<PAGE> 1
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 30, 1999
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) 664-1000
Not applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE> 2
ITEM 5. OTHER EVENTS.
On August 30, 1999, Telxon Corporation (the "Company" or the
"Registrant") issued a press release announcing the closing of its new $100
million senior secured credit facility with Foothill Capital Corporation, with
which it has refinanced the indebtedness owed under its predecessor revolving
credit facility and separate business purpose revolving promissory note. A copy
of the press release discussing the above and certain related matters, as well
as of the Loan and Security Agreement relating to the new credit facility
discussed in the press release, are included as exhibits to this Current Report
on Form 8-K and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
10.3.3 Loan and Security Agreement, dated as of
August 26, 1999, by and between the
Registrant, the Lenders party thereto, and
Foothill Capital Corporation, as Agent.
99 Press Release issued by the Registrant on
August 30, 1999.
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: September 3, 1999 By: /s/ Woody M. McGee
------------------
Woody M. McGee
Vice President,
Chief Financial Officer
<PAGE> 3
INDEX TO EXHIBITS
10.3.3 Loan and Security Agreement, dated as of
August 26, 1999, by and between the
Registrant, the Lenders party thereto, and
Foothill Capital Corporation, as Agent.
99 Press Release issued by the Registrant on
August 30, 1999.
<PAGE> 1
Exhibit 10.3.3
--------------
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT (THIS "AGREEMENT"), is
entered into as of August 26, 1999, among the financial institutions listed on
the signature pages hereof (such financial institutions, together with their
respective successors and assigns, are referred to hereinafter each individually
as a "Lender" and collectively as the "Lenders"), FOOTHILL CAPITAL CORPORATION,
a California corporation, as agent for the Lenders ("Agent"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles,
California 90025-3333 and TELXON CORPORATION, a Delaware corporation
("Borrower"), with its chief executive office located at 3330 West Market
Street, Akron, Ohio 44333.
The parties agree as follows:
DEFINITIONS AND CONSTRUCTION.
1.1. DEFINITIONS.
As used in this Agreement, the following terms shall have the
following definitions:
"30 DAY GOODS" shall mean, at any time, Inventory located in
Canada that has not been fully paid for by a Company (other than Inventory
purchased from another Company) and in respect of which less than thirty (30)
days has expired since the date of delivery of such Inventory to such Company.
"ACCOUNT DEBTOR" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"ACCOUNTS" means, with respect to a Company, all currently
existing and hereafter arising accounts, contract rights and all other forms of
obligations owing to such Company arising out of the sale or lease of goods or
the rendition of services by such Company, irrespective of whether earned by
performance, and any and all credit insurance, guaranties, or security therefor.
"ADJUSTED EURODOLLAR RATE" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate per annum (rounded
upwards, if necessary, to the next 1/16%) determined by dividing (a) the
Eurodollar Rate for such Interest Period by (b) a percentage equal to (i) 100%
minus (ii) the Reserve Percentage. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
"ADVANCES" has the meaning set forth in SECTION 2.1(a).
"AFFILIATE" means, as applied to any Person, any other Person
who, directly or indirectly, controls, is controlled by, is under common control
with or is a director or officer of such Person. For purposes of this
definition, "control" means the possession, directly or
<PAGE> 2
indirectly, of the power to vote 5% or more of the securities having ordinary
voting power for the election of directors or the direct or indirect power to
direct the management and policies of a Person.
"AGENT" means Foothill, solely in its capacity as agent for
the Lenders, and shall include any successor agent.
"AGENT ACCOUNT" has the meaning set forth in SECTION 2.7.
"AGENT ADVANCES" has the meaning set forth in SECTION 2.1(g).
"AGENT'S LIENS" has the meaning set forth in SECTION 4.1.
"AGENT-RELATED PERSONS" means Agent and any successor agent,
together with their respective Affiliates, and the officers, directors,
employees, counsel, agents, and attorneys-in-fact of such Persons and their
Affiliates.
"AGREEMENT" has the meaning set forth in the preamble hereto.
"AIRONET" means Aironet Wireless Communications, Inc., a
Delaware corporation.
"APPLICABLE REVOLVING MARGIN" means, with respect to any
portion of the Revolving Loans constituting a Eurodollar Rate Loan, a percentage
equal to 2.75% and with respect to any portion of Revolving Loans constituting
Reference Rate Loans, a percentage equal to 0.50%; PROVIDED, that the Applicable
Revolving Margin will be adjusted on the tenth day after receipt by Agent of
Borrower's audited financial statements for its fiscal year ending March 31,
2000 based on EBITDA as calculated for such fiscal year and thereafter on the
tenth day after receipt by Agent of Borrower's financial statements for the most
recently ended calendar quarter based on EBITDA as calculated for the 12 month
period ending on the day of such calendar quarter, as follows:
<TABLE>
<CAPTION>
Reference Rate Eurodollar Rate
EBITDA Loans Loans
------ ----- -----
<S> <C> <C>
Less than 90% of projected EBITDA for the 0.75% 3.00%
applicable period as set forth on Schedule A-1
90% to and including 110% of projected EBITDA for 0.50% 2.75%
the applicable period as set forth on Schedule A-1
More than 110% of projected EBITDA for the 0.25% 2.50%
applicable period as set forth on Schedule A-1
</TABLE>
-2-
<PAGE> 3
If Borrower fails to deliver to Agent its financial statements within the time
required under SECTION 6.3, the Applicable Revolving Margin shall conclusively
be presumed to be equal to the highest Applicable Revolving Margin specified in
the above chart until delivery of such financial statements. In addition, if the
audited financial statements of Borrower for any fiscal year show that, in
accordance with the chart set forth above, a higher or lower Applicable
Revolving Margin was applicable, the Applicable Revolving Margin shall be
retroactively adjusted to such actual Applicable Revolving Margin.
"ASSIGNEE" has the meaning set forth in SECTION 15.1.
"ASSIGNMENT AND ACCEPTANCE" has the meaning set forth in
SECTION 15.1 and shall be in the form of EXHIBIT A-1 attached hereto or in such
other form as is acceptable to Agent.
"AUTHORIZED PERSON" means any officer or other employee of
Borrower.
"AVAILABILITY" means the amount that Borrower is entitled to
borrow as Advances under SECTION 2.1, such amount being the amount by which the
maximum amount available to be borrowed under Section 2.1 exceeds the principal
amount of Advances (including Agent Advances and Foothill Loans) then
outstanding (including any amounts that the Lender Group may have paid for the
account of Borrower pursuant to any of the Loan Documents and that have not been
reimbursed by Borrower).
"AVERAGE UNUSED PORTION OF MAXIMUM REVOLVING AMOUNT" means, as
of any date of determination, (a) the Maximum Revolving Amount, LESS (b) the sum
of (i) the average Daily Balance of Advances that were outstanding during the
immediately preceding month, PLUS (ii) the average Daily Balance of the Letter
of Credit Usage during the immediately preceding month.
"BANKRUPTCY CODE" means the United States Bankruptcy Code (11
U.S.C. Section 101 ET SEQ.), as amended, and any successor statute.
"BENEFIT PLAN" means a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which Borrower, any Subsidiary of Borrower, or any
ERISA Affiliate has been an "employer" (as defined in Section 3(5) of ERISA)
within the past six years.
"BORROWER" has the meaning set forth in the preamble to this
Agreement.
"BORROWER'S COLLATERAL" means all of the following:
(a) the Accounts of Borrower,
(b) the Company Books of Borrower,
(c) the Equipment of Borrower,
(d) the General Intangibles of Borrower,
-3-
<PAGE> 4
(e) the Inventory of Borrower,
(f) the Negotiable Collateral of Borrower,
(g) the Real Property Collateral of Borrower,
(h) any money, or other assets of Borrower that now or
hereafter come into the possession, custody, or control of any member of the
Lender Group, and
(i) the proceeds and products, whether tangible or intangible,
of any of the foregoing, including proceeds of insurance covering any or all of
the Collateral, and any and all Accounts of Borrower, the Company Books of
Borrower, Equipment of Borrower, General Intangibles of Borrower, Inventory of
Borrower, Negotiable Collateral of Borrower, Real Property Collateral of
Borrower, money, deposit accounts, or other tangible or intangible property
resulting from the sale, exchange, collection, or other disposition of any of
the foregoing, or any portion thereof or interest therein, and the proceeds
thereof.
"BORROWING" means a borrowing hereunder consisting of Advances
or Term Loans made on the same day by the Lenders to Borrower, or by Foothill in
the case of a Foothill Loan, or by Agent in the case of an Agent Advance.
"BORROWING BASE" has the meaning set forth in SECTION 2.1(a).
"BORROWING BASE COMPANY" means each of Borrower, Telxon Canada
and Telxon U.K.; PROVIDED, that neither Telxon Canada nor Telxon U.K. shall be a
Borrowing Base Company until Agent so notifies Borrower and the Revolving/Term
Lenders pursuant to SECTION 2.1(M) that Telxon Canada and/or Telxon U.K. will be
Borrowing Base Companies.
"BRIDGE COMMITMENT" means, at any time with respect to a
Lender, the principal amount set forth beside such Lender's name under the
heading "Bridge Commitment" on SCHEDULE C-1 attached hereto or on the signature
page of the Assignment and Acceptance pursuant to which such Lender became a
Lender hereunder in accordance with the provisions of SECTION 15.1, as such
Bridge Commitment may be adjusted from time to time in accordance with the
provisions of SECTION 15.1, and "Bridge Commitments" means, collectively, the
aggregate amount of the Bridge Commitments of all of the Lenders.
"BRIDGE LENDERS" means a Lender with a Bridge Commitment.
"BRIDGE LOAN" has the meaning set forth in SECTION 2.3(c).
"BUSINESS DAY" means any day that is not a Saturday, Sunday,
or other day on which national banks are authorized or required to close, except
that if a determination of a Business Day shall relate to any Eurodollar Rate
Loans, the term Business Day shall also exclude any day on which banks are
closed for dealings in dollar deposits in the London interbank market or other
applicable Eurodollar Rate market.
-4-
<PAGE> 5
"CHANGE OF CONTROL" shall be deemed to have occurred at such
time as a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than 15% of the total voting power of all classes of stock
then outstanding of Borrower entitled to vote in the election of directors.
"CLOSING DATE" means the date of the first to occur of the
making of the initial Advance, the issuance of the initial Letter of Credit or
the funding of the Term Loans.
"CODE" means the Illinois Uniform Commercial Code.
"COLLATERAL" means Borrower's Collateral and any other
property or interests in property of a Person (including, without limitation, a
Company) which is subject to Agent's Lien and secures the Obligations or a
guaranty of the Obligations.
"COLLATERAL ACCESS AGREEMENT" means a landlord waiver or
consent, mortgagee waiver or consent, bailee letter, or a similar
acknowledgement agreement of any warehouseman, processor, lessor, consignee, or
other Person in possession of, having a Lien upon, or having rights or interests
in the Equipment of a Company or Inventory of a Company, in each case, in form
and substance satisfactory to Agent.
"COLLECTIONS" means all cash, checks, notes, instruments, and
other items of payment (including, insurance proceeds, proceeds of cash sales,
rental proceeds, and tax refunds).
"COMMITMENT" means, at any time with respect to a Lender, the
sum of such Lender's Bridge Commitment and Revolving/Term Commitment, and
"COMMITMENTS" means, collectively, the aggregate amount of the Commitments of
all Lenders.
"COMMITMENT LETTER" means the Commitment Letter dated as of
August 3, 1999 between Borrower and Foothill pertaining to a $100,000,000 credit
facility.
"COMPANY" means each of Borrower, Telxon Canada, Telxon U.K.
and PenRight!.
"COMPANY BOOKS" means, with respect to a Company, all of such
Company's books and records including: ledgers; records indicating, summarizing,
or evidencing such Company's properties or assets (including the Collateral of
such Company) or liabilities; all information relating to such Company's
business operations or financial condition; and all computer programs, disk or
tape files, printouts, runs, or other computer prepared information.
"COMPLIANCE CERTIFICATE" means a certificate substantially in
the form of EXHIBIT C-1 and delivered by the chief accounting officer of
Borrower to Agent.
-5-
<PAGE> 6
"CONTROL AGREEMENT" means a control agreement, in form and
substance reasonably satisfactory to Agent, between a Company, Agent, and the
applicable securities intermediary with respect to the applicable Securities
Account and related Investment Property.
"CURRENCY EXCHANGE RATE" shall mean, with respect to a
currency, the rate determined by Agent (based on the rate set forth in the WALL
STREET JOURNAL on the Friday on or before the date of determination or based on
such other method and time of determination as Agent shall select in its sole
discretion) to be the exchange rate for the purchase of Dollars with such
currency.
"DAILY BALANCE" means the amount of an Obligation owed at the
end of a given day.
"DEFAULT" means an event, condition, or default that, with the
giving of notice, the passage of time, or both, would be an Event of Default.
"DEFAULTING LENDER" means any Lender that fails to make any
Advance or Term Loan that it is required to make hereunder on any Funding Date
and that has not cured such failure by making such Advance or Term Loan within 1
Business Day after written demand upon it by Agent to do so.
"DEFAULTING LENDERS RATE" means the Reference Rate for the
first 3 days from and after the date the relevant payment is due and,
thereafter, at the interest rate then applicable to Advances that are Reference
Rate Loans.
"DESIGNATED ACCOUNT" means account number 611 911 439 of
Borrower maintained with Borrower's Designated Account Bank, or such other
deposit account of Borrower (located within the United States) which has been
designated, in writing and from time to time, by Borrower to Agent.
"DESIGNATED ACCOUNT BANK" means Bank One, whose office is
located at Cleveland, Ohio, and whose ABA number is 044000037.
"DILUTION" means, in each case based upon the experience of
the most recently ended Dilution Period, the result of dividing the Dollar
amount of (a) bad debt write-downs, discounts, advertising, returns, promotions,
credits, or other dilution with respect to the Accounts of the Borrowing Base
Companies, by (b) Collections of the Borrowing Base Companies (excluding
extraordinary items) plus the Dollar amount of clause (a).
"DILUTION PERIOD" means, at any date of determination, the
most recently ended 12 month period; PROVIDED, that for any date of
determination after February 28, 2000, "Dilution Period" means, at any date of
determination, the most recently ended 12 month period unless the most recently
ended 3 month period yields a higher Dilution in which case "Dilution Period"
means such 3 month period.
-6-
<PAGE> 7
"DILUTION RESERVE" means, as of any date of determination, an
amount sufficient to reduce the advance rate against Eligible Accounts hereunder
by one percentage point for each percentage point by which Dilution is in excess
of 5%.
"DIRECT AND OTHER SALES" means any sale by a Borrowing Base
Company to an Account Debtor (other than a Value Added Distributor or Value
Added Reseller) that does not constitute a Large Install.
"DISBURSEMENT LETTER" means an instructional letter executed
and delivered by Borrower to Agent regarding the extensions of credit to be made
on the Closing Date, the form and substance of which shall be satisfactory to
Agent.
"DOLLAR EQUIVALENT" shall mean, at any time, (a) as to any
amount denominated in Dollars, the amount thereof at such time, and (b) as to
any amount denominated in a currency other than Dollars, the equivalent amount
in Dollars as determined by Agent at such time on the basis of the Currency
Exchange Rate for the purchase of Dollars with such currency.
"DOLLARS OR $" means United States dollars.
"EARLY TERMINATION PREMIUM" has the meaning set forth in
Section 3.6.
"EBITDA" means, for any period, the consolidated net income of
Borrower for such period (exclusive of (i) any gains or losses in connection
with the sale of any Stock of Aironet and (ii) extraordinary non-cash
adjustments), plus depreciation, amortization, interest and taxes deducted in
determining net income for such period.
"ELIGIBLE ACCOUNTS" means, with respect to a Borrowing Base
Company, those Accounts created by such Borrowing Base Company in the ordinary
course of business, that arise out of such Borrowing Base Company's sale of
goods or rendition of services, that strictly comply with each and all of the
representations and warranties respecting Accounts made by such Borrowing Base
Company to Agent in the Loan Documents, and that are and at all times continue
to be acceptable to Agent in all respects; PROVIDED, HOWEVER, that standards of
eligibility may be fixed and revised from time to time by Agent in Agent's
reasonable credit judgment (without limiting the generality of the foregoing,
Borrower acknowledges and agrees that the eligibility terms for Accounts arising
from Large Installs, Accounts owing from Value Added Distributors and Accounts
owing from Value Add Resellers shall be subject to revision by Agent). Eligible
Accounts of a Borrowing Base Company shall not include the following:
(a) (i) Accounts owing by a Value Added Reseller that has
failed to pay within 120 days of invoice or has selling terms of more than 60
days; (ii) Accounts owing by a Value Added Distributor that has failed to pay
within 150 days of invoice date or has selling terms of more than 90 days; (iii)
Accounts arising from sales of Large Installs that the Account Debtor has failed
to pay within 180 days of invoice date or has selling terms of more than 30
days; and (iv) Accounts arising from Direct and Other Sales that the Account
-7-
<PAGE> 8
Debtor has failed to pay within 90 days of invoice date or has selling terms of
more than 30 days;
(b) Accounts owed by an Account Debtor or its Affiliates where
50% or more of all Accounts owed by that Account Debtor (or its Affiliates) are
deemed ineligible under clause (a) above;
(c) Accounts with respect to which the Account Debtor is an
employee, Affiliate, or agent of a Company;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the Account Debtor may be
conditional (including, without limitation, Accounts owing by MRK Technologies,
Inc.);
(e) Accounts that are not payable in Dollars or with respect
to which the Account Debtor: (i) does not maintain its chief executive office in
the United States, or (ii) is not organized under the laws of the United States
or any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof, unless (w) such Account is payable in Canadian dollars
or Dollars owing to Telxon Canada by an Account Debtor organized under the laws
of Canada or a province thereof with its chief executive office and place of
business in a province of Canada and Telxon Canada is then a Borrowing Base
Company pursuant to the terms of SECTION 2.1(m), (x) such Account is owing to
Telxon U.K. by an Account Debtor organized under the laws of England with its
chief executive office and place of business in England and Telxon U.K. is then
a Borrowing Base Company pursuant to the terms of SECTION 2.1(m), (y) the
Account is supported by an irrevocable letter of credit satisfactory to Agent
(as to form, substance, and issuer or domestic confirming bank) that has been
delivered to Agent and is directly drawable by Agent, or (z) the Account is
covered by credit insurance in form and amount, and by an insurer, satisfactory
to Agent;
(f) Accounts with respect to which the Account Debtor is
either (i) the United States, Canada or a province of Canada or any department,
agency, or instrumentality of any thereof (exclusive, however, of Accounts of
the United States or any department, agency or instrumentality thereof with
respect to which Borrower has complied, to the satisfaction of Agent, with the
Assignment of Claims Act, 31 U.S.C. Section 3727) or (ii) any State of the
United States (exclusive, however, of Accounts owed by any State that does not
have a statutory counterpart to the Assignment of Claims Act);
(g) Accounts with respect to which the Account Debtor is a
creditor of such Borrowing Base Company, has or has asserted a right of setoff,
has disputed its liability, or has made any claim with respect to the Account;
(h) Accounts with respect to an Account Debtor (other than
Home Depot or Wal-Mart) whose total obligations owing to Borrowing Base
Companies exceed the
-8-
<PAGE> 9
Dollar Equivalent of 10% of all Eligible Accounts of Borrowing Base Companies,
to the extent of the obligations owing by such Account Debtor in excess of such
percentage; Accounts owing by Home Depot if its total obligations owing to
Borrowing Base Companies exceed the Dollar Equivalent of 15% of all Eligible
Accounts of Borrowing Base Companies, to the extent of the obligations owing by
such Account Debtor in excess of such percentage; or Accounts owing by Wal-Mart
if its total obligations owing to Borrowing Base Companies exceed the Dollar
Equivalent of 15% of all Eligible Accounts of Borrowing Base Companies, to the
extent of the obligations owing by such Account Debtor in excess of such
percentage;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(j) Accounts the collection of which Agent, in its reasonable
credit judgment, believes to be doubtful by reason of the Account Debtor's
financial condition;
(k) Accounts with respect to which the goods giving rise to
such Account have not been shipped and billed to the Account Debtor, the
services giving rise to such Account have not been performed and accepted by the
Account Debtor, or the Account otherwise does not represent a final sale;
(l) Accounts with respect to which the Account Debtor is
located in the states of New Jersey, Minnesota, Indiana, or West Virginia (or
any other jurisdiction that requires a creditor to file a Business Activity
Report or similar document in order to bring suit or otherwise enforce its
remedies against such Account Debtor in the courts or through any judicial
process of such jurisdictions), unless such Borrowing Base Company has qualified
to do business in New Jersey, Minnesota, Indiana, West Virginia, or such other
states, or has filed a Notice of Business Activities Report or similar document,
with the applicable division of taxation, the department of revenue, or with
such other offices, as appropriate, for the then-current year, or is exempt from
such filing requirement;
(m) Accounts that represent unearned progress payments or
other advance billings that are due prior to the completion of performance by
such Borrowing Base Company of the subject contract for goods or services;
(n) Accounts arising under maintenance or service contracts to
the extent they are unearned;
(o) Accounts owing by a Value Added Distributor that has the
right to return more than 10% of Inventory purchased from such Borrowing Base
Company that gave rise to such Accounts;
(p) Accounts with respect to which the Account Debtor is
located in Canada or England and the Account arises under a contract that
prohibits a Lien on such Account unless a consent to such Lien has been
obtained;
(q) Accounts evidenced by promissory notes or similar
instruments;
-9-
<PAGE> 10
(r) Accounts that are not subject to a valid and perfected
first priority security interest in favor of Agent for the benefit of the Lender
Group; and
(s) Accounts due from subvendors (i.e. "TIPS").
"ELIGIBLE INVENTORY" means, with respect to a Borrowing Base
Company (other than Telxon U.K.), Inventory consisting of first quality finished
goods held for sale in the ordinary course of such Borrowing Base Company's
business and raw materials for such finished goods, that are located at such
Borrowing Base Company's premises identified on SCHEDULE E-1, that strictly
comply with each and all of the representations and warranties respecting
Inventory made by such Borrowing Base Company to Agent in the Loan Documents,
and that are and at all times continue to be acceptable to Agent in all
respects; PROVIDED, HOWEVER, that standards of eligibility may be fixed and
revised from time to time by Agent in Agent's reasonable credit judgment. In no
event shall Inventory of Telxon U.K. be Eligible Inventory. In determining the
amount to be so included, Inventory shall be valued at the lower of cost or
market on a basis consistent with such Borrowing Base Company's current and
historical accounting practices. An item of Inventory shall not be included in
Eligible Inventory if:
(a) it is not owned solely by such Borrowing Base Company or
such Borrowing Base Company does not have good, valid, and marketable title
thereto;
(b) in the case of Inventory of Borrower, it is not located at
6333 Rothway, Houston, Texas; and in the case of Inventory of Telxon Canada, it
is not located on property owned or leased by Telxon Canada and listed on
Schedule E-1, in each case, subject to a Collateral Access Agreement executed by
the mortgagee, lessor, the warehouseman, or other third party, as the case may
be, and segregated or otherwise separately identifiable from goods of others, if
any, stored on the premises;
(c) it is not subject to a valid and perfected first priority
security interest in favor of Agent for the benefit of the Lender Group;
(d) it consists of goods returned or rejected by such
Borrowing Base Company's customers or goods in transit;
(e) it is obsolete or slow moving, a restrictive or custom
item, work-in-process, a component that is not part of finished goods, or
constitutes spare or service parts, "phantom parts", packaging and shipping
materials, supplies used or consumed in such Borrowing Base Company's business,
Inventory subject to a Lien in favor of any third Person, bill and hold goods,
defective goods, "seconds," or Inventory acquired on consignment;
(f) it is Inventory accepted on trade;
(g) it is Inventory of Telxon U.K.;
(h) is Inventory in which Symbol Technologies, Inc. has a
Lien; and
-10-
<PAGE> 11
(i) it is located at a third party processor or an outside
contractor.
"ELIGIBLE TRANSFEREE" means: (a) a commercial bank organized
under the laws of the United States, or any state thereof, and having total
assets in excess of $100,000,000; (b) a commercial bank organized under the laws
of any other country which is a member of the Organization for Economic
Cooperation and Development or a political subdivision of any such country, and
having total assets in excess of $100,000,000; provided that such bank is acting
through a branch or agency located in the United States; (c) a finance company,
insurance company or other financial institution or fund that is engaged in
making, purchasing or otherwise investing in commercial loans in the ordinary
course of its business and having total assets in excess of $50,000,000; (d) any
Affiliate (other than individuals) of a pre-existing Lender; (e) so long as no
Event of Default has occurred and is continuing, any other Person approved by
Agent and Borrower; and (f) during the continuation of an Event of Default, any
other Person approved by Agent.
"EQUIPMENT" means, with respect to a Company, all of such
Company's present and hereafter acquired machinery, machine tools, motors,
equipment, furniture, furnishings, fixtures, vehicles (including motor vehicles
and trailers), tools, parts, goods (other than consumer goods, farm products, or
Inventory), wherever located, including, (a) any interest of such Company's in
any of the foregoing, and (b) all attachments, accessories, accessions,
replacements, substitutions, additions, and improvements to any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of
1974, 29 U.S.C. Sections 1000 et seq., amendments thereto, successor statutes,
and regulations or guidance promulgated thereunder.
"ERISA AFFILIATE" means (a) any corporation subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(b), (b) any trade or business subject to ERISA
whose employees are treated as employed by the same employer as the employees of
Borrower under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA that is a
member of an affiliated service group of which Borrower is a member under IRC
Section 414(m), or (d) solely for purposes of Section 302 of ERISA and Section
412 of the IRC, any party subject to ERISA that is a party to an arrangement
with Borrower and whose employees are aggregated with the employees of Borrower
under IRC Section 414(o).
"ERISA EVENT" means (a) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (b) the withdrawal of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Benefit Plan during a plan year in which
it was a "substantial employer" (as defined in Section 4001(a)(2) of ERISA), (c)
the providing of notice of intent to terminate a Benefit Plan in a distress
termination (as described in Section 4041(c) of ERISA), (d) the institution by
the PBGC of proceedings to terminate a Benefit Plan or Multiemployer Plan, (e)
any event or condition (i) that provides a basis under Section 4042(a)(1), (2),
or (3) of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan
-11-
<PAGE> 12
or Multiemployer Plan, or (ii) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA, (f) the partial or complete withdrawal
within the meaning of Sections 4203 and 4205 of ERISA, of Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by Borrower or its
Subsidiaries or any of their ERISA Affiliates.
"EURODOLLAR RATE" means, with respect to the Interest Period
for a Eurodollar Rate Loan, the interest rate per annum at which United States
dollar deposits are offered to Agent (or its Affiliate) by major banks in the
London interbank market (or other Eurodollar Rate market selected by Agent) on
or about 11:00 a.m. (California time) 2 Business Days prior to the commencement
of such Interest Period in amounts comparable to the amount of the Eurodollar
Rate Loans requested by and available to Borrower in accordance with this
Agreement, with a maturity of comparable duration to the Interest Period
selected by Borrower.
"EURODOLLAR RATE LOANS" means any Loan (or any portion
thereof) made or outstanding hereunder during any period when interest on such
Loan (or portion thereof) is payable based on the Adjusted Eurodollar Rate.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 8.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and any successor statute thereto.
"EXISTING LENDERS" means The Bank of New York and each other
lender that is a party to the credit facility agented by The Bank of New York
and Bank One, NA as lender under the Business Purpose Revolving Promissory Note
separate from the Bank of New York credit facility.
"FEIN" means Federal Employer Identification Number.
"FOOTHILL" means Foothill Capital Corporation, a California
corporation.
"FOOTHILL LOANS" has the meaning set forth in SECTION 2.1(f).
"FUNDING DATE" means the date on which a Borrowing occurs.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied.
"GENERAL INTANGIBLES" means, with respect to a Company, all of
such Company's present and future general intangibles and other personal
property (including contract rights, rights arising under common law, statutes,
or regulations, choses or things in action, goodwill, Permits, patents, trade
names, trademarks, servicemarks, copyrights, blueprints, drawings, purchase
orders, customer lists, monies due or recoverable from pension funds, route
lists, rights to payment and other rights under any royalty or licensing
-12-
<PAGE> 13
agreements, infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit accounts,
insurance premium rebates, tax refunds, and tax refund claims), other than
goods, Accounts, and Negotiable Collateral.
"GOVERNING DOCUMENTS" means, with respect to any Person, the
certificate or articles of incorporation, by-laws, or other organizational or
governing documents of such Person.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state, province, or other political subdivision thereof, any central bank (or
similar monetary or regulatory authority) thereof, any entity or agency
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through Stock or capital ownership or otherwise, by any of
the foregoing.
"HAZARDOUS MATERIALS" means (a) substances that are defined or
listed in, or otherwise classified pursuant to, any applicable laws or
regulations as "hazardous substances," "contaminants", "hazardous materials,"
"hazardous wastes," "toxic substances," or any other formulation intended to
define, list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, reproductive toxicity,
or "EP toxicity", (b) oil, petroleum, or petroleum derived substances, natural
gas, natural gas liquids, synthetic gas, drilling fluids, produced waters, and
other wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources, (c) any flammable substances or
explosives or any radioactive materials, and (d) asbestos in any form or
electrical equipment that contains any oil or dielectric fluid containing levels
of polychlorinated biphenyls in excess of 50 parts per million.
"INDEBTEDNESS" means with respect to a Company: (a) all
obligations of such Company for borrowed money, (b) all obligations of such
Company evidenced by bonds, debentures, notes, or other similar instruments and
all reimbursement or other obligations of such Company in respect of letters of
credit, bankers acceptances, interest rate swaps, or other financial products,
(c) all obligations of such Company under capital leases, (d) all obligations or
liabilities of others secured by a Lien on any property or asset of such
Company, irrespective of whether such obligation or liability is assumed, and
(e) any obligation of such Company guaranteeing or intended to guarantee
(whether guaranteed, endorsed, co-made, discounted, or sold with recourse to
such Company) any indebtedness, lease, dividend, letter of credit, or other
obligation of any other Person.
"INDEMNIFIED LIABILITIES" has the meaning set forth in SECTION
11.3.
"INDEMNIFIED PERSON" has the meaning set forth in SECTION
11.3.
"INSOLVENCY PROCEEDING" means any proceeding commenced by or
against any Person under any provision of the Bankruptcy Code or under any other
bankruptcy or insolvency law (including, without limitation, the Bankruptcy and
Insolvency Act (Canada) and the Companies' Creditors Assignment Act (Canada)
-13-
<PAGE> 14
the Insolvency Law of 1986), assignments for the benefit of creditors, formal or
informal moratoria, compositions, extensions generally with creditors, or
proceedings seeking reorganization, arrangement, or other similar relief or any
action or proceeding seeking or affecting the appointment of a receiver,
manager, trustee, custodian or similar official for such Person or any
substantial part of its property and assets.
"INTANGIBLE ASSETS" means, with respect to any Person, that
portion of the book value of all of such Person's assets that would be treated
as intangibles under GAAP.
"INTELLECTUAL PROPERTY" has the meaning ascribed thereto in
SECTION 5.16.
"INTELLECTUAL PROPERTY MORTGAGE" means that certain Patent,
Trademark, Copyright and License Mortgage of even date herewith between Borrower
and Agent, for the benefit of itself and Lenders.
"INTEREST PERIOD" shall mean for any Eurodollar Rate Loan, a
period of approximately 30, 60 or 90 days duration as Borrower may elect, the
exact duration to be determined in accordance with the customary practice in the
applicable Eurodollar Rate market; PROVIDED, that, Borrower may not elect an
Interest Period which will end after the then current term of this Agreement.
"INVENTORY" means, with respect to a Company, all present and
future inventory in which such Company has any interest, including goods held
for sale or lease or to be furnished under a contract of service and all of such
Company's present and future raw materials, work in process, finished goods, and
packing and shipping materials, wherever located.
"INVENTORY LETTER OF CREDIT" means a documentary Letter of
Credit issued to support the purchase by Borrower or Telxon Canada (but only if
Telxon Canada is then a Borrowing Base Company pursuant to SECTION 2.1(M)) of
Inventory prior to transit to a location set forth on SCHEDULE E-1, that
provides that all draws thereunder must require presentation of customary
documentation (including, if applicable, commercial invoices, packing list,
certificate of origin, bill of lading or airway bill, customs clearance
documents, quota statement, inspection certificate, beneficiaries statement, and
bill of exchange, bills of lading, dock warrants, dock receipts, warehouse
receipts, or other documents of title) in form and substance satisfactory to
Agent and reflecting the passage to Borrower or Telxon Canada, as the case may
be, of title to first quality Inventory conforming to Borrower's or Telxon
Canada's contract with the seller thereof. Any such Letter of Credit shall cease
to be an "Inventory Letter of Credit" at such time, if any, as the goods
purchased thereunder become Eligible Inventory.
"INVENTORY RESERVES" means reserves (determined from time to
time by Agent in its discretion) for (a) the estimated costs relating to unpaid
freight charges, warehousing or storage charges, taxes, duties, and other
similar unpaid costs associated with the acquisition of Eligible Inventory by
Borrower and Telxon Canada (if Telxon Canada is then a Borrowing
-14-
<PAGE> 15
Base Company), PLUS (b) the estimated reclamation claims of unpaid sellers of
Inventory sold to Borrower and Telxon Canada (if Telxon Canada is then a
Borrowing Base Company).
"INVESTMENT PROPERTY" means "investment property" as that term
is defined in Section 9-115 of the Code.
"IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.
"L/C" has the meaning set forth in SECTION 2.2(A).
"L/C GUARANTY" has the meaning set forth in SECTION 2.2(A).
"LARGE INSTALLS" means any sale by Borrower to an Account
Debtor in excess of $1,000,000 requiring installation of Inventory at such
Account Debtor's premises.
"LEGAL REQUIREMENTS" means all applicable international,
foreign, federal, state, provincial and local laws, judgments, decrees, orders,
statutes, ordinances, rules, regulations, or Permits.
"LENDER" and "LENDERS" have the respective meanings set forth
in the preamble to this Agreement, and shall include any other Person made a
party to this Agreement in accordance with the provisions of SECTION 15.1
hereof.
"LENDER GROUP" means, individually and collectively, each of
the individual Lenders and Agent.
"LENDER GROUP EXPENSES" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by any Company
under any of the Loan Documents that are paid or incurred by the Lender Group;
fees or charges paid or incurred by the Lender Group in connection with the
Lender Group's transactions with any Company, including, fees or charges for
photocopying, notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC (or equivalent)
searches and including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing, recording,
publication, appraisal (including periodic Personal Property Collateral or Real
Property Collateral appraisals), real estate surveys, real estate title policies
and endorsements, and environmental audits; costs and expenses incurred by Agent
in the disbursement of funds to any Company (by wire transfer or otherwise);
charges paid or incurred by Agent resulting from the dishonor of checks; costs
and expenses paid or incurred by the Lender Group to correct any default or
enforce any provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling, preparing for
sale, or advertising to sell the Personal Property Collateral or the Real
Property Collateral, or any portion thereof, irrespective of whether a sale is
consummated; costs and expenses paid or incurred by Agent in examining any
Company Books; costs and expenses of third party claims or any other suit paid
or incurred by the Lender Group in enforcing or defending the Loan Documents or
in connection with the transactions contemplated by the Loan Documents or the
Lender Group's relationship with
-15-
<PAGE> 16
any Company (or any of its Subsidiaries party to one or more Loan Documents);
and the Lender Group's reasonable attorneys fees and expenses incurred in
advising, structuring, drafting, reviewing, administering, amending,
terminating, enforcing (including attorneys fees and expenses incurred in
connection with a "workout," a "restructuring," or an Insolvency Proceeding
concerning any Company), defending, or concerning the Loan Documents,
irrespective of whether suit is brought.
"LENDER-RELATED PERSONS" means, with respect to any Lender,
such Lender, together with such Lender's Affiliates, and the officers,
directors, employees, counsel, agents, and attorneys-in-fact of such Lender and
such Lender's Affiliates.
"LETTER OF CREDIT" means an L/C or an L/C Guaranty, as the
context requires.
"LETTER OF CREDIT USAGE" means the sum of (a) the undrawn
amount of Letters of Credit, PLUS (b) the amount of unreimbursed drawings under
Letters of Credit.
"LIEN" means any interest in property securing an obligation
owed to, or a claim by, any Person other than the owner of the property, whether
such interest shall be based on the common law, statute, or contract, whether
such interest be choate of inchoate, whether such interest shall be recorded or
perfected, and whether such interest shall be contingent upon the occurrence of
some future event or events or the existence of some future circumstance or
circumstances, including the lien or security interest arising from a mortgage,
deed of trust, encumbrance, pledge, hypothecation, assignment, deposit
arrangement, security agreement, adverse claim or charge, conditional sale or
trust receipt, or from a lease, consignment, or bailment for security purposes
and also including (a) trusts, deemed trusts, requirements to pay and statutory
liens, (b) rights of repossession, reclamation or revindication or similar
rights of unpaid supplies. and (c) reservations, exceptions, encroachments,
easements, rights-of-way, covenants, conditions, restrictions, leases, and other
title exceptions and encumbrances affecting Real Property.
"LOAN" means an Advance or a Term Loan.
"LOAN ACCOUNT" has the meaning set forth in SECTION 2.10.
"LOAN DOCUMENTS" means this Agreement, the Disbursement
Letter, the Letters of Credit, the Lockbox Agreements, the Stock Pledge
Agreement, the Mortgages, the Patent Mortgage, the Trademark Mortgage, the
Copyright Mortgage, any note or notes executed by Borrower and payable to the
Lender Group, the guaranties and security agreements executed by Companies, and
any other agreement entered into, now or in the future, in connection with this
Agreement.
"LOCKBOX ACCOUNT" shall mean a depositary account established
pursuant to one of the Lockbox Agreements.
"LOCKBOX AGREEMENTS" means those certain Lockbox Operating
Procedural Agreements and those certain Depository Account Agreements, in form
and substance
-16-
<PAGE> 17
satisfactory to Agent, each of which is among a Company, Agent, and one of the
Lockbox Banks.
"LOCKBOX BANKS" means Huntington National Bank, and such other
banks as may be agreed upon by Agent and Borrower.
"LOCKBOXES" has the meaning set forth in SECTION 2.7.
"LOCK-UP AGREEMENT" means that certain Lock-Up Agreement dated
as of April 13, 1999 among Aironet, SG Cowen Securities Corporation, Dain
Rauscher Wessels, Prudential Securities, Inc. and Telxon Corporation.
"MAINTENANCE AND SERVICE CONTRACTS" means contracts between a
Borrowing Base Company and an Account Debtor pursuant to which such Borrowing
Base Company agrees to provide maintenance for the Inventory sold to such
Account Debtor after the warranty for such Inventory has expired.
"MATERIAL ADVERSE CHANGE" means (a) a material adverse change
in the business, prospects, operations, results of operations, assets,
liabilities or condition (financial or otherwise) of Borrowing Base Companies
taken as a whole, (b) the material impairment of a Borrowing Base Company's
ability to perform its obligations under the Loan Documents to which it is a
party or of the Lender Group to enforce the Obligations or realize upon the
Collateral, (c) a material adverse effect on the value of the Collateral or the
amount that the Lender Group would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the liquidation
of the Collateral, or (d) a material impairment of the priority of the Agent's
Liens with respect to the Collateral.
"MAXIMUM BRIDGE LOAN AMOUNT" means $30,000,000.
"MAXIMUM REVOLVING AMOUNT" means the Maximum Revolving/Term
Loan Amount less the outstanding principal balance of Term Loan No. 1 and Term
Loan No. 2.
"MAXIMUM REVOLVING/TERM LOAN AMOUNT" means $70,000,000;
PROVIDED, that upon payment in full of the Bridge Loan, the Maximum
Revolving/Term Loan Amount shall be increased to $80,000,00.
"MAXIMUM TERM LOAN NO. 1 AMOUNT" means $6,000,000.
"MAXIMUM TERM LOAN NO. 2 AMOUNT" means $10,000,000.
"MORTGAGES" means one or more mortgages, deeds of trust,
hypothecs, or deeds to secure debt, executed by Borrower in favor of Agent, the
form and substance of which shall be satisfactory to Agent, that encumber the
Real Property Collateral and the related improvements thereto.
-17-
<PAGE> 18
"MULTIEMPLOYER PLAN" means a "multiemployer plan" (as defined
in Section 4001(a)(3) of ERISA) to which Borrower, any of its Subsidiaries, or
any ERISA Affiliate has contributed, or was obligated to contribute, within the
past six years.
"NEGOTIABLE COLLATERAL" means, with respect to a Company, all
of such Company's present and future letters of credit, notes, drafts,
instruments, Investment Property, documents, personal property leases (wherein
such Person is the lessor), chattel paper, and the Company Books relating to any
of the foregoing.
"OBLIGATIONS" means all loans, Advances, Term Loans, debts,
principal, interest (including any interest that, but for the provisions of the
Bankruptcy Code, would have accrued), contingent reimbursement obligations under
any outstanding Letters of Credit, premiums (including Early Termination
Premiums), liabilities (including all amounts charged to Borrower's Loan Account
pursuant hereto), obligations, fees, charges, costs, or Lender Group Expenses
(including any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), lease payments, guaranties, suretyships, covenants,
and duties owing by Borrower to the Lender Group of any kind and description
(whether pursuant to or evidenced by the Loan Documents or pursuant to any other
agreement between the Lender Group and Borrower, and irrespective of whether for
the payment of money), whether direct or indirect, absolute or contingent, due
or to become due, now existing or hereafter arising, and including any debt,
liability, or obligation owing from Borrower to others that the Lender Group may
have obtained by assignment or otherwise, and further including all interest not
paid when due and all Lender Group Expenses that Borrower is required to pay or
reimburse by the Loan Documents, by law, or otherwise.
"OVERADVANCE" has the meaning set forth in SECTION 2.5.
"PARTICIPANT" has the meaning set forth in SECTION 15.1(e).
"PAY-OFF LETTER(S)" means one or more letters, in form and
substance satisfactory to Agent, from Existing Lenders respecting the amount
necessary to repay in full all of the obligations of each Company owing to
Existing Lenders and obtain a termination or release of all of the Liens
existing in favor of Existing Lenders in and to the properties or assets of each
Company.
"PAYMENT DIRECTION NOTICE" means a written notice by Agent to
the Lockbox Bank instructing such Lockbox Bank to transfer all funds deposited
in the Lockbox Account at such Lockbox Bank to the Agent Account.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"PENRIGHT!" means PenRight! Corporation, a Delaware
corporation.
"PERMITS" of a Person shall mean all rights, franchises,
permits, authorities, licenses, certificates of approval or authorizations,
including licenses and other authorizations issuable by a Governmental
Authority, which pursuant to applicable Legal
-18-
<PAGE> 19
Requirements are necessary to permit such Person lawfully to conduct and operate
its business as currently conducted and to own and use its assets.
"PERMITTED LIENS" means (a) Liens held by Agent for the
benefit of the Lender Group, (b) Liens for unpaid taxes that either (i) are not
yet due and payable or (ii) are the subject of Permitted Protests, (c) Liens set
forth on SCHEDULE P-1, (d) the interests of lessors under capital leases and
purchase money Liens of lenders under purchase money financing to the extent
that the lease or acquisition of the underlying asset is permitted under SECTION
7.21 and so long as the Lien only attaches to the asset leased or purchased and
only secures the lease or purchase price of the asset, (e) Liens arising by
operation of law in favor of warehousemen, landlords, carriers, mechanics,
materialmen, laborers, or suppliers, incurred in the ordinary course of business
of a Company and not in connection with the borrowing of money, and which Liens
either (i) are for sums not yet due and payable, or (ii) are the subject of
Permitted Protests, (f) Liens arising from deposits made in connection with
obtaining worker's compensation or other unemployment insurance, (g) Liens or
deposits to secure performance of bids, tenders, or leases (to the extent
permitted under this Agreement), incurred in the ordinary course of business of
a Company and not in connection with the borrowing of money, (h) Liens arising
by reason of security for surety or appeal bonds in the ordinary course of
business of a Company, (i) Liens of or resulting from any judgment or award that
reasonably could not be expected to result in a Material Adverse Change and as
to which the time for the appeal or petition for rehearing of which has not yet
expired, or in respect of which a Company is in good faith prosecuting an appeal
or proceeding for a review and in respect of which a stay of execution pending
such appeal or proceeding for review has been secured, (j) Liens with respect to
the Real Property Collateral that are exceptions to the commitments for title
insurance issued in connection with the Mortgages, as accepted by Agent, (k)
with respect to any Real Property that is not part of the Real Property
Collateral, easements, rights of way, zoning and similar covenants and
restrictions, and similar encumbrances that customarily exist on properties of
Persons engaged in similar activities and similarly situated and that in any
event do not materially interfere with or impair the use or operation of the
Collateral or the value of any of the Agent's Liens thereon or therein for the
benefit of the Lender Group, or materially interfere with the ordinary conduct
of the business of a Company, and (l) Liens in favor of the Existing Lenders
that will be released upon funding of the initial Loans pursuant to the terms of
the Payoff Letters.
"PERMITTED PROTEST" means the right of a Company to protest
any Lien other than any such Lien that secures the Obligations, tax (other than
payroll taxes or taxes that are the subject of a United States federal tax lien
or that may give rise to a Lien under Canadian or provincial law), or rental
payment, provided that (a) a reserve with respect to such obligation is
established on the books of such Company in an amount that is reasonably
satisfactory to Agent, (b) any such protest is instituted and diligently
prosecuted by such Company in good faith, and (c) Agent is satisfied that, while
any such protest is pending, there will be no impairment of the enforceability,
validity, or priority of any of the Agent's Liens in and to the Collateral.
"PERSON" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general partnerships, limited
liability partnerships, joint
-19-
<PAGE> 20
ventures, trusts, land trusts, business trusts, or other organizations,
irrespective of whether they are legal entities, and governments and agencies
and political subdivisions thereof.
"PERSONAL PROPERTY COLLATERAL" means all Collateral other than
the Real Property Collateral.
"PLAN" means any employee benefit plan, program, or
arrangement maintained or contributed to by any Company or with respect to which
it may incur liability.
"PLEDGED STOCK" means the Stock of Aironet owned by Borrower
and pledged to Agent pursuant to the Stock Pledge Agreement.
"PPSA" means the Personal Property Security Act (Ontario) and
any other applicable personal property security statute of any other Province or
Territory of Canada.
"PRO RATA BRIDGE SHARE" means, with respect to a Bridge
Lender, a fraction (expressed as a percentage), the numerator of which is the
amount of such Bridge Lender's Bridge Commitment and the denominator of which is
the aggregate amount of the Bridge Commitments.
"PRO RATA REVOLVING/TERM SHARE" means, with respect to a
Revolving/Term Lender, a fraction (expressed as a percentage), the numerator of
which is the amount of such Revolving/Term Lender's Revolving/Term Commitment
and the denominator of which is the aggregate amount of the Revolving/Term
Commitments.
"PRO RATA SHARE" means, with respect to a Lender, a fraction
(expressed as a percentage), the numerator of which is the amount of such
Lender's Commitment and the denominator of which is the aggregate amount of the
Commitments; PROVIDED, that after all or any portion of the Bridge Loan is
repaid, the amount of such repayment shall be excluded from the calculation
thereof.
"REAL PROPERTY" means any estates or interests in real or
immovable property now owned or hereafter acquired by any Company.
"REAL PROPERTY COLLATERAL" means the parcel or parcels of real
or immovable property and the related improvements thereto identified on
SCHEDULE R-1, and any Real Property hereafter acquired by any Company.
"REFERENCE RATE" means the variable rate of interest, per
annum, most recently announced by Wells Fargo Bank, N.A., or any successor
thereto, as its "prime rate," irrespective of whether such announced rate is the
best rate available from such financial institution.
"REFERENCE RATE LOAN" means any Loan (or any portion thereof)
made or outstanding hereunder during any period when interest on such Loan (or
portion thereof) is payable based on the Reference Rate.
-20-
<PAGE> 21
"RENEWAL DATE" has the meaning set forth in SECTION 3.4.
"REPORTABLE EVENT" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a Reportable
Event as to which the provision of 30 days notice to the PBGC is waived under
applicable regulations.
"REQUIRED BRIDGE LENDERS" means, at any time, Bridge Lenders
whose Pro Rata Bridge Shares aggregate 51% or more of the Bridge Commitments,
or, if the Bridge Commitments have been terminated irrevocably, 51% of the
Bridge Loans then outstanding.
"REQUIRED LENDERS" means, at any time, Lenders whose Pro Rata
Shares aggregate 51% or more of the Commitments, or, if the Commitments have
been terminated irrevocably, 51% of the Obligations then outstanding.
"REQUIRED REVOLVING/TERM LENDERS" mean, at any time,
Revolving/Term Lenders whose Pro Rata Revolving/Term Shares aggregate 51% or
more of the Revolving/Term Commitments, or, if the Revolving/Term Commitments
have been terminated irrevocably 51% of the sum of Revolving Loans, Term Loan
No. 1 and Term Loan No.
2 then outstanding.
"RESERVE PERCENTAGE" means and refers to, as of the date of
determination thereof, the maximum percentage (rounded upward, if necessary to
the nearest 1/100th of 1%), as determined by Agent (or its Affiliate) in
accordance with its (or their) usual procedures (which determination shall be
conclusive in the absence of manifest error), that is in effect on such date as
prescribed by the Federal Reserve Board for determining the reserve requirements
(including supplemental, marginal, and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "eurocurrency
liabilities") by Agent or its Affiliates.
"RETIREE HEALTH PLAN" means an "employee welfare benefit plan"
within the meaning of Section 3(1) of ERISA that provides benefits to
individuals after termination of their employment, other than as required by
Section 601 of ERISA.
"REVOLVING FACILITY USAGE" means, as of any date of
determination, the sum of (a) the aggregate amount of Advances outstanding, PLUS
(b) the Letter of Credit Usage.
"REVOLVING/TERM COMMITMENT" means, at any time with respect to
a Lender, the principal amount set forth beside such Lender's name under the
heading "Revolving/Term Commitment" on SCHEDULE C-1 attached hereto or on the
signature page of the Assignment and Acceptance pursuant to which such Lender
became a Lender hereunder in accordance with the provisions of SECTION 15.1, as
such Revolving/Term Commitment may be adjusted from time to time in accordance
with the provisions of SECTION 15.1, and "REVOLVING/TERM COMMITMENTS" means,
collectively, the aggregate amount of the Revolving/Term Commitments of all of
the Lenders.
"REVOLVING/TERM LENDER" means a Lender that has a
Revolving/Term Commitment.
-21-
<PAGE> 22
"SEC" means the United States Securities and Exchange
Commission and any successor Federal agency having similar powers.
"SECURITIES ACCOUNT" means a "securities account" as that term
is defined in Section 8-501 of the Code.
"SETTLEMENT" has the meaning set forth in SECTION 2.1(h)(i).
"SETTLEMENT DATE" has the meaning set forth in SECTION
2.1(h)(i).
"SOLVENT" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties and assets
of such Person are greater than the sum of the debts, including contingent
liabilities, of such Person, (b) the present fair salable value of the
properties and assets of such Person is not less than the amount that will be
required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize upon its
properties and assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course of
business, (d) such Person does not intend to, and does not believe that it will,
incur debts beyond such Person's ability to pay as such debts mature, and (e)
such Person is not engaged in business or a transaction, and is not about to
engage in business or a transaction, for which such Person's properties and
assets would constitute unreasonably small capital after giving due
consideration to the prevailing practices in the industry in which such Person
is engaged. In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured liability.
"STOCK" means all shares, options, warrants, interests,
participations, or other equivalents (regardless of how designated) of or in a
corporation or equivalent entity, whether voting or nonvoting, including common
stock, preferred stock, or any other "equity security" (as such term is defined
in Rule 3a11-1 of the General Rules and Regulations promulgated by the SEC under
the Exchange Act).
"STOCK PLEDGE AGREEMENT" means the Pledge Agreement of even
date herewith between Borrower and Agent.
"SUBSIDIARY" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person directly or
indirectly owns or controls the shares of Stock or other ownership interests
having ordinary voting power to elect a majority of the board of directors (or
appoint other comparable managers) of such corporation, partnership, limited
liability company, or other entity.
"TANGIBLE NET WORTH" means, as of any date of determination,
the difference of (a) Borrower's total stockholder's equity on a consolidated
basis, MINUS (b) the sum of: (i) all Intangible Assets of Borrower on a
consolidated basis, (ii) all of Borrower's prepaid
-22-
<PAGE> 23
expenses on a consolidated basis, and (iii) all amounts due to Borrower from
Affiliates on a consolidated basis.
"TELXON CANADA" means Telxon Canada Corporation Ltd., a
corporation organized under the laws of the Province of Ontario, Canada.
"TELXON U.K." means Telxon Limited, a company organized under
the laws of England.
"TERM LOAN" means each Term Loan No. 1, Term Loan No. 2 and
Bridge Loan.
"TERM LOAN NO. 1" has the meaning set forth in SECTION 2.3(a).
"TERM LOAN NO. 2" has the meaning set forth in SECTION 2.3(b).
"VALUE ADDED DISTRIBUTOR" means an Account Debtor that
acquires Inventory from a Borrowing Base Company for resale to end-users.
"VALUE ADDED RESELLER" means an Account Debtor that acquires
Inventory from a Borrowing Base Company and adds value to such Inventory before
reselling to end-users.
"VOIDABLE TRANSFER" has the meaning set forth in SECTION 15.8.
"YEAR 2000 PROBLEM" means the risk that computer hardware,
software, equipment and applications used by Companies or any of their material
suppliers or customers may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and after December 31,
1999.
1.2. ACCOUNTING TERMS.
All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. When used herein, the term "financial
statements" shall include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related definition,
it shall be understood to mean Borrower on a consolidated basis unless the
context clearly requires otherwise.
1.3. CODE.
Any terms used in this Agreement that are defined in the Code
shall be construed and defined as set forth in the Code unless otherwise defined
herein.
1.4. CONSTRUCTION.
Unless the context of this Agreement or any other Loan
Document clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term "including" is
not limiting, and the term "or" has, except where
-23-
<PAGE> 24
otherwise indicated, the inclusive meaning represented by the phrase "and/or."
The words "hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement or any other Loan Document refer to this Agreement or any other Loan
Documents, as the case may be, as a whole and not to any particular provision of
this Agreement or such other Loan Document, as the case may be. An Event of
Default shall "continue" or be "continuing" until such Event of Default has been
waived in writing by Agent. Section, subsection, clause, schedule, and exhibit
references herein are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this Agreement or any of
the Loan Documents shall include all alterations, amendments, changes,
extensions, modifications, renewals, replacements, substitutions, joinders, and
supplements, thereto and thereof, as applicable.
1.5. SCHEDULES AND EXHIBITS.
All of the schedules and exhibits attached to this Agreement
shall be deemed incorporated herein by reference.
1.6. CURRENCY.
All dollar amounts referred to in, or payable under, any Loan
Document are denominated in Dollars unless otherwise stated. Without limiting
the foregoing, all Loans shall be made and repaid in Dollars.
2. LOAN AND TERMS OF PAYMENT.
2.1. REVOLVING ADVANCES.
(a) Subject to the terms and conditions of this Agreement and during the term of
this Agreement, each Revolving/Term Lender agrees to make advances ("Advances")
to Borrower in an amount at any one time outstanding not to exceed such
Revolving/Term Lender's Pro Rata Revolving/Term Share of an amount equal to the
lesser of (i) the Maximum Revolving Amount LESS the aggregate amount of all the
Letter of Credit Usage, or (ii) the Borrowing Base LESS (A) the aggregate amount
of all Letter of Credit Usage (other than Inventory Letters of Credit), LESS (B)
70% of the aggregate amount of all undrawn or unreimbursed Inventory Letters of
Credit, LESS (C) the aggregate amount of the Inventory Reserves. For purposes of
this Agreement, "Borrowing Base", as of any date of determination, shall mean
the result of:
(x) the lesser of (i) 85% of the Dollar Equivalent of
Eligible Accounts of the Borrowing Base Companies, LESS the
amount, if any, of the Dilution Reserve, and (ii) an amount
equal to Collections with respect to Accounts of the Borrowing
Base Companies for the immediately preceding 60 day period,
plus
(y) the lowest of (i) $10,000,000, (ii) 30% of the
Dollar Equivalent of the cost of Eligible Inventory, and (iii)
80% of the Dollar Equivalent of the orderly liquidation value
on a going concern basis of
-24-
<PAGE> 25
the Eligible Inventory (as determined by Agent pursuant to
appraisals acceptable to Agent), minus
(z) the aggregate amount of reserves established by
Agent under SECTION 2.1(b).
The Revolving/Term Lenders shall have no obligation to make further Advances
hereunder to the extent they would cause the outstanding Revolving Facility
Usage to exceed the Maximum Revolving Amount.
Amounts borrowed pursuant to this SECTION 2.1 may be repaid
and, subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement.
(b) ADVANCE RATE ADJUSTMENTS AND RESERVES; INVENTORY
REAPPRAISALS.
(i) Anything to the contrary in SECTION 2.1(A) above
notwithstanding, but without duplicating any reserves carried by a Borrowing
Base Company on its books that are already excluded from Eligible Accounts or
Eligible Inventory, Agent may create reserves against the Borrowing Base or
reduce its advance rates based upon Eligible Accounts or Eligible Inventory
without declaring an Event of Default (w) for any amount subject to a Permitted
Protest, (x) for amounts owing to landlords, warehousemen, processors and
similar Persons that could assert a statutory lien in respect of any of the
Collateral, (y) for possible fluctuations in the Currency Exchange Rate or for
30 Day Goods and (z) as determined by Agent in its reasonable discretion.
Without limiting the generality of the foregoing, but without duplication as
aforesaid, it is understood that Agent will establish the following reserves:
(A) a reserve for warranty claims equal to 3% of the amount of
gross Eligible Accounts (as adjusted from time to time based on the actual
warranty experience of Borrower);
(B) a reserve for royalty and licensing arrangements;
(C) a reserve for material overhead;
(D) a reserve for adjustment to the standard cost of new
products to the remanufactured cost;
(E) a reserve for remanufactured goods;
(F) a reserve for quality problems with material; and
(G) a reserve of $342,650 until such time as a survey, in form
and substance satisfactory to Agent, with respect to the Real Property commonly
known as White Pond Drive, Akron, Ohio is delivered to Agent and the title
company, and the title company promptly deletes the survey exception to the
title policy issued to Agent with respect to such Real Property.
-25-
<PAGE> 26
(ii) Agent shall have the right to have the Inventory
reappraised by a qualified appraiser selected by Agent from time to time after
the Closing Date for the purpose of redetermining the orderly liquidation value
of the Inventory. In the absence of the occurrence and continuation of an Event
of Default, such appraisals shall occur annually.
(c) PROCEDURE FOR BORROWING. Each Borrowing shall be made upon
Borrower's irrevocable request therefor delivered to Agent (which notice must be
received by Agent no later than 10:00 a.m. (California time) (i) on the
requested Funding Date if such Advance is to be a Foothill Loan to the extent
permitted in SECTION 2.1(D) or (ii) on the Business Day immediately preceding
the requested Funding Date) if it is not to be a Foothill Loan, specifying (x)
the amount of the Borrowing; and (y) the requested Funding Date, which shall be
a Business Day.
(d) AGENT'S ELECTION. Promptly after receipt of a request for a
Borrowing pursuant to SECTION 2.1(c), Agent shall, if no Event of Default is
then continuing and the amount of the requested Borrowing does not exceed
$5,000,000, cause Foothill to make a Foothill Loan and otherwise Agent shall
elect, in its discretion, (i) to have the terms of SECTION 2.1(e) apply to such
requested Borrowing, or (ii) to have Foothill to make a Foothill Loan pursuant
to the terms of SECTION 2.1(f) in the amount of the requested Borrowing.
(e) MAKING OF ADVANCES.
(i) In the event that Agent shall elect to have the terms of
this SECTION 2.1(E) apply to a requested Borrowing as described in SECTION
2.1(D), then promptly after receipt of a request for a Borrowing pursuant to
SECTION 2.1(C), Agent shall notify the Revolving/Term Lenders, not later than
1:00 p.m. (California time) on the Business Day immediately preceding the
Funding Date applicable thereto, by telecopy, telephone, or other similar form
of transmission, of the requested Borrowing. Each Revolving/Term Lender shall
make the amount of such Revolving/Term Lender's Pro Rata Revolving/Term Share of
the requested Borrowing available to Agent in immediately available funds, to
such account of Agent as Agent may designate, not later than 10:00 a.m.
(California time) on the Funding Date applicable thereto. After Agent's receipt
of the proceeds of such Advances, upon satisfaction of the applicable conditions
precedent set forth in SECTION 3 hereof, Agent shall make the proceeds of such
Advances available to Borrower on the applicable Funding Date by transferring
same day funds equal to the proceeds of such Advances received by Agent to
Borrower's Designated Account; PROVIDED, however, that, subject to the
provisions of SECTION 2.1(k), Agent shall not request any Revolving/Term Lender
to make, and no Revolving/Term Lender shall have the obligation to make, any
Advance if Agent shall have received written notice from any Revolving/Term
Lender, or otherwise has actual knowledge, that (1) one or more of the
applicable conditions precedent set forth in SECTION 3 will not be satisfied on
the requested Funding Date for the applicable Borrowing unless such condition
has been waived, or (2) the requested Borrowing would exceed the Availability of
Borrower on such Funding Date.
(ii) Unless Agent receives notice from a Revolving/Term Lender
on or prior to the Closing Date or, with respect to any Borrowing after the
Closing Date, at least 1 Business Day prior to the date of such Borrowing, that
such Revolving/Term Lender will not
-26-
<PAGE> 27
make available as and when required hereunder to Agent for the account of
Borrower the amount of that Revolving/Term Lender's Pro Rata Revolving/Term
Share of the Borrowing, Agent may assume that each Revolving/Term Lender has
made or will make such amount available to Agent in immediately available funds
on the Funding Date and Agent may (but shall not be so required), in reliance
upon such assumption, make available to Borrower on such date a corresponding
amount. If and to the extent any Revolving/Term Lender shall not have made its
full amount available to Agent in immediately available funds and Agent in such
circumstances has made available to Borrower such amount, that Revolving/Term
Lender shall on the Business Day following such Funding Date make such amount
available to Agent, together with interest at the Defaulting Lenders Rate for
each day during such period. A notice submitted by Agent to any Revolving/Term
Lender with respect to amounts owing under this subsection shall be conclusive,
absent manifest error. If such amount is so made available, such payment to
Agent shall constitute such Revolving/Term Lender's Advance on the date of
Borrowing for all purposes of this Agreement. If such amount is not made
available to Agent on the Business Day following the Funding Date, Agent will
notify Borrower of such failure to fund and, upon demand by Agent, Borrower
shall pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to the Advances
composing such Borrowing. The failure of any Revolving/Term Lender to make any
Advance on any Funding Date shall not relieve any other Revolving/Term Lender of
any obligation hereunder to make an Advance on such Funding Date, but no
Revolving/Term Lender shall be responsible for the failure of any other
Revolving/Term Lender to make the Advance to be made by such other
Revolving/Term Lender on any Funding Date.
(f) MAKING OF FOOTHILL LOANS.
(i) In the event that the conditions for a Foothill Loan set
forth in SECTION 2.1(d) are satisfied or Agent shall otherwise elect to have the
terms of this SECTION 2.1(f) apply to a requested Borrowing as described in
SECTION 2.1(d), Foothill as a Revolving/Term Lender shall make an Advance in the
amount of such Borrowing (any such Advance made solely by Foothill as a
Revolving/Term Lender pursuant to this SECTION 2.1(f) being referred to as a
"Foothill Loan" and such Advances being referred to collectively as "Foothill
Loans") available to Borrower on the Funding Date applicable thereto by
transferring same day funds to Borrower's Designated Account. Each Foothill Loan
is an Advance hereunder and shall be subject to all the terms and conditions
applicable to other Advances, except that all payments thereon shall be payable
to Foothill as a Revolving/Term Lender solely for its own account (and for the
account of the holder of any participation interest with respect to such
Advance). Subject to the provisions of SECTION 2.1(k), Agent shall not request
Foothill as a Revolving/Term Lender to make, and Foothill as a Revolving/Term
Lender shall not make, any Foothill Loan if Agent shall have received written
notice from any Revolving/Term Lender, or otherwise has actual knowledge, that
(i) one or more of the applicable conditions precedent set forth in SECTION 3
will not be satisfied on the requested Funding Date for the applicable Borrowing
unless such condition has been waived, or (ii) the requested Borrowing would
exceed the Availability of Borrower on such Funding Date. Foothill as a
Revolving/Term Lender shall not otherwise be required to determine whether the
applicable conditions precedent
-27-
<PAGE> 28
set forth in SECTION 3 have been satisfied on the Funding Date applicable
thereto prior to making, in its sole discretion, any Foothill Loan.
(ii) The Foothill Loans shall be secured by the Collateral and
shall constitute Advances and Obligations hereunder, and shall bear interest at
the rate applicable from time to time to Advances pursuant to SECTION 2.6
hereof.
(g) AGENT ADVANCES.
(i) Subject to the limitations set forth in the proviso
contained in this SECTION 2.1(g), Agent hereby is authorized by Borrower and the
Revolving/Term Lenders, from time to time in Agent's sole discretion, (1) after
the occurrence and during the continuance of a Default or an Event of Default,
or (2) at any time that any of the other applicable conditions precedent set
forth in SECTION 3 have not been satisfied, to make Advances to Borrower on
behalf of the Revolving/Term Lenders that Agent, in its reasonable business
judgment, deems necessary or desirable (A) to preserve or protect the
Collateral, or any portion thereof, (B) to enhance the likelihood of repayment
of the Obligations, or (C) to pay any other amount chargeable to Borrower
pursuant to the terms of this Agreement, including Lender Group Expenses and the
costs, fees, and expenses described in SECTION 10 (any of the Advances described
in this SECTION 2.1(g) being hereinafter referred to as "Agent Advances");
PROVIDED, that the Required Revolving/Term Lenders may at any time revoke
Agent's authorization contained in this SECTION 2.1(g) to make Agent Advances,
any such revocation to be in writing and to become effective upon Agent's
receipt thereof.
(ii) Agent Advances shall be repayable on demand and secured
by the Collateral, shall constitute Advances and Obligations hereunder, and
shall bear interest at the rate applicable from time to time to the Advances
pursuant to SECTION 2.6 hereof.
(h) SETTLEMENT. It is agreed that each Revolving/Term Lender's funded
portion of the Advances is intended by the Revolving/Term Lenders to equal, at
all times, such Revolving/Term Lender's Pro Rata Revolving/Term Share of the
outstanding Advances. Such agreement notwithstanding, Agent, Foothill, as a
Revolving/Term Lender and the other Revolving/Term Lenders agree (which
agreement shall not be for the benefit of or enforceable by Borrower) that in
order to facilitate the administration of this Agreement and the other Loan
Documents, settlement among them as to the Advances, the Foothill Loans, and the
Agent Advances shall take place on a periodic basis in accordance with the
following provisions:
(i) Agent shall request settlement ("Settlement") with the
Revolving/Term Lenders on a weekly basis, or on a more frequent basis if so
determined by Agent, (1) on behalf of Foothill, with respect to each outstanding
Foothill Loan, (2) for itself, with respect to each Agent Advance, and (3) with
respect to Collections received by Agent, as to each by notifying the
Revolving/Term Lenders by telecopy, telephone, or other similar form of
transmission, of such requested Settlement, no later than 2:00 p.m. (California
time) on the Business Day immediately prior to the date of such requested
Settlement (the date of such requested Settlement being the "Settlement Date").
Such notice of a Settlement Date shall include a summary statement of the amount
of outstanding Advances, Foothill Loans, and
-28-
<PAGE> 29
Agent Advances for the period since the prior Settlement Date, the amount of
repayments received in such period, and the amounts allocated to each
Revolving/Term Lender of the interest, fees, and other charges for such period.
Subject to the terms and conditions contained herein (including SECTION
2.1(e)(iii)): (y) if a Revolving/Term Lender's balance of the Advances, Foothill
Loans, and Agent Advances exceeds such Revolving/Term Lender's Pro Rata
Revolving/Term Share of the Advances, Foothill Loans, and Agent Advances as of a
Settlement Date, then Agent shall by no later than 12:00 p.m. (California time)
on the Settlement Date transfer in immediately available funds to the account of
such Revolving/Term Lender as such Revolving/Term Lender may designate, an
amount such that each such Revolving/Term Lender shall, upon receipt of such
amount, have as of the Settlement Date, its Pro Rata Revolving/Term Share of the
Advances, Foothill Loans, and Agent Advances; and (z) if a Revolving/Term
Lender's balance of the Advances, Foothill Loans, and Agent Advances is less
than such Term/Revolving Lender's Pro Rata Revolving/Term Share of the Advances,
Foothill Loans, and Agent Advances as of a Settlement Date, such Revolving/Term
Lender shall no later than 12:00 p.m. (California time) on the Settlement Date
transfer in immediately available funds to such account of Agent as Agent may
designate, an amount such that each such Revolving/Term Lender shall, upon
transfer of such amount, have as of the Settlement Date, its Pro Rata
Revolving/Term Share of the Advances, Foothill Loans, and Agent Advances. Such
amounts made available to Agent under clause (z) of the immediately preceding
sentence shall be applied against the amounts of the applicable Foothill Loan or
Agent Advance and, together with the portion of such Foothill Loan or Agent
Advance representing Foothill's Pro Rata Revolving/Term Share thereof, shall
constitute Advances of such Revolving/Term Lenders. If any such amount is not
made available to Agent by any Revolving/Term Lender on the Settlement Date
applicable thereto to the extent required by the terms hereof, Agent shall be
entitled to recover for its account such amount on demand from such
Revolving/Term Lender together with interest thereon at the Defaulting Lenders
Rate.
(ii) In determining whether a Revolving/Term Lender's balance
of the Advances, Foothill Loans, and Agent Advances is less than, equal to, or
greater than such Revolving/Term Lender's Pro Rata Revolving/Term Share of the
Advances, Foothill Loans, and Agent Advances as of a Settlement Date, Agent
shall, as part of the relevant Settlement, apply to such balance the portion of
payments and proceeds of Collateral actually received in good funds by Agent or
Foothill with respect to principal, interest, fees payable by Borrower and
allocable to the Revolving/Term Lenders hereunder. To the extent that a net
amount is owed to any such Revolving/Term Lender after such application, such
net amount shall be distributed by Agent or Foothill to that Revolving/Term
Lender as part of such next Settlement.
(iii) Between Settlement Dates, Agent, to the extent no Agent
Advances or Foothill Loans are outstanding, may pay over to Foothill any
payments received by Agent, that, in accordance with the terms of this
Agreement, would be applied to the reduction of the Advances, for application to
Foothill's Pro Rata Revolving/Term Share of the Advances. If, as of any
Settlement Date, Collections received by Agent since the then immediately
preceding Settlement Date have been applied to Foothill's Pro Rata
Revolving/Term Share of the Advances rather than to Foothill Loans or Agent
Advances, as provided for in the previous sentence, Foothill shall pay to Agent
for the accounts of the
-29-
<PAGE> 30
Revolving/Term Lenders, and Agent shall pay to the Revolving/Term Lenders, to be
applied to the outstanding Advances of such Revolving/Term Lenders, an amount
such that each Revolving/Term Lender shall, upon receipt of such amount, have,
as of such Settlement Date, its Pro Rata Revolving/Term Share of the Advances.
During the period between Settlement Dates, Foothill as a Revolving/Term Lender
with respect to Foothill Loans, Agent with respect to Agent Advances, and each
Revolving/Term Lender with respect to the Advances other than Foothill Loans and
Agent Advances, shall be entitled to interest at the applicable rate or rates
payable under this Agreement on the daily amount of funds employed by Foothill,
Agent, or the Revolving/Term Lenders, as applicable.
(i) NOTATION. Agent shall record on its books the principal
amount of the Advances owing to each Revolving/Term Lender, including the
Foothill Loans owing to Foothill, and Agent Advances owing to Agent, and the
interests therein of each Revolving/Term Lender, from time to time. In addition,
each Revolving/Term Lender is authorized, at such Revolving/Term Lender's
option, to note the date and amount of each payment or prepayment of principal
of such Revolving/Term Lender's Advances in its books and records, including
computer records, such books and records constituting rebuttably presumptive
evidence, absent manifest error, of the accuracy of the information contained
therein.
(j) REVOLVING/TERM LENDERS' FAILURE TO PERFORM. All Advances
(other than Foothill Loans and Agent Advances) shall be made by the
Revolving/Term Lenders simultaneously and in accordance with their Pro Rata
Revolving/Term Shares. It is understood that (i) no Revolving/Term Lender shall
be responsible for any failure by any other Revolving/Term Lender to perform its
obligation to make any Advances hereunder, nor shall any Commitment of any
Revolving/Term Lender be increased or decreased as a result of any failure by
any other Revolving/Term Lender to perform its obligation to make any Advances
hereunder, and (ii) no failure by any Revolving/Term Lender to perform its
obligation to make any Advances hereunder shall excuse any other Revolving/Term
Lender from its obligation to make any Advances hereunder.
(k) OPTIONAL OVERADVANCES. Any contrary provision of this
Agreement notwithstanding, if the condition for borrowing under SECTION 3.2(D)
cannot be fulfilled, the Revolving/Term Lenders nonetheless hereby authorize
Agent or Foothill, as applicable, and Agent or Foothill, as applicable, may, but
is not obligated to, knowingly and intentionally continue to make Advances
(including Foothill Loans) to Borrower such failure of condition
notwithstanding, so long as, at any time, (i) the outstanding Revolving Facility
Usage does not exceed the Borrowing Base by more than $5,000,000 and (ii) the
outstanding Revolving Facility Usage (except for and excluding amounts charged
to the Loan Account for interest, fees, or Lender Group Expenses) does not
exceed the Maximum Revolving Amount. The foregoing provisions are for the sole
and exclusive benefit of Agent, Foothill, and the Revolving/Term Lenders and are
not intended to benefit Borrower in any way. The Advances and Foothill Loans, as
applicable, that are made pursuant to this SECTION 2.1(k) shall be subject to
the same terms and conditions as any other Advance or Foothill Loan, as
applicable, except that the rate of interest applicable thereto shall be the
rate applicable to Reference Rate Loans with respect to Advances after giving
effect to the default rate as set forth in SECTION 2.6(c) hereof without regard
to the presence or absence of a Default or Event of Default; PROVIDED, that
-30-
<PAGE> 31
the Required Revolving/Term Lenders may, at any time during the continuance of
an Event of Default or if Borrower fails to satisfy any other material lending
condition, revoke Agent's authorization contained in this SECTION 2.1(k) to make
Overadvances (except for and excluding amounts charged to the Loan Account for
interest, fees, or Lender Group Expenses), any such revocation to be in writing
and to become effective upon Agent's receipt thereof.
In the event Agent obtains actual knowledge that Revolving
Facility Usage exceeds the amount permitted by the preceding paragraph,
regardless of the amount of or reason for such excess, Agent shall notify
Revolving/Term Lenders as soon as practicable (and prior to making any (or any
further) intentional Overadvances (except for and excluding amounts charged to
the Loan Account for interest, fees, or Lender Group Expenses) unless Agent
determines that prior notice would result in imminent harm to the Collateral or
its value), and the Revolving/Term Lenders thereupon shall, together with Agent,
jointly determine the terms of arrangements that shall be implemented with
Borrower intended to reduce, within a reasonable time, the outstanding principal
amount of the Advances to Borrower to an amount permitted by the preceding
paragraph. In the event any Revolving/Term Lender disagrees over the terms of
reduction and/or repayment of any Overadvance, the terms of reduction and/or
repayment thereof shall be implemented according to the determination of the
Required Revolving/Term Lenders.
Each Revolving/Term Lender shall be obligated to settle with
Agent as provided in SECTION 2.1(h) for the amount of such Revolving/Term
Lender's Pro Rata Revolving/Term Share of any unintentional Overadvances by
Agent reported to such Revolving/Term Lender, any intentional Overadvances made
as permitted under this SECTION 2.1(k), and any Overadvances resulting from the
charging to the Loan Account of interest, fees, or Lender Group Expenses.
(l) EFFECT OF BANKRUPTCY. If a case is commenced by or against
Borrower under the U.S. Bankruptcy Code, or other statute providing for debtor
relief, then, unless otherwise agreed by all Lenders, the Lender Group shall not
make additional loans or provide additional financial accommodations under the
Loan Documents to Borrower as debtor or debtor-in-possession, or to any trustee
for Borrower, nor consent to the use of cash collateral (PROVIDED that the Loan
Account shall continue to be charged, to the fullest extent permitted by law,
for accruing interest, fees, and Lender Group Expenses).
(m) INCLUSION OF TELXON CANADA OR TELXON U.K. IN BORROWING
BASE. Notwithstanding any other provision of this Agreement, no Accounts of
Telxon Canada or Telxon U.K. shall be Eligible Accounts and no Inventory of
Telxon Canada shall be Eligible Inventory, (i) until Agent has notified Borrower
and Revolving/Term Lenders in writing that Agent has conducted an audit of the
Accounts and/or Inventory of Telxon Canada, or the Accounts of Telxon U.K., as
applicable, and that the results of each such audit are satisfactory to Agent,
and (ii) Agent shall have received such guaranties, security agreements and
other documents from Telxon Canada and Telxon U.K. as Agent may request,
together with such amendments to this Agreement and the other existing Loan
Documents, legal opinions, and certificates as Agent may request. In such
notice, Agent shall specify any revisions to the eligibility criteria of
Eligible Accounts and Eligible Inventory and/or advance rates with respect
-31-
<PAGE> 32
thereto which revisions shall be effective without further modification of this
Agreement or the consent of Borrower.
2.2. LETTER OF CREDIT SUBFACILITY.
(a) AGREEMENT TO CAUSE ISSUANCE; AMOUNTS; OUTSIDE EXPIRATION DATE.
Subject to the terms and conditions of this Agreement, Agent agrees to issue
letters of credit for the account of Borrower (each, an "L/C") or to issue
guarantees of payment (each such guaranty, an "L/C Guaranty") with respect to
letters of credit issued by an issuing bank for the account of Borrower. Agent
shall have no obligation to issue a Letter of Credit if any of the following
would result:
(i) the sum of 70% of the aggregate amount of all undrawn and
unreimbursed Inventory Letters of Credit and duty and domestic landing costs
PLUS 100% of the aggregate amount of all other types of Letter of Credit Usage,
would exceed the Borrowing Base LESS the amount of outstanding Advances; or
(ii) the aggregate amount of all Letter of Credit Usage
(including Inventory Letters of Credit) would exceed the lower of: (x) the
Maximum Revolving Amount LESS the amount of outstanding Advances LESS the
aggregate amount of Inventory Reserves and reserves established under SECTION
2.1(b); or (y) $5,000,000; or
(iii) the outstanding Obligations (other than Bridge Loan)
would exceed the Maximum Revolving Amount.
Borrower expressly understands and agrees that Agent shall have no obligation to
arrange for the issuance by issuing banks of the letters of credit that are to
be the subject of L/C Guarantees. Borrower and the Revolving/Term Lenders
acknowledge and agree that certain of the letters of credit that are to be the
subject of L/C Guarantees may be outstanding on the Closing Date. Each Letter of
Credit shall have an expiry date no later than 60 days prior to the date on
which this Agreement is scheduled to terminate under SECTION 3.4 (without regard
to any potential renewal term) and all such Letters of Credit shall be in form
and substance acceptable to Agent in its sole discretion. If the Revolving/Term
Lenders are obligated to advance funds under a Letter of Credit, Borrower
immediately shall reimburse such amount to Agent and, in the absence of such
reimbursement, the amount so advanced immediately and automatically shall be
deemed to be an Advance hereunder and, thereafter, shall bear interest at the
rate then applicable to such Advances under SECTION 2.6.
(b) INDEMNIFICATION. Borrower hereby agrees to indemnify, save, defend,
and hold the Revolving/Term Lenders harmless from any loss, cost, expense, or
liability, including payments made by the Revolving/Term Lenders, expenses, and
reasonable attorneys fees incurred by the Revolving/Term Lenders arising out of
or in connection with any Letter of Credit. Borrower agrees to be bound by the
issuing bank's regulations and interpretations of any Letters of Credit
guarantied by the Revolving/Term Lenders and opened to or for Borrower's account
or by Agent's interpretations of any L/C issued by the Revolving/Term Lenders to
or for Borrower's account, even though this interpretation may be different from
-32-
<PAGE> 33
Borrower's own, and Borrower understands and agrees that the Revolving/Term
Lenders shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower's instructions or those contained
in the Letter of Credit or any modifications, amendments, or supplements
thereto. Borrower understands that the L/C Guarantees may require the
Revolving/Term Lenders to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrower against such issuing bank.
Borrower hereby agrees to indemnify, save, defend, and hold the Revolving/Term
Lenders harmless with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by the Revolving/Term Lenders under any
L/C Guaranty as a result of the Revolving/Term Lenders' indemnification of any
such issuing bank.
(c) SUPPORTING MATERIALS. Borrower hereby authorizes and directs any
bank that issues a letter of credit guaranteed by the Revolving/Term Lenders to
deliver to Agent all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and to accept
and rely upon Agent's instructions and agreements with respect to all matters
arising in connection with such letter of credit and the related application.
Borrower may or may not be the "applicant" or "account party" with respect to
such letter of credit.
(d) COMPENSATION FOR LETTERS OF CREDIT. Any and all charges,
commissions, fees, and costs incurred by Agent relating to the letters of credit
guaranteed by the Revolving/Term Lenders shall be considered Lender Group
Expenses for purposes of this Agreement and immediately shall be reimbursable by
Borrower to Agent.
(e) CASH COLLATERAL. Immediately upon the termination of this
Agreement, Borrower agrees to either (i) provide cash collateral to be held by
Agent in an amount equal to 105% of the maximum amount of the Revolving/Term
Lenders' obligations under Letters of Credit, or (ii) cause to be delivered to
Agent releases of all of the Revolving/Term Lenders' obligations under
outstanding Letters of Credit. At Agent's discretion, any proceeds of Collateral
received by Agent after the occurrence and during the continuation of an Event
of Default may be held as the cash collateral required by this SECTION 2.2(e).
(f) INCREASED COSTS. If by reason of (i) any change in any applicable
law, treaty, rule, or regulation or any change in the interpretation or
application by any governmental authority of any such applicable law, treaty,
rule, or regulation, or (ii) compliance by the issuing bank or Agent with any
direction, request, or requirement (irrespective of whether having the force of
law) of any governmental authority or monetary authority including, without
limitation, Regulation D of the Board of Governors of the Federal Reserve System
as from time to time in effect (and any successor thereto):
(i) any reserve, deposit, or similar requirement is or shall
be imposed or modified in respect of any Letters of Credit issued hereunder, or
(ii) there shall be imposed on the issuing bank or any other
condition regarding any letter of credit, or Letter of Credit, as applicable,
issued pursuant hereto;
-33-
<PAGE> 34
and the result of the foregoing is to increase, directly or indirectly, the cost
to the issuing bank or the Revolving/Term Lenders of issuing, making,
guaranteeing, or maintaining any letter of credit, or Letter of Credit, as
applicable, or to reduce the amount receivable in respect thereof by such
issuing bank or the Revolving/Term Lenders, then, and in any such case, the
Revolving/Term Lenders may, at any time within a reasonable period after the
additional cost is incurred or the amount received is reduced, notify Borrower,
and Borrower shall pay on demand such amounts as the issuing bank or Agent may
specify to be necessary to compensate the issuing bank or the Revolving/Term
Lenders for such additional cost or reduced receipt, together with interest on
such amount from the date of such demand until payment in full thereof at the
rate set forth in SECTION 2.6(a)(i) or (c)(i), as applicable. The determination
by the issuing bank or Agent, as the case may be, of any amount due pursuant to
this SECTION 2.2(f), as set forth in a certificate setting forth the calculation
thereof in reasonable detail, shall, in the absence of manifest or demonstrable
error, be final and conclusive and binding on all of the parties hereto.
(g) PARTICIPATIONS.
(i) PURCHASE OF PARTICIPATIONS. Immediately upon issuance of any Letter
of Credit in accordance with this SECTION 2.2, each Revolving/Term Lender shall
be deemed to have irrevocably and unconditionally purchased and received without
recourse or warranty, an undivided interest and participation in the credit
support or enhancement provided through Agent to such issuer in connection with
the issuance of such Letter of Credit, equal to such Revolving/Term Lender's Pro
Rata Revolving/Term Share of the face amount of such Letter of Credit
(including, without limitation, all obligations of Borrower with respect
thereto, and any security therefor or guaranty pertaining thereto).
(ii) DOCUMENTATION. Upon the request of any Revolving/Term Lender,
Agent shall furnish to such Revolving/Term Lender copies of any Letter of
Credit, reimbursement agreements executed in connection therewith, application
for any Letter of Credit and credit support or enhancement provided through
Agent in connection with the issuance of any Letter of Credit, and such other
documentation as may reasonably be requested by such Revolving/Term Lender.
(iii) OBLIGATIONS IRREVOCABLE. The obligations of each Revolving/Term
Lender to make payments to Agent with respect to any Letter of Credit or with
respect to any credit support or enhancement provided through Agent with respect
to a Letter of Credit, and the obligations of Borrower to make payments to
Agent, for the account of the Revolving/Term Lenders, shall be irrevocable, not
subject to any qualification or exception whatsoever, including any of the
following circumstances:
(A) any lack of validity or enforceability of this Agreement
or any of the other Loan Documents;
(B) the existence of any claim, setoff, defense or other right
which Borrower may have at any time against a beneficiary named in a Letter
of Credit or any transferee of any Letter of Credit (or any Person for whom
any such transferee
-34-
<PAGE> 35
may be acting), any Lender, Agent, the issuer of such Letter of Credit, or
any other Person, whether in connection with this Agreement, any Letter of
Credit, the transactions contemplated herein or any unrelated transactions
(including any underlying transactions between Borrower or any other Person
and the beneficiary named in any Letter of Credit);
(c) any draft, certificate or any other document presented
under the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect;
(d) the surrender or impairment of any security for the
performance or observance of any of the terms of any of the Loan Documents;
or
(e) the occurrence of any Default or Event of Default.
(h) RECOVERY OR AVOIDANCE OF PAYMENTS. In the event any payment by or
on behalf of Borrower received by Agent with respect to any Letter of Credit (or
any guaranty by Borrower or reimbursement obligation of Borrower relating
thereto) and distributed by the Agent to the Revolving/Term Lenders on account
of their respective participations therein, is thereafter set aside, avoided or
recovered from Agent in connection with any receivership, liquidation or
bankruptcy proceeding, the Revolving/Term Lenders shall, upon demand by Agent,
pay to Agent their respective Pro Rata Revolving/Term Shares of such amount set
aside, avoided or recovered, together with interest at the rate required to be
paid by Agent upon the amount required to be repaid by it.
2.3. TERM LOAN FACILITIES.
(a) TERM LOAN NO. 1. Subject to the terms and conditions of this
Agreement, each Revolving/Term Lender agrees to make a term loan ("Term Loan No.
1") to Borrower in an aggregate principal amount not to exceed such
Revolving/Term Lender's Pro Rata Revolving/Term Share of the Maximum Term Loan
No. 1 Amount. Term Loan No. 1 shall be repaid in monthly principal installments
of $50,000. Each such installment shall be due and payable on the first day of
each month commencing on October 1, 1999 and continuing on the first day of each
succeeding month until and including the date on which the unpaid balance of
Term Loan No. 1 is paid in full. The outstanding principal balance and all
accrued and unpaid interest under Term Loan No. 1 shall be due and payable upon
the termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. The unpaid principal balance of Term Loan No. 1 may
be prepaid in whole or in part without penalty or premium at any time during the
term of this Agreement upon 30 days prior written notice by Borrower to Agent,
all such prepaid amounts to be applied to the installments due on Term Loan No.
1 in the inverse order of their maturity. All amounts outstanding under Term
Loan No. 1 shall constitute Obligations.
(b) TERM LOAN NO. 2. Subject to the terms and conditions of this
Agreement, each Revolving/Term Lender agrees to make a term loan ("Term Loan No.
2") to Borrower in an aggregate principal amount not to exceed such
Revolving/Term Lender's Pro Rata
-35-
<PAGE> 36
Revolving/Term Share of the Maximum Term Loan No. 2 Amount. Term Loan No. 2
shall be repaid in monthly principal installments of $277,777.77. Each such
installment shall be due and payable on the first day of each month commencing
on October 1, 1999 and continuing on the first day of each succeeding month
until and including the date on which the unpaid balance of Term Loan No. 2 is
paid in full. In addition, (i) if any portion of the Bridge Loan is outstanding
and the sum of the principal balance of Term Loan No. 2 and the Bridge Loan
exceeds 81% of the market value of the Pledged Stock (based on a 2 Business Day
rolling average of the closing price of the Pledge Stock as determined by
Agent), Borrower will prepay Term Loan No. 2 in an amount necessary to eliminate
such excess within one Business Day, and (ii) if no portion of Bridge Loan is
outstanding and the outstanding principal balance of Term Loan No. 2 exceeds 50%
of the market value of the Pledged Stock (based on a 2 Business Day rolling
average of the closing price of the Pledged Stock as determined by Agent),
Borrower will prepay Term Loan No. 2 in an amount necessary to eliminate such
excess within one Business Day. The outstanding principal balance and all
accrued and unpaid interest under Term Loan No. 2 shall be due and payable upon
the termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. The unpaid principal balance of Term Loan No. 2 may
be prepaid in whole or in part without penalty or premium at any time during the
term of this Agreement upon 30 days prior written notice by Borrower to Agent.
All mandatory and voluntary prepaid amounts shall be applied to the installments
due on Term Loan No. 2 in the inverse order of their maturity. All amounts
outstanding under Term Loan No. 2 shall constitute Obligations.
(c) BRIDGE LOAN. Subject to the terms and conditions of this Agreement,
each Bridge Lender agrees to make a term loan (the "Bridge Loan") to Borrower in
an aggregate principal amount not to exceed such Bridge Lender's Pro Rata Bridge
Share of the Maximum Bridge Loan Amount. The Bridge Loan shall be repaid in 11
monthly installments, the first of which installments shall be in the amount
equal to the net cash proceeds received by Agent from the sale of any of the
Pledged Stock which shall not be less than $20,000,000, payable only with
proceeds from the sale of the Pledged Stock and payable on the earlier of the
date of such sale and December 26, 1999, and the next 10 of which installments
shall each be in an amount equal to 1/10th of the remaining balance of the
Bridge Loan and payable commencing on the first day of the first calendar month
after the first installment is paid and continuing on the first day of each
month thereafter; PROVIDED, that the last installment shall be no later than
October 1, 2000. In addition, if at any time the outstanding principal balance
of the Bridge Loan exceeds 61% of the market value of the Pledged Stock (based
on a 2 Business Day rolling average of the closing price of the Pledged Stock as
determined by Agent), Borrower shall make a mandatory prepayment within 1
Business Day in respect of the Bridge Loan in amount necessary to eliminate such
excess which prepayment shall be applied to the installments owing in respect of
the Bridge Loan in the inverse order of their maturities. The outstanding
principal balance and all accrued and unpaid interest under the Bridge Loan
shall be due and payable upon the termination of this Agreement, whether by its
terms, by prepayment, by acceleration, or otherwise. All amounts outstanding
under the Bridge Loan shall constitute Obligations.
(d) MAKING OF TERM LOAN NO. 1 AND TERM LOAN NO. 2 BY REVOLVING/TERM
LENDERS. Unless Agent receives notice from a Revolving/Term Lender on or prior
to the
-36-
<PAGE> 37
Closing Date that such Revolving/Term Lender will not make available as and when
required hereunder to Agent for the account of Borrower the amount of that
Revolving/Term Lender's Pro Rata Revolving/Term Share of such Borrowing, Agent
may assume that each Revolving/Term Lender has made or will make such amount
available to Agent in immediately available funds on the Closing Date and Agent
may (but shall not be so required), in reliance upon such assumption, make
available to Borrower on such date a corresponding amount. If and to the extent
any Revolving/Term Lender shall not have made its full amount available to Agent
in immediately available funds and Agent in such circumstances has made
available to Borrower such amount, that Revolving/Term Lender shall on the
Business Day following such the Closing Date make such amount available to
Agent, together with interest at the Defaulting Lenders Rate for each day during
such period. A notice submitted by Agent to any Revolving/Term Lender with
respect to amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is so made available, such payment to Agent shall
constitute such Revolving/Term Lender's Term Loan No. 1 and Term Loan No. 2 on
the date of Borrowing for all purposes of this Agreement. If such amount is not
made available to Agent on the Business Day following the Closing Date, Agent
will notify Borrower of such failure to fund and, upon demand by Agent, Borrower
shall pay such amount to Agent for Agent's account, together with interest
thereon for each day elapsed since the date of such Borrowing, at a rate per
annum equal to the interest rate applicable at the time to such Term Loans
composing such Borrowing.
(e) MAKING OF BRIDGE LOAN BY BRIDGE LENDERS. Unless Agent receives
notice from a Bridge Lender on or prior to the Closing Date that such Bridge
Lender will not make available as and when required hereunder to Agent for the
account of Borrower the amount of that Bridge Lender's Pro Rata Bridge Share of
such Borrowing, Agent may assume that each Bridge Lender has made or will make
such amount available to Agent in immediately available funds on the Funding
Date and Agent may (but shall not be so required), in reliance upon such
assumption, make available to Borrower on such date a corresponding amount. If
and to the extent any Bridge Lender shall not have made its full amount
available to Agent in immediately available funds and Agent in such
circumstances has made available to Borrower such amount, that Bridge Lender
shall on the Business Day following the Closing Date make such amount available
to Agent, together with interest at the Defaulting Lenders Rate for each day
during such period. A notice submitted by Agent to any Bridge Lender with
respect to amounts owing under this subsection shall be conclusive, absent
manifest error. If such amount is so made available, such payment to Agent shall
constitute such Bridge Lender's Bridge Loan on the date of Borrowing for all
purposes of this Agreement. If such amount is not made available to Agent on the
Business Day following the Closing Date, Agent will notify Borrower of such
failure to fund and, upon demand by Agent, Borrower shall pay such amount to
Agent for Agent's account, together with interest thereon for each day elapsed
since the date of such Borrowing, at a rate per annum equal to the interest rate
applicable at the time to the Bridge Loan composing such Borrowing.
(f) REVOLVING/TERM LENDERS' FAILURE TO PERFORM. Term Loan No. 1 and
Term Loan No. 2 shall be made by the Revolving/Term Lenders on the Closing Date
simultaneously and in accordance with their Pro Rata Revolving/Term Shares. It
is understood
-37-
<PAGE> 38
that (i) no Revolving/Term Lender shall be responsible for any failure by any
other Revolving/Term Lender to perform its obligation to make such Term Loans
hereunder, nor shall any Revolving/Term Commitment of any Revolving/Term Lender
be increased or decreased as a result of any failure by any other Revolving/Term
Lender to perform its obligation to make such Term Loans hereunder, and (ii) no
failure by any Revolving/Term Lender to perform its obligation to make such Term
Loans hereunder shall excuse any other Revolving/Term Lender from its obligation
to make such Term Loans hereunder.
(g) BRIDGE LENDERS' FAILURE TO PERFORM. The Bridge Loan shall
be made by the Bridge Lenders on the Closing Date simultaneously and in
accordance with their Pro Rata Bridge Shares. It is understood that (i) no
Bridge Lender shall be responsible for any failure by any other Bridge Lender to
perform its obligation to make the Bridge Loan hereunder, nor shall the Bridge
Commitment of any Bridge Lender be increased or decreased as a result of any
failure by any other Bridge Lender to perform its obligation to make the Bridge
Loan hereunder, and (ii) no failure by any Bridge Lender to perform its
obligation to make the Bridge Loan hereunder shall excuse any other Bridge
Lender from its obligation to make the Bridge Loan hereunder.
2.4. PAYMENTS.
(a) PAYMENTS BY BORROWER.
(i) All payments to be made by Borrower shall be made without
set-off, recoupment, deduction, or counterclaim, except as otherwise required by
law. Except as otherwise expressly provided herein, all payments by Borrower
shall be made to Agent for the account of the Lenders at Agent's address set
forth in SECTION 12, and shall be made in immediately available funds, no later
than 11:00 a.m. (California time) on the date specified herein. Any payment
received by Agent later than 11:00 a.m. (California time), at the option of
Agent, shall be deemed to have been received on the following Business Day and
any applicable interest or fee shall continue to accrue until such following
Business Day.
(ii) Whenever any payment is due on a day other than a
Business Day, such payment shall be made on the following Business Day, and such
extension of time shall in such case be included in the computation of interest
or fees, as the case may be.
(iii) Unless Agent receives notice from Borrower prior to the
date on which any payment is due to the Lenders that Borrower will not make such
payment in full as and when required, Agent may assume that Borrower has made
such payment in full to Agent on such date in immediately available funds and
Agent may (but shall not be so required), in reliance upon such assumption,
distribute to each Lender on such due date an amount equal to the amount then
due such Lender. If and to the extent Borrower has not made such payment in full
to Agent, each Lender shall repay to Agent on demand such amount distributed to
such Lender, together with interest thereon at the Reference Rate for each day
from the date such amount is distributed to such Lender until the date repaid.
-38-
<PAGE> 39
(b) APPORTIONMENT, APPLICATION, AND REVERSAL OF PAYMENTS.
Except as otherwise provided with respect to Defaulting Lenders, aggregate
principal and interest payments shall be apportioned ratably among the Lenders
(according to the unpaid principal balance of the Advances or the Term Loans to
which such payments relate held by each Lender) and payments of the fees (other
than fees designated for Agent's sole and separate account) shall, as
applicable, be apportioned ratably among the Lenders. All payments shall be
remitted to Agent and so long as no Event of Default exists, all such payments
not relating to principal or interest of specific Advances or the Term Loans, or
not constituting payment of specific fees, and all proceeds of Accounts or other
Collateral received by Agent, shall be applied, FIRST, to pay any fees, or
expense reimbursements then due to Agent from Borrower; SECOND, to pay any fees
or expense reimbursements then due to the Lenders from Borrower; THIRD, to pay
interest due in respect of all Advances (including Foothill Loans and Agent
Advances) and the Term Loans; FOURTH, to pay or prepay principal of Foothill
Loans and Agent Advances; FIFTH, ratably to pay principal of the Advances (other
than Foothill Loans and Agent Advances); SIXTH, ratably to repay the principal
of Term Loan No. 1 and Term Loan No. 2; SEVENTH, to be held by Agent as cash
collateral in accordance with SECTION 2.2(e) hereof with respect to unreimbursed
obligations in respect of Letters of Credit; EIGHTH, ratably to repay the
principal of Bridge Loan; and NINTH, ratably to pay any other Obligations due to
Agent or any Lender by Borrower; PROVIDED, that notwithstanding the foregoing,
proceeds of the Pledged Stock received by Agent shall be applied, FIRST to pay
any fees or expense reimbursements related to the Bridge Loan and the Pledged
Stock, SECOND, ratably to pay principal of the Bridge Loan and, thereafter, in
accordance with the initial portion of this sentence; PROVIDED, FURTHER, that so
long as no Event of Default exists, any and all payments made by Telxon Canada
or Telxon U.K. constituting proceeds of Collateral on or in respect of
Obligations, including proceeds or collections of the Collateral of Telxon
Canada or Telxon U.K., shall be applied to pay or prepay principal of the
Foothill Loans and Agent Advances and then to pay or prepay principal of the
Advances other than Foothill Loans and Agent Advances and to provide cash
collateral in respect of outstanding Letters of Credit or any unrepaid
reimbursement obligations in respect thereof, as applicable, and thereafter to
pay interest due in respect of Advances and Term Loans. Notwithstanding the
foregoing, if an Event of Default exists, all payments remitted to Agent shall
be applied FIRST, to pay any fees, or expense reimbursements then due to Agent
from Borrower; SECOND, to pay any fees or expense reimbursements then due to the
Lenders from Borrower; THIRD, to pay interest due in respect of all Advances
(including Foothill Loans and Agent Advances) and the Term Loans; FOURTH, to pay
or prepay principal of Foothill Loans and Agent Advances; and FIFTH, to the
remaining Obligations in such order and manner as elected by the Required
Revolving/Term Lenders (or if the Revolving/Term Commitment has been terminated
and the Revolving Loan, Term Loan No. 1, Term Loan No. 2 and the Obligations
with respect to Letters of Credit have been satisfied in full, as elected by the
Required Bridge Lenders); PROVIDED, that until the Bridge Loan has been repaid
in full, regardless of whether an Event of Default exists, proceeds of Pledged
Stock shall be applied as provided in the immediately preceding sentence.
(C) DEFAULTING LENDERS. Agent shall not be obligated to
transfer to a Defaulting Lender any payments made by Borrower to Agent for the
Defaulting Lender's benefit; nor shall a Defaulting Lender be entitled to the
sharing of any payments hereunder. Amounts payable to a Defaulting Lender shall
instead be paid to or retained by Agent. Agent
-39-
<PAGE> 40
may hold and, in its discretion, re-lend to Borrower the amount of all such
payments received or retained by it for the account of such Defaulting Lender.
Solely for the purposes of voting or consenting to matters with respect to the
Loan Documents and determining Pro Rata Shares, Pro Rata Revolving/Term Shares
and Pro Rata Bridge Shares, such Defaulting Lender shall be deemed not to be a
"Bridge Lender", "Lender" or "Revolving/Term Lender" and such Lender's
Commitment, Bridge Commitment and Revolving/Term Commitment shall be deemed to
be zero (-0-). This section shall remain effective with respect to such Lender
until the Obligations under this Agreement shall have been declared or shall
have become immediately due and payable. The operation of this section shall not
be construed to increase or otherwise affect the Commitment of any Lender, or
relieve or excuse the performance by Borrower of its duties and obligations
hereunder.
2.5. OVERADVANCES.
If, at any time or for any reason, the amount of Obligations
pursuant to SECTIONS 2.1 AND 2.2 is greater than either the Dollar or percentage
limitations set forth in SECTIONS 2.1 OR 2.2 (an "Overadvance"), Borrower
immediately shall pay to Agent, in cash, the amount of such excess, which amount
shall be used by Agent to reduce the Obligations in accordance with the priority
set forth in SECTION 2.4(b).
2.6. INTEREST AND LETTER OF CREDIT FEES: RATES, PAYMENTS, AND CALCULATIONS.
(a) INTEREST RATE. Except as provided in clause (c) below, (i)
all Obligations (except for Eurodollar Rate Loans, the Term Loans and amounts
undrawn under Letters of Credit) shall bear interest on the Daily Balance at a
per annum rate equal to the Reference Rate plus the Applicable Revolving Margin,
(ii) all Advances that are Eurodollar Rate Loans shall bear interest at a per
annum rate equal to the Adjusted Eurodollar Rate for the applicable Interest
Period plus the Applicable Revolving Margin, (iii) the portion of Term Loan No.
1 or the Bridge Loan that is a Reference Rate Loan shall bear interest at a per
annum rate equal to the Reference Rate plus 0.50%, (iv) the portion of Term Loan
No. 1 or the Bridge Loan that is a Eurodollar Rate Loan shall bear interest at a
per annum rate equal to the Adjusted Eurodollar Rate for the applicable Interest
period plus 2.75%, and (v) Term Loan No. 2 shall bear interest at a fixed per
annum rate of 12.5%; PROVIDED, that notwithstanding the foregoing at all times
on or after the earlier of December 26, 1999 and the date of any sale of the
Pledged Stock, the Bridge Loan shall bear interest at a fixed per annum rate of
15.5%.
(b) LETTER OF CREDIT FEE. Borrower shall pay Agent, for the
ratable benefit of the Revolving/Term Lenders a fee (in addition to the charges,
commissions, fees, and costs set forth in SECTION 2.2(D)) equal to 1.25% per
annum times the Daily Balance of the amount of the undrawn Letters of Credit.
(c) DEFAULT RATE. Upon the occurrence and during the
continuation of an Event of Default, all Obligations (except for the Letter of
Credit fee provided in SECTION 2.6(b)) shall bear interest at a rate per annum
of 3% in excess of the rate otherwise applicable to such Obligations; PROVIDED,
the Bridge Loan will bear interest at a fixed per annum rate of 15.5%. In
addition, the Letter of Credit fee provided in SECTION 2.6(b) shall be increased
to 4.25% per
-40-
<PAGE> 41
annum times the amount of the undrawn Letters of Credit that were outstanding
during the immediately preceding month;
(d) PAYMENTS. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of each month
during the term hereof. Borrower hereby authorizes Agent, at its option, without
prior notice to Borrower, to charge such interest and Letter of Credit fees, all
Lender Group Expenses (as and when incurred), the charges, commissions, fees,
and costs provided for in SECTION 2.2(d) (as and when accrued or incurred), the
fees and charges provided for in SECTION 2.11 (as and when accrued or incurred),
and all installments or other payments due under any Term Loan other than the
Bridge Loan or any Loan Document to Borrower's Loan Account, which amounts
thereafter shall accrue interest at the rate then applicable to Advances
hereunder. Any interest not paid when due shall be compounded and shall
thereafter accrue interest at the rate then applicable to Advances hereunder.
(e) COMPUTATION. The Reference Rate as of the date of this
Agreement is 8.25% per annum. In the event the Reference Rate is changed from
time to time hereafter, the rate of interest provided for in SECTION 2.6(a) and
SECTION 2.6(c)(i) and (ii) automatically and immediately shall be increased or
decreased by an amount equal to such change in the Reference Rate. All interest
and fees chargeable under the Loan Documents shall be computed on the basis of a
360 day year for the actual number of days elapsed.
(f) INTENT TO LIMIT CHARGES TO MAXIMUM LAWFUL RATE. In no
event shall the interest rates payable under this Agreement, plus any other
amounts paid in connection herewith, exceed the highest rate permissible under
any law that a court of competent jurisdiction shall, in a final determination,
deem applicable. Borrower and the Lender Group in executing and delivering this
Agreement, intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; PROVIDED, HOWEVER, that, anything contained herein
to the contrary notwithstanding, if said rate or rates of interest or manner of
payment exceeds the maximum allowable under applicable law, then, IPSO FACTO as
of the date of this Agreement, Borrower is and shall be liable only for the
payment of such maximum as allowed by law, and payment received from Borrower in
excess of such legal maximum, whenever received, shall be applied to reduce the
principal balance of the Obligations to the extent of such excess.
2.7. COLLECTION OF ACCOUNTS.
Borrower shall at all times maintain, and cause each of the
other Companies (other than Telxon Canada and Telxon U.K.) to maintain,
lockboxes (the "Lockboxes") and, immediately after the Closing Date, (i) shall
instruct all Account Debtors with respect to the Accounts, General Intangibles,
and Negotiable Collateral of each Company (other than Telxon Canada and Telxon
U.K.) to remit ALL Collections of such Company in respect thereof to such
Lockboxes, and (ii) shall deposit all other Collections received by Borrower
from any source immediately upon receipt in to the Lockboxes. Each Company
(other than Telxon Canada and Telxon U.K.), Agent, and the applicable Lockbox
Bank shall enter into a Lockbox Agreement, which among other things shall
provide for the opening of a Lockbox
-41-
<PAGE> 42
Account for the deposit of Collections of such Company at a Lockbox Bank.
Borrower agrees that all Collections and other amounts received by Borrower or
by any other Company (other than Telxon Canada and Telxon U.K.) from any Account
Debtor or any other source immediately upon receipt shall be deposited into a
Lockbox Account. No Lockbox Agreement or arrangement contemplated thereby shall
be modified by the Company party thereto without the prior written consent of
Agent. Upon the terms and subject to the conditions set forth in the Lockbox
Agreements, all amounts received in each Lockbox Account shall be wired each
Business Day into an account (the "Agent Account") maintained by Agent at a
depositary selected by Agent.
2.8. CREDITING PAYMENTS; APPLICATION OF COLLECTIONS.
The receipt of any Collections by Agent (whether from
transfers to Agent by the Lockbox Banks pursuant to the Lockbox Agreements or
otherwise) immediately shall be applied provisionally to reduce the Obligations
outstanding under SECTION 2.1, but shall not be considered a payment on account
unless such Collection item is a wire transfer of immediately available federal
funds and is made to the Agent Account or unless and until such Collection item
is honored when presented for payment. From and after the Closing Date, Agent
shall be entitled to charge Borrower for one Business Day of 'clearance' or
'float' at the rate set forth in SECTION 2.6(a) or SECTION 2.6(c), as
applicable, on all Collections that are received by Agent (regardless of whether
forwarded by the Lockbox Banks to Agent, whether provisionally applied to reduce
the Obligations under SECTION 2.1, or otherwise). This across-the-board one
Business Day clearance or float charge on all Collections is acknowledged by the
parties to constitute an integral aspect of the pricing of the Lender Group's
financing of Borrower, and shall apply irrespective of the characterization of
whether receipts are owned by Borrower or Agent, and whether or not there are
any outstanding Advances, the effect of such clearance or float charge being the
equivalent of charging one Business Day of interest on such Collections. Should
any Collection item not be honored when presented for payment, then Borrower
shall be deemed not to have made such payment, and interest shall be
recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by Agent only if
it is received into the Agent Account on a Business Day on or before 11:00 a.m.
California time. If any Collection item is received into the Agent Account on a
non-Business Day or after 11:00 a.m. California time on a Business Day, it shall
be deemed to have been received by Agent as of the opening of business on the
immediately following Business Day. Anything contained herein to the contrary
notwithstanding, the economic benefit of the one Business Day clearance or float
charge provided for in this SECTION 2.8 is not for the ratable benefit of the
Lenders, but instead shall be for the sole and separate account of Agent.
2.9. DESIGNATED ACCOUNT.
Agent, Foothill, and the Lenders are authorized to make the
Advances, the Term Loans, and the Letters of Credit under this Agreement based
upon telephonic or other instructions received from anyone purporting to be an
Authorized Person, or without instructions if pursuant to SECTION 2.6(e).
Borrower agrees to establish and maintain the Designated Account with the
Designated Account Bank for the purpose of receiving the
-42-
<PAGE> 43
proceeds of the Advances and the Term Loans requested by Borrower and made by
Agent, Foothill or the Lenders hereunder. Unless otherwise agreed in writing by
Agent and Borrower, any Advance and the Term Loans requested by Borrower and
made hereunder shall be made to the Designated Account.
2.10. MAINTENANCE OF LOAN ACCOUNT; STATEMENTS OF OBLIGATIONS.
Agent shall maintain an account on its books in the name of
Borrower (the "Loan Account") on which Borrower will be charged with all
Advances and the Term Loans made by Agent, Foothill, or the Lenders to Borrower
or for Borrower's account, including, accrued interest, Lender Group Expenses,
and any other payment Obligations of Borrower. In accordance with SECTION 2.8,
the Loan Account will be credited with all payments received by Agent from
Borrower or for Borrower's account, including all amounts received in the Agent
Account from any Lockbox Bank. Agent shall render statements regarding the Loan
Account to Borrower, including principal, interest, fees, and including an
itemization of all charges and expenses constituting Lender Group Expenses
owing, and such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between Borrower and the Lender Group
unless, within 30 days after receipt thereof by Borrower, Borrower shall deliver
to Agent written objection thereto describing the error or errors contained in
any such statements.
2.11. FEES.
Borrower shall pay to Agent for the ratable benefit of the
Lender Group (except as otherwise indicated) the following fees:
(a) AGENT FEES. Borrower shall pay to Agent, for Agent's sole
and separate account, (i) the fees described in those certain Fee Letters dated
as of July 30, 1999, which Fee Letters are referred to in the $100,000,000
Commitment Letter, and (ii) the fees described in that certain Fee Letter of
even date herewith.
(b) UNUSED LINE FEE. On the first day of each month during the
term of this Agreement, an unused line fee in an amount equal to 0.375% per
annum times the Average Unused Portion of the Maximum Revolving Amount, for the
ratable benefit of the Revolving/Term Lenders; and.
(c) FINANCIAL EXAMINATION, DOCUMENTATION, AND APPRAISAL FEES.
For the sole and separate account of Agent: Agent's customary fee of $750 per
day per examiner, plus Agent's out-of-pocket expenses (including electronic
set-up fees)for each financial analysis and examination (i.e., audits) of
Borrower performed by personnel employed by Agent; Agent's customary appraisal
fee of $1,500 per day per appraiser, plus Agent's out-of-pocket expenses for
each appraisal of the Collateral performed by personnel employed by Agent; and,
the actual charges paid or incurred by Agent if it elects to employ the services
of one or more third Persons to perform such financial analyses and examinations
(i.e., audits) of Borrower or to appraise the Collateral;
-43-
<PAGE> 44
2.12. EURODOLLAR RATE LOANS.
Any other provisions herein to the contrary notwithstanding,
the following provisions shall govern with respect to Eurodollar Rate Loans as
to the matters covered:
(a) BORROWING; CONVERSION; CONTINUATION. Borrower may from
time to time, on or after the Closing Date, request in a written or telephonic
communication with Agent: (i) Loans (other than Term Loan No. 2 or, at any time
after the earlier of December 26, 1999 and the date of any sale of the Pledged
Stock, the Bridge Loan) to constitute Eurodollar Rate Loans (pursuant to SECTION
2.12(C)); (ii) that Reference Rate Loans (other than Term Loan No. 2) be
converted into Eurodollar Rate Loans; or (iii) that existing Eurodollar Rate
Loans continue for an additional Interest Period. Any such request shall specify
the aggregate amount of the requested Eurodollar Rate Loans, the proposed
funding date therefor (which shall be a Business Day, and with respect to
continued Eurodollar Rate shall be the last day of the Interest Period of the
existing Eurodollar Rate loans being continued), and the proposed Interest
Period, in each case subject to the limitations set forth below). Eurodollar
Rate Loans may only be made, continue, or be extended if, as of the proposed
funding date therefor each of the following conditions is satisfied:
(i) no Event of Default exists;
(ii) no more than 5 Interest Periods may be in effect at any one
time (PROVIDED, that no more than 2 Interest Periods with respect to
the Bridge Loan may be in effect at any time);
(iii) the amount of each Eurodollar Rate Loan borrowed,
converted, or continued must be in an amount not less than $1,000,000
and integral multiples of $500,000 in excess thereof;
(iv) Agent shall have determined that the Interest Period or
Adjusted Eurodollar Rate is available to Agent and can be readily
determined as of the date of the request for such Eurodollar Rate Loan
by Borrower;
(v) Agent shall have received such request at least 2 Business
Days prior to the proposed funding date therefor;
(vi) no portion of Term Loan No. 2 shall be a Eurodollar Rate
Loan; and
(vii) no portion of the Bridge shall be a Eurodollar Rate Loan at
any time after the earlier of December 26, 1999 and the date of any
sale of the Pledge Stock.
Any request by Borrower to borrow Eurodollar Rate Loans, to convert Reference
Rate Loans to Eurodollar Rate Loans, or to continue any existing Eurodollar Rate
Loans shall be irrevocable, except to the extent that Agent shall determine
under SECTIONS 2.12(a), 2.13 or 2.14 that such Eurodollar Rate Loans cannot be
made or continued.
-44-
<PAGE> 45
(b) DETERMINATION OF INTEREST PERIOD. By giving notice as set forth in
SECTION 2.12(A), the Borrower shall have the option of selecting an Interest
Period for such Eurodollar Rate Loan. The determination of Interests Periods
shall be subject to the following provisions:
(i) in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the date on which the next
preceding Interest Period expires;
(ii) if any Interest period would otherwise expire on a day
which is not a Business Day, the Interest Period shall be extended to expire on
the next succeeding Business Day; PROVIDED, HOWEVER, that if the next succeeding
Business Day occurs in the following calendar month, then such Interest Period
shall expire on the immediately preceding Business Day;
(iii) if any Interest Period begins on the last Business Day
of a month, or on a day for which there is no numerically corresponding day in
the calendar month at the end of such Interest Period, then the Interest Period
shall end on the last Business Day of the calendar month at the end of such
Interest Period; and
(iv) the Borrower may not select an Interest period which
expires after the last day of the then current term of this Agreement.
(c) AUTOMATIC CONVERSION; OPTIONAL CONVERSION BY AGENT. Any Eurodollar
Rate Loan shall automatically convert to a Reference Rate Loan upon the last day
of the applicable Interest Period, unless Agent has received a request to
continue such Eurodollar Rate Loan at least 2 Business Days prior to the end of
such Interest period in accordance with the terms of SECTION 2.12(A). Any
Eurodollar Rate Loan shall, at Agent's option, upon notice to Borrower, convert
to a Reference Rate Loan in the event that (i) an Event of Default shall have
occurred and be continuing as of the last day of the Interest Period for such
Eurodollar Rate Loan, or (ii) this Agreement shall terminate, and Borrower shall
pay to Agent for the benefit of Lenders any amounts required by SECTION 2.15 as
a result thereof.
2.13. ILLEGALITY.
Any other provision herein to the contrary notwithstanding, if
the adoption of or any change in any law or in the interpretation or application
thereof shall make it unlawful for any Lender to make or maintain Eurodollar
Rate Loans as contemplated by this Agreement, (a) the obligation of such Lender
hereunder to make Eurodollar Rate Loans, continue Eurodollar Rate Loans as such,
and convert Reference Rate Loans to Eurodollar Rate Loans shall forthwith be
cancelled and (b) the then outstanding Eurodollar Rate Loans, if any, shall be
converted automatically to Reference Rate Loans on the respective last days of
the then current Interest Periods with respect thereto or within such earlier
period as required by law; PROVIDED, HOWEVER, that before making any such
demand, such Lender agrees to use reasonable efforts (consistent with its
internal policy and legal and regulatory
-45-
<PAGE> 46
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic or regulatory manner) to
designate a different lending office if the making of such a designation would
allow such Lender or its lending office to continue to perform its obligations
to make Eurodollar Rate Loans. If any such conversion of a Eurodollar Rate Loan
occurs on a day which is not the last day of the then current Interest period
with respect thereto, Borrower shall pay to Agent for the benefit of such Lender
such amounts, if any, as may be required pursuant to SECTION 2.15. If
circumstances subsequently change so that such Lender shall determine that it is
no longer so affected, such Lender will promptly notify Agent and Borrower, and
upon receipt of such notice, the obligations of such Lender to make or continue
Eurodollar Rate Loans or to convert Reference Rate Loans into Eurodollar Rate
Loans shall be reinstated.
2.14. REQUIREMENTS OF LAW.
(a) If the adoption of or any change in any law or in the
interpretation or application thereof or compliance by any Lender with any
request or directive (whether or not having the force of law) from any central
bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject such Lender to any tax, levy, charge, fee,
reduction or withholding of any kind whatsoever with respect to this Agreement
or any Loan, or change the basis of taxation of payments to such Lender in
respect thereof (except for taxes and the establishment of a tax based on the
net income of such Lender or changes in the rate of tax on the net income of
such Lender);
(ii) shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, Loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender; or
(iii) shall impose on such Lender any other condition with
respect to this Agreement or any Loan;
and the result of any of the foregoing is to increase the cost to such
Lender, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining Loans or to increase the cost to such
Lender, by an amount which such Lender deems to be material, or to reduce any
amount receivable hereunder in respect of Loans, or to forego any other sum
payable thereunder or make any new or additional payment on account thereof,
then, in any such case, Borrower shall promptly pay to Agent for the benefit of
such Lender, upon its demand, any additional amounts necessary to compensate
such Lender for such increased cost or reduced amount receivable; PROVIDED,
HOWEVER, that before making any such demand, such Lender agrees to use
reasonable efforts (consistent with its internal policy and legal and regulatory
restrictions and so long as such efforts would not be disadvantageous to it, in
its reasonable discretion, in any legal, economic or regulatory manner) to
designate a different Eurodollar lending office if the making of such
designation would allow such Lender or its Eurodollar lending office to continue
to perform its
-46-
<PAGE> 47
obligations to make Eurodollar Rate Loans or to continue to fund or maintain
Eurodollar Rate Loans and avoid the need for, or materially reduce the amount
of, such increased cost. If any Lender becomes entitled to claim any additional
amounts pursuant to this SECTION 2.14, such Lender shall promptly notify Agent
and Borrower of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this SECTION 2.14
submitted by such Lender to Agent and Borrower shall be conclusive in the
absence of manifest error. If Borrower so notifies Agent and such Lender within
5 Business Days after such Lender notifies Borrower of any increased cost
pursuant to the foregoing provisions of this SECTION 2.14, Borrower may convert
all Eurodollar Rate Loans then outstanding into Reference Rate loans in
accordance with SECTION 2.12 and, additionally, reimburse such Lender for any
cost in accordance with SECTION 2.16. This covenant shall survive the
termination of this Agreement and the payment of all other amounts payable
hereunder for 9 months following such termination and repayment.
(b) If any Lender shall have determined that the adoption of
or any change in any law regarding capital adequacy or in the interpretation or
application thereof or compliance by any Lender or any Person controlling such
Lender with any request or directive regarding capital adequacy (whether or not
having the force of law) from any Governmental Authority made subsequent to the
date hereof does or shall have the effect of increasing the amount of capital
required to be maintained or reducing the rate of return on such Lender's or
such Person's capital as a consequence of its obligations hereunder to a level
below that which such Lender or such Person could have achieved but for such
change or compliance (taking into consideration such Lender's or such Person's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then from time to time, after submission by such Lender to Agent
and Borrower of a prompt written request therefor, Borrower shall pay to Agent,
for the benefit of such Lender, such additional amount or amounts as will
compensate such Lender or such Person for such reduction. This covenant shall
survive the termination of this Agreement and the payment of the Loans and all
other amounts payable hereunder for 9 months following such termination and
repayment.
2.15. INDEMNITY.
Borrower agrees to indemnify each Lender and to hold each
Lender harmless from any loss or expense which such Lender may sustain or incur
as a consequence of (a) default by Borrower in payment when due of the principal
amount of or interest on any Eurodollar Rate Loan, (b) default by Borrower in
making a borrowing of, conversion into, or continuation of Eurodollar Rate Loans
after Borrower has given a notice requesting the same in accordance with the
provisions of this Agreement, (c) default by Borrower in making any prepayment
after Borrower has given a notice thereof in accordance with the provisions of
this Agreement, or (d) the making of a prepayment of Eurodollar Rate Loans on a
day which is not the last day of an Interest Period with respect thereto
(whether due to the termination of this Agreement upon the Event of Default or
otherwise), including, in each case, any such loss or expense (but excluding
loss of margin) arising from the reemployment of funds obtained by it or from
fees payable to terminate the deposits from which such funds were obtained.
Calculation of all amounts payable to any Lender under this SECTION 2.15 shall
be made as though such Lender had actually funded the relevant Eurodollar Rate
Loan through
-47-
<PAGE> 48
the purchase of a deposit bearing interest at the Eurodollar Rate in an amount
equal to the amount of such Eurodollar Rate Loan and having a maturity
comparable to the relevant Interest Period; PROVIDED, HOWEVER, that such Lender
may fund each of the Eurodollar Rate Loans in any manner it sees fit, and the
foregoing assumption shall be utilized only for the calculation of amounts
payable under this SECTION 2.15. This covenant shall survive the termination of
this Agreement and the payment of the Loans and all other amounts payable
hereunder for a period of 9 months thereafter.
2.16. TAXES.
Except as provided below in this SECTION 2.16, all payments
made by any Company under this Agreement and any other Loan Documents shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding net
income taxes and franchise taxes imposed in lieu of net income taxes. If any
such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings ("Non-Excluded Taxes") are required to be withheld from any amounts
payable to any Lender hereunder or under any other Loan Documents, the amounts
so payable to such Lender shall be increased to the extent necessary to yield to
such Lender (after payment of all Non-Excluded Taxes) interest or any such other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement and any other Loan Documents. Whenever any Non-Excluded Taxes are
payable by Borrower or any other Company, as promptly as possible thereafter
Borrower or such other Company shall send to Agent a certified copy of an
original official receipt received by Borrower or such other Company showing
payment thereof. If the applicable Company fails to pay any Non-Excluded Taxes
when due to the appropriate taxing authority or fails to remit to Agent the
required receipts or other required documentary evidence, Borrower shall
indemnify each Lender for any incremental taxes, interest or penalties that may
become payable by such Lender as a result of any such failure. The agreements in
this SECTION 2.16 shall survive the termination of this Agreement and the
payment of all other amounts payable hereunder.
3. CONDITIONS; TERM OF AGREEMENT.
3.1. CONDITIONS PRECEDENT TO THE INITIAL ADVANCE, TERM LOAN, AND LETTER OF
CREDIT.
The obligation of the Lender Group (or any member thereof) to
make the initial Advance and the Term Loans, or to issue the initial Letter of
Credit is subject to the fulfillment, to the satisfaction of Agent and its
counsel, of each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before August 30,
1999;
(b) Agent shall have received all financing statements and
fixture filings required by Agent, duly executed by each Company (other than
Telxon Canada and Telxon
-48-
<PAGE> 49
U.K.), and Agent shall have received searches reflecting the filing of all such
financing statements and fixture filings and all Liens on property of the
Companies (other than Telxon Canada and Telxon U.K.) shall have been terminated
except for Permitted Liens;
(c) Agent shall have received each of the following documents, in form
and substance satisfactory to Agent, duly executed, and each such document shall
be in full force and effect:
(i) the Lockbox Agreements;
(ii) the Disbursement Letter;
(iii) the Pay-Off Letter, together with UCC termination
statements and other documentation evidencing the termination by Existing
Lenders of their Liens in and to the properties and assets of the Companies
(other than Telxon Canada and Telxon U.K.);
(iv) the Mortgages;
(v) the Stock Pledge Agreement and the Intellectual Property
Mortgage; and
(vi) such documents as Agent may require for PenRight! to
grant Agent and/or Lenders (as required by Agent) a perfected Lien in all of the
assets of each such Company.
(d) Agent shall have received a certificate from the Secretary or an
Assistant Secretary of each Company (other than Telxon Canada or Telxon U.K.)
attesting to the resolutions of such Company's Board of Directors authorizing
its execution, delivery, and performance of this Agreement and the other Loan
Documents to which such Company is a party and authorizing specific officers of
such Company to execute the same;
(e) Agent shall have received copies of each Company's Governing
Documents (other than Telxon Canada or Telxon U.K.), as amended, modified, or
supplemented to the Closing Date, certified by the Secretary of such Company;
(f) Agent shall have received a certificate of status with respect to
each Company (other Telxon Canada or Telxon U.K.), dated within 10 days of the
Closing Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Company, which certificate shall indicate
that such Company is in good standing in such jurisdiction;
(g) Agent shall have received certificates of status with respect to
each Company (other Telxon Canada or Telxon U.K.), each dated within 15 days of
the Closing Date, such certificates to be issued by the appropriate officer of
the jurisdictions in which its failure to be duly qualified or licensed would
constitute a Material Adverse Change, which certificates shall indicate that
such Company is in good standing in such jurisdictions;
-49-
<PAGE> 50
(h) Agent shall have received a certificate of insurance,
together with the endorsements thereto, as are required by SECTION 6.10, the
form and substance of which shall be satisfactory to Agent and its counsel;
(i) Agent shall have received duly executed certificates of
title with respect to that portion of the Collateral that is subject to
certificates of title;
(j) Agent shall have received such Collateral Access
Agreements from lessors, warehousemen, bailees, and other third persons as Agent
may require;
(k) Agent shall have received an opinion of counsel to each
Company (other Telxon Canada or Telxon U.K.) in form and substance satisfactory
to Agent in its sole discretion;
(l) Agent shall have received (i) appraisals of the Real
Property Collateral and appraisals of the Equipment, in each case satisfactory
to Agent, and (ii) mortgagee title insurance policies (or marked commitments to
issue the same) and ALTA surveys for the Real Property Collateral issued by a
title insurance company satisfactory to Agent (each a "Mortgage Policy" and,
collectively, the "Mortgage Policies") in amounts satisfactory to Agent assuring
Agent that the Mortgages on such Real Property Collateral are valid and
enforceable first priority mortgage Liens on such Real Property Collateral free
and clear of all defects and encumbrances except Permitted Liens, and the
Mortgage Policies shall otherwise be in form and substance reasonably
satisfactory to Agent;
(m) Agent shall have received a phase-I environmental
report, and a real estate survey shall have been completed, with respect to the
Real Property Collateral, and copies thereof delivered to Agent; the
environmental consultants and surveyors retained for such reports or surveys,
the scope of the reports or surveys, and the results thereof shall be acceptable
to Agent in its sole discretion;
(n) Agent shall have received, if requested by
Agent, satisfactory evidence that all tax returns required to be filed by each
Company have been timely filed and all taxes upon each Company (other Telxon
Canada or Telxon U.K.) or its properties, assets, income, and franchises
(including real property taxes and payroll taxes) have been paid prior to
delinquency, except such taxes that are the subject of a Permitted Protest;
(o) all other documents and legal matters in connection with
the transactions contemplated by this Agreement shall have been delivered,
executed, or recorded and shall be in form and substance satisfactory to Agent
and its counsel;
(p) Borrower shall have executed and/or delivered, or caused
to be delivered, to Agent at or prior to the closing date such documents as are
necessary to grant the Agent a first priority perfected security interest in the
Pledged Stock (including all stock certificates evidencing the same and stock
powers executed in blank) which shall not be less than 4,976,500 shares.
Borrower shall have obtained all consents necessary to grant the security
interests
-50-
<PAGE> 51
referred to in this clause such that such grant of security interest will not
breach the terms of any agreement to which Borrower is a party or violate any
law applicable to Borrower;
(q) Agent shall have completed all lien searches with respect
to the Collateral;
(r) Borrower shall, at closing, have a level of unused loan
availability for Advances under the Agreement in an amount not less than
$30,000,000 before giving effect to the payment of accounts payable that are not
"current" as determined by Agent; PROVIDED, that Agent shall have determined
that the accounts payable have not materially deteriorated since the date of the
prospect audit by Agent;
(s) Agent shall have confirmed that all unearned
maintenance and service billings have been excluded from Eligible Accounts (to
be confirmed at the time of the update audit);
(t) Agent shall have conducted further analysis of the
adequacy of the revenue reversal reserve, to be confirmed at the time of the
update audit;
(u) Agent shall have conducted an update and a pre-closing
audit and the results thereof shall not have differed materially from the
previous audit conducted by Agent and shall otherwise be satisfactory to Agent;
(v) Agent shall have received and reviewed an updated
Business Plan reflecting the initial public offering and secondary offering of
the capital stock of Aironet, and the results of such review shall be
satisfactory to Agent;
(w) Agent shall have completed its legal due diligence,
including a review of material contracts (including the indentures with respect
to all subordinated debt) and the results thereof shall be satisfactory to
Agent;
(x) There shall have been no material adverse change in the
business, operations, assets, financial condition or prospects of Borrower and
Guarantors since March 31, 1999; and
(y) Borrower shall have confirmed no broker's fees are
due in connection with the loan closing.
Execution and delivery to the Agent by a Lender of a counterpart of this
Agreement shall be deemed confirmation by such Lender that (i) all conditions
precedent in this SECTION 3.1 have been fulfilled to the satisfaction of such
Lender and (ii) the decision of such Lender to execute and deliver to the Agent
an executed counterpart of this Agreement was made by such Lender independently
and without reliance on the Agent or any other Lender as to the satisfaction of
any condition precedent set forth in this SECTION 3.1.
-51-
<PAGE> 52
3.2. CONDITIONS PRECEDENT TO ALL ADVANCES AND ALL LETTERS OF CREDIT.
The following shall be conditions precedent to all Advances,
all Term Loans and all Letters of Credit hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in all respects
on and as of the date of such extension of credit, as though made on and as of
such date (except to the extent that such representations and warranties relate
solely to an earlier date);
(b) no Default or Event of Default shall have occurred and be
continuing on the date of such extension of credit, nor shall either result from
the making thereof;
(c) no injunction, writ, restraining order, or other order of
any nature prohibiting, directly or indirectly, the extending of such credit
shall have been issued and remain in force by any governmental authority against
any Company, Agent, the Lender Group, or any of their Affiliates; and
(d) the amount of the Revolving Facility Usage, after giving
effect to the requested Advance or Letter of Credit, shall not exceed the
Availability.
The foregoing conditions precedent are not conditions to each Revolving/Term
Lender (i) participating in or reimbursing Agent for such Revolving/Term
Lenders' Pro Rata Revolving/Term Share of any drawings under Letters of Credit
as provided herein, or (ii) participating in or reimbursing Foothill or the
Agent for such Revolving/Term Lenders' Pro Rata Revolving/Term Share of any
Foothill Loan or Agent Advance as provided herein.
3.3. CONDITION SUBSEQUENT.
As a condition subsequent to initial closing hereunder,
Borrower shall perform or cause to be performed the following (the failure by
Borrower to so perform or cause to be performed constituting an Event of
Default):
(a) within 30 days of the Closing Date, deliver to Agent the
certified copies of the policies of insurance, together with the endorsements
thereto, as are required by SECTION 6.10, the form and substance of which shall
be satisfactory to Agent and its counsel; and
(b) Within 45 days from the Closing Date, Borrower shall have
delivered an appraisal of the recurring revenue stream generated by the
Borrower's Maintenance and Service Contracts in form and substance satisfactory
to Agent.
3.4. TERM; AUTOMATIC RENEWAL.
(a) This Agreement shall become effective upon the execution
and delivery hereof by Borrower and the Lender Group and shall continue in full
force and effect for a term ending on the date (the "Renewal Date") that is
three years from the Closing Date and
-52-
<PAGE> 53
automatically shall be renewed for successive one year periods thereafter,
unless sooner terminated pursuant to the terms hereof.
(b) Any party may terminate this Agreement effective on the
Renewal Date or on any one year anniversary of the Renewal Date by giving the
other party at least 90 days prior written notice. The foregoing
notwithstanding, the Required Revolving/Term Lenders shall have the right to
terminate the obligations of Lenders under this Agreement immediately and
without notice upon the occurrence and during the continuation of an Event of
Default.
3.5. EFFECT OF TERMINATION.
(a) On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of Borrower with
respect to any outstanding Letters of Credit) immediately shall become due and
payable without notice or demand. No termination of this Agreement, however,
shall relieve or discharge Borrower of Borrower's duties, Obligations, or
covenants hereunder or under the other Loan Documents, and Agent's Liens in the
Collateral, for the benefit of the Lender Group, shall remain in effect until
all Obligations have been fully and finally discharged and the Lender Group's
obligations to provide additional credit hereunder have been terminated.
(b) If Borrower has sent a notice of termination pursuant to
the provisions of SECTION 3.4, but fails to pay the Obligations in full on the
date set forth in said notice, then the Lender Group may, but shall not be
required to, renew this Agreement for an additional term of one year.
3.6. EARLY TERMINATION BY BORROWER.
The provisions of SECTION 3.4 that allow termination of this
Agreement by Borrower only on the Renewal Date and certain anniversaries thereof
notwithstanding, Borrower has the option, at any time upon 30 days prior written
notice to Agent, to terminate this Agreement by paying to Agent, for the ratable
benefit of the Revolving/Term Lenders, in cash, the Obligations (including an
amount equal to 105% of the undrawn amount of the Letters of Credit), in full,
together with a premium (the "Early Termination Premium") equal to (a) 3% of the
Maximum Revolving/Term Loan Amount plus the outstanding principal balance of the
Bridge Loan if terminated on or prior to the first anniversary of this
Agreement; (b) 2% of the Maximum Revolving/Term Loan Amount plus the outstanding
principal balance of the Bridge Loan if terminated after the first anniversary
of this Agreement, but on or prior to the second anniversary of this Agreement;
and (c) 1% of the Maximum Revolving/Term Loan Amount plus the outstanding
principal balance of the Bridge Loan if terminated after the second anniversary
of this Agreement, but prior to the third anniversary of this Agreement or
during any renewal term.
3.7. TERMINATION UPON EVENT OF DEFAULT.
If the Revolving/Term Lenders terminates this Agreement upon
the occurrence of an Event of Default, in view of the impracticability and
extreme difficulty of ascertaining
-53-
<PAGE> 54
actual damages and by mutual agreement of the parties as to a reasonable
calculation of the Revolving/Term Lenders lost profits as a result thereof,
Borrower shall pay to Agent, for the ratable benefit of the Revolving/Term
Lenders, upon the effective date of such termination, a premium in an amount
equal to the Early Termination Premium. The Early Termination Premium shall be
presumed to be the amount of damages sustained by the Revolving/Term Lenders as
the result of the early termination and Borrower agrees that it is reasonable
under the circumstances currently existing. The Early Termination Premium
provided for in this SECTION 3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1. GRANT OF SECURITY INTEREST.
Borrower hereby grants to Agent, for the benefit of the Lender
Group, continuing Liens on all right, title, and interest of Borrower in and to
all currently existing and hereafter acquired or arising Borrower's Collateral
in order to secure prompt repayment of any and all Obligations and in order to
secure prompt performance by Borrower of each of its covenants and duties under
the Loan Documents (together with all Liens in favor of Agent and/or Lenders
under the Loan Documents, the "Agent's Liens"). The Agent's Liens in and to the
Collateral shall attach to all Collateral without further act on the part of the
Lender Group or any Company. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for the sale of Inventory
to buyers in the ordinary course of business or other dispositions of Collateral
permitted pursuant to SECTION 7.4 of this Agreement, Borrower has no authority,
express or implied, to dispose of any item or portion of the Borrower's
Collateral. Subject to SECTION 2.4(B), the secured claims of the Lender Group
secured by the Collateral shall be of equal priority, and ratable according to
the respective Obligations due each member of the Lender Group.
4.2. NEGOTIABLE COLLATERAL.
In the event that any of Borrower's Collateral, including
proceeds, is evidenced by or consists of Negotiable Collateral, Borrower
promptly shall endorse and deliver physical possession of such Negotiable
Collateral to Agent.
4.3. COLLECTION OF ACCOUNTS, GENERAL INTANGIBLES, AND NEGOTIABLE
COLLATERAL.
At any time, Agent or Agent's designee may (a) notify
customers or Account Debtors that the Accounts, General Intangibles, or
Negotiable Collateral have been assigned to Agent and/or Lenders for the benefit
of the Lender Group, or that Agent, for the benefit of the Lender Group, and/or
Lenders, has a security interest therein and (b) if an Event of Default has
occurred and while the same is continuing, collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the collection costs
and expenses to the Loan Account. Borrower agrees that it will hold in trust for
the Lender Group, as the Lender Group's trustee, any Collections that it
receives and immediately will deliver said Collections to Agent in their
original form as received by Borrower.
-54-
<PAGE> 55
4.4. DELIVERY OF ADDITIONAL DOCUMENTATION REQUIRED.
At any time upon the request of Agent, Borrower shall execute
and deliver and shall cause the other Companies to executed and deliver to Agent
all financing statements, collateral assignments, continuation financing
statements, fixture filings, security agreements, pledges, assignments,
mortgages, leasehold mortgages, deeds of trust, leasehold deeds of trust,
endorsements of certificates of title, applications for title, affidavits,
reports, notices, schedules of accounts, letters of authority, and all other
documents that Agent reasonably may request, in form satisfactory to Agent, to
perfect and continue perfected the Agent's Liens on the Collateral (whether now
owned or hereafter arising or acquired), and in order to consummate fully all of
the transactions contemplated hereby and under the other the Loan Documents.
4.5. POWER OF ATTORNEY.
Borrower hereby irrevocably makes, constitutes, and appoints
Agent (and any of Agent's officers, employees, or agents designated by Agent) as
Borrower's true and lawful attorney, with power to (a) if Borrower refuses to,
or fails timely to execute and deliver any of the documents described in SECTION
4.4, sign the name of Borrower on any of the documents described in SECTION 4.4,
(b) at any time that an Event of Default has occurred and is continuing, sign
Borrower's name on any invoice or bill of lading relating to any Account, drafts
against Account Debtors, schedules and assignments of Accounts, verifications of
Accounts, and notices to Account Debtors, (c) send requests for verification of
Accounts, (d) endorse Borrower's name on any Collection item that may come into
the Lender Group's possession, (e) at any time that an Event of Default has
occurred and is continuing, notify the post office authorities to change the
address for delivery of Borrower's mail to an address designated by Agent, to
receive and open all mail addressed to Borrower, and to retain all mail relating
to the Collateral and promptly forward all other mail to Borrower, (f) at any
time that an Event of Default has occurred and is continuing, make, settle, and
adjust all claims under Borrower's policies of insurance and make all
determinations and decisions with respect to such policies of insurance, and (g)
at any time that an Event of Default has occurred and is continuing, settle and
adjust disputes and claims respecting the Accounts directly with Account
Debtors, for amounts and upon terms that Agent determines to be reasonable, and
Agent may cause to be executed and delivered any documents and releases that
Agent determines to be necessary. The appointment of Agent as Borrower's
attorney, and each and every one of Agent's rights and powers, being coupled
with an interest, is irrevocable until all of the Obligations have been fully
and finally repaid and performed and the Lender Groups' obligations to extend
credit hereunder are terminated.
4.6. RIGHT TO INSPECT; APPRAISALS.
(a) Agent (through any of its officers, employees, or agents)
shall have the right, from time to time hereafter to inspect the Company Books
of any Company and to check, test, and appraise the Collateral in order to
verify each Company's financial condition or the amount, quality, value,
condition of, or any other matter relating to, the Collateral.
-55-
<PAGE> 56
(b) Borrower will cause an appraiser acceptable to Agent to
deliver new full appraisals of the Companies' Equipment and Real Property
Collateral that were conducted in a manner satisfactory to Agent on an annual
basis. In addition, Borrower will cause desk top appraisals of Companies'
Equipment prepared by an appraiser acceptable to Agent to be delivered to Agent
in a form satisfactory to Agent on a semi-annual basis.
4.7. CONTROL AGREEMENTS.
Borrower agrees that it will not, and it will not permit any
other Company to, transfer assets out of any Securities Accounts other than as
permitted under SECTION 7.22 and, if to another securities intermediary, unless
each of such Company, Agent, and the substitute securities intermediary have
entered into a Control Agreement. No arrangement contemplated hereby or by any
Control Agreement in respect of any Securities Accounts or other investment
property shall be modified by any Company without the prior written consent of
Agent. Upon the occurrence and during the continuance of a Default or Event of
Default, Agent may notify any securities intermediary to liquidate or transfer
the applicable Securities Account or any related investment property maintained
or held thereby and remit the proceeds thereof to the Agent Account.
5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lender Group to enter into this
Agreement, Borrower makes the following representations and warranties to the
Lender Group which shall be true, correct, and complete in all respects as of
the date hereof, and shall be true, correct, and complete in all respects as of
the Closing Date, and at and as of the date of the making of each Advance, Term
Loan or Letter of Credit made thereafter, as though made on and as of the date
of the making of such Advance or Letter of Credit (except to the extent that
such representations and warranties relate solely to an earlier date) and such
representations and warranties shall survive the execution and delivery of this
Agreement:
5.1. NO ENCUMBRANCES.
Each Company has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2. ELIGIBLE ACCOUNTS.
The Eligible Accounts of each Borrowing Base Company are bona
fide existing obligations created by the sale and delivery of Inventory or the
rendition of services to Account Debtors in the ordinary course of such
Borrowing Base Company's business, unconditionally owed to such Borrowing Base
Company without defenses, disputes, offsets, counterclaims, or rights of return
or cancellation. The property giving rise to such Eligible Accounts has been
delivered to the Account Debtor, or to the Account Debtor's agent for immediate
shipment to and unconditional acceptance by the Account Debtor. No Borrowing
Base Company has received notice of actual or imminent bankruptcy, insolvency,
or material
-56-
<PAGE> 57
impairment of the financial condition of any Account Debtor regarding any
Eligible Account.
5.3. ELIGIBLE INVENTORY.
All Eligible Inventory is of good and merchantable quality,
free from defects.
5.4. EQUIPMENT.
All of the Equipment of a Company is used or held for use in
such Company's business and is fit for such purposes.
5.5. LOCATION OF INVENTORY AND EQUIPMENT.
The Inventory and Equipment are not stored with a bailee,
warehouseman, or similar party except those identified on SCHEDULE 6.12 and are
located only at the locations identified on SCHEDULE 6.12 or otherwise permitted
by SECTION 6.12.
5.6. INVENTORY RECORDS.
Each Company keeps correct and accurate records itemizing and
describing the kind, type, quality, and quantity of such Company's Inventory,
and such Company's cost therefor.
5.7. LOCATION OF CHIEF EXECUTIVE OFFICE; FEIN.
The chief executive office of each Company is located at the
address set forth on SCHEDULE 5.7 indicated in the preamble to this Agreement
and each Company's FEIN is set forth on SCHEDULE 5.7.
5.8. DUE ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each Company is duly organized and existing and in good
standing under the laws of the jurisdiction of its incorporation and qualified
and licensed to do business in, and in good standing in, any jurisdiction where
the failure to be so licensed or qualified reasonably could be expected to
constitute a Material Adverse Change.
(b) Set forth on SCHEDULE 5.8, is a complete and accurate
description of the authorized capital Stock of each Company, by class, and, as
of the Closing Date, a description of the number of shares of each such class
that are issued and outstanding and the number of such shares that are held in
each Company's treasury. All such outstanding shares have been validly issued
and, as of the Closing Date, are fully paid, nonassessable shares free of
contractual preemptive rights. The issuance and sale of all such shares have
been in compliance with all applicable federal, state securities and foreign
laws. Other than as described on SCHEDULE 5.8, there are no subscriptions,
options, warrants, or calls relating to any shares of any Company's capital
Stock, including any right of conversion or exchange under any outstanding
security or other instrument. No Company is subject to any obligation
(contingent or otherwise)
-57-
<PAGE> 58
to repurchase or otherwise acquire or retire any shares of its capital Stock or
any security convertible into or exchangeable for any of its capital Stock.
(c) Set forth on SCHEDULE 5.8, is a complete and accurate list
of each Company's direct and indirect Subsidiaries, showing: (i) the
jurisdiction of their incorporation; (ii) the number of shares of each class of
common and preferred Stock authorized for each of such Subsidiaries; and (iii)
the number and the percentage of the outstanding shares of each such class owned
directly or indirectly by each Company. All of the outstanding capital Stock of
each such Subsidiary has been validly issued and is fully paid and
non-assessable.
(d) Except as set forth on SCHEDULE 5.8, no capital Stock (or
any securities, instruments, warrants, options, purchase rights, conversion or
exchange rights, calls, commitments or claims of any character convertible into
or exercisable for capital Stock) of any direct or indirect Subsidiary of any
Company is subject to the issuance of any security, instrument, warrant, option,
purchase right, conversion or exchange right, call, commitment or claim of any
right, title, or interest therein or thereto.
5.9. DUE AUTHORIZATION; NO CONFLICT.
(a) The execution, delivery, and performance by each Company
of this Agreement and the Loan Documents to which it is a party have been duly
authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each Company
of this Agreement and the Loan Documents to which it is a party do not and will
not (i) violate any provision of federal, state, provincial or local law or
regulation (including Regulations T, U, and X of the Federal Reserve Board)
applicable to it, its Governing Documents, or any order, judgment, or decree of
any court or other Governmental Authority binding on it, (ii) conflict with,
result in a breach of, or constitute (with due notice or lapse of time or both)
a default under any material contractual obligation or material lease, (iii)
result in or require the creation or imposition of any Lien of any nature
whatsoever upon any properties or assets, other than Permitted Liens, or (iv)
require any approval of stockholders or any approval or consent of any Person
under any material contractual obligation.
(c) Other than the taking of any action expressly required
under this Agreement and the Loan Documents, the execution, delivery, and
performance by each Company of the Loan Documents to which it is a party do not
and will not require any registration with, consent, or approval of, or notice
to, or other action with or by, any federal, state, foreign, or other
Governmental Authority or other Person.
(d) The Loan Documents to which a Company is a party, and all
other documents contemplated hereby and thereby, when executed and delivered by
such Company will be the legally valid and binding obligations of such Company,
enforceable against such Company in accordance with their respective terms,
except as enforcement may be limited by equitable principles, by public policy
or by bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
-58-
<PAGE> 59
(e) The Agent's Liens granted by each Company to Agent, for
the benefit of the Lender Group, in and to its properties and assets pursuant to
this Agreement and the other Loan Documents are validly created, perfected, and
first priority Liens, subject only to Permitted Liens.
5.10. LITIGATION.
There are no actions or proceedings pending by or against any
Company before any court or administrative agency and Borrower does not have
knowledge or belief of any pending or threatened litigation, governmental
investigations, or claims, complaints, actions, or prosecutions involving any
Company or any guarantor of the Obligations, except for: (a) ongoing collection
matters in which a Company is the plaintiff; (b) matters disclosed on SCHEDULE
5.10; and (c) matters presently existing or arising after the date hereof that,
if decided adversely to a Company, reasonably could not be expected to result in
a Material Adverse Change.
5.11. NO MATERIAL ADVERSE CHANGE.
All financial statements relating to any Company or any
guarantor of the Obligations that have been delivered to the Lender Group have
been prepared in accordance with GAAP (except, in the case of unaudited
financial statements, for the lack of footnotes and being subject to year-end
audit adjustments) and fairly present such Company's (or such guarantor's, as
applicable) financial condition as of the date thereof and such Company's
results of operations for the period then ended. There has not been a Material
Adverse Change with respect to any Company (or such guarantor, as applicable)
since the date of the latest financial statements submitted to the Lender Group
on or before the Closing Date.
5.12. NO FRAUDULENT TRANSFER.
(a) Each Company is Solvent.
(b) No transfer of property is being made by any Company and no obligation is
being incurred by any Company in connection with the transactions contemplated
by this Agreement or the other Loan Documents with the intent to hinder, delay,
or defraud either present or future creditors of any Company.
5.13. EMPLOYEE BENEFITS.
None of Borrower, any of its Subsidiaries, or any of their
ERISA Affiliates maintains or contributes to any Benefit Plan, other than those
listed on SCHEDULE 5.13. Borrower, each of its Subsidiaries and each ERISA
Affiliate have satisfied the minimum funding standards of ERISA and the IRC with
respect to each Benefit Plan to which it is obligated to contribute. No ERISA
Event has occurred nor has any other event occurred that may result in an ERISA
Event that reasonably could be expected to result in a Material Adverse Change.
None of Borrower or its Subsidiaries, any ERISA Affiliate, or any fiduciary of
any Plan has incurred any direct or indirect liability with respect to any Plan
under any applicable law, treaty, rule, regulation, or agreement that could
reasonably be
-59-
<PAGE> 60
expected to result in a Material Adverse Change. None of Borrower or its
Subsidiaries or any ERISA Affiliate is required to provide security to any Plan
under Section 401(a)(29) of the IRC.
5.14. ENVIRONMENTAL CONDITION.
None of any Company's properties or assets or any properties
now or previously in its charge, management or control has ever been used by
such Company or, to the best of such Company's knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. None of such Company's properties or assets
or any properties now or previously in its charge, management or control has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute. No Lien arising under
any environmental protection statute has attached to any revenues or to any real
or personal, movable or immovable, property owned or operated by any Company. No
Company has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal or state governmental
agency concerning any action or omission by any Company resulting in the
releasing or disposing of Hazardous Materials into the environment.
5.15. BROKERAGE FEES.
No brokerage commission or finders fees has or shall be
incurred or payable in connection with or as a result of Borrower's obtaining
financing from the Lender Group under this Agreement, and no Company has
utilized the services of any broker or finder in connection with Borrower's
obtaining financing from the Lender Group under this Agreement.
5.16. PERMITS AND OTHER INTELLECTUAL PROPERTY.
Each Company owns or possesses adequate licenses or other
rights to use all Permits, patents, patent applications, trademarks, trademark
applications, service marks, service mark applications, trade names, copyrights,
trade secrets and know-how (collectively, the "Intellectual Property") that are
necessary for the operation of its business as currently conducted. Except as
set forth on SCHEDULE 5.16, no claim is pending or threatened to the effect that
any Company infringes upon, or conflicts with, the asserted rights of any other
Person under any Intellectual Property, and to the best of Borrower's knowledge
there is no basis for any such claim (whether pending or threatened). No claim
(which if adversely decided against a Company, could reasonably be expected to
result in a Material Adverse Change) is pending or threatened to the effect that
any such Intellectual Property owned or licensed by any Company, or in which any
Company otherwise has the right to use is invalid or unenforceable by Borrower,
and to the best of Borrower's knowledge there is not basis for any such claim
(whether or not pending or threatened).
-60-
<PAGE> 61
6. AFFIRMATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, and unless Required Lenders shall otherwise consent in writing,
Borrower shall, and shall cause each other Company, do all of the following:
6.1. ACCOUNTING SYSTEM.
Maintain, and cause the other Companies to maintain, a
standard and modern system of accounting that enables Borrower to produce
consolidated and consolidating financial statements in accordance with GAAP, and
maintain records pertaining to the Collateral that contain information as from
time to time may reasonably be requested by Agent. Borrower and each other
Company also shall keep an inventory reporting system that adequately shows all
additions, sales, claims, returns, and allowances with respect to the Inventory.
6.2. COLLATERAL REPORTING.
Provide Agent with the following documents at the following
times in form satisfactory to Agent: (a) on each Business Day, a sales journal,
collection journal, and credit register since the last such schedule and a
calculation of the Borrowing Base as of such date, (b) on a monthly basis and,
in any event, by no later than the 10th day of each month during the term of
this Agreement, (i) a detailed calculation of the Borrowing Base, and (ii) a
detailed aging, by total, of the Accounts which shall classify Accounts by type
(VADs, VARs, Large Installs, etc.) and be aged in 30 day increments out to 180
days from invoice date, together with supporting documentation and a
reconciliation to the detailed calculation of the Borrowing Base previously
provided to Agent, (c) on a monthly basis and, in any event, by no later than
the 10th day of each month during the term of this Agreement, a summary aging,
by vendor, of each Company's accounts payable and any book overdraft, (d) on a
weekly basis, Inventory reports specifying each Company's cost and the wholesale
market value of its Inventory by category, with additional detail showing
additions to and deletions from the Inventory, (e) on each Business Day, notice
of all returns, disputes, or claims since the delivery of the previous notice
pursuant to this clause (e), (f) upon request, copies of invoices in connection
with the Accounts, customer statements, credit memos, remittance advices and
reports, deposit slips, shipping and delivery documents in connection with the
Accounts and for Inventory and Equipment acquired by each Company, purchase
orders and invoices, (g) on a quarterly basis, a detailed list of each Company's
customers including the name, address, phone number and contact for each
customer, (h) on a monthly basis, a calculation of the Dilution for the prior
month; (i) within 30 days after the end of each month, a detailed report of all
loans, loan repayments, interest, payments or distributions between any of the
other Companies and Borrower, containing a calculation of all withholding taxes
paid or payable in respect thereof, together with evidence of the payment and
remittance when due of all such withholding taxes to the applicable Governmental
Authority; and (j) such other reports as to the Collateral or the financial
condition of each Company as Agent may reasonably request from time to time.
Original
-61-
<PAGE> 62
sales invoices evidencing daily sales shall be mailed to each Account Debtor
and, at Agent's direction, the invoices shall indicate on their face that the
Account has been assigned to the Lender Group and that all payments are to be
made directly to Agent for the benefit of the Lender Group.
6.3. FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
Deliver to Agent, with copies to each Lender: (a) as soon as
available, but in any event within 30 days after the end of each month during
each of Borrower's fiscal years, a company prepared balance sheet, income
statement, and statement of cash flow covering Borrower's operations during such
period, on a consolidated and consolidating basis (PROVIDED, that in the case of
the monthly financial statements for the last month of each of Borrower's fiscal
quarters, Borrower may satisfy the requirements of this clause (a) by its
delivery of drafts of such financial statements within the aforesaid 30-day
period, which shall be superseded by the quarterly financial statements included
in Borrower's Form 10-Q Quarterly Reports provided pursuant to the next
paragraph of this SECTION 6.3 or the annual financial statements provided
pursuant to clause (b) of this paragraph, as applicable); and (b) as soon as
available, but in any event within 95 days after the end of each of Borrower's
fiscal years, financial statements of Borrower, on a consolidated and
consolidating basis, for each such fiscal year, audited (in the case of the
consolidated financial statements only) by independent certified public
accountants reasonably acceptable to Agent and certified (in the case of the
consolidated financial statements only), without any qualifications, by such
accountants to have been prepared in accordance with GAAP, together with a
certificate of such accountants addressed to Agent stating that such accountants
do not have knowledge of the existence of any Default or Event of Default. Such
audited financial statements shall include a balance sheet, profit and loss
statement, and statement of cash flow and, if prepared, such accountants' letter
to management.
Together with the above, Borrower also shall deliver to Agent,
with copies to each Lender, Borrower's Form 10-Q Quarterly Reports, Form 10-K
Annual Reports, and Form 8-K Current Reports, and any other filings made by
Borrower with the SEC, if any, within 5 days after the same are filed, or any
other information that is provided by Borrower to its shareholders, and any
other report reasonably requested by the Lender Group relating to the financial
condition of Borrower.
Each month (other than (1) the last month of each of
Borrower's first three fiscal quarters, in which case the certificate shall be
provided together with the Form 10-Q Quarterly Reports provided pursuant to the
immediately preceding paragraph of this SECTION 6.3, and (2) the last month of
Borrower's fourth fiscal quarter, in which case the certificate shall be
provided with the delivery of the annual audited financial statements), together
with the financial statements provided pursuant to clause (a) of this SECTION
6.3, Borrower shall deliver to Agent, with copies to each Lender, a certificate
signed by its chief financial officer to the effect that: (i) all financial
statements delivered or caused to be delivered to any one or more members of the
Lender Group hereunder have been prepared in accordance with GAAP (except, in
the case of unaudited financial statements, for the lack of footnotes and being
subject to year-end audit adjustments) and fairly present the financial
-62-
<PAGE> 63
condition of Borrower, on a consolidated and consolidating basis, (ii) the
representations and warranties of each Company contained in the Loan Documents
are true and correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the extent that
such representations and warranties relate solely to an earlier date), (iii) for
each month that also is the date on which a financial covenant in SECTION 7.20
is to be tested, a Compliance Certificate demonstrating in reasonable detail
compliance at the end of such period with the applicable financial covenants
contained in SECTION 7.20, and (iv) on the date of delivery of such certificate
to Agent there does not exist any condition or event that constitutes a Default
or Event of Default (or, in the case of clauses (i), (ii), or (iii), to the
extent of any non-compliance, describing such non-compliance as to which he or
she may have knowledge and what action Borrower has taken, is taking, or
proposes to take with respect thereto).
Borrower shall have issued written instructions to its
independent certified public accountants authorizing them to communicate with
Agent and to release to Agent whatever financial information concerning each
Company that Agent may request. Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to deliver to Agent,
at Borrower's expense, copies of Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their possession, and to
disclose to Agent any information they may have regarding each Company's
business affairs and financial conditions.
6.4. TAX RETURNS.
Deliver to Agent copies of each of Borrower's future federal
income tax returns and Canadian and/or provincial income tax returns, and any
amendments thereto, within 30 days after the filing thereof with the Internal
Revenue Service or any other applicable Governmental Authority.
6.5. [INTENTIONALLY OMITTED].
6.6. RETURNS.
Cause returns and allowances, if any, as between each Company
and its Account Debtors to be on the same basis and in accordance with the usual
customary practices of such Company, as they exist at the time of the execution
and delivery of this Agreement. If, at a time when no Event of Default has
occurred and is continuing, any Account Debtor returns any Inventory to a
Company, such Company promptly shall determine the reason for such return and,
if such Company accepts such return, issue a credit memorandum (with a copy to
be sent to Agent) in the appropriate amount to such Account Debtor. If, at a
time when an Event of Default has occurred and is continuing, any Account Debtor
returns any Inventory to a Company, such Company promptly shall determine the
reason for such return and, if Agent consents (which consent shall not be
unreasonably withheld or delayed), issue a credit memorandum (with a copy to be
sent to Agent) in the appropriate amount to such Account Debtor.
-63-
<PAGE> 64
6.7. TITLE TO EQUIPMENT.
Upon Agent's request, Borrower shall, and Borrower shall cause
each other Company to, promptly deliver to Agent, properly endorsed, any and all
evidences of ownership of, certificates of title, or applications for title to
any items of Equipment of such Company.
6.8. MAINTENANCE OF EQUIPMENT.
Maintain the Equipment in good operating condition and repair
(ordinary wear and tear excepted), and make all necessary replacements thereto
so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Other than those items of Equipment that constitute
fixtures on the Closing Date, Borrower shall not, and shall not permit any other
Company to, permit any item of Equipment to become a fixture to real estate or
an accession to other property, and such Equipment shall at all times remain
personal property.
6.9. TAXES.
(a) Cause all assessments and taxes, whether real, personal,
or otherwise, due or payable by, or imposed, levied, or assessed against it or
any of its property or assets to be paid in full, before delinquency or before
the expiration of any extension period, except to the extent that the validity
of such assessment or tax (other than payroll taxes or taxes that are the
subject of a United States federal tax lien) shall be the subject of a Permitted
Protest.
(b) Make due and timely payment or deposit of all such
federal, state, provincial and local taxes, assessments, or contributions
required of it by law, and will execute and deliver to Agent, on demand,
appropriate certificates attesting to the payment thereof or deposit with
respect thereto.
(c) Make timely payment or deposit of all tax payments and
withholding taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, provincial
and federal income taxes, and will, upon request, furnish Agent with proof
satisfactory to Agent indicating that Borrower has made such payments or
deposits.
6.10. INSURANCE.
(a) At its expense, keep the Collateral insured against loss
or damage by fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by other owners in
similar businesses. Borrower also shall, and shall cause each other Company to,
maintain business interruption, public liability, product liability, and
property damage insurance relating to such Company's ownership and use of the
Collateral, as well as insurance against larceny, embezzlement, and criminal
misappropriation.
(b) At its expense, obtain and maintain (i) insurance of the
type necessary to insure the Improvements and Chattels (as such terms are
defined in the Mortgages), for the full
-64-
<PAGE> 65
replacement cost thereof, against any loss by fire, lightning, windstorm, hail,
explosion, aircraft, smoke damage, vehicle damage, earthquakes, elevator
collision, and other risks from time to time included under "extended coverage"
policies, in such amounts as Agent may require, but in any event in amounts
sufficient to prevent a Company from becoming a co-insurer under such policies,
(ii) combined single limit bodily injury and property damages insurance against
any loss, liability, or damages on, about, or relating to each parcel of Real
Property Collateral, in an amount satisfactory to Agent; (iii) business rental
insurance covering annual receipts for a 12 month period for each leased parcel
of Real Property Collateral; and (iv) insurance for such other risks as Agent
may reasonably require. Replacement costs, at Agent's option, may be
redetermined by an insurance appraiser, satisfactory to Agent, not more
frequently than once every 12 months at Borrower's cost.
(c) All such policies of insurance shall be in such form, with
such companies, and in such amounts as may be reasonably satisfactory to Agent.
All insurance required herein shall be written by companies which have a Best's
rating of A for capital and X for financial stability. All hazard insurance and
such other insurance as Agent shall specify, shall contain a Form 438BFU (NS)
mortgagee endorsement, or an equivalent endorsement satisfactory to Agent,
showing Agent as sole loss payee thereof, and shall contain a waiver of
warranties. Every policy of insurance referred to in this SECTION 6.10 shall
contain an agreement by the insurer that it will not cancel such policy except
after 30 days prior written notice to Agent and that any loss payable thereunder
shall be payable notwithstanding any act or negligence of any Company or the
Lender Group which might, absent such agreement, result in a forfeiture of all
or a part of such insurance payment and notwithstanding (i) occupancy or use of
the Real Property Collateral for purposes more hazardous than permitted by the
terms of such policy, (ii) any foreclosure or other action or proceeding taken
by the Lender Group pursuant to the Mortgages upon the happening of an Event of
Default, or (iii) any change in title or ownership of the Real Property
Collateral. Borrower shall, and shall cause the Companies to, deliver to Agent
certified copies of such policies of insurance and evidence of the payment of
all premiums therefor.
(d) Original policies or certificates thereof satisfactory to
Agent evidencing such insurance shall be delivered to Agent at least 30 days
prior to the expiration of the existing or preceding policies. Borrower shall
give Agent prompt notice of any loss covered by such insurance, and Agent shall
have the right to adjust any loss. Prior to the occurrence of an Event of
Default, Borrower may adjust all losses payable under any such insurance
policies so long as the loss does not exceed $100,000. Agent shall have the
exclusive right to adjust all other losses payable under any such insurance
policies without any liability to any Company whatsoever in respect of such
adjustments. Any monies received as payment for any loss under any insurance
policy including the insurance policies mentioned above, shall be paid over to
Agent to be applied (subject to SECTION 2.4(b) in the case of Telxon Canada and
Telxon U.K.) at the option of the Required Revolving/Term Lenders, or if the
Revolving/Term Commitment equals zero, the Required Bridge Lenders either to the
prepayment of the Obligations without premium, in such order or manner as Agent
may elect, or shall be disbursed to Borrower under stage payment terms
satisfactory to Agent for application to the cost of repairs, replacements, or
restorations. All repairs, replacements, or restorations shall be effected with
reasonable
-65-
<PAGE> 66
promptness and shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the occurrence of
an Event of Default, the Lender Group shall have the right to apply all prepaid
premiums to the payment of the Obligations in such order or form as Agent shall
determine.
(e) Borrower shall not, and shall not permit any Company to,
take out separate insurance concurrent in form or contributing in the event of
loss with that required to be maintained under this SECTION 6.10, unless Agent
is included thereon as named insured with the loss payable to Agent under a
standard 438BFU (NS) Mortgagee endorsement, or its local equivalent. Borrower
immediately shall notify Agent whenever such separate insurance is taken out,
specifying the insurer thereunder and full particulars as to the policies
evidencing the same, and originals of such policies immediately shall be
provided to Agent.
6.11. NO SETOFFS OR COUNTERCLAIMS.
Make payments hereunder and under the other Loan Documents by
or on behalf of such Company without setoff or counterclaim and free and clear
of, and without deduction or withholding for or on account of, any federal,
state, or local taxes.
6.12. LOCATION OF INVENTORY AND EQUIPMENT.
Keep the Inventory and Equipment only at the locations
identified on SCHEDULE 6.12; PROVIDED, HOWEVER, that Borrower may amend SCHEDULE
6.12 to alter location(s) and/or add new location(s) so long as such amendment
occurs by written notice to Agent not less than 30 days prior to the date on
which the Inventory or Equipment is moved to such new location, so long as such
new location is within the continental United States or in the case of Telxon
Canada within any province of Canada other than Quebec, or in the case of Telxon
U.K. within England, and so long as, at the time of such written notification,
Borrower provides, and causes each other Company to provide, any financing
statements or fixture filings necessary or advisable to perfect and continue
perfected the Agent's Liens on such assets and also provides to Agent a
Collateral Access Agreement.
6.13. COMPLIANCE WITH LAWS.
Comply with the requirements of all applicable laws, rules,
regulations, and orders of any governmental authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act, other than laws, rules,
regulations, and orders the non-compliance with which, individually or in the
aggregate, would not result in and reasonably could not be expected to result in
a Material Adverse Change.
6.14. EMPLOYEE BENEFITS.
(a) Cause to be delivered to Agent: (i) promptly, and in any
event within 10 Business Days after Borrower or any of its Subsidiaries knows or
should have known that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement of the
chief financial officer of Borrower describing such ERISA Event and any action
that is being taking with respect thereto by Borrower, any such Subsidiary
-66-
<PAGE> 67
or ERISA Affiliate, and any action taken or threatened by the IRS, Department of
Labor, or PBGC. Borrower or such Subsidiary, as applicable, shall be deemed to
know all facts known by the administrator of any Benefit Plan of which it is the
plan sponsor, (ii) promptly, and in any event within 3 Business Days after the
filing thereof with the IRS, a copy of each funding waiver request filed with
respect to any Benefit Plan and all communications received by Borrower, any of
its Subsidiaries or, to the knowledge of Borrower, any ERISA Affiliate with
respect to such request, and (iii) promptly, and in any event within 3 Business
Days after receipt by Borrower, any of its Subsidiaries or, to the knowledge of
Borrower, any ERISA Affiliate, notice of the PBGC's intention to terminate a
Benefit Plan or to have a trustee appointed to administer a Benefit Plan, copies
of each such notice.
(b) Cause to be delivered to Agent, upon Agent's request, each
of the following: (i) a copy of each Plan (or, where any such plan is not in
writing, complete description thereof) (and if applicable, related trust
agreements or other funding instruments) and all amendments thereto, all written
interpretations thereof and written descriptions thereof that have been
distributed to employees or former employees of Borrower or its Subsidiaries;
(ii) the most recent determination letter issued by the IRS with respect to each
Benefit Plan; (iii) for the three most recent plan years, annual reports on Form
5500 Series required to be filed with any governmental agency for each Benefit
Plan; (iv) all actuarial reports prepared for the last three plan years for each
Benefit Plan and any Canadian pension plan; (v) a listing of all Multiemployer
Plans, with the aggregate amount of the most recent annual contributions
required to be made by Borrower or any ERISA Affiliate to each such plan and
copies of the collective bargaining agreements requiring such contributions;
(vi) any information that has been provided to Borrower or any ERISA Affiliate
regarding withdrawal liability under any Multiemployer Plan; and (vii) the
aggregate amount of the most recent annual payments made to former employees of
Borrower or its Subsidiaries under any Retiree Health Plan.
6.15. LEASES.
Pay when due, and cause each other Company to pay when due,
all rents and other amounts payable under any leases to which Borrower or any
other Company is a party or by which Borrower's or any other Company's
properties and assets are bound, unless such payments are the subject of a
Permitted Protest. To the extent that Borrower or any other Company fails timely
to make payment of such rents and other amounts payable when due under its
leases, Agent shall be entitled, in its discretion, to reserve an amount equal
to such unpaid amounts against the Borrowing Base.
6.16. BROKER COMMISSIONS.
Pay any and all brokerage commission or finders fees incurred
or payable in connection with or as a result of Borrower's obtaining financing
from the Lender Group under this Agreement.
-67-
<PAGE> 68
6.17. YEAR 2000.
Each Company has begun to undertake a comprehensive review and
assessment of its computer applications and has begun to make inquiry of its
material suppliers, vendors and customers. Based on the foregoing, Borrower
reasonably believes that what is commonly referred to as the "Year 2000 problem"
(that is, the risk that computer applications used by any Person may be unable
to recognize and perform properly date-sensitive functions involving certain
dates prior to and any date after December 31, 1999) will not result in a
Material Adverse Change on the operations, business, properties, or conditions
(financial or otherwise) of any Company. Each Company is taking all necessary
and appropriate steps to ascertain the extent of, quantify and successfully
address the business and financial risks facing such Company as a result of the
Year 2000 problem, including ascertaining risks resulting from the failure of
key customers and suppliers of Borrower to address successfully the Year 2000
problem, and Borrower's material computer applications will, on a timely basis,
adequately address the Year 2000 problem in all material respects. Borrower will
provide Agent with evidence by October 31, 1999 that all of each Company's
mission critical systems are Year 2000 compliant.
6.18. SALE OF PLEDGED STOCK.
On or before December 26, 1999, Borrower shall cause all or a
portion of the Pledged Stock to be sold in a transaction consummated in
accordance with applicable law in which the net cash proceeds received by Agent
for such Pledged Stock are at least $20,000,000.
7. NEGATIVE COVENANTS.
Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until full and final payment of the
Obligations, Borrower will not, and will not permit any other Company to, do any
of the following without Required Lenders' prior written consent:
7.1. INDEBTEDNESS.
Create, incur, assume, permit, guarantee, or otherwise become
or remain, directly or indirectly, liable with respect to any Indebtedness,
except:
(a) Indebtedness evidenced by this Agreement, together with
Indebtedness to issuers of letters of credit that are the subject of L/C
Guarantees;
(b) Indebtedness set forth on SCHEDULE 7.1;
(c) Indebtedness secured by Permitted Liens; and
(d) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this SECTION 7.1 (and continuance or
renewal of any Permitted Liens associated therewith) so long as: (i) the terms
and conditions of such refinancings, renewals, or
-68-
<PAGE> 69
extensions do not materially impair the prospects of repayment of the
Obligations, (ii) the net cash proceeds of such refinancings, renewals, or
extensions do not result in an increase in the aggregate principal amount of the
Indebtedness so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of the average
weighted maturity of the Indebtedness so refinanced, renewed, or extended, and
(iv) to the extent that Indebtedness that is refinanced was subordinated in
right of payment to the Obligations, then the subordination terms and conditions
of the refinancing Indebtedness must be at least as favorable to the Lender
Group as those applicable to the refinanced Indebtedness.
7.2. LIENS.
Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or assets, of any
kind, whether now owned or hereafter acquired, or any income or profits
therefrom, except for Permitted Liens (including Liens that are replacements of
Permitted Liens to the extent that the original Indebtedness is refinanced under
SECTION 7.1(D) and so long as the replacement Liens only encumber those assets
or property that secured the original Indebtedness).
7.3. RESTRICTIONS ON FUNDAMENTAL CHANGES.
(a) Enter into any merger, consolidation, reorganization,
amalgamation, arrangement or recapitalization, or reclassify its capital Stock.
(b) Liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution).
(c) Convey, sell, assign, lease, transfer, or otherwise
dispose of, in one transaction or a series of transactions, all or any
substantial part of its property or assets.
7.4. DISPOSAL OF ASSETS.
Sell, lease, assign, transfer, or otherwise dispose of any of
its properties or assets other than sales of Inventory to buyers in the ordinary
course of its business as currently conducted and sales of fixed assets to the
extent that the proceeds thereof exceed 120% of the orderly liquidation value of
such assets, the proceeds of such sale are delivered to Agent to prepay the
principal balance of Term Loan No. 1 in the amount of such proceeds and then to
the other Obligations as otherwise provided herein, and the aggregate amount of
such sales do not exceed $100,000 during any fiscal year of Borrower.
7.5. CHANGE NAME.
Change its name, FEIN, corporate structure (within the meaning
of Section 9402(7) of the Code), or identity, or, unless a timely financing
statement has been filed with respect to the same, add any new fictitious name.
-69-
<PAGE> 70
7.6. GUARANTEE.
Guarantee or otherwise become in any way liable with respect
to the obligations of any third Person except (a) by endorsement of instruments
or items of payment for deposit to its account or which are transmitted or
turned over to Agent, and (b) unsecured guarantees by Borrower of its
Subsidiaries trade credit, office leases and other ordinary course obligations;
PROVIDED, that the aggregate amount of obligations guaranteed pursuant to this
clause (b) may not exceed $300,000 at any one time outstanding.
7.7. NATURE OF BUSINESS.
Make any change in the principal nature of its business.
7.8. PREPAYMENTS AND AMENDMENTS.
(a) Except in connection with a refinancing permitted by
SECTION 7.1(d), prepay, redeem, retire, defease, purchase, or otherwise acquire
any Indebtedness owing to any third Person, other than the Obligations in
accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter, increase, or
change any of the terms or conditions of any agreement, instrument, document,
indenture, or other writing evidencing or concerning Indebtedness permitted
under SECTIONS 7.1(B), (c), OR (d).
7.9. CHANGE OF CONTROL.
Cause, permit, or suffer, directly or indirectly, any Change
of Control.
7.10. CONSIGNMENTS.
Consign any Inventory or sell any Inventory on bill and hold,
sale or return, sale on approval, or other conditional terms of sale.
7.11. DISTRIBUTIONS.
Make any distribution or declare or pay any dividends (in cash
or other property, other than capital Stock) (except that Borrower may continue
to pay its historic $.01 per share annual cash dividend if it deems appropriate
so long as (a) the aggregate amount of such dividends for any year does not
exceed $200,000, (b) no Event of Default has occurred and is continuing, and (c)
after giving effect to such payment, unused loan availability under SECTION 2.1
exceeds $3,000,000) on, or purchase, acquire, redeem, or retire any of
Borrower's capital Stock, of any class, whether now or hereafter outstanding.
7.12. ACCOUNTING METHODS.
Modify or change its method of accounting or enter into,
modify, or terminate any agreement currently existing, or at any time hereafter
entered into with any third party accounting firm or service bureau for the
preparation or storage of Borrower's accounting
-70-
<PAGE> 71
records without said accounting firm or service bureau agreeing to provide Agent
information regarding the Collateral or any Company's financial condition.
Borrower waives the right to assert a confidential relationship, if any, it may
have with any accounting firm or service bureau in connection with any
information requested by Agent pursuant to or in accordance with this Agreement,
and agrees that Agent may contact directly any such accounting firm or service
bureau in order to obtain such information.
7.13. INVESTMENTS.
Except as set forth on SCHEDULE 7.13, directly or indirectly
make, acquire, or incur any liabilities (including contingent obligations) for
or in connection with (a) the acquisition of the securities (whether debt or
equity) of, or other interests in, a Person, (b) loans, advances, capital
contributions, or transfers of property to a Person, or (c) the acquisition of
all or substantially all of the properties or assets of a Person.
7.14. TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter into or permit to exist any
material transaction with any of its Affiliate except for transactions that are
in the ordinary course of its business, upon fair and reasonable terms, that are
fully disclosed to Agent, and that are no less favorable to it than would be
obtained in an arm's length transaction with a non-Affiliate.
7.15. SUSPENSION.
Suspend or go out of a substantial portion of its business.
7.16. [INTENTIONALLY OMITTED].
7.17. USE OF PROCEEDS.
Use the proceeds of the Advances made hereunder for any
purpose other than (a) on the Closing Date, (i) to repay in full the outstanding
principal, accrued interest, and accrued fees and expenses owing to Existing
Lenders, (ii) to pay transactional fees, costs, and expenses incurred in
connection with this Agreement, and (iii) to pay previously disclosed accounts
payable with the proceeds of the Bridge Loan, and (b) thereafter, consistent
with the terms and conditions hereof, for its lawful and permitted corporate
purposes.
7.18. CHANGE IN LOCATION OF CHIEF EXECUTIVE OFFICE; INVENTORY AND EQUIPMENT
WITH BAILEES.
Relocate its chief executive office to a new location without
providing 30 days prior written notification thereof to Agent and so long as, at
the time of such written notification, Borrower provides, or causes such Company
to provide, any financing statements or fixture filings necessary to perfect and
continue perfected the Agent's Liens and also provides to Agent a Collateral
Access Agreement with respect to such new location. The Inventory and Equipment
shall not at any time now or hereafter be stored with a bailee, warehouseman, or
similar party without Agent's prior written consent, except for the third party
locations described on schedule 6.12.
-71-
<PAGE> 72
The Inventory and Equipment shall not at any time now or hereafter be stored
with a bailee, warehouseman, or similar party without Agent's prior written
consent.
7.19. NO PROHIBITED TRANSACTIONS UNDER ERISA.
Directly or indirectly:
(a) engage, or permit any Subsidiary of Borrower to engage, in
any prohibited transaction which is reasonably likely to result in a civil
penalty or excise tax described in Sections 406 of ERISA or 4975 of the IRC for
which a statutory or class exemption is not available or a private exemption has
not been previously obtained from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA and 412 of
the IRC), whether or not waived;
(c) fail, or permit any Subsidiary of Borrower to fail, to pay
timely required contributions or annual installments due with respect to any
waived funding deficiency to any Benefit Plan;
(d) terminate, or permit any Subsidiary of Borrower to
terminate, any Benefit Plan where such event would result in any liability of
Borrower, any of its Subsidiaries or any ERISA Affiliate under Title IV of
ERISA;
(e) fail, or permit any Subsidiary of Borrower to fail, to
make any required contribution or payment to any Multiemployer Plan;
(f) fail, or permit any Subsidiary of Borrower to fail, to pay
any required installment or any other payment required under Section 412 of the
IRC on or before the due date for such installment or other payment;
(g) amend, or permit any Subsidiary of Borrower to amend, a
Plan resulting in an increase in current liability for the plan year such that
either of Borrower, any Subsidiary of Borrower or any ERISA Affiliate is
required to provide security to such Plan under Section 401(a)(29) of the IRC;
or
(h) withdraw, or permit any Subsidiary of Borrower to
withdraw, from any Multiemployer Plan where such withdrawal is reasonably likely
to result in any liability of any such entity under Title IV of ERISA; which,
individually or in the aggregate, results in or reasonably would be expected to
result in a claim against or liability of Borrower, any of its Subsidiaries or
any ERISA Affiliate in excess of $100,000.
-72-
<PAGE> 73
7.20. FINANCIAL COVENANTS.
(a) MINIMUM SERVICE REVENUES. So long as any portion of Term
Loan No. 2 is outstanding, permit the revenues generated pursuant to the
Maintenance and Service Contracts of Borrower to be less than $60,000,000 for
any period of 4 consecutive calendar quarters.
(b) MINIMUM COLLECTION AMOUNT. At any time, permit the
outstanding Obligations (other than the Bridge Loan) to exceed the amount of
Collections with respect to the Accounts of the Borrowing Base Companies during
the immediately preceding 90 days;
(c) MINIMUM EBITDA. Permit EBITDA for any period set forth
below to be less than the amount set forth opposite such period:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
6 months ending September 30, 1999 ($11,904,000)
9 months ending December 31, 1999 ($4,030,000)
12 months ending March 31, 2000 $6,786,000
12 months ending June 30, 2000 $31,451,000
12 months ending September 30, 2000 $40,526,000
12 months ending December 31, 2000 $47,184,000
12 months ending March 31, 2001 $42,483,000
12 months ending June 30, 2001 and the 12 months $45,000,000
ending on the last day of each calendar quarter
thereafter
</TABLE>
(d) TANGIBLE NET WORTH. Permit Tangible Net Worth as of the
last day of each quarter set forth below to be less than the amount set forth
opposite such quarter:
<TABLE>
<CAPTION>
Fiscal Quarter Amount
-------------- ------
<S> <C>
September 30, 1999 ($36,658,000)
December 31, 1999 ($17,788,000)
March 31, 2000 ($15,217,000)
June 30, 2000 ($13,249,000)
September 30, 2000 ($9,376,000)
December 31, 2000 ($2,118,000)
March 31, 2001 and at all times thereafter $7,198,000
</TABLE>
-73-
<PAGE> 74
7.21. CAPITAL EXPENDITURES.
Make capital expenditures in any fiscal year set forth below
in excess of the amount set forth opposite such fiscal year:
<TABLE>
<CAPTION>
Period Amount
------ ------
<S> <C>
Fiscal year ending March 31, 2000 $22,000,000
Fiscal year ending March 31, 2001 and each fiscal $12,000,000
year thereafter
</TABLE>
7.22. SECURITIES ACCOUNTS.
Establish or maintain any Securities Account unless Agent
shall have received a Control Agreement, duly executed and in full force and
effect, in respect of such Securities Account. Borrower agrees that it will not,
and it will not permit any Company to, transfer assets out of any Securities
Accounts; PROVIDED, HOWEVER, that, so long as no Event of Default has occurred
and is continuing or would result therefrom, Companies may use such assets to
the extent permitted by this Agreement.
7.23. MATERIAL CONTRACTS .
Amend, terminate or otherwise modify any of the contracts,
agreements or instruments listed on SCHEDULE 7.23.
7.24. VALUE OF EQUIPMENT AND REAL PROPERTY.
At any time permit the outstanding principal balance of Term
Loan No. 1 to exceed 80% of the orderly liquidation value of Borrower's
Equipment plus 77% of the appraised quick sale value of Borrower's Real Property
Collateral (with such values based on the appraisals delivered to Agent prior to
the Closing Date until updated appraisals have been delivered pursuant to
Section 4.6, and thereafter on the appraisals most recently delivered pursuant
to Section 4.6).
7.25. SYMBOL PURCHASE AGREEMENT.
Permit purchases by Borrower of Inventory pursuant to the
Agreement between Symbol Technologies, Inc. and Borrower dated as of June 22,
1999 to exceed $8,000,000 in the aggregate or permit any obligations under such
agreement to remain outstanding at any time after September 30, 2000.
8. EVENTS OF DEFAULT.
Any one or more of the following events, after the expiration
of all applicable grace periods, shall constitute an event of default (each, an
"Event of Default") under this Agreement:
-74-
<PAGE> 75
8.1 If Borrower fails to pay when due and payable or when
declared due and payable, any portion of the Obligations (whether of principal,
interest (including any interest which, but for the provisions of the Bankruptcy
Code, would have accrued on such amounts), fees and charges due the Lender
Group, reimbursement of Lender Group Expenses, or other amounts constituting
Obligations);
8.2 (a) If any Company fails or neglects to perform, keep or
observe any term, provision, condition, covenant or agreement contained in
SECTIONS 6.1 (Accounting System), 6.4 (Tax Returns), 6.7 (Title to Equipment),
6.8 (Maintenance of Equipment), 6.12 (Location of Inventory and Equipment), 6.13
(Compliance with Laws), 6.14 (Employee Benefits) or 6.15 (Leases) of this
Agreement and such failure continues for a period of 15 Business Days; (b) if
any Company fails or neglects to perform, keep or observe any term, provision,
condition, covenant or agreement contained in SECTION 6.2 (Collateral Reporting)
or SECTION 6.3 (Financial Statements, Reports, Certificates) of this Agreement
and such failure continues for a period of 5 Business Days; or (c) if any
Company fails or neglects to perform, keep, or observe any other term,
provision, condition, covenant or agreement contained in this Agreement, or in
any of the other Loan Documents; in each case, other than any such term,
provision, condition, covenant, or agreement that is the subject of another
provision of this SECTION 8, in which event such other provision of this SECTION
8 shall govern; provided, that during any period of time that any such failure
or neglect of any Company referred to in this paragraph exists, even if such
failure or neglect is not yet an Event of Default by virtue of the existence of
a grace or cure period or the pre-condition of the giving of a notice, Lenders
shall not be required during such period to make Advances to Borrower;
8.3 If there is a Material Adverse Change;
8.4 If any material portion of any Company's properties or
assets is attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any third Person;
8.5 If an Insolvency Proceeding is commenced by any Company;
8.6 If an Insolvency Proceeding is commenced against any
Company and any of the following events occur: (a) such Company consents to the
institution of the Insolvency Proceeding against it; (b) the petition commencing
the Insolvency Proceeding is not timely controverted; (c) the Insolvency
Proceeding is not dismissed within 45 calendar days of the date of the filing
thereof; PROVIDED, HOWEVER, that, during the pendency of such period, Agent,
Foothill, and any other member of the Lender Group shall be relieved of its
obligation to extend credit hereunder; (d) any rights of Agent or Lenders are
stayed under the laws of Canada or any Province thereof, (e) an interim trustee,
monitor, receiver or similar official is appointed in respect of such Company;
or (f) an order for relief shall have been issued or entered therein;
8.7 If any Company is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any material part of
its business affairs;
-75-
<PAGE> 76
8.8 If a notice of Lien, levy, or assessment is filed of
record with respect to any of any Company's properties or assets by the United
States Government or Canadian Government, or any department, agency, or
instrumentality thereof, or by any state, provincial, county, municipal, or
governmental agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a Lien, whether choate or otherwise, upon
any of any Company's properties or assets and the same is not paid on the
payment date thereof;
8.9 If a judgment or other claim becomes a Lien or encumbrance
upon any material portion of any Company's properties or assets;
8.10 If there is a default under any of: (i) Indenture dated
as of June 1, 1987 between Telxon Corporation and Ameritrust Company National
Association, (ii) Indenture dated as of December 1, 1995 (the "1995 Indenture")
between Telxon Corporation and Bank One Trust Company, N.A., (iii) the Amended
and Restated Agreement dated as of September 30, 1992 by and between Symbol
Technologies, Inc., MSI Data Corporation and Borrower (the "Symbol License"),
and (iv) the License, Rights and Supply Agreement dated March 31, 1998 between
Aironet and Borrower (the "Aironet License"); or if the Symbol License or
Aironet License is terminated; or if there is a default under any material
agreement to which any Company is a party with one or more third Persons and
such default (a) occurs at the final maturity of the obligations thereunder, or
(b) results in a right by such third Person(s), irrespective of whether
exercised, to accelerate the maturity of any Company's obligations thereunder,
to terminate such agreement, or to refuse to renew such agreement pursuant to an
automatic renewal right therein; PROVIDED, that in any of the foregoing
circumstances, any applicable grace period has expired;
8.11 If any Company makes any payment on account of
Indebtedness that has been contractually subordinated in right of payment to the
payment of the Obligations, except to the extent such payment is permitted by
the terms of the subordination provisions applicable to such Indebtedness;
8.12 If any misstatement or misrepresentation exists now or
hereafter in any warranty, representation, statement, or report made to the
Lender Group by any Company or any officer, employee, agent, or director of any
Company, or if any such warranty or representation is withdrawn; or
8.13 If the obligation of any guarantor under its guaranty or
other third Person under any Loan Document is limited or terminated by operation
of law or by the guarantor or other third Person thereunder, or any such
guarantor or other third Person becomes the subject of an Insolvency Proceeding.
9. THE LENDER GROUP'S RIGHTS AND REMEDIES.
9.1. RIGHTS AND REMEDIES.
(a) Upon the occurrence, and during the continuation, of an
Event of Default, the Required Revolving/Term Lenders (at their election but
without notice of their election and
-76-
<PAGE> 77
without demand), or if the Revolving/Term Commitment has been terminated and the
Revolving Loan, Term Loan No. 1, Term Loan No. 2 and Obligations with respect to
Letters of Credit have been satisfied, the Required Bridge Lenders, may, except
to the extent otherwise expressly provided or required below, authorize and
instruct Agent (or in the case of Agent's Liens in favor of any Lender, such
Lender) to do any one or more of the following on behalf of the Lender Group
(and Agent (or in the case of Agent's Liens in favor of any Lender, such
Lender), acting upon the instructions of the Required Revolving/Term Lenders or
Required Bridge Lenders, as the case may be, shall do the same on behalf of the
Lender Group), all of which are authorized by Borrower:
(i) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(ii) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement, under any of the Loan Documents, or
under any other agreement between Borrower and the Lender Group;
(iii) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of the Lender Group, but
without affecting Agent's rights and security interests, for the benefit of the
Lender Group, in the Personal Property Collateral or the Real Property
Collateral and without affecting the Obligations;
(iv) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Agent considers advisable, and
in such cases, Agent will credit Borrower's Loan Account with only the net
amounts received by Agent in payment of such disputed Accounts after deducting
all Lender Group Expenses incurred or expended in connection therewith;
(v) Cause Borrower to hold all returned Inventory in trust for
the Lender Group, segregate all returned Inventory from all other property of
Borrower or in Borrower's possession and conspicuously label said returned
Inventory as the property of the Lender Group;
(vi) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Borrower's Collateral.
Borrower agrees to assemble Borrower's Personal Property Collateral if Agent so
requires, and to make Borrower's Personal Property Collateral available to Agent
as Agent may designate. Borrower authorizes Agent to enter the premises where
Borrower's Personal Property Collateral is located, to take and maintain
possession of Borrower's Personal Property Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or Lien that in
Agent's determination appears to conflict with the Agent's Liens and to pay all
expenses incurred in connection therewith. With respect to any of Borrower's
owned or leased premises, Borrower hereby grants Agent and Lenders a license to
enter into possession of such premises and to occupy the same, without charge,
in order to exercise any of the Lender Group's rights or remedies provided
herein, at law, in equity, or otherwise;
-77-
<PAGE> 78
(vii) Without notice to Borrower (such notice being expressly
waived), and without constituting a retention of any collateral in satisfaction
of an obligation (within the meaning of Section 9505 of the Code), set off and
apply to the Obligations any and all (A) balances and deposits of Borrower held
by the Lender Group (including any amounts received in the Lockbox Accounts), or
(B) indebtedness at any time owing to or for the credit or the account of
Borrower held by the Lender Group;
(viii) Hold, as cash collateral, any and all balances and
deposits of Borrower held by the Lender Group, and any amounts received in the
Lockbox Accounts, to secure the full and final repayment of all of the
Obligations;
(ix) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) Borrower's Personal Property Collateral. Borrower hereby grants to Agent
a license or other right to use, without charge, Borrower's labels, patents,
copyrights, rights of use of any name, trade secrets, trade names, trademarks,
service marks, and advertising matter, or any property of a similar nature, as
it pertains to Borrower's Personal Property Collateral, in completing production
of, advertising for sale, and selling any of Borrower's Personal Property
Collateral and Borrower's rights under all licenses and all franchise agreements
shall inure to the Lender Group's benefit; and
(x) Sell Borrower's Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Agent determines is commercially reasonable. It is not
necessary that Borrower's Personal Property Collateral be present at any such
sale.
(b) Upon the occurrence, and during the continuation, of an Event of
Default, the Required Bridge Lenders, or with respect to clauses (ii) and (iii)
below, if the Bridge Loan has been repaid in full, the Required Revolving/Term
Lenders (at their election but without notice of their election and without
demand) may, except to the extent otherwise expressly provided or required
below, authorize and instruct Agent to do any one or more of the following on
behalf of the Bridge Lenders (and Agent, acting upon the instructions of the
Required Bridge Lenders, shall do the same on behalf of the Lender Group), all
of which are authorized by Borrower:
(i) Declare the Bridge Loan, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, immediately due and
payable;
(ii) Without notice to or demand upon Borrower or any
guarantor, make such payments and do such acts as Agent considers necessary or
reasonable to protect its security interests in the Pledged Stock. Borrower
authorizes Agent to pay, purchase, contest, or compromise any encumbrance,
charge, or Lien that in Agent's determination appears to conflict with the
Agent's Liens on the Pledged Stock and to pay all expenses incurred in
connection therewith; and
-78-
<PAGE> 79
(iii) Subject to the Lock-Up Agreement, sell the Pledged Stock
at either a public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places (including
Borrower's premises) as Agent determines is commercially reasonable. It is not
necessary that the Pledged Stock be present at any such sale.
(c) Agent shall give notice of the disposition of Borrower's Personal
Property Collateral as follows:
(i) Agent shall give Borrower and each holder of a security
interest in Borrower's Personal Property Collateral who has filed with Agent a
written request for notice, a notice in writing of the time and place of public
sale, or, if the sale is a private sale or some other disposition other than a
public sale is to be made of Borrower's Personal Property Collateral, then the
time on or after which the private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or mailed,
postage prepaid, to Borrower as provided in SECTION 12, at least 5 days (or such
longer period as is mandated by law) before the date fixed for the sale, or at
least 5 days (or such longer period as is mandated by law) before the date on or
after which the private sale or other disposition is to be made; no notice needs
to be given prior to the disposition of any portion of Borrower's Personal
Property Collateral that is perishable or threatens to decline speedily in value
or that is of a type customarily sold on a recognized market. Notice to Persons
other than Borrower claiming an interest in Borrower's Personal Property
Collateral shall be sent to such addresses as they have furnished to Agent; and
(iii) If the sale is to be a public sale, Agent also shall
give notice of the time and place by publishing a notice one time at least 5
days (or such longer period as is mandated by law) before the date of the sale
in a newspaper of general circulation in the county in which the sale is to be
held;
(d) The Lender Group may credit bid and purchase at any public sale;
(e) Upon the occurrence, and during the continuation, of an Event of
Default, the Lender Group shall have all other rights and remedies available to
it at law or in equity pursuant to any other Loan Documents; and
(f) Any deficiency that exists after disposition of Borrower's Personal
Property Collateral as provided above will be paid immediately by Borrower. Any
excess will be returned, without interest and subject to the rights of third
Persons, by Agent to Borrower.
9.2. REMEDIES CUMULATIVE.
The rights and remedies of the Lender Group under this
Agreement, the other Loan Documents, and all other agreements shall be
cumulative. The Lender Group shall have all other rights and remedies not
inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by the Lender Group of one right or remedy shall be deemed an election,
and no waiver by the Lender Group of any Event of Default shall be deemed a
-79-
<PAGE> 80
continuing waiver. No delay by the Lender Group shall constitute a waiver,
election, or acquiescence by it.
10. TAXES AND EXPENSES.
If any Company fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties or assets,
rents or other amounts payable under such leases) due to third Persons, or fails
to make any deposits or furnish any required proof of payment or deposit, all as
required under the terms of this Agreement, then, to the extent that Agent
determines that such failure by such Company could result in a Material Adverse
Change, in its discretion and without prior notice to Companies, Agent may do
any or all of the following (and shall give notice of the same to Borrower): (a)
make payment of the same or any part thereof; (b) set up such reserves in
Borrower's Loan Account as Agent deems necessary to protect the Lender Group
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type described in SECTION 6.10, and take any action with respect
to such policies as Agent deems prudent. Any such amounts paid by Agent shall
constitute Lender Group Expenses. Any such payments made by Agent shall not
constitute an agreement by the Lender Group to make similar payments in the
future or a waiver by the Lender Group of any Event of Default under this
Agreement. Agent need not inquire as to, or contest the validity of, any such
expense, tax, or Lien and the receipt of the usual official notice for the
payment thereof shall be conclusive evidence that the same was validly due and
owing.
11. WAIVERS; INDEMNIFICATION.
11.1. DEMAND; PROTEST; ETC.
Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment, nonpayment at maturity,
release, compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees at any time held by the Lender Group
on which Borrower may in any way be liable.
11.2. THE LENDER GROUP'S LIABILITY FOR COLLATERAL.
Borrower hereby agrees that: (a) so long as the Lender Group
complies with its obligations, if any, under Section 9207 of the Code (or the
mandatory provisions of any other applicable laws), the Lender Group shall not
in any way or manner be liable or responsible for: (i) the safekeeping of the
Collateral; (ii) any loss or damage thereto occurring or arising in any manner
or fashion from any cause; (iii) any diminution in the value thereof; or (iv)
any act or default of any carrier, warehouseman, bailee, forwarding agency, or
other Person; and (b) all risk of loss, damage, or destruction of the Collateral
shall be borne by the applicable Company.
-80-
<PAGE> 81
11.3. INDEMNIFICATION.
Borrower shall pay, indemnify, defend, and hold the
Agent-Related Persons, the Lender-Related Persons with respect to each Lender,
each Participant, and each of their respective officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified Person") harmless
(to the fullest extent permitted by law) from and against any and all claims,
demands, suits, actions, investigations, proceedings, and damages, and all
reasonable attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person under this SECTION
11.3 with respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross negligence or
willful misconduct of such Indemnified Person. This provision shall survive the
termination of this Agreement and the repayment of the other Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan Document shall
be in writing and (except for financial statements and other informational
documents which may be sent by first-class mail, postage prepaid) shall be
personally delivered or sent by registered or certified mail (postage prepaid,
return receipt requested), overnight courier, or telefacsimile to the relevant
party at its address set forth below:
If to Borrower: TELXON CORPORATION
3330 West Market Street
Akron, Ohio 44333
Attn: Chief Financial Officer
Fax No. (330) 664-2860
with copies to: TELXON CORPORATION
3330 West Market Street
Akron, Ohio 44333
Attn: Legal Department
Fax No.: (330) 664-2009
-81-
<PAGE> 82
<TABLE>
<S> <C>
and to: GOODMAN WEISS MILLER LLP
100 Erieview Plaza
27th Floor
Cleveland, Ohio 44114
Attn: Robert A. Goodman, Esq.
Fax No.: (216) 363-5835
If to Agent or the Lender FOOTHILL CAPITAL CORPORATION
Group in care of Agent: 11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn: Business Finance Division Manager
Fax No. (310) 478-9788
with copies to: GOLDBERG, KOHN, BELL, BLACK,
ROSENBLOOM & MORITZ, LTD.
55 East Monroe Street
Suite 3700
Chicago, Illinois 60603
Attn: Gary Zussman, Esq.
Fax No. (312) 332-2196
</TABLE>
The parties hereto may change the address at which they are to
receive notices hereunder, by notice in writing in the foregoing manner given to
all other parties. All notices or demands sent in accordance with this SECTION
12, other than notices by the Lender Group in connection with Sections 9504 or
9505 of the Code, shall be deemed received on the earlier of the date of actual
receipt or 3 days after the deposit thereof in the mail. Borrower acknowledges
and agrees that notices sent by the Lender Group in connection with Sections
9504 or 9505 of the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted telefacsimile or
other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN ANOTHER LOAN DOCUMENT IN RESPECT
OF SUCH OTHER LOAN DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR
THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF ILLINOIS.
-82-
<PAGE> 83
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE TRIED AND
LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF COOK,
STATE OF ILLINOIS, PROVIDED, HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST
ANY COLLATERAL OR OTHER PROPERTY MAY BE BROUGHT, AT AGENT'S OPTION, IN THE
COURTS OF ANY JURISDICTION WHERE AGENT ELECTS TO BRING SUCH ACTION OR WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. BORROWER AND THE LENDER GROUP WAIVE,
TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY
PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION 13.
BORROWER AND THE LENDER GROUP HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. BORROWER AND THE LENDER GROUP REPRESENT THAT
EACH HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF
LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A
TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to any one or more members of the Lender Group may be destroyed or
otherwise disposed of by such member of the Lender Group 4 months after they are
delivered to or received by such member of the Lender Group, unless Borrower
requests, in writing, the return of said documents, schedules, or other papers
and makes arrangements, at Borrower's expense, for their return.
15. ASSIGNMENTS AND PARTICIPATIONS; SUCCESSORS.
15.1. ASSIGNMENTS AND PARTICIPATIONS.
(a) Any Lender may, with the written consent of Agent, assign
and delegate to one or more assignees (provided that no written consent of Agent
shall be required in connection with any assignment and delegation by a Lender
to an Eligible Transferee) (each an "Assignee") all, or any part (but if in
part, a ratable portion of its Revolving/Term Commitment and Bridge Commitment),
of the Obligations, the Commitments and the other rights and obligations of such
Lender hereunder and under the other Loan Documents, in a minimum
-83-
<PAGE> 84
amount of $5,000,000; PROVIDED, HOWEVER, that Borrower and Agent may continue to
deal solely and directly with such Lender in connection with the interest so
assigned to an Assignee until (i) written notice of such assignment, together
with payment instructions, addresses and related information with respect to the
Assignee, shall have been given to Borrower and Agent by such Lender and the
Assignee; (ii) such Lender and its Assignee shall have delivered to Borrower and
Agent an Assignment and Acceptance ("Assignment and Acceptance") in form and
substance satisfactory to Agent; and (iii) the assignor Lender or Assignee has
paid to Agent for Agent's sole and separate account a processing fee in the
amount of $5,000. Anything contained herein to the contrary notwithstanding, the
consent of Agent shall not be required (and payment of any fees shall not be
required) if such assignment is in connection with any merger, consolidation,
sale, transfer, or other disposition of all or any substantial portion of the
business or loan portfolio of such Lender.
(b) From and after the date that Agent notifies the assignor
Lender that it has received an executed Assignment and Acceptance and payment of
the above-referenced processing fee, (i) the Assignee thereunder shall be a
party hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Acceptance, shall have the rights
and obligations of a Lender under the Loan Documents, and (ii) the assignor
Lender shall, to the extent that rights and obligations hereunder and under the
other Loan Documents have been assigned by it pursuant to such Assignment and
Acceptance, relinquish its rights (except with respect to SECTION 11.3 hereof)
and be released from its obligations under this Agreement (and in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement and the other Loan
Documents, such Lender shall cease to be a party hereto and thereto), and such
assignment shall effect a novation between Borrower and the Assignee.
(c) By executing and delivering an Assignment and Acceptance,
the assigning Lender thereunder and the Assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (1) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or any other Loan Document furnished
pursuant hereto; (2) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of
Borrower or the performance or observance by Borrower of any of its obligations
under this Agreement or any other Loan Document furnished pursuant hereto; (3)
such Assignee confirms that it has received a copy of this Agreement, together
with such other documents and information as it has deemed appropriate to make
its own credit analysis and decision to enter into such Assignment and
Acceptance; (4) such Assignee will, independently and without reliance upon
Agent, such assigning Lender or any other Lender, and based on such documents
and information as it shall deem appropriate at the time, continue to make its
own credit decisions in taking or not taking action under this Agreement; (5)
such Assignee appoints and authorizes Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to
Agent by the terms hereof, together with such powers as are reasonably
incidental thereto; and (6) such Assignee
-84-
<PAGE> 85
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of this Agreement are required to be performed by
it as a Lender.
(d) Immediately upon each Assignee's making its processing fee
payment under the Assignment and Acceptance, this Agreement shall be deemed to
be amended to the extent, but only to the extent, necessary to reflect the
addition of the Assignee and the resulting adjustment of the Commitments arising
therefrom. The Commitment allocated to each Assignee shall reduce such
Commitments of the assigning Lender PRO TANTO.
(e) Any Lender may at any time, with the written consent of
Agent, sell to one or more commercial banks, financial institutions, or other
Persons not Affiliates of such Lender (a "Participant") participating interests
in the Obligations, the Commitment, and the other rights and interests of that
Lender (the "originating Lender") hereunder and under the other Loan Documents
(provided that no written consent of Agent shall be required in connection with
any sale of any such participating interests by a Lender to an Eligible
Transferee); PROVIDED, HOWEVER, that (i) the originating Lender's obligations
under this Agreement shall remain unchanged, (ii) the originating Lender shall
remain solely responsible for the performance of such obligations, (iii)
Borrower and Agent shall continue to deal solely and directly with the
originating Lender in connection with the originating Lender's rights and
obligations under this Agreement and the other Loan Documents, (iv) no Lender
shall transfer or grant any participating interest under which the Participant
has the sole and exclusive right to approve any amendment to, or any consent or
waiver with respect to, this Agreement or any other Loan Document, except to the
extent such amendment to, or consent or waiver with respect to this Agreement or
of any other Loan Document would (A) extend the final maturity date of the
Obligations hereunder in which such Participant is participating; (B) reduce the
interest rate applicable to the Obligations hereunder in which such Participant
is participating; (C) release all or a material portion of the Collateral or
guaranties (except to the extent expressly provided herein or in any of the Loan
Documents) supporting the Obligations hereunder in which such Participant is
participating; (D) postpone the payment of, or reduce the amount of, the
interest or fees payable to such Participant through such Lender; or (E) change
the amount or due dates of scheduled principal repayments or prepayments or
premiums; and (v) all amounts payable by Borrower hereunder shall be determined
as if such Lender had not sold such participation; except that, if amounts
outstanding under this Agreement are due and unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of Default,
each Participant shall be deemed to have the right of set-off in respect of its
participating interest in amounts owing under this Agreement to the same extent
as if the amount of its participating interest were owing directly to it as a
Lender under this Agreement. The rights of any Participant shall only be
derivative through the originating Lender with whom such Participant
participates, and no Participant shall have any direct rights as to the other
Lenders, Agent, Borrower, the Collections, the Collateral, or otherwise in
respect of the Obligations. No Participant shall have the right to participate
directly in the making of decisions by the Lenders among themselves.
(f) In connection with any such assignment or participation or
proposed assignment or participation, a Lender may disclose all documents and
information which it now or hereafter may have relating to Borrower or
Borrower's business.
-85-
<PAGE> 86
(g) Any other provision in this Agreement notwithstanding, any
Lender may at any time create a security interest in, or pledge, all or any
portion of its rights under and interest in this Agreement in favor of any
Federal Reserve Bank in accordance with Regulation A of the Federal Reserve Bank
or U.S. Treasury Regulation 31 CFR ss.203.14, and such Federal Reserve Bank may
enforce such pledge or security interest in any manner permitted under
applicable law.
15.2. SUCCESSORS.
This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; PROVIDED, HOWEVER,
that Borrower may not assign this Agreement or any rights or duties hereunder
without the Lenders' prior written consent and any prohibited assignment shall
be absolutely void ab initio. No consent to assignment by the Lenders shall
release Borrower from its Obligations. A Lender may assign this Agreement and
the other Loan Documents and its rights and duties hereunder and thereunder
pursuant to SECTION 15.1 hereof and, except as expressly required pursuant to
SECTION 15.1 hereof, no consent or approval by Borrower is required in
connection with any such assignment.
16. AMENDMENTS; WAIVERS.
16.1. AMENDMENTS AND WAIVERS.
No amendment or waiver of any provision of this Agreement or
any other Loan Document, and no consent with respect to any departure by
Borrower therefrom, shall be effective unless the same shall be in writing and
signed by the Required Lenders (or by Agent at the written request of the
Required Lenders) and Borrower and then any such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; PROVIDED, HOWEVER, that no such waiver, amendment, or consent shall,
unless in writing and signed by all the Lenders and Borrower and acknowledged by
Agent, do any of the following:
(a) increase or extend the Commitment of any Lender;
(b) postpone or delay any date fixed by this Agreement or any
other Loan Document for any payment of principal, interest, fees or other
amounts due to the Lenders (or any of them) hereunder or under any other Loan
Document;
(c) reduce the principal of, or the rate of interest specified
herein on any Loan, or any fees or other amounts payable hereunder or under any
other Loan Document;
(d) change the percentage of the Commitments that is required
for the Lenders or any of them to take any action hereunder;
(e) amend this section or any provision of the Agreement
providing for consent or other action by all Lenders;
-86-
<PAGE> 87
(f) release Collateral other than as permitted by SECTION
17.11;
(g) change the definition of "Required Lenders";
(h) release Borrower from any Obligation for the payment of
money; or
(i) amend any of the provisions of ARTICLE 17.
and, PROVIDED FURTHER, HOWEVER, that no amendment, waiver or consent shall, (i)
unless in writing and signed by Agent, affect the rights or duties of Agent
under this Agreement or any other Loan Document; (ii) unless in writing and
signed by Foothill in its individual capacity as a Lender, affect the specific
rights or duties of Foothill in its individual capacity as a Lender (as
contrasted with rights or duties of Foothill as a member of the Lender Group)
under this Agreement or any other Loan Document; (iii) unless in writing and
signed by all of the Bridge Lenders, amend or modify SECTION 2.3(C) or the
interest or fees applicable to Bridge Loan, and (iv) unless in writing and
signed by all of the Revolving/Term Lenders, increase the sublimit for credit
available against Eligible Inventory currently contained in clause (y) of
Section 2.1(a). The foregoing notwithstanding, any amendment, modification,
waiver, consent, termination, or release of or with respect to any provision of
this Agreement or any other Loan Document that relates only to the relationship
of the Lender Group among themselves, and that does not affect the rights or
obligations of Borrower, shall not require consent by or the agreement of
Borrower.
16.2. NO WAIVERS; CUMULATIVE REMEDIES.
No failure by Agent or any Lender to exercise any right,
remedy, or option under this Agreement, any other Loan Document, or any present
or future supplement hereto or thereto, or in any other agreement between or
among Borrower and Agent or any Lender, or delay by Agent or any Lender in
exercising the same, will operate as a waiver thereof. No waiver by Agent or any
Lender will be effective unless it is in writing, and then only to the extent
specifically stated. No waiver by Agent or the Lenders on any occasion shall
affect or diminish Agent's and each Lender's rights thereafter to require strict
performance by Borrower of any provision of this Agreement. Agent's and each
Lender's rights under this Agreement and the other Loan Documents will be
cumulative and not exclusive of any other right or remedy which Agent or any
Lender may have.
17. AGENT; THE LENDER GROUP.
17.1. APPOINTMENT AND AUTHORIZATION OF AGENT.
Each Lender hereby designates and appoints Foothill as its
agent under this Agreement and the other Loan Documents and each Lender hereby
irrevocably authorizes Agent to take such action on its behalf under the
provisions of this Agreement and each other Loan Document and to exercise such
powers and perform such duties as are expressly delegated to it by the terms of
this Agreement or any other Loan Document, together with such powers as are
reasonably incidental thereto. Agent agrees to act as such on the express
conditions contained in this ARTICLE 17. The provisions of this ARTICLE 17 are
solely for the
-87-
<PAGE> 88
benefit of Agent and the Lenders, and Borrower shall have no rights as a third
party beneficiary of any of the provisions contained herein; PROVIDED, HOWEVER,
that certain of the provisions of SECTION 17.10 hereof also shall be for the
benefit of Borrower. Any provision to the contrary contained elsewhere in this
Agreement or in any other Loan Document notwithstanding, Agent shall not have
any duties or responsibilities, except those expressly set forth herein, nor
shall Agent have or be deemed to have any fiduciary relationship with any
Lender, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or any other Loan
Document or otherwise exist against Agent; it being expressly understood and
agreed that the use of the word "Agent" is for convenience only, that Foothill
is merely the representative of the Lenders, and has only the contractual duties
set forth herein. Except as expressly otherwise provided in this Agreement,
Agent shall have and may use its sole discretion with respect to exercising or
refraining from exercising any discretionary rights or taking or refraining from
taking any actions which Agent is expressly entitled to take or assert under or
pursuant to this Agreement and the other Loan Documents. Without limiting the
generality of the foregoing, or of any other provision of the Loan Documents
that provides rights or powers to Agent, Lenders agree that Agent shall have the
right to exercise the following powers as long as this Agreement remains in
effect: (a) maintain, in accordance with its customary business practices,
ledgers and records reflecting the status of the Advances, the Letters of
Credit, the Term Loans, the Collateral, the Collections, and related matters;
(b) execute or file any and all financing or similar statements or notices,
amendments, renewals, amendments, discharges, main levies, continuations, whole
or partial releases, supplements, documents, instruments, proofs of claim,
notices and other written agreements with respect to the Loan Documents; (c)
make Advances, the Letters of Credit, and the Term Loans, for itself or on
behalf of Lenders as provided in the Loan Documents; (d) exclusively receive,
apply, and distribute the Collections as provided in the Loan Documents; (e)
open and maintain such bank accounts and lock boxes as Agent deems necessary and
appropriate in accordance with the Loan Documents for the foregoing purposes
with respect to the Collateral and the Collections; (f) perform, exercise, and
enforce any and all other rights and remedies of the Lender Group with respect
to Borrower, the Obligations, the Collateral, the Collections, or otherwise
related to any of same as provided in the Loan Documents; and (g) incur and pay
such Lender Group Expenses as Agent may deem necessary or appropriate for the
performance and fulfillment of its functions and powers pursuant to the Loan
Documents. Each Lender hereby constitutes and appoints Agent as its true and
lawful attorney, with full power of substitution, to execute, deliver, register
and perform such acts, things and documents as Agent considers appropriate or
necessary to give effect to the terms hereof (including all things provided for
in paragraph (b) above and all matters provided for in SECTION 17.11(a)), which
power of attorney shall survive the termination of this Agreement.
17.2. DELEGATION OF DUTIES.
Except as otherwise provided in this section, Agent may
execute any of its duties under this Agreement or any other Loan Document by or
through agents, employees or attorneys-in-fact and shall be entitled to advice
of counsel concerning all matters pertaining to such duties. Agent shall not be
responsible for the negligence or misconduct of
-88-
<PAGE> 89
any agent or attorney-in-fact that it selects as long as such selection was made
in compliance with this section and without gross negligence or willful
misconduct.
17.3. LIABILITY OF AGENT.
None of the Agent-Related Persons shall (i) be liable for any
action taken or omitted to be taken by any of them under or in connection with
this Agreement or any other Loan Document or the transactions contemplated
hereby (except for its own gross negligence or willful misconduct), or (ii) be
responsible in any manner to any of the Lenders for any recital, statement,
representation or warranty made by Borrower or any Subsidiary or Affiliate of
Borrower, or any officer or director thereof, contained in this Agreement or in
any other Loan Document, or in any certificate, report, statement or other
document referred to or provided for in, or received by Agent under or in
connection with, this Agreement or any other Loan Document, or the validity,
effectiveness, genuineness, enforceability or sufficiency of this Agreement or
any other Loan Document, or for any failure of Borrower or any other party to
any Loan Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender to ascertain or
to inquire as to the observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any other Loan Document, or to
inspect the properties, books or records of Borrower or any of Borrower's
Subsidiaries or Affiliates.
17.4. RELIANCE BY AGENT.
Agent shall be entitled to rely, and shall be fully protected
in relying, upon any writing, resolution, notice, consent, certificate,
affidavit, letter, telegram, facsimile, telex or telephone message, statement or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent, or made by the proper Person or Persons, and upon advice
and statements of legal counsel (including counsel to Borrower or counsel to any
Lender), independent accountants and other experts selected by Agent. Agent
shall be fully justified in failing or refusing to take any action under this
Agreement or any other Loan Document unless it shall first receive such advice
or concurrence of the Lenders as it deems appropriate and until such
instructions are received, Agent shall act, or refrain from acting, as it deems
advisable. If Agent so requests, it shall first be indemnified to its reasonable
satisfaction by Lenders against any and all liability and expense that may be
incurred by it by reason of taking or continuing to take any such action. Agent
shall in all cases be fully protected in acting, or in refraining from acting,
under this Agreement or any other Loan Document in accordance with a request or
consent of the Lenders and such request and any action taken or failure to act
pursuant thereto shall be binding upon all of the Lenders.
17.5. NOTICE OF DEFAULT OR EVENT OF DEFAULT.
Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest, fees, and expenses required to be paid to
Agent for the account of the Lenders, except with respect to Events of Default
of which Agent has actual knowledge, unless Agent shall have received written
notice from a Lender or Borrower referring to this Agreement,
-89-
<PAGE> 90
describing such Default or Event of Default, and stating that such notice is a
"notice of default." Agent promptly will notify the Lenders of its receipt of
any such notice or of any Event of Default of which Agent has actual knowledge.
If any Lender obtains actual knowledge of any Event of Default, such Lender
promptly shall notify the other Lenders and Agent of such Event of Default. Each
Lender shall be solely responsible for giving any notices to its Participants,
if any. Subject to SECTION 17.4, Agent shall take such action with respect to
such Default or Event of Default as may be requested by the Required Lenders
and/or the Required Bridge Lenders, as the case may be, in accordance with
SECTION 9; PROVIDED, HOWEVER, that unless and until Agent has received any such
request, Agent may (but shall not be obligated to) take such action, or refrain
from taking such action, with respect to such Default or Event of Default as it
shall deem advisable.
17.6. CREDIT DECISION.
Each Lender acknowledges that none of the Agent-Related
Persons has made any representation or warranty to it, and that no act by Agent
hereinafter taken, including any review of the affairs of Borrower and its
Subsidiaries or Affiliates, shall be deemed to constitute any representation or
warranty by any Agent-Related Person to any Lender. Each Lender represents to
Agent that it has, independently and without reliance upon any Agent-Related
Person and based on such documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the business, prospects,
operations, property, financial and other condition and creditworthiness of
Borrower and any other Person (other than the Lender Group) party to a Loan
Document, and all applicable bank regulatory laws relating to the transactions
contemplated hereby, and made its own decision to enter into this Agreement and
to extend credit to Borrower. Each Lender also represents that it will,
independently and without reliance upon any Agent-Related Person and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of Borrower and any other Person (other than the Lender Group)
party to a Loan Document. Except for notices, reports and other documents
expressly herein required to be furnished to the Lenders by Agent, Agent shall
not have any duty or responsibility to provide any Lender with any credit or
other information concerning the business, prospects, operations, property,
financial and other condition or creditworthiness of Borrower and any other
Person party to a Loan Document that may come into the possession of any of the
Agent-Related Persons.
17.7. COSTS AND EXPENSES; INDEMNIFICATION.
Agent may incur and pay Lender Group Expenses to the extent
Agent deems reasonably necessary or appropriate for the performance and
fulfillment of its functions, powers, and obligations pursuant to the Loan
Documents, including without limiting the generality of the foregoing, court
costs, reasonable attorneys fees and expenses, costs of collection by outside
collection agencies and auctioneer fees and costs of security guards or
insurance premiums paid to maintain the Collateral, whether or not Borrower or
any other
-90-
<PAGE> 91
Company is obligated to reimburse Agent or Lenders for such expenses pursuant to
the Loan Agreement, the Loan Documents or otherwise. Agent is authorized and
directed to deduct and retain sufficient amounts from Collections to reimburse
Agent for such out-of-pocket costs and expenses prior to the distribution of any
amounts to Lenders. In the event Agent is not reimbursed for such costs and
expenses from Collections, each Lender hereby agrees that it is and shall be
obligated to pay to or reimburse Agent for the amount of such Lender's Pro Rata
Share thereof. Whether or not the transactions contemplated hereby are
consummated, the Lenders shall indemnify upon demand the Agent-Related Persons
(to the extent not reimbursed by or on behalf of Borrower and without limiting
the obligation of Borrower to do so), according to their Pro Rata Shares, from
and against any and all Indemnified Liabilities; PROVIDED, HOWEVER, that no
Lender shall be liable for the payment to the Agent-Related Persons of any
portion of such Indemnified Liabilities resulting solely from such Person's
gross negligence or willful misconduct. Without limitation of the foregoing,
each Lender shall reimburse Agent upon demand for its ratable share of any costs
or out-of-pocket expenses (including attorneys fees and expenses) incurred by
Agent in connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Loan Document, or any document
contemplated by or referred to herein, to the extent that Agent is not
reimbursed for such expenses by or on behalf of Borrower. The undertaking in
this section shall survive the payment of all Obligations hereunder and the
resignation or replacement of Agent.
17.8. AGENT IN INDIVIDUAL CAPACITY.
Foothill and its Affiliates may make loans to, issue letters
of credit for the account of, accept deposits from, acquire equity interests in
and generally engage in any kind of banking, trust, financial advisory,
underwriting or other business with Borrower and its Subsidiaries and Affiliates
and any other Person (other than the Lender Group) party to any Loan Documents
as though Foothill were not Agent hereunder and without notice to or consent of
the Lenders. The Lenders acknowledge that, pursuant to such activities, Foothill
or its Affiliates may receive information regarding Borrower or its Affiliates
and any other Person (other than the Lender Group) party to any Loan Documents
that is subject to confidentiality obligations in favor of Borrower or such
other Person and that prohibit the disclosure of such information to the
Lenders, and the Lenders acknowledge that, in such circumstances (and in the
absence of a waiver of such confidentiality obligations, which waiver Agent will
use its reasonable best efforts to obtain), Agent shall be under no obligation
to provide such information to them. With respect to the Foothill Loans and
Agent Advances, Foothill shall have the same rights and powers under this
Agreement as any other Lender and may exercise the same as though it were not
Agent, and the terms "Lender" and "Lenders" include Foothill in its individual
capacity.
17.9. SUCCESSOR AGENT.
Agent may resign as Agent upon 45 days notice to the Lenders.
If Agent resigns under this Agreement, the Required Lenders shall appoint a
successor Agent for the
-91-
<PAGE> 92
Lenders. If no successor Agent is appointed prior to the effective date of the
resignation of Agent, Agent may appoint, after consulting with the Lenders, a
successor Agent. If Agent has materially breached or failed to perform any
material provision of this Agreement or of applicable law, the Required Lenders
may agree in writing to remove and replace Agent with a successor Agent from
among the Lenders. In any such event, upon the acceptance of its appointment as
successor Agent hereunder, such successor Agent shall succeed to all the rights,
powers and duties of the retiring Agent and the term "Agent" shall mean such
successor Agent and the retiring Agent's appointment, powers and duties as Agent
shall be terminated. After any retiring Agent's resignation hereunder as Agent,
the provisions of this SECTION 17 shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was Agent under this Agreement. If
no successor Agent has accepted appointment as Agent by the date which is 45
days following a retiring Agent's notice of resignation, the retiring Agent's
resignation shall nevertheless thereupon become effective and the Lenders shall
perform all of the duties of Agent hereunder until such time, if any, as the
Lenders appoint a successor Agent as provided for above.
17.10. WITHHOLDING TAX.
(a) If any Lender is a "foreign corporation, partnership or trust"
within the meaning of the IRC and such Lender claims exemption from, or a
reduction of, U.S. withholding tax under Sections 1441 or 1442 of the IRC, such
Lender agrees with and in favor of Agent and Borrower, to deliver to Agent and
Borrower:
(i) if such Lender claims an exemption from, or a reduction
of, withholding tax under a United States tax treaty, properly completed IRS
Forms 1001 and W-8 before the payment of any interest in the first calendar year
and before the payment of any interest in each third succeeding calendar year
during which interest may be paid under this Agreement;
(ii) if such Lender claims that interest paid under this
Agreement is exempt from United States withholding tax because it is effectively
connected with a United States trade or business of such Lender, two properly
completed and executed copies of IRS Form 4224 before the payment of any
interest is due in the first taxable year of such Lender and in each succeeding
taxable year of such Lender during which interest may be paid under this
Agreement, and IRS Form W-9; and
(iii) such other form or forms as may be required under the
IRC or other laws of the United States as a condition to exemption from, or
reduction of, United States withholding tax.
Such Lender agrees promptly to notify Agent and Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction.
(b) If any Lender claims exemption from, or reduction of, withholding
tax under a United States tax treaty by providing IRS Form 1001 and such Lender
sells, assigns, grants a participation in, or otherwise transfers all or part of
the Obligations of Borrower to such
-92-
<PAGE> 93
Lender, such Lender agrees to notify Agent of the percentage amount in which it
is no longer the beneficial owner of Obligations of Borrower to such Lender. To
the extent of such percentage amount, Agent will treat such Lender's IRS Form
1001 as no longer valid.
(c) If any Lender claiming exemption from United States withholding tax
by filing IRS Form 4224 with Agent sells, assigns, grants a participation in, or
otherwise transfers all or part of the Obligations of Borrower to such Lender,
such Lender agrees to undertake sole responsibility for complying with the
withholding tax requirements imposed by Sections 1441 and 1442 of the IRC.
(d) If any Lender is entitled to a reduction in the applicable
withholding tax, Agent may withhold from any interest payment to such Lender an
amount equivalent to the applicable withholding tax after taking into account
such reduction. If the forms or other documentation required by subsection (a)
of this section are not delivered to Agent, then Agent may withhold from any
interest payment to such Lender not providing such forms or other documentation
an amount equivalent to the applicable withholding tax.
(e) If the IRS or any other Governmental Authority of the United States
or other jurisdiction asserts a claim that Agent did not properly withhold tax
from amounts paid to or for the account of any Lender (because the appropriate
form was not delivered, was not properly executed, or because such Lender failed
to notify Agent of a change in circumstances which rendered the exemption from,
or reduction of, withholding tax ineffective, or for any other reason) such
Lender shall indemnify Agent fully for all amounts paid, directly or indirectly,
by Agent as tax or otherwise, including penalties and interest, and including
any taxes imposed by any jurisdiction on the amounts payable to Agent under this
section, together with all costs and expenses (including attorneys fees and
expenses). The obligation of the Lenders under this subsection shall survive the
payment of all Obligations and the resignation or replacement of Agent.
17.11. COLLATERAL MATTERS.
(a) The Lenders hereby irrevocably authorize Agent, at its option and
in its sole discretion, to release any Lien on any Collateral (i) upon the
termination of the Commitments and payment and satisfaction in full by Borrower
of all Obligations; (ii) constituting property being sold or disposed of if a
release is required or desirable in connection therewith and if Borrower
certifies to Agent that the sale or disposition is permitted under SECTION 7 of
this Agreement or the other Loan Documents (and Agent may rely conclusively on
any such certificate, without further inquiry); (iii) constituting property in
which the applicable Company owned no interest at the time the security interest
was granted or at any time thereafter; or (iv) constituting property leased to a
Company under a lease that has expired or is terminated in a transaction
permitted under this Agreement. Except as provided above, Agent will not execute
and deliver a release of any Lien on any Collateral without the prior written
authorization of all of the Lenders. Upon request by Agent or Borrower at any
time, the Lenders will confirm in writing Agent's authority to release any such
Liens on particular types or items of Collateral pursuant to this SECTION 17.11;
PROVIDED, HOWEVER, that (1) Agent shall not be required to execute any document
necessary to evidence such release on
-93-
<PAGE> 94
terms that, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Lien without
recourse, representation, or warranty, and (2) such release shall not in any
manner discharge, affect, or impair the Obligations or any Liens (other than
those expressly being released) upon (or obligations of the applicable Company
in respect of) all interests retained by the applicable Company, including, the
proceeds of any sale, all of which shall continue to constitute part of the
Collateral.
(b) Agent shall have no obligation whatsoever to any of the Lenders to
assure that the Collateral exists or is owned by the applicable Company or is
cared for, protected, or insured or has been encumbered, or that the Agent's
Liens have been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to Agent pursuant to any of the Loan
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, subject to the terms and conditions
contained herein, Agent may act in any manner it may deem appropriate, in its
sole discretion given Agent's own interest in the Collateral in its capacity as
one of the Lenders and that Agent shall have no other duty or liability
whatsoever to any Lender as to any of the foregoing, except as otherwise
provided herein.
17.12. RESTRICTIONS ON ACTIONS BY LENDERS; SHARING OF PAYMENTS.
(a) Each of the Lenders agrees that it shall not, without the express
consent of Agent, and that it shall, to the extent it is lawfully entitled to do
so, upon the request of Agent, set off against the Obligations, any amounts
owing by such Lender to Borrower or any accounts of Borrower now or hereafter
maintained with such Lender. Each of the Lenders further agrees that it shall
not, unless specifically requested to do so by Agent, take or cause to be taken
any action, including, the commencement of any legal or equitable proceedings,
to foreclose any Lien on, or otherwise enforce any security interest in, any of
the Collateral the purpose of which is, or could be, to give such Lender any
preference or priority against the other Lenders with respect to the Collateral.
(b) Subject to SECTION 17.8, if, at any time or times any Lender shall
receive (i) by payment, foreclosure, setoff or otherwise, any proceeds of
Collateral or any payments with respect to the Obligations arising under, or
relating to, this Agreement or the other Loan Documents, except for any such
proceeds or payments received by such Lender from Agent pursuant to the terms of
this Agreement, or (ii) payments from Agent in excess of such Lender's ratable
portion of all such distributions by Agent, such Lender promptly shall (1) turn
the same over to Agent, in kind, and with such endorsements as may be required
to negotiate the same to Agent, or in same day funds, as applicable, for the
account of all of the Lenders and for application to the Obligations in
accordance with the applicable provisions of this Agreement, or (2) purchase,
without recourse or warranty, an undivided interest and participation in the
Obligations owed to the other Lenders so that such excess payment received shall
be applied ratably as among the Lenders in accordance with their Pro Rata
Shares; PROVIDED, HOWEVER, that if all or part of such excess payment received
by the purchasing party is thereafter recovered from it, those purchases of
participations shall be rescinded in whole or in part, as applicable,
-94-
<PAGE> 95
and the applicable portion of the purchase price paid therefor shall be returned
to such purchasing party, but without interest except to the extent that such
purchasing party is required to pay interest in connection with the recovery of
the excess payment.
17.13. AGENCY FOR PERFECTION.
Agent and each Lender hereby appoints each other Lender as
agent for the purpose of perfecting the Agent's Liens in assets which, in
accordance with Article 9 of the UCC or the similar provisions of any other
applicable laws can be perfected only by possession. Should any Lender obtain
possession of any such Collateral, such Lender shall notify Agent thereof, and,
promptly upon Agent's request therefor shall deliver such Collateral to Agent or
in accordance with Agent's instructions.
17.14. PAYMENTS BY AGENT TO THE LENDERS.
All payments to be made by Agent to the Lenders shall be made
by bank wire transfer or internal transfer of immediately available funds to:
If to Foothill: The Chase Manhattan Bank
ABA # 021-000-021
Credit: Foothill Capital Corporation
Account No. 323-266193
Re: Telxon Corporation
or pursuant to such other wire transfer instructions as each party may designate
for itself by written notice to Agent. Concurrently with each such payment,
Agent shall identify whether such payment (or any portion thereof) represents
principal, premium or interest on revolving advances or otherwise.
17.15. CONCERNING THE COLLATERAL AND RELATED LOAN DOCUMENTS.
Each member of the Lender Group authorizes and directs Agent
to enter into this Agreement and the other Loan Documents relating to the
Collateral, for the benefit of the Lender Group. Each member of the Lender Group
agrees that any action taken by Agent or all Lenders, as applicable, in
accordance with the terms of this Agreement or the other Loan Documents relating
to the Collateral and the exercise by Agent or all Lenders, as applicable, of
their respective powers set forth therein or herein, together with such other
powers that are reasonably incidental thereto, shall be binding upon all of the
Lenders.
17.16. FIELD AUDITS AND EXAMINATION REPORTS; CONFIDENTIALITY; DISCLAIMERS
BY LENDERS; OTHER REPORTS AND INFORMATION.
By signing this Agreement, each Lender:
(a) is deemed to have requested that Agent furnish such Lender,
promptly after it becomes available, a copy of each field audit or examination
report (each a "Report" and
-95-
<PAGE> 96
collectively, "Reports") prepared by Agent, and Agent shall so furnish each
Lender with such Reports;
(b) expressly agrees and acknowledges that neither Foothill nor Agent
(i) makes any representation or warranty as to the accuracy of any Report, or
(ii) shall be liable for any information contained in any Report;
(c) expressly agrees and acknowledges that the Reports are not
comprehensive audits or examinations, that Agent or other party performing any
audit or examination will inspect only specific information regarding Companies
and will rely significantly upon Borrower's books and records, as well as on
representations of Companies' personnel;
(d) agrees to keep all Reports and other material, non-public
information regarding Companies and their operations, assets, and existing and
contemplated business plans in a confidential manner; it being understood and
agreed by Borrower that in any event such Lender may make disclosures (a) to
counsel for and other advisors, accountants, and auditors to such Lender, (b)
reasonably required by any BONA FIDE potential or actual Assignee, transferee,
or Participant in connection with any contemplated or actual assignment or
transfer by such Lender of an interest herein or any participation interest in
such Lender's rights hereunder, (c) of information that has become public by
disclosures made by Persons other than such Lender, its Affiliates, assignees,
transferees, or participants, or (d) as required or requested by any court,
governmental or administrative agency, pursuant to any subpoena or other legal
process, or by any law, statute, regulation, or court order; PROVIDED, HOWEVER,
that, unless prohibited by applicable law, statute, regulation, or court order,
such Lender shall notify Borrower of any request by any court, governmental or
administrative agency, or pursuant to any subpoena or other legal process for
disclosure of any such non-public material information concurrent with, or where
practicable, prior to the disclosure thereof; and
(e) without limiting the generality of any other indemnification
provision contained in this Agreement, agrees: (i) to hold Agent and any such
other Lender preparing a Report harmless from any action the indemnifying Lender
may take or conclusion the indemnifying Lender may reach or draw from any Report
in connection with any loans or other credit accommodations that the
indemnifying Lender has made or may make to Borrower, or the indemnifying
Lender's participation in, or the indemnifying Lender's purchase of, a loan or
loans of Borrower; and (ii) to pay and protect, and indemnify, defend and hold
Agent and any such other Lender preparing a Report harmless from and against,
the claims, actions, proceedings, damages, costs, expenses and other amounts
(including, attorney costs) incurred by Agent and any such other Lender
preparing a Report as the direct or indirect result of any third parties who
might obtain all or part of any Report through the indemnifying Lender.
In addition to the foregoing: (x) Any Lender may from time to time request of
Agent in writing that Agent provide to such Lender a copy of any report or
document provided by Borrower to Agent that has not been contemporaneously
provided by Borrower to such Lender, and, upon receipt of such request, Agent
shall provide a copy of same to such Lender promptly upon receipt thereof from
Borrower; (y) To the extent that Agent is entitled, under
-96-
<PAGE> 97
any provision of the Loan Documents, to request additional reports or
information from Borrower, any Lender may, from time to time, reasonably request
Agent to exercise such right as specified in such Lender's notice to Agent,
whereupon Agent promptly shall request of Borrower the additional reports or
information specified by such Lender, and, upon receipt thereof from Borrower,
Agent promptly shall provide a copy of same to such Lender; and (z) Any time
that Agent renders to Borrower a statement regarding the Loan Account, Agent
shall send a copy of such statement to each Lender.
17.17. SEVERAL OBLIGATIONS; NO LIABILITY.
Notwithstanding that certain of the Loan Documents now or
hereafter may have been or will be executed only by or in favor of Agent in its
capacity as such, and not by or in favor of the Lenders, any and all obligations
on the part of Agent (if any) to make any credit available hereunder shall
constitute the several (and not joint) obligations of the respective Lenders on
a ratable basis, according to their respective Commitments, to make an amount of
such credit not to exceed, in principal amount, at any one time outstanding, the
amount of their respective Commitments. Nothing contained herein shall confer
upon any Lender any interest in, or subject any Lender to any liability for, or
in respect of, the business, assets, profits, losses, or liabilities of any
other Lender. Each Lender shall be solely responsible for notifying its
Participants of any matters relating to the Loan Documents to the extent any
such notice may be required, and no Lender shall have any obligation, duty, or
liability to any Participant of any other Lender. Except as provided in SECTION
17.7, no member of the Lender Group shall have any liability for the acts or any
other member of the Lender Group. No Lender shall be responsible to Borrower or
any other Person for any failure by any other Lender to fulfill its obligations
to make credit available hereunder, nor to advance for it or on its behalf in
connection with its Commitment, nor to take any other action on its behalf
hereunder or in connection with the financing contemplated herein.
18. GENERAL PROVISIONS.
18.1. EFFECTIVENESS.
This Agreement shall be binding and deemed effective when
executed by Borrower and each member of the Lender Group whose signature is
provided for on the signature pages hereof.
18.2. SECTION HEADINGS.
Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context, everything
contained in each section applies equally to this entire Agreement.
18.3. INTERPRETATION.
Neither this Agreement nor any uncertainty or ambiguity herein
shall be construed or resolved against the Lender Group or Borrower, whether
under any rule of
-97-
<PAGE> 98
construction or otherwise. On the contrary, this Agreement has been reviewed by
all parties and shall be construed and interpreted according to the ordinary
meaning of the words used so as to fairly accomplish the purposes and intentions
of all parties hereto.
18.4. SEVERABILITY OF PROVISIONS.
Each provision of this Agreement shall be severable from every
other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
18.5. AMENDMENTS IN WRITING.
This Agreement can only be amended by a writing signed by
Agent, the requisite Lenders, and Borrower.
18.6. COUNTERPARTS; TELEFACSIMILE EXECUTION.
This Agreement may be executed in any number of counterparts
and by different parties on separate counterparts, each of which, when executed
and delivered, shall be deemed to be an original, and all of which, when taken
together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of this Agreement by telefacsimile shall be equally as
effective as delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by telefacsimile also
shall deliver an original executed counterpart of this Agreement but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Agreement. The forgoing shall apply
to each other Loan Document mutatis mutandis.
18.7. REVIVAL AND REINSTATEMENT OF OBLIGATIONS.
If the incurrence or payment of the Obligations by Borrower or
any guarantor of the Obligations or the transfer by either or both of such
parties to the Lender Group of any property of either or both of such parties
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors' rights, including provisions of the
Bankruptcy Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if the Lender Group is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender Group is required or elects to
repay or restore, and as to all reasonable costs, expenses, and attorneys fees
of the Lender Group related thereto, the liability of Borrower or such guarantor
automatically shall be revived, reinstated, and restored and shall exist as
though such Voidable Transfer had never been made.
-98-
<PAGE> 99
18.8. INTEGRATION.
This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.
18.9. ILLINOIS COLLATERAL PROTECTION ACT.
Unless Borrower provides Agent with evidence of the insurance
coverage required by SECTION 6.10, Agent may purchase insurance at Borrower's
expense to protect Agent's interests in the Collateral. This insurance may, but
need not, protect Borrower's interests. The coverage that Agent purchases may
not pay any claim that Borrower may make or any claim that is made against
Borrower in connection with the Collateral. Borrower may later cancel any
insurance purchased by Agent, but only after providing Agent with evidence that
Borrower has obtained insurance as required by this Agreement. If Agent
purchases insurance for the Collateral, Borrower will be responsible for the
costs of that insurance, including interest and any other charges that may be
imposed in connection with the placement of the insurance, until the effective
date of the cancellation or expiration of the insurance. The costs of the
insurance may be added to the Obligations. The costs of the insurance may be
more than the cost of insurance Borrower may be able to obtain on its own.
18.10. CURRENCY ISSUES.
(a) If, for the purpose of obtaining or enforcing judgment against any
Company in any court in any jurisdiction, it becomes necessary to convert into
any other currency (such currency being hereinafter in this SECTION 18.10
referred to as the "Judgment Currency") an amount due in Dollars under any Loan
Document, the conversion shall be made at the rate of exchange specified by
Agent as being the rate available to Agent on the Business Day immediately
preceding (i) the date of actual payment of the amount due, in the case of any
proceeding in the courts of any jurisdiction that will give effect to such
conversion being made on such date, or (ii) the date on which the judgment is
given, in the case of any proceeding in the courts of any other jurisdiction
(the applicable date as of which such conversion is made pursuant to this
SECTION 18.10(a) being hereinafter in this SECTION 18.10 referred to as the
"Judgment Conversion Date").
(b) If, in the case of any proceeding in the court of any jurisdiction
referred to in SECTION 18.10(a), there is a change in the rate of exchange
available to Agent between the Judgment Conversion Date and the date of actual
receipt of the amount due in immediately available funds, the applicable Company
shall pay such additional amount (if any, but in any event not a lesser amount)
as may be necessary to ensure that the amount actually received in the Judgment
Currency, when converted at the rate of exchange specified by Agent as being the
rate available to Agent on the date of payment, will produce the amount of
Dollars, which could have been purchased with the amount of the Judgment
Currency stipulated in the judgment or judicial order at the rate of exchange on
the Judgment Conversion Date.
-99-
<PAGE> 100
18.11. DESIGNATED SENIOR INDEBTEDNESS.
The Obligations constitute "Designated Senior Indebtedness" under the
1995 Indenture.
-100-
<PAGE> 101
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed.
TELXON CORPORATION,
a Delaware corporation
By /s/ Woody M. McGee
--------------------
Title VP/CFO
-----------------
FOOTHILL CAPITAL CORPORATION,
a California corporation, individually and as Agent
By /s/ Bruce Rivers
--------------------
Title VP
------------------
-101-
<PAGE> 1
EXHIBIT 99
----------
[TELXON LOGO]
NEWS RELEASE
TELXON ANNOUNCES NEW CREDIT FACILITY
REFINANCES EXISTING FACILITY WITH NEW $100 MILLION
SENIOR SECURED CREDIT FACILITY
AKRON, OHIO, August 30, 1999 - Telxon Corporation (Nasdaq: TLXN), a
world leader in delivering quality, innovative solutions for mobile information
and wireless communications systems, announced today that it has successfully
completed the refinancing of its existing revolving credit agreement and
business purpose revolving promissory note with a new $100 million senior
secured credit facility provided by Foothill Capital Corporation. Funding of the
new facility and repayment of the existing facility was completed earlier today.
John W. Paxton, Sr., Telxon's Chairman and CEO, said, "As I had
indicated previously, I remain confident that the new credit facility from
Foothill will provide Telxon with the financial resources necessary to achieve
our strategic objectives and execute our underlying operational plan."
Borrowings under the revolving loan provisions of the new facility will
be subject to availability based on qualifying accounts receivable and
inventory, reduced by amounts borrowed under the facility's term loan features
and amounts outstanding under letters of credit. The facility has three term
loan features. The first, a ten year term loan, has a limit of $6 million, based
on a percentage of the liquidation value of the company's machinery and
equipment. The two remaining term loans, $10 million for a three year term and
$30 million, which must be reduced to $10 million by December 26, 1999 and
repaid in full by October 2000, are limited to specified percentages of the
market value of capital stock owned by the company in its former Aironet
Wireless Communications, Inc. subsidiary (Nasdaq: AIRO). Additional details
regarding the new credit facility will be available upon the company's filing of
the loan agreement as part of a Form 8-K with the SEC.
Telxon Corporation/3330 West Market Street/P.O. Box 5582/Akron, Ohio 44334-0582
800.800.8001/Fax 330.664.2058/www.telxon.com
<PAGE> 2
Telxon Corporation is a leading global designer and manufacturer of
wireless and mobile information systems for vertical markets. The company
integrates advanced mobile computing and wireless data communication technology
with a wide array of peripherals, application-specific software and global
customer services for its customers in more than 60 countries. Telxon's website
address is www.telxon.com.
Other than the historical financial information discussed above, this
news release constitutes forward-looking statements that are inherently subject
to risks and uncertainties which could cause Telxon's actual results or other
future events pertaining to the company to differ materially from the
forward-looking statements. The important factors affecting the realization of
those results or the occurrence of those events include, without limitation, the
adequacy of the company's internal and external sources of working capital, the
company's ability to meet its loan repayment obligations under its new credit
facility, the ability of the company's executive management to successfully
implement its plan to stabilize and grow the company, and the level of customer
demand for the company's products, as well as general and industry-specific
economic conditions, competitive pressures and rapid technological change.
Reference should be made to the discussion of these and other factors affecting
Telxon's business and results as included from time to time in the company's
filings with the Securities and Exchange Commission.
# # #
For more information:
Alex L. Csiszar
Vice President, Investor and Public Relations
Telxon Corporation
(330) 664-2961
