PLEDGE AGREEMENT
This Pledge Agreement is made as of the 15th day of April, 1998 between Xxx
X. Xxxxxxx, Layton, Utah, ("Pledgor") and Iomega Corporation, a Delaware
corporation having a principal place of business at 0000 Xxxx Xxxxxx Xxx, Xxx,
Xxxx 00000 ("Pledgee").
WITNESSETH:
WHEREAS, the Pledgor has issued a Secured Promissory Note (the "Note") of
even date herewith in the original principal amount of Five Million Dollars
($5,000,000.00) payable to the Pledgee; and
WHEREAS, as collateral security for the obligations of the Pledgor under
the Note, the Pledgor has agreed to pledge and grant to the Pledgee a first
priority security interest in certain shares of common stock which the Pledgor
owns in the Pledgee, as more fully set forth herein;
NOW THEREFORE, the parties hereto agree and acknowledge that the foregoing
recitals are true and correct and to the following:
1. Pledge of Collateral. As collateral security for the performance of the
obligations of the Pledgor under the Note and this Pledge Agreement (the
"Obligations"), the Pledgor hereby pledges and grants to the Pledgee a security
interest in and to 2,561,000 shares of the common stock of the Pledgee held or
owned by the Pledgor, as identified in Schedule I annexed hereto, and any and
all stock rights, powers and other distributions, dividends or proceeds thereof
(the "Shares"). In addition, any stock rights, dividends, powers or other
distributions or proceeds received by the Pledgor with respect to the Shares
shall be held in trust for and delivered to the Pledgee to be held in accordance
with the terms of this Agreement, and shall be included in the Shares described
above.
2. Delivery of the Shares. The Shares will be delivered to the Pledgee
within four business days hereof together with undated stock powers executed in
blank. Upon payment in full of the Note and the other Obligations, the Pledgee
shall return to the Pledgor the Shares, undated stock powers as well as such
other instruments, documents, stock certificates, money and goods as may come
into Pledgee's possession from time to time in accordance with the terms of this
Pledge Agreement, whether through delivery by Pledgor or otherwise.
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3. Pledgee's Rights and Duties with Respect to the Collateral. Pledgee's
only duty with respect to the Shares shall be to exercise reasonable care to
secure the safe custody thereof, all other duties being hereby expressly
disclaimed. Pledgee shall be relieved of all responsibility for the Shares upon
surrendering them to Pledgor.
4. Pledgor's Warranties and Indemnity.
4.1 Pledgor represents, warrants and covenants (a) that Pledgor is the
lawful owner of the Shares, (b) the Shares are free and clear of all liens,
encumbrances, and security interests, other than the security interest granted
by the Pledgor hereunder, and that, upon delivery of the Shares to the Pledgee
in accordance with Section 2, this pledge constitutes a valid and perfected
security interest in the Shares enforceable against the Pledgor, (c) that the
Shares are not subject to any outstanding rights of redemption or options to
purchase or sell, (d) that the Pledgor has the sole right and lawful authority
to pledge the Shares and otherwise to comply with the provisions hereof, (e)
except as described in the Pledgee's SEC filings, no litigation is pending or
threatened against the Pledgor, which if adversely determined, would have a
material adverse effect against the Pledgor or the Pledgee's rights in respect
of the Shares, (f) that the Pledgor agrees to defend the Pledgee's title in the
Shares and the security interest therein against any and all claims and demands,
(g) the Pledgor shall not sell, transfer or assign any portion of the Shares,
unless the Net Proceeds (as defined below) from such sale, transfer or
assignment are paid to the Pledgee to reduce the Obligations, and (h) this
Pledge Agreement constitutes the legal, valid and binding obligation of the
Pledgor, enforceable against the Pledgor in accordance with its terms. For
purposes of this Pledge Agreement, Net Proceeds shall mean the gross proceeds
net of any sales commissions actually incurred.
4.2 If any adverse claim is asserted in respect of the Shares or any
portion thereof, except as such may arise from the wanton, reckless or
unauthorized acts of the Pledgee, the Pledgor agrees to indemnify the Pledgee
and hold the Pledgee harmless from and against any reasonable liabilities or
damages, and reasonable attorney's fees incurred by the Pledgee in exercising
any right, power or remedy of the Pledgee hereunder.
5. Voting and Disposition of Shares; Release of Shares.
5.1 While Pledgor is not in default hereunder, Pledgor may vote the Shares.
While Pledgor is not in default hereunder, Pledgor may sell any portion of the
Shares, provided the Net Proceeds from such sale are paid to the Pledgee to
reduce the Obligations.
5.2 The Pledgor may at any time request that a portion of the Shares be
released from this Pledge Agreement by submitting a written request to the
Pledgee accompanied by a payment equal to fifty percent of the fair market value
(determined on the basis on the closing price of the Pledgee's common stock on
the day prior to such request) of the Shares to be released. If, but only if,
the fair market value (determined on the same basis as above) of the Shares to
remain subject to this Pledge Agreement is equal to or greater than two times
the amount of the then outstanding Obligations, the Pledgee shall release the
Shares requested to be released.
5.3 At any time that the Pledgor makes a payment or prepayment of principal
under the Note, the Pledgee shall, within three business days thereafter,
release from this Pledge Agreement Shares having a fair market value (determined
on the basis on the closing price of the Pledgee's common stock on the day prior
to such payment or prepayment) equal to two times the amount of such payment or
prepayment; provided, however, that the Pledgee shall not be required to release
any Shares pursuant to this Section 5.3 if as a result of such release the fair
market value (determined on the same basis as above) of the Shares to remain
subject to this Pledge Agreement would be less than two times the amount of the
then outstanding Obligations.
6. Pledgor's Default. Pledgor shall be in default hereunder upon the
occurrence of any of the following events: (a) Any Event of Default (as defined
in the Note) shall occur under the Note; (b) If any lien, encumbrance or adverse
claim of any nature whatsoever is imposed or comes into existence with respect
to any Shares; (c) If any warranty of Pledgor hereunder is or shall become
false; or (d) If Pledgor fails to fulfill any obligation hereunder.
7. Pledgee's Rights upon Default. Upon the occurrence of any default as
defined in Section 6 hereof, Pledgee may, if Pledgee so elects in its sole
discretion, take any one or more of the following (provided however, that
Pledgee shall not take any such action that would result in the sale of a
greater number of Shares than is required to satisfy the Obligations in full):
(a) at any time and from time to time sell, assign and deliver all or any
part of the Shares, or any interest therein, at any public or private sale, for
cash, on credit or for other property, for immediate or future delivery without
any assumption of credit risk, and for such price or prices and on such terms as
Pledgee in its absolute discretion may determine; provided that (i) at least ten
(10) days' notice of the time and place of any such sale shall be given to
Pledgor, and (ii) in the case of any private sale, such notice shall also
contain the terms of the proposed sale and Pledgee shall sell the Collateral
proposed to be sold to any purchaser procured by Pledgor who is ready, willing
and able to purchase, and who prior to the time of such sale tenders the
purchase price of, such Collateral on terms more favorable to Pledgee than the
terms contained in such notice; provided, further, the Pledgor acknowledges that
the Pledgee may be unable to effect a public sale of all or part of the Shares
by reason of certain prohibitions contained in the Securities Act of 1933, as
amended, and may be compelled to resort to one or more private sales to a
restricted group of purchasers who will be obligated to agree, among other
things, to acquire such securities for their own account, for investment, and
not with a view to the distribution or resale thereof. The Pledgor acknowledges
that any such private sale may be at prices and on terms less favorable to the
seller than if sold at public sales and that private sales shall be deemed to be
made in a commercially reasonable manner notwithstanding that such a private
sale may result in a lower sale price;
(b) on the 15th business day after the occurrence of the default, the
Pledgee may (but shall not be obligated to) purchase as treasury stock all or
any part of the Shares at a purchase price equal to the closing price of the
Pledgee's common stock on the New York Stock Exchange (or such other exchange or
automated quotation system on which the Pledgee's common stock may then be
traded) on the 14th business day after the occurrence of the default;
(c) exercise the right to vote, the right to receive cash dividends and
other distributions, and all other rights with respect to the Collateral as
though Pledgee were the absolute owner thereof, whether or not such rights were
retained by Pledgor as against Pledgee before default; and
(d) exercise all other rights available to a secured party under the
Uniform Commercial Code and other applicable law.
The rights and remedies available pursuant to this Pledge Agreement are
cumulative, and not exclusive of any other rights or remedies otherwise
available to the Pledgee.
8. Application of Sale Proceeds. Notwithstanding anything to the contrary
contained herein, in the event of a sale of Shares by the Pledgee pursuant to
Section 7 hereof, the proceeds shall first be applied to the payment of the
expenses of the sale, including brokers' commissions, counsel fees, any taxes or
other charges imposed by law upon the Shares or the transfer thereof and all
other charges paid or incurred by Pledgee pertaining to the sale; and, second,
to satisfy outstanding Obligations, in the order in which Pledgee elects in its
sole discretion; and, third, the surplus (if any) shall be paid to Pledgor.
9. Notices. All notices made or required to be made hereunder shall be sent
by United States first class or certified or registered mail, with postage
prepaid, or delivered by hand to Pledgee or to Pledgor at the addresses first
above written. Notice by mail shall be deemed to have been made on the date when
the notice is deposited in the mail.
10. Heirs, Successors, Etc. This Pledge Agreement and all of its terms and
provisions shall benefit and bind the heirs, successors, assigns, transferees,
executors and administrators of each of the parties hereto.
11. Pledgee's Forbearance. Any forbearance, failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed a waiver of
such right, power or remedy. Any single or partial exercise of any right, power
or remedy of Pledgee shall continue in full force and effect until such right,
power or remedy is specifically waived in writing by Pledgee.
12. Further Assurances. The Pledgor covenants and agrees to execute and
deliver, or cause to be executed or delivered, all such other stock powers,
proxies, instruments, and documents, and will take such other action or actions
as the Pledgee may reasonably request from time to time in order to carry out
the provisions and purposes hereof.
13. Miscellaneous. (a) This Agreement or any part thereof cannot be
changed, waived, or amended except by an instrument in writing signed by Pledgee
and Pledgor; and waiver on one occasion shall not operate as a waiver on any
other occasion. (b) The Uniform Commercial Code and other laws of the State of
Utah shall govern the construction and enforcement of this Pledge Agreement. (c)
If any part of this Pledge Agreement or any agreement, document, or instrument
executed in connection herewith shall be deemed invalid or unenforceable by a
court of competent jurisdiction, the remaining provisions shall remain in full
force and effect, and shall continue to be binding upon the parties. (d) This
Pledge Agreement may be executed in one or more counterparts, each of which
shall constitute an original, but all of which, when taken together, shall
constitute one and the same instrument.
EXECUTED under seal as of the date first above written.
PLEDGOR:
/s/ Xxx X. Xxxxxxx
Xxx X. Xxxxxxx
PLEDGEE:
IOMEGA CORPORATION
By: /s/ Xxxxx X. Xxxx
Its: Chairman of the Board
