SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 2002
Commission file number 1-9802
SYMBOL TECHNOLOGIES, INC.__________________
(Exact name of registrant as specified in its charter)
Delaware 11-2308681______
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Symbol Plaza, Holtsville, NY 11742_________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 631-738-2400
Former name, former address and former fiscal year, if changed
since last report.
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 _________
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the period
covered by this report.
Class Outstanding at June 30, 2002
Common Stock, 229,457,259 shares
par value $0.01
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 2002 and December 31, 2001 2
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 2002 and 2001 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended June 30, 2002 and 2001 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 2002 and 2001 5
Notes to Condensed Consolidated Financial
Statements 6
ITEM 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations 25
ITEM 3.
Quantitative and Qualitative Disclosures about
Market Risk 35
PART II. OTHER INFORMATION
ITEM 1.
Legal Proceedings 36
ITEM 4.
Submission of Matters to a Vote of Security Holders 45
ITEM 6.
Exhibits and Reports on Form 8-K 46
SIGNATURES 47
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(All amounts in thousands, except stock par value)
June 30, December 31,
ASSETS 2002 2001____
(Unaudited)
CURRENT ASSETS:
Cash and temporary investments $ 69,283 $80,967
Accounts receivable, less allowance for doubtful
accounts of $33,113 and $31,348, respectively 282,702 307,576
Inventories 302,642 310,924
Deferred income taxes 180,894 182,964
Prepaid and refundable income taxes 31,436 22,498
Other current assets 81,157 95,279
TOTAL CURRENT ASSETS 948,114 1,000,208
PROPERTY, PLANT AND EQUIPMENT, net of accumulated
depreciation and amortization of $138,531 and
$146,881, respectively 232,355 241,226
DEFERRED INCOME TAXES 18,527 24,153
INVESTMENT IN MARKETABLE SECURITIES 58,521 76,004
INTANGIBLE AND OTHER ASSETS, net of accumulated
amortization of $175,957 and $202,011,
respectively 511,048 551,083
$1,768,565 $1,892,674
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $261,922 $279,615
Current portion of long-term debt 6,433 6,548
Deferred revenue 29,699 34,641
Accrued restructuring expenses 11,252 18,929
TOTAL CURRENT LIABILITIES 309,306 339,733
CONVERTIBLE SUBORDINATED NOTES AND DEBENTURES - 85,052
LONG-TERM DEBT, less current maturities 237,484 225,168
OTHER LIABILITIES AND DEFERRED REVENUE 62,536 61,932
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1.00; authorized
10,000 shares, none issued or outstanding - -
Series A Junior Participating preferred stock,
par value $1.00; authorized 500 shares, none
issued or outstanding - -
Common stock, par value $0.01; authorized
600,000 shares; issued 255,598 shares and
253,313 shares, respectively 2,556 2,533
Retained earnings 327,109 350,393
Treasury stock, at cost, 26,141 shares
and 24,532 shares, respectively (238,908) (217,959)
Other stockholders' equity 1,068,482 1,045,822
1,159,239 1,180,789
$1,768,565 $1,892,674
See notes to condensed consolidated financial statements
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SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(All amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30,____ June 30,____
2002 2001__ 2002 2001__
REVENUE $246,698 $264,199 $475,153 $638,082
Product, net 69,151 76,011 142,008 152,293
Services, net 315,849 340,210 617,161 790,375
COST OF REVENUE:
Product costs 143,792 262,885 282,952 479,756
Amortization of software
development costs 4,879 4,477 9,067 8,719
Product cost of revenue 148,671 267,362 292,019 488,475
Services cost of revenue 50,210 54,731 102,830 113,407
198,881 322,093 394,849 601,882
GROSS PROFIT 116,968 18,117 222,312 188,493
OPERATING EXPENSES:
Engineering 29,467 28,341 56,240 59,358
Selling, general and administrative 70,201 80,684 134,314 170,946
Non-recurring compensation charge - - 8,597 -
Non-recurring impairment charge 47,200 - 47,200 -
Goodwill amortization - 4,042 - 7,999
146,868 113,067 246,351 238,303
LOSS FROM OPERATIONS (29,900) (94,950) (24,039) (49,810)
INTEREST EXPENSE, net (3,549) (3,952) (7,666) (7,996)
LOSS BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM (33,449) (98,902) (31,705) (57,806)
BENEFIT FROM INCOME TAXES (10,704) (39,349) (10,146) (26,198)
LOSS BEFORE EXTRAORDINARY ITEM (22,745) (59,553) (21,559) (31,608)
EXTRAORDINARY GAIN ON REPURCHASE OF
CONVERTIBLE NOTES AND DEBENTURES,
NET OF $266 IN INCOME TAXES - - 566 -
NET LOSS ($22,745) ($59,553)($20,993)($31,608)
BASIC LOSS PER SHARE:
Loss before extraordinary item ($0.10) ($0.27) ($0.09) ($0.14)
Extraordinary gain on repurchase of
convertible notes and debentures - - - -
Net loss ($0.10) ($0.27) ($0.09) ($0.14)
DILUTED LOSS PER SHARE:
Loss before extraordinary item ($0.10) ($0.27) ($0.09) ($0.14)
Extraordinary gain on repurchase of
convertible notes and debentures - - - -
Net loss ($0.10) ($0.27) ($0.09) ($0.14)
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING:
Basic 229,395 224,597 229,287 225,025
Diluted 229,395 224,597 229,287 225,025
See notes to condensed consolidated financial statements
-3-
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Three Months Ended June 30,
2002 2001____
Cash flows from operating activities:
Net loss ($22,745) ($59,553)
Adjustments to reconcile net loss
to net cash provided by/(used in) operating
activities:
Depreciation and amortization of property,
plant and equipment 11,856 13,676
Other amortization 8,736 10,712
Provision for losses on accounts receivable 1,072 806
Writedown due to probable losses from customers - 16,000
Provision for inventory writedown - 110,000
Non cash impairment charge 47,200 -
Tax benefit on exercise of stock
options and warrants 195 12,580
Changes in assets and liabilities
net of effects of acquisitions & divestitures:
Accounts receivable (1,553) 126
Inventories 5,317 (126,517)
Other assets 10,285 7,943
Accounts payable and accrued expenses 3,183 35,439
Income taxes payable (14,324) (55,774)
Accrued restructuring expenses (3,836) (18,147)
Other liabilities and deferred revenue 1,398 3,774
Net cash provided by/(used in)
operating activities 46,784 (48,935)
Cash flows from investing activities:
Proceeds from sale of property, plant
and equipment 4,196 -
Purchases of property, plant and equipment (8,841) (32,931)
Investments in intangible and other assets (14,072) (13,895)
Net cash used in investing activities (18,717) (46,826)
Cash flows from financing activities:
Net proceeds from issuance and repayment
of notes payable and long-term debt 10,564 101,115
Repurchase of convertible notes and debentures (45,089) -
Exercise of stock options and warrants 345 10,419
Purchase of treasury shares - (13,147)
Net cash (used in)/provided by financing
activities (34,180) 98,387
Effects of exchange rate changes on cash 3,322 (1,944)
Net (decrease)/ increase in cash and temporary
investments (2,791) 682
Cash and temporary investments, beginning
of period 72,074 70,651
Cash and temporary investments, end of
period $69,283 $71,333
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 4,299 $ 3,624
Income taxes $ 2,343 $ 2,508
See notes to condensed consolidated financial statements
-4-
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(All amounts in thousands)
(Unaudited)
Six Months Ended June 30,
2002 2001__
Cash flows from operating activities:
Net loss ($20,993) ($31,608)
Adjustments to reconcile net loss to net cash
provided by/(used in) operating activities:
Depreciation and amortization of property,
plant and equipment 22,076 26,846
Other amortization 15,955 19,628
Provision for losses on accounts receivable 2,696 1,622
Writedown due to probable losses from customers - 16,000
Provision for inventory writedown - 110,000
Non cash impairment charge 47,200 -
Tax benefit on exercise of stock options
and warrants 6,976 38,100
Gain on repurchase of convertible notes
and debentures, net of tax (566) -
Changes in assets and liabilities
net of effects of acquisitions & divestitures:
Accounts receivable 24,469 (11,364)
Inventories 9,308 (159,947)
Other assets 19,271 (7,622)
Accounts payable and accrued expenses (15,950) 21,995
Income taxes payable (8,938) (73,596)
Accrued restructuring expenses (7,677) (47,183)
Other liabilities and deferred revenue (4,338) 7,361
Net cash provided by/(used in) operating
activities 89,489 (89,768)
Cash flows from investing activities:
Proceeds from termination of
collar arrangement - 88,046
Proceeds from sale of property, plant
and equipment 4,196 -
Purchases of property, plant and
equipment (18,192) (54,215)
Investments in intangible and other assets (23,120) (19,828)
Net cash (used in)/provided by investing
activities (37,116) 14,003
Cash flows from financing activities:
Net proceeds from issuance and repayment
of notes payable and long-term debt 26,391 85,726
Repurchase of convertible notes and debentures (84,220) -
Exercise of stock options and warrants 14,130 30,549
Dividends paid (2,291) (1,510)
Purchase of treasury shares (20,949) (27,197)
Net cash (used in)/provided by financing
activities (66,939) 87,568
Effects of exchange rate changes on cash 2,882 (3,881)
Net (decrease)/increase in cash and
temporary investments (11,684) 7,922
Cash and temporary investments, beginning
of period 80,967 63,411
Cash and temporary investments, end of
period $69,283 $71,333
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest $ 9,588 $ 7,771
Income taxes $ 5,711 $ 6,722
See notes to condensed consolidated financial statements
-5-
SYMBOL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(All dollar amounts in thousands, except per share data)
1. BASIS OF PRESENTATION
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all necessary adjustments
(consisting of normal recurring accruals) and present fairly the
Company's financial position as of June 30, 2002, and the results of
its operations and its cash flows for the three and six months ended
June 30, 2002 and 2001, in conformity with generally accepted
accounting principles for interim financial information applied on a
consistent basis. The results of operations for the three and six
months ended June 30, 2002 and 2001 are not necessarily indicative of
the results to be expected for the full year. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 2001. Certain reclassifications have
been made to prior consolidated financial statements to conform with
current presentations.
2. INTANGIBLE ASSETS
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". Under SFAS No. 142, goodwill and intangible
assets acquired in a business combination will no longer be amortized
into results of operations, but rather subject to a periodic
assessment for impairment. The Company adopted the provisions of this
Statement effective January 1, 2002. Under the new standard, goodwill
is subject to an annual assessment for impairment using a prescribed
fair-value-based test. The Company completed the initial step of the
transitional goodwill impairment test as of January 1, 2002 utilizing
an independent appraisal during the quarter ended June 30, 2002. This
step of the goodwill impairment test compares the fair value of a
reporting unit with its carrying amount, including goodwill. Based on
results of these comparisons, the Company concluded there was no
impairment of goodwill related to either of its reporting units.
The changes in the carrying amount of goodwill for the six months
ended June 30, 2002 are as follows:
Product Services
Segment Segment Total_
Balance as of January 1, 2002 $267,862 $ 71,204 $339,066
Net goodwill acquired during
the year 9,132 1,487 10,619
Translation adjustment (465) (123) (588)
Balance as of June 30, 2002 $276,529 $ 72,568 $349,097
-6-
Adjusted financial information assuming SFAS No. 142 had been adopted
as of January 1, 2001 is as follows:
Three Months Ended Six Months Ended
June 30,_______ June 30,____
2002 2001__ 2002 2001__
(Unaudited) (Unaudited)
Reported loss before
extraordinary item ($22,745) ($59,553) ($21,559) ($31,608)
Goodwill amortization, net of tax - 2,434 - 5,125
Adjusted loss before
extraordinary item ($22,745) ($57,119) ($21,559) ($26,483)
Reported net loss ($22,745) ($59,553) ($20,993) ($31,608)
Goodwill amortization, net of tax - 2,434 - 5,125
Adjusted net loss ($22,745) ($57,119) ($20,993) ($26,483)
Basic Loss Per Share:
Loss as reported ($0.10) ($0.27) ($0.09) ($0.14)
Goodwill amortization, net of tax - 0.01 - 0.02
Adjusted loss ($0.10) ($0.25)(1) ($0.09) ($0.12)
Diluted Loss Per Share:
Loss as reported ($0.10) ($0.27) ($0.09) ($0.14)
Goodwill amortization, net of tax - 0.01 - 0.02
Adjusted loss ($0.10) ($0.25)(1) ($0.09) ($0.12)
(1) Basic and diluted loss per share are reported separately. In addition,
loss per share as reported, goodwill amortization, and adjusted loss per
share are calculated independently. Therefore, the sum of loss per share
as reported and the per share amount of goodwill amortization may differ
from adjusted loss per share as presented above.
Basic and diluted loss per share amounts before extraordinary items are not
materially different than the basic and diluted loss per share amounts
shown above. Therefore, the per share effect of the goodwill amortization
on loss per share before extraordinary items has not been presented.
Other than goodwill, the Company's intangible assets, all of which are
subject to amortization, consist of the following:
June 30, 2002 December 31, 2001
Gross Accumulated Gross Accumulated
Amount Amortization Amount Amortization
(Unaudited)
Patents and trademarks $44,096 ($7,891) $40,633 ($6,789)
Purchased technology 63,976 (26,003) 61,154 (21,340)
Software development costs 110,756 (69,585) 138,419 (102,027)
Other 547 (66) 638 (54)
$219,375 ($103,545) $240,844 ($130,210)
Estimated amortization expense for the above intangible assets, assuming
no additions or writeoffs, for the six months ended December 31, 2002
and for each of the subsequent years ended December 31 is as follows:
2002 $ 15,958
2003 26,717
2004 18,354
2005 6,710
2006 5,189
$72,928
-7-
3. LOSS PER SHARE
Basic loss per share is based on the weighted average number of
shares of common stock outstanding during the period. For the
three and six months ended June 30, 2002 and 2001, stock options
and warrants outstanding and the effect of convertible
subordinated notes and debentures have not been included in the
net loss per share calculations since their effect would be
antidilutive.
4. INVENTORIES
June 30, 2002 December 31, 2001
(Unaudited)
Raw materials $159,852 $178,431
Work-in-process 12,686 16,108
Finished goods 130,104 116,385
$302,642 $310,924
5. COMPREHENSIVE LOSS
Three Months Ended Six Months Ended
June 30,____ June 30,____
2002 2001_ 2002 2001__
(Unaudited) (Unaudited)
Net loss ($22,745) ($59,553) ($20,993)($31,608)
Other comprehensive income
(losses), net of related
taxes:
Foreign currency translation
adjustments 8,406 (1,600) 7,151 (7,835)
Net unrealized (losses) gains
on marketable securities (1,547) 5,665 (1,992) (7,978)
Net unrealized derivative
(losses) gains (2,955) (2,390) (3,582) 1,259
Comprehensive loss ($18,841) ($57,878)($19,416) ($46,162)
6. CONVERTIBLE SUBORDINATED NOTES AND DEBENTURES
In January and February 2002, Telxon, a wholly owned subsidiary of the
Company, purchased in the open market $34,790 of its 5.75 percent
convertible subordinated notes for $34,127 in cash, and $5,173 of its
7.5 percent convertible subordinated debentures for $5,004 in cash.
This resulted in an extraordinary gain of $566, net of income taxes of
$266. In April 2002, Telxon redeemed the remaining $25,849 of its 5.75
percent notes and the remaining $19,240 of its 7.5 percent notes for
$26,061 and $19,240 respectively. This represented a redemption price
of 100.8214 percent of the outstanding principal amount for the 5.75
percent notes and 100 percent of the outstanding principal amount for
the 7.5 percent debentures.
-8-
7. RESTRUCTURING AND IMPAIRMENT CHARGES
a.) In September 2001, the Company's management approved and adopted a
formal plan of restructuring related to the reorganization of its
manufacturing facilities. The plan includes a transition of volume
manufacturing away from its Bohemia, New York facility to lower cost
locations, primarily its Reynosa, Mexico facility and Far East
contract manufacturing partners. In connection with this
reorganization, the Company accrued for restructuring and impairment
charges at September 30, 2001 for workforce reduction and asset
impairment costs. Under this plan, the Company recorded a workforce
reduction charge related to the termination of approximately 375
employees, primarily manufacturing associates. As of June 30, 2002,
approximately 250 employees had been terminated. The Company's
restructuring plan has been substantially completed as of June 30,
2002 with the remaining workforce reductions to take place by
September 30, 2002.
Details of the restructuring charges as of June 30, 2002 are as
follows:
December 31,
2001 June 30, 2002
Accrual Utilized Accrual___
Workforce reductions $8,976 $2,621 $6,355
Impaired fixed asset
and other writeoffs 4,423 3,428 995
$13,399 $6,049 $7,350
b.) In December 2000, the Company's management approved and adopted a
formal plan of restructuring as a result of the Telxon acquisition. In
connection with this acquisition, the Company accrued for restructuring,
impairment and integration related charges at December 1, 2000. The
accrual represented costs anticipated for workforce reductions, asset
impairments and lease terminations. The Company's exit plan, which
focused on the consolidation of manufacturing operations, including
plant closings and elimination of redundant activities, was
substantially completed by June 30, 2001. The amount accrued for
workforce reductions related to the termination of 1,251 employees,
primarily in manufacturing, management, sales and administrative
support, all of whom have been terminated. During the six months ended
June 30, 2002, the Company utilized $156 in fixed asset and other
impairment charges, and $1,472 in lease cancellation costs. As a
result, the remaining unutilized restructuring expense balance is
$3,902, which relates to ongoing lease commitments on abandoned
facilities.
The accrued restructuring expenses of $3,902 combined with accrued
restructuring expenses of $7,350 related to the reorganization of the
Company's manufacturing facilities (as discussed in (a), above) result
in a total accrued restructuring expense of $11,252 remaining as of
June 30, 2002.
-9-
c.) In the quarter ended June 30, 2002, the Company recorded a pre-
tax impairment charge of $47,200 related to its investment in AirClic
Inc. ("AirClic"). The Company regularly tests the carrying value of
its investments for impairment. In consideration of the outlook of
AirClic's business, the general decline in the economy and the
decline in information technology spending, it was determined that
the decline in the value of its investment in AirClic was other than
temporary during the quarter ended June 30, 2002. The Company
obtained an independent appraisal of its investment in AirClic and
wrote down the carrying amount of the investment to its estimated
fair value of $2,800 at June 30, 2002. This investment was
previously fully allocated to the product segment.
8. COMMITMENTS AND CONTINGENCIES
In February 2002, the Company's former President and Chief Executive
Officer announced his retirement. In connection therewith, the
Company recorded a pre-tax non-recurring compensation and related
benefits charge of $8,597 during the quarter ended March 31, 2002.
9. OTHER ASSETS
In February 2002, the Company loaned $1,000 to its current Chief
Executive Officer. This loan bears interest at an annual rate of LIBOR
plus 100 basis points, which approximated 2.8 percent at June 30, 2002.
This loan is payable upon the earlier of: (1) the date he ceases to be
an employee of the Company, (2) the date of sale of his California
residence, or (3) February 19, 2007. In addition, if the officer or
his wife sell any shares of common stock of the Company now owned by
either of them or hereafter acquired (other than shares sold to pay the
exercise price and taxes resulting from the exercise of any options
originally granted to this officer by the Company) 100 percent of the
net proceeds of such sales shall be applied immediately to reduce any
outstanding indebtedness under this loan. In addition, the Company
loaned $500 to the officer in October 1999. This loan bears interest at
an annual rate of 7 percent through October 2004, and 2.75 percent
above the One Year Treasury Rate through maturity. It is payable upon
the earlier of: (1) the date he ceases to be an employee of the
Company, (2) the date of sale of his California residence, or (3)
October 5, 2006. This loan is secured by a second mortgage on the
officer's California residence. In addition, if the officer or his
wife sell any shares of common stock of the Company now owned by either
of them or hereafter acquired (other than shares sold to pay the
exercise price and taxes resulting from the exercise of any options
originally granted to this officer by the Company) 100 percent of the
net proceeds of such sales shall be applied immediately to reduce any
outstanding indebtedness under this loan.
These loans, including accrued interest, are classified as Intangible
and Other Assets at June 30, 2002.
-10-
10. ACQUISITIONS
During the second quarter of 2002, the Company entered into an
agreement with the owners of Seal Sistemas e Technologia Da
Informacao Ltda. ("Seal"), a Brazilian corporation which had
operated as a distributor and integrator of the Company's products
since 1987. The agreement resulted in the termination of
distribution rights for Seal and the creation of a majority owned
subsidiary of the Company that would serve as the Brazilian
distributor and customer service entity ("Symbol Brazil"). In
accordance with the terms of the agreement, the owners of Seal
acquired a 49 percent ownership interest in Symbol Brazil.
Terms of the agreement included payments to the minority
shareholders that range from $9,550 to a total of $14,800 contingent
upon the attainment of certain annual net revenue levels of Symbol
Brazil (as defined), and are payable no later than March 31, 2009.
With each of these earnout payments, the Company will repurchase
back a portion of Symbol Brazil's shares owned by the minority
shareholders such that the Company will ultimately own 100 percent
of Symbol Brazil no later than March 31, 2009. Additionally, the
Company loaned these minority shareholders $5,000 at the time of the
agreement, which was recorded by the Company as part of the purchase
price, but which will be repaid on the date the first earnout
payment is triggered.
In order to consummate this business combination, the Company was
also required to make payments aggregating $5,300 to two
shareholders of Seal. These amounts were also included in the
purchase price of Symbol Brazil, resulting in a total purchase price
(including the present value of the minimum future earnout payments)
of $12,292. The only assets acquired in this transaction were
certain intangible assets which were independently appraised and
determined to be immaterial. Therefore the total purchase price has
been classified as goodwill.
The subsidiary commenced operations in the second quarter of 2002
and the results of its operations have been included in the
Company's Statement of Operations since such time. Pro forma
financial information as if the acquisition had taken place at the
beginning of each interim period presented would not be materially
different from the actual results reported. Therefore, no pro forma
information has been disclosed.
11.LEGAL MATTERS
The Company is currently involved in matters of litigation arising
from the normal course of business. Management is of the opinion that
such litigation will not have a material adverse effect on the
Company's consolidated financial position or results of operations.
In March 2001, Proxim Incorporated ("Proxim") sued the Company, 3
Com Corporation, Wayport Incorporated and SMC Networks Incorporated in
the United States District Court in the District of Delaware for
allegedly infringing three patents owned by Proxim. Proxim did not
identify any specific products of the Company that allegedly infringe
these three
-11-
patents. Proxim also filed a similar lawsuit in March 2001 in the
United States District Court in the District of Massachusetts against
Cisco Systems, Incorporated and Intersil Corporation. The complaint
against the Company seeks, among other relief, unspecified damages for
patent infringement, treble damages for willful infringement, and a
permanent injunction against the Company from infringing these three
patents. In a press conference held after the filing of the
complaints, Proxim indicated that it was interested in licensing the
patents that are the subject of the lawsuit against the Company.
On May 1, 2001, the Company filed an answer and counterclaim in
response to Proxim's suit. The Company has responded by asserting its
belief that Proxim's asserted patents are invalid and not infringed by
any of the Company's products. In addition, the Company has asserted
its belief that Proxim's claims are barred under principles of equity,
estoppel and laches. The Company has also filed counterclaims against
Proxim, asserting that Proxim's RF product offerings infringe four of
the Company's patents relating to wireless LAN technology. The
Company has requested the Court grant an unspecified amount of damages
as well as a permanent injunction against Proxim's sale of its
wireless LAN product offerings. The Court has severed the Company's
counterclaim against Proxim involving the four of the Company's
patents relating to wireless LAN technology from Proxim's initial
case.
On May 14, 2001, the Company announced that an agreement had been
reached with Intersil Corporation, a supplier of key wireless LAN
chips to the Company. Under this agreement, Intersil will
generally indemnify and defend the Company against Proxim's
infringement suit. On May 30, 2002, the Court granted Intersil's
motion to intervene as a defendant in the Proxim infringement
suit. Having granted Intersil's motion to intervene, the Court
imposed a mandatory stay in the case until the conclusion of a
related proceeding involving Proxim, Intersil, and other parties
in the U.S. International Trade Commission ("ITC"). The Court
further barred Proxim from collecting damages against the Company
attributable to the Company's alleged infringing conduct during
the stay. On June 14, 2002, Proxim filed a motion requesting the
Court reconsider the damages bar portion of the Court's May 30th
order. The motion is currently pending.
On December 4, 2001, the Company filed a complaint against Proxim
in the United States District Court in the District of Delaware
asserting that Proxim's RF product offerings infringe four of the
Company's patents relating to wireless LAN technology. This
complaint asserts the same four patents that were asserted in the
Company's counterclaim against Proxim in the initial Proxim case
prior to the severance of this counterclaim by the Court. On
December 18, 2001, Proxim filed an answer and counterclaims
seeking declaratory judgments for non-infringement, invalidity
and unenforceability of the four patents asserted by the Company,
injunctive and monetary relief for the Company's alleged
infringement of one additional Proxim patent involving wireless
LAN technology, monetary relief for the Company's alleged false
patent marking, and injunctive and monetary relief for the
Company's alleged unfair competition under the Lanham Act, common
law unfair competition and tortious interference. The Company
believes these claims to be without merit.
-12-
On January 31, 2002, the Company filed an answer in response to
Proxim's counterclaim. The Company has responded by asserting
its belief that Proxim's asserted patent is invalid and not
infringed by any of the Company's products. In addition, the
Company has asserted its belief that Proxim's patent claims are
barred under principles of equity, estoppel and laches. Also on
January 31, 2002, the Company filed a motion to dismiss Proxim's
claims regarding false patent markings, the Lanham Act, common
law unfair competition and tortious interference. On June 25,
2002, the Court granted the Company's motion with respect to
false patent marking, and denied the motion in all other
respects.
On July 21, 1999, the Company and six other leading members of the
Automatic Identification and Data Capture industry jointly initiated a
litigation against the Lemelson Medical, Educational, & Research
Foundation, Limited Partnership (the "Lemelson Partnership"). The
suit, which is entitled Symbol Technologies, Inc. et. al. v. Lemelson
Medical, Educational & Research Foundation, Limited Partnership, was
commenced in the U.S. District Court, District of Nevada in Reno,
Nevada, but was subsequently transferred to the Court in Las Vegas,
Nevada.
In the litigation, the Auto ID companies seek, among other remedies, a
declaration that certain patents, which have been asserted by the
Lemelson Partnership against end users of bar code equipment, are
invalid, unenforceable and not infringed. The Company has agreed to
bear approximately half of the legal and related expenses associated
with the litigation, with the remaining portion being borne by the
other Auto ID companies.
The Lemelson Partnership has contacted many of the Auto ID companies'
customers demanding a one-time license fee for certain so-called "bar
code" patents transferred to the Lemelson Partnership by the late
Jerome H. Lemelson. The Company and the other Auto ID companies have
received many requests from their customers asking that they undertake
the defense of these claims using their knowledge of the technology at
issue. Certain of these customers have requested indemnification
against the Lemelson Partnership's claims from the Company and the
other Auto ID companies, individually and/or collectively with other
equipment suppliers. The Company, and we understand, the other Auto ID
companies believe that generally they have no obligation to indemnify
their customers against these claims and that the patents being
asserted by the Lemelson Partnership against their customers with
respect to bar code equipment are invalid, unenforceable and not
infringed. However, the Company and the other Auto ID companies
believe that the Lemelson claims do concern the Auto ID industry at
large and that it is appropriate for them to act jointly to protect
their customers against what they believe to be baseless claims being
asserted by the Lemelson Partnership.
-13-
The Lemelson Partnership filed a motion to dismiss the lawsuit, or in
the alternative, to stay proceedings or to transfer the case to the
U.S. District Court in Arizona where there are pending cases involving
the Lemelson Partnership and other companies in the semiconductor and
electronics industries. On March 21, 2000, the U.S. District Court in
Nevada denied the Lemelson Partnership's motion to dismiss, transfer,
or stay the action. It also struck one of the four counts.
On April 12, 2000, the Lemelson Partnership filed its answer to the
complaint in the Symbol et al. v. Lemelson Partnership case. In the
answer, the Lemelson Partnership included a counterclaim against the
Company and the other plaintiffs seeking a dismissal of the case.
Alternatively, the Lemelson Partnership's counterclaim seeks a
declaration that the Company and the other plaintiffs have contributed
to, or induced infringement of particular method claims of the
patents-in-suit by the plaintiffs' customers. The Company believes
there is no merit to the Lemelson Partnership's counterclaim.
On May 15, 2000, the Auto ID companies filed a motion seeking
permission to file an interlocutory appeal of the Court's decision to
strike the fourth count of the complaint (which alleged that the
Lemelson Partnership's delays in obtaining its patents rendered them
unenforceable for laches). The motion was granted by the Court on
July 14, 2000. The Court entered a clarifying superseding order on
July 25, 2000. On September 1, 2000, the U.S. Court of Appeals for
the Federal Circuit granted the petition of the Auto ID companies for
permission to pursue this interlocutory appeal. The Federal Circuit
Court heard oral arguments on this appeal on October 4, 2001. On
January 24, 2002, the Federal Circuit found for the Auto ID companies,
holding that the defense of prosecution laches exists as a matter of
law. On March 20, 2002 the Federal Circuit denied Lemelson's petition
for rehearing in banc. Accordingly, the issue has been remanded to
the Court in Nevada to consider whether the laches defense is
applicable to the Lemelson case. On June 18, 2002, Lemelson filed a
petition for a writ of certiorari with the Supreme Court of the United
States seeking review of the Federal Circuit's prosecution laches
decision. The Auto ID companies expect to file an opposition to the
petition in due course.
On July 24, 2000, the Auto ID companies filed a motion for partial
summary judgment arguing that almost all of the claims of the Lemelson
Partnership's patents are invalid for lack of written description. On
August 8, 2000, the Lemelson Partnership filed a motion seeking an
extension of approximately ten weeks in which to file an answer to
this motion. On August 31, 2000, the Court granted the Lemelson
Partnership's motion for such an extension. On October 25, 2000, the
Lemelson Partnership filed a combined opposition to the motion of the
Auto ID companies for partial summary judgment and its own cross-
motion for partial summary judgment that many of the claims of the
Lemelson Partnership's patents satisfy the written description
requirement. On July 12, 2001, the District Court denied both the
Auto ID companies' motion and Lemelson's cross-motion. In doing so,
the Court did not rule on the merits of the matters raised in the
motions, but instead held that there remain triable issues of material
fact that preclude granting summary judgment in favor of either party.
-14-
On May 14, 2001, the Auto ID companies filed another motion for
summary judgment arguing that Lemelson's patents at issue are
unenforceable because of Lemelson's inequitable conduct before the
U.S. Patent and Trademark Office. On June 19, 2001, the Lemelson
Partnership filed a combined opposition to the motion of the Auto ID
companies for summary judgment and its own cross-motion for partial
summary judgment that no such inequitable conduct occurred. On July
10, 2001, the Auto ID companies filed a combined reply in support of
their summary judgment motion and opposition to the Lemelson
Partnership's partial summary judgment cross-motion. On November 13,
2001, the District Court denied both the Auto ID companies' motion and
Lemelson's cross-motion. In doing so, the Court did not rule on the
merits of the matters raised in the motions, but instead held that
there remain triable issues of material fact that preclude granting
summary judgment in favor of either party.
On August 1, 2001, the Auto ID companies filed another motion for
partial summary judgment arguing that the Lemelson Partnership is not
entitled, as a matter of law, to rely on a now-abandoned Lemelson
patent application filed in 1954 to provide a filing date or
disclosure for the claims of the patents-in-suit. On November 13,
2001, the District Court denied the Auto ID companies' motion. In
doing so, the Court did not rule on the merits of the matters raised
in the motion, but instead held that there remain triable issues of
material fact that preclude granting summary judgment.
On July 25, 2001, the Court entered an order setting a schedule that
culminates with a trial scheduled for August 2002. On April 12, 2002,
the Court entered a superseding scheduling order setting a schedule
that culminates with a trial scheduled for November 2002. Under this
timetable, the Auto ID companies' arguments relating to laches,
invalidity, unenforceability and/or non-infringement of the so-called
"bar code" patents will be briefed by motion at the appropriate time,
or at trial.
On July 12, 2002, the Auto ID plaintiffs filed three new summary
judgment motions with the Court in Nevada on the following grounds:
(1) that the so-called bar code patents are unenforceable based on the
prosecution laches doctrine found to exist by the Federal Circuit; (2)
that users of bar code equipment do not infringe Lemelson's patents
based on Lemelson's statements in the prosecution history equating his
alleged invention with video-based technology; and (3) that the so-
called bar code patents are invalid based on Lemelson's admissions
regarding the prior art that were made to advance the prosecution of
his patent applications. These motions are currently pending.
From December 1998 through March 1999, a total of 27 class actions
were filed in the United States District Court, Northern District of
Ohio, by certain alleged stockholders of Telxon on behalf of
themselves and purported classes consisting of Telxon stockholders,
other than the defendants and their affiliates, who purchased stock
during the period from May 21, 1996 through February 23, 1999 or
various portions thereof, alleging claims for "fraud on the market"
arising from alleged misrepresentations and omissions with respect to
Telxon's financial performance and prospects and an alleged violation
of generally accepted accounting principles by improperly recognizing
-15-
revenues. The named defendants are Telxon, its former President and
Chief Executive Officer, Frank E. Brick, and its former Senior Vice
President and Chief Financial Officer, Kenneth W. Haver. The actions
were referred to a single judge. On February 9, 1999, the plaintiffs
filed a motion to consolidate all of the actions and the Court heard
motions on naming class representatives and lead class counsel on
April 26, 1999.
On August 25, 1999, the Court appointed lead plaintiffs and their
counsel, ordered the filing of an amended complaint, and dismissed 26
of the 27 class action suits without prejudice and consolidated those
26 cases into the first filed action. The lead plaintiffs appointed
by the Court filed an amended class action complaint on September 30,
1999. The amended complaint alleges that the defendants engaged in a
scheme to defraud investors through improper revenue recognition
practices and concealment of material adverse conditions in Telxon's
business and finances. The amended complaint seeks certification of
the identified class, unspecified compensatory and punitive damages,
pre- and post-judgment interest, and attorneys' fees and costs.
Various appeals and writs challenging the District Court's August 25,
1999 rulings were filed by two of the unsuccessful plaintiffs but have
all been denied by the Court of Appeals.
On November 8, 1999, the defendants jointly moved to dismiss the
amended complaint, which was denied on September 29, 2000. Following
the denial, the parties filed a proposed joint case schedule,
discovery commenced, and the parties each filed their initial
disclosures. On October 30, 2000, defendants filed their answer to
the plaintiffs' amended complaint as well as a motion for
reconsideration or to certify the order denying the motion to dismiss
for interlocutory appeal and request for oral argument, and a
memorandum of points and authorities in support of that motion. On
November 14, 2000, plaintiffs filed a memorandum in opposition of
defendants' motion. This motion was denied on January 19, 2001. On
November 1, 2000, defendants filed a motion for application of the
Amended Federal Rules of Civil Procedure to the case, and on November
16, 2000, the Court granted this motion in part and held that the
Court will apply the new rules of evidence and new rules of civil
procedure except to the extent those rules effectuate changes to Rule
26 of the Federal Rules for Civil Procedure. Discovery is in its
preliminary stages.
On February 20, 2001, Telxon filed a motion for leave to file and
serve instanter a summons and third-party complaint against third-
party defendant PricewaterhouseCoopers LLP ("PWC") in shareholders'
class action complaints. Telxon's third-party complaint against PWC
concerns PWC's role in the original issuance and restatements of
Telxon's financial statements for its fiscal years 1996, 1997, 1998
and its interim financial statements for its first and second quarters
of fiscal year 1999, the subject of the class action litigation
against Telxon. Telxon states causes of action against PWC for
contribution under federal securities law, as well as state law claims
for accountant malpractice, fraud, constructive fraud, fraudulent
concealment, fraudulent misrepresentation, negligent
misrepresentation, breach of contract, and breach of fiduciary duty.
With respect to its federal claim against PWC, Telxon seeks
contribution from PWC for all sums that Telxon may be required to pay
-16-
in excess of Telxon's proportionate liability, if any, and attorney
fees and costs. With respect to its state law claims against PWC,
Telxon seeks compensatory damages, punitive damages, attorney fees and
costs, in amounts to be determined at trial. Thereafter Plaintiffs
sued PWC directly and that action was consolidated. PWC filed a
motion to dismiss both Telxon's third party complaint and the PWC
action.
On March 25, 2002, the Court ruled on the pending motions. As to
Telxon's third-party complaint against PWC, the Court ruled that it
was timely filed, and that Telxon's allegations of scienter by PWC
under the Federal securities laws were sufficiently pled, that
Telxon's state law fraud claims were sufficiently pled, and that
Telxon's breach of fiduciary duty, constructive fraud and fraudulent
concealment claims against PWC should not be dismissed at the pleading
stage. The Court denied PWC's motion to dismiss Telxon's claims for
contribution under the Federal securities laws with respect to
Telxon's restatements of its 1996, 1997 and 1998 audited financial
statements, and granted PWC's motion to dismiss Telxon's contribution
claims with respect to the restatements of its unaudited first and
second quarter 1999 financial statements. The Court also granted
Telxon's motion for leave to file and serve the third party complaint
instanter on February 20, 2001. The Court also denied PWC's motion to
dismiss the separate action filed against it by the plaintiffs. PWC
has subsequently filed an answer denying liability, asserting numerous
defenses and a third party complaint against Telxon for contribution
and indemnity.
On June 11, 2002 a complaint was filed against Telxon by Wyser-
Pratte Management Co., Inc. whose President and sole shareholder
is Mr. Guy Wyser-Pratte, a well-known securities arbitrageur. In
late August 1998, Mr. Wyser-Pratte and Telxon settled a proxy
litigation which arose out of discussions between Telxon and the
Company during the April-June 1998 time period about a then
possible acquisition by the Company. The complaint also names
several former Telxon executives as well as Telxon's former
outside auditors, PWC, as defendants. The complaint alleges
violations of Sections 10b-5, 14, 18 and 20 of the Securities and
Exchange Act of 1934, as well as common law claims for fraud and
negligent misrepresentation. This litigation is related to the
above described Telxon class action litigation. The Wyser-Pratte
complaint seeks unspecified compensatory and punitive damages, as
well as attorney's fees and costs. By Court Order dated June 20,
2002, this litigation was consolidated for discovery purposes with
the Telxon class action litigation. Telxon filed a motion to
dismiss the complaint. The Company believes that it has
meritorious defenses to the litigation, and intends to defend
against the lawsuit vigorously.
The Securities and Exchange Commission ("Commission") has issued a
Formal Order Directing Private Investigation and Designating
Officers to Take Testimony with respect to certain accounting
matters, principally concerning the timing and amount of revenue
recognized by the Company during the period from January 1, 2000
to December 31, 2001. The Company is cooperating with the
Commission, and has produced documents in response to the
Commission's inquiries.
-17-
In addition, the Company has commenced its own investigation of
these matters with the assistance of an outside law firm and an
independent accounting firm. The Company's investigation is still
in progress and has not yet reached a final conclusion. It is
anticipated that the Company's investigation will be concluded in
the Fall of 2002. Since both the Commission's investigation and
the Company's investigation are continuing, there can be no
assurance that the outcome will not require the Company to restate
reported revenue for some or all of the periods in question.
On March 5, 2002, a purported class action lawsuit was filed,
entitled Pinkowitz v. Symbol Technologies, Inc. et al., in the
United States District Court for the Eastern District of New York,
on behalf of purchasers of the common stock of Symbol between
October 19, 2000 and February 13, 2002, inclusive, against the
Company, Tomo Razmilovic, Jerome Swartz and Kenneth Jaeggi. The
complaint alleges that defendants violated the federal securities
laws by issuing materially false and misleading statements
throughout the class period that had the effect of artificially
inflating the market price of the Company's securities.
Specifically, the complaint alleges that defendants engaged in the
following conduct which had the effect of increasing the Company's
reported revenue and profits: (1) the Company booked as profit in
the third quarter of 2000 a one-time royalty payment in excess of
$10 million, enabling the Company to make its third quarter
projections; (2) the Company used expenses associated with its
acquisition of Telxon to mask the fact that its sales were
declining; and (3) the Company booked as having shipped in the first
quarter of 2001 more than $40 million in inventory in transactions
that included side provisions allowing customers to delay payments
or return merchandise, or included products that "never left the
warehouse". Subsequently, a number of additional purported class
actions containing substantially similar allegations have also been
filed against the Company and certain of its officers in the Eastern
District of New York. All of these actions have been consolidated
into one lawsuit. The Company anticipates that a consolidated
amended complaint will be filed in the near future. The Company
believes that it has meritorious defenses to this litigation, and
intends to defend against the lawsuit vigorously.
12. BUSINESS SEGMENTS AND OPERATIONS BY GEOGRAPHIC AREAS
The Company's business consists of the design, manufacture and
marketing of scanner integrated mobile and wireless information
management systems, and the servicing of, customer support for and
professional services related to these systems. During the fourth
quarter of 2001, the Company reorganized its services activities and
formed a new global services organization. This change allows the
Company to focus on the delivery of all services to its customers.
These activities have been coordinated under one global services
organization. As a result, the Company now presents two reportable
operating segments as Products and Services.
-18-
a.)The Products segment sells bar code capture equipment, mobile
computing devices and other peripheral products and receives
royalties. The Services segment provides wireless communication
solutions that connect the Company's bar code reading equipment and
mobile computing devices to wireless networks. This segment also
provides worldwide comprehensive repair and maintenance integration
and support in the form of service contracts or repairs on an as-
needed basis. Management uses many factors to measure performance
and allocate resources to these two reportable segments. The
primary measurement is gross profit. The accounting policies of the
two reportable segments are essentially the same as those applied to
the consolidated financial statements, but management is continuing
to monitor its cost of revenue allocations between the products and
services segments. Changes in cost allocations between segments may
be required which could materially change the reported gross profit
of the segments. Summarized financial information concerning the
Company's reportable operating segments is shown in the following
table. Prior period data has been reclassified to reflect the
current segment structure. Identifiable assets are those tangible
and intangible assets used by each operating segment. Corporate
assets are principally certain limited fixed assets, deferred taxes
and prepaid and refundable income taxes which can not appropriately
be allocated to either reportable segment. Intersegment
transactions are minimal and any intersegment profit is eliminated
in consolidation.
-19-
REPORTABLE SEGMENTS
Products Services Corporate Consolidated
Three Months ended June 30, 2002
External revenue $246,698 $69,151 - $315,849
Cost of revenue 148,671 50,210 - 198,881
Gross profit $98,027 $18,941 $ - $116,968
Identifiable assets $1,486,147 $273,035 $ 9,383 $1,768,565
Three Months ended June 30, 2001
External revenue $264,199 $76,011 - $340,210
Cost of revenue 267,362(1) 54,731 - 322,093
Gross profit ($3,163) $21,280 - $ 18,117
Identifiable assets $1,807,608 $304,718 $ 9,536 $2,121,862
Six Months ended June 30, 2002
External revenue $475,153 $142,008 - $617,161
Cost of revenue 292,019 102,830 - 394,849
Gross profit $183,134 $39,178 $ - $222,312
Six Months ended June 30, 2001
External revenue $638,082 $152,293 - $790,375
Cost of revenue 488,475(1) 113,407 - 601,882
Gross profit $149,607 $38,886 - $188,493
(1) Product cost of revenue for the three and six months ended June 30,
2001 includes a pre-tax charge of $110,000 related to an inventory
writedown. Excluding this charge, gross profit for the product
segment would have been $106,837 and $259,607, respectively, for
the three and six months ended June 30, 2001.
b). The Company's internal structure is in the form of a matrix
organization whereby certain managers are held responsible for
Products and Services worldwide while other managers are
responsible for specific geographic areas. The operating
results of both components are reviewed on a regular basis.
Supplemental information about geographic areas is as follows:
The Company operates its business in three main geographic
regions; The Americas (which includes North and South America),
EMEA (which includes Europe, Middle East and Africa) and Asia
Pacific (which includes Japan, the Far East and Australia).
Summarized financial information concerning the Company's
geographic regions is shown in the following table. Sales are
allocated to each region based upon the location of the use of
the products and services. The "Corporate" column includes
corporate related expenses (primarily various indirect
manufacturing operations costs, engineering and general and
administrative expenses) not allocated to geographic regions.
-20-
This has the effect of increasing operating profit for The
Americas, EMEA and Asia Pacific. Identifiable assets are those
tangible and intangible assets used in operations in each
geographic region. Corporate assets are principally temporary
investments and goodwill. Certain assets which have been
allocated to each reportable operating segment could not be
allocated to any of the Company's geographic regions.
Therefore, corporate assets as shown in the following table are
different from corporate assets as previously shown in the
segment disclosure.
-21-
1300:
The Asia/
Americas EMEA Pacific Corporate Consolidated
Three Months ended
June 30, 2002:
Sales to unaffiliated
customers $216,512 $80,379 $18,958 $ - $315,849
Transfers between
geographic areas 71,891 - - (71,891) -
Total net revenue $288,403 $80,379 $18,958 ($71,891) $315,849
Loss before
income taxes $68,889 $15,906 $6,140 ($124,384) ($33,449)
Identifiable assets $1,084,723 $295,052 $35,418 $353,372 $1,768,565
Three Months ended
June 30, 2001:
Sales to unaffiliated
customers $230,868 $89,790 $19,552 $ - $340,210
Transfers between
geographic areas 73,994 - - (73,994) -
Total net revenue $304,862 $89,790 $19,552 ($73,994) $340,210
Loss before
income taxes $ 79,330 $21,913 $ 7,655 ($207,800) ($98,902)
Identifiable assets $1,569,562 $194,334 $36,519 $ 321,447 $2,121,862
Six Months ended
June 30, 2002:
Sales to unaffiliated
customers $426,151 $156,727 $34,283 $ - $617,161
Transfers between
geographic areas 136,967 - - (136,967) -
Total net revenue $563,118 $156,727 $34,283 ($136,967) $617,161
Loss before income
taxes and extraordinary
item $137,527 $ 31,821 $11,550 ($212,603) ($ 31,705)
Six Months ended
June 30, 2001:
Sales to unaffiliated
customers $555,994 $194,468 $39,913 $ - $790,375
Transfers between
geographic areas 166,289 - - (166,289) -
Total net revenue $722,283 $194,468 $39,913 ($166,289) $790,375
Loss before
income taxes $193,651 $ 47,768 $15,383 ($314,608) ($57,806)
-22-
13. SUBSEQUENT EVENT
In July 2002, the Company announced the hiring of its new President
and Chief Operating Officer, effective August 2002. As part of his
compensation, the Company granted 400,000 fully vested treasury
shares of the Company's common stock to this officer. Such shares
had a value of $2,992 at the date of grant, which will be included
in compensation expense during the third quarter of 2002. If he is
an employee of the Company, this officer is restricted from selling
or transferring these shares for a period of two years from the date
of issuance. In addition to the aforementioned compensation charge,
the Company will record a charge of approximately $1,000 in the
third quarter of 2002 for recruiting fees and other expenses
associated with this officer's hiring.
-23-
Safe harbor for forward-looking statements under securities litigation
act of 1995; certain cautionary statements
This report contains forward-looking statements based on current
expectations, forecasts and assumptions that involve risks and
uncertainties that could cause actual outcomes and results to differ
materially. These risks and uncertainties include price and product
competition, dependence on new product development, reliance on major
customers, customer demand for the Company's products and services,
control of costs and expenses, international growth, general industry and
market conditions and growth rates and general domestic and international
economic conditions including interest rate and currency exchange rate
fluctuations as well as the effect of the current international political
situation, which is impossible to predict. For a further list and
description of such risks and uncertainties, see the reports filed by the
Company with the Securities and Exchange Commission. The Company
disclaims any intention or obligation to update or revise any forward-
looking statements, whether as a result of new information, future events
or otherwise.
-24-
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
(All dollar amounts in thousands, except per share data)
Results of Operations
Net product revenue of $246,698 and $475,153 for the three and
six months ended June 30, 2002 decreased 6.6 percent and 25.5 percent,
respectively, from the comparable prior year periods. The decrease in
net product revenue is due to a global slowdown in information
technology spending which resulted in a reduction in the quantity of
units sold. Net services revenue of $69,151 and $142,008 for the
three and six months ended June 30, 2002 decreased 9.0 percent and 6.8
percent, respectively, from the comparable prior year periods
primarily due to a decrease in professional service revenue resulting
from fewer project management and software development projects,
partially offset by additional customer service revenue from contract
revenue. Foreign exchange fluctuations favorably impacted the growth
in total net revenue by approximately 0.1 percentage points for the
three months ended June 30, 2002 but unfavorably impacted the growth
in total net revenue by 0.8 percentage points for the six months ended
June 30, 2002. Foreign exchange fluctuations unfavorably impacted the
growth in total net revenue by approximately 2.4 percent and 2.5
percent for the three and six months ended June 30, 2001,
respectively.
Geographically, the Americas revenue decreased 6.2 percent and 23.4
percent, respectively, for the three and six months ended June 30, 2002
from the comparable prior year periods. EMEA revenue decreased 10.5
percent and 19.4 percent for the three and six months ended June 30,
2002 from the comparable prior year periods. Asia Pacific revenue
decreased 3.0 percent and 14.1 percent for the three and six months
ended June 30, 2002 from the comparable prior year periods. The
Americas, EMEA and Asia Pacific revenue represent approximately 69
percent, 25 percent, and 6 percent of net revenue for the three and six
months ended June 30, 2002.
The Company has forecasted revenue to be approximately $1,300,000
for the full year 2002. Attainment of this forecast is dependent on
many factors, some of which are beyond the Company's control,
including those previously enumerated as well as the assumption that
there is a general improvement in the level of economic activity as
well as increased information technology spending.
Based on the aforementioned forecast level of revenue, the
Company expects diluted earnings per share before non-recurring
charges in the range of $0.20 to $0.25 for the full year 2002. The
forecast is contingent upon, among other factors, attainment of the
revenue level previously discussed. As such, the Company has limited
visibility to these numbers and there can be no assurance they will be
achieved.
-25-
Management of the Company has prepared the aforementioned
prospective financial information with respect to financial
performance in 2002. This prospective financial information was not
prepared with a view toward complying with the guidelines established
by the American Institute of Certified Public Accountants with respect
to prospective financial information, but, in the view of the
Company's management, was prepared on a reasonable basis. However,
this information is not fact and should not be relied upon as being
necessarily indicative of future results, and one should not place
undue reliance on the accuracy of the prospective financial
information.
Neither the Company's independent auditors, nor any other
independent accountants, have compiled, examined, or performed any
procedures with respect to the prospective financial information
contained herein, nor have they expressed any opinion or any other
form of assurance on such information or its achievability, and assume
no responsibility for, and disclaim any association with, the
prospective financial information.
Product cost of revenue (as a percentage of net product revenue) was
60.3 percent and 61.5 percent for the three and six months ended June 30,
2002 as compared to 59.6 percent and 59.3 percent before non-recurring
charges in the comparable prior year periods. This increase is due to an
overall shift in product mix to lower margin products, reduced
manufacturing absorption due to lower sales volumes and, for the six
months ended June 30, 2002, the unfavorable impact of foreign exchange
rate fluctuations on net revenue. Amortization of software development
costs for the three and six months ended June 30, 2002 of $4,879 and
$9,067 increased from $4,477 and $8,719 in the comparable prior year
periods due to new product releases.
Included in product cost of revenue for the three and six months
ended June 30, 2001 is a $110,000 non-recurring charge recorded in the
second quarter of 2001 for a writedown of the Company's radio frequency
(RF) infrastructure and systems inventories. The writedown was recorded
as a result of lower demand for the Company's then current RF products,
coupled with technological obsolescence due to planned introductions of
new RF infrastructure products and mobile computing appliances.
Services cost of revenue (as a percentage of net services revenue)
was 72.6 percent and 72.4 percent for the three and six months ended June
30, 2002 as compared to 72.0 percent and 74.5 percent in the comparable
prior year periods. The decrease in services cost of revenue as a
percentage of services revenue for the six month period resulted
primarily from customer service realizing the benefits of additional cost
containment activities in the first quarter of 2002, coupled with higher
selling prices on certain customer service orders.
Engineering costs increased to $29,467 from $28,341 for the three
months ended June 30, 2002, but decreased to $56,240 from $59,358 for
the six months ended June 30, 2002, as compared to the respective prior
year periods. This represents an increase of 4.0 percent and a
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decrease of 5.3 percent, respectively, from the prior year periods.
The increase for the three month period is due to a decrease in the
amount of capitalized costs incurred for internally developed product
software where economic and technological feasibility has been
established. The decrease for the six month period is due to overall
lower expenditures incurred in connection with the continuing research
and development of new products and the improvement of existing
products, reflecting the positive effect of the Company's expense
control programs. As a percentage of total net revenue, engineering
expenses increased to 9.3 percent and 9.1 percent for the three and
six months ended June 30, 2002 compared to 8.3 percent and 7.5 percent
for the comparable prior year periods primarily due to lower revenue
levels.
Selling, general and administrative expenses of $70,201 and
$134,314 for the three and six months ended June 30, 2002 decreased
from $80,684 and $170,946 for the comparable prior year periods. In
absolute dollars, selling, general and administrative expenses
decreased 13.0 percent and 21.4 percent from the comparable prior year
periods. The decrease is a result of cost containment efforts
implemented during the last half of 2001. As a percentage of net
revenue, such expenses decreased to 22.2 percent for the three months
ended June 30, 2002 from 23.7 percent, but remained consistent with
the comparable prior year period at 21.8 percent for the six months
ended June 30, 2002. The decrease for the three month period is due
to the aforementioned cost containment efforts, partially offset by
lower revenue.
In February 2002, the Company's former President and Chief Executive
Officer announced his retirement. In connection therewith, the Company
recorded a pre-tax non-recurring compensation and related benefits charge
of $8,597 for the three months ended March 31, 2002.
In the quarter ended June 30, 2002, the Company recorded a pre-tax
non-recurring impairment charge of $47,200 related to its investment in
AirClic Inc. ("AirClic"). The Company regularly tests the carrying value
of its investments for impairment. In consideration of the outlook of
AirClic's business, the general decline in the economy and the decline in
information technology spending, it was determined that the decline in
the value of the investment in AirClic was other than temporary during
the quarter ended June 30, 2002. The Company obtained an independent
appraisal of its investment in AirClic and wrote down the carrying amount
of the investment to its estimated fair value of $2,800 at June 30, 2002.
This investment was previously fully allocated to the product segment.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". Under SFAS No. 142, goodwill and intangible assets
acquired in a business combination will no longer be amortized into
results of operations, but rather subject to a periodic assessment for
impairment. The Company adopted the provisions of this Statement
effective January 1, 2002. Under the new standard, goodwill is subject
to an annual assessment for impairment using a prescribed fair-value-
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based test. The Company completed the initial step of the transitional
goodwill impairment test as of January 1, 2002 utilizing an independent
appraisal during the quarter ended June 30, 2002. This step of the
goodwill impairment test compares the fair value of a reporting unit
with its carrying amount, including goodwill. Based on results of these
comparisons, the Company concluded there was no impairment of goodwill
related to either of its reporting units.
Adjusted financial information assuming SFAS No. 142 had been
adopted as of January 1, 2001 is as follows:
Three Months Ended Six Months Ended
June 30,_______ June 30,____
2002 2001__ 2002 2001__
Reported loss before
extraordinary item ($22,745) ($59,553) ($21,559)($31,608)
Goodwill amortization, net of tax - 2,434 - 5,125
Adjusted loss before
extraordinary item ($22,745) ($57,119) ($21,559)($26,483)
Reported net loss ($22,745) ($59,553) ($20,993)($31,608)
Goodwill amortization, net of tax - 2,434 - 5,125
Adjusted net loss ($22,745) ($57,119) ($20,993)($26,483)
Basic Loss Per Share:
Loss as reported ($0.10) ($0.27) ($0.09) ($0.14)
Goodwill amortization, net of tax - 0.01 - 0.02
Adjusted loss ($0.10) ($0.25)(1) ($0.09) ($0.12)
Diluted Loss Per Share:
Loss as reported ($0.10) ($0.27) ($0.09) ($0.14)
Goodwill amortization, net of tax - 0.01 - 0.02
Adjusted loss ($0.10) ($0.25)(1) ($0.09) ($0.12)
(1) Basic and diluted loss per share are reported separately. In addition,
loss per share as reported, goodwill amortization, and adjusted loss
per share are calculated independently. Therefore, the sum of loss per
share as reported and the per share amount of goodwill amortization may
differ from adjusted loss per share as presented above.
Basic and diluted loss per share amounts before extraordinary items are not
materially different than the basic and diluted loss per share amounts shown
above. Therefore, the per share effect of goodwill amortization on loss per
share before extraordinary items has not been presented.
Net interest expense decreased to $3,549 and $7,666 for the three
and six months ended June 30, 2002 from $3,952 and $7,996 for the
comparable prior year periods. This net decrease is primarily due to
the lower interest expense resulting from Telxon's repurchase of its
convertible debt.
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The Company's effective tax benefit was 32 percent for the three
and six months ended June 30, 2002. This differed from the statutory
rate primarily as a result of research and development tax credits and
state taxes. The Company's effective tax benefit for the three and
six months ended June 30, 2001 was 39.8 percent and 45.3 percent,
respectively. This differed from the statutory rate primarily as a
result of the non-recurring charge associated with an inventory
writedown recorded in June 2001.
In January and February 2002, Telxon, a wholly owned subsidiary
of the Company, purchased in the open market $34,790 of its 5.75
percent convertible subordinated notes for $34,127 in cash and $5,173
of its 7.5 percent convertible subordinated debentures for $5,004 in
cash. This resulted in an extraordinary gain of $566 net of income
taxes of $266. In April 2002, Telxon redeemed the remaining $25,849
of its 5.75 percent notes and the remaining $19,240 of its 7.5
percent notes for $26,061 and $19,240 respectively. This represented
a redemption price of 100.8214 percent of the outstanding principal
amount for the 5.75 percent notes and 100 percent of the outstanding
principal amount for the 7.5 percent debentures.
Liquidity and Capital Resources
The Company utilizes a number of measures of liquidity including
the following:
June 30, December 31,
2002 _____ 2001_____
Working Capital $638,808 $660,475
Current Ratio (Current Assets
to Current Liabilities) 3.1:1 2.9:1
Long-Term Debt to Capital 17.0% 20.8%
(Convertible subordinated notes
and debentures plus long-term
debt to convertible subordinated
notes and debentures plus
long-term debt plus equity)
Current assets decreased by $52,094 from December 31, 2001
principally due to a decrease in accounts receivable due to lower
revenue levels and increased cash collections, a decrease in other
current assets, cash, and inventories partially offset by an increase in
prepaid and refundable income taxes.
Current liabilities decreased $30,427 from December 31, 2001
primarily due to a decrease in accounts payable and accrued expenses,
the utilization of accrued restructuring expenses and lower deferred
revenue.
The aforementioned activity resulted in a working capital
decrease of $21,667 for the six months ended June 30, 2002. The
Company's current ratio at June 30, 2002 increased to 3.1:1 compared
with 2.9:1 as of December 31, 2001.
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The Company generated $46,784 positive cash flow from operating
activities for the three months ended June 30, 2002, but experienced an
overall decrease in cash of $2,791 for the period. Cash used to
repurchase the Telxon convertible debt, purchases of property, plant
and equipment, and investments in intangible and other assets were
partially offset by the positive cash flow provided by operations, net
proceeds from issuance and repayment of long-term debt and proceeds
from the sale of property, plant and equipment.
Property, plant and equipment expenditures for the six months ended
June 30, 2002 totaled $18,192 compared to $54,215 for the six months
ended June 30, 2001. In February 2001, the Company began a 150,000
square foot expansion of its 140,000 square foot manufacturing and
distribution facility in Reynosa, Mexico. The total cost for this
project is estimated to be $8,500 and is scheduled to be completed
during 2002. Additionally, in February 2001, the Company began
construction of a new 334,000 square foot distribution center and data
center in McAllen, Texas. The total cost for this project is
approximately $33,000, which was substantially completed as of June 30,
2002. The Company continues to make capital investments in major systems
and network conversions but does not have any other material commitments
for capital expenditures.
During the year ended December 31, 2000, the Company established a
special purpose entity ("SPE") for the purpose of entering into a
$50,000 lease receivable securitization agreement with a highly rated
financial institution. The SPE is a consolidated entity and,
accordingly, its results are included in the consolidated financial
statements of the Company. During the six months ended June 30, 2002,
the Company securitized $7,373 of its lease receivables, which resulted
in proceeds of $4,200. During the year ended December 31, 2001, the
Company securitized $32,227 of its lease receivables, which resulted in
proceeds of $18,700. The Company does not consider its securitization
of lease receivables a significant dependency on its continued
liquidity.
The Company had long-term debt outstanding, excluding current
maturities, as follows:
June 30, December 31,
2002 2001____
Revolving Credit Facililty $158,320 $125,439
Senior Notes 6,349 12,698
SAILS Exchangeable Debt 79,015 93,206
Other 233 373
243,917 231,716
Less Current Maturities 6,433 6,548
$237,484 $225,168
The Company has a $350 million revolving credit facility with a
syndicate of U.S. and International banks (the "Credit Agreement"). The
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terms of the Credit Agreement extend to 2004. Use of the borrowings is
unrestricted and the borrowings are unsecured. These borrowings bear
interest at either LIBOR plus 100 basis points or the base rate of the
syndication agent bank which approximated 2.8 percent and 4.8 percent at
June 30, 2002 and December 31, 2001, respectively. At June 30, 2002,
the Company had $158,320 of borrowings outstanding under the Credit
Agreement, as compared to $125,439 outstanding at December 31, 2001.
These borrowings have been classified as long-term obligations in each
respective period.
In March 1993, the Company issued $25,000 of its 7.76 percent
Series A Senior Notes due February 15, 2003, and $25,000 of its 7.76
percent Series B Senior Notes due February 15, 2003 to two insurance
companies for working capital and general corporate purposes. The
Series A Senior Notes are being repaid in equal annual installments of
$2,778, which began in February 1995. The Series B Senior Notes are
being repaid in equal annual installments of $3,571, which began
February 1997. The remaining balance of the Senior Notes is classified
as current at June 30, 2002.
In January 2001, the Company entered into a private SAILS
arrangement with a highly rated financial institution. The securities
which underlie the SAILS contract represent the Company's investment in
Cisco common stock, which was acquired in connection with the Telxon
acquisition. The 4,160,000 shares of Cisco common stock had a market
value of $58,032 at June 30, 2002 and are held as collateral to secure
the debt instrument associated with the SAILS and are included in the
balance of Investment in Marketable Securities. This debt has a seven-
year maturity and pays a cash coupon of 3.625 percent. The SAILS
contain an embedded equity collar, which effectively manages a large
portion of the Company's exposure to fluctuations in the fair value of
its holdings in Cisco common stock. At maturity, the SAILS will be
exchangeable for shares of Cisco common stock, or at the Company's
option, cash in lieu of shares. Net proceeds from the issuance of the
SAILS and termination of an existing freestanding collar agreement were
approximately $262,246 which were used for general corporate purposes,
including the repayment of debt outstanding under its revolving credit
facility. The Company accounts for the embedded equity collar as a
derivative financial instrument in accordance with the requirements of
Statement of Financial Accounting Standards No. 133, "Accounting for
Certain Derivative Instruments and Hedging Activities." The change in
fair value of this derivative between reporting dates is recognized
through earnings but has been mitigated by the changes in market value
of Cisco shares classified as trading securities which resulted in a net
effect on earnings which is not material. The derivative has been
combined with the debt instrument in long-term debt in an appropriate
presentation of the Company's overall future cash outflows for that debt
instrument under Financial Accounting Standards Board Interpretation No.
39, "Offsetting of Amounts Related to Certain Contracts" for the legal
right of offset for accounting purposes. The SAILS liability, net of
the derivative asset, represents $79,015 of the total long-term debt
balance outstanding at June 30, 2002. The Company has the option to
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terminate the SAILS arrangement prior to its scheduled maturity. Such
early termination would require the Company to pay an amount based on
the fair value of the embedded equity collar and the underlying stock,
which would be recorded in the Company's Statement of Operations in the
period of termination. Such amount, however, will never exceed the
present value of the Company's future coupon payments at the time of
termination. At the present time, the Company does not anticipate
terminating the SAILS arrangement prior to its scheduled maturity date.
The remaining portion of long-term debt outstanding relates to
various other loans maturing through 2008.
The combined aggregate amount of long-term debt maturities for the
six months ended December 31, 2002 and each of the subsequent years
ended December 31 are as follows:
2002 $ 77
2003 6,379
2004 158,350
2005 31
2006 32
Thereafter 79,048
$243,917
The Company's long-term debt to capital ratio decreased to 17.0
percent at June 30, 2002 from 20.8 percent at December 31, 2001
primarily due to Telxon's repurchase of its remaining convertible
subordinated notes and debentures and the increase in equity due to
stock option exercises, partially offset by net borrowings under the
Company's credit facility (increase resulting from financing of
convertible notes and debentures repurchase partially offset by
repayments), the decrease in equity due to the net loss for the period,
and the repurchase of treasury shares.
The Company has loan agreements with various banks pursuant to
which, the banks have agreed to provide lines of credit totaling
$57,000. As of June 30, 2002 the Company had no borrowings outstanding
under these lines as compared to $19 outstanding at December 31, 2001.
These agreements continue until such time as either party terminates the
agreements.
At the date of the Telxon acquisition, Telxon had outstanding
$82,500 of 5.75 percent convertible subordinated notes, and $24,413 of
7.5 percent convertible subordinated debentures. During the year ended
December 31, 2001, Telxon purchased in the open market $21,861 of its
5.75 percent notes for $20,665. In January and February 2002, Telxon
repurchased $34,790 of its 5.75 percent notes for $34,127 in cash and
$5,173 of its 7.5 percent debentures for $5,004 in cash. This resulted
in an extraordinary gain of $566, net of income taxes of $266. In April
2002, Telxon redeemed the remaining balance of its 5.75 percent notes
and 7.5 percent debentures at a redemption price of 100.8214 percent of
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the outstanding principal amount plus accrued and unpaid interest for
the 5.75 percent notes and 100 percent of the outstanding principal
amount plus accrued and unpaid interest for the 7.5 percent debentures.
The aggregate principal amount redeemed was $45,089.
The Company continues to enter into obligations and commitments to
make future payments under lease agreements. The future obligations
related to capital lease obligations is not material.
The combined aggregate amount of required future minimum rental
payments under non-cancelable operating leases for the six months ended
December 31, 2002 and each of the subsequent years ended December 31,
are as follows:
2002 $ 8,551
2003 14,947
2004 12,312
2005 10,618
2006 9,523
Thereafter 34,428
$90,379
The Company has a balance of accrued purchase commitments of
$11,251 at June 30, 2002, compared to $13,822 at December 31, 2001.
Payments are due within one year and such balances are included in the
balance of accounts payable and accrued expenses in each respective
period.
The Company believes that it has adequate liquidity to meet its
current and anticipated needs from working capital, results of its
operations, and existing credit facilities.
In the opinion of management, inflation has not had a material
effect on the operations of the Company.
The Securities and Exchange Commission ("Commission") has
issued a Formal Order Directing Private Investigation and Designating
Officers to Take Testimony with respect to certain accounting matters,
principally concerning the timing and amount of revenue recognized by
the Company during the period from January 1, 2000 to December 31,
2001. The Company is cooperating with the Commission, and has
produced documents in response to the Commission's inquiries.
In addition, the Company has commenced its own investigation of
these matters with the assistance of an outside law firm and an
independent accounting firm. The Company's investigation is still in
progress and has not yet reached a final conclusion. It is
anticipated that the Company's investigation will be concluded in the
Fall of 2002. Since both the Commission's investigation and the
Company's investigation are continuing, there can be no assurance that
the outcome will not require the Company to restate reported revenue
for some or all of the periods in question.
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Critical Accounting Policies
The preparation of these financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.
On an on-going basis, management evaluates its estimates and
judgments, including those related to revenue recognition, asset
impairment, intangible assets and derivative instrument valuation.
Management bases its estimates and judgments on historical experience
and on various other factors that are believed to be reasonable under
the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions. Note 1 to the
Company's consolidated financial statements for the year ended December
31, 2001 (as contained in the Company's Form 10-K) "Summary of
Significant Accounting Policies" summarizes each of its significant
accounting policies. Management believes the following critical
accounting policies, among others, affect its more significant judgments
and estimates used in the preparation of its consolidated financial
statements.
Revenue Recognition
Revenue related to sales of the Company's products and systems is
generally recognized when products are shipped or services are rendered,
the title and risk of loss has passed to the customer, the sales price
is fixed or determinable, and collectibility is reasonably assured. The
Company accrues related product return reserves and warranty expenses at
the time of sale. Service and maintenance sales are recognized over the
contract term. In December 1999, the Securities and Exchange Commission
issued Staff Accounting Bulletin ("SAB") No. 101 "Revenue Recognition in
Financial Statements". Accordingly, if products, services or
maintenance are bundled in a single contract, revenue will be recognized
once all elements of the contract are completed unless the following
criteria are met: (1) the product has been delivered; (2) the
undelivered services or maintenance are not essential to the delivered
products; (3) the fee for the product is not subject to forfeiture,
refund or concession based on performance of the services or
maintenance; (4) the fair value of services and maintenance are
determined based on the price charged by the Company, or the price
charged by competitors when similar services or maintenance are sold
separately; and (5) the revenue related to any element of the contract
is not subject to customer acceptance; in which case the revenue for
each element will be recognized independently.
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Long-Lived Assets
The Company assesses the impairment of its long-lived assets,
including property, plant and equipment, identifiable intangible assets
and software development costs whenever events or changes in
circumstances indicate the carrying value may not be recoverable.
Factors the Company considers important which could trigger an impairment
review include significant changes in the manner of the Company's use of
the acquired asset, changes in historical or projected operating
performance and significant negative economic trends.
Research and Development/Software Development Costs
The Company expenses all research and development costs as incurred.
Research and development expenses may fluctuate due to the timing of
expenditures for the varying stages of research and product development
and the availability of capital resources. The Company capitalizes costs
incurred for internally developed product software where economic and
technological feasibility has been established and for qualifying
purchased product software. The Company assesses the recoverability of
its software development costs against estimated future revenue over the
remaining economic life of the software.
Derivative Instruments, Hedging Activities and Foreign Currency
The Company utilizes derivative financial instruments to hedge
foreign exchange rate risk exposures related to foreign currency
denominated payments from its international subsidiaries. The Company
also utilizes a derivative financial instrument to hedge fluctuations in
the fair value of its investment in Cisco common shares. These
derivatives qualify for hedge accounting. The Company does not
participate in speculative derivatives trading. While the Company
intends to continue to meet the conditions for hedge accounting, if
hedges did not qualify as highly effective, or if the Company did not
believe the forecasted transactions would occur, the changes in fair
value of the derivatives used as hedges would be reflected in earnings.
The Company does not believe it is exposed to more than a nominal amount
of credit risk in its hedging activities as the counterparties are
established, well capitalized financial institutions.
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to ITEM 7, in the Company's annual report on Form 10-K for the
year ended December 31, 2001 for required disclosure.
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PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
The Company is currently involved in matters of litigation arising
from the normal course of business. Management is of the opinion
that such litigation will not have a material adverse effect on
the Company's consolidated financial position or results of
operations.
In March 2001, Proxim Incorporated ("Proxim") sued the Company, 3
Com Corporation, Wayport Incorporated and SMC Networks
Incorporated in the United States District Court in the District
of Delaware for allegedly infringing three patents owned by
Proxim. Proxim did not identify any specific products of the
Company that allegedly infringe these three patents. Proxim also
filed a similar lawsuit in March 2001 in the United States
District Court in the District of Massachusetts against Cisco
Systems, Incorporated and Intersil Corporation. The complaint
against the Company seeks, among other relief, unspecified damages
for patent infringement, treble damages for willful infringement,
and a permanent injunction against the Company from infringing
these three patents. In a press conference held after the filing
of the complaints, Proxim indicated that it was interested in
licensing the patents that are the subject of the lawsuit against
the Company.
On May 1, 2001, the Company filed an answer and counterclaim in
response to Proxim's suit. The Company has responded by asserting
its belief that Proxim's asserted patents are invalid and not
infringed by any of the Company's products. In addition, the
Company has asserted its belief that Proxim's claims are barred
under principles of equity, estoppel and laches. The Company
believes Proxim's claims are without merit. The Company has also
filed counterclaims against Proxim, asserting that Proxim's RF
product offerings infringe four of the Company's patents relating
to wireless LAN technology. The Company has requested the Court
grant an unspecified amount of damages as well as a permanent
injunction against Proxim's sale of its wireless LAN product
offerings. The Court has severed the Company's counterclaim
against Proxim involving the four of the Company's patents
relating to wireless LAN technology from Proxim's initial case.
On May 14, 2001, the Company announced that an agreement had been
reached with Intersil Corporation, a supplier of key wireless LAN
chips to the Company. Under this agreement, Intersil will
generally indemnify and defend the Company against Proxim's
initial infringement suit. On May 30, 2002, the Court granted
Intersil's motion to intervene as a defendant in the Proxim
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infringement suit. Having granted Intersil's motion to intervene,
the Court imposed a mandatory stay in the case until the
conclusion of a related proceeding involving Proxim, Intersil, and
other parties in the U.S. International Trade Commission ("ITC").
The Court further barred Proxim from collecting damages against
the Company attributable to the Company's alleged infringing
conduct during the stay. On June 14, 2002, Proxim filed a motion
requesting the Court reconsider the damages bar portion of the
Court's May 30th order. The motion is currently pending.
On December 4, 2001, the Company filed a complaint against Proxim
in the United States District Court in the District of Delaware
asserting that Proxim's RF product offerings infringe four of the
Company's patents relating to wireless LAN technology. This
complaint asserts the same four patents that were asserted in the
Company's counterclaim against Proxim in the initial Proxim case
prior to the severance of this counterclaim by the Court. On
December 18, 2001, Proxim filed an answer and counterclaims
seeking declaratory judgments for non-infringement, invalidity and
unenforceability of the four patents asserted by the Company,
injunctive and monetary relief for the Company's alleged
infringement of one additional Proxim patent involving wireless
LAN technology, monetary relief for the Company's alleged false
patent marking, and injunctive and monetary relief for the
Company's alleged unfair competition under the Lanham Act, common
law unfair competition and tortious interference. The Company
believes these claims to be without merit.
On January 31, 2002, the Company filed an answer in response to
Proxim's counterclaim. The Company has responded by asserting its
belief that Proxim's asserted patent is invalid and not infringed
by any of the Company's products. In addition, the Company has
asserted its belief that Proxim's patent claims are barred under
principles of equity, estoppel and laches. Also on January 31,
2002, the Company filed a motion to dismiss Proxim's claims
regarding false patent markings, the Lanham Act, common law unfair
competition and tortious interference. On June 25, 2002, the
Court granted the Company's motion with respect to false patent
marking, and denied the motion in all other respects.
On July 21, 1999, the Company and six other leading members of the
Automatic Identification and Data Capture industry jointly
initiated a litigation against the Lemelson Medical, Educational,
& Research Foundation, Limited Partnership (the "Lemelson
Partnership"). The suit, which is entitled Symbol Technologies,
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Inc. et. al. v. Lemelson Medical, Educational & Research
Foundation, Limited Partnership, was commenced in the U.S.
District Court, District of Nevada in Reno, Nevada but was
subsequently transferred to the Court in Las Vegas, Nevada.
In the litigation, the Auto ID companies seek, among other
remedies, a declaration that certain patents, which have been
asserted by the Lemelson Partnership against end users of bar code
equipment, are invalid, unenforceable and not infringed. The
Company has agreed to bear approximately half of the legal and
related expenses associated with the litigation, with the
remaining portion being borne by the other Auto ID companies.
The Lemelson Partnership has contacted many of the Auto ID
companies' customers demanding a one-time license fee for certain
so-called "bar code" patents transferred to the Lemelson
Partnership by the late Jerome H. Lemelson. The Company and the
other Auto ID companies have received many requests from their
customers asking that they undertake the defense of these claims
using their knowledge of the technology at issue. Certain of
these customers have requested indemnification against the
Lemelson Partnership's claims from the Company and the other Auto
ID companies, individually and/or collectively with other
equipment suppliers. The Company, and we understand, the other
Auto ID companies believe that generally they have no obligation
to indemnify their customers against these claims and that the
patents being asserted by the Lemelson Partnership against their
customers with respect to bar code equipment are invalid,
unenforceable and not infringed. However, the Company and the
other Auto ID companies believe that the Lemelson claims do
concern the Auto ID industry at large and that it is appropriate
for them to act jointly to protect their customers against what
they believe to be baseless claims being asserted by the Lemelson
Partnership.
The Lemelson Partnership filed a motion to dismiss the lawsuit, or
in the alternative, to stay proceedings or to transfer the case to
the U.S. District Court in Arizona where there are pending cases
involving the Lemelson Partnership and other companies in the
semiconductor and electronics industries. On March 21, 2000, the
U.S. District Court in Nevada denied the Lemelson Partnership's
motion to dismiss, transfer, or stay the action. It also struck
one of the four counts.
On April 12, 2000, the Lemelson Partnership filed its answer to
the complaint in the Symbol et al. v. Lemelson Partnership case.
In the answer, the Lemelson Partnership included a counterclaim
against the Company and the other plaintiffs seeking a dismissal
of the case. Alternatively, the Lemelson Partnership's
counterclaim seeks a declaration that the Company and the other
plaintiffs have contributed to, or induced infringement of
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particular method claims of the patents-in-suit by the plaintiffs'
customers. The Company believes these claims to be without merit.
On May 15, 2000, the Auto ID companies filed a motion seeking
permission to file an interlocutory appeal of the Court's decision
to strike the fourth count of the complaint (which alleged that
the Lemelson Partnership's delays in obtaining its patents
rendered them unenforceable for laches). The motion was granted
by the Court on July 14, 2000. The Court entered a clarifying,
superseding order on July 25, 2000. On September 1, 2000, the U.S.
Court of Appeals for the Federal Circuit granted the petition of
the Auto ID companies for permission to pursue this interlocutory
appeal. The Federal Circuit heard oral argument on this appeal on
October 4, 2001. On January 24, 2002, the Federal Circuit found
for the Auto ID companies, holding that the defense of prosecution
laches exists as a matter of law. On March 20, 2002 the Federal
Circuit denied Lemelson's petition for rehearing in banc.
Accordingly, the issue has been remanded to the Court in Nevada to
consider whether the laches defense is applicable to the Lemelson
case. On June 18, 2002, Lemelson filed a petition for a writ of
certiorari with the Supreme Court of the United States seeking
review of the Federal Circuit's prosecution laches decision. The
Auto ID companies expect to file an opposition to the petition in
due course.
On July 24, 2000, the Auto ID companies filed a motion for partial
summary judgment arguing that almost all of the claims of the
Lemelson Partnership's patents are invalid for lack of written
description. On August 8, 2000, the Lemelson Partnership filed a
motion seeking an extension of approximately ten weeks in which to
file an answer to this motion. On August 31, 2000, the Court
granted the Lemelson Partnership's motion for such an extension.
On October 25, 2000, the Lemelson Partnership filed a combined
opposition to the motion of the Auto ID companies for partial
summary judgment and its own cross-motion for partial summary
judgment that many of the claims of the Lemelson Partnership's
patents satisfy the written description requirement. On January 8,
2001, the Auto ID companies filed a combined reply in support of
their partial summary judgment motion and opposition to the
Lemelson Partnership's partial summary judgment cross-motion. On
June 15, 2001, the District Court heard oral arguments on this
motion. On July 12, 2001, the District Court denied both the Auto
ID companies' motion and Lemelson's cross-motion. In doing so,
the Court did not rule on the merits of the matters raised in the
motions, but instead held that there remain triable issues of
material fact that preclude granting summary judgment in favor of
either party.
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On May 14, 2001, the Auto ID companies filed another motion for
summary judgment arguing that Lemelson's patents at issue are
unenforceable because of Lemelson's inequitable conduct before the
U.S. Patent and Trademark Office. On June 19, 2001, the Lemelson
Partnership filed a combined opposition to the motion of the Auto
ID companies for summary judgment and its own cross-motion for
partial summary judgment that no such inequitable conduct
occurred. On July 10, 2001, the Auto ID companies filed a
combined reply in support of their summary judgment motion and
opposition to the Lemelson Partnership's partial summary judgment
cross-motion. On November 13, 2001, the District Court denied
both the Auto ID companies' motion and Lemelson's cross-motion.
In doing so, the Court did not rule on the merits of the matters
raised in the motions, but instead held that there remain triable
issues of material fact that preclude granting summary judgment in
favor of either party.
On August 1, 2001, the Auto ID companies filed another motion for
partial summary judgment arguing that the Lemelson Partnership is
not entitled, as a matter of law, to rely on a now-abandoned
Lemelson patent application filed in 1954 to provide a filing date
or disclosure for the claims of the patents-in-suit. On November
13, 2001, the District Court denied the Auto ID companies' motion.
In doing so, the Court did not rule on the merits of the matters
raised in the motion, but instead held that there remain triable
issues of material fact that preclude granting summary judgment.
On July 25, 2001, the Court entered an order setting a schedule
that culminates with a trial scheduled for August 2002. On April
12, 2002, the Court entered a superseding scheduling order setting
a schedule that culminates with a trial scheduled for November
2002. Under this timetable, the Auto ID companies' arguments
relating to laches, invalidity, unenforceability and/or non-
infringement of the so-called "bar code" patents will be briefed
by motion at the appropriate time, or at trial.
On July 12, 2002, the Auto ID plaintiffs filed three new summary
judgment motions with the Court in Nevada on the following
grounds: (1) that the so-called bar code patents are unenforceable
based on the prosecution laches doctrine found to exist by the
Federal Circuit; (2) that users of bar code equipment do not
infringe Lemelson's patents based on Lemelson's statements in the
prosecution history equating his alleged invention with video-
based technology; and (3) that the so-called bar code patents are
invalid based on Lemelson's admissions regarding the prior art
that were made to advance the prosecution of his patent
applications. These motions are currently pending.
From December through March 1999, a total of 27 class actions were
filed in the United States District Court, Northern District of
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Ohio, by certain alleged stockholders of Telxon on behalf of
themselves and purported classes consisting of Telxon stockholders,
other than the defendants and their affiliates, who purchased stock
during the period from May 21, 1996 through February 23, 1999 or
various portions thereof, alleging claims for "fraud on the market"
arising from alleged misrepresentations and omissions with respect
to Telxon's financial performance and prospects and an alleged
violation of generally accepted accounting principles by improperly
recognizing revenues. The named defendants are Telxon, its former
President and Chief Executive Officer, Frank E. Brick, and its
former Senior Vice President and Chief Financial Officer, Kenneth
W. Haver. The actions were referred to a single judge. On
February 9, 1999, the plaintiffs filed a Motion to consolidate all
of the actions and the Court heard motions on naming class
representatives and lead class counsel on April 26, 1999.
On August 25, 1999, the Court appointed lead plaintiffs and their
counsel, ordered the filing of an Amended Complaint, and dismissed
26 of the 27 class action suits without prejudice and consolidated
those 26 cases into the first filed action. The lead plaintiffs
appointed by the Court filed an Amended Class Action Complaint on
September 30, 1999. The Amended Complaint alleges that the
defendants engaged in a scheme to defraud investors through
improper revenue recognition practices and concealment of material
adverse conditions in Telxon's business and finances. The Amended
Complaint seeks certification of the identified class, unspecified
compensatory and punitive damages, pre- and post-judgment interest,
and attorneys' fees and costs. Various appeals and writs
challenging the District Court's August 25, 1999 rulings were filed
by two of the unsuccessful plaintiffs but have all been denied by
the Court of Appeals.
On November 8, 1999, the defendants jointly moved to dismiss the
Amended Complaint, which was denied on September 29, 2000.
Following the denial, the parties filed a proposed joint case
schedule, discovery commenced, and the parties each filed their
initial disclosures. On October 30, 2000, defendants filed their
answer to the plaintiffs' amended complaint as well as a Motion for
Reconsideration or to Certify the Order Denying the Motion to
Dismiss for Interlocutory Appeal and request for oral argument, and
a memorandum of points and authorities in support of that motion.
On November 14, 2000, Plaintiffs filed a Memorandum in Opposition
of Defendants Motion. This Motion was denied on January 19, 2001.
On November 1, 2000, defendants filed a Motion for Application of
the Amended Federal Rules of Civil Procedure to the case, and on
November 16, 2000, the Court granted this Motion in part and held
that the Court will apply the new rules of evidence and new rules
of civil procedure except to the extent those rules effectuate
changes to Rule 26 of the Federal Rules for Civil Procedure.
Discovery is in its preliminary stages.
-41-
On February 20, 2001, Telxon filed a motion for leave to file and
serve instanter a summons and third-party complaint against third-
party defendant PricewaterhouseCoopers LLP ( "PWC")in shareholders'
class action complaints. Telxon's third-party complaint against
PWC concerns PWC's role in the original issuance and restatements
of Telxon's financial statements for its fiscal years 1996, 1997,
1998 and its interim financial statements for its first and second
quarters of fiscal year 1999, the subject of the class action
litigation against Telxon. Telxon states causes of action against
PWC for contribution under federal securities law, as well as state
law claims for accountant malpractice, fraud, constructive fraud,
fraudulent concealment, fraudulent misrepresentation, negligent
misrepresentation, breach of contract, and breach of fiduciary
duty. With respect to its federal claim against PWC, Telxon seeks
contribution from PWC for all sums that Telxon may be required to
pay in excess of Telxon's proportionate liability, if any, and
attorney fees and costs. With respect to its state law claims
against PWC, Telxon seeks compensatory damages, punitive damages,
attorney fees and costs, in amounts to be determined at trial.
Thereafter plaintiffs sued PWC directly and that action was
consolidated. PWC filed a motion to dismiss both Telxon's third
party complaint and the PWC action.
On March 25, 2002, the Court ruled on the pending motions. As to
Telxon's third-party complaint against PWC, the Court ruled that it
was timely filed, and that Telxon's allegations of scienter by PWC
under the Federal securities laws were sufficiently pled, that
Telxon's state law fraud claims were sufficiently pled, and that
Telxon's breach of fiduciary duty, constructive fraud and
fraudulent concealment claims against PWC should not be dismissed
at the pleading stage. The Court denied PWC's motion to dismiss
Telxon's claims for contribution under the Federal securities laws
with respect to Telxon's restatements of its 1996, 1997 and 1998
audited financial statements, and granted PWC's motion to dismiss
Telxon's contribution claims with respect to the restatements of
its unaudited first and second quarter 1999 financial statements.
The Court also granted Telxon's motion for leave to file and serve
the third party complaint instanter on February 20, 2001. The
Court also denied PWC's motion to dismiss the separate action filed
against it by the plaintiffs. PWC has subsequently filed an answer
denying liability, asserting numerous defenses and a third party
complaint against Telxon for contribution and indemnity.
On June 11, 2002 a complaint was filed against Telxon by Wyser-
Pratte Management Co., Inc. whose President and sole shareholder is
Mr. Guy Wyser-Pratte, a well-known securities arbitrageur. In late
August 1998, Mr. Wyser-Pratte and Telxon settled a proxy litigation
which arose out of discussions between Telxon and the Company
during the April-June 1998 time period about a then possible
acquisition by the Company. The complaint also names several
former Telxon executives as well as Telxon's former outside
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auditors, PWC as defendants. The complaint alleges violations of
Sections 10b-5, 14, 18 and 20 of the Securities and Exchange Act of
1934, as well as common law claims for fraud and negligent
misrepresentation. This litigation is related to the previously
described Telxon class action litigation. The Wyser-Pratte
complaint seeks unspecified compensatory and punitive damages, as
well as attorney's fees and costs. By Court Order dated June 20,
2002, this litigation was consolidated for discovery purposes with
the Telxon class action litigation. Telxon filed a motion to
dismiss the complaint. The Company believes that it has
meritorious defenses to the litigation and intends to defend the
lawsuit vigorously.
The Securities and Exchange Commission ("Commission") has issued
a Formal Order Directing Private Investigation and Designating
Officers to Take Testimony with respect to certain accounting
matters, principally concerning the timing and amount of revenue
recognized by the Company during the period from January 1, 2000
to December 31, 2001. The Company is cooperating with the
Commission, and has produced documents in response to the
Commission's inquiries.
In addition, the Company has commenced its own investigation of
these matters with the assistance of an outside law firm and an
independent accounting firm. The Company's investigation is
still in progress and has not yet reached a final conclusion.
It is anticipated that the Company's investigation will be
concluded in the Fall of 2002. Since both the Commission's
investigation and the Company's investigation are continuing,
there can be no assurance that the outcome will not require the
Company to restate reported revenue for some or all of the
periods in question.
On March 5, 2002, a purported class action lawsuit was filed,
entitled Pinkowitz v. Symbol Technologies, Inc. et al., in the
United States District Court for the Eastern District of New York,
on behalf of purchasers of the common stock of Symbol between
October 19, 2000 and February 13, 2002, inclusive, against the
Company, Tomo Razmilovic, Jerome Swartz and Kenneth Jaeggi. The
complaint alleges that defendants violated the federal securities
laws by issuing materially false and misleading statements
throughout the class period that had the effect of artificially
inflating the market price of the Company's securities.
Specifically, the complaint alleges that defendants engaged in the
following conduct which had the effect of increasing the Company's
reported revenue and profits: (1) the Company booked as profit in
the third quarter of 2000 a one-time royalty payment in excess of
$10 million, enabling the Company to make its third quarter
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projections; (2) the Company used expenses associated with its
acquisition of Telxon to mask the fact that its sales were
declining; and (3) the Company booked as having shipped in the
first quarter of 2001 more than $40 million in inventory in
transactions that included side provisions allowing customers to
delay payments or return merchandise, or included products that
"never left the warehouse". Subsequently, a number of additional
purported class actions containing substantially similar
allegations have also been filed against the Company and certain of
its officers in the Eastern District of New York. All of these
actions have been consolidated into one lawsuit. The Company
anticipates that a consolidated amended complaint will be filed in
the near future. The Company believes that it has meritorious
defenses to this litigation and intends to defend the lawsuit
vigorously.
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ITEM 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on May 6,
2002. At the meeting six directors nominated by the Company were
elected. The votes cast for each nominee were as follows:
For Against_
George Bugliarello 186,407,671 18,749,402
Leo A. Guthart 186,481,698 18,675,375
Harvey P. Mallement 185,218,151 19,938,922
Raymond R. Martino 185,835,040 19,322,033
James Simons 186,532,628 18,624,445
Jerome Swartz 142,278,409 62,878,664
The shareholders also approved proposals to (i)adopt the 2002
Directors' Stock Option Plan, (ii) amend the 1997 Employee Stock
Purchase Plan and (iii) ratify the appointment of Deloitte &
Touche LLP as auditors for fiscal 2002. The number of shares
voted for, voted against or abstained from voting upon, each
proposal was as follows:
For Against Abstain_
Proposal to adopt the 2002
Directors' Stock Option Plan 115,608,886 88,754,950 2,772,196
Proposal to amend the 1997
Employee Stock Purchase Plan 191,584,431 12,939,584 2,612,017
Proposal to ratify the appointment
of Deloitte & Touche LLP as
auditors for Fiscal 2002 198,859,181 7,344,472 932,379
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ITEM 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
3.2 Amended By-Laws of the Company.
10.1 Employment Agreement between the Company and
William R. Nuti.
10.2 2002 Director's Stock Option Plan.
10.3 2002 Symbol Technologies, Inc. Stock Ownership and
Option Retention Program.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
(b) None
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SIGNATURES
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.
SYMBOL TECHNOLOGIES, INC.
Dated: August 12, 2002 By: /s/ Richard Bravman_____
Richard Bravman
Vice Chairman of the Board
of Directors and
Chief Executive Officer
Dated: August 12, 2002 By: /s/ Kenneth V. Jaeggi
Kenneth V. Jaeggi
Senior Vice President -
Chief Financial Officer
-47-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
QUARTERLY REPORT
ON
FORM 10-Q
FOR QUARTER ENDED
JUNE 30, 2002
__________________________________
SYMBOL TECHNOLOGIES, INC.
EXHIBITS
6a) Exhibits
3.2 Amended By-Laws of the Company.
10.1 Employment Agreement between the Company and
William R. Nuti.
10.2 2002 Director's Stock Option Plan.
10.3 2002 Symbol Technologies, Inc. Stock Ownership and
Option Retention Program.
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
Exhibit 3.2
Amended as of July 15, 2002
By-Laws
OF
SYMBOL TECHNOLOGIES, INC.
__________________________
ARTICLE I
OFFICES
Section 1.1. Registered Office.
The registered office of the Corporation within the State of
Delaware shall be located at the principal place of business in
said State of such corporation or individual acting as the
Corporation's registered agent in Delaware.
Section 1.2 Other Offices.
The Corporation may also have offices and places of business
at such other places both within and without the State of
Delaware as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETING OF STOCKHOLDERS
Section 2.1. Place of Meetings.
All meetings of Stockholders shall be held at the principal
office of the Corporation, or at such other place within or
without the State of Delaware as shall be stated in the notice of
the meeting or in a duly executed waiver of notice thereof.
Section 2.2. Annual Meeting.
The annual Meeting of Stockholders shall be held at such
time on such day as shall be fixed by and in the discretion of
the Board of Directors. At the annual meeting, the stockholders
entitled to vote for the election of directors shall elect, by a
plurality vote, a Board of Directors and transact such other
business as may properly come before the meeting.
Section 2.3. Special Meetings.
A special meeting of the stockholders for any purpose or
purposes, unless otherwise prescribed by statute, may be called
only by the Chairman of the Board of Directors, or if no Chairman
of the Board of Directors is then serving by the President, by
the Board of Directors, or by the Secretary at the request in
writing of a majority of the Board of Directors. Business
transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
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Section 2.4. Notice of Meeting.
Notice of every meeting of stockholders stating the place,
date and hour thereof and, in the case of a special meeting of
stockholders, the purpose or purposes thereof and the person or
persons by whom or at whose direction such meeting has been
called and such notice is being issued shall be given not less
than ten (10) nor more than (60) days before the date of the
meeting, either personally or by mail or as otherwise permitted
by law. If mailed, such notice shall be deemed given when
deposited in the United States mail, with postage prepaid,
directed to the stockholder at his address as it appears on the
record of the stockholders or if he shall have filed with the
Secretary of the Corporation a written request that notices to
him be mailed to some other address, then directed to him at such
other address. Nothing herein contained shall preclude any
stockholder from waiving notice as provided in Section 4 hereof.
Section 2.5. Quorum.
The holders of a majority of the issued and outstanding
shares of stock of the Corporation entitled to vote thereat,
represented in person or by proxy, shall be necessary to and
shall constitute a quorum for the transaction of business at any
meeting of stockholders. If, however, such quorum shall not be
present or represented at any meeting of stockholders, the
meeting may be adjourned from time to time, without notice other
than announcement at the meeting, until a quorum shall be present
or represented. Whether or not a quorum is present, any meeting
of stockholders, annual or special, may be adjourned from time to
time by the person presiding over the meeting or represented by
the holders of a majority of the votes entitled to be cast by the
stockholders who are present in person or by proxy at such
meeting, to reconvene at the same or some other place, without
notice other than announcement at the meeting. At any such
adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been
transacted at the meeting as originally noticed. Notwithstanding
the foregoing, if after any such adjournment the Board of
Directors shall fix a new record date for the adjourned meeting,
or if the adjournment is for more than 30 days, a notice of such
adjourned meeting shall be given as provided in Section 2.4 of
these By-laws, but such notice may be waived as provided in
Section 4 hereof.
Section 2.6. Voting.
Except as otherwise provided by or pursuant to the
provisions of the Certificate of Incorporation, each holder of
record of shares of stock entitled to vote at each meeting of
stockholders shall be entitled to vote in person or by proxy, and
each such holder shall be entitled to one vote for every share
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standing in his name on the books of the Corporation as of the
record date fixed by the Board of Directors or prescribed by law.
Except as otherwise provided by any applicable provision of law,
by these By-laws or by the Certificate of Incorporation, if a
quorum is present, the affirmative vote of a majority of the
shares of such stock present or represented at any meeting of
stockholders shall be the required vote of the stockholders with
respect to any item of business; provided, however, that, unless
otherwise provided by any applicable provision of law or by the
Certificate of Incorporation, a lesser vote of the stockholders
with respect to any item of business shall be applied if required
or otherwise provided for by any applicable rule or regulation of
any stock exchange or regulatory body. The Board of Directors,
in its discretion, or the officer of the Corporation presiding at
a meeting of stockholders, in his discretion, may require that
any votes cast at such meeting shall be cast by written ballot.
Section 2.7. Proxies.
Every stockholder entitled to vote at a meeting may
authorize another person or persons to act for him by proxy. No
Proxy shall be valid after the expiration of three (3) years from
its date, unless a longer period is provided for in such proxy.
Unless and until voted, every proxy shall be revocable at the
pleasure of the person who executed it, or his legal
representative or assigns, except in those cases where an
irrevocable proxy permitted by law has been given.
Section 2.8. Action by Written Consent of Stockholders.
(a) Any action required or permitted to be taken
at any annual or special meeting of the stockholders may be
taken without a meeting, without prior notice and without a
vote, if a consent or consents in writing, setting forth the
action so taken, shall be signed by the holders of outstanding
stock having not less than the minimum number of votes that
would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were
present and voted and shall be delivered to the Corporation by
delivery to its registered office in the State of Delaware, its
principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of
meetings of stockholders are recorded. Delivery to the
Corporation's registered office shall be made by hand or by
certified or registered mail, return receipt requested. The
Corporation shall give prompt notice of the taking of the
corporate action without a meeting by less than unanimous
written consent to those stockholders who have not consented in
writing and who, if the action had been taken at a meeting,
would have been entitled to notice of the meeting if the record
date for such meeting had been the date that written consents
signed by a sufficient number of holders to take the action
were delivered to the Corporation.
-3-
(b) Every written consent purporting to take or
authorizing the taking of corporate action and/or related
revocations (each such written consent and related revocation
is referred to in this Section 2.8 as a "Consent") shall bear
the date of signature of each stockholder who signs the
Consent, and no Consent shall be effective to take or authorize
the corporate action referred to therein unless, within 60 days
of the earliest dated Consent delivered to the Corporation in
the manner provided in Section 2.8(a) hereof, Consents signed
by a sufficient number of stockholders to take such action are
so delivered to the Corporation.
(c) In the event of the delivery to the
Corporation of any Consent in the manner provided in Section
2.8(a), the Secretary of the Corporation shall provide for the
safe keeping of such Consent and shall promptly conduct such
ministerial review of the validity of the Consents and of the
validity of the action or proposal to be taken by written
consent as the Secretary deems necessary or appropriate,
including, without limitation, whether the holders of a number
of shares having the requisite voting power to authorize or
take the action specified in the Consent have given consent;
provided, however that if the action or proposal to be taken by
written consent relates to the election, removal or replacement
of one or more members of the Board of Directors or otherwise
constitutes a solicitation in opposition as referred to in Rule
14a-6 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Secretary shall engage nationally
recognized independent inspectors of elections for the purpose
of conducting such ministerial review of the validity of the
Consents and the validity of the action or proposal to be taken
by written consent and to discharge the functions of the
Secretary of the Corporation under this Section 2.8, provided
further that the independent inspectors shall conduct such
ministerial review of the validity of the Consents and the
validity of the action or proposal to be taken by written
consent only in the manner provided in Sections 2.8(d)(i) and
(d)(ii) hereof. For the purpose of permitting the Secretary or
the independent inspectors (as the case may be) to conduct such
ministerial review of the validity of the Consents and the
validity of the action or proposal to be taken by written
consent, no action by written consent without a meeting shall
be effective until such date as the Secretary or the
independent inspectors (as the case may be) certify to the
Corporation that the Consents delivered to the Corporation in
accordance with Section 2.8(a) represent at least the minimum
number of votes that would be necessary to take or authorize
the corporate action at a meeting at which all shares entitled
to vote thereon were present and voted. The cost of retaining
independent inspectors under this Section 2.8 shall be borne by
the Corporation.
-4-
(d) (i) In the event of the delivery to the
Corporation of any Consent in the manner provided in
Section 2.8(a) hereof that relates to the election, removal
or replacement of one or more members of the Board of
Directors or otherwise constitutes a solicitation in
opposition to Rule 14a-6 of the Exchange Act, Consents
shall be delivered to the independent inspectors upon
receipt by the Corporation, the soliciting stockholders or
their proxy solicitors or other designated agents. As soon
as Consents are received, the independent inspectors shall
review the Consents and shall maintain a count of the
number of valid and unrevoked Consents. The independent
inspectors shall keep such count confidential and shall not
reveal the count to the Corporation, the soliciting
stockholders or their representatives or any other entity.
As soon as practicable after the earlier of (i) sixty (60)
days after the date of the earliest dated Consent delivered
to the Corporation in the manner provided in Section 2.8(a)
hereof or (ii) a written request therefore by the
Corporation or the soliciting stockholders (whichever is
soliciting Consents), notice of which request shall be
given to the party opposing the solicitation of Consents,
which request shall state that the Corporation or
soliciting stockholders, as the case may be, have a good
faith belief that the requisite number of valid and
unrevoked Consents to authorize the action to be taken has
been received in accordance with these By-laws, the
inspectors shall issue a preliminary report to the
Corporation and the soliciting stockholders stating: (i)
the number of valid consents, (ii) the number of valid
revocations, (iii) the number of valid and unrevoked
consents, (iv) the number of invalid consents, (v) the
number of invalid revocations and (vi) whether, based on
their preliminary count, the requisite number of valid and
unrevoked consents has been obtained to authorize the
action to be taken.
(ii) Unless the Corporation and the soliciting
stockholders shall agree to a shorter or longer period, the
Corporation and the soliciting stockholders shall have two
(2) business days to review the Consents and to advise the
independent inspectors and the opposing party in writing as
to whether they intend to challenge the preliminary report
of the inspectors. If no written notice of an intention to
challenge the preliminary report is received within two (2)
business days after the independent inspectors' issuance of
the preliminary report, the independent inspectors' shall
issue to the Corporation and the soliciting stockholders
their final report containing the information from the
independent inspectors, determination with respect to
-5-
whether the requisite number of valid and unrevoked
Consents was obtained to authorize the action to be taken.
If the Corporation or the soliciting stockholders issue
written notice of an intention to challenge the independent
inspectors' preliminary report within two (2) business days
after the issuance of that report, a challenge session
shall be scheduled by the independent inspectors as
promptly as practicable. Following completion of the
challenge session, the independent inspectors shall as
promptly as practicable issue their final report to the
soliciting stockholders and the Corporation, which report
shall contain the information included in the preliminary
report, plus all changes in the vote totals as a result of
the challenge.
(e) If after the completion of the investigation
of the Secretary or the delivery of the final report by the
independent inspectors (as the case may be), the Secretary or
the independent inspectors shall determine that the requisite
number of valid and unrevoked Consents was obtained and that
the action specified therein has been validly authorized, that
fact shall forthwith be certified in the records of the
Corporation kept for the purpose of recording the proceedings
of meetings of stockholders, and the Consents and final report
of the independent inspectors, if any, shall be filed in such
records, at which time the Consents shall become effective as
stockholder action.
Section 2.9. List of Stockholders.
The officer of the Corporation having charge of the stock
ledger shall make, at least ten (10) days before each meeting of
stockholders, a complete list of the stockholders entitled to
vote at such meeting or any adjournment thereof, arranged in
alphabetical order and showing the address of and the number and
class and series, if any, of shares held by each. Such list
shall be open to the examination of any stockholder, for any
purpose germane to the meeting, as required by applicable law.
Except as otherwise provided by law, the stock ledger of the
Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list of
stockholders or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
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Section 2.10. Fixing Date for Determination of Stockholders of
Record.
(a) In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a
meeting, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which
record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of
Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting
of stockholders or adjournment thereof, shall, unless otherwise
required by law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to
corporate action in writing without a meeting, shall not be
more than ten (10) days from the date upon which the resolution
fixing the record date is adopted by the Board of Directors;
and (3) in the case of any other action, shall not be more than
sixty (60) days prior to such other action; provided, however
that in the event that any stockholder of record is seeking to
have the stockholders authorize or take corporate action by
written consent without a meeting, the record date shall be
fixed in the manner provided in Section 2.10(b) hereof.
Subject to the foregoing and Section 2.10(b) hereof, if no
record date is fixed: (1) the record date for determining
stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the
day on which the meeting is held; (2) the record date for
determining stockholders entitled to express consent to
corporate action in writing without a meeting, when no prior
action of the Board of Directors is required by applicable law,
shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is
delivered to the Corporation in the manner provided in Section
2.8(a), or, if prior action by the Board of Directors is
required by applicable law, shall be at the close of business
on the day on which the Board of Directors adopts the
resolution taking such prior action; and (3) the record
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date for determining stockholders for any other purpose shall
be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board
of Directors may fix a new record date for the adjourned
meeting.
(b) Any stockholder of record seeking to have
the stockholders authorize or take corporate action by written
consent without a meeting shall, by written notice to the
Secretary and delivered to the Corporation, request the Board
of Directors to fix a record date for such purpose. The Board
of Directors may promptly, but in all events within ten (10)
days after the date on which such request is received, adopt a
resolution fixing the record date for such purpose. If the
Board of Directors fails within 10 days after the Corporation
receives such notice to fix a record date for such purpose, the
record date for determining the stockholders entitled to
consent in writing without a meeting, when no prior action by
the Board of Directors is required by applicable law, shall be
the day on which the first signed written consent setting forth
the action taken or proposed to be taken is delivered to the
Corporation in the manner provided in Section 2.8(a). If no
record date has been fixed by the Board of Directors and prior
action by the Board of Directors is required by applicable law,
the record date for determining stockholders entitled to
consent in writing without a meeting shall be at the close of
business on the day on which the Board of Directors adopts the
resolution taking such prior action.
Section 2.11. Notice of Stockholder Business and Nominations.
(a) Nominations of Directors.
(i) Only persons who are nominated in
accordance with the procedures set forth in these By-laws
shall be eligible to serve as directors. Nominations of
persons for election to the Board of Directors of the
Corporation may be made at a meeting of stockholders
pursuant to the Corporation's notice of meeting (A) by or
at the direction of the Board of Directors or (B) by any
stockholder of the corporation who is a stockholder of
record at the time of giving of notice provided for in this
Section 2.11(a), who shall be entitled to vote for the
election of directors at the meeting and who complies with
the notice procedures set forth in this Section 2.11(a);
provided, however, that, with respect to any special
meeting, the Board of Directors has determined that
directors shall be elected at such meeting.
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(ii) For nominations to be properly brought
before any meeting by a stockholder pursuant to clause (B)
of paragraph (i) of this Section 2.11(a), the stockholder
must have given timely notice in writing to the Secretary
of the Corporation. To be timely, a stockholders notice
shall be delivered to the Secretary and received at the
principal executive offices of the Corporation (A) in the
case of an annual meeting, not later than the close of
business on the 90th day nor earlier than the close of
business on the 120th day prior to the first anniversary of
the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is
more than 30 days before or more than 60 days later than
such anniversary date, notice by the stockholder to be
timely must be so delivered or received not earlier than
the 120th day prior to such annual meeting and not later
than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such
meeting is first made, and (B) in the case of a special
meeting at which directors are to be elected, not earlier
than the 120th day prior to such special meeting and not
later than the close of business on the later of the 90th
day prior to such special meeting or the 10th day following
the day on which public announcement is first made of the
date of any meeting and of the nominees proposed by the
Board of Directors to be elected; provided, however, that
in no event shall the public announcement of an adjournment
or postponement of a special meeting commence a new time
period (or extend any time period) for the giving of a
stockholder's notice as described above. Such
stockholder's notice shall set forth (A) as to each person
whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such
person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise
required, in each case pursuant to Regulation 14A under the
Exchange Act (including such person's written consent to
being named in the proxy statement as a nominee and to
serving as a director if elected); (B) as to the
stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination is being made (x) the
name and address of such stockholder, as they appear on the
Corporations books, and of such beneficial owner and (y)
the class and number of shares of the Corporation which are
beneficially owned and of record by such stockholder and
such beneficial owner; (C) a representation that the
stockholder is a holder of record of stock of the
Corporation entitled to vote in the election of directors
and intends to appear in person or by proxy at the meeting
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to nominate the person or persons specified in the notice,
(D) a description of all arrangements or understandings
between the stockholder and/or beneficial owner, if any, on
the one hand, and each nominee and any other person or
persons (naming such person or persons), on the other hand,
pursuant to which the nomination or nominations are being
made by the stockholder and such beneficial owner, and (E)
a representation whether the stockholder or the beneficial
owner, if any, intends or is part of a group which intends
(x) to deliver a proxy statement and/or form of proxy to
holders of at least the percentage of the Corporation's
outstanding capital stock required to elect the nominee
and/or (y) otherwise to solicit proxies from stockholders
in support of such nomination(s). The foregoing notice
requirements shall be deemed satisfied by a stockholder if
the stockholder has notified the Corporation of his or her
intention to present a proposal at a meeting in compliance
with Rule 14a-8 (or any successor thereof) promulgated
under the Exchange Act and such stockholder's proposal has
been included in a proxy statement that has been prepared
by the Corporation to solicit proxies for such meeting.
The Corporation may require any proposed nominee to furnish
such other information as it may reasonably require to
determine the eligibility of such proposed nominee to serve
as a director of the Corporation.
(iii) Notwithstanding anything in paragraph
(ii) of this Section 2.11(a) to the contrary, in the event
that the number of directors to be elected to the Board of
Directors of the Corporation at an annual meeting is
Increased and there is no public announcement by the
Corporation naming the nominees for the additional
directorships at least 90 days prior to the first
anniversary of the date of the preceding year's annual
meeting, a stockholders's notice required by this Section
2.11(a) shall also be considered timely, but only with
respect to nominees for the additional directorships, if it
shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the
close of business on the 10th day following the day on which
such public announcement is first made by the Corporation.
(b) Notice of Stockholder Business.
(i) At an annual meeting of the stockholders,
only such business shall be conducted as shall have been
brought before the annual meeting (A) pursuant to the
Corporation's notice of meeting, (B) by or at the direction
of the Board of Directors or (C) by a stockholder of the
Corporation who is a stockholder of record at the time of
giving of the notice provided for in this Section 2.11(b),
who is a stockholder of record of the Corporation at the
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time the notice provided for in this Section 2.11(b) is
delivered to the Secretary of the Corporation, who is
entitled to vote at such annual meeting and who complies
with the notice procedures set forth in this Section
2.11(b).
(ii) For business to be properly brought
before an annual meeting by a stockholder pursuant to
clause (C) of paragraph (i) of this Section 2.11(b), the
business must be a proper matter for stockholder action
under applicable law and the stockholder must have given
timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholders notice shall be
delivered to the Secretary and received at the principal
executive offices of the Corporation not later than the
close of business on the 90th day nor earlier than the close
of business on the 120th day prior to the first anniversary
of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is
more than 30 days before or more than 60 days later than
such anniversary date, notice by the stockholder to be
timely must be so delivered or received not earlier than
the 120th day prior to such annual meeting and not later
than the close of business on the later of the 90th day
prior to such annual meeting or the 10th day following the
day on which public announcement of the date of such
meeting is first made. Such stockholder's notice to the
Secretary shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (A) a brief
description of the business desired to be brought before
the meeting, the text of the proposal or business
(including the text of any resolutions proposed for
consideration and in the event that such business includes
a proposal to amend the By-laws of the Corporation, the
language of the proposed amendment, the reasons for
conducting such business at the meeting and any material
interest in such business of such stockholder of record and
beneficial owner, if any, on whose behalf the proposal is
made, (B) as to the stockholder giving the notice and the
beneficial owner, if any, on whose behalf the proposal is
being made (x) the name and address of the stockholder
giving notice, as they appear on the corporations books,
and of such beneficial owner and (y) the class and number
of shares of the Corporation which are beneficially owned
and of record by such stockholder and such beneficial
owner, (C) a description of all arrangements or
understandings between the stockholder and beneficial
owner, if any, on the one hand, and any other person or
persons (naming such person or persons), on the other hand,
pursuant to which the proposal(s) are being made by the
stockholder and such beneficial owner, (D) a representation
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that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to propose such
business, and (E) a representation whether the stockholder
or the beneficial owner, if any, intends or is part of a
group which intends (x) to deliver a proxy statement and/or
form of proxy to holders of at least the percentage of the
Corporation's outstanding capital stock required to approve
or adopt the proposal and/or (y) otherwise to solicit
proxies from stockholders in support of such proposal. The
foregoing notice requirements shall be deemed satisfied by
a stockholder if the stockholder has notified the
Corporation of his or her intention to present a proposal
at a meeting in compliance with Rule 14a-8 (or any
successor thereof) promulgated under the Exchange Act and
such stockholder's proposal has been included in a proxy
statement that has been prepared by the Corporation to
solicit proxies for such meeting.
(c) General.
(i) Only such persons who are nominated in
accordance with the procedures set forth in this Section
2.11 shall be eligible to be elected at an annual or
special meeting of stockholders of the Corporation to serve
as directors and only such business shall be conducted at
a meeting of stockholders as shall have been brought before
the annual meeting in accordance with the procedures set
forth in this Section 2.11. Except as otherwise provided
by law, the person presiding over the meeting shall have
the power and duty (A) to determine whether a nomination or
any business proposed to be brought before the meeting was
made or proposed, as the case may be, in accordance with
the procedures set forth in this Section 2.11 (including
whether the stockholder or beneficial owner, if any, on
whose behalf the nomination or proposal is made solicited
(or is part of a group which solicited) or did not so
solicit, as the case may be, proxies in support of such
stockholder's and beneficial owner's nominee or proposal in
compliance with such stockholder's and beneficial owner's
representations as required by Sections 2.11(a) and (b)
and (B) if any proposed nomination or business was not made
or proposed in compliance with this Section 2.11, to
declare that such nomination shall be disregarded or that
such proposed business shall not be transacted.
Notwithstanding the foregoing provisions of this Section
2.11, if the stockholder (or a qualified representative of
the stockholder) does not appear in person at the annual or
special meeting of stockholders of the Corporation to
present a nomination or business, such nomination shall be
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disregarded and such proposed business shall not be
transacted, notwithstanding that proxies in respect of such
vote may have been received by the Corporation.
(ii) For purposes of this Section 2.11, "public
announcement" shall include disclosure in a press release
reported by the Dow Jones News Service, Associated Press or
comparable national news service or in a document publicly
filed by the Corporation with the Securities and Exchange
Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
(iii) Notwithstanding the foregoing provisions of
this Section 2.11, a stockholder shall also comply with all
applicable requirements of the Exchange Act and the rules
and regulations thereunder with respect to the matters set
forth in this Section 2.11. Nothing in this Section 2.11
shall be deemed to affect any rights (A) of stockholders to
request inclusion of proposals in the Corporation's proxy
statement pursuant to Rule 14a-8 under the Exchange Act or
(B) of the holders of any series of Preferred Stock to
elect directors pursuant to any applicable provisions of
the Certificate of Incorporation.
Section 2.12. Inspectors of Election.
The Corporation may, and shall if required by law, in advance
of any meeting of stockholders, appoint one or more inspectors
of election, who may be employees of the Corporation, to act
at the meeting or any adjournment thereof and to make a
written report thereof. The Corporation may designate one or
more persons as alternate inspectors to replace any inspector
who fails to act. In the event that no inspector so appointed
or designated is able to act at a meeting of stockholders, the
person presiding at the meeting shall appoint one or more
inspectors to act at the meeting. Each inspector, before
entering upon the discharge of his or her duties, shall take
and sign an oath to execute faithfully the duties of inspector
with strict impartiality and according to the best of his or
her ability. The inspector or inspectors so appointed or
designated shall (i) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power of
each such share, (ii) determine the shares of capital stock of
the Corporation represented at the meeting and the validity of
proxies and ballots, (iii) count all votes and ballots, (iv)
determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the
inspectors, and (v) certify their determination of the number
of shares of capital stock of the Corporation represented at
the meeting and such inspectors' count of all votes and
ballots. Such certification and report shall specify such
other information as may be required by law. In determining
the validity and counting of proxies and ballots cast at any
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meeting of stockholders of the Corporation, the inspectors may
consider such information as is permitted by applicable law.
No person who is a candidate for an office at an election may
serve as an inspector at such election.
2.13 Organization; Conduct of Meetings.
(a) Meetings of stockholders shall be presided over
by the Chairman of the Board of Directors, if any, or in the
Chairman's absence by the President, or in President's absence
by a Vice President, or in the absence of the foregoing persons
by a chairman designated by the Board of Directors, or in the
absence of such designation by a chairman chosen at the
meeting. The Secretary shall act as secretary of the meeting,
but in the Secretary's absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
(b) The date and time of the opening and the closing
of the polls for each matter upon which the stockholders vote
at a meeting shall be announced at the meeting by the person
presiding over the meeting. The Board of Directors may adopt
by resolution such rules and regulations for the conduct of the
meeting of stockholders as it shall deem appropriate. Except
to the extent inconsistent with such rules and regulations as
adopted by the Board of Directors, the person presiding over
any meeting of stockholders shall have the right and authority
to convene and to adjourn the meeting, to prescribe such rules,
regulations and procedures and to do all such acts as, in the
judgment of such person, are appropriate for the proper conduct
of the meeting. Such rules, regulations or procedures, whether
adopted by the Board of Directors or prescribed by the person
presiding over any meeting of stockholders, may include,
without limitation, the following: (i) the establishment of an
agenda or order of business for the meeting; (ii) rules and
procedures for maintaining order at the meeting and the safety
of those present; (iii) limitations on attendance at or
participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or
such other persons as the person presiding over any meeting of
stockholders shall determine; (iv) restrictions on entry to the
meeting after the time fixed for the commencement thereof; and
(v) limitations on the time allotted to questions or comments
by participants. The person presiding over any meeting of
stockholders, in addition to making any other determinations
that may be appropriate to the conduct of the meeting, shall,
if the facts warrant, determine and declare to the meeting that
a matter or business was not properly brought before the
meeting and if such person should so determine, such person
shall so declare to the meeting and any such matter or business
not properly brought before the meeting shall not be transacted
or considered. Unless and to the extent determined by the
Board of Directors or the person presiding over any meeting of
stockholders, meetings of stockholders shall not be required to
be held in accordance with the rules of parliamentary
procedure.
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ARTICLE III
DIRECTORS
Section 3.1. Number of Directors; Terms.
The number of directors of the Corporation which shall
constitute the entire Board of Directors shall be fixed from time
to time by a vote of a majority of the entire Board of Directors
and shall be not less than one (1) nor more than fifteen (15).
The directors shall be elected at the annual meeting of
stockholders and shall serve until a successor shall have been
elected and qualified. Directors need not be stockholders of the
Corporation.
Section 3.2. RESERVED.
Section 3.3. Resignations.
Any director of the Corporation may resign at any time by
giving written notice to the Board of Directors or to the
Secretary of the Corporation. Any such resignation shall take
effect at the time specified therein, or if the time be not
specified, it shall take effect immediately upon its receipt, and
unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 3.4. RESERVED.
Section 3.5. Newly Created Directorships and Vacancies.
Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created directorships
resulting from any increase in the authorized number of directors
or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification, removal from office or
other cause shall be filled by a majority vote of the directors
then in office. Any director elected in accordance with the
preceding sentence of this Section 3.5 shall hold office until
the next meeting of stockholders at which the election of
directors is in the regular course of business and until such
director's successor has been elected and qualified. No decrease
in the number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
Section 3.6. Powers and Duties.
Subject to the applicable provisions of law, these By Laws
or the Certificate of Incorporation, but in furtherance and not
in limitation of any rights therein conferred, the Board of
Directors shall have the control and management of the business
and affairs of the Corporation and shall exercise all such powers
of the Corporation and do all such lawful acts and things as may
be exercised by the Corporation.
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Section 3.7. Place of Meetings.
All meetings of the Board of Directors may be held either
within or without the State of Delaware.
Section 3.8. Annual Meeting.
If the first meeting of each newly elected Board of
Directors shall be held immediately after the annual
stockholder's meeting and in the same place, notice thereof shall
not be necessary in order to constitute the meeting, provided a
quorum shall be present.
In the event that such meeting is not held at such date,
time and place, the meeting may be held on any other date, time
and place as shall be specified in a notice thereof given as
hereinafter provided in Section 3.11 or as shall be specified in
any waiver of notice thereof.
Section 3.9. Regular Meetings.
Regular meetings of the Board of Directors may be held upon
notice or without notice, and at such time and at such place as
shall from time to time be determined by the Board.
Section 3.10. Special Meetings.
Special meetings of the Board of Directors may be called by
the Chairman of the Board, if there be a Chairman of the Board,
or by the President or if he is absent, unable or refuses to act,
by the Secretary and shall be called promptly upon the written
request of any two directors. Neither the business to be
transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
Section 3.11. Notice of Meeting.
Notice of each special meeting of the Board of Directors
(and of each regular meeting for which notice shall be required)
shall be given by the Chairman of the Board, if there be a
Chairman of the Board, the President or the Secretary and shall
state the place, date and time of the meeting. Notice of each
such meeting shall either be (i) mailed to each director,
addressed to such director at such director's residence or usual
place of business, at least one week prior to the day on which
the meeting is to be held, (ii) given by overnight delivery
service to each director, addressed to such director at such
place, at least forty-eight (48) hours before the day on which
the meeting is to be held or (iii) sent to such director at such
place by telegraph, cable, telex, facsimile transmitter, e-mail
or other electronic transmission, or be delivered personally or
by telephone, at least twenty-four (24) hours before the day at
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which the meeting is to be held. Except as otherwise provided by
law, any meeting of the Board of Directors shall be a legal
meeting without any notice thereof having been given if all of
the directors shall be present thereat. Notice of any adjourned
meeting, including the place, date and time of the new meeting,
shall be given to all directors not present at the time of the
adjournment, as well as to the other directors unless the place,
date and time of the new meeting is announced at the adjourned
meeting. Nothing herein contained shall preclude the directors
from waiving notice as provided in Section 4 hereof.
Section 3.12. Quorum and Voting.
At all meetings of the Board of Directors a majority of the
entire board shall be necessary to and shall constitute a quorum
for the transaction of business at any meeting of the Board of
Directors, unless otherwise provided by any applicable provision
of law, by these By-laws, or by the Certificate of Incorporation.
The act of a majority of the directors present at the time of
the vote, if a quorum is present at such time, shall be the act
of the Board of Directors, unless otherwise provided by any
applicable provision of law, by these By-laws or by the
Certificate of Incorporation. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be
present.
Section 3.13. Compensation.
The Board of Directors, by the affirmative vote of a
majority of the directors then in office and irrespective of any
personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services
to the Corporation as directors, officers or otherwise. The
Board of Directors may also provide that the directors may be
reimbursed for their expenses, if any, for attendance at any
meeting of the Board of Directors or any committee thereof.
Section 3.14. Books and Records.
The directors may keep the books for the Corporation, except
such as are required by law to be kept within the state, outside
of the State of Delaware, at such place or places as they may
from time to time determine.
Section 3.15. Action Without a Meeting.
Any action required or permitted to be taken by the Board,
or a committee of the Board, may be taken without a meeting if
all members of the Board of Directors or committee, as the case
may be, consent thereto in writing or by electronic transmission
and the writing or writings or electronic transmission or
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transmissions are filed with the minutes of the proceedings of
the Board of Directors or such committee of the Board, as the
case may be.
Section 3.16. Telephonic Meetings.
Any one or more members of the Board, or any committee of
the Board, may participate in a meeting of the board or committee
by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to
hear each other at the same time. Participation by such means
shall constitute presence in person at a meeting.
Section 3.17. Committee of the Board.
The Board of Directors may designate from among its members
an executive and other committees, each consisting of one (1) or
more directors. The Board of Directors may designate one or more
directors as alternate members of any such committee. Such
alternate members may replace any absent member or members at any
meeting of any such committee. In the absence or
disqualification of a member of a committee, and in the absence
of a designation by the Board of Directors of an alternate member
to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to
act at the meeting in the place of any absent or disqualified
member. Vacancies in the membership of the committee shall be
filled by the Board of Directors at a regular meeting or at a
special meeting for that purpose.
Section 3.18. Authority of Committees; Committee Rules.
Each committee, to the extent permitted by law and to the
extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation
to be affixed to all papers which may require it. Unless the
Board of Directors otherwise provides, each committee designated
by the Board of Directors may make, alter and repeal rules for
the conduct of its business. In the absence of such rules each
committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article III
of these By-laws.
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ARTICLE IV
WAIVER
Section 4.1. Waiver.
Whenever a notice is required to be given by any provision of
law, by these By-laws, or by the Certificate of Incorporation, a
waiver thereof in writing, or by e-mail or other electronic
transmission or any other means of communication permissible by
law, whether before or after the time stated therein, shall be
deemed equivalent to such notice.
In addition, any stockholder attending a meeting of stockholders
in person or by proxy without protesting prior to the meeting or
at its commencement the lack of notice thereof to him, and any
director attending a meeting of the Board of Directors without
protesting prior to the meeting or at its commencement such lack
of notice, shall be conclusively deemed to have waived notice of
such meeting.
ARTICLE V
OFFICERS
Section 5.1. Officers.
The officers of the Corporation shall be a Chairman of the
Board, a President, one or more Vice Presidents and a Secretary.
The Corporation may also have, at the discretion of the Board,
one or more Vice Chairman of the Board, a Treasurer, one or more
Assistant Treasurers, a Controller, one or more Assistant
Controllers, one or more Assistant Vice Presidents, one or more
Assistant Secretaries and such other officers as the Board of
Directors shall at any time or from time to time deem necessary
or advisable to designate as officers or as may be appointed in
accordance with the provisions of Section 5.3 of this Article V.
Any person may hold two or more of such offices. All officers,
as between themselves and the Corporation, shall have such
authority and perform such duties in the management of the
business and affairs of the Corporation as may be provided in
these By-laws, or to the extent not so provided, as may be
prescribed by the Board of Directors or the Chief Executive
Officer as provided in Section 5.3 of this Article V.
Section 5.2. Election.
The officers of the Corporation, except such officers as may
be appointed in accordance with the provisions of Section 5.3 or
Section 5.5 of this Article, shall have been elected annually at
the annual meeting of the Board of Directors following the annual
meeting of stockholders and, as vacancies occur, from time to
time by the Board of Directors. Each officer shall hold his
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office until he shall resign or shall be removed or otherwise
disqualified to serve, or his successor shall have been elected
and qualified. The officers of the Corporation need not be
stockholders of the Corporation nor, except for the Chairman of
the Board need such officers be directors of the Corporation.
Section 5.3. Subordinate Officers.
The Board of Directors may appoint, or may authorize the
Chief Executive Officer to appoint, such other officers as the
business of the Corporation may require, each of whom shall have
authority and perform such duties as are provided in these By-
laws or as the Board of Directors or the Chief Executive Officer
may from time to time specify and each shall hold office until he
shall resign or shall have been removed or otherwise disqualified
to serve.
Section 5.4. Removal and Resignation.
Any officer may be removed, either with or without cause, by
a majority of the directors at the time in office, at any regular
or special meeting of the Board, or, except in the case of an
officer chosen by the Board, by any officer upon whom such power
of removal may be conferred by the Board. Any officer may resign
at any time by giving written notice to the Board, the Chairman
of the Board, the President or the Secretary of the Corporation.
Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein;
and unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 5.5. Vacancies.
A vacancy in any office because of death, resignation,
removal, disqualification or any other cause shall be filled in
the manner prescribed in the By-laws for the regular appointments
to such office.
Section 5.6. Compensation.
The salaries and other compensation of all officers and
agencies of the Corporation shall be fixed by or in the manner
prescribed by the Board of Directors.
Section 5.7. Chairman of Board.
The Chairman of the Board of Directors shall preside at all
meetings of the Board of Directors. The Chairman of the Board of
Directors shall be the Chief Executive Officer of the
Corporation, if designated as such by the Board of Directors.
Section 5.8. Vice Chairman of the Board.
In the absence of the Chairman, a Vice Chairman of the Board
of Directors shall preside at all meetings of the Board of
Directors. A Vice Chairman shall be the Chief Executive Officer
of the Corporation, if designated as such by the Board of
Directors.
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Section 5.9. President.
The President shall be the Chief Executive Office and/or the
Chief Operating Officer of the Corporation, as determined by the
Board of Directors. The President shall have general and active
management of the business and affairs of the Corporation and be
responsible for its day-to-day operations, subject to the control
of the Board of Directors and the Chief Executive Office, if the
President does not hold that position, and shall see to it that
all orders and resolutions of the Board of Directors are carried
into effect.
Section 5.10. Vice Presidents.
Each Vice President (including any Executive Vice President
or Senior Vice President) shall have such powers and limiting
titles and shall perform such duties as may from time to time be
assigned to him by the Board of Directors and/or the Chief
Executive Officer.
Section 5.11. Secretary.
The Secretary shall attend all meetings of the stockholders
and all meetings of the Board of Directors and shall record all
proceedings taken at such meeting in a book to be kept for the
purpose; he or an Assistant Secretary shall see that all notices
of meetings of stockholders and special meetings of the Board of
Directors are duly given in accordance with the provisions of
these By-laws or as required by law; and he shall be custodian of
the records and of the corporate seal or seals of the
Corporation; he or an Assistant Secretary shall have authority to
affix the corporate seal or seals to all documents, the execution
of which, on behalf of the Corporation, under its seal, is duly
authorized, and when so affixed it may be attested by his
signature or the signature of such Assistant Secretary; and in
general, he shall perform all duties incident to the office of
the Secretary of the Corporation and such other duties as the
Board of Directors may from time to time prescribe.
The Board of Directors may give general authority to any
other officer to affix the seal of the Corporation and to attest
the affixing by his signature.
ARTICLE VI
PROVISIONS RELATING TO STOCK CERTIFICATES AND STOCKHOLDERS
Section 6.1. Form and Signature.
Every holder of stock shall be entitled to have a
certificate signed by or in the name of the Corporation by the
Chairman or Vice Chairman of the Board of Directors, if any, or
the President or a Vice President, and by the Treasurer or an
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Assistant Treasurer, or the Secretary or an Assistant Secretary,
of the Corporation certifying the number of shares owned by such
holder in the Corporation. Any of or all the signatures on the
certificate maybe a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is
issued, it may be issued by the Corporation with the same effect
as if such person was such officer, transfer agent or registrar
at the date of issue.
Section 6.2. Registered Stockholders.
The Corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares
of stock to receive dividends or other distributions, and to vote
as such owner, and to hold liable for calls and assessments a
person registered on its books as the owner of shares of stock,
and shall not be bound to recognize any equitable or legal claim
to or interest in such share or shares on the part of any other
person.
Section 6.3. Transfer of Stock.
Upon surrender to the Corporation or the appropriate
transfer agent, if any, of the Corporation, of a certificate
representing shares of stock of the Corporation, duly endorsed or
accompanied by proper evidence of succession, assignment or
authority to transfer, and, in the event that the certificate
refers to any agreement restricting transfer of the shares which
it represents, proper evidence of compliance with such agreement,
a new certificate shall be issued to the person entitled thereto,
and the old certificate cancelled and the transaction recorded
upon the books of the Corporation.
Section 6.4. Lost Certificates, etc.
The Corporation may issue a new certificate for shares in
place of any certificate theretofore issued by it, alleged to
have been lost, mutilated, stolen or destroyed, and the Board of
Directors may require the owner of such lost, mutilated, stolen
or destroyed certificate, or his legal representatives, to make
an affidavit of that fact and/or to give the Corporation a bond
in such sum as it may direct as indemnity against any claim that
may be made against the Corporation on account of the alleged
loss, mutilation, theft or destruction of any such certificate or
the issuance of any such new certificate.
Section 6.5. RESERVED.
Section 6.6. Regulations.
Except as otherwise provided by law, the Board of Directors
may make such additional rules and regulations, not inconsistent
with these By-laws, as it may deem expedient, concerning the
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issue, transfer and registration of certificates for the
securities of the Corporation. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or
more transfer agents and one or more registrars and may require
all certificates for shares of capital stock to bear the
signature or signatures of any of them.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1. Dividends and Distributions.
Dividends and other distributions upon or with respect to
outstanding shares of stock of the Corporation may be declared by
the Board of Directors at any regular or special meeting, and may
be paid in cash, bonds, property or in shares of stock of the
Corporation. The Board of Directors shall have full power and
discretion, subject to the provisions of the Certificate of
Incorporation or the terms of any other corporate document or
instrument binding upon the Corporation to determine what, if
any, dividends or distributions shall be declared and paid or
made.
Section 7.2. Checks, etc.
All checks or demands for money and notes or other
instruments evidencing indebtedness or obligations of the
Corporation shall be signed by such officer or officers or other
person or persons as may from time to time be designated by the
Board of Directors.
Section 7.3. Seal.
The Corporate seal shall have inscribed thereon the name of
the Corporation, the year of its incorporation and the words
"Corporate Seal Delaware". The seal may be used by causing it or
a facsimile thereof to be impressed or affixed or otherwise
reproduced.
Section 7.4. Fiscal Year.
The fiscal year of the Corporation shall be determined by
the Board of Directors.
Section 7.5. General and Special Bank Accounts.
The Board of Directors may authorize from time to time the
opening and keeping of general and special bank accounts with
such banks, trust companies or other depositories as the Board of
Directors may designate or as may be designated by any officer or
officers of the Corporation to whom such power of designation may
be delegated by the Board of Directors from time to time. The
Board of Directors may make such special rules and regulations
with respect to such bank accounts, not inconsistent with the
provisions of these By-laws, as it may deem expedient.
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ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Section 8.1. Indemnification by the Corporation.
The Corporation shall indemnify, to the fullest extent
permitted by the Delaware General Corporation Law as the same
presently exists or may hereafter be amended, any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative
(including but not limited to any action or suit by or in the
right of the Corporation to procure a judgment in its favor) by
reason of the fact that the person is or was a director or
officer of the Corporation or, while a director or officer of the
Corporation, is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by
the person in connection with such action, suit or proceeding.
The foregoing indemnification shall be in addition to any other
rights to which those seeking indemnification may be entitled
under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while
holding such office. Notwithstanding the foregoing, and except
as provided in Section 8.4 hereof, nothing in this Article VIII
shall require the Corporation to indemnify any person for any
expenses incurred in connection with any action, suit or
proceeding commenced by such person against the Corporation.
Section 8.2. Contract Right; Advances.
The right to indemnification conferred in this Article VIII
shall include the right to be paid by the Corporation the
expenses incurred in defending any proceeding referred to in
Section 8.1 hereof in advance of its final disposition; provided,
however, that the payment of expenses (including attorneys' fees)
incurred by a director or officer in defending any such
proceeding shall be made only upon delivery to the Corporation of
an undertaking, by or on behalf of such director or officer,to
repay all amounts so advanced if it shall ultimately be
determined that such person is not entitled to be indemnified by
the Corporation under this Article VIII or otherwise.
Section 8.3. Indemnification of Other Persons.
The Corporation may, by action of the Board of Directors,
indemnify any other person to whom the Corporation is permitted
to provide indemnification or the advancement of expenses under
the Delaware General Corporation Law; provided, however, that no
indemnification shall be made to or on behalf of any such other
person if such indemnification would be prohibited under the
Delaware General Corporation Law or other applicable law.
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Section 8.4. Right to Bring Suit.
If a claim for indemnification under Section 8.1 of this
Article VIII is not paid in full by the Corporation within thirty
days after a written claim has been received by the Corporation,
the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to
also be paid the expense of prosecuting such claim. Neither the
failure of the Corporation (including its Board of Directors,
disinterested directors, independent legal counsel or its
stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant
is proper in the circumstances, nor an actual determination by
the Corporation (including its Board of Directors, disinterested
directors, independent legal counsel or its stockholders) that
the claimant is not entitled to indemnification or to
reimbursement or advancement of expenses, shall be a defense to
the action or create a presumption that the claimant is not so
entitled.
Section 8.5. Insurance.
The Corporation may purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request
of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise against any liability asserted against such person and
incurred by such person in any such capacity, or arising out of
such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such
liability under the Delaware General Corporation Law.
Section 8.6. Amendment or Repeal.
Any repeal or modification of the foregoing provisions of
this Article VIII shall not adversely affect any right or
protection hereunder of any person in respect of any act or
omission occurring prior to the time of such repeal or
modification.
ARTICLE IX
ADOPTION AND AMENDMENTS
Section 9.1. Amendments.
These By-laws may be repealed, altered or amended or new By-
laws adopted by the affirmative vote of a majority of the
outstanding shares of stock of the Corporation entitled to vote
thereon. The Board of Directors shall have the authority, if
such authority is conferred upon the Board of Directors by the
Certificate of Incorporation, to repeal, alter or amend these By-
laws or adopt new By-laws (including, without limitation, the
amendment of any By-laws setting forth the number of directors
who shall constitute the whole Board of Directors).
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Exhibit 10.1
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") made as of the
15th day of July, 2002 by and between SYMBOL TECHNOLOGIES, INC.,
a Delaware corporation (the "Corporation"), and William R. Nuti
(the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ the
Executive and the Executive desires to be employed by the
Corporation in the manner and on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and of
the mutual and dependent agreements and covenants set forth
herein, the parties hereto agree as follows:
1. EMPLOYMENT
The Corporation hereby agrees to employ the
Executive as its President and Chief Operating Officer, and
the Executive hereby agrees to accept such employment and
render services to the Corporation and its subsidiaries,
divisions and affiliates for the period and on the terms and
conditions set forth in this Agreement.
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2. TERM
The Executive's employment under this Agreement shall be for a
term of five (5) years commencing as of August 1, 2002 and
ending July 31, 2007; provided, however, that the term of the
Executive's actual employment hereunder shall at all times be
subject to earlier termination in accordance with the
provisions of section 12 hereof.
3. DUTIES
(a) So long as the Executive's employment under
this Agreement shall continue, the Executive shall, subject to
periods of illness, vacation and other excused absences, devote
his entire business time, attention, and energies to the
affairs of the Corporation and its subsidiaries, divisions and
affiliates, use his best efforts to promote its and their best
interests and perform such executive duties as may be assigned
to him by the Chief Executive Officer of the Corporation;
provided, however, that such executive duties shall be
consistent with the position of President and Chief Operating
Officer of the Corporation as such position exists as of the
date hereof.
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(b) So long as the Executive's employment under
this Agreement shall continue, the Executive shall, if elected or
appointed, serve as an executive officer and/or director of the
Corporation and of any subsidiary, division or affiliate of the
Corporation and shall hold, without any compensation other than
that provided for in this Agreement, the offices in the
Corporation and in any such subsidiary, division or affiliate to
which he may, at any time or from time to time, be elected or
appointed.
(c) The Executive shall be eligible to take, in
addition to holidays recognized by the Corporation, four (4)
weeks per annum of vacation.
4. COMPENSATION
(a) The Corporation hereby agrees to pay to the
Executive, and the Executive hereby agrees to accept compensation
for services rendered under this Agreement, a base salary at the
rate of six hundred thousand dollars ($600,000) per annum payable
at such intervals as the Corporation customarily pays the
salaries of its executive officers. Effective July 1, 2003 and
July 1, 2005, the Executive and the Corporation shall negotiate,
in good faith, with respect to increasing said base salary for
additional two year periods in an amount mutually satisfactory to
the Corporation and the Executive.
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(b) In addition to the base salary provided for in
subsection 4(a) above, the Executive shall participate in the
Corporation's Executive Bonus Plan as may be amended from time to
time and thereby be entitled to receive an annual bonus for each
fiscal year during the term of this Agreement in the amounts
determined pursuant to such plan. The target amount of the
Executive's bonus under said plan shall be 100% of his base
salary actually earned in each fiscal year, provided that the
Executive shall have the possibility, if target goals are
exceeded to an extent specified in the annual bonus plan, of
earning an annual bonus equal to 200% of his base salary.
Payment of the target bonus for fiscal year 2002 shall be
guaranteed by the Corporation. Payment of the bonus provided
herein shall be paid to the Executive no later than ninety (90)
days after the completion of the fiscal year.
(c) During the term of this Agreement, the
Executive shall participate in the Corporation's Executive
Retirement Plan as in effect on the date of this Agreement and as
it may hereafter be amended to improve benefits thereunder. The
Executive acknowledges that he has previously been provided with
a copy of said plan. Executive understands that, following
commencement of his employment, the Corporation shall make a good
faith effort to amend the Executive Retirement Plan in a manner
designed to improve the benefits provided thereunder; provided
that such amendment shall not reduce the level of benefits
currently provided under such plan.
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(d) In addition to the foregoing, it is hereby
agreed that the Corporation shall, at its sole expense, provide
and the Executive shall be entitled to receive, during his
employment hereunder, the employee fringe benefits provided by
the Corporation, from time to time, to its executive officers,
including, but not limited to, benefits relating to life, medical
and disability insurance, and participation in the Corporation's
Section 401(k) Plan; provided, however, that as used in this
Agreement, the term "employee fringe benefits" shall not include
any salary or other bonus plan, except as set forth in this
Agreement.
(e) As a bonus for entering into this Agreement,
and to compensate the Executive for a portion of the compensation
he will be forfeiting from his prior employer, the Corporation
agrees to issue to the Executive 400,000 fully vested treasury
shares of the Corporation's Common Stock (the "Shares") upon
execution of this Agreement. The Certificate representing the
Shares will be issued as soon thereafter as practicable. The
Executive acknowledges that the Shares shall be deemed
"restricted securities" as the term is defined in Regulation 144
promulgated pursuant to the Securities Act of 1933, as amended,
and accordingly, his ability to resell the Shares is restricted
by applicable federal securities laws. In connection with the
Corporation's issuing the Shares, the Executive shall enter into
an agreement with the Corporation containing customary
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representations and warranties to support the Company's reliance
on an exemption from the registration requirements of applicable
securities laws with respect to the issuance of restricted
securities. The Corporation represents and warrants to Executive
that the Shares shall not be subject to the escrow or forfeiture
provisions set forth in Sections 5 and 6 of its 2002 Stock
Ownership and Option Retention Program.
(f) In addition to any restrictions imposed by
law, the Executive agrees not to resell or otherwise transfer the
Shares for two years after the date of issuance unless he is no
longer employed by the Corporation.
5. AUTOMOBILE
During the period of the Executive's employment under
this Agreement, the Corporation shall make available to the
Executive the business and personal use of an automobile, with
a lease allotment of up to $1,000 per month as well as pay the
Executive's gasoline, maintenance and insurance expenses
associated with such automobile.
6. EXPENSES; OPTIONS
(a) The Corporation shall pay or reimburse the
Executive for all reasonable travel and other expenses incurred
or paid by him in connection with the performance of his duties
under this Agreement, upon presentation to the Corporation of
expense statements or vouchers and such other supporting
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documentation as it may, from time to time, reasonably require;
provided however that the maximum amount available for such
expenses may, at any time or from time to time, be fixed in
advance by the Board of Directors of the Corporation.
(b) (1) The Corporation agrees, as promptly as
practicable to cause the award to the Executive by the
Compensation/Stock Option Committee of the Board of Directors
of the Corporation, of stock options to purchase 800,000 shares
of Corporation's Common Stock (the "Initial Option"). All of
the above options shall be at an exercise price equal to the
closing price of the Corporation's Common Stock on the later of
(i) date of the award thereof, or (ii) the date the Executive
first commences employment with the Corporation. These options
shall have a term of ten years; 10% of these options shall vest
one year after the date of award and 15% of these options shall
vest on each of the next six consecutive six-month anniversary
dates of that date. The Executive acknowledges that he has
been provided with a summary of the provisions of the
Corporation's stock option plan. The Corporation represents
and warrants that neither the Initial Option nor the shares
issuable upon exercise thereof shall be subject to the "stock
ownership requirement" set forth in Section 4(b), or to the
escrow or forfeiture provisions set forth in Sections 5 and 6,
of its 2002 Stock Ownership and Option Retention Program.
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(2) Furthermore, at the next meeting of the
Corporation's Compensation/Stock Option Committee meeting one
year after the date the Executive commences employment with the
Corporation and on an annual basis thereafter starting in
February 2004, the Executive shall be eligible to be awarded
additional options subject to satisfactory job performance as
determined by the Corporation. All such options shall be at an
exercise price equal to the closing price of the Corporation's
Common Stock on the date of award and shall otherwise contain
terms and conditions similar to those options referred to in
subsection 6(b)(1) hereof. The target number of options to be
awarded to the Executive in 2003 and 2004 shall be options to
purchase 200,000 shares of the Corporation's Common Stock.
(c) All outstanding options to purchase shares
of Common Stock of the Corporation awarded to the Executive
before or during the term of this Agreement shall vest
regardless of any conditions precedent to the vesting of such
options (such as passage of time) if and when there is a
"change in control of the Corporation" as hereafter defined.
As used in this Agreement, a "change in control of the
Corporation" shall mean a change in control of a nature that
would be required to be reported in response to Item 1 of Form
8-K promulgated under the Securities Exchange Act of 1934, as
amended, (the "Exchange Act"); provided, that, without
-8-
limitation, such a change in control shall be deemed to have
occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than the
Corporation or any "person" who on the date hereof is a
director or officer of the Corporation, is or becomes the
"beneficial owner", (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Corporation representing 25% or more of the combined voting
power of the Corporation's then outstanding securities and the
Corporation's Board of Directors, after having been advised
that such ownership level has been reached, does not, within
fifteen (15) business days, adopt a resolution approving the
acquisition of that level of securities ownership by such
person; or (ii) during any period of two consecutive years
during the term of this Agreement, individuals who at the
beginning of such period constitute the Board of Directors
cease for any reason to constitute at least majority thereof,
unless the election of each director who was not a director at
the beginning of such period has been approved in advance by
directors representing at least two-thirds of the directors
then in office who were directors at the beginning of the
period.
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(d) In addition to any rights to indemnification
and advancement of expenses that the Executive may have under
the Corporation's By-laws, the Executive shall be entitled at
all times to the benefit of the maximum indemnification and
advancement of expenses permissible from time to time under the
laws of the State of Delaware.
(e) The Corporation and/or any of its
subsidiaries, divisions or affiliates may, from time to time,
apply for and obtain, for its or their benefit and at its or
their sole expense, key man life, health, accident, disability,
or other insurance upon the Executive, in any amounts that it
or they may deem necessary or desirable to protect its or their
respective interests, and the Executive agrees to cooperate
with and assist the Corporation or such subsidiary, division or
affiliate in obtaining any and all such insurance by submitting
to all reasonable medical examinations, if any, and by filling
out, executing, and delivering any and all such applications
and other instruments as may reasonably be necessary.
7. INVENTIONS
(a) The Executive agrees to and hereby does
assign to the Corporation or any subsidiary, affiliate or
division of the Corporation designated by the Corporation, all
his right, title and interest throughout the world in and to
all ideas, methods, developments, products, inventions,
processes, improvements, modifications, techniques, designs
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and/or concepts relating directly or indirectly to the Business
of the Corporation (as defined in subsection 10(e) below),
whether patentable or unpatentable, which the Executive may
conceive and/or develop during his employment by the
Corporation (whether pursuant to this Agreement or otherwise)
and during the twenty-four (24) month period following the
termination of his employment, whether or not conceived and/or
developed at the request of the Corporation or any subsidiary,
affiliate or division (the "Inventions"); provided, however,
that if the Corporation or such subsidiary, affiliate or
division determines that it will not use any such Invention or
that it will license or transfer any such Invention to an
unaffiliated third party, then it will negotiate in good faith
with the Executive, if the Executive so requests, with respect
to a transfer or license of such Invention to the Executive.
(b) The Executive further agrees to promptly
communicate and disclose to the Corporation any and all such
Inventions as well as, upon the Corporation's request, any
other knowledge or information which he may possess or obtain
relating to any such Inventions.
(c) In furtherance of the foregoing, the
Executive agrees that at the request of the Corporation, and at
its expense, he will make or cooperate in the making of
applications for letters patent of the United States or
elsewhere and will execute such other agreements, documents or
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instruments which the Corporation may reasonably consider
necessary to transfer to and vest in the Corporation or any
subsidiary, affiliate or division, all right, title and
interest in such Inventions, and all applications for any
letters patent issued in respect of any of the foregoing.
(d) The Executive shall assist, upon request, in
locating writings and other physical evidence of the making of
the Inventions and provide unrecorded information relating to
them and give testimony in any proceeding in which any of the
Inventions or any application or patent directed thereto may be
involved, provided that reasonable compensation shall be paid
the Executive for such services and the Executive shall be
reimbursed for any expenses incurred by him in connection
therewith, except that during such period of time as the
Executive is employed by the Corporation, the Corporation shall
not be obligated to compensate the Executive beyond that
provided under the terms of this Agreement. The Corporation
shall give the Executive reasonable notice should it require
such services, and, to the extent reasonably feasible, the
Corporation shall use its best efforts to request such
assistance at times and places as will least interfere with any
other employment of the Executive.
(e) At the expense of the Corporation, the
Executive shall assign to the Corporation all his interest in
copyrightable material which he produces, composes, or writes,
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individually or in collaboration with others, which arises out
of work performed by him on behalf of the Corporation, and
shall sign all papers and do all other acts necessary to assist
the Corporation to obtain copyrights on such material in any
and all jurisdictions.
8. CONFIDENTIAL INFORMATION
The Executive hereby acknowledges that, in the course
of his employment by the Corporation he will have access to
secret and confidential information, which relates to or
affects all aspects of the business and affairs of the
Corporation and its subsidiaries, affiliates and divisions, and
which are not available to the general public ("Confidential
Information"). Without limiting the generality of the
foregoing, Confidential Information shall include information
relating to inventions (including, without limitations,
Inventions), developments, specifications, technical and
engineering data, information concerning the filing or pendency
of patent applications, business ideas, trade secrets, products
under development, production methods and processes, sources of
supply, marketing plans, and the names of customers or
prospective customers or of persons who have or shall have
traded or dealt with the Corporation. Accordingly, the
Executive agrees that he will not, at any time, during or after
this Agreement terminates, without the express written consent
of the Corporation, directly or indirectly, disclose or
furnish, or negligently permit to be disclosed or furnished,
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any Confidential Information to any person, firm, corporation
or other entity except in performance of his duties hereunder.
The parties acknowledge that "Confidential Information" does
not include any of the foregoing items which has become
publicly and widely known and made generally available through
no wrongful act of the Executive's or of others whom the
Executive has reason to know were under confidentiality
obligations as to the item or items involved.
9. CONFIDENTIAL MATERIALS
The Executive hereby acknowledges and agrees that any and all
models, prototypes, notes, memoranda, notebooks, drawings,
records, plans, documents or other material in physical form
which contain or embody Confidential Information and/or
information relating to Inventions and/or information relating
to the business and affairs of the Corporation, its
subsidiaries, affiliates and divisions and/or the substance
thereof, whether created or prepared by the Executive or by
others ("Confidential Materials"), which are in the Executive's
possession or under his control, are the sole property of the
Corporation. Accordingly, the Executive hereby agrees that,
upon the termination of his employment with the Corporation,
whether pursuant to this Agreement or otherwise, or at the
Corporation's earlier request, the Executive shall return to
the Corporation all Confidential Materials and all copies
thereof in his possession or under his control and shall not
retain any copies of Confidential Materials.
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10. NON-COMPETITION
(a) The Executive agrees that he shall not, so
long as he shall be employed by the Corporation in any capacity
(whether pursuant to this Agreement or otherwise), without the
express written consent of the Corporation, directly or
indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control or be employed by
or connected in any manner with any business, firm or
corporation which is engaged in any business activity
competitive with the Business of the Corporation (as defined in
subsection 10(e) below).
(b) The Executive agrees that for a period of
twenty four (24) months commencing on the effective date of the
termination of his employment, whether such termination is
pursuant to the terms of this Agreement or otherwise, he shall
not, without the express written consent of the Corporation,
directly or indirectly, own, manage, operate, control, or
participate in the ownership, management, operation or control,
or be employed by any business, firm or corporation which is
engaged in any business activity competitive with the Business
of the Corporation (as defined in section 10(e) below);
provided, however, that nothing in this section 10(b) shall
restrict the Executive from being employed or engaged in a
corporate function or senior management position (and holding
commensurate equity interests) in an organization engaged in
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multiple lines of business which organization includes a
corporation, unit, division or entity that is engaged in the
Business of the Corporation (a "Restricted Division"), as long
as the Restricted Division is not part of any business, firm or
corporation that is a Principal Competitor of the Corporation.
For purposes of this Agreement, "Principal Competitor" shall
mean those companies listed as competitors of the Corporation
in the Corporation's most recent Annual Report on Form 10-K
filed with the Securities and Exchange Commission at the time
of termination of the Executive's employment.
(c) During the term of this Agreement and for
twenty four (24) months commencing on the effective date of the
termination of his employment, whether such termination is
pursuant to the term of this Agreement or otherwise, the
Executive shall not, directly or indirectly, solicit, divert or
take away in whole or in part any customers or prospective
customers of the Corporation who were solicited or serviced
directly or indirectly by Executive or by anyone directly or
indirectly under Executive's supervision or with whom Executive
had any business relationship within the two (2) year period
prior to the termination of Executive's employment (or, if
Executive's employment with the Corporation terminates prior to
the second anniversary of the date his employment commences,
then within the period he is employed by the Corporation);
provided, however, that the prohibition set forth in this
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sentence shall not apply to any such actual or prospective
customers of the Corporation if the Executive's contact or
relationship with such party existed prior to the date his
employment with the Corporation commences. The Executive also
agrees that during such period, he will not directly or
indirectly attempt to recruit or solicit or aid in the
recruitment or solicitation of any person who at the time of
such recruitment or solicitation (or within the six month
period prior thereto) is or was an employee, independent
contractor or consultant of the Corporation to terminate his or
her employment or relationship with the Corporation for the
purpose of working for the Executive, any competitor of the
Corporation or any other entity; nor shall Executive employ any
such employee, independent contractor or consultant.
(d) Anything to the contrary herein
notwithstanding, the provisions of this section shall not be
deemed violated by the purchase and/or ownership by the
Executive of shares of any class of equity securities (or
options, warrants or rights to acquire such securities, or any
securities convertible into such securities) representing
(together with any securities which would be acquired upon the
exercise of any such options, warrants or rights or upon the
conversion of any other security convertible into such
securities) the lesser of (i) 1% or less of the outstanding
shares of any such class of equity securities of any issuer
-17-
whose securities are listed on a national securities exchange
or traded on NASDAQ, the National Quotation Bureau Incorporated
or any similar organization or (ii) securities having a market
value of less than $100,000 at the time of purchase; provided,
however, that the Executive shall not be otherwise connected
with or active in the business of the issuers described in this
subsection 10(d).
(e) "Business of the Corporation" shall mean any
business in which the Corporation and its subsidiaries,
affiliates and divisions are actively engaged, or are actively
or demonstrably planning to engage in, during the period of the
Executive's employment (whether pursuant to this Agreement or
otherwise) and at the time of termination thereof.
(f) To the extent that any of the provisions of
this Section 10 conflict with any provisions contained in
Section 3 of the agreement the Executive may be requested to
sign pursuant to Section 9 of the Corporation's 2002 Stock
Ownership and Option Retention Program, the provisions of this
Section 10 shall control.
11. REMEDY FOR BREACH
The Executive hereby acknowledges that in the event
of any breach or threatened breach by him of any of the
provisions of sections 7, 8, 9 or 10 of this Agreement, the
Corporation would have no adequate remedy at law and could
suffer substantial and irreparable damage. Accordingly, the
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Executive hereby agrees that, in such event, the Corporation
shall be entitled, without necessity of proving damages, and
notwithstanding any election by the Corporation to claim
damages, to obtain a temporary and/or permanent injunction to
restrain any such breach or threatened breach or to obtain
specific performance of any of such provisions, all without
prejudice to any and all other remedies which the Corporation
may have at law or in equity.
12. TERMINATION
(a) This Agreement and the employment of the
Executive by the Corporation shall terminate upon the earliest
of the dates specified below:
(i) the close of business on the date as of
which the term of the Executive's employment hereunder has
terminated as provided in Section 2 hereof; provided, however,
that such term is not extended by any other agreement between
the Executive and the Corporation; or
(ii) the close of business on the date of
the death of the Executive; or
(iii) the close of business on the
effective date of the voluntary termination by the Executive of
his employment with the Corporation; or
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(iv) the close of business on the
fourteenth (14th) day following the date on which the
Corporation provides the Executive with written notice of its
intention to terminate the Employment of the Executive for
"cause" (as defined in subsection 12(b)(1) below), which notice
shall set forth the basis for such termination; provided,
however, within the first (7) days of this period the Chief
Executive Officer of the Corporation shall meet with the
Executive and discuss in detail the reasons for the Executive's
termination and permit the Executive (if the Chief Executive
Officer deems it possible) to cure the refusal to perform,
gross negligence or willful misconduct asserted as the
occurrence of such cause or, at the Executive's request, permit
him to resign without the Corporation's making any public
disclosure of the basis of the Corporation's action (provided,
however, that for purposes of this Agreement any such
resignation shall still be deemed to be a termination for
"cause" (as provided herein)), provided further the Corporation
shall not purport to terminate the Executive's Employment for
"cause" unless there exists clear and convincing evidence of
the existence of such "cause" pursuant to the criteria set
forth in subsection 12(b)(1) below;
-20-
(v) the close of business on the last day
of the month in which the Board of Directors of the Corporation
elects to terminate the Executive's employment following and as
a result of the inability of the Executive, by reason of
physical or mental disability, for six (6) months within any
twelve (12) month period during the term of this Agreement, to
render services of the character contemplated by this
Agreement.
(b) (1) For purposes of this Agreement, the
term "cause" shall mean a determination made in good faith by
vote of a majority of the members of the Board of Directors of
the Corporation then holding office (other than the Executive
if he shall then be a director) that one of the following
conditions exists or one of the following events has occurred;
(i) indictment of the Executive for a
criminal offense; or
(ii) the intentional refusal by the
Executive to perform such service as may legally and reasonably
be delegated or assigned to him, consistent with his position,
by the Chief Executive Office of the Corporation; or
(iii) willful misconduct or gross
negligence on his part in connection with the performance of
such duties, which misconduct or negligence causes or is
reasonably likely to cause material economic injury to the
Corporation or its business.
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(c) (1) In the event of the termination of the
Executive's employment (i) at any time for cause pursuant to
subsection 12(a)(iv), (ii) subject to subsection 12(c)(2) below
with respect to a voluntary termination of employment by the
Executive for Good Reason (as defined in subsection 12(d)
below), voluntarily at any time by the Executive pursuant to
subsection 12(a)(iii), or (iii) for any other reason prior to
August 1, 2004, then the sole compensation required to be paid
by the Corporation to the Executive shall consist of his
accrued but as then-unpaid base salary, any unpaid bonuses with
respect to which he has a vested or guaranteed right as of the
date of termination, and any accrued but unpaid vacation time.
In addition, he shall be eligible to exercise any then-vested
options held by him up to and including the date of termination
of his employment. In the event of any termination without
cause by the Corporation pursuant to this section 12(c)(1), the
Corporation shall give the Executive at least 14 days' notice
of such proposed termination prior to the date his employment
termination shall be effective.
(2) Except as otherwise provided in subsection
12(c)(1) above, in the event of the termination of the
Executive's employment for any reason other than due to (i) his
death or disability as provided in subsection 12(a)(ii) or 12
(a)(v); (ii) his voluntary termination of his employment from
the Corporation pursuant to subsection 12(a)(iii) other than
for Good Reason (as defined in subsection 12(d) below); or
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(iii) his termination for cause as provided in subsection
12(a)(iv), the Executive shall be paid at the time of such
termination an amount equal to the annual base salary and the
bonus actually earned by him during the last completed fiscal
year immediately preceding any such termination and the
Corporation shall, to the extent that the Executive's continued
participation is possible under the normal terms and provisions
of such plans and programs, continue to provide the Executive,
at the Corporation's sole expense, for one year after the
termination of his Employment, with all of the employee fringe
benefits he was entitled to receive immediately prior to the
termination of his Employment including but not limited to
life, health, and disability insurance and the use of the
automobile referred to in Section 5 (but the Executive shall
not be credited with an additional year of service in the
Executive Retirement Plan). In the event of any termination
without cause by the Corporation pursuant to this section
12(c)(2), the Corporation shall give the Executive at least 14
days' notice of such proposed termination prior to the date his
employment termination shall be effective. The Executive shall
not be required to mitigate the amount of any payments provided
for in this subsection 12(c) by seeking other employment, nor
shall amounts payable under this subsection 12(c) be reduced as
a result of his obtaining other employment or otherwise being
compensated by any other employer following termination of his
employment with the Corporation.
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(3) Immediately upon any termination of the
Executive's employment for any reason, any shares of capital
stock, or options or rights to purchase shares of capital
stock, of the Corporation shall cease to be subject to the
Corporation's 2002 Stock Ownership and Option Retention Program
(or any successor program), and any shares held in escrow under
Section 5 of this program shall immediately be released to the
Executive (with any restrictive legends imposed under the
program having been removed) and any forfeiture provisions
applicable under such program shall immediately lapse.
(d) For purposes of this Agreement, "Good
Reason" for the Executive's voluntary termination of his
employment shall exist if he:
(i) experiences a material reduction in
his job responsibilities;
(ii) is required to relocate his principal
work site to a facility or location
more than thirty-five (35) miles from
his then current principal work site
for the Corporation.
(iii) experiences a reduction in his base
salary.
(e) All the payments as set forth in subsection
12(c)(2) are contingent upon the Executive's signing at the
time of employment termination the Corporation's standard
waiver and release agreement.
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13. NO CONFLICTING AGREEMENTS
In order to induce the Corporation to enter into this
Agreement and to employ the Executive on the terms and
conditions set forth herein, the Executive hereby represents
and warrants that he is not a party to or bound by any
agreement, arrangement or understanding, written or otherwise,
which prohibits or in any manner restricts his ability to enter
into and fulfill his obligations under this Agreement, to be
employed by and serve as an executive of the Corporation. The
parties acknowledge and agree that the Executive shall not use
or disclose, or be permitted to use or disclose, any
confidential or proprietary information belonging to any prior
employer in connection with his performance of services to the
Corporation under this Agreement.
14. MISCELLANEOUS
(a) This Agreement shall become effective as of
the date hereof and, from and after that time, shall extend to
and be binding upon the Executive, his personal representative
or representatives and testate or intestate distributees, and
upon the Corporation, its successors and assigns; and the term
"Corporation," as used herein, shall include successors and
assigns.
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(b) Nothing contained in this Agreement shall be
deemed to involve the creation by the Corporation of a trust
for the benefit of, or the establishment by the Corporation of
any other form of fiduciary relationship with the Executive,
his beneficiaries or any of their respective legal
representatives or distributees. To the extent that any person
shall acquire the right to receive any payments from the
Corporation hereunder, such right shall be no greater than the
right of any unsecured general creditor of the Corporation.
(c) Any notice required or permitted by this
Agreement shall be given by registered or certified mail,
return receipt requested, addressed to the Corporation at its
then principal office or to the Executive at his residence
address, or to either party at such other address or addresses
as it or he may from time to time specify for the purpose in a
notice similarly given to the other party.
(d) This Agreement shall be construed and
enforced in accordance with the laws of the State of New York.
Any dispute or controversy arising under or in connection with
this Agreement, including, any claims for employment
discrimination under any federal, state, or local civil rights
law, shall be settled exclusively by binding arbitration in
Suffolk County of the state of New York and shall proceed under
the rules then prevailing of the Judicial Arbitration and
Mediation Service ("JAMS"). The dispute shall be referred to a
-26-
single arbitrator to be mutually agreed to by the parties. If
an arbitrator cannot be agreed upon within sixty (60) days of a
demand for arbitration by either party, the dispute shall be
referred to a single arbitrator appointed by JAMS. Any award
determined by an arbitrator must be in accordance with the
terms of this Agreement and shall be final and binding upon the
parties. Judgment upon any award made in such arbitration may
be entered and enforced in any court of competent jurisdiction.
The Corporation and the Executive waive any right of appeal
with respect to any judgment entered on an arbitrator's award
in any court having jurisdiction. In the event that it is
necessary for any party hereto to incur legal expenses in
defending its or his rights hereunder, including but not
limited to rights to reimbursement of legal fees and expenses
under this sentence, the losing party shall reimburse the
winning party for all reasonable legal fees and expenses
incurred by him or it as a result thereof.
(e) Except as stated otherwise herein, this
instrument contains the entire agreement of the parties
relating to the subject matter hereof, and there are no
agreements, representations or warranties not herein set forth.
No modification of this Agreement shall be valid unless in
writing and signed by the Corporation and the Executive. A
waiver of the breach of any term or condition of this Agreement
shall not be deemed to constitute a waiver or any subsequent
breach of the same or any other term or condition.
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(f) If any provision of this Agreement shall be
held invalid, such invalidity shall not affect any other
provision of this Agreement not held so invalid, and all other
such provisions shall remain in full force and effect to the
full extent consistent with the law.
-28-
IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement as of the day and year
first above written.
SYMBOL TECHNOLOGIES, INC.
By: /s/Jerome Swartz
ATTEST:
/s/Leonard H. Goldner
/s/William Nuti__
EXECUTIVE
-29-
Exhibit 10.2
SYMBOL TECHNOLOGIES, INC.
2002 DIRECTORS' STOCK OPTION PLAN
1. PURPOSE. The purpose of the Symbol Technologies, Inc. 2002
Directors' Stock Option Plan (the "Plan") is to advance the
interests of Symbol Technologies, Inc. (the "Company") and its
shareholders by encouraging increased share ownership by members
of the Board of Directors of the Company (the "Board") who are
not employees of the Company or any of its subsidiaries, in order
to promote long-term shareholder value through continuing
ownership of the Company's Common Stock.
2. ADMINISTRATION. The Plan shall be administered by the Board.
The Board shall have all the powers vested in it by the terms of
the Plan, such powers to include authority (within the
limitations described herein) to prescribe the form of the
agreement embodying awards of nonqualified stock options made
under the Plan ("Options"). The Board shall, subject to the
provisions of the Plan, grant Options under the Plan and shall
have the power to construe the Plan, to determine all questions
arising thereunder and to adopt and amend such rules and
regulations for the administration of the Plan as it may deem
desirable. Any decisions of the Board in the administration of
the Plan, as described herein, shall be final and conclusive. The
Board may act only by a majority of its members in office, except
that the members thereof may authorize the Secretary or any other
executive officer of the Company to execute and deliver documents
on behalf of the Board. No member of the Board shall be liable
for anything done or omitted to be done by him or by any other
member of the Board in connection with the Plan, except for his
own willful misconduct or as expressly provided by statute.
3. PARTICIPATION. Each member of the Board who is not employed by
the Company or any of its subsidiaries on a full-time basis(a
"Non-Employee Director") shall be eligible to receive an Option
in accordance with Paragraph 5 below. As used herein, the term
"subsidiary" means any corporation at least fifty percent (50%)
of whose outstanding voting stock is owned, directly or
indirectly, by the Company.
4. AWARDS UNDER THE PLAN. (A) Type of Awards. Awards under the
Plan shall include only Options, which are rights to purchase
shares of common stock of the Company having a par value of $.01
per share (the "Common Stock"). Such Options are subject to the
terms, conditions and restrictions specified in Paragraph 5
below.
-1-
(B) Maximum Number of Shares That May Be Issued. There may
be issued under the Plan pursuant to the exercise of Options an
aggregate of not more than 1,000,000 shares of Common Stock
subject to adjustment as provided in Paragraph 6 below. Such
shares may be reserved or made available from the Corporation's
authorized and reissued Common Stock or from Common Stock
reacquired and held in the Company's treasury. If any Option is
cancelled, terminates or expires unexercised, in whole or in
part, any shares of Common Stock that would otherwise have been
issuable pursuant thereto will be available for issuance under
new Options.
(C) Rights with Respect to Shares. A Non-Employee Director
to whom an Option is granted (and any person succeeding to such a
Non-Employee Director's rights pursuant to the Plan) shall have
no rights as a shareholder with respect to any shares of Common
Stock issuable pursuant to any such Option until receipt by the
Company of the payment referred to in subparagraph 5(c)(iv)
below. Except as provided in Paragraph 7 below, no adjustment
shall be made for dividends, distributions or other rights
(whether ordinary or extraordinary, and whether in cash,
securities or other property) for which the record date is prior
to the date of receipt of such payment.
5. OPTION PRICE AND TERMS. Each Option granted under the Plan
shall be evidenced by an agreement in such form as the Board
shall prescribe from time to time in accordance with the Plan and
shall comply with the following terms and conditions:
(a) The Option exercise price shall be the fair market value
of the Common Stock subject to such Option on the date the Option
is granted, which shall be the closing price on the date of grant
as reported on the New York Stock Exchange Composite Transactions
Tape, or if no shares of Common Stock were traded on that date,
on the last preceding date on which the Common Stock was traded.
(b) Each year beginning in 2002, each Non-Employee Director
who has been a director of the Company for at least eleven (11)
months shall, upon his re-election at the annual meeting of
shareholders, automatically be granted an Option to purchase
20,000 shares of Common Stock.
(c) Options shall not be exercisable:
(i) before the expiration of one year from the
date of grant, and
(ii) after the expiration of ten years from the
date of grant, and
(iii) may be exercised during such period as
follows:
ten percent (10%) of the total number of
-2-
shares of Common Stock covered by an Option
shall become exercisable on the first
anniversary of the date it is granted;
fifteen percent (15%) of the total number of
Shares of Common Stock covered by an Option
shall become exercisable every six (6) months
thereafter.
(iv) unless payment in full is made for the shares
of Common Stock being acquired at the time of
exercise; such payment shall be made:
(A) if such person shall cease to be such a
Non-Employee Director for reasons other
than death, while holding an Option that
has not expired and has not been fully
exercised, such person, at any time
within ninety (90) days of the date he
ceased to be such a Non-Employee Director
(but in no event after the Option has
expired under the provisions of
subparagraph 5(c)(ii) above), may
exercise the Option with respect to any
shares of Common Stock as to which he
could have exercised the Option on the
date he ceased to be a Non-Employee
Director; or
(B) if any person to whom an Option has been
granted shall die holding an Option that
has not expired and has not been fully
exercised, his executors, administrators,
heirs or distributees, or a transferee as
provided in subparagraph 6(b) hereof, as
the case may be, may, at any time within
one (1) year after the date of such date
(but in no event after the Option has
expired under the provisions of sub-
paragraph 5(c)(ii) above), exercise the
Option with respect to any shares of
Common Stock as to which the decedent
could have exercised the Option at the
time of his death.
6. TRANSFERABILITY OF OPTIONS
(a) Subject to the provisions of subparagraph 6 (b) hereof,
options shall not be transferable by the optionee other than by
will or the laws of descent and distribution, and shall be
exercisable during his lifetime only by him (or by his duly
appointed guardian or conservator).
-3-
(b) The Board may, in its discretion, authorize the transfer
of all or a portion of any options granted hereunder on terms
which permit the transfer by the optionee to (i)the spouse,
children or grandchildren of the optionee (the "Immediate Family
Members"), (ii) a trust or trusts for the exclusive benefit of
the Immediate Family Members; or (iii) a partnership in which the
Immediate Family Members and/or the optionee are the only
partners, provided that(A) the optionee shall receive the
approval of the Board prior to such transfer, and such transfer
must be limited to the person or entities listed in this sub-
paragraph 6 (b), and (B) subsequent transfers of such transferred
options shall be prohibited except in accordance with this
paragraph 6. Following any such transfer, such options shall
continue to be subject to the same terms and conditions as were
applicable immediately prior to the transfer, provided that for
purposes of this plan, the term optionee shall be deemed to refer
to the transferor. In the event of the termination of the
employment of the transferor, the provisions provided herein
shall continue to be applicable to the options and shall limit
the ability of the transferee to exercise any such transferred
options the same extent they would have limited the optionee.
7. DILUTION AND OTHER ADJUSTMENTS. In the event of any change in
the outstanding Common Stock of the Company by reason of any
stock split, stock dividend, split-up, split-off,
recapitalization, merger, consolidation, rights offering,
reorganization combination or exchange of shares, a sale by the
Company of all or virtually all of its assets, any distribution
to shareholders other than a normal cash dividend, or other
extraordinary or unusual events, the number or kind of shares
that may be issued under the Plan pursuant to subparagraph 4(b)
above, and the number or kind of Common Stock subject to, and the
Option price per share under all then outstanding Options shall
be automatically adjusted so that the proportionate interest of
the participant shall be maintained as before the occurrence of
such event. Any fractional share resulting from adjustments
pursuant to this paragraph shall be eliminated from any then
outstanding Option. Adjustments under this paragraph shall be
made by the Board, whose determination thereof shall be
conclusive and binding.
8. MISCELLANEOUS PROVISIONS
(a) Except as expressly provided for in the Plan, no person
shall have any claim or right to be granted an Option under the
Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any Non-Employee Director any right to be
retained in the service of the Company or to continue to serve as
a director of the Company.
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(b) An optionee's rights and interest under the Plan may not
be assigned or transferred (except as provided in subparagraph
6(b)), hypothecated or encumbered in whole or in part either
directly or by operation of law or otherwise (except in the event
of a participant's death, by will or the laws of descent and
distribution), including, but not by way of limitation,
execution, levy, garnishment, attachment, pledge, bankruptcy or
in any other manner, and no such right or interest of any
optionee in the Plan shall be subject to any obligation or
liability of such participant.
(c) No Common Stock shall be issued hereunder unless counsel
for the Company shall be satisfied that such issuance will be in
compliance with applicable federal, state, local and foreign
securities, securities exchange and other applicable laws and
requirements.
(d) It shall be a condition to the obligation of the Company
to issue Common Stock upon exercise of an Option, that the
optionee (or any beneficiary or person entitled to act under
subparagraph 5(c)(iv)(B) above) pay to the Company, upon its
demand, such amount as may be requested by the Company for the
purpose of satisfying any liability to withhold federal, state,
local or foreign income or other taxes. If the amount requested
is not paid, the Company may refuse to issue any shares of Common
Stock and all rights under the Option shall become null and void.
(e) The expenses of the Plan shall be borne by the Company.
(f) The Plan shall be unfunded. The Company shall not be
required to establish any special or separate fund or to make any
other segregation of assets to assure the issuance of shares of
Common Stock upon exercise of any Option under the Plan, and
rights to the issuance of Common Stock upon exercise of Options
shall be subordinate to the claims of the Company's general
creditors.
(g) By accepting any Option or other benefit under the Plan,
each optionee and each person claiming under or through him shall
be conclusively deemed to have indicated his acceptance and
ratification of, and consent to, any action taken under the Plan
by the Company or the Board.
(h) The masculine pronoun means the feminine and the
singular means the plural in the Plan, wherever appropriate.
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9. AMENDMENT OR DISCONTINUANCE. The Plan may be amended at any
time and from time to time by the Board as the Board shall deem
advisable; provided, however, that no amendment shall become
effective without shareholder approval if such shareholder
approval is required by law, rule or regulation, and provided
further, to the extent required by Rule 16b-3 under Section 16 of
the Securities Exchange Act of 1934, in effect from time to time,
Plan provisions relating to the amount, price and timing of
Options shall not be amended more than once every six months,
except that the foregoing shall not preclude any amendment to
comport with changes in the Internal Revenue Code of 1986, the
Employee Retirement Income Security Act of 1974 or the rules
thereunder in effect from time to time. No amendment of the Plan
shall materially and adversely affect any right of any
participant with respect to any Option theretofore granted
without such participant's written consent.
10. GENERAL RESTRICTIONS.
(a) No Option granted hereunder shall be exercisable if the
Company shall, at any time and in its sole discretion, determine
that (i) the listing upon any securities exchange, registration
or qualification under any state or federal law of any Shares
otherwise deliverable upon such exercise, or (ii) the consent or
approval of any regulatory body or the satisfaction of
withholding tax or other withholding liabilities, is necessary or
appropriate in connection with such exercise. In any of such
events, the exercisability of such Options shall be suspended and
shall be not effective unless and until such withholding,
listing, registration, qualification or approval shall have been
effected or obtained free of any conditions not acceptable to the
Company in its sole discretion, notwithstanding any termination
of any Option or any portion of an Option during the period when
exercisability has been suspended.
(b) The Board may require, as a condition to the right to
exercise an Option, that the Company receive from the optionee,
at the time of any such exercise, representations, warranties and
agreements to the effect that the Common Stock is being purchased
by the optionee without any present intention to sell or
otherwise distribute such Common Stock in violation of the
Securities Act of 1933 (the "1933 Act") and that the optionee
will not dispose of such Common Stock in transactions which, in
the opinion of counsel to the Company, would violate the
registration provisions of the 1933 Act and the rules and
regulations thereunder and any applicable "blue sky" laws or
regulations. The certificates issued to evidence such shares of
Common Stock shall bear the appropriate legends summarizing such
restrictions on the disposition thereof.
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11. SHAREHOLDER APPROVAL AND ADOPTION. The Plan shall be
submitted to the shareholders of the Company for approval in
accordance with the applicable provisions of the General
Corporate Law of the State of Delaware as promptly as practicable
and in any event by September 30, 2002. Any Options granted
hereunder prior to such shareholder approval shall not be
exercisable unless and until such approval is obtained. If such
approval is not obtained by September 30, 2002, the Plan and any
Options granted hereunder shall be terminated.
12. TERMINATION. Unless the Plan shall theretofore have been
terminated in accordance with Paragraph 11 above, the Plan shall
terminate on February 18, 2012 and no Options under the Plan
shall thereafter be granted, provided, however, the Board at any
time may, in its sole discretion, terminate the Plan prior to the
foregoing date. No termination of the Plan shall without the
consent of the holder of any existing Option, materially and
adversely affect his rights under such Option.
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Exhibit 10.3
SYMBOL TECHNOLOGIES, INC.
2002 STOCK OWNERSHIP and OPTION RETENTION PROGRAM
1. Purpose. The purpose of the Symbol Technologies, Inc. (the
"Company") Stock Ownership and Option Retention Program (the
"Program") is to foster the long-term interests of the Company's
shareholders by requiring its Executive Officers (as that term is
defined under SEC regulations) to maintain an equity interest in
the Company. For purposes of this Program, the holdings of any
Executive Officer shall include any options originally issued to
the Executive Officer and subsequently transferred by him/her to
any permitted transferee, provided however, that such transferee
agrees to also be bound by the provisions of this Program as if
it were an Executive Officer and that any shares of common stock
acquired by such transferee upon the exercise of any such options
shall also be treated as Restricted Stock (as hereinafter
defined) if required under the provisions of this Program.
2. Participation. Participation in the Program shall be limited
to Executive Officers of the Company only so long as the
participant is deemed to be an Executive Officer. The General
Counsel of the Company shall, in good faith, determine which
individuals constitute Executive Officers for the purpose of
complying with the Program. His determination shall be binding on
all participants. At any time, a participant may request a formal
determination from the General Counsel that his position with the
Company has changed so that he is no longer an Executive Officer.
Executive Officers must agree to participate in the Program to be
eligible to receive option awards after May 6, 2002.
3. Oversight. The Compensation/Stock Option Committee of the
Board of Directors (the "Committee") shall have oversight of
the Program. Effective as of May 6, 2002, the Committee has
established target levels of equity for each Executive Officer
of the Company. The Committee retains the authority to waive
any of the requirements of the Program for any individual
participant in compliance with the hardship waiver guidelines
set forth herein. Without prior permission of the Committee,
unless and until an Executive Officer has attained specific
minimum requirements there will exist significant limitations
on the Executive Officer's freedom to reduce his equity
position.
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4. Equity Interest and Stock Ownership Requirements
a) Equity Interest Requirement. An Executive Officer may
not exercise vested options unless the Executive
Officer either (i) retains all shares acquired upon
the exercise of the option (net of shares used to pay
for the exercise price and taxes resulting from any
exercise), or (ii) meets and will continue to meet the
Equity Interest Requirement described below after the
exercise and sale of shares acquired upon exercise.
The Equity Interest Requirement - The combined value
of the Company's Common Stock and vested options held
by the Executive Officer, each valued at the then
market price of the Company's Common Stock, must be
equal to or greater than a designated multiple of
target cash compensation (annual base salary plus
target bonus) ("TCC") as indicated in the chart below.
b) Stock Ownership Requirement. If the Equity Interest
Requirement is satisfied, then an Executive Officer
may exercise vested options within strict limits. At
least 50% of the net after tax proceeds obtainable
upon the exercise of any option must be retained in
the form of Restricted Stock (as hereinafter defined)
of the Company's Common Stock unless and until the
Executive Officer then owns Restricted Stock of the
Company having a market value equal to a specified
multiple of his base salary as indicated in the chart
below. If the Executive meets the Stock Ownership
Requirement, but due to a change in his compensation
(or position) and/or the market price of the Company's
Common Stock, he does not continue to meet the
requirement, then he will be required to retain, as
Restricted Stock, additional shares of Common Stock
acquired upon a subsequent exercise of an option.
Common Stock acquired from a subsequent option
exercise shall become Restricted Stock to the extent
then necessary for the Executive Officer to then
satisfy the Stock Ownership Requirement.
Equity Interest Stock Ownership
Position Requirement Requirements
Chairman of the Board 7 times TCC 5 times Base Salary
President 5 times TCC 3 times Base Salary
Executive and Senior
Vice President 3 times TCC 2 times Base Salary
Vice President 2 times TCC 1 times Base Salary
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5. Restricted Stock. Effective on May 6, 2002, the date of
adoption of the Program (the "Implementation Date"), shares of
the Common Stock of the Company which are acquired in an option
exercise, and which an Executive Officer must retain to satisfy
the Stock Ownership Requirement, shall be designated as
Restricted Stock. In addition, all shares of Common Stock of the
Company designated as Restricted Stock under the 1995 Stock
Ownership and Option Retention Program as of May 5, 2002 must be
delivered by the Executive Officer to the Company and become
Restricted Stock under the Program. The certificates for the
Restricted Stock will bear a restrictive legend stating that the
shares cannot be transferred while the holder is an Executive
Officer of the Company and without the opinion of the Company's
General Counsel. Regardless of changes in the market price of the
Company's Common Stock, the Restricted Stock shall continue to be
held in escrow by the Company until such time as the Executive
Officer is no longer an Executive Officer of the Company (unless
the Committee grants a Hardship Waiver to the Executive Officer).
6. Election to Discontinue Participation; Forfeiture. An
Executive Officer may elect to discontinue participation in the
Program. "Opting out" of the Program shall result in the
immediate forfeiture of the Executive Officer's rights to 1) all
Restricted Stock held in escrow by the Company for the Executive
Officer; and 2) all options awarded to the Executive Officer
after the date on which the individual became an Executive
Officer.
7. Hardship Waiver. In the event an Executive Officer suffers a
serious financial hardship (a "Hardship"), the Committee may
waive such portion of the Equity Interest Requirement and/or the
Stock Ownership Requirement it feels appropriate to meet such
need if the Hardship is a result of one of the following
conditions:
a) Substantial expenses caused by an accident or illness
involving the Executive Officer, a member of the
Executive Officer's immediate family or household, or
another dependent;
b) The need to prevent an eviction or mortgage
foreclosure on the principal residence of the
Executive Officer; or
c) Any other immediate and substantial financial need
that the Committee may designate.
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8. Exempt Stock. Shares of Common Stock which are:
a) not acquired in an option exercise, or
b) acquired prior to the Implementation Date, except
those shares previously designated as Restricted Stock
acquired for the purpose of complying with the
previous program, or
c) acquired after the Implementation Date but not
designated as Restricted Stock because the Executive
Officer fully satisfied the Stock Ownership
Requirement on the exercise date, or
d) acquired upon the exercise of an option granted in
connection with an Executive Officer's initial hiring,
or
e) acquired upon the exercise of an option and/or options
awarded in connection with the promotion of an
individual to the position of Executive Officer as
well as any options awarded to such person prior to
such promotion
shall not be Restricted Stock and shall not be subject to
the restrictions on transferability imposed hereunder.
9. Non-Compete. Each Executive Officer must execute the
agreement in the form of Exhibit A. Violation of the non-compete
provisions of the agreement shall result in a forfeiture of all
of the Executive Officer's interest in any Restricted Stock held
by the Company.
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Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Symbol
Technologies, Inc., (the "Company") on Form 10-Q for the period
ended June 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Richard Bravman,
Chief Executive Officer of the Company, certify, pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002, that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the
financial condition and results of operations
of the Company.
/s/Richard Bravman_________
Richard Bravman
Vice Chairman of the Board
of Directors and
Chief Executive Officer
Dated: August 12, 2002
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Symbol
Technologies, Inc., (the "Company") on Form 10-Q for the period
ended June 30, 2002 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Kenneth V.
Jaeggi, Chief Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements
of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934; and
(2) The information contained in the Report fairly
presents, in all material respects, the
financial condition and results of operations
of the Company.
/s/Kenneth V. Jaeggi_______
Kenneth V. Jaeggi
Senior Vice President -
Chief Financial Officer
Dated: August 12, 2002