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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
• up to 60 percent of the appraised fair market value of eligible real estate (the Original Real Estate Value), such
Original Real Estate Value to be reduced each calendar month by 1/120th, provided, that the Original Real Estate
Value shall not exceed $40 million; plus
• such other classes of collateral as may be mutually agreed upon and at advance rates as may be determined by
the Agent; minus
• such reserves as the Agent may establish in good faith.
Our European obligations under the Credit Agreement are secured by a first priority lien on substantially all of the
material personal property of the European Borrower. Borrowings under the European portion of the Credit Facility are limited
to the lesser of (a) $30 million and (b) the “European borrowing base.” The European borrowing base calculation is
fundamentally the same as the U.S. borrowing base, subject to certain differences to account for European law and other
similar issues.
The Amended Credit Agreement contains covenants which are customary for similar credit agreements, including
covenants related to financial reporting and notification, payment of indebtedness, taxes and other obligations; compliance
with applicable laws; and limitations regarding additional liens, indebtedness, certain acquisitions, investments and
dispositions of assets. The Amended Credit Agreement contains a conditional financial covenant that requires Imation Corp.
to have a Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.00 or
a liquidity requirement of $30.0 million of domestic borrowing availability. We were in compliance with the liquidity requirement
as of December 31, 2013 and our U.S. availability discussed above considers the $30 million liquidity requirement.
On July 16, 2013, we entered into an additional credit agreement for a revolving credit facility with a lender in Japan with
Imation Corporation Japan as the borrower and Imation Corp. as the guarantor. We intend to use the credit facility for general
operating purposes. The credit agreement is a three year asset-based revolving credit facility with a borrowing base
consistent with our existing Credit Agreement that allows for the borrowing of amounts up to 3.0 billion Japanese Yen, or
approximately $30.0 million. Borrowings under the credit facility will bear interest at an interest rate equal to the base rate
based on LIBOR or TIBOR plus the applicable margins provided for in the credit agreement. The credit agreement contains
financial covenants applicable to Imation Corporation Japan including a fixed charge coverage ratio requirement. As of
December 31, 2013, our borrowing capacity under this arrangement was $12.4 million and we did not have any borrowings
outstanding under this credit facility. We are in compliance with all covenant requirements as of December 31, 2013.
During 2013 we capitalized $0.4 million of debt issuance costs related to the Japan Credit Agreement and during 2012
we capitalized $2.6 million of debt issue costs related to the Amended Credit Agreement. These costs were recorded to Other
assets in our Consolidated Balance Sheets as of December 31, 2013 and 2012 and are being amortized over the term of
each of the credit agreements.
As of December 31, 2013 and 2012 we had outstanding standby letters of credit of $0.7 million and $0.4 million,
respectively. The outstanding standby letters of credit are required by our insurance companies to cover potential deductibles
and reduce our allowed borrowing capacity under the Amended Credit Agreement. Additionally, as of December 31, 2013 we
had a $6.0 million overdraft line of credit available in Japan.
Our interest expense, which includes letter of credit fees, facility fees, commitment fees under the Amended Credit
Agreement and amortization of debt issuance costs, for 2013, 2012 and 2011 was $2.5 million, $2.9 million and $3.7 million,
respectively. Cash paid for interest for 2013, 2012 and 2011, relating to both continuing and discontinued operations, was
$1.7 million, $2.4 million and $2.7 million, respectively.
Note 12 — Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit
price in an orderly transaction between market participants on the measurement date. A three-level hierarchy is used for fair
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