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Patent And Trademark Security Agreement

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PATENT AND TRADEMARK SECURITY AGREEMENT


PATENT AND TRADEMARK SECURITY AGREEMENT, dated as of March 26 , 1999, made by TELXON CORPORATION ("TELXON" or the "BORROWER") the Persons listed on the signature pages under the caption "Grantors" (the "Grantors") and the Additional Grantors (as defined in Section 13(b)) to BANK ONE, NA successor by merger to BANK ONE AKRON, NA ("Bank One") (as the same may be amended, amended and restated, supplemented or otherwise modified from time to time, this "AGREEMENT").


RECITALS


WHEREAS, the Borrower, the Lenders, including Bank One, from time-to-time party to the Credit Agreement, the Issuer, the Swing Line Lender and Bank of New York ("BNY"), as the Agent (the "AGENT"), on behalf of the Lenders, the Issuer and the Swing Line Lender entered into that certain Credit Agreement dated as of March 8, 1996, as amended by that certain Amendment No. 1 to the Credit Agreement dated as of August 6, 1996 ("AMENDMENT NO.1"), Amendment No. 2 to the Credit Agreement dated as of December 16, 1996 and Amendment No. 3 to the Credit Agreement dated as of December 12, 1997 (as further amended, modified or supplemented from time to time, the "CREDIT AGREEMENT").


WHEREAS, pursuant to Amendment No. 1 and the Intercreditor Agreement dated as of August 6, 1996, by and between Bank One and the Agent , as acknowledged by the Borrower (as the same may be amended, supplemented or otherwise modified from time to time, the "INTERCREDITOR AGREEMENT"), Bank One extended to Borrower a certain Twenty Million Dollar ($20,000,000.00) revolving line of credit (as the same may be amended, supplemented or otherwise modified from time to time, the "SWING LINE") which is evidenced by a certain Business Purpose Revolving promissory Note dated August 4, 1998 and executed by Borrower (as the same may be amended, supplemented or otherwise modified from time to time, the "SWING LINE NOTE") and a Standby Letter of Credit No. 047769 dated April 25, 1996 in the amount of $75,608.33 ("BANK ONE LETTER OF CREDIT"). The Borrower granted Bank One a security interest in certain collateral pursuant to the Bank One Security Agreement dated as of August 6, 1996 and the Amended and Restated Security Agreement dated as of the same date as the Agreement..


WHEREAS, the Borrower and Bank One have heretofore entered into a Waiver and Agreement, dated as of December 29, 1998 (the "ORIGINAL WAIVER") and a Waiver Extension and Agreement, dated as of February 12, 1999 (the "ORIGINAL WAIVER EXTENSION), with respect to certain matters relating to the compliance by the Borrower with certain provisions of the Credit Agreement.


WHEREAS, the Borrower has requested that Bank One agree to a further waiver of compliance by the Borrower with certain provisions of the Credit Agreement, including an


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extension of the waiver granted in the Original Waiver as extended by the Original Waiver Extension and to amend certain other provisions of the Credit Agreement.


WHEREAS, contemporaneously with the execution and delivery of this Agreement, Bank One and the Borrower are entering into that certain Second Further Consent and Agreement by and between Bank One and the Borrower dated as of the date hereof (the "SECOND BANK ONE WAIVER").


WHEREAS, unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined;


WHEREAS, it is a condition precedent to the effectiveness of the Second Bank One Waiver and the continued extension of credit under the Swing Line that the Grantors shall have granted to Bank One, the security interests and liens upon the Grantor's assets and property contemplated by this Agreement.


NOW, THEREFORE, in consideration of the premises, the covenants and conditions set forth herein and in the Second Bank One Waiver, and for other good and valuable consideration, the receipt and sufficiency are hereby acknowledged, each of the Grantors hereby agrees with the Bank One as follows:


1. GRANT OF SECURITY. Each Grantor hereby assigns, pledges and grants to Bank One a lien on and security interest in (except to the extent such assignment, pledge or grant would violate the terms of any license agreement with any other person in connection with any of the Patents and Trademarks, as defined below, whether such Grantor is a licensee or licensor under any such license agreement), the entire right, title and interest of such Grantor in and to the following, whether now owned or hereafter acquired (the "PATENT AND TRADEMARK COLLATERAL") which Security Interest shall be subordinate in all respects to the Security Interest and Liens granted by the Borrower and certain of its Subsidiaries to the Agent on behalf of the Lender, Issuer and Swing Line Lender as security for the obligations of the Borrower and certain of its Subsidiaries under the Credit Agreement and Loan Documents:


(a) All trademarks, service marks, trade names and trade dress and all trademark and service mark registrations and applications for trademark or service mark registration in the United States (except for "intent to use" applications for trademark or service mark registrations filed pursuant to Section l(b) of the Lanham Act, unless and until an Amendment to Allege Use or a Statement of Use under Sections l(c) and l(d) of said Act has been filed) and throughout the world (including, without limitation, each trademark and service mark registration and application for trademark and service mark registration identified on Schedule I attached hereto and made a part hereof), and (i) all renewals thereof, (ii) all income, royalties, damages and payments now and hereafter due and/or payable with respect thereto (including, without limitation, payments under all licenses entered into in connection therewith, and damages and payments for past or future infringements thereof), (iii) the right to sue or otherwise recover for all past, present and future infringements thereof, and (iv) all rights corresponding thereto throughout the world (but only such rights as now exist or may come to exist under applicable


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local law), together, in each case, with the goodwill of the business connected with the use of, and symbolized by each such trademark, service mark, trade name and trade dress (all of the foregoing and other rights being, collectively, the "TRADEMARKS");


(b) All letters patent of the United States or any other country, and all registrations and recordings thereof, including, without limitation, applications, registrations and recordings in the United States patent and Trademark Office or in any similar office or agency of the United States, any State thereof or any other country or any political subdivision thereof, all whether now owned or hereafter acquired by the Company, including, but not limited to, those described in Schedule I annexed hereto and made a part hereof, and all reissues, continuations, continuations-in-part or extensions thereof and all licenses thereof (all of the foregoing being herein referred to as the "PATENTS"); and


(c) All license agreements with any other Person in connection with any of the Patents and Trademarks or such other Person's names or marks, whether such Grantor is a licensor or licensee under any such license agreement (subject, in each case, to the terms of such license agreements), and the right to prepare for sale, sell and advertise for sale, all inventory (as defined in the Uniform Commercial Code in effect in the State of Ohio (the "OUCC"), to the extent now or hereafter owned by each Grantor and now or hereafter covered by such licenses (the "LICENSES").


2. SECURITY FOR OBLIGATIONS. The assignment and pledge of and grant of a security interest in the Patent and Trademark Collateral by each Grantor pursuant to this Agreement (collectively, the "SECURITY INTERESTS") secures the payment of all obligations of the Borrower to Bank One now or hereafter existing (and any other documents in respect of such obligations) under the Swing Line (as the same may be amended, amended and restated, modified or supplemented from time-to-time), whether for principal, interest, fees, expenses or otherwise (all such obligations being the "SECURED OBLIGATIONS").


The Security Interests granted by this Agreement are granted in conjunction with the security interests granted to Bank One in the Amended and Restated Security Agreement between Borrower and Bank One executed contemporaneously herewith..


3. REPRESENTATIONS AND WARRANTIES. Each Grantor represents and warrants on the date hereof and on each date that representations and warranties are deemed made by any Grantor or the Borrower under the Credit Agreement as follows:


(a) Such Grantor is the sole, legal and beneficial owner of the entire right, title and interest in and to the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto and the Licenses free and clear of any lien, security interest, option, charge, pledge, registered user agreement, assignment (whether conditional or not), or covenant, or any other encumbrance, except for the Security Interests created or permitted by this Agreement or the Credit Agreement, and except for any such encumbrances which do not have a material adverse impact on the economic value of any of the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto, and except as permitted by Section 5 of this Agreement. No effective


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financing statement or other instrument similar in effect covering all or any part of the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto or the Licenses purported to be granted by such Grantor hereunder is on file in any recording office, including, without limitation, the United States Patent and Trademark Office, except such as may have been filed in favor of Bank One relating to this Agreement. No Grantor owns any material copyrights of the United States, or any country, including, without limitation, applications or registrations which have been recorded or registered (or are currently the subject of a pending application) in the United States Copyright Office or in any similar office or agency of the United States, any State thereof, or any country or political subdivision thereof.


(b) Set forth on Schedules I and II below the name of such Grantor is a complete and accurate list of all of the federal registrations and applications for federal registration of the Patents and Trademarks owned by such Grantor.


(c) Each federal patent and trademark and service mark registration and application for registration of such Grantor identified on Schedules I and II is subsisting and, to the best of such Grantor's knowledge, has not been adjudged invalid, unregistrable or unenforceable, in whole or in part, and is, to the best of such Grantor's knowledge, valid, registrable and enforceable. Each License of such Grantor, to the best of such Grantor's knowledge, is subsisting and has not been adjudged invalid or unenforceable, in whole or in part, and is, to the best of such Grantor's knowledge, valid and enforceable. Such Grantor has notified Bank One in writing of all prior uses of any federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto of which such Grantor is aware, which would in the reasonable judgment of such Grantor lead to such Patents and Trademarks becoming invalid or unenforceable, including prior unauthorized uses by third parties and uses which were not supported by the goodwill of the business connected with such item.


(d) Such Grantor has not granted any license, release, covenant not to sue, or non-assertion assurance to any third person with respect to any part of the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto which would materially interfere with its business as currently carried on under any such registrations or applications for registrations.


(e) Such Grantor has used reasonable and proper statutory notice in connection with its use of each registered patent and trademark and service mark listed on Schedules I and II, except inadvertent omissions thereof.


(f) Such Grantor has the unqualified right to enter into this Agreement and to perform its terms.


(g) Except for (i) the appropriate filings with the United States Patent and Trademark Office, and (ii) the appropriate filings under Article 9 of the Uniform Commercial Code, no consent of any other Person (other than licensors of any License to which any Grantor is a licensee), no authorization, consent, approval or other action by, and no notice to or filing or recording with, any governmental, administrative or judicial authority or regulatory body is


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required in the United States either (x) for the granting by such Grantor of the Security Interests granted hereby or for the execution, delivery or performance of this Agreement by such Grantor, or (y) for the perfection of or the exercise by Bank One of its rights and remedies hereunder, except where the failure to obtain, take, give or make such authorizations, consents, approvals, actions, notices or filings would not, and would not be reasonably likely to, have a material adverse effect on the financial condition, operations, business, properties or assets of the Grantors taken as a whole.


(h) The consummation of actions contemplated under or in connection with the Credit Agreement, Swing Line Note or Bank One Letter of Credit to be performed by such Grantor, will not impair the legal right of such Grantor to use any of the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto.


(i) Such Grantor has no knowledge of the existence of any patent, trademark, service mark, trade name or trade dress, or license agreement held or claimed by any other Person that, if upheld, would preclude such Grantor from distributing, marketing, selling or providing any product or service currently distributed, marketed, sold or provided by it, as the case may be, under or in connection with any of the federal registrations and applications for registration of the Patents and Trademarks listed on Schedules I and II hereto (except, in each case, to the extent that such Grantor has granted an exclusive license to another person), or that would have a material adverse effect on the financial condition, operations, business, properties or assets of the Grantors taken as a whole, and such Grantor has no knowledge of any claim that is likely to be made that if upheld would have a material adverse effect on the financial condition, operations, business, properties or assets of the Grantors taken as a whole.


(j) No material claim in any court or in the United States Patent and Trademark Office has been made (and, as to any trademark, service mark, trade name, or trade dress with respect to which such Grantor is a licensee, to the best knowledge of such Grantor, no material claim has been made against the third party licensor), and such Grantor has no knowledge o
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