7. Litigation and Contingencies
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 the Company 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,
attorney's 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; however, the claims
relating to breach of fiduciary duty survived the Motion to Dismiss.
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 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
8
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Officer and director at the time of the first acquisition transaction,
as a new defendant. The defendants opposed the Motion of 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. On March 18, 1998, defendant Meyo filed a Motion for
Judgement on the Pleadings (as to himself), in response to which
Plaintiff filed its Answer and Brief in Opposition. The Motion was
argued before the Court on November 4, 1998, and was granted from the
bench, dismissing Meyo as a defendant in the case. The
post-intervention claims are the subject of ongoing discovery, and no
deadline for the completion of the discovery has yet been set by the
Court.
The defendants believe that the post-intervention claims lack merit,
and they intend to continue vigorously defending this action. While the
ultimate outcome of this action cannot presently be determined, the
Company does not anticipate that this matter will have a material
adverse effect on the Company's consolidated financial position,
results of operations or cash flows and accordingly has not made
provisions for any loss or related insurance recovery in the
accompanying consolidated financial statements.
On February 17, 1998, a complaint was filed against the Company in the
District Court of Harris County, Texas, by Southwest Business
Properties, the landlord of the Company's former Wynnwood Lane facility
in Houston, Texas. The complaint alleges counts for breach of contract
and temporary and permanent injunctive relief, all related to alleged
environmental contamination at the Wynnwood property, and seeks
specific performance, unspecified monetary damages for all injuries
suffered by plaintiff, payment of pre-judgement interest, attorneys'
fees and costs and other unspecified relief. In its Answer, Telxon
denied plaintiff's allegations. No hearing has been had on, or is
currently scheduled for, plaintiff's claim for temporary injunctive
relief. Pursuant to the Court's Scheduling Order for this action, trial
is set for March 8, 1999. If the Company were ultimately to become
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. Telxon
believes that these claims lack merit, and it intends to vigorously
defend this action.
On May 8, 1998, two class action suits were filed in the Court of
Chancery of the State of Delaware, in and for the County of New Castle,
by certain alleged stockholders of Telxon on behalf of themselves and
purported classes consisting of Telxon stockholders, other than
defendants and their affiliates, relating to an alleged offer by Symbol
Technologies, Inc. ("Symbol") to acquire the Company. The named
defendants are Telxon and its current Board of Directors, namely, Frank
E. Brick, Robert A. Goodman, Dr. Raj Reddy, John H. Cribb, Richard J.
Bogomolny, and Norton W. Rose.
The plaintiffs allege that on April 21, 1998, Symbol made an offer to
purchase Telxon for $38.00 per share in cash and that on May 8, 1998,
Telxon rejected Symbol's proposal. Plaintiffs further allege that
Telxon has certain anti-takeover devices in place purportedly designed
to thwart hostile bids for the Company. Plaintiffs charge the Director
defendants with breach of fiduciary duty and claim that they are
entrenching themselves in office. The plaintiffs seek certification of
the purported class, unspecified compensatory damages, equitable and/or
injunctive relief requiring the defendants to act in specified manners
consistent with the defendant Directors' fiduciary duties, and payment
of attorney's fees and costs. The parties have stipulated that the
plaintiffs will file an Amended Complaint and that the defendants will
answer only the Amended Complaint.
On June 2, 1998, the Court ordered consolidation of the above-captioned
cases. This action is in its early stages, with no scheduling order
having been issued by the Court; discovery has not yet commenced. The
defendants believe that these claims lack merit and intend to
vigorously defend the consolidated action.
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. In
management's opinion, all such 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 consolidated
financial position, results of operations or cash flows.
8. Income Taxes
The Company's consolidated effective income tax rate reflects income
before taxes increased by non-deductible goodwill amortization and the
tax effect of unutilized subsidiary net operating loss benefits, which
sum is multiplied by the United States statutory rate and increased by
foreign tax rate differentials. The effective income tax rate was
decreased by a credit for
9
<PAGE> 10
research and development and the favorable tax treatment of the
Company's foreign sales corporation.
9. Subsidiary Stock Transactions
During the first quarter of fiscal 1999, the Company entered into a
series of transactions with a business partner. The Company repurchased
the voting common shares of its Metanetics subsidiary ("Metanetics"), a
development stage subsidiary that develops image processing technology,
for $1,950. The Company has assessed the additional expenditure of cash
for the increased investment in such subsidiary because of in-process
product development and the historical financial losses and future
funding requirements for its operations. As a result of this
assessment, a pre-tax loss of $1,950 was recorded in the accompanying
consolidated statement of operations. Simultaneously, the business
partner agreed to pay amounts due of $1,850 for previously purchased
manufacturing rights and software licenses. Additionally, the Companies
mutually agreed to terminate such agreements and released each other
from any future liability related to the original agreements. Giving
effect to the repurchase of 400,000 shares of the subsidiary at $4.875
per share, the Company's interest in the voting common stock of such
subsidiary was 60% at June 30, 1998.
During the first quarter of fiscal 1999, the Company's Aironet Wireless
Communications, Inc. ("Aironet") subsidiary, a developer, manufacturer,
and marketer of wireless LAN systems, sold 222,222 shares of its voting
common stock to various third-party investors at a price of $3.50 per
share. Proceeds from this sale of stock were $778. The resulting
pre-tax net gain of $340 was recorded as non-operating income in the
accompanying consolidated statement of operations. In addition to the
sale of the shares of stock, 66,667 $2.50 warrants for the purchase of
Aironet voting common stock were issued. A gain of $47 relating to
these warrants has been deferred until the warrants are exercised or
lapse. The Company's remaining interest in the voting common stock of
Aironet at September 30, 1998, was 76%.
10. Other Debt and Equity Transactions
During the first quarter of fiscal 1999, $311 in aggregate principal
amount of the Company's 7-1/2% Convertible Subordinated Debentures were
surrendered for conversion into 11,621 shares of the Company's Common
Stock, $.01 par value per share. The surrendered Convertible
Subordinated Debentures have been cancelled effective as of their
conversion into common stock.
During the second quarter of fiscal 1999, the Company repurchased
24,500 shares of its common stock, at a weighted average price of
$19.91 per share, pursuant to its open market repurchase program.
During the first half of fiscal 1999, the Company re-issued 53,349
shares of treasury stock, at a weighted average cost of $14.87, to
satisfy options exercised under the Company's stock option plans.
During the first half of fiscal 1999, the Company re-issued 23,775
shares of treasury stock, at a weighted average cost of $14.88, to
satisfy purchases made by employees through the Telxon Corporation 1995
Employee Stock Purchase Plan.
During the second quarter of fiscal 1999, the Company extended to
August 3, 1999, the $20.0 million in bank credit which it maintains
under its business purpose revolving promissory note in addition to its
ongoing $100.0 million credit agreement.
11. Subsequent Events
Subsequent to September 30, 1998, the Company re-issued 25,419 shares
of treasury stock to satisfy stock options exercised under the
Company's stock option plans.
Subsequent to September 30, 1998, the Company repurchased 38,800 shares
of its common stock pursuant to its open market repurchase program.
12. Reclassifications
Certain items in the fiscal 1998 consolidated financial statements and
notes thereto have been reclassified to conform to the fiscal 1999
presentation.
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TELXON CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
IN ADDITION TO DISCUSSING AND ANALYZING THE COMPANY'S RECENT HISTORICAL
FINANCIAL RESULTS AND CONDITION, THE FOLLOWING MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCLUDES STATEMENTS
REGARDING CERTAIN TRENDS OR OF OTHER FORWARD-LOOKING INFORMATION CONCERNING THE
COMPANY'S ANTICIPATED REVENUES, COSTS, FINANCIAL RESOURCES OR OTHERWISE
AFFECTING OR RELATING TO THE COMPANY WHICH ARE INTENDED TO QUALIFY FOR THE
PROTECTIONS AFFORDED "FORWARD-LOOKING STATEMENTS" UNDER THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, PUBLIC LAW 104-67. THE FORWARD-LOOKING
STATEMENTS MADE HEREIN AND ELSEWHERE IN THIS FORM 10-Q ARE INHERENTLY SUBJECT
TO RISKS AND UNCERTAINTIES, WHICH COULD CAUSE THE COMPANY'S ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS. THE SUMMARY OF CERTAIN
OF THE RISKS AND OTHER IMPORTANT FACTORS WHICH MAY AFFECT THE COMPANY'S
BUSINESS, OPERATING RESULTS AND FINANCIAL AND OTHER CONDITION UNDER "FACTORS
THAT MAY AFFECT FUTURE RESULTS" BELOW SHOULD BE READ IN CONJUNCTION WITH THE
MORE COMPLETE DISCUSSION OF THOSE AND OTHER RISKS AND IMPORTANT FACTORS
AFFECTING THE BUSINESS, OPERATING RESULTS AND CONDITION OF THE COMPANY UNDER
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION - FACTORS THAT MAY AFFECT FUTURE RESULTS", AND OTHER
CAUTIONARY STATEMENTS APPEARING UNDER "ITEM 1. BUSINESS" AND ELSEWHERE, IN THE
COMPANY'S ANNUAL REPORT ON FORM 10-K, AS AMENDED BY AMENDMENTS NO. 1 AND NO. 2
ON FORM 10-K/A, FOR THE FISCAL YEAR ENDED MARCH 31, 1998.
Overview
The Company recorded net income of $2.5 million or $.15 per common share
(diluted) and $2.7 million or $.16 per common share (diluted) for the second
quarter and first half of fiscal 1999, respectively. In comparison, the Company
recorded net income of $2.4 million or $.15 per common share (diluted) and $4.0
or $.25 per common share (diluted) for the second quarter and first half of
fiscal 1998, respectively. The results for the first half of fiscal 1999 include
after-tax charges of $2.1 million or $.13 per common share (diluted) for costs
incurred in response to an unsolicited takeover proposal and $1.0 million or
$.06 per common share (diluted) related to transactions in the voting common
stock and warrants of two of the Company's subsidiaries.
The Company operates in a rapidly changing and dynamic market, and the Company's
strategies and plans are designed to adapt to changing market conditions where
and when possible. However, there can be no assurance that the Company's
management will identify the risks (especially those newly emerging from time to
time) affecting, and their impact on, the Company and its business, that the
Company's strategies and plans will take into account all market conditions and
changes thereto or that such strategies and plans will be successfully
implemented. Accordingly, neither the historical results presented in the
Company's consolidated financial statements and discussed herein, nor any
forward-looking statements in this Form 10-Q, are necessarily indicative of the
Company's future results. See "Factors That May Affect Future Results" for a
discussion of risk factors which may affect the Company's future results of
operations.
Factors That May Affect Future Results
The Company's business, operating results and financial and other condition may
be affected by a number of risks and other important factors, including,
without limitation, the following, some of which are inherently difficult to
identify and predict and/or are beyond the Company's control: general and
industry-specific economic conditions; the identification and implementation of
appropriate cost saving and operational efficiency initiatives; sales and
manufacturing cycles from quarter to quarter and within each quarter; serving
markets characterized by increasingly rapid technological change and associated
changes in market demand and product obsolescence and by price erosion; intense
competition; concentration of revenues in the retail industry, and possible
decreases in their purchases from the Company in response to any downturn in
general economic prospects or conditions to the extent reduced levels of new
store openings are not offset by their investment in the Company's systems to
improve the efficiency of existing stores; ability to penetrate and expand
revenues in new and existing markets; risks associated with foreign sales and
operations, including the possible affects of the adoption of the "evro";
timely and efficient enhancement of appropriate product offerings through
internal development and acquisition of or investment in new businesses and
technologies; dependence on, and freedom from infringement of, technologies and
other proprietary rights of or by third parties; government regulation of radio
and other products and product health and safety concerns; dependence on sole
source, or a limited number of, suppliers; and attracting and retaining
qualified employees. In addition to being subject to the foregoing factors and
other cautionary statements elsewhere in this Form 10-Q, the Company's conduct
of its business and the results and condition thereof are also subject to the
possible adverse effects of certain pending litigation and other contingencies
discussed in Note 7 to the accompanying consolidated financial statements
included in Item 1 above.
Readiness for the Year 2000
As the end of the twentieth century nears, there is worldwide concern regarding
the use by many existing computer programs of only the last two digits rather
than four to identify the year in a date field. If not corrected, many computer
applications may fail to treat year dates intended to represent years in the
twenty-first century as such but instead treat them as still in the twentieth
century, potentially resulting in system failure or miscalculations disruptive
of business operations, including, among other things, an inability to initiate,
receive, process, invoice or otherwise complete normal business activities.
These Year 2000 issues affect virtually all companies and organizations.
11
<PAGE> 12
Year 2000 issues affect both the Company's offerings of computer products and
related services to its customers as well as its own operations. The Year 2000
readiness of the Company's operations in turn involves not only its corporate
information systems but also computer-based systems used directly in the conduct
of its business ("Business Function Systems"), such as hardware and software
engineering design tools, manufacturing equipment and customer service and
maintenance tracking systems. In addition, the Company could also be affected by
the Year 2000 readiness of its customers and of its suppliers of raw materials,
components, peripherals, finished products and software and its providers of
facilities, equipment and services. The costs of the Company's Year 2000
readiness efforts are being funded from the Company's operating cash flows.
With respect to its products, the Company has identified those that are or will
be made Year 2000 ready. Those already- or to-be-made-Year 2000 ready products
represent the existing products which management believes will continue to be a
significant part of the Company's ongoing product line. Customers may continue
to order the Company's other existing products, but with no assurance from the
Company as to their Year 2000 readiness or the feasibility or availability of an
upgrade path to readiness. All new products are being designed to be Year 2000
ready.
The Company has substantially completed the initial writing of the
software/firmware upgrades for the products which are not presently, but are to
be made, Year 2000 ready, and has completed a majority of the testing of those
upgrades. Subject to negotiated contractual commitments, the Company will make
the upgrades available free of charge for products purchased after December 31,
1997, but customers will be responsible for installing the upgrades (or they may
retain the Company to do so for a fee). The costs to date of upgrading the
Company's products to Year 2000 readiness have not been, and the Company does
not expect that the remaining cost of doing so will be, material to the
Company's financial position or results of operations.
As further discussed under "FINANCIAL CONDITION - Cash Flows from Investing
Activities" below, the Company has purchased and is working with outside
contractors to develop and install new corporate-wide information systems.
Though the new systems were identified as a strategic business initiative
independent of Year 2000 considerations, they are also being designed to make
the Company's Information Systems Year 2000 ready. During the second quarter of
fiscal 1999, the Company completed the first phase of the new systems
installation, encompassing the Company's key financial reporting and the
accounting systems. While the new information systems will be dynamic ones
permitting ongoing improvements as business needs are identified, the basic
remaining operational systems are expected to be substantially completed during
the first quarter of fiscal 2000 at a total estimated capital expenditure of
approximately $24.6 million and accelerated expenditures for the replacement of
computer hardware of $2.4 million. To date, the Company has spent approximately
$18.0 million in capital expenditures and $.5 million on computer hardware
replacement. Those time and cost targets are management's current best estimates
based on presently available information and numerous assumptions. Given the
uncertainties and complexities inherent in any new system installation, there
can be no assurance that the project will be completed within the expected time
and cost parameters.
The Company has engaged an outside consultant to evaluate the Year 2000
readiness of its engineering, manufacturing and customer maintenance and service
Business Function Systems. The consultant's findings and recommendations are to
be delivered to the Company by January 1, 1999 and will be reviewed and acted
upon by the Company team overseeing the study, which includes senior management
from each of the affected functional areas. To the extent any Year 2000 issues
are identified, remediation options will include re-writing the affected
software or replacing the affected hardware or software with hardware or
software that is Year 2000 ready. The Company believes that, in general,
replacement, Year 2000 ready hardware and software for its Business Function
Systems are readily available, making that the most likely means of addressing
any remediation needs identified by the consultant. The estimated cost of the
study is immaterial but until the results of the consultant's study are received
and evaluated by the Company, the timetable and cost (though not expected to be
material) for any remediation that may ultimately be required with respect to
the Company's Business Function Systems cannot be estimated.
To the extent that the re-writing of affected software is selected as the means
for remediating any Year 2000 issues, whether in preparing upgrades to Company
products, making Business Function Systems Year 2000 ready or otherwise, given
the technical nature of the task of isolating and correcting non-compliant
programming and the limited internal resources available, and the increasing
demand for available external resources, to perform the work, there can be no
assurances as to if, when and at what cost any such software work can be
completed.
The Company's own Year 2000 readiness is also affected by the Year 2000
readiness of its customers as well as of its suppliers of raw materials,
components, peripherals, finished products and software and its providers of
facilities, equipment and services and any failure on their part to achieve
readiness in their own operations or with respect to the items they supply or
otherwise provide to the Company. Insofar as no single customer has accounted
for more than ten percent of the Company's revenues in recent fiscal years, the
Company does not anticipate that its operating results will be materially
adversely affected by the failure of any particular customer to itself be Year
2000 ready. The volume of Year 2000 inquiries which the Company has received
from its customers regarding the Year 2000 readiness of the Company products
they use further suggests that the Company's customers are addressing their Year
2000 issues. The Company has made Year 2000 readiness inquiries of the current
suppliers to its engineering, manufacturing and service functions and is
beginning the process of assessing the responses which are being received. The
Company has also made readiness inquires of its providers of facilities and
related equipment and services (elevators, HVAC, utilities, etc.) and while
still in the process of receiving and assessing the providers' responses, has
not to date indentified any significant Year 2000 issues.
There are several possible scenarios which, alone or in aggregate effect, could,
depending on the particular circumstances, materially adversely affect Company's
business and/or its financial results or conditions. These scenarios could
affect the Year 2000 readiness of the Company's own product or service
offerings, disrupt its business operations or negatively impact its operating
results. The Company could be adversely affected by the failure of one or more
of its suppliers of raw materials, components, peripherals, finished products or
software or its providers of facilities, equipment and services to achieve Year
2000 readiness in their own operations or with respect to the items they supply
or otherwise provide to the Company. If such an event were to, or circumstances
indicate that one is likely to, occur, the Company would seek alternative
sources of supply (the Company periodically reviews its sourcing options as part
of its general operating procedures independent of Year 2000 concerns) or seek
to develop or obtain a software upgrade to make the affected item Year 2000
ready. As with all businesses such as the Company engaged in some facet of the
computer industry, there is a risk that the Company's customers may, in advance
of or after the change in the millennium, experience Year 2000 failures or other
difficulties in their use of computer systems comprised of or incorporating
products or services furnished by the Company and may commence legal action or
other compensation for their resulting losses; such legal actions, even if not
ultimately determined adversely to the Company, would likely involve significant
defense costs to the Company, particularly where the combination of products
and/or services of several different vendors in addition to the Company in the
subject customer system presents complex issues for isolating the cause of the
Year 2000 problem and determining the vendor responsible for that problem.
Disruptions in the economy generally, domestically and/or in foreign countries,
resulting from Year 2000 issues could also materially affect the Company. At
this time, the Company does not believe that the likelihood of any of the above
scenarios occurring can be reliably predicted, or that the nature or extent of
their possible adverse effects on the Company, can be reasonably estimated.
Though the Company currently does not have formal contingency plans in place to
address any particular possible Year 2000 scenario, the Company intends to
develop appropriate contingency plans if and when any significant risks relating
to its Year 2000 readiness can be more definitely indentified.
12
<PAGE> 13
RESULTS OF OPERATIONS
Revenues
- - --------
<TABLE>
<CAPTION>
Quarter ended September 30, Increase
----------------------------- --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Net Revenues:
Product, net $103,133 $ 91,138 $11,995 13.2%
Customer service, net 21,236 19,182 2,054 10.7%
-------- -------- -------
Total net revenues $124,369 $110,320 $14,049 12.7%
======== ======== =======
Six Months ended September 30, Increase
------------------------------ --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
Net Revenues:
Product, net $197,210 $177,829 $19,381 10.9%
Customer service, net 42,206 37,404 4,802 12.8%
-------- -------- --------
Total net revenues $239,416 $215,233 $24,183 11.2%
======== ======== =======
</TABLE>
Net product revenues include the sale of portable tele-transaction computers
("PTCs"), including rugged, wireless mobile computers and pen-based and
touch-screen workslates; hardware accessories; wireless data communication
products; custom application software, network management software and software
licenses; and a variety of professional services, including system integration
and project management.
The increase in the second quarter fiscal 1999 consolidated product revenues
from fiscal 1998 levels was due primarily to a 11.2% increase in PTC unit volume
and a .9% increase in the average selling price per PTC unit. The increase in
consolidated PTC unit volume was the result of a substantial increase in
shipments of PTC 960 units in the second quarter of fiscal 1999 as compared to
the second quarter of fiscal 1998. This was the result of the Company's
continued successful penetration of the retail market.
The increase in the first half of fiscal 1999 consolidated product revenues
from fiscal 1998 levels was due primarily to a 8.0% increase in PTC unit volume
and a 2.9% increase in the average selling price per PTC unit. The increase in
consolidated PTC unit volume was the result of a substantial increase in
shipments of PTC 960 units in the first half of fiscal 1999 and the
approximately 400% increase in shipments of pen-based units as compared to the
first half of fiscal 1998. The Company expects consolidated product revenues
for the remainder of fiscal 1999 to increase from fiscal 1998 levels.
The increase in the second quarter and first half of fiscal 1999 consolidated
customer service revenues from the fiscal 1998 levels was primarily the result
of the continued increase in the installed base of the Company's products. The
Company anticipates increased consolidated customer service revenues for the
remainder of fiscal 1999.
Revenues from the Company's international operations (including Canada)
increased $2.3 million or 7.5% and $3.8 million or 6.2% in the second quarter
and first half of fiscal 1999, respectively, as compared to fiscal 1998 levels.
This increase was attributable primarily to the increased revenues recorded by
the Company's European operations. Changes in foreign exchange rates did not
have a material impact on the results of the Company's international
operations. The European Economic and Monetary Union and a new currency, the
"euro," will begin in Europe on January 1, 1999 as participating countries
adopt the euro as their home currency. As the Company operates in certain of
these countries, the adoption of the euro may have an impact on its financial
results. While the Company's initial assessment is that the adoption of the
euro will not have a material adverse affect on the Company, the Company will
continue to monitor trends, issues and events related to the adoption of the
euro and their potential impact on the Company and its financial results and
operations.
13
<PAGE> 14
Cost of Revenues
- - ----------------
<TABLE>
<CAPTION>
Quarter ended September 30, Increase
--------------------------- --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Cost of Revenues:
Product $62,411 $54,276 $8,135 15.0%
Customer service 13,502 12,336 1,166 9.5%
------- ------- ------
Total cost of revenues $75,913 $66,612 $9,301 14.0%
======= ======= ======
Cost of product revenues as a
percentage of product revenues,
net 60.5% 59.6%
Cost of customer service revenues
as a percentage of customer
service revenues, net 63.6% 64.3%
Six Months ended September 30, Increase
------------------------------ --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
Cost of Revenues:
Product $119,722 $106,836 $12,886 12.1%
Customer service 26,327 23,462 2,865 12.2%
-------- -------- ------
Total cost of revenues $146,049 $130,298 $15,751 12.1%
======== ======== =======
Cost of product revenues as a
percentage of product revenues,
net 60.7% 60.1%
Cost of customer service revenues
as a percentage of customer
service revenues, net 62.4% 62.7%
</TABLE>
Consolidated product gross margins decreased to 39.5% in the second quarter of
fiscal 1999 from 40.4% in the second quarter of fiscal 1998. Consolidated
product gross margins decreased to 39.3% during the first half of fiscal 1999
from 39.9% during the first half of fiscal 1998. These decreases were due
primarily to an increase in the average cost per PTC unit, which increased 8.2%
and 6.0% during the second quarter and first half of fiscal 1999 from
comparable fiscal 1998 averages, and the result of a shift in product mix to
large retail customers, which tend to carry lower margins.
At September 30, 1998, consolidated inventory allowance accounts decreased to
$11.0 million from $11.5 million at March 31, 1998. As a percentage of
consolidated gross inventories, the Company's consolidated inventory allowances
decreased to 9.4% at September 30, 1998, from 9.5% at March 31, 1998. The
allowance accounts decreased due to the physical scrapping of obsolete
materials in excess of amounts provided during the first half of fiscal 1999.
Consolidated provisions for excess and obsolete material were $4.1 million for
the first half of fiscal 1999. The Company anticipates continuing to provide
for inventory obsolescence resulting from technological change.
Operating Expenses
- - ------------------
<TABLE>
<CAPTION>
Quarter ended September 30, Increase/(Decrease)
--------------------------- -------------------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Operating Expenses:
Selling expenses $20,317 $18,677 $1,640 8.8%
Product development and
engineering expenses 9,261 9,525 (264) (2.8)%
General and administrative
expenses 10,425 9,843 582 5.9%
------- ------- ------
Total operating expenses before other operating items $40,003 $38,045 $1,958 5.1%
======= ======= ======
Other operating items:
Take-over defense costs $ 1,830 $ - $1,830 N.M.
------- ------- ------
Total other operating items $ 1,830 $ - $1,830 N.M.
======= ======= ======
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Six Months ended September 30, Increase/(Decrease)
------------------------------ -------------------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Operating Expenses:
Selling expenses $41,678 $36,776 $4,902 13.3%
Product development and
engineering expenses 18,191 18,651 (460) (2.5)%
General and administrative
expenses 19,862 19,547 315 1.6%
------- ------- ------
Total operating expenses before other operating items $79,731 $74,974 $4,757 6.3%
======= ======= =======
Other operating items:
Take-over defense costs 3,579 - 3,579 N.M.
Charge related to transaction with
business partner 1,950 - 1,950 N.M.
------- ------- ------
Total other operating items $ 5,529 $ - $ 5,529 N.M.
======= ======= =======
</TABLE>
Selling expenses as a percentage of total revenues decreased to 16.3% in the
second quarter of fiscal 1999 from 16.9% in the second quarter of fiscal 1998.
Selling expenses as a percentage of total revenues increased to 17.4% in the
first half of fiscal 1999 from 17.1% in the first half of fiscal 1998. Selling
expenses as a percentage of total revenues for the second quarter of fiscal 1999
decreased due to the spreading of fixed expenses over a higher revenue base. The
increase in consolidated selling expenses for the first half of fiscal 1999 from
fiscal 1998 levels was due primarily to investments in personnel and resources
to support the revenue growth of the Company and its investment in indirect
channel distribution. Due to these investments, the Company expects selling
expenses as a percentage of total revenues for the remainder of fiscal 1999 to
be slightly higher than the comparable fiscal 1998 levels.
Product development and engineering expenses as a percentage of total revenues
decreased to 7.6% in the first half of fiscal 1999 from 8.7% in the first half
of fiscal 1998. This decrease primarily resulted from the absence of
amortization related to the acquisition of, and of research and development
expenditures related to, a technical subsidiary disposed of in fiscal 1998, and
cost reductions related to consolidation and relocation of certain of the
Company's engineering and product development operations from Akron, Ohio to
Houston, Texas. These decreases were partially offset by increased engineering
and development expenses for new pen-based product introductions. The Company
expects product development and engineering expenses, as a percentage of total
revenues, for the remainder of fiscal 1999 to be below the corresponding fiscal
1998 levels.
During the first half of fiscal 1999, 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" aggregating $2.7 million, offset by
amortization of $3.7 million. The Company anticipates the dollar amount of
internal software development cost capitalized during the remainder of fiscal
1999 to remain generally consistent with the fiscal 1998 level.
General and administrative expenses as a percentage of total revenues decreased
to 8.3% in the first half of fiscal 1999 from 9.1% in the first half of fiscal
1998, while general and administrative expenses increased slightly in dollar
terms. General and administrative expenses as a percentage of total revenues for
the first half of fiscal 1999 decreased due the spreading of fixed expenses over
a higher revenue base. The dollar increase in general and administrative
expenses was primarily due to increased costs related to the Company's
installation of its new corporate-wide information systems. These increases were
partially offset by a decrease in expenses due to the absence of certain
international operations which were curtailed during fiscal 1998.
During the second quarter and first half of fiscal 1999 the Company recorded
$1.8 and $3.6 million, respectively, related to costs incurred in response to an
unsolicited takeover proposal by Symbol Technologies, Inc. ("Symbol") in the
first quarter and to a proxy contest initiated by a stockholder of the Company
late in the first quarter which was settled during the second quarter. In the
proxy contest, the stockholders, citing the Company's rejection of the Symbol
proposal, proposed to present six proposals to reform the Company's corporate
governance structure, particularly as it relates to takeover proposals such as
Symbol's, and to nominate a director at the Company's 1998 annual meeting of
stockholders held September 15, 1998. The Terms of the proxy contest settlement
included an agreement kept by the Company that, from September 1, 1998, to May
31, 1999, it will take all actions necessary to declare its shareholder rights
plan inapplicable to any fully financed, all-cash tender offer that, among other
things, ensures holders of the Company's common stock a price per share that is
in excess of $40 or 140% of the average closing price per share of the Company's
common stock during a
15
<PAGE> 16
specified period ending before the announcement of the tender offer.
During the first quarter of fiscal 1999, the Company entered into a series of
transactions with a business partner. The Company repurchased the voting common
shares of its Metanetics subsidiary ("Metanetics"), a development stage
subsidiary that develops image processing technology for $1,950. The Company has
assessed the additional expenditure of cash for the increased investment in such
subsidiary because of in-process product development and the historical
financial losses and future funding requirements for its operations. As a result
of this assessment, a pre-tax loss of $1,950 was recorded in the accompanying
consolidated statement of operations. Simultaneously, the business partner
agreed to pay amounts due of $1,850 for previously purchased manufacturing
rights and software licenses. Additionally, the Companies mutually agreed to
terminate such agreements and released each other from any future liability
related to the original agreements. Giving effect to the repurchase of 400,000
shares of the subsidiary at $4.875 per share, the Company's interest in the
voting common stock of such subsidiary was 60% at June 30, 1998.
Other Non-Operating Income (Expense), net
- - -----------------------------------------
<TABLE>
<CAPTION>
Quarter ended September 30, Decrease
--------------------------- --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C>
Non-Operating Income (Expense):
Gain on sale of subsidiary stock $ - $ - $ - N.M.
Other non-operating (expense) - (7) 7 N.M.
------ ----- -----
Total non-operating income (expense), net $ - $ (7) $ 7 N.M
====== ===== =====
Six Months ended September 30, Increase
------------------------------ --------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
Non-Operating Income (Expense):
Gain on sale of subsidiary stock $ 340 $ - $ 340 N.M.
Other non-operating income (expense) 120 (165) 285 172.7%
----- ----- -----
Total non-operating income (expense), net $ 460 $(165) $ 625 378.8%
===== ===== =====
</TABLE>
During the first quarter of fiscal 1999, the Company's Aironet Wireless
Communications, Inc. ("Aironet") subsidiary, a developer, manufacturer and
marketer of wireless LAN systems, sold 222,222 shares of its voting common stock
to various third-party investors at a price of $3.50 per share. The resulting
pre-tax gain of $340, net of a deferred gain of $47 related to warrants for an
additional 66,667 shares that were also issued, was recorded as other
non-operating income in the accompanying consolidated statement of operations.
Income Taxes
- - ------------
<TABLE>
<CAPTION>
Quarter ended September 30, (Decrease)
--------------------------- ----------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
<S> <C> <C> <C> <C>
Income Taxes:
Provision for income taxes $1,672 $1,877 $(205) (10.9)%
Six Months ended September 30, (Decrease)
------------------------------ ----------
1998 1997 Dollar Percentage
---- ---- ------ ----------
(in thousands)
Income Taxes:
Provision for income taxes $1,837 $3,129 $(1,292) (41.3)%
</TABLE>
The Company's consolidated effective tax rate was 40.1% in the first half of
fiscal 1999 and 44.0% in the first half of fiscal 1998. The consolidated
effective income tax rate for the first half of fiscal 1999 reflects income
before taxes multiplied by the United States federal statutory tax rate. The tax
rate was increased by nondeductible goodwill amortization, international tax
rate differentials and unutilized subsidiary net operating loss benefits. The
effective income tax rate was decreased as a result of the utilization of
research and development credits earned in prior periods and the favorable tax
treatment of the Company's foreign sales corporation.
16
<PAGE> 17
The consolidated effective income tax rate for the first half of fiscal 1998
reflects, income before taxes multiplied by the United States federal statutory
tax rate, increased by nondeductible goodwill amortization, international tax
rate differentials and subsidiaries' net operating loss benefits not currently
utilized. The consolidated effective tax rate was decreased by the favorable tax
treatment of the Company's foreign sales corporation.
FINANCIAL CONDITION
Liquidity
- - ---------
<TABLE>
<CAPTION>
Dollar
September 30, March 31, Increase
1998 1998 (Decrease)
---- ---- ----------
(in thousands except ratios)
<S> <C> <C> <C>
Cash and cash equivalents $ 37,586 $ 27,500 $ 10,086
Accounts and notes receivable 133,110 148,688 (15,578)
Inventories 104,336 108,178 (3,842)
Other 14,337 11,307 3,030
-------- -------- --------
Total current assets $289,369 $295,673 $ (6,304)
======== ======== ========
Notes payable $ 17,580 $ 3,000 $ 14,580
Accounts payable 50,726 58,634 (7,908)
Income taxes payable 2,623 3,390 (767)
Accrued liabilities 39,720 41,034 (1,314)
Other 855 968 (113)
-------- -------- -----------
Total current liabilities $111,504 $107,026 $ 4,478
======== ======== ========
Working capital (current assets
less current liabilities) $177,865 $188,647 $ (10,782)
======== ======== =========
Current ratio (current assets divided
by current liabilities) 2.6 to 1 2.8 to 1
</TABLE>
As illustrated in the preceding table, the decrease in the Company's
consolidated working capital at September 30, 1998, from March 31, 1998, was
due primarily to the decreases in accounts and notes receivable and inventories
and increased borrowing of notes payable. These decreases to working capital
were offset by increases in working capital as a result of increases in cash
and cash equivalents, and decreases in accounts payable and accrued
liabilities. The increase in cash was the result of increased borrowing on
notes payable offset by payments to vendors. The increase in notes payable
reflect increased borrowings from the Company's revolving credit facilities due
to the timing of cash collections within the quarter. Consolidated days sales
outstanding ("DSO") decreased to 82 days at September 30, 1998, from 85 days at
March 31, 1998. The decrease in inventory was the result of decreased
manufacturing inventories partially offset by increased investments in customer
service inventories in order to support the Company's expanded product base.
Consolidated inventory turns decreased to 2.3 at September 30, 1998, from 2.4
at March 31, 1998.
The Company had $17.6 million outstanding under its bank credit agreements at
September 30, 1998, and was in compliance with all restrictive covenants
contained in those agreements.
The Company believes its existing resources, including available cash and cash
equivalents, internally generated funds and bank credit facilities ($100 million
credit agreement and $20 million promissory note) will be sufficient to meet
working capital requirements for the next twelve months.
17
<PAGE> 18
Cash Flows from Operating Activities
- - ------------------------------------
<TABLE>
<CAPTION>
Dollar
Increase
(Decrease)
Six Months ended September 30, in
------------------------------ Cash Flow
1998 1997 Impact
---- ---- ------
(in thousands)
<S> <C> <C> <C>
Net income $ 2,744 $ 3,982 $(1,238)
Depreciation and amortization 12,534 12,183 351
Provision for inventory obsolescence 4,086 3,548 538
Deferred income taxes 3 172 (169)
Accounts and notes receivable 8,989 7,597 1,392
Inventories (280) (7,032) 6,752
Prepaid expenses and other (2,318) (2,231) (87)
Accounts payable and accrued liabilities (9,381) (21,341) 11,960
Other 1,351 (946) 2,297
------- -------- --------
Net cash provided by (used in) operating activities $17,728 $ (4,068) $21,796
======= ======== =======
</TABLE>
As detailed in the preceding table, the increase in the net cash provided by the
Company's consolidated operating activities for the first half of fiscal 1999 as
compared to the first half of fiscal 1998 was the result of the positive cash
flow impacts resulting from the decrease in inventories and the increase in
accounts payable and accrued liabilities. The consolidated inventories have not
grown at the same pace with revenue growth due to improved inventory management
and use of outside processors for certain manufacturing functions. Accounts
payable and accrued liabilities have not decreased as in the prior year due to
improved cash and vendor management.
Cash Flows from Investing Activities
- - ------------------------------------
<TABLE>
<CAPTION>
Dollar
Decrease
Six Months ended September 30, in
------------------------------ Cash Flow
1998 1997 Impact
---- ---- ------
(in thousands)
<S> <C> <C> <C>
Additions to property and equipment $ (18,848) $(12,212) $(6,636)
Software and other investments (2,939) (2,279) (660)
Proceeds from sale of assets - 866 (866)
Other (608) (140) (468)
-------- ------- -------
Net cash used in investing activities $(22,395) $(13,765) $(8,630)
======== ======== =======
</TABLE>
As detailed in the preceding table, the increase in the amount of cash used in
the Company's consolidated investing activities in the first half of fiscal 1999
from the first half of fiscal 1998 was due primarily to increased investments in
property and equipment, primarily the capitalization of $5.6 million of
expenditures relating to the installation of new corporate-wide information
systems. As of September 30, 1998, the Company has capitalized $18.0 million of
the total estimated capital expenditures of approximately $24.6 million for the
new systems. The Company anticipates additional capitalization of costs
associated with the new corporate-wide information systems during the remainder
of fiscal 1999.
Cash Flows from Financing Activities
- - ------------------------------------
<TABLE>
<CAPTION>
Dollar
Increase
(Decrease)
Six Months ended September 30, in
------------------------------ Cash Flow
1998 1997 Impact
---- ---- ------
(in thousands)
<S> <C> <C> <C>
Notes payable, net $14,580 $ (50) $14,630
Purchase of treasury stock (488) (3,256) 2,768
Proceeds from exercise of stock options 1,222 4,863 (3,641)
Other (343) (318) (25)
------- ------- -------
Net cash provided by financing activities $14,971 $ 1,239 $13,732
======= ======== =======
</TABLE>
As detailed in the preceding table, the increase in the Company's net cash
provided by financing activities for the first half of fiscal 1999 from the
first half of fiscal 1998 was due primarily to
18
<PAGE> 19
the increase in the level of borrowings from the Company's revolving credit
facilities during the first half of fiscal 1999 and the reduction in the fiscal
1999 period of the cash flow impact of the repurchase of treasury stock during
the first quarter of fiscal 1998, partially offset by the decrease in the cash
flow impact of the proceeds from the exercise of stock options due to the
decrease in the market price of the Company's common stock.
Other Transactions
During the first quarter of fiscal 1999, $311 in aggregate principal amount of
the Company's 7-1/2% Convertible Subordinated Debentures were surrendered for
conversion into 11,621 shares of the Company's common stock. The surrendered
Convertible Subordinated Debentures have been cancelled effective as of their
conversion into common stock.
During the second quarter of fiscal 1999, the Company repurchased 24,500 shares
of its common stock, at a weighted average price of $19.91 per share, pursuant
to its open market repurchase program.
During the first half of fiscal 1999, the Company re-issued 53,349 shares of
treasury stock, at a weighted average cost of $14.87, to satisfy stock options
exercised under the Company's stock option plans.
During the first half of fiscal 1999, the Company re-issued 23,775 shares of
treasury stock, at a weighted average cost of $14.88, to satisfy purchases made
by employees through the Telxon Corporation 1995 Employee Stock Purchase Plan.
During the second quarter of fiscal 1999, the Company extended to August 3,
1999, the $20.0 million in bank credit which it maintains under its business
purpose revolving promissory note in addition to its ongoing $100.0 million
credit agreement.
Subsequent Events
Subsequent to September 30, 1998, the Company re-issued 25,419 shares of
treasury stock to satisfy stock options exercised under the Company's stock
option plans.
Subsequent to September 30, 1998, the Company repurchased 38,800 shares of its
common stock pursuant to its open market repurchase program.
19
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 7 to the consolidated financial statements included in Part I of this
Quarterly Report on Form 10-Q for a discussion of the material pending legal
proceedings to which the Company is a party, which footnote discussion is
incorporated in this Part II by this reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Company held its Annual Meeting of Stockholders
on September 15, 1998 (the "Annual Meeting").
(b) The sole matter voted upon by the Company's
stockholders at the Annual Meeting was the election
of two directors of the class to hold office until
the 2001 annual meeting of stockholders. Richard J.
Bogomolny and John H. Cribb were nominated by the
Board of Directors for re-election to serve as the
directors of such class, and they were elected by the
Company's stockholders at the Annual Meeting. The
other directors of the Company, whose terms of office
as directors continued after the Annual Meeting, are
Frank E. Brick, Robert A. Goodman, Dr. Raj Reddy and
Norton W. Rose.
(c) The following votes were cast for each director
nominee:
For the election of Richard J. Bogomolny --
Votes for: 13,131,606
Votes withheld: 519,402; and
For the election of John H. Cribb --
Votes for: 13,131,321
Votes withheld: 519,687
(d) Proxy soliciting materials regarding the settlement
made by the Company prior to the Annual Meeting
terminating a proxy solicitation commenced by a
stockholder of the Company with respect to the Annual
Meeting have previously been furnished by the Company
to its stockholders.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K:
2 Asset Purchase Agreement by and among
Dynatech Corporation, IAQ Corporation,
Registrant and Itronix Corporation, a wholly
owned subsidiary of Registrant, dated as of
December 28, 1996, incorporated 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. 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.
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
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.
4.2 Text of form of Certificate for Registrant's
Common Stock, par value $.01 per share, and
description of graphic and image material
appearing thereon,
20
<PAGE> 21
incorporated herein by reference to
Exhibit 4.2 to Registrant's Form 10-Q for
the quarter ended June 30, 1995.
4.3 Rights Agreement between Registrant and
KeyBank National Association, as Rights
Agent, dated as of August 25, 1987, as
amended and restated as of July 31, 1996,
incorporated herein by reference to Exhibit
4 to Registrant's Form 8-K dated August 5,
1996.
4.3.1 Form of Rights Certificate
(included as Exhibit A to the
Rights Agreement included as
Exhibit 4.3 above). Until the
Distribution Date (as defined in
the Rights Agreement), the Rights
Agreement provides that the common
stock purchase rights created
thereunder are evidenced by the
certificates for Registrant's
Common Stock (the text of which and
description thereof is included as
Exhibit 4.2 above, which stock
certificates are deemed also to be
certificates for such common stock
purchase rights) and not by
separate Rights Certificates; as
soon as practicable after the
Distribution Date, Rights
Certificates will be mailed to each
holder of Registrant's Common Stock
as of the close of business on the
Distribution Date.
4.3.2 Letter agreement among Registrant,
KeyBank National Association and
Harris Trust and Savings Bank, dated
June 11, 1997, with respect to the
appointment of Harris Trust and
Savings Bank as successor Rights
Agent under the Rights Agreement
included as Exhibit 4.3 above,
incorporated herein by reference to
Exhibit 4.3.2 to Registrant's Form
10-K for the year ended March 31,
1997.
4.4 Indenture by and between Registrant and
AmeriTrust Company National Association, as
Trustee, dated as of June 1, 1987, regarding
Registrant's 7-1/2% Convertible Subordinated
Debentures Due 2012, incorporated herein by
reference to Exhibit 4.2 to Registrant's
Registration Statement on Form S-3,
Registration No. 33-14348, filed May 18,
1987.
4.4.1 Form of Registrant's 7-1/2%
Convertible Subordinated Debentures
Due 2012 (set forth in the Indenture
included as Exhibit 4.4 above).
4.5 Indenture by and between Registrant and Bank
One Trust Company, N.A., as Trustee, dated
as of December 1, 1995, regarding
Registrant's 5-3/4% Convertible Subordinated
Notes due 2003, incorporated herein by
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.
21
<PAGE> 22
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 10.1.2 to
Registrant's Form 10-Q for the
quarter ended September 30, 1997.
10.1.3 1990 Stock Option Plan for Non-
Employee Directors of Registrant,
as amended, filed herewith.
10.1.4 Non-Qualified Stock Option
Agreement between Registrant and
Raj Reddy, dated as of October 17,
1988, incorporated herein by
reference to Exhibit 10.1.6 to
Registrant's Form 10-K for the year
ended March 31, 1994.
10.1.4.a Description of amendments
extending the term of the
Agreement included as
Exhibit 10.1.4 above, filed
herewith.
10.1.5 1992 Restricted Stock Plan of
Registrant, incorporated herein by
reference to Exhibit 10.1.17 to
Registrant's Form 10-Q for the
quarter ended December 31, 1993.
10.1.5.a Amendment, dated December
7, 1993, to the Plan
included as Exhibit 10.1.5
above, incorporated herein
by reference to Exhibit
10.1.17.a to Registrant's
Form 10-Q for the quarter
ended December 31, 1993.
10.1.5.b Amendment, dated July 18,
1994, to the Plan included
as Exhibit 10.1.5 above,
incorporated herein by
reference to Exhibit
10.1.17.b to Registrant's
Form 10-Q for the quarter
ended September 30, 1994.
10.1.6 1995 Employee Stock Purchase Plan of
Registrant, as amended,
incorporated herein by reference to
Exhibit 10.1.7 to Registrant's Form
10-Q for the quarter ended
September 30, 1995.
10.1.7 1996 Stock Option Plan for
employees, directors and advisors
of Aironet Wireless Communications,
Inc., a subsidiary of Registrant,
incorporated herein by reference to
Exhibit 10.1.7 to Registrant's Form
10-K for the year ended March 31,
1997.
10.1.7.a Amended and Restated 1996
Stock Option Plan for
employees, directors and
advisors of Aironet
Wireless Communications,
Inc., a subsidiary of
Registrant, incorporated
herein by reference to
Exhibit 10.1.7.a to
Registrant's Form 10-K for
the year ended March 31,
1998.
10.1.8 Non-Competition Agreement by and
between Registrant and Robert F.
Meyerson, effective February 27,
1997, incorporated herein
22
<PAGE> 23
by reference to Exhibit 10.1.8 to
Registrant's Form 10-K for the year
ended March 31, 1997.
10.1.9 Employment Agreement between
Registrant and Frank E. Brick,
incorporated herein by reference to
Exhibit 10.1.9 to Registrant's Form
10-K for the year ended March 31,
1998.
10.1.9.a 1997 Section 162(m)
Performance-Based
Compensation Plan of
Registrant with respect to
its President and Chief
Executive Officer adopted
by the Performance-Based
Compensation Committee of
Registrant's Board of
Directors and approved by
Registrant's Stockholders
at the Annual Meeting
thereof, held September
10, 1997, incorporated
herein by reference to
Exhibit 10.1.9.a to
Registrant's Form 10-K for
the year ended March 31,
1998.
10.1.10 Amended and Restated Employment
Agreement between Registrant and
James G. Cleveland, effective as of
April 1, 1997, incorporated herein
by reference to Exhibit 10.1.10 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.1.11 Amended and Restated Employment
Agreement between Registrant and
Kenneth W. Haver, effective as of
April 1, 1997, incorporated herein
by reference to Exhibit 10.1.11 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.1.12 Amended and Restated Employment
Agreement between Registrant and
David D. Loadman, effective as of
April 1, 1997, incorporated herein
by reference to Exhibit 10.1.12 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.1.13 Amended and Restated Employment
Agreement between Registrant and
David W. Porter, effective as of
April 1, 1997, incorporated herein
by reference to Exhibit 10.1.13 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.1.14 Amended and Restated Employment
Agreement between Registrant and
Danny R. Wipff, effective as of
April 1, 1997, incorporated herein
by reference to Exhibit 10.1.14 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.1.15 Description of Key Employee
Retention Program, incorporated
herein by reference to Exhibit
10.1.15 to Registrant's Form 10-K
for the year ended March 31, 1998.
10.1.15.a Form of letter agreement
made with key employees
selected under the
retention program
described in Exhibit
10.1.15 above,
incorporated herein by
reference to Exhibit
10.1.15.a to Registrant's
Form 10-K for the year
ended March 31, 1998.
10.1.16 Letter of the Audit Committee of
Registrant's Board of Directors,
dated July 22, 1996, engaging
Norton Rose to act as the
Committee's delegate to advise and
assist Registrant's management,
incorporated herein by reference to
Exhibit 10.1.16 to Registrant's
Form 10-K for the year ended March
31, 1997.
10.1.17 Letter agreement of Registrant with
Robert A. Goodman, dated as of
December 29, 1997 and executed and
delivered January 20, 1998, for
continued consulting services
following certain changes in his
law practice, incorporated herein
by reference to Exhibit 10.1.17 to
Registrant's Form 10-K for the year
ended March 31, 1998.
10.2 Material Leases of Registrant.
23
<PAGE> 24
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 Lease Agreement between The
Woodlands Commercial Properties
Company, L.P. and Registrant, made
and entered into as of January 16,
1998, including Rider No. 1
thereto, for premises at 8302 New
Trails Drive, The Woodlands, Texas,
incorporated herein by reference to
Exhibit 10.2.2 to Registrant's Form
10-K for the year ended March 31,
1998.
10.2.3 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.
10.2.3.a Second Addendum, dated as of
October 5, 1995, to the Lease
included as Exhibit 10.2.3 above,
incorporated herein by reference to
Exhibit 10.2.4.a to Registrant's
Form 10-K for the year ended March
31, 1996.
10.2.3.b Third Addendum, dated as of March
1, 1996, to the Lease included as
Exhibit 10.2.3 above, incorporated
herein by reference to Exhibit
10.2.4.b to Registrant's Form 10-K
for the year ended March 31, 1996.
10.2.3.c Fourth Addendum, dated as of April
16, 1996, to the Lease included as
Exhibit 10.2.3 above, incorporated
herein by reference to Exhibit
10.2.2.c to Registrant's Form 10-Q
for the quarter ended June 30,
1997.
10.2.3.d Fifth Addendum, dated as of June
24, 1997, to the Lease included as
Exhibit 10.2.3 above, incorporated
herein by reference to Exhibit
10.2.2.d to Registrant's Form 10-Q
for the quarter ended June 30,
1997.
10.2.3.e Sixth Addendum, dated as of March,
1998, to the Lease included as
Exhibit 10.2.3 above, filed
herewith.
10.2.3.f Seventh Addendum, dated as of July
20, 1998, to the Lease included as
Exhibit 10.2.3 above, filed
herewith.
10.2.3.g Eighth Addendum, dated as of
September 8, 1998, to the Lease
included as Exhibit 10.2.3 above,
filed herewith.
10.2.4 Lease Contract between Desarrollos
\ Inmobiliarios Paso del Norte, S.A.
de C.V. and Productos y Servicios
de Telxon, S.A. de C.V., a
subsidiary of Registrant, for in
Ciudad Juarez, Chihuahua, Mexico,
made and entered into as of April
10, 1997, incorporated herein by
reference to Exhibit 10.2.4 to
Registrant's Form 10-K for the year
ended March 31, 1998.
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.
24
<PAGE> 25
10.3.1.b Security Agreement, dated
as of August 6, 1996, by
and among Registrant and
The Bank of New York, as
Agent, incorporated herein
by reference to Exhibit
10.3.2.b to Registrant's
Form 8-K dated August 16,
1996.
10.3.1.c Amendment No. 2, dated as
of December 16, 1996, to
the Agreement included as
Exhibit 10.3.1 above,
incorporated herein by
reference to Exhibit
10.3.2.c to Registrant's
Form 8-K dated December
16, 1996.
10.3.1.d Amendment No. 3, dated as
of December 12, 1997, to
the Agreement included as
Exhibit 10.3.1 above,
included herein by
reference to Exhibit
10.3.1.d to Registrant's
Form 10-K for the year
ended March 31, 1998.
10.3.2 Business Purpose Revolving
Promissory Note (Swing Line) made
by Registrant in favor of Bank One,
Akron, N.A., dated August 6, 1996,
incorporated herein by reference to
Exhibit 10.3.8 to Registrant's Form
8-K dated August 16, 1996.
10.3.2.a Bank One Security
Agreement, dated as of
August 6, 1996, by and
among Registrant and Bank
One, Akron N.A.,
incorporated herein by
reference to Exhibit
10.3.8.a to Registrant's
Form 8-K dated August 16,
1996.
10.3.3 Business Purpose Revolving
Promissory Note (Swing Line) made
by Registrant in favor of Bank One,
NA (fka Bank One, Akron, N.A.),
dated August 5, 1997 (extending the
credit facility evidenced by the
Note included as Exhibit 10.3.2
above), incorporated herein by
reference to Exhibit 10.3.8 to
Registrant's Form 10-Q for the
quarter ended June 30, 1997.
10.3.4 Business Purpose Revolving
Promissory Note (Swing Line) made
by Registrant in favor of Bank One,
NA (fka Bank One, Akron, N.A.),
dated August 4, 1998 (extending the
credit facility evidenced by the
Note included as Exhibit 10.3.3
above), filed with the Original
Filing.
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, 1998.
10.5 License, Rights, and Supply Agreement
between Aironet Wireless Communications,
Inc., a subsidiary of Registrant, and
Registrant, dated as of March 31, 1998,
incorporated herein by reference to Exhibit
10.5 to Registrant's Form 10-K for the year
ended March 31, 1998.
10.6 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.
10.7 Stock Purchase Agreement by and among
Registrant and FED Corporation, dated as of
March 31, 1998, with respect to FED
Corporation's purchase of all of the stock
of Virtual Vision, Inc. (fka Vision Newco,
Inc.), incorporated herein by reference
Exhibit 10.7 to Registrant's Form 10-K for
the year ended March 31, 1998.
10.7.1 Escrow Agreement by and among FED
Corporation, Registrant and First
Union National Bank, with respect to
the transactions under the Stock
Purchase Agreement included as
Exhibit 10.7 above, incorporated
herein by reference to Exhibit
10.7.1 to Registrant's Form 10-K for
the year ended March 31, 1998.
25
<PAGE> 26
10.8 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.
10.9 Amended and Restated Shareholder Agreement
by and among Metanetics Corporation fka New
Meta Licensing Corporation, and its
Shareholders, including the officers of
Registrant party to the Agreement included
as Exhibit 10.8 above, dated as of March 28,
1996, incorporated herein by reference to
Exhibit 10.9.3 to Registrant's Form 10-K for
the year ended March 31, 1996.
10.10 First Amendment, dated as of March 30,
1996, to the Agreement included as Exhibit
10.9 above, incorporated herein by
reference to Exhibit 10.9.4 to Registrant's
Form 10-K for the year ended March 31, 1996.
10.11 Stock Purchase Agreement by and among Meta
Holding Corporation, a subsidiary of
Registrant, and certain officers of
Registrant as Purchasers, dated as of March
30, 1996, incorporated herein by reference
to Exhibit 10.8 to Registrant's Form 10-K
for the year ended March 31, 1997.
10.12 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.
10.13 Stock Purchase Agreement by and between
Registrant and Telantis Capital, Inc., dated
as of March 31, 1997, incorporated herein by
reference to Exhibit 10.10 to Registrant's
Form 10-K for the year ended March 31, 1997.
10.14 Subscription Agreement by and among Aironet
Wireless Communications, Inc., a subsidiary
of Registrant, and the investors who
executed the same, dated as of March 31,
1998, incorporated herein by reference to
Exhibit 10.14 to Registrant's Form 10-K for
the year ended March 31, 1998.
10.14.1 Form of Warrant issued pursuant
to the Subscription Agreement
included as Exhibit 10.14 above,
incorporated herein by reference
to Exhibit 10.14.1 to
Registrant's Form 10-K for the
year ended March 31, 1998.
10.14.2 Stockholders Agreement by and
among Aironet Wireless
Communications, Inc. and its
Stockholders party thereto,
including Registrant and the
investors party to the
Subscription Agreement included
as Exhibit 10.14 above, entered
into as of March 31, 1998 in
connection with the transactions
under the Subscription Agreement,
incorporated herein by reference
to Exhibit 10.14.2 to
Registrant's Form 10-K for the
year ended March 31, 1998.
10.14.3 Registration Rights Agreement by
and among Aironet Wireless
Communications, Inc. and certain
of its security holders,
including Registrant and the
investors party to the
Subscription Agreement included
as Exhibit 10.14 above, entered
into as of March 31, 1998 in
connection with the transactions
under the Subscription Agreement,
incorporated herein by reference
to Exhibit 10.14.3 to
Registrant's Form 10-K for the
year ended March 31, 1998.
27. Financial Data Schedule as of September 30,
1998, filed herewith.
(b) Reports on Form 8-K
During the second quarter of fiscal 1999 to which
this Form 10-Q relates, the Registrant filed the
following Current Reports on Form 8-K: (i) Current
Report dated July 20, 1998, attaching the
Registrant's press release of that date which
announced its financial results for the first
quarter of fiscal 1999 (the press release, as
incorporated into the Form 8-K, includes
consolidated balance sheets for the Registrant for
June 30, 1998 (unaudited), and March 31, 1998, and
condensed consolidated statements of operations for
the three-month periods (unaudited) ended June 30,
1998 and 1997); and (ii) Current Report dated August
26, 1998, reporting the Registrant's settlement with
one of its stockholders over his proposals and
director nomination to have been presented at the
Registrant's September 15, 1998 annual meeting of
stockholders.
26
<PAGE> 27
Subsequent to the end of the first quarter of fiscal
1999, the Company filed a Current Report on Form 8-K
dated October 20, 1998, attaching the Registrant's
press release of that date which announced its
financial results for the second quarter of fiscal
1999, and the six month period, ended September 30,
1998 (the press release, as incorporated in the Form
8-K, includes consolidated balance sheets for the
Registrant for September 30, 1998 (unaudited), and
March 31, 1998, and condensed consolidated
statements of operations for the quarterly and six-
month periods (unaudited) ended September 30, 1998
and 1997).
27
<PAGE> 28
TELXON CORPORATION
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 16, 1998
TELXON CORPORATION
(Registrant)
/s/ Kenneth W. Haver
----------------------------
Kenneth W. Haver, Senior
Vice President and Chief
Financial Officer
<PAGE> 29
TELXON CORPORATION
EXHIBITS TO
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1998
<PAGE> 30
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Where
Filed
- - -----
<S> <C> <C>
* 2 Asset Purchase Agreement by and among Dynatech Corporation, IAQ Corporation,
Registrant and Itronix Corporation, a wholly owned subsidiary of Registrant, dated as
of December 28, 1996, incorporated herein by reference to Exhibit 2 to Registrant's
Form 8-K dated December 31, 1996.
* 3.1 Restated Certificate of Incorporation of Registrant, incorporated herein by reference
to Exhibit No. 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.
* 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 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.
* 4.2 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,
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C>
1997, with respect to the appointment of Harris Trust and Savings Bank as
successor Rights Agent under the Rights Agreement included as Exhibit 4.3
above, incorporated herein by reference to Exhibit 4.3.2 to Registrant's Form
10-K for the year ended March 31, 1997.
* 4.4 Indenture by and between Registrant and AmeriTrust Company National Association, as
Trustee, dated as of June 1, 1987, regarding Registrant's 7-1/2% Convertible
Subordinated Debentures Due 2012, incorporated herein by reference to Exhibit 4.2 to
Registrant's Registration Statement on Form S-3, Registration No. 33-14348, filed May
18, 1987.
* 4.4.1 Form of Registrant's 7-1/2% Convertible Subordinated Debentures Due 2012 (set
forth in the Indenture included as Exhibit 4.4 above).
* 4.5 Indenture by and between Registrant and Bank One Trust Company, N.A., as Trustee,
dated as of December 1, 1995, regarding Registrant's 5-3/4% Convertible Subordinated
Notes due 2003, incorporated herein by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-3, Registration No. 333-1189, filed February 23,
1996.
* 4.5.1 Form of Registrant's 5-3/4% Convertible Subordinated Notes due 2003 issued under
the Indenture included as Exhibit 4.5 above, incorporated herein by reference
to Exhibit 4.2 to Registrant's Registration Statement on Form S-3,
Registration No. 333-1189, filed February 23, 1996.
* 4.5.2 Registration Rights Agreement by and among Registrant and Hambrecht & Quist LLC
and Prudential Securities Incorporated, as the Initial Purchasers of
Registrant's 5-3/4% Convertible Subordinated Notes due 2003, with respect to
the registration of said Notes under applicable securities laws, incorporated
herein by reference to Exhibit 4.3 to Registrant's Registration Statement on
Form S-3, Registration No. 333-1189, filed February 23, 1996.
* 10.1 Compensation and Benefits Plans of Registrant.
* 10.1.1 Amended and Restated Retirement and Uniform Matching Profit-Sharing Plan of
Registrant, effective July 1, 1993, incorporated herein by reference to
Exhibit 10.1.1 to Registrant's Form 10-K for the year ended March 31, 1994.
* 10.1.1.a Amendment, dated January 1, 1994, to the Plan included as Exhibit 10.1.1
above, incorporated herein by reference to Exhibit 10.1.1.a to
Registrant's Form 10-K for the year ended March 31, 1994.
* 10.1.1.b Amendment, dated April 1, 1994, to the Plan included as Exhibit 10.1.1
above, incorporated herein by reference to Exhibit 10.1.1.b to
Registrant's Form 10-K for the year ended March 31, 1994.
* 10.1.1.c Amendment, dated January 1, 1994, to the Plan included as Exhibit 10.1.1
above,
</TABLE>
<PAGE> 32
<TABLE>
<S> <C> <C>
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 10.1.2 to Registrant's Form 10-Q for the
quarter ended September 30, 1997.
** 10.1.3 1990 Stock Option Plan for Non-Employee Directors of Registrant, as amended,
filed herewith.
* 10.1.4 Non-Qualified Stock Option Agreement between Registrant and Raj Reddy, dated as
of October 17, 1988, incorporated herein by reference to Exhibit 10.1.6 to
Registrant's Form 10-K for the year ended March 31, 1994.
** 10.1.4.a Description of amendments extending the term of the Agreement included
as Exhibit 10.1.4 above, filed herewith.
* 10.1.5 1992 Restricted Stock Plan of Registrant, incorporated herein by reference to
Exhibit 10.1.17 to Registrant's Form 10-Q for the quarter ended December
31, 1993.
* 10.1.5.a Amendment, dated December 7, 1993, to the Plan included as
Exhibit 10.1.5 above, incorporated herein by reference to
Exhibit 10.1.17.a to Registrant's Form 10-Q for the quarter
ended December 31, 1993.
* 10.1.5.b Amendment, dated July 18, 1994, to the Plan included as
Exhibit 10.1.5 above, incorporated herein by reference to
Exhibit 10.1.17.b to Registrant's Form 10-Q for the quarter
ended September 30, 1994.
* 10.1.6 1995 Employee Stock Purchase Plan of Registrant, as amended, incorporated
herein by reference to Exhibit 10.1.7 to Registrant's Form 10-Q for the
quarter ended September 30, 1995.
* 10.1.7 1996 Stock Option Plan for employees, directors and advisors of Aironet Wireless
Communications, Inc., a subsidiary of Registrant, incorporated herein by
reference to Exhibit 10.1.7 to Registrant's Form 10-K for the year ended
March 31, 1997.
* 10.1.7.a Amended and Restated 1996 Stock Option Plan for employees,
directors and advisors of Aironet Wireless Communications,
Inc., a subsidiary of
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C>
Registrant, incorporated herein by reference to Exhibit 10.1.7.a
to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.8 Non-Competition Agreement by and between Registrant and Robert F. Meyerson,
effective February 27, 1997, incorporated herein by reference to Exhibit
10.1.8 to Registrant's Form 10-K for the year ended March 31, 1997.
* 10.1.9 Employment Agreement between Registrant and Frank E. Brick, incorporated
herein by reference to Exhibit 10.1.9 to Registrant's Form 10-K for the year
ended March 31, 1998.
* 10.1.9.a 1997 Section 162(m) Performance-Based Compensation Plan of
Registrant with respect to its President and Chief Executive
Officer adopted by the Performance-Based Compensation
Committee of Registrant's Board of Directors and approved by
Registrant's Stockholders at the Annual Meeting thereof, held
September 10, 1997, incorporated herein by reference to
Exhibit 10.1.9.a to Registrant's Form 10-K for the year ended
March 31, 1998.
* 10.1.10 Amended and Restated Employment Agreement between Registrant and James G.
Cleveland, effective as of April 1, 1997, incorporated herein by reference to
Exhibit 10.1.10 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.11 Amended and Restated Employment Agreement between Registrant and Kenneth W.
Haver, effective as of April 1, 1997, incorporated herein by reference to
Exhibit 10.1.11 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.12 Amended and Restated Employment Agreement between Registrant and David D.
Loadman, effective as of April 1, 1997, incorporated herein by reference to
Exhibit 10.1.12 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.13 Amended and Restated Employment Agreement between Registrant and David W.
Porter, effective as of April 1, 1997, incorporated herein by reference to
Exhibit 10.1.13 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.14 Amended and Restated Employment Agreement between Registrant and Danny R.
Wipff, effective as of April 1, 1997, incorporated herein by reference to
Exhibit 10.1.14 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.15 Description of Key Employee Retention Program, incorporated herein by
reference to Exhibit 10.1.15 to
</TABLE>
<PAGE> 34
<TABLE>
<S> <C> <C>
Registrant's Form 10-K for the year ended March 31, 1998.
*
10.1.15.a Form of letter agreement made with key employees selected
under the retention program described in Exhibit 10.1.15
above, incorporated herein by reference to Exhibit 10.1.15.a
to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.1.16 Letter of the Audit Committee of Registrant's Board of Directors, dated July
22, 1996, engaging Norton Rose to act as the Committee's delegate to advise
and assist Registrant's management, incorporated herein by reference to
Exhibit 10.1.16 to Registrant's Form 10-K for the year ended March 31, 1997.
* 10.1.17 Letter agreement of Registrant with Robert A. Goodman, dated as of December
29, 1997 and executed and delivered January 20, 1998, for continued consulting
services following certain changes in his law practice, incorporated herein by
reference to Exhibit 10.1.17 to Registrant's Form 10-K for the year ended
March 31, 1998.
* 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 Lease Agreement between The Woodlands Commercial Properties Company, L.P. and
Registrant, made and entered into as of January 16, 1998, including Rider No.
1 thereto, for premises at 8302 New Trails Drive, The Woodlands, Texas,
incorporated herein by reference to Exhibit 10.2.2 to Registrant's Form 10-K
for the year ended March 31, 1998.
* 10.2.3 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.
* 10.2.3.a Second Addendum, dated as of October 5, 1995, to the Lease included as Exhibit
10.2.3 above, incorporated herein by reference to Exhibit 10.2.4.a to
Registrant's Form 10-K for the year ended March 31, 1996.
* 10.2.3.b Third Addendum, dated as of March 1, 1996, to the Lease included as Exhibit
10.2.3 above, incorporated herein by reference to Exhibit 10.2.4.b to
Registrant's Form 10-K for the year ended March 31, 1996.
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C>
* 10.2.3.c Fourth Addendum, dated as of April 16, 1996, to the Lease included as Exhibit
10.2.3 above, incorporated herein by reference to Exhibit 10.2.2.c to
Registrant's Form 10-Q for the quarter ended June 30, 1997.
* 10.2.3.d Fifth Addendum, dated as of June 24, 1997, to the Lease included as Exhibit
10.2.2 above, incorporated herein by reference to Exhibit 10.2.2.d to
Registrant's Form 10-Q for the quarter ended June 30, 1997.
** 10.2.3.e Sixth Addendum, dated as of March, 1998, to the Lease included as Exhibit
10.2.3 above, filed herewith.
** 10.2.3.f Seventh Addendum, dated as of July 20, 1998, to the Lease included as Exhibit
10.2.3 above, filed herewith.
** 10.2.3.g Eighth Addendum, dated as of September 8, 1998, to the Lease included as
Exhibit 10.2.3 above, filed herewith.
* 10.2.4 Lease Contract between Desarrollos Inmobiliarios Paso del Norte, S.A. de C.V.
and Productos y Servicios de Telxon, S.A. de C.V., a subsidiary of Registrant,
for in Ciudad Juarez, Chihuahua, Mexico, made and entered into as of April 10,
1997, incorporated herein by reference to Exhibit 10.2.4 to Registrant's Form
10-K for the year ended March 31, 1998.
* 10.3 Credit Agreements of Registrant.
* 10.3.1 Credit Agreement by and among Registrant, the lenders party thereto from time
to time and The Bank of New York, as letter of credit issuer, swing line
lender and agent for the lenders, dated as of March 8, 1996, incorporated
herein by reference to Exhibit 10.3.2 to Registrant's Form 10-K for the year
ended March 31, 1996.
* 10.3.1.a Amendment No. 1, dated as of August 6, 1996, to the Agreement
included as Exhibit 10.3.1 above, incorporated herein by reference
to Exhibit 10.3.2.a to Registrant's Form 8-K dated August 16,
1996.
* 10.3.1.b Security Agreement, dated as of August 6, 1996, by and among
Registrant and The Bank of New York, as Agent, incorporated herein
by reference to Exhibit 10.3.2.b to Registrant's Form 8-K dated
August 16, 1996.
* 10.3.1.c Amendment No. 2, dated as of December 16, 1996, to the Agreement
included as Exhibit 10.3.1 above, incorporated herein by reference
to Exhibit 10.3.2.c
</TABLE>
<PAGE> 36
<TABLE>
<S> <C> <C>
to Registrant's Form 8-K dated December 16, 1996.
* 10.3.1.d Amendment No. 3, dated as of December 12, 1997, to the Agreement
included as Exhibit 10.3.1 above, incorporated herein by reference
to Exhibit 10.3.1.d to Registrant's Form 10-K for the year ended
March 31, 1998.
* 10.3.2 Business Purpose Revolving Promissory Note (Swing Line) made by Registrant in
favor of Bank One, Akron, N.A., dated August 6, 1996, incorporated herein by
reference to Exhibit 10.3.8 to Registrant's Form 8-K dated August 16, 1996.
* 10.3.2.a Bank One Security Agreement, dated as of August 6, 1996, by and
among Registrant and Bank One, Akron N.A., incorporated herein by
reference to Exhibit 10.3.8.a to Registrant's Form 8-K dated
August 16, 1996.
* 10.3.3 Business Purpose Revolving Promissory Note (Swing Line) made by Registrant in
favor of Bank One, NA (fka Bank One, Akron, N.A.), dated August 5, 1997
(extending the credit facility evidenced by the Note included as Exhibit
10.3.2 above), incorporated herein by reference to Exhibit 10.3.8 to
Registrant's Form 10-Q for the quarter ended June 30, 1997.
* 10.3.4 Business Purpose Revolving Promissory Note (Swing Line) made by Registrant in
favor of Bank One, NA (fka Bank One, Akron, N.A.), dated August 5, 1997
(extending the credit facility evidenced by the Note included as Exhibit
10.3.3 above), filed with the Original Filing.
* 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, 1998.
* 10.5 License, Rights, and Supply Agreement between Aironet Wireless Communications, Inc., a
subsidiary of Registrant, and Registrant, dated as of March 31, 1998, incorporated herein
by reference to Exhibit 10.5 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.6 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.
* 10.7 Stock Purchase Agreement by and among Registrant and FED Corporation, dated as of March
31, 1998, with respect to FED Corporation's purchase of all of the stock of Virtual
Vision, Inc.
</TABLE>
<PAGE> 37
<TABLE>
<S> <C> <C>
(fka Vision Newco, Inc.), incorporated herein by reference Exhibit 10.7 to Registrant's
Form 10-K for the year ended March 31, 1998.
* 10.7.1 Escrow Agreement by and among FED Corporation, Registrant and First Union
National Bank, with respect to the transactions under the Stock Purchase
Agreement included as Exhibit 10.7 above, incorporated herein by reference to
Exhibit 10.7.1 to Registrant's Form 10-K for the year ended March 31, 1998.
* 10.8 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.
* 10.9 Amended and Restated Shareholder Agreement by and among Metanetics Corporation fka New
Meta Licensing Corporation, and its Shareholders, including the officers of Registrant
party to the Agreement included as Exhibit 10.8 above, dated as of March 28, 1996,
incorporated herein by reference to Exhibit 10.9.3 to Registrant's Form 10-K for the year
ended March 31, 1996.
* 10.10 First Amendment, dated as of March 30, 1996, to the Agreement included as Exhibit 10.9
above, incorporated herein by reference to Exhibit 10.9.4 to Registrant's Form 10-K for
the year ended March 31, 1996.
* 10.11 Stock Purchase Agreement by and among Meta Holding Corporation, a subsidiary of
Registrant, and certain officers of Registrant as Purchasers, dated as of March 30, 1996,
incorporated herein by reference to Exhibit 10.8 to Registrant's Form 10-K for the year
ended March 31, 1997.
* 10.12 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.
* 10.13 Stock Purchase Agreement by and between Registrant and Telantis Capital, Inc., dated as
of March 31, 1997, incorporated herein by reference to Exhibit 10.10 to Registrant's Form
10-K for the year ended March 31, 1997.
* 10.14 Subscription Agreement by and among Aironet Wireless Communications, Inc., a subsidiary
of Registrant, and the investors who executed the same, dated as of March 31, 1998,
incorporated herein by reference to Exhibit 10.14 to Registrant's Form 10-K for the year
ended March 31, 1998.
* 10.14.1 Form of Warrant issued pursuant to the Subscription Agreement included as
Exhibit 10.14 above, incorporated herein by reference to Exhibit 10.14.1 to
Registrant's Form 10-K for the year ended March 31, 1998.
* 10.14.2 Stockholders Agreement by and among Aironet Wireless Communications, Inc. and
its Stockholders party thereto, including Registrant and the investors party to
the Subscription Agreement included as Exhibit 10.14 above, entered into as of
March 31, 1998 in connection with the transactions under the Subscription
Agreement, incorporated
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
herein by reference to Exhibit 10.14.2 to Registrant's Form 10-K for the year
ended March 31, 1998.
* 10.14.3 Registration Rights Agreement by and among Aironet Wireless Communications, Inc.
and certain of its security holders, including Registrant and the investors
party to the Subscription Agreement included as Exhibit 10.14 above, entered
into as of March 31, 1998 in connection with the transactions under the
Subscription Agreement, incorporated herein by reference to Exhibit 10.14.3 to
Registrant's Form 10-K for the year ended March 31, 1998.
** 27. Financial Data Schedule as of September 30, 1998, filed herewith.
* Previously filed
** Filed herewith
</TABLE>
<PAGE> 1
Exhibit 10.1.3
TELXON CORPORATION
1990 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED THROUGH AND EFFECTIVE
AS OF SEPTEMBER 15, 1998)
1. PURPOSE OF THE PLAN. The purpose of this Plan is to promote the best
interests of the Company and its stockholders by enabling the Company to attract
and retain the services of experienced and knowledgeable independent directors
by providing such directors the opportunity, pursuant to Options granted under
the Plan, to acquire a proprietary interest in the Company and thereby encourage
them to put forth their maximum efforts for the continued success and growth of
the Company.
2. DEFINITIONS. In addition to such other capitalized terms as are
defined elsewhere in this Plan, the following terms shall when used in this Plan
have the respective meanings set forth below:
(a) "Act" means the Securities Exchange Act of 1934, as
amended from time to time.
(b) "Authorized Shares" means the maximum aggregate number of
shares of Common Stock specified in Section 4(a) as being authorized
for issuance and sale under Options granted pursuant to the Plan,
subject to adjustment thereof in accordance with Section 12.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Commission" means the United States Securities and
Exchange Commission.
(f) "Committee" means the Committee appointed by the Board in
accordance with Section 5(a), if a Committee is appointed. The members
of such Committee shall be members of the Board. If no Committee has
been appointed, any reference to the "Committee" shall be deemed a
reference to the "Board."
<PAGE> 2
(g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Company.
(h) "Company" means Telxon Corporation, a Delaware
corporation.
(i) "Director" means any person elected or duly appointed in
accordance with the certificate of incorporation or by-laws of the
Company, or applicable law, to serve on the Board.
(j) "Employee" means any person, including officers and
Directors who are also officers, employed by the Company or any
Subsidiary. The payment of director's fees by the Company shall not be
sufficient to constitute a person as an "Employee" of the Company.
(k) "Family Member" means (i) the spouse or any sibling of an
Optionee or any lineal descendant (including, but not limited to,
adopted and step children) of any of the foregoing, (ii) a trust for
the exclusive benefit of the Optionee and/or person(s) described in
clause (i) of this Section 2(k), or the trustee of such a trust in his,
her or its capacity as such, (iii) a partnership, corporation, limited
liability company or similar entity the partners, stockholders or other
owners of which include only the Optionee and/or person(s) described in
clause (i) of this Section 2(k).
(l) "Non-Profit Organization" means any organization which is
exempt from United States income taxes under Section 501(c)(3), (4),
(5), (6), (7), (8) or (10) of the Code.
(m) "Option" means a right granted to a non-Employee Director
pursuant to the Plan to purchase a specified number of shares of Common
Stock at a specified price during a specified period and on such other
terms and conditions as may be specified pursuant to the Plan. Options
may be granted as Tax Qualified Options or as Options which do not
qualify as Tax Qualified Options.
(n) "Option Agreement" means the written agreement evidencing
an Option by and between the Company and the Optionee as required by
Section 14.
(o) "Optioned Stock" means the Common Stock subject to an
Option.
(p) "Optionee" means a non-Employee Director who receives an
Option.
2
<PAGE> 3
(p) "Plan" means this Telxon Corporation 1990 Stock Option
Plan for Non-Employee Directors.
(q) "Rule 16b-3" means Rule 16b-3 promulgated by the
Commission under the Act or any similar successor regulation exempting
certain transactions involving stock-based compensation arrangements
from the liability provisions of Section 16 of the Act, as adopted and
amended from time to time and as interpreted by formal or informal
opinions of, and releases published or other interpretive advice
provided by, the Staff of the Commission.
(r) "Securities Law Requirements" means the Securities Act of
1933, as amended from time to time, and the Act and the rules and
regulations promulgated by the Commission under such laws, as such
rules and regulations are adopted and amended from time to time,
including but not limited to Rule 16b-3, and as all such laws, rules
and regulations are interpreted by formal or informal opinions of, and
releases published or other interpretive advice provided by, the Staff
of the Commission, and the requirements of any stock exchange,
automated inter-dealer quotation system or other recognized securities
market on which the Common Stock is listed or traded or in which the
Common Stock is included, as adopted and amended from time to time and
as interpreted by formal or informal opinions of, and other
interpretive advice provided by, the representatives of such stock
exchange, quotation system or other securities market.
(s) "Shares" means the Common Stock as adjusted in accordance
with Section 12.
(t) "Subsidiary" means a corporation of which not less than
fifty percent (50%) of the voting shares are owned by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(u) "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.
(v) "Tax Qualified Option" means an Option which is intended
at the time of grant to qualify for special tax treatment under Section
422A or other particular provisions of the Code and the regulations,
rulings and procedures promulgated, published or otherwise provided
thereunder, as adopted and amended from time to time.
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3. QUALIFICATION OF PLAN. The Plan is intended to qualify for an
exemption from the operation of Section 16(b) of the Act, pursuant to Rule
16b-3. Further, with respect to Options granted hereunder prior to November 1,
1996, the Plan is structured to comply with the requirements of Rule
16b-3(c)(2)(ii) as then in effect regarding disinterested administration and
formula awards to ensure that Directors then receiving grants under the Plan
continue to be "disinterested persons," as that term is defined in Rule
16b-3(c)(2)(i) as in effect prior to November 1, 1996, for the purpose of
administering the Company's employee stock option plans under such Rule. Insofar
as transactions under this Plan are thus intended to comply with all applicable
conditions of Rule 16b-3, to the extent that any provision of the Plan or action
by the Board or the Committee fails to so comply, such provision or action shall
be deemed null and void to the extent permitted by law and deemed advisable by
the Board or, but only with respect to actions taken by it, the Committee.
4. STOCK SUBJECT TO THE PLAN.
(a) NUMBER OF SHARES ISSUABLE. Subject to adjustment in
accordance with the provisions of Section 12, the maximum aggregate
number of Authorized Shares which may be issued and sold under Options
granted pursuant to the Plan is 400,000 shares of Common Stock. The
Shares issued and sold upon the exercise of Options may be treasury
Shares, Shares of original issue or a combination thereof.
(B) COMPUTATION OF SHARES AVAILABLE FOR GRANT. For purposes of
computing the number of Authorized Shares available from time to time
under the Plan for the grant of Options, the number of Shares subject
to each Option granted pursuant to the Plan shall be provisionally
counted against the Authorized Shares from and after the grant of such
Option but only for so long as and to the extent that such Option shall
remain outstanding and unexercised. Upon the exercise, in whole or in
part, of an Option, the number of Shares issued upon such exercise
shall be permanently deducted from the Authorized Shares, provided that
no such permanent deduction shall be made, and the provisional
deduction against the Authorized Shares shall be reversed, to the
extent that the exercise price and/or the withholding taxes with
respect to such exercise are paid through the delivery to the Company
by the person exercising the option of Shares already owned by such
person and/or through the withholding by the Company of Shares from the
total number of Shares with respect to which the Option is exercised.
The provisional deduction against the Authorized Shares shall likewise
be reversed to the extent of the unexercised portion of an Option upon
the expiration, lapse, cancellation, surrender, forfeiture or other
termination of such Option. The Shares covered by
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any such reversal of a provisional deduction against the Authorized
Shares shall immediately become available for the granting of new
Options under the Plan with respect thereto.
5. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE. The Plan shall be administered by the Board or
the Board may, in its discretion, appoint a Committee to administer the
Plan, subject to such terms and conditions as the Board may prescribe,
which Committee, once appointed, shall continue to serve until
otherwise directed by the Board; provided that the granting of Options
under Section 6(c) and any action under the Plan affecting the number
of Shares covered thereby, the exercise price payable thereunder or the
times at which the same may be exercised (including, but not limited
to, the acceleration of the vesting thereof or any extension of the
period (subject to the maximum term fixed by Section 7(a)) during which
such an Option may be exercised) shall not be taken by the Committee
but shall lie solely within the authority of the full Board, subject to
the abstention of the Optionee from any decision regarding any Option
held by him or her. Subject to the provisions of the Plan, the
Committee has authority to manage and control the operation of the
Plan, interpret the provisions of the Plan, and prescribe, amend and
rescind rules and regulations relating to the Plan. From time to time
the Board may increase the size of the Committee and may appoint
additional members thereof, remove members (with or without cause),
fill vacancies however caused and remove all members of the Committee
and thereafter directly administer the Plan.
(b) POWERS OF THE COMMITTEE. Subject to the provisions of this
Plan, the Committee shall have the authority, in its sole discretion:
(i) To determine, upon review of relevant information
in accordance with Section 8(b) of the Plan, the "Fair Market
Value" (as defined in said Section 8(b)) of the Shares;
(ii) To determine the terms and provisions of each
Option;
(iii) To amend any outstanding Option;
(iv) To authorize any person to prepare and execute
on behalf of the Company any instrument deemed by the
Committee to be necessary or advisable to evidence or
effectuate the Plan, any Option granted thereunder or any
amendment to the Plan or any Option;
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(v) To interpret the Plan;
(vi) To prescribe, amend and rescind, if deemed
necessary or appropriate, rules and regulations relating to
the Plan, to the extent not inconsistent with the Plan;
(vii) To make all other determinations the Committee
may deem necessary or advisable in connection with the
administration of the Plan; and
(viii) To accelerate the time as of which any Option
shall vest and may be exercised by the Optionee; provided,
however, that the Optionee shall not participate in any
decision regarding acceleration of vesting of any Option held
by him or her.
(c) EFFECT OF BOARD AND COMMITTEE DECISIONS. All decisions,
determinations and actions of the Board and the Committee in connection
with the construction, interpretation, administration, application,
operation and implementation of the Plan shall be final, conclusive and
binding on the Company, its stockholders and Subsidiaries, all
Directors and Optionees and the respective legal representatives,
heirs, successors and assigns of all of the foregoing and all other
persons claiming under or through any of them.
(d) EXCULPATION AND INDEMNIFICATION. No member of the Board or
the Committee, and no Employee or other agent acting on behalf of the
Board or the Committee, shall be personally liable for any decision,
determination or action made or taken, or failed to be made or taken,
with respect to this Plan or any Option granted hereunder, and the
Company shall fully protect each such person in respect of any such
decision, determination or action and shall indemnify each such person
against any and all claims, losses, damages, expenses and liabilities
arising from or in connection with any such decision, determination or
action.
6. ELIGIBILITY; FORMULA GRANTS.
(a) ELIGIBILITY. Each Director who is not an Employee shall be
eligible to receive grants of Options under the Plan.
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(b) FORMULA GRANTS.
(i) INITIAL GRANTS. Each non-Employee Director who is
newly elected or appointed to the Board after May 19, 1992
shall automatically be granted an Option (the "Initial Grant")
to purchase 25,000 Shares of Common Stock (subject to
adjustment as provided in Section 12) on the day he or she
joins the Board.
(ii) CONTINUING GRANTS. Each non-Employee Director
shall automatically be granted an Option (the "Continuing
Grant") to purchase 10,000 Shares of Common Stock (subject to
adjustment as provided in Section 12) on each anniversary of
his or her election or last re-election to the Board so long
as such Director is serving on the Board on the date of such
anniversary.
(c) DISCRETIONARY GRANTS. In its sole discretion, the Board
may at any time and from time to time while the Plan is in effect grant
to any one or more of the non-Employee Directors Options to purchase
Shares on such terms and subject to such provisions as the Board may,
and the Board is hereby authorized to, determine (which terms and
provisions need not be identical), including but not limited to, (i)
the number of Shares subject to the Option, (ii) the exercise price per
Share (subject to the provisions of Section 8), and (iii) whether the
Option shall become exercisable over a period of time and when it shall
be fully exercisable. Any Options granted under this Section 6(c) shall
be in addition to those automatically granted to eligible Directors
under Section 6(b) above, and there shall be no limit on the number of
Options which may be granted to any one eligible Director or on the
aggregate number of Shares subject to purchase thereunder.
7. TERM OF OPTIONS; VESTING.
(a) TERM OF OPTIONS. The term of each Option shall be seven
(7) years from the date of grant thereof provided that the Committee,
if it intends that a particular Option qualify as a Tax-Qualified
Option, shall observe such restrictions on the term of such Option as
may be imposed by applicable tax laws in order for such Option so to
qualify. In the exercise of its authority under Section 5(b)(iii) and
other applicable provisions of the Plan, the Committee may extend the
term of any Option outstanding under the Plan, provided that the term
of the Option, as so extended, shall expire no later than ten (10)
years after the date as of which the Option was originally granted.
Each Option shall continue in effect in accordance with its terms
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<PAGE> 8
notwithstanding that the Plan may be terminated prior to the expiration
of the term of such Option.
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(b) VESTING.
(i) INITIAL GRANTS. Each Option constituting an
Initial Grant shall be exercisable as to one-third of the
Shares subject to the Option after the first anniversary of
the grant date, exercisable as to two-thirds of the Shares
subject to the Option after the second anniversary of the
grant date, and exercisable as to all or any part of the
Shares subject to the Option after the third anniversary of
the grant date.
(ii) CONTINUING GRANTS. Each Option constituting a
Continuing Grant shall be exercisable as to all or any part of
the Shares subject to the Option after the third anniversary
of the grant date.
(iii) DISCRETIONARY GRANTS. Each Option granted
pursuant to Section 6(c) shall be exercisable at such times
and as to all or any part of the Shares subject to the Option
as determined by the Board at the time of grant and reflected
in the Option Agreement evidencing the same.
8. EXERCISE PRICE.
(a) MINIMUM PRICE REQUIRED. The per Share exercise price for
the Shares subject to an Option shall be (i) with respect to Options
granted under Section 6(b), the Fair Market Value per Share as of the
day prior to the date of grant of such Option, and (ii) with respect to
Options granted under Section 6(c), such price per Share as the Board
may determine at the time of grant and reflected in the Option
Agreement evidencing the same, but in no event less than the Fair
Market Value per Share as of the day prior to the date of grant.
(b) DEFINITION OF "FAIR MARKET VALUE". For all purposes under
the Plan, "Fair Market Value" per Share shall be determined by the
Committee in its sole discretion; provided that if the Shares are
included in the NASDAQ National Market or listed on a stock exchange on
the date as of which the same is to be determined, the Fair Market
Value per Share shall be the closing price on such quotation system or
exchange which is the principal trading market for the Shares on the
date of determination or, if no sale price was reported for the Shares
on the date of determination, the closing price on such principal
trading market for the last trading day prior to the date of
determination for which a sale price was reported; provided further,
however, that if the foregoing method of determining Fair Market Value
is inconsistent with the then existing tax law requirements with
respect to any Option which the Committee intends to qualify as a Tax
Qualified Option, then the Fair Market Value per Share shall be
determined by the
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Committee in such manner as is required for such Tax Qualified Option
to qualify as such.
9. FORM OF PAYMENT.
(a) ACCEPTABLE FORMS OF CONSIDERATION. Except as may otherwise
be specified by the Committee in its sole discretion at the time of
grant thereof and reflected in the Option Agreement evidencing such
Option, the following forms of consideration will be accepted in
payment of the exercise price for the Shares to be issued upon exercise
of an Option: (i) cash, (ii) personal check, (iii) bank cashier's
check, (iv) already owned Shares (duly endorsed for transfer with
signature guaranteed), (v) Shares withheld from the Shares to be issued
upon such exercise, (vi) subject to compliance with applicable law, a
commitment for the delivery to the Company of proceeds from the sale,
pursuant to a brokerage or similar arrangement, of Shares to be issued
upon exercise of the Option, or (vii) any combination of the foregoing.
The person or persons entitled to exercise the Option shall be entitled
to elect from the foregoing forms of consideration the form(s) to be
used in effecting payment with respect to a particular exercise;
provided that any election by an Optionee to use already owned Shares
or have Shares withheld from those issuable upon such exercise shall be
effective only if made in accordance with the applicable requirements
of Rule 16b-3; and provided further that a commitment for the delivery
to the Company of proceeds from the sale, pursuant to a brokerage or
similar arrangement, of Shares to be issued upon exercise of an Option
will not be accepted from an Optionee if under Securities Law
Requirements such a sale would be matched with such exercise to result
in "short-swing" profit liability under Section 16(b) of the Act on the
part of such Optionee with respect to such transaction.
(b) VALUATION OF SHARES DELIVERED OR WITHHELD. Where already
owned Shares, or Shares withheld from those issuable upon such
exercise, are used in payment of the exercise price, such Shares shall
be valued at Fair Market Value as of the day immediately preceding the
date of exercise.
(c) DELIVERY OF ALREADY OWNED SHARES. The Company shall not be
obligated to accept from an Optionee Shares he or she already owns as
full or partial payment of the exercise price of an Option unless such
tender is accompanied by a written statement of the Optionee certifying
that either (i) the Shares tendered in payment were acquired other than
through the exercise of a stock option granted by the Company, or (ii)
the Shares tendered in payment were acquired through the exercise, on
such date(s) as shall be recited in such statement (any such Shares
acquired through such an exercise occurring less than six (6)
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months prior to the date of exercise of the Option in respect of which
such already owned Shares are tendered are ineligible for use as
payment toward such Option exercise), of stock option(s) granted by the
Company. The Committee may, in its sole discretion, accept, in lieu of
physical delivery of the stock certificates evidencing such Shares,
such constructive delivery of such Shares as may be satisfactory to the
Committee.
10. METHOD OF EXERCISE.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A STOCKHOLDER. Any
Option granted hereunder shall be exercisable at such times and under
such conditions as determined by the Committee and as permitted under
the Plan. An Option may not be exercised for a fraction of a Share. In
order to exercise an Option, the person or persons entitled to exercise
it shall deliver to the Company written notice of the number of Shares
with respect to which the Option is being exercised, accompanied by
payment in full of the aggregate price for the Shares so to be
acquired. To constitute an effective exercise of an Option, such notice
and payment shall be addressed to the attention of the Treasurer of the
Company and must be received at the principal executive office of the
Company by 5:00 p.m., local time, on the date of expiration or
termination of the Option. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends nor any other rights as a
stockholder shall exist with respect to the Optioned Stock
notwithstanding the exercise of the Option. No adjustment will be made
for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12.
Exercise of an Option shall result in a decrease in the number
of Shares which thereafter shall be available for sale under such
Option by the number of Shares as to which the Option is exercised,
including any Shares withheld from the Shares to be issued pursuant to
such exercise to cover the exercise price.
(b) TERMINATION OF SERVICE. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option,
in the event that an Optionee shall cease to be a Director (other than
by reason of the Optionee's death or disability), he may exercise his
Option (to the extent that he was entitled to exercise it at the time
he ceased to be a Director) until the earlier of (i) the date three (3)
months after the date Optionee ceased to be a Director or (ii) the
expiration date of such Option, and the Option shall terminate on the
earlier of such dates.
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(c) DEATH OF OPTIONEE. Except as may otherwise be specified by
the Committee in its sole discretion at the time of grant thereof and
reflected in the Option Agreement evidencing such Option, upon the
death of an Optionee:
(i) who is at the time of his death a Director of the
Company, the Option may be exercised (to the extent the
Optionee would have been entitled to do so had he continued
living and terminated directorship six (6) months after the
date of death) by his Successor until the earlier of (A) the
date six (6) months (or, if the Committee intends that a
particular Option qualify as a Tax Qualified Option, such
lesser period of time within which the applicable tax laws may
require that the Option be exercised in order for such Option
so to qualify) following the date of the Optionee's death or
(B) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates; or
(ii) within thirty (30) days after the termination of
Optionee's directorship (other than termination due to
disability), the Option may be exercised (to the extent the
Optionee was entitled to do so at the date of termination of
his directorship) by his Successor until the earlier of (A)
the date six (6) months following the date of the Optionee's
death (or, if the Committee intends that a particular Option
qualify as a Tax Qualified Option, such lesser period of time
within which the applicable tax laws may require that the
Option be exercised in order for such Option so to qualify) or
(B) the expiration date of such Option, and the Option shall
terminate on the earlier of such dates.
(d) DISABILITY OF OPTIONEE. Except as may otherwise be
specified by the Committee in its sole discretion at the time of grant
thereof and reflected in the Option Agreement evidencing such Option,
if an Optionee's directorship terminates due to Optionee having become
permanently and totally disabled within the meaning of Section 23(e)(3)
of the Code ("disability"), the Option may be exercised (to the extent
the Optionee was entitled to do so as of the effective date of the
termination of Optionee's directorship by reason of such disability)
until the earlier of (i) the date one (1) year after the effective date
of such termination or (ii) the expiration date of such Option, and the
Option shall terminate on the earlier of such dates.
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11. LIMITED TRANSFERABILITY OF OPTIONS.
(a) Options granted under the Plan and any rights and
privileges appertaining thereto (i) may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner by the Optionee
other than (1) by will or the laws of descent and distribution, (2)
pursuant to a "qualified domestic relations order" as defined in Code
Section 414(p)(1)(B) and satisfying the requirements of Code Section
414(p)(1)(A), or (3) without the payment of any cash or other economic
consideration by the transferee to the transferor, to (A) a Family
Member, (B) a Non-Profit Organization, or (C) a charitable trust, and
(ii) shall not be subject to execution, attachment or similar process.
A transfer of an Option pursuant to one of the foregoing clauses
(i)(1)-(3) may relate to all or any part of the Shares (but must be for
whole Shares) which then continue to be subject to such Option. Written
evidence of any such transfer, accompanied by the transferring
Optionee's original copy of the Grant Agreement evidencing the
transferred Option, shall be promptly provided to the Company, in the
case of clauses (i)(1)-(2), upon the entry of the court order
effecting, or other judicial authorization or direction of, such
transfer or, in the case of clause (i)(3), upon the transferor's making
of such transfer, which transfer must in all cases comply with the
requirements of Section 15 and otherwise be in form and substance
reasonably acceptable to the Company before the Company shall be
obligated to recognize such transfer. Upon its receipt of the
foregoing, the Company shall cancel the original Option Agreement and
re-issue a replacement Option Agreement to the transferee for the
Option or portion thereof so transferred and to the transferring
Optionee for any balance of the Option he or she retains without
transfer.
(b) Upon the transfer of an Option in accordance with Section
11(a), the transferee shall succeed to, and be entitled to exercise,
all of the rights and privileges of the transferring Optionee, provided
that the Option in the hands of the transferee shall continue to be
subject to all of the terms, conditions and restrictions under the Plan
and the Option Agreement with respect to such Option which would be
applicable to the Option were it still held by the Optionee to whom it
was originally granted, including, without limitation, any requirement
for the continued exercisability or other effectiveness of the Option
based upon the life, employment or other status of the original
Optionee.
(c) The restrictions on transferability set forth in Section
11(a) shall not be construed to limit the ability of an Optionee to
elect to pay all or any portion of the exercise price using the form of
consideration described in clause (vi) of Section 9(a).
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12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER.
(e) ADJUSTMENTS, IN GENERAL. Subject to the provisions of
Paragraph (b) of this Section 12 and to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized
for issuance under the Plan but as to which no Options have yet been
granted or which due to the expiration, lapse, cancellation, surrender,
forfeiture or other termination of an Option under this Plan are again
available for grant, as well as the price per Share covered by each
such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued and outstanding Shares
resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of Shares or any other increase or
decrease in the aggregate number of issued and outstanding Shares
effected without receipt of consideration by the Company; provided,
however, that the issuance of Shares pursuant to the conversion or
exchange of any securities of the Company convertible into or
exchangeable for Shares shall not be deemed to have been "effected
without receipt of consideration." Any fractional Shares which would
otherwise result from any such adjustments shall be eliminated either
by deleting all fractional Shares or by appropriate rounding to the
next higher (fractions of one-half or more) or lower (fractions of less
than one-half) whole Share. All such adjustments shall be made by the
Board in its sole discretion. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into or exchangeable for shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made to, the
number of or exercise price for Shares subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, all outstanding Options will terminate immediately prior to
the consummation of such proposed action, unless otherwise provided by
the Board. The Board may, in the exercise of its sole discretion in
such instances, declare that any Option shall terminate as of a date
fixed by the Board and give each Optionee the right to exercise his
Option as to all or any part of the Optioned Stock, including Shares as
to which the Option would not otherwise then be exercisable.
Subject to the provisions of Paragraph (b) of this Section 12,
in the event of a sale of all or substantially all of the assets of the
Company, or the merger or consolidation of the Company with or into
another corporation, each outstanding Option shall be assumed or an
equivalent option shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the Board,
in the exercise of its sole discretion, determines that, in lieu of
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<PAGE> 15
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.
(f) SPECIAL ADJUSTMENTS UPON CHANGE IN CONTROL. In the event
of a "Change in Control" of the Company (as defined in Paragraph (c) of
this Section 12), unless otherwise determined by the Board in its sole
discretion prior to the occurrence of such Change in Control, the
following acceleration and valuation provisions shall apply:
(i) Any Options outstanding as of the date of such
Change in Control that are not yet fully vested on such date
shall become fully vested; and
(ii) The value of all outstanding Options, measured
by the excess of the "Change in Control Price" (as defined in
Paragraph (d) of this Section 12) over the exercise price,
shall be cashed out. The cash out proceeds shall be paid to
the Optionee or, in the event of death of an Optionee prior to
payment, to his Successor.
(g) DEFINITION OF "CHANGE IN CONTROL". For purposes of this
Section 12, a "Change in Control" means the happening of any of the
following:
(i) When any "person," as such term is used in
Sections 13(d) and 14(d) of the Act (other than the Company, a
Subsidiary or a Company or Subsidiary employee benefit plan,
including any trustee of such a plan acting as trustee)
becomes the "beneficial owner" (as defined in Rule 13d-3
promulgated by the Commission under the Act, as adopted and
amended from time to time and as interpreted by formal or
informal opinions of, and releases published or other
interpretive advice provided by, the Staff of the Commission),
directly or indirectly, of securities of the Company
representing fifty percent (50%) or more of the combined
voting power of the Company's then outstanding securities; or
(i) The consummation of a transaction requiring
stockholder approval and involving the sale of all or
substantially all of the assets of the
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Company or the merger or consolidation of the Company with or
into another corporation.
(h) DEFINITION OF "CHANGE IN CONTROL PRICE". For purposes of
this Section 12, "Change in Control Price" shall be, as determined by
the Board, (i) the highest closing sale price of a Share, as reported
by the NASDAQ National Market, any stock exchange on which the Shares
are listed or any other recognized securities market on which the
Shares are traded, at any time within the sixty (60) day period
immediately preceding the date of the Change in Control (the "Sixty-Day
Period"), or (ii) the highest price paid or offered, as determined by
members of the Board other than the Optionees, in any bona fide
transaction or bona fide offer related to the Change in Control, at any
time within the Sixty-Day Period.
13. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for
all purposes, be (i) with respect to Options granted under Section 6(b), the
dates for the automatic granting thereof as specified in said Section 6(b), and
(ii) with respect to Options granted under Section 6(c), the date on which the
Board makes the determination to grant such Options.
11. OPTION AGREEMENTS. As a condition to the effectiveness of each
grant of an Option under this Plan, the Optionee shall enter into a written
Option Agreement in such form as may be authorized by the Committee from time to
time. Subject to the provisions of Section 19(a), each such Option Agreement
shall contain such provisions as are required by the terms of this Plan and may
contain such additional provisions not inconsistent with the terms of this Plan
as the Committee in its sole discretion may from time to time authorize. Each
Option Agreement shall also provide for such minimum waiting period from the
date of grant before the Option may be exercised, and such minimum holding
period from the date of the acquisition of Shares upon exercise of an Option for
which such Shares must be held before making any disposition of such Shares, as
may be required by Rule 16b-3.
12. CONDITIONS UPON ISSUANCE OF SHARES AND TRANSFERS OF OPTIONS.
Notwithstanding anything express or implied to the contrary in the Plan or any
Option Agreement made hereunder:.
(a) No Shares shall be issued with respect to an Option unless
the exercise of such Option and the issuance and delivery of such
Shares pursuant thereto, nor shall the transfer of an Option be
effective under Section 11 unless the same, shall comply with all
applicable Securities Law Requirements and all other applicable
provisions of law, including without limitation, any applicable state
"blue sky" laws and foreign (national and provincial) securities laws
and the rules
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and regulations promulgated under any of such laws, and shall be
further subject to the approval of counsel for the Company with respect
to such compliance As a condition to the exercise of an Option or the
issuance of Shares upon exercise of an Option, or to the transfer of an
Option under Section 11, the Company may require the person exercising
such Option to make such representations and warranties to the Company
as may be required, in the opinion of counsel for the Company, by any
of the aforementioned Securities Law Requirements and other laws, which
may include, without limitation, representations and warranties that
the Shares which are being or may be purchased thereunder are being or
will be acquired only for investment and without any present intention
to sell or distribute such Shares.
(b) The Company shall not have any liability to any Optionee
in respect of any delay in the sale or issuance of Shares, or the
transfer of an Option, hereunder until the Company is able to obtain
authority from any governmental authority (domestic or foreign) or
self-regulatory organization having jurisdiction thereover, which
authority is deemed by the Company's counsel to be necessary to the
lawful sale, issuance or transfer of such Shares or Option, as the case
may be, or any failure to sell or issue such Shares, or to effect any
such Option transfer, as to which the Company is unable to obtain such
requisite authority.
(c) The Company may, but shall be under no obligation to,
effect or obtain any registration or other qualification or approval of
any Option granted or transferred hereunder, or of any Shares issuable
upon the exercise thereof, under any applicable Securities Law
Requirements or any other applicable provisions of law, including
without limitation, any applicable state "blue sky" laws and foreign
(national and provincial) securities laws and the rules and regulations
promulgated under any of such laws, and in the event any such
registration, qualification or approval is not effected or obtained,
such Option or Shares, as the case may be, shall be subject to such
transfer and/or other restrictions (including, if so provided by such
laws, rules and regulations, the prohibition of a particular
transaction) as may be imposed by such laws, rules and regulations
under such circumstances. By way of illustrating, but without limiting
the generality of, the foregoing provisions of this Section 14(c), as
of the time of the September 10, 1997 amendments to the Plan, the
Shares issuable upon the exercise of an Option by a Director were
covered by an effective registration statement which the Company had
prior to that date elected to file (consistent with the discretion
recognized in this Section 14(c)) with the Commission on Form S-8 and
would be freely tradable (subject to the filing of a Form 144 and the
other applicable requirement of Rule 144 as then promulgated by the
Commission) by the Director, but unless the Company were to file (but
in its discretion, the Company has not elected to file) with the
17
<PAGE> 18
Commission a registration statement with respect thereto on Form S-3 or
other available Form, the Shares issuable to a non-Director transferee
of such Option under Section 11 would not upon his or her exercise
thereof be able to dispose of such Shares on the public securities
markets for a one year period as is further required by Rule 144 in the
absence of an applicable Form S-8 or other registration statement. In
the event that any such transfer and/or other restrictions shall apply,
the Option Agreement evidencing such Option or the Shares so issued, as
the case may be, shall bear such legends referencing such restrictions
as the Company may reasonably require.
13. RESERVATION OF SHARES. The Company, during the term of this Plan,
shall at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
14. EFFECTIVENESS OF PLAN. This Plan was adopted by the Board on, and
effective as of, October 18, 1990; subject to the approval hereof by the vote of
the Company's stockholders required therefor by the Delaware General Corporation
Law and applicable Securities Law Requirements within one (1) year of such
adoption by the Board, which approval was obtained at the Annual Meeting of such
stockholders held September 5, 1991. Amendments to this Plan changing the
frequency and amount of automatic grants and as to certain other matters were
adopted by the Board subject to the, and which received such, required approval
of the Company's stockholders at the Annual Meeting thereof held August 19,
1992. The Board also approved an increase in the number of Authorized Shares and
certain other amendments to this Plan subject to and which received such
required approval of the Company's stockholders at the Annual Meeting thereof
held August 31, 1995. On September 10, 1997, the Plan was further amended by the
Board, without the necessity of any stockholder action with respect to such
amendments, principally to permit discretionary grants of options in addition to
those automatically granted under the Plan and the limited transferability of
Options. The Plan shall continue in full force and effect until (i) terminated
by resolution of the Board or (ii) both (A) all Options granted under the Plan
have been exercised in full and (B) no Authorized Shares remain available for
the granting of additional Options. The termination of the Plan shall not affect
Options already granted, which Options shall remain in full force and effect in
accordance with their respective terms as if this Plan had not been terminated.
18
<PAGE> 19
15. AMENDMENT OF PLAN AND OUTSTANDING OPTIONS. The Board may, in its
sole discretion, amend the Plan from time to time, provided that any amendment
which Rule 16b-3 or any other Securities Law Requirement requires be approved by
the stockholders of the Company shall be made only with the approval of such
stockholders. Amendments to the Plan shall apply prospectively to all Options
then outstanding under the Plan, except in the case of any amendment which is
adverse to an Optionee, in which case the amendment shall apply with respect to
the outstanding Options held by the adversely affected Optionee only upon the
consent of such Optionee to such amendment. In exercising its authority under
Section 5(b)(vii) to amend outstanding Options, the Committee likewise may make
an amendment which adversely affects the Optionee only upon the consent of such
Optionee to such amendment. Notwithstanding the provisions of this Section 18,
the consent of the Optionee shall not be required with respect to an amendment
to the Plan or to any outstanding Option which is made in order to comply with
Securities Law Requirements or which causes a Tax Qualified Option no longer to
qualify as such.
16. GENERAL PROVISIONS.
(a) GRANTS TO FOREIGN DIRECTORS. Notwithstanding any other
provision of this Plan to the contrary but subject to applicable
Securities Law Requirements and tax laws, to the extent deemed
necessary or appropriate by the Committee in its sole discretion in
order to further the purposes of the Plan with respect to Directors who
are foreign nationals and/or employed outside the United States of
America, an Option granted to any such Director may be on terms and
conditions different from those specified in this Plan in recognition
of the differences in the laws, tax policies and customs applicable to
such a Director, without the necessity of the Plan being amended to
provide for such different terms and conditions.
(b) DETERMINATION OF DEADLINES. If any day on or before which
action under this Plan or any Option granted hereunder must be taken
falls on a Saturday, Sunday or Company-recognized holiday, such action
may be taken on the next succeeding day which is not a Saturday, Sunday
or Company-recognized holiday.
(c) GOVERNING LAW. To the extent that federal laws (such as
the Act or the Code) or the Delaware General Corporation Law do not
otherwise control, this Plan and all determinations made and actions
taken pursuant hereto shall be governed by the laws of the State of
Ohio and construed accordingly.
(d) GENDER AND NUMBER. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine,
feminine or
19
<PAGE> 20
neuter forms, and the singular form of nouns and pronouns shall include
the plural and vice versa.
(e) CAPTIONS. The captions contained in this Plan are for
convenience of reference only and do not affect the meaning of any term
or provision hereof.
20
<PAGE> 1
Exhibit 10.1.4.a
The Company's Non-Qualified Stock Option Agreement with Dr. Raj Reddy,
originally scheduled to expire October 17, 1993, was previously extended for an
additional five year term ending October 17, 1998 at the same $14.625 exercise
price per share at which the option was originally granted. On September 15,
1998, the option agreement was further extended to an expiration date of October
17, 2003 while continuing the original exercise price.
<PAGE> 1
Exhibit 10.2.3.e
SIXTH ADDENDUM TO LEASE
-----------------------
THE WATERFORD BUILDING AT
-------------------------
3875 EMBASSY PARKWAY
--------------------
This Sixth Addendum to Lease (hereinafter referred to as the
"Addendum")is made and entered into as of this day of March, 1998, by and
between JOHN D. DELLAGNESE III, hereinafter referred to as "Lessor", and TELXON
CORPORATION, hereinafter referred to as "Lessee". Reference is made to that
certain "Standard Office Lease (Modified Net Lease)" dated July 19, 1995, which,
together with the Attachments, Exhibits, and Addendum of such lease, together
with four additional Addendum to Lease documents, are collectively referred to
as the "Lease". In the event of a conflict between the terms of the Lease and
the terms of this Addendum, the terms of this Addendum shall control.
This Addendum is made necessary because Lessee is vacating all of its
premises located on the second floor of The Waterford Building (the "Building").
In consideration of the mutual undertaking of the parties, as
hereinafter set forth, it is agreed to by and between the parties as follows:
1. On or before April 1, 1998, Lessee will completely vacate all of the
space which it is presently leasing on the second floor of the Building and
surrender such space to Lessor, and space will no longer be a part of the
premises described in the Lease.
2. In consideration of the foregoing, on or before April 1, 1998,
Lessee shall pay to Lessor a one time cancellation fee of $28,461.13.
3. As a result of the above, as of April 1, 1998, and thereafter,
Lessee's premises in the Building will consist of approximately 44,827 rentable
square feet; the annual base rent for such premises shall be $748,526.26 per
year, payable in equal monthly installments of $62,377.19 per month, on the
first day of each month, in advance; and Lessee's Share, per Section 4(e) of the
Lease for said premises shall be 48.24%. The state of affairs described herein
shall begin on April 1, 1998 and shall end at midnight on February 28th, 2001,
which is the termination date of such Lease.
<PAGE> 2
IN WITNESS WHEREOF, the parties have set their hands on the dates
hereinafter noted.
Signed and acknowledged LESSOR:
in the presence of: ------
/s/ Deborah L. Zushin
- - ---------------------------------------
Signature
Deborah L. Zushin
------------------------------
Printed Name /s/ John D. Dellagnese III
-----------------------------
John D. Dellagnese III
/s/ Beverly J. Goss
- - ---------------------------------------
Signature Date: 5-20-98
Beverly J. Goss -------------------------
------------------------------
Printed Name
STATE OF OHIO, COUNTY OF SUMMIT, SS:
The foregoing instrument was acknowledged before me this 20th day of
May, 1998, by John D. Dellagnese, III.
/s/ Regina M. Shaw My Commission Expires: May 28, 2002
- - -------------------------- ------------
Notary Public
Signed and acknowledged LESSEE:
in the presence of: ------
TELXON CORPORATION
/s/ Ed Rain
- - ---------------------------------------
Signature
Ed Rain By:/s/ Dennis K. Oleksuk
------------------------------ ----------------------------------
Printed Name
Its: Sr. Director, Corporate Services
/s/ Walter L. Mullett ---------------------------------
- - ---------------------------------------
Signature Date: 5/19/98
Walter L. Mullett -------------------------------
------------------------------
Printed Name
STATE OF OHIO, COUNTY OF SUMMIT, SS:
The foregoing instrument was acknowledged before me this 19th day of
May, 1998, by DENNIS K. OLEKSUK, as SR. DIR., CORPORATE SERVICES of Telxon
Corporation, a corporation, on behalf thereof.
/s/ Sandra Hendrickson My Commission Expires: 8/28/99
- - -------------------------------------- -------------
Notary Public
<PAGE> 1
Exhibit 10.2.3.f
SEVENTH ADDENDUM TO LEASE
-------------------------
THE WATERFORD BUILDING AT
-------------------------
3875 EMBASSY PARKWAY
--------------------
This Seventh Addendum to Lease (hereinafter referred to as the
"Addendum")is made and entered into as of this 20th day of July , 1998, by and
between JOHN D. DELLAGNESE III, hereinafter referred to as "Lessor", and TELXON
CORPORATION, hereinafter referred to as "Lessee". Reference is made to that
certain "Standard Office Lease (Modified Net Lease)" dated July 19, 1995, which,
together with the Attachments, Exhibits, and Addendum of such lease, together
with five additional Addendum to Lease documents, are collectively referred to
as the "Lease". In the event of a conflict between the terms of the Lease and
the terms of this Addendum, the terms of this Addendum shall control.
This Addendum is made necessary because Lessee is vacating a portion of
its space on the first floor and the third floor of the Waterford Building. In
consideration of the mutual undertaking of the parties, as hereinafter set
forth, it is agreed to by and between the parties as follows:
1. On or before June 1, 1998, Lessee will completely vacate the space
shown as Exhibit A-7a which it is presently leasing on the first floor of the
Building and surrender such space to Lessor, and space will no longer be a part
of the premises described in the Lease.
2. In consideration of the foregoing, on or before August 1, 1998,
Lessee shall pay to Lessor a one time cancellation fee of $36,313.12.
3. Commencing June 1, 1998, Lessee's premises in the Building will
consist of approximately 40,185 rentable square feet; the annual base rent for
said premises shall be $671,044.84 per year with a monthly payment of
$55,917.07. Lessee's Share, per section 4(e) of the Lease shall be adjusted to
43.21%.
4. On or before August 1, 1998, Lessee will completely vacate the space
shown as Exhibit A-7b which it is presently leasing on the third floor of the
Building and surrender such space to Lessor, and space will no longer be a part
of the premise described in the Lease.
<PAGE> 2
5. In consideration of the foregoing, on or before August 1, 1998,
Lessee shall pay to Lessor a one time cancellation fee of $44,673.00.
6. Commencing August 1, 1998, Lessee's premises in the Building will
consist of approximately 35,407 rentable square feet; the annual base rent for
said premises shall be $591,221.28 per year with a monthly payment of
$49,268.44. Lessee's Share, per section 4(e) of the Lease shall then be adjusted
to 38.07%.
IN WITNESS WHEREOF, the parties have set their hands on the dates
hereinafter noted.
Signed and acknowledged LESSOR:
in the presence of: ------
/s/ Brian D. Wagster
- - ---------------------------
Signature
Brian D. Wagster
----------------------
Printed Name /s/ John D. Dellagnese III
------------------------
John D. Dellagnese III
/s/ Thomas A. Karcher
- - -------------------------------
Signature Date: 7/20/98
Thomas A. Karcher ----------------------------
-----------------------
Printed Name
Signed and acknowledged LESSEE:
in the presence of: ------
TELXON CORPORATION
/s/ Sandra Hendrickson
- - --------------------------------
Signature
Sandra Hendrickson By:/s/ Dennis K. Oleksuk
----------------------- ----------------------------
Printed Name
Its:Sr. Director, Corporate Services
/s/ Sherman W. Grant --------------------------------
- - --------------------------------
Signature Date: 7/16/98
Sherman W. Grant ------------------------------
--------------------------
Printed Name
<PAGE> 1
Exhibit 10.2.3.g
EIGHTH ADDENDUM TO LEASE
------------------------
THE WATERFORD BUILDING AT
-------------------------
3875 EMBASSY PARKWAY
--------------------
This Eighth Addendum to Lease (hereinafter referred to as the
"Addendum")is made and entered into as of this 8th day of September, 1998, by
and between JOHN D. DELLAGNESE III, hereinafter referred to as "Lessor", and
TELXON CORPORATION, hereinafter referred to as "Lessee". Reference is made to
that certain "Standard Office Lease (Modified Net Lease)" dated July 19, 1995,
which, together with the Attachments, Exhibits, and Addendum of such lease,
together with six additional Addendum to Lease documents, are collectively
referred to as the "Lease". In the event of a conflict between the terms of the
Lease and the terms of this Addendum, the terms of this Addendum shall control.
This Addendum is made necessary because Lessee is vacating a portion of
its space on the first floor of the Waterford Building. In consideration of the
mutual undertaking of the parties, as hereinafter set forth, it is agreed to by
and between the parties as follows:
1. On or before September 1, 1998, Lessee shall completely vacate the
1,429 rentable square feet on the first floor shown on Exhibit A.
2. Commencing September 1, 1998, Lessee's premises in the building
shall consist of approximately 33,978 rentable square feet; the annual base rent
for said premises shall be $570,858.03 per year with a monthly payment of
$47,571.50. Lessee's Share per section 4(e) of the Lease shall be adjusted to
36.53%.
<PAGE> 2
IN WITNESS WHEREOF, the parties have set their hands on the dates
hereinafter noted.
Signed and acknowledged LESSOR:
in the presence of: ------
/s/ Deborah L. Zushin
- - ---------------------------
Signature
Deborah L. Zushin
--------------------
Printed Name /s/ John D. Dellagnese III
----------------------------
John D. Dellagnese III
/s/ Victoria Fair
- - -----------------------------
Signature Date: September 8, 1998
Victoria Fair -------------------------
---------------------------
Printed Name
Signed and acknowledged LESSEE:
in the presence of: ------
TELXON CORPORATION
/s/ Sandra Hendrickson
- - -------------------------------
Signature
Sandra Hendrickson By:/s/ Dennis K. Oleksuk
---------------------- ----------------------------
Printed Name
Its:Sr. Director, Corporate Services
/s/ Monica Jamison --------------------------------
- - -------------------------------
Signature Date: 9/1/98
Monica Jamison ------------------------------
--------------------------
Printed Name
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