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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 11, 1998
METATEC CORPORATION
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(Exact name of registrant as specified in its charter)
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Florida 0-9220 59-1698890
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(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
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7000 Metatec Boulevard, Dublin, Ohio 43017
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(Address of principal executive offices) (Zip Code)
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Registrant's telephone number, including area code: (614) 761-2000
No Change
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
On September 11, 1998, Metatec Corporation, a Florida
corporation ("Metatec"), through its wholly owned subsidiaries, Metatec
Acquisition Corp., an Ohio corporation ("Metatec Acquisition"), and Metatec
International B.V., a Netherlands corporation ("Metatec International"),
purchased certain assets of Imation Corp., a Delaware corporation ("Imation"),
Imation International B.V., a Netherlands corporation ("Imation International"),
and Imation Enterprises Corp., a Delaware corporation ("Imation Enterprises"),
pursuant to an Asset Purchase Agreement dated July 29, 1998 (the "Purchase
Agreement"), among Metatec, Metatec Acquisition, Metatec International
(collectively, the "Purchasers"), and Imation, Imation International, and
Imation Enterprises (collectively, the "Sellers").
The assets purchased constituted substantially all of the assets used
in the CD-ROM services business of the Sellers. The consideration paid pursuant
to the Purchase Agreement was determined through negotiation by the parties, and
the purchase price consisted of cash in the aggregate amount of $37,000,000, a
promissory note from the Purchasers to the Sellers in the amount of $2,800,000,
and the assumption of certain contractual and other liabilities of the Sellers.
The purchase price may be adjusted subsequent to closing based upon a
determination of Imation's net working capital as reflected by a final
accounting of Sellers' inventory, accounts receivable, and other current assets,
and the amount of the obligations assumed by the Purchasers, as of the day
immediately prior to closing.
As part of the terms of acquisition, the Sellers and one
affiliate of the Sellers also entered into agreements pursuant to which, from
the date of closing until December 15, 1998, Imation would provide various
transition services to the Purchasers, including certain manufacturing, packing,
shipping, computer operation, engineering, billing, collection, ordering,
purchasing, human resource, and other services.
The Purchasers financed the asset purchase through a $30,000,000 term
loan facility and a portion of a $25,000,000 revolving loan facility, which
facilities were obtained through a participation arrangement between the
Huntington National Bank and Bank One N.A. Prior to the transaction, there was
no material relationship between Imation, Imation Enterprises or Imation
International and Metatec, Metatec Acquisition and Metatec International or any
of their affiliates, any directors or any officers, or any associates of any
such directors or officers. Prior to the transaction, those acquired assets
which constituted plant, equipment, or other physical property were used by the
Sellers in the manufacture and distribution of CD-ROM and DVD-ROM products and
related services, including data preparation and mastering, disc replication,
printing, and electronic tracking. Following the asset purchase, Metatec and
Metatec International intend to continue such use of such assets in their own
operations.
The description contained herein of the Purchase Agreement is qualified
in its entirety by reference to the Purchase Agreement which is attached hereto
as Exhibit 2 and incorporated herein by reference.
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Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
As of the date of the filing of this Current Report on Form
8-K, it is impracticable for Metatec to provide the financial statements
required by this Item 7(a). No such financial statements are presently
available. In accordance with Item 7(a)(4) of Form 8-K, the required financial
statements will be filed by amendment under cover of Form 8-K/A no later than 60
days after September 26, 1998.
.
(b) Pro Forma Financial Information
As of the date of the filing of this Current Report on Form 8-K, it is
impracticable for Metatec to provide the pro forma financial information
required by this Item 7(b). No such pro forma financial information is presently
available. In accordance with Item 7(b)(2) of Form 8-K, the required pro forma
financial information will be filed by amendment under cover of Form 8-K/A no
later than 60 days after September 26, 1998.
(c) Exhibits.
The following documents related to the acquisition of the assets of Imation are
being filed as exhibits to this Form 8-K:
Exhibit
No. Description of Exhibit
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(2) Asset Purchase Agreement dated July 29, 1998, among Metatec
Corporation, Metatec Acquisition Corp., Metatec International
B.V., Imation Corp., Imation International B.V., and Imation
Enterprises Corp.
10(a) Loan Agreement dated September 11, 1998 among Metatec
Corporation, Bank One, NA, The Huntington National Bank, other
financial institutions from time to time party thereto, as
banks, and The Huntington National Bank, as administrative
agent for the banks.
Schedules and exhibits to the Purchase Agreement have not been filed
because Metatec believes that they do not contain information material to an
investment decision which is not otherwise disclosed in the Purchase Agreement.
A list has been attached to the Purchase Agreement briefly identifying the
contents of the omitted schedules and exhibits. Metatec hereby agrees to furnish
supplementally a copy of any omitted schedule or exhibit to the Securities and
Exchange Commission upon its request.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
METATEC CORPORATION
Date: September 23, 1998 By /s/ JEFFREY M. WILKINS
----------------------
Jeffrey M. Wilkins
Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description of Exhibit
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(2) Asset Purchase Agreement dated July 29, 1998, among Metatec
Corporation, Metatec Acquisition Corp., Metatec International
B.V., Imation Corp., Imation International B.V., and Imation
Enterprises Corp.
10(a) Loan Agreement dated September 11, 1998 among Metatec
Corporation, Bank One, NA, The Huntington National Bank, other
financial institutions from time to time party thereto, as
banks, and The Huntington National Bank, as administrative
agent for the banks.
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Exhibit 2
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ASSET PURCHASE AGREEMENT
AMONG
METATEC ACQUISITION CORP.
("METATEC ACQUISITION")
METATEC INTERNATIONAL B.V.
("METATEC INTERNATIONAL")
METATEC CORPORATION
("METATEC")
AND
IMATION CORP.
("IMATION")
IMATION INTERNATIONAL B.V.
("INTERNATIONAL")
IMATION ENTERPRISES CORP.
("ENTERPRISES")
DATED AS OF JULY 29, 1998
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..................................................................................1
1.1 Definitions..................................................................................1
1.2 Interpretation...............................................................................9
ARTICLE II SALE AND PURCHASE OF ASSETS;
ASSUMPTION OF ASSUMED OBLIGATIONS............................................................9
2.1 Purchased Assets.............................................................................9
2.2 Assignment of Contracts and Permits.........................................................11
2.3 Excluded Assets.............................................................................13
2.4 Assumed Obligations.........................................................................14
2.5 No Other Liabilities Assumed................................................................15
ARTICLE III PURCHASE PRICE AND PAYMENT..................................................................16
3.1 Payment of Purchase Price...................................................................16
3.2 Adjustment to Purchase Price................................................................17
3.4 Allocation of Consideration.................................................................19
3.5 Reassignment of Certain Accounts Receivable.................................................19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE IMATION
COMPANIES...................................................................................20
4.1 Due Incorporation...........................................................................20
4.2 Due Authorization...........................................................................20
4.3 No Conflicts................................................................................20
4.4 Financial Statements. .....................................................................21
4.5 Title to Properties.........................................................................21
4.6 Undisclosed Liabilities.....................................................................22
4.7 Absence of Certain Changes..................................................................22
4.8 Consents and Approvals......................................................................23
4.9 Contracts and Leases........................................................................23
4.10 Inventory...................................................................................23
4.11 Accounts Receivable.........................................................................23
4.12 Permits.....................................................................................23
4.13 Employee Benefit Plans and Employment Agreements............................................24
4.14 Employment and Labor Matters................................................................24
4.15 Taxes.......................................................................................25
4.16 Compliance with Laws........................................................................25
4.17 Environmental Matters.......................................................................25
4.18 Litigation..................................................................................26
4.19 Brokers.....................................................................................26
4.20 Certain Intellectual Property...............................................................26
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ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE METATEC
COMPANIES...................................................................................27
5.1 Due Incorporation...........................................................................27
5.2 Due Authorization...........................................................................27
5.3 Consents and Approvals; No Conflicts........................................................28
5.4 Litigation..................................................................................29
5.5 Brokers.....................................................................................29
ARTICLE VI COVENANTS OF THE IMATION COMPANIES..........................................................29
6.1 Conduct of Business.........................................................................29
6.2 Access......................................................................................31
6.3 HSR Act Notification; Other Governmental Consents...........................................31
6.4 Tax Matters.................................................................................31
6.5 Financial Statements........................................................................32
6.6 Confidentiality.............................................................................32
6.7 Exclusive Rights............................................................................32
6.8 Reasonable Efforts..........................................................................32
6.9 Collection of Accounts Receivable...........................................................33
ARTICLE VII COVENANTS OF THE METATEC COMPANIES..........................................................33
7.1 HSR Act Notification; Other Governmental Consents...........................................33
7.2 Tax Matters.................................................................................33
7.3 Access; Retention of Records................................................................33
7.4 Confidentiality.............................................................................34
7.5 Duty Drawback...............................................................................34
7.6 Reasonable Efforts..........................................................................34
7.7 Financial Statements........................................................................34
ARTICLE VIII CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE METATEC COMPANIES....................................................................35
8.1 Warranties True as of Both Present Date and Closing Date....................................35
8.2 Compliance with Agreements and Covenants....................................................35
8.3 Hart-Scott-Rodino...........................................................................35
8.4 Consents and Approvals......................................................................35
8.5 Related Agreements..........................................................................35
8.6 Actions or Proceeding.......................................................................36
8.7 No Material Adverse Change..................................................................36
8.8 Financial Statements........................................................................36
8.9 Works Council...............................................................................36
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ARTICLE IX CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE IMATION COMPANIES....................................................................36
9.1 Warranties True as of Both Present Date and Closing Date....................................36
9.2 Compliance with Agreements and Covenants....................................................36
9.3 Hart-Scott-Rodino...........................................................................37
9.4 Actions or Proceeding.......................................................................37
9.5 Related Agreements..........................................................................37
9.6 Works Council...............................................................................37
ARTICLE X EMPLOYEES AND BENEFIT PLANS.................................................................37
10.1 Offer of Employment.........................................................................37
10.2 Seniority and Certain Payables..............................................................38
10.3 401(k) Plan.................................................................................38
10.4 No Third Party Beneficiaries................................................................38
ARTICLE XI CLOSING.....................................................................................38
11.1 Closing.....................................................................................38
11.2 Deliveries by the Imation Companies.........................................................39
11.3 Deliveries by Purchasers....................................................................40
ARTICLE XII TERMINATION.................................................................................41
12.1 Termination.................................................................................41
12.2 Effect of Termination.......................................................................41
ARTICLE XIII INDEMNIFICATION.............................................................................42
13.1 Survival; Remedy for Breach.................................................................42
13.2 Indemnification by the Imation Companies ...................................................42
13.3 Indemnification by the Metatec Companies....................................................43
13.4 Claims......................................................................................44
13.5 Notice of Third Party Claims; Assumption of Defense.........................................44
13.6 Settlement or Compromise....................................................................45
13.7 Losses in Connection with Third Party Claims................................................45
ARTICLE XIV NON-COMPETITION.............................................................................45
14.1 Non-Competition.............................................................................45
14.2 Equitable Relief............................................................................46
ARTICLE XV MISCELLANEOUS...............................................................................46
15.1 Disclosure Schedules........................................................................46
15.2 Expenses....................................................................................46
15.3 Amendment...................................................................................47
15.4 Notices.....................................................................................47
15.5 Payments in Dollars.........................................................................48
15.6 Waivers.....................................................................................48
15.7 Bulk Sales..................................................................................48
15.8 Successors and Assigns......................................................................48
15.9 No Third Party Beneficiaries................................................................49
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15.10 Publicity...................................................................................49
15.11 Further Assurances..........................................................................49
15.12 Severability................................................................................49
15.13 Remedies Cumulative.........................................................................49
15.14 Entire Understanding........................................................................49
15.15 Applicable Law..............................................................................50
15.16 Waiver of Jury Trial........................................................................50
15.17 Counterparts................................................................................50
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SCHEDULES
Schedule 1.1(a) Knowledge
Schedule 1.1(b) Transition Services Agreement
Schedule 2.1(a) Equipment
Schedule 2.1(b) Vehicles
Schedule 2.2(a) Real Property Leases
Schedule 2.2(b) Personal Property Leases
Schedule 2.2(e) Other Contracts
Schedule 2.2(g) Transferred Permits
Schedule 2.3(b) Excluded Contracts
Schedule 2.3(n) Other Excluded Assets
Schedule 3.4 Preliminary Purchase Price Allocation
Schedule 4.3 Seller Conflicts
Schedule 4.4 Financial Statements
Schedule 4.5 Liens
Schedule 4.7 Absence of Certain Changes
Schedule 4.8 Consents and Approvals
Schedule 4.9 Certain Contracts and Leases
Schedule 4.10 Inventory Exceptions
Schedule 4.11 Accounts Receivable Exceptions
Schedule 4.14(a) Employee Matters
Schedule 4.14(b) Contract Employees
Schedule 4.14(c) Breda Affected Employees
Schedule 4.17 Environmental Matters
Schedule 4.18 Litigation
Schedule 5.3(a) Metatec Company Consents
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Schedule 5.3(b) Metatec Company Conflicts
Schedule 6.1 Conduct of Business
Schedule 8.4 Required Consents and Approvals
Schedule 8.5 Terms of Breda Lease
Schedule 10.1(a) Selected Menomonie Employees
Schedule 10.1(b) Benefits
Schedule 10.1(c) Severance Benefits
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of International Asset Transfer Agreement
Exhibit C Form of Note
Exhibit D Form of License Agreement
Exhibit E Form of Opinion of Counsel for Imation Companies
Exhibit F Form of Opinion of Van Benthem & Keulen
Exhibit G Form of Opinion of Counsel for the Metatec Companies
Exhibit H Form of Opinion of Trenite Van Doorne
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ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT is made as of the 29th day of July 1998,
by and among METATEC ACQUISITION CORP., an Ohio corporation ("Metatec
Acquisition"), METATEC INTERNATIONAL B.V., a Netherlands corporation ("Metatec
International"), METATEC CORPORATION, a Florida corporation ("Metatec"), IMATION
CORP., a Delaware corporation ("Imation"), IMATION INTERNATIONAL B.V., a
Netherlands corporation ("International"), and IMATION ENTERPRISES CORP., a
Delaware corporation ("Enterprises"). Certain capitalized terms used herein are
defined in Article I.
W I T N E S S E T H:
WHEREAS, Purchasers desires to purchase from the Imation Companies and
the Imation Companies desire to sell to Purchasers all of the Purchased Assets
(as hereinafter defined), and Purchasers are willing to assume all of the
Assumed Obligations (as hereinafter defined), all upon the terms and conditions
hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing and the mutual
warranties, representations, covenants and agreements herein contained, the
parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
"Accounts Receivable" shall mean all accounts receivable, trade
receivables, notes receivable and other receivables, which in any case are
payable as a result of goods sold or services provided by the Imation Companies
exclusively as part of the Business.
"Acquisition Proposal" shall have the meaning provided in Section 6.9.
"Affected Employees" shall have the meaning provided in Section 4.14.
"Affiliate" shall mean, with respect to any specified Person, any other
Person which, directly or indirectly, owns or controls, is under common
ownership or control with, or is owned or controlled by such specified Person. A
Person shall be deemed to "own" another Person if it owns more than 50% of the
capital stock or other equity interest of such other Person.
"Agreement" shall mean this Asset Purchase Agreement, including all
exhibits and schedules hereto, as it may be amended, supplemented or modified
from time to time in accordance with its terms.
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"Assets" shall mean the Purchased Assets and the Leased Assets.
"Assignment and Assumption Agreement" shall mean an assignment and
assumption agreement and bill of sale between Metatec Acquisition and Sellers to
be dated the Closing Date, in substantially the form attached hereto as
Exhibit A.
"Assumed Obligations" shall have the meaning provided in Section 2.4.
"Breda Facility" shall mean the facility leased by International in
Breda, The Netherlands, for use in the Business.
"Bulk Sale Laws" shall mean the Laws of any jurisdiction relating to
bulk sales which are applicable to the sale of the Purchased Assets by Sellers
pursuant to this Agreement.
"Business" shall mean the CD-ROM Services business previously and
currently conducted by the Imation Companies. The term "Business" excludes the
operation of the Excluded Assets and all other businesses of the Imation
Companies, including but not limited to any business of the Imation Companies
conducted under secure military contracts.
"Business Day" shall mean any day of the year other than (i) any
Saturday or Sunday or (ii) any other day on which banks located in Minneapolis,
Minnesota generally are closed for business.
"Business Financial Statements" shall mean the unaudited summary of pro
forma balance sheet information of the Business as of December 31, 1996 and 1997
and March 31, 1998 and the pro forma income statements of the Business for the
years ended December 31, 1996 and 1997 and for the quarter ended March 31, 1998.
"Cash" shall mean all cash, certificates of deposit, bank deposits and
other cash equivalents, together with all accrued but unpaid interest thereon.
"Cause" shall have the meaning provided on Schedule 10.1(b).
"Closing" shall mean the consummation of the transactions contemplated
herein in accordance with Article XI.
"Closing Date" shall mean the date on which the Closing occurs or is to
occur.
"Closing Date Deficiency" shall mean the amount by which the Net
Working Capital, calculated based on the Closing Date Working Capital Statement,
is less than $12,800,000. If the Net Working Capital is not less than
$12,800,000, there shall be no Closing Date Deficiency.
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"Closing Date Excess" shall mean the amount by which the Net Working
Capital, calculated based on the Closing Date Working Capital Statement, exceeds
$12,800,000. If the Net Working Capital does not exceed $12,800,000, there shall
be no Closing Date Excess.
"Closing Date Working Capital Statement" shall have the meaning
provided in Section 3.2(a).
"Closing Documents" shall have the meaning provided in Section 13.1.
"Code" shall mean the United States Internal Revenue Code of 1986, as
amended.
"Confidential Information" shall mean all Information and Records and
Intellectual Property that are not and have not become ascertainable or
obtainable from public or published information.
"Confidentiality Agreement" shall mean the Confidentiality Agreement
dated February 20, 1998 between Metatec and Greene Holcomb & Company LLC, as
agent for Imation.
"Contested Adjustments" shall have the meaning provided in
Section 3.2(b).
"Contract" shall mean any contract, lease, commitment, understanding,
sales order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant, instrument, plan, permit, license or Customer Contract, whether written
or verbal, which is intended or purports to be binding and enforceable.
"Contract Employees" shall have the meaning provided in
Section 4.14(b).
"Credit Agreement" shall mean the Credit Agreement, dated as of July 1,
1996, as modified and supplemented, among Imation, certain Lenders, Issuing
Banks, Swing Line Lenders and the Administrative Agent (as such terms are
defined therein) and any and all agreements relating thereto.
"Customer Contracts" shall have the meaning provided in Section 2.2(c).
"Default" shall mean a breach of any obligation under any Real Property
Lease or any Contract by any of the Imation Companies that would give the
counterparty thereto the right to (a) terminate such Real Property Lease or
Contract or (b) accelerate all payments due under such Real Property Lease or
Contract.
"Disclosure Schedules" shall mean the schedules hereto with respect to
the representations and warranties of the Imation Companies set forth in Article
IV, as updated in accordance with Section 15.1.
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"Dollars" or numbers preceded by the symbol "$" shall mean amounts in
United States Dollars.
"DVD-ROM" shall mean digital versatile disk - read only memory.
"Enterprises" shall have the meaning provided in the Preamble.
"Environmental Law" shall mean any Law relating to the protection of
the environment, natural resources or pollution and any Law which relates to or
otherwise imposes liability or standards of conduct concerning the manufacture,
transportation, storage, handling, disposal, discharges, emissions, releases or
threatened releases of odors or any pollutants, contaminants or hazardous or
toxic wastes, substances or materials, whether as matter or energy, into ambient
air, water or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants or hazardous or toxic wastes, substances
or materials, including without limitation the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the Superfund
Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Toxic Substances Control
Act of 1976, as amended, the Federal Water Pollution Control Act of 1976, as
amended, the Clean Water Act of 1977, as amended, any so-called "Superfund" or
"Superlien" Law (including those already referenced in this definition) and any
other Law having a similar subject matter.
"Environmental Permit" shall mean any Permit required by or pursuant to
any applicable Environmental Law.
"Equipment" shall have the meaning provided in Section 2.1(a).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Excluded Assets" shall have the meaning provided in Section 2.3.
"Excluded Contracts" shall have the meaning provided in Section 2.3(b).
"Excluded Obligations" shall have the meaning provided in Section 2.5.
"Facilities" shall mean the Breda Facility, the Fremont Facility and
the Menomonie Facility.
"Fremont Employees" shall have the meaning provided in Section 10.1.
"Fremont Facility" shall mean the facilities leased by Enterprises in
Fremont, California for use in the Business.
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"GAAP" shall mean U.S. generally accepted accounting principles, as
applied by the Imation Companies consistent with past practices, at the time in
effect.
"Governmental Authority" shall mean the government of the United States
or any foreign country or any state or political subdivision thereof and any
entity, body or authority exercising executive, legislative, judicial,
regulatory or administrative functions of or pertaining to government.
"Hazardous Substance" shall mean any material or substance which
(i) constitutes a hazardous substance, toxic substance or pollutant (as such
terms are defined by or pursuant to any Environmental Law) or (ii) is regulated
or controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Law.
"Hired Employee" shall have the meaning provided in Section 10.1.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended.
"Imation" shall have the meaning provided in the Preamble.
"Imation Companies" shall mean Imation, Enterprises and International,
collectively.
"Imation Company" shall mean Imation, Enterprises or International, as
applicable.
"Imation Employees" shall have the meaning provided in Section 10.3.
"Indemnified Person" shall mean the Person or Persons entitled to, or
claiming a right to, indemnification under Article XIII.
"Indemnifying Person" shall mean the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article
XIII.
"Independent Accountants" shall have the meaning provided in
Section 3.2(b).
"Information and Records" shall have the meaning provided in
Section 2.1(d).
"Intellectual Property" shall mean all United States and foreign
patents (including continuations, continuations-in-part, reissues and
re-examinations thereof) and patent applications; registered and unregistered
trade names, trademarks, service names and service marks (and applications for
registration of the same) and all goodwill associated therewith; copyrights and
copyright registrations (and applications for the same); trade secrets, computer
data (including formulations and analyses), computer software (in source code
and object code form) and all related
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programming, user and systems documentation; inventions, processes and designs
(whether or not patentable or reduced to practice); know-how and formulae; and
all other intangible assets, properties and rights.
"Intellectual Property Licenses" shall mean all agreements for the
license to or by any of the Imation Companies of any Intellectual Property
relating exclusively to the Business.
"International" shall have the meaning provided in the Preamble.
"International Asset Transfer Agreement" shall mean the asset transfer
agreement between Metatec International and International, in substantially the
form attached hereto as Exhibit B.
"Inventory" shall have the meaning provided in Section 2.1(c).
"Law" shall mean any law (including common law), statute, regulation,
ordinance, rule, order, writ, injunction, ruling, decree, judgment, consent
decree, settlement agreement or governmental requirement enacted, promulgated,
entered into, agreed or imposed by any Governmental Authority.
"Leased Assets" shall mean all assets leased to any of the Imation
Companies pursuant to any of the Real Property Leases or the Personal Property
Leases.
"Leased Real Property" shall have the meaning provided in
Section 4.17(a).
"License Agreement" shall mean a license agreement between Metatec and
Imation to be dated the Closing Date for the use of certain Intellectual
Property, in substantially the form attached hereto as Exhibit D.
"Licensed Software" shall mean all computer software and all related
programming, user and systems documentation (which documentation is in the
possession of the Imation Companies) licensed to one or more of the Imation
Companies that is listed on Schedule 2.2(e).
"Liens" shall mean mortgages, liens, charges, restrictions, pledges,
security interests, options, leases or subleases, claims, rights of any
third-party, easements, encroachments or encumbrances. Notwithstanding the
foregoing, the term "Liens" shall not include any of the following: (a)
mechanics', carriers', workers', suppliers' and other similar liens arising in
the ordinary course of business and consistent with past practice for any amount
the payment of which is not delinquent or in dispute; (b) zoning laws that do
not impair the present or anticipated use of the property subject thereto; and
(c) liens for current Taxes not yet due and payable.
"Loss" or "Losses" shall mean any and all liabilities, losses, costs,
claims, damages (excluding, except as otherwise provided in Section 13.7,
punitive damages and claims for
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lost profits), penalties and expenses (including without limitation reasonable
attorneys' fees and expenses and costs of investigation and litigation).
"Material Adverse Change" shall mean a change in the business,
operations or condition (financial or otherwise) of the Business that is
material and adverse.
"Material Adverse Effect" shall mean an effect on the business,
operations or condition (financial or otherwise) of the Business that is
material and adverse.
"Menomonie Facility" shall mean the facilities leased by Imation in
Menomonie, Wisconsin, and Chippewa Falls, Wisconsin for use in the Business.
"Metatec" shall have the meaning provided in the Preamble.
"Metatec Acquisition" shall have the meaning provided in the Preamble.
"Metatec Companies" shall mean Metatec, Metatec Acquisition and Metatec
International.
"Metatec Company" shall mean Metatec, Metatec Acquisition or Metatec
International, as applicable.
"Metatec International" shall have the meaning provided in the
Preamble.
"Net Working Capital" shall mean the amount by which the Working
Capital Assets exceed the book value of the current portion of the Assumed
Obligations as set forth on the Closing Date Working Capital Statement.
"Note" shall mean the Promissory Note in substantially the form
attached hereto as Exhibit C.
"Other Contracts" shall have the meaning provided in Section 2.2(e).
"Owned Software" shall have the meaning provided in Section 2.1(g).
"Permits" shall mean all consents, orders, registrations, permits,
tariffs, authorizations, licenses, certificates, variances, interim permits,
approvals, franchises and rights under any Law or otherwise required by or
obtained from any Governmental Authority and any applications for the foregoing.
"Person" shall mean any individual, corporation, proprietorship, firm,
partnership, limited partnership, limited liability partnership, limited
liability company, trust, association or other entity.
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"Personal Property Leases" shall have the meaning provided in
Section 2.2(b).
"Purchase Price" shall have the meaning provided in Section 3.1.
"Purchased Assets" shall have the meaning provided in Section 2.1.
"Purchased Contracts and Permits" shall have the meaning provided in
Section 2.2.
"Purchasers" shall mean Metatec Acquisition and Metatec International.
"Purchasers' Accountants" shall mean the accounting firm of Deloitte &
Touche, L.L.P.
"Purchaser's 401(k) Plan" shall have the meaning provided in
Section 10.3.
"Real Property Leases" shall have the meaning provided in
Section 2.2(a).
"Related Agreement" shall mean any Contract which is or is to be
entered into at the Closing or otherwise pursuant to or in connection with this
Agreement, including, without limitation, the International Asset Transfer
Agreement. The Related Agreements executed by a specified Person shall be
referred to as "such Person's Related Agreements," "its Related Agreements" or
another similar expression.
"Selected Menomonie Employees" shall have the meaning provided in
Section 10.1.
"Seller" shall mean Imation or Enterprises, as applicable.
"Sellers" shall mean Imation and Enterprises.
"Sellers' Accountants" shall mean the accounting firm of
PricewaterhouseCoopers L.L.P.
"Specified Agreement" shall mean the Assignment and Assumption
Agreement, the International Asset Transfer Agreement or the Note, as
applicable.
"Specified Agreements" shall mean the Assignment and Assumption
Agreement, the International Asset Transfer Agreement and the Note.
"Tax Return" shall mean any report, return or other information
required to be supplied to a Governmental Authority in connection with any
Taxes.
"Taxes" shall mean all taxes, charges, fees, duties (including customs
duties), levies or other assessments, including income, gross receipts, net
proceeds, ad valorem, turnover, real and personal property (tangible and
intangible), sales, use, franchise, excise, value added, stamp, leasing, lease,
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user, transfer, fuel, excess profits, occupational, interest equalization,
windfall profits, license, payroll, environmental, capital stock, disability,
severance, employee's income withholding, other withholding, unemployment and
Social Security taxes, which are imposed by any Governmental Authority, and such
term shall include any interest, penalties or additions to tax attributable
thereto, whether or not disputed.
"to the knowledge" of an Imation Company or the Imation Companies or
"knowledge", when used in reference to any Imation Company, shall mean the
actual knowledge of the Persons listed on Schedule 1.1(a), acquired in the
ordinary course and without any special investigation or inquiry, or acquired in
connection with the negotiation, preparation, execution or delivery of this
Agreement or the International Asset Transfer Agreement, without any other
special investigation or inquiry, as applicable.
"to the knowledge" of a Metatec Company or the Metatec Companies or
"knowledge", when used in reference to any Metatec Company, shall mean the
actual knowledge of Jeffrey Wilkens, Julia Pollner, Chris Winslow or Alex Deak,
acquired in the ordinary course and without any special investigation or
inquiry, or acquired in connection with the negotiation, preparation, execution
or delivery of this Agreement or the International Asset Transfer Agreement,
without any other special investigation or inquiry, as applicable.
"Transferred Permits" shall have the meaning provided in
Section 2.2(f).
"Transition Services Agreement" shall mean a transition services
agreement between the appropriate Metatec Companies and Imation Companies and
their respective Affiliates to be dated the Closing Date, which agreement shall
include, amongst other terms and conditions, the terms and conditions consistent
with those set forth on Schedule 1.1(b).
"Vehicles" shall have the meaning provided in Section 2.1(b).
"Working Capital Assets" shall mean the sum of the book values (as
determined in accordance with U.S. generally accepted accounting principles
consistently applied pursuant to the historical accounting practices of the
Imation Companies except for packaging, factory supplies, factory spare parts
and raw materials that are transferred on the Closing Date which will be valued
based upon actual quantities on hand and the actual or estimated purchase price
thereof as of the Closing Date, and except as otherwise provided below) of the
following Purchased Assets as of the close of business on the day prior to the
Closing Date (as shown on the Closing Date Working Capital Statement): Accounts
Receivable (not net of any reserve for doubtful accounts); prepaid expenses
which will benefit Purchasers following the Closing in the ordinary course of
the operation of the Business; deposits, to the extent useable by Purchasers
following the Closing in the ordinary course of Business; and Inventory (to the
extent usable in the operation of the Business in the ordinary course).
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1.2 Interpretation. The headings preceding the text of Articles and
Sections included in this Agreement and the headings to Schedules attached to
this Agreement are for convenience only and shall not be deemed part of this
Agreement or be given any effect in interpreting this Agreement. The use of the
masculine, feminine or neuter gender or the singular or plural form of words
herein shall not limit any provision of this Agreement.
ARTICLE II
SALE AND PURCHASE OF ASSETS;
ASSUMPTION OF ASSUMED OBLIGATIONS
2.1 Purchased Assets. Subject to the terms and conditions of this
Agreement, at and as of the Closing, the Imation Companies shall sell, assign,
convey, transfer and deliver to Purchasers all of the Imation Companies' right,
title and interest in and to, and Purchasers shall purchase, acquire and take
assignment and delivery of all of the Imation Companies' right, title and
interest in and to, the following assets, but in each case excluding the
Excluded Assets:
(a) Equipment. All machinery, equipment, fixed assets,
furniture, tools, spare parts, mastering equipment, manufacturing
machinery and equipment, production machinery and equipment, fulfilment
and distribution machinery and equipment, maintenance equipment,
monitoring and test equipment, materials, computers, printers, servers
and other items of personal property of every kind and description that
are (i) located at the Menomonie Facility and used or held for use
exclusively in, or related exclusively to, or material to, the
Business, (ii) located at the Fremont Facility or (iii) located at the
Breda Facility, together with (x) the DVD-ROM equipment located at the
Facilities and (y) the leasehold improvements owned by the Imation
Companies located at the Fremont Facility and the Breda Facility, but
excluding in all cases the Vehicles and Inventory, and including
without limitation the Equipment set forth on Schedule 2.1(a)
(collectively, the "Equipment");
(b) Vehicles. All automobiles, service trucks, delivery
trucks, tractors, trailers and other vehicles that are (i) located at
the Menomonie Facility and used or held for use exclusively in, or
related exclusively to, or material to, the Business, (ii) located at
the Fremont Facility or (iii) located at the Breda Facility
(collectively, the "Vehicles"), including, without limitation, the
Vehicles set forth on Schedule 2.1(b);
(c) Inventory. All (i) raw materials, factory spare parts and
factory supplies inventories located at the Fremont Facility and the
Breda Facility (provided that factory spare parts located at the Breda
Facility shall not exceed $100,000 in value), (ii) raw materials
inventories located at the Menomonie Facility that are used or held for
use exclusively in, or related exclusively to, or material to, the
Business, (iii) customer specific packaging inventories located at the
Fremont Facility and the Breda Facility having usage in the six month
period immediately preceding the Closing Date, (iv) customer specific
packaging
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inventories having usage in the six month period immediately preceding
the Closing Date that are located at the Menomonie Facility and that
are used or held for use exclusively in, or related exclusively to, or
material to, the Business, (v) finished goods and packaging inventories
identified as active with customers that are located at the Fremont
Facility and the Breda Facility and (vi) finished goods and packaging
inventories identified as active with customers that are located at the
Menomonie Facility and that are used or held for use exclusively in, or
related exclusively to, or material to, the Business, including in all
such cases, to the extent not inconsistent with the foregoing
subparagraphs (i)-(vi), the inventory set forth in the computer disk or
other electronic media delivered to Purchasers on the date of this
Agreement (collectively, the "Inventory").
(d) Information and Records. Copies or originals of the
following papers and records in the care, custody or control of the
Imation Companies that are used or held for use exclusively in, or
related exclusively to, or material to, the Business (other than
Intellectual Property, Tax and labor relations records): books,
records, files, databases, plans, specifications, technical
information, confidential information (to the extent permitted),
operating manuals, computer hardware documentation (which documentation
is in the possession of the Imation Companies), copies of business
plans and reports, price lists, supplier lists, promotional materials,
advertising copy and data, marketing research and information,
competitive analyses, sales records, service records, customer lists
and files, other customer information, plans and designs of fixtures
and equipment, monitoring and test records and all other proprietary
information, including financial and accounting records, work papers
and files, personnel records and employee benefits and compensation
plans and records exclusively involving Affected Employees and all
other such files, papers and records which are used or held for use
exclusively in or related exclusively to, or material to, the operation
of the Business (collectively, the "Information and Records");
(e) Other Intangibles. All customer relationships and
goodwill, if any, used exclusively in, related exclusively to, or
arising solely in conjunction with, the Business;
(f) Accounts Receivable. All Accounts Receivable;
(g) Computer Software. All computer software (including,
without limitation, source code) and all related programming, user and
systems documentation (which documentation is in the possession of the
Imation Companies) owned by the Imation Companies that relates
exclusively to the Assets or is used or held for use exclusively in, or
relates exclusively to, the Business (the "Owned Software"); and
(h) Other Assets. All of the following other assets of the
Imation Companies that are used or held for use exclusively in the
Business: prepaid expenses and lease, utility and similar deposits of
the Imation Companies, and any and all other deposits, prepayments,
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guaranties, letters of credit, bonds, claims and rights of or for the
benefit of the Imation Companies that are used or held for use
exclusively in, or related solely to, the Business.
All of the foregoing assets described in this Section 2.1, together with the
Purchased Contracts and Permits, are referred to herein collectively as the
"Purchased Assets."
2.2 Assignment of Contracts and Permits. Subject to the terms and
conditions of this Agreement, at and as of the Closing Date, the Imation
Companies shall assign and transfer to Purchasers all of the Imation Companies'
right, title and interest in and to, and Purchasers shall take assignment of,
(i) all of the Contracts (including, without limitation, portions of customer
contracts, purchase orders and other Contracts for the sale or provision by the
Imation Companies of goods and/or services) to which any Imation Company is a
party which relate solely to the Business and which are assignable and (ii) all
of the Permits of the Imation Companies which relate solely to the Business and
which are transferable, including the following:
(a) Real Property Leases. All rights and claims under leases
and subleases of real property and improvements listed on Schedule
2.2(a), together with all easements, rights-of-way and other
appurtenant rights and privileges relating thereto (collectively, the
"Real Property Leases");
(b) Personal Property Leases. All rights and claims under the
leases of equipment, vehicles or other tangible personal property that
are (i) used at the Menomonie Facility and relate exclusively to or are
material to the Business, (ii) used at the Fremont Facility or (iii)
used at the Breda Facility (collectively, the "Personal Property
Leases"), including, without limitation, the Personal Property Leases
set forth on Schedule 2.2(b);
(c) Customer Contracts. All customer contracts, purchase
orders and other Contracts for the sale or provision by the Imation
Companies of goods and/or services or pursuant to which the Imation
Companies are granted any franchise or license to provide goods and/or
services that relate exclusively to the Business (collectively, the
"Customer Contracts");
(d) Purchase Contracts. All purchase and sales orders,
quotations, executory commitments and other Contracts for the purchase
by the Imation Companies of goods, materials and/or services that
relate exclusively to the Business;
(e) Other Contracts. All other Contracts of the Imation
Companies that relate exclusively to the Business including, without
limitation, the Licensed Software listed on Schedule 2.2(e)
(collectively, the "Other Contracts");
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(f) Telephone Numbers. All of Sellers' telephone numbers used
at the Fremont Facility, the Breda Facility and Sellers' toll-free
telephone number used at the Menomonie Facility; and
(g) Transferred Permits. All Permits that relate solely to the
Business and which are transferable (collectively, the "Transferred
Permits"), including, without limitation, the Transferred Permits set
forth on Schedule 2.2(g).
All of the foregoing are referred to herein collectively as the "Purchased
Contracts and Permits." Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Contract or Permit or any claim or right or any benefit or obligation thereunder
or resulting therefrom if an assignment thereof, without the consent of a third
party thereto, would constitute a breach or violation thereof and if such a
consent is not obtained at or prior to the Closing.
If a consent to the assignment of a Contract or Permit related to the
Business is not obtained prior to the Closing or if an attempted assignment of a
Contract or Permit related to the Business is ineffective for any other reason,
the Imation Companies will use commercially reasonable efforts to attempt to
obtain such consent or otherwise procure an effective assignment of such
Contract or Permit and, pending the obtaining of such consent or the procurement
of such assignment, the Imation Companies and the Metatec Companies will discuss
the desirability and feasibility of implementing an arrangement to provide for
Purchasers the benefits and obligations under any such Contracts or Permits on
terms mutually satisfactory to the parties. If, with respect to any such
Contract or Permit that the parties agree to assign or effectively assign to a
Purchaser, the consent to assignment is obtained or an effective assignment can
otherwise be made following the Closing on mutually satisfactory terms, the
appropriate Imation Company shall promptly assign to the appropriate Purchaser,
all of its right, title and interest in and to such Contract or Permit and such
Purchaser shall assume the liabilities and obligations of such Imation Company
under such Contract or Permit pursuant to a transfer instrument substantially
similar in form and substance to the transfer instrument used for the assignment
of similar Contracts or Permits related to the Business at the Closing.
Purchasers acknowledge that all or some of the Permits used by the
Imation Companies in the Business may not be transferable, however, the Imation
Companies shall use all commercially reasonable efforts to have all transferable
Permits transferred.
2.3 Excluded Assets. Notwithstanding the terms of Sections 2.1 and 2.2,
the following assets of the Imation Companies shall be retained by the Imation
Companies, are not being sold, assigned, transferred or conveyed to Purchasers
hereunder and do not constitute Purchased Assets (all of the following are
referred to herein collectively as the "Excluded Assets"):
(a) Cash. All Cash, marketable securities and bank accounts;
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(b) Excluded Contracts. All loan agreements and credit
facilities and related agreements of the Imation Companies with banks,
financial institutions or other lenders, all Contracts of the Imation
Companies with Minnesota Mining and Manufacturing Corporation (except
for Contracts for the supply of raw materials or the purchase of CD-ROM
services in the ordinary course of the Business) and all other
Contracts of the Imation Companies listed on Schedule 2.3(b)
(collectively, the "Excluded Contracts") and any rights thereunder,
including the right to receive any payments thereunder;
(c) Employee Assets. Except as otherwise provided in the
International Asset Transfer Agreement, all assets of any Benefit
Plans, Contracts between the Imation Companies and their respective
employees, arrangements and other plans;
(d) Originals. Except to the extent originals are provided in
accordance with Section 2.1(d), originals of the Imation Companies'
financial records and files, personnel records and employee benefits
and compensation plans and records, in whatever form or media embodied,
other than those originals or copies of such documents required to be
delivered by the Imation Companies pursuant to Section 11.2(b);
(e) Intellectual Property. Except for the Owned Software and
except to the extent the Licensed Software and Intellectual Property is
licensed pursuant to the License Agreement, all Intellectual Property
owned by or licensed to any Imation Company;
(f) Insurance Policies. Any insurance policies and claims and
rights to insurance proceeds and awards;
(g) Securities. All securities, including, without limitation,
all of the shares of issued and outstanding capital stock of Imation,
Enterprises and International;
(h) Excluded Receivables. The Accounts Receivable relating to
(i) secure contracts with Governmental Authorities, (ii) the sale of
blank recordable media (data products) and (iii) sales to or between
the Imation Companies and their Affiliates (the "Excluded
Receivables");
(i) Excluded Accounts. All rights, goodwill or opportunities
with respect to accounts and business opportunities with (i)
Governmental Authorities covered by secure contract and (ii) the
Imation Companies and their Affiliates (collectively, the "Excluded
Accounts") and all Customer Contracts, receivables and other documents
relating thereto;
(j) Excluded Businesses. Any assets, properties and rights of
the Imation Companies relating exclusively to or used exclusively in
any business of the Imation Companies other than the Business,
including, without limitation, all of the Imation Companies' right,
title and interest in and to the video disk business of the Imation
Companies;
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(k) Related Agreements. This Agreement and the agreements,
documents and instruments contemplated herein;
(l) Tax Refunds. Any claim for Tax refunds with respect to any
Tax return of any Imation Company;
(m) Duty Drawback. All rights of the Imation Companies with
respect to claims for duty drawback, as provided in 19 U.S.C. section
1313, as amended, on merchandise exported, returned or destroyed by the
Imation Companies prior to the Closing Date;
(n) Other Excluded Assets. The assets listed on
Schedule 2.3(n); and
(o) Excluded Inventory. All factory spare parts and factory
supplies inventories located at the Menomonie Facility, and all
packaging and other inventory not specifically described in
Section 2.1(c).
2.4 Assumed Obligations. At the Closing, Purchasers shall assume, and
agree to pay, perform, fulfill and discharge, the following obligations of the
Imation Companies (the "Assumed Obligations"):
(a) Contract Obligations. The obligations of the Imation
Companies which are required to be performed and which accrue after the
Closing Date under the Purchased Contracts and Permits, to the extent
such Contracts and Permits, and all rights of the Imation Companies
thereunder, are effectively assigned to Purchasers on the Closing Date
or thereafter pursuant to Section 2.2;
(b) Current Liabilities. All liabilities of the Imation
Companies relating exclusively to the Business that are classified as
current liabilities (other than accounts payable) in accordance with
GAAP and which were incurred in the ordinary course of business, for
which an Imation Company received goods or services and which are
listed specifically in the Closing Date Working Capital Statement; and
(c) International Obligations. The obligations of any Imation
Company specifically assumed by any Metatec Company pursuant to the
International Asset Transfer Agreement.
2.5 No Other Liabilities Assumed. Except as expressly set forth in
Sections 2.4 and 7.9 of this Agreement or in the International Asset Transfer
Agreement, no Metatec Company nor any Affiliates of the Metatec Companies shall
assume or in any way be liable or responsible for, any
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claims, liabilities, obligations or debts of the Imation Companies or any of
their Affiliates, including without limitation, the following claims,
liabilities, obligations, or debts of the Imation Companies and their Affiliates
(collectively, "Excluded Obligations"):
(a) indebtedness and other obligations or guarantees of the
Imation Companies, including without limitation, current liabilities of
the Imation Companies (other than Assumed Obligations) or short-term
and long-term indebtedness;
(b) federal, state or local tax liabilities or obligations of
the Imation Companies relating to the operations of the Imation
Companies prior to the Closing or arising or accruing prior to the
Closing or resulting from the consummation of the transactions
contemplated herein, including, without limitation, any income tax, any
franchise tax, and tax recapture, any sales/or use tax, any state and
local recording fees and taxes and any FICA, FUTA, workers'
compensation and, any and all other taxes or amounts due and payable as
a result of the exercise by any of the Imation Companies' employees of
such employees' right to vacation, sick leave and holiday benefits
accrued while in the employ of the Imation Companies.
(c) liability for any and all claims by or on behalf of the
Imation Companies employees, any other individual, entity, governmental
agency or employee plan, including, without limitation, for or related
to any pension, profit sharing, deferred compensation, disability, or
any other employee health and welfare benefit plans or any other
arrangement providing for insurance coverage, liability for any EEOC
claim, wage and hour claim, unemployment compensation claim or workers'
compensation claim or other liability, and liability for all employee
wages and benefits, including accrued vacation, sick leave and holiday
pay and taxes or other liability related thereto in respect of the
Imation Companies' employees;
(d) liabilities or obligations relating to any Contract;
(e) any liability arising out of or in connection with claims
for alleged acts or omissions relating to the ownership or operation of
the Assets which occurred prior to the Closing;
(f) any liability for any environmental claims or claims
associated with or arising under any Environmental Laws relating to
periods prior to or as of the Closing whether or not discovered or
known prior to Closing;
(g) any debt, obligation, expense or liability of the Imation
Companies arising out of or incurred as a result of any transaction or
activity of the Imation Companies occurring after the Closing or for
any violation by the Imation Companies of any Law at any time;
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(h) any account payable attributable to legal or accounting
fees or similar expenses incurred by the Imation Companies;
(i) any warranty liabilities or products liability of the
Imation Companies with respect to any products or merchandise of the
Business manufactured or sold or services provided prior to the
Closing;
(j) any liability of the Imation Companies for injury to or
death of person or damage to or destruction of property which occurred
prior to Closing, regardless of when said claim or liability is
asserted;
(k) any liabilities of the Imation Companies arising out of
infringement of the intellectual property right of any Person which
occurred prior to the Closing;
(l) any liabilities not reflected on the Closing Date Working
Capital Statement;
(m) any liabilities relating to the Excluded Assets; and
(n) any liability for compensation paid or payable to any
employee of the Imation Companies except to the extent such liability
is accrued on the Working Capital Statement.
ARTICLE III
PURCHASE PRICE AND PAYMENT
3.1 Payment of Purchase Price. On the Closing Date, in consideration
for the sale of the Purchased Assets by the Imation Companies, Purchasers shall
(a) assume the Assumed Obligations, and (b) pay an aggregate purchase price (the
"Purchase Price") of $39,800,000 as follows: (i) (A) Metatec Acquisition shall
pay to Sellers $30,400,000, (B) less or plus the net amount of prorations owing
to or payable by Purchasers pursuant to Section 3.3 (to the extent ascertainable
on or prior to the Closing Date), and (C) less the principal amount of the Note,
payable to Sellers by electronic transfer to such account or accounts as Sellers
shall specify to Purchasers prior to the Closing Date, (ii) the Metatec
Companies shall execute and deliver the Note (having a principal amount of
$2,800,000) to the Imation Companies and (iii) Metatec International shall pay
to International the amount specified in Section 2.2 of the International Asset
Transfer Agreement, payable to International as provided in the International
Asset Transfer Agreement.
3.2 Adjustment to Purchase Price.
(a) As soon as practicable, but within 60 days after the
Closing Date, the Imation Companies and Sellers' Accountants shall prepare and
deliver to Purchasers a pro forma net working capital statement (the "Closing
Date Working Capital Statement") as at the close of business on the day prior to
the Closing Date, setting forth the Net Working Capital as at such date. In
connection
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with the preparation of the Closing Date Working Capital Statement, the Imation
Companies and Sellers' Accountants shall take a physical inventory of all of the
Inventory as of the close of business on the day prior to the Closing Date, and
Purchasers and Purchasers' Accountants shall be entitled to observe such
physical inventory at each location at which it is conducted.
(b) Upon receipt of the Closing Date Working Capital
Statement, Purchasers and Purchasers' Accountants shall have a period of 60 days
to review such Closing Date Working Capital Statement and propose any
adjustments thereto. All adjustments proposed by Purchasers shall be set out in
a written statement delivered to the Imation Companies and shall be incorporated
into the Closing Date Working Capital Statement unless the Imation Companies
shall object in writing to such proposed adjustments within 30 days of delivery
by Purchasers to the Imation Companies of such proposed adjustments. If the
Imation Companies do object in writing within 30 days to any such proposed
adjustment (the proposed adjustment or adjustments to which the Imation
Companies object are referred to herein as the "Contested Adjustments"), the
Imation Companies and Purchasers shall use reasonable efforts to resolve their
dispute regarding the Contested Adjustments, but if a final resolution thereof
is not obtained within 15 days after the Imation Companies deliver to Purchasers
the Imation Companies' written objection to the Contested Adjustments, the
Imation Companies and Purchasers shall promptly retain Arthur Andersen LLP or
another nationally recognized independent accounting firm acceptable to both the
Imation Companies and Purchasers (the "Independent Accountants") to resolve any
remaining disputes concerning the Contested Adjustments to the Closing Date
Working Capital Statement. Either the Imation Companies or Purchasers may retain
the Independent Accountants on behalf of the Imation Companies and Purchasers
upon the expiration of such 15-day period, except that if the Independent
Accountants are other than Arthur Andersen LLP, the written agreement of the
Imation Companies and Purchasers shall be required to retain the Independent
Accountants. If Independent Accountants are retained, then (i) the Imation
Companies and Purchasers shall each submit to the Independent Accountants in
writing within 15 days after the Independent Accountants are retained their
respective proposals with respect to the Contested Adjustments, together with
such supporting documentation as they deem necessary or as the Independent
Accountants request (provided that if any documentation requested by the
Independent Accountants cannot be obtained by the Imation Companies or
Purchasers within such 15-day period (acting in good faith and in a diligent
manner), then such 15-day period shall be extended for such period of time as is
reasonably necessary for such information to be obtained), (ii) the Independent
Accountants shall select, within 30 days after receiving the proposals of both
the Imation Companies and Purchasers and all supplementary supporting
documentation requested by the Independent Accountants, either the Imation
Companies' or Purchasers' proposal, but not a different proposal, with respect
to the Contested Adjustments, which selection shall be final and binding on the
Imation Companies and Purchasers, and (iii) the fees and expenses of the
Independent Accountants shall be borne by the party whose proposal with respect
to the Contested Adjustments is not selected.
(c) Within five Business Days after the Closing Date Working
Capital Statement has become final and binding upon the Imation Companies and
Purchasers pursuant to Section
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3.2(b), the Purchase Price shall be adjusted as follows: (i) if, based on the
Closing Date Working Capital Statement, there is a Closing Date Deficiency, then
the Imation Companies shall pay to Purchasers the amount of the Closing Date
Deficiency; and (ii) if, based on the Closing Date Working Capital Statement,
there is a Closing Date Excess, Purchasers shall pay to the Imation Companies
the amount of such Closing Date Excess. If, based on the Closing Date Working
Capital Statement, there is neither a Closing Date Deficiency nor a Closing Date
Excess, the Purchase Price shall not be adjusted pursuant to this Section 3.2.
Any amounts payable under this Section 3.2(c) shall be made by electronic
transfer of immediately available funds to such account or accounts as the party
being paid shall specify to the paying party.
(d) Any adjustment to the Purchase Price made pursuant to this
Section 3.2 shall be appropriately allocated between that portion of the
Purchase Price payable to the Sellers and the portion of the Purchase Price
payable to International consistent with the allocation schedule referred to in
Section 3.4.
3.3 Prorations. The Imation Companies and the Purchasers agree that all
of the items listed below relating to the Business and the Purchased Assets will
be prorated as of the Closing Date to the extent that such items are not
otherwise covered in the Closing Date Working Capital Statement, with the
Imation Companies liable to the extent such items relate to any time period up
to (and including) the Closing Date and the Purchasers liable to the extent such
items relate to periods subsequent to the Closing Date.
(a) Personal property, real estate, occupancy and other Taxes,
if any, payable by the Imation Companies with respect to the Purchased Assets;
(b) Rents, Taxes, royalties and other items which in any case
are payable periodically by or to the Imation Companies under any of the Real
Property Leases or Personal Property Leases;
(c) The amount of any fees and charges which in any case are
payable periodically by the Imation Companies pursuant to any Contracts;
(d) The amount of any fees and charges which in any case are
payable periodically to the Imation Companies pursuant to any Contracts;
(e) The amount of any fees or charges which in any case are
payable to or by the Imation Companies periodically with respect to any of the
Transferred Permits; and
(f) The amount of sewer rents and charges for water,
electricity and other utilities and fuel.
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The Imation Companies agree to furnish the Purchasers with such documents and
other records as are reasonably necessary in order to confirm all adjustment and
proration calculations made pursuant to this Section 3.3. Final payments with
respect to prorations contemplated by this Section 3.3 that are not
ascertainable on or before the Closing Date shall be settled between the parties
as soon as practicable after they are ascertainable.
3.4 Allocation of Consideration. The Purchase Price for the Purchased
Assets shall be allocated among the Purchased Assets in accordance with Section
1060 of the Code and pursuant to a schedule jointly prepared and mutually agreed
upon by the Imation Companies and the Purchasers. A preliminary Purchase Price
allocation is set forth on Schedule 3.4 and the final Purchase Price allocation
shall be substantially consistent with Schedule 3.4. The Imation Companies and
the Purchasers shall exercise all reasonable good faith efforts to agree upon
such final allocation as soon as reasonably practicable after the Closing, and
in any event within 120 days after the Closing Date. The Purchasers and the
Imation Companies shall not take any position inconsistent with such allocation
in connection with their respective federal, state, or local Tax Returns and
other filings (including without limitation Internal Revenue Service Form 8594).
Any adjustment to the Purchase Price shall be allocated as provided in Temp.
Treas. Reg. Section 1.1060-1T(f).
3.5 Reassignment of Certain Accounts Receivable. Beginning on the date
that is 60 calendar days after the Closing Date, the Purchasers shall be
entitled to reassign and transfer to the Imation Companies any Account
Receivable that has not been collected in full within 90 days after such Account
Receivable arose and the Imation Companies shall be required to accept any such
uncollected Account Receivable which has been so reassigned and transferred;
provided, however, that no particular Account Receivable may be so reassigned
and transferred if (a) the Purchasers have not used commercially reasonable
efforts to collect such Account Receivable, (b) the obligor on such Account
Receivable has refused to pay such Account Receivable due to any disagreement
between such obligor and Purchasers regarding the failure of Purchasers to
perform their obligation to the obligor or (c) during the first 90 calendar days
after the Closing Date the Purchasers have not followed substantially the same
credit and collection policies as the Imation Companies applied to such Account
Receivable immediately prior to the Closing Date. In the event the Purchasers
reassign and transfer any such uncollected Account Receivable, the Imation
Companies shall pay to the Purchasers an amount equal to the aggregate amount of
such uncollected Account Receivable concurrently with such reassignment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE IMATION COMPANIES
The Imation Companies, jointly and severally, represent and warrant to
the Metatec Companies, as of the date of this Agreement (unless otherwise
specified), as follows:
4.1 Due Incorporation. Each of Imation and Enterprises is a corporation
duly organized, validly existing and in good standing under the Laws of the
State of Delaware, with all requisite corporate power and authority to own,
lease and operate its properties and to carry on the Business
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as they are now owned, leased and operated. International is a corporation
organized under the Laws of The Netherlands, with all requisite corporate power
and authority to own, lease and operate its properties and to carry on the
Business as they are now owned, leased and operated. Each of Imation and
Enterprises is licensed or qualified to do business and is in good standing as a
foreign corporation in each jurisdiction where the nature of the properties
owned, leased or operated by it and the businesses transacted by it require such
licensing and qualification, except where the failure to be so licensed,
qualified or in good standing would not result in a Material Adverse Effect.
4.2 Due Authorization. Each of Imation and Enterprises has full
corporate power and authority to execute, deliver and perform this Agreement and
its Related Agreements and to consummate the transactions contemplated hereby
and thereby. International has full power and authority to execute, deliver and
perform this Agreement, the International Asset Transfer Agreement and its
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by each of the Imation
Companies of this Agreement, and by the applicable Imation Company of each of
the Related Agreements, and the consummation by each of the Imation Companies of
the transactions contemplated hereby and thereby, have been duly and validly
approved by the board of directors of each of the Imation Companies, as
applicable, and, to the extent required by applicable Law, by all stockholders
of the Imation Companies entitled to vote thereon, and no other actions or
proceedings on the part of any Imation Company are necessary to authorize the
execution, delivery and performance by any of the Imation Companies of this
Agreement or by any Imation Company of its Related Agreements, or the
transactions contemplated hereby and thereby. Each of the Imation Companies has
duly and validly executed and delivered this Agreement and each of the Imation
Companies has duly and validly executed and delivered (or prior to or at the
Closing will duly and validly execute and deliver) its Related Agreements. This
Agreement constitutes the legal, valid and binding obligation of each of the
Imation Companies, and the Related Agreements, upon execution and delivery by
the applicable Imation Companies, will constitute legal, valid and binding
obligations of each such Imation Company, in each case enforceable in accordance
with their respective terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally, by equitable
limitations on the availability of specific remedies and by principles of
equity.
4.3 No Conflicts. Except as set forth on Schedule 4.3, and except as
would not result in a Material Adverse Effect, the execution, delivery and
performance by the Imation Companies of this Agreement and of their Related
Agreements and the consummation by the Imation Companies of the transactions
contemplated hereby and thereby do not and will not (i) violate any Law
applicable to the Imation Companies or any of the Purchased Assets; (ii) violate
or conflict with, result in a breach or termination of, constitute a default
under, accelerate the performance required by or give any third-party any
additional right (including a termination right) under, permit the cancellation
of, result in the creation of any Lien upon any of the Purchased Assets under,
or result in or constitute a circumstance which, with or without notice or lapse
of time or both, would constitute any of the foregoing under any Contract
relating to the Business to which any Imation
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Company is a party or by which any of the Imation Companies or any of the
Purchased Assets are bound; (iii) permit the acceleration of the maturity of any
indebtedness of any of the Imation Companies related to the Business or
indebtedness secured by any of the Purchased Assets; or (iv) violate, conflict
with or result in a breach of, any provision of the certificate of incorporation
or bylaws or similar organizational instruments of any Imation Company.
4.4 Financial Statements. Attached hereto as Schedule 4.4 are copies of
the Business Financial Statements. The Business Financial Statements fairly
present the financial position of the Business in all material respects as of
the dates thereof and the results of the operation of the Business for the
periods covered thereby.
4.5 Title to Properties. Except as set forth on Schedule 4.5, the
Imation Companies have good and valid title to all of the Purchased Assets and
have the right to sell, convey, transfer, assign and deliver the Purchased
Assets as contemplated by this Agreement (provided that no representation or
warranty is being made as to the effectiveness of any arrangement to convey the
benefits and burdens of any Contract as contemplated pursuant to Section 2.2).
Except as set forth on Schedule 4.5, none of the Purchased Assets is subject to
any Lien. At the Closing, the Imation Companies will convey the Purchased Assets
to the Metatec Companies free and clear of all Liens.
Except as set forth on Schedule 4.5, all of the Purchased Assets have
been properly maintained consistent with the past practices of the Imation
Companies and are reasonably suitable for the purpose or purposes for which they
are being used by the Imation Companies (including full compliance with all
applicable Laws). Except as set forth on Schedule 4.5 and excluding the
Menomonie Facility, to the knowledge of the Imation Companies there are no
material structural defects in the exterior walls or the interior bearing walls,
the foundation or the roof of any building, garage or other such structure
leased or used by any of the Imation Companies in connection with the Business,
and the electrical, plumbing, heating systems and air conditioning systems of
any such structures are in good operating condition, ordinary wear and tear
excepted. To the knowledge of the Imation Companies, (a) the utilities servicing
any such real properties are adequate to permit the continued operation of the
Business by the Imation Companies, and (b) there are no pending or threatened
zoning, condemnation or eminent domain proceedings, building, utility or other
moratoria, or injunctions or court orders which would have a Material Adverse
Effect. Schedule 4.5 lists, and the Imation Companies have furnished or made
available to Purchasers, copies of all engineering, geologic, and environmental
reports prepared by or for the Imation Companies and in their possession with
respect to such real properties.
4.6 Undisclosed Liabilities. Except for any liability or obligation
that would not result in a Material Adverse Effect, and except for any liability
or obligation relating to duty drawbacks, there is no liability or obligation of
any nature relating in any way to the Business (whether liquidated,
unliquidated, accrued, absolute, contingent or otherwise and whether due or to
become due) other than:
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(a) Those liabilities or obligations set forth or reflected in
the Business Financial Statements which have not been paid or
discharged since the date thereof;
(b) Current liabilities (determined in accordance with GAAP)
incurred since the date of the most recent balance sheet contained in
the Business Financial Statements and arising in the ordinary course of
business consistent with past practices which are properly reflected on
their books; and
(c) Those liabilities or obligations arising from and after
the date of this Agreement under the Purchased Contracts and Permits
and the Excluded Contracts.
4.7 Absence of Certain Changes. Except as set forth on Schedule 4.7,
since the date of the most recent balance sheet contained in the Business
Financial Statements, there has not been:
(a) Any Material Adverse Change;
(b) Any transaction entered into or carried out by any of the
Imation Companies other than in the ordinary course of business
consistent with past practices;
(c) Any material change by any of the Imation Companies in the
method of doing business with respect to the Business or any material
change in the accounting principles or practices utilized by the
Imation Companies with respect to the Business or in the method of
application of such principles or practices;
(d) Any sale, lease or other disposition of, or any agreement
to sell, lease or otherwise dispose of any of the properties or assets
which are part of the Assets of the Business owned by any Imation
Company, other than in the ordinary course of business consistent with
past practices;
(e) Unless previously approved by Purchasers as herein
provided, any purchase of, or any agreement to purchase, any capital
assets or any lease or any agreement to lease, as lessee, any capital
assets in connection with the Business; or
(f) Any material modification, waiver, change, amendment,
release, rescission or termination of, or accord and satisfaction with
respect to, any material term, condition or provision of any assumed
contract obligation under Section 2.4(a), other than any satisfaction
by performance in accordance with the terms thereof in the ordinary
course of business.
4.8 Consents and Approvals. Except as would not result in a Material
Adverse Effect, and except with respect to HSR Act filings, and except with
respect to any purchase orders accepted in the ordinary course of the Business
and except as set forth on Schedule 4.8, no consent, authorization or approval
of, or filing or registration with, any Governmental Authority or any other
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Person not a party to this Agreement is necessary in connection with the
execution, delivery and performance by the Imation Companies of this Agreement
and their Related Agreements. The share of the Imation Companies of the CD-ROM
Services market in Belgium constitutes less than 25% of such market.
4.9 Contracts and Leases. Schedules 2.2(a), 2.2(b), 2.2(e) and 4.9
collectively list each Real Property Lease, each Personal Property Lease and all
other Contracts of the Imation Companies to be assigned to Purchasers in
accordance with this Agreement (other than (a) purchase orders or sales orders
made or accepted in the ordinary course of the Business and (b) Contracts made
in the ordinary course of the Business that are not material to the Business).
All rents and other amounts currently due and payable by the Imation Companies
under such leases and Contracts have been paid. The Imation Companies have not
received any notice of Default under any of such leases which has not been
remedied or waived and which Default could result in a Material Adverse Effect.
If a Contract listed on Schedule 2.2(a) is an oral arrangement, Schedule 2.2(a)
also contains a description of the material terms of such arrangement. Originals
or copies of the written Contracts assigned to Purchasers in accordance with
this Agreement have been provided or will be provided to the Metatec Companies
prior to or at Closing.
4.10 Inventory. Schedule 2.1(c) sets forth a list of the Inventory as
of the date of this Agreement. Except as set forth on Schedule 4.10, the
Inventory is, in all material respects, usable in the ordinary course of the
Business and (a) the Inventory has been priced at the lower of cost or market,
standard costs that approximate the FIFO method for raw materials and the
average cost method for work in process, all applied on a consistent basis, and
(b) each item of Inventory which has been purchased (as opposed to manufactured)
has been purchased by the Imation Companies directly from the manufacturer
thereof or from any authorized distributor of such items in full compliance with
applicable Law and any policy of, and any agreement with, such manufacturer or
distributor. None of the Inventory has been pledged or otherwise given as
collateral, or is held by the Imation Companies on assignment or consignment.
4.11 Accounts Receivable. Schedule 2.1(f) sets forth a list of the
Accounts Receivable as of the date set forth on such schedule. Except as set
forth on Schedule 4.11, each existing Account Receivable represents and each
Account Receivable arising between the date of this Agreement and the Closing
Date will represent a sale made in the ordinary course of the Business. The
applicable Imation Company has (or will have by the Closing Date) performed all
of its obligations to produce the goods or perform the services to which each
such Account Receivable relates.
4.12 Permits. Each of the Permits relating to the Business is currently
valid and in full force, except where the failure to maintain such Permits valid
and in full force would not result in a Material Adverse Effect. With respect to
the Business, each of the Imation Companies possesses, is not in violation of
and is not subject to any suspension, adverse modification, revocation or
adverse proceeding with respect to, any Permit which is necessary or material
for such Imation
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Company to engage in the Business as currently conducted, other than such
Permits the failure of which to possess, or the suspension, modification or
revocation of which, would not result in a Material Adverse Effect. There is no
pending or, to the knowledge of the Imation Companies, threatened proceeding
which would result in the revocation, cancellation or inability to renew any
material Permit. All Permits which relate solely to the Business and which are
transferable are listed on Schedule 2.2(g).
4.13 Employee Benefit Plans and Employment Agreements. Descriptions of
all "employee welfare benefit plans" or "employee pension benefit plans" as
those terms are respectively defined in sections 3(1) and 3(2) of ERISA, and all
retirement or deferred compensation plans, incentive compensation plans, stock
plans, unemployment compensation plans, vacation pay, severance pay, bonus or
benefit arrangements, insurance or hospitalization programs or any other fringe
benefit arrangements (whether pursuant to Contract, arrangement, custom or
informal understanding) which do not constitute "employee benefit plans" (as
defined in section 3(3) of ERISA) and all employment agreements, covering any
Affected Employee of Sellers have been supplied to the Metatec Companies.
4.14 Employment and Labor Matters. (a) Schedule 4.14(a) sets forth a
list, as of the date set forth on such schedule, of the names and titles of each
employee of the Sellers wholly or primarily dedicated to the Business and each
employee of the Sellers who devotes substantially all of his or her time to the
day-to-day operations of the Business and Schedule 4.14(c) sets forth a list, as
of the date set forth on such schedule, of the names and titles of each employee
of International wholly or primarily dedicated to the Business and each employee
of International who devotes substantially all of his or her time to the
day-to-day operations of the Business (the employees listed on Schedule 4.14(a)
and (c) together being the "Affected Employees"). Except as set forth on
Schedule 4.14(a) or Schedule 4.14(c), since December 31, 1997, there has been no
material change in compensation, by means of wages, salaries, bonuses,
gratuities or otherwise, to any Affected Employee or any material change in
compensation to Affected Employees for reimbursable business expenses, other
than changes made pursuant to the normal periodic salary review process of the
Imation Companies, and other than certain bonuses to be paid in connection with
the transactions contemplated by this Agreement. Except as set forth on Schedule
4.14(a) or Schedule 4.14(c), during the past two (2) years, there has been no
labor strike, dispute, slow-down, work stoppage, union organizing campaign,
unfair labor practice complaint or other labor difficulty actually pending or,
to the knowledge of the Imation Companies, threatened involving the Business
which had or would have a Material Adverse Effect on the Business. None of the
Affected Employees is covered by any collective bargaining agreement other than
the agreements listed on Schedule 4.14(a) or Schedule 4.14(c).
(b) Schedule 4.14(b) sets forth, as of the date set forth on such
schedule, a list of the names (other than names of employees (i) at the
Menomonie Facility and (ii) of Minnesota Mining and Manufacturing Company) and
titles of each individual not employed by the Imation Companies who, by contract
with the Imation Companies, (x) is wholly or primarily dedicated to the Business
or (y)
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devotes substantially all of his or her time to the day-to-day operations of the
Business (collectively, the "Contract Employees") and the annual compensation
payable to each such individual for the current fiscal year.
4.15 Taxes. The Imation Companies are not delinquent in the payment of
any Taxes, the failure of which to pay would result in a Lien on all or a
substantial part of the Purchased Assets or a liability to the Metatec
Companies, and the accrual for Taxes on the most recent balance sheet in the
Business Financial Statements is adequate to cover the corresponding liability
for accrued and unpaid Taxes.
4.16 Compliance with Laws. Except as may be disclosed in any Disclosure
Schedule hereto and except for failures to comply which would not result in a
Material Adverse Effect, the Business has been and is being conducted in
compliance with all applicable Laws (other than Environmental Laws, which are
covered in Section 4.17), including without limitation: (a) zoning, fire, safety
and building Laws; (b) Title VII of the Civil Rights Act of 1964, as amended;
(c) the Fair Labor Standards Act of 1938, as amended; (d) the Occupational
Safety and Health Act of 1970, as amended; (e) the Americans with Disabilities
Act of 1990; (f) Laws relating to employment; (g) Laws governing payment of
minimum wages and overtime rates and the withholding and payment of taxes from
compensation of employees; (h) applicable federal and state antitrust and trade
regulation Laws governing competition generally or governing agreements
restricting, allocating or otherwise affecting geographic or product markets;
(i) the Controlled Substances Act, as amended; and (j) the Foreign Corrupt
Practices Act of 1977, as amended.
4.17 Environmental Matters. Except as set forth on Schedule 4.17 or in
the environmental reports, if any, referenced therein:
(a) The Imation Companies have not used the real property
leased pursuant to the Real Property Leases (the "Leased Real
Property") or any part thereof or any personal property owned, leased
or used by the Imation Companies, for the generation, transportation,
treatment, storage, processing, handling or disposal of any Hazardous
Materials or any hazardous or toxic substance or waste in violation of
any Environmental Law. Except as set forth on Schedule 4.17, the
Imation Companies have not disposed, released or discharged any
hazardous or toxic substance or water on any real property owned,
leased or used by the Imation Companies in connection with the Business
in violation of any Environmental Law. To the knowledge of the Imation
Companies, there is no asbestos located in, or which is a part of, any
of the Assets that the Imation Companies are obligated to remove or
otherwise remediate pursuant to any applicable Environmental Laws, the
Occupational Safety and Health Act or any state equivalent or pursuant
to the provisions of any of the Real Property Leases. None of the
Imation Companies has been given notice that it may be obligated to so
remove or otherwise remediate any such asbestos. The Imation Companies
have not released into, stored or deposited, upon or below any real
property leased or otherwise used in the Business, or released directly
or indirectly into any surface or ground water systems
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on or below the surface of any real property used in the Business, or
in any structures located on any real property used in the Business,
any hazardous substance in violation of any Environmental Law. To the
knowledge of the Imation Companies, there is no condition of the
structures or fixtures of any real property described above in this
paragraph which is in violation of any Environmental Law, there are no
notices of violation and no pending or threatened investigations,
consensual or unilateral work orders, or plans for removal, remediation
or corrective action relating to such real property from or required by
any police or fire department, sanitation, environmental or health
authorities or from any other foreign, federal, state or municipal
authority.
(b) There is not now pending or, to the knowledge of the
Imation Companies, threatened any action, suit or proceeding before any
court or Governmental Authority alleging that the Leased Real Property
is in violation of any Environmental Law.
(c) The Imation Companies have obtained, kept current and
maintained compliance with the terms and conditions of all permits,
authorizations, registrations or other requirements imposed by any
applicable Environmental Law, including the filing of all reports that
may be required.
4.18 Litigation. Except as set forth on Schedule 4.18, there is no
legal, administrative or arbitration proceeding, suit or action of any nature
pending or, to the knowledge of the Imation Companies, threatened against (i)
any Imation Company, with respect to the Business, which involves claims against
such party exceeding $100,000 or (ii) any of the Imation Companies which
questions or challenges the validity of this Agreement or the International
Asset Transfer Agreement or any action taken or to be taken by the Imation
Companies pursuant to this Agreement or the International Asset Transfer
Agreement or any of the Imation Companies in connection with the transactions
contemplated hereby or thereby. Except for any disputes, conflicts or
circumstances that would not result in a Material Adverse Effect, there exists
no dispute, conflict or circumstance providing the basis for a dispute or
conflict which would result in material legal, administrative or arbitration
proceeding, suit or action. The Imation Companies are not subject to any
outstanding judgment, order, writ, injunction or decree which would result in a
Material Adverse Effect. Except as set forth in Schedule 4.18, there are no
pending or, to the knowledge of the Imation Companies, threatened disputes,
investigations or controversies between any Imation Company and any Governmental
Authority with respect to the Business that would result in a Material Adverse
Effect.
4.19 Brokers. Other than Greene Holcomb & Company LLC, the Imation
Companies have not used any broker or finder in connection with the transactions
contemplated hereby, and neither Purchasers nor any of their Affiliates has or
shall have any liability or otherwise suffer or incur any Loss as a result of or
in connection with any brokerage or finder's fee or other commission of any
Person retained by the Imation Companies in connection with any of the
transactions contemplated by this Agreement, the International Asset Transfer
Agreement or the Related Agreements.
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4.20 Certain Intellectual Property. That portion of the Imation
Companies' Intellectual Property to be licensed pursuant to the License
Agreement includes all of the intellectual property owned by the Imation
Companies which is necessary for the operation of the Business.
EXCEPT AS TO THOSE MATTERS EXPRESSLY COVERED BY THE REPRESENTATIONS AND
WARRANTIES BY THE IMATION COMPANIES IN THIS AGREEMENT, THE IMATION COMPANIES
EXPRESSLY DISCLAIM ALL REPRESENTATIONS AND WARRANTIES, WHETHER EXPRESSED OR
IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE.
The Imation Companies make no representation or warranty with respect
to any information concerning the Assets, the Business or the Imation Companies
not expressly represented or warranted to in this Agreement, including, without
limitation, except as otherwise expressly set forth in this Agreement (a) the
information set forth in the Confidential Memorandum distributed by Greene
Holcomb & Company LLC with respect to the Imation Companies and the Business or
(b) any financial projection or forecast relating to the Assets, the Business or
the Imation Companies. With respect to any such projection or forecast delivered
by or on behalf of the Imation Companies to any Metatec Company each of the
Metatec Companies acknowledges that (x) there are uncertainties inherent in such
projections and forecasts and (y) each of the Metatec Companies is familiar with
such uncertainties and takes full responsibility for making its own evaluation
of the adequacy and accuracy of all such projections and forecasts. None of the
Metatec Companies shall have any claim against the Imation Companies, and the
Imation Companies shall have no liability to the Metatec Companies with respect
to any such disclaimed information, including, without limitation, the
Confidential Information Memorandum or any financial projection or forecast
relating to the Assets, the Business or the Imation Companies.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE METATEC COMPANIES
The Metatec Companies, jointly and severally, represent and warrant to
the Imation Companies, as of the date of this Agreement, as follows:
5.1 Due Incorporation. Each of Metatec Acquisition and Metatec is a
corporation duly organized, validly existing and in good standing under the Laws
of the States of Ohio and Florida, respectively, with all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as they are now owned, leased and operated. Metatec International is a
corporation organized under the Laws of The Netherlands, with all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its businesses as they are now owned, leased and operated. Each of
Metatec Acquisition and Metatec is licensed or qualified to do business and is
in good standing as a foreign corporation in each jurisdiction where the nature
of the properties owned, leased or operated by it and the businesses transacted
by it require such licensing
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or qualification, except where the failure to be so licensed, qualified or in
good standing would not result in a material adverse effect on the business,
operations or condition (financial or otherwise) of the Metatec Companies taken
as a whole (a "Metatec Material Adverse Effect").
5.2 Due Authorization. Each of the Metatec Companies has full corporate
power and authority to execute, deliver and perform this Agreement and its
Related Agreements and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance by each of the Metatec
Companies of this Agreement and the execution, delivery and performance by each
of the Metatec Companies of its Related Agreements and the consummation by the
Metatec Companies of the transactions contemplated hereby and thereby have been
duly and validly approved by each of the Metatec Companies' board of directors
and, to the extent required by applicable Law, by all stockholders of the
Metatec Companies entitled to vote thereon, and no other actions or proceedings
on the part of the Metatec Companies are necessary to authorize the execution,
delivery and performance by each of the Metatec Companies of this Agreement, or
the execution, delivery and performance by each of the Metatec Companies of its
Related Agreements or the transactions contemplated hereby and thereby. Each of
the Metatec Companies has duly and validly executed and delivered this
Agreement, and each of Metatec Companies has duly and validly executed and
delivered (or prior to or at the Closing will duly and validly execute and
deliver) its Related Agreements. This Agreement constitutes legal, valid and
binding obligations of the Metatec Companies and the Related Agreements upon
execution and delivery by each of the Metatec Companies will constitute legal,
valid and binding obligations of the Metatec Companies, in each case enforceable
in accordance with their respective terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium, reorganization or
similar laws in effect which affect the enforcement of creditors' rights
generally, by equitable limitations on the availability of specific remedies and
by principles of equity.
5.3 Consents and Approvals; No Conflicts.
(a) Except as would not result in a Metatec Material Adverse
Effect and except with respect to HSR Act filings and consents identified on
Schedule 5.3(a), no consent, authorization or approval of, or filing or
registration with, any Governmental Authority or any other Person not a party to
this Agreement is necessary in connection with the execution, delivery and
performance of this Agreement and their Related Agreements by the Metatec
Companies; and the agreements, documents and instruments contemplated herein do
not, and the consummation of the transactions contemplated hereby and thereby by
the Metatec Companies will not, violate or conflict with, result in a breach of,
constitute a Default under (whether with notice or the lapse of time or both),
or accelerate or permit the acceleration of the performance required by, any
contract or agreement to which any of the Metatec Companies is a party or by
which it is bound or by which any of its property is bound.
(b) Except as set forth on Schedule 5.3(b), the execution,
delivery and performance by each of the Metatec Companies of this Agreement and
their Related Agreements and
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the consummation by the Metatec Companies of the transactions contemplated
hereby and thereby do not and will not: (i) violate any Law applicable to the
Metatec Companies or any of their respective properties or assets; (ii) violate
or conflict with, result in a breach or termination of, constitute a default or
give any third-party any additional right (including a termination right) under,
permit the cancellation of, or result in or constitute a circumstance which,
with or without notice or lapse of time or both, would constitute any of the
foregoing under any Contract to which any of the Metatec Companies is a party or
by which any of the Metatec Companies or any of their respective assets are
bound; (iii) permit the acceleration of the maturity of any indebtedness of any
of the Metatec Companies or indebtedness secured by any of their assets or
properties; or (iv) violate or conflict with any provision of the certificate of
incorporation or bylaws or similar organizational instruments of the Metatec
Companies.
5.4 Litigation. There is no legal, administrative or arbitration
proceeding, suit or action of any nature pending or, to the knowledge of the
Metatec Companies, threatened against any of the Metatec Companies or any of
their respective Affiliates which questions or challenges the validity of this
Agreement or any of the agreements, documents and instruments contemplated
herein or any action taken or to be taken by the Metatec Companies pursuant to
this Agreement or in connection with the transactions contemplated hereby. There
are no pending or, to the knowledge of the Metatec Companies, threatened
disputes or controversies between the Metatec Companies or any of their
respective Affiliates and any Governmental Authority or third party that would
adversely affect or impair the ability of the Metatec Companies to consummate
the transactions contemplated by this Agreement or any of the agreements,
documents and instruments contemplated herein. As of the date of this Agreement,
none of the Metatec Companies nor any of their respective Affiliates has
received any communication from any Governmental Authority that such authority
would oppose or refuse to grant or issue its consent or approval to, if
required, or would impose a burdensome condition on any of the Metatec Companies
with respect to, the transactions contemplated by this Agreement.
5.5 Brokers. Other than Legg, Mason, Wood, Walker, Inc., none of the
Metatec Companies has used any broker or finder in connection with the
transactions contemplated hereby, and none of the Imation Companies or any of
their Affiliates has or shall have any liability or otherwise suffer or incur
any Loss as a result of or in connection with any brokerage or finder's fee or
other commission of any Person retained by any of the Metatec Companies in
connection with any of the transactions contemplated by this Agreement or the
Related Agreements.
ARTICLE VI
COVENANTS OF THE IMATION COMPANIES
Prior to the Closing, the Imation Companies agree to perform each of
the following covenants:
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6.1 Conduct of Business.
(a) Except as otherwise contemplated by this Agreement, and
except as described on Schedule 6.1, or as otherwise consented to by Purchasers
(which consent shall not be unreasonably withheld or delayed), from the date
hereof until the Closing, the Imation Companies will conduct the Business in the
usual and ordinary course and shall use commercially reasonable efforts to (i)
preserve intact the present business organization and personnel of the Business
and (ii) preserve the goodwill and advantageous relationships of the Business
with customers, suppliers, independent contractors, employees and other Persons
material to the operation of the Business, in each case taking into account any
reaction that customers, suppliers, independent contractors, employees and other
Persons material to the conduct of the Business may have to the announcement of
the transactions contemplated hereby.
(b) Except as otherwise contemplated by this Agreement, and
except as described on Schedule 6.1, or as otherwise consented to by Purchasers
(which consent shall not be unreasonably withheld or delayed), from the date
hereof until the Closing, the Imation Companies shall not, with respect to the
Business:
(i) enter into or amend in any material respect any
Contract material to the Business except in the ordinary course of
business;
(ii) other than pursuant to this Agreement, sell,
lease or dispose of any of the Assets, except sales of Inventory in the
ordinary course of business;
(iii) purchase, lease or otherwise acquire any asset
(of any type or nature), other than (A) Inventory in the ordinary
course of business, and (B) other operating assets having an aggregate
value of $100,000 or less;
(iv) except as otherwise expressly contemplated by
this Agreement, modify or terminate any of the Real Property Leases,
Permits, Personal Property Leases or Contracts in a manner which
results in a Material Adverse Change;
(v) engage in any transaction or enter into any
Contract with any Affiliate of any of the Imation Companies, except for
transactions expressly permitted by this Agreement or transactions in
the ordinary course of business;
(vi) Other than changes made pursuant to the normal
periodic salary review process of the Imation Companies, and other than
certain bonuses to be paid in connection with the transactions
contemplated by this Agreement, enter into or modify any employment,
severance, termination, or similar agreement or arrangement with, or
grant any bonuses, salary increases, severance or termination pay to,
any officer or consultant of any of the Imation Companies employed in
the Business;
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(vii) Other than certain compensation changes that
are described on Schedule 4.14, and other than certain bonuses to be
paid in connection with the transactions contemplated by this
Agreement, and except as required by Law, adopt, amend or terminate any
employee benefit plan or increase, amend or terminate any benefits to
officers, consultants or employees employed in the Business or change
the compensation of any Fremont Employees or Selected Menomonie
Employees or any employee of International employed in the Business; or
(viii) enter into any Contract to do any of the
foregoing.
(c) As used in this Section 6.1, "ordinary course of business"
shall be determined by reference to the past practices of the Imation Companies
(in each case solely with respect to the Business).
6.2 Access. The Imation Companies will afford to the Metatec Companies
and their authorized representatives and agents reasonable access from the date
hereof until the Closing, during normal business hours, to the properties,
books, records and employees of the Imation Companies to the extent relating to
the Business and furnish to the Metatec Companies such additional financial and
operating data and other information as the Metatec Companies may reasonably
request to the extent that such access and disclosure would not violate the
terms of any agreement to which any Imation Company is bound or any applicable
Law. The Metatec Companies and their representatives will have the right at
mutually agreeable times and at mutually agreeable locations to interview the
suppliers and customers and key personnel of the Imation Companies identified to
them by the Metatec Companies. The Imation Companies will exercise commercially
reasonable efforts to cooperate with the Metatec Companies and their
representatives in conducting these activities. Other than in connection with
any claims, suits, actions or proceeding against the Imation Companies or any of
their Affiliates by any of the Metatec Companies or any of their Affiliates, the
Imation Companies will, at and after the Closing, furnish the Metatec Companies
with such additional financial and operating data and other information about
the Purchased Assets and the Business as may be reasonably requested by the
Metatec Companies and which is reasonably available.
6.3 HSR Act Notification; Other Governmental Consents. Sellers shall
cause to be filed with the Federal Trade Commission and the Department of
Justice the notification and report form required for the transactions
contemplated by this Agreement and the agreements, documents and instruments
contemplated herein and any supplemental information that may be reasonably
requested in connection therewith, which notification and report form and which
supplemental information will comply with the requirements of the HSR Act. The
Imation Companies shall make as promptly as practicable the filings with, and
take all commercially reasonable steps to obtain the authorizations, approvals,
consents and other actions of, Governmental Authorities described in Section
4.8.
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6.4 Tax Matters. The Imation Companies shall, at their own expense,
preserve and keep the records in their possession relating to the preparation of
any Tax Return required to be filed by any Metatec Company (other than in
connection with claims for duty drawbacks) and such records as any Metatec
Company may reasonably require in connection with any other Tax matter,
including, without limitation, for the defense of any audit, examination,
administrative appeal or litigation of any such Tax Return (other than in
connection with claims for duty drawbacks) for a period of seven years from the
Closing Date and shall make such records available to any Metatec Company as may
be reasonably required by such Metatec Company. In the event the Imation
Companies wish to destroy such records after that time, the Imation Companies
shall first give ninety (90) days' prior written notice to the Metatec Companies
and the Metatec Companies shall have the right at their option and expense, upon
prior written notice given to the Imation Companies within that ninety (90) day
period, to take possession of the records within one hundred eighty (180) days
after the date of such notice.
6.5 Financial Statements. The Imation Companies shall use commercially
reasonable efforts to assist PricewaterhouseCoopers L.L.P. in the preparation of
(i) audited balance sheets of the Business as of December 31, 1996 and December
31, 1997 and the related audited statements of income, retained earnings and
cash flows for the three fiscal years ended December 31, 1997 and (ii) unaudited
statements of income, retained earnings and cash flows for the six-month periods
ended June 30, 1997 and June 30, 1998, in each case to the extent required to
enable Metatec to satisfy its Form 8-K filing requirement under the Securities
Exchange Act of 1934, as amended, provided that the Imation Companies shall not
be required to incur any out-of-pocket expenses in connection therewith.
6.6 Confidentiality. Except as required by Law or any Governmental
Authority, the Imation Companies shall maintain all Confidential Information
relating to the Business (other than such Confidential Information which (i)
relates to the Excluded Assets or the Excluded Obligations or (ii) after the
Closing is or becomes generally known to the public other than through any
breach of any provision of this Section 6.7 by any of the Imation Companies, or
received from a third party (provided such third party is not known by the
Imation Companies to be bound by an obligation of secrecy)) in strict confidence
in accordance with the procedures they use to protect their own information of a
similar nature and shall not use any such Confidential Information for any
purpose.
6.7 Exclusive Rights. None of the Imation Companies shall, directly or
indirectly, solicit (including without limitation by way of furnishing or making
available any non-public information concerning the Business) or engage in
negotiations or discussions with, disclose any of the terms of this Agreement
to, accept any offer from, furnish any information to, or otherwise cooperate,
assist or participate with any Person (other than the Metatec Companies and
their representatives) regarding any Acquisition Proposal (defined below),
except that any Person making an Acquisition Proposal may be informed of the
restrictions contained in this sentence. The Imation Companies agree to promptly
notify Metatec of any such Acquisition Proposal or any negotiations, discussions
or requests for information relating to any Acquisition Proposal. For purposes
of this Agreement,
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"Acquisition Proposal" shall mean any offer or proposal received by any of the
Imation Companies after the date of this Agreement and prior to the Closing Date
regarding the acquisition by purchase, merger, lease or otherwise of the
Business.
6.8 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, the Imation Companies shall use all commercially reasonable efforts
to take all actions and do all things necessary to consummate the transactions
contemplated by this Agreement or the International Asset Transfer Agreement,
including without limitation using all commercially reasonable efforts to cause
the conditions set forth in Article VIII for which any Imation Company is wholly
or partially responsible to be satisfied, as soon as reasonably practicable.
Furthermore, subject to the terms and conditions of this Agreement, the Imation
Companies shall use all reasonable good faith efforts to negotiate the terms and
conditions of the Transition Services Agreement with the Metatec Companies as
soon as reasonably practicable. Subject to the terms and conditions of this
Agreement, International shall execute and deliver the International Asset
Transfer Agreement on the Closing Date.
6.9 Collection of Accounts Receivable. If the Imation Companies receive
payment for any of the Accounts Receivable which have been transferred to the
Metatec Companies pursuant to this Agreement or the International Asset Transfer
Agreement, the Imation Companies shall promptly remit the funds so collected to
the Metatec Companies.
ARTICLE VII
COVENANTS OF THE METATEC COMPANIES
Prior to the Closing, the Metatec Companies agree to perform each of
the following covenants:
7.1 HSR Act Notification; Other Governmental Consents. The Metatec
Companies will cause to be filed as promptly as practicable with the Federal
Trade Commission and the Department of Justice the notification and report form
required for the transactions contemplated by this Agreement and the agreements,
documents and instruments contemplated herein and any supplemental information
that may be reasonably requested in connection therewith, which notification and
report form and supplemental information will comply with the requirements of
the HSR Act. The Metatec Companies shall make as promptly as practicable the
filings with, and take all commercially reasonable steps to obtain the
authorizations, approvals, consents and other actions of, Governmental
Authorities described in Section 5.3(a).
7.2 Tax Matters. The Metatec Companies shall, at their own expense,
preserve and keep the records in their possession relating to the preparation of
any Tax Return required to be filed by any Imation Company and such records as
any Imation Company may reasonably require for the defense of any audit,
examination, administrative appeal or litigation of any such Tax Return for a
period of seven years from the Closing Date and shall make such records
available to the Imation
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Companies as may be reasonably required by the Imation Companies. In the event
the Metatec Companies wish to destroy such records after that time, the Metatec
Companies shall first give ninety (90) days' prior written notice to the Imation
Companies and the Imation Companies shall have the right at their option and
expense, upon prior written notice given to the Metatec Companies within that
ninety (90) day period, to take possession of the records within one hundred
eighty (180) days after the date of such notice.
7.3 Access; Retention of Records. The Metatec Companies will, at and
after the Closing, afford promptly to the Imation Companies and their agents
reasonable access during normal business hours to the properties, books,
records, employees and auditors of the Business, to the extent reasonably
necessary to permit the Imation Companies to determine any matter relating to
the Imation Companies' rights and obligations hereunder (including such Imation
Company's rights and obligations under Section 13.5) or relating to or arising
during any period ending on or before the Closing Date. Without limiting the
foregoing, the Metatec Companies shall also reasonably cooperate with the
Imation Companies in connection with claims, suits, actions and proceedings of
the types referred to in Section 13.5, including making available the personnel
of the Metatec Companies, whether as witnesses or for informational purposes.
The Metatec Companies shall, at their own expense, preserve and keep the
properties, books and records relating to the Business for a period of seven
years from the Closing Date. In the event the Metatec Companies wish to destroy
such records after that time, the Metatec Companies shall first give ninety (90)
days prior written notice to the Imation Companies and the Imation Companies
shall have the right at their option and expense, upon prior written notice
given to the Metatec Companies within that ninety (90) day period, to take
possession of the properties, books and records within one hundred eighty (180)
days after the date of such notice.
7.4 Confidentiality. Nothing contained herein shall negate the
obligations of the Metatec Companies under the Confidentiality Agreement.
7.5 Duty Drawback. After the date of this Agreement, the Metatec
Companies shall not make any claims, demands or inquiries relating to duty
drawback, as provided in 19 U.S.C. section 1313, as amended, on merchandise
exported, returned or destroyed by the Imation Companies in the ordinary course
of the Business prior to the Closing. Notwithstanding any other provision of
this Agreement, the Imation Companies shall retain any and all rights to such
duty drawback on merchandise exported, returned or destroyed by the Imation
Companies prior to the Closing, and the Metatec Companies waive any and all such
rights with respect to merchandise included in, or manufactured from, the
Purchased Assets. The Imation Companies shall have no obligation to maintain
records pertinent to, nor shall the Metatec Companies have any right of access
to the Imation Companies' records pertinent to, any such duty drawback claims of
the Metatec Companies.
7.6 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, the Metatec Companies shall use all commercially reasonable efforts
to take all actions and do all things necessary to consummate the transactions
contemplated by this Agreement and the International
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Asset Transfer Agreement, including without limitation using all commercially
reasonable efforts to cause the conditions set forth in Article IX for which any
Metatec Company is wholly or partially responsible to be satisfied, as soon as
reasonably practicable. Furthermore, subject to the terms and conditions of this
Agreement, the Metatec Companies shall use all reasonable good faith efforts to
negotiate the terms and conditions of the Transition Services Agreement with the
Imation Companies as soon as reasonably practicable.
7.7 Financial Statements. The Metatec Companies shall reimburse the
Imation Companies promptly upon request for the Imation Companies' payment of
the fees and expenses of PricewaterhouseCoopers L.L.P. in connection with the
audit of the financial statements described in Section 6.5. Coopers and Lybrand
L.L.P. has initially indicated to the Imation Companies that its fees will be
billed as follows: $75,000 on June 29, 1998, $75,000 on July 15, 1998, $25,000
on July 31, 1998, $25,000 on August 15, 1998, and any remaining unbilled fees on
August 31, 1998.
7.8 Non-Solicitation. Prior to the earlier of the Closing and May 5,
2000, the Metatec Companies and their Affiliates agree that they will not
solicit for hire or hire any employee of the Business, whether the Business is
owned by the Imation Companies or any other Person.
7.9 Inventory Matters. During the term of the Transition Services
Agreement, the Metatec Companies will purchase from the Imation Companies all of
their requirements of factory spare parts and factory supplies inventories used
exclusively in the Business, to the extent available, from the Menomonie
Facility. Promptly following the termination of the Transition Services
Agreement, the Metatec Companies will purchase from the Imation Companies the
factory spare parts and factory supplies inventories used exclusively in the
Business that are then located at the Menomonie Facility; provided, however,
that the Metatec Companies shall not be required to purchase (a) more than
$200,000 of such inventories or (b) such inventories as would not be useable
within a reasonable time in the ordinary course of the Business. The purchase
price for any such inventories shall be as agreed from time to time by the
Imation and the Metatec Companies.
ARTICLE VIII
CONDITIONS PRECEDENT
TO OBLIGATIONS OF THE METATEC COMPANIES
The obligations of the Metatec Companies under Articles II and III of
this Agreement are subject to the satisfaction or waiver by the Metatec
Companies of the following conditions precedent on or before the Closing Date:
8.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of the Imation Companies contained herein and in
the Related Agreements shall have been true, accurate and correct in all
material respects on and as of the date of this Agreement and shall also be
true, accurate and correct in all material respects on and as of the Closing
Date with the same force and effect as though made by the Imation Companies on
and as of the Closing Date.
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8.2 Compliance with Agreements and Covenants. The Imation Companies
shall have performed and complied in all material respects with all of their
covenants, obligations and agreements contained in this Agreement and in their
Related Agreements to be performed and complied with by them on or prior to the
Closing Date.
8.3 Hart-Scott-Rodino. All waiting periods under the HSR Act shall have
expired or been earlier terminated without action by the Justice Department or
the Federal Trade Commission to prevent or materially alter the consummation of
the transactions contemplated by this Agreement and the Related Agreements.
8.4 Consents and Approvals. Purchasers shall have received written
evidence satisfactory to them that the consents listed on Schedule 8.4 have been
obtained. If the Imation Companies update any schedules as permitted by Section
15.1 then the Metatec Companies shall be permitted to update Schedule 8.4 within
five (5) Business Days after any such schedule update by the Imation Companies,
but only to add to such Schedule 8.4 any consents related to matters added to
any schedules by the Imation Companies after the date of this Agreement.
8.5 Related Agreements. Sellers shall have executed and delivered the
Assignment and Assumption Agreement and the License Agreement. The appropriate
Imation Companies and their Affiliates shall have executed and delivered the
Transition Services Agreement and such Transition Services Agreement shall be
reasonably satisfactory in all material respects to Purchasers. International
shall have executed and delivered the International Asset Transfer Agreement.
Metatec International and Minnesota Mining and Manufacturing Company shall have
entered into a lease concerning the facility currently leased by International
for use in the Business from Minnesota Mining and Manufacturing Company in
Breda, The Netherlands, such lease to substantially have the terms described in
Schedule 8.5. The closing contemplated by the International Asset Transfer
Agreement shall occur at the same time as the Closing.
8.6 Actions or Proceeding. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or any Related Agreement or the consummation
of the transactions contemplated hereby and thereby.
8.7 No Material Adverse Change. There shall have been no Material
Adverse Change since the date of the most recent balance sheet contained in the
Business Financial Statements.
8.8 Financial Statements. Metatec shall have received the financial
statements described in Section 6.5 in form and content sufficient to allow
Metatec to comply with its Form 8-K filing requirements under the Securities
Exchange Act of 1934, as amended.
8.9 Works Council. The Imation-Breda employee works council shall have
provided its positive advice to International regarding the transactions
contemplated hereunder.
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ARTICLE IX
CONDITIONS PRECEDENT
TO OBLIGATIONS OF THE IMATION COMPANIES
The obligations of the Imation Companies under Article II of this
Agreement are subject to the satisfaction or waiver by the Imation Companies of
the following conditions precedent on or before the Closing Date:
9.1 Warranties True as of Both Present Date and Closing Date. The
representations and warranties of the Metatec Companies contained herein and in
their Related Agreements shall have been true, accurate and correct in all
material respects on and as of the date of this Agreement and shall also be
true, accurate and correct in all material respects on and as of the Closing
Date with the same force and effect as though made by the Metatec Companies on
and as of the Closing Date.
9.2 Compliance with Agreements and Covenants. The Metatec Companies
shall have performed and complied in all material respects with all of its
covenants, obligations and agreements contained in this Agreement and in their
Related Agreements to be performed and complied with by them on or prior to the
Closing Date.
9.3 Hart-Scott-Rodino. All waiting periods under the HSR Act shall have
expired or been earlier terminated without action by the Justice Department or
the Federal Trade Commission to prevent or materially alter the consummation of
the transactions contemplated by this Agreement and the Related Agreements.
9.4 Actions or Proceeding. No action or proceeding by any Governmental
Authority or other Person shall have been instituted or threatened which could
enjoin, restrain or prohibit, or could result in substantial damages in respect
of, any provision of this Agreement or any Related Agreement or the consummation
of the transactions contemplated hereby and thereby.
9.5 Related Agreements. The Metatec Companies, as appropriate, shall
have executed and delivered the Assignment and Assumption Agreement, the License
Agreement, the Transition Services Agreement and the International Asset
Transfer Agreement and the Transition Services Agreement shall be reasonably
satisfactory in all material respects to the Imation Companies. The closing
contemplated by the International Asset Transfer Agreement shall occur at the
same time as the Closing.
9.6 Works Council. The Imation-Breda employee works council shall have
provided its positive advice to International regarding the transactions
contemplated hereunder.
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ARTICLE X
EMPLOYEES AND BENEFIT PLANS
10.1 Offer of Employment. Schedule 4.14(a) contains a list of all
Affected Employees of Sellers as of the date stated in such schedule. Schedule
4.14(a) shall be updated by Sellers immediately prior to the Closing Date to
reflect changes in the Fremont Employees and any changes to Schedule 10.1(a). On
the Closing Date, Metatec Acquisition shall offer employment to all those
Affected Employees who were employed at the Fremont Facility on the day
immediately preceding the Closing Date (the "Fremont Employees") and to those
Affected Employees who were employed at the Menomonie Facility immediately
preceding the Closing Date who are listed on Schedule 10.1(a) (such schedule to
be updated upon the mutual agreement of the parties) (the "Selected Menomonie
Employees"). The offer of employment shall involve an at will employment
relationship, shall include similar job responsibilities as those under which
the Affected Employees were employed immediately prior to the Closing Date; and
Metatec Acquisition shall offer employment at a rate of base pay equal to the
employee's base pay from Sellers as in effect on the date immediately prior to
the Closing Date, plus an amount such that the employee's before-tax base pay
from Metatec Acquisition will be six percent greater than the employee's
before-tax base pay from Sellers and such rate of pay shall not be reduced
during the 12 month period immediately following the Closing Date except in
connection with a pay rate adjustment equally affecting substantially all of the
employees of Metatec and its Affiliates. Each Fremont Employee and each Selected
Menomonie Employee who accepts any such offer of employment shall be referred to
herein as a "Hired Employee." Effective as of the Closing Date, Metatec
Acquisition shall establish benefit plans covering Hired Employees which provide
those benefits described in Schedule 10.1(b) in addition to any benefits
specifically described in this Article X. If Metatec Acquisition terminates the
employment of a Hired Employee without cause, then Metatec Acquisition shall pay
severance benefits in accordance with and in the amount specified in the table
listed in Schedule 10.1(c). The obligations of Metatec Acquisition set forth in
this Section 10.1 shall not apply to any Contract Employees. Notwithstanding any
other provisions of this Article X, subject to the agreement expressly set forth
above prohibiting reductions in pay rates during the 12-month period following
the Closing Date, the Metatec Companies shall have the right to change the terms
and conditions of employment, including without limitation rates of pay and
benefits, provided to its employees from time to time after the Closing Date.
10.2 Seniority and Certain Payables. Effective as of the Closing Date,
Metatec Acquisition shall credit the Hired Employees with seniority for
vacation, promotion, compensation and employee welfare benefits equal to that
which such Hired Employees were credited with by the Sellers as of the Closing
Date for service with the Sellers and their predecessors. Sellers shall pay at
or prior to the Closing all accrued amounts for vacation, compensation and other
employee welfare benefits owing to Affected Employees, except for any such
amounts specifically assumed by Metatec Acquisition in writing and as reflected
on the Working Capital Statement.
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10.3 401(k) Plan. If not already adopted by Purchasers prior to the
Closing Date, as soon as practicable after the Closing Date, Purchasers shall
establish an individual account plan qualified under section 401(a) of the Code
and containing a cash or deferred arrangement meeting the requirements of
section 401(k) of the Code, which shall provide benefits described in Schedule
10.1(b) (the "Purchasers' 401(k) Plan").
10.4 No Third Party Beneficiaries. It is understood and agreed between
the parties that all provisions contained in this Agreement with respect to
employee benefit plans or employee compensation are included for the sole
benefit of the respective parties hereto and do not and shall not create any
right in any other Person, including any Hired Employee, any participant in any
benefit or compensation plan or any beneficiary thereof.
ARTICLE XI
CLOSING
11.1 Closing. The Closing shall take place at the offices of Mayer,
Brown & Platt, Chicago, Illinois, at 10:00 a.m. on August 31, 1998 or, if all of
the closing conditions set forth in Articles VIII and IX have not then been
satisfied, on the date that is five (5) Business Days after all of the closing
conditions set forth in Articles VIII and IX have been satisfied. The Closing,
and all transactions to occur at the Closing, shall be deemed to have taken
place at, and shall be effective as of, the close of business on the Closing
Date.
11.2 Deliveries by the Imation Companies. At the Closing, the Imation
Companies shall deliver to the Metatec Companies the following:
(a) The Assignment and Assumption Agreement, duly executed by
Sellers;
(b) Originals or copies of, and assignments duly executed by
the Imation Companies of, all of the following: (i) the Real Property
Leases; (ii) the Personal Property Leases; and (iii) all other
Purchased Contracts and Permits;
(c) Certificates of title for all Vehicles, duly endorsed for
transfer to the Metatec Companies, and keys for all Vehicles;
(d) Written evidence of the consents referred to in
Section 8.4;
(e) A certificate, dated the Closing Date, of the Imation
Companies certifying as to the compliance by the Imation Companies with
Sections 8.1 and 8.2;
(f) A certificate of the secretary of each of the Sellers,
each such certificate certifying resolutions of the board of directors
or similar governing body of the applicable Seller (i) approving and
authorizing the execution, delivery and performance of this
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Agreement and its Related Agreements and the consummation by such
Seller of the transactions contemplated hereby and thereby and (ii)
with respect to Sellers only, relating to the Business;
(g) The certificate of incorporation or similar instrument of
each of the Sellers, certified by the appropriate Secretary of State or
equivalent Person of the jurisdiction of incorporation of each of the
Sellers and the bylaws or similar instrument of each of the Sellers,
each certified by the secretary of the applicable Seller;
(h) A Certificate of Good Standing for Sellers from the
Secretary of State of the State of Delaware;
(i) An opinion, dated the Closing Date, of Mayer, Brown &
Platt, counsel for Sellers, substantially in the form set forth on
Exhibit E;
(j) An opinion, dated the Closing Date, of Van Benthem &
Keulen Advocaten, counsel for International, substantially in the form
set forth in Exhibit F;
(k) The closing documents to be delivered pursuant to the
International Asset Transfer Agreement;
(l) The License Agreement, the Transition Services Agreement
and the International Asset Transfer Agreement, duly executed by the
appropriate Imation Companies;
(m) A written statement reasonably satisfactory to Purchasers
from each Person holding a Lien upon any of the Purchased Assets,
confirming the release of such Lien; and
(n) Such other documents and instruments as may be reasonably
required by the Metatec Companies to consummate the transactions
contemplated by this Agreement and the Related Agreements.
11.3 Deliveries by Purchasers. At the Closing, Purchasers shall make
the payments described in Section 3.1 and deliver to the Imation Companies the
following:
(a) The Assignment and Assumption Agreement, duly executed by
Metatec Acquisition;
(b) A certificate, dated the Closing Date, of the Metatec
Companies, certifying as to compliance by the Metatec Companies with
Sections 9.1 and 9.2;
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(c) A certificate of the secretary of each Purchaser
certifying resolutions of the board of directors or similar governing
body of each Purchaser approving and authorizing the execution,
delivery and performance of this Agreement and its Related Agreements
and the consummation by the Purchasers of the transactions contemplated
hereby and thereby;
(d) The certificate of incorporation or similar instrument of
each Purchaser, certified by the Secretary of State or equivalent
Person of the jurisdiction of incorporation of each Purchaser, and the
by-laws or similar instrument of each Purchaser, each certified by the
secretary of the applicable Purchaser;
(e) A Certificate of Good Standing for Metatec and Metatec
Acquisition from the Secretary of State or equivalent Person of the
States of Ohio and Florida, as the case may be.
(f) An opinion, dated the Closing Date, of Baker & Hostetler
LLP, counsel for the Metatec Companies, substantially in the form set
forth on Exhibit G;
(g) An opinion, dated the Closing Date, of Trenite Van Doorne,
counsel for Metatec International, substantially in the form set forth
on Exhibit H.
(h) The closing documents to be delivered pursuant to the
International Asset Transfer Agreement;
(i) The License Agreement, the Transition Services Agreement,
the Note and the International Asset Transfer Agreement, duly executed
by the appropriate Metatec Companies; and
(j) Such other documents and instruments as may be reasonably
required by the Imation Companies to consummate the transactions
contemplated by this Agreement and the Related Agreements.
ARTICLE XII
TERMINATION
12.1 Termination. This Agreement may be terminated at any time on or
prior to the Closing Date:
(a) by the mutual written agreement of the Imation Companies
and the Metatec Companies;
(b) by the Metatec Companies, if there shall have been a
material breach of any covenant, representation or warranty of the
Imation Companies hereunder or under any of their Related Agreements
and such breach shall not have been remedied within thirty (30)
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<PAGE> 49
days after receipt by the Imation Companies of a notice in writing from
the Metatec Companies specifying the breach and requesting such be
remedied;
(c) by the Imation Companies, if there shall have been a
material breach of any covenant, representation or warranty of the
Metatec Companies hereunder or under any of their Related Agreements
and such breach shall not have been remedied within thirty (30) days
after receipt by the Metatec Companies of notice in writing from the
Imation Companies specifying the breach and requesting such be
remedied; or
(d) by the Imation Companies or the Metatec Companies, if the
Closing shall not have taken place on or before October 15, 1998;
provided, that the right to terminate this Agreement under this clause
(d) shall not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of or resulted in
the failure of the Closing to occur on or before such date.
12.2 Effect of Termination. If this Agreement is terminated pursuant to
Section 12.1, all obligations of the parties hereunder shall terminate, except
for the obligations set forth in Sections 7.4, and 15.2 and 15.10, which shall
survive the termination of this Agreement, and except that no such termination
shall relieve any party from liability for any prior wilful breach of this
Agreement.
ARTICLE XIII
INDEMNIFICATION
13.1 Survival; Remedy for Breach. (a) The representations and
warranties contained in this Agreement or in any Specified Agreement shall
survive the Closing until March 31, 2000, at which time they shall expire,
except that the representations and warranties in Section 4.17 shall survive the
Closing for a period of five years, at which time they shall expire. No claim
regarding a breach of any such representation or warranty shall be made for the
first time after the expiration date applicable to such representation or
warranty. The agreements and covenants of the parties contained in this
Agreement or in any Closing Document shall survive the Closing; provided, that
no claim regarding a breach of any agreement or covenant contained in this
Agreement occurring before the Closing and known prior to the Closing to the
party claiming indemnification shall be made after the Closing Date.
(b) Except as provided in Section 14.2, and except in the case
of a claim of fraud or a claim for specific performance relating to the failure
of the Imation Companies to deliver the Purchased Assets or perform any of their
other respective obligations under this Agreement in accordance with the terms
and conditions of this Agreement, the sole and exclusive remedy of the Metatec
Companies and the Imation Companies for any breach of any covenant or agreement,
or any inaccuracy or other breach of any representation or warranty, contained
in this Agreement or any Specified Agreement shall be the indemnities contained
in Sections 13.2 and 13.3, respectively, and the parties hereby waive, release
and agree not to assert any other right, whether arising by statute,
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<PAGE> 50
common law, equity or otherwise, in connection therewith or otherwise relating
to the transactions contemplated by this Agreement.
13.2 Indemnification by the Imation Companies . (a) Subject to Sections
13.1, 13.2(b) and 13.2(c), the Imation Companies, jointly and severally, agree
to indemnify, defend and hold harmless the Metatec Companies and their
respective officers, directors, employees and Affiliates from and against any
and all Losses incurred or suffered by the Metatec Companies arising out of any
of the following:
(i) any breach of or any inaccuracy in any
representation or warranty made by the Imation Companies in this
Agreement or any Specified Agreement;
(ii) any material breach of or material failure by
the Imation Companies to perform any covenant or obligation of the
Imation Companies set out or contemplated in this Agreement or any
Specified Agreement;
(iii) the Excluded Assets and the Excluded
Obligations;
(iv) the fees of Greene Holcomb & Company LLC owed by
the Imation Companies or any fee claimed from the Imation Companies by
any other broker or finder as a result of the transactions contemplated
hereby; or
(v) the failure of the Imation Companies to comply
with any applicable Bulk Sales Laws.
(b) The liability of the Imation Companies to provide
indemnification pursuant to Section 13.2 shall be limited as follows:
(i) The Imation Companies shall not be liable with
respect to any matter referred to in Sections 13.2(a)(i) or (ii), until
the total of all Losses with respect to such matters exceeds $250,000
and then only for the amount by which such Losses exceed $250,000. The
Imation Companies' aggregate liability under Sections 13.2(a)(i) and
(ii) shall not exceed $23,000,000.
(ii) Notwithstanding anything to the contrary in this
Section 13.2(b), the limits on liability set forth in this Section
13.2(b)(i) shall not apply to any payments required to be made under
Section 3.2(c) or Section 3.5.
(c) The amount for which the Imation Companies shall be liable
in respect of any Loss pursuant to Section 13.2(a) shall be reduced to the
extent that any Metatec Company or any Affiliate thereof shall realize any net
proceeds recovered from insurers or other third parties with respect to such
Loss. If any Metatec Company shall have received or shall have had paid on its
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<PAGE> 51
behalf an indemnity payment in respect of a Loss and shall subsequently receive
directly or indirectly such proceeds, then such Metatec Company shall promptly
pay to the Imation Companies the net amount of such proceeds or, if less, the
amount of such indemnity payment. The Metatec Companies shall promptly recover
insurance proceeds that may be due to the Metatec Companies.
13.3 Indemnification by the Metatec Companies. (a) Subject to Sections
13.1, and 13.3(b), the Metatec Companies, jointly and severally, agree to
indemnify, defend and hold harmless each of the Imation Companies and their
respective officers, directors, employees and Affiliates from and against any
and all Losses incurred or suffered by them arising out of any of the following:
(i) any breach of or any inaccuracy in any
representation or warranty made by the Metatec Companies in this
Agreement or any Specified Agreement;
(ii) any material breach of or material failure by
the Metatec Companies to perform any covenant or obligation of the
Metatec Companies set out or contemplated in this Agreement or any
Specified Agreement;
(iii) the Assumed Obligations;
(iv) any liability or obligation arising from the
operation of the Business or the Assets by the Metatec Companies (or
any of its Affiliates, or their respective successors or assigns) from
and after the Closing (including, without limitation, any liability or
obligation arising out of or related to the removal of Assets from the
Menomonie Facility);
(v) any liability or obligation relating to Licensed
Products (as defined in the License Agreement) under the License
Agreement;
(vi) any liability or obligation of the Metatec
Companies pursuant to Article X or Section 6 of the International Asset
Transfer Agreement;
(vii) any liability or obligation arising from the
failure of any Metatec Company to hire any Affected Employee or any of
the Transferred Employees (as defined in the International Asset
Transfer Agreement);
(viii) any liability or obligation of the Metatec
Companies pursuant to the International Asset Transfer Agreement; or
(ix) any fee claimed from the Metatec Companies by
Legg, Mason, Wood, Walker, Inc. or any fee claimed from the Metatec
Companies by any other broker or finder as a result of the transactions
contemplated hereby.
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<PAGE> 52
(b) The amount for which the Metatec Companies shall be liable
in respect of any Loss pursuant to Section 13.3(a) shall be reduced to the
extent that the Imation Companies shall realize any net proceeds recovered from
insurers or other third parties with respect to such Loss. If any Imation
Company shall have received or shall have had paid on its behalf an indemnity
payment in respect of a Loss and shall subsequently receive directly or
indirectly such proceeds, then such Imation Company shall promptly pay to the
Metatec Companies the net amount of such proceeds or, if less, the amount of
such indemnity payment. The Imation Companies shall promptly recover insurance
proceeds that may be due to the Imation Companies.
13.4 Claims. As soon as is reasonably practicable after becoming aware
of a claim for indemnification under this Agreement not involving any claim, or
the commencement of any suit, action or proceeding, of the type described in
Section 13.5, the Indemnified Person shall promptly give notice to the
Indemnifying Person of such claim and the amount the Indemnified Person will be
entitled to receive hereunder from the Indemnifying Person; provided, that the
failure of the Indemnified Person to give notice shall not relieve the
Indemnifying Person of its obligations under this Article XIII except to the
extent (if any) that the Indemnifying Person shall have been actually prejudiced
thereby.
13.5 Notice of Third Party Claims; Assumption of Defense. The
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person of the assertion of any claim, or the commencement of
any suit, action or proceeding, by any Person not a party hereto in respect of
which indemnity may be sought under this Agreement; provided, that the failure
of the Indemnified Person to give notice shall not relieve the Indemnifying
Person of its obligations under this Article XIII except to the extent (if any)
that the Indemnifying Person shall have been actually prejudiced thereby. The
Indemnifying Person may, at its own expense, (a) participate in the defense of
any claim, suit, action or proceeding and (b) upon notice to the Indemnified
Person and the Indemnifying Person's delivery to the Indemnified Person of a
written agreement that the Indemnified Person is entitled to indemnification
pursuant to Section 13.2 or 13.3 for all Losses arising out of such claim, suit,
action or proceeding, at any time during the course of any such claim, suit,
action or proceeding, assume the defense thereof; provided, that (i) the
Indemnifying Person's counsel is reasonably satisfactory to the Indemnified
Person and (ii) the Indemnifying Person shall thereafter consult with the
Indemnified Person upon the Indemnified Person's reasonable request for such
consultation from time to time with respect to such claim, suit, action or
proceeding. If the Indemnifying Person assumes such defense, the Indemnified
Person shall have the right (but not the obligation) to participate in the
defense thereof and to employ counsel, at its own expense, separate from the
counsel employed by the Indemnifying Person. If, however, the Indemnified Person
reasonably determines in its judgment that representation by the Indemnifying
Person's counsel of both the Indemnifying Person and the Indemnified Person
would present such counsel with a conflict of interest, then such Indemnified
Person may employ separate counsel to represent or defend it in any such claim,
action, suit or proceeding, and the Indemnifying Person shall pay the fees and
disbursements of such separate counsel. Whether or not the Indemnifying Person
chooses to defend
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<PAGE> 53
or prosecute any such claim, suit, action or proceeding, all of the parties
hereto shall cooperate in the defense or prosecution thereof.
13.6 Settlement or Compromise. Any settlement or compromise made or
caused to be made by the Indemnified Person or the Indemnifying Person, as the
case may be, of any such claim, suit, action or proceeding of the kind referred
to in Section 13.5 shall also be binding upon the Indemnifying Person or the
Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided, that no obligation,
restriction or Loss shall be imposed on the Indemnified Person as a result of
such settlement without its prior written consent. The Indemnified Person will
give the Indemnifying Person at least thirty (30) days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending, during which time the Indemnifying Person may reject such proposed
settlement or compromise; provided, that from and after such rejection, the
Indemnifying Person shall be obligated to assume the defense of and full and
complete liability and responsibility for such claim, suit, action or proceeding
and any and all Losses in connection therewith in excess of the amount of
unindemnifiable Losses which the Indemnified Person would have been obligated to
pay under the proposed settlement or compromise.
13.7 Losses in Connection with Third Party Claims. The definitions of
"Loss" and "Losses" shall be deemed to include indirect, special, exemplary,
punitive and consequential damages if such Loss or Losses arise out of any
claim, suit, action or proceeding by any Person not a party (or an Affiliate of
a party) to this Agreement in respect of which indemnity may be sought under
this Agreement.
ARTICLE XIV
NON-COMPETITION
14.1 Non-Competition. Each of the Imation Companies, in order to induce
the Metatec Companies to enter into this Agreement, expressly covenants and
agrees, jointly and severally, that for a period of two years from and after the
Closing Date, none of the Imation Companies or any of their respective
Affiliates will own, manage, operate or control any Person, which is at the time
engaged, wholly or partly, in the use of duplication and fulfilment services of
pre-recorded optical media equipment in the markets traditionally served by the
Business, provided that the restrictions contained in this Section 14.1 shall
not apply to the operations or activities of the Imation Companies or any of
their respective Affiliates in the video disk business. Nothing in this Section
14.1 shall prevent the Imation Companies from licensing third parties under
Imation's Intellectual Property to make, use and sell any products, including
CD-ROM and DVD-ROM.
To the extent that any part of this Section 14.1 may be invalid, illegal or
unenforceable for any reason, it is intended that such part shall be enforceable
to the extent that a court of competent jurisdiction shall determine that such
part if more limited in scope would have been enforceable and
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<PAGE> 54
such part shall be deemed to have been so written and the remaining parts shall
as written be effective and enforceable in all events.
14.2 Equitable Relief. The Imation Companies agree that damages would
be an inadequate remedy for any actual or threatened breach of Section 14.1 and
that the Metatec Companies shall, in addition to other potential remedies
available at law, be entitled to equitable relief in the form of preliminary and
permanent injunctions without bond or other security upon any actual or
threatened breach of Section 14.1.
ARTICLE XV
MISCELLANEOUS
15.1 Disclosure Schedules. The Imation Companies may update any
Schedule referred to in this Agreement from time to time prior to or at the
Closing to reflect matters occurring after the date hereof, by notice in
accordance with the terms of this Agreement. Such update will be effective to
cure and correct for all other purposes any immaterial breach of any
representation, warranty, agreement or covenant which would have existed if the
Imation Companies had not made such update unless such breaches are material in
the aggregate, in which event such update shall not cure and correct such
breaches, and all references to any Schedule hereto which is updated as provided
in this Section 15.1 shall, for all purposes, whether or not the Closing occurs,
be deemed to be a reference to such Schedule as so updated. The Metatec
Companies agree that any disclosure by the Imation Companies in any Schedule
attached hereto shall constitute a disclosure under each other Schedule referred
to herein, whether or not such disclosure is specifically referenced within such
other Schedule.
15.2 Expenses. Except as otherwise provided herein, each party hereto
shall bear its own expenses with respect to the transactions contemplated
hereby. Purchasers and Sellers each shall pay one-half of any filing fee
required under the HSR Act. The Imation Companies shall pay all sales, use,
stamp, transfer, value-added and like Taxes, if any, excluding income and
capital gains Taxes of any Metatec Company, which are required to be paid in
connection with the transfer of the Purchased Assets pursuant hereto and the
assets sold to Metatec International pursuant to the International Asset
Transfer Agreement, and shall pay all recording and filing fees (and the fees
and costs of any agent retained to effect any such recordations or filings)
required to be paid in connection with the transfer of the Purchased Assets
pursuant to this Agreement and the assets sold to Metatec International pursuant
to the International Asset Transfer Agreement or any agreement, document or
instrument contemplated herein or therein; provided that, for the purposes of
determining California State sales or use Taxes, the Metatec Companies will use
the appraised value of the Purchased Assets at the Fremont Facility for which
the Metatec Companies have obtained a specific appraisal ($3,296,000 maximum)
and will use all commercially reasonable efforts to obtain the 5% exemption
potentially available under California Code Section 6377, and the parties hereto
will reasonably cooperate to obtain all other applicable exemptions or
reductions; provided further that, to the extent the Metatec Companies receive
California State investment Tax credits on the
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Purchased Assets at the Fremont Facility and use the same to offset California
income Taxes in future years, the Metatec Companies will pay the amount of such
credits to the Imation Companies from time to time as such credits are used up
to a maximum aggregate amount not to exceed the amount of transfer Taxes paid by
the Imation Companies pursuant to this Section 15.2 in connection with the
transfer of the Purchased Assets at the Fremont Facility.
15.3 Amendment. This Agreement may be amended, modified or
supplemented, but only in writing signed by the parties.
15.4 Notices. Any notice, request, instruction or other document to be
given hereunder by a party hereto shall be in writing and shall be deemed to
have been given (a) when received if given in person or by courier or a courier
service, (b) on the date of transmission if sent by telex, facsimile or other
wire transmission (receipt confirmed) or (c) five (5) Business Days after being
deposited in the mail, certified or registered, postage prepaid:
If to any Imation Company, addressed as follows:
Imation Corp.
1 Imation Place
Oakdale, Minnesota 55128
Attention: General Counsel
Telephone No.: (612) 704-4000
Facsimile No.: (800) 537-4675
with a copy to:
Mayer, Brown & Platt
190 South LaSalle Street
Chicago, Illinois 60603
Attention: Jerome F. Donohoe
Telephone No.: (312) 782-0600
Facsimile No.: (312) 701-7711
If to any Metatec Company, addressed as follows:
Metatec Acquisition Corp.
c/o Metatec Corporation
7001 Metatec Blvd.
Dublin, Ohio 43017
Attention: Jeffrey Wilkins
Telephone No.: (614) 761-2000
Facsimile No.: (614) 766-3146
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with a copy to:
Baker & Hostetler LLP
65 East State Street, Suite 2100
Attention: Gary A. Wadman
Telephone No.: (614) 228-1541
Facsimile No.: (614) 462-2616
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
15.5 Payments in Dollars. Except as otherwise provided herein or in a
Related Agreement, all payments pursuant hereto shall be made in U.S. Dollars,
in same day or immediately available funds, without any setoff, deduction or
counterclaim whatsoever.
15.6 Waivers. The failure of a party hereto at any time or times to
require performance of any provision hereof shall in no manner affect its right
at a later time to enforce the same. No waiver by a party of any condition or of
any breach of any term, covenant, representation or warranty contained in this
Agreement shall be effective unless in writing, and no waiver in any one or more
instances shall be deemed to be a further or continuing waiver of any such
condition or breach in other instances or a waiver of any other condition or
breach of any other term, covenant, representation or warranty.
15.7 Bulk Sales. The parties hereby waive compliance with the
requirements of (a) all applicable state Tax laws that may require notification
of state taxing authorities and related actions in respect of bulk sales of
assets outside of the ordinary course of business and (b) any bulk transfer laws
(such as Article 6 of the Uniform Commercial Code as enacted in any state) or
similar legislation applicable to the transactions provided for in this
Agreement, and the Metatec Companies shall have no liability with respect to any
failure by any Imation Company to comply therewith.
15.8 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns; provided, however, that neither this Agreement, any Related Agreement
or other document or instrument contemplated herein nor any right or obligation
hereunder or thereunder may be assigned by a party without the consent of the
other parties. Notwithstanding the foregoing, no party shall have the right to
assign any right or obligation under this Agreement or any Related Agreement or
any other document or instrument contemplated herein if such assignment may
reasonably be expected to result in (a) any material increase in the obligations
of the other parties under this Agreement or any agreement, document or
instrument contemplated herein or (b) the failure of the Closing to occur or a
delay in the occurrence of the Closing.
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15.9 No Third Party Beneficiaries. This Agreement is solely for the
benefit of the parties hereto and, to the extent provided herein, their
respective Affiliates, and no provision of this Agreement shall be deemed to
confer upon any other third parties any remedy, claim, liability, reimbursement,
cause of action or other right.
15.10 Publicity. Prior to the Closing Date, except as required by Law
or the rules of NASDAQ or any stock exchange (in which case the affected party
shall give the other parties hereto notice and an opportunity to review any
required public announcement or other publicity), no public announcement or
other publicity regarding the transactions referred to herein shall be made by
the Metatec Companies or the Imation Companies or any of their respective
Affiliates, officers, directors, employees, representatives or agents, without
the prior written agreement of the Metatec Companies and the Imation Companies,
in any case, as to form, content, timing and manner of distribution or
publication; provided, that nothing in this Section 15.10 shall prevent such
parties from discussing such transactions with those Persons whose approval,
agreement or opinion, as the case may be, is required for consummation of such
transactions. Such parties shall exercise all reasonable efforts to assure that
such Persons will agree to keep confidential any information relating to this
Agreement or any agreement, document or instrument contemplated herein.
15.11 Further Assurances. The Imation Companies and the Metatec
Companies agree to cooperate fully with each other in connection with obtaining
the satisfaction of the conditions set forth in Articles VIII and IX. The
Imation Companies and the Metatec Companies agree to execute and deliver such
other documents, certificates, agreements and other writings and to take such
other actions as may be reasonable, necessary or desirable in order to
consummate or implement expeditiously the transactions contemplated by this
Agreement and any agreement, document or instrument contemplated herein.
15.12 Severability. If any provision of this Agreement shall be held
invalid, illegal or unenforceable, the validity, legality or enforceability of
the other provisions hereof shall not be affected thereby, and there shall be
deemed substituted for the provision at issue a valid, legal and enforceable
provision as similar as possible to the provision at issue.
15.13 Remedies Cumulative. The remedies provided in this Agreement
shall be cumulative and shall not preclude the assertion or exercise of any
other rights or remedies available under law, in equity or otherwise.
15.14 Entire Understanding. This Agreement and the Related Agreements
set forth the entire agreement and understanding of the parties hereto with
respect to the transactions contemplated hereby and supersede any and all prior
agreements, arrangements and understandings among the parties relating to the
subject matter hereof.
15.15 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
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STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW
THEREOF. The State Courts of Delaware and the United States District Court for
Delaware shall have non-exclusive jurisdiction over any and all claims, lawsuits
and litigation relating to or arising out of this Agreement, the subject matter
hereof or the transactions contemplated hereby. Each of the parties hereto
hereby irrevocably (a) submits to the personal jurisdiction of such courts over
such party in connection with any litigation, proceeding or other legal action
arising out of or in connection with this Agreement, (b) waives to the fullest
extent permitted by Law any objection to the venue of any such litigation,
proceeding or action which is brought in any such court and (c) agrees to the
mailing of service of process to the address specified above for such party as
an alternative method of service of process in any legal proceeding brought in
any such court.
15.16 Waiver of Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A
TRIAL BY JURY IN ANY DISPUTE ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, ANY RELATED AGREEMENT, OR ANY MATTERS DESCRIBED OR CONTEMPLATED
HEREIN OR THEREIN AND AGREES TO TAKE ANY AND ALL ACTION NECESSARY OR APPROPRIATE
TO EFFECT SUCH WAIVER.
15.17 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same original instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
IMATION CORP.
By: /s/ WILLIAM T. MONAHAN
------------------------------
Name: WILLIAM T. MONAHAN
----------------------------
Title: CEO
---------------------------
IMATION ENTERPRISES CORP.
By: /s/ WILLIAM T. MONAHAN
------------------------------
Name: WILLIAM T. MONAHAN
----------------------------
Title: CEO
---------------------------
IMATION INTERNATIONAL B.V.
By: /s/ WILLIAM T. MONAHAN
------------------------------
Name: WILLIAM T. MONAHAN
----------------------------
Title: CEO
---------------------------
METATEC ACQUISITION CORP.
By: /s/ JEFFREY M. WILKINS
------------------------------
Name: JEFFREY M. WILKINS
----------------------------
Title: PRESIDENT
---------------------------
METATEC INTERNATIONAL B.V.
By: Metatec Corporation, managing director
By: /s/ JEFFREY M. WILKINS
---------------------------
Name: JEFFREY M. WILKINS
-------------------------
Title: CHIEF EXECUTIVE OFFICER
------------------------
METATEC CORPORATION
By: /s/ JEFFREY M. WILKINS
------------------------------
Name: JEFFREY M. WILKINS
----------------------------
Title: CHIEF EXECUTIVE OFFICER
---------------------------
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List of Omitted Schedules
- -------------------------
Schedule 1.1(a) Knowledge
Schedule 1.1(b) Transition Services Agreement
Schedule 2.1(a) Equipment
Schedule 2.1(b) Vehicles
Schedule 2.2(a) Real Property Leases
Schedule 2.2(b) Personal Property Leases
Schedule 2.2(e) Other Contracts
Schedule 2.2(g) Transferred Permits
Schedule 2.3(b) Excluded Contracts
Schedule 2.3(n) Other Excluded Assets
Schedule 3.4 Preliminary Purchase Price Allocation
Schedule 4.3 Seller Conflicts
Schedule 4.4 Financial Statements
Schedule 4.5 Liens
Schedule 4.7 Absence of Certain Changes
Schedule 4.8 Consents and Approvals
Schedule 4.9 Certain Contracts and Leases
Schedule 4.10 Inventory Exceptions
Schedule 4.11 Accounts Receivable Exceptions
Schedule 4.14(a) Employee Matters
Schedule 4.14(b) Contract Employees
Schedule 4.14(c) Breda Affected Employees
Schedule 4.17 Environmental Matters
Schedule 4.18 Litigation
Schedule 5.3(a) Metatec Company Consents
Schedule 5.3(b) Metatec Company Conflicts
Schedule 6.1 Conduct of Business
Schedule 8.4 Required Consents and Approvals
Schedule 8.5 Terms of Breda Lease
Schedule 10.1(a) Selected Menomonie Employees
Schedule 10.1(b) Benefits
Schedule 10.1(c) Severance Benefits
<PAGE> 61
List of Omitted Exhibits
- ------------------------
EXHIBITS
Exhibit A Form of Assignment and Assumption Agreement
Exhibit B Form of International Asset Transfer Agreement
Exhibit C Form of Note
Exhibit D Form of License Agreement
Exhibit E Form of Opinion of Counsel for Imation Companies
Exhibit F Form of Opinion of Van Benthem & Keulen
Exhibit G Form of Opinion of Counsel for the Metatec Companies
Exhibit H Form of Opinion of Trenite Van Doorne
<PAGE> 1
Exhibit 10(a)
LOAN AGREEMENT
DATED AS OF
SEPTEMBER 11, 1998
AMONG
METATEC CORPORATION
AND
BANK ONE, NA,
THE HUNTINGTON NATIONAL BANK,
AND
THE OTHER FINANCIAL INSTITUTIONS FROM TIME TO TIME PARTY HERETO,
AS BANKS,
AND
THE HUNTINGTON NATIONAL BANK,
AS ADMINISTRATIVE AGENT FOR THE BANKS
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION HEADING PAGE
<S> <C>
1. The Loans................................................................................................1
1.1 Extensions of Credit............................................................................1
1.2 Loan Commitment.................................................................................1
1.3 Revolving Loan..................................................................................1
1.4 The Term Loan...................................................................................2
2. Interest Rates, Prepayment; Fees and Costs...............................................................4
2.1 Interest Rates..................................................................................4
2.2 Prime Rate......................................................................................5
2.3 Federal Funds Rate..............................................................................5
2.4 LIBOR Rate......................................................................................5
2.5 Conversion of Advances..........................................................................6
2.6 Interest Calculation and Interest Payment Date..................................................7
2.7 Additional Costs................................................................................7
2.8 Limitation on Requests and Elections............................................................8
2.9 Illegality and Impossibility....................................................................9
2.10 Compensation....................................................................................9
2.11 Increased Capital..............................................................................10
2.12 Survival of Obligations........................................................................10
2.13 Termination and Prepayment.....................................................................10
2.14 Fees...........................................................................................11
2.15 Calculation of LIBOR Margin and Commitment Fee.................................................11
2.16 Costs and Expenses.............................................................................11
2.17 Guarantors.....................................................................................11
3. Warranties and Representations..........................................................................12
3.1 Corporate Organization and Authority...........................................................12
3.2 Borrowing is Legal and Authorized..............................................................12
3.3 Taxes..........................................................................................12
3.4 Compliance with Law............................................................................13
3.5 Financial Statements; Full Disclosure..........................................................13
3.6 Litigation; Adverse Effects....................................................................13
3.7 No Insolvency..................................................................................13
3.8 Government Consent.............................................................................14
3.9 Title to Properties............................................................................14
3.10 ERISA Matters..................................................................................14
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
3.11 Labor Matters..................................................................................15
3.12 No Defaults....................................................................................16
3.13 Environmental Protection.......................................................................16
3.14 No Margin Loans................................................................................16
3.15 Warranties and Representations.................................................................17
4. Company's Business Covenants............................................................................17
4.1 Payment of Taxes and Claims....................................................................17
4.2 Maintenance of Properties and Corporate Existence..............................................17
4.3 Sale of Assets, Merger, Subsidiaries, Tradenames, Conduct of Business..........................18
4.4 Negative Pledge................................................................................18
4.5 Other Borrowings and Contingent Liabilities....................................................19
4.6 Compliance with Laws...........................................................................19
4.7 Sale of Accounts; No Consignment...............................................................19
4.8 Ownership and Management.......................................................................19
4.9 Acquisition of Capital Stock...................................................................20
4.10 Cash Dividends and Other Distributions.........................................................20
4.11 Transactions With Affiliates...................................................................20
4.12 Minimum Consolidated Tangible Net Worth........................................................20
4.13 Leverage Ratio.................................................................................20
4.14 Interest Coverage Ratio........................................................................21
4.15 Fixed Charge Coverage Ratio....................................................................21
4.16 Environmental Compliance and Indemnification...................................................22
4.17 Loans, Advances and Investments................................................................22
4.18 Year 2000 Compatibility........................................................................22
5. Financial Information and Reporting; Regulatory Reports.................................................23
5.1 Financial Information and Reporting............................................................23
5.2 Regulatory Reports.............................................................................24
6. Default.................................................................................................24
6.1 Events of Default..............................................................................24
6.2 Default Remedies...............................................................................25
7. The Administrative Agent................................................................................25
7.1 Appointment....................................................................................25
7.2 Nature of Duties, Exculpation..................................................................26
7.3 Lack of Reliance on the Administrative Agent and Resignation...................................26
7.4 Right to Request Instructions..................................................................27
7.5 Reliance.......................................................................................27
7.6 Relations Among Banks..........................................................................27
7.7 Concerning the Collateral and the Loan Documents...............................................27
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C>
7.8 Setoff.........................................................................................30
7.9 Ratable Sharing................................................................................31
7.10 Indemnification................................................................................31
7.11 The Administrative Agent in its Individual Capacity............................................32
7.12 Amendment and Modifications....................................................................32
7.13 Commitment Percentage..........................................................................32
7.14 Pro Rata Treatment and Payments................................................................32
7.15 Funding of Advances............................................................................33
7.16 Successors and Assigns.........................................................................33
8. Miscellaneous...........................................................................................36
8.1 Notices........................................................................................36
8.2 Access to Accountants..........................................................................37
8.3 Confidentiality................................................................................37
8.4 Reproduction of Documents......................................................................37
8.5 Survival, Successors and Assigns...............................................................37
8.6 Amendment and Waiver, Duplicate Originals......................................................38
8.7 Uniform Commercial Code and Generally Accepted Accounting Principles...........................38
8.8 Enforceability and Governing Law...............................................................38
8.9 Waiver of Right to Trial by Jury...............................................................39
8.10 Advertising....................................................................................39
8.11 Conditions Precedent to the Loans..............................................................39
8.12 No Consequential Damages.......................................................................39
8.13 Indemnity......................................................................................40
8.14 Conditions Precedent to Subsequent Extensions of Credit........................................40
8.15 Termination....................................................................................40
8.16 Index of Definitions...........................................................................41
</TABLE>
EXHIBITS
Exhibit A......... Notice of Borrowing
Exhibit B-1....... Revolving Note
Exhibit B-2....... Term Note
Exhibit C......... Compliance Certificate
SCHEDULES
Schedule 3.6...... Schedule of Pending or Threatened Litigation
Schedule 3.10..... Schedule of ERISA Plans
Schedule 4.3...... Schedule of Subsidiaries
Schedule 4.4...... Schedule of Permitted Liens
Schedule 4.5...... Schedule of Existing Indebtedness
iii
<PAGE> 5
LOAN AGREEMENT
This Loan Agreement (this "Agreement") is entered into at Columbus,
Ohio, as of the 11th day of September, 1998, by and among (a) Metatec
Corporation, a Florida corporation ("Company"), as borrower, (b) the financial
institutions from time to time party hereto, as lenders, whether by execution of
this Agreement or an assignment and acceptance acceptable to the Administrative
Agent (collectively, the "Banks" and individually a "Bank"), and (c) The
Huntington National Bank ("Huntington"), as Administrative Agent for the Banks
(Huntington in such capacity, the "Administrative Agent").
1. THE LOANS.
1.1. EXTENSIONS OF CREDIT. Subject to the terms and conditions hereof,
including, without limitation, the individual limitations set forth below, the
Banks, severally, will extend credit to the Company up to the aggregate sum of
$55,000,000.00 (the "Loans"). Subject to the terms and conditions hereof, the
Loans shall be comprised of (a) revolving loans and advances to the Company,
which each Bank shall extend severally, and not jointly, up to such Bank's Loan
Commitment, which revolving loans and advances in the aggregate shall not exceed
the maximum principal sum of $25,000,000.00 (the "Revolving Loans"), and (b) a
term loan facility to the Company, which each Bank shall extend severally, and
not jointly, up to such Bank's Loan Commitment, in an aggregate amount which
shall not exceed $30,000,000.00 (the "Term Loan"). The Company's right to obtain
advances under the Revolving Loan shall terminate on September 10, 2003. Each
advance requested by the Company under the Revolving Loan shall be accompanied
by such documents or communications as may be acceptable to the Administrative
Agent in its sole good faith discretion.
1.2. LOAN COMMITMENT. As used herein with respect to any Bank, "Loan Commitment"
means with respect to the principal balance of (a) the Revolving Loan, the
product of (i) such Bank's Commitment Percentage (as hereinafter defined)
multiplied by (ii) $25,000,000.00, and (b) the Term Loan, the product of (i)
such Bank's Commitment Percentage multiplied by (ii) $30,000,000.00.
1.3. REVOLVING LOAN.
(a) FREQUENCY AND AMOUNT OF ADVANCES. Subject to the terms and
conditions hereof, the Company may borrow and repay any outstanding
advance under the Revolving Loan on any Business Day (as hereinafter
defined), and any amounts so repaid may be re-borrowed. "Business Day"
means a day which is not a Saturday or Sunday or a legal holiday and on
which Huntington is not required by law or other governmental action to
close in Ohio.
(b) NOTICES OF BORROWING. When the Company desires to borrow hereunder,
it shall deliver to the Administrative Agent, no later than 12:00 noon
(Columbus, Ohio time), an
<PAGE> 6
irrevocable notice of borrowing in substantially the form set forth in
EXHIBIT A attached hereto or in such other form as may be satisfactory
to the Administrative Agent, (i) in the case of the funding of or the
conversion to a Prime Rate Advance (as hereinafter defined) or a
Federal Funds Rate Advance (as hereinafter defined) made in connection
with the Revolving Loan, on the Business Day immediately preceding the
proposed funding or conversion date, and (ii) in the case of the
funding or the continuation of or the conversion to LIBOR Rate Advance
(as hereinafter defined) made in connection with the Revolving Loan, at
least three Business Days in advance of the proposed funding,
continuation or conversion date. Such notice of borrowing shall specify
the proposed advance, continuation or conversion date, the amount of
the proposed advance, whether the proposed advance will be a Prime Rate
Advance/Federal Funds Rate Advance or a LIBOR Rate Advance, and, in the
case of a LIBOR Rate Advance, the requested Interest Period. The notice
shall also set forth instructions for the disbursement of the proceeds
of the proposed Revolving Loan advance.
(c) OBLIGATION TO FUND REVOLVING LOAN ADVANCES. The Banks, or any of
them, shall have no obligation to advance any sums pursuant to the
Revolving Loan upon the occurrence and continuance of an Event of
Default (as hereinafter defined) or upon the occurrence of an event
which, but for the giving of notice or the lapse of time or both, would
constitute an Event of Default.
(d) USE OF PROCEEDS. The net proceeds of the Revolving Loan shall be
used for general corporate purposes, including, without limitation,
repayment of existing indebtedness to Huntington, and, if necessary, to
partially fund the acquisition by the Company or its subsidiaries of
the CD-ROM services business of Imation Corp. (the "Imation Asset
Purchase").
(e) EVIDENCE OF INDEBTEDNESS. The Revolving Loan shall be evidenced by
a note or by one or more notes (collectively, the "Revolving Note")
subsequently executed in substitution therefor, each in substantially
the form set forth in EXHIBIT B-1 attached hereto.
(f) INTEREST. Interest accrued with respect to the Revolving Loan shall
be due and payable on each Interest Payment Date (as hereinafter
defined).
(g) MATURITY. The unpaid principal balance of the Revolving Loan,
together with all accrued and unpaid interest and all other outstanding
obligations arising in connection with the Revolving Loan, shall be
paid in full on the earlier of acceleration or September 11, 2003.
1.4. THE TERM LOAN.
(a) SINGLE ADVANCE. The Company shall borrow the proceeds of the Term
Loan in a single advance. Amounts repaid with respect to the Term Loan
may not be re-borrowed.
2
<PAGE> 7
(b) NOTICE OF BORROWING. No later than 12:00 noon (Columbus, Ohio time)
at least three Business Days in advance of the execution of this
Agreement, the Company shall deliver to the Administrative Agent an
irrevocable notice of borrowing in substantially the form set forth in
EXHIBIT A or in such other form as may be satisfactory to the
Administrative Agent. Such notice of borrowing shall specify the total
amount of the proposed Term Loan advance, the amount of the proposed
Term Loan advance that is to be a Prime Rate Advance/Federal Funds Rate
Advance, the amount of the proposed Term Loan advance that is to be a
LIBOR Rate Advance and, in the case of a LIBOR Rate Advance, the
requested Interest Period. The notice shall also set forth instructions
for the disbursement of the proceeds of the proposed Term Loan advance.
Subsequent irrevocable notices by the Company to the Administrative
Agent concerning the continuation of a Term Loan LIBOR Rate Advance as
such or the conversion of a Term Loan Prime Rate Advance/Federal Funds
Rate Advance to a LIBOR Rate Advance shall be in substantially the form
set forth in EXHIBIT A or in such other form as may be satisfactory to
the Administrative Agent, and shall be delivered by the Company to the
Administrative Agent no later than 12:00 noon (Columbus, Ohio time) at
least three Business Days in advance of such a continuation or
conversion and shall specify the requested Interest Period. Subsequent
irrevocable notices by the Company to the Administrative Agent
concerning the conversion of a Term Loan LIBOR Rate Advance to a Term
Loan Prime Rate Advance/Federal Funds Rate Advance shall be in
substantially the form set forth in EXHIBIT A or in such other form as
may be satisfactory to the Administrative Agent, and shall be delivered
by the Company to the Administrative Agent no later than 12:00 noon
(Columbus, Ohio time) on the Business Day immediately preceding the
proposed conversion date.
(c) USE OF PROCEEDS. The net proceeds of the Term Loan shall be used to
partially fund the Imation Asset Purchase.
(d) EVIDENCE OF INDEBTEDNESS. The Term Loan shall be evidenced by a
note or by one or more notes (collectively, the "Term Note")
subsequently executed in substitution therefor, each in substantially
the form set forth in EXHIBIT B-2 attached hereto. (The Revolving Note
and the Term Note are hereinafter sometimes collectively referred to as
the "Notes.")
(e) INTEREST. Interest accrued with respect to the Term Loan shall be
due and payable on each Interest Payment Date.
(f) AMORTIZATION AND MATURITY. The Term Loan shall be paid as follows:
The unpaid balance of the principal sum of each Term Note
shall be due and payable in 20 quarterly installments, beginning on
December 31, 1998, and continuing on the last day of each quarter
thereafter. The amount of each such quarterly installment due for each
year during the term of this Agreement shall be determined in
accordance with the following chart:
<TABLE>
<S> <C>
YEAR PERCENT OF ORIGINAL PRINCIPAL DUE
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
One 10% / 4
Two 20% / 4
Three 20% / 4
Four 25% / 4
Five 25% / 4
</TABLE>
The final installment of the principal sum of each Term Note shall be
for the unpaid balance thereof. The unpaid balance of the principal sum
of each Term Note shall be due and payable at maturity, which shall
occur on the earlier of September 11, 2003 (the "Termination Date"), or
the date of the acceleration of the principal sum of such Term Note.
In addition to the foregoing scheduled payments of principal
concerning the Term Notes, commencing September 11, 1999, and
continuing thereafter on each anniversary date of this Agreement, there
shall be due and payable by the Company to the Administrative Agent an
additional payment of principal equal to 50% of the Excess Cash Flow
(as hereinafter defined) of the Company for the preceding twelve
months. As used in this Agreement, "Excess Cash Flow" means EBITDA (as
defined in Section 4.13 of this Agreement, except that extraordinary
losses and other non-recurring expenses shall not be added back for
purposes of calculating EBITDA under this Subsection) MINUS debt
service (principal, interest and all related costs, expenses and
charges), cash taxes, CAPEX (as defined in Section 4.13 of this
Agreement) and working capital changes, all as determined in accordance
with generally accepted accounting principles consistently applied
("GAAP"). Additional payments made under this paragraph shall be
applied to scheduled payments of principal under the preceding
paragraph in inverse order of maturity.
2. INTEREST RATES, PREPAYMENT; FEES AND COSTS.
2.1. INTEREST RATES.
(a) All advances under the Loans shall bear interest on the unpaid
principal amount thereof from the date such advances are made until
paid in full as follows: at the election of the Company, at (i) the
higher of (A) the Prime Rate (as hereinafter defined) from time to time
in effect, with each change in the Prime Rate automatically and
immediately changing the interest rate on the Loans without notice to
the Company, or (B) the Federal Funds Margin (as hereinafter defined)
PLUS the Federal Funds Rate (as hereinafter defined) from time to time
in effect, with each change in the Federal Funds Rate automatically and
immediately changing the interest rate on the Loans without notice to
the Company, or (ii) the LIBOR Margin (as hereinafter defined) PLUS the
LIBOR Rate (as hereinafter defined). With respect to each outstanding
and new LIBOR Rate Advance, the LIBOR Margin shall be adjusted
automatically on the first business day of the next month following the
receipt by the Administrative Agent and each of the Banks of the
Company's quarterly financial statements (as required in Section 5.1 of
this Agreement), based upon the pricing grid set forth in Section 2.15
of this Agreement.
4
<PAGE> 9
(b) The higher of (i) the Prime Rate or (ii) the Federal Funds Margin
PLUS the Federal Funds Rate shall be applicable at all times prior to
the Termination Date to so much of the outstanding principal balances
of the Loans as is not subject to an alternative interest rate option
elected in the manner provided in this Agreement.
2.2. PRIME RATE. "Prime Rate" means, with respect to any Prime Rate Advance (as
hereinafter defined), for any period, a variable commercial lending rate of
interest per annum as determined from time to time by Huntington, and designated
as Huntington's "Prime Rate," based upon its consideration of economic, money
market, business and competitive factors. The Company waives any right to claim
that the Prime Rate is an interest rate other than that rate designated by
Huntington as its "Prime Rate" on the grounds that: (i) such rate may or may not
be published or otherwise made known to the Company; or (ii) Huntington may make
loans to certain borrowers at interest rates which are lower than Huntington's
"Prime Rate."
"Prime Rate Advance" means any amount borrowed as part of the Loans
that bears interest at a rate calculated with reference to the Prime Rate.
2.3. FEDERAL FUNDS RATE. "Federal Funds Rate" means, with respect to any Federal
Funds Rate Advance (as hereinafter defined), for any period, a variable rate of
interest per annum equal for each day during such period to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day which is a Business Day, the average of the quotations for such day on such
transactions received by Huntington from three Federal Funds brokers of
recognized standing selected by Huntington.
"Federal Funds Rate Advance" means any amount outstanding as part of
the Loans that bears interest at a rate calculated with reference to the Federal
Funds Rate. "Federal Funds Margin" means 50 basis points per annum.
2.4. LIBOR RATE. "LIBOR Rate" means, with respect to any LIBOR Rate Advance and
the related Interest Period, the per annum rate that is obtained by dividing:
(a) the actual or estimated arithmetic mean of the per annum rates of interest
at which deposits in U.S. dollars for the related Interest Period and in an
aggregate amount comparable to the amount of such LIBOR Rate Advance are being
offered to U.S. banks by one or more prime banks in the London interbank market,
as determined by the Administrative Agent in its sole good faith discretion
based upon reference to information appearing in Dow Jones Markets, in the
section captioned "British Bankers Assoc. Interest Settlement Rates," or any
comparable index selected by the Administrative Agent, the obtaining of rate
quotations, or any other reasonable procedure, at approximately 11:00 a.m.
London, England time, on the second LIBOR Business Day prior to the first day of
the related Interest Period, all as determined by the Administrative Agent, such
interest rate to be rounded up to the nearest whole multiple of 1/16 of 1% per
annum, by (b) a percentage equal to 100%, MINUS the LIBOR Reserve Percentage.
The LIBOR Rate shall be adjusted automatically on and as of the effective date
of any change in the LIBOR Reserve Percentage.
5
<PAGE> 10
"LIBOR Reserve Percentage" means, for any day, that percentage which is
in effect on such day, as prescribed by the Federal Reserve Board for
determining the maximum reserve requirement (including, without limitation, any
emergency, supplemental, or other marginal reserve requirement) for a member
bank of the Federal Reserve System in respect of "Certificate of Deposit
Liabilities" or in respect of any other category of liabilities which includes
deposits by reference to which the interest rate on LIBOR loans is determined or
any category of extensions of credit or other assets which includes loans by a
non-United States office of any bank to United States residents), or with
respect to any "Eurocurrency Liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System, or any other regulations of any
governmental authority having jurisdiction with respect thereto.
"LIBOR Rate Advance" means any amount borrowed as part of the Loans
that bears interest at a rate calculated with reference to the LIBOR Rate. Each
LIBOR Rate Advance shall be reserve adjusted, including all types of reserve
insurance and brokerage costs. "LIBOR Business Day" means, with respect to any
LIBOR Rate Advance, a day which is both a day on which the Administrative Agent
is open for business and a day on which transactions in U.S. dollar deposits are
effected in the London interbank market. The "LIBOR Margin" shall be calculated
in accordance with the pricing grid set forth in Section 2.15 of this Agreement.
Each LIBOR Rate Advance shall be in a minimum amount of $1,000,000.00
and integral multiples of $250,000.00 in excess thereof. No more than five LIBOR
Rate Advances shall be outstanding at any time in connection with the Revolving
Loan, and no more than five LIBOR Rate Advances shall be outstanding at any time
in connection with the Term Loan.
2.5. CONVERSION OF ADVANCES. An outstanding advance may only be converted on the
last day of the then current Interest Period (if applicable) with respect to
such advance. Upon the conversion of a LIBOR Rate Advance to a Prime Rate
Advance/Federal Funds Rate Advance, the continuation of a LIBOR Rate Advance as
such or the conversion of a Prime Rate Advance/Federal Funds Rate Advance to a
LIBOR Rate Advance, the Company shall comply with the provisions of Section
1.3(b) and/or 1.4(b)as applicable, in the same manner as if an initial such
advance were being made. If the Company shall fail to timely deliver such a
notice with respect to any outstanding LIBOR Rate Advance, the Company shall be
deemed to have elected to convert the LIBOR Rate Advance to a Prime Rate
Advance/Federal Funds Rate Advance on the last day of the then current Interest
Period existing with respect to such LIBOR Rate Advance.
2.6. INTEREST CALCULATION AND INTEREST PAYMENT DATE. "Interest Period"
means:
(a) With respect to any Prime Rate Advance/Federal Funds Rate Advance,
an initial period commencing, as the case may be, on the day such an
advance shall be made by the Administrative Agent or any of the Banks,
or on the day of conversion of any then outstanding advance to an
advance of such type, and ending on the day of conversion to an advance
of a different type.
6
<PAGE> 11
(b) With respect to any LIBOR Rate Advance, an initial period
commencing, as the case may be, on the day such an advance shall be
made by the Administrative Agent or any of the Banks, or on the day on
which a LIBOR Rate Advance is continued as such, or on the day of
conversion of any then outstanding advance to an advance of such type,
and ending on the date one, two, three or six months thereafter, all as
the Company may elect pursuant to this Agreement; provided, that (i)
any Interest Period with respect to a LIBOR Rate Advance that shall
commence on the last LIBOR Business Day of the calendar month (or on
any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last LIBOR
Business Day of the appropriate subsequent calendar month; and (ii)
each Interest Period with respect to a LIBOR Rate Advance that would
otherwise end on a day which is not a LIBOR Business Day shall end on
the next succeeding LIBOR Business Day or, if such next succeeding
LIBOR Business Day falls in the next succeeding calendar month, on the
next preceding LIBOR Business Day.
Notwithstanding the provisions of (a) and (b) above, no Interest Period
shall be permitted which would end after the Termination Date.
Interest with respect to all Prime Rate Advances made in connection
with the Loans shall be calculated on a 365/366-day year basis and shall be
based on the actual number of days which elapse during the interest calculation
period. Interest with respect to all Federal Funds Rate Advances and LIBOR Rate
Advances made in connection with the Loans shall be calculated on a 360-day year
basis and shall be based on the actual number of days which elapse during the
interest calculation period. "Interest Payment Date" means (a) the last day of
each quarter; and (b) the last day of each Interest Period in the case of a
LIBOR Rate Advance, and the ninetieth day of such Interest Period if such
Interest Period is longer than 90 days. The Company agrees to pay in arrears to
the Administrative Agent all interest accrued with respect to the Loans at the
times herein specified.
Upon the occurrence of any Event of Default, interest shall thereafter
accrue on the outstanding principal balance of all advances made pursuant to
this Agreement at a rate equal to 300 basis points in excess of the Prime Rate.
2.7. ADDITIONAL COSTS. In the event that any applicable law, treaty, rule or
regulation (whether domestic or foreign) now or hereafter in effect, or any
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof, or compliance by the
Administrative Agent or any of the Banks with any request or directive of any
such authority (whether or not having the force of law) (each of the foregoing
being referred to as a "Regulatory Requirement"), shall (a) affect the basis of
taxation of payments to the Administrative Agent or any of the Banks of any
amounts payable by the Company under this Agreement (other than taxes imposed on
the overall net income of the Administrative Agent or any of the Banks by the
jurisdiction, or by any political subdivision or taxing authority of any such
jurisdiction, in which the Administrative Agent or any of the Banks has its
principal office), or (b) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of, or credit extended by the Administrative
7
<PAGE> 12
Agent or any of the Banks, or (c) shall impose any other condition, requirement
or charge with respect to this Agreement or the Loans (including, without
limitation, any capital adequacy requirement, any requirement which affects the
manner in which the Administrative Agent or any of the Banks allocates capital
resources to its commitments or any similar requirement), and the result of any
of the foregoing is to increase the cost to the Administrative Agent or any of
the Banks of making or maintaining the Loans or any advance thereunder, to
reduce the amount of any sum receivable by the Administrative Agent or any of
the Banks thereon, or to reduce the rate of return on the Administrative Agent's
or any of the Banks' capital, then provided such Regulatory Requirement is then
being applied or directed to all banks or to a class of banks, and not just to
one or more banks as a result of their non-compliance with existing laws,
treaties, rules or regulations, or existing directive of an authority
interpreting or administering the same, the Company shall pay to the
Administrative Agent or any of the Banks, as the case may be, from time to time,
upon request of the Administrative Agent or any of the Banks, additional amounts
sufficient to compensate the Administrative Agent or any of the Banks, as the
case may be, for such increased cost, reduced sum receivable or reduced rate of
return (collectively, "Reduced Earnings") to the extent the Administrative Agent
or any of the Banks, as the case may be, is not compensated therefor in the
computation of the interest rates applicable to the Loans, and provided such
Reduced Earnings are not the result of a decline in the economic performance the
Administrative Agent or any of the Banks, as the case may be, not resulting from
a Regulatory Requirement. A detailed statement as to the amount of such
increased cost, reduced sum receivable or reduced rate of return, prepared in
good faith and submitted by the Administrative Agent or any of the Banks, as the
case may be, to the Company, shall be conclusive and binding for all purposes
relative hereto, absent error in computation.
2.8. LIMITATION ON REQUESTS AND ELECTIONS. Notwithstanding any other provision
of this Agreement to the contrary, if, upon receiving a request for an advance
or a request for a continuation of an advance as an advance of the then existing
type or conversion of an advance to an advance of another type (a) in the case
of any LIBOR Rate Advance, deposits in dollars for periods comparable to the
Interest Period elected are not available to the Administrative Agent in the
London interbank or secondary market, or (b) the LIBOR Rate will not accurately
cover the cost to the Administrative Agent of making or maintaining the related
LIBOR Rate Advance or (c) by reason of national or international financial,
political or economic conditions or by reason of any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect, or
the interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by the
Administrative Agent or any of the Banks with any request or directive of such
authority (whether or not having the force of law), including, without
limitation, exchange controls, it is impracticable, unlawful or impossible for
the Administrative Agent (i) to make the relevant LIBOR Rate Advance or (ii) to
continue such advance as a LIBOR Rate Advance or (iii) to convert an advance to
a LIBOR Rate Advance, then the Company shall not be entitled, so long as such
circumstances continue, to request a LIBOR Rate Advance or a continuation of or
conversion to such advance from the Administrative Agent. In the event that such
circumstances no longer exist, the Administrative Agent shall again consider
requests for LIBOR Rate Advances of the affected type and requests for
continuations of and conversions to such advances of the affected type.
8
<PAGE> 13
2.9. ILLEGALITY AND IMPOSSIBILITY. In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in effect, or
any interpretation or administration thereof by any governmental authority
charged with the interpretation or administration thereof, or compliance by the
Administrative Agent or any of the Banks with any request or directive of such
authority (whether or not having the force of law), including, without
limitation, exchange controls, shall make it unlawful for the Administrative
Agent or any of the Banks to maintain any advance under this Agreement, the
Company shall, upon receipt of notice thereof from the Administrative Agent,
repay in full the then outstanding principal amount of all such advances made by
the Banks together with all accrued interest thereon to the date of payment and
all amounts due to the Banks under Section 2.1, (a) on the last day of the then
current Interest Period, if any, applicable to such advance, if the
Administrative Agent or any of the Banks may lawfully continue to maintain such
advance to such day, or (b) immediately if the Administrative Agent or any of
the Banks may not continue to maintain such advance to such day. This provision
is for the benefit of the Administrative Agent and the Banks, and is not
intended to increase the yield to the Administrative Agent or any of the Banks
above the rates of interest provided for in this Agreement. The Administrative
Agent and the Banks shall use reasonable lawful efforts to avoid the impact of
such law, rule, treaty or regulation. This Section 2.9 shall apply only as long
as such illegality exists. As an alternative to the repayment obligation
provided in this Section 2.9, the Company may, at its option, and at the time
provided in this Section 2.9, convert any affected advance to a Prime Rate
Advance/Federal Funds Rate Advance.
2.10. COMPENSATION. In addition to all amounts required to be paid by the
Company pursuant to this Section 2, the Company shall compensate the
Administrative Agent and the Banks, and each of them, upon demand, for all
losses, expenses and liabilities (including, without limitation, any loss or
expense incurred by reason of the liquidation or reemployment of deposits or
other funds acquired by the Administrative Agent or any of the Banks to fund or
maintain the LIBOR Rate Advances to the Company) which the Administrative Agent
or any of the Banks may sustain (a) if for any reason an advance, conversion
into or continuation of such an advance does not occur on the date specified
therefor after notice thereof is given to the Administrative Agent, (b) if for
any reason any LIBOR Rate Advance is prepaid on a date which is not the last day
of the applicable Interest Period, (c) as a consequence of a conversion of a
LIBOR Rate Advance to a Prime Rate Advance/Federal Funds Rate Advance as a
result of any event indicated in Sections 2.8 or 2.9, or (d) as a consequence of
any failure by the Company to repay a LIBOR Rate Advance when required by the
terms hereof. The Company shall reimburse the Administrative Agent and the
Banks, or any of them, as the case may be, on demand for any resulting loss or
expense incurred by such entity, determined in such entity's reasonable opinion,
including, without limitation, any loss incurred in obtaining, liquidating or
employing deposits or other sources of funding from third parties or funding
sources. A detailed statement as to the amount of such loss or expense, prepared
in good faith and submitted by such entity to the Company shall be conclusive
and binding for all purposes absent manifest error in computation.
2.11. INCREASED CAPITAL. If after the date hereof the Banks determine in good
faith that (i) the adoption or implementation of or any change in or in the
interpretation or administration of any law or regulation or any guideline or
request from any central bank or other governmental authority or
quasi-governmental authority exercising jurisdiction, power or control over the
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<PAGE> 14
Banks or banks or financial institutions generally (whether or not having the
force of law), compliance with which affects the amount of capital required or
expected to be maintained by the Banks, or any of them, or any corporation
controlling any of the Banks and (ii) the amount of such capital is increased by
or based upon the making or maintenance by any of the Banks of the Loans, any
participation in or obligation to participate in the Loans, or other advances
made hereunder or the existence of any obligation to make the Loans, then, in
any such case, upon written demand by the Administrative Agent, the Company
shall immediately pay to the Administrative Agent, for the ratable benefit of
the Banks, from time to time as specified by the Administrative Agent,
additional amounts sufficient to compensate the Banks, or any of them, therefor.
Such demand shall be accompanied by a statement as to the amount of such
compensation and include a summary of the basis for such demand with detailed
calculations. Such statement shall be conclusive and binding for all purposes,
absent manifest error in computation.
2.12. SURVIVAL OF OBLIGATIONS. The provisions of Sections 2.7 and 2.10 shall
survive the termination of this Agreement and the payment in full of all Notes
outstanding pursuant hereto.
2.13. TERMINATION AND PREPAYMENT. The Company shall have the option at all times
to permanently terminate the unused portion of the Revolving Loan, in whole or
in part, by providing to the Administrative Agent three Business Days' prior
written notice of the effective date and amount of such termination; provided,
however, that each partial termination of an unused portion of the Revolving
Loan shall be in a minimum amount of $1,000,000.00 or in a multiple of
$500,000.00 in excess thereof. The Company shall have the option at all times to
prepay the Term Loan, in whole or in part, by providing to the Administrative
Agent three Business Days' prior written notice of the effective date and amount
of such prepayment; provided, however, that each partial prepayment of the Term
Loan shall be in a minimum amount of $1,000,000.00 or in a multiple of
$1,000,000.00, all such amounts to be applied to scheduled principal payments
under the Term Note in inverse order of maturity. In addition, on the effective
date of any such termination of all or any portion of the Revolving Loan or any
such prepayment of all or any portion of the Term Loan, the Company shall pay to
the Administrative Agent and the Banks all sums required under Sections 2.7,
2.10 and 2.11 of this Agreement.
2.14. FEES. On the date of this Agreement and on each anniversary date
thereafter through and including September 11, 2002, the Company shall pay to
the Administrative Agent, for the sole benefit of the Administrative Agent, a
fee ("Agent's Fee") in the amount of $15,000.00. The Company further agrees to
pay to the Administrative Agent, for the ratable benefit of the Banks, a
commitment fee ("Commitment Fee") on the average daily unused portion of the
Revolving Loan at an annual rate calculated in accordance with the pricing grid
set forth in Section 2.15 of this Agreement. The Commitment Fee shall be payable
quarterly in arrears beginning on September 30, 1998, and continuing on the last
day of each quarter thereafter throughout the term of this Agreement and at
maturity.
All fees shall be fully earned by the Bank pursuant to the foregoing
provisions of this Agreement on the due date thereof and, except as otherwise
set forth herein or required by applicable law, shall not be subject to rebate,
refund or proration. All fees provided for in this
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<PAGE> 15
Section 2.14 shall be deemed to be for compensation for services and are not,
and shall not be deemed to be, interest or any other charge for the use,
forbearance or detention of money.
2.15. CALCULATION OF LIBOR MARGIN AND COMMITMENT FEE. The LIBOR Margin and the
Commitment Fee shown below are based on the ratio of Funded Debt (as hereinafter
defined) to EBITDA MINUS CAPEX (as defined in Section 4.13 of this Agreement).
(EBITDA and CAPEX shall be determined on a pro forma basis for the first twelve
months after the date of this Agreement. As used in this Agreement, "pro forma"
means that the applicable calculation shall be based on the assumption that the
Imation Asset Purchase occurred twelve months prior to the execution of this
Agreement) "Funded Debt" means the Company's obligations for borrowed
(outstanding) money, capitalized leases, letters of credit and guarantees. The
pricing grid is as follows:
<TABLE>
<CAPTION>
RATIO LIBOR MARGIN COMMITMENT FEE
<S> <C> <C>
x[greater than]1.00 .750% .125%
1.00[greater than]=x[greater than]1.50 .875% .15%
1.50[greater than]=x[greater than]2.00 1.00% .20%
2.00[greater than]=x[greater than]2.50 1.25% .25%
2.50[greater than]x 1.50% .30%
</TABLE>
2.16. COSTS AND EXPENSES. The Company further agrees to pay all reasonable costs
and expenses incidental to or in connection with (i) the Loans or any services
provided by the Administrative Agent or the Banks, or any of them, in connection
therewith; (ii) the enforcement of the rights of the Administrative Agent or any
of the Banks in connection with the Loans; (iii) any amendment or modification
of this Agreement or any other loan documents; and (iv) any litigation, contest,
dispute, proceeding or action in any way relating to this Agreement, whether any
of the foregoing are incurred prior to or after the occurrence of an Event of
Default or prior to or after the rendering of a judgment, irrespective of
whether any such Event of Default or rendering of a judgment occurs prior to or
after maturity. Such costs shall include, but not be limited to, reasonable fees
and out-of-pocket expenses of counsel for the Administrative Agent and the
Banks, recording fees, inspection fees, revenue stamps and note and mortgage
taxes, if any. (All indebtedness, debts and liabilities including, but not
limited to, principal, interest, prepayment fees, late charges, collection
costs, attorneys' fees and expenses, of the Company to the Administrative Agent
and the Banks, and each of them, arising under or in connection with this
Agreement, the Notes, any draft, interest rate contract, currency agreement,
application for letter of credit or otherwise, and any and all renewals of or
substitutes therefor or any other document, instrument or agreement executed in
connection with the foregoing are hereafter referred to collectively as the
"Obligations.")
2.17. GUARANTORS. Metatec/Discovery Systems, Inc., Metatec Acquisition Corp. and
Metatec Worldwide, Inc., all Ohio corporations (each separately, a "Guarantor,"
and collectively, the "Guarantors"), shall unconditionally guarantee the prompt
and full payment and complete performance of the Company's obligations arising
in connection with the Loans.
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<PAGE> 16
3. WARRANTIES AND REPRESENTATIONS. In order to induce the Administrative Agent
and the Banks to enter into this Agreement and to make the Loans and the other
financial accommodations to the Company described herein, the Company represents
and warrants to the Administrative Agent and to each of the Banks that each of
the following statements is true and correct:
3.1. CORPORATE ORGANIZATION AND AUTHORITY. The Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida; (b) has all requisite corporate power and authority and all material
licenses and permits necessary to own and operate its properties and to carry on
its business as now conducted and as presently proposed to be conducted, except
where the failure to obtain any such license or permit will not have a Material
Adverse Effect; and (c) is not doing business or conducting any activity in any
jurisdiction in which it has not duly qualified and become authorized to do
business, except where the failure to so qualify will not have a Material
Adverse Effect. "Material Adverse Effect" means a material adverse effect upon
(i) the business, condition (financial or otherwise), operations, performance or
properties of the Company, (ii) the ability of the Company to perform its
obligations under this Agreement or any document, agreement, guaranty or
instrument executed in connection herewith, or (iii) the rights and remedies of
the Administrative Agent or any of the Banks under this Agreement, or any
document, agreement, guaranty or instrument executed in connection herewith.
3.2. BORROWING IS LEGAL AND AUTHORIZED. (a) The Board of Directors of the
Company has duly authorized the execution and delivery of this Agreement and of
the Notes and documents contemplated herein, and this Agreement, the Notes and
other documents executed in connection with this Agreement will constitute valid
and binding obligations of the Company enforceable in accordance with their
respective terms; (b) the execution of this Agreement and the Notes and all
documents and the compliance by the Company with all the provisions of this
Agreement (i) are within the corporate powers of the Company; and (ii) are legal
and will not conflict with, result in any breach in any of the provisions of,
constitute a default under, or result in the creation of any lien or encumbrance
upon any property of the Company under the provisions of, any agreement, charter
instrument, bylaw, or other instrument to which the Company is a party or by
which it may be bound; (c) there are no limitations in any indenture, contract,
agreement, mortgage, deed of trust or other agreement or instrument to which the
Company is now a party or by which the Company may be bound (except those in
favor of Huntington) with respect to the payment of principal or interest on any
indebtedness, or the Company's ability to incur indebtedness, including the
Notes to be executed in connection with this Agreement.
3.3. TAXES. All tax returns required to be filed by the Company in any
jurisdiction have in fact been filed, and all taxes, assessments, fees and other
governmental charges upon the Company, or upon any of its properties, which are
required to be paid pursuant to Section 4.1 have been paid. The Company does not
know of any proposed additional tax assessment against it. The accruals for
taxes on the books of the Company for its current fiscal period are adequate.
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<PAGE> 17
3.4. COMPLIANCE WITH LAW. The Company (a) is not in violation of any laws,
ordinances, governmental rules or regulations to which it is subject, including,
without limitation, any laws, rulings or regulations relating to the Employee
Retirement Income Security Act of 1974 or Section 4975 of the Internal Revenue
Code, and (b) has not failed to obtain any licenses, permits, franchises or
other governmental or environmental authorizations necessary to the ownership of
its properties or to the conduct of its business, except to the extent that any
such violation or failure does not have or is not likely to have a Material
Adverse Effect.
3.5. FINANCIAL STATEMENTS; FULL DISCLOSURE. The audited financial statements of
the Company for the fiscal year ending December 31, 1997, which have been
supplied to the Administrative Agent and to the Banks, have been prepared in
accordance with GAAP and fairly represent the financial condition of the Company
as of such date. The financial analyses, reports, business plans, projections
and pro forma financial statements of the Company which have been supplied to
the Administrative Agent are based on reasonable, good faith assumptions about
the Company's financial condition and projected financial condition as of the
dates of such financial information or projections. No adverse change has
occurred which would materially and adversely alter any such analyses, reports,
business plans, financial statements, projections or assumptions. The financial
statements, analyses, projections and other reports referred to in this Section
3.5 do not, nor does this Agreement or any written statement furnished by the
Company to the Administrative Agent or to the Banks in connection with obtaining
the Loans, contain any untrue statement of a material fact, each as of the date
thereof.
3.6. LITIGATION; ADVERSE EFFECTS. Except as set forth in Schedule 3.6 attached
hereto, there is no action, suit, audit, proceeding, administrative proceeding,
investigation or arbitration (or series of related actions, suits, audits,
proceedings, investigations or arbitrations) before or by any governmental
authority or private arbitrator pending or, to the knowledge of the Company,
threatened against the Company or any property of the Company (i) challenging
the validity or the enforceability of any of this Agreement, or any loan
document, agreement, or instrument executed in connection herewith, or (ii)
which has had, shall have or is reasonably likely to have a Material Adverse
Effect. The Company is not subject to or in default with respect to any final
judgment, writ, injunction, restraining order or order of any nature, decree,
rule or regulation of any court or governmental authority, in each case which
shall have or is likely to have a Material Adverse Effect.
3.7. NO INSOLVENCY. On the date of this Agreement and after giving effect to all
indebtedness of the Company (including the Loans), the Company (a) will be able
to pay its obligations as they become due and payable; (b) has assets, the
present fair saleable value of which exceeds the amount that will be required to
pay its probable liability on its obligations as the same become absolute and
matured; (c) has sufficient property, the sum of which at a fair valuation
exceeds all of its indebtedness; and (d) will have sufficient capital to engage
in its business. The determination of the foregoing for the Company takes into
account all of the Company's properties and liabilities, regardless of whether,
or the amount at which, any such property or liability is included on a balance
sheet of the Company prepared in accordance with GAAP, including property such
as contingent contribution or subrogation rights, business prospects, and
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<PAGE> 18
goodwill. The determination of the sum of the Company's properties at the
present fair salable value has been made on a going concern basis.
3.8. GOVERNMENT CONSENT. Neither the nature of the Company or of its business or
properties, nor any relationship between the Company and any other entity or
person, nor any circumstance in connection with the execution of this Agreement,
is such as to require a consent, approval or authorization of or filing,
registration or qualification with, any governmental authority on the part of
the Company as a condition to the execution and delivery of this Agreement and
the Notes and documents contemplated herein.
3.9. TITLE TO PROPERTIES. The Company (a) has good and marketable title to all
the property in which it has a property interest, free from any liens and
encumbrances, except for Customary Permitted Liens (as hereinafter defined) and
liens in favor of Huntington, and (b) has not agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
its property whether now owned or hereafter acquired to be subject to a lien or
encumbrance except as provided in this Section 3.9.
3.10. ERISA MATTERS. Neither the Company nor any ERISA Affiliate maintains or
contributes to any Plan other than those set forth in Schedule 3.10 attached
hereto. Each Plan which is intended to be qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended to the date hereof (the "Internal
Revenue Code"), has been determined by the Internal Revenue Service (the "IRS")
to be so qualified, and each trust related to any such Plan has been determined
to be exempt from federal income tax under Section 501(a) of the Internal
Revenue Code. Neither the Company nor any ERISA Affiliate knows of any material
reason why such Plans or trusts are no longer qualified or exempt following such
determination by the IRS. Except as disclosed in Schedule 3.10, the Company does
not maintain or contribute to any employee welfare benefit plan within the
meaning of Section 3(1) of ERISA which provides material benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
The Company and its ERISA Affiliates are in compliance in all material respects
with the responsibilities, obligations or duties imposed on them by ERISA, the
Internal Revenue Code and regulations promulgated thereunder with respect to all
Plans. No Benefit Plan has incurred any accumulated funding deficiency (as
defined in Sections 302(a)(2) of ERISA and 412(a) of the Internal Revenue Code)
whether or not waived. Neither the Company nor any ERISA Affiliate nor any
fiduciary of any Plan which is not a Multiemployer Plan (i) has engaged in a
nonexempt prohibited transaction described in Sections 406 of ERISA or 4975 of
the Internal Revenue Code or (ii) has taken or failed to take any action which
would constitute or result in a Termination Event. Neither the Company, nor any
ERISA Affiliate has any liability under Sections 4063, 4064, 4069, 4204 or
4212(c) of ERISA. Neither the Company nor any ERISA Affiliate has incurred any
liability to the PBGC which remains outstanding other than the payment of
premiums, and there are no premium payments which have become due which are
unpaid. Schedule B to the most recent annual report filed with the IRS with
respect to each Benefit Plan and furnished to the Administrative Agent is
complete and accurate. Since the date of each such Schedule B, there has been no
material adverse change in the funding status or financial condition of the
Benefit Plan relating to such Schedule B. Neither the Company nor any ERISA
Affiliate has (i) failed to make a required contribution or payment to a
Multiemployer Plan or (ii) made a
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<PAGE> 19
complete or partial withdrawal under Sections 4203 or 4205 of ERISA from a
Multiemployer Plan. Neither the Company nor any ERISA Affiliate has failed to
make a required installment or any other required payment under Section 412 of
the Internal Revenue Code on or before the due date for such installment or
other payment. Neither the Company nor any ERISA Affiliate is required to
provide security to a Benefit Plan under Section 401(a)(29) of the Internal
Revenue Code due to a Plan amendment that results in an increase in current
liability for the plan year. Except as set forth in Schedule 3.10, the Company
has not, by reason of the transactions contemplated hereby, incurred any
obligation to make any payment to any employee pursuant to any Plan or existing
contract or arrangement.
As used herein, "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and any successor statute. As used
herein, "ERISA Affiliate" means any (i) corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Company, (ii) partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Company, and (iii)
member of the same affiliated service group (within the meaning of section
414(m) of the Internal Revenue Code) as the Company, any corporation described
in clause (i) above or any partnership or trade or business described in clause
(ii) above. As used herein, "Plan" means an employee benefit plan defined in
Section 3(3) of ERISA in respect of which the Company or any ERISA Affiliate is,
or within the immediately preceding six years was, an "employer" as defined in
Section 3(5) of ERISA. As used herein, "Benefit Plan" means a defined benefit
plan as defined in Section 3(35) of ERISA (other than a Multiemployer Plan) in
respect of which the Company or any ERISA Affiliate is, or within the
immediately preceding six years was, an "employer" as defined in Section 3(5) of
ERISA. As used herein, "Multiemployer Plan" means a "multiemployer plan" as
defined in Section 4001 (a)(3) of ERISA which is, or within the immediately
preceding six years was, contributed to by the Company or any ERISA Affiliate.
As used herein, "Termination Event" means (i) a Reportable Event, as defined in
Section 4043(c) of ERISA, unless such notice requirements are either
inapplicable or waived under ERISA; (ii) the withdrawal of the Company or any
ERISA Affiliate from a Benefit Plan during a plan year in which the Company or
such ERISA Affiliate was a "substantial employer" as defined in Section
4001(a)(2) of ERISA, or the termination of employment of 20% of Benefit Plan
participants who are employees of the Company or any ERISA Affiliate in any one
of the four immediately preceding plan years; (iii) the imposition of an
obligation on the Company or any ERISA Affiliate under Section 4041 of ERISA to
provide affected parties written notice of intent to terminate a Benefit Plan in
a distress termination described in Section 4041(c) of ERISA; (iv) the
institution by the Pension Benefit Guaranty Corporation, or any Person
succeeding to the functions thereof (the "PBGC"), of proceedings to terminate a
Benefit Plan; (v) any event or condition which might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Benefit Plan; or (vi) the partial or complete withdrawal of the
Company or any ERISA Affiliate from a Multiemployer Plan.
3.11. LABOR MATTERS. As of the date of this Agreement, there is no collective
bargaining agreement covering any of the employees of the Company. To the
knowledge of the Company,
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<PAGE> 20
as of the date of this Agreement no attempt to organize the employees of the
Company is pending, threatened, planned or contemplated.
3.12. NO DEFAULTS. No event has occurred and no condition exists which would
constitute an Event of Default pursuant to this Agreement. The Company is not in
violation in any material respect of any term of any material agreement, charter
instrument, bylaw or other material instrument to which it is a party or by
which it may be bound.
3.13. ENVIRONMENTAL PROTECTION. The Company (a) has no actual knowledge of the
permanent placement, burial or disposal of any Hazardous Substances (as
hereinafter defined) on any real property owned, leased, or used by the Company
(the "Premises"), of any spills, releases, discharges, leaks, or disposal of
Hazardous Substances that have occurred or are presently occurring on, under, or
onto the Premises, or of any spills, releases, discharges, leaks or disposal of
Hazardous Substances that have occurred or are occurring off the Premises as a
result of the improvement, operation, or use of the Premises which would result
in non-compliance with any of the Environmental Laws (as hereinafter defined);
(b) is and has been in compliance with all applicable Environmental Laws in all
material respects; (c) knows of no pending or threatened environmental civil,
criminal or administrative proceedings against the Company relating to Hazardous
Substances; and (d) knows of no facts or circumstances that would give rise to
any future civil, criminal or administrative proceeding against the Company
relating to Hazardous Substances.
As used herein, "Hazardous Substances" means and include all hazardous and
toxic substances, wastes, materials, compounds, pollutants and contaminants
(including, without limitation, asbestos, polychlorinated biphenyls, and
petroleum products) which are included under or regulated by the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (42 U.S.C.
Sec.9601, et seq.), the Hazardous Materials Transportation Act, as amended (49
U.S.C. Sec.1801, et seq.), the Toxic Substances Control Act, as amended (15
U.S.C. Sec.2601, et seq.), the Resource Conservation and Recovery Act, as
amended (42 U.S.C. Sec.6901, et seq.), the Water Quality Act of 1987, as amended
(33 U.S.C. Sec.1251, et seq.), the Clean Water Act, as amended (33 U.S.C.
Sec.1321 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act, as
amended (7 U.S.C. Sec. 136, et seq.), the National Environmental Policy Act of
1969, as amended (42 U.S.C. Sec. 4321, et seq.), and the Clean Air Act, as
amended (42 U.S.C. Sec.7401, et seq.), and any other federal, state or local
statute, ordinance, law, code, rule, regulation or order regulating or imposing
liability (including strict liability) or standards of conduct regarding
Hazardous Substances (hereinafter the "Environmental Laws"), but does not
include such substances as are permanently incorporated into a structure or any
part thereof in such a way as to preclude their subsequent release into the
environment, or the permanent or temporary storage or disposal of household
hazardous substances by tenants, and which are thereby exempt from or do not
give rise to any violation of any Environmental Laws.
3.14. NO MARGIN LOANS. None of the transactions contemplated in the Agreement
will violate or result in a violation of Section 7 of the Securities Exchange
Act of 1934, as amended, or any regulation issued pursuant thereto, including,
without limitation, Regulation U of the Board of Governors of the Federal
Reserve System, 12 C.F.R., Chapter II. The Company does not own or
16
<PAGE> 21
intend to carry or purchase any "margin security" within the meaning of said
Regulation U. None of the proceeds of the Loans will be used to purchase or
refinance any borrowing, the proceeds of which were used to purchase any
"security" within the meaning of the Securities Exchange Act of 1934, as
amended.
3.15. WARRANTIES AND REPRESENTATIONS. On the date of each advance pursuant to
the Loans, the warranties and representations set forth in this Section 5 shall
be true and correct on and as of such date with the same effect as though such
warranties and representations had been made on and as of such date, except to
the extent that such warranties and representations expressly relate to an
earlier date.
4. COMPANY'S BUSINESS COVENANTS. The Company covenants that on and after the
date of this Agreement and for so long as any of the Obligations provided for
herein remain unpaid:
4.1. PAYMENT OF TAXES AND CLAIMS. The Company will pay (a) all taxes, estimated
payments, assessments and governmental charges or levies imposed upon it or its
property or assets or in respect of any of its franchises, businesses, income or
property before any penalty or interest accrues thereon; and (b) all claims of
materialmen, mechanics, carriers, warehousemen, landlords, bailees and other
like persons, (including, without limitation, claims for labor, services,
materials and supplies) for sums which have become due and payable and which by
law may become a lien or encumbrance upon any of the Company's property or
assets, prior to the time when any penalty or fine shall be incurred with
respect thereto; provided, however, that no such taxes, assessments and
governmental charges referred to in clause (a) above or claims referred to in
clause (b) above are required to be paid if being contested in good faith by the
Company, by appropriate proceedings diligently instituted and conducted, without
danger of any material risk to the Collateral or the interest of the
Administrative Agent or the Banks therein, without any of the same becoming a
lien upon the Collateral, and if such reserve or other appropriate provision, if
any, as shall be required in accordance with GAAP, shall have been made
therefor.
4.2. MAINTENANCE OF PROPERTIES AND CORPORATE EXISTENCE. The Company shall (a)
maintain its property in good condition and make all renewals, replacements,
additions, betterments and improvements thereto which it deems necessary; (b)
maintain, with financially sound and reputable insurers, insurance with respect
to its properties and business against such casualties and contingencies, of
such types (including but not limited to fire and casualty, public liability,
products liability, larceny, embezzlement or other criminal misappropriation
insurance) and in such amounts as are customary in the case of entities of
established reputations engaged in the same or a similar business and similarly
situated; (c) reflect in its financial statements adequate accruals and
appropriations to reserves and keep and maintain proper books of record and
account in which entries in conformity with GAAP shall be made of all dealings
and transactions in relation to its businesses and activities; (d) do or cause
to be done all things necessary (i) to preserve and keep in full force and
effect its existence, rights and franchises, and (ii) to maintain its status as
a corporation duly organized and existing and in good standing under the laws of
the state of its incorporation; (e) conduct continuously and operate actively
its business and take all actions necessary to enforce and protect the validity
of any intellectual property; and (f) not be in violation of any laws,
ordinances, or governmental rules and regulations or fail to obtain any
17
<PAGE> 22
licenses, permits, franchises or other governmental authorizations necessary to
the ownership of its properties or to the conduct of its business, which
violation or failure to obtain has or is likely to have a Material Adverse
Effect.
4.3. SALE OF ASSETS, MERGER, SUBSIDIARIES, TRADENAMES, CONDUCT OF BUSINESS. The
Company will not (a) except in the ordinary course of business or upon the prior
written consent of the Administrative Agent and the Required Banks (as
hereinafter defined), sell, transfer or otherwise dispose of any personal
property asset in any fiscal year having a value in excess of $50,000.00, sell,
transfer or otherwise dispose of personal property assets in one or more
transactions in any fiscal year having an aggregate value that, when added to
all dispositions of personal property assets by the Company during such fiscal
year, exceeds $100,000.00, or sell, transfer or otherwise dispose of any real
estate; (b) except for the Imation Asset Purchase and except upon the prior
written consent of the Administrative Agent and the Required Banks, consolidate
or merge with, enter into partnerships or joint ventures with or make
investments in any person or entity, or permit any person or entity to
consolidate with or merge into it, or acquire all or substantially all of the
stock, beneficial interests, assets or business of any person or entity; or (c)
conduct business under any tradenames except upon 30 days' prior written notice
to and the delivery of any documents or instruments reasonably requested by the
Administrative Agent.
The proceeds from any sale, financing or refinancing of real property
owned by the Company (less applicable taxes and expenses of sale) shall be
delivered by the Company to the Administrative Agent, for the ratable benefit of
the Banks, immediately upon the closing of such sale or refinancing. The Banks
shall apply such proceeds first to payments of principal under the Term Loan (in
inverse order of maturity) and then to sums outstanding in connection with the
Revolving Loan. Notwithstanding the foregoing terms of this paragraph, the
Company shall not be required to deliver to the Administrative Agent the
proceeds from any construction mortgage financing or permanent mortgage
financing of certain vacant real property (the "Vacant Dublin Property")
adjacent to the Company's existing office building located at 7001 Metatec
Boulevard, Dublin, Ohio (the "Dublin Office Property"), it being the intention
of the Company to incur mortgage loan indebtedness in order to construct on the
Vacant Dublin Property a warehouse complex.
Except as disclosed in Schedule 4.3 attached hereto, the Company has no
subsidiaries and conducts business only in the name of the Company. The Company
shall not engage in any business other than the businesses engaged in by the
Company on the date hereof or resulting from the Imation Asset Purchase and any
business or activities which are substantially similar or related thereto, or
derived therefrom, without the prior written consent of the Administrative Agent
and the Required Banks.
4.4. NEGATIVE PLEDGE. The Company will not cause or permit or permit to exist or
agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), any of its real property (other than the Vacant
Dublin Property and the Dublin Office Property) or personal property, whether
now owned or hereafter acquired, to become subject to a lien or encumbrance,
except: (a) liens in connection with deposits required by workers' compensation,
unemployment insurance, social security and other like laws; (b) taxes,
assessments, reservations,
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<PAGE> 23
exceptions, encroachments, easements, rights of way, covenants, conditions,
restrictions, leases and other similar title exceptions or encumbrances
affecting real property, provided they do not in the aggregate materially
detract from the value of said property or materially interfere with its use in
the ordinary conduct of business; (c) inchoate liens arising under ERISA to
secure the contingent liability of the Company (collectively (a), (b) and (c)
above shall be referred to as the "Customary Permitted Liens"); (d) liens as set
forth in Schedule 4.4 attached to this Agreement; and (e) liens in connection
with secured borrowings permitted by Section 4.5 below. In addition, the Company
will not grant or agree to provide in the future (upon the happening of a
contingency or otherwise), a "negative pledge" or other covenant or agreement
similar to this Section 4.4 in favor of any other lender, creditor or third
party.
4.5. OTHER BORROWINGS AND CONTINGENT LIABILITIES. Except for (a) the Loans, (b)
loans from Affiliates (as hereinafter defined) that are subordinated to the
Loans on terms and conditions satisfactory to the Administrative Agent, (c) the
existing indebtedness set forth in Schedule 4.5 attached hereto, (d) capitalized
lease agreements that, in aggregate face amount, do not exceed the sum of
$250,000.00, (e) purchase money financing transactions secured by the item or
items being purchased in an amount not to exceed the purchase price of such item
or items that, in the aggregate, do not exceed the sum of $100,000.00 in any one
fiscal year, (f) construction mortgage loans and permanent mortgage loans
incurred in connection with the development of the aforesaid warehouse complex
on the Vacant Dublin Property; (g) mortgage loans incurred in connection with
the financing or refinancing of the Dublin Office Property; and (h) unsecured
trade payables and normal operating accruals incurred in the ordinary course of
the Company's business, the Company will not (i) create or incur or permit to
exist extensions of credit or indebtedness, including, without limitation, any
indebtedness for borrowed money or advances, letters of credit, or capitalized
lease agreements or (ii) guarantee, indorse or otherwise become surety for or
upon the obligations of others, except by indorsement of negotiable instruments
for deposit or collection in the ordinary course of business, and except for
those accommodation obligations, guaranties, or contingent liabilities disclosed
in Schedule 4.5 attached hereto.
4.6. COMPLIANCE WITH LAWS. The Company will comply in all material respects with
all applicable laws, including ERISA and all laws, statutes, regulations and
ordinances regarding the collection, payment and deposit of taxes, and obtain
and keep in force any and all government approvals necessary to the ownership of
the Company's properties or the conduct of the Company's business, to the extent
that any such failure to comply, obtain or keep in force would be reasonably
likely to have a Material Adverse Effect.
4.7. SALE OF ACCOUNTS; NO CONSIGNMENT. The Company shall not sell, assign, or
encumber, except to the Administrative Agent for the ratable benefit of the
Banks, any of its accounts or notes receivable. The Company shall not permit any
of its inventory to be sold or transferred on consignment or acquire or possess
any of its inventory on consignment.
4.8. OWNERSHIP AND MANAGEMENT. The Company shall not replace or change its
chairman, president, chief executive officer or chief financial officer without
the prior written consent of the Bank, unless such replacement or change will
not or is not likely to have a Material Adverse Effect.
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<PAGE> 24
4.9. ACQUISITION OF CAPITAL STOCK. The Company shall not redeem or acquire its
own capital stock, or warrants or securities for its capital stock, except
through the use of the net proceeds from the simultaneous sale of an equivalent
amount of its capital stock for the same purchase or redemption price.
4.10. CASH DIVIDENDS AND OTHER DISTRIBUTIONS. Without the prior written consent
of the Administrative Agent and the Required Banks, the Company shall not pay
any cash dividends. The Company shall make no other distributions of any kind to
shareholders.
4.11. TRANSACTIONS WITH AFFILIATES. After the date hereof, the Company shall not
directly or indirectly enter into or permit to exist any transactions
(including, without limitation, the purchase, sale, lease or exchange of any
property or the rendering of any service) with any of its Affiliates,
shareholders or any Affiliates of either of the foregoing, on terms that are
less favorable to the Company than those which might be obtained at the time
from persons or entities who are not affiliated with the Company or its
shareholders. "Affiliate" means any individual, partnership, limited liability
company, corporation, or other entity which, directly or indirectly, is in
control of, is controlled by, or is under common control with the Company, or is
a family member related by birth or marriage to any one or more of the foregoing
persons. For the purposes of this definition, "control" of such entity means the
power, directly or indirectly, to vote 15% or more of the securities, units or
other measures having ordinary voting power for the election of directors,
management committees, or similar committees of such entity, or the power to
direct or cause the direction of the management and policies of such entity,
whether by contract or otherwise.
4.12. MINIMUM CONSOLIDATED TANGIBLE NET WORTH. The Company, on a consolidated
basis, shall maintain at all times a Tangible Net Worth of (a) not less than
$20,000,000 beginning with the date of this Agreement, and continuing through
and including September 30, 1998. As of the last day of each fiscal quarter
thereafter during the term of this Agreement, the Company's Tangible Net Worth
shall increase over the prior quarter's Tangible Net Worth by 50% of the
Company's net income (to the extent that the change in such quarterly net income
is positive) for the quarter just ended. "Tangible Net Worth" means the
Company's equity, MINUS all of the following: (i) the excess of cost over the
value of net assets of purchased businesses, rights, and other similar
intangibles, (ii) organizational expenses, (iii) intangible assets (to the
extent not reflected in the foregoing), (iv) goodwill, (v) deferred charges or
deferred financing costs, (vi) loans or advances to and/or accounts or notes
receivable from Affiliates (as hereafter defined), and (vii) non-compete
agreements.
4.13. LEVERAGE RATIO. The Company, on a consolidated basis, shall maintain at
all times a ratio ("Leverage Ratio") of Funded Debt to EBITDA MINUS CAPEX of not
more than the following:
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<PAGE> 25
<TABLE>
<CAPTION>
PERIOD RATIO
<S> <C>
September 11, 1998 - June 30, 1999 3.00 to 1.00
July 1, 1999 - December 31, 1999 2.00 to 1.00
January 1, 2000 - Termination Date 1.50 to 1.00
</TABLE>
The Leverage Ratio shall be tested as of the last day of each fiscal
quarter throughout the term of this Agreement.
As used in this Agreement, "EBITDA" means for any period, the sum of
the Company's consolidated (i) net income for such period determined in
accordance with GAAP, PLUS (ii) interest expense for such period, PLUS (iii)
charges for federal, state, local and foreign income taxes, PLUS (iv)
depreciation, amortization expense and non-cash charges, extraordinary losses
and any other non-recurring expenses during such period, MINUS non-cash gains,
extraordinary gains and any other non-recurring income during such period. As
used in this Agreement, "CAPEX" shall for any period, the expenditures of the
Company or its subsidiaries for fixed or capital assets, including, without
limitation, the incurrence of capitalized lease obligations or expenditures for
maintenance and repairs which should be capitalized in accordance with GAAP.
EBITDA and CAPEX will each be calculated on a rolling four-quarters basis (pro
forma for the first twelve months from the date of this Agreement).
4.14. INTEREST COVERAGE RATIO. As of the last day of each fiscal quarter ending
during the term of this Agreement, the Company, on a consolidated basis, shall
maintain at all times a ratio ("Interest Coverage Ratio") of EBITDA (pro forma
for the first twelve months from the date of this Agreement) MINUS CAPEX (pro
forma for the first twelve months from the date of this Agreement) to interest
expense of not less than 2.50 to 1.00.
The Interest Coverage Ratio shall be tested as of the last day of each
fiscal quarter throughout the term of this Agreement.
The Company, on a consolidated basis, shall maintain at all times a ratio
("Fixed Charge Coverage Ratio") of the sum of the Company's EBITDA (pro forma
for the first twelve months from the date of this Agreement) MINUS CAPEX (pro
forma for the first twelve months from the date of this Agreement) to Fixed
Charges (as hereinafter defined) of not less than 1.25 to 1.00, as measured on a
rolling twelve-month basis.
The Fixed Charge Coverage Ratio shall be tested as of the last day of
each fiscal quarter throughout the term of this Agreement.
"Fixed Charges" means, on a consolidated basis for the Company, the sum
of (i) scheduled principal payments on term obligations and capital lease
payments of the Company, required to be made during such period in respect of
all long-term debt, as reflected in the long-term debt schedule to the Company's
balance sheet contained in the Company's financial statements for the
immediately preceding year, PLUS (ii) the Company's interest expense determined
in accordance with GAAP as measured on a rolling four-quarter basis.
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<PAGE> 26
4.16. ENVIRONMENTAL COMPLIANCE AND INDEMNIFICATION. The Company hereby
indemnifies the Administrative Agent and the Banks, and each of them, and holds
the Administrative Agent and the Banks, and each of them, harmless from and
against any loss, damage, cost, expense or liability (including strict
liability) directly or indirectly arising from or attributable to the
generation, storage, release, threatened release, discharge, disposal or
presence (whether prior to or during the term of the Loans) of Hazardous
Substances on, under or about the Premises (whether by the Company or any
employees, agents, contractors or subcontractors of the Company or any
predecessor in title or any third persons occupying or present on the Premises),
or the breach of any of the representations and warranties regarding the
Premises, including, without limitation: (a) those damages or expenses arising
under the Environmental Laws; (b) the costs of any repair, cleanup or
detoxification of the Premises, including the soil and ground water thereof, and
the preparation and implementation of any closure, remedial or other required
plans; (c) damage to any natural resources; and (d) all reasonable costs and
expenses incurred by the Administrative Agent and the Banks, or any of them, in
connection with clauses (a), (b) and (c) including, but not limited to,
reasonable attorneys' fees. The Company will not permit any of its employees,
agents, contractors, subcontractors, or any other person occupying or present on
the Premises to generate, manufacture, store, dispose or release on, about or
under the Premises any Hazardous Substances in a manner which would result in
the Premises not complying with the Environmental Laws in any material respect.
The indemnification provided for herein shall not apply to any losses,
liabilities, damages, injuries, expenses or costs which: (i) arise from the
gross negligence or willful misconduct of the Administrative Agent and the
Banks, or any of them, or (ii) relate to Hazardous Substances placed or disposed
of on the Premises after the Administrative Agent and the Banks, or any of them,
acquires title to the Premises through foreclosure or otherwise.
4.17. LOANS, ADVANCES AND INVESTMENTS. The Company, on a consolidated basis,
will not make any loans or advances to any Affiliate or to any other person,
corporation or entity in the aggregate in excess of $250,000.00 at any one time
outstanding, without the prior written consent of the Banks; provided, however,
that the Company, on a consolidated basis, may make loans and advances to
shareholders and employees in an aggregate amount of not more than $100,000.00
at any one time outstanding; provided, however, that the foregoing shall not
prohibit loans or advances by the Company to its subsidiaries.
4.18. YEAR 2000 COMPATIBILITY. The Company will take all action reasonably
necessary to assure that the Company's computer-based systems are able to
operate and effectively process data in all material respects, including,
without limitation, dates, on and after January 1, 2000. The Company shall (a)
promptly and in no event later than June 30, 1999, take all action reasonably
necessary to ensure that all computer-based systems of the Company and its
subsidiaries are capable of the following: (i) handling date information
involving all and any dates before, during and/or after January 1, 2000,
including, without limitation, accepting input, providing output and performing
date calculations in whole or in part; (ii) operating, accurately without
material interruption on and in respect of any and all dates before, during
and/or after January 1, 2000, and without any change in performance; (iii)
responding to and processing two
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<PAGE> 27
digit year input without creating any ambiguity as to the century; and (iv)
storing and providing date input information without creating any ambiguity as
to the century; and (b) promptly, and periodically thereafter, use its best
efforts to cause all computer-based systems of each of its vendors, suppliers
and customers to be capable of (i) through (iv) above, where noncompliance could
have a Material Adverse Effect. In addition, at the request of the
Administrative Agent, the Company shall provide to the Administrative Agent
assurances in form and substance reasonably satisfactory to the Administrative
Agent of the Company's and each subsidiary's Year 2000 compatibility.
5. FINANCIAL INFORMATION AND REPORTING; REGULATORY REPORTS.
5.1. FINANCIAL INFORMATION AND REPORTING. The Company shall deliver the
following to the Administrative Agent and to each of the Banks:
(a) Within 60 days after the end of each fiscal quarter, internal
financial statements of the Company, on a consolidated basis, including
a balance sheet and statements of income and surplus, and statement of
cash flows, comparing the information for the current period with the
information for the same period of the preceding year, certified by the
Company's president, chief financial officer or chief operating officer
(each a "Financial Officer") as fairly representing the Company's
financial condition as of the end of such period;
(b) Within 60 days after the end of each fiscal quarter, a statement in
substantially the form of EXHIBIT C attached hereto signed by a
Financial Officer certifying the compliance of the Company with the
terms of this Agreement, and specifically certifying the compliance by
the Company with the terms of Sections 4.12 through 4.15 of this
Agreement, in such form and of such content as may be satisfactory to
the Administrative Agent and the Banks;
(c) Within 120 days after the end of each fiscal year, audited,
unqualified, consolidated financial statements of the Company (with
consolidating schedules, if requested by the Administrative Agent or a
Bank) prepared in accordance with GAAP and certified by Deloitte &
Touche, LLP or any other nationally recognized accounting firm
reasonably satisfactory to the Administrative Agent, containing a
balance sheet, statements of income and shareholder's equity,
statements of cash flows and reconciliation of capital accounts,
together with any management letters written by such accountants, and a
lender reliance letter from such accountants authorizing the
Administrative Agent and the Banks to rely on such accountants'
certifications;
(d) Promptly after the filing or submission thereof, a copy of each
financial statement and each periodic and other report sent to
shareholders of the Company, as well as a copy of each registration
statement and other filing made by the Company with the Securities and
Exchange Commission;
(e) Not later than each January 31 throughout the term of this
Agreement, the Company's operating plan for the forthcoming fiscal
year;
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<PAGE> 28
(f) Immediately upon becoming aware of the existence of any Event of
Default or breach of any term or conditions of this Agreement, a
written notice specifying the nature and period of existence thereof
and what action the Company is taking or proposes to take with respect
thereto; and
(g) At the request of the Administrative Agent, such other information
as the Administrative Agent may from time to time reasonably require.
5.2. REGULATORY REPORTS. The Company shall send to the Administrative Agent and
to each of the Banks written notice of any material filings required to be filed
by any regulatory authority having jurisdiction over the Company, such notice to
be sent within 10 days after such filing is due to be filed.
6. DEFAULT.
6.1. EVENTS OF DEFAULT. Each of the following shall constitute an "Event of
Default" hereunder: (a) the Company's failure to make any payment of principal,
interest or any other sum due and payable under any Note executed in connection
with this Agreement on or before the date such payment is due; (b) the Company's
failure to perform or observe any agreement, term or covenant contained in
Sections 1, 2, 4 or 5 of this Agreement, or any Guarantor's failure to perform
or observe any covenant contained in its agreement of guaranty; (c) the
Company's failure to comply with any other provision of this Agreement or any
provision contained in any mortgage, security agreement or other agreement in
favor of the Administrative Agent or the Banks, and such failure continues for
more than 10 days after such failure shall first become known to any officer of
the Company; (d) any warranty, representation or other statement by or on behalf
of the Company contained in this Agreement or in any instrument furnished in
compliance with or in reference to this Agreement is false or misleading in any
material respect, or any warranty, representation or other statement by or on
behalf of any Guarantor contained in its agreement of guaranty or in any
instrument furnished in compliance therewith or in reference thereto is false or
misleading in any material respect; (e) the Company or any Guarantor becomes
insolvent or makes an assignment for the benefit of creditors, or consents to
the appointment of a trustee, receiver or liquidator; (f) bankruptcy,
reorganization, composition, arrangement, insolvency or liquidation proceedings
are instituted by the Company or any Guarantor, or bankruptcy, reorganization,
composition, arrangement, insolvency or liquidation proceedings are instituted
against the Company or any Guarantor which are not stayed or dismissed within 60
days; (g) a final judgment or judgments for the payment of money aggregating in
excess of $100,000.00 is or are outstanding against the Company or any Guarantor
and any such judgment or judgments have not been discharged in full or stayed;
(h) the occurrence of any event which allows the acceleration of the maturity of
any indebtedness of the Company or any Guarantor to the Administrative Agent,
the Banks, or any of them, or any affiliates of the Administrative Agent or the
Banks, or any other person, corporation or entity under any indenture, agreement
or undertaking in excess of $250,000.00 in the aggregate; (i) the default by, or
dissolution of, any Guarantor or any insurer or other surety for the Company
with respect to any obligation or liability to the Administrative Agent, the
Banks, or any of them; (j) the suspension, termination or
24
<PAGE> 29
adverse restriction of any license, permit or privilege necessary or useful in
the operation of the business of the Company or any Guarantor, which has or is
likely to have a Material Adverse Effect; or (k) the Administrative Agent, upon
the consent of the Required Banks, for any reason in good faith deems itself
insecure with respect to the repayment of the Obligations.
6.2. DEFAULT REMEDIES. If an Event of Default exists, the Administrative Agent,
upon the consent of the Required Banks, may immediately exercise any right,
power or remedy permitted to the Administrative Agent or any of the Banks by law
or any provision of this Agreement, and shall have, in particular, without
limiting the generality of the foregoing, the right to declare the entire
principal and all interest accrued on all Notes then outstanding pursuant to
this Agreement to be forthwith due and payable, without any presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Company.
7. THE ADMINISTRATIVE AGENT.
7.1. APPOINTMENT. Each Bank hereby designates and appoints Huntington to act as
Administrative Agent for such Bank under this Agreement and under any
instrument, document and agreement executed in connection herewith
(collectively, the "Loan Documents"). Each Bank hereby irrevocably authorizes
the Administrative Agent to execute the Loan Documents and any other documents
or agreements related thereto and to take such action on its behalf under the
provisions of this Agreement and any other instruments and agreements referred
to herein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of the Administrative
Agent by the terms hereof and thereof and such other powers as are incidental
thereto, and the Administrative Agent shall hold all collateral, payments of
principal and interest, fees (except for agency fees), charges and collections,
received pursuant to this Agreement, for the benefit of the Banks as provided
herein. The Administrative Agent may perform any of its duties hereunder by or
through its agents or employees. As to any matters not expressly provided for by
this Agreement, the Administrative Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Required Banks or such greater proportion of the
Banks as shall be required hereunder; provided, however, that the Administrative
Agent shall not be required to take any action which might expose the
Administrative Agent to liability or which is contrary to any of the Loan
Documents or applicable law unless the Administrative Agent is furnished with an
indemnification satisfactory to the Administrative Agent with respect thereto.
"Required Banks" means, at any time, the Banks holding more than 66.67% of the
principal amount of the Term Loan outstanding at such time and more than 66.67%
of the then aggregate amount of the Loan Commitments for the Revolving Loan in
effect at such time; provided, however, that, in the event any of the Banks
shall have failed to fund its Pro Rata Share (as hereinafter defined) of any
Revolving Loan requested by the Company which the Banks are obligated to fund
under the terms hereof, and any such failure has not been cured, then for so
long as such failure continues, "Required Banks" means those Banks (excluding
any Banks whose failure to fund its respective Pro Rata Share of the Revolving
Loan has not been so cured) whose Pro Rata Shares represent more than 66.67% of
the aggregate Pro Rata Shares of such Banks; provided, further, however, that,
in the event that the maturity of the Loans has been accelerated pursuant to the
terms hereof,
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<PAGE> 30
"Required Banks" means the Banks (without regard to such Banks' performance of
their respective obligations hereunder) whose aggregate ratable shares (stated
as a percentage) of the aggregate outstanding principal balance of the
Obligations existing or arising with respect to the Loans are greater than
66.67%. The provisions of this Section 7 are solely for the benefit of the
Administrative Agent and the Banks, and the Company shall not have any right to
rely on or enforce any of the provisions hereof, except as expressly set forth
herein. In performing its functions and duties hereunder, the Administrative
Agent shall act solely as Administrative Agent of the Banks and does not assume
and should not be deemed to have assumed any obligation or relationship of
agency, trustee or fiduciary with or for the Company.
7.2. NATURE OF DUTIES, EXCULPATION. The Administrative Agent shall have no
duties or responsibilities except those expressly set forth in this Agreement or
in the Loan Documents. Neither the Administrative Agent nor any of its officers,
directors, employees or agents has made any representations or warranties,
express or implied, nor shall be (a) liable to any Bank for any action taken or
omitted by them as such hereunder or in connection herewith, unless caused by
their willful misconduct or gross negligence, as determined in a final, non
appealable judgment by a court of competent jurisdiction, or (b) responsible in
any manner to any Bank for any recitals, information, statements,
representations or warranties made by any Company or any officer thereof
contained in this Agreement, or in any of the Loan Documents or in any
certificate, report, statement or other document referred to or provided for in,
or received by the Administrative Agent under or in connection with, this
Agreement or for the value, validity, execution, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any of the Loan Documents or
the financial condition or creditworthiness of the Company or for any failure of
any Company to perform its obligations hereunder. The Administrative Agent shall
not be under any obligation to any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements contained in, or conditions
of, this Agreement, or any of the Loan Documents, or to inspect the properties,
books or records of any Company. The duties of the Administrative Agent shall be
mechanical and administrative in nature; the Administrative Agent shall not have
by reason of this Agreement a fiduciary relationship in respect of any Bank; and
nothing in this Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon the Administrative Agent any obligations in respect
of this Agreement except as expressly set forth herein.
7.3. LACK OF RELIANCE ON THE ADMINISTRATIVE AGENT AND RESIGNATION. Independently
and without reliance upon the Administrative Agent, each Bank has made and shall
continue to make (a) its own independent investigation of the financial
condition and affairs of the Company in connection with the making and the
continuance of the Loans hereunder and the taking or refraining from taking of
any action in connection herewith, and (b) its own credit analysis or appraisal
of the creditworthiness of the Company. In addition, each Bank has reviewed and
approved the form and substance of each of this Agreement and the Loan
Documents. Except with respect to the information to be provided to the
Administrative Agent in accordance with Section 8.2 of this Agreement, the
Administrative Agent shall have no duty or responsibility, either initially or
on a continuing basis, to provide any Bank with any credit or other information
with respect thereto, whether coming into its possession before the making of
the Loans or at any time or times thereafter. The Administrative Agent shall not
be required to make any inquiry
26
<PAGE> 31
concerning either the performance or observance of any of the terms, provisions
or conditions of this Agreement or the Loan Documents, or the financial
condition or creditworthiness of Company, or the existence of any Event of
Default or any condition, event or act that, with notice or lapse of time or
both, would constitute such an Event of Default.
The Administrative Agent may resign on 30 days' prior written notice to
the Banks, and upon such resignation, the Required Banks shall designate a
successor Administrative Agent. Any such successor agent shall succeed to the
rights, powers and duties of the Administrative Agent, and the term
"Administrative Agent" shall include such successor agent effective upon its
appointment, and the former Administrative Agent's rights, powers and duties as
Administrative Agent shall be terminated, without any other or further act or
deed on the part of such former Administrative Agent. After any Administrative
Agent's resignation or removal hereunder as Administrative Agent, the provisions
of this Section 7.3 shall continue to inure to its benefit as to any actions
taken or omitted to be taken by it while it was Administrative Agent under this
Agreement.
7.4. RIGHT TO REQUEST INSTRUCTIONS. Subject to the provisions of this Agreement,
if the Administrative Agent shall request instructions from the Banks with
respect to any act or action (including failure to act) in connection with this
Agreement, the Administrative Agent shall be entitled to refrain from such act
or taking such action unless and until the Administrative Agent shall have
received instructions from the Required Banks or such greater proportion of the
Banks as shall be required hereunder; and the Administrative Agent shall not
incur liability to any Bank or any other party by reason of so refraining.
Without limiting the foregoing, none of the Banks shall have any right of action
whatsoever against the Administrative Agent as a result of its acting or
refraining from acting hereunder in accordance with the instructions of the
Required Banks or such greater proportion of the Banks as shall be required
hereunder.
7.5. RELIANCE. The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, affidavit, resolution, notice,
statement, certificate, telex, teletype or telecopier message, cablegram, order
or other document or telephone message believed by it to be genuine and correct
and, with respect to all legal matters pertaining to this Agreement or the Loan
Documents and its duties hereunder, upon advice and statements of legal counsel
(including, without limitation, counsel to the Company), independent accountants
and other experts selected by the Administrative Agent. The Administrative Agent
may employ agents and attorneys-in-fact and shall not be liable for the default
or misconduct of any such agents or attorneys-in-fact selected by the
Administrative Agent.
7.6. RELATIONS AMONG BANKS. Each Bank agrees that except as provided herein it
shall not take any legal action, nor institute any actions or proceedings,
against the Company or any other obligor hereunder or with respect to any
collateral without the prior written consent of the Administrative Agent.
Without limiting the generality of the foregoing, no Bank may accelerate or
otherwise enforce its portion of the Obligations, or terminate its commitment to
make advances except in accordance with Section 1 or pursuant to a setoff
permitted under Section 7.7.
7.7. CONCERNING THE COLLATERAL AND THE LOAN DOCUMENTS.
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<PAGE> 32
(a) PROTECTIVE ADVANCES. The Administrative Agent may from time to
time, after the occurrence and during the continuance of an Event of
Default, make such disbursements and advances pursuant to the Loan
Documents which the Administrative Agent, in its sole discretion, deems
necessary or desirable to preserve or protect any collateral (or any
portion thereof) for the Loans given by the Company or any Guarantor
(the "Collateral") or to enhance the likelihood or maximize the amount
of repayment of the Loans ("Protective Advances"). The Administrative
Agent shall notify the Company and each Bank in writing of each such
Protective Advance, which notice shall include a description of the
purpose of such Protective Advance. The Company agrees to pay to the
Administrative Agent, upon demand, the principal amount of all
outstanding Protective Advances, together with interest thereon at the
higher of the Prime Rate or the Federal Funds Rate (PLUS 300 basis
points) from the date of such Protective Advance until the outstanding
principal balance thereof is paid in full. If the Company fails to make
payment in respect of any Protective Advance within one Business Day
after the date the Company receives written demand therefor from the
Administrative Agent, the Administrative Agent shall promptly notify
each Bank, and each Bank agrees that it shall thereupon make available
to the Administrative Agent, in U. S. dollars in immediately available
funds, the amount equal to such Bank's Pro Rata Share of such
Protective Advance. If such funds are not made available to the
Administrative Agent by such Bank within one Business Day after the
Administrative Agent's demand therefor, the Administrative Agent shall
be entitled to recover any such amount from such Bank together with
interest thereon at the Federal Funds Rate for each day during the
period commencing on the date of such demand and ending on the date
such amount is received. The failure of any Bank to make available to
the Administrative Agent its Pro Rata Share of any such Protective
Advance shall neither relieve any other Bank of its obligation
hereunder to make available to the Administrative Agent such other
Bank's Pro Rata Share of such Protective Advance on the date such
payment is to be made nor increase the obligation of any other Bank to
make such payment to the Administrative Agent. All outstanding
principal of, and interest on, Protective Advances shall constitute
Obligations secured by the Collateral until paid in full by the
Company.
(b) AUTHORITY. Each Bank authorizes and directs the Administrative
Agent to enter into the Loan Documents relating to the Collateral for
the benefit of the Banks. Each Bank agrees that any action taken by the
Administrative Agent or the Required Banks (or, where required by the
express terms hereof, a different proportion of the Banks) in
accordance with the provisions hereof or of the other Loan Documents,
and the exercise by the Administrative Agent or the Required Banks (or,
where so required, such different proportion) of the powers set forth
herein or therein, together with such other powers as are reasonably
incidental thereto, shall be authorized and binding upon all of the
Banks. Without limiting the generality of the foregoing, the
Administrative Agent shall have the sole and exclusive right and
authority to (i) act as the disbursing and collecting agent for the
Banks with respect to all payments and collections arising in
connection herewith and with the Loan Documents relating to the
Collateral; (ii) execute and deliver each Loan Document relating to the
Collateral and accept delivery of each such agreement delivered
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by the Company or any Guarantor; (iii) act as collateral agent for the
Banks for purposes of the perfection of all security interests and
liens created by such agreements and all other purposes stated therein;
provided, however, the Administrative Agent hereby appoints, authorizes
and directs each Bank to act as collateral sub-agent for the
Administrative Agent and the Banks for purposes of the perfection of
all security interests and liens with respect to the respective deposit
accounts of the Company and any Guarantor maintained with, and cash and
cash equivalents held by, such Bank; (iv) manage, supervise and
otherwise deal with the Collateral; (v) take such action as is
necessary or desirable to maintain the perfection and priority of the
security interests and liens created or purported to be created by the
Loan Documents; and (vi) except as may be otherwise specifically
restricted by the terms hereof or of any other Loan Document, exercise
all remedies given to the Administrative Agent or the Banks with
respect to the Collateral under the Loan Documents relating thereto,
applicable law or otherwise.
(c) RELEASE OF COLLATERAL. (i) Each of the Banks hereby directs the
Administrative Agent to release any lien held by the Administrative
Agent for the benefit of the Banks:
(A) against all of the Collateral, upon final payment in full
of the Obligations and termination hereof;
(B) against all of the Collateral, upon the Company's
maintenance of a Leverage Ratio for two consecutive fiscal
quarters of not more than 1.50 to 1.00; and
(C) against any part of the Collateral sold or disposed, if
such sale or disposition is permitted by the Loan Documents
(or permitted pursuant to a waiver or consent of a transaction
otherwise prohibited by the Loan Documents) or, if not
pursuant to such sale or disposition, against any other part
of the Collateral if such release is consented to by the Banks
whose Pro Rata Shares, in the aggregate, are equal to or
greater than 66.67%;
(ii) Each of the Banks hereby directs the Administrative Agent to
execute and deliver or file such termination and partial release
statements and do such other things as are necessary to release Liens
to be released pursuant to this Section 7.7(c) promptly upon the
effectiveness of any such release.
(d) CONFIRMATION BY BANKS. Without in any manner limiting the
Administrative Agent's authority to act without any specific or further
authorization or consent by the Banks (as set forth in Section 7.7(c)
above), each Bank agrees to confirm in writing, upon request by the
Company, the authority to release Collateral conferred upon the
Administrative Agent under clauses (A) and (B) of Section 7.7(c) above.
So long as no Event of Default is then continuing, upon receipt by the
Administrative Agent of any such written confirmation from the Banks of
the Administrative Agent's authority to release any particular items or
types of Collateral, and in any event upon any sale and transfer of
Collateral which is expressly permitted pursuant to the terms of this
Agreement, and upon at least five Business Days' prior written request
by the Company, the Administrative
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Agent shall (and is hereby irrevocably authorized by the Banks to)
execute such documents as may be necessary to evidence the release of
the liens upon such Collateral granted to the Administrative Agent for
the benefit of the Banks; provided, however, that (i) the
Administrative Agent shall not be required to execute any such
document on terms which, in the Administrative Agent's opinion, would
expose the Administrative Agent to liability or create any obligation
or entail any consequence other than the release of such liens without
recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any liens upon (or
obligations of the Company in respect of) all interests retained by
the Company, including, without limitation, the proceeds of any sale,
all of which shall continue to constitute part of the Collateral.
(e) NO OBLIGATION. The Administrative Agent shall not have any
obligation whatsoever to any Bank or to any other person to assure that
the Collateral exists or is owned by the Company or is cared for,
protected or insured or has been encumbered or that the liens granted
to the Administrative Agent herein or pursuant to the Loan Documents
have been properly or sufficiently or lawfully created, perfected,
protected or enforced or are entitled to any particular priority, or to
exercise at all or in any particular manner or under any duty of care,
disclosure or fidelity, or to continue exercising, any of the rights,
authorities and powers granted or available to the Administrative Agent
in this Section 7.7 or in any of the Loan Documents, it being
understood and agreed that in respect of the Collateral, or any act,
omission or event related thereto, the Administrative Agent may act in
any manner it may deem appropriate, in its sole good faith discretion,
given the Administrative Agent's own interests in the Collateral as one
of the Banks and that the Administrative Agent shall not have any duty
or liability whatsoever to any Bank.
7.8. SETOFF. In addition to any liens granted under the Loan Documents and any
rights now or hereafter granted under applicable law, upon the occurrence of any
Event of Default, each Bank and any affiliate of any Bank is hereby authorized
by the Company at any time or from time to time, without notice to any person
(any such notice being hereby expressly waived) to set off and to appropriate
and to apply any and all deposits (general or special, including, but not
limited to, indebtedness evidenced by certificates of deposit, whether matured
or unmatured (but not including trust accounts) and any other indebtedness at
any time held or owing by such Bank or any of their affiliates to or for the
credit or the account of the Company against and on account of the Obligations
of the Company to such Bank or any affiliates, including, but not limited to,
all Loans and all claims of any nature or description arising out of or in
connection herewith, irrespective of whether (i) such Bank shall have made any
demand hereunder, or (ii) the Administrative Agent, at the request or with the
consent of the Required Banks, shall have declared the principal of and interest
on the Loans and other amounts due hereunder to be due and payable as permitted
by Section 6 and even though such Obligations may be contingent or unmatured. To
the extent permitted by applicable law, the aforesaid right of set off may be
exercised by such Bank against the Company or against any trustee in bankruptcy,
custodian, debtor-in-possession, assignee for the benefit of creditors, receiver
or execution, judgment or attachment creditor of the Company, or against anyone
else claiming through or against the Company or against any such trustee in
bankruptcy, custodian, debtor-in-possession, assignee for the benefit of
creditors, receivers, or execution, judgment or attachment creditor,
notwithstanding
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the fact that any such right of set off shall not have been exercised by such
Bank prior to the making, filing or issuance, or service upon such Bank of,
notice of, any such petition, assignment for the benefit of creditors,
appointment or application for the appointment of a receiver, or issuance of
execution, subpoena, order or warrant.
7.9. RATABLE SHARING. The Banks agree among themselves that, except as otherwise
expressly provided in any Loan Document, (i) with respect to all amounts
received by them which are applicable to the payment of the Obligations
(excluding the fees described in Sections 2.10, 2.11, 2.14 (Agent's Fee only),
2.16 and 4.16), equitable adjustment shall be made so that, in effect, all such
amounts shall be shared among them ratably in accordance with their Pro Rata
Shares, whether received by voluntary payment, by the exercise of any right of
setoff or banker's lien, by counterclaim or cross-action or by the enforcement
of any or all of such Obligations (excluding the fees described in Sections
2.10, 2.11, 2.14 (Agent's Fee only), 2.16 and 4.16), and (ii) if any of them
shall by voluntary payment or by the exercise of any right of setoff or banker's
lien, by counterclaim or cross-action or by the enforcement of any or all of
such Obligations, receive payment of a proportion of the aggregate amount of
such Obligations held by it which is greater than the amount which such Bank is
entitled to receive hereunder, the Bank receiving such excess payment shall
purchase, without recourse or warranty, an undivided interest and participation
(which it shall be deemed to have done simultaneously upon the receipt of such
payment) in such Obligations owed to the others so that all such recoveries with
respect to such Obligations shall be applied ratably in accordance with their
Pro Rata Shares; provided, however, that if all or part of such excess payment
received by the purchasing party is thereafter recovered from it, those
purchases shall be rescinded and the purchase prices paid for such participation
shall be returned to such party to the extent necessary to adjust for such
recovery, but without interest except to the extent the purchasing party is
required to pay interest in connection with such recovery. The Company agrees
that any Bank so purchasing a participation from another Bank pursuant to this
Section 7.9 may, to the fullest extent permitted by law, exercise all its rights
of payment (including, subject to Section 7.8, the right of setoff) with respect
to such participation as fully as if such Bank were the direct creditor of the
Company in the amount of such participation.
7.10. INDEMNIFICATION. To the extent the Administrative Agent is not reimbursed
and indemnified by the Company, each Bank will reimburse and indemnify the
Administrative Agent in proportion to its Commitment Percentage for and against
any and all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which at any time (including, without limitation, at any time
following the payment of the Loans) may be imposed on, incurred by or asserted
against the Administrative Agent in performing its duties hereunder, or in any
way relating to or arising out of this Agreement, the Loan Documents, or any
documents contemplated by or referred to therein or the transactions
contemplated thereby or any action taken or omitted by the Administrative Agent
in any such capacity thereunder or in connection therewith; provided that, the
Banks shall not be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Administrative Agent's willful misconduct or
gross negligence, as determined in a final, non-appealable judgment by a court
of competent jurisdiction.
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7.11. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. Huntington and its
affiliates may accept deposits from, make loans or otherwise extend credit to,
and generally engage in any kind of banking, trust or other business with the
Company, and receive payment on such loans or extensions of credit or otherwise
act with respect thereto fully and without accountability to the Banks in the
same manner as if Huntington or any of its affiliates were not acting as the
Administrative Agent pursuant hereto. None of the other Banks shall have an
interest in any property taken as collateral or security for any of such other
loans or extensions of credit made by Huntington or any of its affiliates, or in
any property in Huntington's possession or control for any of such other loans
or extensions of credit, or in any deposit held or other indebtedness owing by
Huntington or its affiliates, which may be or become collateral for or otherwise
available for payment of the Loans by reason of a general description of secured
obligations contained in any security agreement or other instrument held by
Huntington, or its affiliates, or by reason of the right of set-off,
counterclaim or otherwise, except that if such property, deposit or indebtedness
or the proceeds thereof shall be applied in reduction of the Loans, each Bank
shall be entitled to its pro rata percentage of such application. Huntington
shall have no obligation to make any claim against, or assert any lien upon or
right of set off against, any such property held by Huntington.
7.12. AMENDMENT AND MODIFICATIONS. The Administrative Agent, upon the consent of
the Required Banks and subject to the provisions of this Section 7.12, may from
time to time enter into written amendments or supplemental agreements to this
Agreement, or the Loan Documents executed by the Company, for the purpose of
adding or deleting any provisions, or otherwise changing, varying or waiving in
any manner the rights of the Banks, the Administrative Agent or the Company
thereunder or the conditions, provisions or terms thereof, or waiving any Event
of Default thereunder, but only to the extent specified in such written
agreements; provided, however, that no such amendment or supplemental agreement
without the consent of all the Banks shall: (a) extend the maturity of any of
the Loans, (b) increase the principal amount of any of the Loans, (c) decrease
the rate or rates of interest thereon or any fee payable by the Company to the
Administrative Agent or the Banks pursuant to this Agreement (except pursuant to
the terms of this Agreement), (d) alter, amend or modify this Section 7.12, (e)
release any Guarantor (except pursuant to the terms of the applicable guaranty
agreements, or release all or substantially all of the Collateral (except
pursuant to the terms of any security agreement or mortgage), or (f) alter the
meaning of the term Required Banks. The rights and duties of the Administrative
Agent may be changed upon the consent of the Required Banks, but only if the
Administrative Agent consents to such change. Any such amendment or supplemental
agreement shall be binding upon the Company, the Banks and the Administrative
Agent, and any of them. No waiver of a specific Event of Default shall extend to
any subsequent Event of Default (whether or not the subsequent Event of Default
is the same as the Event of Default which was waived), or impair any right
consequent thereon.
7.13. COMMITMENT PERCENTAGE. "Commitment Percentage" means 60% of the Loans in
respect of Huntington, and 40% of the Loans in respect of Bank One, NA.
7.14. PRO RATA TREATMENT AND PAYMENTS. Each borrowing or extension of credit
hereunder and each payment (including each prepayment) by the Company, of
principal, interest, and fees
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<PAGE> 37
(excluding agency fees) provided for in this Agreement shall be made or applied
Pro Rata pursuant to the Commitment Percentage of each of the Banks.
7.15. FUNDING OF ADVANCES. On or before the closing of the Loans or any later
date when funds are to be disbursed to the Company pursuant to the Loans, each
Bank shall deposit with the Administrative Agent its Pro Rata Share, in
accordance with its Commitment Percentage (the "Pro Rata Share"), of the amount
of the disbursement, in funds available for immediate use, no later than 11:00
a.m. Columbus, Ohio time on the same day on which the advance is made, provided,
however, that the Administrative Agent shall use its best efforts to give each
Bank advance notice of such funding request no later than 4:00 p.m., Columbus,
Ohio time (i) on the Business Day immediately preceding the day of the advance
with respect to advances under the Revolving Loan and, (ii) three Business Days
immediately preceding the day of the advance with respect to other types of
advances. In the event any Bank fails or refuses to deposit with the
Administrative Agent the amounts required herein, then the Administrative Agent,
without limitation, shall be entitled to pursue all remedies and rights
permitted by this Agreement, law, or equity and further shall be entitled to,
but not be required to, do all or any of the following: (a) fund such Bank's Pro
Rata Share of the disbursement, (b) accrue interest on any unpaid amount of such
Bank at the Federal Funds Rate, (c) withhold from such Bank all interest,
principal, fees and late charges attributable to such Bank's Pro Rata Share
thereof through the date such Bank funds its Pro Rata Share thereof and pays the
interest due thereon, PLUS any additional cost or expense, including, without
limitation, reasonable attorneys' fees, incurred by the Administrative Agent as
a result of such Bank's failure to pay, and (d) offset against such Bank's Pro
Rata Share all sums received by the Administrative Agent in connection with the
Loans until reimbursed by the Bank that failed or refused to make such payment.
7.16. SUCCESSORS AND ASSIGNS.
(a) GENERAL TERMS. The terms and provisions of this Agreement and the
Loan Documents shall be binding upon and inure to the benefit of the
Company, the Banks, and the Administrative Agent and their respective
successors and assigns, except that (i) the Company shall not have the
right to assign its rights or obligations under this Agreement and the
Loan Documents, and (ii) any assignment by any Bank must be made in
compliance with Section 7.16(c). Notwithstanding clause (ii) of the
preceding sentence, any Bank may at any time, without the consent of
the Company or the Administrative Agent, assign all or any portion of
its rights under this Agreement and any Note to a Federal Reserve Bank;
provided, however, that no such assignment to a Federal Reserve Bank
shall release the transferor Bank from its obligations hereunder. The
Administrative Agent may treat the entity which made any Loan or which
holds any Note as the owner thereof for all purposes hereof unless and
until such entity complies with Section 7.16(c) in the case of an
assignment thereof or, in the case of any other transfer to which the
Administrative Agent has consented or which has occurred by operation
of law, a written notice of the transfer is filed with the
Administrative Agent. Any assignee or transferee of the rights to any
Loan or any Note agrees by acceptance of such transfer or assignment to
be bound by all the terms and provisions of this Agreement and the Loan
Documents. Any request, authority or consent of any entity, which at
the time of making such request
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or giving such authority or consent is the owner of the rights to any
Loan (whether or not a Note has been issued in evidence thereof), shall
be conclusive and binding on any subsequent holder, transferee or
assignee of the rights to such Loan.
(b) PARTICIPATIONS.
(1) PERMITTED PARTICIPANTS; EFFECT. Any Bank may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities (each a
"Participant") participating interests in any Loan owing to such Bank,
any Note held by such Bank, any Commitment Percentage of such Bank, any
Pro Rata Share of such Bank or any other interest of such Bank under
this Agreement or the Loan Documents; provided, however, that such Bank
shall at all times retain for its own account an interest of not less
than $1,000,000, exclusive of interest, fees and other charges; and,
provided further, however, that so long as Huntington is the
Administrative Agent, Huntington shall retain for its own account an
interest of not less than 25% of its original Loan Commitment,
exclusive of interest, fees and other charges. In the event of any such
sale by a Bank of participating interests to a Participant, such Bank's
obligations under this Agreement and the Loan Documents shall remain
unchanged, such Bank shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Bank shall
remain the owner of its Loan and the holder of any Note issued to it in
evidence thereof for all purposes under this Agreement and the Loan
documents, all amounts payable by the Company under this Agreement
shall be determined as if such Bank had not sold such participating
interests, and the Company and the Administrative Agent shall continue
to deal solely and directly with such Bank in connection with such
Bank's rights and obligations under this Agreement and the Loan
Documents.
(2) VOTING RIGHTS. Each Bank shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of this Agreement and the Loan
Documents other than any amendment, modification or waiver with respect
to any Loan or Commitment Percentage in which such Participant has an
interest which forgives principal, interest or fees or reduces the
interest rate or fees payable with respect to any such Loan or
Commitment, extends the Termination Date, postpones any date fixed for
any regularly-scheduled payment of principal of, or interest or fees
on, any such Loan or Commitment Percentage, or releases any Guarantor.
(3) BENEFIT OF SETOFF. The Company agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 7.8 in respect of its participating interest in amounts owing
under this Agreement and the Loan Documents to the same extent as if
the amount of its participating interest were owing directly to such
Participant as a Bank under this Agreement and the Loan Documents;
provided, however, that each Bank shall retain the right of setoff
provided in Section 7.8 with respect to the amount of participating
interests sold to each Participant. The Banks agree to share with each
Participant, and each Participant, by exercising the right of setoff
provided in Section 7.8, agrees to share with each Bank, any amount
received pursuant to the exercise of its right
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of setoff, such amounts to be shared in accordance with Section 7.9 as
if each Participant were a Bank.
(c) ASSIGNMENTS.
(1) PERMITTED ASSIGNMENTS. Any Bank may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities (each a "Purchaser")
all or any part of its rights and obligations under this Agreement and
the Loan Documents; provided, however, that each assignment shall be in
an amount of not less than $5,000,000.00; and, provided further,
however, that so long as Huntington is the Administrative Agent,
Huntington shall retain for its own account an interest of not less
than 25% of its original Loan Commitment, exclusive of interest, fees
and other charges. Such assignment shall be substantially in such form
as may be agreed to by the parties thereto. The consent of the Company
and the Administrative Agent shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not a Bank or
an affiliate thereof; provided, however, that if an Event of Default
has occurred and is continuing, the consent of the Company shall not be
required. Such consent shall not be unreasonably withheld or delayed.
(2) EFFECT; EFFECTIVE DATE. Upon (i) delivery to the
Administrative Agent of a notice of assignment setting forth such
information as the Administrative Agent may reasonably require to
accommodate such assignment (a "Notice of Assignment"), together with
any consents required by Section 7.16(c)(1), and (ii) payment of a
$3,000.00 fee to the Administrative Agent for processing such
assignment, such assignment shall become effective on the effective
date specified in such Notice of Assignment. On and after the effective
date of such assignment, such Purchaser shall for all purposes be a
Bank party to this Agreement and any other Loan Document executed by
the Banks and shall have all the rights and obligations of a Bank under
this Agreement and the Loan Documents, to the same extent as if it were
an original party hereto, and no further consent or action by the
Company, the Banks or the Administrative Agent shall be required to
release the transferor Bank with respect to the percentage of the
Commitment Percentage and Loans assigned to such Purchaser. Upon the
consummation of any assignment to a Purchaser pursuant to this Section
7.16(c), the transferor Bank, the Administrative Agent and the Company
shall make appropriate arrangements so that new Notes or, as
appropriate, replacement Notes are issued to such transferor Bank and
new Notes or, as appropriate, replacement Notes, are issued to such
Purchaser, in each case in principal amounts reflecting their
respective Commitment Percentages, as adjusted pursuant to such
assignment.
(d) DISSEMINATION OF INFORMATION. The Company authorizes each Bank to
disclose to any Participant or Purchaser or any other entity acquiring an
interest in this Agreement and the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Bank's possession concerning the creditworthiness of the Company, including,
without limitation, any information provided by the Company as required under
this
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Agreement; provided that each Transferee and prospective Transferee agrees to be
bound by Section 8.3 of this Agreement.
8. MISCELLANEOUS.
8.1. NOTICES. All communications under this Agreement or under the Notes,
instruments, agreements or other documents executed pursuant hereto shall be in
writing and shall be mailed by certified mail, postage prepaid, by telecopier,
or by commercial overnight courier:
(a) If to the Administrative Agent or to any of the Banks, at the following
address, or at such other address as may have been furnished in writing to the
Company by the Administrative Agent:
The Huntington National Bank
41 South High Street
Huntington Center
Columbus, Ohio 43215
Attn.: Robert H. Friend, Vice President
Fax: 614-480-5791
Confirm: 614-480-3903
With a copy to:
Bank One, NA
100 East Broad Street
OH1-1070
Columbus, Ohio 43215
Attn.: David T. Clark, Vice President
Fax: 614-248-5518
Confirm: 614-248-9785
(b) If to the Company, at the following address, or at such other address as may
have been furnished in writing to the Administrative Agent by the Company:
Metatec Corporation
7001 Metatec Boulevard
Dublin, Ohio 43017
Attn: Julia A. Pollner, Vice President, Finance
Fax: 614-766-3146
Confirm: 614-777-3003
With a copy of any notice given by the Company pursuant to Section 5.1(f) to:
Baker & Hostetler LLP
65 East State Street Columbus, Ohio 43215
Attn: Gary A. Wadman, Esq.
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Fax: 614-462-2616
Confirm: 614-462-2678
Any notice so addressed and mailed by registered or certified mail shall be
deemed to be given on the third Business Day next following the postmark dated
which it bears; or by overnight courier shall be deemed to be given when
delivered; and any notice sent by telecopier shall be deemed to be given when
confirmed.
8.2. ACCESS TO ACCOUNTANTS. The Company hereby authorizes its certified public
accountants to provide to the Administrative Agent, for the benefit of the
Banks, any and all information that the Administrative Agent reasonably requests
from time to time with regard to the Company, and to discuss with the
Administrative Agent from time to time any and all matters relating to the
Company; provided, however, that if the Administrative Agent requests financial
or material information in writing or verbally from such accountants, such
accountants shall contemporaneously provide a copy of such correspondence to a
Financial Officer or shall inform a Financial Officer of the Company. In
furtherance of the foregoing, the Company hereby waives any privilege or claim
of confidentiality to the extent such might otherwise prevent the Company's
accountants from providing such information to the Administrative Agent or
discussing such matters with the Administrative Agent.
8.3. CONFIDENTIALITY. The Administrative Agent and each Bank shall hold all
non-public information identified as such by the Company in accordance with the
Administrative Agent's or such Bank's customary procedures for handling
confidential information of this nature and in accordance with safe and sound
banking practices, but may make disclosures reasonably required by a Bank in
connection with the contemplated co-lending arrangement or participation, as the
case may be, or as required by any governmental authority or any representative
thereof, or as required pursuant to any legal process, or on a confidential
basis to its accountants, lawyers and other advisors.
8.4. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating
hereto, including, without limitation, (a) consents, waivers and modifications
which may hereafter be executed, (b) documents received by the Administrative
Agent or any of the Banks at the closing or otherwise, and (c) financial
statements, certificates and other information previously or hereafter furnished
to the Administrative Agent or any of the Banks, may be reproduced by the
Administrative Agent or any of the Banks by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and the
Administrative Agent and the Banks, or any of them, may destroy any original
document so reproduced. The Company agrees and stipulates that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by the Administrative
Agent or any of the Banks in the regular course of business) and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
8.5. SURVIVAL, SUCCESSORS AND ASSIGNS. All warranties, representations, and
covenants made by the Company herein or on any certificate or other instrument
delivered by it or on its behalf
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under this Agreement shall be considered to have been relied upon by the
Administrative Agent and the Banks, and each of them, and shall survive the
closing of the Loans regardless of any investigation made by the Administrative
or the Banks, or any of them, on their behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company. This Agreement shall inure to the benefit of and be binding upon
the successors and assigns of each of the parties.
8.6. AMENDMENT AND WAIVER, DUPLICATE ORIGINALS. All references to this Agreement
shall also include all amendments, extensions, renewals, modifications, and
substitutions thereto and thereof. Subject to the provisions of Section 7.12
herein, this Agreement may be amended, and the observance of any term of this
Agreement may be waived only in writing executed by the Company and the
Administrative Agent; provided, however that nothing herein shall change the
Administrative Agent's sole good faith discretion (as set forth elsewhere in
this Agreement) to make advances, determinations, decisions or to take or
refrain from taking other actions. No delay or failure or other course of
conduct by the Administrative Agent or the Banks, or any of them, in the
exercise of any power or right shall operate as a waiver thereof, nor shall any
single or partial exercise of the same preclude any other or further exercise
thereof, or the exercise of any other power or right. Two or more duplicate
originals of this Agreement may be signed by the parties, each of which shall be
an original but all of which together shall constitute one and the same
instrument.
8.7. UNIFORM COMMERCIAL CODE AND GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
Unless the context otherwise requires, or terms are defined in this Agreement,
all terms used herein which are defined in the Uniform Commercial Code as
enacted in Ohio shall have the meaning stated therein, and all accounting terms
shall be determined in accordance with GAAP. The fiscal year of the Company
begins on January 1, and ends on December 31, and if the Company elects to
change its fiscal year, the Company shall provide written notice of such change
to the Administrative Agent within 30 days of such election.
8.8. ENFORCEABILITY AND GOVERNING LAW. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction, as to such jurisdiction, shall
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. No delay or omission on
the part of the Administrative Agent or the Banks, or any of them, in exercising
any right shall operate as a waiver of such right or any other right. All of the
rights and remedies of the Administrative Agent and the Banks, and each of them,
whether evidenced hereby or by any other agreement or instrument, shall be
cumulative and may be exercised singularly or concurrently. This Agreement shall
be governed by and construed in accordance with the laws of the State of Ohio.
The Company agrees that any legal suit, action or proceeding arising out of or
relating to this Agreement may be instituted in a state or federal court of
appropriate subject matter jurisdiction in the State of Ohio; waives any
objection which it may have now or hereafter to the venue of any suit, action or
proceeding; and irrevocably submits to the jurisdiction of any such court in any
such suit, action or proceeding.
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8.9. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (2) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
8.10. ADVERTISING. Without the prior written consent of the Company, which
consent shall not be unreasonably withheld, the Administrative Agent and the
Banks shall not advertise or otherwise disclose for marketing purposes the
extent and nature of the credit extended or to be extended and other services
provided to the Company by the Administrative Agent and the Banks in connection
with or relating in any way to the Loans.
8.11. CONDITIONS PRECEDENT TO THE LOANS. The obligation of the Banks to make the
Loans requested to be made shall be subject to satisfaction of the following
conditions precedent:
The Administrative Agent shall receive on or before the date of the
initial advance hereunder all of the following: (i) this Agreement, the
Notes and other agreements, documents and instruments relating hereto,
each duly executed where appropriate and in form and substance
satisfactory to the Administrative Agent; (ii) such additional
documentation as the Administrative Agent and the Required Banks may
reasonably request, including, but not limited to, an opinion of
counsel for the Company and the Guarantors, in form and substance
reasonably satisfactory to the Banks; and (iii) the Agent's Fee.
8.12. NO CONSEQUENTIAL DAMAGES. No claim may be made by the Company, or any of
its officers, directors, or agents against the Administrative Agent and the
Banks, or any of them, or any of their respective affiliates, directors,
officers, employees, attorneys or agents for any special, indirect, punitive, or
consequential damages in respect of any breach or wrongful conduct (whether the
claim there for is based in contract, tort or duty imposed by law) in connection
with, arising out of or in any way related to the transactions contemplated and
relationship established by this Agreement, or any act, omission or event
occurring in connection therewith, and the Company hereby waives, releases and
agrees not to sue upon any such claim for any such damages, whether or not
accrued and whether or not known or suspected to exist in its favor.
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8.13. INDEMNITY. The Company shall indemnify the Administrative Agent, the
Banks, and each of them, from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses and
disbursements of any kind or nature whatsoever (including, without limitation,
attorneys' fees and related disbursements) which may be imposed on, incurred by,
or asserted against the Administrative Agent, the Banks, or any of them, in any
litigation, proceeding or investigation instituted or conducted by any
governmental agency or instrumentality or any third person or entity with
respect to any aspect of, or any transaction contemplated by, or referred to in,
or any matter related to, this Agreement, whether or not the Administrative
Agent or any of the Banks is a party thereto, except to the extent that any of
the foregoing arises out of the gross negligence or willful misconduct of the
party being indemnified as determined in a final, non-appealable judgment by a
court of competent jurisdiction.
8.14. CONDITIONS PRECEDENT TO SUBSEQUENT EXTENSIONS OF CREDIT. The obligation of
Banks to make any disbursement, advance or other extension of credit subsequent
to the initial disbursement, advance, or extension of credit under the Loans, of
any portion of any of the Loans is subject to all the conditions and
requirements of this Agreement and delivery of the following required documents,
or other action, all of which are conditions precedent:
(a) COMPLIANCE. The Company shall have complied and shall then be in
compliance with all the terms, covenants and conditions of the
Agreement which are binding upon it.
(b) CONTINUATION OF REPRESENTATIONS AND WARRANTIES: The representations
and warranties herein contained shall be true, with the same effect as
though such representations and warranties had been made at the time of
the making of such advance or extension of credit, and any request for
an advance or extension of credit hereunder shall be deemed a
representation and warranty of same.
8.15. TERMINATION.
This Agreement, which shall inure to the benefit of and shall be
binding upon the respective successors and assigns of the Company, the
Administrative Agent and each Bank, shall become effective on the date hereof
and shall continue in full force and effect until the Termination Date, unless
sooner terminated under the terms of this Agreement. Subject to the provisions
hereof, the Company may terminate this Agreement at any time upon five Business
Days' prior written notice and upon payment in full of all Obligations existing
hereunder.
The termination of this Agreement shall not affect the Company's or the
Administrative Agent's or any Bank's rights, or any of the Obligations arising
prior to the effective date of such termination, and the provisions hereof shall
continue to be fully operative until all transactions entered into, rights or
interests created or Obligations have been fully disposed of, concluded or
liquidated. The rights granted to the Administrative Agent and the Banks
hereunder shall continue in full force and effect, notwithstanding the
termination of this Agreement or the Loan Commitments or the fact that the Loans
may from time to time be temporarily in a zero or credit position, until all of
the Obligations of the Company have been paid in full after the termination of
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this Agreement or the Company has furnished the Administrative Agent and the
Banks with an indemnification satisfactory to the Administrative Agent with
respect thereto.
All representations and warranties made herein and all obligations of
the Company in respect of taxes, indemnification and expense reimbursement shall
survive the execution and delivery hereof, the making and repayment of the
Loans, and the termination hereof, and shall not be limited in any way by the
passage of time or occurrence of any event and shall expressly cover time
periods when the Administrative Agent or any of the Banks may have come into
possession or control of any of the Company's property; provided, however, all
representations and warranties of the Company shall terminate when all
Obligations (other than indemnities not then due) have been paid in full and
this Agreement has been terminated.
8.16. INDEX OF DEFINITIONS.
"Administrative Agent" is defined in the preamble.
"Affiliate" is defined in Section 4.11.
"Agent's Fee" is defined in Section 2.14.
"Agreement" is defined in the preamble.
"Approved Affiliated Indebtedness" is defined in Section 4.15(a).
"Bank" and "Banks" are defined in the preamble.
"Benefit Plan" is defined in Section 3.10.
"Business Day" is defined in Section 1.3.
"CAPEX" is defined in Section 4.13.
"Collateral" is defined in Section 7.7.
"Commitment Fee" is defined in Section 2.14.
"Commitment Percentage" is defined in Section 7.13.
"Company" is defined in the preamble.
"Control" is defined in Section 4.11.
"Customary Permitted Liens" is defined in Section 4.4.
"Dublin Office Property" is defined in Section 4.3.
"EBITDA" is defined in Section 4.13.
"Environmental Laws" is defined in Section 3.13.
"ERISA" is defined in Section 3.10.
"ERISA Affiliate" is defined in Section 3.10.
"Event of Default" is defined in Section 6.1.
"Excess Cash Flow" is defined in Section 1.4.
"Federal Funds Margin" is defined in Section 2.3.
"Federal Funds Rate" is defined in Section 2.3.
"Federal Funds Rate Advance" is defined in Section 2.3.
"Financial Officer" is defined in Section 5.1.
"Fixed Charge Coverage Ratio" is defined in Section 4.15.
"Fixed Charges" is defined in Section 4.15.
"Funded Debt" is defined in Section 2.15.
"GAAP" is defined in Section 1.4.
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"Guarantor" and "Guarantors" are defined in Section 2.17.
"Hazardous Substances" is defined in Section 3.13.
"Huntington" is defined in the preamble.
"Imation Asset Purchase" is defined in Section 1.3(d).
"Interest Coverage Ratio" is defined in Section 4.14.
"Interest Payment Date" is defined in Section 2.6.
"Interest Period" is defined in Section 2.6.
"Internal Revenue Code" is defined in Section 3.10.
"IRS" is defined in Section 3.10.
"Leverage Ratio" is defined in Section 4.13.
"LIBOR Business Day" is defined in Section 2.4.
"LIBOR Margin" is defined in Section 2.4.
"LIBOR Rate" is defined in Section 2.4.
"LIBOR Rate Advance" is defined in Section 2.4.
"LIBOR Reserve Percentage" is defined in Section 2.4.
"Loan Commitment" is defined in Section 1.2.
"Loan Documents" is defined in Section 7.1.
"Loans" is defined in Section 1.1.
"Material Adverse Effect" is defined in Section 3.1.
"Multiemployer Plan" is defined in Section 3.10.
"Notes" is defined in Section 1.4.
"Notice of Assignment" is defined in Section 7.16.
"Obligations" is defined in Section 2.16.
"Participant" is defined in Section 7.16.
"PBGC" is defined in Section 3.10.
"Plan" is defined in Section 3.10.
"Premises" is defined in Section 3.13.
"Prime Rate" is defined in Section 2.2.
"Prime Rate Advance" is defined in Section 2.2.
"Pro Rata Share" is defined in Section 7.15.
"Protective Advances" is defined in Section 7.7.
"Purchaser" is defined in Section 7.16.
"Reduced Earnings" is defined in Section 2.7.
"Regulatory Requirement" is defined in Section 2.7.
"Reportable Event" is defined in Section 3.10.
"Required Banks" is defined in Section 7.1.
"Revolving Loan" is defined in Section 1.1.
"Revolving Note" is defined in Section 1.1.
"Tangible Net Worth" is defined in Section 4.12.
"Term Loan" is defined in Section 1.1.
"Term Note" is defined in Section 1.4.
"Termination Date" is defined in Section 1.4.
"Termination Event" is defined in Section 3.10.
"Transferee" is defined in Section 7.16.
"Vacant Dublin Property" is defined in Section 4.3.
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Each of the parties has signed this Agreement as of the date set forth
in the preamble.
COMPANY:
METATEC CORPORATION,
a Florida corporation
By /s/ JULIA A. POLLNER
---------------------------------
Its Vice President, Finance
---------------------------------
AGENT:
THE HUNTINGTON NATIONAL BANK,
a national banking association,
as Administrative Agent
By /s/ ROBERT H. FRIEND
---------------------------------
Its Vice President
---------------------------------
BANK:
THE HUNTINGTON NATIONAL BANK,
a national banking association
By /s/ ROBERT H. FRIEND
---------------------------------
Its Vice President
---------------------------------
BANK:
BANK ONE, NA,
a national banking association
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By /s/ LAURENCE S. CHRIST
---------------------------------
Its Vice President
---------------------------------
44
