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 JUNE 29, 1997
COMMISSION FILE NUMBER 1-12333
IOMEGA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 86-0385884
(State or other jurisdiction (IRS emploer identification number)
of incorporation or organization)
1821 West Iomega Way, Roy, Utah 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 June 29, 1997.
COMMON STOCK, PAR VALUE $.03 1/3 129,650,370
(Title of each class) (Number of shares)
<PAGE>
IOMEGA CORPORATION
TABLE OF CONTENTS
Page
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements
Condensed consolidated balance sheets at June 29, 1997
and December 31, 1996......................................... 2
Condensed consolidated statements of operations for the three months
ended June 29, 1997 and June 30, 1996......................... 4
Condensed consolidated statements of operations for the six months
ended June 29, 1997 and June 30, 1996......................... 5
Condensed consolidated statements of cash flows for the six months
ended June 29, 1997 and June 30, 1996......................... 6
Notes to condensed consolidated financial statements............... 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 14
PART II - OTHER INFORMATION
Item 1. Legal Proceedings............................................. 21
Item 2. Changes in Securities......................................... 22
Item 4. Submission of Matters to a Vote of Security Holders........... 23
Item 6. Exhibits and Reports on 8-K................................... 23
Signatures............................................................. 24
Exhibit Index.......................................................... 25
This Quarterly Report on Form 10-Q contains a number of forward-looking
statements, including statements relating to the sufficiency of cash and cash
equivalent balances and available sources of financing; projected effective tax
rates; expected further declines in component and manufacturing costs; the
impact on gross margins of the sales mix between disks and drives and the mix
between OEM sales and sales through other channels; anticipated expenditures for
selling, general and administrative and research and development activities; the
possible effects on future sales due to a shortage of certain integrated
circuits utilized in manufacturing Zip drives; the possible effects of an
adverse outcome in legal proceedings, described in Item 1 of Part II, and the
Company's efforts to protect its intellectual property rights. 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 under, and in the paragraph
immediately preceding, the caption "Factors Affecting Future Operating Results"
included under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" in Item 2 of Part I of this Quarterly Report on Form
10-Q, and those set forth in Item 1 of Part II of this Quarterly Report on Form
10-Q.
-1-
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(In thousands)
<TABLE>
June 29, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $123,612 $108,312
Temporary investments 11,790 -
Trade receivables, net 244,110 210,733
Inventories 150,542 171,920
Deferred tax assets 35,367 38,059
Other current assets 11,493 27,644
-------- ---------
Total current assets 576,914 556,668
-------- ---------
PROPERTY, PLANT AND EQUIPMENT, at cost 216,935 187,125
Less: Accumulated depreciation and amortization (76,988) (61,083)
-------- ---------
Net property, plant and equipment 139,947 126,042
-------- ---------
OTHER ASSETS 3,448 3,432
-------- ---------
$720,309 $686,142
======== =========
</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
(In thousands, except share data)
<TABLE>
June 29, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of notes payable $ 398 $ 33,770
Accounts payable 154,355 145,844
Accrued payroll, vacation and bonus 19,024 17,731
Deferred revenue 17,660 15,677
Other accrued liabilities 86,509 69,847
Current portion of capitalized lease obligations 5,438 4,114
----------- ----------
Total current liabilities 283,384 286,983
----------- ----------
CAPITALIZED LEASE OBLIGATIONS,
net of current portion 5,883 5,711
----------- ----------
NOTES PAYABLE, net of current portion 177 13,465
----------- ----------
CONVERTIBLE SUBORDINATED NOTES,
6.75%, due 2001 45,684 45,733
----------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value; authorized 4,750,000
shares, none issued - -
Series C, Junior Participating Preferred Stock,
authorized 250,000 shares, none issued - -
Common Stock, $.03 1/3 par value; authorized 400,000,000
shares, issued 130,064,975 and 128,277,426 shares at
June 29, 1997 and December 31, 1996, respectively 4,335 4,275
Additional paid-in capital 271,643 268,426
Less: 414,605 and 300,000 Common Stock treasury shares
at June 29, 1997 and December 31, 1996, respectively, at cost (6,099) (4,363)
Deferred compensation (502) (669)
Retained earnings 115,804 66,581
----------- ----------
Total stockholders' equity 385,181 334,250
----------- ----------
$720,309 $686,142
=========== ==========
</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
(In thousands, except per share data)
<TABLE>
For the Three Months Ended
June 29, June 30,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
SALES $ 400,162 $ 283,638
COST OF SALES 282,703 207,443
--------- ---------
Gross margin 117,459 76,195
--------- ---------
OPERATING EXPENSES:
Selling, general and administrative 60,816 39,126
Research and development 17,007 11,542
--------- ---------
Total operating expenses 77,823 50,668
--------- ---------
OPERATING INCOME 39,636 25,527
Interest and other income (expense), net 598 (2,239)
--------- ---------
INCOME BEFORE INCOME TAXES 40,234 23,288
Provision for income taxes (14,025) (9,206)
--------- ---------
NET INCOME $ 26,209 $ 14,082
========= =========
NET INCOME PER COMMON SHARE $ 0.19 $ 0.11
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 136,452 132,405
========= =========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
-4-
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<TABLE>
For the Six Months Ended
June 29, June 30,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
SALES $ 761,506 $ 505,626
COST OF SALES 536,768 369,531
--------- ---------
Gross margin 224,738 136,095
--------- ---------
OPERATING EXPENSES:
Selling, general and administrative 115,176 72,282
Research and development 31,724 18,533
--------- ---------
Total operating expenses 146,900 90,815
--------- ---------
OPERATING INCOME 77,838 45,280
Interest and other income (expense), net (2,274) (5,400)
--------- ---------
INCOME BEFORE INCOME TAXES 75,564 39,880
Provision for income taxes (26,341) (15,677)
--------- ---------
NET INCOME $ 49,223 $ 24,203
========= =========
NET INCOME PER COMMON SHARE $ 0.36 $ 0.19
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 136,078 130,419
========= =========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
-5-
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
For the Six Months Ended
June 29, June 30,
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income $ 49,223 $ 24,203
Non-Cash Revenue and Expense Adjustments:
Depreciation and amortization expense 16,787 9,674
Deferred income tax provision (benefit) 2,692 (18,111)
Other 306 443
Changes in Assets and Liabilities:
Trade receivables, net (33,377) (74,139)
Inventories 21,378 (47,470)
Other current assets 16,151 (14,295)
Accounts payable 8,511 64,559
Accrued liabilities 19,938 31,058
---------- ----------
Net cash provided from (used in) operating activities 101,609 (24,078)
---------- ----------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (27,435) (35,505)
Purchase of temporary investments (11,790) -
Net decrease in other assets (16) 71
----------- ----------
Net cash used in investing activities (39,241) (35,434)
----------- ----------
Cash Flows from Financing Activities:
Proceeds from sales of Common Stock 1,906 1,458
Proceeds from issuance of notes payable 87,295 701,537
Payments on notes payable and capitalized lease
obligations (135,799) (719,775)
Purchase of Common Stock (1,736) -
Tax benefit from dispositions of employee stock 1,266 1,607
Net proceeds from public offering of Common Stock - 191,209
Net proceeds from issuance of convertible
subordinated notes - 43,131
---------- ----------
Net cash provided from (used in) financing activities (47,068) 219,167
---------- ----------
Net Increase in Cash and Cash Equivalents 15,300 159,655
Cash and Cash Equivalents at Beginning of Period 108,312 1,023
---------- ----------
Cash and Cash Equivalents at End of Period $ 123,612 $ 160,678
========== ==========
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
-6-
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd.)
(In thousands)
<TABLE>
For the Six Months Ended
June 29, June 30,
1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Property, plant and equipment financed under
capitalized lease obligations $ 3,342 $ 6,234
============ ============
Conversion of Subordinated Notes to Common Stock $ 49 $ 265
============ ============
</TABLE>
The accompanying notes to condensed
consolidated financial statements are an integral part
of these statements.
-7-
<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 June 29, 1997 and December 31, 1996, the results of
operations for the three- and six-month periods ended June 29, 1997 and
June 30, 1996, and cash flows for the six-month periods ended June 29,
1997 and June 30, 1996.
The results of operations for the three- and six-month periods ended
June 29, 1997 are not necessarily indicative of the results to be
expected for the entire year or for any future period.
These unaudited condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and
notes included in or incorporated into the Company'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 - The Company's customers include original
equipment manufacturers, end users, retailers and distributors.
Revenue, less reserves for returns, is generally recognized upon
shipment to the customer.
In addition to reserves for returns, the Company defers recognition of
revenue on estimated excess inventory in the distribution and retail
channels. For this purpose, excess inventory is the amount of inventory
which exceeds the channels' 30 day requirements as estimated by
management. The gross margin associated with deferral of revenue for
returns and estimated excess channel inventory totaled $17.7 million
and $15.7 million at June 29, 1997 and December 31, 1996, respectively.
Price Protection and Volume Rebates - 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 the price decrease.
When a price decrease is anticipated, the Company establishes reserves
against gross accounts receivable for amounts estimated to be
reimbursed to the qualifying customers.
-8-
<PAGE>
In addition, the Company records reserves at the time of shipment for
estimated volume rebates. These reserves for volume rebates and price
protection credits totaled $17.5 million and $17.0 million at June 29,
1997 and December 31, 1996, respectively, and are netted against
accounts receivable in the accompanying condensed consolidated balance
sheets.
Foreign Currency Translation - For purposes of consolidating foreign
operations, the Company has determined the functional currency for its
foreign operations to be the U.S. dollar. Therefore, translation gains
and losses are included in the determination of income.
Cash Equivalents and Temporary Investments - For purposes of the
statements of cash flows, the Company considers all highly liquid debt
instruments purchased with maturities of three or fewer months to be
cash equivalents. Instruments with maturities in excess of three months
are classified as temporary investments. Cash equivalents primarily
consist of investments in money market mutual funds, commercial paper,
option rate preferred stock and taxable municipal bonds and notes and
are recorded at cost, which approximates market. At June 29, 1997,
temporary investments consist of certificates of deposit and commercial
paper recorded at cost, which approximates market.
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>
June 29, December 31,
1997 1996
----------- ------------
<S> <C> <C>
Raw materials $ 75,517 $ 88,728
Work-in-process 20,633 14,004
Finished goods 54,392 69,188
----------- -----------
$ 150,542 $ 171,920
=========== ===========
</TABLE>
Reclassifications - Certain reclassifications were made to the prior
periods' condensed consolidated financial statements to conform with
the current presentation.
Net Income Per Common Share - Net income 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.
-9-
<PAGE>
In February 1997, the Financial Accounting Standards Board released
Statement of Financial Accounting Standards No. 128, "Earnings per
Share" (SFAS 128). This statement specifies the computation,
presentation, and disclosure requirements for earnings per share (EPS)
for financial statements issued for all periods ending after December
15, 1997. SFAS 128 replaces the standards for computing EPS previously
found in APB Opinion No. 15 with a presentation of Basic EPS and
Diluted EPS. The following represents the Company's pro forma earnings
per share as computed under the rules of SFAS 128:
<TABLE>
For the Three Months Ended For the Six Months Ended
June 29, 1997 June 30, 1996 June 29, 1997 June 30, 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Pro Forma Basic EPS $0.20 $0.12 $0.38 $0.21
Pro Forma Diluted EPS $0.19 $0.11 $0.36 $0.19
</TABLE>
(2) INCOME TAXES
Income taxes for the six months ended June 29, 1997 have been provided
for at an effective rate of 35% compared to an effective rate of 39%
for the year ended December 31, 1996. This tax rate is based on the
Company's projected mix of domestic and foreign pre-tax income for
1997. The decrease in the effective tax rate is due to tax advantages
associated with the relocation of the Company's manufacturing capacity
to Malaysia and the move of the Company's European headquarters from
Germany to Switzerland.
U.S. taxes have not been provided for unremitted foreign earnings
which are considered to be permanently reinvested in non-U.S.
operations.
Cash paid for income taxes was $13.8 million for the first six months
of 1997 and $22.0 million for the corresponding period in 1996.
-10-
<PAGE>
(3) NOTES PAYABLE
Line of Credit - On March 11, 1997, the Company entered into a $200
million Senior Secured Credit Facility ("Credit Facility") with Morgan
Guaranty Trust Company of New York, Citibank, N.A. and a syndicate of
other lenders. The Credit Facility is a three-year revolving line of
credit secured by U.S. and Canadian accounts receivable and a pledge of
66% of the stock of certain of the Company's subsidiaries. Borrowings
under the Credit Facility are limited to the lesser of 70% of eligible
accounts receivable or $200 million. Under the Credit Facility, the
Company may borrow at a base rate, which is the higher of prime or
federal funds plus a margin of 0.0% to 0.5%, depending on the Company's
debt-to-equity ratio, or at LIBOR plus a margin of 1.0% to 2.0%,
depending on the Company's debt-to-equity ratio. Total availability
under the Credit Facility at June 29, 1997 was $170.9 million, of which
none was outstanding. Among other restrictions, the Credit Facility
treats a change of control (as defined) as an event of default and
requires the maintenance of minimum levels of consolidated tangible net
worth and earnings.
Capital Leases - The Company has entered into various agreements to
obtain capital lease financing for the purchase of certain
manufacturing equipment, software, office furniture and other
equipment. The leases have 36-month to 60-month terms and mature at
various dates from July 1998 to March 2000. Principal and interest
payments are payable monthly and quarterly. Interest rates are fixed
and range from 7.1% to 10.2%. The leases are secured by the leased
equipment, software and furniture.
Other Term Notes - During the second quarter of 1997, the Company fully
paid a term note with an outstanding balance of approximately $1.6
million. At June 29, 1997, the Company had only one term note remaining
for which $.6 million was outstanding. This remaining term note was
subsequently fully paid in July 1997.
Promissory Note on Malaysian Manufacturing Facility - In September
1996, the Company entered into an agreement with Quantum Corporation to
finance a portion of the purchase price of a building and equipment
associated with a manufacturing facility in Penang, Malaysia. The
amount financed under this agreement totaled $18 million. During April
1997, the Company elected to prepay the entire $18 million plus accrued
interest.
-11-
<PAGE>
(4) OTHER MATTERS
Increase in Authorized Shares - On April 22, 1997, shareholders
approved an amendment to the Company's Restated Certificate of
Incorporation increasing the number of authorized shares of Common
Stock from 150,000,000 to 400,000,000.
Significant Customers - During the three months and six months ended
June 29, 1997, sales to Ingram Micro, Inc. accounted for 12% and 13%,
respectively, of consolidated sales. During the three months and six
months ended June 30, 1996, sales to Ingram Micro, Inc. accounted for
17% and 14%, respectively, of consolidated sales. No other single
customer accounted for more than 10% of the Company's sales for these
periods.
Forward Exchange Contracts - The Company has commitments to sell and
purchase foreign currencies relating to forward exchange contracts in
order to hedge against future currency fluctuations.
At June 29, 1997 outstanding forward exchange sales (purchase)
contracts, which all mature in September 1997, were as follows:
<TABLE>
Contracted
Currency Amount Forward Rate
<S> <C> <C>
Belgian Franc 4,500,000 35.38
British Pound 3,500,000 .60
Dutch Guilder 3,100,000 1.93
French Franc 15,200,000 5.79
German Mark (4,800,000) 1.71
Irish Punt (200,000) .66
Italian Lira 7,200,000,000 1,688.17
Malaysian Ringgitt (5,200,000) 2.53
Spanish Peseta 200,000,000 145.33
Swiss Franc 900,000 1.42
</TABLE>
The contracts are revalued at the month-end spot rate. 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 are recognized as part of the cost of the underlying
transaction being hedged. At June 29, 1997, 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.
-12-
<PAGE>
(5) SUBSEQUENT EVENT
In July 1997, the Company was named as a defendant in a purported class
action lawsuit alleging violations of the Magnuson-Moss Consumer
Products Warranties Act and the Delaware Consumer Fraud Act. The
claimed violations are based on alleged breaches of the Company's Zip,
Jaz and Ditto product warranties and on the Company's technical support
charges and practices. The relief sought in the complaint includes
injunctive relief, restitution for amounts paid by consumers for
certain calls to Iomega's technical support line and reasonable
attorneys' fees. The Company is in the process of investigating and
evaluating the claims stated in the complaint and assessing the
maintainability of this suit as a class action.
-13-
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
The Company reported sales of $400.2 million and net income of $26.2 million, or
$0.19 per share, in the second quarter of 1997. This compares to sales of $283.6
million and net income of $14.1 million, or $0.11 per share, in the second
quarter of 1996. For the first six months of 1997, sales were $761.5 million and
net income was $49.2 million, or $0.36 per share, compared to sales of $505.6
million and net income of $24.2 million, or $0.19 per share, for the first six
months of 1996.
SALES
- -----
Sales for the three months ended June 29, 1997 increased by $116.6 million, or
41.1%, when compared to the corresponding period of 1996. The primary reason for
the increase was higher sales of Zip and Jaz products reflecting higher volumes
of drive units offset by lower prices. Combined Zip and Jaz sales totaled $370.8
million, or 92.7% of total sales, in the second quarter of 1997, as compared to
$246.2 million, or 86.8% of total sales, in the second quarter of 1996. Sales of
Zip drives to OEM customers increased to approximately 30% of total Zip drive
unit sales in the second quarter of 1997, as compared to less than 3% in the
second quarter of 1996. Ditto product sales also increased slightly in the
second quarter of 1997, as total Ditto sales were $28.9 million, or 7.2% of
sales, as compared to $28.4 million, or 10.0% of sales, in the second quarter of
1996.
Sales for the six months ended June 29, 1997 increased by $255.9 million, or
50.6%, when compared to the corresponding period of 1996. Zip and Jaz sales
totaled $693.8 million, or 91.1% of total sales, and Ditto product sales totaled
$64.5 million, or 8.5% of total sales. When compared to the first six months of
1996, Zip and Jaz sales increased by $262.2 million, and Ditto sales increased
by $8.5 million.
Sales in Europe were $107.4 million, or 26.8% of total sales, in the second
quarter of 1997, as compared to $56.3 million, or 19.9% of sales, in the second
quarter of 1996. For the first six months of 1997, sales in Europe were $214.7
million, or 28.2% of total sales, as compared to $118.8 million, or 23.5% of
total sales, for the first six months of 1996. Sales in Asia were $46.4 million,
or 11.6% of total sales, in the second quarter of 1997, as compared to $35.5
million, or 12.5% of total sales, in the second quarter of 1996. For the first
six months of 1997, sales in Asia were $74.3 million, or 9.8% of total sales, as
compared to $56.9 million, or 11.3% of total sales, for the first six months of
1996.
-14-
<PAGE>
GROSS MARGIN
- ------------
The Company's overall gross margin percentage was 29.4% in the second quarter of
1997, as compared to 26.9% in the second quarter of 1996. Overall gross margin
percentage for the first six months of 1997 was 29.5%, as compared to 26.9% for
the first six months of 1996. Gross margins increased in the second quarter and
first six months of 1997, as compared to the second quarter and first six months
of 1996, due primarily to reductions in component material costs and per unit
manufacturing overhead costs, plus a higher ratio of disk sales to drive sales
on Zip products. These improvements were partially offset by price reductions
enacted during the second quarter of 1997 for Zip, Jaz and Ditto drives, a
recall of approximately 75,000 Jaz disks (discussed below), plus a growing
percentage of drives sold to OEMs. Jaz product gross margins are lower than Zip
product gross margins, due in large part to a lower ratio of disk sales to drive
sales. Gross margins on Ditto products were lower in the second quarter of 1997
than the second quarter of 1996, due primarily to lower prices on Ditto drives.
Gross margins for the remainder of 1997 will depend in large part on sales of
Zip and Jaz disks, which generate significantly higher gross margins than the
corresponding drives, and on the sales mix between disks and drives, and among
Zip, Jaz and Ditto products. Although the Company expects the costs of Zip, Jaz
and Ditto products to decline in the future due to lower component material cost
and lower per unit overhead expenses, the gross margin percentages will depend
in large part on the Company's ability to achieve planned cost reductions, as
well as on recent and any future pricing actions. Also, future gross margin
percentages will be impacted by the mix between OEM sales, which generally
provide lower gross margins than sales through other channels, and retail sales,
as well as other factors.
In April 1997, the Company announced the recall of a batch of approximately
75,000 Jaz cartridges manufactured within the period March 13, 1997 to April 20,
1997 at one of the Company's facilities. The recall was announced after the
Company's ongoing reliability testing revealed that the batch of cartridges
contained a component that did not conform over time to Iomega's reliability
requirements. The Company contacted its distributors and channel partners to
remove the affected cartridges from their inventories and took steps to replace
any affected cartridges purchased by customers. The costs associated with this
recall totaled approximately $3.1 million, which lowered the overall gross
margin percentage from 30.1% to 29.4%, in the second quarter of 1997.
-15-
<PAGE>
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
- --------------------------------------------
Selling, general and administrative expenses increased by $21.7 million and
$42.9 million in the second quarter and first six months of 1997, respectively,
when compared to the corresponding period of 1996, and increased as a percentage
of sales to 15.2% and 15.1% in the second quarter and first six months of 1997,
respectively, from 13.8% and 14.3%, respectively, in each of the corresponding
periods of 1996. The increased expenses in the second quarter of 1997 were
primarily the result of the expansion of the Company's international operations
and customer satisfaction group, advertising expenses incurred to increase
market awareness of Zip, Jaz and Ditto products, variable selling expenses, and
increased salaries and wages associated with increased headcount in all areas of
sales, marketing and administration. Management expects selling, general and
administrative expenses to increase further in the remainder of 1997 in absolute
dollars due primarily to increased advertising and promotional expenses in the
United States, Europe and Asia, as well as increased variable selling expenses
and increased fixed administrative expenses.
RESEARCH AND DEVELOPMENT EXPENSES
- ---------------------------------
Research and development expenses for the second quarter and first six months of
1997 increased by $5.5 million, or 47.4%, and $13.2 million, or 71.2%,
respectively, when compared to the second quarter and first six months of 1996.
Research and development also increased as a percentage of sales to 4.3% and
4.2% of sales in the second quarter and first six months of 1997, respectively,
as compared to 4.1% and 3.7% of sales in the second quarter and first six months
of 1996, respectively. The increase was primarily the result of expenditures
related to the continued development and enhancement of Zip, Jaz and Ditto
products, as well as continued development expenses related to the Company's
n*hand and other products. Management expects continued increases in research
and development expenses during the remainder of 1997, in absolute dollars, as
the result of planned increases in resources dedicated to product development
and enhancement.
OTHER
- -----
The Company recorded interest income of $1.4 million and $2.5 million in the
second quarter and first six months of 1997, respectively, as compared to $0.5
million and $0.6 million in the comparable periods of 1996, respectively, due to
increased available cash balances in the second quarter and first six months of
1997. Interest expense was $1.2 million and $3.7 million in the second quarter
and first six months of 1997, respectively, as compared to $2.4 million and $4.6
million in the second quarter and first six months of 1996, respectively. The
decrease in interest expense is primarily due to decreased average borrowings
during the second quarter of 1997 resulting, in large part, from the early
payment of the $18 million obligation relating to the Malaysian manufacturing
facility and the repayment of amounts outstanding under an agreement to finance
European accounts receivable and other notes payable.
Also included in other income and expense were bank charges related to the
European financing agreement which totaled approximately $0.8 million for both
six month periods.
-16-
<PAGE>
INCOME TAXES
- ------------
For the first six months of 1997, the Company recorded an income tax provision
of $26.3 million, representing an effective income tax rate of 35%. The
effective tax rate decreased from 39% in the first six months of 1996 due to tax
advantages associated with the relocation of manufacturing capacity to Malaysia
and the relocation of the Company's European headquarters from Germany to
Switzerland. Differences between the currently anticipated mix of foreign income
versus domestic income, and the actual mix, may have an impact on the effective
tax rate that is recorded during the remainder of 1997.
SEASONALITY
- -----------
The Company's Ditto, Zip and Jaz products are sold primarily to the retail
consumer market. This market is generally seasonal, with a substantial portion
of total sales occurring in the fourth quarter and sales slowdowns commonly
occurring during the summer months. In light of the seasonal nature of the
market for the Company's products, revenues for any prior quarter are not
necessarily indicative of the revenues to be expected in any future quarter.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At June 29, 1997, the Company had cash, cash equivalents and temporary
investments of $135.4 million, working capital of $293.5 million, and a ratio of
current assets to current liabilities of 2.04 to 1. During the first six months
of 1997, the Company generated $101.6 million of cash from operating activities.
The primary sources of cash provided by operating activities were net income,
non-cash expenses, reductions of inventories and other current assets, and
increases in accounts payable and accrued liabilities. Inventories decreased by
$21.4 million, due primarily to a reduction in raw materials and finished goods
resulting from improved inventory management and an increase in inventory turns
to 7.5 for the second quarter of 1997 as compared to 6.6 during fiscal 1996.
Other current assets decreased by $16.2 million, due primarily to the collection
of value-added taxes in Europe, offset by higher prepaid advertising expenses.
Accounts payable increased by $8.5 million, due primarily to timing of payments
to vendors. Accrued liabilities increased $19.9 million and included, among
other changes, an $8.3 million increase in income taxes payable, a $6 million
increase in marketing and advertising accruals, and a $2.0 million increase in
deferred revenue. These sources of cash were offset by a $33.4 million increase
in net accounts receivable, due primarily to increased sales and the timing of
sales and collections during the respective quarters. The Company used $39.2
million of cash in investing activities during the first six months of 1997 for
the purchase of property, plant and equipment and temporary investments. Cash
used in financing activities totaled $47.1 million during the first six months
of 1997, and included $48.5 million of net payments on notes payable and
capitalized lease obligations and $1.7 million to repurchase 114,605 shares of
the Company's Common Stock, offset by a $1.2 million tax benefit for
dispositions of employee stock and proceeds of $1.9 million for sales of Common
Stock to option holders.
-17-
<PAGE>
On March 11, 1997, the Company entered into a $200 million Senior Secured Credit
Facility ("Credit Facility") with Morgan Guaranty Trust Company of New York,
Citibank, N.A. and a syndicate of other lenders. The Credit Facility is a
three-year revolving line of credit secured by U.S. and Canadian accounts
receivable and a pledge of 66% of the stock of certain of the Company's
subsidiaries. Borrowings under the Credit Facility are limited to the lesser of
70% of eligible accounts receivable or $200 million. Under the Credit Facility,
the Company may borrow at a base rate, which is the higher of prime or federal
funds plus a margin of 0.0% to 0.5%, depending on the Company's debt-to-equity
ratio, or at LIBOR plus a margin of 1.0% to 2.0%, depending on the Company's
debt-to-equity ratio. Total availability under the Credit Facility at June 29,
1997 was $170.9 million, of which none was outstanding. Among other
restrictions, the Credit Facility treats a change of control (as defined) as an
event of default and requires the maintenance of minimum levels of consolidated
tangible net worth and earnings.
The Company's balance sheet at June 29, 1997 reflected current notes payable of
$0.4 million and long-term notes payable of $0.2 million consisting of a term
loan. The current and long-term portions of capitalized lease obligations at
June 29, 1997 were $5.4 million and $5.9 million, respectively. During the
second quarter of 1997, the Company paid the entire $18.0 million obligation,
plus accrued interest, relating to the purchase of its Malaysian manufacturing
facility and $1.6 million related to a term note payable.
The Company had $45.7 million of convertible subordinated notes outstanding at
June 29, 1997, which bear interest at 6.75% per year and mature on March 15,
2001. Additions to property, plant and equipment during the first six months of
1997 totaled $30.7 million, partially offset by $3.3 million in proceeds from
capital leases.
The Company expects that its balance of cash, cash equivalents and temporary
investments, together with current and future sources of available financing,
will be sufficient to fund the Company's operations during the next twelve
months. Thereafter, the Company may require additional funds to finance its
operations. The precise amount and timing of the Company's future financing
needs, if any, cannot be determined at this time, and will depend on a number of
factors, including the market demand for the Company's products, the
availability of critical components, 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 accounts receivable and accounts
payable.
-18-
<PAGE>
FACTORS AFFECTING FUTURE OPERATING RESULTS
- ------------------------------------------
Because the Company is relying on its Zip and Jaz products for the substantial
majority of its sales in 1997, 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 market demand for
removable data storage solutions for personal computers, there can be no
assurance that the Company will be successful in establishing Zip and Jaz as the
preferred 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, including the LS-120 (product of the
consortium of Compaq Computer, Imation and MKE) and SyJet 1.5 GB and EZ Flyer
230 (products of Syquest Technology, Inc.) and the Shark 250 (product of Avatar
Peripherals, Inc.; the success of the Company in meeting targeted availability
dates for new products; the success of the Company in establishing and
maintaining OEM arrangements and meeting OEM quality, supply and other
requirements; the willingness of OEMs to promote the products containing the
Company's drives; the ability of the Company to create demand for Zip and Jaz,
including demand from leading personal computer manufacturers; the success of
the Company in educating consumers about the existence and possible uses of Zip
and Jaz products as storage devices; any adverse consumer reaction resulting
from the recall of a limited number of Jaz disks; and the success of the
Company's plans to improve customer service and satisfaction. In addition,
component problems, shortages, quality issues or other factors affecting the
supply of the Company's products, and the Company's inability to add
manufacturing capacity as needed could limit the Company's sales and provide an
opportunity for competing products to achieve market acceptance. For example,
sales were adversely affected during the second quarter of 1997 due to a
shortage of integrated circuits for Zip drives, resulting from interrupted and
insufficient shipments from a vendor, and may also be adversely affected in the
second half of 1997.
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/or 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.
Future market demand for the Company's products cannot be predicted with
certainty. Sales of Zip and Jaz products in 1996 and the first six months of
1997 were the primary reasons for the Company's revenue growth in these periods.
However, these sales may not be indicative of the long-term demand for such
products. Accordingly, the sales growth experienced by the Company in 1996 and
in the first six months of 1997 should not be assumed to be an indication of
future sales. Moreover, because the Company's expense levels are based in part
on expectations of future sales levels, a shortfall in expected sales could
result in a disproportionate decrease in the Company's net income. In addition,
the Company has experienced and may in the future experience significant
fluctuations in its quarterly operating results.
-19-
<PAGE>
In addition to the risks surrounding existing products, the Company faces
development, manufacturing, demand and market acceptance risks with regard to
future products, including n*hand. The Company's future operating results will
depend in part on its success in introducing enhanced and new products in a
timely and competitively effective manner.
The Company has significant international operations with transactions often
denominated in foreign currencies. The Company enters into forward exchange
contracts to sell or buy foreign currencies as a means of hedging its foreign
operating requirements. Fluctuations in the value of foreign currencies relative
to the U.S. dollar could result in foreign currency gains and losses.
A significant portion of the Company's revenues are currently being generated in
Europe and Asia. The Company's existing infrastructure outside of the United
States is significantly less mature and developed than in the United States. In
particular, the Company's relocation of its European operations from Germany to
Switzerland and the Netherlands, combined with the expansion of the Company's
Asian headquarters and sales offices, could adversely impact sales momentum in
these international markets.
Zip and Jaz are both relatively new products, and the Company continues to
refine the design of these products in an effort to improve product performance
and reduce manufacturing costs. In addition, the Company depends on independent
parties for the supply of critical components for its Zip and Jaz products. As a
result of these and other factors, the Company may experience problems relating
to the quality and/or reliability of certain of its products. For example, in
April 1997 the Company recalled a limited number of its Jaz cartridges. Any
product availability, quality or reliability problems experienced by the Company
could have an adverse effect on the Company's sales and net income, result in
damage to the Company's reputation in the marketplace, and/or subject the
Company to damage claims from its customers.
Other factors that could cause actual events or actual results to differ
materially from those indicated by any forward-looking statements include the
ability of management to manage growth and an increasingly complex business,
market demand for personal computers with which the Company's products are used,
transportation issues, product and component pricing, competition, intellectual
property rights, litigation (see "Legal Proceedings") and general economic
conditions.
-20-
<PAGE>
IOMEGA CORPORATION
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As previously disclosed in the Company's Annual Report on Form 10-K for the
period ended December 31, 1996, the Company has commenced litigation against
Nomai S.A. ("Nomai") in conjunction with Nomai's alleged plans to announce a
disk product claimed to be compatible with the Company's Zip drive. The Company
has not licensed Nomai to manufacture or sell Zip products, and believes the
Nomai planned product would infringe the Company's copyrights, patents and other
intellectual property rights and constitute unfair competition. With respect to
the preliminary injunction obtained by the Company against Nomai in Germany and
previously described in the Company's Annual Report on Form 10-K for the period
ended December 31, 1996, Nomai has now opposed this injunction. A court hearing
relating to such opposition is scheduled to occur on August 26, 1997. On June
20, 1997, the District Court in Paris, France issued a ruling granting, in part,
the Company's motion for a preliminary injunction against Nomai. Under the Paris
court's order, from which an appeal may be taken by Nomai until August 19, 1997,
Nomai is prohibited from manufacturing, having manufactured, offering for sale,
selling or licensing any disk reproducing certain aspects of Iomega's Zip disk
cartridges.
The Company's suit against Thames Automation, Inc., in the United States
District Court for the District of Utah, previously described in the Company's
Quarterly Report on From 10-Q for the period ended March 30, 1997, was settled
following a three-day hearing on the Company's motion for a preliminary
injunction. An Order was entered on July 29, 1997 by the District Court
approving the confidential terms of the parties' Settlement Agreement and
vacating the prior Order of the Court entered April 11, 1997.
An adverse outcome in any of the ongoing proceedings referred to above could
result in the introduction by Nomai in one or more countries of a Zip-compatible
product. Any such introduction could have a material adverse effect on the
Company's future sales and operating results.
On July 29, 1997, the Company filed suit against SyQuest Technology, Inc.
("SyQuest"), in the United States District Court for the District of Delaware
claiming patent and trademark infringement with respect to SyQuest's SyJet
product, including infringement of United States Patent Nos. 5,644,444, issued
July 1, 1997, covering Iomega's "Read/Write Software Protect Scheme for a Disk
Cartridge and Drive", and D378518, issued March 18, 1997, covering a "Computer
Storage Disk Cartridge". The Company is seeking injunctive relief and damages in
an unspecified amount. As of August 11, 1997, SyQuest had not yet filed a
responsive pleading to the Company's complaint and discovery had not yet
commenced.
The Company intends to vigorously protect and enforce its intellectual property
rights in the proceedings referenced above.
-21-
<PAGE>
As reported in a press release issued July 23, 1997, the Company has been named
as a defendant in Cox v. Iomega Corporation, a purported class action suit filed
in the Chancery Court of the State of Delaware on July 16, 1997. The named
plaintiff, who purchased a Zip drive in 1996, purports to represent other
similarly situated consumers who have purchased Zip, Jaz or Ditto products for
household purposes since July 16, 1994. The complaint alleges violations of the
Magnuson-Moss Consumer Products Warranties Act and the Delaware Consumer Fraud
Act based on, among other things, the Company's imposition, beginning in August
1996, of per-incident support charges applicable to certain support requests,
alleged difficulties in reaching the Company's technical support call center and
alleged difficulties in installing Zip drives, as well as an alleged failure by
the Company to specify whether certain of its warranties are "Full" or "Limited"
within the meaning of the Magnuson-Moss Consumer Products Warranties Act. The
relief sought in the complaint includes injunctive relief, restitution in an
unspecified amount for charges paid by consumers for certain calls to the
Company's technical support line and reasonable attorneys' fees. As the lawsuit
has just been filed, the Company is still in the process of investigating and
evaluating the claims stated in the complaint and assessing the maintainability
of this suit as a class action. The Company intends to defend itself vigorously
against the claims asserted in the lawsuit.
Item 2. Change in Securities
During the second quarter of 1997, the Company issued 3,847 shares of Common
Stock upon conversion of its 6-3/4% Convertible Subordinated Notes due 2001 in
reliance upon the exemption from registration set forth in Section 3(a)(9) of
the Securities Act. No underwriters were engaged in connection with such
issuances. The Company did not sell any other equity securities during the
second quarter of 1997 that were not registered under the Securities Act.
-22-
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Stockholders was commenced on April 22, 1997 and
adjourned to May 19, 1997 and June 6, 1997. The following proposals were adopted
by the vote specified below:
<TABLE>
Against/ Broker
Proposal For Withheld Abstain Non-Votes
- ------------------------------ ----------- --------- --------- -----------
<S> <C> <C> <C> <C>
1. Election of Directors:
Willem H.J. Andersen 122,380,022 2,067,649
Robert P. Berkowitz 122,288,479 2,159,192
David J. Dunn 122,373,971 2,073,700
Kim B. Edwards 122,369,104 2,078,567
Michael J. Kucha 122,382,831 2,064,840
John Myers 122,383,736 2,063,935
John Nolan 122,379,305 2,068,366
John Sheehan 122,156,937 2,290,734
2. Approval of Classified
Board of Directors 65,424,500 8,248,408 1,292,937 49,481,826
3. Approval of Authorized
Share Increase to
400,000,000 113,541,219 9,836,385 1,070,067
4. Approval of 1997 Stock
Incentive Plan 112,440,442 10,499,451 1,507,778
5. Approval of Amendments
to 1995 Director Stock
Option Plan 113,718,906 8,645,606 2,083,159
6. Ratification of Arthur
Andersen LLP as
Independent Auditors 122,686,268 899,507 861,896
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The exhibits listed on the Exhibit Index filed as a part of
this Quarterly Report on Form 10-Q are incorporated herein by
reference.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter for which this report on Form 10-Q is filed.
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IOMEGA CORPORATION
(Registrant)
/s/ Kim B. Edwards
----------------------------
Dated: August 11, 1997 Kim B. Edwards
President and Chief Executive Officer
/s/ Leonard C. Purkis
----------------------------
Dated: August 11, 1997 Leonard C. Purkis
Senior Vice President, Finance
and Chief Financial Officer
-24-
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report on Form 10-Q:
Exhibit No. Description
3(i).1 Restated Certificate of Incorporation of the Company,
as amended.
3(ii).1 Bylaws of the Company, as amended.
27 Financial Data Schedule (only filed as part of
electronic copy).
-25-
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
IOMEGA CORPORATION
PURSUANT TO SECTIONS 242 AND 245 OF THE GENERAL
CORPORATION LAW OF THE STATE OF DELAWARE
IOMEGA CORPORATION (hereinafter called the "Corporation"), a
corporation originally organized and incorporated under the name "Databyte
Corporation" by the filing of a Certificate of Incorporation in the office of
the Secretary of State of the State of Delaware on April 2, 1980, and existing
under and by virtue of the General Corporation Law of the State of Delaware,
does hereby certify that (a) at a meeting of the Board of Directors of the
Corporation, the Board of Directors duly adopted a resolution pursuant to
Sections 242 and 245 of the General Corporation Law of the State of Delaware
proposing an amendment to and restatement of the Certificate of Incorporation of
the Corporation and declaring said amendment and restatement to be advisable;
(b) the stockholders of the Corporation duly approved said proposed amendment
and restatement by written consent in accordance with Sections 228 and 242 of
the General Corporation Law of the State of Delaware, and written notice of such
consent has been given to all stockholders who have not consented in writing to
said amendment and restatement; and (c) the capital of the Corporation will not
be reduced under or by reason of this amendment and restatement.
<PAGE>
-4-
The resolution setting forth the amendment and restatement is as
follows:
RESOLVED: That the Restated Certificate of Incorporation of the Corporation
shall read as follows:
FIRST: The name of the Corporation is IOMEGA CORPORATION.
SECOND: The registered office of the Corporation is to be
located at No. 100 West Tenth Street, in the City of
Wilmington, in the County of New Castle, in the State
of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may
be organized under the General Corporation Law of
Delaware.
Without limiting in any manner the scope and generality of the
foregoing, it is hereby provided that the Corporation shall have the following
purposes, objects and powers:
To purchase, manufacture, produce, assemble, receive, lease or in
any manner acquire, hold, own, use, operate, install, maintain, service, repair,
process, alter, improve, import, export, sell, lease, assign, transfer and
generally to trade and deal in and with computers and computer systems,
equipment, devices, apparatus, components, parts and supplies of every type and
description, natural or manufactured articles or products, machinery, equipment,
devices, systems, parts, supplies, apparatus, goods, wares, merchandise and
personal property of every kind, nature or description, tangible or intangible,
used or capable of being used for any purpose whatsoever; and to engage and
participate in any mercantile, manufacturing or trading business of any kind or
character.
To improve, manage, develop, sell, assign, transfer, lease, mortgage,
pledge or otherwise dispose of or turn to account or deal with all or any part
of the property of the corporation and from time to time to vary any investment
or employment of capital of the corporation.
To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all
<PAGE>
kinds, whether secured by mortgage, pledge or otherwise, without limit as to
amount, and to secure the same by mortgage, pledge or otherwise; and generally
to make and perform agreements and contracts of every kind and description,
including contracts of guaranty and suretyship.
To lend money for its corporate purposes, invest and reinvest its
funds, and take, hold and deal with real and personal property as security for
the payment of funds so loaned or invested.
To the same extent as natural persons might or could do, to purchase or
otherwise acquire, and to hold, own, maintain, work, develop, sell, lease,
exchange, hire, convey, mortgage or otherwise dispose of and deal in lands and
leaseholds, and any interest, estate and rights in real property, and any
personal or mixed property, and any franchises, rights, licenses or privileges
necessary, convenient or appropriate for any of the purposes herein expressed.
To apply for, obtain, register, purchase, lease or otherwise to acquire
and to hold, own, use, develop, operate and introduce and to sell, assign, grant
licenses or territorial rights in respect to, or otherwise to turn to account or
dispose of, any copyrights, trade marks, trade names, brands, labels, patent
rights, letters patent of the United States or of any other country or
government, inventions, improvements and processes, whether used in connection
with or secured under letters patent or otherwise.
To participate with others in any corporation, partnership, limited
partnership, joint venture, or other association of any kind, or in any
transaction, undertaking or arrangement which the participating corporation
would have power to conduct by itself, whether or not such participation
involves sharing or delegation of control with or to others; and to be an
incorporator, promoter or manager of other corporations of any type or kind.
To pay pensions and establish and carry out pension, profit sharing,
stock option, stock purchase, restricted stock, stock bonus, retirement,
benefit, incentive and commission plans, trusts and provisions for any or all of
its directors, officers and employees, and for any or all of the directors,
officers and employees of its subsidiaries; and to provide insurance for its
benefit on the life of any of its directors, officers or employees, or on the
life of any stockholder for the purpose of acquiring at his death shares of its
stock owned by such stockholders.
<PAGE>
To acquire by purchase, subscription or otherwise, and to hold for
investment or otherwise and to use, sell, assign, transfer, mortgage, pledge or
otherwise deal with or dispose of stocks, bonds or any other obligations or
securities of any corporation or corporations; to merge or consolidate with any
corporation in such manner as may be permitted by law; to aid in any manner any
corporation whose stocks, bonds or other obligations are held or in any manner
guaranteed by this corporation, or in which this corporation is in any way
interested; and to do any other acts or things for the preservation, protection,
improvement or enhancement of the value of any such stock, bonds of other
obligations; and while owner of any such stock, bonds or other obligations to
exercise all the rights, powers and privileges of ownership thereof, and to
exercise any and all voting powers thereon; and to guarantee the payment of
dividends upon any stock, the principal or interest or both, of any bonds or
other obligations, and the performance of any contracts.
To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes or the attainment of any of the objects or
the furtherance of any of the powers hereinbefore set forth, either alone or in
association with other corporations, firms or individuals, and to do every other
act or acts, thing or things incidental or appurtenant to or growing out of or
connected with the aforesaid business or powers or any part or parts thereof,
provided the same be not inconsistent with the laws under which this corporation
is organized.
The business or purpose of the Corporation is from time to time to do
any one or more of the acts and things hereinabove set forth, and it shall have
power to conduct and carry on its said business, or any part thereof, and to
have one or more offices, and to exercise any or all of its corporate powers and
rights, in the State of Delaware, and in the various other states, territories,
colonies and dependencies of the United States, in the District of Columbia, and
in all or any foreign countries.
The enumeration herein of the objects and purposes of the Corporation
shall be construed as powers as well as objects and purposes and shall not be
deemed to exclude by inference any powers, objects or purposes which the
corporation is empowered to exercise, whether expressly by force of the laws of
the State of Delaware now or hereafter in effect, or impliedly by the reasonable
construction of the said laws.
<PAGE>
FOURTH: The total number of shares of stock which the
Corporation shall have authority to issue is
30,000,000 shares of Common Stock, $.03 1/3 par value
per share.
FIFTH: The following provisions are inserted for the
management of the business and for the conduct of
the affairs of the Corporation, and for further
definition, limitation and regulation of the powers
of the Corporation and of its directors and
stockholders:
(1) The number of directors of the Corporation
shall be such as from time to time shall be
fixed by, or in the manner provided in the
by-laws. Election of directors need not be
by ballot unless the by-laws so provide.
(2) The Board of Directors shall have power
without the assent or vote of the
stockholders to make, alter, amend, change,
add to or repeal the by-laws of the
Corporation; to fix and vary the amount to
be reserved for any proper purpose; to
authorize and cause to be executed mortgages
and liens upon all or any part of the
property of the Corporation; to determine
the use and disposition of any surplus or
net profits; and to fix the times for the
declaration and payment of dividends.
(3) In addition to the powers and authorities
hereinbefore or by statute expressly
conferred upon them, the directors are
hereby empowered to exercise all such powers
and do all such acts and things as may be
exercised or done by the Corporation;
subject, nevertheless, to the provisions of
the statutes of Delaware, of this
certificate, and to any by-laws from time to
time made by the stockholders; provided,
however, that no by-laws so made shall
invalidate any prior act of the directors
which would have been valid if such by-law
had not been made.
SIXTH: The Corporation shall, to the full extent permitted
by Section 145 of the Delaware General Corporation
Law, as amended from time to time, indemnify all
directors and officers of the Corporation whom it may
indemnify pursuant thereto.
SEVENTH: Whenever a compromise or arrangement is proposed
between this corporation and its creditors or any
class of them and/or between this corporation and its
stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware
may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof
or on the application of any receiver or receivers
appointed for this corporation under the provisions
of Section 291 of Title 8 of the Delaware Code or on
the application of trustees in dissolution or
<PAGE>
of any receiver or receivers appointed for this
corporation under the provisions of Section 279 of
Title 8 of the Delaware Code, order a meeting of the
creditors or class of creditors, and/or of the
stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority
in number representing three-fourths in value of the
creditors or class of creditors, and/or of the
stockholders or class of stockholders of this
corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization
of this corporation as consequence of such compromise
or arrangement, the said compromise or arrangement
and the said reorganization shall, if sanctioned by
the court to which the said application has been
made, be binding on all the creditors or class of
creditors, and/or on all the stockholders or class of
stockholders, of this corporation, as the case may
be, and also on this corporation.
EIGHTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this
Certificate of Incorporation in the manner now or
hereafter prescribed by law, and all rights and
powers conferred herein on stockholders, directors,
and officers are subject to this reserved power.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
hereto affixed and this Certificate of Amendment and Restatement to be signed by
its President and attested by its Secretary this 14th day of July, 1983.
IOMEGA CORPORATION
By: /s/ Gabriel P. Fusco
------------------------------------
President
ATTEST: /s/ Paul P. Brountas
------------------------------
Secretary
(CORPORATE SEAL)
<PAGE>
CERTIFICATE OF AMENDMENT OF
RESTATED CERTIFICATE OF INCORPORATION OF
IOMEGA CORPORATION
IOMEGA CORPORATION (the "Corporation"), a corporation originally
organized and incorporated under the name "Databyte Corporation" by the filing
of a Certificate of Incorporation in the office of the Secretary of State of the
State of Delaware on April 2, 1980, and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby certify as
follows:
1. The Restated Certificate of Incorporation of the Corporation is
hereby amended by deleting, in its entirety, Article FOURTH, and inserting in
lieu thereof a new Article FOURTH, which shall read in its entirety as follows:
"FOURTH. The total number of shares of capital stock of all
classes which the Corporation shall have authority to issue is
35,000,000, consisting of 30,000,000 shares of Common Stock,
$.03 1/3 par value per share, and 5,000,000 shares of
Preferred Stock, $.01 par value per share.
The following is a statement of the designations, powers,
preferences and rights, and the relative, participating,
optional or other special rights, and the qualifications,
limitations and restrictions granted to or imposed upon the
respective classes of shares of capital stock of the
Corporation or the holders thereof:
A. COMMON STOCK
The voting and dividend rights, and the rights in the event of
the liquidation of the Corporation, of the holders of Common
Stock are subject to and qualified by such rights of the
holders of any series of Preferred Stock as set forth herein
or as the Board of Directors may designate upon the issuance
of shares of any series of Preferred Stock.
<PAGE>
The holders of Common Stock are entitled to one vote for each
share held at all meetings of stockholders. There shall be no
cumulative voting.
Dividends may be declared and paid on Common Stock from funds
lawfully available therefor as and when determined by the
Board of Directors and subject to any preferential dividend
rights of any then outstanding shares of Preferred Stock.
Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will
be entitled to receive pro rata all net assets of the
Corporation available for distribution after payment of
creditors and payment of any preferential liquidation rights
of any then outstanding shares of Preferred Stock.
B. PREFERRED STOCK
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or
expressed herein and in the resolution or resolutions
providing for the issuance of shares of such series adopted by
the Board of Directors of the Corporation as hereinafter
provided. Any shares of Preferred Stock which may be redeemed,
purchased or acquired by the Corporation may be reissued
except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different
classes of shares for the purposes of voting by classes unless
expressly provided.
Authority is hereby expressly granted to the Board of
Directors to issue from time to time shares of Preferred Stock
in one or more series, and in connection with the creation of
any such series, by resolution or resolutions providing for
the issuance of the shares thereof, to determine and fix such
voting powers, full or limited, or no voting powers, and such
designation, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, including without limitation dividend
rights, conversion rights, redemption privileges and
liquidation preferences, as shall be stated and expressed in
such resolutions, all to the full extent now or hereafter
permitted by the General Corporation Law of Delaware. Without
limiting the generality of the foregoing, the resolutions
providing for the issuance of shares of any series of
Preferred
<PAGE>
Stock may provide that such series shall be superior or rank
equally or be junior to shares of any other series of
Preferred Stock to the extent permitted by law. Unless
otherwise expressly provided, no vote of the holders of shares
of Preferred Stock or Common Stock shall be a prerequisite to
the issuance of any shares of any series of Preferred Stock
authorized by and complying with the conditions of the
Restated Certificate of Incorporation."
2. The Restated Certificate of Incorporation of the Corporation is
hereby amended by adding a new Article NINTH, which shall read in its entirety
as follows:
"NINTH: Except to the extent that the General Corporation Law
of the State of Delaware prohibits the elimination of
liability of directors for breaches of fiduciary duty, no
director of the Corporation shall be liable for any breach of
fiduciary duty. No amendment to or repeal of this provision
shall apply to or have any effect on the liability or alleged
liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring
prior to such amendment."
3. Pursuant to the requirements of Section 242 of the General
Corporation Law of the State of Delaware, (i) the Board of Directors of the
Corporation adopted resolutions setting forth the foregoing amendments to the
Restated Certificate of Incorporation of the Corporation, declaring their
advisability, and directing that they be presented to the stockholders of the
Corporation for consideration, and (ii) the stockholders of the Corporation duly
approved the foregoing amendments.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its Senior Vice President - Finance and Planning and
attested by its Assistant Secretary, and its corporate seal to be affixed, this
20th day of May, 1987.
IOMEGA CORPORATION
By: /s/ E. Kevin Dahill
-----------------------------------
E. Kevin Dahill
Senior Vice President -
Finance and Planning
Attest: /s/ Gwenn Newbold
-------------------------------
Gwenn Newbold
Assistant Secretary
(Corporate Seal)
<PAGE>
IOMEGA CORPORATION
CERTIFICATE OF DESIGNATION OF SERIES A AND
SERIES B CONVERTIBLE PREFERRED STOCK
------------------------------------------
Iomega Corporation, a Delaware corporation (the "Corporation"),
pursuant to authority conferred on the Board of Directors of the Corporation by
the Restated Certificate of Incorporation, as amended, of the Corporation and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, certifies that the Board of Directors of the Corporation,
at a meeting thereof duly called and held on October 13, 1987, duly adopted the
following resolutions providing for the establishment of two series of Preferred
Stock of the Corporation, one to be designated "Series A Convertible Preferred
Stock" and consisting of 1,200,000 shares and one to be designated "Series B
Convertible Preferred Stock" and consisting of 250,000 shares, as follows:
"RESOLVED: That, pursuant to the authority expressly granted
and vested in the Board of Directors of the Company in
accordance with the provisions of its Restated Certificate of
Incorporation, there are hereby established (i) a series of
Preferred Stock of the Company, consisting of 1,200,000 shares
designated "Series A Convertible Preferred Stock" ("Series A
Preferred Stock") and (ii) a series of Preferred Stock of the
Company, consisting of 250,000 shares designated "Series B
Convertible Preferred Stock" ("Series B Preferred Stock"); and
subject to the limitations provided by law and by the Restated
Certificate of Incorporation, the powers, designations,
preferences and relative, participating, optional or other
special rights of, and the qualifications, limitations or
restrictions upon, the Series A Preferred Stock and Series B
Preferred Stock shall be as follows:
A. SERIES A CONVERTIBLE PREFERRED STOCK.
One million two hundred thousand (1,200,000) shares of the authorized
and unissued Preferred Stock of the Corporation are hereby designated "Series A
Convertible Preferred Stock" (the "Series A Preferred Stock") with the following
rights, preferences, powers, privileges and restrictions, qualifications and
limitations.
1. DIVIDENDS.
(a) The holders of record of shares of the Series A Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of any funds legally available therefor,
dividends at the rate of five percent (5%)
<PAGE>
-21-
per annum of the Series A Preference (as defined in Subsection 2(a) below) of
such shares for the 1989 calendar year and at the rate of six percent (6%) per
annum of the Series A Preference thereafter. Accrued dividends for each calendar
year shall be paid annually on the March 31 (a "dividend payment date")
following the end of such calendar year (commencing March 31, 1990) to holders
of record of shares of Series A Preferred Stock on such record date (not more
than 60 days prior to March 31) as is established by the Board of Directors for
such dividend.
Dividends at the applicable rates set forth above shall accrue daily
and be cumulative from January 1, 1989. For purposes of the payment of dividends
in cash, the amount of any dividends accrued on any shares of Series A Preferred
Stock at any dividend payment date shall be deemed to be the amount of any
unpaid dividends accumulated thereon to and including the last day of the
preceding calendar year, whether or not earned or declared.
Notwithstanding anything to the contrary herein, accrued dividends for
any calendar year shall not be required to be paid unless the Corporation's
after-tax net income (before any extraordinary benefits) for such year, as shown
on the Company's audited consolidated financial statements, is equal to or
greater than the sum of the aggregate amount of such accrued dividends. Any
accrued dividends that are not paid shall be paid on the dividend payment date
following the end of the first succeeding calendar year in which the
Corporation's after-tax net income, before any extraordinary benefits
(determined as set forth above), is sufficient to pay all of such accrued but
unpaid dividends and the regular dividend on the Series A Preferred Stock for
such year.
(b) So long as shares of Series A Preferred Stock are
outstanding, no cash dividends shall be paid or declared on the Common Stock of
the Corporation or any security ranking junior to the Series A Preferred Stock
as to the payment of dividends, unless all dividends on the Series A Preferred
Stock for all past dividend payment dates shall have been paid and the full
dividend payment for the dividend payment date next succeeding the payment date
of such cash dividend shall have been paid or declared and set apart for
payment.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series A
Preferred Stock then outstanding shall be entitled to be paid out of the assets
of the Corporation available for distribution to its stockholders, after and
subject to the payment in full of all amounts required to be distributed to the
holders of any other class or series of stock of the Corporation
<PAGE>
ranking on liquidation prior and in preference to the Series A Preferred Stock
(collectively referred to as "Senior Preferred Stock"), but before any payment
shall be made to the holders of Common Stock or any other class or series of
stock ranking on liquidation junior to the Series A Preferred Stock (such Common
Stock and other stock being collectively referred to as "Junior Stock") by
reason of their ownership thereof, an amount equal to $5.00 per share (the
"Series A Preference"). The Series A Preferred Stock shall rank on a parity with
the Series B Preferred Stock upon any liquidation, dissolution or winding up of
the Corporation. If upon any such liquidation, dissolution or winding up of the
Corporation the remaining assets of the Corporation available for distribution
to its stockholders shall be insufficient to pay the holders of shares of Series
A Preferred Stock the full amount to which they shall be entitled, the holders
of shares of Series A Preferred Stock, Series B Preferred Stock and any other
class or series of stock ranking on liquidation on a parity with the Series A
Preferred Stock shall share ratably in any distribution of the remaining assets
and funds of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series A Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series A Preferred Stock, upon the liquidation, dissolution or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into
another corporation or entity, or a sale of all or substantially all of the
assets of the Corporation, shall not be regarded as a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 2.
3. VOTING. Except as otherwise required by law, holders of Series A
Preferred Stock shall have no voting rights.
4. OPTIONAL CONVERSION. The holders of the Series A Preferred Stock
shall have conversion rights as follows (the "Series A Conversion Rights"):
(a) As used herein, the following items shall have the
following respective meanings:
<PAGE>
(i) "CONVERSION DATE" shall have the meaning set
forth in Subsection 4(d)(i).
(ii) "MARKET VALUE" shall mean (A) if the Common
Stock of the Corporation is listed on any
national securities exchange or the NASDAQ
National Market System, the reported last sale
price of the Common Stock on such exchange
or system, or, if the Common Stock shall not be
so listed,(B) the average of the closing bid
and asked prices for the Common Stock, as
reported by NASDAQ, or (C) if there are no such
closing bid and asked prices, the fair market
value of the Common Stock as determined by the
Board of Directors of the Corporation.
(iii) "SERIES A MINIMUM CONVERSION PRICE" shall mean
$15.00 per share, subject to adjustment
pursuant to the provisions of this Section 4.
(iv) "SERIES A CONVERSION PRICE" shall mean, as of
the applicable Conversion Date, the greater of
(A) the average of the Market Values of the
Common Stock for the five consecutive Trading
Days preceding (but not including) such
Conversion Date, or (B) the then effective
Series A Minimum Conversion Price.
(v) "TRADING DAY" shall mean any day on which the
New York Stock Exchange is generally open for
trading.
(b) RIGHT TO CONVERT. If (but only if) the Market Value of
Common Stock of the Corporation shall have been equal to or greater than the
Series A Minimum Conversion Price for at least 20 of the 30 Trading Days
preceding the Conversion Date, holders of shares of Series A Preferred Stock may
convert all or any of such shares, on such Conversion Date, into such number of
fully paid and nonassessable shares of Common Stock as is determined by (i)
multiplying the aggregate Series A Preferences of the shares so converted by
1.5, (ii) adding to such sum the aggregate amount of any accrued but unpaid
dividends on such shares, excluding any such dividends declared for payment by
the Board of Directors to holders of Series A Preferred Stock on a record date
occurring prior to or on the Conversion Date, and (iii) dividing the sum so
obtained by the Series A Conversion Price in effect on such Conversion Date.
In the event of a notice of redemption of any shares of Series A
Preferred Stock pursuant to Section 6 hereof, the Series A Conversion Rights of
the shares designated for redemption shall terminate at the close of business on
the fifth Trading Day preceding the date fixed for redemption. In the event of a
liquidation, dissolution or winding up of the Corporation, the
<PAGE>
Series A Conversion Rights shall terminate at the close of business on the first
Trading Day preceding the date fixed for the payment of any amounts
distributable on liquidation to the holders of Series A Preferred Stock.
(c) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series A Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series A Conversion Price.
(d) MECHANICS OF CONVERSION.
(i) In order for a holder of Series A Preferred
Stock to convert shares of Series A Preferred Stock into shares of Common
Stock, such holder shall surrender the certificate or certificates for such
shares of Series A Preferred Stock, at the office of the transfer agent for the
Series A Preferred Stock (or at the principal office of the Corporation if the
Corporation serves as its own transfer agent), together with written notice that
such holder elects to convert all or any number of the shares of the Series A
Preferred Stock represented by such certificate or certificates. Such notice
shall state such holder's name or the names of the nominees in which such holder
wishes the certificate or certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates surrendered for conversion shall be
endorsed or accompanied by a written instrument or instruments of transfer, in
form satisfactory to the Corporation, duly executed by the registered holder or
his or its attorney duly authorized in writing. The date of receipt of such
certificates and notice by the transfer agent (or by the Corporation if the
Corporation serves as its own transfer agent) shall be the Conversion Date,
provided, however, that in the event that the shares tendered for conversion are
not eligible for conversion on the date of receipt of such certificates and
notice by the transfer agent (or by the Corporation if the Corporation serves as
its own transfer agent), the transfer agent or Corporation shall promptly return
such certificates to the registered holder. The Corporation shall, as soon as
practicable after the Conversion Date, issue and deliver at such office to such
holder of Series A Preferred Stock, or to his or its nominees, a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled, together with cash in lieu of any fraction of a share.
(ii) The Corporation shall at all times when the
Series A Preferred Stock shall be outstanding,
reserve and keep available out of its
authorized but unissued stock, for the pur-
<PAGE>
pose of effecting the conversion of the
Series A Preferred Stock, such number of its
duly authorized shares of Common Stock as
shall from time to time be sufficient to effect
the conversion of all outstanding Series A
Preferred Stock.
(iii) All shares of Series A Preferred Stock which
shall have been surrendered for conversion as
herein provided shall no longer be deemed to
be outstanding and all rights with respect to
such shares, including the rights, if any, to
receive notices and to vote, shall
immediately cease and terminate on the
Conversion Date, except only the right of the
holders thereof to receive (A) shares of
Common Stock in exchange therefor pursuant to
Subsection 4(b), (B) payments of accrued but
unpaid dividends in accordance with
Subsection 4(d)(iv) and (C)payments in lieu of
any fractional shares pursuant to Subsection
4(c). Any shares of Series A Preferred Stock
so converted shall be retired and cancelled
and shall not be reissued, and the Corporation
may from time to time take such appropriate
action as may be necessary to reduce the
authorized Series A Preferred Stock
accordingly.
(iv) In the case of any share of Series A Preferred Stock
which is converted after any dividend record date and
on or prior to the corresponding dividend payment date
(except shares of Series A Preferred Stock called for
redemption during such period as to which any accrued
and unpaid dividends shall have been paid), the
dividend payable on such dividend payment date shall be
paid on such date notwithstanding such conversion and
such dividend shall be paid to the person who is the
holder of such shares of Series A Preferred Stock at
the close of business on such dividend record date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date on which a
share of Series A Preferred Stock was first issued (the "Series A Original Issue
Date") effect a subdivision of the outstanding Common Stock, the Series A
Minimum Conversion Price then in effect immediately before that subdivision
shall be proportionately decreased. If the Corporation shall at any time or from
time to time after the Series A Original Issue Date combine the outstanding
shares of Common Stock, the Series A Minimum Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(f) ADJUSTMENT FOR DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to time after the Series A Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to
<PAGE>
receive, a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Series A Minimum Conversion Price then in
effect shall be decreased as of the time of such issuance or, in the event such
a record date shall have been fixed, as of the close of business on such record
date, by multiplying the Series A Minimum Conversion Price then in effect by a
fraction:
(1) the numerator of which shall be the total number of
shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business
on such record date, and
(2) the denominator of which shall be the total number of
shares of Common Stock issued and outstanding immediately
prior to the time of such issuance or the close of business
on such record date plus the number of shares of Common
Stock issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series A
Minimum Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter
the Series A Minimum Conversion Price shall be adjusted
pursuant to this paragraph as of the time of actual payment
of such dividends or distributions.
(g) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another corporation
(other than a merger or consolidation in which the Corporation is the surviving
corporation and which does not result in any reclassification of the outstanding
shares of Common Stock) or the sale of all or substantially all of the assets of
the Corporation to another corporation, entity or person, each share of Series A
Preferred Stock shall thereafter be convertible into the kind and amount of
shares of stock or other securities or assets to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion of such
Series A Preferred Stock would have been entitled upon such consolidation,
merger or sale (assuming for this purpose the conversion of the Series A
Preferred Stock into Common Stock pursuant to Subsection 4(b) at the then
effective Series A Conversion Price).
(h) CERTIFICATE AS TO ADJUSTMENTS. The Corporation shall, upon
the written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a certificate setting forth (i)
such adjustments and read-
<PAGE>
justments, (ii) the Series A Minimum Conversion Price then in effect, and (iii)
the number of shares of Common Stock and the amount, if any, of other property
which then would be received upon the conversion of Series A Preferred Stock.
5. MANDATORY CONVERSION.
(a) The Corporation may, at its option, require all, but not
less than all, holders of shares of Series A Preferred Stock then outstanding to
convert their shares of Series A Preferred Stock into shares of Common Stock, at
the then effective Series A Conversion price and otherwise in accordance with
the terms of Section 4, if the Market Value of the Common Stock has been equal
to or greater than the Series A Minimum Conversion Price for at least 20 of the
30 Trading Days prior to notice of such required conversion by the Corporation.
(b) All holders of record of shares of Series A Preferred
Stock will be given at least 10 days' prior written notice of the date fixed and
the place designated for mandatory conversion of shares of Series A Preferred
Stock pursuant to this Section 5. Such notice will be sent by first class or
registered mail, postage prepaid, to each record holder of Series A Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series A Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). On or before the date fixed for conversion,
each holder of shares of Series A Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the date fixed for conversion, all rights with respect to the
Series A Preferred Stock so converted, including the rights, if any, to receive
notices and vote, will terminate, except only the rights of the holders thereof,
upon surrender of their certificate or certificates therefor, to receive (i)
certificates for the number of shares of Common Stock into which such Series A
Preferred Stock has been converted, (ii) payments of any accrued but unpaid
dividends in accordance with Subsection 4(d)(iv) and (iii) payments in lieu of
any fractional shares pursuant to Subsection 4(c). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
date of such mandatory conversion and the surrender of the certificate or
certificates for Series A Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his
<PAGE>
or its written order, a certificate or certificates for the number of full
shares of Common Stock issuable on such conversion in accordance with the
provisions hereof and cash as provided in Subsection 4(c) in respect of any
fraction of a share of Common Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series A Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and cancelled and the
shares of Series A Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series A Preferred Stock accordingly.
6. MANDATORY REDEMPTION.
(a) The Corporation will, subject to the conditions set forth
in Subsection 6(b) below, on the date ten years after the Series A Original
Issue Date (the "Series A Redemption Date"), redeem from each holder of shares
of Series A Preferred Stock, at a price per share equal to the Series A
Preference, plus an amount equal to all accrued but unpaid dividends thereon
(the "Series A Redemption Price"), all of the shares of Series A Preferred Stock
held by such holder on the Series A Redemption Date.
(b) If the funds of the Corporation legally available for
redemption of Series A Preferred Stock on the Series A Redemption Date are
insufficient to redeem all of the shares of Series A Preferred Stock then
outstanding, those funds which are legally available will be used to redeem the
maximum possible number of such shares of Series A Preferred Stock ratably on
the basis of the number of shares of Series A Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series A Preferred Stock. At any
time thereafter when additional funds of the Corporation become legally
available for the redemption of Series A Preferred Stock, such funds will be
used, after the end of the next succeeding fiscal quarter (also referred to as a
"Series A Redemption Date"), to redeem the balance of the shares, ratably on the
basis set forth in the preceding sentence.
(c) The Corporation shall provide notice of any redemption of
Series A Preferred Stock pursuant to this Section 6 specifying the time and
place of redemption and the Series A Redemption Price, by first class or
registered mail, postage
<PAGE>
prepaid, to each holder of record of Series A Preferred Stock at the address for
such holder last shown on the records of the transfer agent therefor (or the
records of the Corporation, if it serves as its own transfer agent), not more
than 60 nor less than 30 days prior to the date on which such redemption is to
be made. If less than all Series A Preferred Stock owned by such holder is then
to be redeemed, the notice will also specify the number of shares which are to
be redeemed. Upon mailing any such notice of redemption, the Corporation will
become obligated to redeem at the time of redemption specified therein all
Series A Preferred Stock specified therein (other than such shares of Series A
Preferred Stock as are duly converted pursuant to Section 4 or Section 5 prior
to the close of business on the fifth Trading Day preceding the Series A
Redemption Date). In case less than all Series A Preferred Stock represented by
any certificate is redeemed in any redemption pursuant to this Section 6, a new
certificate will be issued representing the unredeemed Series A Preferred Stock
to the holder thereof.
(d) No share of Series A Preferred Stock is entitled to any
dividends declared after its Series A Redemption Date, and on such Series A
Redemption Date all rights of the holder of such share as a stockholder of the
Corporation by reason of the ownership of such share will cease, except the
right to receive the Series A Redemption Price of such share, without interest,
upon presentation and surrender of the certificate representing such share, and
such share will not from and after such Series A Redemption Date be deemed to be
outstanding.
(e) Any Series A Preferred Stock redeemed pursuant to this
Section 6 will be cancelled and will not under any circumstances be reissued,
sold or transferred and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized Series A
Preferred Stock accordingly.
B. SERIES B CONVERTIBLE PREFERRED STOCK.
Two hundred fifty thousand (250,000) shares of the authorized and
unissued Preferred Stock of the Corporation are hereby designated "Series B
Convertible Preferred Stock" (the "Series B Preferred Stock") with the following
rights, preferences, powers, privileges and restrictions, qualifications and
limitations.
1. DIVIDENDS.
(a) The holders of record of shares of the Series B Preferred
Stock shall be entitled to receive, when and as declared by the Board of
Directors of the Corporation, out of any funds legally available therefor,
dividends at the rate of five percent (5%)
<PAGE>
per annum of the Series B Preference (as defined in Subsection 2(a) below) of
such shares for the 1989 calendar year and at the rate of six percent (6%) per
annum of the Series B Preference thereafter. Accrued dividends for each calendar
year shall be paid annually on the March 31 (a "dividend payment date")
following the end of such calendar year (commencing March 31, 1990) to holders
of record of shares of Series B Preferred Stock on such record date (not more
than 60 days prior to March 31) as is established by the Board of Directors for
such dividend.
Dividends at the applicable rates set forth above shall accrue daily
and be cumulative from January 1, 1989. The amount of any dividends accrued on
any shares of Series B Preferred Stock at any dividend payment date shall be
deemed to be the amount of any unpaid dividends accumulated thereon to and
including the last day of the preceding calendar year, whether or not earned or
declared.
Notwithstanding anything to the contrary herein, accrued dividends for
any calendar year shall not be required to be paid unless the Corporation's
after-tax net income (before any extraordinary benefits) for such year, as shown
on the Company's audited consolidated financial statements, is equal to or
greater than the sum of the aggregate amount of such accrued dividends and the
aggregate amount of all dividends required to be paid on the Series A Preferred
Stock for such year. Any accrued dividends that are not paid shall be paid on
the dividend payment date following the end of the first succeeding calendar
year in which the Corporation's after-tax net income, before any extraordinary
benefits (determined as set forth above), is sufficient to pay all of such
accrued but unpaid dividends, the regular dividend on the Series B Preferred
Stock for such year and all accrued but unpaid dividends required to be paid on
such dividend payment date with respect to the Series A Preferred Stock.
(b) So long as shares of Series B Preferred Stock are
outstanding, no cash dividends shall be paid or declared on the Common Stock of
the Corporation or any security ranking junior to the Series B Preferred Stock
as to the payment of dividends, unless all dividends on the Series B Preferred
Stock for all past dividend payment dates shall have been paid and the full
dividend payment for the dividend payment date next succeeding the payment date
of such cash dividend shall have been paid or declared and set apart for
payment.
2. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock then outstanding shall be
<PAGE>
entitled to be paid out of the assets of the Corporation available for
distribution to its stockholders, after and subject to the payment in full of
all amounts required to be distributed to the holders of any other class or
series of stock of the Corporation ranking on liquidation prior and in
preference to the Series B Preferred Stock (collectively referred to as "Senior
Preferred Common Stock"), but before any payment shall be made to the holders of
Common Stock or any other class or series of stock ranking on liquidation junior
to the Series B Preferred Stock (such Common Stock and other stock being
collectively referred to as "Junior Stock") by reason of their ownership
thereof, an amount equal to $5.00 per share (the "Series B Preference "). The
Series B Preferred Stock shall rank on a parity with the Series A Preferred
Stock upon any liquidation, dissolution or winding up of the Corporation. If
upon any such liquidation, dissolution or winding up of the Corporation the
remaining assets of the Corporation available for distribution to its
stockholders shall be insufficient to pay the holders of shares of Series B
Preferred Stock the full amount to which they shall be entitled, the holders of
shares of Series B Preferred Stock, Series A Preferred Stock and any other class
or series of stock ranking on liquidation on a parity with the Series B
Preferred Stock shall share ratably in any distribution of the remaining assets
and funds of the Corporation in proportion to the respective amounts which would
otherwise be payable in respect of the shares held by them upon such
distribution if all amounts payable on or with respect to such shares were paid
in full.
(b) After the payment of all preferential amounts required to
be paid to the holders of Senior Preferred Stock, Series B Preferred Stock and
any other class or series of stock of the Corporation ranking on liquidation on
a parity with the Series B Preferred Stock, upon the liquidation, dissolution or
winding up of the Corporation, the holders of shares of Junior Stock then
outstanding shall be entitled to receive the remaining assets and funds of the
Corporation available for distribution to its stockholders.
(c) A consolidation or merger of the Corporation with or into
another corporation or entity, or a sale of all or substantially all of the
assets of the Corporation, shall not be regarded as a liquidation, dissolution
or winding up of the Corporation within the meaning of this Section 2.
3. VOTING. The Corporation shall not amend, alter or repeal the
preferences, special rights or other powers of the Series B Preferred Stock so
as to affect adversely the Series B Preferred Stock, or authorize any class or
series of capital stock having a preference over the Series B Preferred Stock
with respect
<PAGE>
to liquidation or redemption rights or dividends, without the written consent or
affirmative vote of the holders of a majority of the then outstanding shares of
Series B Preferred Stock, given in writing or by vote at a meeting, consenting
or voting (as the case may be) separately as a class. Except as expressly set
forth above or as otherwise required by law, holders of Series B Preferred Stock
shall have no voting rights.
4. OPTIONAL CONVERSION. The holders of the Series B Preferred Stock
shall have conversion rights as follows (the "Series B Conversion Rights"):
(a) As used herein, the following items shall have the
following respective meanings:
(i) "CONVERSION DATE" shall have the meaning set forth in
Subsection 4(d)(i).
(ii) "MARKET VALUE" shall mean (A) if the Common Stock of
the Corporation is listed on any national securities
exchange or the NASDAQ National Market System, the
reported last sale price of the Common Stock on such
exchange or system, or (B) if the Common Stock shall
not be so listed, the average of the closing bid and
asked prices for the Common Stock, as reported by
NASDAQ, or (C) if there are no such closing bid and
asked prices, the fair market value of the Common Stock
as determined by the Board of Directors of the
Corporation.
(iii)"SERIES B MINIMUM CONVERSION PRICE" shall mean $7.50
per share, subject to adjustment pursuant to the
provisions of this Section 4.
(iv) "SERIES B CONVERSION PRICE" shall mean, as of the
applicable Conversion Date, the greater of (A) the
average of the Market Values of the Common Stock for
the five consecutive Trading Days preceeding (but not
including) such Conversion Date, or (B) the then
effective Series B Minimum Conversion Price.
(v) "TRADING DAY" shall mean any day on which the New York
Stock Exchange is generally open for trading.
(b) RIGHT TO CONVERT. If (but only if) the Market Value of
Common Stock of the Corporation shall have been equal to or greater than the
Series B Minimum Conversion Price for at least 20 of the 30 Trading Days
preceding the Conversion Date, holders
<PAGE>
of shares of Series B Preferred Stock may convert all or any of such shares, on
such Conversion Date, into such number of fully paid and nonassessable shares of
Common Stock as is determined by (i) multiplying the aggregate Series B
Preferences of the shares so converted by 1.5, (ii) adding to such sum the
aggregate amount of any accrued but unpaid dividends on such shares, excluding
any such dividends declared for payment by the Board of Directors to holders of
Series B Preferred Stock on a record date occurring prior to or on the
Conversion Date, and (iii) dividing the sum so obtained by the Series B
Conversion Price in effect on such Conversion Date.
In the event of a notice of redemption of any shares of Series B
Preferred Stock pursuant to Section 6 hereof, the Series B Conversion Rights of
the shares designated for redemption shall terminate at the close of business on
the fifth Trading Day preceding the date fixed for redemption. In the event of a
liquidation, dissolution or winding up of the Corporation, the Series B
Conversion Rights shall terminate at the close of business on the first Trading
Day preceding the date fixed for the payment of any amounts distributable on
liquidation to the holders of Series B Preferred Stock.
(c) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of the Series B Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the then
effective Series B Conversion Price.
(d) MECHANICS OF CONVERSION.
(i) In order for a holder of Series B Preferred Stock to
convert shares of Series B Preferred Stock into shares
of Common Stock, such holder shall surrender the
certificate or certificates for such shares of Series B
Preferred Stock, at the office of the transfer agent
for the Series B Preferred Stock (or at the principal
office of the Corporation if the Corporation serves as
its own transfer agent), together with written notice
that such holder elects to convert all or any number of
the shares of the Series B Preferred Stock represented
by such certificate or certificates. Such notice shall
state such holder's name or the names of the nominees
in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued.
If required by the Corporation, certificates
surrendered for conversion shall be endorsed or
accompanied by a written instrument or instruments of
transfer, in form satisfactory to the Corporation, duly
executed by the registered holder or his or its
attorney duly authorized in writing. The date of
receipt of such certificates and notice by the transfer
agent (or by the Corporation if the Corporation serves
as its own transfer agent) shall be the Conversion
Date, provided, however, that in the event that the
shares tendered for conversion are not eligible for
conversion on the date of receipt of such certificates
and notice by the transfer agent (or by the Corporation
if the Corporation serves as its own transfer agent),
the transfer agent or Corporation shall promptly return
such certificates to the registered holder. The
Corporation shall, as soon as practicable after the
Conversion Date, issue and deliver at such office to
such holder of Series B Preferred Stock, or to his or
its nominees, a certificate or certificates for the
number of shares of Common Stock to which such holder
shall be entitled, together with cash in lieu of any
fraction of a share.
(ii) The Corporation shall at all times when the Series B
Preferred Stock shall be outstanding, reserve and keep
available out of its authorized but unissued stock, for
the purpose of effecting the conversion of the Series B
Preferred Stock, such number of its duly authorized
shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding
Series B Preferred Stock.
(iii)All shares of Series B Preferred Stock which shall
have been surrendered forconversion as herein provided
shall no longer be deemed to be outstanding and all
rights with respect to such shares, including the
rights, if any, to receive notices and to vote, shall
immediately cease and terminate on the Conversion Date,
except only the right of the holders thereof to receive
(A) shares of Common Stock in exchange therefor
pursuant to Subsection 4(b), (B) payments of accrued
but unpaid dividends in accordance with Subsection
4(d)(iv) and (C) payments in lieu of any fractional
shares pursuant to Subsection 4(c). Any shares of
Series B Preferred Stock so converted shall be retired
and cancelled and shall not be reissued, and the
Corporation may from time to time take such appropriate
action as may be necessary to
<PAGE>
reduce the authorized Series B Preferred Stock
accordingly.
(iv) In the case of any share of Series B Preferred Stock
which is converted after any dividend record date and
on or prior to the corresponding dividend payment date
(except shares of Series B Preferred Stock called for
redemption during such period as to which any accrued
and unpaid dividends shall have been paid), the
dividend payable on such dividend payment date shall be
paid on such date notwithstanding such conversion an
such dividend shall be paid to the person who is the
holder of such shares of Series B Preferred Stock at
the close of business on such dividend record date.
(e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Corporation shall at any time or from time to time after the date on which a
share of Series B Preferred Stock was first issued (the "Series B Original Issue
Date") effect a subdivision of the outstanding Common Stock, the Series B
Minimum Conversion Price then in effect immediately before that subdivision
shall be proportionately decreased. If the Corporation shall at any time or from
time to time after the Series B Original Issue Date combine the outstanding
shares of Common Stock, the Series B Minimum Conversion Price then in effect
immediately before the combination shall be proportionately increased. Any
adjustment under this paragraph shall become effective at the close of business
on the date the subdivision or combination becomes effective.
(f) ADJUSTMENT FOR DIVIDENDS AND DISTRIBUTIONS. In the event
the Corporation at any time, or from time to time after the Series B Original
Issue Date shall make or issue, or fix a record date for the determination of
holders of Common Stock entitled to receive, a dividend or other distribution
payable in additional shares of Common Stock, then and in each such event the
Series B Minimum Conversion Price then in effect shall be decreased as of the
time of such issuance or, in the event such a record date shall have been fixed,
as of the close of business on such record date, by multiplying the Series B
Minimum Conversion Price then in effect by a fraction:
(1) the numerator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such
record date, and
<PAGE>
(2) the denominator of which shall be the total number of shares
of Common Stock issued and outstanding immediately prior to
the time of such issuance or the close of business on such
record date plus the number of shares of Common Stock
issuable in payment of such dividend or distribution;
provided, however, if such record date shall have been fixed
and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Series B
Minimum Conversion Price shall be recomputed accordingly as
of the close of business on such record date and thereafter
the Series B Minimum Conversion Price shall be adjusted
pursuant to this paragraph as of the time of actual payment
of such dividends or distributions.
(g) ADJUSTMENT FOR MERGER OR REORGANIZATION, ETC. In case of
any consolidation or merger of the Corporation with or into another corporation
(other than a merger or consolidation in which the Corporation is the surviving
corporation and which does not result in any reclassification of the outstanding
shares of Common Stock) or the sale of all or substantially all of the assets of
the Corporation to another corporation, entity or person, each share of Series B
Preferred Stock shall thereafter be convertible into the kind and amount of
shares of stock or other securities or assets to which a holder of the number of
shares of Common Stock of the Corporation deliverable upon conversion of such
Series B Preferred Stock would have been entitled upon such consolidation,
merger or sale (assuming for this purpose the conversion of the Series B
Preferred Stock into Common Stock pursuant to Subsection 4(b) at the then
effective Series B Conversion Price).
(h) CERTIFICATE AS TO ADJUSTMENTS. The Corporation shall, upon
the written request at any time of any holder of Series B Preferred Stock,
furnish or cause to be furnished to such holder a certificate setting forth (i)
such adjustments and readjustments, (ii) the Series B Minimum Conversion Price
then in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which then would be received upon the conversion of
Series B Preferred Stock.
<PAGE>
5. MANDATORY CONVERSION.
(a) The Corporation may, at its option, require all, but not
less than all, holders of shares of Series B Preferred Stock then outstanding to
convert their shares of Series B Preferred Stock into shares of Common Stock, at
the then effective Series B Conversion Price and otherwise in accordance with
the terms of Section 4, if the Market Value of the Common Stock has been equal
to or greater than the Series B Minimum Conversion Price for at least 20 of the
30 Trading Days prior to notice of such required conversion by the Corporation.
(b) All holders of record of shares of Series B Preferred
Stock will be given at least 10 days' prior written notice of the date fixed and
the place designated for mandatory conversion of shares of Series B Preferred
Stock pursuant to this Section 5. Such notice will be sent by first class or
registered mail, postage prepaid, to each record holder of Series B Preferred
Stock at such holder's address last shown on the records of the transfer agent
for the Series B Preferred Stock (or the records of the Corporation, if it
serves as its own transfer agent). On or before the date fixed for conversion,
each holder of shares of Series B Preferred Stock shall surrender his or its
certificate or certificates for all such shares to the Corporation at the place
designated in such notice, and shall thereafter receive certificates for the
number of shares of Common Stock to which such holder is entitled pursuant to
this Section 5. On the date fixed for conversion, all rights with respect to the
Series B Preferred Stock so converted, including the rights, if any, to receive
notices and vote, will terminate, except only the rights of the holders thereof,
upon surrender of their certificate or certificates therefor, to receive (i)
certificates for the number of shares of Common Stock into which such Series B
Preferred Stock has been converted, (ii) payments of any accrued but unpaid
dividends in accordance with Subsection 4(d)(iv) and (iii) payments in lieu of
any fractional shares pursuant to Subsection 4(c). If so required by the
Corporation, certificates surrendered for conversion shall be endorsed or
accompanied by written instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder or by
his or its attorney duly authorized in writing. As soon as practicable after the
date of such mandatory conversion and the surrender of the certificate
<PAGE>
or certificates for Series B Preferred Stock, the Corporation shall cause to be
issued and delivered to such holder, or on his or its written order, a
certificate or certificates for the number of full shares of Common Stock
issuable on such conversion in accordance with the provisions hereof and cash as
provided in Subsection 4(c) in respect of any fraction of a share of Common
Stock otherwise issuable upon such conversion.
(c) All certificates evidencing shares of Series B Preferred
Stock which are required to be surrendered for conversion in accordance with the
provisions hereof shall, from and after the date such certificates are so
required to be surrendered, be deemed to have been retired and cancelled and the
shares of Series B Preferred Stock represented thereby converted into Common
Stock for all purposes, notwithstanding the failure of the holder or holders
thereof to surrender such certificates on or prior to such date. The Corporation
may thereafter take such appropriate action as may be necessary to reduce the
authorized Series B Preferred Stock accordingly.
6. MANDATORY REDEMPTION.
(a) The Corporation will, subject to the conditions set forth
in Subsection 6(b) below, on the date ten years after the Series B Original
Issue Date (the "Series B Redemption Date"), redeem from each holder of shares
of Series B Preferred Stock, at a price per share equal to the Series B
Preference, plus an amount equal to all accrued but unpaid dividends thereon
(the "Series B Redemption Price"), all of the shares of Series B Preferred Stock
held by such holder on the Series B Redemption Date.
(b) If the funds of the Corporation legally available for
redemption of Series B Preferred Stock on the Series B Redemption Date are
insufficient to redeem all of the shares of Series B Preferred Stock then
outstanding, those funds which are legally available will be used to redeem the
maximum possible number of such shares of Series B Preferred Stock ratably on
the basis of the number of shares of Series B Preferred Stock which would be
redeemed on such date if the funds of the Corporation legally available therefor
had been sufficient to redeem all shares of Series B Preferred Stock. At any
time thereafter when additional funds of the Corporation become legally
available for the redemp-
<PAGE>
tion of Series B Preferred Stock, such funds will be used, after the end of the
next succeeding fiscal quarter (also referred to as a "Series B Redemption
Date"), to redeem the balance of the shares, ratably on the basis set forth in
the preceding sentence.
(c) The Corporation shall provide notice of any redemption of
Series B Preferred Stock pursuant to this Section 6 specifying the time and
place of redemption and the Series B Redemption Price, by first class or
registered mail, postage prepaid, to each holder of record of Series B Preferred
Stock at the address for such holder last shown on the records of the transfer
agent therefor (or the records of the Corporation, if it serves as its own
transfer agent), not more than 60 nor less than 30 days prior to the date on
which such redemption is to be made. If less than all Series B Preferred Stock
owned by such holder is then to be redeemed, the notice will also specify the
number of shares which are to be redeemed. Upon mailing any such notice of
redemption, the Corporation will become obligated to redeem at the time of
redemption specified therein all Series B Preferred Stock specified therein
(other than such shares of Series B Preferred Stock as are duly converted
pursuant to Section 4 or Section 5 prior to the close of business on the fifth
Trading Day preceding the Series B Redemption Date). In case less than all
Series B Preferred Stock represented by any certificate is redeemed in any
redemption pursuant to this Section 6, a new certificate will be issued
representing the unredeemed Series B Preferred Stock to the holder thereof.
(d) No share of Series B Preferred Stock is entitled to any
dividends declared after its Series B Redemption Date, and on such Series B
Redemption Date all rights of the holder of such share as a stockholder of the
Corporation by reason of the ownership of such share will cease, except the
right to receive the Series B Redemption Price of such share, without interest,
upon presentation and surrender of the certificate representing such share, and
such share will not from and after such Series B Redemption Date be deemed to be
outstanding.
(e) Any Series B Preferred Stock redeemed pursuant to this
Section 6 will be cancelled and will not under any circumstances be reissued,
sold or transferred and the Corporation may from time to time take such
appropriate action as may be necessary to reduce the authorized Series B
Preferred Stock accordingly.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation to be duly executed by its Chief Executive Officer and attested by
its Assistant Secretary, and its corporate seal to be affixed this 27th day of
October, 1987.
IOMEGA CORPORATION
By: /s/ Michael J. Kucha
-----------------------------
Michael J. Kucha
Chief Executive Officer
Attest:
/s/ Gwenn Newbold
- -----------------------------
Gwenn Newbold
Assistant Secretary
[Corporate Seal]
<PAGE>
CERTIFICATE OF DESIGNATIONS
of
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK
of
IOMEGA CORPORATION
------------------------------
Iomega Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (hereinafter called the
"Corporation"), pursuant to the authority conferred on the Board of Directors of
the Corporation by the Restated Certificate of Incorporation, as amended, and in
accordance with the provisions of Section 151 of the General Corporation Law of
the State of Delaware, hereby certifies that the following resolution was
adopted by the Board of Directors of the Corporation at a meeting duly called
and held on July 28, 1989:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Board of Directors of this Corporation in accordance with the
provisions of its Restated Certificate of Incorporation, as amended, there is
hereby created a series of preferred stock, $.01 par value (the "Preferred
Stock"), of the Corporation to be designated as "Series C Junior Participating
Preferred Stock"; and, subject to the limitations provided by law and by the
Restated Certificate of Incorporation, the powers, preferences and relative,
participating, optional or other rights of, and the qualifications, limitations
or restrictions upon, the Series C Junior Participating Preferred Stock shall be
as follows:
SERIES C JUNIOR PARTICIPATING PREFERRED STOCK:
1. DESIGNATION AND AMOUNT. The shares of such series shall be
designated as "Series C Junior Participating Preferred Stock" (the "Series C
Preferred Stock") and the number of shares constituting the Series C Preferred
Stock shall be 250,000. Such number of shares shall be increased or decreased by
resolution of the Board of Directors of the Corporation (hereinafter, the "Board
of Directors" or the "Board"); PROVIDED, that no decrease shall reduce the
number of shares of Series C Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series C
Preferred Stock.
<PAGE>
-9-
2. DIVIDENDS AND DISTRIBUTIONS.
(a) Subject to the rights of the holders of any shares of any
series of Preferred Stock (or any similar stock) ranking prior and superior to
the Series C Preferred Stock with respect to dividends, the holders of shares of
Series C Preferred Stock, in preference to the holders of Common Stock, par
value $.03 1/3 per share (the "Common Stock"), of the Corporation, and of any
other security ranking junior to the Series C Preferred Stock as to the payment
of dividends, shall be entitled to receive, when, as and if declared by the
Board of Directors out of funds of the Corporation legally available for the
payment of dividends, quarterly dividends payable in cash on March 31, June 30,
September 30 and December 31 in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series C Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) $1 or (ii) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other distributions, other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common Stock
since the immediately preceding Quarterly Dividend Payment Date or, with respect
to the first Quarterly Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series C Preferred Stock. In the event the
Corporation shall at any time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision, combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series C Preferred Stock were entitled
immediately prior to such event under clause (ii) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution
on the Series C Preferred Stock as provided in paragraph (a) of this Section 2
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in
<PAGE>
shares of Common Stock) and the Corporation shall pay such dividend or
distribution on the Series C Preferred Stock before the dividend or distribution
declared on the Common Stock is paid or set apart; provided that, in the event
no dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1 per share on the Series C
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C Preferred Stock from the Quarterly Dividend
Payment date next preceding the date of issue of such shares, unless the date of
issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series C Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series C Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series C Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the date
fixed for the payment thereof.
3. VOTING RIGHTS. The holders of shares of Series C Preferred Stock
shall have the following voting rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series C Preferred Stock shall entitle the holder thereof
to 100 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes per share to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such event
<PAGE>
shall be adjusted by multiplying such number by a fraction, the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(b) Except as otherwise provided herein, in the Certificate of
Incorporation or by law, the holders of shares of Series C Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.
(c) (i) If any time dividends on any Series C Preferred Stock
shall be in arrears in an amount equal to six quarterly dividends thereon, the
holders of the Series C Preferred Stock, voting as a separate series from all
other series of Preferred Stock and classes of capital stock, shall be entitled
to elect two members of the Board of Directors in addition to any Directors
elected by any other series, class or classes of securities and the authorized
number of Directors will automatically be increased by two. Promptly thereafter,
the Board of Directors of this Corporation shall, as soon as may be practicable,
call a special meeting of holders of Series C Preferred Stock for the purpose of
electing such members of the Board of Directors. Said special meeting shall in
any event be held within 45 days of the occurrence of such arrearage.
(ii) During any period when the holders of Series C
Preferred Stock, voting as a separate
series, shall be entitled and shall have exercised their right to elect two
Directors, then and during such time as such right continues (A) the then
authorized number of Directors shall be increased by two, and the holders of
Series C Preferred Stock, voting as a separate series, shall be entitled to
elect the additional Director so provided for, and (B) each such additional
Director shall not be a member of any existing class of the Board of Directors,
but shall serve until the next annual meeting of stockholders for the election
of Directors, or until his successor shall be elected and shall qualify, or
until his right to hold such office terminates pursuant to the provisions of
this paragraph (c).
(iii)A Director elected pursuant to the terms hereof may be
removed with or without cause by the holders of Series
C Preferred Stock entitled to vote in an election of
such Director.
(iv) If, during any interval between annual meetings of
stockholders for the election of Directors and while
the holders of Series C Preferred Stock shall be
entitled to elect two Directors, there is no such
Director in office by reason of resignation, death or
removal, then, promptly thereafter, the Board of
Directors shall cause a special meeting of the holders
of Series C Preferred Stock for the purpose of filling
such vacancy and such vacancy shall be filled at such
special meeting. Such special meeting shall in any
event be held within 45 days of the occurrence of such
vacancy.
(v) At such time as the arrearage is fully cured, and all
dividends accumulated and unpaid on any shares of
Series C Preferred Stock outstanding are paid, and, in
addition thereto, at least one regular dividend has
been paid subsequent to curing such arrearage, the term
of office of any Director elected pursuant to this
paragraph (c), or his successor, shall automatically
terminate, and the authorized number of Directors shall
automatically decrease by two, the rights of the
holders of the shares of the Series C Preferred Stock
to vote as provided in this paragraph (c) shall cease,
subject to renewal from time to time upon the same
terms and conditions, and the holders of shares of the
Series C Preferred Stock shall have only the limited
voting rights elsewhere herein set forth.
(d) Except as set forth herein, or as otherwise provided by
law, holders of Series C Preferred Stock shall have no special voting rights and
their consent shall not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for taking any corporate
action.
4. CERTAIN RESTRICTIONS.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Preferred Stock as provided in Section 2
are in arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series C Preferred Stock
outstanding shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series C Preferred
Stock, except dividends paid ratably on the Series C
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such
shares are then entitled;
(iii)redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior
(either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred
Stock, provided that the Corporation may at any time
redeem, purchase or otherwise acquire shares of any
such junior stock in exchange for shares of any stock
of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding
up) to the Series C Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock,
or any shares of stock ranking on a parity with the
Series C Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend
rates and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. REACQUIRED SHARES. Any shares of Series C Preferred Stock purchased
or otherwise acquired by the Corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock subject to
the conditions and restrictions on issuance set forth herein, in the Certificate
of Incorporation, or in any other Certificate of Designations creating a series
of Preferred Stock or any similar stock or as otherwise required by law.
6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made (i) to the holders of shares of stock
ranking junior (either as to dividends or upon liquidation, dissolution or
winding up) to the Series C Preferred
<PAGE>
Stock unless, prior thereto, the holders of shares of Series C Preferred Stock
shall have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment, provided that the holders of shares of Series C Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 100 times the aggregate
amount to be distributed per share to holders of shares of Common Stock, or (ii)
to the holders of shares of stock ranking on a parity (either as to dividends or
upon liquidation, dissolution or winding up) with the Series C Preferred Stock,
except distributions made ratably on the Series C Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such
shares are entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation, merger or other business
combination of the Corporation with or into any other corporation nor the sale,
lease, exchange or conveyance of all or any part of the property, assets or
business of the Corporation shall be deemed to be a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 6.
(c) In the event the Corporation shall at any time declare or
pay any dividend on the Common Stock payable in shares of Common Stock, or
effect a subdivision, combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the aggregate amount to which holders of shares of
Series C Preferred Stock were entitled immediately prior to such event under the
proviso in clause (i) of paragraph (a) of this Section 6 shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. CONSOLIDATION, MERGER, ETC. Notwithstanding anything to the contrary
contained herein, in case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case each share of Series C Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 100
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as
<PAGE>
the case may be, into which or for which each share of Common Stock is changed
or exchanged. In the event the Corporation shall at any time declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the amount set forth in the preceding sentence with respect to
the exchange or change of shares of Series C Preferred Stock shall be adjusted
by multiplying such amount by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
8. NO REDEMPTION. The shares of Series C Preferred Stock shall not be
redeemable.
9. RANK. The Series C Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Preferred Stock issued either before or after the issuance of
the Series C Preferred Stock, unless the terms of any such series shall provide
otherwise.
10. AMENDMENT. The Certificate of Incorporation of the Corporation
shall not be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Series C Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of a majority
of the then outstanding shares of Series C Preferred Stock, voting as a single
class.
11. FRACTIONAL SHARES. Series C Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series C Preferred Stock.
<PAGE>
IN WITNESS WHEREOF, this Certificate of Designations is executed on
behalf of the Corporation by its President and Chief Executive Officer and
attested by its Secretary this 7th day of August, 1989.
IOMEGA CORPORATION
By: /s/ Fred Wenninger
---------------------------
Name: Fred Wenninger
Title: President and Chief
Executive Officer
Attest:
/s/ Paul D. Slack
- -------------------------
Paul D. Slack
Title: Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
TO
RESTATED CERTIFICATE OF INCORPORATION
0F
IOMEGA CORPORATION
IOMEGA CORPORATION (the "Corporation"), a corporation originally
incorporated under the General Corporation law of the State of Delaware, under
the name "Databyte Corporation," on April 2, 1980, does hereby certify as
follows:
1. The Restated Certificate of Incorporation of the Corporation, as
filed with the Delaware Secretary of State on July 18, 1983, as amended to date,
is hereby further amended by the addition of a new Article TENTH and Article
ELEVENTH, which shall read in their entirety as follows:
TENTH: This Article is inserted for the management of the
business and for the conduct of the affairs of the Corporation.
SECTION 1. NUMBER OF DIRECTORS. The number of directors of the
Corporation shall not be less than three. The exact number of directors
within the limitations specified in the preceding sentence shall be
fixed from time to time pursuant to a resolution adopted by the Board
of Directors.
SECTION 2. CLASSES OF DIRECTORS. The Board of Directors shall
be and is divided into three classes: Class I, Class II and Class III.
No one class shall have more than one director more than any other
class. If a fraction is contained in the quotient arrived at by
dividing the designated number of directors by three, then, if such
fraction is one-third, the extra director shall be a member of Class
III, and if such fraction is two-thirds, one of the extra directors
shall be a member of Class III and one of the extra directors shall be
a member of Class II, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
<PAGE>
-4-
SECTION 3. ELECTION OF DIRECTORS. Elections of directors need not
be by written ballot except as and to the extent provided in the
By-laws of the Corporation.
SECTION 4. TERMS OF OFFICE. Each director shall serve for a
term ending on the date of the third annual meeting following the
annual meeting at which such director was elected; PROVIDED that each
initial director in Class I shall serve for a term ending on the date
of the annual meeting next following the end of the Corporation's 1990
fiscal year; and each initial director in Class II shall serve for a
term ending on the date of the annual meeting next following the end of
the Corporation's 1991 fiscal year; and PROVIDED FURTHER, that the term
of each director shall be subject to the election and qualification of
his/her successor and to his/her earlier death, resignation or removal.
SECTION 5. ALLOCATION OF DIRECTORS AMONG CLASSES IN THE EVENT
OF INCREASES OR DECREASES IN THE NUMBER OF DIRECTORS. In the event of
any increase or decrease in the authorized number of directors, (i)
each director then serving as such shall nevertheless continue as a
director of the class of which he/she is a member and (ii) the newly
created or eliminated directorships resulting from such increase or
decrease shall be apportioned by the Board of Directors among the three
classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible,
consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at
the latest dates following such allocation, and any newly eliminated
directorships shall be subtracted from those classes whose terms of
office are to expire at the earliest dates following such allocation,
unless otherwise provided from time to time by resolution adopted by
the Board of Directors.
SECTION 6. QUORUM; ACTION AT MEETING. A majority of the
directors at any time in office shall constitute a quorum for the
transaction of business. In the event one or more of the directors
shall be disqualified to vote at any meeting, then the required quorum
shall be reduced by one for each such director so disqualified,
provided that in no case shall less than one-third of the number of
directors fixed pursuant to Section 1 above constitute a quorum. If at
any meeting of the Board of Directors there shall be less than such a
quorum, a majority of those present may adjourn the meeting from time
to time. Every act or decision done or made by a majority of the
directors present at a meeting duly held at which a quorum is present
shall be regarded as the act of the
<PAGE>
Board of Directors unless a greater number is required by law, by the
By-laws of the Corporation or by this Certificate of Incorporation.
SECTION 7. REMOVAL. Any director or the entire Board of
Directors may be removed, with or without cause, by the holders of a
majority of the shares then entitled to vote at an election of
directors; provided that, if and for so long as the Board of Directors
is classified pursuant to Section 141(d) of the Delaware General
Corporation Law, stockholders may effect such removal only for cause,
unless this Certificate of Incorporation otherwise provides.
SECTION 8. VACANCIES. Unless and until filled by the
stockholders, any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, may be
filled by a vote of a majority of the directors then in office,
although less than a quorum, or by a sole remaining director. A
director elected to filled a vacancy shall be elected to hold office
until the next election of the class for which such director shall have
chosen, subject to the election and qualification of his/her successor
and to his/her earlier death, resignation or removal.
SECTION 9. AMENDMENTS. Notwithstanding any other provisions of
law, this Certificate of Incorporation or the By-laws of the
Corporation, and notwithstanding the fact that a lesser percentage may
be specified by law, the affirmative vote of the holders of at least
eighty percent (80%) of the votes which all of the stockholders would
be entitled to cast at an annual election of directors or class of
directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, this Article Tenth.
ELEVENTH: Any action which is required to be taken or which
may be taken at any annual or specified meeting of stockholders of the
Corporation may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of all of the outstanding shares
of stock that would be entitled to vote thereon at a meeting of
stockholders. Notwithstanding any other provisions of law, this
Certificates of Incorporation or the By-laws of the Corporation, and
notwithstanding the fact that a lesser percentage may be specified by
law, the affirmative vote of the holders of at least eighty percent
(80%) of the votes which all of the stockholders would be entitled to
cast at an annual election of directors or class of directors shall be
<PAGE>
required to amend or repeal, or to adopt any provision inconsistent
with, this Article Eleventh.
2. The foregoing amendments to the Corporation's Restated Certificate
of Incorporation were duly adopted by the Board of Directors and the
stockholders of the Corporation in accordance with Section 242 of the General
Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be executed and acknowledged as set forth below on this 24th day of
April, 1990.
IOMEGA CORPORATION
By: /s/ Fred Wenninger
--------------------------------
Fred Wenninger
President and Chief Executive
Officer
Attest: /s/ Paul D. Slack
--------------------------------
Paul D. Slack
Senior Vice President
Administration and Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IOMEGA CORPORATION
Pursuant to Section 242 of the
General Corporation Law of
the State of Delaware
------------------------------
IOMEGA CORPORATION (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
1. The Restated Certificate of Incorporation of the Corporation, as
filed with the Delaware Secretary of State on July 18, 1983, as amended to date,
is hereby further amended by (i) deleting Article TENTH in its entirety and (ii)
renumbering Article ELEVENTH as Article TENTH.
2. The foregoing amendment to the Corporation's Restated Certificate of
Incorporation was duly adopted by the Board of Directors and the Stockholders of
the Corporation in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
and attested by its Secretary on this 20th day of April, 1993.
IOMEGA CORPORATION
By: /s/ Fred Wenninger
--------------------------------
Fred Wenninger
President and Chief Executive Officer
Attest: /s/ Paul D. Slack
--------------------------------
Paul D. Slack
Senior Vice President
Administration and Secretary
[Corporate Seal]
<PAGE>
IOMEGA CORPORATION
CERTIFICATE OF DECREASE
OF NUMBER OF SHARES OF PREFERRED STOCK
DESIGNATED AS
SERIES A CONVERTIBLE PREFERRED STOCK
AND SERIES B CONVERTIBLE PREFERRED STOCK
Iomega Corporation, a Delaware corporation (the "Corporation"),
pursuant to authority conferred upon the Board of Directors of the Corporation
by the Corporation's Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and in accordance with the provisions of
Section 151(g) of the General Corporation Law of the State of Delaware (the
"Delaware Law"), certifies that the Board of Directors of the Corporation, by
unanimous written consent in accordance with Section 141(f) of the Delaware Law,
duly adopted the following resolutions:
"RESOLVED: That no shares of the Corporation's Series A Convertible
Preferred Stock (the "Series A Preferred Stock") are outstanding and
no shares of Series A Preferred Stock will be issued subject to the
Certificate of Designation previously filed with respect to such
series (the "Series A Certificate of Designation"); and that the
proper officers of the Corporation be and hereby are authorized and
directed in the name and on behalf of the Corporation to execute and
file a certificate with the Secretary of State of the State of
Delaware pursuant to Section 151(g) of the Delaware Law setting forth
the text of this resolution, upon the filing and effectiveness of
which all matters set forth in the Series A Certificate of Designation
shall be deemed to have been eliminated from the Certificate of
Incorporation and the 1,200,000 shares of Preferred Stock previously
designated as Series A Preferred
<PAGE>
-2-
Stock shall resume their status as undesignated shares of Preferred
Stock available for future issuance in accordance with the Certificate
of Incorporation.
RESOLVED: That no shares of the Corporation's Series B Convertible
Preferred Stock (the "Series B Preferred Stock") are outstanding and
no shares of Series B Preferred Stock will be issued subject to the
Certificate of Designation previously filed with respect to such
series (the "Series B Certificate of Designation"); and that the
proper officers of the Corporation be and hereby are authorized and
directed in the name and on behalf of the Corporation to execute and
file a certificate with the Secretary of State of the State of
Delaware pursuant to Section 151(g) of the Delaware Law setting forth
the text of this resolution, upon the filing and effectiveness of
which all matters are set forth in the Series B Certificate of
Designation shall be deemed to have been eliminated from the
Certificate of Incorporation and the 250,000 shares of Preferred Stock
previously designated as Series B Preferred Stock shall resume their
status as undesignated shares of Preferred Stock available for future
issuance in accordance with the Certificate of Incorporation."
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate to be signed by its President this 14th day
of December, 1995.
IOMEGA CORPORATION
By: /s/ Kim B. Edwards
-------------------------------
President
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IOMEGA CORPORATION
PURSUANT TO SECTION 242 OF THE
GENERAL CORPORATION OF LAW OF
THE STATE OF DELAWARE
IOMEGA CORPORATION (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
1. The Restated Certificate of Incorporation of the Corporation, as
filed with the Delaware Secretary of State on July 18, 1983, as amended to date,
is hereby further amended by deleting the first paragraph of Article FOURTH in
its entirety and replacing it with the following paragraph:
"FOURTH. The total number of shares of capital stock of all classes
which the Corporation shall have authority to issue is 155,000,000
consisting of 150,000,000 shares of Common Stock, $.03 1/3 par value
per share, and 5,000,000 shares of Preferred Stock, $.01 par value per
share."
<PAGE>
2. The foregoing amendment to the Corporation's Restated Certificate of
Incorporation was duly adopted by the Board of Directors and the Stockholders of
the Corporation in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Certificate of Amendment to be signed by its President
on this 26th day of January, 1996.
IOMEGA CORPORATION
By: /s/ Kim B. Edwards
-------------------------------
Kim B. Edwards
President and Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IOMEGA CORPORATION
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Iomega Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
1. The Corporation's Restated Certificate of Incorporation, as filed
with the Delaware Secretary of State on July 18, 1993, as amended to date, is
hereby further amended as follows by deleting the first paragraph of Article
FOURTH in its entirety and replacing it with the following paragraph:
"FOURTH. The total number of shares of capital stock of all
classes which the Corporation shall have authority to issue is
405,000,000, consisting of 400,000,000 shares of Common Stock,
$.03 1/3 par value per share, and 5,000,000 shares of Preferred
Stock, $.01 par value per share."
2. The foregoing amendment to the Corporation's Restated Certificate of
Incorporation was duly adopted by the Board of Directors and the stockholders of
the Corporation in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by its President this 22nd day of April, 1997.
IOMEGA CORPORATION
By: /s/ Kim B. Edwards
-----------------------------
Kim B. Edwards
President and Chief Executive Officer
<PAGE>
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IOMEGA CORPORATION
Pursuant to Section 242
of the General Corporation Law of
the State of Delaware
Iomega Corporation (the "Corporation"), a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware, does hereby certify as follows:
1. The Corporation's Restated Certificate of Incorporation, as filed
with the Delaware Secretary of State on July 18, 1983, as amended to date, is
hereby further amended by inserting the following new Article ELEVENTH:
"ELEVENTH: This Article is inserted for the management of the
business and for the conduct of the affairs of the Corporation.
Section 1. Number of Directors. The number of directors shall
not be less than three. The exact number of directors within
the limitations specified in the preceding sentence shall be
fixed from time to time pursuant to a resolution adopted by
the Board of Directors or as provided in the By-laws of the
Corporation.
Section 2. Classes of Directors. The Board of Directors shall
be and is divided into three classes: Class I, Class II and
Class III. No one class shall have more than one director more
than any other class. If a fraction is contained in the
quotient arrived at by dividing the authorized number of
directors by three, then, if such fraction is one-third, the
extra director shall be a member of Class I, and if such
fraction is two-thirds, one of the extra directors shall be a
member of Class I and one of the extra directors shall be a
member of Class II, unless otherwise provided from time to
time by resolution adopted by the Board of Directors.
<PAGE>
-4-
Section 3. Election of Directors. Elections of directors
need not be by written ballot except as and to the extent
provided in the By-laws of the Corporation.
Section 4. Terms of Office. Each director shall serve for a
term ending on the date of the third annual meeting following
the annual meeting at which such director was elected;
provided, that each initial director in Class I shall serve
for a term expiring at the Corporation's annual meeting held
in 1998; each initial director in Class II shall serve for a
term expiring at the Corporation's annual meeting held in
1999; and each initial director in Class III shall serve for a
term expiring at the Corporation's annual meeting held in
2000; provided, further, that the term of each director shall
continue until the election and qualification of his successor
and shall be subject to his earlier death, resignation or
removal.
Section 5. Allocation of Directors among Classes in the Event
of Increases or Decreases in the Number of Directors. In the
event of any increase or decrease in the authorized number of
directors, (i) each director then serving as such shall
nevertheless continue as a director of the class of which he
is a member until the expiration of his current term, subject
to his earlier death, resignation or removal, and (ii) the
newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of
Directors among the three classes of directors in accordance
with the provisions of Section 2 above. To the extent
possible, consistent with the provisions of Section 2 above,
any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest
dates following such allocation, and any newly eliminated
directorships shall be subtracted from those classes whose
terms of offices are to expire at the earliest dates following
such allocation, unless otherwise provided from time to time
by resolution adopted by the Board of Directors.
Section 6. Quorum; Action at Meeting. A majority of the
directors at any time in office shall constitute a quorum for
the transaction of business. In the event one or more of the
directors shall be disqualified to vote at any meeting, then
the required quorum shall be reduced by one for each such
director so disqualified, provided that in no case shall less
than one-third of the number of directors fixed pursuant to
<PAGE>
Section 1 above constitute a quorum. In the absence of a
quorum at any such meeting, a majority of the directors
present may adjourn the meeting from time to time without
further notice other than announcement at the meeting, until a
quorum shall be present. Every act or decision done or made by
a majority of the directors present at a meeting duly held at
which a quorum is present shall be regarded as the act of the
Board of Directors unless a greater number is required by law,
by the By-laws of the Corporation or by this Certificate of
Incorporation.
Section 7. Removal. Directors of the Corporation may be
removed only for cause by the affirmative vote of the
holders of at least two-thirds of the shares of the capital
stock of the Corporation issued and outstanding and entitled
to vote.
Section 8. Vacancies. Unless and until filled by the
stockholders, any vacancy in the Board of Directors, however
occurring, including a vacancy resulting from an enlargement
of the Board, may be filled by vote of a majority of the
directors then in office, although less than a quorum, or by a
sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the
class for which such director shall have been chosen, subject
to the election and qualification of his successor and to his
earlier death, resignation or removal.
Section 9. Amendments to Article. Notwithstanding any other
provisions of law, this Certificate of Incorporation or the
By-laws of the Corporation, and notwithstanding the fact that
a lesser percentage may be specified by law, the affirmative
vote of the holders of at least eighty percent (80%) of the
shares of capital stock of the Corporation issued and
outstanding and entitled to vote shall be required to amend or
repeal, or to adopt any provision inconsistent with, this
Article ELEVENTH."
2. The foregoing amendment to the Corporation's Restated Certificate of
Incorporation was duly adopted by the Board of Directors and the stockholders of
the Corporation in accordance with Section 242 of the General Corporation Law of
the State of Delaware.
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by the undersigned this 6th day of June, 1997.
IOMEGA CORPORATION
By: /s/ Robert J. Simmons
-------------------------
Name: Robert J. Simmons
Title: Treasurer
BY-LAWS
OF
IOMEGA CORPORATION
(as amended through June 6, 1997)
<PAGE>
-ii-
Table of Contents
.. Page
ARTICLE I - Stockholders............................................ 1
1.1 Place of Meetings................................. 1
1.2 Annual Meeting.................................... 1
1.3 Special Meetings.................................. 1
1.4 Notice of Meetings................................ 1
1.5 Voting List....................................... 1
1.6 Quorum............................................ 2
1.7 Adjournments...................................... 2
1.8 Voting and Proxies................................ 2
1.9 Action at Meeting................................. 2
1.10 Action without Meeting............................ 2
ARTICLE 2 - Directors............................................... 3
2.1 General Powers.................................... 3
2.2 Number; Election; Tenure and Qualification........ 3
2.3 Increases and Decreases in the Size of the Board.. 4
2.4 Vacancies......................................... 4
2.5 Resignation....................................... 4
2.6 Regular Meetings.................................. 4
2.7 Special Meetings.................................. 4
2.8 Notice of Special Meetings........................ 4
2.9 Meetings by Telephone Conference Calls............ 5
2.10 Quorum............................................ 5
2.11 Action at Meeting................................. 5
2.12 Action by Consent................................. 5
2.13 Removal........................................... 5
2.14 Committees........................................ 5
2.15 Compensation of Directors......................... 6
ARTICLE 3 - Officers................................................ 6
3.1 Enumeration....................................... 6
3.2 Election.......................................... 6
3.3 Qualification..................................... 6
3.4 Tenure............................................ 6
3.5 Resignation and Removal........................... 6
3.6 Vacancies......................................... 7
<PAGE>
3.7 Chairman of the Board and Vice-Chairman of the Board 7
3.8 President......................................... 7
3.9 Vice Presidents................................... 7
3.10 Secretary and Assistant Secretaries............... 8
3.11 Treasurer and Assistant Treasurers................ 8
3.12 Bonded Officers................................... 9
3.13 Salaries.......................................... 9
ARTICLE 4 - Capital Stock........................................... 9
4.1 Issuance of Stock................................. 9
4.2 Certificates of Stock............................. 9
4.3 Transfers......................................... 9
4.4 Lost, Stolen or Destroyed Certificates............ 10
4.5 Record Date....................................... 10
ARTICLE 5 - Indemnification......................................... 10
ARTICLE 6 - General Provisions...................................... 11
6.1 Fiscal Year....................................... 11
6.2 Corporate Seal.................................... 11
6.3 Execution of Instruments.......................... 11
6.4 Waiver of Notice.................................. 12
6.5 Voting of Securities.............................. 12
6.6 Evidence of Authority............................. 12
6.7 Certificate of Incorporation...................... 12
6.8 Transactions with Interested Parties.............. 12
6.9 Severability...................................... 13
6.10 Pronouns.......................................... 13
ARTICLE 7 - Amendments.............................................. 13
7.1 By the Board of Directors......................... 13
7.2 By the Stockholders............................... 13
7.3 Certain Amendments................................ 13
<PAGE>
BY-LAWS
OF
IOMEGA CORPORATION
(as amended through June 6, 1997)
ARTICLE 1 - Stockholders
1.1 Place of Meetings. All meetings of stockholders shall be held at
such place within or without the State of Delaware as may be designated from
time to time by the Board of Directors or the President or, if not so
designated, at the registered office of the corporation.
1.2 Annual Meeting. The annual meeting of stockholders for the election
of directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on the third Tuesday of April in each
year, at a time fixed by the Board of Directors or the President. If this date
shall fall upon a legal holiday at the place of the meeting, then such meeting
shall be held on the next succeeding business day at the same hour. If no annual
meeting is held in accordance with the foregoing provisions, the Board of
Directors shall cause the meeting to be held as soon thereafter as convenient.
1.3 Special Meetings. Special meetings of stockholders may be called at
any time by the President or by the Board of Directors. Business transacted at
any special meeting of stockholders shall be limited to matters relating to the
purpose or purposes stated in the notice of meeting.
1.4 Notice of Meetings. Except as otherwise provided by law, written
notice of each meeting of stockholders, whether annual or special, shall be
given not less than 10 nor more than 60 days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notices of all meetings
shall state the place, date and hour of the meeting. The notice of a special
meeting shall state, in addition, the purpose or purposes for which the meeting
is called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
<PAGE>
-13-
1.5 Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
10 days prior to the meeting, at a place within the city where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time of the meeting, and may be inspected by any
stockholder who is present.
1.6 Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
1.7 Adjournments. Any meeting of stockholders may be adjourned to any
other time and to any other place at which a meeting of stockholders may be held
under these By-Laws by the stockholders present or represented at the meeting
and entitled to vote, although less than a quorum, or, if no stockholder is
present, by any officer entitled to preside at or to act as Secretary of such
meeting. It shall not be necessary to notify any stockholder of any adjournment
of less than 30 days if the time and place of the adjourned meeting are
announced at the meeting at which adjournment is taken, unless after the
adjournment a new record date is fixed for the adjourned meeting. At the
adjourned meeting, the corporation may transact any business which might have
been transacted at the original meeting.
1.8 Voting and Proxies. Each stockholder shall have one vote for each
share of stock entitled to vote held of record by such stockholder and a
proportionate vote for each fractional share so held, unless otherwise provided
in the Certificate of Incorporation. Each stockholder of record entitled to vote
at a meeting of stockholders, or to express consent or dissent to corporate
action in writing without a meeting, may vote or express such consent or dissent
in person or may authorize another person or persons to vote or act for him by
written proxy executed by the stockholder or his authorized agent and delivered
to the Secretary of the corporation. No such proxy shall be voted or acted upon
after three years from the date of its execution, unless the proxy expressly
provides for a longer period.
1.9 Action at Meeting. When a quorum is present at any meeting, the
holders of a majority of the stock present or represented and voting on a matter
(or if there are two or more classes of stock entitled to vote as separate
classes, then in the case of each such class, the holders of a majority of the
stock of that class present or represented and voting on a matter) shall decide
any matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these ByLaws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
<PAGE>
1.10 Action without Meeting. Any action which is required to be taken
or which may be taken at any annual or special meeting of stockholders may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
all of the outstanding shares of stock that would be entitled to vote thereon at
a meeting of stockholders.
ARTICLE 2 - Directors
2.1 General Powers. The business and affairs of the corporation shall
be managed by or under the direction of a Board of Directors, who may exercise
all of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2.2 Number; Election; Tenure and Qualification.
(a) The number of directors shall not be less than three. The
exact number of directors within the limitations specified in the preceding
sentence shall be fixed from time to time pursuant to a resolution adopted by
the Board of Directors. The directors shall be elected at the annual meeting of
stockholders by such stockholders as have the right to vote on such election.
Directors need not be stockholders of the corporation.
(b) The Board of Directors shall be and is divided into three
classes: Class I, Class II and Class III. No one class shall have more than one
director more than any other class. If a fraction is contained in the quotient
arrived at by dividing the authorized number of directors by three, then, if
such fraction is one-third, the extra director shall be a member of Class I, and
if such fraction is two-thirds, one of the extra directors shall be a member of
Class I and one of the extra directors shall be a member of Class II, unless
otherwise provided from time to time by resolution adopted by the Board of
Directors.
(c) Each director shall serve for a term ending on the date of
the third annual meeting following the annual meeting at which such director was
elected; provided, that each initial director in Class I shall serve for a term
expiring at the Corporation's annual meeting held in 1998; each initial director
in Class II shall serve for a term expiring at the Corporation's annual meeting
held in 1999; and each initial director in Class III shall serve for a term
expiring at the Corporation's annual meeting held in 2000; provided further,
that the term of each director shall continue until the election and
qualification of his successor and shall be subject to his earlier death,
resignation or removal.
<PAGE>
2.3 Increases and Decreases in the Size of the Board. In the event of
any increase or decrease in the authorized number of directors, (i) each
director then serving as such shall nevertheless continue as a director of the
class of which he is a member until the expiration of his current term, subject
to his earlier death, resignation or removal, and (ii) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of directors in
accordance with the provisions of Section 2.2 above. To the extent possible,
consistent with the provisions of Section 2.2 above, any newly created
directorships shall be added to those classes whose terms of office are to
expire at the latest dates following such allocation, and any newly eliminated
directorships shall be subtracted from those classes whose terms of offices are
to expire at the earliest dates following such allocation, unless otherwise
provided from time to time by resolution adopted by the Board of Directors.
2.4 Vacancies. Unless and until filled by the stockholders, any vacancy
in the Board of Directors, however occurring, including a vacancy resulting from
an enlargement of the Board, may be filled by a vote of a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. A director elected to fill a vacancy shall be elected to hold office
until the next election of the class for which such director shall have been
chosen, subject to the election and qualification of his successor and to his
earlier death, resignation or removal.
2.5 Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the President or
Secretary. Such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
2.6 Regular Meetings. Regular meetings of the Board of Directors may be
held without notice at such time and place, either within or without the State
of Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
2.7 Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
<PAGE>
2.8 Notice of Special Meetings. Notice of any special meeting of
directors shall be given to each director by the Secretary or by the officer or
one of the directors calling the meeting. Notice shall be given to each director
in person, by telephone or by telegram sent to his business or home address at
least 48 hours in advance of the meeting, or by written notice mailed to his
business or home address at least 72 hours in advance of the meeting. A notice
or waiver of notice of a meeting of the Board of Directors need not specify the
purposes of the meeting.
2.9 Meetings by Telephone Conference Calls. Directors or any members of
any committee designated by the directors may participate in a meeting of the
Board of Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation by such means shall constitute
presence in person at such meeting.
2.10 Quorum. A majority of the directors at any time in office shall
constitute a quorum for the transaction of business. In the event one or more of
the directors shall be disqualified to vote at any meeting, then the required
quorum shall be reduced by one for each such director so disqualified, provided
that in no case shall less than one-third of the number of directors fixed
pursuant to Section 2.2 above constitute a quorum. In the absence of a quorum at
any such meeting, a majority of the directors present may adjourn the meeting
from time to time without further notice other than announcement at the meeting,
until a quorum shall be present.
2.11 Action at Meeting. At any meeting of the Board of Directors at
which a quorum is present, the vote of a majority of those present shall be
sufficient to take any action, unless a different vote is specified by law, the
Certificate of Incorporation or these By-Laws.
2.12 Action by Consent. Any action required or permitted to be taken at
any meeting of the Board of Directors or of any committee of the Board of
Directors may be taken without a meeting, if all members of the Board or
committee, as the case may be, consent to the action in writing, and the written
consents are filed with the minutes of proceedings of the Board or committee.
2.13 Removal. Directors of the Corporation may be removed only for
cause by the affirmative vote of the holders of at least two-thirds of the
shares of the capital stock of the Corporation issued and outstanding and
entitled to vote.
<PAGE>
2.14 Committees. The Board of Directors may, by resolution passed by a
majority of the whole Board, designate one or more committees, each committee to
consist of one or more of the directors of the corporation. The Board may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
the absence or disqualification of a member of a committee, the member or
members of the committee present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors and subject to the
provisions of the General Corporation Law of the State of Delaware, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation and may authorize the
seal of the corporation to be affixed to all papers which may require it. Each
such committee shall keep minutes and make such reports as the Board of
Directors may from time to time request. Except as the Board of Directors may
otherwise determine, any committee may make rules for the conduct of its
business, but unless otherwise provided by the directors or in such rules, its
business shall be conducted as nearly as possible in the same manner as is
provided in these By-Laws for the Board of Directors.
2.15 Compensation of Directors. Directors may be paid such compensation
for their services and such reimbursement for expenses of attendance at meetings
as the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE 3 - Officers
3.1 Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice-Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
3.2 Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3.3 Qualification. The President shall be a director. No officer need
be a stockholder. Any two or more offices may be held by the same person.
3.4 Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
<PAGE>
3.5 Resignation and Removal. Any officer may resign by delivering his
written resignation to the corporation at its principal office or to the
President or Secretary. Such resignation shall be effective upon receipt unless
it is specified to be effective at some other time or upon the happening of some
other event.
The Board of Directors, or a committee duly authorized to do so, may
remove any officer with or without cause. Except as the Board of Directors may
otherwise determine, no officer who resigns or is removed shall have any right
to any compensation as an officer for any period following his resignation or
removal, or any right to damages on account of such removal, whether his
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.
3.6 Vacancies. The Board of Directors may fill any vacancy occurring in
any office for any reason and may, in its discretion, leave unfilled for such
period as it may determine any offices other than those of President, Treasurer
and Secretary. Each such successor shall hold office for the unexpired term of
his predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
3.7 Chairman of the Board and Vice-Chairman of the Board. If the Board
of Directors appoints a Chairman of the Board, he shall perform such duties and
possess such powers as are assigned to him by the Board of Directors. If the
Board of Directors appoints a Vice-Chairman of the Board, he shall, in the
absence or disability of the Chairman of the Board, perform the duties and
exercise the powers of the Chairman of the Board and shall perform such other
duties and possess such other powers as may from time to time be vested in him
by the Board of Directors.
3.8 President. The President shall, unless otherwise determined by the
Board of Directors, be the Chief Operating Officer of the corporation. The
President may also be the Chief Executive Officer of the corporation, unless the
Board of Directors has designated another person to serve as Chief Executive
Officer of the corporation. The President shall, subject to the direction of the
Board of Directors, have general charge and supervision of the business of the
corporation. Unless otherwise provided by the Board of Directors, he shall
preside at all meetings of the stockholders and, if he is a Director, at all
meetings of the Board of Directors. The President shall perform such other
duties and shall possess such other powers as the Board of Directors may from
time to time prescribe.
<PAGE>
3.9 Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the President may from time to
time prescribe. In the event of the absence, inability or refusal to act of the
President, the Vice President (or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President. The Board of Directors
may assign to any Vice President the title of Executive Vice President, Senior
Vice President or any other title selected by the Board of Directors.
3.10 Secretary and Assistant Secretaries. The Secretary shall perform
such duties and shall have such powers as the Board of Directors or the
President may from time to time prescribe. In addition, the Secretary shall
perform such duties and have such powers as are incident to the office of the
secretary, including without limitation the duty and power to give notices of
all meetings of stockholders and special meetings of the Board of Directors, to
attend all meetings of stockholders and the Board of Directors and keep a record
of the proceedings, to maintain a stock ledger and prepare lists of stockholders
and their addresses as required, to be custodian of corporate records and the
corporate seal and to affix and attest to the same on documents.
Any Assistant Secretary shall perform such duties and possess such
powers as the Board of Directors, the President or the Secretary may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Secretary, the Assistant Secretary, (or if there shall be more than one, the
Assistant Secretaries in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any
meeting of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
3.11 Treasurer and Assistant Treasurers. The Treasurer shall perform
such duties and shall have such powers as may from time to time be assigned to
him by the Board of Directors or the President. In addition, the Treasurer shall
perform such duties and have such powers as are incident to the office of
treasurer, including without limitation the duty and power to keep and be
responsible for all funds and securities of the corporation, to deposit funds of
the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such
powers as the Board of Directors, the President or the Treasurer may from time
to time prescribe. In the event of the absence, inability or refusal to act of
the Treasurer, the Assistant Treasurer, (or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors) shall
perform the duties and exercise the powers of the Treasurer.
<PAGE>
3.12 Bonded Officers. The Board of Directors may require any officer to
give the corporation a bond in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors upon such terms and conditions
as the Board of Directors, may specify, including without limitation a bond for
the faithful performance of his duties and for the restoration to the
corporation of all property in his possession or under his control belonging to
the corporation.
3.13 Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE 4 - Capital Stock
4.1 Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
4.2 Certificates of Stock. Every holder of stock of the corporation
shall be entitled to have a certificate, in such form as may be prescribed by
law and by the Board of Directors, certifying the number and class of shares
owned by him in the corporation. Each such certificate shall be signed by, or in
the name of the corporation by, the Chairman or Vice-Chairman, if any, of the
Board of Directors, or the President or a Vice President, and the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
Each certificate for shares of stock which are subject to any
restriction on transfer pursuant to the Certificate of Incorporation, the
By-Laws, applicable securities laws or any agreement among any number of
shareholders or among such holders and the corporation shall have conspicuously
noted on the face or back of the certificate either the full text of the
restriction or a statement of the existence of such restriction.
<PAGE>
4.3 Transfers. Subject to the restrictions, if any, stated or noted on
the stock certificates, shares of stock may be transferred on the books of the
corporation by the surrender to the corporation or its transfer agent of the
certificate representing such shares properly endorsed or accompanied by a
written assignment or power of attorney properly executed, and with such proof
of authority or the authenticity of signature as the corporation or its transfer
agent may reasonably require. Except as may be otherwise required by law, by the
Certificate of Incorporation or by these By-Laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect to such stock, regardless of any transfer, pledge or other
disposition of such stock until the shares have been transferred on the books of
the corporation in accordance with the requirements of these By-Laws.
4.4 Lost, Stolen or Destroyed Certificates. The corporation may issue a
new certificate of stock in place of any previously issued certificate alleged
to have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
4.5 Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders or to express consent (or dissent) to
corporate action in writing without a meeting, or entitled to receive payment of
any dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day before the day on which notice is given,
or, if notice is waived, at the close of business on the day before the day on
which the meeting is held. The record date for determining stockholders entitled
to express consent to corporate action in writing without a meeting, when no
prior action by the Board of Directors is necessary, shall be the day on which
the first written consent is expressed. The record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
ARTICLE 5 - Indemnification
<PAGE>
The corporation shall, to the fullest extent permitted by Section 145
of the General Corporation Law of Delaware, as that Section may be amended and
supplemented from time to time, indemnify any director, officer or trustee which
it shall have power to indemnify under that Section against any expenses,
liabilities or other matters referred to in or covered by that Section. The
indemnification provided for in this Article (i) shall not be deemed exclusive
of any other rights to which those indemnified may be entitled under any by-law,
agreement or vote of stockholders or disinterested directors or otherwise, both
as to action in their official capacities and as to action in another capacity
while holding such office, (ii) shall continue as to a person who has ceased to
be a director, officer or trustee and (iii) shall inure to the benefit of the
heirs, executors and administrators of such a person. The corporation's
obligation to provide indemnification under this Article shall be offset to the
extent of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the corporation or any other
person.
To assure indemnification under this Article of all such persons who
are determined by the corporation or otherwise to be or to have been
"fiduciaries" of any employee benefit plan of the corporation which may exist
from time to time, such Section 145 shall, for the purposes of this Article, be
interpreted as follows: an "other enterprise" shall be deemed to include such an
employee benefit plan, including, without limitation, any plan of the
corporation which is governed by the Act of Congress entitled "Employee
Retirement Income Security Act of 1974", as amended from time to time; the
corporation shall be deemed to have requested a person to serve an employee
benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan pursuant to such
Act of Congress shall be deemed "fines"; and action taken or omitted by a person
with respect to an employee benefit plan in the performance of such person's
duties for a purpose reasonably believed by such person to be in the interest of
the participants and beneficiaries of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the corporation.
ARTICLE 6 - General Provisions
6.1 Fiscal Year. Except as from time to time otherwise designated by
the Board of Directors, the fiscal year of the corporation shall begin on the
first day of January in each year and end on the last day of December in each
year.
6.2 Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
<PAGE>
6.3 Execution of Instruments. The President or the Treasurer shall have
power to execute and deliver on behalf and in the name of the corporation any
instrument requiring the signature of an officer of the corporation, except as
otherwise provided in these By-Laws, or where the execution and delivery of such
an instrument shall be expressly delegated by the Board of Directors to some
other officer or agent of the corporation.
6.4 Waiver of Notice. Whenever any notice whatsoever is required to be
given by law, by the Certificate of Incorporation or by these By-Laws, a waiver
of such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telegraph, cable or any other
available method, whether before, at or after the time stated in such waiver, or
the appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
6.5 Voting of Securities. Except as the directors may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at, any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
6.6 Evidence of Authority. A certificate by the Secretary, or an
Assistant Secretary, or a temporary Secretary, as to any action taken by the
stockholders, directors, a committee or any officer or representative of the
corporation shall as to all persons who rely on the certificate in good faith be
conclusive evidence of such action.
6.7 Certificate of Incorporation. All references in these By-Laws to
the Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
6.8 Transactions with Interested Parties. No contract or transaction
between the corporation and one or more of the directors or officers, or between
the corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
(1) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board or committee in good
faith authorizes the contract or transaction by the affirmative votes
of a majority of the disinterested directors, even though the
disinterested directors be less than a quorum;
<PAGE>
(2) The material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon; and the contract or transaction
is specifically approved in good faith by vote of the stockholders; or
(3) The contract or transaction is fair as to the corporation
as of the time it is authorized, approved or ratified, by the Board of
Directors, a committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or of a committee
which authorizes the contract or transaction.
6.9 Severability. Any determination that any provision of these By-Laws
is for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
6.10 Pronouns. All pronouns used in these By-Laws shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person or persons may require.
ARTICLE 7 - Amendments
7.1 By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
7.2 By the Stockholders. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of the holders of
a majority of the shares of the capital stock of the corporation issued and
outstanding and entitled to vote at any regular meeting of stockholders, or at
any special meeting of stockholders, provided notice of such alteration,
amendment, repeal or adoption of new by-laws shall have been stated in the
notice of such special meeting.
7.3 Certain Amendments. Notwithstanding any other provisions of law,
these By-Laws or the Certificate of Incorporation, and notwithstanding the fact
that a lesser percentage may be specified by law, the affirmative vote of the
holders of at least eighty percent (80%) of the votes which all of the
stockholders would be entitled to cast at an annual election of directors or
class of directors shall be required to amend or repeal, or to adopt any
provision inconsistent with, Sections 1.10, 2.2, 2.3, 2.4 or 2.13 of these
By-Laws.
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