SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10/A
AMENDMENT NO. 4
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR (G) OF
THE SECURITIES EXCHANGE ACT OF 1934
IMATION CORP.
(Formerly known as 3M Information Processing, Inc.)
(Exact name of registrant as specified in its charter)
DELAWARE 41-1838504
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 IMATION PLACE
OAKDALE, MINNESOTA 55128
(Address of principal executive offices) (Zip Code)
(612) 704-4000
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON
TO BE SO REGISTERED WHICH EACH CLASS IS TO BE REGISTERED
Common Stock, par value $.01 per share New York Stock Exchange, Inc.;
Chicago Stock Exchange, Incorporated
Preferred Stock Purchase Rights New York Stock Exchange, Inc.;
Chicago Stock Exchange, Incorporated
Securities to be registered pursuant to Section 12(g) of the Act:
None
IMATION CORP.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN INFORMATION STATEMENT
<S> <C> <C>
Item 1. Business SUMMARY; INTRODUCTION; THE DISTRIBUTION; SPECIAL
FACTORS; MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS;
BUSINESS AND PROPERTIES OF THE COMPANY; HISTORICAL
FINANCIAL STATEMENTS
Item 2. Financial Information SUMMARY; SPECIAL FACTORS; PRO FORMA CAPITALIZATION;
PRO FORMA FINANCIAL STATEMENTS; SELECTED HISTORICAL
FINANCIAL DATA; MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS;
HISTORICAL FINANCIAL STATEMENTS
Item 3. Properties BUSINESS AND PROPERTIES OF THE COMPANY
Item 4. Security Ownership of Certain
Beneficial Owners and Management SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS;
BENEFICIAL OWNERSHIP OF MANAGEMENT
Item 5. Directors and Executive Officers MANAGEMENT OF THE COMPANY; LIABILITY AND
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Item 6. Executive Compensation MANAGEMENT OF THE COMPANY; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS
Item 7. Certain Relationships and
Related Transactions SUMMARY; THE DISTRIBUTION; RELATIONSHIP BETWEEN 3M
AND THE COMPANY AFTER THE DISTRIBUTION; MANAGEMENT
OF THE COMPANY; CERTAIN RELATIONSHIPS AND
TRANSACTIONS
Item 8. Legal Proceedings BUSINESS AND PROPERTIES OF THE COMPANY
Item 9. Market Price of and Dividends on
the Registrant's Common Equity
and Related Stockholder Matters SUMMARY; THE DISTRIBUTION; SPECIAL FACTORS;
MANAGEMENT OF THE COMPANY; SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS; BENEFICIAL OWNERSHIP OF
MANAGEMENT; DESCRIPTION OF COMPANY CAPITAL STOCK
Item 10. Recent Sales of Unregistered
Securities Not Applicable
Item 11. Description of Registrant's
Securities to be Registered DESCRIPTION OF COMPANY CAPITAL STOCK; PURPOSES AND
EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BYLAWS
Item 12. Indemnification of Directors and
Officers LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS
Item 13. Financial Statements and
Supplementary Data SUMMARY; PRO FORMA FINANCIAL STATEMENTS; SELECTED
HISTORICAL FINANCIAL DATA; MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS; HISTORICAL FINANCIAL STATEMENTS
Item 14. Changes in and Disagreements
with Accountants on Accounting
and Financial Disclosure Not Applicable
</TABLE>
INFORMATION STATEMENT
IMATION CORP.
COMMON STOCK
PAR VALUE $.01 PER SHARE
This Information Statement is being furnished in connection with the
distribution (the "Distribution") by Minnesota Mining and Manufacturing Company
("3M") to holders of record of 3M common stock at the close of business on June
28, 1996 (the "Record Date"), of one share of Common Stock, par value $.01 per
share (the "Common Stock"), of Imation Corp. (the "Company") for every ten
shares of 3M common stock owned on the Record Date. The Distribution will result
in 100% of the outstanding shares of Common Stock of the Company being
distributed to holders of 3M common stock on a pro rata basis. The Distribution
will be effective on July 1, 1996 (the "Distribution Date"). It is expected that
certificates representing shares of Common Stock will be mailed to 3M
stockholders on or about July 15, 1996.
The Company is a newly formed company which, as a result of transactions entered
into in connection with the Distribution, will own substantially all of the
businesses and assets of, and will be responsible for substantially all of the
liabilities associated with, 3M's global data storage and imaging systems
businesses, as more fully described herein (the "Transferred Businesses").
No consideration will be paid by 3M's stockholders for the shares of Common
Stock. There is no current public trading market for the shares of Common Stock,
although it is expected that a "when-issued" trading market will develop on or
about the Record Date. The shares of Common Stock have been approved for listing
on the New York Stock Exchange and the Chicago Stock Exchange, subject to
official notice of issuance, under the symbol "IMN".
IN REVIEWING THIS INFORMATION STATEMENT, YOU SHOULD CAREFULLY CONSIDER THE
MATTERS DESCRIBED UNDER THE CAPTION "SPECIAL FACTORS."
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION. WE
ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS INFORMATION STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Information Statement is June 21, 1996.
TABLE OF CONTENTS
PAGE
SUMMARY 1
THE COMPANY 3
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA 5
INTRODUCTION 7
THE DISTRIBUTION 8
Reasons for the Distribution 8
Opinion of Financial Advisor 8
Manner of Effecting the Distribution 11
Certain Federal Income Tax Consequences 11
Listing and Trading of the Common Stock 12
SPECIAL FACTORS 13
Absence of History as an Independent Company 13
Changing Industry Environment 13
Transition to Independent Public Company 13
Absence of 3M Financial Support 13
Competition 14
International Operations 14
Absence of Prior Trading Market for the Common Stock 14
Common Stock Dividend Policy 14
Certain Anti-Takeover Effects 14
RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION 16
Distribution Agreement 16
Tax Sharing and Indemnification Agreement 17
Corporate Services Transition Agreement 17
Environmental Matters Agreement 17
Intellectual Property Agreement 18
Supply, Service, Contract Manufacturing and Sales Agency Agreements 19
Shared Facility and Lease Agreements 19
FINANCING 20
PRO FORMA CAPITALIZATION 21
PRO FORMA FINANCIAL STATEMENTS 22
NOTES TO PRO FORMA STATEMENT OF OPERATIONS 24
SELECTED HISTORICAL FINANCIAL DATA 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS 28
General Overview 28
Strategic Reorganization 28
Operating Results 29
Performance by Geographic Area 32
Financial Position 33
Liquidity 33
Future Outlook 35
Forward Looking Statements 35
BUSINESS AND PROPERTIES OF THE COMPANY 36
Overview 36
Industry Background 37
Business Strategy 38
Customer Applications 40
Competition 42
Distributor Channels 42
Raw Materials 42
Research and Patents 42
Manufacturing 43
Properties 43
Employees 43
Legal Proceedings 44
Environmental Matters 44
MANAGEMENT OF THE COMPANY 45
Directors 45
Committees of the Board of Directors 45
Compensation of Directors 46
Directors Stock Compensation Program 46
Executive Officers 48
Compensation of Executive Officers 50
Stock Options Table 51
Option Exercises and Year-End Value Table 52
Long-Term Incentive Plan Awards 52
Transactions With Management 53
Employment Agreement 53
Compensation Under Retirement Plans 54
Company Pension Plan 54
Plans Encouraging Employee Stock Ownership 55
Retirement Investment Plan 55
1996 Employee Stock Incentive Program 55
Federal Tax Consequences 57
New Plan Benefits 58
TREATMENT OF EMPLOYEE OPTIONS AND RESTRICTED STOCK IN
THE DISTRIBUTION 59
CERTAIN RELATIONSHIPS AND TRANSACTIONS 59
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS 59
BENEFICIAL OWNERSHIP OF MANAGEMENT 60
DESCRIPTION OF COMPANY CAPITAL STOCK 61
Authorized Capital Stock 61
Common Stock 61
Preferred Stock 61
No Preemptive Rights 61
Transfer Agent and Registrar 61
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE
OF INCORPORATION AND BY-LAWS 61
General 61
Classified Board of Directors 61
Special Meetings of Stockholders; Action by Written Consent;
Advance Notice Provisions 62
Stockholder Nominations 62
Stockholder Proposals 62
Preferred Stock 63
Supermajority Provision 63
Rights Agreement 64
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS 65
General 65
Elimination of Liability in Certain Circumstances 65
Indemnification and Insurance 65
INDEPENDENT PUBLIC ACCOUNTANTS 66
ADDITIONAL INFORMATION 66
INDEX TO HISTORICAL FINANCIAL STATEMENTS F-1
ANNEX A A-1
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
INFORMATION STATEMENT. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED BY,
THE MORE DETAILED INFORMATION SET FORTH IN THIS INFORMATION STATEMENT, WHICH
SHOULD BE READ IN ITS ENTIRETY. UNLESS THE CONTEXT OTHERWISE REQUIRES, (I)
REFERENCES IN THIS INFORMATION STATEMENT TO 3M AND THE COMPANY SHALL INCLUDE
3M'S AND THE COMPANY'S RESPECTIVE SUBSIDIARIES AND (II) REFERENCES IN THIS
INFORMATION STATEMENT TO THE COMPANY PRIOR TO THE DISTRIBUTION DATE SHALL REFER
TO THE TRANSFERRED BUSINESSES AS OPERATED BY 3M.
DISTRIBUTING CORPORATION Minnesota Mining and Manufacturing Company, a
Delaware corporation ("3M").
DISTRIBUTED CORPORATION Imation Corp., a newly formed Delaware
corporation (the "Company") which, as of the
Distribution Date, will have transferred to it
substantially all of the businesses and assets
of, and will be responsible for substantially
all of the liabilities associated with, 3M's
global data storage and imaging systems
businesses, as more fully described herein (the
"Transferred Businesses").
PRINCIPAL BUSINESSES TO BE
RETAINED BY 3M 3M will retain its core businesses,
consisting of all of its current businesses
other than the Transferred Businesses (the
"Core Businesses"). 3M has announced that its
consumer audio and video tape business, which
is not part of the Transferred Businesses, will
be discontinued.
PRIMARY PURPOSE OF THE
DISTRIBUTION To separate the Transferred Businesses from the
Core Businesses so that each can (i) adopt
strategies and pursue objectives appropriate to
its specific businesses and industries and
thereby achieve, among other things, potential
cost savings, (ii) implement more focused
incentive compensation arrangements that are
tied more directly to results of its operations
and (iii) be recognized by the financial
community as separate and distinct businesses.
SHARES TO BE DISTRIBUTED Approximately 41,863,000 shares of Common
Stock, based on the shares of 3M common stock
outstanding on May 1, 1996. The shares to be
distributed will constitute 100% of the
outstanding shares of Common Stock of the
Company on the Distribution Date.
DISTRIBUTION RATIO Each 3M stockholder will receive one
share of Common Stock of the Company for every
ten shares of 3M common stock held on the
Record Date.
FRACTIONAL SHARE INTERESTS Fractional share interests will be sold by the
Distribution Agent and the cash proceeds
distributed to those stockholders entitled to a
fractional interest. See "THE DISTRIBUTION --
Manner of Effecting the Distribution."
LISTING AND TRADING
MARKET The shares of Common Stock have been approved
for listing on the New York Stock Exchange and
the Chicago Stock Exchange, subject to official
notice of issuance, under the symbol "IMN."
RECORD DATE Close of business on June 28, 1996.
DISTRIBUTION DATE July 1, 1996. As of the Distribution Date,
the transfer of substantially all of the assets
and liabilities of the Transferred Businesses
from 3M to the Company will become effective
and the shares of Common Stock to be
distributed will be delivered to the
Distribution Agent for distribution to holders
of 3M common stock.
MAILING DATE Certificates representing the shares of
Common Stock will be mailed to 3M stockholders
on or about July 15, 1996.
DISTRIBUTION AGENT Norwest Bank Minnesota, N.A. (the "Distribution
Agent").
TAX CONSEQUENCES The Distribution is expected to qualify as a
tax-free distribution under Section 355 of the
Internal Revenue Code of 1986, as amended (the
"Code"). See "THE DISTRIBUTION -- Certain
Federal Income Tax Consequences."
DIVIDEND POLICY The payment and amount of cash dividends on the
Common Stock after the Distribution will be at
the discretion of the Company's Board of
Directors. The Company's dividend policy will
be reviewed by the Company's Board of Directors
at such future times as may be appropriate, and
payment of dividends will depend upon the
Company's financial position, capital
requirements and such other factors as the
Company's Board of Directors deems relevant.
RELATIONSHIP WITH 3M AFTER THE
DISTRIBUTION Following the Distribution, 3M and the Company
will be operated as independent public
companies. 3M and the Company will, however,
continue to have a relationship as a result of
the agreements being entered into between 3M
and the Company in connection with the
Distribution, including the Transfer and
Distribution Agreement, the Tax Sharing and
Indemnification Agreement, the Corporate
Services Transition Agreement, the
Environmental Matters Agreement, the
Intellectual Property Rights Agreement, the
Supply Agreements and other miscellaneous
agreements. Except as referred to above or as
otherwise described herein, 3M and the Company
will cease to have any material contractual or
other material relationships with each other.
See "RELATIONSHIP BETWEEN 3M AND THE COMPANY
AFTER THE DISTRIBUTION," "FINANCING," "PRO
FORMA CAPITALIZATION" and "MANAGEMENT OF THE
COMPANY -- Directors."
SPECIAL FACTORS Stockholders should carefully consider
the matters discussed under the section
entitled "SPECIAL FACTORS" in this Information
Statement.
THE COMPANY
The Company is a leader in developing, manufacturing and marketing a wide
variety of products and services worldwide for data storage and imaging
applications within the information processing industry. The Company's products,
which number in excess of 10,000, are used to capture, process, store, reproduce
and distribute information and images in a wide range of information-intensive
markets, including enterprise computing, network servers, personal computing,
graphic arts, photographic imaging, medical imaging, and commercial and consumer
markets. See "BUSINESS AND PROPERTIES OF THE COMPANY."
The breadth of the Company's product lines, the Company's worldwide leadership
position in a number of product classes and its global distribution network
serve to differentiate the Company from its competitors. In 1995, the Company
had revenues of $2.2 billion, with approximately half of its revenues derived
internationally. The Company's major products, classified by customer
application, are shown below and are described in more detail under "BUSINESS
AND PROPERTIES OF THE COMPANY -- Customer Applications."
<TABLE>
<CAPTION>
INFORMATION PROCESSING,
MANAGEMENT AND INFORMATION PRINTING MEDICAL AND PHOTO IMAGING
STORAGE APPLICATIONS APPLICATIONS APPLICATIONS
- -------------------- ------------ ------------
<S> <C> <C>
* Computer diskettes * Conventional color proofing * Laser imaging products
* Data cartridges and Travan(tm) * Digital color proofing * Laser imagers
cartridges
* Computer tapes * Printing plates * X-ray film
* Rewritable optical media * Image setting and graphic arts * "Dry" imaging products
products
* CD ROM replication services * Carbonless paper products * Film processors
* Photographic film products
</TABLE>
INFORMATION PROCESSOR SERVICE APPLICATIONS
- ------------------------------------------
* Technical field service support for equipment
* Customer service, documentation and training for equipment
* Engineering and office document systems
As part of 3M, the Transferred Businesses have developed leadership positions in
a number of markets serving the information processing industry, which the
Company believes can serve as platforms for future growth. For example, the
Company:
* is the world's largest supplier of branded removable magnetic and optical
media (see "BUSINESS AND PROPERTIES OF THE COMPANY -- Customer Applications
-- Information Processing, Management and Storage
Applications");
* is one of the world's largest suppliers of color proofing systems to the
graphic arts industry, with a number of its Matchprint(tm) and Rainbow
products serving as industry standards (see "BUSINESS AND PROPERTIES OF THE
COMPANY -- Customer Applications -- Information and Printing
Applications");
* was the first to develop the new, widely-used laser imager for medical
imaging applications, with an installed base of over 7,000 imagers (see
"BUSINESS AND PROPERTIES OF THE COMPANY -- Customer Applications--Medical and
Photo Imaging Applications");
* is one of the world's largest suppliers of private label film for the amateur
photography market (see "BUSINESS AND PROPERTIES OF THE COMPANY--Customer
Applications"); and
* introduced in 1995 and expects to introduce in 1996 several innovative
products with significant market potential, including the Travan(tm) high
capacity data storage tape cartridges, the new family of Rainbow proofing
systems, a new line of DryView(tm) imagers, medical imaging delivery
systems developed under an alliance with Cemax/Icon and Hewlett-Packard,
and a 120 MB 3.5 inch diskette, the LS-120 diskette, which has been
developed with Compaq Computer Corporation and Matsushita-Kotobuki
Electronics Industries, Ltd. ("MKE") (See "BUSINESS AND PROPERTIES OF THE
COMPANY -- Customer Applications").
STRATEGY
Following the Distribution, the Company intends to utilize its research and
development capabilities, its solid technology platforms, its well established
product lines, and its strong customer relationships to enhance its position as
a leader in the information processing industry, providing innovative,
cost-effective system solutions to its customers' information processing needs.
To achieve its objectives, the Company intends to focus on the following
elements:
* REFINING PRODUCT PORTFOLIO -- The Company will make adjustments to its
product portfolio when appropriate to ensure that all of its resources are
focused on the Company's objective of consistent, profitable growth.
* STREAMLINING OPERATIONS AND REDUCING COSTS -- The Company is in the process
of reducing employment levels and consolidating manufacturing operations. In
addition, the Company intends to continue its efforts to streamline its
management structure, consolidate administrative functions and facilitate
communications among various parts of the organization so as to enable the
Company to respond quickly to the rapidly changing needs of its customers.
* EXPANDING CUSTOMER FOCUS -- The Company will strive to provide more timely
solutions tailored to each of its potential and existing customers' needs.
* IMPROVING CASH FLOWS -- The Company continues to take steps to improve cash
flows, including instilling in its employees a strong focus on cash
management and re-engineering business processes.
* EXPANDING INTERNATIONAL OPERATIONS -- The Company intends over the next
several years to take advantage of opportunities for growth by expanding its
international penetration in higher growth regions of the world.
* CAPITALIZING ON PROPRIETARY TECHNOLOGIES TO PROVIDE CUSTOMER SOLUTIONS -The
Company will continue to focus significant efforts on the development of new
products utilizing its core technologies so as to improve profit margins and
enhance the Company's position as a leading supplier of products, services
and systems to the information processing industry.
* ENCOURAGING EMPLOYEE STOCK OWNERSHIP -- The Company intends to encourage and
increase employee stock ownership as an additional incentive toward
consistent, profitable growth.
In late 1995, in connection with its plan to distribute the Company to its
stockholders, 3M recognized a loss on disposal which included pre-tax charges of
$340 million related to the adoption of a reorganization plan to rationalize the
Company's manufacturing operations, streamline its organizational structure and
write off impaired assets.
The Company believes its continued leadership in developing new data storage
technologies, strong position in high quality color proofing for the printing
industry and strong history of leadership in medical imaging for the health care
industry, together with the benefits of its reorganization plan and business
strategy, should help position the Company to realize future growth and
profitability. See "BUSINESS AND PROPERTIES OF THE COMPANY -- Business
Strategy."
The Company's headquarters are located at 1 Imation Place, Oakdale, Minnesota
55128. Its telephone number is (612) 704-4000.
SUMMARY HISTORICAL AND PRO FORMA
FINANCIAL DATA
The following summary historical and pro forma financial data of the Company
should be read in conjunction with the Company's historical and pro forma
financial statements and the notes thereto included elsewhere in this
Information Statement. The following summary historical financial information
relates to the Transferred Businesses as they were operated as part of 3M and is
derived from the historical financial statements of the Company. They also
include an allocation of certain general corporate expenses of 3M which were not
directly related to these businesses.
The summary pro forma financial data make adjustments to the historical balance
sheet at March 31, 1996 and the historical statements of operations for the
three months ended March 31, 1996 and the year ended December 31, 1995 as if the
Distribution had occurred on March 31, 1996 for purposes of the pro forma
balance sheet and January 1, 1995 for purposes of the pro forma statements of
operations. The summary historical financial data that relate to the three years
in the period ended December 31, 1995 have been derived from the historical
financial statements audited by Coopers & Lybrand L.L.P., independent
accountants. The historical and pro forma financial statements of the Company
may not reflect the results of operations or financial position that would have
been obtained had the Company been a separate, independent company during such
periods.
IMATION CORP.
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
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<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
------------------- ----------------------------------
1996* 1995 1995** 1994 1993
-------- ------ -------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenues $ 576.1 $576.7 $2,245.6 $2,280.5 $2,307.8
Gross profit 202.3 212.5 724.7 838.5 886.2
Selling, general and administrative
expense 130.7 137.9 539.4 531.5 529.0
Research and development 47.9 56.4 222.4 211.2 216.7
Operating income (loss) 13.3 18.2 (148.9) 95.8 140.5
Income (loss) before taxes and minority
interest 10.1 13.0 (166.8) 81.3 127.4
Net income (loss) 6.1 7.5 (85.0) 54.3 75.3
BALANCE SHEET DATA (AS OF END OF PERIOD)
Total working capital 633.4 658.4 714.0
Property, plant and equipment -- net 503.9 513.2 654.9
Total assets 1,520.0 1,541.5 1,671.7
Total liabilities 398.3 392.8 371.7
Total equity 1,121.7 1,148.7 1,300.0
STATEMENT OF CASH FLOWS DATA
Net cash provided by operating activities 69.7 29.5 256.8 170.1 229.2
Net cash used in investing activities (40.1) (46.9) (187.5) (179.7) (210.2)
Net cash (paid to) received from 3M (27.0) 13.4 (72.9) 18.5 (13.1)
Depreciation 48.5 49.1 189.5 185.9 184.4
</TABLE>
SUMMARY PRO FORMA FINANCIAL DATA
(DOLLARS IN MILLIONS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED DECEMBER 31,
MARCH 31, 1996* 1995**
--------------- ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA
Net revenues $ 576.1 $2,245.6
Gross profit 202.3 724.7
Selling, general and administrative expense 130.7 539.4
Research and development 47.9 222.4
Operating income (loss) 13.3 (148.9)
Income (loss) before taxes and minority
interest 9.7 (168.3)
Net income (loss) 5.6 (97.4)
Net income (loss) per share 0.13 (2.32)
BALANCE SHEET DATA (AS OF END OF PERIOD)
Total working capital 721.0
Property, plant and equipment -- net 503.9
Total assets 1,570.3
Total debt 280.0
Total liabilities 648.7
Total equity 921.6
</TABLE>
* Restructuring charges reduced results for the three months ended March
31, 1996 by $10.4 million before taxes and minority interest and $6.1
million after taxes and minority interest. Net income for the three
months ended March 31, 1996 excluding these charges would have been
$12.2 million on a historical basis and $11.7 million on a pro forma
basis. These charges related to costs for certain employee separation
programs.
** Restructuring charges and asset write-offs reduced 1995 results by
$166.3 million before taxes and minority interest and $88.3 million
($97.8 million on a pro forma basis) after taxes and minority interest.
1995 net income excluding these charges would have been $3.3 million on
a historical basis and $0.4 million on a pro forma basis. The majority
of these charges related to the write down of property, plant and
equipment.
INTRODUCTION
On June 18, 1996, the Board of Directors of 3M declared a dividend payable to
holders of record of 3M's common stock at the close of business on the Record
Date of one share of Common Stock of the Company for every ten shares of 3M
common stock held on the Record Date. The Distribution will be effective on July
1, 1996. Certificates representing shares of Common Stock of the Company will be
mailed to 3M stockholders on or about July 15, 1996. As a result of the
Distribution, 100% of the outstanding shares of Common Stock of the Company will
be distributed to 3M stockholders.
The Company was formed for the purpose of effecting the Distribution. On or
before the Distribution Date, 3M will transfer to the Company substantially all
of the assets and liabilities of the Transferred Businesses. Prior to the
Distribution, 3M operated the Transferred Businesses as part of its Information,
Imaging and Electronics Sector.
If you have questions relating to the Distribution and delivery of
certificates representing shares of Common Stock of the Company, please
contact the Distribution Agent at:
In Minneapolis-St. Paul (612) 948-5464
Elsewhere in the U.S. (800) 859-2881
For other information relating to 3M, please contact 3M Investor Relations, 3M
Center, St. Paul, Minnesota 55144, telephone number (612) 733-8704. For
Company-specific questions, please contact Investor Relations at the Company, 1
Imation Place, Oakdale, Minnesota 55128, telephone number (612) 704-5818.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
3M's Board of Directors has determined that it is in the best interests of 3M
and the Company to undertake the Distribution, thereby separating the
Transferred Businesses from 3M, for the reasons described herein.
The Distribution is designed to establish the Transferred Businesses as a stand
alone independent company which can adopt strategies and pursue objectives
appropriate to its specific businesses. The industry in which the Transferred
Businesses operate is extremely competitive and is generally characterized by
rapid technological change and declining prices.
In this highly competitive industry, the Company must operate with a reduced
cost structure, broad distribution channels, a streamlined supply chain and fast
paced decision-making. As an independent company, the Company's management
should be better able to organize the Company in a manner more appropriate to
the markets in which it competes. As a result, the Distribution should enhance
the Company's position as an effective competitor, and the Company should be
better able to capitalize quickly on changes in the rapidly expanding
information processing industry.
The Distribution is also designed to allow the Company to establish its own
employee stock ownership plan and other equity-based compensation plans so that
there will be a more direct alignment between the performance of the Transferred
Businesses and the compensation of employees of the Transferred Businesses,
which, among other things, is intended to strengthen and support the Company's
ability to achieve cost savings, greater efficiencies and sales growth. Prior to
1996, management of the Transferred Businesses received 3M stock options and
until the Distribution Date, employees may participate in a company-wide
employee stock ownership plan holding 3M common stock. Following the
Distribution, employees of the Company will participate in an employee stock
ownership plan holding Common Stock of the Company and receive equity-based
incentives which will be more closely aligned with the financial results of the
Company, thereby linking each employee's financial success more directly to the
financial success of the Company. See "MANAGEMENT OF THE COMPANY -- Retirement
Investment Plan," and "-- 1996 Employee Stock Incentive Program."
3M believes that the separation of the information and imaging businesses from
its life sciences, industrial and consumer businesses will cause the two
entities to be recognized by the financial community as distinct businesses with
different investment risk and return profiles. As a result of the Distribution,
3M should develop its following in the financial community primarily as a global
manufacturer and marketer of products for the life sciences and industrial and
consumer markets while the Company should develop its following primarily as a
company serving the global information processing industry. In this regard,
investors will be better able to evaluate the merits and future prospects of the
businesses of 3M and the Company, enhancing the likelihood that each will
achieve appropriate market recognition for its performance and potential. In
addition, current stockholders and potential investors will be able to direct
their investments to their specific areas of interest. Also, the Distribution
will enable the Company, as and when appropriate, to engage in strategic
acquisitions using its own capital stock.
For the reasons stated above, the 3M Board of Directors believes that the
Distribution is in the best interests of 3M and the Company. In reaching its
conclusions, the 3M Board of Directors also considered the opinion of 3M's
financial advisor, Morgan Stanley & Co. Incorporated ("Morgan Stanley"), which
is described below, to the effect that the Distribution is fair, from a
financial point of view, to the holders of shares of 3M common stock.
OPINION OF FINANCIAL ADVISOR
3M retained Morgan Stanley to act as 3M's financial advisor in connection with
the Distribution and related matters based upon Morgan Stanley's experience and
expertise. Morgan Stanley rendered a written opinion to the Board of Directors
of 3M that, as of the date of this Information Statement and subject to the
considerations set forth in such opinion, the proposed Distribution is fair from
a financial point of view to the holders of shares of 3M common stock.
THE FULL TEXT OF MORGAN STANLEY'S WRITTEN OPINION DATED JUNE 18, 1996, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN, IS ATTACHED AS ANNEX A TO THIS INFORMATION STATEMENT AND IS
INCORPORATED HEREIN BY REFERENCE. STOCKHOLDERS ARE URGED TO, AND SHOULD, READ
THE MORGAN STANLEY OPINION CAREFULLY AND IN ITS ENTIRETY. THE MORGAN STANLEY
OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF 3M AND CONCERNS THE FAIRNESS OF
THE PROPOSED DISTRIBUTION FROM A FINANCIAL POINT OF VIEW TO THE HOLDERS OF
SHARES OF 3M COMMON STOCK, AND IT DOES NOT ADDRESS ANY OTHER ASPECT OF THE
DISTRIBUTION. THE SUMMARY OF THE MORGAN STANLEY OPINION SET FORTH IN THIS
INFORMATION STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In arriving at its opinion, Morgan Stanley (i) analyzed certain publicly
available financial statements and other information relating to 3M and the
Company, including this Information Statement; (ii) analyzed certain internal
historical financial statements and other historical financial operating data
concerning 3M and the Company prepared by their respective managements; (iii)
analyzed certain financial projections prepared by the respective managements of
3M and the Company; (iv) compared the financial performance of the Company with
that of certain other companies with publicly traded securities which were
deemed to be comparable to the Company and its respective business units; (v)
compared the financial performance of 3M (both with and without the Transferred
Businesses) with that of certain other companies with publicly traded securities
which were deemed to be comparable to 3M (both with and without the Transferred
Businesses), respectively; (vi) discussed past and current operations and
financial condition and the prospects of 3M with senior executives of 3M and of
the Company with senior executives of the Company; (vii) participated in
discussions among representatives of 3M and the Company and their legal
advisors; and (viii) performed such other analyses as were deemed appropriate.
In connection with the delivery of its opinion, Morgan Stanley discussed with
the Board, among other things, Morgan Stanley's analysis of the possible
post-Distribution market values of 3M common stock and the Common Stock, in each
case assuming, among other things, that such securities are fully and widely
distributed among investors and subject only to normal trading activity (which
distribution Morgan Stanley noted could take a period of time). The analysis was
based on a range of price/earnings multiples and 1996 and 1997 earnings
estimates for the Company and 3M. The price/earnings multiples used in the
analysis were compared to the price/earnings multiples of certain
publicly-traded companies which Morgan Stanley deemed comparable to the Company
and 3M, respectively. The earnings estimates used in the analysis for 3M were
compared to certain published analysts' estimates. The analysis generally
indicated that, on a post-Distribution basis, based on the earnings estimates
and price/earnings multiples that were considered most appropriate, the combined
implied market value of one share of 3M common stock and the fractional share of
Common Stock reflecting the Distribution ratio would exceed the closing market
price per share of 3M common stock on the day prior to the Board's determination
to pursue the Distribution.
Morgan Stanley also discussed with the Board Morgan Stanley's analysis of
selected "spin-off" transactions completed since 1988, none of which were deemed
directly comparable to the Distribution. This analysis generally indicated,
among other things, that during the six month periods following the selected
spin-offs, the stock prices of the "spun-off" companies slightly outperformed
the S&P 500 average.
In addition, Morgan Stanley discussed with the Board Morgan Stanley's view of
certain potential benefits of the Distribution, including (i) the ability to
reposition 3M with a greater emphasis on its core technologies, (ii) the
enhanced focus of 3M's and the Company's management teams, (iii) the ability to
enhance the value of the Company's businesses as an independent company with a
lower cost structure, simplified management structure and focused management
incentives, (iv) the tax-free nature of this transaction, (v) the ability to
reflect the Transferred Businesses pending completion of the spinoff as a
discontinued operation and (vi) the certainty of completion since the spinoff is
not dependent on any third party. Morgan Stanley also discussed with the Board
Morgan Stanley's view of certain potential detriments of the Distribution,
including potential redistribution of the Common Stock for a period of time
following the Distribution.
In rendering its opinion, Morgan Stanley assumed and relied upon, without
independent verification, the accuracy and completeness of the information
reviewed by Morgan Stanley for the purposes of its opinion. With respect to the
financial budgets and forecasts, Morgan Stanley assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial performance of 3M and the Company. Morgan
Stanley did not make any independent valuation or appraisal of the assets or
liabilities, contingent or otherwise, of 3M or the Company, nor has Morgan
Stanley been furnished with any such appraisals.
Morgan Stanley noted that 3M has received a ruling from the Internal Revenue
Service to the effect that the Distribution will not be a taxable transaction to
the shareholders of 3M under federal income tax laws (except to the extent of
any cash distributed in lieu of fractional shares of the Company). In that
regard, Morgan Stanley assumed the correctness of the conclusions set forth in
such ruling. Morgan Stanley also assumed that the Distribution will comply with
all federal, state, local and foreign laws and applicable regulations, except
for any noncompliance with such applicable laws and regulations that would not
have a material adverse effect on 3M or the Company. In rendering its opinion,
Morgan Stanley, with 3M's consent, did not consider the effect of any terms or
arrangements relating to the Distribution, including the terms of any
distribution, tax or other agreement or arrangement, or any amendment or
modification to any existing such agreement or arrangement.
Morgan Stanley's opinion was rendered on the basis of securities markets,
economic and general business and financial conditions prevailing as of the date
of its opinion and the conditions and prospects, financial and otherwise, of 3M
and the Company as they were represented to Morgan Stanley as of the date of its
opinion or as they were reflected in the information and documents reviewed by
Morgan Stanley. Morgan Stanley's opinion assumes that the Distribution will be
completed substantially on the basis set out in the Information Statement and
that the shares of 3M and the Company will be fully and widely distributed among
investors and are subject only to normal trading activity. The estimation of
market trading prices of newly distributed securities is subject to
uncertainties and contingencies, all of which are difficult to predict and
beyond the control of the firm making such estimates.
In addition, Morgan Stanley noted that the market price of such securities will
fluctuate with changes in market conditions, the conditions and prospects,
financial and otherwise, of 3M and the Company, and other factors which
generally influence the prices of securities. In rendering its opinion, Morgan
Stanley did not opine as to the price at which the common stock of 3M or the
Company will trade after the Distribution is effected.
As financial advisor to 3M in connection with the Distribution, Morgan Stanley
has been paid an advisory fee of approximately $300,000 which compensated Morgan
Stanley for the time and efforts expended in rendering advice in connection with
the Distribution and, upon consummation of the Distribution, Morgan Stanley will
be paid a transaction fee, against which all or a portion of any advisory fee
will be credited. The transaction fee, which shall not exceed $5,500,000, will
be determined based on a percentage of the market value of the equity of the
Company on the Distribution Date plus any debt assumed or incurred by the
Company (the "Aggregate Value"). For example, for an Aggregate Value of $500
million, Morgan Stanley's fee would be 0.7% or $3.5 million; for an Aggregate
Value of $1 billion, Morgan Stanley's fee would be 0.45% or $4.5 million; and
for an Aggregate Value in excess of approximately $1.25 billion, Morgan
Stanley's fee would be capped at $5.5 million. 3M has agreed to reimburse Morgan
Stanley for its out-of-pocket expenses incurred in connection with its services
as financial advisor. 3M has also agreed, in a separate letter agreement, to
indemnify Morgan Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any, controlling Morgan
Stanley or any of its affiliates against certain liabilities, including
liabilities under the federal securities laws, and expenses related to Morgan
Stanley's engagement.
Morgan Stanley was selected by the 3M Board to act as 3M's financial advisor
based upon Morgan Stanley's qualifications, expertise and reputation. Morgan
Stanley is a nationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings and private placements.
Morgan Stanley and its affiliates may in the future act as underwriters for, or
participate as members of underwriting syndicates with respect to, offerings of
3M securities, and Morgan Stanley may effect securities transactions for 3M or
perform financial advisory services in connection with certain acquisitions and
dispositions by 3M. In the past, Morgan Stanley and its affiliates have provided
investment banking and financing services for 3M and have received fees for the
rendering of such services. In addition, in the ordinary course of its business,
Morgan Stanley actively trades the equity securities of 3M and may actively
trade the securities of the Company following the consummation of the
Distribution, for its own account and for the accounts of others. Accordingly,
Morgan Stanley may at any time hold a long or short position in the securities
of 3M or the Company.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth in a
Transfer and Distribution Agreement, dated as of June 18, 1996 (the
"Distribution Agreement"), between 3M and the Company.
3M will effect the Distribution on the Distribution Date by delivering all of
the outstanding shares of Common Stock of the Company to the Distribution Agent
for distribution to the holders of record of 3M common stock on the Record Date
(other than the holders of a limited number of shares of restricted common stock
of 3M, who, pursuant to the terms of the 3M Management Stock Ownership Program
as implemented by 3M's Compensation Committee, will receive additional shares of
restricted 3M Common Stock with a value equal to the value of the Common Stock
which would have been received by such holders in the Distribution). The
Distribution will be made on the basis of one share of Common Stock for every
ten shares of 3M common stock held on the Record Date. The actual total number
of shares of Common Stock to be distributed will depend on the number of shares
of 3M common stock outstanding on the Record Date (other than shares of
restricted stock). Based upon the shares of 3M common stock outstanding on May
1, 1996, approximately 41,863,000 shares of Common Stock would be distributed to
3M stockholders. The shares of Common Stock will be fully paid and nonassessable
and the holders thereof will not be entitled to preemptive rights. See
"DESCRIPTION OF COMPANY CAPITAL STOCK." Certificates representing shares of
Common Stock will be mailed to 3M stockholders on or about July 15, 1996.
No holder of 3M common stock will be required to pay any cash or other
consideration for the shares of Common Stock received in the Distribution or to
surrender or exchange shares of 3M common stock in order to receive shares of
Common Stock.
No certificates or scrip representing fractional shares of Common Stock will be
issued to 3M stockholders as part of the Distribution. The Distribution Agent
will aggregate fractional shares into whole shares and sell them in the open
market at then prevailing prices on behalf of holders who otherwise would be
entitled to receive fractional share interests, and such persons will receive
instead a cash payment in the amount of their pro rata shares of the total sale
proceeds (net of any commissions incurred in connection with such sales). Such
sales are expected to be made on, or as soon as practicable after, the
Distribution Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
3M has received a private letter ruling (the "Private Letter Ruling") from the
Internal Revenue Service (the "Service") substantially to the effect that, among
other things, the Distribution will qualify as a tax-free spin-off to 3M and its
stockholders under Section 355 of the Code. The following is a summary of the
material federal income tax consequences to 3M stockholders expected to result
from the Distribution:
1. A 3M stockholder will not recognize any income, gain or loss as a
result of the Distribution, except, as described below, in connection with
cash received in lieu of fractional shares of Common Stock.
2. A 3M stockholder will apportion his tax basis for his 3M common stock
on which Common Stock is distributed between his 3M common stock and the
Common Stock received in the Distribution (including any fractional shares
of Common Stock deemed received) in proportion to the relative fair market
values of such 3M common stock and Common Stock on the Distribution Date.
3. A 3M stockholder's holding period for the Common Stock received in the
Distribution will include the period during which such stockholder held the
3M common stock on which the Common Stock is distributed, provided that such
3M common stock is held as a capital asset by such stockholder as of the
Distribution Date.
4. A 3M stockholder who receives cash in lieu of a fractional share of
Common Stock as a result of the sale of such shares by the Distribution
Agent will be treated as if such fractional share had been received by the
stockholder as part of the Distribution and then sold by such stockholder.
Accordingly, such stockholder will recognize gain or loss equal to the
difference between the cash so received and the portion of the tax basis in
the Common Stock that is allocable to such fractional share. Such gain or
loss will be capital gain or loss, provided that such fractional share was
held by such stockholder as a capital asset at the time of the Distribution.
Current Treasury regulations require each 3M stockholder who receives Common
Stock pursuant to the Distribution to attach to his federal income tax return
for the year in which the Distribution occurs a detailed statement setting forth
such data as may be appropriate in order to show the applicability of Section
355 of the Code to the Distribution. 3M will convey the appropriate information
to each stockholder of record as of the Record Date.
The summary of federal income tax consequences set forth above is for general
information only and may not be applicable to stockholders who received their
shares of 3M common stock through the exercise of an employee stock option or
otherwise as compensation or who are not citizens or residents of the United
States or who are otherwise subject to special treatment under the Code. All
stockholders should consult their own tax advisors as to the particular tax
consequences of the Distribution to them, including the applicability and effect
of state, local and foreign tax laws.
LISTING AND TRADING OF THE COMMON STOCK
The shares of Common Stock have been approved for listing on the New York Stock
Exchange, Inc. ("NYSE") and the Chicago Stock Exchange, subject to official
notice of issuance, and will trade under the symbol "IMN." Initially the Company
is expected to have approximately 106,000 holders of record, based on the number
of stockholders of record of 3M on May 1, 1996.
A "when-issued" trading market is expected to develop on or about the Record
Date. The term "when-issued" means that shares can be traded prior to the time
certificates are actually available or issued. Prices at which the shares of
Common Stock may trade, on a "when-issued" basis or after the Distribution,
cannot be predicted. See "SPECIAL FACTORS -- Absence of Prior Trading Market for
the Common Stock."
The shares of Common Stock distributed to 3M stockholders will be freely
transferable, except for shares of Common Stock received by persons who may be
deemed to be "affiliates" of the Company under the Securities Act of 1933, as
amended (the "Securities Act"). Persons who may be deemed to be affiliates of
the Company after the Distribution generally include individuals or entities
that control, are controlled by, or are under common control with the Company
and may include the directors and principal executive officers of the Company as
well as any principal stockholder of the Company. Persons who are affiliates of
the Company will be permitted to sell their shares of Common Stock only pursuant
to an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the exemptions
afforded by Section 4(2) of the Securities Act and Rule 144 thereunder.
SPECIAL FACTORS
ABSENCE OF HISTORY AS AN INDEPENDENT COMPANY
The Company was formed for the purpose of effecting the Distribution and does
not have an operating history as an independent company. Accordingly, the
financial statements included herein may not necessarily reflect the results of
operations, financial position and cash flows of the Transferred Businesses had
the Company been operated independently during the periods presented. In
addition, the financial information does not reflect many changes that will
occur in the operations of the Company as a result of the Company's strategic
reorganization (See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS -- Strategic Reorganization") and future business
strategies (See "BUSINESS AND PROPERTIES OF THE COMPANY -- Business Strategy").
The Company believes that these changes, when implemented, will have a
meaningful positive impact on the results of operations of the Company. However,
there can be no assurance as to the timing or amount of any positive impact
which may be realized.
CHANGING INDUSTRY ENVIRONMENT
The information processing industry involves the creation, capture,
manipulation, storage, production and distribution of information. As there is a
greatly expanding need to manage and store more complex information in less
time, with less resources and with greater accuracy, there is an increasing
emphasis in the marketplace on products using digital technology (See "BUSINESS
AND PROPERTIES OF THE COMPANY -- Industry Background").
While the Company has a number of successful digital products, the long-term
profitability of the Company will depend, in part, on the Company's ability to
anticipate the growing uses of digital technologies. The Company believes that
its leadership positions in a number of markets, its proprietary technologies
and its commitment to the development of innovative solution-based products are
factors which will contribute to the Company's ability to be successful. The
Company recognizes, however, that there are many factors beyond its control and
that no assurances can be given as to the Company's ability to anticipate and
satisfy the needs of this evolving marketplace.
TRANSITION TO INDEPENDENT PUBLIC COMPANY
Prior to the Distribution, the Transferred Businesses had the benefit of certain
3M trademarks and 3M's reputation in marketing their products. Pursuant to
agreements being entered into with 3M, the Company will continue to have the use
of certain 3M trademarks for an agreed upon period of time following the
Distribution. One of the challenges facing the Company will be to develop a name
and identity for itself independent of 3M. There can be no assurance that the
Company will be successful in this regard or that the loss of use of 3M
trademarks might not have an adverse effect on the business of the Company.
Prior to the Distribution, a number of services have been provided to the
Company by 3M. For a transition period following the Distribution, 3M will
continue to provide such services to the Company. See "RELATIONSHIP BETWEEN 3M
AND THE COMPANY AFTER THE DISTRIBUTION." However, during and after this
transitional period the Company will need to develop its own services and
support systems independent of 3M.
ABSENCE OF 3M FINANCIAL SUPPORT
Prior to the Distribution, the Transferred Businesses participated in 3M's
centralized funding and cash and foreign currency management. The capital
requirements of the Transferred Businesses in excess of their internally
generated funds were provided by 3M. 3M, and not the Transferred Businesses, was
responsible for obtaining any external financing required by the Transferred
Businesses. Although in the years 1993 and 1995, the Company provided cash to 3M
in excess of amounts required for capital expenditures and operating
requirements in the amounts of $13.1 million and $72.9 million respectively, in
1994, 3M provided financial support in the amount of $18.5 million to the
Company. See "HISTORICAL FINANCIAL STATEMENTS -- Historical Statements of Cash
Flows." This financial support will not be available to the Company following
the Distribution and the Company will be responsible for obtaining its own
financing and may experience a higher cost of capital. See "RELATIONSHIP BETWEEN
3M AND THE COMPANY AFTER THE DISTRIBUTION," "FINANCING" and "SPECIAL FACTORS --
Transition to Independent Public Company."
COMPETITION
The Company operates in a highly competitive environment. The Company's
competitors are both larger and smaller than the Company in terms of resources
and market shares. The marketplaces in which the Company operates are generally
characterized by strong unit growth, rapid technological change, evolution to
digital business solutions, and declining prices. In these highly competitive
markets, the Company must compete on the basis of understanding customer needs,
lower costs, introduction of new products and strong digital technology.
Although the Company believes that it can take the necessary steps to meet the
competitive challenges of these marketplaces, no assurance can be given with
regard to the Company's ability to take these steps, the actions of competitors,
some of which will have greater resources than the Company, or the pace of
technological changes. See "BUSINESS AND PROPERTIES OF THE COMPANY --
Competition."
INTERNATIONAL OPERATIONS
The Company does business in approximately 60 countries outside of the United
States, most significantly Italy, the United Kingdom, France and Germany.
International operations, which comprised approximately 50% of the Company's
revenues in 1995, may be subject to various risks which are not present in
domestic operations, including political instability, the possibility of
expropriation, restrictions on royalties, dividends and currency remittances,
volatility of exchange rates of foreign currencies, local government involvement
required for operational changes within the Company, requirements for
governmental approvals for new ventures and local participation in operations
such as local equity ownership and workers' councils.
ABSENCE OF PRIOR TRADING MARKET FOR THE COMMON STOCK
There has not been any established public market for the trading of the
Company's Common Stock, although it is expected that a "when-issued" trading
market will develop on or about the Record Date. The shares of Common Stock have
been approved for listing on the NYSE and the Chicago Stock Exchange, subject to
official notice of issuance. However, there can be no assurance as to the prices
at which the Common Stock will trade before or after the Distribution Date.
Until the Common Stock is fully distributed and an orderly market develops, the
prices at which shares trade may fluctuate significantly. Prices for shares of
Common Stock will be determined in the marketplace and may be influenced by many
factors, including the depth and liquidity of the market for the shares,
investor perception of the Company and the industry in which the Company
participates and general economic and market conditions.
COMMON STOCK DIVIDEND POLICY
The payment and amount of cash dividends on the Common Stock after the
Distribution will be subject to the discretion of the Company's Board of
Directors. The Company's dividend policy will be reviewed by the Company's Board
of Directors at such future times as may be appropriate, and payment of
dividends on the Company's Common Stock will depend upon the Company's financial
position, capital requirements, profitability and such other factors as the
Company's Board of Directors deems relevant.
CERTAIN ANTI-TAKEOVER EFFECTS
Certain provisions of the Company's Restated Certificate of Incorporation (the
"Certificate of Incorporation") and By-Laws (the "By-Laws"), including
provisions classifying the board of directors, prohibiting stockholder action by
written consent, governing business transactions with certain stockholders and
requiring advance notice for nomination of directors and stockholder proposals,
may inhibit changes in control of the Company not approved by the Company's
Board of Directors. In addition, preferred stock purchase rights which will
attach to the Common Stock would have similar effects. See "PURPOSES AND EFFECTS
OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS -- Rights
Agreement." Such Certificate of Incorporation and By-law provisions and
preferred stock purchase rights could diminish the opportunities for a
stockholder to participate in certain tender offers, including tender offers at
prices above the then-current market value of the Common Stock, and may also
inhibit fluctuations in the market price of the Common Stock that could result
from takeover attempts. See "PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE
CERTIFICATE OF INCORPORATION AND BY-LAWS." In addition, the Company's Board of
Directors, without further stockholder approval, may issue preferred stock that
could have the effect of delaying, deterring or preventing a change in control
of the Company. The issuance of preferred stock could also adversely affect the
voting power of the holders of the Common Stock, including the loss of voting
control to others. The Company has no present plans to issue any preferred
stock. See "DESCRIPTION OF COMPANY CAPITAL STOCK -- Preferred Stock." Certain
agreements pursuant to which 3M is transferring to the Company rights with
respect to certain patents, trademarks, know-how and other intellectual property
provide that 3M may terminate some or all of such rights in the event that
control of the Company is acquired by an entity which may result in
substantially enhanced competition to a significant business of 3M. As a result,
these provisions may inhibit a change in control of the Company. In addition,
there can be no assurance that the loss of such intellectual property rights
following a change of control would not have a material adverse effect on the
Company's business. Such agreements, the provisions of the Certificate of
Incorporation and By-laws and the preferred stock rights may have the effect of
discouraging or preventing an acquisition of the Company or a disposition of
certain of the Company's businesses.
RELATIONSHIP BETWEEN 3M AND THE COMPANY
AFTER THE DISTRIBUTION
For purposes of an orderly transfer on the Distribution Date of the Transferred
Businesses to the Company and an orderly transition to the status of two
separate independent companies, 3M and the Company have entered or will enter
into various agreements and relationships, including those described in this
section. These agreements are generally intended to be on an arms-length basis.
The forms of agreements summarized in this section are included as exhibits to
the Registration Statement of which this Information Statement forms a part, and
the following summaries are qualified in their entirety by reference to the
agreements as filed.
DISTRIBUTION AGREEMENT
3M and the Company have entered into the Distribution Agreement, which provides
for, among other things, the principal corporate transactions required to effect
the Distribution, the transfer to the Company of the Transferred Businesses, the
division between 3M and the Company of certain liabilities and certain other
agreements governing the relationship between 3M and the Company following the
Distribution.
The Distribution Agreement generally provides for the transfer by 3M to the
Company or Imation Enterprises Corp. ("Enterprises"), which will be a wholly
owned subsidiary of the Company immediately following the Distribution, of the
assets used in the Transferred Businesses on an "as is and where is" basis, and
for the assumption by the Company or Enterprises of substantially all of the
liabilities relating to the Transferred Businesses. In particular, approximately
one-half of the domestic manufacturing operations of the Transferred Businesses,
as well as research and development, administrative and corporate staff
functions and the capital stock of Enterprises and certain foreign subsidiaries
of 3M, will be transferred to the Company together with substantially all assets
and liabilities associated therewith. The remaining manufacturing operations and
all marketing, field logistical and service operations will be transferred to
Enterprises, together with primarily all assets and liabilities related to such
operations. Substantially all the assets of the Transferred Businesses will be
transferred to the Company as a contribution to capital, except for certain
assets related to non-U.S. operations which will be purchased by the Company.
The assets relating to non-U.S. operations will generally be transferred to
subsidiaries of the Company around the world, either as a contribution to
capital or through a sale of assets at book value. Generally, such subsidiaries
will carry on the sales, service and marketing functions of the Transferred
Businesses outside the United States, except that manufacturing operations will
be conducted by the Company's subsidiaries in Italy and Argentina. In addition,
in most countries outside the U.S., trade accounts receivable and accounts
payable will be retained by 3M and 3M will pay to the Company following the
Distribution an amount corresponding to the amount by which such receivables
exceed such payables. See "PRO FORMA FINANCIAL STATEMENTS."
The Distribution Agreement provides that in the event that it is not feasible to
effect the transfers of non-U.S. operations on or prior to the Distribution Date
in any particular country, 3M and the Company will continue, following the
Distribution Date, their respective efforts to have such transfers and payments
effected as promptly as practicable following the Distribution Date or, if the
Company and 3M determine that such transfers are not capable of being effected
on a timely basis, enter into such other arrangements as are mutually agreed
upon which are intended to enable the Company to operate in such country on a
basis similar to that being conducted by 3M with respect to the Transferred
Businesses. Pending consummation of any such transfers, the Company and 3M shall
enter into such arrangements as may be necessary to enable 3M to continue to
conduct the Transferred Businesses. Following completion of each such transfer,
either 3M shall pay to the Company an amount equal to the net profits realized
after the Distribution Date with respect to these operations or the Company
shall pay to 3M an amount equal to any net losses incurred by 3M after the
Distribution Date with respect to these operations, as the case may be.
The Distribution Agreement also contains certain provisions relating to employee
compensation, benefits and labor matters and the treatment of options to
purchase and awards with respect to 3M common stock held by employees of 3M who
are becoming employees of the Company. Among other things, these provisions
apply to the discharge by the Company of liabilities and obligations relating to
employees of the Transferred Businesses.
The Distribution Agreement further provides that 3M and the Company shall each
be granted access to certain records and information in the possession of the
other, and requires the retention by each of 3M and the Company following the
Distribution Date of all such information in its possession in accordance with
existing document retention policies.
The Distribution Agreement provides that, except as otherwise set forth therein
or in any related agreement, 3M and the Company will pay their own costs and
expenses in connection with the Distribution.
TAX SHARING AND INDEMNIFICATION AGREEMENT
3M and the Company have entered into a Tax Sharing and Indemnification Agreement
(the "Tax Sharing Agreement"), providing for their respective obligations
concerning various tax liabilities. The Tax Sharing Agreement provides that 3M
shall pay, and indemnify the Company if necessary, with respect to all federal,
state, local and foreign income taxes relating to the Transferred Businesses for
any taxable period ending on or before the Distribution Date except that the
Company shall indemnify 3M for any income taxes arising out of the failure of
the Distribution or any of the transactions related to it to qualify as tax free
as a result of certain actions taken by the Company or any of its subsidiaries.
3M has also generally agreed to pay all other taxes (other than those which are
imposed solely on the Company) that are payable in connection with the
Distribution and the transactions related to it the liability for which arises
on or before the Distribution Date. The Tax Sharing Agreement further provides
for cooperation with respect to certain tax matters, the exchange of information
and the retention of records which may affect the income tax liability of either
party.
CORPORATE SERVICES TRANSITION AGREEMENT
3M and the Company have entered into a Corporate Services Transition Agreement
(the "Corporate Services Agreement") pursuant to which 3M has agreed to provide
to the Company certain services, including engineering and environmental
services, logistics and information technology services, financial services,
human resources administration services and tax, insurance, treasury, and
employee benefits administration, which 3M historically has provided to the
Transferred Businesses. The length of time that 3M will provide such services
and the amount that the Company will pay for such services varies based on the
type of service. Generally, no services are expected to be provided beyond two
years following the Distribution Date, and after such time the Company expects
to provide such services on its own behalf. The Corporate Services Agreement is
terminable by each party upon 90 days notice, provided that 3M is not permitted
to terminate certain specified services, which the parties have determined will
require a longer period to replace. The cost associated with the services to be
provided by 3M will be either a fixed dollar amount based on the estimated cost
of the services to be provided, or an amount to be determined pursuant to a
formula based on the services actually provided. Any services required by the
Company beyond the first year will be based on costs incurred plus an 8%
mark-up.
Certain foreign subsidiaries of the Company and 3M have entered or will enter
into corporate services agreements pursuant to which 3M will provide to such
subsidiaries services similar to those to be provided to the Company pursuant to
the Corporate Services Agreement.
ENVIRONMENTAL MATTERS AGREEMENT
3M and the Company have entered into an Environmental Matters Agreement (the
"Environmental Matters Agreement") providing for their respective obligations
concerning environmental liabilities arising out of the operation of the
premises of the Transferred Businesses and other environmental matters.
Under the Environmental Matters Agreement, the Company will assume and indemnify
3M for all liabilities relating to, arising out of or resulting from (i)
operations at the Company's facilities as conducted before the Closing Date;
(ii) the disposal of hazardous materials, from the Company's facilities, before
the Distribution Date, at disposal sites operated by third parties ("Superfund
Sites"), where such liabilities are discovered after the Distribution Date; or
(iii) operations of the Transferred Businesses on and after the Distribution
Date. 3M has agreed to retain responsibility for environmental liabilities
relating to former premises which may have been associated with the Transferred
Businesses, and known Superfund sites associated with the current properties of
the Transferred Businesses. See "BUSINESS AND PROPERTIES OF THE COMPANY --
Environmental Matters."
As of March 31, 1996 the Company had reserved approximately $6.5 million with
respect to environmental liabilities.
INTELLECTUAL PROPERTY AGREEMENT
3M and the Company have entered into an Intellectual Property Rights Agreement
(the "Intellectual Property Agreement") pursuant to which 3M will grant to the
Company, effective as of the Distribution Date, rights to use certain
intellectual property (such as patent rights, copyrights, mask work rights and
proprietary information) exclusively in the fields of use in which the
Transferred Businesses presently operate and non-exclusively in certain other
fields. In addition, 3M is transferring to the Company title to certain
intellectual property rights used by the Transferred Businesses, subject to
certain rights which 3M will have to continue to use such intellectual property
rights. The Intellectual Property Agreement further provides for cross licensing
of certain future intellectual property developed during a transition period. In
addition, for various transition periods specified in the Intellectual Property
Agreement, the Company will be granted the right to use certain 3M trademarks
under a royalty-bearing license. Trademarks used only by the Transferred
Businesses will be assigned to the Company.
The Intellectual Property Agreement provides that the costs associated with the
procurement and maintenance of patents and trademarks licensed to either party
by the other under the Intellectual Property Agreement will be the
responsibility of the party owning the particular patent or trademark. However,
with respect to patents, either party may designate a patent or patent
application under which it is licensed by the other party to be of "common
interest." The licensed party is granted certain rights to participate in
decisions involving such common interest patents and patent applications, and
the costs thereof are shared by the parties. The costs of enforcing licensed
patents against an infringer will be borne by the party instituting the lawsuit
unless the parties agree otherwise. For jointly-owned patents, enforcement costs
are shared if both parties desire to participate. The licensed party's
enforcement of patents requires prior approval by the party owning the patent.
With the exception of licensed trademark rights, no royalties or fees are
payable by the Company to 3M for the assignment and license of intellectual
property to the Company under the Intellectual Property Agreement. With respect
to licensed trademarks, the Company will pay a reasonable royalty through cash
payments, commitments to purchase product from 3M and/or engaging in certain
other activities benefiting 3M.
The parties will cross-license each other under certain patents and proprietary
information developed by each party during the two year period following the
Distribution Date. The cross-licenses are royalty-free and generally of the same
scope (i.e., exclusive or non-exclusive in defined fields) as the licenses
granted to and retained by the Company and 3M, respectively, under the patents
and proprietary information existing at the time of the Distribution.
The Company and 3M will enter into joint development agreements pursuant to
which the parties will assist each other in the development of new products
after the Distribution Date. The relationship between the parties under the
agreements will vary from simple purchased research to shared product
development.
3M and the Company have agreed not to compete with each other in their
respective businesses for a period of five years following the Distribution
Date. 3M agrees that, except for ancillary activity involving an insubstantial
business, it will not compete directly or indirectly in the Company's Exclusive
Fields (which, as defined in the Intellectual Property Agreement are generally
the fields of business in which the Company is presently engaged). The Company
agrees that, except for ancillary activity involving an insubstantial business,
it will not compete, directly or indirectly in the 3M Business Fields (which, as
defined in the Intellectual Property Agreement, are generally the fields of
business in which 3M is presently engaged). However, this provision does not
preclude the Company from indirect activity, outside of the 3M Reserved Fields
(which, as defined in the Intellectual Property Agreement, are generally fields
closely related to the Company's Exclusive Fields where 3M has retained
exclusive rights), involving working with a third party on that party's imaging
and electronic information processing needs, internal or external, as long as
the activity does not benefit, in more than an ancillary way, a product or
service of the third party which competes with a product or service in the 3M
Business Fields.
SUPPLY, SERVICE, CONTRACT MANUFACTURING AND SALES AGENCY AGREEMENTS
3M and the Company have entered into various product and service supply
agreements (the "Supply Agreements") providing for the supply by 3M to the
Company and by the Company to 3M, of certain products and services. Under the
Supply Agreements, 3M will supply to the Company certain raw material and
intermediate products including film, specialty chemicals and abrasives and will
provide to the Company certain contract manufacturing services, primarily
equipment assembly services. The cost of all such products and services supplied
by 3M to the Company during 1995 totaled approximately $103 million. Under the
Supply Agreements, the Company will supply to 3M certain semi-finished products
and components and will provide to 3M certain contract manufacturing and other
services, including converting, slitting and coating services and technical
field service. The cost of all such products and services supplied by the
Company to 3M during 1995 totaled approximately $41 million. The prices for
products supplied by either party under the Supply Agreements will be based on
the cost of supplying such product plus a 5% mark-up in 1996, a 10% mark-up in
1997 and a 15% mark-up in 1998 and thereafter. The prices paid for contract
manufacturing services provided by either party vary depending on the services
provided but generally will be based on costs incurred plus an 8% mark-up. 3M
and the Company have also entered into a sales agency agreement providing for
the appointment of 3M as a sales agent for certain finished products supplied by
the Company in return for the payment of a commission for orders taken for the
Company's products. The Company expects to pay commissions to 3M for sales
agency services of approximately $1.3 million during the last six months of
1996.
SHARED FACILITY AND LEASE AGREEMENTS
3M and the Company have entered into various lease agreements with respect to
certain facilities (the "Shared Facility Agreements") at which 3M and the
Company will continue to share space. With respect to each of these facilities,
the party that will be the owner (or primary tenant) of the facility will lease
to the other party a portion of the facility so as to enable the other party to
conduct operations at such facility.
The form of lease to be entered into by 3M and the Company provides for the
payment of rent in an amount approximating the standard recharge rate used by
the lessor with respect to internal uses of such facilities. The leases
generally provide for a two year term, in some cases with an option to extend
for an additional two years. It is expected that 3M will pay to the Company
approximately $455,000 and that the Company will pay approximately $11.4 million
to 3M in the first year following the Distribution with respect to Shared
Facility Agreements.
Each of 3M and the Company believes that the properties it will own or have a
leasehold interest in following the Distribution will be adequate for its
business following the Distribution. Over the next two years, the Company
anticipates building new facilities at the site of its corporate headquarters so
as to consolidate its headquarters operations.
FINANCING
The Company has obtained a commitment letter dated June 10, 1996, from Citibank,
N.A., to provide, or arrange for a group of lenders to provide, a $350 million
five-year, revolving credit facility (the "Revolving Credit Facility") to the
Company which will be used primarily to refinance certain existing debt, to
finance the Company's purchase of certain assets from 3M related to the
Company's non-U.S. operations, to fund certain accrued employee benefits and
certain loans to the Company's employee stock ownership plan and to fund working
capital and other general corporate needs of the Company and its subsidiaries
following the Distribution. A definitive credit agreement containing the terms
described below will be executed prior to the Distribution Date.
Loans obtained under the Revolving Credit Facility are expected to bear
interest, at the election of the Company, at (i) a fluctuating rate equal to the
the highest of (a) Citibank N.A.'s publicly announced "base" rate, (b) the
latest three-week moving average of secondary market morning offering rates for
three-month certificates of deposit plus -1/2 of 1% and (c) the Federal funds
rate plus -1/2 of 1%, in each case plus an applicable margin or (ii) a periodic
fixed rate equal to the London Interbank Offered Rate plus an applicable margin,
in either case with the applicable margin varying based on a pricing grid tied
to the Company's financial performance or, if and when obtained, the ratings on
the Company's long-term senior unsecured indebtedness. The Company will also pay
a facility fee on the entire amount of the Revolving Credit Facility in effect
from time to time at a per annum rate that will vary depending on the same
criteria used to determine the applicable margin. The Revolving Credit Facility
is also expected to contain, among other terms, conditions precedent, covenants,
mandatory prepayment provisions and events of default customary for facilities
of this type. Such covenants may relate to limitations on the incurrence of
indebtedness, mergers and consolidations involving the Company, certain sales of
assets, the creation of liens and maintenance of financial ratios (including an
adjusted interest coverage ratio, a total capitalization ratio, and a minimum
consolidated tangible net worth). In addition to the facility fee described
above, the Company expects to pay certain other customary fees in connection
with the Revolving Credit Facility.
PRO FORMA CAPITALIZATION
The following table sets forth the unaudited pro forma capitalization of the
Company at March 31, 1996. This data should be read in conjunction with the pro
forma balance sheet and the introduction to the pro forma financial statements
appearing elsewhere in this Information Statement. The pro forma information may
not reflect the capitalization of the Company in the future or as it would have
been had the Company been a separate, independent company on March 31, 1996.
Assumptions regarding the number of shares of the Company's Common Stock may not
reflect the actual numbers at the Effective Date. See "PRO FORMA FINANCIAL
STATEMENTS."
IMATION CORP.
PRO FORMA CAPITALIZATION TABLE
AS OF MARCH 31, 1996
(DOLLARS IN MILLIONS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
Long-term debt $ 250.0 (a) $ 280.0
30.0 (b)
Equity
Net investment by 3M $1,121.7 (150.1)(c) --
(20.3)(d)
0.3 (e)
(951.6)(f)
Common stock 0.4 (f) 0.4
Additional paid in
capital 951.2 (f) 951.2
Unearned ESOP shares (30.0)(b) (30.0)
-------- ------- --------
Total equity 1,121.7 (200.1) 921.6
-------- ------- --------
Total capitalization $1,121.7 $ 79.9 $1,201.6
======== ======= ========
NOTES TO PRO FORMA CAPITALIZATION TABLE
(a) Reflects an estimated $250 million of debt the Company expects to incur for
general corporate purposes on or shortly after the Distribution Date.
Approximately $150.1 million of the $250 million to be borrowed will be used at
the time of the Distribution to purchase from 3M certain assets located outside
the United States where spin-off transactions will not be consummated and to
repay intercompany indebtedness being assumed by the Company in connection with
the Distribution, and approximately $26.9 million will be used to pay certain
accrued employee benefits.
(b) Reflects funds borrowed by the Company and on-lent to the ESOP and the
adjustment to the Company's equity resulting from the purchase of outstanding
shares of Common Stock by the ESOP which have not been earned by ESOP
participants and allocated to their respective accounts.
(c) Reflects the net payment to 3M of an estimated $150.1 million to purchase
certain assets located outside the United States where spinoff transactions will
not be consummated and to repay intercompany indebtedness being assumed by the
Company in connection with the Distribution.
(d) Represents a valuation allowance necessary to reflect deferred tax assets at
their estimated realizable value on a purely separate return basis.
(e) Reflects the net deferred tax assets to be realized by 3M upon the
Company's purchase of certain assets outside the United States (see Note
(c)).
(f) Reflects the issuance of an estimated 42 million shares of common stock, par
value $.01 per share, as of July 1, 1996. This is based on 3M's common stock
outstanding at March 31, 1996 of 418.6 million shares and an assumed
distribution of one share of the Company's common stock for every ten shares of
3M common stock outstanding. Additional paid in capital represents the excess of
the historical carrying values of the Company's net assets at the Distribution
Date over the amount reflected as Common Stock.
PRO FORMA FINANCIAL STATEMENTS
The Company was formed by 3M for the purpose of effecting the Distribution and
has no operating history as a separate, independent company. The historical
financial statements of the Company reflect periods during which the Company did
not operate as a separate, independent company, and certain assumptions were
made in preparing such financial statements. Therefore, such historical
financial statements may not reflect the results of operations or financial
position that would have existed had the Company been a separate, independent
company.
The following pro forma financial statements of the Company make adjustments to
the historical (unaudited) balance sheet at March 31, 1996 and the historical
statements of operations for the year ended December 31, 1995, and the three
months ended March 31, 1996 (unaudited) as if the Distribution had occurred on
March 31, 1996 for purposes of the pro forma balance sheet and January 1, 1995
for purposes of the pro forma statements of operations.
THE PRO FORMA FINANCIAL STATEMENTS OF THE COMPANY SHOULD BE READ IN CONJUNCTION
WITH THE HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO
CONTAINED ELSEWHERE IN THIS INFORMATION STATEMENT. THE PRO FORMA FINANCIAL
INFORMATION IS PRESENTED FOR INFORMATIONAL PURPOSES ONLY AND MAY NOT REFLECT THE
FUTURE RESULTS OF OPERATIONS OR FINANCIAL POSITION OF THE COMPANY OR WHAT THE
RESULTS OF OPERATIONS OR FINANCIAL POSITION WOULD HAVE BEEN HAD THE COMPANY'S
BUSINESSES BEEN OPERATED AS A SEPARATE, INDEPENDENT COMPANY.
The pro forma financial statements assume the completion of the transactions
contemplated by the Distribution Agreement and the agreements to be entered into
pursuant to the Distribution Agreement, including the completion of all the
asset transfers and contract assignments contemplated thereby. Although it is
possible that certain asset transfers relating to the Company's operations
outside the United States may not be completed prior to the Distribution Date,
the Distribution Agreement provides that the economic benefits or costs relating
to such assets following the Distribution will be for the Company's account. See
"RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION -- Distribution
Agreement." Assumptions regarding the number of shares of the Company's Common
Stock may not reflect the actual numbers at the Distribution Date.
IMATION CORP.
PRO FORMA STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND YEAR ENDED DECEMBER 31, 1995
(IN MILLIONS EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1996 YEAR ENDED DECEMBER 31, 1995
------------------------------------------ -----------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED) HISTORICAL (UNAUDITED) (UNAUDITED)
----------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net revenues $576.1 $576.1 $2,245.6 $2,245.6
Cost of goods sold 373.8 373.8 1,520.9 1,520.9
------ ----- ------ -------- ------ --------
Gross profit 202.3 -- 202.3 724.7 -- 724.7
Operating expenses:
Selling, general and
administrative 130.7 130.7 539.4 539.4
Research and development 47.9 47.9 222.4 222.4
Restructuring charges 10.4 10.4 111.8 111.8
------ ----- ------ -------- ------ --------
Total 189.0 -- 189.0 873.6 -- 873.6
------ ----- ------ -------- ------ --------
Operating income (loss) 13.3 -- 13.3 (148.9) -- (148.9)
Interest expense and other 3.2 0.4 (a) 3.6 17.9 1.5 (a) 19.4
------ ----- ------ -------- ------ --------
Income (loss) before taxes and
minority interest 10.1 (0.4) 9.7 (d) (166.8) (1.5) (168.3) (d)
Income tax provision (benefit) 4.1 (0.2)(b) 4.5 (70.5) (0.6)(b) (48.1)
0.6 (c) 23.0 (c)
Minority interest (0.1) (0.3)(c)(f) (0.4) (11.3) (11.5)(c)(f) (22.8)
------ ----- ------ -------- ------ --------
Net income (loss) $ 6.1 $(0.5) $ 5.6 (d) $ (85.0) $(12.4) $ (97.4) (d)
====== ===== ====== ======== ====== ========
Net income (loss) per share $ 0.13 (e) $ (2.32) (e)
======= =========
</TABLE>
The accompanying notes are an integral part of this statement.
NOTES TO PRO FORMA STATEMENTS OF OPERATIONS
(a) Represents an adjustment of the allocation of 3M's interest expense to
reflect an estimate of the weighted average interest rate the Company would have
experienced during the periods presented. The interest rates used were 8.1% in
1995 and 7.3% in first quarter, 1996. These rates represent 3M's historical
weighted average rates during these periods as adjusted to reflect the higher
cost of borrowing the Company expects to incur on a stand-alone basis. The
interest calculation is based on the Company's estimated non-ESOP debt level
expected on or shortly after the Distribution of $250 million.
(b) Reflects the adjustment to income tax provision (benefit) associated with
the change in interest expense described in Note (a).
(c) Represents an adjustment to the income tax provision (benefit) to reflect
a valuation allowance for deferred tax assets on a purely separate return
basis and the resulting impact on minority interest.
(d) Restructuring charges reduced pro forma results for the three months ended
March 31, 1996 by $10.4 million before taxes and minority interest and $6.1
million after taxes and minority interest. Pro forma net income for the three
months ended March 31, 1996 would have been $11.7 million, or $.28 per share
excluding these charges. Restructuring charges and asset write-offs reduced 1995
pro forma results by $166.3 million before taxes and minority interest and $97.8
million after taxes and minority interest. 1995 pro forma net income excluding
these charges would have been $0.4 million, or $.01 per share.
(e) Represents the net income (loss) per share on an assumed approximately 42
million shares of the Company's common stock outstanding. This is based on 3M's
weighted average number of shares outstanding during first quarter, 1996 of
418.5 million shares and full year 1995 of 419.8 million shares and an assumed
distribution of one share of the Company's stock for every ten shares of 3M
common stock outstanding.
(f) The historical and pro forma statements of operations reflect minority
interests in Japan and Korea since the Company's operations in such countries
are presently conducted by 3M through joint ventures in which third parties have
minority interests. The Company has an agreement in principle with 3M's joint
venture partners in Japan providing for an aggregate minority interest following
the Distribution equal to 40%. Accordingly, the Company expects its future
statements of operations to continue to reflect minority interests in Japan. In
Korea, the Company presently does not expect to have a minority interest
partner, however the transfer of the Korean operations to the Company is subject
to the approval of 3M's joint venture partner. If this approval is not obtained,
3M and the Company will be required to enter into arrangements which enable the
Company to operate in Korea on a basis similar to that being conducted by 3M.
See "RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION --
Distribution Agreement." The Company does not believe that the expected future
minority interest in Japan or a failure to effect the transfer in Korea would
have a material adverse effect on the financial position or results of the
Company.
IMATION CORP.
PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1996
(IN MILLIONS)
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
ASSETS
Current Assets
Cash and equivalents $ 250.0 (a) $ 73.0
(26.9)(b)
(150.1)(c)
Accounts receivable -- net $ 472.2 -- (d) 472.2
Inventories 420.1 420.1
Other current assets 48.1 (1.5)(e) 44.2
(2.4)(f)
-------- ------- --------
Total current assets 940.4 69.1 1,009.5
Property, Plant and Equipment -- net 503.9 503.9
Other Assets 75.7 (18.8)(e) 56.9
-------- ------- --------
Total assets $1,520.0 $ 50.3 $1,570.3
======== ======= ========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 117.0 -- (d) $ 117.0
Accrued payroll 52.8 52.8
Other current liabilities 137.2 (17.2)(b) 118.7
(1.3)(f)
-------- ------- --------
Total current liabilities 307.0 (18.5) 288.5
Other Liabilities 91.3 (9.7)(b) 80.2
(1.4)(f)
Long-Term Debt 250.0 (a) 280.0
30.0 (g)
Equity
Net investment by 3M 1,121.7 (150.1)(c) --
(20.3)(e)
0.3 (f)
(951.6)(h)
Common stock 0.4 (h) 0.4
Additional paid in capital 951.2 (h) 951.2
Unearned ESOP shares (30.0)(g) (30.0)
-------- ------- --------
Total equity 1,121.7 (200.1)(i) 921.6
-------- ------- --------
Total liabilities and equity $1,520.0 $ 50.3 $1,570.3
======== ======= ========
The accompanying notes are an integral part of this statement.
NOTES TO PRO FORMA BALANCE SHEET
(a) Reflects an estimated $250 million of debt the Company expects to incur for
general corporate purposes on or shortly after the Distribution Date.
Approximately $150.1 million of the $250 million to be borrowed will be used at
the time of the Distribution to purchase from 3M certain assets located outside
the United States where spin-off transactions will not be consummated and to
repay intercompany indebtedness being assumed by the Company in connection with
the Distribution, and approximately $26.9 million will be used to pay certain
accrued employee benefits.
(b) Reflects the payment shortly after the Distribution Date of an estimated
$26.9 million to pay certain accrued employee benefits, including approximately
$17.2 million of current liabilities and approximately $9.7 million of other
liabilities.
(c) Reflects the net payment to 3M of an estimated $150.1 million to purchase
certain assets located outside the United States where spin-off transactions
will not be consummated and to repay intercompany indebtedness being assumed by
the Company in connection with the Distribution.
(d) To provide a more accurate reflection of future financial statements, the
pro forma financial statements do not give effect to the retention by 3M of
certain trade receivables and payables outside the United States and the
agreement by 3M to pay to the Company following the Distribution an amount
corresponding to the amount by which such receivables exceed such payables.
(See "RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION --
Distribution Agreement.")
(e) Represents a valuation allowance necessary to reflect deferred tax assets at
their estimated realizable value on a purely separate return basis.
(f) Reflects the net deferred tax assets to be realized by 3M upon the Company's
purchase of certain assets outside the United States (see Note (c)).
(g) Reflects funds borrowed by the Company and on-lent to the ESOP and the
adjustment to the Company's equity resulting from the purchase of outstanding
shares of Common Stock by the ESOP which have not been earned by ESOP
participants and allocated to their respective accounts.
(h) Reflects the issuance of an estimated 42 million shares of common stock, par
value $.01 per share, as of July 1, 1996. This is based on 3M's common stock
outstanding at March 31, 1996 of 418.6 million shares and an assumed
distribution of one share of the Company's common stock for every ten shares of
3M common stock outstanding. Additional paid in capital represents the excess of
the historical carrying values of the Company's net assets at the Distribution
Date over the amount reflected as Common Stock.
(i) No minority interest has been reflected in the historical or pro forma
balance sheets. While the Company's operations in Japan and Korea are presently
conducted by 3M through joint ventures in which the third parties own minority
interests, the Company does not expect to have any minority interest partners as
of the Distribution Date. The Company does, however, have an agreement in
principle with 3M's joint venture partners in Japan providing for an aggregate
minority interest following the Distribution equal to 40%. Accordingly, the
Company expects its future balance sheets to reflect minority interests in
Japan. In Korea, the transfer of the operations to the Company is subject to the
approval of 3M's joint venture partner. If this approval is not obtained, 3M and
the Company will be required to enter into arrangements which enable the Company
to operate in Korea on a basis similar to that being conducted by 3M. See
"RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION -- Distribution
Agreement." The Company does not believe that the expected future minority
interest in Japan or a failure to effect the transfer in Korea would have a
material adverse effect on the financial position or results of the Company.
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data of the Company should be read
in conjunction with the historical financial statements and notes thereto
included elsewhere in this Information Statement. This selected historical
financial data relates to the Transferred Businesses as they were operated as
part of 3M. They also include an allocation of certain general corporate
expenses of 3M which were not directly related to these businesses. The
following selected historical financial data are derived from the historical
financial statements of the Company. The selected historical financial data that
relate to the three year period ended December 31, 1995 have been derived from
the historical financial statements audited by Coopers & Lybrand L.L.P.,
independent public accountants. The selected historical financial data for the
three month periods ended March 31, 1996 and 1995 and for the two year period
ended December 31, 1992 have been derived from unaudited historical financial
statements. In the opinion of management, the unaudited historical financial
statements reflect all adjustments, consisting of normal adjustments, necessary
to present fairly the financial position of the Company at March 31, 1996 and
the results of operations and cash flows for the three month periods ended March
31, 1996 and 1995 and its financial position at December 31, 1992 and 1991 and
the results of operations and cash flows for the years then ended. The
historical financial data of the Company may not reflect the results of
operations or financial position that would have been obtained had the Company
been a separate, independent company. The results of operations for the three
month period ended March 31, 1996 should not necessarily be taken as indicative
of the results of operations that may be expected for the entire year 1996.
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------------ ------------------------------------------------------------
1996* 1995 1995** 1994 1993 1992 1991
-------- ------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Net revenues $ 576.1 $576.7 $2,245.6 $2,280.5 $2,307.8 $2,350.0 $2,319.0
Gross profit 202.3 212.5 724.7 838.5 886.2 885.0 911.0
Selling, general and
administrative expense 130.7 137.9 539.4 531.5 529.0 542.0 525.0
Research and development 47.9 56.4 222.4 211.2 216.7 181.0 174.0
Operating income (loss) 13.3 18.2 (148.9) 95.8 140.5 162.0 212.0
Income (loss) before tax and
minority interest 10.1 13.0 (166.8) 81.3 127.4 142.0 187.0
Net income (loss) 6.1 7.5 (85.0) 54.3 75.3 94.0 119.0
Balance Sheet Data (as of end of period):
Total working capital 633.4 658.4 714.0 618.4 608.1 606.7
Property, plant and equipment --
net 503.9 513.2 654.9 642.2 618.5 607.6
Total assets 1,520.0 1,541.5 1,671.7 1,545.6 1,533.9 1,514.7
Total liabilities 398.3 392.8 371.7 345.8 361.7 341.4
Total equity 1,121.7 1,148.7 1,300.0 1,199.8 1,172.2 1,173.3
</TABLE>
* Restructuring charges reduced results for the three months ended March
31, 1996 by $10.4 million before taxes and minority interest and $6.1
million after taxes and minority interest. Net income for the three
months ended March 31, 1996 excluding these charges would have been
$12.2 million. These charges relate to costs for certain employee
separation programs.
** Restructuring charges and asset write-offs reduced 1995 results by
$166.3 million before taxes and minority interest and $88.3 million
after taxes and minority interest. 1995 net income excluding these
charges would have been $3.3 million. The majority of these charges
related to the write-down of property, plant and equipment.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL OVERVIEW
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations is based upon the separate historical financial statements
of the Company, which present the Company's results of operations, financial
position and cash flows. These historical financial statements include the
assets, liabilities, income and expenses that were directly related to the
Transferred Businesses as they were operated within 3M. In the case of assets
and liabilities not specifically identifiable to any particular business of 3M,
only those assets and liabilities expected to be owned by the Company after the
Distribution were included in the Company's separate balance sheets. Regardless
of the allocation of these assets and liabilities, however, the Company's
statement of operations includes 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. These allocations were based on a number of factors
including, for example, personnel, space, time and effort, and sales volume.
Management believes these allocations as well as the assumptions underlying the
development of the Company's separate financial statements to be reasonable.
The financial information included herein, however, may not necessarily reflect
the results of operations, financial position and cash flows of the Company as
it will operate in the future or what the results of operations, financial
position and cash flows would have been had the Company been a separate,
stand-alone entity during the periods presented. This is due, in part, to the
historical operation of the Company as an integral part of the larger 3M. The
historical financial information included herein also does not reflect the
changes that will occur in the operations of the Company following the
Distribution.
STRATEGIC REORGANIZATION
The Company historically has operated as part of 3M. Following the Distribution,
the Company will be a stand-alone entity with objectives and strategies separate
from those of 3M. The Company will focus on providing solution-based products
and systems to customers in the information processing industry. 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 has adopted a reorganization plan to rationalize
its manufacturing operations, streamline its organizational structure and write
off impaired assets.
To reflect the direct and indirect costs associated with this reorganization
plan, 3M recognized a loss on disposal which included pre-tax charges of
approximately $340 million in the fourth quarter of 1995 as a part of its
discontinued operations charges. The Company will reflect the direct portion of
these charges, approximately $250 million, in its separate financial statements
partially in 1995 and partially in 1996 based upon the timing of recognition
criteria required for restructuring 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 Company expects to record the remainder in its 1996 financial statements.
These costs relate primarily to employee separations for direct employees of the
Company.
As a part of the reorganization, 3M announced an expected reduction of
approximately 5,000 positions. The Company's direct employee reductions are
expected to total more than 1,600 positions and will occur through already
announced voluntary and involuntary separation programs and through the
completion of the Company's manufacturing consolidation activities. As of May 1,
1996, approximately 850 United States employees have accepted voluntary
separation offers. The Company has also announced the closure of one
manufacturing facility in the United States, which will result in the reduction
of approximately 325 additional employees over the next 12 months. Outside the
United States, the Company expects employment reductions of approximately 290
positions through already announced voluntary and involuntary separation
programs. Additional future employment reductions will result primarily from the
completion of the Company's manufacturing rationalization programs.
The separation costs related to these programs are recognizable in the Company's
financial statements when employees accept voluntary separation offers and upon
announcement for involuntary separation programs. The first quarter 1996
statement of operations includes $10.4 million of these restructuring charges.
The Company expects to record approximately $74 million of additional employee
separation costs, the majority of which will be recorded in the second quarter
of 1996. 3M will fund most of the cash requirements of announced separation
programs. See further discussion of these charges in "-- Operating Results."
As of March 31, 1996 the Company had approximately 12,000 direct and indirect
employees. This number included positions in factory locations to be transferred
to the Company, and in laboratory, engineering, selling, marketing and
administrative positions held by direct Company employees. It also included
indirect equivalent positions in staff services functions at 3M which have
historically provided services to the businesses of the Company. After the
Distribution, approximately 1,100 staff services equivalent positions will
remain with 3M. In the near term, the costs related to the staff services
support provided by these employees will continue to be incurred by the Company
through the Corporate Services Agreement. After the Distribution, it is expected
that the Company will have less than 10,000 direct employees as a result of the
above actions. The Company believes that this is an appropriate staffing level
for the near term.
The Company's overall financial goal is to improve the Company's 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, improved revenue growth and increased asset
utilization resulting from the implementation of the Company's business
strategy, including the steps outlined under "--Operating Results -Comparison of
Years Ended December 31, 1995, 1994 and 1993." The Company anticipates total
cost savings (net of start-up expenses) during the three year period 1996-1998
of $90 million after taxes; or, on a pre-tax basis, $30 million in cost savings
in 1996, an additional $70 million in 1997 and an additional $50 million in
1998. The Company, however, does not expect the reorganization plan to have any
meaningful effect on cash flows until 1997, as start-up expenses are likely to
offset any cash generated from reduced costs in 1996. Although management
believes that this goal is appropriate for the Company, there can be no
assurance as to the Company's ability to achieve this goal. See "Forward Looking
Statements."
OPERATING RESULTS
COMPONENTS OF NET REVENUE CHANGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
THREE MONTHS ENDED ----------------------------------------------------------
MARCH 31, 1996 1995 1994
-------------------------- -------------------------- ---------------------------
U.S. INTL. WORLDWIDE U.S. INTL. WORLDWIDE U.S. INTL. WORLDWIDE
---- ----- --------- ---- ----- --------- ---- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Volume 3% 9% 6% (1)% 6% 2% 5% 9% 7%
Price (4) (7) (5) (5) (7) (6) (9) (8) (9)
Translation -- (2) (1) -- 4 2 -- 1 1
--- --- --- --- --- --- --- --- ---
Total (1)% --% --% (6)% 3% (2)% (4)% 2% (1)%
=== === === === === === === === ===
</TABLE>
The following table displays the components of the Company's historical
statements of operations as a percentage of total net revenues.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
--------------- ---------------------------
1996 1995 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 64.9 63.2 67.7 63.2 61.6
----- ----- ----- ----- -----
Gross profit 35.1 36.8 32.3 36.8 38.4
Operating expenses:
Selling, general and administrative 22.7 23.8 24.0 23.3 22.9
Research and development 8.3 9.8 9.9 9.3 9.4
Restructuring charges 1.8 -- 5.0 -- --
----- ----- ----- ----- -----
Total operating expenses 32.8 33.6 38.9 32.6 32.3
----- ----- ----- ----- -----
Operating income (loss) 2.3 3.2 (6.6) 4.2 6.1
Interest expense and other 0.5 0.9 0.8 0.6 0.6
----- ----- ----- ----- -----
Income (loss) before tax and minority
interest 1.8 2.3 (7.4) 3.6 5.5
Effective income tax rate (% of pre-tax) 41.0 42.3 (42.3) 36.0 40.7
Net income (loss) 1.1% 1.3% (3.8)% 2.4% 3.3%
----- ----- ----- ----- -----
</TABLE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Net revenues in the first three months of 1996 were essentially equal to the
level during the same period in 1995. Volume increases of 6 percent were
substantially offset by price declines of 5 percent. Net revenues in the United
States declined 1 percent with a volume increase of 3 percent being more than
offset by pricing declines. Outside the United States, volume increased 9
percent. Price declines of 7 percent and a 2 percent negative effect of changes
in currency exchange rates offset these volume increases.
Gross profit in the first quarter of 1996 was 35.1 percent of revenues, down 1.7
percentage points from first quarter 1995. This decline was primarily due to the
effect of lower selling prices, only partially offset by volume increases,
productivity benefits and other factors.
Selling, general and administrative expenses were 22.7 percent of revenues in
the first three months of 1996, down 1.1 percentage points from the same period
in 1995. The majority of this decline was in sales related costs which were down
approximately $5.0 million.
Research and development costs totaled $47.9 million or 8.3 percent of revenues
in the first three months of 1996, down $8.5 million and 1.5 percentage points
from the same period in 1995. The higher level of spending in 1995 reflects
investments made in a number of the Company's new products which came to market
during 1995 and early 1996.
The Company recorded restructuring charges of $10.4 million in the first quarter
of 1996 reflecting costs for certain voluntary separation programs which were
recognized based on the number of employee acceptances of separation offers
during the quarter ended March 31, 1996 in accordance with the applicable
accounting rules.
Operating income for the first three months of 1996 was $13.3 million but would
have totaled $23.7 million or 4.1 percent of revenues excluding restructuring
charges. This represents a $5.5 million increase from operating income in the
same period in 1995 which totaled $18.2 million or 3.2 percent of revenues.
Excluding restructuring charges, income before taxes and minority interest was
$20.5 million in 1996, improved by $7.5 million from the three month period
ended March 31, 1995. This resulted from a lower effective interest rate in
1996.
The Company's effective tax rate was 41.0 percent, down from 42.3 percent in the
first quarter of 1995. This decrease was due primarily to a shift in profits to
lower tax jurisdictions.
Net income in the first quarter of 1996 was $6.1 million, and would have totaled
$12.2 million or 2.1 percent of revenues excluding restructuring charges. This
represents an increase of $4.7 million and 0.8 percentage points from the same
period in 1995.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
Net revenues in 1995 and 1994 declined 1.5 percent and 1.2 percent,
respectively. These declines resulted primarily from the effects of downward
pricing pressures which exceeded the Company's volume growth in both 1995 and
1994, especially in the United States. See Note 8 to NOTES TO HISTORICAL
FINANCIAL STATEMENTS for the Company's revenues by classes of similar products
or services.
Approximately 50 percent of the Company's net revenues in 1995 were from sales
outside the United States, which is up from just over 47 percent in 1994 and 46
percent in 1993. This trend is expected to continue in future years. In the
Company's international operations, volume rose 6 percent in 1995 and 9 percent
in 1994. In both 1995 and 1994, these volume gains were substantially offset by
price declines. Changes in currency exchange rates positively impacted
international net revenues by 4 percent in 1995 and 1 percent in 1994.
United States net revenues declined 6 percent in 1995 and 4 percent in 1994,
driven by price declines in both years. Volume declined slightly in 1995, after
having grown 5 percent in 1994.
Gross profit in 1995 was 32.3 percent of revenues, representing a 4.5 percentage
point decrease from 1994. This decrease was primarily due to the effect of lower
selling prices and the portion of special charges included in cost of goods sold
noted below. In 1994, gross profit was 36.8 percent of revenues, representing a
1.6 percentage point decrease from 1993. In this period, the negative effects of
price declines were only partially offset by volume increases and other factors.
Selling, general and administrative expenses were 24.0 percent of revenues in
1995, as compared to 23.3 percent in 1994, and 22.9 percent in 1993. These
increases were primarily due to the decline in the revenue base. Spending in
dollars has been relatively flat during the past three years, reflecting cost
control and productivity improvements, and is expected to decline as a
percentage of revenues in the future.
Research and development expenses in 1995 were 9.9 percent of revenues, up from
9.3 percent and 9.4 percent in 1994 and 1993, respectively. In 1995, this
represented an $11.2 million increase over 1994 spending and reflects
investments in a number of the Company's promising new products including
Travan(tm) high-capacity data cartridges, LS-120 diskettes, the new family of
Rainbow proofing systems and DryView(tm) imagers. Management intends to continue
its strong focus on research and development, while controlling the related
costs through prioritized spending. Management expects expenditures for research
and development to decline as a percentage of revenues in the future.
The Company recorded special charges of $166.3 million ($88.3 million after
taxes and minority interest) in its 1995 financial statements. Of these charges,
$111.8 million relate to world-wide manufacturing rationalization programs to
exit less profitable manufacturing locations and to centralize manufacturing in
the United States and in Italy. The $111.8 million charge is included as a
separate restructuring charge in the statement of operations. The remaining
special charge of $54.5 million primarily relates to asset write-offs included
in cost of goods sold.
The operating loss for 1995 totaled $148.9 million. This loss was driven by the
special charges discussed above. Excluding these charges, operating income would
have been $17.4 million, representing a decline of $78.4 million from 1994
operating income which totaled $95.8 million. This decline primarily reflects
the factors affecting the lower gross profit as discussed above, and to a lesser
extent the increase in research and development spending. In 1994, operating
income declined $44.7 million as a result of the factors affecting gross profit
as discussed earlier and to a lesser extent by the lower overall revenue level.
Non-operating expense (primarily interest expense allocation from 3M) totaled
$17.9 million, $14.5 million and $13.1 million in 1995, 1994 and 1993,
respectively. The increases are due to 3M's rising effective interest rates over
the three year period. The allocation methodology for interest expense is more
fully discussed in Note 6 of the NOTES TO HISTORICAL FINANCIAL STATEMENTS.
The Company's effective tax rate was 42.3, 36.0 and 40.7 percent of pre-tax
income for 1995, 1994 and 1993, respectively. The lower effective rate in 1994
was primarily the result of tax benefits recognized in the Company's Italian
operations. See Notes 2 and 5 of the NOTES TO HISTORICAL FINANCIAL STATEMENTS.
In 1995, minority interest (primarily in Japan) increased to $11.3 million
compared to $2.3 million in 1994. This change is primarily the result of the
portion of restructuring charges which related to the Company's operations in
Japan.
The 1995 net loss totaled $85.0 million or 3.8 percent of revenues. 1995 net
income excluding special charges would have totaled $3.3 million or 0.1 percent
of revenues, down from $54.3 million or 2.4 percent of revenues in 1994.
In order to reverse the historical decline in revenues and gross profits
described above, the Company intends to implement its business strategies (See
"BUSINESS AND PROPERTIES OF THE COMPANY"). Key factors in reversing this trend
are expected to be (i) anticipated increased sales for key new products
(including Travan(tm), DryView(tm) imagers, LS-120 diskettes and new models of
Rainbow color proofing systems) which were introduced commercially in late 1995
or early 1996, (ii) the Company's ability to sell a broader range of the
Company's products to existing customers, (iii) the Company's success in market
penetration in areas of the world where the Company has a limited market
position, (iv) the Company's ability to consolidate factories to increase
efficiencies and (v) the Company's success in refining product portfolios to
focus on more profitable business opportunities.
Generally, outside the United States, the Company will be relocating employees,
systems and inventory out of 3M facilities. By country, this will occur at
various times over the next year. Sales, marketing and administrative personnel
will be moving to leased facilities in all countries except the United Kingdom,
Italy and Canada, where most personnel will be located in Company-owned
facilities transferred from 3M. Initially 3M will provide systems support
services in all countries. It is anticipated that independent Imation supported
systems will gradually replace these 3M systems support services over the next
18 months. Inventory will generally be moved to third-party warehouse providers
by July 1, 1997.
It is the Company's intention to continue expanding market penetration globally.
Recently, sales of DryView(tm) and Travan(tm) products have commenced in Europe
and many other countries. These new products as well as existing products will
be supported by the Company personnel residing in these local markets. In some
countries, 3M will continue to provide selling assistance for Company products
through local sales agency agreements.
PERFORMANCE BY GEOGRAPHIC AREA
UNITED STATES
In 1995, United States net revenues totaled $1,128.8 million down 6 percent from
$1,199.9 million in 1994. Volume declined approximately 1 percent and selling
prices decreased approximately 5 percent, for a total revenue decline of
approximately 6 percent. Operating income in 1995 decreased by $170.5 million
from 1994. Adjusted for the special charges discussed above, operating income
decreased $70.7 million in 1995. United States results were adversely affected
by price declines, higher raw material costs, lack of volume growth and
adjustments in production to reduce inventory levels. Employment levels were
reduced by approximately 500 people at December 31, 1995 as compared with the
levels at December 31, 1994. Inventories were reduced by approximately $34
million in 1995 as compared to December 31, 1994.
EUROPE, MIDDLE EAST AND AFRICA
Net revenues totaled $803.8 million in 1995, up 5 percent from $764.1 million in
1994. Volume increased almost 5 percent, selling prices declined approximately 7
percent, and changes in currency exchange rates positively impacted revenues by
approximately 7 percent. Excluding special charges in Europe, which reduced 1995
operating results by $20.4 million, profits would have increased 4.5 percent to
$76.2 million. The Company's manufacturing structure in Europe is expected to be
further reduced in 1996.
LATIN AMERICA, ASIA AND CANADA
Net revenues declined by approximately 1 percent in 1995 to $313 million,
entirely driven by changes in currency exchange rates. The devaluing rates of
exchange in Latin America more than offset the gains recognized in Asia Pacific.
Changes in volume and selling prices offset each other with local currency
revenues flat. Operating income declined by approximately $11 million, after
excluding $46.1 million in special charges. The majority of this income decline
occurred in Asia Pacific, where the results were adversely impacted by the
underutilization of a magnetic tape coater in Japan and the high costs of
producing products in that country. Sales and marketing programs were scaled
back to reduce volume growth given the high production costs. The Company
discontinued the use of this equipment in the first quarter of 1996 and changed
the source of supply to a facility in the United States with lower costs.
FINANCIAL POSITION
The Company had 3.4 months of inventory on hand at March 31, 1996 and at
December 31, 1995, a decline from 4.0 months at the end of 1994. The accounts
receivable days sales outstanding was 75 days at March 31, 1996, down from 78
days at December 31, 1995, which was up from 76 days at December 31, 1994.
The book value of property, plant and equipment at March 31, 1996 was $503.9
million, a slight decrease from $513.2 million at December 31, 1995. The balance
at December 31, 1995 reflected a decline of $141.7 million from year-end 1994.
The majority of this decline, $128 million, is attributable to the special
charges discussed above. The increase in other assets of $54.5 million was
driven by the increase in deferred income taxes of $57.4 million. This increase
in deferred tax assets resulted from the special charges, which for the most
part, were not yet deductible at December 31, 1995 for income tax purposes.
Management believes the Company, or in certain cases 3M prior to the
Distribution, will generate sufficient taxable income in future periods to fully
recover these deferred tax assets based on the Company's implementation of the
actions discussed under " -- Strategic Reorganization" and "BUSINESS AND
PROPERTIES OF THE COMPANY -- Business Strategy." Also see NOTES TO PRO FORMA
BALANCE SHEET, item (e) regarding establishing deferred tax valuation allowance
on a purely separate return basis.
LIQUIDITY
3M uses a centralized approach to cash management and the financing of its
operations. As a result, cash and equivalents and debt were not allocated to the
Company in the historical financial statements. The Company's historical
financing requirements are represented by cash transactions with 3M and are
reflected in "Net Amount (Paid to) Received From 3M," as described in Note 7 of
the NOTES TO HISTORICAL FINANCIAL STATEMENTS. This financial support will be
discontinued following the Distribution. See "SPECIAL FACTORS -- Absence of 3M
Financial Support."
Cash provided from operating activities was $256.8 million in 1995, $170.1
million in 1994, and $229.2 million in 1993. The major non-cash item is
depreciation, which ranged between $184.4 million and $189.5 million per year
during this period. Working capital and related cash requirements increased
$85.6 million in 1994 and $25.6 million in 1993, while in 1995 working capital
and related cash requirements decreased by $52.0 million.
The Company is developing, and expects to have in place by July 1, relationships
and systems and staffing for a corporate currency management program to monitor
and centrally manage currency exposures. In connection with this currency
management program a variety of financial instruments will be employed,
including but not limited to foreign exchange forward contacts, currency options
and futures.
Investing activities, mainly capital expenditures, utilized cash provided by
operations in the amounts of $187.5 million in 1995, $179.7 million in 1994 and
$210.2 million in 1993. These investments were made to help meet growing global
demand for the Company's products, to improve manufacturing efficiencies and to
establish manufacturing operations for key new products. Over the past two
years, $74.6 million of these expenditures related to new products which were
commercialized in late 1995 and early 1996, including DryView(tm) medical
imagers, Travan(tm) high-capacity data cartridges and LS-120 diskettes.
Excluding one-time start up costs, management intends to maintain annual capital
expenditures in the range of $140 to $170 million per year for the next several
years.
The Company generated cash flows before financing activities with 3M of $72.9
million in 1995, and $13.1 million in 1993, while using $18.5 million in 1994, a
year in which the growth in inventory and accounts receivable more than offset
reductions in capital expenditures. In 1995, improvements in working capital
(primarily accounts receivable, inventories and accounts payable) generated
approximately $52.0 million in increased cash.
During the three months ended March 31, 1996 the Company generated cash flows
before financing activities with 3M of $27.0 million while using $13.4 million
for the same period in 1995. The improvement in the first quarter of 1996
reflects reduced levels of inventory coupled with somewhat lower capital
spending in 1996.
Following the Distribution, the Company expects its operations, exclusive of
contemplated borrowings, to generate sufficient funds to meet the Company's
operating needs for the 12 month period following the Distribution, including
capital expenditures. It is expected that additional progress in reducing
working capital needs will be achieved by re-engineering the Company's worldwide
supply chain and information technology systems. The components of the supply
chain include all operations of the Company from procurement of raw materials
through manufacturing and delivery of products to the Company's customers, and
the collection of accounts receivable.
Prior to the Distribution, the Company did not have any cash flows from
financing activities outside of 3M. Following the Distribution, the Company will
rely on internally generated funds and, to the extent necessary, the borrowing
of funds from third party sources. The Company anticipates that on or prior to
the Distribution Date, it will borrow approximately $280 million under the
Credit Facility to be negotiated with a syndicate of banks, which also will
allow the Company to borrow additional amounts for working capital purposes.
Approximately $150.1 million of the $280 million to be borrowed will be used at
the time of the Distribution to purchase from 3M certain assets located outside
the United States and to repay intercompany indebtedness being assumed by the
Company in connection with the Distribution, approximately $26.9 million will be
used to pay certain accrued employee benefits, approximately $30 million will be
on-lent to the ESOP as described in the next paragraph, and the remainder will
be retained for working capital purposes. The Company believes that the cash
available under the Credit Facility, together with cash generated from
operations, are sufficient to meet the Company's anticipated funding
requirements.
The Company will establish an employee stock ownership plan (the "ESOP") which
will be leveraged by a loan from the Company and is expected to lead over time
to employee stock ownership (directly or beneficially) of approximately 4
percent of the Company's outstanding shares. At the time of the Distribution or
shortly thereafter, the Company will lend approximately $30 million to the ESOP
with which the ESOP will purchase shares of Common Stock. The Company intends
annually to contribute funds to the ESOP in order to repay the loans, and to
satisfy the Company's obligation to make matching contributions in respect of
employee salary deferrals and other performance based contributions.
On the Distribution Date, the Company is expected to begin independent
operations with a ratio of total debt to total capital of approximately 20
percent excluding the effects of the ESOP. The Company also expects to begin
operations with approximately $73 million in cash, $50 million of which will be
borrowed under the Company's Credit Facility, to satisfy the Company's initial
working capital requirements.
In connection with the Distribution, the Company and 3M will enter into a
transition agreement relating to the collection of accounts receivable and
payment of accounts payable. See "RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER
THE DISTRIBUTION -- Corporate Services Transition Agreement." The objective of
this approach is to minimize the impact of the transition on customers and
suppliers and it is not expected to have any material impact on the financial
position or cash flows of the Company.
FUTURE OUTLOOK
1996 will be a year of transition for the Company, both in business operations
and financial returns. The Company believes its continued worldwide leadership
in developing data storage technologies, strong position in high quality color
proofing for the printing industry and strong history of leadership in medical
imaging for the health care industry along with strong worldwide distribution
coverage will offer significant opportunities to help achieve its goals. The
Company will be implementing a comprehensive re-engineering of its operations.
Some components of this re-engineering will be completed in 1996 and others in
1997 and beyond.
Examples of the actions contemplated include (i) the consolidation and
rationalization of manufacturing organization by reducing the number of
facilities operated by the Company, by consolidating similar operations in one
facility, by consolidating purchasing to take advantage of volume purchasing, by
utilizing just-in-time purchasing and by managing the manufacturing process to
reduce inventories of finished goods by attempting to anticipate demand for
various products, (ii) encouraging cooperation between research and development
teams and the manufacturing units, thereby encouraging the development of
technologies and products which provide solutions to customers' problems, (iii)
aggressively cross-marketing the Company's existing products to customers of one
of the Company's products and (iv) motivating employees through the linkage of
compensation to the financial results of the Company (See "BUSINESS AND
PROPERTIES OF THE COMPANY -- Business Strategy"). The Company expects that these
actions will improve productivity and market share, reduce costs and facilitate
sustainable revenue growth, thereby improving the Company's financial
performance and results of operations.
At the same time, the Company will be faced with the challenges of establishing
operations as an independent public company. These activities are expected to
result in one-time cost increases which will occur during 1996 and 1997.
Management is currently developing its plans for the start-up, but at this time
expects that the most significant changes will occur in the areas of systems and
logistics. For a transitional period, it is expected that 3M will provide many
of these services and that stand-alone operations should be in place by the end
of 1997.
The Company intends to achieve its goals through the training and dedication of
its work force, extensive efforts to enhance its relationships with customers
and suppliers and the continued use of certain 3M trademarks during a transition
period. In addition, the Company's management team is experienced and familiar
with this industry and its opportunities and will be developing a strong new
identity tied to the Company's specific industry. This background combined with
their new roles should allow them to provide the Company with the necessary
leadership to meet these challenges.
The Company has established as a goal achieving an annual earnings per share
growth rate of at least 15% per year. While the management of the Company
believes that this rate is an appropriate goal for the Company, there can be
no assurance as to the Company's ability to achieve this goal or as to the
timing thereof. See "Forward Looking Statements."
FORWARD LOOKING STATEMENTS
Certain information, other than the historical information, discussed in this
Information Statement (including in "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS"), may constitute forward looking
statements and as such may involve risks and uncertainties. Important factors
which may cause actual results to differ from the forward looking statements
contained herein or in other public statements by the Company are described in
the section entitled "SPECIAL FACTORS," including, in particular, the Company's
ability to implement successfully its reorganization plan and future business
strategy. See "SPECIAL FACTORS -Absence of History as an Independent Company."
BUSINESS AND PROPERTIES OF THE COMPANY
OVERVIEW
The Company develops, manufactures and markets a wide variety of products and
services worldwide for information processing, specializing in data storage and
imaging applications. The Company's products, which number in excess of 10,000,
are used to capture, process, store, reproduce and distribute information and
images in a wide range of information-intensive markets, including enterprise
computing, network servers, personal computing, graphic arts, photographic
imaging, medical imaging, and commercial and consumer markets. The Company
offers solutions for both conventional/analog and proprietary digital work
processes for the information processing industry.
The breadth of the Company's product lines, the Company's worldwide leadership
position in a number of product classes and its global distribution network
serve to differentiate the Company from its competitors. The Company's focus is
global in nature, with nearly half of its revenues derived internationally and
expectations for this percentage to grow over time. The Company's major
products, classified by customer application are shown below.
<TABLE>
<CAPTION>
INFORMATION PROCESSING,
MANAGEMENT AND INFORMATION PRINTING MEDICAL AND PHOTO IMAGING
STORAGE APPLICATIONS APPLICATIONS APPLICATIONS
- -------------------- ------------ ------------
<S> <C> <C>
* Computer diskettes * Conventional color proofing * Laser imaging products
* Data cartridges and Travan(tm) * Digital color proofing * Laser imagers
cartridges
* Computer tapes * Printing plates * X-ray film
* Rewritable optical media * Image setting and graphic arts * "Dry" imaging products
products
* CD-ROM replication services * Carbonless paper products * Film processors
* Photographic film products
</TABLE>
INFORMATION PROCESSOR SERVICE APPLICATIONS
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* Technical field service support for equipment
* Customer service, documentation and training for equipment
* Engineering and office document systems
As part of 3M, the Transferred Businesses have developed leadership positions in
a number of markets serving the information processing industry, which the
Company believes can serve as platforms for future growth. For example, the
Company:
* is the world's largest supplier of branded removable magnetic and optical
media;
* is one of the world's largest suppliers of color proofing systems to the
graphic arts industry, with a number of its Matchprint(tm) and Rainbow
products serving as industry standards;
* was the first to develop the new, widely-used laser imager for medical
imaging applications, with an installed base of over 7,000 imagers;
* is one of the world's largest suppliers of private label film for the
amateur photography market; and
* introduced in 1995 and expects to introduce in 1996 several innovative
products with significant market potential, including the Travan(tm) high
capacity data storage tape cartridges, the new family of Rainbow proofing
systems, a new line of DryView(tm) imagers, medical imaging delivery systems
developed under an alliance with Cemax/Icon and Hewlett-Packard, and a 120 MB
3.5 inch diskette, the LS-120 diskette, which has been developed with Compaq
Computer Corporation and MKE.
INDUSTRY BACKGROUND
The information processing industry is concerned with the creation, capture,
manipulation, storage, production and distribution of information. Information
may exist in the form of numbers, text, sound, graphics, photos, videos or other
images. Users may view and store this information in an analog format, such as
hard copies. Increasingly, however, information is converted to a digital format
for more efficient handling, processing, storage and distribution. Digital
technologies provide much needed information processing solutions as users are
required to use, manage and store more complex information in less time, with
less resources and with greater accuracy. Methods of transporting and accessing
data are dramatically increasing due to software developments, networking and
the development of the World Wide Web.
Data storage technologies provide users with solutions specific to the
particular users' needs in storing, managing and accessing digital information.
Removable data storage technologies, such as those offered by the Company,
provide a wide range of solutions that provide users with the benefits of
expandable storage capacity, data transportability, data management, data
security and the flexibility to enhance data utilization and which are not
confined to component status as is fixed rigid disk storage.
Removable data storage solutions, based on digital technologies, are used in
applications across all computing platforms -- enterprise systems, network
servers, desktop systems and mobile computing. International Data Corporation
("IDC") has estimated that there are over 150 million computer systems in use
worldwide that use removable data storage technologies. Removable data storage
technologies are used in a variety of applications including graphic imaging,
video imaging, medical diagnostics, communications systems and consumer
entertainment electronics. Overall, the data storage solution market is growing
at double digits annually, with Asia, Latin America and Eastern Europe leading
this growth, although there is significant price competition. Customer demand
for these solutions is multiplying at an ever increasing pace due to the
enhanced enabling software that increases the applications and usage rates and
the developing need by customers to manipulate, store and protect even larger
data bases. The need for convenient digital storage solutions is also
accelerating as people gain access to information of all types from many
sources, including the Internet and the World Wide Web. Increasingly, end users
want to download files and information for later use. As the number of Internet
users grow and the variety of information increases, the demand for portable,
cost-effective data storage and output media also will grow. This is true in
both commercial and consumer markets.
Imaging technologies also have been profoundly impacted by advancements in
digital technologies as many users begin to convert their conventional/analog
processes to proprietary digital processes to capture, create, manipulate,
process, transmit and store still and moving images. Conventional/analog
technologies rely upon chemical or electrical processes which capture
information onto paper, film or other media by reacting to external stimuli.
Digital technologies have significantly increased the amount of information that
can be used, managed and stored and have reduced the need for film and chemicals
in the imaging process. Many work processes in use today are hybrid systems in
which organizations continue to use conventional materials for certain processes
in their work flows utilizing the speed of digital processing.
Medical diagnostic imaging is an example in which proven X-ray films exist side
by side with high tech magnetic resonance imaging ("MRI") and computed
tomography ("CT") scanning systems. Today, an active mid-size hospital or
diagnostic imaging center may generate ten to twelve gigabytes of electronic
information daily from its scanning devices. More than 90% of this information
will be converted to film for viewing and storage in the diagnostic process.
Printing and publishing applications similarly have experienced a blending of
analog and digital work processes. Virtually all text and images used in graphic
arts processes today are converted to electronic or digital form early in the
work process and are later reconverted to film or lithographic plates for high
quality reproduction on traditional printing presses. Images and pages may be
captured photographically or electronically in a variety of formats including
removable data storage. Those that are captured in digital format allow for more
efficient processing and management. The information also may be used in the
production of high quality CD-ROMs for multi-media applications, distributed to
digital printers and copiers for reproduction, or used in the production of
images and pages for distribution over the Internet.
As discussed above, because digital processes are more efficient than
alternative technologies in the imaging and information processing industries,
the Company believes the use of digital technology is increasing. In 1994,
digital technologies accounted for approximately 54% of the Company's revenues.
The Company expects digital technologies to increase to approximately two-thirds
of revenues over the next two years. As the amount of information generated each
day increases, the need for efficient methods of data storage and manipulation
is increasing.
For example, in medical and photo imaging applications, the Company estimates
that a typical 400 bed hospital utilizing Computed Tomography, MRI, ultrasound
and nuclear medical technology will require between four and nine gigabytes of
new digital storage per day, along with associated recording, distribution and
imaging equipment. In information and printing applications, the Company expects
that the current mixture of digital and analog processes will continue to become
more reliant on digital technologies as such technologies become more efficient.
The Company believes that, starting from its base of products which are
currently used in these applications, it will be able to introduce new digital
products which will replace analog processes now used in these customer
applications. The Company believes that it has the technology, products and
strong customer relationships to take advantage of this opportunity.
Because the Company has existing technologies, products and customers in these
applications, the introduction of new digital technologies in these areas is not
expected to require major additional investments. The Company does anticipate,
however, entering into strategic alliances with other companies to complement
its existing technologies, as and when appropriate. The Company believes that
new digital applications and products for its existing customer base, along with
opportunities to enter into new markets not currently served by the Company,
will give the Company the benefit of additional revenues in both the short term
and the long term.
BUSINESS STRATEGY
The Company believes that the advancements in digital technology transforming
the information processing industry are creating opportunities for the Company.
The Company intends to utilize its research and development capabilities, its
solid technology platforms, its well established product lines and its strong
customer relationships to enhance its position as a leader in the information
processing industry, providing innovative, cost-effective system solutions to
its customers' information processing needs. To achieve its objectives, the
Company intends to focus on the following elements.
* REFINING PRODUCT PORTFOLIO -- Included in the Company's 1995 special
charges were costs associated with existing lines of business which the
Company believes will not satisfy its goal of profitable growth and
generating cash flows. Following the Distribution, the Company will
continue to examine intensively its product portfolio and make adjustments
when necessary to insure that all of its resources are focused on the
Company's objective of consistent, profitable growth. Resources freed from
less profitable product lines will then be available for new business
growth opportunities.
* STREAMLINING OPERATIONS AND REDUCING COSTS -- The Company recently has
taken a number of steps to streamline its operating structure and reduce
operating costs, including reducing its employment levels by offering
various voluntary separation plans to its employees. In addition, the
Company has decided to consolidate various manufacturing facilities and
has commenced preparations to close or downsize certain facilities and
utilize efficient outsourcing. Following the Distribution, the Company
will continue its efforts to streamline its management structure,
consolidate administrative functions and facilitate communications among
various parts of the organization so as to enable the Company to respond
quickly to the rapidly changing needs of its customers. In this regard,
the Company intends to intensively review the alternatives for further
improving its manufacturing, sales and distribution activities, both from
a customer responsiveness and a cost effectiveness point of view, with a
goal of reducing costs, improving profit margins and facilitating fast
paced decision making, so as to better enable the Company to respond
quickly to the rapidly changing needs of its customers.
* EXPANDING CUSTOMER FOCUS -- The Company will focus on understanding the
information processing challenges of both its existing and potential
customers. By utilizing its core competencies in product development, as
well as database marketing and electronic interactive communications, the
Company will strive to provide more timely solutions tailored to each
customer's needs, thereby enhancing its opportunities for growth and its
ability to satisfy its current large customer base. The goal of the
Company is to be perceived by its customers as responsive and committed to
their needs.
* IMPROVING CASH FLOWS -- An improved focus on cash flows is a critical
component of the Company's strategy for future growth and diversification.
To achieve this objective, the Company will instill in its employees a
strong focus on cash flow management and educate them regarding how their
actions and decisions impact the Company's cash flows. In this regard, the
Company has begun to take a number of actions, including: (i) revising
financial measurements to focus on cash flows management, including
adoption of the concept of "Economic Profit" (the measurement of income
from operations after tax and after deducting interest and a return to
shareholders), and using such measurements as a factor in determining
employee compensation, (ii) adjusting the evaluation process for capital
expenditures to focus on the near term cash return, reflecting the short
life cycle of the Company's high technology products, and (iii)
recognizing the cash impact of reducing working capital by re-engineering
the entire supply chain process (the period of time from the procurement
of raw materials, through manufacturing and delivery of the Company's
products to its customers, and finally to the receipt of payment from the
customer), and establishing one organization within the Company to focus
on reducing this "cycle time." The Company is confident that these and
other steps to be taken in the future will result in improved cash flow.
* EXPANDING INTERNATIONAL OPERATIONS -- The Company believes that there are
significant growth opportunities outside the United States. Accordingly,
the Company intends over the next several years to seek to take advantage
of these opportunities for growth by expanding its international
operations. A key strength of the Company lies in its global distribution
and sales network, and its long-standing relationships with multi-national
customers which will facilitate this expansion. The Company has
streamlined management of its international operations and has organized
those operations into two key areas, Europe/Middle East/Africa and Latin
America/Asia/Canada. Global growth strategies will be driven through these
two focused organizations.
* CAPITALIZING ON PROPRIETARY TECHNOLOGIES TO PROVIDE CUSTOMER SOLUTIONS --
The Company has significant proprietary technologies in information
processing. While part of 3M, the Company acquired hundreds of patents,
which are assigned or exclusively licensed to the Company by 3M in certain
fields of use. See "RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE
DISTRIBUTION -- Intellectual Property Agreement." Following the
Distribution, the Company will continue to focus significant efforts on
the development of new products utilizing these core technologies and
systems. As described in the section entitled "BUSINESS AND PROPERTIES OF
THE COMPANY -- Customer Applications," the Company has been successful in
this regard in recent years with the introduction of its DryView(tm) and
Travan(tm) branded products. In addition, the Company intends over time to
increase the development of new products designed to help position itself as
a provider of comprehensive, integrated solutions to the information
processing industry. As part of its strategy, the Company also intends to
explore the acquisition of new technologies through strategic alliances,
acquisitions or licensing.
* ENCOURAGING EMPLOYEE STOCK OWNERSHIP -- A key strategy and objective of
the Company is encouraging and increasing employee stock ownership as an
incentive toward consistent, profitable growth. The Company believes that
this will help drive cost reductions, quality improvement and growth
leading to achievement of Company objectives. As described under
"MANAGEMENT OF THE COMPANY -- Retirement Investment Plan," an employee
stock ownership plan will be implemented which is expected to lead over
time to employee stock ownership (directly or beneficially) of
approximately 4 percent of the Company's outstanding shares.
CUSTOMER APPLICATIONS
The Company's products are market leaders in the conventional/analog processes
for recording, manipulation and storage of data and images. While these
established products generate a substantial portion of the Company's revenues,
the Company seeks to leverage its existing market positions and to continually
develop and market new products and solutions to serve the changing needs of its
customers. With the industry's evolution to information processing systems based
on digital technologies, the Company is focusing its efforts on developing
solution-based products utilizing proprietary digital technologies and providing
more complete solutions to its customers' information processing needs. Set
forth below is a description of the products and services presently offered by
the Company. See Note 8 to NOTES TO HISTORICAL FINANCIAL STATEMENTS for the
revenues derived from each class of products.
INFORMATION PROCESSING, MANAGEMENT AND STORAGE APPLICATIONS
The Company is the world's largest supplier and developer of branded removable
data storage media, in both magnetic and optical formats. It is recognized as
the worldwide preferred supplier, based on its reputation for reliability and
convenience. The Company also is a supplier of CD-ROM replication and software
services provided to software developers. The Company's products include:
* Diskettes (3.5 inch, 5.25 inch and 8 inch) used for personal file storage,
for backup and for exchange of data. Diskettes are used primarily in
desktop and mobile personal computer systems, and also in workstations,
word processors and computer control equipment. In April, the Company
began shipment of a 120 MB 3.5 inch diskette, the LS-120 diskette, which
provides 80 times the storage capacity of a standard diskette. The LS-120
diskette has been developed as part of the Laser Servo 120 MB program in
which the Company, Compaq Computer Corporation and MKE are co-development
partners. Under the present arrangement between the parties, Compaq
markets computer systems which incorporate LS-120 drives manufactured by
MKE and which may include a Company brand LS-120 pack-in diskette and a
coupon towards the purchase of additional LS-120 diskettes.
* Data cartridge and Travan(tm) cartridge products used for backup of data
from hard disk storage systems and for applications in which large volumes
of information that do not need to be retrieved on a frequent basis.
Travan(tm) cartridges more than double the storage capacity of the prior
mini-cartridge, which is the most popular tape cartridge storage media
today. Used primarily on desktop personal computer systems, local area
networks and workstation computer systems, the Travan(tm) cartridges make
up a family of innovative products that were introduced in 1995 through
the joint efforts of 3M, Sony and a group of drive manufacturers. 3M has
maintained, and following the Distribution the Company will continue to
maintain, relationships with these and other companies regarding the
production and joint marketing of compatible drives and cartridge storage
media and the development of future versions of the technology.
* Computer cartridge tapes used for near-line data storage and retrieval, mass
storage and archival storage of data. Large cartridge tapes are used
primarily on enterprise computer systems and in data library systems that
store very large volumes of data. The smaller 4 mm and 8 mm cartridges are
used primarily in workstations and mid-size computer systems and networks for
backup and other data storage applications.
* Rewritable optical disks including magneto-optical (90mm and 130mm), phase
change disks and CD recordable disks used for the storage of data and images
on personal computers, workstations and local area networks. These disks are
also used in library systems for mid-range computer installations.
* CD-ROM products are produced on a made to order basis and are used for the
distribution of data and software to the personal computer and mid-range
markets.
INFORMATION AND PRINTING APPLICATIONS
The Company manufactures and markets products and provides service and technical
support for the printing, publishing and graphic arts markets. Its diverse
product line includes conventional color proofing systems, digital color
proofing systems and software, digital storage systems, laser films and image
setting materials, metal and polyester printing plates, graphic arts films,
photographic chemicals and miscellaneous supplies. The Company also markets
carbonless paper products, such as multi-part business forms. The Company has
strong leadership positions in certain product areas, including the
Matchprint(tm) color proofing system, an industry standard for more than 20
years. More recently, the Rainbow color proofing system, which provides color
proofs from digital data before a job is put on a printing press, also has
established a leadership role, winning both industry awards and acceptance as
the digital proofer of choice among many graphic arts professionals.
The Company's printing and publishing systems products are marketed globally,
with approximately 40 percent of its business derived from outside the United
States. This percentage is expected to grow in future years.
Products designed for printing and publishing applications are changing rapidly
in association with the digital/electronic communication revolution in the
information processing industry. This "digitization" of the image reproduction
process has greatly affected the work methods and work flow of many of the
Company's customers. Although short-run color print jobs are on the rise and
conventional lithographic printing will continue, in the Company's judgment, to
exist well into the next century, rapid changes are occurring in the pre-press
area of the graphic arts work processes. Desktop workstations, the acceptance of
digital proofing and the emergence and growth of "filmless" and chemical-free
(thus, environmentally attractive) printing processes all serve to streamline
the graphic arts process. The Company believes it is well-positioned to take
advantage of the industry transformation to digital systems. In addition to the
products mentioned above that carry leadership roles, the Company has the
technologies, color science expertise and industry relationships to aggressively
pursue emerging opportunities.
MEDICAL AND PHOTO IMAGING APPLICATIONS
The Company develops, manufactures and markets diagnostic imaging film, film
processors and imaging systems for both X-ray and electronic imaging systems.
The Company participates in the conventional X-ray film market and is the
world's leading supplier of high-quality laser imagers for producing medical
diagnostic images directly from MRI, CT, ultrasound, nuclear and other
electronic systems, with more than 7,000 laser imagers installed worldwide. In
December 1995, the Company announced a new line of DryView(tm) laser imagers
that produce high-quality film images without using standard wet chemistry
through a specially designed photothermographic process. Since no wet chemistry
is involved, the DryView(tm) laser imagers represent a significant technological
breakthrough and offer significant cost savings, productivity gains and
environmental benefits to the health care industry. Through a strategic alliance
among the Company, Hewlett-Packard and Cemax-Icon, hardware and software
solutions are provided to clients that help them manage, distribute and archive
their medical images. Under the alliance, the Company sells its DryView(tm)
product and other medical imaging equipment and Hewlett-Packard supplies its
computer hardware stations to Cemax-Icon which redistributes such products on an
integrated basis with its own software products. This is an example of linking
newly developed imaging solutions based on the Company's technology platforms
with the expanding requirements for digitization and information access.
The Company's customers include major hospital network buying groups as well as
individual hospitals and medical imaging centers. Hospital administrators and
materials managers, radiology administrators and radiologists represent the key
customer decision makers. Geographically, approximately 40% of the Company's
medical imaging business is in the United States. The major industrial countries
in Europe, Latin America and Japan account for the remainder of the business.
The Company is one of the world's leading suppliers of private label film for
the amateur photography retail market. The Company's primary geographic markets
for color photographic film are the United States and Europe, representing 70%
of the global demand for film. The Company manufactures a complete line of print
and slide films which fit in standard 35mm, 110, and 126 cameras used by
consumers globally. The Company has recently added single use cameras to its
product line which are sold preloaded with the Company's ISO 400 speed film.
Single use cameras represent a high growth segment of the consumer film market.
The Company's color print film can be found in more than 125 private label
brands, as well as 3M's Scotch brand. The Company will continue to use certain
3M trademarks and tradenames including the Scotch brand for a period of time
following the Distribution. See "RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER
THE DISTRIBUTION -- Intellectual Property Agreement." These products and brands
are positioned as a high value, comparable quality alternative to global brands
such as Kodak and Fuji.
INFORMATION PROCESSOR SERVICE APPLICATIONS
The Company's team of field service technicians provides technical servicing and
other post-sale technical support for equipment sold by the Company in the
information processing industry. The Company offers superior customer service
for its products by providing a 24 hour information and customer support
hotline. Customers also benefit from user-friendly product documentation and
training programs in a variety of languages. The Company also supplies systems
and user support services to meet engineering document management needs and
produces and distributes continuous and high-contrast black-and-white dry
photographic papers and films. These services and support will be extended
aggressively to customers of all the Company's product line and into new markets
to generate additional profits and customer satisfaction.
COMPETITION
The Company operates in a highly competitive environment. The Company's
principal competitors include large, well capitalized technology companies based
in the United States, Europe and Japan. These competitors include Eastman Kodak,
Fuji Photo Film, Sony, Agfa, Polaroid Corp., Konica, KAO and Du Pont. The
Company also competes in certain product markets with smaller, more specialized
firms such as Polychrome Corp. and Scitex America Corp. Businesses in the
information processing industry compete on a variety of factors such as price,
value, product quality, customer service, breadth of product line and
availability of system solutions. In these highly competitive and rapidly
changing markets, the Company intends to compete by emphasizing its global
distribution network, streamlining its supply operations, reducing its costs and
building on its industry leadership positions by developing new products and
services to address the digital environment and the information processing needs
of its customers.
DISTRIBUTOR CHANNELS
The Company's products are sold directly to users and through numerous
wholesalers, retailers, jobbers, distributors and dealers in approximately 65
countries. The Company believes it has one of the strongest global distribution
networks serving the information processing industry. The Company also plans to
utilize 3M as a sales agent to cover selected channels of distribution on an
interim basis following the Distribution. See "RELATIONSHIP BETWEEN 3M AND THE
COMPANY AFTER THE DISTRIBUTION -- Supply, Service, Contract Manufacturing and
Sales Agency Agreements." However, it is the Company's intention to explore all
avenues of distribution and to put in place, following the Distribution, the
most cost-effective channels of distribution.
RAW MATERIALS
The Company experienced no significant or unusual problems in the purchase of
raw materials during 1995. 3M will continue to be a major supplier of certain
raw materials and services to the Company after the Distribution. See
"RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION -- Supply,
Service, Contract Manufacturing and Sales Agency Agreements."
RESEARCH AND PATENTS
Research and product development have historically played an important role in
the Company's activities. The Company has research laboratories for the
improvement of its existing products and development of new products. The
Company's expenditures for research and development activities were $222
million, $211 million and $217 million for 1995, 1994 and 1993, respectively.
The Company has been granted rights, on both exclusive and non-exclusive bases,
from 3M and others which will enable it to continue to use the intellectual
property presently utilized by the Transferred Businesses. The Company does not
consider that its business as a whole is materially dependent upon any one
patent, license or trade secret or any group of related patents, licenses or
trade secrets, except with respect to those rights granted from 3M. See
"RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION -- Intellectual
Property Agreement."
MANUFACTURING
The Company operates 17 manufacturing, research and distribution facilities
throughout the world. The Company's plants are generally operated around the
clock at or near full capacity to minimize unit production costs and to fulfill
customer demands.
The Company is in the process of consolidating manufacturing by centralizing
such operations into the United States and Italy. This consolidation is intended
to reduce costs and improve quality by allowing the Company to adjust its
capacity to current needs and take advantage of the facilities with the most
advanced quality management system.
The core manufacturing competencies of the Company include coating, fine
chemical production for photographic film, state-of-the-art molding
capabilities, hardware prototyping and unit cost reduction. These competencies,
combined with the Company's research and development competencies of materials
science, color management, hardcopy imaging, magnetic and optical recording give
the Company a strong technological base to take advantage of the opportunities
in the evolving information processing industry.
PROPERTIES
The Company's headquarters are located in Oakdale, Minnesota. The Company's
major facilities (all of which are owned by the Company, except where noted),
and the products manufactured at such facilities are as follows:
FACILITY PRODUCTS
DOMESTIC
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Camarillo, California Data tape
Fremont, California (leased) CD-ROM
Middleway, W. Virginia Printing plates
Nekoosa, Wisconsin Carbonless paper
Oakdale, Minnesota Headquarters
Pine City, Minnesota Micrographic cards
Rochester, New York Printing plates and graphic film
St. Paul, Minnesota (leased) Laboratory facilities
Tucson, Arizona Data tape
Vadnais Heights, Minnesota (leased) Optical
Wahpeton, North Dakota Diskettes/molding
Weatherford, Oklahoma Diskettes/photographic film
White City, Oregon Imagers/X-ray films
INTERNATIONAL
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Bracknell, United Kingdom Administrative
Ferrania, Italy X-ray films/photographic film
Florida, Argentina X-ray films
Harlow, United Kingdom Research facility
London, Ontario Administrative
Sulmona, Italy Printing plates
EMPLOYEES
As of March 31, 1996, the Company had approximately 12,000 employees,
approximately 7,500 in the United States and 4,500 internationally. The Company
has begun the process of streamlining operations which will result in a
significant reduction in the number of employees required for operations. As a
first step, several voluntary separation plans recently have been offered to the
Company's employees. After the Distribution, it is expected that the Company
will have less than 10,000 direct employees as a result of the above actions.
See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
LEGAL PROCEEDINGS
The Company has assumed substantially all liabilities for legal proceedings
relating to the Transferred Businesses. As a result, although 3M is the named
defendant, the Company is the party in interest and is herein described as a
defendant.
The Company is a party to various legal proceedings and administrative actions,
all of which are of an ordinary or routine nature incidental to the operations
of the Company. In the opinion of the Company's management, such proceedings and
actions should not, individually or in the aggregate, have a material adverse
effect on the financial position of the Company.
ENVIRONMENTAL MATTERS
The Company's operations are subject to a wide range of environmental protection
laws. The Company has remedial and investigatory activities underway at some of
its current facilities. Under the Environmental Matters Agreement, the Company
will assume and indemnify 3M for all liabilities relating to, arising out of or
resulting from (i) operations at the Company's facilities as conducted before
the Closing Date; (ii) the disposal of hazardous materials, from the Company's
facilities, before the Distribution Date, at Superfund Sites, where such
liabilities are discovered after the Distribution Date; or (iii) operations of
the Transferred Businesses on and after the Distribution Date. 3M has agreed to
retain responsibility for environmental liabilities relating to former premises
which may have been associated with the Transferred Businesses and known
Superfund sites associated with the current properties of the Transferred
Businesses.
It is the Company's policy to accrue environmental remediation costs if it is
probable that a liability has been incurred and the amount of such liability is
reasonably estimable. As assessments and remediations proceed, these accruals
are reviewed periodically and adjusted, if necessary, as additional information
becomes available. The accruals for these liabilities can change due to such
factors as additional information on the nature or extent of contamination,
methods of remediation required, the allocated share of responsibility among
other parties, if applicable, and other actions by governmental agencies or
private parties. However, it is often difficult to estimate the future impact of
environmental matters, including potential liabilities.
As of March 31, 1996, the Company had reserved approximately $6.5 million with
respect to environmental liabilities. Although the Company believes that its
reserves are adequate, there can be no assurance that the amount of expenses
relating to remedial actions and compliance with applicable environmental laws
will not exceed the amounts reflected in the Company's reserves. The Company
believes that such additional charges, if any, will not have a material adverse
effect on the financial position of the Company. See "RELATIONSHIP BETWEEN 3M
AND THE COMPANY AFTER THE DISTRIBUTION -Environmental Matters Agreement."
MANAGEMENT OF THE COMPANY
DIRECTORS
As of the Distribution Date, the Board of Directors of the Company consists of
five persons, each of whom has been elected for a term expiring at the annual
meeting of stockholders indicated below and until his successor shall have been
elected and qualified. The following table sets forth information concerning the
individuals who will serve as directors of the Company following the
Distribution.
TERM EXPIRES AT
NAME AGE ANNUAL MEETING IN
- ---- --- -----------------
William T. Monahan 49 1999
Linda W. Hart 56 1999
Daryl J. White 48 1998
William W. George 53 1998
Lawrence E. Eaton 57 1997
The Board of Directors is presently being selected. The Board will consist of a
majority of outside directors who are familiar with the industry in which the
Company operates and with financial operations similar to the Company. The Board
is expected to be diverse, with a maximum of 16 directors.
WILLIAM T. MONAHAN will serve as Chairman of the Board, President and Chief
Executive Officer of the Company. Since June 1993 he has served as Group Vice
President responsible for the Electro and Communication Group of 3M and from May
1992 to May 1993, he was Senior Managing Director of 3M Italy. From September
1989 to May 1992, Mr. Monahan was Vice President of Data Storage Products.
LINDA W. HART is Vice-Chairman of Hart Group, Inc., a diversified group of
companies primarily involved in insulation manufacturing and residential and
commercial services. Prior to joining Hart Group in 1990, Ms. Hart was a
partner of the law firm of Vinson & Elkins from July 1986 to January 1990.
Ms. Hart is a former director of both Conner Peripherals, Inc. and
WordPerfect Corporation and a current director of each of the Hart Group
companies, Hart Group, Inc. (management services and investments), Rmax, Inc.
(insulation manufacturing) and Axon, Inc. (residential and commercial
services).
DARYL J. WHITE served as the Senior Vice President of Finance and Chief
Financial Officer of Compaq Computer Corporation, a computer equipment
manufacturer, from 1988 to May 1996. Prior to such time, he held the positions
of Corporate Controller and Director of Information Management at Compaq.
Mr.White is also currently the Chairman of the Board of Pinnacle Micro, Inc.
WILLIAM W. GEORGE has been the President and Chief Executive Officer of
Medtronic, Inc., a therapeutic medical technology company, since May 1991.
From March 1989 to April 1991, Mr. George served as President and Chief
Operating Officer of that company. Prior to such time, Mr. George was the
President of Honeywell Space and Aviation Systems (products for commercial
and military aviation markets and space and satellite applications) and of
Honeywell Industrial Automation and Control. Mr. George is currently a
director of Medtronic, Inc., Dayton Hudson Corporation, Valspar Corporation and
Allina Health System.
LAWRENCE E. EATON recently announced his retirement, effective in August
1996, from the position of Executive Vice President of 3M's Information,
Imaging and Electronic Sector and Corporate Services which he has held since
1991. Mr. Eaton is currently a director of Cray Research, Inc. and will
remain as such until mid-June 1996. Prior to 1991, Mr. Eaton served in
various other capacities at 3M, including, from 1986 to 1991, as Group Vice
President, Memory Technologies Group.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors of the Company is expected to establish an Audit
Committee, a Compensation Committee and a Nominating and Governance Committee.
The Audit Committee will, among other things, recommend the appointment of
independent public accountants; review the scope of the annual audit, including
fees and staffing; review the independence of the independent accountants;
review nonaudit services provided by the independent accountants; review
findings and recommendations of independent accountants and management's
response; review the internal audit and control function; and review compliance
with the Company's ethical business practices policy.
The Compensation Committee will review management compensation programs, approve
compensation changes for senior executive officers, review compensation changes
for senior management, and administer stock option plans and other performance
based compensation plans.
The Nominating and Governance Committee will act to select and recommend
candidates to the Board of Directors to be submitted for election at the annual
meeting. The Committee will also review and make recommendations to the Board of
Directors concerning the composition and size of the Board and its Committees,
frequency of meetings, directors' fees, and similar subjects; review and make
recommendations concerning retirement and tenure policy for Board members;
recommend proxies for meetings at which directors are elected; approve programs
for senior management succession; evaluate performance of the Board as a whole;
and consider and approve corporate governance principles.
COMPENSATION OF DIRECTORS
The Company intends to pay to directors who are not employees of the Company
("Non-Employee Directors") an annual fee of $40,000, subject to the terms of the
1996 Directors Stock Compensation Program (the "Directors Program") described
below. The Company intends to pay Non-Employee Directors an additional $2,500
for each meeting they attend in excess of four meetings per year, and to
Non-Employee Directors who are Committee chairmen, an additional $5,000 per
year. In addition, the Company intends to match up to $15,000 of charitable
contributions made to a Code section 501(c)(3) organization by each Non-Employee
Director per year. Directors are reimbursed for all reasonable travel and other
expenses of attending meetings of the Board or a Committee thereof.
DIRECTORS STOCK COMPENSATION PROGRAM
The Company has adopted the Directors Program, which was approved by 3M, the
Company's sole stockholder, as of the Distribution Date, and will become
effective as of the consummation of the Distribution (the "Effective Date"). The
Directors Program will provide nonemployee directors of the Company (each an
"Eligible Director") with automatic grants of stock options ("Options") and
units equivalent to shares of Common Stock ("Restricted Share Units").
The purpose of the Directors Program is to attract and retain well-qualified
persons for service as nonemployee directors of the Company and to promote
identity of interest between directors and stockholders of the Company. The
Directors Program is designed and intended to comply with Rule 16b-3,
promulgated under the Exchange Act ("Rule 16b-3"). The Directors Program will be
administered by the Compensation Committee of the Board of Directors.
Under the Program, a maximum of 800,000 shares of Common Stock, consisting of
authorized and unissued shares or of treasury shares, will be available for
issuance during the term of the Directors Program. These shares are subject to
adjustments in the event of any recapitalization, stock split, reverse stock
split, stock dividend, reorganization, merger, consolidation, spin-off,
combination, repurchase, or share exchange, or other similar corporate
transaction or event affecting the Common Stock.
Pursuant to the Program, Eligible Directors will generally be entitled to
options to purchase 10,000 shares of Common Stock for each year of service.
Specifically, on the Effective Date, each Eligible Director and, thereafter,
each new Eligible Director who has not previously been granted Options under the
Directors Program, will automatically be issued an Option pursuant to the
Program to purchase a number of shares of Common Stock equal to 30,000
multiplied by a fraction the numerator of which is the number of years of such
Eligible Director's term of office and the denominator of which is three. Each
reelected Eligible Director will automatically be issued an Option to purchase
30,000 shares of Common Stock as of the date such Eligible Director is
reelected. Options will be granted at an option price equal to the fair market
value of the Common Stock on the date of grant.
Each Option will vest and become exercisable as to 10,000 of the shares of
Common Stock underlying such Option on each anniversary of the date of grant,
provided that all outstanding and previously unvested Options of an Eligible
Director will immediately vest and become fully exercisable upon the Eligible
Director's death or disability, or upon a Change of Control (as defined in the
Program). If an Eligible Director otherwise terminates service as an Eligible
Director, any Options that have not become exercisable will be forfeited as of
the date of such termination of service.
On the Effective Date and each anniversary thereof during the term of the
Program, each Eligible Director will automatically be granted, in lieu of 25% of
his or her annual retainer fee for services as a director of the Company, a
number of Restricted Share Units calculated by dividing 25% of such director's
annual retainer fee by the fair market value of a share of Common Stock as of
the date of grant. The value of any fractional Restricted Share Units will be
paid in cash.
Dividend equivalents will be credited to each Eligible Director's Restricted
Share Units during his or her term of office, and will be converted into
additional Restricted Share Units. Upon ceasing to be a member of the Board, the
Restricted Share Units credited to each Eligible Director will be paid to him or
her in the form of a number of shares of Common Stock equal to the number of
Restricted Share Units so credited.
In the event of any recapitalization, stock split, reverse stock split, stock
dividend, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
affecting the Common Stock, the maximum number or class of shares available
under the Directors Program, the number of shares of Common Stock subject to
outstanding Options and the number of Restricted Share Units to be credited
pursuant to the terms of the Directors Program will be adjusted by the Committee
to reflect any such change in the number or class of shares of Common Stock.
The Directors Program may be amended or terminated by the Board, provided that
(a) no amendment that requires stockholder approval in order for the exemptions
available under Rule 16b-3 to be applicable to the Directors Program will be
effective without the approval of the stockholders of the Company, and (b) the
Directors Program will not be amended more than once every six months, other
than to conform with changes in the Code, the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
FEDERAL TAX CONSEQUENCES. The grant of Options will create no tax consequences
to the Eligible Directors or to the Company. Upon exercise of an Option, the
difference between the option price and the fair market value at the time of
exercise is treated as ordinary income to the Eligible Director and the Company
is entitled to a deduction for the same amount. Gain or loss upon a subsequent
sale of any shares of Common Stock received upon the exercise of an Option is
taxed as capital gain or loss to the participant (long-term or short-term,
depending upon the holding period of the stock sold).
An Eligible Director will not realize taxable income and the Company will not be
entitled to a deduction upon the crediting of Restricted Share Units. When the
Restricted Share Units are paid to the Eligible Director in the form of shares
of Common Stock, the Eligible Director will realize ordinary taxable income in
an amount equal to the fair market value of the shares of Common Stock at the
time of payment, and the Company will be entitled to a deduction in the same
amount.
NEW PLAN BENEFITS
1996 DIRECTORS STOCK COMPENSATION PROGRAM
NUMBER OF
NAME AND POSITION OPTIONS
- ----------------- -------
Non-Executive Director Group (4 persons) 80,000
No Options have been issued yet under the Director Plan. The number of options
listed above is the number of options that the Non-Employee Directors will
receive as of the Distribution Date.
The Directors Program has been included as an exhibit to the Registration
Statement of which this Information Statement forms a part. The preceding
description is subject in all respects to the provisions of the Directors
Program.
EXECUTIVE OFFICERS
The following table sets forth certain information concerning the persons who
will serve as executive officers of the Company following the Distribution. Each
such person has been elected to the indicated office with the Company on or
prior to the Distribution Date and serves at the pleasure of the Board of
Directors of the Company.
NAME AGE POSITIONS
- ---- --- ---------
William T. Monahan 49 Chairman of the Board, President and Chief
Executive Officer
Carolyn A. Bates 49 General Counsel and Secretary
Jill D. Burchill 41 Chief Financial Officer
Dr. Krzysztof K. Burhardt 54 Vice President -- Technology Development
Wilmer G. DeBoer 51 General Manager, Customer Support Technology
and Document Imaging
Dennis A. Farmer 52 Vice President -- Marketing and Public
Affairs
Barry R. Melchior 52 Director, Corporate Engineering and
Manufacturing Services
David G. Mell 49 Vice President -- Corporate Business
Processes
Richard W. Northrop 58 Vice President -- Europe
Charles D. Oesterlein 53 Vice President -- Operations
Clifford T. Pinder 49 Vice President -- Operations
Michael E. Sheridan 51 Vice President -- Operations
James R. Stewart 39 Corporate Controller
Deborah D. Weiss 40 Treasurer
David H. Wenck 52 Vice President -- International
Set forth below is a description of the position presently held with the Company
by each executive officer, as well as positions held with 3M prior to the
Distribution Date.
WILLIAM T. MONAHAN will serve as Chairman of the Board, President and Chief
Executive Officer. From June 1993 to the Distribution Date, he was Group Vice
President responsible for the Electro and Communications Group and from May 1992
to May 1993, he was Senior Managing Director of 3M Italy. From September 1989 to
May 1992, he was Vice President of Data Storage Products.
CAROLYN A. BATES will serve as General Counsel and Secretary. From 1991 to
the Distribution Date, she was Assistant Chief Intellectual Property Counsel.
JILL D. BURCHILL will serve as the Chief Financial Officer. From April 1995 to
the Distribution Date, she was Sector Controller for 3M's Information, Imaging
and Electronic Sector. From May 1993 to April 1995, she was Group Controller for
the Memory Technology Group and from July 1990 to May 1993, she was Financial
Manager for the Audio/Video Products Division.
DR. KRZYSZTOF K. BURHARDT will serve as Vice President, Technology
Development. From July 1991 to the Distribution Date, he was Research and
Development Vice President for 3M's Information, Imaging and Electronic
Sector.
WILMER G. DEBOER will serve as General Manager, Customer Support Technology
and Document Imaging. From July 1993 to the Distribution Date, he was Global
Field Service Director and Business Director of 3M's Document Systems
Department. From April 1990 to June 1993, he was Manufacturing Director for
3M's Engineering Document Systems Division.
DENNIS A. FARMER will serve as Vice President, Marketing and Public Affairs.
From March 1994 to the Distribution Date, he was Vice President of Data Storage
Markets and from May 1992 to February 1994, he was General Manager of Data
Storage Markets Division. From February 1991 to January 1992, he was Sales
Department Manager of Data Storage Products. From July 1988 to January 1991, he
was Group Director, Europe, for the Memory Technology Group.
BARRY R. MELCHIOR will serve as Director, Corporate Engineering and
Manufacturing Services. From April 1995 to the Distribution Date, he was
Engineering Director of 3M's Information, Imaging and Electronic Sector. From
August 1993 to April 1995, he was Engineering Manager for the Tape Group and
from January 1991 to August 1993 he was Plant Manager for the Traffic Control
Materials Division plant in Brownwood, Texas.
DAVID G. MELL will serve as Vice President, Corporate Business Processes. He was
Vice President of Data Storage Tape Technology from May 1995 to the Distribution
Date, Vice President of Data Storage Diskette and Optical Technology from March
1994 to April 1995, and General Manager of Data Storage Diskette and Optical
Technology Division from May 1992 to February 1994. He was Department Manager of
3M's Computer Tape Technology Department Data Storage Products from September
1989 to April 1992.
RICHARD W. NORTHROP will serve as Vice President in charge of the Company's
European operations. He was a Managing Director of European operations for 3M's
Printing Systems, Hardgoods and Electronic Businesses from January 1994 through
the Distribution Date, a Managing Director of European operations for 3M's
Hardgood and Electronic Businesses from January 1992 through December 1993 and a
Director of 3M's Information and Imaging Divisions from January 1991 through
December 1992.
CHARLES D. OESTERLEIN will serve as Vice President, Operations. From 1994 to the
Distribution Date, he was Vice President of Printing and Publishing Systems and
from 1992 to 1994, he was General Manager of Audio and Video Technology. From
1989 to 1992, he was Department Manager of 3M's Data Storage Products Division.
CLIFFORD T. PINDER will serve as Vice President, Operations. From March 1994 to
the Distribution Date, he was Vice President of Medical Imaging Systems and from
July 1993 to March 1994, he was Vice President of Photo Color Systems. From
November 1991 to June 1993, he was General Manager of 3M's Photo Color Systems
and from 1986 to 1990, he was Managing Director of 3M Puerto Rico.
MICHAEL E. SHERIDAN will serve as Vice President, Operations. He was General
Manager of Data Storage Diskette Technology from May 1995 to the Distribution
Date, Director of Sumitomo/3M's MTG Technology and Special Projects from July
1993 to April 1995 and Group Director of 3M Europe's Memory Technologies Group
from May 1990 to July 1993.
JAMES R. STEWART will serve as Corporate Controller. From July 1995 to the
Distribution Date, he was Group Controller for 3M's Memory Technologies Group
and from March 1992 to July 1995, he was Medical Group Controller -- Europe.
From September 1989 to March 1992, he was the Financial Manager for the
Commercial Office Supply Division.
DEBORAH D. WEISS will serve as Treasurer. From 1988 to the Distribution Date,
she was Manager of 3M's Benefit Funds Investment.
DAVID H. WENCK will serve as Vice President in charge of the Company's
international operations. From May 1995 to the Distribution Date, he was General
Manager of 3M's Data Storage Optical Technology Division. From December 1994 to
April 1995, he was Department Manager of 3M's Software Media and CD-ROM Services
Department and from July 1986 to September 1994, he was Project Manager of 3M's
Optical Recording Project. From October 1981 to January 1986, he was Managing
Director of 3M's Singapore operations.
COMPENSATION OF EXECUTIVE OFFICERS
All of the information set forth in the following tables reflects compensation
earned based on services rendered to 3M by the Company's Chief Executive Officer
and the four other most highly paid executive officers. The services rendered to
3M were, in many cases, in capacities not equivalent to those to be provided to
the Company. Therefore, these tables may not reflect the compensation to be paid
executive officers of the Company.
The following table summarizes compensation paid to the Company's Chief
Executive Officer and the four other most highly paid executive officers based
on services rendered to 3M in 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION (1)
-----------------------------------------------------------
ANNUAL COMPENSATION (1) AWARDS PAYOUTS
---------------------------------- --------------------------- -----------
PROFIT
SHARING
STOCK OPTIONS PERFORMANCE
PROFIT OTHER (RESTRICTED GRANTED UNIT PLAN
SHARING ANNUAL STOCK (NUMBER (LTIP) ALL OTHER
NAME AND PRINCIPAL POSITION SALARY (BONUS) (2) COMPENSATION AWARDS) OF SHARES) (3) PAYOUTS (4) COMPENSATION (5)
- --------------------------- ------ ----------- ------------ ------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C>
W.T. Monahan, $236,025 $124,964 -- 0 11,948 $45,980 $14,455
Chief Executive Officer
K.K. Burhardt, $196,500 $ 90,607 -- 0 13,615 $45,980 $16,039
Vice President --
Research and Development
C.D. Oesterlein, $174,400 $ 35,014 -- 0 4,800 $37,620 $17,065
Vice President -- Operations
D.G. Mell, $164,870 $ 46,317 -- 0 4,800 $37,620 $13,479
Vice President --
Corporate Business Processes
D.A. Farmer, $161,315 $ 45,885 -- 0 4,800 $37,620 $17,936
Vice President --
Corporate Marketing
</TABLE>
(1) The amounts shown in the Summary Compensation Table do not include amounts
expensed for financial reporting purposes under 3M's pension plan. This plan
is a defined benefit plan. The amounts shown in the table do, however,
include those amounts voluntarily deferred by the named individuals under
3M's Deferred Compensation Plan. The Deferred Compensation Plan allows
management personnel to defer portions of current base salary, profit
sharing and performance unit compensation earned during the year.
(2) The amounts shown under the headings "Profit Sharing (Bonus)" are cash
payments received under 3M's Profit Sharing Plan. The term "(Bonus)" is
included to satisfy the requirements of the Securities and Exchange
Commission ("SEC"). These payments are based upon 3M's performance and are
variable in accordance with a predetermined formula. 3M's Profit Sharing
Plan provides for quarterly payments (in cash, or, as determined by 3M, in
3M common stock) based upon net income after deducting an allowance for a
predetermined 10 percent annual rate of return on stockholder equity and is
determined by multiplying the number of profit sharing units awarded to an
individual by this quarterly net income, after deduction, divided by the
number of the outstanding shares of 3M's Common Stock. Because of the
required minimum return on stockholder equity, profit sharing tends to rise
and fall relatively more sharply than changes in net income. The number of
profit sharing units awarded to the individuals named is determined by 3M
and is intended to reflect the level of responsibility of the respective
individual. Profit sharing payments are subject to limitations when
individual amounts exceed specified relationships to base salary.
(3) The number of stock options shown in this column includes both annual grants
of incentive and nonqualified stock options and Progressive Stock Options
("PSOs"), which are described more fully in footnote 1 of the table entitled
"Option Grants In Last Fiscal Year (1995)." Although these stock options are
forfeitable by these participants upon termination of employment with 3M,
the Compensation Committee of the 3M Board of Directors has decided to
continue these options for the benefit of the participants during the
continued employment of the participants by the Company, adjusted as set
forth in "TREATMENT OF EMPLOYEE OPTIONS AND RESTRICTED STOCK IN THE
DISTRIBUTION," pursuant to the terms of the original grants under 3M's
option plans.
(4) "LTIP Payouts" reflects the value of the total grant for each individual
under 3M's Performance Unit Plan after the three year performance period
(e.g., for 1995, the performance period is 1993-1995), but no amount will be
paid to these individuals under the grant for an additional three years
pursuant to the terms of the grant. The numbers shown represent estimates
based upon information available as of February 29, 1996. During this
additional three year period, interest will be paid at a rate determined by
3M's "return on capital employed" performance. More specific information
about 3M's Performance Unit Plan is set forth in footnote (1) to the table
entitled "Long-Term Incentive Plans Awards In Last Fiscal Year (1995)."
Although these rights are forfeitable by these participants upon termination
of employment with 3M, the Compensation Committee of the 3M Board of
Directors has decided to continue these rights for the benefit of the
participants during the continued employment of the participants by the
Company, pursuant to the terms of the original grants under the operative 3M
plan.
(5) "All Other Compensation" includes: (a) that amount of Performance Unit Plan
earnings allocated during the year to the base amounts determined after the
three year performance periods of each respective grant, to the extent that
such earnings are in excess of market interest rates (as determined by the
Securities and Exchange Commission); and (b) that amount deemed to be
compensation to the individuals under 3M's Senior Executive Split Dollar
Plan in accordance with rules developed by the SEC. The Senior Executive
Split Dollar Plan provides insurance to all of 3M's executive officers under
split dollar life insurance, which is partly term insurance and partly whole
life insurance with a cash value. Under this plan, 3M is reimbursed for the
premium costs of the non-term portion of coverage and a possible return when
the arrangement terminates either by insurance proceeds incident to the
death of the individual or by cash value after 15 years of participation in
the plan. During 1995, amounts deemed compensation under the plan to the
named executive officers in the Summary Compensation Table were $8,976 for
Mr. Monahan; $10,560 for Dr. Burhardt; $17,065 for Mr. Oesterlein; $13,479
for Mr. Mell; and $17,936 for Mr. Farmer. These amounts were determined by
treating the non-term portion of the coverage as an interest-free loan.
STOCK OPTIONS TABLE
The following table shows for each person named in the Summary Compensation
Table the specified information with respect to 3M stock option grants during
1995. Since this compensation was received by the named individuals for services
rendered to 3M which are not equivalent, in many cases, to those to be provided
the Company, this table may not reflect the compensation to be paid executive
officers of the Company.
OPTION GRANTS IN LAST FISCAL YEAR (1995)
<TABLE>
<CAPTION>
INDIVIDUAL
GRANTS % OF
TOTAL
OPTIONS GRANTED DATE VALUE
GRANTED TO EXERCISE OR GRANTED DATE
OPTIONS EMPLOYEES BASE PRICE EXPIRATION PRESENT
NAME GRANTED(#) (1) IN FISCAL YEAR ($/SH.) (2) DATE VALUE (3)
- ---- -------------- -------------- ----------- ---------- ------------------
<S> <C> <C> <C> <C> <C>
W.T. Monahan 9,600 0.223% $59.60 5-09-2005 $131,424
1,436 0.033% $57.10 5-05-2000 $ 13,556
912 0.021% $57.10 5-11-2001 $ 8,609
K.K. Burhardt 4,800 0.112% $59.60 5-09-2005 $ 65,712
141 0.003% $61.40 5-12-1997 $ 1,771
882 0.021% $61.40 5-10-1998 $ 11,078
1,302 0.030% $61.40 5-05-2000 $ 16,353
2,086 0.049% $61.40 5-11-2001 $ 26,200
1,914 0.045% $61.40 5-10-2002 $ 24,040
2,490 0.058% $61.40 5-07-2004 $ 31,274
C.D. Oesterlein 4,800 0.112% $59.60 5-09-2005 $ 65,712
D.G. Mell 4,800 0.112% $59.60 5-09-2005 $ 65,712
D.A. Farmer 4,800 0.112% $59.60 5-09-2005 $ 65,712
</TABLE>
(1) In connection with the Distribution, all outstanding and unexercised 3M
options will be appropriately adjusted to reflect the Distribution. See
"TREATMENT OF EMPLOYEE OPTIONS AND RESTRICTED STOCK IN THE DISTRIBUTION."
3M does not grant any stock appreciation rights ("SARs"). The options shown
for each individual include both annual grants of Incentive Stock Options
and nonqualified stock options and grants of PSO's. Nonqualified options are
subject to a reload feature when exercised with the payment of the option
price in the form of previously owned shares of 3M's common stock. Such an
exercise results in further grants of PSO's. The first grant shown for each
individual is the annual grant. The remaining lines are PSO's. The PSO
grants for each individual were made on a single date, but are, pursuant to
SEC rules, shown in multiple lines because of different expiration dates.
PSO grants were made to participants who exercised nonqualified stock
options and who paid the purchase price using shares of previously owned 3M
common stock. The PSO grant is for the number of shares equal to the shares
utilized in payment of the purchase price and tax withholding, if any. The
option price for the PSO is equal to 100 percent of the market value of 3M's
common stock on the date of the exercise of the primary option or,
alternatively, on the date of the PSO grant to the five named individuals in
the Summary Compensation Table, all of whom are subject to the requirements
of Section 162(m) of the Code. The option period is equal to the remaining
period of the options exercised.
Although these tables reflect the grants of PSO's for those participants
eligible for such while employed by 3M during 1995, the 3M Compensation
Committee has decided that the named participants will no longer be eligible
for subsequent PSO grants after the Distribution Date. All nonqualified
options at the Distribution Date may be exercised once thereafter, but 3M
will not grant any new or additional options, by way of PSO's or otherwise.
All other operative terms of the options listed above will continue past the
Distribution Date, so that the options granted under 3M's plans will be
exercisable during the continued employment of the participants by the
Company, notwithstanding termination of employment with 3M at the
Distribution Date, per the original terms of the grants by 3M.
(2) All options granted during the period were granted at the market value on
the date of grant of initial grants, or at the fair market values discussed
in footnote 1 above in the case of PSO's, as calculated from the average of
the high and low prices reported on the New York Stock Exchange Composite
Index.
(3) Pursuant to the rules of the SEC, 3M has elected to provide a grant date
present value for these option grants determined by a modified Black-Scholes
pricing model. Among key assumptions utilized in this pricing model were:
(i) that the time of exercise of Incentive Stock Options would be four
years, and of PSOs would be two years, into the term of the option, which
could be for terms as long as ten years, in recognition of the historical
exercise patterns at 3M for these types of options; (ii) expected volatility
of 21.7 percent; (iii) risk-free rate of return of 6.26 percent for two
years, and 6.86 percent for four years; and (iv) dividend growth rate of
6.34 percent. No adjustments for non-transferability or risk of forfeiture
have been made. 3M voices no opinion that the present value will, in fact,
be realized and expressly disclaims any representation to that effect.
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table shows for each person named in the Summary Compensation
Table the specified information with respect to 3M option exercises during 1995
and the value of unexercised 3M options at the end of 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR (1995)
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT IN-THE-MONEY OPTIONS AT
SHARES FISCAL YEAR-END (#)(2) FISCAL YEAR-END (1)
ACQUIRED VALUE ---------------------------- ------------------------------
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
- ---- ----------- ------------ ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
W.T. Monahan 3,121 $ 51,455 36,348 11,948 $769,168 $86,818
K.K. Burhardt 10,895 116,251 27,056 13,615 608,935 76,375
C.D. Oesterlein 2,400 38,220 14,400 4,800 222,000 32,520
D.G. Mell 1,600 31,720 16,800 4,800 284,820 32,520
D.A. Farmer 100 3,256 21,548 4,800 443,467 32,520
</TABLE>
(1) The "Value Realized" or the unrealized "Value of Unexercised In-the-Money
Options at FY-End" represents the aggregate difference between the market
value on the date of exercise or at December 31, 1995, in the case of the
unrealized values, and the applicable exercise prices. These differences
accumulate over what may be, in many cases, several years. These stock
options all have option periods of ten years when first granted, and PSOs
have option periods equal to the remaining option period of the initial
nonqualified options resulting in PSOs.
(2) See "TREATMENT OF EMPLOYEE OPTIONS AND RESTRICTED STOCK IN THE
DISTRIBUTION."
LONG-TERM INCENTIVE PLAN AWARDS
The following table shows for each person in the Summary Compensation Table the
specified information with respect to awards during 1995 under 3M's Performance
Unit Plan. Since this compensation was received by the named individuals for
services rendered to 3M which are not equivalent, in many cases, to those to be
provided to the Company, this table may not reflect the compensation to be paid
executive officers of the Company.
LONG-TERM INCENTIVE PLANS -- AWARDS
IN LAST FISCAL YEAR (1995)
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUT
NUMBER OF OTHER PERIOD UNDER NON-STOCK PRICE-BASED PLANS
SHARES, UNITS UNTIL (3)
OR OTHER MATURATION ---------------------------------
NAME RIGHTS (1) OR PAYOUT (2) THRESHOLD TARGET MAXIMUM
- ---- ---------- ------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
W.T. Monahan 950 6 years $0 $95,000 $190,000
K.K. Burhardt 550 6 years $0 $55,000 $110,000
C.D. Oesterlein 550 6 years $0 $55,000 $110,000
D.G. Mell 550 6 years $0 $55,000 $110,000
D.A. Farmer 550 6 years $0 $55,000 $110,000
</TABLE>
(1) To date, the 3M Compensation Committee has established the performance
goals based on criteria of return on capital employed and sales growth.
Performance units awarded to date have been assigned a face value of $100
each. However, the actual amount of the payments is based upon 3M's
attainment of the performance goals. If the targets established by the
Committee are attained during the performance periods, the performance unit
will have a value of $100 at the end of the performance period. If the
targets are not attained, the value will be less than $100 and, if exceeded,
will be more than $100. The ultimate value of the performance unit can vary
from no value to $200, depending upon actual performance.
Payment is contingent upon continued employment to the payment date or
earlier retirement under 3M's pension plan. The Compensation Committee of
the 3M Board of Directors has decided to extend the rights of these
participants going to the Company beyond the Distribution Date during the
continued employment of the participants by the Company, pursuant to the
terms of the original grants under 3M's Performance Unit Plan.
(2) The value of awards granted for 1995 will be determined by 3M's attainment
of return on capital employed and sales growth criteria during a three-year
performance period of 1995, 1996 and 1997. However, there will be an
additional three-year involuntary holding period thereafter during which the
base amounts determined during the performance period will earn interest and
remain subject to forfeiture if the participant discontinues employment for
any reason other than death, disability or retirement.
(3) The estimated future payouts do not include any interest factor that would
be earned annually during the three-year involuntary holding period
following the performance period. Interest during the involuntary holding
period would accrue annually at a rate equal to 50 percent of the return on
capital employed by 3M during the three years and would be payable, together
with the base award, in 2001.
TRANSACTIONS WITH MANAGEMENT
During 1995, three executive officers and directors had loans outstanding with
the Eastern Heights State Bank of St. Paul, a subsidiary of 3M. These loans were
made in the ordinary course of business on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons of comparable circumstances and did
not involve more than normal risk of collectibility or present other unfavorable
features.
EMPLOYMENT AGREEMENT
The Company expects to enter into an employment agreement with Mr. Monahan,
which commences as of the Distribution Date for an initial four year term, with
automatic one-year renewals commencing as of the second anniversary of the
Distribution Date, unless notice not to renew is given by either party. Pursuant
to the agreement, Mr. Monahan will serve as the Chief Executive Officer of the
Company, and the Company will use its best efforts to have Mr. Monahan elected
to the Board. Mr. Monahan will receive an annual base salary at a rate no less
than his current rate and an annual incentive bonus to be set by the Company's
Compensation Committee. The agreement will also provide for Mr. Monahan's
participation in the Company's employee benefit, welfare, retirement and
incentive compensation plans and programs in which other senior executive
officers of the Company participate.
The agreement is expected to provide that if Mr. Monahan's employment is
terminated by the Company without cause or by Mr. Monahan for good reason, he
will be entitled to receive, for the remainder of the term of the agreement (a)
base salary, (b) annual incentive compensation (with a pro rata portion for a
partial year) equal to the average annual incentive awards for the three
completed years immediately preceding the date of employment termination
(including, if applicable annual incentive awards received from 3M for any year
within the applicable three-year period), plus a pro rata annual incentive award
for the year in which termination of employment occurs, (c) the additional
benefits that Mr. Monahan would have been entitled to receive under the
Company's defined benefit pension plans had he remained an employee during the
remainder of the term of the agreement, based on the base salary and incentive
compensation levels described in clauses (a) and (b) above and (d) continued
participation in all welfare benefit plans, subject to an offset to the extent
similar benefits are made available to Mr. Monahan without cost under welfare
benefit plans of a subsequent employer. In addition, Mr. Monahan's equity-based
awards will become fully vested and, with respect to his stock options, fully
exercisable, as of his date of termination.
Also, if Mr. Monahan's employment is terminated by reason of death, his estate
or designated beneficiary will be entitled to receive his base salary for a
period of one year and a prorated annual incentive compensation award. If his
employment is terminated by reason of disability, he will be entitled to receive
a prorated annual incentive compensation award.
If Mr. Monahan receives payments under his agreement that would subject him to
any federal excise tax due under section 280G of the Code, then he will also
receive a cash "gross-up" payment so that he will be in the same net after-tax
position that he would have been in had such excise tax not been applied.
During (a) the term of the agreement, (b) any period during which Mr. Monahan
continues to receive salary pursuant to the terms of the agreement, and (c) the
one-year period following termination of Mr. Monahan's employment by the Company
for cause or by Mr. Monahan other than for good reason, Mr. Monahan is required
to comply with appropriate provisions regarding noncompetition, nonsolicitation
of employees, nondisparagement of the Company, return of work papers and
compliance with policies regarding confidentiality of information.
COMPENSATION UNDER RETIREMENT PLANS
Substantially all domestic employees of the Company will be eligible to
participate in the qualified pension and defined contribution plans that the
Company intends to establish. In addition, the executive officers of the Company
will be eligible to participate in certain nonqualified pension or deferred
compensation plans to be established by the Company's Board of Directors.
COMPANY PENSION PLAN
The Company expects to adopt a cash balance pension plan, and it intends that
this plan will be qualified under the applicable provisions of the Code. The
plan will become effective July 1, 1996, and will cover substantially all
domestic employees of the Company. Under this plan, benefits will be determined
by the amount of annual pay credits to each employee's account (equal to 6% of
each employee's annual earnings) and annual interest credits (equal to the
return on the 30-year U.S. Treasury bond) to such accounts. All former 3M
employees will retain their right to receive their benefits accrued as of the
Distribution Date under 3M's pension plan. Those former 3M employees whose age
and years of 3M service as of the Distribution Date equal or exceed 50 (with a
minimum of 10 years of 3M service) will continue to be credited with service for
purposes of early retirement subsidies under 3M's pension plan based on their
combined service with the Company and 3M, and will have their 3M accrued
benefits as of the Distribution Date increased following the Distribution by 4%
per year of employment with the Company.
The following table shows the estimated aggregate annual benefits payable from
the Company's qualified and nonqualified retirement plans to its executive
officers and other participating employees at normal retirement, assuming that
the Company adopts nonqualified pension plans similar to 3M's:
PENSION PLAN TABLE -- COMPANY PLAN
<TABLE>
<CAPTION>
YEARS WITH COMPANY (EXCLUDING SERVICE WITH 3M)
EMPLOYEES ANNUAL EARNINGS -----------------------------------------------------------
USED FOR COMPUTATION OF BENEFITS 5 YEARS 10 YEARS 15 YEARS 20 YEARS 25 YEARS
- -------------------------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$150,000 $ 5,845 $13,668 $24,136 $ 38,145 $ 56,892
200,000 7,794 18,224 32,182 50,860 75,856
250,000 9,742 22,780 40,227 63,575 94,820
300,000 11,691 27,336 48,272 76,290 113,784
350,000 13,639 31,892 56,318 89,005 132,748
400,000 15,588 36,448 64,363 101,720 151,712
450,000 17,536 41,004 72,409 114,435 170,676
500,000 19,485 45,560 80,454 127,150 189,640
</TABLE>
Under this table the normal form of benefit payment under the plan to married
employees would require a reduction in the amounts shown in the table pursuant
to an actuarially based formula to provide a benefit to a surviving spouse upon
the employee's death following retirement equal to 50% of the reduced benefit.
These amounts do not include the 4% per year additional benefit described above,
a portion of which will be provided by the Company's plan.
In addition to their benefits under the Company's plan, it is estimated that the
named executive officers in the Summary Compensation Table will be entitled to
the following aggregate annual benefits payable under 3M's qualified and
nonqualified pension plans at normal retirement, based on their service with 3M
as of the Distribution Date and assuming that they remain employed by the
Company until their normal retirement date: $156,826 for Mr. Monahan; $124,756
for Dr. Burhardt; $124,848 for Mr. Oesterlein; $113,146 for Mr. Mell; and
$117,878 for Mr. Farmer.
PLANS ENCOURAGING EMPLOYEE STOCK OWNERSHIP
The following two plans are intended to help the Company accomplish its
objective of encouraging and increasing employee stock ownership. As a result of
these plans, the Company expects employees to eventually own (directly or
beneficially) in excess of 5% of its outstanding shares.
RETIREMENT INVESTMENT PLAN
The Company expects to adopt a defined contribution plan including a cash or
deferred arrangement, and it intends that this plan will be qualified under the
applicable provisions of the Code. The plan will become effective July 1, 1996,
and will cover substantially all domestic employees of the Company. Under this
plan, employees may generally elect to defer up to 15% of their pay on a
before-tax basis and have it contributed to their individual accounts, subject
to Code and Internal Revenue Service limits. The Company will make matching
contributions to the employees' accounts equal to 100 percent of the first 3% of
pay deferred during each pay period and 25% of the next 3% of pay deferred
during each pay period. All of the Company's matching contributions will be
invested in Common Stock of the Company through an employee stock ownership
plan. Individuals currently employed by 3M who join the Company on the
Distribution Date will have their account balances under the 3M Voluntary
Investment Plan and Employee Stock Ownership Plan transferred to the Company's
plan on or prior to the Distribution Date. In addition to matching
contributions, the Company may also make annual contributions to the accounts of
all eligible employees based on its financial performance. These additional
contributions will also be invested in Common Stock of the Company through the
employee stock ownership plan.
1996 EMPLOYEE STOCK INCENTIVE PROGRAM
The Company has adopted the 1996 Employee Stock Incentive Program (the "Stock
Option Plan"), which was approved by 3M as the sole stockholder of the Company
prior to the Distribution, and will become effective upon, and only in the event
of the consummation of, the Distribution.
The Stock Option Plan is designed to provide incentives to employees to become
stockholders of the Company through the granting of incentive and nonqualified
stock options, restricted stock grants and stock appreciation rights. Further,
the Stock Option Plan is designed to ensure that compensation payable with
respect to the exercise of certain options thereunder will qualify as
performance based compensation within the meaning of section 162(m) of the Code
and thereby be fully tax-deductible by the Company.
The total number of shares of Common Stock (which includes treasury or
authorized but unissued shares) that may be issued or awarded under the Stock
Option Plan may not exceed 6,000,000, subject to equitable adjustment in the
event of a stock split, stock dividend, reduction or combination of shares,
merger, consolidation, recapitalization or other similar transactions). All
shares subject to awards under the Stock Option Plan that are forfeited or
terminated, will be available again for issuance pursuant to awards under the
Stock Option Plan. The maximum number of shares of Common Stock that may be
granted to any one participant under the Stock Option Plan by way of options and
stock appreciation rights, during the term of the plan shall not exceed
1,000,000 (including Progressive Stock Options (as defined below) granted to
such participant.)
The Stock Option Plan will be administered by the Compensation Committee (the
"Committee") of the Board of Directors, consisting of two or more persons who
are "disinterested persons" within the meaning of Rule 16b-3 ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended and "outside directors"
within the meaning of section 162(m) of the Code. Eligibility criteria, the
number of participants, and the number of shares subject to option, restricted
stock or other awards will be determined by the Committee.
The option price of (a) incentive stock options within the meaning of section
422 of the Code ("Incentive Stock Options") will equal 100 percent of the fair
market value of the Common Stock on the date the options are granted, and (b)
options other than Incentive Stock Options ("Nonqualified Stock Options") may be
equal to, less than or more than 100 percent of the fair market value of the
Common Stock on the date the options are granted. Full payment for the shares
(which may be made in whole or in part, in shares of Common Stock valued at the
fair market value on the date the option is exercised) must be made at the time
the option is exercised.
Generally, options will be for a ten-year period (or shorter in the case of
Progressive Stock Options), and become exercisable commencing one year from the
date of grant (no sooner than six months from date of grant with respect to
Progressive Stock Options), unless otherwise determined by the Committee. Option
rights are forfeited by a participant in the event of termination of employment
for any cause other than retirement, death, or disability, and abbreviated
exercise periods are provided in the event of death or disability. Progressive
Stock Options are Nonqualified Stock Options equal to the number of shares of
previously owned stock delivered in payment of the option price of outstanding
Nonqualified Stock Options granted under the Stock Option Plan or in payment of
any applicable federal, state, local and employment withholding taxes.
Progressive Stock Options have as their term the remaining term of the primary
option being exercised and are granted at the fair market value of the stock on
the date of the primary option exercise.
Incentive Stock Options are not transferable other than by will or the laws of
descent and distribution. All options are nontransferable to the extent
necessary to comply with the applicable provisions of Rule 16b-3.
The Committee may also grant restricted stock subject to conditions and
restrictions as may be specified by the Committee. The participant shall
generally have the rights and privileges of a stockholder as to the shares of
restricted stock, including the right to vote, except that the restricted stock
shall remain in the custody of the Company until all restrictions have lapsed.
None of the shares representing the restricted stock may be sold, transferred,
assigned, pledged, or otherwise encumbered or disposed of during the period of
restrictions determined by the Committee. At the discretion of the Committee,
cash and stock dividends with respect to restricted stock awards may be either
currently paid or withheld by the Company for the participant's account, and
interest may be paid on the amount of cash dividends withheld at a rate and
subject to such terms as determined by the Committee. Cash or stock dividends so
withheld by the Committee shall not be subject to forfeiture.
Upon the satisfaction of the conditions and the lapsing of restrictions
applicable to restricted stock awards, the Company shall deliver to the
participant or the participant's beneficiary or estate, a stock certificate for
the number of shares of restricted stock granted, free of all such restrictions,
except any that may be imposed by applicable law. The Committee may also award
shares of Common Stock under the Stock Option Plan other than restricted stock.
Under the Stock Option Plan, the Committee may grant stock appreciation rights
that entitle the recipient to receive an amount of cash or a number of shares of
Common Stock measured by the appreciation of the fair market value of the Common
Stock at the date of exercise above the fair market value of the Common Stock at
the date of the initial grant. Stock appreciation rights will be exercisable
during a period determined by the Committee, but which will commence no sooner
than six months from the date of grant and will expire no later than ten years
from the date of grant. Stock appreciation rights are forfeited by a participant
in the event of termination of employment for any cause other than retirement,
death, or disability, and abbreviated exercise periods are provided in the event
of death or disability.
The Stock Option Plan provides that all outstanding options under the Stock
Option Plan would become immediately exercisable in full for the remainder of
the respective option period and remain exercisable in full for a minimum period
of six months following a change in control of the Company (as defined in the
Stock Option Plan), and all restrictions imposed by the Committee on outstanding
grants of restricted stock or other stock awards would automatically be
terminated.
Further, in the event that the exercise of options granted under the Stock
Option Plan or the receipt of Common Stock as a result of a restricted stock
grant or other stock award, after an event of acceleration (i.e., a change of
control), shall be determined to be subject to the excise tax of section 4999 of
the Code, the Company will pay affected participants such additional amounts of
cash so that the net amount, after allowance for the excise tax, any additional
federal, state and local income tax and any additional employment tax paid on
the additional amount, shall be equal to the net amount that would be retained
by the participant if there were no excise tax imposed by section 4999.
Similarly, in the event that a participant should be required to take legal
action to obtain or enforce rights under the Stock Option Plan after an event of
acceleration, the Company shall pay all reasonable legal and accounting fees and
expenses incurred, unless a lawsuit is subsequently determined to have been
spurious or frivolous.
The Stock Option Plan may be amended or terminated by the Board, except that no
amendment will be made without prior approval of the Company's stockholders if
such approval is required for purposes of Rule 16b-3, or, to the extent
applicable, Section 162(m) of the Code.
The Stock Option Plan will terminate five years after its effective date.
FEDERAL TAX CONSEQUENCES
The grant of stock options will create no tax consequences to the participant or
to the Company. The participant will not recognize any taxable income with
respect to the exercise of an Incentive Stock Option (except that the
alternative minimum tax may apply), and the Company will not be entitled to a
deduction when such stock option is exercised, to the extent the individual
$100,000 limit on Incentive Stock Options that first become exercisable in any
calendar year is not exceeded, and to the extent that the shares acquired upon
exercise are disposed of no earlier than two years after the date of grant of
the option and one year after the date of exercise of the option. The tax
payable by the participant upon disposition of the shares acquired upon exercise
of Incentive Stock Options will be at the long-term capital gain rate. Options
that do not satisfy the Code requirements for Incentive Stock Options will be
taxed as Nonqualified Stock Options.
Upon exercise of a Nonqualified Stock Option, the difference between the option
price and the fair market value at the time of exercise is treated as ordinary
income to the participant and the Company is entitled to a deduction for the
same amount, subject to the application of section 162(m) of the Code. Gain or
loss upon a subsequent sale of any shares of Common Stock received upon the
exercise of a Nonqualified Stock Option is taxed as capital gain or loss to the
participant (long-term or short-term, depending upon the holding period of the
stock sold).
A participant generally will not realize taxable income and the Company will not
be entitled to a deduction upon the grant of restricted shares. When the shares
are no longer subject to a substantial risk of forfeiture, the participant will
realize taxable ordinary income in an amount equal to the fair market value of
the stock at the time, and the Company will be entitled to a deduction in the
same amount, subject to the provisions of section 162(m) of the Code. However, a
participant may elect to realize taxable ordinary income in the year the
restricted shares are granted in an amount equal to their fair market value at
the time, determined without regard to the restrictions. In that event, subject
to section 162(m) of the Code, the Company will be entitled to a deduction in
such year in the same amount, and any gain or loss realized by the participant
upon the subsequent disposition of the stock will be taxable at short or long
term capital gain rates but will not result in any further deduction to the
Company.
NEW PLAN BENEFITS
Prior to the Distribution, certain employees of the Company participated in 3M's
Management Stock Ownership Program covering management employees of 3M. In lieu
of a 1996 annual grant under 3M's Program, the Company intends to grant to its
employees who would otherwise have been eligible to receive a 1996 grant under
3M's Program options to purchase shares of Common Stock under the Stock Option
Plan. The exercise price of these options will be the fair market value of the
Common Stock at the time of the grant. As a result, shortly after the
Distribution the Company expects to grant to such employees options to purchase
approximately 800,000 shares of Common Stock.
The following table sets forth the options which would have been received in
1996 by certain employees under 3M's Management Stock Ownership Program.
NEW PLAN BENEFITS
EMPLOYEE STOCK INCENTIVE PROGRAM
NAME AND POSITION NUMBER OF OPTIONS
- ----------------- -----------------
W.T. Monahan 36,100
K.K. Burhardt 5,280
C.D. Oesterlein 5,280
D.G. Mell 5,280
D.A. Farmer 5,280
Executive Group 98,580
Non-Executive Director Group 0
Non-Executive Officer Employee Group (1)
(1) Not determinable as of May 31, 1996.
It cannot be determined at this time the number of options that, will be granted
to the above-named individuals in 1996 under the Stock Option Plan. For options
to purchase shares of common stock of 3M that were granted to the five named
executive officers of the Company in the previous fiscal year under the 3M Stock
Option Plan, see "-- Option Grants in Last Fiscal Year (1995)".
The Stock Option Plan has been included as an exhibit to the Registration
Statement of which this Information Statement forms a part. The preceding
description is subject in all respects to the provisions of the Stock Option
Plan.
TREATMENT OF EMPLOYEE OPTIONS AND RESTRICTED STOCK
IN THE DISTRIBUTION
Certain employees of 3M (including certain employees who, as a result of the
Distribution, will become employees of the Company) currently hold options to
purchase 3M common stock (the "3M Options") pursuant to the 3M Stock Plans.
In connection with the Distribution, and pursuant to the 3M Stock Plans and the
related option agreements, the number of shares subject to each 3M Option and
the exercise prices thereof will be equitably adjusted to reflect the
Distribution. 3M will remain solely responsible for satisfying all exercises of
3M Options.
Pursuant to the terms of the 3M Management Stock Ownership Program, and pursuant
to a determination of 3M's Compensation Committee, holders of 3M restricted
common stock will not receive shares of Common Stock in the Distribution. In
lieu of such Common Stock, the holders of 3M restricted common stock will
receive additional shares of restricted common stock of 3M with a value equal to
the value of the Common Stock which would have been received by such holders in
the Distribution with respect to such restricted common stock.
CERTAIN RELATIONSHIPS AND TRANSACTIONS
The businesses to be conducted by the Company have in the past engaged in
transactions with 3M and its businesses. Such transactions have included, among
other things, various types of financial support by 3M. Following the
Distribution, 3M will continue to have a relationship with the Company as a
result of the agreements being entered into between 3M and the Company in
connection with the Distribution. Except as referred to above or as otherwise
described in this Information Statement, 3M and the Company will cease to have
any material contractual or other material relationships with each other. See
"RELATIONSHIP BETWEEN 3M AND THE COMPANY AFTER THE DISTRIBUTION."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Based on information which has been obtained from 3M's records and a review of
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d) and 13(g) of the Exchange Act with respect to 3M common stock and
received by 3M prior to March 1, 1996, no person known to the Company will be
the beneficial owner of more than 5% of the outstanding voting securities of any
class of the Company upon completion of the Distribution.
BENEFICIAL OWNERSHIP OF MANAGEMENT
The following table sets forth information with respect to the shares of Common
Stock which are expected to be beneficially owned by each director and the named
executive officers of the Company and by all directors and officers of the
Company as a group as of the Distribution Date based upon their respective
holdings of 3M common stock as of June 18, 1996. The table does not include as a
basis for calculation options to purchase shares of 3M common stock exercisable
at or within 60 days of June 18, 1996 as such options will not be converted in
the Distribution to options to purchase shares of Common Stock. See "TREATMENT
OF EMPLOYEE OPTIONS AND RESTRICTED STOCK IN THE DISTRIBUTION." In addition, the
table does not include any options which may be granted as part of the Company's
employee benefit programs following the Distribution. Based upon such data, no
director or officer will own beneficially, as of the Distribution Date, more
than 1% of the shares of Common Stock outstanding at such date and all directors
and officers as a group will beneficially own less than five-tenths of one
percent (0.5%) of the common stock outstanding at such date.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP
- ---- --------------------
William T. Monahan 1,248
Linda W. Hart 0
Daryl J. White 0
William W. George 0
Lawrence E. Eaton 4,153
Carolyn A. Bates 121
Jill D. Burchill 188
Dr. Krzysztof K. Burhardt 1,914
Wilmer G. DeBoer 77
Dennis A. Farmer 433
Barry R. Melchior 88
David G. Mell 209
Richard W. Northrop 71
Charles D. Oesterlein 110
Clifford T. Pinder 955
Michael E. Sheridan 367
James R. Stewart 87
Deborah D. Weiss 288
David H. Wenck 565
All directors and officers of the
Company as a group (19 persons) 10,874
DESCRIPTION OF COMPANY CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
Under the Certificate of Incorporation, the total number of shares of all
classes of stock that the Company has authority to issue is 125 million, of
which 25 million are shares of preferred stock, and 100 million are shares of
Common Stock. Based on the number of shares of 3M common stock outstanding at
May 1, 1996, approximately 41,863,000 shares of Common Stock will be issued to
shareholders of 3M.
COMMON STOCK
The holders of Common Stock will be entitled to one vote for each share on all
matters voted on by stockholders, and the holders of such shares will possess
all voting power, except as otherwise required by law or provided in any
resolution adopted by the Board of Directors of the Company with respect to any
series of preferred stock. Subject to any preferential or other rights of any
outstanding series of Company preferred stock that may be designated by the
Board of Directors of the Company, the holders of Common Stock will be entitled
to such dividends as may be declared from time to time by the Board of Directors
of the Company from funds available therefor, and upon liquidation will be
entitled to receive pro rata all assets of the Company available for
distribution to such holders. See "SPECIAL FACTORS -- Common Stock Dividend
Policy."
PREFERRED STOCK
The Board of Directors of the Company will be authorized to provide for the
issuance of shares of preferred stock, in one or more series, and to fix for
each such series such voting powers, designations, preferences and relative,
participating, optional and other special rights, and such qualifications,
limitations or restrictions, as are stated in the resolution adopted by the
Board of Directors of the Company providing for the issuance of such series as
are permitted by the Delaware General Corporation Law (the "Delaware GCL"). See
"PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
AND BY-LAWS -- Preferred Stock."
NO PREEMPTIVE RIGHTS
No holder of any stock of the Company of any class authorized at the
Distribution Date will then have any preemptive right to subscribe to any
securities of the Company of any kind or class.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Norwest Bank
Minnesota, N.A.
PURPOSES AND EFFECTS OF CERTAIN PROVISIONS OF THE
CERTIFICATE OF INCORPORATION AND BY-LAWS
GENERAL
The Certificate of Incorporation and By-laws contain certain provisions that
could make more difficult the acquisition of control of the Company by means of
a tender offer, open market purchases, a proxy contest or otherwise. Set forth
below is a description of such provisions contained in the Certificate of
Incorporation and By-laws. Such description is intended as a summary only and is
qualified in its entirety by reference to the Certificate of Incorporation and
By-laws, the forms of which are included as exhibits to the Registration
Statement of which this Information Statement forms a part.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation provides that the number of directors shall be
fixed from time to time by the Board of Directors of the Company. The directors
shall be divided into three classes, as nearly equal in number as is reasonably
possible, serving staggered terms so that directors' initial terms will expire
either at the 1997, 1998 or 1999 annual meeting of the Company's stockholders.
Starting with the 1997 annual meeting of the Company's stockholders, one class
of directors will be elected each year for a three-year term. See "MANAGEMENT OF
THE COMPANY -- Directors."
The Company believes that a classified Board of Directors will help to assure
the continuity and stability of the Company's Board of Directors and the
Company's business strategies and policies as determined by the Board of
Directors of the Company, since a majority of the directors at any given time
will have had prior experience as directors of the Company. The Company believes
that this, in turn, will permit the board to more effectively represent the
interests of stockholders.
With a classified Board of Directors, at least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in a
majority of the Board of Directors. As a result, a classified Board of Directors
of the Company may discourage proxy contests for the election of directors or
purchases of a substantial block of the Common Stock because its provisions
could operate to prevent obtaining control of the Board of Directors of the
Company in a relatively short period of time. The classification provisions
could also have the effect of discouraging a third party from making a tender
offer or otherwise attempting to obtain control of the Company. In addition,
because under Delaware law a director serving on a classified Board of Directors
may be removed only for cause, a classified Board of Directors would delay
stockholders who do not agree with the policies of the Board of Directors from
replacing a majority of the Board of Directors for two years unless they can
demonstrate that the directors should be removed for cause and can obtain the
requisite vote. Such a delay may help ensure that the Board of Directors of the
Company, if confronted by a holder conducting a proxy contest or an
extraordinary corporate transaction, will have sufficient time to review the
proposal and appropriate alternatives to the proposal and to act in what it
believes are the best interests of the Company's stockholders.
SPECIAL MEETINGS OF STOCKHOLDERS; ACTION BY WRITTEN CONSENT; ADVANCE NOTICE
PROVISIONS
The By-laws provide that special meetings of stockholders of the Company may be
called by the Board of Directors of the Company or the Chairman of the Board.
The Certificate of Incorporation also requires that stockholder action be taken
at a meeting of stockholders and prohibits action by written consent.
STOCKHOLDER NOMINATIONS
The By-laws establish procedures that must be followed for a stockholder to
nominate individuals for election to the Company's Board of Directors.
Nominations of persons for election to the Board will be required to be made by
delivering written notice to the Secretary of the Company not less than 60 days
and not more than 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 10 days before
or after such anniversary date, notice by the stockholder to be timely will be
required to be so received before the later of the close of business on the 10th
day following the day on which such notice of the date of the meeting was mailed
or public disclosure made of the date of the annual meeting was made, whichever
first occurs and the close of business on the day which is 60 days prior to the
date of the annual meeting. The nomination notice will be required to set forth
certain background information about the persons to be nominated, including the
nominees' principal occupation or employment and the class and number of shares
of capital stock of the Company that are beneficially owned by such person. If
the presiding officer at the annual meeting determines that a nomination was not
made in accordance with these procedures, he may so declare at the meeting and
the nomination may be disregarded.
STOCKHOLDER PROPOSALS
The By-laws establish procedures that must be followed for a stockholder to
submit a proposal at an annual meeting of the stockholders of the Company. Under
these procedures, no proposal for a stockholder vote will be able to be
submitted to the stockholders unless the submitting stockholder has timely filed
with the Secretary of the Company a written statement setting forth specified
information, including the names and addresses of the persons making the
proposal, the class and number of shares of capital stock of the Company
beneficially owned by such persons, a description of the proposal and the
reasons for bringing such business before the annual meeting and any material
interest of the stockholder in such business. The statement will be required to
be filed no later than the latest date for filing a nomination notice as
described above under "--Stockholder Nominations." If the presiding officer at
any stockholder meeting determines that any such proposal was not made in
accordance with these procedures or is otherwise not in accordance with
applicable law, he may so declare at the meeting and such defective proposal may
be disregarded.
PREFERRED STOCK
The Certificate of Incorporation authorizes the Board of Directors to establish
a series of preferred stock and to determine, with respect to any series of
preferred stock, the terms and rights of such series, including the following:
(i) the designation of such series; (ii) the rate and time of, and conditions
and preferences with respect to, dividends, and whether such dividends are
cumulative; (iii) the voting rights, if any, of shares of such series; (iv) the
price, timing and conditions regarding the redemption of shares of such series
and whether a sinking fund should be established for such series; (v) the rights
and preferences of shares of such series in the event of voluntary or
involuntary dissolution, liquidation or winding up of the affairs of the
Company; and (vi) the right, if any, to convert or exchange shares of such
series into or for stock or securities of any other series or class.
The Company believes that the availability of the preferred stock will provide
the Company with increased flexibility in structuring possible future financing
and acquisitions, and in meeting other corporate needs which might arise. Having
such authorized shares available for issuance will allow the Company to issue
shares of preferred stock without the expense and delay of a special
stockholders' meeting. The authorized shares of preferred stock, as well as
shares of Common Stock, will be available for issuance without further action by
the Company's stockholders, unless action is required by applicable law or the
rules of any stock exchange on which the Company's securities may be listed or
unless the Company is restricted by the terms of previously issued preferred
stock or by the Company's bank credit facility.
SUPERMAJORITY PROVISION
The Certificate of Incorporation generally provides that, whether or not a vote
of the stockholders is otherwise required, the affirmative vote of the holders
of not less than eighty percent (80%) of the outstanding shares of Common Stock
shall be required for the approval or authorization of any Business Transaction
with a related Person, or any Business Transaction in which a Related Person has
an interest; provided, however, that the eighty percent (80%) voting requirement
shall not be applicable if (1) the Business Transaction is approved by the
Continuing Directors, or (2) all of the following conditions are satisfied:
(a) the Business Transaction is a merger or consolidation or sale of
substantially all of the assets of the Company, and the aggregate amount of cash
to be received per share by holders of Common Stock in connection with such
Business Transaction is at least equal in value to the highest amount of
consideration paid by such related person for a share of Common Stock in the
transaction in which such person became a Related Person, or within one year
prior to the date such related Person became a Related Person, whichever is
higher; and
(b) after such Related Person has become the beneficial owner of not less than
ten percent (10%) of the voting power of the stock of the Company entitled to
vote generally in the election of directors, and prior to the consummation of
such Business Transaction, such Related Person shall not have become the
Beneficial Owner of any additional shares of voting stock or securities
convertible into voting stock, except (i) as a part of the transaction which
resulted in such Related Person becoming the beneficial owner of not less than
ten percent (10%) of the voting power of the voting stock or (ii) as a result of
a pro rata stock dividend or stock split; and
(c) prior to the consummation of such Business Transaction, such Related Person
shall not have, directly or indirectly, (i) received the benefit (other than
only a proportionate benefit as a stockholder of the Company) of any loans,
advances, guarantees, pledges, or other financial assistance or tax credits
provided by the Company or any of its subsidiaries, (ii) caused any material
change in the Company's business or equity capital structure, including, without
limitation, the issuance of shares of capital stock of the Company, or (iii)
except as approved by the Continuing Directors, caused the Company to fail to
declare and pay (y) at the regular date therefor any full quarterly dividends on
any outstanding preferred stock or (z) quarterly cash dividends on the
outstanding Common Stock on a per share basis at least equal to the cash
dividends being paid thereon by the corporation immediately prior to the date on
which the Related Person became a Related Person.
The term "Business Transaction" is generally defined as (a) any merger or
consolidation involving the Company or a subsidiary of the Company, (b) any
sale, lease, exchange, transfer, or other disposition (in one transaction or a
series of related transactions), including, without limitation, a mortgage or
any other security device, of all or any substantial part of the assets either
of the Company or of a subsidiary of the Company, (c) any sale, lease, exchange,
transfer, or other disposition (in one transaction or a series of related
transactions) of all or any substantial part of the assets of an entity to the
Company, (d) the issuance, sale, exchange, transfer, or other disposition (in
one transaction or a series of related transactions) by the Company or a
subsidiary of the Company of any securities of the Company or any subsidiary of
the Company, (e) any recapitalization or reclassification of the securities of
the Company or other transaction that would have the effect of increasing the
voting power of a Related Person or reducing the number of shares of each class
of voting stock outstanding, (f) any liquidation, spin-off, split-off, split-up,
or dissolution of the Company, and (g) any agreement, contract, or other
arrangement providing for any of the transactions described in this definition
of Business Transaction. "Continuing Director" is generally defined as a member
of the Board of Directors on the Distribution Date and any member of the Board
of Directors whose election was approved by the Continuing Directors. "Related
Person" generally is defined as any individual or entity which, together with
its affiliates and associates owns not less than 10% of the voting power of the
voting stock of the Company.
RIGHTS AGREEMENT
The Board of Directors of the Company has declared a dividend distribution of
one right (a "Right") to purchase one one-hundredth of a share of Series A
Junior Participating Preferred Stock for each outstanding share of Common Stock
to stockholders of record of the Company on the Record Date. The description and
terms of the Rights are set forth in a Rights Agreement, dated as of June 18,
1996, between the Company and Norwest Bank Minnesota, N.A. (the "Rights
Agreement").
The Rights remain non-exercisable, nontransferable and non-separable from the
Company's Common Stock until the earlier of (i) 10 days after a public
announcement that a person or group of affiliated or associated persons (an
"Acquiring Person") has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding shares of the Company's Common Stock
(the "Stock Acquisition Date") or (ii) 10 business days (or such later date as
may be determined by the Board of Directors) after the commencement of a tender
offer or exchange offer for 15% or more of the Common Stock.
In the event that a person becomes the beneficial owner of 15% or more of the
then outstanding shares of the Common Stock (except pursuant to an offer for all
outstanding shares of Common Stock that the independent directors of the Company
determine to be fair to and otherwise in the best interests of the Company and
its stockholders (an "Approved Offer"), each holder of a Right will thereafter
have the right to receive, upon exercise, shares of Common Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Rights. Each Right, when
exercisable, currently entitles the registered holder to purchase from the
Company one one-hundredth of a share of Series A Junior Participating Preferred
Stock at a price of $125, subject to adjustment. In the event that, at any time
following the Stock Acquisition Date, (i) the Company is acquired in a merger or
other business combination transaction in which the Company is not the surviving
corporation (other than a merger that follows an Approved Offer and meets
certain other requirements) or (ii) more than 50% of the Company's assets, cash
flows or earning power is sold or transferred, each holder of a Right shall
thereafter have the right to receive, upon exercise, common stock of the
acquiring company having a value equal to two times the exercise price of the
Right.
In general, at any time prior to their expiration on July 1, 2006 or until 10
days following the Stock Acquisition Date, the Board of Directors in its
discretion may redeem the Rights in whole, but not in part, at a price of $.01
per Right.
Each share of Series A Junior Participating Preferred Stock, when issued, will
be nonredeemable and entitled to cumulative dividends and will rank junior to
any series of Preferred Stock senior to it. Dividends are payable on the Series
A Junior Participating Preferred Stock in an amount equal to the greater of (i)
$1.00 per share or (ii) 100 times the aggregate per share amount of all cash and
noncash dividends (other than dividends payable in Common Stock) declared on the
Common Stock since the last quarterly dividend payment date or, with respect to
the first such date, since the first issuance of the Series A Junior
Participating Preferred Stock. Each share of Series A Junior Participating
Preferred Stock will entitle the holder (subject to adjustment) to 100 votes on
all matters submitted to a vote of the stockholders of the Company. The number
of shares constituting the series of Series A Junior Participating Preferred
Stock is 1,000,000.
The Rights may have certain anti-takeover effects, including deterring someone
from acquiring control of the Company in a manner or on terms not approved by
the Board of Directors. The Rights should not interfere with any merger or other
business combination approved by the Board of Directors, since the Rights
generally may be redeemed at any time by the Company as set forth above.
LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS
GENERAL
Officers and directors of the Company are covered by certain provisions of the
Delaware GCL, the Certificate of Incorporation, the By-laws and insurance
policies which serve to limit, and, in certain instances, to indemnify them
against, certain liabilities which they may incur in such capacities. None of
such provisions would have retroactive effect for periods prior to the
Distribution Date, and the Company is not aware of any claim or proceeding in
the last three years, or any threatened claim, which would have been or would be
covered by these provisions. These various provisions are described below.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
In June 1986, Delaware enacted legislation which authorizes corporations to
limit or eliminate the personal liability of directors to corporations and their
stockholders for monetary damages for breach of directors' fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations now authorized
by such legislation, directors are accountable to corporations and their
stockholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission. The Certificate
of Incorporation limits the liability of directors to the Company or its
stockholders (in their capacity as directors but not in their capacity as
officers) to the fullest extent permitted by such legislation. Specifically, the
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as director, except for liability (i) for
any breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payments of
dividends or unlawful stock repurchases or redemptions as provided in Section
174 of the Delaware GCL, or (iv) for any transaction from which the director
derived an improper personal benefit.
INDEMNIFICATION AND INSURANCE
As a Delaware corporation, the Company has the power, under specified
circumstances generally requiring the director or officer to act in good faith
and in a manner he reasonably believes to be in or not opposed to the Company's
best interests, to indemnify its directors and officers in connection with
actions, suits or proceedings brought against them by a third party or in the
name of the Company, by reason of the fact that they were or are such directors
or officers, against expenses, judgments, fines and amounts paid in settlement
in connection with any such action, suit or proceeding. The By-laws generally
provide for mandatory indemnification of the Company's directors and officers to
the full extent provided by Delaware corporate law.
The Company intends to purchase and maintain insurance on behalf of any person
who is or was a director or officer of the Company, or is or was a director or
officer of the Company serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise against any liability asserted
against him and incurred by him in any such capacity, or arising out of his
status as such, whether or not the Company would have the power or obligation to
indemnify him against such liability under the provisions of the By-laws.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company has appointed Coopers & Lybrand L.L.P. as the Company's independent
public accountants to audit the Company's financial statements as of and for the
year ending December 31, 1996. Coopers & Lybrand L.L.P. has audited the
Company's historical financial statements as of December 31, 1995 and 1994 and
for each of the three years in the period ended December 31, 1995.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form 10
(the "Registration Statement", which term shall include any amendments or
supplements thereto) under the Exchange Act with respect to the shares of Common
Stock being received by 3M stockholders in the Distribution. This Information
Statement does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto, to which reference is hereby
made. Statements made in this Information Statement as to the contents of any
contract, agreement or other document referred to herein are not necessarily
complete. With respect to each such contract, agreement or other document filed
as an exhibit to the Registration Statement, reference is made to such exhibit
for a more complete description of the matter involved, and each such statement
shall be deemed qualified in its entirety by such reference.
The Registration Statement and the exhibits thereto filed by the Company with
the Commission may be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the Regional Offices of the Commission at Northwest
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and
7 World Trade Center, Suite 1300, 13th Floor, New York, New York 10048. Copies
of such information can be obtained by mail from the Public Reference Branch of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
INDEX TO HISTORICAL FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Report of Independent Accountants F-2
Historical Statements of Operations for the three month periods ended March 31,
1996 and 1995 (unaudited) and for each of the three years in the period ended
December 31, 1995 F-3
Historical Balance Sheets as of March 31, 1996 (unaudited) and as of December 31, 1995 and
1994 F-4
Historical Statements of Cash Flows for the three month periods ended March 31,
1996 and 1995 (unaudited) and for each of the three years in the period ended
December 31, 1995 F-5
Notes to Historical Financial Statements F-6
</TABLE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of Minnesota Mining
and Manufacturing Company:
We have audited the historical financial statements of the businesses to
comprise Imation Corp. (as described in Note 1 to the historical financial
statements) listed on page F-1 of this Information Statement. These historical
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these historical financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe our audits provide a reasonable basis for our opinion.
In our opinion, the historical financial statements referred to above present
fairly, in all material respects, the financial position of Imation Corp. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
March 29, 1996
IMATION CORP.
HISTORICAL STATEMENTS OF OPERATIONS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
---------------- --------------------------------
1996 1995 1995 1994 1993
------ ------ -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues $576.1 $576.7 $2,245.6 $2,280.5 $2,307.8
Cost of goods sold 373.8 364.2 1,520.9 1,442.0 1,421.6
------ ------ -------- -------- --------
Gross profit 202.3 212.5 724.7 838.5 886.2
Operating expenses:
Selling, general and
administrative 130.7 137.9 539.4 531.5 529.0
Research and development 47.9 56.4 222.4 211.2 216.7
Restructuring charges 10.4 -- 111.8 -- --
------ ------ -------- -------- --------
Total 189.0 194.3 873.6 742.7 745.7
Operating income (loss) 13.3 18.2 (148.9) 95.8 140.5
Interest expense and other 3.2 5.2 17.9 14.5 13.1
------ ------ -------- -------- --------
Income (loss) before tax and
minority interest 10.1 13.0 (166.8) 81.3 127.4
Income tax provision
(benefit) 4.1 5.5 (70.5) 29.3 51.8
Minority interest (0.1) -- (11.3) (2.3) 0.3
------ ------ -------- -------- --------
Net income (loss) $ 6.1 $ 7.5 $ (85.0) $ 54.3 $ 75.3
====== ====== ======== ======== ========
</TABLE>
Unaudited pro forma information assuming tax provision (benefit) based on a
purely separate return basis:
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, DECEMBER 31,
1996 1995
--------------- ------------
<S> <C> <C>
Income (loss) before tax and minority
interest $10.1 $(166.8)
Income tax provision (benefit) 4.7 (47.5)
Minority interest (0.4) (22.8)
----- -------
Net income (loss) $ 5.8 $ (96.5)
===== =======
</TABLE>
THE ACCOMPANYING NOTES TO HISTORICAL FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
HISTORICAL BALANCE SHEETS
(IN MILLIONS)
<TABLE>
<CAPTION>
AS OF MARCH 31, AS OF DECEMBER 31,
--------------- ---------------------
1996 1995 1994
-------- -------- --------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets
Accounts receivable, net $ 472.2 $ 479.5 $ 476.5
Inventories:
Finished goods 240.1 244.0 290.5
Work in process 77.6 81.2 75.2
Raw materials and supplies 102.4 101.1 107.8
-------- -------- --------
Total inventories 420.1 426.3 473.5
Other current assets 48.1 48.8 47.6
-------- -------- --------
Total current assets 940.4 954.6 997.6
Property, Plant and Equipment, Net 503.9 513.2 654.9
Other Assets 75.7 73.7 19.2
-------- -------- --------
Total Assets $1,520.0 $1,541.5 $1,671.7
======== ======== ========
LIABILITIES AND EQUITY
Current Liabilities
Accounts payable $ 117.0 $ 125.9 $ 129.0
Accrued payroll 52.8 44.4 42.4
Other current liabilities 137.2 125.9 112.2
-------- -------- --------
Total current liabilities 307.0 296.2 283.6
Other Liabilities 91.3 96.6 88.1
Commitments and Contingencies
Equity 1,121.7 1,148.7 1,300.0
-------- -------- --------
Total Liabilities and Equity $1,520.0 $1,541.5 $1,671.7
======== ======== ========
</TABLE>
THE ACCOMPANYING NOTES TO HISTORICAL FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
HISTORICAL STATEMENTS OF CASH FLOWS
(IN MILLIONS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
----------------- -------------------------------
1996 1995 1995 1994 1993
------ ------ ------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 6.1 $ 7.5 $ (85.0) $ 54.3 $ 75.3
Non-cash items included in net income (loss):
Depreciation 48.5 49.1 189.5 185.9 184.4
Deferred income taxes 6.1 0.6 (68.1) 14.0 (10.0)
Restructuring charge and asset write-offs 9.8 -- 166.3 -- --
Other (0.2) 1.6 2.1 1.5 5.1
Changes in operating assets and liabilities:
Accounts receivable 5.1 3.1 (0.6) (16.8) (53.6)
Inventories 4.6 (26.3) 25.4 (87.8) 8.7
Other (10.3) (6.1) 27.2 19.0 19.3
------ ------ ------- ------- -------
Net cash provided by operating activities 69.7 29.5 256.8 170.1 229.2
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (40.7) (46.0) (180.2) (182.7) (211.4)
Other 0.6 (0.9) (7.3) 3.0 1.2
------ ------ ------- ------- -------
Net cash used in investing activities (40.1) (46.9) (187.5) (179.7) (210.2)
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash (paid to) received from 3M (27.0) 13.4 (72.9) 18.5 (13.1)
Effect of exchange rate changes on cash (2.6) 4.0 3.6 (8.9) (5.9)
------ ------ ------- ------- -------
Net change in cash and equivalents $ -- $ -- $ -- $ -- $ --
====== ====== ======= ======= =======
</TABLE>
THE ACCOMPANYING NOTES TO HISTORICAL FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THESE STATEMENTS.
IMATION CORP.
NOTES TO HISTORICAL FINANCIAL STATEMENTS
NOTE 1 -- BACKGROUND AND BASIS OF PRESENTATION
BACKGROUND
Imation Corp. (the "Company") is a newly formed Delaware corporation which
initially will be a wholly-owned subsidiary of Minnesota Mining and
Manufacturing Company ("3M"). On November 13, 1995, 3M announced its intention
to launch its data storage and imaging systems businesses as an independent,
publicly owned company. This transaction is expected to be effected through the
distribution of shares of the Company to 3M shareholders effective on or about
July 1, 1996 ("the Distribution"). Prior to the Distribution, 3M plans to
transfer to the Company substantially all of the assets and liabilities
associated with 3M's global data storage and imaging systems businesses. 3M and
the Company will enter into a number of agreements to facilitate the
Distribution and the transition of the Company to an independent business
enterprise.
BASIS OF PRESENTATION
The historical financial statements reflect the assets, liabilities, revenues
and expenses that were directly related to the Company as they were operated
within 3M. In cases involving assets and liabilities not specifically
identifiable to any particular business of 3M, only those assets and liabilities
expected to be transferred to the Company prior to the Distribution were
included in the Company's separate historical balance sheets. Regardless of the
allocation of these assets and liabilities, however, the Company's Statements of
Operations 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. These allocations were based on a variety of factors including, for
example, personnel, space, time and effort, and sales volume. 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.
3M uses a centralized approach to cash management and the financing of its
operations. As a result, cash and equivalents, and debt were not allocated to
the Company in the financial statements. The historical statements of operations
include an allocation of 3M's interest expense (see Note 6). The Company's
financing requirements are represented by cash transactions with 3M and are
reflected in the "Net Investment by 3M" account (see Note 7). Certain assets and
liabilities of 3M such as certain employee benefit and income tax-related
balances have not been allocated to the Company and are included in the Net
Investment by 3M account. Activity in the Net Investment by 3M equity account
relates to net cash flows of the Company as well as changes in the assets and
liabilities not allocated to the Company.
The Company also participated in 3M's centralized interest rate risk management
function. As part of this activity, derivative financial instruments are
utilized to manage risks generally associated with interest rate market
volatility. 3M does not hold or issue derivative financial instruments for
trading purposes. 3M is not a party to leveraged derivatives. The historical
balance sheets of the Company do not reflect any of the associated asset or
liability positions resulting from this activity because the Company will not
assume any of 3M's derivative financial instruments. The historical statements
of operations and statements of cash flows, however, do reflect an allocation of
the related gains and losses. Such gains and losses were recognized by 3M as
interest expense over the borrowing period and, as a result, are reflected in
the effective interest rates utilized by the Company in deriving its interest
expense. See Note 6.
The minority interest within the historical statements of operations gives
recognition to the Company's share of net income (loss) of certain majority
owned subsidiaries of 3M. The minority shareholders' proportionate interests in
the net assets of majority owned subsidiaries have not been presented in the
historical balance sheets based on the assumption that the Company will obtain
100 percent ownership of the assets and liabilities of these subsidiaries in
connection with the Distribution. See Note (i) to Pro Forma Balance Sheet.
The financial information included herein 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.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTERIM FINANCIAL DATA (UNAUDITED)
The financial information presented as of March 31, 1996 and for each of the
three month periods ended March 31, 1996 and 1995 is unaudited. In the opinion
of management, this financial information reflects all adjustments necessary for
a fair presentation of the financial information for such periods. These
adjustments, except for the restructuring charge recorded in the three months
ended March 31, 1996, consist of normal, recurring items.
The results of operations for the three month period ended March 31, 1996 should
not necessarily be taken as indicative of the results of operations that may be
expected for the entire year 1996.
FOREIGN CURRENCY TRANSLATION
Local currencies are generally considered the functional currencies outside the
United States. Assets and liabilities are translated at year-end exchange rates
with cumulative translation adjustments included as a component of equity.
Income and expense items are translated at average rates of exchange prevailing
during the year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates. Principal areas requiring the
use of estimates include: the allocation of financial statement amounts between
the Company and 3M, determination of allowances for uncollectible accounts
receivable and obsolete/excess inventories, and assessments of the
recoverability of deferred tax assets and certain long-lived assets.
INVENTORIES
Inventories are stated at the lower of cost or market, with cost generally
determined on a first-in first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Plant and equipment are
depreciated on a straight-line basis over their estimated useful lives.
Maintenance and repairs are expensed as incurred. Periodic reviews for
impairment of the carrying value of property, plant and equipment are made based
on undiscounted future cash flows.
EMPLOYEE SEVERANCE INDEMNITIES
Employee severance indemnities consist of termination indemnities and are
accrued for each employee in accordance with labor legislation in each
applicable country.
REVENUE RECOGNITION
Revenue is recognized upon shipment of goods to customers or upon performance of
services. Revenues from service contracts are deferred and recognized over the
life of the contracts as service is performed.
CONCENTRATIONS OF CREDIT RISK
The Company sells a wide range of products and services to a diversified base of
customers around the world and performs ongoing credit evaluations of its
customers' financial condition, and therefore believes there is no material
concentration of credit risk.
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are charged to expense as incurred.
ADVERTISING COSTS
Advertising costs are charged to expense as incurred and totaled $52 million,
$52 million and $45 million in 1995, 1994 and 1993 respectively.
INCOME TAXES
As an operating unit within 3M, the Company does not file separate tax returns
but rather is included in the income tax returns filed by 3M and its
subsidiaries in various domestic and foreign jurisdictions. For purposes of the
historical financial statements, the Company's allocated share of 3M's income
tax provision was based on the "separate return" method, except that the tax
benefit of the Company's tax losses in certain jurisdictions was allocated to
the Company on a current basis if such losses could be utilized by 3M in its tax
returns and an assessment of realizability of certain deferred tax assets was
made assuming the availability of future 3M taxable income. The unaudited pro
forma information on the face of the historical statements of operations for the
three months ended March 31, 1996 and for the year ended December 31, 1995
assumes that the Company's income tax provision (benefit) was calculated based
on a purely "separate return" method (see Note (c) to Pro Forma Statements of
Operations). The balance of accrued current income taxes for the Company's
operations is included in the Net Investment by 3M equity account because 3M
pays all taxes and receives all tax refunds on the Company's behalf.
NOTE 3 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
1995 1994
-------- --------
(MILLIONS)
ACCOUNTS RECEIVABLE
Accounts receivable $ 497.0 $ 495.2
Less allowances 17.5 18.7
-------- --------
Accounts receivable, net $ 479.5 $ 476.5
-------- --------
OTHER CURRENT ASSETS
Deferred taxes $ 23.4 $ 21.9
Other 25.4 25.7
-------- --------
Total other current assets $ 48.8 $ 47.6
-------- --------
PROPERTY, PLANT AND EQUIPMENT
Land $ 7.7 $ 7.6
Buildings and leasehold improvements 180.9 170.5
Machinery and equipment 1,616.2 1,489.3
Construction in progress 63.5 98.3
-------- --------
1,868.3 1,765.7
Less accumulated depreciation 1,355.1 1,110.8
-------- --------
Property, plant and equipment, net $ 513.2 $ 654.9
-------- --------
OTHER ASSETS
Deferred taxes $ 60.6 $ 3.2
Other 13.1 16.0
-------- --------
Total other assets $ 73.7 $ 19.2
-------- --------
OTHER CURRENT LIABILITIES
Accrued rebates $ 44.6 $ 30.6
Deferred income 35.8 38.8
Other 45.5 42.8
-------- --------
Total other current liabilities $ 125.9 $ 112.2
-------- --------
OTHER LIABILITIES
Employee severance indemnities $ 59.2 $ 49.4
Other 37.4 38.7
-------- --------
Total other liabilities $ 96.6 $ 88.1
-------- --------
NOTE 4 -- RESTRUCTURING CHARGES AND ASSET WRITE-OFFS
In late 1995, the Company initiated a review of all of its operations, including
its organizational structure, manufacturing operations, products and markets. In
connection with this review, the Company has adopted a reorganization plan to
rationalize its manufacturing operations, streamline its organizational
structure and write-off impaired assets.
To reflect the direct and indirect costs associated with this reorganization
plan, 3M recognized a loss on disposal which included pre-tax charges of
approximately $340 million in the fourth quarter of 1995 as a part of its
discontinued operations. The Company will reflect the direct portion of these
charges, approximately $250 million, in its separate financial statements
partially in 1995 and partially in 1996 based upon the timing recognition
criteria required for restructuring charges. The Company recorded $166.3 million
of these charges ($88.3 million after taxes and minority interest) in its 1995
historical financial statements and an additional $10.4 million ($6.1 million
after taxes and minority interest) in the first quarter of 1996. The balance of
the $250 million relates primarily to employee severance costs and is expected
to be reflected in the Company's financial statements during the remaining
quarters of 1996.
The 1995 special charge of $166.3 million includes $111.8 million related to
world-wide manufacturing rationalization programs to exit less profitable
manufacturing locations and to centralize manufacturing in the United States and
in Italy, and consists principally of write-offs of property, plant and
equipment. This $111.8 million charge is included as a separate restructuring
charge in the statement of operations. The remaining 1995 special charge of
$54.5 million relates primarily to asset write-offs included in cost of goods
sold.
The first quarter 1996 restructuring charge reflects costs for certain voluntary
separation programs.
NOTE 5 -- INCOME TAXES
1995 1994 1993
------- ----- ------
(MILLIONS)
INCOME (LOSS) BEFORE TAX AND MINORITY
INTEREST
U.S. $(136.1) $63.2 $ 74.8
International (30.7) 18.1 52.6
------- ----- ------
Total $(166.8) $81.3 $127.4
------- ----- ------
INCOME TAX PROVISION (BENEFIT)
Currently payable (refundable)
Federal $ (14.0) $ 8.3 $ 24.0
State (4.3) 1.7 3.5
International 15.6 4.6 34.4
Deferred
Federal (34.9) 9.4 (5.6)
State (3.1) 0.8 (0.4)
International (29.8) 4.5 (4.1)
------- ----- ------
Total $ (70.5) $29.3 $ 51.8
------- ----- ------
1995 1994
----- ------
(MILLIONS)
COMPONENTS OF NET DEFERRED TAX ASSETS AND
LIABILITIES
Receivables $ 4.0 $ 5.3
Inventories 5.9 5.8
Property, plant and equipment 44.5 (16.9)
Payroll 19.2 16.9
Other, net 9.5 4.2
----- ------
Net Deferred Tax Assets and Liabilities $83.1 $ 15.3
----- ------
Management believes the Company, or in certain cases 3M prior to the
Distribution, will generate sufficient taxable income in future periods to
recover fully the Company's deferred tax assets.
1995 1994 1993
----- ---- ----
RECONCILIATION OF EFFECTIVE INCOME TAX RATE
Statutory U.S. tax rate (35.0)% 35.0% 35.0%
State income taxes, net of federal benefit (6.3) 3.1 2.4
International taxes in excess of statutory rate (0.3) 3.4 9.3
All other, primarily foreign tax credits (0.7) (5.5) (6.0)
----- ---- ----
Effective Worldwide Tax Rate (42.3)% 36.0% 40.7%
----- ---- ----
NOTE 6 -- INTEREST EXPENSE
The Company's financial statements include allocations of 3M's interest expense
totaling $18.8 million, $16.3 million and $13.3 million in 1995, 1994 and 1993,
respectively. These allocations are based on a targeted non-ESOP debt
anticipated at the Distribution Date of $250 million. The interest rates used
were 7.5%, 6.5% and 5.3% in 1995, 1994 and 1993, respectively, which reflect
3M's weighted average effective interest rates on non-ESOP debt during these
periods. The historical balance sheets of the Company do not include this debt
as the total capitalization of the Company is reflected in its equity.
NOTE 7 -- EQUITY
Changes in equity during each of the years ended December 31 were as follows:
NET CUMULATIVE
INVESTMENT TRANSLATION TOTAL
BY 3M ADJUSTMENT EQUITY
----- ---------- ------
(MILLIONS)
Balance at December 31, 1992 $1,210.7 $(38.5) $1,172.2
Net income 75.3 75.3
Net amount paid to 3M (13.1) (13.1)
Net change in cumulative
translation (34.6) (34.6)
-------- ------ --------
Balance at December 31, 1993 1,272.9 (73.1) 1,199.8
Net income 54.3 54.3
Net amount received from 3M 18.5 18.5
Net change in cumulative
translation 27.4 27.4
-------- ------ --------
Balance at December 31, 1994 1,345.7 (45.7) 1,300.0
Net loss (85.0) (85.0)
Net amount paid to 3M (72.9) (72.9)
Net change in cumulative
translation 6.6 6.6
-------- ------ --------
Balance at December 31, 1995 $1,187.8 $(39.1) $1,148.7
-------- ------ --------
NOTE 8 -- REVENUES BY CLASS OF SIMILAR PRODUCTS OR SERVICES (UNAUDITED)
The Company operates in one industry segment, the information processing
industry, supplying products and services to meet the information processing
needs for a variety of customer applications. Below are the product and service
revenues by class of similar products or services for each of the years ended
December 31.
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(MILLIONS)
<S> <C> <C> <C>
REVENUE BY CLASSES OF SIMILAR PRODUCTS OR
SERVICES
Information processing, management and storage $ 930.7 $ 935.4 $ 947.3
Information printing 542.2 566.0 567.0
Medical and photo imaging 608.1 589.1 564.4
Other 164.6 190.0 229.1
-------- -------- --------
Total $2,245.6 $2,280.5 $2,307.8
-------- -------- --------
</TABLE>
NOTE 9 -- GEOGRAPHIC AREAS
Information in the table below is presented on the same basis utilized by the
Company to manage its business. Export sales and certain income and expense
items are reported in the geographic area where the final sale to customers is
made, rather than where the transaction originates.
<TABLE>
<CAPTION>
OTHER
UNITED INTERNATIONAL ELIMINATIONS TOTAL
STATES EUROPE* AREAS** AND OTHER COMPANY
------ ------- ------- --------- -------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Net Revenues 1995 $1,128.8 $803.8 $313.0 $2,245.6
to Customers 1994 1,199.9 764.1 316.5 2,280.5
1993 1,247.8 763.2 296.8 2,307.8
Transfers Between 1995 $ 290.9 $ 76.2 $ 4.0 $(371.1)
Geographic Areas 1994 341.2 89.4 0.1 (430.7)
1993 310.9 86.5 0.1 (397.5)
Operating 1995*** $ (169.0) $ 55.8 $(35.7) $ (148.9)
Income (Loss) 1994 1.5 72.9 21.4 95.8
1993 6.0 97.8 36.7 140.5
Identifiable
Assets 1995 $ 816.4 $575.7 $149.7 $ (0.3) $1,541.5
1994 894.9 582.9 194.7 (0.8) 1,671.7
1993 857.4 517.8 176.2 (5.8) 1,545.6
</TABLE>
* Includes operations in the Middle East and Africa since such regions are
managed together with Europe. These operations are not material to the
overall financial results of the Company.
** Includes Latin America, Asia and Canada.
*** Includes special charges of $99.8 million in the United States, $20.4
million in Europe and $46.1 million in Other International Areas.
NOTE 10 -- RETIREMENT PLANS
Prior to the Distribution, employees of the Company participated in various
3M-sponsored retirement plans covering substantially all 3M United States
employees and many employees outside the United States. The following
information is provided for historical purposes only, since the Company intends
to adopt different retirement plans.
3M's pension benefits are based principally on an employee's years of service
and compensation near retirement. Plan assets are invested in common stocks,
fixed-income securities, real estate and other investments.
3M's funding policy is to deposit with an independent trustee amounts at least
equal to those required by law. A trust fund is maintained to provide pension
benefits to United States plan participants and their beneficiaries. In
addition, a number of plans are maintained by deposits with insurance companies.
The Company's allocated portion of pension costs were $24 million, $25 million
and $28 million in 1995, 1994 and 1993, respectively.
Net pension cost and the funded status of pension plans as shown below includes
all employees covered by 3M plans including those associated with the Company.
3M has decided to retain the accrued liabilities (and the assets attributable to
such liabilities) under its United States pension plan pertaining to employees
of the Company. The Company intends to adopt a separate cash balance pension
plan to be effective July 1, 1996 which will cover substantially all United
States employees of the Company. All employees of the Company who are previous
employees of 3M will retain their rights to receive their accrued benefits under
3M's United States pension plan.
<TABLE>
<CAPTION>
U.S. PLAN INTERNATIONAL PLANS
------------------------- ------------------------
1995 1994 1993 1995 1994 1993
----- ----- ----- ----- ---- -----
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
NET PENSION COST
Service cost $ 96 $ 117 $ 110 $ 86 $ 85 $ 86
Interest cost 304 280 276 92 89 80
Return on plan assets --
actual (846) 70 (430) (124) (2) (185)
Net amortization and deferral 532 (377) 154 39 (79) 112
----- ----- ----- ----- ---- -----
Net pension cost $ 86 $ 90 $ 110 $ 93 $ 93 $ 93
----- ----- ----- ----- ---- -----
</TABLE>
<TABLE>
<CAPTION>
U.S. PLAN INTERNATIONAL PLANS
----------------- -----------------
1995 1994 1995 1994
------ ------ ------ ------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
FUNDED STATUS OF PENSION PLANS
Plan assets at fair value $4,134 $3,343 $1,293 $1,333
Accrued pension cost 97 161 110 97
------ ------ ------ ------
Amount provided for future benefits $4,231 $3,504 $1,403 $1,430
Actuarial present value of:
Vested benefit obligation 3,666 2,889 1,051 1,022
Non-vested benefit obligation 521 423 108 100
------ ------ ------ ------
Accumulated benefit obligation $4,187 $3,312 $1,159 $1,122
Amount provided for future benefits less
accumulated benefit obligation 44 192 244 308
Projected benefit obligation 4,696 3,721 1,482 1,514
------ ------ ------ ------
Plan assets at fair value less projected benefit
obligation $ (562) $ (378) $ (189) $ (181)
Unrecognized net transition (asset) obligation (149) (187) 22 22
Other unrecognized items 614 404 57 62
------ ------ ------ ------
Accrued pension cost $ (97) $ (161) $ (110) $ (97)
------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
U.S. PLAN INTERNATIONAL PLANS
------------------------ ------------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
ASSUMPTIONS AT YEAR-END
Discount rate 7.00% 8.25% 7.25% 7.10% 7.45% 7.26%
Compensation rate increase 5.00% 5.00% 5.00% 5.38% 5.71% 5.31%
Long-term rate of return on assets 9.00% 9.00% 9.00% 7.59% 7.65% 7.64%
</TABLE>
Net pension cost is determined using assumptions at the beginning of the year.
Funded status is determined using assumptions at year-end.
Prior to the Distribution, U.S. employees of the Company also participated in a
3M-sponsored employee savings plan under Section 401(k) of the Code. Under this
plan, 3M matches employee contributions of up to 6 percent of compensation at
rates ranging from 35 to 85 percent depending upon financial performance. 3M's
matching contributions to the employee savings plan are funded through an
employee stock ownership plan. The Company's allocation of the expense related
to the employee savings plan was $4.5 million, $4.6 million and $4.7 million in
1995, 1994 and 1993, respectively.
The Company expects to adopt its own employee savings plan under Section 401(k)
of the Code pursuant to which it will make matching contributions through an
employee stock ownership plan.
NOTE 11 -- OTHER POSTRETIREMENT BENEFITS
Prior to the Distribution, employees of the Company who were eligible to retire
from 3M were eligible to participate in various 3M health care and life
insurance benefit plans available to substantially all of 3M's United States
employees. The following information is provided for historical purposes only,
since the Company does not intend to adopt similar postretirement benefit plans.
3M has set aside funds with an independent trustee for these postretirement
benefits and makes periodic contributions to the plans. The assets held by the
trustee are invested in common stocks and fixed-income securities. Employees
outside the United States are covered principally by government-sponsored plans.
The cost of 3M-provided plans for these employees is not material. The Company's
allocation of the net charges to income for plans covering United States
employees was $9 million, $8 million and $8 million in 1995, 1994 and 1993,
respectively.
The table below sets forth the historical components of the net periodic
postretirement benefit cost and a reconciliation of the funded status of the
postretirement benefit plans for all 3M United States employees including those
associated with the Company.
1995 1994 1993
---- ---- ----
(MILLIONS)
NET PERIODIC POSTRETIREMENT BENEFIT
COST
Service cost $ 26 $ 28 $ 23
Interest cost 63 55 53
Return on plan assets -- actual (76) 16 (23)
Net amortization and deferral 51 (40) 1
---- ---- ----
Total $ 64 $ 59 $ 54
---- ---- ----
1995 1994
----- -----
(MILLIONS)
FUNDED STATUS OF POSTRETIREMENT BENEFIT PLANS
Fair value of plan assets $ 398 $ 319
----- -----
Accumulated postretirement benefit
obligation:
Retirees $ 286 $ 256
Fully eligible active plan participants 201 167
Other active plan participants 468 367
----- -----
Benefit obligation $ 955 $ 790
----- -----
Plan assets less benefit obligation $(557) $(471)
Adjustments and unrecognized items 134 67
----- -----
Accrued postretirement cost $(423) $(404)
----- -----
The accumulated postretirement benefit obligation and related benefit cost are
determined through the application of relevant actuarial assumptions. 3M
anticipates its health care cost trend rate to slow from 6.9 percent in 1996 to
5.0 percent in 2003, after which the trend rate is expected to stabilize. The
effect of a one percentage point increase in the assumed health care cost trend
rate for each future year would increase the benefit obligation by $78 million
and the current year benefit expense by $9 million. Other actuarial assumptions
include an expected long-term rate of return on plan assets of 9.0 percent
(before taxes applicable to a portion of the return on plan assets), and a
discount rate of 7.0 percent.
NOTE 12 -- EMPLOYEE STOCK PLANS
Prior to the Distribution certain employees of the Company participated in 3M's
Management Stock Ownership Program covering management employees of 3M. In lieu
of a 1996 annual grant under 3M's program, the Company intends to grant to its
employees who would otherwise have been eligible to receive a 1996 grant under
such Program, options to purchase shares of Common Stock under the new stock
option plan of the Company which was approved by 3M, as the sole stockholder of
the Company, prior to Distribution.
As a result, shortly after the Distribution the Company expects to grant to such
employees options to purchase approximately 800,000 shares of Common Stock.
NOTE 13 -- COMMITMENTS AND CONTINGENCIES
The Company is a party to various claims and litigation arising from the normal
course of business, including product liability and environmental claims. While
there can be no certainty that the Company may not ultimately incur charges in
excess of presently established accruals, management believes that such
additional charges, if any, will not have a material adverse effect on the
Company's financial position.
On or immediately after the Distribution, the Company expects to enter into a
debt facility agreement to borrow approximately $280 million. Of this amount,
the Company will lend $30 million to the employee stock ownership plan it will
establish. The terms of these borrowings are expected to contain customary
covenants including financial covenants. In addition, in connection with the
Distribution the Company intends to enter into a number of agreements with 3M to
facilitate the Distribution and the transition of the Company to an independent
business enterprise. Such agreements are expected to relate to tax sharing
matters, corporate services to be provided by 3M, environmental liabilities,
intellectual property, supply, service, contract manufacturing and sales agency
matters, and shared facilities.
NOTE 14 -- NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. If the sum of the
undiscounted expected future cash flows is less than the carrying amount of the
asset, an impairment loss is recognized. The impact of this statement on the
Company is immaterial.
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation." This statement establishes
financial accounting and reporting standards for stock-based employee
compensation plans. The Company intends to follow the option that permits
entities to continue to apply current accounting standards to stock-based
employee compensation arrangements. Effective with year-end 1996 reporting, the
Company will disclose pro forma net income and earnings per share amounts as if
Statement No. 123 accounting were applied to the Company's stock compensation
programs that may exist once the Company is established as a separate entity
from 3M.
PART II
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements -- Index to Historical Financial Statements
(b) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Form of Transfer and Distribution Agreement, to be dated as of June
18, 1996, between Minnesota Mining and Manufacturing Company ("3M")
and the Registrant.
3.1 * Restated Certificate of Incorporation of the Registrant.
3.2 * Amended and Restated By-Laws of the Registrant.
4.1 * Rights Agreement, dated as of June 18, 1996 between the Registrant and Norwest Bank
Minnesota, N.A., as Rights Agent.
4.2 * Form of Certificate of Designations, Preferences and Rights of Series A Junior
Participating Preferred Stock of the Registrant.
10.1 Form of Tax Sharing and Indemnification Agreement, to be dated as of July 1, 1996 between
3M and the Registrant.
10.2 Form of Corporate Services Transition Agreement, to be dated as of July 1, 1996 between 3M
and the Registrant.
10.3 Form of Environmental Matters Agreement to be dated as of July 1, 1996 between 3M and the
Registrant.
10.4 Form of Intellectual Property Rights Agreement, to be dated as of July 1, 1996 between 3M
and the Registrant.
10.5 Forms of Supply Agreement, to be dated as of July 1, 1996, between 3M and the Registrant.
10.6 Form of Lease Agreement to be dated as of July 1, 1996 between 3M and the Registrant.
10.7 Form of Employment Agreement, to be dated as of July 1, 1996, between William T. Monahan
and the Registrant.
10.8 Form of Imation 1996 Employee Stock Incentive Program.
10.9 Form of Imation Cash Balance Pension Plan.
10.10 Form of Imation Excess Benefit Plan.
10.11 Form of Imation 1996 Retirement Investment Plan.
10.12 Form of Imation 1996 Director Stock Compensation Program.
10.13 Commitment Letter, dated as of June 10, 1996, among 3M, the Registrant, Citibank, N.A. and
Citibank Securities, Inc.
21.1 Subsidiaries of the Registrant.
</TABLE>
*Previously filed.
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
IMATION CORP.
By /S/ W.T. MONAHAN
Name: W.T. Monahan
Title: Chief Executive Officer
Date: June 19, 1996
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
<S> <C> <C>
2.1 Form of Transfer and Distribution Agreement, to be dated as of June
18, 1996, between Minnesota Mining and Manufacturing Company ("3M")
and the Registrant.
3.1 * Restated Certificate of Incorporation of the Registrant.
3.2 * Amended and Restated By-Laws of the Registrant.
4.1 * Rights Agreement, dated as of June 18, 1996 between the Company and Norwest Bank
Minnesota, N.A., as Rights Agent.
4.2 * Form of Certificate of Designations, Preferences and Rights of Series A Junior
Participating Preferred Stock of the Registrant.
10.1 Form of Tax Sharing and Indemnification Agreement, to be dated as of July 1, 1996
between 3M and the Registrant.
10.2 Form of Corporate Services Transition Agreement, to be dated as of July 1, 1996
between 3M and the Registrant.
10.3 Form of Environmental Matters Agreement to be dated as of July 1, 1996 between 3M
and the Registrant.
10.4 Form of Intellectual Property Rights Agreement, to be dated as of July 1, 1996
between 3M and the Registrant.
10.5 Forms of Supply Agreement, to be dated as of July 1, 1996 between 3M and the
Registrant.
10.6 Form of Lease Agreement to be dated as of July 1, 1996 between 3M and the
Registrant.
10.7 Form of Employment Agreement, to be dated as of July 1, 1996, between William T.
Monahan and the Registrant.
10.8 Form of Imation 1996 Employee Stock Incentive Program.
10.9 Form of Imation Cash Balance Pension Plan.
10.10 Form of Imation Excess Benefit Plan.
10.11 Form of Imation 1996 Retirement Investment Plan.
10.12 Form of Imation 1996 Director Stock Compensation Program.
10.13 Commitment Letter, dated as of June 10, 1996, among 3M, the Registrant, Citibank,
N.A. and Citibank Securities, Inc.
21.1 Subsidiaries of the Registrant.
</TABLE>
* Previously filed.
- --------------------------------------------------------------------------------
TRANSFER AND DISTRIBUTION AGREEMENT
Dated as of June 18, 1996
between
MINNESOTA MINING AND MANUFACTURING COMPANY
and
IMATION CORP.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
ARTICLE I
DEFINITIONS
<S> <C> <C>
Section 1.1 General.............................................................................. 2
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.1 The Reorganization................................................................... 13
Section 2.2 Assumption of Parent Liabilities..................................................... 15
Section 2.3 Foreign Transfers.................................................................... 15
Section 2.4 3M Approval.......................................................................... 22
ARTICLE III
ASSUMPTION AND RETENTION OF LIABILITIES
Section 3.1 Assumed Liabilities.................................................................. 22
Section 3.2 Retained Liabilities................................................................. 23
ARTICLE IV
THE DISTRIBUTION
Section 4.1 The Distribution..................................................................... 23
Section 4.2 Fractional Shares.................................................................... 23
Section 4.3 3M Board Action...................................................................... 24
ARTICLE V
INDEMNIFICATION, CLAIMS AND OTHER MATTERS
Section 5.1 Indemnification...................................................................... 24
Section 5.2 Procedure for Indemnification........................................................ 27
Section 5.3 Other Claims by Indemnified Parties Against
Indemnifying Parties................................................................. 30
Section 5.4 Indemnifiable Losses under Sections
5.1(a)(ii) and 5.1(b)(ii)............................................................ 31
Section 5.5 No Beneficiaries..................................................................... 31
Section 5.6 Special Provision Relating to Nishika Case........................................... 32
Section 5.7 Named Parties........................................................................ 32
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.1 Conveyancing and Assumption Instruments.............................................. 33
Section 6.2 No Representations or Warranties; Exceptions......................................... 33
Section 6.3 Further Assurances; Subsequent Transfers............................................. 34
Section 6.4 Imation Officers and Directors....................................................... 36
Section 6.5 Resignations......................................................................... 37
Section 6.6 Certain Intercompany Arrangements.................................................... 37
Section 6.7 Related Agreements................................................................... 37
Section 6.8 Sales and Transfer Taxes............................................................. 37
Section 6.9 Signs; Use of 3M Name................................................................ 38
Section 6.10 Supplies and Documents............................................................... 38
Section 6.11 Plant Closings and Layoffs........................................................... 38
Section 6.12 Shared Facility Arrangements......................................................... 39
Section 6.13 Leased Employees..................................................................... 40
Section 6.14 Other Leased/Shared Properties....................................................... 41
Section 6.15 Domestic Receivables and Payables.................................................... 41
Section 6.16 Diskette Anti-Dumping Duty Exemption................................................. 43
Section 6.17 Repayment of Italian Debt............................................................ 43
Section 6.18 GECC Financing Agreements............................................................ 44
Section 6.19 Letters of Credit.................................................................... 50
Section 6.20 Industrial Revenue Bonds............................................................. 50
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1 Provision of Corporate Records....................................................... 51
Section 7.2 Access to Information................................................................ 51
Section 7.3 Production of Witnesses and Individuals.............................................. 51
Section 7.4 Retention of Records................................................................. 52
Section 7.5 Confidentiality...................................................................... 52
Section 7.6 Privileged Matters................................................................... 55
Section 7.7 Mail and Other Communications........................................................ 56
ARTICLE VIII
EMPLOYEE MATTERS AND BENEFITS.......................................................... 57
Section 8.1 Employment........................................................................... 57
Section 8.2 Qualified and NonQualified Retirement and
Benefit Plans........................................................................ 57
Section 8.3 Welfare Plans........................................................................ 62
Section 8.4 Assumption of Certain Employee Related
Obligations.......................................................................... 66
Section 8.5 Other Liabilities and Obligations.................................................... 67
Section 8.6 Preservation of Rights to Amend or Terminate
Plans................................................................................ 67
Section 8.7 Reimbursement; Indemnification....................................................... 67
Section 8.8 Stock Plans.......................................................................... 68
Section 8.9 Limitation on Enforcement............................................................ 70
Section 8.10 Employment Following the Distribution Date........................................... 70
Section 8.11 Foreign Service Employee and O.U.S. Transferred
Employee Obligations................................................................. 71
ARTICLE IX
INSURANCE
Section 9.1 General.............................................................................. 71
Section 9.2 Imation's Insurance.................................................................. 71
Section 9.3 Access to 3M's Insurance Program..................................................... 71
Section 9.4 Insurance Recoveries................................................................. 73
Section 9.5 Assignment........................................................................... 74
ARTICLE X
DISPUTE RESOLUTION
Section 10.1 Mediation and Binding Arbitration.................................................... 74
Section 10.2 Initiation........................................................................... 74
Section 10.3 Submission to Mediation.............................................................. 74
Section 10.4 Selection of Mediator................................................................ 75
Section 10.5 Mediation and Arbitration............................................................ 75
Section 10.6 Selection of Arbitrator.............................................................. 75
Section 10.7 Cost of Arbitration.................................................................. 76
Section 10.8 Arbitration Period................................................................... 76
Section 10.9 Treatment of Negotiation and Mediation............................................... 76
Section 10.10 Confidentiality...................................................................... 76
Section 10.11 Equitable Relief..................................................................... 77
Section 10.12 Notices.............................................................................. 77
Section 10.13 Consolidation........................................................................ 77
ARTICLE XI
MISCELLANEOUS
Section 11.1 Complete Agreement................................................................... 77
Section 11.2 Expenses............................................................................. 77
Section 11.3 Governing Law........................................................................ 78
Section 11.4 Notices.............................................................................. 78
Section 11.5 Amendment and Modification........................................................... 79
Section 11.6 Termination.......................................................................... 79
Section 11.7 Successors and Assigns............................................................... 79
Section 11.8 No Third Party Beneficiaries......................................................... 80
Section 11.9 Counterparts......................................................................... 80
Section 11.10 Interpretation....................................................................... 80
Section 11.11 Annexes, Etc......................................................................... 80
Section 11.12 Construction of Agreements........................................................... 81
Section 11.13 Legal Enforceability................................................................. 81
Section 11.14 Survival............................................................................. 81
Section 11.15 Guaranty............................................................................. 81
</TABLE>
Annexes:
ANNEX I - Assumed Liabilities
ANNEX II - Retained Liabilities
ANNEX III - Transferred Assets
ANNEX IV - Enterprise Liabilities
ANNEX V - Enterprise Assets
Exhibits:
Exhibit A - Corporate Services Transition Agreement
Exhibit B - Environmental Matters Agreement
Exhibit C - Intellectual Property Agreement
Exhibit D - Joint Defense Agreement
Exhibit E - Joint Representation and Defense Agreement
Exhibit F - Tax Sharing Agreement
Exhibit G - Services Agreements
Exhibit H - Supply Agreements
Exhibit I - Sales Agency Agreements
Exhibit J - Redistribution Agreement
Exhibit K - Contract Manufacturing Agreements
Exhibit L - Reorganization Agreement for Italian Operations
Exhibit M - Form of Foreign Asset Transfer Agreements
Exhibit N - Contribution Agreement for French Operations
Exhibit O - Minutes of Shareholders Meeting relating to
Argentinean Operations
Exhibit P - Minutes of Quotaholders Meeting relating to Brazil-
ian Operations
Exhibit Q - Shared Facility Agreements
Exhibit R - Leased Employee Agreement
Schedules:
Schedule 1.1A - Transferred Businesses
Schedule 1.1B - Business Units Excluded from Transferred
Businesses
Schedule 1.1C - Imation Employees
Schedule 1.1D - Pilot Plant Assets
Schedule 1.1E - 3M Center Assets
Schedule 1.1F - Human Resources Codes
Schedule 5.1(a) - 3M Information in Information Statement
Schedule 6.12(a) - Domestic Shared Facilities
Schedule 6.14(a) - Assigned Third Party Leases
Schedule 6.14(b) - 3M Leased Properties
Schedule 6.15(a) - Trade Receivables/Payables Settlement Schedule
Schedule 8.11 - Foreign Service Employee Obligations
Schedule 9.3 - Pre-Distribution Date Insurance Claims
TRANSFER AND DISTRIBUTION AGREEMENT
TRANSFER AND DISTRIBUTION AGREEMENT, dated as of June 18,
1996, by and between Minnesota Mining and Manufacturing Company, a Delaware
corporation ("3M"), and Imation Corp., a Delaware corporation and a wholly owned
subsidiary of 3M ("Imation").
WHEREAS, 3M has, among other endeavors, been engaged in the
research, manufacturing and marketing of products in its Imaging Systems Group
(the "Imaging Systems Group") and Memory Technologies Group (collectively,
including the business units and plants set forth on Schedule 1.1A hereto, but
not including the business units and plants set forth on Schedule 1.1B hereto,
the "Transferred Businesses");
WHEREAS, the Board of Directors of 3M has determined that the
interests of 3M's businesses and shareholders would be best served by separating
its businesses into two separate companies, one consisting of the Transferred
Businesses and the other consisting of 3M's core businesses (the "Core
Businesses");
WHEREAS, in furtherance of the foregoing, 3M wishes to
transfer and assign to Imation substantially all of the assets and properties of
the Transferred Businesses specified in this Agreement in exchange for (i) the
assumption by Imation of substantially all of the liabilities and obligations
relating to the Transferred Businesses specified in this Agreement and (ii) the
issuance to 3M by Imation of shares of its common stock, par value $.01 per
share (the "Imation Common Stock");
WHEREAS, Imation is willing to assume such liabilities and
obligations and to issue such shares of Imation Common Stock to 3M in exchange
for such assets and properties;
WHEREAS, 3M intends to distribute all of the outstanding
shares of Imation Common Stock, on a pro rata basis, to the holders of the
common stock of 3M, without par value (the "3M Common Stock") (such distribution
hereinafter referred to as the "Distribution");
WHEREAS, 3M and Imation have determined that it is necessary
and desirable to set forth the principal corporate transactions required to
effect the Distribution and to set forth other agreements that will govern
certain other matters in connection with the Distribution.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein and intending to be legally
bound hereby, 3M and Imation hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 General. As used in this Agreement, capitalized
terms defined immediately after their use shall have the respective meanings
thereby provided and the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the
terms defined):
Accrued Benefits: shall have the meaning set forth in Section
8.2(e)(ii) hereof.
Action: any action, claim, suit, arbitration, inquiry,
subpoena, discovery request, proceeding or investigation by or before any court
or grand jury, any governmental or other regulatory or administrative agency or
commission or any arbitration tribunal.
Affiliate: with respect to any specified person, a person
that, directly or indirectly, through one or more intermediaries, controls, or
is controlled by, or is under common control with, such specified person;
provided, however, that 3M and Imation shall not be deemed to be Affiliates of
each other for purposes of this Agreement.
Agent: Norwest Bank Minnesota, N.A., the distribution agent
appointed by 3M to distribute shares of Imation Common Stock pursuant to the
Distribution.
Asset and Liability Transfer: shall have the meaning set forth
in Section 2.1(b) hereof.
Assumed Liabilities: collectively, all of the Liabilities and
other obligations of 3M listed on Annex I hereto which are to be assumed by
Imation or its Affiliates as part of the transaction.
Bids, Quotations and Proposals: the bids, quotations or
proposals which have been submitted or made by the Transferred Businesses or 3M
on behalf of the Transferred Businesses which are outstanding as of the
Distribution Date.
Books and Records: the books and records of 3M (or true and
complete copies thereof), including all computerized books and records owned by
3M, which relate principally to the Transferred Businesses and are necessary for
Imation to operate the Transferred Businesses, including, without limitation,
all such books and records relating to Transferred Employees, the purchase of
materials, supplies and services, the manufacture and sale of products by the
Transferred Businesses or dealings with customers of the Transferred Businesses
and all files relating to any Action being assumed by Imation as part of the
Assumed Liabilities.
COBRA: shall have the meaning set forth in Section 8.4(a)(ii)
hereof.
Code: the Internal Revenue Code of 1986, as amended.
Contract Manufacturing Agreements: the Contract Manufacturing
Agreements, in the form of the agreements attached as Exhibit K hereto, pursuant
to which 3M will manufacture certain products for Imation and Imation will
manufacture certain products for 3M.
Conveyancing and Assumption Instruments: collectively, the
various agreements, instruments and other documents to be entered into in order
to effect the transfer to Imation of Transferred Assets, and the assumption by
Imation of the Assumed Liabilities in the manner contemplated by this Agreement.
Core Businesses: shall have the meaning set forth in the
second WHEREAS clause hereof.
Corporate Services Transition Agreement: the Corporate
Services Transition Agreement, substantially in the form set forth as Exhibit A
hereto, pursuant to which 3M will provide to Imation certain corporate services
specified therein.
Debt Available for Foreign Purchase Transactions: shall have
the meaning set forth in Section 2.3(xiii) hereof.
Defend: address or respond in any manner to any Action
brought, asserted, commenced or pursued by any person or entity that is not a
party to this Agreement.
Defense: the plan for or state of defending.
Dispute: shall have the meaning set forth in Section 10.1
hereof.
Distribution: the distribution as a dividend to holders of 3M
Common Stock of Imation Common Stock on the basis provided in Section 4.1
hereof, which shall be effective on the date specified for the dividend by the
3M Board of Directors.
Distribution Date: the date as of which the Distribution shall
be effected as determined by the 3M Board of Directors.
EBTA: shall have the meaning set forth in Section 8.3(a)(ii)
hereof.
Enterprise Assets: collectively, all of the assets of 3M
identified on Annex V hereto which are to be transferred to Imation Enterprises
in connection with the Distribution.
Enterprise Liabilities: collectively, all of the Liabilities
and other obligations of 3M identified on Annex IV hereto which are to be
assumed by Imation Enterprises in connection with the Distribution.
Enterprise Operations: collectively, the operations conducted
by 3M at the manufacturing facilities of 3M's Imaging Systems Group or at the
manufacturing facilities located at Weatherford, Oklahoma or Menomonie,
Wisconsin, all sales and field logistic operations and the operations
conducted by 3M's HESD Field Service and Customer Support department, in all
instances to the extent part of the domestic operations of the Transferred
Businesses.
Environmental Matters Agreement: the agreement,
substantially in the form of Exhibit B hereto, pursuant to which 3M and Imation
have provided for certain environmental matters.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
ESOP Transfer: shall have the meaning set forth in Section
8.2(b) hereof.
ESOP Transfer Date: shall have the meaning set forth in
Section 8.2(b) hereof.
Exchange Act: the Securities Exchange Act of 1934, as amended.
First Party: shall have the meaning set forth in Section
7.5(b) hereof.
Foreign Asset Transfer Agreements: the Foreign Asset Transfer
Agreements, substantially in the form of the agreements attached as Exhibit M
hereto, pursuant to which certain assets will be sold between respective
Affiliates of 3M and Imation.
Form 10: the registration statement on Form 10 filed by
Imation with the SEC to effect the registration of the Imation Common Stock
pursuant to the Exchange Act.
Grandfathered Employees: shall have the meaning set forth in
Section 8.2(h)(ii) hereof.
Imaging Systems Group: shall have the meaning set forth in the
first WHEREAS clause hereof.
Imation Common Stock: shall have the meaning set forth in the
third WHEREAS clause hereof.
Imation Defined Benefit Plans: shall have the meaning set
forth in Section 8.2(a)(i) hereof.
Imation Defined Contribution Plan: shall have the meaning set
forth in Section 8.2(a)(i) hereof.
Imation Employee Stock Incentive Plan: shall have the meaning
set forth in Section 8.8(c) hereof.
Imation Enterprises: Imation Enterprises Corp., a Delaware
corporation and, as of the date of this Agreement, a wholly owned subsidiary of
3M.
Imation Flexible Benefits Program: shall have the meaning set
forth in Section 8.3(c)(ii) hereof.
Imation Nonqualified Pension Plan: shall have the meaning set
forth in Section 8.2(a)(iii) hereof.
Imation Party: shall have the meaning set forth in Section 5.4
hereof.
Imation Pension Plans: shall have the meaning set forth in
Section 8.2(a)(i) hereof.
Imation Shared Facilities: shall have the meaning set forth in
Section 6.12(a) hereof.
Imation Stock Options: shall have the meaning set forth in
Section 8.8(c) hereof.
Imation VEBA: shall have the meaning set forth in Section
8.3(a)(i) hereof.
Indemnifiable Loss Deduction: shall have the meaning set forth
in Section 5.1(d)(i) hereof.
Indemnifiable Losses: with respect to any claim by an
Indemnified Party for indemnification authorized pursuant to Article V hereof,
any and all losses, liabilities, claims, damages, obligations, payments, costs
and expenses (including, without limitation, the costs and expenses of any and
all Actions, demands, assessments, judgments, settlements and compromises
relating thereto and reasonable attorneys' fees and expenses in connection
therewith) suffered by such Indemnified Party with respect to such claim.
Indemnification Claimant: shall have the meaning set forth in
Section 5.2(c) hereof.
Indemnified Party: any party who is entitled to receive
payment from an Indemnifying Party pursuant to Article V hereof.
Indemnifying Party: any party who is required to pay any other
person pursuant to Article V hereof.
Indemnity Payment: the amount an Indemnifying Party is
required to pay an Indemnified Party pursuant to Article V hereof.
Indemnity Return: shall have the meaning set forth in Section
5.1(d)(i) hereof.
Information: shall have the meaning set forth in Section 7.2
hereof.
Information Statement: the information statement to be sent
to the holders of 3M Common Stock in connection with the Distribution.
Insurance Program: collectively, the series of policies
pursuant to which various insurance carriers provide insurance coverage to 3M
and its Affiliates in respect of claims or occurrences relating to, without
limitation, property damage, manufacturer's output, business interruption,
transit, fire, extended coverage, fiduciary, fidelity, environmental impairment,
employee crime, general liability, products' liability, automobile liability and
employer's liability, excluding risks assumed by Seaside without the benefit of
reinsurance.
Intellectual Property Agreement: the Intellectual Property
Rights Agreement, substantially in the form of Exhibit C hereto, pursuant to
which 3M and Imation are providing for certain matters involving intellectual
property.
Joint Defense Agreement: any agreement, substantially in the
form of Exhibit D hereto, which may be entered into by 3M and Imation with
respect to their defense of certain matters.
Joint Representation and Defense Agreement: any agreement,
substantially in the form of Exhibit E hereto, which may be entered into by 3M
and Imation with respect to representation and defense of certain matters.
Leased Employees: As provided in the Leased Employee
Agreement, all hourly and salaried employees of 3M at 3M's Rochester, New York
facility, all hourly employees in the CD Rom section of 3M's Menomonie,
Wisconsin facility, and all other 3M employees listed on attachments to the
Leased Employee Agreement who are leased to Imation and/or its Affiliates for
various periods as provided in the Leased Employee Agreement.
Leased Employee Agreement: The Leased Employee Agreement,
substantially in the form of Exhibit R hereto, pursuant to which Imation and/or
Imation Enterprises will lease the Leased Employees from 3M.
Liabilities: any and all debts, liabilities and obligations,
whether accrued, contingent (known or unknown) or reflected on a balance sheet,
including, without limitation, those arising under any law, rule, regulation,
Action, order or consent decree of any governmental entity or any judgment of
any court of any kind or any award of any arbitrator of any kind, and those
arising under any contract, commitment or undertaking.
Minnesota Research: shall have the meaning set forth in
Section 2.3(viii) hereof.
1996 Grants: shall have the meaning set forth in Section
8.8(c) hereof.
Non-Permitted Names: shall have the meaning set forth in
Section 6.9 hereof.
Option: an option to purchase shares of 3M Common Stock under
any of the Stock Option Plans.
O.U.S. Transferred Employees: shall have the meaning set forth
in Section 8.1 hereof.
Parent Assets: shall have the meaning set forth in Section
2.1(a) hereof.
Parent Liabilities: shall have the meaning set forth in
Section 2.1(a) hereof.
Pilot Plant Assets: the assets utilized by the Transferred
Businesses relating to the pilot plants located in buildings 235 and 236 of 3M
Center which are set forth on Schedule 1.1D hereto.
Privilege(s): shall have the meaning set forth in Section
7.6(a) hereof.
Privileged Information: shall have the meaning set forth in
Section 7.6(a) hereof
Progressive Stock Options: shall have the meaning set forth in
Section 8.8(a) hereof.
PUP: shall have the meaning set forth in Section 8.4(a)(iv)
hereof.
Record Date: the date determined by the Board of Directors of
3M as the record date for the Distribution.
Recovery: the amount obtained pursuant to a claim under an
insurance policy in the Insurance Program.
Redistribution Agreement: the Redistribution Agreement, in the
form of Exhibit J hereto, pursuant to which 3M will distribute certain products
on behalf of Imation.
Related Agreements: the Conveyancing and Assumption
Instruments, Corporate Services Transition Agreement, Environmental Matters
Agreement, Intellectual Property Agreement, Tax Sharing Agreement, Services
Agreements, Supply Agreements, Sales Agency Agreements, Redistribution
Agreement, Contract Manufacturing Agreements, Shared Facility Agreements, the
Leased Employee Agreement, the foreign transfer agreements, and the various
service, supply and other agreements to be entered into between 3M and its
subsidiaries, on the one hand, and Imation and its subsidiaries on the other
hand in connection with the Distribution and the other transactions contemplated
hereby.
Retained Liabilities: collectively, all of the Liabilities and
obligations of 3M listed on Annex II hereto.
Sales Agency Agreements: the Sales Agency Agreements, in the
form of the agreements attached as Exhibit I hereto, pursuant to which 3M will
provide certain sales services to Imation and Imation will provide certain sales
services to 3M, as the case may be.
SEC: the Securities and Exchange Commission.
Services Agreements: the Services Agreements, in the form of
the agreements attached as Exhibit G hereto, pursuant to which 3M will provide
certain services to Imation or Imation will provide certain services to 3M, as
the case may be.
Shared Facility Agreements: the Shared Facilities Lease
Agreements, in the form of the agreements attached as Exhibit Q, pursuant to
which 3M or Imation will lease to the other a portion of a facility and provide
certain services in connection therewith.
Shared Facility Arrangements: shall have the meaning set forth
in Section 6.12(a)hereof.
Shared Facility Term: with respect to a specific Shared
Facility Agreement, the term set forth in such agreement, as such term may be
extended or shortened in accordance with the terms of such agreement.
Special Retirement Benefits: shall mean the 3M Special
Retirement Benefits and the Imation Special Retirement Benefits as defined in
Sections 8.2(e)(iv) and 8.2(h)(ii) hereof.
Stock Option Plans: 3M's 1987 and 1992 Management Stock
Ownership Programs.
Supply Agreements: the Supply Agreements, in the form of the
agreements attached as Exhibit H hereto, pursuant to which 3M and Imation will
provide certain materials to each other.
Tax Saving Amount: shall have the meaning set forth in Section
5.1(d)(ii) hereof.
Tax Sharing Agreement: the Tax Sharing and Indemnification
Agreement, in the form of Exhibit F hereto, pursuant to which 3M and Imation
have provided for certain tax matters.
Third Party Claim: shall have the meaning set forth in Section
5.2(a) hereof.
3M Center Assets: the assets located at 3M Center which are
principally utilized by the Transferred Businesses and are to be transferred to
Imation or Imation Enterprises pursuant to Section 2.1 hereof, as identified on
Schedule 1.1E hereof.
3M Common Stock: shall have the meaning set forth in the fifth
WHEREAS clause hereof.
3M Defined Benefit Plans: shall have the meaning set forth
in Section 8.2(e) hereof.
3M 401(K)/ESOP: shall have the meaning set forth in Section
8.2(b) hereof.
3M Nonqualified Pension Plans: shall have the meaning set
forth in Section 8.2(e) hereof.
3M Options: shall have the meaning set forth in Section 8.8(a)
hereof.
3M Party: shall have the meaning set forth in Section 5.4
hereof.
3M Pension Plans: shall have the meaning set forth in Section
8.2(e) hereof.
3M Post Retirement Medical Plans: shall have the meaning set
forth in Section 8.3(a)(iii) hereof.
3M Qualified Pension Plans: shall have the meaning set forth
in Section 8.2(e) hereof.
3M Shared Facility: shall have the meaning set forth in
Section 6.12(a) hereof.
3M Survivor Program: shall have the meaning set forth in
Section 8.2(a) hereof.
3M VEBA: shall have the meaning set forth in Section 8.3(a)(i)
hereof.
Transaction Taxes: shall have the meaning set forth in Section
6.8 hereof.
Transferred Assets: collectively, all of the assets and
properties of 3M and its Affiliates identified on Annex III hereto.
Transferred Businesses: the businesses referred to as such in
the first WHEREAS clause of this Agreement, including any businesses (such as
Dynacolor, the Data Cartridge Drive Business and Comtal) or products of 3M that
were discontinued or otherwise terminated by 3M prior to the Distribution Date,
to the extent, but only to the extent, that such businesses were conducted or
products were sold as part of the business units (irrespective of the name of
any such unit at the time) referred to as part of the Transferred Businesses in
such WHEREAS clause.
Transferred Employee: any employee of 3M who is employed by
the business units, or at the plants listed on Schedule 1.1A, any 3M employee
from the 3M staff organizations, such as engineering, controllers, human
resources or Legal Affairs, who is assigned full-time to one of such business
units or plants as of the Distribution Date or who is listed on Schedule 1.1C,
domestic employees of 3M who are on the Distribution Date assigned Inactive
Status Codes 20, 21, 22, 23, 24, 32 and 34, or Special Status Codes 30, 40 and
41 (a copy of 3M's human resources codes is attached as Schedule 1.1F) and who
last worked for the business units or at the plants listed on Schedule 1.1A, any
foreign employee identified on schedules to, or otherwise contemplated by, the
various foreign transfer agreements, and any employee of 3M who has volunteered
to be employed by Imation as of the Distribution Date, but excluding 3M
employees who, as of the Distribution Date, are: Leased Employees, 3M employees
on Pre-Retirement Leave Status, 3M employees on 3M's Unassigned List or 3M
employees in those portions of Imation's facilities leased by 3M from Imation
and, further, excluding 3M employees who have accepted on or prior to the
Distribution Date voluntary separation plans offered prior to the Distribution
Date by the business units or at the plants listed on Schedule 1.1A.
U.S. Transferred Employees: shall have the meaning set forth
in Section 8.1 hereof.
WARN Act: shall have the meaning set forth in Section 6.10
hereof.
ARTICLE II
REORGANIZATION AND RELATED TRANSACTIONS
Section 2.1 The Reorganization.
(a) Subject to the terms and conditions of this Agreement, 3M
and Imation shall cause, on the Distribution Date, (i) all of 3M's right, title
and interest in and to the Transferred Assets (other than the Enterprise Assets)
(the "Parent Assets") to be conveyed, assigned, transferred and delivered to
Imation (or the appropriate Imation Affiliate), free and clear of all liens or
encumbrances in favor of 3M, (ii) all of 3M's duties, obligations and
responsibilities under the Assumed Liabilities (other than the Enterprise
Liabilities) (the "Parent Liabilities") to be assumed by Imation (or the
appropriate Imation Affiliate), and (iii) all of 3M's right, title and interest
in and to all capital stock of Imation Enterprises to be conveyed, assigned,
transferred and delivered to Imation, free and clear of all liens or
encumbrances in favor of 3M.
(b) Subject to the terms and conditions of this Agreement, 3M
and Imation shall cause, immediately prior to the transfer and assumption
contemplated by Section 2.1(a) hereof, (i) all of 3M's right, title and interest
in and to the Enterprise Assets to be conveyed, assigned, transferred and
delivered to Imation Enterprises, free and clear of all liens or encumbrances in
favor of 3M, and (ii) all of 3M's duties, obligations and responsibilities under
the Enterprise Liabilities to be assumed by Imation Enterprises (the transfers
set forth in subsections (a) and (b) hereof, the "Asset and Liability
Transfer").
(c) Subject to Section 6.3 hereof, to the extent that any such
conveyances, assignments, transfers and deliveries shall not have been so
consummated on the Distribution Date, 3M and Imation shall cooperate to effect
such consummation as promptly thereafter as shall be practicable, it nonetheless
being understood and agreed by 3M and Imation that neither shall be liable in
any manner to any person who is not a party to this Agreement for any failure of
any of the transfers contemplated by this Article II to be consummated on or
subsequent to the Distribution Date. Whether or not all of the Parent Assets or
the Parent Liabilities shall have been legally transferred to Imation or all of
the Enterprise Assets or the Enterprise Liabilities shall have been legally
transferred to Imation Enterprises as of the Distribution Date, 3M and Imation
agree that, as of the Distribution Date, Imation and Imation Enterprises shall
have, and shall be deemed to have acquired, complete and sole beneficial
ownership over all of the Parent Assets and Enterprise Assets, respectively,
except as described herein with respect to assets which are non-assignable,
together with all of 3M's rights, powers and privileges (except as provided in
Section 7.6 hereto) incident thereto, and shall be deemed to have assumed in
accordance with the terms of this Agreement all of the Parent Liabilities and
Enterprise Liabilities, respectively, and all of 3M's duties, obligations and
responsibilities incident thereto.
(d) In furtherance of the transfers and assumptions
contemplated by the foregoing Sections 2.1(a) and (b), Imation and 3M, as
between the two of them, acknowledge and agree as follows: (a) 3M and its
Affiliates shall have no obligation or liability of any kind to Imation or its
Affiliates for any condition existing at or prior to the Distribution Date or
for any conduct, act or omission by or on behalf of 3M, its Affiliates or any
other person on, or at any time prior, to the Distribution Date; and Imation and
its Affiliates shall have no claims, or right to bring a claim or Action,
against 3M or its Affiliates with respect thereto, including (without
limitation) any claim or Action arising out of (i) the operation of the
Transferred Businesses on or before the Distribution Date, (ii) any advice,
rights, products or services made available to the Transferred Businesses, on or
before the Distribution Date, by 3M, its Affiliates or any other person, (iii)
the Assumed Liabilities or (iv) the formation of Imation; except for, and to the
extent of, any responsibilities specifically retained by 3M or any of its
Affiliates pursuant to the terms of this Agreement or any of the Related
Agreements; and (b) Imation and its Affiliates shall have no obligation or
liability of any kind to 3M or its Affiliates for any condition existing at or
prior to the Distribution Date or for any conduct, act or omission by or on
behalf of Imation, its Affiliates or any other person on, or at any time prior
to, the Distribution Date; and 3M and its Affiliates shall have no claims, or
right to bring a claim or Action, against Imation or its Affiliates with respect
thereof, including (without limitation) any claim or Action arising out of (i)
the operations of 3M other than the Transferred Businesses on or before the
Distribution Date, (ii) any advice, rights, products or services made available
to 3M or its Affiliates, on or before the Distribution Date, by the Transferred
Businesses or any other person or (iii) the Retained Liabilities; except for,
and to the extent of, any responsibilities specifically assumed by Imation or
any of its Affiliates pursuant to the terms of this Agreement or any of the
Related Agreements.
(e) Representatives of 3M and Imation have prepared schedules
to identify equipment located at various domestic manufacturing facilities which
is not to be retained by the party retaining the respective facilities. These
schedules, which have been initialled by the respective heads of manufacturing
for 3M and Imation, shall be binding on the parties so as to resolve any
questions as to the allocation of equipment at such facilities.
Section 2.2 Assumption of Parent Liabilities. In consideration
for the conveyance, assignment, transfer and delivery of the Parent Assets and
Enterprise Assets being made pursuant to Section 2.1 hereof, Imation agrees to
assume the Parent Liabilities and to issue and deliver to the Agent for delivery
to stockholders of 3M as of the Record Date certificates representing the number
of shares of Imation Common Stock provided for in Section 4.1 hereof and to
cause Imation Enterprises to assume, pay, perform and discharge in due course
any and all Enterprise Liabilities.
Section 2.3 Foreign Transfers. The foregoing notwithstanding,
3M and Imation shall cause the assets and liabilities related to the Transferred
Businesses which are located outside the United States to be transferred in
accordance with the following provisions:
(i) Italy. On or prior to the Distribution Date,
the operations of 3M in Italy shall be reorganized pursuant to the agreements
set forth as Exhibit L hereto, which reorganization shall effectively separate
the respective operations of the Transferred Businesses and the Core Businesses
in Italy. As a result of the reorganization, the operations of the Transferred
Businesses shall be conducted by Imation Finanziaria S.p.A. (including its
direct and indirect subsidiaries), the stock of which will be transferred to
Imation on or prior to the Distribution Date.
(ii) France. On or prior to the Distribution Date,
(i) the assets and liabilities of 3M in France related to the Transferred
Businesses (other than certain trade receivables and payables) will be
transferred to a newly formed subsidiary of the 3M subsidiary incorporated under
the laws of such country and (ii) the stock of such subsidiary will be
distributed to 3M and, thereafter, contributed to the capital of Imation, all as
more fully described in the contribution agreement attached as Exhibit N hereto
(the "French Contribution Agreement").
(iii) Argentina. On or prior to the Distribution
Date, (i) the assets and liabilities of 3M in Argentina related to the
Transferred Businesses will be transferred to a newly formed corporation
incorporated under the laws of such country and (ii) the stock of such
corporation will be contributed by 3M to the capital of Imation, all as more
fully described in the minutes of a special shareholders meeting attached as
Exhibit O hereto. Following the Distribution, Imation shall, or shall cause its
Affiliate in Argentina to, indemnify and hold harmless 3M and its Affiliates
against any and all liabilities arising as a result of any reduction in the
workforce or closure of any facilities effected by Imation's Affiliate in
Argentina following the Distribution Date.
(iv) Brazil. On or prior to the Distribution Date,
(i) the assets and liabilities of 3M in Brazil related to the Transferred
Businesses will be transferred to a newly formed corporation incorporated under
the laws of such country and (ii) the stock of such corporation will be
contributed by 3M to the capital of Imation, all as more fully described in the
minutes of a special quotaholders meeting attached as Exhibit P hereto.
(v) India. Birla 3M Ltd. shall retain all assets and
liabilities (including those relating to the Transferred Businesses) owned by it
as of the Distribution Date. In addition, it is the present intention of the
parties that, following the Distribution Date and subject to the receipt of any
required approvals, Birla 3M Ltd. will act as a non-exclusive sales agent of
Imation. At the time of the Distribution, Birla 3M Ltd. may transfer the
inventory related to the Transferred Businesses to distributors designated by
Imation and, in such event, Imation will, if requested, guarantee the payments
to be made by the distributors.
(vi) Netherlands. On or prior to the Distribution
Date, 3M shall cause to be assigned and transferred to Imation all of the
outstanding interests of CD-Rom Services C.V.
(vii) Belgium. On or prior to the Distribution
Date, 3M shall cause to be assigned and transferred to Imation all of the
outstanding shares of CD-Rom Sales S.A.
(viii) United Kingdom. The transfer of operations of
the Transferred Businesses in the United Kingdom shall be effected as follows:
* 3M agrees that if as at the date of this Agreement, 3M is
the beneficial owner of the building known as Building 2, 3M
House, Bracknell, England, it shall transfer the said Building
2 to Imation in accordance with Section 2.1 hereof or if 3M
is not the beneficial owner of the said Building 2 as at the
date of this Agreement, 3M shall cause its Affiliate in the
United Kingdom to agree to sell to 3M the said Building 2
and 3M shall procure the transfer of the said Building 2 to
Imation in accordance with Section 2.1. Any such transfers
shall be subject to (and with the benefit of) any leases of
parts of the said Building 2 previously granted by any
Affiliate of 3M in the United Kingdom or otherwise agreed to
be granted to an Affiliate of 3M in the United Kingdom.
* As of the Distribution Date, the outstanding stock of
Minnesota 3M Research Limited ("Minnesota Research") shall be
transferred to Imation in the following manner: (a) the 80%
interest owned by 3M UK Holdings PLC and 3M (Holdings)
Limited shall be sold, assigned and transferred to 3M, and (b)
the 100% interest then owned by 3M shall be transferred to
Imation in accordance with the provisions of Section 2.1
hereof.
* The other assets and/or liabilities of the Transferred
Businesses owned by Affiliates of 3M in the United Kingdom
shall be transferred to an Affiliate(s) of Imation in a manner
consistent with subparagraph (xii) below.
(ix) Japan. It is the intention of the parties,
subject to the receipt of any required approvals, to transfer the Transferred
Businesses in Japan to an Affiliate of Imation in Japan in a manner consistent
with subparagraph (xii) below, although the parties recognize that the HESD
businesses relating to the Core Businesses will not be transferred and that
certain fixed assets may be leased, rather than sold.
(x) Korea. It is the intention of the parties,
subject to the receipt of any required approvals, to transfer the Transferred
Businesses in Korea to an Affiliate of Imation in Korea in a manner consistent
with subparagraph (xii) below. Imation agrees that it will not establish for a
period commencing on the Distribution Date and ending on the earlier of (a)
consummation of the transfer contemplated by the preceding sentence or (b) the
six month anniversary of the Distribution Date any independent operations in
Korea.
(xi) China. It is the intention of the parties to
transfer the Transferred Businesses in China to an Affiliate of Imation in China
in a manner consistent with subparagraph (xii) below, although the parties
recognize that the HESD businesses may not be transferred unless and until the
Imation Affiliate in China obtains an appropriate license from the appropriate
authorities in China.
(xii) Other Countries. On or prior to the
Distribution Date, 3M shall use its best efforts to cause its Affiliate in each
other country located outside the United States (in addition to those countries
referred to in subparagraphs (viii)-(xi) above, as described therein) to sell to
the Affiliate of Imation designated by Imation, and Imation shall use its best
efforts to cause its respective Affiliate(s) to purchase from the appropriate 3M
Affiliate, the inventory, property, plant and equipment and other assets of the
Transferred Businesses owned by such 3M Affiliate, in consideration for a cash
payment by the respective Imation Affiliate(s) to the respective 3M Affiliate
equal to the value of the assets so transferred (net of assumed liabilities)
which is reflected on the books of 3M at the time of the transfer, all as more
fully set forth in the respective Foreign Asset Transfer Agreements (which shall
be amended, as appropriate, to include deferred receivables under financing
contracts). In the event that it is not feasible to effect the transfers
contemplated by the preceding sentence on or prior to the Distribution Date in
any particular country, 3M and Imation will continue, following the Distribution
Date, their respective efforts to have such transfers and payments effected as
promptly as practicable following the Distribution Date or, if Imation and 3M
determine that such transfers are not capable of being effected on a timely
basis (not to exceed 6 months), enter into such other arrangements as are
mutually agreed upon which are intended to enable Imation to operate in such
country on a basis similar to that being conducted by 3M with respect to the
Transferred Businesses. Pending consummation of any such transfers or the
entering into of other arrangements as contemplated by the preceding sentence,
Imation and 3M shall enter into such arrangements as may be necessary to enable
3M and its Affiliates to continue to conduct the Transferred Businesses,
including with respect to the supply of inventory. Following completion of each
such transfer (or, if earlier, six months), either 3M shall pay to Imation an
amount equal to any operating income after taxes and minority interests realized
by 3M after the Distribution Date with respect to these operations or Imation
shall pay to 3M an amount equal to any operating losses after taxes and minority
interests realized by 3M after the Distribution Date with respect to these
operations, as the case may be.
(xiii) Additional Cash Payments. (a) In connection
with the Distribution, 3M shall contribute to the capital of Imation an amount
in cash equal to the total amount to be paid by the respective Imation
Affiliates pursuant to the preceding subparagraphs (viii)-(xii) (net of any
V.A.T. or other similar taxes which are recoverable by the respective Imation
Affiliates) less an amount equal to the Debt Available for Foreign Purchase
Transactions. For purposes of the preceding sentence, the Debt Available for
Foreign Purchase Transactions shall be an amount equal to $200 million less the
sum, without duplication, of (x) any debt presently outstanding (including
accrued interest) to 3M from its Affiliates in Italy which is being assumed by
an Affiliate of Imation and repaid with funds advanced by Imation or one of its
Affiliates, (y) $23 million, and (z) an amount equal to the vacation pay of the
U. S. Transferred Employees, which is accrued on the books of 3M as of the
Distribution Date. 3M shall make an estimated payment at the time of the
Distribution (to reflect (x) payments actually made by Imation or its Affiliates
at the time of the Distribution with respect to foreign transfers consummated at
the time of the Distribution and (y) the estimated amounts utilized to determine
the Debt Available for Foreign Purchase Transactions), which payment shall be
adjusted from time to time by 3M and Imation to reflect (A) all payments
contemplated by subparagraphs (viii) through (xii) above, including payments
made with respect to delayed closings or as post-closing adjustments to the
purchase prices paid at the time of the Distribution for foreign transfers
effected as of t he Distribution Date, and (B) the final amounts utilized to
determine the Debt Available for Foreign Purchase Transactions. The amounts to
be contributed by 3M pursuant to this Section 2.3(xiii)(a) shall be reduced by
the amount of the cash balances, if any, as of the Distribution Date in the
Imation Affiliates in Italy, France, Argentina and Brazil.
(b) Unless specifically provided otherwise, it is the intent of the
parties that, for federal income tax purposes, all payments made pursuant to
this Agreement shall be treated as adjustments (whether increases or decreases)
to the amount of cash contributed to the capital of Imation pursuant to Section
2.3(xiii)(a) hereof, and, to the extent any such payments decrease the amount of
such cash contributed (as adjusted by this Section 2.3(xiii)(b)) to zero, any
additional payments shall be treated as otherwise relating back to the transfers
made pursuant to Section 2.1(a) hereof.
(xiv) Certain Foreign Receivables/Payables.
Notwithstanding anything contained herein to the contrary, the respective
Affiliates of 3M in the countries a portion of whose businesses are being
transferred in accordance with the provisions of subparagraphs (viii) through
(xii) above and in France shall retain all trade receivables and all trade
payables relating to the Transferred Businesses (except as otherwise provided in
a specific Foreign Asset Transfer Agreement or the French Contribution
Agreement) and, in connection therewith, 3M agrees to remit to Imation an amount
equal to (a) such trade receivables (net of doubtful accounts determined in the
ordinary course consistent with past practice) less trade payables, in each
instance as reflected on the books of 3M as of Distribution Date, less (b) the
amount by which intercompany trade receivables transferred to Affiliates of
Imation exceed intercompany payables assumed by Affiliates of Imation. The
amount payable pursuant to the preceding sentence shall be in U.S. dollars and
paid in the following installments: one-third within 30 days of the Distribution
Date, one-third within 60 days of the Distribution Date and the remainder within
90 days of the Distribution Date. Following the Distribution Date, the
responsibility for such receivables and payables shall be entirely with 3M.
(xv) Foreign Exchange Rates. Except as agreed upon by
3M and Imation or as otherwise provided in this Agreement, all payments to each
other shall be in U.S. dollars and all amounts represented on the books of 3M or
Imation as a foreign currency obligation shall be converted into U.S. dollars
based on the exchange rate quoted in The Wall Street Journal on the last
business day preceding the Distribution Date (or as of such other day as may be
agreed to by Imation and 3M) or, with respect to payments to be made with
respect to a date other than the Distribution Date, the last business day
preceding the respective applicable date (or as of such other day as may be
agreed to by Imation and 3M). 3M and Imation acknowledge that neither party is
intended to benefit from any changes in exchange rates following the
Distribution Date and that 3M and Imation will cooperate with each other to
facilitate the prompt transfer of funds so as to minimize the potential effect
of any changes in exchange rates.
(xvi) Structure. 3M and Imation recognize that the
form of the transaction to effect the transfer of assets and liabilities in a
particular country may change between the date of this Agreement and the
Distribution Date, provided that any such change shall not adversely effect the
rights or obligations being transferred to, or assumed by, Imation and its
Affiliates. In such event, the provisions of this Section 2.3 shall be deemed to
be amended appropriately to reflect the form of such transaction.
(xvii) Delayed Spinoff Transactions. 3M and Imation
agree that the provisions set forth in the last three sentences of subparagraph
(xii) shall also apply to the transactions contemplated in subparagraphs (iii)
and (iv) should either of the transactions contemplated in such subparagraphs
not be effected on the Distribution Date.
Section 2.4 3M Approval. 3M shall cooperate with Imation in
effecting, and if so requested by Imation, 3M shall, as the sole stockholder of
Imation and Imation Enterprises, ratify any actions which are reasonably
necessary or desirable to be taken by Imation and Imation Enterprises to
effectuate the transactions contemplated by this Agreement in a manner
consistent with the terms of this Agreement, including, without limitation, the
election or appointment of directors and officers of Imation to serve in such
capacities following the Distribution Date (if not so appointed by the Board of
Directors of Imation).
ARTICLE III
ASSUMPTION AND RETENTION OF LIABILITIES
Section 3.1 Assumed Liabilities. Upon the terms and subject to
the conditions set forth in this Agreement and in addition to any other
Liabilities otherwise expressly assumed by Imation pursuant to this Agreement,
the Related Agreements or any other agreement contemplated by this Agreement,
Imation hereby agrees with 3M to assume, pay, perform and discharge (or to cause
the appropriate Affiliate of Imation to pay, perform and discharge) in due
course any and all Assumed Liabilities (other than the Enterprise Liabilities)
and cause Imation Enterprises to assume, pay, perform and discharge in due
course any and all Enterprise Liabilities.
Section 3.2 Retained Liabilities. Upon the terms and subject
to the conditions set forth in this Agreement and in addition to any other
Liabilities otherwise expressly retained by 3M pursuant to this Agreement, the
Related Agreements or any other agreement contemplated by this Agreement, 3M
hereby agrees with Imation that 3M shall pay, perform and discharge in due
course any and all Retained Liabilities.
ARTICLE IV
THE DISTRIBUTION
Section 4.1 The Distribution. On or prior to the Distribution
Date, 3M shall deliver to the Agent the certificate for 100 shares of Imation
Common Stock which were owned by 3M prior to the Distribution. Upon receipt from
3M of a certificate as to the number of shares of 3M Common Stock outstanding on
the Record Date, Imation shall deliver to the Agent, for the benefit of holders
of record of 3M Common Stock on the Record Date, a stock certificate
representing, in the aggregate (and rounded down to the nearest whole share), a
number of shares representing one share of Imation Common Stock for every 10
shares of 3M Common Stock outstanding on the Record Date (less the 100 shares of
Imation Common Stock owned prior to the Distribution by 3M), and shall instruct
the Agent to distribute as promptly as practicable following the Distribution
Date to holders of record of 3M Common Stock on the Record Date one share of
Imation Common Stock for every 10 shares of 3M Common Stock and cash in lieu of
fractional shares of Imation Common Stock obtained in the manner provided in
Section 4.2 hereof. Imation agrees to provide to the Agent sufficient
certificates in such denominations as the Agent may request in order to effect
the Distribution. All of the shares of Imation Common Stock issued in the
Distribution shall be fully paid, nonassessable and free of preemptive rights.
Section 4.2 Fractional Shares. No certificate or scrip
representing fractional shares of Imation Common Stock shall be issued as part
of the Distribution and in lieu of receiving fractional shares, each holder of
3M Common Stock who would otherwise be entitled to receive a fractional share of
Imation Common Stock pursuant to the Distribution will receive cash for such
fractional share. 3M and Imation agree that 3M shall instruct the Agent to
determine the number of whole shares and fractional shares of Imation Common
Stock allocable to each holder of record of 3M Common Stock as of the Record
Date, to aggregate all such fractional shares into whole shares and sell the
whole shares obtained thereby in the open market at then prevailing prices on
behalf of holders who otherwise would be entitled to receive fractional share
interests and to distribute to each such holder such holder's ratable share of
the total proceeds of such sales (net of any commissions incurred in connection
with such sales), net of any amount required to be withheld under applicable
law.
Section 4.3 3M Board Action.
(a) This Agreement and the Related Agreement have been
approved by the Board of Directors of 3M, subject to the declaration of the
Distribution by the Board of Directors of 3M, and the consummation of the
transactions provided for herein or therein shall only be effected after the
Distribution has been declared by the Board of Directors of 3M.
(b) The Board of Directors of 3M, in its discretion, shall
establish the Record Date and the Distribution Date and all appropriate
procedures in connection with the Distribution.
ARTICLE V
INDEMNIFICATION, CLAIMS
AND OTHER MATTERS
Section 5.1 Indemnification.
(a) 3M shall indemnify, defend and hold harmless Imation and
each of its directors, officers, employees, agents and Affiliates from and
against any and all Indemnifiable Losses of Imation or any of its Affiliates
arising out of or due to, directly or indirectly, (i) any Third Party Claims (as
defined in Section 5.2) in connection with any of the Retained Liabilities, (ii)
Third Party Claims that the information included in the Information Statement or
the Form 10 under the captions set forth on Schedule 5.1(a) hereto is false or
misleading with respect to any material fact or omits to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, (iii) Third Party Claims that 3M or its Affiliates failed to
perform, or violated, any provision of this Agreement which is to be performed
or complied with by 3M or its Affiliates, (iv) breaches of this Agreement by 3M
or its Affiliates or (v) any guarantees which may be granted, either before or
after the Distribution Date, by Imation or one of its Affiliates on behalf of 3M
or one of its Affiliates.
(b) Imation shall indemnify, defend and hold harmless 3M and
each of its directors, officers, employees, agents and Affiliates from and
against any and all Indemnifiable Losses of 3M or any of its Affiliates arising
out of or due to, directly or indirectly, (i) Third Party Claims in connection
with any of the Assumed Liabilities, (ii) Third Party Claims that the
information included in the Information Statement or the Form 10, other than
under the captions set forth on Schedule 5.1(a) hereto, or the information
provided, or statements made, in connection with the investor roadshow held in
connection with the Distribution, is false or misleading with respect to any
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, (iii) Third Party
Claims that Imation or its Affiliates failed to perform, or violated, any
provision of this Agreement which is to be performed or complied with by Imation
or its Affiliates or (iv) breaches of this Agreement by Imation or its
Affiliates or (v) any guarantees which may be granted, either before or after
the Distribution Date, by 3M or one of its Affiliates on behalf of Imation or
one of its Affiliates, including without limitation with respect to any third
party leases assumed or undertaken by Imation or any of its Affiliates in
Australia or otherwise.
(c) Amounts required to be paid pursuant to this Article V are
hereafter sometimes collectively called "Indemnity Payments" and are
individually called an "Indemnity Payment." The amount which any party (an
"Indemnifying Party") is required to pay to any other party (an "Indemnified
Party") pursuant to Section 5.1(a) or Section 5.1(b) shall be reduced
(including, without limitation, retroactively) by any insurance proceeds and
other amounts actually recovered by such Indemnified Party in reduction of the
related Indemnifiable Loss. If an Indemnified Party shall have received an
Indemnity Payment in respect of an Indemnifiable Loss and shall subsequently
actually receive insurance proceeds or other amounts (such as settlement
amounts) in respect of such Indemnifiable Loss, then such Indemnified Party
shall immediately pay to such Indemnifying Party a sum equal to the lesser of
the amount of such insurance proceeds or other amounts actually received or the
net amount of Indemnity Payments actually received previously. The foregoing
notwithstanding, nothing in this Section 5.1(c) shall grant to Imation or its
Affiliates any direct or indirect rights or benefits to insurance coverage with
respect to which Imation is not otherwise entitled under Article IX hereof nor
require 3M or its Affiliates to make any claim for insurance coverage unless and
to the extent that Imation would otherwise be entitled to have 3M make a claim
under Article IX hereof.
(d) (i) For purposes of this Section 5.1(d), an
Indemnified Party shall be deemed to have received a tax saving with respect to
an Indemnifiable Loss if, upon the filing of a Federal or foreign income tax
return for a taxable year ending on or after the Distribution Date (the
"Indemnity Return"), an amount attributable to an Indemnifiable Loss (the
"Indemnifiable Loss Deduction") is deductible by the Indemnified Party or any of
its wholly owned subsidiaries and an amount attributable to the Indemnity
Payment is not includable in gross income by the Indemnified Party or any of its
wholly owned subsidiaries. The foregoing notwithstanding, if the Indemnifying
Party may deduct the amount attributable to the Indemnity Payment, the
Indemnified Party shall be deemed to have not received a tax saving with respect
to an Indemnifiable Loss.
(ii) In the event that an Indemnified Party is deemed
to have received a tax saving by reason of an Indemnifiable Loss, such
Indemnified Party shall pay the Indemnifying Party within thirty (30) days after
the filing of an Indemnity Return by an Indemnified Party which results in a
reduction in the tax liability of the Indemnified Party that is attributable to
such Indemnifiable Loss, a sum equal to the Indemnifiable Loss Deduction
multiplied by an amount equal to A + ((l - A) x .06), where A equals the highest
marginal corporate Federal income tax rate applicable to corporations taxable
under Subchapter C of the Code on the date the Indemnity Return is filed (the
"Tax Saving Amount").
(iii) In the event that any such Indemnifiable Loss
is deductible outside the United States, the provisions of Section 5.1(d)(ii)
shall be appropriately adjusted to reflect the tax structure of the appropriate
foreign jurisdiction.
(iv) Any payment made pursuant to this Section 5.1(d)
shall be treated as a reduction of the Indemnity Payment to which it relates.
(e) 3M'S AND IMATION'S RESPECTIVE OBLIGATIONS PURSUANT TO
SECTION 5.1(A)(IV) AND (B)(IV) SHALL BE LIMITED TO DIRECT AND ACTUAL DAMAGES, TO
THE EXCLUSION OF INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES. PARAGRAPH 5.1(E)
SHALL NOT APPLY TO (I) ANY FAILURE BY IMATION OR ITS AFFILIATES TO ASSUME, PAY,
PERFORM AND DISCHARGE (OR CAUSE THE APPROPRIATE AFFILIATE OF IMATION TO ASSUME,
PAY, PERFORM AND DISCHARGE) ANY AND ALL ASSUMED LIABILITIES, OR (II) ANY FAILURE
BY 3M OR ITS AFFILIATES TO ASSUME, PAY, PERFORM AND DISCHARGE (OR CAUSE THE
APPROPRIATE AFFILIATE OF 3M TO ASSUME, PAY, PERFORM AND DISCHARGE) ANY AND ALL
RETAINED LIABILITIES, OR (III) EXCEPT AS PROVIDED IN SECTION 6.18, ANY BREACH BY
3M OR IMATION OF THEIR RESPECTIVE INDEMNITY OBLIGATIONS UNDER THIS AGREEMENT,
INCLUDING THE INDEMNITY OBLIGATIONS SET FORTH IN ARTICLE V.
(f) Indemnification obligations contained elsewhere in this
Agreement shall be subject to the provisions of this Article V.
Section 5.2 Procedure for Indemnification.
(a) If either party shall receive notice of any claim or
Action brought, asserted, commenced or pursued by any person or entity not a
party to this Agreement (hereinafter a "Third Party Claim"), with respect to
which the other Party is or may be obligated to make an Indemnity Payment, it
shall give such other Party prompt notice thereof (including any pleadings
relating thereto) after becoming aware of such Third Party Claim, specifying in
such reasonable detail as is known to it, the nature of such Third Party Claim
and the amount or estimated amount thereof to the extent then feasible (which
estimate shall not be conclusive of the final amount of such claim); provided,
however, that the failure of a Party to give notice as provided in this Section
5.2 shall not relieve the other Party of its indemnification obligations under
this Article V, except to the extent that such other Party is actually
prejudiced by such failure to give notice.
(b) For any Third Party Claim concerning which notice is
required to be given, and, in fact, given, under subparagraph (a) of this
Section 5.2, the Indemnifying Party shall defend in a timely manner, to the
extent permitted by law, such Third Party Claim through counsel appointed by the
Indemnifying Party and reasonably acceptable to the Indemnified Party. Once an
Indemnifying Party has commenced its defense of an Indemnified Party, it cannot
withdraw from such defense until conclusion of the matter, unless the
Indemnified Party agrees to the withdrawal or the Indemnified Party is also
defending the claim. The Indemnified Party shall have the right to participate
in the defense of the Third Party Claim by employing separate counsel at its own
expense, provided that the parties enter into a Joint Defense Agreement or Joint
Representation and Defense Agreement, substantially in the form of Exhibit D or
E to this Agreement, as appropriate.
(c) If a party responds to a notice of a Third Party Claim by
denying its obligation to indemnify the person or entity claiming a right of
defense and indemnification under this Agreement ("Indemnification Claimant"),
or if the Indemnifying Party fails to defend in a timely manner, the Indemnified
Party shall be entitled to defend such Third Party Claim through counsel
appointed by it. In addition, if it is later determined, through procedures
referenced in Article X of this Agreement, or agreement of the parties, that
said party wrongfully denied such claim, or the Indemnifying Party failed to
timely defend, then the Indemnifying Party shall (1) reimburse the Indemnified
Party for all costs and expenses (other than salaries of officers and employees)
incurred reasonably by the Indemnified Party in connection with its defense of
such Third Party Claim and (2) be estopped from challenging a judgment, order,
settlement, compromise, or consent judgment resolving the Third Party Claim
entered into in good faith by the Indemnified Party (if such claim has been
resolved prior to the conclusion of the proceeding between the Indemnified Party
and Indemnifying Party). An Indemnifying Party, after initially rejecting a
claim for defense or indemnification by an Indemnification Claimant, may defend
and indemnify the Indemnification Claimant, at any time prior to the resolution
of said Third Party Claim, for such claim, provided that (x) the Indemnifying
Party reimburses the Indemnified Party for all costs and expenses (other than
salaries of officers and employees) incurred reasonably by the Indemnified Party
in connection with its defense of such Third Party Claim up to the time the
Indemnifying Party assumes control of the defense of such claim (including costs
incurred in the transition of the defense from the Indemnified Party to the
Indemnifying Party) and (y) the assumption of the defense of the Third Party
Claim will not prejudice or cause harm to the Indemnified Party.
(d) With respect to any Third Party Claim relating to any
matter subject to a claim for indemnification hereunder, no party shall enter
into any compromise or settlement or consent to the entry of any judgment which
(i) does not include as a term thereof the giving by the third party of a
release to the Indemnified Party from all further liability concerning such
Third Party Claim on terms no less favorable than those obtained by the party
entering into such compromise, settlement or consent or (ii) imposes any
obligation on the Indemnified Party without said Indemnified Party's written
consent (such consent not to be unreasonably withheld), except an obligation to
pay money which the Indemnifying Party has agreed to pay on behalf of the
Indemnified Party. In the event that an Indemnified Party enters into any such
compromise, settlement or consent without the written consent of the
Indemnifying Party (other than as contemplated by Section 5.2(c)), the entry of
such compromise, settlement or consent shall relieve the Indemnifying Party of
its indemnification obligation related to the claims underlying such compromise,
settlement or consent.
(e) Upon final judgment, determination, settlement or
compromise of any Third Party Claim, and unless otherwise agreed by the parties
in writing, the Indemnifying Party shall pay promptly on behalf of the
Indemnified Party, or to the Indemnified Party in reimbursement of any amount
theretofore required to be paid by it, the amount so determined by final
judgment, determination, settlement or compromise. Upon the payment in full by
the Indemnifying Party of such amount, the Indemnifying Party shall succeed to
the rights of such Indemnified Party to the extent not waived in settlement,
against the third party who made such Third Party Claim and any other person who
may have been liable to the Indemnified Party with respect to the indemnified
matter.
(f) In connection with defending against Third Party Claims,
the parties shall cooperate with and assist each other by making available all
employees, books, records, communications, documents, items and matters within
their knowledge, possession or control that are necessary, appropriate or
reasonably deemed relevant with respect to defense of such claims; provided,
however, that nothing in this subparagraph (f) shall be deemed to require the
waiver of any privilege, including the attorney-client privilege, or protection
afforded by the attorney work product doctrine. In addition, regardless of the
party actually defending a Third Party Claim for which there is an indemnity
obligation under Section 5.1 of this Agreement, the parties shall give each
other regular status reports relating to such action with detail sufficient to
permit the other party to assert and protect its rights and obligations under
this Agreement.
(g) The provisions of this Section 5.2 shall survive in
perpetuity and shall be the exclusive procedures for any claims subject to the
provisions of Section 5.1(a) or (b) hereof.
Section 5.3 Other Claims by Indemnified Parties Against
Indemnifying Parties. Any claim on account of an Indemnifiable Loss which does
not result from a Third Party Claim shall be asserted by written notice from the
Indemnified Party to the Indemnifying Party within sixty (60) days of first
learning of the breach under Section 5.1(a)(iv) or 5.1(b)(iv). All such claims
that are not timely asserted pursuant to this Section shall be deemed to be
forever waived. The Indemnified Party's written notice shall contain such
information as the Indemnified Party has regarding the alleged breach. Such
Indemnifying Party shall have a period of sixty (60) days (or such shorter time
period as may be required by law as indicated by the Indemnified Party in the
written notice) within which to respond thereto. If such Indemnifying Party does
not respond within such 60-day (or lesser period) such Indemnifying Party shall
be deemed to have accepted responsibility to make payment for the amount of the
Indemnifiable Loss and shall have no further right to contest the validity of
such claim. If such Indemnifying Party does respond within such 60-day (or
lesser) period and rejects such claim in whole or in part, such Indemnified
Party shall be free to pursue resolution as provided in Article X hereof.
Section 5.4 Indemnifiable Losses under Sections 5.1(a)(ii) and
5.1(b)(ii). If the indemnification provided for in this Article V is unavailable
to an Indemnified Party in respect of any Indemnifiable Loss arising out of or
related to information contained in the Information Statement the Form 10 or the
roadshow, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such Indemnifiable Loss, in such proportion as is appropriate to
reflect the relative fault of Imation, each of its directors, each of its
officers who has signed any registration statement and each Affiliate of Imation
(an "Imation Party") on the one hand and 3M and each Affiliate of 3M (a "3M
Party") on the other hand in connection with the statements or omissions which
resulted in such Indemnifiable Loss. The relative fault of an Imation Party on
the one hand and of a 3M Party on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by an Imation Party on the one hand or a 3M
Party on the other hand.
Section 5.5 No Beneficiaries. Except to the extent expressly
provided otherwise in this Article V, the indemnification provided for by this
Article V shall not inure to the benefit of any third party or parties and shall
not relieve any insurer who would otherwise be obligated to pay any claim of the
responsibility with respect thereto or, solely by virtue of the indemnification
provisions hereof, provide any subrogation rights with respect thereto and each
party agrees to waive such rights against the other to the fullest extent
permitted.
Section 5.6 Special Provision Relating to Nishika Case. 3M
agrees to accept as Retained Liabilities the obligations relating to or arising
from the lawsuit entitled Minnesota Mining and Manufacturing Company v. Nishika,
Ltd., et al. (Supreme Court of Texas; Case No. 94-1124). In return, Imation
agrees that in the event the case is retried, it will use its best efforts to
make available on a priority basis, and for as long as is needed by 3M, any
Imation employee witnesses requested by 3M. In such connection, it is
anticipated that 3M will need, and Imation agrees to use its best efforts to
make available, Roger Lorenzini, for as long as he is an Imation employee or
under contract to provide any service to Imation, for extended periods prior to
any retrial in connection with this case and, if requested by 3M, for the entire
duration of any retrial. 3M shall reimburse Imation's out-of-pocket expenses,
but not salaries, in connection with any such employee witnesses.
Notwithstanding any other provisions of this Agreement, in the event Imation
fails to use its best efforts to provide such witnesses, and if such failure has
a material adverse impact on the outcome of the retrial, then all Liabilities
and obligations relating to such case will be deemed to be Assumed Liabilities
under this Agreement and Imation shall indemnify, defend and hold harmless 3M
from and against all Indemnifiable Losses arising out of or due to, directly or
indirectly, such case, whether incurred prior to the Distribution Date or
incurred on or after the Distribution Date. For purposes of this Section 5.6,
Imation shall be deemed to have satisfied its best efforts obligations to the
extent, but only to the extent, that it exercises a degree of care and effort
which is no less diligent than that which Imation would be expected to exercise
had it retained responsibility for the foregoing lawsuit.
Section 5.7 Named Parties. The parties hereto acknowledge that
it may not be feasible to substitute Imation (or one of its Affiliates) for 3M
(or one of its Affiliates) as a named party in Actions, whether domestic or
foreign, constituting Assumed Liabilities. In such event, 3M (or one of its
Affiliates) shall remain as a named party, but, following the Distribution Date,
Imation (or one of its Affiliates) shall assume the defense of any such Action
in accordance with the provisions of Section 5.2 hereof and 3M and its
Affiliates shall cooperate with Imation as contemplated by such Section 5.2 and
Article VII hereof.
ARTICLE VI
CERTAIN ADDITIONAL MATTERS
Section 6.1 Conveyancing and Assumption Instruments. In
connection with the transfer, conveyance, assignment and delivery of the
Transferred Assets and the assumption of Assumed Liabilities contemplated by
this Agreement, 3M and Imation agree to execute or cause to be executed by the
appropriate parties and to deliver to each other, as appropriate, the
Conveyancing and Assumption Instruments.
Section 6.2 No Representations or Warranties; Exceptions.
Except as provided in Section 2.1 hereof, Imation understands and agrees that 3M
is not in this Agreement or in any other agreement or document contemplated by
this Agreement, representing or warranting in any way (a) as to the value or
freedom from encumbrance of, or any other matter concerning, any Transferred
Assets or (b) as to the legal sufficiency to convey title to any Transferred
Assets of the execution, delivery and filing of the Conveyancing Instruments, IT
BEING AGREED AND UNDERSTOOD THAT ALL SUCH ASSETS AND THE ASSUMED LIABILITIES ARE
BEING TRANSFERRED "AS IS, WHERE IS" and without any representation or warranty
of any kind (express or implied) and that Imation shall bear the economic and
legal risk that any conveyances of such assets shall prove to be insufficient or
that Imation's title to any such assets shall be other than good and marketable
and free from encumbrances. Similarly, Imation understands and agrees that 3M is
not in this Agreement or in any other agreement or document contemplated by this
Agreement, representing or warranting in any way that the obtaining of the
consents or approvals, the execution and delivery of any amendatory agreements
and the making of the filings and applications contemplated by this Agreement
shall satisfy the provisions of all applicable agreements or the requirements of
all applicable laws or judgments, it being understood and agreed that, subject
to Section 6.3 hereof, Imation shall bear the economic and legal risk that any
necessary consents or approvals are not obtained or that any requirements of law
or judgments are not complied with. The foregoing, however, shall not limit any
responsibilities which 3M may have to use its commercially reasonable efforts to
effect transfers under the other provisions of this Agreement.
Section 6.3 Further Assurances; Subsequent Transfers.
(a) Each of 3M and Imation will execute and deliver such
further instruments of conveyance, transfer and assignment and will take such
other actions as each of them may reasonably request of the other in order to
effectuate the purposes of this Agreement and to carry out the terms hereof.
Without limiting the generality of the foregoing, at any time and from time to
time after the Distribution Date, at the request of Imation and without further
consideration, 3M will execute and deliver to Imation such other instruments of
transfer, conveyance, assignment and confirmation and take such action as
Imation may reasonably deem necessary or desirable in order to more effectively
transfer, convey and assign to Imation and to confirm Imation's title to all of
the Transferred Assets, to put Imation in actual possession and operating
control thereof and to permit Imation to exercise all rights with respect
thereto (including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer thereof
shall not have previously been obtained) and Imation will execute and deliver to
3M all instruments, undertakings or other documents and take such other action
as 3M may reasonably deem necessary or desirable in order to have Imation fully
assume and discharge the Assumed Liabilities and relieve 3M of any Liability or
obligations with respect thereto and evidence the same to third parties.
Notwithstanding the foregoing, 3M and Imation shall not be obligated, in
connection with the foregoing, to expend monies other than reasonable
out-of-pocket expenses and attorneys' fees.
(b) 3M and Imation will use their commercially reasonable
efforts to obtain any consent, approval or amendment required to novate and/or
assign all agreements, leases, licenses and other rights of any nature
whatsoever relating to the Transferred Assets to Imation or Affiliates of
Imation; provided, however, that 3M and its Affiliates shall not be obligated to
pay any consideration therefor (except for filing fees and other administrative
charges and except as otherwise specifically provided herein) to the third party
from whom such consents, approvals and amendments are requested. In the event
and to the extent that 3M is unable to obtain any such required consent,
approval or amendment (i) 3M shall continue to be bound thereby and (ii) unless
not permitted by law or the terms thereof, Imation shall pay, perform and
discharge fully all the obligations of 3M thereunder from and after the
Distribution Date and indemnify 3M for all Indemnifiable Losses arising out of
such performance by Imation or any claims by third parties thereunder. 3M shall,
without further consideration therefor, pay and remit to Imation promptly all
monies, rights and other considerations received in respect of such performance.
3M shall exercise or exploit its rights and options under all such agreements,
leases, licenses and other rights and commitments referred to in this Section
6.3(b) only as reasonably directed by Imation and at Imation's expense. If and
when any such consent shall be obtained or such agreement, lease, license or
other right shall otherwise become assignable or able to be novated, 3M shall
promptly assign and novate all its rights and obligations thereunder to Imation
without payment of further consideration and Imation shall, without the payment
of any further consideration therefor, assume such rights and obligations. To
the extent that the assignment of any contract or agreement (or their proceeds)
pursuant to this Section 6.3 is prohibited by law, the assignment provisions of
this Section shall operate to create a subcontract with Imation to perform each
relevant unassignable 3M contract or agreement at a subcontract price equal to
the monies, rights and other considerations received by 3M with respect to the
performance by Imation under such subcontract.
(c) All Bids, Quotations and Proposals included in the
Transferred Assets shall be transferred to Imation or Imation Enterprises to the
extent permitted by law. 3M and Imation shall work together and use their best
efforts to preserve such Bids, Quotations and Proposals and facilitate the award
of contracts pursuant thereto consistent with applicable laws and regulations.
Any contracts awarded pursuant to an outstanding Bid, Quotation or Proposal
shall be considered an agreement and treated in the same manner as provided for
in the last two sentences of Section 6.3(b) hereof.
(d) 3M and Imation acknowledge that the following governmental
programs shall remain with 3M through their respective terms: the Advanced Tape
Systems Program, the Optical Storage Program, the National Media Lab Program and
the Factory Support Program. With respect to the Advanced Tape Systems Program
and the Optical Storage Program, 3M shall use its commercially reasonable
efforts to have Imation added as another consortium member. With respect to the
other programs and subject to the receipt of any required governmental
approvals, 3M and Imation shall enter into a subcontracting agreement (as
contemplated by subsection (b) above) to the extent necessary to allow Imation
to perform any services required to be performed by it and to enable Imation to
receive any benefits of the particular program relating to those services. 3M
and Imation further acknowledge that the Mapping Contract shall remain with 3M,
which shall have the sole responsibility of performing thereunder.
(e) With respect to any governmental commercial supply
contracts relating to the Transferred Businesses, 3M and Imation shall use their
respective commercially reasonable efforts to execute one or more novation
agreements with the appropriate governmental authority so as to effectively
substitute Imation for 3M under all such contracts.
(f) From and after the Distribution Date, 3M shall have no
responsibility to take any action with respect to any UCC filings made prior to
the Distribution Date relating to equipment sold by, or on behalf of, the
Transferred Businesses, including, without limitation, any action which may be
necessary to renew any such filings. The foregoing notwithstanding, at the
request of Imation, 3M shall assist Imation in effecting the transfer of any
such filings into the name of Imation.
(g) All references in this Section 6.3 to Imation shall
include Imation Enterprises as and to the extent appropriate.
Section 6.4 Imation Officers and Directors. Imation and 3M
shall take all actions which may be required to elect or otherwise appoint, as
of the Distribution Date, those individuals designated in the Information
Statement to be directors or officers of Imation.
Section 6.5 Resignations. On or prior to the Distribution
Date, 3M shall cause all directors and officers of 3M who are not designated in
the Information Statement to be directors and officers of Imation following the
Distribution Date to resign from their positions as directors or officers of
Imation.
Section 6.6 Certain Intercompany Arrangements.
(a) Following the Distribution Date, the parties shall discuss
in good faith the provision of any services and products to be provided by the
other, but which inadvertently were not the subject of a written agreement.
Nothing in this Section 6.6, however, shall require or authorize 3M or Imation
to provide and charge each other for any services other than on the terms and
conditions specified in the Corporate Services Transition Agreement or the other
Related Agreements.
(b) In connection with the Distribution, 3M and Imation shall
effect the transfer of intercompany receivables and payables relating to
products of the Transferred Businesses which are in-transit as of the
Distribution Date to achieve an appropriate matching of such receivables and
payables (i.e., both the receivables and payables relating to a product
in-transit shall be held by one party and its Affiliate following the
Distribution).
Section 6.7 Related Agreements. As of the Distribution Date,
3M and Imation shall enter, and shall cause Imation Enterprises and their
respective Affiliates to enter (if applicable), into the Related Agreements.
Section 6.8 Sales and Transfer Taxes. Imation and 3M agree to
cooperate to determine the amount of sales, transfer or other taxes or fees
(including, without limitation, all real estate, patent, copyright and trademark
transfer taxes and recording fees) payable in connection with the transactions
contemplated by this Agreement (the "Transaction Taxes"). 3M agrees to file
promptly and timely the returns for such Transaction Taxes with the appropriate
taxing authorities and remit payment of the Transaction Taxes and Imation will
join in the execution of any such tax returns or other documentation. Payment of
all such Transaction Taxes shall be the responsibility of 3M, except as
otherwise provided in Section 11.2 hereof, the foreign transfer agreements or
the Tax Sharing Agreement. The foregoing notwithstanding, Imation shall be
responsible for sales taxes payable upon the transfer of motor vehicles and for
mortgage recording taxes which by statute are the primary responsibility of
Imation.
Section 6.9 Signs; Use of 3M Name. Within 90 days after the
Distribution Date, Imation, at its own expense, shall remove (or, if necessary,
cover up) any and all exterior and interior signs and identifiers which refer or
pertain to 3M at the Transferred Businesses. After such 90-day period, Imation
shall not use or display the name "3M" or other trademarks, trade names or their
identifiers owned by or licensed to 3M except to the extent such marks, names
and identifiers have been assigned or licensed to Imation or Imation Enterprises
pursuant to the Intellectual Property Agreement ("NonPermitted Names"), without
the prior written consent of 3M.
Section 6.10 Supplies and Documents. For a period of time
following the Distribution Date (as contemplated in the Intellectual Property
Agreement), Imation shall have the right to use existing supplies and documents
(including, but not limited to forms, labels, shipping materials, packaging
materials, catalogues, sales brochures, operating manuals, instructional
documents and similar materials, and advertising material) being transferred to
it pursuant to this Agreement which have imprinted thereon the name "3M" or
trademarks, logotypes or variations comprising the name "3M" as and to the
extent contemplated by the Intellectual Property Agreement. At the end of such
time period, Imation shall destroy all such remaining supplies and documents. In
addition, Imation will cause the name of any of its subsidiaries or Affiliates
containing the phrase "3M" to be changed to delete any such reference.
Section 6.11 Plant Closings and Layoffs. Imation agrees that
it shall not, at any time during the 90-day period following the Distribution
Date, effectuate (i) a "plant closing" as defined in the Worker Adjustment and
Retraining Notification Act of 1988 (the "WARN Act") affecting any site of
employment or operating units within any site of employment of the Transferred
Businesses or (ii) take any action to precipitate a "mass layoff" as defined in
the WARN Act affecting any site of employment of the Transferred Businesses,
except, in either case, after complying fully with the notice and other
requirements of the WARN Act. Imation agrees to indemnify 3M and to defend and
hold 3M harmless from and against any and all claims, losses, damages, expenses,
obligations and liabilities (including attorney's fees and other costs of
defense) which 3M may incur in connection with any suit or claim of violation
brought against 3M under the WARN Act, which relate, in whole or in part, to
actions taken by Imation with regard to any site of employment of Imation or
operating units within any site of employment of the Transferred Businesses.
Section 6.12 Shared Facility Arrangements.
(a) 3M and Imation agree that, subsequent to the Distribution
Date, the facilities located in Menomonie, Wisconsin and at 3M Center (the "3M
Shared Facility") shall be owned by 3M, but shared by the parties for the
concurrent operations of certain of the Core Businesses and Transferred
Businesses in accordance with the terms set forth in this Section 6.12. 3M and
Imation further agree that subsequent to the Distribution Date, the facilities
located in Middleway, West Virginia, Vadnais Heights, Minnesota, Camarillo,
California and Pine City, Minnesota (the "Imation Shared Facilities") shall be
owned by Imation (or Imation Enterprises) or leased by Imation (or Imation
Enterprises) from third parties (as the case may be), but shared by the parties
for the concurrent operations of certain of the Core Businesses and Transferred
Businesses in accordance with the terms set forth in this Section 6.12. (All
such arrangements are collectively referred to as the "Shared Facility
Arrangements" and are more fully described on Schedule 6.12(a)).
(b) During the applicable Shared Facility Term, the parties
agree that Imation shall lease from 3M a portion of the 3M Shared Facility for
the purpose of conducting operations relating to the Transferred Businesses to
the extent and in a manner substantially consistent with the operations
conducted at such facilities in connection with the Transferred Businesses
immediately prior to the Distribution Date. In furtherance thereof, 3M and
Imation shall, on or prior to the Distribution Date, enter into a Shared
Facility Agreement, with respect to each such facility, which shall set forth
(i) the portion of the building to be made available and the services to be
provided by 3M to Imation at each of the 3M Shared Facilities, (ii) the payments
to be paid by Imation to 3M in consideration therefor and (iii) such further
arrangements as the parties deem appropriate with respect to the 3M Shared
Facilities. In addition, Affiliates of Imation shall continue following the
Distribution Date to lease from Affiliates of 3M (x) a portion of 3M's facility
at Breda, Netherlands pursuant to the lease which is in effect on the
Distribution Date and (y) a portion of 3M's facility in London, Ontario, Canada
pursuant to the terms of the Transition Agreement being entered into between 3M
Canada, Inc. and Imation Canada, Inc.
(c) During the applicable Shared Facility Term, the parties
agree that 3M shall lease (or sublease, as the case may be) from Imation a
portion of each of the Imation Shared Facilities for the purpose of conducting
operations relating to the Core Businesses to the extent and in a manner
substantially consistent with the operations conducted at such facilities in
connection with the Core Businesses immediately prior to the Distribution Date.
In furtherance thereof, 3M and Imation shall, on or prior to the Distribution
Date, enter into a Shared Facility Agreement with respect to each such facility,
which shall set forth (i) the portion of the building to be made available and
services to be provided by Imation to 3M at each of the Imation Shared
Facilities, (ii) the payments to be made by 3M to Imation in consideration
therefor and (iii) such further arrangements as the parties deem appropriate
with respect to the Imation Shared Facilities.
(d) Upon the termination by either party of any of the Shared
Facility Arrangements with respect to a particular facility in accordance with
the respective Shared Facility Agreement, Imation or 3M, as the case may be,
shall promptly remove all of its personnel, equipment, materials and other
property from such facility.
Section 6.13 Leased Employees. Following the Distribution
Date, Imation shall lease from 3M the Leased Employees in accordance with the
terms of the Leased Employee Agreement.
Section 6.14 Other Leased/Shared Properties.
(a) In connection with the Distribution, 3M shall assign to
Imation or Imation Enterprises (as the case may be), and Imation or Imation
Enterprises (as the case may be) shall accept responsibility for the third party
leases relating to real property and/or the facilities set forth on Schedule
6.14(a).
(b) In connection with the Distribution, Imation or Imation
Enterprises (as the case may be) shall assume responsibility with respect to
certain lease agreements relating to the Transferred Businesses, including those
which are set forth on Schedule 6.14(b), pursuant to which 3M presently leases a
portion of its facilities to unaffiliated third parties.
(c) 3M shall retain all distribution centers. Any distribution
center services to be provided by 3M to Imation shall be provided pursuant to
the terms of the Corporate Services Agreement.
Section 6.15 Domestic Receivables and Payables.
(a) Following the Distribution Date and through December 31,
1996 (or such earlier date as 3M and Imation shall mutually agree), 3M, on
behalf of Imation and Imation Enterprises, shall collect all domestic trade
receivables of the Transferred Businesses outstanding as of the Distribution
Date which constitute shared accounts (i.e., a portion of such receivables
relate to each of the Core Businesses and the Transferred Businesses,
respectively) and pay all domestic payables of the Transferred Businesses
outstanding as of such date (irrespective of whether such payables constitute
shared payables or are payables solely for the account of the Transferred
Businesses). 3M will diligently pursue the collection of such receivables and
the payment of payables, with the same degree of care and effort as 3M performs
such services with respect to its own receivables and payables; it being
understood, however, that subject to the provisions of this sentence, any risk
of non-collection of Imation's portion of the shared receivables shall remain
with Imation. Pending a final reconciliation, 3M will remit to Imation, per a
mutually agreed schedule which is set forth on Schedule 6.15(a), an estimate of
the amount, if any, by which collections with respect to shared and non-shared
(net of the items specified on Schedule 6.15(a)) are expected to exceed
payments, and Imation will remit to 3M the amount, if any, by which payments are
expected to exceed collections (net of the items specified on Schedule 6.15(a)).
The remittances schedule shall be reviewed on a monthly basis by 3M and Imation
and shall be adjusted in good faith by mutual agreement of the parties to the
extent necessary to reflect more accurately the actual schedule of collections
and payments. If 3M receives a payment with respect to a receivable of which a
portion relates to the Transferred Businesses and a portion relates to the Core
Businesses, 3M shall allocate the payments as directed by the customer and, in
the absence of any such direction, in a manner corresponding to the relative
amounts of the specific invoices in question outstanding with respect to the
Transferred Businesses and the Core Businesses.
(b) Promptly following December 31, 1996 (or such earlier date
as 3M and Imation shall mutually agree upon), 3M shall prepare a final
reconciliation of cash collected from domestic trade receivables (net of the
items specified on Schedule 6.15(a)) and cash paid for all domestic payables, in
either instance relating to the Transferred Businesses and outstanding on the
Distribution Date. Upon completion of the final reconciliation, 3M shall remit
to Imation, or Imation shall remit to 3M, as the case may be, any funds required
so that the total amount of funds remitted by 3M to Imation (net of any funds
remitted by Imation to 3M) pursuant to Sections 6.15(a) and (b) shall equal the
actual amount by which collections (net of the items set forth on Schedule
6.15(a)) exceed payments.
(c) The foregoing notwithstanding, commencing with the
Distribution Date, Imation shall assume responsibility for the collection of all
trade receivables of the Transferred Businesses which are not "shared" accounts,
and be entitled to any amounts so collected; although the funds relating to
pre-Distribution Date receivables may be deposited in 3M lock boxes and remitted
to Imation in accordance with Schedule 6.15(a). The risk of non-collection of
the trade receivables referred to in the preceding sentence shall remain with
Imation. In addition, after December 31, 1996 (or such earlier date as 3M and
Imation shall mutually agree upon), Imation shall assume responsibility for the
collection of all domestic trade receivables and the payment of all trade
payables, in either instance relating to the Transferred Businesses; although 3M
may continue to provide services with respect to trade payables in accordance
with the terms of the Corporate Services Transition Agreement. Accordingly,
should 3M or Imation inadvertently receive payment with respect to any trade
receivables the collection of which is the responsibility of the other party, it
will remit payment to the appropriate party of any amounts so received at the
time of the final reconciliation or at such other time as the improper payment
is identified.
Section 6.16 Diskette Anti-Dumping Duty Exemption. 3M is
presently entitled to certain exemptions from anti-dumping duties which respect
to the importation of diskettes into the European Union. 3M and Imation shall
use their respective commercially reasonable efforts to have Imation substituted
for 3M with respect to such exemption with an effective date of July 1, 1996 or
as soon as possible thereafter. 3M and Imation agree to cooperate with each
other in good faith to minimize any obligation to pay anti-dumping duties should
the parties be unable to effect such substitution and/or have such substitution
effective as of July 1, 1996, including to the extent permitted by applicable
law by having 3M import on behalf of Imation (it being understood that Imation
would reimburse 3M for all its costs and expenses so involved). In the event
that Affiliates of 3M in Europe shall receive diskettes following the foregoing
substitution of Imation, 3M and Imation shall cooperate with each other in good
faith to minimize any obligation to pay anti-dumping duties with respect to such
diskettes; it being understood, however, that Imation shall be responsible for
any duties which may be payable and any other costs which may be incurred in
handling such diskettes.
Section 6.17 Repayment of Italian Debt. In connection with the
Distribution, Imation shall, or shall cause one of its Affiliates, to repay
certain indebtedness which is presently outstanding and owing to 3M from its
Affiliates in Italy and which is being assumed by an Affiliate of Imation
pursuant to Section 2.3 hereof.
Section 6.18 GECC Financing Agreements. The respective rights
and obligations of 3M and Imation under the Portfolio Purchase Agreement and the
Operating Agreement entered into by 3M with GECC in December 1995 with respect
to financing transactions entered into with customers to enable those customers
to purchase equipment sold by the Transferred Businesses or used in connection
with products of the Transferred Businesses are as set forth below:
(a) respective rights and obligations of 3M and Imation under
the Portfolio Purchase Agreement and the Operating Agreement entered into by 3M
with respect to the Imation Contracts and other obligations described therein
shall be as follows:
(i) With respect to the Portfolio Purchase Agreement:
(1) So long as Imation is not in material default of its obligations
pursuant to this Section 6.18 and to the extent 3M is entitled to
certain rights with respect to Imation Contracts pursuant to the
Portfolio Purchase Agreement, including without limitation, the right
to receive notice in certain cases, the right to make cure payments on
behalf of customers, and the right to remarket Property, Imation shall
have all such rights from and after the Distribution Date and, subject
to GECC's consent, shall have the right to exercise such rights
directly to GECC;
(2) To the extent amounts are owed or become due to GECC resulting from
the breach of a representation or warranty relating to Lease Contracts
or the Property related thereto which are Imation Contracts pursuant to
Section 3.4, 3.7, 3.8, 3.10 or 3.11 thereof, Imation shall pay those
amounts to GECC;
(3) To the extent amounts are owed or become due to GECC pursuant to
Article V thereof, Imation shall pay those amounts to GECC which result
from Lease Contract Defaults that are related to Imation Contracts;
(4) To the extent any Recoveries or Remarketing Proceeds are owed or
become due to GECC pursuant to Section 5.5 or Section 6.7 thereof,
Imation shall pay those amounts to GECC which relate to any Property
that is subject to Imation Contracts and if Imation pays any such
amounts to GECC then 3M shall direct that GECC transfer such Imation
Contracts directly to Imation;
(5) To the extent that any Recoveries or Remarketing Proceeds have been
paid to 3M pursuant to Section 5.5 or Section 6.7 thereof, 3M shall pay
to Imation any portion of such amounts attributable to Imation
Contracts (except to the extent 3M has previously paid to GECC any
amounts with respect to such Imation Contracts);
(6) On the Distribution Date, 3M shall transfer to Imation all of its
rights and interests in and to all Administered Accounts that relate to
Imation Contracts; and, to the extent that any Recoveries or
Remarketing Proceeds are paid to 3M with respect to any Administered
Account, 3M shall promptly pay to Imation any portion of such amounts
to Imation which result from those Administered Accounts relating to
Imation Contracts and any amounts paid from GECC to 3M on each such
Imation Contract will be promptly paid to Imation;
(7) To the extent amounts are owed or become due to GECC with respect
to any Administered Account pursuant to Section 7.4 thereof, Imation
shall pay those amounts to GECC which result from those Administered
Accounts relating to Imation Contracts;
(8) To the extent amounts are owed or become due to GECC under any
Service and Maintenance Contract pursuant to Article VIII thereof,
Imation shall pay those amounts to GECC which result from those Service
and Maintenance Contracts relating to Property that is subject to
Imation Contracts and if Imation pays any such amounts to GECC then 3M
shall direct GECC to transfer such Imation Contracts directly to
Imation;
(9) To the extent amounts are owed or become due to GECC under any
Dealer Enhancement pursuant to Article VIII thereof, Imation shall
pay those amounts to GECC which result from those Dealer Enhancements
relating to Imation Contracts and if Imation pays any such amounts to
GECC then 3M shall direct GECC to transfer such Imation Contracts
directly to Imation;
(10) To the extent that remarketing obligations are required to be
performed pursuant to Section 8.3 thereof with respect to Imation
Contracts, Imation shall perform such obligations;
(11) To the extent amounts are owed or become due to GECC under any
Recourse Contract pursuant to Article VIII thereof, Imation shall pay
those amounts to GECC which result from those Recourse Contracts
relating to Imation Contracts and if Imation pays any such amounts to
GECC then 3M shall direct GECC to transfer such Imation Contracts
directly to Imation;
(12) To the extent any Damages are owed or become due to GECC pursuant
to Section 9.2(a)(other than clause (iii) therein) or 9.2(b) thereof,
Imation shall pay those amounts to GECC which are attributable to, or
arise out of, Imation's actions or failure to act, or relate to Imation
Contracts or the Property related thereto;
(13) 3M shall endeavor in good faith to enter into an amendment thereto
with GECC which provides that, with respect to Imation Contracts,
Imation shall be entitled to all rights of 3M pursuant to the Portfolio
Purchase Agreement and, subject to GECC's consent, GECC shall
thereafter fulfill its obligations relating to Imation Contracts
directly to Imation and 3M shall, upon request, be entitled to receive
copies of all such reports relating to Imation Contracts, and all
notices, letters and other forms of communication provided by GECC to
Imation pursuant to the Portfolio Purchase Agreement from time to time
during the term of such Agreement; and
(14) On the Distribution Date, 3M shall transfer to Imation a non-cash
accrual in the amount of sixty percent (60%) of the remaining balance
in 3M's General Ledger Account 9030 Project DIVESTGECC as of the
Distribution Date as a reserve against future liabilities relating to
Imation Contracts. This is a transfer of the asset reserve account only
and does not include any current or future transfer of cash from 3M to
Imation.
(ii) With respect to the Operating Agreement:
(1) 3M shall transfer to Imation the right to receive all amounts to be
received from GECC, if any, for funding Imation Contracts which have
not been funded as of the Distribution Date;
(2) 3M and Imation shall use all reasonable efforts to enter into an
assignment and assumption agreement with GECC pursuant to which 3M
shall assign its rights and obligations under the Operating Agreement
with respect to Imation Contracts to Imation. Imation shall assume such
rights and obligations, and GECC shall consent to such assignment and
assumption.
(3) In the event the parties do not enter into such an assignment and
assumption agreement, the following provisions shall apply:
(A) To the extent amounts are owed or become due to GECC
resulting from the breach of a representation, warranty or
covenant in Section 12 thereof, Imation shall pay those
amounts to GECC that relate to any such breach that is
attributable to Imation Contracts or the Equipment related
thereto and will perform the covenants shown in such Section
12 to the extent that such covenants relate to Imation
Contracts or the Equipment related thereto;
(B) To the extent amounts are owed or become due to GECC
pursuant to Section 15 thereof, Imation shall pay those
amounts to GECC which result from Lease Contract Defaults that
relate to Imation Contracts;
(C) To the extent any Recoveries or Remarketing Proceeds are
owed or become due to GECC pursuant to Section 15(d) or
Section 16(g) thereof, Imation shall pay those amounts to GECC
which relate to Property that is subject to Imation Contracts;
(D) To the extent that any Recoveries or Remarketing Proceeds
are paid to 3M pursuant to Section 15(d) or Section 16(g)
thereof, 3M shall pay to Imation the portion of such amounts
attributable to Imation Contracts;
(E) To the extent amounts are owed or become due to GECC under
any Service Transaction pursuant to Section 17 thereof,
Imation shall pay those amounts to GECC which result from
those Service Transactions relating to any Property that is
subject to Imation Contracts and if Imation pays any such
amounts to GECC then 3M shall direct GECC to transfer such
Imation Contracts directly to Imation;
(F) To the extent amounts are owed or become due to GECC under
any Recourse Transactions pursuant to Section 17 thereof,
Imation shall pay those amounts to GECC which result from
those Recourse Transactions that are related to Imation
Contracts and if Imation pays any such amounts to GECC then 3M
shall direct GECC to transfer such Imation Contracts directly
to Imation;
(G) To the extent amounts are owed or become due to GECC
resulting from municipal contract terminations for
non-appropriation pursuant to Section 18 thereof, Imation
shall pay those amounts to GECC which are related to Imation
Contracts;
(H) To the extent that obligations are required to be
performed or amounts are owed or become due to GECC pursuant
to Section 18 with respect to Imation Contracts, Imation shall
perform such obligations or pay such amounts;
(I) To the extent any Damages are owed or become due to GECC
pursuant to Section 22(a) thereof, Imation shall pay those
amounts to GECC which are attributable to Imation, or arise
out of, Imation's actions or failure to act, or relate to
Imation Contracts or the Equipment related thereto;
(J) To the extent amounts are owed or become due to GECC
pursuant to Section 26 thereof and Imation has not generated
Transaction volume in an amount at least equal to $90,000,000
during the Term of the Program, then Imation shall pay to GECC
$10,000 for each $1,000,000 of Transaction volume (or portion
thereof) less than $90,000,000 generated during such Term (but
not more than $900,000).
(b) For the purposes of this Section 6.18, all capitalized
terms used herein shall have their respective meanings in the Portfolio Purchase
Agreement or the Operating Agreement, as the context requires, except that the
following terms shall have the following definitions:
3M Contracts: shall mean those Lease Contracts that are not Imation Contracts.
GECC: General Electric Capital Corporation, a corporation organized under the
laws of the State of Connecticut.
Imation Contracts: shall mean those Lease Contracts that were originated by the
Transferred Businesses in existence as of the Distribution Date.
Operating Agreement: shall mean that certain Operating Agreement by and between
GECC and 3M dated as of December 6, 1995.
Portfolio Purchase Agreement: shall mean that certain Portfolio Purchase
Agreement by and between GECC and 3M dated as of December 6, 1995.
All capitalized terms used in this Section 6.18 but not otherwise defined in
this Section 6.18(a) shall have the meanings set forth in this Agreement.
(c) Imation shall, from and after the Distribution Date,
indemnify and hold harmless 3M and each of its directors, officers, employees
and agents from and against any and all liabilities owed to GECC arising out
of or based upon or with respect to any (i) breach under this Section 6.18 or
(ii) any failure to perform any covenant, agreement or undertaking on the part
of Imation contained in this Section 6.18.
(d) 3M shall, from and after the Distribution Date, indemnify
and hold harmless Imation and each of its directors, officers, employees and
agents from and against any and all liabilities owed to GECC arising out of or
based upon or with respect to any (i) breach under this Section 6.18; (ii) any
failure to perform any covenant, agreement or undertaking on the part of 3M
contained in this Section 6.18; or (iii) any breach or failure by 3M to perform
any covenant, agreement or undertaking on the part of 3M contained in the
Portfolio Purchase Agreement and the Operating Agreement other than as a result
of any action or inaction by Imation.
(e) 3M'S AND IMATION'S RESPECTIVE OBLIGATIONS PURSUANT TO
SECTION 6.18(C) AND (D) SHALL BE LIMITED TO DIRECT AND ACTUAL DAMAGES, TO THE
EXCLUSION OF INCIDENTAL, CONSEQUENTIAL OR SPECIAL DAMAGES.
Section 6.19 Letters of Credit. Imation shall use its
commercially reasonable efforts to substitute Imation letters of credit for any
3M letters of credit outstanding on the Distribution Date with respect to
obligations of the Transferred Businesses. In addition, Imation shall reimburse
3M for any costs incurred or funds advanced by 3M following the Distribution
Date with respect to any such letters of credit.
Section 6.20 Industrial Revenue Bonds. 3M shall repay on or
prior to the Distribution Date certain industrial revenue bonds presently
outstanding with respect to the White City, Oregon facility. In connection
with the Distribution, Imation shall assume responsibility for all other
industrial revenue bonds presently outstanding with respect to the White City,
Oregon facility.
ARTICLE VII
ACCESS TO INFORMATION AND SERVICES
Section 7.1 Provision of Corporate Records. As soon as
practicable after the Distribution Date, 3M shall deliver to Imation all Books
and Records. Such Books and Records shall be the property of Imation, but shall
be retained and made available (upon reasonable notice during normal business
hours) to 3M for review and duplication until the earlier of (i) notice from 3M
that such records are no longer needed by 3M or (ii) the end of the customary
retention period under 3M's document retention policies as in effect at the
Distribution Date. The foregoing notwithstanding, technical notebooks and other
Books and Records subject to the Intellectual Property Agreement shall be
governed by the terms of such agreement.
Section 7.2 Access to Information. From and after the
Distribution Date, 3M and Imation shall afford to each other and to each other's
authorized accountants, counsel and other designated representatives reasonable
access and duplicating rights (with copying costs to be borne by the requesting
party) during normal business hours to all Books and Records and documents,
communications, items and matters (collectively, "Information") within each
other's knowledge, possession or control relating to the Transferred Assets, the
Transferred Businesses, the Assumed Liabilities, the Retained Liabilities and
the Transferred Employees, insofar as such access is reasonably required by 3M
or Imation, as the case may be (and shall use reasonable efforts to cause
persons or firms possessing relevant Information to give similar access).
Information may be requested under this Article VII for, without limitation,
audit, accounting, claims, Actions and tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations, but not for competitive
purposes.
Section 7.3 Production of Witnesses and Individuals. From and
after the Distribution Date, 3M and Imation shall use reasonable efforts to make
available to each other, upon written request, its officers, directors,
employees and agents for fact finding, consultation and interviews and as
witnesses to the extent that any such person may reasonably be required in
connection with any Actions in which the requesting party may from time to time
be involved relating to the conduct of the Transferred Businesses or the Core
Businesses (as the case may be) prior to the Distribution Date. Except as
otherwise agreed between the parties or pursuant to a Joint Representation and
Defense Agreement or Joint Defense Agreement, 3M and Imation agree to reimburse
each other for reasonable out-of-pocket expenses (but not labor charges or
salary payments) incurred by the other in connection with providing individuals
and witnesses pursuant to this Section 7.3.
Section 7.4 Retention of Records. Except when a longer
retention period is otherwise required by law or agreed to in writing, 3M and
Imation shall retain, for their retention periods customary under existing 3M
policies, all material Information relating to the Transferred Businesses.
Notwithstanding the foregoing, in lieu of retaining any specific Information, 3M
or Imation may offer in writing to deliver such Information to the other and, if
such offer is not accepted within 90 days, the offered Information may be
destroyed or otherwise disposed of at any time. If a recipient of such offer
shall request in writing prior to the scheduled date for such destruction or
disposal that any of the Information proposed to be destroyed or disposed of be
delivered to such requesting party, the party proposing the destruction or
disposal shall promptly arrange for the delivery of such of the Information as
was requested (at the cost of the requesting party).
Section 7.5 Confidentiality.
(a) Each of 3M and Imation shall, and shall cause its
officers, employees, agents, consultants, advisors and Affiliates to, hold, in
strict confidence and not disclose to another, except as provided herein or
compelled to disclose by judicial or administrative process or, in the opinion
of its independent legal counsel, by other requirements of law, confidential
information concerning the other party.
(b) For purposes of this Section 7.5, confidential information
about a particular party (referred to herein as the "first party") shall mean
information known by the other party on the Distribution Date and reasonably
understood by the other party to be confidential and related to the first
party's business interests, or disclosed confidentially by the first party to
the other party after the Distribution Date under the terms and for purposes of
this Agreement or any of the Related Agreements except for:
(i) information learned by the other party for the first
time after the Distribution Date, but prior to any
disclosure by the first party;
(ii) information which is or becomes publicly available
through no act of the other party, from and after the
date of public availability;
(iii) information disclosed to the other party by a third
party, provided (a) under the circumstances of
disclosure the other party does not have a duty of
non-disclosure owed to such third party, (b) the
third party's disclosure is not violative of a duty
of non-disclosure owed to another, including the
first party, and (c) the disclosure by the third
party is not otherwise unlawful;
(iv) information developed by the other party independent
of any confidential information of the first party
which is known by the other party on the Distribution
Date and/or disclosed by the first party thereafter;
(v) information which pursuant to the terms of the
Intellectual Property Agreement or any of the other
Related Agreements is specifically excluded from the
definition of confidential information; and
(vi) information which the other party can demonstrate was
disclosed by a business of the other party to a third
party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party
has expired, from and after the date such third party
obligation of confidentiality expires, and provided
that disclosure of an item of information to one
third party and a different item of information to
another third party shall not be viewed as disclosure
of information which can only be drawn from those
items of information collectively.
(c) The foregoing restrictions shall expire with respect to
business information which is confidential information five (5) years after the
date of disclosure of such information, unless and to the extent 3M and Imation
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is confidential information of Imation
and/or 3M, in which case the foregoing restrictions shall expire with respect to
such information on the expiration of such longer period. The date of disclosure
in the case of business information which is either confidential information of
3M known by Imation or confidential information of Imation known by 3M on the
Distribution Date shall be considered to be the Distribution Date. 3M and
Imation each shall not disclose to another or use except for purposes of
fulfilling its obligations under this Agreement or the relevant Related
Agreements any business information which is confidential information of Imation
or confidential information of 3M, respectively. In addition, 3M and Imation
each shall not disclose to another or use except for purposes of fulfilling its
obligations under this Agreement or the relevant Related Agreement any technical
information which is confidential information of Imation or confidential
information of 3M, respectively. The foregoing restrictions shall not expire
until such time and to the extent that such information ceases to be
confidential information.
(d) Each party shall protect confidential information of the
other party by using the same degree of care, but no less than a reasonable
degree of care, to prevent the unauthorized disclosure of the other party's
confidential information as the party uses to protect its own confidential
information of a like nature.
(e) Each party shall insure that its Affiliates, sublicensees
and other transferees (such as advisors, attorneys and other consultants) agree
to be bound by the same restrictions on use and disclosure of confidential
information as bind the party in advance of the disclosure of confidential
information to them.
(f) The parties recognize that confidential information
disclosed hereunder or under the Related Agreements may relate to an
Extraordinary Sensitive Technology as defined in, and contemplated by, the
Intellectual Property Agreement. Any such confidential information shall be
subject to the special treatment provided for in Paragraph 15.3 of the
Intellectual Property Agreement.
Section 7.6 Privileged Matters.
(a) Imation and 3M agree to maintain, preserve and assert all
privileges that either party may have, including without limitation, any
privilege or protection arising under or relating to any attorney-client
relationship that existed prior to the Distribution Date ("Privilege" or
"Privileges"). 3M and Imation shall be entitled in perpetuity to require the
assertion or decide whether to consent to the waiver of any and all Privileges
which, in the case of Imation, relate to the Transferred Assets and/or
Transferred Liabilities and, in the case of 3M, relate to the assets and/or
liabilities not transferred to Imation. Imation and 3M shall each use the same
degree of care as it would with respect to itself so as not to waive any
Privilege which could be asserted under applicable law without the prior written
consent of the other party. The rights and obligations created by this Section
7.6 shall apply to all Information as to which, but for the Distribution, 3M or
Imation would have been entitled to assert or did assert the protection of a
Privilege ("Privileged Information"), including but not limited to (i) all
Information generated prior to the Distribution Date but which, after the
Distribution, is in the possession of the other party or its Affiliates; (ii)
all communications subject to a Privilege occurring prior to the Distribution
Date between counsel for 3M and any person who, at the time of the
communication, was an employee of 3M, regardless of whether such employee is or
becomes an Imation employee or an employee of an Imation Affiliate; and (iii)
all Information generated, received or arising after the Distribution Date that
refers or relates to Privileged Information generated, received or arising prior
to the Distribution Date but which, after the Distribution Date, is in the
possession of the other party or its Affiliates.
(b) Upon receipt by any party or its Affiliates of any
subpoena, discovery or other request which arguably calls for the production or
disclosure of Privileged Information of the other party and whenever any party
obtains knowledge that any current or former employee of such party or its
Affiliates has received any subpoena, discovery or other request which arguably
calls for the production or disclosure of Privileged Information, such party
shall promptly notify the other party of the existence of the request and shall
provide the other party a reasonable opportunity to review the Information and
to assert any rights it may have under this Section 7.6 or otherwise to prevent
the production or disclosure of Privileged Information. Each party and its
Affiliates will not produce or disclose any Information covered by a Privilege
of the other party under this Section 7.6 unless (a) the other party has
provided its express written consent to such production or disclosure, or (b) a
court of competent jurisdiction has entered a final, non-appealable order
finding that the Information is not entitled to protection under any applicable
Privilege.
(c) 3M's transfer of Books and Records and any other
Information to Imation, and 3M's agreement to permit Imation to possess
Privileged Information occurring or generated prior to the Distribution Date,
are made in reliance on Imation's agreement, as set forth in this Section 7.6,
to maintain the confidentiality of Privileged Information and to maintain,
preserve and assert all applicable Privileges. The access to information granted
or permitted by this Agreement, the agreement to provide witnesses and
individuals pursuant to Section 7.3 hereof and transfer of Privileged
Information to Imation pursuant to this Agreement shall not be deemed a waiver
of any Privilege that has been or may be asserted under this Section 7.6 or
otherwise. Nothing in this Agreement shall operate to reduce, minimize or
condition the rights granted to either party in, or the obligations imposed upon
either party by, this Section 7.6.
Section 7.7 Mail and Other Communications. Each of 3M and
Imation agrees to forward or direct (as appropriate) to the other party any mail
or other communications of such other party which is received by it.
ARTICLE VIII
EMPLOYEE MATTERS AND BENEFITS
Section 8.1 Employment. At the Distribution Date, Imation
shall employ each Transferred Employee at an annual compensation rate no less
than such Transferred Employee's current annual compensation rate with 3M.
Transferred Employees employed in the United States or employed outside the
United States on temporary foreign assignments (including foreign service
employees, as described in Schedule 8.11 attached hereto) are referred to herein
as the "U.S. Transferred Employees;" all other Transferred Employees are
referred to herein as the "O.U.S. Transferred Employees." Imation shall continue
the status of a Transferred Employee on leave of absence or shortor long-term
disability absence, other than the leave of absence status of a Transferred
Employee on preretirement leave, and shall recall, reinstate, and/or terminate
the employment of such Transferred Employees in accordance with the leave of
absence policy applicable to the Transferred Employee that was in effect when
the Transferred Employee's leave of absence began. Notwithstanding anything to
the contrary in this Section 8.1, Imation shall not be obligated to employ any
person who declines employment with Imation and such person shall not be
considered a Transferred Employee.
Section 8.2 Qualified and NonQualified Retirement and Benefit
Plans.
(a) On or before the Distribution Date, Imation shall (i)
establish, effective as of the Distribution Date, a defined benefit plan (the
"Imation Defined Benefit Plan") and a defined contribution plan (the "Imation
Defined Contribution Plan"), in each case, intended to qualify under Section
401(a) of the Code (the Imation Defined Benefit Plan and the Imation Defined
Contribution Plan being collectively referred to as the "Imation Pension
Plans"), (ii) establish, on or before the Distribution Date, trusts under the
Imation Pension Plans intended to qualify under Section 501(a) of the Code,
(iii) establish, effective as of the Distribution Date, a nonqualified pension
benefit plan (the "Imation Nonqualified Pension Plan" and together with the
Imation Defined Benefit Plan, the "Imation Defined Benefit Plans"), and (iv)
establish, effective as of the Distribution Date, a plan similar to the 3M
Senior Executive Split Dollar Plan (the "3M Survivor Program"). The Imation
Defined Contribution Plan shall relate and apply to compensation paid on or
after the Distribution Date, and shall be (or shall have a component thereof
that consists of) an employee stock ownership plan within the meaning of
Sections 409 and 4975(e)(7) of the Code (the "Imation ESOP").
(b) On or before the Distribution Date, 3M shall direct the
Trustee of the 3M Voluntary Investment Plan and Employee Stock Ownership Plan
(the "3M 401(k)/ESOP") to transfer (the "ESOP Transfer") from the trusts
established thereunder to the trust under the Imation Defined Contribution Plan,
an amount (in the form determined by 3M unless otherwise provided herein) equal
to the sum of the account balances (including liabilities associated with
outstanding participant loans) of each Transferred Employee as of the date of
transfer (the "ESOP Transfer Date"); provided, however, that all shares of 3M
Common Stock and Imation Common Stock represented by units allocated to the
accounts of Transferred Employees shall be transferred, in kind, to the Imation
Defined Contribution Plan. Notwithstanding anything contained herein to the
contrary, no such transfer shall take place until the 31st day following the
filing of all required Forms 5310-A in connection therewith.
(c) Effective as of the ESOP Transfer Date, Imation and the
Imation Defined Contribution Plan shall assume and become solely responsible for
the satisfaction of all liabilities under the 3M 401(k)/ESOP in respect of the
Transferred Employees, and 3M and the 3M 401(k)/ESOP shall be relieved of and
shall cease to have any responsibility for the satisfaction of such liabilities,
other than for any reconciliations required after the ESOP Transfer Date.
(d) Effective as of the Distribution Date, 3M shall assign to
Imation all insurance policies assigned to 3M with respect to Transferred
Employees under the 3M Survivor Program, and all company owned life insurance
policies related thereto with respect to Transferred Employees.
(e) Effective as of the Distribution Date, 3M shall amend the
3M 401(k)/ESOP, the Employee Retirement Income Plan of Minnesota Mining and
Manufacturing Company (the "3M Defined Benefit Plan," and together with the 3M
401(k)/ESOP, the "3M Qualified Pension Plans"), the Nonqualified Pension Plan I
for Minnesota Mining and Manufacturing Company and the Nonqualified Pension Plan
II for Minnesota Mining and Manufacturing Company (collectively the "3M
Nonqualified Pension Plans," and together with the 3M Qualified Pension Plans,
the "3M Pension Plans") as follows: (i) each of the 3M Pension Plans shall be
amended to provide that no benefits shall accrue (except as provided otherwise
in this Agreement) and no contributions shall be allocated with respect to a
Transferred Employee under the 3M Pension Plans with respect to any period
commencing on or after the Distribution Date, and no forfeitures shall be
allocated after the Distribution Date with respect to a Transferred Employee
under the 3M 401(k)/ESOP; (ii) the 3M Defined Benefit Plan and the 3M
Nonqualified Pension Plans (collectively, the "3M Defined Benefit Plans") shall
be amended to provide that the accrued benefits of Transferred Employees under
the 3M Defined Benefit Plans as of the Distribution Date (the "Accrued
Benefits") shall be fully vested, and the 3M 401(k)/ESOP shall be amended to
provide that the account balances of each Transferred Employee thereunder as of
the Distribution Date shall be fully vested; (iii) the 3M Defined Benefit Plans
shall be amended to provide that, for purposes of eligibility for early
retirement subsidies attributable to each Transferred Employee's Accrued
Benefit, each such Transferred Employee's years of service with Imation shall be
recognized; and (iv) the 3M Defined Benefit Plans shall be amended to provide
the following Special Retirement Benefits (the "3M Special Retirement Benefits")
for each Grandfathered Employee (as defined in Section 8.2 (h)(ii)): For each
year of service with Imation, each Grandfathered Employee will be credited with
a benefit equal to one-half of (A) plus (B), where (A) is 4% of such
Grandfathered Employee's Accrued Benefit and (B) is 4% of any benefits
previously accrued on behalf of such Grandfathered Employee pursuant to Sections
8.2(e)(iv) and 8.2(h)(ii) hereof. 3M and the 3M Defined Benefit Plans shall
remain solely responsible for all liabilities with respect to the Accrued
Benefits and the 3M Special Retirement Benefits and Imation and the Imation
Pension Plans shall have no liability or responsibility therefor. 3M and Imation
agree that the transfer of the Transferred Employees to Imation shall not
constitute an event entitling any such Transferred Employee to a distribution
from the 3M Pension Plans.
(f) Effective as of the Distribution Date, 3M shall amend 3M's
Deferred Compensation Plan to provide that all U.S. Transferred Employees shall
no longer be eligible to make deferrals thereto. 3M shall retain sole
responsibility for, and all liabilities relating to, 3M's Deferred Compensation
Plan, and Imation shall have no liability or responsibility therefor.
(g) Imation agrees to indemnify and hold harmless 3M, its
officers, directors, employees, employee benefit plans and trusts, employee
benefit plan trustees, agents and affiliates from and against any and all costs,
damages, losses, expenses (including reasonable attorneys' fees and costs), or
other liabilities arising out of or related to the Imation Pension Plans, other
than any such costs, damages, losses, expenses or other liabilities relating to
the ESOP Transfer that are directly attributable to the acts or omissions of any
such parties prior to or on the Distribution Date, and 3M agrees to indemnify
and hold harmless Imation, its officers, directors, employees, employee benefit
plans and trusts, employee benefit plan trustees, agents and affiliates from and
against any and all costs, damages, losses, expenses (including reasonable
attorneys' fees and costs), or other liabilities relating to the ESOP Transfer
which are directly attributable to such acts or omissions.
(h) (i) The Imation Pension Plans shall provide, effective as
of the Distribution Date, that U.S. Transferred Employees shall (A) immediately
upon their becoming employees of Imation, become eligible to participate in the
Imation Pension Plans, (B) with respect to the Imation Defined Contribution
Plan, for all purposes (including vesting, eligibility for benefits and benefit
determination) receive credit for all service credited for such purposes under
the 3M 401(k)/ESOP as of the Distribution Date as if the service had been
rendered to Imation, and (C) with respect to the Imation Defined Benefit Plans,
for all purposes other than for purposes of benefit accrual, including
participation, eligibility and vesting, receive credit for all service credited
for such purposes under the 3M Defined Benefit Plans as of the Distribution Date
as if the service had been rendered to Imation.
(ii) In addition to other retirement benefits accrued
thereunder, the Imation Defined Benefit Plans shall provide the following
special retirement benefits (the "Imation Special Retirement Benefits") for each
U.S. Transferred Employee who has at least 10 years of 3M service as of the
Distribution Date, and whose combined age and years of 3M service equal 50 or
more as of the Distribution Date (the "Grandfathered Employees"). For each year
of service with Imation, each Grandfathered Employee will be credited with a
benefit equal to one-half of (A) plus (B), where (A) is 4% of such Grandfathered
Employee's Accrued Benefit and (B) is 4% of any benefits previously accrued on
behalf of such Grandfathered Employee pursuant to Sections 8.2(e)(iv) and
8.2(h)(ii). The Imation Special Retirement Benefits shall be payable in the same
form that each Grandfathered Employee's Accrued Benefits are paid under the 3M
Defined Benefit Plans, and Imation's Defined Benefit Plans shall provide that
Grandfathered Employees shall be eligible for the same subsidies for early
retirement as are applied to each Grandfathered Employee's Accrued Benefits
under the 3M Defined Benefit Plans.
(i) 3M and Imation shall provide each other such records and
information as may be necessary or appropriate to carry out their obligations
under this Section 8.2 or for the purposes of administration of the 3M Pension
Plans and the Imation Pension Plans, and they shall cooperate in the filing of
documents required by the transfer of assets and liabilities described herein.
(j) 3M shall retain sole responsibility for, and all
liabilities relating to, the 3M Nonqualified Pension Plans, and Imation shall
have no liability or responsibility therefor.
(k) Imation acknowledges that 3M, following discussions with
the management of Imation, has represented to the Internal Revenue Service in
connection with 3M's request for a private letter ruling as to the federal
income tax consequences of the Distribution, and, to effect such
representations, Imation agrees that (i) Imation will establish an employee
stock ownership plan (the "Imation ESOP") that satisfies the requirements of
Sections 401(a) and 4975(e)(7) of the Code, in which non-union domestic
employees of Imation and Imation Enterprises shall be eligible to participate,
and (ii) within five years after the Distribution a minimum of 4% of the Imation
Common Stock then outstanding will be held by the Imation ESOP for the benefit
of Imation Employees.
Section 8.3 Welfare Plans.
(a) 3M agrees that it shall take or cause to be taken all
action necessary and appropriate to:
(i) direct the trustees of each trust created under
Section 501(c)(9) of the Code for the purpose of funding the payment of benefits
under certain of the employee welfare benefit plans of 3M (individually, a "3M
VEBA"), other than the EBTA, as defined in clause (ii) below, to transfer, as
soon as practicable following the date that the required data is available, to
the trust or trusts established by Imation, which are intended to constitute
"voluntary employees' beneficiary associations" within the meaning of Section
501(c)(9) of the Code (individually an "Imation VEBA"), the actuarially
determined portion of the assets of such 3M VEBAs (as determined by the
certified actuary engaged by 3M for this purpose under generally accepted
actuarial principles) attributable to the Transferred Employees for such
benefits as are being offered by Imation under the corresponding Imation VEBA,
including assets attributable to Transferred Employees relating to employee
medical and dental benefits, and long-term disability benefits, but excluding,
for this purpose, post-retirement medical, dental and life insurance benefits;
(ii) in the case of the trust created under Section
501(c)(9) of the Code by the 3M Employees' Benefits Trust Association (the
"EBTA"), request the Board of Directors of the EBTA to direct, after the
Distribution Date, and as soon as practicable following the date that the
required data is available, the trustee of such EBTA and its insurers to
transfer to the corresponding Imation VEBA the actuarially determined portion
(as determined by such EBTA's actuary under generally accepted actuarial
principles) of the assets and premium stabilization reserve of such EBTA
attributable to the Transferred Employees;
(iii) amend its post-retirement medical benefit plans
(the "3M Post-Retirement Medical Plans") to cover each U.S. Transferred Employee
whose combined age and years of 3M service as of the Distribution Date equals 60
or more (with a minimum of 5 years of 3M service and a minimum age of 50 as of
the Distribution Date) and who retires from employment with Imation, the
benefits (if any) payable to such U.S. Transferred Employee to be based on the
provisions of the 3M Post-Retirement Medical Plans as in effect at the time such
U.S. Transferred Employee retires from employment with Imation, and as such
plans may be amended thereafter;
(iv) provide or arrange for the provision
of benefits administration services for a period of up to 24 months following
the Distribution Date, as described in the Corporate Services Transition
Agreement, with respect to the employee welfare benefit plans to be adopted by
Imation in accordance with Section 8.3(c) hereof; and
(v) pay (A) the severance costs of employees who
have accepted, on or prior to the Distribution Date, the terms of a voluntary
separation plan offered prior to the Distribution Date by any of the business
units or at the plants listed on Schedule 1.1A, (B) the severance costs, if any,
relating to Leased Employees, (C) the severance costs relating to employees at
the Beauchamp, France facility of 3M who will be performing contract
manufacturing services for Imation (except that Imation shall be responsible for
severance costs associated with up to 20% of such employees up to an aggregate
cost to Imation not to exceed $1 million) and (D) the severance and indemnity
costs incurred as a result of the transfer of O.U.S. Transferred Employees, but
only if, and to the extent that, such severance and indemnity costs are imposed
pursuant to applicable foreign law (it being understood, however, that 3M shall
not be responsible for any severance costs payable after the Distribution
Date with respect to employees at the Imation facilities in Harlow,
England; Ferrania, Italy; Sulmona, Italy; London, Ontario; and Florida,
Argentina).
(b) Imation agrees that:
(i) it shall assume and be solely responsible for
all liabilities and obligations whatsoever of 3M in connection with claims for
benefits incurred on or after the Distribution Date by or in respect of
Transferred Employees under the welfare benefit plans maintained by 3M for
employees and the workers' compensation, unemployment compensation and other
legally required employee benefits programs maintained by 3M, and 3M shall cease
to have any such liability or obligation. For purposes of this Section 8.3,
"incurred" shall mean (A) with respect to medical and dental benefits, the date
that services are performed; and (B) with respect to survivor benefits, the date
of death. With respect to disability benefits, Imation shall assume and be
solely responsible for all disability payments with respect to Transferred
Employees (including Transferred Employees who are on shortor long-term
disability absences on or prior to the Distribution Date) payable on or after
the Distribution Date;
(ii) it shall assume and be solely responsible for
all liabilities and obligations whatsoever of 3M in connection with 3M's
vacation plan for the unused vacation benefits of all Transferred Employees as
of the Distribution Date, and shall adopt a vacation plan which, among other
things, pays Transferred Employees the value of such Transferred Employees'
unused vacation benefits earned under 3M's vacation plan as of the Distribution
Date; and
(iii) it shall reimburse 3M on at least a quarterly
basis for 3M's and its Affiliates' net costs (excluding internal administration
costs) arising from their payments of workers' compensation benefits and
liabilities on or after the Distribution Date payable to or with respect to
Transferred Employees for whom 3M or its Affiliates have an obligation to make
such payments after the Distribution Date and for which 3M or its Affiliates
have not received any reimbursement either from Imation or from insurance.
(c) Imation further agrees that it shall take, or cause to be
taken all action necessary and appropriate:
(i) to establish, effective as of the Distribution
Date for a period of not less than 18 months, for the benefit of U.S.
Transferred Employees while such employees are employed by Imation, employee
welfare benefit plans (other than vacation plans) substantially similar to
those employee welfare benefit plans covering employees of the U.S. Transferred
Businesses immediately prior to the Distribution Date. Imation shall recognize
all employment service and earnings of a U.S. Transferred Employee recognized by
3M as employment service and earnings of Imation for purposes of applying the
provisions of any Imation welfare benefit plan or similar program, including any
vacation plan or program, where the U.S. Transferred Employee's benefits
thereunder are a function of the employee's employment service or earnings or a
combination thereof;
(ii) on or before the Distribution Date, to adopt as
a successor employer, on a retroactive basis from January 1, 1996, the 3M
Flexible Benefits Program, including the health care reimbursement account and
dependent daycare reimbursement account covering the Transferred Employees, as
if such Transferred Employees' employment with Imation was a continuation of
their employment with 3M (the "Imation Flexible Benefits Program"). At the same
time that Imation adopts its Flexible Benefits Program, it shall amend such
Program to provide that any unused flexible benefit credits shall be paid in
cash to the respective employees, and not invested in employer common stock, as
currently provided under the 3M Flexible Benefits Program. Imation shall effect
payment of all wage and salary deductions of participating Transferred Employees
required under such plans to 3M as Imation's agent, pursuant to the Corporate
Services Transition Agreement through December 31, 1997, for application by 3M
toward the disbursement of reimbursement benefits and medical, dental and life
insurance premium amounts to, or with respect to, such Transferred Employees on
Imation's behalf, with a final accounting of all such receipts and disbursements
by 3M on or before July 31, 1998. All liabilities relating to the Transferred
Employees' rights and benefits described in this clause (ii) shall be assumed by
Imation as of the Distribution Date, and 3M shall cease to have any such
liability or obligation therefor. As soon as practicable following the date that
the required data is available, 3M shall reduce the amount that Imation is
required to reimburse it for Imation's Flexible Benefits Program benefit
payments in accordance with the Corporate Services Transition Agreement by the
aggregate net amounts credited to the health care reimbursement accounts and the
dependent daycare reimbursement accounts of the Transferred Employees under such
Program as of June 30, 1996. Thereafter, through June 30, 1998, Imation shall
periodically, but in no event less frequently than monthly, reimburse 3M for
claims paid by 3M thereunder;
(iii) to provide the benefit coverage otherwise
necessary to assume the liabilities and obligations that are or shall become the
responsibility of Imation under this Section 8.3; and
(iv) to make legally required contributions or
payments pursuant to any law providing for workers' compensation, unemployment
compensation, disability benefits or other legally required employee benefit
programs with respect to Transferred Employees, and to retain any accounts or
reserves relative to such benefits held solely by Imation for such Transferred
Employees.
In connection with the foregoing, 3M agrees to provide Imation
or its designated insurance representative with such information as may be
reasonably requested by Imation and necessary for Imation to assume, establish
or maintain such plans, funding arrangements, and benefit coverage.
Section 8.4 Assumption of Certain Employee Related
Obligations.
(a) Effective as of the Distribution Date, Imation shall
assume and 3M shall have no further obligation or liability for:
(i) all incentives, bonus and deferred compensation
(including profit sharing and commissions, but excluding all obligations and
liabilities with respect to 3M's Deferred Compensation Plan) earned by
Transferred Employees but not paid on or before the Distribution Date, except as
otherwise provided in paragraph (b) below;
(ii) any requirements under the Consolidated
Omnibus Budget Reconciliation Act of 1985 ("COBRA") to provide continuation of
health care coverage to any Transferred Employee or "qualified beneficiary", as
defined in COBRA, of a Transferred Employee who loses coverage as a result of a
"qualifying event", as defined in COBRA, that occurs after the Distribution
Date;
(iii) any and all obligations to make premium
payments due on or after the Distribution Date with respect to Transferred
Employees who participate in the Imation successor program to the 3M Survivor
Program; and
(iv) all liability under the Performance Unit Plan of
3M (the "PUP") with respect to Transferred Employees that are attributable to
the 1996 award, other than that portion of the 1996 award that was earned during
1996.
(b) 3M shall retain all liability with respect to Transferred
Employees under the PUP for all awards made prior to 1996 and that portion of
the 1996 award that was earned during 1996.
Section 8.5 Other Liabilities and Obligations. As of the
Distribution Date, Imation shall assume and be solely responsible for all
liabilities and obligations whatsoever of the Transferred Businesses with
respect to claims made by or with respect to Transferred Employees, relating to
their employment with or termination from the Transferred Businesses or 3M not
otherwise provided for in this Agreement, including, without limitation, earned
salary, wages or other compensation and accrued holidays and other termination
benefits.
Section 8.6 Preservation of Rights to Amend or Terminate
Plans. No provisions of this Agreement, including, without limitation, the
agreement of 3M or Imation that it will make a contribution or payment to or
under any plan referred to herein for any period, shall be construed as a
limitation on the right of 3M or Imation to amend such plan or terminate its
participation therein which 3M or Imation would otherwise have under the terms
of such plan or otherwise; provided, however, that no amendment shall reduce or
eliminate (i) the Transferred Employees' unused account balances under the
Flexible Benefits Program required to be adopted pursuant to Section 8.3(c)(ii)
hereof; or (ii) the Transferred Employees' unused vacation benefits as of the
Distribution Date.
Section 8.7 Reimbursement; Indemnification. Imation and 3M
acknowledge that each may incur costs and expenses (including, without
limitation, contributions to plans and the payment of insurance premiums)
pursuant to any of the employee benefit or compensation plans, program or
arrangements, which are, as set forth in this Agreement, the responsibility of
the other party. Accordingly, 3M and Imation agree to reimburse each other, as
soon as practicable but in any event within 30 days of receipt from the other
party of appropriate verification, for all such costs and expenses, as the case
may be, as an indemnitee in respect of the corresponding payment made by it, as
determined pursuant to Section 5.2(d) hereof, except to the extent that any such
payment or reimbursement would be duplicative.
Section 8.8 Stock Plans.
(a) 3M Stock Option Plans. 3M shall be solely responsible for
satisfying all option exercises by Transferred Employees under the Stock Option
Plans with respect to options to acquire shares of 3M Common Stock which are
outstanding as of the Distribution Date. 3M shall cause such Stock Option Plans
to be interpreted so that employment of the Transferred Employees with Imation
shall be treated as employment with 3M for purposes of the Stock Option Plans'
provisions causing outstanding stock options to expire upon the termination of
employment of the option holder. Notwithstanding the foregoing, no options
(including Progressive Stock Options, as defined in the Stock Option Plans)
shall be granted to Transferred Employees under the Stock Option Plans after the
Distribution Date. As soon as reasonably possible following the Distribution
Date, Options that are outstanding and unexercised under the Stock Option Plans
immediately prior to the Distribution Date (the "3M Options"), shall be adjusted
as follows:
(i) if there is an ex-dividend market for 3M Common
Stock prior to the Distribution Date, then (A) the shares subject to the 3M
Options shall be multiplied by a fraction, the numerator of which is the closing
per share price of 3M Common Stock on the last trading day immediately preceding
the ex-dividend date, and the denominator of which is the closing price per
share of 3M Common Stock on the ex-dividend date, with the resulting number of
shares rounded downward to the nearest share, and (B) the exercise price of each
such share shall be divided by the fraction set forth in clause (A) above, with
the resulting price rounded upward to the nearest cent; and
(ii) if there is no ex-dividend market for 3M Common
Stock prior to the Distribution Date, then (A) the shares subject to the 3M
Options shall be multiplied by a fraction, the numerator of which is the closing
price per share of 3M Common Stock on the last trading day immediately preceding
the date on which 3M Common Stock begins trading without the Imation dividend
(i.e., without due bills) and the denominator of which is the closing price per
share of 3M Common Stock on the first trading day that 3M Common Stock begins
trading without the Imation dividend (i.e., without due bills), with the
resulting number of shares rounded downward to the nearest share, and (B) the
exercise price of each such share shall be divided by the fraction set forth in
clause (A) above, with the resulting price rounded upward to the nearest cent.
Imation agrees to promptly notify 3M of the death or
termination of employment for any reason of each Transferred Employee for 3M's
use in administering its Stock Option Plans with respect to outstanding stock
options held by such Transferred Employees.
This Section 8.8(a) shall be interpreted and applied in the
discretion of the 3M Compensation Committee, whose interpretation and
application shall be binding upon all optionees under the Stock Option Plans.
(b) 3M Stock Purchase Plan. As soon as possible following the
Distribution Date, each option to purchase 3M Common Stock that is outstanding
and unexercised under the 3M 1992 General Employees Stock Purchase Plan shall be
adjusted in a manner similar to the manner that the 3M Options are adjusted
pursuant to paragraph (a) above.
(c) Imation Stock Options. On or prior to the Distribution
Date, Imation shall adopt a stock option plan (the "Imation Employee Stock
Incentive Plan") enabling Imation to grant options to Transferred Employees, and
3M, as the sole stockholder of Imation, shall approve the Imation Employee Stock
Incentive Plan. Imation agrees to take all actions necessary or appropriate to
grant, effective as of a date not later than 60 days following the Distribution
Date, stock options to purchase Imation Common Stock (the "Imation Stock
Options") under the Imation Employee Stock Incentive Plan. The Imation Stock
Options shall have an exercise price equal to the fair market value of Imation
Common Stock as of the date of grant and shall be granted to those Transferred
Employees designated by 3M, who would otherwise have been granted options in May
1996, to purchase shares of 3M Common Stock under the 3M Stock Option Plans (the
"1996 Grants"). The aggregate number of shares for which Imation Stock Options
shall be granted pursuant to this Section 8.8(c) shall be equal to the product
of (A) multiplied by (B), where (A) is the aggregate number of shares of 3M
Common Stock for which options would have been granted to such Transferred
Employees in May, 1996, but for the Distribution (as disclosed to Imation by 3M)
and (B) is 1.5. The Imation Stock Options shall be granted to the Transferred
Employees in the same proportion as the 1996 Grants would have been granted to
such Transferred Employees. The vesting schedule and other material terms and
conditions of such Imation Stock Options shall be no less favorable to the
applicable Transferred Employees than the vesting schedule and other terms and
conditions that would have been provided under the 1996 Grants.
Section 8.9 Limitation on Enforcement. This Article VIII is an
agreement solely between 3M and Imation. Nothing in this Agreement or any
Related Agreement, whether express or implied, confers upon any employee of
3M or Imation, any Transferred Employee, any former employee of 3M, any
beneficiary of a Transferred Employee or former employee of 3M or any other
person, any rights or remedies, including, but not limited to (i) any right to
employment or recall, (ii) any right to continued employment for any specified
period or (iii) any right to claim any particular compensation, benefit or
aggregation of benefits, of any kind or nature whatsoever, as a result of this
Article VIII.
Section 8.10 Employment Following the Distribution Date. For a
period of 24 months following the Distribution Date, 3M shall not employ any
Transferred Employee without the consent of Imation's Chief Executive Officer
and 3M's Vice President, Human Resources. For a period of 60 months following
the Distribution Date, Imation shall not hire any employee of 3M who is on
preretirement leave from 3M. For a period of 36 months following their last day
of employment with 3M, Imation shall not hire any former employee of 3M who has
signed a release which includes an agreement not to apply for employment with 3M
or Imation.
Section 8.11 Foreign Service Employee and O.U.S. Transferred
Employee Obligations.
(a) Imation shall assume all obligations of 3M with respect to
any U.S. Transferred Employee who immediately prior to the Distribution Date
served as a foreign service employee, including the obligations described in
Schedule 8.11 attached hereto.
(b) All rights, obligations, terms and conditions relating to
O.U.S. Transferred Employees shall be subject to, and governed by, the terms of
the Foreign Asset Transfer Agreements.
ARTICLE IX
INSURANCE
Section 9.1 General. Except as provided in this Article, 3M
shall keep in effect all policies under its Insurance Program in effect as of
the date hereof insuring the Transferred Assets and operations of the
Transferred Businesses until 12:00 midnight on the Distribution Date, unless
Imation shall have earlier obtained appropriate coverage and notified 3M in
writing to that effect. Beginning at 12:01 a.m. on the day following the
Distribution Date, Imation will cease to be a named insured on a world-wide
basis under all policies in 3M's Insurance Program. Imation understands that the
effect of these actions will be to eliminate insurance coverage not only for
future occurrences but also for prior occurrences which might have given or may
give rise to liabilities for which Imation and its Affiliates would be
responsible.
Section 9.2 Imation's Insurance.
(a) Imation will purchase and pay for the types and amounts of
insurance coverage that it deems appropriate for the period beginning on and
continuing after May 1, 1986, including Broad Form Contractual Liability
insurance coverage as to Imation's indemnity obligations set forth in the
Distribution Agreement and in the Related Agreements.
(b) 3M, for and on behalf of Imation, will purchase and pay
for on a one-time basis certain Products and Completed Operations Insurance
Coverage covering certain periods prior to the Distribution Date and with such
limits as shall be determined by 3M.
(c) Imation agrees that 3M has made no warranty, expressed or
implied, and no representation that the insurance described in Section 9.1,
9.2(a) or (b) above is or will be adequate or sufficient to meet Imation's
current or future insurance needs.
Section 9.3 Access to 3M's Insurance Program.
(a) Except as provided in Section 9.3(b) hereof, Imation and
its Affiliates shall have access through 3M after the Distribution Date to such
coverages and limits as may be available under 3M's pre-Distribution Date
Insurance Program for covered claims occurring prior to the Distribution Date
and listed on Schedule 9.3. Imation understands that no coverage will be
available under 3M's Insurance Program unless the claim is listed on Schedule
9.3. Such access shall be subject to available coverage and to all of the terms,
conditions, exclusions, retentions and limits of such policies.
(b) Imation's and its Affiliates' access to 3M's Insurance
Program as provided in Section 9.3(a) hereof shall be limited as described in
this Section 9.3(b):
(i) Product Liability Insurance. Imation, for itself
and its Affiliates, understands and agrees that it will have no access to any
insurance provided by 3M's "Products and Completed Operations Insurance
Coverage" policies for all years prior to May 1, 1986. Imation and its
Affiliates will have access to 3M's claims made products liability coverage for
the period May 1, 1986 to the Distribution Date, but such access shall be
limited to covered claims 3M has reported to its carriers or underwriters as of
the Distribution Date, as listed on Schedule 9.3.
(ii) Environmental Pollution Insurance. Imation
understands and agrees that 3M has made no warranty or representation of any
insurance recovery or insurance coverage from 3M's Insurance Program with
respect to Imation's Assumed Environmental Liabilities. If, in the future, 3M
should receive an insurance recovery relating to an Imation Assumed
Environmental Liability, 3M shall follow the procedures set forth in Section 9.4
hereof.
(iii) All Other Insurance. Imation, for itself and
its Affiliates, understands and agrees that they will have no access to other
insurance coverage in 3M's Insurance Program other than as provided in Section
9.3(b)(i) and (ii) above, unless the claim arose prior to the Distribution Date
and, in the case of product liability claims, unless the claims are listed on
Schedule 9.3.
Section 9.4 Insurance Recoveries. Subject to Sections 9.1 and
9.3 hereof, 3M shall use its reasonable efforts to obtain recoveries for Imation
and its Affiliates from 3M's insurance carriers for coverage available under
Section 9.3 hereof and will keep Imation reasonably informed of 3M's efforts
under this Section 9.4. 3M will reimburse Imation for any recovery obtained by
it pursuant to such claims; provided, however, that notwithstanding the
foregoing, if 3M has made a claim or claims under an insurance policy which is
not to be paid to Imation pursuant to Section 9.3 and a claim or claims which
are to be paid to Imation pursuant to this Article and the amount of the
Recovery for such claims is limited by the amount of coverage provided by such
policy, 3M may use its reasonable discretion in resolving and allocating the
Recovery between it and Imation for such claims. Imation shall pay all costs
incurred by 3M after the Distribution Date in making any claim pursuant to this
Section 9.4, including the salaries of 3M's officers and employees based on the
portion of time spent on such claims and such costs incurred in pursuing a claim
may be deducted from any Recovery for such claim. Imation agrees to make
available to 3M such of its employees as 3M may reasonably request as witnesses
or deponents in connection with 3M's management of claims, at Imation's sole
cost and expense. Imation agrees that, if 3M has paid a Recovery to it for such
a claim and Imation receives proceeds from any other person with respect to such
claim, it will pay over to 3M the amount of proceeds it has received.
Section 9.5 Assignment. Nothing in this Agreement shall be
deemed to constitute (or to reflect) an assignment of any insurance policy or
insurance benefit.
Section 9.6 Conflicts Between Article IX and 3M's Insurance
Program. Any provision of this Agreement that conflicts with any term or
provision of applicable 3M insurance policies shall be void.
ARTICLE X
DISPUTE RESOLUTION
Section 10.1 Mediation and Binding Arbitration. Except with
respect to matters involving Section 7.6 hereof (Privileged Matters) and except
as may be expressly provided in any other agreement between the parties entered
into pursuant hereto, if a dispute, controversy or claim (collectively, a
"Dispute") between 3M and Imation or any of their respective Affiliates arises
out of or relates to this Agreement, the Related Agreements or any other
agreement entered into pursuant hereto or thereto, including, without
limitation, the breach, interpretation or validity of any such agreement or any
matter involving an Indemnifiable Loss, 3M and Imation agree to use the
following procedures, in lieu of either party pursuing other available remedies
and as the sole remedy (except as provided in Section 10.5(b) below), to resolve
the Dispute.
Section 10.2 Initiation. A party seeking to initiate the
procedures shall give written notice to the other party, describing briefly the
nature of the Dispute. A meeting shall be held between the parties within 10
days of the receipt of such notice, attended by individuals with decision-making
authority regarding the Dispute, to attempt in good faith to negotiate a
resolution of the Dispute.
Section 10.3 Submission to Mediation. If, within 30 days after
such meeting, the parties have not succeeded in negotiating a resolution of the
Dispute, they agree to submit the Dispute at the earliest possible date to
mediation in accordance with the Center for Public Resources Model ADR Procedure
- - Mediation of Business Disputes, as modified herein, and to bear equally the
costs of the mediation.
Section 10.4 Selection of Mediator. The parties will jointly
appoint a mutually acceptable mediator. If they are unable to agree upon such
appointment within 20 days from the conclusion of the negotiation period, either
party may request the Center for Public Resources or another mutually
agreed-upon organization to appoint the mediator.
Section 10.5 Mediation and Arbitration.
(a) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of 30 days or such
longer period as they may mutually agree following the initial mediation
session, provided, however, that in the event that one party fails to
participate in mediation, the Dispute may be referred immediately to arbitration
and the time of such failure shall constitute the end of the mediation period.
If the parties are not successful in resolving the Dispute through mediation by
the end of such period, then the parties agree to submit the matter to binding
arbitration in accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as modified herein, by a sole
arbitrator selected in accordance with the provisions of Section 10.6 hereof.
The arbitration shall be in Minnesota and governed by the Minnesota equivalent
of the Federal Arbitration Act, 9 U.S.C. ss. 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof.
(b) Except as may be expressly provided in any other agreement
between the parties, the parties obligation under this Article X to submit
disputes to binding arbitration in lieu of seeking judicial resolution of their
disputes shall expire on July 1, 2001 with respect to disputes of which the
party seeking to be indemnified first becomes aware of after such date.
Section 10.6 Selection of Arbitrator. The parties shall have
10 days from the end of the mediation period to agree upon a mutually acceptable
person to act as arbitrator. The arbitrator shall be a neutral person (i.e., a
person not affiliated with either of the parties). If no arbitrator has been
selected within such time, the parties agree jointly to request the Center for
Public Resources or another mutually agreed-upon organization to supply within
10 days of such request a list of potential arbitrators with qualifications as
specified by the parties in the joint request. Within five days of receipt of
the list, the parties shall independently rank the proposed candidates, shall
simultaneously exchange rankings, and shall be deemed to have selected as the
arbitrator the individual receiving the highest combined ranking who is
available to serve. If there is a tie, then the tie shall be broken by putting
the names on slips of paper, mixing them up and having one party draw one slip
of paper. If one party shall not cooperate in the selection of the arbitrator,
the other party may solely select the arbitrator utilizing the procedures set
forth in this Section 10.6.
Section 10.7 Cost of Arbitration. The costs of arbitration
shall be apportioned between 3M and Imation as determined by the arbitrator in
such manner as the arbitrator deems reasonable taking into account the
circumstances of the case, the conduct of the parties during the proceeding, and
the result of the arbitration.
Section 10.8 Arbitration Period. Any arbitration proceeding
shall be concluded in a maximum of one (1) year from written notice from one
party to the other party initiating the procedures under this Article X and
requesting arbitration after having participated, to the extent contemplated
herein, in negotiation and mediation under this Article X.
Section 10.9 Treatment of Negotiation and Mediation. All
negotiations and mediations pursuant to this Article X shall be treated as
compromise and settlement negotiations for purposes of Rule 408 of the Federal
Rules of Evidence and comparable Minnesota Rules of Evidence.
Section 10.10 Confidentiality. All negotiation, mediation and
arbitration proceedings under this Article X shall be treated as confidential
information in accordance with the provisions of Section 7.5 hereof. Any
mediator or arbitrator shall be bound by an agreement containing confidentiality
provisions at least as restrictive as those contained in Section 7.5 hereof.
Section 10.11 Equitable Relief. Nothing herein shall preclude
either party from seeking equitable relief to prevent any immediate, irreparable
harm to its interests, including multiple breaches of this Agreement or the
relevant Related Agreement by the other party. Otherwise, these procedures are
exclusive and shall be fully exhausted prior to the initiation of any
litigation. Either party may seek specific enforcement of any arbitrator's
decision under this Article X. The other party's only defense to such a request
for specific enforcement shall be fraud by or on the arbitrator.
Section 10.12 Notices. All notices by one party to the other
party in connection with the dispute resolution provisions set forth in this
Article X shall be in accordance with the provisions of Section 11.4 hereof
[except that no notice may be transmitted by facsimile].
Section 10.13 Consolidation. The arbitrator may consolidate an
arbitration under this Agreement with any arbitration arising under or relating
to the Related Agreements or any other agreement between the parties entered
into pursuant hereto, as the case may be, if the subject of the Disputes
thereunder arise out of or relate essentially to the same set of facts or
transactions. Such consolidated arbitration shall be determined by the
arbitrator appointed for the arbitration proceeding that was commenced first in
time.
ARTICLE XI
MISCELLANEOUS
Section 11.1 Complete Agreement. This Agreement, including the
Schedules, Annexes and Exhibits and the agreements and other documents referred
to herein, shall constitute the entire agreement between 3M and Imation with
respect to the subject matter hereof and shall supersede all previous
negotiations, commitments and writings with respect to such subject matter.
Section 11.2 Expenses. Except as otherwise provided in this
Agreement, any Related Agreement or any other agreement being entered into by 3M
and Imation pursuant to this Agreement, 3M or Imation shall each pay its own
costs and expenses incurred in connection with the Distribution (whether or not
payable as of the Distribution Date) and with the consummation of the
transactions contemplated by this Agreement. In furtherance of the foregoing, it
is agreed and acknowledged that 3M will be responsible for all fees of Skadden,
Arps, Slate, Meagher & Flom and Morgan Stanley & Co., Incorporated and the costs
of printing and mailing the Information Statement and the Imation stock
certificates, and Imation shall be responsible for all costs and fees relating
to the credit facility being established by Imation at the time of the
Distribution and the registration and transfer of intellectual property and
regulatory permits.
Section 11.3 Governing Law. This Agreement, the Related
Agreements and any other agreement entered into in connection with this
transaction and any questions, claims, disputes, remedies or procedural matters
shall be governed exclusively by the laws of the State of Minnesota, without
regard to the principles of conflicts of law, as to all matters, including,
without limitation, matters of validity, construction, effect, performance and
remedies. The parties agree that Minnesota has a substantial relationship to
this transaction, and each Party consents to personal jurisdiction in the courts
of Minnesota and further agrees that all such matters shall be heard in the
federal and state courts in Minnesota.
Section 11.4 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given (i) on the date of service if served personally on the
party to whom notice is given, (ii) on the day of transmission if sent via
facsimile transmission to the facsimile number given below, provided telephonic
confirmation of receipt is obtained promptly after completion of transmission,
(iii) on the business day after delivery to an overnight courier service or the
Express mail service maintained by the United States Postal Service, provided
receipt of delivery has been confirmed, or (iv) on the fifth day after mailing,
provided receipt of delivery is confirmed, if mailed to the party to whom notice
is to be given, by first class mail, registered or certified, postage prepaid,
properly addressed and return-receipt requested, to the party as follows:
If to 3M: Minnesota Mining and
Manufacturing Company
3M Center
St. Paul, Minnesota 55144
Attn: General Counsel
Telecopy: (612) 736-7859
If to Imation: Imation Corp.
1 Imation Place
Oakdale, Minnesota 55128
Attn: General Counsel
Telecopy: (612) 736-2185
Any party may change its address by giving the other party written notice of its
new address in the manner set forth above.
Section 11.5 Amendment and Modification. This Agreement may be
amended, modified or supplemented only by written agreement of the parties.
Section 11.6 Termination. This Agreement may be terminated and
the Distribution abandoned at any time prior to the Distribution Date by and in
the sole discretion of 3M without the approval of Imation. In the event of such
termination, no party shall have any liability of any kind to any other party.
Section 11.7 Successors and Assigns. This Agreement and all of
the provisions hereof shall be binding upon and inure to the benefit of the
parties and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by either party without the prior written consent of the other party.
The obligations under Articles V, VI and VII of this Agreement
of Imation and 3M shall survive the sale or other transfer by either of them of
any assets or businesses or the assignment by either of them of any Liabilities.
To the extent that 3M transfers to a party other than a subsidiary of 3M any of
its Retained Liabilities (except for such amounts of Retained Liabilities which
are not material individually or in the aggregate), 3M will cause the transferee
of such Retained Liabilities to assume specifically its obligations with respect
thereto under this Agreement and will cause such transferee to fulfill its
obligations related to such Retained Liabilities. To the extent Imation or
Imation Enterprises transfers to another party other than a subsidiary of
Imation any of the Assumed Liabilities (except for such amounts of Assumed
Liabilities which are not material individually or in the aggregate), Imation
will cause the transferee of such Assumed Liabilities to assume specifically its
obligations with respect thereto under this Agreement and will cause such
transferee to fulfill its obligations related to such Assumed Liabilities. In
the event the transferee of the Retained Liabilities or Assumed Liabilities does
not fulfill its obligations with respect thereto, 3M and Imation, respectively,
shall fulfill their obligations with respect thereto.
Section 11.8 No Third Party Beneficiaries. Except as provided
in Section 5.1(a) and 5.1((b), this Agreement is solely for the benefit of the
parties hereto and is not intended to confer upon any other person except the
parties hereto any rights or remedies hereunder.
Section 11.9 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Section 11.10 Interpretation. The Article, Section and
subparagraph headings contained in this Agreement are solely for the purpose of
reference, are not part of the agreement of the parties and shall not in any way
affect the meaning or interpretation of this Agreement. As used in this
Agreement, the term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof. Whenever any
words are used herein in the masculine gender, they shall be construed as though
they were also used in the feminine gender in all cases where they would so
apply.
Section 11.11 Annexes, Etc. The Annexes, Schedules and
Exhibits shall be construed with and as an integral part of this Agreement to
the same extent as if the same had been set forth verbatim herein.
Section 11.12 Construction of Agreements. Notwithstanding any
other provisions in this Agreement to the contrary, in the event and to the
extent that there shall be a conflict between the provisions of this Agreement
(or any Conveyancing and Assumption Instrument or other instrument of
assumption) and the provisions of any other agreement entered into by 3M or
Imation pursuant to this Agreement (including, without limitation, the Related
Agreements), the provisions of such other agreement shall control (unless such
other agreement provides otherwise).
Section 11.13 Legal Enforceability. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
Section 11.14 Survival. All covenants and agreements of the
parties contained in this Agreement shall survive the Distribution Date.
Section 11.15 Guaranty. Each Party guarantees the performance
of all obligations of its Affiliates under this Agreement, all Related
Agreements and all other agreements to be entered into in connection with this
transaction.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered as of the day and year first above
written.
MINNESOTA MINING AND
MANUFACTURING COMPANY
By:
Name:
Title:
IMATION CORP.
By:
Name:
Title:
ANNEX I
ASSUMED LIABILITIES
Assumed Liabilities: all Liabilities and obligations
relating to or arising from the operation of the Transferred Businesses (other
than Retained Liabilities), whether before or after the Distribution Date,
including but not limited to:
(a) all Liabilities and obligations which should be
set forth, reflected, disclosed or reserved for on a balance sheet for Imation
as of the Distribution Date prepared in the same manner as the March 31, 1996
balance sheet of Imation included in the Information Statement (after giving
effect to any pro forma adjustments reflected in the Information Statement);
(b) all Liabilities and obligations of 3M pursuant
to, under or relating to all agreements, contracts and leases, whether written
or oral, of 3M relating to, but only to the extent that they relate to, the
Transferred Businesses, including, without limitation, the leases set forth on
Schedule 6.14(a) to the Agreement and acquisition or divestiture agreements
entered into on behalf of the Transferred Businesses on or prior to the
Distribution Date;
(c) outstanding Bids, Quotations and Proposals
pertaining to the Transferred Businesses to the extent that such Bids,
Quotations and Proposals can be transferred or assigned without extinguishment;
and all contracts awarded to 3M before or after the Distribution Date pertaining
to the Transferred Businesses, as (i) assignee if those contracts are assignable
and assigned or transferred by operation of law, or (ii) subcontractor if
assignment of those contracts and/or the proceeds therefrom is prohibited by
law;
(d) all warranty, performance and similar obligations
entered into or made in the course of business of the Transferred Businesses
with respect to its products;
(e) all Liabilities and obligations to or with
respect to Transferred Employees not specifically retained by 3M pursuant to the
Agreement or the Related Agreements, including but not limited to withholding,
payroll and employment taxes pursuant to Article VIII of the Agreement;
(f) the Liabilities and obligations being assumed by
or agreed to be performed by Imation pursuant to any other agreement being
entered into in connection with the Agreement, including, without limitation,
the Related Agreements;
(g) all Liabilities and obligations relating to all
Actions related to or arising out of the operations of the Transferred
Businesses, other than those specified as Retained Liabilities;
(h) all Liabilities and obligations arising with
respect to the Transferred Businesses under laws, rules or regulations relating
to the registration or regulation of the sale or use of products in commerce,
including, but not limited to, the Federal Food, Drug and Cosmetic Act, 21
U.S.C. ss. 301 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act,
7 U.S.C. ss. 136 et seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601
et seq. (except that provisions of the Toxic Substances Control Act and the
regulations promulgated thereunder related to the regulation of polychlorinated
biphenyls shall be deemed to be Environmental Laws for purposes of the
Environmental Matters Agreement, and Liabilities related to the management,
transportation, disposal and remediation of polychlorinated biphenyls shall be
governed by the terms of the Environmental Matters Agreement); and similar state
and local laws; and
(i) all Liabilities and obligations under corporate
credit cards which had been issued by 3M to Transferred Employees.
ANNEX II
RETAINED LIABILITIES
Retained Liabilities: the following Liabilities and
obligations as of the Distribution Date:
(a) all Liabilities and obligations with respect to
Transferred Employees provided in Article VIII of the Agreement as being
Liabilities and obligations of 3M;
(b) all Liabilities and obligations under the Related
Agreements which are Liabilities or obligations of 3M;
(c) all Liabilities related to non-United States
operations which pursuant to Section 2.3 of this Agreement or the agreements
contemplated thereby are not to be assumed by Imation or its Affiliates;
(d) subject to the provisions of Section 5.6 of this
Agreement, all Liabilities and obligations arising out of the litigation
entitled Minnesota Mining & Manufacturing Company v. Nishika, Ltd., et al.
(Supreme Court of Texas; Case No. 94-1124);
(e) all Liabilities and obligations arising out of
checks which have been mailed, but not presented for payment, prior to the
Distribution Date; and
(f) all Liabilities with respect to trade payables
relating to the operations of the Transferred Businesses outside the United
States which are being retained by 3M or its Affiliates pursuant to the terms of
this Agreement.
ANNEX III
TRANSFERRED ASSETS
Transferred Assets: All assets and properties of 3M used
principally in the Transferred Businesses as of the Distribution Date (other
than Excluded Assets), including but not limited to:
(a) All assets and properties which should be set
forth or reflected on a balance sheet for Imation as of the Distribution Date
prepared in the same manner as the March 31, 1996 balance sheet of Imation
included in the Information Statement (after giving effect to any pro forma
adjustments reflected in the Information Statement)
(b) the real properties owned by 3M and used in the
Transferred Businesses which are set forth on Exhibit A hereto, including
buildings, structures and improvements (including construction in progress)
located thereon, fixtures contained therein and appurtenances thereto;
(c) all of 3M's right and interest in, to and under
all leases for real property relating to the Transferred Businesses, which are
set forth on Exhibit B hereto;
(d) all of 3M's right and interest in, to and under
all outstanding Bids, Quotations and Proposals pertaining to the Transferred
Businesses to the extent that such Bids, Quotations and Proposals can be
transferred or assigned without extinguishment; all of 3M's right and interest
in, to and under all contracts and agreements awarded to 3M before or after the
Distribution Date pertaining to the Transferred Businesses, as assignee if those
contracts are assignable and assigned or transferred by operation of law;
payment of a subcontract price equal to the monies, rights and other
considerations received by 3M under contracts and agreements awarded to 3M
before or after the Distribution Date pertaining to the Transferred Businesses
if assignment of those contracts and/or agreement and/or the proceeds therefrom
is prohibited by law;
(e) all machinery, equipment and other items of
tangible personal property (including construction in progress) owned by 3M
which are utilized principally in the Transferred Businesses (including any such
assets located at the 3M facilities in Menomonie, Wisconsin, or Breda,
Netherlands);
(f) all of 3M's rights with respect to trade
receivables relating to the Transferred Businesses, except as otherwise provided
in Section 2.3 of this Agreement or the foreign transfer agreements entered into
by Affiliates of 3M and Imation pursuant to such Section 2.3;
(g) all rights and interests of 3M in, to and with
respect to the intellectual property rights concerning the Transferred
Businesses to the extent, but only to the extent, such rights are being licensed
and assigned to Imation pursuant to, and in accordance with, the Intellectual
Property Agreement;
(h) all of the Books and Records (except as otherwise
provided in the Intellectual Property Agreement);
(i) inventories of raw materials, work-in-process,
finished products, supplies and spare parts which at the Distribution Date are
owned by 3M and relate principally to the Transferred Businesses and any
property under bailment relating to the Transferred Businesses;
(j) all permits and licenses held by 3M which are
transferable and which relate principally to the Transferred Businesses;
(k) all intangible assets, other than intellectual
property rights, of 3M used solely in the Transferred Businesses;
(l) employee receivables, temporary and permanent
travel advances and funds advanced for travel not yet taken relating to
Transferred Employees and all petty cash funds in the possession of Transferred
Businesses and all prepayments and deposits;
(m) all supplies, forms, labels, shipping material,
catalogues, sales brochures, operating manuals, instructional documents and
advertising material held for use by the Transferred Businesses;
(n) all shares of capital stock of Imation
Enterprises, CD-Rom B.V./C.V., CD-Rom Services (A), Inc., CD-Rom Services (B),
Inc., Imation Finanziaria S.p.A., Minnesota 3M Research, Limited, Imation France
S.A., Imation Argentina S.A. and Imation do Brasil Ltda. owned by 3M immediately
prior to the Distribution;
(o) all of 3M's rights with respect to the following
investments: CEMEX/ICON, Inc., Printware, Inc., Software Architects, Inc.,
Hummer Winblad Equity Partners, L.P., and Hummer Winblad Equity Partners II
L.P.;
(p) all trucks, automobiles and other vehicles which
are owned by 3M and used principally in the Transferred Businesses;
(q) all of 3M's right relating to all Actions related
to or arising out of the Transferred Business (other than with respect to
Actions specifically retained by 3M pursuant to this Agreement), including,
without limitation, the Action entitled Minnesota Mining & Manufacturing Company
v. Appleton Papers, Inc. (U.S.D.C., District of Minnesota; Civil File No. 4-95-
786);
(r) the Pilot Plant Assets; and
(s) duty drawbacks relating to the Transferred
Businesses which were filed by 3M on or prior to the Distribution Date.
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS ANNEX II OR THE
AGREEMENT, TRANSFERRED ASSETS SHALL NOT INCLUDE THE FOLLOWING ASSETS AND
PROPERTIES (THE "EXCLUDED ASSETS"), WHICH SHALL BE RETAINED BY 3M:
(a) cash and cash equivalents, including cash on hand
or in bank accounts, certificates of deposit, commercial paper and other similar
securities in the possession of the Transferred Businesses, except (i) petty
cash funds in the possession of the Transferred Businesses, (ii) any cash to be
contributed to the capital of Imation pursuant to the terms of this Agreement,
and (iii) any cash advanced by 3M prior to the Distribution Date to capitalize
foreign corporations being formed by Imation to facilitate the Distribution;
(b) any Books and Records which 3M is required by
law to retain in its possession;
(c) except as may otherwise be provided in the Tax
Sharing Agreement, any right, title or interest of 3M in any Federal, state or
local tax refund (including any income with respect thereto) relating to the
operations of the Transferred Businesses prior to the Distribution Date;
(d) all machinery and equipment at the 3M facility in
New Ulm, Minnesota, other than laboratory test equipment utilized by the
Transferred Businesses prior to the Distribution Date;
(e) all machinery, equipment and other items of
personal property, including construction in process, which are located at the
Pine City, Minnesota facility relating to 3M's Traffic Control Materials and
Commercial Office Supply Divisions, the White City, Oregon facility relating to
3M's Electrical Specialties Division, the Middleway, West Virginia facility
relating to 3M's Metalmatrix Program, the Vadnais Heights, Minnesota facility
relating to 3M's Corporate Metrology Laboratory, the Wahpeton, North Dakota
facility relating to 3M's Medical Device Division, OH&ES Division and
Professional Video and Audio Products Division, and the Camarillo, California
facility relating to 3M's Telecom Systems Division;
(f) all assets located outside the United States
which pursuant to Section 2.3 of this Agreement or the agreements contemplated
thereby are not to be transferred to Imation or one of its Affiliates; and
(g) all rights with respect to trade receivables
relating to the operations of the Transferred Businesses outside the United
States which are being retained by 3M or its Affiliates pursuant to the terms of
this Agreement.
ANNEX IV
ENTERPRISE LIABILITIES
Enterprise Liabilities: all Assumed Liabilities and
obligations relating to or arising from the Enterprise Operations, whether
before or after the Distribution Date, including but not limited to:
(a) all Liabilities and obligations of 3M pursuant
to, under or relating to, but only to the extent that they relate to, all
agreements, contracts and leases of 3M relating to the Enterprise Operations;
(b) outstanding Bids, Quotations and Proposals
pertaining to the Enterprise Operations to the extent that such Bids, Quotations
and Proposals can be transferred or assigned without extinguishment; and all
contracts awarded to 3M before or after the Distribution Date pertaining to the
Enterprise Operations, as (i) assignee if those contracts are assignable and
assigned or transferred by operation of law, or (ii) subcontractor if assignment
of those contracts and/or the proceeds therefrom is prohibited by law;
(c) all warranty, performance and similar obligations
entered into or made in the course of business of the Enterprise Operations with
respect to their products and services;
(d) the Liabilities and obligations to or with
respect to Transferred Employees of the Enterprise Operations being assumed by
Imation, including but not limited to withholding, payroll and employment taxes
pursuant to Article VIII of the Agreement;
(e) the Liabilities and obligations relating to the
Enterprise Operations being assumed by or agreed to be performed by Imation
Enterprises pursuant to any other agreement being entered into in connection
with the Agreement, including, without limitation, the Related Agreements;
(f) the Liabilities and obligations relating to all
Actions related to or arising out of the Enterprise Operations, other than those
specified as Retained Liabilities;
(g) all Liabilities and obligations under any
industrial development bond relating to the facility located in White City,
Oregon which is outstanding as of the Distribution Date; and
(h) all Liabilities and obligations under corporate
credit cards which had been issued by 3M to Transferred Employees employed by
the Enterprise Operations.
ANNEX V
ENTERPRISE ASSETS
Enterprise Assets: All Transferred Assets used principally in
the Enterprise Operations as of the Distribution Date, including but not
limited to:
(a) the real properties owned by 3M and identified on
Exhibit A hereto as being transferred to Imation Enterprises, including
buildings, structures and improvements (including construction in progress)
located thereon, fixtures contained therein and appurtenances thereto;
(b) all of 3M's right and interest in, to and under
all leases for real property relating to the Enterprise Operations, which are
identified on Exhibit B hereto as being assigned to Imation Enterprises;
(c) all of 3M's right and interest in, to and under
all outstanding Bids, Quotations and Proposals pertaining to the Enterprise
Operations, to the extent that such Bids, Quotations and Proposals can be
transferred or assigned without extinguishment; all of 3M's right and interest
in, to and under all contracts and agreements awarded to 3M before or after the
Distribution Date pertaining to the Enterprise Operations, as assignee if those
contracts are assignable and assigned or transferred by operation of law;
payment of a subcontract price equal to the monies, rights and other
considerations received by 3M under contracts and agreements awarded to 3M
before or after the Distribution Date pertaining to the Enterprise Operations,
if assignment of those contracts and/or agreement and/or the proceeds therefrom
is prohibited by law;
(d) all machinery, equipment and other items of
tangible personal property (including construction in progress) owned by 3M
which are utilized principally in the Enterprise Operations;
(e) all of 3M's rights with respect to domestic trade
receivables relating to the Transferred Businesses;
(f) all of the Books and Records relating to the
Enterprise Operations (except as otherwise provided in the Intellectual
Property Agreement);
(g) inventories of raw materials, work-in-process,
finished products, supplies and spare parts which at the Distribution Date are
owned by 3M and relate principally to the Enterprise Operations and any property
under bailment relating to the Enterprise Operations;
(h) all permits and licenses held by 3M which are
transferable and which relate principally to the Enterprise Operations;
(i) all intangible assets, other than intellectual
property rights, of 3M used solely in the Enterprise Operations;
(j) employee receivables, temporary and permanent
travel advances and funds advanced for travel not yet taken relating to
Transferred Employees of the Enterprise Operations and all petty cash funds in
the possession of the Enterprise Operations and all prepayments and deposits;
(k) all supplies, forms, labels, shipping material,
catalogues, sales brochures, operating manuals, instructional documents and
advertising material held for use by the Enterprise Operations;
(l) all trucks, automobiles and other vehicles which
are owned by 3M and used principally in the Enterprise Operations; and
(m) the Pilot Plants Assets.
Exhibit A
to ANNEX III and ANNEX V
Owned Properties to be Transferred
United States
Properties of Imation
Camarillo, California
Wahpeton, North Dakota
Tucson, Arizona
Oakdale, Minnesota*
Properties of Imation Enterprises
Weatherford, Oklahoma
Pine City, Minnesota
Rochester, New York
White City, Oregon
Middleway, W. Virginia
Nekoosa, Wisconsin
Outside the United States
Ferrania, Italy
Harlow, England**
Sulmona, Italy
Florida, Argentina
Bracknell, England***
London, Ontario, Canada****
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* Includes Lot 1 and 2, Block 1; and Outlot A, all a part of "Oakdale
Farm" Plat, Washington County, Minnesota.
** Includes an indirect transfer of facility owned by
Minnesota 3M Research Limited.
*** Includes Building #2 only.
**** Includes Service Support Centre only.
Exhibit B
to ANNEX III and ANNEX V
Leased Properties to be Transferred
I Manufacturing Facilities in United States
Leased Properties of Imation
Fremont, California (two locations)
Vadnais Heights, Minnesota
Leased Properties of Imation Enterprises
None
II Other Leases
The leases set forth on Schedule 6.14(a) of the Agreement or identified
in connection with the various foreign transfer agreements are incorporated
herein by reference.
Schedule 1.1A
Transferred Businesses
Imation Business Units:
Data Storage Diskette Technology Division
Data Storage Markets Division
Data Storage Optical Technology Division
Data Storage Tape Technology Division
Medical Imaging Systems Division
Photo Color Systems Division
Printing and Publishing Systems Division
Hardgoods and Electronic Support Department
HESD Field Service and Customer Support
Dry Silver Technology Center
Graphic Research Lab(1)
Aurora Project of HESD
Harlow Laboratory
Storage Laboratory Lab of Advanced Technology Lab
Electronic Imaging Center(1)
European Business Centers corresponding to the
businesses above
Imation Plants:
Camarillo, California
Wahpeton, North Dakota
Weatherford, Oklahoma
Tucson, Arizona
Fremont, California
Pine City, Minnesota
Vadnais Heights, Minnesota
Rochester, New York
White City, Oregon
Middleway, W. Virginia
Nekoosa, Wisconsin
Ferrania, Italy
Sulmona, Italy
Florida, Argentina
- --------
(1) Other than as related to certain projects the employees responsible
for which are not Transferred Employees.
Schedule 1.1B
Business Units Excluded from Transferred Businesses
Audio and Video Products Division
HESD Laboratory
HESD Manufacturing-New Ulm
HESD Product Information Center
HESD Incompany Service
National Media Lab
Photogard
Any Part of the Advanced Technology Lab not relating
to Imaging or Memory Technology
Schedule 1.1C
Imation Employees(2)
- --------
(2) To be updated by mutual agreement of 3M and Imation.
Schedule 1.1D
Pilot Plant Assets(3)
- --------
(3) To be updated by mutual agreement of 3M and Imation.
Schedule 1.1E
3M Center Assets(4)
- --------
(4) To be updated by mutual agreement of 3M and Imation.
Schedule 1.1F
Human Resources Codes
Schedule 5.1(a)
3M Information in Information Statement
"Summary - Distributing Corporation,"
"Summary - Principal Businesses to be Retained by
3M,"
"Summary - Primary Purpose of the Distribution,"
"Introduction,"
"The Distribution - Reasons for the Distribution,"
"The Distribution - Opinion of Financial Advisor,"
"The Distribution - Manner of Effecting the
Distribution,"
"The Distribution - Certain Federal Income Tax
Consequences," and
"Security Ownership of Certain Beneficial Owners".
Schedule 6.12(a)
Domestic Shared Facilities
3M WILL LEASE SPACE IN IMATION CORP. FACILITIES AT:
Camarillo, CA
Vadnais Heights, MN (Sublease)
3M WILL LEASE SPACE IN IMATION ENTERPRISES FACILITIES AT:
Middleway, WV
Pine City, MN
IMATION CORP. WILL LEASE SPACE IN 3M FACILITIES AT:
3M Center, Buildings 201, 209, 223, 235, 236 and 302 (Currell Blvd.)
IMATION ENTERPRISES WILL LEASE (OR SUBLEASE) SPACE IN 3M FACILITIES AT:
3M Center, Building 42 (Bush Avenue)
Menomonie, WI
1927 Case Avenue
St. Paul, MN
Schedule 6.14(a)
Assigned Third Party Leases
To Imation
Tucson, AZ - 7900 E. Tanque Verde
Tucson, AZ - Rita Rd. (Not a lease, but an agreement
for payment of zoning fee)
Fremont, CA - 2933 Bayview Dr.
Fremont, CA - Bayside Business Park (Pending new lease)
To Imation Enterprises
Pine City, MN - 230 E. Third Ave.
Vadnais Heights, MN - 1185 Wolters Blvd.
Woodbury, MN - 6043 Hudson Road - Suites 105D, 201,
230, 245, 295, 300, 360
Woodbury, MN - 6053 Hudson Road - Suites 199, 210,
255, 265, 275, 295
Woodbury, MN - 6063 Hudson Road
Woodbury, MN - 1687 Century Circle
Rochester, NY - 1545 Mount Read Blvd.
Weatherford, OK - 217 S. Eighth St. (mini-storage)
White City, OR - 675 Antelope Road
To Imation Affiliates -- O.U.S.
As provided in various foreign transfer agreements.
Schedule 6.14(b)
Assigned Properties Leased To Third Parties
Imation
Camarillo, CA - Lease to Michael Brucker
Wahpeton, ND - Lease to Barry Pausch
Imation Enterprises
Woodbury, MN - Sublease to Century Design, 6063
Hudson Road
Weatherford, OK - Oil and Gas lease to Arkansas Lousiana Gas Co.
Weatherford, OK - Lease to James L. Tanner
Weatherford, OK - License to Deer Creek Conservation Dist.
White City, OR - Sublease to Sterling Business Forms
Middleway, WV - Lease to Jesse E. Frye
Middleway, WV - Lease to William S. Friend
Schedule 6.15(a)
Trade Receivables/Payables Settlement Schedule
Schedule 8.11
Foreign Service Employee Obligations
Schedule 9.3
Pre-Distribution Date Insurance Claims(5)
- --------
(5) To be updated to reflect additional claims reported prior to the
Distribution Date.
TAX SHARING AND INDEMNIFICATION AGREEMENT
Tax Sharing and Indemnification Agreement (the "Agreement"),
dated as of , by and between Minnesota Mining and Manufacturing Company, a
Delaware corporation ("3M") and Imation Corp., a Delaware corporation and a
wholly owned subsidiary of 3M ("Imation").
WHEREAS, 3M and its domestic subsidiaries currently are
members of an Affiliated Group, of which 3M is the common parent corporation;
WHEREAS, 3M has been engaged through various divisions in,
among other things, the manufacture and sale of data storage, photo color,
medical imaging, printing and publishing, and hardgoods and electronic products
which comprise the Transferred Businesses;
WHEREAS, the Board of Directors of 3M has determined that the
interests of 3M's businesses and shareholders would be best served by separating
its businesses into two separate companies, one consisting of the Transferred
Businesses and the other consisting of 3M's core businesses (the "Core
Businesses");
WHEREAS, as set forth in the Transfer and Distribution
Agreement, dated ("Transfer and Distribution Agreement"), and
subject to the terms and conditions thereof, 3M wishes to transfer and assign to
Imation substantially all the assets of the Transferred Businesses, in exchange
for (i) the assumption by Imation of substantially all the liabilities and
obligations relating to the Transferred Businesses, and (ii) the issuance to 3M
by Imation of shares of its common stock, par value $.01 per share (the "Imation
Common Stock"), all as more fully set forth in the Transfer and Distribution
Agreement;
WHEREAS, 3M intends to distribute all the outstanding shares
of Imation Common Stock, on a pro rata basis, to the holders of the common stock
of 3M, subject to the terms and conditions of the Transfer and Distribution
Agreement;
WHEREAS, in contemplation of the Distribution pursuant to
which Imation and its domestic subsidiaries will cease to be members of the 3M
affiliated Group, the parties hereto have determined to enter into this Tax
Sharing and Indemnification Agreement (the "Agreement"), setting forth their
agreement with respect to certain tax matters;
WHEREAS, this Agreement also creates certain indemnification
obligations between the parties hereto if the actions of a member of the Imation
Group have an adverse effect on the tax-free nature of the Distribution or of
any of the transactions related to the Distribution that were otherwise intended
to be tax free and consequently the tax liability of a member of the 3M Group.
NOW THEREFORE, in consideration of the premises set forth
above and the terms and conditions set forth below, the parties hereto agree as
follows:
Section 1. Definitions. For purposes of this Agreement, the
following definitions shall apply:
(a) "3M Affiliated Group" shall mean, for each taxable period,
the Affiliated Group of which 3M or its successor is the common parent,
corporation.
(b) "3M Group" shall mean, for each taxable period, (i) the
corporations that comprise the 3M Affiliated Group, and (ii) the corporations
that would be members of the 3M Affiliated Group, but for the fact that they are
foreign corporations.
(c) "Adjustment" shall mean any proposed or final change in
the tax liability of a taxpayer.
(d) "Affiliated Group" shall mean an affiliated group of
corporations within the meaning of Code section 1504(a).
(e) "Carryback Item" shall mean any net operating loss, net
capital loss, unused general business tax credit, or any other Tax Item of the
Imation Group which, under the Code or any other applicable Income Tax law, may
be carried back and may generate a Tax Benefit for any member of the 3M Group.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(g) "Imation Affiliated Group" shall mean, for each taxable
period, the Affiliated Group of which Imation or its successor is the common
parent corporation.
(h) "Imation Businesses" shall mean the Transferred
Businesses.
(i) "Imation Group" shall mean, for each taxable period, (i)
the corporations that are members of the Imation Affiliated Group, and (ii) the
corporations that would be members of the Imation Affiliated Group, but for the
fact that they are foreign corporations.
(j) "Distribution" shall mean the pro rata distribution of all
of the Imation Common Stock to the holders of the common stock of 3M, pursuant
to the terms and conditions of the Transfer and Distribution Agreement.
(k) "Domestic Imation Subsidiaries" shall mean the
corporations that are members of the Imation Affiliated Group after the
Distribution.
(l) "Effective Date" shall mean July 1, 1996.
(m) "Final Determination" shall mean the final resolution of
any tax matter. A Final Determination shall result from the first to occur of:
(i) the expiration of 30 days after the IRS'
acceptance of a waiver of restrictions on assessment and collection of
deficiency in tax and acceptance of overassessment on federal revenue (Form 870
or 870-AD (the "Waiver")) or any successor comparable form, except as to
reserved matters specified therein, or the expiration of 30 days after
acceptance by any other taxing authority of a comparable agreement or form under
the laws of any other jurisdiction, including State, local, and foreign; unless,
within such period, the taxpayer gives notice to the other party to this
Agreement of the taxpayer's intention to attempt to recover all or part of any
amount paid pursuant to the Waiver by the filing of a timely claim for refund;
(ii) a decision, judgment, decree, or other order by
a court of competent jurisdiction that is not subject to further judicial review
(by appeal or otherwise) and has become final; (iii) the execution of a closing
agreement under Code section 7121, or the acceptance by the IRS of an offer in
compromise under Code section 7122, or comparable agreements under the laws of
any other jurisdiction, including State, local, and foreign, except as to
reserved matters specified therein;
(iv) the expiration of the time for filing a claim
for refund or for instituting suit in respect of a claim for refund that was
disallowed in whole or part by the IRS or any other taxing authority;
(v) the expiration of the applicable statute of
limitations; or
(vi) an agreement by the parties hereto that a Final
Determination has been made.
(n) "Foreign Imation Subsidiaries" shall mean corporations
that are members of the Imation Group other than Domestic Imation Subsidiaries.
(o) "Income Tax Liability" shall mean the net amount of Income
Taxes due and paid or payable for any taxable period, determined after applying
all tax credits and all applicable carrybacks or carryovers for net operating
losses, net capital losses, unused general business tax credits, or any other
Tax Items arising from a prior or subsequent taxable period, and all other
relevant adjustments, and shall include without limitation the net amount due
and paid or payable for alternative minimum tax imposed under Code section 55 or
similar alternative or add-on minimum taxes.
(p) "Income Taxes" shall mean all Federal, State, local, and
foreign taxes imposed upon, or measured by, net income, including without
limitation, environmental and alternative or add-on minimum taxes (including the
alternative minimum tax imposed under Code section 55), and such related
franchise, excise, and similar taxes as have been customarily included in the
provision for income taxes on 3M's financial statements, together with all
related interest, penalties, and additions to tax.
(q) "Indemnifying Party" shall mean any party that is required
to pay any other party pursuant to the terms and conditions of this Agreement.
(r) "Indemnified Party" shall mean any party who is entitled
to receive payment from an Indemnifying Party pursuant to the terms and
conditions of this Agreement.
(s) "IRS" shall mean the United States Internal Revenue
Service or any successor thereto, including but not limited to its agents,
representatives, and attorneys.
(t) "Other Taxes" shall mean any and all taxes other than
Income Taxes, including, without limitation, gross income, gross receipts,
sales, use, transfer, franchise, license, withholding, payroll, value added,
employment, excise, severance, stamp, occupation, premium, windfall profits,
custom, duty, or other charge of any kind whatsoever, together with all related
interest, penalties, and additions to tax, or additional amount imposed by any
taxing authority. Expressly excluded from "Other Taxes" are all property and ad
valorem taxes.
(u) "Tax Benefit" shall mean a reduction in the Income Tax
Liability of a taxpayer (or of the Affiliated Group of which it is a member) for
any taxable period. Except as otherwise provided in this Agreement, a Tax
Benefit shall be deemed to have been realized or received from a Tax Item in a
taxable period only if and to the extent that the Income Tax Liability of the
taxpayer (or of the Affiliated Group of which it is a member) for such period,
after taking into account the effect of the Tax Item on the Income Tax Liability
of such taxpayer in all prior periods, is less than it would have been if such
Income Tax Liability were determined without regard to such Tax Item.
(v) "Tax Detriment" shall mean an increase in the Income Tax
Liability of a taxpayer (or of the Affiliated Group of which it is a member) for
any taxable period. Except as otherwise provided in this Agreement, a Tax
Detriment shall be deemed to have been realized or suffered from a Tax Item in a
taxable period, only if and to the extent that the Income Tax Liability of the
taxpayer (or the Affiliated Group of which it is a member) for such period,
after taking into account the effect of the Tax Item on the Income Tax Liability
of such taxpayer in all prior periods, is greater than it would have been if
such Income Tax Liability were determined without regard to such Tax Item.
(w) "Disqualifying Disposition" means the disposition of a
share of stock prior to the expiration of the holding period requirements
contained in either Section 422(a) or 423(a) of the Code which results in a
deduction described in Section 421(b) of the Code.
(x) "Tax Item" shall mean any item of income, gain, loss,
deduction, credit, recapture of credit, or any other item which may have the
effect of increasing or decreasing Income Taxes paid or payable.
(y) "Tax Returns" shall mean all reports, estimates,
declarations of estimated tax, information statements and returns relating to,
or required to be filed in connection with any Income Taxes or Other Taxes,
including information returns or reports with respect to backup withholding and
other payments to third parties.
(z) "Transaction Taxes" shall mean all sales, transfer, and
other similar taxes or fees (including, without limitation, all real estate,
patent, copyright, and trademark transfer taxes and recording fees) incurred in
connection with the Distribution and the transactions related to it.
(z-1) "Transferred Businesses" shall have the same meaning as
in the Transfer and Distribution Agreement.
As used in this Agreement, the terms "tax" or "taxes" shall as
appropriate, include interest, penalties, and additions to tax.
Section 2. Filing of Tax Returns.
(a) 3M shall prepare and file, or cause to be prepared and
filed:
(i) all Income and Other Tax Returns (except Other
Tax Returns in respect of Transaction Taxes) of or with respect to all members
of the 3M Group for all periods ending prior to the Effective Date, and
(ii) all Income and Other Tax Returns (except other
Tax Returns in respect of Transaction Taxes), with respect to all members of the
3M Group, other than those corporations that will be Foreign Imation
Subsidiaries following the Distribution, for all periods beginning prior to the
Effective Date and ending on or after the Effective Date ("Straddle Periods").
(b) Imation shall prepare and file, or cause to be prepared
and filed:
(i) all Income and Other Tax Returns (except Other
Tax Returns in respect of Transaction Taxes) of or with respect to all
corporations that will be Foreign Imation Subsidiaries following the
Distribution for all Straddle Periods, and
(ii) all Income and Other Tax Returns of or with
respect to members of the Imation Group for all periods beginning on or after
the Effective Date.
(c) The Provisions of Section 6.8 of the Transfer and
Distribution Agreement shall govern the preparation and filing of all Tax
Returns in respect of Transaction Taxes.
Section 3. Payment of Taxes
(a) Income and Other Taxes for Periods Ending Before the
Effective Date. 3M shall, except as provided in Section 9(a) of this Agreement):
(i) pay, or cause to be paid, and shall indemnify and
hold harmless Imation against all Income Tax Liabilities that relate to all Tax
Returns (other than Tax Returns in respect of Transaction Taxes) that 3M is
required to prepare and file, or cause to be prepared and filed, pursuant to
Section 2 of this Agreement; and
(ii) be entitled to all refunds of taxes related
thereto.
(b) Imation Income and Other Taxes. Imation shall:
(i) pay, or cause to be paid, and shall indemnify and
hold harmless 3M against all Income Tax Liabilities that relate to all Tax
Returns (other than Tax Returns in respect of Transaction Taxes) that Imation is
required to prepare and file, or cause to be prepared and filed, pursuant to
Section 2 of this Agreement; and
(ii) be entitled to all refunds of taxes related
thereto. Nothwithstanding anything to the contrary contained in this Agreement,
the appropriate member of the 3M Group shall be entitled to use for its benefit
any losses of Minnesota 3M Research Limited, a United Kingdom corporation,
generated prior to the distribution.
(c) Imation Payroll and Unemployment Compensation Taxes For
Periods Ending On or After the Effective Date. 3M shall make available to
Imation sufficient data to facilitate a determination of the desirability of the
transfer to the Imation Group of any payroll tax experience and/or any favorable
unemployment compensation tax experience rating of 3M; and at Imation's
election, 3M shall cooperate to effect a transfer of such payroll tax experience
and/or any favorable such favorable experience rating to the Imation Group
within one hundred and twenty (120) days of Imation's written request therefor.
(d) Carrybacks. Unless 3M otherwise waives in writing, the
Imation Group agrees to elect under Code section 172(b)(3) and, to the extent
feasible, any similar provision of any State, local, or foreign Income Tax law,
to relinquish any Carryback Item.
Section 4. Audits.
(a) 3M shall have sole responsibility for and control over all
audits with respect to any Tax Return that it is required to file under Section
2 hereof. Imation shall have sole responsibility and control over all audits
with respect to any Tax Return that it is required to file under Section 2
hereof.
Section 5. Transaction and Property Taxes
(a) Each of 3M and Imation shall pay, or cause to be paid, and
indemnify and hold harmless the other against all Transaction Taxes which each
of 3M and Imation, respectively, have agreed to pay pursuant to Section 6.8 of
the Transfer and Distribution Agreement.
(b) Any property or ad valorem taxes that are due and payable
on Transferred Assets an defined in the Transfer and Distribution Agreement
after the Effective Date shall be paid by the Imation Group.
Section 6. Taxability and Reporting of Stock Options
(a) Employee Stock Purchase Plan Stock . For purposes of this
paragraph, the term "Section 423 Stock" means 3M stock acquired pursuant to
either the 1987 or the 1993 General Employees Stock Purchase Plan. For purposes
of Section 6(a), 6(b) and 6(c) of this Agreement, the term "Imation Employee"
means an employee of Imation or one of its subsidiaries immediately after the
Distribution, and the term "3M Employee" means any employee who is not an
Imation Employee.
Imation shall notify 3M of any Disqualifying Dispositions of
Section 423 Stock by Imation Employees. To the extent permitted by law, 3M shall
take all tax deductions arising by reason of any Disqualifying Dispositions of
Section 423 Stock by Imation Employees. The appropriate member of the Imation
Group shall, to the extent permitted by law, take all tax deductions arising by
reason of any Disqualifying Dispositions of Section 423 Stock not taken by 3M.
If, pursuant to a Final Determination, all or any part of a tax deduction taken
by 3M pursuant to this Section 6(a) is disallowed to 3M, then, to the extent
permitted by law, the appropriate member of the Imation Group shall take such
deduction. If a member of the Imation Group receives a Tax Benefit in any period
as a result of any deduction taken by a member of the Imation Group pursuant to
this Section 6(a), Imation shall pay the amount of such Tax Benefit to 3M.
(b) Nonqualified Stock Options. Each of 3M and Imation shall
be responsible for making all reports required to be made to any relevant tax
authority with respect to any grants or exercises of nonqualified stock options
with respect to their respective stocks. To the extent permitted by law, 3M
shall take all tax deductions arising by reason of exercises of such
nonqualified stock options to purchase shares of 3M stock. The appropriate
member of the Imation Group shall, to the extent permitted by law, take all tax
deductions arising by reason of exercises of nonqualified stock options to
purchase shares of 3M stock not taken by 3M. If, pursuant to a Final
Determination, all or any part of a tax deduction taken pursuant to this Section
6(b) is disallowed to 3M, then, to the extent permitted by law, the appropriate
member of the Imation Group shall take such deduction. If a member of the
Imation Group receives a Tax Benefit in any period as a result of any deduction
taken by a member of the Imation Group pursuant to this Section 6(b), Imation
shall pay the amount of such Tax Benefit (net of any Tax Detriment suffered by a
member of the Imation Group in such taxable period as a result of the exercise
of an option to acquire 3M stock by an Imation Employee) to 3M.
(c) Incentive Stock. "3M Incentive Stock" shall mean stock
acquired by reason of the exercise of an incentive stock option, as defined in
Section 422(b) of the Code, granted by 3M pursuant to either the 1987 or the
1992 Management Stock Ownership Program. Imation shall notify 3M of any
Disqualifying Dispositions of 3M Incentive Stock by Imation Employees. To the
extent permitted by law, 3M shall take all tax deductions arising by reason of
any Disqualifying Dispositions of 3M incentive stock by Imation Employees,. The
appropriate member of the Imation Group shall, to the extent permitted by law,
take all tax deductions arising by reason of any Disqualifying Dispositions of
3M Incentive Stock by Imation Employees not taken by 3M. If, pursuant to a Final
Determination, all or any part of a tax deduction taken by 3M pursuant to this
Section 6(c) is disallowed to 3M, then, to the extent permitted by law, the
appropriate member of the Imation group shall take such deduction. If any member
of the Imation Group receives a Tax Benefit in any period as a result of any
deduction taken by a member of the Imation Group pursuant to this Section 6(c),
Imation shall pay the amount of such Tax Benefit (net of any Tax Detriment
suffered by a member of the Imation Group in such taxable period as a result of
the exercise of an option to acquire 3M stock by an Imation Employee) to 3M.
Section 7. Severance Pay.
(a) Payments made in respect of severance pay shall be
deducted by the party that makes the severance payment.
(b) If, pursuant to a Final Determination, all or any part of
a tax deduction for severance pay is disallowed to 3M then, to the extent
permitted by law the appropriate member of the Imation Group shall claim such
deduction. If any member of the Imation Group receives a Tax Benefit in any
period as a result of such deduction, Imation shall pay to 3M the amount of such
Tax Benefit.
Section 8. Tax Research Credit.
(a) By December 31, 1996, 3M will furnish the Imation Group,
pursuant to Section 41 of the Code, the base period information the Imation
Group will need to properly compute its tax research credits for years beginning
after the Effective Date.
Section 9. Liability of Imation Group for Undertaking Certain
Transactions.
(a) Notwithstanding any other provision of this
Agreement to the contrary, if, as a result of any event, action, or failure to
act wholly or partially within the control of any member of the Imation Group,
any Income Taxes are imposed on any member of the 3M Group with respect to any
action taken pursuant to the Distribution and the transactions related to the
Distribution, including, without limitation, the transactions in various foreign
jurisdictions that were intended to be tax free under Sections 355 and 368 of
the Code for Income Tax purposes, then Imation shall indemnify and hold harmless
each member of the 3M Group with respect to any such Income Taxes on an
after-tax basis. Imation shall make such indemnification payment no later than 7
days after receiving written notice from any member of the 3M Group of a Final
Determination with respect to such Income Taxes, which notice shall be
accompanied by a computation of the amount due.
(b) Notwithstanding any other provision of this Agreement to
the contrary, if, as a result of any event, action, or failure to act any
liabilities are incurred by a member of the 3M Group with respect to the Urban
Renewal Bonds of Jackson County, Oregon, then Imation shall indemnify and hold
harmless each member of the 3M group with respect to said liabilities.
Section 10. Indemnification
(a) Unless otherwise specified in this Agreement, all
indemnification and other payments to be made pursuant to this Agreement shall
be made within 30 days of written notice of a request for indemnification or
payment by the Indemnified Party, which notice shall be accompanied by a
computation of the amount due.
(b) If an indemnification or other payment is required to be
made under this Agreement only upon the realization by the Indemnifying Party of
a Tax Benefit, such payment shall be made no later than 30 days after the
earlier of (a) the filing or (b) the due date (including extensions) of the Tax
Return with respect to which such Tax Benefit is realized, or, if the Tax
Benefit was realized on a Tax Return that was due or filed prior to the time the
indemnification or other payment obligation arose, no later than 30 days after
such obligation arose. The parties shall cooperate in good faith in enforcing
the provisions of this Section 10(b), which cooperation shall include the
provision of reasonable access to the Tax Returns of the Indemnifying Party by
the Indemnified Party in order to determine the amount of any indemnification or
other payment to be made pursuant to this paragraph 10(b).
(c) If an Indemnified Party realizes a Tax Benefit in any
period as a result of making the payment with respect to which an
indemnification or other payment is required to be made, the Indemnified Party
shall pay to the Indemnifying Party the amount of any such Tax Benefit.
(d) If an Indemnifying Party realizes a Tax Benefit in any
period as a result of making an Indemnification or other payment to an
Indemnified Party, the Indemnifying Party shall pay to the Indemnifying Party
the amount of any such Tax Benefit.
(e) If any indemnification payment required to be made
pursuant to this agreement is not made when due, such payment shall bear
interest at the prevailing federal short-term interest rate as determined under
Section 6621 of the Code.
Section 11. Cooperation and Exchange of Information.
(a) Tax Return Information.
(i) Imation shall, and shall cause each appropriate
member of the Imation Group to, provide 3M with all information and other
assistance reasonably requested by 3M to enable the members of the 3M Group to
prepare and file the Tax Returns required to be filed by them pursuant to this
Agreement.
(ii) 3M shall, and shall cause each appropriate
member of the 3M Group to, provide Imation with all information and other
assistance reasonably requested by Imation to enable the members of the Imation
Group to file the Tax Returns required to be filed by them pursuant to this
Agreement.
(iii) Within 5 days of filing a Tax Return that
affects the liability or the determination of the liability for taxes of any
member of the Imation Group by a member of the 3M Group, such member of the 3M
Group shall provide Imation with a copy of only that portion of such Tax Return
which is relevant to a member of the Imation Group.
(iv) In addition to the foregoing, 3M and Imation
agree to fully cooperate with each other in connection with the preparation of
all Tax Returns required to be filed by them. Such cooperation shall include
making personnel and records available promptly and within 20 days (or such
other period as may be reasonable under the circumstances) after a request for
such personnel or records is made by the taxing authority or the other party. If
any member of the 3M Group or the Imation Group, as the case may be,
unreasonably fails to provide any information requested pursuant to this
Section, then the requesting party shall have the right to engage an independent
certified public accountant of its choice to gather such information. 3M or
Imation, as the case may be, agrees to permit any such independent certified
public accountant full access to the Tax Return information in the possession of
any member of the 3M Group or Imation Group, as the case may be, during
reasonable business hours, and to reimburse or pay directly all costs and
expenses in connection with the engagement of such independent certified public
accountant.
(v) If any member of the 3M Group or the Imation
Group, as the case may be, supplies information to a member of the other group
in connection with the preparation of any Tax Return and an officer of the
requesting party signs a statement or other document under penalties of perjury
in reliance upon the accuracy of such information, then a duly authorized
officer of the party supplying such information shall certify, under penalties
of perjury, the accuracy and completeness of the information so supplied within
20 days of supplying such information. 3M shall indemnify and hold harmless each
member of the Imation Group and its officers and employees, and Imation shall
indemnify and hold harmless each member of the 3M Group and its officers and
employees, against any cost, fine, penalty, or other expenses of any kind
attributable to the negligence of a member of the 3M Group or the Imation Group,
as the case may be, in supplying a member of the other group with inaccurate or
incomplete information, in connection with the preparation any tax return.
(vi) 3M will notify Imation of any redetermination of
the earnings and profits of any of the foreign corporations that are transferred
by 3M to Imation following their acquisition by 3M in a transaction intended to
qualify under Section 355(a) of the Code.
(b) (i) Whenever 3M or Imation learns of a breach or
a violation of any obligation or provision contained in this Agreement, or
receives in writing from the IRS or any other taxing authority notice of an
Adjustment which may give rise to a payment from the other party under this
Agreement, 3M or Imation (as the case may be) shall give notice of the
Adjustment to the other party within 10 days of becoming aware of such breach,
violation, or receipt, but in no case less than 10 days before 3M or Imation, as
the case may be, is required to respond to the IRS or any other taxing
authority. Except as otherwise provided in this Agreement, the Indemnifying
Party shall have control over all matters with respect to which such party has
an indemnification or payment obligation pursuant to this Agreement. The
foregoing notwithstanding, the Indemnified Party and its representatives, at the
Indemnified Party's expense, shall be entitled to participate in all
conferences, meetings, and proceedings with respect thereto and shall be
entitled to consult with the Indemnifying Party with respect to all such
matters. Notwithstanding the foregoing, if the IRS or any other taxing authority
proposes to disallow any of the deductions required to be taken by a member of
the Imation Group pursuant to Sections 6 and 7 of this Agreement, Imation shall
contest such proposed disallowance, or shall cause such disallowance to be
contested, to the extent reasonable.
(ii) 3M may consult with Imation, and Imation agrees
to fully cooperate with 3M, in the negotiation, settlement, or litigation of any
liability for taxes of any member of the 3M Group regardless of the effect of
any such negotiation, settlement, or litigation on the liability for taxes of
any member of the Imation Group.
(iii) Imation may consult with 3M, and 3M agrees to
fully cooperate with Imation, in the negotiation, settlement, or litigation of
any liability for taxes of any member of the Imation Group regardless of the
effect of any such negotiation, settlement, or litigation on the liability for
taxes of any member of the 3M Group.
(iv) 3M will notify Imation in writing of any
adjustments made to the tax basis of the assets of the Transferred Businesses,
specifying the nature of the adjustments, such that the Imation Group will be
able to reflect the revised basis in its tax books and records for periods
beginning on or after the Effective Date.
(c) Except as otherwise provided in this Agreement, if as a
result of a Final Determination with respect to any Tax Item (including, without
limitation, any Tax Item relating to depreciation or amortization) of one party
(the "First Party") that may result in a Tax Detriment to that party in any
period and, (i) as a result of such Final Determination, the other party becomes
entitled to take a reporting position with respect to the same Tax Item that may
result in a Tax benefit to such other party, then such other party shall take
such position on an appropriate Tax Return, including an amended Tax Return, or
(ii) if the other party has already taken a reporting position consistent with
such Final Determination, and if the other party realizes or realized a Tax
Benefit in any period as a result of taking or having taken such position, shall
pay to the First Party the amount of such Tax Benefit (net of any Tax Detriment
suffered by the other party as a result of taking or having taken such
position).
For purposes of this Section, the term party shall refer to
any member of the 3M Group and any member of the Imation Group, as the case may
be.
Section 12. Retention of Records.
(a) 3M and Imation agree to retain the appropriate records
which may affect the determination of the liability for taxes of any member of
the 3M Group or the Imation Group, respectively, until such time as there has
been a Final Determination with respect to such liability for taxes.
(b) Any party intending to destroy any materials, records, or
documents shall provide the other party with 90 days advance notice and the
opportunity to copy or take possession of such records and documents.
(c) 3M and Imation will notify each other in writing of any
waivers or extensions of the applicable statute of limitations that may affect
the period for which any materials, records, or documents must be retained.
Section 13. Resolution of Disputes.
(a) If the parties are, after negotiation in good faith,
unable to agree upon the appropriate application of this Agreement, the
controversy shall be settled by arbitration in accordance with the rules of the
American Arbitration Association.
(b) Upon written notice by any party to the other party that
the controversy is to be submitted to arbitration, each party shall appoint an
independent arbitrator (who shall be a tax attorney or independent certified
public accountant) within 30 days, and two arbitrators so appointed shall
appoint a third arbitrator within 30 days after the appointment of the last
arbitrator appointed within the initial 30 day period. If any party fails to
appoint an arbitrator or the parties agree on a single arbitrator, the
controversy shall be determined by a single arbitrator. If the two arbitrators
are unable to agree on a third arbitrator within 30 days, any party may apply to
the American Arbitration Association to make such appointment, and all parties
shall be bound by any appointment so made.
(c) The locale of the arbitration shall be Saint Paul,
Minnesota, or any other location mutually agreed on by all parties.
(d) The award of the arbitrators (or arbitrator) shall be
final, and judgment upon the award rendered may be entered in any court having
jurisdiction.
(e) The expenses of the arbitration procedure shall be borne
in equal parts by the parties, unless the arbitration award specifies otherwise.
Section 14. Miscellaneous.
(a) Term of the Agreement. This Agreement shall become
effective as of the date of its execution and, except as otherwise expressly
provided herein, shall continue in full force and effect indefinitely.
(b) Elections Under Code Section 1552. Nothing in this
Agreement is intended to change or otherwise affect any election made by or on
behalf of the 3M Affiliated Group with respect to the calculation of earnings
and profits under Code section 1552. 3M, as the party who has the most to lose,
is authorized to seek any change in the method of calculating earnings and
profits as it deems desirable.
(c) Injunctions. The parties acknowledge that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with its specific terms or were otherwise
breached. The parties hereto shall be entitled to an injunction or injunctions
to prevent breaches of the provisions of this Agreement and to enforce
specifically the terms and provisions hereof in any court having jurisdiction,
such remedy being in addition to any other remedy to which they may be entitled
at law or in equity.
(d) Severability. If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void, or unenforceable, the remainder of the terms, provisions,
covenants, and restrictions set forth herein shall remain in full force and
effect, and shall in no way be affected, impaired, or invalidated. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants, and restrictions without
including any of such which may be hereafter declared invalid, void, or
unenforceable. In the event that any such term, provision, covenant, or
restriction is held to be invalid, void, or unenforceable, the parties hereto
shall use their best efforts to find and employ an alternate means to achieve
the same or substantially the same result as that contemplated by such term,
provision, covenant, or restriction.
(e) Assignment. Except by operation of law or in connection
with the sale of all or substantially all the assets of a party hereto, this
Agreement shall not be assignable, in whole or in part, directly or indirectly,
by any party hereto without the advance written consent of the other party; and
any attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, however, that the provisions of
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
(f) Further Assurances. Subject to the provisions hereof, the
parties hereto shall make, execute, acknowledge, and deliver such other
instruments and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to consummate
the transactions contemplated hereby. Subject to the provisions hereof, each of
the parties shall, in connection with entering into this Agreement, performing
its obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders, and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority, and promptly provide the other parties with all such information as
they may reasonably request in order to be able to comply with the provisions of
this sentence.
(g) Parties in Interest. Except as herein otherwise
specifically provided, nothing in this Agreement expressed or implied is
intended to confer any right or benefit upon any person, firm, or corporation
other than the parties and their respective successors and permitted assigns.
(h) Waivers, Etc. No failure or delay on the part of the
parties in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No modification or waiver of any provision of this Agreement nor
consent to any departure by the parties therefrom shall in any event be
effective unless the same shall be in writing, and then such waiver or consent
shall be effective only in the specific instance and for the purpose for which
given.
(i) Setoff. All payments to be made by any party under this
Agreement shall be made without setoff, counterclaim, or withholding, all of
which are expressly waived.
(j) Change of Law. If, due to any change in applicable law or
regulations or their interpretation by any court of law or other governing body
having jurisdiction subsequent to the date of this Agreement, performance of any
provision of this Agreement or any transaction contemplated thereby shall become
impracticable or impossible, the parties hereto shall use their best efforts to
find and employ an alternative means to achieve the same or substantially the
same result as that contemplated by such provision.
(k) Confidentiality. Subject to any contrary requirement of
law and the right of each party to enforce its rights hereunder in any legal
action, each party agrees that it shall keep strictly confidential, and shall
cause its employees and agents to keep strictly confidential, any information
which it or any of its employees or agents may require pursuant to, or in the
course of performing its obligations under, any provision of this Agreement.
(l) Headings. Descriptive headings are for convenience only
and shall not control or affect the meaning or construction of any provision of
this Agreement.
(m) Counterparts. For the convenience of the parties, any
number of counterparts of this Agreement may be executed by the parties hereto,
and each such executed counterpart shall be, and shall be deemed to be, an
original instrument.
(n) Notices. All notices, consents, requests, instructions,
approvals, and other communications provided for herein shall be validly given,
made, or served, if in writing and delivered personally, by telegram or sent by
registered mail, postage prepaid, or by facsimile transmission to
3M at: Minnesota Mining and Manufacturing Company
3M Center
St. Paul, Minnesota 55144-1000
Attn: Chief Financial Officer
FAX: (612) 736-7366
Imation at: Imation Corp.
1 Imation Place
Oakdale, Minnesota 55128
Attn: Chief Financial Officer
Telephone: (612) 704-3200
or to such other address as any party may, from time to time, designate in a
written notice given in a like manner. Notice given by telegram shall be deemed
delivered when received by the recipient. Notice given by mail as set out above
shall be deemed delivered five calendar days after the date the same is mailed.
Notice given by facsimile transmission shall be deemed delivered on the day of
transmission provided telephone confirmation of receipt is obtained promptly
after completion of transmission.
(o) 3M and Imation agree to allocate pre-distribution earnings
and profits in accordance with Treasury Regulation Section 1.312-10(a).
(p) Costs and Expenses. Unless otherwise specifically provided
herein, each party agrees to pay its own costs and expenses resulting from the
fulfillment of its respective obligations hereunder.
(q) Cancellation of Tax Allocation or Tax-Sharing Agreements.
On or prior to the Effective Date, 3M shall cancel or cause to be canceled all
agreements (other than this Agreement and the Transfer and Distribution
Agreement) providing for the allocation or sharing of Income or Other Taxes to
which any member of the Imation Group would otherwise be bound following the
Distribution.
Section 15. Applicable Law. This Agreement shall be governed
by and construed and enforced in accordance with the domestic substantive laws
of the State of Minnesota without regard to any choice or conflict of laws,
rules, or provisions that would cause the application of the domestic
substantive laws of any other jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused this Agreement
to be duly executed by their respective officers, each of whom is duly
authorized, all as of the day and year first above written.
MINNESOTA MINING AND MANUFACTURING COMPANY
By:
Title: Chief Financial Officer
IMATION CORP.
By:
Title: Chief Financial Officer
CORPORATE SERVICES TRANSITION AGREEMENT
THIS AGREEMENT is made and entered into this thirtieth day of June,
1996, (hereinafter referred to as "Effective Date") by and between Minnesota
Mining and Manufacturing Company, a Delaware corporation, with its principal
place of business at 3M Center, St. Paul, Minnesota 55144-1000 ("3M"), and
Imation Corp., a Delaware corporation with its principal place of business at 1
Imation Place, Oakdale, Minnesota 55128 and its U.S. subsidiaries (together
referred to as "IMATION"). 3M and IMATION are hereinafter referred to jointly as
the "Parties" and individually as "Party".
WITNESSETH:
WHEREAS, 3M and IMATION have entered into a Distribution Agreement
dated as of June 30, 1996 (the "Distribution Agreement") pursuant to which 3M is
transferring and assigning to IMATION certain businesses and assets in exchange
for the assumption by IMATION of certain liabilities and obligations associated
with 3M's global data storage and imaging system businesses (the "Transferred
Businesses") and the issuance by IMATION to 3M of shares of IMATION common stock
on such terms and conditions as are contained therein; and
WHEREAS, the Distribution Agreement provides that 3M and IMATION shall
enter into an agreement relating to certain transition services to be provided
by 3M to IMATION with respect to the Transferred Businesses after the
Distribution Date and this Agreement is entered into in order to fulfill that
provision.
NOW, THEREFORE, in consideration of the mutual and reciprocal
agreements and promises hereinafter set forth and for other good and valuable
consideration, the Parties agree as follows:
ARTICLE I
SERVICES
1.01 Provision of Services. Subject to the terms and conditions of this
Agreement, 3M agrees to sell to IMATION and IMATION agrees to purchase from 3M
those services described in Exhibit A attached hereto and those miscellaneous
services described in Section 1.02 (collectively referred to herein as
"Services").
1.02 Miscellaneous Services. From time to time, IMATION may find it desirable to
request, in addition to the Services, additional services to be made available
to IMATION by 3M (hereinafter referred to as "Other Services"). It is understood
and agreed, however, that 3M is under no obligation to provide Other Services,
nor has 3M made any promises, representations, or commitments to provide IMATION
with any such Other Services. Upon IMATION's written request for such Other
Services, the Parties shall commence negotiations in good faith in order to
arrange for the delivery thereof and compensation therefor. Any such Other
Services shall only become effective upon execution of an Amendment to Exhibit A
signed by an officer of each party.
1.03 Nature, Volume and Scope of Services. 3M will provide services which are
similar in nature, volume and scope to those which 3M provided to the
Transferred Businesses immediately prior to the Effective Date or which 3M
provides during the term of this Agreement to its own internal organization;
provided, however, that it is contemplated that certain activities necessary to
transition the Services to IMATION will be provided by 3M during the terms of
the Services described in Exhibit A. During the term of this Agreement, Service
upgrades and improvements (including but not limited to improvements to systems,
equipment, technology or methods) which 3M provides to its own internal
organization will be made available to IMATION to the extent practicable and
legally permissible subject to any restrictions in the Intellectual Property
Rights Agreement between the Parties. The costs for Service upgrades and
improvements (including but not limited to improvements to systems, equipment,
technology or methods) which 3M must develop or otherwise acquire solely for the
reason of providing a Service to IMATION and which IMATION agrees are necessary
or desirable for providing a Service to IMATION shall be paid for at actual cost
by IMATION. 3M will provide reasonable notice to IMATION of the need for such
upgrades or improvements and obtain agreement from IMATION. Payment for such
Service upgrades or improvements will be made by IMATION prior to the service
being performed. IMATION shall own any equipment purchased by IMATION to allow
3M to perform the Service.
1.04 Subcontracting of Services. IMATION understands that prior to the date of
this Agreement 3M may have subcontracted for services in connection with all or
any portion of the Services to be provided hereunder. 3M reserves the right to
continue to subcontract with third parties for Services or enter into new
subcontract relationships for any Service described in Exhibit A provided,
however, that any such subcontracting relationship or services shall not relieve
3M of any obligation to provide Services hereunder. Such consultants, associated
firms, testing laboratories and other subcontractors used in connection with
Services provided under this Agreement will be charged to IMATION at actual cost
without markup.
1.05 Excluded Services. Unless otherwise agreed by the Parties in Exhibit A or
other writing, it is understood and agreed that 3M shall not provide legal,
aviation, or any other services not specifically provided for in this Agreement.
1.06 IMATION Acknowledgment and Representation. IMATION understands that the
Services provided hereunder are transitional in nature and are furnished by 3M
solely for the purpose of accommodating the transfer of the Transferred
Businesses from 3M to IMATION. IMATION understands that 3M is not in the
business of providing Services to third parties and has no long term interest in
continuing this Agreement. IMATION agrees to make a transition to its own
internal organization or other third party suppliers for the majority of
Services.
ARTICLE II
TERM AND RENEWAL
2.01 Term of Agreement. The term of this Agreement shall commence on July 1,
1996 and shall expire on July 1, 1998, unless terminated by the Parties as
provided herein.
2.02 Term of Services and Renewal of Services. The term of each Service
identified in Exhibit A shall commence on July 1, 1996 and expire on January 1,
1997 unless specifically provided for otherwise on Exhibit A. The Parties may,
upon mutual written agreement, extend the term of any or all of the Services for
additional, successive six (6) month terms. Unless specifically provided for
otherwise in Exhibit A, in the event IMATION desires to renew any Service,
IMATION shall provide 3M with written notice ("Notice of Service Renewal")
ninety (90) days in advance of the expiration of the Service term, or any
renewal term. The Notice of Service Renewal shall specify which Service(s)
IMATION is interested in renewing, with a description of any requested changes
to Exhibit A. 3M shall respond in writing to IMATION within fifteen (15) days,
and indicate what Service(s), if any, 3M will agree to provide and under what
terms and conditions. Upon mutual agreement of the Parties, Exhibit A of this
Agreement shall be amended in writing to effect such renewal of services.
ARTICLE III
COMPENSATION
3.01 Compensation. IMATION shall pay 3M compensation for Services based on the
fees set forth in Exhibit A for each Service, or any amendments to Exhibit A. If
no fee is specified for a particular Service, the cost of such Service to
IMATION shall be based on the total cost to 3M of providing such Service. "Total
cost" shall be defined as direct and/or indirect costs incurred by 3M as a
result of supplying Services to IMATION and shall be calculated as follows:
(depending on which of the following calculations is most readily determinable
for the Service provided): i) usage by IMATION; ii) 3M allocations based upon
3M's standard accounting practices; or iii) 3M management estimates of Services
provided to IMATION. Notwithstanding anything to the contrary contained in
Exhibit A, however, it is understood and agreed that Services provided
subsequent to July 1, 1997 shall be billed by 3M and paid for by IMATION at an
amount not less than total cost plus eight percent (8%).
Unless otherwise provided in Exhibit A, the following additional and incidental
expenses are included in the charges included in Exhibit A:
(i) For expenses of 3M's employees traveling away from home and overnight on
behalf of IMATION, the actual costs of transportation, meals and lodging.
(Airfare is to be the most economical rate available, but never more costly than
regular carrier coach rate.
(ii) For long distance telephone calls, facsimile, and telegrams placed in
connection with Services provided under this Agreement, the actual cost.
(iii) For printing, reproduction and postage charges incurred in connection with
Services provided under this Agreement, the actual cost.
(iv) For computer time incurred directly in connection with Services provided
under this Agreement, the actual cost.
(v) For supplies, service parts and other materials purchased to perform
Services under this Agreement, the actual cost.
(vi) For automobile mileage charges incurred in connection with Services
provided under this Agreement, the rate of Twenty-eight and one-half cents
($.285) per mile.
(vii) For equipment leased from third parties in connection with Services
provided under this Agreement, the actual cost.
3.02 Billing and Payment Terms. As long as 3M continues to share its current
financial system with IMATION, services performed under this Agreement will be
billed to IMATION by 3M charging the net amount due to the appropriate IMATION
commodity code. The net amount charged will be summarized with all other charges
during the month on the eighth work day of the following month. IMATION will pay
3M the net amounts due on the ninth work day of the month. Once IMATION develops
its own financial system, or in the case of Services for which payments will not
be electronically billed, amounts due under this Agreement will be billed and
paid for in the following manner: Statements will be rendered to IMATION on a
monthly basis for all Services delivered during the preceding month, and each
such statement shall be payable within thirty (30) days after the date of the
statement. Statements not paid within such thirty (30) day period shall
accumulate interest at the annual rate of ten percent (10%). In order to
accommodate billing procedural issues that may occur in the system during the
first three months, payments within the first three months will be made no later
than 60 days after the date of the statement.
ARTICLE IV
INTERRUPTION OF SERVICES
3M will endeavor to provide uninterrupted Services through the term of this
Agreement. In the event, however, 3M or its suppliers are wholly or partially
prevented from providing a Service or Services or if Services are interrupted or
suspended, in either case by reason of any Force Majeure event set forth in
Section 14.01, or 3M shall deem it necessary to suspend delivery of a Service
hereunder for purposes of inspection, maintenance, repair, or replacement of
equipment parts or structures, 3M shall not be obligated to deliver such Service
during such periods, provided that 3M has given, when feasible, reasonable
written notice of the interruption within a reasonable period of time,
explaining the reason, purpose and likely duration therefor, and provided
further, that with respect to 3M scheduled interruptions or maintenance, 3M
shall have provided, when feasible, reasonable advance notice thereof. If such
interruption of Services has a significant negative impact on IMATION's business
operation and 3M cannot readily reinstate the Service involved, 3M will use
reasonable efforts to assist IMATION in securing alternative services to
minimize such negative impact on IMATION.
ARTICLE V
PERSONNEL
5.01 Supervision and Compensation. 3M shall select, employ, pay, supervise,
direct and discharge all 3M personnel providing Services hereunder. 3M shall be
solely responsible for the payment of all fringe benefits and any other direct
and indirect compensation for 3M personnel assigned to perform services under
this Agreement, as well as be responsible for their worker's compensation
insurance, employment taxes, and other employer liabilities relating to such
personnel as required by law to be provided.
5.02 Staffing of Personnel. 3M shall be solely responsible for assigning
personnel to perform the Services, which personnel will be instructed by 3M to
perform the Services in a timely, efficient and workmanlike manner. IMATION
shall have the right to request that personnel not performing Services properly
and in accordance with reasonable technical or general work standards be
replaced by 3M with competent and suitable personnel.
5.03 Standard of Care. Notwithstanding anything to the contrary contained in
this Agreement, it is understood and agreed that 3M is not in the business of
providing Services to third parties and that the standard of care to which 3M
and any 3M employees or agents performing Services hereunder shall be
accountable for shall be the standard of care used by 3M in furnishing these
Services to its own internal organization, and under no circumstances shall 3M
or its employees or agents be held accountable for a greater standard of care or
one that is appropriate for a party in the business of furnishing similar
services.
ARTICLE VI
INGRESS AND EGRESS
3M shall at all times during the term of this Agreement have the right of
ingress to and egress from the facilities and premises of IMATION for any
purposes connected with the delivery of Services hereunder or the exercise of
any right under this Agreement or the performance of any obligations required by
this Agreement, subject to reasonable safety and security policies and practices
implemented by IMATION.
ARTICLE VII
CONFIDENTIALITY
7.01 Confidential Information. As used in this Agreement, 3M Confidential
Information and IMATION Confidential Information are defined as follows:
A. "3M Confidential Information" means information known by IMATION on
the Effective Date of this Agreement and reasonably understood by IMATION to be
confidential and related to 3M's business interests, or disclosed confidentially
by 3M to IMATION after the Effective Date under the terms and for purposes of
this Agreement except for:
(i) information learned by IMATION for the first time after
the Effective Date of this Agreement, but prior to any disclosure by 3M;
(ii) information which is or becomes publicly available
through no act of IMATION, from and after the date of public availability.
(iii) information disclosed to IMATION by a third party,
provided (a) under the circumstances of disclosure IMATION does not have a duty
of non-disclosure owed to such third party, (b) the third party's disclosure is
not violative of a duty of non-disclosure owed to another, including 3M, and (c)
the disclosure by the third party is not otherwise unlawful;
(iv) information developed by IMATION independent of any
confidential 3M information which is known by IMATION on the Effective Date
and/or disclosed by 3M under this Agreement;
(v) information which is inherently disclosed in marketing of
a product by IMATION in the usual course of business and within the scope of the
rights granted to or retained by IMATION under this Agreement or the
Intellectual Property Rights Agreement;
(vi) information which is developed by a business which is
being transferred to IMATION and constitutes performance specifications for
chemicals, compositions, formulations, materials, components, devices, articles
or other items obtained prior to the Effective Date from a business remaining
with 3M on the Effective Date; and
(vii) information which IMATION can demonstrate was disclosed
by a 3M business being transferred to IMATION to a third party prior to November
14, 1995, and for which any obligation of confidentiality by that third party
has expired, from and after the date such third party obligation of
confidentiality expires, and provided that disclosure of an item of information
to one third party and a different item of information to another third party
shall not be viewed as disclosure of information which can only be drawn from
those items of information collectively.
B. "IMATION Confidential Information" means information known by 3M on
the Effective Date and reasonably understood by 3M to be confidential and
related to IMATION's present or future business interests, or disclosed
confidentially by IMATION to 3M under the terms and for purposes of this
Agreement except for:
(i) information learned by 3M for the first time subsequent to
the Effective Date of this Agreement, but prior to any disclosure by IMATION;
(ii) information which is or becomes publicly available
through no act of 3M, from and after the date of public availability;
(iii) information disclosed to 3M by a third party, provided
(a) under the circumstances of disclosure 3M does not have a duty of
non-disclosure owed to such third party, (b) the third party's disclosure is not
violative of a duty of non-disclosure owed to another, including IMATION, and
(c) the disclosure by the third party is not otherwise unlawful;
(iv) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the Effective Date
and/or disclosed by IMATION thereafter;
(v) information which is inherently disclosed in marketing of
a product by 3M in the usual course of business and within the scope of the
rights granted to or retained by 3M under the Intellectual Property Rights
Agreement;
(vi) information which is developed by a business which
remains with 3M on the Effective Date and constitutes performance specifications
for chemicals, compositions, formulations, materials, components, devices,
articles or other items obtained prior to the Effective Date from a business
being transferred to IMATION on the Effective Date; and
(vii) information which 3M can demonstrate was disclosed to a
third party prior to November 14, 1995, and for which any obligation of
confidentiality by that third party has expired, from and after the date such
third party obligation of confidentiality expires, and provided that disclosure
of an item of information to one third party and a different item of information
to another third party shall not be viewed as disclosure of information which
can only be drawn from those items of information collectively.
C. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any business information which is IMATION Confidential
Information or 3M Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five (5) years after
the date of disclosure of such information, unless and to the extent the Parties
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the foregoing restrictions
shall expire with respect to such information on the expiration of such longer
period. The date of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION Confidential
Information known by 3M on the Effective Date shall be considered to be the
Effective Date.
D. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
E. Each Party shall protect Confidential Information hereunder by using
the same degree of care, but no less than a reasonable degree of care, to
prevent the unauthorized disclosure of the other Party's Confidential
Information as the Party uses to protect its own confidential information of a
like nature.
F. Each Party shall insure that its Affiliates, sublicensees and other
transferees agree to be bound by the same restrictions on use and disclosure of
Confidential Information as bind the Party in advance of the disclosure of
Confidential Information to them.
G. The Parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
ARTICLE VIII
OWNERSHIP OF TANGIBLE PROPERTY
AND INTELLECTUAL PROPERTY
8.01 The title to any tangible property, including but not limited to materials,
goods, equipment, apparatus, documents and works of authorship (e.g. drawings,
manuscripts, artwork, photographs, negatives, motion pictures, video programs,
computer software, sound recordings, and similar works) provided to 3M by
IMATION or produced by 3M in carrying out any Services hereunder shall be vested
in IMATION. 3M agrees to return or deliver such tangible property to IMATION
within thirty (30) days after request by IMATION.
8.02 Ownership and rights in any intellectual property (whether patentable or
not) conceived during the course of work under this Agreement up to and
including June 30, 1998, will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be IMATION, 3M or Joint "Foreground IP" and/or "Foreground Patents"
and/or "New Material" as the case may be, depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purpose of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998, regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
ARTICLE IX
DISCLAIMER AND LIMITATION OF LIABILITY
9.01 Disclaimer of Warranties/ Limitation of Direct Damages. EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT, 3M MAKES NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES TO BE PROVIDED
UNDER THIS AGREEMENT. In the event of any performance or non-performance under
this Agreement which results in direct damages to IMATION, 3M's maximum,
cumulative and sole liability to IMATION for such direct damages shall be an
amount up to the fee paid by IMATION to 3M (as of the date of the performance or
non-performance giving rise to the damage) during the term for the specific
Service set forth in Section 2.02 which resulted in direct damages to IMATION.
IMATION acknowledges that such payment constitutes fair and reasonable
compensation for any direct damages. Notice of any claim for direct damages must
be made within two years of the date of termination or expiration of the Service
which gave rise to the claim and such claim must specify the damage amount
claimed and a description of the action and the service giving rise to the
claim.
9.02 Limitation of Consequential Damages. EXCEPT AS PROVIDED IN ARTICLE X,
NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER PARTY FOR ANY
SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING BUT NOT
LIMITED TO LOSS OF PROFITS OR REVENUE) RESULTING OR ARISING FROM THIS AGREEMENT,
ANY PERFORMANCE OR NONPERFORMANCE UNDER THIS AGREEMENT OR TERMINATION OF THIS
AGREEMENT. THIS LIMITATION APPLIES REGARDLESS OF WHETHER THE DAMAGES OR OTHER
RELIEF ARE SOUGHT BASED ON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE,
STRICT LIABILITY IN TORT, OR ANY OTHER LEGAL OR EQUITABLE THEORY.
ARTICLE X
INDEMNIFICATION
10.01 IMATION agrees to indemnify, defend and hold harmless 3M, its directors,
officers, employees, agents and representatives from any and all claims,
actions, demands, judgments, losses, costs, expenses, damages and liabilities
(including but not limited to attorneys fees and other expenses of litigation)
arising out of or connected with the Services supplied under this Agreement or
in any way related to this Agreement, regardless of the legal theory asserted.
This indemnity applies to claims, actions and demands for which 3M may be, or
may be claimed to be, partially or solely liable. The parties agree that the
indemnities stated in Section 10.01 and 10.02 should be construed and applied in
favor of indemnification. The parties agree that the indemnities will not apply
to claims between the parties arising out of or connected to this Agreement.
10.02 IMATION shall reimburse 3M and indemnify, defend and hold harmless 3M, its
directors, officers, employees, agents, and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages, and
liabilities (including but not limited to attorneys fees and expenses of
litigation), arising from or related to any IMATION act or omission connected
with the provision of any Service by 3M in the performance of this Agreement or
caused by any IMATION product, information, or waste provided to 3M in
connection with the Services being provided by 3M.
10.03 If 3M intends to claim indemnification under Section 10.01 or 10.02, 3M
will promptly notify IMATION in writing of any claim, action, or demand for
which 3M intends to claim indemnification. In addition, 3M will promptly notify
IMATION in writing if 3M elects to waive its right to have IMATION defend the
claim, action, or demand. If 3M does not waive its right to have IMATION defend
the claim, action, or demand, 3M agrees that IMATION will control the defense of
the claim, action, or demand. 3M will cooperate fully with IMATION and its legal
representatives in the investigation and defense of any claim, action, or demand
covered by this indemnification. 3M will permit IMATION to settle any claim,
action, or demand and agrees that IMATION will control the settlement, provided,
however that such settlement does not adversely affect 3M's rights under this
Agreement or impose any obligations on 3M in addition to those stated in this
Agreement. IMATION, in the defense of any claims, actions or demands, will not
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term the giving by the claimant or plaintiff to 3M
of a release from all liability with respect to the claim, action, or demand. No
such claim, action, or demand will be settled by 3M without the prior written
consent of IMATION.
ARTICLE XI
RECORDS AND INSPECTION RIGHTS
11.01 Records. 3M agrees to maintain accurate records arising from or related to
any Service(s) provided hereunder, including but not limited to accounting
records and documentation produced in connection with the rendering of any
Service(s).
11.02 Right to Audit. 3M grants IMATION the right to have 3M's cost records
audited by an independent certified public accountant selected by IMATION and
approved by 3M. The independent certified public accountant will agree to treat
this information as confidential and will only disclose to IMATION whether or
not the costs 3M communicated to IMATION were accurate. IMATION may request an
audit no more than twice each year per Service and is responsible for all costs
of the auditor. If the accountant determines that the costs were inaccurate,
then the cost will be adjusted accordingly.
ARTICLE XII
TERMINATION
12.01 Termination by Either Party. This Agreement, or any Service provided
hereunder, may be terminated by either Party upon written notice to the other
Party if:
A. The other Party fails to perform or otherwise breaches an obligation
under this Agreement provided, however, that such Party failing to perform or
otherwise breaching shall have thirty (30) days from the date notice of
intention to terminate is received to cure the failure to perform or breach of
an obligation, at which time this Agreement or Service shall terminate if the
failure or breach has not been cured; or
B. The other Party makes a general assignment for the benefit of
creditors, becomes insolvent, a receiver is appointed, or a court approves
reorganization or arrangement proceedings; or
C. Performance of this Agreement or any Service to be provided
hereunder has been rendered impossible for a period of three (3) consecutive
months by reason of the occurrence of any of the events described in Section
14.01 or if any other event occurs which can be reasonably determined to
permanently prevent the performance of this Agreement or any Service; or
D. During any-agreed upon renewal term, the other Party so desires at
any time, upon ninety (90) days advance written notice of intention to
terminate, except with respect to those Services identified in Exhibit A which
specifically require either a shorter or longer period of notice, in which case
the notice period shall be as set forth in Exhibit A with respect to such
Service.
12.02 Termination Notices. Any termination notice delivered by either Party
shall specify in detail the Service or Services to be terminated and the
effective date of termination.
12.03 Consequences of Termination. In the event this Agreement or any Service is
terminated for any reason:
A. Upon request, each Party shall return to the other Party all
tangible personal property owned by the other Party in their possession as of
the termination date;
B. IMATION will be responsible to 3M for reasonable and proper
termination charges which will include all reasonable cancellation costs
incurred by 3M or costs for materials and equipment reasonably acquired in
connection with the provision of such Service if this Agreement or any Service
described in Exhibit A is terminated by IMATION without cause or by 3M with
cause. Invoices for such charges shall be prepared in reasonable detail by 3M
and payment shall be due thirty (30) days from the date thereof.
C. IMATION shall remain liable for payment to 3M for Services furnished
prior to the effective date of termination.
12.04 Services Provided After Termination/Expiration. Any service(s) furnished
by 3M and received by IMATION after the termination or expiration of this
Agreement or any individual Service shall be governed by the provisions of this
Agreement. The furnishing or receipt of any post-termination or post-expiration
services shall not otherwise extend the term of this Agreement, or any
individual Service.
ARTICLE XIII
DISPUTE RESOLUTION
13.01 Mediation and Binding Arbitration. If a dispute arises between 3M and
IMATION as to the interpretation or alleged breach of this Agreement or Exhibit
A, 3M and IMATION agree to use the following procedures, in lieu of either Party
pursuing other available remedies and as the sole remedy, to resolve the
dispute.
13.02 Initiation. A Party seeking to initiate the procedures shall give written
notice to the other Party, describing briefly the nature of the dispute. A
meeting shall be held between the Parties within 10 days of the receipt of such
notice, attended by individuals with decision-making authority regarding the
dispute, to attempt in good faith to negotiate a resolution of the dispute.
13.03 Submission to Mediation. If, at the conclusion of such meeting, the
Parties have not succeeded in negotiating a resolution of the dispute, they
agree to submit the dispute to mediation within thirty (30) days thereafter in
accordance with the Center for Public Resources Model ADR Procedure - Mediation
of Business Disputes, as modified herein, and to bear equally the costs of the
mediation.
13.04 Selection of Mediator. The Parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment with 20 days from the conclusion of the
negotiation period.
13.05 Mediation And Arbitration. The Parties agree to participate in good faith
in the mediation and negotiations related thereto for a period of 30 days or
such longer period as they may mutually agree following the initial mediation
session. If the Parties are not successful in resolving the dispute through
mediation by the end of such period, then the Parties agree to submit the matter
to binding arbitration in accordance with the Center for Public Resources Rules
for Non-Administered Arbitration of Business Disputes, as modified herein, by a
sole arbitrator, selected in accordance with the provisions of Section 13.06
hereof. The arbitration proceeding shall be held in Minnesota, shall be governed
by the Federal Arbitration Act, 9 U.S.C. SS 1-16, and judgment upon the award
rendered by the arbitrator may be entered by any court having jurisdiction
thereof.
13.06 Selection of Arbitrator. The Parties shall have 10 days from the end of
the mediation period to agree upon a mutually acceptable neutral person not
affiliated with either of the Parties to act as arbitrator. If no arbitrator has
been selected within such time, the Parties agree jointly to request the Center
for Public Resources or another mutually agreed-upon organization to supply
within 10 days a list of potential arbitrators with qualifications as specified
by the Parties in the joint request. Within five days of receipt of the list,
the Parties shall independently rank the proposed candidates, shall
simultaneously exchange rankings, and shall be deemed to have selected as the
arbitrator the individual receiving the highest combined ranking who is
available to serve.
13.07 Cost of Arbitration. The costs of arbitration shall be apportioned between
3M and IMATION as determined by the arbitrator in such manner as the arbitrator
deems reasonable taking into account the circumstances of the case, the conduct
of the Parties during the proceeding, and the result of the arbitration.
13.08 Arbitration Period. Any arbitration proceeding shall be concluded in a
maximum of one (1) year from written notice from one Party to the other Party
identifying a dispute subject to arbitration under this Article and requesting
arbitration after having participated in negotiation and mediation under this
Article.
13.09 Treatment of Negotiations and Mediation. All negotiations and mediations
pursuant to this Article shall be treated as compromise and settlement
negotiations for purposes of Rule 408 of the Federal Rules of Evidence and
comparable Minnesota Rules of Evidence.
13.10 Confidentiality. All negotiation, mediation and arbitration proceedings
under this Article shall be treated as Confidential Information in accordance
with the provisions of Section 7.01. Any mediator or arbitrator shall be bound
by an agreement containing confidentiality provisions at least as restrictive as
those contained in Section 7.01.
13.11 Equitable Relief. Nothing herein shall preclude either Party from taking
whatever actions are necessary to prevent any immediate, irreparable harm to its
interests, including multiple breaches of this Agreement by the other Party.
Otherwise, these procedures are exclusive and shall be fully exhausted prior to
the initiation of any litigation. Either Party may seek specific enforcement of
any arbitrator's decision under this Section. The other Party's only defense to
such a request for specific enforcement shall be fraud by or on the arbitrator.
ARTICLE XIV
MISCELLANEOUS
14.01 Force Majeure. Neither Party shall be responsible for the delay in the
performance of any obligation hereunder due to labor disturbances, accidents,
fires, floods, wars, riots, rebellions, blockages, acts of governments,
governmental requirements and regulations, restrictions imposed by law or any
other similar conditions, beyond the reasonable control and without the fault or
negligence of such Party, and the time for performance by such Party shall be
extended by the period of such delay. Notwithstanding the foregoing, in no event
shall IMATION be relieved of its payment obligations to 3M for Services
delivered, regardless of cause.
14.02 Assignment. Except as set forth in Section 1.04, this Agreement may not be
assigned in whole or in part by either Party without the prior written consent
of the other Party. Any assignment, delegation or transfer of this Agreement or
any interest therein without written consent of the other Party is void and
cause for termination of this Agreement. Nothing in this Agreement shall be
construed to grant any person or entity not a party hereto any rights or powers
whatsoever, and no person or entity shall be a third party beneficiary of this
Agreement. If IMATION sells or otherwise transfers part of its business that is
receiving services from 3M hereunder, 3M agrees to cooperate with IMATION and
the purchaser of that part of IMATION's business to transition the services
provided to that part of IMATION's business to the purchaser or another entity
designated by such purchaser so as to minimize disruption to part of the IMATION
business sold or transferred. Nothing in this section affects the ability of
either party to terminate this Agreement or any Service in accordance with the
provisions of this Agreement or Exhibit A.
14.03 Relationship of the Parties. Neither Party is an agent of the other Party
and neither Party has any authority to bind the other Party, transact any
business in the other Party's name or on its behalf, or make any promises or
representations on behalf of the other Party unless provided for in Exhibit A or
agreed to in writing. Each Party will perform all of its respective obligations
under this Agreement as an independent contractor, and no joint venture,
partnership or other relationship shall be created or implied by this Agreement.
14.04 Governing Law. Any questions, claims, disputes or litigation arising from
or related to the making, performance and termination of this Agreement shall be
governed by the laws of Minnesota without regard to the principles of conflicts
of law.
14.05 Entire Agreement. This Agreement and the Exhibits referred to in this
Agreement, which Exhibits are incorporated and made a part of this Agreement by
reference, constitute the entire agreement between 3M and IMATION relating to
services to be provided by 3M to IMATION and, with the exception of the
Distribution Agreement and any related Agreements, there are no further
agreements or understandings, written or oral, between the Parties with respect
thereto.
14.06 Notices. Any notices, request, demands or other communications required by
or made under this Agreement shall be in writing and shall be deemed to have
been duly given i) on the date of service if served personally on the Party to
whom notice is to be given, ii) on the day of transmission if sent via facsimile
transmission to the facsimile number given below, and telephonic confirmation of
receipt is obtained promptly after completion of transmission, iii) on the day
after delivery to Federal Express or similar overnight courier or the Express
Mail service maintained by the U.S. Postal Service or iv) on the fifth day after
mailing, if mailed to the Party to whom notice is to be given, by first class
mail, registered or certified, postage prepaid and properly addressed, to the
Party as follows:
If to 3M: To the person designated on Exhibit A as the 3M contact for a specific
Service or to:
John Ursu
Vice President Legal Affairs
3M Company
Bldg. 220-14W-07
P. O. Box 33428
St. Paul, Minnesota 55133-3428
If to IMATION: To the person designated on Exhibit A as the Imation contact for
a specific Service or to:
Carolyn Bates
General Counsel
Imation Legal Department
P.O. Box 64898
St. Paul, Minnesota 55164-0898
14.07 Paragraph Headings. The title and headings of various paragraphs of this
Agreement are inserted for convenience of reference only and shall not be used
in the construction or interpretation of any provisions of this Agreement.
14.08 Conflicting Provisions. In the event any provision of Exhibit A conflicts
with the provisions of this Agreement, the provisions of this Agreement shall be
controlling.
14.09 Survival of Provisions. The representations, warranties and covenants
contained herein shall survive the termination or expiration of this Agreement
to the full extent necessary to protect the Party in whose favor they run.
14.10 Waiver and Modification. No part of this Agreement or any of the Exhibits
may be amended, modified, supplemented or waived in any manner whatsoever
(including course of dealing or of performance) except by a written instrument
signed by authorized officers of the Parties. Any failure or delay by either
party in exercising any right or remedy in one or many instances will not
prohibit a Party from exercising it at a later time or from exercising any other
right or remedy.
ACCEPTED AND AGREED TO:
IMATION CORP. MINNESOTA MINING AND
MANUFACTURING COMPANY
By: ___________________________ By: _________________________
Print Name: ___________________ Print Name: _________________
Title: ________________________ Title: _______________________
Corporate Services Transition Agreement
Exhibit A
Listing and Description of Services
Exhibit A-1 Accounting/Finance ( Disbursement Services, Accounts Receivable,
Customer Invoicing, Employee Accounting and Control, Corporate
Auditing, Tax, Controllers)
Exhibit A-2 Office Administration (Central Supply, General Receiving,
Mail Services, Travel Analysis, Forms Management Services,
Records Management Services, Promotional Services, International
Office Supplies)
Exhibit A-3 Legal Affairs Support Service (Patent Illustration, Litigation
Support)
Exhibit A-4 Employee Benefits and Human Resources (Employee Administrative
Services, Benefits, Organizational Learning Services, Employee
Services, Community Affairs, and Human Relations)
Exhibit A-5 Engineering ( Engineering, Corporate Quality and Manufacturing
Services)
Exhibit A-6 Environmental
Exhibit A-7 Corporate Incinerator
Exhibit A-8 Corporate Product Responsibility
Exhibit A-9 Logistics (Export/Import Services, Distribution, Customer
Services, Customer Service Administration, Customer Service
Systems and Process Department, Office Technology Department,
Distribution Operation, Planning and Analysis, Post Sales
Support Department, Logistics Business Services, Transportation
Services, and Product Information Center)
Exhibit A-10 Government Contracts
Exhibit A-11 Health (Toxicology, Industrial Hygiene, Health Physics, and
Occupational Medicine)
Exhibit A-12 Information Technology
Exhibit A-13 Insurance
Exhibit A-14 Library/Information Services
Exhibit A-15 Marketing and Public Affairs (Stemwinder, Corporate Marketing)
Exhibit A-16 Package Engineering
Exhibit A-17 Purchasing
Exhibit A-18 Safety
Exhibit A-19 Corporate Research Laboratories
Exhibit A-20 International Regulatory Services
ENVIRONMENTAL MATTERS AGREEMENT
ENVIRONMENTAL MATTERS AGREEMENT ("Agreement"), dated as of July 1,
1996, by and between Minnesota Mining and Manufacturing Company, a Delaware
corporation ("3M"), and Imation Corp., a Delaware corporation ("Imation") and a
wholly owned subsidiary of 3M.
WHEREAS, 3M and Imation have entered into a Transfer and Distribution
Agreement (the "Distribution Agreement"), whereby 3M has transferred and
assigned to Imation and its Affiliates substantially all of the assets and
properties related to the "Transferred Businesses" (as such term is defined in
the Distribution Agreement), and in connection therewith, Imation (on behalf of
itself and its Affiliates) has assumed certain Assumed Liabilities (as such term
is defined in the Distribution Agreement), including the Assumed Environmental
Liabilities (as defined in Section 1.4 hereof);
WHEREAS, 3M and Imation have determined to set forth their respective
rights and obligations with respect to the Assumed Environmental Liabilities,
Future Environmental Liabilities (as defined in Section 1.10 hereof), Retained
Environmental Liabilities (as defined in Section 1.22 hereof), and related
matters;
WHEREAS, it is the intent of 3M and Imation that Imation and its
Affiliates assume all of the environmental liabilities that arise from or are
connected with the activities and operations of the Transferred Businesses,
except for certain specific matters described herein;
WHEREAS, it is the intent of 3M and Imation that 3M shall be solely
responsible for the environmental liabilities arising from the operations of 3M
on and after the Distribution Date, and that Imation shall be solely responsible
for the environmental liabilities arising from the operations of Imation on and
after the Distribution Date;
WHEREAS, it is the intent of 3M and Imation that the allocation of
liabilities related to the registration and regulation of the use and sale of
products in commerce be addressed in the Distribution Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and in the Distribution Agreement and
the Related Agreements (as such term is defined in the Distribution Agreement),
3M and Imation covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1 3M Entity: Any foreign or domestic predecessor, subsidiary,
division, joint venture, partnership or associated company of or including 3M,
whether or not sold, terminated, liquidated, closed or dissolved on or prior to
the Distribution Date (as defined in the Distribution Agreement), and any other
person or entity with respect to which 3M may have retained Liability under
contract or law.
1.2 Action: Shall have the meaning given such term in the Distribution
Agreement.
1.3 Affiliate: Shall have the meaning given such term in the
Distribution Agreement.
1.4 Assumed Environmental Liabilities: (a) Except as provided in
subsection (b) herein, all Liabilities of 3M and any 3M Entity under or
related to Environmental Laws, arising as a result of or in connection with
activities or operations of 3M or any 3M Entity prior to the Distribution Date
with respect to the Transferred Businesses, whether or not an Action or
Remediation has commenced prior to such date with respect to such activities or
operations, including, but not limited to: (1) any Remediation or Action at any
of the Imation Facilities; (2) Remediation or Actions at Disposal Sites,
including, but not limited to, Co-Disposal Sites, to the extent that 3M's or any
3M Entity's Liability for such matters arises from or is connected with the
activities and operations at or from the Transferred Assets (as such term is
defined in the Distribution Agreement), but only if such Actions or Remediations
have not been identified on Schedule 1.4(b)(2) as of the Distribution Date; or
(3) Remediation or Actions at any Contract Manufacturing Facility to the extent
that 3M's or any 3M Entity's relationship to such facility relates to or arises
from the Transferred Businesses.
(b) Notwithstanding the above, the following are not Assumed
Environmental Liabilities:
(1) Remediation or Actions at Former Facilities, including,
but not limited to, matters listed on Schedule 1.4(b)(1) to this Agreement;
(2) Remediation or Actions at any Disposal Site that: (i) is
identified on Schedule 1.4(b)(2) to this Agreement; or (ii) has not been
identified on a schedule to this Agreement as of the Distribution Date, but only
to the extent that 3M's or any 3M Entity's Liability for such matter arises from
or is connected with the activities and operations of Former Facilities or the
Non-Transferred Businesses;
(3) Remediation or Actions at any Con tract Manufacturing
Facility to the extent that 3M's or any 3M Entity's relationship to such
facility relates to or arises from the Non-Transferred Businesses; and
(4) Remediation or Actions at any facility currently or
formerly owned or operated by a Non-Transferred Business, to the extent such
Remediation or Actions arise from activities or operations by 3M or any 3M
Entity prior to the Distribution Date.
1.5 Co-Disposal Site: Any Disposal Site where 3M's or any 3M Entity's
Liability arises from, relates to, or is connected with the activities or
operations, prior to the Distribution Date, of both (a) the Transferred Assets
and (b) any other current or former facility owned, operated, or leased by 3M or
any 3M Entity, including Former Facilities.
1.6 Contract Manufacturing Facility: Any facility or plant, owned or
operated by a person or an entity neither directly nor indirectly owned by 3M or
a 3M Entity, that engaged in contract manufacturing for 3M or a 3M Entity prior
to the Distribution Date.
1.7 Disposal Site: Any location other than an Imation Facility, a
facility owned or operated by the Non-Transferred Businesses, a Former Facility,
or a Contract Manufacturing Facility, at or to which 3M or any 3M Entity
treated, stored, disposed of or released materials, or arranged for the
treatment, storage, disposal or release of materials, prior to the Distribution
Date.
1.8 Environmental Laws: All applicable federal, state, local, common
law and foreign laws, regulations, rules and duties, from time to time in
effect, relating to pollution or protection of the environment or human health,
including, without limitation, the discharge or release of materials
(including, without limitation, noise, radiation and genetic and pathogenic
substances) into the environment, including all provisions thereof relating to
Remediation, compensation, restitution, penalties or damages of any kind;
provided, that for purposes of this Agreement, the term "Environmental Laws"
does not include any laws, rules, or regulations relating to the registration
or regulation of the sale or use of products in commerce, including, but not
limited to, the Federal Food, Drug and Cosmetic Act, 21 U.S.C. ss. 301 et seq.;
the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. ss. 136 et
seq.; the Toxic Substances Control Act, 15 U.S.C. ss. 2601 et seq. (except that
provisions of the Toxic Substances Control Act and the regulations promulgated
thereunder related to the regulation of polychlorinated biphenyls shall be
deemed to be Environmental Laws for purposes of this Agreement); and similar
state and local laws.
1.9 Former Facilities: All plants, facilities, real property and
equipment owned, operated, leased or otherwise used by 3M or any 3M Entity prior
to the Distribution Date, in connection with or relating to the Transferred
Businesses, that are not included in the Transferred Assets; provided, that
Contract Manufacturing Facilities shall not be deemed to be Former Facilities
for purposes of this Agreement.
1.10 Future Environmental Liabilities: All Liabilities of Imation or
its Affiliates arising under or related to Environmental Laws, arising as a
result of Imation's or its Affiliates' operations and activities subsequent to
the Distribution Date, including, but not limited to:
(a) Imation's and its Affiliates' obligations to comply with
Environmental Laws in the operation of the Transferred Businesses on and after
the Distribution Date; and
(b) Liabilities arising out of: the use, handling, generation,
transportation, treatment, storage, disposal or release of materials on or after
the Distribution Date, or arranging for the treatment, storage, disposal, or
release of materials on or after the Distribution Date, by Imation or its
Affiliates.
1.11 Imation Facility: Any of the Transferred Assets (as defined in the
Distribution Agreement), whether foreign or domestic, and any property to
which pollution from a Transferred Asset migrates or has migrated.
1.12 Indemnifiable Losses: With respect to any claim by an Indemnified
Party for indemnification authorized pursuant to this Agreement, any and all
Losses suffered by such Indemnified Party with respect to such claim.
1.13 Indemnification Claimant. Shall have the meaning given such term
in Section 3.1(c) of this Agreement.
1.14 Indemnified Party: Any person who is entitled to receive payment
from an Indemnifying Party pursuant to this Agreement.
1.15 Indemnifying Party: Any person who is required to pay any other
person pursuant to this Agreement.
1.16 Insurance Coverage: Shall mean the benefits of any policy of
insurance issued by a third party to 3M on or prior to the Distribution Date,
including, without limitation, indemnification, defense costs, and punitive
damages.
1.17 Joint Defense Agreement: Any agreement, substantially in the form
of Exhibit D to the Distribution Agreement, which may be entered into by 3M and
Imation with respect to their defense of certain matters.
1.18 Liabilities: Any and all debts, liabilities, obligations,
penalties, and responsibilities, whether absolute, accrued, contingent,
reflected on the balance sheet, known, unknown, existing or not yet existing,
administrative, civil, or criminal, including, without limitation, those arising
under or in connection with any law (including Environmental Laws), rule,
regulation, duty, Action, order or consent decree of any governmental entity,
any judgment of any court of any kind or any award of any arbitrator of any
kind, and those arising under any contract, commitment or undertaking.
1.19 Loss: Any and all losses, Liabilities, claims, damages,
obligations, payments, penalties, fines, reimbursements, costs and expenses
(including, without limitation, the costs and expenses of any and all Actions,
Remediations, demands, assessments and judgments, and of any and all settlements
and compromises relating thereto, and reasonable attorneys' fees and expenses in
connection therewith).
1.20 Non-Transferred Businesses: Any and all past and current
operations and activities of 3M or any 3M Entity, including, but not limited to,
the Core Businesses (as defined in the Distribution Agreement), that are not
connected with or related to the Transferred Businesses.
1.21 Remediation: Any investigation, remediation, prevention,
containment or abatement of releases or threatened releases of materials into
the workplace or the environment and the assessment and mitigation of risks
and/or restoration of any harm arising therefrom, and related actions thereto.
1.22 Retained Environmental Liabilities: All Liabilities of 3M and any
3M Entity under or related to Environmental Laws, arising as a result of
activities or operations of 3M or any 3M Entity prior to the Distribution Date,
that are not Assumed Environmental Liabilities, including, but not limited to:
(a) Remediation or Actions at Former Facilities, including, but not
limited to, matters listed on Schedule 1.4(b)(1) to this Agreement;
(b) Remediation or Actions at any Disposal Site that: (1) is identified
on Schedule 1.4(b)(2) to this Agreement; (2) has not been identified on a
schedule to this Agreement as of the Distribution Date, but only to the extent
that 3M's or any 3M Entity's Liability for such matter arises from or is
connected with the activities and operations of Former Facilities or the
Non-Transferred Businesses;
(c) Remediation or Actions at any Contract Manufacturing Facility to
the extent that 3M's or any 3M Entity's relationship to such facility relates to
or arises from the Non-Transferred Businesses; and
(d) Remediation or Actions at any facility currently or formerly owned
or operated by a Non-Transferred Business, to the extent such Remediation or
Actions arise from activities or operations by 3M or any 3M Entity prior to the
Distribution Date.
1.23 Third Party Claims: Shall have the meaning given such term in
Section 3.1(a) of this Agreement.
1.24 Other Defined Terms: Capitalized terms not defined herein shall
have the meaning given to such terms in the Distribution Agreement.
1.25 Rule of Construction: The meanings set forth in this Article I
shall be equally applicable to both the singular and the plural forms of the
terms defined.
ARTICLE II
RESPONSIBILITY UNDER ENVIRONMENTAL LAWS; INDEMNIFICATION
2.1 Imation Responsibility. As of the Distribution Date, Imation
shall, and shall cause its Affiliates to, assume and be responsible for the
Assumed Environmental Liabilities. Without limiting the foregoing, Imation, or
an Affiliate of Imation, as the case may be, shall, promptly after the
Distribution Date, execute and obtain to the extent it is possible to do so, and
assist 3M to execute and obtain, any consents, transfers, assignments,
assumptions, waivers, and other legally effective instruments to cause Imation,
or an Affiliate of Imation, as the case may be, to be substituted for 3M with
respect to all permits, licenses, registrations, financial assurances (including
letters of credit), consent decrees and consent orders, other decrees and other
obligations under Environmental Laws relating to (i) the Assumed Environmental
Liabilities and (ii) the on-going operations of the Imation Facilities and the
Transferred Businesses.
2.2 3M Responsibility. As between 3M and Imation, 3M shall remain
responsible for the Retained Environmental Liabilities. 3M does not and shall
not assume any responsibility or Liability for Future Environmental Liabilities.
2.3 Indemnification by Imation. Imation shall and shall cause its
Affiliates to indemnify, defend and hold harmless 3M, each of its directors,
officers, employees and agents and each Affiliate of 3M from and against, and
shall reimburse such Indemnified Parties with respect to, any and all Losses of
such Indemnified Parties arising out of or due to, directly or indirectly, (a)
any of the Assumed Environmental Liabilities, (b) any failure to perform, or
violation of, any covenant, agreement, assumption, or responsibility of Imation
under this Agreement, (c) any Liabilities incurred by, resulting to or imposed
on such Indemnified Parties relating in any way to obligations under
Environmental Laws with respect to which Imation or a Imation Affiliate is
required to be substituted for 3M after the Distribution Date as set forth in
Section 2.1 hereof, or (d) Future Environmental Liabilities.
2.4 Indemnification by 3M. 3M shall and shall cause its Affiliates to
indemnify, defend and hold harmless Imation, each of its directors, officers,
employees and agents and each Affiliate of Imation from and against, and shall
reimburse such Indemnified Parties with respect to, any and all Losses of such
Indemnified Parties arising out of or due to, directly or indirectly, (a) any
Retained Environmental Liability, and (b) any failure to perform, or violation
of, any covenant, agreement, assumption, or responsibility of 3M under this
Agreement.
ARTICLE III
PROCEDURES FOR REMEDIATION OR ACTIONS
SUBJECT TO INDEMNIFICATION
3.1 Procedure for Indemnification. (a) If a party to this Agreement, or
other person or entity affiliated with that party for purposes of
indemnification as set forth in Sections 2.3 and 2.4 of this Agreement, receives
notice of any claim or Action brought, asserted, commenced or pursued by any
person or entity not a party to this Agreement, or any fact or allegation upon
which such claim or Action could be based (hereinafter a "Third Party Claim"),
with respect to which the other party to this Agreement is or may be obligated
to provide defense or indemnification pursuant to Article II hereof, said person
shall give such other party prompt notice thereof (including any pleadings
relating thereto) after becoming aware of such Third Party Claim, specifying in
reasonable detail the nature of such Third Party Claim and the amount or
estimated amount thereof to the extent then feasible (which estimate shall not
be conclusive of the final amount of such claim); provided, however, that the
failure of a person to give notice as provided in this Section 3.1 shall not
relieve the other party of its indemnification obligations under this Agreement,
except to the extent that such other party is actually prejudiced by a failure
to give notice as provided hereunder.
(b) For any Third Party Claim concerning which notice is given under
subparagraph (a) of this Section 3.1, the Indemnifying Party shall defend in a
timely manner, to the extent permitted by law, such Third Party Claim through
counsel appointed by the Indemnifying Party and reasonably acceptable to the
Indemnified Party. Once an Indemnifying Party has commenced its defense of an
Indemnified Party, it cannot withdraw from such defense until the conclusion of
the matter, unless the Indemnified Party agrees to the withdrawal or the
Indemnified Party is also defending the claim. The Indemnified Party shall have
the right to participate in the defense of the Third Party Claim by employing
separate counsel at its own expense, provided that the parties enter into a
Joint Defense Agreement, substantially in the form of Exhibit D to the
Distribution Agreement, that will protect privileged communications.
(c) If a party responds to a notice of a Third Party Claim by denying
its obligation to indemnify the person or entity claiming a right of defense and
indemnification under this Agreement ("Indemnification Claimant"), or if the
Indemnifying Party fails to defend in a timely manner, the Indemnified Party
shall be entitled to defend such Third Party Claim. In addition, if it is later
determined, through the procedures referenced in Article VI of this Agreement,
that said party wrongfully denied such claim or wrongfully failed to defend in a
timely manner, then said Indemnifying Party shall (1) reimburse the Indemnified
Party for all costs and expenses incurred reasonably by the Indemnified Party in
connection with its defense of such Third Party Claim and (2) be estopped from
challenging a judgment, order, settlement, compromise, or consent judgment
entered into in good faith by the Indemnified Party resolving a Third Party
Claim, if such claim has been resolved prior to the conclusion of the proceeding
between the Indemnified Party and Indemnifying Party. An Indemnifying Party,
after initially rejecting a claim for defense or indemnification by an
Indemnification Claimant, may defend and indemnify the Indemnification Claimant,
at any time prior to the resolution of said Third Party Claim, for such claim,
provided that (x) the Indemnifying Party reimburses the Indemnified Party for
all costs and expenses incurred reasonably by the Indemnified Party in
connection with its defense of such Third Party Claim up to the time the
Indemnifying Party assumes control of the defense of such claim (including costs
incurred in the transition of the defense from the Indemnified Party to the
Indemnifying Party) and (y) the assumption of the defense of the Third Party
Claim will not prejudice or cause harm to the Indemnified Party.
(d) Regardless of the party that defends a Third Party Claim, the other
party reasonably shall make available all employees, Books and Records,
communications, documents, items or matters within its knowledge, possession or
control that are necessary, appropriate or reasonably deemed relevant with
respect to such defense; provided, however, that nothing in this subparagraph
(d) shall be deemed to require the waiver of any privilege, including the
attorney-client privilege, or protection afforded by the attorney work product
doctrine. If a party requests the other party to undertake the foregoing
obligations in connection with any other Third Party Claim asserted against the
requesting party and for which the other party has no indemnity obligation under
this Agreement, and where the other party has information, documents or
witnesses within its possession or control that would reasonably assist the
requesting party, the other party shall undertake the foregoing obligation to
cooperate with and assist the requesting party provided that the requesting
party agrees to reimburse the other party's reasonable out-of-pocket expenses
incurred in connection with such cooperative effort.
(e) With respect to any Third Party Claim, no party shall enter into
any compromise or settlement or consent to the entry of any judgment (1) which
does not include as a term thereof the giving by the third party of a release to
the Indemnified Party from all further liability concerning such Third Party
Claim on terms no less favorable than those obtained by the party entering into
such compromise, settlement or consent or (2) imposes any obligation on the
Indemnified Party without said Indemnified Party's written consent (such consent
not to be unreasonably withheld), except an obligation to pay money which the
Indemnifying Party has agreed to pay on behalf of the Indemnified Party.
(f) Upon final judgment, determination, settlement or compromise of any
Third Party Claim, and unless otherwise agreed by the parties, the Indemnifying
Party shall pay promptly on behalf of the Indemnified Party, or to the
Indemnified Party in reimbursement of any amount theretofore required to be paid
by it, the amount so determined by final judgment, determination, settlement or
compromise. Upon the payment in full by the Indemnifying Party of such amount,
the Indemnifying Party shall succeed to the rights of such Indemnified Party, to
the extent not waived in settlement, against the third party who made such Third
Party Claim.
(g) Regardless of the party actually defending a Third Party Claim for
which there is an indemnity obligation under this Agreement, the parties shall
give each other regular status reports relating to such action with detail
sufficient to permit the other party to assert and protect its rights and
obligations under this Agreement.
(h) For any Co-Disposal Site or Contract Manufacturing Facility where
materials have been disposed such that there arises an Assumed Environmental
Liability of Imation and a Retained Environmental Liability of 3M, Imation shall
remain responsible for indemnifying and defending 3M with respect to the Assumed
Environmental Liability and 3M shall remain responsible for indemnifying and
defending Imation with respect to the Retained Environmental Liability.
Notwithstanding the previous sentence, the parties may, in their discretion,
enter into alternative arrangements with respect to the defense of such matter,
including, but not limited to, allowing one or the other party to act as the
lead party with respect to the defense of such matter and allocating Losses
(including, but not limited to, the costs of defense and settlement) for such
matter.
(i) The provisions of this Section 3.1 shall survive in perpetuity.
3.2 Other Claims. Any claim on account of an Indemnifiable Loss which
does not result from a Third Party Claim, shall be asserted by written notice
from the Indemnified Party to the Indemnifying Party. Except as provided below,
such Indemnifying Party shall have a period of 60 days (or such shorter time
period, if required under the circumstances, as indicated by the Indemnified
Party in the written notice) within which to respond thereto. If such
Indemnifying Party does not respond within such 60-day (or lesser) period, such
Indemnifying Party shall be deemed to have accepted responsibility to make
payment and shall have no further right to contest the validity of such claim.
If such Indemnifying Party does respond within such 60-day (or lesser) period
and rejects such claim in whole or in part, the Indemnified Party shall be free
to pursue resolution as provided in Article X of the Distribution Agreement.
ARTICLE IV
RECORDS; CONFIDENTIALITY; COOPERATION
4.1 Records Relating to Assumed Environmental Liabilities and Future
Environmental Liabilities. 3M will make a good faith effort to deliver to
Imation, promptly after the Distribution Date, all files and other documents of
3M relating to the Assumed Environmental Liabilities and Future Environmental
Liabilities, including those maintained by 3M's legal department, provided that
3M may retain copies of documents (i) relating to Insurance Coverage proceedings
or (ii) required for the performance of services 3M is undertaking pursuant to
the Environmental Services Agreement entered into by 3M and Imation. From time
to time thereafter, 3M will make a good faith effort to promptly deliver any
additional documents or copies of documents relating to the Assumed
Environmental Liabilities and Future Environmental Liabilities which come to its
attention. Imation shall, and shall cause its Affiliates to, cooperate fully
with 3M with respect to such documents and copies, including by making available
to 3M all or part of any files or documents delivered by 3M, by promptly
responding to requests for specific files, documents, records or information,
and by making available Imation (or Imation Affiliate) personnel with knowledge
relating to such files, documents, records or information for discussions with
3M with respect thereto.
4.2 Cooperation. From time to time at the reasonable request of either
party, 3M or Imation (as the case may be) will, and will cause their Affiliates
to, make available their personnel with relevant non-privileged (and, if a Joint
Defense Agreement has been signed by the parties pursuant to Section 4.3 hereof,
privileged) information regarding any Assumed Environmental Liability, Future
Environmental Liability, Retained Environmental Liability, or other matter
arising under Environmental Law that relates to either or both of the parties,
for discussions and cooperation with the other party with respect thereto;
provided, that nothing contained herein shall be construed as a waiver by either
party of its rights with respect to the other party, including but not limited
to the circumstance where there is a conflict of interest between Imation and
3M.
4.3 Joint Legal Defense. In order to minimize the risk of the waiver of
any privilege available to Imation or 3M with respect to the matters that may
arise hereunder, Imation and 3M shall, or shall cause their respective
Affiliates to, as necessary, at the request of either party, enter into a Joint
Defense Agreement, substantially in the form of Exhibit D to the Distribution
Agreement, with respect to specific controversies for the purpose of asserting
common claims or defenses in accordance with their obligations hereunder.
4.4 Confidentiality. Without limiting the obligations set forth in any
Joint Defense Agreement contemplated by Section 4.3 hereof, the parties
recognize that during the course of performance of this Agreement, each party
will have access to confidential commercial, business or technical documents,
information and records (whether disclosed orally or in written, electronic or
other form) of the other. The parties shall comply with the requirements of
Section 7.5 of the Distribution Agreement with respect to such confidential
information, provided, that the restrictions in Section 7.5 of the Distribution
Agreement as applied to confidential information directly or indirectly relating
to any actual, alleged or potential liability or obligation of 3M or Imation
under any Environmental Law shall not expire, notwithstanding any time limits
set forth in Section 7.5(c) of the Distribution Agreement, until such time and
to the extent that such information ceases to be confidential information (as
provided in Section 7.5 of the Distribution Agreement).
4.5 Records Retention. (a) Except as provided in subsection (b)
below, Imation shall, and shall cause its Affiliates to, maintain in perpetuity
the following categories of records transferred by 3M to Imation related to the
pre-Distribution Date operations and activities of 3M, and shall cooperate fully
with 3M with respect to such records, including promptly making such records
available to 3M at 3M's request: (1) active or current permits, licenses, or
authorizations required under Environmental Law; (2) applications relating to
such permits, licenses, or authorizations; (3) permits, licenses, or
authorizations required under Environmental Laws that have expired or been
terminated, cancelled or revoked; (4) all documentation relating to solid and
hazardous waste management, including, but not limited to, records relating to
the generation, transportation, treatment, storage, disposal or recycling of
solid and hazardous waste; (5) records relating to drum reconditioning; (6)
records relating to spills, permit or regulatory exceedances, notices of
violation, or government inspections; (7) all contracts relating to the
disposal, transport, treatment, storage or recycling of solid or hazardous
waste; (8) all reports and supporting documentation related to submissions made
under Sections 311, 312 or 313 of the Federal Emergency Planning and Community
Right-to-Know Act; (9) all documents related to the presence, management,
handling, and disposal of materials containing asbestos and polychlorinated
biphenyls, including, but not limited to, equipment containing fluids that are
contaminated with polychlorinated biphenyls; and (10) all correspondence related
to the above-noted categories.
(b) At such point as Imation or a Imation Affiliate determines that it
no longer intends to retain a copy of any document that is covered by Section
4.5(a), Imation shall notify 3M in writing of its (or its Affiliate's) intent to
destroy or dispose of such document and offer to provide the document to 3M as
an alternative to the disposal or destruction of said document. 3M shall have 30
days from the receipt of the notice described in the previous sentence to accept
Imation's offer. If 3M does not accept Imation's offer within such 30 day
period, Imation or its Affiliate shall no longer be bound by any obligation to
retain such document.
ARTICLE V
ENVIRONMENTAL INSURANCE LITIGATION
5.1 Environmental Insurance Litigation. Any claims for Insurance
Coverage that Imation or a Imation Affiliate may have with respect to Assumed
Environmental Liabilities shall be governed in accordance with the provisions of
Article IX of the Distribution Agreement. With respect to claims for Insurance
Coverage with respect to Assumed Environmental Liabilities for which both 3M
and Imation or their Affiliates have incurred Losses, if the amount of the
Recovery (as such term is defined in the Distribution Agreement) for such claims
is limited by the amount of coverage provided by the applicable insurance
policy or policies, 3M may use its reasonable discretion in allocating the
Recovery between it and Imation for such claims.
ARTICLE VI
DISPUTES
6.1 General. All disputes between Imation and 3M with respect to any
matter governed by this Agreement shall be subject to the provisions of Article
X of the Distribution Agreement governing dispute resolution, except that, for
purposes of such Article X, disputes relating to the Information or privileged
information under Article IV hereof shall be treated the same as those arising
under Section 7.6 of the Distribution Agreement.
ARTICLE VII
MISCELLANEOUS
7.1 Distribution Date. This Agreement shall be effective on and from
the Distribution Date.
7.2 Survival. All covenants, agreements and assumptions or allocations
of responsibility contained herein shall survive the Distribution Date.
7.3 Remedies Available. Except as expressly provided in Article VI
hereof or Article X of the Distribution Agreement, nothing in this Agreement
shall limit or constrain the right of the parties to pursue and recover damages
at law or to seek equitable relief for breaches of this Agreement. In the event
any party seeks equitable relief for breach of this Agreement, the party against
whom the claim of breach is asserted waives, and shall not assert, any claim or
defense thereto that the claimant has an adequate remedy at law.
7.4 Notices. All notices and other communications between Imation and
3M hereunder shall be in writing and shall be deemed to have been duly given if
delivered or mailed as specified in Section 11.4 of the Distribution Agreement.
7.5 Scope and Modification. This Agreement constitutes the entire
agreement between the parties and supersedes all prior oral or written
agreements or understandings of the parties with regard to the subject matter
hereof. No interpretation, change, termination or waiver of any provision hereof
shall be binding upon a party unless in writing and executed by the other party.
No modification, waiver, termination, rescission, discharge or cancellation of
any right or claim under this Agreement shall affect the right of any party
hereto to enforce any other claim or right hereunder.
7.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any party hereunder, upon any breach or default of
any party hereunder, shall impair any such right or remedy, nor shall it be
construed to be a waiver of any such breach or default, or any acquiescence
therein, or in any similar breach or default hereunder occurring. No waiver of
any single breach or default shall be deemed a waiver of any other breach or
default occurring hereunder.
7.7 Successors and Assigns. This Agreement and all of the provisions
herein shall be binding upon and inure to the benefit of the parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by either
party without the prior written consent of the other party.
7.8 No Third Party Beneficiaries. This Agreement is not intended to,
and shall not be construed to, confer any rights or remedies on any person other
than the parties hereto and their successors and permitted assigns and the
persons described in Article II.
7.9 Headings. The article and section headings in this Agreement are
for convenience only and shall not be construed as part of this Agreement or as
defining or limiting in any way the scope or intent of the provisions hereof.
7.10 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Minnesota (without
consideration of provisions relating to conflicts of law) as to all matters,
including, without limitation, matters of validity, construction, effect,
performance and remedies.
7.11 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.12 Severability. In the event that any covenant, condition or other
provision of this Agreement is held to be invalid, void or illegal by any court
of competent jurisdiction, the same shall be deemed to be severable from the
remainder of this Agreement, and shall in no way affect, impair or invalidate
any other covenant, condition or other provision hereof.
7.13 Construction of Agreements. In the event and to the extent that
there shall be a conflict between the provisions of this Agreement and the
Distribution Agreement, any other Related Agreement (as such term is defined in
the Distribution Agreement), any Conveyancing and Assumption Instrument (as such
term is defined in the Distribution Agreement) or any other instrument of as-
sumption, the provisions of this Agreement shall control as to matters falling
within the scope and subject matter of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
MINNESOTA MINING AND
MANUFACTURING COMPANY
By:________________________
Name:
Title:
IMATION CORP.
By:________________________
Name:
Title:
INTELLECTUAL PROPERTY
RIGHTS AGREEMENT
BETWEEN
MINNESOTA MINING AND
MANUFACTURING COMPANY
AND
IMATION CORP.
<TABLE>
<CAPTION>
<S> <C> <C>
1. Definitions..................................................................................................1
2. License Grant to IMATION Under Background PI and Background Patents.........................................11
3. Assignment to IMATION of Assigned PI and Assigned Patents and License Back to 3M............................12
4. License Grant to IMATION Under 3M Trademark Rights and Trade Dresses........................................14
5. Assignment to IMATION of Certain Trademarks and Trade Dresses...............................................20
6. License Under 3M Copyright Rights...........................................................................21
7. Licenses Under 3M Software and Third Party Software.........................................................23
8. Ownership of Foreground Intellectual Property Rights........................................................26
9. License Grant to IMATION Under 3M Foreground PI, 3M Foreground Patents, Joint Foreground PI and Joint
Foreground Patents..........................................................................................27
10. License Grant to 3M Under IMATION Foreground PI, IMATION Foreground Patents, Joint Foreground PI and Joint
Foreground Patents..........................................................................................28
11. Sublicense of Rights........................................................................................28
12. Patent Filing, Prosecution and Maintenance and Exchange of Foreground PI....................................30
13. Assignment of Right and Obligations Under Certain Existing and Future Agreements............................34
14. Technical and Other Cooperation, Notebooks and Access to Documents..........................................35
15. Confidentiality and Parties As Third Party Beneficiaries....................................................36
16. Employee Agreements.........................................................................................39
17. Enforcement of Intellectual Property Rights.................................................................42
18. Special Provisions Regarding Certain Fields.................................................................46
19. Non-Compete.................................................................................................47
20. Indemnification.............................................................................................48
21. Disclaimers.................................................................................................50
22. Dispute Resolution..........................................................................................51
23. Amendment...................................................................................................54
24. Term and Termination........................................................................................55
25. Change in Control or Ownership of IMATION...................................................................56
26. Miscellaneous...............................................................................................57
Exhibit A
3M Business Fields............................................................................................61
Exhibit B
3M Reserved Fields............................................................................................63
Exhibit C
3M Supply Fields..............................................................................................66
Exhibit D
IMATION Exclusive Fields......................................................................................67
Exhibit E
IMATION Supply Fields.........................................................................................70
Exhibit F
Non-Exclusive Fields..........................................................................................71
Exhibit G
Assigned Patents..............................................................................................72
Exhibit H
Assigned Trademarks..........................................................................................179
Exhibit I
Assigned Trademark Registrations and Registration Applications...............................................180
Exhibit J
Licensed Trademarks..........................................................................................189
Exhibit K
Trademark Licensed Products..................................................................................190
Exhibit L
Licensed Trademark and Licensed Trade Dress Use Periods......................................................192
Exhibit M
Licensed Trademark and Licensed Trade Dress Use Guidelines...................................................194
Exhibit N
Joint Development Agreement..................................................................................197
Exhibit O
Short Term/Project Consulting Agreement......................................................................228
Exhibit P
Obligations Regarding Extraordinarily Sensitive Technologies.................................................233
Exhibit Q
Royalty For Licenses Under Licensed Trademarks and Licensed Trade Dresses....................................240
</TABLE>
INTELLECTUAL PROPERTY RIGHTS AGREEMENT
This Agreement, effective as of the ____ day of ___________, 1996, is by and
between Imation Corp., a Delaware corporation whose address and principal place
of business is 1 Imation Place, Oakdale, Minnesota 55128 ("IMATION") and
Minnesota Mining and Manufacturing Company, a Delaware corporation whose address
and principal place of business is 3M Center, Saint Paul, Minnesota 55144
("3M").
RECITALS:
3M is spinning off IMATION as a separate independent company to operate in
fields generally distinct from 3M. This Agreement is intended to license and
assign to IMATION certain intellectual property rights. Since certain IMATION
employees will be located in 3M facilities for a period of time in the future
and to provide a smooth transition, 3M and IMATION provide limited licenses to
each other under intellectual property developed in the future. Also, since 3M's
corporate culture provides for an intermingling of technology, noncompete and
change in control provisions are provided to minimize the opportunity for
conflict.
In consideration of these premises and of the mutual promises set forth below,
the parties to this Agreement agree as follows:
1. DEFINITIONS
For the purposes of this Agreement, the terms defined in this Article
shall have the meaning specified and shall be applicable both to the
singular and plural forms:
1.1. "PARTY" means 3M or IMATION, as applicable. Unless the context
herein expressly requires otherwise, any reference to 3M,
IMATION or a Party shall be deemed to also be a reference to
their respective Affiliates.
1.2. "AFFILIATE" means any corporation, firm, partnership,
proprietorship or other form of business organization as to
which the control of the business shall be exercised by a
Party, and any corporation, firm, partnership, proprietorship
or other form of business organization in which a Party has
greater than fifty percent (50%) ownership interest, or the
maximum ownership interest it is permitted to have in the
country where such business organization exists if equal to or
less than fifty percent (50%). In the case of 3M, "Affiliate"
shall further include its affiliate Sumitomo 3M Limited
(hereinafter "Sumitomo 3M"), and in the case of IMATION
"Affiliate" shall further include its affiliates in Japan and
South Korea for so long as: 1.2.1. 3M or IMATION, as the case
may be, maintains ownership or control of at least fifty
percent (50%) of the outstanding shares of the aforesaid
affiliate(s), or 1.2.2. 3M or IMATION, as the case may be, has
the right to elect at least fifty percent (50%) of the members
of the managing authority of the aforesaid affiliate(s).
1.3. "DISTRIBUTION DATE" means the date on which 3M distributes
shares in IMATION to 3M's stockholders to spin off IMATION.
1.4. "FOREGROUND PERIOD" means the period beginning with the
Distribution Date and ending two (2) years thereafter.
1.5. "3M BUSINESS FIELDS" means either i) in respect to all
references thereto throughout this Agreement except those in
Article 19, the fields identified in Exhibit A, to the extent
such fields are outside the scope of the IMATION Exclusive
Fields, IMATION Supply Fields and Non-Exclusive Fields, or ii)
in respect to all references thereto in Article 19, the fields
identified in Exhibit A, to the extent such fields are outside
the scope of the IMATION Exclusive Fields, IMATION Supply
Fields and Paragraphs II, III, V, VII and VIII of the
Non-Exclusive Fields.
1.6. "3M RESERVED FIELDS" means the fields identified in Exhibit B,
to the extent such fields are outside the scope of the IMATION
Supply Fields.
1.7. "3M SUPPLY FIELDS" means the fields identified in Exhibit C.
1.8. "IMATION EXCLUSIVE FIELDS" means the fields identified in
Exhibit D, to the extent such fields are outside the scope of
the 3M Reserved Fields and 3M Supply Fields.
1.9. "IMATION SUPPLY FIELDS" means the fields identified in Exhibit
E.
1.10. "NON-EXCLUSIVE FIELDS" means the fields identified in Exhibit
F, to the extent such fields are outside the scope of the 3M
Reserved Fields, IMATION Exclusive Fields, 3M Supply Fields
and IMATION Supply Fields.
1.11. "BACKGROUND PI" means any information, other than Assigned PI,
which:
1.11.1. is owned by 3M, or is controlled by 3M to the extent
3M may grant licenses, in whole or in part, to
IMATION of the scope and content granted in this
Agreement to IMATION; and
1.11.2. either
1.11.2.1.has been used by a 3M business being
transferred to IMATION prior to the
Distribution Date in producing, marketing or
selling a product or service sold by such a
3M business; or
1.11.2.2.has been used by such a 3M business in an
experimental or developmental setting prior
to the Distribution Date for purposes
related to such a 3M business, but not if
received by such a 3M business from a
business remaining with 3M primarily for the
purpose of developing, manufacturing or
supporting a product or developing or
providing a service to be sold or licensed
by the business remaining with 3M.
1.12. "BACKGROUND PATENTS" means those claims of patent applications
and patents, other than Assigned Patents, which:
1.12.1. are owned by 3M, or are controlled by 3M to the
extent 3M may grant licenses, in whole or in part, to
IMATION of the scope and content granted in this
Agreement to IMATION; and
1.12.2. are directed to inventions which are conceived before
the Distribution Date, and constitute, result from
use of, or are based on Background PI and/or Assigned
PI.
1.13. "ASSIGNED PI" means certain information which has been used
prior to the Distribution Date exclusively by businesses being
transferred to IMATION, is not anticipated by IMATION to be
used by a business remaining with 3M, and is to be identified
in a confidential writing agreed to between the Parties.
1.14. "ASSIGNED PATENTS" means the patent applications and patents
identified in Exhibit G.
1.15. "3M FOREGROUND PI " means any information which:
1.15.1. is owned by 3M, or is controlled by 3M to the extent
3M may grant licenses, in whole or in part, to
IMATION of the scope and content granted in this
Agreement to IMATION;
1.15.2. is conceived during the Foreground Period;
1.15.3. results from use of, or is based upon technical
Background PI and/or Assigned PI; and
1.15.4. in the case of information conceived during the
second year of the Foreground Period, is further
characterized as being i) contained in 3M Records of
Invention which are provided to IMATION pursuant to
Paragraph 12.7 hereof and define inventions resulting
from the use of, or based upon Background PI and/or
Assigned PI; ii) disclosed by 3M, in its sole
discretion, to IMATION in connection with 3M Records
of Invention provided pursuant to i) above; or iii)
related to an Extraordinarily Sensitive Technology
and disclosed during, or as a result of symposia
pursuant to Paragraph 12.8 hereof.
1.16. "3M FOREGROUND PATENTS" means those claims of patent
applications and patents which:
1.16.1. are owned by 3M, or are controlled by 3M to the
extent 3M may grant licenses, in whole or in part, to
IMATION of the scope and content granted in this
Agreement to IMATION; and
1.16.2. are directed to inventions which are conceived during
the Foreground Period, and result from use of, or are
based upon technical Background PI and/or Assigned
PI.
1.17. "IMATION FOREGROUND PI " means any information which:
1.17.1. is owned by IMATION, or is controlled by IMATION to
the extent IMATION may grant licenses, in whole or in
part, to 3M of the scope and content granted in this
Agreement to 3M;
1.17.2. is conceived during the Foreground Period;
1.17.3. results from use of, or is based upon technical
Background PI and/or Assigned PI; and
1.17.4. in the case of information conceived during the
second year of the Foreground Period, is further
characterized as being i) contained in IMATION
Records of Invention which are provided to 3M
pursuant to Paragraph 12.7 hereof and define
inventions resulting from the use of, or based upon
technical Background PI and/or Assigned PI; ii)
disclosed by IMATION, in its sole discretion, to 3M
in connection with IMATION Records of Invention
provided pursuant to i) above; or iii) related to an
Extraordinarily Sensitive Technology and disclosed
during, or as a result of symposia pursuant to
Paragraph 12.8 hereof.
1.18. "IMATION FOREGROUND PATENTS" means those claims of patent
applications and patents which:
1.18.1. are owned by IMATION, or are controlled by IMATION to
the extent IMATION may grant licenses, in whole or in
part, to 3M of the scope and content granted in this
Agreement to 3M; and
1.18.2. are directed to inventions which are conceived during
the Foreground Period, and result from use of, or are
based upon technical Background PI and/or Assigned
PI.
1.19. "JOINT FOREGROUND PI " means any information which is
conceived jointly by one or more employees, agents or contract
employees of 3M and one or more employees, agents or contract
employees of IMATION during the Foreground Period, and results
from the use of, or is based upon technical Background PI
and/or Assigned PI.
1.20. "JOINT FOREGROUND PATENTS" means those claims of patent
applications and patents which are directed to inventions
conceived jointly by one or more employees, agents or contract
employees of 3M and one or more employees, agents or contract
employees of IMATION during the Foreground Period, and
resulting from the use of, or based upon technical Background
PI and/or Assigned PI.
1.21. "ASSIGNED TRADEMARKS" means the trademarks identified in
Exhibit H.
1.22. "ASSIGNED TRADEMARK REGISTRATIONS" means the applications for
registration and registrations for Assigned Trademarks
identified in Exhibit I.
1.23. "ASSIGNED TRADE DRESSES" means each trade dress for each of
the products sold on the Distribution Date by a 3M business
being transferred to IMATION on the Distribution Date,
excluding elements of each trade dress in common with products
sold by a business remaining with 3M on the Distribution Date.
1.24. "LICENSED TRADEMARKS" means the trademarks identified in
Exhibit J.
1.25. "LICENSED TRADE DRESSES" means each trade dress for each of
the products sold on the Distribution Date by a 3M business
being transferred to IMATION on the Distribution Date, except
to the extent each such trade dress is an Assigned Trade
Dress.
1.26. "TRADEMARK LICENSED PRODUCTS" means the products identified in
Exhibit K.
1.27. "3M COPYRIGHT RIGHTS" means all rights owned by 3M arising
under any copyright or mask work law, including, but not
limited to, the right of reproduction, creation of derivative
works, distribution, display and performance, but specifically
excluding any such rights which 3M has licensed from a third
party.
1.28. "3M LICENSED WORKS" means all works which (a) are subject to
3M Copyright Rights, and (b) have actually and regularly been
used in the ordinary course of business on or before the
Distribution Date in the administration, research,
development, production, marketing, leasing, licensing,
selling or servicing of any product or service sold or to be
sold by a 3M business being transferred to IMATION on the
Distribution Date.
1.29. "3M SOFTWARE" means those portions of computer programs,
together with any related documentation or manuals, to which
3M owns all 3M Copyright Rights as of the Distribution Date.
1.30. "THIRD-PARTY SOFTWARE" means all computer programs, together
with any related documentation or manuals, which 3M has
licensed or purchased from a third party where any of the
copyright, trade secret, patent and other intellectual
property rights have been retained by such third party.
1.31. "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Distribution Date and reasonably understood by
IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after
the Distribution Date except for:
1.31.1. information learned by IMATION for the first time
after the Distribution Date, but prior to any
disclosure by 3M;
1.31.2. information which is or becomes publicly available
through no act of IMATION, from and after the date of
public availability;
1.31.3. information disclosed to IMATION by a third party,
provided (i) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed
to such third party, (ii) the third party's
disclosure is not violative of a duty of
non-disclosure owed to another, including 3M, and
(iii) the disclosure by the third party is not
otherwise unlawful;
1.31.4. information developed by IMATION independent of any
confidential 3M information which is known by IMATION
on the Distribution Date and/or disclosed by 3M
thereafter;
1.31.5. information which is inherently disclosed in
marketing of a product by IMATION in the usual course
of business and within the scope of the rights
granted to or retained by IMATION under this
Agreement;
1.31.6. information which is developed by a business which is
being transferred to IMATION and constitutes
performance specifications for chemicals,
compositions, formulations, materials, components,
devices, articles or other items obtained prior to
the Distribution Date from a business remaining with
3M on the Distribution Date; and
1.31.7. information which IMATION can demonstrate was
disclosed by a 3M business being transferred to
IMATION to a third party prior to November 14, 1995,
and for which any obligation of confidentiality by
that third party has expired, from and after the date
such third party obligation of confidentiality
expires, and provided that disclosure of an item of
information to one third party and a different item
of information to another third party shall not be
viewed as disclosure of information which can only be
drawn from those items of information collectively.
1.32. "IMATION CONFIDENTIAL INFORMATION" means information known by
3M on the Distribution Date and reasonably understood by 3M to
be confidential and related to IMATION's present or future
business interests, or disclosed confidentially by IMATION to
3M except for:
1.32.1. information learned by 3M for the first time
subsequent to the Distribution Date, but prior to any
disclosure by IMATION;
1.32.2. information which is or becomes publicly available
through no act of 3M, from and after the date of
public availability;
1.32.3. information disclosed to 3M by a third party,
provided (i) under the circumstances of disclosure 3M
does not have a duty of non-disclosure owed to such
third party, (ii) the third party's disclosure is not
violative of a duty of non-disclosure owed to
another, including IMATION, and (iii) the disclosure
by the third party is not otherwise unlawful;
1.32.4. information developed by 3M independent of any
confidential IMATION information which is known by 3M
on the Distribution Date and/or disclosed by IMATION
thereafter;
1.32.5. information which is inherently disclosed in
marketing of a product by 3M in the usual course of
business and within the scope of the rights granted
to or retained by 3M under this Agreement;
1.32.6. information which is developed by a business which
remains with 3M on the Distribution Date and
constitutes performance specifications for chemicals,
compositions, formulations, materials, components,
devices, articles or other items obtained prior to
the Distribution Date from a business being
transferred to IMATION on the Distribution Date; and
1.32.7. information which 3M can demonstrate was disclosed to
a third party prior to November 14, 1995, and for
which any obligation of confidentiality by that third
party has expired, from and after the date such third
party obligation of confidentiality expires, and
provided that disclosure of an item of information to
one third party and a different item of information
to another third party shall not be viewed as
disclosure of information which can only be drawn
from those items of information collectively.
1.33. "COMMON INTEREST PATENT" shall mean a particular patent
application or patent which i) is owned by one Party, ii) has
been specifically identified by the other Party as being of
significant commercial interest to that other Party; and iii)
is in Background Patents, Assigned Patents, 3M Foreground
Patents or IMATION Foreground Patents.
1.34. "FORMER 3M EMPLOYEES" shall mean and include all employees who
signed a 3M Employee Agreement and whose employment with 3M
terminated or terminates at any time before, on or after the
Distribution Date.
1.35. "IMATION EMPLOYEES" shall mean and include the following
individuals: (i) all Former 3M Employees employed by IMATION,
and (ii) individuals employed by IMATION who have never been
employed by 3M ("Non 3M Employees").
2. LICENSE GRANT TO IMATION UNDER BACKGROUND PI AND BACKGROUND PATENTS
2.1. 3M hereby grants to IMATION paid-up, royalty-free, worldwide
licenses, including the right to manufacture, have
manufactured (subject to Paragraph 15.3), use, offer to sell,
sell and import as follows:
2.1.1. a non-exclusive license, with a right to sublicense
IMATION Affiliates, and third parties to the extent
permitted by Article 11, under Background PI and
Background Patents in the Non-Exclusive Fields;
2.1.2. subject to Paragraph 2.3, an exclusive license
(subject to any licenses granted by 3M prior to the
Distribution Date to third parties which are not 3M
Affiliates), with a right to sublicense IMATION
Affiliates, and third parties to the extent permitted
by Article 11, under Background PI and Background
Patents in the IMATION Exclusive Fields and IMATION
Supply Fields; and
2.1.3. a non-exclusive license, effective five (5) years
after the Distribution Date, but not before, and
including a right to sublicense IMATION Affiliates,
and third parties, under Background PI, but not under
Background Patents, in all fields outside of the 3M
Business Fields, IMATION Exclusive Fields, IMATION
Supply Fields and Non-Exclusive Fields.
2.2. 3M hereby grants to IMATION paid-up, royalty-free, worldwide
licenses, with a right to sublicense IMATION Affiliates, to
use an item in the 3M Supply Fields under Background Patents
as follows:
2.2.1. a non-exclusive license in the Non-Exclusive Fields
for as long as IMATION and IMATION Affiliates are
purchasing their requirements of such item from 3M;
and
2.2.2. an exclusive license in the IMATION Exclusive Fields
for as long as IMATION and IMATION Affiliates are
purchasing their requirements of such item from 3M.
2.3. 3M hereby retains all rights, including the right to
sublicense 3M Affiliates, to use an item in the IMATION Supply
Fields under Background Patents as follows:
2.3.1. a non-exclusive license in the Non-Exclusive Fields
for as long as 3M and 3M Affiliates are purchasing
their requirements of such item from IMATION; and
2.3.2. an exclusive license in the 3M Business Fields for as
long as 3M and 3M Affiliates are purchasing their
requirements of such item from IMATION.
3. ASSIGNMENT TO IMATION OF ASSIGNED PI AND ASSIGNED PATENTS AND LICENSE
BACK TO 3M
3.1. 3M hereby assigns (subject to any licenses granted by 3M prior
to the Distribution Date to third parties which are not 3M
Affiliates) to IMATION its entire right, title and interest to
the Assigned PI and Assigned Patents with 3M retaining
thereunder the following paid-up, royalty-free, worldwide,
irrevocable licenses, with a right to sublicense 3M
Affiliates, and third parties to the extent permitted by
Article 11, to manufacture, have manufactured (subject to
Paragraph 15.3), use, offer to sell, sell and import:
3.1.1. a non-exclusive license under the Assigned PI and
Assigned Patents in the Non-Exclusive fields;
3.1.2. an exclusive license under the Assigned Patents in
the 3M Business Fields and all other fields which are
outside of the Non-Exclusive Fields, IMATION
Exclusive Fields and IMATION Supply Fields;
3.1.3. an exclusive license under the Assigned PI in the 3M
Business Fields; and
3.1.4. a non-exclusive license under the Assigned PI in all
fields outside of the IMATION Exclusive Fields,
IMATION Supply Fields and 3M Business Fields.
3.2. 3M hereby assigns to IMATION its entire right, title and
interest to U.S. Patent Nos. 4,466,564 and 4,581,189.
3.3. IMATION represents that the Assigned PI and Assigned Patents
have been used or practiced prior to the Distribution Date
exclusively by businesses being transferred to IMATION on the
Distribution Date, and are not anticipated by IMATION to be
used or practiced by a business remaining with 3M on the
Distribution Date. The remedy for breach of this
representation shall be prompt reassignment of the component
of the Assigned PI or the Assigned Patent in issue back to 3M
at 3M's request, at no cost to 3M in the case of Assigned PI
and at no cost to IMATION in the case of an Assigned Patent,
and subject in both cases to the grant by 3M to IMATION of
rights commensurate in scope to those contemplated by Article
2.
3.4. 3M shall promptly execute assignments contemplated by
Paragraphs 3.1 and 3.2 and requested by IMATION, at 3M's
expense, and shall provide the same to IMATION for filing by
IMATION, as IMATION deems appropriate and at its expense,
including any fees and taxes associated therewith.
3.5. For any other inventions which are conceived before the
Distribution Date and relate exclusively to 3M businesses
being transferred to IMATION on the Distribution Date, 3M
shall assign its rights in such inventions to IMATION subject
to retention of rights commensurate in scope with Paragraph
3.1. Specifically, 3M shall execute assignments contemplated
by this Paragraph 3.5 and requested by IMATION, at 3M's
expense, and shall provide the same to IMATION for use by
IMATION as it deems appropriate. Records of Invention directed
to inventions contemplated by this Paragraph 3.5 shall be
identified in a confidential writing agreed to between the
Parties.
4. LICENSE GRANT TO IMATION UNDER 3M TRADEMARK RIGHTS AND TRADE DRESSES
4.1. Grant. 3M grants to IMATION the worldwide, exclusive right and
license to use the Licensed Trademarks and Licensed Trade
Dresses on or in connection with the Trademark Licensed
Products identified therewith in Exhibit K which are both
manufactured by or for IMATION and are sold by IMATION for the
periods of time set forth in Exhibit L in respect to each of
the Licensed Trademarks, provided that such Trademark Licensed
Products are manufactured in accordance with the designs,
product specifications and standards set forth from time to
time in writing by 3M. These designs, product specifications
and standards are initially as established by 3M as of the
Distribution Date and as may be modified from time to time by
mutual agreement of the Parties. This license is
royalty-bearing with payments by IMATION to 3M being as set
forth in Exhibit Q.
4.2. Sublicense Right. The right and license granted under
Paragraph 4.1 shall not include the right to grant sublicenses
to any third party, except that IMATION may sublicense IMATION
Affiliates, provided that any such sublicense is at least as
restrictive as, and allows IMATION to ensure compliance with
all the terms and conditions of this Article 4, and provided
that IMATION identifies any such sublicensee to 3M before the
grant of the sublicense. IMATION guarantees the performance of
the sublicensees and compliance of the sublicensees with all
the terms and conditions imposed upon IMATION under this
Article 4.
4.3. Restrictions on Use. IMATION undertakes and agrees to use the
Licensed Trademarks and Licensed Trade Dresses only in the
manner approved by 3M, and only on or in connection with
Trademark Licensed Products manufactured in strict accordance
with the proviso of Paragraph 4.1. IMATION will not market
under the Licensed Trademarks or Licensed Trade Dresses any
Trademark Licensed Products which are not in accordance with
this proviso.
4.4. Samples of Trademark Licensed Products. IMATION agrees to
furnish 3M, from time to time as requested, representative
samples of Trademark Licensed Products to which it affixes the
Licensed Trademarks and/or Licensed Trade Dresses. 3M or its
authorized representative shall also have the right, at any
time or times, to conduct, during regular business hours, an
examination of IMATION's Trademark Licensed Products and the
plants and processes for making Trademark Licensed Products.
3M recognizes that information disclosed by IMATION to 3M as
the result of 3M's exercise of rights under this Paragraph 4.4
is, to the extent applicable, to be considered IMATION
Confidential Information.
4.5. Quality. If, at any time, any Trademark Licensed Products made
or assembled by or for IMATION and bearing the Licensed
Trademarks and/or Licensed Trade Dresses shall, in the
reasonable opinion of 3M, fail to conform to the standards of
quality set by 3M, 3M shall give IMATION notice of such
failure. IMATION shall immediately employ its best efforts to
cure such failure. If IMATION is unable to cure such failure
in as short a period as possible, which in no instance shall
exceed thirty (30) days after such notice, IMATION shall
immediately thereafter remove the Licensed Trademarks and/or
Licensed Trade Dresses from all such non-conforming Trademark
Licensed Products in its possession, and shall, as rapidly as
possible, replace, at its own cost, any such non-conforming
Trademark Licensed Products held in the trade with conforming
Trademark Licensed Products.
4.6. Manner of Use. IMATION is authorized to use the Licensed
Trademarks and Licensed Trade Dress in the manner approved by
3M as set forth in Paragraph 4.7 in connection with Trademark
Licensed Products, in its general publicity, advertising,
letterheads, signs and other forms of advertising, cartons,
packaging, instruction books and other literature packed with
the Trademark Licensed Products. In no event, however, shall
IMATION use the Licensed Trademarks as part of a trade name or
authorize others to do so. Further, IMATION shall not use
"3M/IMATION" or "IMATION/3M" or any other combination of "3M"
and "IMATION" that is likely to cause confusion, mistake or
deception as to the source, origin, association, affiliation,
sponsorship or endorsement between these two separate
companies, or their respective products or services. In
addition to all other obligations and restrictions imposed
upon IMATION under this Article 4 in respect to manner of use
of the Licensed Trademarks, IMATION shall always describe the
Licensed Trademarks used as trademarks in Canada in a manner
so as to indicate clearly that they are trademarks of 3M.
4.7. Style of Use. IMATION agrees to comply with rules set forth
from time to time by 3M with respect to the use of the
Licensed Trademarks and Licensed Trade Dresses as follows:
4.7.1. The use shall be as mutually agreed upon in writing
by the respective corporate marketing and legal
functions of the Parties. IMATION shall discontinue
the use of the Licensed Trademarks and the Licensed
Trade Dresses by the end of the respective use
periods indicated in Exhibit L. Final authority as to
permitted use for the Licensed Trademarks and
Licensed Trade Dress shall rest with 3M. The Parties
expect to establish written use guidelines, Sample
initial product packaging and use guidelines using
the Licensed Trademarks are attached hereto as
Exhibit M. IMATION must transition to initial product
packaging substantially similar to that shown in
Exhibit M within six (6) months after the
Distribution Date, or any later date approved by 3M
in writing, and IMATION shall take all measures
required by law to avoid deception of the public, and
assumes all warranty obligations. If at any time
IMATION's use of Licensed Trademarks or Licensed
Trade Dresses fails to comply with the agreed upon
use guidelines, 3M shall provide notice to IMATION
and IMATION shall conform to such use guidelines
within ninety (90) days of such notice. Any use of
the Licensed Trademarks or Licensed Trade Dresses not
specifically agreed upon shall be adopted by IMATION
only upon prior approval in writing by 3M as set
forth in the first sentence of this Paragraph 4.7.1.
Representative specimens showing the use of the
Licensed Trademarks by IMATION shall be sent to 3M
from time to time upon request of 3M.
4.7.2. IMATION has a certain volume of slow moving inventory
which has the Licensed Trademarks and/or Licensed
Trade Dress molded into the product or otherwise
directly applied to the product. To minimize any
possible need to destroy product, 3M agrees that it
will be sufficient for IMATION to repackage any such
product to be sold by IMATION after March 31, 1997,
in packaging conforming with the sample packaging of
Exhibit M; provided, that IMATION will destroy any
such product remaining in inventory after the
expiration of the use periods in Exhibit L for any of
the Licensed Trademarks appearing on such inventory.
Further, businesses being transferred to IMATION have
certain molds for CD-ROMs prepared for third parties
which these businesses retain in the ordinary course
of business for one to two years to allow for
repressing of more identical CD-ROMs. These existing
molds include the words "Made by 3M" as part of the
mold. These words cannot be removed without
completely replacing the molds, which would impose a
significant cost burden on either IMATION or the
customer. 3M agrees that IMATION may retain and
continue to use such molds through the end of 1997.
IMATION's usage of packaging or molds pursuant to
this Paragraph 4.7.2 is subject to IMATION taking all
measures required by law to avoid deception of the
public and assuming all warranty obligations.
4.8. Compliance With Laws. IMATION shall comply with all laws and
governmental regulations pertaining to the proper use and
designation of trademarks in the various countries where such
trademarks are used.
4.9. Admission of Validity. IMATION admits the validity of the
Licensed Trademarks and Licensed Trade Dresses and agrees that
any and all rights and goodwill that might be acquired by the
use of the Licensed Trademarks and Licensed Trade Dresses by
IMATION shall inure to the sole benefit of 3M. IMATION agrees
to fully cooperate with 3M in registering and maintaining the
Licensed Trademarks and Licensed Trade Dresses and recording
this Agreement, all at 3M's expense.
4.10. Use of Other Trademarks by IMATION. IMATION agrees not to use
or register in any country any trademarks or trade dresses
resembling or confusingly similar to the Licensed Trademarks
or Licensed Trade Dresses during the term of the trademark
license under this Article 4 and thereafter. Whenever the
attention of IMATION is called by 3M to any such uses or
registrations, IMATION agrees to take appropriate steps
immediately to remedy or avoid such trademarks or trade
dresses.
4.11. Infringement of Licensed Trademarks and Licensed Trade Dresses
and Maintenance of Applications For Registrations and
Registrations.
4.11.1. IMATION shall give 3M notice of any known or presumed
infringements of the Licensed Trademarks, and IMATION
shall give 3M full cooperation in the protection of
the Licensed Trademarks and Licensed Trade Dresses.
If 3M decides to enforce the Licensed Trademarks or
Licensed Trade Dresses against an infringer, all
costs incurred and all recoveries made shall be for
the account of 3M, unless otherwise agreed to in a
separate writing between the Parties. 3M shall have
the right to name IMATION as a party in any
litigation involving any such enforcement of rights,
provided 3M agrees to indemnify IMATION vis-a-vis any
damages awarded to any third party as the result of
enforcement of such rights.
4.11.2. The parties will establish a mutually acceptable
docketing system and other procedures to permit
IMATION to monitor the status of registration
applications and registrations for Licensed
Trademarks so as to allow IMATION to take any action
necessary to avoid an unintentional or inadvertent
abandonment by 3M of any such registration
application or registration.
4.12. 3M Right to Terminate Forthwith.
4.12.1. 3M shall have the right to terminate immediately the
license rights granted under this Article 4 in the
event 3M reasonably determines that the use of a
particular Licensed Trademark or Licensed Trade Dress
by IMATION could be deemed to be in connection with
obscene, pornographic, or excessively violent
materials or subjects or otherwise in poor taste or
unlawful and thereby impairing or diminishing the
value of the Licensed Trademark or Licensed Trade
Dress to 3M.
4.12.2. 3M shall have the right to terminate immediately the
license rights granted under this Article 4 relative
to any country in the event 3M shall reasonably
determine that IMATION's use of any Licensed
Trademark, Licensed Trade Dress or activities
associated therewith in such country are such as to
significantly impair, tarnish or diminish the
trademark or 3M corporate image in that country.
4.12.3. 3M shall have the right to terminate immediately the
license rights granted under this Article 4 in the
event that 3M shall reasonably determine that
IMATION's reputation becomes sufficiently negative
that continued use of any Licensed Trademark or
Licensed Trade Dress would significantly impair,
tarnish or diminish 3M's reputation.
4.13. Other Breach by IMATION. In the event that IMATION does not
comply with any provisions of this Article 4, other than
Paragraph 4.12, and 3M elects to give IMATION notice of such
non-compliance, IMATION shall have ten (10) days from the
receipt of such notice to remedy the non-compliance. If the
non-compliance is not remedied within the ten (10) day period
of time, 3M shall have the right to terminate immediately the
license rights granted under this Article 4.
4.14. Cessation of Use of Trademarks and Trade Dresses. Upon
termination of the licenses granted under this Article 4,
IMATION shall as quickly as reasonably possible cease and
discontinue all further use of the Licensed Trademarks and
Licensed Trade Dresses. IMATION shall remove all Licensed
Trademarks and all Licensed Trade Dresses from all Trademark
Licensed Products remaining in inventory after three (3)
months from such termination.
5. ASSIGNMENT TO IMATION OF CERTAIN TRADEMARKS AND TRADE DRESSES
5.1. 3M assigns IMATION all right, title and interest in and to the
Assigned Trademarks and Assigned Trade Dresses, together with
the goodwill of the business symbolized by the Assigned
Trademarks and Assigned Trade Dresses, and the applications
for registration and the registrations for the Assigned
Trademarks as set forth in Exhibit I.
5.2. 3M shall promptly execute assignments contemplated by
Paragraph 5.1 and requested by IMATION, at 3M's expense, and
shall provide the same to IMATION for filing by IMATION, as
IMATION deems appropriate and at its expense, including any
fees and taxes associated therewith.
5.3. 3M shall assign to IMATION the BLACKWATCH trademark and the
"BALL AND LADDER" design trademark on an appropriate date in
the future when 3M is no longer using the same in its own
businesses or otherwise, subject to the retention by 3M of a
worldwide, paid-up, royalty-free sublicensable right and
license to use the "BALL AND LADDER" design trademark in
connection with head cleaners for video and audio drives. Such
assignment shall include the goodwill of the business
symbolized by the above trademarks, except for the goodwill
relating to the businesses for which 3M retains a license
under this Paragraph 5.3.
5.4. Use of Other Trademarks by 3M. 3M agrees not to use or
register in any country any trademarks or trade dresses
resembling or confusingly similar to the Assigned Trademarks
or Assigned Trade Dresses during the term of the trademark
license to 3M under Paragraph 5.3 and thereafter. Whenever the
attention of 3M is called by IMATION to any such uses or
registrations, 3M agrees to take appropriate steps immediately
to remedy or avoid such trademarks or trade dresses.
6. LICENSE UNDER 3M COPYRIGHT RIGHTS
6.1. 3M hereby grants to IMATION paid-up, royalty-free, worldwide
licenses to 3M Licensed Works regularly used in the ordinary
course of business on or before the Distribution Date by a 3M
business being transferred to IMATION as follows:
6.1.1. a non-exclusive license with a right to sublicense
IMATION Affiliates, and third parties to the extent
permitted by Article 11, to exercise any or all of
the 3M Copyright Rights in such 3M Licensed Works in
the Non-Exclusive Fields; and
6.1.2. an exclusive license (subject to any licenses granted
by 3M prior to the Distribution Date to third parties
which are not 3M Affiliates), with a right to
sublicense IMATION Affiliates, and third parties to
the extent permitted by Article 11, to exercise any
or all of the 3M Copyright Rights in such 3M Licensed
Works in the IMATION Supply Fields and the IMATION
Exclusive Fields.
6.2. IMATION's exercise of any license, exclusive or non-exclusive,
granted pursuant to this Article 6, shall be subject to all
prohibitions, restrictions and qualifications set forth in
this Agreement including, for example, restrictions on the use
and disclosure of 3M Confidential Information that may be
contained in a 3M Licensed Work and the limitations respecting
3M Software set forth in Paragraph 7.1.
6.3. If either party modifies, revises, enhances or creates any
derivative work (collectively referred to as "New Material")
of any 3M Licensed Work (including any item of 3M Software)
during the Foreground Period, then: (i) the party making such
New Material shall own all copyright rights arising in and to
such New Material without affecting 3M's ownership of all
copyright rights in the underlying 3M Licensed Work, (ii) if
such New Material has been created by 3M, then it shall be
treated as a 3M Licensed Work and licensed to IMATION subject
to this Article 6 and Article 7, and (iii) if such New
Material has been created by IMATION, then IMATION grants to
3M paid-up, royalty-free, worldwide, irrevocable and
non-exclusive licenses to exercise any or all of IMATION's
copyright rights arising in and to such New Material in the 3M
Business Fields and Non-Exclusive Fields in a manner
consistent with the rights retained by and/or licensed to 3M
under this Agreement.
6.4. 3M and IMATION shall jointly determine within about ninety
(90) days after the Distribution Date any works (including
computer software) which (a) are subject to 3M Copyright
Rights, and (b) have been used prior to the Distribution Date
exclusively by businesses being transferred to IMATION and not
used or anticipated to be used by any business remaining with
3M on the Distribution Date. 3M shall assign its entire right,
title and interest in any such works to IMATION in a manner
consistent with the assignment of Assigned PI under Article 3.
7. LICENSES UNDER 3M SOFTWARE AND THIRD PARTY SOFTWARE
7.1. License of 3M Software. IMATION's use and licensing of any 3M
Copyright Rights in 3M Software which are licensed under
section 6.1 are limited as follows:
7.1.1. External Use Software. 3M and IMATION shall jointly
determine within about ninety (90) days after the
Distribution Date those items of 3M Software which
are being developed as of the Distribution Date by a
3M business being transferred to IMATION and intended
by 3M for sublicensing, leasing or otherwise
distributing to third parties in the regular course
of business by such 3M business. IMATION may
sublicense, lease or otherwise distribute i) such
software, ii) any software being licensed, leased or
otherwise distributed to third parties on or before
the Distribution Date in the regular course of
business by a 3M business being transferred to
IMATION, and iii) revisions, updates or new versions
of the foregoing, to third parties to the extent
permitted in Article 11 and in a manner consistent
with the license rights expressly granted to IMATION
under Articles 2 and 3 of this Agreement to end
users, either directly, through distributors, through
value-added resellers, or otherwise.
7.1.2. Internal Use Software. Except as provided in
Paragraph 7.1.3, IMATION shall use any 3M Software,
other than that identified in Paragraph 7.1.1, only
for IMATION's own internal operations (including, but
not limited to, research, development, manufacture,
purchasing, accounting, engineering, marketing,
merchandising, selling, leasing, servicing or
finance) and only in a manner consistent with the
rights expressly granted to IMATION under Articles 2
and 3 of this Agreement. Such use may include loading
and executing such software on computers owned or
leased by IMATION (or, where appropriate and agreed
between the parties, remotely accessing such software
loaded on 3M computers and executing such software
via such remote access). Access to, and use of, such
software shall be restricted to IMATION Employees,
and to such contract workers, consultants and other
contractors who have executed a nondisclosure
agreement limiting the access to and use of the
software for IMATION's strictly internal purposes.
Such software shall be considered 3M Confidential
Information, and may not be sublicensed or otherwise
transferred at any time to any third party, except
that it may be sublicensed or otherwise transferred
to IMATION Affiliates only for use by IMATION
Affiliates in their internal operations.
7.1.3. Manufacturing Software. IMATION may sublicense to
third parties a limited right to use that 3M Software
which, on or before the Distribution Date, a business
being transferred to IMATION used, or was developing
specifically for use, directly in the manufacture of
IMATION products (i.e., to drive, control or regulate
manufacturing equipment), to the extent permitted by
Article 11, as well as in connection with
out-sourcing of products by IMATION or otherwise
exercising the "have made" rights granted to IMATION
elsewhere in this Agreement, subject to i) IMATION
procuring agreements restricting the use and
disclosure by any such third party of 3M Confidential
Information discernible from such software to the
extent contemplated by Article 15, and ii) the
provisions herein regarding protection of
Extraordinarily Sensitive Technologies.
Provided, however, that nothing in this Paragraph 7.1 shall be
construed i) as in any way limiting IMATION's right to use any
algorithms, tools, utilities, sub-routines and the like for
computer programming in any manner which is consistent with
the rights expressly granted to IMATION under Articles 2 and 3
of this Agreement, or ii) as granting any right to use content
in programs or software other than as expressly granted to
IMATION under Articles 2 and 3 of this Agreement.
7.2. Delivery of Software. Upon request by IMATION within two (2)
years after the Distribution Date, 3M shall deliver to IMATION
human-readable and machine-executable copies of all source
codes and object codes, and any associated documentation for
the 3M Software to which IMATION is entitled under this
Article 7.
7.3. No Support or Maintenance. Unless specified in a separate
written agreement between 3M and IMATION, 3M shall have no
obligation to provide support (either telephone or on-site),
maintenance, modifications, updates or enhancements to IMATION
concerning any 3M Software. 3M shall provide to IMATION, at
IMATION's expense, reasonable amounts of consulting to explain
source codes, object codes and associated documents provided
under Paragraph 7.2.
7.4. Third Party Software.
7.4.1. IMATION understands and acknowledges that many
software products utilized by 3M, including software
directly used by the 3M businesses being transferred
to IMATION and software used by various 3M
departments providing support and services to such 3M
businesses and their employees (e.g., Human
Resources, Finance and the like) have been licensed
from third parties pursuant to software license
agreements that contain restrictions which, by their
terms, specifically prohibit 3M from making and
transferring copies of the Third Party Software to
IMATION, or permitting IMATION to access or use the
Third Party Software. IMATION further understands and
acknowledges that Third Party Software licensed to 3M
under distribution and value-added reseller
agreements, including 3M businesses being transferred
to IMATION, contain provisions that prohibit or
condition assignment of 3M's rights under such
agreements to IMATION.
7.4.2. Accordingly, with respect to Third Party Software, 3M
will assist IMATION to, where appropriate, obtain the
third party licensor's permission: (i) to assign 3M's
rights and obligations (in whole or in part) to
IMATION, and transfer possession of the Third Party
Software to IMATION, and/or (ii) to make and provide
copies of the Third Party Software to IMATION, and/or
(iii) to permit IMATION to access remotely the Third
Party Software resident on 3M computers and to use
such Third Party Software, and/or (iv) to permit 3M
to utilize the Third Party Software on IMATION's
behalf in instances where IMATION will not be given
access to such software.
7.4.3. When such third party permission has been secured,
IMATION shall be responsible for complying with all
conditions imposed by such third party, including
restrictions and limitations on IMATION's use of the
Third Party Software and the payment of any
additional licensee/transfer fees together with all
applicable federal, state and local taxes imposed
thereon.
8. OWNERSHIP OF FOREGROUND INTELLECTUAL PROPERTY RIGHTS
8.1. 3M Owned. Unless and to the extent a separate written
agreement between 3M and IMATION provides otherwise,
including, but not limited to, any agreement pursuant to
Paragraph 14.1 or 14.2, 3M shall own all right, title and
interest to 3M Foreground PI, 3M Foreground Patents and any
other intellectual property, whether patented or not,
conceived solely by one or more employees or agents of 3M
after the Distribution Date.
8.2. IMATION Owned. Unless and to the extent either Paragraph
16.3.1 or a separate written agreement between 3M and IMATION
provides otherwise, including, but not limited to, any
agreement pursuant to Paragraph 14.1 or 14.2, IMATION shall
own all right, title and interest to IMATION Foreground PI,
IMATION Foreground Patents and any other intellectual
property, whether patented or not, conceived solely by one or
more employees or agents of IMATION after the Distribution
Date.
8.3. Jointly Owned. Unless and to the extent either Paragraph
16.3.1 or a separate written agreement between 3M and IMATION
provides otherwise, including, but not limited to, any
agreement pursuant to Paragraph 14.1 or 14.2, 3M and IMATION
shall jointly own all right, title and interest to Joint
Foreground PI, Joint Foreground Patents and any other
intellectual property, whether patented or not, conceived
jointly by one or more employees, agents or contract employees
of 3M and one or more employees, agents or contract employees
of IMATION, with each Party having an undivided, fifty (50)
percent interest therein.
9. LICENSE GRANT TO IMATION UNDER 3M FOREGROUND PI, 3M FOREGROUND PATENTS,
JOINT FOREGROUND PI AND JOINT FOREGROUND PATENTS
9.1. 3M hereby grants to IMATION paid-up, royalty-free, worldwide
licenses, including the right to manufacture, have
manufactured (subject to Paragraph 15.3), use, offer to sell,
sell and import, as follows:
9.1.1. a non-exclusive license, with a right to sublicense
IMATION Affiliates, and third parties to the extent
permitted by Article 11, under the 3M Foreground PI
and 3M Foreground Patents in the Non-Exclusive Fields
and IMATION Supply Fields; and
9.1.2. an exclusive license (subject to any licenses granted
by 3M prior to the Distribution Date to third parties
which are not 3M Affiliates), with a right to
sublicense IMATION Affiliates, and third parties to
the extent permitted by Article 11, under the 3M
Foreground PI and 3M Foreground Patents, and under
3M's interest in the Joint Foreground PI and Joint
Foreground Patents in the IMATION Exclusive Fields.
10. LICENSE GRANT TO 3M UNDER IMATION FOREGROUND PI, IMATION FOREGROUND
PATENTS, JOINT FOREGROUND PI AND JOINT FOREGROUND PATENTS
10.1. IMATION hereby grants to 3M paid-up, royalty-free, worldwide,
irrevocable licenses, including the right to manufacture, have
manufactured (subject to Paragraph 15.3), use, offer to sell,
sell and import, as follows:
10.1.1. a non-exclusive license, with a right to sublicense
3M Affiliates, and third parties to the extent
permitted by Article 11, under the IMATION Foreground
PI and IMATION Foreground Patents in the
Non-Exclusive Fields and 3M Supply Fields; and
10.1.2. an exclusive license, with the right to sublicense 3M
Affiliates, and third parties to the extent permitted
by Article 11, under IMATION Foreground PI and
IMATION Foreground Patents and under IMATION's
interest in Joint Foreground PI and Joint Foreground
Patents in the 3M Business Fields, but not in the 3M
Supply Fields within the 3M Business Fields.
11. SUBLICENSE OF RIGHTS
11.1. Except as may be provided otherwise under Paragraph 15.3,
Article 19 or elsewhere in this Agreement, a licensee under
Article 2, 3, 6, 7, 9 or 10 may sublicense its rights under
such Articles (except, in the case of Article 7, as expressly
limited or prohibited by Paragraph 7.1.2 and 7.1.3) to third
parties which are not Affiliates of the licensee only as
follows:
11.1.1. For a period of five (5) years after the Distribution
Date, a right non-exclusively licensed hereunder may
be sublicensed to a third party only: i) as an
ancillary part of the sale by the licensee to the
third party of the business to which the sublicense
pertains, ii) as an ancillary part of a broad
crosslicensing program; iii) as an ancillary part of
a business alliance relating to the development of a
product or service; or iv) in the case of software,
in the normal course of business in a manner
comparable to the sale of a non-software product.
11.1.2. For a period of five (5) years after the Distribution
Date, a right exclusively licensed hereunder may be
sublicensed to any third party.
11.1.3. After the five (5) year period after the Distribution
Date, rights whether non-exclusively or exclusively
licensed hereunder may be sublicensed to any third
party.
11.2. In any sublicense permitted under Paragraph 11.1.1 (i) of this
Article 11, the Party granting the sublicense shall obtain
from its sublicensee a paid-up, royalty-free, non-exclusive
license for the other Party under any and all claims in any
and all patents claiming inventions conceived by the
sublicensee during the Foreground Period and resulting from
the use of, or based upon technical Background PI and/or
Assigned PI. The fields of such license when such other Party
is 3M are the 3M Business Fields and Non-Exclusive Fields. The
fields of such license when such other Party is IMATION are
the IMATION Exclusive Fields, IMATION Supply Fields and
Non-Exclusive Fields.
11.3. The Party granting a sublicense to a third party under this
Article 11, or to an Affiliate under Article 2, 3, 4, 6, 7, 9
or 10, guarantees the performance of the sublicensee and
compliance of the sublicensee with all the terms and
conditions of this Agreement.
12. PATENT FILING, PROSECUTION AND MAINTENANCE AND EXCHANGE OF FOREGROUND
PI
12.1. Patents Owned by a Single Party. Except as limited for Common
Interest Patents below, each Party shall have the exclusive
right to file, prosecute, issue and maintain all patent
applications and patents, throughout the world, owned by that
Party, and will bear all expense associated with their filing,
prosecution, issuance and maintenance.
12.2. Common Interest Patents. The Parties will cooperate in the
filing, prosecution and maintenance of each patent application
or patent owned by one Party but specifically identified by
the other Party as a Common Interest Patent, for so long as
that patent application or patent remains designated as a
Common Interest Patent. Ultimate prosecution control will
remain with the Party that owns the patent application or
patent, but that Party will provide the other Party with a
reasonable opportunity to comment upon the application and
prosecution strategy, and will in good faith consider such
comments. Filing, prosecution and maintenance expenses and
in-house and outside legal fees associated therewith will be
shared equally by the Parties for Common Interest Patents
except as the Parties may agree differently in a separate
writing between them.
12.3. Right to File on Joint Foreground Patents. If a joint
invention is clearly directed primarily to subject matter for
which only one Party has exclusive field of use rights
hereunder, that Party shall have the right in the first
instance to file, prosecute, issue and maintain throughout the
world Joint Foreground Patents directed to that invention. If
a joint invention is not clearly directed primarily to subject
matter for which only one Party has exclusive field of use
rights hereunder, then the Parties shall agree upon how to
file, prosecute, issue and maintain throughout the world Joint
Foreground Patents directed to that invention. The Parties
agree to cooperate fully with each other in filing,
prosecuting, issuing and maintaining such patent applications
and patents throughout the world and agree to equally share
all expenses and in-house and outside legal fees associated
therewith. The Parties will agree upon the extent of
interaction and review for each application on a case by case
basis.
12.4. Proposed Abandonment of Common Interest or Joint Patents. If a
Party which owns a Common Interest Patent or which has
initially filed a Joint Foreground Patent elects not to file,
continue to prosecute, issue or maintain the Common Interest
Patent or the Joint Foreground Patent, or not to file
equivalents in a particular country to the Common Interest
Patent or Joint Foreground Patent, that Party shall give the
other Party notice of such election promptly, and preferably
at least two (2) months prior to any date that action must be
taken to avoid abandonment or lapse. The other Party shall
have the right to take over at its sole expense the filing,
prosecution or maintenance of any such patent application or
patent or equivalent, except in the situation where the Party
electing not to proceed has done so so as to avoid disclosure
of a trade secret such as through publication of a patent
application which would disclose the trade secret. If the
other Party takes over the filing, prosecution or maintenance
of a Common Interest Patent, the electing Party shall assign
all of its rights in the patent application or patent to the
other Party, subject to the retention by the electing Party of
a non-exclusive license therein, which license is commensurate
in scope with the field of use rights the recipient thereof
has under this Agreement. The Party electing not to file,
prosecute or maintain a Common Interest Patent or a Joint
Foreground Patent shall provide reasonable assistance to the
other Party if the other Party files, prosecutes or maintains
such Common Interest Patent or Joint Foreground Patent and
shall execute and cause its employees, agents or consultants
to execute such documents as are reasonably necessary (i) to
vest ownership of such application or patent in the other
Party (as appropriate); and (ii) for the other Party to file,
continue prosecution or maintenance of such patent application
or patent. Any Party filing, prosecuting or maintaining such
patent application or patent after the other Party has elected
not to file, prosecute or maintain such patent application or
patent, shall have no liability to the other Party for that
Party's acts or failure to act with respect to such patent
application or patent, and may subsequently elect to
discontinue to prosecute or maintain such patent application
or patent.
12.5. Review of Proposed Patent Applications. The Parties recognize
that in the course of preparing or prosecuting a patent
application hereunder it may become apparent to a Party that
proprietary information owned by the other Party, or otherwise
of interest to the other Party such as in the case of an
Extraordinarily Sensitive Technology, would have to be
disclosed in the application or papers filed during
prosecution of the application, including, without limitation,
in an Information Disclosure Statement, for a resulting patent
to be legally valid and enforceable. Upon recognizing such a
situation, the first Party shall notify the second Party of
the potential need to disclose such information. The second
Party will then have thirty (30) days to object to such
disclosure with specificity of the concerns. If the second
Party does not so object, the first Party may disclose as
necessary to the relevant patent office. If the second Party
does so object, the Parties will attempt to make a reasonable
accommodation to allow disclosure of a sufficient amount of
the information to meet the minimum legal requirements. If no
such accommodation can be reached, such as in the case where
the proprietary information is a trade secret owned by the
second Party, the first Party will not disclose such
information. In the event the first Party must file a patent
application before the thirty (30) day notice period has
expired to avoid potential loss of patent rights in one or
more countries throughout the world, the first Party may do so
in confidence in the U.S. Patent and Trademark Office or the
United Kingdom Patent Office only. If agreement to disclose
the information is not then forthcoming from the second Party,
the first Party shall take the necessary steps to prevent the
relevant application from being published.
12.6. Docketing. The Parties will establish mutually acceptable
docketing systems and other procedures to ensure compliance
with the various duties and obligations under this Article.
Such docketing systems and other procedures shall provide a
Party having a joint ownership interest in a patent
application or an interest in a Common Interest Patent with
sufficient information with respect to the status thereof to
ensure preservation of its interests therein to the extent
otherwise contemplated by this Article 12. For example, the
Party having a joint ownership interest in a patent
application or an interest in a Common Interest Patent shall
be permitted to take any action necessary to avoid an
unintentional or inadvertent abandonment by the other Party of
the jointly owned patent application or the Common Interest
Patent.
12.7. Exchange of Records of Invention. Each Party shall provide to
the other Party Records of Invention disclosing inventions
conceived during the Foreground Period and resulting from use
of, or based upon Background PI and/or Assigned PI promptly
after preparation thereof to permit the other Party to
determine whether it intends to identify any invention
disclosed therein as one to be claimed in a Common Interest
Patent, and to comply with the disclosure of proprietary
information contained in such Records of Invention as
contemplated in this Agreement.
12.8. Symposia Regarding Extraordinarily Sensitive Technologies. The
Parties shall meet for about four (4) hours every six (6)
months during the Foreground Period to disclose to the other
developments each Party has made relating to Extraordinarily
Sensitive Technologies.
13. ASSIGNMENT OF RIGHT AND OBLIGATIONS UNDER CERTAIN EXISTING AND FUTURE
AGREEMENTS
13.1. Assignment of Agreements of Interest Only to IMATION. Provided
the agreements so permit, 3M shall assign to IMATION its
rights and obligations in agreements with third parties which
are effective on the Distribution Date and concern
intellectual property relating only to IMATION Exclusive
Fields, excluding 3M Business Fields. IMATION hereby accepts
with all agreements so assigned any and all obligations
undertaken by 3M under such agreements. In the event an
agreement prohibits an assignment to IMATION, 3M shall use
reasonable efforts in cooperating with IMATION in an endeavor
to obtain approval of the third party to the agreement for an
assignment thereof to IMATION.
13.2. Agreements of Interest to Both 3M and IMATION. 3M shall use
reasonable efforts in cooperating with IMATION in an endeavor
to provide IMATION with rights and obligations under
agreements with third parties which are effective on the
Distribution Date and concern intellectual property relating
to IMATION Exclusive Fields and/or IMATION Supply Fields, as
well as other fields. IMATION hereby accepts, with the partial
assignment of rights under such agreements, such obligations
undertaken by 3M under such agreements which are commensurate
in scope with the rights provided to IMATION thereunder. The
rights and obligations endeavored to be provided to IMATION
are intended to be commensurate in scope with the intellectual
property rights received by IMATION under this Agreement.
13.3. Future Agreements. Each Party shall provide in all future
agreements with third parties provisions sufficient to carry
out its obligations under this Agreement.
14. TECHNICAL AND OTHER COOPERATION, NOTEBOOKS AND ACCESS TO DOCUMENTS
14.1. Existing and Future Joint Development Projects. Joint
development projects in progress on the Distribution Date
between a laboratory being transferred to IMATION on the
Distribution Date and a laboratory remaining with 3M on the
Distribution Date or projects to be initiated between the
Parties after the Distribution Date shall be made the subject
of a written joint development agreement to be negotiated
between the Parties. The Parties expect that the contents of
joint development agreements pursuant to this Paragraph 14.1
will typically be substantially of the form contained in
Exhibit N, but the Parties may agree otherwise.
14.2. Consulting Services. The Parties contemplate that they may
enter into agreements relating to provision by one Party to
the other of technical and other consulting services. The
Parties expect that the contents of such agreements pursuant
to this Paragraph 14.2 will typically be substantially of the
form contained in Exhibit O, but the Parties may agree
otherwise.
14.3. Notebooks. All notebooks existing on the Distribution Date and
in the possession of 3M businesses being transferred to
IMATION shall have been made current up to the Distribution
Date and shall be signed off before the Distribution Date. All
such notebooks shall be retained and owned by 3M. IMATION
shall have reasonable access to such notebooks to permit
IMATION to exercise the rights granted to it under this
Agreement.
14.4. Access to Other Documents, Data and Other Services. Each Party
will provide the other Party with reasonable access to
documents, data, information services and the like to the
extent generally contemplated by the rights granted to the
other Party under this Agreement. To the extent such data
already exists in electronic form, this access will include
providing relevant data to the other Party in electronic form,
in such format as the other Party may reasonably request.
Provision of information and other services may also be
contemplated in other written agreements between the parties.
15. CONFIDENTIALITY AND PARTIES AS THIRD PARTY BENEFICIARIES
15.1. Restrictions on Use and Disclosure of Business Confidential
Information. 3M and IMATION each shall not disclose to another
or use except for purposes of the Agreement any business
information which is IMATION Confidential Information or 3M
Confidential Information, respectively. The foregoing
restrictions shall expire with respect to IMATION Confidential
Information and 3M Confidential Information five (5) years
after the date of disclosure of such information, unless and
to the extent the Parties agree to a longer period for the
foregoing restrictions with respect to specific categories of
business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the
foregoing restrictions shall expire with respect to such
information on the expiration of such longer period. The date
of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION
Confidential Information known by 3M on the Distribution Date
shall be considered to be the Distribution Date.
15.2. Restrictions on Use and Disclosure of Technical Confidential
Information. Except as provided otherwise elsewhere in this
Agreement or in a separate written agreement between 3M and
IMATION including, but not limited to, any agreement pursuant
to Paragraph 14.1 or 14.2, 3M and IMATION each shall not
disclose to another or use except for purposes of the
Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information,
respectively. The foregoing restrictions shall not expire
until such time and to the extent that such information ceases
to be IMATION Confidential Information or 3M Confidential
Information, as the case may be.
15.3. Confidential Information Relating to Extraordinarily Sensitive
Technologies. The Parties have agreed upon a list of
Extraordinarily Sensitive Technologies which involve
Confidential Information that is considered to be
extraordinarily sensitive. These technologies are identified
on a list which has been exchanged by the Parties. Certain of
the Extraordinarily Sensitive Technologies are primarily used
by one Party and of primary commercial importance to that
Party. Others are used substantially by both Parties and those
Extraordinarily Sensitive Technologies are of significant
commercial importance to both Parties. All of these
Extraordinarily Sensitive Technologies shall be subject to the
special treatment set forth in Exhibit P. Any Extraordinarily
Sensitive Technology which finds its primary commercial
importance in one Party will be treated under the restrictions
set forth in Exhibit P by the other Party as well as any
sublicensee of such other Party and any third party
manufacturing product under such other Party's "have
manufactured" rights or any other transferee of such other
Party. No sublicense or other transfer, whether for purposes
of exercising "have manufactured" rights or otherwise, of any
rights or use of the Extraordinarily Sensitive Technology
shall occur without the prior written approval of the Party
which is the primary commercial user of that Extraordinarily
Sensitive Technology. Any Extraordinarily Sensitive Technology
which finds substantial commercial importance in both Parties
shall not be sublicensed or otherwise transferred by either
Party without the prior written approval of the other Party.
Any such sublicense or other transfer of the Extraordinarily
Sensitive Technology shall be subject to the restrictions set
forth in Exhibit P.
15.4. Reasonable Efforts. Each Party shall protect Confidential
Information hereunder by using the same degree of care, but no
less than a reasonable degree of care, to prevent the
unauthorized disclosure of the other Party's Confidential
Information as the Party uses to protect its own confidential
information of a like nature, including the heightened degree
of care for Confidential Information which has been designated
as relating to an Extraordinarily Sensitive Technology by the
other Party pursuant to Paragraph 15.3.
15.5. Disclosure to Affiliates and Licensees; Binding Effect. Each
Party may disclose Confidential Information to third parties,
such as potential sublicensees, in the normal course of its
business and consistent with the rights expressly reserved by
and/or licensed to it under this Agreement and consistent with
any other restrictions on the disclosure of Confidential
Information in this Agreement including, but not limited to,
those contained in this Article 15. Each Party shall insure
that its Affiliates, sublicensees and other transferees agree
in writing to be bound by restrictions on use and disclosure
of Confidential Information at least as stringent as those
which bind the Party in advance of the disclosure of
Confidential Information to any Affiliate, sublicensee or
other transferee.
15.6. 3M as Third Party Beneficiary in Event Third Party Breaches
CDA With IMATION. 3M shall have the right to bring a lawsuit
for injunction and/or other remedy directly against any third
party which is violating restrictions on use or disclosure of
3M Confidential Information which was disclosed to the third
party under a confidentiality agreement between that third
party and IMATION. IMATION shall cooperate in all reasonable
respects with 3M in any such litigation.
15.7. IMATION as Third Party Beneficiary in Event Third Party
Breaches CDA With 3M. IMATION shall have the right to bring a
lawsuit for injunction and/or other remedy directly against
any third party which is violating restrictions on use or
disclosure of IMATION Confidential Information which was
disclosed to the third party under a confidentiality agreement
between that third party with 3M. 3M shall cooperate in all
reasonable respects with IMATION in any such litigation.
16. EMPLOYEE AGREEMENTS
16.1. IMATION Employee Agreements. IMATION shall determine the
individual IMATION Employees, or classes of IMATION Employees,
who must execute an IMATION Employee Agreement as a condition
of employment with IMATION. The IMATION Employee Agreement
shall contain terms and conditions which are consistent with
and effectuate the terms of this Agreement. The portions of
the initial version of the IMATION Employee Agreement relating
to rights under this Agreement shall be in a form which is
acceptable to 3M prior to its use.
16.2. Survival of 3M Employee Agreement Obligations and 3M's Common
Law Rights. The 3M Employee Agreements of all Former 3M
Employees shall remain in full force and effect according to
their terms; provided, however, that 3M shall not consider any
of the following acts committed by Former 3M Employees within
the scope of their IMATION employment to constitute a breach
of such 3M Employee Agreements: (i) the use or disclosure of
Confidential Information (as that term is defined in the
Former 3M Employee's 3M Employee Agreement) for or on behalf
of IMATION, if such use or disclosure is consistent with the
license rights granted to IMATION under this Agreement, (ii)
the disclosure and assignment to IMATION of rights in
Inventions authored or conceived by the Former 3M Employee
after the Distribution Date of this Agreement and resulting
from the use of, or based upon Background PI and/or Assigned
PI (as Inventions are defined in the Former 3M Employee's 3M
Employee Agreement) and (iii) the rendering of any services,
directly or indirectly, to IMATION to the extent such services
are consistent with the assignment or license of rights
granted to IMATION under this Agreement. IMATION shall remind
all Former 3M Employees transferred to or hired by IMATION
during the period beginning with the Distribution Date and
ending five (5) years thereafter of their obligations under
the 3M Employee Agreement. Further, 3M retains any rights it
has under statute or common law vis-a-vis actions by its
former employees who did not execute 3M Employee Agreements to
the extent such actions are inconsistent with the rights
granted to IMATION under this Agreement.
16.3. Assignment, Cooperation for Compliance and Enforcement.
16.3.1. 3M retains all rights under the 3M Employee
Agreements of all Former 3M Employees necessary to
permit 3M to protect the rights and interests of
continuing 3M businesses, but hereby transfers and
assigns to IMATION its rights under the 3M Employee
Agreements of all Former 3M Employees to the extent
required to permit IMATION to enjoin, restrain,
recover damages from or obtain specific performance
of the 3M Employee Agreements or obtain other
remedies against any employee who breaches his/her 3M
Employee Agreement, to the extent necessary to permit
IMATION to protect the rights and interests of the 3M
businesses being transferred to IMATION on the
Distribution Date. IMATION agrees to perform the
obligations of 3M under the 3M Employee Agreements of
Former 3M Employees necessary to enable IMATION to
enforce said agreement including, without limitation,
the obligation to compensate any Former 3M Employee
who is unable to obtain employment consistent with
his/her abilities and education solely as a
consequence of the covenant not to compete contained
in the 3M Employee Agreement. IMATION acknowledges
that 3M background proprietary information which is
not Background PI or Assigned PI is not licensed or
assigned to IMATION under this Agreement.
Consequently, IMATION shall assist 3M in obtaining
the entire right, title and interest to intellectual
property (whether patented or not) resulting from
activities constituting a breach of the 3M Employee
Agreement by an employee who was in IMATION's employ
at the time of the breach, such assistance including,
but not being limited to, assigning to 3M any patent
or patent application claiming inventions resulting
from breach of a 3M Employee Agreement and
inadvertently filed by IMATION.
16.3.2. 3M and IMATION agree, at their own respective cost
and expense, to use their reasonable efforts to
cooperate as follows: (i) IMATION shall advise 3M of:
(a) any possible violation(s) of the 3M Employee
Agreement by Former 3M Employees, and (b) any
possible violation(s) of the IMATION Employee
Agreement which affect 3M's rights under this
Agreement; (ii) 3M shall advise IMATION of any
possible violations of the 3M Employee Agreement by
current or former 3M Employees which affect IMATION's
rights under this Agreement; and (iii) each Party
shall advise the other of the identity of the
subsequent employer of each such employee leaving the
employ of IMATION or 3M, as the case may be, during a
period of five (5) years after the Distribution Date,
to the extent known and necessary to permit the other
Party to protect its rights and interests under that
former employee's Employee Agreement.
16.3.3. 3M and IMATION each may separately enforce the 3M
Employee Agreements of Former 3M Employees to the
extent necessary to reasonably protect their
respective interests, provided, however, that IMATION
shall not commence any litigation relating thereto
without first consulting with 3M's Chief Intellectual
Property Counsel. If either Party, in seeking to
enforce any 3M Employee Agreement, notifies the other
party that it requires, or desires, the other Party
to join in such action, then the other Party shall do
so. In addition, if either Party commences or becomes
a party to any action to enforce a 3M Employee
Agreement of a Former 3M Employee, the other Party
shall, whether or not it becomes a party to the
action, cooperate with the other Party by making
available its files and employees who have
information or knowledge relevant to the dispute,
subject to appropriate measures to protect the
confidentiality of any proprietary or confidential
information that may be disclosed in the course of
such cooperation or action.
16.3.4. 3M and IMATION understand and acknowledge that
matters relating to the making, performance,
enforcement, assignment and termination of employee
agreements are typically governed by the laws and
regulations of the national, federal, state or local
governmental unit where an employee resides, or where
an employee's services are rendered, and that such
laws and regulations may supersede or limit the
applicability or enforceability of Paragraphs 16.1 to
16.3. In such circumstances, 3M and IMATION agree to
take action with respect to the employee agreements
that best accomplishes the Parties' objectives as set
forth in Paragraphs 16.1 to 16.3 and which is
consistent with applicable law.
17. ENFORCEMENT OF INTELLECTUAL PROPERTY RIGHTS
17.1. Enforcement of Solely Owned IP. Except as provided in
Paragraph 17.2, each Party shall have the exclusive right to
enforce any intellectual property rights owned solely by it,
and any decision on the institution or continuation of any
litigation thereunder shall be that Party's. The expenses
associated with such enforcement shall be borne by such Party
and any damage award shall be retained by such Party, unless
the Parties agree otherwise. To the extent the intellectual
property rights to be enforced under this Paragraph 17.1 were
assigned by 3M to IMATION under this Agreement, IMATION shall
provide reasonable notice to 3M prior to instituting such a
lawsuit, and shall advise 3M periodically during the course of
the lawsuit of any developments in the litigation, to
facilitate a determination that the lawsuit can be initiated
and continued without providing significant legal exposure to
3M which cannot be totally compensated for by the
indemnification contemplated in Paragraph 17.3.
17.2. Enforcement By Party Having Exclusive License. A Party which
has received under this Agreement an exclusive license under
any intellectual property that is owned by the other Party may
institute a lawsuit against a third party for patent
infringement of such claim or continue a lawsuit initially
brought by the Party owning the intellectual property,
provided that:
17.2.1. the Party owning the patent has elected not to
institute a lawsuit under Paragraph 17.1 within sixty
(60) days of a request to do so by the exclusively
licensed Party (or within a reasonable, shorter
period of time in the event the exclusively licensed
Party is reasonably concerned about the likelihood of
a declaratory judgment being filed by a third party
in respect to the patent, will be seeking a
preliminary injunction against the third party or
otherwise may have its interests significantly
injured if immediate action is not taken), or having
instituted such a lawsuit, the Party owning the
patent subsequently determines that it wishes to
terminate the lawsuit, by settlement or otherwise;
17.2.2. the patent does not cover an invention of overriding
potential commercial importance or value or actual
commercial importance or value to the Party owning
the patent; and
17.2.3. such a lawsuit can be instituted or continued without
providing significant legal exposure to the owner of
the patent which cannot be totally compensated for by
the indemnification contemplated in Paragraph 17.3.
The Party owning such patent shall join in any such litigation
if necessary for the exclusive licensee to bring or maintain
the lawsuit. All expenses associated with such litigation
shall be borne by the exclusive licensee, including the
expenses incurred by the Party owning the patent if it is
required to join in such litigation, except for expenses
associated with the owner's independent representation by
counsel, and all recovery from such litigation shall accrue to
the exclusively licensed Party. The exclusive licensee shall
not initiate any activity vis-a-vis any third party which
could provide a basis for a declaratory judgment action
brought by that third party against the patent owner unless
the exclusive licensee has first obtained the right to bring a
lawsuit under this Paragraph 17.2.
17.3. Indemnification. The Party owning intellectual property which
is being enforced pursuant to Paragraph 17.1 shall indemnify
the other Party and hold such other Party harmless in respect
to any damages or other costs of any type, reasonably related
to the intellectual property rights being enforced under
Paragraph 17.1 (but not related to any counterclaim for
infringement against such other Party), payable to third
parties as a result of litigation pursuant to Paragraph 17.1.
The exclusively licensed Party which is enforcing intellectual
property pursuant to Paragraph 17.2 shall indemnify the Party
owning the patent and hold such Party harmless in respect to
any damages or other costs of any type, reasonably related to
the intellectual property rights being enforced under
Paragraph 17.2 (but not related to any counterclaim for
infringement against the Party owning the patent), payable to
third parties as a result of litigation pursuant to Paragraph
17.2.
17.4. Enforcement of Joint Patents Outside Exclusive Field. The
Parties shall cooperate in enforcing Joint Foreground Patents
in the Non-Exclusive Fields or other fields outside of 3M
Business Fields, IMATION Exclusive Fields and IMATION Supply
Fields and shall share in all expenses associated therewith
and in any damage award received as a result thereof. However,
either Party may elect not to participate or continue to
participate in any such litigation. The Party so electing
shall not share in the expenses incurred in such litigation
after such election, and shall not share in any damage award
received as a result. Further, the Party electing not to
participate or continue to participate shall be indemnified
and held harmless by the other Party in respect to any damages
or other costs of any type payable to third parties as a
result of such litigation. Notwithstanding anything expressed
or implied to the contrary, in the event the patent contains a
claim of overriding potential or actual commercial importance
or value to a Party, the other Party may not institute an
action hereunder without the first Party's written consent.
17.5. Enforcement of Joint Patents in Exclusive Field. For Joint
Patents under which one Party has granted the other an
exclusive license, the licensed Party may bring suit in its
exclusive fields under Paragraph 17.1 as if the patent were
solely owned by that Party. The Party electing to file such a
suit shall indemnify and hold harmless the other Party in
respect to any damages or other costs of any type, reasonably
related to the intellectual property rights being enforced
under this Paragraph 17.5 (but not related to any counterclaim
for infringement against such other Party), payable to third
parties as a result of such litigation. Notwithstanding
anything expressed or implied to the contrary, in the event
the patent contains a claim of overriding potential or actual
commercial importance or value to a Party, the other Party may
not institute an action hereunder without the first Party's
written consent.
17.6. "Overriding" Interest. In evaluating whether a Party's
interests in a patent under this Article are "overriding," the
Parties shall consider the materiality of the patent to the
particular business to which it relates in both Parties, and
the relative significance of the patent and the litigation to
those businesses.
17.7. Enforcement of Rights Relating to Proprietary Information.
Enforcement of proprietary information rights licensed under
this Agreement shall be handled in a fashion consistent with
enforcement of patent rights hereunder.
18. SPECIAL PROVISIONS REGARDING CERTAIN FIELD
18.1. "Aurora". IMATION's exploitation of the technology described
in Paragraph IV of Exhibit D hereto shall be subject to the
following conditions:
18.1.1. IMATION shall i) keep 3M advised of IMATION's
endeavors to select partners to develop and
commercialize such technology; ii) consider in good
faith partners proposed by 3M to be involved in
development and/or commercialization; iii) provide 3M
a first right to negotiate with IMATION for rights to
supply soft goods such as toner to IMATION; iv)
provide 3M a first right to negotiate with IMATION
for rights to use the technology in overhead
transparency applications; and v) provide 3M a first
right to negotiate with IMATION and its partners for
rights to adapt and use the technology in signage
applications, label applications, and textile
printing applications and to supply soft goods such
as toner to IMATION and its partners for such
applications; and
18.1.2. IMATION shall not itself exploit or partner with or
license any third party to exploit such technology
specifically for generating graphics on products
comprising retroreflective substrates.
19. NON-COMPETE
19.1. For a period of five (5) years after the Distribution Date,
except for i) an ancillary activity involving an insubstantial
business, ii) resale of products or services purchased from
IMATION, or iii) making and using magneto-optical and optical
media for use with such Blue-Green Diode Lasers which embody
intellectual property owned by 3M, 3M and its Affiliates shall
not intentionally engage directly or indirectly in the sale of
products or services which compete with products or services
within the IMATION Exclusive Fields or IMATION Supply Fields.
A non-limiting example of activity which constitutes "engaging
indirectly" under this Paragraph 19.1 is 3M or a 3M Affiliate
working with a third party in focused joint promotion of a 3M
product with a product of the third party which competes with
a product in the IMATION Exclusive fields. This Paragraph 19.1
shall not preclude 3M and 3M Affiliates from indirect activity
involving continued selling of products or services sold on
the Distribution Date by businesses remaining with 3M (and to
exploit the normal progression of such products and services
using similar standards as employed by 3M before the
Distribution Date) to customers involved in the IMATION
Exclusive Field.
19.2. For a period of five (5) years after the Distribution Date,
except for i) an ancillary activity involving an insubstantial
business, ii) resale of products or services purchased from
3M, or iii) making and using Blue-Green Diode Lasers
independently of intellectual property owned by 3M, IMATION
and IMATION Affiliates shall not engage directly or indirectly
in the sale of products or services which compete with
products or services in the 3M Business Fields (defined as in
Paragraph 1.5. ii)). A non-limiting example of activity which
constitutes "engaging indirectly" under this Paragraph 19.2 is
IMATION or an IMATION Affiliate working with a third party in
focused joint promotion of an IMATION product with a product
of the third party which competes with a product in 3M
Business Fields (as defined in Paragraph 1.5. ii)). This
Paragraph 19.2 shall not preclude IMATION and IMATION
Affiliates from indirect activity, outside of the 3M Reserved
Fields, involving working with a third party on that party's
image and electronic information processing (i.e., capture,
movement, storage, access, retrieval, conversion, organization
and output of information) needs, internal or external, as
long as the activity does not benefit, in more than in an
ancillary way, a product or service of the third party which
competes with a product or service in the 3M Business Fields
(as defined in Paragraph 1.5. ii)) outside of the 3M Reserved
Fields. Further, this Paragraph 19.2 shall not preclude
IMATION and IMATION Affiliates from indirect activity
involving continued selling of products or services sold on
the Distribution Date by businesses being transferred to
IMATION (and to exploit the normal progression of such
products and services using similar standards employed by 3M
before the Distribution Date) to customers involved in the 3M
Business Fields (as defined in Paragraph 1.5. ii)).
20. INDEMNIFICATION
20.1. By 3M. 3M shall indemnify and hold IMATION and its Affiliates
harmless from any and all loss or liability, evolving out of
the relationship established by this Agreement, for any and
all claims, causes of action, suits, proceedings, losses,
damages, demands, fees, expenses, fines, penalties and costs
(including without limitation reasonable attorney's fees,
costs and disbursements) arising from any injury or alleged
injury to any third person or business for property damage,
personal injury or incidental, special or consequential
damages caused by any products made or processes performed by
3M, an Affiliate thereof, or a licensee or sublicensee of
either other than IMATION or an Affiliate thereof.
20.2. By IMATION. IMATION shall indemnify and hold 3M and its
Affiliates harmless from any and all loss or liability,
evolving out of the relationship established by this
Agreement, for any and all claims, causes of action, suits,
proceedings, losses, damages, demands, fees, expenses, fines,
penalties and costs (including without limitation reasonable
attorney's fees, costs and disbursements) arising from any
injury or alleged injury to any third person or business for
property damage, personal injury or incidental, special or
consequential damages caused by any products made or processes
performed by IMATION, an Affiliate thereof, or a licensee or
sublicensee of either other than 3M or an Affiliate thereof.
20.3. Claims. A Party (the "indemnitee") which intends to claim
indemnification under this Article 20 shall promptly notify
the other Party ("the indemnitor") in writing of any action,
claim or liability in respect of which the indemnitee or any
of its employees or agents intend to claim such
indemnification. The indemnitee shall permit, and shall cause
its employees and agents to permit, the indemnitor to settle
any such action, claim or liability and agrees to the control
of such defense or settlement by the indemnitor; provided,
however, that such settlement does not adversely affect the
indemnitee's rights hereunder or impose any obligations on the
indemnitee in addition to those set forth herein. No such
action, claim or liability shall be settled without the prior
written consent of the indemnitor to the extent the indemnitor
has responsibility or liability for any portion of such
settlement, and the indemnitor shall not be responsible for
any attorneys' fees or other costs incurred other than as
provided herein. The indemnitee, its employees and agents,
shall cooperate fully with the indemnitor and its legal
representatives in the investigation and defense of any
action, claim or liability covered by this indemnification.
The indemnitee shall have the right, but not the obligation,
to be represented by counsel of its own selection and at its
own expense.
20.4. Insurance. Each Party shall maintain commercial general
liability insurance, including products liability and
contractual liability coverage, in an amount and for a time
period which will cover the liability assumed by that Party
under this Agreement, provided that each Party shall have the
right to be self-insured for at least a portion of such
amount. Each Party shall provide the other upon request with a
certificate of insurance evidencing the existence of these
coverages.
21. DISCLAIMERS
21.1. Limitation of Liabilities. NEITHER 3M NOR IMATION SHALL UNDER
ANY CIRCUMSTANCES BE LIABLE TO THE OTHER FOR INDIRECT,
INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT
NOT LIMITED TO, LOSS OF PROFITS, REVENUE OR BUSINESS)
RESULTING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT EXCEPT
TO THE EXTENT SUCH DAMAGES ARE PAYABLE TO A THIRD PARTY AND
ARE INDEMNIFIED BY A PARTY PURSUANT TO ARTICLE 17 OR 20. This
limitation applies regardless of whether such damages are
sought based on breach of contract, negligence or any other
legal theory.
21.2. No Warranty of Non-Infringement. In entering into this
Agreement, neither Party is representing to the other that any
right licensed or assigned hereunder to the other Party can be
practiced or otherwise exploited without infringement of
patent, trade secret, trademark, copyright or other
intellectual property rights of third parties.
21.3. "As-is" Basis of Licenses and Assignments. Each Party
recognizes that any license or assignment of intellectual
property received under this Agreement is on an "as-is" basis
with no representations or warranties whatsoever as to the
validity or scope of the intellectual property rights so
licensed or assigned.
22. DISPUTE RESOLUTION
22.1. Either Party may invoke the dispute resolution process of this
Article upon notice to the other Party that it believes a
dispute has arisen between the Parties relating to the making
or performance of this Agreement, including, but not limited
to, any act or failure to act by said other Party which the
Party providing notice believes constitutes a material breach
hereof. Any such dispute shall be resolved in the following
order of preference:
22.1.1. by good faith negotiation between executives of 3M
and IMATION who have authority to fully and finally
resolve the dispute;
22.1.2. if necessary, by non-binding mediation at a location
acceptable to both Parties using a neutral mediator
having experience with the industry under the Center
for Public Resources Model Procedure for Mediation of
Business Disputes (with the costs therefor shared
equally); or
22.1.3. as a last resort only, by binding arbitration of
disputes concerning inventorship or involving a risk
that a trade secret could be disclosed publicly or
otherwise compromised if litigated, or by litigation
of any other disputes, including disputes pertaining
to Article 25.
22.2. In the case of negotiation or mediation under Paragraph 22.1.1
or 22.1.2, the following executives (as well as such other
persons as they may deem appropriate) will be personally
involved in such negotiations or mediation depending upon the
subject matter of the dispute:
22.2.1. For disputes relating to intellectual property
(including, without limitation, inventorship, scope
of license, scope of fields, enforcement) other than
trademarks or trade dress, each Party's respective
Vice President of Research and Chief Intellectual
Property Counsel, or designates of any of them.
22.2.2. For disputes relating to trademarks or trade dress,
each Party's respective Vice President of Marketing
and Chief Intellectual Property Counsel, or
designates of any of them.
22.2.3. For disputes in respect to non-competition issues,
each Party's respective Chief Executive Officer,
General Counsel and Chief Intellectual Property
Counsel, or designates of any of them.
22.3. Treatment of Negotiations and Mediations. All negotiations and
mediations pursuant to this Article shall be treated as
compromise and settlement negotiations for purposes of Rule
408 of the Federal Rules of Evidence and comparable state
rules of evidence.
22.4. Disputes Subject to Binding Arbitration. Disputes regarding
inventorship (the process for which is further detailed in
Paragraph 22.6) and disputes which involve a risk that a trade
secret could be disclosed publicly or otherwise compromised if
litigated shall be subject to binding arbitration. If
litigation is initiated relative to a dispute, and subsequent
to such initiation it is realized by a Party that there is a
risk of public disclosure or other compromise of a trade
secret if the litigation continued, that Party may request
that the litigation be terminated and that the dispute be sent
to arbitration. If there is a disagreement between the Parties
as to whether the dispute should be sent to arbitration, the
court where the litigation is pending shall be asked to take
evidence in camera and decide if the dispute should be sent to
arbitration under this provision. The Party asserting that a
trade secret could be disclosed publicly or could otherwise be
compromised in resolving the dispute shall bear the burden of
proof by a preponderance of the evidence.
22.5. Arbitration Procedures. If the Parties are unable to resolve
any dispute that is subject to arbitration under this Article
22 by negotiation or mediation under Paragraphs 22.1.1 and
22.2.2, they agree to submit such dispute to binding
arbitration under the Center for Public Resources Rules for
Non-Administered Arbitration of Patent and Trade Secret
Disputes. The Parties agree to employment of a single
arbitrator in resolving any such dispute. The Federal Rules of
Civil Procedure and the Federal Rules of Evidence shall be
applicable except where they may conflict with the more
explicit process for resolving inventorship disputes set forth
in Paragraph 22.6. Any arbitration proceeding shall be
concluded in a maximum of one (1) year from written notice
from one Party to the other Party identifying a dispute
subject to arbitration under this Paragraph 22.5 and
requesting arbitration after having participated in
negotiation under Paragraph 22.1.1 and mediation under
Paragraph 22.1.2.
22.6. Disputes Regarding Inventorship. In addition to the procedure
set forth in Paragraph 22.5, the following shall apply to
arbitration of disputes regarding inventorship. The arbitrator
shall be an independent patent attorney residing in the United
States and registered to practice before the United States
Patent and Trademark Office. The arbitrator shall resolve the
inventorship dispute in accordance with the laws of the United
States within three (3) months of his or her appointment. The
Parties agree to supply to the arbitrator such documentary
evidence of inventorship as they wish to rely upon together
with a written statement of their position not to exceed
twenty (20) pages in length within twenty (20) days of the
appointment of the arbitrator. Unless the Parties agree to
rely on affidavits, the arbitrator shall set a hearing at
which each Party shall have up to eight (8) hours to present
witnesses and to cross examine the witnesses for the other
Party. If there is a hearing, each Party shall provide a
statement summarizing the anticipated testimony of each
witness it may have testify to the other Party and the
arbitrator at least fifteen (15) days in advance of the
hearing. The arbitrator's award shall be in writing not to
exceed twenty (20) pages in length and shall include reasoning
in support of the award. The resolution of the arbitrator
shall be final and binding on the Parties, without right of
appeal.
22.7. Confidentiality. All negotiation, mediation and arbitration
proceedings under this Article shall be treated as
Confidential Information in accordance with the provisions of
Article 15. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions at least as
restrictive as those contained in Article 15.
22.8. Equitable Relief. Nothing herein shall preclude either Party
from taking whatever actions are necessary to prevent any
immediate, irreparable harm to its interests, including
multiple breaches of this Agreement by the other Party.
Otherwise, these procedures are exclusive and shall be fully
exhausted prior to the initiation of any litigation. Either
Party may seek specific enforcement of any arbitrator's
decision under this Article. The other Party's only defense to
such a request for specific enforcement shall be fraud by or
on the arbitrator.
22.9. Governing Law; Personal Jurisdiction. Any questions, claims,
disputes, remedies or procedural matters shall be governed
exclusively by the laws of the State of Minnesota, without
regard to the principles of conflicts of law. The Parties
agree that Minnesota has a substantial relationship to this
transaction, and each Party consents to personal jurisdiction
in the courts of Minnesota.
23. AMENDMENT
23.1. Written Amendment. This Agreement, including any Exhibits
hereof, may not be modified, amended or discharged except as
expressly stated in this Agreement or by a written agreement
signed by an authorized representative of each Party.
23.2. Proposed Amendments. With a transaction of this magnitude, it
is anticipated by both Parties that amendments may need to be
made to this Agreement. Any proposed amendment to this
Agreement, including any Exhibit hereof, relating to
intellectual property other than trademarks or trade dress
shall be negotiated by each Party's respective Vice President
of Research and Development and Chief Intellectual Property
Counsel, or by designates of any of them. Any proposed
amendment relating to trademarks or trade dress shall be
negotiated by each Party's respective Vice President of
Marketing and Chief Intellectual Property Counsel, or by
designates of any of them. Any proposed amendment relating to
non-competition issues shall be negotiated by each Party's
respective Chief Executive Officer, General Counsel and Chief
Intellectual Property Counsel, or by designates of any of
them.
24. TERM AND TERMINATION
24.1. Expiration. This Agreement shall expire upon expiration of the
last right licensed or retained hereunder.
24.2. Termination. While this Agreement may not be terminated in
whole by either Party, a Party may terminate license and other
rights granted to the other Party as follows:
24.2.1. 3M may terminate all license and other rights granted
to IMATION under this Agreement as provided in
Article 25;
24.2.2. 3M may terminate license rights granted to IMATION
under the Licensed Trademarks and Licensed Trade
Dresses under Article 4 as provided in Article 4; or
24.2.3. subject to applicable bankruptcy laws, a Party may
terminate all license and other rights granted to the
other Party under this Agreement upon written notice
to such other Party if such other Party becomes
insolvent or acknowledges its insolvency in any
manner, or if a receiver or receiver-manager is
appointed in respect of such other Party's business,
or if a petition in bankruptcy is instituted by or
against such other Party, or if such other Party
makes a general assignment for the benefit of its
creditors.
24.3. Reassignment. Any rights assigned to IMATION under Articles 3
and 5 shall be promptly reassigned to 3M upon any termination
by 3M under Paragraphs 24.2.1 or 24.2.3.
25. CHANGE IN CONTROL OR OWNERSHIP OF IMATION
25.1. For five (5) years after the Distribution Date, 3M shall have
the right to terminate a portion or all of IMATION's rights
under this Agreement in the event that the direct or
beneficial ownership of IMATION or of IMATION's business or
assets changes, in whole or in part, through merger or
otherwise, such that because of the ownership change a person
or a group can significantly impact, or control directly or
indirectly, the business of IMATION or the direction of
IMATION's business. This right to terminate by 3M shall not be
exercised except for good cause due to the reasonable
likelihood that the change in ownership will result in
substantially enhanced competition to a significant existing
3M business or an anticipated business involving significant
development activities by or on behalf of 3M at the
Distribution Date and the extent of the rights terminated
shall be commensurate in scope with the enhanced competition
reasonably likely to result but for the termination of the
rights, provided that 3M shall further have the right to
terminate all licenses granted under Article 4 of this
Agreement. The effective date of any such termination by 3M of
rights granted to IMATION under this Agreement shall be
considered to be the effective date of notice pursuant to
Paragraph 26.1 of 3M's decision to terminate such rights.
26. MISCELLANEOUS
26.1. Notices. All notices or reports shall be delivered personally
or by first class mail to the following addresses, or by
facsimile transmission to the following phone numbers, of the
respective Parties:
To 3M: Chief Intellectual Property Counsel
3M Office of Intellectual Property Counsel
3M Center
Post Office Box 33427
Saint Paul, Minnesota 55133-3427
Telephone: 612-733-8904
Facsimile: 612-733-9155
To IMATION: General Counsel
Imation Corp.
P.O. Box 64898
Saint Paul, Minnesota 55164-0898
Telephone: 612-____________
Facsimile: 612-____________
Notices shall be effective upon receipt if personally
delivered or sent by facsimile transmission, or on the
business day following the date of mailing. Any change of
address of a Party shall be promptly communicated in writing
to the other Party.
26.2. Assignment. Neither this Agreement nor any right or obligation
hereunder shall be assignable by either Party without the
prior written consent of the other Party and any purported
assignment without such consent shall be void; provided,
however, that 3M may assign this Agreement without such
consent in connection with the sale of substantially all of
its business to which this Agreement relates. Any permitted
assignee shall assume all obligations of 3M under this
Agreement. No assignment shall relieve 3M of responsibility
for the performance of any accrued obligation which 3M then
has hereunder. IMATION shall not grant multiple sublicenses to
one or more third parties to the extent otherwise permitted
under this Agreement in a concerted fashion in an attempt to
assign de facto, during the five (5) year period after the
Distribution Date, substantially all of the benefits of the
intellectual property rights received by IMATION hereunder to
said third party(ies).
26.3. Succession. This Agreement shall bind the Parties and any
permitted successors in interest to the Parties, trustees, or
assigns.
26.4. Force Majeure. If the performance of this Agreement or any
obligations under this Agreement is prevented, restricted, or
interfered with by reason of fire, flood, explosion, or other
casualty, accident, or act of God; strikes or labor
disturbances; war, whether declared or not, or other violence;
sabotage; any law, order, proclamation, regulation, ordinance,
demand, or requirement of any government agency; or any other
event beyond the reasonable control of the Parties, the
affected Party, upon giving prompt notice to the other Party,
shall be excused from such performance to the extent of such
prevention, restriction, or interference. The affected Party
shall use its reasonable efforts to avoid or remove such cause
of non-performance or to limit the impact of the event on such
Party's performance and shall continue performance with the
utmost dispatch whenever such causes are removed.
26.5. Export Controls. A recipient hereunder of technical data or
products agrees to comply with all United States Department of
Commerce and other United States export controls. Each Party
agrees that, unless prior authorization is obtained from the
Office of Export Administration, it will not knowingly ship or
transfer technical data covered by this Agreement or any
direct product of such technical data, directly or indirectly,
to any country in contravention of any Office of Export
Administration requirement.
26.6. No Other Licenses. Nothing in this Agreement shall be
construed as granting any licenses other than those explicitly
granted herein.
26.7. Entire Agreement. This Agreement and its Exhibits set forth
the entire agreement between the Parties relating to
intellectual property and supersede all previous agreements
and understandings, whether oral or written, between the
Parties with respect to the subject matter of this Agreement,
except that this Agreement is a part of the entire set of
agreements relating to the spin-off of IMATION by 3M, and is
to be construed as such, and specifically does not supersede
any intellectual property provisions in agreements (such as
Supply Agreements or Joint Development Agreements) relating to
specific products or programs.
26.8. Separability. The provisions of this Agreement shall be deemed
separable. If any provision in this Agreement shall be found
or be held to be invalid or unenforceable in any jurisdiction
in which this Agreement is performed, then the meaning of that
provision shall be construed, to the extent feasible, to
render the provision enforceable, and if no feasible
interpretation would save such provision, it shall be severed
from the remainder of this Agreement which shall remain in
full force and effect unless the provisions that are invalid
or unenforceable substantially impair the value of all the
Agreements involved in the spin-off to either Party.
26.9. Waiver. No waiver of any term, provision or condition of this
Agreement whether by conduct or otherwise in any one or more
instances shall be deemed to be or construed as a further or
continuing waiver of any such term, provision or condition or
of any other term, provision or condition of this Agreement.
26.10. Relationship of Parties. Each of the Parties hereto is an
independent contractor and nothing herein shall be deemed to
constitute the relationship of partners, joint venturers, nor
of principal and agent between the Parties hereto.
26.11. Guaranty Affiliates. Each Party guarantees the performance and
fulfillment of all obligations of its Affiliates under this
Agreement.
26.12. Authority. Each Party has the full right, power, and authority
to execute and deliver this Agreement and to perform its
terms. The execution and delivery of this Agreement and the
consummation of the transactions required by this Agreement
will not violate or conflict with any charter provision or
bylaw of either Party or any of its Affiliates. Each Party has
taken all required corporate actions to approve and adopt this
Agreement. This Agreement is enforceable against each Party
according to its terms, subject to bankruptcy, insolvency, and
other laws relating to or affecting creditors' rights and to
general equity principles. Each Party represents and warrants
that the person or persons executing this Agreement on its
behalf are duly authorized and empowered to do so.
26.13. Headings. The article and paragraph headings in this Agreement
are inserted for convenience only and shall not constitute a
part hereof.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed in duplicate as of the date and year first above written.
Attest: IMATION CORP.
_______________________ By:______________________________
William T. Monahan
Chief Executive Officer
Date:____________________________
Attest: MINNESOTA MINING AND
MANUFACTURING COMPANY
_______________________ By:______________________________
Livio D. DeSimone
Chairman and Chief Executive Officer
Date:____________________________
EXHIBIT A
3M BUSINESS FIELDS
THE PRODUCTS SET FORTH BELOW ARE TO BE CONSTRUED IN THE CONTEXT OF THE
BUSINESSES AND TECHNOLOGIES OF 3M AND IMATION AS OF THE DISTRIBUTION DATE, AND
THE NORMAL PROGRESSION OF SUCH BUSINESSES AND TECHNOLOGIES, AND ARE NOT TO BE
CONSTRUED JUST IN THE CONTEXT OF PRODUCTS SOLD BY 3M OR IMATION AS OF THE
DISTRIBUTION DATE. FURTHER, AS DEFINED IN PARAGRAPH 1.5 AND IN RESPECT TO ALL
REFERENCES TO 3M BUSINESS FIELDS EXCEPT THOSE IN ARTICLE 19, 3M BUSINESS FIELDS
MEANS THE FIELDS IDENTIFIED BELOW TO THE EXTENT THAT SUCH FIELDS ARE OUTSIDE THE
SCOPE OF THE IMATION EXCLUSIVE FIELDS, IMATION SUPPLY FIELDS AND NON-EXCLUSIVE
FIELDS. FOR PURPOSES OF ARTICLE 19, 3M BUSINESS FIELDS MEANS THE FIELDS
IDENTIFIED BELOW TO THE EXTENT THAT SUCH FIELDS ARE OUTSIDE THE SCOPE OF THE
IMATION EXCLUSIVE FIELDS, IMATION SUPPLY FIELDS AND PARAGRAPHS II, III, V, VII
AND VIII OF THE NON-EXCLUSIVE FIELDS.
Abrasive, scouring, surface conditioning, polishing and buffing products
Adhesives(except for padding adhesive for carbonless documents), coatings and
sealants and systems that dispense them
Primers
Adhesive-coated tapes, papers, films and other articles and systems that
dispense them, except for i) adhesive-coated films and papers for
proofs, adhesive-coated proofs and lithographic printing plates, and
ii) labels for application to other IMATION products
Films, except for acetate and coated films utilized in the photographic,
imaging and electronic processing area within the IMATION Exclusive
Fields or Non-Exclusive Fields
Materials for imparting abrasion and solvent resistance
Materials for imparting corrosion-resistance and abatement
Mechanical devices for splicing, splitting, terminating, connecting, or
protecting signal transmission
Mechanical fasteners
Testing and measurement instruments for the telecommunications and electrical
industries, electronic assembly and fiber optics
Semiconductor packaging and processing equipment and materials, except for
equipment and materials for production and use of photoresists
and photomasks
Cleaning, protecting, finishing and polishing products
Mats and surface coverings
Aggregate and granules
Refinishing and restoration materials and tools
Polymer, ceramic and metal composites
Ceramic fibers and components
Fiber optic materials and components
Fillers as finished or semi-finished goods (includes glass microspheres)
Magazine, billboard and sound advertising
Insulating and absorbing materials
Light control, privacy, energy conservation and safety films (includes (BEF))
Products,components and materials to be incorporated in electronic displays or
for electronic display manufacture, except for i) software for
displays; ii) fully designed and assembled circuit board assemblies;
iii) thin-film transistors for use in displays and tiling of the same
into larger displays; iv) phosphors for displays, except for laser
induced thermal image transfer of phosphors (LITI) and v) color filters
produced utilizing wet photolithographic proofing involving thermal
lamination of color layers
Specialty chemical protectants
Fluorochemicals and fluoropolymers
Products for filtering, separating or extracting physical substances, except for
such products which are components of other IMATION products
Transportation safety (including retroreflective) and control products/systems
Personal safety products
Components for personal hygiene products
Pharmaceuticals and drug delivery products Dental and orthodontic products
Cardiovascular intervention and critical care products
Orthopedic products
Sterilization devices and indicators
Surgical and infection control products
Wound and trauma management products
Sensors/monitors/ diagnostics for medical and personal safety
Microbiology testing, monitoring and control devices
Hearing aids and protective products
Respirators and masks
Security products and systems, except for software and systems routinely used in
electronic information processing
Encapsulated products except for those used for carbonless paper and printing
Fly fishing products
Packaging products and equipment, except for molded plastic products
Vibration damping systems, except for use in or with other IMATION products
Lithium polymer and lithium ion batteries and components therefor
Products and services in 3M Reserved Fields and 3M Supply Fields
EXHIBIT B
3M RESERVED FIELDS
AS DEFINED IN PARAGRAPH 1.6, 3M RESERVED FIELDS MEANS THE FIELDS IDENTIFIED
BELOW TO THE EXTENT SUCH FIELDS ARE OUTSIDE THE SCOPE OF THE IMATION SUPPLY
FIELDS.
I. Unrecorded media (i.e., media having no significant information content
other than formatting, header information and the like), equipment,
systems and sub-systems intended for large scale replication of
pre-recorded analog video and audio tapes and packaging materials for
the same, including tapes known as "AAT" (i.e., dual application or all
application tape for duplication in real time and at high speed).
II. Head cleaners for analog video and audio drives.
III. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of graphics generally of the
type described as graphics for vehicles, recreational equipment, yard
and household equipment, decoration, signs, architectural enhancements,
floor marking and corporate identity items and conspicuity products,
and their substantial equivalents.
IV. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of graphics larger than 22
inches by 29 inches (55.88 cm x 73.66 cm) for uses generally described
as displays, exhibits, advertising or sales promotion, and their
substantial equivalents, but not including:
i) graphics on or produced using silver halide and dry silver
compositions;
ii) graphics produced by photofinishers on photographic film; and
iii) graphics on or produced using lithography.
V. Government and geological mapping as of the Distribution Date and the
normal progression of the technology and business of the foregoing.
VI. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of traffic control materials,
including, without limitation, license plates, validation stickers,
traffic signs, pavement markings, other traffic management markings,
conspicuity markings, and reflective (including retroreflective)
graphics for transportation. Materials, equipment, systems, sub-systems
and the software for running them, intended for traffic or fleet
sensing, management, or control, but not scheduling of service
representatives.
VII. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of pressure-sensitive tapes,
mechanical fastening devices or labels having graphics thereon, or
direct labeling on containers, but not i) the labeling of IMATION's
products either directly or using labels, ii) provision of labels with
or in association with IMATION's products for customer use to label
such products, or iii) for packaging mock-ups.
VIII. Transparency films and framing materials and meeting/presentation
graphics, except for silver halide, dry silver, proofing or thermal dye
sublimation products.
IX. Equipment, systems and sub-systems and the software for running them
for overhead projectors, electronic projectors and display panels for
use with overhead projectors and electronic projectors, but not
including software and displays for conferencing for medical imaging
purposes.
X. Graphics on office supplies generally of the type described as printed
repositionable adhesive backed notes, labels, pads and documents, and
adhesive tapes and tape flags, and substantial equivalents of any of
the foregoing.
XI. Materials, equipment, systems and sub-systems and the software for
running them for electronic manipulation of image data (beyond that
necessary to print or store the data) for purposes of treatment
planning in the dental and orthodontic fields and generation of 3D
reconstructive components or implants in the dental and orthodontic
fields.
XII. Materials, equipment, systems, sub-systems, and the software for
running them, intended for the creation of safety, security, and
identification products of the type generally described as identity
cards, personal safety articles, identification on clothing or other
personal effects, driver licenses, passports, visas, security badges,
security laminates and inventory security control.
XIII. Materials, equipment, systems and sub-systems and software for making
and using Blue-Green Diode Lasers, except for magneto-optical and
optical media for use with Blue-Green Diode Lasers.
XIV. Flexible printed electronic circuits including, but not limited to,
processes, materials, tools and software for the creation and
manufacture of flexible printed tape automated bonding,
microinterconnect systems, and z-axis adhesive interconnect circuits
for electronic circuits, and the normal progression thereof, but not
the sale of lithographic materials for use as photoresists or
photomasks.
XV. Software which was
i) produced,
ii) distributed, either by sale or license, or
iii) the subject of significant development activities and intended
by 3M for outside distribution
prior to the Distribution Date by businesses remaining with 3M on the
Distribution Date, and derivatives thereof, except to the extent that
portions of the software are the same as software which was
i) produced,
ii) distributed, either by sale or license, or
iii) the subject of significant development activities and intended
by 3M for outside distribution
prior to the Distribution Date by businesses being transferred to
IMATION on the Distribution Date.
XVI. Software distributed or under development prior to the Distribution
Date by 3M Health Information Systems, particularly software employing
expert systems technology, that is useful for the coding, grouping and
classification of patient data; determining reimbursement for health
care services; measuring severity of illness and quality of care;
optimizing the use of medical resources; collecting, integrating,
managing and accessing patient data, except for medical image data,
from multiple sources and locations to support patient care
decision-making through master patient indices, longitudinal (lifetime)
data repositories, clinical alerts, and clinical work station-based
patient care applications; and all software resulting from the normal
progression of the technology and business relating to the foregoing,
but excluding interfaces thereto.
PROVIDED, that equipment, materials for running such equipment (but not
substrates for printing or providing graphics on), systems and
sub-systems and the software for running them intended for use with and
graphics produced using liquid toner-based color electrophotography
using organosol toners differentially released from a photoreceptor are
excluded from any and all of the foregoing, subject to Article 18.
EXHIBIT C
3M SUPPLY FIELDS
Chemicals, compositions, formulations, materials, components, devices, articles
and any other items of any type which i) were obtained prior to the Distribution
Date by a 3M business being transferred to IMATION on the Distribution Date from
a business remaining with 3M on the Distribution Date, or ii) if not obtained by
a 3M business being transferred to IMATION on the Distribution Date pursuant to
i) above, are of a nature such that they would have been obtained from a
business remaining with 3M on the Distribution Date had IMATION remained part of
3M.
EXHIBIT D
IMATION EXCLUSIVE FIELDS
AS DEFINED IN PARAGRAPH 1.8, IMATION EXCLUSIVE FIELDS MEANS THE FIELDS
IDENTIFIED BELOW TO THE EXTENT THAT SUCH FIELDS ARE OUTSIDE THE SCOPE OF THE 3M
RESERVED FIELDS AND 3M SUPPLY FIELDS.
I. Unrecorded media (i.e., media having no significant information content
other than formatting, header information and the like) for magnetic,
optical and magneto-optical storage of retrievable representations of
information of any type of the design on sale by 3M as of the
Distribution Date, as well as equipment such as drive equipment,
systems and sub-systems and the software for running them for use
therewith, and future unrecorded media, drive equipment, systems and
sub-systems and the Software for running them resulting from the normal
progression of the technology and business of the foregoing. Examples
of such unrecorded media include, but are not limited to:
computer tape products diskettes
data cartridges magneto-optical disks
optical compact disks
This exclusive field shall not include i) digital beta max cassettes,
or ii) unrecorded media for magnetic analog storage of retrievable
representations of information of the types on sale by 3M's Audio/Video
Group as of the Distribution Date, as well as equipment, systems and
sub-systems and the software for running them for use therewith, and
future unrecorded media, equipment, systems and sub-systems and the
software for running them resulting from the normal progression of the
technology and business of the foregoing. Examples of such unrecorded
media include, but are not limited to:
VHS/Beta/Other videocassettes Open reel recording tape
Beta videocassettes Magnetic film for recording
Audio cassettes motion picture soundtracks
II. Magneto-optical and optical media for use with Blue-Green Diode Lasers.
III. Providing services to others to master and duplicate information on
optical Media.
IV. Liquid organosol film-forming toner intended for use in color
electrophotography. Materials, equipment, systems and sub-systems, and
the software for running them intended for use with and graphics
produced using toner-based color electrophotography using toners
differentially released from a photoreceptor.
V. Materials, equipment, systems and sub-systems and the software for
running them, intended for proofing, but not non-critical proofing
materials sold by 3M's Visual Systems Division as of the Distribution
Date or non-critical proofing materials, intended for use in office
market applications and exhibiting performance characteristics similar
to such existing non-critical proofing materials, resulting from the
normal progression of the technology and business of the foregoing.
VI. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of graphics using lithography
or thermal dye sublimation, but not i) for creation of flexible printed
electronic circuits, ii) materials sold by 3M's Commercial Graphics
Division as of the Distribution Date intended for creation of graphics
smaller than or equal to 22 inches by 29 inches (55.88 cm x 73.66 cm)
for uses generally described as displays, exhibits, advertising or
sales promotion, and their substantial equivalents, or the normal
progression of the technology and business of the foregoing Commercial
Graphics Division's materials, iii) flexography, or iv) use of thermal
dye sublimation intended for overhead transparencies.
VII. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of graphics using silver halide
or dry silver compositions.
VIII. Materials, equipment, systems and sub-systems and the software for
running them, intended for the creation of carbonless paper and laser
perforated or scored business forms.
IX. Materials, equipment, systems and sub-systems and the software for
running them, intended for medical imaging of the body and for medical
image management, except for i) software interfaces thereto; ii) dental
and orthodontic applications; iii) collecting integrating, managing and
accessing patient data to support or manage patient care; and iv)
generation or presentation of data and the like in graphs, charts,
diagrams and the like (in contrast to imaging of the body).
X. Materials, equipment, systems and sub-systems and the software for
running them, intended for the photography industry, generally of the
type described as camera films and cartridges, cameras, printing
systems for camera films and supplies for camera films.
XI. Materials, equipment, systems and sub-systems and the software for
running them, intended for use in monochrome hardcopy document
management and production generally of the type described as documents
produced in a typical office, such as print-outs on stock such as
paper, engineering documents and microfilm systems, and their
substantial equivalents.
XII. Materials, equipment, systems and sub-systems and the software for
running them, intended for use in industrial imaging such as industrial
X-ray systems and ultrasound imaging systems.
XIII. Materials, equipment, systems and sub-systems and the software for
running them, intended for preparation of photomasks and photoresists,
but not for making flexible printed electronic circuits.
XIV. Software which was
i) produced,
ii) distributed, either by sale or license, or
iii) the subject of significant development activities and intended
by 3M for outside distribution
prior to the Distribution Date by businesses being transferred to
IMATION on the Distribution Date, and derivatives thereof, except to
the extent that portions of the software are the same as software which
was
i) produced,
ii) distributed, either by sale or license, or
iii) the subject of significant development activities and intended
by 3M for outside distribution
prior to the Distribution Date by businesses remaining with 3M on the
Distribution Date.
XV. Software and systems for color management, except software and systems
for the development and use of color tables and halftone systems for
use with 3M specified engines or products.
EXHIBIT E
IMATION SUPPLY FIELDS
Materials, components, devices, articles and any other items of any type which
i) were obtained prior to the Distribution Date by a business remaining with 3M
on the Distribution Date from a 3M business being transferred to IMATION on the
Distribution Date, or ii) if not obtained by a business remaining with 3M from a
3M business being transferred to IMATION on the Distribution Date pursuant to i)
above, are of a nature such that they would have been obtained by a business
remaining with 3M on the Distribution Date from a business being transferred to
IMATION on the Distribution Date had IMATION remained part of 3M; but not
including chemicals, compositions, formulations, materials, components, devices,
articles and any other items in 3M Supply Fields.
EXHIBIT F
NON-EXCLUSIVE FIELDS
AS DEFINED IN PARAGRAPH 1.9, NON-EXCLUSIVE FIELDS MEANS THE FIELDS IDENTIFIED
BELOW TO THE EXTENT THAT SUCH FIELDS ARE OUTSIDE THE SCOPE OF THE 3M RESERVED
FIELDS, IMATION EXCLUSIVE FIELDS, 3M SUPPLY FIELDS AND IMATION SUPPLY FIELDS.
I. Recorded media or unrecorded media (i.e., media having no significant
information content other than formatting, header information and the
like) of any type for storage of retrievable representations of
information of any type, as well as equipment, systems, sub-systems and
the software for running them for use therewith, except this does not
include rights to content other than as expressly reserved by and/or
licensed to a Party elsewhere under this Agreement.
II. Accessories generally of the type described as head cleaners, covers,
cases and sleeves for any of the products included in Paragraph I of
Exhibit D.
III. Providing services to others to master and duplicate information or
media.
IV. Materials, systems, sub-systems and the software for running them,
intended for imaging.
V. Unrecorded flash card-type non-volatile electronic memory for storage
of information of any type and the software for running them, but not
components or subassemblies for the foregoing.
VI. Software, except this does not include rights to content in programs or
software other than as expressly reserved by and/or licensed to a Party
elsewhere under this Agreement.
VII. Plastic molding services, components and assembly, but not
microreplication.
VIII. Cellulose triacetate film.
IX. Training, maintenance, field support and similar services consistent
with the rights expressly reserved by and/or licensed to a Party
elsewhere under this Agreement.
IMATION SUPPLY AGREEMENT
This Agreement is between IMATION CORP., a Delaware corporation, with
its principal offices at 1 Imation Place, Oakdale, Minnesota 55128, and its
Affiliates (IMATION), and MINNESOTA MINING AND MANUFACTURING COMPANY, a Delaware
corporation, with its principal offices at 3M Center, St. Paul, Minnesota 55144,
and its Affiliates (3M).
1. PRODUCTS TO BE SOLD.
1.1 IMATION agrees to sell to 3M the raw material, intermediate
products and finished products listed in Exhibit A, manufactured, assembled and
packaged in accordance with the applicable Product specifications, except as
stated in Section 1.3 below (the "Products"). Except for finished Products
listed in Exhibit A, 3M will not resell Products in the form supplied by IMATION
unless specifically agreed to in writing by 3M and IMATION. Additional products
may be added to this Agreement on the mutual written agreement of IMATION and 3M
referencing this Agreement.
1.2 Non-standard Products are Products listed in Exhibit A for which
IMATION and 3M have not yet mutually agreed to a specification. IMATION agrees
to provide Non-standard Products to 3M as described in a mutually agreed to
purchase order.
1) 3M will pay IMATION for Non-standard Products as stated in
Section 3, except that IMATION's Factory Cost will be calculated based
on IMATION's actual costs to produce the Non-standard Products.
2) Section 4 of this Agreement regarding forecasts will not
apply to Non-standard Products. For Non-standard Products, 3M will
provide IMATION with a rolling six (6) month non-binding forecast each
month during the term of this Agreement.
3) Section 8 of this Agreement regarding warranty and remedies
will not apply to Non-standard Products. For Non-standard Products,
IMATION agrees to use its reasonable efforts to meet the Product
definition stated in the purchase order. Non-standard Products are
supplied to 3M "AS IS" AND WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF MERCHANTABILITY,
THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY
IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING, A CUSTOM OR USAGE
OF TRADE.
2. DEFINITIONS.
2.1 "Affiliate" means any corporation, firm, partnership, individual or
other form of business organization as to which the control of the business may
be exercised by a party to this Agreement, any corporation firm, partnership,
individual or other form of business organization in which the party has at
least fifty percent (50%) ownership interest or the maximum ownership interest
it is permitted to have in the county where that business organization exits.
2.2 "Factory Cost" means IMATION's direct raw material, labor and plant
overhead as normally equalized and allocated to the factory unit cost for
production of the Products, and excludes any internal IMATION intracompany
profit markup. Unless otherwise mutually agreed in writing, the initial Factory
Cost will be calculated based on the actual rates for labor and plant overhead
for the fourth quarter of 1995 and first quarter of 1996, and actual April 1996
raw materials costs.
2.3 "Base Cost" means IMATION's Factory Cost for the Product plus six
percent (6%) of the Factory Cost for laboratory, engineering and administrative
expenses. The initial Base Cost is stated in Exhibit A.
2.4 "Rolling Forecast" has the meaning stated in Section 4.2 of this
Agreement.
2.5 "Fixed Zone" has the meaning stated in Section 4.3 of this
Agreement.
2.6 "Intellectual Property Rights Agreement" means the agreement
entitled "Intellectual Property Rights Agreement" between IMATION and 3M and
executed on or about the same date as this Agreement.
2.7 "Effective Date" of this Agreement means the date the distribution
is effective, as defined by the Distribution Agreement between IMATION and 3M
executed on or about the same date as this Agreement.
3. PRODUCT PRICES.
3.1 IMATION agrees to sell Products to 3M at the applicable Base Cost
plus a mark up as follows:
For 1996 - + 5%
For 1997 - + 10%
For 1998 - + 15%
For 1999 and future years under this Agreement - + 15% or as
otherwise mutually agreed in writing
The Base Cost will not change during the term of this Agreement except as stated
in this Section 3. Prices include packaging suitable for shipment. The prices
are F.O.B. IMATION's dock delivered to 3M's designated carrier. The prices do
not include any sales, excise, use, value added or other similar taxes. All such
taxes will be invoiced to and paid by 3M unless 3M provides IMATION with
appropriate exemption certificates.
3.2 Factory Cost for Products will be recalculated annually prior to
January 1 each year, based on the actual costs during the most recent two (2)
calendar quarters for which financial data is available, unless otherwise
mutually agreed in writing.
3.3 If at any time during the term of this Agreement 3M is offered a
product of comparable or better quality, in quantities comparable to the
quantities of those Products purchased under this Agreement, and under
comparable terms and conditions at a cost lower than that for a Product under
this Agreement within the same market as 3M, IMATION will either reduce its
price for the Product to the lower cost within thirty (30) days of receipt of
3M's notice or 3M may purchase the Product elsewhere without providing the
notice required under Section 15.
3.4 If at any time during the term of this Agreement IMATION sells to
any other customer, other than to Affiliates of IMATION, a product of at least
comparable quality and at comparable quantity to that of a Product sold to 3M
under this Agreement, within the same market as 3M at a price lower than that in
effect under this Agreement, IMATION will give 3M the benefit of the lower price
on all deliveries of that Product which are made during the period when the
lower price is in effect.
3.5 Any changes in the prices will apply to orders placed after
implementation of the change.
3.6 IMATION and 3M agree to meet on a regular basis during the term of
this Agreement to review pricing and quality, working towards continuous
improvements and targeted price reduction levels.
3.7 IMATION grants 3M the right to have IMATION's Factory Cost records
for all Products (including the initial Base Cost listed in Exhibit A) audited
by an independent certified public accountant selected by 3M and approved by
IMATION. The independent certified public accountant will agree to treat this
information as confidential and will only disclose to 3M whether or not the
costs IMATION communicated to 3M were accurate. 3M may request an audit no more
than twice each year per Product and is responsible for all costs of the
auditor. If the accountant determines that any costs were inaccurate, then the
Factory Cost will be adjusted accordingly and retroactively for all purchases
made at the inaccurate price.
4. FORECAST.
4.1 On execution of this Agreement and on each anniversary of the
Effective Date of this Agreement during the term of this Agreement, 3M will
provide IMATION with a non-binding written long-range forecast of purchases of
Products for the period stated in Exhibit A, by Product number, for IMATION's
long-range planning purposes. Within thirty (30) days of receipt of 3M's
long-range forecast, IMATION will provide 3M with a non-binding response,
outlining IMATION's anticipated ability to meet the long-range forecast.
4.2 3M will also provide IMATION with a rolling twelve (12) month
forecast each month during the term of this Agreement (the "Rolling Forecast").
The Rolling Forecast will provide specific release quantities for Products
ordered in the Fixed Zone and estimated release quantities for each remaining
month. Within thirty (30) days of receipt of 3M's Rolling Forecast provided on
execution of this Agreement and each anniversary date of the Effective Date of
this Agreement, IMATION will notify 3M whether IMATION has the manufacturing
capacity to supply each Product at the levels stated in the Rolling Forecast.
4.3 3M agrees that each time it gives IMATION a Rolling Forecast, it is
making an 3M commitment to purchase the quantities of Products specified for the
period of time stated in Exhibit A (the "Fixed Zone"). IMATION may rely on Fixed
Zone quantities as a firm commitment in ordering raw materials and scheduling
time needed to manufacture the specified quantities of Products in the Fixed
Zone. Except for those quantities of Products that fall within the Fixed Zone,
the Rolling Forecast will not be construed as a commitment by 3M to purchase any
quantities of Products. When 3M submits a new Rolling Forecast each month, the
new third month Product quantity may not exceed the quantity listed for the
fourth month of the previous Rolling Forecast by more than twenty-five percent
(25%).
4.4 IMATION and 3M agree to accept deviations from the Fixed Zone
quantities of +/- ten percent (10%). Any larger deviations must be mutually
agreed to in writing by IMATION and 3M. If 3M wishes to receive quantities which
exceed the Fixed Zone quantities by more than ten percent (10%), then 3M will
submit to IMATION a written request to deviate from the Fixed Zone quantities.
IMATION will make a good faith effort to comply with such requests. Within five
(5) days after the receipt of a request, IMATION will send 3M a written reply
informing 3M 1) whether or not IMATION is in a position to comply with the
request and 2) if IMATION can comply with the request, the estimated delivery
date for the excess quantities.
4.5 This Section 4 will apply unless on the Effective Date of this
Agreement the ordering process for a Product was a Kanban system or similar
just-in-time inventory system or unless IMATION and 3M mutually agree in writing
to use such a system for any Product. For Products using a Kanban or similar
system, IMATION and 3M agree to continue using that system during the term of
this Agreement.
5. ORDERS, SHIPMENT AND PAYMENT.
5.1 Lead times for ordering Products are stated in Exhibit A. For
Products purchased on a regular basis, 3M will periodically send IMATION Blanket
Purchase Orders. A Blanket Purchase Order is not a commitment by 3M to purchase
Products. 3M will issue Purchase Order Releases against a Blanket Purchase Order
which constitutes 3M's firm commitment to purchase specific quantities of
Products stated in the Purchase Order Release and will be consistent with the
Fixed Zone quantities. 3M will issue Purchase Order Releases specifying
quantities, delivery dates and the eleven (11) digit Product number.
5.2 Any provision in 3M's Purchase Order or Purchase Order Release or
IMATION's invoice that is additional to, conflicts with or differs from the
terms and conditions stated in this Agreement, except as to identification and
quantity of Products involved, will not govern the purchase. All orders are
governed by the provisions of this Agreement.
5.3 3M will send all purchase orders to the applicable address stated
in Exhibit A.
5.4 IMATION will use its reasonable efforts to deliver all Product
ordered consistent with Sections 4.3 and 4.4 to 3M's designated carrier on the
delivery date stated in the Purchase Order or Purchase Order Release, to the
location stated in the order.
5.5 Payment terms are net thirty (30) days from IMATION's invoice date
for shipments within the U.S. For shipments outside the U.S., payment terms are
net sixty (60) days. IMATION will not invoice 3M until the date of delivery of
Product to 3M's designated carrier.
6. PRODUCT SHORTAGES.
If at any time during the term of this Agreement there is a shortage of
any Product, IMATION will allocate its available quantities of that Product
among its purchasers (including IMATION divisions and Affiliates) based on the
proportionate amount of Product purchased in the previous six (6) months.
7. PRODUCT QUALITY AND CHANGES.
7.1 Each Product Specification will be agreed to by IMATION and 3M in
writing prior to the Effective Date of this Agreement. No changes to the Product
Specifications will be made by either party except by mutual written agreement.
7.2 IMATION will deliver a Certificate of Analysis with each shipment
of Products for those Products IMATION was supplying a Certificate of Analysis
prior to the Effective Date of this Agreement. The Certificate of Analysis will
contain the release results of the Product properties and the test methods used
as indicated in the Product Specification.
7.3 Where it has been a practice prior to the Effective Date of this
Agreement, IMATION and 3M will mutually conduct Product testing at IMATION's
facility prior to shipment of the Product to 3M.
7.4 3M and IMATION may from time to time submit to the other party a
written request to make a change to a Product (a "Change Request"). The
requesting party will give the other party at least sixty (60) days prior
written notice of the change. If both parties agree to the proposed change, the
parties will negotiate in good faith any required Product modification
definition, implementation timing, and impact on pricing and non-recurring
engineering cost and capital costs. Any information supplied in a Change Request
will be considered "Confidential Information" by the disclosing party and
subject to Section 12 of this Agreement. IMATION agrees to submit a Change
Request to 3M in connection with any known change in:
1) any Product formulation, raw materials (including source of
supply), or basic methods of manufacturing that may result in a
significant alteration of specified properties, or processing,
performance or handling characteristics of the Product, or
2) the location of the manufacturing facilities of the
Product.
IMATION will not make any of the above changes without the prior written consent
of 3M and will continue to supply 3M with the existing Product until 3M has
qualified the changed Product.
7.5 IMATION will provide 3M with samples of the changed Product for
3M's evaluation and testing on 3M's request. If the change was requested by 3M,
3M will pay for the samples. If the change was requested by IMATION, IMATION
will pay for the samples. If the change was jointly initiated, the cost of the
samples will be shared equally.
8. WARRANTY AND LIMITATION OF REMEDIES; TIME LIMIT FOR FILING ACTION.
8.1 The following warranty and limited remedy are included in the
purchase price of the Products:
THE FOLLOWING WARRANTY IS MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF
MERCHANTABILITY, THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND
ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING, A CUSTOM OR USAGE OF
TRADE:
IMATION warrants that Products will meet the Specifications and be free
from defects in manufacture and material for a period of time stated in Exhibit
A, from the date of delivery to 3M's designated carrier. For defects occurring
within the warranty period and about which IMATION has received notice within
the warranty period, 3M's exclusive remedy and IMATION's sole obligation will
be, at IMATION's option, to replace the quantity of the Product which is proved
to be defective or to refund the purchase price of that quantity. IMATION will
pay 3M for any shipping costs for replacement Product. 3M will obtain a return
authorization number from IMATION prior to returning any defective Product.
8.2 If 3M believes that a unit of a Product is defective, 3M will
document its assessment and rationale in writing to IMATION. IMATION will have
the right to evaluate all alleged defects in the specified Product. If requested
by IMATION, 3M will return allegedly defective Product to IMATION's
manufacturing facility, at IMATION's cost, for evaluation by IMATION. IMATION
will evaluate the allegedly defective Product submitted by 3M within thirty (30)
days of receipt of 3M's documentation, unless otherwise agreed by IMATION and
3M. If IMATION does not confirm the alleged defect, IMATION will document its
assessment and rationale to 3M.
8.3 No employee of IMATION or any other party is authorized to make any
warranty in addition to the warranty made in this Agreement.
8.4 Any action for breach of warranty or other breach of obligation
under this Agreement must be begun within two (2) years after the breach occurs.
9. LIMITATION OF LIABILITIES.
9.1 The limited remedy set forth in Section 8.1 above is 3M's exclusive
remedy in the event of a breach of warranty under this Agreement. In no case
will IMATION be liable for any other direct, indirect, special, incidental or
consequential damages based on breach of warranty under this Agreement.
9.2 In no case will IMATION be liable for any direct damages based on
negligence, strict liability or any legal theory other than breach of contract.
9.3 In no case will IMATION be liable for any indirect, special,
incidental or consequential damages based on negligence, strict liability,
breach of contract or any other legal theory.
9.4 In no case will 3M be liable for any direct, indirect, special,
incidental or consequential damages to IMATION if 3M discontinues purchasing a
Product under this Agreement, or for reliance by IMATION on non-binding
forecasts provided to IMATION under Sections 4.1 and 4.2.
10. INDEMNIFICATION
10.1 3M agrees to indemnify, defend and hold harmless IMATION, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Products supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
IMATION may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Section 10 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
10.2 If IMATION intends to claim indemnification under this Section 10,
IMATION will promptly notify 3M in writing of any claim, action or demand for
which IMATION intends to claim indemnification. In addition, IMATION will
promptly notify 3M in writing if IMATION elects to waive its right to have 3M
defend the claim, action, or demand. If IMATION does not waive its right to have
3M defend the claim, action, or demand, IMATION agrees that 3M will control the
defense of the claim, action, or demand. IMATION will cooperate fully with 3M
and its legal representatives in the investigation and defense of any claim,
action, or demand covered by this indemnification. IMATION will permit 3M to
settle any claim, action, or demand and agrees that 3M will control the
settlement, provided, however, that such settlement does not adversely affect
IMATION's rights under this Agreement or impose any obligations on IMATION in
addition to those stated in this Agreement. 3M, in the defense of any claims,
actions or demands, will not consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to IMATION of a release from all liability with respect to
the claim, action, or demand. No such claim, action, or demand will be settled
by IMATION without the prior written consent of 3M.
11. REGULATORY COMPLIANCE.
11.1 IMATION represents that the Products have been manufactured and
sold in compliance with all applicable federal, state and municipal laws, rules
and regulations.
11.2 IMATION certifies to 3M that each of the component chemicals
contained in each Product has been manufactured 1) in compliance with the
Pre-Manufacture Notice requirements of the United States Toxic Substance Control
Act or the new chemical notification regulations in the country in which it is
manufactured, and 2) in compliance with new chemical notification regulations in
countries outside the U.S. in which the Product is being sold as of the
Effective Date of this Agreement. For Products for which IMATION will be the
importer of record, IMATION will maintain compliance with new chemical
notifications required by law in countries outside the U.S. as long as the
Product is supplied under this Agreement. On 3M's request, IMATION will provide
3M information regarding the status of a component of a Product on inventories
outside the U.S. Also on 3M's request, 3M will have the right to review
IMATION's file of TSCA Section 8(c) "Records of Allegations of Significant
Adverse Reactions" solely as they relate to components of Products.
11.3 Each party will be responsible for the final and proper disposal
of all waste material and hazardous waste material generated in their respective
manufacturing operations.
12. USE OF 3M EQUIPMENT.
12.1 For supply of some Products, 3M may furnish IMATION various pieces
of equipment to be used by IMATION solely to supply the Products under this
Agreement (the "Equipment"). IMATION acknowledges that all Equipment, together
with all drawings and other documentation related to the Equipment are the
property of 3M. 3M will pay all applicable personal property taxes that pertain
to the Equipment.
12.2 IMATION agrees to execute a UCC-1 financing statement, to be filed
by 3M, as an acknowledgment that the Equipment in the custody of IMATION is
owned by 3M. Where practical, pieces of Equipment will be marked with an 3M
identification number. IMATION will not sell, transfer, or remove the Equipment
from IMATION's place of business. In addition, IMATION will not allow any third
party to obtain a mortgage, security interest, lien, or any other type of
encumbrance in or on the Equipment.
12.3 IMATION acknowledges that 3M has made absolutely no
representations or statements about the character, condition, quality or
characteristics of the Equipment. Before using the Equipment, IMATION will do
whatever is necessary to make certain that the Equipment is in a safe and proper
working condition for its intended use. 3M NEITHER EXPRESSES NOR IMPLIES ANY
WARRANTIES AS TO THE QUALITY OR CONDITION OF THE EQUIPMENT AND EXPRESSLY
DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
3M EXPRESSLY DISCLAIMS ANY REPRESENTATIONS ABOUT THE CONDITION, QUALITY,
CAPACITY OR OTHER CHARACTERISTIC OF THE EQUIPMENT. This section applies
regardless of whether 3M has paid or offered IMATION any consideration for use
of the Equipment.
12.4 Except as stated in Section 12.7, IMATION will not make any
alteration in the Equipment without the prior written approval of 3M.
12.5 The Equipment will be used SOLELY AND EXCLUSIVELY for supplying
Products under this Agreement and will not be used for any other purpose
whatsoever without the prior written approval of 3M.
12.6 3M may inspect the Equipment and related documentation at all
reasonable times during normal business hours.
12.7. During the time the Equipment is in IMATION's possession, IMATION
will at its own expense:
1) service the Equipment regularly and maintain the Equipment
in good operating condition at all times in accordance with the
schedule provided by 3M;
2) not allow the Equipment to be misused or to deteriorate,
ordinary wear and tear excepted;
3) provide all routine repair and maintenance for the
Equipment. Major or extraordinary maintenance costs incurred will be
borne by 3M, subject to 3M's prior written approval for IMATION to
undertake those costs.
12.8 3M has the full risk of loss and damage as to any Equipment and
related documentation in IMATION's care, custody or control. 3M waives
subrogation against IMATION for any loss or damage to any Equipment or related
documentation in IMATION's care, custody or control.
12.9 On discontinuation of the Product associated with the Equipment
under this Agreement, IMATION will return any and all Equipment and related
documentation to 3M in the same condition as originally received, loss, damage
and reasonable wear and tear excepted. 3M will pay the cost of tear down,
crating and shipping the Equipment and restoring the premises to their original
condition at the time the Equipment was installed, reasonable wear and tear
excepted. If for any reason IMATION fails to comply promptly with a request to
return Equipment, 3M will have the right to peaceably enter IMATION's premises
during normal business hours to remove the Equipment and 3M may take all action
permitted by law to immediately recover the Equipment. IMATION will on demand
reimburse 3M for all actual and reasonable costs 3M incurs in recovering the
Equipment (including reasonable attorney's fees and other expenses of
litigation). IMATION expressly waives any rights or remedies IMATION may have
with regard to the Equipment, including but not limited to any right IMATION may
have to notice and a hearing or to a bond, undertaking, or surety before a writ
of replevin, order of seizure, or similar writ or order will issue or become
enforceable.
13. CONFIDENTIAL INFORMATION.
13.1 As used in this Agreement, IMATION Confidential Information and 3M
Confidential Information are defined as follows:
1) "IMATION CONFIDENTIAL INFORMATION" means information known
by 3M on the Effective Date of this Agreement and reasonably understood
by 3M to be confidential and related to IMATION's business interests,
or disclosed confidentially by IMATION to 3M after the Effective Date
of this Agreement under the terms and for purposes of this Agreement
except for:
(i) information learned by 3M for the first time
after the Effective Date of this Agreement, but prior to any
disclosure by IMATION;
(ii) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(iii) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does
not have a duty of non-disclosure owed to such third party,
(b) the third party's disclosure is not violative of a duty
of non-disclosure owed to another, including IMATION, and (c)
the disclosure by the third party is not otherwise unlawful;
(iv) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
Effective Date and/or disclosed by IMATION under this
Agreement;
(v) information which is inherently disclosed in
marketing of a product by 3M in the usual course of business
and within the scope of the rights granted to or retained by
3M under this Agreement or the Intellectual Property Rights
Agreement.
(vi) information which is developed by a business
which is being transferred to IMATION and constitutes
performance specifications for chemicals, composition,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business remaining with 3M on the Effective Date; and
(vii) information which IMATION can demonstrate was
disclosed by a 3M business being transferred to IMATION to a
third party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party has
expired, from and after the date such third party obligation
of confidentiality expires, and provided that disclosure of
an item of information to one third party and a different
item of information to another third party shall not be
viewed as disclosure of information which can only be drawn
from those items of information collectively.
2) "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Effective Date and reasonably understood by IMATION to
be confidential and related to 3M's present or future business
interests, or disclosed confidentially by 3M to IMATION under the terms
and for purposes of this Agreement except for:
(i) information learned by IMATION for the first
time subsequent to the Effective Date of this Agreement, but
prior to any disclosure by 3M;
(ii) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(iii) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not
violative of a duty of non-disclosure owed to another,
including 3M, and (c) the disclosure by the third party is
not otherwise unlawful;
(iv) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the Effective Date and/or disclosed by 3M under this
Agreement;
(v) information which is inherently disclosed in
marketing of a product by IMATION in the usual course of
business and within the scope of the rights granted to or
retained by IMATION under this Agreement or the Intellectual
Property Rights Agreement.
(vi) information which is developed by a business
which remains with 3M on the Effective Date and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business being transferred to IMATION on the Effective Date;
and
(vii) information which 3M can demonstrate was
disclosed to a third party prior to November 14, 1995, and
for which any obligation of confidentiality by that third
party has expired, from and after the date of such third
party obligation of confidentiality expires, and provided
that disclosure of an item of information to one third party
and a different item of information to another third party
shall not be viewed as disclosure of information which can
only be drawn from those items of information collectively.
13.2 IMATION and 3M each shall not disclose to another or use except
for purposes of the Agreement any business information which is 3M Confidential
Information or IMATION Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is 3M
Confidential Information and IMATION Confidential Information five (5) years
after the date of disclosure of such information, unless and to the extent the
parties agree to a longer period for the foregoing restrictions with respect to
specific categories of business information which is 3M Confidential Information
and/or IMATION Confidential Information, in which case the foregoing
restrictions shall expire with respect to such information on the expiration of
such longer period. The date of disclosure in the case of business information
which is either IMATION Confidential Information known by 3M or 3M Confidential
Information known by IMATION on the Effective Date shall be considered to be the
Effective Date.
13.3 IMATION and 3M each shall not disclose to another or use except
for purposes of this Agreement any technical information which is 3M
Confidential Information or IMATION Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be 3M Confidential Information or IMATION
Confidential Information, as the case may be.
13.4 Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a reasonable degree
of care, to prevent the unauthorized disclosure of the other party's
Confidential Information as the party uses to protect its own confidential
information of a like nature.
13.5 Each party shall insure that its Affiliates, sublicensees and
other transferees agree to be bound by the same restrictions on use and
disclosure of Confidential Information as bind the party in advance of the
disclosure of Confidential Information to them.
13.6 The parties recognize that IMATION Confidential Information and/or
3M Confidential Information disclosed under this Agreement may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
14. PATENT INFRINGEMENT.
14.1 IMATION will indemnify, defend and hold 3M harmless from all cost,
expense and liability, including attorney's fees, arising out of any claim or
action based on actual or alleged infringement by Products, as shipped by
IMATION to 3M, of any third party Letters Patent, copyright, trade secret or
other proprietary interest; with the proviso that IMATION will have no liability
to 3M for any actual or claimed infringement arising out of (1) compliance by
IMATION with detailed designs, plans or specifications furnished by 3M unless
such infringement would arise independent of such designs, plans and
specifications, (2) use of Products by 3M in combination with other equipment or
materials not reasonably contemplated by IMATION or (3) use of Products or any
part thereof by 3M in a manner not reasonably contemplated by IMATION.
14.2 3M will indemnify, defend and hold IMATION harmless from all cost,
expense and liability, including attorney's fees, arising out of any claim or
action based on actual or alleged infringement by Products, as shipped by
IMATION to 3M, of any third party Letters Patent, copyright, trade secret or
other proprietary interest to the extent such infringement arises out of (1)
compliance by IMATION with detailed designs, plans or specifications furnished
by 3M unless such infringement would arise independent of such designs, plans
and specifications, (2) use of Products by 3M in combination with other
equipment or materials not reasonably contemplated by IMATION or (3) use of
Products or any part thereof by 3M in a manner not reasonably contemplated by
IMATION.
14.3 The party seeking indemnification under this Section 14 will give
the other party notice of any infringement claim or action which may arise under
this Agreement, and will allow the other party at its option to control the
defense thereof and will provide at the other party's expense reasonable
cooperation in the defense or settlement of and claim or action.
14.4 The terms and conditions of this Section 14 will survive the
termination of this Agreement for any reason whatsoever.
15. TERM AND TERMINATION.
15.1 The term of this Agreement will commence on the Effective Date and
will continue until terminated as stated in Section 15.2.
15.2 This Agreement may be terminated only as follows:
1) automatically on the discontinuation of the last Product
under this Agreement;
2) at any time on thirty (30) days prior written notice to the
other party if the other party is in default of its obligations under
this Agreement and has not remedied the default within the thirty (30)
day period;
3) subject to applicable bankruptcy laws, by written notice to
the other party if bankruptcy or insolvency proceedings are instituted
by or against the other party, or if the other party acknowledges its
insolvency in any manner, or if the other party is adjudicated a
bankrupt, makes an assignment for the benefit of its creditors or
proposes or makes any arrangement for the liquidation of its debts; or
4) by written notice to the other party if the other party
assigns or delegates this Agreement contrary to Section 18.
15.3 Even after termination, the provisions of this Agreement still
apply to all Product ordered, all obligations created or arising, and all
transactions and events occurring before the date of termination.
16. DISCONTINUATION OF PRODUCTS.
IMATION may discontinue sales of individual Products at any time by
giving 3M written notice, as stated in Exhibit A, prior to the desired
discontinuation date. 3M may discontinue purchases of individual Products at any
time by giving IMATION written notice as stated in Exhibit A. After receipt of a
notice of discontinuing a Product, 3M's orders for that Product may not exceed
one hundred twenty-five percent (125%) of the most recent Rolling Forecast.
This Section 16 does not apply if 3M discontinues purchases under
Section 3.4 or if the discontinuation is due to 3M closing a manufacturing
facility or ceasing to market a 3M product which uses a Product in its
manufacture. If the discontinuation is for a reason stated above, 3M will give
IMATION as much notice as reasonably practical.
17. MANUFACTURE OF PRODUCTS BY A THIRD PARTY VENDOR OR 3M.
17.1 On occurrence of one of the events contemplated by Section 17.4,
IMATION shall elect, at IMATION's sole option, one of the following
alternatives: Option A, select and grant a royalty-free, nonexclusive license to
a third party vendor to manufacture the particular Product concerned for 3M,
provided that any proposed third party vendor shall be subject to 3M's
reasonable approval; or Option B, grant a royalty-free license to 3M solely to
manufacture or have manufactured the particular Product concerned, provided that
any proposed third party selected by 3M in exercising its rights to have
manufactured shall be subject to IMATION's reasonable approval. Both Option A
and Option B shall be in accordance with the other provisions of this Section
17. If it appears likely that IMATION will elect to resume supplying a Product
under Section 17.5, 3M will exercise such licenses in a manner to facilitate
that resumption and minimize associated costs.
17.2 IMATION shall provide to any third party vendor pursuant to Option
A, or to 3M or any third party selected by 3M pursuant to Option B, at IMATION's
expense, reasonable technical assistance to allow the third party vendor, 3M or
any third party selected by 3M, as the case may be, to manufacture the
particular Product concerned, such technical assistance not to exceed ten (10)
person-days.
17.3 Any license under proprietary information disclosed by IMATION to
any third party vendor, 3M or any third party selected by 3M pursuant to this
Section 17 is strictly limited to use of such proprietary information by the
recipient for manufacturing the particular Product concerned for subsequent use
in manufacturing products to be sold by 3M, and the license includes no other
rights whatsoever. Any third party selected pursuant to Option A or B shall
further be subject to restrictions on disclosure at least as stringent as those
contemplated in Section 12. Any patent license pursuant to this Section 17 is
strictly limited to the manufacture of the particular Product concerned, using
the proprietary information which is disclosed to the third party vendor, 3M or
any third party selected by 3M, for subsequent use in manufacturing products to
be sold by 3M, and the license includes no other rights whatsoever. Further, any
license under proprietary information and/or patents granted under this Section
17 pursuant to Section 17.4-4) shall be limited to the manufacture of such
quantities of Product in excess of the quantity IMATION notified 3M it has the
manufacturing capacity to supply pursuant to Section 4.2.
17.4 Occurrence of any of the following shall constitute an event
requiring IMATION to elect Option A or Option B pursuant to Section 17.1:
1) IMATION notifies 3M in writing that it will discontinue the
supply of a Product under Section 17 of this Agreement which 3M still
wishes to purchase for a sustained period of time in quantities
substantially comparable to quantities purchased from IMATION
previously. Such discontinuation, if the result of force majeure, shall
take effect immediately upon issuance of such written notice. Such
discontinuation, if not the result of force majeure, shall not take
effect until after the time period for notice of discontinuation stated
in Exhibit A.
2) 3M provides to IMATION written notification that at least
twenty percent (20%) of a Product supplied by IMATION to 3M materially
does not comply with mutually agreed Product Specification, and after a
period of four (4) consecutive months IMATION has not brought the
Product into material compliance with the Product Specification despite
cooperation from 3M in attempting to bring the Product into compliance
with the Product Specification.
3) IMATION places the Product on allocation such that 3M
receives less than sixty (60%) of its Requirements for that Product for
more than six (6) consecutive months.
4) IMATION notified 3M under Section 4.2 that IMATION does not
have the manufacturing capacity to supply a Product at the level stated
in 3M's Rolling Forecast.
17.5 If IMATION's discontinuation of supply of a Product to 3M is as a
result of force majeure or as a result of Section 17.4-2), 3) or 4), resulting
in implementation of Option A or Option B, IMATION may elect to resume supplying
the particular Product concerned to 3M. In the event that IMATION elects to
resume supply of the particular Product concerned pursuant to this Section 17.5,
any licenses under proprietary information and patents granted under this
Section 17 terminate forthwith upon such resumption of supply from IMATION.
IMATION and 3M agree to work together to affect the resumption of supply from
IMATION in a reasonable manner.
17.6 3M shall indemnify and hold IMATION harmless from any and all loss
or liability of any and all claims, causes of action, suits, proceedings,
losses, damages, demands, fees, expenses, fines, penalties and costs (including
without limitation reasonable attorney's fees, costs and disbursements) arising
from any injury or alleged injury to any person or business for property damage,
personal injury or incidental, special or consequential damages caused by any
Products made or processes performed under the license granted under this
Section 17.
18. ASSIGNMENT.
18.1 Neither party may assign or transfer this Agreement or any of its
rights and obligations under this Agreement without the prior written consent of
the other party, except that 3M may assign or transfer all or part of this
Agreement to a purchaser of or successor in interest to all or a portion of 3M's
businesses.
18.2 If 3M assigns or transfers all or part of this Agreement to a
purchaser or successor in interest, the pricing for Products as stated in
Section 3 will continue for a period of one (1) year and will then convert to
market pricing mutually agreed to by IMATION and the purchaser. All other
provisions of the Agreement will remain in effect, except as follows:
1) Any right to purchase Products so assigned or transferred
shall be strictly limited to the right to purchase such Products
required for use in manufacturing products previously manufactured by
3M before such assignment or transfer and any future products resulting
from the normal progression of the business and technology of such
products.
2) Any licenses which thereafter are granted pursuant to
Section 16 to or on behalf of the purchaser or successor in interest
shall be royalty-bearing, with terms commensurate with industry
standards.
3) Any purchaser or successor in interest shall agree in any
such assignment or transfer to utilize reasonable efforts to find an
alternative source of supply not dependent upon intellectual property
owned by IMATION to obviate the need for any licenses from IMATION in
the first instance.
19. DISPUTE RESOLUTION.
19.1 The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 19.11, these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
19.2 A party seeking to initiate the procedures shall give written
notice to the other party, describing briefly the nature of the dispute. A
meeting shall be held between the parties within ten (10) days of the receipt of
such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
19.3 If, within thirty (30) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they agree to submit
the dispute to mediation in accordance with the Center for Public Resources
Model ADR Procedure - Mediation of Business Disputes, as modified herein, and to
bear equally the costs of the mediation.
19.4 The parties will jointly appoint a mutually acceptable mediator,
seeking assistance in such regard from the Center for Public Resources or
another mutually agreed-upon organization if they are unable to agree upon such
appointment within twenty (20) days from the conclusion of the negotiation
period.
19.5 The parties agree to participate in good faith in the mediation
and negotiations related thereto for a period of thirty (30) days or such longer
period as they may mutually agree following the initial mediation session.
1) If the parties are not successful in resolving the dispute
through mediation by the end of such period, then the parties agree to
submit the matter to binding arbitration in accordance with the Center
for Public Resources Rules for Non-Administered Arbitration of Business
Disputes, as modified herein, by a sole arbitrator selected in
accordance with the provisions of Section 19.6. The arbitration
proceeding shall be held in Minnesota and shall be governed by the
United States Arbitration Act, 9 U.S.C. ss.ss. 1-16. Judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction.
2) The parties' obligation under this Section 19 to submit
dispute to binding arbitration in lieu of seeking judicial resolution
of their disputes shall expire on July 1, 2001.
19.6 The parties shall have ten (10) days from the end of the mediation
period to agree upon a mutually acceptable neutral person not affiliated with
either of the parties to act as arbitrator. If no arbitrator has been selected
within such time, the parties agree to jointly request the Center for Public
Resources or another mutually agreed-upon organization to supply within ten (10)
days a list of potential arbitrators with qualifications as specified by the
parties in the joint request. Within five (5) days of receipt of the list, the
parties shall independently rank the proposed candidates, shall simultaneously
exchange rankings, and shall be deemed to have selected as the arbitrator the
individual receiving the highest combined ranking who is available to serve. If
there is a tie, then the tie will be broken by putting the names on slips of
paper, mixing them up and one party drawing one slip of paper.
19.7 The costs of arbitration shall be apportioned between the parties
as determined by the arbitrator in such manner as the arbitrator deems
reasonable taking into account the circumstances of the case, the conduct of the
parties during the proceeding, and the result of the arbitration.
19.8 Any arbitration proceeding shall be concluded in a maximum of one
(1) year from written notice from one party to the other party identifying a
dispute subject to arbitration under this Section and requesting arbitration
after having participated in negotiation and mediation under this Section.
19.9 All negotiations and mediations pursuant to this Section shall be
treated as compromise and settlement negotiations for purposes of Rule 408 of
the Federal Rules of Evidence and comparable Minnesota Rules of Evidence.
19.10 All negotiation, mediation and arbitration proceedings under this
Section shall be treated as Confidential Information and shall not be disclosed
to any third party unless a party is legally required to disclose the
information. Any mediator or arbitrator shall be bound by an agreement
containing confidentiality provisions.
19.11 Nothing herein shall preclude either party from taking whatever
actions are necessary to prevent any immediate, irreparable harm to its
interests, including multiple breaches of this Agreement by the other party.
Otherwise, these procedures are exclusive and shall be fully exhausted prior to
the initiation of any litigation. Either party may seek specific enforcement of
any arbitrator's decision under this Section. The other party's only defense to
such a request for specific enforcement shall be fraud by or on the arbitrator.
20. NOTICES.
20.1 All notices will be in writing and will be delivered by courier,
facsimile transmission or prepaid first class mail. Notices delivered by courier
or facsimile transmission will be deemed to have been given on the date of
delivery. Notices delivered by first class mail will be deemed to have been
given on the next business day after date of mailing.
20.2 All notices will be addressed as follows and to the appropriate
contact person for the Product as listed in Exhibit A:
(a) if to 3M: Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
Facsimile: 612/736-7859
(b) if to IMATION: Imation Corp.
General Counsel
P. O. Box 64898
St. Paul, MN 55164-0898
Facsimile:
20.3 Either party may change its address for notice by giving notice in
accordance with Sections 20.1 and 20.2.
21. GENERAL TERMS.
21.1 This Agreement will be governed by the laws of the State of
Minnesota.
22.2 Except for 3M's obligation to make payments to IMATION, neither
party is liable to the other for damages caused by delays in delivery or
performance due to acts of God or other causes beyond its control. During any
period where IMATION's performance of this Agreement is made impracticable by
any reason stated in this Section, IMATION will allocate any processing
capability for delivery in the manner stated in Section 6 of this Agreement.
22.3 This Agreement is binding on and benefits the parties, their
successors and permitted assigns.
22.4 IMATION and 3M do not in any way or for any purpose intend to
become partners in the conduct of a business or otherwise, or joint venturers,
or members of a joint enterprise under this Agreement. The relationship will be
one of manufacturer and purchaser. Neither party will have any authority to
obligate, or to otherwise act as representative of, or agent for, the other
party for any purpose, and neither party will make any representations or hold
itself out as having such authority.
22.5 This Agreement may only be modified by a written amendment signed
by both parties. A course of conduct or performance does not modify or amend
this Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
22.6 This Agreement and all Exhibits constitute the entire Agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Exhibit and any documents used by the parties in
performing their obligations under this Agreement or any Exhibit, the provisions
of this Agreement and the relevant Exhibit will govern.
22.7 All Section headings are included for reference only and will not
affect the meaning of the relevant Sections. All references to "Section" mean a
Section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND IMATION CORP.
MANUFACTURING COMPANY (IMATION)
(3M)
By:_______________________________ By:_______________________________
Livio D. DeSimone William T. Monahan
Chairman of the Board and Chief Executive Officer
Chief Executive Officer
Date:_____________________________ Date:_____________________________
Exhibit A - List of Products
3M SUPPLY AGREEMENT
This Agreement is between MINNESOTA MINING AND MANUFACTURING COMPANY, a
Delaware corporation, with its principal offices at 3M Center, St. Paul,
Minnesota 55144, and its Affiliates (3M), and IMATION CORP., a Delaware
corporation, with its principal offices at 1 Imation Place, Oakdale, Minnesota
55128, and its Affiliates (IMATION).
1. PRODUCTS TO BE SOLD.
1.1 3M agrees to sell to IMATION the raw material, intermediate
products and finished products listed in Exhibit A, manufactured, assembled and
packaged in accordance with the applicable Product specifications, except as
stated in Section 1.3 below (the "Products"). Except for finished Products
listed in Exhibit A, IMATION will not resell Products in the form supplied by 3M
unless specifically agreed to in writing by IMATION and 3M. Additional products
may be added to this Agreement on the mutual written agreement of 3M and IMATION
referencing this Agreement.
1.2 3M agrees not to sell Chemical Products to any third party while
that Product is being supplied under this Agreement. In order to maintain this
exclusivity for a particular Chemical Product, IMATION agrees to purchase one
hundred percent (100%) of its Requirements for that Chemical Product from 3M. If
IMATION does not purchase its Requirements of a Chemical Product from 3M,
IMATION's rights to that Product will convert from exclusive to non-exclusive
and 3M will be free to sell that Product to third parties. Nothing in this
Section 1.2 will affect the rights and obligations of 3M and IMATION under the
Intellectual Property Rights Agreement.
1.3 Non-standard Products are Products listed in Exhibit A for which 3M
and IMATION have not yet mutually agreed to a specification. 3M agrees to
provide Non-standard Products to IMATION as described in a mutually agreed to
purchase order.
1) IMATION will pay 3M for Non-standard Products as stated in
Section 3, except that 3M's Factory Cost will be calculated based on
3M's actual costs to produce the Non-standard Products.
2) Section 4 of this Agreement regarding forecasts will not
apply to Non-standard Products. For Non-standard Products, IMATION will
provide 3M with a rolling six (6) month non-binding forecast each month
during the term of this Agreement.
3) Section 8 of this Agreement regarding warranty and remedies
will not apply to Non-standard Products. For Non-standard Products, 3M
agrees to use its reasonable efforts to meet the Product definition
stated in the purchase order. Non-standard Products are supplied to
IMATION "AS IS" AND WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF MERCHANTABILITY,
THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND ANY
IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING, A CUSTOM OR USAGE
OF TRADE.
2. DEFINITIONS.
2.1 "Affiliate" means any corporation, firm, partnership, individual or
other form of business organization as to which the control of the business may
be exercised by a party to this Agreement, any corporation firm, partnership,
individual or other form of business organization in which the party has at
least fifty percent (50%) ownership interest or the maximum ownership interest
it is permitted to have in the county where that business organization exits.
2.2 "Chemical Products" means the chemical Products listed in Exhibit
A-1 of this Agreement.
2.3 "Film Products" means the film Products listed in Exhibit A-2 of
this Agreement.
2.4 "Miscellaneous Products" means the Products listed in Exhibit A-3
of this Agreement.
2.5 "Factory Cost" means 3M's direct raw material, labor and plant
overhead as normally equalized and allocated to the factory unit cost for
production of the Products, and excludes any internal 3M intracompany profit
markup. Unless otherwise mutually agreed in writing, the initial Factory Cost
will be calculated based on the actual rates for labor and plant overhead for
the fourth quarter of 1995 and first quarter of 1996, and actual April 1996 raw
materials costs. 3M and IMATION agree that non-recurring costs incurred at
Caserta during the fourth quarter of 1995 and first quarter of 1996 will not be
included in the initial Factory Cost for Film Products.
2.6 "Base Cost" means 3M's Factory Cost for the Product plus six
percent (6%) of the Factory Cost for laboratory, engineering and administrative
expenses. The initial Base Cost is stated in Exhibit A.
2.7 "Rolling Forecast" has the meaning stated in Section 4.2 of this
Agreement.
2.8 "Fixed Zone" has the meaning stated in Section 4.3 of this
Agreement.
2.9 "Intellectual Property Rights Agreement" means the agreement
entitled "Intellectual Property Rights Agreement" between 3M and IMATION and
executed on or about the same date as this Agreement.
2.10 "Effective Date" of this Agreement means the date the distribution
is effective, as defined by the Distribution Agreement between 3M and IMATION
and executed on or about the same date as this Agreement.
2.11 "Requirements" means IMATION's total manufacturing requirements
of the applicable Product, except to the extent that (i) 3M has failed to supply
the Product in accordance with this Agreement or is otherwise in default of this
Agreement, (ii) 3M is unable to supply the Product for any reason, or (iii) 3M
has elected not to reduce its price for the Product to meet a comparable third
party offer under Section 3.4
3. PRODUCT PRICES.
3.1 3M agrees to sell Products to IMATION at the applicable Base Cost
plus a mark up as follows:
For 1996 - + 5%
For 1997 - + 10%
For 1998 - + 15%
For 1999 and future years under this Agreement - + 15% or as
otherwise mutually agreed in writing
The Base Cost will not change during the term of this Agreement except as stated
in this Section 3. Prices include packaging suitable for shipment. The prices
are F.O.B. 3M's dock delivered to IMATION's designated carrier. The prices do
not include any sales, excise, use, value added or other similar taxes. All such
taxes will be invoiced to and paid by IMATION unless IMATION provides 3M with
appropriate exemption certificates.
3.2 Prices for Film Products will be adjusted as follows:
1) For orders placed during 1996 and 1997, 3M's Factory Cost
will be adjusted quarterly and only to the extent of changes in 3M's
actual raw material costs for PTA and Mono Ethylene Glycol. The Factory
Cost will be adjusted if the prices for Mono Ethylene Glycol and/or PTA
change +/- three percent (3%) from the previous review date.
2) Through 1997, every six (6) months 3M and IMATION agree to
meet to review any reductions in the labor and plant overhead portion
of all Factory Costs. Any Factory Cost savings will be shared equally
by 3M and IMATION and reflected in an adjusted Factory Cost.
3) For orders placed during 1998, Factory Cost will be
recalculated prior to January 1, 1998, based on the average of 3M's
actual Factory Cost during the most recent two (2) calendar quarters
for which financial data is available, unless otherwise mutually agreed
in writing.
4) For orders placed during 1999 and future years during the
term of this Agreement, the Factory Cost will be recalculated annually
prior to January 1 of that year, based on the average of 3M's actual
Factory Cost during the most recent two (2) calendar quarters for which
financial data is available, unless otherwise mutually agreed in
writing.
5) IMATION agrees to purchase from 3M the following percentage
of its Requirements of those Film Products, as defined by the
applicable Product specification, that IMATION was purchasing from 3M
on the Effective Date:
For 1996 and 1997 90% of IMATION's Requirements
For 1998 80% of IMATION's Requirements
If IMATION does not purchase its stated percentage of Requirements for
a Film Product in accordance with this Section 3.2, 3M will be entitled
to discontinue supply of all Film Products without providing notice as
stated in Section 16.2.
3.3 Factory Cost for Chemical Products and Miscellaneous Products will
be recalculated annually prior to January 1 each year, based on actual costs
during the most recent two (2) calendar quarters for which financial data is
available, unless otherwise mutually agreed in writing.
3.4 If at any time during the term of this Agreement IMATION is offered
a product of comparable or better quality, in quantities comparable to the
quantities of those Products purchased under this Agreement, and under
comparable terms and conditions at a cost lower than that for a Product under
this Agreement within the same market as IMATION, 3M will either reduce its
price for the Product to the lower cost within thirty (30) days of receipt of
IMATION's notice or IMATION may purchase the Product elsewhere without providing
the notice required under Section 16.2.
3.5 If at any time during the term of this Agreement 3M sells to any
other customer, other than to Affiliates of 3M, a product of at least comparable
quality and at comparable quantity to that of a Product sold to IMATION under
this Agreement, within the same market as IMATION at a price lower than that in
effect under this Agreement, 3M will give IMATION the benefit of the lower price
on all deliveries of that Product which are made during the period when the
lower price is in effect.
3.6 Any changes in the prices will apply to orders placed after
implementation of the change.
3.7 3M and IMATION agree to meet on a regular basis during the term of
this Agreement to review pricing and quality, working towards continuous
improvements and targeted price reduction levels.
3.8 3M grants IMATION the right to have 3M's Factory Cost records for
all Products (including the initial Base Cost listed in Exhibit A) audited by an
independent certified public accountant selected by IMATION and approved by 3M.
The independent certified public accountant will agree to treat this information
as confidential and will only disclose to IMATION whether or not the costs 3M
communicated to IMATION were accurate. IMATION may request an audit no more than
twice each year per Product and is responsible for all costs of the auditor. If
the accountant determines that any costs were inaccurate, then the Factory Cost
will be adjusted accordingly and retroactively for all purchases made at the
inaccurate price.
3.9 IMATION grants 3M the right to have IMATION's purchasing records
relating to exclusive Products under Section 1.2 and Film Products audited by an
independent certified public accountant selected by 3M and approved by IMATION.
The independent certified public accountant will agree to treat this information
as confidential and will only disclose to 3M whether or not IMATION is meeting
its stated percentage of purchase Requirements as stated in Section 1.2 and
Section 3.2-5. 3M may request an audit no more than twice each year per Product
and is responsible for all costs of the auditor.
4. FORECAST.
4.1 On execution of this Agreement and on each anniversary of the
Effective Date of this Agreement during the term of this Agreement, IMATION will
provide 3M with a non-binding written long-range forecast of purchases of
Products for the period stated in Exhibit A, by Product number, for 3M's
long-range planning purposes. Within thirty (30) days of receipt of IMATION's
long-range forecast, 3M will provide IMATION with a non-binding response,
outlining 3M's anticipated ability to meet the long-range forecast.
4.2 IMATION will also provide 3M with a rolling twelve (12) month
forecast each month during the term of this Agreement (the "Rolling Forecast").
The Rolling Forecast will provide specific release quantities for Products
ordered in the Fixed Zone and estimated release quantities for each remaining
month. Within thirty (30) days of receipt of IMATION's Rolling Forecast provided
on execution of this Agreement and each anniversary date of the Effective Date
of this Agreement, 3M will notify IMATION whether 3M has the manufacturing
capacity to supply each Product at the levels stated in the Rolling Forecast.
4.3 IMATION agrees that each time it gives 3M a Rolling Forecast, it is
making an IMATION commitment to purchase the quantities of Products specified
for the period of time stated in Exhibit A (the "Fixed Zone"). 3M may rely on
Fixed Zone quantities as a firm commitment in ordering raw materials and
scheduling time needed to manufacture the specified quantities of Products in
the Fixed Zone. Except for those quantities of Products that fall within the
Fixed Zone, the Rolling Forecast will not be construed as a commitment by
IMATION to purchase any quantities of Products. When IMATION submits a new
Rolling Forecast each month, the new third month Product quantity may not exceed
the quantity listed for the fourth month of the previous Rolling Forecast by
more than twenty-five percent (25%).
4.4 3M and IMATION agree to accept deviations from the Fixed Zone
quantities of +/- ten percent (10%). Any larger deviations must be mutually
agreed to in writing by 3M and IMATION. If IMATION wishes to receive quantities
which exceed the Fixed Zone quantities by more than ten percent (10%), then
IMATION will submit to 3M a written request to deviate from the Fixed Zone
quantities. 3M will make a good faith effort to comply with such requests.
Within five (5) days after the receipt of a request, 3M will send IMATION a
written reply informing IMATION 1) whether or not 3M is in a position to comply
with the request and 2) if 3M can comply with the request, the estimated
delivery date for the excess quantities.
4.5 This Section 4 will apply unless on the Effective Date of this
Agreement the ordering process for a Product was a Kanban system or similar
just-in-time inventory system or unless 3M and IMATION mutually agree in writing
to use such a system for any Product. For Products using a Kanban or similar
system, 3M and IMATION agree to continue using that system during the term of
this Agreement.
5. ORDERS, SHIPMENT AND PAYMENT.
5.1 Lead times for ordering Products are stated in Exhibit A. For
Products purchased on a regular basis, IMATION will periodically send 3M Blanket
Purchase Orders. A Blanket Purchase Order is not a commitment by IMATION to
purchase Products. IMATION will issue Purchase Order Releases against a Blanket
Purchase Order which constitutes IMATION's firm commitment to purchase specific
quantities of Products stated in the Purchase Order Release and will be
consistent with the Fixed Zone quantities. IMATION will issue Purchase Order
Releases specifying quantities, delivery dates and the eleven (11) digit Product
number.
5.2 Any provision in IMATION's Purchase Order or Purchase Order Release
or 3M's invoice that is additional to, conflicts with or differs from the terms
and conditions stated in this Agreement, except as to identification and
quantity of Products involved, will not govern the purchase. All orders are
governed by the provisions of this Agreement.
5.3 IMATION will send all purchase orders to the applicable address
stated in Exhibit A.
5.4 3M will use its reasonable efforts to deliver all Product ordered
consistent with Sections 4.3 and 4.4 to IMATION's designated carrier on the
delivery date stated in the Purchase Order or Purchase Order Release, to the
location stated in the order.
5.5 Payment terms are net thirty (30) days from 3M's invoice date for
shipments within the U.S. For shipments outside the U.S., payment terms are net
sixty (60) days. 3M will not invoice IMATION until the date of delivery of
Product to IMATION's designated carrier.
6. PRODUCT SHORTAGES.
If at any time during the term of this Agreement there is a shortage of
any Product, 3M will allocate its available quantities of that Product among its
purchasers (including 3M divisions and Affiliates) based on the proportionate
amount of Product purchased in the previous six (6) months.
7. PRODUCT QUALITY AND CHANGES.
7.1 Each Product Specification will be agreed to by 3M and IMATION in
writing prior to the Effective Date of this Agreement. No changes to the Product
Specifications will be made by either party except by mutual written agreement.
7.2 3M will deliver a Certificate of Analysis with each shipment of
Products for those Products 3M was supplying a Certificate of Analysis prior to
the Effective Date of this Agreement. 3M will begin delivering a Certificate of
Analysis with each shipment of all Chemical Products and Film Products no later
than January 1, 1997. The Certificate of Analysis will contain the release
results of the Product properties and the test methods used as indicated in the
Product Specification.
7.3 Where it has been a practice prior to the Effective Date of this
Agreement, 3M and IMATION will mutually conduct Product testing at 3M's facility
prior to shipment of the Product to IMATION.
7.4 IMATION and 3M may from time to time submit to the other party a
written request to make a change to a Product (a "Change Request"). The
requesting party will give the other party at least sixty (60) days prior
written notice of the change. If both parties agree to the proposed change, the
parties will negotiate in good faith any required Product modification
definition, implementation timing, and impact on pricing and non-recurring
engineering cost and capital costs. Any information supplied in a Change Request
will be considered "Confidential Information" by the disclosing party and
subject to Section 13 of this Agreement. 3M agrees to submit a Change Request to
IMATION in connection with any known change in:
1) any Product formulation, raw materials (including source of
supply), or basic methods of manufacturing that may result in a
significant alteration of specified properties, or processing,
performance or handling characteristics of the Product, or
2) the location of the manufacturing facilities of the
Product.
3M will not make any of the above changes without the prior written consent of
IMATION and will continue to supply IMATION with the existing Product until
IMATION has qualified the changed Product.
7.5 3M will provide IMATION with samples of the changed Product for
IMATION's evaluation and testing on IMATION's request. If the change was
requested by IMATION, IMATION will pay for the samples. If the change was
requested by 3M, 3M will pay for the samples. If the change was jointly
initiated, the cost of the samples will be shared equally.
8. WARRANTY AND LIMITATION OF REMEDIES; TIME LIMIT FOR FILING ACTION.
8.1 The following warranty and limited remedy are included in the
purchase price of the Products:
THE FOLLOWING WARRANTY IS MADE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE IMPLIED WARRANTY OF
MERCHANTABILITY, THE IMPLIED WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE AND
ANY IMPLIED WARRANTY ARISING OUT OF A COURSE OF DEALING, A CUSTOM OR USAGE OF
TRADE:
3M warrants that Products will meet the Specifications and be free from
defects in manufacture and material for a period of time stated in Exhibit A,
from the date of delivery to IMATION's designated carrier. For defects occurring
within the warranty period and about which 3M has received notice within the
warranty period, IMATION's exclusive remedy and 3M's sole obligation will be, at
3M's option, to replace the quantity of the Product which is proved to be
defective or to refund the purchase price of that quantity. 3M will pay IMATION
for any shipping costs for replacement Product. IMATION will obtain a return
authorization number from 3M prior to returning any defective Product.
8.2 If IMATION believes that a unit of a Product is defective, IMATION
will document its assessment and rationale in writing to 3M. 3M will have the
right to evaluate all alleged defects in the specified Product. If requested by
3M, IMATION will return allegedly defective Product to 3M's manufacturing
facility, at 3M's cost, for evaluation by 3M. 3M will evaluate the allegedly
defective Product submitted by IMATION within thirty (30) days of receipt of
IMATION's documentation, unless otherwise agreed by 3M and IMATION. If 3M does
not confirm the alleged defect, 3M will document its assessment and rationale to
IMATION.
8.3 No employee of 3M or any other party is authorized to make any
warranty in addition to the warranty made in this Agreement.
8.4 Any action for breach of warranty or other breach of obligation
under this Agreement must be begun within two (2) years after the breach occurs.
9. LIMITATION OF LIABILITIES.
9.1 The limited remedy set forth in Section 8.1 above is IMATION's
exclusive remedy in the event of a breach of warranty under this Agreement. In
no case will 3M be liable for any other direct, indirect, special, incidental or
consequential damages based on breach of warranty under this Agreement.
9.2 In no case will 3M be liable for any direct damages based on
negligence, strict liability or any legal theory other than breach of contract.
9.3 In no case will 3M be liable for any indirect, special, incidental
or consequential damages based on negligence, strict liability, breach of
contract or any other legal theory.
9.4 In no case will IMATION be liable for any direct, indirect,
special, incidental or consequential damages to 3M if IMATION discontinues
purchasing a Product under this Agreement, or for reliance by 3M on non-binding
forecasts provided to 3M under Sections 4.1 and 4.2.
10. INDEMNIFICATION.
10.1 IMATION agrees to indemnify, defend and hold harmless 3M, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Products supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
3M may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Section 10 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
10.2 If 3M intends to claim indemnification under this Section 10, 3M
will promptly notify IMATION in writing of any claim, action, or demand for
which 3M intends to claim indemnification. In addition, 3M will promptly notify
IMATION in writing if 3M elects to waive its right to have IMATION defend the
claim, action, or demand. If 3M does not waive its right to have IMATION defend
the claim, action, or demand, 3M agrees that IMATION will control the defense of
the claim, action, or demand. 3M will cooperate fully with IMATION and its legal
representatives in the investigation and defense of any claim, action, or demand
covered by this indemnification. 3M will permit IMATION to settle any claim,
action, or demand and agrees that IMATION will control the settlement, provided,
however, that such settlement does not adversely affect 3M's rights under this
Agreement or impose any obligations on 3M in addition to those stated in this
Agreement. IMATION, in the defense of any claims, actions or demands, will not
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term the giving by the claimant or plaintiff to 3M
of a release from all liability with respect to the claim, action, or demand. No
such claim, action, or demand will be settled by 3M without the prior written
consent of IMATION.
11. REGULATORY COMPLIANCE.
11.1 3M represents that the Products have been manufactured and sold in
compliance with all applicable federal, state and municipal laws, rules and
regulations.
11.2 3M certifies to IMATION that each of the component chemicals
contained in each Product has been manufactured 1) in compliance with the
Pre-Manufacture Notice requirements of the United States Toxic Substance Control
Act or the new chemical notification regulations in the country in which it is
manufactured, and 2) in compliance with new chemical notification regulations in
countries outside the U.S. in which the Product is being sold as of the
Effective Date of this Agreement. For Products for which 3M will be the importer
of record, 3M will maintain compliance with new chemical notifications required
by law in countries outside the U.S. as long as the Product is supplied under
this Agreement. On IMATION's request, 3M will provide IMATION information
regarding the status of a component of a Product on inventories outside the U.S.
Also on IMATION's request, IMATION will have the right to review 3M's file of
TSCA Section 8(c) "Records of Allegations of Significant Adverse Reactions"
solely as they relate to components of Products.
11.3 Each party will be responsible for the final and proper disposal
of all waste material and hazardous waste material generated in their respective
manufacturing operations.
12. USE OF IMATION EQUIPMENT.
12.1 For supply of some Products, IMATION may furnish 3M various pieces
of equipment to be used by 3M solely to supply the Products under this Agreement
(the "Equipment"). 3M acknowledges that all Equipment, together with all
drawings and other documentation related to the Equipment are the property of
IMATION. IMATION will pay all applicable personal property taxes that pertain to
the Equipment.
12.2 3M agrees to execute a UCC-1 financing statement, to be filed by
IMATION, as an acknowledgment that the Equipment in the custody of 3M is owned
by IMATION. Where practical, pieces of Equipment will be marked with an IMATION
identification number. 3M will not sell, transfer, or remove the Equipment from
3M's place of business. In addition, 3M will not allow any third party to obtain
a mortgage, security interest, lien, or any other type of encumbrance in or on
the Equipment.
12.3 3M acknowledges that IMATION has made absolutely no
representations or statements about the character, condition, quality or
characteristics of the Equipment. Before using the Equipment, 3M will do
whatever is necessary to make certain that the Equipment is in a safe and proper
working condition for its intended use. IMATION NEITHER EXPRESSES NOR IMPLIES
ANY WARRANTIES AS TO THE QUALITY OR CONDITION OF THE EQUIPMENT AND EXPRESSLY
DISCLAIMS ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
IMATION EXPRESSLY DISCLAIMS ANY REPRESENTATIONS ABOUT THE CONDITION, QUALITY,
CAPACITY OR OTHER CHARACTERISTIC OF THE EQUIPMENT. This section applies
regardless of whether IMATION has paid or offered 3M any consideration for use
of the Equipment.
12.4 Except as stated in Section 12.7, 3M will not make any alteration
in the Equipment without the prior written approval of IMATION.
12.5 The Equipment will be used SOLELY AND EXCLUSIVELY for supplying
Products under this Agreement and will not be used for any other purpose
whatsoever without the prior written approval of IMATION.
12.6 IMATION may inspect the Equipment and related documentation at all
reasonable times during normal business hours.
12.7. During the time the Equipment is in 3M's possession, 3M will at
its own expense:
1) service the Equipment regularly and maintain the Equipment
in good operating condition at all times in accordance with the
schedule provided by IMATION;
2) not allow the Equipment to be misused or to deteriorate,
ordinary wear and tear excepted;
3) provide all routine repair and maintenance for the
Equipment. Major or extraordinary maintenance costs incurred will be
borne by IMATION, subject to IMATION's prior written approval for 3M to
undertake those costs.
12.8 IMATION has the full risk of loss and damage as to any Equipment
and related documentation in 3M's care, custody or control. IMATION waives
subrogation against 3M for any loss or damage to any Equipment or related
documentation in 3M's care, custody or control.
12.9 On discontinuation of the Product associated with the Equipment
under this Agreement, 3M will return any and all Equipment and related
documentation to IMATION in the same condition as originally received, loss,
damage and reasonable wear and tear excepted. IMATION will pay the cost of tear
down, crating and shipping the Equipment and restoring the premises to their
original condition at the time the Equipment was installed, reasonable wear and
tear excepted. If for any reason 3M fails to comply promptly with a request to
return Equipment, IMATION will have the right to peaceably enter 3M's premises
during normal business hours to remove the Equipment and IMATION may take all
action permitted by law to immediately recover the Equipment. 3M will on demand
reimburse IMATION for all actual and reasonable costs IMATION incurs in
recovering the Equipment (including reasonable attorney's fees and other
expenses of litigation). 3M expressly waives any rights or remedies 3M may have
with regard to the Equipment, including but not limited to any right 3M may have
to notice and a hearing or to a bond, undertaking, or surety before a writ of
replevin, order of seizure, or similar writ or order will issue or become
enforceable.
13. CONFIDENTIAL INFORMATION.
13.1 As used in this Agreement, 3M Confidential Information and IMATION
Confidential Information are defined as follows:
1) "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Effective Date of this Agreement and reasonably
understood by IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after the
Effective Date of this Agreement under the terms and for purposes of
this Agreement except for:
(i) information learned by IMATION for the first
time after the Effective Date of this Agreement, but prior to
any disclosure by 3M;
(ii) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(iii) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not
violative of a duty of non-disclosure owed to another,
including 3M, and (c) the disclosure by the third party is
not otherwise unlawful;
(iv) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the Effective Date and/or disclosed by 3M under this
Agreement;
(v) information which is inherently disclosed in
marketing of a product by IMATION in the usual course of
business and within the scope of the rights granted to or
retained by IMATION under this Agreement or the Intellectual
Property Rights Agreement.
(vi) information which is developed by a business
which is being transferred to IMATION and constitutes
performance specifications for chemicals, composition,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business remaining with 3M on the Effective Date; and
(vii) information which IMATION can demonstrate was
disclosed by a 3M business being transferred to IMATION to a
third party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party has
expired, from and after the date such third party obligation
of confidentiality expires, and provided that disclosure of
an item of information to one third party and a different
item of information to another third party shall not be
viewed as disclosure of information which can only be drawn
from those items of information collectively.
2) "IMATION CONFIDENTIAL INFORMATION" means information known
by 3M on the Effective Date and reasonably understood by 3M to be
confidential and related to IMATION's present or future business
interests, or disclosed confidentially by IMATION to 3M under the terms
and for purposes of this Agreement except for:
(i) information learned by 3M for the first time
subsequent to the Effective Date of this Agreement, but prior
to any disclosure by IMATION;
(ii) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(iii) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does
not have a duty of non-disclosure owed to such third party,
(b) the third party's disclosure is not violative of a duty
of non-disclosure owed to another, including IMATION, and (c)
the disclosure by the third party is not otherwise unlawful;
(iv) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
Effective Date and/or disclosed by IMATION under this
Agreement;
(v) information which is inherently disclosed in
marketing of a product by 3M in the usual course of business
and within the scope of the rights granted to or retained by
3M under this Agreement or the Intellectual Property Rights
Agreement.
(vi) information which is developed by a business
which remains with 3M on the Effective Date and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business being transferred to IMATION on the Effective Date;
and
(vii) information which 3M can demonstrate was
disclosed to a third party prior to November 14, 1995, and
for which any obligation of confidentiality by that third
party has expired, from and after the date of such third
party obligation of confidentiality expires, and provided
that disclosure of an item of information to one third party
and a different item of information to another third party
shall not be viewed as disclosure of information which can
only be drawn from those items of information collectively.
13.2 3M and IMATION each shall not disclose to another or use except
for purposes of the Agreement any business information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall expire with respect to business information which
is IMATION Confidential Information and 3M Confidential Information five (5)
years after the date of disclosure of such information, unless and to the extent
the parties agree to a longer period for the foregoing restrictions with respect
to specific categories of business information which is IMATION Confidential
Information and/or 3M Confidential Information, in which case the foregoing
restrictions shall expire with respect to such information on the expiration of
such longer period. The date of disclosure in the case of business information
which is either 3M Confidential Information known by IMATION or IMATION
Confidential Information known by 3M on the Effective Date shall be considered
to be the Effective Date.
13.3 3M and IMATION each shall not disclose to another or use except
for purposes of this Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
13.4 Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a reasonable degree
of care, to prevent the unauthorized disclosure of the other party's
Confidential Information as the party uses to protect its own confidential
information of a like nature.
13.5 Each party shall insure that its Affiliates, sublicensees and
other transferees agree to be bound by the same restrictions on use and
disclosure of Confidential Information as bind the party in advance of the
disclosure of Confidential Information to them.
13.6 The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed under this Agreement may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
14. PATENT INFRINGEMENT.
14.1 3M will indemnify, defend and hold IMATION harmless from all cost,
expense and liability, including attorney's fees, arising out of any claim or
action based on actual or alleged infringement by Products, as shipped by 3M to
IMATION, of any third party Letters Patent, copyright, trade secret or other
proprietary interest; with the proviso that 3M will have no liability to IMATION
for any actual or claimed infringement arising out of (1) compliance by 3M with
detailed designs, plans or specifications furnished by IMATION unless such
infringement would arise independent of such designs, plans and specifications,
(2) use of Products by IMATION in combination with other equipment or materials
not reasonably contemplated by 3M or (3) use of Products or any part thereof by
IMATION in a manner not reasonably contemplated by 3M.
14.2 IMATION will indemnify, defend and hold 3M harmless from all cost,
expense and liability, including attorney's fees, arising out of any claim or
action based on actual or alleged infringement by Products, as shipped by 3M to
IMATION, of any third party Letters Patent, copyright, trade secret or other
proprietary interest to the extent such infringement arises out of (1)
compliance by 3M with detailed designs, plans or specifications furnished by
IMATION unless such infringement would arise independent of such designs, plans
and specifications, (2) use of Products by IMATION in combination with other
equipment or materials not reasonably contemplated by 3M or (3) use of Products
or any part thereof by IMATION in a manner not reasonably contemplated by 3M.
14.3 The party seeking indemnification under this Section 14 will give
the other party notice of any infringement claim or action which may arise under
this Agreement, and will allow the other party at its option to control the
defense thereof and will provide at the other party's expense reasonable
cooperation in the defense or settlement of and claim or action.
14.4 The terms and conditions of this Section 14 will survive the
termination of this Agreement for any reason whatsoever.
15. TERM AND TERMINATION.
15.1 The term of this Agreement will commence on the Effective Date and
will continue until terminated as stated in Section 15.2.
15.2 This Agreement may be terminated only as follows:
1) automatically on the discontinuation of the last Product
under this Agreement;
2) at any time on thirty (30) days prior written notice to the
other party if the other party is in default of its obligations under
this Agreement and has not remedied the default within the thirty (30)
day period;
3) subject to applicable bankruptcy laws, by written notice to
the other party if bankruptcy or insolvency proceedings are instituted
by or against the other party, or if the other party acknowledges its
insolvency in any manner, or if the other party is adjudicated a
bankrupt, makes an assignment for the benefit of its creditors or
proposes or makes any arrangement for the liquidation of its debts; or
4) by written notice to the other party if the other party
assigns or delegates this Agreement contrary to Section 18.
15.3 Even after termination, the provisions of this Agreement still
apply to all Product ordered, all obligations created or arising, and all
transactions and events occurring before the date of termination.
16. DISCONTINUATION OF PRODUCTS.
16.1 3M may discontinue sales of individual Products at any time by
giving IMATION written notice, as stated in Exhibit A, prior to the desired
discontinuation date. In addition, for Chemical Products and Film Products 3M is
supplying on the Effective Date of this Agreement, 3M will continue supplying
the Products until IMATION, using good faith efforts, is able to qualify another
supplier.
16.2 IMATION may discontinue purchases of individual Products at any
time by giving 3M written notice as follows:
1) For Chemical Products, ninety (90) days notice. In
addition, IMATION will reimburse 3M for any excess non-returnable raw
materials purchased to manufacture Chemical Products.
2) For Film Products, twelve (12) months notice.
3) For Miscellaneous Products, the notice period will be as
stated in Exhibit A-3.
16.3 After receipt of a notice of discontinuing a Product, IMATION's
orders for that Product may not exceed one hundred twenty-five percent (125%) of
the most recent Rolling Forecast.
16.4 This Section 16 does not apply if IMATION discontinues purchases
under Section 3.4 or if the discontinuation is due to IMATION closing a
manufacturing facility or ceasing to market an IMATION product which uses a
Product in its manufacture. If the discontinuation is for a reason stated in
this Section 16.4, IMATION will give 3M as much notice as reasonably practical.
17. MANUFACTURE OF PRODUCTS BY A THIRD PARTY VENDOR OR IMATION.
17.1 On occurrence of one of the events contemplated by Section 17.4,
3M shall elect, at 3M's sole option, one of the following alternatives: Option
A, select and grant a royalty-free, nonexclusive license to a third party vendor
to manufacture the particular Product concerned for IMATION, provided that any
proposed third party vendor shall be subject to IMATION's reasonable approval;
or Option B, grant a royalty-free license to IMATION solely to manufacture or
have manufactured the particular Product concerned, provided that any proposed
third party selected by IMATION in exercising its rights to have manufactured
shall be subject to 3M's reasonable approval. Both Option A and Option B shall
be in accordance with the other provisions of this Section 17. If it appears
likely that 3M will elect to resume supplying a Product under Section 17.5,
IMATION will exercise such licenses in a manner to facilitate that resumption
and minimize associated costs.
17.2 3M shall provide to any third party vendor pursuant to Option A,
or to IMATION or any third party selected by IMATION pursuant to Option B, at
3M's expense, reasonable technical assistance to allow the third party vendor,
IMATION or any third party selected by IMATION, as the case may be, to
manufacture the particular Product concerned, such technical assistance not to
exceed ten (10) person-days.
17.3 Any license under proprietary information disclosed by 3M to any
third party vendor, IMATION or any third party selected by IMATION pursuant to
this Section 17 is strictly limited to use of such proprietary information by
the recipient for manufacturing the particular Product concerned for subsequent
use in manufacturing products to be sold by IMATION, and the license includes no
other rights whatsoever. Any third party selected pursuant to Option A or B
shall further be subject to restrictions on disclosure at least as stringent as
those contemplated in Section 12. Any patent license pursuant to this Section 17
is strictly limited to the manufacture of the particular Product concerned,
using the proprietary information which is disclosed to the third party vendor,
IMATION or any third party selected by IMATION, for subsequent use in
manufacturing products to be sold by IMATION, and the license includes no other
rights whatsoever. Further, any license under proprietary information and/or
patents granted under this Section 17 pursuant to Section 17.4-4) shall be
limited to the manufacture of such quantities of Product in excess of the
quantity 3M notified IMATION it has the manufacturing capacity to supply
pursuant to Section 4.2.
17.4 Occurrence of any of the following shall constitute an event
requiring 3M to elect Option A or Option B pursuant to Section 17.1:
1) 3M notifies IMATION in writing that it will discontinue the
supply of a Product under Section 17 of this Agreement which IMATION
still wishes to purchase for a sustained period of time in quantities
substantially comparable to quantities purchased from 3M previously.
Such discontinuation, if the result of force majeure, shall take effect
immediately upon issuance of such written notice. Such discontinuation,
if not the result of force majeure, shall not take effect until after
the time period for notice of discontinuation stated in Exhibit A.
2) IMATION provides to 3M written notification that at least
twenty percent (20%) of a Product supplied by 3M to IMATION materially
does not comply with mutually agreed Product Specification, and after a
period of four (4) consecutive months 3M has not brought the Product
into material compliance with the Product Specification despite
cooperation from IMATION in attempting to bring the Product into
compliance with the Product Specification.
3) 3M places the Product on allocation such that IMATION
receives less than sixty (60%) of its Requirements of that Product for
more than six (6) consecutive months.
4) 3M notified IMATION under Section 4.2 that 3M does not have
the manufacuturing capacity to supply a Product at the level stated in
IMATION's Rolling Forecast.
17.5 If 3M's discontinuation of supply of a Product to IMATION is as a
result of force majeure or as a result of Sections 17.4-2), 3) or 4), resulting
in implementation of Option A or Option B, 3M may elect to resume supplying the
particular Product concerned to IMATION. In the event that 3M elects to resume
supply of the particular Product concerned pursuant to this Section 17.5, any
licenses under proprietary information and patents granted under this Section 17
terminate forthwith upon such resumption of supply from 3M. 3M and IMATION agree
to work together to affect the resumption of supply from 3M in a reasonable
manner.
17.6 IMATION shall indemnify and hold 3M harmless from any and all loss
or liability for any and all claims, causes of action, suits, proceedings,
losses, damages, demands, fees, expenses, fines, penalties and costs (including
without limitation reasonable attorney's fees, costs and disbursements) arising
from any injury or alleged injury to any person or business for property damage,
personal injury or incidental, special or consequential damages caused by any
Products made or processes performed under the license granted under this
Section 17.
18. ASSIGNMENT.
18.1 Neither party may assign or transfer this Agreement or any of its
rights and obligations under this Agreement without the prior written consent of
the other party, except that IMATION may assign or transfer all or part of this
Agreement to a purchaser of or successor in interest in all or a portion of
IMATION's businesses.
18.2 If IMATION assigns or transfers all or part of this Agreement to a
purchaser or successor in interest, the pricing for Products as stated in
Section 3 will continue for a period of one (1) year and will then convert to
market pricing mutually agreed to by 3M and the purchaser. All other provisions
of the Agreement will remain in effect, except as follows:
1) Any right to purchase Products so assigned or transferred
shall be strictly limited to the right to purchase such Products
required for use in manufacturing products previously manufactured by
IMATION before such assignment or transfer and any future products
resulting from the normal progression of the business and technology of
such products.
2) Any licenses which thereafter are granted pursuant to
Section 17 to or on behalf of the purchaser or successor in interest
shall be royalty-bearing, with terms commensurate with industry
standards.
3) Any purchaser or successor in interest shall agree in any
such assignment or transfer to utilize reasonable efforts to find an
alternative source of supply not dependent upon intellectual property
owned by 3M to obviate the need for any licenses from 3M in the first
instance.
19. DISPUTE RESOLUTION.
19.1 The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 19.11, these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
19.2 A party seeking to initiate the procedures shall give written
notice to the other party, describing briefly the nature of the dispute. A
meeting shall be held between the parties within ten (10) days of the receipt of
such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
19.3 If, within thirty (30) days after such meeting, the parties have
not succeeded in negotiating a resolution of the dispute, they agree to submit
the dispute to mediation in accordance with the Center for Public Resources
Model ADR Procedure - Mediation of Business Disputes, as modified herein, and to
bear equally the costs of the mediation.
19.4 The parties will jointly appoint a mutually acceptable mediator,
seeking assistance in such regard from the Center for Public Resources or
another mutually agreed-upon organization if they are unable to agree upon such
appointment within twenty (20) days from the conclusion of the negotiation
period.
19.5 The parties agree to participate in good faith in the mediation
and negotiations related thereto for a period of thirty (30) days or such longer
period as they may mutually agree following the initial mediation session.
1) If the parties are not successful in resolving the dispute
through mediation by the end of such period, then the parties agree to
submit the matter to binding arbitration in accordance with the Center
for Public Resources Rules for Non-Administered Arbitration of Business
Disputes, as modified herein, by a sole arbitrator selected in
accordance with the provisions of Section 19.6. The arbitration
proceeding shall be held in Minnesota and shall be governed by the
United States Arbitration Act, 9 U.S.C. ss.ss. 1-16. Judgment upon the
award rendered by the arbitrator may be entered by any court having
jurisdiction.
2) The parties' obligation under this Section 19 to submit
dispute to binding arbitration in lieu of seeking judicial resolution
of their disputes shall expire on July 1, 2001.
19.6 The parties shall have ten (10) days from the end of the mediation
period to agree upon a mutually acceptable neutral person not affiliated with
either of the parties to act as arbitrator. If no arbitrator has been selected
within such time, the parties agree to jointly request the Center for Public
Resources or another mutually agreed-upon organization to supply within ten (10)
days a list of potential arbitrators with qualifications as specified by the
parties in the joint request. Within five (5) days of receipt of the list, the
parties shall independently rank the proposed candidates, shall simultaneously
exchange rankings, and shall be deemed to have selected as the arbitrator the
individual receiving the highest combined ranking who is available to serve. If
there is a tie, then the tie will be broken by putting the names on slips of
paper, mixing them up and one party drawing one slip of paper.
19.7 The costs of arbitration shall be apportioned between the parties
as determined by the arbitrator in such manner as the arbitrator deems
reasonable taking into account the circumstances of the case, the conduct of the
parties during the proceeding, and the result of the arbitration.
19.8 Any arbitration proceeding shall be concluded in a maximum of one
(1) year from written notice from one party to the other party identifying a
dispute subject to arbitration under this Section and requesting arbitration
after having participated in negotiation and mediation under this Section.
19.9 All negotiations and mediations pursuant to this Section shall be
treated as compromise and settlement negotiations for purposes of Rule 408 of
the Federal Rules of Evidence and comparable Minnesota Rules of Evidence.
19.10 All negotiation, mediation and arbitration proceedings under this
Section shall be treated as Confidential Information and shall not be disclosed
to any third party unless a party is legally required to disclose the
information. Any mediator or arbitrator shall be bound by an agreement
containing confidentiality provisions.
19.11 Nothing herein shall preclude either party from taking whatever
actions are necessary to prevent any immediate, irreparable harm to its
interests, including multiple breaches of this Agreement by the other party.
Otherwise, these procedures are exclusive and shall be fully exhausted prior to
the initiation of any litigation. Either party may seek specific enforcement of
any arbitrator's decision under this Section. The other party's only defense to
such a request for specific enforcement shall be fraud by or on the arbitrator.
20. NOTICES.
20.1 All notices will be in writing and will be delivered by courier,
facsimile transmission or prepaid first class mail. Notices delivered by courier
or facsimile transmission will be deemed to have been given on the date of
delivery. Notices delivered by first class mail will be deemed to have been
given on the next business day after date of mailing.
20.2 All notices will be addressed as follows and to the appropriate
contact person for the Product as listed in Exhibit A:
(a) if to 3M: Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
Facsimile: 612/736-7859
(b) if to IMATION: Imation Corp.
General Counsel
P.O. Box 64898
St. Paul, MN 55164-0898
Facsimile:
20.3 Either party may change its address for notice by giving notice in
accordance with Sections 20.1 and 20.2.
21. GENERAL TERMS.
21.1 This Agreement will be governed by the laws of the State of
Minnesota.
21.2 Except for IMATION's obligation to make payments to 3M, neither
party is liable to the other for damages caused by delays in delivery or
performance due to acts of God or other causes beyond its control. During any
period where 3M's performance of this Agreement is made impracticable by any
reason stated in this Section, 3M will allocate any processing capability for
delivery in the manner stated in Section 6 of this Agreement.
21.3 This Agreement is binding on and benefits the parties, their
successors and permitted assigns.
21.4 3M and IMATION do not in any way or for any purpose intend to
become partners in the conduct of a business or otherwise, or joint venturers,
or members of a joint enterprise under this Agreement. The relationship will be
one of manufacturer and purchaser. Neither party will have any authority to
obligate, or to otherwise act as representative of, or agent for, the other
party for any purpose, and neither party will make any representations or hold
itself out as having such authority.
21.5 This Agreement may only be modified by a written amendment signed
by both parties. A course of conduct or performance does not modify or amend
this Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
21.6 This Agreement and all Exhibits constitute the entire Agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Exhibit and any documents used by the parties in
performing their obligations under this Agreement or any Exhibit, the provisions
of this Agreement and the relevant Exhibit will govern.
21.7 All Section headings are included for reference only and will not
affect the meaning of the relevant Sections. All references to "Section" mean a
Section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND IMATION CORP.
MANUFACTURING COMPANY
(3M) (IMATION)
By:_______________________________ By:_______________________________
Livio D. DeSimone William T. Monahan
Chairman of the Board and Chief Executive Officer
Chief Executive Officer
Date:_____________________________ Date:_____________________________
Exhibit A - List of Products
Exhibit A-1 - Chemical Products
Exhibit A-2 - Film Products
Exhibit A-3 - Miscellaneous Products
SALES AGENCY AGREEMENT
THIS AGREEMENT is entered into between MINNESOTA MINING AND
MANUFACTURING COMPANY, 3M Center, St. Paul, Minnesota 55144 (3M) and IMATION
ENTERPRISES CORP., 1 Imation Place, Oakdale, Minnesota 55128 (IMATION).
1. PURPOSE AND SCOPE OF APPOINTMENT
1.1 IMATION wishes to appoint certain business units of 3M as a
non-exclusive sales agent to solicit orders for the IMATION products of certain
IMATION business units from certain 3M customers located in the forty-eight
contiguous states of the United States of America.
1.2 A separate exhibit (an "Exhibit") will be signed for each sales
agency relationship between a IMATION business unit and a 3M business unit. Each
Exhibit will identify the IMATION business unit, the 3M business unit, the
IMATION products the 3M business unit is authorized to represent (PRODUCTS), the
customers the 3M business unit is authorized to call on, the commission the 3M
business unit will receive, the effective date of the appointment and any
special conditions relating to the appointment.
1.3 This Agreement does not give 3M any exclusive rights or access to
PRODUCTS. IMATION reserves the right to sell PRODUCTS in any other lawful
manner, including but not limited to sales through other independent sales
agents, sales to distributors, dealers and wholesalers and direct sales to
customers.
2. TERM
The Agreement term (the "Term") will commence on July 1, 1996 and will
continue until the Agreement has been terminated pursuant to the termination
provisions in Section 13 below.
3. AGENT DUTIES
3.1 3M shall solicit orders for PRODUCTS in a manner which will best
generate increased sales of such PRODUCTS to the customers listed in the
Exhibits (CUSTOMERS). In addition, 3M agrees to perform any specific tasks
listed in the Exhibits. All such orders shall be solicited in accordance with
the prices and conditions of sale established by IMATION in accordance with
Section 4 below.
3.2 3M shall receive orders for PRODUCTS from CUSTOMERS on behalf of
IMATION but shall transmit such orders to IMATION at an address specified by
IMATION for acceptance or rejection. 3M is not authorized to bind IMATION to any
proposals, orders or agreements relating to the sale of PRODUCTS. IMATION shall
not be required to accept any order obtained by 3M and may in its sole
discretion reject any or all of such orders.
3.3 3M shall not make any representations, warranties, claims or other
statements with respect to PRODUCTS except as contained in technical data
sheets, promotional and advertising material, brochures, catalogs, or other
product literature published by IMATION. 3M shall not make or omit to make any
statements which could reasonably be interpreted to create any warranty or
guarantee with respect to any PRODUCTS which in any way differs from the
warranties or guaranties contained in the IMATION materials provided to 3M. 3M
shall not create or use any sales materials with respect to PRODUCTS unless such
materials have been previously approved by IMATION in writing.
3.4 CUSTOMER inquiries to 3M concerning PRODUCTS and any issues related
to the performance or alleged non-performance of PRODUCTS shall be communicated
promptly to IMATION.
3.5 3M shall be solely responsible for all out-of-pocket expenses
incurred by 3M or any of 3M's personnel in performing 3M's obligations under
this Agreement. 3M's entire compensation for services performed under this
Agreement is set out in Section 6.
3.6 Upon request by IMATION, 3M will make reasonable efforts to assist
IMATION in collecting past due amounts. However, 3M shall have no financial
obligation to IMATION in respect to such past due amounts.
4. PRICES AND CONDITIONS OF SALE
IMATION shall in its sole discretion determine the prices and
conditions of sale under which it shall sell PRODUCTS. In soliciting orders for
PRODUCTS, 3M shall quote only the applicable prices and conditions of sale as
established by IMATION for such PRODUCTS from time to time during the Term.
IMATION may change such prices and conditions of sale at any time without
advance notice, provided that IMATION promptly communicates any such changes to
3M.
5. SALES BY IMATION
5.1 Sales of PRODUCTS resulting from 3M's efforts under this Agreement
shall be construed as sales directly from IMATION to the CUSTOMER and not as
sales from 3M to such CUSTOMER.
5.2 Acceptance of any order for PRODUCTS by IMATION is conditional upon
receipt of full payment for such order. IMATION may cancel any such acceptance
at any time and for any reason without incurring any obligation to 3M. IMATION
will notify 3M of all canceled orders for PRODUCTS.
5.3 IMATION will make all billings directly to the CUSTOMERS and
IMATION will be responsible for and assume all risks, including credit, normally
incident to such sales.
6. COMMISSION
6.1 As used in this Section 6:
(a) "Commission" means a commission equal to the percentage
listed in the applicable Exhibit of the Net Selling Price of the
PRODUCTS listed in such Exhibit, unless otherwise provided in an
Exhibit.
(b) "Net Selling Price" means the invoice price of each
PRODUCT invoiced to a CUSTOMER minus all sales, use, value added,
excise and other similar taxes, customs duties, freight and
transportation charges and all trade discounts or other allowances
actually made with respect to such invoiced sales.
6.2 In consideration of and in full payment for all services provided
by 3M under this Agreement, IMATION shall pay to 3M a Commission on PRODUCTS
sold during each month of the Term while the relevant Exhibit is in effect.
(a) As long as 3M continues to share its current financial
system with IMATION, Commissions earned under this Agreement will be
billed to IMATION by 3M charging the net amount due to the appropriate
IMATION commodity code. The net amount charged will be summarized with
all other charges during the month on the eighth work day of the
following month. IMATION will pay 3M the net amounts due on the ninth
work day of the month. Once IMATION develops its own financial system,
amounts due under this Agreement will be billed and paid for as
provided below.
(b) If the Commission is a percentage of PRODUCTS sales, then
such Commission shall be payable within thirty (30) business days
following the end of the relevant month based on invoices actually
rendered for such PRODUCTS during the month.
(c) If the Commission is some other amount, then 3M will bill
IMATION for amounts due as provided in the applicable Exhibit and
IMATION will pay the invoice within thirty (30) days after the invoice
date.
6.3 Commission shall be payable only if it has been earned by 3M during
the Term. Commission earned by 3M during the Term but payable after termination
shall be governed by Section 13.3.
6.4 If any order upon which a Commission has been paid is canceled, or
if IMATION accepts PRODUCTS for return from a CUSTOMER, or if payment for any
shipment is not received by IMATION, then the relevant Commission shall be
deducted from any future Commissions earned by 3M. If such future Commissions
are insufficient to offset the full amount of such deduction, then 3M shall
repay to IMATION the balance of such overpaid Commission.
7. RECORDS
7.1 During the Term 3M shall maintain at its head office accurate
books, records and data pertaining to this Agreement (collectively, the "3M
Records") and shall make such 3M Records available to IMATION or its authorized
representatives for review during normal business hours. All 3M Records shall be
retained by 3M during the Term and for a period of one (1) year following
termination of this Agreement.
7.2 During the Term IMATION shall maintain at its head office accurate
books, records and data pertaining to this Agreement (collectively, the "IMATION
Records") and shall make such IMATION Records available to 3M or its authorized
representatives for review during normal business hours. All IMATION Records
shall be retained by IMATION during the Term and for a period of one (1) year
following termination of this Agreement.
8. RELATIONSHIP OF PARTIES
8.1 3M enters into and agrees to perform its obligations under this
Agreement as an independent contractor. 3M's personnel who assist in providing
services under this Agreement are the employees or agents of 3M and not IMATION.
8.2 3M agrees that since none of its employees or agents are employees
of IMATION:
(a) no workers' compensation insurance, unemployment
insurance, pension plans, health insurance, life insurance or other
benefits and protections made available by IMATION to its employees
will apply to 3M's employees;
(b) IMATION will not be responsible for withholding from any
Commissions payable to 3M any state or federal income taxes, social
security taxes, unemployment tax, workers' compensation taxes or any
other payroll taxes; and
(c) 3M shall be solely responsible for the payment of all
taxes due in respect of Commissions paid to 3M under this Agreement.
8.3 Neither party shall be liable for third party claims resulting from
any acts or omissions of the other party in the performance of this Agreement.
Each party shall therefore be solely responsible for obtaining and maintaining
such insurance as may, in its discretion, be appropriate for the risks assumed
by such party under this Agreement.
9. CONFIDENTIAL INFORMATION
9.1 As used in this Agreement, 3M Confidential Information and IMATION
Confidential Information are defined as follows:
(a) "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the effective date of this Agreement and reasonably
understood by IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after the
effective date of this Agreement under the terms and for purposes of
this Agreement except for:
(i) information learned by IMATION for the first time
after the effective date of this Agreement, but prior to any
disclosure by 3M;
(ii) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(iii) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not violative
of a duty of non-disclosure owed to another, including 3M, and
(c) the disclosure by the third party is not otherwise
unlawful; and
(iv) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the effective date of this Agreement and/or disclosed by 3M
under this Agreement.
(b) "IMATION CONFIDENTIAL INFORMATION" means information known
by 3M on the effective date of this Agreement and reasonably understood
by 3M to be confidential and related to IMATION's present or future
business interests, or disclosed confidentially by IMATION to 3M under
the terms and for purposes of this Agreement except for:
(i) information learned by 3M for the first time
subsequent to the effective date of this Agreement, but prior
to any disclosure by IMATION;
(ii) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(iii) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does not
have a duty of non-disclosure owed to such third party, (b)
the third party's disclosure is not violative of a duty of
non-disclosure owed to another, including IMATION, and (c) the
disclosure by the third party is not otherwise unlawful; and
(iv) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
effective date of this Agreement and/or disclosed by IMATION
under this Agreement.
9.2 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any business information which is IMATION Confidential
Information or 3M Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five (5) years after
the date of disclosure of such information, unless and to the extent the parties
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the foregoing restrictions
shall expire with respect to such information on the expiration of such longer
period. The date of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION Confidential
Information known by 3M on the effective date of this Agreement shall be
considered to be the effective date of this Agreement.
9.3 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
9.4 Each party shall protect Confidential Information hereunder by
using the same degree of care, but no less than a reasonable degree of care, to
prevent the unauthorized disclosure of the other party's Confidential
Information as the party uses to protect its own confidential information of a
like nature.
9.5 Each party shall insure that its affiliates, sublicensees and other
transferees agree to be bound by the same restrictions on use and disclosure of
Confidential Information as bind the party in advance of the disclosure of
Confidential Information to them.
9.6 The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
10. LIMITATION OF LIABILITY
10.1 NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY UNDER BREACH OF
CONTRACT, WARRANTY, NEGLIGENCE, STRICT LIABILITY OR ANY OTHER LEGAL THEORY FOR
ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL LOSS, EXPENSE, DAMAGES OR
OTHER CLAIMS WHATSOEVER (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS,
COMMISSIONS, INVESTMENT, GOODWILL, BUSINESS OR BUSINESS OPPORTUNITY) ARISING OUT
OF OR RESULTING FROM PRODUCTS, THIS AGREEMENT OR THE TERMINATION OF THIS
AGREEMENT.
10.2 Section 10.1 shall not apply to any claims by federal, state or
local authority or to claims for personal injury, property damage or
intellectual property infringement by a third party.
11. USE OF TRADEMARKS
11.1 Except as otherwise provided in other agreements, including but
not limited to the Intellectual Property Rights Agreement entered into between
the parties as part of the spin-off of IMATION from 3M and subject to Section
11.2, neither party shall use the other party's trademarks, tradenames or logos
in any manner which, in the sole discretion of such other party, may be
confusingly similar, misleading, detrimental or otherwise objectionable.
11.2 A party may use the other party's trademarks, tradenames or logos
in accordance with standards or guidelines previously approved in writing by
such other party.
11.3 Neither party shall, at any time, either during or after the Term
put in issue the validity of, claim any rights in or disparage or lessen the
significance of any trademarks, tradenames or logos of the other party as
branding and identifying the products of such other party.
12. DISPUTE RESOLUTION
12.1 The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 12.11, these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
12.2 Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
12.3 Submission to Mediation; Cost of Mediation: If, at the conclusion
of such meeting, the parties have not succeeded in negotiating a resolution of
the dispute, they agree to submit the dispute to mediation within thirty (30)
days thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
12.4 Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
12.5 Mediation And Arbitration.
(a) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty (30)
days or such longer period as they may mutually agree following the
initial mediation session. If the parties are not successful in
resolving the dispute through mediation by the end of such period, then
the parties agree to submit the matter to binding arbitration in
accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as modified herein,
by a sole arbitrator selected in accordance with the provisions of
Section 12.6. The arbitration proceeding shall be held in Minnesota,
shall be governed by the United States Arbitration Act, 9 U.S.C. SS
1-16 and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof.
(b) Except as may be expressly provided in any other agreement
between the parties, the parties obligation under this Section 12 to
submit disputes to binding arbitration in lieu of seeking judicial
resolution of their disputes, shall expire on July 1, 2001.
12.6 Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
12.7 Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
12.8 Arbitration Period. Any arbitration proceeding shall be concluded
in a maximum of one (1) year from written notice from one party to the other
party identifying a dispute subject to arbitration under this Section and
requesting arbitration after having participated in negotiation and mediation
under this Section.
12.9 Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Section shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
12.10 Confidentiality. All negotiation, mediation and arbitration
proceedings under this Section shall be treated as Confidential Information in
accordance with Section 9. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
12.11 Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Section. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
13. TERMINATION
13.1 This Agreement may only be terminated as follows:
(a) upon the termination of the last Exhibit to this
Agreement;
(b) at any time without cause upon six (6) months prior
written notice to the other party;
(c) at any time upon thirty (30) days prior written notice to
the other party if such other party is in default of its obligations
under this Agreement and has not remedied such default within such
thirty (30) day period;
(d) subject to applicable bankruptcy laws, by written notice
to the other party if bankruptcy or insolvency proceedings are
instituted by or against such other party, or if such other party
acknowledges its insolvency in any manner, or if such other party is
adjudicated a bankrupt, makes an assignment for the benefit of its
creditors or proposes or makes any arrangement for the liquidation of
its debts; or
(e) by written notice to the other party if such other party
assigns this Agreement contrary to Section 15.1.
13.2 Individual Exhibits will terminate on the date stated in the
Exhibit. If no termination date is stated in the Exhibit, then the Exhibit may
be terminated at any time by either party giving the other party written notice
at least sixty (60) days prior to the desired termination date.
13.3 If this Agreement or any exhibit is terminated for any reason, all
Commissions otherwise payable in connection with orders solicited prior to the
effective termination date shall be paid to 3M within thirty (30) days following
such date. If such payment would result in an overpaid Commission for any of the
reasons set out in Section 6.5, then IMATION may withhold any amount necessary
to avoid overpaying 3M.
13.4 The provisions of Sections 7 (Records), 8 (Relationship of the
Parties), 10 (Limitation of Liability) and 11 (Use of Trademarks) shall survive
termination of this Agreement. The provisions of Section 9 (Confidential
Information) shall survive termination for the period referred to in Section
9.2.
14. NOTICE
14.1 All notices shall be in writing and shall be delivered by courier,
facsimile transmission or prepaid certified mail, return receipt requested.
Notices delivered by courier or facsimile transmission shall be deemed to have
been given on the date of delivery. Notices delivered by certified mail shall be
deemed to have been given on the date shown on the return receipt.
14.2 All notices shall be addressed as follows:
(a) if to 3M: Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
(b) if to IMATION: IMATION ENTERPRISES CORP.
General Counsel
Imation Legal Department
Bldg. 220-11W-01
I-94 & McKnight Road
St. Paul, MN 55144-1000
14.3 Either party may change its address for notice by giving notice in
accordance with Sections 14.1 and 14.2.
15. GENERAL
15.1 Neither party shall assign or transfer this Agreement or any of
its rights and obligations under this Agreement to any third party without the
prior written consent of the other party.
15.2 This Agreement shall be governed by the laws of the State of
Delaware.
15.3 Neither party shall be responsible for any failure or inability to
perform its obligations due to causes beyond the reasonable control of such
party.
15.4 This Agreement is binding upon and benefits the parties, their
successors and permitted assigns.
15.5 This Agreement may only be modified by a written amendment signed
by both parties. A course of conduct or performance does not modify or amend
this Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
15.6 This Agreement and all Exhibits constitute the entire agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Exhibit and any documents used by the parties in
performing their obligations under this Agreement or any Exhibit, the provisions
of this Agreement and the relevant Exhibit shall govern.
15.7 All Section headings are included for reference only and shall not
affect the meaning of the relevant Sections. All references to "Section" mean a
Section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement.
MINNESOTA MINING AND IMATION ENTERPRISES CORP.
MANUFACTURING COMPANY
By:_____________________________ By:______________________________
Title:____________________________ Title:_____________________________
Date:____________________________ Date:_____________________________
IMATION HIRING 3M SALES AGENCY AGREEMENT EXHIBIT
A. IMATION Business Unit: ____________________________________
B. 3M Business Unit: ________________________________
C. Effective Date: __________________________________
D. Termination Date: _______________________________
E. IMATION Products:
_______________________________________________________________________________
_______________________________________________________________________________
F. Customers:
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
G. Commission: _____________________________________________________________
H. Merchandising Program Support:
I. Special Conditions:
ACCEPTED AND AGREED TO:
IMATION ENTERPRISES CORP. SALES AGENT: MINNESOTA MINING AND
MANUFACTURING COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
SERVICES AGREEMENT (3M TO IMATION)
This Agreement, between Minnesota Mining and Manufacturing Company, a
Delaware corporation with its principal offices at 3M Center, St. Paul,
Minnesota 55144-1000 (3M) and Imation Corp., a Delaware corporation with its
principal offices at 1 Imation Place, Oakdale, Minnesota 55128 (IMATION).
1. Description of Services
A. This Agreement sets out the terms and conditions under which 3M will
provide services to IMATION as described in Attachments to be negotiated and
signed by the parties.
B. During the Agreement term (Term) 3M agrees to do, furnish and pay
for all labor, supervision, taxes, equipment, supplies and any and all other
things necessary to perform fully and to IMATION's reasonable satisfaction the
services described in all Attachments executed by the parties (Services).
C. During the Term IMATION will do, furnish and pay for all things
described in all Attachments executed by the parties.
D. A separate Attachment will be signed for each Service to be
performed by 3M. Each Attachment will identify (i) the IMATION business unit
requesting the Service, (ii) the 3M business unit which will perform the
Service, (iii) the effective date, (iv) the Service to be performed, (v) the
things to be provided or paid for by IMATION, (vi) the amount to be paid to 3M
by IMATION; and (vii) any other special conditions governing the specific
Services described in the Attachment.
E. 3M represents to IMATION it has experience and expertise in
providing the Services listed in the Attachments.
F. 3M shall provide the Services as a subcontractor to IMATION where
the Service described in an Attachment is supporting guaranteed maintenance or
other similar service contracts entered into between IMATION and IMATION
customers.
G. Subject to any special requirements in any Attachment, if 3M
provides services to its own internal organization (Internal Services)
comparable to the Services to be provided to IMATION under this Agreement, 3M
shall not be obligated to provide Services greater in nature or scope than such
Internal Services. During the Term, any improvements in systems, equipment,
technology or methods used in or related to such Internal Services will be made
available to IMATION as part of the Services, provided however that the parties
first agree to any increased cost for Services resulting from such improvements.
2. Service Ordering Procedures
A. IMATION shall send 3M blanket purchase orders for the Services
listed in each Attachment. A blanket purchase order is for 3M's planning
purposes only and is not a commitment to purchase any particular dollar value of
Service. Unless otherwise stated in an Attachment, IMATION shall issue purchase
order releases against a blanket purchase order which constitutes IMATION's firm
commitment to purchase specific quantities of Services. IMATION will not be
responsible for any of 3M's cost or expense for supplies, labor, or other
commitments or expenses other than as authorized by written IMATION purchase
order releases in 3M's possession. EXCEPT AS SET OUT IN SUCH PURCHASE ORDER
RELEASES, IMATION MAKES NO REPRESENTATION OR GUARANTEE AS TO THE DOLLAR VALUE OF
SERVICES THAT IMATION WILL PURCHASE UNDER THIS AGREEMENT.
B. The information on the purchase order release will include the
purchase order number, description of Service purchased, and, as applicable,
routing instructions, delivery schedule and destination.
C. 3M agrees to accept telegraphic or telecopied purchase order
releases. IMATION will make its best effort to send a confirming, written
purchase order release within two (2) days of such telegraphic or telecopied
purchase order release. Unless otherwise provided in an Attachment, 3M will not
proceed without the issuance of a purchase order release number by IMATION.
D. The terms and conditions contained on IMATION's purchase orders
shall apply to all transactions relating to the Services covered by this
Agreement. If IMATION's purchase order terms and conditions contain any specific
provisions inconsistent with this Agreement, then this Agreement shall govern
and the inconsistent provision of IMATION's purchase order shall be applicable
only so far as it is consistent with this Agreement. If IMATION's purchase order
terms and conditions contain any specific provisions which address issues not
covered by this Agreement, then they will not be part of this Agreement unless
they are accepted in writing by 3M.
E. 3M shall only accept purchase order releases that originate from the
following IMATION facility, or other location designated by IMATION in writing.
IMATION CORP.
Purchasing Department
1 Imation Place
Oakdale, MN 55128
3. Additional Services
A. If IMATION requests 3M to perform any services beyond the scope of
services described in an Attachment, then IMATION will pay 3M a mutually agreed
upon amount for performing such additional services.
B. If 3M believes certain services constitutes services beyond the
scope of services specified in an Attachment, then the following procedure shall
apply:
1) Before performing the services in question, 3M shall bring
the matter to IMATION's attention by sending IMATION a letter
describing in reasonable detail why such services constitute additional
services.
2) Upon receipt of the letter, IMATION will evaluate the
services in question and inform 3M in writing of IMATION's position. If
IMATION agrees that the services in question constitute additional
services, then IMATION and 3M shall negotiate the amount which 3M will
charge IMATION if IMATION requests 3M to perform the additional
services. IMATION will then inform 3M whether or not IMATION wishes 3M
to perform the additional services. If IMATION does not agree that the
services in question constitute additional services, then 3M agrees to
perform the services in question, keep accurate records of the time
spent performing the services in question and reserves the right to
seek resolution of the dispute using the procedure described in Section
13 below.
C. If 3M performs any services without following the procedure set
forth in Section 3.B above, then 3M shall be deemed to have waived its right to
seek additional compensation based upon the claim that such services are beyond
the scope of services specified in the Attachment.
4. Costs, Billing and Payment
A. Unless otherwise stated in an Attachment, the price which 3M will
charge and IMATION will pay for Services provided under this Agreement will be
3M's Total Cost plus a mark-up of eight percent (8%). For the purposes of this
Agreement, "Total Cost" means 3M's actual factory cost for labor and overhead
plus any laboratory, engineering and administrative costs expended to provide
the Service. The initial Total Cost will be determined based on actual costs
from the previous six (6) months. Thereafter, prices will be adjusted at the
beginning of each calendar year by recalculating the Total Cost for each Service
based on the actual cost for the previous six (6) months.
B. Unless otherwise provided in an Attachment, where an Attachment
lists the price of a Service as an hourly rate 3M will invoice IMATION for the
amounts listed below, plus the listed hourly rate(s) for 3M employee(s) that the
parties agree will perform the relevant Services:
(i) Travel time is chargeable for a 3M employee only to the
extent that travel time charges combined with work charges for that
employee on any calendar day amount to eight (8) hours or less. Travel
is to be completed in the most expeditious manner possible, without any
unnecessary stopovers or delays.
(ii) For the expenses of 3M's employees traveling away from
home and overnight on behalf of IMATION, the actual costs of
transportation, meals and lodging. (Airfare is to be the most
economical rate available, but never more costly than regular carrier
coach rate.)
(iii) For long distance telephone calls, facsimile, and
telegrams placed in connection with Services provided under this
Agreement, the actual cost.
(iv) For printing, reproduction and postage charges incurred
in connection with Services provided under this Agreement, the actual
cost.
(v) For consultants, associated firms, testing laboratories
and other subcontractors used, with IMATION's prior written approval,
in connection with Services provided under this Agreement, the actual
amounts paid by 3M.
(vi) For computer time incurred directly in connection with
Services provided under this Agreement, the actual and reasonable cost.
(vii) For supplies, service parts and other materials
purchased to perform Services under this Agreement, the actual cost.
(viii) For automobile mileage charges incurred in connection
with Services provided under this Agreement, the rate of Twenty-eight
and one-half cents ($.285) per mile.
(ix) For equipment leased from third parties in connection
with Services provided under this Agreement, the actual cost.
C. Unless otherwise provided in an Attachment, any single expenditure
on IMATION's behalf in excess of $1,000 must be pre-approved, in writing, by
IMATION.
D. As long as 3M continues to share its current financial system with
IMATION, Services performed under this Agreement will be billed to IMATION by 3M
charging the net amount due to the appropriate IMATION commodity code. The net
amount charged will be summarized with all other charges during the month on the
eighth work day of the following month. IMATION will pay 3M the net amounts due
on the ninth work day of the month. Once IMATION develops its own financial
system, amounts due under this Agreement will be billed and paid for as provided
in Section 4.E. below. If for any reason an amount due does not get charged to
the appropriate IMATION commodity code, then 3M may send IMATION an invoice for
the amount due and Section E will apply.
E. Unless otherwise provided in this Agreement or in an Attachment, 3M
will send IMATION a monthly invoice, including supporting documentation, for all
Services provided during such month. Invoices shall be due and payable within
thirty (30) days of receipt. Where the amount due is covered by Section 4.B.,
invoices must be supported with the following documents:
(i) Time sheets showing for each employee: (a) the actual
number of hours spent by day in performing Services under this
Agreement, with travel time itemized separately; (b) the type of
Service and the payment rate; and (c) the total number of hours and the
total dollar amount claimed.
(ii) For transportation, lodging and meal expenses claimed
under Section B(ii) above, receipts for all individual expense items
exceeding Twenty-five Dollars ($25.00).
(iii) For long distance telephone charges claimed under
Section B(iii) above, invoices or payment receipts.
(iv) For printing, reproduction or postage charges claimed
under Section B(iv) above, invoices or payment receipts.
(v) For subcontractor charges claimed under Section B(v)
above, invoices or payment receipts.
(vi) For computer time charges claimed under Section B(vi)
above, an itemization of all charges.
(vii) For materials and supplies charges claimed under Section
B(vii) above, invoices or payment receipts.
(viii) For mileage claimed under Section B(viii) above, an
itemization of all charges.
(ix) For equipment leasing charges claimed under Section B(ix)
above, invoices or payment receipts.
(x) Any other information or documentation which 3M may
reasonably request, including lien waivers.
F. Unless otherwise provided in an Attachment, this Section 4 states
3M's total right to remuneration for Services performed under this Agreement,
and includes all payment for 3M's profits and total compensation for all 3M's
costs, including statutory coverages (e.g., unemployment insurance, F.I.C.A.),
salary and fringe benefits, overhead (including secretarial and other support
services), and all other 3M expenses and expenditures, including any applicable
sales, use or other taxes.
G. For Services which are priced at 3M's Total Cost plus a markup of
eight percent, 3M grants IMATION the right to have 3M's cost records audited by
an independent certified public accountant selected by IMATION and approved by
3M. The independent certified public accountant will agree to treat this
information as confidential and will only disclose to IMATION whether or not the
Total Cost 3M communicated to IMATION was accurate. IMATION may request an audit
no more than twice each year per Service. If the accountant determines that the
Total Cost is inaccurate, then the Total Cost will be adjusted accordingly.
5. Term and Termination
A. This Agreement takes effect when both 3M and IMATION sign this
Agreement (the "Effective Date") and continues in effect until the last
Attachment has been terminated or until either party sends the other a written
termination notice in accordance with this Section, whichever occurs first.
Except as provided in Section 5.C., 3M cannot terminate this Agreement while
still obligated to perform Services under an outstanding Attachment. Even after
termination, the provisions of this Agreement continue to apply to Services
provided, charges incurred, payments made, events occurring and obligations
arising before the date of termination.
B. 3M's obligations under this Agreement with respect to a specific
Attachment shall begin on the date listed in the Attachment and shall terminate
on the earlier of:
(i) where the Attachment provides a fixed term, the expiration
date of the term specified in the applicable Attachment;
(ii) the date on which 3M discontinues permanently the
provision of such Service to its own internal organization;
(iii) where the Attachment provides an open-ended term, the
date of termination contained in the termination notice; or
(iv) the date of termination pursuant to Section 5.C or 5.D,
as applicable.
With respect to Section B(ii), 3M agrees to give IMATION written notice at least
ninety (90) days before the date 3M discontinues the Service. With respect to
Section B(iii), the party terminating the Attachment agrees to give the other
party written notice at least ninety (90) days prior to the desired termination
date, unless otherwise provided in the Attachment.
C. Subject to Section 12 (Force Majeure), and any special requirements
in an Attachment, either party (the "Non-Defaulting Party") may terminate this
Agreement upon sixty (60) calendar days prior written notice to the other party
(the "Defaulting Party") if the Defaulting Party is in breach of a material
obligation under this Agreement and does not remedy such default to the
reasonable satisfaction of the Non-Defaulting Party within such sixty (60) day
period. In the case of non-payment under Section 4.C, 3M may terminate this
Agreement upon seven (7) calendar days prior written notice to IMATION. For
purposes of this Section 5.C., good faith disputes regarding the quality or
timeliness with respect to any specific Service shall not be deemed a failure to
perform a material obligation under this Agreement.
D. If a Non-Defaulting Party is entitled to terminate this Agreement in
its entirety under Section 5.C, it may instead, terminate this Agreement in
part, upon the same notice provisions as specified in Section 5.C as follows:
(i) If the default relates to the payment for a Service, 3M
may terminate this Agreement as to the provision of that Service to
IMATION.
(ii) If the default relates to the provision of a Service,
IMATION may, in its sole discretion, terminate this Agreement as to the
provision of that Service by 3M.
Either party's use of this Section to terminate Services does not waive the
Defaulting Party's other obligations under this Agreement nor the Non-Defaulting
Party's right to make claims for breach of this Agreement.
6. Confidential Information
A. As used in this Agreement, 3M Confidential Information and IMATION
Confidential Information are defined as follows:
i. "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Effective Date of this Agreement and reasonably
understood by IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after the
Effective Date of this Agreement under the terms and for purposes of
this Agreement except for:
(1) information learned by IMATION for the first time
after the Effective Date, but prior to any disclosure by 3M;
(2) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(3) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not violative
of a duty of non-disclosure owed to another, including 3M, and
(c) the disclosure by the third party is not otherwise
unlawful;
(4) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the Effective Date and/or disclosed by 3M under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by IMATION in the usual course of
business and within the scope of the rights granted or
retained by IMATION under this Agreement or the Intellectual
Property Rights Agreement;
(6) information which is developed by a business
which is being transferred to IMATION and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business remaining with 3M on the Effective Date; and
(7) information which IMATION can demonstrate was
disclosed by a 3M business being transferred to IMATION to a
third party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party has expired,
from and after the date such third party obligation of
confidentiality expires, and provided that disclosure of an
item of information to one third party and a different item of
information to another third party shall not be viewed as
disclosure of information which can only be drawn from those
items of information collectively.
(ii) "IMATION CONFIDENTIAL INFORMATION" means information
known by 3M on the Effective Date and reasonably understood by 3M to be
confidential and related to IMATION's present or future business
interests, or disclosed confidentially by IMATION to 3M under the terms
and for purposes of this Agreement except for:
(1) information learned by 3M for the first time
subsequent to the Effective Date, but prior to any disclosure
by IMATION;
(2) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(3) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does not
have a duty of non-disclosure owed to such third party, (b)
the third party's disclosure is not violative of a duty of
non-disclosure owed to another, including IMATION, and (c) the
disclosure by the third party is not otherwise unlawful;
(4) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
Effective Date and/or disclosed by IMATION under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by 3M in the usual course of business
and within the scope of the rights granted to or retained by
3M under this Agreement or the Intellectual Property Rights
Agreement;
(6) information which is developed by a business
which remains with 3M on the Effective Date and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business being transferred to IMATION on the Effective Date;
and
(7) information which 3M can demonstrate was
disclosed to a third party prior to November 14, 1995, and for
which any obligation of confidentiality by that third party
has expired, from and after the date such third party
obligation of confidentiality expires, and provided that
disclosure of an item of information to one third party and a
different item of information to another third party shall not
be viewed as disclosure of information which can only be drawn
from those items of information collectively.
B. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any business information which is IMATION Confidential
Information or 3M Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five (5) years after
the date of disclosure of such information, unless and to the extent the parties
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the foregoing restrictions
shall expire with respect to such information on the expiration of such longer
period. The date of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION Confidential
Information known by 3M on the Effective Date shall be considered to be the
Effective Date.
C. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
D. Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a reasonable degree
of care, to prevent the unauthorized disclosure of the other party's
Confidential Information as the party uses to protect its own confidential
information of a like nature.
E. Each party shall insure that its affiliates, sublicensees and other
transferees agree to be bound by the same restrictions on use and disclosure of
Confidential Information as bind the party in advance of the disclosure of
Confidential Information to them.
F. The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
7. Limited Warranty
A. 3M warrants that Services performed under this Agreement will be
performed competently and in accordance with industry practices, and any
equipment and service parts furnished by 3M will be free of defects in material
and manufacture upon installation. Individual Attachments may have additional or
different warranties for different Services. 3M MAKES NO OTHER WARRANTIES WITH
RESPECT TO SUCH SERVICES AND ANY EQUIPMENT AND SERVICE PARTS FURNISHED BY 3M,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IF ANY FAILURE TO MEET THE
FOREGOING WARRANTY APPEARS AND NOTICE THEREOF IS PROVIDED TO 3M WITHIN THE TERM
OF THIS AGREEMENT OR WITHIN THIRTY (30) DAYS FROM THE DATE SERVICE WAS
PERFORMED, WHICHEVER IS LATER, 3M WILL CORRECTLY RE-PERFORM THE SERVICES
IDENTIFIED OR REPLACE OR REPAIR, AT 3M'S OPTION, THE DEFECTIVE EQUIPMENT OR
SERVICE PART PROVIDED. THE FOREGOING CONSTITUTES THE SOLE AND EXCLUSIVE REMEDY
FOR BREACH OF THIS WARRANTY.
B. No employee of 3M or any other party is authorized to make any
warranty in addition to the warranty made in this Agreement or the applicable
Attachments.
8. Limitation of Liabilities
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 9,
(INDEMNIFICATION), NEITHER PARTY SHALL BE LIABLE UNDER ANY CIRCUMSTANCES FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR ECONOMIC LOSS, BASED
UPON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN
TORT OR ANY OTHER LEGAL THEORY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS,
REVENUE, EQUIPMENT USE, DATA OR INFORMATION OF ANY KIND). EXCEPT AS PROVIDED IN
SECTION 9, 3M SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN
FURNISHING SERVICES UNDER THIS AGREEMENT.
9. Indemnification
9.1 IMATION agrees to indemnify, defend and hold harmless 3M, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Services supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
3M may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Section 9 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
9.2 If 3M intends to claim indemnification under this Section 9, 3M
will promptly notify IMATION in writing of any claim, action, or demand for
which 3M intends to claim indemnification. In addition, 3M will promptly notify
IMATION in writing if 3M elects to waive its right to have IMATION defend the
claim, action, or demand. If 3M does not waive its right to have IMATION defend
the claim, action, or demand, 3M agrees that IMATION will control the defense of
the claim, action, or demand. 3M will cooperate fully with IMATION and its legal
representatives in the investigation and defense of any claim, action, or demand
covered by this indemnification. 3M will permit IMATION to settle any claim,
action, or demand and agrees that IMATION will control the settlement, provided,
however, that such settlement does not adversely affect 3M's rights under this
Agreement or impose any obligations on 3M in addition to those stated in this
Agreement. IMATION, in the defense of any claims, actions or demands, will not
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term the giving by the claimant or plaintiff to 3M
of a release from all liability with respect to the claim, action, or demand. No
such claim, action, or demand will be settled by 3M without the prior written
consent of IMATION.
10. Insurance
Both IMATION and 3M shall carry insurance of types and in amounts
adequate to protect each party's interests under this Agreement.
11. Notices
A. All notices will be in writing and will be delivered by courier,
facsimile transmission or prepaid certified mail, return receipt requested.
Notices delivered by courier or facsimile transmission will be deemed to have
been given on the date of delivery. Notices delivered by certified mail will be
deemed to have been given on the date shown on the return receipt.
B. All notices will be addressed as follows:
(i) If to 3M:
Division Vice President
[3M Business Unit listed on applicable Attachment]
Minnesota Mining and Manufacturing Company
3M Center
St. Paul, Minnesota 55144-1000
with a copy to:
Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
(ii) If to IMATION:
President
IMATION CORP.
1 Imation Place
Oakdale, Minnesota 55128
with a copy to:
IMATION CORP.
General Counsel
Imation Legal Department
Bldg. 220-11W-01
I-94 & McKnight Road
St. Paul, MN 55144-1000
C. Either party may change its address for notice by giving notice in
accordance with Sections 11.B.(i) and 11.B.(ii).
12. Force Majeure
Neither party shall be responsible for failure to comply with this
Agreement due to causes beyond its reasonable control.
13. Dispute Resolution
A. The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 13.K., these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
B. Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
C. Submission to Mediation; Cost of Mediation: If, at the conclusion of
such meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation within thirty (30) days
thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
D. Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
E. Mediation And Arbitration.
(i) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty (30)
days or such longer period as they may mutually agree following the
initial mediation session. If the parties are not successful in
resolving the dispute through mediation by the end of such period, then
the parties agree to submit the matter to binding arbitration in
accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as modified herein,
by a sole arbitrator selected in accordance with the provisions of
Section 13.F. The arbitration proceeding shall be held in Minnesota,
shall be governed by the United States Arbitration Act, 9 U.S.C. SS
1-16 and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof.
(ii) Except as may be expressly provided in any other
agreement between the parties, the parties obligation under this
Section 13 to submit disputes to binding arbitration in lieu of seeking
judicial resolution of their disputes, shall expire on July 1, 2001.
F. Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
G. Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
H. Arbitration Period. Any arbitration proceeding shall be concluded in
a maximum of one (1) year from written notice from one party to the other party
identifying a dispute subject to arbitration under this Section and requesting
arbitration after having participated in negotiation and mediation under this
Section.
I. Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Section shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
J. Confidentiality. All negotiation, mediation and arbitration
proceedings under this Section shall be treated as Confidential Information in
accordance with Section 6. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
K. Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Section. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
14. Rights To Developments
Ownership and rights in any intellectual property (whether patentable
or not) conceived during the course of work under this Agreement up to and
including June 30, 1998, will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be 3M or Joint "Foreground IP" and/or "Foreground Patents" and/or
"New Material" as the case may be, depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purpose of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998, regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
15. General Terms
A. This Agreement may not be assigned in whole or in part by either
party without the prior written consent of the other party, which consent shall
not be unreasonably withheld. It shall not be unreasonable for IMATION to
withhold consent to assignment of this Agreement to a competitor of IMATION. Any
assignment, delegation or transfer of this Agreement or any interest therein,
whether by merger, acquisition or change of corporate form, without written
consent of the other party is void and cause of termination of this Agreement.
Nothing in this Agreement shall be construed to grant any person or entity not a
party hereto any rights or powers whatsoever; and no person or entity shall be a
third party beneficiary of this Agreement.
B. This Agreement and all matters related to its making and
performance, and all rights or remedies arising under or related to the
Agreement will be governed exclusively by the laws of the State of Minnesota.
C. This Agreement is binding on and benefits the parties, their
successors and permitted assigns.
D. 3M and IMATION do not in any way or for any purpose intend to become
partners in the conduct of a business or otherwise, or joint ventures, or
members of a joint enterprise under this Agreement. The relationship will be one
of service provider and purchaser. Neither party will have any authority to
obligate, or to otherwise act as representative of, or agent for, the other
party for any purpose and neither party will make any representations or hold
itself out as having such authority. The employees of either party are not under
any circumstances the employees of the other party.
E. This Agreement may only be modified by a written amendment signed by
both parties. A course of conduct or performance does not modify or amend this
Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
F. This Agreement and all Attachments constitute the entire agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Attachment and any other documents used by the
parties in performing their obligations under this Agreement or any Attachment,
the provisions of this Agreement and the relevant Attachment will govern. In the
event of any conflict between this Agreement and any Attachment, the provisions
of the Attachment will govern.
G. All Section headings are included for reference only and will not
affect the meaning of the relevant Sections. All references to "Section" mean a
section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement. All Attachments are incorporated
herein by reference and form part of this Agreement.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND IMATION CORP.
MANUFACTURING COMPANY
By: By:
Date: Date:
Service Attachments
3M TO IMATION
Service Attachment
1. IMATION Business Unit Requesting Service:_____________________________
2. 3M Business Unit Performing Service: __________________________________
3. Term: ____________________________
4. Notice Period for Termination: ____ days
5. Service to be Performed by 3M:
_______________________________________________________________________________
_______________________________________________________________________________
6. Amount to be Paid by IMATION for Service:
|_| Fixed Dollar Amount/Time Period: _____________________________
|_| Hourly Rate: $_________/hr
|_| Measurable Unit of Service x Charge/measurable unit: _________
|_| Other ______________________________________________________
7. Things to be Provided or Paid for by IMATION (if any):
_______________________________________________________________________________
8. Special Conditions:
_______________________________________________________________________________
9. Contact Persons:
3M: ____________________________________ Phone No. ________________
IMATION: ______________________________ Phone No. ________________
ACCEPTED AND AGREED TO:
IMATION CORP. MINNESOTA MINING AND
MANUFACTURING COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
SERVICES AGREEMENT (IMATION TO 3M)
This Agreement, between Minnesota Mining and Manufacturing Company, a
Delaware corporation with its principal offices at 3M Center, St. Paul,
Minnesota 55144-1000 (3M) and Imation Corp., a Delaware corporation with its
principal offices at 1 Imation Place, Oakdale, Minnesota 55128 (IMATION).
1. Description of Services
A. This Agreement sets out the terms and conditions under which IMATION
will provide services to 3M as described in Attachments to be negotiated and
signed by the parties.
B. During the Agreement term (Term) IMATION agrees to do, furnish and
pay for all labor, supervision, taxes, equipment, supplies and any and all other
things necessary to perform fully and to 3M's reasonable satisfaction the
services described in all Attachments executed by the parties (Services).
C. During the Term 3M will do, furnish and pay for all things described
in all Attachments executed by the parties.
D. A separate Attachment will be signed for each Service to be
performed by IMATION. Each Attachment will identify (i) the 3M business unit
requesting the Service, (ii) the IMATION business unit which will perform the
Service, (iii) the effective date, (iv) the Service to be performed, (v) the
things to be provided or paid for by 3M, (vi) the amount to be paid to IMATION
by 3M; and (vii) any other special conditions governing the specific Services
described in the Attachment.
E. IMATION represents to 3M it has experience and expertise in
providing the Services listed in the Attachments.
F. IMATION shall provide the Services as a subcontractor to 3M where
the Service described in an Attachment is supporting guaranteed maintenance or
other similar service contracts entered into between 3M and 3M customers.
G. Subject to any special requirements in any Attachment, if IMATION
provides services to its own internal organization (Internal Services)
comparable to the Services to be provided to 3M under this Agreement, IMATION
shall not be obligated to provide Services greater in nature or scope than such
Internal Services. During the Term, any improvements in systems, equipment,
technology or methods used in or related to such Internal Services will be made
available to 3M as part of the Services, provided however that the parties first
agree to any increased cost for Services resulting from such improvements.
2. Service Ordering Procedures
A. 3M shall send IMATION blanket purchase orders for the Services
listed in each Attachment. A blanket purchase order is for IMATION's planning
purposes only and is not a commitment to purchase any particular dollar value of
Service. Unless otherwise stated in an Attachment, 3M shall issue purchase order
releases against a blanket purchase order which constitutes 3M's firm commitment
to purchase specific quantities of Services. 3M will not be responsible for any
of IMATION's cost or expense for supplies, labor, or other commitments or
expenses other than as authorized by written 3M purchase order releases in
IMATION's possession. EXCEPT AS SET OUT IN SUCH PURCHASE ORDER RELEASES, 3M
MAKES NO REPRESENTATION OR GUARANTEE AS TO THE DOLLAR VALUE OF SERVICES THAT 3M
WILL PURCHASE UNDER THIS AGREEMENT.
B. The information on the purchase order release will include the
purchase order number, description of Service purchased, and, as applicable,
routing instructions, delivery schedule and destination.
C. IMATION agrees to accept telegraphic or telecopied purchase order
releases. 3M will make its best effort to send a confirming, written purchase
order release within two (2) days of such telegraphic or telecopied purchase
order release. Unless otherwise provided in an Attachment, IMATION will not
proceed without the issuance of a purchase order release number by 3M.
D. The terms and conditions contained on 3M's purchase orders shall
apply to all transactions relating to the Services covered by this Agreement. If
3M's purchase order terms and conditions contain any specific provisions
inconsistent with this Agreement, then this Agreement shall govern and the
inconsistent provision of 3M's purchase order shall be applicable only so far as
it is consistent with this Agreement. If 3M's purchase order terms and
conditions contain any specific provisions which address issues not covered by
this Agreement, then they will not be part of this Agreement unless they are
accepted in writing by IMATION.
E. IMATION shall only accept purchase order releases that originate
from the following 3M facility, or other location designated by 3M in writing.
Minnesota Mining and Manufacturing Company
Purchasing Department
P.O. Box 33327
St. Paul, Minnesota 55133
3. Additional Services
A. If 3M requests IMATION to perform any services beyond the scope of
services described in an Attachment, then 3M will pay IMATION a mutually agreed
upon amount for performing such additional services.
B. If IMATION believes certain services constitutes services beyond the
scope of services specified in an Attachment, then the following procedure shall
apply:
1) Before performing the services in question, IMATION shall
bring the matter to 3M's attention by sending 3M a letter describing in
reasonable detail why such services constitute additional services.
2) Upon receipt of the letter, 3M will evaluate the services
in question and inform IMATION in writing of 3M's position. If 3M
agrees that the services in question constitute additional services,
then 3M and IMATION shall negotiate the amount which IMATION will
charge 3M if 3M requests IMATION to perform the additional services. 3M
will then inform IMATION whether or not 3M wishes IMATION to perform
the additional services. If 3M does not agree that the services in
question constitute additional services, then IMATION agrees to perform
the services in question, keep accurate records of the time spent
performing the services in question and reserves the right to seek
resolution of the dispute using the procedure described in Section 13
below.
C. If IMATION performs any services without following the procedure set
forth in Section 3.B above, then IMATION shall be deemed to have waived its
right to seek additional compensation based upon the claim that such services
are beyond the scope of services specified in the Attachment.
4. Costs, Billing and Payment
A. Unless otherwise stated in an Attachment, the price which IMATION
will charge and 3M will pay for Services provided under this Agreement will be
IMATION's Total Cost plus a mark-up of eight percent (8%). For the purposes of
this Agreement, "Total Cost" means IMATION's actual factory cost for labor and
overhead plus any laboratory, engineering and administrative costs expended to
provide the Service. The initial Total Cost will be determined based on actual
costs from the previous six (6) months. Thereafter, prices will be adjusted at
the beginning of each calendar year by recalculating the Total Cost for each
Service based on the actual cost for the previous six (6) months.
B. Unless otherwise provided in an Attachment, where an Attachment
lists the price of a Service as an hourly rate IMATION will invoice 3M for the
amounts listed below, plus the listed hourly rate(s) for IMATION employee(s)
that the parties agree will perform the relevant Services:
(i) Travel time is chargeable for a IMATION employee only to
the extent that travel time charges combined with work charges for that
employee on any calendar day amount to eight (8) hours or less. Travel
is to be completed in the most expeditious manner possible, without any
unnecessary stopovers or delays.
(ii) For the expenses of IMATION's employees traveling away
from home and overnight on behalf of 3M, the actual costs of
transportation, meals and lodging. (Airfare is to be the most
economical rate available, but never more costly than regular carrier
coach rate.)
(iii) For long distance telephone calls, facsimile, and
telegrams placed in connection with Services provided under this
Agreement, the actual cost.
(iv) For printing, reproduction and postage charges incurred
in connection with Services provided under this Agreement, the actual
cost.
(v) For consultants, associated firms, testing laboratories
and other subcontractors used, with 3M's prior written approval, in
connection with Services provided under this Agreement, the actual
amounts paid by IMATION.
(vi) For computer time incurred directly in connection with
Services provided under this Agreement, the actual and reasonable cost.
(vii) For supplies, service parts and other materials
purchased to perform Services under this Agreement, the actual cost.
(viii) For automobile mileage charges incurred in connection
with Services provided under this Agreement, the rate of Twenty-eight
and one-half cents ($.285) per mile.
(ix) For equipment leased from third parties in connection
with Services provided under this Agreement, the actual cost.
C. Unless otherwise provided in an Attachment, any single expenditure
on 3M's behalf in excess of $1,000 must be pre-approved, in writing, by 3M.
D. As long as 3M continues to share its current financial system with
IMATION, Services performed under this Agreement will be billed to 3M by IMATION
charging the net amount due to the appropriate 3M commodity code. The net amount
charged will be summarized with all other charges during the month on the eighth
work day of the following month. 3M will pay IMATION the net amounts due on the
ninth work day of the month. Once IMATION develops its own financial system,
amounts due under this Agreement will be billed and paid for as provided in
Section 4.E. below. If for any reason an amount due does not get charged to the
appropriate 3M commodity code, then IMATION may send 3M an invoice for the
amount due and Section 4.E. will apply.
E. Unless otherwise provided in this Agreement or in an Attachment,
IMATION will send 3M a monthly invoice, including supporting documentation, for
all Services provided during such month. Invoices shall be due and payable
within thirty (30) days of receipt. Where the amount due is governed by Section
4.B., invoices must be supported with the following documents:
(i) Time sheets showing for each employee: (a) the actual
number of hours spent by day in performing Services under this
Agreement, with travel time itemized separately; (b) the type of
Service and the payment rate; and (c) the total number of hours and the
total dollar amount claimed.
(ii) For transportation, lodging and meal expenses claimed
under Section B(ii) above, receipts for all individual expense items
exceeding Twenty-five Dollars ($25.00).
(iii) For long distance telephone charges claimed under
Section B(iii) above, invoices or payment receipts.
(iv) For printing, reproduction or postage charges claimed
under Section B(iv) above, invoices or payment receipts.
(v) For subcontractor charges claimed under Section B(v)
above, invoices or payment receipts.
(vi) For computer time charges claimed under Section B(vi)
above, an itemization of all charges.
(vii) For materials and supplies charges claimed under Section
B(vii) above, invoices or payment receipts.
(viii) For mileage claimed under Section B(viii) above, an
itemization of all charges.
(ix) For equipment leasing charges claimed under Section B(ix)
above, invoices or payment receipts.
(x) Any other information or documentation which 3M may
reasonably request, including lien waivers.
F. Unless otherwise provided in an Attachment, this Section 4 states
IMATION's total right to remuneration for Services performed under this
Agreement, and includes all payment for IMATION's profits and total compensation
for all IMATION's costs, including statutory coverages (e.g., unemployment
insurance, F.I.C.A.), salary and fringe benefits, overhead (including
secretarial and other support services), and all other IMATION expenses and
expenditures, including any applicable sales, use or other taxes.
G. For Services which are priced at IMATION's Total Cost plus a markup
of eight percent, IMATION grants 3M the right to have IMATION's cost records
audited by an independent certified public accountant selected by 3M and
approved by IMATION. The independent certified public accountant will agree to
treat this information as confidential and will only disclose to 3M whether or
not the Total Cost IMATION communicated to 3M was accurate. 3M may request an
audit no more than twice each year per Service. If the accountant determines
that the Total Cost is inaccurate, then the Total Cost will be adjusted
accordingly.
5. Term and Termination
A. This Agreement takes effect when both 3M and IMATION sign this
Agreement (the "Effective Date") and continues in effect until the last
Attachment has been terminated or until either party sends the other a written
termination notice in accordance with this Section, whichever occurs first.
Except as provided in Section 5.C., IMATION cannot terminate this Agreement
while still obligated to perform Services under an outstanding Attachment. Even
after termination, the provisions of this Agreement continue to apply to
Services provided, charges incurred, payments made, events occurring and
obligations arising before the date of termination.
B. IMATION's obligations under this Agreement with respect to a
specific Attachment shall begin on the date listed in the Attachment and shall
terminate on the earlier of:
(i) where the Attachment provides a fixed term, the expiration
date of the term specified in the applicable Attachment;
(ii) the date on which IMATION discontinues permanently the
provision of such Service to its own internal organization;
(iii) where the Attachment provides an open-ended term, the
date of termination contained in the termination notice; or
(iv) the date of termination pursuant to Section 5.C or 5.D.,
as applicable.
With respect to Section B(ii), IMATION agrees to give 3M written notice at least
ninety (90) days before the date IMATION discontinues the Service. With respect
to Section B(iii), the party terminating the Attachment agrees to give the other
party written notice at least ninety (90) days prior to the desired termination
date, unless otherwise provided in the Attachment.
C. Subject to Section 12 (Force Majeure), and any special requirements
in an Attachment, either party (the "Non-Defaulting Party") may terminate this
Agreement upon sixty (60) calendar days prior written notice to the other party
(the "Defaulting Party") if the Defaulting Party is in breach of a material
obligation under this Agreement and does not remedy such default to the
reasonable satisfaction of the Non-Defaulting Party within such sixty (60) day
period. In the case of non-payment under Section 4.C, IMATION may terminate this
Agreement upon seven (7) calendar days prior written notice to 3M. For purposes
of this Section 5.C., good faith disputes regarding the quality or timeliness
with respect to any specific Service shall not be deemed a failure to perform a
material obligation under this Agreement.
D. If a Non-Defaulting Party is entitled to terminate this Agreement in
its entirety under Section 5.C, it may instead, terminate this Agreement in
part, upon the same notice provisions as specified in Section 5.C as follows:
(i) If the default relates to the payment for a Service,
IMATION may terminate this Agreement as to the provision of that
Service to 3M.
(ii) If the default relates to the provision of a Service, 3M
may, in its sole discretion, terminate this Agreement as to the
provision of that Service by IMATION.
Either party's use of this Section to terminate Services does not waive the
Defaulting Party's other obligations under this Agreement nor the Non-Defaulting
Party's right to make claims for breach of this Agreement.
6. Confidential Information
A. As used in this Agreement, 3M Confidential Information and IMATION
Confidential Information are defined as follows:
i. "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Effective Date of this Agreement and reasonably
understood by IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after the
Effective Date of this Agreement under the terms and for purposes of
this Agreement except for:
(1) information learned by IMATION for the first time
after the Effective Date, but prior to any disclosure by 3M;
(2) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(3) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not violative
of a duty of non-disclosure owed to another, including 3M, and
(c) the disclosure by the third party is not otherwise
unlawful;
(4) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the Effective Date and/or disclosed by 3M under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by IMATION in the usual course of
business and within the scope of the rights granted to or
retained by IMATION under this Agreement or the Intellectual
Property Rights Agreement;
(6) information which is developed by a business
which is being transferred to IMATION and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business remaining with 3M on the Effective Date; and
(7) information which IMATION can demonstrate was
disclosed by a 3M business being transferred to IMATION to a
third party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party has expired,
from and after the date such third party obligation of
confidentiality expires, and provided that disclosure of an
item of information to one third party and a different item of
information to another third party shall not be viewed as
disclosure of information which can only be drawn from those
items of information collectively.
(ii) "IMATION CONFIDENTIAL INFORMATION" means information
known by 3M on the Effective Date and reasonably understood by 3M to be
confidential and related to IMATION's present or future business
interests, or disclosed confidentially by IMATION to 3M under the terms
and for purposes of this Agreement except for:
(1) information learned by 3M for the first time
subsequent to the Effective Date, but prior to any disclosure
by IMATION;
(2) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(3) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does not
have a duty of non-disclosure owed to such third party, (b)
the third party's disclosure is not violative of a duty of
non-disclosure owed to another, including IMATION, and (c) the
disclosure by the third party is not otherwise unlawful;
(4) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
Effective Date and/or disclosed by IMATION under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by 3M in the usual course of business
and within the scope of the rights granted to or retained by
3M under this Agreement or the Intellectual Property Rights
Agreement;
(6) information which is developed by a business
which remains with 3M on the Effective Date and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business being transferred to IMATION on the Effective Date;
and
(7) information which 3M can demonstrate was
disclosed to a third party prior to November 14, 1995, and for
which any obligation of confidentiality by that third party
has expired, from and after the date such third party
obligation of confidentiality expires, and provided that
disclosure of an item of information to one third party and a
different item of information to another third party shall not
be viewed as disclosure of information which can only be drawn
from those items of information collectively.
B. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any business information which is IMATION Confidential
Information or 3M Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five (5) years after
the date of disclosure of such information, unless and to the extent the parties
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the foregoing restrictions
shall expire with respect to such information on the expiration of such longer
period. The date of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION Confidential
Information known by 3M on the Effective Date shall be considered to be the
Effective Date.
C. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
D. Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a reasonable degree
of care, to prevent the unauthorized disclosure of the other party's
Confidential Information as the party uses to protect its own confidential
information of a like nature.
E. Each party shall insure that its affiliates, sublicensees and other
transferees agree to be bound by the same restrictions on use and disclosure of
Confidential Information as bind the party in advance of the disclosure of
Confidential Information to them.
F. The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
7. Limited Warranty
A. IMATION warrants that Services performed under this Agreement will
be performed competently and in accordance with industry practices, and any
equipment and service parts furnished by IMATION will be free of defects in
material and manufacture upon installation. Individual Attachments may have
additional or different warranties for different Services. IMATION MAKES NO
OTHER WARRANTIES WITH RESPECT TO SUCH SERVICES AND ANY EQUIPMENT AND SERVICE
PARTS FURNISHED BY IMATION, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IF ANY
FAILURE TO MEET THE FOREGOING WARRANTY APPEARS AND NOTICE THEREOF IS PROVIDED TO
IMATION WITHIN THE TERM OF THIS AGREEMENT OR WITHIN THIRTY (30) DAYS FROM THE
DATE SERVICE WAS PERFORMED, WHICHEVER IS LATER, IMATION WILL CORRECTLY
RE-PERFORM THE SERVICES IDENTIFIED OR REPLACE OR REPAIR, AT IMATION'S OPTION,
THE DEFECTIVE EQUIPMENT OR SERVICE PART PROVIDED. THE FOREGOING CONSTITUTES THE
SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THIS WARRANTY.
B. No employee of IMATION or any other party is authorized to make any
warranty in addition to the warranty made in this Agreement or the applicable
Attachments.
8. Limitation of Liabilities
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 9,
(INDEMNIFICATION), NEITHER PARTY SHALL BE LIABLE UNDER ANY CIRCUMSTANCES FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR ECONOMIC LOSS, BASED
UPON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN
TORT OR ANY OTHER LEGAL THEORY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS,
REVENUE, EQUIPMENT USE, DATA OR INFORMATION OF ANY KIND). EXCEPT AS PROVIDED IN
SECTION 9, IMATION SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN
FURNISHING SERVICES UNDER THIS AGREEMENT.
9. Indemnification
9.1 3M agrees to indemnify, defend and hold harmless IMATION, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Services supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
IMATION may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Section 9 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
9.2 If IMATION intends to claim indemnification under this Section 9,
IMATION will promptly notify 3M in writing of any claim, action or demand for
which IMATION intends to claim indemnification. In addition, IMATION will
promptly notify 3M in writing if IMATION elects to waive its right to have 3M
defend the claim, action, or demand. If IMATION does not waive its right to have
3M defend the claim, action, or demand, IMATION agrees that 3M will control the
defense of the claim, action, or demand. IMATION will cooperate fully with 3M
and its legal representatives in the investigation and defense of any claim,
action, or demand covered by this indemnification. IMATION will permit 3M to
settle any claim, action, or demand and agrees that 3M will control the
settlement, provided, however, that such settlement does not adversely affect
IMATION's rights under this Agreement or impose any obligations on IMATION in
addition to those stated in this Agreement. 3M, in the defense of any claims,
actions or demands, will not consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to IMATION of a release from all liability with respect to
the claim, action, or demand. No such claim, action, or demand will be settled
by IMATION without the prior written consent of 3M.
10. Insurance
Both IMATION and 3M shall carry insurance of types and in amounts
adequate to protect each party's interests under this Agreement.
11. Notices
A. All notices will be in writing and will be delivered by courier,
facsimile transmission or prepaid certified mail, return receipt requested.
Notices delivered by courier or facsimile transmission will be deemed to have
been given on the date of delivery. Notices delivered by certified mail will be
deemed to have been given on the date shown on the return receipt.
B. All notices will be addressed as follows:
(i) If to 3M:
Division Vice President
[3M Business Unit listed on applicable Attachment]
Minnesota Mining and Manufacturing Company
3M Center
St. Paul, MN 55144-1000
with a copy to:
Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
(ii) If to IMATION:
President
IMATION CORP.
1 Imation Place
Oakdale, MN 55128
with a copy to:
IMATION CORP.
General Counsel
Imation Legal Department
I-94 and McKnight Road
St. Paul, MN 55144-1000
C. Either party may change its address for notice by giving notice in
accordance with Sections 11.B.(i) and 11.B.(ii).
12. Force Majeure
Neither party shall be responsible for failure to comply with this
Agreement due to causes beyond its reasonable control.
13. Dispute Resolution
A. The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 13.K., these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
B. Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
C. Submission to Mediation; Cost of Mediation: If, at the conclusion of
such meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation within thirty (30) days
thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
D. Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
E. Mediation And Arbitration.
(i) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a period of thirty (30)
days or such longer period as they may mutually agree following the
initial mediation session. If the parties are not successful in
resolving the dispute through mediation by the end of such period, then
the parties agree to submit the matter to binding arbitration in
accordance with the Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as modified herein,
by a sole arbitrator selected in accordance with the provisions of
Section 13.F. The arbitration proceeding shall be held in Minnesota,
shall be governed by the United States Arbitration Act, 9 U.S.C. SS
1-16 and judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof.
ii. Except as may be expressly provided in any other agreement
between the parties, the parties obligation under this Section 13 to
submit disputes to binding arbitration in lieu of seeking judicial
resolution of their disputes, shall expire on July 1, 2001.
F. Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
G. Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
H. Arbitration Period. Any arbitration proceeding shall be concluded in
a maximum of one (1) year from written notice from one party to the other party
identifying a dispute subject to arbitration under this Section and requesting
arbitration after having participated in negotiation and mediation under this
Section.
I. Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Section shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
J. Confidentiality. All negotiation, mediation and arbitration
proceedings under this Section shall be treated as Confidential Information in
accordance with Section 6. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
K. Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Section. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
14. Rights To Developments
Ownership and rights in any intellectual property (whether patentable
or not) conceived during the course of work under this Agreement up to and
including June 30, 1998, will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be Imation or Joint "Foreground IP" and/or "Foreground Patents"
and/or "New Material" as the case may be, depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purpose of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998, regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
15. General Terms
A. This Agreement may not be assigned in whole or in part by either
party without the prior written consent of the other party, which consent shall
not be unreasonably withheld. It shall not be unreasonable for 3M to withhold
consent to assignment of this Agreement to a competitor of 3M. Any assignment,
delegation or transfer of this Agreement or any interest therein, whether by
merger, acquisition or change of corporate form, without written consent of the
other party is void and cause of termination of this Agreement. Nothing in this
Agreement shall be construed to grant any person or entity not a party hereto
any rights or powers whatsoever; and no person or entity shall be a third party
beneficiary of this Agreement.
B. This Agreement and all matters related to its making and
performance, and all rights or remedies arising under or related to the
Agreement will be governed exclusively by the laws of the State of Minnesota.
C. This Agreement is binding on and benefits the parties, their
successors and permitted assigns.
D. 3M and IMATION do not in any way or for any purpose intend to become
partners in the conduct of a business or otherwise, or joint ventures, or
members of a joint enterprise under this Agreement. The relationship will be one
of service provider and purchaser. Neither party will have any authority to
obligate, or to otherwise act as representative of, or agent for, the other
party for any purpose and neither party will make any representations or hold
itself out as having such authority. The employees of either party are not under
any circumstances the employees of the other party.
E. This Agreement may only be modified by a written amendment signed by
both parties. A course of conduct or performance does not modify or amend this
Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
F. This Agreement and all Attachments constitute the entire agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Attachment and any other documents used by the
parties in performing their obligations under this Agreement or any Attachment,
the provisions of this Agreement and the relevant Attachment will govern. In the
event of any conflict between this Agreement and any Attachment, the provisions
of the Attachment will govern.
G. All Section headings are included for reference only and will not
affect the meaning of the relevant Sections. All references to "Section" mean a
section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement. All Attachments are incorporated
herein by reference and form part of this Agreement.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND IMATION CORP.
MANUFACTURING COMPANY
By: By:
Date: Date:
Service Attachments
IMATION TO 3M
Service Attachment
1. 3M Business Unit Requesting Service: __________________________________
2. IMATION Business Unit Performing Service:____________________________
3. Term: ____________________________
4. Notice Period for Termination: ____ days
5. Service to be Performed by IMATION:
_______________________________________________________________________________
_______________________________________________________________________________
6. Amount to be Paid by 3M for Service:
|_| Fixed Dollar Amount/Time Period: _____________________________
|_| Hourly Rate: $_________/hr
|_| Measurable Unit of Service x Charge/measurable unit: _________
|_| Other ______________________________________________________
7. Things to be Provided or Paid for by 3M (if any):
_______________________________________________________________________________
8. Special Conditions:
_______________________________________________________________________________
9. Contact Persons:
3M: ____________________________________ Phone No. ________________
IMATION: ______________________________ Phone No. ________________
ACCEPTED AND AGREED TO:
IMATION CORP. MINNESOTA MINING AND
MANUFACTURING COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
HESD SERVICES AGREEMENT (IMATION TO 3M)
This Agreement, between Minnesota Mining and Manufacturing Company, a
Delaware corporation with its principal offices at 3M Center, St. Paul,
Minnesota 55144-1000 (3M) and Imation Enterprises Corp., a Delaware corporation
with its principal offices at 1 Imation Place, Oakdale, Minnesota 55128
(IMATION).
1. Description of Services
A. This Agreement sets out the terms and conditions under which IMATION
will provide services to 3M as described in Attachments to be negotiated and
signed by the parties.
B. During the Agreement term (Term) IMATION agrees to do, furnish and
pay for all labor, supervision, taxes, equipment, supplies and any and all other
things necessary to perform fully and to 3M's reasonable satisfaction the
services described in all Attachments executed by the parties (Services).
C. During the Term 3M will do, furnish and pay for all things described
in all Attachments executed by the parties.
D. A separate Attachment will be signed for each Service to be
performed by IMATION. Each Attachment will identify (i) the 3M business unit
requesting the Service, (ii) the IMATION business unit which will perform the
Service, (iii) the effective date, (iv) the Service to be performed, (v) the
things to be provided or paid for by 3M, (vi) the amount to be paid to IMATION
by 3M; and (vii) any other special conditions governing the specific Services
described in the Attachment.
E. IMATION represents to 3M it has experience and expertise in
providing the Services listed in the Attachments.
F. IMATION shall provide the Services as a subcontractor to 3M where
the Service described in an Attachment is supporting guaranteed maintenance or
other similar service contracts entered into between 3M and 3M customers and as
a service provider where service contracts have been entered into between HESD
and 3M customers.
G. Subject to any special requirements in any Attachment, if IMATION
provides services to its own internal organization (Internal Services)
comparable to the Services to be provided to 3M under this Agreement, IMATION
shall not be obligated to provide Services greater in nature or scope than such
Internal Services. During the Term, any improvements in systems, equipment,
technology or methods used in or related to such Internal Services will be made
available to 3M as part of the Services, provided however that the parties first
agree to any increased cost for Services resulting from such improvements.
2. Service Ordering Procedures
A. 3M shall send IMATION blanket purchase orders for the Services
listed in each Attachment. A blanket purchase order is for IMATION's planning
purposes only and is not a commitment to purchase any particular dollar value of
Service. Unless otherwise stated in an Attachment, 3M shall issue purchase order
releases against a blanket purchase order which constitutes 3M's firm commitment
to purchase specific quantities of Services. 3M will not be responsible for any
of IMATION's cost or expense for supplies, labor, or other commitments or
expenses other than as authorized by written 3M purchase order releases in
IMATION's possession. EXCEPT AS SET OUT IN SUCH PURCHASE ORDER RELEASES, 3M
MAKES NO REPRESENTATION OR GUARANTEE AS TO THE DOLLAR VALUE OF SERVICES THAT 3M
WILL PURCHASE UNDER THIS AGREEMENT.
B. The information on the purchase order release will include the
purchase order number, description of Service purchased, and, as applicable,
routing instructions, delivery schedule and destination.
C. IMATION agrees to accept telegraphic or telecopied purchase order
releases. 3M will make its best effort to send a confirming, written purchase
order release within two (2) days of such telegraphic or telecopied purchase
order release. Unless otherwise provided in an Attachment, IMATION will not
proceed without the issuance of a purchase order release number by 3M.
D. The terms and conditions contained on 3M's purchase orders shall
apply to all transactions relating to the Services covered by this Agreement. If
3M's purchase order terms and conditions contain any specific provisions
inconsistent with this Agreement, then this Agreement shall govern and the
inconsistent provision of 3M's purchase order shall be applicable only so far as
it is consistent with this Agreement. If 3M's purchase order terms and
conditions contain any specific provisions which address issues not covered by
this Agreement, then they will not be part of this Agreement unless they are
accepted in writing by IMATION.
E. IMATION shall only accept purchase order releases that originate
from the following 3M facility, or other location designated by 3M in writing.
Minnesota Mining and Manufacturing Company
Purchasing Department
P.O. Box 33327
St. Paul, Minnesota 55133
3. Additional Services
A. If 3M requests IMATION to perform any services beyond the scope of
services described in an Attachment, then 3M will pay IMATION a mutually agreed
upon amount for performing such additional services.
B. If IMATION believes certain services constitutes services beyond the
scope of services specified in an Attachment, then the following procedure shall
apply:
1) Before performing the services in question, IMATION shall
bring the matter to 3M's attention by sending 3M a letter describing in
reasonable detail why such services constitute additional services.
2) Upon receipt of the letter, 3M will evaluate the services
in question and inform IMATION in writing of 3M's position. If 3M
agrees that the services in question constitute additional services,
then 3M and IMATION shall negotiate the amount which IMATION will
charge 3M if 3M requests IMATION to perform the additional services. 3M
will then inform IMATION whether or not 3M wishes IMATION to perform
the additional services. If 3M does not agree that the services in
question constitute additional services, then IMATION agrees to perform
the services in question, keep accurate records of the time spent
performing the services in question and reserves the right to seek
resolution of the dispute using the procedure described in Section 13
below.
C. If IMATION performs any services without following the procedure set
forth in Section 3.B above, then IMATION shall be deemed to have waived its
right to seek additional compensation based upon the claim that such services
are beyond the scope of services specified in the Attachment.
4. Costs, Billing and Payment
A. Unless otherwise stated in an Attachment, the price which IMATION
will charge and 3M will pay for Services provided under this Agreement will be
IMATION's Total Cost plus a mark-up of eight percent (8%). For the purposes of
this Agreement, "Total Cost" means IMATION's actual factory cost for labor and
overhead plus any laboratory, engineering and administrative costs expended to
provide the Service. The initial Total Cost will be determined based on actual
costs from the previous six (6) months. Thereafter, prices will be adjusted at
the beginning of each calendar year by recalculating the Total Cost for each
Service based on the actual cost for the previous six (6) months.
B. Unless otherwise provided in an Attachment, where an Attachment
lists the price of a Service as an hourly rate IMATION will invoice 3M for the
amounts listed below, plus the listed hourly rate(s) for IMATION employee(s)
that the parties agree will perform the relevant Services:
(i) Travel time is chargeable for a IMATION employee only to
the extent that travel time charges combined with work charges for that
employee on any calendar day amount to eight (8) hours or less. Travel
is to be completed in the most expeditious manner possible, without any
unnecessary stopovers or delays.
(ii) For the expenses of IMATION's employees traveling away
from home and overnight on behalf of 3M, the actual costs of
transportation, meals and lodging. (Airfare is to be the most
economical rate available, but never more costly than regular carrier
coach rate.)
(iii) For long distance telephone calls, facsimile, and
telegrams placed in connection with Services provided under this
Agreement, the actual cost.
(iv) For printing, reproduction and postage charges incurred
in connection with Services provided under this Agreement, the actual
cost.
(v) For consultants, associated firms, testing laboratories
and other subcontractors used, with 3M's prior written approval, in
connection with Services provided under this Agreement, the actual
amounts paid by IMATION.
(vi) For computer time incurred directly in connection with
Services provided under this Agreement, the actual and reasonable cost.
(vii) For supplies, service parts and other materials
purchased to perform Services under this Agreement, the actual cost.
(viii) For automobile mileage charges incurred in connection
with Services provided under this Agreement, the rate of Twenty-eight
and one-half cents ($.285) per mile.
(ix) For equipment leased from third parties in connection
with Services provided under this Agreement, the actual cost.
C. Unless otherwise provided in an Attachment, any single expenditure
on 3M's behalf in excess of $1,000 must be pre-approved, in writing, by 3M.
D. As long as 3M continues to share its current financial system with
IMATION, Services performed under this Agreement will be billed to 3M by IMATION
charging the net amount due to the appropriate 3M commodity code. The net amount
charged will be summarized with all other charges during the month on the eighth
work day of the following month. 3M will pay IMATION the net amounts due on the
ninth work day of the month. Once IMATION develops its own financial system,
amounts due under this Agreement will be billed and paid for as provided in
Section 4.E. below. If for any reason an amount due does not get charged to the
appropriate 3M commodity code, then IMATION may send 3M an invoice for the
amount due and Section 4.E. will apply.
E. Unless otherwise provided in this Agreement or in an Attachment,
IMATION will send 3M a monthly invoice, including supporting documentation, for
all Services provided during such month. Invoices shall be due and payable
within thirty (30) days of receipt. Where the amount due is governed by Section
4.B., invoices must be supported with the following documents:
(i) Time sheets showing for each employee: (a) the actual
number of hours spent by day in performing Services under this
Agreement, with travel time itemized separately; (b) the type of
Service and the payment rate; and (c) the total number of hours and the
total dollar amount claimed.
(ii) For transportation, lodging and meal expenses claimed
under Section B(ii) above, receipts for all individual expense items
exceeding Twenty-five Dollars ($25.00).
(iii) For long distance telephone charges claimed under
Section B(iii) above, invoices or payment receipts.
(iv) For printing, reproduction or postage charges claimed
under Section B(iv) above, invoices or payment receipts.
(v) For subcontractor charges claimed under Section B(v)
above, invoices or payment receipts.
(vi) For computer time charges claimed under Section B(vi)
above, an itemization of all charges.
(vii) For materials and supplies charges claimed under Section
B(vii) above, invoices or payment receipts.
(viii) For mileage claimed under Section B(viii) above, an
itemization of all charges.
(ix) For equipment leasing charges claimed under Section B(ix)
above, invoices or payment receipts.
(x) Any other information or documentation which 3M may
reasonably request, including lien waivers.
F. Unless otherwise provided in an Attachment, this Section 4 states
IMATION's total right to remuneration for Services performed under this
Agreement, and includes all payment for IMATION's profits and total compensation
for all IMATION's costs, including statutory coverages (e.g., unemployment
insurance, F.I.C.A.), salary and fringe benefits, overhead (including
secretarial and other support services), and all other IMATION expenses and
expenditures, including any applicable sales, use or other taxes.
G. For Services which are priced at IMATION's Total Cost plus a markup
of eight percent, IMATION grants 3M the right to have IMATION's cost records
audited by an independent certified public accountant selected by 3M and
approved by IMATION. The independent certified public accountant will agree to
treat this information as confidential and will only disclose to 3M whether or
not the Total Cost IMATION communicated to 3M was accurate. 3M may request an
audit no more than twice each year per Service. If the accountant determines
that the Total Cost is inaccurate, then the Total Cost will be adjusted
accordingly.
5. Term and Termination
A. This Agreement takes effect when both 3M and IMATION sign this
Agreement (the "Effective Date") and continues in effect until the last
Attachment has been terminated or until either party sends the other a written
termination notice in accordance with this Section, whichever occurs first.
Except as provided in Section 5.C., IMATION cannot terminate this Agreement
while still obligated to perform Services under an outstanding Attachment. Even
after termination, the provisions of this Agreement continue to apply to
Services provided, charges incurred, payments made, events occurring and
obligations arising before the date of termination.
B. IMATION's obligations under this Agreement with respect to a
specific Attachment shall begin on the date listed in the Attachment and shall
terminate on the earlier of:
(i) where the Attachment provides a fixed term, the expiration
date of the term specified in the applicable Attachment;
(ii) the date on which IMATION discontinues permanently the
provision of such Service to its own internal organization;
(iii) where the Attachment provides an open-ended term, the
date of termination contained in the termination notice; or
(iv) the date of termination pursuant to Section 5.C or 5.D.,
as applicable.
With respect to Section B(ii), IMATION agrees to give 3M written notice at least
ninety (90) days before the date IMATION discontinues the Service. With respect
to Section B(iii), the party terminating the Attachment agrees to give the other
party written notice at least ninety (90) days prior to the desired termination
date, unless otherwise provided in the Attachment.
C. Subject to Section 12 (Force Majeure), and any special requirements
in an Attachment, either party (the "Non-Defaulting Party") may terminate this
Agreement upon sixty (60) calendar days prior written notice to the other party
(the "Defaulting Party") if the Defaulting Party is in breach of a material
obligation under this Agreement and does not remedy such default to the
reasonable satisfaction of the Non-Defaulting Party within such sixty (60) day
period. In the case of non-payment under Section 4.C, IMATION may terminate this
Agreement upon seven (7) calendar days prior written notice to 3M. For purposes
of this Section 5.C., good faith disputes regarding the quality or timeliness
with respect to any specific Service shall not be deemed a failure to perform a
material obligation under this Agreement.
D. If a Non-Defaulting Party is entitled to terminate this Agreement in
its entirety under Section 5.C, it may instead, terminate this Agreement in
part, upon the same notice provisions as specified in Section 5.C as follows:
(i) If the default relates to the payment for a Service,
IMATION may terminate this Agreement as to the provision of that
Service to 3M.
(ii) If the default relates to the provision of a Service, 3M
may, in its sole discretion, terminate this Agreement as to the
provision of that Service by IMATION.
Either party's use of this Section to terminate Services does not waive the
Defaulting Party's other obligations under this Agreement nor the Non-Defaulting
Party's right to make claims for breach of this Agreement.
6. Confidential Information
A. As used in this Agreement, 3M Confidential Information and IMATION
Confidential Information are defined as follows:
i. "3M CONFIDENTIAL INFORMATION" means information known by
IMATION on the Effective Date of this Agreement and reasonably
understood by IMATION to be confidential and related to 3M's business
interests, or disclosed confidentially by 3M to IMATION after the
Effective Date of this Agreement under the terms and for purposes of
this Agreement except for:
(1) information learned by IMATION for the first time
after the Effective Date, but prior to any disclosure by 3M;
(2) information which is or becomes publicly
available through no act of IMATION, from and after the date
of public availability;
(3) information disclosed to IMATION by a third
party, provided (a) under the circumstances of disclosure
IMATION does not have a duty of non-disclosure owed to such
third party, (b) the third party's disclosure is not violative
of a duty of non-disclosure owed to another, including 3M, and
(c) the disclosure by the third party is not otherwise
unlawful;
(4) information developed by IMATION independent of
any confidential 3M information which is known by IMATION on
the Effective Date and/or disclosed by 3M under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by IMATION in the usual course of
business and within the scope of the rights granted to or
retained by IMATION under this Agreement or Intellectual
Property Rights Agreement;
(6) information which is developed by a business
which is being transferred to IMATION and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business remaining with 3M on the Effective Date; and
(7) information which IMATION can demonstrate was
disclosed by a 3M business being transferred to IMATION to a
third party prior to November 14, 1995, and for which any
obligation of confidentiality by that third party has expired,
from and after the date such third party obligation of
confidentiality expires, and provided that disclosure of an
item of information to one third party and a different item of
information to another third party shall not be viewed as
disclosure of information which can only be drawn from those
items of information collectively.
(ii) "IMATION CONFIDENTIAL INFORMATION" means information
known by 3M on the Effective Date of this Agreement and reasonably
understood by 3M to be confidential and related to IMATION's present or
future business interests, or disclosed confidentially by IMATION to 3M
under the terms and for purposes of this Agreement except for:
(1) information learned by 3M for the first time
subsequent to the Effective Date, but prior to any disclosure
by IMATION;
(2) information which is or becomes publicly
available through no act of 3M, from and after the date of
public availability;
(3) information disclosed to 3M by a third party,
provided (a) under the circumstances of disclosure 3M does not
have a duty of non-disclosure owed to such third party, (b)
the third party's disclosure is not violative of a duty of
non-disclosure owed to another, including IMATION, and (c) the
disclosure by the third party is not otherwise unlawful;
(4) information developed by 3M independent of any
confidential IMATION information which is known by 3M on the
Effective Date and/or disclosed by IMATION under this
Agreement;
(5) information which is inherently disclosed in
marketing of a product by 3M in the usual course of business
and within the scope of the rights granted to or retained by
3M under this Agreement or the Intellectual Property Rights
Agreement;
(6) information which is developed by a business
which remains with 3M on the Effective Date and constitutes
performance specifications for chemicals, compositions,
formulations, materials, components, devices, articles or
other items obtained prior to the Effective Date from a
business being transferred to IMATION on the Effective Date;
and
(7) information which 3M can demonstrate was
disclosed to a third party prior to November 14, 1995, and for
which any obligation of confidentiality by that third party
has expired, from and after the date such third party
obligation of confidentiality expires, and provided that
disclosure of an item of information to one third party and a
different item of information to another third party shall not
be viewed as disclosure of information which can only be drawn
from those items of information collectively.
B. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any business information which is IMATION Confidential
Information or 3M Confidential Information, respectively. The foregoing
restrictions shall expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five (5) years after
the date of disclosure of such information, unless and to the extent the parties
agree to a longer period for the foregoing restrictions with respect to specific
categories of business information which is IMATION Confidential Information
and/or 3M Confidential Information, in which case the foregoing restrictions
shall expire with respect to such information on the expiration of such longer
period. The date of disclosure in the case of business information which is
either 3M Confidential Information known by IMATION or IMATION Confidential
Information known by 3M on the Effective Date shall be considered to be the
Effective Date.
C. 3M and IMATION each shall not disclose to another or use except for
purposes of the Agreement any technical information which is IMATION
Confidential Information or 3M Confidential Information, respectively. The
foregoing restrictions shall not expire until such time and to the extent that
such information ceases to be IMATION Confidential Information or 3M
Confidential Information, as the case may be.
D. Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a reasonable degree
of care, to prevent the unauthorized disclosure of the other party's
Confidential Information as the party uses to protect its own confidential
information of a like nature.
E. Each party shall insure that its affiliates, sublicensees and other
transferees agree to be bound by the same restrictions on use and disclosure of
Confidential Information as bind the party in advance of the disclosure of
Confidential Information to them.
F. The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may relate to an
"Extraordinarily Sensitive Technology" as contemplated by the Intellectual
Property Rights Agreement. Any such Confidential Information shall be subject to
the special treatment provided for in Paragraph 15.3 of the Intellectual
Property Rights Agreement.
7. Limited Warranty
A. IMATION warrants that Services performed under this Agreement will
be performed competently and in accordance with industry practices, and any
equipment and service parts furnished by IMATION will be free of defects in
material and manufacture upon installation. Individual Attachments may have
additional or different warranties for different Services. IMATION MAKES NO
OTHER WARRANTIES WITH RESPECT TO SUCH SERVICES AND ANY EQUIPMENT AND SERVICE
PARTS FURNISHED BY IMATION, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IF ANY
FAILURE TO MEET THE FOREGOING WARRANTY APPEARS AND NOTICE THEREOF IS PROVIDED TO
IMATION WITHIN THE TERM OF THIS AGREEMENT OR WITHIN THIRTY (30) DAYS FROM THE
DATE SERVICE WAS PERFORMED, WHICHEVER IS LATER, IMATION WILL CORRECTLY
RE-PERFORM THE SERVICES IDENTIFIED OR REPLACE OR REPAIR, AT IMATION'S OPTION,
THE DEFECTIVE EQUIPMENT OR SERVICE PART PROVIDED. THE FOREGOING CONSTITUTES THE
SOLE AND EXCLUSIVE REMEDY FOR BREACH OF THIS WARRANTY.
B. No employee of IMATION or any other party is authorized to make any
warranty in addition to the warranty made in this Agreement or the applicable
Attachments.
8. Limitation of Liabilities
EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN SECTION 9,
(INDEMNIFICATION), NEITHER PARTY SHALL BE LIABLE UNDER ANY CIRCUMSTANCES FOR ANY
INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OR ECONOMIC LOSS, BASED
UPON BREACH OF WARRANTY, BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN
TORT OR ANY OTHER LEGAL THEORY, EVEN IF THE PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES (INCLUDING BUT NOT LIMITED TO LOSS OF PROFITS,
REVENUE, EQUIPMENT USE, DATA OR INFORMATION OF ANY KIND). EXCEPT AS PROVIDED IN
SECTION 9, IMATION SHALL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY DELAY IN
FURNISHING SERVICES UNDER THIS AGREEMENT.
9. Indemnification
9.1 3M agrees to indemnify, defend and hold harmless IMATION, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the Services supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
IMATION may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Section 9 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
9.2 If IMATION intends to claim indemnification under this Section 9,
IMATION will promptly notify 3M in writing of any claim, action or demand for
which IMATION intends to claim indemnification. In addition, IMATION will
promptly notify 3M in writing if IMATION elects to waive its right to have 3M
defend the claim, action, or demand. If IMATION does not waive its right to have
3M defend the claim, action, or demand, IMATION agrees that 3M will control the
defense of the claim, action, or demand. IMATION will cooperate fully with 3M
and its legal representatives in the investigation and defense of any claim,
action, or demand covered by this indemnification. IMATION will permit 3M to
settle any claim, action, or demand and agrees that 3M will control the
settlement, provided, however, that such settlement does not adversely affect
IMATION's rights under this Agreement or impose any obligations on IMATION in
addition to those stated in this Agreement. 3M, in the defense of any claims,
actions or demands, will not consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to IMATION of a release from all liability with respect to
the claim, action, or demand. No such claim, action, or demand will be settled
by IMATION without the prior written consent of 3M.
10. Insurance
Both IMATION and 3M shall carry insurance of types and in amounts
adequate to protect each party's interests under this Agreement.
11. Notices
A. All notices will be in writing and will be delivered by courier,
facsimile transmission or prepaid certified mail, return receipt requested.
Notices delivered by courier or facsimile transmission will be deemed to have
been given on the date of delivery. Notices delivered by certified mail will be
deemed to have been given on the date shown on the return receipt.
B. All notices will be addressed as follows:
(i) If to 3M:
Division Vice President
[3M Business Unit listed on applicable Attachment]
Minnesota Mining and Manufacturing Company
3M Center
St. Paul, MN 55144-1000
with a copy to:
Minnesota Mining and Manufacturing Company
Vice President, Legal Affairs
Building 220-14W-01
3M Center
St. Paul, MN 55144-1000
(ii) If to IMATION:
President
IMATION ENTERPRISES CORP.
1 Imation Place
Oakdale, MN 55128
with a copy to:
IMATION CORP.
General Counsel
Imation Legal Department
I-94 and McKnight Road
St. Paul, MN 55144-1000
C. Either party may change its address for notice by giving notice in
accordance with Sections 11.B.(i) and 11.B.(ii).
12. Force Majeure
Neither party shall be responsible for failure to comply with this
Agreement due to causes beyond its reasonable control.
13. Dispute Resolution
A. The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Section 13.K., these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
B. Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
C. Submission to Mediation; Cost of Mediation: If, at the conclusion of
such meeting, the parties have not succeeded in negotiating a resolution of the
dispute, they agree to submit the dispute to mediation within thirty (30) days
thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
D. Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
E. Mediation And Arbitration.
(i) The parties agree to participate in good faith in the mediation and
negotiations related thereto for a period of thirty (30) days or such
longer period as they may mutually agree following the initial
mediation session. If the parties are not successful in resolving the
dispute through mediation by the end of such period, then the parties
agree to submit the matter to binding arbitration in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration
of Business Disputes, as modified herein, by a sole arbitrator selected
in accordance with the provisions of Section 13.F. The arbitration
proceeding shall be held in Minnesota, shall be governed by the United
States Arbitration Act, 9 U.S.C. SS 1-16 and judgment upon the award
rendered by the arbitrator may be entered by any court having
jurisdiction thereof.
(ii) Except as may be expressly provided in any other agreement between
the parties, the parties obligation under this Section 13 to submit
disputes to binding arbitration in lieu of seeking judicial resolution
of their disputes, shall expire on July 1, 2001.
F. Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
G. Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
H. Arbitration Period. Any arbitration proceeding shall be concluded in
a maximum of one (1) year from written notice from one party to the other party
identifying a dispute subject to arbitration under this Section and requesting
arbitration after having participated in negotiation and mediation under this
Section.
I. Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Section shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
J. Confidentiality. All negotiation, mediation and arbitration
proceedings under this Section shall be treated as Confidential Information in
accordance with Section 6. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
K. Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Section. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
14. Rights To Developments
Ownership and rights in any intellectual property (whether patentable
or not) conceived during the course of work under this Agreement up to and
including June 30, 1998, will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be Imation or Joint "Foreground IP" and/or "Foreground Patents"
and/or "New Material" as the case may be, depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purpose of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998, regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
15. General Terms
A. This Agreement may not be assigned in whole or in part by either
party without the prior written consent of the other party, which consent shall
not be unreasonably withheld. It shall not be unreasonable for 3M to withhold
consent to assignment of this Agreement to a competitor of 3M. Any assignment,
delegation or transfer of this Agreement or any interest therein, whether by
merger, acquisition or change of corporate form, without written consent of the
other party is void and cause of termination of this Agreement. Nothing in this
Agreement shall be construed to grant any person or entity not a party hereto
any rights or powers whatsoever; and no person or entity shall be a third party
beneficiary of this Agreement.
B. This Agreement and all matters related to its making and
performance, and all rights or remedies arising under or related to the
Agreement will be governed exclusively by the laws of the State of Minnesota.
C. This Agreement is binding on and benefits the parties, their
successors and permitted assigns.
D. 3M and IMATION do not in any way or for any purpose intend to become
partners in the conduct of a business or otherwise, or joint ventures, or
members of a joint enterprise under this Agreement. The relationship will be one
of service provider and purchaser. Neither party will have any authority to
obligate, or to otherwise act as representative of, or agent for, the other
party for any purpose and neither party will make any representations or hold
itself out as having such authority. The employees of either party are not under
any circumstances the employees of the other party.
E. This Agreement may only be modified by a written amendment signed by
both parties. A course of conduct or performance does not modify or amend this
Agreement unless subsequently ratified by a written and mutually agreeable
amendment.
F. This Agreement and all Attachments constitute the entire agreement
between the parties with respect to its subject matter and supersede all prior
agreements, proposals, understandings and other communications, if any, whether
oral or written, pertaining to such subject matter. In the event of any conflict
between this Agreement or any Attachment and any other documents used by the
parties in performing their obligations under this Agreement or any Attachment,
the provisions of this Agreement and the relevant Attachment will govern. In the
event of any conflict between this Agreement and any Attachment, the provisions
of the Attachment will govern.
G. All Section headings are included for reference only and will not
affect the meaning of the relevant Sections. All references to "Section" mean a
section of this Agreement and all references to a "party" or the "parties" mean
a party or the parties to this Agreement. All Attachments are incorporated
herein by reference and form part of this Agreement.
ACCEPTED AND AGREED TO:
MINNESOTA MINING AND IMATION ENTERPRISES CORP.
MANUFACTURING COMPANY
By: By:
Date: Date:
Service Attachments
IMATION TO 3M
Service Attachment
1. 3M Business Unit Requesting Service: __________________________________
2. IMATION Business Unit Performing Service:____________________________
3. Term: ____________________________
4. Notice Period for Termination: ____ days
5. Service to be Performed by IMATION:
_______________________________________________________________________________
_______________________________________________________________________________
6. Amount to be Paid by 3M for Service:
|_| Fixed Dollar Amount/Time Period: ____________________________
|_| Hourly Rate: $_________/hr
|_| Measurable Unit of Service x Charge/measurable unit: ________
|_| Other _______________________________________________________
7. Things to be Provided or Paid for by 3M (if any):
_______________________________________________________________________________
8. Special Conditions:
_______________________________________________________________________________
9. Contact Persons:
3M: ____________________________________ Phone No. ________________
IMATION: ______________________________ Phone No. ________________
ACCEPTED AND AGREED TO:
IMATION ENTERPRISES CORP. MINNESOTA MINING AND MANUFACTURING
COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
CONTRACT MANUFACTURING SERVICES AGREEMENT (3M FOR IMATION)
This Agreement is between MINNESOTA MINING AND MANUFACTURING COMPANY, a
Delaware corporation, with its principal place of business at 3M Center, St.
Paul, Minnesota 55144, (3M); and IMATION ENTERPRISES CORP., a Delaware
corporation, with its principal place of business at 1 Imation Place, Oakdale,
Minnesota 55128 (IMATION).
1. DEFINITIONS.
For the purpose of this Agreement, the following words and phrases
shall have the meaning set forth below:
(A) "AGREEMENT" means this document, together with all Exhibits. The
Exhibits are incorporated by reference and made a part of this document.
(B) "DEFAULTING PARTY" is defined in Paragraph 3(C).
(C) "DISTRIBUTION DATE" means the date on which 3M distributes Imation
Corp. stock.
(D) DOCUMENTATION" means all drawings and other documentation related
to Equipment.
(E) "EQUIPMENT" means all equipment furnished by 3M to IMATION for
IMATION to use to perform contract manufacturing services under this Agreement.
(F) "FINISHED PRODUCTS" means the finished products fabricated,
assembled or processed by IMATION under this Agreement.
(G) "IMATION CONFIDENTIAL INFORMATION" is defined in Paragraph
14(A)(2).
(H) "MATERIALS" means components, materials or sub-assemblies provided
by 3M to IMATION.
(I) "3M CONFIDENTIAL INFORMATION" is defined in Paragraph 14(A)(1).
(J) "NON-DEFAULTING PARTY" is defined in Paragraph 3(C).
(K) "SPECIFICATION(S)" means the written product specifications,
process specifications, performance specifications, and packaging specifications
agreed upon by the parties. The Specifications may be changed at any time by
mutual written agreement of the parties.
(L) "TERM" means the term of this Agreement as governed by Paragraph 3.
(M) "TOTAL COST" is defined in Paragraph 6(A).
(N) "WASTE" is defined in Paragraph 20(A).
2. SCOPE AND PURPOSE.
(A) This Agreement sets out the terms and conditions under which 3M
will provide fabrication, assembly, processing and other similar contract
manufacturing services for IMATION using Materials provided by IMATION and in
accordance with the Specifications. Title to all such Materials shall at all
times remain with IMATION.
(B) During the Term 3M agrees to do, furnish and pay for all labor,
supervision, taxes, equipment, facilities, supplies and any and all other things
necessary to perform fully and to IMATION's reasonable satisfaction the contract
manufacturing services described in all Exhibits executed by the parties.
(C) During the Term IMATION will do, furnish and pay for all things
described in all Exhibits executed by the parties.
(D) A separate Exhibit will be signed for each contract manufacturing
service to be performed by 3M. Each Exhibit will identify (i) the IMATION
business unit requesting the contract manufacturing service, (ii) the 3M
business unit which will perform the service, (iii) the term during which the
service will be performed , (iv) the contract manufacturing service to be
performed, (v) the Materials, equipment and other things to be provided or paid
for by IMATION, (vi) the amount to be paid to 3M by IMATION and (vii) any other
special conditions governing the specific services described in the Exhibit.
3. TERM AND TERMINATION.
(A) This Agreement takes effect when both 3M and IMATION sign this
Agreement and continues in effect until the last Exhibit has been terminated or
until either party sends the other a written termination notice in accordance
with this Paragraph, whichever occurs first. Except as provided in Paragraph
3(C), 3M cannot terminate this Agreement while still obligated to perform
services under an outstanding Exhibit. Even after termination, the provisions of
this Agreement continue to apply to services provided, charges incurred,
payments made, events occurring and obligations arising before the date of
termination.
(B) 3M's obligations under this Agreement with respect to a specific
Exhibit shall begin on the date listed in the Exhibit and shall terminate on the
earlier of:
(1) where the Exhibit provides a fixed term, the expiration date
of the term specified in the applicable Exhibit;
(2) where the Exhibit provides an open-ended term, the date of
termination contained in the termination notice; or
(3) the date of termination pursuant to Paragraph 3(C) or 3(D), as
applicable.
With respect to Paragraph 3(B)(2), the party terminating the Exhibit
agrees to give the other party written notice at least ninety (90) days prior to
the desired termination date, unless otherwise provided in the Exhibit.
(C) Subject to Paragraph 23 (Force Majeure), and any special
requirements in an Exhibit, either party (the "Non-Defaulting Party") may
terminate this Agreement upon sixty (60) calendar days prior written notice to
the other party (the "Defaulting Party") if the Defaulting Party is in breach of
a material obligation under this Agreement and does not remedy such default to
the reasonable satisfaction of the Non-Defaulting Party within such sixty (60)
day period. In the case of non-payment under Paragraph 10, 3M may terminate this
Agreement upon seven (7) calendar days prior written notice to IMATION. For
purposes of this Paragraph 3(C), good faith disputes regarding the quality or
timeliness with respect to any specific service shall not be deemed a failure to
perform a material obligation under this Agreement.
(D) If a Non-Defaulting Party is entitled to terminate this Agreement
in its entirety under Paragraph 3(C), it may instead terminate this Agreement in
part, upon the same notice provisions as specified in Paragraph 3(C) as follows:
(1) If the default relates to the payment for a service, 3M may
terminate this Agreement as to the provision of that service
to IMATION.
(2) If the default relates to the provision of a service, the
Non-Defaulting Party may, in its sole discretion, terminate
this Agreement as to the provision of that service by 3M.
Either party's use of this Paragraph to terminate services does not
waive the Defaulting Party's other obligations under this Agreement or the
Non-Defaulting Party's right to make claims for breach of this Agreement.
4. ORDERING PROCEDURES.
(A) IMATION shall send 3M blanket purchase orders for the contract
manufacturing services listed in each Exhibit. A blanket purchase order is for
3M's planning purposes only and is not a commitment to purchase any particular
dollar value of contract manufacturing service. Unless otherwise stated in an
Exhibit, IMATION shall issue purchase order releases against a blanket purchase
order which constitutes IMATION's firm commitment to purchase a specific dollar
value of contract manufacturing services. IMATION will not be responsible for
any of 3M's cost or expense for supplies, labor, or other commitments or
expenses other than as authorized by written IMATION purchase order releases in
3M's possession. EXCEPT AS SET OUT IN PURCHASE ORDER RELEASES SENT TO 3M,
IMATION MAKES NO REPRESENTATION OR GUARANTEE AS TO THE DOLLAR VALUE OF CONTRACT
MANUFACTURING SERVICES THAT IMATION WILL PURCHASE UNDER THIS AGREEMENT.
(B) The information on the purchase order release will include the
purchase order number, Specification number or title, description of service
purchased, and, as applicable, routing instructions, delivery schedule and
destination.
(C) 3M agrees to accept telegraphic or telecopied purchase order
releases. IMATION will make a reasonable effort to send a confirming, written
purchase order release within two (2) days of receiving such telegraphic or
telecopied purchase order release. Unless otherwise provided in an Exhibit, 3M
will not proceed without the issuance of a purchase order release number by
IMATION.
(D) The terms and conditions contained on IMATION's purchase orders
shall apply to all transactions relating to the contract manufacturing services
covered by this Agreement. If IMATION's purchase order terms and conditions
contain any specific provisions inconsistent with this Agreement, then this
Agreement shall govern and the inconsistent provision of IMATION's purchase
order shall be applicable only so far as it is consistent with this Agreement.
If IMATION's purchase order terms and conditions contain any specific provisions
which address issues not covered by this Agreement, then they will not be part
of this Agreement unless they are accepted in writing by 3M.
(E) 3M shall only accept purchase order releases that originate from
the following IMATION facility, or other location designated by IMATION in
writing.
IMATION ENTERPRISES CORP.
Purchasing Department
1 Imation Place
Oakdale, MN 55128
5. ADDITIONAL SERVICES.
(A) If IMATION requests 3M to perform any services beyond the scope of
the contract manufacturing services described in an Exhibit, then IMATION will
pay 3M a mutually agreed upon amount for performing such additional services.
(B) If 3M believes certain services constitutes services beyond the
scope of services specified in an Exhibit, then the following procedure shall
apply:
(1) Before performing the services in question, 3M shall bring
the matter to IMATION's attention by sending IMATION a letter describing in
reasonable detail why such services constitute additional services.
(2) Upon receipt of the letter, IMATION will evaluate the
services in question and inform 3M in writing of IMATION's position. If IMATION
agrees that the services in question constitute additional services , then
IMATION and 3M shall negotiate the amount which 3M will charge IMATION if
IMATION requests 3M to perform the additional services. IMATION will then inform
3M whether or not IMATION wishes 3M to perform the additional services. If
IMATION does not agree that the services in question constitute additional
services, then 3M agrees to perform the services in question, keep accurate
records of the time spent performing the services in question and reserves the
right to seek resolution of the dispute using the procedure described in
Paragraph 27.
(C) If 3M performs any services without following the procedure set
forth in Paragraph 5(B) above, then 3M shall be deemed to have waived its right
to seek additional compensation based upon the claim that such services are
beyond the scope of services specified in the Exhibit.
6. PRICE.
(A) Unless otherwise stated in an Exhibit, the prices which 3M will
charge and IMATION will pay for contract manufacturing services under this
Agreement will be 3M's Total Cost plus a markup of eight percent (8%). For the
purposes of this Agreement, "Total Cost" means 3M's total factory cost for labor
and overhead plus any laboratory, engineering and administrative costs expended
to provide the service. The initial Total Cost will be determined based on
actual costs from the previous six (6) months. Thereafter, prices will be
adjusted at the beginning of each calendar year by recalculating the Total Cost
for each service based on the actual cost for the previous six (6) months. Where
the prices in an Exhibit are not Total Cost + 8%, the prices may not be
increased during the first twelve (12) months of the applicable blanket purchase
order, unless otherwise stated in an Exhibit. Thereafter, the prices may be
changed by 3M with thirty (30) days prior written notice to IMATION, unless an
Exhibit provides otherwise.
(B) The prices are F.O.B. 3M's facility, unless stated otherwise in the
Exhibit. The Exhibit prices state 3M's total right to remuneration for all
obligations performed (or to be performed) under this Agreement, and include all
payment for 3M's profit and total compensation for transfer of Product
Developments and Process Developments to IMATION as described in Paragraph 15
and for all of 3M's costs, including labor, statutory coverages (e.g.,
unemployment insurance, F.I.C.A.); fringe benefits; overhead; the costs of
providing the reports described in Paragraph 16; the costs of storing Materials,
Equipment, packaging supplies and Finished Products; the costs of the insurance
described in Paragraph 22; the costs of secretarial and other support services;
and all other 3M expenses and expenditures.
(C) For services which are priced at 3M's Total Cost plus a markup of
eight percent, 3M grants IMATION the right to have 3M's cost records audited by
an independent certified public accountant selected by IMATION and approved by
3M. The independent certified public accountant will agree to treat this
information as confidential and will only disclose to IMATION whether or not the
Total Cost 3M communicated to IMATION was accurate. IMATION may request an audit
no more than twice each year per service. If the accountant determines that the
Total Cost is inaccurate, then the Total Cost will be adjusted accordingly.
7. LABELING AND PACKAGING.
Labeling and packaging of products requested in an Exhibit shall be
done in accordance with the Specifications. 3M agrees, at its own expense, to
provide labor, materials, and facilities required to provide such labeling and
packaging, unless the Exhibit provides otherwise.
8. DELIVERY.
(A) The purchase order releases forwarded by IMATION to 3M shall state
the completion dates for the requested contract manufacturing services and,
where appropriate, shipment dates for IMATION products serviced by 3M.
(B) Unless otherwise stated in an Exhibit, IMATION shall select the
carrier and shall assume and pay transportation charges. Risk of loss for
products serviced by 3M shall pass to IMATION only upon proper delivery of the
serviced products by 3M to the IMATION-designated carrier. IMATION shall have
the option to select the mode of transportation and carrier for each single
shipment. Any excess costs due to use of alternative modes or carriers not
requested by IMATION shall be borne by 3M.
9. INSPECTION.
(A) 3M shall inspect each shipment of the Finished Products before
delivery to confirm and certify that such Finished Products meet the applicable
Specifications. 3M agrees to provide in-process and Finished Product quality
data as agreed to by the parties.
(B) IMATION may inspect Finished Products within sixty (60) days after
receipt at IMATION's location to the same incoming test or inspection criteria
as provided to 3M in the Specifications. Any Finished Products not rejected
within sixty (60) days after receipt are accepted. IMATION is authorized to
perform source inspection and quality assurance audits in nonproprietary areas
at 3M's facilities upon reasonable notice from IMATION, but this shall in no way
relieve 3M of its obligation to deliver Finished Products that conform to the
Specifications or waive IMATION's right of inspection and acceptance (or
rejection) at IMATION's location.
(C) Finished Products that fail to meet the Specifications may be
rejected by IMATION. In such event, if it is possible to correct the problem,
then IMATION will return such Finished Products to 3M to be reworked with 3M
bearing all costs of transportation and risk of loss both ways and 3M will
rework such Finished Products within thirty (30) days after receipt. If it is
not possible to rework such Finished Products to meet the applicable
Specifications, then 3M will reimburse IMATION for the amount IMATION paid 3M
for the Finished Products plus the cost of the Materials provided to 3M by
IMATION and used by 3M to make the rejected Finished Products within thirty (30)
days after receipt of an invoice from IMATION. IMATION, at its option, may elect
to take a credit for the amount due against future service invoices received
from 3M. IMATION Complaint Analysis shall make the final determination of
whether Finished Products fail to meet the Specifications.
(D) Where 3M can show that the Finished Products fail to meet the
Specifications as a direct result of the Materials being defective, 3M will not
be liable for the failure of the Finished Products to meet the applicable
Specifications.
10. PAYMENT TERMS.
(A) As long as 3M continues to share its current financial system with
IMATION, contract manufacturing services performed under this Agreement will be
billed to IMATION by 3M charging the net amount due to the appropriate IMATION
commodity code. The net amount charged will be summarized with all other charges
during the month on the eighth work day of the following month. IMATION will pay
3M the net amounts due on the ninth work day of the month. Once IMATION develops
its own financial system, amounts due under this Agreement will be billed and
paid for as provided in Paragraphs 10(B)-(D) below. If for any reason an amount
due does not get charged to the appropriate IMATION commodity code, then 3M may
send IMATION an invoice for the amount due and Paragraphs 10(B)-(D) will apply.
(B) Invoices for all contract manufacturing services performed under
this Agreement shall be issued and dated by 3M not earlier than the date
services are completed. Invoices shall refer to IMATION's purchase order release
number, quantity, service price and total invoice price. Payment terms shall be
net thirty (30) days from the date of 3M's invoice.
(C) Invoices shall be submitted at the following address:
IMATION ENTERPRISES CORP.
1 Imation Place
Oakdale, MN 55128
(D) IMATION shall submit payments to 3M at the following address:
Minnesota Mining and Manufacturing Company
3M Accounts Payable
P.O. Box 33121
St. Paul, MN 55133-3121
(E) Credits due to rejection of Finished Products and discrepancies on
paid invoices may be deducted by IMATION from subsequent payments by means of a
debit memo.
11. MATERIALS PROVIDED BY IMATION.
(A) IMATION will provide the Materials listed in each Exhibit to 3M
F.O.B. the relevant 3M facility for 3M to use in performing the contract
manufacturing services described in the Exhibit. IMATION will provide such
Materials to 3M's facility in sufficient quantities to allow 3M to provide the
requested contract manufacturing services in a timely manner. 3M will keep
IMATION informed of the quantities of Materials on hand and will promptly notify
IMATION if additional Materials are required to enable 3M to continue performing
the requested services in a timely manner.
(B) If specified in an Exhibit, 3M will inspect all Materials received
from IMATION using inspection standards supplied by IMATION. All Materials
failing the inspection test will be held for pickup by IMATION.
(C) 3M will keep all Materials at its manufacturing facility and will
not relocate any of such Materials without IMATION's prior written approval. 3M
will use Materials only to perform work for IMATION. 3M will keep the storage
area for Materials segregated from any inventory of 3M.
(D) Materials, work-in-process and Finished Products will remain at all
times IMATION property. 3M will not pledge or mortgage any of the Materials,
work-in-process or Finished Products. 3M will not do or omit to do anything
which might encumber or threaten to encumber IMATION's ownership rights in the
products, work-in-process or serviced products. 3M agrees to execute, upon
request, a UCC-1 Financing Statement for filing by IMATION to record these
IMATION ownership rights.
(E) When this Agreement expires or terminates (regardless of cause), 3M
will immediately make available to IMATION all Materials and any other property
belonging to IMATION and stored at 3M's premises or under 3M's control. If 3M
does not immediately make such property available to IMATION, then IMATION may
take all action permitted by law to immediately recover the property and 3M will
on demand reimburse IMATION for all actual and reasonable costs IMATION incurs
in recovering the property (including reasonable attorneys' fees and other
expenses of litigation).
(F) IMATION has full risk of loss and damage as to any Materials,
work-in-process and Finished Products in 3M's care, custody or control. IMATION
waives subrogation against 3M for any loss or damage to any Materials,
work-in-process or Finished Products in 3M's care, custody or control.
12. COST REDUCTIONS; QUALITY IMPROVEMENTS.
(A) IMATION is committed to low-cost, high quality manufacturing and
expects the same commitment from its vendors. 3M has represented to IMATION that
it shares this commitment to low-cost, high quality manufacturing and that 3M
has the experience, expertise and resources necessary to provide contract
manufacturing services at the lowest possible cost and the highest possible
quality.
(B) The parties agree to meet semi-annually to establish mutually
agreeable cost reduction and quality improvement targets and to develop
effective and on-going cost reduction and quality improvement programs to meet
or exceed the cost and quality targets.
(C) 3M recognizes the importance to IMATION of meeting or exceeding the
cost reduction and quality improvement targets.
13. WARRANTIES.
(A) 3M will perform all services under this Agreement in a manner
consistent with the highest standards of the industry and in strict compliance
with all relevant statutes, ordinances, rules, regulations and other applicable
law.
(B) 3M warrants that the contract manufacturing services provided under
this Agreement will conform to the Specifications. If IMATION determines that
any service provided fails to meet the foregoing warranty, IMATION's exclusive
remedies are set out in Paragraph 9(C).
(C) EXCEPT AS STATED HEREIN, THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE RESPECTING THE SERVICES PROVIDED TO IMATION UNDER THIS
AGREEMENT.
14. CONFIDENTIAL INFORMATION.
(A) As used in this Agreement, 3M Confidential Information and
IMATION Confidential Information are defined as follows:
(1) "3M CONFIDENTIAL INFORMATION" means information known
by IMATION on the effective date of this Agreement
and reasonably understood by IMATION to be
confidential and related to 3M's business interests,
or disclosed confidentially by 3M to IMATION after
the effective date of this Agreement under the terms
and for purposes of this Agreement except for:
(i) information learned by IMATION for the first
time after the effective date of this
Agreement, but prior to any disclosure by
3M;
(ii) information which is or becomes publicly
available through no act of IMATION, from
and after the date of public availability;
(iii) information disclosed to IMATION by a third
party, provided (a) under the circumstances
of disclosure IMATION does not have a duty
of non-disclosure owed to such third party,
(b) the third party's disclosure is not
violative of a duty of non-disclosure owed
to another, including 3M, and (c) the
disclosure by the third party is not
otherwise unlawful;
(iv) information developed by IMATION independent
of any confidential 3M information which is
known by IMATION on the effective date of
this Agreement and/or disclosed by 3M under
this Agreement;
(v) information which is inherently disclosed in
marketing of a product by IMATION in the
usual course of business and within the
scope of the rights granted to or retained
by IMATION under this Agreement or the
Intellectual Property Rights Agreement;
(vi) information which is developed by a business
which is being transferred to IMATION and
constitutes performance specifications for
chemicals, compositions, formulations,
materials, components, devices, articles or
other items obtained prior to the effective
date of this Agreement from a business
remaining with 3M on the effective date of
this Agreement; and
(vii) information which IMATION can demonstrate
was disclosed by a 3M business being
transferred to IMATION to a third party
prior to November 14, 1995, and for which
any obligation of confidentiality by that
third party has expired, from and after the
date such third party obligation of
confidentiality expires, and provided that
disclosure of an item of information to one
third party and a different item of
information to another third party shall not
be viewed as disclosure of information which
can only be drawn from those items of
information collectively.
(2) "IMATION CONFIDENTIAL INFORMATION" means information
known by 3M on the effective date of this Agreement
and reasonably understood by 3M to be confidential
and related to IMATION's present or future business
interests, or disclosed confidentially by IMATION to
3M under the terms and for purposes of this Agreement
except for:
(i) information learned by 3M for the first time
subsequent to the effective date of this
Agreement, but prior to any disclosure by
IMATION;
(ii) information which is or becomes publicly
available through no act of 3M, from and
after the date of public availability;
(iii) information disclosed to 3M by a third
party, provided (a) under the circumstances
of disclosure 3M does not have a duty of
non-disclosure owed to such third party, (b)
the third party's disclosure is not
violative of a duty of non-disclosure owed
to another, including IMATION, and (c) the
disclosure by the third party is not
otherwise unlawful;
(iv) information developed by 3M independent of
any confidential IMATION information which
is known by 3M on the effective date of this
Agreement and/or disclosed by IMATION under
this Agreement;
(v) information which is inherently disclosed in
marketing of a product by 3M in the usual
course of business and within the scope of
rights granted to or retained by 3M under
this Agreement or the Intellectual Property
Rights Agreement;
(vi) information which is developed by a business
which remains with 3M on the effective date
of this Agreement and constitutes
performance specifications for chemicals,
compositions, formulations, materials,
components, devices, articles or other items
obtained prior to the effective date of this
Agreement from a business being transferred
to IMATION on the effective date of this
Agreement; and
(vii) information which 3M can demonstrate was
disclosed to a third party prior to November
14, 1995, and for which any obligation of
confidentiality by that third party has
expired, from and after the date such third
party obligation of confidentiality expires,
and provided that disclosure of an item of
information to one third party and a
different item of information to another
third party shall not be viewed as
disclosure of information which can only be
drawn from those items of information
collectively.
(B) 3M and IMATION each shall not disclose to another or use
except for purposes of the Agreement any business information
which is IMATION Confidential Information or 3M Confidential
Information, respectively. The foregoing restrictions shall
expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five
(5) years after the date of disclosure of such information,
unless and to the extent the parties agree to a longer period
for the foregoing restrictions with respect to specific
categories of business information which is IMATION
Confidential Information and/or 3M Confidential Information,
in which case the foregoing restrictions shall expire with
respect to such information on the expiration of such longer
period. The date of disclosure in the case of business
information which is either 3M Confidential Information known
by IMATION or IMATION Confidential Information known by 3M on
the effective date of this Agreement shall be considered to be
the effective date of this Agreement.
(C) 3M and IMATION each shall not disclose to another or use
except for purposes of the Agreement any technical information
which is IMATION Confidential Information or 3M Confidential
Information, respectively. The foregoing restrictions shall
not expire until such time and to the extent that such
information ceases to be IMATION Confidential Information or
3M Confidential Information, as the case may be.
(D) Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a
reasonable degree of care, to prevent the unauthorized
disclosure of the other party's Confidential Information as
the party uses to protect its own confidential information of
a like nature.
(E) Each party shall insure that its affiliates, sublicensees and
other transferees agree to be bound by the same restrictions
on use and disclosure of Confidential Information as bind the
party in advance of the disclosure of Confidential Information
to them.
(F) The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may
relate to an "Extraordinarily Sensitive Technology" as
contemplated by the Intellectual Property Rights Agreement.
Any such Confidential Information shall be subject to the
special treatment provided for in Paragraph 15.3 of the
Intellectual Property Rights Agreement.
15. RIGHTS TO DEVELOPMENTS.
Ownership and rights in any intellectual property (whether patentable
or not) conceived during the course of work under this Agreement up to and
including June 30, 1998 will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be 3M or Joint "Foreground IP" and/or "Foreground Patents" and/or
"New Material" as the case may be, depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purposes of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998 regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
16. REPORTS.
During the Term and for one (1) month after this Agreement expires or
is terminated, before the twenty-fifth (25th) day of each month 3M will provide
IMATION written reports on services performed during the prior month, including
Finished Products shipped, Material usage and end-of-month inventory balances
for each type of Material received from IMATION. 3M also agrees to conduct a
physical inventory at least once per year during the Agreement term for each
type of Material received from IMATION (or more frequently if requested by
IMATION) and 3M will provide assistance in reconciling such physical inventory.
In addition, as requested by IMATION, 3M agrees to provide IMATION a written
report (in a form satisfactory to IMATION) covering quality audits, defect
analysis (Pareto Diagram), corrective action, and other reports agreed to by the
parties.
17. EQUIPMENT.
(A) In some Exhibits IMATION may agree to furnish Equipment to be used
by 3M solely to perform its duties under this Agreement. 3M acknowledges that
all such Equipment and any replacement thereof, together with all Documentation
created during the Term with respect to the Equipment are the property of
IMATION. IMATION will pay all applicable personal property taxes that pertain to
the Equipment. 3M agrees to update the Documentation in a timely manner after
changes to the Equipment have been made.
(B) 3M agrees to execute a UCC-1 financing statement (to be filed by
IMATION) as an acknowledgment that the Equipment in the custody of 3M is owned
by IMATION. Most pieces of Equipment where practical have been or will be marked
with a IMATION identification number. 3M shall not sell, transfer, or remove the
Equipment from the 3M location where the Equipment is originally delivered. 3M
will not allow any third party to obtain a mortgage, security interest, lien, or
any other type of encumbrance in or upon the Equipment.
(C) 3M acknowledges that IMATION has made absolutely no representations
or statements about the character, condition, quality or characteristics of the
Equipment. Before using the Equipment, 3M will do whatever is necessary to make
certain that the Equipment is in a safe and proper condition for its intended
use. IMATION NEITHER EXPRESSES NOR IMPLIES ANY WARRANTIES AS TO THE QUALITY OR
CONDITION OF THE EQUIPMENT AND EXPRESSLY DISCLAIMS ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IMATION EXPRESSLY DISCLAIMS
ANY REPRESENTATIONS ABOUT THE CONDITION, QUALITY, CAPACITY OR OTHER
CHARACTERISTICS OF THE EQUIPMENT. This paragraph applies regardless of whether
3M has paid or offered IMATION any consideration for the use of the Equipment.
(D) 3M will not alter any Equipment in any manner whatsoever without
the prior written approval of IMATION.
(E) The Equipment shall be used SOLELY AND EXCLUSIVELY for performing
contract manufacturing services for IMATION under this Agreement and shall not
be used for any other purpose whatsoever without the prior written approval of
an officer of IMATION.
(F) IMATION may inspect the Equipment and Documentation at all
reasonable times during normal business hours.
(G) During the time the Equipment is in 3M's possession, 3M at its own
expense, shall:
(1) service the Equipment regularly and maintain it in
good operating condition at all times as specified by
IMATION;
(2) establish and maintain a documented calibration
program (when applicable) and preventive maintenance
program for Equipment with verification of the
calibration sent to IMATION monthly. 3M will not
allow the Equipment to be misused or to deteriorate,
ordinary wear and tear excepted; and
(3) provide all routine repair and maintenance for the
Equipment. Major or extraordinary maintenance costs
incurred will be borne by IMATION subject to
IMATION's prior written approval for 3M to undertake
such costs.
(H) IMATION has full risk of loss and damage as to any Equipment and
Documentation in 3M's care, custody or control. IMATION waives subrogation
against 3M for any loss or damage to any Equipment or Documentation in 3M's
care, custody or control.
(I) If for any reason 3M is unable to continue to perform certain
contract manufacturing services involving the use of some Equipment, 3M shall
notify IMATION immediately and IMATION shall have the right to peaceably enter
3M's premises during normal business hours to remove the Equipment and
Documentation, and 3M expressly waives any rights or remedies 3M may have with
regard to IMATION Equipment and Documentation, including but not limited to any
right 3M may have to notice and a hearing or to a bond, undertaking or surety
before a writ of replevin, order of seizure or similar writ or order will issue
or become enforceable.
(J) At the termination or expiration of this Agreement, 3M shall return
any and all Equipment and Documentation to IMATION in the same condition as
originally received or created by or for 3M, loss, damage and reasonable wear
and tear excepted. IMATION shall pay the cost of tear down, crating and shipping
of the Equipment and restoring the premises to their original condition at the
time the Equipment was installed, reasonable wear and tear excepted. If for any
reason 3M fails to comply promptly with such a request, IMATION shall have the
right to peaceably enter 3M's premises during normal business hours to remove
the Equipment and Documentation and IMATION may take all action permitted by law
to immediately recover the Equipment and Documentation. 3M will on demand
reimburse IMATION for all actual and reasonable costs IMATION incurs in
recovering the Equipment and Documentation (including reasonable attorneys' fees
and other expenses of litigation). 3M expressly waives any rights or remedies 3M
may have with regard to the IMATION Equipment and Documentation, including but
not limited to any right 3M may have to notice and a hearing or to a bond,
undertaking, or surety before a writ of replevin, order of seizure, or similar
writ or order will issue or become enforceable.
18. PLANT SAFETY.
(A) 3M is solely responsible for the safe performance of all contract
manufacturing services, and for the safety of (1) all 3M's employees, agents, or
delegates, (2) all employees, agents and delegates of 3M's subcontractors, and
(3) for all people who may be present at or in the vicinity of 3M's plant.
(B) IMATION may from time to time provide certain industrial hygiene
and other safety-related information to 3M. 3M will not pay IMATION for
providing this information, and IMATION will provide this type of information at
3M's sole risk. 3M agrees to continue to exercise its own independent judgment
on industrial hygiene and safety issues. Neither IMATION's providing of nor
IMATION's failure to provide the type of information covered by this paragraph
in any way changes or limits 3M's obligations under this Agreement or in any way
changes or limits 3M's obligation to perform contract manufacturing services
safely.
(C) If any employee of 3M, or of 3M's subcontractors, agents or
delegates, claims to have suffered or aggravated an injury while performing work
on Equipment, 3M will notify IMATION of the claim as soon as 3M becomes aware of
it. Neither this paragraph nor IMATION's receipt of any notice contemplated by
this paragraph make IMATION liable for any injury.
19. LIMITATION OF LIABILITIES; TIME LIMIT FOR FILING ACTION.
(A) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN PARAGRAPH 21
(INDEMNIFICATION), NEITHER 3M NOR IMATION SHALL UNDER ANY CIRCUMSTANCES BE
LIABLE TO EACH OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, REVENUE, OR BUSINESS)
RESULTING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TERMINATION,
EXPIRATION, OR NONRENEWAL OF THIS AGREEMENT OR ARISING OUT OF OR ALLEGED TO HAVE
ARISEN OUT OF BREACH OF THIS AGREEMENT OR BREACH OF ANY PRODUCT SPECIFICATION OR
PURCHASE ORDER RELEASE ACCEPTED PURSUANT TO THIS AGREEMENT. This limitation
applies regardless of whether such damages are sought based on breach of
warranty, breach of Agreement, negligence, strict liability in tort, or any
other legal theory. This limitation does not apply to claims for personal injury
by a third party or infringement of intellectual property rights.
(B) ANY CLAIM FOR BREACH OF WARRANTY OR BREACH OF ANY OTHER OBLIGATION
UNDER THIS AGREEMENT MUST BE COMMENCED WITHIN ONE (1) YEAR AFTER THE BREACH
OCCURS.
20. WASTE MATERIAL.
(A) 3M will be responsible for the final and proper disposal of all
waste material generated while performing contract manufacturing services
(Waste). 3M represents and warrants that it will properly package, label, store,
transport, dispose of and otherwise handle Waste in accordance with all federal,
state and local regulations and laws and in accordance with sound environmental
practice.
(B) 3M shall, at its sole cost and expense, apply for and obtain all
permits required by all applicable laws, ordinances and regulations for the
transportation, handling or disposal of those materials. 3M shall maintain the
permits for the duration of this Agreement.
21. INDEMNIFICATION.
(A) IMATION agrees to indemnify, defend and hold harmless 3M, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the services supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
3M may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Paragraph 21 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
(B) If 3M intends to claim indemnification under this Paragraph 21, 3M
will promptly notify IMATION in writing of any claim, action, or demand for
which 3M intends to claim indemnification. In addition, 3M will promptly notify
IMATION in writing if 3M elects to waive its right to have IMATION defend the
claim, action, or demand. If 3M does not waive its right to have IMATION defend
the claim, action, or demand, 3M agrees that IMATION will control the defense of
the claim, action, or demand. 3M will cooperate fully with IMATION and its legal
representatives in the investigation and defense of any claim, action, or demand
covered by this indemnification. 3M will permit IMATION to settle any claim,
action, or demand and agrees that IMATION will control the settlement, provided,
however, that such settlement does not adversely affect 3M's rights under this
Agreement or impose any obligations on 3M in addition to those stated in this
Agreement. IMATION, in the defense of any claims, actions or demands, will not
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term the giving by the claimant or plaintiff to 3M
of a release from all liability with respect to the claim, action, or demand. No
such claim, action, or demand will be settled by 3M without the prior written
consent of IMATION.
22. INSURANCE.
(A) 3M will obtain the following minimum insurance coverage, and
maintain it at all times throughout the life of this Agreement.
(1) Comprehensive General Liability Insurance or
Commercial General Liability Insurance, to cover
personal injuries, including death, and property
damage.
(2) Broad Form Contractual Liability insurance coverage
as to 3M's indemnity obligations.
(3) Workers' Compensation and Employers' Liability
Insurance or legally self-insured as required by law.
The Employers' Liability Insurance must have a
minimum limit of One Million Dollars ($1,000,000.00)
per accident. 3M may satisfy this limit either with a
single policy or with a primary policy plus an
umbrella policy.
(B) 3M will provide to IMATION certificates of insurance no later than
July 31, 1996 showing compliance with the insurance specifications. The
certificates must state that the insurance cannot be canceled or changed without
thirty (30) days advance notice to IMATION. 3M must keep the certificates
current and must in any event file a new certificate each year while this
Agreement is in effect. Neither IMATION's failure to require or to insist upon
certificates or other evidence of insurance, nor IMATION's acceptance of a
certificate or other evidence of insurance showing a variance from the specified
coverage changes 3M's obligation to maintain the required insurance.
(C) If 3M does not provide the specified insurance, then 3M will
defend, indemnify and hold harmless IMATION, and IMATION's directors, officers,
agents and employees to the extent necessary to afford the same protection as
would have been provided by the specified insurance. The intent of this defense
and indemnity obligation is to put IMATION in the same position that IMATION
would have occupied if 3M had maintained the required insurance.
(D) IMATION does not in any way represent or warrant that the types or
limits of insurance specified in Paragraph 22(A) adequately protect 3M's
interests or sufficiently cover 3M's liability.
23. FORCE MAJEURE.
(A) If the performance of the services listed in any Exhibit or of any
obligation under this Agreement is prevented, restricted or interfered with by
reason of fire or earthquake or other casualty or accident; inability to procure
raw materials, power or supplies (for reasons other than 3M's negligence or
fault or failure to timely order); war or other violence; any law, order,
proclamation, regulation, ordinance, demand or requirement of any government
agency, court or intergovernmental body; or any other act or condition
whatsoever beyond the reasonable control of the parties hereto, the party so
affected, upon giving notice to the other party, shall be excused from such
performance to the extent of such prevention, restriction or interference;
provided that the party so affected shall use its best effort as to avoid or
remove such causes of nonperformance and shall continue performance under this
Agreement with the utmost dispatch whenever such causes are removed.
(B) If performance of the services listed in any Exhibit or of any
obligation under this Agreement is prevented, restricted or interfered with for
any reason set forth in this paragraph and such prevention, restriction or
interference lasts for, or is expected to last for more than one hundred twenty
(120) days, the party whose performance is not affected by the force majeure
condition shall have the option of being excused, without further obligation,
from performance of the Exhibit or from performance of the Agreement, whichever
is applicable.
24. RELATIONSHIP OF PARTIES.
Neither party is an agent of the other party under this Agreement and
has no authority to bind any other party, transact any business in any other
party's name or on its behalf, or make any promises or representations on behalf
of any other party. Each party makes this Agreement and will perform all of its
respective obligations under this Agreement as an independent contractor, and no
joint venture, partnership or other relationship shall be created or implied by
this Agreement. The employees and agents of each party are NOT for any purpose
the employees or agents of the other party.
25. NO UNAUTHORIZED DELEGATION OR ASSIGNMENT
THIRD PARTY RIGHTS.
(A) Except as specifically authorized in a writing signed by a Vice
President of IMATION, 3M will not delegate, assign or permit by merger,
acquisition or change of corporate form any of its duties under this Agreement
to be performed by anyone else. The decision as to whether to authorize any
delegation, assignment or change in performance obligations is solely within
IMATION's discretion.
(B) The promises and obligations contained in this Agreement apply to,
benefit and bind not only the parties but also their respective divisions,
subsidiaries, assigns, delegatees and successors in interest.
(C) Any assignment, delegation, or transfer of this Agreement or any
interest therein without the written consent of the other party is void and
cause for termination of this Agreement.
(D) NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED TO GRANT ANY PERSON OR
ENTITY NOT A PARTY HERETO ANY RIGHTS OR POWERS WHATSOEVER; AND NO PERSON OR
ENTITY SHALL BE A THIRD PARTY BENEFICIARY OF THIS AGREEMENT.
26. SURVIVAL.
The rights and obligations of the parties hereto under Paragraph 13
[Warranties], 15 [Rights to Developments], 19 [Limitation of Liabilities; Time
Limit for Filing Action], 20 [Waste Material] and 21 [Indemnification] shall
survive any termination, cancellation or expiration of this Agreement. The
obligations of the parties under Paragraph 14 [Confidential Information] shall
survive for the period specified in Paragraph 14(D)(6).
27. DISPUTE RESOLUTION.
(A) The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Paragraph 27(K) these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
(B) Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
(C) Submission to Mediation; Cost of Mediation: If, at the conclusion
of such meeting, the parties have not succeeded in negotiating a resolution of
the dispute, they agree to submit the dispute to mediation within thirty (30)
days thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
(D) Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
(E) Mediation And Arbitration.
(1) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a
period of thirty (30) days or such longer period as
they may mutually agree following the initial
mediation session. If the parties are not successful
in resolving the dispute through mediation by the end
of such period, then the parties agree to submit the
matter to binding arbitration in accordance with the
Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as
modified herein, by a sole arbitrator selected in
accordance with the provisions of Paragraph 27(F).
The arbitration proceeding shall be held in
Minnesota, shall be governed by the United States
Arbitration Act, 9 U.S.C. SS 1-16 and judgment upon
the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof.
(2) Except as may be expressly provided in any other
agreement between the parties, the parties obligation
under this Paragraph 27 to submit disputes to binding
arbitration in lieu of seeking judicial resolution of
their disputes, shall expire on July 1, 2001.
(F) Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
(G) Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
(H) Arbitration Period. Any arbitration proceeding shall be concluded
in a maximum of one (1) year from written notice from one party to the other
party identifying a dispute subject to arbitration under this Paragraph and
requesting arbitration after having participated in negotiation and mediation
under this Paragraph.
(I) Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Paragraph shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
(J) Confidentiality. All negotiation, mediation and arbitration
proceedings under this Paragraph shall be treated as Confidential Information in
accordance with Paragraph 14. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
(K) Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Paragraph. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
28. GOVERNING LAW; CHOICE OF FORUM.
Any questions, claims, disputes, or litigation arising from or related
to this Agreement are governed by the laws of Minnesota without regard to the
principles of conflicts of law.
29. PARAGRAPH HEADINGS.
The title and headings of the various paragraphs of this Agreement are
inserted for convenience of reference only and shall not be construed to affect
the construction or interpretation of any of its provisions.
30. WAIVER.
Any failure or delay by either party in exercising any right or remedy
in one or many instances will not prohibit a party from exercising it at a later
time or from exercising any other right or remedy.
31. MODIFICATION.
No part of this Agreement may be waived, modified, or supplemented in
any manner whatsoever (including a course of dealing or of performance or usage
of trade) except by a written instrument signed by authorized officers of the
parties.
32. NOTICES.
All notices shall be in writing and shall be deemed to have been given
when received. Any notice to be given to IMATION shall be addressed to:
Vice-President
[Imation business unit listed on
applicable Exhibit)
Imation Enterprises Corp.
1 Imation Place
Oakdale, Minnesota 55128
with a copy to: General Counsel
Imation Legal Department
Bldg. 220-11W-01
I-94 & McKnight Road
St. Paul, MN 55144-1000
Any notice to 3M shall be addressed to:
Staff Vice President
3M Purchasing
3M Center, Bldg. 224-1N
St. Paul, Minnesota 55144-1000
with a copy to:
Division Vice President
[3M business unit listed on applicable Exhibit]
Minnesota Mining and Manufacturing Company
3M Center, Building _________
St. Paul, Minnesota 55144-1000
Any change in address shall be promptly communicated by either party to the
other party.
33. AUTHORITY.
The undersigned represent and warrant that they are persons legally
authorized to execute this Agreement on behalf of IMATION and 3M, respectively.
34. ENTIRE AGREEMENT.
This Agreement and the Exhibits referred to in this Agreement, which
exhibits are incorporated and made a part of this Agreement by this reference,
supersede and terminate any and all prior agreements, if any, whether written or
oral, between the parties with respect to the subject matter contained herein.
Each party agrees that it has not relied on any representation, warranty, or
provisions not explicitly stated in this Agreement, and that no oral statement
has been made to either party that in any way tends to waive any of the terms or
conditions of this Agreement. THIS AGREEMENT IS INTENDED BY THE PARTIES TO BE A
FINAL, COMPLETE AND EXCLUSIVE STATEMENT OF ALL TERMS AND CONDITIONS OF THE
AGREEMENT.
The parties have signed this Agreement on the date indicated below.
MINNESOTA MINING AND IMATION ENTERPRISES CORP. (IMATION)
MANUFACTURING COMPANY (3M)
By______________________________ By_______________________________
Name (print)______________________ Name (print)_______________________
Title____________________________ Title______________________________
Date____________________________ Date______________________________
3M TO IMATION
CONTRACT MANUFACTURING SERVICE EXHIBIT
1. IMATION Business Unit Requesting Service: ____________________________
2. 3M Business Unit Performing Service:__________________________________
3. Effective Date: ______________________________
4. Contract Manufacturing Service To Be Performed By 3M:
_______________________________________________________________________________
_______________________________________________________________________________
5. Material(s) To Be Provided By IMATION:
_______________________________________________________________________________
6. Other Things To Be Provided or Paid For By IMATION:
_______________________________________________________________________________
7. Amount To Be Paid By IMATION For Contract Manufacturing Service:
_______________________________________________________________________________
8. Special Conditions:
_______________________________________________________________________________
ACCEPTED AND AGREED TO:
IMATION ENTERPRISES CORP. MINNESOTA MINING AND
MANUFACTURING COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
CONTRACT MANUFACTURING SERVICES AGREEMENT (IMATION FOR 3M)
This Agreement is between MINNESOTA MINING AND MANUFACTURING COMPANY, a
Delaware corporation, with its principal place of business at 3M Center, St.
Paul, Minnesota 55144, (3M); and IMATION ENTERPRISES CORP., a Delaware
corporation, with its principal place of business at 1 Imation Place, Oakdale,
Minnesota 55128 (IMATION).
1. DEFINITIONS.
For the purpose of this Agreement, the following words and phrases
shall have the meaning set forth below:
(A) "AGREEMENT" means this document, together with all Exhibits. The
Exhibits are incorporated by reference and made a part of this document.
(B) "DEFAULTING PARTY" is defined in Paragraph 3(C).
(C) "DISTRIBUTION DATE" means the date on which 3M distributes Imation
Corp. stock.
(D) "DOCUMENTATION" means all drawings and other documentation related
to Equipment.
(E) "EQUIPMENT" means all equipment furnished by 3M to IMATION for
IMATION to use to perform contract manufacturing services under this Agreement.
(F) "FINISHED PRODUCTS" means the finished products fabricated,
assembled or processed by IMATION under this Agreement.
(G) "IMATION CONFIDENTIAL INFORMATION" is defined in Paragraph
14(A)(2).
(H) "MATERIALS" means components, materials or sub-assemblies provided
by 3M to IMATION.
(I) "3M CONFIDENTIAL INFORMATION" is defined in Paragraph 14(A)(1).
(J) "NON-DEFAULTING PARTY" is defined in Paragraph 3(C).
(K) "SPECIFICATION(S)" means the written product specifications,
process specifications, performance specifications, and packaging specifications
agreed upon by the parties. The Specifications may be changed at any time by
mutual written agreement of the parties.
(L) "TERM" means the term of this Agreement as governed by Paragraph 3.
(M) "TOTAL COST" is defined in Paragraph 6(A).
(N) "WASTE" is defined in Paragraph 20(A).
2. SCOPE AND PURPOSE.
(A) This Agreement sets out the terms and conditions under which
IMATION will provide fabrication, assembly, processing and other similar
contract manufacturing services for 3M using Materials provided by 3M and in
accordance with the Specifications. Title to all such Materials shall at all
times remain with 3M.
(B) During the Term IMATION agrees to do, furnish and pay for all
labor, supervision, taxes, equipment, facilities, supplies and any and all other
things necessary to perform fully and to 3M's reasonable satisfaction the
contract manufacturing services described in all Exhibits executed by the
parties.
(C) During the Term 3M will do, furnish and pay for all things
described in all Exhibits executed by the parties.
(D) A separate Exhibit will be signed for each contract manufacturing
service to be performed by IMATION. Each Exhibit will identify (i) the 3M
business unit requesting the contract manufacturing service, (ii) the IMATION
business unit which will perform the service, (iii) the term during which the
service will be performed, (iv) the contract manufacturing service to be
performed, (v) the Materials, equipment and other things to be provided or paid
for by 3M, (vi) the amount to be paid to IMATION by 3M and (vii) any other
special conditions governing the specific services described in the Exhibit.
3. TERM AND TERMINATION.
(A) This Agreement takes effect when both 3M and IMATION sign this
Agreement and continues in effect until the last Exhibit has been terminated or
until either party sends the other a written termination notice in accordance
with this Paragraph, whichever occurs first. Except as provided in Paragraph
3(C), IMATION cannot terminate this Agreement while still obligated to perform
services under an outstanding Exhibit. Even after termination, the provisions of
this Agreement continue to apply to services provided, charges incurred,
payments made, events occurring and obligations arising before the date of
termination.
(B) IMATION's obligations under this Agreement with respect to a
specific Exhibit shall begin on the date listed in the Exhibit and shall
terminate on the earlier of:
(1) where the Exhibit provides a fixed term, the expiration date
of the term specified in the applicable Exhibit;
(2) where the Exhibit provides an open-ended term, the date of
termination contained in the termination notice; or
(3) the date of termination pursuant to Paragraph 3(C) or 3(D), as
applicable.
With respect to Paragraph 3(B)(2), the party terminating the Exhibit
agrees to give the other party written notice at least ninety (90) days prior to
the desired termination date, unless otherwise provided in the Exhibit.
(C) Subject to Paragraph 23 (Force Majeure), and any special
requirements in an Exhibit, either party (the "Non-Defaulting Party") may
terminate this Agreement upon sixty (60) calendar days prior written notice to
the other party (the "Defaulting Party") if the Defaulting Party is in breach of
a material obligation under this Agreement and does not remedy such default to
the reasonable satisfaction of the Non-Defaulting Party within such sixty (60)
day period. In the case of non-payment under Paragraph 10, IMATION may terminate
this Agreement upon seven (7) calendar days prior written notice to 3M. For
purposes of this Paragraph 3(C), good faith disputes regarding the quality or
timeliness with respect to any specific service shall not be deemed a failure to
perform a material obligation under this Agreement.
(D) If a Non-Defaulting Party is entitled to terminate this Agreement
in its entirety under Paragraph 3(C), it may instead terminate this Agreement in
part, upon the same notice provisions as specified in Paragraph 3(C) as follows:
(1) If the default relates to the payment for a service,
IMATION may terminate this Agreement as to the
provision of that service to 3M.
(2) If the default relates to the provision of a service,
the Non-Defaulting Party may, in its sole discretion,
terminate this Agreement as to the provision of that
service by IMATION.
Either party's use of this Paragraph to terminate services does not
waive the Defaulting Party's other obligations under this Agreement or the
Non-Defaulting Party's right to make claims for breach of this Agreement.
4. ORDERING PROCEDURES.
(A) 3M shall send IMATION blanket purchase orders for the contract
manufacturing services listed in each Exhibit. A blanket purchase order is for
IMATION's planning purposes only and is not a commitment to purchase any
particular dollar value of contract manufacturing service. Unless otherwise
stated in an Exhibit, 3M shall issue purchase order releases against a blanket
purchase order which constitutes 3M's firm commitment to purchase a specific
dollar value of contract manufacturing services. 3M will not be responsible for
any of IMATION's cost or expense for supplies, labor, or other commitments or
expenses other than as authorized by written 3M purchase order releases in
IMATION's possession. EXCEPT AS SET OUT IN PURCHASE ORDER RELEASES SENT TO
IMATION, 3M MAKES NO REPRESENTATION OR GUARANTEE AS TO THE DOLLAR VALUE OF
CONTRACT MANUFACTURING SERVICES THAT 3M WILL PURCHASE UNDER THIS AGREEMENT.
(B) The information on the purchase order release will include the
purchase order number, Specification number or title, description of service
purchased, and, as applicable, routing instructions, delivery schedule and
destination.
(C) IMATION agrees to accept telegraphic or telecopied purchase order
releases. 3M will make a reasonable effort to send a confirming, written
purchase order release within two (2) days of receiving such telegraphic or
telecopied purchase order release. Unless otherwise provided in an Exhibit,
IMATION will not proceed without the issuance of a purchase order release number
by 3M.
(D) The terms and conditions contained on 3M's purchase orders shall
apply to all transactions relating to the contract manufacturing services
covered by this Agreement. If 3M's purchase order terms and conditions contain
any specific provisions inconsistent with this Agreement, then this Agreement
shall govern and the inconsistent provision of 3M's purchase order shall be
applicable only so far as it is consistent with this Agreement. If 3M's purchase
order terms and conditions contain any specific provisions which address issues
not covered by this Agreement, then they will not be part of this Agreement
unless they are accepted in writing by IMATION.
(E) IMATION shall only accept purchase order releases that originate
from the following 3M facility, or other location designated by 3M in writing.
Minnesota Mining and Manufacturing Company
Purchasing Department
P.O. Box 33327
St. Paul, Minnesota 55133
5. ADDITIONAL SERVICES
(A) If 3M requests IMATION to perform any services beyond the scope of
the contract manufacturing services described in an Exhibit, then 3M will pay
IMATION a mutually agreed upon amount for performing such additional services.
(B) If IMATION believes certain services constitutes service beyond the
scope of services specified in an Exhibit, then the following procedure shall
apply:
(1) Before performing the services in question, IMATION shall
bring the matter to 3M's attention by sending 3M a letter describing in
reasonable detail why such services constitute additional services.
(2) Upon receipt of the letter, 3M will evaluate the services
in question and inform IMATION in writing of 3M's position. If 3M agrees that
the services in question constitute additional services, then 3M and IMATION
shall negotiate the amount which IMATION will charge 3M if 3M requests IMATION
to perform the additional services. 3M will then inform IMATION whether or not
3M wishes IMATION to perform the additional services. If 3M does not agree that
the services in question constitute additional services, then IMATION agrees to
perform the services in question, keep accurate records of the time spent
performing the services in question and reserves the right to seek resolution of
the dispute using the procedure described in Paragraph 27.
(C) If IMATION performs any services without following the procedure
set forth in Paragraph 5(B) above, then IMATION shall be deemed to have waived
its right to seek additional compensation based upon the claim that such
services are beyond the scope of services specified in the Exhibit.
6. PRICE.
(A) Unless otherwise stated in an attached Exhibit, the prices which
IMATION will charge and 3M will pay for contract manufacturing services under
this Agreement will be IMATION's Total Cost plus a markup of eight percent (8%).
For the purposes of this Agreement, "Total Cost" means IMATION's actual factory
cost for labor and overhead plus any laboratory, engineering and administrative
costs expended to provide the service. The initial Total Cost will be determined
based on actual costs from the previous six (6) months. Thereafter, prices will
be adjusted at the beginning of each calendar year by recalculating the Total
Cost for each service based on the actual cost for the previous six (6) months.
Where the prices in an Exhibit are not Total Cost + 8%, the prices may not be
increased during the first twelve (12) months of the applicable blanket purchase
order, unless otherwise stated in an Exhibit. Thereafter, the prices may be
changed by IMATION with thirty (30) days prior written notice to 3M, unless an
Exhibit provides otherwise.
(B) The prices are F.O.B. IMATION's facility, unless stated otherwise
in the Exhibit. The Exhibit prices state IMATION's total right to remuneration
for all obligations performed (or to be performed) under this Agreement, and
include all payment for IMATION's profit and total compensation for transfer of
Product Developments and Process Developments to 3M as described in Paragraph 15
and for all of IMATION's costs, including labor; statutory coverages (e.g.,
unemployment insurance, F.I.C.A.); fringe benefits; overhead; the costs of
providing the reports described in Paragraph 16; the costs of storing Materials,
Equipment, packaging supplies and Finished Products; the costs of the insurance
described in Paragraph 22; the costs of secretarial and other support services;
and all other IMATION expenses and expenditures.
(C) For services which are priced at IMATION's Total Cost plus a markup
of eight percent, IMATION grants 3M the right to have IMATION's cost records
audited by an independent certified public accountant selected by 3M and
approved by IMATION. The independent certified public accountant will agree to
treat this information as confidential and will only disclose to 3M whether or
not the Total Cost IMATION communicated to 3M was accurate. 3M may request an
audit no more than twice each year per service. If the accountant determines
that the Total Cost is inaccurate, then the Total Cost will be adjusted
accordingly.
7. LABELING AND PACKAGING.
Labeling and packaging of products requested in an Exhibit shall be
done in accordance with the Specifications. IMATION agrees, at its own expense,
to provide labor, materials, and facilities required to provide such labeling
and packaging, unless the Exhibit provides otherwise.
8. DELIVERY.
(A) The purchase order releases forwarded by 3M to IMATION shall state
the completion dates for the requested contract manufacturing services and,
where appropriate, shipment dates for 3M products serviced by IMATION.
(B) Unless otherwise stated in an Exhibit, 3M shall select the carrier
and shall assume and pay transportation charges. Risk of loss for products
serviced by IMATION shall pass to 3M only upon proper delivery of the serviced
products by IMATION to the 3M-designated carrier. 3M shall have the option to
select the mode of transportation and carrier for each single shipment. Any
excess costs due to use of alternative modes or carriers not requested by 3M
shall be borne by IMATION.
9. INSPECTION.
(A) IMATION shall inspect each shipment of the Finished Products before
delivery to confirm and certify that such Finished Products meet the applicable
Specifications. IMATION agrees to provide in-process and Finished Product
quality data as agreed to by the parties.
(B) 3M may inspect Finished Products within sixty (60) days after
receipt at 3M's location to the same incoming test or inspection criteria as
provided to IMATION in the Specifications. Any Finished Products not rejected
within sixty (60) days after receipt are accepted. 3M is authorized to perform
source inspection and quality assurance audits in nonproprietary areas at
IMATION's facilities upon reasonable notice from 3M, but this shall in no way
relieve IMATION of its obligation to deliver Finished Products that conform to
the Specifications or waive 3M's right of inspection and acceptance (or
rejection) at 3M's location.
(C) Finished Products that fail to meet the Specifications may be
rejected by 3M. In such event, if it is possible to correct the problem, then 3M
will return such Finished Products to IMATION to be reworked with IMATION
bearing all costs of transportation and risk of loss both ways and IMATION will
rework such Finished Products within thirty (30) days after receipt. If it is
not possible to rework such Finished Products to meet the applicable
Specifications, then IMATION will reimburse 3M for the amount 3M paid IMATION
for the Finished Products plus the cost of the Materials provided to IMATION by
3M and used by IMATION to make the rejected Finished Products within thirty (30)
days after receipt of an invoice from 3M. 3M, at its option, may elect to take a
credit for the amount due against future service invoices received from IMATION.
3M Complaint Analysis shall make the final determination of whether Finished
Products fail to meet the Specifications.
(D) Where IMATION can show that the Finished Products fail to meet the
Specifications as a direct result of the Materials being defective, IMATION will
not be liable for the failure of the Finished Products to meet the applicable
Specifications.
10. PAYMENT TERMS.
(A) As long as 3M continues to share its current financial system with
IMATION, contract manufacturing services performed under this Agreement will be
billed to 3M by IMATION charging the net amount due to the appropriate 3M
commodity code. The net amount charged will be summarized with all other charges
during the month on the eighth work day of the following month. 3M will pay
IMATION the net amounts due on the ninth work day of the month. Once IMATION
develops its own financial system, amounts due under this Agreement will be
billed and paid for as provided in Paragraphs 10(B)-(D) below. If for any reason
an amount due does not get charged to the appropriate 3M commodity code, then
IMATION may send 3M an invoice for the amount due and Paragraphs 10(B)-(D) will
apply.
(B) Invoices for all contract manufacturing services performed under
this Agreement shall be issued and dated by IMATION not earlier than the date
services are completed. Invoices shall refer to 3M's purchase order release
number, quantity, service price and total invoice price. Payment terms shall be
net thirty (30) days from the date of IMATION's invoice.
(C) Invoices shall be submitted at the following address:
Minnesota Mining and Manufacturing Company
3M Accounts Payable
P.O. Box 33121
St. Paul, Minnesota 55133-3121
(D) 3M shall submit payments to IMATION at the following address:
IMATION ENTERPRISES CORP.
1 Imation Place
Oakdale, MN 55128
(E) Credits due to rejection of Finished Products and discrepancies on
paid invoices may be deducted by 3M from subsequent payments by means of a debit
memo.
11. MATERIALS PROVIDED BY 3M
(A) 3M will provide the Materials listed in each Exhibit to IMATION
F.O.B. the relevant IMATION facility for IMATION to use in performing the
contract manufacturing services described in the Exhibit. 3M will provide such
Materials to IMATION's facility in sufficient quantities to allow IMATION to
provide the requested contract manufacturing services in a timely manner.
IMATION will keep 3M informed of the quantities of Materials on hand and will
promptly notify 3M if additional Materials are required to enable IMATION to
continue performing the requested services in a timely manner.
(B) If specified in an Exhibit, IMATION will inspect all Materials
received from 3M using inspection standards supplied by 3M. All Materials
failing the inspection test will be held for pickup by 3M.
(C) IMATION will keep all Materials at its manufacturing facility and
will not relocate any of such Materials without 3M's prior written approval.
IMATION will use Materials only to perform work for 3M. IMATION will keep the
storage area for Materials segregated from any inventory of IMATION.
(D) Materials, work-in-process and Finished Products will remain at all
times 3M property. IMATION will not pledge or mortgage any of the Materials,
work-in-process or Finished Products. IMATION will not do or omit to do anything
which might encumber or threaten to encumber 3M's ownership rights in the
products, work-in-process or serviced products. IMATION agrees to execute, upon
request, a UCC-1 Financing Statement for filing by 3M to record these 3M
ownership rights.
(E) When this Agreement expires or terminates (regardless of cause),
IMATION will immediately make available to 3M all Materials and any other
property belonging to 3M and stored at IMATION's premises or under IMATION's
control. If IMATION does not immediately make such property available to 3M,
then 3M may take all action permitted by law to immediately recover the property
and IMATION will on demand reimburse 3M for all actual and reasonable costs 3M
incurs in recovering the property (including reasonable attorneys' fees and
other expenses of litigation).
(F) 3M has full risk of loss and damage as to any Materials,
work-in-process and Finished Products in IMATION's care, custody or control. 3M
waives subrogation against IMATION for any loss or damage to any Materials,
work-in-process or Finished Products in IMATION's care, custody or control.
12. COST REDUCTIONS; QUALITY IMPROVEMENTS.
(A) 3M is committed to low-cost, high quality manufacturing and expects
the same commitment from its vendors. IMATION has represented to 3M that it
shares this commitment to low-cost, high quality manufacturing and that IMATION
has the experience, expertise and resources necessary to provide contract
manufacturing services at the lowest possible cost and the highest possible
quality.
(B) The parties agree to meet semi-annually to establish mutually
agreeable cost reduction and quality improvement targets and to develop
effective and on-going cost reduction and quality improvement programs to meet
or exceed the cost and quality targets.
(C) IMATION recognizes the importance to 3M of meeting or exceeding the
cost reduction and quality improvement targets.
13. WARRANTIES.
(A) IMATION will perform all services under this Agreement in a manner
consistent with the highest standards of the industry and in strict compliance
with all relevant statutes, ordinances, rules, regulations and other applicable
law.
(B) IMATION warrants that the contract manufacturing services provided
under this Agreement will conform to the Specifications. If 3M determines that
any service provided fails to meet the foregoing warranty, 3M's exclusive
remedies are set out in Paragraph 9(C).
(C) EXCEPT AS STATED HEREIN, THERE ARE NO EXPRESS OR IMPLIED
WARRANTIES, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE RESPECTING THE SERVICES PROVIDED TO 3M UNDER THIS
AGREEMENT.
14. CONFIDENTIAL INFORMATION.
(A) As used in this Agreement, 3M Confidential Information and
IMATION Confidential Information are defined as follows:
(1) "3M CONFIDENTIAL INFORMATION" means information known
by IMATION on the effective date of this Agreement
and reasonably understood by IMATION to be
confidential and related to 3M's business interests,
or disclosed confidentially by 3M to IMATION after
the effective date of this Agreement under the terms
and for purposes of this Agreement except for:
(i) information learned by IMATION for the first
time after the effective date of this
Agreement, but prior to any disclosure by
3M;
(ii) information which is or becomes publicly
available through no act of IMATION, from
and after the date of public availability;
(iii) information disclosed to IMATION by a third
party, provided (a) under the circumstances
of disclosure IMATION does not have a duty
of non-disclosure owed to such third party,
(b) the third party's disclosure is not
violative of a duty of non-disclosure owed
to another, including 3M, and (c) the
disclosure by the third party is not
otherwise unlawful;
(iv) information developed by IMATION independent
of any confidential 3M information which is
known by IMATION on the effective date of
this Agreement and/or disclosed by 3M under
this Agreement;
(v) information which is inherently disclosed in
marketing of a product by IMATION in the
usual course of business and within the
scope of the rights granted to or retained
by IMATION under this Agreement or the
Intellectual Property Rights Agreement;
(vi) information which is developed by a business
which is being transferred to IMATION and
constitutes performance specifications for
chemicals, compositions, formulations,
materials, components, devices, articles or
other items obtained prior to the effective
date of this Agreement from a business
remaining with 3M on the effective date of
this Agreement; and
(vii) information which IMATION can demonstrate
was disclosed by a 3M business being
transferred to IMATION to a third party
prior to November 14, 1995, and for which
any obligation of confidentiality by that
third party has expired, from and after the
date such third party obligation of
confidentiality expires, and provided that
disclosure of an item of information to one
third party and a different item of
information to another third party shall not
be viewed as disclosure of information which
can only be drawn from those items of
information collectively.
(2) "IMATION CONFIDENTIAL INFORMATION" means information
known by 3M on the effective date of this Agreement
and reasonably understood by 3M to be confidential
and related to IMATION's present or future business
interests, or disclosed confidentially by IMATION to
3M under the terms and for purposes of this Agreement
except for:
(i) information learned by 3M for the first time
subsequent to the effective date of this
Agreement, but prior to any disclosure by
IMATION;
(ii) information which is or becomes publicly
available through no act of 3M, from and
after the date of public availability;
(iii) information disclosed to 3M by a third
party, provided (a) under the circumstances
of disclosure 3M does not have a duty of
non-disclosure owed to such third party, (b)
the third party's disclosure is not
violative of a duty of non-disclosure owed
to another, including IMATION, and (c) the
disclosure by the third party is not
otherwise unlawful;
(iv) information developed by 3M independent of
any confidential IMATION information which
is known by 3M on the effective date of this
Agreement and/or disclosed by IMATION under
this Agreement;
(v) information which is inherently disclosed in
marketing of a product by 3M in the usual
course of business and within the scope of
the rights granted to or retained by 3M
under this Agreement or the Intellectual
Property Rights Agreement;
(vi) information which is developed by a business
which remains with 3M on the effective date
of this Agreement and constitutes
performance specifications for chemicals,
compositions, formulations, materials,
components, devices, articles or other items
obtained prior to the effective date of this
Agreement from a business being transferred
to IMATION on the effective date of this
Agreement; and
(vii) information which 3M can demonstrate was
disclosed to a third party prior to November
14, 1995, and for which any obligation of
confidentiality by that third party has
expired, from and after the date such third
party obligation of confidentiality expires,
and provided that disclosure of an item of
information to one third party and a
different item of information to another
third party shall not be viewed as
disclosure of information which can only be
drawn from those items of information
collectively.
(B) 3M and IMATION each shall not disclose to another or use
except for purposes of the Agreement any business information
which is IMATION Confidential Information or 3M Confidential
Information, respectively. The foregoing restrictions shall
expire with respect to business information which is IMATION
Confidential Information and 3M Confidential Information five
(5) years after the date of disclosure of such information,
unless and to the extent the parties agree to a longer period
for the foregoing restrictions with respect to specific
categories of business information which is IMATION
Confidential Information and/or 3M Confidential Information,
in which case the foregoing restrictions shall expire with
respect to such information on the expiration of such longer
period. The date of disclosure in the case of business
information which is either 3M Confidential Information known
by IMATION or IMATION Confidential Information known by 3M on
the effective date of this Agreement shall be considered to be
the effective date of this Agreement.
(C) 3M and IMATION each shall not disclose to another or use
except for purposes of the Agreement any technical information
which is IMATION Confidential Information or 3M Confidential
Information, respectively. The foregoing restrictions shall
not expire until such time and to the extent that such
information ceases to be IMATION Confidential Information or
3M Confidential Information, as the case may be.
(D) Each party shall protect Confidential Information under this
Agreement by using the same degree of care, but no less than a
reasonable degree of care, to prevent the unauthorized
disclosure of the other party's Confidential Information as
the party uses to protect its own confidential information of
a like nature.
(E) Each party shall insure that its affiliates, sublicensees and
other transferees agree to be bound by the same restrictions
on use and disclosure of Confidential Information as bind the
party in advance of the disclosure of Confidential Information
to them.
(F) The parties recognize that 3M Confidential Information and/or
IMATION Confidential Information disclosed hereunder may
relate to an "Extraordinarily Sensitive Technology" as
contemplated by the Intellectual Property Rights Agreement.
Any such Confidential Information shall be subject to the
special treatment provided for in Paragraph 15.3 of the
Intellectual Property Rights Agreement.
15. RIGHTS TO DEVELOPMENTS.
Ownership and rights in any intellectual property (whether patentable
or not) conceived during the course of work under this Agreement up to and
including June 30, 1998 will be governed by the Intellectual Property Rights
Agreement. For purposes of such Agreement, information conceived hereunder shall
be deemed to be Imation or Joint "Foreground IP" and/or "Foreground Patents"
and/or "New Material" as the case may be depending on the party or parties that
conceived same (even if such intellectual property does not result from, or is
not based upon, technical Background PI and/or Assigned PI and/or 3M Licensed
Works as defined in the Intellectual Property Rights Agreement). Furthermore,
for purpose of the Intellectual Property Rights Agreement, ownership and rights
in any intellectual property conceived during the period July 1, 1997, up to and
including June 30, 1998, shall be treated the same as if conceived between July
1, 1996, up to and including June 30, 1997. If any services are to be provided
under this Agreement after June 30, 1998, the parties agree to negotiate
mutually acceptable provisions by June 30, 1998 regarding ownership and rights
in any intellectual property conceived during the course of work under this
Agreement after June 30, 1998.
16. REPORTS.
During the Term and for one (1) month after this Agreement expires or
is terminated, before the twenty-fifth (25th) day of each month IMATION will
provide 3M written reports on services performed during the prior month,
including Finished Products shipped, Material usage and end-of-month inventory
balances for each type of Material received from 3M. IMATION also agrees to
conduct a physical inventory at least once per year during the Agreement term
for each type of Material received from 3M (or more frequently if requested by
3M) and IMATION will provide assistance in reconciling such physical inventory.
In addition, as requested by 3M, IMATION agrees to provide 3M a written report
(in a form satisfactory to 3M) covering quality audits, defect analysis (Pareto
Diagram), corrective action, and other reports agreed to by the parties.
17. EQUIPMENT.
(A) In some Exhibits 3M may agree to furnish Equipment to be used by
IMATION solely to perform its duties under this Agreement. IMATION acknowledges
that all such Equipment and any replacement thereof, together with all
Documentation created during the Term with respect to the Equipment are the
property of 3M. 3M will pay all applicable personal property taxes that pertain
to the Equipment. IMATION agrees to update the Documentation in a timely manner
after changes to the Equipment have been made.
(B) IMATION agrees to execute a UCC-1 financing statement (to be filed
by 3M) as an acknowledgment that the Equipment in the custody of IMATION is
owned by 3M. Most pieces of Equipment where practical have been or will be
marked with a 3M identification number. IMATION shall not sell, transfer, or
remove the Equipment from the IMATION location where the Equipment is originally
delivered. IMATION will not allow any third party to obtain a mortgage, security
interest, lien, or any other type of encumbrance in or upon the Equipment.
(C) IMATION acknowledges that 3M has made absolutely no representations
or statements about the character, condition, quality or characteristics of the
Equipment. Before using the Equipment, IMATION will do whatever is necessary to
make certain that the Equipment is in a safe and proper condition for its
intended use. 3M NEITHER EXPRESSES NOR IMPLIES ANY WARRANTIES AS TO THE QUALITY
OR CONDITION OF THE EQUIPMENT AND EXPRESSLY DISCLAIMS ANY WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 3M EXPRESSLY DISCLAIMS ANY
REPRESENTATIONS ABOUT THE CONDITION, QUALITY, CAPACITY OR OTHER CHARACTERISTICS
OF THE EQUIPMENT. This paragraph applies regardless of whether IMATION has paid
or offered 3M any consideration for the use of the Equipment.
(D) IMATION will not alter any Equipment in any manner whatsoever
without the prior written approval of 3M.
(E) The Equipment shall be used SOLELY AND EXCLUSIVELY for performing
contract manufacturing services for 3M under this Agreement and shall not be
used for any other purpose whatsoever without the prior written approval of an
officer of 3M.
(F) 3M may inspect the Equipment and Documentation at all reasonable
times during normal business hours.
(G) During the time the Equipment is in IMATION's possession, IMATION
at its own expense, shall:
(1) service the Equipment regularly and maintain it in
good operating condition at all times as specified by
3M;
(2) establish and maintain a documented calibration
program (when applicable) and preventive maintenance
program for Equipment with verification of the
calibration sent to 3M monthly. IMATION will not
allow the Equipment to be misused or to deteriorate,
ordinary wear and tear excepted; and
(3) provide all routine repair and maintenance for the
Equipment. Major or extraordinary maintenance costs
incurred will be borne by 3M subject to 3M's prior
written approval for IMATION to undertake such costs.
(H) 3M has full risk of loss and damage as to any Equipment and
Documentation in IMATION's care, custody or control. 3M waives subrogation
against IMATION for any loss or damage to any Equipment or Documentation in
IMATION's care, custody or control.
(I) If for any reason IMATION is unable to continue to perform certain
contract manufacturing services involving the use of some Equipment, IMATION
shall notify 3M immediately and 3M shall have the right to peaceably enter
IMATION's premises during normal business hours to remove the Equipment and
Documentation, and IMATION expressly waives any rights or remedies IMATION may
have with regard to 3M Equipment and Documentation, including but not limited to
any right IMATION may have to notice and a hearing or to a bond, undertaking or
surety before a writ of replevin, order of seizure or similar writ or order will
issue or become enforceable.
(J) At the termination or expiration of this Agreement, IMATION shall
return any and all Equipment and Documentation to 3M in the same condition as
originally received or created by or for IMATION, loss, damage and reasonable
wear and tear excepted. 3M shall pay the cost of tear down, crating and shipping
of the Equipment and restoring the premises to their original condition at the
time the Equipment was installed, reasonable wear and tear excepted. If for any
reason IMATION fails to comply promptly with such a request, 3M shall have the
right to peaceably enter IMATION's premises during normal business hours to
remove the Equipment and Documentation and 3M may take all action permitted by
law to immediately recover the Equipment and Documentation. IMATION will on
demand reimburse 3M for all actual and reasonable costs 3M incurs in recovering
the Equipment and Documentation (including reasonable attorneys' fees and other
expenses of litigation). IMATION expressly waives any rights or remedies IMATION
may have with regard to the 3M Equipment and Documentation, including but not
limited to any right IMATION may have to notice and a hearing or to a bond,
undertaking, or surety before a writ of replevin, order of seizure, or similar
writ or order will issue or become enforceable.
18. PLANT SAFETY.
(A) IMATION is solely responsible for the safe performance of all
contract manufacturing services, and for the safety of (1) all IMATION's
employees, agents, or delegates, (2) all employees, agents and delegates of
IMATION's subcontractors, and (3) for all people who may be present at or in the
vicinity of IMATION's plant.
(B) 3M may from time to time provide certain industrial hygiene and
other safety-related information to IMATION. IMATION will not pay 3M for
providing this information, and 3M will provide this type of information at
IMATION's sole risk. IMATION agrees to continue to exercise its own independent
judgment on industrial hygiene and safety issues. Neither 3M's providing of nor
3M's failure to provide the type of information covered by this paragraph in any
way changes or limits IMATION's obligations under this Agreement or in any way
changes or limits IMATION's obligation to perform contract manufacturing
services safely.
(C) If any employee of IMATION, or of IMATION's subcontractors, agents
or delegates, claims to have suffered or aggravated an injury while performing
work on Equipment, IMATION will notify 3M of the claim as soon as IMATION
becomes aware of it. Neither this paragraph nor 3M's receipt of any notice
contemplated by this paragraph make 3M liable for any injury.
19. LIMITATION OF LIABILITIES; TIME LIMIT FOR FILING ACTION.
(A) EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED IN PARAGRAPH 21
(INDEMNIFICATION), NEITHER IMATION NOR 3M SHALL UNDER ANY CIRCUMSTANCES BE
LIABLE TO EACH OTHER FOR ANY INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGES (INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, REVENUE, OR BUSINESS)
RESULTING FROM OR IN ANY WAY RELATED TO THIS AGREEMENT OR THE TERMINATION,
EXPIRATION, OR NONRENEWAL OF THIS AGREEMENT OR ARISING OUT OF OR ALLEGED TO HAVE
ARISEN OUT OF BREACH OF THIS AGREEMENT OR BREACH OF ANY PRODUCT SPECIFICATION OR
PURCHASE ORDER RELEASE ACCEPTED PURSUANT TO THIS AGREEMENT. This limitation
applies regardless of whether such damages are sought based on breach of
warranty, breach of Agreement, negligence, strict liability in tort, or any
other legal theory. This limitation does not apply to claims for personal injury
by a third party or infringement of intellectual property rights.
(B) ANY CLAIM FOR BREACH OF WARRANTY OR BREACH OF ANY OTHER OBLIGATION
UNDER THIS AGREEMENT MUST BE COMMENCED WITHIN ONE (1) YEAR AFTER THE BREACH
OCCURS.
20. WASTE MATERIAL.
(A) IMATION will be responsible for the final and proper disposal of
all waste material generated while performing contract manufacturing services
(Waste). IMATION represents and warrants that it will properly package, label,
store, transport, dispose of and otherwise handle Waste in accordance with all
federal, state and local regulations and laws and in accordance with sound
environmental practice.
(B) IMATION shall, at its sole cost and expense, apply for and obtain
all permits required by all applicable laws, ordinances and regulations for the
transportation, handling or disposal of those materials. IMATION shall maintain
the permits for the duration of this Agreement.
21. INDEMNIFICATION.
(A) 3M agrees to indemnify, defend and hold harmless IMATION, its
directors, officers, employees, agents and representatives from any and all
claims, actions, demands, judgments, losses, costs, expenses, damages and
liabilities (including but not limited to attorneys fees and other expenses of
litigation) arising out of or connected with the services supplied under this
Agreement or in any way related to this Agreement, regardless of the legal
theory asserted. This indemnity applies to claims, actions and demands for which
IMATION may be, or may be claimed to be, partially or solely liable. The parties
agree that the indemnity stated in this Paragraph 21 should be construed and
applied in favor of indemnification. The parties agree that this indemnity will
not apply to claims between the parties arising out of or connected to this
Agreement.
(B) If IMATION intends to claim indemnification under this Paragraph
21, IMATION will promptly notify 3M in writing of any claim, action or demand
for which IMATION intends to claim indemnification. In addition, IMATION will
promptly notify 3M in writing if IMATION elects to waive its right to have 3M
defend the claim, action, or demand. If IMATION does not waive its right to have
3M defend the claim, action, or demand, IMATION agrees that 3M will control the
defense of the claim, action, or demand. IMATION will cooperate fully with 3M
and its legal representatives in the investigation and defense of any claim,
action, or demand covered by this indemnification. IMATION will permit 3M to
settle any claim, action, or demand and agrees that 3M will control the
settlement, provided, however, that such settlement does not adversely affect
IMATION's rights under this Agreement or impose any obligations on IMATION in
addition to those stated in this Agreement. 3M, in the defense of any claims,
actions or demands, will not consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term the giving by the
claimant or plaintiff to IMATION of a release from all liability with respect to
the claim, action, or demand. No such claim, action, or demand will be settled
by IMATION without the prior written consent of 3M.
22. INSURANCE.
(A) IMATION will obtain the following minimum insurance coverage, and
maintain it at all times throughout the life of this Agreement.
(1) Comprehensive General Liability Insurance or
Commercial General Liability Insurance, to cover
personal injuries, including death, and property
damage.
(2) Broad Form Contractual Liability insurance coverage
as to IMATION's indemnity obligations.
(3) Workers' Compensation and Employers' Liability
Insurance or legally self-insured as required by law.
The Employers' Liability Insurance must have a
minimum limit of One Million Dollars ($1,000,000.00)
per accident. IMATION may satisfy this limit either
with a single policy or with a primary policy plus an
umbrella policy.
(B) IMATION will provide to 3M certificates of insurance no later than
July 31, 1996 showing compliance with the insurance specifications. The
certificates must state that the insurance cannot be canceled or changed without
thirty (30) days advance notice to 3M. IMATION must keep the certificates
current and must in any event file a new certificate each year while this
Agreement is in effect. Neither 3M's failure to require or to insist upon
certificates or other evidence of insurance, nor 3M's acceptance of a
certificate or other evidence of insurance showing a variance from the specified
coverage changes IMATION's obligation to maintain the required insurance.
(C) If IMATION does not provide the specified insurance, then IMATION
will defend, indemnify and hold harmless 3M, and 3M's directors, officers,
agents and employees to the extent necessary to afford the same protection as
would have been provided by the specified insurance. The intent of this defense
and indemnity obligation is to put 3M in the same position that 3M would have
occupied if IMATION had maintained the required insurance.
(D) 3M does not in any way represent or warrant that the types or
limits of insurance specified in Paragraph 22(A) adequately protect IMATION's
interests or sufficiently cover IMATION's liability.
23. FORCE MAJEURE.
(A) If the performance of the services listed in any Exhibit or of any
obligation under this Agreement is prevented, restricted or interfered with by
reason of fire or earthquake or other casualty or accident; inability to procure
raw materials, power or supplies (for reasons other than IMATION's negligence or
fault or failure to timely order); war or other violence; any law, order,
proclamation, regulation, ordinance, demand or requirement of any government
agency, court or intergovernmental body; or any other act or condition
whatsoever beyond the reasonable control of the parties hereto, the party so
affected, upon giving notice to the other party, shall be excused from such
performance to the extent of such prevention, restriction or interference;
provided that the party so affected shall use its best effort as to avoid or
remove such causes of nonperformance and shall continue performance under this
Agreement with the utmost dispatch whenever such causes are removed.
(B) If performance of the services listed in any Exhibit or of any
obligation under this Agreement is prevented, restricted or interfered with for
any reason set forth in this paragraph and such prevention, restriction or
interference lasts for, or is expected to last for more than one hundred twenty
(120) days, the party whose performance is not affected by the force majeure
condition shall have the option of being excused, without further obligation,
from performance of the Exhibit or from performance of the Agreement, whichever
is applicable.
24. RELATIONSHIP OF PARTIES.
Neither party is an agent of the other party under this Agreement and
has no authority to bind any other party, transact any business in any other
party's name or on its behalf, or make any promises or representations on behalf
of any other party. Each party makes this Agreement and will perform all of its
respective obligations under this Agreement as an independent contractor, and no
joint venture, partnership or other relationship shall be created or implied by
this Agreement. The employees and agents of each party are NOT for any purpose
the employees or agents of the other party.
25. NO UNAUTHORIZED DELEGATION OR ASSIGNMENT;
THIRD PARTY RIGHTS.
(A) Except as specifically authorized in a writing signed by a Vice
President of 3M, IMATION will not delegate, assign or permit by merger,
acquisition or change of corporate form any of its duties under this Agreement
to be performed by anyone else. The decision as to whether to authorize any
delegation, assignment or change in performance obligations is solely within
3M's discretion.
(B) The promises and obligations contained in this Agreement apply to,
benefit and bind not only the parties but also their respective divisions,
subsidiaries, assigns, delegatees and successors in interest.
(C) Any assignment, delegation, or transfer of this Agreement or any
interest therein without the written consent of the other party is void and
cause for termination of this Agreement.
(D) NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED TO GRANT ANY PERSON OR
ENTITY NOT A PARTY HERETO ANY RIGHTS OR POWERS WHATSOEVER; AND NO PERSON OR
ENTITY SHALL BE A THIRD PARTY BENEFICIARY OF THIS AGREEMENT.
26. SURVIVAL.
The rights and obligations of the parties hereto under Paragraph 13
[Warranties], 15 [Rights to Developments], 19 [Limitation of Liabilities; Time
Limit for Filing Action], 20 [Waste Material] and 21 [Indemnification] shall
survive any termination, cancellation or expiration of this Agreement. The
obligations of the parties under Paragraph 14 [Confidential Information] shall
survive for the period specified in Paragraph 14(D)(6).
27. DISPUTE RESOLUTION.
(A) The parties agree to resolve any questions, claims or disputes
arising from or relating to this Agreement or its negotiation or termination by
the following sequence of dispute resolution methods. Except as otherwise
provided in Paragraph 27(K), these methods are exclusive and shall be fully
exhausted before the commencement of any litigation.
(B) Initiation. A party seeking to initiate the procedures shall give
written notice to the other party, describing briefly the nature of the dispute.
A meeting shall be held between the parties within ten (10) days of the receipt
of such notice, attended by individuals with decision-making authority regarding
the dispute, to attempt in good faith to negotiate a resolution of the dispute.
(C) Submission to Mediation; Cost of Mediation: If, at the conclusion
of such meeting, the parties have not succeeded in negotiating a resolution of
the dispute, they agree to submit the dispute to mediation within thirty (30)
days thereafter in accordance with the Center for Public Resources Model ADR
Procedure - Mediation of Business Disputes, as modified herein, and to bear
equally the costs of the mediation.
(D) Selection of Mediator. The parties will jointly appoint a mutually
acceptable mediator, seeking assistance in such regard from the Center for
Public Resources or another mutually agreed-upon organization if they are unable
to agree upon such appointment within twenty (20) days from the conclusion of
the negotiation period.
(E) Mediation And Arbitration.
(1) The parties agree to participate in good faith in the
mediation and negotiations related thereto for a
period of thirty (30) days or such longer period as
they may mutually agree following the initial
mediation session. If the parties are not successful
in resolving the dispute through mediation by the end
of such period, then the parties agree to submit the
matter to binding arbitration in accordance with the
Center for Public Resources Rules for
Non-Administered Arbitration of Business Disputes, as
modified herein, by a sole arbitrator selected in
accordance with the provisions of Paragraph 27(F).
The arbitration proceeding shall be held in
Minnesota, shall be governed by the United States
Arbitration Act, 9 U.S.C. SS 1-16 and judgment upon
the award rendered by the arbitrator may be entered
by any court having jurisdiction thereof.
(2) Except as may be expressly provided in any other
agreement between the parties, the parties obligation
under this Paragraph 27 to submit disputes to binding
arbitration in lieu of seeking judicial resolution of
their disputes, shall expire on July 1, 2001.
(F) Selection of Arbitrator. The parties shall have ten (10) days from
the end of the mediation period to agree upon a mutually acceptable neutral
person not affiliated with either of the parties to act as arbitrator. If no
arbitrator has been selected within such time, the parties agree to jointly
request the Center for Public Resources or another mutually agreed-upon
organization to supply within ten (10) days a list of potential arbitrators with
qualifications as specified by the parties in the joint request. Within five (5)
days of receipt of the list, the parties shall independently rank the proposed
candidates, shall simultaneously exchange rankings, and shall be deemed to have
selected as the arbitrator the individual receiving the highest combined ranking
who is available to serve. If there is a tie, then the tie will be broken by
putting the names on slips of paper, mixing them up and one party drawing one
slip of paper.
(G) Cost of Arbitration. The costs of arbitration shall be apportioned
between the parties as determined by the arbitrator in such manner as the
arbitrator deems reasonable taking into account the circumstances of the case,
the conduct of the parties during the proceeding, and the result of the
arbitration.
(H) Arbitration Period. Any arbitration proceeding shall be concluded
in a maximum of one (1) year from written notice from one party to the other
party identifying a dispute subject to arbitration under this Paragraph and
requesting arbitration after having participated in negotiation and mediation
under this Paragraph.
(I) Treatment of Negotiation and Mediation. All negotiations and
mediations pursuant to this Paragraph shall be treated as compromise and
settlement negotiations for purposes of Rule 408 of the Federal Rules of
Evidence and comparable Minnesota Rules of Evidence.
(J) Confidentiality. All negotiation, mediation and arbitration
proceedings under this Paragraph shall be treated as Confidential Information in
accordance with Paragraph 14. Any mediator or arbitrator shall be bound by an
agreement containing confidentiality provisions.
(K) Equitable Relief. Nothing herein shall preclude either party from
taking whatever actions are necessary to prevent any immediate, irreparable harm
to its interests, including multiple breaches of this Agreement by the other
party. Otherwise, these procedures are exclusive and shall be fully exhausted
prior to the initiation of any litigation. Either party may seek specific
enforcement of any arbitrator's decision under this Paragraph. The other party's
only defense to such a request for specific enforcement shall be fraud by or on
the arbitrator.
28. GOVERNING LAW; CHOICE OF FORUM.
Any questions, claims, disputes, or litigation arising from or related
to this Agreement are governed by the laws of Minnesota without regard to the
principles of conflicts of law.
29. PARAGRAPH HEADINGS.
The title and headings of the various paragraphs of this Agreement are
inserted for convenience of reference only and shall not be construed to affect
the construction or interpretation of any of its provisions.
30. WAIVER.
Any failure or delay by either party in exercising any right or remedy
in one or many instances will not prohibit a party from exercising it at a later
time or from exercising any other right or remedy.
31. MODIFICATION.
No part of this Agreement may be waived, modified, or supplemented in
any manner whatsoever (including a course of dealing or of performance or usage
of trade) except by a written instrument signed by authorized officers of the
parties.
32. NOTICES.
All notices shall be in writing and shall be deemed to have been given
when received. Any notice to be given to 3M shall be addressed to:
Staff Vice President
3M Purchasing
3M Center, Bldg. 224-1N
St. Paul, Minnesota 55144-1000
with a copy to:
Division Vice President
[3M business unit listed on applicable Exhibit]
Minnesota Mining and Manufacturing Company
3M Center, Building _________
St. Paul, Minnesota 55144-1000
Any notice to IMATION shall be addressed to:
Vice-President
[Imation business unit listed on applicable Exhibit]
Imation Enterprises Corp.
1 Imation Place
Oakdale, Minnesota 55128
with a copy to:
General Counsel
Imation Legal Department
Bldg. 220-11W-01
I-94 & McKnight Road
St. Paul, MN 55144-1000
Any change in address shall be promptly communicated by either party to the
other party.
33. AUTHORITY.
The undersigned represent and warrant that they are persons legally
authorized to execute this Agreement on behalf of 3M and IMATION, respectively.
34. ENTIRE AGREEMENT.
This Agreement and the Exhibits referred to in this Agreement, which
exhibits are incorporated and made a part of this Agreement by this reference,
supersede and terminate any and all prior agreements, if any, whether written or
oral, between the parties with respect to the subject matter contained herein.
Each party agrees that it has not relied on any representation, warranty, or
provisions not explicitly stated in this Agreement, and that no oral statement
has been made to either party that in any way tends to waive any of the terms or
conditions of this Agreement. THIS AGREEMENT IS INTENDED BY THE PARTIES TO BE A
FINAL, COMPLETE AND EXCLUSIVE STATEMENT OF ALL TERMS AND CONDITIONS OF THE
AGREEMENT.
The parties have signed this Agreement on the date indicated below.
MINNESOTA MINING AND IMATION ENTERPRISES CORP. (IMATION)
MANUFACTURING COMPANY (3M)
By______________________________ By_______________________________
Name (print)______________________ Name (print)_______________________
Title____________________________ Title______________________________
Date____________________________ Date______________________________
IMATION TO 3M
CONTRACT MANUFACTURING SERVICE EXHIBIT
1. 3M Business Unit Requesting Service: _________________________________
2. IMATION Business Unit Performing Service:_____________________________
3. Effective Date: ______________________________
4. Contract Manufacturing Service To Be Performed By IMATION:
_______________________________________________________________________________
5. Materials To Be Provided By 3M:
_______________________________________________________________________________
6. Other Things To Be Provided or Paid For By 3M:
_______________________________________________________________________________
7. Amount To Be Paid By 3M For Contract Manufacturing Service:
_______________________________________________________________________________
8. Special Conditions:
_______________________________________________________________________________
ACCEPTED AND AGREED TO:
IMATION ENTERPRISES CORP. MINNESOTA MINING AND
MANUFACTURING COMPANY
____________________________________ ____________________________________
____________________________________ ____________________________________
By By
____________________________________ ____________________________________
____________________________________ ____________________________________
Print Name Print Name
____________________________________ ____________________________________
____________________________________ ____________________________________
Title Title
____________________________________ ____________________________________
____________________________________ ____________________________________
Date Date
____________________________________ ____________________________________
SHARED FACILITIES LEASE AGREEMENT
THIS LEASE, Made this _____ day of _____________________ 19__, by and
between MINNESOTA MINING AND MANUFACTURING COMPANY a corporation organized and
existing under and by virtue of the laws of the State of Delaware, hereinafter
called "Landlord" and IMATION CORP., a Delaware Corporation, hereinafter called
"Tenant";
WITNESSETH:
ARTICLE 1. PREMISES Landlord for and in consideration of the rents and
covenants hereinafter mentioned does hereby demise, lease and let unto Tenant
and Tenant does hereby hire, lease and take from
Landlord________________situated at ____________________ (the "Premises"), as
shown on Exhibit A attached.
ARTICLE 2. ACCESS Tenant is hereby granted access to the Premises through
the main entrance of the building.
ARTICLE 3. TERM The term of this Lease shall be a two-year term to commence
on July 1, 1996 and to expire on June 30, 1998. After the initial term, Tenant
shall have the option to extend the term for __________terms upon thirty (30)
days prior written notice to Landlord.
If Tenant accepts possession on a day other than the first day of the month,
Tenant shall occupy the Premises under the terms and provisions of this Lease
and pay the prorata portion of the monthly rent for said month and the term of
the Lease shall commence on the first day of the month following that in which
possession is accepted. If Tenant holds over the expiration of the term, it is
agreed that the tenancy shall be month-to-month under the same terms and
conditions as this Lease.
Tenant shall have the right at any time during the term or any extension,
upon sixty (60) days prior written notice to Landlord, to terminate occupancy in
any or all portions of the Premises.
ARTICLE 4. RENTAL The monthly rental shall be a cost calculation determined
on an activity or allocation basis, such as shown on Exhibit B. Monthly rent
will be adjusted based on increases or decreases in the calculation.
ARTICLE 5. TAXES, UTILITIES, SERVICES AND EQUIPMENT Said rental payment
shall include but not be limited to all real estate taxes and assessments,
existing equipment and services as shown on Exhibit B as well as such other
items as Controllers for Landlord and Tenant agree upon.
ARTICLE 6. ASSIGNMENT AND SUBLETTING Tenant shall have no right at any time
to either assign or sublet any or all of the Premises without Landlord's prior
written consent, which Landlord shall have the right to withhold arbitrarily at
its sole discretion.
ARTICLE 7. USE Tenant may use the Premises for office and administration
purposes. Tenant will at its own expense comply with all statutes, ordinances,
rules, orders and regulations of federal, state or local public authorities,
provided compliance does not require a structural modification to the Premises.
ARTICLE 8. DAMAGE OR DESTRUCTION If all or a part of the Premises are
rendered untenantable by reason of damage or destruction caused by perils
customarily covered under fire and extended coverage insurance, acts of God or
any cause beyond the reasonable control of Tenant, this Lease shall, at the
option of Tenant, terminate UNLESS (a) Landlord notifies Tenant within ten (10)
days after notice from Tenant of the untenantable condition of the Premises, of
its intention to repair and restore the Premises to their former condition, and
(b) such restoration is completed within one hundred twenty (120) days from the
date Landlord receives notice of the untenantable condition of the Premises.
During the period of restoration, Tenant's rental obligation shall be abated
proportionate to the time and the extent of the damage or destruction and the
time during which and the extent to which the Premises have been untenantable.
In the event of termination, Landlord shall reimburse to Tenant any portion of
rent paid representing the portion of the term subsequent to the date on which
Premises were rendered untenantable.
ARTICLE 9. SURRENDER Prior to the expiration or termination of this Lease
Tenant will remove its equipment and trade fixtures, cap utilities and surrender
possession of the Premises in broom clean condition. Tenant shall not be
responsible for (a) Reasonable wear and tear, (b) Repairs and restoration to be
made by Landlord as herein provided, and (c) Damage or destruction caused by
perils customarily covered under fire and extended coverage insurance.
ARTICLE 10. MAINTENANCE AND REPAIR SERVICE The Landlord shall make all
repairs in and to the building and Premises and to all equipment regardless of
whether owned by Tenant or Landlord. In the event of breakdown or needed repairs
to the building, Premises and equipment herein referred to, the Tenant shall
notify the Landlord or its agent of such breakdown or needed repairs and the
Landlord shall promptly cause such repairs and/or replacements to be made. All
such notifications shall be made through Landlord's Plant Engineering
Department. The cost of such repairs and maintenance shall be allocated as set
forth in Article 4.
ARTICLE 11. SIGNS Any sign, lettering, decal or design of Tenant which is
visible from the exterior of the Premises or located in any common area of the
Premises shall be at Tenant's expense and subject to Landlord's written consent,
which consent Landlord may grant or withhold in its reasonable discretion.
ARTICLE 12. ALTERATIONS Tenant shall have no right at any time to make any
interior or exterior changes, additions or alterations to the Premises. Tenant
shall request in writing to Landlord any changes, additions or alterations
desired, which Landlord shall have the right to approve or disapprove in its
sole discretion. Landlord shall make all approved alterations, additions or
changes and Tenant shall promptly reimburse Landlord for the cost.
ARTICLE 13. RIGHT OF ENTRY Tenant agrees to permit Landlord, its agents or
employees, to enter the Premises at all reasonable times to make repairs,
alterations and improvements or in cases of emergency.
ARTICLE 14. LIABILITY Landlord shall not be liable for any damage to
property of Tenant or property of Tenant's employees, agents or invitees
resulting from perils customarily covered by fire and extended coverage
insurance, acts of God or any other cause beyond the reasonable control of
Landlord. Tenant agrees to indemnify and save harmless Landlord from any
liability, claim or demand which may arise from such damage to said property.
Tenant shall not be responsible for any damage to or destruction of the Premises
resulting from perils customarily covered by fire and extended coverage
insurance.
ARTICLE 15. ENVIRONMENTAL MATTERS
a) Hazardous Waste and Special Waste. Landlord agrees to handle and dispose
or treat hazardous waste and other wastes generated by Tenant operations. Tenant
agrees to follow all federal, state and local rules and regulations and Landlord
procedures and policies regarding the handling and storage of wastes and grants
access to Landlord's personnel to gather and remove the wastes to appropriate
storage locations. Charges for hazardous waste or other wastes generated in
Tenant operations and treated at the Cottage Grove Incinerator will be paid by
Tenant to the Incinerator.
b) Wastewater and Stormwater Permit. The parties agree that Tenant will
discharge wastewater and stormwater in compliance with all Federal, state or
local rules and all wastewater and stormwater permits issued to Landlord for the
Premises, and in accordance with any of Landlord's internal procedures or
policies. Tenant will reimburse Landlord for Tenant's proportional share of any
wastewater or stormwater fee or tax, if paid by Landlord.
c) Air Permits. Tenant agrees to comply with any air permits covering Tenant
operations, whether issued to Tenant or issued to Landlord and any of Landlord's
procedures or policies regarding air emission sources. Tenant will reimburse
Landlord for Tenant's proportional share of any air emission fee or tax if paid
by Landlord.
d) Emergency Spill Notification. Tenant agrees to immediately notify
Landlord's plant environmental personnel of any spill occurring on the Premises.
Landlord agrees to make any required notifications to appropriate governmental
agencies, on behalf of Tenant, of such spill upon notification by Tenant. Tenant
shall remain responsible for the costs of cleanup and emergency response and for
any penalties or fines resulting from such spill.
e) Emergency Response. Landlord will respond to emergency situations
involving Tenant operations through use of its emergency response procedures.
Any costs incurred in responding to such situations will be charged to Tenant at
actual cost.
ARTICLE 16. INDEMNIFICATION
a) Indemnification. Tenant shall indemnify, defend and hold harmless
Landlord and its directors, officers, shareholders, employees and agents from
any loss, damage, claim, liability and expense (including but not limited to
reasonable attorneys' fees and expenses of litigation), whether based in
contract, tort (including allegations of negligence on the part of Landlord, and
strict liability) or otherwise, arising from or related to any Landlord act or
omission in providing any service to Tenant hereunder which results in bodily
injury, personal injury, death, or damage or loss as asserted by any third party
(including any employees of Tenant). Additionally, Tenant shall reimburse
Landlord and indemnify, defend and hold harmless Landlord and its directors,
officers, shareholders, employees and agents from any loss, damage, claim,
liability and expense (including but not limited to reasonable attorneys' fees
and expenses of litigation), arising from or related to any Tenant act or
omission connected with the provision of any service by Landlord or caused by
any Tenant product, information, or waste provided to Landlord in connection
with the services being provided by Landlord.
b) Construction. Tenant agrees that the indemnity provided in section a)
above shall be interpreted and construed in favor of indemnification and if
applicable law limits or precludes any aspect of this indemnity, then the
indemnity will be limited only to the extent necessary to comply with such law.
c) Notice. If a claim arises within the scope of this indemnity, Landlord
agrees to promptly notify Tenant of any such claims. Tenant shall at its sole
expense defend, with counsel reasonably acceptable to Landlord, all claims,
suits or proceedings arising from an indemnified claim. Landlord agrees to give
Tenant full and complete authority, information and assistance for the defense
of any indemnified claim, suit or proceeding provided, however that Tenant shall
have no authority to enter into any settlement or compromise on behalf of
Landlord without the prior written consent of Landlord. In all events, Landlord
shall have the right to participate in the defense of any proceedings with
counsel of its own choosing at its own expense.
ARTICLE 17. DISCLAIMER AND LIMITATION OF LIABILITY (A) EXCEPT AS EXPRESSLY
SET FORTH IN THIS LEASE, LANDLORD MAKES NO REPRESENTATIONS OR WARRANTIES
WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE SERVICES TO BE PROVIDED
UNDER THIS LEASE. In the event of any performance or non-performance under this
Lease which results in direct damages to Tenant, Landlord's maximum, cumulative
and sole liability to Tenant for such direct damages shall be an amount up to
the rent paid by Tenant to Landlord (as of the date of the performance or
non-performance giving rise to the damage) during the term of this Lease for the
specific service set forth in this Lease which resulted in direct damages to
Tenant. Tenant acknowledges that such payment constitutes fair and reasonable
compensation for any direct damages. Notice of any claim for direct damages must
be made within two years of the date of termination or expiration of the service
which gave rise to the claim and such claim must specify the damage amount
claimed and a description of the action and the service giving rise to the
claim.
(b) NEITHER PARTY SHALL UNDER ANY CIRCUMSTANCES BE LIABLE TO THE OTHER PARTY
FOR ANY SPECIAL, INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES (INCLUDING BUT
NOT LIMITED TO LOSS OF PROFITS OR REVENUE) RESULTING OR ARISING FROM THIS LEASE
AGREEMENT, ANY PERFORMANCE OR NONPERFORMANCE UNDER THIS LEASE AGREEMENT OR
TERMINATION OF THIS LEASE AGREEMENT. THIS LIMITATION APPLIES REGARDLESS OF
WHETHER THE DAMAGES OR OTHER RELIEF ARE SOUGHT BASED ON BREACH OF WARRANTY,
BREACH OF CONTRACT, NEGLIGENCE, STRICT LIABILITY IN TORT, OR ANY OTHER LEGAL OR
EQUITABLE THEORY.
ARTICLE 18. DEFAULT If Tenant defaults in the payment of the rent or in the
due performance of any of the other conditions or covenants contained in this
Lease or if Tenant is adjudicated bankrupt or shall make an assignment for the
benefit of creditors, Landlord in addition to any and all other rights hereunder
or as provided by law shall have the right at any time during the existence of
such fault or condition to (a) terminate this Lease and re-enter the Premises
and repossess and enjoy the same or (b) re-enter the Premises and from time to
time relet the same or portions thereof as agent of Tenant and receive the rent
therefor, applying such rent first to the payment of the resulting expenses and
then to the payment of the rent accruing hereunder. Tenant will receive the
balance if any and will remain liable for any deficiency. Notwithstanding the
foregoing, no default shall exist under the terms of this Lease until Landlord
shall have given Tenant a thirty (30) days' written notice of the default and
Tenant shall have failed or neglected throughout the said thirty (30) day period
to remedy such default or condition.
ARTICLE 19. LANDLORD'S WARRANTY Landlord warrants and covenants that it is
lawfully in possession of the Premises and has good right and authority to lease
the same and that upon Tenant's paying the rents and performing the covenants as
herein provided it shall and may peaceably and quietly have, hold and enjoy the
Premises for the term or terms herein provided and Landlord will defend such
holding and enjoyment.
ARTICLE 20. RULES AND REGULATIONS Tenant agrees to comply with Landlord's
rules and regulations for the Premises and the site as they may be amended from
time to time.
ARTICLE 21. SUCCESSORS AND ASSIGNS The covenants and agreements contained in
this Agreement shall apply to, inure to the benefit of and be binding upon the
Landlord and Tenant and upon their respective successors in interest and
assigns.
ARTICLE 22. WAIVER Any failure or neglect by either party to assert or
enforce any rights or remedies because of any breach or default by the others
hereunder shall not prejudice or affect their respective rights or remedies with
respect to any subsequent breach or default.
IN TESTIMONY WHEREOF, The parties hereto have signed this Lease the day and
year first above written.
Landlord: Tenant:
MINNESOTA MINING AND IMATION CORP.
MANUFACTURING COMPANY
By:______________________________ By:___________________________________
Title:___________________________ Title:________________________________
EMPLOYMENT AGREEMENT
AGREEMENT by and between William T. Monahan (the "Executive") and
Imation Corp., a Minnesota corporation (the "Company"), effective as of the
effective date (the "Effective Date") of the distribution by Minnesota Mining
and Manufacturing Company ("3M") to its stockholders of shares of common stock
of the Company.
WHEREAS, the Board of Directors of the Company (the "Board") desires
that the Company employ the Executive and the Executive desires to furnish
services to the Company on the terms and conditions hereinafter set forth; and
WHEREAS, the parties desire to enter into this agreement setting forth
the terms and conditions of the employment relationship of the Executive with
the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements set forth below, the parties hereby agree as follows:
1. Employment. The Company hereby agrees to employ the Executive, and
the Executive hereby accepts such employment, on the terms and conditions
hereinafter set forth.
2. Employment Period. The initial period of employment of the Executive
by the Company hereunder shall commence as of the Effective Date and shall end
on the fourth anniversary of the Effective Date or the Date of Termination (as
determined pursuant to Section 6 below), if earlier (the "Employment Period"),
which Employment Period shall automatically be extended for one additional year,
commencing on the second anniversary of the Effective Date and each anniversary
thereof thereafter (provided that the Executive's employment has not previously
terminated pursuant to the terms of this Agreement), unless, not later than
ninety (90) days prior to such anniversary date, the Company or the Executive
shall have given notice not to extend the Employment Period.
3. Position and Duties. During the Employment Period, the Executive
shall serve as Chief Executive Officer of the Company. During the Employment
Period, subject to the supervisory powers of the Board, the Executive shall have
those powers and duties consistent with his position as Chief Executive Officer
of the Company as may be prescribed by the Board. During the Employment Period,
the Executive agrees to devote substantially all his working time, attention and
energies during normal business hours to the performance of his duties for the
Company, and shall comply with all general policies of the Company relating to
conduct by officers and employees that have been communicated to the Executive
in writing. Anything herein to the contrary notwithstanding, subject to Section
10(c) hereof, nothing shall preclude the Executive from (i) serving on the
boards of directors of a reasonable number of other corporations or the boards
of a reasonable number of trade associations and/or charitable organizations,
(ii) engaging in charitable activities and community affairs, and (iii) managing
his personal investments and affairs, provided that such activities do not
interfere with the proper performance of his duties and responsibilities
hereunder.
The Company shall use its best efforts to have the Executive elected to
and continue to serve on the Board of Directors of the Company (the "Board")
during the Employment Period. The Executive agrees that, upon the termination of
the Executive's employment for any reason, he will resign from the Board and the
board of directors of any subsidiary of the Company and any directorship held by
reason of his employment with the Company or any of its subsidiaries, effective
as of the Date of Termination (as determined pursuant to Section 6 hereof).
4. Place of Performance. The principal place of employment of the
Executive shall be at the Company's principal executive offices in the
metropolitan St. Paul, Minnesota area, or such other location as may be agreed
to by the Board and the Executive.
5. Compensation and Related Matters.
(a) Base Salary. As compensation for the performance by the
Executive of his duties hereunder, during the Employment Period, the Company
shall pay the Executive a base salary at an annual rate not less than the rate
in effect as of the Effective Date (the base salary, at the rate in effect from
time to time, is hereinafter referred to as the "Base Salary"). The Base Salary
shall be payable in accordance with the Company's normal payroll practices,
shall be reviewed annually and may be increased upon such review.
(b) Incentive Compensation. During the Employment Period, the
Executive shall be eligible to participate in the Company's annual incentive
compensation program (the "Incentive Program") and shall receive such annual
incentive compensation in such amounts and on such terms as shall be determined
from time to time by the Compensation Committee of the Board. Payments of annual
incentive compensation made to the Executive, whether or not pursuant to the
Incentive Program, shall be hereinafter referred to as "Incentive Compensation."
(c) Expenses. During the Employment Period, the Company shall
reimburse the Executive for all reasonable business expenses upon the
presentation of records of such expenses, in accordance with the applicable
policies and procedures of the Company then in force.
(d) Vacation. The Executive shall be entitled to vacation
during the Employment Period in accordance with policies applicable generally to
senior executives of the Company.
(e) Other Benefits. During the Employment Period, the
Executive shall be eligible to participate in all employee benefit, retirement,
welfare and incentive compensation plans and programs (including group life
insurance, medical and dental insurance, and accident and disability insurance)
in which other senior executives of the Company are generally eligible to
participate.
6. Termination. The Executive's employment hereunder, as the case may
be, may be terminated as follows:
(a) Death. The Executive's employment shall terminate upon his
death, and the date of his death shall be the Date of Termination.
(b) Disability. If, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall have been absent from his
duties hereunder on a full-time basis for the entire period of six consecutive
months (which incapacity is determined by a medical doctor mutually agreed to be
the Executive and the Company), and, within thirty (30) days after written
Notice of Termination (as defined in Section 6(f) hereof) is given, shall not
have returned to the performance of his duties hereunder on a full-time basis
("Disability"), the Company may terminate the Executive's employment hereunder.
In this event, the Date of Termination shall be thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
performance of his duties on a full-time basis during such thirty-day period).
(c) Cause. The Company may terminate the Executive's
employment hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder:
(i) upon the Executive's conviction for the
commission of a felony;
(ii) if, in carrying out his duties
hereunder, the Executive engages in conduct that constitutes
willful gross misconduct or willful gross neglect resulting in
material harm to the Company; or
(iii) upon the Executive's material breach
of the Executive's obligations under Section 10 hereof;
provided, however, that Cause shall not exist unless and until the Company has
delivered to the Executive a written Notice of Termination that specifically
identifies the events, actions, or non-actions, as applicable, that the Company
believes constitute Cause hereunder and the Executive has been provided with an
opportunity to be heard (which shall include an opportunity to address the
Compensation Committee of the Board in writing) within fifteen (15) days after
the delivery of such notice. In the event of Cause, the Date of Termination
shall be the date specified in the Notice of Termination.
(d) Good Reason. The Executive may terminate his employment
hereunder within sixty (60) days after the occurrence of one or more of the
following events, without the written consent of the Executive, that has not
been cured within fifteen (15) business days after written notice thereof has
been given by the Executive to the Company ("Good Reason"):
(i) a reduction in the Executive's then
current Base Salary, Incentive Compensation opportunity or the
termination or material reduction of any employee benefit set
forth in Section 5(f) hereof (other than a reduction in
benefits as part of an across-the-board reduction similarly
affecting other senior executive officers of the Company);
(ii) a material diminution in the
Executive's duties, assignment of duties (including reduction
of duties) which are materially inconsistent with the
Executive's position or, the appointment of anyone else to an
executive position at the Company senior to that of the
Executive;
(iii) during the Employment Period, the
relocation of the Executive's office location as assigned to
him by the Company, without his written consent, to a location
more than 50 miles from the metropolitan St. Paul, Minnesota
area;
(iv) a material breach by the Company of
this Agreement; or
(v) the failure of the Company to obtain the
assumption in writing of its obligation to perform this
Agreement by any successor to all or substantially all of the
assets of the Company within 45 days after a merger,
consolidation, sale or similar transaction;
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any act or failure to act constituting Good
Reason hereunder. In the event of a termination for Good Reason, the Date of
Termination shall be the date specified in the Notice of Termination, which
shall be no more than thirty (30) days after the Notice of Termination.
(e) Other Terminations. If the Executive's employment is
terminated hereunder for any reason other than as set forth in Sections 6(a)
through 6(d) hereof, the date on which a Notice of Termination is given or any
later date (within 30 days) set forth in such Notice of Termination shall be the
Date of Termination.
(f) Notice of Termination. Any termination of the
Executive's employment hereunder by the Company or by the Executive (other than
termination pursuant to Section 6(a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with Section 12
hereof. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific termination provision in this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive's employment under
the provision so indicated.
7. Compensation Upon Termination or During Disability.
(a) Disability Period. During any period during the Employment
Period that the Executive fails to perform his duties hereunder as a result of
incapacity due to physical or mental illness ("Disability Period"), the
Executive shall continue to (i) receive his full Base Salary, (ii) remain
eligible to receive Incentive Compensation under Section 5(b) hereof and
equity-based awards under Section 5(c) hereof, and (iii) participate in the
programs described in Section 5(f) hereof (except to the extent such
participation is not permitted under the terms of such programs). Such payments
made to the Executive during the Disability Period shall be reduced by the sum
of the amounts, if any, payable to the Executive at or prior to the time of any
such payment under disability benefit plans of the Company or under the Social
Security disability insurance program, and which amounts were not previously
applied to reduce any such payment.
(b) Death. If the Executive's employment hereunder is
terminated as a result of death, then:
(i) the Company shall pay the Executive's
estate or designated beneficiary, as soon as practicable after
the Date of Termination, any amounts earned, accrued or owing
the Executive hereunder for services prior to the Date of
Termination;
(ii) the Company shall pay the Executive's
estate or designated beneficiary, in accordance with the
Company's normal payroll practice, an amount equal to the
Executive's Base Salary for a period of one year following the
Date of Termination;
(iii) the Company shall pay the Executive's
estate or designated beneficiary, at the time it would
otherwise have been payable, Incentive Compensation for the
year in which the Date of Termination occurs, prorated based
upon the number of days during such year or period that the
Executive was employed by the Company;
(iv) vesting, exercisability and expiration
of all Options and other equity-based awards shall be
determined pursuant to the terms of the applicable grants and
the underlying plan; and
(v) the Company shall have no additional
obligations to the Executive under this Agreement except to
the extent otherwise provided in the applicable plans and
programs of the Company.
(c) Disability. If the Executive's employment hereunder is
terminated as a result of Disability, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any amounts
earned, accrued or owing the Executive hereunder for services
prior to the Date of Termination;
(ii) the Company shall pay the Executive, at
the time it would otherwise have been payable, Incentive
Compensation for the year in which the Date of Termination
occurs, prorated based upon the number of days during such
year or period the Executive was employed by the Company;
(iii) vesting, exercisability and expiration
of all Options and other equity-based awards shall be
determined pursuant to the terms of the applicable grants and
the underlying plan;
(iv) the Company shall have no additional
obligations to the Executive under this Agreement except to
the extent otherwise provided in the applicable plans and
programs of the Company (including any Company long-term
disability plan).
(d) Cause or By Executive other than for Good Reason. If the
Executive's employment hereunder is terminated by the Company for Cause or by
the Executive, other than for Good Reason, then:
(i) the Company shall pay the Executive, as
soon as practicable after the Date of Termination, any amounts
earned, accrued or owing the Executive hereunder for services
prior to the Date of Termination; and
(ii) the Company shall have no additional
obligations to the Executive under this Agreement except to
the extent otherwise provided in the applicable plans and
programs of the Company.
(e) Termination by Company without Cause or by the Executive
with Good Reason. If the Executive's employment hereunder is terminated by the
Company (other than for Cause or Disability) or by the Executive for Good
Reason, then:
(i) the Company shall pay the Executive,
as soon as practicable after the Date of Termination, any
amounts earned, accrued or owing the Executive hereunder for
services prior to the Date of Termination;
(ii) subject to the Executive's continued
compliance with the provisions of Section 10 hereof, the
Company shall pay the Executive, at the time it would
otherwise have been payable, Incentive Compensation for the
year in which the Date of Termination occurs, prorated based
upon the number of days during such year or period the
Executive was employed by the Company;
(iii) subject to the Executive's continued
compliance with the provisions of Section 10 hereof, the
Company shall pay to the Executive over a period equal to the
remainder of the Employment Period (determined immediately
prior to the Date of Termination without any further
extensions) (the "Salary Continuation Period"), and in
accordance with the Company's payroll practices, an aggregate
annual amount equal to the sum of (A) the Executive's Base
Salary (at the annualized rate in effect at the time Notice of
Termination is given) and (B) the Executive's average annual
Incentive Compensation with respect to the three full calendar
years immediately preceding the Date of Termination
(including, if applicable, annual incentive awards received
from 3M for any years within the applicable three-year
period);
(iv) all equity-based awards previously
granted to the Executive shall become fully vested and, with
respect to the Options, fully exercisable, as of the Date of
Termination, and shall remain exercisable pursuant to the
terms of the applicable Option grants;
(v) subject to the Executive's continued
compliance with the provisions of Section 10 hereof, during
the Salary Continuation Period, the Executive shall continue
to participate in all employee welfare benefit plans and
programs in which the Executive was entitled to participate
immediately prior to the Date of Termination in accordance
with the terms of such plans and programs as in effect from
time to time, provided that the Executive's continued
participation is permitted under the general terms and
provisions of such plans and programs. In the event that the
Executive's participation in any such plan or program is
barred, the Company shall arrange to provide the Executive and
his dependents with benefits substantially similar to those
which the Executive and his dependents would otherwise have
been entitled to receive under such plans and programs from
which their continued participation is barred. Benefits
otherwise receivable by the Executive pursuant to this Section
7(e)(v) shall be reduced to the extent comparable benefits are
actually received by or made available to the Executive
without cost during the Salary Continuation Period (and any
such benefits actually received by or made available to the
Executive shall be reported to the Company by the Executive);
(vi) subject to the Executive's continued
compliance with the provisions of Section 10 hereof, during
the Salary Continuation Period, Executive shall be credited
with continued service for purposes of computing the aggregate
benefit earned by the Executive under any defined benefit
pension plans maintained by the Company. To the extent such
service cannot be recognized pursuant to the terms of any such
pension plan, the Executive shall receive a lump sum payment
equal to the present value of the additional benefits which he
would have been entitled to receive under such pension plan
had he remained an employee for the remainder of the Salary
Continuation Period at the Base Salary and Incentive
Compensation levels taken into account under clause (iii)
above; and
(vii) the Company shall have no additional
obligations to the Executive under this Agreement except to
the extent otherwise provided in the applicable plans and
programs of the Company.
8. Gross-Up for Excise Tax. In the event that the Executive becomes
entitled to the payments or benefits pursuant to Section 7 of this Agreement
(the "Severance Payments"), if any of the Severance Payments will be subject to
the excise tax (the "Excise Tax") under Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), the Company shall pay to the Executive,
within five (5) days following the Date of Termination or as soon thereafter as
practicable, an additional amount (the "Gross-Up Payment") such that the net
amount retained by the Executive, after deduction of any Excise Tax on the
Severance Payments and any federal, state and local income tax, employment tax
and Excise Tax upon the payment provided for by this Section 8, shall be equal
to the Severance Payments. The determination of whether an Excise Tax is due,
the amount of the Excise Tax and the amount of the Gross-Up Payment shall be
made by an independent auditor (the "Auditor") jointly selected by the Company
and the Executive and paid by the Company. If the Executive and the Company
cannot agree on the firm to serve as the Auditor, then the Executive and the
Company shall each select one nationally recognized accounting firm and those
two firms shall jointly select the nationally recognized accounting firm to
serve as the Auditor.
9. Mitigation. The Executive shall not be required to mitigate amounts
payable pursuant to Section 7 hereof by seeking other employment or otherwise,
nor, except as otherwise provided in Section 7(e)(v) hereof, shall there be any
offset against such payments on account of (a) any remuneration attributable to
any subsequent employment that he may obtain or (b) any claims the Company may
have against the Executive.
10. Confidential Information, Removal of Documents, Non-Competition.
(a) Confidential Information. During and after the Employment
Period, the Executive shall hold in a fiduciary capacity for the benefit of the
Company all trade secrets, confidential information, and knowledge or data
relating to the Company and the businesses and investments of the Company, which
shall have been obtained by the Executive during the Executive's employment by
the Company and which shall not have been or now or hereafter have become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). Except as may be required or
appropriate in connection with his carrying out his duties under this Agreement,
the Executive shall not, without the prior written consent of the Company or as
may otherwise be required by law or legal process, communicate or divulge any
such trade secrets, information, knowledge or data to anyone other than the
Company and those designated by the Company.
(b) Removal of Documents. All records, files, drawings,
documents, models, equipment, and the like relating to the business of the
Company, which the Executive prepares, uses or comes into contact with shall not
be removed by the Executive from the premises of the Company (without the
written consent of the Company) during or after the Employment Period unless
such removal shall be required or appropriate in connection with his carrying
out his duties under this Agreement, and, if so removed by the Executive, shall
be returned to the Company immediately upon termination of the Executive's
employment hereunder.
(c) Non-Competition. During (i) the Executive's employment
with the Company, (ii) in case of termination by the Company for Cause or by the
Executive without Good Reason, the one (1)-year period after the Executive's
Date of Termination, and (iii) in case of termination by the Company (other than
for Cause or Disability) or termination by the Executive for Good Reason, the
Salary Continuation Period, the Executive (A) shall not engage, anywhere within
the geographical areas in which the Company has conducted its business
operations or provided services as of the date hereof or at any time prior to
the Date of Termination, directly or indirectly, alone, in association with or
as a shareholder, principal, agent, partner, officer, director, employee or
consultant of any other organization, in any business (a "Competitive Business")
which is in competition with the information processing, management and storage
applications, information printing applications, medical and photo imaging
applications or information processor service applications businesses of the
Company; provided, however, that nothing herein shall preclude the Executive
from so engaging in that portion of the business of any enterprise which does
not constitute a Competitive Business; (B) shall not solicit or encourage any
officer, employee or consultant of the Company to leave the employ of the
Company for employment by or with any other employer; (C) shall not divert to
any Competitive Business any customer of the Company; and (D) shall not
disparage the Company or any employee, director or officer of the Company. If,
at any time, the provisions of this Section 10(c) shall be determined to be
invalid or unenforceable, by reason of being vague or unreasonable as to area,
duration or scope of activity, this Section 10(c) shall be considered divisible
and shall become and be immediately amended to only such area, duration and
scope of activity as shall be determined to be reasonable and enforceable by the
court or other body having jurisdiction over the matter; and the Executive
agrees that this Section 10(c) as so amended shall be valid and binding as
though any invalid or unenforceable provision had not been included herein.
(d) Remedies. In the event of a breach or threatened breach of
this Section 10, the Executive agrees that the Company shall be entitled to
injunctive relief in a court of appropriate jurisdiction to remedy any such
breach or threatened breach, the Executive acknowledging that damages would be
inadequate and insufficient. In addition, in the event of any breach of Section
10 by the Executive after the Date of Termination, the Company's obligations to
the Executive under clauses (ii), (iii), (iv) and (vi) of Section 7(e) hereof
shall immediately cease and the Company shall have no further obligation to the
Executive under this Agreement.
(e) Continuing Operation. Any termination of the Executive's
employment or of this Agreement shall have no effect on the continuing operation
of this Section 10.
11. Successors; Binding Agreement.
(a) Company's Successors. No rights or obligations of the
Company under this Agreement may be assigned or transferred by the Company
except that such rights or obligations may be assigned or transferred pursuant
to a merger or consolidation in which the Company is not the continuing entity,
or the sale or liquidation of all or substantially all of the business and/or
assets of the Company, provided that the assignee or transferee is the successor
to all or substantially all of the business and/or assets of the Company and
such assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a matter
of law. The Company will require any such successor to expressly assume and
agree to perform this Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such succession had taken
place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which executes and delivers the agreement provided for in this Section
11 or which otherwise becomes bound by all the terms and provisions of this
Agreement or by operation of law.
(b) Executive's Successors. This Agreement shall not be
assignable by the Executive. This Agreement and all rights of the Executive
hereunder shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. Upon the Executive's death, all amounts to
which he is entitled hereunder, unless otherwise provided herein, shall be paid
in accordance with the terms of this Agreement to the Executive's devisee,
legatee, or other designee or, if there be no such designee, to the Executive's
estate.
12. Notice. For the purposes of this Agreement, notices, demands and
all other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or (unless otherwise
specified) mailed by United States certified or registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
William T. Monahan
2373 Cochrane Drive
Woodbury, Minnesota 55125
If to the Company:
Imation Corp.
One Imation Place
Oakdale, Minnesota 55128
Attention: General Counsel
or to such other address as any party may have furnished to the other in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. Miscellaneous. No provisions of this Agreement may be modified
unless such modification is agreed to in writing signed by the Executive and
such officer of the Company as may be specifically designated for the Company by
the Board. Any waiver or discharge must be in writing and signed by the
Executive or such an authorized officer of the Company, as the case may be. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Minnesota without regard
to its conflicts of law principles.
14. Withholding. Any payments provided for in this Agreement shall be
paid net of any applicable withholding required under federal, state or local
law.
15. Arbitration. Except as otherwise provided herein, all
controversies, claims or disputes arising out of or related to this Agreement
shall be settled under the rules of the American Arbitration Association then in
effect in the City of Saint Paul, in the State of Minnesota, as the sole and
exclusive remedy of either party, and judgment upon such award rendered by the
arbitrator(s) may be entered in any court of competent jurisdiction.
16. Validity. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
18. Entire Agreement. This Agreement between the Company and the
Executive sets forth the entire agreement of the parties hereto in respect of
the subject matter contained herein and supersedes all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by the parties hereto in respect of the
subject matter contained herein; and any prior agreement of the parties hereto
in respect of the subject matter contained herein is hereby terminated and
cancelled.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on this ____day of __________, 1996, to be effective as of the date
first above written.
IMATION CORP.
By: ____________________________________
Name: _____________________________
Title: ____________________________
_____________________________
William T. Monahan
IMATION 1996 EMPLOYEE
STOCK INCENTIVE PROGRAM
SECTION 1 PURPOSE
The purpose of this program is to provide a strong incentive for employees to
remain with Imation and to exert added effort toward its growth and success by
affording these employees an opportunity to acquire or receive shares of
Imation's common stock on terms which are mutually advantageous to the employee
and Imation. It will be the policy of Imation to encourage employee
participation as stockholders, and Imation believes that employee stock
ownership will be an important factor contributing to its growth and progress.
It is intended that the 1996 Employee Stock Incentive Program may provide for
the granting to participants of: (1) stock options, either Incentive Stock
Options as defined in section 422 of the Internal Revenue Code of 1986, as
amended from time to time, or options not so qualified under the foregoing or
similar tax provisions; (2) stock appreciation rights; (3) restricted stock
grants; and (4) other stock awards.
SECTION 2 DEFINITIONS
(a) "Agreement" shall mean the agreement entered into between Imation
and a Participant at the time of the grant of any rights under the 1996 Program,
or other written evidence issued by Imation to the Participant.
(b) "Anniversary Date" shall be the date one year after the Date the
Option is Granted to a Participant.
(c) "Board of Directors" shall mean the Board of Directors of Imation
Corp.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "Committee" shall mean the Compensation Committee established by
the Board of Directors acting without the participation of any member who may
have received a grant or award under the 1996 Program or any other similar plan
or program of Imation (except those limited to participation by non-employee
directors) during the previous one year period, or such other committee of
disinterested administrators established by the Board of Directors to comply
with Rule 16b-3 promulgated by the Securities and Exchange Commission, as
amended from time to time, and section 162(m) of the Code.
(f) "Common Stock" shall mean the common stock, with par value $.01 per
share, of Imation Corp.
(g) "Conditions" shall mean the condition that the Restricted Period
stipulated by the Committee at the time of grants of Restricted Stock shall have
expired or terminated and that any other conditions prescribed by the Committee
regarding a Participant's continued employment by Imation or Imation's
performance during the Restricted Period shall have been satisfied, or any other
conditions stipulated by the Committee with respect to Stock Awards.
(h) "Imation" shall mean Imation Corp. and such subsidiaries or
affiliates as may be designated by the Board of Directors from time to time.
(i) "Date the Option is Granted" shall mean the effective date of the
Agreement.
(j) "Dividend Equivalents" shall mean that sum of cash or Common Stock
of equivalent value equal to the amount of cash or stock dividends paid upon
Common Stock subject to any grants or awards under the 1996 Program, prior to
such time as the Participant otherwise becomes entitled thereto as a holder of
record.
(k) "Fair Market Value" shall mean the average of the high and low
prices for Common Stock as reported on the New York Stock Exchange Composite
Transactions, rounded upwards to the nearest $0.05.
(l) "Incentive Stock Option" shall mean an Option granted to a
Participant under the 1996 Program which is properly qualified under the
provisions of section 422 of the Code of 1986, as amended from time to time and
in effect at the date of the grant.
(m) "Nonqualified Option" shall mean an Option granted to a Participant
under the 1996 Program which is not an Incentive Stock Option or otherwise
qualified under similar tax provisions.
(n) "Option" shall mean a Participant's right to purchase the number of
shares of Common Stock designated in the Agreement, subject to the terms and
conditions of the 1996 Program and Agreement, and the term shall include both
Incentive Stock Options and Nonqualified Options.
(o) "Option Period" shall mean the shorter of (i) the ten-year period
commencing with the Date the Option is Granted, or (ii) the period commencing
with the Date the Option is Granted and terminating pursuant to Section 10
hereof.
(p) "Participant" shall mean any employee of Imation who is designated
as a Participant by the Committee.
(q) "1996 Program" shall mean the Imation Corp. 1996 Employee Stock
Incentive Program.
(r) "Program Effective Date" shall mean the date fixed by the Board of
Directors upon which the 1996 Program becomes effective after approval by 3M, as
sole stockholder of Imation.
(s) "Restricted Period" shall mean that period of time determined by
the Committee and provided in the applicable Conditions stated in the Restricted
Stock Agreement of a Participant regarding the incremental or complete lapse of
the restrictions.
(t) "Restricted Stock" shall mean that Common Stock granted to a
Participant in a Restricted Stock Agreement and subject to the Conditions, as so
determined by the Committee, during the Restricted Period of the grant.
(u) "Retirement Date" shall be the date a Participant retires from
employment with Imation, pursuant to any pension plan of Imation.
(v) "Stock Appreciation Right" shall mean a Participant's right to
receive an amount of cash or shares of Common Stock measured by the appreciation
in the Fair Market Value of the Common Stock to which the right relates on the
date of exercise above the Fair Market Value of such Common Stock on the date of
the initial grant.
(w) "Stock Award" shall mean any award of Common Stock under the
Program and may include Restricted Stock awards or other awards of Common Stock
as determined to be appropriate by the Committee.
SECTION 3 PARTICIPATION
(a) The Committee shall determine and designate from time to time those
employees of Imation who are to be granted Options, Stock Appreciation Rights,
and/or Stock Awards and thereby become Participants and the number of shares to
be the subject of the grant to each Participant.
(b) The maximum number of shares of Common Stock which may be made
subject to Option or Stock Appreciation Right grants with regard to any one
Participant under the 1996 Program (including Progressive Stock Options granted
to such Participant pursuant to Section 4(e)) shall not exceed in the aggregate
1,000,000 shares, subject to adjustment pursuant to Section 13.
SECTION 4 OPTIONS
(a) Options granted by the Committee shall be designated as Incentive
Stock Options or Nonqualified Options and shall be evidenced by Agreements in
such forms as the Committee shall approve, which Agreements shall comply with
and be subject to the terms and conditions of the 1996 Program.
(b) Incentive Stock Options granted from time to time hereunder shall
have a purchase price equal to one hundred percent (100%) of the Fair Market
Value of Common Stock on the Date the Option is Granted. Nonqualified Options
may have a purchase price equal to or more or less than one hundred percent
(100%) of Fair Market Value, as determined by and at the sole discretion of the
Committee, provided that such purchase price shall be clearly set forth in the
Agreement presented to the Participant.
(c) Exercise. A Participant may purchase the total number of shares
under option after the Anniversary Date or at such other date as determined by
the Committee and clearly set forth in the Agreement, except that Progressive
Stock Options may be exercised six months after the date of grant. This right to
purchase may be exercised as to any shares not previously purchased during the
remainder of the Option Period. In order to exercise an Option, a Participant
shall give written notice to the Office of the Treasurer at Oakdale, Minnesota,
together with full payment. The exercise of Nonqualified Options may be made
subject to such additional conditions and restrictions as the Committee, in its
sole discretion, shall determine. Such restrictions, if any, will be clearly set
forth in the Agreement applicable to such Nonqualified Options.
(d) Payment. No shares of Common Stock shall be issued to any
Participant upon exercise of an Option until full payment of the purchase price
has been made to Imation and the Participant has remitted to Imation the
required federal and state withholding taxes, if any. A Participant shall obtain
no rights as a stockholder until certificates for such stock are issued to the
Participant. Payment of the purchase price or applicable withholding taxes, if
any, may be made in whole, or in part, in shares of Common Stock, pursuant to
such terms and conditions as may be established from time to time by the
Committee. If payment is made in shares of Common Stock, such stock shall be
valued at one hundred percent (100%) of Fair Market Value on the day a
Participant exercised his or her Option or, as regards a withholding tax, such
other date when the tax withholding obligation becomes due. A Participant need
not surrender shares of Common Stock as payment; and Imation may, upon the
giving of satisfactory evidence of ownership of said Common Stock by
Participant, deliver the appropriate number of additional shares of Common Stock
reduced by the number of shares required to pay the purchase price and any
applicable withholding taxes. Such form of evidence shall be determined by the
Committee.
(e) Progressive Stock Options. For the purpose of promoting the
retention of Common Stock received upon the exercise of Nonqualified Options and
encouraging Participants to exercise Nonqualified Options early in the Option
Period, the Committee may, in its sole discretion, grant Nonqualified Options
("Progressive Stock Options") to a Participant who exercises Nonqualified
Options and makes payment of all or part of the purchase price and withholding
taxes, if any, in Common Stock, equal in number to shares of Common Stock
utilized by the Participant to effect payment of the purchase price and
withholding taxes, if any. Progressive Stock Options, if granted by the
Committee, will have a purchase price equal to one hundred percent (100%) of the
Fair Market Value on the date of exercise of Nonqualified Options and will be
exercisable no sooner than six months from the date of grant and for an
additional time period expiring at the end of the Option Period of the
Nonqualified Option exercised. Notwithstanding the foregoing, the Committee may
grant Nonqualified Options in any manner provided in this Section 4, and
Participants will have no rights to receive Nonqualified Options or Progressive
Stock Options, except to the extent determined by the Committee in its sole
discretion.
SECTION 5 STOCK APPRECIATION RIGHTS
(a) Stock Appreciation Rights granted by the Committee shall be
evidenced by Agreements in such forms as the Committee shall approve, which
Agreement shall comply with and be subject to the terms and conditions of the
1996 Program.
(b) Exercise. Stock Appreciation Rights shall be exercisable at such
time or times consistent with the terms and conditions determined by the
Committee and set forth in the Agreement presented to the Participant. No Stock
Appreciation Right shall, in any event, be exercisable during the first six
months from the date of grant of such Stock Appreciation Right, except as
provided in Section 10 of this 1996 Program. In order to exercise his or her
Stock Appreciation Right, a Participant shall give written notice to the Office
of the Treasurer, at Oakdale, Minnesota.
(c) Term. The term of a Stock Appreciation Right shall be fixed by the
Committee and set forth in the Agreement evidencing the Stock Appreciation
Right, but no Stock Appreciation Right shall be exercisable more than ten years
after the date of grant.
SECTION 6 RESTRICTED STOCK
(a) Restricted Stock granted by the Committee shall be designated as
such and shall be evidenced by Agreements in such forms as the Committee shall
approve, which Agreements shall comply with and be subject to the terms and
conditions of this 1996 Program.
(b) Restricted Stock, in addition to the Conditions stated and
determined by the Committee in the Agreement, may or may not have a stated
purchase price. The purchase price determined by the Committee, in its sole
discretion, if any, shall be clearly set forth in the Agreement presented to a
Participant, along with any and all other applicable Conditions.
(c) If the Committee shall fix a purchase price for Restricted Stock in
addition to other Conditions therefor, no shares of Common Stock shall be issued
upon the satisfaction of Conditions until full payment has been made to Imation
as provided in the foregoing paragraph (d) of Section 4, subject to such
restrictions regarding payments in shares of Common Stock as the Committee may
determine from time to time. Similarly, any applicable withholding taxes may be
paid upon the lapse of restrictions upon Restricted Stock by the withholding of
shares of Common Stock otherwise deliverable, in accordance with the valuation
procedures set forth in Section 4(d) of this 1996 Program.
(d) At the time a grant of Restricted Stock is made, the Committee, in
its sole discretion, shall establish a Restricted Period and such additional
Conditions as may be deemed appropriate for the incremental lapse or complete
lapse of restrictions with respect to all or any portion of the shares of Common
Stock represented by the Restricted Stock. The Committee may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any Conditions
with respect to all or any portion of the shares of Common Stock represented by
the Restricted Stock. Notwithstanding the foregoing, all restrictions set forth
in the Conditions shall lapse or terminate with respect to all Common Stock
represented in the grant of Restricted Stock in the event of the death or total
disability of a Participant (as defined in Section 10 below) or the occurrence
of a Change in Control (as defined in Section 15 below).
(e) A stock certificate for the number of shares of Common Stock
represented in the grant of Restricted Stock to a Participant shall be
registered in the Participant's name but shall be held in custody by Imation for
the Participant's account. The Participant shall generally have the rights and
privileges of a stockholder as to such Restricted Stock, including the right to
vote such Restricted Stock, except that, subject to the provisions of Section 10
below, the following restrictions shall apply: (i) the Participant shall not be
entitled to delivery of the certificate until the expiration or termination of
the Restricted Period, the satisfaction of any other Conditions prescribed by
the Committee, if any, and the payment in full of the purchase price, if any;
(ii) none of the Restricted Stock may be sold, transferred, assigned, pledged,
or otherwise encumbered or disposed of during the Restricted Period and until
the satisfaction of other Conditions prescribed by the Committee, if any; and
(iii) all of the Restricted Stock shall be forfeited and all rights of the
Participant shall terminate without further obligation on the part of Imation
unless the Participant shall have remained a regular full-time employee of
Imation, or any of its subsidiaries or affiliates until the expiration or
termination of the Restricted Period and the satisfaction of other Conditions
prescribed by the Committee, if any.
(f) At the sole discretion of the Committee, Dividend Equivalents may
be either currently paid or withheld by Imation for the Participant's account,
and interest may be paid on the amount of cash dividends withheld at a rate and
under such terms as determined by the Committee. Cash or stock dividends so
withheld by the Committee shall not be subject to forfeiture. Upon the
forfeiture of any Restricted Stock, such shares of Common Stock represented in
the grant of Restricted Stock shall be transferred to Imation without further
action by the Participant.
(g) Upon the expiration or termination of the Restricted Period and the
satisfaction of other Conditions prescribed by the Committee, if any, or at such
earlier time as provided for in Section 10 below, the restrictions applicable to
the Restricted Stock shall lapse and a stock certificate for the number of
shares of Common Stock represented in the grant of Restricted Stock shall be
delivered to the Participant or the Participant's beneficiary, representative,
or estate, as the case may be, free of all restrictions, except any that may be
imposed by law, subject as well to the obligation of the Participant to pay the
purchase price and applicable withholding taxes, if any, as provided in Section
4(d) herein. Unless otherwise instructed by a Participant by an irrevocable,
written instruction received by Imation at least six months prior to the date
that applicable restrictions lapse, Imation shall automatically withhold as
payment the number of shares of Common Stock, determined by the Fair Market
Value at the date of the lapse, required to pay withholding taxes, if any.
Imation shall not be required to deliver any fractional share of Common Stock
but will pay, in lieu thereof, the Fair Market Value (as of the date the last
Conditions lapse) of such fractional share.
SECTION 7 OTHER STOCK AWARDS
(a) The Committee may, in its sole discretion, grant Stock Awards other
than Restricted Stock grants, and such Stock Awards may be granted singly, in
combination or in tandem with, in replacement of, or as alternatives to grants
or rights under this Program or any other employee or compensation plan of
Imation, including the plan of any acquired entity.
(b) If the Committee shall stipulate Conditions with respect to such
Stock Awards, the Conditions will be set forth in Agreements evidencing the
grant, and such Agreements shall comply with and be subject to the terms and
conditions of this 1996 Program.
(c) If Conditions with respect to such Stock Awards shall require the
surrender or forfeiture of other grants or rights under this 1996 Program or any
other employee or compensation plan of Imation, then the Participant shall not
have any rights under such Stock Awards until the grants or rights exchanged
have been fully and effectively surrendered or forfeited.
SECTION 8 ADMINISTRATION
The 1996 Program shall be administered under the direction of the
Committee. In administering the 1996 Program, it will be necessary to follow
various laws and regulations. It may be necessary from time to time to change or
waive requirements of the 1996 Program to conform with the law, to meet special
circumstances not anticipated or covered in the 1996 Program, or to carry on
successful operation of the 1996 Program, and in connection therewith, the
Committee shall have the full power and authority to:
(a) Prescribe, amend, and rescind rules and regulations relating to the
1996 Program, establish procedures deemed appropriate for its administration,
and make any and all other determinations not herein specifically authorized
which may be necessary or advisable for its effective administration;
(b) Make any amendments to or modifications of the 1996 Program which
may be required or necessary to make the 1996 Program set forth herein comply
with the provisions of any laws, federal or state, or any regulations issued
thereunder, and to cause Imation at its expense to take any action related to
the 1996 Program which may be required under such laws or regulations.
(c) Contest on behalf of the Participants or Imation, at the sole
discretion of the Committee and at the expense of Imation, any ruling or
decision on any issue related to the 1996 Program, and conduct any such contest
and any resulting litigation to a final determination, ruling, or decision.
SECTION 9 SHARES SUBJECT TO THE 1996 PROGRAM
(a) The Committee may from time to time provide for Option, Stock
Appreciation Right, or Stock Award grants to the extent that such grants do not
exceed an aggregate total of 6,000,000 shares of Common Stock, subject to
adjustment pursuant to Section 13. Shares shall be made available in the
discretion of the Board of Directors from authorized but unissued shares,
treasury shares, or Imation may reacquire shares from time to time for sale
under the 1996 Program. No fractional shares shall be issued under the 1996
Program. Cash may be paid in lieu of any fractional shares issuable under the
1996 Program.
(b) In instances where a Stock Appreciation Right or other award under
the 1996 Program is settled in cash or any form other than Common Stock, then
the shares of Common Stock covered by these settlements shall remain available
for issuance of rights under the 1996 Program, to the extent permitted under
Rule 16b-3 as promulgated by the Securities and Exchange Commission. Further,
the payment of stock dividends and Dividend Equivalents settled in Common Stock
in conjunction with outstanding awards shall not be counted against the shares
available for issuance. Any shares that are issued by Imation through the
assumption by Imation of, or in substitution for, outstanding awards previously
granted by an acquired entity shall not be counted against the shares available
for issuance under the 1996 Program. In the event that the Securities and
Exchange Commission determines that any of the foregoing shares of Common Stock
must be counted, then the shares of Common Stock otherwise provided in the
foregoing not to be counted shall be counted against the aggregate limit of
shares under the 1996 Program, but only to the minimum amount necessary to
comply with the determination by the Securities and Exchange Commission.
(c) In instances where Options, Stock Appreciation Rights, or Stock
Awards expire, terminate, or are forfeited or canceled for whatever reasons,
then the shares of Common Stock covered by these previously outstanding awards
shall be returned to the unutilized, authorized shares available for further
granting of rights under the 1996 Program.
SECTION 10 TERMINATION OF RIGHTS UNDER THE 1996 PROGRAM
The following provisions of Section 10 shall apply to all grants under the 1996
Program unless otherwise provided in the Agreements or as determined by the
Committee:
(a) Participation hereunder shall cease and all rights under the 1996
Program are automatically forfeited by the Participant upon the date of
termination of employment for any cause other than: (i) retirement under a
pension plan maintained by Imation, (ii) because of physical or mental
disability as recognized under a plan maintained by Imation, or (iii) death.
(b) If a Participant retires pursuant to a pension plan maintained by
Imation or changes employment status as a result of physical or mental
disability, without having fully exercised an Option or Stock Appreciation
Right, the Participant shall be entitled, within the remaining Option Period or
term of the Stock Appreciation Right, as provided in the applicable Agreement,
even though subsequent to the Participant's Retirement Date (but not more than
ten years from the date of Agreement), to exercise his or her Option or Stock
Appreciation Right and, in case of Options, to purchase (i) the number of shares
which could have been purchased on the Retirement Date or date of changed
employment status, plus (ii) the number of additional shares which the
Participant would be entitled to purchase on the next Anniversary Date; or, in
the case of Stock Appreciation Rights, to receive the full amount of
appreciation for all issued Stock Appreciation Rights, regardless of whether yet
exercisable. Incentive Stock Options, if not exercised within three months (one
year in the case of a Participant who was disabled at retirement) following
Participant's Retirement Date, shall fail to qualify for treatment under Section
422 of the Code, except in the case where a Participant dies within the three
month period (one year period in the case of a disabled person) following such
Retirement Date, in which event Participant's estate or representative shall
have two years to exercise Options as Incentive Stock Options. If a Participant
who has thus retired dies prior to the end of such remaining Option Period or
term of the Stock Appreciation Right, without having yet fully exercised an
Option or Stock Appreciation Right, the Option or Stock Appreciation Right may
be exercised within two years after the date of his or her death (not more than
ten years from the date of the Agreement) by the Participant's estate or by a
person who acquired the right to exercise such Option or Stock Appreciation
Right by bequest or inheritance or by reason of the death of the Participant.
(c) If the Participant, prior to such Participant's Retirement Date,
dies without having fully exercised an Option or Stock Appreciation Right, the
Option or Stock Appreciation Right may be exercised within two years following
his or her death (but not more than ten years from the date of the Agreement) by
the Participant's estate or by a person who acquired the right to exercise such
Option or Stock Appreciation Right by bequest or inheritance or by reason of the
death of the Participant, and such representative may, in the case of Options,
purchase (i) the number of shares which the decedent could have purchased on the
date of death, plus (ii) the number of shares which the decedent would have been
entitled to purchase on the next Anniversary Date, or, in the case of Stock
Appreciation Rights, may receive the full amount of appreciation for all issued
Stock Appreciation Rights at the date of Participant's death, regardless of
whether yet exercisable.
(d) Notwithstanding paragraph (a) of this section, if the Participant
is terminated without having fully exercised an Option or Stock Appreciation
Right under circumstances which the Committee believes to warrant special
consideration and the Committee has determined that the Participant's rights
will not be forfeited at the date of termination, the Option or Stock
Appreciation Right may be exercised within two years following his or her
termination of employment (but not more than ten years from the date of the
Agreement) for (i) the number of shares which the Participant could have
purchased or received on the date of termination of employment, plus (ii) the
number of additional shares which the Participant would have been entitled to
purchase on the next Anniversary Date.
(e) If the Participant dies, either prior to or following his or her
Retirement Date, or becomes totally disabled because of a physical or mental
disability but before the Stock Aware has expired, and has not yet received the
stock certificate for the shares of Common Stock represented by the grant of
Restricted Stock or other Stock Award, then all restrictions imposed by the
Restricted Period or other Conditions prescribed by the Committee, if any, shall
automatically lapse and a stock certificate shall be delivered to the
participant or the Participant's beneficiary, representative, or estate, as the
case may be, as provided in Section 6(g) herein.
SECTION 11 DELIVERY OF STOCK CERTIFICATES
Imation will have delivered to Participants certificates representing
all stock purchased or received hereunder promptly after the receipt of notice
of exercise of an Option or Stock Appreciation Right, or the complete
satisfaction of Conditions applicable to Stock Awards.
Imation shall not, however, be required to issue or deliver any
certificates for its Common Stock prior to the admission of such stock to
listing on any stock exchange on which stock may at that time be listed or
required to be listed, or prior to registration under the Securities Act of
1933. The Participant shall have no interest in Common Stock until certificates
for such stock are issued or transferred to the Participant and the Participant
becomes the holder of record.
SECTION 12 TRANSFERABILITY
Rights and grants under the 1996 Program may not be assigned,
transferred (other than a transfer by will or the laws of descent and
distribution as provided in Section 10), pledged, or hypothecated (whether by
operation of law or otherwise), and shall not be subject to execution,
attachment, or similar process. Any attempted assignment, transfer (other than a
transfer by will or laws of descent and distribution), pledge, hypothecation,
other disposition of the rights and grants under the 1996 Program, or levy of
attachment or similar process upon the Option, Stock Appreciation Right, or
Stock Award shall constitute an immediate cancellation of the rights and grants
under the 1996 Program.
SECTION 13 STOCK DIVIDEND, STOCK SPLIT,
REDUCTION IN SHARES, MERGER, OR CONSOLIDATION
If a record date for a stock dividend, split, or reduction in the
number of shares of stock should occur after the Program Effective Date during
the period of continued exercisability of any rights under the 1996 Program,
appropriate adjustment shall be made to give effect thereto on an equitable
basis.
If Imation is merged into or consolidated with one or more corporations
during the period of continued exercisability of any rights under the 1996
Program, appropriate adjustments shall be made to give effect thereto on an
equitable basis in terms of issuance of shares of the corporation surviving the
merger or the consolidated corporation, as the case may be. In the event of a
reclassification or stock split after the Program Effective Date, the absolute
numbers of shares subject to grants under the 1996 Program shall be
appropriately adjusted.
In the event that within such period there shall be any change in the
number or kind of the issued shares of stock (of the class optioned or granted
hereunder), or of any issued capital stock or other securities into which such
shares shall have been converted, or for which they shall have been exchanged,
and such change or transaction shall occur otherwise than through a stock
dividend or split-up or combination of shares of stock of Imation, or if there
is a recapitalization or other transaction involving a change in Imation's
capital structure, then if (and only if) the Committee shall, in its sole
discretion, determine that such change equitably requires an adjustment in the
number or kind or purchase price of shares of stock then subject to rights under
this 1996 Program, such adjustment as the Committee shall, in its sole
discretion, determine is equitable, shall be made and shall be effective and
binding for all purposes of such outstanding rights.
SECTION 14 WITHDRAWAL, AMENDMENT, OR
TERMINATION OF THE 1996 PROGRAM
The 1996 Program shall terminate five (5) years after the date of the
initial grants or awards under the 1996 Program, and no rights under the 1996
Program shall be granted after the date of termination. Such termination shall
not adversely affect rights under the 1996 Program theretofore granted.
The Board of Directors may at any time withdraw or amend the 1996
Program, except that there shall be no withdrawal or amendment which shall
adversely affect rights under the 1996 Program theretofore granted, and no
amendment shall be made without prior approval of the stockholders if
stockholder approval is necessary to comply with section 16(b) of the Securities
Exchange Act of 1934, as amended.
SECTION 15 CHANGE IN CONTROL
(a) For purposes of this Section 15, the following words and phrases
shall have the meanings indicated below, unless the context clearly indicates
otherwise:
(i) "Person" shall have the meaning associated with that term
as it is used in Sections 13(d) and 14(d) of the Act.
(ii) "Affiliates and Associates" shall have the meanings
assigned to such terms in Rule 12b-2 promulgated under Section 12 of
the Act.
(iii) "Act" means the Securities Exchange Act of 1934.
(iv) "Continuing Directors" shall have the meaning assigned to
such term in Article Thirteenth of Imation's Restated Certificate of
Incorporation.
(b) Notwithstanding any other provision of this 1996 Program to the
contrary, all outstanding Options and Stock Appreciation Rights shall (i) become
immediately exercisable in full for the remainder of the respective Option
Period upon the occurrence of a Change in Control of Imation, and (ii) remain
exercisable in full for a minimum period of six months following the Change in
Control; provided, however, that in no event shall any Option or Stock
Appreciation Right be exercisable more than ten years from the date of the
Agreement.
(c) Similarly, all restrictions regarding the Restricted Period or the
satisfaction of other Conditions prescribed by the Committee, if any, with
respect to grants of Stock Awards, shall automatically lapse, expire, and
terminate and the Participant shall be immediately entitled to receive a stock
certificate for the number of shares of Common Stock represented in the grant of
Stock Awards as provided in Section 6(g) herein upon the occurrence of a Change
in Control.
(d) For purposes of this Section 15, a Change in Control of Imation
shall be deemed to have occurred if:
(i) any Person (together with its Affiliates and Associates),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of Imation, is or becomes the "beneficial owner"
(as that term is defined in Rule 13d-3 promulgated under the Act),
directly or indirectly, of securities of Imation representing thirty
percent (30%) or more of the combined voting power of Imation's then
outstanding securities, unless a majority of the Continuing Directors
of Imation's Board of Directors prior to that time have determined in
their sole discretion that, for purposes of this 1996 Program, a Change
in Control of Imation has not occurred; or
(ii) the Continuing Directors of Imation's Board of Directors
shall at any time fail to constitute a majority of the members of such
Board of Directors.
(e) In the event that the provisions of this Section 15 result in
"payments" that are finally determined to be subject to the excise tax imposed
by Section 4999 of the Code, Imation shall pay to each Participant an additional
amount such that the net amount retained by such Participant following
realization of all compensation under the 1996 Program that resulted in such
"payments," after allowing for the amount of such excise tax and any additional
federal, state, and local income and employment taxes paid on the additional
amount, shall be equal to the net amount that would otherwise have been retained
by the Participant if there were no excise tax imposed by Section 4999 of the
Code.
(f) Imation shall pay to each Participant the amount of all reasonable
legal and accounting fees and expenses incurred by such Participant in seeking
to obtain or enforce his or her rights under this Section 15, or in connection
with any income tax audit or proceeding to the extent attributable to the
application of Section 4999 of the Code to the payments made pursuant to this
Section 15, unless a lawsuit commenced by the Participant for such purposes is
dismissed by the court as being spurious or frivolous. Imation shall also pay to
each Participant the amount of all reasonable tax and financial planning fees
and expenses incurred by such Participant in connection with such Participant's
receipt of payments pursuant to this Section 15.
SECTION 16 DIVIDENDS AND DIVIDEND EQUIVALENTS
The Committee may provide that awards under the 1996 Program earn
dividends or Dividend Equivalents. Such Dividend Equivalents may be paid
currently or may be credited to a Participant's account. In addition, dividends
paid on outstanding awards or issued shares may be credited to a Participant's
account rather than paid currently. Any crediting of dividends or Dividend
Equivalents may be subject to such restrictions and conditions as the Committee
may establish, including reinvestment in additional shares or share equivalents.
SECTION 17 DEFERRALS AND SETTLEMENTS
Payment of awards may be in the form of cash, Common Stock, other
awards or combinations thereof as the Committee shall determine, and with such
other restrictions as it may impose. The Committee may also require or permit
Participants to elect to defer the issuance of shares or the settlement of
awards in cash under such rules and procedures as it may establish under the
1996 Program. It may also provide that deferred settlements include the payment
or crediting of interest on the deferral amounts denominated in cash or the
payment or crediting of Dividend Equivalents on deferred settlements denominated
in shares.
SECTION 18 OTHER IMATION BENEFIT AND
COMPENSATION PROGRAMS
Unless otherwise specifically determined by the Committee, settlements
of awards received by Participants under the 1996 Program shall not be deemed a
part of a Participant's regular, recurring compensation for purposes of
calculating payments or benefits under any Imation benefit plan, severance
program, or severance pay law of any country. Further, Imation may adopt other
compensation programs, plans, or arrangements as it deems appropriate or
necessary.
SECTION 19 UNFUNDED PLAN
Unless otherwise determined by the Committee, the 1996 Program shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The 1996 Program shall not establish any fiduciary relationship
between Imation and any Participant or other person. To the extent any person
holds any rights by virtue of a grant under the 1996 Program, such right (unless
otherwise determined by the Committee) shall be no greater than the right of an
unsecured general creditor of Imation.
SECTION 20 FUTURE RIGHTS
No person shall have any claim or rights to be granted an award under
the 1996 Program, and no Participant shall have any rights under the 1996
Program to be retained in the employ of Imation.
IMATION CASH BALANCE PENSION PLAN
Effective July 1, 1996
IMATION CASH BALANCE PENSION PLAN
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TABLE OF CONTENTS
PAGE
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PREAMBLES ...................................................................................................... 1
SECTION 1. INTRODUCTION ......................................................................................... 2
1.1. Definitions
1.1.1. Account Balance
1.1.2. Accrued Benefit
1.1.3. Actuarial Equivalent
1.1.4. Actuary
1.1.5. Affiliate
1.1.6. Age
1.1.7. Beneficiary
1.1.8. Change in Control
1.1.9. Code
1.1.10. Disability
1.1.11. Earliest Retirement Date
1.1.12. Effective Date
1.1.13. Eligible Earnings
1.1.14. Employer
1.1.15. Employment Commencement Date
1.1.16. ERISA
1.1.17. Fund
1.1.18. Hour of Service
1.1.19. Imation
1.1.20. Investment Manager
1.1.21. Interest Percentage
1.1.22. Interest Credits
1.1.23. Joint and 50% Survivor Annuity
1.1.24. Joint Annuitant
1.1.25. Life and Five Year Certain Annuity
1.1.26. Life Only Annuity
1.1.27. Normal Retirement Age
1.1.28. Normal Retirement Date
1.1.29. Pay Credit
1.1.30. PRAC
1.1.31. PRC
1.1.32. Participant
1.1.33. Pension and Retirement Administrative
Committee ("PRAC")
1.1.34. Pension and Retirement Committee ("PRC")
1.1.35. Period of Service
1.1.36. Period of Severance
1.1.37. Plan
1.1.38. Plan Document
1.1.39. Plan Year
1.1.40. Principal Sponsor
1.1.41. Recognized Employment
1.1.42. Reemployment Commencement Date
1.1.43. Severance from Service Date
1.1.44. Trust Agreement
1.1.45. Termination of Employment
1.1.46. Trustee
1.1.47. Vested
1.1.48. Vesting Service
1.2. Participant's Account Balance
1.2.1. Initial Account Balance
1.2.2. Pay Credit
1.2.3. Interest Credits
1.3. Rules of Interpretation
SECTION 2. ELIGIBILITY AND PARTICIPATION ........................................................................ 12
2.1. Eligibility Rule
2.2. Participants Must Furnish Data
2.3. Effect of Misstatements by Participant
2.4. Additional Benefits for Certain Former 3M Employees
SECTION 3. RETIREMENT INCOME BENEFITS ........................................................................... 13
3.1. Normal Retirement Benefit
3.1.1. When Available
3.1.2. Amount
3.1.3. Form of Benefit
3.2. Early Retirement Benefit
3.2.1. When Available
3.2.2. Amount
3.2.3. Form of Benefit
3.3. Vested Benefit
3.3.1. When Available
3.3.2. Amount
3.3.3. Form of Benefit
3.4. Disability Rules
3.4.1. Continuing Pay Credits
3.4.2. Continuing Interest Credits
3.5. General Benefits Rules
3.5.1. Nonduplication of Benefits
3.5.2. Effect of Termination Before Vesting --
Forfeiture and Restoration
3.6. Facility of Payment
3.7. Limitation on Benefits
3.8. Suspension of Benefits
3.8.1. Reemployment Before Normal Retirement Date
3.8.2. Reemployment After Normal Retirement Date
3.8.3. Reemployment Before Benefits Commence
3.8.4. Continued Employment After Normal Retirement Date
3.8.5. Procedural Requirements
3.8.6. Offsets of Suspendible Amounts
3.8.7. Minimum Threshold for Suspension
3.9. No Payments Before January 1, 1997
SECTION 4. OPTIONAL FORMS OF RETIREMENT BENEFIT ................................................................. 18
4.1. Optional Forms Available
4.1.1. Forms of Retirement Benefit
4.1.2. Limitation on Lump Sums for Certain Highly
Compensated Employees
4.1.3. Effect of Lump Sum on Rehired Employee
4.2. Presumptive Forms
4.3. Participant's Election Rights
4.4. Direct Rollovers
SECTION 5. DEATH BENEFITS ....................................................................................... 21
5.1. Death After Benefit Commencement
5.2. Death Before Benefit Commencement
5.2.1. When Available
5.2.2. Surviving Spouse
5.2.3. Nonspouse Beneficiaries
5.3. Designation of Beneficiaries
5.3.1. Right To Designate
5.3.2. Spousal Consent
5.3.3. Failure of Designation
5.3.4. Disclaimers by Beneficiaries
5.3.5. Definitions
5.3.6. Special Rules
SECTION 6. SPENDTHRIFT PROVISIONS ............................................................................... 25
SECTION 7. AMENDMENT AND TERMINATION ............................................................................ 26
7.1. Amendment
7.2. Discontinuance of Contributions and Termination of Plan
7.3. Merger or Spinoff of Plans
7.3.1. In General
7.3.2. Limitations
7.3.3. Beneficiary Designations
7.4. Adoption by Business Affiliates
7.4.1. Adoption by Consent
7.4.2. Procedure for Adoption
7.4.3. Effect of Adoption
7.4.4. Adoption by Subsidiary
SECTION 8. FUNDING OF THE PLAN .................................................................................. 28
8.1. Concerning the Trustee
8.2. Cost of Plan
8.3. Contributions Not To Be Diverted
SECTION 9. DETERMINATIONS-- RULES AND REGULATIONS ............................................................... 29
9.1. Determinations
9.2. Rules and Regulations
9.3. Method of Executing Instruments
9.4. Claims Procedure
9.4.1. Original Claim
9.4.2. Claims Review Procedure
9.4.3. General Rules
9.5. Information Furnished by Participants
SECTION 10. PLAN ADMINISTRATION .................................................................................. 31
10.1. Principal Sponsor
10.1.1. Officers
10.1.2. Chief Executive Officer
10.1.3. Board of Directors
10.2. Committees
10.2.1. PRC -- Appointment and Removal
10.2.2. PRC -- Duties
10.2.3. PRAC -- Appointment and Removal
10.2.4. PRAC -- Duties
10.2.5. Automatic Removal
10.2.6. Majority Decisions
10.3. Limitation on Authority
10.3.1. Fiduciaries Generally
10.3.2. Trustee
10.4. Conflict of Interest
10.5. Dual Capacity
10.6. Administrator
10.7. Named Fiduciaries
10.8. Service of Process
10.9. Administrative Expenses
10.10. IRS Qualification - Type of Plan
SECTION 11. IN GENERAL ........................................................................................... 35
11.1. Disclaimers
11.1.1. Effect on Employment
11.1.2. Sole Source of Benefits
11.1.3. Co-Fiduciary Matters
11.2. Reversion of Fund Prohibited
11.3. Contingent Top Heavy Plan Rules
</TABLE>
APPENDIX A -- LIMITATION ON BENEFITS .................................... A-1
APPENDIX B -- CONTINGENT TOP HEAVY PLAN RULES ........................... B-1
APPENDIX C -- QUALIFIED DOMESTIC RELATIONS ORDERS ....................... C-1
APPENDIX D -- FACTORS TO CONVERT ACCOUNT BALANCE TO ANNUAL ANNUITY ...... D-1
APPENDIX E -- HIGHLY COMPENSATED EMPLOYEE ............................... E-1
APPENDIX F -- ADDITIONAL BENEFITS FOR GRANDFATHERED 3M PARTICIPANTS .... F-1
IMATION CASH BALANCE PENSION PLAN
Effective as of July 1, 1996, Imation Corp. ( Imation"), a spin-off"
from Minnesota Mining and Manufacturing Company ( 3M"), hereby establishes the
Imation Cash Balance Pension Plan (the "Plan").
SECTION 1
INTRODUCTION
1.1. DEFINITIONS. When the following terms are used herein with initial capital
letters, they shall have the following meanings:
1.1.1. ACCOUNT BALANCE -- a single lump sum dollar amount
(sometimes called a Personal Retirement Account" or PRA") determined for each
Participant as provided in Section 1.2.
1.1.2. ACCRUED BENEFIT -- the monthly amount of retirement
income payable at Normal Retirement Date in the Life and Five Year Certain
Annuity form determined for a Participant as of a specified date (the
determination date") which shall equal one-twelfth (1/12th) of the annual amount
determined by adjusting such Participant's Account Balance as of the
determination date as follows:
(a) ANNUAL AMOUNT IF PARTICIPANT IS AGE 65 OR OVER. If
the Participant's Age as of the determination date
is 65 or over, such Account Balance shall be
divided by the factor from Appendix D to this Plan
Document for the Life and Five Year Certain Annuity
form for the Participant's Age.
(b) ANNUAL AMOUNT IF PARTICIPANT IS UNDER AGE 65. If
the Participant's Age as of the determination date
is less than 65, such Account Balance shall be
increased by assumed Interest Credits projected to
the Participant's Age 65 at the Interest Percentage
in effect on the determination date and such
increased Account Balance shall then be divided by
the factor from Appendix D to this Plan Document
for the Life and Five Year Certain Annuity form for
Age 65 (such projected increase of the Account
Balance by assumed Interest Credits is made solely
for the purpose of determining the Participant's
Accrued Benefit as of the determination date and
does not increase the Account Balance for any other
purpose).
No amendment of this Plan shall have the effect of reducing the Accrued Benefit
of any Participant under this Plan Document. If any such amendment would appear
to have the effect of reducing an Accrued Benefit, such amendment shall not be
given effect to reduce the Accrued Benefit below the level determined as of one
day prior to the effective date of the amendment or, if later, the date such
amendment is adopted (but such amendment may have the effect of temporarily or
indefinitely curtailing the accrual of additional benefits).
1.1.3. ACTUARIAL EQUIVALENT -- a benefit of equivalent value
computed on the basis of actuarial tables, factors and assumptions set forth in
this Plan Document, including Appendix D.
1.1.4. ACTUARY -- a corporation, firm or individual selected
by the PRAC which has on its staff one or more actuaries who are enrolled with
the Joint Board for the Enrollment of Actuaries. The PRAC reserves the right to
retain the Actuary and to change the Actuary at any time and from time to time.
1.1.5. AFFILIATE -- a business entity which is under "common
control" with the Employer or which is a member of an "affiliated service group"
that includes the Employer, as those terms are defined in section 414(b), (c)
and (m) of the Code. A business entity which is a predecessor to the Employer
shall be treated as an Affiliate if the Employer maintains a plan of such
predecessor business entity or if, and to the extent that, such treatment is
otherwise required by regulations under section 414(a) of the Code. A business
entity shall also be treated as an Affiliate if, and to the extent that, such
treatment is required by regulations under section 414(o) of the Code. In
addition to said required treatment, the PRC may, in its discretion, designate
as an Affiliate any business entity which is not such a "common control,"
"affiliated service group" or "predecessor" business entity but which is
otherwise affiliated with the Employer, subject to such limitations as the PRC
may impose.
1.1.6. AGE -- unless specified otherwise, a person's Age shall
be computed in years and months, assuming the person was born on the first day
of the month following the month in which such person was actually born (unless
the person was born on the first day of a month, in which case the actual birth
date shall apply). When the term age" is used without an initial capital letter,
it shall mean actual age.
1.1.7. BENEFICIARY -- a person designated by a Participant (or
designated automatically by operation of this Plan Document) to receive a death
benefit payable under the terms of this Plan (other than the survivor benefit
payable under a joint and survivor annuity, the recipient of which is referred
to as a Joint Annuitant). A person so designated shall not be considered a
Beneficiary until the death of the Participant. Subject to other provisions of
this Plan Document, a Beneficiary designation may be changed at any time before
the death of the Participant.
1.1.8. CHANGE IN CONTROL -- a Change in Control shall have the
same meaning as that term in the Imation Employee Stock Incentive Plan or any
successor document.
1.1.9. CODE -- the Internal Revenue Code of 1986, as amended,
including applicable regulations for the specified section of the Code. Any
reference in this Plan Document to a section of the Code, including the
applicable regulation, shall be considered also to mean and refer to any
subsequent amendment or replacement of that section or regulation.
1.1.10. DISABILITY -- the total and permanent disability of a
Participant which shall be deemed to occur only during the period when the
Participant is receiving payments under the Employer's long-term disability plan
(or would be receiving such payments but for offsets for Social Security or any
other benefits specified by such plan).
1.1.11. EARLIEST RETIREMENT DATE -- the first day of the
calendar month coincident with or next following the date when the Participant
both has attained Age fifty-five (55) years and has completed at least five (5)
years of Vesting Service.
1.1.12. EFFECTIVE DATE -- July 1, 1996.
1.1.13. ELIGIBLE EARNINGS -- for any Plan Year, that portion
of the amount reportable by the Employer for federal income tax purposes as base
pay, overtime pay, incentive pay for hourly-paid employees, cash bonuses,
vacation pay, shift premium pay, commission pay and performance sharing paid to
the Participant during such Plan Year; increased by the amount of compensation
reductions experienced by the Participant during such year pursuant to the
provisions of any Employer 401(k) plan, and by the amount of any employer
contributions made on behalf of the Participant pursuant to a salary reduction
agreement and which are not includable in the gross income of the Participant
under section 125 of the Code. Compensation in excess of $150,000 (as adjusted
by the Commissioner of the Internal Revenue Service for increases in the cost of
living in accordance with section 401(a)(17)(B) of the Code) in any Plan Year
shall be disregarded. In determining a Participant's Eligible Earnings, the
rules of section 414(q)(6) of the Code apply, except that in applying such
rules, the term "family" shall include only the spouse of the Participant and
lineal descendants of the Participant who have not attained age nineteen (19)
years before the close of the Plan Year. If Participants are aggregated as such
family members (and do not otherwise agree in writing), the Eligible Earnings of
each family member shall equal the applicable limit multiplied by a fraction,
the numerator of which is such family member's Eligible Earnings (before
application of the applicable limit) and the denominator of which is the total
Eligible Earnings (before application of the applicable limit) of all such
family members. In addition, there shall be excluded from the Eligible Earnings:
any compensation such Participant who is a Highly Compensated Employee (as
defined in Appendix E to this Plan Document) has agreed in writing shall not be
included in Eligible Earnings; any compensation such Participant received for
employment that is not Recognized Employment; and any compensation such
Participant received after the last day of the Participant's Recognized
Employment.
1.1.14. EMPLOYER -- Imation Corp.; Imation Enterprises Corp.,
a wholly owned subsidiary of Imation; any other business affiliate of Imation
that adopts the Plan pursuant to Section 7.4; and any successor thereof that
adopts the Plan.
1.1.15. EMPLOYMENT COMMENCEMENT DATE -- the date upon which an
employee first performs one (1) Hour of Service for the Employer or an Affiliate
(without regard to whether such Hour of Service is performed in Recognized
Employment or otherwise).
1.1.16. ERISA -- the Employee Retirement Income Security Act
of 1974, including applicable regulations for the specified section of ERISA.
Any reference in this Plan Document to a section of ERISA, including the
applicable regulation, shall be considered also to mean and refer to any
subsequent amendment or replacement of that section or regulation.
1.1.17. FUND -- the assets of the Plan held by the Trustee
from time to time, including all contributions and the investments and
reinvestments, earnings and profits thereon.
1.1.18. HOUR OF SERVICE -- each hour for which the employee is
paid, or entitled to payment, for the performance of duties for the Employer or
an Affiliate and each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer or an Affiliate.
These hours shall be credited to the employee for the period or periods in which
the duties are performed.
1.1.19. IMATION -- Imation Corp., a Delaware corporation, and
any successor thereof that adopts the Plan (also called the Principal Sponsor").
1.1.20. INVESTMENT MANAGER -- the person or persons, other
than the Trustee, appointed by the PRC to manage all or a portion of the Fund.
1.1.21. INTEREST PERCENTAGE -- a percentage determined once
for each calendar year which shall be equal to the average annual interest rate
on 30-year Treasury Constant Maturities as published by the Internal Revenue
Service for the month of December preceding such calendar year.
1.1.22. INTEREST CREDITS -- interest amounts credited to
Account Balance as specified in Section 1.2.
1.1.23. JOINT AND 50% SURVIVOR ANNUITY -- a form of level
annuity payable monthly to and for the lifetime of the Participant with a
survivor annuity payable monthly after the death of the Participant to and for
the lifetime of the spouse or other designated Joint Annuitant of the
Participant in an amount equal to fifty percent (50%) of the amount payable
during the joint lives of the Participant and such Joint Annuitant. The first
payment to such Participant shall be due on the date specified in Section 3. The
last payment to a Participant shall be due on the first day of the calendar
month in which the Participant's death occurs. The last payment to a Joint
Annuitant who survives the Participant shall be due on the first day of the
calendar month in which such Joint Annuitant dies. The monthly amount payable to
the Participant n the Joint and 50% Survivor Annuity form shall be one-twelfth
(1/12th) of the annual amount determined by dividing the Participant's Account
Balance as of the date payment commences by the factor from Appendix D to this
Plan Document for the Joint and 50% Survivor Annuity form for the Participant's
Age and the Joint Annuitant's Age as of such date.
1.1.24. JOINT ANNUITANT -- a person designated by a
Participant (or designated automatically by operation of this Plan Document) to
receive the survivor benefit payable under a joint and survivor annuity under
the terms of this Plan. A person so designated shall not be considered a Joint
Annuitant until payments under the joint and survivor annuity commence to the
Participant. Subject to other provisions of this Plan Document, a Joint
Annuitant designation may be changed at any time before payments so commence to
the Participant (but not thereafter).
1.1.25. LIFE AND FIVE YEAR CERTAIN ANNUITY -- a form of level
annuity payable monthly to and for the lifetime of the Participant; provided,
however, that if the Participant dies before receiving sixty (60) monthly
payments, such monthly payments shall continue to the Participant's Beneficiary
until the total monthly payments made to the Participant and to the Beneficiary
equals sixty (60). The first payment shall be due on the date specified in
Section 3 and the last payment shall be due on the first day of the calendar
month in which the Participant's death occurs (or, if later, on the date of the
60th monthly payment). The monthly amount payable to the Participant in the Life
and Five Year Certain Annuity form shall be one-twelfth (1/12th) of the annual
amount determined by dividing the Participant's Account Balance as of the date
payment commences by the factor from Appendix D to this Plan Document for the
Life and Five Year Certain Annuity form for the Participant's Age as of such
date.
1.1.26. LIFE ONLY ANNUITY -- a form of level annuity payable
monthly to and for the lifetime of the Participant. The first payment shall be
due on the date specified in Section 3 and the last payment shall be due on the
first day of the calendar month in which the Participant's death occurs. The
monthly amount payable to the Participant in the Life Only Annuity form shall be
one-twelfth (1/12th) of the annual amount determined by dividing the
Participant's Account Balance as of the date payment commences by the factor
from Appendix D to this Plan Document for the Life Only Annuity form for the
Participant's Age as of such date.
1.1.27. NORMAL RETIREMENT AGE -- age 65.
1.1.28. NORMAL RETIREMENT DATE -- the first day of the month
coincident with or next following Normal Retirement Age.
1.1.29. PAY CREDIT -- pay-related amounts credited to the
Account Balance as specified in Section 1.2.
1.1.30. PRAC -- see Section 1.1.33.
1.1.31. PRC -- see Section 1.1.34.
1.1.32. PARTICIPANT -- an employee of the Employer who becomes
a Participant in the Plan in accordance with the provisions of Section 2. An
employee who has become a Participant shall be considered to continue as a
Participant in the Plan until the date of the Participant's death or, if
earlier, the date when the Participant is no longer employed by the Employer or
an Affiliate and upon which the Participant no longer has any Vested Accrued
Benefit under the Plan (that is, the Participant has received a distribution of
all of the Participant's Vested Accrued Benefit, if any, or the Participant's
Accrued Benefit that is not Vested has been forfeited under Section 3.5.2).
1.1.33. PENSION AND RETIREMENT ADMINISTRATIVE COMMITTEE
("PRAC") -- a committee of not less than 3 members who are employees of the
Employer appointed by and serving at the pleasure of the PRC.
1.1.34. PENSION AND RETIREMENT COMMITTEE ("PRC") -- a
committee of not less than 3 members who are employees of the Employer appointed
by and serving at the pleasure of the Chief Executive Officer of Imation.
1.1.35. PERIOD OF SERVICE -- a measure of an employee's
employment with the Employer and all Affiliates which is equal to the period
commencing on the employee's Employment Commencement Date or Reemployment
Commencement Date, whichever is applicable, and ending on the next following
Severance from Service Date; provided, however:
(a) YEARS AND MONTHS. A Period of Service shall be
stated in years and full calendar months. A Period
of Service actually commencing on or before the
seventeenth (17th) day of a calendar month shall be
deemed to have commenced on the first day of such
calendar month. A Period of Service actually
commencing after the seventeenth (17th) day of a
calendar month shall be deemed to have commenced on
the first day of the following calendar month. A
Period of Service ending before the seventeenth
(17th) day of a calendar month shall be deemed to
have ended on the last day of the prior calendar
month. A Period of Service actually ending on or
after the seventeenth (17th) day of a calendar
month shall be deemed to have ended on the last day
of such calendar month.
(b) AGGREGATION. Unless some or all of an employee's
service may be disregarded pursuant to other rules
of this Plan Document, all discontinuous Periods of
Service shall be aggregated in determining the
total of an employee's Period of Service. When
aggregating discontinuous periods of less than one
(1) year, twelve (12) months shall equal one (1)
year.
(c) SERVICE SPANNING NO. 1. If an employee quits, is
discharged or retires from service with the
Employer and all Affiliates and performs an Hour of
Service within the twelve (12) months following the
Severance from Service Date, that Period of
Severance shall be deemed to be a Period of
Service.
(d) SERVICE SPANNING NO. 2. If an employee quits, is
discharged or retires during the first twelve (12)
months of an absence from service for any reason
other than a quit, a discharge, retirement or
death, and then performs an Hour of Service within
the twelve (12) months following the date on which
the employee was first absent from service, that
Period of Severance shall be deemed to be a Period
of Service.
1.1.36. PERIOD OF SEVERANCE -- the period of time commencing
on an employee's Severance from Service Date and ending on the date on which
that employee next again performs an Hour of Service for the Employer or for an
Affiliate (without regard to whether such Hour of Service is performed in
Recognized Employment or otherwise); provided, however:
(a) YEARS AND MONTHS. A Period of Severance shall be
stated in years and full calendar months. A Period
of Severance commencing on or before the
seventeenth (17th) day of a calendar month shall be
deemed to have commenced on the first day of such
calendar month. A Period of Severance actually
commencing after the seventeenth (17th) day of a
calendar month shall be deemed to have commenced on
the first day of the following calendar month. A
Period of Severance ending before the seventeenth
(17th) day of a calendar month shall be deemed to
have ended on the last day of the prior calendar
month. A Period of Severance actually ending on or
after the seventeenth (17th) day of a calendar
month shall be deemed to have ended on the last day
of such calendar month.
(b) PARENTING LEAVE. Notwithstanding the foregoing, for
the limited purpose of determining the length of a
Period of Severance, the Severance from Service
Date for an employee shall be advanced during any
period of an absence from work due to the pregnancy
of the employee, the birth of a child of the
employee, the placement of a child with the
employee in connection with the adoption of such
child by the employee, or for the purpose of caring
for such child for a period beginning immediately
following such birth or placement. In no event,
however, shall the Severance from Service Date be
advanced under the foregoing sentence to a date
that is later than the last day of the calendar
month which is two (2) years after the first day of
such absence. This adjustment in the Severance from
Service Date shall not be made until the employee
furnishes to the PRAC timely information which may
be reasonably required by the PRAC to establish
that the absence from work is for a reason for
which this adjustment will be made.
1.1.37. PLAN -- the tax-qualified retirement plan of the
Employer established for the benefit of employees eligible to participate
therein, as first set forth in this Plan Document. For Code and ERISA purposes,
the Plan is a defined-benefit pension plan. (As used herein, "Plan" refers to
the legal entity established by the Employer and not to the document pursuant to
which the Plan is maintained. That document is referred to herein as the "Plan
Document.") The Plan shall be referred to as the "IMATION CASH BALANCE PENSION
PLAN."
1.1.38. PLAN DOCUMENT -- this document entitled "IMATION CASH
BALANCE PENSION PLAN" as adopted by the Principal Sponsor effective as of July
1, 1996, as the same may be amended from time to time.
1.1.39. PLAN YEAR -- the calendar year (that is, the twelve
(12) consecutive month period ending on each December 31).
1.1.40. PRINCIPAL SPONSOR -- Imation.
1.1.41. RECOGNIZED EMPLOYMENT -- all employment with the
Employer, excluding, however:
(a) employment classified by the Employer as temporary"
employment,
(b) employment in a unit of employees whose terms and
conditions of employment are subject to a
collective bargaining agreement between the
Employer and a union representing that unit of
employees, unless such collective bargaining
agreement provides for the inclusion of those
employees in the Plan,
(c) employment of a nonresident alien who is not
receiving any earned income from the Employer which
constitutes income from sources within the United
States,
(d) employment in a division or facility of the
Employer which is not in existence on the Effective
Date (that is, was acquired, established, founded
or produced by the liquidation or similar
discontinuation of a separate subsidiary after the
Effective Date) unless and until the PRC shall
declare such employment to be Recognized
Employment,
(e) services of a person who is not a common law
employee of the Employer including, without
limiting the generality of the foregoing, services
of a leased employee, leased owner, leased manager,
shared employee, shared leased employee, temporary
employee or other similar classification,
(f) employment of a Highly Compensated Employee (as
defined in Appendix E to this Plan Document) to the
extent agreed to in writing by the employee.
1.1.42. REEMPLOYMENT COMMENCEMENT DATE -- the date upon which
an employee first performs one (1) Hour of Service for the Employer or for an
Affiliate following a Period of Severance that is not deemed to be a Period of
Service (without regard to whether such Hour of Service is performed in
Recognized Employment or otherwise).
1.1.43. SEVERANCE FROM SERVICE DATE -- the earlier of:
(a) the date upon which an employee quits, is
discharged or retires from service with the
Employer and all Affiliates, or dies; or
(b) the date which is the first anniversary of the
first day of a period in which an employee remains
continuously absent from service (with or without
pay) with the Employer and all Affiliates for any
reason other than a quit, a discharge, retirement
or death, such as vacation, holiday, leave of
absence or layoff.
Notwithstanding the foregoing, the Severance from Service Date of a Participant
who is continuously absent from service due to Disability shall not be earlier
than the last day of such Disability.
1.1.44. TRUST AGREEMENT -- the separate document entitled
IMATION CASH BALANCE PENSION TRUST AGREEMENT entered into by and between the
Principal Sponsor and the Trustee effective as of July 1, 1996, as the same may
be amended from time to time thereafter.
1.1.45. TERMINATION OF EMPLOYMENT -- a complete severance of
an employee's employment relationship with the Employer and all Affiliates, for
any reason other than the employee's death. A transfer from employment with the
Employer to employment with an Affiliate of the Employer shall not constitute a
Termination of Employment. A Participant shall not be considered to have had a
Termination of Employment during Disability.
1.1.46. TRUSTEE -- State Street Bank and Trust Company, and
its successor or successors in trust.
1.1.47. VESTED -- nonforfeitable, i.e., a claim obtained by a
Participant or the Participant's Beneficiary to that part of an immediate or
deferred benefit hereunder which arises from the Participant's service, which is
unconditional and which is legally enforceable against the Plan.
1.1.48. VESTING SERVICE -- a measure of an employee's
employment with the Employer and all Affiliates which is equal to the employee's
Period of Service; subject, however, to the following rules:
(a) 3M SERVICE. Service with 3M before July 1, 1996
(beginning from 3M's service credit date"), shall
be considered service with the Employer for
Participants who transferred employment from 3M to
the Employer as of July 1, 1996, in connection with
the spin-off" of Imation from 3M.
(b) EFFECT OF PERIODS OF SEVERANCE.
(i) GENERAL RULE. Except as otherwise provided
in Section 1.1.48(b)(ii) below, if an
employee has a Period of Severance and
returns thereafter to employment with the
Employer or an Affiliate, both employment
before and employment after such Period of
Severance shall be taken into account in
determining whether the employee is Vested.
(ii) RULE OF PARITY. If an employee does not have
any Vested interest in an Accrued Benefit
upon the occurrence of a Period of Severance
which equals or exceeds in length the
greater of five (5) years or the employee's
prior Vesting Service, such prior Vesting
Service shall be disregarded. Any Vesting
Service disregarded by a prior application
of this paragraph need not thereafter be
taken into account.
(c) PAID LEAVES OF ABSENCE. Irrespective of whether it
is counted as Vesting Service under the other rules
of this Section 1.1.48, any leave of absence from
Recognized Employment designated by the Employer as
paid leave for Plan purposes shall count as Vesting
Service.
(d) UNPAID LEAVES OF ABSENCE. Irrespective of whether
it is counted as Vesting Service under other rules
of this Section 1.1.48, any leave of absence from
Recognized Employment designated by the Employer as
unpaid leave for Plan purposes shall count as
Vesting Service, but only if the employee returns
directly to Recognized Employment at the end of the
leave.
(e) MILITARY LEAVES. During service in the Armed Forces
of the United States, if the employee both entered
such service and returned to employment with the
Employer or an Affiliate from such service under
circumstances entitling the employee to
reemployment rights granted veterans under federal
law, the employee shall, to the extent required by
such federal law, receive the Vesting Service (and
other benefits hereunder) which otherwise would
normally have been earned by such employee but for
such absence; provided, however, that if the
employee does not return to employment for any
reason other than death, Disability or attainment
of Normal Retirement Date within the time
prescribed by law for the retention of veteran's
reemployment rights, such Vesting Service (and
other benefits hereunder) shall not be received.
(f) MEDICAL LEAVES. Irrespective of whether it is
counted as Vesting Service under other rules of
this Section 1.1.48, any leave of absence from
Recognized Employment designated by the Employer as
medical leave for Plan purposes shall count as
Vesting Service.
(g) DISABILITY. Irrespective of whether it is counted
as Vesting Service under other rules of this
Section 1.1.48, a period of Disability shall count
as Vesting Service.
(h) LEASED EMPLOYEES. To the extent required under
section 414 of the Code, services of leased
employees, leased owners, leased managers, shared
employees, shared leased employees and other
similar classifications for the Employer or an
Affiliate shall be taken into account as if such
services were performed as a common law employee of
the Employer for the sole purpose of determining
qualification for a Vested Benefit under Section
3.3.1(a).
(i) EFFECT OF 3M EMPLOYMENT. Notwithstanding any other
provision of this Plan Document, Vesting Service
(if any) for a Participant on leave of absence
shall cease if such Participant becomes an employee
of 3M.
1.2. PARTICIPANT'S ACCOUNT BALANCE. There shall be maintained for each
Participant an Account Balance which shall be adjusted periodically with the
accruals hereinafter described and the value of which shall be determined
without regard to any contributions to the Fund or the income, expenses, gains
and losses of the Fund or any forfeitures of other Participants under the Plan;
subject, however, to the following rules:
1.2.1. INITIAL ACCOUNT BALANCE. The opening Account Balance
for each Participant shall be zero (0).
1.2.2. PAY CREDIT. As of each December 31 (beginning December
31, 1996, for each pay period with a pay date after July 1, 1996), each eligible
Participant's Account Balance shall receive a Pay Credit equal to six percent
(6%) of that Participant's Eligible Earnings for the Plan Year ending on that
date. For purposes of this Section 1.2.2:
(a) A Participant who is receiving Vesting Service
during a paid leave of absence under Section
1.1.48(c) shall receive Pay Credits during the
period of such receipt based on actual Eligible
Earnings during such leave.
(b) A Participant who is receiving Vesting Service
during an unpaid leave of absence under Section
1.1.48(d) shall not receive Pay Credits for such
leave (irrespective of whether such Participant
returns to Recognized Employment).
(c) A Participant who is receiving Vesting Service
during a medical leave under Section 1.1.48(f)
shall, during the period of such receipt, receive
Pay Credits based on such Participant's stated
monthly wage or salary (as specified by the
Employer) for the calendar month preceding the
Participant's effective date of leave.
(d) A Participant shall receive Pay Credits during a
period of Disability to the extent provided in
Section 3.4.
(e) Pay Credits shall be credited on a prorated basis
up to and including the last day of a Participant's
Recognized Employment.
1.2.3. INTEREST CREDITS. As of the last day of each calendar
year (beginning December 31, 1997), there shall be credited to each eligible
Participant's or Beneficiary's Account Balance an Interest Credit, determined
under the following rules:
(a) The amount of each annual Interest Credit shall be
equal to the Interest Percentage for the current
calendar year multiplied by the Account Balance
determined as of the last day of the prior calendar
year (which Account Balance shall include any Pay
Credits made as of such last day of such prior
calendar year).
(b) Interest Credits to each Account Balance will be
credited on a prorated basis up to and including
the last day of the month prior to the date as of
which payments first commence with respect to such
Account Balance (but not thereafter). Such prorated
Interest Credits shall be based on the Account
Balance determined as of the last day of the prior
calendar year (which Account Balance shall include
any Pay Credits made as of such last day of such
prior calendar year but shall not include any
prorated Pay Credits made for the current calendar
year).
1.3. RULES OF INTERPRETATION. An individual shall be considered to have
attained a given age on the individual's birthday for that age (and not on the
day before). The birthday of any individual born on a February 29 shall be
deemed to be February 28 in any year that is not a leap year. Whenever
appropriate, words used herein in the singular may be read in the plural, or
words used herein in the plural may be read in the singular; the masculine may
include the feminine; and the words "hereof," "herein" or "hereunder" or other
similar compounds of the word "here" shall mean and refer to this entire Plan
Document and not to any particular paragraph or Section of this Plan Document
unless the context clearly indicates to the contrary. The titles given to the
various Sections of this Plan Document are inserted for convenience of reference
only and are not part of this Plan Document, and they shall not be considered in
determining the purpose, meaning or intent of any provision hereof. Any
reference in this Plan Document to a statute or regulation shall be considered
also to mean and refer to any subsequent amendment or replacement of that
statute or regulation. This document has been executed and delivered in the
State of Minnesota and has been drawn in conformity to the laws of that State
and shall, except to the extent that federal law is controlling, be construed
and enforced in accordance with the laws of the State of Minnesota.
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1. ELIGIBILITY RULE. Each employee of the Employer shall become a Participant
on the employee's first day in Recognized Employment.
2.2. PARTICIPANTS MUST FURNISH DATA. As a condition of participation in the
Plan, each employee shall furnish the PRAC such data and information, including,
specifically, satisfactory proof of age, and complete such forms as the PRAC may
consider desirable or necessary for the effective administration of the Plan.
Notwithstanding anything to the contrary provided herein, no benefit shall be
payable under the Plan unless the employee has complied with the requirements of
this section, but the right of a Participant to a benefit shall be fully
preserved upon subsequent compliance with said requirements.
2.3. EFFECT OF MISSTATEMENTS BY PARTICIPANT. If any Participant in any written
statement required under Section 2.2 shall misstate such Participant's age or
the age of any person upon whose survival the payment of any benefit in respect
of such Participant is contingent or any other fact the misstatement of which
would affect the amount of a benefit payable hereunder, the accrual of benefits
in respect of such Participant shall not be invalidated, but the amount of the
benefit to be available with respect to such Participant will be adjusted
retroactively to the amount which would have been payable if such fact or facts
had not been misstated; provided, however, that in no event will the Plan be
liable to pay any greater benefit in respect of any Participant than that which
would have been payable on the basis of the truth.
2.4. ADDITIONAL BENEFITS FOR CERTAIN FORMER 3M EMPLOYEES. In addition to other
benefits described in this Plan Document, certain grandfathered" Participants
who transferred employment from 3M to the Employer as of July 1, 1996, in
connection with the spinoff" of Imation from 3M shall receive the benefits
described in Appendix F to this Plan Document. Notwithstanding such benefits, no
assets or liabilities will be transferred to this Plan from any 3M plan and this
Plan is not a successor plan to any 3M plan.
SECTION 3
RETIREMENT INCOME BENEFITS
3.1. NORMAL RETIREMENT BENEFIT.
3.1.1. WHEN AVAILABLE. Upon the Termination of Employment of
a Participant at or after Normal Retirement Date and upon the filing of any
required application with the PRAC, the Participant shall receive a benefit
under this Section 3.1 (a Normal Retirement Benefit").
3.1.2. AMOUNT. The initial monthly amount of the
Participant's Normal Retirement Benefit shall be the amount of the Participant's
Accrued Benefit determined as of the date the first payment of the Normal
Retirement Benefit is made.
3.1.3. FORM OF BENEFIT. The normal form of the Normal
Retirement Benefit is a Life and Five Year Certain Annuity, the first payment of
which is due on the first day of the calendar month following the Participant's
Termination of Employment or on the first day of any later calendar month which
is designated by the Participant, in writing delivered to the PRAC, as the
commencement date (but such date cannot be later than the January 1 following
the calendar year in which the Participant attains Age seventy and one-half
(70-1/2) years). In lieu of the Life and Five Year Certain Annuity form of
Normal Retirement Benefit, a Participant may receive an optional form of
retirement benefit as provided in Section 4 and a married Participant who does
not elect otherwise shall receive the Normal Retirement Benefit in the Joint and
50% Survivor Annuity form as provided in Section 4.
3.2. EARLY RETIREMENT BENEFIT.
3.2.1. WHEN AVAILABLE. Upon the Termination of Employment of
a Participant at or after Earliest Retirement Date and upon the filing of any
required application with the PRAC, the Participant shall receive a benefit
under this Section 3.2 (an Early Retirement Benefit").
3.2.2. AMOUNT. The initial monthly amount of the
Participant's Early Retirement Benefit shall be the amount of the Participant's
Accrued Benefit determined as of the date the first payment of the Early
Retirement Benefit is made; provided, however, that if payments commence before
the Participant attains Age sixty-five (65), the initial monthly amount of the
Participant's Early Retirement Benefit shall be one-twelfth (1/12th) of the
annual amount determined by dividing the Participant's Account Balance as of the
date payment commences by the factor from Appendix D to this Plan Document for
the Life and Five Year Certain Annuity form for the Participant's Age as of such
date.
3.2.3. FORM OF BENEFIT. The normal form of the Early
Retirement Benefit is a Life and Five Year Certain Annuity, the first payment of
which is due (i) on the first day of the calendar month following the
Participant's Normal Retirement Date, or (ii) on the first day of any earlier
calendar month which follows such Participant's Earliest Retirement Date and
Termination of Employment and which is designated by the Participant, in writing
delivered to the PRAC, as the commencement date, or (iii) on the first day of
any later calendar month which is designated by the Participant, in writing
delivered to the PRAC, as the commencement date (but such date cannot be later
than the January 1 following the calendar year in which the Participant attains
Age seventy and one-half (70-1/2) years). In lieu of the Life and Five Year
Certain Annuity form of Early Retirement Benefit, a Participant may receive an
optional form of retirement benefit as provided in Section 4 and a married
Participant who does not elect otherwise shall receive the Early Retirement
Benefit in the Joint and 50% Survivor Annuity form as provided in Section 4.
3.3. VESTED BENEFIT.
3.3.1. WHEN AVAILABLE. A Participant shall be fully Vested in
such Participant's Accrued Benefit upon the occurrence of the first of the
following while still an employee of the Employer or an Affiliate:
(a) upon completing five (5) or more years of Vesting
Service;
(b) upon attainment of Normal Retirement Age;
(c) upon a Change in Control; or
(d) upon a complete termination of the Plan (but only
to the extent such Participant's Accrued Benefit is
then funded) or upon a partial termination of the
Plan affecting such Participant (but only to the
extent such Participant's Accrued Benefit would
then be funded if the Plan were then completely
terminated).
The Participant shall receive a benefit under this Section 3.3 (a Vested
Benefit") after Termination of Employment (or, if earlier, on the January 1
following the calendar year in which the Participant attains Age seventy and
one-half (70-1/2) years) and upon the filing of any required application with
the PRAC.
3.3.2. AMOUNT. The initial monthly amount of the
Participant's Vested Benefit shall be the amount of the Participant's Accrued
Benefit determined as of the date the first payment of the Vested Benefit is
made; provided, however, that if payments commence before the Participant
attains Age sixty-five (65), the initial monthly amount of the Participant's
Vested Benefit shall be one-twelfth (1/12th) of the annual amount determined by
dividing the Participant's Account Balance as of the date payment commences by
the factor from Appendix D to this Plan Document for the Life and Five Year
Certain Annuity form for the Participant's Age as of such date. If a Participant
in receipt of a Vested Benefit continues in employment with the Employer beyond
the January 1 following the calendar year in which such Participant attains Age
seventy and one-half (70-1/2) years, the amount of such Participant's Vested
Benefit shall be redetermined as of Termination of Employment and as of each
January 1 upon which such Participant continues to be employed by the Employer
as if that date were the date of Termination of Employment. The amount of
increased benefit, if any, shall be paid to the Participant in the form
originally determined for the Participant (without any requirement for further
notice to the Participant or the Participant's spouse, Joint Annuitant or
Beneficiary and without any requirement for further Participant elections or
spousal consent).
3.3.3. FORM OF BENEFIT. The normal form of the Vested Benefit
is a Life and Five Year Certain Annuity, the first payment of which is due (i)
on the first day of the calendar month following the Participant's Normal
Retirement Date, or (ii) on the first day of any earlier calendar month which
follows such Participant's Termination of Employment and which is designated by
the Participant, in writing delivered to the PRAC, as the commencement date, or
(iii) on the first day of any later calendar month which is designated by the
Participant, in writing delivered to the PRAC, as the commencement date (but
such date cannot be later than the January 1 following the calendar year in
which the Participant attains Age seventy and one-half (70-1/2) years). In lieu
of the Life and Five Year Certain Annuity form of Vested Benefit, a Participant
may receive an optional form of retirement benefit as provided in Section 4 and
a married Participant who does not elect otherwise shall receive the Vested
Benefit in the Joint and 50% Survivor Annuity form as provided in Section 4.
3.4. DISABILITY RULES.
3.4.1. CONTINUING PAY CREDITS. Pay Credits under Section
1.2.2 shall continue to be made to a Participant's Account Balance during such
Participant's Disability. Such Pay Credits will be based on such Participant's
annual rate of pay" as determined by the Employer (excluding any pay that is not
Eligible Earnings) in effect on such Participant's last full day of active
employment with the Employer. Such Participant shall also receive Pay Credits
for any Eligible Earnings actually received by such Participant after such full
day that otherwise qualifies for Pay Credits.
3.4.2. CONTINUING INTEREST CREDITS. Interest Credits under
Section 1.2.3 shall continue to be made to such Participant's Account Balance
until the commencement of payments.
3.5. GENERAL BENEFITS RULES.
3.5.1. NONDUPLICATION OF BENEFITS. There shall be no
duplication of retirement income benefits under the Plan. If a Participant is
eligible for more than one (1) of the retirement income benefits provided under
Section 3, such Participant shall elect only one (1) such benefit.
3.5.2. EFFECT OF TERMINATION BEFORE VESTING -- FORFEITURE AND
RESTORATION. No retirement income benefits are available upon the Termination
of Employment of a Participant before such Participant is entitled to those
retirement income benefits specifically enumerated herein. If a Participant has
a Termination of Employment prior to the date upon which retirement benefits are
Vested, such employee's Account Balance, if any, shall be forfeited and reduced
to zero as of the December 31 coincident with or next following the Termination
of Employment (after any Pay Credits or Interest Credits are made as of such
day). If such Participant returns to employment with the Employer or an
Affiliate before the occurrence of a Period of Severance which equals or exceeds
five (5) years, however, the Account Balance of such Participant shall be
restored in the amount so forfeited (without interest or other increase).
Actuarial gains resulting from the Termination of Employment of a Participant
prior to the date on which retirement income benefits are Vested shall be taken
into account in determining the succeeding contributions of the Employer and
shall not be used to increase the retirement income benefits of other
Participants. A Participant who has a Termination of Employment when not Vested
shall be considered to have received full distribution.
3.6. FACILITY OF PAYMENT. In case of the legal disability, including minority,
of a Participant, Joint Annuitant or Beneficiary entitled to receive any
distribution under the Plan, payment shall be made, if the PRAC shall be advised
of the existence of such condition:
(a) to the duly appointed guardian, conservator or
other legal representative of such Participant,
Joint Annuitant or Beneficiary, or
(b) to a person or institution entrusted with the care
or maintenance of the incompetent or disabled
Participant, Joint Annuitant or Beneficiary,
provided such person or institution has satisfied
the PRAC that the payment will be used for the best
interest and assist in the care of such
Participant, Joint Annuitant or Beneficiary, and
provided further, that no prior claim for said
payment has been made by a duly appointed guardian,
conservator or other legal representative of such
Participant, Joint Annuitant or Beneficiary.
Any payment made in accordance with the foregoing provisions of this Section
shall constitute a complete discharge of any liability or obligation of the
Plan, the Employer, the PRC, the PRAC, the Trustee and the Fund therefor.
3.7. LIMITATION ON BENEFITS. In no event shall any benefit be payable to any
Participant if, or to the extent that, it would exceed the limitations set forth
in the Appendix A to this Plan Document.
3.8. SUSPENSION OF BENEFITS.
3.8.1. REEMPLOYMENT BEFORE NORMAL RETIREMENT DATE. If a
Participant who is receiving retirement income from the Plan for a previous
period of employment is reemployed in Recognized Employment by the Employer
before Normal Retirement Date, payment of such retirement income shall be
suspended during the period of reemployment. Upon such suspension, the
Participant shall be credited with an initial Account Balance equal to the then
Actuarial Equivalent single sum value of the remaining retirement income due to
the Participant and, if applicable, the Participant's Joint Annuitant or
Beneficiary. Upon proper application at subsequent Termination of Employment,
the Participant shall be entitled to the retirement income which is accrued
under the Plan on account of total employment, adjusted, however, for the
payments previously received. In no event shall the Participant receive, in the
aggregate, a greater retirement income than would have been received if the
entire period of employment had been continuous.
3.8.2. REEMPLOYMENT AFTER NORMAL RETIREMENT DATE. If a
Participant who is receiving retirement income from the Plan for a previous
period of employment is reemployed in Recognized Employment by the Employer
after Normal Retirement Date, payment of such retirement income shall be
suspended for a period of calendar months equal to the number of calendar months
(beginning with the month of reemployment) during which the Participant has
forty (40) or more Hours of Service. Upon such suspension, the Participant shall
be credited with an initial Account Balance equal to the then Actuarial
Equivalent single sum value of the remaining retirement income due to the
Participant and, if applicable, the Participant's Joint Annuitant or
Beneficiary. In no event shall the Participant receive, in the aggregate, a
greater retirement income than would have been received if the entire period of
employment had been continuous. The payments of retirement income shall resume
no later than the first day of the third calendar month following the first
calendar month during which the Participant has fewer than forty (40) Hours of
Service. The payments of retirement income shall resume in an amount adjusted
for any additional retirement income accrued under the Plan during the
suspension. The initial payment upon resumption shall include the amount due for
the month of resumption plus the amount due for any prior month during which the
Participant had fewer than forty (40) Hours of Service. If the Participant
should die during the period of suspension, then such survivor's benefits (if
any) as may be provided for under the form of annuity in effect prior to the
suspension shall be paid commencing with the first day of the month following
the month in which the Participant's death occurs.
3.8.3. REEMPLOYMENT BEFORE BENEFITS COMMENCE. If a
Participant is reemployed by the Employer after Termination of Employment
(whether in Recognized Employment or otherwise) but before any retirement income
payments have commenced under the Plan (without regard to whether such
reemployment occurs before or after Normal Retirement Date), such retirement
income payments shall not thereafter commence until the Participant's subsequent
Termination of Employment.
3.8.4. CONTINUED EMPLOYMENT AFTER NORMAL RETIREMENT DATE. If
a Participant continues in employment with the Employer after Normal Retirement
Date, benefits will continue to accrue under the provisions of Section 1.2. Upon
the subsequent Termination of Employment of the Participant, a Normal Retirement
Benefit shall be paid to the Participant under the provisions of Section 3.1.
3.8.5. PROCEDURAL REQUIREMENTS. Notwithstanding the
foregoing, no retirement income benefit shall be suspended under this Section
3.8 unless the Participant is furnished a written notice during the first month
in which a payment is withheld that includes the following:
(a) a statement that payment of the Participant's
retirement income benefits are being suspended;
(b) a description of the specific reasons why payment
is being suspended;
(c) a general description of the Plan provisions
relating to the suspension of payments;
(d) a copy of this Section 3.8;
(e) a statement to the effect that the Department of
Labor regulations pertaining to suspension of
benefits may be found in section 2530.203-3 of
Title 29, Code of Federal Regulations;
(f) a description of the Plan's procedures for
affording a review of the suspension of payments
(which shall be the Plan's general claims
procedure); and
(g) a description of how any suspendible amount
actually (but improperly) paid will be offset from
future payments;
provided, however, that if some or all of that information is set forth in the
Plan's summary plan description and if the notice also includes information
concerning how the employee may obtain a copy of the summary plan description or
relevant portions thereof, then the notice may merely refer the Participant to
the relevant pages of the summary plan description.
3.8.6. OFFSETS OF SUSPENDIBLE AMOUNTS. If any retirement
income payment that should have been suspended under this Section 3.8 is paid to
a Participant, then the suspendible amount shall be offset (without any
adjustment for interest) from future payments as follows:
(a) from the first payment due the Participant after a
suspension of retirement income benefits, an amount
not in excess of one hundred percent (100%) of the
payment may be offset; and
(b) from subsequent payments to the Participant, an
amount not in excess of twenty-five percent (25%)
of each such payment may be offset; and
(c) from subsequent payments to Joint Annuitants or
Beneficiaries, an amount not in excess of
twenty-five percent (25%) of each such payment may
be offset.
3.8.7. MINIMUM THRESHOLD FOR SUSPENSION. Notwithstanding the
foregoing, such suspension and permanent withholding shall not occur: (a) if the
Participant is a full-time employee, unless the Participant is employed for more
than one (1) calendar month; and (b) if the Participant is not a full-time
employee, unless the Participant is employed at an annual rate of at least one
thousand (1,000) Hours of Service in a year.
3.9. NO PAYMENTS BEFORE JANUARY 1, 1997. Notwithstanding any other provision of
this Plan Document, no payments shall be made from this Plan before January 1,
1997 (except to the extent the PRAC in its discretion adopts uniform rules
providing otherwise).
SECTION 4
OPTIONAL FORMS OF RETIREMENT BENEFIT
4.1. OPTIONAL FORMS AVAILABLE.
4.1.1. FORMS OF RETIREMENT BENEFIT. To the extent authorized
in Section 3, the forms of retirement benefit which shall be available to a
Participant under the Plan shall be:
(a) a single lump sum payment in cash equal to the
Account Balance, determined on the last day of the
month preceding the day payment is made;
(b) Options for fixed monthly payments:
(i) the Life and Five Year Certain
Annuity form.
(ii) the Life Only Annuity form.
(iii) the Joint and 50% Survivor Annuity
form.
4.1.2. LIMITATION ON LUMP SUMS FOR CERTAIN HIGHLY COMPENSATED
EMPLOYEES. Notwithstanding the foregoing, a single lump sum payment shall not
be made to a Participant who is a highly compensated employee or a highly
compensated former employee (as defined in Appendix E to this Plan Document)
unless: (i) after payment of the single lump sum to such Participant, the value
of Plan assets equals or exceeds one hundred ten percent (110%) of the value of
current liabilities under the Plan (as defined in section 412(1)(7) of the
Code), or (ii) the value of the single lump sum payable to such Participant is
less than one percent (1%) of the value of such current liabilities before the
payment. In any Plan Year, the total number of Participants whose benefits are
subject to this restriction is limited to the twenty-five (25) highly
compensated employees and highly compensated former employees with the greatest
compensation in the current or any prior Plan Year. For purposes of this
restriction, the value of Plan assets and the value of current liabilities must
be determined as of the same date.
4.1.3. EFFECT OF LUMP SUM ON REHIRED EMPLOYEE. Notwithstanding
any other provision of this Plan Document, if a Participant who has received a
lump sum payment is rehired by an Employer in Recognized Employment, such
Participant's prior Vesting Service (but not the Account Balance) shall be
restored.
4.2. PRESUMPTIVE FORMS. In the absence of an affirmative written election to
the contrary:
(a) each Participant who is not married when the first
payment is due shall receive Vested benefit
payments in the Life and Five Year Certain Annuity
form, and
(b) each Participant who is married when the first
payment is due shall receive Vested benefit
payments in the Joint and 50% Survivor Annuity
form.
4.3. PARTICIPANT'S ELECTION RIGHTS. Subject to all other rules of this Plan
(which may place limitations upon the forms of retirement benefit available or
the conditions under which they may be effectively elected), a Participant shall
be permitted to elect not to receive the retirement benefit in the form
otherwise specified and to elect to receive it in another available form and to
rescind any such prior elections before the first payment is made.
The PRAC shall notify each Participant in writing a reasonable time before
Earliest Retirement Date of such Participant's option to begin immediately (or
at a deferred date) to receive benefits in the form of a Life and Five Year
Certain Annuity or other optional form made available under Section 4. This
written notice shall also be given within a reasonable period of time prior to
the date distribution is to be made or commenced to the Participant (but no less
than 30 days) and shall include an explanation of the Life and Five Year Certain
Annuity and of the other optional forms of retirement benefit made available to
the Participant under Section 4 and the relative financial effect on the
Participant's annuity if the Participant makes any of the elections described in
Section 4 and of the following rules:
(a) A Participant who is unmarried when payments begin
will receive benefits in the form of a Life and
Five Year Certain Annuity unless an optional form
that is available under Section 4 is elected before
the first payment is made.
(b) A Participant who is married when payments begin
will receive benefits in the form of a Joint and
50% Survivor Annuity unless such Participant elects
not to receive such form before the first payment
is made.
(c) A Participant who is married when payments begin
and who elects not to receive benefits as a Joint
and 50% Survivor Annuity will receive benefits in
the form of a Life and Five Year Certain Annuity
unless, before the first payment is made, the
Participant:
(i) is eligible for and makes an
election of an optional form made
available under Section 4, or
(ii) rescinds the prior election not to
receive benefits in the form of a
Joint and 50% Survivor Annuity.
(d) A Participant who is married when payments begin
and who elects not to receive benefits in the form
of a Joint and 50% Survivor Annuity and later
rescinds that election may thereafter again make
and rescind such election any number of times
provided that, to be effective, such elections and
rescissions must be made before the first payment
is made.
(e) An election not to receive the Vested benefit in
the form of a Life and Five Year Certain Annuity
shall not be effective unless accompanied by an
affirmative election of some other optional form.
(f) An election of a form of retirement benefit (other
than a Life and Five Year Certain Annuity) shall be
automatically rescinded by the death of the
Participant or of a designated Joint Annuitant
prior to the Termination of Employment of the
Participant.
(g) Except for a distribution made in the Joint and 50%
Survivor Annuity form or a lump sum distribution of
the Vested Account Balance of not more than Three
Thousand Five Hundred Dollars ($3,500), no
distribution will be commenced to a married
Participant in any form or at any time or under any
circumstances unless such Participant has made a
written application for such distribution which
specifies the time and form of the distribution and
the Participant's spouse consents to such
distribution. This consent of the Participant's
spouse must be given not more than ninety (90) days
before the first payment of benefits is made, must
be in writing, must be witnessed by a notary public
and must acknowledge the effect of the
Participant's application (and the terms and
conditions of the requested distribution) to which
it relates. The consent of a spouse is effective
only for that spouse and is irrevocable once it is
given.
(h) Under no circumstances shall any election change
the form of retirement benefit after the first
payment has been made.
(i) All elections and rescissions of elections and
requests for information must be made in writing,
must be signed by the Participant and will be
deemed made only when delivered in fact to the
PRAC.
4.4. DIRECT ROLLOVERS. The PRAC will issue such notices as may be required
under Code section 402(f) in connection with distributions from the Plan. The
Plan will accept and honor instructions for direct rollovers as required by Code
section 401(a)(31).
SECTION 5
DEATH BENEFITS
5.1. DEATH AFTER BENEFIT COMMENCEMENT. The only death benefits which shall be
payable under the Plan upon the death of a Participant after payment of benefits
under the Plan has commenced to the Participant shall be the unpaid monthly
payments of annuity, if any, which are to be continued under a period certain or
joint and survivor form of retirement benefit elected by the Participant under
Section 4 or provided automatically in the absence of the Participant's
affirmative election.
5.2. DEATH BEFORE BENEFIT COMMENCEMENT.
5.2.1. WHEN AVAILABLE. Upon the death of a Participant who
was then in active employment (including Disability) with the Employer or an
Affiliate or upon the death of a Participant who was then fully Vested in such
Participant's Accrued Benefit but had not yet begun to receive any payment of
any benefits under the Plan, the entire Account Balance attributable to such
Participant shall be payable to the Participant's Beneficiary. If, at the death
of the Participant, payment of benefits to the Participant was due or otherwise
pending but not yet actually commenced, such pending payment shall not be made
and the Participant shall be deemed to have not yet begun to receive any payment
of any benefits under the Plan at the Participant's death. No benefits shall be
payable with respect to a Participant who dies while not in active employment
(or Disability) with the Employer or an Affiliate unless such Participant was
then fully Vested in such Participant's Accrued Benefit.
5.2.2. SURVIVING SPOUSE.
(a) LIFE ANNUITY. If the payment of the Account Balance
is to be made to the surviving spouse of a deceased
Participant, and the surviving spouse has not
rejected distribution in this form, distribution
shall be effected for the surviving spouse in the
Life Only Annuity form in a monthly amount that is
one-twelfth (1/12th) of the annual amount
determined by dividing the Participant's Account
Balance as of the date payment commences by the
factor from Appendix D to this Plan Document for
the Life Only Annuity form for the surviving
spouse's Age as of such date. Such benefit shall
commence as of the first day of a month designated
by the surviving spouse, which date may not be
earlier than the first day of the month following
the date the Participant died and may not be later
than the date which would have been the
Participant's Normal Retirement Date (or, if later,
the first day of the month following the date of
the Participant's death).
(b) OPTIONAL LUMP SUM. A surviving spouse may reject
distribution in the Life Only Annuity form by
filing with the PRAC an affirmative written
rejection of distribution in that form and an
election of payment in a single lump sum equal to
the Participant's Account Balance as of the first
day of any month specified by such spouse (but in
all events actual payment shall be made not later
than the later of (i) the latest day specified in
Section 5.2.2(a) for the beginning of annuity
payments, or (ii) five (5) years after the death of
the Participant). Such rejection and election must
be made not more than ninety (90) days before the
date the lump sum distribution is to be made to the
surviving spouse. The surviving spouse may make any
number of rejections and revocations of rejections
and they may be made at any time until the date the
lump sum distribution is actually made to the
surviving spouse.
(c) WRITTEN EXPLANATION. Within a reasonable period of
time prior to the date distribution is to be made
or commenced to the surviving spouse (but no less
than 30 days), there shall be furnished to the
surviving spouse a written explanation of the terms
and conditions of the Life Only Annuity form, and
the surviving spouse's right to reject, and the
effect of a rejection of, distribution in such
form.
5.2.3. NONSPOUSE BENEFICIARIES. If the Beneficiary is not the
spouse of the deceased Participant, distribution shall be made to the
Beneficiary in a single lump sum equal to the Participant's Account Balance as
of the first day of any month following the death of the Participant and the
filing by the Beneficiary of any required application (which shall include proof
of death) with the PRAC (but in all events actual payment shall be made not
later than five (5) years after the date of the death of the Participant).
5.3. DESIGNATION OF BENEFICIARIES.
5.3.1. RIGHT TO DESIGNATE. Each Participant may designate,
upon forms to be furnished by and filed with the PRAC, one or more primary
Beneficiaries or alternative Beneficiaries to receive all or a specified part of
the Participant's Vested Account Balance in the event of the Participant's
death. The Participant may change or revoke any such designation from time to
time without notice to or consent from any Beneficiary or spouse. No such
designation, change or revocation shall be effective unless executed by the
Participant and received by the PRAC during the Participant's lifetime. If,
however, such designation of a Beneficiary is made before the first day of the
Plan Year in which the Participant attains age thirty-five (35) years and the
Participant dies on or after that date while married, the Beneficiary
designation is void.
5.3.2. SPOUSAL CONSENT. Notwithstanding the foregoing, a
designation will not be valid for the purpose of paying benefits from the Plan
to anyone other than a surviving spouse of the Participant (if there is a
surviving spouse) unless that surviving spouse consents in writing to the
designation of another person as Beneficiary. To be valid, the consent of such
spouse must be in writing, must acknowledge the effect of the designation of the
Beneficiary and must be witnessed by a notary public. The consent of the spouse
must be to the designation of a specific named Beneficiary which may not be
changed without further spousal consent, or alternatively, the consent of the
spouse must expressly permit the Participant to make and to change the
designation of Beneficiaries without any requirement of further spousal consent.
The consent of the spouse to a Beneficiary is a waiver of the spouse's rights to
death benefits under the Plan. The consent of the surviving spouse need not be
given at the time the designation is made. The consent of the surviving spouse
need not be given before the death of the Participant. The consent of the
surviving spouse will be required, however, before benefits can be paid to any
person other than the surviving spouse. The consent of a spouse shall be
irrevocable and shall be effective only with respect to that spouse. The
provisions of this Section 5.3.2 shall not apply to a spouse of a Participant
who became such after benefits have commenced to such Participant.
5.3.3. FAILURE OF DESIGNATION. If a Participant:
(a) fails to designate a Beneficiary;
(b) designates a Beneficiary and thereafter such
designation is revoked without another Beneficiary
being named; or
(c) designates one or more Beneficiaries and all such
Beneficiaries so designated fail to survive the
Participant;
such Participant's Vested Account Balance, or the part thereof as to which such
Participant's designation fails, as the case may be, shall be payable to the
first class of the following classes of automatic Beneficiaries with a member
surviving the Participant in equal shares (except in the case of the
Participant's surviving issue) if there is more than one member in such class
surviving the Participant:
Participant's surviving spouse
Participant's surviving issue per stirpes and not per capita
Participant's surviving parents
Participant's surviving brothers and sisters
Representative of Participant's estate.
5.3.4. DISCLAIMERS BY BENEFICIARIES. A Beneficiary entitled
to a distribution of all or a portion of a deceased Participant's Vested Account
Balance may disclaim his or her interest therein subject to the requirements of
this Section 5.3.4. To be eligible to disclaim, a Beneficiary must be a natural
person, must not have received a distribution of all or any portion of a Vested
Account Balance at the time such disclaimer is executed and delivered, and must
have attained at least age twenty-one (21) years as of the date of the
Participant's death. Any disclaimer must be in writing and must be executed
personally by the Beneficiary before a notary public. A disclaimer shall state
that the Beneficiary's entire interest in the undistributed Vested Account
Balance is disclaimed or shall specify what portion thereof is disclaimed. To be
effective, duplicate original executed copies of the disclaimer must be both
executed and actually delivered to both the PRAC and to the Trustee after the
date of the Participant's death but not later than one hundred eighty (180) days
after the date of the Participant's death. A disclaimer shall be irrevocable
when delivered to both the PRAC and the Trustee. A disclaimer shall be
considered to be delivered to the PRAC or the Trustee only when actually
received by the PRAC or the Trustee (and in the case of a corporate Trustee,
shall be considered to be delivered only when actually received by a trust
officer familiar with the affairs of the Plan, which trust officer shall
immediately inform the PRAC of such receipt). The PRAC (and not the Trustee)
shall be the sole judge of the content, interpretation and validity of a
purported disclaimer. Upon the filing of a valid disclaimer, the Beneficiary
shall be considered not to have survived the Participant as to the interest
disclaimed. A disclaimer by a Beneficiary shall not be considered to be a
transfer of an interest in violation of the provisions of Section 6 and shall
not be considered to be an assignment or alienation of benefits in violation of
federal law prohibiting the assignment or alienation of benefits under this
Plan. No other form of attempted disclaimer shall be recognized by either the
PRAC or the Trustee.
5.3.5. DEFINITIONS. When used herein and, unless the
Participant has otherwise specified in the Participant's Beneficiary
designation, when used in a Beneficiary designation, "issue" means all persons
who are lineal descendants of the person whose issue are referred to, including
legally adopted descendants and their descendants but not including illegitimate
descendants and their descendants; "child" means an issue of the first
generation; "per stirpes" means in equal shares among living children of the
person whose issue are referred to and the issue (taken collectively) of each
deceased child of such person, with such issue taking by right of representation
of such deceased child; and "survive" and "surviving" mean living after the
death of the Participant.
5.3.6. SPECIAL RULES. Unless the Participant has otherwise
specified in the Participant's Beneficiary designation, the following rules
shall apply:
(a) If there is not sufficient evidence that a
Beneficiary was living at the time of the death of
the Participant, it shall be deemed that the
Beneficiary was not living at the time of the death
of the Participant.
(b) The automatic Beneficiaries specified in Section
5.3.3 and the Beneficiaries designated by the
Participant shall become fixed at the time of the
Participant's death so that, if a Beneficiary
survives the Participant but dies before the
receipt of all payments due such Beneficiary
hereunder, such remaining payments shall be payable
to the representative of such Beneficiary's estate.
(c) If the Participant designates as a Beneficiary the
person who is the Participant's spouse on the date
of the designation, either by name or by
relationship, or both, the dissolution, annulment
or other legal termination of the marriage between
the Participant and such person shall automatically
revoke such designation. (The foregoing shall not
prevent the Participant from designating a former
spouse as a Beneficiary on a form executed by the
Participant and received by the PRAC after the date
of the legal termination of the marriage between
the Participant and such former spouse, and during
the Participant's lifetime.)
(d) Any designation of a nonspouse Beneficiary by name
that is accompanied by a description of
relationship to the Participant shall be given
effect without regard to whether the relationship
to the Participant exists either then or at the
Participant's death.
(e) Any designation of a Beneficiary only by statement
of relationship to the Participant shall be
effective only to designate the person or persons
standing in such relationship to the Participant at
the Participant's death.
A Beneficiary designation is permanently void if it either is executed or is
filed by a Participant who, at the time of such execution or filing, is then a
minor under the law of the state of the Participant's legal residence. The PRAC
(and not the Trustee) shall be the sole judge of the content, interpretation and
validity of a purported Beneficiary designation.
SECTION 6
SPENDTHRIFT PROVISIONS
No Participant or Beneficiary or Joint Annuitant shall have any transmissible
interest in any Accrued Benefit nor shall any Participant or Beneficiary or
Joint Annuitant have any power to anticipate, alienate, dispose of, pledge or
encumber the same while in the possession or control of the Trustee, nor shall
the Trustee, the Employer, the PRC, or the PRAC recognize any assignment
thereof, either in whole or in part, nor shall any Accrued Benefit be subject to
attachment, garnishment, execution following judgment or other legal process
while in the possession or control of the Trustee.
The power to designate Beneficiaries to receive the Vested Accrued Benefit of a
Participant in the event of death shall not permit or be construed to permit
such power or right to be exercised by the Participant so as thereby to
anticipate, pledge, mortgage or encumber the Participant's Accrued Benefit or
any part thereof, and any attempt of a Participant so to exercise said power in
violation of this provision shall be of no force and effect and shall be
disregarded by the Employer, the PRC, the PRAC and the Trustee.
This Section shall not prevent the Employer, the PRC, the PRAC or the Trustee
from exercising, in their discretion, any of the applicable powers and options
granted to them upon the occurrence of a Termination of Employment, as such
powers may be conferred upon them by any applicable provision hereof. This
Section shall not prevent the Employer, the PRC, the PRAC or the Trustee from
observing the terms of a qualified domestic relations order as provided in
Appendix C to this Plan Document.
SECTION 7
AMENDMENT AND TERMINATION
7.1. AMENDMENT. The Principal Sponsor reserves the power to amend this Plan
Document either prospectively or retroactively or both:
(a) in any respect by resolution of its Board of
Directors; or
(b) by the PRC
(i) in any respect that does not
materially increase the cost of the
Plan, or
(ii) to the extent necessary, proper or
desirable to maintain the Plan's
tax qualification under the Code or
compliance under ERISA;
provided that no amendment shall be effective to reduce or divest the Accrued
Benefit of any Participant unless the same shall have been adopted with the
consent of the Secretary of Labor pursuant to the provisions of ERISA, or in
order to comply with the provisions of the Code and the regulations and rulings
thereunder affecting the tax-qualified status of the Plan and the deductibility
of Employer contributions thereto.
7.2. DISCONTINUANCE OF CONTRIBUTIONS AND TERMINATION OF PLAN. The Board of
Directors of the Principal Sponsor reserves the right to totally or partially
terminate the Plan. Upon the termination of the Plan, each Participant,
Beneficiary and Joint Annuitant shall look solely to the assets of the Fund
created for the purposes of the Plan and shall have no claim against the
Employer on account of the inadequacy of the assets of the Fund to adequately
provide the benefits otherwise apparently promised in this Plan Document. The
rights of Participants who shall then retire or who have theretofore retired
from the employment of the Employer and who or whose designated Joint Annuitants
or Beneficiaries are then entitled to receive a retirement benefit or who are
then in receipt of a retirement benefit hereunder and the rights of Participants
who, on the date of such termination, are then employed by the Employer shall be
determined in accordance with section 4044 of ERISA. Notwithstanding the
foregoing, the benefit of any highly compensated employee and any highly
compensated former employee (as defined in Appendix E to this Plan Document) is
limited to a benefit that is nondiscriminatory under section 401(a)(4) of the
Code. Any funds held by the Trustee after making the allocations described in
said section 4044 shall revert to and be paid to the Employer.
7.3. MERGER OR SPINOFF OF PLANS.
7.3.1. IN GENERAL. The PRC may cause all or a part of this
Plan to be merged with all or a part of any other plan and may cause all or a
part of the assets and liabilities to be transferred from this Plan to another
plan. In the case of merger or consolidation of this Plan with, or transfer of
assets and liabilities of this Plan to, any other plan, each Participant shall
(if such other plan were then terminated) receive a benefit immediately after
the merger, consolidation or transfer which is not less than the benefit the
Participant would have been entitled to receive immediately before the merger,
consolidation or transfer (if this Plan had then terminated).
7.3.2. LIMITATIONS. In no event shall assets be transferred
from any other plan to this Plan unless this Plan complies (or has been amended
to comply) with the optional form of benefit requirements of section
411(d)(6)(B)(ii) of the Code with respect to such transferred assets. In no
event shall assets be transferred from this Plan to any other plan unless such
other plan complies (or has been amended to comply) with the optional form of
benefit requirements of section 411(d)(6)(B)(ii) of the Code with respect to
such transferred assets.
7.3.3. BENEFICIARY DESIGNATIONS. If assets and liabilities
are transferred from another plan to this Plan, Beneficiary designations made
under that plan shall become void on the date as of which such transfer is made
and the Beneficiary designation rules of this Plan Document shall apply
beginning on such date (unless the PRAC adopts rules to the contrary).
7.4. ADOPTION BY BUSINESS AFFILIATES.
7.4.1. ADOPTION BY CONSENT. The PRC may consent to the
adoption of the Plan by any business entity affiliated with the Principal
Sponsor (subject to such conditions as the PRC may impose).
7.4.2. PROCEDURE FOR ADOPTION. Any such adopting business
entity shall initiate its adoption of the Plan by delivery of a certified copy
of the resolutions of its board of directors (or other authorized body or
individual) adopting this Plan Document to the PRC. Upon the consent by the PRC
in writing to the adoption by the adopting business entity, and the delivery to
the Trustee of written evidence of the PRC's consent, the adoption of the Plan
by the adopting business entity shall be effective as of the date specified by
the PRC. If such adopting business entity is not a corporation, any reference in
the Plan Document to its board of directors shall be deemed to refer to such
entity's governing body or other authorized individual.
7.4.3. EFFECT OF ADOPTION. Upon the adoption of the Plan by
an adopting business entity as heretofore provided, the adopting business entity
shall be an Employer hereunder in all respects. Each adopting business entity,
as a condition of continued participation in the Plan, delegates to the
Principal Sponsor the sole power and authority over all Plan matters except that
the board of directors of each adopting business entity shall have the power to
amend this Plan Document as applied to it by establishing a successor plan to
which assets and liabilities may be transferred as provided in Section 7.3 and
to terminate the Plan as applied to it. Each reference herein to the Employer
shall include the Principal Sponsor and all adopting business entities unless
the context clearly requires otherwise.
7.4.4. ADOPTION BY SUBSIDIARY. As of the Effective Date,
Imation Enterprises Corp. has so adopted the Plan.
SECTION 8
FUNDING OF THE PLAN
8.1. CONCERNING THE TRUSTEE. The Principal Sponsor shall enter into and shall
continue in force a Trust Agreement with a Trustee establishing a Fund for the
purpose of receiving contributions made in support of the Plan, managing the
assets of the Plan, paying the reasonable expenses of the Plan and disbursing
benefits determined by the PRAC to be due under the Plan. The Principal Sponsor
by action of the PRC reserves the right to select the Trustee, remove a Trustee
and amend the Trust Agreement from time to time and at any time.
As of the Effective Date, the Trust Agreement in effect is entitled "IMATION
CASH BALANCE PENSION TRUST AGREEMENT," and designates STATE STREET BANK AND
TRUST COMPANY as Trustee.
The rights and obligations of the Trustee shall be determined solely under the
terms of the Trust Agreement. The Trustee is not a party to this Plan Document
and the terms of this Plan Document shall not be binding on the Trustee except
to the extent that they are expressly incorporated by reference into the Trust
Agreement or are made binding upon the Trustee as a matter of law.
8.2. COST OF PLAN. During the continuation of the Plan and after consultation
with the Actuary, the Employer will determine and contribute annually or more
frequently to the Trustee such amounts which, together with the principal and
accumulated earnings, will comply with the provisions of the Code and ERISA.
Participants will neither be required nor permitted to make contributions to the
Fund in support of the Plan. Each contribution to the Plan is conditioned upon
its deductibility for federal income tax purposes.
8.3. CONTRIBUTIONS NOT TO BE DIVERTED. Except as hereinafter provided, no part
of the contributions that the Employer makes under the Plan shall be available
to the Employer for any purpose except for providing benefits under the Plan to
Participants, Joint Annuitants and Beneficiaries under the Plan until all such
liabilities have been satisfied in full. If the deduction for federal income tax
purposes under section 404 of the Code should be disallowed, in whole or in
part, for any Employer contribution to the Plan for any year, or if any Employer
contribution to the Plan is made by reason of a mistake of fact, then there
shall be calculated the excess of the amount contributed over the amount that
would have been contributed had there not occurred a mistake in determining the
deduction or a mistake of fact. The PRAC, at its election, may direct the
Trustee to return such excess, adjusted for its pro rata share of any net loss
(but not any net gain) in the value of the Fund which accrued while such excess
was held therein, to the Employer within one (1) year of the disallowance of the
deduction or the mistaken payment of the contribution, as the case may be.
SECTION 9
DETERMINATIONS -- RULES AND REGULATIONS
9.1. DETERMINATIONS. The PRAC shall make such determinations as may be required
from time to time in the administration of the Plan. The PRAC shall have the
final authority and responsibility to interpret and construe the Plan Document
and to determine all factual and legal questions under the Plan, including but
not limited to the entitlement of employees, Participants, Joint Annuitants and
Beneficiaries and the amounts of their respective interests. The Trustee and
other interested parties may act and rely upon all information reported to them
hereunder and need not inquire into the accuracy thereof, nor be charged with
any notice to the contrary.
9.2. RULES AND REGULATIONS. The PRAC may adopt, by resolution, any rules not in
conflict or at variance with the provisions hereof to satisfy its obligations
under this Plan Document.
9.3. METHOD OF EXECUTING INSTRUMENTS. Information to be supplied or written
notices to be made or consents to be given by the Principal Sponsor, the
Employer, the PRC or the PRAC pursuant to any provision of this Plan Document
may be signed in the name of the Principal Sponsor or Employer by any officer
thereof who has been authorized to make such certification or to give such
notices or consents or by any member of an authorized committee.
9.4. CLAIMS PROCEDURE. Until modified by the PRAC, the claims procedure set
forth in this Section 9.4 shall be the claims procedure for the resolution of
disputes and disposition of claims arising under the Plan. An application for
benefits under Sections 3 or 5 shall be considered as a claim for the purposes
of this Section.
9.4.1. ORIGINAL CLAIM. Any employee, former employee, or
Joint Annuitant or Beneficiary of such employee or former employee may, if the
employee, former employee, Joint Annuitant or Beneficiary so desires, file with
the PRAC a written claim for benefits under the Plan. Within ninety (90) days
after the filing of such a claim, the PRAC shall notify the claimant in writing
whether the claim is upheld or denied in whole or in part or shall furnish the
claimant a written notice describing specific special circumstances requiring a
specified amount of additional time (but not more than one hundred eighty (180)
days from the date the claim was filed) to reach a decision on the claim. If the
claim is denied in whole or in part, the PRAC shall state in writing:
(a) the specific reasons for the denial,
(b) the specific references to the pertinent provisions
of this Plan Document on which the denial is based,
(c) a description of any additional material or
information necessary for the claimant to perfect
the claim and an explanation of why such material
or information is necessary, and
(d) an explanation of the claims review procedure set
forth in this Section.
9.4.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after
receipt of notice that the claim has been denied in whole or in part, the
claimant may file with the PRAC a written request for a review and may, in
conjunction therewith, submit written issues and comments. Within sixty (60)
days after the filing of such a request for review, the PRAC shall notify the
claimant in writing whether, upon review, the claim was upheld or denied in
whole or in part or shall furnish the claimant a written notice describing
specific special circumstances requiring a specified amount of additional time
(but not more than one hundred twenty days (120) from the date the request for
review was filed) to reach a decision on the request for review.
9.4.3. GENERAL RULES.
(a) No inquiry or question shall be deemed to be a
claim or a request for a review of a denied claim
unless made in accordance with the claims
procedure. The PRAC may require that any claim for
benefits and any request for a review of a denied
claim be filed on forms to be furnished by the PRAC
upon request.
(b) All decisions on original claims shall be made by
the PRAC (or by another entity, committee or person
pursuant to the authority so delegated by
resolution of the PRAC) and requests for a review
of denied claims shall be made by the PRAC (or such
delegee).
(c) The PRAC may, in its discretion, hold one or more
hearings on a claim or a request for a review of a
denied claim.
(d) Claimants may be represented by a lawyer or other
representative at their own expense, but the PRAC
reserves the right to require the claimant to
furnish written authorization. A claimant's
representative shall be entitled to copies of all
notices given to the claimant.
(e) The decision of the PRAC on an original claim and
of the PRAC on a request for a review of a denied
claim shall be served on the claimant in writing.
If a decision or notice is not received by a
claimant within the time specified, the claim or
request for a review of a denied claim shall be
deemed to have been denied.
(f) Prior to filing a claim or a request for a review
of a denied claim, the claimant or the claimant's
representative shall have a reasonable opportunity
to review a copy of this Plan Document and all
other pertinent documents in the possession of the
Employer, the PRAC and the Trustee.
(g) Any claimant to benefits under this Plan shall be
required to exhaust the procedures of this Section
9.4 before commencing any legal action with respect
to such benefits.
9.5. INFORMATION FURNISHED BY PARTICIPANTS. Neither the Employer, nor the PRC,
nor the PRAC, nor the Trustee shall be liable or responsible for any error in
the computation of the Accrued Benefit of a Participant resulting from any
misstatement of fact made by the Participant, directly or indirectly, to the
Employer, the PRC, the PRAC or the Trustee and used by them in determining the
Participant's Accrued Benefit. Neither the Employer nor the PRC nor the PRAC nor
the Trustee shall be obligated or required to increase the Accrued Benefit of
such Participant which, on discovery of the misstatement, is found to be
understated as a result of such misstatement of the Participant. However, the
Accrued Benefit of any Participant which is overstated by reason of any such
misstatement shall be reduced to the amount appropriate for the Participant in
view of the truth. Any refund received upon reduction of an Accrued Benefit so
made shall be used to reduce the next succeeding contribution of the Employer to
the Plan.
SECTION 10
PLAN ADMINISTRATION
10.1. PRINCIPAL SPONSOR.
10.1.1. OFFICERS. Except as hereinafter provided, functions
generally assigned to the Principal Sponsor shall be discharged by its officers
or delegated and allocated as provided herein.
10.1.2. CHIEF EXECUTIVE OFFICER. Except as hereinafter
provided, the Chief Executive Officer of the Principal Sponsor may delegate or
redelegate and allocate and reallocate to one or more persons or to a committee
of persons jointly or severally, and whether or not such persons are directors,
officers or employees, such functions assigned to the Principal Sponsor
hereunder as the Chief Executive Officer may from time to time deem advisable.
10.1.3. BOARD OF DIRECTORS. Notwithstanding the foregoing,
the Board of Directors of the Principal Sponsor shall have the exclusive
authority, which may not be delegated, to act for the Principal Sponsor to
terminate the Plan.
10.2. COMMITTEES.
10.2.1. PRC -- APPOINTMENT AND REMOVAL. The PRC shall consist
of 3 or more members as may be determined and appointed from time to time by the
Chief Executive Officer of the Principal Sponsor and they shall serve at the
pleasure of such Chief Executive Officer. Members of the PRC shall be employees
of the Employer and shall serve without compensation, but their reasonable
expenses shall be an expense of the administration of the Fund and shall be paid
by the Trustee from and out of the Fund except to the extent the Employer, in
its discretion, directly pays such expenses.
10.2.2. PRC -- DUTIES. The PRC may elect such officers as the
PRC may decide upon. In addition to the other duties described in this Plan
Document, the PRC shall:
(a) establish rules for the functioning of the PRC,
including the times and places for holding
meetings, the notices to be given in respect of
such meetings and the number of members who shall
constitute a quorum for the transaction of
business,
(b) organize and delegate to such person or persons
(who need not be members of the PRC) as it shall
select, authority to execute or authenticate rules,
advisory opinions or instructions, and other
instruments adopted or authorized by the PRC; adopt
such bylaws or regulations as it deems desirable
for the conduct of its affairs; appoint a
secretary, who need not be a member of the PRC, to
keep its records and otherwise assist the PRC in
the performance of its duties; keep a record of all
its proceedings and acts and keep all books of
account, records and other data as may be necessary
for its administration of the Plan; notify the
Employer and the Trustee of any action taken by the
PRC and, when required, notify any other interested
person or persons,
(c) set up such rules as are deemed necessary to carry
out its administration of the terms of this Plan
Document,
(d) appoint and remove members of the PRAC and assign
to it duties under the Plan,
(e) perform all other acts reasonably necessary for its
administration of the Plan and carrying out the
provisions of this Plan Document and the Trust
Agreement and performing the duties imposed on it,
and
(f) delegate or redelegate to one or more persons,
jointly or severally, and whether or not such
persons are members of the PRC or employees of the
Employer, such functions assigned to the PRC
hereunder as it may from time to time deem
advisable.
10.2.3. PRAC -- APPOINTMENT AND REMOVAL. The PRAC shall
consist of 3 or more members as may be determined and appointed from time to
time by the PRC and they shall serve at the pleasure of the PRC. Members of the
PRAC shall be employees of the Employer and shall serve without compensation,
but their reasonable expenses shall be an expense of the administration of the
Fund and shall be paid by the Trustee from and out of the Fund except to the
extent the Employer, in its discretion, directly pays such expenses.
10.2.4. PRAC -- DUTIES. The PRAC may elect such officers as
the PRAC may decide upon. In addition to other duties described in this Plan
Document, the PRAC shall:
(a) organize and delegate to such person or persons
(who need not be members of the PRAC) as it shall
select, authority to execute or authenticate rules,
advisory opinions or instructions, and other
instruments adopted or authorized by the PRAC;
adopt such bylaws or regulations as it deems
desirable for the conduct of its affairs; appoint a
secretary, who need not be a member of the PRAC, to
keep its records and otherwise assist the PRAC in
the performance of its duties; keep a record of all
its proceedings and acts and keep all books of
account, records and other data as may be necessary
for its administration of the Plan; notify the
Employer and the Trustee of any action taken by the
PRAC and, when required, notify any other
interested person or persons,
(b) determine from the records of the Employer the
compensation, service records, status and other
facts regarding Participants and other employees,
(c) cause to be compiled at least annually, from the
records of the PRC and the PRAC and the reports and
accountings of the Trustee, a report or accounting
of the status of the Plan and the Accrued Benefits
of the Participants, and make it available to each
Participant who shall have the right to examine
that part of such report or accounting (or a true
and correct copy of such part) which sets forth the
Participant's benefits and ratable interest in the
Fund,
(d) prescribe forms to be used for applications for
benefits, notifications, etc., as may be required
in the administration of the Plan,
(e) set up such rules as are deemed necessary to carry
out its administration of the terms of this Plan
Document,
(f) appoint, supervise, and remove recordkeepers,
(g) perform all other acts reasonably necessary for its
administration of the Plan and carrying out the
provisions of this Plan Document and performing the
duties imposed on it by the PRC,
(h) resolve all questions of administration of the Plan
not specifically referred to in this Section, and
(i) delegate or redelegate to one or more persons,
jointly or severally, and whether or not such
persons are members of the PRAC or employees of the
Employer, such functions assigned to the PRAC
hereunder as it may from time to time deem
advisable.
10.2.5. AUTOMATIC REMOVAL. If any individual who is a member
of a committee established in accordance with this section is a director,
officer or employee when appointed as a member of the committee, then such
individual shall be automatically removed as a member of the committee at the
earliest time such individual ceases to be a director, officer or employee. This
removal shall occur automatically and without any requirement for action by the
Chief Executive Officer of the Principal Sponsor or the PRC and without any
notice to the individual so removed.
10.2.6. MAJORITY DECISIONS. If there shall at any time be
three (3) or more members of a committee serving hereunder who are qualified to
perform a particular act, the same may be performed, on behalf of all, by a
majority of those qualified, with or without the concurrence of the minority. No
person who failed to join or concur in such act shall be held liable for the
consequences thereof, except to the extent that liability is imposed under
ERISA.
10.3. LIMITATION ON AUTHORITY.
10.3.1. FIDUCIARIES GENERALLY. No action taken by any
fiduciary, if authority to take such action has been delegated or redelegated to
it, shall be the responsibility of any other fiduciary except as may be required
by the provisions of ERISA. Except to the extent imposed by ERISA, no fiduciary
shall have the duty to question whether any other fiduciary is fulfilling all of
the responsibility imposed upon such other fiduciary under the Plan Document or
by ERISA.
10.3.2. TRUSTEE. The responsibilities and obligations of the
Trustee shall be strictly limited to those set forth in the agreement entitled
"Imation Cash Balance Pension Trust Agreement" or any successor document. The
Trustee shall have no authority or duty to determine or enforce payment of any
Employer contribution under the Plan or to determine the existence, nature or
extent of any individual's rights in the Fund or under the Plan or question any
determination made by the Principal Sponsor or the committees regarding the
same. Nor shall the Trustee be responsible in any way for the manner in which
the Principal Sponsor, the Employer, the PRC, or the PRAC carry out their
responsibilities under this Plan Document or, more generally, under the Plan.
10.4. CONFLICT OF INTEREST. If any officer or employee of the Employer, any
member of the Board of Directors of the Principal Sponsor, any member of the PRC
or the PRAC, or any Trustee to whom authority has been delegated or redelegated
hereunder shall also be a Participant, Joint Annuitant or Beneficiary in the
Plan, the individual shall have no authority as such officer, employee, member
or Trustee with respect to any matter specially affecting his or her individual
interest hereunder (as distinguished from the interests of all Participants,
Joint Annuitants and Beneficiaries or a broad class of Participants, Joint
Annuitants and Beneficiaries), all such authority being reserved exclusively to
the other officers, employees, members or Trustees, as the case may be, to the
exclusion of such Participant, Joint Annuitant or Beneficiary, and such
Participant, Joint Annuitant or Beneficiary shall act only in his or her
individual capacity in connection with any such matter.
10.5. DUAL CAPACITY. Individuals, firms, corporations or partnerships
identified herein or delegated or allocated authority or responsibility
hereunder may serve in more than one fiduciary capacity.
10.6. ADMINISTRATOR. The Principal Sponsor shall be the plan administrator for
purposes of section 3(16)(A) of ERISA.
10.7. NAMED FIDUCIARIES. The PRC, PRAC, and the Trustee shall be named
fiduciaries for the purpose of section 402(a) of ERISA.
10.8. SERVICE OF PROCESS. In the absence of any designation to the contrary by
the PRC, the corporate secretary of the Principal Sponsor is designated as the
appropriate and exclusive agent for the receipt of service of process directed
to the Plan in any legal proceeding, including arbitration, involving the Plan.
10.9. ADMINISTRATIVE EXPENSES. The reasonable expenses of administering the
Plan shall be payable out of the Fund except to the extent that the Employer, in
its discretion, directly pays the expenses.
10.10. IRS QUALIFICATION - TYPE OF PLAN. This Plan is intended to qualify under
section 401(a) of the Code as a defined-benefit pension plan (and not as a
defined-contribution plan).
SECTION 11
IN GENERAL
11.1. DISCLAIMERS.
11.1.1. EFFECT ON EMPLOYMENT. Neither the terms of this Plan
Document nor the benefits hereunder nor the continuance thereof shall be a term
of the employment of any employee, and the Employer shall not be obliged to
continue the Plan. The terms of this Plan Document shall not give any employee
the right to be retained in the employment of the Employer.
11.1.2. SOLE SOURCE OF BENEFITS. Neither the Employer nor any
of its officers or employees nor any member of its board of directors nor any
member of the PRC or the PRAC nor the Trustee in any way guarantee the Fund
against loss or depreciation, nor do they guarantee the payment of any benefit
or amount which may become due and payable hereunder to any Participant, Joint
Annuitant, Beneficiary or other person. Each Participant, Joint Annuitant,
Beneficiary or other person entitled at any time to payments hereunder shall
look solely to the assets of the Fund for such payments. If a Vested Accrued
Benefit shall have been distributed to a former Participant, Joint Annuitant,
Beneficiary or any other person entitled jointly to the receipt thereof (or
shall have been transferred to the trustee of another tax-qualified deferred
compensation plan), such former Participant, Joint Annuitant, Beneficiary or
other person, as the case may be, shall have no further right or interest in the
other assets of the Fund.
11.1.3. CO-FIDUCIARY MATTERS. Neither the Employer nor any of
its officers or employees nor any member of its board of directors nor any
member of the PRC or the PRAC shall in any manner be liable to any Participant,
Joint Annuitant, Beneficiary or other person for any act or omission of the
Trustee (except to the extent that liability is imposed under ERISA). Neither
the Employer nor any of its officers or employees nor any member of its board of
directors nor any member of the PRC or the PRAC nor the Trustee shall be under
any liability or responsibility (except to the extent that liability is imposed
under ERISA) for failure to effect any of the objectives or purposes of the Plan
by reason of loss or fluctuation in the value of Fund or for the form,
genuineness, validity, sufficiency or effect of any Fund asset at any time held
hereunder, or for the failure of any person, firm or corporation indebted to the
Fund to pay such indebtedness as and when the same shall become due or for any
delay occasioned by reason of any applicable law, order or regulation or by
reason of any restriction or provision contained in any security or other asset
held by the Fund. Except as is otherwise provided in ERISA, the Employer and its
officers, employees, the members of its board of directors, the members of the
PRC or the PRAC, the Trustee and other fiduciaries shall not be liable for an
act or omission of another person with regard to a fiduciary responsibility that
has been allocated to or delegated in whole or in part to such other person
pursuant to the terms of this Plan Document or pursuant to procedures set forth
in this Plan Document.
11.2. REVERSION OF FUND PROHIBITED. The Fund shall at all times be a trust fund
separate and apart from the assets of the Employer, and no part thereof shall be
or become available to the Employer or to creditors of the Employer under any
circumstances other than those specified in Sections 7.2 and 8.3 and Appendix A
to this Plan Document. It shall be impossible for any part of the corpus or
income of the Fund to be used for, or diverted to, purposes other than for the
exclusive benefit of Participants, Joint Annuitants and Beneficiaries (except as
hereinbefore provided).
11.3. CONTINGENT TOP HEAVY PLAN RULES. The rules set forth in Appendix B to this
Plan Document (concerning additional provisions that apply if the Plan becomes
top heavy) are incorporated herein.
APPENDIX A
LIMITATION ON BENEFITS
SECTION 1
INTRODUCTION
Terms defined in the Plan Document shall have the same meanings when used in
this Appendix. In addition, when used in this Appendix, the following terms
shall have the following meanings:
1.1. ANNUAL ADDITION. Annual addition means, with respect to any Participant for
a limitation year, the sum of:
(i) all employer contributions
(including employer
contributions of the
Participant's earnings
reductions under section
401(k), section 403(b) and
section 408(k) of the Code)
allocable as of a date during
such limitation year to the
Participant under all defined
contribution plans;
(ii) all forfeitures allocable as
of a date during such
limitation year to the
Participant under all defined
contribution plans; and
(iii) all Participant contributions
made as of a date during such
limitation year to all defined
contribution plans.
1.1.1. SPECIFIC INCLUSIONS. With regard to a plan which
contains a qualified cash or deferred arrangement or matching contributions or
employee contributions, excess deferrals and excess contributions and excess
aggregate contributions (whether or not distributed during or after the
limitation year) shall be considered annual additions in the year contributed.
1.1.2. SPECIFIC EXCLUSIONS. The annual addition shall not,
however, include any portion of a Participant's rollover contributions or any
additions to accounts attributable to a plan merger or a transfer of plan assets
or liabilities or any other amounts excludable under law.
1.1.3. ESOP RULES. In the case of an employee stock ownership
plan within the meaning of section 4975(e)(7) of the Code, annual additions
shall not include any dividends or gains on sale of employer securities held by
the employee stock ownership plan (regardless of whether such dividends or gains
are (i) on securities which are allocated to Participants' accounts or (ii) on
securities which are not allocated to Participants' accounts which, in the case
of dividends used to pay principal on an employee stock ownership plan loan,
result in employer securities being allocated to Participants' accounts or, in
the case of a sale, result in sale proceeds being allocated to Participants'
accounts). In the case of an employee stock ownership plan under which no more
than one-third (1/3rd) of the employer contributions for a limitation year which
are deductible under section 404(a)(9) of the Code are allocated to highly
compensated employees (as defined in section 414(q) of the Code), annual
additions shall not include forfeitures of employer securities under the
employee stock ownership plan if such securities were acquired with the proceeds
of an exempt loan or employer contributions to the employee stock ownership plan
which are deductible by the employer under section 404(a)(9)(B) of the Code and
charged against the Participant's account (i.e., interest payments).
1.2. ANNUAL BENEFIT. Annual benefit means a retirement benefit under a defined
benefit plan which is payable annually in the form of a straight life annuity.
1.2.1. FIXED LIFE ONLY ANNUITY. Except as provided below, a
benefit payable in a form other than a fixed life only annuity will be adjusted
to the actuarial equivalent straight life annuity before applying the
limitations of this Appendix. To determine this actuarial equivalent, the
interest rate assumption shall be the greater of the interest rate specified in
the defined benefit plan's Plan Document or five percent (5%) and the mortality
assumption shall be that specified in the defined benefit plan's Plan Document
(except that no mortality assumption shall be used for the Imation Retirement
Plan for ages before 62).
1.2.2. EXCLUDED CONTRIBUTIONS. The annual benefit does not
include any benefits attributable to employee contributions, rollover
contributions or the assets transferred from a qualified plan that was not
maintained by a controlled group member.
1.2.3. ANCILLARY BENEFITS. No actuarial adjustment to the
annual benefit is required for: (i) the value of a qualified joint and survivor
annuity (to the extent such value exceeds the sum of the value of a fixed life
only annuity beginning on the same date and the value of post-retirement death
benefits that would be paid even if the annuity were not in the form of a joint
and survivor annuity), or (ii) the value of benefits that are not directly
related to retirement benefits (such as a pre-retirement disability benefit, a
pre-retirement death benefit or a post-retirement medical benefit), or (iii) the
value of post-retirement cost-of-living increases made in accordance with
regulations under the Code.
1.3. CONTROLLED GROUP MEMBER. Controlled group member means the Employer and
each member of a controlled group of corporations (as defined in section 414(b)
of the Code and as modified by section 415(h) of the Code), all commonly
controlled trades or businesses (as defined in section 414(c) of the Code and as
modified by section 415(h) of the Code), affiliated service groups (as defined
in section 414(m) of the Code) of which the Employer is a part and other
organizations required to be aggregated for this purpose under section 414(o) of
the Code.
1.4. DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS. Defined benefit plan and
defined contribution plan have the meanings assigned to those terms by section
415(k)(1) of the Code. Whenever reference is made to defined benefit plans and
defined contribution plans in this Appendix, it shall include all such plans
maintained by the Employer and all controlled group members.
1.5. DEFINED BENEFIT FRACTION.
1.5.1. GENERAL RULE. Defined benefit fraction means a fraction
the numerator of which is the sum of the Participant's projected annual benefits
under all defined benefit plans determined as of the close of the limitation
year, and the denominator of which is the lesser of:
(i) one hundred twenty-five percent
(125%) of the dollar limitation
in effect under section
415(b)(l)(A) of the Code as of
the close of such limitation
year (i.e., 125% of $90,000 as
adjusted for cost of living,
commencement dates, length of
service and other factors), or
(ii) one hundred forty percent
(140%) of the dollar amount
which may be taken into account
under section 415(b)(l)(B) of
the Code with respect to such
Participant as of the close of
such limitation year (i.e.,
140% of the Participant's
highest average compensation as
adjusted for cost of living,
length of service and other
factors).
1.5.2. TRANSITION RULE. Notwithstanding the above, if the
Participant was a participant as of the first day of the first limitation year
beginning after December 31, 1986, in one or more defined benefit plans which
were in existence on May 6, 1986, the denominator of this fraction will not be
less than one hundred twenty-five percent (125%) of the sum of the annual
benefits under such plans which the Participant had accrued as of the close of
the last limitation year beginning before January 1, 1987, disregarding any
changes in the terms and conditions of the Plan after May 5, 1986. The preceding
sentence applies only if the defined benefit plans individually and in the
aggregate satisfied the requirements of section 415 of the Code for all
limitation years beginning before January 1, 1987.
1.6. DEFINED CONTRIBUTION FRACTION.
1.6.1. GENERAL RULE. Defined contribution fraction means a
fraction the numerator of which is the sum of the Participant's annual additions
(including Employer contributions which are allocated to a separate account
established for the purpose of providing medical benefits or life insurance
benefits with respect to a key employee (as defined in Appendix B) under a
welfare benefit fund or individual medical account) as of the close of the
limitation year and for all prior limitation years, and the denominator of which
is the sum of the amounts determined under paragraph (i) or (ii) below,
whichever is the lesser, for such limitation year and for each prior limitation
year in which the Participant had any service with the employer (regardless of
whether that or any other defined contribution plan was in existence during
those years or continues in existence):
(i) one hundred twenty-five percent
(125%) of the dollar limitation
in effect under section
415(c)(l)(A) of the Code for
such limitation year determined
without regard to section
415(c)(6) of the Code (i.e.,
125% of $30,000 as adjusted for
cost of living), or
(ii) one hundred forty percent
(140%) of the dollar amount
which may be taken into account
under section 415(c)(l)(B) of
the Code with respect to such
individual under the Plan for
such limitation year (i.e.,
140% of 25% of the
Participant's ss. 415
compensation for such
limitation year).
1.6.2. TEFRA TRANSITION RULE. The Employer may elect that the
amount taken into account for each Participant for all limitation years ending
before January 1, 1983, under Section 1.6.1(i) and Section 1.6.1(ii) shall be
determined pursuant to the special transition rule provided in section 415(e)(6)
of the Code.
1.6.3. EMPLOYEE CONTRIBUTIONS. Notwithstanding the definition
of "annual additions", for the purpose of determining the defined contribution
fraction in limitation years beginning before January 1, 1987, employee
contributions shall not be taken into account to the extent that they were not
required to be taken into account under section 415 of the Code prior to the Tax
Reform Act of 1986.
1.6.4. ANNUAL DENOMINATOR. The amounts to be determined under
Section 1.6.1(i) and Section 1.6.1(ii) for the limitation year and for all prior
limitation years in which the Participant had any service with the employer
shall be determined separately for each such limitation year on the basis of
which amount is the lesser for each such limitation year.
1.6.5. RELEVANT LAW. For all limitation years ending before
January 1, 1976, the dollar limitation under section 415(c)(1)(A) of the Code is
Twenty-five Thousand Dollars ($25,000). For limitation years ending after
December 31, 1975, and before January 1, 1993, the amount shall be:
For limitation years The ss. 415(c)(1)(A)
ending during: dollar amount is:
1976 $26,825
1977 $28,175
1978 $30,050
1979 $32,700
1980 $36,875
1981 $41,500
1982 $45,475
1983-1992 $30,000
1.6.6. RELIEF RULE. If the Participant was a participant as of
the end of the first day of the first limitation year beginning after December
31, 1986, in one or more defined contribution plans which were in existence on
May 6, 1986, the numerator of this fraction will be adjusted if the sum of this
fraction and the defined benefit fraction would otherwise exceed one (1.0) under
the terms of this Plan Document. Under the adjustment, an amount equal to the
product of the excess of the sum of the fractions over one (10), times the
denominator of this fraction, will be permanently subtracted from the numerator
of this fraction. The adjustment is calculated using the fractions as they would
be computed as of the end of the last limitation year beginning before January
1, 1987, and disregarding any changes in the terms and conditions of the plan
made after May 6, 1986, but using the section 415 limitations applicable to the
first limitation year beginning on or after January 1, 1987.
1.7. HIGHEST AVERAGE COMPENSATION. Highest average compensation means the
average ss. 415 compensation for the three (3) consecutive years of service with
the controlled group members that produce the highest average. A year of service
with the controlled group members is the Plan Year.
1.8. INDIVIDUAL MEDICAL ACCOUNT. Individual medical account means an account, as
defined in section 415(1)(2) of the Code maintained by the Employer or a
controlled group member which provides an annual addition.
1.9. LIMITATION YEAR. The limitation year shall be the calendar year.
1.10. MAXIMUM PERMISSIBLE BENEFIT.
1.10.1. GENERAL RULE. The maximum permissible annual benefit
is the lesser of:
(i) Ninety Thousand Dollars
($90,000), or
(ii) the Participant's highest
average compensation.
1.10.2. EARLY COMMENCEMENT. If the annual benefit commences
before the social security retirement age, the maximum permissible benefit may
not exceed the lesser of the actuarial equivalent of a Ninety Thousand Dollar
($90,000) annual benefit beginning at the social security retirement age or the
Participant's highest average compensation. To determine this actuarial
equivalent, the interest rate assumption shall be the greater of the rate
specified in the Appendix D to the Plan Document or five percent (5%) and the
mortality assumption shall be that specified in the Appendix D to the Plan
Document (except that no mortality assumption shall be used for the Imation
Retirement Plan for ages before 62).
1.10.3. LATE COMMENCEMENT. If the annual benefit commences
after the social security retirement age, the benefit may not exceed the lesser
of the actuarial equivalent of a Ninety Thousand Dollar ($90,000) annual benefit
beginning at the social security retirement age or the Participant's highest
average compensation. To determine this actuarial equivalent, the interest rate
assumption shall be the lesser of the rate specified in the Appendix D to the
Plan Document or five percent (5%) and the mortality assumption shall be that
specified in the Appendix D to the Plan Document.
1.10.4. COST-OF-LIVING ADJUSTMENTS. Effective on January 1,
1988, and each January 1 thereafter, the Ninety Thousand Dollar ($90,000) limit
and the highest average compensation limit (for Participants who have separated
from service) shall be adjusted automatically for increases in the cost of
living by the Secretary of the Treasury. The new amounts will apply to
limitation years ending within such calendar year.
1.10.5. PARTICIPATION REDUCTION. If a Participant has less
than ten (10) years of participation in the Plan, the Ninety Thousand Dollar
($90,000) limit otherwise defined and adjusted above (but not the highest
average compensation limit) shall be reduced to an amount equal to ninety
thousand dollars ($90,000) as otherwise defined and adjusted above multiplied by
a fraction:
(i) the numerator of which is the
number of years (and part
thereof) of participation, and
(ii) the denominator of which is ten
(10).
1.10.6. SERVICE REDUCTION. If a Participant has less than ten
(10) years of service with the controlled group members, the highest average
compensation limit otherwise defined and adjusted above (but not the Ninety
Thousand Dollar limit) shall be reduced to an amount equal to the highest
average compensation limit as otherwise defined and adjusted above multiplied by
a fraction:
(i) the numerator of which is the
number of years (and part
thereof) of service, and
(ii) the denominator of which is
ten (10).
1.11. PROJECTED ANNUAL BENEFIT. Projected annual benefit means the annual
benefit payable to the Participant at his or her normal retirement age (as
defined in the defined benefit plan) adjusted to an actuarially equivalent fixed
life only annuity form (or, if it would be a lesser amount, to any actuarially
equivalent qualified joint and survivor annuity form that is available under the
defined benefit plan) assuming that:
(i) the Participant continues
employment and participation
under the defined benefit plan
until his or her normal
retirement age (as defined in
the defined benefit plan) or,
if later, until his or her
current age, and
(ii) the Participant's ss. 415
compensation and all other
factors used to determine
annual benefits under the
defined benefit plan remain
unchanged for all future
limitation years.
1.12. SECTION 415 COMPENSATION. Section 415 compensation (sometimes, "ss. 415
compensation") shall mean, with respect to any limitation year, the wages, tips
and other compensation paid to the Participant by the Employer and reportable in
the box designated "wages, tips, other compensation" on Treasury Form W-2 (or
any comparable successor box or form) for the limitation year but determined
without regard to any rules that limit the remuneration included in wages based
on the nature or location of the employment or the services performed (such as
the exception for agricultural labor in section 3401(a)(2) of the Code). For
limitation years beginning after December 31, 1991, ss. 415 compensation shall
be determined on a cash basis.
1.13. SOCIAL SECURITY RETIREMENT AGE. Social security retirement age means the
age used as retirement age under section 216(l) of the Social Security Act
except that such section shall be applied (i) without regard to the age increase
factor, and (ii) as if the early retirement age under section 216(1)(2) of the
Social Security Act were age sixty-two (62) years.
1.14. WELFARE BENEFIT FUND. Welfare benefit fund means a fund as defined in
section 419(e) of the Code which provides post-retirement medical benefits
allocated to separate accounts for key employees as defined in section
419A(d)(3).
SECTION 2
DEFINED BENEFIT LIMITATION
Notwithstanding anything to the contrary contained in the Plan Document, there
shall not be accrued for the benefit of any Participant for any limitation year
an amount which would cause the annual benefit for such Participant to exceed
the maximum permissible benefit.
SECTION 3
COMBINED PLANS LIMITATION
Notwithstanding anything to the contrary contained in the Plan Document, if the
Participant participates in both a defined benefit plan and a defined
contribution plan, the sum of the defined benefit fraction and the defined
contribution fraction shall not exceed one (1) at the close of any limitation
year.
SECTION 4
REMEDIAL ACTION
4.1. DEFINED BENEFIT PLANS ONLY. If the Participant's annual benefit would
exceed the maximum permissible benefit, the Plan shall cease the accrual of
benefits or reduce benefits previously accrued so that such annual benefit shall
not exceed the maximum permissible amount. It is specifically intended that such
remedial action as may be necessary to prevent an annual benefit from exceeding
the maximum permissible amount in a limitation year shall be made in defined
benefit plans as follows:
(i) if the Participant is accruing
benefits in only this Plan
during such limitation year,
all such cessations and
reductions shall be made in
this Plan; and
(ii) to the extent that such
cessations and reductions are
not adequate and the
Participant has accrued
benefits in one or more other
defined benefit plans in
earlier limitation years, such
cessations and reduction of
accrued benefits under other
plans shall be made in
chronological order as
determined by the effective
date of each plan (using the
original effective date of the
plan) beginning with the most
recently established plan; and
(iii) if the Participant is
concurrently accruing benefits
in this Plan and one or more
other defined benefit plans
during such limitation year,
such cessations and reductions
of accrued benefits under this
Plan and all other plans shall
be made in chronological order
as determined by the effective
date of each plan (using the
original effective date of the
plan) beginning with the most
recently established plan.
4.2. COMBINED DEFINED BENEFIT AND DEFINED CONTRIBUTION PLANS. If the combination
of benefits under all defined contribution plans and all defined benefit plans
would exceed the limits described above which are applicable to a combination of
defined benefit and defined contribution plans, then such Participant shall not
be entitled to the accrual of any benefits under such defined benefit plans to
the extent it would cause such combination of plans to exceed the limits
hereinabove described. If such reduction or curtailment of the accrual of future
benefits under the defined benefit plans and the cancellation of previously
accrued benefits is not adequate to eliminate an excess under the
combination-of-plans rule, then annual additions to the defined contribution
plans shall be reduced. It is specifically intended that the Employer shall
cause the reduction or elimination of future accruals and the cancellation of
previously accrued benefits under all defined benefit plans (other than
terminated defined benefit plans) to occur in the sequence specified in Section
4.1 before any reduction of annual additions to defined contribution plans.
APPENDIX B
CONTINGENT TOP HEAVY PLAN RULES
Notwithstanding any of the foregoing provisions of the Plan
Statement, if, after applying the special definitions set forth in Section 1 of
this Appendix, this Plan is determined under Section 2 of this Appendix to be a
top heavy plan for a Plan Year, then the special rules set forth in Section 3 of
this Appendix shall apply. For so long as this Plan is not determined to be a
top heavy plan, the special rules in Section 3 of this Appendix shall be
inapplicable to this Plan.
SECTION 1
SPECIAL DEFINITIONS
Terms defined in the Plan Statement shall have the same meanings when used in
this Appendix. In addition, when used in this Appendix, the following terms
shall have the following meanings:
1.1. AGGREGATED EMPLOYERS. Aggregated employers means the Employer and each
other corporation, partnership or proprietorship which is a "predecessor" to the
Employer, or is under "common control" with the Employer, or is a member of an
"affiliated service group" that includes the Employer, as those terms are
defined in section 414(b), (c), (m) or (o) of the Code.
1.2. AGGREGATION GROUP. Aggregation group means a grouping of this Plan and:
(a) if any Participant in the Plan is a key employee,
each other qualified pension, profit sharing or stock
bonus plan of the aggregated employers in which a key
employee is a Participant (and for this purpose, a
key employee shall be considered a Participant only
during periods when he is actually accruing benefits
and not during periods when he has preserved accrued
benefits attributable to periods of participation
when he was not a key employee), and
(b) each other qualified pension, profit sharing or stock
bonus plan of the aggregated employers which is
required to be taken into account for this Plan or
any plan described in paragraph (a) above to satisfy
the qualification requirements under section 410 or
section 401(a)(4) of the Code, and
(c) each other qualified pension, profit sharing or stock
bonus plan of the aggregated employers which is not
included in paragraph (a) or (b) above, but which the
Employer elects to include in the aggregation group
and which, when included, would not cause the
aggregation group to fail to satisfy the
qualification requirements under section 410 or
section 401(a)(4) of the Code.
1.3. COMPENSATION. Unless the context clearly requires otherwise, compensation
means the wages, tips and other compensation paid to the Participant by the
Employer and reportable in the box designated "wages, tips, other compensation"
on Treasury Form W-2 (or any comparable successor box or form) for the
applicable period but determined without regard to any rules that limit the
remuneration included in wages based on the nature or location of the employment
or the services performed (such as the exception for agricultural labor in
section 3401(a)(2) of the Code). In determining compensation there shall be
included elective contributions made by the Employer on behalf of the
Participant that are not includible in gross income under sections 125,
402(e)(3), 402(h), 403(b), 414(h)(2) and 457 of the Code including elective
contributions authorized by the Participant under a cafeteria plan or any
qualified cash or deferred arrangement under section 401(k) of the Code. For the
purposes of this Appendix (excluding Section 1.6 of this Appendix), compensation
shall be limited to Two Hundred Thousand Dollars ($200,000) (as adjusted under
the Code for cost of living increases) for Plan Years beginning before January
1, 1994, and One Hundred and Fifty Thousand Dollars ($150,000) (as so adjusted)
for Plan Years beginning after December 31, 1993.
1.4. DETERMINATION DATE. Determination date means, for the first (1st) Plan Year
of a plan, the last day of such first (1st) Plan Year, and for each subsequent
Plan Year, the last day of the immediately preceding Plan Year.
1.5. FIVE PERCENT OWNER. Five percent owner means for each aggregated employer
that is a corporation, any person who owns (or is considered to own within the
meaning of the shareholder attribution rules) more than five percent (5%) of the
value of the outstanding stock of the corporation or stock possessing more than
five percent (5%) of the total combined voting power of the corporation, and,
for each aggregated employer that is not a corporation, any person who owns more
than five percent (5%) of the capital interest or the profits interest in such
aggregated employer. For the purposes of determining ownership percentages, each
corporation, partnership and proprietorship otherwise required to be aggregated
shall be viewed as a separate entity.
1.6. KEY EMPLOYEE. Key employee means each Participant (whether or not then an
employee) who at any time during a Plan Year (or any of the four preceding Plan
Years) is:
(a) an officer of any aggregated employer (excluding
persons who have the title of an officer but not the
authority and including persons who have the
authority of an officer but not the title) having an
annual compensation from all aggregated employers for
any such Plan Year in excess of fifty percent (50%)
of the amount in effect under section 415(b)(1)(A) of
the Code for any such Plan Year, or
(b) one (1) of the ten (10) employees (not necessarily
Participants) owning (or considered to own within the
meaning of the shareholder attribution rules) both
more than one-half of one percent (1/2%) ownership
interest in value and the largest percentage
ownership interests in value of any of the aggregated
employers (which are owned by employees) and who has
an annual compensation from all the aggregated
employers in excess of the limitation in effect under
section 415(c)(1)(A) of the Code for any such Plan
Year, or
(c) a five percent owner, or
(d) a one percent owner having an annual compensation
from the aggregated employers of more than One
Hundred Fifty Thousand Dollars ($150,000);
provided, however, that no more than fifty (50) employees (or, if lesser, the
greater of three of all the aggregated employers' employees or ten percent of
all the aggregated employers' employees) shall be treated as officers. For the
purposes of determining ownership percentages, each corporation, partnership and
proprietorship otherwise required to be aggregated shall be viewed as a separate
entity. For purposes of paragraph (b) above, if two (2) employees have the same
interest in any of the aggregated employers, the employee having the greatest
annual compensation from that aggregated employer shall be treated as having a
larger interest. For the purpose of determining compensation, however, all
compensation received from all aggregated employers shall be taken into account.
The term "key employee" shall include the beneficiaries of a deceased key
employee.
1.7. ONE PERCENT OWNER. One percent owner means, for each aggregated employer
that is a corporation, any person who owns (or is considered to own within the
meaning of the shareholder attribution rules) more than one percent (1%) of the
value of the outstanding stock of the corporation or stock possessing more than
one percent (1%) of the total combined voting power of the corporation, and, for
each aggregated employer that is not a corporation, any person who owns more
than one percent (1%) of the capital or the profits interest in such aggregated
employer. For the purposes of determining ownership percentages, each
corporation, partnership and proprietorship otherwise required to be aggregated
shall be viewed as a separate entity.
1.8. SHAREHOLDER ATTRIBUTION RULES. Shareholder attribution rules means the
rules of section 318 of the Code, (except that subparagraph (C) of section
318(a)(2) of the Code shall be applied by substituting "5 percent" for "50
percent") or, if the Employer is not a corporation, the rules determining
ownership in such Employer which shall be set forth in regulations prescribed by
the Secretary of the Treasury.
1.9. TOP HEAVY AGGREGATION GROUP. Top heavy aggregation group means any
aggregation group for which, as of the determination date, the sum of:
(i) the present value of the cumulative
accrued benefits for key employees
under all defined benefit plans included
in such aggregation group, and
(ii) the aggregate of the accounts of key
employees under all defined
contribution plans included in such
aggregation group,
exceed sixty percent (60%) of a similar sum determined for all employees. In
applying the foregoing, the following rules shall be observed:
(a) For the purpose of determining the present value of
the cumulative accrued benefit for any employee under
a defined benefit plan, or the amount of the account
of any employee under a defined contribution plan,
such present value or amount shall be increased by
the aggregate distributions made with respect to such
employee under the plan during the five (5) year
period ending on the determination date.
(b) Any rollover contribution (or similar transfer)
initiated by the employee, made from a plan
maintained by one employer to a plan maintained by
another employer and made after December 31, 1983, to
a plan shall not be taken into account with respect
to the transferee plan for the purpose of determining
whether such transferee plan is a top heavy plan (or
whether any aggregation group which includes such
plan is a top heavy aggregation group). Any rollover
contribution (or similar transfer) not described in
the preceding sentence shall be taken into account
with respect to the transferee plan for the purpose
of determining whether such transferee plan is a top
heavy plan (or whether any aggregation group which
includes such plan is a top heavy aggregation group).
(c) If any individual is not a key employee with respect
to a plan for any Plan Year, but such individual was
a key employee with respect to a plan for any prior
Plan Year, the cumulative accrued benefit of such
employee and the account of such employee shall not
be taken into account.
(d) The determination of whether a plan is a top heavy
plan shall be made once for each Plan Year of the
plan as of the determination date for that Plan Year.
(e) In determining the present value of the cumulative
accrued benefits of employees under a defined benefit
plan, the determination shall be made as of the
actuarial valuation date last occurring during the
twelve (12) months preceding the determination date
and shall be determined on the assumption that the
employees terminated employment on the valuation date
except as provided in section 416 of the Code and the
regulations thereunder for the first and second Plan
Years of a defined benefit plan. The accrued benefit
of any employee (other than a key employee) shall be
determined under the method which is used for accrual
purposes for all plans of the employer or if there is
no method which is used for accrual purposes under
all plans of the employer, as if such benefit accrued
not more rapidly than the slowest accrual rate
permitted under section 411(b)(1)(C) of the Code. In
determining this present value, the mortality and
interest assumptions shall be those which would be
used by the Pension Benefit Guaranty Corporation in
valuing the defined benefit plan if it terminated on
such valuation date. The accrued benefit to be valued
shall be the benefit expressed as a single life
annuity.
(f) In determining the accounts of employees under a
defined contribution plan, the account values
determined as of the most recent asset valuation
occurring within the twelve (12) month period ending
on the determination date shall be used. In addition,
amounts required to be contributed under either the
minimum funding standards or the plan's contribution
formula shall be included in determining the account.
In the first year of the plan, contributions made or
to be made as of the determination date shall be
included even if such contributions are not required.
(g) If any individual has not performed any services for
any employer maintaining the plan at any time during
the five (5) year period ending on the determination
date, any accrued benefit of the individual under a
defined benefit plan and the account of the
individual under a defined contribution plan shall
not be taken into account.
(h) For this purpose, a terminated plan shall be treated
like any other plan and must be aggregated with other
plans of the employer if it was maintained within the
last five (5) years ending on the determination date
for the Plan Year in question and would, but for the
fact that it terminated, be part of the aggregation
group for such Plan Year.
1.10. TOP HEAVY PLAN. Top heavy plan means a qualified plan under which (as of
the determination date):
(i) if the plan is a defined benefit plan,
the present value of the cumulative
accrued benefits for key employees
exceeds sixty percent (60%) of the
present value of the cumulative accrued
benefits for all employees, and
(ii) if the plan is a defined contribution
plan, the aggregate of the accounts of
key employees exceeds sixty percent
(60%) of the aggregate of all of the
accounts of all employees.
In applying the foregoing, the following rules shall be observed:
(a) Each plan of an Employer required to be included in
an aggregation group shall be a top heavy plan if
such aggregation group is a top heavy aggregation
group.
(b) For the purpose of determining the present value of
the cumulative accrued benefit for any employee under
a defined benefit plan, or the amount of the account
of any employee under a defined contribution plan,
such present value or amount shall be increased by
the aggregate distributions made with respect to such
employee under the plan during the five (5) year
period ending on the determination date.
(c) Any rollover contribution (or similar transfer)
initiated by the employee, made from a plan
maintained by one employer to a plan maintained by
another employer and made after December 31, 1983, to
a plan shall not be taken into account with respect
to the transferee plan for the purpose of determining
whether such transferee plan is a top heavy plan (or
whether any aggregation group which includes such
plan is a top heavy aggregation group). Any rollover
contribution (or similar transfer) not described in
the preceding sentence shall be taken into account
with respect to the transferee plan for the purpose
of determining whether such transferee plan is a top
heavy plan (or whether any aggregation group which
includes such plan is a top heavy aggregation group).
(d) If any individual is not a key employee with respect
to a plan for any Plan Year, but such individual was
a key employee with respect to the plan for any prior
Plan Year, the cumulative accrued benefit of such
employee and the account of such employee shall not
be taken into account.
(e) The determination of whether a plan is a top heavy
plan shall be made once for each Plan Year of the
plan as of the determination date for that Plan Year.
(f) In determining the present value of the cumulative
accrued benefits of employees under a defined benefit
plan, the determination shall be made as of the
actuarial valuation date last occurring during the
twelve (12) months preceding the determination date
and shall be determined on the assumption that the
employees terminated employment on the valuation date
except as provided in section 416 of the Code and the
regulations thereunder for the first and second Plan
Years of a defined benefit plan. The accrued benefit
of any employee (other than a key employee) shall be
determined under the method which is used for accrual
purposes for all plans of the employer or if there is
no method which is used for accrual purposes under
all plans of the employer, as if such benefit accrued
not more rapidly than the slowest accrual rate
permitted under section 411(b)(1)(C) of the Code. In
determining this present value, the mortality and
interest assumptions shall be those which would be
used by the Pension Benefit Guaranty Corporation in
valuing the defined benefit plan if it terminated on
such valuation date. The accrued benefit to be valued
shall be the benefit expressed as a single life
annuity.
(g) In determining the accounts of employees under a
defined contribution plan, the account values
determined as of the most recent asset valuation
occurring within the twelve (12) month period ending
on the determination date shall be used. In addition,
amounts required to be contributed under either the
minimum funding standards or the plan's contribution
formula shall be included in determining the account.
In the first year of the plan, contributions made or
to be made as of the determination date shall be
included even if such contributions are not required.
(h) If any individual has not performed any services for
any employer maintaining the plan at any time during
the five (5) year period ending on the determination
date, any accrued benefit of the individual under a
defined benefit plan and the account of the
individual under a defined contribution plan shall
not be taken into account.
(i) For this purpose, a terminated plan shall be treated
like any other plan and must be aggregated with other
plans of the employer if it was maintained within the
last five (5) years ending on the determination date
for the Plan Year in question and would, but for the
fact that it terminated, be part of the aggregation
group for such Plan Year.
SECTION 2
DETERMINATION OF TOP HEAVINESS
Once each Plan Year, as of the determination date for that Plan Year, the
administrator of this Plan shall determine if this Plan is a top heavy plan.
SECTION 3
CONTINGENT PROVISIONS
3.1. WHEN APPLICABLE. If this Plan is determined to be a top heavy plan for any
Plan Year, the following provisions shall apply for that Plan Year (and, to the
extent hereinafter specified, for subsequent Plan Years), notwithstanding any
provisions to the contrary in the Plan.
3.2. VESTING REQUIREMENT.
3.2.1. GENERAL RULE. During any Plan Year that the Plan is
determined to be a Top Heavy Plan, then all accounts of all Participants in a
defined contribution plan that is a top heavy plan and the accrued benefits of
all Participants in a defined benefit plan that is a top heavy plan shall be
vested and nonforfeitable in accordance with the following schedule if, and to
the extent, that it is more favorable than other provisions of the Plan:
If the Participant Has His Vested
Completed the Following Percentage
Years of Vesting Service: Shall Be:
------------------------- ---------
Less than 2 years 0%
2 years but less than 3 years 20%
3 years but less than 4 years 40%
4 years but less than 5 years 60%
5 years but less than 6 years 80%
6 years or more 100%
3.2.2. SUBSEQUENT YEAR. In each subsequent Plan Year that the
Plan is determined not to be a top heavy plan, the other nonforfeitability
provisions of the Plan Statement (and not this section) shall apply in
determining the vested and nonforfeitable rights of Participants who do not have
five (5) or more years of Vesting Service (three or more years of Vesting
Service for Participants who have one or more Hours of Service in any Plan Year
beginning after December 31, 1988) as of the beginning of such subsequent Plan
Year; provided, however, that they shall not be applied in a manner which would
reduce the vested and nonforfeitable percentage of any Participant.
3.2.3. CANCELLATION OF BENEFIT SERVICE. If this Plan is a
defined benefit plan and if the Participant's vested percentage is determined
under this Appendix and if a Participant receives a lump sum distribution of the
present value of the vested portion of his accrued benefit, the Plan shall:
(a) thereafter disregard the Participant's service with
respect to which he received such distribution in
determining his accrued benefit, and
(b) permit the Participant who receives a distribution of
less than the present value of his entire accrued
benefit to restore this service by repaying (after
returning to employment covered under the Plan) to
the trustee the amount of such distribution together
with interest at the interest rate of five percent
(5%) per annum compounded annually (or such other
interest rate as is provided by law for such
repayment). If the distribution was on account of
separation from service such repayment must be made
before the earlier of,
(i) five (5) years after the first date on
which the Participant is subsequently
reemployed by the employer, or
(ii) the close of the first period of five
(5) consecutive one-year breaks in
service commencing after the
distribution.
If the distribution was on account of any other reason, such repayment must be
made within five (5) years after the date of the distribution.
3.3. DEFINED CONTRIBUTION PLAN MINIMUM BENEFIT REQUIREMENT.
3.3.1. GENERAL RULE. If this Plan is a defined contribution
plan, then for any Plan Year that this Plan is determined to be a top heavy
plan, the Employer shall make a contribution for allocation to the account of
each employee who is a Participant for that Plan Year and who is not a key
employee in an amount (when combined with other Employer contributions and
forfeited accounts allocated to his account) which is at least equal to three
percent (3%) of such Participant's compensation. (This minimum contribution
amount shall be further reduced by all other Employer contributions to this Plan
or any other defined contribution plans.) This contribution shall be made for
each Participant who has not separated from service with the Employer at the end
of the Plan Year (including for this purpose any Participant who is then on
temporary layoff or authorized leave of absence or who, during such Plan Year,
was inducted into the Armed Forces of the United States from employment with the
Employer) including, for this purpose, each employee of the Employer who would
have been a Participant if he had: (i) completed one thousand (1,000) Hours of
Service (or the equivalent) during the Plan Year, and (ii) made any mandatory
contributions to the Plan, and (iii) earned compensation in excess of the stated
amount required for participation in the Plan.
3.3.2. SPECIAL RULE. Subject to the following rules, the
percentage referred to in Section 3.3.1 of this Appendix shall not exceed the
percentage at which contributions are made (or required to be made) under this
Plan for the Plan Year for that key employee for whom that percentage is the
highest for the Plan Year.
(a) The percentage referred to above shall be determined
by dividing the Employer contributions for such key
employee for such Plan Year by his compensation for
such Plan Year.
(b) For the purposes of this Section 3.3, all defined
contribution plans required to be included in an
aggregation group shall be treated as one (l) plan.
(c) The exception contained in this Section 3.3.2 shall
not apply to (be available to) this Plan if this Plan
is required to be included in an aggregation group if
including this Plan in an aggregation group enables a
defined benefit plan to satisfy the qualification
requirements of section 410 or section 401(a)(4) of
the Code.
3.3.3. SALARY REDUCTION AND MATCHING CONTRIBUTIONS. For the
purpose of this Section 3.3, all Employer contributions attributable to a salary
reduction or similar arrangement shall be taken into account for the purpose of
determining the minimum percentage contribution required to be made for a
particular Plan Year for a Participant who is not a key employee but not for the
purpose of determining whether that minimum contribution requirement has been
satisfied. For the purpose of this Section 3.3 during all Plan Years beginning
after December 31, 1988, all Employer matching contributions shall be taken into
account for the purposes of determining the minimum percentage contribution
required to be made for a particular Plan Year for a Participant who was not a
key employee but not for the purpose of determining whether that minimum
contribution requirement has been satisfied.
3.4. DEFINED BENEFIT PLAN MINIMUM BENEFIT REQUIREMENT.
3.4.1. GENERAL RULE. If this Plan is a defined benefit plan,
then for any Plan Year that the Plan is determined to be a top heavy plan, the
accrued benefit for each Participant who is not a key employee shall not be less
than one-twelfth (l/12th) of the applicable percentage of the Participant's
average compensation for years in the testing period.
3.4.2. SPECIAL RULES AND DEFINITIONS. In applying the general
rule of Section 3.4.1 of this Appendix, the following special rules and
definitions shall apply:
(a) The term "applicable percentage" means the lesser of:
(1) two percent (2%) multiplied by the
number of years of service with the
Employer, or
(2) twenty percent (20%).
(b) For the purpose of this Section 3.4, a Participant's
years of service with the Employer shall be equal to
the Participant's Vesting Service except that a year
of Vesting Service shall not be taken into account
if:
(1) the Plan was not a top heavy plan for
any Plan Year ending during such year
of Vesting Service, or
(2) such year of Vesting Service was
completed in a Plan Year beginning
before January l, 1984.
(c) A Participant's "testing period" shall be the period
of five (5) consecutive years during which the
Participant had the greatest compensation from the
Employer; provided, however, that:
(1) the years taken into account shall be
properly adjusted for years not
included in a year of service, and
(2) a year shall not be taken into account
if such year ends in a Plan Year
beginning before January l, 1984, or
such year begins after the close of the
last year in which the Plan was a top
heavy plan.
(d) An individual shall be considered a Participant for
the purpose of accruing the minimum benefit only if
such individual has at least one thousand (1,000)
Hours of Service during a benefit accrual computation
period (or equivalent service determined under
Department of Labor regulations). Furthermore, such
individual shall accrue a minimum benefit only for a
benefit accrual computation period in which such
individual has one thousand (1,000) Hours of Service
(or equivalent service). An individual shall not fail
to accrue the minimum benefit merely because the
individual: (i) was not employed on a specified date,
or (ii) was excluded from participation (or otherwise
failed to accrue a benefit) because the individual's
compensation was less than a stated amount, or (iii)
because the individual failed to make any mandatory
contributions.
3.4.3. ACCRUALS PRESERVED. In years subsequent to the last
Plan Year in which this Plan is a top heavy plan, the other benefit accrual
rules of the Plan Statement shall be applied to determine the accrued benefit of
each Participant, except that the application of such other rules shall not
serve to reduce a Participant's accrued benefit as determined under this Section
3.4.
3.5. PRIORITIES AMONG PLANS. In applying the minimum benefit provisions of this
Appendix in any Plan Year that this Plan is determined to be a top heavy plan,
the following rules shall apply:
(a) If an employee participates only in this Plan, the
employee shall receive the minimum benefit applicable
to this Plan.
(b) If an employee participates in both a defined benefit
plan and a defined contribution plan and only one (1)
of such plans is a top heavy plan for the Plan Year,
the employee shall receive the minimum benefit
applicable to the plan which is a top heavy plan.
(c) If an employee participates in both a defined
contribution plan and a defined benefit plan and both
are top heavy plans, then the employee, for that Plan
Year, shall receive the defined benefit plan minimum
benefit unless for that Plan Year the employee has
received employer contributions and forfeitures
allocated to his account in the defined contribution
plan in an amount which is at least equal to five
percent (5%) of his compensation.
(d) If an employee participates in two (2) or more
defined contribution plans which are top heavy plans,
then the employee, for that Plan Year, shall receive
the defined contribution plan minimum benefit in that
defined contribution plan which has the earliest
original effective date.
3.6. ANNUAL CONTRIBUTION LIMITS.
3.6.1. GENERAL RULE. Notwithstanding anything apparently to
the contrary in the Appendix A to the Plan Statement, for any Plan Year that
this Plan is a top heavy plan, the defined benefit fraction and defined
contribution fraction of the Appendix to the Plan Statement pertaining to limits
under section 415 of the Code shall be one hundred percent (100%) and not one
hundred twenty-five percent (125%).
3.6.2. SPECIAL RULE. Section 3.6.1 of this Appendix shall not
apply to any top heavy plan if such top heavy plan satisfies the following
requirements:
(a) MINIMUM BENEFIT REQUIREMENT. The top heavy plan (and
any plan required to be included in an aggregation
group with such plan) satisfies the requirements of
Section 3.4 of this Appendix when Section 3.4.2(a)(1)
of this Appendix is applied by substituting three
percent (3%) for two percent (2%) and by increasing
(but by no more than ten percentage points) twenty
percent (20%) by one percentage point for each year
for which the plan was taken into account under this
Section 3.7. Section 3.3.1 of this Appendix shall be
applied by substituting "four percent (4%)" for
"three percent (3%)." Section 3.5(c) of this Appendix
shall be applied by substituting "seven and one-half
percent (7-1/2%)" for "five percent (5%)."
(b) NINETY PERCENT RULE. A top heavy plan would not be a
top heavy plan if "ninety percent (90%)" were
substituted for "sixty percent (60%)" each place that
it appears in the definitions of top heavy plan and
top heavy aggregation group.
3.6.3. TRANSITION RULE. If, but for this Section 3.6.3,
Section 3.6.l of this Appendix would begin to apply with respect to this Plan
because it is a top heavy plan, the application of Section 3.6.l of this
Appendix shall be suspended with respect to any individual so long as there are
no:
(a) employer contributions, forfeitures or voluntary
nondeductible contributions allocated to such
individual (if this Plan is a defined contribution
plan), or
(b) accruals for such individual (if this Plan is a
defined benefit plan).
3.6.4. COORDINATING CHANGE. If this Plan is a top heavy plan
for any Plan Year, then for purposes of the Appendix A to the Plan Statement,
section 415(e)(6)(i) of the Code shall be applied by substituting "Forty-one
Thousand Five Hundred Dollars ($41,500)" for "Fifty-one Thousand Eight Hundred
Seventy-five Dollars ($51,875)."
3.7. BARGAINING UNITS. The requirements of Section 3.2 through Section 3.6 of
this Appendix shall not apply with respect to any employee included in a unit of
employees covered by an agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and one (1) or
more employers if there is evidence that retirement benefits are the subject of
good faith bargaining between such employee representatives and such employer or
employers.
APPENDIX C
QUALIFIED DOMESTIC RELATIONS ORDERS
SECTION 1
GENERAL MATTERS
Terms defined in the Plan Document shall have the same meanings when used in
this Appendix.
1.1. GENERAL RULE. The Plan shall not honor the creation, assignment or
recognition of any right to any benefit payable with respect to a Participant
pursuant to a domestic relations order unless that domestic relations order is a
qualified domestic relations order.
1.2. ALTERNATE PAYEE DEFINED. The only persons eligible to be considered
alternate payees with respect to a Participant shall be that Participant's
spouse, former spouse, child or other dependent.
1.3. DRO DEFINED. A domestic relations order ( DRO") is any judgment, decree or
order (including an approval of a property settlement agreement) which relates
to the provision of child support, alimony payments, or marital property rights
to a spouse, former spouse, child or other dependent of a Participant and which
is made pursuant to a state domestic relations law (including a community
property law).
1.4. QDRO DEFINED. A qualified domestic relations order ( QDRO") is a domestic
relations order which creates or recognizes the existence of an alternate
payee's right to (or assigns to an alternate payee the right to) receive all or
a portion of the Account Balance of a Participant under the Plan and which
satisfies all of the following requirements.
1.4.1. NAMES AND ADDRESSES. The order must clearly specify the
name and the last known mailing address, if any, of the Participant and the name
and mailing address of each alternate payee covered by the order.
1.4.2. AMOUNT. The order must clearly specify the amount or
percentage of the Participant's Account Balance to be paid by the Plan to each
such alternate payee or the manner in which such amount or percentage is to be
determined.
1.4.3. PAYMENT METHOD. The order must clearly specify the
number of payments or period to which the order applies.
1.4.4. PLAN IDENTITY. The order must clearly specify that it
applies to this Plan.
1.4.5. SETTLEMENT OPTIONS. Except as provided in Section 1.4.8
of this Appendix, the order may not require the Plan to provide any type or form
of benefits or any option not otherwise provided under the Plan.
1.4.6. INCREASED BENEFITS. The order may not require the Plan
to provide increased benefits.
1.4.7. PRIOR AWARDS. The order may not require the payment of
benefits to an alternate payee which are required to be paid to another
alternate payee under another order previously determined to be a qualified
domestic relations order.
1.4.8. EXCEPTIONS. The order will not fail to meet the
requirements of Section 1.4.5 of this Appendix if:
(a) The order requires payment of benefits be made to
an alternate payee before the Participant has
separated from service but as of a date that is on
or after the date on which the Participant attains
(or would have attained) the earliest payment date
described in Section 1.4.10 of this Appendix; and
(b) The order requires that payment of benefits be made
to an alternate payee as if the Participant had
retired on the date on which payment is to begin
under such order (but taking into account only the
present value of benefits actually accrued); and
(c) The order requires payment of benefits to be made
to an alternate payee in any form in which benefits
may be paid under the Plan to the Participant
(other than in the form of a joint and survivor
annuity with respect to the alternate payee and his
or her subsequent spouse).
In lieu of the foregoing, the order will not fail to meet the requirements of
Section 1.4.5 of this Appendix if the order: (1) requires that payment of
benefits be made to an alternate payee in a single lump sum as soon as is
administratively feasible after the order is determined to be a qualified
domestic relations order, and (2) does not contain any of the provisions
described in Section 1.4.9 of this Appendix, and (3) provides that the payment
of such single lump sum fully and permanently discharges all obligations of the
Plan to the alternate payee.
1.4.9. DEEMED SPOUSE. Notwithstanding the foregoing:
(a) The order may provide that the former spouse of a
Participant shall be treated as a surviving spouse
of such Participant for the purposes of Sections 4
and 5 of the Plan Document (and that any subsequent
or prior spouse of the Participant shall not be
treated as a spouse of the Participant for such
purposes), and
(b) The order may provide that, if the former spouse
has been married to the Participant for at least
one (1) year at any time, the surviving former
spouse shall be deemed to have been married to the
Participant for the one (1) year period ending on
the date of the Participant's death.
1.4.10. PAYMENT DATE DEFINED. For the purpose of Section 1.4.8
of this Appendix, the earliest payment date means the earlier of:
(a) The date on which the Participant is entitled to a
distribution under the Plan; or
(b) The later of (i) the date the Participant attains age
fifty (50) years, or (ii) the earliest date on which
the Participant could begin receiving benefits under
the Plan if the Participant separated from service.
SECTION 2
PROCEDURES
2.1. ACTIONS PENDING REVIEW. During any period when the issue of whether a
domestic relations order is a qualified domestic relations order is being
determined by the PRAC, the PRAC may cause the Plan to segregate the amounts
which would be payable to the alternate payee during such period if the order
were determined to be a qualified domestic relations order.
2.2. REVIEWING DROS. Upon the receipt of a domestic relations order, the PRAC or
its delegee shall determine whether such order is a qualified domestic relations
order.
2.2.1. RECEIPT. A domestic relations order shall be considered
to have been received only when the PRAC shall have received a copy of a
domestic relations order which is complete in all respects and is originally
signed, certified or otherwise officially authenticated.
2.2.2. NOTICE TO PARTIES. Upon receipt of a domestic relations
order, the PRAC shall notify the Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant
that such domestic relations order has been received. The PRAC shall include
with such notice a copy of this Appendix.
2.2.3. INITIAL DETERMINATION. Within a reasonable period of
time, the PRAC shall give written notice to the Participant and all persons
claiming to be alternate payees and all prior alternate payees with respect to
the Participant of its decision that the domestic relations order is or is not a
qualified domestic relations order. If the PRAC determines that the order is not
a qualified domestic relations order, the PRAC shall include in its written
notice:
(i) the specific reasons for its decision;
(ii) the specific reference to the pertinent
provisions of this Plan Document upon
which its decision is based;
(iii) a description of additional material or
information, if any, which would cause
the PRAC to reach a different
conclusion; and
(iv) an explanation of the procedures for
reviewing the initial determination of
the PRAC.
2.2.4. APPEAL PERIOD. The Participant and all persons claiming
to be alternate payees and all prior alternate payees with respect to the
Participant shall be afforded an appeal period of sixty (60) days from the date
such an initial determination and explanation is mailed in which to make
comments or objections concerning whether the original determination of the PRAC
is correct and to make amendments to the domestic relation order. By the
unanimous written consent of the Participant and all persons claiming to be
alternate payees and all prior alternate payees with respect to the Participant,
the sixty (60) day appeal period may be shortened.
2.2.5. FINAL DETERMINATION. In all events, the final
determination of the PRAC shall be made not later than eighteen (18) months
after the date on which first payment would be required to be made under the
domestic relations order if it were a qualified domestic relations order. The
final determination shall be communicated in writing to the Participant and all
persons claiming to be alternate payees and all prior alternate payees with
respect to the Participant.
2.3. FINAL DISPOSITION. If the domestic relations order is finally determined to
be a qualified domestic relations order, the Plan shall pay all amounts required
to be paid pursuant to the domestic relations order to the alternate payee
entitled thereto. If the domestic relations order is finally determined not to
be a qualified domestic relations order, benefits under the Plan shall be paid
to the person or persons who would have been entitled to such amounts if there
had been no domestic relations order.
2.4. ORDERS BEING SOUGHT. If the PRAC has notice that a domestic relations order
is being or may be sought but has not received the order, the PRAC shall not (in
the absence of a written request from the Participant) delay payment of benefits
to a Participant or Beneficiary which otherwise would be due. If the PRAC has
determined that a domestic relations order is not a qualified domestic relations
order and after the 18-month period set forth in Section 2.2.5 above, the PRAC
shall not (in the absence of a written request from the Participant) delay
payment of benefits to a Participant or Beneficiary which otherwise would be due
even if the PRAC has notice that the party claiming to be an alternate payee or
the Participant or both are attempting to rectify any deficiencies in the
domestic relations order.
SECTION 3
PROCESSING OF AWARD
3.1. GENERAL RULES. If a benefit is awarded to an alternate payee pursuant to an
order which has been finally determined to be a qualified domestic relations
order, the following rules shall apply.
3.1.1. EFFECT ON ACCOUNT. For all purposes of the Plan, the
Participant's Account Balance (and all benefits payable under the Plan which are
derived in whole or in part by reference to the Participant's Account Balance)
shall be permanently diminished by the portion of the Participant's Account
Balance which is awarded to the alternate payee.
3.1.2. AFTER DEATH. After the death of an alternate payee, all
amounts awarded to the alternate payee which have not been distributed to the
alternate payee and which continue to be payable shall be paid in a single lump
sum distribution to the personal representative of the alternate payee's estate
as soon as administratively feasible, unless the qualified domestic relations
order clearly provides otherwise. The Participant's Beneficiary designation
shall not be effective to dispose of any portion of the benefit awarded to an
alternate payee, unless the qualified domestic relations order clearly provides
otherwise.
3.2. SEGREGATED ACCOUNT. If the PRAC determines that it would facilitate the
administration or the distribution of the benefit awarded to the alternate payee
or if the qualified domestic relations order so requires, the benefit awarded to
the alternate payee shall be established on the books and records of the Plan as
a separate account belonging to the alternate payee.
3.3. FORMER ALTERNATE PAYEES. If an alternate payee has received all benefits to
which the alternate payee is entitled under a qualified domestic relations
order, the alternate payee will not at any time thereafter be deemed to be an
alternate payee or prior alternate payee for any substantive or procedural
purpose of this Plan.
APPENDIX D
FACTORS TO CONVERT ACCOUNT BALANCE TO ANNUAL ANNUITY AT SPECIFIED AGE
- --------------------------------------------------------------------------------
NORMAL FORM OPTIONAL FORM
- --------------------------------------------------------------------------------
AGE LIFE AND FIVE YEAR LIFE ONLY JOINT AND 50%
CERTAIN ANNUITY ANNUITY SURVIVOR ANNUITY1/
- ---------------------- ------------------- ------------------- ----------------
18 19.3 13.6 13.7
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19 19.2 13.6 13.7
- ---------------------- ------------------- ------------------- ----------------
20 19.2 13.6 13.7
- ---------------------- ------------------- ------------------- ----------------
21 19.1 13.5 13.6
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22 19.1 13.5 13.6
- ---------------------- ------------------- ------------------- ----------------
23 19.0 13.5 13.6
- ---------------------- ------------------- ------------------- ----------------
24 18.9 13.5 13.6
- ---------------------- ------------------- ------------------- ----------------
25 18.8 13.4 13.6
- ---------------------- ------------------- ------------------- ----------------
26 18.8 13.4 13.6
- ---------------------- ------------------- ------------------- ----------------
27 18.7 13.4 13.5
- ---------------------- ------------------- ------------------- ----------------
28 18.6 13.4 13.5
- ---------------------- ------------------- ------------------- ----------------
29 18.5 13.3 13.5
- ---------------------- ------------------- ------------------- ----------------
30 18.4 13.3 13.5
- ---------------------- ------------------- ------------------- ----------------
31 18.3 13.3 13.4
- ---------------------- ------------------- ------------------- ----------------
32 18.2 13.2 13.4
- ---------------------- ------------------- ------------------- ----------------
33 18.1 13.2 13.4
- ---------------------- ------------------- ------------------- ----------------
34 18.0 13.1 13.3
- ---------------------- ------------------- ------------------- ----------------
35 17.9 13.1 13.3
- ---------------------- ------------------- ------------------- ----------------
36 17.8 13.0 13.2
- ---------------------- ------------------- ------------------- ----------------
37 17.7 13.0 13.2
- ---------------------- ------------------- ------------------- ----------------
38 17.5 12.9 13.2
- ---------------------- ------------------- ------------------- ----------------
39 17.4 12.9 13.1
- ---------------------- ------------------- ------------------- ----------------
40 17.2 12.8 13.1
- ---------------------- ------------------- ------------------- ----------------
41 17.1 12.7 13.0
- ---------------------- ------------------- ------------------- ----------------
42 16.9 12.7 13.0
- ---------------------- ------------------- ------------------- ----------------
43 16.8 12.6 12.9
- ---------------------- ------------------- ------------------- ----------------
44 16.6 12.5 12.8
- ---------------------- ------------------- ------------------- ----------------
45 16.4 12.4 12.8
- -------------------------------------------------------------------------------
46 16.3 12.3 12.7
- ---------------------- ------------------- ------------------- ----------------
47 16.1 12.2 12.6
- ---------------------- ------------------- ------------------- ----------------
48 15.9 12.1 12.5
- ---------------------- ------------------- ------------------- ----------------
49 15.7 12.0 12.4
- ---------------------- ------------------- ------------------- ----------------
50 15.5 11.9 12.4
- ---------------------- ------------------- ------------------- ----------------
51 15.3 11.8 12.3
- ---------------------- ------------------- ------------------- ----------------
52 15.1 11.7 12.2
- ---------------------- ------------------- ------------------- ----------------
53 14.9 11.6 12.1
- ---------------------- ------------------- ------------------- ----------------
54 14.6 11.4 11.9
- ---------------------- ------------------- ------------------- ----------------
55 14.4 11.3 11.8
- ---------------------- ------------------- ------------------- ----------------
56 14.2 11.1 11.7
- ---------------------- ------------------- ------------------- ----------------
57 13.9 11.0 11.6
- ---------------------- ------------------- ------------------- ----------------
58 13.6 10.8 11.4
- ---------------------- ------------------- ------------------- ----------------
59 13.4 10.7 11.3
- ---------------------- ------------------- ------------------- ----------------
60 13.1 10.5 11.1
- ---------------------- ------------------- ------------------- ----------------
61 12.8 10.3 11.0
- ---------------------- ------------------- ------------------- ----------------
62 12.5 10.1 10.8
- ---------------------- ------------------- ------------------- ----------------
63 12.3 9.9 10.6
- ---------------------- ------------------- ------------------- ----------------
64 12.0 9.7 10.5
- ---------------------- ------------------- ------------------- ----------------
65 11.7 9.5 10.3
- ---------------------- ------------------- ------------------- ----------------
66 11.4 9.3 10.1
- ---------------------- ------------------- ------------------- ----------------
67 11.1 9.1 9.9
- ---------------------- ------------------- ------------------- ----------------
68 10.8 8.9 9.7
- ---------------------- ------------------- ------------------- ----------------
69 10.4 8.6 9.4
- ---------------------- ------------------- ------------------- ----------------
70 10.1 8.4 9.2
- ---------------------- ------------------- ------------------- ----------------
71 9.8 8.1 9.0
- ---------------------- ------------------- ------------------- ----------------
72 9.5 7.9 8.8
- ---------------------- ------------------- ------------------- ----------------
73 9.2 7.7 8.5
- ---------------------- ------------------- ------------------- ----------------
74 8.9 7.4 8.3
- ---------------------- ------------------- ------------------- ----------------
75 8.6 7.2 8.0
- ---------------------- ------------------- ------------------- ----------------
76 8.4 6.9 7.8
- -------------------------------------------------------------------------------
77 8.1 6.7 7.5
- ---------------------- ------------------- ------------------- ----------------
78 7.8 6.4 7.3
- ---------------------- ------------------- ------------------- ----------------
79 7.6 6.2 7.0
- ---------------------- ------------------- ------------------- ----------------
80 7.3 5.9 6.8
- ---------------------- ------------------- ------------------- ----------------
1/ For ages 55 and over, if age of survivor is 30 and under, multiply the
Joint and 50% Survivor factor above by 1.05.
If the annual rate of interest on 30 year Treasury securities for the month
before the date of distribution is below 5%, then the conversion factors used in
converting to the normal form of payment will be the factors determined using
the 1983 Group Annuity Mortality Table and the 30 year Treasury securities for
the month before the date of distribution.
APPENDIX E
HIGHLY COMPENSATED EMPLOYEE
SECTION 1
GENERAL DEFINITIONS
1.1. HIGHLY COMPENSATED EMPLOYEE. A "highly compensated employee" is any
employee who, during the "determination year" or the "look-back year":
(i) was at any time a five percent (5%)
owner;
(ii) received compensation from the Employer
in excess of Seventy-Five Thousand
Dollars ($75,000);
(iii) received compensation from the Employer
in excess of Fifty Thousand Dollars
($50,000) and was in the top-paid group
of employees for such year; or
(iv) was at any time an officer and received
compensation greater than fifty percent
(50%) of the amount in effect under
section 415(b)(1)(A) of the Code for
such year.
The group of employees (including former employees) who are highly compensated
employees consists of both highly compensated active employees and highly
compensated former employees.
1.2. DETERMINATION YEAR. The determination year is the current Plan Year (that
is, the Plan Year for which the determination of which employees are highly
compensated employees is being made).
1.3. LOOK-BACK YEAR. The look-back year is the twelve-month period immediately
preceding the determination year (generally, the preceding Plan Year). The
Employer does not elect to make the look-back year calculation on the basis of
the calendar year ending with or within the determination year.
1.4. SPECIAL RULE FOR DETERMINATION YEAR. An employee not described in Section
1.1(ii), (iii) or (iv) for the look-back year shall not be treated as described
in Section 1.1(ii), (iii) or (iv) for the determination year unless such
employee is a member of the group consisting of the one hundred (100) employees
paid the greatest compensation during the determination year. If there is no
difference in compensation between the 100th employee and the 101st employee,
then those employees receiving the same compensation as the 100th employee shall
be ranked in descending order of seniority, with the employee with the greatest
seniority being ranked first.
1.5. HIGHLY COMPENSATED ACTIVE EMPLOYEE. A highly compensated active employee is
any highly compensated employee who performs services for the Employer during
the determination year (whether or not the employee performs services for the
Employer during the lag period described in Section 1.2).
1.6. HIGHLY COMPENSATED FORMER EMPLOYEE. A highly compensated former employee is
any former employee who had a "separation year" (as defined in Section 2.9)
prior to the determination year and was a highly compensated active employee for
either (1) such employee's separation year or (2) any determination year ending
on or after the employee's 55th birthday. An employee who performs no services
for the Employer during a determination year is treated as a former employee.
SECTION 2
SPECIAL RULES & DEFINITIONS
2.1. INCORPORATED DEFINITIONS. Terms defined in the Plan Document shall have the
same meanings when used in this Appendix.
2.2. FIVE PERCENT OWNER. An employee shall be treated as a five percent (5%)
owner for any determination year or look-back year if at any time during such
year such employee was a five percent (5%) owner (as defined in Appendix B to
this Plan Document) of the Employer.
2.3. TOP-PAID GROUP. An employee is in the top-paid group of employees for any
determination year or look-back year if such employee is in the group consisting
of the top twenty percent (20%) of the employees when ranked on the basis of
compensation paid during such year, excluding those employees described in
Section 2.10. For purposes of the preceding sentence, the top twenty percent
(20%) shall be determined by disregarding fractional numbers (i.e., the top 20%
of 118 employees shall be the top 22 employees). Employees who perform no
services for the Employer during the year are not included in determining the
top-paid group of employees for that year.
2.4. SPECIAL RULES FOR OFFICERS.
2.4.1. NOT MORE THAN 50 OFFICERS. For purposes of Section
1.1(iv) of this Appendix, no more than fifty (50) employees (or, if lesser, the
greater of three employees or ten percent of the employees) shall be treated as
officers. If the actual number of officers exceeds this limit, then the officers
who will be considered as includible officers under Section 1.1(iv) are those
who receive the greatest compensation from the Employer during the determination
year or the look-back year.
2.4.2. AT LEAST 1 OFFICER. If for any determination year or
look-back year no officer of the Employer is described in Section 1.1(iv) of
this Appendix, the highest paid officer of the Employer for such year shall be
treated as described in such Section 1.1(iv). This is true whether or not such
employee is also a highly compensated employee on any other basis.
2.5. FORMER EMPLOYEES EXCLUDED FOR CERTAIN PURPOSES. Former employees are not
included in the top-paid group, the group consisting of the one hundred (100)
employees paid the greatest compensation or the group of includible officers for
purposes of determining who are highly compensated active employees. In
addition, former employees are not counted as employees for purposes of
determining the number of employees in the top-paid group.
2.6. EMPLOYEES DESCRIBED IN SEVERAL GROUPS. An employee who is a highly
compensated active employee for a determination year by reason of being
described in one group under Section 1.1 for either the determination year or
the look-back year, shall not be disregarded in determining whether another
employee is a highly compensated active employee by reason of being described in
another group under Section 1.1.
2.7. CERTAIN FAMILY MEMBERS.
2.7.1. IN GENERAL. If any individual is a member of the family
of a five percent (5%) owner or of a highly compensated employee in the group
consisting of the ten (10) highly compensated employees paid the greatest
compensation during the determination year or the look-back year, then:
(i) such individual shall not be considered
a separate employee; and
(ii) any compensation paid to such
individual (and any applicable
contribution or benefit on behalf of
such individual) shall be treated as if
it were paid to (or on behalf of) the
five percent (5%) owner or highly
compensated employee.
Family members are subject to this aggregation rule whether or not they may be
excluded under Section 2.10 for purposes of determining the top-paid group and
whether or not they are highly compensated employees when considered separately.
2.7.2. FAMILY. For purposes of Section 2.7.1 of this Appendix,
the term "family" means, with respect to any employee, such employee's spouse
and lineal ascendants or descendants and the spouses of such lineal ascendants
or descendants.
2.7.3. PRIORITY. The determination of which employees are
highly compensated employees and which highly compensated employees are among
the ten highly compensated employees paid the greatest compensation during the
determination year or the look-back year shall be made prior to the application
of the family aggregation rules. Similarly, the determination of the number and
identity of employees in the top-paid group for a determination year or a
look-back year and the identity of the group of employees consisting of the 100
employees paid the greatest compensation for a determination year shall be made
prior to the application of the family aggregation rules. The family aggregation
rules apply separately to the determination year and the look-back year.
2.7.4. CHANGE IN FAMILY RELATIONSHIP. An individual is a
family member with respect to an employee or former employee if such individual
is a family member on any day during the determination year or the look-back
year, even though such relationship changes during such year as a result of
death or divorce.
2.8. COMPENSATION. For purposes of this Appendix:
2.8.1. IN GENERAL. The term "compensation" means compensation
within the meaning of section 415(c)(3) of the Code.
2.8.2. CERTAIN PROVISIONS NOT TAKEN INTO ACCOUNT. The
determination under Section 2.8.1 of this Appendix shall be made:
(i) without regard to sections 125,
402(a)(8) and 402(h)(1)(B) of the Code;
and
(ii) in the case of Employer contributions
made pursuant to a salary reduction
agreement, without regard to section
403(b) of the Code.
Compensation for any employee who performed services for only part of a year is
not annualized for purposes of determining such employee's compensation for the
determination year or the look-back year.
2.9. SEPARATION YEAR. Generally the "separation year" is the determination year
during which the employee separates from service with the Employer. An employee
who performs no services for the Employer during a determination year will be
treated as having separated from service in the year in which that employee last
performed services for the Employer.
2.9.1. DEEMED SEPARATION. Solely for the purpose of
determining whether an employee is a highly compensated former employee after
the employee actually separates from service, an employee may be deemed to have
separated from service during a determination year in which the employee
actually performs some services for the Employer. An employee will be deemed to
have a separation year if, in a determination year prior to the employee's
attaining the age of 55, the employee receives compensation in an amount less
than 50% of the employee's average annual compensation for the three consecutive
calendar years preceding such determination year during which the employee
received the greatest amount of compensation from the Employer (or the total
period of the employee's service with the Employer, if less). This deemed
separation from service may occur without regard to whether the reduction in
compensation occurs on account of the employee's leave of absence from service
with the Employer.
2.9.2. DEEMED RESUMPTION. An employee who is treated as having
a deemed separation year by reason of Section 2.9.1 will not be treated as a
highly compensated former employee after such employee actually separates from
service with the Employer if, after such deemed separation year, and before the
year of actual separation, such employee's compensation from the Employer for a
particular determination year increased significantly so that such employee is
treated as having a deemed resumption of employment. In order for a deemed
resumption of employment to occur, there must be an increase in compensation
from the Employer to the extent that such compensation would not result in a
deemed separation year under Section 2.9.1 using the same three-year period
taken into account for purposes of that Section.
2.10. EXCLUDED EMPLOYEES.
2.10.1. GENERAL EXCLUSIONS. For purposes of determining the
number of employees in the top-paid group for a determination year or a
look-back year under Section 2.3 of this Appendix, the following employees shall
be excluded:
(i) employees who have not completed six
(6) months of service by the end of the
year;
(ii) employees who normally work less than
seventeen and one-half (17-1/2) hours
per week;
(iii) employees who normally work during less
than six (6) months during the year;
and
(iv) employees who have not attained age
twenty-one (21) by the end of the year.
For purposes of computing months of service, an employee's service in the
immediately preceding year is added to service in the current year to determine
whether an employee is excluded in the current year.
2.10.2. EMPLOYEES COVERED BY COLLECTIVE BARGAINING AGREEMENTS.
In general, employees who are included in a unit of employees covered by a
collective bargaining agreement are included in determining the number of
employees in the top-paid group. However, if ninety percent (90%) or more of all
employees are covered under collective bargaining agreements and this Plan
covers only employees who are not covered under such agreements, then the
employees who are covered under such collective bargaining agreements shall not
be counted in determining the number of employees who will be included in the
top-paid group. In addition, the employees covered by such agreements will not
be included in the top-paid group.
2.10.3. MINIMUM HOUR RULE. An employee who works at least
17-1/2 hours a week for 50% or more of the total weeks worked by such employee
during a determination year or look-back year is deemed to normally work more
than 17-1/2 hours a week. An employee who works less than 17-1/2 hours a week
for 50% or more of the total weeks worked by such employee during a
determination year or look-back year is deemed to normally work less than 17-1/2
hours a week. The foregoing determinations may be made separately with respect
to each employee or on the basis of groups of employees who fall within
particular job categories as established by the Employer on a reasonable basis.
In general, 80% of the positions within a particular job category must be filled
by employees who normally work less than 17-1/2 hours a week before any
employees may be excluded under this rule on the basis of their membership in
that job category. Alternatively, an Employer may exclude employees who are
members of a particular job category if the median number of hours credited to
employees in that category during a determination year or look-back year is 500
or less.
2.10.4. MINIMUM PERIOD OF TIME RULE. The determination of
whether an employee normally works during less than six months in any
determination year or look-back year is made on the basis of the facts and
circumstances of the Employer as evidenced by the Employer's customary
experience in the years preceding such year. An employee who works on one day
during a month is deemed to have worked during that month.
2.10.5. NONRESIDENT ALIENS. Employees who are nonresident
aliens and who receive no earned income (within the meaning of section 911(d)(2)
of the Code) from the employer which constitutes income from sources within the
United States (within the meaning of section 861(a)(3) of the Code) are excluded
for all purposes of this Appendix.
2.11. ADJUSTMENTS TO DOLLAR AMOUNTS. The dollar amounts described in Section
1.1(ii) and (iii) shall be adjusted for cost-of-living increases as provided by
regulations or other rulings by the Secretary of the Treasury. The applicable
dollar amount for a particular determination year shall be the dollar amount for
the calendar year in which the determination year begins. For determination
years beginning before January 1, 1987, the dollar amounts in Section 1.1(ii)
and (iii) shall be $75,000 and $50,000 respectively.
2.12. ELECTION TO INCLUDE LEASED EMPLOYEES. The term "employee" shall include
all leased employees of the Employer, whether or not such leased employees are
covered by a "safe-harbor plan" as described in section 414(n)(5) of the Code.
2.13. AGGREGATION. Subsections (b), (c), (m), (n), and (o) of section 414 of the
Code shall be applied before the application of the rules in this Appendix.
APPENDIX F
ADDITIONAL BENEFITS FOR GRANDFATHERED 3M PARTICIPANTS
1. DEFINITIONS. Terms defined in the Plan Document shall have the same meanings
when used in this Appendix F. In addition, when used in this Appendix, the
following terms shall have the following meanings:
1.1. 3M ACCRUED BENEFIT. The accrued benefit of a
Grandfathered Participant under the 3M Pension Plan as of June 30, 1996, payable
in the Life Only Annuity form commencing at Normal Retirement Date.
1.2. GRANDFATHERED PARTICIPANT. A Participant who, as of July
1, 1996:
(a) transferred employment from 3M to the Employer in
connection with the spinoff" of Imation from 3M, and
(b) then had a total attained Age plus pension service"
under the 3M Pension Plan equal to or greater than
fifty (50), and
(c) then had pension service" under the 3M Pension Plan
equal to or greater than ten (10).
1.3. IMATION GRANDFATHERED BENEFIT. Fifty Percent (50%) of the
Total Grandfathered Benefit.
1.4. TOTAL GRANDFATHERED BENEFIT. The amount determined under
Sections 2.1 and 2.2 of this Appendix F.
2. BENEFITS. In addition to other benefits payable under the Plan, each
Grandfathered Participant shall be eligible to receive a benefit (the Imation
Grandfathered Benefit") equal to 50% of the following amount (the Total
Grandfathered Benefit") payable as a Life Only Annuity commencing at Normal
Retirement Date:
2.1. FOR INITIAL SIX MONTHS OF PLAN. If the Grandfathered
Participant remains in Recognized Employment (including Disability) until
December 31, 1996, the Total Grandfathered Benefit shall equal 2% of his or her
3M Accrued Benefit.
2.2. FOR 1997 AND FOLLOWING CALENDAR YEARS. As of each
following December 31 (beginning December 31, 1997), the Total Grandfathered
Benefit as of the prior December 31 shall be increased by 4%, but only if the
Grandfathered Participant remains in Recognized Employment (including
Disability) until that December 31.
2.3. NO PRORATION. No prorated increase shall be made to the
Imation Grandfathered Benefit of a Grandfathered Participant who leaves
Recognized Employment before any December 31 (that is, the Imation Grandfathered
Benefit of such Grandfathered Participant shall be the amount determined as of
the prior December 31).
3. FORM OF PAYMENT. The Imation Grandfathered Benefit shall be paid at the same
time and in the same form as other benefits under the Plan. If such other
benefits under the Plan are payable other than as a Life Only Annuity commencing
at Normal Retirement Date, then:
(a) the monthly amount of the Imation Grandfathered
Benefit shall be multiplied by twelve (12), then
(b) that amount shall be multiplied by the factor from
Appendix D for the Life Only Annuity form for the
Participant's Age as of the date payment commences,
then
(c) that amount shall be added to the Account Balance as
of the date payment commences, and finally
(d) the increased Account Balance shall be used to
determine benefits under the Plan.
4. EFFECT OF 3M EARLY RETIREMENT FACTORS. Under uniform rules established by the
PRAC, the subsidized early retirement benefits under the 3M Pension Plan shall
be taken into account in determining the Imation Grandfathered Benefit.
5. EFFECT OF DEATH. If a Grandfathered Participant dies before payments commence
under the Plan, no Imation Grandfathered Benefit shall be paid; provided,
however, that, if such Grandfathered Participant is survived by a spouse, then:
(a) the monthly amount of the Imation Grandfathered
Benefit shall be multiplied by twelve (12), then
(b) that amount shall be multiplied by the factor from
Appendix D for the Life Only Annuity form for the
Participant's Age as of the date payment commences,
then
(c) 50% of that amount shall be added to the Account
Balance as of the date payment commences, and finally
(d) the increased Account Balance shall be used to
determine benefits under the Plan.
IMATION EXCESS BENEFIT PLAN
Effective July 1, 1996
IMATION EXCESS BENEFIT PLAN
TABLE OF CONTENTS
PAGE
SECTION 1. INTRODUCTION ...................................... 1
SECTION 2. PLAN NAME ......................................... 1
SECTION 3. PARTICIPANTS ...................................... 1
3.1. General Participation Rule
3.2. Overriding Exclusion
SECTION 4. BENEFITS PAYABLE .................................. 2
4.1. Benefit for Participants
4.2. Benefit for Beneficiaries
SECTION 5. FUNDING ........................................... 3
5.1. Unfunded Obligation
5.2. Hedging Investments
5.3. Corporate Obligation
SECTION 6. GENERAL MATTERS ................................... 4
6.1. Amendments and Termination
6.2. ERISA Administrator
6.3. Service of Process
6.4. Limited Benefits
6.5. Spendthrift Provision
6.6. Administrative Determinations
6.7. Rules and Regulations
6.8. Certifications
6.9. Errors in Computations
SECTION 7. FORFEITURE OF BENEFITS ............................ 5
SECTION 8. CLAIMS PROCEDURE .................................. 6
8.1. Original Claim
8.2. Claims Review Procedure
8.3. General Rules
SECTION 9. CONSTRUCTION ...................................... 7
9.1. Defined Terms
9.2. ERISA Status
9.3. Code Status
9.4. Effect on Other Plans
9.5. Rules of Document Construction
9.6. References to Laws
9.7. Effect on Employment
9.8. Choice of Law
SIGNATURE ................................................................ 8
IMATION EXCESS BENEFIT PLAN
SECTION 1.
INTRODUCTION
IMATION CORP., a Delaware corporation, (the Principal Sponsor") has established
a tax-qualified defined benefit pension plan known as the Imation Cash Balance
Pension Plan (the Pension Plan"), effective July 1, 1996, for the purpose of
providing retirement benefits to certain eligible employees. The Pension Plan is
subject to the Employee Retirement Income Security Act of 1974, as amended
(ERISA") and is intended to qualify as a defined benefit pension plan under
section 401(a) of the Internal Revenue Code of 1986, as amended (the Code"). By
operation of section 401(a)(16) of the Code, benefits under the Pension Plan are
restricted so that they do not exceed certain maximum benefits allowed under
section 415 of the Code. Section 401(a)(17) of the Code restricts the maximum
amount of annual compensation which may be taken into account in determining the
benefits for any employee.
Section 3(36) and section 4(b)(5) of ERISA recognize and authorize the
establishment of an unfunded, nonqualified plan of deferred compensation
maintained by an employer solely for the purpose of providing benefits for
employees in excess of the limitations on benefits imposed under section 415 of
the Code. Section 201, 301 and 401 of ERISA also recognize the creation of an
unfunded plan maintained by an employer primarily for the purpose of providing
deferred compensation for a select group of management or highly compensated
employees.
The Principal Sponsor desires to establish an excess benefit plan for the
purpose of providing the full benefits promised to employees under the Pension
Plan without regard to the limitations imposed by section 415 and section
401(a)(17) of the Code.
Therefore, effective as of July 1, 1996, the Principal Sponsor hereby adopts
this excess benefit plan.
SECTION 2.
PLAN NAME
This employee pension benefit plan shall be referred to as the IMATION EXCESS
BENEFIT PLAN (the Excess Plan").
SECTION 3.
PARTICIPANTS
3.1. GENERAL PARTICIPATION RULE. The individuals eligible to participate in and
receive benefits under this Excess Plan are those employees of Principal Sponsor
and other affiliated companies:
(a) who are, on or after July 1, 1996, participants in the Pension
Plan,
(b) who are, at some time on or after July 1, 1996, actively
employed by the Principal Sponsor or such other affiliated
companies, and
(c) whose benefits under the Pension Plan are limited by Section
401(a)(17) or 415 of the Code.
Any employee who has become a Participant in the Excess Plan shall continue as a
Participant until all benefits which are due under this Excess Plan have been
received without regard to whether he or she continues as a participant in the
Pension Plan or an active employee. Notwithstanding anything apparently to the
contrary contained in this Excess Plan, the Excess Plan shall be construed and
administered to prevent the duplication of benefits provided under this Excess
Plan and any other qualified or nonqualified plan maintained in whole or in part
by the Principal Sponsor or such other affiliated companies.
3.2. OVERRIDING EXCLUSION. Notwithstanding anything apparently to the contrary
in this Excess Plan or in any written communication, summary, resolution or
document or oral communication, no individual shall be a Participant in this
Excess Plan, develop benefits under this Excess Plan or be entitled to receive
benefits under this Excess Plan (either for such individual or his or her
survivors) unless such individual is a member of a select group of management or
highly compensated employees (as that expression is used in ERISA). If a court
of competent jurisdiction, any representative of the U.S. Department of Labor or
any other governmental, regulatory or similar body makes any direct or indirect,
formal or informal, determination that an individual is not a member of a select
group of management or highly compensated employees (as that expression is used
in ERISA), such individual shall not be (and shall not have ever been) a
Participant in this Excess Plan at any time. If any person not so defined has
been erroneously treated as a Participant in this Excess Plan, upon discovery of
such error such person's erroneous participation shall immediately terminate ab
initio and upon demand such person shall be obligated to reimburse the Principal
Sponsor for all amounts erroneously paid to him or her.
SECTION 4.
BENEFITS PAYABLE
4.1. BENEFIT FOR PARTICIPANTS. Upon the termination of employment of a
Participant, this Excess Plan shall pay to a Participant the excess, if any, of:
(a) the amount that would have been payable to the Participant
under the Pension Plan if such benefit had been determined:
(i) without regard to the benefit limitations under
section 415 of the Code, and
(ii) without regard to the compensation limitation of
section 401(a)(17) of the Code; minus
(b) the amount actually paid from the Pension Plan.
Except as may otherwise be specifically provided in this Excess Plan, this
benefit (minus the withholding, payroll and other taxes which must be deducted
therefrom) shall be paid to the Participant in the same manner, at the same
time, for the same duration and in the same form as if such benefit had been
paid directly from the Pension Plan. All elections and optional forms of
settlement in effect and all other rules governing the payment of benefits under
the Pension Plan shall, to the extent practicable, be given effect under this
Excess Plan so that the Participant will receive from a combination of the
Pension Plan and this Excess Plan the same benefit (minus the withholding,
payroll and other taxes which must be deducted therefrom) which would have been
received under the Pension Plan if the Excess Plan benefit had been paid from
the Pension Plan.
4.2. BENEFIT FOR BENEFICIARIES. Upon the death of a Participant, this Excess
Plan shall pay to the surviving spouse or other joint or contingent annuitant or
beneficiary of a Participant, the excess, if any, of:
(a) the amount which would have been payable to such person under
the Pension Plan if such benefit had been determined:
(i) without regard to the benefit limitations under
section 415 of the Code, and
(ii) without regard to the compensation limitation of
section 401(a)(17) of the Code; minus
(b) the amount actually paid from the Pension Plan.
This benefit (minus the withholding, payroll and other taxes which must be
deducted therefrom) shall be paid to such person in the same manner, at the same
time, for the same duration and in the same form as if such benefit had been
paid directly from the Pension Plan. All elections and optional forms of
settlement in effect and all other rules governing the payment of benefits under
the Pension Plan shall, to the extent practicable, be given effect under this
Excess Plan so that such person will receive from a combination of the Pension
Plan and this Excess Plan the same benefit (minus the withholding, payroll and
other taxes which must be deducted therefrom) which would have been received
under the Pension Plan if the Excess Plan benefit had been paid from the Pension
Plan.
SECTION 5.
FUNDING
5.1. UNFUNDED OBLIGATION. The obligation of the Principal Sponsor to make
payments under this Excess Plan constitutes only the unsecured (but legally
enforceable) promise of the Principal Sponsor to make such payments. The
Participant shall have no lien, prior claim or other security interest in any
property of any Principal Sponsor. If a fund is established by the Principal
Sponsor in connection with this Excess Plan, the property therein shall remain
the sole and exclusive property of the Principal Sponsor. The Principal Sponsor
will pay the cost of this Excess Plan out of its general assets.
5.2. HEDGING INVESTMENTS. If the Principal Sponsor elects to finance all or a
portion of its costs in connection with this Excess Plan through the purchase of
life insurance or other investments, the Participant agrees, as a condition of
participation in this Excess Plan, to cooperate with the Principal Sponsor in
the purchase of such investment to any extent reasonably required by the
Principal Sponsor and relinquishes any claim he or she may have either for
himself or herself or any beneficiary to the proceeds of any such investment or
any other rights or interests in such investment. If a Participant fails or
refuses to cooperate, then (notwithstanding any other provision of this Excess
Plan, including, without limiting the generality of the foregoing, Section 4)
the Principal Sponsor shall immediately and irrevocably terminate and forfeit
the Participant's entitlement to benefits under the Excess Plan.
5.3. CORPORATE OBLIGATION. Neither the Principal Sponsor's officers nor any
member of its Board of Directors or its Pension and Retirement Committee ( PRC")
in any way secures or guarantees the payment of any benefit or amount which may
become due and payable hereunder to or with respect to any Participant. Each
Participant and other person entitled at any time to payments hereunder shall
look solely to the assets of the Principal Sponsor for such payments as an
unsecured, general creditor. After benefits shall have been paid to or with
respect to a Participant and such payment purports to cover in full the benefit
hereunder, such former Participant or other person or persons, as the case may
be, shall have no further right or interest in the other assets of the Principal
Sponsor in connection with this Excess Plan. Neither the Principal Sponsor nor
any of its officers nor any member of its Board of Directors or PRC shall be
under any liability or responsibility for failure to effect any of the
objectives or purposes of the Excess Plan by reason of the insolvency of the
Principal Sponsor.
SECTION 6.
GENERAL MATTERS
6.1. AMENDMENTS AND TERMINATION. The Board of Directors of the Principal
Sponsor (or, in any respect that does not materially increase the cost of the
Excess Plan, the PRC) may unilaterally amend this Excess Plan prospectively,
retroactively or both, at any time and for any reason deemed sufficient by it
without notice to any person affected by this Excess Plan and may likewise
terminate or curtail the benefits of this Excess Plan both with regard to
persons expecting to receive benefits in the future and persons already
receiving benefits at the time of such action. No modification of the terms of
this Excess Plan shall be effective unless it is in writing and signed on behalf
of the Principal Sponsor by a person authorized to execute such writing. No oral
representation concerning the interpretation or effect of this Excess Plan shall
be effective to amend the Excess Plan.
6.2. ERISA ADMINISTRATOR. The Principal Sponsor shall be the plan administrator
of this Excess Plan.
6.3. SERVICE OF PROCESS. In the absence of any designation to the contrary by
the PRC, the corporate Secretary of the Principal Sponsor is designated as the
appropriate and exclusive agent for the receipt of service of process directed
to the Excess Plan in any legal proceeding, including arbitration, involving the
Excess Plan.
6.4. LIMITED BENEFITS. This Excess Plan shall not provide any benefits
determined with respect to any defined contribution plan.
6.5. SPENDTHRIFT PROVISION. No Participant, surviving spouse, joint or
contingent annuitant or beneficiary shall have the power to transmit, assign,
alienate, dispose of, pledge or encumber any benefit payable under this Excess
Plan before its actual payment to such person. The Principal Sponsor shall not
recognize any such effort to convey any interest under this Excess Plan. No
benefit payable under this Excess Plan shall be subject to attachment,
garnishment, execution following judgment or other legal process before actual
payment to such person.
6.6. ADMINISTRATIVE DETERMINATIONS. The PRC shall make such determinations as
may be required from time to time in the administration of the Excess Plan. The
PRC shall have the discretionary authority and responsibility to interpret and
construe the Excess Plan and to determine all factual and legal questions under
the Excess Plan, including but not limited to the entitlement of Participants
and Beneficiaries, and the amounts of their respective interests. No member of
the PRC shall participate, however, in any PRC determinations with respect to
his or her own benefit. Each interested party may act and rely upon all
information reported to them hereunder and need not inquire into the accuracy
thereof, nor be charged with any notice to the contrary.
6.7. RULES AND REGULATIONS. Any rule not in conflict or at variance with the
provisions hereof may be adopted by the PRC.
6.8. CERTIFICATIONS. Information to be supplied or written notices to be made
or consents to be given by the Principal Sponsor pursuant to any provision of
this Excess Plan may be signed in the name of the Principal Sponsor by any
officer who has been authorized to make such certification or to give such
notices or consents.
6.9. ERRORS IN COMPUTATIONS. The Principal Sponsor shall not be liable or
responsible for any error in the computation of any benefit payable to or with
respect to any Participant resulting from any misstatement of fact made by the
Participant or by or on behalf of any survivor to whom such benefit shall be
payable, directly or indirectly, to the Principal Sponsor, and used by the
Principal Sponsor in determining the benefit. The Principal Sponsor shall not be
obligated or required to increase the benefit payable to or with respect to such
Participant which, on discovery of the misstatement, is found to be understated
as a result of such misstatement of the Participant. However, the benefit of any
Participant which is overstated by reason of any such misstatement or any other
reason shall be reduced to the amount appropriate in view of the truth (and to
recover any prior overpayment).
SECTION 7.
FORFEITURE OF BENEFITS
All unpaid benefits under this Excess Plan, shall be permanently forfeited upon
the determination by the PRC that the Participant, either before or after
termination of employment:
(a) engaged in a felonious or fraudulent conduct resulting in
material harm to the Principal Sponsor or an affiliate; or
(b) made an unauthorized disclosure to a competitor of any
material confidential information, trade information, or trade
secrets of the Principal Sponsor or an affiliate; or
(c) provided the Principal Sponsor or an affiliate with materially
false reports concerning his or her business interests or
employment; or
(d) made materially false representations which are relied upon by
the Principal Sponsor or an affiliate in furnishing
information to shareholders, accountants, a stock exchange,
the Securities and Exchange Commission or a public or private
regulatory body; or
(e) maintained an undisclosed, unauthorized and material conflict
of interest in the discharge of the duties owed by the
Participant to the Principal Sponsor or an affiliate; or
(f) engaged in conduct causing a serious violation of state or
federal law by the Principal Sponsor or an affiliate; or
(g) engaged in the theft of assets or funds of the Principal
Sponsor or an affiliate; or
(h) has been convicted of any crime which directly or indirectly
arose out of his or her employment relationship with the
Principal Sponsor or an affiliate or materially affected his
or her ability to discharge the duties of his or her
employment with the Principal Sponsor or an affiliate; or
(i) engaged during his or her employment or during a period of two
(2) years after the termination of his or her employment in
any employment or self-employment with a competitor of the
Principal Sponsor or an affiliate within the geographical area
which is then served by the Principal Sponsor or an affiliate.
SECTION 8.
CLAIMS PROCEDURE
Without limiting the generality of the following, an application for benefits
under Section 4 and any objection to a forfeiture under Section 7 shall be
processed as a claim for the purposes of this section.
8.1. ORIGINAL CLAIM. Any person may file with the PRC a written claim for
benefits under the Excess Plan. Within ninety (90) days after the filing of such
a claim, the PRC shall notify the claimant in writing whether his or her claim
is upheld or denied in whole or in part or shall furnish the claimant a written
notice describing specific special circumstances requiring a specified amount of
additional time (but not more than one hundred eighty days from the date the
claim was filed) to reach a decision on the claim. If the claim is denied in
whole or in part, the PRC shall state in writing:
(a) the specific reasons for the denial;
(b) the specific references to the pertinent provisions of this
Excess Plan on which the denial is based;
(c) a description of any additional material or information
necessary for the claimant to perfect the claim and an
explanation of why such material or information is necessary;
and
(d) an explanation of the claims review procedure set forth in
this section.
8.2. CLAIMS REVIEW PROCEDURE. Within sixty (60) days after receipt of notice
that his or her claim has been denied in whole or in part, the claimant may file
with the PRC a written request for a review and may, in conjunction therewith,
submit written issues and comments. Within sixty (60) days after the filing of
such a request for review, the PRC shall notify the claimant in writing whether,
upon review, the claim was upheld or denied in whole or in part or shall furnish
the claimant a written notice describing specific special circumstances
requiring a specified amount of additional time (but not more than one hundred
twenty days from the date the request for review was filed) to reach a decision
on the request for review.
8.3. GENERAL RULES.
(a) No inquiry or question shall be deemed to be a claim or a
request for a review of a denied claim unless made in
accordance with the claims procedure. The PRC may require that
any claim for benefits and any request for a review of a
denied claim be filed on forms to be furnished by the PRC upon
request.
(b) All decision on claims and on requests for a review of denied
claims shall be made by the PRC.
(c) The PRC may, in its discretion, hold one or more hearings on a
claim or a request for a review of a denied claim.
(d) Claimants may be represented by a lawyer or other
representative (at their own expense), but the PRC reserves
the right to require the claimant to furnish written
authorization. A claimant's representative shall be entitled
to receive copies of notices sent to the claimant.
(e) The decision of the PRC on a claim and on a request for a
review of a denied claim shall be served on the claimant in
writing. If a decision or notice is not received by a claimant
within the time specified, the claim or request for a review
of a denied claim shall be deemed to have been denied.
(f) Prior to filing a claim or a request for a review of a denied
claim, the claimant or his or her representative shall have a
reasonable opportunity to review a copy of this Excess Plan
and all other pertinent documents in the possession of the
Principal Sponsor.
(g) The PRC may permanently or temporarily delegate all or a
portion of its authority and responsibility under this Section
8 to a committee or individual.
SECTION 9.
CONSTRUCTION
9.1. DEFINED TERMS. Words and phrases used in this Excess Plan with initial
capital letters, which are defined in the Pension Plan documents and which are
not separately defined in this Excess Plan shall have the same meaning ascribed
to them in the Pension Plan documents unless in the context in which they are
used it would be clearly inappropriate to do so.
9.2. ERISA STATUS. This Excess Plan is adopted with the understanding that it
is an unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees as
provided in section 201(2), section 301(3) and section 401(a)(1) of ERISA. Each
provision shall be interpreted and administered accordingly.
9.3. CODE STATUS. This Excess Plan is intended to be a nonqualified deferred
compensation arrangement. The rules of section 401(a) et. seq. of the Code shall
not apply to this Excess Plan. The rules of section 3121(v) and section
3306(r)(2) of the Code shall apply to this Excess Plan.
9.4. EFFECT ON OTHER PLANS. This Excess Plan shall not alter, enlarge or
diminish any person's employment rights or obligations or rights or obligations
under the Pension Plan or any other plan. It is specifically contemplated that
the Pension Plan will, from time to time, be amended and possibly terminated.
All such amendments and termination shall be given effect under this Excess Plan
(it being expressly intended that this Excess Plan shall not lock in the benefit
structures of the Pension Plan as they exist at the adoption of this Excess Plan
or upon the commencement of participation, or commencement of benefits by any
Participant).
9.5. RULES OF DOCUMENT CONSTRUCTION. Whenever appropriate, words used herein in
the singular may be read in the plural, or words used herein in the plural may
be read in the singular; the masculine may include the feminine; and the words
hereof," herein" or hereunder" or other similar compounds of the word here"
shall mean and refer to the entire Excess Plan and not to any particular
paragraph or Section of this Excess Plan unless the context clearly indicates to
the contrary. The titles given to the various Sections of this Excess Plan are
inserted for convenience of reference only and are not part of this Excess Plan,
and they shall not be considered in determining the purpose, meaning or intent
of any provision hereof.
9.6. REFERENCES TO LAWS. Any reference in this Excess Plan to a statute or
regulation shall be considered also to mean and refer to any subsequent
amendment or replacement of that statute or regulation.
9.7. EFFECT ON EMPLOYMENT. Neither the terms of this Excess Plan nor the
benefits hereunder nor the continuance thereof shall be a term of the employment
of any employee. Except as provided in Section 6.1, the Principal Sponsor shall
not be obliged to continue the Excess Plan. The terms of this Excess Plan shall
not give any employee the right to be retained in the employment of any
Employer.
9.8. CHOICE OF LAW. This instrument has been executed and delivered in the
State of Minnesota and has been drawn in conformity to the laws of that State
and shall, except to the extent that federal law is controlling, be construed
and enforced in accordance with the laws of the State of Minnesota.
________________, 1996 IMATION CORP.
By _____________________________
Its __________________________
1996
IMATION RETIREMENT
INVESTMENT PLAN
1996
IMATION RETIREMENT INVESTMENT PLAN
Table of Contents
<TABLE>
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Page
<S> <C> <C>
ARTICLE 1. BACKGROUND AND PURPOSES OF THE PLAN
Section 1.1 Creation of the Retirement Investment Plan...........................................1
Section 1.2 Transfers from Voluntary Investment Plan
and Employee Stock Ownership Plan....................................................1
Section 1.3 Purposes of the Plan.................................................................1
ARTICLE 2. DEFINITIONS AND GENDER
Section 2.1 Definitions..........................................................................2
Section 2.2 Gender and Number...................................................................11
Section 2.3 Termination of Employment...........................................................11
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
Section 3.1 Eligibility.........................................................................11
Section 3.2 Telephone Enrollment................................................................12
Section 3.3 Effective Date of Participation.....................................................12
Section 3.4 Leased Employees....................................................................13
ARTICLE 4. CONTRIBUTIONS
Section 4.1 Elective Deferrals ................................................................13
Section 4.2 Employer Matching Contributions.....................................................18
Section 4.3 Performance Pays Contributions......................................................22
Section 4.4 Restrictions on Contributions.......................................................25
Section 4.5 Rollover Contributions..............................................................30
Section 4.6 Direct Transfers....................................................................31
Section 4.7 Credit to Accounts..................................................................31
ARTICLE 5. EMPLOYEE STOCK OWNERSHIP PLAN
Section 5.1 Stock Loans.........................................................................32
Section 5.2 Investment in Imation Common Stock..................................................33
Section 5.3 Dividends...........................................................................34
Section 5.4 Voting..............................................................................34
Section 5.5 Tender or Exchange Offers...........................................................35
Section 5.6 Diversification.....................................................................36
ARTICLE 6. PERIODIC ADJUSTMENT OF ACCOUNTS
Section 6.1 Periodic Adjustments................................................................37
Section 6.2 Statements..........................................................................38
ARTICLE 7. VESTING
....................................................................................38
ARTICLE 8. DISTRIBUTION OF BENEFITS
Section 8.1 Payment Methods.....................................................................38
Section 8.2 Time of Payment.....................................................................39
Section 8.3 Form of Payment.....................................................................40
Section 8.4 Death...............................................................................40
Section 8.5 Distribution Limitations............................................................42
Section 8.6 Payment Satisfies Claims............................................................44
Section 8.7 Missing Persons.....................................................................45
Section 8.8 Qualified Domestic Relations Orders.................................................45
Section 8.9 Claims Procedure....................................................................46
Section 8.10 Direct Rollovers....................................................................47
ARTICLE 9. WITHDRAWALS DURING EMPLOYMENT
Section 9.1 Withdrawal from Retirement Savings Account..........................................48
Section 9.2 Withdrawal from Individual Retirement
Account...........................................................................48
Section 9.3 Withdrawal from Thrift Account......................................................49
Section 9.4 Withdrawal from Rollover Account ...................................................49
Section 9.5 Withdrawal from Company Match Account, CCA
Pre-7/96 Account and/or Performance Pays
Account...........................................................................49
Section 9.6 Procedures..........................................................................49
ARTICLE 10. LOANS
Section 10.1 Amount and Number...................................................................50
Section 10.2 Loan Interest and Repayment Period..................................................51
Section 10.3 Segregated Account..................................................................51
Section 10.4 Security............................................................................51
Section 10.5 Administration of Loan Program......................................................52
ARTICLE 11. ADMINISTRATION
Section 11.1 Administrator.......................................................................52
Section 11.2 Delegation..........................................................................52
Section 11.3 Plan Administration.................................................................53
Section 11.4 Facility of Payment.................................................................54
Section 11.5 Trust Agreement.....................................................................54
Section 11.6 Administration of Trust.............................................................54
Section 11.7 Reports and Records.................................................................55
Section 11.8 Payment of Expenses.................................................................55
Section 11.9 Service of Process..................................................................56
Section 11.10 Indemnification.....................................................................56
ARTICLE 12. AMENDMENT TO, AND TERMINATION OF, PLAN
Section 12.1 Amendments..........................................................................56
Section 12.2 Termination of Plan.................................................................57
Section 12.3 Distributions.......................................................................58
Section 12.4 Partial Termination.................................................................58
ARTICLE 13. MISCELLANEOUS
Section 13.1 No Guaranty of Employment...........................................................58
Section 13.2 Construction of Agreement...........................................................59
Section 13.3 Spendthrift Provision...............................................................59
Section 13.4 Headings............................................................................59
Section 13.5 Limitation on Employer's and Trustee's
Liability.........................................................................59
Section 13.6 Merger..............................................................................59
Section 13.7 Counterparts........................................................................60
Section 13.8 Exclusive Benefit...................................................................60
ARTICLE 14. SEPARATE FUNDS
Section 14.1 In General..........................................................................60
Section 14.2 Establishment of Separate Funds.....................................................61
Section 14.3 Investment of CCA Pre-7/96 Accounts and
Company Match Accounts............................................................61
Section 14.4 Valuation of Separate Funds and Accounts............................................63
Section 14.5 Consolidation of Funds..............................................................63
ARTICLE 15. TOP HEAVY PROVISIONS
Section 15.1 Special Definitions.................................................................63
Section 15.2 Minimum Contribution................................................................65
Section 15.3 Vested Account Balance..............................................................66
Section 15.4 Limitation on Benefits..............................................................66
Section 15.5 Distributions.......................................................................67
</TABLE>
SCHEDULE A Employers
IMATION RETIREMENT INVESTMENT PLAN
ARTICLE 1. BACKGROUND AND PURPOSES OF THE PLAN
SECTION 1.1 CREATION OF THE RETIREMENT INVESTMENT PLAN.
Effective as of July 1, 1996, Imation Corp. (hereinafter "IMATION"), created the
IMATION RETIREMENT INVESTMENT PLAN for the benefit of eligible salaried and
union-free hourly employees.
The Plan is intended to be a qualified profit sharing plan satisfying the
requirements of section 401(a) of the Code, which also includes a stock
bonus/employee stock ownership plan satisfying the requirements of section
4975(e)(7) of the Code which is designed to invest primarily in IMATION Common
Stock.
SECTION 1.2 TRANSFERS FROM THE 3M VOLUNTARY INVESTMENT PLAN AND EMPLOYEE STOCK
OWNERSHIP PLAN.
Effective July 1, 1996, the account balances of all employees of the Employer
who were formerly employed by Minnesota Mining and Manufacturing Company ("3M")
and the respective assets and liabilities attributable to such account balances
were transferred from the 3M Voluntary Investment Plan and Employee Stock
Ownership Plan (the "VIP") to this Plan. The transfer was intended to comply
with the requirements of section 414(l) of the Code.
SECTION 1.3 PURPOSES OF THE PLAN.
The purposes of the Plan are to:
(a) encourage savings by Employees on a tax-effective basis for
retirement, disability and other contingencies, in order to
supplement other IMATION and government sponsored benefit
programs;
(b) assist Employees in acquiring greater financial security; and
(c) increase the proprietary interest of Employees in IMATION
through accumulation of IMATION Common Stock.
The Plan and Trust are intended to meet the requirements of sections 401(a),
401(k), 401(m), 501(a) and 4975(e)(7) of the Code, as well as the applicable
provisions of ERISA; and are subject to approval by the Internal Revenue Service
and to any amendments necessary to obtain such approval.
ARTICLE 2. DEFINITIONS AND GENDER
SECTION 2.1 DEFINITIONS.
Whenever used in the Plan, the following terms shall have the respective
meanings set forth below, unless the context clearly requires otherwise, and,
when the defined meaning is intended, the term is capitalized:
(a) "Account" or "Accounts" means the record of the amounts credited to an
individual under the Plan, and may refer to any or all of the
following: Retirement Savings Accounts (sometimes referred to herein as
"RSAs"), Company Match Accounts (sometimes referred to herein as
"CMAs"), CCA Pre-7/96 Accounts (sometimes referred to herein as
"CCAs"), Thrift Accounts (sometimes referred to herein as "TAs"),
Individual Retirement Accounts (sometimes referred to herein as
"IRAs"), and Rollover Accounts (sometimes referred to herein as
"ROAs"), and Performance Pays Accounts (sometimes referred to herein as
"PPAs").
"Retirement Savings Account" means the record of amounts attributable
to contributions made by the Employer on behalf of Participants
pursuant to Section 4.1, in conjunction with Compensation reductions
experienced by Participants under the terms of the Plan, together with
Trust earnings with respect thereto.
"Company Match Account" means the record of amounts attributable to
contributions made by the Employer on behalf of Participants pursuant
to Section 4.2, together with Trust earnings with respect thereto.
"CCA Pre-7/96 Account" means the record of amounts transferred from the
VIP to the Plan attributable to the company contribution accounts of
Participants under the VIP as of the transfer date, together with Trust
earnings with respect thereto.
"Individual Retirement Account" means the record of amounts
attributable to a Participant's deductible employee contributions
(within the meaning of section 72(o)(5)(B) of the Code) made under the
provisions of the VIP in effect prior to 1987, together with Trust
earnings with respect thereto.
"Thrift Account" means the record of amounts attributable to a
Participant's after-tax contributions made under the provisions of the
VIP in effect prior to July 1, 1996, together with Trust earnings with
respect thereto.
"Rollover Account" means the record of amounts attributable to a
Participant's rollover contributions made pursuant to Section 4.5, and
transfers made pursuant to Section 4.6, together with Trust earnings
with respect thereto.
"Performance Pays Account" means the record of amounts attributable to
contributions made by the Employer on behalf of Participants pursuant
to Section 4.3, together with Trust earnings with respect thereto.
The various Accounts shall be maintained as separate bookkeeping
records but, with the exception of Company Match Accounts, CCA Pre-7/96
Accounts and Performance Pays Accounts, which shall be invested
(subject to the diversification provisions of Sections 5.6) primarily
in 3M common stock and IMATION Common Stock, assets in the said
Accounts may, for investment purposes, be commingled, invested and
administered as a single fund (except as may be specifically provided
herein to the contrary).
(b) "Actual Contribution Percentage" means, for purposes of paragraph
4.3(e), the ratio (expressed as a percentage and calculated to the
nearest one-hundredth of one percent) of (i) the sum of (A) the value
of the units representing shares of IMATION Common Stock allocated to
an Employee's Company Match Account for a Plan Year pursuant to Section
4.2, and (B) the value of the units representing shares of IMATION
Common Stock allocated to an Employee's Performance Pays Account for
such Plan Year pursuant to Section 4.3, to (ii) such Employee's
Compensation for such Plan Year. The Actual Contribution Percentage for
any Highly Compensated Employee who is eligible to have employer
matching contributions made on his or her behalf or to make after-tax
employee contributions under two or more plans or arrangements
described in section 401(m) of the Code (which are all employee stock
ownership plans) that are maintained by an Employer or Affiliate shall
be determined as if all such matching contributions and employee
contributions were made under a single plan. If any Highly Compensated
Employee is subject to the family aggregation rules of section
414(q)(6) of the Code because such Employee is either a five-percent
owner (within the meaning of section 416(i) of the Code) of any
Employer or one of the ten most highly compensated Employees, the
combined Actual Contribution Percentage for the family group including
such Highly Compensated Employee shall be the greater of (iii) the
Percentage determined by combining the units representing shares of
IMATION Common Stock allocated to Company Match Accounts pursuant to
Sections 4.2 and 4.3 and the Compensation of all eligible Family
Members who are Highly Compensated Participants without regard to
family aggregation, and (iv) the Percentage determined by combining the
units representing shares of IMATION Common Stock allocated to Company
Match Accounts pursuant to Sections 4.2 and 4.3 and the Compensation of
all the eligible Family Members, and such Family Members (and all of
their units representing shares of IMATION Common Stock allocated to
their Company Match Accounts pursuant to Sections 4.2 and 4.3 and
Compensation) shall be disregarded in determining the Actual
Contribution Percentage for all other Employees. However, in applying
the $150,000 Compensation limit of paragraph 2.01(i), the only Family
Members taken into account with respect to such Highly Compensated
Employee shall be the Employee's spouse and any lineal descendants who
have not attained age 19 before the close of the Plan Year.
(c) "Actual Deferral Percentage" means the ratio (expressed as a percentage
and calculated to the nearest one-hundredth of one percent) of (i) the
amount of Elective Deferrals allocated to an Employee's Retirement
Savings Account for a Plan Year, to (ii) such Employee's Compensation
for such Plan Year. The Actual Deferral Percentage for any Highly
Compensated Employee who is eligible to have elective deferrals
allocated to his or her account under two or more plans or arrangements
described in section 401(k) of the Code that are maintained by an
Employer or Affiliate shall be determined as if all such elective
deferrals were made under a single plan. If any Highly Compensated
Employee is subject to the family aggregation rules of section
414(q)(6) of the Code because such Employee is either a five-percent
owner (within the meaning of section 416(i) of the Code) of any
Employer or one of the ten most highly compensated Employees, the
combined Actual Deferral Percentage for the family group including such
Highly Compensated Employee shall be the greater of (iii) the
Percentage determined by combining the Elective Deferrals and
Compensation of all eligible Family Members who are Highly Compensated
Participants without regard to family aggregation, (iv) the Percentage
determined by combining the Elective Deferrals and Compensation of all
the eligible Family Members, and such Employee's Family Members (and
all of their Elective Deferrals and Compensation) shall be disregarded
in determining the Actual Deferral Percentage for all other Employees.
(d) "Adjustment Factor" means the cost of living adjustment factor
prescribed by the Secretary of the Treasury under section 415(d) of the
Code for years beginning after December 31, 1987, as applied to such
items and in such manner as the Secretary shall provide.
(e) "Affiliate" means any corporation which is a member of a controlled
group of corporations (as defined in section 414(b) of the Code) which
includes IMATION; any trade or business (whether or not incorporated)
which is under common control (as defined in section 414(c) of the
Code) with IMATION; any organization which is a member of an affiliated
service group (within the meaning of section 414(m) of the Code) which
includes IMATION; and any other entity required to be aggregated with
IMATION pursuant to regulations under section 414(o) of the Code. For
purposes of applying Section 4.4 of the Plan, the foregoing Code
sections shall be modified to the extent provided in section 415(h) of
the Code.
(f) "Beneficiary" or "Beneficiaries" means such person or persons who, at
any particular time, shall be entitled to receive a distribution from
the Trust in the event of the death of a Participant.
(g) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. Any reference to a section of the Code refers to that section of
the Code or the corresponding section of the Code as amended, together
with the regulations issued thereunder.
(h) "Compensation" of an Employee for any Plan Year means that portion of
the amount reportable by Employers for federal income tax purposes as
base pay, overtime pay, incentive pay for hourly-paid employees, cash
bonuses, vacation pay, shift premium pay, commission pay and
performance sharing paid to the Employee during such Plan Year;
increased by the amount of Compensation reductions experienced by the
Employee during such year pursuant to the provisions of Section 4.1,
and by the amount of any employer contributions made on behalf of the
Employee pursuant to a salary reduction agreement and which are not
includable in the gross income of the Employee under section 125 of the
Code. Compensation in excess of $150,000 (as adjusted by the
Commissioner of the Internal Revenue Service for increases in the cost
of living in accordance with section 401(a)(17)(B) of the Code) in any
Plan Year shall be disregarded.
(i) "Disability" or "Disabled" means total and permanent disability due to
a physical or mental condition which results in the Participant's
receiving disability benefit payments under the applicable provisions
of the Social Security Act of the United States.
(j) "Earnings", with respect to a Participant for any Plan Year, means the
aggregate amount reportable by all Employers and Affiliates for federal
income tax purposes (in Box 10 of Form W-2) as wages paid or made
available to the Participant for that Plan Year; provided, however,
that this amount shall be reduced by any amounts which such Participant
received as payment or reimbursement of moving expenses by or from an
Employer or Affiliate if such amounts are reasonably believed to be
deductible from the Participant's gross income in accordance with
section 217 of the Code;
(k) "Elective Deferrals" means the contributions made to the Trust during a
Plan Year by an Employer pursuant to the Compensation reduction
elections made under Section 4.1 by its participating Employees.
(l) "Employee" means any person, including an officer, who is employed as
an active regular common-law employee by an Employer; including such
regular employees who are United States citizens on foreign assignment;
but excluding (i) any such person who is covered by a collective
bargaining agreement to which an Employer is a party (unless such
collective bargaining agreement expressly provides for inclusion of
such person, by category, in the Plan), (ii) to the extent specified,
by category, by the Committee, any such person who is a foreign
national employed in the United States; and (iii) any person classified
by an Employer as a "temporary employee". The term "Employee" shall
also include any leased employee, within the meaning of section
414(n)(2) of the Code, of any Employer.
(m) "Employer" means IMATION, Imation Enterprises Corp. and any other
Affiliate which adopts the Plan, if such adoption is approved by the
Pension and Retirement Committee, specifically including the Affiliates
listed on the attached Schedule A, as such schedule may be amended from
time to time.
(n) "ERISA" means the Employee Retirement Income Security Act of 1974, as
it may be amended from time to time. Any reference to a section of
ERISA refers to that section of ERISA or the corresponding section of
ERISA as amended, together with the regulations issued thereunder.
(o) "Excess Aggregate Contributions" means, with respect to any Plan Year,
the excess of (i) the sum of (A) the aggregate amount of units
representing shares of IMATION Common Stock allocated to the Company
Match Accounts of all Highly Compensated Employees for such Plan Year
pursuant to Section 4.2, and (B) the aggregate amount of units
representing shares of IMATION Common Stock allocated to the
Performance Pays Accounts of all Highly Compensated Employees for such
Plan Year pursuant to Section 4.3, over (ii) the maximum amount of such
allocations permitted under the limitations of subparagraph 4.3(e)(2).
The maximum amount of allocations permitted under the limitations of
subparagraph 4.3(e)(2) shall be determined in accordance with the
leveling method described in subparagraph 4.3(e)(1)(B).
The determination and correction of Excess Aggregate Contributions with
respect to a Highly Compensated Employee whose Actual Contribution
Percentage is determined under the family aggregation rules described
in paragraph 2.1(b) shall be accomplished as follows:
(1) If the Actual Contribution Percentage for such Highly
Compensated Employee is determined in accordance with
subparagraph 2.1(b)(iv), then his or her Actual Contribution
Percentage shall be reduced (if necessary) in accordance with
the leveling method described in subparagraph 4.3(e)(1)(B) and
the resulting Excess Aggregate Contributions (if any) shall be
allocated among such Employee's Family Members in proportion
to the contributions of each Family Member that have been
combined.
(2) If the Actual Contribution Percentage for such Highly
Compensated Employee is determined in accordance with
subparagraph 2.1(b)(iii), then his or her Actual Contribution
Percentage shall first be reduced (if necessary) in accordance
with the leveling method described in subparagraph
4.3(e)(1)(B), but not below the Actual Contribution Percentage
of the group of such Employee's Family Members who are not
Highly Compensated Participants without regard to family
aggregation. The Excess Aggregate Contributions resulting from
this initial reduction shall be allocated among the Family
Members whose contributions were combined to determine such
Employee's Actual Contribution Percentage, in proportion to
the contributions of each Family Member that have been
combined. If further reduction of such Employee's Actual
Contribution Percentage is required, the Excess Aggregate
Contributions resulting from this reduction shall be
determined by taking into account the Company Match Account
allocations and Performance Pays Account allocations of all of
such Employee's Family Members and shall be allocated among
such Family Members in proportion to their respective
allocations.
(p) "Excess Contributions" means, with respect to any Plan Year, the excess
of (i) the aggregate amount of Elective Deferrals allocated to the
Retirement Savings Accounts of all Highly Compensated Employees for
such Plan Year, over (ii) the maximum amount of such Elective Deferrals
permitted under the limitations of subparagraph 4.1(d)(2). The maximum
amount of Elective Deferrals permitted under the limitations of
subparagraph 4.1(d)(2) shall be determined in accordance with the
leveling method described in subparagraphs 4.1(d)(1)(B) and (C).
The determination and correction of Excess Contributions with respect
to a Highly Compensated Employee whose Actual Deferral Percentage is
determined under the family aggregation rules described in paragraph
2.1(c) shall be accomplished as follows:
(1) If the Actual Deferral Percentage for such Highly
Compensated Employee is determined in accordance with
subparagraph 2.1(c)(iv), then his or her Actual Deferral
Percentage shall be reduced (if necessary) in accordance with
the leveling method described in subparagraphs 4.1(d)(1)(B)
and (C) and the resulting Excess Contributions (if any) shall
be allocated among such Employee's Family Members in
proportion to the contributions of each Family Member that
have been combined.
(2) If the Actual Deferral Percentage for such Highly
Compensated Employee is determined in accordance with
subparagraph 2.1(c)(iii), then his or her Actual Deferral
Percentage shall first be reduced (if necessary) in accordance
with the leveling method described in subparagraphs
4.1(d)(1)(B) and (C), but not below the Actual Deferral
Percentage of the group of such Employee's Family Members who
are not Highly Compensated Participants without regard to
family aggregation. The Excess Contributions resulting from
this initial reduction shall be allocated among the Family
Members whose Elective Deferrals were combined to determine
such Employee's Actual Deferral Percentage, in proportion to
the Elective Deferrals of each Family Member that have been
combined. If further reduction of such Employee's Actual
Deferral Percentage is required, the Excess Contributions
resulting from this reduction shall be determined by taking
into account the Elective Deferrals of all of such Employee's
Family Members and shall be allocated among such Family
Members in proportion to their respective Elective Deferrals.
(q) "Family Member" means an individual described in section 414(q)(6)(B)
of the Code.
(r) "414(q) Compensation" of an Employee for any Plan Year means Earnings
as defined in paragraph (k) of this Section 2.1, increased by the
amount of Compensation reductions experienced by the Employee during
such year pursuant to the provisions of Section 4.1, and by the amount
of any employer contributions made on behalf of the Employee pursuant
to a salary reduction agreement and which are not includable in the
gross income of the Employee under section 125 of the Code.
(s) "Highly Compensated Employee" or "Highly Compensated Participant" means
an individual described in section 414(q) of the Code, considering the
414(q) Compensation of such Employee or Participant as his or her
compensation for purposes of such Code section and the regulations
thereunder.
(t) "Nonhighly Compensated Employee" or "Nonhighly Compensated Participant"
means an Employee or Participant who is not a Highly Compensated
Employee or a Highly Compensated Participant, respectively.
(u) "Normal Retirement Age" means the date a Participant attains age 65.
(v) "Participant" means a person who meets the requirements of Section 3.1
and 3.2, and who is not ineligible to participate by reason of Section
3.4. Such person who has one or more Account balances shall continue to
be a Participant until all benefits hereunder have been distributed to
him or her, or until his or her death, if earlier.
"Active Participant" means a Participant who is, at the time in
question, eligible to make Elective Deferrals.
(w) "Pension and Retirement Administrative Committee" or "PRAC" means the
administrative committee of not less than 3 members who are employees
of an Employer appointed by and serving at the pleasure of the PRC.
(x) "Pension and Retirement Committee" or "PRC" means the management
committee of not less than 3 members who are employees of an Employer
appointed by and serving at the pleasure of the chief executive officer
of IMATION.
(y) "Performance Pays Percentage" means, with respect to a Plan Year, the
percentage of Employees' Compensation (with a minimum of zero percent
and a maximum of two percent) determined by the performance of IMATION
during such Plan Year as compared to the financial targets established
for such Plan Year by the PRC.
(z) "Plan" means the "IMATION RETIREMENT INVESTMENT PLAN" as set forth
herein, and as may be amended, restated or revised from time to time.
(aa) "Plan Year" means the 12-month period commencing on January 1 and
ending on the next following December 31.
(bb) "Retirement" means a Participant's voluntary or involuntary termination
of employment with an Employer for any reason on or after attainment of
age 55.
(cc) "Stock Loan" means a loan or other extension of credit to the Plan
which is used to finance the purchase of IMATION Common Stock, or to
refinance a prior Stock Loan.
(dd) "Stock Loan Suspense Account" means the record of amounts attributable
to shares of IMATION Common Stock purchased with a Stock Loan and
initially allocated to and held therein until released to the Company
Match Accounts and Performance Pays Accounts of Participants, together
with Trust earnings with respect thereto.
(ee) "3M" means Minnesota Mining and Manufacturing Company.
(ff) "Trust" means the trust or trusts established by IMATION for the
purpose of holding the assets of the Plan.
(gg) "Trustee" means the trustee or trustees which shall accept the
appointment to execute the duties of the Trustee as set forth in the
Plan and the trust agreement or agreements establishing the Trust.
(hh) "Valuation Date" means each day that all or substantially all of the
U.S. and international financial markets in which the Plan's assets are
invested are open for trading.
(ii) "VIP" means the 3M Voluntary Investment Plan and Employee Stock
Ownership Plan.
(jj) "Voice Response System" means a telephone answering service by which
Employees, Participants and Beneficiaries may submit applications, give
instructions and make elections by electronic communication to the Plan
Administrator or by speaking with a representative of the Plan
Administrator.
SECTION 2.2 GENDER AND NUMBER.
Pronoun references herein shall be deemed to be of any gender relevant to the
context, and words used in the singular shall include the plural.
SECTION 2.3 TERMINATION OF EMPLOYMENT.
For purposes of the Plan, an Employee will be deemed to have terminated his or
her employment only if such Employee has severed his or her employment
relationship with all Employers and Affiliates. Accordingly, neither transfer of
employment among Employers and/or Affiliates, nor absence from active employment
by reason of layoff, disability leave or any other leave of absence will
constitute a termination of employment.
ARTICLE 3. ELIGIBILITY AND PARTICIPATION
SECTION 3.1 ELIGIBILITY.
With the exception of those Employees described in Section 3.4, each Employee
shall be eligible to participate in the Plan on the first day of his or her
employment or reemployment as an Employee by an Employer.
SECTION 3.2 TELEPHONE ENROLLMENT.
(a) In General. In order to become a Participant in the Plan, each Employee
who is otherwise eligible to make or have contributions made on his or
her behalf pursuant to Sections 4.1 and/or 4.5, must use the Plan's
Voice Response System to specify the amount of his or her
contributions, authorize the reduction of his or her Compensation as
may be necessary to make such contributions, specify the separate
investment fund or funds in which his or her contributions under the
Plan are to be invested (if there is more than one at that time), and
provide such other pertinent data, with respect to the Employee and
with respect to any person named by him or her as a Beneficiary, as the
PRAC may require. To use the Plan's Voice Response System, an Employee
must complete and return to the Plan Administrator a personal
identification number authorization form. By signing and returning such
personal identification number authorization form and using the Plan's
Voice Response System, each Employee agrees to be bound by the terms
and conditions of the Plan and all amendments thereto.
(b) Transferred from 3M. With the following exceptions, all elections made
by Employees using the voice response system of the VIP and outstanding
as of 11:59 PM CT on June 30, 1996 shall be transferred to and remain
in effect under this Plan (until changed by the respective Employee)
from and after 12:01 AM CT on July 1, 1996. Elections to make
contributions to the VIP's personal thrift account will not be
recognized by the Plan. Elections to make contributions to the VIP's
savings plus account at the rate of 16% of compensation will be
recognized as elections to contribute at the Plan's maximum of 15% of
Compensation.
SECTION 3.3 EFFECTIVE DATE OF PARTICIPATION.
Elections made by an eligible Employee using the Plan's Voice Response System
after returning a properly completed and signed personal identification number
authorization form to the Plan Administrator shall be effective, and the
Employee shall become a Participant (if he or she is not already a Participant),
as soon as administratively practicable following receipt thereof by the Plan
Administrator.
SECTION 3.4 LEASED EMPLOYEES.
No leased employee, within the meaning of section 414(n)(2) of the Code, of any
Employer or Affiliate shall be eligible to participate in the Plan.
ARTICLE 4. CONTRIBUTIONS
SECTION 4.1 ELECTIVE DEFERRALS.
(a) Amount and Payment. Subject to the remaining provisions of this Section
4.1 and to the limitations set forth in Section 4.4, each Employer
shall contribute to the Trust, on behalf of each Participant who was in
its employ during such Plan Year and whose Compensation otherwise
payable by such Employer to such Participant has been reduced in
accordance with paragraph 4.1(b), the amount by which the Participant's
Compensation has been so reduced (referred to hereinafter as the
"Elective Deferrals"). Each Employer's contributions hereunder shall be
paid to the Trust within a reasonable time after the Participant would
have otherwise received the Compensation from which the Elective
Deferral was made; provided, that, to the extent deemed necessary by
the PRAC in connection with its determination under paragraph 4.1(d),
Elective Deferrals may be prospectively decreased or otherwise applied
in the manner specified in that paragraph.
(b) Compensation Reduction Procedure. For purposes of implementing
paragraph 4.1(a), a Participant may, by using the Plan's Voice Response
System, elect to have his or her Compensation reduced, in accordance
with the following rules:
(1) A Participant's Elective Deferrals hereunder shall be made as
a percentage of his or her Compensation (in any 1% increment).
The minimum Elective Deferral percentage shall be 1% of a
Participant's Compensation, and the maximum Deferral Election
percentage (subject to the limitation described in paragraph
4.4(d)) shall be (A) 15% of a Participant's Compensation for
Participants who are Nonhighly Compensated Participants based
on their 414(q) Compensation during the preceding Plan Year,
and (B) 10% of a Participant's Compensation for Participants
who are Highly Compensated Participants based on their 414(q)
Compensation during the preceding Plan Year. The percentage
elected by the Participant shall automatically apply to his or
her Compensation as the same may be adjusted from time to
time;
(2) A Participant's Elective Deferrals made for any taxable year
pursuant to this Section 4.1 shall not exceed $7,000 (as
adjusted by the Commissioner of the Internal Revenue Service
for increases in the cost of living in accordance with section
402(g) of the Code).
(3) Subject to the limitations set forth in subparagraph (1)
above, a Participant may change the rate at which his or her
Compensation is being reduced for subsequent periods.
Application for such change shall be made by using the Plan's
Voice Response System. Such change shall be effective as soon
as administratively practicable following receipt of such
application by the PRAC. The PRAC may limit the number of
Elective Deferral rate changes which may be made during each
Plan Year in accordance with uniform rules.
(4) Upon notice to the PRAC, by using the Plan's Voice Response
System, a Participant may suspend his or her Elective
Deferrals, effective as soon as administratively practicable
following receipt of such notice by the PRAC. Any Participant
who has so suspended his or her Elective Deferrals may elect
to resume such Deferrals in the manner provided in Section
3.2.
(5) Notwithstanding the foregoing provisions hereof, to the extent
required by applicable law, a Participant may not elect to
have his or her Compensation reduced below an amount which
would result in his or her Compensation being less than that
prescribed by minimum wage laws.
(6) Unless and until the PRAC issues rules to the contrary,
Participants' Elective Deferrals shall be made only on a
payroll reduction basis, and shall be made with respect to all
Compensation payments made to the Participant by his or her
respective Employer.
(c) Allocation to Participants' Retirement Savings Accounts. The amount
contributed under this Section 4.1 on behalf of a Participant shall be
allocated to the Retirement Savings Account of the Participant at the
same time as or as soon as administratively practicable following the
date on which the contribution is paid to the Trustee.
(d) Compensation Reduction Adjustments.
(1) Notwithstanding the provisions of paragraphs 4.1(a) and
4.1(b), if and to the extent deemed necessary by the PRAC in
order to maintain the tax-qualified status of the Plan in
accordance with the rules set forth in section 401(a) of the
Code and to comply with the actual deferral percentage
requirements of section 401(k)(3) of the Code for any Plan
Year, the PRAC may, in its sole discretion, exercised
uniformly among Participants similarly situated, prospectively
reduce the maximum amount of Elective Deferrals permitted to
be made for such Plan Year (from the amount described in
subparagraph 4.1(b)(2)) by Highly Compensated Participants,
decrease the rate at which a Highly Compensated Participant's
Compensation will be reduced during the remainder of such Plan
Year, direct the Trustee to distribute to Highly Compensated
Participants the amount of any Excess Contributions (and any
income allocable thereto), or any combination of the above.
The amount of Excess Contributions for any Plan Year to be
distributed to a Highly Compensated Participant shall be
reduced by any excess deferrals previously distributed to such
Participant for his or her taxable year ending with or within
such Plan Year.
(A) In the event the amount of the Highly Compensated
Participants' Elective Deferrals are so decreased,
such decreases shall be applied by successively
decreasing the rate of Elective Deferrals under this
Section 4.1 for such Highly Compensated Participants
who have elected the highest percentage rate of such
Deferrals, to the next lower percentage; then, if
deemed necessary by the Committee, again decreasing
the percentage of the same Highly Compensated
Participants' Elective Deferrals, together with the
percentage of Elective Deferrals of those Highly
Compensated Participants who were already at such
lower percentage, to the next lower percentage; and
continuing such procedure for as many percentage
decreases as the PRAC shall determine.
(B) In the event the amount of any Excess Contributions
are so distributed, such distributions shall be made
by successively distributing the Elective Deferrals
(and any income allocable to such Deferrals) of the
Highly Compensated Participants with the highest
Actual Deferral Percentage for such Plan Year to the
extent required to cause such Participants' Actual
Deferral Percentage to equal the Actual Deferral
Percentage of the Highly Compensated Participants
with the next highest Actual Deferral Percentage for
such Plan Year; then, if deemed necessary by the
PRAC, again distributing the Elective Deferrals (and
any income allocable to such Deferrals) of the same
Participants together with the Elective Deferral (and
any income allocable to such Deferrals) of the Highly
Compensated Participants who were already at such
lower Actual Deferral Percentage to the extent
required to cause such Participants' Actual Deferral
Percentage to equal the Actual Deferral Percentage of
the Highly Compensated Participants with the next
highest Actual Deferral Percentage; and continuing
such procedure for as many distributions as the PRAC
shall determine. Any distributions of Excess
Contributions made in accordance with this paragraph
4.1(d) shall be completed by the end of the Plan Year
following the Plan Year in which such contributions
were made. The income allocable to any Excess
Contributions distributed in accordance with this
paragraph 4.1(d) shall include both the income (or
loss) for the Plan Year for which such contributions
were made and the income (or loss) for the period
between the end of such Plan Year and the date of
distribution.
(2) For each Plan Year, the Plan shall satisfy the actual deferral
percentage requirements of section 401(k)(3) of the Code by
meeting one of the following tests:
(A) The average Actual Deferral Percentage for all
eligible Highly Compensated Employees is not more
than the average Actual Deferral Percentage for all
eligible Nonhighly Compensated Employees multiplied
by 1.25; or
(B) The excess of the average Actual Deferral Percentage
for all eligible Highly Compensated Employees over
the average Actual Deferral Percentage for all
eligible Nonhighly Compensated Employees is not more
than two percentage points, and the average Actual
Deferral Percentage for all eligible Highly
Compensated Employees is not more than the average
Actual Deferral Percentage for all eligible Nonhighly
Compensated Employees multiplied by 2.
For purposes of applying the provisions of this subparagraph
(2), the terms "eligible Highly Compensated Employees" and
"eligible Nonhighly Compensated Employees" mean those
Employees who are eligible to make Elective Deferrals for that
Plan Year. Elective Deferrals will be taken into account under
the actual deferral percentage tests described in this
subparagraph (2) for a Plan Year only if they (i) are
allocated (within the meaning of Income Tax Regulation
ss.1.401(k)-1(b)(4), which is incorporated herein by
reference) to an Employee as of a date within such Plan Year,
and (ii) relate to Compensation that either would have been
received by the Employee in such Plan year (but for the
Employee's deferral election or salary reduction agreement in
connection with section 125 of the Code), or are attributable
to services performed by the Employee in such Plan Year and
would have been received by the Employee within 2-1/2 months
after the end of such Plan Year (but for the Employee's
deferral election or salary reduction agreement in connection
with section 125 of the Code). In addition to the foregoing,
if and to the extent deemed necessary by the PRAC in order to
maintain the tax-qualified status of the Plan in accordance
with the rules set forth in section 415 of the Code, the PRAC
may, in its sole discretion exercised uniformly among
Participants similarly situated, prospectively decrease the
rate at which a Participant's Compensation will be reduced, to
the level necessary to satisfy the requirements of Code
section 415 and the provisions of Section 4.4 of this Plan.
(3) For the purpose of determining whether this Plan satisfies the
actual deferral percentage tests described in subparagraph (2)
above, the cash or deferred arrangement under this Plan and
the cash or deferred arrangements under any other plans that
are aggregated with this Plan for purposes of sections
401(a)(4) or 410(b) (other than section 410(b)(2)(A)(ii)) of
the Code (if any) shall be treated as one arrangement. In
addition, if two or more cash or deferred arrangements
(including the cash or deferred arrangement under this Plan)
are treated as a single arrangement for purposes of sections
401(a)(4), 401(k) and 410(b) of the Code, these cash or
deferred arrangements and the plans including such
arrangements shall be treated as one arrangement and as one
plan for purposes of subparagraph (2) above and sections
401(a)(4), 401(k) and 410(b) of the Code.
SECTION 4.2 EMPLOYER MATCHING CONTRIBUTIONS.
(a) Required Stock Loan Contributions. The Employers shall make
contributions to the Trust, without regard to annual or accumulated
earnings or profits, in amounts equal to the principal and interest
required to be paid on all Stock Loans during each Plan Year, reduced
by the amount of dividends and other earnings of the Trust which are
applied to make such payments as provided in paragraph 5.1(b).
(b) Discretionary Stock Loan Contributions. The Employers may at any time
make additional contributions to the Trust to be applied to the
repayment of a Stock Loan. Both the decision to make such additional
contributions and the amount of such contributions, if any, shall be
within the sole discretion of the Employers.
(c) Required Supplemental Matching Contributions. For each Plan Year and
subject to the limitations set forth in Section 4.4, each Employer
shall also contribute to the Trust the amount (if any) by which:
(1) the sum of:
(A) matching contributions equal to one hundred percent
(100%) of that portion of the Elective Deferrals
allocated to its Employees' Retirement Savings
Accounts for such Plan Year which does not exceed
three percent (3%) of any such Employee's
Compensation for the pay period from which such
Elective Deferrals are made; and
(B) matching contributions equal to twenty-five percent
(25%) of that portion of the Elective Deferrals
allocated to its Employees' Retirement Savings
Accounts for such Plan Year which exceeds three
percent (3%) but does not exceed six percent (6%) of
any such Employee's Compensation for the pay period
from which such Elective Deferrals are made; exceeds
(2) the fair market value (determined at the time of allocation)
of the shares of IMATION common stock released from the Stock
Loan Suspense Account and allocated to its Employees' Company
Match Accounts for such Plan Year pursuant to subparagraph 2
of paragraph 4.2(g).
For purposes of this paragraph 4.2(c), the fair market value of the
shares of IMATION common stock released from the Stock Loan Suspense
Account and allocated to Participants' Company Match Accounts shall be
the mean between the aggregate high and low sales prices for such
shares on the New York Stock Exchange on the trading day coinciding
with or immediately preceding the date of allocation, as quoted by such
brokers as are specified for this purpose by the PRAC.
(d) Form of Contributions. Employers' contributions under paragraphs (a)
and (b) of this Section 4.2 shall be made in cash. Employers'
contributions under paragraph (c) of this Section 4.2 may be made, in
IMATION's sole discretion, in cash or in shares of IMATION common
stock. If such contributions are made in shares of IMATION common
stock, the value thereof for purposes of this paragraph 4.2(d) shall be
the mean between the aggregate high and low sales prices for such
shares on the New York Stock Exchange on the trading day coinciding
with or immediately preceding the day such contribution was made, as
quoted by such brokers as are specified for this purpose by the PRAC;
and the value of a fractional share of such stock shall be contributed
in the form of cash.
(e) Payment. Employers' contributions under paragraph (a) of this Section
4.2 shall be paid to the Trustee on or before the due date for each
scheduled Stock Loan payment. Employers' contributions under paragraphs
(b) and (c) of this Section 4.2 for a Plan Year shall be paid to the
Trustee on or before the date on which the Employers' federal income
tax return for such Plan Year is required to be filed or such date as
duly extended.
(f) Release of Shares from Stock Loan Suspense Account. As soon as
practicable after the Trust makes each payment with respect to a Stock
Loan (other than a payment made with the proceeds of another Stock
Loan), a number of shares of IMATION common stock credited to the Stock
Loan Suspense Account shall be released from such Account and credited
to the ESOP Stock Fund. The number of shares released shall equal the
number of shares of IMATION common stock credited to the Stock Loan
Suspense Account at the time of each Loan payment which are
attributable to the Stock Loan multiplied by a fraction. The numerator
of this fraction shall be the amount of principal and interest paid on
such Stock Loan with such Loan payment. The denominator of this
fraction shall be the sum of (a) the numerator (current principal and
interest payment), and (b) the total remaining principal and interest
payments under such Stock Loan. For this purpose, each Stock Loan and
the IMATION common stock purchased with the proceeds thereof shall be
considered separately.
The number of future payments under each Stock Loan must be definitely
ascertainable, and must be determined without taking into account any
possible extensions or renewal periods. If the rate of interest under a
Stock Loan is variable, the amount of interest to be paid in future
Loan payments must be computed by using the interest rate applicable as
of the due date of the current Loan payment.
(g) Allocation to Participants' Accounts. Units representing shares of
IMATION common stock credited to the ESOP Stock Fund shall be allocated
to the Participants' Company Match Accounts at the time and in the
manner specified in subparagraphs (1), (2) and (3) below:
(1) Dividend Allocations. As soon as practicable following the
release of shares of IMATION common stock from the Stock Loan
Suspense Account as a result of a payment on a Stock Loan made
in whole or in part with cash dividends on IMATION common
stock, units representing a portion of the total number of
shares so released shall be allocated to the Participants'
Company Match Accounts based on the amount of such dividends
used to make the payment. The units so allocated shall be
calculated separately with respect to (1) cash dividends on
IMATION common stock acquired with the proceeds of a Stock
Loan and credited to the ESOP Stock Fund (the "Allocated
Dividends"), and (2) cash dividends on IMATION common stock
held in the Stock Loan Suspense Account (the "Unallocated
Dividends").
The number of units allocated with respect to Allocated
Dividends shall equal the total number of shares released on
account of the Stock Loan payment multiplied by a fraction.
The numerator of this fraction shall be the amount of the
Allocated Dividends used to make the Loan payment. The
denominator of this fraction shall be the fair market value of
the total number of units allocated as a result of the Loan
payment. The number of units allocated with respect to
Allocated Dividends shall be allocated among the Participants'
Company Match Accounts in the same proportion that the
Allocated Dividends from each Participant's Company Match
Account used to make the Stock Loan payment bear to the total
amount of such Allocated Dividends.
The number of units allocated with respect to Unallocated
Dividends shall equal the balance (after the application of
the preceding paragraph) of the number of shares released on
account of the Stock Loan payment multiplied by a fraction.
The numerator of this fraction shall be the amount of
Unallocated Dividends used to make the Loan payment. The
denominator of this fraction shall be the amount of the Loan
payment reduced by the amount of Allocated Dividends used to
make such payment, if any. The number of units allocated with
respect to Unallocated Dividends shall be allocated among the
Participants' Company Match Accounts in the same manner as the
units representing the balance of the released shares are
allocated among such Accounts, pursuant to subparagraphs (2)
and (3) of this paragraph 4.2(g).
(2) Stock Loan Contribution Allocations. Once each week, units
representing a portion of the total number of shares of
IMATION common stock that have been released from the Stock
Loan Suspense Account and credited to the ESOP Stock Fund as a
result of Stock Loan amortization payments made during such
Plan Year shall be allocated to the Participants' Company
Match Accounts as set forth below. The number of units
allocated with respect to such payments shall be the total
number of units representing shares of IMATION common stock
previously released on account of Stock Loan Amortization
payments and not previously allocated, multiplied by a
fraction (which shall not exceed one).
The numerator of this fraction shall be the sum of (i)
matching contributions equal to one hundred percent (100%) of
that portion of the Elective Deferrals allocated to all
Participants' Retirement Savings Accounts since the previous
allocation date which did not exceed three percent (3%) of the
amount of any such Participant's Compensation for the pay
period for which such Deferrals were made, and (ii) additional
matching contributions equal to the twenty-five percent (25%)
of that portion of the Elective Deferrals allocated to all
Participants' Retirement Savings Accounts since the previous
allocation date which exceeded three percent (3%) but did not
exceed six percent (6%) of the amount of any such
Participant's Compensation for the pay period for which such
Deferrals were made. The denominator of this fraction shall be
the fair market value (as of the Valuation Date) of the total
number of units representing shares released on account of
Stock Loan payments and not previously allocated as of the
previous allocation date.
The number of units allocated each week with respect to Stock
Loan Amortization payments shall be allocated among the
Participants' Company Match Accounts in the same proportion
that matching contributions attributable to the Elective
Deferrals allocated to each Participant's Retirement Savings
Account since the previous allocation date bear to the total
amount of such matching contributions attributable to the
Elective Deferrals allocated to all Participants' Retirement
Savings Accounts since the previous allocation date.
(3) Supplemental Matching Contributions Allocations. The amount
contributed on behalf of a Participant pursuant to paragraph
4.2(c) shall be allocated to the Company Match Account of such
Participant as soon as administratively practicable after such
contribution is paid to the Trustee.
SECTION 4.3 PERFORMANCE PAYS CONTRIBUTIONS.
(a) Amount. Subject to the remaining provisions of this Section 4.3 and to
the limitations set forth in Section 4.4, for each Plan Year each
Employer shall contribute to the Trust the amount (if any) by which:
(1) the Performance Pays Percentage of the aggregate Compensation
payments made during such Plan Year to all Employees eligible
to participate in this Plan as of the last day of such Plan
Year, exceeds
(2) the fair market value (determined at the time of allocation)
of the shares of IMATION common stock released from the Stock
Loan Suspense Account and allocated to its Employees'
Performance Pays Accounts pursuant to subparagraph (1) of
paragraph 4.3(d).
For purposes of this paragraph 4.3(a), the fair market value of the
shares of IMATION common stock released from the Stock Loan Suspense
Account and allocated to Participants' Performance Pays Accounts shall
be the mean between the aggregate high and low sales prices for such
shares on the New York Stock Exchange on the trading day coinciding
with or immediately preceding the date of allocation, as quoted by such
brokers as are specified for this purpose by the PRAC.
(b) Form of Contributions. Employers' contributions under this Section 4.3
may be made, in IMATION's sole discretion, in cash or in shares of
IMATION common stock. If such contributions are made in shares of
IMATION common stock, the value thereof for purposes of this paragraph
4.3(b) shall be the mean between the aggregate high and low sales
prices for such shares on the New York Stock Exchange on the trading
day coinciding with or immediately preceding the day such contribution
was made, as quoted by such brokers as are specified for this purpose
by the PRAC; and the value of a fractional share of such stock shall be
contributed in the form of cash.
(c) Payment. Employers' contributions under this Section 4.3 for a Plan
Year shall be paid to the Trustee on or before the date on which the
Employers' federal income tax return for such Plan Year is required to
be filed or such date as duly extended.
(d) Allocation to Performance Pays Accounts.
(1) Stock Loan Contribution Allocations. As of the last day of
each Plan Year, units representing a portion of the total
number of shares of IMATION common stock that have been
released from the Stock Loan Suspense Account and credited to
the ESOP Stock Fund as a result of Stock Loan amortization
payments made during such Plan Year shall be allocated to the
Performance Pays Accounts of all eligible Employees (as
defined in Section 3.1) as set forth below. The total number
of units allocated to such Accounts for each Plan Year with
respect to such payments shall be the total number of units
representing shares of IMATION common stock previously
released on account of Stock Loan Amortization payments during
such Plan Year and not previously allocated. This total number
of units shall be allocated among the Performance Pays
Accounts of all eligible Employees in the proportion that the
Compensation paid by the Employers to each eligible Employee
during such Plan Year bears to the total amount of
Compensation paid by the Employers to all eligible Employees
during such Plan Year.
(2) Performance Pays Contributions Allocations. The amount
contributed on behalf of each eligible Employee pursuant to
paragraph 4.3(a) shall be allocated to the Performance Pays
Account of such Employee as soon as administratively
practicable after such contribution is paid to the Trustee.
(e) Adjustment of Excess Aggregate Contributions.
(1) Notwithstanding the provisions of paragraphs 4.2(g) and
4.3(d), if and to the extent deemed necessary by the PRAC in
order to maintain the tax-qualified status of the Plan in
accordance with the rules set forth in section 401(a) of the
Code and to comply with the actual contribution percentage
requirements of section 401(m)(2) of the Code for any Plan
Year, the PRAC may, in its sole discretion, exercised
uniformly among Employees similarly situated, direct the
Trustee to distribute to Highly Compensated Participants the
amount of any Excess Aggregate Contributions (and any income
allocable thereto). In the event the amount of any Excess
Aggregate Contributions are so distributed, such distributions
shall be made by successively distributing the Stock Loan
Contribution Allocations (pursuant to subparagraph (2) of
paragraph 4.2(g)) and the Supplemental Matching Contribution
Allocations (pursuant to subparagraph (3) of paragraph 4.2(g))
(and any income allocable to such Allocations) of the Highly
Compensated Participants with the highest Actual Contribution
Percentage for such Plan Year to the extent required to cause
such Participants' Actual Contribution Percentage to equal the
Actual Contribution Percentage of the Highly Compensated
Participants with the next highest Actual Contribution
Percentage for such Plan Year; then, if deemed necessary by
the PRAC, again distributing the Stock Loan Contribution
Allocations and the Supplemental Matching Contribution
Allocations (and any income allocable to such Allocations) of
the same Participants together with the Stock Loan
Contribution Allocations and the Supplemental Matching
Contribution Allocations (and any income allocable to such
Allocations) of the Highly Compensated Participants who were
already at such lower Actual Contribution Percentage to the
extent required to cause such Participants' Actual
Contribution Percentage to equal the Actual Contribution
Percentage of the Highly Compensated Participants with the
next highest Actual Contribution Percentage; and continuing
such procedure for as many percentage decreases as the PRAC
shall determine. Any distributions of Excess Aggregate
Contributions made in accordance with this paragraph 4.3(e)
shall be completed by the end of the Plan Year following the
Plan Year in which such Allocations were made.
(2) For each Plan Year, the Plan shall satisfy the actual
contribution percentage requirements of section 401(m)(2) of
the Code by meeting one of the following tests:
(A) The average Actual Contribution Percentage for all
eligible Highly Compensated Employees is not more
than the average Actual Contribution Percentage for
all eligible Nonhighly Compensated Employees
multiplied by 1.25; or
(B) The excess of the average Actual Contribution
Percentage for all eligible Highly Compensated
Employees over the average Actual Contribution
Percentage for all eligible Nonhighly Compensated
Employees is not more than two percentage points or
such lesser amount as may be determined pursuant to
section 401(m) of the Code to be necessary to prevent
the multiple use of this alternative limitation with
respect to any Highly Compensated Employee, and the
average Actual Contribution Percentage for all
eligible Highly Compensated Employees is not more
than the average Actual Contribution Percentage for
all eligible Nonhighly Compensated Employees
multiplied by 2.
For purposes of applying the provisions of this subparagraph
(2), the terms "eligible Highly Compensated Employee" and
"eligible Nonhighly Compensated Employee" mean those Employees
who are eligible to have Stock Loan Contribution Allocations
and Supplemental Matching Contribution Allocations allocated
to their Company Match Accounts for that Plan Year.
SECTION 4.4 RESTRICTIONS ON CONTRIBUTIONS.
Notwithstanding the foregoing provisions of this Article 4:
(a) (1) The amount of "annual additions" to an Employee's Accounts for
any Plan Year shall not exceed the lesser of $30,000 (or, if
greater, one-fourth of the dollar limitation in effect under
section 415(b)(1)(A) of the Code) or 25% of his or her
Earnings for such Plan Year.
(2) For purposes of this Section 4.4, the "annual additions" with
respect to an Employee shall be the sum of the amounts
allocated to his or her accounts for any Plan Year as:
(A) employer contributions to all qualified defined
contribution plans maintained by an Employer or
Affiliate (including Elective Deferrals, Employer
Matching Contributions and Performance Pays
Contributions); provided, however, that the "annual
additions" with respect to the Stock Loan
Contribution Allocations shall be calculated with
respect to Employer contributions used to repay Stock
Loans rather than with respect to the units
representing shares of IMATION common stock allocated
to Employees' Company Match Accounts and Performance
Pays Accounts as a result of such Loan repayments;
(B) employee contributions to such qualified defined
contribution plans;
(C) forfeitures under such qualified defined contribution
plans;
(D) contributions to an individual medical account
(within the meaning of section 415(l)(2) of the Code)
which is part of a pension or annuity plan maintained
by an Employer; and
(E) amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending
after such date, which are attributable to
post-retirement medical benefits allocated to the
separate account of a key employee (within the
meaning of section 419A(d)(3) of the Code) under a
welfare benefit fund (within the meaning of section
419(e) of the Code) maintained by an Employer;
provided, however, that amounts described in clauses
(D) and (E) above shall not be taken into account for
the purpose of applying the 25%-of-Earnings
limitation described in subparagraph 4.4(a)(1).
(3) For any Plan Year in which no more than one-third of the
employer contributions to the employee stock ownership plan of
this Plan are allocated to Highly Compensated Employees:
(A) the "annual additions" for purposes of this Section
4.4 shall not include any shares of IMATION common
stock forfeited by participants in the employee stock
ownership plan, if such shares were originally
acquired with the proceeds of a Stock Loan, or any
participant's allocable portion of the employer
contributions to such employee stock ownership plan
which are deductible under section 404(a)(9)(B) of
the Code; and
(B) the dollar limitation described in subparagraph
4.4(a)(1) for such Plan Year shall be increased by an
amount equal to the lesser of the amount of such
dollar limitation determined without regard to this
subparagraph 4.4(a)(3) or the value of shares of
IMATION common stock contributed, or purchased with
cash contributed, to such Plan for such Plan Year.
(b) The sum of an Employee's "defined benefit plan fraction" and "defined
contribution plan fraction," for any Plan Year shall not exceed 1.00.
(1) For purposes of this Section 4.4, the "defined benefit plan
fraction" for a Plan Year is a fraction, the numerator of
which is the sum of the Employee's projected annual benefits
under all qualified defined benefit pension plans maintained
by an Employer or Affiliate (determined as of the end of such
Plan Year), and the denominator of which is the lesser of:
(A) the maximum dollar limitation in effect for defined
benefit plans for such Plan Year under section
415(b)(1)(A) of the Code, multiplied by 1.25; or
(B) the average Earnings of such Employee during the
three consecutive Plan Years during which he or she
was a participant in such a defined benefit pension
plan which produce the greatest average, multiplied
by 1.40.
For purposes of applying the foregoing provisions of this
Section 4.4, an Employee's projected annual benefit under a
qualified defined benefit pension plan in which he or she
participates is based upon the following assumptions:
(C) the Employee will continue employment with an
employer maintaining such plan until reaching his or
her normal retirement age under the terms of such
plan or, if later, his or her current age;
(D) the Employee's Earnings for the current Plan Year
will remain unchanged until the date on which he or
she attains the applicable age specified in clause
(C) above; and
(E) all other relevant factors on which the amount of his
or her benefit is based under such plan for the
current Plan Year will remain unchanged for future
Plan Years.
(2) For purposes of this Section 4.4, the "defined contribution
plan fraction" for a Plan Year is a fraction, the numerator of
which is the sum of the "annual additions" to the Employee's
accounts for the Plan Year, and the denominator of which is
the sum of the lesser of:
(A) the maximum dollar limitation in effect for defined
contribution plans for such Plan Year under section
415(c)(1)(A) of the Code (determined without regard
to section 415(c)(6)), multiplied by 1.25; or
(B) 35% of such Employee's Earnings for such Plan Year,
applied for all years during which the Employee was employed
with an Employer or Affiliate, whether or not there was a
defined contribution plan in effect during such years or, if
there was such a plan in effect, whether or not the Employee
participated in such plan during such years.
(c) (1) If for any reason it appears that an Employee's "annual
additions" will exceed or have exceeded the limitation
described in subparagraph 4.4(a)(1) above for a particular
Plan Year, to the extent necessary to prevent such excess from
occurring and after making any prospective adjustments to the
rate at which the Employee is making Elective Deferrals,
pursuant to paragraph 4.1(d), the amount of Employer
contributions made as a result of such Employee's Elective
Deferrals for future Plan Years shall be reduced; and, to the
extent necessary to prevent such excess from occurring, the
amount of Supplemental Matching Contributions or Stock Loan
Contribution Allocations allocated to the Company Match
Account of the Employee for future Plan Years shall be
reduced. If, in spite of such reductions and as a result of
reasonable error in estimating the amount of the Employee's
Compensation for such Plan Year, such limitation is exceeded
for that Plan Year, the amount of such excess shall be held in
a suspense account for the Employee's benefit and shall be
used to reduce the amount of Employer contributions which
otherwise would have been made on his or her behalf for the
next succeeding Plan Year and, to the extent necessary,
subsequent Plan Years; provided, that if the Employee is not
employed with an Employer as of the end of the Plan Year
during which such excess amount has not yet been exhausted in
the form of reduced Employer contributions on his or her
behalf, such amount shall be held unallocated in a suspense
account, shall operate to reduce the amount of Employer
contributions for such succeeding Plan Year, and shall be
allocated to all other Participants for the next succeeding
Plan Year and, to the extent necessary, subsequent Plan Years,
prior to Employer contributions being made for such succeeding
Plan Year(s). Any suspense account established pursuant to
this subparagraph 4.4(c)(1) shall not share in the earnings
and losses of the Trust.
(2) If for any reason it appears that the sum of the "defined
benefit plan fraction" and the "defined contribution plan
fraction" will exceed or has exceeded the limitation described
in paragraph 4.4(b) for a Plan Year, to the extent necessary
to prevent such excess from occurring and after making any
prospective adjustments to the rate at which the Employee is
making Elective Deferrals pursuant to paragraph 4.1(d),
adjustment shall first be made to the amount of the Employee's
benefit under any qualified defined benefit pension plans in
which he or she participates, following which there shall be a
redetermination of the necessity for an adjustment under this
Plan. If an adjustment under this Plan is necessary, the
procedure set forth in the preceding subparagraph shall be
applied with respect to the amount of Employer contributions
made on behalf of the Employee for future Plan Years.
SECTION 4.5 ROLLOVER CONTRIBUTIONS.
With the consent of the PRAC, and so long as it will not create adverse tax
consequences for the Plan, the Trustee shall accept rollover contributions from
any Employee who is eligible to participate in this Plan (to be credited to his
or her Rollover Account) if the Employee certifies that any of the following
circumstances have been satisfied:
(a) The amount contributed by the Employee consists only of a direct
rollover of an eligible rollover distribution from a qualified trust
described in section 401(a) of the Code, so long as such direct
rollover is in the form of cash;
(b) The amount contributed by the Employee consists only of any portion of
(i) the cash, and (ii) the cash proceeds from the sale of the
properties, such Employee received in an eligible rollover distribution
from a qualified trust described in section 401(a) of the Code, and the
transfer to the Trustee occurs on or before the 60th day following the
Employee's receipt of such distribution;
(c) The amount contributed by the Employee consists only of any portion of
(in the form of cash and the cash proceeds of the sale of other
property) of his or her (i) individual retirement account described in
section 408(a) of the Code, or (ii) individual retirement annuity
described in section 408(b) of the Code, and no amount in said account
and no part of the value of said account or annuity is attributable to
any source other than an eligible rollover distribution from a
qualified trust described in section 401(a) of the Code and any
earnings on such distribution; provided, however, that the transfer to
the Trustee occurs on or before the 60th day following the Employee's
receipt of the amount from said account or annuity.
The Trustee and the PRAC may require the Employee to provide evidence
satisfactory to them that the foregoing conditions have been satisfied.
For purposes of this Section 4.5, the term "eligible rollover distribution"
shall have the same meaning as that term is used in Section 8.10; provided,
however, that any distribution to an Employee under a qualified domestic
relations order (within the meaning of section 206(d)(3) of ERISA) that
otherwise meets the requirements of paragraph 8.10(a) shall also be treated as
an "eligible rollover distribution". For purposes of this Section 4.5, a "direct
rollover" is a payment directly from another plan to the Trustee.
Rollover contributions to the Plan pursuant to this Section 4.5 may be made
without regard to whether such Employee has become a Participant pursuant to
Article 3, but nothing herein shall alter the requirements to become a
Participant under Article 3.
SECTION 4.6 DIRECT TRANSFERS.
The Trustee may accept, with the express written approval of the PRAC, a direct
transfer of funds to an individual's Rollover Account hereunder from the trustee
or insurer with respect to any plan, account or annuity, if the assets to be
transferred could otherwise be rolled over pursuant to Section 4.5 (without
regard to the requirement of a lump sum distribution). No such transfer may be
made if, in the opinion of the PRAC, such a transfer would adversely affect the
exempt status of the Trust under section 501(a) of the Code. As a condition of
any such transfer, the PRAC may require such information to be provided to it as
it may determine to be relevant.
The Trustee shall also accept direct transfers of funds from an Employee's
accounts in the VIP, upon the satisfaction of such plan's conditions for such a
transfer. Amounts transferred from an Employee's savings plus account under the
VIP shall be credited to the Employee's Retirement Savings Account, amounts
transferred from an Employee's company contribution account under the VIP shall
be credited to the Employee's CCA Pre-7/96 Account, amounts transferred from an
Employee's personal thrift account under the VIP shall be credited to the
Employee's Thrift Account, amounts transferred from an Employee's individual
retirement account under the VIP shall be credited to the Employee's Individual
Retirement Account, and amounts transferred from an Employee's rollover account
under the VIP shall be credited to the Employee's Rollover Account.
SECTION 4.7 CREDIT TO ACCOUNTS.
After the allocations of contributions have been made, each Retirement Savings,
Company Match, CCA Pre-7/96, Performance Pays, Individual Retirement, Thrift and
Rollover Account shall be credited with the allocation to said Account as of the
effective date of the allocation, as provided in this Article 4, but the fact
that allocations are so made and credited to such Accounts shall not create in
any Participant or Beneficiary any right, title or interest in or to any of the
assets of the Trust except at the time or times and upon the terms and
conditions set forth in the Plan.
ARTICLE 5. EMPLOYEE STOCK OWNERSHIP PLAN
SECTION 5.1 STOCK LOANS.
(a) Terms and Conditions. This employee stock ownership plan was
established with the intention of acquiring IMATION common stock using
the proceeds from Stock Loans meeting the requirements of section
4975(d)(3) of the Code. In general, the terms of each Stock Loan must,
at the time such Loan is made, be at least as favorable to the Plan as
the terms of a comparable loan resulting from arm's-length negotiating
between independent parties. Each Stock Loan shall be for a specific
term, shall bear a reasonable rate of interest and shall be primarily
for the benefit of Participants and their Beneficiaries.
(b) Repayment. Payments of principal and interest with respect to a Stock
Loan shall be made only from (1) contributions made by Employers
pursuant to Section 4.2, (2) earnings attributable to such
contributions, (3) cash dividends received by the Trust with respect to
shares of IMATION common stock, and earnings attributable thereto, and
(4) in the event of default or (if permitted by the Code and ERISA) in
the event that this employee stock ownership plan is terminated for
unanticipated substantial business reasons, the proceeds from the
disposition of shares of IMATION common stock acquired with the
proceeds of a Stock Loan. No Stock Loan shall be payable on demand
except in the event of default. In the event of default upon a Stock
Loan, the value of Trust assets transferred in satisfaction of such
Loan shall not exceed the amount of the default. Repayment of a Stock
Loan may be guaranteed by an Employer.
(c) Security. The only assets which may be pledged as collateral for a
Stock Loan are shares of IMATION common stock which are acquired with
the proceeds of the Stock Loan (or were acquired with the proceeds of a
prior Stock Loan which is being refinanced). No other Trust assets may
be pledged as collateral for a Stock Loan, and a lender shall have no
recourse against the Trust except with respect to (1) collateral given
for a Stock Loan, (2) contributions made by Employers pursuant to
Section 4.2 to repay the Stock Loan, and (3) earnings attributable to
such collateral and the investment of such contributions. Each Stock
Loan for which shares of IMATION common stock owned by the Trust are
pledged as collateral shall provide for the release of such shares as
payments on the Stock Loan are made. Each such Loan's provisions for
determining the number of shares to be released shall be consistent
with the formula described in Section 4.2.
SECTION 5.2 INVESTMENT IN IMATION COMMON STOCK.
(a) Acquisition. This employee stock ownership plan is designed to invest
primarily in qualifying employer securities. The proceeds of each Stock
Loan shall be used by the Trustee within a reasonable time after their
receipt to acquire shares of IMATION common stock, to repay such Loan
or to repay a prior Stock Loan. In acquiring shares of IMATION common
stock for the Trust, the Trustee shall ensure that the Trust pays no
more than adequate consideration (within the meaning of section 3(18)
of ERISA) for such shares.
(b) Suspense Account. All shares of IMATION common stock acquired with the
proceeds of a Stock Loan shall be credited initially to the Stock Loan
Suspense Account. To the extent such shares are pledged as collateral
for a Stock Loan, the shares held as collateral in the Suspense Account
may be physically segregated from the other assets of the Trust.
(c) Stock Restrictions. Except as set forth below, or as otherwise required
by applicable law, no shares of IMATION common stock acquired with the
proceeds of a Stock Loan may be subject to a put, call or other option,
or buy-sell or similar arrangement while held by or when distributed
from the Plan. The protections and rights provided by this paragraph
5.2(c) shall be nonterminable, so that they shall continue to be
applicable after the repayment of the Stock Loan and even if the Plan
ceases to be an employee stock ownership plan within the meaning of
section 4975(e)(7) of the Code.
In the event that the shares of IMATION common stock allocated to the
Company Match Account of a Participant are not readily tradeable on an
established market, then a Participant who is entitled to a
distribution from the Plan will have the right to require that IMATION
repurchase such shares under a fair valuation formula. A Participant's
right to exercise the "put option" described above shall exist only in
a Plan Year in which shares of IMATION common stock are not readily
tradeable on an established market. In such a Plan Year, the "put
option" shall be provided for periods that meet the requirements of
section 409(h)(4) of the Code, and, if exercised, shall result in
payments that meet the requirements of section 409(h)(5) or 409(h)(6)
of the Code, if applicable.
SECTION 5.3 DIVIDENDS.
Any dividends received by the Trust with respect to shares of IMATION common
stock credited to the Stock Loan Suspense Account shall be used to make the next
scheduled Stock Loan amortization payments. Any dividends received by the Trust
with respect to shares of IMATION common stock credited to the ESOP Stock Fund
and allocated to the Participants' Company Match Accounts shall be (a) credited
to the ESOP Stock Fund and allocated among such Participants' Company Match
Accounts on a pro rata basis in accordance with the number of units credited to
such Accounts as of the record date of the dividend, and (b) used to make the
next scheduled Stock Loan amortization payments.
SECTION 5.4 VOTING.
(a) ESOP Stock Fund. Each Participant shall be entitled to direct the
Trustee with respect to the voting of shares of IMATION common stock
represented by units allocated to his or her Company Match Account.
Upon timely receipt of such directions, the Trustee shall vote the
number of shares of IMATION common stock credited to the ESOP Stock
Fund for which it has received directions in accordance with the
directions of the Participants. Any shares of IMATION common stock
credited to the ESOP Stock Fund for which the Trustee does not receive
timely voting directions shall be voted by the Trustee in the same
proportion as it votes the shares of IMATION common stock credited to
the ESOP Stock Fund for which it did receive such directions.
Participants shall be named fiduciaries, within the meaning of section
403(a)(1) of ERISA, of the Plan with respect to the directions given
under this paragraph 5.4(a).
(b) Stock Loan Suspense Account. Shares of IMATION common stock credited to
the Stock Loan Suspense Account shall be voted by the Trustee in the
same proportion as it votes the shares of IMATION common stock credited
to the ESOP Stock Fund for which it receives timely directions from
Participants.
(c) Procedure. IMATION and the Trustee shall establish and maintain a
procedure by which Participants shall be timely notified of their right
to direct the Trustee with respect to the voting of shares of IMATION
common stock represented by units allocated to their Company Match
Accounts, and the manner in which any such directions are to be
conveyed to the Trustee. IMATION and the Trustee shall prepare all
materials necessary to give effect to the Participants' voting rights,
including proxies and other communications directed generally to the
owners of shares of IMATION common stock entitled to vote, and shall
mail or otherwise deliver all such materials to each Participant
entitled to exercise voting rights pursuant to this Section. All voting
directions given by Participants shall be held in strict confidence by
the Trustee, and shall not be disclosed to any person.
SECTION 5.5 TENDER OR EXCHANGE OFFERS.
(a) ESOP Stock Fund. Each Participant shall be entitled to instruct the
Trustee that all, but not less than all, of the shares of IMATION
common stock represented by units allocated to his or her Company Match
Account shall be tendered or exchanged in the event of a tender or
exchange offer for such stock. Upon timely receipt of such
instructions, the Trustee shall tender or exchange the number of shares
of IMATION common stock credited to the ESOP Stock Fund for which it
has received instructions from Participants. The Trustee shall not
tender or exchange any shares credited to the ESOP Stock Fund for which
it has not received appropriate instructions from the Participants to
whose Company Match Accounts units representing such shares are
allocated. Participants shall be named fiduciaries, within the meaning
of section 403(a)(1) of ERISA, of the Plan with respect to the
instructions given under this paragraph 5.5(a).
(b) Stock Loan Suspense Account. Shares of IMATION common stock credited to
the Stock Loan Suspense Account shall be tendered or exchanged, or
shall not be tendered or exchanged, by the Trustee in the same
proportion as the number of shares credited to the ESOP Stock Fund for
which timely instructions to tender or exchange are received from
Participants bears to the total number of shares credited to the ESOP
Stock Fund.
(c) Procedure. IMATION and the Trustee shall establish a procedure by which
Participants shall be timely notified of their right to instruct the
Trustee with respect to the tender or exchange of shares of IMATION
common stock represented by units allocated to their Company Match
Accounts, and the manner in which any such instructions are to be
conveyed to the Trustee. IMATION and the Trustee shall promptly provide
to Participants copies of any such tender or exchange offer and any
other communications directed generally to the owners of shares of
IMATION common stock eligible to tender or exchange their shares. All
tender or exchange instructions given by Participants shall be held in
strict confidence by the Trustee, and shall not be disclosed to any
person.
(d) Proceeds. Any securities received by the Trustee as a result of a
tender or exchange offer as provided in this Section 5.5 shall be held,
and any cash so received shall be invested temporarily in short term
investments, pending directions by the PRC.
SECTION 5.6 DIVERSIFICATION.
(a) Eligibility to Make Election. Each Participant who has either (i)
Retired as described in paragraph 2.1(bb) of Article 2, or (ii) both
attained age 55 and completed five years of service with an Employer
(including years of service with 3M), shall be eligible to elect to
diversify the investment of a portion of his or her Company Match
Account invested in the IMATION Stock Fund.
(b) Election Procedure. In order to make a diversification election, an
eligible Participant must notify the Plan Administrator via the Plan's
Voice Response System of the amount or percentage of his or her Company
Match Account to be transferred and the other Fund or Funds to which
such amount or percentage shall be transferred by the Trustee. Amounts
which a Participant elects to diversify out of his or her Company Match
Account may be transferred to any of the Funds described in Article 14
other than the 3M Stock Fund and the IMATION Stock Fund.
(c) Amount. An eligible Participant may elect to diversify the investment
of up to fifty percent (50%) of the value of his or her Company Match
Account invested in the IMATION Stock Fund (reduced by any amounts
previously diversified).
(d) Transfer. Upon receipt of the notice described in paragraph (b) above
from an eligible Participant, the Plan Administrator shall direct the
Trustee to reinvest the respective portion of such Participant's
Company Match Account in accordance with his or her instructions as
soon as practicable following receipt of such notice.
ARTICLE 6. PERIODIC ADJUSTMENT OF ACCOUNTS
SECTION 6.1 PERIODIC ADJUSTMENTS.
As of each Valuation Date following the effective date of the Plan, the
Retirement Savings, Company Match, CCA Pre-7/96, Performance Pays, Individual
Retirement, Thrift and Rollover Accounts of each Participant and Beneficiary
shall be revalued. As of each Valuation Date, the Trustee shall value the assets
of the Trust at their fair market value and determine the net investment gain or
loss of such assets since the preceding Valuation Date in accordance with the
customary method of valuation employed by the Trustee, but in determining the
net investment gain or loss:
(a) the accrual basis of accounting shall be used,
(b) general expenses of the Plan and Trust which have not been paid by the
Employers shall be deducted, and
(c) contributions to the Trust and payments, withdrawals or distributions
from the Trust to provide benefits under the Plan for Participants and
Beneficiaries shall not be considered as gains or losses of the Trust;
provided, that any gain or loss realized on the sale of IMATION or 3M
common stock in connection with the conversion of IMATION or 3M common
stock to cash pursuant to a Participant's election to diversify the
investment of his or her Company Match Account or to receive a
distribution of cash from his or her Company Match or CCA Pre-7/96
Account, shall be considered as a gain or loss of the Trust.
After each Valuation Date, the net investment gain or loss for the period since
the preceding Valuation Date shall be credited or debited, as of said Valuation
Date, to the respective Accounts containing such assets and which are existing
on said Valuation Date, in proportion to the value of each such Account on the
preceding Valuation Date, but reduced by payments, withdrawals or distributions
made from said Account, and reduced by any service fees applicable to each
respective Account (as opposed to general expenses of the Plan and Trust) since
the preceding Valuation Date.
The value of each Account, as adjusted by the preceding provisions of this
Section 6.1, increased by contributions allocated to such Account, if any, and
reduced by payments, applicable service fees, withdrawals and distributions made
from such Account for the period since the prior Valuation Date, shall be the
value of said Account on the Valuation Date.
SECTION 6.2 STATEMENTS.
As soon as administratively feasible after the end of each calendar quarter,
each Participant shall be furnished with a statement of his or her Accounts in
the Plan.
ARTICLE 7. VESTING
Each Participant shall at all times have a fully vested, nonforfeitable interest
in all of his or her Accounts under the Plan.
ARTICLE 8. DISTRIBUTION OF BENEFITS
SECTION 8.1 PAYMENT METHODS.
If a Participant is alive at the time distribution of his or her Accounts
commences pursuant to Section 8.2, the Trustee shall pay the amount of such
Accounts hereunder to such Participant by the method elected by him or her using
the Plan's Voice Response System from the following available methods:
(a) Termination of Employment. If the Participant ceases to be employed by
an Employer or Affiliate for any reason other than Retirement or
Disability, then his or her Accounts shall be paid by the method of a
single lump sum distribution.
(b) Disability. If the Participant ceases to be employed by an Employer or
Affiliate due to Disability, then his or her Accounts shall be paid by
either of the following methods:
(1) A single lump sum distribution; or
(2) Two or more partial payments in such amounts and at such times
as may be selected by such Participant.
(c) Retirement. If the Participant ceases to be employed by an Employer or
Affiliate due to his or her Retirement, then his or her Accounts shall
be paid by one of the following methods:
(1) A single lump sum distribution;
(2) Two or more partial payments in such amounts and at such times
as may be selected by such Participant; or
(3) Two or more monthly, quarterly, semi-annual or annual (as
selected by the Participant) installments over such period of
time as the Participant shall select. Unless the Participant
elects a different amount (which must be the same for each
installment payment), the amount of each installment payment
shall be determined by dividing the sum of the Participant's
Account balances as of the Valuation Date immediately
preceding the payment date for such installment by the number
of installment payments remaining to be paid.
Participants shall be limited to a maximum of six partial payments in any Plan
Year, and the minimum amount of any partial payment shall be $100. Unless the
Participant directs otherwise, each partial or installment payment made by the
Plan in accordance with the provisions of this Section 8.1 shall be deemed to be
made from and charged against such Participant's Accounts in the following
order: (i) Thrift Account, (ii) Individual Retirement Account, (iii) Rollover
Account, (iv) CCA Pre-7/96 Account, (v) Retirement Savings Account, (vi) Company
Match Account, and (vii) Performance Pays Account.
SECTION 8.2 TIME OF PAYMENT.
(a) Payment of each Participant's Accounts, as adjusted pursuant to Article
6, shall commence in accordance with Section 8.1 upon his or her
separation from service (within the meaning of section
402(e)(4)(A)(iii) of the Code) with all Employers and Affiliates by
reason of Retirement, Disability or termination of employment;
provided, however, that no distribution of a Participant's Accounts to
the Participant without his or her written consent may be made before
such Participant's Normal Retirement Age if the value of such
Participant's Accounts immediately prior to such distribution exceeds
$3,500. Notwithstanding the foregoing, a Participant who has Retired or
is Disabled may elect to defer distribution, provided that such
deferral does not exceed the limitations described in Section 8.5.
(b) Notwithstanding the foregoing paragraph (a), payment of each
Participant's Accounts, as adjusted pursuant to Article 6, shall
commence in accordance with paragraph 8.1(a) upon his or her
termination of employment with all Employers and Affiliates by reason
of:
(1) The sale or other disposition by an Employer to an entity that
is not an Affiliate of substantially all of the assets used by
such Employer in a trade or business, but only if such
Participant continues employment with the entity acquiring
such assets; or
(2) The sale or other disposition by an Employer or an Affiliate
to an entity that is not an Affiliate of its interest in a
subsidiary, but only if such Participant continues employment
with such subsidiary;
provided, however, that no distribution of a Participant's Accounts to
the Participant without his or her written consent may be made before
such Participant's Normal Retirement Age if the value of such
Participant's Accounts immediately prior to such distribution exceeds
$3,500.
SECTION 8.3 FORM OF PAYMENT.
With the exception of the Company Match Account and the CCA Pre-7/96 Account,
all payments of any Participant's Accounts shall be made in cash. Payment of a
Participant's Company Match Account and CCA Pre-7/96 Account shall also be made
in cash, unless the Participant elects to receive the entire amount of such
Accounts (other than the portion which such Participant elected to invest in
another Fund or Funds in accordance with Section 5.6) in the form of whole
shares of IMATION common stock and 3M common stock, respectively, and cash for
any fractional shares.
SECTION 8.4 DEATH.
The entire Accounts of a Participant, as adjusted pursuant to Article 6, shall
be distributed in a single lump sum payment to his or her Beneficiaries upon his
or her death; provided, that the Beneficiary or Beneficiaries may elect to have
such distribution made to him or her or them, as the case may be, in
installments over a period extending up to 5 years following the Participant's
death. If such distribution is made in the form of installments, in no event may
the aggregate amount of such installments for a Plan Year be less than the
amount of earnings credited to the Accounts during that Plan Year.
Distribution upon the death of a Participant shall be made to:
(a) the Participant's surviving spouse (unless such spouse has consented in
writing to waive his or her right to receive such distribution) if such
Participant was legally married at the time of his or her death, or
(b) the person or persons, and in the proportions, designated in a writing
signed by him or her and filed with the Plan Administrator if such
Participant was not married at the time of his or her death or (if
married) if his or her surviving spouse has consented in writing to
waive her or his right to receive such distribution.
A Participant who is legally married may execute and file with the Plan
Administrator a similar designation of Beneficiaries, but such designation shall
not be valid or binding on the Plan unless (i) it includes the written consent
of the Participant's spouse waiving her or his right to receive a distribution
of the Participant's Accounts in the event of his or her death, and (ii) the
spouse's signature has been witnessed by a notary public. Any special
designation filed under the Plan may be revoked or changed by written instrument
so signed (including the written consent of the Participant's spouse, if he or
she is legally married) and filed prior to the Participant's death. If a
Participant designates more than one person to receive such death benefit and
any Beneficiary shall predecease him or her, the Trustee, pursuant to the Plan
Administrator's instructions, shall distribute the deceased Beneficiary's share
to the surviving designee or designees proportionately, as the portion
designated by the Participant for each bears to the total portion designated for
all survivors.
For purposes of this Section 8.4, a Participant's Beneficiary designation (if
any) in effect under the VIP immediately prior to the transfer of such
Participant's Accounts to this Plan shall remain in effect until the earlier of
(i) the date it is revoked by such Participant, and (ii) January 1, 1997. All
Beneficiary designations made by Participants under the VIP shall become void
and shall be disregarded for purposes of this Plan from and after January 1,
1997.
If a Participant who is not legally married at the time of his or her death
files no designation or revokes a designation previously filed without filing a
new designation, or if all persons designated shall predecease the Participant,
the Trustee, pursuant to the Plan Administrator's instructions, shall distribute
such death benefit or balance thereof to the first of the following survivors:
(i) equally to the Participant's children; (ii) equally to the Participant's
parents; (iii) equally to the Participant's brothers and sisters; and (iv) the
Participant's estate executor(s) or administrator(s).
If a Beneficiary to whom payments hereunder are to be made pursuant to the
Participant's designation or by operation of the foregoing provisions of this
Section 8.4 survives the Participant but dies prior to complete distribution to
him or her of his or her share:
(c) unless the Participant has otherwise specified in his or her
designation, the Trustee shall distribute the undistributed portion of
such Beneficiary's share to such person or persons, including such
Beneficiary's estate, as such Beneficiary shall have designated in a
writing signed by such Beneficiary and filed with the Plan
Administrator prior to such Beneficiary's death (which designation
shall be subject to change or revocation by such Beneficiary at any
time); or
(d) if the Participant's designation specifies that such Beneficiary does
not have the power to designate a successor beneficiary or if such
Beneficiary is granted such power but fails to designate a successor
beneficiary prior to such Beneficiary's death, the Trustee shall
distribute the undistributed portion of such Beneficiary's share to
such Beneficiary's estate.
Notwithstanding the foregoing provisions of this Section 8.4, in the event a
Beneficiary, to whom payments hereunder would otherwise be made, disclaims all
or any portion of his or her interest in such payments, such disclaimed portion
of such Beneficiary's interest in such payments shall pass to the person or
persons specified by the Participant to take such disclaimed interest or, in the
event the Participant did not specify a person or persons to take disclaimed
interests, such disclaimed portion of such Beneficiary's interest in such
payments shall pass to the person or persons who would be entitled thereto
pursuant to this Section 8.4 if such Beneficiary had predeceased the
Participant.
SECTION 8.5 DISTRIBUTION LIMITATIONS.
(a) Section 401(a)(9). Notwithstanding any provision of this Article 8 to
the contrary, but subject to any election made by the Participant
pursuant to the provisions of section 242(b) of the Tax Equity and
Fiscal Responsibility Act of 1982, distribution of each Participant's
Accounts must be made to such Participant either:
(1) in total, no later than the December 31 of the calendar year
during which he or she attains age 70 1/2; or
(2) in installments commencing not later than the December 31 of
the calendar year during which he or she attains age 70 1/2,
and continuing either for the life of the Participant, for the
lives of the Participant and his or her Beneficiary, for a
period not extending beyond the Participant's life expectancy,
or for a period not extending beyond the life expectancy of
the Participant and his or her Beneficiary.
All distributions required to be made under this paragraph 8.5(a) shall
be determined and made in accordance with the income tax regulations
issued under section 401(a)(9) of the Code. Life expectancies of the
Participant and the Participant's spouse will be recalculated annually
in accordance with the rules of such regulations. Unless the
Participant directs otherwise, each installment payment made by the
Plan in order to comply with the requirements of this paragraph 8.5(a)
shall be deemed to be made from and charged against such Participant's
Accounts in the following order: (i) Thrift Account, (ii) Individual
Retirement Account, (iii) Rollover Account, (iv) CCA Pre-7/96 Account,
(v) Retirement Savings Account, (vi) Company Match Account, and (vii)
Performance Pays Account.
In the event the Participant dies after distribution of his or her
Accounts has begun but before the entire amount of such Accounts has
been distributed to him or her, and such Accounts were scheduled to be
paid over a period not extending beyond the Participant's life
expectancy or the life expectancy of the Participant and his or her
Beneficiary, the distribution may continue to be made as so scheduled.
In the event the Participant dies before distribution of his or her
Accounts has begun, the entire remaining amount of such Accounts shall
be distributed to his or her Beneficiaries by December 31 of the fifth
calendar year following the calendar year in which the Participant
died, unless:
(3) any portion of the Participant's Accounts is distributable to
his or her surviving spouse over such spouse's lifetime (or
over a period not exceeding such spouse's life expectancy), in
which event this Section 8.5 shall not be applied to require
distributions to such spouse to commence before the later of
(i) December 31 of the calendar year immediately following the
calendar year during which the Participant died, and (ii)
December 31 of the calendar year during which such Participant
would have attained age 70 1/2; provided, that if such
surviving spouse dies before distributions to him or her
begin, then the entire portion distributable to such surviving
spouse shall be distributed within five (5) years following
the death of such surviving spouse; or
(4) any portion of the Participant's Accounts is distributable to
a Beneficiary designated by the Participant over the life (or
over a period not exceeding the life expectancy) of such
Beneficiary commencing on or before December 31 of the
calendar year immediately following the calendar year in which
the Participant died, in which event the distribution may
continue to be made as so scheduled.
(b) Section 401(a)(14). Notwithstanding any provision of this Article 8 to
the contrary, distribution of a Participant's Accounts shall begin,
unless the Participant elects otherwise, no later than the 60th day
after the latest of:
(1) the last day of the Plan Year during which the Participant
attains his or her Normal Retirement Age;
(2) the last day of the Plan Year during which the tenth
anniversary of the year in which the Participant commenced
participation in the Plan occurs; or
(3) the last day of the Plan Year in which the Participant
terminates his or her service with all Employers.
(c) Section 409(o). Notwithstanding any provision of this Article 8 to the
contrary, if a Participant so elects, distribution of his or her
Company Match Account and CCA Pre-7/96 Account shall commence on or
before the last day of the Plan Year immediately following the Plan
Year:
(1) in which the Participant separates from service with all
Employers by reason of Retirement after having attained his or
her Normal Retirement Age, Disability or death; or
(2) which is the fifth Plan Year following the Plan Year in which
the Participant otherwise separated from service with all
Employers (but only if such Participant has not been
reemployed by an Employer);
provided, however, that in no event shall this paragraph 8.5(c) require
a distribution to be made from a Participant's Company Match Account
with respect to the portion thereof attributable to an outstanding
Stock Loan.
SECTION 8.6 PAYMENT SATISFIES CLAIMS.
Any payment to or for the benefit of any Participant, Beneficiary, the legal
representative thereof or any other person, pursuant to the terms of the Plan
shall, to the extent thereof, be in full satisfaction of all claims hereunder
against the Trustee, the Plan Administrator and the Participating Employers, any
of whom may require such payee, as a condition precedent to such payment, to
execute a receipted release therefor.
SECTION 8.7 MISSING PERSONS.
The amount of a Participant's Account which is otherwise considered as
nonforfeitable shall be forfeited as of the last day of the Plan Year ending 5
years after the later of:
(a) the date of the Participant's termination of employment, or
(b) the last date a payment from said Account was made, if at least one
such payment was made, or
(c) the first date a payment from said Account became payable if no
payments have been made,
if the Trustee, after diligent inquiry, is unable to locate the Participant or
his or her Beneficiary for purposes of making distribution.
Any amount so forfeited shall be used by the Trustee to defray the costs of
administering the Plan. Notwithstanding the foregoing, if at any subsequent date
such person is located, IMATION shall, to the extent not restored from the
Trust's reserve for forfeitures, contribute an amount to the Trust, to be placed
in a Retirement Savings Account, a Company Match Account, a CCA Pre-7/96
Account, an Individual Retirement Account, a Thrift Account, a Rollover Account
or a Performance Pays Account, as the case may be (or pay directly to such
person if the Plan is not then in existence), for such person, equal to the
amount of forfeiture effected pursuant to this Section 8.7 attributable to each
such Account, but reduced by any amount paid by the Trustee or IMATION to any
state or political subdivision under any escheat law or statute.
SECTION 8.8 QUALIFIED DOMESTIC RELATIONS ORDERS.
Notwithstanding any provision of this Article 8 to the contrary, the Trustee may
comply with any court order determined by the Plan Administrator to be a
qualified domestic relations order (within the meaning of section 206(d)(3) of
ERISA), even if such order requires the distribution to an alternate payee of
all or a portion of a Participant's Accounts while he or she is still employed
by an Employer and before such Participant's earliest retirement age (within the
meaning of section 206(d)(3)(E)(ii) of ERISA).
SECTION 8.9 CLAIMS PROCEDURE.
Any Participant or Beneficiary who wishes to request an informal review of a
claim for benefits or desires an explanation of a benefit calculation or denial
shall direct a written request for informal review to the Plan Administrator.
The Plan Administrator shall respond to the request by issuing a written notice
to the Participant or Beneficiary within 60 days of its receipt of the request.
Such notice shall be written in a manner calculated to be understood by the
Participant or Beneficiary and shall set forth:
(a) the specific reasons for any denial of benefits,
(b) a specific reference to the provision or provisions of the Plan on
which the denial is based,
(c) a description of any additional information or material necessary for
the Participant or Beneficiary to perfect his or her claim, and a
description of why it is needed, and
(d) an explanation of the Plan's claim review procedure and other
appropriate information as to the steps to be taken if the Participant
or Beneficiary wishes to have his or her claim reviewed.
If the Plan Administrator determines that there are special circumstances
requiring additional time to make a decision, the Plan Administrator shall
notify the Participant or Beneficiary of the special circumstances and the date
by which a decision is expected to be made, and may extend the time for up to an
additional 60-day period. If a Participant or Beneficiary is determined by the
Plan Administrator to be not eligible for benefits, or if the Participant or
Beneficiary believes that he or she is entitled to greater or different
benefits, he or she shall have the opportunity to have his or her claim reviewed
by the Plan Administrator by filing a petition for review with the Plan
Administrator within 120 days after receipt by him or her of the notice issued
by the Plan Administrator. Said petition shall state the specific reasons the
Participant or Beneficiary believes he or she is entitled to benefits or greater
or different benefits. Within 60 days after receipt by the Plan Administrator of
said petition, the Plan Administrator shall afford the Participant or
Beneficiary (and his or her counsel, if any) an opportunity to present his or
her position to the Plan Administrator, orally or in writing, and said
Participant or Beneficiary (or his or her counsel) shall have the right to
review the pertinent documents, and the Plan Administrator shall notify the
Participant or Beneficiary of its decision in writing within said 60-day period,
stating specifically the basis of said decision written in a manner calculated
to be understood by the Participant or Beneficiary and referencing the specific
provision or provisions of the Plan on which the decision is based. If, because
of special circumstances such as the need for a hearing, the 60-day period is
not sufficient, the decision may be deferred for up to another 60-day period at
the election of the Plan Administrator, but notice of this deferral shall be
given to the Participant or Beneficiary.
SECTION 8.10 DIRECT ROLLOVERS.
Notwithstanding any provision of the Plan to the contrary that would otherwise
limit a distributee's election under this Section, a distributee may elect, at
the time and in the manner prescribed by the PRAC, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover.
(a) Eligible Rollover Distribution. For purposes of this Section 8.10, an
eligible rollover distribution is any distribution of all or any
portion of the balance to the credit of the distributee, except that an
eligible rollover distribution does not include:
(1) any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the distributee or
the joint lives (or joint life expectancies) of the
distributee and the distributee's designated beneficiary, or
for a specified period of ten years or more;
(2) any distribution to the extent that such distribution is
required under section 401(a)(9) of the Code; and
(3) the portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
(b) Eligible Retirement Plan. For purposes of this Section 8.10, an
eligible retirement plan is an individual retirement account described
in section 408(a) of the Code, an individual retirement annuity
described in section 408(b) of the Code, an annuity plan described in
section 403(a) of the Code, or a qualified trust described in section
401(a) of the Code, that accepts the distributee's eligible rollover
distribution. However, in the case of an eligible rollover distribution
to the surviving spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) Distributee. For purposes of this Section 8.10, a distributee includes
an employee or former employee. In addition, the employee's or former
employee's surviving spouse and the employee's or former employee's
spouse or former spouse who is the alternate payee under a qualified
domestic relations order, as defined in section 414(p) of the Code, are
distributees with regard to the interest of the spouse or former
spouse.
(d) Direct Rollover. For purposes of this Section 8.10, a direct rollover
is a payment by the Plan to the eligible retirement plan specified by
the distributee.
ARTICLE 9. WITHDRAWALS DURING EMPLOYMENT
SECTION 9.1 WITHDRAWAL FROM RETIREMENT SAVINGS ACCOUNT.
As of any Valuation Date, a Participant may withdraw from his or her Retirement
Savings Account all or any portion of the difference between the then
outstanding balance of any loans from such Retirement Savings Account under
Article 10 and the value of such Retirement Savings Account upon the Plan
Administrator's receipt of the Participant's telephone instructions if he or she
either:
(1) has attained age 59 1/2; or
(2) has become Disabled.
SECTION 9.2 WITHDRAWAL FROM INDIVIDUAL RETIREMENT ACCOUNT.
As of any Valuation Date, a Participant may withdraw from his or her Individual
Retirement Account all or any part of the value thereof specified in his or her
telephone instructions to the Plan Administrator.
SECTION 9.3 WITHDRAWAL FROM THRIFT ACCOUNT.
As of any Valuation Date, a Participant may withdraw from his or her Thrift
Account all or any part of the value thereof specified in his or her telephone
instructions to the Plan Administrator. Such withdrawal shall be made in the
following order:
(a) first, from the contributions made to such Account under the VIP prior
to January 1, 1987;
(b) second, pro rata from the contributions made to such Account under the
VIP and the earnings credited to such Account under the VIP and this
Plan after December 31, 1986; and
(c) third, from the earnings credited to such Account under the VIP prior
to January 1, 1987.
SECTION 9.4 WITHDRAWAL FROM ROLLOVER ACCOUNT.
As of any Valuation Date, a Participant may withdraw from his or her Rollover
Account all or any portion of the difference between the then outstanding
balance of any loans from such Rollover Account under Article 10 and the value
of such Rollover Account specified in his or her telephone instructions to the
Plan Administrator.
SECTION 9.5 WITHDRAWAL FROM COMPANY MATCH ACCOUNT, CCA PRE-7/96 ACCOUNT, AND/OR
PERFORMANCE PAYS ACCOUNT.
As of any Valuation Date, a Participant may withdraw from his or her Company
Match Account, CCA Pre-7/96 Account and/or Performance Pays Account all or any
portion of the value thereof, upon the Plan Administrator's receipt of the
Participant's telephone instructions if he or she either:
(a) has attained age 59 1/2 ; or
(b) has become Disabled.
SECTION 9.6 PROCEDURES.
No withdrawal may be made under this Article 9 unless the Participant making the
withdrawal gives the Plan Administrator appropriate telephone instructions and
such other information as the Plan Administrator requires to confirm that such
Participant is eligible to make such withdrawal. Withdrawals from the Plan made
by Participants who are then employed by an Employer shall be limited to a
maximum of six in each Plan Year, and the minimum amount of any withdrawal shall
be $100. Notwithstanding the preceding sentence, the PRAC may, by uniform rules,
liberalize or further restrict the frequency and timing of withdrawals, but,
subject to the provisions of this Article 9, such rules shall permit at least
one withdrawal from each type of Account in each calendar year and may impose a
service fee for withdrawals in excess of the number which the PRAC determines
may be made without any service fee. Unless the Participant directs otherwise,
withdrawal made in accordance with the provisions of this Article 9 shall be
deemed to be made from and charged against such Participant's Accounts in the
following order: (i) Thrift Account, (ii) Individual Retirement Account, (iii)
Rollover Account, (iv) CCA Pre-7/96 Account, (v) Retirement Savings Account,
(vi) Company Match Account, and (vii) Performance Pays Account.
ARTICLE 10. LOANS
SECTION 10.1 AMOUNT AND NUMBER.
A Participant may, upon complete and proper application being made to the Plan
Administrator via the Plan's Voice Response System, borrow from his or her
Retirement Savings Account and/or Rollover Account an amount which (when added
to the outstanding balance of any other loans made by the Plan to the
Participant) does not exceed the lesser of:
(a) fifty percent (50%) of the combined value of the Participant's
Retirement Savings Account, Rollover Account, CCA Pre-7/96 Account and
Company Contribution Account as of the last preceding Valuation Date;
(b) $50,000.00 reduced by the highest outstanding balance of loans from the
Plan to the Participant during the 12-month period ending on the day
before the date of the new loan; and
(c) ninety percent (90%) of the combined value of the Participant's
Retirement Savings Account and Rollover Account as of the last
preceding Valuation Date.
The minimum loan amount shall be $500.
No Participant shall have more than two loans outstanding from the Plan at any
time.
Prior to any loan being made to a Participant hereunder, the Plan Administrator
shall deliver to the Participant requesting the loan a clear statement of the
charges involved in the proposed loan transaction, which statement shall include
the dollar amount of the loan and the annual rate of the finance charge.
The PRAC may, by uniform rules, impose a service fee in connection with any loan
made hereunder, which shall be included in the amount of such loan.
SECTION 10.2 LOAN INTEREST AND REPAYMENT PERIOD.
Each such loan shall be evidenced by a promissory note of the Participant to the
Trust, shall bear interest at a reasonable rate established by the PRAC under
uniform rules, and shall be repaid to the Trust by payroll deductions with
substantially equal payments of principal and interest over a period not to
exceed 60 months. Notwithstanding the foregoing, the Participant may prepay in
cash (via a cashier's check or money order) the entire outstanding balance of
any loan at any time.
SECTION 10.3 SEGREGATED ACCOUNT.
Any loan made hereunder to a Participant shall be treated as a separate,
segregated investment account of the Participant. Accordingly, at the time such
loan transaction is consummated, the Participant's allocated interest in the
Fund or Funds in which his or her Retirement Savings Account and/or Rollover
Account is then invested shall be reduced, on a pro rata basis among such Fund
or Funds, by the principal amount of such loan.
Amounts of interest paid by the Participant under the loan shall be treated as
earnings of his or her Retirement Savings Account and/or Rollover Account, and
payments of interest and repayments of principal shall be credited to the
investment Fund or Funds in which such Account or Accounts are otherwise
invested, in accordance with the Participant's most recent investment
directions.
SECTION 10.4 SECURITY.
All loans made pursuant to this Article 10 shall be secured by the necessary
portion of the Participant's Retirement Savings Account, Rollover Account, CCA
Pre-7/96 Account and Company Match Account balances. In the event the
Participant does not repay any such loan within the time prescribed for
repayment thereof, the Plan Administrator may:
(a) initiate collection proceedings for the unpaid balance of such loan and
accumulated interest, plus collection and attorney fees (where
permitted by law); or
(b) deduct the remaining unpaid balance of such loan from the amount to
which the Participant would be entitled following the occurrence of an
event which enables the Plan to pay benefits to such Participant. In
the event there remains an unpaid balance under any such loan at the
time distribution is to be made following the occurrence of such an
event, distribution to the Participant or his or her Beneficiaries, as
the case may be, shall be made by delivering the value of the
Participant's Account balances and the note to such person, and such
delivery shall be in full satisfaction of all amounts due such person
under the Plan.
SECTION 10.5 ADMINISTRATION OF LOAN PROGRAM.
The Plan Administrator shall administer the loan program authorized by this
Article 10 in a uniform and nondiscriminatory manner, in accordance with the
rules and procedures therefor which may be established by the PRAC.
ARTICLE 11. ADMINISTRATION
SECTION 11.1 ADMINISTRATOR.
IMATION shall be a named fiduciary and the Plan Administrator of the Plan. As
Plan Administrator, IMATION shall administer the Plan in accordance with its
terms, and shall have all powers necessary to carry out its terms. IMATION may
retain one or more agents to perform administrative and recordkeeping services
with respect to the Plan, and IMATION may require or permit certain notices,
elections and instructions otherwise required or permitted to be given to the
Plan Administrator to be given to such agent or agents on its behalf.
SECTION 11.2 DELEGATION.
IMATION's Board of Directors shall have the power to delegate specific fiduciary
duties and responsibilities (other than those of the Trustee with respect to the
custody and control of the assets of the Trust). Such delegations may be to
officers or other employees of IMATION or to other individuals or entities. Any
delegation by IMATION may, if specifically stated, allow further delegations by
the individual or entity to whom the delegation has been made. Any delegation
may be rescinded by IMATION at any time. Each person or entity to whom a
fiduciary duty or responsibility has been delegated shall be responsible for the
exercise of such duties or responsibilities and shall not be responsible for the
acts or failure to act of any other fiduciary.
SECTION 11.3 PLAN ADMINISTRATION.
The PRAC shall be a named fiduciary and, unless otherwise provided by resolution
of the PRC, shall have the power and responsibility to:
(a) Adopt rules and regulations not inconsistent with the declared purposes
and specific provisions of the Plan for their administration;
(b) Interpret and construe the provisions of the Plan;
(c) Determine from time to time the status of all Employees and
Participants and Beneficiaries for the purposes of the Plan;
(d) Determine the rights of Employees, Participants and Beneficiaries to
benefits under the Plan, the amount thereof and the method and time or
times of payment of the same;
(e) Instruct the Trustee to make benefit payments pursuant to the Plan;
(f) Impose reasonable service fees in accordance with uniform rules with
respect to changes or other transactions requested by Participants or
Beneficiaries; and
(g) Delegate to a subcommittee or to an individual or individuals such of
its duties and responsibilities as it shall specify in writing to such
subcommittee members and/or individual or individuals.
In addition to the foregoing, the PRAC shall have the power to appoint, review
and remove an Acting Plan Administrator and other individuals to implement and
assist in the administration of the Plan. The Acting Plan Administrator shall be
delegated the authority of the PRAC set forth above, and shall have the
authority to retain such other agents deemed advisable, including, but not
limited to, legal and accounting counsel, subject to the approval of the PRAC.
The PRAC shall have no power to add to, or subtract from, any of the terms of
the Plan, or to change any benefits provided by the Plan, or to waive or fail to
apply any requirements for eligibility for a benefit under the Plan, except as
specified by IMATION.
SECTION 11.4 FACILITY OF PAYMENT.
Whenever, in the PRAC's or Plan Administrator's opinion, a person entitled to
receive any payment of a benefit or installment thereof hereunder is under a
legal disability or is incapacitated in any way so as to be unable to manage his
or her financial affairs, the PRAC or Plan Administrator may direct the Trustee
to make payments to such person or to his or her legal representative for his or
her benefit. Any payment of a benefit or installment thereof in accordance with
the provisions of Articles 8 or 9 shall be a complete discharge of any liability
for the making of such payment under the provisions of the Plan.
SECTION 11.5 TRUST AGREEMENT.
IMATION shall enter into a trust agreement with a Trustee selected by the PRC in
its sole discretion. All contributions made under this Plan shall be paid to the
Trustee and deposited in the Trust. The Trustee shall hold, invest, reinvest and
distribute the assets of the Trust in accordance with the provisions of this
Plan and the trust agreement. The PRC will determine the provisions of such
trust agreement and may modify such agreement from time to time to accomplish
the purposes of this Plan. The PRC shall review and may, in its sole discretion,
remove any Trustee and select any successor Trustee. The trust agreement may
provide that the Trust created thereby may be used to fund hold the assets of
this Plan and any other qualified plan maintained by an Employer which meets the
requirements of section 401(a) of the Code.
SECTION 11.6 ADMINISTRATION OF TRUST.
The Trust shall be administered by the PRC. The PRC shall have such powers as
may be necessary to perform its duties under this Plan, including the power:
(a) to establish and review a funding policy for the Plan which is
consistent with the Plan's needs and objectives, and to direct and
supervise the Trustee to see that this policy is carried out;
(b) to appoint, review and remove investment managers, who shall be charged
with the power and responsibility to direct the Trustee as to the
management, acquisition and disposition of any or all assets of the
Trust or any separate Fund; provided that such investment managers meet
the requirements of section 3(38) of ERISA;
(c) to authorize IMATION's Treasurer to direct the Trustee as to the
management, acquisition and disposition of the portion of the Stable
Value Fund invested in (1) interest-earning securities and pooled
investment funds investing in such securities, (2) financial
derivatives, including but not limited to futures, options and swaps,
and (3) benefit responsive contracts; and
(d) to direct the Trustee to use any or all assets of the Trust to purchase
insurance policies or annuity contracts, or any combination of the
foregoing, from any insurance company qualified to do business in a
state.
(e) Receive and review periodic reports of audits of the Plan made by a
certified public accountant;
The PRC shall authorize the Plan Administrator and other persons it selects to
issue written instructions and directions to the Trustee concerning the payment
of expenses from the Trust, the investment of Trust assets and such other
matters as are consistent with the provisions of this Plan and the trust
agreement, and shall instruct the Trustee to rely on such written instructions
and directions.
SECTION 11.7 REPORTS AND RECORDS.
IMATION and those to whom IMATION has delegated fiduciary duties shall keep
records of all their proceedings and actions, and shall maintain all such books
of account, records and other data as shall be necessary for the proper
administration of the Plan and to comply with applicable law.
SECTION 11.8 PAYMENT OF EXPENSES.
The Employers may pay all expenses of administering the Plan, including but not
limited to Trustee's fees, attorney fees, recordkeeping and customer service
fees, and expenses incurred by persons or entities to whom fiduciary duties have
been delegated; provided, that, if the Employers do not pay such expenses, the
Trust shall pay such expenses upon statements issued by the person incurring
such expense. If the Trust pays such expenses, the Trustee shall have the
discretion to determine whether any expenses are to be paid with forfeitures or
charged against Retirement Savings Accounts, Company Match Accounts, CCA
Pre-7/96 Accounts, Performance Pays Accounts, Individual Retirement Accounts,
Thrift Accounts, Rollover Accounts, or any combination in such proportions as
determined by the Trustee, or against any separate Fund created pursuant to
Article 14.
SECTION 11.9 SERVICE OF PROCESS.
In the absence of any designation to the contrary, in any legal proceeding,
including arbitration, involving the Plan, the corporate secretary of IMATION is
designated as the appropriate and exclusive agent for receipt of service of
process directed to the Plan.
SECTION 11.10 INDEMNIFICATION.
To the extent permitted by law, the Employers shall indemnify the members of the
PRC, the PRAC, individual Trustees and others to whom IMATION has delegated
fiduciary duties pursuant to the provisions of this Article 11, who are either
employees, officers or directors of IMATION or its Affiliates, against any and
all claims, loss, damages, expense and liability arising from their
responsibilities in connection with the Plan which is not covered by insurance
(without recourse) paid for by the Employers, unless the same is determined to
be due to gross negligence or intentional misconduct.
ARTICLE 12. AMENDMENT TO, AND TERMINATION OF, PLAN
SECTION 12.1 AMENDMENTS.
IMATION shall have the right, at any time and from time to time, to modify or
amend the Plan either prospectively or retroactively or both:
(a) in any respect by resolution of its Board of Directors; or
(b) by the PRC:
(1) in any respect that does not materially increase the cost of
the Plan; or
(2) to the extent necessary, proper or desirable to enable the
Plan to remain qualified under section 401(a) of the Code or
to comply with ERISA;
provided, however, that no such amendment shall:
(A) substantially enlarge the duties and responsibilities
of the Trustee without its written consent thereto;
(B) either directly or indirectly have the effect of
giving any Employer any interest in any part of the
corpus or income of the Trust or cause any part of
the Trust to be used for, or diverted to, purposes
other than for the exclusive benefit of Participants
and their Beneficiaries; and
(C) deprive any Participant, or the Beneficiary of a
deceased Participant, of any benefit already accrued
or vested, unless such amendment has been made
retroactively to the effective date of the Plan or to
any other date, which is at any time required to
bring the Plan into conformity with government
regulations so as to maintain the tax-qualified
status of the Plan and the tax-exempt status of the
Trust.
Any amendment adopted under the provisions of this Section 12.1 shall be deemed
a part of the Plan as if incorporated herein, and the Plan shall be deemed
accordingly amended. Unless an Employer elects to withdraw from the Plan within
10 days of receiving notice of such amendment, it shall be deemed to have agreed
to, and accepted, the amendment.
An Employer may withdraw from the Plan by adopting a resolution of its Board of
Directors, stating the date of withdrawal, and serving a certified copy on
IMATION. IMATION shall certify any withdrawal to the Trustee. A withdrawal shall
be treated as a termination with respect to that Employer.
IMATION shall have the authority, by action of its Board of Directors, to
require any other Participating Employer to withdraw from the Plan.
SECTION 12.2 TERMINATION OF PLAN.
IMATION and the Employers have established the Plan with the bona fide intention
and expectation that the Plan will be permanent, but neither IMATION nor the
Employers are, nor shall they be, under any obligation or liability whatsoever
to continue to maintain the Plan for any given length of time. The Board of
Directors of IMATION reserves the right, in its sole and absolute discretion, to
terminate the Plan in its entirety at any time without any liability whatsoever
for such termination.
SECTION 12.3 DISTRIBUTIONS.
Upon termination of the Plan or discontinuance of the Employers' contributions
for any reason whatsoever, all Accounts shall become nonforfeitable, and the
Trustee shall distribute the assets of the Trust according to the provisions of
Article 8; provided, however, that no distribution of any Participant's
Retirement Savings Account, Company Match Account, CCA Pre-7/96 Account or
Performance Pays Account may occur pursuant to this Section 12.3 prior to the
termination of the Plan without the existence or establishment of another
defined contribution plan (other than an employee stock ownership plan) by an
Employer or Affiliate within the period ending twelve months after the
distribution of all Retirement Savings, Company Match, CCA Pre-7/96 and
Performance Pays Account assets.
SECTION 12.4 PARTIAL TERMINATION.
Upon termination of the Plan with respect to a group of Participants which
constitutes a partial termination of the Plan, the Trustee shall allocate and
segregate for the benefit of Participants with respect to whom the Plan is being
terminated, the proportionate interest of such persons in the Trust, as
determined by the Trustee. The Accounts of all such persons shall become
nonforfeitable, and the Trustee shall distribute the segregated assets of the
Trust to said persons according to the provisions of Article 8 as if it were a
total termination of the Plan; provided, however, that no distribution of any
Participant's Retirement Savings Account, Company Match Account, CCA Pre-7/96
Account or Performance Pays Account may occur pursuant to this Section 12.4
prior to the termination of the Plan without the existence or establishment of
another defined contribution plan (other than an employee stock ownership plan)
by an Employer or Affiliate within the period ending twelve months after the
distribution of all Retirement Savings, Company Match, CCA Pre-7/96 and
Performance Pays Account assets.
ARTICLE 13. MISCELLANEOUS
SECTION 13.1 NO GUARANTY OF EMPLOYMENT.
The adoption and maintenance of the Plan and Trust shall not be deemed to be a
contract between an Employer and any Employee. Nothing herein contained shall be
deemed to give any Employee the right to be retained in the employ of an
Employer or to interfere with the right of an Employer to discharge any Employee
at any time, nor shall it be deemed to give any Employer the right to require
any Employee to remain in its employ, nor shall it interfere with the Employee's
right to terminate his or her employment at any time.
SECTION 13.2 CONSTRUCTION OF AGREEMENT.
The Plan shall be construed according to the laws of the State of Minnesota to
the extent not preempted by Federal law; provided, however, that, if any
provision is susceptible to more than one interpretation, such interpretation
shall be given thereto as is consistent with the Plan and the Trust being a
qualified plan and trust within the meaning of section 401(a) of the Code. If
any provision of this instrument shall be held by a court of competent
jurisdiction to be invalid or unenforceable, the remaining provisions hereof
shall continue to be fully effective.
SECTION 13.3 SPENDTHRIFT PROVISION.
Except as otherwise provided by applicable law in connection with marriage
dissolution proceedings, benefits payable hereunder and any interest of a
Participant or Beneficiary in the Trust shall not be subject to assignment,
transfer or anticipation or otherwise alienable, either by voluntary or
involuntary act or by operation of law, nor subject to attachment, execution,
garnishment, levy, sequestration or other seizure under any legal or equitable
process.
SECTION 13.4 HEADINGS.
Headings and sub-headings in the Plan are inserted for convenience of reference
only, and are not to be considered in the interpretation or the construction of
the provisions of the Plan.
SECTION 13.5 LIMITATION ON EMPLOYER'S AND TRUSTEE'S LIABILITY.
Neither the Trustee, IMATION nor any Employer guarantees the benefits payable
under the Plan and Trust Agreement, and payments which are specified to be made
to Participants and Beneficiaries shall be made exclusively from the assets of
the Trust.
SECTION 13.6 MERGER.
In the event of any merger or consolidation of the Plan with any other plan, no
assets or liabilities of the Plan shall be transferred to any other plan unless
each person having an interest in the Trust would (if the Plan were then
terminated) receive a benefit immediately after the merger, consolidation or
transfer which is equal to or greater than the benefit he or she would have been
entitled to receive immediately before the merger, consolidation or transfer (if
the Plan had then terminated).
SECTION 13.7 COUNTERPARTS.
The Plan may be executed in any number of counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
SECTION 13.8 EXCLUSIVE BENEFIT.
Except with respect to the payment of administrative expenses, in no event shall
any part of the Trust assets be paid to, or become vested in, any Employer, or
be used for any purpose whatsoever other than for the exclusive benefit of
Participants and their Beneficiaries, except that contributions to the Plan may
be returned if the Plan does not qualify under section 401(a) of the Code, the
contribution is made pursuant to a mistake of fact or the Employer is not
allowed a deduction under section 404 of the Code with respect to such
contribution, and the contributions are returned within one year after the
occurrence of such an event.
ARTICLE 14. SEPARATE FUNDS
SECTION 14.1 IN GENERAL.
In recognition of the fact that the existing and future Participants and
Beneficiaries may have diverse economic situations which make it desirable to
permit some degree of individual selection of different types of investments in
the Trust, the PRC may establish from time to time separate Funds within the
Trust, and consolidate such Funds from time to time, subject to the following
provisions of this Article 14.
SECTION 14.2 ESTABLISHMENT OF SEPARATE FUNDS.
The PRC may, at any time or from time to time, establish separate Funds by
written resolution. Any separate Fund shall at all times remain a part of the
Trust and subject to all of the Trust provisions, and the total of such separate
Funds existing at any time shall comprise the total Trust attributable to
Accounts.
In establishing separate Funds, the PRC may authorize, but shall not require,
each Participant or Beneficiary having an interest in the Trust to transfer
assets allocated to his or her Accounts from one separate Fund to another and to
allocate future contributions to any separate Fund, at such time or times and
upon such terms, restrictions, rules and conditions as the PRC may determine;
provided, however, that all such terms, restrictions, rules and conditions
shall:
(a) Be uniform, requiring persons in like circumstances to be treated in
the same manner (however, the PRC rules may distinguish between types
of Accounts);
(b) Grant to all Participants and Beneficiaries for each type of Account
the right to select the separate Fund or Funds (authorized by the PRC)
in which the assets allocated to his or her Accounts are to be
invested;
(c) Specify the general nature or type of investments to be utilized for
each separate Fund.
Investment changes by Participants among the separate Funds may be made at any
time in accordance with rules established by the PRAC. Notwithstanding the
preceding sentence, the PRAC may, by uniform rules, liberalize or further
restrict the frequency and timing of investment changes, but such rules shall
permit at least one investment change in each calendar year and may impose a
service fee for investment changes in excess of the number which the PRAC
determines may be made without any service fee.
SECTION 14.3 INVESTMENT OF CCA PRE-7/96 AND COMPANY MATCH ACCOUNTS.
(a) 3M Common Stock. Notwithstanding the provisions of Section 14.1 and
14.2, and with the exception of the portion which such Participant has
elected to invest in another Fund or Funds in accordance with Section
5.6, the portion (if any) of each Participant's CCA Pre-7/96 Account
attributable to the transfer of such Participant's company contribution
account under the VIP to such Account shall be invested in the 3M Stock
Fund. The 3M Stock Fund shall be invested substantially in 3M common
stock, although dividends received by such Fund with respect to its
shares of 3M common stock shall be invested in the other Funds of the
Plan in accordance with the respective Participants' current elections
for the investment of Elective Deferrals (or in the Stable Value Fund
for those Participants who have no current election for the investment
of Elective Deferrals).
(b) IMATION Common Stock. Notwithstanding the provisions of Sections 14.1
and 14.2, and with the exception of the portion which such Participant
has elected to invest in another Fund or Funds in accordance with
Section 5.6, each Participant's Company Match Account shall be invested
substantially in IMATION common stock and, with respect to dividends
paid thereon, additional shares of such stock; provided, that in no
event may Participants who are required to file reports pursuant to
section 16(a) of the Securities Exchange Act of 1934 and rules
promulgated thereunder have allocated, in the aggregate, to their
Company Match Accounts an amount of IMATION common stock which would
result in the value of such Accounts being in excess of 20% of the fair
market value of the entire Trust Fund at any given time. To the extent
such an excess would otherwise occur, each such Participant's
investment in IMATION common stock within his or her respective Company
Match Account shall be reduced and shall be invested in the manner,
among such other investment Funds as may be available, as each such
Participant shall specify.
(c) Voting. To the extent the value of full and fractional shares of 3M or
IMATION common stock are allocated to a Participant's CCA Pre-7/96
Account or Company Match Account, respectively, the Participant may
direct the Trustee as to the manner in which such shares of stock are
to be voted at a meeting of 3M or IMATION stockholders at which such
shares of stock are entitled to vote. Any such shares of stock for
which the Trustee does not receive timely voting instructions shall be
voted by the Trustee in the same proportion as it votes the shares of
3M or IMATION common stock credited to the Participants' CCA Pre-7/96
Accounts or Company Match Accounts, respectively, for which it did
receive such instructions. Participants shall be named fiduciaries,
within the meaning of section 403(a)(1) of ERISA, of the Plan with
respect to the directions given under this paragraph 14.3(c). All
voting directions given by Participants shall be held in strict
confidence by the Trustee and shall not be disclosed to any person.
SECTION 14.4 VALUATION OF SEPARATE FUNDS AND ACCOUNTS.
If any Participant or Beneficiary who has an interest in the Trust elects, or
has elected, to have any part of his or her Accounts invested in more than one
separate Fund, the value of his or her Accounts shall consist of the total of
his or her proportionate interest in each separate Fund.
Each separate Fund shall be valued at the same times as the Trust is required to
be valued, as provided in Article 6.
SECTION 14.5 CONSOLIDATION OF FUNDS.
At such time or times as the PRC may determine, one or more separate Funds
(other than the 3M Stock Fund and the IMATION Stock Fund) may be consolidated,
using fair market values as of the date of consolidation, such consolidation to
be governed by such uniform terms, restrictions, rules and conditions as the PRC
may determine. The consent of any individual Participant or Beneficiary shall
not be required to permit a consolidation.
ARTICLE 15. TOP HEAVY PROVISIONS
Notwithstanding any provision of the Plan to the contrary, the provisions of
this Article 15 shall govern in the event that the Plan is a Top Heavy Plan as
of a Determination Date.
SECTION 15.1 SPECIAL DEFINITIONS.
Whenever used in the Plan the following terms shall have the respective meanings
set forth below, unless the context clearly requires otherwise, and when the
defined meaning is intended the term is capitalized.
(a) "Credited Compensation" of a Participant for any Plan Year means for
purposes of this Article 15 only the compensation paid by the Employer
to such Participant during such Plan Year as determined pursuant to
Treas. Reg. section 1.415-2(d)(2); provided that a Participant's
Credited Compensation shall not include compensation in excess of
$150,000 (or such greater amount prescribed by the Secretary of the
Treasury or his delegate).
(b) "Determination Date" means, with respect to a particular Plan Year, the
last day of the preceding Plan Year, which date shall also be a
Valuation Date or, in the case of the first Plan Year of the Plan, the
last day of such Plan Year.
(c) "Key Employee" means any Employee who, at any time during the Plan Year
or any of the four preceding Plan Years, is or was (i) an officer of
the Employer having annual Compensation greater than 50 percent of the
dollar limitation on annual benefits under a defined benefit pension
plan under section 415(b)(1)(A) of the Code (but in no event shall more
than fifty Employees or, if lesser, the greater of three Employees or
ten percent of the Employees, be treated as officers), (ii) is one of
the ten Employees having annual Compensation greater than the dollar
limitation on annual additions to a defined contribution plan under
section 415(c)(1)(A) of the Code and owning (or considered as owning
within the meaning of section 318 of the Code) the largest interests in
the Employer, (iii) a shareholder owning (or considered as owning
within the meaning of section 318 of the Code) five percent or more of
the outstanding shares of the Employer or shares possessing more than
five percent of the total combined voting power of all shares of the
Employer, or (iv) shareholders owning (or considered as owning within
the meaning of section 318 of the Code) one percent of the outstanding
shares of the Employer or shares possessing one percent of the combined
voting power of all shares if such shareholder's Credited Compensation
for the Plan Year exceeds $150,000. For purposes of applying section
318 of the Code to the foregoing, subparagraph (C) of section 318(a)(2)
of the Code shall be applied by substituting five percent for fifty
percent. The rules of subsection (b), (c), and (m) of section 414 of
the Code shall not be applicable for purposes of determining ownership
in the Employer under this paragraph.
(d) "Top Heavy Plan" means that as of the Determination Date for the Plan
Year in question, (i) the aggregate balance of the Accounts of all Key
Employees under the Plan exceeds sixty percent of the aggregate of the
Accounts of all Employees and their Beneficiaries under the Plan, or,
if applicable, (ii) the present value of the accrued benefits under a
defined benefit plan maintained by the Employer for Key Employees
exceeds sixty percent of the present value of the accrued benefits for
all Employees and their beneficiaries under such plan. If the Employer
maintains any other defined benefit plan or defined contribution plan
in which a Key Employee participating in the Plan also participates (in
the Plan Year containing the Determination Date or in any of the four
preceding Plan Years) or maintains any such plans which permit this
Plan to meet the coverage requirements of section 401(a)(4) of the Code
or section 410 of the Code, then such plans will be aggregated with the
Plan. In addition to such required aggregation, the Employer may
include in the aggregation group any other defined contribution plans
or defined benefit plans maintained by the Employer if such permissive
aggregation thereby eliminates the Top Heavy status of the plans within
the aggregation group. Any plan, including this Plan, in such
aggregation group shall be deemed to be a Top Heavy Plan if the sum, as
of the Determination Date, of the present value of the accrued benefits
for Key Employees under all defined benefit plans included in such
group and the aggregate of the account balances of Key Employees under
all defined contribution plans included in such group exceeds sixty
percent of a similar sum for all Employees and their beneficiaries. For
purposes of determining the aggregate value of the accrued benefit of
all Employees and their beneficiaries or the account balances of all
Employees and their beneficiaries such aggregate value shall be
increased by the aggregate distributions made with respect to all
Employees and their beneficiaries during the five-year period ending on
the Determination Date, and there shall not be taken into account an
Employee's contributions to his or her Individual Retirement Account or
transfers to his or her Rollover Account under this Plan. In addition,
there shall not be taken into account any accrued benefit or account
balance of any individual who has not performed services for an
Employer maintaining the plan at any time during the five-year period
ending on the Determination Date. The present value of accrued benefits
for defined benefit plans shall be determined using an interest rate of
five percent per annum and the 1971 Group Annuity Mortality Table. For
purposes of this paragraph 15.1(d) the term Employee shall not include
any individual who was a Key Employee but is now not a Key Employee. A
plan is a "Super Top Heavy Plan" if, as of the Determination Date, the
plan would meet the test specified above for being a Top Heavy Plan if
ninety percent were substituted for sixty percent in each place it
appears in this paragraph 15.1(d).
SECTION 15.2 MINIMUM CONTRIBUTION.
Any contribution to be made to the Trust by an Employer for a Plan Year and
forfeitures, if any, shall be allocated among the individuals entitled to
participate in the Employer's contribution to the Trust for such Plan Year in
the proportion that the Credited Compensation for such Plan Year of each such
individual paid by the Employer bears to the Credited Compensation of all such
individuals. Allocation of contributions pursuant to this Section 15.2 are
subject to the following limitations:
(a) No allocation shall be made to the Company Match Account of a
Participant in excess of three percent of the Participant's Credited
Compensation (four percent if the Plan is Super Top Heavy and the
limitations set forth in Section 15.4 would otherwise be applicable).
(b) No such allocation shall be made pursuant to this Section 15.2 if the
Employer maintains a defined benefit pension plan or other defined
contribution plan which provides for the accrual of a minimum benefit
or the allocation of a minimum contribution in accordance with section
416(c)(1) of the Code as modified by section 416(h)(2) of the Code.
Any amounts not allocated because of the limitations set forth in paragraphs (a)
and (b) shall be allocated in accordance with the allocation provisions set
forth in Article 4 of the Plan. Notwithstanding the foregoing, if a defined
benefit plan maintained by the Employer is included in the aggregation group
with the Plan and this Plan enables such defined benefit plan to meet the
requirements of section 401(a)(4) or 410 of the Code, then a minimum
contribution of three percent of Credited Compensation (four percent of Credited
Compensation if the Plan is Super Top Heavy and the limitation set forth in
Section 15.4 would otherwise be applicable) shall be allocated to the Company
Match Accounts of all Employees.
SECTION 15.3 VESTED ACCOUNT BALANCE.
The vested portion of an Employee's Company Match Account shall be the greater
of (a) the vested percentage set forth in ARTICLE 7 of the Plan or (b) the
vested percentage determined from the following table:
YEARS OF VESTING SERVICE VESTED PERCENTAGE
Less than 2 0
2 20
3 40
4 60
5 80
6 or More 100
SECTION 15.4 LIMITATION ON BENEFITS.
If the Participant is a Key Employee in the Plan and any defined benefit plan
maintained by the Employer, and the Plan is Super Top Heavy, the sum of such
Participant's defined benefit plan fraction and defined contribution plan
fraction, as determined pursuant to section 415(e) of the Code (as modified by
section 416(h) of the Code) for any Plan Year, may not exceed 1. The Employer
may, in calculating the defined contribution plan fraction, elect to apply the
transitional rule provided in section 415(e)(6) of the Code as modified by
section 416(h)(4) of the Code. Provided the Plan is not a Super Top Heavy Plan,
and section 416(h) of the Code would otherwise be applicable to the Plan, a
Participant's defined benefit plan fraction and defined contribution plan
fraction will be determined solely in accordance with section 415(e) of the Code
and additional minimum contributions or benefits will be provided all
Participants in accordance with Section 15.2.
In the event that the Plan is Super Top Heavy and the sum of a Participant's
defined contribution plan and defined benefit plan fractions would otherwise
exceed 1 for the Plan Year, then the accrued benefit of such Participant under
any defined benefit pension plan will be reduced to the extent necessary so that
such sum does not exceed 1. If after all such adjustments, the sum of the
fractions would still exceed 1, then the annual additions under this Plan and
any other defined contribution plan maintained by the Employer in which the
Participant participates shall be adjusted in accordance with this Plan to the
extent necessary in order that the sum of such fractions does not exceed 1.
SECTION 15.5 DISTRIBUTIONS.
Payment of benefits of any Key Employee in a Top Heavy Plan must commence no
later than the taxable year of the Key Employee in which said Key Employee
attains age 70 1/2 but only if the Plan is a Top Heavy Plan for the Plan Year
ending in such taxable year.
SCHEDULE A
EMPLOYERS
As of July 1, 1996 the following entities are Employers for purposes of the
Plan:
1. Imation Corp.
2. Imation Enterprises Corp.
IMATION CORP.
1996 DIRECTORS STOCK COMPENSATION PROGRAM
SECTION 1. PURPOSE
The purpose of the Program is to attract and retain well-qualified
persons for service as nonemployee directors of the Company and to promote
identity of interest between directors and stockholders of the Company. It is
intended that the 1996 Directors Stock Compensation Program will provide for the
granting to participants of stock options and restricted share units.
The Program is designed and intended to comply with Rule 16b-3 under
the Securities Exchange Act of 1934 as amended (the "Exchange Act"), as such
Rule may be amended from time to time ("Rule 16b-3"), and shall be interpreted
in a manner consistent with the requirements thereof, as now or hereafter
construed, interpreted and applied by regulations, rulings and cases.
SECTION 2. DEFINITIONS
(a) "Accounting Date" shall mean the first business day following the
annual meeting of stockholders of the Company; provided, that for the Plan Year
that begins on the Effective Date, Accounting Date shall mean the Effective
Date.
(b) "Basic Fee" shall mean the annual retainer payable to an Eligible
Director with respect to each Plan Year (at the annual rate in effect on the
Accounting Date of such Plan Year) for such Eligible Director's services on the
Board (exclusive of any amounts payable with respect to service on a committee
of the Board or other committee of directors or for attendance at Board or
committee meetings).
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change in Control Price" of the Common Stock shall equal the
higher of (i) if applicable, the price paid for the Common Stock in the
transaction constituting a Change in Control (as defined in Section 8) and (ii)
the Fair Market Value of the Common Stock as of the last trading day preceding
the date of the Change in Control.
(e) "Committee" shall mean the Compensation Committee of the Board.
(f) "Common Stock" shall mean the common stock, par value $.01 per
share, of the Company.
(g) "Company" shall mean Imation Corp.
(h) "Distribution" shall mean the distribution by Minnesota Mining
and Manufacturing Company to its stockholders of shares of Common Stock of the
Company.
(i) "Dividend Equivalent Right" shall mean a right, described in
Section 5(b) hereof, of a holder of Restricted Share Units with respect to
certain dividends paid on outstanding shares of Common Stock.
(j) "Effective Date" shall mean the effective date of the Distribution.
(k) "Eligible Director" shall mean each member of the Board who is not
at the time of reference an employee of the Company or any of its subsidiaries.
(l) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(m) "Fair Market Value" as of any date shall mean the average of the
high and low prices for Common Stock on such date, as reported on the New York
Stock Exchange Composite Transactions, rounded upwards to the nearest $0.05;
provided, however that the Fair Market Value as of the Effective Date shall mean
the average of the daily averages of the high and low prices for Common Stock,
as reported on the New York Stock Exchange Composite Transactions, on each day
during the five consecutive trading days commencing on the Effective Date,
rounded upwards to the nearest $0.05.
(n) "Options" shall mean the stock options issued pursuant to Section
6 hereof.
(o) "Plan Year" shall mean the twelve-month period commencing on the
Accounting Date; provided, that the first Plan Year of the Program shall
commence on the Effective Date and end on the date of the first annual meeting
of stockholders of the Company.
(p) "Program" shall mean the Company's 1996 Directors Stock
Compensation Program.
(q) "Restricted Share Unit" shall mean a right to receive payment, in
accordance with the conditions set forth herein, of the Fair Market Value of one
share of Common Stock.
SECTION 3. ADMINISTRATION
The Program shall be administered by the Committee. In administering
the Program, it will be necessary to follow various laws and regulations. It may
be necessary from time to time to change or waive requirements of the Program to
conform with the law, to meet special circumstances not anticipated or covered
in the Program, or to carry on successful operation of the Program, and in
connection therewith, the Committee shall have the full power and authority to:
(a) Prescribe, amend, and rescind rules and regulations relating to the
Program, establish procedures deemed appropriate for its administration, and
make any and all other determinations not herein specifically authorized which
may be necessary or advisable for its effective administration;
(b) Make any amendments to or modifications of the Program which may
be required or necessary to make the Program set forth herein comply with the
provisions of any laws, federal or state, or any regulations issued thereunder,
and to cause the Company at its expense to take any action related to the
Program which may be required under such laws or regulations; and
(c) Contest on behalf of the Eligible Directors or the Company, at the
sole discretion of the Committee and at the expense of the Company, any ruling
or decision on any issue related to the Program, and conduct any such contest
and any resulting litigation to a final determination, ruling, or decision.
SECTION 4. SHARES SUBJECT TO THE PROGRAM
(a) No more than 800,000 shares of Common Stock, subject to adjustment
pursuant to Section 7 hereof, shall be available for issuance under the Program.
(b) Shares of Common Stock issued under the Program may consist in
whole or in part of authorized and unissued shares or of treasury shares, and no
fractional shares shall be issued under the Program. Cash shall be paid in lieu
of any fractional shares issuable under the Program.
SECTION 5. TERMS AND CONDITIONS OF RESTRICTED SHARE UNIT GRANTS
(a) Grant of Restricted Share Units. As of each Accounting Date
commencing with the Effective Date, each Eligible Director shall automatically
be granted a number of Restricted Shares Units (excluding fractional shares,
which shall be paid in cash), the number of which shall be calculated by
dividing 25% of his or her Basic Fee payable with respect to the Plan Year that
commences on such Accounting Date by the Fair Market Value of one share of
Common Stock on such Accounting Date.
(b) Restricted Share Units. Each grant of Restricted Shares Units under
the Program shall comply with the following terms and conditions:
(1) NUMBER OF SHARES. Each grant shall state the number of
Restricted Share Units to be granted.
(2) RESTRICTED SHARE UNIT ACCOUNT. Upon the grant of
Restricted Share Units to an Eligible Director, such units shall be
credited to an account established for such Eligible Director.
(3) DIVIDEND EQUIVALENT RIGHTS. Outstanding Restricted Share
Units shall be credited with Dividend Equivalent Rights based upon
dividends paid on outstanding shares of Common Stock from the date such
Restricted Share Units are granted to the date of payment in respect of
such Restricted Share Units. Such Dividend Equivalent Rights, once
credited, shall be converted into an equivalent number of Restricted
Share Units (including fractional Restricted Share Units). If a
dividend is paid in cash, each Eligible Director shall be credited, as
of each applicable dividend payment date, in accordance with the
following formula:
(A x B) / C
in which "A" equals the number of Restricted Share Units held by the
Eligible Director on the dividend payment date, "B" equals the cash
dividend per share and "C" equals the Fair Market Value per share of
Common Stock on the dividend payment date. If a dividend is paid in
property other than cash, Dividend Equivalent Rights shall be credited,
as of the applicable dividend payment date, in accordance with the
formula set forth above, except that "B" shall equal the fair market
value per share of the property that the Eligible Director would have
received in respect of the number of shares of Common Stock equal to
the number of Restricted Share Units held by the Eligible Director as
of the dividend payment date, had such shares been owned as of the
record date for such dividend.
(4) TIME OF PAYMENT. All payments in respect of an Eligible
Director's Restricted Share Units shall be made as soon as practicable
following the earlier of (i) the occurrence of a Change in Control, and
(ii) the date the Eligible Director's service on the Board terminates
for any reason.
(5) FORM OF PAYMENT. Payment in respect of Restricted Share
Units shall be made in one lump sum payment in the form of shares of
Common Stock. For purposes of the preceding sentence, any payment made
upon the occurrence of a Change in Control in full or partial payment
of Restricted Share Units shall equal the Change in Control Price
multiplied by the number of shares (including fractional shares) of
Common Stock relating to the Restricted Share Units with respect to
which such cash payment is being made.
(6) STATEMENT OF ACCOUNT. Each Eligible Director shall receive
an annual statement showing the number of Restricted Share Units that
have been credited to the Eligible Director's account under the
Program.
SECTION 6. GRANT OF OPTIONS
(a) Annual Grant. As of the Effective Date, each Eligible Director
shall automatically be issued an Option pursuant to the Program to purchase a
number of shares of Common Stock equal to 30,000 multiplied by a fraction (the
"Option Fraction"), the numerator of which is the number of years in such
Eligible Director's term of office as director and the denominator of which is
three (3). Thereafter, each new Eligible Director (one who has not previously
been granted Options under the Program) shall automatically be issued an Option
pursuant to the Program to purchase a number of shares of Common Stock equal to
30,000 multiplied by the Option Fraction, as of the date such Eligible Director
first becomes an Eligible Director. Each Eligible Director who is reelected to
the Board shall be issued an Option to purchase 30,000 shares of Common Stock as
of the date of reelection. Options shall be granted at an option price equal to
the Fair Market Value of the Common Stock on the date of grant.
(b) Terms and Conditions of Options.
(i) Subject to paragraph (ii) below, each Option shall vest
and become exercisable as to 10,000 shares of Common Stock underlying
such Option on each of anniversary of the date of grant.
(ii) Notwithstanding paragraph (i) above, all outstanding and
previously unvested options of an Eligible Director shall immediately
vest and become fully exercisable upon the Eligible Director's death or
disability or upon a Change of Control (as defined in Section 8). If an
Eligible Director otherwise terminates service as an Eligible Director,
any Options that have not become exercisable shall be forfeited as of
the date of such termination of service. Subject to the foregoing and
to Section 6(b)(iv) below, each Option shall expire on the date that
is ten years following the date of grant (the "Expiration Date").
(iii) Options shall be exercised by written notice to the
Secretary of the Company in such form as is from time to time
prescribed by the Committee and by the payment in full, in cash or
previously owned shares of Common Stock, of the aggregate option price
of the shares of Common Stock for which the Option is being exercised.
To the extent that an Option is not exercised by an optionee when it
becomes initially exercisable, it shall not expire but shall be carried
forward and shall be exercisable until the Expiration Date. Partial
exercise shall be permitted from time to time, provided that exercises
shall be in multiples of one hundred shares of Common Stock.
(iv) If for any reason during the term of a vested,
unexercised and unexpired Option, the Eligible Director shall cease to
be a member of the Board, such Option may be exercised, to the extent
exercisable at the time of such termination of service, by the Eligible
Director (or, in the event of such Eligible Director's death, such
Eligible Director's estate) until the second anniversary of the date
that the Eligible Director ceases to be a member of the Board.
SECTION 7. EFFECTS OF CERTAIN CHANGES IN CAPITALIZATION
In the event of any recapitalization, stock split, reverse stock split,
stock dividend, reorganization, merger, consolidation, spin-off, combination,
repurchase, or share exchange, or other similar corporate transaction or event
affecting the Common Stock, the maximum number or class of shares available
under the Program, the number or class of shares, and exercise price, of Common
Stock subject to outstanding Options, the number or class of shares of Common
Stock automatically granted to Eligible Directors, and the number or class of
shares of Restricted Share Units to be delivered or credited hereunder, as the
case may be, shall be adjusted by the Committee to reflect any such event.
SECTION 8. CHANGE IN CONTROL
(a) For purposes of this Section 8, the following words and phrases
shall have the meanings indicated below, unless the context clearly indicates
otherwise:
(i) "Person" shall have the meaning associated with that term
as it is used in Sections 13(d) and 14(d) of the Act.
(ii) "Affiliates and Associates" shall have the meanings
assigned to such terms in Rule 12b-2 promulgated under Section 12 of
the Act.
(iii) "Act" shall mean the Securities Exchange Act of 1934.
(iv) "Continuing Directors" shall have the meaning assigned to
such term in Article Thirteenth of the Company's Restated Certificate
of Incorporation.
(v) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(b) For purposes of the Program, a Change in Control of the Company
shall be deemed to have occurred if:
(i) any Person (together with its Affiliates and Associates),
other than a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, is or becomes the "beneficial
owner" (as that term is defined in Rule 13d-3 promulgated under the
Act), directly or indirectly, of securities of the Company representing
thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities, unless a majority of the
Continuing Directors of the Company's Board of Directors prior to that
time have determined in their sole discretion that, for purposes of
this Program, a Change in Control of the Company has not occurred; or
(ii) the Continuing Directors of the Company's Board of
Directors shall at any time fail to constitute a majority of the
members of such Board of Directors.
SECTION 9. TERM OF PROGRAM
The Program was approved by Minnesota Mining and Manufacturing Company,
as sole stockholder of the Company, and shall become effective as of the
Effective Date. This Program shall remain in effect until all authorized shares
have been issued, unless sooner terminated by the Board.
SECTION 10. AMENDMENT; TERMINATION
The Board may at any time and from time to time alter, amend, suspend,
or terminate the Program in whole or in part; provided, however, that no
amendment which requires stockholder approval in order for the exemptions
available under Rule 16b-3, to be applicable to the Program and the Eligible
Directors shall be effective unless the same shall be approved by the
stockholders of the Company entitled to vote thereon; and, provided further,
that, so long as required by Rule 16b-3, the provisions of Section 5 and 6
hereof shall not be amended more than once every six months, other than to
conform with changes in the Internal Revenue Code of 1986, as amended (the
"Code"), the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), or the rules thereunder.
SECTION 11. RIGHTS OF ELIGIBLE DIRECTORS
Nothing contained in the Program or with respect to any grant shall
interfere with or limit in any way the right of the stockholders of the Company
to remove any Eligible Director from the Board pursuant to the bylaws of the
Company, nor confer upon any Eligible Director any right to continue in the
service of the Company as a director.
SECTION 12. GENERAL RESTRICTIONS
(a) Investment Representations. The Company may require any Eligible
Director to whom Common Stock is issued, as a condition of receiving such Common
Stock, to give written assurances in substance and form satisfactory to the
Company and its counsel to the effect that such person is acquiring the Common
Stock for his own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with Federal and
applicable state securities laws.
(b) Compliance with Securities Laws. Each issuance shall be subject to
the requirement that, if at any time counsel to the Company shall determine that
the listing, registration or qualification of the shares upon any securities
exchange or under any state or Federal law, or the consent or approval of any
governmental or regulatory body, is necessary as a condition of, or in
connection with, the issuance of shares thereunder, such issuance may not be
accepted or exercised in whole or in part unless such listing, registration,
qualification, consent or approval shall have been effected or obtained on
conditions acceptable to the Committee. Nothing herein shall be deemed to
require the Company to apply for or to obtain such listing, registration or
qualification.
(c) Nontransferability. To the extent required by Rule 16b-3, awards
under this Program shall not be transferable by an Eligible Director other than
by the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined in the Code, or Title I of ERISA, or the rules
thereunder.
SECTION 13. WITHHOLDING
The Company may defer making payments under the Program until
satisfactory arrangements have been made for the payment of any federal, state
or local income or employment taxes required to be withheld with respect to such
payment or delivery.
SECTION 14. GOVERNING LAW
The Program and all rights hereunder shall be construed in accordance
with and governed by the laws of the State of Minnesota.
SECTION 15. UNFUNDED PROGRAM
Unless otherwise determined by the Committee, the Program shall be
unfunded and shall not create (or be construed to create) a trust or a separate
fund or funds. The Program shall not establish any fiduciary relationship
between the Company and any Eligible Director or other person. To the extent any
person holds any rights by virtue of a grant under the Program, such right shall
be no greater than the right of an unsecured general creditor of the Company.
SECTION 16. HEADINGS
The headings of sections and subsections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Program.
June 10, 1996
Minnesota Mining and Manufacturing
Company
3M Center
St. Paul, Minnesota 55144
Imation Corp.
1 Imation Place
Oakdale, Minnesota 55128
Attention: Deborah Weiss
Vice President
$350 Million Five-Year Revolving Credit Facility
COMMITMENT LETTER
Ladies and Gentlemen:
Minnesota Mining and Manufacturing Company ("3M") and Imation Corp. ("Imation"
or the "Company" and, together with 3M, "you") have advised us that, in
connection with the formation by 3M of the Company, Imation Enterprises and
their respective U.S. and non-U.S. subsidiaries and the distribution by 3M of
100% of the outstanding common stock of the Company to 3M's shareholders (such
transactions being referred to herein as the "Spin-Off"), the Company desires to
establish a $350 million five-year revolving credit facility (the "Facility"),
the proceeds of which would be used to refinance certain existing debt, to fund
certain purchases of non-U.S. inventory and other short-term assets, to fund
certain employee benefit plans and to fund loans by the Company to the Company's
employee stock ownership plans, in each case in connection with the Spin-Off,
and for the working capital needs and other general corporate purposes of the
Company and its subsidiaries. You have asked Citibank, N.A. ("Citibank") to
commit to provide the Company with financing commitments for the entire
Facility.
Citibank is pleased to inform you of its commitment to provide the entire amount
of the Facility, subject to the terms and conditions described in this letter
and the attached Annex I (collectively, and together with the Fee Letter
referred to below, the "Commitment Letter").
CONDITIONS PRECEDENT
The commitment of Citibank hereunder is subject to: (i) the preparation,
execution and delivery of mutually acceptable loan documentation, including a
credit agreement incorporating substantially the terms and conditions outlined
in this Commitment Letter; (ii) the absence of (A) except as disclosed in
Imation's Form 10 filed with the Securities and Exchange Commission prior to the
date hereof, a material adverse change in the financial condition or results of
operations of the Company, or the Company and its subsidiaries, taken as a
whole, since December 31, 1995 and (B) any change in loan syndication, financial
or capital market conditions generally that, in Citicorp Securities' judgment,
would materially impair syndication of the Facility; (iii) the accuracy and
completeness of all representations that you make to us and all information that
you furnish to us and your compliance with the terms of this Commitment Letter;
(iv) without limiting the terms set forth on the attached Annex I, Citicorp
Securities' reasonable satisfaction with (A) the ownership, capital, corporate,
organizational and legal structure of the Company and its subsidiaries; (B) the
Company's tax assumptions and tax-sharing agreements; (C) the insurance
maintained by the Company and its subsidiaries; (D) intellectual property
matters affecting the Company and its subsidiaries and (E) the material
contracts of the Company and its subsidiaries; (v) Citicorp Securities'
reasonable satisfaction with the final terms and conditions of the Spin-Off,
including, without limitation, all legal and tax aspects thereof, and all
documentation relating to the Distribution shall be in form and substance
reasonably satisfactory to Citicorp Securities; (vi) the payment in full of all
fees, expenses and other amounts payable under this Commitment letter; and (vii)
a closing of the Facility on or prior to July 15, 1996.
COMMITMENT TERMINATION
Citibank's commitment set forth in this Commitment Letter will terminate on July
15, 1996, unless the Facility closes on or before such date. Prior to such date,
this Commitment Letter may be terminated (i) by you at any time at your option
upon payment of all fees, expenses and other amounts then payable under this
Commitment Letter or (ii) by Citibank if any event occurs or information has
become available that, in its reasonable judgment, results or is likely to
result in the failure to satisfy any condition set forth in the immediately
preceding paragraph.
SYNDICATION
Citibank reserves the right, prior to or after the execution of definitive
documentation with respect to the Facility, to syndicate all or a portion of its
commitment to one or more other financial institutions reasonably acceptable to
the Company that will become parties to such definitive documentation pursuant
to a syndication to be managed by Citicorp Securities, Inc. ("Citicorp
Securities") (the financial institutions becoming parties to such definitive
documentation being collectively referred to herein as the "Lenders"). You
understand that Citicorp Securities intends to commence syndication efforts
promptly and that it may elect to appoint one or more syndication agents (which
may include Citibank) to direct the syndication efforts on its behalf.
Citicorp Securities will act as the syndication agent with respect to the
Facility and will manage all aspects of the syndication in consultation with
you, including the timing of all offers to potential Lenders, the acceptance of
commitments, and the determination of the amounts offered and the compensation
provided.
You agree to take all action as Citicorp Securities may reasonably request to
assist it in forming a syndicate acceptable to it and you. Your assistance in
forming such a syndicate shall include but not be limited to: (i) making senior
management and representatives of the Company available to participate in
information meetings with potential Lenders at such times and places as Citicorp
Securities may reasonably request; (ii) using your best efforts to ensure that
the syndication efforts benefit from your lending relationships; and (iii)
providing Citicorp Securities with all information reasonably deemed necessary
by it to successfully complete the syndication.
To ensure an orderly and effective syndication of the Facility, you agree that
until the termination of the syndication (as determined by Citicorp Securities),
the Company will not, and will not permit any of its affiliates to, syndicate or
issue, attempt to syndicate or issue, announce or authorize the announcement of
the syndication or issuance of, or engage in discussions concerning the
syndication or issuance of, any debt facility or debt security (including any
renewals thereof) without the prior written consent of Citicorp Securities;
provided, however, that the foregoing shall not limit 3M's ability to issue
commercial paper, other short-term debt programs currently in place or equity or
public debt securities.
You agree that Citibank will act as the sole agent bank for the Facility and
that Citicorp Securities will act as sole syndication agent and that no
additional agents, co-agents or arrangers will be appointed, or other titles
conferred, without the consent of Citicorp Securities and Citibank. You agree
that no Lender will receive any compensation of any kind for its participation
in the Facility, except as expressly provided for in the Fee Letter (as defined
below) or in the attached Annex I.
FEES
In addition to the fees described in Annex I, the Company agrees to pay the fees
set forth in that certain letter between the Company and us of even date
herewith (the "Fee Letter"). The terms of the Fee Letter are an integral part of
Citibank's commitment hereunder, and constitute part of this Commitment Letter
for all purposes hereof. Each of the fees described in the Fee Letter shall be
nonrefundable when paid.
INDEMNIFICATION
You agree to indemnify and hold harmless Citibank, Citicorp Securities, each
Lender and each of their affiliates and each of their respective officers,
directors, employees, agents, advisors and representatives (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, fees and disbursements
of counsel), joint or several, that may be incurred by or asserted or awarded
against any Indemnified Party, in each case arising out of or in connection with
or relating to any investigation, litigation or proceeding or the preparation of
any defense with respect thereto, arising out of or in connection with or
relating to this Commitment Letter or the loan documentation or the transactions
contemplated hereby or thereby, or any use made or proposed to be made with the
proceeds of the Facility, whether or not such investigation, litigation or
proceeding is brought by the Company, any of its shareholders or creditors, an
Indemnified Party or any other person, or an Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except to the extent such claim, damage, loss, liability or expense
is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct.
You agree that no Indemnified Party shall have any liability (whether direct or
indirect, in contract, tort or otherwise) to 3M, the Company or any of 3M's or
the Company's shareholders or creditors for or in connection with the
transactions contemplated hereby, except to the extent such liability is found
in a final nonappealable judgment by a court of competent jurisdiction to have
resulted from such Indemnified Party's gross negligence or willful misconduct;
PROVIDED that nothing in this paragraph shall be deemed to constitute a waiver
of any claim 3M or the Company may hereafter have for breach by any party of
this Commitment Letter.
COSTS AND EXPENSES
In further consideration of the commitment of Citibank hereunder, and
recognizing that in connection herewith each of Citibank and Citicorp Securities
is incurring substantial costs and expenses (including, without limitation, fees
and disbursements of counsel and its syndication agent(s), filing and recording
fees and due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, messenger, appraisal, audit,
insurance and consultant costs and expenses), you hereby agree to pay, or
reimburse Citibank and Citicorp Securities on demand for, all such costs and
expenses (whether incurred before or after the date hereof), regardless of
whether any of the transactions contemplated hereby are consummated. You also
agree to pay all costs and expenses of Citibank and Citicorp Securities
(including, without limitation, fees and disbursements of counsel) incurred in
connection with the enforcement of any of its rights and remedies hereunder.
CONFIDENTIALITY
By accepting delivery of this Commitment Letter, you agree that this Commitment
Letter is for your confidential use only and that neither its existence nor the
terms hereof will be disclosed by you to any person other than your respective
officers, directors, employees, accountants, attorneys and other advisors, and
then only on a "need to know" basis in connection with the transactions
contemplated hereby and on a confidential basis. Notwithstanding the foregoing,
following your acceptance of the provisions hereof and your return of an
executed counterpart of this Commitment Letter to us as provided below, (i) you
may make public disclosure of the existence and amount of Citibank's commitment
hereunder and of Citibank's identity as agent bank, (ii) you may file a copy of
this Commitment Letter (other than the Fee Letter) in any public record in which
it is required by law to be filed and (iii) you may make such other public
disclosures of the terms and conditions hereof as you are required by law, in
the opinion of your counsel, to make.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
You represent and warrant that (i) all information that has been or will
hereafter be made available to Citibank, any Lender or any potential Lender by
you or any of your representatives in connection with the transactions
contemplated hereby is and will be complete and correct in all material respects
and does not and will not contain any untrue statement of a material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements were or are made and (ii) all financial projections, if any, that
have been or will be prepared by you and made available to Citibank, any Lender
or any potential Lender have been or will be prepared in good faith based upon
reasonable assumptions (it being understood that such projections are subject to
significant uncertainties and contingencies, many of which are beyond the
Company's control, and that no assurance can be given that the projections will
be realized). You agree to supplement the information and projections from time
to time so that the representations and warranties contained in this paragraph
remain correct. It is understood and agreed that the representations and
warranties set forth in this paragraph will, on and after the signing of
definitive documentation for the Facility, be superseded by the representations
and warranties set forth therein.
In issuing this commitment, Citibank is relying on the accuracy of the
information furnished to it by or on behalf of the Company and its affiliates
without independent verification thereof.
NO THIRD PARTY RELIANCE, ETC.
The agreements of Citibank hereunder and of any Lender that issues a commitment
to provide financing under the Facility are made solely for the benefit of the
Company and may not be relied upon or enforced by any other person. Please note
that those matters that are not covered or made clear herein or in Annex I or in
the Fee Letter are subject to mutual agreement of the parties. The terms and
conditions of this commitment may be modified only in writing.
You should be aware that Citibank or one or more of its affiliates may be
providing financing or other services to parties whose interests may conflict
with yours. Be assured, however, that consistent with Citibank's longstanding
policy to hold in confidence the affairs of its customers, neither Citibank nor
any of its affiliates will furnish confidential information obtained from you to
any of its other customers. By the same token, neither Citibank nor any of its
affiliates will make available to you confidential information that it obtained
or may obtain from any other customer.
3M OBLIGATIONS
The obligations of 3M hereunder (other than under the paragraph captioned
"Confidentiality") shall be terminated and of no further force and effect upon
the consummation of the Spin-Off and the making of the initial loan under the
Facility.
GOVERNING LAW, ETC.
This Commitment Letter shall be governed by, and construed in accordance with,
the laws of the State of New York. This Commitment Letter sets forth the entire
agreement between the parties with respect to the matters addressed herein and
supersedes all prior communications, written or oral, with respect hereto. This
Commitment Letter may be executed in any number of counterparts, each of which,
when so executed, shall be deemed to be an original and all of which, taken
together, shall constitute one and the same Commitment Letter. Delivery of an
executed counterpart of a signature page to this Commitment Letter by telecopier
shall be as effective as delivery of a manually executed counterpart of this
Commitment Letter. Your obligations under the paragraphs captioned "Fees",
"Indemnification", "Costs and Expenses" and "Confidentiality" shall survive the
expiration or termination of this Commitment Letter.
WAIVER OF JURY TRIAL
Each party hereto irrevocably waives all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to this Commitment Letter or the transactions
contemplated hereby or the actions of Citibank or Citicorp Securities in the
negotiation, performance or enforcement hereof.
Please indicate your acceptance of the provisions hereof by signing the enclosed
copy of this Commitment Letter and the Fee Letter and returning them to Ms.
Heidi McKibben, Vice President, Citicorp Securities, Inc., 399 Park Avenue, New
York, New York 10043 (telecopier: 212-832-9213) at or before 5:00 p.m. (New York
City time) on Tuesday, June 11, 1996, the time at which the commitment of
Citibank set forth above (if not so accepted prior thereto) will expire. If you
elect to deliver this Commitment Letter by telecopier, please arrange for the
executed original to follow by next-day courier.
Very truly yours,
CITICORP SECURITIES, INC.,
By: _____________________
Title: Vice President
CITIBANK, N.A.
By: _____________________
Title: Attorney-in-Fact
ACCEPTED AND AGREED
this ___ day of June, 1996:
MINNESOTA MINING AND MANUFACTURING
COMPANY
By: _____________________
Title:
IMATION CORP.
By: _____________________
Title:
ANNEX I
IMATION CORP.
SUMMARY OF TERMS AND CONDITIONS
$350 MILLION REVOLVING CREDIT FACILITY
BORROWER: Imation Corp. ("Imation" or the "Borrower").
ADMINISTRATIVE AGENT: Citibank, N.A. ("Citibank") (in such capacity, the
"Agent").
ARRANGER: Citicorp Securities, Inc. ("Citicorp Securities").
LENDERS: Citibank and other financial institutions
acceptable to the Agent and the Borrower.
TYPE OF FACILITY: A $350,000,000 five-year Revolving Credit
Facility, available in U.S dollars. All
outstandings under the Revolving Credit Facility
shall be payable in full at the Maturity Date.
PURPOSE: Proceeds of Advances under the Revolving Credit
Facility will be used:
(1) to refinance certain existing debt, to
fund certain purchases of non-U.S.
inventory and other short-term assets,
to fund certain employee benefit plans
and to fund loans by the Borrower to the
Borrower's employee stock ownership
plans (collectively, the "ESOP"), in
each case in connection with (a) the
formation by Minnesota Mining and
Manufacturing Company ("3M") of Imation,
Imation Enterprises and their respective
U.S. and non-U.S. subsidiaries and (b)
the distribution by 3M of 100% of the
common stock of Imation to 3M's
shareholders (the transactions referred
to in the preceding clauses (a) and (b)
being referred to herein as the
"Spin-Off"); and
(2) for the working capital needs and other
general corporate purposes of the
Borrower and its subsidiaries.
No more than $50,000,000 of Advances under the
Revolving Credit Facility shall be used to fund
loans by the Borrower to the ESOP.
AVAILABILITY: The Revolving Credit Facility will be available in
multiple drawings from time to time.
BORROWINGS: All Borrowings (other than Swing Loan Borrowings)
shall be in minimum principal amounts of
$10,000,000 and integral multiples of $1,000,000
in excess thereof. Swing Loan Borrowings shall be
in minimum principal amounts of $1,000,000.
All Advances (other than Swing Loan Advances)
shall be made by the Lenders ratably in proportion
to their respective commitments under the
Revolving Credit Facility. Borrowings will be
available on same day notice for Base Rate
Advances (including Swing Loan Advances) and three
business days' notice for Eurodollar Advances.
LETTER OF CREDIT
SUBLIMIT: Up to $10,000,000 of standby Letters of Credit may
be issued under the Revolving Credit Facility by
those Lenders designated in the credit agreement
as issuing Lenders. The other Lenders under the
Revolving Credit Facility will acquire
participations in the Letters of Credit issued.
SWING LOAN SUBLIMIT: Up to $10,000,000 at any time may be outstanding
as Swing Loan Advances under the Revolving Credit
Facility made by those Lenders designated in the
credit agreement as Swing Loan Lenders. Swing Loan
Advances will have maturities not exceeding seven
days.
CLOSING DATE: July 1, 1996, or such other date as may be agreed
upon by the Borrower and the Agent.
MATURITY DATE: Fifth anniversary of the Closing Date.
COMMITMENT REDUCTION: The Borrower will have the right, upon at least
three business days' notice, to terminate or
cancel, in whole or in part, the unused portion of
the Revolving Credit Facility in excess of the
aggregate outstanding Revolving Credit Advances,
Swing Loan Advances and outstanding Letters of
Credit, PROVIDED that each partial reduction shall
be in a minimum amount of $10,000,000 or any whole
multiple of $1,000,000 in excess thereof. Once
terminated, a commitment may not be reinstated.
INTEREST RATES AND
INTEREST PERIODS: At the Borrower's option, any Advance (other than
Swing Loan Advances) will be available at the
rates and for the Interest Periods stated below:
(a) Base Rate: a fluctuating rate equal to
the Base Rate plus the Applicable
Margin.
The Base Rate is a fluctuating rate per
annum equal at all times to the highest
of (i) Citibank's publicly announced
"base" rate, (ii) 1/2 of 1% percent per
annum above the latest three-week moving
average of secondary market morning
offering rates in the United States for
three-month certificates of deposit of
major U.S. money market banks, adjusted
to the nearest 1/16 of 1%, and (iii) a
rate equal to 1/2 of 1% per annum above
the weighted average of the rates on
overnight Federal funds transactions
with members of the Federal Reserve
System arranged by Federal funds
brokers.
(b) Eurodollar Rate: a periodic fixed rate
equal to LIBOR plus the Applicable
Margin.
LIBOR is the average rate per annum
(rounded upward to the nearest 1/16 of
1%) at which U.S. dollar deposits are
offered by the Reference Banks to prime
banks in the London interbank market at
11:00 A.M. (London time) two business
days before the first day of the
Interest Period and in amounts
approximately equal to the Reference
Banks' pro rata share of the
contemplated Eurodollar Advance for a
given Interest Period and with a
maturity equal to such Interest Period,
adjusted for reserve requirements.
Eurodollar Advances will be available
for 1, 2, 3 and 6- month Interest
Periods, as selected by the Borrower.
All Swing Loan Advances will bear interest at the
Base Rate plus the Applicable Margin.
REFERENCE BANKS: Citibank and certain other Lenders to be
determined.
APPLICABLE MARGIN: Prior to obtaining a rating on the Borrower's
long-term senior unsecured indebtedness from
Standard & Poor's or Moody's, the facility fee
rate and applicable margins will be determined on
the basis of (1) the ratio (the "Interest Coverage
Ratio") of EBIT to Interest Expense (each to be
defined) of the Borrower from time to time
(determined for the first year after the Closing
Date on the basis of the fiscal quarters that have
ended since the Closing Date and, thereafter, on a
rolling four-quarter basis) and (2) the total
utilization (the "Utilization") of the Revolving
Credit Facility (including outstanding Advances,
Swing Loan Advances and Letters of Credit), as set
forth in the pricing grid below:
<TABLE>
<CAPTION>
Applicable Applicable
Margin Margin
for for
Base Rate Eurodollar
Advances Advances
-------- --------
Utilization Utilization
----------- -----------
Interest Facility (less than or equal to) (greater than) (less than or equal to) (greater than)
Level Coverage Ratio Fee Rate 50% 50% 50% 50%
----- -------------- --------
<S> <C> <C> <C> <C> <C> <C>
1 Greater than 7.00 0.125% 0.00% 0.05% 0.25% 0.30%
to 1.00
2 Less than or equal
to 7.00 to 1.00 and 0.15% 0.00% 0.05% 0.30% 0.35%
greater than 3.50
to 1.00
3 Less than or equal
to 3.50 to 1.00 and 0.20% 0.00% 0.05% 0.35% 0.40%
greater than 2.50
to 1.00
4 Less than or equal 0.25% 0.50% 0.55% 0.50% 0.55%
to 2.50 to 1.00
</TABLE>
The Interest Coverage Ratio shall be deemed to be
at Level 3 for the period from the Closing Date to
September 30, 1996.
After the Borrower obtains a rating on its
long-term senior unsecured indebtedness from
Standard & Poor's or Moody's, the facility fee
rate and applicable margins will be determined on
the basis of (1) the lower of such ratings by
Standard & Poor's and Moody's (or, if the Borrower
obtains only one such rating, on the basis of such
rating) and (2) the Utilization, as set forth in
the pricing grid below:
<TABLE>
<CAPTION>
Applicable Applicable
Margin Margin
for for
Base Rate Eurodollar
Advances Advances
Long-Term Senior -------- --------
Unsecured Debt Utilization Utilization
Rating from ----------- -----------
Standard & Poor's Facility (less than or equal to) (greater than) (less than or equal to) (greater than)
Level and Moody's Fee Rate 50% 50% 50% 50%
----- ----------- --------
<S> <C> <C> <C> <C> <C>
1 At least A- by
Standard & Poor's
and 0.090% 0.00% 0.05% 0.16% 0.21%
at least A3 by
Moody's
2 Less than Level 1
but at least BBB+
by Standard & 0.100% 0.00% 0.05% 0.20% 0.25%
Poor's and at least
Baa1 by Moody's
3 Less than Level 2
but at least BBB
by Standard & 0.125% 0.00% 0.05% 0.25% 0.30%
Poor's and at least
Baa2 by Moody's
4 Less than Level 3
but at least BBB-
by Standard & 0.180% 0.00% 0.05% 0.30% 0.35%
Poor's and at least
Baa3 by Moody's
5 Less than Level 4 0.250% 0.50% 0.55% 0.50% 0.55%
</TABLE>
Any principal of any Advance that is not paid when
due will bear interest at a rate per annum equal
to 2% plus the rate otherwise applicable to such
Advance (and, if a Eurodollar Advance is not paid
when due, it will convert to a Base Rate Advance
at the end of the Interest Period then in effect
for such Eurodollar Advance). Any interest, fee or
other amount that is not paid when due will accrue
interest at a rate per annum equal to 2% plus the
Base Rate plus the Applicable Margin. Any default
interest will be payable on demand.
FACILITY FEES: Facility fees under the Revolving Credit Facility
(irrespective of usage) will be calculated and
payable at the rates set forth in the
above pricing grids. Facility fees will be payable
quarterly and on the Maturity Date and will be
computed on a 360-day basis.
LETTER OF CREDIT FEES: Letter of Credit fees for the pro rata account of
the Revolving Credit Lenders will be calculated
and payable as set forth as the Applicable Margin
for Eurodollar Advances in the above pricing
grids. Letter of Credit fees will be payable
quarterly and on the Maturity Date and will be
computed on a 360-day basis.
ANNUAL AGENCY FEE: As agreed between the Agent and the Borrower.
INTEREST PAYMENTS: At the end of each Interest Period for each
Advance, but no less frequently than quarterly.
Interest to be computed on a 365/366-day basis
for Base Rate Advances and a 360-day basis for
Eurodollar Advances.
OPTIONAL PREPAYMENTS: Advances may be prepaid without penalty, with
notice not later than 11:00 A.M. for Base Rate
Advances and with three business days' notice for
Eurodollar Advances, in minimum amounts of
$10,000,000 and increments of $1,000,000 in excess
thereof. The Borrower will bear all costs related
to the prepayment of a Eurodollar Advance prior to
the last day of its Interest Period.
MANDATORY PREPAYMENTS: Commitments under the Revolving Credit Facility
shall be reduced (and outstanding Letters of
Credit cash collateralized) in an amount equal to
the net proceeds of:
(a) Debt issuances by the Borrower and its
Material Subsidiaries (as defined
below); and
(b) Material asset sales (including, without
limitation, sales of accounts and other
asset securitizations, but excluding
permitted sale-leasebacks) by the
Borrower and its Material Subsidiaries,
subject (in the case of asset sales) to
reinvestment of the net proceeds thereof in the
business of the Borrower and its subsidiaries
within one year and subject (in the case of all
such prepayment events) to certain other
carve-outs and exceptions to be agreed.
LOAN DOCUMENTATION: The commitments will be subject to preparation,
execution and delivery of mutually acceptable loan
documentation which will contain conditions
precedent, representations and warranties,
covenants, events of default and other provisions
customary for facilities of this nature,
including, but not limited to, those noted below.
CONDITIONS PRECEDENT TO
CLOSING: Customary for facilities of this nature and others
determined by Citibank to be appropriate,
including, but not limited to:
(1) Promissory Notes payable to each Lender.
(2) Board resolutions and other corporate
authority (including, without
limitation, resolutions of 3M and its
subsidiaries as to the Spin-Off and
related transactions).
(3) Incumbency certificates.
(4) Favorable legal opinion from counsel for
the Borrower.
(5) Favorable legal opinion from counsel for
the Agent.
(6) Representations and Warranties.
(7) The Lender's review of and satisfaction
with the terms and conditions of, and
the documents (collectively, the
"SpinOff Documents") relating to, the
Spin-Off; all conditions to the Spin-Off
shall have been met or waived to the
satisfaction of the Lenders; the
properties and businesses contemplated
to be transferred to or purchased by
Imation and its subsidiaries under the
Spin-Off Documents (the "Spin-Off
Properties") shall have been (or shall
simultaneously with the closing of the
Revolving Credit Facility be) so
transferred or purchased (PROVIDED that
properties and businesses constituting
not more than 10% of the Spin-Off
Properties may not be so transferred or
purchased on or prior to the Closing
Date ("Delayed SpinOff Properties"), but
substantially all of the Delayed SpinOff
Properties shall be so transferred or
purchased by Imation and its
subsidiaries pursuant to the Spin-Off
Documents no later than September 30,
1996); satisfactory arrangements shall
be in place between 3M and Imation with
respect to the attribution to Imation of
the economic costs and benefits of
ownership the Delayed Spin-Off
Properties; and the Spin-Off shall
otherwise have been (or shall
simultaneously with the closing of the
Revolving Credit Facility be)
consummated in all material respects in
accordance with the terms of the
Distribution Agreement and the other
Spin-Off Documents (without any waiver
or amendment not consented to by the
Lenders of any material term, provision
or condition therein), and in compliance
with all applicable law.
(8) The Lender's review of and satisfaction
with:
(a) the Borrower's tax assumptions
and tax-sharing agreements;
(b) the ownership, capital,
corporate, organizational and
legal structure of the
Borrower and its subsidiaries;
(c) the insurance maintained by
the Borrower and its
subsidiaries;
(d) intellectual property matters
affecting the Borrower and its
subsidiaries; and
(e) the material contracts of the
Borrower and its subsidiaries,
including, without limitation,
(i) all documents relating to
any material amount of
indebtedness and other
liabilities of the Borrower
and its subsidiaries
(including (x) guarantees, (y)
other contingent obligations
and (z) all liabilities
assumed from 3M and its
subsidiaries pursuant to the
Spin-Off Documents), (ii) all
material supply and purchase
contracts of the Borrower and
its subsidiaries, (iii) all
material indemnity agreements,
(iv) all employee benefit
agreements and (v) all
collective bargaining
agreements.
(9) Financial information, including pro
forma financial statements reflecting
the forecasted consolidated financial
condition, income and expenses of the
Borrower and its subsidiaries after
giving effect to the Spin-Off, the
extensions of credit under the Revolving
Credit Facility and the other
transactions contemplated hereby.
(10) Solvency certificate of the Borrower.
(11) The Lenders' satisfaction with ERISA and
environmental matters affecting the
Borrower and its subsidiaries.
CONDITIONS PRECEDENT TO
ALL ADVANCES: Customary for facilities of this nature and others
determined by Citibank to be appropriate,
including, but not limited to:
(1) All representations and warranties are
true and correct in all material
respects on and as of the date of the
Borrowing, before and after giving
effect to such Borrowing and to the
application of the proceeds therefrom,
as though made on and as of such date.
(2) No Event of Default or event which, with
the giving of notice or passage of time
or both, would be an Event of Default,
has occurred and is continuing, or would
result from such Borrowing.
REPRESENTATIONS
AND WARRANTIES: Customary for facilities of this nature and others
determined by Citibank to be appropriate,
including, but not limited to the following
representations and warranties as to the Borrower
and each of its Material Subsidiaries:
(1) Confirmation of corporate status and
authority;
(2) Execution, delivery, and performance of
loan documents do not violate law or
existing agreements;
(3) All material corporate, governmental and
third-party consents and approvals
necessary in connection with the
execution, delivery and performance of
the loan documents and the Spin-Off
shall have been obtained and shall
remain in effect; all applicable waiting
periods shall have expired without any
action being taken by any competent
authority; and no law or regulation
shall be applicable that restrains,
prevents or imposes materially adverse
conditions upon the Revolving Credit
Facility or the Spin-Off;
(4) No litigation which would have a
material adverse effect on the financial
condition or operations of the Borrower
(or of the Borrower and its
subsidiaries, taken as a whole), or
which would affect the legality,
validity and enforceability of the loan
documents or the Spin-Off;
(5) Except as disclosed in the Borrower's
Form 10 relating to the Spin-Off, no
material adverse change in financial
condition or results of operations of
the Borrower (or of the Borrower and its
subsidiaries, taken as a whole) since
December 31, 1995 (determined based on
the audited financial statements as at
such date);
(6) Accuracy of information, financial
statements;
(7) Material compliance with laws and
regulations, including ERISA and all
applicable environmental laws and
regulations;
(8) Legality, validity, binding effect and
enforceability of the loan documents;
(9) Not an investment company or a public
utility holding company;
(10) Solvency;
(11) Proceeds of Advances not used to acquire
margin stock (other than Advances to
fund loans by the Borrower to the ESOP
to finance the purchase of common stock
of the Borrower); no violation of margin
regulations.
FINANCIAL COVENANTS: (1) Imation must maintain a ratio (the
"Adjusted Interest Coverage Ratio") of
(a) EBITDA minus capital expenditures to
(b) Interest Expense (each to be
defined) of not less than:
Calendar Year Ratio
------------- -----
1996 1.50 to 1.00
1997 and thereafter 4.50 to 1.00
The Adjusted Interest Coverage Ratio will be
determined for the first year after the Closing
Date on the basis of the fiscal quarters that have
ended since the Closing Date and, thereafter, on a
rolling four-quarter basis.
(2) Imation must maintain a ratio of Total
Debt to Total Capitalization (each to be
defined) of not more than 0.30 to 1.00.
(3) Imation must maintain Consolidated
Tangible Net Worth (to be defined) of at
least:
Calendar Year Amount
------------- ------
1996 $825,000,000
1997 $875,000,000
1998 $925,000,000
1999 $975,000,000
2000 and thereafter $1,125,000,000
AFFIRMATIVE COVENANTS: Customary for facilities of this nature and others
determined by Citibank to be appropriate,
including, but not limited to the following
affirmative covenants applicable to the Borrower
and each subsidiary of the Borrower having at
least 5% of the total revenues of the Borrower and
its subsidiaries or at least 5% of the total
assets of the Borrower and its subsidiaries (each,
a "Material Subsidiary"):
(1) Preservation of corporate existence;
(2) Material compliance with laws (including
ERISA and applicable environmental
laws);
(3) Payment of taxes;
(4) Payment of material obligations;
(5) Visitation rights;
(6) Maintenance of books and records;
(7) Maintenance of properties;
(8) Maintenance of insurance;
(9) Certain reporting requirements
(including, without limitation, delivery
of reports on Form 10-K and Form 10-Q
and other SEC filings);
(10) Transactions with Affiliates;
(11) Protection and enforcement of material
rights under Spin- Off Documents.
NEGATIVE COVENANTS: Customary for facilities of this nature and others
determined by Citibank to be appropriate for the
transaction, including but not limited to the
following negative covenants applicable to the
Borrower and each Material Subsidiary:
(1) Certain restrictions on liens (negative
pledge), indebtedness (including certain
contingent obligations), lease
obligations;
(2) Certain restrictions on change of
business, consolidations, mergers, sale
of assets (other than permitted sale-
leasebacks), investments;
(3) Limitations on restrictions binding upon
Material Subsidiaries and all other
subsidiaries of the Borrower that would
prohibit or impose adverse conditions
upon dividend payments to the Borrower,
payments of principal or interest on
advances made by the Borrower or any of
its subsidiaries and investments in and
other transfers of property to the
Borrower;
(4) Restriction on material amendments to
the Borrower's charter documents or the
Spin-Off Documents.
EVENTS OF DEFAULT: Customary for facilities of this nature and others
determined by Citibank to be appropriate for the
transaction, including but not limited to the
following:
(1) Failure to pay principal when due and
interest within three days when due;
(2) Representations or warranties materially
incorrect;
(3) Failure to comply with covenants (with
notice and cure periods as applicable);
(4) Cross-default to payment defaults on
principal of indebtedness of the
Borrower and the Material Subsidiaries
aggregating $10,000,000, or to default
or event if the effect is to accelerate
or permit acceleration;
(5) Unsatisfied judgment or order binding on
the Borrower or any Material Subsidiary
in excess of $10,000,000 in the
aggregate;
(6) Bankruptcy/insolvency of the Borrower or
any Material Subsidiary;
(7) ERISA;
(8) Change of control or ownership;
(9) Material default by 3M or its affiliates
under the Spin-Off Documents.
OTHER: Loan documentation will include:
(1) Indemnification of Agent and Lenders and
their respective affiliates, officers,
directors, employees, agents and
advisors for any liabilities and
expenses arising out of the Revolving
Credit Facility or the use of proceeds.
(2) Normal agency language.
(3) Majority Lenders defined as those
holding at least 51% of the Revolving
Credit Facility.
ASSIGNMENTS AND
PARTICIPATIONS: Each Lender will have the right to assign to one
or more Eligible Assignees all or a portion of its
rights and obligations under the loan documents,
with the consent, not to be unreasonably withheld,
of the Agent and the Borrower. Minimum aggregate
assignment level of $10,000,000 and increments of
$1,000,000 in excess thereof. The parties to the
assignment (other than the Borrower) shall pay to
the Agent an administrative fee of $3,000.
Each Lender will also have the right, without
consent of the Borrower or the Agent, to assign
(i) as security, all or part of its rights under
the loan documents to any Federal Reserve Bank and
(ii) with notice to the Borrower and the Agent,
all or part of its rights or obligations under the
loan documents to any of its affiliates.
Each Lender will have the right to sell
participations in its rights and obligations under
the loan documents, subject to customary
restrictions on the participants' voting rights.
YIELD PROTECTION,
TAXES, OTHER DEDUCTIONS: (1) The loan documents will contain yield
protection provisions, customary for
facilities of this nature, protecting
the Lenders in the event of
unavailability of funding, funding
losses, reserve and capital adequacy
requirements.
(2) All payments to be free and clear of any
present or future taxes, withholdings or
other deductions whatsoever (other than
income taxes in the jurisdiction of the
Lender's applicable lending office). The
Lenders will use reasonable efforts to
minimize to the extent possible any
applicable taxes and the Borrower will
indemnify the Lenders and the Agent for
such taxes paid by the Lenders or the
Agent.
GOVERNING LAW: The State of New York.
SUBMISSION TO
JURISDICTION, ETC.: The Borrower will submit to the non-exclusive
jurisdiction of New York courts. All of the
parties to the loan documentation will, to the
fullest extent permitted by applicable law, waive
any right to a trial by jury.
COUNSEL TO THE AGENT: Milbank, Tweed, Hadley & McCloy.
EXPENSES: The Borrower shall reimburse Citicorp Securities
and Citibank for all out-of-pocket expenses
(including reasonable fees and expenses of counsel
to the Agent) incurred by them in the negotiation,
syndication and execution of the Revolving Credit
Facility. Such fees and expenses shall be
reimbursed by the Borrower on the Closing Date and
from time to time upon presentation of a statement
of account, regardless of whether the transaction
contemplated is actually completed or the loan
documents are signed.
6/14/96
IMATION OUS SUBSIDIARIES
COUNTRY OF REGISTRATION COMPANY NAME
Australia Imation ANZ Pty Ltd
China Imation (Shanghai) Co., Ltd. (to be formed)
Hong Kong Imation Hong Kong Limited
Japan Imation Corporation Japan.
Korea Imation Korea Inc. (to be formed)
Singapore Imation Asia Pacific Pte Ltd
Singapore Imation Singapore Pte Ltd
Taiwan Imation Taiwan (to be formed)
Austria Imation Osterreich GmbH (to be formed)
Belgium Imation Belgium N.V.
Czech Republic Imation SPOL. s.r.o. (to be formed)
Denmark Imation Denmark (to be formed)
Finland Imation Finland Oy
France Imation France
Germany Imation Deutschland GmbH
Greece Imation Greece S.A. (to be formed)
Hungary Imation Hungary Ltd.
Italy Imation Italy (to be formed)
Italy Imation Spa (to be formed
Italy Imation Research (to be formed)
Italy Imation Sulmona Spa
U.A.E. Imation Middle-East FZE (to be formed)
Netherlands Imation Europe B.V.
Netherlands Imation International B.V.
Norway Imation Norge A/S
Poland Imation Poland Sp. zo.o. (to be formed)
South Africa Imation South Africa (Proprietary) Limited
Spain Imation Iberia, S.A.
Sweden Imation Sweden AB (to be formed)
Switzerland Imation AG (to be formed)
U.K. Imation UK Limited
U.K. Harlow Imation Research Ltd.
6/14/96
IMATION OUS SUBSIDIARIES CONT.
COUNTRY OF REGISTRATION COMPANY NAME
Argentina Imation Argentina S.A. (to be formed)
Brazil Imation Brasil (to be formed)
Chile Imation Chile (to be formed)
Colombia Imation Colombia S.A.
Costa Rica Imation de Costa Rica
Ecuador Imation Ecuador S.A.
El Salvador Imation de El Salvador S.A. de C.V.
Guatemala Imation de Guatemala S.A.
Mexico Imation Mexico, S.A. de C.V.
Panama Imation Panama, S.A.
Peru Imation Peru S.A.
Puerto Rico Imation Puerto Rico, Inc.
Venezuela Imation Venezuela, S.A.
Canada Imation Canada Inc.
