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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): August 16, 1996
TELXON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-11402 74-1666060
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
3330 WEST MARKET STREET, AKRON, OHIO 44333
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (330) 867-3700
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ITEM 5. OTHER EVENTS.
Effective August 16, 1996, certain terms of the $100 million
revolving credit facility maintained by Telxon Corporation (the "Company"
or the "Registrant") with The Bank of New York, as Agent for an eight-bank
lending group, were amended as set forth in the agreements attached as Exhibits
10.3.2.a and 10.3.2.b to this Current Report, which are by this reference
incorporated herein. Thereafter the Company entered into the agreements
attached as Exhibits 10.3.8 and 10.3.8.a to this Current Report, which are by
this reference incorporated herein, in order to make coordinating changes to
its supplemental $20 million revolving credit facility with Bank One, Akron,
NA. Both sets of agreements conditionally grant a security interest in certain
assets of the Company which will only become effective if the
Company were to become in default under the Bank of New York facility and then
only if the requisite lenders under that facility were to direct that the
security documents be filed.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.3.2.a Amendment No. 1, dated as of August 6, 1996, to the Credit
Agreement between the Registrant, the lenders party thereto
from time to time and The Bank of New York, as letter of
credit issuer, swing line lender and agent for the lenders,
dated as of March 8, 1996, filed herewith.
10.3.2.b Security Agreement, dated as of August 6, 1996, by and among
the Registrant and The Bank of New York, as Agent, filed
herewith.
10.3.8 Business Purpose Revolving Promissory Note (Swing Line)
made by the Registrant in favor of Bank One, Akron, N.A.,
dated August 6, 1996 (in replacement of the Business
Purpose Revolving Promissory Note (Swing Line) made by the
Registrant in favor of Bank One, Akron, N.A., dated March
20, 1996), filed herewith.
10.3.8.a Bank One Security Agreement, dated as of August 6, 1996, by
and among the Registrant and Bank One, Akron, N.A., filed
herewith.
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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 hereunto duly authorized.
TELXON CORPORATION
DATE: October 15, 1996 By: /s/ Glenn S. Hansen
-------------------
Glenn S. Hansen
Vice President, Legal Administration
and Corporate Counsel
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INDEX TO EXHIBITS
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Telxon Corporation
Current Report on Form 8-K
(Earliest Event Reported: August 16, 1996)
10.3.2.a Amendment No. 1, dated as of August 6, 1996, to the Credit
Agreement between the Registrant, the lenders party thereto
from time to time and The Bank of New York, as letter of credit
issuer, swing line lender and agent for the lenders, dated as
of March 8, 1996, filed herewith.
10.3.2.b Security Agreement, dated as of August 6, 1996, by and among
the Registrant and The Bank of New York, as Agent filed
herewith.
10.3.8 Business Purpose Revolving Promissory Note (Swing Line) made
by the Registrant in favor of Bank One, Akron, NA, dated August
6, 1996, (in replacement of the Business Purpose Revolving
Promissory Note (Swing Line) made by the Registrant in favor
of Bank One, Akron, NA, dated March 20, 1996), filed herewith.
10.3.8.a Bank One Security Agreement, dated as of August 6, 1996, by and
among the Registrant and Bank One, Akron, NA, filed herewith.
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Exhibit 10.3.2.a
AMENDMENT NO. 1
---------------
AMENDMENT NO. 1 (this "AMENDMENT"), dated as of August 6, 1996, to the
Credit Agreement, dated as of March 8, 1996, by and among Telxon Corporation
(the "BORROWER"), the Lenders party thereto, and The Bank of New York, as
Issuer, Swing Line Lender and Agent (the "AGREEMENT").
RECITALS
--------
I. Capitalized terms used herein which are not otherwise defined herein
shall have the respective meanings ascribed thereto in the Agreement.
II. The Borrower has requested that the Agent, the Issuer and the Swing
Line Lender agree to amend the Agreement upon the terms and conditions contained
herein, and the Agent, the Issuer and the Swing Line Lender are willing so to
agree.
Accordingly, in consideration of the Recitals and the covenants and
conditions hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of which are hereby acknowledged, the Borrower, the
Agent, the Issuer and the Swing Line Lender hereby agree as follows:
1. Section 1.1 of the Agreement is amended by adding the following
definitions in the appropriate alphabetical order:
"BANK ONE": Bank One, Akron, N.A.
"BANK ONE CREDIT LINE": the committed, revolving line of credit, in
the amount of $20,000,000, maintained by Bank One for the Borrower, as the
same may be extended, increased or otherwise modified from time to time.
"BANK ONE SECURITY AGREEMENT": the security agreement, if any, by and
between the Borrower and Bank One, pursuant to which the Borrower grants to
Bank One a security interest, solely in the Collateral, to secure the
obligations of the Borrower to Bank One solely under the Bank One Credit
Line, as the same may be amended, supplemented or otherwise modified from
time to time.
"BORROWING BASE AMOUNT": as of any date, the sum of (i) 70% of an
amount equal to Eligible Accounts Receivable MINUS $8,000,000 and (ii) 40%
of Eligible Inventory,
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as set forth in the Borrowing Base Certificate most recently delivered to
the Agent and the Lenders pursuant to this Agreement.
"BORROWING BASE CERTIFICATE": a certificate of the Borrower in
substantially the form of Exhibit J, duly executed by the chief financial
officer of the Borrower or such other officer of the Borrower as shall be
acceptable to the Agent.
"COLLATERAL": the assets and other property in which a security
interest is granted under the Security Agreement.
"CURRENT RATIO": as of any date, and with respect to the Borrower and
the Subsidiaries on a Consolidated basis, the ratio of (a) accounts
receivable plus inventory to (b) the sum of, without duplication, accounts
payable, accrued liabilities, notes payable, the aggregate Outstandings of
the Issuer, the Swing Line Lender and each Lender, and the current
maturities of all long-term Indebtedness, in each case as such amounts
would be included in a balance sheet as at such date prepared in accordance
with GAAP.
"ELIGIBLE ACCOUNTS RECEIVABLE": as of any date, accounts receivable of
the Borrower (less all applicable pending credits to account debtors and
reserves for doubtful accounts) arising in the ordinary course of business
thereof as to each of which the following requirements are satisfied: (a)
such receivable is payable to the Borrower and the Borrower has sole,
lawful and unencumbered (other than with respect to the Liens, if any,
arising under the Bank One Security Agreement and the Security Agreement)
title to such receivable, (b) assuming the Perfection Date shall have
occurred and the Agent shall have presented for filing all of the Notice
Documents in the appropriate governmental office, the Agent would have a
first Lien thereon in accordance with the Security Agreement and, on and
after the Perfection Date, such Lien shall be perfected, (c) such
receivable is payable in Dollars, (d) the account debtor in respect of such
receivable is organized under the laws of (i) the United States of America
or any State thereof, or (ii) any other jurisdiction, provided however,
that the amount of all receivables due from account debtors organized under
the laws of jurisdictions other than the United States of America or any
State thereof does not exceed $3,000,000 in the aggregate, and (e) such
receivable has
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not been outstanding more than 90 days from the due date thereof.
"ELIGIBLE INVENTORY": as of any date, inventory of the Borrower (less
all applicable reserves with respect thereto) as to each item of which the
following requirements are satisfied: (a) such item consists of (i) first
quality current finished products or service parts held for sale or for use
of the provision of maintenance services to customers of the Borrower in
the ordinary course of its business, (ii) work in process to become
products held for sale to customers of the Borrower in the ordinary course
of business, or (iii) raw materials to become products held for sale to
customers of the Borrower in the ordinary course of business, (b) assuming
the Perfection Date shall have occurred, if such item is located either in
the State of Ohio or the State of Texas, the Agent would have a first Lien
thereon in accordance with the Security Agreement and, on and after the
Perfection Date, if such item is located either in the State of Ohio or the
State of Texas, such Lien shall be perfected, (c) for purposes of this
definition, such item is valued at the lower of cost or market, such value
being determined on a first-in-first-out basis, (d) such item is owned by,
and in the possession of, the Borrower, (e) such item is located (i) in the
United States of America, or (ii) in Singapore, and the Borrower accounts
for such item as if it were located in the State of Texas, (f) such item is
not obsolete, (g) such item has not been returned or rejected as defective
by customers of the Borrower, and (h) such item is not inventory to be
returned to suppliers.
"EXCLUDED AMOUNT": as of any date, the lesser of (i) the aggregate
cost of all Restricted Payments made pursuant to Section 8.6(c) through and
including such date and (ii) the amount set forth below under the heading
"Amount" adjacent to the applicable period during which such date occurs:
Period Amount
------ ------
July 1, 1996 through
September 30, 1996 $25,000,000
October 1, 1996 through
December 31, 1996 $25,000,000
January 1, 1997 through
March 31, 1997 $22,000,000
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April 1, 1997 through
June 30, 1997 $15,000,000
July 1, 1997 and thereafter $0
"INTERCREDITOR AGREEMENT": the Intercreditor Agreement, dated as of
August 6, 1996, by and between Bank One and the Agent.
"NOTICE DOCUMENTS": as defined in Section 34(e) of Amendment No. 1,
dated August 6, 1996, to this Agreement.
"PERFECTION DATE": the date, if any, upon which Required Lenders shall
instruct the Agent, pursuant to and in accordance with Section 9.2(a)(i),
to file the Notice Documents.
"PURCHASE PRICE": as defined in the definition of "Softechnics
Transaction" in this Section 1.1.
"RMS": as defined in the definition of "Softechnics Transaction" in
this Section 1.1.
"RTCS": as defined in the definition of "Softechnics Transaction" in
this Section 1.1.
"SECURITY AGREEMENT": the Security Agreement, dated as of August 6,
1996, by and among the Borrower and the Agent, substantially in the form
attached hereto as Exhibit K, as the same may be amended, supplemented or
otherwise modified from time to time.
"SOFTECHNICS": as defined in the definition of "Softechnics
Transaction" in this Section 1.1.
"SOFTECHNICS TRANSACTION": the transaction by and among the Borrower
and Softechnics, Inc., a Delaware corporation ("SOFTECHNICS"), whereby
(a) the Borrower granted to Softechnics an exclusive license to market
software (the "SOFTWARE") previously marketed for the Borrower by two of
its divisions, Retail Management Systems ("RMS") and Real-Time Computer
Specialists ("RTCS"), in exchange for minimum payments of principal and
interest totaling $6,300,000 (the "PURCHASE PRICE", $150,000 of which was
paid in cash upon the granting of the license and the remainder of which
has been, or is to be, paid in quarterly installments, such remainder
having been evidenced by a promissory note and secured by a security
interest in all of the assets of Softechnics) plus certain royalties on
Softechnics' revenues from the
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Software, (b) the Borrower has covenanted to transfer title to the Software
to Softechnics upon payment in full of the Purchase Price, (c) the Borrower
has been granted an option to purchase up to a 29.4% equity interest in
Softechnics in an amount not exceeding $3,000,000, (d) certain office
equipment previously used by RMS and RTCS has been transferred to
Softechnics, and (e) accounts receivable of RMS and RTCS equal to
$2,800,000 have been transferred to Softechnics (the "TRANSFERRED
ACCOUNTS").
"SOFTWARE": as defined in the definition of "Softechnics Transaction"
in this Section 1.1.
"TRANSFERRED ACCOUNTS": as defined in the definition of "Softechnics
Transaction" in this Section 1.1.
2. Clause (b) of the definition of "Applicable Margin" contained in Section
1.1 of the Agreement is amended and restated in its entirety as follows:
(b) The Applicable Margin shall be based on the Compliance Certificate
most recently delivered with respect to the last fiscal quarter of the
preceding fiscal year pursuant to Section 7.7(d), and shall become
effective on the date such Compliance Certificate is delivered to the
Lenders, provided, however, that prior to the delivery of the Compliance
Certificate with respect to the fiscal quarter ending March 31, 1998
pursuant to Section 7.7(d), in the event (i) the Borrower shall have made a
Restricted Payment pursuant to Section 8.6(c) hereof, and (ii) the
Capitalization Ratio as set forth in any Compliance Certificate or
Borrowing Request delivered to the Agent hereunder shall equal or exceed
45%, then the Applicable Margin shall instead be based on such Compliance
Certificate or Borrowing Request (and shall become effective on the date
such Compliance Certificate is delivered to the Lenders or on the date such
Borrowing Request is delivered to the Agent) and, thereafter until the
delivery of the Compliance Certificate with respect to the fiscal quarter
ending March 31, 1998 pursuant to Section 7.7(d), shall be based on the
Compliance Certificate most recently delivered pursuant hereto, and shall
become effective on the date each such Compliance Certificate is delivered
to the Lenders.
3. The definition of "Capitalization Ratio" in Section 1.1 of the Agreement
is amended and restated in its entirety as follows:
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"CAPITALIZATION RATIO": as of any date of determination, the ratio of
Net Debt to Capitalization.
4. The definition of "Loan Documents" in Section 1.1 of the Agreement is
amended and restated in its entirety as follows:
"LOAN DOCUMENTS": this Agreement, the Subsidiary Guaranty, the
Security Agreement and, upon the execution and delivery thereof, the Notes
and the Reimbursement Agreements.
5. The definitions of "Pricing Level I", "Pricing Level II", "Pricing Level
III", "Pricing Level IV", and "Pricing Level V" in Section 1.1 of the Agreement
are amended and restated in their entirety as follows:
"PRICING LEVEL I": at any time, when the Capitalization Ratio is less
than 20%.
"PRICING LEVEL II": at any time, when the Capitalization Ratio is less
than 25% but greater than or equal to 20%.
"PRICING LEVEL III": at any time, when the Capitalization Ratio is
less than 35% but greater than or equal to 25%.
"PRICING LEVEL IV": at any time, when the Capitalization Ratio is less
than 45% but greater than or equal to 35%.
"PRICING LEVEL V": at any time, when the Capitalization Ratio is
greater than or equal to 45%.
6. Section 2.1 of the Agreement is hereby amended by deleting clause (b) of
the proviso in the first sentence of such Section and replacing such clause with
a new clause (b) as follows:
(b) the Aggregate Revolving Credit Exposure would not exceed the
lesser of (i) the Borrowing Base Amount, or (ii) the Aggregate Revolving
Commitment Amount.
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7. Section 2.3 of the Agreement is hereby amended by deleting clause (b) of
the proviso in the first sentence of such Section and replacing such clause with
a new clause (b) as follows:
(b) the Aggregate Revolving Credit Exposure would not exceed the
lesser of (i) the Borrowing Base Amount, or (ii) the Aggregate Revolving
Commitment Amount.
8. Section 2.9 of the Agreement is further amended by redesignating
subsection (d) thereof as subsection (e) and adding a new subsection (d) as
follows:
(d) MANDATORY BORROWING BASE PREPAYMENT OF REVOLVING LOANS AND SWING
LINE LOANS. If on any date the Aggregate Revolving Credit Exposure shall
exceed the Borrowing Base Amount, the Borrower shall immediately prepay the
Revolving Loans, prepay the Swing Line Loans, make a deposit into the Cash
Collateral Account, or any combination thereof, in an aggregate amount
equal to not less than such excess.
9. Clause (ii) of Section 2.10(a) of the Agreement is amended and restated
as follows:
(ii) the Aggregate Revolving Credit Exposure would not exceed the
lesser of (x) the Borrowing Base Amount, or (y) the Aggregate Revolving
Commitment Amount.
10. Section 6.1 of the Agreement is amended by inserting the words "and the
Security Agreement" immediately after the phrase "contained in this Agreement".
11. Section 7.7 of the Agreement is amended by deleting the word "and"
following subsection (l) thereof, deleting the period at the end of subsection
(m) thereof, adding a semicolon and the word "and" to the end of such subsection
(m), and adding a new subsection (n) as follows:
(n) and to each Lender, as soon as available, but in any
event not later than 20 days after the end of each month, a
Borrowing Base Certificate setting forth the Borrowing Base
Amount as of the last day of such month.
12. Section 7.10(b) of the Agreement is amended and restated in its
entirety as follows:
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(b) Notwithstanding the exceptions set forth in Section 7.10(a), at
all times maintain (directly or indirectly), beneficially and of record,
(i) 85% of the voting control of, and 85% of the equity in, each of its
Material Subsidiaries other than those set forth on Schedule 7.14, and (ii)
70% of the voting control of, and 70% of the equity in, each of its
Material Subsidiaries set forth on Schedule 7.10(b).
13. Sections 7.11, 7.12 and 7.13 of the Agreement are amended and restated
in their entirety as follows:
7.11 LEVERAGE RATIO
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As of any date during each period set forth
below, have a Leverage Ratio not greater than the ratio set forth below
adjacent to such period:
Period Ratio
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Effective Date through
March 30, 1997 3.75:1.00
March 31, 1997 through
June 29, 1997 3.25:1.00
June 30, 1997 through
September 29, 1997 3.00:1.00
September 30, 1997 and
thereafter 2.75:1.00
7.12 TANGIBLE NET WORTH
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As of any date, maintain Tangible Net Worth
of not less than (a) $106,000,000 MINUS (b) the Excluded Amount PLUS
(c) 25% of the positive Consolidated net income of the Borrower and its
Subsidiaries for each completed fiscal quarter ending after December
31, 1995.
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7.13 FIXED CHARGE COVERAGE RATIO
---------------------------
At each fiscal quarter end during each period
set forth below, have a Fixed Charge Coverage Ratio greater than or
equal to the ratio set forth adjacent to such period:
Period Ratio
------ -----
Effective Date through
December 30, 1996 1.00:1.00
December 31, 1996 through
March 30, 1997 1.05:1.00
March 31, 1997 and
thereafter 1.10:1.00
14. Section 7.14(a) of the Agreement is amended by adding the phrase, "or
AIRONET Wireless Communications, Inc." immediately after the words, "(other than
an existing Guarantor" wherever they appear.
15. The Agreement is amended by adding a new Section 7.15 as follows:
7.15 CURRENT RATIO
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As of any date, have a Current Ratio not less
than 1.75:1.00.
16. The Agreement is amended by adding a new Section 7.16 as follows:
7.16 SEARCH REPORTS
--------------
Furnish to the Agent, no later than the date
that is the sixtieth (60th) day following the Amendment Effective Date,
UCC, federal tax and judgment lien search reports (none of which shall
be dated earlier than 30 days prior to the date such reports are
furnished) with respect to each applicable public office where Liens
are or may be filed disclosing that there are no Liens of record in
such official's office covering any Collateral or showing the Borrower
as debtor thereunder (other than Liens permitted under Section 8.2 of
the Agreement).
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17. Section 8.2 of the Agreement is amended by deleting the word "and"
immediately preceding subsection (o) thereof, by deleting the period after the
word "Texas" at the end of such subsection (o) and replacing the period with a
comma, and by adding new subsections (p), (q) and (r) to the end of Section 8.2
of the Agreement as follows:
(p) Liens created under the Security Agreement, (q) Liens created
under the Bank One Security Agreement, and (r) Liens created by the
Borrower in the granting to Softechnics of an exclusive license to market
the Software pursuant to the Softechnics Transaction.
18. Section 8.3 of the Agreement is amended by adding the phrase "(other
than Collateral)" immediately after the first use of the word "Property" in
subsection (g) thereof.
19. Section 8.3 of the Agreement is further amended by deleting the word
"and" immediately preceding subsection (h) thereof, deleting the period
following such subsection (h) and replacing such period with a comma, and by
adding a new subsection (i) to the end of Section 8.3 of the Agreement as
follows:
(i) the Disposition by the Borrower of the license to market the
Software to Softechnics pursuant to the Softechnics Transaction, with title
to the Software vesting in Softechnics upon payment in full of the Purchase
Price pursuant to the Softechnics Transaction, the Disposition by the
Borrower of office equipment used by RMS and RTCS pursuant to the
Softechnics Transaction, and the Disposition by the Borrower of the
Transferred Accounts pursuant to the Softechnics Transaction.
20. Section 8.4 of the Agreement is amended by deleting the word "and"
immediately preceding subsection (f) thereof, deleting the period following such
subsection (f) and replacing such period with a comma, and by adding a new
subsection (g) to the end of Section 8.4 of the Agreement as follows:
(g) the Acquisition by the Borrower of a promissory note from
Softechnics pursuant to the Softechnics Transaction, the Acquisition by the
Borrower of up to a 29.4% equity interest in Softechnics pursuant to the
Softechnics Transaction, and the Acquisition by the Borrower of any
Softechnics assets upon foreclosure on its security interest pursuant to
the Softechnics Transaction.
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21. Section 8.5 of the Agreement is amended by deleting the word "and"
immediately preceding subsection (t) thereof, deleting the period at the end of
such subsection, adding a comma to the end of subsection (t) of such Section,
and adding new subsections (u) and (v) as follows:
(u) Investments contemplated by Section 8.6(c), and
(v) the Investment by the Borrower in the provision of credit to
Softechnics pursuant to the Softechnics Transaction and the Investment by
the Borrower in up to a 29.4% equity interest in Softechnics pursuant to
the Softechnics Transaction.
22. Section 8.6 of the Agreement is amended by deleting the word "and"
immediately preceding clause (b) thereof, deleting the period at the end of such
Section, adding a comma and the word "and" to the end of such Section, and
adding a new clause (c) as follows:
(c) Restricted Payments by the Borrower on or prior to June
30, 1997, in the form of the purchase or repurchase by the Borrower of
outstanding registered shares thereof and/or convertible subordinated
debt thereof, provided that (i) immediately before and after giving
effect thereto no Default or Event of Default shall or would exist, and
(ii) immediately after giving effect to each such Restricted Payment,
the aggregate cost of all such Restricted Payments under Section 8.6(b)
and this Section 8.6(c) shall not exceed $33,000,000.
23. Section 9.1(c) of the Agreement is amended by deleting the word "or"
immediately preceding the term "7.14" and by adding a comma and the words "or
7.15" immediately after the term "7.14".
24. Section 9.1 of the Agreement is further amended by replacing the
period at the end of subsection (n) thereof with "; or" and adding new
subsections (o) and (p) to the end thereof as follows:
(o) The Security Agreement shall cease to be valid and enforceable
(except as otherwise specifically provided therein), an "Event of Default"
shall have occurred under, and as defined in, the Security Agreement or,
from and after the Perfection Date, the Lien granted to the Agent
thereunder shall cease to be a first priority, perfected security interest;
or
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(p) The Intercreditor Agreement shall cease to be valid and
enforceable (except as otherwise specifically provided therein).
25. Section 9.2(a) of the Agreement is amended by inserting the phrase "(i)
file the Notice Documents with the appropriate Governmental Authorities and
other public offices, and/or (ii)" immediately after the phrase "at the written
request of the Required Lenders, shall".
26. Section 11.1 of the Agreement is amended by deleting the word "or"
immediately preceding clause (xi) of subsection (a) thereof, by adding the word
"or" immediately after the comma following such clause (xi), and by adding a new
clause (xii) to subsection (a) of Section 11.1 of the Agreement as follows:
(xii) release any Collateral or any security interest therein (other than
in connection with (A) a Disposition permitted under Section 8.3, (B) any
release specifically provided for in the Security Agreement, or (C) any
release of Collateral having a fair market value of $2,000,000 or less
during any fiscal year),
27. Section 11.1(b) of the Agreement is amended and restated in its
entirety as follows:
(b) Notwithstanding anything to the contrary contained in Section
11.1(a), the Agent may, at any time and from time to time without the
consent of the Issuer, the Swing Line Lender or any one or more of the
Lenders, (i) release all or any of the obligations of a Loan Party under
the Subsidiary Guaranty in connection with a Disposition of such Loan Party
permitted by Section 8.3, or (ii) release any Collateral or any security
interest therein in connection with (A) any Disposition of such Collateral
permitted by Section 8.3, (B) any release specifically provided for in the
Security Agreement, or (C) any release of Collateral having a fair market
value of $2,000,000 or less during any fiscal year.
28. Section 11.7(d) of the Agreement is amended by deleting the word "or"
immediately preceding subclause (H) of clause (vi) of such Section, and by
inserting new subclauses (I) and (J) as follows:
(I) release all of the obligations of or by any Loan Party under the
Security Agreement (other than
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in connection with a Disposition of such Loan Party permitted by Section
8.3), or (J) release all of the Collateral (other than in connection with
(A) a Disposition permitted under Section 8.3, (B) any release specifically
provided for in the Security Agreement, or (C) any release of Collateral
having a fair market value of $2,000,000 or less during any fiscal year).
29. Exhibit C to the Agreement is amended and restated in its entirety as
set forth in Attachment D attached hereto.
30. Exhibit G to the Agreement is amended and restated in its entirety as
set forth in Attachment E attached hereto.
31. The Agreement is amended by adding Exhibit J and Exhibit K thereto in
the forms attached hereto as Attachment A and Attachment B, respectively.
32. The Agreement is amended by (a) amending and restating Schedule 7.14
thereto in the form of Schedule 7.14 hereto, and (b) adding a new Schedule
7.10(b) thereto in the form of Schedule 7.10(b) hereto.
33. Pursuant to Section 11.1 of the Agreement, the Agent hereby releases
AIRONET Wireless Communications, Inc. from its obligations under the Subsidiary
Guaranty.
34. Subject to Paragraph 35 of this Agreement, Paragraphs 1 - 33 of this
Amendment shall not be effective until such date (the "AMENDMENT EFFECTIVE
DATE") as each of the following conditions shall have been satisfied:
(a) The Agent shall have received counterparts of this Amendment
executed by Required Lenders and the Guarantors.
(b) The Agent shall have received from the Borrower, for the pro rata
account of the Lenders, a fee in consideration for this Amendment in an
amount equal to 0.075% of the Aggregate Revolving Commitment Amount.
(c) The Agent shall have received an opinion of special counsel to the
Borrower and the Subsidiaries, in form and substance satisfactory to the
Agent.
(d) The Agent shall have received a certificate of an executive
officer of the Borrower, dated the Amendment Effective Date, certifying
that (i) there exist no Liens on the Collateral other than Liens permitted
under
-13-
<PAGE> 14
the Agreement, (ii) no amendment, supplement, or modification to the
certificate of incorporation or by-laws of the Borrower has been made since
March 8, 1996, and (iii) the Borrower is in good standing and authorized to
conduct business in the State of its formation and each other jurisdiction
where the failure to be in good standing and authorized to conduct business
would have a Material Adverse effect.
(e) The Borrower shall have delivered to the Agent (i) a security
agreement, dated no later than the Amendment Effective Date, executed by
the Borrower and in the form of Attachment B attached hereto, and (ii) such
UCC Financing Statements executed by the Borrower, all other documents and
certificates which may be required to be filed in any public office in
order to perfect the security interest in the collateral located in the
States of Ohio and Texas granted under such security agreement (such UCC
Financing Statements and other documents and certificates being
collectively referred to as the "NOTICE DOCUMENTS"), and such other
documents and instruments as shall be reasonably requested by the Agent in
order to perfect the security interest in the collateral located in the
states of Ohio and Texas granted under such security agreement.
(f) The Agent shall have received a certificate, in all respects
satisfactory to the Agent, of the Secretary of the Borrower (i) attaching a
true and complete copy of the resolutions of its Board of Directors and of
all documents evidencing other necessary corporate action (in form and
substance satisfactory to the Agent) taken by it to authorize the execution
and delivery of this Amendment and the Security Agreement (collectively,
the "AMENDMENT DOCUMENTS"), and the transactions contemplated by the
Amendment Documents, and (ii) setting forth the incumbency of its officer
or officers who may sign the Amendment Documents, including therein a
signature specimen of such officer or officers.
(g) The Agent shall have received (i) a Borrowing Base Certificate,
setting forth Borrowing Base Amount on and as of the Amendment Effective
Date, and (ii) a certificate of the chief financial officer of the Borrower
setting forth the Capitalization Ratio as of the Amendment Effective Date.
(h) The Agent shall have received an intercreditor agreement, dated no
later than the Amendment Effective
-14-
<PAGE> 15
Date, executed by Bank One, acknowledged by the Borrower, and in the form
of Attachment C attached hereto.
(i) The Agent shall have received such other documents, each in form
and substance reasonably satisfactory to the Agent, as the Agent shall
reasonably require in connection with the Amendment Documents.
(j) All legal matters incident to the execution and delivery of the
Amendment Documents shall be reasonably satisfactory to Special Counsel.
(k) The Borrower shall have paid the reasonable fees and disbursements
of Special Counsel which shall have accrued up to the Amendment Effective
Date.
(l) On and as of the Amendment Effective Date, there shall exist no
Default or Event of Default, and all of the representations and warranties
of the Loan Parties contained in the Loan Documents shall be true and
correct with the same effect as though such representations and warranties
had been made on the Amendment Effective Date.
35. Notwithstanding anything in Paragraph 34 to the contrary, Paragraphs 14
and 33 of this Amendment shall not be effective until such date as (a) the Agent
shall have received counterparts of this Amendment executed by Super-Majority
Lenders, and (b) the Agent shall have received evidence satisfactory to it that
the Borrower has disposed of 30% or less of its voting control of, and 30% or
less of its equity interest in, AIRONET Wireless Communications, Inc.
36. On each of the date hereof and the Amendment Effective Date, the
Borrower hereby (a) reaffirms and admits the validity and enforceability of the
Loan Documents and all of its obligations thereunder, (b) agrees and admits that
it has no defenses to or offsets against any such obligation, and (c) represents
and warrants that no Default or Event of Default has occurred and is continuing,
and that each of the representations and warranties made by it in the Agreement
is true and correct with the same effect as though such representation and
warranty had been made on such date.
37. In all other respects, the Loan Documents shall remain in full force
and effect, and no amendment in respect of any term or condition of any Loan
Document contained herein shall be deemed to be an amendment in respect of any
other term or condition contained in any Loan Document.
-15-
<PAGE> 16
38. This Amendment may be executed in any number of counterparts all of
which, taken together, shall constitute one Amendment. In making proof of this
Amendment, it shall only be necessary to produce the counterpart executed and
delivered by the party to be charged.
39. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO
BE PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND ENFORCEABLE IN
ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
-16-
<PAGE> 17
AS EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Amendment to be
executed on its behalf.
TELXON CORPORATION
By: /s/ Kenneth W. Haver
-----------------------------------
Name: Kenneth W. Haver
---------------------------------
Title: Senior Vice President,
--------------------------------
Chief Financial Officer
and Treasurer
THE BANK OF NEW YORK, in its capacity
as a Lender, as the Issuer, as the
Swing Line Lender and as the Agent
By: /s/ Robert J. Joyce
-----------------------------------
Name: Robert J. Joyce
---------------------------------
Title: Vice President
--------------------------------
Each of the following Lenders consents to the execution and
delivery of this Amendment by the Agent and agrees to all of
the terms and conditions hereof:
BANK ONE, AKRON, N.A.
By: /s/ Susan D. Steiger
-----------------------------
Name: Susan D. Steiger
---------------------------
Title: Vice President
--------------------------
COMERICA BANK
By: /s/ Charles L. Weddell
-----------------------------
Name: Charles L. Weddel
---------------------------
Title: Vice President
--------------------------
-17-
<PAGE> 18
THE HUNTINGTON NATIONAL BANK
By: /s/ Timothy M. Ward
-----------------------------
Name: Timothy M. Ward
---------------------------
Title: Assistant Vice President
--------------------------
PNC BANK, N.A.
By: /s/ Bryon A. Pike
-----------------------------
Name: Bryon A. Pike
---------------------------
Title: Vice President
--------------------------
SOCIETE GENERALE
By: /s/ Joseph A. Philbin
-----------------------------
Name: Joseph A. Philbin
---------------------------
Title: Vice President
--------------------------
UNITED STATES NATIONAL BANK OF OREGON
By: /s/ Chris J. Karlin
-----------------------------
Name: Chris J. Karlin
---------------------------
Title: Vice President
--------------------------
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By: /s/ Hiroaki NaKamura
-----------------------------
Name: Hiroaki NaKamura
---------------------------
Title: Joint General Manager
--------------------------
Each of the Guarantors acknowledges the execution and
delivery of this Amendment by the Agent and by signing
below, indicates its reaffirmation of the Guarantor
Obligations (as such term is defined in the Subsidiary
Guaranty):
-18-
<PAGE> 19
AIRONET WIRELESS COMMUNICATIONS, INC.
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Treasurer
-------------------------------
ITRONIX CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Treasurer
-------------------------------
PTC AIRCO, INC.
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Sr. V.P., C.F.O. and Treasurer
-------------------------------
META HOLDING CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Sr. V.P., C.F.O. and Treasurer
-------------------------------
TELETRANSACTION, INC.
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Sr. V.P., C.F.O. and Treasurer
-------------------------------
-19-
<PAGE> 1
Exhibit 10.3.2.b
SECURITY AGREEMENT
------------------
Security Agreement, dated as of August 6, 1996, by and among Telxon
Corporation, a Delaware corporation (the "BORROWER"), and The Bank of New York
("BNY"), as Agent (as the same may be amended, supplemented or otherwise
modified from time to time, this "AGREEMENT").
RECITALS
--------
I. Reference is made to the Credit Agreement, dated as March 8, 1996, by
and among the Borrower, the Lenders party thereto, and BNY, as Issuer, Swing
Line Lender and Agent, as amended by Amendment No. 1 ("AMENDMENT NO. 1"), dated
as of the date hereof, by and among the Borrower and BNY (as the same may be
amended, supplemented or otherwise modified from time to time, the "CREDIT
AGREEMENT").
II. It is a condition precedent to the effectiveness of Amendment No. 1
that the Borrower shall have executed and delivered this Agreement.
Therefore, in consideration of the Recitals, the terms and conditions
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Agent hereby
agree as follows:
1. DEFINED TERMS
-------------
(a) Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement.
(b) When used in this Agreement, the following capitalized terms shall
have the respective meanings ascribed thereto as follows:
"APPLICABLE COLLATERAL": (a) as of the Perfection Date, any Equipment
and Inventory located in the States of Ohio and Texas, and (b) as of any date
thereafter, (i) any Equipment or Inventory located in Ohio and Texas, and (ii)
any Equipment or Inventory located in Ohio or Texas on or after the Perfection
Date.
"COLLATERAL": as defined in Section 2.
<PAGE> 2
"EVENT OF DEFAULT": as defined in Section 5 hereof.
"FINANCING STATEMENTS": the UCC financing statements, copies of which
are annexed hereto as Annex A.
"NYUCC": the UCC as in effect in the State of New York on the date
hereof.
"OBLIGATIONS": all of the obligations and liabilities of the
Borrower under the Loan Documents, in each case whether fixed, contingent, now
existing or hereafter arising, created, assumed, incurred or acquired.
"OFFICE LOCATION": as defined in Section 3(a)(i) hereof.
"PERMITTED LIEN": a Lien permitted by Section 8.2 of the Credit
Agreement.
"UCC": with respect to any jurisdiction, Articles 1, 8 and 9 of the
Uniform Commercial Code as from time to time in effect in such jurisdiction.
(c) When used in this Agreement, the following capitalized terms shall
have the respective meanings ascribed thereto in the NYUCC: "ACCOUNT",
"EQUIPMENT", "INVENTORY", "PROCEEDS", "SECURED PARTY" and "SECURITY INTEREST".
2. GRANT OF SECURITY INTEREST
--------------------------
Subject to Section 7 of this Agreement, to secure the prompt and
complete payment, observance and performance of the Obligations, the Borrower
grants to the Agent, for its benefit and the ratable benefit of the Issuer, the
Swing Line Lender and the Lenders, a Security Interest in and to all of the
Borrower's right, title and interest in and to all Accounts, Equipment,
Inventory and all of the Proceeds (which shall include all dividends,
distributions, accessions and income on and in respect of all of the foregoing
and all other rights and benefits in respect thereof) of all of the foregoing,
whether now owned or existing or hereafter arising or acquired (collectively,
the "Collateral").
3. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to the Agent as follows:
(a) GENERALLY. (i) The Borrower's place of business or, if the
Borrower has more than one place of business, its
-2-
<PAGE> 3
chief executive office, is, and has been continuously for the immediately
preceding 5 month period, located (the "OFFICE LOCATION") at (A) the address set
forth for notices to the Borrower contained in the Credit Agreement, or (B) such
other location in respect of which (1) the Borrower shall have provided the
Agent with at least 30 days' prior written notice thereof, and (2) UCC financing
statements (or amendments thereto), in form and substance reasonably
satisfactory to the Agent, shall have been filed within two months after the
later of (x) the Perfection Date, or (y) such change. The Borrower has not
changed its legal name during the last 6 years.
(ii) All of the information set forth on each of the Schedules
hereto is true, complete and correct.
(iii) On and after the Perfection Date, this Agreement shall
create a continuing "enforceable" Security Interest in the Collateral in favor
of the Agent. There are no Liens upon the Collateral other than Permitted
Liens, if any. Upon the presentation for filing of the Financing Statements at
the respective offices listed thereon together with the appropriate filing fee
therefor, such Security Interest shall be perfected.
(b) ACCOUNTS. All records concerning any Account constituting
Collateral are located at the Office Location, and no such Account (other than
with respect to one or more Accounts which are over 90 days past due and which,
in the aggregate, are not in excess of $500,000) is evidenced by a promissory
note or other instrument.
(c) EQUIPMENT AND INVENTORY. The Borrower has exclusive possession and
control of all Equipment and Inventory constituting the Collateral, all of which
is and has been continuously for the last 5 month period, located at (i) one or
more of the places listed on Schedule I hereto, or (ii) such other places
located within the United States in respect of which (A) the Borrower shall have
provided the Agent with at least 10 days' prior written notice, and (B) UCC
financing statements (or amendments thereto), in form and substance satisfactory
to the Agent, shall have been filed within two months after the later of (1) the
Perfection Date, or (2) such change.
-3-
<PAGE> 4
4. COVENANTS
---------
The Borrower hereby covenants with the Agent as follows:
(a) GENERALLY. (i) The Borrower shall maintain its place of business,
or if it has more than one place of business, its chief executive office, at the
Office Location.
(ii) It shall, at its own expense, (A) promptly after each
request by the Agent cause to be provided to the Agent UCC, federal tax,
judgment and other lien search reports with respect to each applicable public
office where Liens are or may be filed disclosing that there are no Liens of
record in such official's office covering any Collateral or showing the Borrower
as debtor thereunder (other than Permitted Liens), (B) promptly execute and
deliver all certificates, documents, instruments (other than instruments which
represent Accounts which are over 90 days past due and which, in the aggregate,
are not in excess of $500,000), financing and continuation statements and
amendments thereto, notices and other agreements, and (C) take all further
action, in each case that the Agent may reasonably request from time to time, in
order to perfect and protect the Security Interest granted hereby in the
Collateral (other than Equipment and Inventory which is not Applicable
Collateral) or to enable the Agent to exercise and enforce its rights and
remedies hereunder with respect to the Collateral (other than Equipment and
Inventory which is not Applicable Collateral). The Debtor hereby irrevocably
appoints the Secured Party as the Debtor's true and lawful attorney-in-fact, in
the name, place and stead of the Debtor, to perform on behalf of the Debtor any
and all obligations of the Debtor under this Agreement, and the Debtor agrees
that the power of attorney herein granted constitutes a power coupled with an
interest, provided, however, that the Secured Party shall have no obligation to
perform any such obligation and such performance shall be at the sole cost and
expense of the Debtor. If the Debtor fails to comply with any of its obligations
hereunder, the Secured Party may do so in the Debtor's name or in the Secured
Party's name, but at the Debtor's expense, and the Debtor hereby agrees to
reimburse the Secured Party in full for all reasonable expenses, including
reasonable attorney's fees, incurred by the Secured Party in connection
therewith.
(iii) The Borrower shall, at its own expense, furnish to the
Agent such information, reports, statements and schedules with respect to the
Collateral as the Agent may reasonably request from time to time.
-4-
<PAGE> 5
(iv) The Borrower shall, at its own expense, defend the
Collateral against all claims of any kind or nature (other than Permitted Liens,
if any) of all Persons at any time claiming the same or any interest therein
adverse to the interests of the Agent, the Issuer, the Swing Line Lender or any
Lender, and it shall not cause, permit or suffer to exist any Lien upon the
Collateral other than (A) the Lien granted hereby, and (B) Permitted Liens, if
any.
(v) Except as otherwise required by law, the Borrower agrees
that, with respect to the Collateral, neither the Agent, the Issuer, the Swing
Line Lender nor any Lender has any obligation to preserve rights against prior
or third parties.
(vi) The Agent's only duty with respect to the Collateral
delivered to it shall be to use reasonable care in the custody and preservation
of the Collateral, and the Borrower agrees that if the Agent accords the
Collateral substantially the same kind of care as the Agent accords its own
Property, such care shall conclusively be deemed reasonable.
(vii) Anything herein to the contrary notwithstanding, (A) the
Borrower shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (B) the exercise by the Agent of any of its rights hereunder shall not
release the Borrower from any of its duties or obligations under any such
contract or agreement, (C) neither the Agent, the Issuer, the Swing Line Lender
nor any Lender shall have any obligation or liability, including indemnification
obligations, under any such contract or agreement by reason of this Agreement,
nor shall the Agent, the Issuer, the Swing Line Lender or any Lender be
obligated to perform any of the obligations or duties of the Borrower
thereunder, to make any payment, to make any inquiry as to the nature or
sufficiency of any payment received by the Borrower or the sufficiency of any
performance by any party under any such contract or agreement or to take any
action to collect or enforce any claim for payment assigned hereunder, and (D)
neither the Agent, the Issuer, the Swing Line Lender nor any Lender shall be
under any duty to send notices, perform services, exercise any rights of
collection, enforcement, conversion or exchange, vote, pay for insurance, taxes
or other charges or take any action of any kind in connection with the
management of the Collateral.
-5-
<PAGE> 6
(b) ACCOUNTS. Except as otherwise provided in this Section 4(b), the
Borrower shall continue to collect in accordance with its customary practice, at
its own expense, all amounts due or to become due to the Borrower in respect of
the Borrower's Accounts and, prior to the occurrence of an Event of Default, the
Borrower shall have the right to adjust, settle or compromise the amount or
payment of any such Account, all in accordance with its customary practices. In
connection with such collections, the Borrower may take and, at the direction of
the Agent at any time that an Event of Default shall have occurred and be
continuing shall take, such action as the Borrower or the Agent may reasonably
deem necessary or advisable to enforce collection of such Accounts.
(c) EQUIPMENT AND INVENTORY. (i) The Borrower shall keep the Equipment
and Inventory constituting the Collateral at the places listed on Schedule I
hereto, and such other places located within the United States in respect of
which (A) the Borrower shall have provided the Agent with at least 10 days'
prior written notice, and (B) UCC financing statements (or amendments thereto),
in form and substance satisfactory to the Agent, shall have been filed within
two months after the later of (1) the Perfection Date, or (2) such change.
(ii) The Borrower shall promptly furnish to the Agent a statement
respecting any material loss or damage to any of the Equipment or Inventory
constituting the Collateral with an aggregate fair market value exceeding
$500,000 as a result of a single occurrence except to the extent that such loss
or damage shall be insured pursuant to policies required to be maintained
pursuant to the Credit Agreement.
5. EVENTS OF DEFAULT
-----------------
Each of the following shall constitute an "EVENT OF DEFAULT":
(a) If the Borrower shall fail to observe or perform any term,
covenant or agreement contained in this Agreement; or
(b) The occurrence and continuance of an Event of Default under, and
as such term is defined in, the Credit Agreement.
-6-
<PAGE> 7
6. REMEDIES
--------
(a) Upon the occurrence of an Event of Default or at any time
thereafter during the continuance thereof, the Agent may:
(i) exercise any and all rights and remedies (A) granted to a
Secured Party by the UCC in effect in the State of New York or
otherwise allowed at law, and (B) otherwise provided by this
Agreement, and
(ii) dispose of the Collateral as it may choose, so long as every
aspect of the disposition including the method, manner, time, place
and terms are commercially reasonable, and the Borrower agrees that,
without limitation, the following are each commercially reasonable:
(A) the Agent shall not in any event be required to give more than 14
days' prior notice to the Borrower of any such disposition, (B) any
place within the City of New York or the counties of Nassau, Suffolk,
and Westchester in New York State may be designated by the Agent for
disposition, and (C) the Agent may adjourn any public or private sale
from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the
time and place to which it was so adjourned.
(b) To the extent permitted by law, the Borrower hereby expressly
waives and covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar laws, now or at any time hereafter in force, which might
delay, prevent or otherwise impede the performance or enforcement of this
Agreement.
7. EFFECTIVENESS OF SECURITY INTEREST
----------------------------------
Notwithstanding anything herein to the contrary, Section 2 of this
Agreement shall not be effective until the Perfection Date.
8. NOTICES
-------
All notices and other communications provided for or otherwise
required hereunder or in connection herewith shall be given in the manner and to
the addresses set forth in Section 11.2 of the Credit Agreement.
-7-
<PAGE> 8
9. RELATIONSHIP TO CREDIT AGREEMENT
--------------------------------
This Agreement is the Security Agreement under, and as such term is
defined in, the Credit Agreement, and is subject to, and should be construed in
accordance with, the provisions thereof.
10. FINANCING STATEMENTS
--------------------
The Agent shall not file the Financing Statements prior to the
Perfection Date.
11. GOVERNING LAW
-------------
This Agreement and the rights and obligations of the parties hereto
shall be governed by, and construed and interpreted in accordance with, the laws
of the State of New York, without regard to principles of conflict of laws.
-8-
<PAGE> 9
IN EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Agreement to be
duly executed on its behalf.
TELXON CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Senior Vice President,
Chief Financial Officer
and Treasurer
THE BANK OF NEW YORK, as Agent
By: /s/ Robert J. Joyce
----------------------------------
Name: Robert J. Joyce
--------------------------------
Title: Vice President
-------------------------------
-9-
<PAGE> 1
Exhibit 10.3.8
BANK ONE, AKRON, NA
BUSINESS PURPOSE REVOLVING PROMISSORY NOTE
(SWING LINE)
$20,000,000.00 Akron, Ohio
August 6, 1996
FOR VALUE RECEIVED, the undersigned, TELXON CORPORATION, an Ohio
corporation (the "Borrower"), hereby promises to pay to the order of BANK ONE,
AKRON, NA (hereinafter called the "Bank," which term shall include any holder
hereof), at such place as the Bank may designate or, in the absence of such
designation, at any of the Bank's offices, the sum of Twenty Million and
No/100ths Dollars ($20,000,000.00) or so much thereof as shall have been
advanced by the Bank at any time and not hereafter repaid, together with
interest calculated daily on the current outstanding principal balance at a
variable rate at the time of each request for a money advance under this Note
equal to the "Money Market rate", as determined solely by Bank, plus the
"Applicable Margin" as defined with respect to Eurodollar Advances in Section 1
of the Agreement referred to below. Interest shall be due monthly upon this Note
and shall be payable for each month on the fifth day of the next subsequent
month commencing on the fifth day of the month next subsequent to the date of
this Note. If not sooner paid, this Note shall mature and all principal,
interest and unpaid expenses shall be due and payable in full on August 5, 1997.
Bank shall have the right to assess a late payment processing fee in the amount
of Fifty and no/100ths Dollars ($50.00) or five percent (5%) of the scheduled
payment in the event of default in payment that remains uncured for a period of
at least ten (10) days. The proceeds of the loan evidenced hereby may be
advanced, repaid and re-advanced, in partial amounts, until maturity. Each money
advance may be made to the Borrower during the term hereof, in the Bank's sole
discretion, upon receipt by the Bank of the Borrower's request therefor, which
request shall be made in accordance with reasonable procedures which Bank shall
from time to time prescribe. Telephonic requests received by appropriate Bank
representatives prior to 3:00 p.m. local time (Akron, Ohio) shall be funded the
same business day. Telephonic requests received after 3:00 p.m. local time may
not be funded until the next subsequent business day. The Bank shall be entitled
to rely on any oral or telephonic communication requesting a money advance
and/or providing disbursement instructions hereunder, which shall be received by
it in good faith from anyone reasonably believed by the Bank to be the Borrower,
or the Borrower's authorized agent. The Borrower agrees that all money advances
made by the Bank, and interest thereon, will be evidenced by entries made by the
Bank to a loan account through its electronic data processing system and/or
internal memoranda maintained by the Bank. The Borrower further agrees that the
sum or sums shown on loan account from the Bank's electronic data processing
system and/or such memoranda shall be conclusively binding evidence of the
amount of the principal sum and of the amount of any accrued interest, except as
to manifest errors.
There shall be no penalty for prepayment. All payments shall be applied in
the following order (i) fees and expenses (including reasonable attorney fees)
incurred by Bank in connection with the enforcement of this Note, (ii) accrued
but unpaid interest, and last (iii) principal.
<PAGE> 2
Borrower is a party to a Credit Agreement, dated March 8, 1996, as amended
by Amendment No. 1 dated as of August 6, 1996, with The Bank of New York ("BNY")
acting as agent, issuer and swing line lender. Such amended agreement, as the
same may be further amended, modified or replaced from time to time, is
hereafter referred to as the "Agreement". Borrower agrees that so long as this
Note remains in effect and until paid in full, Borrower shall neither create nor
permit any lien, mortgage, deed of trust, or security interest in its property
or assets other than those granted or permitted (including under Section 8.2
thereof) under the terms of the Agreement. Borrower further agrees that a
default under the Agreement, including but not limited to a default under the
affirmative or negative covenants under the Agreement (whether the default is
declared or undeclared, waived or not waived, by the lender under the
Agreement), shall, at Bank's option, constitute a default under this Note.
Borrower shall not amend or modify the material terms of the Agreement, without
the Bank's consent. Borrower shall notify Bank in writing within twenty-four
hours of its receipt of notice of a claimed default under the Agreement. The
terms and conditions of the Agreement with respect to events of defaults,
notices and cure rights and remedies are incorporated herein by reference to the
extent applicable.
Upon the occurrence of any one or more defaults under this Note, the holder
hereof, at its option, may declare the entire unpaid balance of principal and
interest on this Note to be immediately due and payable, without notice or
demand, and may, at its option, cumulatively exercise any other right or remedy
provided at law or equity. Failure to exercise any such option shall not
constitute a waiver of the right to exercise the same in the event of any
subsequent default. Upon Bank's declaration that the entire unpaid balance is
immediately due, the unpaid balance of principal shall bear interest at 2% plus
the rate otherwise applicable to this Note.
All of the parties hereto, including the Borrower, and any endorser,
surety, or guarantor, hereby severally waive presentment, notice of dishonor,
protest, notice of protest, and diligence in bringing suit against any party
hereto, and consent that, without discharging any of them, the time of payment
may be extended an unlimited number of times before or after maturity by the
Bank without notice to them.
The obligations evidenced hereby may from time to time be evidenced by
amendments hereto or another note or note given in substitution, renewal or
extension hereof.
The obligations of the Borrower under this Note shall constitute
"Designated Senior Indebtedness" under, and as such term is defined and used as
of the date hereof in, the Indenture, dated as of December 1, 1995, between the
Borrower and Bank One Trust Company, N.A., as Trustee, as the same may be
amended, supplemented or otherwise modified from time to time, with respect to
the $82,500,000 in issued and outstanding principal amount of the Borrower's
5-3/4% Convertible Subordinated Notes due 2003.
2
<PAGE> 3
This Note evidences the Credit Line under, and as such term is defined in,
the Intercreditor Agreement by and between Bank and BNY, as acknowledged by
Borrower, and is subject to, and should be construed in conjunction with, the
provisions thereof.
If any terms or provisions of this Note shall be deemed unenforceable, the
enforceability of the remaining terms and provisions shall not be affected. This
Note shall be governed by and construed in accordance with the laws of the State
of Ohio.
BORROWER:
TELXON CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------------
Kenneth W. Haver, Senior Vice President,
Chief Financial Officer and Treasurer
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Exhibit 10.3.8.a
BANK ONE SECURITY AGREEMENT
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Security Agreement, dated as of August 6, 1996, by and among Telxon
Corporation, a Delaware corporation (the "BORROWER"), and Bank One, Akron, NA
("BANK"), (as the same may be amended, supplemented or otherwise modified from
time to time, this "AGREEMENT").
RECITALS
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I. Reference is made to the Credit Agreement, dated as March 8, 1996, by
and among the Borrower, the Lenders party thereto (one of which is the Bank),
and The Bank of New York ("BNY"), as Issuer, Swing Line Lender and Agent, as
amended by Amendment No. 1 ("AMENDMENT NO. 1"), dated as of the date hereof, by
and among the Borrower and BNY (as the same may be amended, supplemented or
otherwise modified from time to time, the "CREDIT AGREEMENT").
II. Reference is further made to the Intercreditor Agreement, dated as of
August 6, 1996, by and between Bank and BNY, as Agent, as acknowledged by
Borrower (as the same may be amended, supplemented or otherwise modified from
time to time, the "INTERCREDITOR AGREEMENT").
III. As of the date hereof, Bank has extended to Borrower a certain Twenty
Million Dollar ($20,000,000.00) revolving line of credit (as the same may be
amended, supplemented or otherwise modified from time to time, the "SWING
LINE"), which is evidenced by a certain Business Purpose Revolving Promissory
Note dated August 6, 1996 and executed by Borrower (as the same may be amended,
supplemented or otherwise modified from time to time, the "SWING LINE NOTE").
Therefore, in consideration of the Recitals, the terms and conditions
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Borrower and the Bank hereby
agree as follows:
A. DEFINED TERMS
-------------
(a) Capitalized terms used herein which are not otherwise defined
herein shall have the respective meanings ascribed thereto in the Credit
Agreement, Intercreditor Agreement, and/or Swing Line Note, as appropriate.
(b) When used in this Agreement, the following capitalized terms shall
have the respective meanings ascribed thereto as follows:
"APPLICABLE COLLATERAL": (a) as of the Perfection Date, any Equipment
and Inventory located in the States of Ohio and Texas, and (b) as of any date
thereafter, (i) any Equipment or
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Inventory located in Ohio and Texas, and (ii) any Equipment or Inventory located
in Ohio or Texas on or after the Perfection Date.
"COLLATERAL": as defined in Section B.
"EVENT OF DEFAULT": as defined in Section E hereof.
"FINANCING STATEMENTS": the UCC financing statements, copies of which
are annexed hereto as Annex A.
"OUCC": the UCC as in effect in the State of Ohio on the date hereof.
"OBLIGATIONS": all of the obligations and liabilities of the Borrower
under the Swing Line Note, whether fixed, contingent, now existing or hereafter
arising, created, assumed, incurred or acquired.
"OFFICE LOCATION": as defined in Section C(1)(a) hereof.
"PERMITTED LIEN": a Lien permitted by Section 8.2 of the Credit
Agreement.
"UCC": with respect to any jurisdiction, Articles 1, 8 and 9 of the
Uniform Commercial Code as from time to time in effect in such jurisdiction.
(c) When used in this Agreement, the following capitalized terms shall
have the respective meanings ascribed thereto in the OUCC: "ACCOUNT",
"EQUIPMENT", "INVENTORY", "PROCEEDS", "SECURED PARTY" and "SECURITY INTEREST".
B. GRANT OF SECURITY INTEREST
--------------------------
Subject to Section G of this Agreement, to secure the prompt and
complete payment, observance and performance of the Obligations, the Borrower
grants to the Bank a Security Interest in and to all of the Borrower's right,
title and interest in and to all Accounts, Equipment, Inventory and all of the
Proceeds (which shall include all dividends, distributions, accessions and
income on and in respect of all of the foregoing and all other rights and
benefits in respect thereof) of all of the foregoing, whether now owned or
existing or hereafter arising or acquired (collectively, the "COLLATERAL").
C. REPRESENTATIONS AND WARRANTIES
------------------------------
The Borrower hereby represents and warrants to Bank as follows:
1. GENERALLY. a. The Borrower's place of business or, if the Borrower
has more than one place of business, its chief executive office, is, and has
been continuously for the immediately
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preceding 5 month period, located (the "OFFICE LOCATION") at (A) the address set
forth for notices to the Borrower contained in the Credit Agreement, or (B) such
other location in respect of which (1) the Borrower shall have provided the Bank
with at least 30 days' prior written notice thereof, and (2) UCC financing
statements (or amendments thereto), in form and substance reasonably
satisfactory to the Bank, shall have been filed within two months after the
later of (x) the Perfection Date, or (y) such change. The Borrower has not
changed its legal name during the last 6 years.
b. All of the information set forth on each of the Schedules
hereto is true, complete and correct.
c. On and after the Perfection Date, this Agreement shall create
a continuing "enforceable" Security Interest in the Collateral in favor of the
Bank. There are no Liens upon the Collateral other than Permitted Liens, if any.
Upon the presentation for filing of the Financing Statements at the respective
offices listed thereon together with the appropriate filing fee therefor, such
Security Interest shall be perfected.
2. ACCOUNTS. All records concerning any Account constituting
Collateral are located at the Office Location, and no such Account (other than
with respect to one or more Accounts which are over 90 days past due and which,
in the aggregate, are not in excess of $500,000) is evidenced by a promissory
note or other instrument.
3. EQUIPMENT AND INVENTORY. The Borrower has exclusive possession and
control of all Equipment and Inventory constituting the Collateral, all of which
is and has been continuously for the last 5 month period, located at (i) one or
more of the places listed on Schedule I hereto, or (ii) such other places
located within the United States in respect of which (A) the Borrower shall have
provided the Agent with at least 10 days' prior written notice, and (B) UCC
financing statements (or amendments thereto), in form and substance satisfactory
to the Bank, shall have been filed within two months after the later of (1) the
Perfection Date, or (2) such change.
D. COVENANTS
---------
The Borrower hereby covenants with the Bank as follows:
1. GENERALLY. a. The Borrower shall maintain its place of business, or
if it has more than one place of business, its chief executive office, at the
Office Location.
b. It shall, at its own expense, (A) promptly after each request
by the Bank cause to be provided to the Bank UCC, federal tax, judgment and
other lien search reports with respect to each applicable public office where
Liens are or may be
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filed disclosing that there are no Liens of record in such official's office
covering any Collateral or showing the Borrower as debtor thereunder (other than
Permitted Liens), (B) promptly execute and deliver all certificates, documents,
instruments (other than instruments which represent Accounts which are over 90
days past due and which, in the aggregate, are not in excess of $500,000),
financing and continuation statements and amendments thereto, notices and other
agreements, and (C) take all further action, in each case that the Bank may
reasonably request from time to time, in order to perfect and protect the
Security Interest granted hereby in the Collateral (other than Equipment and
Inventory which is not Applicable Collateral) or to enable the Bank to exercise
and enforce its rights and remedies hereunder with respect to the Collateral
(other than Equipment and Inventory which is not Applicable Collateral). The
Borrower hereby irrevocably appoints the Bank as the Borrower's true and lawful
attorney-in-fact, in the name, place and stead of the Borrower, to perform on
behalf of the Borrower any and all obligations of the Borrower under this
Agreement, and the Borrower agrees that the power of attorney herein granted
constitutes a power coupled with an interest, provided, however, that the Bank
shall have no obligation to perform any such obligation and such performance
shall be at the sole cost and expense of the Borrower. If the Borrower fails to
comply with any of its obligations hereunder, the Bank may do so in the
Borrower's name or in the Bank's name, but at the Borrower's expense, and the
Borrower hereby agrees to reimburse the Bank in full for all reasonable
expenses, including reasonable attorney's fees, incurred by the Bank in
connection therewith.
c. The Borrower shall, at its own expense, furnish to the Bank
such information, reports, statements and schedules with respect to the
Collateral as the Bank may reasonably request from time to time.
d. The Borrower shall, at its own expense, defend the Collateral
against all claims of any kind or nature (other than Permitted Liens, if any) of
all Persons at any time claiming the same or any interest therein adverse to the
interests of the Bank, and it shall not cause, permit or suffer to exist any
Lien upon the Collateral other than (A) the Lien granted hereby, and (B)
Permitted Liens, if any.
e. Except as otherwise required by law, the Borrower agrees that,
with respect to the Collateral, the Bank has no obligation to preserve rights
against prior or third parties.
f. The Bank's only duty with respect to the Collateral delivered
to it shall be to use reasonable care in the custody and preservation of the
Collateral, and the Borrower agrees that if the Bank accords the Collateral
substantially the same kind of care as the Bank accords its own Property, such
care shall conclusively be deemed reasonable.
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g. Anything herein to the contrary notwithstanding, (A) the
Borrower shall remain liable under the contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations thereunder to the same extent as if this Agreement had not been
executed, (B) the exercise by the Bank of any of its rights hereunder shall not
release the Borrower from any of its duties or obligations under any such
contract or agreement, (C) the Bank shall not have any obligation or liability,
including indemnification obligations, under any such contract or agreement by
reason of this Agreement, nor shall the Bank be obligated to perform any of the
obligations or duties of the Borrower thereunder, to make any payment, to make
any inquiry as to the nature or sufficiency of any payment received by the
Borrower or the sufficiency of any performance by any party under any such
contract or agreement or to take any action to collect or enforce any claim for
payment assigned hereunder, and (D) the Bank shall not be under any duty to send
notices, perform services, exercise any rights of collection, enforcement,
conversion or exchange, vote, pay for insurance, taxes or other charges or take
any action of any kind in connection with the management of the Collateral.
2. ACCOUNTS. Except as otherwise provided in this Section D(2), the
Borrower shall continue to collect in accordance with its customary practice, at
its own expense, all amounts due or to become due to the Borrower in respect of
the Borrower's Accounts and, prior to the occurrence of an Event of Default, the
Borrower shall have the right to adjust, settle or compromise the amount or
payment of any such Account, all in accordance with its customary practices. In
connection with such collections, the Borrower may take and, at the direction of
the Bank at any time that an Event of Default shall have occurred and be
continuing shall take, such action as the Borrower or the Bank may reasonably
deem necessary or advisable to enforce collection of such Accounts.
3. EQUIPMENT AND INVENTORY. (i) The Borrower shall keep the Equipment
and Inventory constituting the Collateral at the places listed on Schedule I
hereto, and such other places located within the United States in respect of
which (A) the Borrower shall have provided the Bank with at least 10 days' prior
written notice, and (B) UCC financing statements (or amendments thereto), in
form and substance satisfactory to the Bank, shall have been filed within two
months after the later of (1) the Perfection Date, or (2) such change.
(ii) The Borrower shall promptly furnish to the Bank a statement
respecting any material loss or damage to any of the Equipment or Inventory
constituting the Collateral with an aggregate fair market value exceeding
$500,000 as a result of a single occurrence except to the extent that such loss
or damage shall be insured pursuant to policies required to be maintained
pursuant to the Credit Agreement.
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E. EVENTS OF DEFAULT
-----------------
Each of the following shall constitute an "EVENT OF DEFAULT":
1. If the Borrower shall fail to observe or perform any term, covenant
or agreement contained in this Agreement; or
2. If the Borrower shall fail to pay any amount when due under the
Swing Line Note; or
3. The occurrence and continuance of an Event of Default under, and as
such term is defined in, the Credit Agreement.
F. REMEDIES
--------
1. Upon the occurrence of an Event of Default or at any time
thereafter during the continuance thereof, the Bank may:
a. exercise any and all rights and remedies (A) granted to a
Secured Party by the UCC in effect in the State of Ohio or otherwise
allowed at law, and (B) otherwise provided by this Agreement, and
b. dispose of the Collateral as it may choose, so long as every
aspect of the disposition including the method, manner, time, place and
terms are commercially reasonable, and the Borrower agrees that, without
limitation, the following are each commercially reasonable: (A) the Bank
shall not in any event be required to give more than 14 days' prior notice
to the Borrower of any such disposition, (B) any place within the City of
Akron, Ohio or the counties of Summit and/or Cuyahoga in Ohio may be
designated by the Bank for disposition, and (C) the Bank may adjourn any
public or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
2. To the extent permitted by law, the Borrower hereby expressly
waives and covenants not to assert any appraisement, valuation, stay, extension,
redemption or similar laws, now or at any time hereafter in force, which might
delay, prevent or otherwise impede the performance or enforcement of this
Agreement.
G. EFFECTIVENESS OF SECURITY INTEREST
----------------------------------
Notwithstanding anything herein to the contrary, Section B of this
Agreement shall not be effective until the Perfection Date.
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H. NOTICES
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All notices, requests and other communications required under this
Security Agreement, or required by law, shall be in writing and shall be deemed
given when and if (a) personally delivered, (b) delivered by overnight private
courier service which in the ordinary course of its business maintains a record
of receipt of each of its deliveries, or (c) when delivered by United States
mail, postage prepaid, certified or registered, return receipt requested,
addressed to the parties hereto and other persons listed below, at their
respective addresses set forth below or as they may hereafter specify by written
notice delivered in accordance herewith:
if to Bank: Bank One, Akron, NA
50 South Main Street
Akron, Ohio 44309-3547
Attn: Susan Steiger
if to Borrower: Telxon Corporation
3330 West Market Street
P.O. Box 5582
Akron, Ohio 44334-0582
Attn: Legal Department
I. RELATIONSHIP TO INTERCREDITOR AGREEMENT
---------------------------------------
This Agreement is the Bank One Security Agreement under, and as such
term is defined in, the Intercreditor Agreement, and is subject to, and should
be construed in conjunction with, the provisions thereof.
J. FINANCING STATEMENTS
--------------------
The Bank shall not file the Financing Statements prior to the
Perfection Date.
K. GOVERNING LAW
-------------
This Agreement and the rights and obligations of the parties
hereto shall be governed by, and construed and interpreted in accordance with,
the laws of the State of Ohio, without regard to principles of conflict of laws.
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IN EVIDENCE of the agreement by the parties hereto to the terms and
conditions herein contained, each such party has caused this Agreement to be
duly executed on its behalf.
TELXON CORPORATION
By: /s/ Kenneth W. Haver
----------------------------------
Name: Kenneth W. Haver
--------------------------------
Title: Senior Vice President, Chief
-------------------------------
Financial Officer and Treasurer
BANK ONE, AKRON, NA
By: /s/ Susan D. Steiger
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Name: Susan D. Steiger
--------------------------------
Title: Vice President
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