SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 1, 1995
COMMISSION FILE NUMBER 0-11963
iomega
Corporation
(Exact name of registrant as specified in its charter)
Delaware 86-0385884
(State or other jurisdiction (IRS employer identification number)
of incorporation or organization)
1821 West Iomega Way, Roy, UT 84067
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (801) 778-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 1, 1995.
Common Stock, par value $.03 1/3 19,431,676
(Title of each class) (Number of shares)
<PAGE>
IOMEGA CORPORATION
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets at
October 1, 1995 and December 31, 1994. . . . . 2
Condensed consolidated statements of operations
for the three months ended October 1, 1995
and October 2, 1994. . . . . . . . . . . . . . 4
Condensed consolidated statements of operations
for the nine months ended October 1, 1995
and October 2, 1994. . . . . . . . . . . . . . 5
Condensed consolidated statements of cash flows
for the nine months ended October 1, 1995
and October 2, 1994. . . . . . . . . . . . . . 6
Notes to condensed consolidated financial statements . . 7
Management's discussion and analysis of financial
condition and results of operations. . . . . . 12
PART II - OTHER INFORMATION. . . . . . . . . . . . . . . 15
SIGNATURES. . . 16
EXHIBIT INDEX . 17
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
October 1, December 31,
1995 1994
(In thousands)
<C> <S> <S>
CURRENT ASSETS:
Cash and cash equivalents $ - $ 16,861
Temporary investments - 2,932
Trade receivables (net) 53,519 18,892
Inventories 52,681 17,318
Income taxes receivable - 1,682
Deferred income taxes (net) 2,037 477
Other current assets 4,092 2,395
-------- -------
Total current assets 112,329 60,557
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, at cost 81,642 59,193
Less - accumulated depreciation and
amortization (47,740) (43,917)
---------- ---------
Net equipment and leasehold improvements 33,902 15,276
DEFERRED INCOME TAXES (NET) 1,408 -
---------- ---------
$147,639 $ 75,833
========== ==========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
October 1, December 31,
1995 1994
(In thousands)
<C> <S> <S>
CURRENT LIABILITIES:
Accounts payable $ 47,366 $ 7,228
Other accrued liabilities 23,414 18,511
Notes payable 21,791 -
Income taxes payable 2,014 -
Current portion of capitalized lease
obligations 462 -
--------- --------
Total current liabilities 95,047 25,739
CAPITALIZED LEASE OBLIGATIONS, net of
current portion 924 -
SERIES A CONVERTIBLE PREFERRED STOCK, Authorized
1,200,000 shares, 258,816 outstanding
shares at December 31, 1994, none outstanding
at October 1, 1995 - 1,031
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
3,300,000 shares, none issued - -
Series C junior participating preferred
stock, authorized 250,000 shares,
none issued - -
Common stock, $.03 1/3 par value; authorized
30,000,000 shares, 19,431,676 and 18,519,749
shares outstanding at October 1, 1995 and
December 31, 1994, respectively 648 617
Additional paid-in capital 51,690 48,258
Notes receivable from shareholders - (597)
Retained earnings (deficit) (670) 785
------- --------
Total shareholders' equity 51,668 49,063
--------- ---------
$147,639 $ 75,833
========= ==========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the Three Months Ended
October 1, October 2,
1995 1994
(In thousands except
per share data)
<C> <S> <S>
SALES $ 84,721 $ 35,534
COST OF SALES 63,225 23,039
--------- --------
Gross Margin 21,496 12,495
OPERATING EXPENSES:
Selling, general and administrative 13,878 8,437
Research and development 4,691 3,889
---------- --------
Total operating expenses 18,569 12,326
---------- --------
OPERATING INCOME 2,927 169
Interest and other income and expense (230) 873
----------- ---------
INCOME BEFORE INCOME TAXES 2,697 1,042
Benefit (provision) for income taxes (672) 1,426
------------ ---------
NET INCOME $ 2,025 $ 2,468
============ =========
NET INCOME PER COMMON SHARE $ 0.10 $ 0.13
=========== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(1994 includes effects of 5-for-4
stock split) 21,206 18,950
=========== =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the Nine Months Ended
October 1, October 2,
1995 1994
(In thousands except
per share data)
<C> <S> <S>
SALES $177,427 $102,907
COST OF SALES 132,527 67,796
------- ---------
Gross Margin 44,900 35,111
OPERATING EXPENSES:
Selling, general and administrative 33,389 27,061
Research and development 12,793 11,196
---------- ---------
Total operating expenses 46,182 38,257
---------- ---------
OPERATING LOSS (1,282) (3,146)
Foreign currency (loss) gain (1,232) 119
Interest and other income and expense 927 1,140
---------- ---------
LOSS BEFORE INCOME TAXES (1,587) (1,887)
Benefit (provision) for income taxes 167 (1,274)
---------- ---------
NET LOSS $ (1,420) $ (3,161)
========== =========
NET LOSS PER COMMON SHARE $ (0.07) $ (0.17)
========== =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
(1994 includes effects of 5-for-4
stock split) 19,044 18,460
========== =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the Nine Months Ended
October 1, October 2,
1995 1994
(In thousands)
<C> <S> <S>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (1,420) $ (3,161)
Non-cash Revenue and Expense Adjustments:
Depreciation and amortization expense 6,198 5,138
Deferred income tax (benefit) provision (2,968) 2,700
Change in restructuring reserve - 1,015
Other (489) 128
Changes in Assets and Liabilities:
Trade receivables (net) (34,627) 2,215
Inventories (35,363) (2,066)
Income taxes receivable/payable 3,696 (831)
Other current assets (1,980) (464)
Accounts payable 40,138 490
Accrued liabilities 5,058 (722)
Net cash provided from (used in) -------- --------
operating activities (21,757) 4,442
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold
improvements (24,221) (3,697)
Purchase of temporary investments (2,090) -
Sale of temporary investments 5,022 -
Net increase in other assets - (5)
Proceeds from sale of research and development
assets - 2,792
---------- --------
Net cash used in investing activities (21,289) (910)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of Common Stock 1,914 201
Proceeds from notes payable and capital leases 79,222 -
Payments on notes payable and capital leases (56,045) -
Tax benefit from early dispositions of
employee stock 244 -
Purchase of Common Stock - (305)
Conversion of Series A Convertible Stock (30) -
Proceeds from notes receivable from sharehold 880 -
Net cash provided from (used in) --------- ---------
financing activities 26,185 (104)
--------- ---------
NET INCREASE (DECREASE)IN CASH AND
CASH EQUIVALENTS (16,861) 3,428
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 16,861 18,804
---------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ - $ 22,232
========== =========
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Net (payable) receivable associated with
revaluation of forward exchange contracts $ (892) $ 109
=========== =========
Sale of common stock for a note $ 283 $ -
=========== =========
Conversion of Series A Preferred Stock to
Common Stock $ 1,205 $ -
=========== ==========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which are necessary to present fairly the financial
position of Iomega Corporation and subsidiaries (the "Company") as of
October 1, 1995 and December 31, 1994, the results of operations for the
three-and nine-month periods ended October 1, 1995 and October 2, 1994,
and cash flows for the nine-month periods ended October 1, 1995 and
October 2, 1994.
The results of operations for the nine-month period ended October 1, 1995
are not necessarily indicative of the results for the entire year.
These unaudited condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes
included in or incorporated into Iomega Corporation's latest Annual Report
on Form 10-K.
Principles of Consolidation -- The condensed consolidated financial
statements include the accounts of the Company and its wholly owned
subsidiaries after elimination of all material intercompany accounts and
transactions.
Revenue Recognition -- Revenue is recognized when units are shipped to
customers. However, revenue recognition is deferred on shipments to
distributors whose inventory is in excess of normal distributor inventory
requirements. The Company's general policy is not to accept returns of
product except for those products under warranty or for which the customer
has a right of return agreement. The gross margin associated with the
deferral of sales in excess of normal distributor inventory requirements
due to right of return agreements totaled $1,610,000 and $1,947,000 at
October 1, 1995 and December 31, 1994, respectively, and is recorded in
deferred revenue as a component of other accrued liabilities.
Foreign Currency Translation -- For purposes of consolidating foreign
operations, the Company has determined the functional currency for its
foreign operations is the U.S. dollar. Therefore, translation gains and
losses are included in the determination of income as a component of
interest and other income and expense.
Cash Equivalents and Temporary Investments -- The Company considers all
highly liquid debt instruments purchased with maturities of three or fewer
months to be cash equivalents. Instruments with maturities in excess of
three months are classified as temporary investments. At December 31,
1994, all temporary investments had maturities less than six months.
Accordingly, the Company classifies all cash equivalents and temporary
investments as held to maturity. Cash equivalents and temporary
investments consist primarily of commercial paper, banker's acceptances,
investments in money market mutual funds and certificates of deposit and
are recorded at cost which approximates market value.
The Company's policy is to invest in high quality commercial paper of
reputable companies rated at A2P2 or above. The diversification of risk
is consistent with Company policy to maintain liquidity and ensure the
safety of principal.
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
Inventories -- Inventories include direct materials, direct labor and
manufacturing overhead costs and are recorded at the lower of cost
(first-in, first-out) or market and consist of the following:
October 1, December 31,
1995 1994
(In thousands)
Raw materials $ 32,810 $ 7,524
Work-in-process 17,645 4,839
Finished goods 2,226 4,955
--------- ---------
$ 52,681 $ 17,318
========= =========
Reclassifications -- Certain reclassifications were made to the 1994
condensed consolidated financial statements to conform with the 1995
presentation.
Net Income (Loss) Per Common Share -- Net income (loss) per common share
is based on the weighted average number of shares of common stock and
dilutive common stock equivalent shares outstanding during the respective
periods. Common stock equivalent shares consist primarily of stock
options and convertible preferred stock that have a dilutive effect when
applying the treasury stock method. In periods where losses are recorded,
common stock equivalents would decrease the loss per share and are
therefore not added to weighted average shares outstanding. The
outstanding shares and earnings per share have been restated for all 1994
periods presented to reflect the impact of the Stock Split described in
Note 2.
(2) STOCK SPLIT
On October 27, 1994 the Company's Board of Directors declared a 5-for-4
stock split which was effected in the form of a 25% common stock dividend
paid on November 23, 1994 to stockholders of record at the close of
business on November 9, 1994 ("Stock Split"). The Company paid cash in
lieu of issuing fractional shares.
The transaction was accounted for as a stock split. Of the shares of
Common Stock distributed by the Company in connection with the Stock
Split, approximately 3,017,000 were treasury shares and the remainder were
authorized but unissued shares. The cost of the treasury shares and
authorized but unissued shares was recorded as a reduction in paid-in
capital. All earnings per share and outstanding shares have been
retroactively restated in the 1994 financial statements.
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(3) INCOME TAXES
The components of and the changes in the net deferred tax assets and
liabilities for the nine month period ended October 1, 1995 are as follows
(in thousands):
Deferred
December 31, (Expense) October 1,
1994 Benefit 1995
Deferred tax assets:
Bad debt reserves $ 482 $ 557 $ 1,039
Inventory reserves 940 700 1,640
Fixed asset reserves 36 29 65
Accrued expense reserves 4,596 787 5,383
Unrealized foreign currency - 304 304
Inventory unicap adjustment 160 121 281
Accelerated depreciation - 292 292
Foreign net operating loss
carryover 1,493 1,976 3,469
Research credit carryover 5,365 (2,323) 3,042
Intercompany profit in
inventory 95 (14) 81
Other (216) 2 (214)
-------- ------- -------
Total deferred tax assets 12,951 2,431 15,382
Valuation allowance (12,333) 396 (11,937)
--------- ------- --------
Deferred tax asset net of
valuation allowance 618 2,827 3,445
Deferred tax liabilities:
Accelerated depreciation (141) 141 -
---------- -------- -------
Net deferred tax asset $ 477 $ 2,968 $ 3,445
========== ========= =======
Cash paid for income taxes was $50,000 for the first nine months of 1995
and $84,000 for the corresponding period in 1994. A tax refund of
$1,332,000 was received during the first nine months of 1995.
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) OTHER MATTERS
Significant Customers -- During the fiscal quarter and nine-month periods
ended October 1, 1995, a single customer accounted for 11% and 10%,
respectively, of consolidated sales. During the fiscal quarter and
nine-month periods ended October 2, 1994, sales to another single customer
accounted for 12% and 11%, respectively, of the Company's sales. No other
single customer accounted for more than 10% of the Company's sales for
these periods.
Notes Receivable from Related Parties -- In September 1993, the Company
loaned an executive officer approximately $679,000 on a full recourse
basis as part of the officer's severance package; a portion of the loan
was used by the executive to exercise stock options. This loan is
included in note receivable from shareholder in the accompanying
consolidated financial statements. The loan was paid in full with accrued
interest during the first quarter of 1995.
In January 1995, the Company loaned an executive officer approximately
$283,000 as part of the officer's severance package. A portion of the
loan was used by the executive to exercise stock options. The loan was
paid in full with accrued interest during the second quarter of 1995.
Forward Exchange Contracts -- The Company's foreign subsidiaries sell
products in several foreign currencies. In order to hedge the estimated
cash flow (revenues less expenses) which is remitted to the parent
company, the Company has entered into forward exchange contracts to sell
foreign currencies. The contracts mature at February 1996.
The outstanding forward exchange sales contracts at October 1, 1995 are as
follows:
Deutsche Marks 12,170,000 DM
Great Britain Pound 1,095,000 GBP
French Franc 14,950,000 FRF
Spanish Pesta 222,000,000 ESB
Italian Lira 2,490,000,000 ITL
The forward contracts are marked to market by obtaining forward rates from
financial institutions. Gains and losses on foreign currency contracts
intended to be used to hedge operating requirements are reported currently
in income. The Company's risk in these transactions includes the cost of
replacing, at current market rates, these contracts in the event of
default by the counterparty.
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
(6) CONVERSION OF SERIES A CONVERTIBLE PREFERRED STOCK
Effective June 16, 1995, the Company exercised its right to require the
conversion of all outstanding Series A Convertible Preferred Stock
("Series A") into the Company's Common Stock pursuant to the original
conversion terms. Upon conversion, 106,200 shares of Common Stock were
issued to the Series A shareholders. Any fractional shares were paid cash
in lieu of stock.
Common shares issued on conversion of the Series A shares were recorded at
the net carrying value of Series A shares, plus accrued dividends.
(7) COMMITMENTS
Loan Agreement -On July 5, 1995, the Company entered into a loan agreement
with the Commercial Finance Division of Wells Fargo Bank, N.A. The
agreement permits revolving loans, term loans and letters of credit up to
an aggregate outstanding principal amount equal to the lesser of $60
million or 80% of eligible accounts receivable. The revolving credit line
bears interest at the bank's prime rate plus 1%, and the Wells Fargo term
loans bear interest at the bank's prime rate plus 1.25%. At October 1,
1995, borrowings under the revolving credit line were $21.8 million,
consisting of $17.9 million under the revolving credit facility and $3.9
million under the term loan facility. Total availability under the Wells
Fargo agreement at October 1, 1995 was $28.8 million. The agreement
expires June 30, 1996. Certain covenants within the agreement require the
Company maintain minimum levels of working capital and net worth.
Capital Leases - Under the above agreement with Wells Fargo, the Company
may also secure financing of equipment purchases from third parties up to
a maximum of $20 million, less term loans outstanding to Wells Fargo. In
August of 1995, the Company entered into an agreement to provide capital
lease financing for the purchase of certain manufacturing equipment. The
total amount of capital lease commitments at October 1, 1995 is $1.4
million, of which $462,000 is classified as a current liability in the
accompanying balance sheet.
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On October 27, 1994, the Company's Board of Directors declared a 5-for-4 stock
split effected in the form of a 25% common stock dividend paid on November 23,
1994 (the "Stock Split"). The following discussion gives retroactive effect to
the Stock Split for all 1994 periods presented.
RESULTS OF OPERATIONS
The Company reported record quarterly sales of $84.7 million in the third
quarter ended October 1, 1995, and returned to profitability after posting
losses in the first two quarters of 1995. The Company recorded net income of
$2.0 million, or $0.10 per share, for the third quarter ended October 1,
1995, compared to net income of $2.5 million, or $0.13 per share, for the
third quarter ended October 2, 1994. Net income for the third quarter of
1994 included a one-time tax benefit of $1.4 million, or $0.08 per share.
For the nine months ended October 1, 1995, sales were $177.4 million,
resulting in a net loss of $1.4 million, or $0.07 per share. These results
are compared to sales of $102.9 million, and a net loss of $3.2 million, or
$0.17 per share, for the same period in 1994.
Sales for the three and nine months ended October 1, 1995 increased by $49.2
million, or 138%, and $74.5 million, or 72%, respectively, when compared to the
corresponding periods of 1994. The positive sales results were due to the
introduction of the new Zip product line which began shipping at the end of the
first quarter of 1995 and increased sales of Ditto tape products. These
increased sales have been partially offset by the expected decline in the sales
of Bernoulli products. Ditto sales in the third quarter of 1995 increased by
117% in North America and 57% in Europe over the third quarter of 1994.
International sales, primarily to customers located in Europe, represented 18.2%
and 25.2% of sales for the three- and nine-month periods ended October 1, 1995,
respectively, compared to 26.6% and 32.9% for the corresponding periods of
1994. Management expects increased sales of Zip and Ditto products in the
fourth quarter of 1995. Management also expects fourth quarter sales to be
enhanced by the previously announced Jaz product line which is expected to
begin shipping by the end of the fourth quarter. These increases are
expected to be partially offset by declines in Bernoulli product sales.
However, the Company is experiencing component shortages which may continue
to limit production. There can be no assurance that future sales will
materialize as expected.
The Company's gross margin percentages for the three- and nine-month periods
ended October 1, 1995 were 25.4% and 25.3%, respectively, compared to 35.2% and
34.1% reported for the comparable periods of 1994. The decline in gross margin
percentages is due to a shift in product mix from higher margin Bernoulli
products to lower margin Ditto and Zip products. Gross margins thus far in 1995
have also been negatively impacted by start-up costs related to the Zip and Jaz
products. The third quarter gross margin percentage of 25.4% represented an
improvement over the second quarter gross margin percentage of 22.2%. This
improvement is primarily due to the impact of increased sales of Zip disks,
which more than offset the decline in higher margin Bernoulli sales.
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Selling, general and administrative expenses represented 16.4% and 18.8% of
sales for the third quarter and first nine months of 1995, compared to 23.7%
and 26.3% for the same periods of 1994. The decline in percentages is due to
the increased sales volumes in 1995. The actual selling, general and
administrative expenses increased by $5.4 million for the three-month and
$6.3 million for the nine-month periods ended October 1, 1995 as compared to
the prior year periods. The increased expenses are primarily the result of
advertising expenses incurred to launch new products, variable selling
expenses, and increased salaries and wages resulting from increased headcount
in all areas of sales, marketing and administration. Management expects
selling, general and administrative expenses to increase further in the
fourth quarter of 1995 due to additional advertising expenses, trade show
expenses, and payroll-related costs.
Research and development expenses were 5.5% and 7.2% of sales for the three -
and nine-month periods ended October 1, 1995, respectively, compared to 10.9%
for both the three- and nine-month periods ended October 2, 1994. The decline in
percentages is due to the increased sales volumes in 1995. The actual research
and development expenses have increased by $0.8 million and $1.6 million for the
third quarter and first nine months of 1995 compared to the same periods of
1994. These increases were primarily the result of expenditures related to the
development of the Zip, Ditto and Jaz products. Management expects continued
increases in research and development expenses in the fourth quarter of 1995 as
the result of the resources needed for future product development and
enhancement.
During the first quarter of 1995, the Company recorded a net foreign currency
loss of $1.0 million as a result of the U.S. dollar weakening against European
currencies. The majority of this decline took place in March. The Company also
recorded interest expense of approximately $.3 million, primarily in the third
quarter of 1995. These expenses have been partially offset by interest income,
royalties and other income.
For the third quarter of 1995, the Company recorded a tax provision of $0.7
million representing an effective tax rate of 24.9%. For the first nine months
of 1995, the Company recorded a tax benefit of $0.2 million representing 10.5%
of the pre-tax loss for the period. The Company expects the effective income
tax rate to increase in the future to the statutory rate of 34% for federal
income tax and approximately 5% for state income taxes. The timing of the
rate increase will depend on future taxable income and the utilization of
available tax credits.
LIQUIDITY AND CAPITAL RESOURCES
At October 1, 1995, the Company had cash and cash equivalents of $0, working
capital of $17.3 million, and a ratio of current assets to current liabilities
of 1.2 to 1. For the first nine months of 1995, the Company has used $16.8
million in cash and cash equivalents consisting of $21.7 million used in
operating activities, and $21.3 million in investing activities, offset by $26.2
million provided by financing activities.
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
On July 5, 1995, the Company entered into a loan agreement with the Commercial
Finance Division of Wells Fargo Bank, N.A. The agreement permits revolving
loans, term loans and letters of credit up to an aggregate outstanding principal
amount equal to the lesser of $60 million or 80% of eligible accounts
receivable. The revolving credit line bears interest at the bank's prime
rate plus 1%, and the Wells Fargo term loans bear interest at the bank's
prime rate plus 1.25%. At October 1, 1995, borrowings under the revolving
credit line were $21.8 million, consisting of $17.9 million under the
revolving credit facility and $3.9 million under the term loan facility.
Total availability under the Wells Fargo agreement was $28.8 million. The
agreement expires June 30, 1996. Certain covenants within the agreement
require the Company maintain minimum levels of working capital and net worth.
Under the agreement with Wells Fargo, the Company may also secure financing
of equipment purchases from third parties up to a maximum of $20 million,
less term loans outstanding to Wells Fargo. In August of 1995, the Company
entered into an agreement to provide capital lease financing
for the purchase of certain manufacturing equipment. The total of capital lease
commitments at October 1, 1995 is $1.4 million, of which $462,000 is classified
as a current liability in the accompanying balance sheet.
The Company's balance sheet at October 1, 1995 reflected short-term borrowings
of $22.3 million, representing utilization of the revolving credit line with
Wells Fargo of $17.9 million, term loans with Wells Fargo of $3.9 million, and
the short-term portion of capital lease obligations of $.5 million. In
addition, the long-term portion of capital lease obligations totaled $.9
million at October 1, 1995. The borrowings have been used to finance working
capital needs, including increases in inventory and accounts receivable and
capital expenditures related to production volume increases.
Accounts receivable have increased by $34.6 million at October 1, 1995 compared
to December 31, 1994, due to increased sales, particularly in the last portion
of the third quarter. Inventory increased by $35.4 million during the first
nine months of 1995 due to build-ups in manufacturing capacity. The
increases in receivables and inventory were partially offset by increases in
accounts payable and accrued liabilities of $45.2 million and proceeds from
the sale of common stock of $1.9 million.
Fixed asset additions for the first nine months of 1995 totaled $24.2 million.
These additions are primarily related to increased manufacturing capacity for
Zip, Ditto and Jaz products. The Company expects capital expenditures in future
quarters to continue to be significant as production capacity is added at the
Company's current manufacturing facility, as well as tooling at vendor
facilities and third-party manufacturing facilities.
In addition to the credit facility with Wells Fargo discussed above, the Company
is continuing to investigate other sources of financing. However, there can be
no assurance that additional financing will be secured or that funds available
under the existing finance arrangements will be sufficient.
PART II - OTHER INFORMATION
IOMEGA CORPORATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits listed on the Exhibit Index filed as
a part of this Quarterly Report on Form 10-Q are incorporated
herein by reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by the
Company during the quarter for which this report is filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IOMEGA CORPORATION
(Registrant)
/s/ Kim B. Edwards
Dated: November 15, 1995 Kim B. Edwards
President and Chief Executive
Officer
/s/ Leonard C. Purkis
Dated: November 15, 1995 Leonard C. Purkis
Senior Vice President, Finance,
Chief Financial Officer and
Treasurer
EXHIBIT INDEX
The following exhibit is filed as part of this Quarterly Report on Form 10-Q:
Exhibit No. Description
10.32 Iomega Incentive Plan for Kim B. Edwards
10.33(a) Loan Agreement dated July 5, 1995 between Iomega Corporation
and Wells Fargo Bank, N.A., Commercial Finance Division
10.33(b) Security Agreement dated July 5, 1995 between Iomega
Corporation and Wells Fargo Bank, N.A., Commercial Finance
Division
10.33(c) Wells Fargo Bank Continuing Commercial Letter of Credit
Agreement
EXHIBIT 10.32
SUMMARY OF 1995 BONUS ARRANGEMENTS
The Compensation Committee has approved and ratified 1995 target bonus payments
for Kim B. Edwards, the Company's President and Chief Executive Officer. The
maximum bonus payable under such arrangement is $160,000 in cash plus a maximum
of 20,000 shares of the Company's common stock. Payments of the cash and stock
bonuses are based on the Company achieving certain specified objectives, sales
levels, and net income levels.
One-third of the total number of common stock shares awarded would be issued on
each of the first three anniversary dates of the date on which the Compensation
Committee determines the total number of shares to be awarded. The shares
awarded will be issued at a purchase price equal to par value.
EXHIBIT 10.33(a)
LOAN AGREEMENT
Dated as of July 5, 1995
between
IOMEGA CORPORATION
and
WELLS FARGO BANK, N.A.,
COMMERCIAL FINANCE DIVISION
TABLE OF CONTENTS
SECTION PAGE
Section 1. DEFINITIONS. . . . . . . . . . . . . . . . . 1
1.1 "Accounts". . . . . . . . . . . . . . . . . 1
1.2 "Availability Reserves" . . . . . . . . . . 1
1.3 "Cash Collateral Account" . . . . . . . . . 2
1.4 "Closing Date". . . . . . . . . . . . . . . 2
1.5 "Collateral". . . . . . . . . . . . . . . . 2
1.6 "Eligible Accounts" . . . . . . . . . . . . 2
1.7 "Equipment" . . . . . . . . . . . . . . . . 4
1.8 "Event of Default". . . . . . . . . . . . . 4
1.9 "Facility A". . . . . . . . . . . . . . . . 4
1.10 "Facility A Revolving Credit Note". . . . . 4
1.11 "Facility B". . . . . . . . . . . . . . . . 4
1.12 "Facility B Term Note". . . . . . . . . . . 4
1.13 "GAAP". . . . . . . . . . . . . . . . . . . 4
1.14 "General Intangibles" . . . . . . . . . . . 5
1.15 "Information Certificate" . . . . . . . . . 5
1.16 "Inventory" . . . . . . . . . . . . . . . . 5
1.17 "Letters of Credit" . . . . . . . . . . . . 5
1.18 "Letter of Credit Agreement". . . . . . . . 5
1.19 "Letter of Credit Obligations". . . . . . . 5
1.20 "Loan Documents". . . . . . . . . . . . . . 5
1.21 "Loans" . . . . . . . . . . . . . . . . . . 5
1.22 "Maximum Amount". . . . . . . . . . . . . . 5
1.23 "Net Amount of Eligible Accounts" . . . . . 5
1.24 "Notes" . . . . . . . . . . . . . . . . . . 6
1.25 "Obligations" . . . . . . . . . . . . . . . 6
1.26 "Obligor" . . . . . . . . . . . . . . . . . 6
1.27 "Pledge Agreement". . . . . . . . . . . . . 6
1.28 "Prime Rate". . . . . . . . . . . . . . . . 6
1.29 "Records" . . . . . . . . . . . . . . . . . 6
1.30 "Revolving Loans" . . . . . . . . . . . . . 6
1.31 "Rights to Payment" . . . . . . . . . . . . 7
1.32 "Security Agreement". . . . . . . . . . . . 7
1.33 "Tangible Net Worth". . . . . . . . . . . . 7
1.34 "Term Loans". . . . . . . . . . . . . . . . 7
1.35 "Value" . . . . . . . . . . . . . . . . . . 7
1.36 "Working Capital" . . . . . . . . . . . . . 7
Section 2. CREDIT FACILITIES. . . . . . . . . . . . . . 7
2.1 Facility A. . . . . . . . . . . . . . . . . 7
2.2 Facility B. . . . . . . . . . . . . . . . . 8
2.3 Letters of Credit . . . . . . . . . . . . . 9
2.4 Overadvance . . . . . . . . . . . . . . . . 10
2.5 Availability Reserves . . . . . . . . . . . 10
Section 3. INTEREST AND FEES. . . . . . . . . . . . . . 10
3.1 Interest. . . . . . . . . . . . . . . . . . 10
3.2 Maximum Interest. . . . . . . . . . . . . . 11
3.3 Payments . . . . . . . . . . . . . . . . . 11
3.4 Closing Fee. . . . . . . . . . . . . . . . 12
3.5 Unused Line Fee. . . . . . . . . . . . . . 12
3.6 Audit Fees . . . . . . . . . . . . . . . . 12
3.7 Computation and Payment. . . . . . . . . . 12
Section 4. CONDITIONS PRECEDENT . . . . . . . . . . . 12
4.1 Initial Credit . . . . . . . . . . . . . . 12
4.2 Subsequent Credit. . . . . . . . . . . . . 14
Section 5. GRANT OF SECURITY INTEREST . . . . . . . . 15
Section 6. COLLECTION AND ADMINISTRATION . . . . . . . 15
6.1 Cash Collateral Account. . . . . . . . . . 15
6.2 Statements . . . . . . . . . . . . . . . . 16
6.3 Payments . . . . . . . . . . . . . . . . . 16
6.4 Use of Proceeds. . . . . . . . . . . . . . 17
Section 7. REPRESENTATIONS AND WARRANTIES . . . . . . 17
7.1 Legal Status . . . . . . . . . . . . . . . 17
7.2 Authorization and Validity . . . . . . . . 18
7.3 No Violation . . . . . . . . . . . . . . . 18
7.4 No Claims. . . . . . . . . . . . . . . . . 18
7.5 Correctness of Financial Statement . . . . 18
7.6 Income Tax Returns . . . . . . . . . . . . 18
7.7 No Subordination . . . . . . . . . . . . . 18
7.8 Permits, Franchises. . . . . . . . . . . . 18
7.9 ERISA. . . . . . . . . . . . . . . . . . . 19
7.10 Other Obligations. . . . . . . . . . . . . 19
7.11 Environmental Matters. . . . . . . . . . . 19
7.12 No Default . . . . . . . . . . . . . . . . 19
7.13 Priority of Liens. . . . . . . . . . . . . 19
Section 8. AFFIRMATIVE COVENANTS. . . . . . . . . . . 19
8.1 Punctual Payments. . . . . . . . . . . . . 20
8.2 Records and Premises . . . . . . . . . . . 20
8.3 Collateral Reporting . . . . . . . . . . . 20
8.4 Financial Statements . . . . . . . . . . . 21
8.5 Compliance . . . . . . . . . . . . . . . . 22
8.6 Insurance. . . . . . . . . . . . . . . . . 22
8.7 Facilities . . . . . . . . . . . . . . . . 22
8.8 Taxes and Other Liabilities. . . . . . . . 22
8.9 Litigation . . . . . . . . . . . . . . . . 22
8.10 Financial Condition. . . . . . . . . . . . 22
8.11 Notice to Lender . . . . . . . . . . . . . 23
8.12 Further Assurances . . . . . . . . . . . . 23
Section 9. NEGATIVE COVENANTS . . . . . . . . . . . . 23
9.1 Other Indebtedness . . . . . . . . . . . . 23
9.2 Merger, Consolidation, Transfer of
Assets . . . . . . . . . . . . . . . . . 24
9.3 Guaranties . . . . . . . . . . . . . . . . 24
9.4 Loans, Advances, Investments . . . . . . . 24
9.5 Dividends, Distributions . . . . . . . . . 24
9.6 Pledge of Assets . . . . . . . . . . . . . 24
9.7 New Collateral Location. . . . . . . . . . 24
Section 10. EVENTS OF DEFAULT . . . . . . . . . . . . . 25
10.1 Events of Default . . . . . . . . . . . . . 25
10.2 Remedies . . . . . . . . . . . . . . . . . 26
Section 11. TERM OF AGREEMENT AND MISCELLANEOUS . . . . 27
11.1 Term . . . . . . . . . . . . . . . . . . . 27
11.2 No Waiver. . . . . . . . . . . . . . . . . 28
11.3 Notices. . . . . . . . . . . . . . . . . . 28
11.4 Costs, Expenses and Attorneys' Fees. . . . 29
11.5 Successors, Assignment . . . . . . . . . . 29
11.6 Entire Agreement, Amendment. . . . . . . . 30
11.7 No Third Party Beneficiaries . . . . . . . 30
11.8 Time . . . . . . . . . . . . . . . . . . . 30
11.9 Severability of Provisions . . . . . . . . 30
11.10 Governing Law . . . . . . . . . . . . . . . 30
11.11 Confidentiality . . . . . . . . . . . . . . 30
<PAGE>
LOAN AGREEMENT
(LINE OF CREDIT)
This Loan Agreement dated July 5, 1995 is entered into by
and between Wells Fargo Bank, National Association, a national
banking association ("Lender") and Iomega Corporation, a Delaware
corporation ("Borrower").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender enter into
certain financing arrangements with Borrower pursuant to which
Lender may make loans and provide other financial accommodations
to Borrower; and
WHEREAS, Lender is willing to make such loans and provide
such financial accommodations on the terms and conditions set
forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. DEFINITIONS
All terms used herein which are defined in Article 1 or
Article 9 of the Uniform Commercial Code shall have the meanings
given therein unless otherwise defined in this Agreement. Any
accounting term used herein unless otherwise defined or set forth
in this Agreement shall have the meanings customarily given to
such term in accordance with GAAP. For purposes of this
Agreement, the following terms shall have the respective meanings
given to them below:
1.1 "Accounts" shall mean all present and future rights of
Borrower to payment for goods sold or leased or for services
rendered, which are not evidenced by instruments or chattel
paper, and whether or not earned by performance.
1.2 "Availability Reserves" shall mean, as of any date of
determination, such amounts as Lender may from time to time
establish and revise in good faith and in a commercially
reasonable manner reducing the amount of Revolving Loans and
Letters of Credit which would otherwise be available to Borrower
under the lending formula(s) provided for herein: (a) to reflect
events, conditions, contingencies or risks which, as determined
by Lender in good faith, do or may affect either (i) the
Collateral or its value, (ii) the assets, business or prospects
of Borrower or any Obligor or (iii) the security interests and
other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or
financial information furnished by or on behalf of Borrower or
any Obligor to Lender is or may have been incomplete, inaccurate
or misleading in any material respect or (c) in respect of any
state of facts which Lender determines in good faith constitutes
an Event of Default or may, with notice or passage of time or
both, constitute an Event of Default.
1.3 "Cash Collateral Account" shall have the meaning set
forth in Section 6.1 hereof.
1.4 "Closing Date" shall mean the date on which all of the
conditions precedent set forth in Section 4 hereof have been
satisfied to Lender's satisfaction.
1.5 "Collateral" shall mean all the property in which
Borrower or an Obligor grants or is required to grant to Lender a
security interest or lien, as described in Section 5 hereof.
1.6 "Eligible Accounts" shall mean Accounts created by
Borrower which are and continue to be acceptable to Lender in its
reasonable discretion based on the criteria set forth below. In
general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide
sale and delivery of goods by Borrower or rendition of services
by Borrower in the ordinary course of its business which
transactions are completed in accordance with the terms and
provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than [ninety
(90)] days after the date of the original invoice for them;
(c) such Accounts comply with the terms and
conditions applicable thereto contained in the Security Agreement
executed in connection therewith;
(d) such Accounts do not arise from sales on
consignment, guaranteed sale, sale and return, sale on approval,
or other terms under which payment by the account debtor may be
conditional or contingent;
(e) the chief executive office of the account debtor
with respect to such Accounts is located in the United States of
America, or, at Lender's option, if: (i) the account debtor has
delivered to Borrower an irrevocable letter of credit issued or
confirmed by a bank satisfactory to Lender, sufficient to cover
such Account, in form and substance satisfactory to Lender and,
if required by Lender, the original of such letter of credit has
been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of
credit to Lender, or (ii) such Account is subject to credit
insurance payable to Lender issued by an insurer and on terms and
in an amount acceptable to Lender, or (iii) such Account is
otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress
billings, bill and hold invoices or retainage invoices;
(g) the account debtor with respect to such Accounts
has not asserted a counterclaim, defense or dispute and does not
have, and does not engage in transactions which are likely to
give rise to, any right of setoff against such Accounts;
(h) there are no facts, events or occurrences which
would impair the validity, enforceability or collectability of
such Accounts or reduce the amount payable or delay payment
thereunder;
(i) such Accounts are subject to the first priority,
valid and perfected security interest of Lender and any goods
giving rise thereto are not, and were not at the time of the sale
thereof, subject to any liens except those permitted in this
Agreement;
(j) neither the account debtor nor any officer or
employee of the account debtor with respect to such Accounts is
an officer, employee or agent of or affiliated with Borrower
directly or indirectly by virtue of family membership, ownership,
control, management or otherwise;
(k) the account debtors with respect to such Accounts
are not any foreign government, the United States of America, any
State, political subdivision, department, agency or
instrumentality thereof, unless, if the account debtor is the
United States of America, any State, political subdivision,
department, agency or instrumentality thereof, upon Lender's
request, the Federal Assignment of Claims Act of 1940, as
amended, or any similar State or local law, if applicable, has
been complied with in a manner satisfactory to Lender;
(l) there are no proceedings or actions which are
threatened or pending against the account debtors with respect to
such Accounts which might result in any material adverse change
in any such account debtor's financial condition;
(m) such Accounts of a single account debtor or its
affiliates do not constitute more than twenty-five percent (25%)
of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of such percentage may be deemed Eligible
Accounts);
(n) such Accounts are not owed by an account debtor
who has Accounts unpaid more than ninety (90) days after the date
of the original invoice for them which constitute more than fifty
percent (50%) of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose
total indebtedness to Borrower does not exceed the credit limit
with respect to such account debtors as determined by Lender from
time to time (but the portion of the Accounts not in excess of
such credit limit may still be deemed Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as determined by Lender.
General criteria for Eligible Accounts may be established and
revised from time to time by Lender in good faith. Any Accounts
which are not Eligible Accounts shall nevertheless be part of the
Collateral.
1.7 "Equipment" shall mean all of Borrower's now owned and
hereafter acquired equipment, machinery, computers and computer
hardware and software (whether owned or licensed, but only to the
extent assignable), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed
thereto or used in connection therewith, and substitutions and
replacements thereof, wherever located.
1.8 "Event of Default" shall mean the occurrence or
existence of any event or condition described in Section 10.1
hereof.
1.9 "Facility A" shall mean a line of credit under which
Lender agrees to make Revolving Loans and issue Letters of
Credit, subject to the terms and conditions of this Agreement.
1.10 "Facility A Revolving Credit Note" shall have the
meaning set forth in Section 2.1 hereof.
1.11 "Facility B" shall mean the term loan facility made
available by Lender to Borrower as set forth in Section 2.2
hereof, which Facility B shall be a sub-facility of Facility A.
1.12 "Facility B Term Note" shall have the meaning set
forth in Section 2.2 hereof.
1.13 "GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from time
to time as set forth in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of
Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Boards which
are applicable to the circumstances as of the date of
determination consistently applied, except that, for purposes of
Section 8.10 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with
those used in the preparation of the audited financial statements
delivered to Lender prior to the date hereof.
1.14 "General Intangibles" shall mean general intangibles
(including, but not limited to, tax and duty refunds, registered
and unregistered patents, trademarks, service marks, copyrights,
trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists,
licenses (whether as licensor or licensee), choses in action and
other claims, and existing and future leasehold interests in
equipment).
1.15 "Information Certificate" shall mean the Information
Certificate of Borrower constituting Exhibit A hereto containing
material information with respect to Borrower, its business and
assets, provided by or on behalf of Borrower to Lender in
connection with the preparation of this Agreement and the other
Loan Documents and the financing arrangements provided for
herein.
1.16 "Inventory" shall mean all of Borrower's now owned and
hereafter existing or acquired raw materials, work in process,
finished goods and all other inventory of whatsoever kind or
nature, wherever located.
1.17 "Letters of Credit" shall mean commercial letters of
credit issued by Lender from time to time under Facility A.
1.18 "Letter of Credit Agreement" shall have the meaning
set forth in Section 2.3(c) hereof.
1.19 "Letter of Credit Obligations" shall mean at any time,
the aggregate amount available to be drawn, plus amounts drawn
and not yet reimbursed, under Letters of Credit.
1.20 "Loan Documents" shall mean, collectively, this
Agreement, the Facility A Revolving Credit Note, the Facility B
Term Note, the Letter of Credit Agreement, the Security
Agreement, the Pledge Agreement and all other notes, guarantees,
landlord waivers, security agreements, subordination agreements,
and other agreements, documents and instruments now or at any
time hereafter executed and/or delivered by Borrower or any
Obligor in connection with this Agreement, as the same now exist
or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
1.21 "Loans" shall mean, collectively, the Term Loans and
the Revolving Loans.
1.22 "Maximum Amount" shall mean the amount of $60,000,000.
1.23 "Net Amount of Eligible Accounts" shall mean the gross
amount of Eligible Accounts less (a) sales, excise or similar
taxes included in the amount thereof and (b) returns, discounts,
claims, credits and allowances of any nature at any time issued,
owing, granted, outstanding, available or claimed with respect
thereto.
1.24 "Notes" shall mean, collectively, the Facility A
Revolving Credit Note and the Facility B Term Note.
1.25 "Obligations" shall mean all Loans, Letter of Credit
Obligations and all other advances, debts, liabilities,
obligations, covenants and duties, together with all interest,
fees and other charges thereon, owing, arising, due or payable
from Borrower to Lender of any kind or nature, present or future,
whether or not evidenced by any note, guaranty or other
instrument, whether arising under this Agreement or any of the
other Loan Documents or otherwise, whether direct or indirect
(including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or
hereafter arising and however acquired.
1.26 "Obligor" shall mean any guarantor, endorser,
acceptor, surety or other person liable on or with respect to the
Obligations or who is the owner of any property which is security
for the Obligations, or any of them, other than Borrower.
1.27 "Pledge Agreement" shall mean that certain stock
pledge agreement of even date herewith between Borrower and
Lender relating to the stock of Borrower's domestic subsidiaries,
as it may be modified from time to time.
1.28 "Prime Rate" shall mean the rate of interest most
recently announced at Lender's principal office in San Francisco,
California as its Prime Rate, with the understanding that the
Prime Rate is one of Lender's base rates and serves as the basis
upon which effective rates of interest are calculated for those
loans making reference thereto, and is evidenced by the recording
thereof after its announcement in such internal publication or
publications as Lender may designate.
1.29 "Records" shall mean all of Borrower's present and
future books of account of every kind or nature, purchase and
sale agreements, invoices, ledger cards, bills of lading and
other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any
account debtor, together with the tapes, disks, diskettes and
other data and software storage media and devices, file cabinets
or containers in or on which the foregoing are stored (including
any rights of Borrower with respect to the foregoing maintained
with or by any other person).
1.30 "Revolving Loans" shall mean advances made by Lender
to Borrower on a revolving basis under Facility A, as set forth
in Section 2.1 hereof.
1.31 "Rights to Payment" shall mean all Accounts, General
Intangibles, contract rights, chattel paper, documents,
instruments, letters of credit, bankers acceptances and
guaranties, all present and future liens, security interests,
rights, remedies, title and interest in, to and in respect of
Accounts and other Collateral (including, without limitation, (a)
rights and remedies under or relating to guaranties, contracts of
suretyship, letters of credit and credit and other insurance
related to the Collateral, (b) rights of stoppage in transit,
replevin, repossession, reclamation and other rights and remedies
of an unpaid vendor, lienor or secured party, (c) goods described
in invoices, documents, contracts or instruments with respect to,
or otherwise representing or evidencing, Accounts or other
Collateral, including, without limitation, returned, repossessed
and reclaimed goods, and (d) deposits by and property of account
debtors or other persons securing the obligations of account
debtors), all monies, securities, credit balances, deposits,
deposit accounts and other property of Borrower now or hereafter
held or received by or in transit to Lender or its affiliates or
at any other depository or other institution from or for the
account of Borrower, whether for safekeeping, pledge, custody,
transmission, collection or otherwise.
1.32 "Security Agreement" shall mean that certain security
agreement of even date herewith between Borrower and Lender, as
it may be modified from time to time.
1.33 "Tangible Net Worth" shall mean the aggregate of total
stockholders' equity plus subordinated debt less any intangible
assets, determined from Borrower's balance sheet prepared in
accordance with GAAP.
1.34 "Term Loans" shall mean term loans made by Lender to
Borrower under Facility B, as set forth in Section 2.2 hereof.
1.35 "Value" shall mean, as determined by Lender in good
faith, with respect to Inventory, the lower of (a) cost computed
on a first-in-first-out basis in accordance with GAAP or
(b) market value.
1.36 "Working Capital" shall mean total current assets less
total current liabilities, determined from Borrower's balance
sheet prepared in accordance with GAAP.
Section 2. CREDIT FACILITIES
2.1 Facility A
(a) Lending Formula. Subject to and upon the terms
and conditions contained herein, Lender agrees to make Revolving
Loans (pursuant to Section 2.1 hereof), Term Loans (pursuant to
Section 2.2 hereof), and issue Letters of Credit (pursuant to
Section 2.3 hereof) from time to time in amounts requested by
Borrower up to an aggregate outstanding principal amount equal to
the lesser of (1) the Maximum Amount, less the aggregate amount
of Term Loans then outstanding; or (2) an amount equal to:
(i) eighty percent (80%) of the Net Amount of
Eligible Accounts, less
(ii) the aggregate amount of Letter of Credit
Obligations then outstanding, and less
(iii) any Availability Reserves.
(b) Reduction of Lending Formula. Lender may, in its
discretion, from time to time, upon not less than five (5) days'
prior notice to Borrower, reduce the lending formula with respect
to Eligible Accounts to the extent that Lender determines in good
faith that: (A) the dilution with respect to the Accounts for any
period (based on the ratio of (1) the aggregate amount of
reductions in Accounts other than as a result of payments in cash
to (2) the aggregate amount of total sales) has increased in any
material respect or may be reasonably anticipated to increase in
any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined. In determining
whether to reduce the lending formula(s), Lender may consider
events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts or in establishing
Availability Reserves.
(c) Facility A Revolving Credit Note. Borrower's
obligation to repay Revolving Loans made under Facility A shall
be evidenced by a promissory note executed by Borrower,
substantially in the form of Exhibit B hereto (the "Facility A
Revolving Credit Note").
2.2 Facility B.
(a) Lending Formula. Subject to and upon the terms
and conditions contained herein, Lender agrees to make Term Loans
from time to time in amounts requested by Borrower up to an
aggregate outstanding principal amount equal to the lesser of (1)
$10,000,000; or (2) eighty percent (80%) of the orderly
liquidation value of the Equipment up to a maximum of one hundred
percent (100%) of auction value of the Equipment, with such
values to be determined by Lender and subject to reduction from
time to time based on appraisals of the Equipment or otherwise in
Lender's discretion.
(b) Terms and Conditions of Draws Under Facility B.
Advances under Facility B shall be subject to a minimum
$1,000,000 per extension of credit and shall be available only
for a period of one hundred eighty (180) days from the Closing
Date. Each such draw under Facility B shall be amortized over a
period of three (3) years from the date of making the Term Loan,
with the outstanding principal amount of all Term Loans made
under Facility B due and payable one (1) year from the Closing
Date.
(c) Facility B Term Note. Borrower's obligation to
repay Term Loans under Facility B shall be evidenced by one or
more promissory notes executed by Borrower, substantially in the
form of Exhibit C hereto (the "Facility B Term Note").
(d) Third Party Term Lender. At Borrower's option,
Borrower may obtain term loan financing not to exceed $10,000,000
from a party other than Lender, which loans may be secured only
by purchase money liens on Equipment acquired concurrently with
or subsequent to the making of such loans and which loans, in the
aggregate with all loans outstanding under Facility B, do not
exceed $10,000,000. For purposes of this Section 2.2(d), the
Equipment which may be financed with another party includes,
without limitation, "3 Up" Servo Writers and any Servo Writers
hereafter acquired.
2.3 Letters of Credit.
(a) Issuance. Subject to, and upon the terms and
conditions contained herein, at the request of Borrower, Lender
agrees from time to time during the term of this Agreement to
issue Letters of Credit for the account of Borrower containing
terms and conditions acceptable to Lender, provided however that
no Letter of Credit shall have an expiration date beyond ninety
(90) days following the maturity date of the Obligations set
forth in Section 11.1 hereof.
(b) Letter of Credit Sublimits. No Letters of Credit
shall be issued unless, on the date of the proposed issuance of
any Letter of Credit, the Revolving Loans available to Borrower
(subject to the Maximum Amount and Availability Reserves) are
equal to 100% of the face amount of such Letters of Credit.
Effective on the issuance of each Letter of Credit, the amount of
Revolving Loans which would otherwise be available to Borrower
shall be reduced by the amount available to be drawn under such
Letter of Credit. Except in Lender's discretion, (i) the amount
of all Letter of Credit Obligations shall not at any time exceed
$10,000,000. At any time an Event of Default exists or has
occurred and is continuing, upon Lender's request, Borrower shall
furnish cash collateral to Lender for the Letter of Credit
Obligations, and in either case, the Revolving Loans otherwise
available to Borrower shall not be reduced as provided in this
Section 2.3(b) to the extent of such cash collateral.
(c) Letter of Credit Fees. Borrower shall pay to
Lender, for Letters of Credit, one and one-half percent (1.50%)
per annum of the aggregate face amount of such Letters of Credit
outstanding from time to time during the term of this Agreement,
plus all of Lender's normal and customary charges associated with
the issuance thereof, which fees and charges shall be deemed
fully earned upon issuance of each such Letter of Credit, shall
be due and payable on the first business day of each month and
shall not be subject to rebate or proration upon the termination
of this Agreement for any reason.
(d) Letter of Credit Agreement. Each Letter of
Credit shall be subject to the additional terms and conditions of
the Letter of Credit Agreement and related documents, if any,
required by Lender in connection with the issuance thereof (each,
a "Letter of Credit Agreement"). Each draft paid by Lender under
a Letter of Credit shall be deemed a Revolving Loan under
Facility A and shall be repaid by Borrower in accordance with the
terms and conditions of this Agreement applicable to such
Revolving Loans; provided however, that if Facility A is not
available, for any reason whatsoever, at the time any draft is
paid by Lender, or if Revolving Loans are not available under
Facility A at such time due to any limitation on borrowings set
forth herein, then the full amount of such draft shall be
immediately due and payable, together with interest thereon, from
the date such amount is paid by Lender to the date such amount is
fully repaid by Borrower, at the rate of interest applicable to
Revolving Loans. In such event, Borrower agrees that Lender, at
Lender's sole discretion, may debit Borrower's deposit account
with Lender for the amount of any such draft.
2.4 Overadvance. In the event that the outstanding amount
of any component of the Loans, or the aggregate amount of the
outstanding Loans and Letter of Credit Obligations, exceed the
amounts available under the lending formulas, the sublimits for
Letters of Credit set forth in Section 2.3(b) or the Maximum
Amount, as applicable, such event shall not limit, waive or
otherwise affect any rights of Lender in that circumstance or on
any future occasions and Borrower shall, upon demand by Lender,
which may be made at any time or from time to time, immediately
repay to Lender the entire amount of any such excess(es) for
which payment is demanded.
2.5 Availability Reserves. All Loans and Letters of
Credit otherwise available to Borrower pursuant to the lending
formulas, sublimits and subject to the Maximum Amount, and other
applicable limits hereunder shall be subject to Lender's
continuing right to establish and revise Availability Reserves.
Section 3. INTEREST AND FEES
3.1 Interest.
(a) Interest shall accrue on the principal amount of
the Revolving Loans outstanding at the end of each day at a
fluctuating rate per annum equal to one percent (1.0%) plus the
Prime Rate. At Borrower's option, Borrower may utilize the LIBOR
option as defined and set forth in the Facility A Revolving
Credit Note.
(b) Interest shall accrue on the principal amount of
the Term Loans outstanding at the end of each day at a
fluctuating rate per annum equal to one and one-quarter percent
(1.25%) plus the Prime Rate.
(c) Except as provided in the Facility A Revolving
Credit Note, upon and after the occurrence of an Event of
Default, and during the continuation thereof, the principal
amount of all Loans shall bear interest at a rate per annum equal
to two percent (2.0%) above the interest rate otherwise
applicable thereto (the "Default Rate").
The above rates of interest shall increase or decrease by an
amount equal to any increase or decrease in the Prime Rate,
effective as of the opening of business on the day that any such
change in the Prime Rate occurs. The interest and all fees shall
be calculated over a year of 360 days, actual days elapsed.
3.2 Maximum Interest. In no event whatsoever shall the
aggregate of all amounts deemed interest on the Loans and charged
or collected pursuant to the terms of this Agreement or pursuant
to the Facility A Revolving Credit Note or the Facility B Term
Note exceed the highest rate permissible under any law which a
court of competent jurisdiction shall, in a final determination,
deem applicable hereto. If any provisions of this Agreement, the
Facility A Revolving Credit Note or the Facility B Term Note are
in contravention of any such law, such provisions shall be deemed
amended to conform thereto.
3.3 Payments. Except where evidenced by notes or other
instruments issued or made by Borrower to Lender specifically
containing payment provisions which are in conflict with this
Section 3.3 or Section 6.3 (in which event the conflicting
provisions of said notes or other instruments shall govern and
control), the Loans shall be repayable as follows:
(a) Principal on Revolving Loans. Principal payable
on account of Revolving Loans made under Facility A shall be
payable by Borrower to Lender immediately upon the earliest of
(i) the receipt by Lender or Borrower of any proceeds of any of
the Collateral, to the extent of said proceeds, (ii) the
occurrence of an Event of Default in consequence of which Lender
elects to accelerate the maturity and payment of the Obligations,
or (iii) termination of this Agreement pursuant to Section 11
hereof.
(b) Principal on Term Loans. The entire outstanding
principal balance of all Term Loans made under Facility B shall
be due and payable upon the earliest of (i) June 30, 1996, (ii)
the occurrence of an Event of Default in consequence of which
Lender elects to accelerate the maturity and payment of the
Obligations, or (iii) termination of this Agreement pursuant to
Section 11 hereof. The Term Loans may be prepaid without a
prepayment or termination fee.
(c) Interest on All Loans. Interest accrued on the
Revolving Loans and the Term Loans shall be due on the earliest
of (i) the first calendar day of each month (for the immediately
preceding month), computed through the last calendar day of the
preceding month, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and
payment of the Obligations or (iii) termination of this Agreement
pursuant to Section 11 hereof.
3.4 Closing Fee. Borrower shall pay to Lender as a
closing fee the amount of $450,000, which shall be fully earned
as of and payable on the Closing Date.
3.5 Unused Line Fee. Borrower shall pay to Lender monthly
an unused line fee equal to a rate per annum of three-eights of
one percent (3/8 of 1%) of the amount by which the Maximum Amount
exceeds the average daily principal balance of the outstanding
Loans and Letter of Credit Obligations during the immediately
preceding month (or part thereof) while this Agreement is in
effect and for so long thereafter as any of the Loans or Letter
of Credit Obligations are outstanding, which fee shall be payable
on the first day of each month in arrears.
3.6 Audit Fees. In connection with each audit or
examination of Borrower performed by Lender prior to or after the
Closing Date, Borrower shall pay to Lender, on demand, a fee in
the amount of Lender's prevailing rate at the time of such audit
or examination (currently $600.00 per person, per day), plus all
other costs and expenses incurred by Lender in connection with
such audit or examination. Prior to the occurrence of an Event
of Default, Borrower shall not be liable for audit fees in excess
of $20,000 pursuant to this Section 3.6.
3.7 Computation and Payment. Interest and fees shall be
computed on the basis of a 360-day year, actual days elapsed.
Interest shall be payable at the times and place set forth in the
Facility A Revolving Credit Note and the Facility B Term Note.
Section 4. CONDITIONS PRECEDENT
4.1 Initial Credit. The obligation of Lender to extend
any credit contemplated by this Agreement is subject to the
fulfillment to Lender's satisfaction of all of the following
conditions on or prior to July 31, 1995:
(a) Approval of Lender's Counsel. All legal matters
incidental to the extension of credit by Lender shall be
satisfactory to counsel of Lender.
(b) Documentation. Lender shall have received, in
form and substance satisfactory to Lender, each of the following,
duly executed by the parties thereto and such additional
documents as Lender may require:
(i) This Agreement;
(ii) The Facility A Revolving Credit Note;
(iii) The Facility B Term Note;
(iv) The Letter of Credit Agreement;
(v) UCC-1 Financing Statement(s);
(vi) The Security Agreement;
(vii) Cash Collateral Account Agreement;
(viii) The Pledge Agreement (along with the
original stock certificates of Borrower's
domestic subsidiaries pledged thereunder
and appropriate stock powers therefor);
and
(ix) Corporate resolutions of Borrower,
certified by the secretary or assistant
secretary of Borrower, authorizing the
transactions contemplated by the Loan
Documents.
(c) Insurance. Borrower shall have delivered to
Lender evidence of insurance coverage on all Borrower's property,
covering risks, in amounts, issued by companies and in form and
substance satisfactory to Lender, with loss payable endorsements
in favor of Lender.
(d) Financial Condition. There shall have been since
the date of the latest audited financial statements delivered to
Lender prior to the Closing Date no material adverse change, as
determined by Lender in its reasonable discretion, in the
financial condition or business of Borrower or any Obligor, nor
any material decline, as determined by Lender in its reasonable
discretion, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of
Borrower or any Obligor.
(e) Security Interests. Lender shall have received
evidence, in form and substance satisfactory to Lender, that
Lender has valid perfected and first priority security interests
in and liens upon the Collateral and any other property which is
intended to be security for the Obligations or the liability of
any Obligor in respect thereof, subject only to the security
interests and liens permitted herein or in the other Loan
Documents.
(f) Field Review. Lender shall have completed a
field review of the Records and such other information with
respect to the Collateral as Lender may require to determine the
amount of Revolving Loans available to Borrower, the results of
which shall be satisfactory to Lender.
(g) Appraisal. Lender shall have received and deemed
satisfactory the results of an appraisal of Borrower's Equipment,
which appraisal shall have been prepared by an appraiser
acceptable to Lender.
(h) Review of Books and Records. Lender shall have
performed and deemed satisfactory the results of an audit of
Borrower's books and records.
(i) Cash Collateral Account. The Cash Collateral
Account provided for in Section 6.1(a) shall have been opened.
(j) Other Documents. Lender shall have received, in
form and substance satisfactory to Lender, all consents, waivers,
acknowledgments and other agreements from third persons which
Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the
Collateral or to effectuate the provisions or purposes of this
Agreement and the other Loan Documents, including, without
limitation, acknowledgments by lessors, mortgagees and
warehousemen of Lender's security interests in the Collateral,
waivers by such persons of any security interests, liens or other
claims by such persons to the Collateral and agreements
permitting Lender access to, and the right to remain on, the
premises to exercise its rights and remedies and otherwise deal
with the Collateral.
(k) Opinion. Lender shall have received, in form and
substance satisfactory to Lender and its counsel, such opinion
letters of counsel to Borrower with respect to the Loan Documents
and such other matters as Lender may request.
4.2 Subsequent Credit. The obligation of Lender to make
each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Lender's satisfaction of each of
the following conditions:
(a) Compliance. The representations and warranties
contained herein shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of
credit by Lender pursuant hereto, with the same effect as though
such representations and warranties had been made on and as of
each such date, and on each such date, no Event of Default as
defined herein, and no condition, event or act which with the
giving of notice or the passage of time or both would constitute
such an Event of Default, shall have occurred and be continuing
or shall exist.
(b) No Adverse Change. There shall have been since
the date of the latest audited financial statements delivered to
Lender prior to the Closing Date, no material adverse change, as
determined by Lender in its reasonable discretion, in the
financial condition or business of Borrower or any Obligor, nor
any material decline, as determined by Lender in its reasonable
discretion, in the market value of any collateral required
hereunder or a substantial or material portion of the assets of
Borrower or any Obligor.
(c) Documentation. Lender shall have received all
additional documents which may be required in connection with
such extension of credit.
Section 5. GRANT OF SECURITY INTEREST
As security for the Obligations, Borrower has executed
contemporaneously herewith a Security Agreement and Pledge
Agreement granting and pledging to Lender a security interest in
the Collateral as defined therein.
Borrower shall reimburse Lender, immediately upon demand,
for all reasonable costs and expenses incurred by Lender in
connection with any of the foregoing security, including without
limitation, filing and recording fees and reasonable costs of
environmental studies, appraisals, audits and title insurance, if
applicable.
All Loans, Letter of Credit Obligations and all costs, fees
and expenses payable by Borrower hereunder shall constitute one
general Obligation of Borrower, and shall be secured by Lender's
lien upon all of the Collateral.
Section 6. COLLECTION AND ADMINISTRATION
6.1 Cash Collateral Account.
(a) Cash Collateral Account. Borrower shall, at
Borrower's expense and in the manner requested by Lender,
establish and maintain with First Security Bank a blocked account
and with Bank of America a lock box, acceptable to Lender, and
shall direct that remittances and all other collections and
proceeds of Accounts and other Collateral shall be deposited into
such blocked account or lock box and wire transferred daily to
Lender. In its discretion, Lender may replace the blocked
account arrangement with a lockbox account maintained in Lender's
name. In connection therewith, Borrower shall execute such
dominion account and lock box agreements as Lender shall require.
Borrower shall maintain with Lender, and Borrower hereby grants
to Lender a security interest in, a non-interest bearing deposit
account over which Borrower shall have no control ("Cash
Collateral Account") and into which the proceeds of all
Borrower's accounts and other rights to payment in which Lender
has a security interest shall be deposited immediately upon their
receipt.
(b) Calculations. For purposes of calculating
interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) as a
principal reduction thereon one (1) business day following the
date of receipt thereof by Lender's Commercial Finance Division.
For purposes of calculating the amount of the Revolving Loans
available to Borrower such payments will be applied (conditional
upon final collection) to the Obligations on the business day of
receipt by the Commercial Finance Division, if such advices are
received within sufficient time (in accordance with Lender's
usual and customary practices as in effect from time to time) to
credit Borrower's loan account on such day, and if not, then on
the next business day.
(c) Immediate Deposit. Borrower and all of its
affiliates, subsidiaries, shareholders, directors, employees or
agents shall, acting as trustee for Lender, receive, as the
property of Lender, any monies, checks, notes, drafts, or any
other payment relating to and/or proceeds of Accounts or other
Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or
cause the same to be deposited in the Cash Collateral Account, or
remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrower's
own funds.
6.2 Statements. Lender shall render to Borrower each
month a statement setting forth the balance in Borrower's loan
account(s) maintained by Lender for Borrower pursuant to the
provisions of this Agreement, including principal, interest,
fees, costs and expenses. Each such statement shall be subject
to subsequent adjustment by Lender but shall, absent manifest
errors or omissions, be considered correct and deemed accepted by
Borrower and conclusively binding upon Borrower as an account
stated except to the extent that Lender receives a written notice
from Borrower of any specific exceptions of Borrower thereto
within thirty (30) days after the date such statement has been
mailed by Lender. Until such time as Lender shall have rendered
to Borrower a written statement as provided above, the balance in
Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrower.
6.3 Payments. All amounts due under Loan Documents shall
be payable to the Cash Collateral Account as provided in
Section 6.1 or such other place as Lender may designate from time
to time. Lender may apply payments received or collected from
Borrower or for the account of Borrower (including, without
limitation, the monetary proceeds of collections or of
realization upon any Collateral) to the Obligations, whether or
not then due, in such order and manner as Lender determines. At
Lender's option, all principal, interest, fees, costs, expenses
and other charges provided for in this Agreement or the other
Loan Documents may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments due Lender free and
clear of, and without deduction or withholding for or on account
of, any setoff, counterclaim, defense, duties, taxes, levies,
imposts, fees, deductions, withholding, restrictions or
conditions of any kind. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of
Borrower's obligations to Lender under this Agreement, Lender is
required to surrender or return such payment or proceeds to any
person or entity for any reason, then the obligations intended to
be satisfied by such payment or proceeds shall be reinstated and
continue and this Agreement shall continue in full force and
effect as if such payment or proceeds had not been received by
Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any
payments or proceeds surrendered or returned. This Section 6.3
shall remain effective notwithstanding any contrary action which
may be taken by Lender in reliance upon such payment or proceeds.
This Section 6.3 shall survive the payment of Borrower's
obligations under the Loan Documents and the termination of this
Agreement.
6.4 Use of Proceeds. Borrower shall use the initial
proceeds of the Revolving Loans provided by Lender to Borrower
hereunder only for: (a) payments to each of the persons listed
in the disbursement order furnished by Borrower to Lender on or
about the date hereof, and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and
delivery of this Agreement and the other Financing Agreements.
All other Revolving Loans made or Letters of Credit provided by
Lender to Borrower pursuant to the provisions hereof shall be
used by Borrower only for general operating, working capital and
other proper corporate purposes of Borrower not otherwise
prohibited by the terms of this Agreement. None of the proceeds
will be used, directly or indirectly, for the purpose of
purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally
incurred to purchase or carry any margin security or for the any
other purpose which might cause any of the Revolving Loans to be
considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as
amended.
Section 7. REPRESENTATIONS AND WARRANTIES
Borrower makes the following representations and warranties
to Lender, which representations and warranties shall survive the
execution of this Agreement and shall continue in full force and
effect until the full and final payment, and satisfaction and
discharge, of all obligations of Borrower to Lender subject to
this Agreement.
7.1 Legal Status. Borrower is a corporation duly
organized and existing and in good standing under the laws of the
State of Delaware, and is qualified or licensed to do business,
and is in good standing as a foreign corporation, if applicable,
in all jurisdictions in which such qualification or licensing is
required or in which the failure to so qualify or to be so
licensed could have a material adverse effect on Borrower.
7.2 Authorization and Validity. The Loan Documents have
been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal,
valid and binding agreements and obligations of Borrower or the
party which executes the same, enforceable in accordance with
their respective terms.
7.3 No Violation. The execution, delivery and performance
by Borrower of each of the Loan Documents do not violate any
provision of any law or regulation, or contravene any provision
of Borrower's certificate of incorporation or bylaws, or result
in a breach of or constitute a default under any contract,
obligation, indenture or other instrument to which Borrower is a
party or by which Borrower may be bound.
7.4 No Claims. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations,
suits or proceedings before any governmental authority,
arbitrator, court or administrative agency which may adversely
affect the financial condition or operation of Borrower other
than those disclosed by Borrower to Lender in the Information
Certificate.
7.5 Correctness of Financial Statement. The financial
statement of Borrower dated April 2, 1995, heretofore delivered
by Borrower to Lender is complete and correct and presents fairly
the financial condition of Borrower; discloses all liabilities of
Borrower that are required to be reflected or reserved against
under GAAP, whether liquidated or unliquidated, fixed or
contingent; and has been prepared in accordance with generally
accepted accounting principles consistently applied. Since the
date of such financial statement there has been no material
adverse change in the financial condition of Borrower, nor has
Borrower mortgaged, pledged or granted a security interest in or
encumbered any of its assets or properties except as permitted by
this Agreement.
7.6 Income Tax Returns. Except as set forth in the
Information Certificate, Borrower has no knowledge of any pending
assessments or adjustments of its income tax payable with respect
to any year.
7.7 No Subordination. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which
Borrower may be bound that requires the subordination in right of
payment of any of Borrower's obligations subject to this
Agreement to any other obligation of Borrower.
7.8 Permits, Franchises. Borrower possesses, and will
hereafter possess, all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade
names, trade name rights, patents, patent rights and fictitious
name rights necessary to enable it to conduct the business in
which it is now engaged without conflict with the rights of
others.
7.9 ERISA. Borrower is in compliance in all material
respects with all applicable provisions of the Employee
Retirement Income Security Act of 1974, as amended from time to
time (ERISA); Borrower has not violated any provision of any
defined employee pension benefit plan (as defined in ERISA)
maintained or contributed to by Borrower (each, a "Plan"); no
Reportable Event as defined in ERISA has occurred and is
continuing with respect to any Plan initiated by Borrower;
Borrower has met its minimum funding requirements under ERISA
with respect to each Plan; and each Plan will be able to fulfill
its benefit obligations as they come due in accordance with the
Plan documents.
7.10 Other Obligations. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or
any other material lease, commitment, contract, instrument or
obligation.
7.11 Environmental Matters. Except as disclosed by
Borrower to Lender in writing prior to the date hereof, Borrower
is in compliance in all material respects with all applicable
environmental, hazardous waste, health and safety statutes and
regulations governing its operations and/or properties, including
without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (CERCLA), the Superfund
Amendments and Reauthorization Act of 1986 (SARA), the Federal
Resource Conservation and Recovery Act of 1976, the Federal Toxic
Substances Control Act and the California Health and Safety Code.
None of the operations of Borrower is the subject of any federal
or state investigation evaluating whether any remedial action
involving a material expenditure is needed to respond to a
release of any toxic or hazardous waste or substance into the
environment. Borrower has no material contingent liability in
connection with any release of any toxic or hazardous waste or
substance into the environment.
7.12 No Default. As of the Closing Date, no Event of
Default and no condition, event or act which with the giving of
notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall
exist.
7.13 Priority of Liens. There exist no liens or
encumbrances on any property of Borrower other than Lender's
liens, such other liens or encumbrances as are permitted in the
Loan Documents and such liens described on Schedule 1 hereto.
Section 8. AFFIRMATIVE COVENANTS. Borrower covenants that so
long as Lender remains committed to extend credit to Borrower
pursuant to the terms of this Agreement or any liabilities
(whether direct or contingent, liquidated or unliquidated) of
Borrower to Lender under any of the Loan Documents remain
outstanding, and until payment in full of all obligations of
Borrower subject hereto, Borrower shall:
8.1 Punctual Payments. Punctually pay the interest and
principal on each of the Loan Documents requiring any such
payments at the times and place and in the manner specified
therein, and any fees or other liabilities due under any of the
Loan Documents at the times and place and in the manner specified
therein, and immediately upon demand by Lender, the amount by
which the outstanding principal balance of the Obligations is at
any time in excess of any limitation on borrowings hereunder.
8.2 Records and Premises. Maintain proper books and
records in which true and complete entries shall be made of all
dealings or transactions of or in relation to Collateral and the
business of Borrower in accordance with GAAP. From time to time
as requested by Lender, at the cost and expense of Borrower
(provided that prior to an Event of Default, and except as
provided in Section 3.6, Borrower shall not be liable for costs
and expenses of more than two visits per year from and after the
date hereof), allow Lender or its designee complete access to all
of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower
if an Event of Default exists or has occurred and is continuing,
for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrower's books and records, including,
without limitation, the Records, and promptly furnish to Lender
such copies of such books and records or extracts therefrom as
Lender may request, and allow Lender during normal business hours
to use such of Borrower's personnel, equipment, supplies and
premises as may be reasonably necessary for the foregoing and if
an Event of Default exists or has occurred and is continuing for
the collection of Accounts and realization of other Collateral.
8.3 Collateral Reporting. Borrower shall provide Lender
with the following documents in a form satisfactory to Lender:
(a) on a regular basis as required by Lender, a
schedule of Accounts, including without limitation, daily sales,
credit and adjustment journals and cash receipts;
(b) on or before the tenth (10th) day after and as of
the end of each month, (or more frequently as Lender may
request), (i) perpetual inventory reports, (ii) inventory reports
by category and (iii) agings of accounts payable,
(c) upon Lender's request, (i) copies of customer
statements and credit memos, remittance advices and reports, and
copies of deposit slips and bank statements, (ii) copies of
shipping and delivery documents, and (iii) copies of purchase
orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower;
(d) agings of accounts receivable on or before the
tenth (10th) day after and as of the end of each month or more
frequently as Lender may request;
(e) upon Lender's request, Borrower shall, at its
expense, no more than once in any twelve (12) month period, but
at any time or times as Lender may request on or after an Event
of Default, deliver or cause to be delivered to Lender written
reports or appraisals as to the Collateral in form, scope and
methodology acceptable to Lender and by an appraiser acceptable
to Lender, addressed to Lender or upon which Lender is expressly
permitted to rely; and
(f) such other reports as to the Collateral as Lender
shall request from time to time. If any of Borrower's records of
the Collateral are prepared or maintained by an accounting
service, contractor, shipper or other agent, Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent
to deliver such records, reports, and related documents to Lender
and to follow Lender's instructions with respect to further
services at any time that an Event of Default exists or has
occurred and is continuing.
8.4 Financial Statements. Provide to Lender all of the
following, in form and detail satisfactory to Lender:
(a) not later than one-hundred twenty (120) days
after and as of the end of each fiscal year, an audited financial
statement of Borrower, prepared in accordance with GAAP by a
certified public account acceptable to Lender;
(b) not later than thirty (30) days after and as of
the end of each month, a financial statement of Borrower prepared
by Borrower in accordance with GAAP, together with a
certification of Borrower's chief financial officer;
(c) contemporaneously with each annual and monthly
financial statement of Borrower required hereby, a certificate of
the president or chief financial officer of Borrower that the
financial statements delivered pursuant thereto are accurate and
that there exists no Event of Default nor any condition, act or
event which with the giving of notice or the passage of time or
both would constitute an Event of Default;
(d) promptly upon their becoming available (but not
later than concurrently with the delivery thereof to the
Securities and Exchange Commission), copies of all registration
statements and regular periodic reports (including Forms 10-K and
10-Q) which Borrower or any of its subsidiaries, direct or
indirect, shall have made to or filed with the Securities and
Exchange Commission or any national securities exchange; and
(e) from time to time such other information as
Lender may reasonably request, which may include, without
limitation, budgets, forecasts, projections and other information
respecting the Collateral and the business of Borrower.
8.5 Compliance. Maintain all licenses, permits,
governmental approvals, rights, privileges and franchises
necessary for the conduct of its business; conduct its business
in an orderly and regular manner; and comply with the provisions
of all documents pursuant to which Borrower is organized and/or
which govern Borrower's continued existence and with the
requirements of all laws, rules, regulations and orders of any
governmental authority applicable to Borrower or its business.
8.6 Insurance. Maintain and keep in force insurance of
the types and in amounts customarily carried in lines of business
similar to Borrower's, including but not limited to fire,
extended coverage, public liability, property damage and workers'
compensation, carried with companies and in amounts satisfactory
to Lender, and deliver to Lender from time to time at Lender's
request schedules setting forth all insurance then in effect. At
its option, Lender may apply any insurance proceeds received by
Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Borrower's Obligations to
Lender under this Agreement, whether or not then due, in any
order and in such manner as Lender may determine or hold such
proceeds as cash collateral for such Obligations.
8.7 Facilities. Keep all Borrower's properties useful or
necessary to Borrower's business in good repair and condition,
and from time to time make necessary repairs, renewals and
replacements thereto so that Borrower's properties shall be fully
and efficiently preserved and maintained.
8.8 Taxes and Other Liabilities. Pay and discharge when
due any and all indebtedness, obligations, assessments and taxes,
both real or personal and including federal and state income and
payroll taxes, except such as Borrower may in good faith contest
or as to which a bona fide dispute may arise, provided provision
is made to the satisfaction of Lender for eventual payment
thereof in the event that it is found that the same is an
obligation of Borrower.
8.9 Litigation. Promptly give notice in writing to Lender
of any litigation pending or threatened in writing against
Borrower seeking in excess of $1,000,000.
8.10 Financial Condition. Maintain Borrower's financial
condition as follows:
(a) As of the end of each fiscal quarter, Borrower's
Working Capital shall not be less than $10,000,000.
(b) As of the end of each fiscal quarter, Borrower's
Tangible Net Worth shall not be less than $42,500,000.
8.11 Notice to Lender. Promptly (but in no event more than
five (5) days after the occurrence of each such event or matter)
give written notice to Lender in reasonable detail of: (a) the
occurrence of any Event of Default, or any condition, event or
act which with the giving of notice or the passage of time or
both would constitute such an Event of Default; (b) the
occurrence and nature of any Reportable Event or Prohibited
Transaction, each as defined in ERISA, or any funding deficiency
with respect to any Plan; (c) any termination or cancellation of
any insurance policy which Borrower is required to maintain, or
any loss through liability or property damage, or through fire,
theft or any other cause affecting Borrower's property in excess
of $500,000. Borrower shall provide no less than thirty (30)
days prior notice of any change in the name or the organizational
structure of Borrower.
8.12 Further Assurances. At the request of Lender at any
time and from time to time, duly execute and deliver, or cause to
be duly executed and delivered, such further agreements,
documents and instruments, and do or cause to be done such
further acts as may be necessary or proper to evidence, perfect,
maintain and enforce the security interests and the priority
thereof in the Collateral and to otherwise effectuate the
provisions or purposes of this Agreement or any of the other Loan
Documents, at Borrower's expense. Lender may at any time and
from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making
of Revolving Loans and issuing Letters of Credit contained herein
are satisfied. In the event of such request by Lender, Lender
may, at its option, cease to make any further Revolving Loans or
provide any further Letters of Credit until Lender has received
such certificate and, in addition, Lender has determined that
such conditions are satisfied. Where permitted by law, Borrower
hereby authorizes Lender to execute and file one or more UCC
financing statements signed only by Lender. Lender may, at
Borrower's sole expense, commission an appraisal of Borrower's
Inventory, from an appraiser acceptable to Lender.
Section 9. NEGATIVE COVENANTS. Borrower further covenants that
so long as Lender remains committed to Borrower pursuant to the
terms of this Agreement or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Lender
under any of the Loan Documents remain outstanding, and until
payment in full of all obligations of Borrower subject hereto,
Borrower will not without the prior written consent of Lender:
9.1 Other Indebtedness. Create, incur, assume or permit
to exist any indebtedness or liabilities in excess of $500,000 in
the aggregate at any time outstanding resulting from borrowings,
loans or advances, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, except
as permitted by Section 2.2(d) hereof and except the liabilities
of Borrower to Lender and any other liabilities of Borrower
existing as of, and disclosed to Lender in the Information
Certificate prior to, the date hereof.
9.2 Merger, Consolidation, Transfer of Assets. Merge into
or consolidate with any corporation or other entity; make any
substantial change in the conduct or nature of Borrower's
business; acquire all or substantially all of the assets of any
corporation or other entity; nor sell, lease, transfer or
otherwise dispose of all or a substantial or material part of its
assets except in the ordinary course of business.
9.3 Guaranties. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable
instruments for deposit or collection in the ordinary course of
business), accommodation endorser or otherwise for, nor pledge or
hypothecate any assets of Borrower as security for, any
liabilities or obligations of any other person or entity, except
as disclosed in the Information Certificate.
9.4 Loans, Advances, Investments. Except as permitted in
Sections 9.1 and 9.2, make any loans or advances to or
investments in any person or entity except for:
(a) loans and advances to Borrower's employees in the
ordinary course of Borrower's business in an amount not to exceed
$500,000 at any time outstanding, and
(b) provided no Event of Default has occurred and is
continuing, investments not to exceed $10,000,000 outstanding at
any one time in the aggregate provided any single investment
shall not exceed $5,000,000.
9.5 Dividends, Distributions. Declare or pay any dividend
or distribution either in cash, stock or any other property on
Borrower's stock now or hereafter outstanding; nor redeem,
retire, repurchase or otherwise acquire any shares of any class
of Borrower's stock now or hereafter outstanding.
Notwithstanding anything to the contrary herein or in Section
9.1, Borrower may effect a stock split of outstanding shares and
may issue up to $100,000,000 in gross proceeds of preferred stock
or subordinated unsecured debt provided that if an Event of
Default has occurred and while it is continuing, Borrower may not
pay interest or dividends on such preferred stock or subordinated
debt.
9.6 Pledge of Assets. Mortgage, pledge, grant or permit
to exist a security interest in, or lien upon, any of its assets
of any kind, now owned or hereafter acquired, except any of the
foregoing in favor of Lender, except as permitted in Section
2.2(d), and except as set forth in the Information Certificate.
9.7 New Collateral Location. Open any new location unless
Borrower (a) gives Lender thirty (30) days prior written notice
of the intended opening of any such new location and (b) executes
and delivers, or causes to be executed and delivered, to Lender
such agreements, documents, and instruments as Lender may deem
reasonably necessary or desirable to protect its interests in the
Collateral at such location, including, without limitation, UCC
financing statements. Notwithstanding the foregoing, Borrower
may transfer, to another location and without Bank's consent, the
existing "3 UP" Servo Writers and any Servo Writers hereafter
acquired, and may further transfer any newly acquired equipment
which is (a) financed with a third party to the extent permitted
under Section 2.2(d) hereof and (b) which is shipped immediately
out of the United States.
Section 10. EVENTS OF DEFAULT
10.1 Events of Default. The occurrence of any of the
following shall constitute an "Event of Default" under this
Agreement:
(a) Borrower shall fail to pay within five (5) days
of when due or upon maturity any principal, interest, fees or
other amounts payable under any of the Loan Documents.
(b) Any financial statement or certificate (including
the Information Certificate) furnished to Lender in connection
with this Agreement or any representation or warranty made by
Borrower hereunder shall prove to be false, incorrect or
incomplete in any material respect when furnished or made.
(c) Any default in the performance of or compliance
with any obligation, agreement or other provision contained in
Sections 6.1, 6.3, 8.1, 8.2, 8.3, 8.9, 8.10 or 8.11 of this
Agreement or any other default which shall continue for more than
10 days after the occurrence thereof.
(d) Any default in the payment or performance of any
obligation, or any defined event of default, under the terms of
any contract or instrument (other than any of the Loan Documents)
pursuant to which Borrower or any Obligor has incurred any debt
for borrowed money and as a result of which maturity thereof has
been accelerated.
(e) Any default in the payment or performance of any
obligation, or any defined event of default, in either case after
the expiration of any applicable grace period, under any of the
Loan Documents other than this Agreement which shall continue for
more than 10 days after the occurrence of such default.
(f) The filing of a notice of judgment lien against
Borrower or any Obligor; or the recording of any abstract of
judgment against Borrower or any Obligor in any county in which
Borrower or such Obligor has an interest in real property; or the
service of a notice of levy and/or of a writ of attachment or
execution, or other like process, against the assets of Borrower
or any Obligor; or the entry of a judgment against Borrower or
any Obligor; and with respect to any of the foregoing, the amount
in dispute is in excess of $1,000,000 and has not been stayed or
bonded within thirty (30) days provided that as to a levy, writ
of attachment, execution or other like process, Bank shall have
no obligation to advance funds during the foregoing 30 day
period.
(g) Borrower or any Obligor shall become insolvent,
or shall suffer or consent to or apply for the appointment of a
receiver, trustee, custodian or liquidator of itself or any of
its property, or shall generally fail to pay its debts as they
become due, or shall make a general assignment for the benefit of
creditors; Borrower or any Obligor shall file a voluntary
petition in bankruptcy, or seeking reorganization, in order to
effect a plan or other arrangement with creditors or any other
relief under the Bankruptcy Reform Act, Title 11 of the United
States Code, as amended or recodified from time to time
("Bankruptcy Code"), or under any state or federal law granting
relief to debtors, whether now or hereafter in effect; or any
involuntary petition or proceeding pursuant to said Bankruptcy
Code or any other applicable state or federal law relating to
bankruptcy, reorganization or other relief for debtors is filed
or commenced against Borrower or any Obligor, or Borrower or any
Obligor shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition;
or Borrower or any Obligor shall be adjudicated a bankrupt, or an
order for relief shall be entered by any court of competent
jurisdiction under said Bankruptcy Code or any other applicable
state or federal law relating to bankruptcy, reorganization or
other relief for debtors.
(h) The dissolution or liquidation of Borrower or any
Obligor; or Borrower or any Obligor, or if any of its their
respective directors, stockholders or members, shall take action
seeking to effect the dissolution or liquidation of Borrower or
such Obligor.
(i) Any entity or individual, singly or collectively
with its affiliates, shall own more than 50% of the issued and
outstanding capital stock of Borrower.
(j) The indictment of Borrower or any Obligor under
any criminal statute, or commencement or threatened commencement
of criminal or civil proceedings against Borrower or any Obligor,
pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the
property of Borrower or such Obligor.
10.2 Remedies. If an Event of Default shall occur, (a) any
indebtedness of Borrower under any of the Loan Documents, any
term thereof to the contrary notwithstanding, shall at Lender's
option and without notice become immediately due and payable
without presentment, demand, protest or notice of dishonor, all
of which are hereby expressly waived by Borrower; (b) the
obligation, if any, of Lender to permit further borrowings
hereunder shall immediately cease and terminate; and (c) Lender
shall have all the default rights, powers and remedies available
under each of the Loan Documents, or accorded by law, including
without limitation the right to resort to any or all security for
any credit accommodation from Lender subject hereto and to
exercise any or all of the rights of a beneficiary or secured
party pursuant to applicable law. All rights, powers and
remedies of Lender in connection with each of the Loan Documents
may be exercised at any time by Lender and from time to time
after the occurrence of an Event of Default, are cumulative and
not exclusive, and shall be in addition to any other rights,
powers or remedies provided by law or equity.
Section 11. TERM OF AGREEMENT AND MISCELLANEOUS
11.1 Term.
(a) Maturity Date. This Agreement and the other Loan
Documents shall become effective on the Closing Date and shall
continue in full force and effect for a term ending on June 30,
1996. Upon the date of termination of the Loan Documents,
Borrower shall pay to Lender, in full, all outstanding and unpaid
obligations under this Agreement and the other Loan Documents and
shall furnish cash collateral to Lender in such amounts as Lender
determines are reasonably necessary to secure Lender from loss,
cost, damage or expense, including attorneys' fees and legal
expenses, in connection with any contingent obligations,
including issued and outstanding Letters of Credit and checks or
other payments provisionally credited to the obligations and/or
as to which Lender has not yet received final and indefeasible
payment. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank
account designated by Lender are received in such bank account
later than 12:00 noon, California time.
(b) Continuing Obligations. No termination of this
Agreement or the other Loan Documents shall relieve or discharge
Borrower of its respective duties, obligations and covenants
under this Agreement or the other Loan Documents until all
Borrower's obligations under this Agreement and the other Loan
Documents have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the
rights and remedies of Lender hereunder, under the other Loan
Documents and applicable law, shall remain in effect until all
such obligations have been fully and finally discharged and paid.
(c) Early Termination Fee. If for any reason (other
than as set forth in paragraph 11.1(d)) this Agreement is
terminated prior to the end of the then current term of this
Agreement, in view of the impracticality and extreme difficulty
of ascertaining actual damages and by mutual agreement of the
parties as to a reasonable calculation of Lender's lost profits
as a result thereof, Borrower shall pay to Lender, upon the
effective date of such termination, an early termination fee in
the amount set forth below for the corresponding date of
termination.
Date of Termination Fee
Date hereof through January 31, 1996 $600,000
February 1 to February 28, 1996 $500,000
March 1 to March 31, 1996 $400,000
April 1 to April 30, 1996 $300,000
May 1 to May 31, 1996 $200,000
June 1 to June 29, 1996 $100,000
Such early termination fee shall be presumed to be the amount of
damages sustained by Lender as a result of such early termination
and Borrower agrees that it is reasonable under the circumstances
currently existing.
(d) No Early Termination Fee. No early termination
fee shall be payable if a group or division of Wells Fargo Bank
(other than the workout group) or an affiliate of Wells Fargo
Bank extends credit to Borrower, which credit refinances and/or
replaces in full the credit facilities granted under this
Agreement.
11.2 No Waiver. No delay, failure or discontinuance of
Lender in exercising any right, power or remedy under any of the
Loan Documents shall affect or operate as a waiver of such right,
power or remedy; nor shall any single or partial exercise of any
such right, power or remedy preclude, waive or otherwise affect
any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or
approval of any kind by Lender of any breach of or default under
any of the Loan Documents must be in writing and shall be
effective only to the extent set forth in such writing.
11.3 Notices. All notices, requests and demands which any
party is required or may desire to give to any other party under
any provision of this Agreement must be in writing delivered to
each party at the following address:
BORROWER: Iomega Corporation
1821 West Iomega Way
Roy, Utah 84067
Attention: Leonard C. Purkis, C.F.O.,
with a copy to Donald R. Sterling,
Esq.
Telephone: (801) 778-1000
Facsimile: (801) 778-3190
LENDER: WELLS FARGO BANK, NATIONAL ASSOCIATION
Commercial Finance Division
9000 Flair Drive
El Monte, California 91731
Attention: Manager
Telephone: (818) 573-6471
Facsimile: (818) 571-1090
or to such other address as any party may designate by written
notice to all other parties. Each such notice, request and
demand shall be deemed given or made as follows: (a) if sent by
hand delivery, upon delivery; (b) if sent by mail, upon the
earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent
by telecopy, upon receipt.
11.4 Costs, Expenses and Attorneys' Fees. Borrower shall
pay to Lender immediately upon demand the full amount of all
reasonable costs and expenses, including reasonable attorneys'
fees (to include outside counsel fees and all allocated costs of
Lender's in-house counsel), incurred by Lender in connection with
(a) the negotiation and preparation of this Agreement and each
other of the Loan Documents, Lender's continued administration
hereof and thereof, and the preparation of any amendments and
waivers hereto and thereto, (b) all reasonable out-of-pocket
expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field
examinations of the Collateral and Borrower's operations, plus a
per diem charge for Lender's examiners in the field and office at
Lender's Commercial Finance Division's rate in effect from time
to time as set forth herein, (c) the enforcement of Lender's
rights and/or the collection of any amounts which become due to
Lender under any of the Loan Documents, (d) the prosecution or
defense of any action in any way related to any of the Loan
Documents, including without limitation any action for
declaratory relief and (e) Lender's participation in any
bankruptcy or insolvency proceeding involving Borrower, whether
or not suit is filed.
11.5 Successors, Assignment. This Agreement shall be
binding on and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of
the parties; provided however, that Borrower may not assign or
transfer its interest hereunder without the prior written consent
of Lender. Lender reserves the right to sell, assign, transfer,
negotiate or grant participations in all or any part of, or any
interest in, Lender's rights and benefits under each of the Loan
Documents. In connection therewith, Lender may disclose all
documents and information which Lender now has or may hereafter
acquire relating to any credit extended by Lender to Borrower,
Borrower or its business, any Obligor or the business of any
Obligor, or any collateral required hereunder.
11.6 Entire Agreement, Amendment. This Agreement and each
other of the Loan Documents constitute the entire agreement
between Borrower and Lender with respect to any extension of
credit by Lender subject hereto and supersede all prior
negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be
amended or modified only by a written instrument executed by each
party hereto.
11.7 No Third Party Beneficiaries. This Agreement is made
and entered into for the sole protection and benefit of the
parties hereto and their respective permitted successors and
assigns, and no other person or entity shall be a third party
beneficiary of, or have any direct or indirect cause of action or
claim in connection with, this Agreement or any other of the Loan
Documents to which it is not a party.
11.8 Time. Time is of the essence of each and every
provision of this Agreement and each other of the Loan Documents.
11.9 Severability of Provisions. If any provision of this
Agreement shall be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such
prohibition or invalidity without invalidating the remainder of
such provision or any remaining provisions of this Agreement.
11.10 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of
California, except to the extent that Lender has greater rights
or remedies under Federal law, whether as a national bank or
otherwise, in which case such choice of California law shall not
be deemed to deprive Lender of such rights and remedies as may be
available under Federal law.
11.11 Confidentiality. Lender shall use reasonable efforts
to maintain the confidentiality of information it receives from
Borrower pursuant to the Loan Documents, except for disclosure to
(i) Lender's affiliates, (ii) prospective participants in or
assignees of all or any part of the Obligations, (iii) legal
counsel, accountants and other professional advisors to Lender,
(iv) regulatory officials, and (v) any person or entity as
required by law, regulation, or legal process; provided that
Lender shall instruct such persons or entities to treat the
information in a confidential manner.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the day and year first written
above.
IOMEGA CORPORATION WELLS FARGO BANK,
NATIONAL ASSOCIATION
By: /s/Kim B. Edwards_________ By: /s/Michael P. Baranowski__
Title: President & CEO________ Title: Vice President / RM____
EXHIBIT 10.33(b)
SECURITY AGREEMENT
Dated as of July 5, 1995
between
IOMEGA CORPORATION
and
WELLS FARGO BANK, N.A.,
COMMERCIAL FINANCE DIVISION
TABLE OF CONTENTS
Page
Section 1. Definitions and Interpretation . . . . . 1
1.1 Certain Defined Terms . . . . . . . . . . . . . 1
1.2 Interpretation. . . . . . . . . . . . . . . . . 4
Section 2. Collateral . . . . . . . . . . . . . . . 5
2.1 Grant . . . . . . . . . . . . . . . . . . . . . 5
2.2 Intellectual Property . . . . . . . . . . . . . 6
2.3 Perfection. . . . . . . . . . . . . . . . . . . 7
2.4 Preservation and Protection of Security
Interests. . . . . . . . . . . . . . . . 7
2.5 Attorney-in-Fact. . . . . . . . . . . . . . . . 8
2.6 Use of Intellectual Property. . . . . . . . . . 9
2.7 Instruments . . . . . . . . . . . . . . . . . . 9
2.8 Use or Sale of Collateral . . . . . . . . . . . 9
2.9 Rights and Obligations. . . . . . . . . . . . . 10
2.10 Termination. . . . . . . . . . . . . . . . . . 10
Section 3. Cash Proceeds of Collateral. . . . . . . 11
3.1 Cash Collateral Account . . . . . . . . . . . . 11
3.2 Certain Proceeds. . . . . . . . . . . . . . . . 11
Section 4. Representations and Warranties . . . . . 11
4.1 Title . . . . . . . . . . . . . . . . . . . . . 11
4.2 Intellectual Property . . . . . . . . . . . . . 12
Section 5. Covenants. . . . . . . . . . . . . . . . 12
5.1 Books and Records . . . . . . . . . . . . . . . 12
5.2 Removals, Etc.. . . . . . . . . . . . . . . . . 13
5.3 Sales and Other Liens . . . . . . . . . . . . . 13
5.4 Intellectual Property . . . . . . . . . . . . . 13
5.5 Further Assurances. . . . . . . . . . . . . . . 15
Section 6. Remedies . . . . . . . . . . . . . . . . 15
6.1 Events of Default, Etc. . . . . . . . . . . . . 15
6.2 Deficiency. . . . . . . . . . . . . . . . . . . 16
6.3 Manner of Disposition . . . . . . . . . . . . . 16
6.4 Application of Proceeds . . . . . . . . . . . . 16
Section 7. Miscellaneous. . . . . . . . . . . . . . 17
7.1 Waiver. . . . . . . . . . . . . . . . . . . . . 17
7.2 Notices . . . . . . . . . . . . . . . . . . . . 17
7.3 Expenses, Etc.. . . . . . . . . . . . . . . . . 18
7.4 Amendments, Etc.. . . . . . . . . . . . . . . . 19
7.5 Successors and Assigns. . . . . . . . . . . . . 19
7.6 Survival. . . . . . . . . . . . . . . . . . . . 19
7.7 Agreements Superseded . . . . . . . . . . . . . 19
7.8 Severability. . . . . . . . . . . . . . . . . . 19
7.9 Captions. . . . . . . . . . . . . . . . . . . . 19
7.10 Counterparts . . . . . . . . . . . . . . . . . 19
7.11 GOVERNING LAW; SUBMISSION TO
JURISDICTION . . . . . . . . . . . . . . 19
7.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . . 20
ANNEX 1 LIST OF NON-FOREIGN COPYRIGHTS, COPYRIGHT
REGISTRATIONS AND APPLICATIONS FOR COPYRIGHT
REGISTRATIONS
ANNEX 2 LIST OF NON-FOREIGN PATENTS AND PATENT
APPLICATIONS
ANNEX 3 LIST OF NON-FOREIGN TRADE NAMES, TRADEMARKS,
SERVICES MARKS, TRADEMARK AND SERVICE MARK
REGISTRATIONS AND APPLICATIONS FOR TRADEMARK AND
SERVICE MARK REGISTRATIONS
ANNEX 4 LIST OF LOCATIONS
ANNEX 5 ASSIGNMENT FOR SECURITY (PATENTS)
ANNEX 6 ASSIGNMENT FOR SECURITY (TRADEMARKS)
<PAGE>
SECURITY AGREEMENT
This SECURITY AGREEMENT (this "Agreement") dated as of
July 5, 1995 is made between IOMEGA CORPORATION, a Delaware
corporation (the "Company") and WELLS FARGO BANK, N.A. (the
"Bank").
The Loan Agreement (Line of Credit) dated as of July 5,
1995 (the "Loan Agreement") between the Company and the Bank
provides, subject to its terms and conditions, for certain
extensions of credit by the Bank to the Company. It is a
condition to the obligations of the Bank under the Loan Agreement
that the Company shall have executed and delivered, and granted
the Liens provided for in this Agreement.
To induce the Bank to enter into, and to extend credit
under, the Loan Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company has agreed to pledge and grant a
security interest in the Collateral as security for the Secured
Obligations. Accordingly, the Company agrees with the Bank as
follows:
Section 1. Definitions and Interpretation.
1.1 Certain Defined Terms. Unless otherwise defined,
all capitalized terms used in this Agreement that are defined in
the Loan Agreement (including those terms incorporated by
reference) shall have the respective meanings assigned to them in
the Loan Agreement. In addition, the following terms shall have
the following meanings under this Agreement:
"Account" shall have the meaning assigned to that term
in Section 9106 of the Uniform Commercial Code as in effect on
the date of this Agreement, without regard to any subsequent
amendments.
"Chattel Paper" shall have the meaning assigned to that
term in Section 9105 of the Uniform Commercial Code, as in effect
on the date of this Agreement, without regard to any subsequent
amendments.
"Collateral" shall have the meaning assigned to that
term in Section 2.1.
"Copyright Collateral" shall mean all Copyrights,
whether now owned or hereafter acquired by the Company, including
each Copyright identified in Annex 1.
"Copyrights" shall mean, collectively, (a) all non-foreign copyrights,
copyright registrations and applications for
copyright registrations, (b) all renewals and extensions of all
non-foreign copyrights, copyright registrations and applications
for copyright registration and (c) all rights, now existing or
hereafter coming into existence, (i) to all income, royalties,
damages and other payments (including in respect of all past,
present or future infringements) now or hereafter due or payable
under or with respect to any of the foregoing, (ii) to sue for
all past, present and future infringements with respect to any of
the foregoing and (iii) otherwise accruing under or pertaining to
any of the foregoing.
"Deposit Account" shall have the meaning assigned to
that term in Section 9105 of the Uniform Commercial Code as in
effect on the date of this Agreement, without regard to any
subsequent amendments.
"Document" shall have the meaning assigned to that term
in Section 9105 of the Uniform Commercial Code as in effect on
the date of this Agreement, without regard to any subsequent
amendments.
"Equipment" shall have the meaning assigned to that
term in Section 9109 of the Uniform Commercial Code as in effect
on the date of this Agreement, without regard to any subsequent
amendments.
"General Intangibles" shall have the meaning assigned
to that term in Section 9106 of the Uniform Commercial Code as in
effect on the date of this Agreement, without regard to any
subsequent amendments.
"Instrument" shall have the meaning assigned to that
term in Section 9105 of the Uniform Commercial Code as in effect
on the date of this Agreement, without regard to any subsequent
amendments.
"Intellectual Property" shall mean all Copyright
Collateral, all Patent Collateral and all Trademark Collateral,
together with (a) all inventions, processes, production methods,
proprietary information, know-how and trade secrets; (b) all
licenses or user or other agreements granted to the Company with
respect to any of the foregoing, in each case whether now or
hereafter owned or used; (c) all information, customer lists,
identification of suppliers, data, plans, blueprints,
specifications, designs, drawings, recorded knowledge, surveys,
engineering reports, test reports, manuals, materials standards,
processing standards, performance standards, catalogs, computer
and automatic machinery software and programs; (d) all accounting
information and all media in which or on which any information or
knowledge or data or records may be recorded or stored and all
computer programs used for the compilation or printout of such
information, knowledge, records or data; (e) all governmental
approvals now held or hereafter obtained by the Company in
respect of any of the foregoing; and (f) all causes of action,
claims and warranties now owned or hereafter acquired by the
Company in respect of any of the foregoing. It is understood
that Intellectual Property shall include all of the foregoing
owned or acquired by the Company on a worldwide basis.
"Inventory" shall have the meaning assigned to that
term in Section 9109 of the Uniform Commercial Code as in effect
on the date of this Agreement, without regard to any subsequent
amendments.
"Lien" shall mean any interest in Property securing an
obligation owed to, or a claim by, a Person other than the owner
of the Property, whether such interest is based on common law,
statute or contract. The term "Lien" shall also include
reservations, exceptions, encroachments, easements,
rights-of-way, covenants, conditions, restrictions, leases and
other title exceptions and encumbrances affecting Property. For
the purpose of the Agreement, the Company shall be deemed to be
the owner of any Property which it has acquired or holds subject
to a conditional sale agreement or other arrangement pursuant to
which title to the Property has been retained by or vested in
some other Person for security purposes.
"Motor Vehicles" shall mean motor vehicles, tractors,
trailers and other like property, whether or not the title to
such property is governed by a certificate of title or ownership.
"Patent Collateral" shall mean all Patents, whether now
owned or hereafter acquired by the Company, including each Patent
identified in Annex 2.
"Patents" shall mean, collectively, (a) all non-foreign
patents and patent applications, (b) all reissues, divisions,
continuations, renewals, extensions and continuations-in-part of
all patents or patent applications and (c) all rights, now
existing or hereafter coming into existence, (i) to all income,
royalties, damages, and other payments (including in respect of
all past, present and future infringements) now or hereafter due
or payable under or with respect to any of the foregoing, (ii) to
sue for all past, present and future infringements with respect
to any of the foregoing and (iii) otherwise accruing under or
pertaining to any of the foregoing, including all inventions and
improvements described or discussed in all such patents and
patent applications.
"Person" means any individual, corporation, company,
voluntary association, partnership, joint venture, trust,
unincorporated organization, limited liability company or
governmental entity.
"Proceeds" shall have the meaning assigned to that term
in Section 9306 of the Uniform Commercial Code.
"Property" shall mean any interest in any kind of
property or asset, whether real, personal or mixed, or tangible
or intangible.
"Secured Obligations" shall mean (a) any and all
Obligations, and (b) any and all other obligations of the Company
for the performance of its agreements, covenants and undertakings
under or in respect of the Loan Documents.
"Security" shall have the meaning assigned to that term
in Section 8102(c) of the Uniform Commercial Code.
"Trademark Collateral" shall mean all Trademarks,
whether now owned or hereafter acquired by the Company, including
each Trademark identified in Annex 3. Notwithstanding the
foregoing, the Trademark Collateral shall not include any
Trademark which would be rendered invalid, abandoned, void or
unenforceable by reason of its being included as part of the
Trademark Collateral.
"Trademarks" shall mean, collectively, (a) all non-foreign trade
names, trademarks and service marks, logos,
trademark and service mark registrations and applications for
trademark and service mark registrations, (b) all renewals and
extensions of any of the foregoing and (c) all rights, now
existing or hereafter coming into existence, (i) to all income,
royalties, damages and other payments (including in respect of
all past, present and future infringements) now or hereafter due
or payable under or with respect to any of the foregoing, (ii) to
sue for all past, present and future infringements with respect
to any of the foregoing and (iii) otherwise accruing under or
pertaining to any of the foregoing, together, in each case, with
the product lines and goodwill of the business connected with the
use of, or otherwise symbolized by, each such trade name,
trademark and service mark.
"Uniform Commercial Code" shall mean the Uniform
Commercial Code as in effect in the State of California from time
to time, except as otherwise specified herein.
Section 1.2 Interpretation. In this Agreement, unless
otherwise indicated: the singular includes the plural and plural
the singular; words importing either gender include the other
gender; references to statutes or regulations are to be construed
as including all statutory or regulatory provisions
consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing,
lithography and other means of reproducing words in a tangible
visible form; the words "including," "includes" and "include"
shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections),
exhibits, annexes or schedules are to this Agreement; references
to agreements and other contractual instruments shall be deemed
to include all subsequent amendments, extensions and other
modifications to such instruments (without, however, limiting any
prohibition on any such amendments, extensions and other
modifications by the terms of any Loan Document); and references
to Persons include their respective permitted successors and
assigns and, in the case of governmental entities, Persons
succeeding to their respective functions and capacities.
Section 2. Collateral.
2.1 Grant. As collateral security for the prompt
payment in full when due (whether at stated maturity, by
acceleration or otherwise) and performance of the Secured
Obligations, the Company hereby pledges and grants to the Bank a
security interest in all of the Company's right, title and
interest in and to the following property, whether now owned or
hereafter acquired by the Company and whether now existing or
hereafter coming into existence (collectively, the "Collateral"):
(a) all Accounts and General Intangibles, including
all rights to the payment of money, whether or not earned by
performance, including all moneys due and to become due to the
Company in repayment of any loans or advances, in payment for
goods (including Inventory and Equipment) sold or leased or for
services rendered, in payment of tax refunds and in payment of
any guarantee of any of the foregoing;
(b) all Documents, Instruments, and Chattel Paper and,
without limiting the generality of the foregoing, letters of
credit, including any such writing evidencing, representing,
arising from or existing in respect of, relating to, covering,
evidencing, securing or supporting the payment of, any of the
Accounts, General Intangibles, Equipment or Inventory;
(c) all Inventory, including all goods of the Company
that are held by the Company for sale, lease or furnishing under
a contract of service that are so leased or furnished, and
including all spare parts and related supplies, all goods
obtained by the Company in exchange for any such goods, all
products made or processed from any such goods and all
substances, if any, commingled with or added to any such goods;
(d) all Equipment, including all goods (excluding
Motor Vehicles) of the Company that are used or bought for use
primarily in its business, including all spare parts and related
supplies, all goods obtained by the Company in exchange for any
such goods, all substances, if any, commingled with or added to
such goods and all upgrades and other improvements to such goods;
(e) all money and Deposit Accounts and the balances
thereof from time to time, including the Cash Collateral Account
and the balance thereof from time to time;
(f) without limiting the generality of the foregoing,
all Intellectual Property;
(g) without limiting the generality of the foregoing,
all contracts and other agreements relating to the sale or other
disposition of all or any part of the Collateral and all rights,
warranties, claims and benefits against any Person arising out
of, relating to or in connection with all or any part of the
Collateral;
(h) without limiting the generality of the foregoing,
to the extent related to all or any part of the other Collateral,
all books, correspondence, credit files, records, invoices,
tapes, cards, computer runs and other papers and documents in the
possession or under the control of the Company or any computer
bureau or service company from time to time acting for the
Company;
(i) without limiting the generality of the foregoing,
all Securities;
(j) without limiting the generality of the foregoing,
all property that is or may become fixtures under applicable law;
(k) all other tangible and intangible property of the
Company; and
(l) all Proceeds in whatever form of all or any part
of the other Collateral including all insurance payments in
respect of the Collateral and all condemnation awards and all
other compensation for any casualty event with respect to all or
any part of the other Collateral, together with all rights to
recover and proceed with respect to the same, and all accessions
to, substitutions for and replacements of all or any part of the
Collateral.
2.2 Intellectual Property. For the purpose of
enabling the Bank to exercise its rights, remedies, powers and
privileges under Section 6 at such time or times as the Bank
shall be lawfully entitled to exercise such rights, remedies,
powers and privileges, and for no other purpose, the Company
hereby grants to the Bank, to the extent assignable, an
irrevocable, nonexclusive license (exercisable without payment of
royalty or other compensation to the Company) to use, assign,
license or sublicense any of the Intellectual Property, together
with reasonable access to all media in which any of the licensed
items may be recorded or stored and to all computer programs used
for the compilation or printout of such items.
2.3 Perfection. Concurrently with the execution and
delivery of this Agreement, the Company shall (i) execute such
financing statements and other documents as the Bank may request
with respect to the Liens granted hereby, (ii) deliver and pledge
to the Bank any and all Instruments, endorsed or accompanied by
such instruments of assignment and transfer in such form and
substance as the Bank may request, (iii) give appropriate notice
to the relevant depository institution or financial intermediary
with respect to all Deposit Accounts or uncertificated
Securities, and (iv) take all such other actions as the Bank may
request to perfect or establish the priority of the Liens granted
by this Agreement.
2.4 Preservation and Protection of Security Interests.
The Company shall:
(a) upon the acquisition after the Closing Date, by
the Company of any Instrument (so long as no Event of Default
shall have occurred and be continuing, excluding any checks
received by the Company for the payment of goods or services in
the ordinary course of business), promptly deliver and pledge to
the Bank all such Instruments, endorsed or accompanied by such
instruments of assignment and transfer in such form and substance
as the Bank may request;
(b) upon the acquisition after the Closing Date by the
Company of any Equipment (other than Motor Vehicles) covered by a
certificate of title or ownership issued by a jurisdiction whose
laws permit the notation of liens on such certificate, promptly
cause the Bank to be listed as the lienholder on such certificate
of title and within 120 days of the acquisition of such Equipment
deliver evidence of the same to the Bank;
(c) upon the Company's acquiring, or otherwise
becoming entitled to the benefits of, any Copyright (or
copyrightable material), Patent (or patentable invention),
Trademark (or associated goodwill) or other Intellectual Property
or upon or prior to the Company's filing, either directly or
through any agent, licensee or other designee, of any application
with any governmental entity for any Copyright, Patent,
Trademark, or other Intellectual Property, in each case after the
Closing Date, amend Annex 1, 2 or 3 (as the case may be) to
reflect the inclusion of any such Intellectual Property as part
of the Collateral (it being understood that the failure to amend
any such Annex shall not affect the Liens granted by this
Agreement on any such Intellectual Property); and
(d) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other
instruments, obtain any and all governmental approvals and take
any and all steps that may be necessary or as the Bank may
request to create, perfect, establish the priority of, or to
preserve the validity, perfection or priority of, the Liens
granted by this Agreement or to enable the Bank to exercise and
enforce its rights, remedies, powers and privileges under this
Agreement with respect to such Liens, provided that notices to
account debtors or other Persons obligated in respect of any
Accounts, General Intangibles, Instruments or Securities shall be
governed by the provisions of Section 3.2.
2.5 Attorney-in-Fact.
(a) Subject to the rights of the Company under
Sections 2.6, 2.7, 2.8 and 2.9, the Bank is hereby appointed the
attorney-in-fact of the Company for the purpose of carrying out
the provisions of this Agreement and taking any action and
executing any instruments which the Bank may deem necessary or
advisable to accomplish the purposes of this Agreement, to
preserve the validity, perfection or priority of the Liens
granted by this Agreement, including the execution and filing of
financing statements, continuation statements and the like, and
to exercise its rights, remedies, powers and privileges under
this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. The Bank shall be
entitled under this Agreement upon the occurrence and during the
continuance of any Event of Default, (i) to ask, demand, collect,
sue for, recover, receive and give receipt and discharge for
amounts due and to become due under and in respect of all or any
part of the Collateral; (ii) to receive, endorse and collect any
Instruments or other drafts, instruments, documents and chattel
paper in connection with clause (i) above (including any draft or
check representing the proceeds of insurance or the return of
unearned premiums); (iii) to file any claims or take any action
or proceeding that the Bank may deem necessary or advisable for
the collection of all or any part of the Collateral, including
the collection of any compensation due and to become due under
any contract or agreement with respect to all or any part of the
Collateral; (iv) to execute, in connection with any sale or
disposition of the Collateral under Section 6, any endorsements,
assignments, bills of sale or other instruments of conveyance or
transfer with respect to all or any part of the Collateral; and
(v) to execute such documents and instruments on behalf of, and
to take such action in the name of, the Company as the Bank may
deem necessary or advisable to accomplish the purpose of this
Agreement.
(b) Without limiting the rights and powers of the Bank
under Section 2.5(a), the Company hereby appoints the Bank as its
attorney-in-fact, effective as of the Closing Date and
terminating upon the termination of this Agreement and upon
satisfaction in full of the Secured Obligations, for the purpose
of executing and filing all such contracts, agreements and other
documents as are contemplated by Section 2.4(c) but subject to
the limitations of Section 5.5. This appointment as
attorney-in-fact is irrevocable and coupled with an interest.
2.6 Use of Intellectual Property. So long as no Event
of Default shall have occurred and be continuing, the Company
will be permitted to exploit, use, enjoy, protect, license,
sublicense, assign, sell, dispose of or take other actions with
respect to the Intellectual Property in the ordinary course of
the business of the Company. In furtherance of the foregoing, so
long as no Event of Default shall have occurred and be
continuing, the Bank shall from time to time, upon the request of
the Company, execute and deliver any instruments, certificates or
other documents, in the form so requested, which the Company
shall have certified are appropriate (in its judgment) to allow
it to take any action permitted above (including relinquishment
of the license provided pursuant to Section 2.2 as to any
specific Intellectual Property). The exercise of rights,
remedies, powers and privileges under Section 6 by the Bank shall
not terminate the rights of the holders of any licenses or
sublicenses theretofore granted by the Company in accordance with
the first sentence of this Section 2.6.
2.7 Instruments. So long as no Event of Default shall
have occurred and be continuing, the Company may retain for
collection in the ordinary course of business any checks received
by the Company for the payment of goods and services in the
ordinary course of business, and the Bank shall, promptly upon
the request, and at the expense, of the Company, make appropriate
arrangements for making any other Instruments pledged by the
Company available to the Company for purposes of presentation,
collection or renewal. Any such arrangement shall be effected,
to the extent deemed appropriate by the Bank, against trust
receipt or like document.
2.8 Use or Sale of Collateral. So long as no Event
of Default shall have occurred and be continuing, the Company
shall, in addition to its rights under Sections 2.6 and 2.7 in
respect of the Collateral contemplated in those sections, be
entitled to use and possess the other Collateral and to exercise
its rights, title and interest in all contracts, agreements,
licenses and governmental approvals, subject to the rights,
remedies, powers and privileges of the Bank under Sections 3 and
6 and to such use, possession or exercise not otherwise
constituting an Event of Default.
2.9 Rights and Obligations.
(a) The Company shall remain liable to perform its
duties and obligations under the contracts and agreements
included in the Collateral in accordance with their respective
terms to the same extent as if this Agreement had not been
executed and delivered. The exercise by the Bank of any right,
remedy, power or privilege in respect of this Agreement shall not
release the Company from any of its duties and obligations under
such contracts and agreements. The Bank shall not have any duty,
obligation or liability under such contracts and agreements or in
respect to any governmental approval included in the Collateral
by reason of this Agreement or any other Loan Document, nor shall
the Bank be obligated to perform any of the duties or obligations
of the Company under any such contract or agreement or any such
governmental approval or to take any action to collect or enforce
any claim (for payment) under any such contract or agreement or
governmental approval.
(b) No Lien granted by this Agreement in the Company's
right, title and interest in any contract, agreement or
governmental approval shall be deemed to be a consent by the Bank
to any such contract, agreement or governmental approval.
(c) No reference in this Agreement to Proceeds or to
the sale or other disposition of Collateral shall authorize the
Company to sell or otherwise dispose of any Collateral except to
the extent otherwise expressly permitted by the terms of any Loan
Document.
(d) The Bank shall not be required to take steps
necessary to preserve any rights against prior parties to any
part of the Collateral.
2.10 Termination. When all Secured Obligations shall
have been fully paid or otherwise fully performed and the
commitments thereunder and all Letter of Credit Obligations shall
have expired or been terminated, this Agreement shall terminate,
and the Bank shall, on the Company's written demand and at no
cost to the Bank, forthwith cause to be assigned, transferred and
delivered, against receipt but without any recourse, warranty or
representation whatsoever, any remaining Collateral and money
received in respect of the Collateral, to or on the order of the
Company and to be released, canceled and granted back all
licenses and rights referred to in Section 2.2. The Bank shall
also execute and deliver to the Company upon such termination
such Uniform Commercial Code termination statements and such
other documentation as shall be reasonably requested by the
Company to effect the termination and release of the Liens
granted by this Agreement on the Collateral.
Section 3. Cash Proceeds of Collateral.
3.1 Cash Collateral Account. The balance from time to
time in the Cash Collateral Account shall constitute part of the
Collateral and shall not constitute payment of the Secured
Obligations until applied as provided in the Loan Agreement.
3.2 Certain Proceeds.
(a) If any Event of Default shall have occurred and be
continuing, the Company shall, upon request of the Bank, instruct
(and the Company hereby authorizes the Bank so to notify) each
account debtor and other Person obligated in respect of any
Accounts and General Intangibles to make all payments in respect
of the Accounts, General Intangibles directly to the Bank (by
instructing that such payments shall be made to the Bank for
deposit into the Cash Collateral Account) or to such other
Persons or under other arrangements in form and substance
satisfactory to the Bank.
(b) If any Event of Default shall have occurred and be
continuing, the Company shall, upon request of the Bank, promptly
notify (and the Company hereby authorizes the Bank so to notify)
each account debtor in respect of any Instruments or Securities
that such Collateral has been assigned to the Bank under this
Agreement and that any payments due or to become due in respect
of such Collateral are to be made directly to the Bank. All such
payments made to the Bank shall be immediately deposited in the
Cash Collateral Account.
(c) The Company agrees that if the Proceeds of any
Collateral required to be deposited in the Cash Collateral
Account shall be received by the Company, the Company shall
promptly deposit such Proceeds into the Cash Collateral Account
or, if the Proceeds are of a type that cannot be so deposited,
deliver such Proceeds to the Bank in kind. Until so deposited or
delivered, all such Proceeds shall be held in trust by the
Company for the Bank and shall not be commingled with any other
funds or property of the Company.
Section 4. Representations and Warranties. As of the
Closing Date and as of the date of each extension of credit by
the Bank under the Loan Agreement, the Company represents and
warrants to the Bank as follows:
4.1 Title. The Company is the sole beneficial owner
of the Collateral in which it purports to grant a Lien pursuant
to this Agreement, and such Collateral is free and clear of all
Liens, except for Liens expressly permitted in the Loan
Documents. The Liens granted by this Agreement in favor of the
Bank for the benefit of the Bank have attached and constitute a
perfected security interest in all of such Collateral prior to
all other Liens (except such permitted Liens or Liens disclosed
in the Schedule to the Loan Agreement). Notwithstanding the
foregoing, nothing contained in this Section 4.1 shall derogate
the grant of a security interest under Section 2.1 with respect
to any property not owned by the Company but with respect to
which the Company has sufficient rights to confer a security
interest.
4.2 Intellectual Property.
(a) Annexes 1, 2 and 3 set forth completely and
correctly all Copyrights, Patents and Trademarks owned by the
Company on the Closing Date; except pursuant to licenses and
other user agreements entered into by the Company in the ordinary
course of business, the Company owns and possesses the right to
use, and has done nothing to authorize or enable any other Person
to use, any Copyright, Patent or Trademark listed in Annex 1, 2
or 3; all registrations listed in Annexes 1, 2 and 3 are valid
and in full force and effect; and, except as limited by certain
licensing agreements, the Company owns and possesses the right to
use all Copyrights, Patents and Trademarks listed in Annexes 1, 2
and 3.
(b) To the Company's knowledge, (i) there is no
violation by others of any right of the Company with respect to
any Copyright, Patent or Trademark listed in Annex 1, 2 or 3 and
(ii) the Company is not infringing in any respect upon any
Copyright, Patent or Trademark of any other Person; and no
proceedings have been instituted, are pending against the Company
or, to the Company's knowledge, have been threatened against, and
no claim has been received by, the Company, alleging any such
violation.
(c) The Company does not own any Trademarks registered
in the United States of America to which the last sentence of the
definition of Trademark Collateral applies.
Section 5. Covenants.
5.1 Books and Records. The Company shall:
(a) keep full and accurate books and records relating
to the Collateral and stamp or otherwise mark such books and
records in such manner as the Bank may reasonably require in
order to reflect the Liens granted by this Agreement; and
(b) permit representatives of the Bank, upon
reasonable notice, at any time during normal business hours, to
inspect and make abstracts from its books and records pertaining
to the Collateral, permit representatives of the Bank to be
present at the Company's place of business to receive copies of
all communications and remittances relating to the Collateral and
forward copies of any notices or communications received by the
Company with respect to the Collateral, all in such manner as the
Bank may reasonably request.
5.2 Removals, Etc. Without at least 30 days' prior
written notice to the Bank, the Company shall not (i) maintain
any of its books and records with respect to the Collateral at
any office or maintain its principal place of business at any
place, other than at the address initially indicated for notices
to it under Section 7.2 or at one of the locations identified in
Annex 4 or in transit from one of such locations to another,
(ii) without also obtaining the prior written consent of the
Bank, maintain any Collateral (other than "3UP" Servo Writers,
any Servo Writers hereafter acquired and any newly acquired
Equipment which is (a) financed with a third party to the extent
permitted under Section 2.2(d) of the Loan Agreement and (b)
which is shipped immediately out of the United States) at any
place other than at the address initially indicated for notices
to it under Section 7.2 or at one of the locations identified in
Annex 4 or in transit from one of such locations to another, or
(iii) change its corporate name, or the name under which it does
business, from the name shown on the signature pages to this
Agreement.
5.3 Sales and Other Liens. Except as otherwise
permitted under the Loan Agreement, without the prior written
consent of the Bank, the Company shall not dispose of any
Collateral, create, incur, assume or suffer to exist any Lien
upon any Collateral or file or suffer to be on file or authorize
to be filed, in any jurisdiction, any financing statement or like
instrument with respect to all or any part of the Collateral in
which the Bank is not named as the sole secured party for the
benefit of the Bank.
5.4 Intellectual Property.
(a) The Company (either itself or through licensees)
will, for each Trademark, (i) to the extent consistent with past
practice and good business judgment, continue to use such
Trademark on each and every trademark class of goods in order to
maintain such Trademark in full force and effect free from any
claim of abandonment for nonuse, (ii) maintain as in the past the
quality of products and services offered under such Trademark,
(iii) employ such Trademark with the appropriate notice of
registration and (iv) not (and not permit any licensee or
sublicensee to) do any act or knowingly omit to do any act
whereby any Trademark material to the conduct of its business may
become invalidated.
(b) The Company will not do or omit to do and will use
its best efforts to prevent any licensee from doing or knowingly
omitting to do any act whereby any Patent material to the conduct
of the Company's business may become abandoned or dedicated.
(c) The Company shall notify the Bank promptly if it
knows or has reason to know that any Intellectual Property
material to the conduct of its business may become abandoned or
dedicated, or of any adverse determination or development
(including the institution of, or any such determination or
development in, any proceeding before any governmental entity)
regarding the Company's ownership of any Intellectual Property
material to the conduct of its business, its right to copyright,
patent or register the same (as the case may be), or its right to
keep, use and maintain the same.
(d) The Company will take all necessary steps that are
consistent with good business practices in any proceeding before
any appropriate governmental entity to maintain and pursue each
application relating to any Intellectual Property (and to obtain
the relevant registrations) and to maintain each registration
material to the conduct of its business, including payment of
maintenance fees, filing of applications for renewal, affidavits
of use, affidavits of incontestability and opposition,
interference and cancellation proceedings.
(e) In the event that any Intellectual Property
material to the conduct of its business is infringed,
misappropriated or diluted by a third party, the Company shall
notify the Bank within thirty (30) days after it learns of such
event and shall, if consistent with good business practice,
promptly sue for infringement, misappropriation or dilution, seek
temporary restraints and preliminary injunctive relief to the
extent practicable, seek to recover any and all damages for such
infringement, misappropriation or dilution and take such other
actions as are appropriate under the circumstances to protect
such Collateral.
(f) The Company shall, through counsel acceptable to
the Bank, prosecute diligently any application for any
Intellectual Property pending as of the date of this Agreement or
thereafter made until the termination of this Agreement, make
application on uncopyrighted but copyrightable material,
unpatented but patentable inventions and unregistered but
registerable Trademarks and preserve and maintain all rights in
applications for any Intellectual Property; provided, however,
that the Company shall have no obligation to make any such
application if making such application would be unnecessary or
imprudent in the good faith business judgment of the Company.
Any expenses incurred in connection with such an application
shall be borne by the Company. The Company shall not abandon any
right to file an application for any Intellectual Property or any
pending such application in the United States without the consent
of the Bank, which consent shall not be unreasonably withheld.
(g) The Bank shall have the right but shall in no way
be obligated to bring suit in its own name to enforce the
Copyrights, Patents and Trademarks and any license under such
Intellectual Property, in which event the Company shall, at the
request of the Bank, do any and all lawful acts and execute and
deliver any and all proper documents required by the Bank in aid
of such enforcement action.
5.5 Further Assurances. The Company agrees that, from
time to time upon the request of the Bank, the Company will
execute and deliver such further writings and do such other acts
and things as the Bank may reasonably request in order fully to
effect the purposes of this Agreement. After the occurrence of
an Event of Default under the Loan Agreement, at the Bank's
request, Borrower shall execute and deliver to the Bank, and file
with each relevant governmental entity, each of the assignments
in the form of Annex 5 (in the case of any Patent Collateral) and
Annex 6 (in the case of any Trademark Collateral). Prior to the
occurrence of an Event of Default under the Loan Agreement, the
Bank will not record or file any matter with the United States
Patent and Trademark Office or any other federal agency to
evidence or perfect the Bank's security interest in the
Intellectual Property.
Section 6. Remedies.
6.1 Events of Default, Etc. If any Event of Default
shall have occurred and be continuing:
(a) the Bank in its discretion may require the Company
to, and the Company shall, assemble the Collateral owned by it at
such place or places, reasonably convenient to both the Bank and
the Company, designated in the Bank's request.
(b) the Bank in its discretion may make any reasonable
compromise or settlement it deems desirable with respect to any
of the Collateral and may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, all or
any part of the Collateral.
(c) the Bank in its discretion may, in its name or in
the name of the Company or otherwise, demand, sue for, collect or
receive any money or property at any time payable or receivable
on account of or in exchange for all or any part of the
Collateral, but shall be under no obligation to do so.
(d) in the event of any sale, license or other
disposition of any of the Trademark Collateral, the goodwill
connected with and symbolized by the Trademark Collateral subject
to such disposition shall be included, and the Company shall
supply to the Bank or its designee, for inclusion in such sale,
assignment or other disposition, all Intellectual Property
relating to such Trademark Collateral.
(e) in addition to any rights conferred by this
Agreement, the Bank shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with
respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not a version of the Official Text of
the Uniform Commercial Code is in effect in the jurisdiction
where such rights, remedies, powers and privileges are asserted)
and such additional rights, remedies, powers and privileges to
which a secured party is entitled under the laws in effect in any
jurisdiction where any rights, remedies, powers and privileges in
respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law, to
exercise all voting, consensual and other powers of ownership
pertaining to the Collateral (and the Company agrees to take all
such action as may be appropriate to give effect to such right).
The Proceeds of, and other realization upon, the Collateral by
virtue of the exercise of remedies under this Section 6.1 and of
the exercise of the license granted to the Bank in Section 2.2
shall be applied in accordance with Section 6.4.
6.2 Deficiency. If the Proceeds of, or other
realization upon, the Collateral by virtue of the exercise of
remedies under Section 6.1 and of the exercise of the license
granted by the Bank in Section 2.2 are insufficient to cover the
costs and expenses of such exercise and the payment in full of
the other Secured Obligations, the Company shall remain liable
for any deficiency.
6.3 Manner of Disposition. The Bank shall incur no
liability as a result of the sale, lease or other disposition of
all or any part of the Collateral conducted in any commercially
reasonable manner. The Company hereby waives any claims against
the Bank arising by reason of the fact that the price at which
the Collateral may have been sold, leased, or otherwise disposed
of was less than the price which might have been obtained by some
other manner of sale, lease or other disposition or was less than
the aggregate amount of the Secured Obligations, even if, in
connection with a private sale or other non-public disposition,
the Bank accepts the first offer received and does not offer the
Collateral to more than one offeree, so long as the Bank has
acted in a commercially reasonable manner.
6.4 Application of Proceeds. Except as otherwise
expressly provided in this Agreement and except as provided below
in this Section 6.4, the Proceeds of, or other realization upon,
all or any part of the Collateral by virtue of the exercise of
remedies under Section 6.1 or of the exercise of the license
granted in Section 2.2, and any other cash at the time held by
the Bank under Section 3 or this Section 6, shall be applied by
the Bank:
First, to the reasonable expenses of retaking, holding,
preparing for sale or lease, selling, or leasing or other
disposition of the Collateral, including reasonable out-of-pocket
costs and expenses of the Bank, and the reasonable fees and
expenses of its agents, as well as reasonable attorneys' fees and
legal expenses incurred by the Bank in that connection;
Next, to satisfaction of the Secured Obligations in
such order as the Bank in its discretion may choose; and
Finally, to the Persons legally entitled thereto, or as
a court of competent jurisdiction may direct, with respect to any
surplus then remaining.
Section 7. Miscellaneous.
7.1 Waiver. No failure on the part of the Bank to
exercise and no delay in exercising, and no course of dealing
with respect to, any right, remedy, power or privilege under this
Agreement shall operate as a waiver of such right, remedy, power
or privilege, nor shall any single or partial exercise of any
right, remedy, power or privilege under this Agreement preclude
any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges provided
in this Agreement are cumulative and not exclusive of any rights,
remedies, powers and privileges provided by law.
7.2 Notices. All notices and communications to be
given under this Agreement shall be given or made in writing to
the intended recipient at the address specified below or, as to
any party, at such other address as shall be designated by such
party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be
deemed to have been duly given when transmitted by telex or
telecopier, or personally delivered or, in the case of a mailed
notice, upon receipt, in each case, given or addressed as
provided in this Section 7.2:
To the Company:
Iomega Corporation
1821 West Iomega Way
Roy, Utah 84067
Attention: Leonard C. Purkis, Chief Financial
Officer, with a copy to Donald R.
Sterling, Esq.
Telecopier No.: (801) 778-3190
To the Bank:
Wells Fargo Bank, N.A.
Commercial Finance Division
9000 Flair Drive
El Monte, California 91731
Attention: Mr. Michael Baranowski
Telecopier No.: (818) 571-1090
Notwithstanding the foregoing, if a notice is
transmitted by telex, telecopier or personal delivery or, in the
case of a mailed notice, is received on a day that is not a
business day, then such notice shall be deemed to have been duly
given on the first business day after such transmission or, in
the case of a mailed notice, receipt.
7.3 Expenses, Etc. The Company agrees to pay or to
reimburse the Bank for all reasonable costs and expenses
(including reasonable attorneys' fees and expenses) that may be
incurred by the Bank in any effort to enforce any of the
provisions of Section 6 or any of the obligations of the Company
in respect of the Collateral or in connection with (a) the
preservation of the Lien of, or the rights of the Bank under this
Agreement, (b) any actual or attempted sale, lease, disposition,
exchange, collection, compromise, settlement or other realization
in respect of, or care of, the Collateral, or (c) all such
reasonable costs and expenses and any other reasonable costs and
expenses, including reasonable attorneys' fees and expenses
incurred in any bankruptcy, reorganization, workout,
restructuring or other similar process or proceeding, including
reasonable costs, expenses and reasonable attorneys' fees and
expenses relating to any proceeding concerning relief from stay,
cash collateral, appointment of a trustee, disclosure statement
approval, or plan confirmation. Notwithstanding the foregoing,
the Company's obligation to reimburse the Bank for legal fees and
expenses incurred in connection with the initial documentation of
this Agreement and the other Loan Documents shall be governed by
Section 11.4 of the Loan Agreement, and in connection with any
modification of the terms of this Agreement that is not in
connection with any bankruptcy, reorganization, workout,
restructuring or other similar process or proceeding, the Company
shall be obligated to reimburse the Bank for its reasonable costs
and expenses (including reasonable attorneys' fees and costs).
7.4 Amendments, Etc. Any provision of this Agreement
may be modified, supplemented or waived only by an instrument in
writing duly executed by the Company and the Bank. Any such
modification, supplement or waiver shall be for such period and
subject to such conditions as shall be specified in the
instrument effecting the same and shall be binding upon the Bank
and the Company, and any such waiver shall be effective only in
the specific instance and for the purposes for which given.
7.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company and the
Bank, and their respective successors and permitted assigns. The
Company shall not assign or transfer its rights under this
Agreement without the prior written consent of the Bank.
7.6 Survival. All representations and warranties made
in this Agreement or in any certificate or other document
delivered pursuant to or in connection with this Agreement shall
survive the execution and delivery of this Agreement or such
certificate or other document (as the case may be) or any deemed
repetition of any such representation or warranty.
7.7 Agreements Superseded. This Agreement supersedes
all prior agreements and understandings (including any and all
commitment letters and term sheets), written or oral, between the
Company and the Bank with respect to the subject matter of this
Agreement.
7.8 Severability. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement, and any such prohibition
or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
7.9 Captions. The table of contents and captions and
section headings appearing in this Agreement are included solely
for convenience of reference and are not intended to affect the
interpretation of any provision of this Agreement.
7.10 Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one and the same instrument and any of the parties to
this Agreement may execute this Agreement by signing any such
counterpart.
7.11 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH,
THE LAW OF THE STATE OF CALIFORNIA. THE COMPANY HEREBY SUBMITS
TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA AND OF ANY STATE
COURT SITTING IN THE COUNTY OF LOS ANGELES, CALIFORNIA FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT. THE COMPANY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
7.12 WAIVER OF JURY TRIAL. THE COMPANY AND THE BANK
HEREBY IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the day and
year first above written.
IOMEGA CORPORATION
By:/s/Leonard C. Purkis_________________
Title:Chief Financial Officer
WELLS FARGO BANK, N.A.
By:/s/Michael P. Baranowski_____________
Title: Vice President / RM
ANNEX 1
LIST OF NON-FOREIGN COPYRIGHTS, COPYRIGHT REGISTRATIONS AND
APPLICATIONS FOR COPYRIGHT REGISTRATIONS
IOMEGA CORPORATION
Title Date Filed Registration No. Closing Date
ANNEX 2
LIST OF NON-FOREIGN PATENTS AND PATENT APPLICATIONS
IOMEGA CORPORATION
File Patent Country Registration No. Date
ANNEX 3
LIST OF NON-FOREIGN TRADE NAMES, TRADEMARKS, SERVICES MARKS,
TRADEMARK AND SERVICE MARK REGISTRATIONS AND
APPLICATIONS FOR TRADEMARK AND SERVICE MARK REGISTRATIONS
U.S. Trademarks
IOMEGA CORPORATION
Application (A)
Registration (R) Registration
Mark or Series No. (S) or Filing Date
ANNEX 4
LIST OF LOCATIONS
IOMEGA CORPORATION
1821 West Iomega Way
Roy, Utah 84067
ANNEX 5
ASSIGNMENT FOR SECURITY
(PATENTS)
WHEREAS, Iomega Corporation, a Delaware corporation
(herein referred to as "Assignor"), owns the letters patent,
and/or applications for letters patent, of the United States,
more particularly described on Schedule 1 annexed hereto as part
hereof (the "Patents");
WHEREAS, Assignor has executed and delivered to Wells
Fargo Bank, N.A. (herein referred to as "Assignee") for the
benefit of Assignee under the Loan Agreement dated as of July 5,
1995 (as amended, supplemented, restated or otherwise modified
from time to time, the "Loan Agreement"), a Security Agreement of
even date herewith (the "Agreement", terms defined therein and
not otherwise defined herein being used herein as therein
defined) in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has
assigned to Assignee, and granted to Assignee a security interest
in, and mortgage on, all right, title and interest of Assignor in
and to the Patents, together with any reissue, continuation,
continuation-in-part or extension thereof, and all proceeds
thereof, including, without limitation, any and all causes of
action which may exist by reason of infringement thereof for the
full term of the Patents (the "Intellectual Property
Collateral"), to secure the prompt payment, performance and
observance of the Secured Obligations;
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, Assignor does hereby
further assign unto Assignee and grant to Assignee a security
interest in, and mortgage on, the Intellectual Property
Collateral to secure the prompt payment, performance and
observance of the Secured Obligations.
Assignor does hereby further acknowledge and affirm
that the rights and remedies of Assignee with respect to the
assignment of, security interest in and mortgage on the
Intellectual Property Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of
which are hereby incorporated herein by reference as if fully set
forth herein.
Assignee's address is 1821 West Iomega Way, Roy, Utah
84067.
IN WITNESS WHEREOF, Assignor has caused this Assignment
to be duly executed by its officer thereunto duly authorized as
of the 5th day of July, 1995.
IOMEGA CORPORATION
By: _______________________________
Name: _________________________
Title: ________________________
SCHEDULE 1 TO ASSIGNMENT FOR SECURITY
PATENTS
Title Date Issued Patent No.
ANNEX 6
ASSIGNMENT FOR SECURITY
(TRADEMARKS)
WHEREAS, Iomega Corporation, a Delaware corporation
(herein referred to as "Assignor"), has adopted, used and is
using the trademarks listed on the annexed Schedule 1, which
trademarks are registered in the United States Patent and
Trademark Office (the "Trademarks");
WHEREAS, Assignor has executed and delivered to Wells
Fargo Bank, N.A. (herein referred to as "Assignee") for the
benefit of Assignee under the Loan Agreement dated as of July 5,
1995 (as amended, supplemented, restated or otherwise modified
from time to time, the "Loan Agreement"), a Security Agreement of
even date herewith (the "Agreement", terms defined therein and
not otherwise defined herein being used herein as therein
defined) in favor of Assignee; and
WHEREAS, pursuant to the Agreement, Assignor has
assigned to Assignee and granted to Assignee a security interest
in, and mortgage on, all right, title and interest of Assignor in
and to the Trademarks, together with the goodwill of the business
symbolized by the Trademarks and the applications and
registrations thereof, and all proceeds thereof, including,
without limitation, any and all causes of action which may exist
by reason of infringement thereof (the "Intellectual Property
Collateral"), to secure the payment, performance and observance
of the Secured Obligations;
NOW, THEREFORE, for good and valuable consideration,
receipt of which is hereby acknowledged, Assignor does hereby
further assign unto Assignee and grant to Assignee a security
interest in, and mortgage on, the Intellectual Property
Collateral to secure the prompt payment, performance and
observance of the Secured Obligations.
Assignor does hereby further acknowledge and affirm
that the rights and remedies of Assignee with respect to the
assignment of, security interest in and mortgage on the
Intellectual Property Collateral made and granted hereby are more
fully set forth in the Agreement, the terms and provisions of
which are hereby incorporated herein by reference as if fully set
forth herein.
Assignee's address is 1821 West Iomega Way, Roy, Utah
84067.
IN WITNESS WHEREOF, Assignor has caused this Assignment
to be duly executed by its officer thereunto duly authorized as
of the 5th day of July, 1995.
IOMEGA CORPORATION
By: _______________________________
Name: _________________________
Title: ________________________
SCHEDULE 1 TO ASSIGNMENT FOR SECURITY
TRADEMARKS
Trademark Reg. Date Reg. No.
EXHIBIT 10.33(c)
WELLS FARGO BANK CONTINUING COMMERCIAL LETTER OF CREDIT AGREEMENT
To: WELLS FARGO BANK, NATIONAL ASSOCIATION
In consideration of Wells Fargo Bank, National Association, at the
request and for the account of the undersigned Applicant, and, unless
otherwise specifically provided in any Loan Document, at the option of Wells
Fargo, issuing commercial letters of credit pursuant to applications for
commercial letters of credit and the terms and conditions of this Agreement,
Applicant hereby agrees that the terms and conditions hereinafter set forth
shall apply to each such Application, to the Credit issued by Wells Fargo
pursuant to such Application, to the issuance of each such Credit, and to
transactions under each such Application, each such Credit and this Agreement.
SECTION 1. DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth after each term: "Acceptance" shall mean
any time draft drawn or made, or purported to be drawn or made, under any
Credit, and accepted for payment by Wells Fargo or by any other bank specified
by Wells Fargo to accept such time draft for payment. "Acceptance Fee" shall
mean the fee, computed at the acceptance fee rate specified by Wells Fargo,
charged by Wells Fargo when each Acceptance is created on the amount of each
Acceptance for the time period each such Acceptance is to be outstanding.
"Agreement" shall mean this Continuing Commercial Letter of Credit Agreement
as it may be revised or amended from time to time pursuant to its terms.
"Applicant" shall mean the person or persons or the entity or entities
signing this Agreement. "Application" shall mean Wells Fargo's printed form
titled "Application for Commercial Letter of Credit" or any other form
acceptable to Wells Fargo on which Applicant applies for the issuance by Wells
Fargo of a Credit and/or an application for amendment of a Credit or any
combination of such applications, as the context may require. "Beneficiary"
shall mean any person or entity named on an Application as the beneficiary or
any person or entity who is the transferee of any such beneficiary.
"Collateral" shall mean the Property, together with the proceeds of such
Property, securing any or all the obligations and liabilities of Applicant to
Wells Fargo at any time existing under or in connection with any Letter of
Credit Document and/or any Loan Document. "Credit" shall mean an instrument
or document titled "Irrevocable Commercial Letter of Credit" or "Irrevocable
Documentary Credit", or any instrument or document whatever it is titled or
whether or not it is titled functioning as a commercial letter of credit,
issued under or pursuant to an Application, and all renewals, extensions and
amendments of such instrument or document. "Deferred Payment Fee" shall mean
the fee, computed at the deferred payment fee rate specified by Wells Fargo,
charged by Wells Fargo on the amount of each Demand presented
under a Credit providing for deferred payment of Demands which are not time
drafts, which fee will be payable when the Demand is determined by Wells
Fargo to comply with such Credit and cover the time period from the date of
such determination to the date such Demand is payable. "Delivery
Authorization" shall mean any agreement, undertaking, guarantee, indemnity,
release, bond, letter, document or authorization given or executed by Wells
Fargo, at its option in each case, at the request of Applicant or Applicant's
agent to or in favor of a carrier or other person or entity in order to
permit delivery to Applicant or Applicant's agent of Property referred to in
or shipped under any Credit. "Demand" shall mean any sight or time draft
(before it is accepted), electronic or telegraphic transmission or other
written demand drawn or made, or purported to be drawn or made, under or in
connection with any Credit. "Document" shall mean any instrument, statement,
certificate or other document, including, but not limited to, shipping
documents, warehouse receipts and policies or certificates of insurance,
referred to in or related to any Credit or required by any Credit to be
presented with any Demand. "Dollars" shall mean the lawful currency at any
time for the payment of public or private debts in the United States of
America. "Event of Default" shall mean any of the events set forth in
Section 14 of this Agreement. "Expiration Date" shall mean the date any
Credit expires. "Guarantor" shall mean any person or entity guaranteeing the
payment and/or performance of any or all the obligations of Applicant to
Wells Fargo under or in connection with any Letter of Credit Document and/or
any Loan Document. "Holding Company" shall mean any company or other entity
controlling Wells Fargo. "Issuance Fee" shall mean the fee, computed at the
issuance fee rate specified by Wells Fargo, charged by Wells Fargo on the
amount of each Credit and on the amount of each increase in a Credit at the
time each Credit is issued and the time the amount of each Credit is
increased. "Letter of Credit Document" shall mean this Agreement, each
Application, each Credit, each Demand and each Acceptance. "Loan Document"
shall mean each and any promissory note, credit agreement, loan agreement,
security agreement, pledge agreement, guarantee or other agreement or writing
signed by Wells Fargo and/or Applicant and/or any Guarantor relating to,
evidencing or guaranteeing any loan or other extension of credit made by
Wells Fargo to Applicant under or in connection with any Letter of Credit
Document. The foregoing includes, without limitation, the Loan Agreement and
Security Agreement of even date. "Negotiation Fee" shall mean the fee,
computed at the negotiation fee rate specified by Wells Fargo, charged by
Wells Fargo on the amount of each Demand paid or accepted by Wells Fargo when
each Demand is paid or accepted. "Payment Office" shall mean such office of
Wells Fargo specified by Wells Fargo as the office where reimbursements and
other payments under or in connection with any Letter of Credit Document
are to be made by Applicant. "Prime Rate" shall mean the rate of interest
most recently announced at Wells Fargo's principal office in San Francisco,
California as its Prime Rate, with the understanding that the Prime Rate is
one of Wells Fargo's base rates and serves as the basis upon which effective
rates of interest are calculated for those loans making reference thereto,
and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate. "Property"
shall mean all forms of property, whether tangible or intangible, real,
personal or mixed. "Rate of Exchange" shall mean Wells Fargo's then current
selling rate of exchange in San Francisco, California for sales of the
currency of payment of any Demand or Acceptance, or of any fees or expenses
or other amounts payable under this Agreement, for cable transfer to the
country of which such currency is the legal tender. "UCP" shall mean the
Uniform Customs and Practice for Documentary Credits, an International Chamber
of Commerce publication, or any substitution therefor or replacement thereof.
"Unpaid and Undrawn Balance" shall mean at any time and from time to time the
entire amount which has not been paid by Wells Fargo under all the Credits
issued for the account of Applicant, including, but not limited to, the amount
of each Demand and Acceptance on which Wells Fargo has not yet effected
payment as well as the amount undrawn under all such Credits. "Wells Fargo"
shall mean Wells Fargo Bank, National Association, a national banking
association.
SECTION 2. HONORING DEMANDS AND DOCUMENTS. Applicant agrees that Wells
Fargo may receive, accept and honor, as complying with the terms of any
Credit, any Demand and any Documents accompanying such Demand; provided,
however, that (a) such Demand and accompanying Documents appear on their face
to comply substantially with the provisions of such Credit, and (b) such
Demand and accompanying Documents are, or appear on their face to be,signed
or issued by (I) a person or entity authorized under such Credit to draw,
sign or issue such Demand and such accompanying Documents, or (ii) an
administrator, executor, trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, liquidator, receiver or other legal
representative or successor in interest by operation of law of any such
person or entity. Notwithstanding the preceding sentence, Applicant agrees
that (x) in consideration for Wells Fargo giving or executing a Delivery
Authorization at its option at any time, Wells Fargo may, in its sole
discretion, receive, accept and honor, as complying with the terms of the
Credit related to such Delivery Authorization, any Demand and any Documents
accompanying such Demand which are presented under such Credit and relate to
any Property covered by such Delivery Authorization even if such Demand or
any such Document does not conform to the requirements of such Credit or is
not otherwise in order or any other term or condition of such Credit has not
been complied with; and (y) in consideration for Wells Fargo issuing a Credit
which, at the request of Applicant and at the option of Wells Fargo, contains
provisions that (I) any Demand made under such Credit will be honored only if
and when Wells Fargo receives written notice that the Property referred to
in the Documents accompanying such Demand has been inspected and passed
and/or released and/or approved by the United States Food and Drug
Administration or by any other state or federal government agency or
regulatory authority or by any other party or entity, and (ii) the Documents
accompanying such Demand are to be released by Wells Fargo to Applicant or
Applicant's agent for the purpose of arranging such inspection against
Applicant or Applicant's agent signing a receipt for such Documents, Wells
Fargo may in its sole discretion honor and accept such Demand and such
Documents as complying with the terms of such Credit without having received
written notice that such Property has been inspected and passed and/or released
and/or approved as aforesaid (1) if such Demand and accompanying Documents
appear on their face to comply substantially with all other terms of such
Credit, or Applicant has waived any failure of such Demand or Documents to
comply with the terms of such Credit, and (11) if Applicant or Applicant's
agent does not promptly (A) sign such a receipt which is in form and substance
acceptable to Wells Fargo and (B) comply with all the terms of such receipt
and (C) arrange such inspection of such Property.
SECTION 3. REIMBURSEMENT FOR PAYMENT OF DEMANDS AND ACCEPTANCES.
Applicant agrees to reimburse Wells Fargo for all amounts paid by Wells Fargo
on each Demand and on each Acceptance, including, but not limited to, all
amounts paid by Wells Fargo on each Demand and on each Acceptance to any
paying, accepting, negotiating or other bank. If in connection with the
issuance of any Credit, Wells Fargo agrees to pay any other bank the amount
of any payment or negotiation made by such other bank under such Credit upon
receipt by Wells Fargo of a cable, telex or other written telecommunication
advising Wells Fargo of such payment or negotiation, or authorizes any other
bank to debit Wells Fargo's account for the amount of such payment or
negotiation, Applicant agrees to reimburse Wells Fargo for all such amounts
paid by Wells Fargo, or debited to Wells Fargo's account with such other bank,
even if any Demand or Document specified in such Credit fails to arrive in
whole or in part or if, upon the arrival of any such Demand or Document, the
terms of such Credit have not been complied with or such Demand or Document
does not conform to the requirements of such Credit or is not otherwise in
order.
SECTION 4. FEES AND EXPENSES. Applicant agrees to pay to Wells Fargo
(a) all Issuance Fees, Negotiation Fees, Acceptance Fees, Deferred Payment
Fees, cable fees, amendment fees, non-usance fees and cancellation fees of,
and all out-of-pocket expenses incurred by, Wells Fargo under or in connection
with any Letter of Credit Document, and (b) all fees and charges of banks
other than Wells Fargo under or in connection with any Letter of Credit
Document if any Application (i) does not indicate who will pay such fees and
charges, (ii) indicates that such fees and charges are to be paid by
Applicant, or (iii) indicates that such fees and charges are to be paid
by the Beneficiary and the Beneficiary does not, for any reason whatsoever,
pay such fees or charges. There shall be no refund of any portion of any
Issuance Fee in the event any Credit is used, reduced, amended, modified or
terminated before its Expiration Date; and there shall be no refund of any
portion of any Acceptance Fee or Deferred Payment Fee if any Acceptance or
deferred payment Demand is reimbursed by Applicant before it matures.
SECTION 5. DEFAULT INTEREST. Unless otherwise specified in any Loan
Document or on an Application and agreed to by Wells Fargo, all amounts to be
reimbursed by Applicant to Wells Fargo pursuant to Section 3 of this Agreement
and all fees and expenses to be paid by Applicant to Wells Fargo pursuant to
Section 4 of this Agreement, and all other amounts due from Applicant to Wells
Fargo under or in connection with the Letter of Credit Documents, will bear
interest (to the extent permitted by law), payable on demand, from the date
Wells Fargo paid the amounts to be reimbursed or the date such fees, expenses
and other amounts were due until such amounts are reimbursed in full or such
fees, expenses and other amounts are paid in full, at that interest rate per
annum, calculated for the actual days elapsed in a year of 360 days, which is
two percent (2%) above the Prime Rate in effect from time to time.
SECTION 6. TIME AND METHOD OF REIMBURSEMENT AND PAYMENT. Unless otherwise
specified in this Section 6, in any Loan Document or on an Application and
agreed to by Wells Fargo, all amounts to be reimbursed by Applicant to Wells
Fargo pursuant to Section 3 of this Agreement, all fees and expenses to be
paid by Applicant to Wells Fargo pursuant to Section 4 of this Agreement, all
interest due to Wells Fargo pursuant to Section 5 of this Agreement, and all
other amounts due to Wells Fargo from Applicant under or in connection with
the Letter of Credit Documents will be reimbursed or paid at the Payment
Office in Dollars in immediately available funds without setoff or
counterclaim on demand or, at Wells Fargo's option, by Wells Fargo debiting
any of Applicant's accounts with Wells Fargo without presentment, protest,
demand for reimbursement or payment, notice of dishonor or any other notice
whatsoever, all of which are hereby expressly waived by Applicant. Such
debit will be made (a) at the time each Demand is paid by Wells Fargo or on
the maturity of each Acceptance or, if earlier, at the time each amount
is paid by Wells Fargo to any paying, accepting, negotiating or other bank,
(b) at the time each fee and expense referenced in Section 4 of this Agreement
is to be paid, (c) at the time interest is due to Wells Fargo pursuant to
Section 5 of this Agreement, and (d) at the time each other amount is due
under or in connection with the Letter of Credit Documents. If any Demand or
Acceptance or any fee, expense, interest or other amount payable under or in
connection with the Letter of Credit Documents is payable in a currency other
than Dollars, Applicant agrees to reimburse Wells Fargo for all amounts paid
by Wells Fargo on such Demand and on such Acceptance, and/or to pay Wells
Fargo all such fees, expenses, interest and other amounts, in one of the
three following ways, as determined by Wells Fargo in its sole discretion in
each case, (i) at such place as Wells Fargo shall direct, in such other
currency, or (ii) at the Payment Office in the Dollar equivalent of
the amount of such other currency calculated at the Rate of Exchange on the
date determined by Wells Fargo in its sole discretion, or (iii) at the
Payment Office in the Dollar equivalent, as determined by Wells Fargo (which
determination shall be deemed correct absent manifest error), of such fees,
expenses, interest or other amounts or of the actual cost to Wells Fargo of
paying such Demand or Acceptance.
SECTION 7. AGREEMENTS OF APPLICANT. Applicant agrees that (a) unless
otherwise specifically provided in any Loan Document, Wells Fargo shall not
be obligated at any time to issue any Credit for the account of Applicant;
(b) unless otherwise specifically provided in any Loan Document, if any Credit
is issued by Wells Fargo for the account of Applicant, Wells Fargo shall
not be obligated to issue any further Credit for the account of Applicant or to
make other extensions of credit to Applicant or in any other manner to extend
any financial consideration to Applicant; (c) Wells Fargo has not given
Applicant any legal or other advice with regard to any Letter of Credit
Document or Loan Document; (d) if Wells Fargo at any time discusses with
Applicant the wording for any Credit, any such discussion will not constitute
legal or other advice by Wells Fargo or any representation or warranty of
Wells Fargo that any wording or Credit will satisfy Applicant's needs; (a)
Applicant Is responsible for the wording of each Credit, including, but not
limited to, any drawing conditions, and will not rely on Wells Fargo in any
way in connection with the wording of any Credit or the structuring of any
transaction related to any Credit; (f) Applicant and not Wells Fargo is
responsible for entering into the contracts relating to the Credits between
Applicant and the Beneficiaries and for causing Credits to be issued; (g)
Wells Fargo may, as Wells Fargo deems appropriate, modify or alter and use in
any Credit the terminology contained on the Application for such Credit; (h)
unless the Application for a Credit specifies whether the Documents to be
presented with a Demand under such Credit must be sent to Wells Fargo in one
parcel or in two parcels or may be sent to Wells Fargo in any number of
parcels, Wells Fargo may, if it so desires, make such determination and
specify in the Credit whether such Documents must be sent in one parcel or
two parcels or may be sent in any number of parcels; (i) Wells Fargo shall
not be deemed the agent of Applicant, any Beneficiary or any other user of
any Credit, and neither Applicant, nor any Beneficiary nor any other user of
any Credit shall be deemed an agent of Wells Fargo; (j) Applicant will
promptly examine all Documents and each Credit if and when they are delivered
to Applicant by Wells Fargo and, in the event of any claim of noncompliance
of any Documents or any Credit with Applicant's instructions or any
Application, or in the event of any other irregularity, will promptly notify
Wells Fargo in writing of such noncompliance or irregularity, Applicant being
conclusively deemed to have waived an such claim of noncompliance or
irregularity unless such notice is promptly given; (k) all directions and
correspondence relating to any Letter of Credit Document are to be sent at
the risk of Applicant; (1) if any Credit has a provision concerning the
automatic extension of the Expiration Date of such Credit, Wells Fargo may,
at its sole option , give notice of nonrenewal of such Credit and if Applicant
does not at any time want such Credit to be renewed Applicant will so notify
Wells Fargo at least fifteen (15) calendar days before Wells Fargo is to
notify the Beneficiary of such Credit or any advising bank of such nonrenewal
pursuant to the terms of such Credit; (m) Applicant will not seek to obtain,
apply for, or acquiesce in any temporary restraining order, restraining order,
preliminary injunction, permanent injunction or any type of pretrial or
permanent injunctive relief or any similar relief, however named, restraining,
prohibiting or enjoining Wells Fargo, any of Wells Fargo's correspondents or
any advising, confirming, negotiating, paying, accepting or other bank from
paying or negotiating any Demand or creating or paying any Acceptance or
honoring any other obligation under or in connection with any Credit; and (n)
except for any of Applicant's obligations which are specifically affected by
the actions referred to in subsection (vi) of this Section 7(n), Applicant's
obligations under or in connection with each Letter of Credit Document
and each Loan Document shall be absolute, unconditional and irrevocable, and
shall be performed strictly in accordance with the terms of each such Letter
of Credit Document and each such Loan Document under all circumstances
whatsoever, including, but not limited to, the following circumstances and
the circumstances listed in Section 13(b) through (bb) of this Agreement: (i)
any lack of validity or enforceability of any Letter of Credit Document, any
Loan Document, any Document or any agreement relating to any Letter of Credit
Document, any Loan Document or any Document; (ii) any amendment of or waiver
relating to, or any consent to or departure from, any Letter of Credit
Document, any Loan Document or any Document; (iii) any release or substitution
at any time of any Property which may be held as Collateral; (iv) the
existence of any claim, set-off, defense or other right which Applicant may
have at any time against Wells Fargo or any Beneficiary (or any person or
entity for whom any Beneficiary may be acting) or any other person or entity,
whether under or in connection with any Letter of Credit Document, any Loan
Document, any Document or any Property referred to in or related to any
Letter of Credit Document, any Loan Document or any Document or under or in
connection with any unrelated transaction; (v) any breach of contract or
other dispute between or among any two or more of Applicant, Wells Fargo,
any Beneficiary, any transferee of any Beneficiary, any person or entity for
whom any Beneficiary or any transferee of any Beneficiary may be acting, or
any other person or entity; or (vi) any delay, extension of time, renewal,
compromise or other indulgence granted or agreed to by Wells Fargo with or
without notice to, or approval by, Applicant in respect of any of Applicant's
indebtedness or other obligations to Wells Fargo under or in connection with
any Letter of Credit Document or any Loan Document.
SECTION 8. COMPLIANCE WITH LAWS AND REGULATIONS. Applicant represents
and warrants to Wells Fargo that no Application, Credit or transaction under
any Application and/or any Credit will contravene any law or regulation of
the government of the United States or any state thereof. Applicant agrees
(a) to comply with all federal, state and foreign exchange regulations
and other government laws and regulations now or hereafter applicable to any
Letter of Credit Document, to any payments under or in connection with any
Letter of Credit Document, to each transaction under or in connection with
any Letter of Credit Document, or to the import, export, shipping or financing
of the Property referred to in or shipped under or in connection with any
Credit, and (b) to reimburse Wells Fargo for such amounts as Wells Fargo may
be required to expend as a result of such laws or regulations, any change in
such laws or regulations or any change in the interpretation of such laws or
regulations by any court or administrative or government authority charged
with the administration of such laws or regulations.
SECTION 9. TAXES, RESERVES AND CAPITAL ADEQUACY REQUIREMENTS. In addition
to, and notwithstanding, any other provision of any Letter of Credit Document
or any Loan Document, in the event that any law, treaty, rule, regulation,
guideline, request, order, directive or determination (whether or not having
the force of law) of or from any government authority, including, but not
limited to, any court, central bank or government regulatory authority, or any
change therein or in the interpretation or application thereof, (a) does or
shall subject Wells Fargo to any tax of any kind whatsoever with respect to
the Letter of Credit Documents or the Loan Documents, or change the basis of
taxation of payments to Wells Fargo of any amount payable thereunder (except
for changes in the rate of tax on the net income of Wells Fargo); or (b) does
or shall impose, modify or hold applicable any reserve, special deposit,
assessment, compulsory loan, Federal Deposit Insurance Corporation insurance
or similar requirement against assets held by, deposits or other liabilities
in or for the account of, advances or loans by, other credit extended by or
any other acquisition of funds by, any office of Wells Fargo; or (c) does or
shall impose, modify or hold applicable any capital adequacy requirements,
(whether or not having the force of law); or (d) does or shall impose on Wells
Fargo any other condition; and the result of any of the foregoing is (i) to
increase the cost to Wells Fargo of issuing or maintaining any Credit or of
performing any transaction under any Letter of Credit Document or any Loan
Document, or (ii) to reduce any amount receivable by Wells Fargo under any
Letter of Credit Document or any Loan Document, or (iii) to reduce the rate
of return on the capital of Wells Fargo or the Holding Company to a level
below that which Wells Fargo or the Holding Company could have achieved but
for any imposition, modification or application of any capital adequacy
requirement (taking into consideration the policy of Wells Fargo or the
Holding Company, as the case may be, with respect to capital adequacy), and
any such increase or reduction is material (as determined by Wells Fargo
in its sole discretion); then, in any such case, Applicant agrees to pay to
Wells Fargo such amount or amounts as may be necessary to compensate Wells
Fargo or the Holding Company for (1) any such additional cost, (2) any
reduction in the amount received by Wells Fargo under any Letter of Credit
Document or any Loan Document, or (3) to the extent allocable (as determined
by Wells Fargo in its sole discretion) to any Letter of Credit Document or
any Loan Document, any reduction in the rate of return on the capital of Wells
Fargo or the Holding Company.
SECTION 10. COLLATERAL. In addition to, and not in substitution for, any
Property delivered, conveyed, transferred or assigned to Wells Fargo under
any Loan Document as security for any or all of the obligations and
liabilities of Applicant to Wells Fargo at any time existing under or in
connection with any Letter of Credit Document or any Loan Document', Applicant
grants to Wells Fargo a security interest in and to the following Collateral,
whether or not any such Collateral is in Wells Fargo's possession or control
or in the possession or control of Wells Fargo's agents or correspondents or
in transit to, or set apart for, Wells Fargo or any of Wells Fargo's agents or
correspondents: (a) with respect to each Credit and until such time as all the
obligations and liabilities of Applicant to Wells Fargo at any time existing
under or in connection with each Credit and each Letter of Credit Document
and each Loan Document related to such Credit have been fully paid and
discharged, all as security for such obligations and liabilities, (i) all
Property referred to in each Credit or at any time shipped under or pursuant
to each Credit or in any way related to each Credit or to any Demand made or
Acceptance created under each Credit, whether or not Wells Fargo receives the
Documents covering such Property or releases such Documents to Applicant on
trust or bailee receipt or otherwise, (ii) all Documents accompanying any
Demand made under each Credit, and (iii) all the proceeds of the Property and
the Documents referred to in subsections (i) and (ii) of this Section 10(a);
and (b) with respect to all the Credits and until such time as all the
obligations and liabilities of Applicant to Wells Fargo at any time existing
under or connection with each Letter of Credit Document and each Loan
Document have been fully paid and discharged, all as security for such
obligations and liabilities, (i) all the property, claims, demands, right,
title and interest of Applicant in and to the balance of every deposit account
of Applicant with Wells Fargo now or at any time hereafter existing, and all
evidences of such deposit accounts, (ii) all Property belonging to Applicant
or in which Applicant may have an interest, now or at any time hereafter
delivered, conveyed, assigned, pledged or paid to Wells Fargo or its agents or
correspondents in any manner whatsoever, whether as security or for
safekeeping or otherwise, including, but not limited to, any items received
for collection or transmission, and the proceeds of such items, whether or
not such Property is in whole or in part released to Applicant on trust or
bailee receipt or otherwise, and (iii) where more than one person or entity
is an Applicant, all right, title and interest of each Applicant in and to
all the Property which any Applicant may now or hereafter obtain as security
for the obligations of the other Applicants or Applicant to such Applicant
arising under or in connection with the transaction to which any Credit
relates. Further, in addition to, and not in substitution for, any Property
delivered, conveyed, transferred or assigned to Wells Fargo under any Loan
Document as security for any or all of the obligations and liabilities of
Applicant to Wells Fargo at any time existing under or in connection with any
Letter of Credit Document or any Loan Document, Applicant agrees to deliver,
convey, transfer and assign to Wells Fargo, on demand, as security, Property
of a value and character satisfactory to Wells Fargo (x) if Wells Fargo at
any time feels insecure about Applicant's ability or willingness to repay any
amounts which Wells Fargo has paid or may pay in the future on any Demand or
Acceptance or in honoring any other obligation of Wells Fargo under or in
connection with any Credit, or (y) without limiting the generality of the
foregoing subsection (x), if any temporary restraining order, restraining
order, preliminary injunction, permanent injunction or any type of pretrial
or permanent injunctive relief or any similar relief, however named, is
obtained restraining, prohibiting or enjoining Wells Fargo, any of Wells
Fargo's correspondents or any advising, confirming, negotiating, paying or
other bank from paying or negotiating any Demand or creating or paying any
Acceptance or honoring any other obligation under or in connection with any
Credit. Applicant agrees that the receipt by Wells Fargo's agents or
correspondents at any time of any kind of security, including, but not limited
to, cash, shall not be deemed a waiver of any of Wells Fargo's rights or
powers under this Agreement. Applicant agrees to sign and deliver to Wells
Fargo on demand of Wells Fargo all such deeds of trust, security agreements,
financing statements and other documents as Wells Fargo shall at any time
request which are necessary or desirable (in the sole opinion of Wells Fargo)
to grant to Wells Fargo an effective and perfected security interest in
and to any or all of the Collateral. Applicant agrees to pay all filing and
recording fees related to the perfection of any security interest granted to
Wells Fargo in accordance with this Section 10. Applicant hereby agrees that
any or all of the Collateral may be held and disposed of by Wells Fargo as
provided in this Agreement. Upon any transfer, sale, delivery, surrender or
endorsement of any Document or Property which is or was part of the
Collateral, Applicant will indemnify and hold Wells Fargo and Wells Fargo's
agents and correspondents harmless from and against each and every claim,
demand, action or suit which may arise against Wells Fargo or any such agent
or correspondent by reason of such transfer, sale, delivery, surrender or
endorsement.
SECTION 11. LICENSES AND INSURANCE FOR PROPERTY. Applicant agrees (a) to
procure promptly any necessary import, export or other licenses for the
import, export or shipping of the Property referred to in or shipped under,
pursuant to or in connection with any Credit; (b) to furnish such instruments,
certificates and other documents as Wells Fargo may at any time require with
respect to such import, export or other licenses and with respect to the
compliance by Applicant with all federal, state and foreign government laws,
regulations, guidelines, requests, directives and/or determinations with
regard to the import, export, shipping and financing of the Property referred
to in or shipped under, pursuant to or in connection with any Credit; (c) to
keep such Property adequately covered by insurance in amounts, against risks
and with companies satisfactory to Wells Fargo; (d) to assign the policies
or certificates of insurance to Wells Fargo, or to make the loss or adjustment,
if any, payable to Wells Fargo, at its option; and (e) to furnish to Wells
Fargo, upon demand of Wells Fargo, evidence of such insurance and/or evidence of
acceptance by the insurers of the assignment of such policies or certificates of
insurance. Should the insurance on any Property referred to in or shipped
under, pursuant to or in connection with any Credit for any reason be
unsatisfactory to Wells Fargo, Wells Fargo may, at Applicant's expense,
obtain insurance satisfactory to Wells Fargo.
SECTION 12. INDEMNIFICATION. Except to the extent caused by Wells Fargo's
lack of good faith, and notwithstanding any other provision of this Agreement,
Applicant agrees to reimburse and indemnify Wells Fargo for (a) all amounts
paid by Wells Fargo to any person or entity under or in connection with any
Delivery Authorization, and (b) all damages, losses, liabilities, actions,
claims, suits, penalties, judgments, obligations, costs or expenses, of any
kind whatsoever and howsoever caused, including, but not limited to,
attorneys' fees and interest, paid, suffered or incurred by, or imposed upon,
Wells Fargo directly or indirectly arising out of or in connection with (i)
any Letter of Credit Document, any Loan Document, any Document or any
Property referred to in or related to any Credit; (ii) the issuance of any
Credit; (iii) the transfer of any Credit; (iv) any Delivery Authorization;
(v) the collection of any amounts owed to Wells Fargo by Applicant under or
in connection with any Letter of Credit Document or any Loan Document;
(vi) the foreclosure against, or other enforcement of, any Collateral; (vii) the
protection, exercise or enforcement of Wells Fargo's rights and remedies
under or in connection with any Letter of Credit Document or any Loan
Document; (viii) any court decrees or orders, including, but not limited to,
temporary restraining orders, restraining orders, preliminary injunctions,
permanent injunctions or any type of pretrial or permanent injunctive relief
or any similar relief, however named, restraining, prohibiting or enjoining
or seeking to restrain, prohibit or enjoin Wells Fargo, any of Wells Fargo's
correspondents or any advising, confirming, negotiating, paying, accepting
or other bank from paying or negotiating any Demand or creating or paying any
Acceptance or honoring any other obligation under or in connection with any
Credit; or (ix) any Credit being governed by laws or rules other than the UCP
in effect on the date such Credit is issued. The indemnity provided in this
Section 12 will survive the termination of this Agreement and the expiration
or cancellation of any or all the Credits.
SECTION 13. LIMITATION OF LIABILITY. Notwithstanding any other provision
of this Agreement, neither Wells Fargo nor any of its agents or correspondents
will have any liability to Applicant for any action, neglect or omission, if
done in good faith, under or in connection with any Letter of Credit Document,
Loan Document or Credit, including, but not limited to, any issuance or
amendment of any Credit, the failure to issue or amend any Credit, or the
honoring or dishonoring of any Demand under any Credit, and such good faith
action, neglect or omission will bind the Applicant. Notwithstanding any
other provision of any Letter of Credit Document, in no event shall Wells
Fargo, its officers or directors be liable or responsible, regardless of
whether any claim is based on contract or tort, for (a) any special,
consequential, indirect or incidental damages, including, but not limited to,
lost profits, arising out of or in connection with the issuance of any Credit
or any action taken or not taken by Wells Fargo in connection with any Letter
of Credit Document, any Loan Document or any Document or Property referred to
in or related to any Credit; (b) the honoring of any Demand or Acceptance in
accordance with any order or directive of any court or government or
regulatory body or entity requiring such honor despite any temporary
restraining order, restraining order, preliminary injunction, permanent
injunction or any type of pretrial or permanent injunctive relief or any
similar relief, however named, restraining, prohibiting or enjoining such
honor; (c) the use which may be made of any Credit; (d) the validity of any
purported transfer of any Credit or the identity of any purported transferee
of any Beneficiary; (e) any acts or omissions of any Beneficiary or any other
user of any Credit; (f) the existence, character, quality, quantity, condition,
packing, value or delivery of the Property referred to in or related to any
Credit or purporting to be represented by any Document; (g) any difference in
the character, quality, quantity, condition or value of the Property referred
to in or related to any Credit or purporting to be represented by any
Document from that expressed in any Credit or any Document; (h) the time,
place, manner or order in which shipment is made of, or the failure or
omission to ship, or the partial or incomplete shipment of, any or all of the
Property referred to in or related to any Credit or any Document; (i) the
form, validity, sufficiency, correctness, genuineness or legal effect of any
Demand or any Document, or of any signatures or endorsements on any Demand or
Document, even if any Demand or any Document should in fact prove to be in
any or all respects invalid, insufficient, fraudulent or forged; (j) any
deviation from instructions, delay, default or fraud by the shipper or anyone
else in connection with any Document or any Property referred to in or related
to any Credit or the shipping of any such Property; (k) any delay in giving
or failure to give any notice, including, but not limited to, notice of
arrival of any Property referred to in or related to any Credit or any
Document; (l) any delay in arrival or failure to arrive of any Property
referred to in or related to any Credit or any Document; (m) any breach of
contract between the shippers or vendors and the consignees or buyers; (n)
the character, adequacy, validity or genuineness of any insurance or the
solvency or responsibility of any insurer of any risk; (o) the solvency of
any person or entity issuing any Document or the responsibility of any such
person or entity for, or the relationship of any such person or entity to,
any Property referred to in or related to any Document; (p) payment or
acceptance by Wells Fargo of any Demand when the Demand and any Documents
which accompany such Demand appear on their face to comply substantially with
the terms of the Credit to which they relate or dishonor by Wells Fargo of any
Demand when the Demand and any Documents which accompany such Demand do not
strictly comply on their face with the terms of the Credit to which they
relate; (q) the failure of any Demand or Document to bear any reference or
adequate reference to the Credit to which it relates; (r) the failure of any
Document to accompany any Demand; (s) the failure of any person or entity
to note the amount of any Demand on the Credit to which it relates or on any
Document; (t) the failure of any person or entity to surrender or take up any
Credit; (u) the failure of any Beneficiary to comply with the terms of any
Credit or to meet the obligations of such Beneficiary to Applicant; (v) the
failure of any person or entity to send or forward Documents if and as
required by the terms of any Credit; (w) any errors, inaccuracies, omissions,
interruptions or delays in transmission or delivery of any messages,
directions or correspondence by mail, cable, telegraph, wireless or otherwise,
whether or not they are in cipher; (x) any notice of nonrenewal of a Credit
sent by Wells Fargo not being received on time or at any time by the
Beneficiary of such Credit; (y) any inaccuracies in the translation of any
messages, directions or correspondence; (z) any Beneficiary's use of the
proceeds of any Demand or Acceptance; (aa) any Beneficiary's failure to repay
to Wells Fargo or Applicant the proceeds of any Demand or Acceptance if the
terms of any Credit require such repayment; (bb) any act, error, neglect,
default, negligence, gross negligence, omission, willful misconduct, lack of
good faith, insolvency or failure in business of any of Wells Fargo's
agents or correspondents or of any advising, confirming, negotiating, paying,
accepting or other bank. The occurrence of any one or more of the
contingencies referred to in the preceding sentence shall not affect, impair
or prevent the vesting of any of Wells Fargo's rights or powers under this
Agreement or any Loan Document or Applicant's obligation to make reimbursement
or payment to Wells Fargo under this Agreement or any Loan Document. The
provisions of this Section 13 will survive the termination of this Agreement
and any Loan Documents and the expiration or cancellation of any or all the
Credits.
SECTION 14. EVENTS OF DEFAULT. Applicant agrees that each of the
following shall constitute an Event of Default under this Agreement: (a)
Applicant's or any Guarantor's failure to pay any principal, interest, fee or
other amount when due under or in connection with any Letter of Credit
Document; (b) the occurrence and continuance of any default or defined event
of default under any Loan Document or any other agreement, document or
instrument signed or made by Applicant or any Guarantor in favor of Wells
Fargo; (c) Applicant's or any Guarantor's failure to perform or observe any
term, covenant or agreement contained in this Agreement (other than those
referred to in subsections (a), (b) and (c) of this Section 14); (d) any
representation, warranty or certification made or furnished by Applicant or
any Guarantor under or in connection with any Letter of Credit Document, or as
an inducement to Wells Fargo to enter into any Letter of Credit Document,
shall be materially false, incorrect or incomplete when made; (e) any
guarantee of, or any security covering, any indebtedness of Applicant to
Wells Fargo arising under or in connection with any Letter of Credit Document
or any Loan Document fails to be in full force and effect at any time;
SECTION 15. REMEDIES. Upon the occurrence and continuance of any Event of
Default, Wells Fargo may, as it may at any time during the term of this
Agreement, exercise its rights under Section 7 of this Agreement and refuse
to issue any Credit or Credits for the account of Applicant, and all amounts
paid by Wells Fargo on any Demand or Acceptance which have not previously
been repaid to Wells Fargo, together with all interest on such amounts, and
the Unpaid and Undrawn Balance, if any, shall automatically be owing by
Applicant to Wells Fargo and shall be due and payable by Applicant on demand.
Applicant agrees that upon payment of the Unpaid and Undrawn Balance to Wells
Fargo Applicant shall have no further legal or equitable interest therein,
and that Wells Fargo will not be required to segregate on its books or records
the Unpaid and Undrawn Balance paid by Applicant. After Wells Fargo receives
the Unpaid and Undrawn Balance, Wells Fargo agrees to pay to Applicant, upon
termination of all of Wells Fargo's liability under all the Credits, Demands
and Acceptances, a sum equal to the amount which has not been drawn under all
the Credits less all amounts due and owing to Wells Fargo from Applicant under
or in connection with the Letter of Credit Documents and the Loan Documents.
Further, upon the occurrence and continuance of any Event of Default, Wells
Fargo may sell immediately, without demand for payment, advertisement or
notice to Applicant, all of which are hereby expressly waived, any and all
Collateral, received or to be received, at private sale or public auction or at
brokers' board or upon any exchange or otherwise, at Wells Fargo's option, in
such parcel or parcels, at such time or times, at such place or places, for
such price or prices and upon such terms and conditions as Wells Fargo may
deem proper, and Wells Fargo may apply the net proceeds of such sale or sales,
together with any deposit balances and any sums credited by or due from Wells
Fargo to Applicant in a general account or otherwise, to the payment of any and
all obligations and liabilities due to Wells Fargo by Applicant under or in
connection with the Letter of Credit Documents and the Loan Documents, all
without prejudice to the rights of Wells Fargo against Applicant with respect
to any and all such obligations and liabilities which may be or remain unpaid.
If any sale pursuant to the preceding sentence be at brokers' board or at
public auction or upon any exchange, Wells Fargo may itself be a purchaser at
such sale free from any right of redemption, which Applicant hereby expressly
waives and releases. All rights and remedies of Wells Fargo existing under
the Letter of Credit Documents and the Loan Documents are in addition to, and
not exclusive of, any rights or remedies otherwise available to Wells Fargo
under applicable law.
SECTION 16. SETOFF. In addition to any rights now or hereafter granted
under applicable law, and not by way of limitation of any such rights, upon
the occurrence and continuance of any Event of Default, Wells Fargo is hereby
authorized by Applicant at any time or from time to time, without notice to
Applicant or to any other person (any such notice being hereby expressly waived
by Applicant) to set off and to appropriate and to apply any and all deposits
(general or special, including, but not limited to, indebtedness evidenced by
certificates of deposit), whether matured or unmatured, and any other
indebtedness at any time held or owing by Wells Fargo to or for the credit or
the account of Applicant, against and on account of the obligations and
liabilities of Applicant to Wells Fargo under or in connection with any of the
Letter of Credit Documents or the Loan Documents, irrespective of whether or
not Wells Fargo shall have made any demand for payment of any or all such
obligations and liabilities or declared any or all such obligations and
liabilities to be due and payable, and although any or all such obligations
and liabilities shall be contingent or unmatured.
SECTION 17. WAIVERS. Applicant agrees that no delay, extension of time,
renewal, compromise or other indulgence which may occur or be granted by Wells
Fargo under any Letter of Credit Document or any Loan Document from time to
time shall impair Wells Fargo's rights or powers under this Agreement or any
Application. Wells Fargo shall not be deemed to have waived any of its rights
under this Agreement or any Application unless such waiver is in writing
signed by an authorized representative of Wells Fargo. No such waiver, unless
expressly provided in such waiver, shall be effective as to any transactions
which occur subsequent to the date of such waiver, or as to any continuance of
any Event of Default after such waiver. No amendment or modification of this
Agreement shall be effective unless such amendment or modification is in
writing signed by authorized representatives of Wells Fargo and Applicant.
SECTION 18. AMENDMENTS AND MODIFICATIONS TO CREDITS. At the request or
with the consent of Applicant, and without affecting the obligations of
Applicant under this Agreement, Wells Fargo may, but will not be obligated to,
(a) increase the amount of any Credit, (b) extend the time for, and amend or
modify the terms and conditions governing, the making and honoring of any
Demand, Acceptance or Document or any other terms and conditions of any
Credit, or (c) waive the failure of any Demand or Document to comply with the
terms of the Credit to which it relates. No amendment to, or modification of,
the terms of any Credit will become effective if the Beneficiary of such
Credit or any confirming bank objects to such amendment or modification. If
any Credit is amended or modified in accordance with this Section 18,
Applicant shall be bound by, and obligated under, the provisions of this
Agreement with respect to such Credit as so amended or modified and any action
taken by Wells Fargo or any advising, confirming, negotiating, paying,
accepting or other bank in accordance with such amendment or modification.
SECTION 19. SUCCESSORS AND ASSIGNS. Applicant agrees that the terms and
conditions of this Agreement and each Application shall bind the heirs,
executors, administrators, successors and assigns of Applicant, and that all
rights, benefits and privileges conferred on Wells Fargo under or in
connection with each Letter of Credit Document and each Loan Document shall
be and hereby are extended to, conferred upon and may be enforced by the
successors and assigns of Wells Fargo. Applicant will not assign this
Agreement or Applicant's obligations or liabilities under or in connection
with any Letter of Credit Document or any Loan Document to any person or
entity without the prior written approval of Wells Fargo.
SECTION 20. GOVERNING LAW. This Agreement and each Application, and the
performance by Applicant and Wells Fargo under this Agreement and each
Application, shall be governed by and be construed in accordance with the
laws of the State of California. Unless Wells Fargo otherwise specifically
agrees in writing, each Credit, the opening of each Credit, the performance by
Wells Fargo under each Credit, and the performance by the Beneficiary and any
advising, confirming, negotiating, paying, accepting or other bank under each
Credit, shall be governed by and be construed in accordance with the UCP in
force on the date of the issuance of each Credit.
SECTION 21. JURISDICTION AND SERVICE OF PROCESS. Any suit, action or
proceeding against Applicant under or with respect to any Letter of Credit
Document may, at Wells Fargo's sole option, be brought in (a) the courts of
the State of California, (b) the United States District Courts in California,
(c) the courts of the jurisdiction of Applicant's incorporation or principal
office, or (d) the courts of the jurisdiction where any Beneficiary, any
advising, confirming, negotiating, paying, accepting or other bank, or any
other person or entity has brought any suit, action or proceeding against
Wells Fargo with respect to any Credit, any Demand or any Acceptance, and
Applicant hereby submits to the nonexclusive jurisdiction of such courts for
the purpose of any such suit, action, proceeding or judgment and waives any
other preferential jurisdiction by reason of domicile. Applicant further
agrees that it will accept joinder in any suit, action or proceeding brought
in any court or jurisdiction against Wells Fargo by any Beneficiary, any
advising, confirming, negotiating, paying, accepting or other bank or any
other person or entity with respect to any Credit, any Demand or any
Acceptance. Applicant irrevocably waives trial by jury and any objection,
including, but not limited to, any objection of the laying of venue or any
objection based on the grounds of forum non conveniens, which Applicant may
now or hereafter have to the bringing of any such action or proceeding,
Applicant further waives any right to transfer or change the venue of any
suit, action or proceeding brought against Applicant by Wells Fargo under or
in connection with any Letter of Credit Document. Applicant irrevocably
consents to the service of process in any action or proceeding in any court
by the mailing of copies thereof by registered or certified mail, postage
prepaid, to Applicant at its address specified next to its signature on this
Agreement or at such other address as Applicant shall have notified to Wells
Fargo in writing, such service to be effective ten (10) days after such
mailing.
SECTION 22. JOINT APPLICANTS. If this Agreement is signed by more than
one person or entity, each Applicant agrees that this Agreement and the
Applications shall be the joint and several agreement of all such Applicants
and that all references to Applicant in this Agreement and the Applications
shall refer to all such Applicants jointly and severally.
SECTION 23. SEVERABILITY. Any provision of any Letter of Credit Document
which is prohibited or unenforceable in any jurisdiction shall be, only as to
such jurisdiction, ineffective to the extent of such prohibition or
unenforceability, but all the remaining provisions of such Letter of Credit
Document and all the other Letter of Credit Documents shall remain valid.
SECTION 24. HEADINGS. The headings used in this Agreement are for
convenience of reference only and shall not define or limit the provisions of
this Agreement.
SECTION 25. COMPLETE AGREEMENT. This Agreement and the Application for
each Credit contain the entire agreement of Wells Fargo and Applicant with
respect to such Credit; provided, however, that such entire agreement will
also include any written document or instrument signed by Wells Fargo and/or
Applicant, and approved by Wells Fargo, which specifically references this
Agreement, any Application or any Credit. Except as specifically provided in
this Agreement, in any Application or in any written document or instrument
referred to in the preceding sentence, no statements or representations not
contained in this Agreement, such Application or such written document or
instrument shall have any force or effect on this Agreement, such Application or
such written document or instrument.
This Agreement is signed by Applicant's duly authorized representative or
representatives on the date specified below,
1821 West Iomega Way
Roy, Utah 84067
ADDRESS
Date: July 5, 1995
IOMEGA CORPORATION
APPLICANT
By:/s/Leonard C. Purkis
Chief Financial Officer
TITLE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> OCT-01-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 57028
<ALLOWANCES> (3509)
<INVENTORY> 52681
<CURRENT-ASSETS> 112329
<PP&E> 81642
<DEPRECIATION> 47740
<TOTAL-ASSETS> 147639
<CURRENT-LIABILITIES> 95047
<BONDS> 0
<COMMON> 648
0
0
<OTHER-SE> 51690
<TOTAL-LIABILITY-AND-EQUITY> 147639
<SALES> 177427
<TOTAL-REVENUES> 177427
<CGS> 132527
<TOTAL-COSTS> 46182
<OTHER-EXPENSES> 305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1587)
<INCOME-TAX> 167
<INCOME-CONTINUING> (1420)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1420)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
