SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 30, 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 employer identification number)
of incorporation or organization)
1821 West Iomega Way, Roy, UT 84067
(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code (801) 778-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 30, 1997.
Common Stock, par value $.03 1/3 129,382,495
(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 March 30, 1997
and December 31, 1996 2
Condensed consolidated statements of operations for the
three months ended March 30, 1997 and March 31, 1996 4
Condensed consolidated statements of cash flows for the
three months ended March 30, 1997 and March 31, 1996 5
Notes to condensed consolidated financial statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 19
Item 6. Exhibits and Reports on 8-K 19
Signatures 20
Exhibit Index 21
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; the possible material adverse impact on second quarter results of
the recall of a limited number of Jaz disks; 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
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.
<PAGE>
<TABLE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
(Unaudited)
March 30, December 31,
1997 1996
----------- -----------
(In thousands)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $116,767 $108,312
Trade receivables (net) 210,674 210,733
Inventories 155,326 171,920
Deferred tax assets 37,802 38,059
Other current assets 29,236 27,644
-------- --------
Total current assets 549,805 556,668
-------- --------
PROPERTY, PLANT AND EQUIPMENT, at cost 202,472 187,125
Less - accumulated depreciation and
amortization (68,494) (61,083)
-------- --------
Net property, plant and equipment 133,978 126,042
-------- --------
OTHER ASSETS 3,072 3,432
-------- --------
$686,855 $686,142
======== ========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
<TABLE>
March 30, December 31,
1997 1996
---------- -----------
(In thousands)
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of notes payable $ 7,144 $ 33,770
Accounts payable 128,922 145,844
Accrued liabilities 104,037 103,255
Current portion of capitalized lease
obligations 4,602 4,114
---------- ---------
Total current liabilities 244,705 286,983
---------- ---------
CAPITALIZED LEASE OBLIGATIONS,
net of current portion 5,389 5,711
---------- ---------
NOTES PAYABLE, net of current portion 33,137 13,465
---------- ---------
CONVERTIBLE SUBORDINATED NOTES,
6.75%, due 2001 45,722 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
150,000,000 shares, issued 129,797,100
and 128,277,426 shares at March 30, 1997
and December 31, 1996, respectively 4,325 4,275
Additional paid-in capital 270,667 268,426
Less: 414,605 and 300,000 Common Stock
treasury shares at March 30, 1997 and
December 31, 1996, respectively, at cost (6,099) (4,363)
Deferred compensation (586) (669)
Retained earnings 89,595 66,581
---------- ---------
Total stockholders' equity 357,902 334,250
---------- ---------
$686,855 $686,142
========== =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these balance sheets.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
For the Three Months Ended
March 30, March 31,
1997 1996
---------- ---------
(In thousands, except per share data)
<S> <C> <C>
SALES $ 361,344 $ 221,988
COST OF SALES 254,065 162,088
--------- ---------
Gross Margin 107,279 59,900
--------- ---------
OPERATING EXPENSES:
Selling, general and administrative 54,360 33,156
Research and development 14,717 6,991
--------- ---------
Total operating expenses 69,077 40,147
--------- ---------
OPERATING INCOME 38,202 19,753
Interest and other income and expense, net (2,872) (3,161)
--------- ---------
INCOME BEFORE INCOME TAXES 35,330 16,592
Provision for income taxes (12,316) (6,471)
--------- ---------
NET INCOME $ 23,014 $ 10,121
========= =========
NET INCOME PER COMMON SHARE $ 0.17 $ 0.08
========= =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING
Includes effect of stock splits (see Note 2) 135,703 128,838
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
For the Three Months Ended
March 30, March 31,
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents
Cash Flow from Operating Activities:
Net Income $ 23,014 $ 10,121
Non-Cash Revenue and Expense Adjustments:
Depreciation and amortization expense 7,964 4,179
Deferred income tax provision (benefit) 257 (6,879)
Other 197 107
Changes in Assets and Liabilities:
Trade receivables (net) 59 (38,791)
Inventories 16,594 (6,928)
Other current assets (1,592) (4,864)
Accounts payable (16,922) 16,610
Accrued liabilities 782 15,060
Net cash provided from (used in) --------- ---------
operating activities 30,353 (11,385)
--------- ---------
Cash Flows from Investing Activities:
Purchase of property, plant and equipment (14,489) (14,608)
Net decrease in other assets 360 108
--------- ---------
Net cash used in investing activities (14,129) (14,500)
--------- ---------
Cash Flows from Financing Activities:
Proceeds from sales of Common Stock 1,168 595
Proceeds from issuance of notes payable 86,725 365,096
Payments on notes payable and capitalized
lease obligations (94,982) (383,377)
Purchase of Common Stock (1,736) -
Tax benefit from dispositions of employee
stock 1,056 86
Net proceeds from issuance of convertible
subordinated notes - 43,163
Net cash provided from (used in) --------- ---------
financing activities (7,769) 25,563
--------- ---------
Net Increase (Decrease) in Cash and Cash
Equivalents 8,455 (322)
Cash and Cash Equivalents at Beginning of Period 108,312 1,023
--------- ---------
Cash and Cash Equivalents at End of Period $ 116,767 $ 701
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
<PAGE>
IOMEGA CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Cont'd.)
(Unaudited)
<TABLE>
For the Three Months Ended
March 30, March 31,
1997 1996
--------- ---------
(In thousands)
<S> <C> <C>
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Property, plant and equipment financed under
capitalized lease obligations $ 1,321 $ 4,841
========= =========
</TABLE>
The accompanying notes to condensed consolidated
financial statements are an integral part of these statements.
<PAGE>
IOMEGA CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
In the opinion of management, the accompanying condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) which are necessary to present fairly the financial
position of Iomega Corporation and subsidiaries (the "Company") as of
March 30, 1997 and December 31, 1996, the results of operations for the
three-month periods ended March 30, 1997 and March 31, 1996, and cash flows
for the three-month periods ended March 30, 1997 and March 31, 1996.
The results of operations for the three-month period ended March 30, 1997 are
not necessarily indicative of the results to be expected for the entire year.
These unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes included in
or incorporated into 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 $16.9 million and $15.7 million at March 30, 1997 and
December 31, 1996, respectively, and is included in accrued liabilities in the
accompanying condensed consolidated balance sheets.
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.
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 $24.3 million and $17.0 million at March 30, 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 is the U.S. dollar. Therefore, translation gains and
losses are included in the determination of income.
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:
March 30, December 31,
1997 1996
Raw materials $ 84,443 $ 88,728
Work-in-process 21,163 14,004
Finished goods 49,720 69,188
---------- ----------
$ 155,326 $ 171,920
========== ==========
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. The outstanding shares and earnings per
share have been restated for the three-month period ended March 31, 1996 to
reflect the impact of the April 1996 stock split described in Note 2.
Recent Accounting Pronouncement - 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:
For the Three Months Ended
March 30, 1997 March 31, 1996
-------------- --------------
Pro Forma Basic EPS $0.18 $0.09
Pro Forma Diluted EPS $0.17 $0.08
(2) STOCK SPLITS
In December 1995, the Board of Directors declared a three-for-one Common Stock
split which was effected in the form of a 200% Common Stock dividend paid on
January 31, 1996 to stockholders of record at the close of business on January
15, 1996.
In April 1996, the Company's Board of Directors declared a two-for-one Common
Stock split which was effected in the form of a 100% Common Stock dividend
paid on May 20, 1996 to stockholders of record at the close of business on
May 6, 1996.
Each of these stock splits was accounted for as a stock split and the April
1996 stock split has been retroactively reflected in the accompanying
condensed consolidated financial statements. In connection with the stock
splits, proportional adjustments were made to outstanding stock options and
other outstanding obligations of the Company to issue shares of Common Stock.
(3) INCOME TAXES
Income taxes for the three months ended March 30, 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 $3,298,000 for the first three months of 1997
and $4,772,000 for the corresponding period in 1996.
(4) 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. This
Credit Facility replaced the Company's prior loan facility with Wells Fargo
Bank, N.A. 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. As
of March 30, 1997, the Credit Facility bore interest at LIBOR plus 1.25%, or
6.69%. Total availability under the Credit Facility at March 30, 1997 was
$147.5 million, of which $20.0 million 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 provide
capital lease financing for the purchase of certain manufacturing equipment,
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. Interest rates are fixed and range
from 7.9% to 10.2% per year. At March 30, 1997, the Company had $10.0 million
outstanding on these leases. The leases are secured by the leased equipment
and furniture.
Other Term Notes - The Company has entered into term notes with various
financial institutions. The proceeds of the notes were used to purchase
manufacturing equipment. The term notes have 36-month terms which mature at
various dates from November 1998 to January 1999. Principal and interest
payments are payable monthly. Interest rates are fixed and range from 8.89%
to 9.11% per year. At March 30, 1997, the Company had $2.3 million
outstanding on these term notes. The term notes are secured by the equipment
purchased. The term notes require the Company to maintain minimum levels of
working capital, net worth and quarterly operating income.
Financing of European Accounts Receivable - In November 1995, a foreign
subsidiary of the Company entered into an agreement with a German commercial
bank for up to DM 50 million (approximately $35 million) which involved the
sales of a portion of the foreign subsidiary's accounts receivable to the
bank. During March 1997, the agreement expired and the Company repaid all
amounts outstanding under the agreement.
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, bearing interest at 8.5%, and was payable over
a three-year period. The agreement required the Company to maintain minimum
levels of working capital and net worth and restrictions on maximum levels
of indebtedness. In April 1997, in connection with the consummation of the
purchase of the facility, the Company elected to prepay the entire $18 million
plus accrued interest.
(5) CONVERTIBLE SUBORDINATED NOTES
In March 1996, the Company issued $46.0 million of convertible subordinated
notes. The net proceeds from the issuance of the notes totaled $43.1 million
and were used to pay down other debt and for operating requirements. The
notes bear interest at 6.75% per year and interest payments are payable semi-
annually on March 15 and September 15 in each year commencing on September 15,
1996. The notes mature on March 15, 2001. The notes are unsecured and
subordinated to all existing and future senior indebtedness of the Company and
are effectively subordinated to all existing and future indebtedness and other
liabilities of the Company's subsidiaries.
The principal amount of the notes is convertible into Common Stock of the
Company at the option of the holder at or before maturity, unless previously
redeemed or repurchased, at a conversion price of $9.875 per share (equivalent
to a conversion rate of approximately 101.26 shares per $1,000 principal
amount of notes), subject to adjustment in certain events. At March 30, 1997,
holders have converted $278,000 of convertible subordinated notes into 28,147
shares of Common Stock.
The notes are redeemable at any time on or after March 15, 1999, in whole or
in part, at the option of the Company, at declining redemption prices of
102.7% for 1999 and 101.35% for 2000, together with accrued interest, if any,
to the redemption date.
If any repurchase event, as defined in the indenture agreement, occurs, each
holder of notes may require the Company to repurchase all or any part of such
holder's notes at 100% of the principal amount thereof plus accrued interest
to the repurchase date.
(6) OTHER MATTERS
Significant Customers - During the fiscal quarter ended March 30, 1997, sales
to Ingram Micro, Inc. accounted for 13.2% of consolidated sales. During the
fiscal quarter ended March 31, 1996, sales to Ingram Micro, Inc. accounted
for 11% 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.
The outstanding forward exchange sales (purchase) contracts at March 30, 1997
are as follows. The contracts mature in June 1997.
Contracted
Currency Amount Forward Rate
-------- ------------- ------------
British Pound 8,550,000 .62
Dutch Guilder 15,900,000 1.89
French Franc 50,100,000 5.67
German Mark 45,950,000 1.67
Irish Punt 280,000 .64
Italian Lira 16,650,000,000 1,701.25
Malaysian Ringgitt (1,600,000) 2.49
Spanish Peseta 460,550,000 143.47
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 March 30, 1997 and December 31, 1996, 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.
<PAGE>
IOMEGA CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company reported sales of $361.3 million and net income of $23.0 million,
or $0.17 per share, in the first quarter of 1997. This compares to sales of
$222.0 million and net income of $10.1 million, or $0.08 per share, in the
first quarter of 1996.
SALES
Sales for the three months ended March 30, 1997 increased by $139.3 million,
or 62.7%, when compared to the corresponding period of 1996. The primary
reasons for the increase were higher sales of Zip and Jaz products. Combined
Zip and Jaz sales totaled $323.0 million, or 89.4% of total sales, in the
first quarter of 1997, as compared to $185.6 million, or 83.6% of total sales,
in the first quarter of 1996. Sales of Zip drives to OEM customers increased
to over 20% of total Zip drive unit sales in the first quarter of 1997, as
compared to less than 1% in the first quarter of 1996. Ditto product sales
also increased in the first quarter of 1997, as total Ditto sales were $35.6
million, or 9.9% of sales, as compared to $27.6 million, or 12.4% of sales,
in the first quarter of 1996.
International sales, primarily to customers in Europe and Asia, were $135.2
million, or 37.4% of sales, in the first quarter of 1997. In the first
quarter of 1996, international sales, which were primarily to customers in
Europe, totaled $83.9 million, or 37.8% of sales.
Sales to the U.S. market increased to $226.1 million, or 62.6% of sales, in
the first quarter of 1997, from $138.1 million or 62.2% of sales, in the first
quarter of 1996.
GROSS MARGIN
The Company's gross margin percentage was 29.7% in the first quarter of 1997,
as compared to 27.0% in the first quarter of 1996. Gross margins on Zip
products improved in the first quarter of 1997, as compared to the first
quarter of 1996, due primarily to reductions in component material costs and
per unit manufacturing overhead costs. These cost improvements were partially
offset by price reductions on Zip products resulting from a series of rebate
programs which began in July of 1996. In addition, first quarter 1997 gross
margins were negatively impacted by price protection reserves recorded by the
Company in anticipation of price reductions on its Zip and Jaz products which
became effective in the second quarter. The ratio of disk sales to drive
sales on Zip products was slightly higher in the first quarter of 1997, than
in the first quarter of 1996. Jaz product gross margins improved in the first
quarter of 1997, as compared to the first quarter of 1996, due to the absence
of manufacturing start-up costs and a higher ratio of disk sales to drive
sales. 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 similar in the first quarter of 1997 and the
first quarter of 1996.
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
between 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.
The Company's ability to achieve planned cost reductions will depend in large
part on the success of the Company's efforts to shift manufacturing capacity
from the United States to Malaysia. 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 disks 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 disks
contained a component that did not conform over time to Iomega's reliability
requirements. The Company has contacted its distributors and channel
partners to remove the affected disks from their inventories and will
replace any affected disk purchased by a customer. The costs associated
with this recall could have a material adverse impact on second quarter
1997 gross margins. The amount of the impact will depend, in part, on the
Company's ability to meet anticipated demand for Jaz disks while at the same
time replacing the recalled disks, and the timing and amount of any monetary
recovery by the Company from its supplier.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by $21.2 million in
the first quarter of 1997, as compared to the first quarter of 1996, and
increased slightly as a percentage of sales to 15.0% in the first quarter of
1997 from 14.9% in the first quarter of 1996. The increased expenses in the
first quarter of 1997 were primarily the result of 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 increased by $7.7 million in the first
quarter of 1997, as compared to the first quarter of 1996, and increased as
a percentage of sales to 4.1% of sales in the first quarter of 1997, as
compared to 3.1% of sales in the first quarter of 1996. The increase was
primarily the result of expenditures related to the continued development and
enhancement of Zip, Jaz and Ditto products, as well as development expenses
related to the Company's n-hand product. 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 $1.1 million in the first quarter of
1997, as compared to $0.1 million in the first quarter of 1996, due to
increased available cash balances in the first quarter of 1997. Interest
expense was $2.5 million in the first quarter of 1997, as compared to $2.2
million in the first quarter of 1996, due to increased average borrowings
under a financing agreement in Europe and several new capital lease
obligations.
INCOME TAXES
For the first quarter of 1997, the Company recorded an income tax provision
of $12.3 million, representing an effective income tax rate of 35%. The
effective tax rate decreased from 39% in the first quarter 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, will 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 targeted 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 March 30, 1997, the Company had cash and cash equivalents of $116.8
million, working capital of $305.1 million, and a ratio of current assets
to current liabilities of 2.25 to 1. During the first quarter of 1997, the
Company generated $30.4 million from operating activities. The primary
sources of funds provided by operating activities were net income and non-cash
expenses. Inventories decreased by $16.6 million. This reduction was offset
by decreases in accounts payable and accrued liabilities of $16.1 million.
The Company used $14.1 million in investing activities during the first
quarter of 1997, primarily for the purchase of property, plant and equipment.
Cash used in financing activities totaled $7.8 million during the first
quarter of 1997. Included in cash and cash equivalents used in financing
activities was $8.3 million of net payments on notes payable and capitalized
lease obligations and $1.7 million used to repurchase 114,605 shares of the
Company's Common Stock, offset by a $1.1 million tax benefit for dispositions
of employee stock and proceeds of $1.2 million for sales of Common Stock to
option holders.
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. This Credit Facility
replaced the Company's prior loan facility with Wells Fargo Bank, N.A. 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. As of March 30, 1997,
the Credit Facility bore interest at LIBOR plus 1.25%, or 6.69%. Total
availability under the Credit Facility at March 30, 1997 was $147.5 million,
of which $20.0 million 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.
In November 1995, a foreign subsidiary of the Company entered into an
agreement with a German commercial bank for up to DM 50 million (approximately
$35 million), which involved the sales of a portion of the foreign
subsidiary's accounts receivable to the bank. During March 1997, the
agreement expired and the Company repaid all amounts outstanding under the
agreement.
The Company's balance sheet at March 30, 1997 reflected current notes payable
of $7.1 million, consisting of term loans of $1.1 million and the short-term
portion of financing entered into in connection with the purchase of a
manufacturing facility in Malaysia of $6.0 million. At March 30, 1997,
long-term notes payable totaled $33.1 million, consisting of the long-term
portion of the financing agreement for the purchase of the facility in
Malaysia of $12.0 million, borrowings under the Company's Credit Facility of
$20.0 million and other term loans of $1.1 million. The current and long-term
portions of capitalized lease obligations at March 30, 1997 were $4.6 million
and $5.4 million, respectively. In April 1997, the Company prepaid the
entire $18.0 million relating to the Malaysian manufacturing facility.
The Company had $45.7 million of convertible subordinated notes outstanding at
March 30, 1997, which bear interest at 6.75% per year and mature on March 15,
2001.
Net accounts receivable at the end of the first quarter of 1997 were
relatively comparable to the first quarter of 1996. As indicated above,
inventory decreased by $16.6 million in the first quarter of 1997, due
primarily to a reduction in finished goods resulting from higher than
anticipated sales of Zip products. Other current assets increased by $1.6
million due to increases in prepaid advertising expenses.
Additions to property, plant and equipment during the first quarter of 1997
totaled $15.7 million, partially offset by $1.3 million in proceeds from
capital leases.
The Company expects that its balance of cash and cash equivalents, together
with current and future sources of available financing, will be sufficient
to fund the Company's operations during at least the remainder of 1997.
Thereafter, the Company may require additional funds to finance its
operations. The precise amount and timing of the Company's future financing
needs cannot be determined at this time, and will depend on a number of
factors, including the market demand for the Company's products, the success
of the Company's strategy to transfer manufacturing capacity to Malaysia,
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 cash and accounts
payable.
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
new personal computer data storage solutions, 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 EZ Flyer 230 and SyJet 1.5 GB
(products of Syquest Technology, Inc.), the success of the Company in
establishing OEM arrangements, 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 with 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 recently-announced recall of a limited number of Jaz disks
and the success of the Company's plans to improve customer satisfaction and
provide quicker turnaround on its rebate programs. In addition, component
problems, shortages or other factors affecting the supply of the Company's
products, including any difficulties encountered relating to the transfer of
manufacturing capacity to the Company's new facility in Malaysia or the
Company's ability to add manufacturing capacity as needed, could limit the
Company's sales and provide an opportunity for competing products to achieve
market acceptance.
The Company's business strategy is substantially dependent on maximizing sales
of its proprietary Zip and Jaz disks, which generate significantly higher
margins than its disk drives. If this strategy is not successful, either
because the Company does not establish a sufficiently large installed base of
Zip and Jaz drives, because the sales mix between disks and drives is below
levels anticipated by the Company, because another party succeeds in producing
disks that are compatible with Zip and Jaz drives without infringing the
Company's proprietary rights, or for any other reason, the Company's sales
would be adversely affected, and its net income would be disproportionately
adversely affected.
Future market demand for the Company's products cannot be predicted with
certainty. Sales of Zip and Jaz products in 1996 and the first quarter 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 quarter 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.
The Company's European sales are predominantly denominated in foreign
currencies. The Company enters into forward exchange contracts to sell
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 recent relocation of its European
operations from Germany to Switzerland and the Netherlands, combined with
the recent start-up and expansion of the Company's Asian headquarters and
sales offices, could adversely impact sales momentum in these international
markets.
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, manufacturing capacity, component availability,
transportation and quality issues (including, for example, the Company's
recall of a limited number of Jaz cartridges on April 25, 1997), product and
component pricing, competition, intellectual property rights, litigation and
general economic conditions.
<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. 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. In
addition to the preliminary injunction obtained by the Company against Nomai
in Germany and other legal proceedings commenced by the Company previously
described in the Company's Annual Report on Form 10-K for the period ended
December 31, 1996, on April 7, 1997, the Company filed suit against an
equipment supplier, Thames Automation, Inc. ("Thames"), in United States
District Court for the District of Utah, claiming breach of contract,
conversion and infringement of various Iomega intellectual property rights,
misappropriation of trade secrets and unfair competition. The claims arise
from Thames' alleged offer for sale to Nomai of equipment for the automated
assembly of a Zip-compatible product. On April 8, 1997, the Company filed a
motion for a temporary restraining order prohibiting Thames from selling or
delivering to Nomai or any other person any automated assembly lines or other
equipment designed or suited for making a computer disk compatible with Zip
drives and from disclosing to any third party various documents and
information relating to Zip disk manufacturing equipment sold by Thames to
Iomega. On April 10, 1997, following a hearing before the Court, Thames
stipulated to the entry by the District Court of an order prohibiting Thames
from selling or delivering any such equipment and from making any such
disclosure. The Order was entered on April 11, 1997 and will remain in
effect until the Court rules on the Company's pending motion for a preliminary
injunction. Discovery in the litigation with Thames is underway.
An adverse outcome in any of the 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, as previously indicated in the
Company's most recent Annual Report on Form 10-K.
The Company intends to vigorously protect and enforce its intellectual
property rights in the proceedings referenced above.
Item 2. Change in Securities
The Company did not sell any equity securities during the quarter ended
March 30, 1997 that were not registered under the Securities Act of 1933.
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.
<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: May 12, 1997 Kim B. Edwards
President and Chief Executive Officer
/S/ LEONARD C. PURKIS
-----------------------
Dated: May 12, 1997 Leonard C. Purkis
Senior Vice President, Finance
and Chief Financial Officer
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Quarterly Report on Form
10-Q:
Exhibit No. Description
3(i).1 (1) Restated Certificate of Incorporation of the Company, as
amended.
10.13 (2) 1995 Director Stock Option Plan of the Company, as amended.
10.32 $200 million Credit Agreement, dated March 11, 1997.
10.32 (a) Pledge Agreement, dated March 11, 1997.
10.32 (b) Security Agreement, dated March 11, 1997.
10.33 (2) 1997 Stock Incentive Plan of the Company.
10.34 1997 Bonus Program.
27 Financial Data Schedule (only filed as part of electronic
copy).
______________________________
(1) Incorporated herein by reference to the exhibits to the Company's
Registration Statement on Form S-8 (File No. 333-26375).
(2) Incorporated herein by reference to the Company's Preliminary Proxy
Statement for the 1997 Annual Meeting of Stockholders as filed with the
SEC on February 21, 1997 (File No. 001-12333).
EXHIBIT 10.32
$200,000,000
CREDIT AGREEMENT
dated as of
March 11, 1997
among
Iomega Corporation,
The Banks Party Hereto,
Citibank, N.A.,
as Administrative Agent,
and
Morgan Guaranty Trust Company of New York,
as Documentation Agent
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS
SECTION 1.01. Definitions 1
SECTION 1.02. Accounting Terms and Determinations 12
ARTICLE 2 THE CREDITS
SECTION 2.01. Commitments to Lend 12
SECTION 2.02. Method of Borrowing 12
SECTION 2.03. Maturity of Loans 14
SECTION 2.04. Interest Rates 14
SECTION 2.05. Method of Electing Interest Rates 15
SECTION 2.06. Fees 17
SECTION 2.07. Termination or Reduction of Commitments 17
SECTION 2.08. Optional Prepayments 17
SECTION 2.09. General Provisions as to Payments 18
SECTION 2.10. Funding Losses 18
SECTION 2.11. Computation of Interest and Fees 19
SECTION 2.12. Notes 19
ARTICLE 3 CONDITIONS
SECTION 3.01. Closing 20
SECTION 3.02. Borrowings 21
ARTICLE 4 REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Corporate Existence and Power 22
SECTION 4.02. Corporate and Governmental Authorization;
No Contravention 22
SECTION 4.03. Binding Effect 22
SECTION 4.04. Financial Information 22
SECTION 4.05. Litigation 23
SECTION 4.06. Compliance with ERISA 23
SECTION 4.07. Environmental Matters 23
SECTION 4.08. Taxes 24
SECTION 4.09. Subsidiaries 24
SECTION 4.10. Regulatory Restrictions on Borrowing 24
SECTION 4.11. Full Disclosure 24
SECTION 4.12. Representations in Collateral Documents
True and Correct 25
ARTICLE 5 COVENANTS
SECTION 5.01. Information 25
SECTION 5.02. Payment of Obligations 27
SECTION 5.03. Maintenance of Property; Insurance 28
SECTION 5.04. Conduct of Business and Maintenance of
Existence 28
SECTION 5.05. Compliance with Laws 29
SECTION 5.06. Inspection of Property, Books and Records 29
SECTION 5.07. Mergers and Sales of Assets 29
SECTION 5.08. Use of Proceeds 29
SECTION 5.09. Negative Pledge 30
SECTION 5.10. Limitation on Debt 31
SECTION 5.11. Minimum Consolidated Tangible Net Worth 31
SECTION 5.12. Debt to Consolidated Tangible Net Worth 32
SECTION 5.13. Minimum Consolidated EBITDA 32
SECTION 5.14. Maximum Cash Conversion Days 32
SECTION 5.15. Restricted Payments 32
SECTION 5.16. Investments 32
SECTION 5.17. Transactions with Affiliates 33
SECTION 5.18. Further Assurances 33
ARTICLE 6 DEFAULTS
SECTION 6.01. Events of Default 34
SECTION 6.02. Notice of Default 36
ARTICLE 7 THE AGENTS
SECTION 7.01. Appointment and Authorization 36
SECTION 7.02. Agents and Affiliates 37
SECTION 7.03. Action by Agents 37
SECTION 7.04. Consultation with Experts 37
SECTION 7.05. Liability of Agents 37
SECTION 7.06. Indemnification 38
SECTION 7.07. Credit Decision 38
SECTION 7.08. Successor Agents 38
SECTION 7.09. Agents Fees 38
ARTICLE 8 CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate
Inadequate or Unfair 39
SECTION 8.02. Illegality 39
SECTION 8.03. Increased Cost and Reduced Return 40
SECTION 8.04. Taxes 41
SECTION 8.05. Base Rate Loans Substituted for
Affected Euro-Dollar Loans 43
SECTION 8.06. Substitution of Bank 43
ARTICLE 9 MISCELLANEOUS
SECTION 9.01. Notices 44
SECTION 9.02. No Waivers 44
SECTION 9.03. Expenses; Indemnification 44
SECTION 9.04. Sharing of Set-offs 45
SECTION 9.05. Amendments and Waivers; Release of
Collateral 45
SECTION 9.06. Successors; Participation and Assignments 46
SECTION 9.07. No Reliance on Margin Stock 47
SECTION 9.08. Governing Law; Submission to Jurisdiction 47
SECTION 9.09. Counterparts; Integration; Effectiveness 48
SECTION 9.10. WAIVER OF JURY TRIAL 48
SECTION 9.11. Confidentiality 48
SECTION 9.12. Right of Set-off 49
COMMITMENT SCHEDULE
PRICING SCHEDULE
SCHEDULE I - Debt
EXHIBIT A - Note
EXHIBIT B - Opinion of Counsel for the Borrower
EXHIBIT C - Opinion of Special Counsel for the Agents
EXHIBIT D - Assignment and Assumption Agreement
EXHIBIT E - Security Agreement
EXHIBIT F - Pledge Agreement
AGREEMENT dated as of March 11, 1997 among IOMEGA CORPORATION, the BANKS
party hereto, CITIBANK, N.A., as Administrative Agent, and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK, as Documentation Agent.
The parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms, as used herein, have the
following meanings:
Administrative Agent means Citibank, N.A., in its capacity as administrative
agent for the Banks hereunder, and its successors in such capacity.
Administrative Questionnaire means, with respect to each Bank, an
administrative questionnaire in the form prepared by the Administrative Agent,
completed by such Bank and returned to the Administrative Agent (with a copy
to the Borrower and the Documentation Agent).
Affiliate means (i) any Person that directly, or indirectly through one or
more intermediaries, controls the Borrower (a Controlling Person) or (ii)
any Person (other than the Borrower or a Subsidiary) which is controlled by
or is under common control with a Controlling Person. As used herein, the
term control means possession, directly or indirectly, of the power to vote
10% or more of any class of voting securities of a Person or to direct or
cause the direction of the management or policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.
Agents means the Administrative Agent and the Documentation Agent, and Agent
means either of the foregoing.
Applicable Lending Office means, with respect to any Bank, (i) in the case of
its Base Rate Loans, its Domestic Lending Office, and (ii) in the case of its
Euro-Dollar Loans, its Euro-Dollar Lending Office.
Assignee has the meaning set forth in Section 9.06(c).
Bank means each bank listed on the signature pages hereof, each Assignee which
becomes a Bank pursuant to Section 9.06(c), and their respective successors.
Base Rate means, for any day, a rate per annum equal to the higher of (i) the
Prime Rate for such day and (ii) the sum of 2 of 1% plus the Federal Funds
Rate for such day.
Base Rate Loan means a Loan which bears interest at the Base Rate pursuant to
the applicable Notice of Borrowing or Notice of Interest Rate Election or the
provisions of Section 2.05(a) or Article 8.
Borrower means Iomega Corporation, a Delaware corporation, and its successors.
Borrowing means a borrowing hereunder consisting of Loans made to the Borrower
on the same day pursuant to Article 2, all of which Loans are of the same type
(subject to Article 8) and, except in the case of Base Rate Loans, have the
same initial Interest Period. A Borrowing is a Base Rate Borrowing if such
Loans are Base Rate Loans or a Euro-Dollar Borrowing if such Loans are Euro-
Dollar Loans.
Borrowing Base means, on any date, a dollar amount equal to 70% of the
consolidated trade receivables, less allowance for doubtful accounts, of the
Borrower and its Consolidated Subsidiaries determined as of the last day of
the most recently ended Fiscal Quarter for which financial statements are
required to have been delivered on or before such date pursuant to clauses
(a) and (b) of Section 5.01.
Closing Date means the date on or after the Effective Date on which the
Documentation Agent shall have received all the documents specified in or
pursuant to Section 3.01.
Collateral means collateral subject to the Collateral Documents.
Collateral Documents means the Pledge Agreement, the Security Agreement, any
additional pledge or security agreements required to be delivered pursuant
to the Loan Documents and any instruments of assignment, lockbox letters or
other instruments or agreements executed pursuant to the foregoing.
Commitment means (i) with respect to each Bank listed on the Commitment
Schedule, the amount set forth opposite the name of such Bank on the
Commitment Schedule, and (ii) with respect to any Assignee, the amount of the
transferor Bank's Commitment assigned to it pursuant to Section 9.06(c), in
each case as such amount may be changed from time to time pursuant to Section
2.07 or 9.06(c).
Commitment Schedule means the Commitment Schedule attached hereto.
Consolidated Debt means, at any date, the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis as of such date.
Consolidated EBITDA means, for any period, the net income of the Borrower and
its Consolidated Subsidiaries, determined on a consolidated basis for such
period, after excluding the effect of any extraordinary or other non-recurring
gain (but not loss) and the effect of the one-time pre-tax charge of
$9,100,000 taken in the last Fiscal Quarter of 1996, plus, to the extent
deducted in determining such net income for such period, the aggregate amount
of (i) interest expense, (ii) income tax expense, and (iii) depreciation,
amortization and other similar non-cash charges.
Consolidated Subsidiary means, at any date, any Subsidiary or other entity the
accounts of which would be consolidated with those of the Borrower in its
consolidated financial statements if such statements were prepared as of such
date.
Consolidated Tangible Net Worth means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries less
their consolidated Intangible Assets, all determined as of such date. As
used herein, Intangible Assets means the amount (to the extent reflected
in determining such consolidated stockholders' equity) of (i) all write-ups
(except write-ups resulting from foreign currency translations and write-ups
of assets of a going concern business made within twelve months after the
acquisition of such business) after September 30, 1996 in the book value of
any asset owned by the Borrower or a Consolidated Subsidiary, (ii) all
Investments in unconsolidated Subsidiaries and all equity Investments in
Persons which are not Subsidiaries and (iii) all unamortized debt discount
and expense, unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, anticipated future benefit of tax loss carry-
forwards, copyrights, organization or developmental expenses and other
intangible assets.
Debt of any Person means, at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee which are
capitalized in accordance with GAAP, (v) all non-contingent obligations (and,
for purposes of Section 5.09 and the definitions of Material Debt and
Material Financial Obligations, all contingent obligations) of such Person
to reimburse any bank or other Person in respect of amounts paid under a
letter of credit or similar instrument, (vi) all Debt secured by a Lien on
any asset of such Person, whether or not such Debt is otherwise an obligation
of such Person, and (vii) all Guarantees by such Person of Debt of another
Person (each such Guarantee to constitute Debt in an amount equal to the
amount of such other Person's Debt Guaranteed thereby).
Default means any condition or event which constitutes an Event of Default or
which with the giving of notice or lapse of time or both would, unless cured
or waived, become an Event of Default.
Derivatives Obligations of any Person means all obligations of such Person in
respect of any rate swap transaction, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or
equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency
swap transaction, cross-currency rate swap transaction, currency option or
any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
Documentation Agent means Morgan Guaranty Trust Company of New York, in its
capacity as documentation agent for the Banks hereunder, and its successors in
such capacity.
Domestic Business Day means any day except a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
close.
Domestic Lending Office means, as to each Bank, its office located at its
address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Bank may hereafter designate as its Domestic Lending Office
by notice to the Borrower and the Administrative Agent.
Effective Date means the date this Agreement becomes effective in accordance
with Section 9.09.
Environmental Laws means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to the
environment or the effect of the environment on human health or to emissions,
discharges or releases of pollutants, contaminants, Hazardous Substances or
wastes into the environment, including (without limitation) ambient air,
surface water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, Hazardous Substances or wastes or the
clean-up or other remediation thereof.
ERISA means the Employee Retirement Income Security Act of 1974, as amended,
or any successor statute.
ERISA Group means the Borrower, any Subsidiary and all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
Euro-Dollar Business Day means any Domestic Business Day on which commercial
banks are open for international business (including dealings in dollar
deposits) in London.
Euro-Dollar Lending Office means, as to each Bank, its office, branch or
affiliate located at its address set forth in its Administrative Questionnaire
(or identified in its Administrative Questionnaire as its Euro-Dollar Lending
Office) or such other office, branch or affiliate of such Bank as it may
hereafter designate as its Euro-Dollar Lending Office by notice to the
Borrower and the Administrative Agent.
Euro-Dollar Loan means a Loan which bears interest at a Euro-Dollar Rate
pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election.
Euro-Dollar Margin has the meaning set forth in Section 2.04(b).
Euro-Dollar Rate means a rate of interest determined pursuant to Section
2.04(b) on the basis of a London Interbank Offered Rate.
Euro-Dollar Reserve Percentage means, for any day, that percentage (expressed
as a decimal) which is in effect on such day, as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining
the maximum reserve requirement for a member bank of the Federal Reserve
System in New York City with deposits exceeding five billion dollars in
respect of Eurocurrency liabilities (or in respect of any other category
of liabilities which includes deposits by reference to which the interest
rate on Euro-Dollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
any Bank to United States residents).
Events of Default has the meaning set forth in Section 6.01.
Exchange Act means the Securities Exchange Act of 1934, as amended from time
to time.
Federal Funds Rate means, for any day, the rate per annum (rounded upward, if
necessary, to the nearest 1/100 of 1%) equal to the weighted average of the
rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers on such day, as published
by the Federal Reserve Bank of New York on the Domestic Business Day next
succeeding such day, provided that (i) if such day is not a Domestic Business
Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published
on the next succeeding Domestic Business Day and (ii) if no such rate is
so published on such next succeeding Domestic Business Day, the Federal
Funds Rate for such day shall be the average rate quoted to Citibank, N.A.
on such day on such transactions as determined by the Administrative Agent.
Fiscal Quarter means a fiscal quarter of the Borrower.
Fiscal Year means a fiscal year of the Borrower.
GAAP means generally accepted accounting principles as in effect from time to
time, applied on a basis consistent (except for changes concurred in by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks.
Group of Loans means, at any time, a group of Loans consisting of (i) all
Loans which are Base Rate Loans at such time or (ii) all Euro-Dollar Loans
having the same Interest Period at such time, provided that, if a Loan of
any particular Bank is converted to or made as a Base Rate Loan pursuant to
Article 8, such Loan shall be included in the same Group or Groups of Loans
from time to time as it would have been in if it had not been so converted
or made.
Guarantee by any Person means any obligation, contingent or otherwise, of such
Person directly or indirectly guaranteeing any Debt or other obligation of any
other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i)
to purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise), (ii) to reimburse a bank for amounts drawn under a letter of
credit for the purpose of paying such Debt or (iii) entered into for the
purpose of assuring in any other manner the holder of such Debt or other
obligation of the payment thereof or to protect such holder against loss in
respect thereof (in whole or in part), provided that the term Guarantee shall
not include endorsements for collection or deposit in the ordinary course of
business. The term Guarantee used as a verb has a corresponding meaning.
Hazardous Substances means any toxic, radioactive, caustic or otherwise
hazardous substance, including petroleum, its derivatives, by-products and
other hydrocarbons, or any substance having any constituent elements
displaying any of the foregoing characteristics.
Indemnitee has the meaning set forth in Section 9.03(b).
Information Memorandum means the confidential descriptive memorandum dated
January 1997 furnished to the Banks in connection with the transactions
contemplated hereby.
Interest Period means: (1) with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in an applicable Notice of Interest Rate
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in such notice; provided that
(a) any Interest Period which would otherwise end on a day which is not
a Euro-Dollar Business Day shall be extended to the next succeeding Euro-
Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case such Interest Period shall end on the next
preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business
Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (c) below, end on the last Euro-Dollar
Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
Internal Revenue Code means the Internal Revenue Code of 1986, as amended, or
any successor statute.
Investment means any investment in any Person, whether by means of share
purchase, capital contribution, loan, Guarantee, time deposit or otherwise
(but not including any demand deposit).
Lien means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind, or any other type of
preferential arrangement that has substantially the same practical effect as
a security interest, in respect of such asset. For purposes hereof, the
Borrower or any Subsidiary shall be deemed to own subject to a Lien any asset
which it has acquired or holds subject to the interest of a vendor or lessor
under any conditional sale agreement, capital lease or other title retention
agreement relating to such asset.
Loan means a loan made by a Bank pursuant to Section 2.01.
Loan Documents means this Agreement, the Notes and the Collateral Documents.
London Interbank Offered Rate has the meaning set forth in Section 2.04(b).
Material Adverse Effect means (i) any material adverse effect upon the
condition (financial or otherwise), results of operations, properties, assets
or business of the Borrower and its Subsidiaries, taken as a whole; (ii) a
material adverse effect on the ability of the Borrower or any other Person
to consummate the transactions contemplated hereby to occur on the Closing
Date; (iii) a material adverse effect on the ability of the Borrower to
perform under this Agreement and the Notes and the other Loan Documents; or
(iv) a material adverse effect on the rights and remedies of the Agents and
the Banks under this Agreement and the Notes and the other Loan Documents.
Material Debt means Debt (except Debt outstanding hereunder) of the Borrower
and/or one or more of its Subsidiaries, arising in one or more related or
unrelated transactions, in an aggregate principal or face amount exceeding
$5,000,000.
Material Financial Obligations means a principal or face amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, arising
in one or more related or unrelated transactions, exceeding in the aggregate
$5,000,000.
Material Plan means, at any time, a Plan or Plans having aggregate Unfunded
Liabilities in excess of $5,000,000.
Multiemployer Plan means, at any time, an employee pension benefit plan within
the meaning of Section 4001(a)(3) of ERISA to which any member of the ERISA
Group is then making or accruing an obligation to make contributions or has
within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during
such five year period.
Notes means promissory notes of the Borrower, substantially in the form of
Exhibit A hereto, evidencing the Borrower's obligation to repay the Loans,
and Note means any one of such promissory notes issued hereunder.
Notice of Borrowing has the meaning set forth in Section 2.02.
Notice of Interest Rate Election has the meaning set forth in Section 2.05.
Parent means, with respect to any Bank, any Person controlling such Bank.
Participant has the meaning set forth in Section 9.06(b).
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding
to any or all of its functions under ERISA.
Person means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof.
Plan means, at any time, an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person
which was at such time a member of the ERISA Group for employees of any
Person which was at such time a member of the ERISA Group.
Pledge Agreement means the pledge agreement dated as of the Closing Date
substantially in the form of Exhibit F hereto between the Borrower and the
Security Agent, as amended from time to time.
Pricing Schedule means the Pricing Schedule attached hereto.
Prime Rate means the rate of interest publicly announced by Citibank, N.A.
in New York City from time to time as its Prime Rate.
Quarterly Payment Dates means each March 31, June 30, September 30 and
December 31.
Reference Banks means the principal London offices of Fleet National Bank,
Citibank, N.A. and Morgan Guaranty Trust Company of New York, and
Reference Bank means any one of such Reference Banks.
Regulation U means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
Required Banks means, at any time, Banks having at least 51% of the aggregate
amount of the Commitments or, if the Commitments shall have terminated,
holding at least 51% of the aggregate unpaid principal amount of the Loans.
Restricted Payment means (i) any dividend or other distribution on any shares
of the Borrower's capital stock (except dividends payable solely in shares of
its capital stock other than mandatorily redeemable preferred stock) or (ii)
any payment on account of the purchase, redemption, retirement or acquisition
of (a) any shares of the Borrower's capital stock or (b) any option, warrant
or other right to acquire shares of the Borrower's capital stock (but not
including payments of principal, premium (if any) or interest made pursuant
to the terms of convertible debt securities prior to conversion).
Revolving Credit Period means the period from and including the Effective
Date to but not including the Termination Date.
SEC means the Securities and Exchange Commission.
Security Agent means Citicorp USA, Inc., in its capacity as agent for the
Banks under the Collateral Documents, and its successors in such capacity.
Security Agreement means the security agreement dated as of the Closing
Date substantially in the form of Exhibit E hereto among the Borrower, the
Security Agent and Wells Fargo Bank, N.A., as Concentration Bank, as amended
from time to time.
Subsidiary means, as to any Person, any corporation or other entity of which
securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person. Unless
otherwise specified, Subsidiary means a Subsidiary of the Borrower.
Temporary Cash Investment means any Investment in (i) direct obligations of
the United States or any agency thereof or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A-1
by Standard & Poor's Ratings Services or P-1 by Moody's Investors Service,
Inc., (iii) time deposits with, including certificates of deposit issued by,
any office located in the United States of any bank or trust company which is
organized or licensed under the laws of the United States or any State thereof
and has capital, surplus and undivided profits aggregating at least
$1,000,000,000, (iv) repurchase agreements with respect to securities
described in clause (i) above entered into with an office of a bank or trust
company meeting the criteria specified in clause (iii) above, or (v) any other
obligation which meets the criteria established in the Borrower's U.S. cash
investment policy as in effect on the date hereof.
Termination Date means March 11, 2000, or, if such day is not a Euro-Dollar
Business Day, the next succeeding Euro-Dollar Business Day unless such Euro-
Dollar Business Day falls in another calendar month, in which case the
Termination Date shall be the next preceding Euro-Dollar Business Day.
Unfunded Liabilities means, with respect to any Plan at any time, the amount
(if any) by which (i) the value of all benefit liabilities under such Plan,
determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of
ERISA (excluding any accrued but unpaid contributions), all determined as of
the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA
Group to the PBGC or any other Person under Title IV of ERISA.
United States means the United States of America.
SECTION 1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in accordance
with GAAP; provided that, if the Borrower notifies the Administrative Agent
that the Borrower wishes to amend any provision hereof to eliminate the effect
of any change in GAAP on the operation of such provision (or if the
Administrative Agent notifies the Borrower that the Required Banks wish to
amend any provision hereof for such purpose), then the Borrower's compliance
with such provision shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such provision is amended in a manner satisfactory
to the Borrower and the Required Banks.
ARTICLE 2
THE CREDITS
SECTION 2.1. Commitments to Lend. Each Bank severally agrees, on the terms
and conditions set forth in this Agreement, to make loans to the Borrower
from time to time during the Revolving Credit Period; provided that,
immediately after each such loan is made, the aggregate outstanding principal
amount of all Loans by such Bank shall not exceed its Commitment. Each
Borrowing under this Section shall be in an aggregate principal amount of
$5,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount of the unused Commitments) and
shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may
borrow under this Section, prepay Loans to the extent permitted by Section
2.08 and reborrow at any time during the Revolving Credit Period under this
Section.
SECTION 2.2. Method of Borrowing. (a) The Borrower shall give the
Administrative Agent notice (a Notice of Borrowing) not later than 12:00
Noon (New York City time) on (x) the date of each Base Rate Borrowing and
(y) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(i) the date of such Borrowing, which shall be a Domestic Business Day in the
case of a Base Rate Borrowing or a Euro-Dollar Business Day in the case of a
Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear interest
initially at the Base Rate or a Euro-Dollar Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the initial
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
In no event shall the total number of Groups of Loans at any one time
outstanding exceed twenty.
(b) Promptly after receiving a Notice of Borrowing, the Administrative
Agent shall notify each Bank of the contents thereof and of such Bank's
ratable share of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
(c) Not later than 1:00 P.M. (New York City time) on the date of each Euro-
Dollar Borrowing or 2:00 P.M. (New York City time) on the date of each Base
Rate Borrowing, each Bank shall make available its ratable share of such
Borrowing, in Federal or other funds immediately available in New York City,
to the Administrative Agent at its address specified in or pursuant to Section
9.01. Unless the Administrative Agent determines that any applicable
condition specified in Article 3 has not been satisfied, the Administrative
Agent will make the funds so received from the Banks available to the
Borrower at the Administrative Agent's aforesaid address.
(d) Unless the Administrative Agent shall have received notice from a Bank
before the date of any Borrowing (or, in the case of a Base Rate Borrowing,
prior to 1:30 P.M.(New York City time) on the date of such Borrowing) that
such Bank will not make available to the Administrative Agent such Bank's
share of such Borrowing, the Administrative Agent may assume that such Bank
has made such share available to the Administrative Agent on the date of
such Borrowing in accordance with subsection (b) of this Section and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If and to the extent that
such Bank shall not have so made such share available to the Administrative
Agent, such Bank and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together
with interest thereon, for each day from the date such amount is made
available to the Borrower until the date such amount is repaid to the
Administrative Agent, at (i) if such amount is repaid by the Borrower, a rate
per annum equal to the higher of the Federal Funds Rate and the interest rate
applicable thereto pursuant to Section 2.04 and (ii) if such amount is repaid
by such Bank, the Federal Funds Rate. If such Bank shall repay to the
Administrative Agent such corresponding amount, the Borrower shall not be
required to repay such amount and the amount so repaid by such Bank shall
constitute such Bank's Loan included in such Borrowing for purposes of this
Agreement.
SECTION 2.3. Maturity of Loans. (a) Each Loan shall mature, and the
principal amount thereof shall be due and payable (together with interest
accrued thereon), on the Termination Date.
(b) If at any time the aggregate outstanding principal amount of the Loans
exceeds the Borrowing Base, the Borrower shall prepay on the next succeeding
Domestic Business Day a principal amount of Loans equal to such excess.
SECTION 2.4. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from the date such
Loan is made until it becomes due, at a rate per annum equal to the sum of (x)
the Base Rate Margin (as determined in accordance with the Pricing Schedule)
plus (y) the Base Rate for such day. Such interest shall be payable quarterly
in arrears on each Quarterly Payment Date and, with respect to the principal
amount of any Base Rate Loan converted to a Euro-Dollar Loan, on the date such
amount is so converted. Any overdue principal of or interest on any Base Rate
Loan shall bear interest, payable on demand, for each day until paid at a rate
per annum equal to the sum of 2% plus the Base Rate Margin for such day plus
the Base Rate for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto, at
a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day
thereof and, if such Interest Period is longer than three months, at intervals
of three months after the first day thereof.
Euro-Dollar Margin means a rate per annum determined in accordance with the
Pricing Schedule.
The Adjusted London Interbank Offered Rate applicable to any Interest Period
means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable
London Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve
Percentage.
The London Interbank Offered Rate applicable to any Interest Period means the
average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each
of the Reference Banks in the London interbank market at approximately 11:00
A.M. (London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of
the Euro-Dollar Loan of such Reference Bank to which such Interest Period is
to apply and for a period of time comparable to such Interest Period.
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such day
plus the Adjusted London Interbank Offered Rate applicable to such Loan on the
day before such payment was due and (ii) the sum of 2% plus the Euro-Dollar
Margin for such day plus a rate per annum equal to the quotient obtained
(rounded upward, if necessary, to the next higher 1/100 of 1%) by dividing
(x) the average (rounded upward, if necessary, to the next higher 1/16 of 1%)
of the respective rates per annum at which one day (or, if such amount due
remains unpaid more than three Euro-Dollar Business Days, then for such other
period of time not longer than three months as the Administrative Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Reference Banks are offered to such Reference Bank
in the London interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if
the circumstances described in clause (a) or (b) of Section 8.01 shall exist,
at a rate per annum equal to the sum of 2% plus the Base Rate for such day).
(d) The Administrative Agent shall determine each interest rate applicable
to the Loans hereunder. The Administrative Agent shall promptly notify the
Borrower and the participating Banks of each rate of interest so determined,
and its determination thereof shall be conclusive in the absence of manifest
error.
(e) Each Reference Bank agrees to use its best efforts to furnish quotations
to the Administrative Agent as contemplated by this Section. If any Reference
Bank does not furnish a timely quotation, the Administrative Agent shall
determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.5. Method of Electing Interest Rates. (a) The Loans included in
each Borrowing shall bear interest initially at the type of rate specified by
the Borrower in the applicable Notice of Borrowing. Thereafter, the Borrower
may from time to time elect to change or continue the type of interest rate
borne by each Group of Loans (subject to subsection (d) of this Section and
the provisions of Article 8), as follows:
(i) if such Loans are Base Rate Loans, the Borrower may elect to convert such
Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to convert
such Loans to Base Rate Loans or elect to continue such Loans as Euro-Dollar
Loans for an additional Interest Period, subject to Section 2.10 if any such
conversion is effective on any day other than the last day of an Interest
Period applicable to such Loans.
Each such election shall be made by delivering a notice (a Notice of Interest
Rate Election) to the Administrative Agent not later than 10:30 A.M. (New
York City time) on the third Euro-Dollar Business Day before the conversion
or continuation selected in such notice is to be effective. A Notice of
Interest Rate Election may, if it so specifies, apply to only a portion of the
aggregate principal amount of the relevant Group of Loans; provided that (i)
such portion is allocated ratably among the Loans comprising such Group and
(ii) the portion to which such Notice applies, and the remaining portion to
which it does not apply, are each at least $5,000,000 (unless such portion is
comprised of Base Rate Loans). If no such notice is timely received before
the end of an Interest Period for any Group of Euro-Dollar Loans, the Borrower
shall be deemed to have elected that such Group of Loans be converted to Base
Rate Loans at the end of such Interest Period.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice applies;
(ii) the date on which the conversion or continuation selected in such notice
is to be effective, which shall comply with the applicable clause of
subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new type
of Loans and, if the Loans resulting from such conversion are to be Euro-
Dollar Loans, the duration of the next succeeding Interest Period applicable
thereto; and
(iv) if such Loans are to be continued as Euro-Dollar Loans for an additional
Interest Period, the duration of such additional Interest Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Promptly after receiving a Notice of Interest Rate Election from the
Borrower pursuant to subsection (a) above, the Administrative Agent shall
notify each Bank of the contents thereof and such notice shall not thereafter
be revocable by the Borrower.
(d) The Borrower shall not be entitled to elect to convert any Loans to, or
continue any Loans for an additional Interest Period as, Euro-Dollar Loans if
(i) the aggregate principal amount of any Group of Euro-Dollar Loans created
or continued as a result of such election would be less than $5,000,000 or
(ii) a Default shall have occurred and be continuing when the Borrower
delivers notice of such election to the Administrative Agent.
SECTION 2.6. Fees. The Borrower shall pay to the Administrative Agent,
for the account of the Banks ratably in proportion to their Commitments, a
commitment fee at the Commitment Fee Rate (determined daily in accordance with
the Pricing Schedule) per annum on the daily average amount by which the
aggregate amount of the Commitments exceeds the aggregate outstanding
principal amount of the Loans. Such commitment fee shall accrue from and
including the Effective Date to but excluding the date on which the
Commitments terminate in their entirety, and shall be payable quarterly in
arrears on each Quarterly Payment Date and on the date on which the
Commitments terminate in their entirety.
SECTION 2.7. Termination or Reduction of Commitments. (a) The Borrower
may, upon at least three Domestic Business Days' notice to the Administrative
Agent, (i) terminate the Commitments at any time, if no Loans are outstanding
at such time, or (ii) ratably reduce from time to time, by an aggregate amount
of at least $25,000,000, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans. Promptly after
receiving a notice pursuant to this subsection, the Administrative Agent
shall notify each Bank of the contents thereof.
(b) Unless previously terminated, the Commitments shall terminate in their
entirety on the Termination Date.
SECTION 2.8. Optional Prepayments. (a) Subject in the case of Euro-Dollar
Loans to Section 2.10, the Borrower may, upon at least one Domestic Business
Day's notice to the Administrative Agent, prepay any Group of Base Rate Loans
or upon at least three Euro-Dollar Business Days' notice to the Administrative
Agent, prepay any Group of Euro-Dollar Loans, in each case in whole at any
time, or from time to time in part in amounts aggregating $5,000,000 or any
larger multiple of $1,000,000, by paying the principal amount to be prepaid
together with interest accrued thereon to the date of prepayment. Each such
optional prepayment shall be applied to prepay ratably the Loans of the
several Banks included in such Group of Loans.
(b) Promptly after receiving a notice of prepayment pursuant to this Section,
the Administrative Agent shall notify each Bank of the contents thereof and
of such Bank's ratable share of such prepayment, and such notice shall not
thereafter be revocable by the Borrower.
SECTION 2.9. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of fees
hereunder not later than 1:00 P.M. (New York City time) on the date when due,
in Federal or other funds immediately available in New York City, to the
Administrative Agent at its address specified in or pursuant to Section 9.01.
The Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the
account of the Banks. Whenever any payment of principal of, or interest on,
the Base Rate Loans or of fees shall be due on a day which is not a Domestic
Business Day, the date for payment thereof shall be extended to the next
succeeding Domestic Business Day. Whenever any payment of principal of, or
interest on, the Euro-Dollar Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to
the next succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case the date for payment
thereof shall be the next preceding Euro-Dollar Business Day. If the date
for any payment of principal is extended by operation of law or otherwise,
interest thereon shall be payable for such extended time.
(b) Unless the Borrower notifies the Administrative Agent before the date
on which any payment is due to the Banks hereunder that the Borrower will not
make such payment in full, the Administrative Agent may assume that the
Borrower has made such payment in full to the Administrative Agent on such
date and the Administrative Agent may, in reliance on such assumption, cause
to be distributed to each Bank on such due date an amount equal to the amount
then due such Bank. If and to the extent that the Borrower shall not have so
made such payment, each Bank shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Bank together with
interest thereon, for each day from the date such amount is distributed to
such Bank until the date such Bank repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.10. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan, or any Euro-Dollar Loan is
converted to a Base Rate Loan (whether such payment or conversion is
pursuant to Article 2, 6 or 8 or otherwise), on any day other than the last
day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.04(c), or if the Borrower
fails to borrow, prepay, convert or continue any Euro-Dollar Loans after
notice has been given to any Bank in accordance with Section 2.02(b),
2.05(c) or 2.08(b), the Borrower shall reimburse each Bank within 15 days
after demand for any resulting loss or expense incurred by it (or by an
existing or prospective Participant which has purchased or agreed to
purchase a participation in the related Loan), including (without limitation)
any loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after such payment or
conversion or failure to borrow, prepay, convert or continue; provided that
such Bank shall have delivered to the Borrower a certificate as to the
amount of such loss or expense, which certificate shall be conclusive in
the absence of manifest error.
SECTION 2.11. Computation of Interest and Fees. All interest and fees shall
be computed on the basis of a year of 360 days and paid for the actual number
of days elapsed (including the first day but excluding the last day).
SECTION 2.12. Notes. (a) The Borrower's obligation to repay the Loans
of each Bank shall be evidenced by a single Note payable to the order of such
Bank for the account of its Applicable Lending Office
(b) Each Bank may, by notice to the Borrower and the Administrative Agent,
request that the Borrower's obligation to repay such Bank's Loans of a
particular type be evidenced by a separate Note. Each such Note shall be in
substantially the form of Exhibit A hereto with appropriate modifications to
reflect the fact that it relates solely to Loans of the relevant type. Each
reference in this Agreement to the Note of such Bank shall be deemed to
refer to and include any or all of such Notes, as the context may require.
(c) Promptly after it receives each Bank's Note pursuant to Section 3.01(a),
the Documentation Agent shall forward such Note to such Bank. Each Bank
shall record the date, amount and type of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part thereof
appropriate notations to evidence the foregoing information with respect to
each such Loan then outstanding; provided that a Bank's failure to make any
such recordation or endorsement shall not affect the Borrower's obligations
hereunder or under the Notes. Each Bank is hereby irrevocably authorized
by the Borrower so to endorse its Note and to attach to and make a part of
its Note a continuation of any such schedule as and when required.
ARTICLE 3
CONDITIONS
SECTION 3.1. Closing. The closing hereunder shall occur when the
Documentation Agent has received all the following documents, each dated the
Closing Date unless otherwise indicated:
(a) a duly executed Note for the account of each Bank dated on or before
the Closing Date and complying with the provisions of Section 2.12;
(b) an opinion of Hale and Dorr LLP, counsel for the Borrower,
substantially in the form of Exhibit B hereto, and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;
(c) an opinion of Davis Polk & Wardwell, special counsel for the Agents,
substantially in the form of Exhibit C hereto and covering such additional
matters relating to the transactions contemplated hereby as the Required
Banks may reasonably request;
(d) duly executed counterparts of each of the Collateral Documents, together
with evidence satisfactory to the Agents of the effectiveness and perfection
(to the extent required thereby) of the Liens contemplated thereby, including
the filing of UCC-1's and the delivery of any stock certificates comprising
the Collateral;
(e) evidence satisfactory to it of (i) the repayment in full, not later than
the Closing Date, of all loans (if any) and other amounts outstanding under
the Loan Agreement dated as of July 5, 1995, as amended, between the Borrower
and Wells Fargo Bank, N.A., and the Factoringvertrag dated November 10, 1995,
as amended, between Heller Bank A.G. and Iomega International S.A.
(collectively, the Existing Credit Agreements), together with interest
accrued thereon to the Closing Date and all accrued and unpaid commitment
fees and all other amounts due and payable under the Existing Credit
Agreements, and the release of all Liens relating thereto, and (ii) receipt by
such banks of irrevocable notice of the termination of the commitments under
the Existing Credit Agreements, not later than the Closing Date, which notice
shall also state that no further notices of borrowing will be delivered
thereunder;
(f) evidence satisfactory to it that all fees and expenses payable for the
account of the Banks and the Agents and their affiliates on or before the
Closing Date have been paid in full in the amounts previously agreed upon on
or before the Closing Date; and
(g) all documents the Documentation Agent may reasonably request relating to
the existence of the Borrower, the corporate authority for and the validity
of the Loan Documents, and any other matters relevant hereto, all in form and
substance satisfactory to the Documentation Agent.
Promptly after the Closing Date occurs, the Documentation Agent shall notify
the Borrower, the Administrative Agent and the Banks thereof, and such notice
shall be conclusive and binding on all parties hereto.
SECTION 3.2. Borrowings. The obligation of any Bank to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) the fact that the Closing Date shall have occurred on or before April
30, 1997;
(b) receipt by the Administrative Agent of a Notice of Borrowing as
required by Section 2.02;
(c) the fact that, immediately after such Borrowing, the aggregate
outstanding principal amount of the Loans will not exceed the lesser of the
aggregate Commitments and the Borrowing Base;
(d) the fact that, immediately before and after such Borrowing, no Default
shall have occurred and be continuing; and
(e) the fact that the representations and warranties of the Borrower
contained in this Agreement shall be true on and as of the date of such
Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty
by the Borrower on the date of such Borrowing as to the facts specified in
clauses (c), (d) and (e) of this Section.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.1. Corporate Existence and Power. The Borrower is a corporation
duly incorporated, validly existing and in good standing under the laws of
the jurisdiction of its incorporation, and has all corporate powers and all
material governmental licenses, consents, authorizations and approvals
required to carry on its business as now conducted.
SECTION 4.2. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by the Borrower of the Loan Documents
are within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or filing
with, any governmental body, agency or official (other than in connection
with the Collateral Documents) and do not contravene, or constitute a default
under, any provision of applicable law or regulation or of the Borrower's
certificate of incorporation or by-laws or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or
any Subsidiary, the contravention of which instrument or default under which
instrument could reasonably be expected to have a Material Adverse Effect,
or result in the creation or imposition of any Lien on any asset of the
Borrower or any Subsidiary.
SECTION 4.3. Binding Effect. The Loan Documents (other than the Notes)
constitute valid and binding agreements of the Borrower and each Note, when
executed and delivered in accordance with this Agreement, will constitute a
valid and binding obligation of the Borrower, in each case enforceable in
accordance with its terms except (i) as may be limited by bankruptcy,
insolvency or similar laws affecting creditors' rights generally and (ii)
as rights of acceleration and the availability of equitable remedies may be
limited by equitable principles of general applicability.
SECTION 4.4. Financial Information. (a) The consolidated balance sheet
of the Borrower and its Consolidated Subsidiaries as of December 31, 1996 and
the related consolidated statements of operations, stockholders= equity and
cash flows for the Fiscal Year then ended, reported on by Arthur Andersen
LLP , a copy of which financial statements has been delivered to each of the
Banks, fairly present, in conformity with GAAP, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such date
and their consolidated results of operations and cash flows for such Fiscal
Year.
(b) Since December 31, 1996 there has been no material adverse change in the
business, financial position, results of operations or prospects of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.5. Litigation. There is no action, suit or proceeding pending
against, or to the Borrower's knowledge threatened against or affecting, the
Borrower or any Subsidiary before any court or arbitrator or any governmental
body, agency or official in which there is a reasonable possibility of an
adverse decision which could materially adversely affect the business,
consolidated financial position or consolidated results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole, or which
in any manner draws into question the validity or enforceability of the Loan
Documents.
SECTION 4.6. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and
the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and
the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
Section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed
to make any contribution or payment to any Plan or Multiemployer Plan, or
made any amendment to any Plan, which has resulted or could result in the
imposition of a Lien or the posting of a bond or other security under ERISA
or the Internal Revenue Code or (iii) incurred any liability under Title IV
of ERISA other than a liability to the PBGC for premiums under Section 4007
of ERISA.
SECTION 4.7. Environmental Matters. In the ordinary course of its
business, the Borrower conducts an ongoing review of the effect of
Environmental Laws on the business, operations and properties of the Borrower
and its Subsidiaries, in the course of which it identifies and evaluates
associated liabilities and costs (including, without limitation, any capital
or operating expenditures required for clean-up or closure of properties
presently or previously owned, any capital or operating expenditures required
to achieve or maintain compliance with environmental protection standards
imposed by law or as a condition of any license, permit or contract, any
related constraints on operating activities, including any periodic or
permanent shutdown of any facility or reduction in the level of or change in
the nature of operations conducted thereat, any costs or liabilities in
connection with off-site disposal of wastes or Hazardous Substances and any
actual or potential liabilities to third parties, including employees, and
any related costs and expenses). On the basis of this review, the Borrower
has reasonably concluded that such associated liabilities and costs, including
the costs of complying with Environmental Laws, are unlikely to have a
material adverse effect on the business, financial condition or results of
operations of the Borrower and its Consolidated Subsidiaries, considered as
a whole.
SECTION 4.8. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant
to such returns or pursuant to any assessment received by the Borrower or
any Subsidiary. The charges, accruals and reserves on the books of the
Borrower and its Subsidiaries in respect of taxes or other governmental
charges are, in the Borrower's opinion, adequate.
SECTION 4.9. Subsidiaries. Each of the Borrower's corporate Subsidiaries is
a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation, and has all corporate powers
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
SECTION 4.10. Regulatory Restrictions on Borrowing. The Borrower is not
(i) an investment company within the meaning of the Investment Company Act
of 1940, as amended, (ii) a holding company within the meaning of the
Public Utility Holding Company Act of 1935, as amended, or (iii) otherwise
subject to any regulatory scheme which restricts its ability to incur debt.
SECTION 4.11. Full Disclosure. (a) All information heretofore furnished
by the Borrower to the Agents or any Bank for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Agents or any Bank
will be, true and accurate in all material respects on the date as of which
such information is stated or certified. The Borrower has disclosed to the
Banks any and all facts which materially and adversely affect, or may
materially and adversely affect (to the extent the Borrower can now
reasonably foresee), the business, operations or financial condition of
the Borrower and its Consolidated Subsidiaries, taken as a whole, or the
Borrower's ability to perform its obligations under the Loan Documents.
(b) The projections set forth in the Information Memorandum were based on
reasonable assumptions and as of their date represented the best estimate of
future performance of the Borrower and its Subsidiaries. During the period
from the respective dates as of which information is stated in the
Information Memorandum to and including the Closing Date, no event has
occurred and no condition has come into existence which would have caused
the projections therein to be materially misleading.
SECTION 4.12. Representations in Collateral Documents True and Correct.
Each of the representations and warranties of the Borrower contained in the
Collateral Documents is true and correct.
ARTICLE 5
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any principal of or interest on any Loan remains unpaid:
SECTION 5.1. Information. The Borrower will deliver to each of the Banks:
(a) as soon as available and in any event within 90 days after the end of
each Fiscal Year, a consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of the end of such Fiscal Year and the related
consolidated statements of operations, stockholders= equity and cash flows
for such Fiscal Year, setting forth in each case in comparative form the
figures for the previous Fiscal Year, all reported on in a manner acceptable
to the SEC by Arthur Andersen LLP or other independent public accountants
of nationally recognized standing;
(b) as soon as available and in any event within 45 days after the end of
each of the first three Fiscal Quarters of each Fiscal Year, a consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as of the
end of such Fiscal Quarter, the related consolidated statement of operations
for such Fiscal Quarter and the related consolidated statements of operations
and cash flows for the portion of the Fiscal Year ended at the end of such
Fiscal Quarter, setting forth in the case of each such statement of
operations and cash flows in comparative form the figures for the
corresponding period in the previous Fiscal Year, all certified (subject to
normal year-end adjustments) as to fairness of presentation and consistency
with GAAP by the Borrower's chief financial officer or chief accounting
officer;
(c) simultaneously with the delivery of each set of financial statements
referred to in clauses (a) and (b) above, a certificate of the Borrower's
chief financial officer or chief accounting officer (i) setting forth in
reasonable detail the calculations required to establish whether the Borrower
was in compliance with the requirements of Sections 5.09 to 5.16, inclusive,
and the calculation of the Borrowing Base on the date of such financial
statements and (ii) stating whether any Default exists on the date of such
certificate and, if any Default then exists, setting forth the details
thereof and the action which the Borrower is taking or proposes to take with
respect thereto;
(d) simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement of the firm of independent
public accountants which reported on such statements stating whether anything
has come to their attention to cause them to believe that (i) any Default
existed on the date of such statements and (ii) the calculations set forth
in the officer's certificate delivered simultaneously therewith pursuant to
clause (c) above are not correct;
(e) within five Domestic Business Days after any officer of the Borrower
obtains knowledge of any Default, if such Default is then continuing, a
certificate of the Borrower's chief financial officer or chief accounting
officer setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto;
(f) as soon as reasonably practicable after any officer of the Borrower
obtains knowledge thereof, notice of any event or condition which has had
or could reasonably be expected to have a Material Adverse Effect and the
nature of such Material Adverse Effect;
(g) as soon as reasonably practicable after any officer of the Borrower
obtains knowledge of the commencement of, or of a threat of the commencement
of, an action, suit or proceeding against the Borrower or any of its
Subsidiaries before any court or arbitrator or any governmental body, agency
or official in which there is a reasonable likelihood of an adverse decision
which could have a Material Adverse Effect or which in any manner questions
the validity of the Loan Documents, a certificate of a senior financial
officer of the Borrower setting forth the nature of such pending or
threatened action, suit or proceeding and such additional information with
respect thereto as may be reasonably requested by any Bank;
(h) promptly after the mailing thereof to the Borrower's shareholders
generally, copies of all financial statements, reports and proxy statements
so mailed;
(i) promptly after the filing thereof, copies of all registration statements
(other than the exhibits thereto and any registration statements on Form S-8
or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) filed by the Borrower with the SEC;
(j) if and when any member of the ERISA Group (i) gives or is required to
give notice to the PBGC of any reportable event (as defined in Section 4043
of ERISA) with respect to any Plan which might constitute grounds for a
termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any such
reportable event, a copy of the notice of such reportable event given or
required to be given to the PBGC; (ii) receives notice of complete or partial
withdrawal liability under Title IV of ERISA or notice that any Multiemployer
Plan is in reorganization, is insolvent or has been terminated, a copy of
such notice; (iii) receives notice from the PBGC under Title IV of ERISA of
an intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer any
Plan, a copy of such notice; (iv) applies for a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code, a copy of
such application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information filed
with the PBGC; (vi) gives notice of withdrawal from any Plan pursuant to
Section 4063 of ERISA, a copy of such notice; or (vii) fails to make any
payment or contribution to any Plan or Multiemployer Plan or makes any
amendment to any Plan which has resulted or could result in the imposition of
a Lien or the posting of a bond or other security, a certificate of the
Borrower's chief financial officer or chief accounting officer setting forth
details as to such occurrence and the action, if any, which the Borrower or
applicable member of the ERISA Group is required or proposes to take;
(k) within 30 days after the commencement of each Fiscal Year, the Borrower's
operating and capital expenditure budgets and cash flow forecast on a
quarterly basis for such Fiscal Year and on an annual basis for the
succeeding Fiscal Years through the Termination Date; and
(l) from time to time such additional information regarding the financial
position or business of the Borrower and its Subsidiaries as either Agent, at
the request of any Bank, may reasonably request.
SECTION 5.2. Payment of Obligations. The Borrower will pay and discharge,
and will cause each Subsidiary to pay and discharge, at or before maturity,
all their respective material obligations and liabilities (including, without
limitation, tax liabilities and claims of materialmen, warehousemen and the
like which if unpaid might by law give rise to a Lien), except where the same
are contested in good faith, and will maintain, and will cause each Subsidiary
to maintain, in accordance with GAAP, if and to the extent appropriate,
reserves for the accrual thereof.
SECTION 5.3. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Subsidiary to keep, all property useful and
necessary in its business in reasonably good working order and condition,
ordinary wear and tear excepted.
(b) The Borrower will, and will cause each Subsidiary to, maintain (either
in the Borrower's name or in such Subsidiary's own name) with financially
sound and responsible insurance companies, insurance on all their respective
material properties in at least such amounts, against at least such risks
and with no greater risk retention as are usually maintained, insured against
or retained, as the case may be, in the same general area by companies of
established repute engaged in the same or a similar business. The Borrower
will furnish to the Banks, upon request from the Administrative Agent,
information presented in reasonable detail as to the insurance so carried.
SECTION 5.4. Conduct of Business and Maintenance of Existence. The
Borrower and its Subsidiaries will continue to engage in business of the
same general type as now conducted by the Borrower and its Subsidiaries, and
will preserve, renew and keep in full force and effect their respective
corporate existences and their respective rights, privileges and franchises
necessary or desirable in the normal conduct of business; provided that
nothing in this Section shall prohibit:
(i) the merger of a Subsidiary into the Borrower if, after giving effect
thereto, no Default shall have occurred and be continuing;
(ii) the merger or consolidation of a Subsidiary with or into a Person other
than the Borrower if the corporation surviving such consolidation or merger
is a Subsidiary and, after giving effect thereto, no Default shall have
occurred and be continuing; or
(iii) the termination of the corporate existence of a Subsidiary if the
Borrower in good faith determines that such termination is in the best
interest of the Borrower and is not materially disadvantageous to the Banks.
The Borrower will not modify its policy for classification of doubtful
accounts in any manner materially detrimental to the interests of the Banks
(including, without limitation, in any manner which would result in an
increase in the Borrowing Base) without the consent of the Required Banks.
SECTION 5.5. Compliance with Laws. The Borrower will comply, and will cause
each Subsidiary to comply, in all respects with all applicable laws,
ordinances, rules, regulations and requirements of governmental authorities
(including, without limitation, Environmental Laws and ERISA and the rules
and regulations thereunder), except (i) where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or (ii)
where such noncompliance could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.6. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and
account in which full and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit,
and will cause each Subsidiary to permit, representatives of any Bank at such
Bank's expense to visit and inspect any of their respective properties, to
examine and make abstracts from any of their respective books and records and
to discuss their respective affairs, finances and accounts with their
respective officers, employees and independent public accountants, all at such
reasonable times (including reasonable notice) and as often as may reasonably
be requested.
SECTION 5.7. Mergers and Sales of Assets. (a) The Borrower will not, and
will not permit any Subsidiary to, consolidate or merge with or into, or
transfer all or substantially all of its assets to, any other Person, provided
that (i) the Borrower may merge with another Person if the Borrower is the
corporation surviving such merger and immediately after giving effect to such
merger, no Default shall have occurred and be continuing, and (ii) any
Subsidiary may merge with, or transfer all or substantially all of its assets
to, any other Person if the corporation which survives the merger or is the
transferee of the assets is the Borrower or a Subsidiary and immediately after
giving effect to such merger or transfer, no Default shall have occurred and
be continuing.
(b) The Borrower will not sell, lease or otherwise transfer, directly or
indirectly, any Collateral except to the extent permitted by the Collateral
Documents.
SECTION 5.8. Use of Proceeds. The proceeds of the Loans will be used by
the Borrower for general corporate purposes. None of such proceeds will be
used, directly or indirectly, for the purpose, whether immediate, incidental
or ultimate, of buying or carrying any margin stock within the meaning of
Regulation U.
SECTION 5.9. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt outstanding
on the date of this Agreement in an aggregate principal or face amount not
exceeding $13,700,000, and Liens on Plot 44, Bayan Lepas Industrial Park IV,
Penang, Malaysia, securing debt in an aggregate principal or face amount not
at any time exceeding $18,000,000;
(b) any Lien existing on any asset of any Person at the time such Person
becomes a Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed for the purpose
of financing all or any part of the cost of acquiring such asset, including,
without limitation, Liens securing obligations under capital leases,
provided that such Lien attaches to such asset concurrently with or within
90 days after the acquisition thereof;
(d) any Lien on any asset of any Person existing at the time such Person is
merged or consolidated with or into the Borrower or a Subsidiary and not
created in contemplation of such event;
(e) any Lien existing on any asset prior to the acquisition thereof by the
Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is not
secured by any additional assets;
(g) Liens arising in the ordinary course of its business (i) which do not
secure Debt or Derivatives Obligations, (ii) which do not secure any single
obligation (or class of obligations having a common cause) in an amount
exceeding $10,000,000 and (iii) as to which no financing statement or other
document similar in effect is on file in any recording office;
(h) Liens created by the Collateral Documents; and
(i) Liens not otherwise permitted by the foregoing clauses of this Section
securing Debt in an aggregate principal or face amount not at any time
exceeding $15,000,000.
Notwithstanding the foregoing, the Borrower will not create, assume or suffer
to exist any Lien on any inventories now owned or hereafter acquired by the
Borrower (other than Liens described in clause (g) above, so long as such
Liens have not given rise to an Event of Default) or any Collateral (other
than Liens described in clause (h) above).
SECTION 5.10. Limitation on Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(a) Debt under this Agreement;
(b) Debt outstanding on the date hereof not in excess of $77,500,000 in
aggregate principal amount and identified on Schedule I hereto;
(c) Debt secured by Liens permitted by Section 5.09; and
(d) Debt of the Borrower and its Subsidiaries not otherwise permitted by this
Section incurred after the Closing Date in an aggregate principal amount at
any time outstanding not to exceed $10,000,000.
SECTION 5.11. Minimum Consolidated Tangible Net Worth. Consolidated
Tangible Net Worth will at no time be less than an amount equal to the sum
of (i) $250,000,000 plus (ii) an amount equal to 75% of Consolidated Net
Income for each Fiscal Quarter ending after December 31, 1996 but before the
date of determination, in each case, for which Consolidated Net Income is
positive (but with no deduction on account of negative Consolidated Net Income
for any Fiscal Quarter) plus (iii) 75% of the aggregate net proceeds,
including the fair market value of property other than cash (as determined
in good faith by the Borrower's board of directors), received by the Borrower
from the issuance and sale after the date hereof of any capital stock of the
Borrower (other than the proceeds of any issuance and sale of any capital
stock (x) to a Subsidiary or (y) which is required to be redeemed, or is
redeemable at the option of the holder, if certain events or conditions occur
or exist or otherwise) or in connection with the conversion or exchange of
any Debt of the Borrower into capital stock of the Borrower after December
31, 1996.
SECTION 5.12. Debt to Consolidated Tangible Net Worth. Consolidated Debt
will not at any time exceed 60% of Consolidated Tangible Net Worth.
SECTION 5.13. Minimum Consolidated EBITDA. Consolidated EBITDA for any
four consecutive quarters will at no time be less than $100,000,000 for any
period ending prior to March 31, 1998 and $125,000,000 for any period ending
on or after March 31, 1998.
SECTION 5.14. Maximum Cash Conversion Days. Cash Conversion Days for any
Fiscal Quarter shall not exceed eighty. For purposes of this Section, Cash
Conversion Days means the sum of (i) Accounts Receivable Days and (ii)
Inventory Days, minus (iii) Accounts Payable Days; Accounts Receivable Days
means, for any period, consolidated trade receivables, less allowance for
doubtful accounts, of the Borrower and its Consolidated Subsidiaries on the
last day of such period, divided by consolidated average daily sales of the
Borrower and its Consolidated Subsidiaries during such period; Inventory Days
means, for any period, consolidated inventories of the Borrower and its
Consolidated Subsidiaries on the last day of such period divided by the
consolidated average daily cost of sales of the Borrower and its Consolidated
Subsidiaries for such period; and Accounts Payable Days means, for any
period, consolidated accounts payable of the Borrower and its Consolidated
Subsidiaries on the last day of such period divided by the consolidated
average daily cost of sales of the Borrower and its Consolidated Subsidiaries
for such period.
SECTION 5.15. Restricted Payments. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment; provided that the Borrower may
purchase and retire shares of its capital stock so long as the aggregate
amount paid for such purchases in any Fiscal Year does not exceed the sum of
(i) the Base Amount for such Fiscal Year and (ii) the amount (if any) by
which the Base Amount for the prior Fiscal Year exceeds the amount paid for
such purchases during such prior Fiscal Year. For purposes of this Section,
Base Amount means (x) in 1997, $30,000,000, and (y) in any subsequent Fiscal
Year, 20% of consolidated net income of the Borrower and its Consolidated
Subsidiaries for the prior Fiscal Year.
SECTION 5.16. Investments. Neither the Borrower nor any Subsidiary will
hold, make or acquire any Investment in any Person other than:
(a) Investments in Persons which are Subsidiaries on the date hereof;
(b) Temporary Cash Investments; and
(c) any Investment not otherwise permitted by the foregoing clauses of this
Section if, immediately after such Investment is made or acquired, (i) no
Default shall have occurred and be continuing and (ii) the aggregate net book
value of all Investments permitted by this clause (c) does not exceed 7.5% of
Consolidated Tangible Net Worth.
SECTION 5.17. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to
or for the account of, make any investment (whether by acquisition of stock
or indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction
with, any Affiliate except on an arms-length basis on terms at least as
favorable to the Borrower or such Subsidiary as could have been obtained
from a third party that was not an Affiliate.
SECTION 5.18. Further Assurances. (a) The Borrower will at its sole
cost and expense, do, execute, acknowledge and deliver all such further acts,
deeds, conveyances, mortgages, assignments, notices of assignment and
transfers as the Administrative Agent shall from time to time request, which
may be necessary in the reasonable judgment of the Administrative Agent from
time to time to assure, perfect, convey, assign and transfer to the
Administrative Agent the property and rights conveyed or assigned pursuant
to the Collateral Documents, or which may facilitate the performance of the
terms of the Collateral Documents, or the filing, registering or recording
of the Collateral Documents.
(b) All costs and expenses in connection with the grant of any
security interests under the Collateral Documents, including without
limitation reasonable legal fees and other reasonable costs and expenses
in connection with the granting, perfecting and maintenance of any security
interests under the Collateral Documents or the preparation, execution,
delivery, recordation or filing of documents and any other acts as the
Administrative Agent may reasonably request in connection with the grant of
such security interests shall be paid by the Borrower promptly upon demand.
(c) The Borrower will not enter into or become subject to any
agreement which would impair its ability to comply, or which would purport
to prohibit it from complying, with the provisions of this Section.
ARTICLE 6
DEFAULTS
SECTION 6.1. Events of Default. If one or more of the following events
(Events of Default) shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any Loan, or
shall fail to pay within three Domestic Business Days of the due date
thereof any interest, fee or other amount payable hereunder;
(b) the Borrower shall fail to observe or perform (i) any covenant
contained in Article 5, other than those contained in Sections 5.01 through
5.06, Section 5.17 and Section 5.18, or (ii) any covenant contained in
Section 4(A) or 4(H) of the Security Agreement or Section 5(B) of the Pledge
Agreement;
(c) the Borrower shall fail to observe or perform any covenant or agreement
(other than those covered by clause (a) or (b) above) contained in the Loan
Documents for 10 days after the Administrative Agent gives notice thereof to
the Borrower at the request of any Bank;
(d) any representation, warranty, certification or statement made by the
Borrower or any Subsidiary in any Loan Document or in any certificate,
financial statement or other document delivered pursuant to any Loan Document
shall prove to have been incorrect in any material respect when made (or
deemed made);
(e) the Borrower or any Subsidiary shall fail to make one or more payments in
respect of Material Financial Obligations when due or within any applicable
grace period;
(f) any event or condition shall occur which results in the acceleration of
the maturity of any Material Debt or enables (or, with the giving of notice
or lapse of time or both, would enable) the holder of such Debt or any Person
acting on such holder's behalf to accelerate the maturity thereof;
(g) the Borrower or any Subsidiary shall commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect
to itself or its debts under any bankruptcy, insolvency or other similar law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against the
Borrower or any Subsidiary seeking liquidation, reorganization or other
relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Borrower or any Subsidiary
under the federal bankruptcy laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount or
amounts aggregating in excess of $5,000,000 which it shall have become liable
to pay under Title IV of ERISA; or notice of intent to terminate a Material
Plan shall be filed under Title IV of ERISA by any member of the ERISA Group,
any plan administrator or any combination of the foregoing; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate, to impose
liability (other than for premiums under Section 4007 of ERISA) in respect
of, or to cause a trustee to be appointed to administer, any Material Plan;
or a condition shall exist by reason of which the PBGC would be entitled to
obtain a decree adjudicating that any Material Plan must be terminated; or
there shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or more
Multiemployer Plans which could cause one or more members of the ERISA Group
to incur a current payment obligation in excess of $5,000,000;
(j) judgments or orders for the payment of money exceeding $5,000,000 in
aggregate amount shall be rendered against the Borrower or any Subsidiary
and such judgments or orders shall continue unsatisfied and unstayed for a
period of 20 days;
(k) any Lien created by any of the Collateral Documents shall at any time
fail to constitute a valid and (to the extent required by the Collateral
Documents) perfected Lien on all of the Collateral purported to be subject
thereto, securing the obligations purported to be secured thereby, with the
priority required by the Loan Documents, or the Borrower shall so assert in
writing; or
(l) any person or group of persons (within the meaning of Section 13 or 14
of the Exchange Act) shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 promulgated by the SEC under said Act) of 30% or more
of the outstanding shares of common stock of the Borrower; or, during any
period of twelve consecutive calendar months, individuals who were directors
of the Borrower on the first day of such period (Initial Directors) or who
were nominated for election by at least 66b% of the Initial Directors shall
cease to constitute a majority of the Borrower's board of directors;
then, and in every such event, the Administrative Agent shall (i) if requested
by Banks having more than 50% in aggregate amount of the Commitments, by
notice to the Borrower terminate the Commitments and they shall thereupon
terminate, and (ii) if requested by Banks holding more than 50% of the
aggregate unpaid principal amount of the Loans, by notice to the Borrower
declare the Loans (together with accrued interest thereon) to be, and the
Loans (together with accrued interest thereon) shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; provided
that, if any Event of Default specified in clause 6.01(g) or 6.01(h) occurs
with respect to the Borrower, then without any notice to the Borrower or any
other act by the Agents or the Banks, the Commitments shall thereupon
terminate and the Loans (together with accrued interest thereon) shall
become immediately due and payable without presentment, demand, protest or
other notice of any kind, all of which are hereby waived by the Borrower.
SECTION 6.2. Notice of Default. The Administrative Agent shall give notice
to the Borrower under Section 6.01(c) promptly upon being requested to do so
by any Bank and shall thereupon notify all the Banks thereof.
ARTICLE 7
THE AGENTS
SECTION 7.1. Appointment and Authorization. Each Bank irrevocably appoints
and authorizes each Agent to enter into and act as its agent in connection
with the Collateral Documents and to take such action as agent on its behalf
and to exercise such powers under the Loan Documents as are delegated to
such Agent by the terms hereof or thereof, together with all such powers as
are reasonably incidental thereto.
SECTION 7.2. Agents and Affiliates. Each of Citibank, N.A. and Morgan
Guaranty Trust Company of New York shall have the same rights and powers
under the Loan Documents as any other Bank and may exercise or refrain from
exercising the same as though it were not an Agent, and each of Citibank,
N.A. and Morgan Guaranty Trust Company of New York and its affiliates may
accept deposits from, lend money to and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower
as if it were not an Agent.
SECTION 7.3. Action by Agents. The obligations of the Agents hereunder
are only those expressly set forth herein. Without limiting the generality
of the foregoing, neither Agent shall be required to take any action with
respect to any Default, except as expressly provided with respect to the
Administrative Agent in Article 6.
SECTION 7.4. Consultation with Experts. Each Agent may consult with legal
counsel (who may be counsel for the Borrower), independent public accountants
and other experts selected by it and shall not be liable for any action taken
or omitted to be taken by it in good faith in accordance with the advice of
such counsel, accountants or experts.
SECTION 7.5. Liability of Agents. Neither Agent nor any of its affiliates
or any of their respective directors, officers, agents or employees shall be
liable for any action taken or not taken by it in connection herewith (i) with
the consent or at the request of the Required Banks (or such different number
of Banks as any provision hereof expressly requires for such consent or
request) or (ii) in the absence of its own gross negligence or willful
misconduct. Neither Agent nor any of its affiliates nor any of their
respective directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with the Loan Documents or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of the Borrower; (iii) the satisfaction of any
condition specified in Article 3, except receipt of items required to be
delivered to such Agent; or (iv) the validity, effectiveness or genuineness
of the Loan Documents or any other instrument or writing furnished in
connection herewith. Neither Agent shall incur any liability by acting
in reliance upon any notice, consent, certificate, statement or other
writing (which may be a bank wire, telex, facsimile or similar writing)
believed by it to be genuine or to be signed by the proper party or parties.
Without limiting the generality of the foregoing, the use of the term agent
in this Agreement with reference to the Agents is not intended to connote
any fiduciary or other implied (or express) obligations arising under
agency doctrine of any applicable law. Instead, such term is used merely
as a matter of market custom and is intended to create or reflect only an
administrative relationship between independent contracting parties.
SECTION 7.6. Indemnification. The Banks shall, ratably in proportion to
their Commitments, indemnify each Agent, its affiliates and their respective
directors, officers, agents and employees (to the extent not reimbursed by
the Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that
such indemnitees may suffer or incur in connection with the Loan Documents
or any action taken or omitted by such indemnitees thereunder.
SECTION 7.7. Credit Decision. Each Bank acknowledges that it has,
independently and without reliance on either Agent or any other Bank, and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Bank also acknowledges that it will, independently and without reliance on
either Agent or any other Bank, and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking any action under the Loan Documents.
SECTION 7.8. Successor Agents. Either Agent may resign at any time by
giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Agent. If no successor Agent shall have been so appointed by the Required
Banks, and shall have accepted such appointment, within 30 days after the
retiring Agent gives notice of resignation, then the retiring Agent may, on
behalf of the Banks, appoint a successor Agent, which shall be a commercial
bank organized or licensed under the laws of the United States or of any State
thereof and having a combined capital and surplus of at least $100,000,000.
Upon the acceptance of its appointment as Agent hereunder by a successor
Agent, such successor Agent shall thereupon succeed to and become vested with
all the rights and duties of the retiring Agent, and the retiring Agent shall
be discharged from its duties and obligations hereunder. After any retiring
Agent resigns as Agent hereunder, the provisions of this Article shall inure
to its benefit as to actions taken or omitted to be taken by it while it was
Agent.
SECTION 7.9. Agents' Fees. The Borrower shall pay to each Agent for its
own account fees in the amounts and at the times previously agreed upon by
the Borrower and such Agent.
ARTICLE 8
CHANGE IN CIRCUMSTANCES
SECTION 8.1. Basis for Determining Interest Rate Inadequate or Unfair. If
on or before the first day of any Interest Period for any Euro-Dollar Loan:
(a) the Administrative Agent is advised by the Reference Banks that deposits
in dollars (in the applicable amounts) are not being offered to the Reference
Banks in the London interbank market for such Interest Period, or
(b) Banks holding 50% or more of the aggregate principal amount of the
affected Loans advise the Administrative Agent that the Adjusted London
Interbank Offered Rate as determined by the Administrative Agent will not
adequately and fairly reflect the cost to such Banks of funding their Euro-
Dollar Loans for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower
and the Banks, whereupon until the Administrative Agent notifies the Borrower
that the circumstances giving rise to such suspension no longer exist, (i) the
obligations of the Banks to make Euro-Dollar Loans or to continue or convert
outstanding Loans as or into Euro-Dollar Loans shall be suspended and (ii)
each outstanding Euro-Dollar Loan shall be converted into a Base Rate Loan on
the last day of the then current Interest Period applicable thereto. Unless
the Borrower notifies the Administrative Agent at least two Domestic Business
Days before the date of any affected Borrowing for which a Notice of Borrowing
has previously been given that it elects not to borrow on such date, such
Borrowing shall instead be made as a Base Rate Borrowing.
SECTION 8.2. Illegality. If, on or after the date hereof, the adoption of
any applicable law, rule or regulation, or any change in any applicable law,
rule or regulation, or any change in the interpretation or administration
thereof by any governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by
any Bank (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank
or comparable agency, shall make it unlawful or impossible for any Bank (or
its Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar
Loans and such Bank shall so notify the Administrative Agent, the
Administrative Agent shall forthwith give notice thereof to the other Banks
and the Borrower, whereupon until such Bank notifies the Borrower and the
Administrative Agent that the circumstances giving rise to such suspension no
longer exist, the obligation of such Bank to make Euro-Dollar Loans, or to
convert outstanding Loans into Euro-Dollar Loans or continue outstanding Loans
as Euro-Dollar Loans, shall be suspended. Before giving any notice to the
Administrative Agent pursuant to this Section, such Bank shall designate a
different Euro-Dollar Lending Office if such designation will avoid the need
for giving such notice and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank. If such notice is given, each Euro-
Dollar Loan of such Bank then outstanding shall be converted to a Base Rate
Loan either (a) on the last day of the then current Interest Period
applicable to such Euro-Dollar Loan if such Bank may lawfully continue to
maintain and fund such Loan as a Euro-Dollar Loan to such day or (b)
immediately if such Bank shall determine that it may not lawfully continue
to maintain and fund such Loan as a Euro-Dollar Loan to such day.
SECTION 8.3. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency, shall impose,
modify or deem applicable any reserve (including, without limitation, any
such requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement included in an applicable Euro-
Dollar Reserve Percentage), special deposit, insurance assessment or similar
requirement against assets of, deposits with or for the account of, or credit
extended by, any Bank (or its Applicable Lending Office) or shall impose on
any Bank (or its Applicable Lending Office) or the London interbank market
any other condition affecting its Euro-Dollar Loans, its Note or its
obligation to make Euro-Dollar Loans and the result of any of the foregoing
is to increase the cost to such Bank (or its Applicable Lending Office) of
making or maintaining any Euro-Dollar Loan, or to reduce the amount of any
sum received or receivable by such Bank (or its Applicable Lending Office)
under this Agreement or under its Note with respect thereto, by an amount
deemed by such Bank to be material, then, within 15 days after demand by
such Bank (with a copy to the Administrative Agent), the Borrower shall pay
to such Bank such additional amount or amounts as will compensate such Bank
for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date hereof, the
adoption of any applicable law, rule or regulation regarding capital adequacy,
or any change in any such law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority,
central bank or comparable agency, has or would have the effect of reducing
the rate of return on capital of such Bank (or its Parent) as a consequence
of such Bank's obligations hereunder to a level below that which such Bank
(or its Parent) could have achieved but for such adoption, change, request or
directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time
to time, within 15 days after demand by such Bank (with a copy to the
Administrative Agent), the Borrower shall pay to such Bank such additional
amount or amounts as will compensate such Bank (or its Parent) for such
reduction.
(c) Each Bank will promptly notify the Borrower and the Administrative
Agent of any event of which it has knowledge, occurring after the date
hereof, which will entitle such Bank to compensation pursuant to this
Section and will designate a different Applicable Lending Office if such
designation will avoid the need for, or reduce the amount of, such
compensation and will not, in the judgment of such Bank, be otherwise
disadvantageous to such Bank. A certificate of any Bank claiming
compensation under this Section and setting forth the additional amount
or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error. In determining such amount, such Bank may use any
reasonable averaging and attribution methods.
SECTION 8.4. Taxes. (a) For the purposes of this Section, the following
terms have the following meanings:
Taxes means any and all present or future taxes, duties, levies, imposts,
deductions, charges or withholdings with respect to any payment by the
Borrower pursuant to this Agreement or under any Note, and all liabilities
with respect thereto, excluding (i) in the case of each Bank and Agent,
taxes imposed on its net income, and franchise or similar taxes imposed on
it, by a jurisdiction under the laws of which such Bank or Agent (as the case
may be) is organized or in which its principal executive office is located
or, in the case of each Bank, in which its Applicable Lending Office is
located and (ii) in the case of each Bank, any United States withholding tax
imposed on such payment, but not any portion of such tax that exceeds the
United States withholding tax which would have been imposed on such a payment
to such Bank under the laws and treaties in effect when such Bank first
became a party to this Agreement.
Other Taxes means any present or future stamp or documentary taxes and any
other excise or property taxes, or similar charges or levies, which arise from
any payment made pursuant to this Agreement or under any Note or from the
execution, delivery, registration or enforcement of, or otherwise with respect
to, any Loan Document.
(b) All payments by the Borrower to or for the account of any Bank or Agent
hereunder or under any Note shall be made without deduction for any Taxes or
Other Taxes; provided that, if the Borrower shall be required by law to deduct
any Taxes or Other Taxes from any such payment, (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section) such Bank
or Agent (as the case may be) receives an amount equal to the sum it would
have received had no such deductions been made, (ii) the Borrower shall make
such deductions, (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall promptly furnish to the Administrative Agent,
at its address specified in or pursuant to Section 9.01, the original or a
certified copy of a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Bank and Agent for the full amount
of Taxes and Other Taxes (including, without limitation, any Taxes or Other
Taxes imposed or asserted (whether or not correctly) by any jurisdiction on
amounts payable under this Section) paid by such Bank or Agent (as the case
may be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto. This indemnification shall be paid within
15 days after such Bank or Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside the United
States, before it signs and delivers this Agreement in the case of each Bank
listed on the signature pages hereof and before it becomes a Bank in the case
of each other Bank, and from time to time thereafter if requested in writing
by the Borrower (but only so long as such Bank remains lawfully able to do
so), shall provide each of the Borrower and the Administrative Agent with
Internal Revenue Service form 1001 or 4224, as appropriate, or any successor
form prescribed by the Internal Revenue Service, certifying that such Bank is
entitled to benefits under an income tax treaty to which the United States is
a party which exempts the Bank from United States withholding tax or reduces
the rate of withholding tax on payments of interest for the account of such
Bank or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States.
(e) For any period with respect to which a Bank has failed to provide the
Borrower or the Administrative Agent with the appropriate form referred to
in Section 8.04(d) (unless such failure is due to a change in treaty, law or
regulation occurring after the date on which such form originally was required
to be provided), such Bank shall not be entitled to indemnification under
Section 8.04(b) or (c) with respect to Taxes imposed by the United States;
provided that if a Bank, that is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take such steps as such
Bank shall reasonably request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to this Section as a result of a change in law
or treaty occurring after such Bank first became a party to this Agreement,
then such Bank will, at the Borrower's request, change the jurisdiction of
its Applicable Lending Office if, in the judgment of such Bank, such change
(i) will eliminate or reduce any such additional payment which may thereafter
accrue and (ii) is not otherwise disadvantageous to such Bank.
SECTION 8.5. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Bank to make, or to continue or convert
outstanding Loans as or to, Euro-Dollar Loans has been suspended pursuant to
Section 8.02 or (ii) any Bank has demanded compensation under Section 8.03 or
8.04 with respect to its Euro-Dollar Loans, and in any such case the Borrower
shall, by at least five Euro-Dollar Business Days' prior notice to such Bank
through the Administrative Agent, have elected that the provisions of this
Section shall apply to such Bank, then, unless and until such Bank notifies
the Borrower that the circumstances giving rise to such suspension or demand
for compensation no longer exist, all Loans which would otherwise be made by
such Bank as (or continued as or converted to) Euro-Dollar Loans shall instead
be Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks).
If such Bank notifies the Borrower that the circumstances giving rise to
such suspension or demand for compensation no longer exist, the principal
amount of each such Base Rate Loan shall be converted into a Euro-Dollar Loan
on the first day of the next succeeding Interest Period applicable to the
related Euro-Dollar Loans of the other Banks.
SECTION 8.6. Substitution of Bank. If (i) the obligation of any Bank to
make Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii)
any Bank has demanded compensation under Section 8.03 or 8.04, the Borrower
shall have the right, with the assistance of the Agents, to require such Bank
to transfer, pursuant to an Assignment and Assumption Agreement substantially
in the form of Exhibit D hereto, its Note and Commitment to a substitute bank
or banks (which may be one or more of the Banks) satisfactory to the Borrower
and the Agents.
ARTICLE 9
MISCELLANEOUS
SECTION 9.1. Notices. Communications to any party hereunder shall be in
writing (including bank wire, telex, facsimile or similar writing) and shall
be given to such party: (a) in the case of the Borrower or either Agent, at
its address, facsimile number or telex number set forth on the signature pages
hereof, (b) in the case of any Bank, at its address, facsimile number or
telex number set forth in its Administrative Questionnaire or (c) in the case
of any party, at such other address, facsimile number or telex number as such
party may hereafter specify for the purpose by notice to the Agents and the
Borrower. Each such notice, request or other communication shall be effective
(i) if given by telex, when transmitted to the telex number referred to in
this Section and the appropriate answerback is received, (ii) if given by
facsimile, when transmitted to the facsimile number referred to in this
Section and confirmation of receipt is received, (iii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address referred to in this Section; provided that
notices to the Administrative Agent under Article 2 or Article 8 shall not
be effective until received.
SECTION 9.2. No Waivers. No failure or delay by either Agent or any Bank
in exercising any right, power or privilege hereunder or under any Note shall
operate as a waiver thereof nor shall any single or partial exercise thereof
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege. The rights and remedies herein provided shall be
cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.3. Expenses; Indemnification. (a) The Borrower shall pay (i)
all reasonable out-of-pocket expenses of the Agents, including fees and
disbursements of special counsel for the Agents, in connection with the
preparation and administration of the Loan Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default
thereunder and (ii) if an Event of Default occurs, all out-of-pocket expenses
incurred by either Agent and each Bank, including (without duplication) the
fees and disbursements of outside counsel and the allocated cost of inside
counsel, in connection with such Event of Default and collection, bankruptcy,
insolvency and other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Agent and Bank, their respective
affiliates (including, without limitation, the Security Agent and the
Concentration Bank (as defined in the Security Agreement)) and the respective
directors, officers, agents and employees of the foregoing (each an
Indemnitee) and hold each Indemnitee harmless from and against any and all
liabilities, losses, damages, costs and expenses of any kind, including,
without limitation, the reasonable fees and disbursements of counsel
(including the allocated cost of in-house counsel), which may be incurred by
such Indemnitee in connection with any investigative, administrative or
judicial proceeding (whether or not such Indemnitee shall be designated a
party thereto) brought or threatened relating to or arising out of the Loan
Documents or any actual or proposed use of proceeds of Loans hereunder;
provided that no Indemnitee shall have the right to be indemnified hereunder
for such Indemnitee's own gross negligence or willful misconduct as
determined by a court of competent jurisdiction.
SECTION 9.4. Sharing of Set-offs. Each Bank agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment
of a proportion of the aggregate amount of principal and interest then due
with respect to the Loans held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal
and interest then due with respect to the Loans held by such other Bank, the
Bank receiving such proportionately greater payment shall purchase such
participation in the Loans held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Loans held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall impair the right
of any Bank to exercise any right of set-off or counterclaim it may have and
to apply the amount subject to such exercise to the payment of indebtedness
of the Borrower other than its indebtedness hereunder. The Borrower agrees,
to the fullest extent it may effectively do so under applicable law, that any
holder of a participation in a Loan, whether or not acquired pursuant to the
foregoing arrangements, may exercise rights of set-off or counterclaim and
other rights with respect to such participation as fully as if such holder of
a participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.5. Amendments and Waivers; Release of Collateral. Any provision
of this Agreement or the Notes may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and the
Required Banks (and, if the rights or duties of either Agent are affected
thereby, by such Agent); provided that no such amendment or waiver shall,
unless signed by all the Banks, (i) increase or decrease the Commitment of
any Bank (except for a ratable decrease in the Commitments of all Banks) or
subject any Bank to any additional obligation, (ii) reduce the principal of
or rate of interest on any Loan or any fees hereunder, (iii) postpone the
date fixed for any payment of principal of or interest on any Loan or any fees
hereunder or for the termination of any Commitment or (iv) change the
percentage of the Commitments or of the aggregate unpaid principal amount of
the Loans, or the number of Banks, which shall be required for the Banks or
any of them to take any action under this Section or any other provision of
this Agreement. Any provision of the Collateral Documents may be amended or
waived if, but only if, such amendment or waiver is in writing and is signed
by the Borrower and the Administrative Agent with the consent of the Required
Banks; provided that no such amendment or waiver shall, unless signed by all
the Banks, effect or permit a release of all or substantially all of the
Collateral. Notwithstanding the foregoing, Collateral shall be released from
the Lien of the Collateral Documents from time to time as necessary to effect
any sale or pledge of assets permitted by the Loan Documents, and the Agent
shall execute and deliver all release documents reasonably requested to
evidence such release.
SECTION 9.6. Successors; Participation and Assignments. (a) The provisions
of this Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, except that the
Borrower may not assign or otherwise transfer any of its rights under this
Agreement without the prior written consent of all Banks.
(b) Any Bank may at any time grant to one or more banks or other institutions
(each a Participant) participating interests in its Commitment or any or
all of its Loans. If a Bank grants any such participating interest to a
Participant, whether or not upon notice to the Borrower and the Agents, such
Bank shall remain responsible for the performance of its obligations
hereunder, and the Borrower and the Agents shall continue to deal solely and
directly with such Bank in connection with such Bank's rights and obligations
under this Agreement. Any agreement pursuant to which any Bank may grant
such a participating interest shall provide that such Bank shall retain the
sole right and responsibility to enforce the Borrower's obligations hereunder,
including (without limitation) the right to approve any amendment,
modification or waiver of any provision of this Agreement; provided that such
participation agreement may provide that such Bank will not agree to any
modification, amendment or waiver of this Agreement described in clause (i),
(ii) or (iii) of, or in the proviso in the penultimate sentence of, Section
9.05 without the consent of the Participant. The Borrower agrees that each
Participant shall, to the extent provided in its participation agreement, be
entitled to the benefits of Article 8 with respect to its participating
interest. An assignment or other transfer which is not permitted by
subsection (c) or (d) below shall be given effect for purposes of this
Agreement only to the extent of a participating interest granted in
accordance with this subsection.
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an Assignee) all, or a proportionate part (equivalent
to an initial Commitment of not less than $10,000,000) of all, of its rights
and obligations under this Agreement and its Note, and such Assignee shall
assume such rights and obligations, pursuant to an Assignment and Assumption
Agreement substantially in the form of Exhibit D hereto signed by such
Assignee and such transferor Bank, with (and subject to) the subscribed
consent of the Borrower, which shall not be unreasonably withheld, and the
Agents; provided that if an Assignee is an affiliate of such transferor
Bank or was a Bank immediately before such assignment, no such consent
shall be required. When such instrument has been signed and delivered by
the parties thereto and such Assignee has paid to such transferor Bank the
purchase price agreed between them, such Assignee shall be a Bank party to
this Agreement and shall have all the rights and obligations of a Bank with
a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall
be required. Upon the consummation of any assignment pursuant to this
subsection, the transferor Bank, the Administrative Agent and the Borrower
shall make appropriate arrangements so that, if required, a new Note is
issued to the Assignee. In connection with any such assignment, the
transferor Bank shall pay to the Administrative Agent an administrative fee
for processing such assignment in the amount of $3,000. If the Assignee
is not incorporated under the laws of the United States or a State thereof,
it shall deliver to the Borrower and the Administrative Agent certification
as to exemption from deduction or withholding of any United States federal
income taxes in accordance with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its rights under
this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's rights shall
be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Bank would have been entitled to receive with respect to the rights
transferred, unless such transfer is made with the Borrower's prior written
consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to
such greater payment did not exist.
SECTION 9.7. No Reliance on Margin Stock. Each of the Banks represents to
the Agents and each of the other Banks that it in good faith is not relying
upon any margin stock (as defined in Regulation U) as collateral in the
extension or maintenance of the credit provided for in this Agreement.
SECTION 9.8. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws
of the State of New York. The Borrower hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. The Borrower irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a
court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.9. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement constitutes the entire agreement and
understanding among the parties hereto and supersedes any and all prior
agreements and understandings, oral or written, relating to the subject matter
hereof. This Agreement shall become effective when the Documentation Agent
has received from each of the parties hereto a counterpart hereof signed by
such party or facsimile or other written confirmation satisfactory to the
Documentation Agent confirming that such party has signed a counterpart
hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENTS AND
THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
SECTION 9.11. Confidentiality. Each Agent and Bank agrees to keep any
information delivered or made available by the Borrower pursuant to this
Agreement confidential from anyone other than persons employed or retained
by such Bank who are engaged in evaluating, approving, structuring or
administering the credit facility contemplated hereby; provided that nothing
herein shall prevent either Agent or any Bank from disclosing such
information (a) to any other Bank or to either Agent, (b) to any other
Person if reasonably incidental to the administration of the credit facility
contemplated hereby, (c) upon the order of any court or administrative
agency, (d) upon the request or demand of any regulatory agency or
authority, (e) which had been publicly disclosed other than as a result of
a disclosure by either Agent or any Bank prohibited by this Agreement, (f)
in connection with any litigation to which either Agent, any Bank or its
subsidiaries or Parent may be a party, (g) to the extent necessary in
connection with the exercise of any remedy hereunder, (h) to such Bank's or
Agent's legal counsel and independent auditors and (i) subject to provisions
substantially similar to those contained in this Section, to any actual or
proposed Participant or Assignee; provided, further, that for purposes of
this Section, information does not mean any information which (x) was
already in the possession of such Bank or Agent at the time of its disclosure
by the Borrower or (y) is made available to such Bank or Agent by a third
party which, to the knowledge of such Bank or Agent, did not violate any
confidentiality obligation by doing so.
SECTION 9.12. Right of Set-off. Upon the occurrence and during the
continuance of any Event of Default, each Bank is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to
set-off and otherwise apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Bank to or for the credit or the account of the
Borrower against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the Note held by such Bank,
whether or not such Bank shall have made any demand under this Agreement
or the Note held by such Bank and although such obligations may be
unmatured. Such Bank agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights
of each Bank under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) which
such Bank may have.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and
year first above written.
IOMEGA CORPORATION
By /S/ ROBERT J. SIMMONS
Name: ROBERT J. SIMMONS
Title: TREASURER
Address: 1821 West Iomega Way
Roy, Utah 84067
Attention: Treasurer and General
Counsel
Facsimile: (801) 778-4142
BANKS
CITIBANK, N.A.
By /S/ CAROLYN A. KEE
Name: CAROLYN A. KEE
Title: ATTORNEY-IN-FACT
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /S/ ADAM J. SILVER
Name: ADAM J. SILVER
Title: ASSOCIATE
FLEET NATIONAL BANK
By /S/ FRANK BENESH
Name: FRANK BENESH
Title: VICE PRESIDENT
WELLS FARGO BANK, N.A.
By /S/ MATHEW HARVEY
Name: MATHEW HARVEY
Title: VICE PRESIDENT
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By /S/ KEVIN MCMAHON
Name: KEVIN MCMAHON
Title: MANAGING DIRECTOR
CIBC, INC.
By /S/CYD D PETRE
Name: CYD D PETRE
Title: AUTHORIZED SIGNATORY
FIRST SECURITY BANK OF UTAH, N.A.
By /S/ TAFT G. MEYER
Name: TAFT G. MEYER
Title: VICE PRESIDENT
KEY BANK OF WASHINGTON
By /S/ J.T. TAYLOR
Name: J.T. TAYLOR
Title: ASSISTANT VICE PRESIDENT
ABN AMRO BANK N.V.
By /S/ THOMAS R. WAGNER
Name: THOMAS R. WAGNER
Title: GROUP VICE PRESIDENT
CREDIT LYONNAIS LOS ANGELES
BRANCH
By /S/ THIERRY VINCENT
Name: THIERRY VINCENT
Title: VICE PRESIDENT
NATIONAL BANK OF CANADA
By /S/ WILLIAM N. TSIOUVARAS
Name: WILLIAM N. TSIOUVARAS
Title: VICE PRESIDENT
THE SUMITOMO TRUST & BANKING
CO., LTD., LOS ANGELES AGENCY
By /S/ NINOOS Y. BENJAMIN
Name: NINOOS Y. BENJAMIN
Title: VICE PRESIDENT & MANAGER
CREDITO ITALIANO, NEW YORK BRANCH
By /S/ PIERLUIGI MAINARDI
Name: PIERLUIGI MAINARDI
Title: ASST. VICE PRESIDENT
THE NORTHERN TRUST COMPANY
By /S/ JOHN E. BURDA
Name: JOHN E. BURDA
Title: SECOND VICE PRESIDENT
ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A
By /S/ ILLEGIBLE
Name: ILLEGIBLE
Title: FVP
By /S/ ILLEGIBLE
Name: ILLEGIBLE
Title: V.P.
THE SANWA BANK, LIMITED, LOS
ANGELES BRANCH
By /S/ GILL S. REALON
Name: GILL S. REALON
Title: VICE PRESIDENT
UNION BANK OF CALIFORNIA, N.A.
By /S/ WADE SCHLUETER
Name: WADE SCHLUETER
Title: VICE PRESIDENT
CITIBANK, N.A., as Administrative Agent
By /S/ CAROLYN A. KEE
Name: CAROLYN A. KEE
Title: ATTORNEY-IN-FACT
Address: 399 PARK AVENUE, NY, NY 10043
Facsimile: (415) 433-0307
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Documentation Agent
By /S/ ADAM J. SILVER
Name: ADAM J. SILVER
Title: ASSOCIATE
Address: 60 Wall Street
New York, NY 10260
Facsimile:
COMMITMENT SCHEDULE
Bank Commitment
Citibank, N.A. $20,000,000
Morgan Guaranty Trust Company of New York 20,000,000
Fleet National Bank 15,000,000
Wells Fargo Bank, N.A. 15,000,000
Bank of America National Trust and Savings
Association 12,500,000
CIBC, Inc. 12,500,000
First Security Bank of Utah, N.A. 12,500,000
Key Bank of Washington 12,500,000
ABN AMRO Bank N.V. 10,000,000
Credit Lyonnais Los Angeles Branch 10,000,000
National Bank of Canada 10,000,000
The Sumitomo Trust & Banking Co., Ltd.
Los Angeles Agency 10,000,000
Credito Italiano, New York Branch 8,000,000
The Northern Trust Company 8,000,000
Istituto Bancario San Paolo Di Torino S.P.A. 8,000,000
The Sanwa Bank, Limited, Los Angeles Branch 8,000,000
Union Bank of California, N.A. 8,000.000
Total $200,000,000
PRICING SCHEDULE
Each of Euro-Dollar Margin, Base Rate Margin and Commitment Fee Rate means,
for any date, the percentage as set forth below in the row opposite such
term and in the column corresponding to the Pricing Level that applies
at such date:
Level Level Level Level
I II III IV
Euro-Dollar
Margin 1.0% 1.25% 1.50% 2.0%
Base Rate
Margin 0% 0% 0% .50%
Commitment Fee Rate .375% .375% .375% .50%
For purposes of this Schedule, the following terms have the following
meanings:
Level I Pricing applies at any date if, as of such date, the Leverage Ratio
is less than .15 to 1.
Level II Pricing applies at any date if, as of such date, (i) the Leverage
Ratio is less than or equal to .35 to 1 and (ii) Level I Pricing does not
apply.
Level III Pricing applies at any date if, as of such date, (i) the Leverage
Ratio is less than or equal to .5 to 1 and (ii) neither Level I Pricing nor
Level II Pricing applies.
Level IV Pricing applies at any date if, as of such date, no other Pricing
Level applies.
Leverage Ratio means as of any date the ratio of Consolidated Debt to
Consolidated Tangible Net Worth set forth in the most recent certificate
delivered pursuant to Section 5.01(c); provided that unless the Required
Banks otherwise agree, if the Borrower has failed to deliver the financial
statements and accompanying certificates most recently required to have been
delivered within the time periods specified therefor in Section 5.01, Level
IV Pricing shall apply until the next date on which financial statements
and accompanying certificates are timely delivered.
Pricing Level refers to the determination of which of Level I, Level II,
Level III or Level IV applies at any date.
EXHIBIT A
Note
New York, New York
___________ __, 199_
For value received, Iomega Corporation, a Delaware corporation (the Borrower),
promises to pay to the order of ______________________ (the Bank), for the
account of its Applicable Lending Office, the unpaid principal amount of each
Loan made by the Bank to the Borrower pursuant to the Credit Agreement
referred to below on the maturity date provided for in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal amount of each
such Loan on the dates and at the rate or rates provided for in the Credit
Agreement. All such payments of principal and interest shall be made in
lawful money of the United States in Federal or other immediately available
funds at the office of Citibank, N.A., _________________, New York, New York.
All Loans made by the Bank, the respective types thereof and all repayments
of the principal thereof shall be recorded by the Bank and, if the Bank so
elects in connection with any transfer or enforcement hereof, appropriate
notations to evidence the foregoing information with respect to each such
Loan then outstanding may be endorsed by the Bank on the schedule attached
hereto, or on a continuation of such schedule attached to and made a part
hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the Borrower's obligations hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement dated as of
March 11, 1997 among Iomega Corporation, the Banks party thereto, Citibank,
N.A., as Administrative Agent, and Morgan Guaranty Trust Company of New York,
as Documentation Agent (as the same may be amended from time to time, the
Credit Agreement). Terms defined in the Credit Agreement are used herein
with the same meanings. Reference is made to the Credit Agreement for
provisions for the prepayment hereof and the acceleration of the maturity
hereof.
IOMEGA CORPORATION
By____________________
Name:
Title:
Loans and Payments of Principal
Date Amount of Type of Amount of Notation Made
Loan Loan Principal By
Repaid
EXHIBIT B
Opinion of
Counsel for the Borrower
EXHIBIT C
Opinion of
Davis Polk & Wardwell, Special Counsel
for the Agents
________________, 199__
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Credit Agreement dated as of
March 11, 1997 (the Credit Agreement) among Iomega Corporation, a Delaware
corporation (the Borrower), the Banks party thereto, Citibank, N.A., as
Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent, and have acted as special counsel for the Agents for
the purpose of rendering this opinion pursuant to Section 3.01(c) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein
as therein defined.
We have examined originals or copies, certified or otherwise identified to
our satisfaction, of such documents, corporate records, certificates of
public officials and other instruments and have conducted such other
investigations of fact and law as we have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the Credit
Agreement and the Notes are within the Borrower's corporate powers and have
been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement of the
Borrower and each Note issued thereunder today constitutes a valid and binding
obligation of the Borrower, in each case enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally and general principles of equity.
We are members of the Bar of the State of New York and the foregoing opinion
is limited to the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law of the State of
Delaware. In giving the foregoing opinion, we express no opinion as to the
effect (if any) of any law of any jurisdiction (except the State of New York)
in which any Bank is located which limits the rate of interest that such Bank
may charge or collect.
This opinion is rendered solely to you in connection with the above matter.
This opinion may not be relied upon by you for any other purpose or relied
upon by any other Person without our prior written consent.
Very truly yours,
EXHIBIT D
Assignment and Assumption Agreement
AGREEMENT dated as of _________, 19__ among <NAME OF ASSIGNOR> (the Assignor),
<NAME OF ASSIGNEE> (the Assignee)[, IOMEGA CORPORATION (the Borrower),
CITIBANK, N.A., as Administrative Agent, and MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent (collectively, the Agents).]
WHEREAS, this Assignment and Assumption Agreement (the Agreement) relates to
the Credit Agreement dated as of March 11, 1997 among the Borrower, the
Assignor and the other Banks party thereto and the Agent (as amended from
time to time, the Credit Agreement);
WHEREAS, as provided under the Credit Agreement, the Assignor has a Commitment
to make Loans to the Borrower in an aggregate principal amount at any time
outstanding not to exceed $____________;
WHEREAS, Loans made to the Borrower by the Assignor under the Credit Agreement
in the aggregate principal amount of $__________ are outstanding at the date
hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of the rights of
the Assignor under the Credit Agreement in respect of a portion of its
Commitment thereunder in an amount equal to $__________ (the Assigned Amount),
together with a corresponding portion of each of its outstanding Loans, and
the Assignee proposes to accept assignment of such rights and assume the
corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual agreements
contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise defined herein
have the respective meanings set forth in the Credit Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to the Assignee
all of the rights of the Assignor under the Credit Agreement to the extent of
the Assigned Amount, and the Assignee hereby accepts such assignment from the
Assignor and assumes all of the obligations of the Assignor under the Credit
Agreement to the extent of the Assigned Amount, including the purchase from
the Assignor of the corresponding portion of the principal amount of each of
the Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee, [the Borrower
and the Agent] and the payment of the amounts specified in Section 3
required to be paid on the date hereof (i) the Assignee shall, as of the date
hereof, succeed to the rights and be obligated to perform the obligations of
a Bank under the Credit Agreement with a Commitment in an amount equal to
the Assigned Amount, and (ii) the Commitment of the Assignor shall, as of
the date hereof, be reduced by a like amount and the Assignor released from
its obligations under the Credit Agreement to the extent such obligations
have been assumed by the Assignee. The assignment provided for herein shall
be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on
the date hereof in Federal funds the amount heretofore agreed between them.*
Commitment and/or facility fees accrued before the date hereof are for the
account of the Assignor and such fees accruing on and after the date hereof
with respect to the Assigned Amount are for the account of the Assignee.
Each of the Assignor and the Assignee agrees that if it receives any amount
under the Credit Agreement which is for the account of the other party hereto,
it shall receive the same for the account of such other party to the extent
of such other party's interest therein and promptly pay the same to such other
party.
[SECTION 4. Consent of the Borrower and the Agents. This Agreement is
conditioned upon the consent of the Borrower and the Agents pursuant to
Section 9.06(c) of the Credit Agreement. The execution of this Agreement by
the Borrower and the Agents is evidence of their consent. Pursuant to
Section 9.06(c), the Borrower agrees to execute and deliver a Note payable
to the order of the Assignee to evidence the assignment and assumption
provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no representation or
warranty in connection with, and shall have no responsibility with respect to,
the solvency, financial condition or statements of the Borrower, or the
validity and enforceability of the Borrower's obligations under the Credit
Agreement or any Note. The Assignee acknowledges that it has, independently
and without reliance on the Assignor, and based on such documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement and will continue to be responsible for
making its own independent appraisal of the business, affairs and financial
condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
<NAME OF ASSIGNOR>
By
Name:
Title:
<NAME OF ASSIGNEE>
By
Name:
Title:
[IOMEGA CORPORATION
By
Name:
Title:]
[CITIBANK, N.A., as Administrative Agent
By
Name:
Title:]
[MORGAN GUARANTY TRUST
COMPANY OF NEW YORK,
as Documentation Agent
By
Name:
Title:]
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum. If this Agreement is prepared in connection with
a substitution pursuant to Section 8.06 of the Credit Agreement, amount must
combine principal, accrued interest and fees and breakage compensation, if
any, and the administrative fee referred to in Section 9.06(c) of the Credit
Agreement must be paid to the Administrative Agent.
EXHIBIT 10.32 (A)
PLEDGE AGREEMENT
AGREEMENT dated as of March 11, 1997 between IOMEGA CORPORATION (with its
successors, the Borrower, and, together with any other Person which becomes
a Grantor pursuant to Section 3(B), the Grantors and each a Grantor),
and CITICORP USA, INC., as Security Agent (with its successors in such
capacity, the Security Agent).
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks (the Banks), Citibank, N.A., as
Administrative Agent (the Administrative Agent) and Morgan Guaranty Trust
Company of New York, as Documentation Agent (together with the Administrative
Agent, the Bank Agents), are parties to a Credit Agreement of even date
herewith (as the same may be amended from time to time, the Credit Agreement);
WHEREAS, in order to induce said Banks and Bank Agents to enter into the
Credit Agreement, each Grantor has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined) to secure the
obligations of the Borrower under the Credit Agreement and the Notes issued
pursuant thereto;
WHEREAS, the Banks and the Bank Agents have appointed Citicorp USA, Inc.,
their Security Agent hereunder;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein have,
as used herein, the respective meanings provided for therein. The following
additional terms, as used herein, have the following respective meanings:
Collateral has the meaning assigned to such term in Section 3(A).
Domestic Subsidiary means any Subsidiary which is either incorporated under
the laws of, or has a principal place of business in, the United States or any
State, the District of Columbia or any territory or possession of the United
States.
Foreign Subsidiary means any Subsidiary which is not a Domestic Subsidiary.
Issuer means Iomega International S.A. and any other Subsidiary which owns
trade receivables which, in accordance with GAAP, would be included in trade
receivables on the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries; provided that the Borrower may, by notice to the
Security Agent, exclude from this definition any Subsidiary so long as such
Subsidiary, together with all other Subsidiaries so excluded, at no time owns
more than 5% of the consolidated trade receivables, less allowance for
doubtful accounts, of the Borrower and its Consolidated Subsidiaries.
Pledged Stock means (i) the Subsidiary Shares and (ii) any other capital stock
required to be pledged to the Security Agent pursuant to Section 3(B).
Secured Obligations means (i) all principal of and interest on any loan under,
or any Note issued pursuant to, the Credit Agreement, (ii) all other amounts
payable by any Grantor hereunder or under the Credit Agreement and (iii) any
renewals or extensions of any of the foregoing. The Secured Obligations shall
include, without limitation, any interest, costs, fees and expenses which
accrue on or with respect to any of the foregoing, whether before or after
the commencement of any case, proceeding or other action relating to the
bankruptcy, insolvency or reorganization of any Grantor; provided that, for
the purposes of payments and allocations pursuant to Section 13 after the
commencement of any case, action or other proceeding relating to the
bankruptcy, insolvency or reorganization of the Borrower, each Secured
Obligation shall be deemed to include interest accrued thereon after the
commencement of such proceeding only to the extent that such interest is
allowed in such proceeding (pursuant to Section 506(b) of the United States
Bankruptcy Code or otherwise).
Secured Parties means the Security Agent, the Bank Agents and the Banks.
Security Interests means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
Subsidiary Shares means the capital stock of the Issuers listed in Schedule
I.
Unless otherwise defined herein, or unless the context otherwise requires, all
terms used herein which are defined in the New York Uniform Commercial Code as
in effect on the date hereof shall have the meanings therein stated.
SECTION 2. Representations and Warranties.
Each Grantor represents and warrants as follows:
(A) Title to Pledged Stock. The Grantors own all of the Pledged Stock, free
and clear of any Liens other than the Security Interests. The Pledged Stock
includes all of the issued and outstanding capital stock of each Issuer which
is a Domestic Subsidiary and at least 66% of the issued and outstanding
capital stock of each Issuer which is a Foreign Subsidiary. All of the Pledged
Stock has been duly authorized and validly issued, and is fully paid and non-
assessable, and is subject to no options to purchase or similar rights of any
Person. No Grantor is or will become a party to or otherwise bound by any
agreement, other than this Agreement, which restricts in any manner the rights
of any present or future holder of any of the Pledged Stock with respect
thereto.
(B) Validity, Perfection and Priority of Security Interests. Upon the
delivery of the certificates representing the Pledged Stock to the Security
Agent in accordance with Section 4 hereof, the Security Agent will have valid
and perfected security interests in the Collateral subject to no prior Lien.
No registration, recordation or filing with any governmental body, agency or
official is required in connection with the execution or delivery of this
Agreement or necessary for the validity or enforceability hereof or for the
perfection or enforcement of the Security Interests. Neither the Borrower nor
any of its Subsidiaries has performed or will perform any acts which might
prevent the Security Agent from enforcing any of the terms and conditions of
this Agreement or which would limit the Security Agent in any such
enforcement.
(C) UCC Filing Locations. The chief executive office of the Borrower is
located at its address set forth on the signature pages of the Credit
Agreement. Under the Uniform Commercial Code as in effect in the State in
which such office is located, no local filing is required to perfect a
security interest in collateral consisting of general intangibles.
SECTION 3. The Security Interests.
In order to secure the full and punctual payment of the Secured Obligations in
accordance with the terms thereof, and to secure the performance of all the
obligations of the Grantors hereunder:
(A) Each Grantor hereby assigns and pledges to and with the Security Agent for
the benefit of the Secured Parties and grants to the Security Agent for the
benefit of the Secured Parties security interests in the Pledged Stock, and
all of its rights and privileges with respect to the Pledged Stock, and all
dividends and other payments and distributions with respect thereto, and all
proceeds of the foregoing (the Collateral). Contemporaneously with the
execution and delivery hereof, the Borrower is delivering the certificates
representing the Subsidiary Shares in pledge hereunder.
(B) In the event that any Subsidiary becomes an Issuer, or any Issuer at any
time issues any shares of capital stock of any class to a Grantor or any other
Subsidiary, including, without limitation, any additional or substitute
shares, such Grantor will, or will cause such Subsidiary to take appropriate
steps to become a Grantor hereunder (including, in connection therewith, the
delivery by such Subsidiary Grantor of appropriate limited recourse guaranties
of the Borrower=s obligations under the Credit Agreement and legal opinions
and the making of appropriate representations and warranties) and to,
immediately pledge and deposit with the Security Agent certificates
representing all (or, if such Issuer is a Foreign Subsidiary, at least 66%
of) such shares as additional security for the Secured Obligations. All such
shares constitute Pledged Stock and are subject to all provisions of this
Agreement.
(C) The Security Interests are granted as security only and shall not subject
any Secured Party to, or transfer or in any way affect or modify, any
obligation or liability of the Borrower or any of its Subsidiaries with
respect to any of the Collateral or any transaction in connection therewith.
SECTION 4. Delivery of Pledged Stock.
All certificates representing Pledged Stock delivered to the Security Agent
by the Grantors pursuant hereto shall be in suitable form for transfer by
delivery, or shall be accompanied by duly executed instruments of transfer
or assignment in blank, with signatures appropriately guaranteed, and
accompanied by any required transfer tax stamps, all in form and substance
satisfactory to the Security Agent.
SECTION 5. Further Assurances.
(A) Each Grantor agrees that it will, at its expense and in such manner and
form as the Security Agent may require, execute, deliver, file and record
any financing statement, specific assignment or other paper and take any
other action that may be necessary or desirable, or that the Security Agent
may request, in order to create, preserve, perfect or validate any Security
Interest or to enable the Security Agent to exercise and enforce its rights
hereunder with respect to any of the Collateral. To the extent permitted by
applicable law, each Grantor hereby authorizes the Security Agent to execute
and file, in the name of the Borrower or otherwise, Uniform Commercial Code
financing statements (which may be carbon, photographic, photostatic or
other reproductions of this Agreement or of a financing statement relating to
this Agreement) which the Security Agent in its sole discretion may deem
necessary or appropriate to further perfect the Security Interests.
(B) Each Grantor agrees that it will not change (i) its name, identity or
corporate structure in any manner or (ii) the location of its chief executive
office unless it shall have given the Security Agent not less than 30 days'
prior notice thereof.
SECTION 6. Record Ownership of Pledged Stock.
The Security Agent may at any time during the continuance of a Default, in
its sole discretion, cause any or all of the Pledged Stock to be transferred
of record into the name of the Security Agent or its nominee. Each Grantor
will promptly give to the Security Agent copies of any notices or other
communications received by it with respect to Pledged Stock registered in its
name and the Security Agent will promptly give to the Borrower copies of any
notices and communications received by the Security Agent with respect to
Pledged Stock registered in the name of the Security Agent or its nominee.
SECTION 7. Right to Receive Distributions on Collateral.
The Security Agent shall have the right to receive and, during the continuance
of any Default, to retain as Collateral hereunder all dividends and other
payments and distributions made upon or with respect to the Collateral, and
each Grantor shall take all such action as the Security Agent may deem
necessary or appropriate to give effect to such right. All such dividends
and other payments and distributions which are received by a Grantor shall be
received in trust for the benefit of the Secured Parties and, if the Security
Agent so directs during the continuance of a Default, shall be segregated from
other funds of such Grantor and shall, forthwith upon demand by the Security
Agent during the continuance of a Default, be paid over to the Security Agent
as Collateral in the same form as received (with any necessary endorsement).
After all Defaults have been cured, the Security Agent's right to retain
dividends and other payments and distributions under this Section 7 shall
cease and the Security Agent shall pay over to such Grantor any such
Collateral retained by it during the continuance of a Default. It is
understood that prior to the occurrence of a Default, all dividends and other
payments and distributions made upon or with respect to the Collateral shall
be distributable to the Grantors.
SECTION 8. Right to Vote Pledged Stock.
Unless a Default shall have occurred and be continuing, each Grantor shall
have the right, from time to time, to vote and to give consents, ratifications
and waivers with respect to its Pledged Stock, and the Security Agent shall,
upon receiving a written request from such Grantor accompanied by a
certificate signed by the principal financial officer of the Borrower stating
that no Default has occurred and is continuing, deliver to such Grantor or as
specified in such request such proxies, powers of attorney, consents,
ratifications and waivers in respect of any of the Pledged Stock which is
registered in the name of the Security Agent or its nominee as shall be
specified in such request and be in form and substance satisfactory to the
Security Agent.
If a Default shall have occurred and be continuing, the Security Agent shall
have the right to the extent permitted by law and each Grantor shall take all
such action as may be necessary or appropriate to give effect to such right,
to vote and to give consents, ratifications and waivers, and take any other
action with respect to any or all of the Pledged Stock with the same force and
effect as if the Security Agent were the absolute and sole owner thereof.
SECTION 9. General Authority.
Each Grantor hereby irrevocably appoints the Security Agent its true and
lawful attorney, with full power of substitution, in the name of the Grantors,
the Security Agent, the Bank Agents, the Banks or otherwise, for the sole use
and benefit of the Secured Parties, but at the expense of such Grantor, to
the extent permitted by law to exercise, at any time and from time to time
while an Event of Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any
and all monies due or to become due upon or by virtue thereof,
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto,
(iii) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the
Security Agent were the absolute owner thereof, and
(iv) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
provided that the Security Agent shall give the relevant Grantor not less than
ten days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which threatens to
decline speedily in value or is of a type customarily sold on a recognized
market. The Security Agent and the Grantors agree that such notice
constitutes reasonable notification within the meaning of Section 9-504(3)
of the Uniform Commercial Code.
SECTION 10. Remedies upon Event of Default.
If any Event of Default shall have occurred and be continuing, the Security
Agent may exercise on behalf of the Secured Parties all the rights of a
secured party under the Uniform Commercial Code (whether or not in effect in
the jurisdiction where such rights are exercised) and, in addition, the
Security Agent may, without being required to give any notice, except as
herein provided or as may be required by mandatory provisions of law, (i)
apply the cash, if any, then held by it as Collateral as specified in Section
13 and (ii) if there shall be no such cash or if such cash shall be
insufficient to pay all the Secured Obligations in full, sell the Collateral
or any part thereof at public or private sale or at any broker's board or on
any securities exchange, for cash, upon credit or for future delivery, and
at such price or prices as the Security Agent may deem satisfactory. Any
Bank may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a
recognized market or is of a type which is the subject of widely distributed
standard price quotations, at any private sale). The Security Agent is
authorized, in connection with any such sale, if it deems it advisable so to
do, (i) to restrict the prospective bidders on or purchasers of any of the
Pledged Stock to a limited number of sophisticated investors who will
represent and agree that they are purchasing for their own account for
investment and not with a view to the distribution or sale of any of such
Pledged Stock, (ii) to cause to be placed on certificates for any or all of
the Pledged Stock or on any other securities pledged hereunder a legend to
the effect that such security has not been registered under the Securities
Act of 1933 and may not be disposed of in violation of the provision of said
Act, and (iii) to impose such other limitations or conditions in connection
with any such sale as the Security Agent deems necessary or advisable in
order to comply with said Act or any other law. Each Grantor will execute
and deliver such documents and take such other action as the Security Agent
deems necessary or advisable in order that any such sale may be made in
compliance with law. Upon any such sale the Security Agent shall have the
right to deliver, assign and transfer to the purchaser thereof the Collateral
so sold. Each purchaser at any such sale shall hold the Collateral so sold
absolutely and free from any claim or right of whatsoever kind, including
any equity or right of redemption of the Grantors which may be waived, and
each Grantor, to the extent permitted by law, hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under any
law now existing or hereafter adopted. The notice (if any) of such sale
required by Section 9 shall (1) in the case of a public sale, state the time
and place fixed for such sale, (2) in the case of a sale at a broker's board
or on a securities exchange, state the board or exchange at which such sale
is to be made and the day on which the Collateral, or the portion thereof
so being sold, will first be offered for sale at such board or exchange, and
(3) in the case of a private sale, state the day after which such sale may
be consummated. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Security
Agent may fix in the notice of such sale. At any such sale the Collateral
may be sold in one lot as an entirety or in separate parcels, as the Security
Agent may determine. The Security Agent shall not be obligated to make any
such sale pursuant to any such notice. The Security Agent may, without
notice or publication, adjourn any public or private sale or cause the same
to be adjourned from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which
the same may be so adjourned. In the case of any sale of all or any part of
the Collateral on credit or for future delivery, the Collateral so sold may
be retained by the Security Agent until the selling price is paid by the
purchaser thereof, but the Security Agent shall not incur any liability in
the case of the failure of such purchaser to take up and pay for the
Collateral so sold and, in the case of any such failure, such Collateral may
again be sold upon like notice. The Security Agent, instead of exercising
the power of sale herein conferred upon it, may proceed by a suit or suits
at law or in equity to foreclose the Security Interests and sell the
Collateral, or any portion thereof, under a judgment or decree of a court
or courts of competent jurisdiction.
SECTION 11. Expenses.
The Grantors jointly and severally agree that they will forthwith upon demand
pay to the Security Agent:
(i) the amount of any taxes which the Security Agent may have been
required to pay by reason of the Security Interests or to free any of the
Collateral from any Lien thereon, and
(ii) the amount of any and all out-of-pocket expenses, including the
fees and disbursements of counsel and of any other experts, which the Security
Agent may incur in connection with (w) the administration or enforcement of
this Agreement, including such expenses as are incurred to preserve the value
of the Collateral and the validity, perfection, rank and value of any Security
Interest, (x) the collection, sale or other disposition of any of the
Collateral, (y) the exercise by the Security Agent of any of the rights
conferred upon it hereunder or (z) any Default or Event of Default.
Any such amount not paid on demand shall bear interest at the rate applicable
to Base Rate Borrowings plus 2% and shall be an additional Secured Obligation
hereunder.
SECTION 12. Limitation on Duty of Security Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Security
Agent all have no duty as to any Collateral in its possession or control or
in the possession or control of any agent or as to the preservation of rights
against prior parties or any other rights pertaining thereto. The Security
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment substantially equal to that which it accords its own property, and
shall not be liable or responsible for any loss or damage to any of the
Collateral, or for any diminution in the value thereof, by reason of the act
or omission of any agent selected by the Security Agent in good faith.
SECTION 13. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held shall be applied by the Security Agent in the
following order of priorities:
first, to payment of the expenses of such sale or other realization,
including reasonable compensation to agents and counsel for the Security
Agent, and all expenses, liabilities and advances incurred or made by the
Security Agent in connection therewith, and any other unreimbursed expenses
for which any Secured Party is to be reimbursed pursuant to Section 9.03 of
the Credit Agreement or Section 11 hereof and unpaid fees owing to the Bank
Agents under the Credit Agreement;
second, to the ratable payment of unpaid principal of the Secured
Obligations;
third, to the ratable payment of accrued but unpaid interest on the
Secured Obligations in accordance with the provisions of the Credit
Agreement;
fourth, to the ratable payment of all other Secured Obligations, until
all Secured Obligations shall have been paid in full; and
finally, to payment to the Grantors or their successors or assigns, or
as a court of competent jurisdiction may direct, of any surplus then
remaining from such proceeds.
The Security Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
SECTION 14. Concerning the Security Agent.
(A) The Security Agent is authorized to take all such action as is provided
to be taken by it as Security Agent hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including, without limitation, the timing and methods of realization upon
the Collateral) the Security Agent shall act or refrain from acting in
accordance with written instructions from the Required Banks or, in the
absence of such instructions, in accordance with its discretion.
(B) Citicorp USA, Inc. and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it were not the Security Agent
hereunder.
(C) The obligations of the Security Agent hereunder are only those expressly
set forth herein. Without limiting the generality of the foregoing, the
Security Agent shall not be required to take any action with respect to any
Default or Event of Default, except as expressly provided herein.
(D) The Security Agent may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(E) Neither the Security Agent nor any director, officer, agent, or employee
of the Security Agent shall be liable for any action taken or not taken by it
in connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Security Agent, nor any of its affiliates, nor any
of their respective directors, officers, agents or employees, shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement;
(ii) the performance or observance of any of the covenants or agreements of
the Grantors, or (iii) the validity, effectiveness or genuineness of this
Agreement or any instrument or writing furnished in connection herewith. The
Security Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a
bank wire, telex or similar writing) believed by it to be genuine or to be
signed by the proper party or parties. The Security Agent shall not be
responsible for the existence, genuineness or value of any of the Collateral
or for the validity, perfection, priority or enforceability of the Security
Interests in any of the Collateral, whether impaired by operation of law or
by reason of any action or omission to act on its part hereunder. The
Security Agent shall have no duty to ascertain or inquire as to the
performance or observance of any of the terms of this Agreement by the
Grantors.
(F) Each Bank shall, ratably in accordance with the amount of its Secured
Obligations, indemnify the Security Agent (to the extent not reimbursed by
the Grantors) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from the Security Agent's gross negligence or willful misconduct)
that the Security Agent may suffer or incur in connection with this
Agreement or any action taken or omitted by the Security Agent hereunder or
thereunder.
(G) The Security Agent may resign at any time by giving written notice of
its resignation to the other Secured Parties and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Security Agent (a Successor Agent). If no Successor Agent shall have been
so appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Security Agent's giving of notice of
resignation, then the retiring Security Agent may, on behalf of the other
Secured Parties, appoint a Successor Agent, which shall be a commercial
bank organized under the laws of the United States of America or of any
State thereof and having a combined capital and surplus of at least
$100,000,000. Upon the acceptance of its appointment as Security Agent
hereunder by a Successor Agent, such Successor Agent shall thereupon succeed
to and become vested with all the rights and duties of the retiring Security
Agent, and the retiring Security Agent shall be discharged from its duties
and obligations hereunder. After any retiring Security Agent's resignation
hereunder as Security Agent, the provisions of this Section shall inure to
its benefit as to any actions taken or omitted to be taken by it while it
was Security Agent.
SECTION 15. Appointment of Co-Agents.
At any time or times, in order to comply with any legal requirement in any
jurisdiction, the Security Agent may appoint another bank or trust company or
one or more other persons, either to act as co-agent or co-agents, jointly
with the Security Agent, or to act as separate agent or agents on behalf of
the Secured Parties with such power and authority as may be necessary for
the effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Security
Agent, include provisions for the protection of such co-agent or separate
agent similar to the provisions of Section 14).
SECTION 16. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination of
the Commitments under the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Grantors. At
any time and from time to time prior to such termination of the Security
Interests, the Security Agent may release any of the Collateral with the
prior written consent of the Required Banks; provided that prior to such
termination, the Security Agent may release all or substantially all of the
Collateral (as defined in the Credit Agreement) only with the consent of all
Banks. Upon any such termination of the Security Interests or release of
Collateral, the Security Agent will, at the expense of the Grantors, execute
and deliver to the Grantors such documents as the Grantors shall reasonably
request to evidence the termination of the Security Interests or the release
of such Collateral, as the case may be.
SECTION 17. Notices.
All notices hereunder shall be in writing (including telex, facsimile or
similar writing) and shall be given to the parties hereto at their respective
addresses, facsimile numbers or telex numbers set forth on the signature
pages hereof or at such other addresses, facsimile numbers or telex numbers
as the addressees may hereafter specify for such purpose by notice to the
other parties hereto. Each such notice, request or other communication
shall be effective (i) if given by telex, when transmitted to the telex
number referred to in this Section and the appropriate answerback is
received, (ii) if given by facsimile, when transmitted to the facsimile
number referred to in this Section and confirmation of receipt is received,
(iii) if given by mail, 72 hours after such communication is deposited in
the mails with first class postage prepaid, addressed as aforesaid or (iv)
if given by any other means, when delivered at the address referred to in
this Section.
SECTION 18. Waivers, Non-Exclusive Remedies.
No failure on the part of any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by such party of any right under the Credit Agreement or this
Agreement preclude any other or further exercise thereof or the exercise of
any other right. The rights in this Agreement and the other Loan Documents
are cumulative and are not exclusive of any other remedies provided by law.
SECTION 19. Successors and Assigns.
This Agreement is for the benefit of the Secured Parties and their successors
and assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Grantors and their successors and assigns.
SECTION 20. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Grantors
and the Security Agent with the consent of the Required Banks.
SECTION 21. New York Law.
This Agreement shall be construed in accordance with and governed by the laws
of the State of New York, except as otherwise required by mandatory provisions
of law and except to the extent that remedies provided by the laws of any
jurisdiction other than New York are governed by the laws of such
jurisdiction.
SECTION 22. Severability.
If any provision hereof is invalid or unenforceable in any jurisdiction, then,
to the fullest extent permitted by law, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Security Agent and the other Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
IOMEGA CORPORATION
By /S/ ROBERT J. SIMMONS
Name: ROBERT J. SIMMONS
Title: TREASURER
Address:1821 WEST IOMEGA WAY, ROY, UT 84067
Facsimile:
CITICORP USA, INC., as Security Agent
By /S/ CAROLYN A. KEE
Name: CAROLYN A. KEE
Title: ATTORNEY-IN-FACT
Address: 399 PARK AVENUE, NY, NY 10043
Facsimile:
Schedule I
Subsidiary Shares
Issuer Shares of Capital Stock
Iomega International S.A. Capital Stock
EXHIBIT 10.32 (B)
SECURITY AGREEMENT
AGREEMENT dated as of March 11, 1997 among IOMEGA CORPORATION (with its
successors, the Borrower), CITICORP USA, INC., as Security Agent (with its
successors in such capacity, the Security Agent), and WELLS FARGO BANK,
N.A., as agent of the Secured Parties referred to below for purposes of
administering the Collateral Account referred to below (with its successors
in such capacity, the Concentration Bank).
W I T N E S S E T H :
WHEREAS, the Borrower, certain banks (the Banks), Citibank, N.A., as
Administrative Agent (the Administrative Agent) and Morgan Guaranty Trust
Company of New York, as Documentation Agent (together with the Administrative
Agent, the Bank Agents), are parties to a Credit Agreement of even date
herewith (as the same may be amended from time to time, the Credit Agreement);
WHEREAS, in order to induce said Banks and Bank Agents to enter into the
Credit Agreement, the Borrower has agreed to grant a continuing security
interest in and to the Collateral (as hereafter defined) to secure its
obligations under the Credit Agreement and the Notes issued pursuant thereto;
and
WHEREAS, the Banks and the Bank Agents have appointed Citicorp USA, Inc.,
their Security Agent hereunder;
NOW, THEREFORE, in consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. Definitions.
Terms defined in the Credit Agreement and not otherwise defined herein have,
as used herein, the respective meanings provided for therein. The following
additional terms, as used herein, have the following respective meanings:
Collateral has the meaning set forth in Section 3.
Collateral Account has the meaning set forth in Section 5.
Instruments means all instruments, chattel paper or letters of credit (each
as defined in the UCC) evidencing, representing, arising from or existing in
respect of, relating to, securing or otherwise supporting the payment of,
any of the Receivables, including (but not limited to) promissory notes,
drafts, bills of exchange and trade acceptances evidencing, representing,
arising from or existing in respect of, relating to, securing or otherwise
supporting the payment of, any of the Receivables, now owned or hereafter
acquired by the Borrower.
Liquid Investments has the meaning set forth in Section 5(D).
Lockbox Banks means each bank which has signed a Lockbox Letter substantially
in the form of Annex C hereto or has entered into the other arrangements
described in Section 5(B).
Perfection Certificate means a certificate substantially in the form of Annex
A, completed and supplemented with the schedules and attachments contemplated
thereby to the satisfaction of the Security Agent, and duly executed by the
chief financial officer and the chief legal officer of the Borrower.
Proceeds means all cash and other proceeds of, and all other profits or
receipts, in whatever form, arising from the collection, sale, exchange,
assignment or other disposition of, or realization upon, Collateral,
including, without limitation, all claims of the Borrower against third
parties for loss of, damage to or destruction of, or for proceeds payable
under any Collateral, whether now existing or hereafter arising.
Receivables means, whether now owned or hereafter acquired by the Borrower,
(i) all accounts (as defined in Article 9-106 of the UCC) and shall also mean
and include all accounts receivable, contract rights, chattel paper,
instruments, general intangibles and other rights of the Borrower to receive
a payment of money or other consideration, in each case which result from
transactions with account debtors located in the United States or Canada or
are evidenced by invoices or other documents issued in the name of or held
by the Borrower in the United States or Canada, and (ii) any and all rights of
the Borrower (x) with respect to any collateral securing any Receivable
described in clause (i) above, (y) under any security agreement (as defined
in the UCC) securing any Receivable described in clause (i) above or (z)
assertable against any Person other than the related account debtor, under
a guaranty, warranty or otherwise, in connection with any Receivable described
in clause (i) above or any collateral securing any Receivable described in
clause (i) above.
Secured Obligations means (a) all principal of and interest on any Loan
under, or any Note issued pursuant to, the Credit Agreement, (b) all other
amounts payable by the Borrower hereunder or under the Credit Agreement and
(c) any renewals or extensions of any of the foregoing. The Secured
Obligations shall include, without limitation, any interest, costs, fees and
expenses which accrue on or with respect to any of the foregoing, whether
before or after the commencement of any case, proceeding or other action
relating to the bankruptcy, insolvency or reorganization of the Borrower;
provided that, for the purposes of payments and allocations pursuant to
Section 9 after the commencement of any case, action or other proceeding
relating to the bankruptcy, insolvency or reorganization of the Borrower,
each Secured Obligation shall be deemed to include interest accrued thereon
after the commencement of such proceeding only to the extent that such
interest is allowed in such proceeding (pursuant to Section 506(b) of the
United States Bankruptcy Code or otherwise).
Secured Parties means the Security Agent, the Concentration Bank, the Bank
Agents and the Banks.
Security Interests means the security interests in the Collateral granted
hereunder securing the Secured Obligations.
UCC means the Uniform Commercial Code as in effect on the date hereof in the
State of New York; provided that if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of any of the
Security Interests in any Collateral is governed by the Uniform Commercial
Code as in effect in a jurisdiction other than New York, UCC means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provisions hereof relating to such perfection or effect of perfection
or non-perfection.
SECTION 2. Representations, Warranties and Covenants.
The Borrower represents, warrants and covenants as follows:
(A) The Borrower has good and marketable title to all of the Collateral, free
and clear of any Liens. The Borrower has taken all actions necessary under
the UCC to perfect its interest in any Receivables purchased or otherwise
acquired by it, as against its assignors and creditors of its assignors.
(B) The Borrower has not performed any acts which might prevent the Security
Agent from enforcing any of the terms of this Agreement or which would limit
the Security Agent in any such enforcement. No registration, recordation or
filing with any governmental body, agency or official is required in
connection with the execution or delivery of this Agreement. Other than
financing statements or other similar or equivalent documents or instruments
with respect to the Security Interests, no financing statement, mortgage,
security agreement or similar or equivalent document or instrument covering
all or any part of the Collateral is on file or of record in any jurisdiction
in which such filing or recording would be effective to perfect a Lien on such
Collateral. No Collateral is in the possession of any Person (other than the
Borrower) asserting any claim thereto or security interest therein, except
that the Security Agent, the Concentration Bank or any designee of the
Security Agent may have possession of Collateral as contemplated hereby.
(C) Not less than five Domestic Business Days prior to the date of the first
Borrowing under the Credit Agreement, the Borrower will deliver the
Perfection Certificate to the Security Agent. The information set forth
therein will be correct and complete as of the dates referred to therein.
Not later than 60 days following the date of the first Borrowing, the
Borrower will furnish to the Security Agent file search reports from each
UCC filing office set forth in Schedule 7 to the Perfection Certificate
confirming the filing information set forth in such Schedule.
(D) The Security Interests constitute valid security interests under the UCC
securing the Secured Obligations. When UCC financing statements in the form
specified in Schedule 6(A) to the Perfection Certificate have been filed in
the offices specified in the Perfection Certificate, the Security Interests
will constitute perfected security interests in the Collateral to the extent
that a security interest therein may be perfected by filing pursuant to the
UCC, prior to all other Liens and rights of others therein.
SECTION 3. The Security Interests.
(A) In order to secure the full and punctual payment of the Secured
Obligations in accordance with the terms thereof, and to secure the
performance of all of the obligations of the Borrower hereunder and under
the Credit Agreement, the Borrower hereby grants to the Security Agent, for
the ratable benefit of the Secured Parties, a continuing security interest
in and to all of the following property of the Borrower, whether now owned
or existing or hereafter acquired or arising and regardless of where
located (all being collectively referred to as the Collateral):
(1) Receivables;
(2) Instruments;
(3) The Collateral Account, all cash deposited therein from time to time,
the Liquid Investments made pursuant to Section 5(D) and other monies and
property of any kind of the Borrower in the possession or under the control
of the Security Agent;
(4) All books and records (including, without limitation, customer lists,
credit files, computer programs, printouts and other computer materials and
records) of the Borrower pertaining to any of the Collateral described in
Clauses 1 through 3 hereof; and
(5) All Proceeds of all or any of the Collateral described in Clauses 1
through 4 hereof.
(B) The Security Interests are granted as security only and shall not subject
the Security Agent or any other Secured Party to, or transfer or in any way
affect or modify, any obligation or liability of the Borrower with respect to
any of the Collateral or any transaction in connection therewith.
SECTION 4. Further Assurances; Covenants.
(A) (I) The Borrower will not change (i) the location of its chief executive
office or chief place of business or (ii) the locations where it keeps or
holds any Collateral or any records relating to any Collateral from the
applicable location described in the Perfection Certificate unless it shall
have (a) given the Security Agent at least 30 days' prior notice thereof and
(b) delivered an opinion of counsel with respect thereto in accordance with
Section 4(J). The Borrower shall not in any event change the location of
any Collateral if such change would cause the Security Interests in such
Collateral to lapse or cease to be perfected.
(II) The Borrower will not change its name, identity or corporate structure
in any manner unless it shall have (i) given the Security Agent at least 30
days' prior notice thereof and (ii) delivered an opinion of counsel with
respect thereto in accordance with Section 4(J).
(B) The Borrower will, from time to time, at its expense, execute, deliver,
file and record any statement, assignment, instrument, document, agreement
or other paper and take any other action (including, without limitation, any
filings of financing or continuation statements under the UCC) that from time
to time may be necessary or desirable, or that the Security Agent may
request, under the laws of the United States of America or Canada or any
State, provincial or local jurisdiction located therein, in order to create,
preserve, perfect, confirm or validate the Security Interests or to enable
the Secured Parties to obtain the full benefits of this Agreement, or to
enable the Security Agent to exercise and enforce any of its rights, powers
and remedies hereunder with respect to any of the Collateral. To the extent
permitted by applicable law, the Borrower hereby authorizes the Security
Agent to execute and file financing statements or continuation statements
without the Borrower's signature appearing thereon. The Borrower agrees
that a carbon, photographic, photostatic or other reproduction of this
Agreement or of a financing statement is sufficient as a financing statement.
The Borrower shall pay the costs of, or incidental to, any recording or
filing of any financing or continuation statements concerning the Collateral.
(C) If any Collateral is at any time in the possession or control of any of
the Borrower's agents, the Borrower shall notify such agents of the Security
Interests created hereby and to hold all such Collateral for the Security
Agent's account subject to the Security Agent's instructions.
(D) The Borrower shall keep full and accurate books and records consistent
with GAAP relating to the Collateral, and stamp or otherwise mark such books
and records in such manner as the Security Agent or the Required Banks may
reasonably require in order to reflect the Security Interests.
(E) The Borrower will immediately deliver and pledge each Instrument to the
Security Agent, appropriately endorsed to the Security Agent; provided that
so long as no Event of Default shall have occurred and be continuing, the
Borrower may retain for collection in the ordinary course any Instruments
(other than checks and drafts constituting payments in respect of Receivables,
as to which the provisions of Section 5(B) shall apply) received by it in the
ordinary course of business and the Security Agent shall, promptly upon
request of the Borrower, make appropriate arrangements for making any other
Instrument pledged by the Borrower available to it for purposes of
presentation, collection or renewal (any such arrangement to be effected, to
the extent deemed appropriate to the Security Agent, against trust receipt
or like document).
(F) The Borrower shall use its best efforts to cause to be collected from its
account debtors, as and when due, any and all amounts owing under or on
account of each Receivable and Instrument (including, without limitation,
Receivables which are delinquent, such Receivables to be collected in
accordance with lawful collection procedures) and shall apply forthwith upon
receipt thereof all such amounts as are so collected to the outstanding
balance of the related Receivable. Subject to the rights of the Security
Agent and the other Secured Parties hereunder if an Event of Default shall
have occurred and be continuing, the Borrower may allow in the ordinary
course of business as adjustments to amounts owing under its Receivables or
Instruments (i) an extension or renewal of the time or times of payment, or
settlement for less than the total unpaid balance, which the Borrower finds
appropriate in accordance with sound business judgment and (ii) a refund or
credit due as a result of returned or damaged merchandise, all in accordance
with the Borrower's ordinary course of business consistent with its historical
collection practices. The costs and expenses (including, without limitation,
attorney's fees) of collection, whether incurred by the Borrower or the
Security Agent, shall be borne by the Borrower.
(G) Upon the occurrence and during the continuance of any Event of Default,
upon request of the Required Banks through the Security Agent, the Borrower
will promptly notify (and the Borrower hereby authorizes the Security Agent
so to notify) each account debtor in respect of any Receivable or Instrument
that such Collateral has been assigned to the Security Agent hereunder, and
that any payments due or to become due in respect of such Collateral are to
be made directly to the Security Agent or its designee.
(H) Without the prior written consent of the Security Agent, the Borrower
will not (a) sell, exchange, assign or otherwise dispose of any Collateral
or (b) create, incur or suffer to exist any Lien with respect to any
Collateral (other than the Security Interests) or with respect to any
inventories now owned or hereafter acquired by the Borrower (other than
Liens described in clause (g) of Section 5.09 of the Credit Agreement, so
long as such Liens have not given rise to an Event of Default).
(I) The Borrower will, promptly upon request, provide to the Security Agent
all information and evidence it may reasonably request concerning the
Collateral, and in particular concerning the Receivables, to enable the
Security Agent to enforce the provisions of this Agreement. The Borrower
will permit the representatives of the Security Agent to call at its places
of business from time to time and at any reasonable time during business
hours (such visits to be conducted so as not to disrupt the business and
affairs of the Borrower), and, without hindrance or delay but with prior
notice, to inspect the Collateral and, no more than once each Fiscal Year
unless an Event of Default has occurred and is continuing, to inspect,
audit, check and make extracts from and copies of the books, records,
journals, orders, receipts and correspondence which relate to the Collateral
at the Borrower's cost and expense without undue interference with the
Borrower's operations. The Borrower will provide each Secured Party with
such information as to the Collateral as such Secured Party may reasonably
request.
(J) Not more than six months nor less than 30 days prior to (i) each date
on which the Borrower proposes to take any action contemplated by Section
4(A)(I) or (II) and (ii) each anniversary of the date of the first Borrowing
during the term of the Credit Agreement, the Borrower shall, at its cost and
expense, cause to be delivered to the Secured Parties an opinion of counsel
satisfactory to the Security Agent substantially in the form of Annex B
hereto or in such other form as is reasonably acceptable to the Secured
Parties and their counsel, to the effect that all financing statements and
amendments or supplements thereto, continuation statements and other
documents required to be recorded or filed in order to perfect and protect
the Security Interests, for a period, specified in such opinion, continuing
until a date not earlier than eighteen months from the date of such opinion,
against all creditors of and purchasers from the Borrower have been filed
in each filing office necessary for such purpose. Each such opinion shall
be accompanied by a certificate of the Borrower to the effect that all
filing fees and taxes, if any, payable in connection with such filings have
been paid in full.
SECTION 5. Collateral Account.
(A) There is hereby established with the Concentration Bank a cash collateral
account designated Collateral Account No. 4518099635 of Citicorp USA, Inc.,
as Security Agent under the Security Agreement dated as of March 11, 1997
among Iomega Corporation, Citicorp USA, Inc. and Wells Fargo Bank, N.A. (the
Collateral Account) in the name and under the control of the Security Agent
into which there shall be deposited from time to time and as they become
available the cash proceeds of the Collateral required to be delivered to the
Concentration Bank or the Security Agent pursuant to subsection (B) of this
Section 5 or any other provision of this Agreement. Any income received by
the Concentration Bank or the Security Agent with respect to the balance
from time to time standing to the credit of the Collateral Account, including
any interest or capital gains on Liquid Investments, shall remain, or be
deposited, in the Collateral Account. All right, title and interest in and
to the cash amounts on deposit from time to time in the Collateral Account
together with any Liquid Investments from time to time made pursuant to
subsection (D) of this Section shall vest in the Security Agent, shall
constitute part of the Collateral hereunder and shall not constitute payment
of the Secured Obligations until applied thereto as hereinafter provided.
(B) The Borrower shall instruct all account debtors and other Persons
obligated in respect of all Receivables to make all payments in respect of
the Receivables either (i) directly to the Concentration Bank (by electronic
transfer to the Collateral Account or by remittance to a post office box
which shall be in the name and under the control of the Concentration Bank)
or (ii) to one or more other banks in any state (other than Louisiana) in
the United States (by remittance to a post office box which shall be in the
name and under the control of such bank) under a Lockbox Letter substantially
in the form of Annex C hereto duly executed by the Borrower and such bank or
under other arrangements, in form and substance satisfactory to the Security
Agent, pursuant to which the Borrower shall have irrevocably instructed such
other bank (and such other bank shall have agreed) to remit all proceeds of
such payments directly to the Concentration Bank for deposit into the
Collateral Account or as the Security Agent may otherwise instruct such bank
(it being understood that the Security Agent may not otherwise instruct such
bank unless an Event of Default has occurred and is continuing or the
Concentration Bank or the Collateral Account changes). All such payments
made to the Concentration Bank or the Security Agent shall be deposited in
the Collateral Account. In addition to the foregoing, the Borrower agrees
that if the proceeds of any Collateral hereunder (including the payments made
in respect of Receivables) shall be received by it, the Borrower shall as
promptly as possible deposit such proceeds into the Collateral Account. Until
so deposited, all such proceeds shall be held in trust by the Borrower for
and as the property of the Secured Parties and shall not be commingled with
any other funds or property of the Borrower.
(C) The balance from time to time standing to the credit of the Collateral
Account shall, except upon the occurrence and continuation of an Event of
Default, be distributed without set-off (except for any set-off for amounts
owed under this Agreement or the Credit Agreement) to the Borrower upon the
order of the Borrower. If immediately available cash on deposit in the
Collateral Account is not sufficient to make any distribution to the Borrower
referred to in the previous sentence of this Section 5(C), the Security Agent
shall liquidate as promptly as practicable Liquid Investments as required to
obtain sufficient cash to make such distribution and, notwithstanding any
other provision of this Section 5, such distribution shall not be made until
such liquidation has taken place. Upon the occurrence and continuation of an
Event of Default, the Security Agent shall, if so instructed by the Required
Banks, apply or cause to be applied (subject to collection) any or all of the
balance from time to time standing to the credit of the Collateral Account in
the manner specified in Section 9.
(D) Amounts on deposit in the Collateral Account shall be invested and re-
invested from time to time in such Liquid Investments as the Borrower shall
from time to time determine, which Liquid Investments shall be held in the
name and be under the control of the Security Agent; provided that, if an
Event of Default has occurred and is continuing, the Security Agent shall, if
so instructed by the Required Banks, liquidate any such Liquid Investments
and apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 9. For the purposes
hereof, Liquid Investments means any investment in (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated in the
highest grade or, in the case of commercial paper issued by the Agent, in any
investment grade, by a nationally recognized credit rating agency or (iii)
time deposits with, including certificates of deposit issued by, the Security
Agent or any office located in the United State of any bank or trust company
which is organized or licensed under the laws of the United States or any
state thereof and has capital, surplus and undivided profits aggregating at
least $1,000,000,000; provided that (i) each Liquid Investment shall mature
within 30 days after it is acquired by the Security Agent and (ii) in order
to provide the Security Agent, for the benefit of the Secured Parties, with
a perfected security interest therein, each Liquid Investment shall be either:
(a) evidenced by negotiable certificates or instruments, or if non-negotiable
then issued in the name of the Security Agent, which (together with any
appropriate instruments of transfer) are delivered to, and held by, the
Security Agent or an agent thereof (which shall not be the Borrower or any of
its Affiliates) in the State of New York; or
(b) in book-entry form and issued by the United States and subject to pledge
under applicable state law and Treasury regulations and as to which (in the
opinion of counsel to the Security Agent) appropriate measures shall have been
taken for perfection of the Security Interests.
SECTION 6. General Authority.
The Borrower hereby irrevocably appoints the Security Agent its true and
lawful attorney, with full power of substitution, in the name of the Borrower,
the Security Agent, the Bank Agents, the Banks or otherwise, for the sole use
and benefit of the Secured Parties, but at the Borrower's expense, to the
extent permitted by law to exercise, at any time and from time to time while
an Event of Default has occurred and is continuing, all or any of the
following powers with respect to all or any of the Collateral:
(i) to demand, sue for, collect, receive and give acquittance for any and
all monies due or to become due thereon or by virtue thereof;
(ii) to settle, compromise, compound, prosecute or defend any action or
proceeding with respect thereto;
(iii) to sell, transfer, assign or otherwise deal in or with the same or
the proceeds or avails thereof, as fully and effectually as if the Security
Agent were the absolute owner thereof; and
(iv) to extend the time of payment of any or all thereof and to make any
allowance and other adjustments with reference thereto;
provided that the Security Agent shall give the Borrower not less than ten
days' prior notice of the time and place of any sale or other intended
disposition of any of the Collateral except any Collateral which threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. The Security Agent and the Borrower agree that such notice
constitutes reasonable notification within the meaning of Section 9-504(3)
of the UCC.
SECTION 7. Remedies upon Event of Default.
(A) If any Event of Default has occurred and is continuing, the Security
Agent may exercise on behalf of the Secured Parties all rights of a secured
party under the UCC (whether or not in effect in the jurisdiction where such
rights are exercised) and, in addition, the Security Agent may, without being
required to give any notice, except as herein provided or as may be required
by mandatory provisions of law, (i) withdraw all cash and Liquid Investments
in the Collateral Account and apply such monies, Liquid Investments and other
cash, if any, then held by it as Collateral as specified in Section 9 and
(ii) if there shall be no such monies, Liquid Investments or cash or if
such monies, Liquid Investments or cash shall be insufficient to pay all
the Secured Obligations in full, sell the Collateral or any part thereof at
public or private sale, for cash, upon credit or for future delivery, and
at such price or prices as the Security Agent may deem satisfactory. The
Security Agent or any other Secured Party may be the purchaser of any or
all of the Collateral so sold and thereafter hold the same, absolutely and
free from any right or claim of any kind whatsoever. The Borrower will
execute and deliver such documents and take such other action as the
Security Agent deems necessary or advisable in order that any such sale may
be made in compliance with law. Upon any such sale the Security Agent shall
have the right to deliver, assign and transfer to the purchaser thereof the
Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely and free from any claim or right of
any kind whatsoever, including any equity or right of redemption of the
Borrower which may be waived, and the Borrower, to the extent permitted by
law, hereby specifically waives all rights of redemption, stay or appraisal
which it has or may have under any law now existing or hereafter adopted.
The notice (if any) of such sale required by Section 6 shall (1) in the
case of a public sale, state the time and place fixed for such sale, and
(2) in the case of a private sale, state the day after which such sale may
be consummated. Any such public sale shall be held at such time or times
within ordinary business hours and at such place or places as the Security
Agent may fix in the notice of such sale. At any such sale, the Collateral
may be sold in one lot as an entirety or in separate parcels, as the
Security Agent may determine. The Security Agent shall not be obligated
to make any such sale pursuant to any such notice. The Security Agent may,
without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place
to which the same may be so adjourned. In the case of any sale of all or
any part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Security Agent until the selling
price is paid by the purchaser thereof, but the Security Agent shall not
incur any liability in the case of the failure of such purchaser to take
up and pay for the Collateral so sold and, in the case of any such failure,
such Collateral may again be sold upon like notice. The Security Agent,
instead of exercising the power of sale herein conferred upon it, may
proceed by a suit or suits at law or in equity to foreclose the Security
Interests and sell the Collateral, or any portion thereof, under a judgment
or decree of a court or courts of competent jurisdiction.
(B) For the purpose of enforcing any and all rights and remedies under this
Agreement the Security Agent may (i) require the Borrower to, and the Borrower
agrees that it will, at its expense and upon the request of the Security
Agent, forthwith assemble all or any part of the Collateral as directed by
the Security Agent and make it available at a place designated by the Security
Agent which is, in its opinion, reasonably convenient to the Security Agent
and the Borrower or otherwise, (ii) to the extent permitted by applicable law,
enter, with or without process of law and without breach of the peace, any
premise where any of the Collateral is or may be located, and without charge
or liability to it seize and remove such Collateral from such premises and
(iii) have access to and use the Borrower=s books and records relating to the
Collateral. The Security Agent may also render any or all of the Collateral
unusable at the Borrower=s premises and may dispose of such Collateral on such
premises without liability for rent or costs.
SECTION 8. Limitation on Duty of Security Agent in Respect of Collateral.
Beyond the exercise of reasonable care in the custody thereof, the Security
Agent shall have no duty as to any Collateral in its possession or control or
in the possession or control of any agent or nominee of it or any income
thereon or as to the preservation of rights against prior parties or any other
rights pertaining thereto. The Security Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Collateral
in its possession if the Collateral is accorded treatment substantially equal
to that which it accords its own property and shall not be liable or
responsible for any loss or damage to any of the Collateral, or for any
diminution in the value thereof, by reason of the act or omission of any
agent or bailee selected by the Security Agent in good faith.
SECTION 9. Application of Proceeds.
Upon the occurrence and during the continuance of an Event of Default, the
proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Collateral Account or otherwise held by
the Security Agent shall be applied by the Security Agent in the following
order of priorities:
first, to payment of the expenses of such sale or other realization, including
reasonable compensation to agents of (including, but not limited to, the
Concentration Bank) and counsel for the Security Agent, and all expenses,
liabilities and advances incurred or made by the Security Agent in connection
therewith;
second, to payment of any other unreimbursed expenses for which the Security
Agent or any Bank Agent or Bank is to be reimbursed pursuant to Section 9.03
of the Credit Agreement or Section 11 hereof and unpaid fees owing to the
Security Agent hereunder or to the Bank Agents under the Credit Agreement;
third, to the ratable payment of unpaid principal of the Secured Obligations;
fourth, to the ratable payment of accrued but unpaid interest on the Secured
Obligations in accordance with the provisions of the Credit Agreement;
fifth, to the ratable payment of all other Secured Obligations, until all
Secured Obligations shall have been paid in full; and
finally, to payment to the Borrower or its successors or assigns, or as a
court of competent jurisdiction may direct, of any surplus then remaining
from such proceeds.
The Security Agent may make distributions hereunder in cash or in kind or,
on a ratable basis, in any combination thereof.
SECTION 10. Concerning the Security Agent and the Concentration Bank.
(A) The Security Agent is authorized to take all such action as is provided
to be taken by it as Security Agent hereunder and all other action reasonably
incidental thereto. As to any matters not expressly provided for herein
(including, without limitation, the timing and methods of realization upon
the Collateral) the Security Agent shall act or refrain from acting in
accordance with written instructions from the Required Banks or, in the
absence of such instructions, in accordance with its discretion.
(B) Citicorp USA, Inc. and its affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it were not the Security Agent
hereunder.
(C) The obligations of the Security Agent hereunder are only those expressly
set forth herein. Without limiting the generality of the foregoing, the
Security Agent shall not be required to take any action with respect to any
Default or Event of Default, except as expressly provided herein.
(D) The Security Agent may consult with legal counsel, independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with
the advice of such counsel, accountants or experts.
(E) Neither the Security Agent nor any director, officer, agent, or employee
of the Security Agent shall be liable for any action taken or not taken by it
in connection herewith (i) with the consent or at the request of the Required
Banks or (ii) in the absence of its own gross negligence or willful
misconduct. Neither the Security Agent, nor any of its affiliates, nor any
of their respective directors, officers, agents or employees, shall be
responsible for or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with this Agreement;
(ii) the performance or observance of any of the covenants or agreements of
the Borrower; or (iii) the validity, effectiveness or genuineness of this
Agreement or any instrument or writing furnished in connection herewith. The
Security Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, statement, or other writing (which may be a bank
wire, telex or similar writing) believed by it to be genuine or to be signed
by the proper party or parties The Security Agent shall not be responsible
for the existence, genuineness or value of any of the Collateral or for the
validity, perfection, priority or enforceability of the Security Interests in
any of the Collateral, whether impaired by operation of law or by reason of
any action or omission to act on its part hereunder. The Security Agent shall
have no duty to ascertain or inquire as to the performance or observance of
any of the terms of this Agreement by the Borrower.
(F) Each Bank shall, ratably in accordance with the amount of its Secured
Obligations, indemnify the Security Agent (to the extent not reimbursed by the
Borrower) against any cost, expense (including counsel fees and
disbursements), claim, demand, action, loss or liability (except such as
result from the Security Agent's gross negligence or willful misconduct) that
the Security Agent may suffer or incur in connection with this Agreement or
any action taken or omitted by the Security Agent hereunder or thereunder.
(G) The Security Agent may resign at any time by giving written notice of its
resignation to the other Secured Parties and the Borrower. Upon any such
resignation, the Required Banks shall have the right to appoint a successor
Security Agent (a Successor Agent). If no Successor Agent shall have been
so appointed by the Required Banks, and shall have accepted such appointment,
within 30 days after the retiring Security Agent's giving of notice of
resignation, then the retiring Security Agent may, on behalf of the other
Secured Parties, appoint a Successor Agent, which shall be a commercial bank
organized under the laws of the United States of America or of any State
thereof and having a combined capital and surplus of at least $100,000,000.
Upon the acceptance of its appointment as Security Agent hereunder by a
Successor Agent, such Successor Agent shall thereupon succeed to and become
vested with all the rights and duties of the retiring Security Agent, and
the retiring Security Agent shall be discharged from its duties and
obligations hereunder. After any retiring Security Agent's resignation
hereunder as Security Agent, the provisions of this Section shall inure to
its benefit as to any actions taken or omitted to be taken by it while it
was Security Agent.
(H) The Concentration Bank is acting hereunder as the agent of the Secured
Parties, and is entitled to the benefits of Sections 8 and 10 of this
Agreement in respect of its activities under this Agreement to the same
extent as if it were the Security Agent.
(I) The Concentration Bank may at any time, by giving written notice to
the Security Agent and the Borrower, and shall, if requested to do so by the
Security Agent, resign its position as the Secured Parties' agent and be
discharged of its responsibilities hereunder, such resignation to be effective
upon the appointment by the Security Agent, with the consent of the Borrower,
of a successor Concentration Bank. If no successor Concentration Bank shall
be appointed and shall have accepted such appointment within 30 days after
the Concentration Bank gives the aforesaid notice of resignation, the
Security Agent may appoint a successor Concentration Bank or apply to any
court of competent jurisdiction to appoint a successor Concentration Bank.
Any successor Concentration Bank shall be a commercial bank organized under
the laws of the United States of America or of any state thereof and having
a combined capital and surplus of at least $100,000,000. Upon the acceptance
of its appointment as Concentration Bank hereunder by a successor
Concentration Bank, such successor Concentration Bank shall thereupon succeed
to and become vested with all the rights and duties of the retiring
Concentration Bank, the Collateral Account shall be transferred to such
successor Concentration Bank, and the retiring Concentration Bank shall be
discharged from its duties and obligations hereunder. After any retiring
Concentration Bank's resignation hereunder the provisions of Sections 8 and
10 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Concentration Bank.
(J) In order to comply with any legal requirement in any jurisdiction, the
Security Agent may at any time appoint another bank or trust company or one
or more other persons, either to act as co-agent or co-agents, jointly with
the Security Agent, or to act as separate agent or agents on behalf of the
Secured Parties with such power and authority as may be necessary for the
effectual operation of the provisions hereof and may be specified in the
instrument of appointment (which may, in the discretion of the Security Agent,
include provisions for the protection of such co-agent or separate agent
similar to the provisions of this Section 10).
SECTION 11. Fees and Expenses.
If the Borrower fails to comply with the provisions of the Credit Agreement
or this Agreement, and as a result thereof, the value of any Collateral or
the validity, perfection, rank or value of any part of the Security Interests
is thereby diminished or potentially diminished or put at risk, the Security
Agent, if requested by the Required Banks, may, but shall not be required to,
effect such compliance on behalf of the Borrower, and the Borrower shall
reimburse the Security Agent for the costs thereof on demand. All insurance
expenses and all expenses of protecting, storing, warehousing, appraising,
insuring, handling, maintaining, and shipping the Collateral, any and all
excise, property, sales, and use taxes imposed by any state, federal, or
local authority on any of the Collateral, or in respect of periodic
appraisals and inspections of the Collateral to the extent the same may be
requested by the Requested Banks during the continuance of an Event of
Default, or in respect of the sale or other disposition thereof, shall be
borne and paid by the Borrower; and if the Borrower fails to promptly pay
any portion thereof when due, the Security Agent or any Bank may, at its
option, but shall not be required to, pay the same and charge the Borrower's
account therefor, and the Borrower agrees to reimburse the Security Agent or
such Bank therefor on demand. All sums so paid or incurred by the Security
Agent or any other Secured Party for any of the foregoing and any and all
other sums for which the Borrower may become liable hereunder and all costs
and expenses (including reasonable attorneys' fees and expenses and court
costs) reasonably incurred by the Security Agent in enforcing or protecting
the Security Interests or any of their rights or remedies under this
Agreement, shall, together with interest thereon until paid at the rate
applicable to Base Rate Borrowings plus 2%, be additional Secured Obligations
hereunder.
SECTION 12. Termination of Security Interests; Release of Collateral.
Upon the repayment in full of all Secured Obligations and the termination of
the Commitments under the Credit Agreement, the Security Interests shall
terminate and all rights to the Collateral shall revert to the Borrower. At
any time and from time to time prior to such termination of the Security
Interests, the Security Agent may release any of the Collateral with the prior
written consent of the Required Banks; provided that prior to such
termination, the Security Agent may release all or substantially all of the
Collateral (as defined in the Credit Agreement) only with the consent of all
Banks. Upon any such termination of the Security Interests or release of
Collateral, the Security Agent will, at the expense of the Borrower, execute
and deliver to the Borrower such documents as the Borrower shall reasonably
request to evidence the termination of the Security Interests or the release
of such Collateral, as the case may be.
SECTION 13. Notices.
All notices hereunder shall be in writing (including telex, facsimile or
similar writing) and shall be given to the parties hereto at their respective
addresses, facsimile numbers or telex numbers set forth on the signature pages
hereof or at such other addresses, facsimile numbers or telex numbers as the
addressees may hereafter specify for such purpose by notice to the other
parties hereto. Each such notice, request or other communication shall be
effective (i) if given by telex, when transmitted to the telex number referred
to in this Section and the appropriate answerback is received, (ii) if given
by facsimile, when transmitted to the facsimile number referred to in this
Section and confirmation of receipt is received, (iii) if given by mail, 72
hours after such communication is deposited in the mails with first class
postage prepaid, addressed as aforesaid or (iv) if given by any other means,
when delivered at the address referred to in this Section.
SECTION 14. Waivers, Non-Exclusive Remedies.
No failure on the part of any Secured Party to exercise, and no delay in
exercising and no course of dealing with respect to, any right under this
Agreement shall operate as a waiver thereof; nor shall any single or partial
exercise by such party of any right under any other Loan Document preclude
any other or further exercise thereof or the exercise of any other right.
The rights in this Agreement and the other Loan Documents are cumulative and
are not exclusive of any other remedies provided by law.
SECTION 15. Successors and Assigns.
This Agreement is for the benefit of the Secured Parties and their successors
and assigns, and in the event of an assignment of all or any of the Secured
Obligations, the rights hereunder, to the extent applicable to the
indebtedness so assigned, may be transferred with such indebtedness. This
Agreement shall be binding on the Borrower and its successors and assigns.
SECTION 16. Changes in Writing.
Neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally, but only in writing signed by the Borrower
and the Security Agent with the consent of the Required Banks (and, if the
rights or duties of the Concentration Bank are affected thereby, by the
Concentration Bank).
SECTION 17. New York Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of New York, except as otherwise required by mandatory
provisions of law and except to the extent that remedies provided by the
laws of any jurisdiction other than New York are governed by the laws of
such jurisdiction.
SECTION 18. Severability.
If any provision hereof is invalid or unenforceable in any jurisdiction, then,
to the fullest extent permitted by law, (i) the other provisions hereof shall
remain in full force and effect in such jurisdiction and shall be liberally
construed in favor of the Security Agent and the other Secured Parties in
order to carry out the intentions of the parties hereto as nearly as may be
possible; and (ii) the invalidity or unenforceability of any provision hereof
in any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
SECTION 19. Notice of Security Interest.
By signing below, Wells Fargo Bank, N.A. acknowledges receipt of notice,
pursuant to '9302(g)(ii) of Division 9 of the California Commercial Code,
that Citicorp USA, Inc., as Security Agent, has a security interest in the
Collateral Account.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
IOMEGA CORPORATION
By /S/ ROBERT J. SIMMONS
Name: ROBERT J. SIMMONS
Title: TREASURER
Address: 1821 WEST IOMEGA WAY, ROY, UTAH 84067 Facsimile:
CITICORP USA, INC., as Security Agent
By /S/ CAROLYN A. KEE
Name: CAROLYN A. KEE
Title: ATTORNEY-IN-FACT
Address: 399 PARK AVENUE, NY, NY 10043 Facsimile:
WELLS FARGO BANK, N.A., as Concentration Bank
By /S/ MATHEW HARVEY
Name: MATHEW HARVEY
Title: VICE PRESIDENT
Address: Facsimile:
ANNEX A
PERFECTION CERTIFICATE
The undersigned, the chief financial officer and chief legal officer of IOMEGA
CORPORATION, a Delaware corporation (the Borrower), hereby certify with
reference to the Security Agreement dated as of March 11, 1997 among the
Borrower, Citicorp USA, Inc., as Security Agent, and Wells Fargo Bank, N.A.,
as Concentration Bank (terms defined therein being used herein as therein
defined), to the Secured Parties as follows:
1. Names. (a) The exact corporate name of the Borrower as it appears in its
certificate of incorporation is as follows:
(b) Set forth below is each other corporate name the Borrower has had since
its organization, together with the date of the relevant change:
(c) Except as set forth in Schedule 1, the Borrower has not changed its
identity or corporate structure in any way within the past five years.*
(d) The following is a list of all other names (including trade names or
similar appellations) used by the Borrower or any of its divisions or other
business units at any time during the past five years:
2. Current Locations. (a) The chief executive office of the Borrower is
located at the following address:
Mailing Address County State
(b) The following are all the locations where the Borrower maintains any
books or records relating to any Receivables:
Mailing
Name Address County State
(c) The following are all the places of business of the Borrower not
identified above that have any connection with or relationship to the
Receivables:
Mailing
Name Address County State
3. Prior Locations. Set forth below is the information required by
subparagraphs (a), (b) and (c) of paragraph 2 with respect to each location
or place of business maintained by the Borrower at any time during the past
five years:
4. Unusual Transactions. [Except as set forth in Schedule 4,] all
Receivables have been originated by the Borrower in the ordinary course
of its business.
5. File Search Reports. Attached hereto as Schedule 5(A) is a true copy
of a file search report from the Uniform Commercial Code filing officer in
each jurisdiction identified in paragraph 2 or 3 above with respect to each
name set forth in paragraph 1 above. Attached hereto as Schedule 5(B) is a
true copy of each financing statement or other filing identified in such
file search reports.
6. UCC Filings. A duly signed financing statement on Form UCC-1 in
substantially the form of Schedule 6(A) hereto has been duly filed in the
Uniform Commercial Code filing office in each jurisdiction identified in
paragraph 2 hereof. Attached hereto as Schedule 6(B) is a true copy of each
such filing duly acknowledged by the filing officer.
7. Schedule of Filings. Attached hereto as Schedule 7 is a schedule setting
forth filing information with respect to the filings described in paragraph 6
above.
8. Filing Fees. All filing fees and taxes payable in connection with the
filings described in paragraph 6 above have been paid.
IN WITNESS WHEREOF, we have hereunto set our hands this day of March, 1997.
____________________________
Name:
Title:
____________________________
Name:
Title:
SCHEDULE 6(A)
Description of Collateral
All accounts (including receivables, contract rights, and chattel paper),
instruments and general intangibles pertaining to accounts and instruments,
now owned and hereafter acquired, wherever located, and all proceeds thereof.
SCHEDULE 7
SCHEDULE OF FILINGS
Debtor Filing Officer File Number Date of Filing**
ANNEX B
OPINION OF
COUNSEL FOR BORROWER
* * * *
1. The Security Agreement creates valid security interests, for the benefit
of the Secured Parties, in all the Borrower's right, title and interest in
all Collateral to the extent the UCC is applicable thereto (the Security
Interests).
2. UCC financing statements [and amendments thereto] (collectively, the
Financing Statements) have been filed in the filing offices listed in Schedule
7 to the Perfection Certificate (the Filing Jurisdictions), which are all of
the offices in which filings are required to perfect the Security Interests,
to the extent the Security Interests may be perfected by filing under the UCC,
and no further filing or recording of any document or instrument or other
action will be required so to perfect the Security Interests, except that (i)
continuation statements with respect to each Financing Statement must be filed
within the respective time periods set forth on Schedule 7 to the Perfection
Certificate; (ii) additional filings may be necessary if the Borrower changes
its name, identity or corporate structure or the jurisdiction in which its
places of business, its chief executive office or the Collateral are located;
and (iii) we express no opinion on the perfection of, or need for further
filing or recording to perfect, the Security Interests in the Collateral now
or hereafter located in any jurisdiction other than the Filing Jurisdictions.
3. Based solely on information provided to us by ______ through the dates of
the respective searches in each of the respective filing offices set forth in
Schedule A hereto, there are
(i) no UCC financing statements which name the Borrower as debtor or seller
and cover any of the Collateral, other than the Financing Statements, listed
in the available records in the UCC filing offices set forth in paragraphs 2
and 3 of the Perfection Certificate, which include all of the offices
prescribed under the UCC as the offices in which filings should have been
made to perfect security interests in the Collateral; and
(ii) no notices of the filing of any federal tax lien (filed pursuant to
Section 6323 of the Internal Revenue Code) or any lien of the Pension Benefit
Guaranty Corporation (filed pursuant to Section 4068 of ERISA) covering any
of the Collateral listed in the available records in the [office of the clerk
of the United States district court for the judicial district of Utah], which
is the only office having files which must be searched in order to fully
determine the existence of notices of the filing of federal tax liens (filed
pursuant to Section 6323 of the Internal Revenue Code) and liens of the
Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of ERISA)
on the Collateral.
4. The Security Interests validly secure the payment of all future Loans made
by the Banks to the Borrower, whether or not at the time such Loans are made
an Event of Default or other event not within the control of the Banks has
relieved or may relieve the Banks of their obligations to make such Loans, and
are perfected to the extent set forth in paragraph 7 above with respect to
such future Loans.
ANNEX C
[FORM OF LOCKBOX LETTER]
March 11, 1997
[Name and Address of Lockbox Bank]
Re: Iomega Corporation
Gentlemen:
We hereby notify you that effective March 11, 1997, we have transferred
exclusive ownership and control of our lock-box account[s] No[s].
_________________ (the Lockbox Account[s]) [maintained with you under the
terms of the [Lockbox Agreement] attached hereto as Exhibit A] to Citicorp
USA, Inc., as Security Agent (the Security Agent).
We hereby irrevocably instruct you to make all payments to be made by you out
of or in connection with the Lockbox Account[s] (i) to the Security Agent for
credit to account no. ___________ maintained by Wells Fargo Bank, N.A., at
the latter's office at ________________, or (ii) as you may otherwise be
instructed by the Security Agent.
We also hereby notify you that the Security Agent shall be irrevocably
entitled to exercise any and all rights in respect of or in connection with
the Lockbox Account[s], including, without limitation, the right to specify
when payments are to be made out of or in connection with the Lockbox
Account[s].
No funds deposited into the Lockbox Account[s] will be subject to deductions,
set-off, banker's lien or any other right in favor of any other person than
the Security Agent, except that you may set-off against the Lockbox Account[s]
the face amount of any check deposited in and credited to such Lockbox
Account[s] which is subsequently returned for any reason and fees owed with
respect to the Lockbox Account[s]. Your compensation for providing the
services contemplated herein shall be as mutually agreed between you and us
from time to time and we will continue to pay such compensation.
Please confirm your acknowledgment of and agreement to the foregoing
instructions by signing in the space provided below.
Very truly yours,
IOMEGA CORPORATION
By___________________________
Title:
Acknowledged and agreed
to as of this ____ day of
March __, 1997.
[LOCKBOX BANK]
By_________________________
Title:
* Changes in identity or corporate structure would include mergers,
consolidations and acquisitions, as well as any change in the form, nature
or jurisdiction of corporate organization. If any such change has occurred,
include in Schedule 1 the information required by paragraphs 1, 2 and 3 of
this certificate as to each acquiree or constituent party to a merger or
consolidation.
** Indicate lapse date, if other than fifth anniversary.
EXHIBIT 10.34
IOMEGA CORPORATION
1997 BONUS PLAN
The 1997 Bonus Plan ("Plan") for the Chief Executive Officer, Executive Group
and Key Contributors of Iomega Corporation (the "Company") is as follows:
1. Definitions
For purposes of the Plan, the following terms shall have the following
meanings:
"NATP" means the consolidated net after-tax income of the Company and its
subsidiaries for fiscal 1997 as reported by the Company in its audited
financial statements for 1997.
"Minimum NATP" means the minimum amount of fiscal 1997 NATP required to allow
the Plan to be funded, as determined by the Board of Directors of the Company.
"Minimum Plus NATP" means the sum of Minimum NATP and an amount equal to
12.5% of Minimum NATP.
"Target NATP" means the sum of Minimum NATP and an amount equal to 25% of
Minimum NATP.
"Consolidated Worldwide Revenue" means the consolidated gross revenue of the
Company and its subsidiaries.
"Minimum Consolidated Worldwide Revenue" means the minimum amount of fiscal
1997 Consolidated Worldwide Revenue required to allow the Plan to be funded,
as determined by the Board of Directors of the Company.
"Executive Group" means the senior executives of the Company listed in
Appendix A and such additional executives as the Chief Executive Officer of
the Company ("CEO") shall designate.
"Key Contributors" means employees who perform management or management-
equivalent duties and responsibilities, who are designated to participate in
the Plan based on their performance and their contributions to the Company.
"Gross Salary" means the gross salary (before bonus) paid during fiscal 1997
to salary-based employees of the Company.
2. Bonus for Chief Executive Officer
Unless 1997 NATP equals or exceeds Minimum NATP and 1997 Consolidated
Worldwide Revenue equals or exceeds Minimum Consolidated Worldwide Revenue,
no bonus shall be paid under the Plan to the CEO except as provided below
under "Discretionary CEO Bonus." If 1997 NATP equals or exceeds Minimum NATP
and 1997 Consolidated Worldwide Revenue equals or exceeds Minimum
Consolidated Worldwide Revenue, the Company shall pay a bonus to the CEO for
1997, determined as follows:
For Minimum NATP, a sum of $180,000 plus
1% of the amount by which fiscal 1997 NATP exceeds Minimum NATP but is less
than Target NATP, plus
1.7% of the amount by which 1997 NATP exceeds Target NATP.
Discretionary CEO Bonus. In addition, the Company may pay the CEO a
discretionary bonus of up to $400,000, as determined by the Board of
Directors, based upon the CEO's performance with respect to the following
non-financial objectives:
Improving Customer Satisfaction
Building an Outstanding Organization
Managing the Corporation's Assets
3. Bonus for Executive Group
Unless 1997 NATP equals or exceeds Minimum NATP and 1997 consolidated
Worldwide Revenue equals or exceeds Minimum Consolidated Worldwide Revenue,
no bonus shall be paid under the Plan to the Executive Group. If 1997 NATP
equals or exceeds Minimum NATP and 1997 Consolidated Worldwide Revenue
exceeds Minimum Consolidated Worldwide Revenue, the Company shall pay a
bonus to each member of the Executive Group for 1997 as follows:
If 1997 NATP exceeds Minimum NATP but is less than Minimum Plus NATP, a
bonus equal to 20% of such executive's 1997 Gross Salary.
If 1997 NATP exceeds Minimum Plus NATP but is less than Target NATP, a bonus
equal to 30% of such executive's 1997 Gross Salary.
If 1997 NATP equals or exceeds Target NATP, a bonus equal to 40% of such
executive's 1997 Gross Salary.
In addition, the Company may establish a Discretionary Pool funded as
follows: 2% of the amount by which 1997 NATP exceeds Minimum NATP but is
less than Target NATP, and 2.5% of the amount by which 1997 NATP exceeds
Target NATP. The Discretionary Pool may be distributed to some or all
members of the Executive Group at the discretion of the CEO based upon the
contributions by the members of the Executive Group to the achievement of
the Company's 1997 Business Plan or other performance criteria as may be
established by the CEO.
4. Bonus for Key Contributors
If 1997 NATP equals or exceeds Minimum NATP and 1997 Consolidated Worldwide
Revenue equals or exceeds Minimum Consolidated Worldwide Revenue, the
Company may pay an incentive bonus to its Key Contributors. Each Key
Contributor shall be assigned a target annual bonus which shall be a
percentage of his/her Gross Salary, and such percentage may increase as
various levels of NATP are achieved, based on the performance of the Company
and its ability to achieve or exceed its Business Plan. It is expected that
approximately 300 Key Contributors will participate in the Plan in 1997.
5. Profit Sharing Program
If 1997 NATP equals or exceeds Minimum NATP and 1997 Consolidated Worldwide
Revenue equals or exceeds Minimum Consolidated Worldwide Revenue, the
Company may make profit sharing awards to full-time regular employees who
do not participate in any incentive bonus plan or sales commission plan.
Profit sharing awards, if made, will generally be paid quarterly on the basis
of achievement of specified quarterly results as measured against the
Company's Minimum NATP and Target NATP, with a holdback of approximately 50%
for the first quarter, 40% for the second quarter, 25% for the third quarter
and 0% for the fourth quarter. The profit sharing payments will range from
5% of a participating employee's Gross Salary, with an increasing percentage
as the Company's operating results exceed Minimum NATP, provided that for 1997
the maximum payment percentage shall not exceed 7.5% of a participating
employee's Gross Salary. The Profit Sharing Program will be funded as
follows:
$1.8 million if 1997 NATP is at least equal to Minimum NATP, plus
1.4% of the amount by which 1997 NATP exceeds Minimum NATP, provided that the
maximum aggregate amount which may be available for profit sharing for 1997
is $2.8 million.
6. CEO's Discretionary Authority
The CEO shall have the authority to allocate bonuses and profit sharing
payments payable pursuant to the Plan among the Key Contributors and Company
employees participating in the Profit Sharing Program, including the authority
to allocate more or less than the maximum amount payable under the Plan if he
determines, in his discretion, that such action is in the best interest of the
Company.
The CEO is also authorized to pay a discretionary bonus up to a maximum
aggregate amount of $1.0 million to professional personnel of Level 15 and
below, and "Spot Awards" primarily to employees that are not classified as
"executives" as special recognition for outstanding performance. However, no
such bonuses shall be paid if the Company is not profitable. The CEO shall
report quarterly to the Board of Directors and the Compensation Committee the
aggregate amounts of any discretionary bonuses awarded for outstanding
performance.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<ARTICLE> 5
<MULTIPLIER> 1,000
EXHIBIT 27
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-30-1997
<CASH> 116,767
<SECURITIES> 0
<RECEIVABLES> 260,934
<ALLOWANCES> 50,260
<INVENTORY> 155,326
<CURRENT-ASSETS> 549,805
<PP&E> 202,472
<DEPRECIATION> 68,494
<TOTAL-ASSETS> 686,855
<CURRENT-LIABILITIES> 244,705
<BONDS> 45,722
0
0
<COMMON> 274,992
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 686,855
<SALES> 361,344
<TOTAL-REVENUES> 361,344
<CGS> 254,065
<TOTAL-COSTS> 254,065
<OTHER-EXPENSES> 69,077
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,461
<INCOME-PRETAX> 35,330
<INCOME-TAX> 12,316
<INCOME-CONTINUING> 23,014
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 23,014
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<EPS-DILUTED> .17
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