<PAGE>
- --------------------------------------------------------------------------------
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 MARCH 31, 1996
COMMISSION FILE NUMBER 0-11963
[LOGO]
IOMEGA
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 March 31, 1996.
COMMON STOCK, PAR VALUE $.03 1/3 59,523,109*
(Title of each class) (Number of shares)
* Does not give effect to a 2-for-1 stock split declared on April 23, 1996
to be paid in the form of 100% stock dividend on or about May 20, 1996 to
stockhoders of record on May 6, 1996. All other amounts in this report
have been adjusted to give effect to the stock split (see Note 2).
- --------------------------------------------------------------------------------
<PAGE>
IOMEGA CORPORATION
TABLE OF CONTENTS
Page
----
PART I - FINANCIAL INFORMATION
Condensed consolidated balance sheets at
March 31, 1996 and December 31, 1995. . . . . . . . . 2
Condensed consolidated statements of operations
for the three months ended March 31, 1996
and April 2, 1995 . . . . . . . . . . . . . . . . . . 4
Condensed consolidated statements of cash flows
for the three months ended March 31, 1996
and April 2, 1995 . . . . . . . . . . . . . . . . . . 5
Notes to condensed consolidated financial statements. . . . 6
Management's discussion and analysis of financial
condition and results of operations . . . . . . . . . 11
PART II - OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . 16
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . 17
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . 18
This Quarterly Report on Form 10-Q contains forward-looking statements,
including information with respect to the Company's plans and strategy for its
business. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements.
Without limiting the foregoing, the words "believes", "anticipates", "plans",
"expects" and similar expressions are intended to identify forward-looking
statements. There are a number of important factors that could cause actual
events or the Company's actual results to differ materially from those indicated
by such forwarding-looking statements. These factors include, without
limitation, those set forth below under the caption "Factors Affecting Future
Operating Results" included under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in Part I of this Quarterly
Report on Form 10-Q.
- 1 -
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 701 $ 1,023
Trade receivables (net) 144,746 105,955
Inventories 105,631 98,703
Deferred income taxes 9,929 2,778
Other current assets 8,537 3,673
-------- --------
Total current assets 269,544 212,132
-------- --------
PROPERTY AND EQUIPMENT, at cost 121,601 103,149
Less - accumulated depreciation and amortization (52,961) (49,779)
-------- --------
Net property and equipment 68,640 53,370
-------- --------
DEFERRED INCOME TAXES 248 520
-------- --------
OTHER ASSETS 2,934 205
-------- --------
$341,366 $266,227
-------- --------
-------- --------
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
- 2 -
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of notes payable $ 30,051 $ 47,640
Accounts payable 116,643 94,782
Bank overdraft 6,582 11,833
Other accrued liabilities 48,168 39,331
Income taxes payable 11,364 5,141
Current portion of capitalized lease obligations 2,339 782
-------- --------
Total current liabilities 215,147 199,509
-------- --------
CAPITALIZED LEASE OBLIGATIONS, net of current portion 4,324 1,481
-------- --------
NOTES PAYABLE, net of current portion 2,300 2,551
-------- --------
CONVERTIBLE SUBORDINATED NOTES, 6.75%, due 2001 46,000 -
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value; authorized
4,750,000 shares - -
Series C junior participating preferred
stock, authorized 250,000 shares, none issued - -
Common stock, $.03 1/3 par value; authorized
150,000,000 shares, 119,046,218 and 117,638,670
shares outstanding at March 31, 1996 and
December 31, 1995, respectively 3,968 3,921
Additional paid-in capital 51,175 49,512
Deferred compensation (922) -
Retained earnings 19,374 9,253
-------- --------
Total stockholders' equity 73,595 62,686
-------- --------
$341,366 $266,227
-------- --------
-------- --------
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
- 3 -
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
March 31, April 2,
1996 1995
------------- -------------
(In thousands except
per share data)
<S> <C> <C>
SALES $221,988 $ 40,112
COST OF SALES 162,088 28,395
-------- --------
Gross Margin 59,900 11,717
-------- --------
OPERATING EXPENSES:
Selling, general and administrative 33,156 9,349
Research and development 6,991 4,126
-------- --------
Total operating expenses 40,147 13,475
-------- --------
OPERATING INCOME (LOSS) 19,753 (1,758)
Interest expense (2,257) (6)
Foreign currency loss (93) (1,044)
Other income (expense) (811) 1,030
-------- --------
INCOME (LOSS) BEFORE INCOME TAXES 16,592 (1,778)
Benefit (provision) for income taxes (6,471) 280
-------- --------
NET INCOME (LOSS) $ 10,121 $ (1,498)
-------- --------
-------- --------
NET INCOME (LOSS) PER COMMON SHARE $ 0.08 $ (0.01)
-------- --------
-------- --------
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Includes effects of stock splits (see Note 2) 128,838 112,602
-------- --------
-------- --------
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
- 4 -
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
-----------------------------
March 31, April 2,
1996 1995
------------- -------------
(In thousands)
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 10,121 $ (1,498)
Non-cash Revenue and Expense Adjustments:
Depreciation and amortization expense 4,179 1,843
Deferred income tax (benefit) provision (6,879) (367)
Other 107 432
Changes in Assets and Liabilities:
Trade receivables (net) (38,791) (3,485)
Inventories (6,928) (2,796)
Income taxes payable 6,223 (24)
Other current assets (4,864) (1,316)
Accounts payable and bank overdraft 16,610 5,744
Accrued liabilities 8,837 804
-------- --------
Net cash used in operating activities (11,385) (663)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and leasehold improvements (14,608) (4,302)
Purchase of temporary investments - (2,090)
Sale of temporary investments - 990
Net decrease in other assets 108 -
-------- --------
Net cash used in investing activities (14,500) (5,402)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of Common Stock 595 217
Proceeds from issuance of notes payable 365,096 -
Payments on notes payable and capitalized
lease obligations (383,377) -
Tax benefit from early dispositions of
employee stock 86 53
Net proceeds from issuance of convertible notes 43,163 -
Proceeds from notes receivable from shareholders - 597
-------- --------
Net cash provided from financing activities 25,563 867
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (322) (5,198)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 1,023 16,861
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 701 $ 11,663
-------- --------
-------- --------
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND
FINANCING ACTIVITIES:
Sale of common stock for a note $ - $ 283
-------- --------
-------- --------
Machinery and equipment financed under
capitalized lease obligations $ 4,841 $ -
-------- --------
-------- --------
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
- 5 -
<PAGE>
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 March
31, 1996 and December 31, 1995, the results of operations for the three-
month periods ended March 31, 1996 and April 2, 1995, and cash flows for
the three-month periods ended March 31, 1996 and April 2, 1995.
The results of operations for the three-month periods 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.
PERVASIVENESS OF ESTIMATES -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from these estimates.
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
customers with right of return privileges whose inventory is in excess of
estimated normal customers' inventory requirements. The gross margin
associated with the deferral of sales in excess of normal customers'
inventory requirements totaled $6,613,000 and $3,207,000 at March 31, 1996
and December 31, 1995, respectively, and is included in deferred revenue as
a component of other accrued liabilities in the accompanying condensed
consolidated balance sheets.
In addition, the Company records reserves at the time of shipment for
estimated volume rebates and price protection credits to be issued to
customers. These reserves totaled $3,487,000 and $1,633,000 at March 31,
1996 and December 31, 1995, respectively, and are netted against accounts
receivables in the accompanying condensed consolidated balance sheets.
PRICE PROTECTION -- The Company has agreements with certain of its
customers which, in the event of a price decrease, allow those customers
(subject to certain limitations) credit equal to the difference between the
price originally paid and the reduced price on units in the customers'
inventories at the date of a price decrease. When a price decrease is
anticipated, the Company establishes reserves for amounts estimated to be
reimbursed to the qualifying customers.
- 6 -
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(1) SIGNIFICANT ACCOUNTING POLICIES (CONCLUDED)
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.
BANK OVERDRAFT -- The bank overdraft represents those checks which have
been disbursed to vendors but have not been presented to the bank for
clearance. Upon presentment to the bank, the bank overdraft will be funded
by the revolving line of credit, thereby reducing the availability under
the line (see Note 4).
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:
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ --------------
(In thousands)
<S> <C> <C>
Raw materials $ 88,564 $ 89,030
Work-in-process 8,299 5,680
Finished goods 8,768 3,993
-------- --------
$105,631 $ 98,703
-------- --------
-------- --------
</TABLE>
RECLASSIFICATIONS -- Certain reclassifications were made to the prior
periods' condensed consolidated financial statements to conform with the
current 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 period. Common Stock
equivalent shares consist primarily of stock options 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
periods presented to reflect the impact of the stock splits described in
Note 2.
(2) STOCK SPLITS
In December 1995, the Board of Directors approved a 3-for-1 Common Stock
split, which was effected in the form of a 200% Common Stock dividend, paid
on January 31, 1996 to stockholders of record at the close of business on
January 15, 1996. This stock split has been retroactively reflected in the
accompanying condensed consolidated financial statements.
On April 23, 1996, the Company's Board of Directors declared a 2-for-1
stock split which will be effected in the form of a 100% stock dividend.
The dividend will be distributed on or about May 20, 1996 to stockholders
of record on May 6, 1996. This stock split has been retroactively
reflected in the accompanying condensed consolidated financial statements.
- 7 -
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(2) STOCK SPLITS (CONCLUDED)
In connection with each stock split, proportional adjustments were made to
outstanding stock options and other outstanding obligations of the Company
to issue shares of Common Stock.
(3) INCOME TAXES
Income tax expense for the three months ended March 31, 1996 has been
provided at an effective rate of 39% compared to an effective rate of 27%
for 1995. This tax rate is based on the Company's projected domestic and
foreign pre-tax income for 1996. The increase in the effective tax rate is
due to the Company's full utilization of available tax credits and foreign
net operating loss carryforwards in 1996, and because pre-tax income of
certain foreign operations is subject to foreign income taxes at a rate in
excess of the U.S. statutory rate. The higher tax on foreign operations is
expected to offset the benefits of the tax credits and net operating loss
carryforwards.
Cash paid for income taxes was $4,772,000 for the first three months of
1996 and $23,000 for the corresponding period in 1995.
(4) DEBT
LINE OF CREDIT -- On July 5, 1995, the Company entered into a loan
agreement with the Commercial Finance Division of Wells Fargo Bank, N.A.
("Wells Fargo Bank") 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, with a
10% overadvance provision through April 12, 1996. The revolving credit
line bears interest at the bank's prime rate plus 1%, and the term loans
bear interest at the bank's prime rate plus 1.25%. Total availability
under the Wells Fargo agreement at March 31, 1996 was $56.4 million, of
which $5.1 million (exclusive of bank overdrafts of $6.6 million) had been
drawn. The $5.1 million outstanding consisted of $1.8 million under the
revolving credit facility and $3.3 million under the term loan facility.
The agreement expires June 30, 1996. Among other restrictions, covenants
within the agreement require the Company maintain minimum levels of working
capital and net worth.
Effective May 13, 1996, the Company renewed and amended its loan agreement
with Wells Fargo Bank. The amended agreement permits revolving loans, term
loans and letters of credit up to an aggregate outstanding principal amount
equal to the lesser of $100 million or 80% of eligible accounts receivable.
Amounts outstanding are collateralized by accounts receivable, inventory,
equipment, general intangibles and certain other assets. The new revolving
line bears interest at the bank's prime rate plus .5% and the term loans
bear interest at the bank's prime rate plus .75%. This agreement expires
June 30, 1997. Under this agreement, the Company may also secure financing
of equipment purchases from third parties up to a maximum of $75 million,
less term loans outstanding to Wells Fargo Bank. Among other restrictions,
covenants within the agreement require the Company to maintain minimum
levels of working capital and net worth.
- 8 -
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) DEBT (CONCLUDED)
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 $75 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 March 31, 1996 is $6.7
million.
OTHER TERM NOTES -- During 1995, the Company entered into term notes with
financial institutions. The proceeds of the notes were used to purchase
manufacturing equipment. The term notes have 36-month terms which mature
at various dates from November 1988 to January 1999. Interest rates are
fixed and range from 8.89% to 9.11%. At March 31, 1996, the Company has
$3.3 million outstanding on these notes. The notes are secured by the
equipment purchased. The term notes require the Company to maintain
minimum levels of working capital, net worth, and quarterly operating
income.
FINANCING OF EUROPEAN ACCOUNTS RECEIVABLE -- In November 1995, a foreign
subsidiary of the Company entered into an agreement with a German
commercial bank for up to DM 50 million (approximately $35 million) which
involves the sale of a portion of the foreign subsidiary's accounts
receivable to the bank. The agreement expires in November 1996. Such
sales of receivables are limited to 90% of eligible accounts receivable
subject to certain credit limits. The Company has retained the bad debt
risk on the receivables up to DM 1 million per customer. At March 31,
1996, borrowings against the agreement totaled $23.9 million.
Cash paid for interest was $1,524,000 during the first quarter of 1996,
including interest on capital leases. There was no debt outstanding during
the first quarter of 1995. Included in interest expense for the three
months ended March 31, 1996 was $211,000 of amortization of deferred
charges associated with obtaining the debt.
(5) CONVERTIBLE SUBORDINATED NOTES
In March 1996, the Company issued $46,000,000 in convertible subordinated
notes. The net proceeds from the issuance of the notes totaled $43.2
million and were used to pay down other debts and for operating
requirements. The notes carry an interest rate of 6.75% and interest
payments are payable semi-annually on March 15 and September 15 in each
year commencing on September 15, 1996. The notes mature on March 15, 2001.
The notes are unsecured and subordinated to all existing and future senior
indebtedness of the Company and are effectively subordinated to all
existing and future indebtedness and other liabilities of the Company's
subsidiaries.
The notes are convertible into Common Stock of the Company at the option of
the holder at any time after 60 days following the latest date of original
issuance thereof and at or before maturity, unless previously redeemed or
repurchased, at a conversion price of $9.875 per share (equivalent to a
conversion rate of approximately 101.26 shares per $1,000 principal amount
of notes), subject to adjustment in certain events.
- 9 -
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(5) CONVERTIBLE SUBORDINATED NOTES (CONCLUDED)
The notes are redeemable at any time on or after March 15, 1999, in whole
or in part, at the option of the Company, at declining redemption prices,
102.7% for 1999 and 101.35% for 2000, together with accrued interest, if
any, to the redemption date.
In the event any repurchase event, as defined in the indenture agreement,
occurs, each holder of notes may require the Company to repurchase all or
any part of such holder's notes at 100% of the principal amount thereof
plus accrued interest to the repurchase date.
(6) OTHER MATTERS
SIGNIFICANT CUSTOMERS -- During the fiscal quarter ended March 31, 1996,
sales to Ingram Micro D, Inc. accounted for 11% of consolidated sales.
During the fiscal quarter ended April 2, 1995, sales to no single customer
accounted for more than 10% of the Company's sales.
FORWARD EXCHANGE CONTRACTS -- The Company has commitments to sell foreign
currencies relating to forward exchange contracts in order to hedge against
future currency fluctuations. In addition, the Company purchases
components denominated in Yen and has purchased forward contracts to buy
Yen.
The outstanding forward exchange sales and (purchase) contracts at March 31,
1996 are as follows. The contracts mature in April through June of 1996.
<TABLE>
<CAPTION>
Contracted
Amount Currency Forward Rate
------ -------- ------------
<S> <C> <C> <C>
German Deutsche Marks (6,300,000) DM 1.4688
Great Britain Pound 4,900,000 GBP 1.5255
French Franc 15,500,000 FRF 5.017
Spanish Pesta 337,000,000 ESB 124.98
Italian Lira 5,700,000,000 ITL 1584.8
Japanese Yen (1,298,372,579) YEN 102.45 - 106.68
</TABLE>
Gains and losses on foreign currency contracts intended to be used to hedge
operating requirements are reported currently in income. Gains and losses
on foreign currency contracts intended to meet firm commitments are
deferred and recognized as part of the cost of the underlying transaction
being hedged. At March 31, 1996 and December 31, 1995, all of the
Company's foreign currency contracts are being used to hedge operating
requirements. The Company's theoretical risk in these transactions is the
cost of replacing, at current market rates, these contracts in the event
of default by the counterparty.
- 10 -
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In December 1995, the Company's Board of Directors declared a 3-for-1 stock
split, effected in the form of a 200% common stock dividend which was paid on
January 31, 1996. In April 1996, the Company's Board of Directors declared a 2-
for-1 stock split, which will be effected in the form of a 100% stock dividend
on or about May 20, 1996 to stockholders of record on May 6, 1996. The
following discussion gives retroactive effect to these stock splits for all
periods presented.
RESULTS OF OPERATIONS
The Company reported record quarterly sales of $222.0 million in the first
quarter ended March 31, 1996. The Company recorded net income of $10.1 million,
or $0.08 per share, for the first quarter ended March 31, 1996, compared to a
net loss of $1.5 million, or $0.01 per share, for the first quarter ended April
2, 1995.
SALES
Sales for the three months ended March 31, 1996 increased by $181.9 million, or
453%, when compared to the corresponding period of 1995. The primary reason for
the increase was sales of Zip and Jaz products, which began shipping in March
1995 and December 1995, respectively. Increased sales of Ditto products also
contributed to the increased sales. These sales increases were partially offset
by reduced sales of Bernoulli products.
In the first quarter of 1996, sales of Zip and Jaz products accounted for
$185 million or 84% of sales. Ditto products accounted for $28 million or
12% of sales in the first quarter of 1996, an increase of 60% over the first
quarter of 1995. Bernoulli and other product sales totaled $9 million or 4%
of sales in the first quarter of 1996, compared to $21 million or 52% of
sales in the first quarter of 1995.
Sales outside of the United States in the first quarter of 1996, were $83.9
million, or 38% of sales, when compared to $17.1 million, or 43% for the same
period in 1995. The reasons for the sales increases outside of the United
States were similar to the reasons for the total increase in consolidated
sales.
Management expects increased sales of Zip, Jaz and Ditto products through the
remainder of 1996. However, the Company is still experiencing some component
shortages which may continue to limit production and, therefore, sales. In
addition, future market demand for the Company's products cannot be predicted
with certainty. Accordingly, there can be no assurance that future sales will
materialize as expected.
GROSS MARGIN
The Company's gross margin percentage for the three-month period ended March
31, 1996 was 27%, compared to 29% for the comparable period of 1995. The
decline in gross margin percentage is due to a shift in product mix from
higher margin Bernoulli products to lower margin Ditto, Jaz and Zip products.
Start-up costs associated with Jaz products also contributed to the decline
in gross margin percentage.
- 11 -
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Gross margins for the remainder of 1996 will depend in large part on sales of
Zip and Jaz disks, which generate significantly higher gross margin than the
corresponding drives, and on the sales mix between disks and drives.
Historically, the gross margin of Bernoulli products has generally been in
excess of 40%; the gross margin of Zip, Jaz and Ditto product lines have been
significantly lower. Although the Company expects the gross margins of Zip
and Jaz products to increase as production increases and start-up costs
associated with Jaz products decrease, it does not expect them to achieve the
levels historically achieved by Bernoulli. In addition, gross margins may be
affected significantly by the mix between sales to OEM and retail sales, the
Company's ability to achieve planned cost reductions and future price
reductions and other factors.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses represented 15% of sales for the
first quarter of 1996, compared to 23% for the corresponding period of 1995.
The decline in this percentage was primarily due to the increased sales
volumes in 1996. The actual selling, general and administrative expenses
increased by $23.8 million for the three-month period ended March 31, 1996,
as compared to the corresponding prior year period. The increased expenses
were primarily the result of advertising expenses incurred to increase
awareness of Ditto and Zip, 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, in absolute dollars, to increase further in the remainder of 1996
due to planned additional advertising expenses, trade show expenses, variable
selling expenses, and increased fixed administrative expenses.
RESEARCH AND DEVELOPMENT EXPENSES
Research and development expenses were 3% of sales for the three month period
ended March 31, 1996, compared to 10% for the three month period ended April
2, 1995. The decline in percentages is primarily due to the increased sales
volumes in 1996. The actual research and development expenses increased by
$2.9 million for the first quarter of 1996 compared to the corresponding
period of 1995. These increases were primarily the result of expenditures
related to the continued development of the Zip, Ditto and Jaz products.
Management expects continued increases in research and development expenses,
in absolute dollars, in the remainder of 1996 as the result of planned
increases in the resources dedicated to future product development and
enhancement.
OTHER
Interest expense increased by $2.2 million in the first quarter of 1996 as
compared to the first quarter of 1995. This increase is primarily due to
interest expense associated with the Wells Fargo line of credit, financing of
European accounts receivable, capital leases, other term notes and the
Convertible Notes.
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.
Other income in the first quarter of 1995 consisted primarily of interest
income, royalty income and other miscellaneous income. Other expense in the
first quarter of 1996 consisted of various miscellaneous other expense items.
- 12 -
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES
For the first quarter of 1996, the Company recorded a tax provision of $6.5
million representing an effective tax rate of 39%. The tax rate has
increased from an effective rate of 27% during 1995 due to the Company's full
utilization of available tax credits and foreign net operating loss
carryforwards in 1996. The Company anticipates that the effective income tax
rate will remain at 39% throughout 1996. However, differences between the
currently anticipated mix of foreign income versus domestic income, and the
actual mix, will have an impact on the income tax rate that is recorded in
future quarters.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company had cash and cash equivalents of $.7 million,
working capital of $54.4 million, and a ratio of current assets to current
liabilities of 1.3 to 1. For the first three months of 1996, the Company's cash
positions remained flat, with $11.4 million used in operating activities and
$14.5 million used in investing activities, offset by $25.6 million provided by
financing activities.
On July 5, 1995, the Company entered into a loan agreement with the
Commercial Finance Division of Wells Fargo. Effective May 13, 1996, the
Company renewed and amended its loan agreement with Wells Fargo. The amended
agreement permits revolving loans, term loans and letters of credit up to an
aggregate outstanding principal amount equal to the lesser of $100 million or
80% of eligible accounts receivable. Amounts outstanding are collateralized
by accounts receivable, inventory, equipment, general intangibles and certain
other assets. The new revolving line bears interest at the bank's prime rate
plus 0.5% and the term loans bear interest at the bank's prime rate plus
0.75%. This agreement expires June 30, 1997. Under this agreement, the
Company may also secure financing of equipment purchases from third parties
up to a maximum of $75 million, less term loans outstanding to Wells Fargo.
Among other restrictions, covenants within the agreement require the Company
to maintain minimum levels of working capital and net worth. In November
1995, a foreign subsidiary of the Company entered into an agreement with a
German commercial bank for up to DM 50 million (approximately $35 million),
which involves the sale of a portion of the foreign subsidiary's accounts
receivable to the bank. In addition, the Company has entered into various
agreements to provide capital lease financing and other term loans for the
purchase of certain manufacturing equipment.
The Company's balance sheet at March 31, 1996 reflected short-term borrowings
of $32.4 million, representing utilization of the revolving credit line with
Wells Fargo of $1.8 million, term loans with Wells Fargo of $3.3 million,
borrowings under the German loan agreement of $23.9 million and the
short-term portion of capital lease obligations and other term loans of $3.4
million. At March 31, 1996, the Company's long-term borrowings were $52.6
million, consisting of $46.0 million of the Convertible Notes, $4.3 million
in capitalized leases and $2.3 million of other term notes. 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.
- 13 -
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Accounts receivable have increased by $38.8 million at March 31, 1996
compared to December 31, 1995, due to increased sales. Inventory increased
by $6.9 million during the first quarter of 1996 due to build-ups in
manufacturing capacity. The 7% increase in inventory as compared to the 49%
increase in sales volume from the fourth quarter of 1995, reflects an
increase in inventory turnover in the first quarter of 1996 versus the fourth
quarter of 1995. Also, the inventory balance at March 31, 1996 was reduced by
the sale of inventory, which had previously been consigned to one of the
Company's suppliers. The increases in receivables and inventory were more
than offset by increases in accounts payable and accrued liabilities of $25.4
million, and $43.2 million in net proceeds from convertible notes.
Fixed asset additions for the first quarter of 1996 totaled $19.4 million,
offset by $4.8 million of proceeds from capital leases. 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.
The Company expects that proceeds from an anticipated stock offering,
together with current sources of financing available to the Company, will be
sufficient to fund the Company's operations into 1997, including any planned
expense increases or capital expenditures discussed above. Thereafter, the
Company anticipates that it may require additional funds to finance its
operations. The precise amount and timing of the Company's funding needs
cannot be determined at this time and will depend upon a number of factors,
including the market demand for the Company's products, the availability of
critical components, the Company's strategic alliances for the manufacture of
its products, the progress of the Company's product development efforts,
the success of the Company in improving its inventory management, and the
Company's management of its cash and accounts payable, and the Company's
ability to refinance its outstanding debt, a significant portion of which
matures in late 1996. The Company currently expects that it would seek to
obtain such funds from additional borrowing arrangements and/or a public
offering of debt or equity securities. There can be no assurance that funds
required by the Company in the future will be available on terms satisfactory
to the Company, if at all.
FACTORS AFFECTING FUTURE OPERATING RESULTS
Because the Company is relying on its Zip and Jaz products for the
substantial majority of its sales in 1996, the Company's future operating
results will depend in large part on the ability of those products to attain
widespread market acceptance. Although the Company believes there is a
market demand for new personal computer data storage solutions, there can be
no assurance that the Company will be successful in establishing Zip and Jaz
as accepted solutions for that market need. The extent to which Zip and Jaz
achieve a significant market presence will depend upon a number of factors,
including the price, performance and other characteristics of competing
solutions introduced by other vendors, the timing of the introduction of such
solutions, and the success of the Company in establishing OEM arrangements
for Zip and Jaz with leading personal computer manufacturers and in educating
consumers about the existence and possible uses of Zip and Jaz products as
storage devices. In addition, component shortages or other factors limiting
the supply of the Company's products could limit the Company's sales and
provide an opportunity for competing products to achieve market acceptance.
- 14 -
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONCLUDED)
A number of elements of the Company's business strategy may also directly
impact the Company's future operating results. Because the Company's
marketing strategy is based in significant part on generating consumer
awareness of and demand for its products, the Company plans to incur
significantly increased marketing and advertising expenses in 1996. In
addition, a critical element of the Company's distribution strategy is the
establishment of OEM arrangements for its Zip, Jaz and Ditto products. OEM
sales generally provide lower gross margins than sales to other channels.
Moreover, reductions in the prices of the Company's Zip, Jaz and Ditto
products would likely have an adverse effect on gross margins for those
products.
The Company's business strategy is substantially dependent on maximizing
sales of its proprietary Zip and Jaz disks, which generate significantly
higher margins than its disk drives. If this strategy is not successful,
either because the Company does not establish a sufficiently large installed
base of Zip and Jaz drives, because the sales mix between disks and drives is
below levels anticipated by the Company, because another party succeeds in
producing disks that are compatible with Zip and Jaz drives without
infringing the Company's proprietary rights, or for any other reason, the
Company's sales would be adversely affected, and its net income would be
disproportionately adversely affected.
Although sales of Zip drives and disks were the primary reason for the
Company's revenue growth during 1995 and the first quarter of 1996, sales of
such products may be attributable in large part to the novelty of such
products and the initial publicity surrounding the introduction of Zip and
Jaz may not be indicative of the long-term demand for such products.
Moreover, the retail market to which the Company's products are targeted is
seasonal, with a substantial portion of total sales typically occurring in
the fourth quarter, and sales slowdowns commonly occurring during the summer
months. In addition, some retailers have been experiencing sales decreases
and certain analysts have predicted continued softening of this market.
Accordingly, investors should not assume that the sales growth experienced by
the Company in 1995 and the first quarter of 1996 is an indication of future
sales. Moreover, in light of the Company's revenue growth in 1995 and the
change in the nature of its business over the past year, the Company believes
that period-to-period comparisons of its financial results are not
necessarily meaningful. In addition, the Company has experienced and may
experience significant fluctuations in its quarterly operating results.
The Company's European sales are predominantly denominated in foreign
currencies. In addition, the Company purchases certain components in foreign
currencies. The Company enters into forward exchange contracts to sell and
purchase foreign currencies as a means of hedging its foreign operating cash
flows. Fluctuations in the value of foreign currencies relative to the U.S.
dollar would result in foreign currency gains and losses.
- 15 -
<PAGE>
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. The Company filed a current report on Form
8-K dated February 1, 1996 incorporating a press release issued by
the Company on February 1, 1996 entitled "Iomega Announces Public
Offering on Hold" and a letter to shareholders dated February 5,
1996.
- 16 -
<PAGE>
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: May 14, 1996 Kim B. Edwards
President and Chief Executive
Officer
/s/ Leonard C. Purkis
-------------------------------
Dated: May 14, 1996 Leonard C. Purkis
Senior Vice President, Finance
and Chief Financial Officer
- 17 -
<PAGE>
EXHIBIT INDEX
The following exhibit is filed as part of this Quarterly Report on Form 10-Q:
Exhibit No. Description
- ----------- -----------
10.26 (g) Fifth Amendment to Loan Agreement dated March 12, 1996
between the Company and Wells Fargo Bank, N.A., Commercial
Finance Division
10.26 (h) Sixth Amendment to Loan Agreement dated May 13, 1996 between
the Company and Wells Fargo Bank, N.A., Commercial Finance
Division
10.32 Lease dated December 8, 1995 between the Company and John
Arrillaga, Trustee and Richard T. Peery, Trustee relating to
Milpitas Bldg. 8
- 18 -
<PAGE>
FIFTH AMENDMENT TO LOAN AGREEMENT
THIS FIFTH AMENDMENT TO LOAN AGREEMENT (this "Amendment") is entered into
as of March 12, 1996, by and between IOMEGA CORPORATION, a Delaware corporation
("Borrower"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("Lender").
RECITALS
WHEREAS, Borrower is currently indebted to Lender pursuant to the terms and
conditions of that certain Loan Agreement between Borrower and Lender dated as
of July 5, 1995, as amended ("the Loan Agreement").
WHEREAS, Lender and Borrower have agreed to certain changes in the terms
and conditions set forth in the Loan Agreement and have agreed to amend the Loan
Agreement to reflect said changes.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree that the Loan Agreement
shall be amended as follows:
1. Lender agrees to waive compliance by Borrower with the Working Capital
covenant set forth in Section 8.10(a) of the Loan Agreement as of March 31, 1996
only. Section 8.10(a) is hereby deemed amended accordingly. Except as so
amended, Section 8.10(a) of the Loan Agreement shall remain in full force and
effect.
2. Section 9.1 of the Loan Agreement is amended by deleting the period at
the end thereof, replacing it with a comma, and adding thereto a new clause
which reads as follows:
<PAGE>
"and except for convertible subordinated notes ("Junior Notes") in an
original principal amount not to exceed $46,000,000.00, in form and
content satisfactory to Lender which are subordinated to Borrower's
obligations to Lender pursuant to subordination provisions which have
been approved in writing by Lender prior to incurring the indebtedness
evidenced by such notes; provided however, that Borrower shall not
make any payment of principal (whether scheduled or not) on such
Junior Notes nor redeem, voluntarily or otherwise, any or all of such
Junior Notes without the prior written consent of Lender. Borrower
shall be permitted to make regularly scheduled interest payments on
such Junior Notes solely in accordance with the subordination
provisions which have been approved by Lender in writing."
3. Borrower shall, promptly upon receipt of proceeds of the Junior Notes,
repay in full the principal amount by which the Revolving Loans and Letter of
Credit Obligations exceed the availability therefor, without regard to the
temporary increase in availability set forth in clause 2.1(a)(iv) of the Loan
Agreement as amended in the Fourth Amendment, which temporary increase shall be
immediately automatically cancelled upon receipt by Borrower of such proceeds.
4. Except as specifically provided herein, all terms and conditions of
the Loan Agreement remain in full force and effect, without waiver or
modification. All terms defined in the Loan Agreement shall have the same
meaning when used in this Amendment. This Amendment and the Loan Agreement
shall be read together, as one document.
5. Borrower hereby remakes all representations and warranties contained
in the Loan Agreement and reaffirms all covenants set forth therein. Borrower
further certifies that as of the date of this Amendment there exists no Event of
Default as defined in the Loan Agreement, nor any condition, act or event
- 2 -
<PAGE>
which with the giving of notice or the passage of time or both would constitute
any such Event of Default.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed as of the day and year first written above.
WELLS FARGO BANK,
IOMEGA CORPORATION NATIONAL ASSOCIATION
By: /s/ Robert J. Simmons By: /s/ illegible
-------------------------- --------------------------
Title: Treasurer Title: Vice President
------------------------ -----------------------
- 3 -
<PAGE>
SIXTH AMENDMENT TO LOAN AGREEMENT
THIS SIXTH AMENDMENT TO LOAN AGREEMENT (this "AMENDMENT") dated
May 13, 1996, by and between IOMEGA CORPORATION, a Delaware corporation
("BORROWER"), and WELLS FARGO BANK, NATIONAL ASSOCIATION ("LENDER"), is made in
reference to the following facts:
A. Lender and Borrower have previously entered into that certain
Loan Agreement dated as of July 5, 1995 (as amended, the "LOAN AGREEMENT") and
the documents, instruments and agreements executed in connection therewith. All
capitalized terms used herein, unless otherwise defined herein, shall have the
meaning set forth in the Loan Agreement.
B. Borrower has requested certain modifications to the Loan
Agreement.
C. Lender is willing to amend the Loan Agreement on the terms and
subject to the conditions set forth in this Amendment. Borrower is entering
into this Amendment with the understanding and agreement that, except as
specifically provided herein, none of Lender's rights or remedies as set forth
in the Loan Agreement is being waived or modified by the terms of this
Amendment.
NOW, THEREFORE, on the terms and subject to the conditions set forth
herein, and for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree that the Loan Agreement shall be
amended as follows:
1. INCREASE IN MAXIMUM AMOUNT. The definition of "MAXIMUM AMOUNT"
set forth in Section 1.22 of the Loan Agreement is amended in full to read as
follows:
"'Maximum Amount' shall mean the amount of $100,000,000."
2. THIRD PARTY TERM LENDER(S). Section 2.2(d) of the Loan Agreement
is hereby deleted in its entirety, and the following substituted therefor:
"Section 2.2(d). THIRD PARTY TERM LENDER. At Borrower's
option, Borrower may obtain term loan financing not to
exceed $75,000,000 from one or more parties other than
Lender, which loans may be secured only by purchase money
liens on new equipment and which loans, in the aggregate
with all loans outstanding under Facility B, do not exceed
$75,000,000. Borrower shall provide to Lender executed
copies of all documentation evidencing the
<PAGE>
term loan financing permitted hereunder not later than ten (10) days
after the funding of the loan(s) evidenced thereby."
3. INTEREST RATES.
a. Section 3.1(a) of the Loan Agreement is amended by
substituting "one-half of one percent (0.5%)" in place of "one percent
(1.0%)" in such Section. In addition, the LIBOR rate applicable to
Facility A is amended as set forth on the Facility A Revolving Credit Note
attached hereto as EXHIBIT A.
b. Section 3.1(b) of the Loan Agreement is amended by
substituting "three-quarters of one percent (0.75%)" in place of "one and
one-quarter percent (1.25%)" in such Section.
4. UNUSED LINE FEE. Section 3.5 of the Loan Agreement is amended by
substituting "$80,000,000" in place of "the Maximum Amount" in such Section.
5. SERVICING FEE. A new Section 3.8 is added to the Loan Agreement,
to read as follows:
"3.8 SERVICING FEE. Borrower shall pay to Lender on the
first day of each month, commencing June 1996, a Servicing
Fee in the amount of (i) $3,000 per month, for so long as
Borrower is permitted to provide schedules of Accounts on a
weekly basis in accordance with Section 8.3(a), or (ii)
$5,000 per month at all other times."
6. FACILITY FEE. Borrower shall pay to Lender a facility fee of
$250,000 on the Effective Date (defined below) and on each anniversary of the
Loan Agreement, commencing with June 30, 1997, so long as the Loan Agreement is
in effect.
7. FACILITY INCREASE FEE. In consideration of this Amendment and
the financial accommodations made available to Borrower from Lender, Borrower
shall pay to Lender a facility increase fee of One Hundred Thousand Dollars
($100,000) for this Amendment. Such fee shall be due and payable on the
Effective Date.
8. ACCOUNTS REPORTING. Section 8.3(a) of the Loan Agreement is
hereby deleted in its entirety, and the following substituted therefor:
"(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;
2
<PAGE>
PROVIDED HOWEVER, that, for so long as excess borrowing
availability under Facility A exceeds $20,000,000 (without
consideration of the limitation on Revolving Loans imposed
by the Maximum Amount) and no Event of Default has occurred
and is continuing, Borrower shall not be required to provide
Lender with a schedule of Accounts more frequently than once
each week;"
9. EQUITY AND SUBORDINATED DEBT. In addition to such other
indebtedness incurred by Borrower prior to the Effective Date as permitted under
Section 9.1 of the Loan Agreement (as amended by the Fifth Amendment to Loan
Agreement, dated March 12, 1996) and Section 9.5 of the Loan Agreement, Borrower
may, after the Effective Date, issue an additional $175,000,000 in equity or
convertible unsecured subordinated debt, all on the terms and subject to the
conditions set forth in such Sections.
10. LIMITED GUARANTEE RIGHTS. Section 9.3 of the Loan Agreement is
hereby amended by deleting the period at the end of such Section, replacing it
with a semi-colon, and adding thereto a clause which reads as follows:
"PROVIDED HOWEVER, that Borrower may issue a guaranty in
favor of Heller Bank AG regarding the factoring of the
receivables of Iomega Europe GmbH, provided that Lender has
approved in its discretion the form and substance of such
guaranty and provided further that such guaranty is limited
to not more than $35,000,000."
11. SEIKO EPSON JOINT-VENTURE. Section 9.4 of the Loan Agreement is
amended by (i) deleting the period at the end of clause (b) of such Section and
replacing it with ", and", and (ii) adding a new clause (c) which reads as
follows:
"(c) in addition to the foregoing, and provided no Event of
Default has occurred and is continuing, guaranties and/or
investments in one or more joint ventures with Seiko Epson,
not to exceed $15,000,000 outstanding (including outstanding
contingent liabilities) at any one time in the aggregate."
12. CONSENT TO NEW LEASE. Notwithstanding anything to the contrary
in the Loan Agreement (including, without limitation, Section 9.1 thereof),
Borrower may enter into a lease for its new administrative building in Roy, Utah
on terms acceptable to Lender in its reasonable discretion.
3
<PAGE>
13. TERM OF LOAN AGREEMENT. Section 11.1(a) of the Loan Agreement is
amended by substituting "June 30, 1997" in place of "June 30, 1996", in the
first sentence thereof.
14. EXTENSION OF FACILITY B TERM NOTE. Notwithstanding anything to
the contrary in that certain Facility B Term Note dated September 12, 1995, in
the original principal amount of $3,940,185 ("Facility B Note"), Borrower shall
continue to make monthly payments thereunder in the amounts and on the terms
provided therein through June 1, 1997, with all amounts of unpaid principal and
accrued but unpaid interest and expenses on the Facility B Note due and payable
on June 30, 1997.
15. EARLY TERMINATION FEE. The amount of the early termination fees
provided for in Section 11.1(c) of the Loan Agreement are amended in full to
read as follows:
"Date of Termination Fee
------------------- ---
First 90 days from the date of the
Sixth Amendment to Loan Agreement $500,000
91st to 180th day from the date of
the Sixth Amendment to Loan Agreement $250,000
Thereafter -0-"
16. CONDITIONS PRECEDENT. Each of the following shall constitute a
condition precedent to the effectiveness of this Amendment (the "EFFECTIVE
DATE") and to Lender's obligation to increase the Maximum Amount:
a. Borrower shall have executed and delivered to Lender an
original of this Amendment;
b. Borrower shall have executed and delivered to Lender a new
Facility A Revolving Credit Note in the form of EXHIBIT A hereto.
Concurrently with the effectiveness of this Amendment, Lender shall mark
"CANCELLED" and deliver to Borrower the existing Facility A Revolving
Credit Note dated July 5, 1995, in the original principal amount of
$60,000,000;
c. There shall have been no material adverse change in the
business, operations, profits or prospects of Borrower between December 31,
1995 and the Effective Date;
d. Each of the representations and warranties set forth in the
Loan Agreement and any of the other Loan Documents shall be true and
correct in all material respects on and as of the Effective Date;
e. No Event of Default shall have occurred and be continuing;
and
4
<PAGE>
f. Lender shall have received the Facility Fee and the Facility
Increase Fee provided for in paragraphs 6 and 7 hereof, respectively, along
with all other fees and charges payable by Borrower on or before the
Effective Date.
17. REAFFIRMATION. Except as specifically provided herein, all terms
and conditions of the Loan Agreement and the other Loan Documents remain in full
force and effect, without waiver or modification. This Amendment and the Loan
Agreement shall be read together, as one document.
18. REPRESENTATIONS AND WARRANTIES. Borrower hereby remakes all
representations and warranties contained in the Loan Agreement and all other
Loan Documents, and reaffirms all covenants set forth therein. Borrower further
certifies that as of the date of this Amendment there exists no Event of Default
as defined in the Loan Agreement, nor any condition, act or event which with the
giving of notice or the passage of time or both would constitute any such Event
of Default.
19. ENTIRE AGREEMENT. This Amendment embodies the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements, understandings and
inducements, whether express or implied, oral or written, relating to the
subject matter of this Amendment.
20. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
21. GOVERNING LAW. This Amendment 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.
22. ATTORNEYS' FEES. Borrower hereby agrees to pay Lender's
attorneys' fees and other out-of-pocket expenses incurred in connection with the
preparation, negotiation, execution and delivery of this Amendment. Further, if
any legal action or proceeding shall be commenced at any time by any party to
this Amendment in connection with its interpretation or enforcement, the
prevailing party or parties in such action or proceeding shall be entitled to
reimbursement of its reasonable attorneys' fees and costs in connection
therewith, in addition to all other relief to which the prevailing party or
parties may be entitled.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be executed as of the day and year first written above.
WELLS FARGO BANK,
IOMEGA CORPORATION NATIONAL ASSOCIATION
By: /s/ Robert J. Simmons By:
---------------------- ------------------------
Title: Treasurer Title:
---------------------- ------------------------
6
<PAGE>
EXHIBIT A
FORM OF FACILITY A REVOLVING CREDIT NOTE
FACILITY A REVOLVING CREDIT NOTE
$100,000,000 May ___, 1996
FOR VALUE RECEIVED, the undersigned Iomega Corporation promises to pay to
the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at
Commercial Finance Division, 9000 Flair Drive, El Monte, California, or at such
other place as the holder hereof may designate, in lawful money of the United
States of America and in immediately available funds, the principal sum of One
Hundred Million Dollars ($100,000,000), or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement (computed on the basis of a 360-day year, actual
days elapsed) either (i) at a fluctuating rate per annum of one-half of one
percent (0.5%) above the Prime Rate in effect from time to time, or (ii) at a
fixed rate per annum determined by Bank to be two and five-eighths percent
(2.625%) above Bank's LIBOR in effect on the first day of the applicable Fixed
Rate Term. When interest is determined in relation to the Prime Rate, each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within Bank. With respect to each LIBOR option
selected hereunder, Bank is hereby authorized to note the date, principal
amount, interest rate and Fixed Rate Term applicable thereto and any payments
made thereon on Bank's books and records (either manually or by electronic
entry) and/or on any schedule attached to this Note, which notations shall be
prima facie evidence of the accuracy of the information noted.
A. DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each:
1. "Business Day" means any day except a Saturday, Sunday or any other
day designated as a holiday under Federal or California statute or regulation.
2. "Fixed Rate Term" means a period commencing on a Business Day and
continuing for thirty (30), sixty (60), ninety (90) or one hundred eighty (180)
days, as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in relation
to Bank's LIBOR; provided however, that no Fixed Rate Term may be
A-1
<PAGE>
selected for a principal amount less than Two Million Dollars ($2,000,000); and
provided further, that no Fixed Rate Term shall extend beyond the scheduled
maturity date hereof. If any such Fixed Rate Term would end on a day which is
not a Business Day, then the Fixed Rate Term shall be extended to the next
succeeding Business Day.
3. "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
--------------------------------
100% - LIBOR Reserve Percentage
(a) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(b) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
4. "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office in San Francisco as its Prime
Rate, with the understanding that the Prime Rate is one of the Bank'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
Bank may designate.
B. INTEREST:
1. PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
on the 1st day of each month, commencing June 1, 1996.
2. SELECTION OF INTEREST RATE OPTIONS. At any time any portion of the
outstanding principal balance of this Note bears interest determined in relation
to Bank's LIBOR, it may be
A-2
<PAGE>
continued by Borrower at the end of the Fixed Rate Term applicable thereto so
that it bears interest determined in relation to the Prime Rate or in relation
to the Bank's LIBOR for a new Fixed Rate Term designated by Borrower. At any
time any portion of the outstanding principal balance of this Note bears
interest determined in relation to the Prime Rate, Borrower may convert all or a
portion thereof so that it bears interest determined in relation to Bank's LIBOR
for a Fixed Rate Term designated by Borrower. At the time each advance is
requested hereunder or Borrower wishes to select the LIBOR option for all or a
portion of the outstanding principal balance hereof, and at the end of each
Fixed Rate Term, Borrower shall give Bank notice specifying (a) the interest
rate option selected by Borrower, (b) the principal amount subject thereto, and
(c) if the LIBOR option is selected, the length of the applicable Fixed Rate
Term. Any such notice may be given by telephone so long as, with respect to
each LIBOR option selected by Borrower, (i) Bank receives written confirmation
from Borrower not later than three (3) Business Days after such telephone notice
is given, and (ii) such notice is given to Bank prior to 10:00 a.m., California
time, on the first day of the Fixed Rate Term. If Borrower does not immediately
accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be
subject to a redetermination by Bank of the applicable fixed rate; provided,
however, that if Borrower fails to accept any such rate by 11:00 a.m.,
California time, on the Business Day such quotation is given, then the quoted
rate shall expire and Bank shall have no obligation to permit a LIBOR option to
be selected on such day. If no specific designation of interest is made at the
time any advance is requested hereunder or at the end of any Fixed Rate Term,
Borrower shall be deemed to have made a Prime Rate interest selection for such
advance or the principal amount to which such Fixed Rate Term applied.
Notwithstanding the foregoing, no more than four (4) LIBOR options may be
outstanding at any one time.
3. ADDITIONAL LIBOR PROVISIONS.
(a) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining Bank's LIBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until
such notice has been withdrawn by Bank, than (i) no new LIBOR option may be
selected by Borrower, and (ii) any portion of the outstanding principal balance
hereof which bears interest determined in relation to Bank's LIBOR, subsequent
to the end of the Fixed Rate Term applicable thereto, shall bear interest
determined in relation to the Prime Rate.
(b) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(i) to make LIBOR options available hereunder, or (ii) to maintain interest
rates based on Bank's LIBOR, then in the former event, any obligation of Bank to
A-3
<PAGE>
make available such unlawful LIBOR options shall immediately be cancelled, and
in the latter event, any such unlawful LIBOR-based interest rates then
outstanding shall be converted, at Bank's option, so that interest on the
portion of the outstanding principal balance subject thereto is determined in
relation to the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect until the
expiration of the Fixed Rate Term applicable thereto, then such permitted LIBOR-
based interest rates shall continue in effect until the expiration of such Fixed
Rate Term. Upon the occurrence of any of the foregoing events, Borrower shall
pay to Bank immediately upon demand such amounts as may be necessary to
compensate Bank for any fines, fees, charges, penalties or other costs incurred
or payable by Bank as a result thereof and which are attributable to any LIBOR
options made available to Borrower hereunder, and any reasonable allocation made
by Bank among its operations shall be conclusive and binding upon Borrower.
(c) If any Change in Law or compliance by Bank with any request for
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(i) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(ii) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank; or
(iii) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduced
any amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to any LIBOR
options made available to Borrower hereunder, any reasonable allocation made by
Bank among its operations shall be conclusive and binding upon Borrower.
(d) In addition to all other fees and charges, Borrower shall pay Bank a
LIBOR fee of $500 for each LIBOR option.
4. DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the
A-4
<PAGE>
outstanding principal balance of this Note shall bear interest until paid in
full at an increased rate per annum (computed on the basis of a 360-day year,
actual days elapsed) equal to two percent (2%) above the rate of interest from
time to time applicable to this Note.
C. BORROWING AND REPAYMENT
1. BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to time by the holder.
The outstanding principal balance of this Note shall be due and payable in full
on June 30, 1997.
2. ADVANCES. Advances hereunder, to the total amount of the principal
sum stated above, may be made by the holder at the oral or written request of
any officer acting alone until written notice of the revocation of such
authority is received by the holder at the office designated above, or any
person, with respect to advances deposited to the credit of any account of
Borrower with the holder, which advances, when so deposited, shall be
conclusively presumed to have been made to or for the benefit of Borrower
regardless of the fact that persons other than those authorized to request
advances may have authority to draw against such account. The holder shall have
no obligation to determine whether any person requesting an advance is or has
been authorized by Borrower.
3. APPLICATION OF PAYMENTS. Each payment on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation of the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to Bank's
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
4. PREPAYMENT.
(a) PRIME RATE. Borrower may repay principal on any portion of this Note
as permitted in the Loan Agreement.
(b) LIBOR. Borrower may prepay principal on any portion of the Note which
bears interest determined in relation to Bank's LIBOR at any time as permitted
in the Loan Agreement and in the
A-5
<PAGE>
minimum amount of Two Million Dollars ($2,000,000); provided however, that if
the outstanding principal balance of such portion of this Note is less than said
amount, the minimum repayment amount shall be the entire outstanding principal
balance thereof. In consideration of Bank providing this prepayment option to
Borrower, or if any such portion of this Note shall become due and payable at
any time prior to the last day of the Fixed Rate Term applicable thereto by
acceleration or otherwise, Borrower shall pay to Bank, in addition to any other
termination charges, immediately upon demand, a fee which is the sum of the
discounted monthly differences for each month from the month of prepayment
through the month in which such Fixed Rate Term matures, calculated as follows
for each such month:
(i) DETERMINE the amount of interest which would have accrued each month
on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at Bank's LIBOR
in effect on the date of repayment for new loans made for such term
and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by Bank's LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount will result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum three percent (3%) above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).
D. EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Loan Agreement between Borrower and Bank dated as of July 5, 1995,
as amended from time to time. Any default in the payment or performance of any
obligation, or any defined event of default, under said Loan Agreement shall
constitute an "Event of Default" under this Note.
A-6
<PAGE>
E. MISCELLANEOUS
1. REMEDIES. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are expressly
waived by Borrower, and the obligation, if any, of the holder to extend any
further credit hereunder shall immediately cease and terminate. Borrower shall
pay to the holder immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys' fees (to
include outside counsel fees and all allocated costs of the holder's in-house
counsel), incurred by the holder in connection with the enforcement of the
holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to any Borrower.
2. OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
3. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California, except to the extent Bank
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 Bank of any such rights and remedies as may be available under Federal
law.
IOMEGA CORPORATION
By EXHIBIT
----------------------------------
Title
----------------------------------
A-7
<PAGE>
FACILITY A REVOLVING CREDIT NOTE
$100,000,000 May 13, 1996
FOR VALUE RECEIVED, the undersigned Iomega Corporation promises to pay to
the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at
Commercial Finance Division, 9000 Flair Drive, El Monte, California, or at such
other place as the holder hereof may designate, in lawful money of the United
States of America and in immediately available funds, the principal sum of One
Hundred Million Dollars ($100,000,000), or so much thereof as may be advanced
and be outstanding, with interest thereon, to be computed on each advance from
the date of its disbursement (computed on the basis of a 360-day year, actual
days elapsed) either (i) at a fluctuating rate per annum of one-half of one
percent (0.5%) above the Prime Rate in effect from time to time, or (ii) at a
fixed rate per annum determined by Bank to be two and five-eighths percent
(2.625%) above Bank's LIBOR in effect on the first day of the applicable Fixed
Rate Term. When interest is determined in relation to the Prime Rate, each
change in the rate of interest hereunder shall become effective on the date each
Prime Rate change is announced within Bank. With respect to each LIBOR option
selected hereunder, Bank is hereby authorized to note the date, principal
amount, interest rate and Fixed Rate Term applicable thereto and any payments
made thereon Bank's books and records (either manually or by electronic entry)
and/or on any schedule attached to this Note, which notations shall be prima
facie evidence of the accuracy of the information noted.
A. DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each:
1. "Business Day" means any day except a Saturday, Sunday or any other
day designated as a holiday under Federal or California statute or regulation.
2. "Fixed Rate Term" means a period commencing on a Business Day and
continuing for thirty (30), sixty (60), ninety (90) or one hundred eighty (180)
days, as designated by Borrower, during which all or a portion of the
outstanding principal balance of this Note bears interest determined in relation
to Bank's LIBOR; provided however, that no Fixed Rate Term may be selected for a
principal amount less than Two Million Dollars ($2,000,000); and provided
further, that no Fixed Rate Term shall extend beyond the scheduled maturity date
hereof. If any such Fixed Rate Term would end on a day which is not a Business
Day, then the Fixed Rate Term shall be extended to the next succeeding Business
Day.
<PAGE>
3. "LIBOR" means the rate per annum (rounded upward, if necessary, to the
nearest whole 1/8 of 1%) and determined pursuant to the following formula:
LIBOR = Base LIBOR
-------------------------------
100% - LIBOR Reserve Percentage
(a) "Base LIBOR" means the rate per annum for United States dollar
deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the
understanding that such rate is quoted by Bank for the purpose of calculating
effective rates of interest for loans making reference thereto, on the first day
of a Fixed Rate Term for delivery of funds on said date for a period of time
approximately equal to the number of days in such Fixed Rate Term and in an
amount approximately equal to the principal amount to which such Fixed Rate Term
applies. Borrower understands and agrees that Bank may base its quotation of
the Inter-Bank Market Offered Rate upon such offers or other market indicators
of the Inter-Bank Market as Bank in its discretion deems appropriate including,
but not limited to, the rate offered for U.S. dollar deposits on the London
Inter-Bank Market.
(b) "LIBOR Reserve Percentage" means the reserve percentage
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the
Federal Reserve Board, as amended), adjusted by Bank for expected changes in
such reserve percentage during the applicable Fixed Rate Term.
4. "Prime Rate" means at any time the rate of interest most recently
announced within Bank at its principal office in San Francisco as its Prime
Rate, with the understanding that the Prime Rate is one of the Bank'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
Bank may designate.
B. INTEREST
1. PAYMENT OF INTEREST. Interest accrued on this Note shall be payable
on the 1st day of each month, commencing June 1, 1996.
2. SELECTION OF INTEREST RATE OPTIONS. At any time any portion of the
outstanding principal balance of this Note bears interest determined in relation
to Bank's LIBOR, it may be continued by Borrower at the end of the Fixed Rate
Term applicable thereto so that it bears interest determined in relation to the
Prime Rate or in relation to the Bank's LIBOR for a new Fixed Rate Term
designated by Borrower. At any time any portion of the outstanding principal
balance of this Note bears interest determined in relation to the Prime Rate,
Borrower may convert all or a portion thereof so that it bears interest
2
<PAGE>
determined in relation to Bank's LIBOR for a Fixed Rate Term designated by
Borrower. At the time each advance is requested hereunder or Borrower wishes to
select the LIBOR option for all or a portion of the outstanding principal
balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank
note specifying (a) the interest rate option selected by Borrower, (b) the
principal amount subject thereto, and (c) if the LIBOR option is selected, the
length of the applicable Fixed Rate Term. Any such notice may be given by
telephone so long as, with respect to each LIBOR option selected by Borrower,
(i) Bank receives written confirmation from Borrower not later than three (3)
Business Days after such telephone notice is given, and (ii) such notice is
given to Bank prior to 10:00 a.m., California time, on the first day of the
Fixed Rate Term. If Borrower does not immediately accept the rate quoted by
Bank, any subsequent acceptance by Borrower shall be subject to a
redetermination by Bank of the applicable fixed rate; provided, however, that if
Borrower fails to accept any such rate by 11:00 a.m., California time, on the
business Day such quotation is given, then the quoted rate shall expire and Bank
shall have no obligation to permit a LIBOR option to be selected on such day.
If no specific designation of interest is made at the time any advance is
requested hereunder or at the end of any Fixed Rate Term, Borrower shall be
deemed to have made a Prime Rate interest selection for such advance or the
principal amount to which such Fixed Rate Term applied. Notwithstanding the
foregoing, no more than four (4) LIBOR options may be outstanding at any one
time.
3. ADDITIONAL LIBOR PROVISIONS.
(a) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining Bank's LIBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until
such notice has been withdrawn by Bank, than (i) no new LIBOR option may be
selected by Borrower, and (ii) any portion of the outstanding principal
balance hereof which bears interest determined in relation to Bank's LIBOR,
subsequent to the end of the Fixed Rate Term applicable thereto, shall bear
interest determined in relation to the Prime Rate.
(b) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(i) to make LIBOR options available hereunder, or (ii) to maintain interest
rates based on Bank's LIBOR, then in the former event, any obligation of Bank to
make available such unlawful LIBOR options shall immediately be cancelled, and
in the latter event, any such unlawful LIBOR-based interest rates then
outstanding shall be converted, at Bank's option, so that interest on the
portion of the outstanding principal balance subject thereto is determined in
relation to the Prime Rate; provided however, that if any such Change in Law
shall permit any LIBOR-based interest rates to remain in effect
3
<PAGE>
until the expiration of the Fixed Rate Term applicable thereto, then such
permitted LIBOR-based interest rates shall continue in effect until the
expiration of such Fixed Rate Term. Upon the occurrence of any of the foregoing
events, Borrower shall pay to Bank immediately upon demand such amounts as may
be necessary to compensate Bank for any fines, fees, charges, penalties or other
costs incurred or payable by Bank as a result thereof and which are attributable
to any LIBOR options made available to Borrower hereunder, and any reasonable
allocation made by Bank among its operations shall be conclusive and binding
upon Borrower.
(c) If any Change in Law or compliance by Bank with any request for
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(i) subject Bank to any tax, duty or other charge with respect to any
LIBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(ii) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of, advances or
loans by, or any other acquisition of funds by any office of Bank; or
(iii) impose on Bank any other condition;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any LIBOR options hereunder and/or to reduced
any amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to any LIBOR
options made available to Borrower hereunder, any reasonable allocation made by
Bank among its operations shall be conclusive and binding upon Borrower.
(d) In addition to all other fees and charges, Borrower shall pay Bank a
LIBOR fee of $500 for each LIBOR option.
4. DEFAULT INTEREST. From and after the maturity date of this Note, or
such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, the outstanding principal balance of this Note shall
bear interest until paid in full at an increased rate per annum (computed on the
basis of a 360-day year, actual days elapsed) equal to two percent (2%) above
the rate of interest from time to time applicable to this Note.
4
<PAGE>
C. BORROWING AND REPAYMENT
1. BORROWING AND REPAYMENT. Borrower may from time to time during the
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and reborrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with this Note; provided
however, that the total outstanding borrowings under this Note shall not at any
time exceed the principal amount stated above. The unpaid principal balance of
this obligation at any time shall be the total amounts advanced hereunder by the
holder hereof less the amount of principal payments made hereon by or for any
Borrower, which balance may be endorsed hereon from time to time by the
holder. The outstanding principal balance of this Note shall be due and
payable in full on June 30, 1997.
2. ADVANCES. Advances hereunder, to the total amount of the principal sum
stated above, may be made by the holder at the oral or written request of any
officer acting alone until written notice of the revocation of such authority is
received by the holder at the office designated above, or any person, with
respect to advances deposited to the credit of any account of Borrower with the
holder, which advances, when so deposited, shall be conclusively presumed to
have been made to or for the benefit of Borrower regardless of the fact that
persons other than those authorized to request advances may have authority to
draw against such account. The holder shall have no obligation to determine
whether any person requesting an advance is or has been authorized by Borrower.
3. APPLICATION OF PAYMENTS. Each payment on this Note shall be credited
first, to any interest then due and second, to the outstanding principal balance
hereof. All payments credited to principal shall be applied first, to the
outstanding principal balance of this Note which bears interest determined in
relation to the Prime Rate, if any, and second, to the outstanding principal
balance of this Note which bears interest determined in relation to Bank's
LIBOR, with such payments applied to the oldest Fixed Rate Term first.
4. PREPAYMENT.
(a) PRIME RATE. Borrower may repay principal on any portion of this Note
as permitted in the Loan Agreement.
(b) LIBOR. Borrower may prepay principal on any portion of the Note which
bears interest determined in relation to Bank's LIBOR at any time as permitted
in the Loan Agreement and in the minimum amount of Two Million Dollars
($2,000,000); provided however, that if the outstanding principal balance of
such portion of this Note is less than said amount, the minimum repayment amount
shall be the entire outstanding principal balance thereof. In consideration of
Bank providing this prepayment option to Borrower, or if any such portion of
this
5
<PAGE>
Note shall become due and payable at any time prior to the last day of the Fixed
Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to
Bank, in addition to any other termination charges, immediately upon demand, a
fee which is the sum of the discounted monthly differences for each month from
the month of prepayment through the month in which such Fixed Rate Term matures,
calculated as follows for each such month:
(i) DETERMINE the amount of interest which would have accrued each month
on the amount prepaid at the interest rate applicable to such amount
had it remained outstanding until the last day of the Fixed Rate Term
applicable thereto.
(ii) SUBTRACT from the amount determined in (i) above the amount of
interest which would have accrued for the same month on the amount
prepaid for the remaining term of such Fixed Rate Term at Bank's LIBOR
in effect on the date of repayment for new loans made for such term
and in a principal amount equal to the amount prepaid.
(iii) If the result obtained in (ii) for any month is greater than zero,
discount that difference by Bank's LIBOR used in (ii) above.
Borrower acknowledges that prepayment of such amount will result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum three percent (3%) above the Prime
Rate in effect from time to time (computed on the basis of a 360-day year,
actual days elapsed).
D. EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Loan Agreement between Borrower and Bank dated as of July 5, 1995,
as amended from time to time. Any default in the payment or performance of any
obligation, or any defined event of default, under said Loan Agreement shall
constitute an "Event of Default" under this Note.
E. MISCELLANEOUS
1. REMEDIES. Upon the occurrence of any Event of Default, the holder of
this Note, at the holder's option, may declare all sums of principal and
interest outstanding hereunder to be immediately due and payable without
presentment, demand, protest
6
<PAGE>
or notice of dishonor, all of which are expressly waived by Borrower, and the
obligation, if any, of the holder to extend any further credit hereunder shall
immediately cease and terminate. Borrower shall pay to the holder immediately
upon demand the full amount of all payments, advances, charges, costs and
expenses, including reasonable attorneys' fees (to include outside counsel fees
and all allocated costs of the holder's in-house counsel), incurred by the
holder in connection with the enforcement of the holder's rights and/or the
collection of any amounts which become due to the holder under this Note, and
the prosecution or defense of any action in any way related to this Note,
including without limitation, any action for declaratory relief, and including
any of the foregoing incurred in connection with any bankruptcy proceeding
relating to any Borrower.
2. OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
3. GOVERNING LAW. This Note shall be governed by and construed in
accordance with the laws of the State of California, except to the extent Bank
has greater rights or remedfies under Federal law, whether as a national bank or
otherwise, in which case such choice of California law shall not be deemed to
deprive Bank of any such rights and remedies as may be available under Federal
law.
IOMEGA CORPORATION
By /s/ Robert J. Simmons
-------------------------------
Title Treasurer
------------------------------
7
<PAGE>
May 13, 1996
Iomega Corporation
1821 West Iomega Way
Roy, Utah 84067
Attention: Robert J. Simmons, Treasurer
Re: AMENDMENT TO LOAN AGREEMENT
Dear Mr. Simmons:
Reference is made to that certain Loan Agreement dated as of July 5,
1995 (the "LOAN AGREEMENT"), and to that certain Sixth Amendment thereto dated
on or about the date hereof (the "SIXTH AMENDMENT"). Capitalized terms used but
not defined herein shall have the meanings given them in the Loan Agreement.
In consideration for Lender's entering into the Sixth Amendment,
Borrower shall pay to Lender on the Effective Date (as defined in the Sixth
Amendment) an agency fee in the amount of $50,000, which fee shall be solely for
the account of Wells Fargo Bank, N.A. (the "AGENCY FEE"). The Agency Fee shall
be in addition to all other fees and charges payable in connection with the
Sixth Amendment, and receipt thereof by Lender shall be a condition precedent to
the effectiveness of the Sixth Amendment.
If the foregoing accurately sets forth our agreement, please sign
this letter where indicated below and return it to the undersigned.
Very truly yours,
WELLS FARGO BANK, NATIONAL
ASSOCIATION
By:
----------------------------
Title:
-------------------------
All of the foregoing is
accepted and agreed to as
May 13, 1996:
IOMEGA CORPORATION
By: /s/ Robert J. Simmons
--------------------------------
Title: Treasurer
-----------------------------
<PAGE>
EXHIBIT 10.32
BLDG: Milpitas 8
LEASE AGREEMENT OWNER: 500
PROP: 208
UNIT: 1
TENANT: 20803
THIS LEASE, made this 8th day of December, 1995 between JOHN ARRILLAGA,
Trustee, or his Successor Trustee, UTA dated 7/20/77 (ARRILLAGA FAMILY TRUST)
as amended, and RICHARD T. PEERY, Trustee, or his Successor Trustee, UTA
dated 7/20/77 (RICHARD T. PEERY SEPARATE PROPERTY TRUST) as amended,
hereinafter called Landlord, and IOMEGA CORPORATION, a Delaware corporation,
hereinafter called Tenant.
WITNESSETH:
Landlord hereby leases to Tenant and Tenant hereby hires and takes from
Landlord those certain premises (the "Premises") outlined in red on Exhibit
"A", attached hereto and incorporated herein by this reference thereto more
particularly described as follow:
All of that certain 51,600+ square foot, one-story building located at 800
Tasman Drive, Milpitas, California 95035. Said Premises leased hereunder,
is more particularly shown within the area outlined in Red on EXHIBIT A
attached hereto. The entire parcel, of which the Premises is a part, is shown
within the area outlined in Green on EXHIBIT A attached hereto. Subject to
Paragraph 49, the Premises is leased on an "as-is" basis, in its present
condition, and in the configuration as shown in Red on EXHIBIT B to be
attached hereto.
The interior of the building leased hereunder shall be improved by Landlord
and leased by Tenant in the configuration as shown in Red on EXHIBIT B to be
attached hereto.
As used herein the Complex shall mean and include all of the land outlined in
Green and described in Exhibit "A" attached hereto, and all of the buildings,
improvements, fixtures and equipment now or hereafter situated on said land.
Said letting and hiring is upon the subject to the terms, covenants and
conditions hereinafter set forth and Tenant covenants as a material part of
the consideration for this Lease to perform and observe each and all of said
terms, covenants and conditions. This Lease is made upon the conditions of
such performance and observance.
1. USE Tenant shall use the Premises only in conformance with applicable
governmental laws, regulations, rules and ordinances for the purpose of
general office, light manufacturing, research and development, and storage
and other uses necessary for Tenant to conduct Tenant's business, provided
that such uses shall be in accordance with all applicable governmental laws
and ordinances, and for no other purpose. Tenant shall not do or permit to be
done in or about the Premises or the Complex nor bring or keep or permit to
be brought or kept in or about the Premises or the Complex anything which is
prohibited by or will in any way increase the existing rate of (or otherwise
affect) fire or any insurance covering the Complex or any part thereof, or
any of its contents, or will cause a cancellation of any insurance covering
the Complex or any part thereof, or any of its contents. Tenant shall not do
or permit to be done anything in, on or about the Premises or the Complex
which will in any way obstruct or interfere with the rights of other tenants
or occupants of the Complex or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or
about the Premises or the Complex. No sale by auction shall be permitted on
the Premises. Tenant shall not place any loads upon the floors, walls, or
ceiling, which endanger the structure, or place any harmful fluids or other
materials in the drainage system of the building, or overload existing
electrical or other mechanical systems. No waste materials or refuse shall be
dumped upon or permitted to remain upon any part of the Premises or outside
of the building in which the Premises are a part, except in trash containers
placed inside exterior enclosures designated by Landlord for that purpose or
inside of the building proper where designated by Landlord. No materials,
supplies, equipment, finished products or semi-finished products, raw
materials or articles of any nature shall be stored upon or permitted to
remain outside the Premises or on any portion of common area of the Complex.
No loudspeaker or other device, system or apparatus which can be heard
outside the Premises shall be used in or at the Premises without the prior
written consent of Landlord. Tenant shall not commit or suffer to be
committed any waste in or upon the Premises. Tenant shall indemnify, defend
and hold Landlord harmless against any loss, expense, damage, attorneys'
fees, or liability arising out of failure of Tenant to comply with any
applicable law. Tenant shall comply with any covenant, condition, or
restriction ("CC&R's") affecting the Premises. The provisions of this
paragraph are for the benefit of Landlord only and shall not be construed to
be for the benefit of any tenant or occupant of the Complex.
2. TERM*
A. The term of this Lease shall be for a period of FIVE (5) years (unless
sooner terminated as hereinafter provided) and, subject to Paragraphs 2(B)
and 3, shall commence on the 1st day of January, 1996 and end on the 31st day
December, of 2000.
B. Possession of the Premises shall be deemed tendered and the term of
this Lease shall commence when the first of the following occurs:
(a) One day after a Certificate of Occupancy is granted by the proper
governmental agency, or, if the governmental agency having jurisdiction over
the area in which the Premises are situated does not issue certificates of
occupancy, then the same number of days after certification by Landlord's
architect or contractor that Landlord's construction work has been completed;
or
(b) Upon the occupancy of the Premises by any of Tenant's operating
personnel; or
(c) When the Tenant Improvements have been substantially completed for
Tenant's use and occupancy, in accordance and compliance with Exhibit B of
this Lease Agreement; or
(d) As otherwise agreed in writing.
3. POSSESSION If Landlord, for any reason whatsoever, cannot deliver
possession of said premises to Tenant at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable; no
obligation of Tenant shall be affected thereby; nor shall Landlord or
Landlord's agents be liable to Tenant for any loss or damage resulting
therefrom; but in that event that commencement and termination dates of the
Lease, and all other dates affected thereby shall be revised to conform to
the date of Landlord's delivery of possession, as specified in Paragraph
2(b), above. The above is, however, subject to the provision that the period
of delay, of delivery of the premises shall not exceed 60 days from the
commencement date herein (except those delays caused by Acts of God, strikes,
war, utilities, governmental bodies, weather, unavailable materials, and
delays beyond Landlord's control shall be excluded in calculating such
period) in which instance Tenant, at its option, may, by written notice to
Landlord, terminate this Lease.
* It is agreed in the event said Lease commences on a date other than the
first day of the month the term of the Lease will be extended to account for
the number of days in the partial month. The Basic Rent during the resulting
partial month will be pro-rated (for the number of days in the partial month)
at the Basic Rent scheduled for the projected commencement date as shown in
Paragraph 43.
page 1 of 8
<PAGE>
4. RENT
A. BASIC RENT. Tenant agrees to pay to Landlord at such place as Landlord
may designate without deduction, offset, prior notice, or demand, and
Landlord agrees to accept as Basic Rent for the leased Premises the total sum
of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND NO/100 ($3,870,000.00)
Dollars in lawful money of the United States of America, payable as follows:
See paragraph 43 for Basic Rent Schedule
B. TIME FOR PAYMENT. In the event that the term of this Lease commences
on a date other than the first day of a calendar month, on the date of
commencement of the term hereof Tenant shall pay to Landlord as rent for the
period from such date of commencement to the first day of the next succeeding
calendar month that proportion of the monthly rent hereunder which the number
of days between such date of commencement and the first day of the next
succeeding calendar month bears to thirty (30). In the event that the term of
this Lease for any reason ends on a date other than the last day of a
calendar month, on the first day of the last calendar month of the term
hereof Tenant shall pay to Landlord as rent for the period from said first
day of said last calendar month to and including the last day of the term
hereof that proportion of the monthly rent hereunder which the number of days
between said first day of said last calendar monty and the last day of the
term hereof bears to thirty (30).
C. LATE CHARGE. Notwithstanding any other provision of this Lease, if
Tenant is in default in the payment of rental as set forth in this Paragraph
4 when due, or any part thereof, Tenant agrees to pay Landlord, in addition
to the delinquent rental due, a late charge for each rental payment in
default ten (10) days. Said late charge shall equal ten (10%) percent of each
rental payment so in default.
D. ADDITIONAL RENT. Beginning with the commencement date of the term of
this Lease, Tenant shall pay to Landlord in addition to the Basic Rent and as
Additional Rent the following:
(a) Tenant's proportionate share of all Taxes relating to the Complex as
set forth in Paragraph 12, and
(b) Tenant's proportionate share of all insurance premiums relating to the
Complex, as set forth in Paragraph 15, and
(c) Tenant's proportionate share of expenses for the operation,
management, maintenance and repair of the Building (including common
areas of the Building) and Common Areas of the Complex in which the
Premises are located as set forth in Paragraph 7, and
(d) All charges, costs and expenses, which Tenant is required to pay
hereunder, together with all interest and penalties, costs and
expenses including attorneys' fees and legal expenses, that may accrue
thereto in the event of Tenant's failure to pay such amounts, and all
damages, reasonable costs and expenses which Landlord may incur by
reason of default of Tenant or failure on Tenant's part to comply with
the terms of this Lease. In the event of nonpayment by Tenant of
Additional Rent, Landlord shall have all the rights and remedies with
respect thereto as Landlord has for nonpayment of rent.
The Additional Rent due hereunder shall be paid to Landlord or Landlord's
agent (i) within five days for taxes and insurance and within thirty (30)
days for all other Additional Rent items after presentation of invoice from
Landlord or Landlord's agent setting forth such Additional Rent and/or (ii)
at the option of Landlord. Tenant shall pay to Landlord monthly, in advance,
Tenant's prorata share of an amount estimated by Landlord to be Landlord's
approximate average monthly expenditure for such Additional Rent items, which
estimated amount shall be reconciled within 120 days of the end of each
calendar year or more frequently if Landlord so elects to do so at Landlord's
sole and absolute discretion, as compared to Landlord's actual expenditure
for said Additional Rent items, with Tenant paying to Landlord, upon demand,
any amount of actual expenses expended by Landlord in excess of said
estimated amount, or Landlord refunding to Tenant (providing Tenant is not in
default in the performance of any of the terms, covenants and conditions of
this Lease) any amount of estimated payments made by Tenant in excess of
Landlord's actual expenditures for said Additional Rent items.
The respective obligations of Landlord and Tenant under this paragraph
shall survive the expiration or other termination of the term of this Lease,
and if the term hereof shall expire or shall otherwise terminate on a day
other than the last day of a calendar year, the actual Additional Rent
incurred for the calendar year in which the term hereof expires or otherwise
terminates shall be determined and settled on the basis of the statement of
actual Additional Rent for such calendar year and shall be prorated in the
proportion which the number of days in such calendar year preceding such
expiration or termination bears to 365.
E. PLACE OF PAYMENT OF RENT AND ADDITIONAL RENT. All Basic Rent hereunder
and all payments hereunder for Additional Rent shall be paid to Landlord at
the office of Landlord at Peery/Arrillaga, File 1504, Box 60000, San
Francisco, CA 94160 or to such other person or to such other place as
Landlord may from time to time designate in writing.
F. SECURITY DEPOSIT. Concurrently with Tenant's execution of this Lease,
Tenant shall deposit with Landlord the sum of ONE HUNDRED THIRTY NINE
THOUSAND THREE HUNDRED TWENTY AND NO/100 ($139,320.00) Dollars. Said sum
shall be held by Landlord as a Security Deposit for the faithful performance
by Tenant of all of the terms, covenants, and conditions of this Lease to be
kept and performed by Tenant during the term hereof. If Tenant defaults with
respect to any provision of this Lease, including, but not limited to, the
provisions relating to the payment of rent and any of the monetary sums due
herewith, Landlord may (but shall not be required to) use, apply or retain
all or any part of this Security Deposit for the payment of any other amount
which Landlord may spend by reason of Tenant's default or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant's default. If any portion of said Deposit is so used or applied,
Tenant shall, within ten (10) days after written demand therefor, deposit cash
with Landlord in the amount sufficient to restore the Security Deposit to its
original amount. Tenant's failure to do so shall be a material breach of this
Lease. Landlord shall not be required to keep this Security Deposit separate
from its general funds, and Tenant shall not be entitled to interest on such
Deposit. If Tenant fully and faithfully performs every provision of this
Lease to be performed by it, the Security Deposit or any balance thereof
shall be returned to Tenant (or at Landlord's option, to the last assignee of
Tenant's interest hereunder) at the expiration of the Lease term and after
Tenant has vacated the Premises. In the event of termination of Landlord's
interest in this Lease, Landlord shall transfer said Deposit to Landlord's
successor in interest whereupon Tenant agrees to release Landlord from
liability for the return of such Deposit or the accounting therefor.
5. RULES AND REGULATIONS AND COMMON AREA Subject to the terms and
conditions of this Lease and such Rules and Regulations as Landlord may from
time to time prescribe, Tenant and Tenant's employees, invitees and customers
shall, in common with other occupants of the Complex in which the Premises
are located, and their respective employees, invitees and customers, and
others entitled to the use thereof, have the non-exclusive right to use the
access roads, parking areas, and facilities provided and designated by
Landlord for the general use and convenience of the occupants of the Complex
in which the Premises are located, which areas and facilities are referred to
herein as "Common Area". This right shall terminate upon the termination of
this Lease, Landlord reserves the right from time to time to make changes in
the shape, size, location, amount and extent of Common Area. Landlord further
reserves the right to promulgate such reasonable rules and regulations
relating to the use of the Common Area, and any part or parts thereof, as
Landlord may deem appropriate for the best interests of the occupants of the
Complex. The Rules and Regulations shall be binding upon Tenant upon delivery
of a copy of them to Tenant, and Tenant shall abide by them and cooperate in
their observance. Such Rules and Regulations may be amended by Landlord from
time to time, with or without advance notice, and all amendments shall be
effective upon delivery of a copy to Tenant. Landlord shall not be
responsible to Tenant for the non-performance by any other tenant or occupant
of the Complex of any of said Rules and Regulations.
Landlord shall operate, manage and maintain the Common Area. The manner in
which the Common Area shall be maintained and the expenditures for such
maintenance shall be at the discretion of the Landlord.
page 2 of 8
<PAGE>
6. PARKING Tenant shall have the right to use with other tenants or
occupants of the Complex 181 parking spaces and (12) exclusive spaces as
shown in Orange on Exhibit A in the common parking areas of the Complex.
Tenant agrees, that Tenant, Tenant's employees, agents, representatives
and/or invitees shall not use parking spaces in excess of said 181 spaces
allocated to Tenant hereunder. Landlord shall have the right, at Landlord's
sole discretion, to specifically designate the location of Tenant's parking
spaces within the common parking areas of the Complex in the event of a
dispute among the tenants occupying the building and/or Complex referred to
herein, in which event Tenant agrees that Tenant, Tenant's employees, agents,
representatives and/or invitees shall not use any parking spaces other than
those parking spaces specifically designated by Landlord for Tenant's use.
Said parking spaces, if specifically designated by Landlord to Tenant, may be
relocated by Landlord at any time, and from time to time, Landlord reserves
the right, at Landlord's sole discretion, to rescind any specific designation
of parking spaces, thereby returning Tenant's parking spaces to the common
parking area. Landlord shall give Tenant written notice of any change in
Tenant's parking spaces, Tenant shall not, at any time, park, or permit to be
parked, any trucks or vehicles adjacent to the loading areas so as to
interfere in any way with the use of such areas, nor shall Tenant at any time
park, or permit the parking of Tenant's trucks or other vehicles or the
trucks and vehicles of Tenant's suppliers or others, in any portion of the
common area not designated by Landlord for such use by Tenant. Tenant shall
not park nor permit to be parked, any inoperative vehicles or equipment on
any portion of the common parking area or other common areas of the Complex.
Tenant agrees to assume responsibility for compliance by its employees with
the parking provision contained herein. If Tenant or its employees park in
other than such designated parking areas, then Landlord may charge Tenant, as
an additional charge, and Tenant agrees to pay, ten ($10.00) Dollars per day
for each day or partial day each such vehicle is parked in any area other
than that designated. Tenant hereby authorizes Landlord at Tenant's sole
expense to tow away from the Complex any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions, or to attach
violation stickers or notices to such vehicles. Tenant shall use the parking
areas for vehicle parking only, and shall not use the parking areas for
storage.
7. EXPENSES OF OPERATION, MANAGEMENT, AND MAINTENANCE OF THE COMMON AREAS OF
THE COMPLEX As Additional Rent and in accordance with Paragraph 4 D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share (calculated
on a square footage or other equitable basis as calculated by Landlord) or
all expenses of the operation, management, maintenance and repair of the
Common Areas of the Complex including, but not limited to, license, permit,
and inspection fees; security; utility charges associated with exterior
landscaping and lighting (including water and sewer charges); all charges
incurred in the maintenance of landscaped areas, lakes, parking lots,
sidewalks, driveways; maintenance, repair and replacement of all fixtures and
electrical, mechanical, and plumbing systems; structural elements and
exterior surfaces of the buildings; salaries and employee benefits of
personnel and payroll taxes applicable thereto; supplies, materials,
equipment and tools; the cost of capital expenditures which have the effect
of reducing operating expenses, provided, however, that in the event Landlord
makes such capital improvements, Landlord may amortize its investment in said
improvements (together with interest at the rate of fifteen (15%) percent per
annum the unamortized balance) as an operating expense in accordance with
standard accounting practices, provided, that such amortization is not at a
rate greater than the anticipated savings in the operating expenses.
"Additional Rent" as used herein shall not include Landlord's debt
repayments; interest on charges; expenses directly or indirectly incurred by
Landlord for the benefit of any other tenant; costs for the installation of
partitioning or any other tenant improvements; cost of attracting tenants;
depreciation; interest, or executive salaries.
8. ACCEPTANCE AND SURRENDER OF PREMISES Except as otherwise noted herein, by
entry hereunder, Tenant accepts the Premises as being in good and sanitary
order, condition and repair and accepts the building and improvements
included in the Premises in their present condition and without
representation or warranty by Landlord as to the condition of such building
or as to the use or occupancy which may be made thereof. Any exceptions to
the foregoing must be by written agreement executed by Landlord and Tenant.
Tenant agrees on the last day of the Lease term, or on the sooner termination
of this Lease, to surrender the Premises promptly and peaceably to Landlord
in good condition and repair (damage by Acts of God, fire, normal wear and
tear excepted), with all interior walls painted, or cleaned so that they
appear freshly painted, and repaired and replaced, if damaged; all floors
cleaned and waxed; all carpets cleaned and shampooed; the airconditioning and
heating equipment serviced by a reputable and licensed service firm and in
good operating condition (provided the maintenance of such equipment has been
Tenant's responsibility during the term of this Lease) together with all
alterations, additions, and improvements which may have been made in, to, or
on the Premises (except movable trade fixtures installed at the expense of
Tenant) except that Tenant shall ascertain from Landlord within thirty (30)
days before the end of the term of this Lease whether Landlord desires to
have the Premises or any part or parts thereof restored to their condition
and configuration as when the Premises were delivered to Tenant and if
Landlord shall so desire, then Tenant shall restore said Premises or such
part or parts thereof before the end of this Lease at Tenant's sole cost and
expense. Tenant, on or before the end of the term or sooner termination of
this Lease, shall remove all of Tenant's personal property and trade fixtures
from the Premises, and all property not so removed on or before the end of
the term or sooner termination of this Lease shall be deemed abandoned by
Tenant and title to same shall thereupon pass to Landlord without
compensation to Tenant. Landlord may, upon termination of this Lease, remove
all moveable furniture and equipment so abandoned by Tenant, at Tenant's sole
cost, and repair any damage caused by such removal at Tenant's sole cost. If
the Premises be not surrendered at the end of the term or sooner termination
of this Lease, Tenant shall indemnify Landlord against loss or liability
resulting from the delay by Tenant in so surrendering the Premises including,
without limitation, any claims made by any succeeding tenant founded on such
delay. Nothing contained herein shall be construed as an extension of the term
hereof or as a consent of Landlord to any holding over by Tenant. The
voluntary or other surrender of this Lease or the Premises by Tenant or a
mutual cancellation of this Lease shall not work as a merger and, at the
option of Landlord, shall either terminate all or any existing subleases or
subtenancies or operate as an assignment to Landlord of all or any such
subleases or subtenancies.
9. ALTERNATIONS AND ADDITIONS Tenant shall not make, or suffer to be made,
any alteration or addition to the Premises, or any part thereof, without the
written consent of Landlord first had and obtained by Tenant, but at the
cost of Tenant, and any addition to, or alteration of, the Premises, except
moveable furniture and trade fixtures, shall at once become a part of the
Premises and belong to Landlord. Landlord reserves the right to approve all
contractors and mechanics proposed by Tenant to make such alterations and
additions. Tenant shall retain title to all moveable furniture and trade
fixtures placed in the Premises. All heating, lighting, electrical,
airconditioning, floor to ceiling partitioning, drapery, carpeting, and floor
installations made by Tenant, together with all property that has become an
integral part of the Premises, shall not be deemed trade fixtures. Tenant
agrees that it will not proceed to make such alteration or additions, without
having obtained consent from Landlord to do so, and until five (5) days from
the receipt of such consent, in order that Landlord may post appropriate
notices to avoid any liability to contractors or material suppliers for
payment for Tenant's improvements. Tenant will at all times permit such
notices to be posted and to remain posted until the completion of work.
Tenant shall, if required by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, satisfactory to Landlord, for
such work. Tenant further covenants and agrees that any mechanic's lien filed
against the Premises or against the Complex for work claimed to have been
done for, or materials claimed to have been furnished to Tenant, will be
discharged by Tenant, by bond or otherwise, within ten (10) days after the
filing thereof, at the cost and expense of Tenant. Any exceptions to the
foregoing must be made in writing and executed by both Landlord and Tenant.
10. TENANT MAINTENANCE Except as otherwise noted herein, Tenant shall, at
its sole cost and expense, keep and maintain the Premises (including
appurtenances) and every part thereof in a high standard of maintenance and
repair, and in good and sanitary condition. Tenant's maintenance and repair
responsibilities herein referred to include, but are not limited to, all
windows, window frames, plate glass, glazing, truck doors, plumbing systems
(such as water and drain lines, sinks, toilets, faucets, drains, showers and
water fountains), electrical systems (such as panels, conduits, outlets,
lighting fixtures, lamps, bulbs, tubes, ballasts), heating and
air-conditioning systems (such as compressors, fans, air handlers, ducts,
mixing boxes, thermostats, time clocks, boilers, heaters, supply and return
grills), store fronts, roofs, downspouts, all interior improvements within
the premises including but not limited to wall coverings, window coverings,
carpet (damage to the carpet resulting from Tenant's failure to use carpet
shields shall not be considered normal wear and tear), floor coverings,
partitioning, ceilings, doors (both interior and exterior, including closing
mechanisms, latches, locks, skylights (if any), automatic fire extinguishing
systems, and elevators and all other interior improvements of any nature
whatsoever. Areas of excessive wear shall be replaced at Tenant's sole
expense upon Lease termination. Tenant hereby waivers all rights under, and
benefits of, subsection 1 of Section 1932 and Section 1941 and 1942 of the
California Civil Code and under any similar law, stature or ordinance now or
hereafter in effect.
11. UTILITIES Tenant shall pay promptly, as the same become due, all charges
for water, gas, electricity, telephone, telex and other electronic
communications service, sewer service, waste pick-up and any other utilities,
materials or services furnished directly to or used by Tenant on or about the
Premises during the term of this Lease, including, without limitation, any
temporary or permanent utility surcharge or other exactions whether or not
hereinafter imposed.
Landlord shall not be liable for and Tenant shall not be entitled to any
abatement or reduction of rent by reason of any interruption or failure of
utility services to the Premises when such interruption or failure is caused
by accident, breakage, repair, strikes, lockouts, or other labor disburbances
or labor disputes of any nature, or by any other cause, similar or
dissimilar, beyond the reasonable control of Landlord.
12. TAXES A. As Additional Rent and in accordance with Paragraph 4 D of this
Lease, Tenant shall pay to Landlord Tenant's proportionate share of all Real
Property Taxes, which prorata share shall be allocated to the leased Premises
by square footage or other equitable basis, as calculated by Landlord. The
term "Real Property Taxes" as used herein, shall mean (i) all taxes,
assessments, levies and other charges of any kind or nature whatsoever,
general and special, foreseen and unforeseen (including all installments of
principal and interest required to pay any general or special assessments for
public improvements and any increases resulting from reassessments caused by
page 3 of 8
<PAGE>
any change in ownership of the Complex) now or hereafter imposed by any
governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of, all or
any portion of the Complex (as now constructed or as may at any time
hereafter be constructed, altered, or otherwise changed) or Landlord's
interest therein; any improvements located within the Complex (regardless of
ownership); the fixtures, equipment and other property of Landlord, real or
personal, that are an integral part of and located in the Complex; or parking
areas, public utilities, or energy within the Complex; (ii) all charges,
levies or fees imposed by reason of environmental regulation or other
governmental control the Complex; and (iii) all costs and fees (including
attorneys' fees) incurred by Landlord in contesting any Real Property Tax and
in negotiating with public authorities as to any Real Property Tax. If at any
time during the term of this Lease the taxation or assessment of the Complex
prevailing as of the commencement date of this Lease shall be altered so that
in lieu of or in addition to any Real Property Tax described above there
shall be levied, assessed or imposed (whether by reason of a change in the
method of taxation or assessment, creation of a new tax or charge, or any
other cause) an alternate or additional tax or charge (i) on the value, use
or occupancy of the Complex or Landlord's interest therein or (ii) on or
measured by the gross receipts, income or rentals from the Complex, on
Landlord's business of leasing the Complex, or computed in any manner with
respect to the operation of the Complex, then any such tax or charge, however
designated, shall be included within the meaning of the term "Real Property
Taxes" for purposes of this Lease. If any Real Property Tax is based upon
property or rents unrelated to the Complex, then only that part of such real
Property Tax that is fairly allocable to the Complex shall be included within
the meaning of the term "Real Property Taxes". Notwithstanding the foregoing,
the term "Real Property Taxes" shall not include estate, inheritance, gift
or franchise taxes of Landlord or the federal or state net income tax imposed
on Landlord's income from all sources.
B. TAXES ON TENANT'S PROPERTY
(a) Tenant shall be liable for and shall pay ten days before delinquency,
taxes levied against any personal property or trade fixtures placed by Tenant
in or about the Premises. If any such taxes on Tenant's personal property or
trade fixtures are levied against Landlord or Landlord's property or if the
assessed value of the Premises is increased by the inclusion therein of a
value placed upon such personal property or trade fixtures of Tenant and if
Landlord, after written notice to Tenant, pays the taxes based on such
increased assessment, which Landlord shall have the right to do regardless of
the validity thereof, but only under proper protest if requested by Tenant,
Tenant shall upon demand, as the case may be, repay to Landlord the taxes so
levied against Landlord, or the proportion of such taxes resulting from such
increase in the assessment; provided that in any such event Tenant shall have
the right, in the name of Landlord and with Landlord's full cooperation, to
bring suit in any court of competent jurisdiction to recover the amount of any
such taxes so paid under protest, and any amount so recovered shall belong to
Tenant.
(b) if the Tenant improvements in the Premises, whether installed, and/or
paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which standard office
improvements in other space in the Complex are assessed, then the real
property taxes and assessments levied against Landlord or the Complex by
reason of such excess assessed valuation shall be deemed to be taxes levied
against personal property of Tenant and shall be governed by the provisions
of 12Ba above. If the records of the County Assessor are available and
sufficiently detailed to serve as a basis for determining whether said Tenant
improvements are assessed at a higher valuation than standard office
improvements in other space in the Complex, such records shall be binding on
both the Landlord and the Tenant. If the records of the County Assessor are
not available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.
13. LIABILITY INSURANCE Tenant, at Tenant's expense, agrees to keep in force
during the term of this Lease a policy of commercial general insurance with
combined single limit coverage of not less than Two Million dollars
($2,000,000) for injuries to or death of persons occurring in, on or about
the Premises or the Complex, and property damage insurance with limits of
$500,000. The policy or policies affecting such insurance, certificates of
insurance of which shall be furnished to Landlord, shall name Landlord as
additional insureds, and shall insure any liability of Landlord, contingent
or otherwise, as respects acts or omissions of Tenant, its agents, employees
or invitees or otherwise by any conduct or transactions of any of said
persons in or about or concerning the Premises, including any failure of
Tenant to observe or perform any of its obligations hereunder; shall be
issued by an insurance company admitted to transact business in the State of
California; and shall provide that the insurance effected thereby shall not
be canceled, except upon thirty (30) days' prior written notice to Landlord.
If, during the term of this Lease, in the considered opinion of Landlord's
Lender, insurance advisor, or counsel, the amount of insurance described in
this paragraph 13 is not adequate, Tenant agrees to increase said coverage to
such reasonable amount as Landlord's Lender, insurance advisor, or counsel
shall deem adequate.
14. TENANT'S PERSONAL PROPERTY INSURANCE AND WORKMAN'S COMPENSATION INSURANCE
Tenant shall maintain a policy or policies of fire and property damage
insurance in "all risk" form with a sprinkler leakage endorsement insuring
the personal property, inventory, trade fixtures, and leasehold improvements
within the leased premises for the full replacement value thereof. The
proceeds from any of such policies shall be used for the repair or
replacement of such items so insured.
Tenant shall also maintain a policy or policies of workman's compensation
insurance and any other employee benefit insurance sufficient to comply with
all laws.
15. PROPERTY INSURANCE Landlord shall purchase and keep in force and as
Additional Rent and in accordance with Paragraph 4D of this Lease. Tenant
shall pay to Landlord (or Landlord's agent if so directed by Landlord)
Tenant's proportionate share (calculated on a square footage or other
equitable basis as calculated by Landlord) of the deductibles on insurance
claims and the cost of policy or policies of insurance covering loss or
damage to the Premises and Complex in the amount of the full replacement
value thereof, providing protection against those perils included within the
classification of "all risks" insurance and flood and/or earthquake
insurance, if available, plus a policy of rental income insurance in the
amount of one hundred (100%) percent of twelve (12) months Basic Rent, plus
sums paid as Additional rent and any deductibles related thereto. If such
insurance cost is increased due to Tenant's use of the Premises or the
Complex, Tenant agrees to pay to Landlord the full cost of such increase.
Tenant shall have no interest in nor any right to the proceeds of any
insurance procured by Landlord for the Complex.
Landlord and Tenant do each hereby respectively release the other, to the
extent of insurance coverage of the releasing party, from any liability for
loss or damage caused by fire or any of the extended coverage casualties
included in the releasing party's insurance policies, irrespective of the
cause of such fire or casualty; provided, however, that if the insurance
policy of either releasing party prohibits such waiver, then this waiver
shall not take effect until consent to such waiver is obtained. If such
waiver is so prohibited, the insured party affected shall promptly notify the
other party thereof.
16. INDEMNIFICATION Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person
or damage to or destruction of property in or about the Premises or the
Complex by or from any cause whatsoever, including, without limitation, gas
fire, oil, electricity or leakage of any character from the roof, walls,
basement or other portion of the Premises or the Complex but excluding,
however, the willful misconduct or negligence of Landlord, its agents,
servants, employees, invitees, or contractors of which negligence Landlord
has knowledge and reasonable time to correct. Except as to injury to persons
or damage to property to the extent arising from willful misconduct or the
negligence of Landlord, its agents, servants, employees, invitees, or
contractors. Tenant shall hold Landlord harmless from and defend Landlord
against any and all expenses, including reasonable attorneys' fees, in
connection therewith, arising out of any injury to or death of any person or
damage to or destruction of property occurring in, on or about the Premises,
or any part thereof, from any cause whatsoever.
17. COMPLIANCE Tenant, at its sole cost and expense, shall promptly comply
with all laws, statutes, ordinances and governmental rules, regulations or
requirements now or hereafter in effect; with the requirements of any board
of fire underwriters or other similar body now or hereafter constituted; and
with any direction or occupancy certificate issued pursuant to law by any
public officer; provided, however, that no such failure shall be deemed a
breach of the provisions if Tenant, immediately upon notification, commences
to remedy or rectify said failure. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action against Tenant, whether
Landlord be a party thereto or not, that Tenant has violated any such law,
statute, ordinance or governmental rule, regulation, requirement, direction
or provision, shall be conclusive of that fact as between Landlord and
Tenant. This paragraph shall not be interpreted as requiring Tenant to make
structural changes or improvements, except to the extent such changes or
improvements are required as a result of Tenant's use of the Premises. Tenant
shall, at its sole cost and expense, comply with any and all requirements
pertaining to said Premises, of any insurance organization or company,
necessary for the maintenance of reasonable fire and public liability
insurance covering the Premises.
18. LIENS Tenant shall keep the Premises and the Complex free from any liens
arising out of any work performed, materials furnished or obligation incurred
by Tenant. In the event that Tenant shall not, within ten (10) days following
the imposition of such lien, cause the same to be released of record,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but no obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All sums paid by Landlord for such purpose, and all expenses
incurred by it in connection therewith, shall be payable to Landlord by
Tenant on demand with interest at the prime rate of interest as quoted by the
Bank of America.
page 4 of 8
<PAGE>
19. ASSIGNMENT AND SUBLETTING Tenant shall not assign, transfer, or
hypothecate the leasehold estate under this Lease, or any interest herein,
and shall not sublet the Premises, or any part thereof, or any right or
privilege appurtenant thereto, or suffer any other person or entity to occupy
or use the Premises, or any portion thereof, without, in each case, the prior
written consent of Landlord which consent will not be unreasonably withheld.
As a condition for granting this consent to any assignment, transfer, or
subletting, Landlord may require that Tenant agrees to pay to Landlord, as
additional rent, all rents or additional consideration received by Tenant
from its assignees, transferees, or subtenants in excess of the rent payable
by Tenant to Landlord hereunder. Tenant shall, by thirty (30) days written
notice, advise Landlord of its intent to assign or transfer Tenant's interest
in the Lease or sublet the Premises or any portion thereof for any part of
the term hereof. Within thirty (30) days after receipt of said written
notice, Landlord may, in its sole discretion, elect to terminate this Lease
as to the portion of the Premises described in Tenant's notice on the date
specified in Tenant's notice by giving written notice of such election to
terminate. If no such notice to terminate is given to Tenant within said
thirty (30) day period, Tenant may proceed to locate an acceptable sublessee,
assignee, or other transferee for presentment to Landlord for Landlord's
approval, all in accordance with the terms, covenants, and conditions of
this paragraph 19. If Tenant intends to sublet the entire Premises and
Landlord elects to terminate this Lease, this Lease shall be terminated on
the date specified in Tenant's notice. If, however, this Lease shall
terminate pursuant to the foregoing with respect to less than all the
Premises, the rent, as defined and reserved hereinabove shall be adjusted on
a pro rata basis to the number of square feet retained by Tenant, and this
Lease as so amended shall continue in full force and effect. In the event
Tenant is allowed to assign, transfer or sublet the whole or any part of the
Premises, with the prior written consent of Landlord, no assignee, transferee
or subtenant shall assign or transfer this Lease, either in whole or in part,
or sublet the whole or any part of the Premises, without also having obtained
the prior written consent of Landlord which consent shall not be unreasonably
withheld. A consent of Landlord to one assignment, transfer, hypothecation,
subletting, occupation or use by any other person shall not release Tenant
from any of Tenant's obligations hereunder or be deemed to be a consent to
any subsequent similar or dissimilar assignment, transfer, hypothecation,
subletting, occupation or use by any other person. Any such assignment,
transfer, hypothecation, subletting, occupation or use without such consent
shall be void and shall constitute a breach of this Lease by Tenant and
shall, at the option of Landlord exercised by written notice to Tenant,
terminate this Lease. The leasehold estate under this Lease shall not, nor
shall any interest therein, be assignable for any purpose by operation of law
without the written consent of Landlord which consent shall not be
unreasonably withheld. As a condition to its consent, Landlord may require
Tenant to pay all expenses in connection with the assignment, and Landlord
may require Tenant's assignee or transferee (or other assignees or
transferees) to assume in writing all of the obligations under this Lease and
for Tenant to remain liable to Landlord under the Lease.
20. SUBORDINATION AND MORTGAGES In the event Landlord's title or leasehold
interest is now or hereafter encumbered by a deed of trust, upon the interest
of Landlord in the land and buildings in which the demised Premises are
located, to secure a loan from a lender (hereinafter referred to as "Lender")
to Landlord, Tenant shall, at the request of Landlord or Lender, execute in
writing an agreement subordinating its rights under this Lease to the lien of
such deed of trust, or, if so requested, agreeing that the lien of Lender's
deed of trust shall be or remain subject and subordinate to the rights of
Tenant under this Lease. Notwithstanding any such subordination, Tenant's
possession under this Lease shall not be disturbed if Tenant is not in
default and so long as Tenant shall pay all rent and observe and perform all
of the provisions set forth in this Lease.
21. ENTRY BY LANDLORD Landlord reserves, and shall at all reasonable times
after at least 24 hours notice (except in emergencies) have, the right to
enter the Premises to inspect them; to perform any services to be provided by
Landlord hereunder; to submit the Premises to prospective purchasers,
mortgagers or tenants; to post notices of nonresponsibility; and to alter,
improve or repair the Premises and any portion of the Complex, all without
abatement of rent; and may erect scaffolding and other necessary structures
in or through the Premises where reasonably required by the character of the
work to be performed; provided, however that the business of Tenant shall be
interfered with to the least extent that is reasonably practical. For each of
the foregoing purposes, Landlord shall at all times have and retain a key with
which to unlock all of the doors in an emergency in order to obtain entry to
the Premises, and any entry to the Premises obtained by Landlord by any of
said means, or otherwise, shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Premises
or an eviction, actual or constructive, of Tenant from the Premises or any
portion thereof. Landlord shall also have the right at any time to change the
arrangement or location of entrances or passageways, doors and doorways,
and corridors, elevators, stairs, toilets or other public parts of the
Complex and to change the name, number or designation by which the Complex is
commonly known, and none of the foregoing shall be deemed an actual or
constructive eviction of Tenant, or shall entitle Tenant to any reduction of
rent hereunder.
22. BANKRUPTCY AND DEFAULT The commencement of a bankruptcy action or
liquidation action or reorganization action or insolvency action or an
assignment of or by Tenant for the benefit of creditors, or any similar
action undertaken by Tenant, or the insolvency of Tenant, shall, at Landlord's
option, constitute a breach of this Lease by Tenant. If the trustee or
receiver appointed to serve during a bankruptcy, liquidation, reorganization,
insolvency or similar action elects to reject Tenant's unexpired Lease, the
trustee or receiver shall notify Landlord in writing of its election within
thirty (30) days after an order for relief in a liquidation action or within
thirty (30) days after the commencement of any action.
Within thirty (30) days after court approval of the assumption of this
Lease, the trustee or receiver shall cure (or provide adequate assurance to
the reasonable satisfaction of Landlord that the trustee or receiver shall
cure) any and all previous defaults under the unexpired Lease and shall
compensate Landlord for all actual pecuniary loss and shall provide adequate
assurance of future performance under said Lease to the reasonable
satisfaction of Landlord. Adequate assurance of future performance, as used
herein, includes, but shall not be limited to: (i) assurance of source and
payment of rent, and other consideration due under this Lease; (ii) assurance
that the assumption or assignment of this Lease will not breach substantially
any provision, such as radius, location, use, or exclusivity provision, in
any agreement relating to the above described Premises.
Nothing contained in this section shall affect the existing right of
Landlord to refuse to accept an assignment upon commencement of or in
connection with a bankruptcy, liquidation, reorganization or insolvency
action or an assignment of Tenant for the benefit of creditors or other
similar act. Nothing contained in this Lease shall be construed as giving or
granting or creating an equity in the demised Premises to Tenant. In no event
shall the leasehold estate under this Lease, or any interest therein, be
assigned by voluntary or involuntary bankruptcy proceeding without the prior
written consent of Landlord. In no event shall this Lease or any rights or
privileges hereunder be an asset of Tenant under any bankruptcy, insolvency
or reorganization proceedings.
The failure to perform or honor any covenant, condition or representation
made under this Lease shall constitute a default hereunder by Tenant upon
expiration of the appropriate grace period hereinafter provided. Tenant shall
have a period of five (5) days from the date of written notice from Landlord
within which to cure any default in the payment of rental or adjustment
thereto. Tenant shall have a period of thirty (30) days from the date of
written notice from Landlord within which to cure any other default under
this Lease; provided, however, that if the nature of Tenant's failure is such
that more than thirty (30) days is reasonably required to cure the same,
Tenant shall not be in default so long as Tenant commences performance within
such thirty (30) day period and thereafter prosecutes the same to completion.
Upon an uncured default of this Lease by Tenant, Landlord shall have the
following rights and remedies in addition to any other rights or remedies
available to Landlord at law or in equity:
(a). The rights and remedies provided for by California Civil Code Section
1951.2, including but not limited to, recovery of the worth at the time of
award of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of rental loss for the same period that
Tenant proves could be reasonably avoided, as computed pursuant to subsection
(b) of said Section 1951.2. Any proof by Tenant under subparagraphs (2) and
(3) of Section 1951.2 of the California Civil Code of the amount of rental
loss that could be reasonably avoided shall be made in the following manner:
Landlord and Tenant shall each select a licensed real estate broker in the
business of renting property of the same type and use as the Premises and in
the same geographic vicinity. Such two real estate brokers shall select a
third licensed real estate broker, and the three licensed real estate brokers
so selected shall determine the amount of the rental loss that could be
reasonably avoided from the balance of the term of this Lease after the time
of award. The decision of the majority of said licensed real estate brokers
shall be final and binding upon the parties hereto.
(b). The rights and remedies provided by California Civil Code Section
which allows Landlord to continue the Lease in effect and to enforce all of
its rights and remedies under this Lease, including the right to recover rent
as it becomes due, for so long as Landlord does not terminate Tenant's right
to possession; acts of maintenance or preservation, efforts to the relet the
Premises, or the appointment of a receiver upon Landlord's initiative to
protect its interest under this Lease shall not constitute a termination of
Tenant's right to possession.
(c). The right to terminate this Lease by giving notice to Tenant in
accordance with applicable law.
(d). To the extent permitted by law the right and power to enter the
Premises and remove therefrom all persons and property, to store such
property in a public warehouse or elsewhere at the cost of and for the
account of Tenant, and to sell such property and apply such proceeds
therefrom pursuant to applicable California law. Landlord, may from time to
time sublet the Premises or any part thereof for such term or terms (which
may extend beyond the term of this Lease) and at such rent and such other
terms as Landlord in its sole discretion may deem advisable, with the right
to make alterations and repairs to the Premises. Upon each subletting, (i)
Tenant shall be immediately liable to pay Landlord, in addition to
indebtedness other than rent due hereunder, the cost of such subletting,
including, but not limited to, reasonable attorneys' fees, and any real
estate commissions actually paid, and the cost of such alterations and
repairs incurred by Landlord and the amount, if any, by which the rent
hereunder for the period of such subletting (to the extent such period does
not exceed the term hereof) exceeds the amount to be paid as rent for the
Premises for such period or (ii) at the option of Landlord, rents received
from such subletting shall be applied first to payment of indebtedness other
than rent due hereunder from Tenant to Landlord; second, to the payment of
any costs of such subletting and of such alterations and repairs; third to
payment of rent due and unpaid hereunder; and the residue, if any, shall be
held by Landlord and applied in payment of future rent as the same becomes
due hereunder. If Tenant has been credited with any rent to be received by
such subletting under option (i) and such rent shall not be promptly paid to
Landlord by the subtenant(s), or if such rentals received from such
subletting under option (ii) during any month be less than that to be paid
during the month by Tenant hereunder, Tenant shall pay any such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No taking
possession of the Premises by Landlord, shall be construed as an election on
its part to terminate this Lease unless a written notice of such
page 5 of 8
<PAGE>
intention to be given to Tenant. Notwithstanding any such subletting without
termination, Landlord may at any time hereafter elect to terminate this Lease
for such previous breach.
(e). The right to have a receiver appointed for Tenant upon application by
Landlord, to take possession of the Premises and to apply any rental
collected from the Premises and to exercise all other rights and remedies
granted to Landlord (except that Tenant may vacate so long as it pays rent,
provides an on-site security guard during normal business hours from Monday
through Friday, and otherwise performs its obligations hereunder), pursuant
to subparagraph d. above.
23. ABANDONMENT Tenant shall not vacate or abandon the Premises at any time
during the term of this Lease and if Tenant shall abandon, vacate or
surrender said Premises, or be dispossessed by the process of law, or
otherwise, any personal property belonging to Tenant and left on the Premises
shall be deemed to be abandoned, at the option of Landlord, except such
property as may be mortgaged to Landlord.
24. DESTRUCTION In the event the Premises are destroyed in whole or in part
from any cause, except for routine maintenance and repairs and incidental
damage and destruction caused from vandalism and accidents for which Tenant
is responsible for under Paragraph 10, Landlord may, at its option:
(a) Rebuild or restore the Premises to their condition prior to the damage
or destruction, or
(b) Terminate this Lease (providing that the Premises is damaged to the
extent of 33 1/3% of the replacement cost).
If Landlord does not give Tenant notice in writing within thirty (30) days
from the destruction of the Premises of its election to either rebuild and
restore them, or to terminate this Lease, Landlord shall be deemed to have
elected to rebuild or restore them, in which event Landlord agrees, at its
expense, promptly to rebuild or restore the Premises to their condition prior
to the damage or destruction. Tenant shall be entitled to a reduction in rent
while such repair is being made in the proportion that the area of the
Premises rendered untenantable by such damage bears to the total area of the
Premises. If Landlord initially estimates that the rebuilding or restoration
will exceed 180 days or if Landlord does not complete the rebuilding or
restoration within one hundred eighty (180) days following the date of
destruction (such period of time to be extended for delays caused by the
fault or neglect of Tenant or because of Acts of God, acts of public
agencies, labor disputes, strikes, fires, freight embargoes, rainy or stormy
weather, inability to obtain materials, supplies or fuels, acts of
contractors or subcontractors, or delay of the contractors or subcontractors
due to such causes or other contingencies beyond the control of Landlord),
then Tenant shall have the right to terminate this Lease by giving fifteen
(15) days prior written notice to Landlord. Notwithstanding anything herein
to the contrary, Landlord's obligation to rebuild or restore shall be limited
to the building and interior improvements constructed by Landlord as they
existed as of the commencement date of the Lease and shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by tenant to the Premises, which
Tenant shall forthwith replace or fully repair at Tenant's sole cost and
expense provided this Lease is not cancelled according to the provisions above.
Unless this lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect. Tenant hereby expressly waives
the provisions of Section 1932, Subdivision 2, in Section 1933, Subdivision 4
of the California Civil Code.
In the event that the building in which the Premises are situated is damaged
or destroyed to the extent of not less than 33 1/3% of the replacement cost
thereof, Landlord may elect to terminate this Lease, whether the Premises be
injured or not.
25. EMINENT DOMAIN If all or any part of the Premises shall be taken by any
public or quasi-public authority under the power of eminent domain or
conveyance in lieu thereof, this Lease shall terminate as to any portion of
the Premises so taken or conveyed on the date when title vests in the
condemnor, and Landlord shall be entitled to any and all payment, income,
rent, award, or any interest therein whatsoever which may be paid or made in
connection with such taking or conveyance, and Tenant shall have no claim
against Landlord or otherwise for the value of any unexpired term of this
Lease. Notwithstanding the foregoing paragraph, any compensation specifically
awarded Tenant for loss of business, Tenant's personal property, moving cost
or loss of goodwill, shall be and remain the property of Tenant.
If (i) any action or proceeding is commenced for such taking of the Premises
or any part thereof, or if Landlord is advised in writing by any entity or
body having the right of power of condemnation of its intention to condemn
the premises or any portion thereof, or (ii) any of the foregoing events
occur with respect to the taking of any space in the Complex not leased
hereby, or if any such spaces so taken or conveyed in lieu of such taking and
Landlord shall decide to discontinue the use and operation of the Complex, or
decide to demolish, alter or rebuild the Complex, then, in any of such events
Landlord shall have the right to terminate this Lease by giving Tenant
written notice thereof within sixty (60) days of the date of receipt of said
written advice, or commencement of said action or proceeding, or taking
conveyance, which termination shall take place as of the first to occur of
the last day of the calendar month next following the month in which such
notice is given or the date on which title to the Premises shall vest in the
condemnor.
In the event such a partial taking or conveyance of the Premises, if the
portion of the Premises taken or conveyed is so substantial that the Tenant
can no longer reasonably conduct its business, Tenant shall have the
privilege of terminating this Lease within sixty (60) days from the date of
such taking or conveyance, upon written notice to Landlord of its intention
so to do, and upon giving of such notice this Lease shall terminate on the
last day of the calendar month next following the month in which such notice
is given, upon payment by Tenant of the rent from the date of such taking or
conveyance to the date of termination.
If a portion of the Premises be taken by condemnation or conveyance in lieu
thereof and neither Landlord nor Tenant shall terminate this Lease as
provided herein, this Lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed, and the rent herein shall be
apportioned as of the date of such taking or conveyance so that thereafter
the rent to be paid by Tenant shall be in the ratio that the area of the
portion of the Premises not so taken or conveyed bears to the total area of
the Premises prior to such taking.
26. SALE OR CONVEYANCE BY LANDLORD In the event of a sale or conveyance of
the Complex or any interest therein, by any owner of the reversion then
constituting Landlord, the transferor shall thereby be released from any
further liability upon any of the terms, covenants or conditions (express or
implied) herein contained in favor of Tenant, and in such event, insofar as
such transfer is concerned, Tenant agrees to look solely to the
responsibility of the successor in interest of such transferor in and to the
Complex and this Lease. This Lease shall not be affected by any such sale or
conveyance, and Tenant agrees to attorn to the successor in interest of such
transferor.
27. ATTORNMENT TO LENDER OR THIRD PARTY In the event the interest of Landlord
in the land and buildings in which the leased Premises are located (whether
such interest of Landlord is a fee title interest or a leasehold interest) is
encumbered by deed of trust, and such interest is acquired by the lender or
any third party through judicial foreclosure or by exercise of a power of
sale at private trustee's foreclosure sale, Tenant hereby agrees to attorn to
the purchaser at any such foreclosure sale and to recognize such purchaser as
the Landlord under this Lease. In the event the lien of the deed of trust
securing the loan from a Lender to Landlord is prior and paramount to the
Lease, this Lease shall nonetheless continue in full force and effect for the
remainder of the unexpired term hereof, at the same rental herein reserved
and upon all the other terms, conditions and covenants herein contained.
28. HOLDING OVER Any holding over by Tenant after expiration or other
termination of the term of this Lease with the written consent of Landlord
delivered to Tenant shall not constitute a renewal or extension of the Lease
or give Tenant any rights in or to the leased Premises except as expressly
provided in this Lease. Any holding over after the expiration or other
termination of the term of this Lease, with the consent of Landlord, shall be
construed to be a tenancy from month to month, on the same terms and
conditions herein specified insofar as applicable except that the monthly
Basic Rent shall be increased to an amount equal to one hundred fifty (150%)
percent of the monthly Basic Rent required during the last month of the Lease
term.
29. CERTIFICATE OF ESTOPPEL Tenant shall at any time upon not less than ten
(10) days' prior written notice to Landlord execute, acknowledge and deliver
to Landlord a statement in writing (i) certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature
of such modification and certifying that this Lease, as so modified, is in
full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to
Tenant's knowledge, any uncured defaults on the part of Landlord hereunder,
or specifying such defaults, if any, are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Premises. Tenant's failure to deliver such statement within such time shall
be conclusive upon Tenant that this Lease is in full force and effect,
without modification except as may be represented by Landlord; that there are
no uncured defaults in Landlord's performance, and that not more than one
month's rent has been paid in advance.
30. CONSTRUCTION CHANGES It is understood that the description of the
Premises and the location of ductwork, plumbing and other facilities therein
are subject to such minor changes as Landlord or Landlord's architect
determines to be desirable in the course of construction of the Premises, and
no such changes, or any changes in plans for any other portions of the
Complex shall affect this Lease or entitle Tenant to any reduction of rent
hereunder or result in any liability of Landlord to Tenant. Landlord does
not guarantee the accuracy of any drawings supplied to Tenant and
verification of the accuracy of such drawings rests with Tenant.
31. RIGHT OF LANDLORD TO PERFORM All terms, covenants and conditions of this
Lease to be performed or observed by Tenant shall be performed or observed by
Tenant at Tenant's sole cost and expense and without any reduction of rent.
If Tenant shall fail to pay any sum of money, or other rent, required to be
paid by it hereunder or shall fail to perform any other term or covenant
hereunder on its part to be performed, and such failure shall continue for
five (5) days after written notice thereof by Landlord, Landlord, without
waiving or releasing Tenant from any obligation of Tenant hereunder, may, but
shall not be obligated to, make any such payment or perform
page 6 of 8
<PAGE>
any such other term or covenant on Tenant's part to be performed. All sums so
paid by Landlord and all necessary costs of such performance by Landlord
together with interest thereon at the rate of the prime rate of interest per
annum as quoted by the Bank of America from the date of such payment or
performance by landlord, shall be paid (and Tenant covenants to make such
payment) to Landlord on demand by Landlord, and Landlord shall have (in
addition to any other right or remedy of Landlord) the same rights and
remedies in the event of nonpayment by Tenant as in the case of failure by
Tenant in the payment of rent hereunder.
32. ATTORNEYS' FEES.
(A) In the event that either Landlord or Tenant should bring suit for the
possession of the Premises, for the recovery of any sum due under this Lease,
or because of the breach of any provision of this Lease, or for any other
relief against the other party hereunder, then all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party
therein shall be paid by the other party, which obligation on the part of the
other party shall be deemed to have accrued on the date of the commencement
of such action and shall be enforceable whether or not the action is
prosecuted to judgement.
(B) Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including a reasonable attorney's fee.
33. WAIVER The waiver by either party of the other party's failure to perform
or observe any term, covenant or condition herein contained to be performed
or observed by such waiving party shall not be deemed to be a waiver of such
term, covenant or condition or of any subsequent failure of the party failing
to perform or observe the same or any other such term, covenant or condition
therein contained, and no custom or practice which may develop between the
parties hereto during the term hereof shall be deemed a waiver of, or in any
way affect, the right of either party to insist upon performance and
observance by the other party in strict accordance with the terms hereof.
34. NOTICES All notices, demands, requests, advices or designations which may
be or are required to be given by either party to the other hereunder shall
be in writing. All notices, demands, requests, advices or designations by
Landlord to Tenant shall be sufficiently given, made or delivered if
personally served on Tenant by leaving the same at the Premises or if sent by
United States certified or registered mail, postage prepaid, addressed to
Tenant at the Premises. All notices, demands, requests, advices or designations
by Tenant to Landlord shall be sent by United States certified or registered
mail, postage prepaid, addressed to Landlord at its offices at
Peery/Arrillaga, 2560 Mission College Blvd., Suite 101, Santa Clara, CA
95054. Each notice, request, demand, advice or designation referred to in
this paragraph shall be deemed received on the date of the personal service
or mailing thereof in the manner herein provided, as the case may be.
35. EXAMINATION OF LEASE Submission of this instrument for examination or
signature by Tenant does not constitute a reservation of or option for a
lease, and this instrument is not effective as a lease or otherwise until its
execution and delivery by both Landlord and Tenant.
36. DEFAULT BY LANDLORD Landlord shall not be in default unless Landlord
fails to perform obligations required of Landlord within a reasonable time,
but in no event earlier than thirty (30) days after written notice by Tenant
to Landlord and to the holder of any first mortgage or deed of trust covering
the Premises whose name and address shall have heretofore been furnished to
Tenant in writing, specifying wherein Landlord has failed to perform such
obligations; provided, however, that if the nature of Landlord's obligations
is such that more than thirty (30) days are required for performance, then
Landlord shall not be in default if Landlord commences performance within
such thirty (30) day period and thereafter diligently prosecutes the same to
completion.
37. CORPORATE AUTHORITY If Tenant is a corporation, (or a partnership) each
individual executing this Lease on behalf of said corporation (or
partnership) represents and warrants that he is duly authorized to execute
and deliver this Lease on behalf of said corporation (or partnership) in
accordance with the by-laws of said corporation (or partnership in accordance
with the partnership agreement) and that this Lease is binding upon said
corporation (or partnership) in accordance with its terms. If Tenant is a
corporation, Tenant shall, within thirty (30) days after execution of this
Lease, deliver to Landlord a certified copy of the resolution of the Board of
Directors of said corporation authorizing or ratifying the execution of this
Lease.
. . . . .
39. LIMITATION OF LIABILITY In consideration of the benefits accruing
hereunder, Tenant and all successors and assigns covenant and agree that, in
the event of any actual or alleged failure, breach or default hereunder by
Landlord:
(i) the sole and exclusive remedy shall be against Landlord and
Landlord's assets;
(ii) no partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction
of the partnership)
(iii) no service of process shall be made against any partner of Landlord
(except as may be necessary to secure jurisdiction of the
partnership)
(iv) no partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(v) no judgment will be taken against any partner of Landlord;
(vi) any judgment taken against any partner of Landlord may be vacated
and set aside at any time without hearing;
(vii) no writ of execution will ever be levied against the assets of any
partner of Landlord;
(viii) these covenants and agreements are enforceable both by Landlord and
also by any partner of Landlord.
Tenant agrees that each of the foregoing covenants and agreements shall
be applicable to any covenant or agreement either expressly contained in this
Lease or imposed by statute or at common law.
40. MISCELLANEOUS AND GENERAL PROVISIONS
a. Tenant shall not, without the written consent of Landlord, use the
name of the building for any purpose other than as the address of the
business conducted by Tenant in the Premises.
b. This Lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision
of this Lease shall be invalid, unenforceable or ineffective for any
reason whatsoever, all other provisions hereof shall be and remain in
full force and effect.
c. The term "Premises" includes the space leased hereby and any
improvements now or hereafter installed therein or attached thereto.
The term "Landlord" or any pronoun used in place thereof includes the
plural as well as the singular and the successors and assigns of
Landlord. The term "Tenant" or any pronoun used in place thereof
includes the plural as well as the singular and individuals, firms,
associations, partnerships and corporations, and their and each of
their respective heirs, executors, administrators, successors and
permitted assigns, according to the context hereof, and the provisions
of this Lease shall inure to the benefit of and bind such heirs,
executors, administrators, successors and permitted assigns.
The term "person" includes the plural as well as the singular and
individuals, firms, associations, partnerships and corporations. Words
used in any gender include other genders. If there be more than one
Tenant the obligations of Tenant hereunder are joint and several. The
paragraph headings of this Lease are for convenience of reference only
and shall have no effect upon the construction or interpretation of
any provision hereof.
d. Time is of the essence of this Lease and of each and all of its
provisions.
page 7 of 8
<PAGE>
e. At the expiration or earlier termination of this Lease, Tenant
shall execute, acknowledge and deliver to Landlord, within ten (10)
days after written demand from Landlord to Tenant, any quitclaim deed
or other document required by any reputable title company, licensed to
operate in the State of California, to remove the cloud or encumbrance
created by this Lease from the real property of which Tenant's
Premises are a part.
f. This instrument along with any exhibits and attachments hereto
constitutes the entire agreement between Landlord and Tenant relative
to the Premises and this agreement and the exhibits and attachments
may be altered, amended or revoked only by an instrument in writing
signed by both Landlord and Tenant. Landlord and Tenant agree hereby
that all prior or contemporaneous oral agreements between and among
themselves and their agents or representatives relative to the leasing
of the Premises are merged in or revoked by this agreement.
g. Neither Landlord nor Tenant shall record this Lease or a short form
memorandum hereof without the consent of the other.
h. Tenant further agrees to execute any amendments required by a
lender to enable Landlord to obtain financing, so long as Tenant's
rights hereunder are not substantially affected.
i. Paragraphs 43 through 49 are added hereto and are included as a
part of this lease.
j. Clauses, plats and riders, if any, signed by Landlord and Tenant
and endorsed on or affixed to this Lease are a part hereof.
k. Tenant covenants and agrees that no diminution or shutting off of
light, air or view by any structure which may be hereafter erected
(whether or not by Landlord) shall in any way affect his Lease,
entitle Tenant to any reduction of rent hereunder or result in any
liability of Landlord to Tenant.
41. BROKERS Tenant warrants that it had dealings with only the following real
estate brokers or agents in connection with the negotiation of
this Lease: none
and that it knows of no other real estate broker or agent who is entitled to
a commission in connection with this Lease.
42. SIGNS No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the outside
of the Premises or any exterior windows of the Premises without the written
consent of Landlord first had and obtained and Landlord shall have the right
to remove any such sign, placard, picture, advertisement, name or notice
without notice to and at the expense of Tenant. If Tenant is allowed to print
or affix or in any way place a sign in, on, or about the Premises, upon
expiration or other sooner termination of this Lease, Tenant at Tenant's sole
cost and expense shall both remove such sign and repair all damage in such a
manner as to restore all aspects of the appearance of the Premises to the
condition prior to the placement of said sign.
All approved signs or lettering on outside doors shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person approved
of by Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door partition or wall which may appear unsightly from
outside the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
Lease as of the day and year last written below.
LANDORD: TENANT:
ARRILLAGA FAMILY TRUST IOMEGA CORPORATION
a Delaware Corporation
By: /s/ John Arrillaga By: /s/ C. David Correll
-------------------------------- ------------------------------
John Arrillaga, Trustee C. David Correll, Director of
Corporate Facilities
Dated: 12/28/95 Dated: 12/27/95
----------------------------- ---------------------------
RICHARD T. PEERY SEPARATE PROPERTY TRUST
By: /s/ Richard T. Peery
--------------------------------
Richard T. Peery, Trustee
Dated: 1/2/96
-----------------------------
page 8 of 8
<PAGE>
Paragraphs 43 through 49 to Lease Agreement Dated December 8, 1995, By and
Between the Arrillaga Family Trust and the Richard T. Peery Separate Property
Trust, as Landlord, and IOMEGA CORPORATION, a Delaware corporation, as Tenant
for 51,600+ Square Feet of Space Located at 800 Tasman Drive, Milpitas,
California.
43. BASIC RENT: In accordance with Paragraph 4A herein, the total aggregate
sum of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND NO/100 DOLLARS
($3,870,000.00), shall be payable as follows:
On January 1, 1996, the sum of FIFTY NINE THOUSAND THREE HUNDRED FORTY
AND NO/100 DOLLARS ($59,340.00) shall be due, and a like sum due on the first
day of each month thereafter, through and including December 1, 1996.
On January 1, 1997, the sum of SIXTY ONE THOUSAND NINE HUNDRED TWENTY AND
NO/100 DOLLARS ($61,920.00) shall be due, and a like sum due on the first day
of each month thereafter, through and including December 1, 1997.
On January 1, 1998, the sum of SIXTY FOUR THOUSAND FIVE HUNDRED AND
NO/100 DOLLARS ($64,500.00) shall be due, and a like sum due on the first day
of each month thereafter, through and including December 1, 1998.
On January 1, 1999, the sum of SIXTY SEVEN THOUSAND EIGHTY AND NO/100
DOLLARS ($67,080.00) shall be due, and a like sum due on the first day of
each month thereafter, through and including December 1, 1999.
On January 1, 2000, the sum of SIXTY NINE THOUSAND SIX HUNDRED SIXTY AND
NO/100 DOLLARS ($69,660.00) shall be due, and a like sum due on the first day
of each month thereafter, through and including December 1, 2000; or until
the entire aggregate sum of THREE MILLION EIGHT HUNDRED SEVENTY THOUSAND AND
NO/100 DOLLARS ($3,870,000.00) has been paid.
44. EARLY ENTRY: Tenant and its agents and contractors shall be permitted to
enter the Premises prior to the Commencement Date for the purpose of
installing at Tenant's sole cost and expense, Tenant's trade fixtures and
equipment, telephone equipment, security systems and cabling for computers.
Such entry shall be subject to all of the terms and conditions of this Lease,
except that Tenant shall not be required to pay any Rent on account thereof.
Any entry or installation work by Tenant and its agents in the Premises
pursuant to this Paragraph 44 shall (i) be undertaken at Tenant's SOLE RISK,
(ii) not interfere with or delay Landlord's work in the Premises (if any),
and (iii) not be deemed occupancy or possession of the Premises for purposes
of the Lease. Tenant shall indemnify, defend, and hold Landlord harmless from
any and all loss, damage, liability, expense (including reasonable attorney's
fees), claim or demand of whatsoever character, direct or consequential,
including, but without limiting thereby the generality of the foregoing,
injury to or death of persons and damage to or loss of property arising out
of the exercise by Tenant of any early entry right granted hereunder. In the
event Tenant's work in said Premises delays completion of the interior
improvements to be provided by Landlord, if any, or in the event Tenant has
not completed construction of its interior improvements by the scheduled
Commencement Date, it is agreed between the parties that this Lease will
commence on the scheduled Commencement Date of January 1, 1996 regardless of
the construction status of said interior improvements completed or to be
completed by Tenant or Landlord. It is the intent of the parties hereto that
the commencement of Tenant's obligation to pay Rent under the Lease not be
delayed by any of such causes or by any other act of Tenant (except as
expressly provided herein) and, in the event it is so delayed, Tenant's
obligation to pay Rent under the Lease shall commence as of the date it would
otherwise have commenced absent delay caused by Tenant.
45. "AS-IS" BASIS: Subject only Paragraph 49 and to Landlord making the
improvements shown on EXHIBIT B to be attached hereto, it is hereby agreed
that the Premises leased hereunder is leased strictly on an "as-is" basis and
in its present condition, and in the configuration as shown on EXHIBIT B to
be attached hereto, and by reference made a part hereof. Except as noted
herein, it is specifically agreed between the parties that after Landlord
makes the interior improvements as shown on EXHIBIT B, Landlord shall not be
required to make, nor be
Page 9
<PAGE>
responsible for any cost, in connection with any repair, restoration, and/or
improvement to the Premises in order for this Lease to commence, or
thereafter, throughout the Term of this Lease. Subject to Paragraph 49,
Landlord makes no warranty or representation of any kind or nature whatsoever
as to the condition or repair of the Premises, nor as to the use or occupancy
which may be made thereof.
46. CONSENT: Whenever the consent of one party to the other is required
hereunder, such consent shall not be unreasonably withheld.
47. HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with respect to
the existence or use of "Hazardous Materials" (as defined herein) on, in,
under or about the Premises and real property located beneath said Premises
(hereinafter collectively referred to as the "Property") and the Complex:
As used herein, the term "Hazardous Materials" shall mean any hazardous or
toxic substance, material or waste which is or becomes subject to or
regulated by any local governmental authority, the State of California, or
the United States Government. The term "Hazardous Materials" includes,
without limitation any material or hazardous substance which is (i) listed
under Article 9 or defined as "hazardous" or "extremely hazardous" pursuant
to Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 30, (ii) listed or defined as a "hazardous waste" pursuant to the
Federal Resource Conservation and Recovery Act, Section 42 U.S.C. Section
6901 et. seq., (iii) listed or defined as a "hazardous substance" pursuant to
the Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et. seq. (42 U.S.C. Section 9601), (iv) petroleum or any
derivative of petroleum, or (v) asbestos.
Subject to the terms of this Paragraph 47, Tenant shall have no obligation to
"clean up", reimburse, release, indemnify, or defend Landlord with respect to
any Hazardous Materials or wastes which Tenant (prior to and during the term
of the Lease) or other parties on the Property or Complex, as described
below, (during the term of this Lease) did not store, dispose, or transport
in, use, or cause to be on the Property or which Tenant, its agents,
employees, contractors, vendors, invitees, visitors or its future subtenants
and/or assignees (if any) (during the Term of this Lease), did not store,
dispose, or transport in, use or cause to be on the Complex in violation of
applicable law.
Tenant shall be 100 percent liable and responsible for: (i) any and all
"investigation and cleanup" of said Hazardous Materials contamination which
Tenant, its agents, employees, contractors, vendors, invitees, visitors or
its future subtenants and/or assignees (if any), or other parties on the
Property, does store, dispose, or transport in, use or cause to be on the
Property, and which Tenant, its agents, employees, contractors, vendors,
invitees, visitors or its future subtenants and/or assignees (if any) does
store, dispose, or transport in, use or cause to be on the Complex and (ii)
any claims, including third party claims, resulting from such Hazardous
Materials contamination. Tenant shall indemnify Landlord and hold Landlord
harmless from any liabilities, demands, costs, expenses and damages,
including, without limitation, attorney fees incurred as a result of any
claims resulting from such Hazardous Materials contamination.
Tenant also agrees not to use or dipose of any Hazardous Materials on the
Property or the Complex without first obtaining Landlord's written consent.
Tenant agrees to complete compliance with governmental regulations regarding
the use or removal or remediation of Hazardous Materials used, stored,
disposed of, transported or caused to be on the Property or the Complex as
stated above, and prior to the termination of said Lease Tenant agrees to
follow the proper closure procedures and will obtain a clearance from the
local fire department and/or the appropriate governing agency. If Tenant uses
Hazardous Materials, Tenant also agrees to install, at Tenant's expense, such
Hazardous Materials monitoring devices as Landlord deems reasonably
necessary. It is agreed that the Tenant's responsibilities related to
Hazardous Materials will survive the termination date of the Lease and that
Landlord may obtain specific performance of Tenant's responsibilities under
this Paragraph 47.
48. ASSESSMENT CREDITS: The demised property herein is subject to a special
assessment levied by the City of Milpitas in Improvement District No. 9. As a
part of said special assessment proceedings, additional bonds were sold and
assessments levied to provide for construction contingencies and reserve
funds. Interest will be earned on such funds created for contingencies and
on reserve funds which will be credited for the benefit of said assessment
Page 10
<PAGE>
district. To the extent surpluses are created in said district through unused
contingency funds, interest earnings or reserve funds, such surpluses shall
be deemed the property of Landlord. Notwithstanding that such surpluses may
be credited on assessments otherwise due against the demised premises, Tenant
shall pay to Landlord, as additional rent if, and at the time of any such
credit of surpluses, an amount equal to all such surpluses so credited.
49. REPAIRS TO HVAC AND MECHANICAL SYSTEMS AND ROOF MEMBRANE: In addition to
and notwithstanding anything to the contrary in Paragraphs 10 and 45 of this
Lease, during the first thirty (30) day period of the Lease Term, Landlord
shall be responsible for having, as reasonably determined by Landlord,
repairs (excluding maintenance) made to the HVAC system, the mechanical
systems and roof membrane and for the payment of the same, provided however,
any repair resulting from Tenant's use will be paid for one hundred (100%)
percent by Tenant. Tenant shall notify Landlord in writing of any such
necessary repairs and Landlord will reasonably approve such repairs and the
related cost before such repairs are made and Landlord shall select the
vendor to make said repairs. This Paragraph shall be of no force and effect
if Tenant shall fail to give any such written notice to Landlord within
thirty (30) days after the Commencement Date of this Lease. Notwithstanding
the above, Landlord shall, prior to Lease Commencement, have the HVAC system,
the mechanical systems, and the roof membrane of the Premises inspected and
all such repairs noted in said inspection reports shall be performed by
Landlord's contractors and at Landlord's cost and expense.
Page 11
