AMENDMENT NO. 2 TO MEDIA
DISTRIBUTION AGREEMENT
This Amendment is entered into as of
October 31, 2005 (the “Effective Date”) between
EXABYTE CORPORATION , a Delaware corporation with principal
offices at 2108 55 th Street, Boulder, Colorado 80301
(“Exabyte”) and IMATION CORP. , a Delaware
corporation with principal offices at 1 Imation Place, Oakdale,
Minnesota 55128 (“Imation”).
Exabyte and Imation have entered
into a Media Distribution Agreement dated as of November 7, 2003,
as amended by Amendment No. 1 dated February 9, 2004 (the
“MDA”).
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Exabyte and Imation now wish to modify the MDA
as set forth in this Amendment.
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NOW, THEREFORE, Exabyte and Imation agree that
the MDA is amended as follows:
1.1 In
consideration of Exabyte’s performance under Section 2 of
this Amendment and subject to the terms and conditions of the MDA
and this Amendment, effective January 1, 2006 Sections 7.A and 7.C
of the MDA are amended to provide that Exabyte’s pricing to
Imation will be such that:
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(i)
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with respect to Products (as defined in the MDA)
delivered by Exabyte and purchased by Imation on or after January
1, 2006 through December 31, 2006 Imation is able to re-sell such
Products while obtaining at least an 8% Gross Margin on sales to
third parties; and
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(ii)
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with respect to Products delivered by Exabyte
and purchased by Imation on or after January 1, 2007 Imation is
able to re-sell such Products while obtaining at least a 10% Gross
Margin on sales to third parties.
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1.2 Section
14.B of the MDA is modified to add the following: “For
purposes of this Section 14.B the Distribution Fee shall be deemed
to be Eight Million Five Hundred Thousand Dollars
($8,500,000.00).”
1.3 Imation
agrees to purchase Products in the 4 th quarter of 2005
with the objective of maintaining no more than normal inventory
levels of Products at the close of the quarter.
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2.0
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Consideration from Exabyte
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2.1 In
consideration of the changes stated in Section 1 of this Amendment
and subject to the terms and conditions of the MDA and this
Amendment, Exabyte will provide the following to
Imation:
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(i)
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On or prior to the First Closing Date (defined
in Section 8.1 below) Exabyte shall sign and deliver to Imation a
secured promissory note for Five Million Dollars ($5,000,000) in
the form of Exhibit A to this Amendment (the “$5 Million
Note”);
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(ii)
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On or prior to the First Closing Date Exabyte
shall deliver to Imation Three Million Dollars ($3,000,000) in the
form of common stock of Exabyte Corporation (or its applicable
parent company, if reorganized) based upon a price of $2.00 per
share (i.e., 1.5 million shares) to be delivered pursuant to and
under the terms of an Agreement For Issuance of Stock in the form
of Exhibit C (the “Stock Issuance Agreement”) to be
entered into by Exabyte and Imation on the Effective Date of this
Amendment; and
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(iii)
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On January 2, 2006 (the “Second Closing
Date”) Exabyte shall pay Two Million Dollars ($2,000,000) to
Imation in the form of cash or credits (at the option of Exabyte)
which Imation may use to purchase inventory.
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2.2 Imation
shall not be deemed to have accepted the consideration described in
Section 2.1 of this Amendment based upon Exabyte’s delivery
of some of the consideration at the First Closing Date. Imation
shall only be deemed to have accepted the consideration described
in Section 2.1 upon Exabyte’s satisfaction of all conditions
required by this Amendment. If Exabyte fails to satisfy all
conditions required by Section 7 of this Amendment by the Second
Closing Date, Imation may return any consideration described in
Section 2.1 received at an earlier date.
2.3 As
security for the payment and performance of all obligations under
the $5 Million Note, Exabyte grants to Imation a security interest
in all assets of Exabyte. The security interest shall be subject to
only the following prior security interests and will terminate when
the $5 Million Note is paid in full:
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(i)
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A first priority security interest in favor of
Wells Fargo Business Credit, Inc. (“Wells Fargo”) as
security for all indebtedness and other obligations of Exabyte to
Wells Fargo, as such indebtedness or other obligations may be
amended or extended from time to time or in favor of another lender
as security for all indebtedness and other obligations which
refinance the indebtedness and other obligations of Exabyte to
Wells Fargo or any predecessor refinancing lender covered by this
clause;
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(ii)
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A second priority security interest in favor of
the New Lender as described in Section 8 of this
Amendment;
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(iii)
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Such security interests as are permitted by
covenants in the loan documents of Wells Fargo Business Credit,
Inc. as in effect on the date hereof.
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2.4 Imation,
Wells Fargo and the New Lender will negotiate an intercreditor
agreement to recognize and reflect the relative priority of their
security interests (the “Intercreditor Agreement”). The
Intercreditor Agreement shall be reasonable in scope and intent and
consistent with the existing subordination agreement between
Imation and Wells Fargo dated March 9, 2005. Unless otherwise
agreed by Imation, an amendment to the Credit Agreement
between
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Exabyte and Wells Fargo shall indicate that (a)
Wells Fargo consents to the $2 Million Note, the $5 Million Note,
the security interests granted to Imation under this Amendment, the
New $4+ Million Financing described in Section 8 of this Amendment,
and the other transactions contemplated by this Amendment; and (b)
Wells Fargo waives (1) any default by Imation under the
Subordination Agreement between Imation and Wells Fargo dated March
9, 2005, and (2) any default by Exabyte under any agreement between
Exabyte and Wells Fargo, which would otherwise result from the $2
Million Note, the $5 Million Note, the security interests granted
to Imation under this Amendment, and the other transactions
contemplated by this Amendment. Imation’s security interest
will convert to a higher priority security interest if debt with a
higher priority security interest is paid off without a
refinancing, as permitted by Section 2.3(i), that replaces such
debt.
2.5 If
any amount of principal or interest on the $5 Million Note is not
paid when due, pricing under the Media Distribution Agreement will
be automatically modified so that, with respect to Products
delivered by Exabyte and purchased by Imation on or after the date
of such default, Imation is able to re-sell such Products while
obtaining at least a 25% Gross Margin on sales to third parties
until the amount in default is paid in full via the excess margin
(25% vs. 8% (through Dec. 31, 2006) or 25% vs. 10% (beginning Jan.
1, 2007)). Once the amount which is in default is paid in full, the
Imation Gross Margin will revert to 8% or 10%, as the case may
be.
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3.0
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Secured $2 Million Loan
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3.1 On
the First Closing Date Imation will loan $2,000,000 to Exabyte via
wire transfer (the “$2 Million Loan”). This loan will
bear interest at a rate of ten percent (10%) per year. As evidence
of the $2 Million Loan, on or prior to the First Closing Date
Exabyte shall sign and deliver to Imation a secured promissory note
for Two Million Dollars ($2,000,000) in the form of Exhibit B to
this Amendment (the “$2 Million Note”). Interest shall
be payable quarterly, and all principal of and interest on the $2
Million Loan will be due and payable on December 15,
2006.
3.2 As
security for the payment and performance of all obligations under
the $2 Million Note, Exabyte grants to Imation a security interest
in all assets of Exabyte. This security interest shall be subject
only to the higher priority security interests described in clauses
(i), (ii) and (iii) of Section 2.3. Unless otherwise agreed by
Imation, Imation’s security interest will convert to a higher
priority security interest if debt with a higher priority security
interest is paid off without a refinancing that replaces such debt.
Such security interest will terminate when the $2 Million Note is
paid in full.
3.3 If
any amount of principal or interest on the $2 Million Note is not
paid when due, pricing under the Media Distribution Agreement will
be automatically modified so that, with respect to Products
delivered by Exabyte and purchased by Imation on or after the date
of default, Imation is able to re-sell such Products while
obtaining at least a 25% Gross Margin on sales to third parties
until the amount in default is paid in full via the excess margin
(25% vs. 8% (through Dec. 31, 2006) or 25% vs. 10% (beginning Jan.
1, 2007)). Once the amount which is in default is paid in full, the
Imation Gross Margin will revert to 8% or 10%, as the case may
be.
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4.0
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Representations and Warranties
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Exabyte represents and warrants to Imation
that:
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(i)
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The execution, delivery and performance by
Exabyte of this Amendment, the $2 Million Note, the $5 Million
Note, the Stock Issuance Agreement, and all other agreements and
documents to which Exabyte is a party referred to in this
Amendment:
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(a)
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have been duly authorized by all requisite
corporate action, including, without limitation, by the Board of
Directors of Exabyte;
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(b)
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will not violate any provisions of law, or
Exabyte’s Certificate of Incorporation, as amended to the
date hereof; and
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(c)
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will not violate or be in conflict with, result
in a breach of, or constitute a default under, any material
indenture, agreement or other instrument to which Exabyte is a
party or by which Exabyte or any of its properties is bound, or any
order, writ, injunction or de
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