SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996 OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
______________ TO _____________ .
COMMISSION FILE NUMBER: 1-14310
---------------
IMATION CORP.
(Exact name of registrant as specified in its charter)
A DELAWARE 41-1838504
CORPORATION
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 IMATION PLACE
OAKDALE, MINNESOTA 55128
(Address of principal executive offices)
(612) 704-4000
(Registrant's telephone number, including area code)
--------------------------------------------
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 the latest practicable date: 42,852,952 shares of Common
Stock, par value $0.01 per share, were outstanding at October 31, 1996.
<TABLE>
<CAPTION>
IMATION CORP.
INDEX
PAGE NO.
<S> <C> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Operations for the three and
nine month periods ended September 30, 1996 and 1995 3
Consolidated Balance Sheets as of September
30, 1996 and December 31, 1995 4
Consolidated Statements of Cash Flows for the nine month
periods ended September 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Report of Independent Accountants 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10
PART II. OTHER INFORMATION 19
SIGNATURE 20
</TABLE>
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
IMATION CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Millions, Except Per Share Amounts)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
-------------------- ------------------------
1996 1995 1996 1995
--------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Net revenues $ 559.3 $ 546.2 $ 1,696.6 $ 1,687.9
Cost of goods sold 362.7 364.5 1,105.0 1,099.1
------- -------- ---------- ----------
Gross profit 196.6 181.7 591.6 588.8
Operating expenses:
Selling, general and
administrative 133.5 129.1 423.4 405.6
Research and development 38.6 53.9 132.1 168.2
Restructuring charges -- -- 53.9 --
------- -------- ---------- ----------
Total 172.1 183.0 609.4 573.8
Operating income (loss) 24.5 (1.3) (17.8) 15.0
Interest expense and other 2.5 4.3 7.9 14.2
------- -------- ---------- ----------
Income (loss) before tax and
minority interest 22.0 (5.6) (25.7) 0.8
Income tax provision (benefit) 10.2 (2.4) (5.4) 0.3
Minority interest -- (1.4) (0.4) (2.0)
------- -------- ---------- ----------
Net income (loss) $ 11.8 $ (1.8) $ (19.9) $ 2.5
======= ======== ========== ==========
Earnings (loss) per share $ .29 $ (.04) $ (.48) $ .06
======= ======== ========== ==========
Weighted average shares
outstanding (1) 40.8 42.0 41.5 42.0
======= ======== ========== ==========
</TABLE>
Unaudited pro forma information assuming tax benefit based on a purely
separate return basis:
Nine months ended
September 30, 1996
------------------
Income (loss) before tax and
minority interest $(25.7)
Income tax provision (benefit) 3.0
Minority interest (1.6)
-------
Net income (loss) $(27.1)
=======
(1) The number of weighted average shares outstanding used in the computation of
earnings per share prior to July 1, 1996 is one-tenth the weighted average
number of 3M shares outstanding based on the distribution of one share of
Imation Corp. for ten shares of 3M pursuant to the spin-off on July 1, 1996.
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
CONSOLIDATED BALANCE SHEETS
(In Millions)
September 30,
1996 December 31,
(Unaudited) 1995
-------- --------
ASSETS
Current Assets
Cash and equivalents $ 126.8 $ --
Accounts receivable - net 482.8 479.5
Inventories
Finished goods 206.3 244.0
Work in process 67.0 81.2
Raw materials and supplies 98.2 101.1
-------- --------
Total inventories 371.5 426.3
Other current assets 109.7 48.8
-------- --------
Total current assets 1,090.8 954.6
Property, Plant and Equipment 1,672.8 1,868.3
Less accumulated depreciation (1,198.7) (1,355.1)
-------- --------
Property, plant and equipment - net 474.1 513.2
Other Assets 32.7 73.7
-------- --------
Total Assets $1,597.6 $1,541.5
======== ========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 192.8 $ 125.9
Accrued payroll 43.9 44.4
Income taxes payable 10.4 --
Short-term debt 17.2 --
Other current liabilities 175.2 125.9
-------- --------
Total current liabilities 439.5 296.2
Other Liabilities 80.0 96.6
Long-Term Debt 166.3 --
Commitments and Contingencies
Shareholders' Equity
Common Stock - $.01 par value 0.4 --
Additional paid in capital 992.6 --
Retained earnings 11.8 --
Unearned ESOP shares (47.5) --
Cumulative translation adjustment (45.5) (46.1)
Net investment by 3M -- 1,194.8
-------- --------
Total shareholders' equity 911.8 1,148.7
Total Liabilities and Equity $1,597.6 $1,541.5
======== ========
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Millions)
(Unaudited)
Nine months ended
September 30
------------------
1996 1995
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(19.9) $ 2.5
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation 137.7 141.5
Deferred income taxes (3.2) (2.5)
Restructuring and other one-time charges 76.4 --
Working capital changes 88.1 (24.9)
Other (14.2) 9.4
------ ------
Net cash provided by operating activities 264.9 126.0
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (115.9) (135.4)
Other 6.2 (7.6)
------ ------
Net cash used in investing activities (109.7) (143.0)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in short-term debt 16.2 --
Borrowings of long-term debt 249.3 --
Repayment of long-term debt (82.0) --
Loan to ESOP (50.0) --
Net cash (paid to) received from 3M (155.9) 8.0
------ ------
Net cash (used in) provided by financing activities (22.4) 8.0
Effect of exchange rate changes on cash (6.0) 9.0
------ ------
Net change in cash and equivalents 126.8 --
Cash and equivalents - beginning of period -- --
------ ------
Cash and equivalents - end of period $126.8 $ --
====== ======
SUPPLEMENTAL NON-CASH DISCLOSURE
Pursuant to the spin-off on July 1, 1996, certain assets and liabilities with a
net value of $6.2 million were retained by 3M, primarily related to certain
deferred tax assets of $26.9 million and severance obligations of $23.9 million.
THE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. FINANCIAL STATEMENTS
On June 18, 1996, the Board of Directors of Minnesota Mining and Manufacturing
Company ("3M") approved the spin-off of Imation Corp., a Delaware corporation
(the "Company"), which is comprised of substantially all of the businesses
previously operated within 3M's data storage and imaging systems groups. To
effectuate the transaction, the Board of Directors of 3M declared a dividend
payable to the holders of record of 3M common stock as of June 28, 1996, based
upon a ratio of one share of the Company's common stock, par value $0.01 per
share (the "Common Stock") for every ten shares of 3M common stock owned on the
record date. Effective July 1, 1996, all of the outstanding shares of Common
Stock were distributed to 3M stockholders (the "Distribution"). 3M and the
Company have entered into a number of agreements to facilitate the Distribution
and the transition of the Company to an independent business enterprise.
Descriptions of the various agreements are set forth under the caption
"Relationships Between 3M and the Company After the Distribution" contained in
the Company's Information Statement in the Form 10 Registration Statement filed
with the Securities and Exchange Commission on June 21, 1996.
The consolidated financial statements for periods prior to July 1, 1996 reflect
the assets, liabilities, revenues, and expenses that were directly related to
the Company as it was operated within 3M. In cases involving assets and
liabilities not specifically identifiable to any particular business of 3M, only
those assets and liabilities actually transferred to the Company in the
Distribution were included in the Company's balance sheets prior to July 1,
1996. Regardless of the allocation of these assets and liabilities, however, the
Company's consolidated statements of operations for periods prior to July 1,
1996 include all of the related costs of doing business including an allocation
of certain general corporate expenses of 3M which were not directly related to
these businesses, including costs for corporate logistics, corporate research
and development, information technologies, finance, legal and corporate
executives. Management believes these allocations were made on a reasonable
basis. All material inter-company transactions and balances between the
Company's businesses have been eliminated. The financial information included
herein for periods prior to July 1, 1996 may not necessarily be indicative of
the financial position, results of operations or cash flows of the Company in
the future or what the financial position, results of operations or cash flows
would have been if the Company had been a separate, independent company during
the periods presented.
As of July 1, 1996, the effective date of the Distribution, the transfer of
certain non-U.S. operations were pending subject to receipt of consents or
approvals or satisfaction of other applicable foreign requirements. The Company
is in the process of obtaining these consents and approvals and making the
appropriate governmental filings and expects to finalize these foreign transfers
in due course. The Company's consolidated financial statements reflect the
consummation of all such transactions. The Company and 3M have entered into an
agreement that allows for the businesses not yet transferred to continue to
operate and for the Company to realize any income or losses generated from such
businesses following the effective date of the Distribution. The Company
believes that the delay in consummating these transfers will have no material
impact on the Company's consolidated financial position or results of
operations.
The interim consolidated financial statements are unaudited but, in the opinion
of management, reflect all adjustments necessary for a fair presentation of
financial position, results of operations and cash flows for the periods
presented. These adjustments, except for the restructuring and other one-time
charges recorded in 1996, consist of normal, recurring items. The results of
operations for any interim period are not necessarily indicative of results for
the full year. The consolidated financial statements and notes are presented as
permitted by the requirements for Form 10-Q and do not contain certain
information included in the Company's annual financial statements and notes.
This Form 10-Q should be read in conjunction with the Company's historical
financial statements and notes included in its Form 10 Registration Statement
filed with the Securities and Exchange Commission on June 21, 1996.
2. RESTRUCTURING CHARGES AND OTHER ONE-TIME CHARGES
In late 1995, the Company initiated a review of all of its operations, including
its organizational structure, manufacturing operations, products and markets,
with the goal of maximizing its cash flows and improving net income. In
connection with this review, the Company adopted a reorganization plan to
rationalize its manufacturing operations, streamline its organizational
structure and write-off impaired assets.
The Company has recorded one-time pre-tax charges of approximately $240 million
based upon the timing criteria required for the recognition of restructuring
charges or upon incurrence for other one-time charges. The Company recorded $166
million of these charges in its 1995 consolidated statement of operations
primarily for the write-down of assets associated with its manufacturing
rationalization programs. In the first and second quarters of 1996, the Company
recorded $53.9 million of restructuring charges related primarily to employee
separation programs and $22.5 million of one-time charges associated with
start-up activities. No additional restructuring or one-time charges were
recorded in the third quarter of 1996. Substantially all of the restructuring
charges have either been utilized by the Company or retained by 3M pursuant to
the spin-off.
3. FINANCING ARRANGEMENT
On July 1, 1996, the Company entered into a $350 million revolving credit
facility with a syndicate of banks which expires on June 30, 2001. There is no
collateral required and no principal amortization prior to expiration of the
facility. Borrowings under the facility are to be used for working capital needs
and other general corporate purposes. Borrowings under the credit facility bear
interest based on the London interbank offered rate (LIBOR) or the
administrative agent bank's base rate, plus an applicable margin based on the
Company's interest coverage ratio. The agreement contains financial covenants
that include a maximum debt to capital ratio, a minimum interest coverage ratio,
and a minimum consolidated tangible net worth. As of September 30, 1996, the
Company had a principal balance of $163 million outstanding under the credit
facility. In addition, the Company had various borrowing arrangements in its
international locations with a total balance outstanding as of September 30,
1996 of $20.5 million.
4. SUBSEQUENT EVENT
Effective October 11, 1996, the Company acquired Luminous Corporation, a
developer and marketer of desktop software to the prepress, print production,
printing, and graphic arts industries. The acquisition was accounted for by the
purchase method with consideration being paid in the form of cash and common
stock of the Company. In the fourth quarter of 1996, the Company will recognize
a non-deductible charge of approximately $12 million for the write-off of the
purchase price allocated to in-process research and development. Exclusive of
the research and development charge, it is expected that this acquisition will
not have a significant impact on the Company's operating results in 1996.
*****
Coopers & Lybrand L.L.P., the Company's independent accountants, have performed
a review of the unaudited interim consolidated financial statements included
herein and their report thereon accompanies this filing.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Imation Corp.:
We have reviewed the accompanying condensed consolidated balance sheet of
Imation Corp. (the Company) as of September 30, 1996, and the related condensed
consolidated statements of operations for the three- and nine-month periods
ended September 30, 1996 and 1995, and cash flows for the nine-month periods
ended September 30, 1996 and 1995. These consolidated financial statements are
the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the condensed consolidated financial statements referred to above for
them to be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1995, and the
related consolidated statements of operations and cash flows for the year then
ended (not presented herein); and in our report dated March 29, 1996, we
expressed an unqualified opinion on those consolidated financial statements. In
our opinion, the information set forth in the accompanying condensed
consolidated balance sheet as of December 31, 1995, is fairly stated in all
material respects in relation to the consolidated balance sheet from which it
has been derived.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
October 30, 1996
IMATION CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
On June 18, 1996, the Board of Directors of Minnesota Mining and Manufacturing
Company ("3M") approved the spin-off of Imation Corp., a Delaware corporation
(the "Company"), which is comprised of substantially all of the businesses
previously operated within 3M's data storage and imaging systems groups. To
effectuate the transaction, the Board of Directors of 3M declared a dividend
payable to the holders of record of 3M common stock as of June 28, 1996, based
upon a ratio of one share of the Company's common stock, par value $0.01 per
share (the "Common Stock") for every ten shares of 3M common stock owned on the
record date. Effective July 1, 1996, all of the outstanding shares of Common
Stock were distributed to 3M stockholders (the "Distribution"). Following the
Distribution, the Company began operations as an independent, publicly held
company. Prior to July 1, 1996, the financial statements reflect the results of
operations, financial position and cash flows of the businesses transferred to
the Company from 3M as they operated within 3M. As a result, the financial
statements of the Company prior to July 1, 1996 have been carved out from the
financial statements of 3M using the historical results of operations and
historical basis of the assets and liabilities of such businesses. The Company's
statements of operations prior to July 1, 1996 include all of the related costs
of doing business, including charges for the use of facilities and for employee
benefits, and include an allocation of certain general corporate expenses of 3M
which were not directly related to these businesses including costs for
corporate logistics, corporate research and development, information
technologies, finance, legal and corporate executives. Management believes these
allocations were made on a reasonable basis.
As of July 1, 1996, the effective date of the Distribution, the transfer of
certain non-U.S. operations were pending subject to receipt of consents or
approvals or satisfaction of other applicable foreign requirements. The Company
is in the process of obtaining these consents and approvals and making the
appropriate governmental filings and expects to finalize these foreign transfers
in due course. The Company's consolidated financial statements reflect the
consummation of all such transactions. The Company and 3M have entered into an
agreement that allows for the businesses not yet transferred to continue to
operate and for the Company to realize any income or losses generated from such
businesses following the effective date of the Distribution. The Company
believes that the delay in consummating these transfers will have no material
impact on the Company's consolidated financial position or results of
operations.
The financial information for periods prior to July 1, 1996 included herein,
however, may not necessarily be indicative of the results of operations,
financial position and cash flows of the Company in the future or what the
results of operations, financial position and cash flows would have been had the
Company been a separate, independent company during the periods presented.
STRATEGIC REORGANIZATION
In late 1995, the Company initiated a review of all of its operations, including
its organizational structure, manufacturing operations, products and markets,
with the goal of maximizing its cash flows and improving net income. In
connection with this review, the Company adopted a reorganization plan to
rationalize its manufacturing operations, streamline its organizational
structure and write-off impaired assets.
The Company has recorded one-time pre-tax charges of approximately $240 million
based upon the timing criteria required for the recognition of restructuring
charges or upon incurrence for other one-time charges. The Company recorded $166
million of these charges in its 1995 statement of operations, primarily for the
write-down of assets associated with its manufacturing rationalization programs.
The remainder, primarily related to employee separations for direct employees of
the Company and one-time charges associated with start-up activities, has been
recorded in the first six months of 1996. No additional restructuring or
one-time charges were recorded in the third quarter of 1996.
RESULTS OF OPERATIONS
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:
The following table displays the components of the Company's consolidated
statements of operations as a percentage of total revenues.
Three Months Ended
September 30,
--------------------
1996 1995
------ ------
Net revenues 100.0% 100.0%
Cost of goods sold 64.8% 66.7%
----- -----
Gross profit 35.2% 33.3%
Operating expenses:
Selling, general
and administrative 23.9% 23.6%
Research and development 6.9% 9.9%
----- -----
Total 30.8% 33.5%
Operating income (loss) 4.4% (0.2%)
Interest expense and other 0.5% 0.8%
----- -----
Income (loss) before tax
& minority interest 3.9% (1.0%)
Income tax provision (benefit) 1.8% (0.4%)
Minority interest - (0.3%)
----- -----
Net income (loss) 2.1% (0.3%)
===== =====
Net revenues for the third quarter of 1996 were $559.3 million, an increase of
$13.1 million or 2.4 percent from the same period in 1995. This represented the
first quarter over quarter increase in revenues in the last eleven quarters.
Volume increases of 8.8 percent were offset by price declines of 5.1 percent and
the negative effect of changes in currency exchange rates of 1.3 percent. Volume
growth was at the highest rate of increase in the past two years and was
primarily due to newly introduced products (principally DryView(TM) laser
imagers and Travan(TM) data cartridges).
Net revenues in the United States increased 1.5 percent with volume increases of
4.8 percent partially offset by pricing declines of 3.3 percent.
Internationally, net revenues increased 3.3 percent. Volume increases of 13.2
percent were partially offset by price declines of 7.1 percent and a 2.8 percent
negative effect of changes in currency exchange rates. International revenues
accounted for 47.4 percent of third quarter 1996 revenues, up from 46.9 percent
of total revenues for third quarter 1995.
Gross profit in the third quarter of 1996 was $196.6 million or 35.2 percent of
revenues, an increase of 1.9 percentage points from the third quarter of 1995.
This increase is due to lower employee headcount, increased volume and lower raw
material costs driven by better utilization and lower prices, partially offset
by negative pricing pressure, foreign currency impacts and a negative impact
from the sale of the Company's Sulmona, Italy facility.
Selling, general and administrative expenses were $133.5 million or 23.9 percent
of revenues, up 0.3 percentage points from the same period in 1995. Cost savings
from reduced sales related costs, reduced employee headcount and the benefit
realized from establishing a lower overhead cost structure were more than offset
by start-up costs of $19.3 million related to supply chain development and
identity development which are expected to continue through 1997. See additional
discussion in "Future Outlook".
Research and development costs totaled $38.6 million or 6.9 percent of revenues
in the third quarter of 1996, down $15.3 million or 3.0 percentage points from
the same period in 1995. This decrease is due to the implementation of a more
efficient research and development cost structure including consolidation of
laboratories from fourteen to seven, and higher than normal spending in 1995
reflecting investments made in a number of the Company's new products which came
to market during 1995 and early 1996. See additional discussion in "Future
Outlook".
Operating income for the third quarter of 1996 was $24.5 million, or 4.4 percent
of net revenues. This represents a $25.8 million increase from the $1.3 million
operating loss in the same period in 1995.
Third quarter non-operating expense was $2.5 million, down $1.8 million from the
same quarter last year. This decrease was due to an increase in other income of
$1.2 million, primarily interest income and currency transaction gains, and to
lower interest expense due to lower average debt outstanding and a lower
effective interest rate. Interest expense prior to July 1, 1996 was based on an
assumed $250 million in outstanding debt and 3M's effective interest rate during
the period. The allocation of interest expense for periods prior to July 1, 1996
is more fully discussed in Note 6 of the Notes to Historical Financial
Statements included in the Company's Form 10 Registration Statement.
The Company's effective tax rate was 46.4 percent compared to 42.3 percent in
the third quarter of 1995. This increase is due to higher effective rates in
certain international tax jurisdictions.
Net income in the third quarter of 1996 was $11.8 million, or $.29 per share.
This represents an improvement of $13.6 million or $0.33 per share from the same
period in 1995.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:
The following table sets forth the Company's consolidated statements of
operations, restructuring and other one-time charges and the resulting adjusted
balances for the nine month period ended September 30, 1996 with comparative
balances for the nine month period ended September 30, 1995. The adjusted
balances are also presented as a percentage of revenues as are the results for
the comparable period of 1995.
<TABLE>
<CAPTION>
(In Millions Except per Share Data)
Nine Months Ended September 30, Percent of Revenues
--------------------------------------------- -------------------
1996 One-Time 1996 1996
Historical Charges Adjusted 1995 Adjusted 1995
---------- -------- -------- -------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Net revenues $1,696.6 $ - $1,696.6 $1,687.9 100.0% 100.0%
Cost of goods sold 1,105.0 (7.9) 1,097.1 1,099.1 64.7% 65.1%
-------- ------ -------- -------- ----- -----
Gross profit 591.6 7.9 599.5 588.8 35.3% 34.9%
Operating expenses:
Selling, general
and administrative 423.4 (14.6) 408.8 405.6 24.1% 24.0%
R&D 132.1 - 132.1 168.2 7.7% 10.0%
Restructuring chgs 53.9 (53.9) - - - -
-------- ------ -------- -------- ----- -----
Total 609.4 (68.5) 540.9 573.8 31.8% 34.0%
Oper. Income (loss) (17.8) 76.4 58.6 15.0 3.5% 0.9%
Int. exp. and other 7.9 - 7.9 14.2 0.5% 0.9%
-------- ------ -------- -------- ----- -----
Income (loss) before tax
& minority interest (25.7) 76.4 50.7 0.8 3.0% 0.0%
Income taxes (5.4) 27.8 22.4 0.3 1.3% 0.0%
Minority interest (0.4) - (0.4) (2.0) 0.0% (0.1%)
-------- ------ -------- -------- ----- -----
Net income (loss) $ (19.9) $ 48.6 $ 28.7 $ 2.5 1.7% 0.1%
======== ====== ======== ======== ===== =====
Earnings (loss)
per share $ (0.48) $ 1.17 $ 0.69 $ 0.06
======== ======= ======== ========
</TABLE>
On a year-to-date basis, net revenues totaled $1,696.6 million, an increase of
$8.7 million or 0.5 percent from the same period in 1995. Volume increases of
7.2 percent were offset by price declines of 5.2 percent and 1.5 percent from
the negative effect of changes in currency exchange rates. Volume increases were
driven primarily by newly introduced products (principally DryView(TM) laser
imagers and Travan(TM) data cartridges).
Net revenues in the United States increased 1.9 percent with volume increases of
5.5 percent partially offset by pricing declines of 3.6 percent.
Internationally, net revenues decreased 0.8 percent. Volume increases of 8.9
percent were more than offset by price declines of 6.8 percent and a 2.9 percent
negative effect of changes in currency exchange rates. International revenues
accounted for 49.3% of total revenues compared with 50.0% in the same period in
1995.
Gross profit for the first nine months of 1996 was $591.6 million. This includes
special one-time charges of $7.9 million related to the write off of certain
packaging materials in connection with the Distribution. Excluding these
charges, gross profit would have been $599.5 million or 35.3 percent of
revenues, an increase of 0.4 percentage points from the first nine months of
1995. This increase was primarily due to productivity improvements, volume
increases and lower raw material costs driven by better utilization and lower
prices, partially offset by lower selling prices and negative impact of changes
in currency exchange rates.
Selling, general and administrative expenses were $423.4 million. Excluding
special one-time charges of $14.6 million related to the spin-off, selling,
general and administrative expenses would have been $408.8 million or 24.1
percent of revenues, an increase of 0.1 percentage points from the same period
in 1995. Reduced sales related costs, reduced employee headcount and the benefit
realized from establishing a lower overhead cost structure were more than offset
by start-up costs of $32.0 million related to supply chain development and
identity development which are expected to continue through 1997. See additional
discussion in "Future Outlook".
Research and development costs totaled $132.1 million or 7.7 percent of revenues
in the first nine months of 1996, down $36.1 million or 2.3 percentage points
from the same period in 1995. This decrease is due to the implementation of a
more efficient research and development cost structure including consolidation
of laboratories from fourteen to seven, and higher than normal spending in 1995
reflecting investments made in a number of the Company's new products which came
to market during 1995 and early 1996. See additional discussion in "Future
Outlook".
The Company recorded restructuring charges of $53.9 million in the first nine
months of 1996. These charges primarily relate to employee separation programs.
See additional discussion in "Strategic Reorganization".
The operating loss for the first nine months of 1996 was $17.8 million.
Excluding restructuring charges of $53.9 million and special one-time charges of
$22.5 million, the Company would have had operating income of $58.6 million or
3.5 percent of revenues. This represents a $43.6 million increase from operating
income in the same period in 1995 which totaled $15.0 million.
Non-operating expense for the first nine months of 1996 was $7.9 million, down
$6.3 million from the same period last year. This decrease was due to an
increase in other income of $3.0 million, primarily related to investment gains
prior to the Distribution and interest income, and to lower interest expense due
to a lower effective interest rate. Interest expense prior to July 1, 1996 was
based on an assumed $250 million in outstanding debt and 3M's effective interest
rate during the period. The allocation of interest expense prior to July 1, 1996
is more fully discussed in Note 6 of the Notes to Historical Financial
Statements in the Company's Form 10 Registration Statement.
The Company's effective tax rate was 21.0 percent. Excluding restructuring and
special one-time charges, the Company's effective tax rate was 44.2 percent, up
slightly from the same period of 1995.
Net loss year-to-date 1996 was $19.9 million. Excluding restructuring and
special one-time charges, net income would have been $28.7 million resulting in
earnings per share of $0.69. This represents an improvement of $26.2 million or
$0.63 per share from the same period in 1995.
FINANCIAL POSITION
The Company had 3.0 months of inventory on hand at September 30, 1996, down from
3.4 months at December 31, 1995. Months in inventory have decreased due to
better management of inventories as part of the supply chain development. The
accounts receivable days sales outstanding was 78 days at September 30, 1996,
unchanged from December 31, 1995.
The book value of property, plant and equipment at September 30, 1996 was
$474.1, a decrease of $39.1 million from $513.2 million at December 31, 1995.
This decrease is primarily due to lower capital spending and the sale of the
Company's Sulmona, Italy facility. The decrease from December 31, 1995 in other
assets of $41.0 million was more than offset by the increase in other current
assets of $60.9 million primarily due to changes in deferred tax assets as more
of the temporary differences related to current items.
Accounts payable at September 30, 1996 increased $66.9 million from December 31,
1995. This increase is driven by certain spin-off transactions that were not
finalized prior to the end of the third quarter and payables to 3M for products
and transitional services that were previously eliminated intercompany
transactions. Other current liabilities increased $49.3 million from $125.9
million at December 31, 1995 to $175.2 million at September 30, 1996. This
increase was driven by accruals for the special one-time charges and accruals
for identity development and supply chain development costs.
LIQUIDITY
Prior to July 1, 1996, cash and equivalents and debt were not allocated to the
Company from 3M since 3M uses a centralized approach to cash management and the
financing of its operations. The Company's financing requirements prior to July
1, 1996 are represented by cash transactions with 3M and are reflected in "Net
cash (paid to) received from 3M" in the statements of cash flows. This financial
support was discontinued following the Distribution.
Cash provided by operating activities was $264.9 million during the nine months
ended September 30, 1996, compared to $126.0 million during the same period in
1995. The major non-cash items were depreciation which was $137.7 million
compared to $141.5 million during the first nine months of 1995 and
restructuring and other one-time charges of $76.4 million during the nine months
ended September 30, 1996. Working capital provided $88.1 million for the first
nine months of 1996, an improvement of $113.0 million over the $24.9 million
used in the comparable period of 1995. Cash provided by working capital was
driven by a decrease in inventories and an increase in accounts payable.
Accounts payable are expected to decrease in the fourth quarter in connection
with the finalization of certain spin-off transactions.
Cash used in investing activities was $109.7 million for the first nine months
of 1996 compared to $143.0 million in the comparable period of 1995. Investing
activities included capital expenditures of $115.9 million for the first nine
months of 1996 compared to $135.4 million during the same period of 1995.
Capital expenditures were higher in the nine months ended September 30, 1995
reflecting expenditures made for additional plant capacity for a number of the
Company's new products that came to market during 1995 and early 1996.
Financing activities during the first nine months of 1996 used cash of $22.4
million. Financing activities primarily related to the net borrowing of
approximately $163.0 million under the Company's credit facility and subsidiary
borrowings of $20.5 million primarily from banks outside the United States.
Borrowings were principally used to pay 3M for certain overseas assets in
connection with the Distribution, to repay certain intercompany indebtedness
assumed by the Company in connection with the Distribution, and to fund a
portion of the Company's ESOP.
The Company expects its operations, exclusive of contemplated borrowings, to
generate sufficient funds to meet the Company's operating needs for the next
twelve months, including anticipated capital expenditures. At September 30,
1996, the Company's ratio of total debt to total capital is 17%.
FUTURE OUTLOOK
The Company's overall financial goal is to improve economic profit (which is
measured as operating income after taxes in excess of the Company's cost of
capital) by $150 million by the end of 1998. This goal is based on anticipated
cost reductions, modest revenue growth and improved asset management resulting
from the implementation of the Company's business strategy. The Company
anticipates total cost savings (net of start-up expenses) during the three year
period 1996-1998 of $90 million after taxes; or, $150 million on a pre-tax
basis.
Through the first three quarters of 1996, the Company's economic profit improved
by $45 million. This improvement is driven by cost reductions, increased
revenues and better management of operating capital due to the implementation of
the Company's reorganization plan as well as other management actions.
The Company continues to implement its reorganization plan including the closure
or consolidation of five factory locations, the consolidation of laboratories
from fourteen to seven and a reduction in the number of employees of more than
20%.
As of September 30, 1996, the Company's headcount was 9,400, down from 9,700 it
began with on July 1, 1996 and down from the 12,000 reported at March 31, 1996.
The third quarter reduction reflects the continued impact of previously
announced voluntary separation plans. The reduction from the level reported at
March 31, 1996 reflects the aforementioned separation plans as well as the
retention by 3M of staff services positions which had been allocated to the
Company as part of 3M. In the near term, the majority of the costs related to
the staff services support provided by these employees will continue to be
incurred by the Company through transition support services agreements with 3M.
The Company believes its current staffing levels are appropriate for the near
term.
The third quarter net benefit from establishing a lower cost overhead structure
was approximately $14 million. This benefit was offset by the additional
expenses incurred by the Company to establish itself as an independent public
company. The Company expects to continue to incur these start-up costs through
1997 with the full benefit of the lower cost overhead structure being realized
in 1998.
Also in the third quarter, the Company announced the acquisition of Luminous
Corporation, a pre-press software solutions company. In the fourth quarter of
1996, the Company will recognize a non-deductible charge of approximately $12
million for the write-off of the purchase price allocated to in-process research
and development. Exclusive of the research and development charge, it is
expected that this acquisition will not have a significant impact on operating
results in 1996.
FORWARD-LOOKING STATEMENTS
Certain information, other than the historical information, discussed in this
Report, may constitute forward-looking statements for the purposes of the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. These
statements are subject to various factors which could cause actual results in
the future to differ materially from these statements. Such factors include, but
are not limited to, customer acceptance of the Company's new product platforms,
competitive pricing pressures on the Company's products, technological
developments in the markets served by the Company, the Company's ability to
establish its operations as an independent company, and the various factors set
forth under the caption "Special Factors" contained in the Company's Information
Statement included in the Form 10 Registration Statement filed with the
Securities and Exchange Commission on June 21, 1996 in connection with the
Distribution.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company, in the ordinary course of its business, is the subject of various
pending or threatened legal actions. Although it is impossible to predict the
outcome of any legal proceeding and the Company therefore cannot estimate the
ultimate liability, if any, relating to these various proceedings, the Company
believes that any ultimate liability arising from these actions should not have
a material adverse effect on the financial position of the Company.
Items 2-5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The following documents are filed as exhibits to this Report.
(3.1) Amended By-Laws.
(10.1) Form of Indemnity Agreement between Imation Corp and
each of its directors.
(11) A statement regarding the computation of per share
earnings.
(15) An awareness letter from the Company's independent
accountants regarding unaudited interim financial
statements.
(27) Financial data schedule (EDGAR filing only).
(b) No reports on Form 8-K were filed during the quarter ended September
30, 1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Imation Corp.
(REGISTRANT)
Date: November 13, 1996 By: /s/ Jill D. Burchill
----------------------------
Jill D. Burchill
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
3.1 Amended By-Laws
10.1 Form of Indemnity Agreement between Imation Corp. and each of its
directors.
11 A statement regarding the computation of per share earnings.
15 An awareness letter from the Company's independent accountants
regarding unaudited interim financial statements.
27 Financial data schedule (EDGAR filing only).
Exhibit 3.1
IMATION CORP.
BYLAWS
As Amended October 24, 1996
- - -
ARTICLE I
SEAL
Section 1. The corporate seal shall have inscribed thereon the name of
the Corporation, the year of its organization, and shall be in such form as may
be approved from time to time by the Board of Directors. Said seal may be used
by causing it or a facsimile thereof to be impressed or affixed or otherwise
reproduced.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders shall be held at such date,
time, and place either within or without the State of Delaware as may be
designated by the Board of Directors from time to time in the notice of the
meeting. An annual meeting shall be held for the election of directors, and any
other proper business may be transacted thereat.
Section 2. The holders of a majority of each class of stock issued and
outstanding, and entitled to vote thereat, present in person, or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business except as otherwise provided by law, by the Restated
Certificate of Incorporation, or by these Bylaws. For purposes of the foregoing,
two or more classes or series of stock shall be considered a single class if the
holders thereof are entitled to vote together as a single class at the meeting.
In the absence of a quorum the stockholders so present may, by majority vote,
adjourn the meeting from time to time in the manner provided by Section 3 of
Article II of these Bylaws until a quorum shall attend.
Section 3. Any meeting of stockholders, annual or special, may adjourn
from time to time and reconvene at the same or some other place, and notice need
not be given of any such adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 4. At any meeting of the stockholders every stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder and bearing a date not
more than three (3) years prior to said meeting, unless said instrument provides
for a longer period. Unless otherwise provided in the Restated Certificate of
Incorporation or as otherwise determined by the Board of Directors pursuant to
the powers conferred by the Restated Certificate of Incorporation, each
stockholder shall have one vote for each share of stock having voting power
registered in his or her name on the books of the Corporation.
Section 5. Written notice of the annual meeting which shall state the
place, date, and hour of the meeting shall be mailed to each stockholder
entitled to vote thereat at such address as appears on the stock book of the
Corporation, at least ten (10) days prior to the meeting and not more than sixty
(60) days prior to the meeting.
Section 6. No business may be transacted at an annual meeting of
stockholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any stockholder of the Corporation (i) who
is a stockholder of record on the date of the giving of the notice provided for
in this Section and on the record date for the determination of stockholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section.
In addition to any other applicable requirements, for business to be
properly brought before an annual meeting by a stockholder, such stockholder
must have given timely notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within ten (10) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received before the
later of the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or the day on
which public disclosure of the date of the annual meeting was made, whichever
first occurs and the close of business on the day which is sixty (60) days prior
to the date of the annual meeting.
To be in proper written form, a stockholder's notice to the Secretary
must set forth as to each matter such stockholder proposes to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such stockholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such stockholder, (iv) a description of
all arrangements or understandings between such stockholder and any other person
or persons (including their names) in connection with the proposal of such
business by such stockholder and any material interest of such stockholder in
such business and (v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of stockholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section, provided, however, that, once business has
been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section shall be deemed to preclude discussion by
any stockholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual meeting in
accordance with the foregoing procedures, the Chairman shall declare to the
meeting that the business was not properly brought before the meeting and such
business shall not be transacted.
Section 7. A complete list of the stockholders entitled to vote at each
meeting of stockholders, arranged in alphabetical order, with the record address
of each, and the number of voting shares held by each, shall be prepared by the
Secretary and made available for examination by any stockholder either at a
place within the city where the meeting is to be held, which place shall be so
specified in the notice of the meeting or, if not specified, at the place where
the meeting is to be held, at least ten (10) days before every meeting, and
shall at all times during said meeting continue to be open to the examination of
any stockholder.
Section 8. Special meetings of the stockholders may be called for any
purpose or purposes by the Chairman of the Board, and shall be called by the
Secretary at the request in writing of the Chairman of the Board or of a
majority of the Board of Directors. Business transacted at all special meetings
shall be confined to the objects stated in the notice of the meeting.
Section 9. Written notice of a special meeting of stockholders, stating
the time and place and object thereof, shall be mailed postage prepaid, at least
ten (10) days before such meeting, to each stockholder entitled to vote thereat
at such address as appears on the books of the Corporation.
Section 10. The Board of Directors shall appoint two persons as
inspectors of election, to serve for one year or until their successors are
chosen. The inspectors shall act at meetings of stockholders on elections of
Directors and on all other matters voted upon by ballot.
If at the time of any meeting inspectors have not been appointed or if
none, or only one, of the inspectors is present and willing to act, the Chairman
of the Board shall appoint the required number of inspectors so that two
inspectors shall be present and acting.
ARTICLE III
DIRECTORS
Section 1. The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors, except as may be otherwise
provided by law or in the Restated Certificate of Incorporation.
Section 2. Except as otherwise fixed by or pursuant to the provisions
of Article FOURTH of the Restated Certificate of Incorporation (as it may be
duly amended from time to time) relating to the rights of the holders of any
class or series of stock having a preference over the common stock as to
dividends or upon liquidation to elect, by separate class vote, additional
directors, the number of directors of the Corporation shall be the number fixed
from time to time by the affirmative vote of a majority of the total number of
directors which the Corporation would have, prior to any increase or decrease,
if there were no vacancies. The persons receiving the votes of a plurality in
amount of holders of the shares of capital stock of the Corporation, considered
as a single class, entitled to vote generally in the election of directors
present at the meeting in person or by proxy shall be directors for the term
prescribed by Article TENTH of the Restated Certificate of Incorporation or
until their successors shall be elected and qualified.
Section 3. Newly created directorships resulting from an increase in
the number of directors of the Corporation and vacancies occurring in the Board
of Directors resulting from death, resignation, retirement, removal, or any
other reason shall be filled by the affirmative vote of a majority of the
directors, although less than a quorum, then remaining in office and elected by
the holders of the capital stock of the Corporation entitled to vote generally
in the election of directors or, in the event that there is only one such
director, by such sole remaining director. Any director elected in accordance
with the preceding sentence shall hold office for the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified.
Section 4. Only persons who are nominated in accordance with the
following procedures shall be eligible for election as directors of the
Corporation, except as may be otherwise provided in the Restated Certificate of
Incorporation of the Corporation with respect to the right of holders of
preferred stock of the Corporation to nominate and elect a specified number of
directors in certain circumstances. Nominations of persons for election to the
Board of Directors may be made at any annual meeting of stockholders (a) by or
at the direction of the Board of Directors (or any duly authorized committee
thereof) or (b) by any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided for in this Section
and on the record date for the determination of stockholders entitled to vote at
such annual meeting and (ii) who complies with the notice procedures set forth
in this Section.
In addition to any other applicable requirements, for a nomination to
be made by a stockholder, such stockholder must have given timely notice thereof
in proper written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the Secretary must be delivered
to or mailed and received at the principal executive offices of the Corporation
not less than sixty (60) days nor more than ninety (90) days prior to the
anniversary date of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting is called for a
date that is not within ten (10) days before or after such anniversary date,
notice by the stockholder in order to be timely must be so received before the
later of the close of business on the tenth (10th) day following the day on
which such notice of the date of the annual meeting was mailed or the day on
which public disclosure of the date of the annual meeting was made, whichever
first occurs and the close of business on the day which is sixty (60) days prior
to the date of the annual meeting.
To be in proper written form, a stockholder's notice to the Secretary
must set forth (a) as to each person whom the stockholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or employment of the
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by the person and (iv) any
other information relating to the person that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder; and (b) as to the stockholder giving the
notice (i) the name and record address of such stockholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such stockholder, (iv) a
representation that such stockholder intends to appear in person or by proxy at
the annual meeting to nominate the persons named in its notice and (v) any other
information relating to such stockholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to being named
as a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. If the Chairman of the annual meeting determines that a nomination was
not made in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the nomination was defective and such defective nomination
shall be disregarded.
Section 5. In addition to the powers and authorities by these Bylaws
expressly conferred upon them, the Board of Directors may exercise all such
powers of the Corporation and do all such lawful acts and things as are not by
statute or by the Restated Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 1. The Board of Directors may by resolution or resolutions
passed by a majority of the whole Board, designate an Executive Committee and
one or more committees, each committee to consist of one (1) or more Directors
of the Corporation, which, to the extent provided in said resolution or
resolutions or in these Bylaws, or unless otherwise prescribed by statute, shall
have and may exercise the powers of the Board of Directors in the management of
the business and affairs of the Corporation, and may have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated in these
Bylaws or as may be determined from time to time by resolution adopted by the
Board.
Section 2. The committees of the Board of Directors shall keep regular
minutes of their proceedings and report the same to the Board when required. In
the absence or disqualification of a member of a committee, the member or
members thereof present at any meeting and not disqualified from voting, whether
or not such member or members constitute a quorum, may unanimously appoint
another member of the Board to act at the meeting in place of any absent or
disqualified member.
ARTICLE V
COMPENSATION OF DIRECTORS
Section 1. The compensation of the Directors of the Corporation shall
be fixed by resolution of the Board of Directors.
ARTICLE VI
MEETINGS OF THE BOARD
Section 1. Regular meetings of the Board of Directors may be held at
such places within or without the State of Delaware and at such times as the
Board may from time to time determine, and if so determined notice thereof need
not be given.
Section 2. Special meetings of the Board may be held at any time or
place within or without the State of Delaware whenever called by the Chairman of
the Board, if any, or by any two directors. Reasonable notice thereof shall be
given by the persons or persons calling the meeting.
Section 3. Unless otherwise restricted by the Restated Certificate of
Incorporation or these Bylaws, members of the Board of Directors, or any
committee designated by the Board, may participate in a meeting of the Board or
of such committee, as the case may be, by means of conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting pursuant to this
Section shall constitute presence in person at such meeting.
Section 4. Meetings of the Board of Directors shall be presided over by
the Chairman of the Board, if any, or in the absence of the Chairman of the
Board, by a chairman chosen at the meeting. The Secretary, or in the absence of
the Secretary an Assistant Secretary, shall act as secretary of the meeting, but
in the absence of the Secretary and any Assistant Secretary, the chairman of the
meeting may appoint any person to act as secretary of the meeting.
Section 5. Unless otherwise restricted by the Restated Certificate of
Incorporation or these Bylaws, any action required or permitted to be taken at
any meeting of the Board of Directors, or of any committee thereof, may be taken
without a meeting if all members of the Board or of such committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 6. At all meetings of the Board of Directors, a majority of the
Directors shall constitute a quorum for the transaction of business, and the
vote of a majority of the Directors present at any meeting at which there is a
quorum, shall be the act of the Board, except as may be otherwise specifically
provided by statute or by the Restated Certificate of Incorporation or by these
Bylaws. In case at any meeting of the Board a quorum shall not be present, the
members of the Board present may adjourn the meeting from time to time until a
quorum shall attend.
ARTICLE VII
OFFICERS
Section 1. The officers of the Corporation shall be elected by the
Board of Directors at its annual meeting, or if the case requires, at any other
regular or special meeting; and shall be a Chairman of the Board of Directors, a
President and a Secretary, and, if it so determines, one or more vice
presidents, a Treasurer, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as the Board shall deem desirable.
The same person may hold any two offices at the same time.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem desirable with such further designations and titles as
it considers desirable, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board.
Section 3. The compensation of the officers of the Corporation shall be
fixed by or under the direction of the Board of Directors.
Section 4. Except as otherwise provided in the resolution of the Board
of Directors electing any officer, each officer shall hold office until the
first meeting of the Board after the annual meeting of stockholders next
succeeding his or her election, and until his or her successor is elected and
qualified or until his or her earlier resignation or removal. Any officer may
resign at any time upon written notice to the Board or to the Chairman or the
Secretary of the Corporation. Such resignation shall take effect at the time
specified therein, and unless otherwise specified therein, no acceptance of such
resignation shall be necessary to make it effective. The Board may remove any
officer with or without cause at any time. Any such removal shall be without
prejudice to the contractual rights of such officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal, or otherwise may be filled for the unexpired
portion of the term by the Board at any regular or special meeting.
Section 5. The officers of the Corporation shall have such powers and
duties in the management of the Corporation as shall be stated in these Bylaws
or in a resolution of the Board of Directors which is not inconsistent with
these Bylaws, and, to the extent so stated, as generally pertain to their
respective offices, subject to the control of the Board. The Board may require
any officer, agent, or employee to give security for the faithful performance of
his or her duties.
ARTICLE VIII
CERTIFICATES OF STOCK
Section 1. The certificates of stock of the Corporation shall be
numbered and shall be entered in the books of the Corporation as they are
issued. They shall exhibit the holder's name and number of shares and shall be
signed by the Chairman of the Board, or a vice president, and the Treasurer or
an assistant treasurer, or the Secretary or an assistant secretary. The Board of
Directors may adopt the facsimile signature of any such officer as his or her
signature and give to such facsimile the same force and effect as though it were
written on the certificates of stock by such officer, and upon appointment of a
Transfer Agent and Registrar any certificate bearing such facsimile signature
when certified and registered by such Transfer Agent and Registrar shall be
deemed duly signed, and unless and until changed by the Board, certificates in
the form so adopted may be issued and delivered whether the said officer so
signing and to be taken as so signing the same continue to be such officers or
whether because of death, resignation, or otherwise they, or either of them,
cease to be such officers.
ARTICLE IX
LOST, STOLEN, OR DESTROYED STOCK CERTIFICATE
Section 1. The Corporation may issue a new certificate of stock in the
place of any certificate theretofore issued by it, alleged to have been lost,
stolen, or destroyed, and the Corporation may require the owner of the lost,
stolen, or destroyed certificate, or such owner's legal representative, to give
the Corporation a bond sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft, or destruction of any
such certificate or the issuance of such new certificate.
ARTICLE X
FISCAL YEAR
Section 1. The fiscal year shall begin on the first day of January in
each year.
ARTICLE XI
NOTICES
Section 1. Whenever under the provisions of these Bylaws notice is
required to be given to any Director, officer, or stockholder, it shall not be
construed to mean personal notice, but such notice may be given by any means or
instrumentality reasonably designed for such purpose and permitted by law.
Section 2. Whenever notice is required to be given by law or under any
provision of the Restated Certificate of Incorporation or these Bylaws, a
written waiver thereof, signed by the person entitled to notice, whether before
or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Restated
Certificate of Incorporation or these Bylaws.
ARTICLE XII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. The Corporation shall indemnify, to the full extent
authorized or permitted by law, any person made or threatened to be made a
party, witness or participant in or to any action, suit, or proceeding, whether
criminal, civil, administrative, or investigative, by reason of the fact that
such person or such person's testator or intestate is or was a Director,
officer, or employee of the Corporation or serves or served at the request of
the Corporation any other enterprise as a director, officer, or employee.
Expenses incurred by any such person in defending any such action,
suit, or proceeding or as a witness or participant shall be paid or reimbursed
by the Corporation promptly upon receipt by it of an undertaking of such person
to repay such expenses if it shall ultimately be determined that such person is
not entitled to be indemnified by the Corporation. The rights provided to any
person by this Section shall be enforceable against the Corporation by such
person who shall be presumed to have relied upon it in serving or continuing to
serve as a Director, officer, or employee. No amendment of this Section shall
impair the rights of any person arising at any time with respect to events
occurring prior to such amendment.
For purposes of this Section, the term "Corporation" shall include any
predecessor of the Corporation and any constituent corporation (including any
constituent of a constituent) absorbed by the Corporation in a consolidation or
merger; the term "other enterprise" shall include any corporation, partnership,
joint venture, trust, or employee benefit plan; service "at the request of the
Corporation" shall include service as a Director, officer, or employee of the
Corporation which imposes duties on, or involves services by, such Director,
officer, or employee with respect to an employee benefit plan, its participant
or beneficiaries; any excise taxes assessed on a person with respect to an
employee benefit plan shall be deemed to be indemnifiable expenses; and action
by a person with respect to an employee benefit plan which such person
reasonably believes to be in the interest of the participants and beneficiaries
of such plan shall be deemed to be action not opposed to the best interest of
the Corporation.
Section 2. The indemnification provided by these Bylaws shall not be
deemed exclusive of any other rights to which those indemnified may be entitled
by any Bylaw, agreement, vote of stockholders or disinterested Directors or
otherwise, both as to action in his or her official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a Director, officer, or employee and shall inure to the
benefit of the heirs, executors, and administrators of such a person.
Section 3. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a Director, officer, employee,
or agent of the Corporation, or is or was serving at the request of the
Corporation as a Director, officer, employee, or agent of another corporation,
partnership, joint venture, trust, or other enterprise against any liability
asserted against him or her and incurred by him or her in any such capacity or
arising out of his or her status as such, whether or not the Corporation would
have the power to indemnify him or her against such liability under the
provisions of these Bylaws.
ARTICLE XIII
INTERESTED DIRECTORS
Section 1. No contract or transaction between the Corporation and one
or more of its Directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its Directors or officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the Director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof which authorizes the contract or
transaction, or solely because his or her or their votes are counted for such
purpose, if: (i) the material facts as to his or her relationship or interest
and as to the contract or transaction are disclosed or are known to the Board or
the committee, and the Board or committee in good faith authorizes the contract
or transaction by the affirmative votes of a majority of the disinterested
Directors, even though the disinterested Directors be less than a quorum; or
(ii) the material facts as to his or her relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders entitled
to vote thereon, and the contract or transaction is specifically approved in
good faith by vote of the stockholders; or (iii) the contract or transaction is
fair as to the Corporation as of the time it is authorized, approved, or
ratified by the Board, a committee thereof, or the stockholders. Common or
interested Directors may be counted in determining the presence of a quorum at a
meeting of the Board or of a committee which authorizes the contract or
transaction.
ARTICLE XIV
FORM OF RECORDS
Section 1. Any records maintained by the Corporation in the regular
course of its business, including its stock ledger, books of account, and minute
books, may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, microphotographs, or any other information storage device, provided
that the records so kept can be converted into clearly legible form within a
reasonable time. The Corporation shall so convert any records so kept upon the
request of any person entitled to inspect the same.
ARTICLE XV
AMENDMENTS
Section 1. Subject to any limitations imposed by the Restated
Certificate of Incorporation, the Board of Directors shall have power to adopt,
amend, or repeal these Bylaws. Any Bylaws made by the directors under the powers
conferred by the Restated Certificate of Incorporation may be amended or
repealed by the directors or by the stockholders. Notwithstanding the foregoing
and any other provisions of the Restated Certificate of Incorporation or these
Bylaws (and notwithstanding that a lesser percentage may be specified by law),
no provisions of these Bylaws shall be adopted, amended or repealed by the
stockholders without an affirmative vote of the holders of not less than eighty
percent (80%) of the voting power of all of the outstanding shares of capital
stock of the Corporation entitled to vote generally in the election of
directors, considered for the purposes of this Section as a single class.
Exhibit 10.1
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of ____________________ by and
between Imation Corp., a Delaware corporation (the "Company") and
__________________, a director of the Company (the "Indemnitee").
RECITALS
A. The company is aware that competent and experienced persons are
increasingly reluctant to serve as directors of corporations unless they are
protected by comprehensive liability insurance or indemnification, due to
increased exposure to litigation costs and risks resulting from their service to
such corporations, and due to the fact that the exposure frequently bears no
reasonable relationship to the compensation of such directors;
B. The statutes and judicial decisions regarding the duties of
directors are often difficult to apply, ambiguous, or conflicting, and therefore
fail to provide such directors with adequate, reliable knowledge of legal risks
to which they are exposed or information regarding the proper course of action
to take;
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors;
D. The Company believes that it is unfair for its directors to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director received no personal profit and in cases where the director was not
culpable;
E. Based upon their experience, the Board of Directors of the Company
(the "Board") has concluded that, to retain and attract talented and experienced
individuals to serve directors of the Company and to encourage such individuals
to take the business risks necessary for the success of the Company and its
subsidiaries, it is necessary for the Company to contractually indemnify its
directors, and to assume for itself maximum liability for expenses and damages
in connection with claims against such directors in connection with their
service to the Company, and has further concluded that the failure to provide
such contractual indemnification could result in harm to the Company and its
shareholders;
F. The Delaware General Corporation Law under which the Company is
organized empowers the Company to indemnify its officers, directors, employees
and agents by agreement and to indemnify persons who serve, at the request of
the Company, as the directors, officers, employees or agents of other
corporations or enterprises, and expressly provides that the indemnification
provided by Section 145 is not exclusive;
G. As a result of circumstances that may have no relation to, or that
may be beyond the control of, the Company or the Indemnitee, there can be no
assurance of the adequacy of, or continuation or renewal of current liability
insurance coverage for its directors. The Company believes, therefore, that the
interests of the Company's shareholder would best be served by a combination of
such insurance and the indemnification by the Company of the directors of the
Company;
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director of the Company free from undue concern for
claims for damages arising out of or related to such services to the Company;
and
I. The Indemnitee is willing to serve, or to continue to serve, the
Company, provided that he or she is furnished the Indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Agent. or the purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) Expenses. For purpose; of this Agreement, "expenses"
includes all direct and indirect costs Of any type or nature whatsoever
(including, without limitation, all attorneys' fees and related disbursements,
other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement,
Section 145, or otherwise; provided, however, that expenses shall not include
amounts for which the Company is prohibited by law from providing
indemnification.
(c) Proceeding. For the purpose of this Agreement,
"proceeding" means any threatened, pending, or completed action, suit or other
proceeding, whether civil, criminal, administrative, investigative or any other
type whatsoever.
(d) Subsidiary. For purposes of this Agreement, "subsidiary"
means any corporation of which more than 50% of the outstanding voting
securities is owned directly or indirectly by the Company, by the Company and
one or more other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue
to serve as a director of the Company, so long as the Indemnitee is duly
appointed or elected and qualified in accordance with the applicable provisions
of the by-laws of the Company or until such time as the Indemnitee tenders his
or her resignation in writing, provided, however, that nothing contained in this
Agreement is intended to create any right to continued employment or Board
membership by Indemnitee.
3. Maintenance of Liability Insurance.
(a) The Company hereby covenants and agrees that, so long as
the Indemnitee shall continue to serve as an agent of the Company and thereafter
so long as the Indemnitee shall be subject to any possible proceeding by reason
of the fact that the Indemnitee was an agent of the Company, the Company,
subject to Section 3(c), shall promptly obtain and maintain in full force and
effect directors' and officers' liability insurance ("D&O Insurance") in
reasonable amounts from established and reputable insurers.
(b) In all policies of D&O Insurance, the Indemnitee shall be
named as an insured in such a manner as to provide the Indemnitee the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines in good
faith that such insurance is not reasonably available, the premium costs for
such insurance are disproportionate to the amount of coverage provided, the
coverage provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a subsidiary of the Company.
4. Mandatory Indemnification. The Company shall indemnify the
Indemnitee:
(a) Third Party Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding (other than
an action by or in the right of the Company) by reason of the fact that the
Indemnitee is or was an agent of the Company, or by reason of anything done or
not done by him or her in any such capacity, against any and all expenses and
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) actually
and reasonably incurred by him or her in connection with the investigation,
defense, settlement or appeal of such proceeding if the Indemnitee acted in good
faith and in a manner the Indemnitee reasonably believed to be in the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful;
and
(b) Derivative Actions. If the Indemnitee is a person who was
or is a party or is threatened to be made a party to any proceeding by or in the
right of the Company to procure a judgment in its favor by reason of the fact
that the Indemnitee is or was an agent of the Company, or by reason of anything
done or not done by the Indemnitee in any such capacity, against any and all
expenses actually and reasonably incurred by the Indemnitee in connection with
the investigation, defense, settlement, or appeal of such proceeding if the
Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in the best interests of the Company; such indemnification shall
also be granted if the Court of Chancery or the court in which such proceeding
was brought shall determine upon application, that, in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the Court of Chancery or such other court shall
deem proper; and
(c) Actions where Indemnitee is Deceased. If the Indemnitee died
before his or her right to indemnification is determined or, after
determination, but before indemnification is paid, the Indemnitee's right to
indemnification shall survive and shall be determined and paid as if the
Indemnitee had survived.
5. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) incurred by the Indemnitee in the investigation, defense,
settlement or appeal of a proceeding but not entitled, however, to
indemnification for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 8(a) below,
the Company shall advance all reasonable expenses incurred by the Indemnitee in
connection with the investigation, defense, settlement or appeal of any
proceeding to which the Indemnitee is a party or is threatened to be made a
party by reason of the fact that the Indemnitee is or was an agent of the
Company. Indemnitee hereby undertakes to repay such amounts advanced only if,
and to the extent that, it shall ultimately be determined pursuant to Section 8
hereof that the Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to the Indemnitee within twenty (20) days following delivery of a
written request therefor by the Indemnitee to the Company. Any such request
shall reasonably evidence the expenses and costs incurred or to be incurred by
Indemnitee hereunder. Any dispute concerning the advancement of expenses may, at
the election of Indemnitee, be resolved by binding arbitration before one
neutral arbitrator in accordance with the Center for Public Resources, New York,
New York ("CPR") Rules for Non-Administered Arbitration of Business Disputes. If
the Company and the Indemnitee encounter difficulty in agreeing on an arbiter,
they will seek assistance or CPR in the selection process. In any dispute
concerning Indemnitee's right to the advancement of expenses, Indemnitee shall
be presumed to be entitled to such advancement and the Company shall bear the
burden to prove by clear and convincing evidence that Indemnitee is not so
entitled.
7. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that Indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof. Indemnitee will be presumed to
have met the standard of conduct entitling him or her to indemnification; the
Company shall be entitled to try to rebut the presumption in accordance with the
procedures set forth in Section 8 below.
(b) If, at the time of the receipt of a notice of the
commencement of a proceeding pursuant to Section 7(a) hereof, the Company has
D&O Insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(c) If the Company shall be obligated to pay the expenses of
any proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, with counsel reasonably
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of such
counsel by the Indemnitee and the retention of such counsel by the Indemnitee
and the retention of such counsel by the Company, the Company will not be liable
to the Indemnitee under this Agreement for any fees of counsel subsequently
incurred by the Indemnitee with respect to the same proceeding, provided that
(i) the Indemnitee shall have the right to employ counsel in any such proceeding
at the Indemnitee's expense; and (ii) if (A) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (B) the Indemnitee or
counsel selected by the Company shall have concluded that there may be a
conflict of interest between the Company and the Indemnitee or among Indemnitees
jointly represented in the conduct of any such defense or (C) the Company shall
not, in fact, have employed counsel to assume the defense of such proceeding,
then fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
8. Determination of Right to Indemnification.
(a) To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any proceeding referred to in subsections
4(a), 4(b) or 4(c) of this Agreement or in the defense of any claim, issue or
matter described therein, the Company shall indemnify the Indemnitee against
expenses actually and reasonably incurred by the Indemnitee in connection with
the investigation, defense, or appeal of such proceeding.
(b) To determine Indemnitee's right to indemnification other
than as provided in subsection 8(a), Indemnitee shall be presumed to have met
the standard of care entitling him or her to indemnification. The Company shall
bear the burden to prove that Indemnitee is not entitled to indemnification.
Such determination shall be made by:
(1) A majority vote of a quorum of the Board
consisting of directors who are not parties to the proceeding for which
indemnification is being sought;
(2) The shareholders of the Company;
(3) Legal counsel selected by the board, and
reasonably approved by the Indemnitee, which counsel shall make such
determination in a written opinion; or
(4) One neutral arbitrator who shall be a litigation
or corporate attorney with experience in the area of director or officer
indemnification. The arbitrator shall be selected within 30 days of the demand
for arbitration and shall render his or her decision within 60 days after the
Company and the Indemnitee have completed the submission of their respective
cases, unless good cause be shown as to why a longer time for decision is
necessary. The arbitration shall be conducted in accordance with the CPR Rules
for Non-Administered Arbitration or Business Disputes. If the Company and the
Indemnitee encounter difficulty in agreeing on an arbiter, they will seek
assistance of CPR in the selection process.
(c) Notwithstanding any other provision in this Agreement to
the contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the Indemnitee in connection with any hearing or proceeding under
this Section 8 involving the Indemnitee and against all expenses incurred by the
Indemnitee in connection with any other proceeding between the Company and the
Indemnitee involving the interpretation or enforcement of the rights of the
Indemnitee under this Agreement unless a court of competent jurisdiction finds
that each of the claims and/or defenses of the Indemnitee in any such proceeding
was frivolous or made in bad faith, in which case Indemnitee will repay the
amounts previously paid, and will do so within 20 days following written demand.
The indemnification provided to Indemnitee in this section shall be paid by
Company on a current basis (i.e., no later than 20 days following written
demand).
9. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement;
(a) Claims Initiated by Indemnitees. To indemnify or advance
expenses to the Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by the Indemnitee and not by way of defense ("defense"
includes contribution or indemnification or proceedings to enforce proportionate
fault rules where applicable), except with respect to proceedings brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if the Board of
Directors finds it to be appropriate; or
(b) Lack of Good Faith. To indemnify the Indemnitee for any
expenses incurred by the Indemnitee with respect to any proceeding instituted by
the Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee
under this Agreement for any amounts paid in settlement of a proceeding unless
the Company consents to such settlement, which consent shall not be unreasonably
withheld.
10. Non-exclusivity. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's certificate of incorporation or bylaws, the vote of the Company's
shareholders or disinterested directors, other agreements, or otherwise, both as
to action in the Indemnitee's official capacity and to action in another
capacity while occupying his or her position as an agent of the company, and the
Indemnitee's rights hereunder shall continue after the Indemnitee has ceased
acting as an agent of the Company and shall inure to the benefit of the heirs,
executors and administrators of the Indemnitee.
11. Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent now or hereafter
permitted by law.
12. Severability. It any provision or provisions of this Agreement
shall be held to be invalid illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions or any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 12 hereof.
13. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
14. Successors and Assigns. The terms of this agreement shall bind, and
shall inure to the benefit of, the successors and assigns of the parties hereto.
15. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.
16. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
within Delaware.
17. Consent to Jurisdiction. The Company and the Indemnitee each hereto
irrevocably consent to the jurisdiction of the courts of the State of Minnesota
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Minnesota,
or in arbitration as set forth herein.
The parties hereto have entered into this Indemnity Agreement effective
as of date first above written.
EXHIBIT 11
<TABLE>
<CAPTION>
IMATION CORP.
COMPUTATION OF EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
(In millions, except per share amounts)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
--------------------- ---------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
PRIMARY:
Net income (loss) $ 11.8 $ (1.8) $ (19.9) $ 2.5
======= ======= ======= =======
Shares (1):
Weighted average number of shares
outstanding during the period 41.930 41.992 41.926 41.995
Weighted average number of shares
held by the ESOP not committed
to be released (1.189) -- (0.396) --
Shares issuable in connection with
stock options less shares assumed
purchasable from proceeds 0.104 -- -- --
------- ------- ------- -------
Total Shares 40.845 41.992 41.530 41.995
======= ======= ======= =======
Earnings (Loss) per Common and
Common Equivalent Share $ .29 $ (.04) $ (.48) $ .06
======= ======= ======= =======
FULLY DILUTED:
Net income (loss) $ 11.8 $ (1.8) $ (19.9) $ 2.5
======= ======= ======= =======
Shares (1):
Weighted average number of shares
outstanding during the period 41.930 41.992 41.926 41.995
Weighted average number of shares
held by the ESOP not committed
to be released (1.189) -- (0.396) --
Shares issuable in connection with
stock options less shares assumed
purchasable from proceeds 0.137 -- -- --
------- ------- ------- -------
Total Shares 40.878 41.992 41.530 41.995
======= ======= ======= =======
Earnings (Loss) per Common and
Common Equivalent Share $ .29 $ (.04) $ (.48) $ .06
======= ======= ======= =======
</TABLE>
(1) The number of shares outstanding used in the computation of earnings
per share prior to July 1, 1996 was one-tenth of the average 3M shares
outstanding. For both primary and fully diluted earnings, assumed
conversion of options was not made in those periods with a loss as the
conversion would be anti-dilutive.
EXHIBIT 15
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Imation Corp.
Registrations on Form S-8
We are aware that our report dated October 30, 1996 on our reviews of the
interim condensed information of Imation Corp. (the Company) for the three and
nine month periods ended September 30, 1996 and 1995, and included in the
Company's Form 10-Q for the quarter ended September 30, 1996, is incorporated by
reference in the Company's Registration Statements on Form S-8 (Registration
Nos. 333-15273, 333-15275 and 333- 15277). Pursuant to Rule 436(c), under the
Securities Act of 1933, this report should not be considered part of the
Registration Statements prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
St. Paul, Minnesota
November 13, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS AND NOTES.
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0
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