EXHIBIT 10.13
IMATION 1998 SUCCESS SHARING PROGRAM
IMATION CORP.
FEBRUARY 1998
I. Objectives of the Success Sharing Plan
II. Success Sharing Plan and Imation's Compensation Philosophy
III. Participation
IV. Success Sharing Metrics
A. Company Performance
B. Business Unit Performance
V. Calculation and Payment of Awards
VI. General Provisions
SUCCESS SHARING PLAN OBJECTIVES
IMATION'S SUCCESS SHARING PLAN IS DESIGNED TO REWARD EMPLOYEES FOR THEIR
CONTRIBUTIONS TO THE COMPANY'S ANNUAL FINANCIAL SUCCESS. THE PLAN PROVIDES
PARTICIPATING EMPLOYEES WITH A VARIABLE COMPONENT TO THEIR TOTAL CASH
COMPENSATION. THE PLAN PROVIDES THE OPPORTUNITY TO RECEIVE AN ABOVE-MARKET LEVEL
OF TOTAL CASH COMPENSATION IN CORRELATION WITH AN ABOVE-TARGET LEVEL OF BUSINESS
UNIT AND COMPANY FINANCIAL PERFORMANCE. CORRESPONDINGLY, EMPLOYEES' VARIABLE
COMPONENT (OF TOTAL CASH COMPENSATION) WOULD BE REDUCED IN CORRELATION WITH
REDUCED LEVELS OF FINANCIAL PERFORMANCE.
The Plan provides a variable component of each participating employee's total
cash compensation and is designed to create a strong linkage between the
employee participants and company shareholders. A primary focus of the
corporation (and the employees making up the corporation) is value creation for
Imation's shareholders through the achievement of company and business unit
financial targets.
The purpose and objectives of the Success Sharing Plan are:
* More closely align employees' interests with those of shareholders;
* Reward team performance and customer satisfaction that supports the
achievement of the business units' and company's annual financial
objectives;
* Attract, retain and motivate a highly effective employee population
possessing the skills, talents and mindset necessary to achieving
organizational success; and
* Provide the opportunity for employees to be an engaged participant in
Imation's profitability and success
SUCCESS SHARING PLAN AND IMATION'S COMPENSATION PHILOSOPHY
The Success Sharing Plan supports Imation's compensation philosophy of having
employees participate in the risk and rewards associated with the company's
financial performance:
Imation's compensation philosophy is based on the principal of
attracting, retaining and motivating people with the skills, knowledge
and capabilities necessary for Imation to compete and excel in an
ever-evolving marketplace. Rewards will be focused on performance,
demonstrated competencies and employee innovation and risk taking. The
company's business strategies, (internal and external) economic factors
and Imation's ability to pay will be primary influences in the design
and administration of compensation programs.
Compensation programs will be targeted to be competitive with other
companies in similar industries with whom Imation competes for
employees. Imation believes in providing compensation programs which
allow employees to share in the risk and rewards of the company's
financial performance, thus aligning employees' interests with those of
Imation's shareholders.
Imation's compensation philosophy includes a commitment to open,
on-going communications and fair program administration.
The guiding principles of Imation's compensation program will be beneficial in
understanding the Success Sharing Plan. These principles are:
* Pay for performance
* Implement compensation programs which motivate employees to become key
stakeholders in the success of the company
* Maintain a market-competitive compensation program which attracts,
retains and motivates a talented, high-performing workforce
* Incorporate a variable component to total cash compensation programs
VARIABLE PAY STRATEGY
Imation has a strong commitment to making variable pay a component of every
employee's total compensation. This variable component provides the opportunity
for participants' total cash compensation to be significantly greater than
market when the company's financial performance exceeds operational targets.
PARTICIPATION IN THE SUCCESS SHARING PLAN
While it is the company's desire to move all Imation employees to the Success
Sharing Plan, incorporating a variable component to each employees' pay, most
current participants are limited to regular Imation (full- and part-time)
employees in Career Bands C through G, excluding those employees who are covered
under a specific incentive pay plan for their plant or business organization.
Typically, sales-commissioned employees (regardless of Career Band positioning)
will be excluded from participation in the Plan as this time.
SUCCESS SHARING PERFORMANCE METRICS
The 1998 Success Sharing Plan will have two components of financial performance:
Company and Business Unit. Each Plan participant (within a business unit) will
have his/her payout determined by a combination of company and business unit
financial performance. Company performance will comprise 50% of the total payout
opportunity, and business unit performance will determine the remaining 50%
payout opportunity. Corporate and Advanced Imaging Technology employees, along
with those European employees not assigned to specific business units, will have
their payouts determined 100% by overall company performance. Employees in MOW
(Most of World) will have their payout determined by a combination of company
and MOW performance.
Employee Assigned to:
--------------- ----------------------- ---------------------- ------------------
Advanced
Corporate Europe Imaging Tech. Business Unit
Organizational
Performance --------------- -------- ----------------------- ------------------
Metric(s) B.U. Non B.U.
--------------- -------- -------------- ---------------------- ------------------
Corporate 100% 50% 100% 100% 50%
- -------------------------- --------------- -------- -------------- ---------------------- ------------------
Business Unit 50% 50%
- -------------------------- --------------- -------- -------------- ---------------------- ------------------
Business unit financial success is critical to an overall successful performance
by the total company; however, a respective business unit could potentially
achieve a level of performance below the threshold with business unit employees
still having the opportunity for a partial payout based upon overall company
performance - and vice versa.
COMPANY PERFORMANCE - 50% OF TOTAL PAYOUT OPPORTUNITY
Company financial targets are established annually by the CEO and approved by
the Compensation Committee of the Board of Directors. Imation must exceed a
threshold level of annual performance in order for any payout to occur from the
corporate performance component of the Plan. The company's 1998 performance
metric is a target level of Economic Profit improvement. The Corporate
performance targets will be provided to Plan participants in a separate
schedule.
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ECONOMIC PROFIT: OPERATING INCOME AFTER TAX - CAPITAL CHARGE ON ASSETS
- --------------------------------------------------------------------------------
This metric is further broken down as follows:
OPERATING INCOME = REVENUE - OPERATING EXPENSES
OPERATING INCOME represents earnings derived from the direct activities of the
business, before taking other income and other expenses into account -- such as
investment income and interest expense.
REVENUE includes product sales, service contracts and lease revenues
OPERATING EXPENSES include cost of sales, cost of leased equipment,
cost of services, development and engineering costs, marketing, and
general and administrative expenses.
The CAPITAL CHARGE ON ASSETS represents the finance cost of carrying business
assets - equipment, inventory, receivables, buildings, etc. along with
occasional, one-time charges associated with activities such as acquisitions or
divestitures. This includes the costs associated with borrowing or losing the
use of cash in order to obtain the assets as well as a risk component (called
the beta factor) that the market has determined for our business. This carrying
cost represents the minimal return on investment that Imation shareholders
desire.
Achievement of the following Corporate performance levels will result in the
associated level of payout from the CORPORATE COMPONENT of Success Sharing
target compensation:
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CORPORATE
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PERFORMANCE LEVEL SUCCESS SHARING
AT: PAYOUT PERCENT
----------------------------- -------------- ----------------------------
Threshold (Floor) = 75%
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Risk-Adjusted Target = 100%
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Business Model Target = 150%
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Maximum (Ceiling) = 200%
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There will be no payout for achievement of a Corporate economic profit
performance below the threshold level and the maximum payout would be 200% of
the corporate component of a participating employee's Success Sharing target
award. Payouts will be made at levels between those indicated above and will be
calculated based on fiscal year-end results.
BUSINESS UNIT PERFORMANCE - 50% OF TOTAL PAYOUT OPPORTUNITY
Management determines the appropriate financial targets for each respective
business making up Imation. These targets are then reviewed by the Compensation
Committee in conjunction with their review and approval of the corporate target.
Individual businesses must exceed a threshold level of annual performance in
order for any payout to occur from the business unit component of the Plan.
The 1998 performance metrics will vary by business, dependent upon the
respective business model. These metrics may be ECONOMIC PROFIT, SALES, AND/OR
OPERATING INCOME. Plan
participants will receive specific information related to their 1998 business
unit Plan metrics via a separate schedule.
Achievement of the following Business Unit performance levels will result in the
associated level of payout from the BUSINESS UNIT COMPONENT of Success Sharing
target compensation:
-------------------------------------------------------------------------
BUSINESS UNIT
-------------------------------------------------------------------------
----------------------------- -------------- ----------------------------
PERFORMANCE LEVEL SUCCESS SHARING
AT: PAYOUT PERCENT
----------------------------- -------------- ----------------------------
----------------------------- -------------- ----------------------------
Threshold (Floor) = 75%
----------------------------- -------------- ----------------------------
----------------------------- -------------- ----------------------------
Risk-Adjusted Target = 100%
----------------------------- -------------- ----------------------------
----------------------------- -------------- ----------------------------
Business Model Target = 150%
----------------------------- -------------- ----------------------------
----------------------------- -------------- ----------------------------
Maximum (Ceiling) = 200%
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There will be no payout for achievement of any performance below the threshold
level defined for respective businesses, and the maximum payout would be 200% of
each business unit component of a participating employee's Success Sharing
target award. Payouts will be made at levels between those indicated previously
and will be calculated based on fiscal year-end results.
CALCULATION OF SUCCESS SHARING AWARDS
As indicated previously, Success Sharing Plan participants will have their
annual payouts determined by a combination of business unit and corporate
performance, with the exception of Corporate, Advanced Imaging Technology, and
some European employees.
Employee Assigned to:
--------------- ----------------------- ---------------------- ------------------
Advanced
Corporate Europe Imaging Tech. Business Unit
Organizational
Performance --------------- -------- -------------- ---------------------- ------------------
Metric(s) B.U. Non B.U.
- -------------------------- --------------- -------- -------------- ---------------------- ------------------
Corporate 100% 50% 100% 100% 50%
- -------------------------- --------------- -------- -------------- ---------------------- ------------------
Business Unit 50% 50%
- -------------------------- --------------- -------- -------------- ---------------------- ------------------
Examples of Bonus Calculations
ASSUMPTIONS FOR FOLLOWING EXAMPLES:
CORPORATE ACHIEVES BUSINESS MODEL TARGET PERFORMANCE = $25 MILLION = 150% NEW
GROWTH VENTURES SALES ACHIEVES RISK-ADJUSTED PERFORMANCE = 1 .5 MILLION =100%
NEW GROWTH VENTURES OPERATING INCOME COMES IN AT THRESHOLD LEVEL = .25 MILLION
= 75%
Mary Smith, employed in the Corporate Finance group, has an annual Success
Sharing target of $5,000. The business model target level of $25MM in corporate
economic profit is achieved; therefore, Mary's 1998 Success Sharing award will
be:
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$5,000 x 150% = $7,500
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Brad Olson is an employee within the New Growth Ventures (NGV) business, and he
has an annual target Success Sharing bonus of $6,000. Year-end corporate
economic profit results hit the business model target level of $25MM. Brad's
business unit metrics are NGV sales and NGV operating income. NGV sales for the
year fall short of the business model target, but the group does achieve its 80%
business model level in sales of 1.5MM; additionally, NGV's operating income for
the year meets the $.25MM threshold level of performance. Brad's 1998 annual
Success Sharing payment would be calculated as:
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CORPORATE: $6,000 X .50 X 150% = $4,500
- --------------------------------------------------------------------------------
BUSINESS:
- --------------------------------------------------------------------------------
NGV SALES $6,000 X .25 X 100% = $1,500
- --------------------------------------------------------------------------------
NGV O.I. $6,000 X .25 X 75% = $1,125
- --------------------------------------------------------------------------------
TOTAL AWARD PAYOUT $7,125
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4
Imation's Success Sharing Plan year runs from January 1 through December 31,
1998. Award payments are generally paid annually, during the February following
Plan year-end.
1998 PLAN PROGRESS PAYMENT
As a one-time, transitional process, 1998 award opportunities will be considered
for payment twice - mid-year in July 1998 and year-end during February 1999.
Corporate operating income must reach a minimum level (for the period January 1
through June 30, 1998) in order for the progress payment (a partial, mid-year
payout) to be distributed to Plan participants. This mid-year operating income
figure will be distributed to Plan participants via a separate schedule. If the
mid-year operating income target is achieved, all participating employees will
receive a payment equal to 35% of their target annual Success Sharing
compensation. Any payment resulting would be distributed during July 1998 and
will be deducted from actual year-end awards.
Referring to one of the previous payout examples, progress and adjusted year-end
payments would be calculated as follows:
Mary's progress payment - Target Award of $5,000 x .35 = $1,750 Mary's
year-end payment - Year-end Award of $7,500 - $1,750 = $5,750
PAYOUT ELIGIBILITY
To be eligible to receive the 1998 Plan Progress Payment, Plan participants must
be an active employee of Imation on June 30, 1998; Plan participants must be
active employees of Imation on December 31, 1998 to be eligible for any year-end
payout opportunity. Employees hired throughout the year will receive a pro-rated
portion of their target annual Success Sharing award, based upon the portion of
the Plan year employed. Any exceptions to this are noted as follows:
Disability, Retirement, or Death
In the event of total disability, retirement, or death, a pro-rated award will
be made to the participant or the participant's estate based on the portion of
the year worked up to the time of total disability, retirement or death.
Transfers Between Businesses
Employees transferring between discrete business units throughout the Plan year
will have their year-end payouts pro-rated based upon the period of time worked
in each business unit. For example, if an employee works in Corporate 3 months
of the Plan year and then transfers to the Internet Products group for the
remaining 9 months, his/her award would be calculated as follows:
OLD: 100% Corporate NEW: 50% Corporate + 50% Internet Products
YEAR-END PAYOUT = .25(Corporate) + .75[(.5(Corporate)) + (.5 (Internet
Products))] less mid-year progress payment
GENERAL PROVISIONS
Imation reserves the right to modify or terminate this Plan at any time and for
any reason, as determined by the Board of Directors. For example, mergers,
acquisitions, or divestitures of Imation businesses will necessarily result in
modifications to financial metrics. Should such a modification or termination
occur, Plan participants will be notified of such change as soon as
administratively possible.
The terms of this Plan are not intended to modify the at-will employment
relationship between Imation and its employees.