Memorex 2009 Annual Report Download - page 57

As a result of the transaction, TDK became our largest shareholder and has the right to nominate a representative to
serve on the Imation Board of Directors. Raymond Leung, TDK’s nominee, was elected to serve as a Class III member of
the Board of Directors on November 7, 2007 and was reelected by shareholders in May 2008. Pursuant to an Investor
Rights Agreement, dated July 31, 2007, TDK’s ownership stake will be permitted to increase up to 21 percent of Imation
common stock on a fully diluted basis through open market purchases. TDK received certain preemptive rights and
registration rights and TDK agreed to a standstill on further acquisitions of Imation common stock above the 21 percent
threshold (except as a result of stock repurchases initiated by Imation, in which event TDK’s ownership will not be
permitted to exceed 22 percent of the then outstanding shares). TDK also agreed to a voting agreement with respect to
certain matters presented to Imation shareholders and a three-year lock-up on sales of the Imation shares acquired in the
transaction.
TDK and Imation also entered into two long-term Trademark License Agreements, dated July 31, 2007, with respect
to the TDK Life on Record brand, which will continue, unless terminated by TDK at the earliest in 2032, (2017 in the case
of headphones, speakers or wholly new products) or earlier in the event of a material breach of the Trademark License
Agreement, specific change of control events or default by Imation. One of the agreements licenses the trademark to
Imation for the U.S. territory, while the other licenses the trademark to an Imation affiliate outside the United States. The
trademark licenses provide us exclusive use of the TDK Life on Record logo for marketing and sales of current and
successor magnetic tape, optical media and flash memory products, certain accessories, headphones and speakers and
certain future removable recording media products. We anticipate that TDK will continue its research and development
(R&D) and manufacturing operations for recording media products including audio, video and data storage tape and
Blu-ray optical discs, which TDK will supply us as well as its other OEM customers.
We also entered into a Supply Agreement, dated July 31, 2007, with TDK to purchase Imation’s requirements of
removable recording media products and accessory products for resale under the TDK Life on Record brand to the extent
TDK can supply such products on competitive terms and TDK agreed not to sell any such products to third parties for
resale under the TDK Life on Record brand during the term of the Trademark License Agreement. The Supply Agreement
will continue until 2012 or for so long as TDK manufactures any of the products.
The following table summarizes our original purchase price as of December 31, 2007:
Amount
(In millions)
Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 54.9
Cash consideration to minority interest holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9
Common stock issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216.7
Direct acquisition costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2
Restructuring and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.2
Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $314.9
The purchase price allocation resulted in goodwill of $55.9 million. The portion of goodwill deductible for tax purposes
was $11.7 million.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)