1
Exhibit 10.7
SERVICES AGREEMENT
THIS SERVICES AGREEMENT (this "Agreement") is entered into as of March
31, 1998 (the "Effective Date"), by and between AIRONET WIRELESS COMMUNICATIONS,
INC. ("Aironet"), a Delaware corporation, and TELXON CORPORATION, a Delaware
corporation ("Telxon").
BACKGROUND
WHEREAS, as Aironet's principal stockholder, Telxon has heretofore
provided certain administrative, financial, management and other services to
Aironet;
WHEREAS, simultaneously with the execution of this Agreement, Aironet
is selling shares of its common stock to investors in a private sale (the
"Offering"); and
WHEREAS, in connection with the Offering, Telxon will in general cease
providing services to Aironet; however, Aironet desires to retain Telxon, and
Telxon desires to act, as an independent contractor to continue to provide
certain services to Aironet on the terms and subject to the conditions set forth
herein.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the agreements
made herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Telxon and Aironet hereby agree as
follows:
1. SERVICES.
1.1 SALE AND PURCHASE. During the Term (defined herein), Telxon will
provide to (or procure for) Aironet, and Aironet will purchase from (or acquire
through) Telxon, the services, employee benefits and insurance described in
Schedules I and II attached hereto ("Services"). At Aironet's request, Telxon
will provide Services directly to Aironet's subsidiaries.
1.2 QUALITY. The Services shall be substantially similar in scope to
those provided by Telxon to Aironet prior to the Effective Date, and Telxon
shall use reasonable efforts to ensure that the nature and quality of the
Services provided to Aironet hereunder shall be undifferentiated from the nature
and quality of the Services that Telxon provides to itself and its subsidiaries.
Without limiting the generality of the foregoing, Telxon shall use reasonable
efforts to ensure that the nature and quality of Services provided to Aironet
employees under the Telxon Plans (defined herein), either by Telxon directly or
through administrators under contract, shall be undifferentiated from the nature
and quality of the Services provided to Telxon employees.
2
2. EMPLOYEE BENEFIT PLANS.
2.1 PARTICIPATION. During the Term, eligible Aironet employees will
continue to participate in Telxon's employee welfare and benefit plans
identified in the Schedules (defined herein) ("Telxon Plans").
2.2 COOPERATION. Aironet agrees to cooperate with Telxon in the
administration and coordination of and compliance with regulatory and
administrative requirements associated with the Telxon Plans, including, but not
limited to: sharing payroll data for determination of highly compensated
employees; providing census information (including accrued benefits) for
purposes of performing discrimination tests; providing actuarial reports for
purposes of determining the funded status of any plan; review and coordination
of insurance and other independent third-party contracts; and providing for
review of all summary plan descriptions, requests for determination letters,
insurance contracts, Forms 5500, financial statement disclosures and plan
documents.
2.3 DELEGATION. Aironet hereby delegates to Telxon final, binding and
exclusive authority, responsibility and discretion to interpret and construe the
provisions of the Telxon Plans in which Aironet employees participate. Telxon
may further delegate such authority to plan administrators, including the
authority to:
(a) provide administrative and other services;
(b) reach factually supported conclusions regarding
claims, consistent with terms of the Telxon Plans; and
(c) make a full and fair review of each claim denial
or other decision relating to the provision of benefits provided or
arranged for under the Telxon Plans, in accordance with the
requirements of the Employee Retirement Income and Security Act
("ERISA"), where applicable.
3. FEES AND PAYMENT.
3.1 FEES AND COSTS. Schedules I and II (collectively, the "Schedules")
set forth the prices that Aironet will pay to Telxon for certain Services, and
whether the costs associated with other Services (including any contributions to
benefit plans, premiums for insurance and third-party expenses paid by Telxon in
connection with the Services) will be passed-through to Aironet or charged to
Aironet employees through payroll deductions. In addition, Aironet shall
reimburse Telxon in accordance with past practices for Telxon's expenses and
costs related to (i) participation by Aironet employees in any Telxon Plans,
(ii) coverage of Aironet's property, officers and directors under Telxon's
liability, property and casualty, and fiduciary insurance policies and (iii)
other third party costs and expenses incurred by Telxon in connection with the
provision of the Services to Aironet and its employees. Costs which are passed
through to Aironet will be equal to the third-party costs and expenses incurred
by Telxon on Aironet's behalf. If Telxon incurs costs or expenses on behalf of
both Aironet and businesses operated by Telxon, Telxon will allocate such costs
and expenses in good faith, in accordance with generally accepted accounting
principles, if applicable,
2
3
among Aironet and the various other businesses. Aironet will pay the amounts
incurred in connection with Telxon's performing services for Aironet's
subsidiaries. The amounts payable by Aironet to Telxon hereunder, regardless of
whether they are fixed fees, passed-through costs, reimbursement of costs
incurred, deductions from payroll or otherwise, are referred to as "Service
Fees."
3.2 INVOICING AND SETTLEMENT OF FEES.
(a) Telxon will invoice Aironet for all Service Fees due and
payable for the prior month then ended, and Aironet will pay such
invoices within thirty (30) days after its receipt thereof.
(b) At Aironet's election: (i) Aironet will fund and administer all
wage and salary payments to Aironet employees, and all medical,
retirement and other benefits and claims payable to or on behalf of
Aironet employees and their dependents ("Employee Payments"); or (ii)
Telxon will administer Employee Payments and Aironet will establish
accounts against which Telxon may draw to make Employee Payments.
4. LIABILITY.
4.1 LIMITATION OF LIABILITY. Telxon, its subsidiaries and, to the
extent permitted by law, the Telxon Plans, and their respective directors,
officers, agents, and employees (each, a "Telxon Indemnified Person") shall have
no liability, direct or indirect, to Aironet or its employees for or in
connection with any Services performed by any Telxon Indemnified Person pursuant
to this Agreement, other than Telxon's liability for breach of this Agreement
and other than liability for damages caused to Aironet or its employees by a
Telxon Indemnified Person's gross negligence or willful misconduct. Aironet
acknowledges and agrees that the scope and availability of coverage for Aironet,
its property, directors, officers and employees under the Telxon Plans and under
Telxon's insurance policies may from time to time differ from that which was
available prior to or at the Effective Date.
4.2 INDEMNIFICATION. Aironet agrees to indemnify, defend and hold
harmless each Telxon Indemnified Person from and against any and all damages,
and to reimburse each Telxon Indemnified Person for all reasonable expenses as
they are incurred in investigating, preparing, pursuing or defending any claim,
action, suit, proceeding or investigation, arising out of or in connection with
Services performed by any Telxon Indemnified Person pursuant to this Agreement,
including but not limited to expenses incurred by Telxon under Section 6.3(c),
except to the extent that such damages and expenses result from a Telxon
Indemnified Person's gross negligence or willful misconduct.
4.3 MULTI-EMPLOYER PLANS. Telxon agrees to indemnify, defend and hold
harmless Aironet, its stockholders, directors, and officers from and against any
and all damages, costs and expenses which arise by operation of law merely by
virtue of the fact that Aironet employees participate in the Telxon Plans, and
which do not directly relate to or arise in connection with Aironet employees'
participation.
3
4
4.4 FURTHER INDEMNIFICATION. To the extent that any third party has
agreed to indemnify any Telxon Indemnified Person or to hold a Telxon
Indemnified Person harmless in connection with the third party's performance of
Services, Telxon will use reasonable efforts to make the benefits of such
Agreement available to Aironet in the event that indemnification is required.
5. RECORDS.
5.1 GENERAL. Upon reasonable notice to Telxon, Aironet may inspect
Telxon's books and records which support invoices for Service Fees and any
related allocation of costs between Aironet and Telxon's businesses.
5.2 TELXON PLANS. Upon reasonable prior written request to Telxon,
Aironet may inspect, and Telxon shall provide Aironet with reports, relating to:
(i) benefits paid to or on behalf of Aironet employees under the Telxon Plans,
including but not limited to financial statements, claims history, and census
information; and (ii) other information relating to the Services that is
required to satisfy any reporting or disclosure requirement of ERISA or the
Internal Revenue Code of 1986, as amended. Telxon's costs to prepare such
reports may be charged to Aironet as a Service Fee.
6. TERM AND TERMINATION.
6.1 TERM. The initial term of this Agreement is the one (1) year period
commencing on the Effective Date and ending on March 31, 1998. The term will be
renewed automatically for successive one-year periods unless either Aironet or
Telxon elects not to renew this Agreement upon not less than six (6) months
prior written notice (the initial term and any renewal term, as either may be
terminated in accordance with Section 6.2, is referred to as the "Term").
6.2 TERMINATION.
(a) After the initial one-year term, Aironet or Telxon may
terminate this Agreement at any time upon not less than six (6) months
written notice.
(b) At any time after the Effective Date:
(i) Telxon may terminate any Service that Telxon ceases to
provide to itself and its subsidiaries (other than Aironet) upon
not less than six (6) months written notice, or a shorter period if
required under the terms of a terminated Telxon Plan.
(ii) Telxon may terminate any Service if Aironet fails to
perform any of its material obligations under this Agreement
relating to any such Service, upon not less than sixty (60) days
written notice, during which period Aironet may cure its failure.
(iii) Aironet may terminate any Service if Telxon fails to
perform any of its material obligations under this Agreement
relating to any such Service, upon not
4
5
less than sixty (60) days written notice, during which period
Telxon may cure its failure.
(iv) Aironet may terminate any Service if Aironet elects in
writing to provide such Service itself and Telxon will not be
adversely affected by such termination, upon not less than sixty
(60) days written notice.
6.3 EFFECT OF TERMINATION.
(a) Upon the effective date of a termination of any Service or of
this Agreement, Telxon will have no further obligation to provide the
terminated Service and Aironet will have no obligation to pay any
Service Fees relating to such Services; provided, however, that
notwithstanding such termination: (i) Aironet shall remain liable to
Telxon for Service Fees for Services provided prior to the effective
date of the termination; (ii) Aironet shall be liable for Service Fees
relating to benefits paid to Aironet employees after, but incurred
prior, to the effective date of the termination; (iii) Aironet shall
remain liable for any Service Fees relating to any Services required by
law to be provided by Telxon after the effective date of the
termination; and (iv) the provisions of Sections 4 and 5 shall survive
the expiration or termination of the Term.
(b) Telxon and Aironet agree to cooperate with each other in order
to allow for an orderly transition of Services to Aironet upon the
expiration or termination of the Term. Without limiting the generality
of the foregoing, Telxon agrees promptly upon termination of this
Agreement to provide Aironet with copies of all records relating to
Aironet employee participation in the Telxon Plans and benefits to
Aironet Employees thereunder, and relating to Aironet employee
compensation and service records.
(c) Aironet and Telxon agree to cooperate with each other, both
during the Term and after its expiration or termination, in the event
that either is engaged in any civil or governmental actions,
proceedings or investigations relating to the Services.
7. MISCELLANEOUS.
7.1 PRIOR AGREEMENTS. This Agreement supersedes all prior and
contemporaneous agreements between the parties, whether oral or in writing,
relating to the subject matter hereof.
7.2 NO AGENCY. Nothing in this Agreement shall constitute or be deemed
to constitute a partnership or joint venture between the parties hereto, and,
except as expressly provided herein, neither party shall have authority or power
to bind the other or to contract in the name of, or create a liability against,
the other in any way or for any purpose.
7.3 SUBCONTRACTORS. Telxon may hire or engage one or more
subcontractors to perform all or any of the Services, provided that Telxon will
in all cases remain primarily responsible for all obligations undertaken by it
in this Agreement with respect to the scope, quality and nature of the Services
provided to Aironet.
5
6
7.4 ASSIGNABILITY. Neither this Agreement nor any right or obligation
hereunder may be assigned or delegated by Aironet to a direct competitor of
Telxon (a "Competitor"), and any such assignment or delegation shall be void and
of no effect. The merger, consolidation, asset sale, change of control, or any
other reorganization of Aironet with or into a Competitor, or of a Competitor
with or into Aironet, shall be deemed an assignment under this Section 7.4.
Subject to the foregoing, this Agreement shall be binding upon and enforceable
by, and shall inure to the benefit of, the parties hereto and their respective
successors and assigns. Nothing in this Agreement is intended to give any person
not named herein the benefit of any legal or equitable right, remedy or claim
under this Agreement, except as expressly provided herein.
7.5 GOVERNING LAW. This Agreement shall be construed in accordance with
and governed by the laws of the state of Ohio without regards to conflict of
laws principles.
7.6 SEVERABILITY. If any provisions of this Agreement shall be invalid
or unenforceable, such invalidity or unenforceability shall not render the
entire Agreement invalid. Rather, the Agreement shall be construed to the
greatest extent possible without striking the invalid or unenforceable provision
or, if required, as if not containing the particular invalid or unenforceable
provision, and the rights and obligations of each party shall be construed and
enforced accordingly, so long as to do so will not materially alter the rights
and responsibilities considered as a whole of the parties hereunder.
7.7 AMENDMENT. This Agreement may only be amended by a written
agreement executed by both parties hereto.
7.8 HEADINGS. The headings of the sections of this Agreement are
inserted for convenience only and shall not constitute a part thereof or affect
in any way the meaning or interpretation of this Agreement.
7.9 COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which shall be deemed an original and all of which, when
taken together, shall constitute one agreement. For evidentiary purposes, faxed
executed counterparts shall be deemed to be originals.
6
7
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized representatives as of the date first set forth
above.
AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Roger J. Murphy
----------------------------------
Roger J. Murphy, President and
Chief Executive Officer
TELXON CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Kenneth W. Haver,
Senior Vice President and
Chief Financial Officer
7
8
SERVICES AGREEMENT-SCHEDULE I
GENERAL CORPORATE SERVICES(1)
SERVICE BILLING METHODOLOGY OR RATE
- ------- ---------------------------
- - TAXES $2,000/month
- Tax return preparation (federal, state and sales)
- Tax planning services
- - HUMAN RESOURCES AND BENEFITS $5,833/month
- Benefit plan administration
- Maintenance of eligibility files upon Aironet's
notification of status changes
- Claim adjudication under the terms of applicable plans
- Maintenance of toll-free telephone lines for inquiries, etc.
- Support services (internal and external, including COBRA)
- Other benefit support services
- Audit, legal, actuarial fees and related recoveries
- benefits administration (insurance,
savings, other benefit plans and statutory requirements)
- Employee relations support
- New hire and termination processing services
- - PAYROLL PROCESSING $2,500/month
- - IN-HOUSE LEGAL SERVICES Pass-Through Billing
(capped at $3,000/month)
- --------
(1) In each case, third-party costs incurred by Telxon on behalf of Aironet will
be passed through by Telxon to Aironet as a Service Fee.
8
9
SERVICE BILLING METHODOLOGY OR RATE
- ------- ---------------------------
- - INSURANCE POLICIES (LIABILITY, PROPERTY, CASUALTY PASS-THROUGH BILLING
AND FIDUCIARY)
- - CORPORATE, ADMINISTRATIVE AND GENERAL OVERHEAD $4,000/month
- Non-inventory U.S. purchasing
- General real estate and facilities services,
including normal office relocations
- Travel services
- - CORPORATE AIRCRAFT SERVICES Pass-Through Billing
subject to Federal
Aviation Regulations
- - MIS SERVICES $8,333/month
- Telephone voice and data line installation
and maintenance.
- Personal computer and server installation,
maintenance, backup, recovery and upgrade
for systems utilized by Aironet
- Access to network and communications
lines for e mail, print services, other
- Access to Oracle financial software
- "Help Desk" user support
9
10
SERVICES AGREEMENT-SCHEDULE II
BENEFITS SERVICES
SERVICE BILLING METHODOLOGY
- ------- -------------------
MEDICAL/DENTAL PROGRAMS
BENEFITS/CLAIMS
- - Claims costs for Aironet employees Pass-Through Billing
participating in the following
Telxon plans and programs:
- Medical Plan (including prescription coverage)
- Short Term Disability Plan
- Dental Plan
PARTICIPANT CONTRIBUTIONS
- Participant contributions for above plans Payroll Deduction or Direct Bill
OTHER BENEFIT PLANS
LIFE INSURANCE
- Life insurance for Aironet employees Pass-Through Billing
(including Accidental Death and Dismemberment)
SAVINGS/RETIREMENT PLANS
- Company match/retirement contribution Pass-Through Billing
- Participant Contribution Payroll Deduction
LONG-TERM DISABILITY PLANS
- Employer contributions Pass-Through Billing
- Employee contributions Payroll Deduction
10