Exhibit 10.1
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT is made as of the ___ day of ________,
199_, between Imation Corp., a Delaware corporation, with its principal
offices at One Imation Place, Oakdale, Minnesota 55125 (the "Company") and
_________ ("Executive"), residing at
______________________________________.___________________________________
WHEREAS, this Agreement is intended to specify the financial
arrangements that the Company will provide to Executive upon Executive's
separation from employment with the Company under any of the circumstances
described herein; and
WHEREAS, this Agreement is entered into by the Company in the belief
that it is in the best interests of the Company and its shareholders to
help assure that the Company will have the continued dedication of the
Executive during his or her employment with the Company, by providing for
certain severance benefits under certain circumstances in connection with
the Executive's employment with the Company, thereby enhancing the
Company's ability to attract and retain highly qualified people.
NOW THEREFORE, to assure the Company that it will have the continued
dedication of Executive, and to induce Executive to remain in the employ
of the Company, and for other good and valuable consideration, the Company
and Executive agree as follows:
1. Term of Agreement. The term of this Agreement shall commence on
the date of this Agreement (the "Effective Date") and shall continue in
effect until the first anniversary of the Effective Date, and shall
thereafter be automatically renewed for successive one-year terms provided
that you are employed by the Company on each anniversary of the Effective
Date (the "Covered Period"), unless, the Board of Directors of the Company
shall have authorized, by majority vote, management of the Company to give
notice to Executive, and the Company shall have given such notice, that
the Company does not wish to extend this Agreement, and provided further,
that, notwithstanding any such notice by the Company not to extend, this
Agreement shall continue in effect for a period of 12 months beyond the
term provided herein.
2. Definitions. When the following terms are used in this Agreement
with initial capital letters, they shall have the following meanings.
(i) "Cause" shall mean termination by the Company of your employment
based upon:
(a) the willful and continued failure by you to substantially
perform your duties and obligations (other than any such failure
resulting from incapacity due to physical or mental illness or any
such actual or anticipated failure resulting from your termination
for Good Reason);
(b) the willful engaging by you in misconduct which is
materially injurious to the Company, monetarily or otherwise; or
(c) your conviction of, or entering a plea of nolo contendere
to, a crime that constitutes a felony.
For purposes of this Section 2(i), no action or failure to act on
your part shall be considered "willful" unless done, or omitted to be
done, by you in bad faith and without reasonable belief that your action
or omission was in the best interests of the Company.
(ii) "Good Reason" shall mean the occurrence of any of the following
events, except for occurrence of such an event in connection with the
termination of your employment or reassignment by the Company for Cause,
for disability or for death:
(a) the assignment to you of employment duties, functions or
responsibilities that are significantly different from, and result
in a substantial diminution of, your duties, functions or
responsibilities as of the date of this Agreement; or
(b) a significant reduction by the Company in your base
salary, bonus opportunity or benefits as in effect as of the date of
this Agreement;
(iii) "Date of Termination" shall mean the date specified in the
Notice of Termination (except in the case of your death, in which case
Date of Termination shall be the date of death).
(iv) "Notice of Termination" shall mean a written notice which sets
forth the Date of Termination and, in reasonable detail, the facts and
circumstances claimed to provide a basis, if any, for termination of your
employment.
3. Termination Procedures. Any purported termination of your
employment by the Company or you (other than by reason of your death)
during the Covered Period shall be communicated by a Notice of Termination
in accordance with Section 9 hereof. No purported termination by the
Company of your employment in the Covered Period shall be effective if it
is not pursuant to a Notice of Termination. Failure by you to provide
Notice of Termination shall not limit any of your rights under this
Agreement except (a) that the Company shall be permitted to cure any
purported event specified in Section 2 (ii) and (b) to the extent the
Company can demonstrate that it suffered actual damages by reason of such
failure.
4. Qualification for Severance Benefits. You shall be eligible for
severance benefits pursuant to the terms of this Agreement if your
employment is terminated and the Date of Termination occurs during the
Covered Period in either of the following circumstances: (a) termination
of employment by the Company for any reason other than Cause or (b)
termination of employment by you for Good Reason; provided, however, that
you shall not begin receiving any payments or benefits under this
Agreement unless and until you execute an effective general release of all
claims against the Company and its affiliates in the form and manner
prescribed by the Company; and provided further, that failure to execute
such a general release within one month of your Date of Termination shall
result in the loss of any rights to receive payments or benefits under
this Agreement. No severance benefits become payable pursuant to this
Agreement in the event of termination of employment upon your death or
disability.
5. Compensation Upon Termination.
(i) Amounts. Upon qualification for severance benefits pursuant to
this Agreement, you shall be entitled to the benefits, to be funded from
the general assets of the Company, provided below:
(a) The Company shall pay to you (i) the full base salary
earned by you and unpaid through the Date of Termination, at the
rate in effect on the date of the Notice of Termination, (ii) any
amount earned by you as a bonus with respect to the fiscal year of
the Company preceding the Date of Termination if such bonus has not
theretofore been paid to you, and (iii) an amount representing
credit for any vacation earned or accrued by you but not taken
during the current "vacation year.";
(b) In lieu of any further base salary payments to you for
periods subsequent to the Date of Termination, the Company shall pay
to you a cash amount equal to the sum of:
(I) an amount equal to the target bonus under the
applicable bonus plan for the fiscal year in which the Date of
Termination occurs; plus
(II) an amount equal to one year's salary for the fiscal
year in which the Date of Termination occurs.
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(c) The Company shall provide the Company's standard employee
medical and dental insurance coverages, as elected by you and in
effect immediately prior to the Date of Termination, for twelve (12)
months following the Date of Termination.
(d) Notwithstanding any other agreement in existence between
the Company and you at the Date of Termination, all shares of
restricted stock owned or held by you or promised to you by the
Company shall be immediately vested in you without further
restriction and you shall be treated at that time as the
unrestricted owner of such Company stock, subject to applicable
constraints under federal and state securities laws.
(ii) No Disability Benefits. The Company shall not be required to
continue to provide disability benefits (group or individual) following
your Date of Termination other than with respect to benefits to which you
became entitled prior to the Date of Termination and which are required to
be paid following such Date of Termination in accordance with the terms of
applicable disability plans or policies in effect prior to such Date of
Termination.
(iii) Time and Form of Cash Payments. The cash payments provided for
in Sections 5(i)(a) and 5(i)(b) above shall be paid at regular payroll
intervals beginning after your Date of Termination (subject to the
provisions of Section 4 of this Agreement relating to execution of a
general release of claims) or, at the election of the Company, in a single
lump sum payment as soon as administratively feasible after the Date of
Termination. If severance is paid at regular payroll periods, you shall
receive the same amount each pay-day that you were receiving before
termination (plus an amount equal to the pro rata portion of your target
bonus, if not otherwise included in such pre-termination amount) until the
total amount of severance pay that is due under this agreement has been
paid. All severance payments are subject to any required withholding. In
no event, however, shall severance payments be made beyond twelve (12)
months after the Date of Termination; provided, however, that appropriate
adjustments to payment amounts will be made so that you are paid all cash
payments to which you become entitled under this Agreement.
(iv) Effect of Reemployment. If you are re-employed by the Company
after severance payments have been scheduled to be made but before the
final severance payment is made, all remaining severance payments shall be
suspended and shall automatically terminate as of the date of
re-employment. If you have received severance payments in a single lump
sum and are re-employed before the date the final severance payment would
have been made if payments had been made at regular payroll intervals, you
will be required to refund to the Company: (a) that portion of the lump
sum payment representing severance payments you would have received after
the date of re-employment minus (b) an amount equal to any taxes paid or
payable on such portion of the lump sum payment.
(v) No Mitigation. You shall not be required to mitigate the amount
of any payment provided for in this Section 5 by seeking other employment
or otherwise, nor shall the amount of any payment provided for in this
Section 5 be reduced by any compensation earned by you as the result of
employment by another employer after the Date of Termination, or
otherwise, except as set forth in Section 5.(iv) hereof.
6. 280G Limitation. In the event that any payment or benefit
received or to be received by you (whether payable pursuant to the terms
of this Agreement or otherwise (collectively, the "Total Payments")) would
be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") or any interest, penalties
or additions to tax with respect to such excise tax (such excise tax,
together with any such interest, penalties or additions to tax, are
collectively referred to as the "Excise Tax"), then you shall be entitled
to receive from the Company an additional cash payment (a "Gross-Up
Payment") within thirty business days of such determination in an amount
such that after payment by you of all taxes (including such interest,
penalties or additions to tax imposed with respect to such taxes),
including any Excise Tax, imposed upon the Gross-Up Payment, you retain an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Total Payments. All determinations required to be made under this Section
6, including whether a Gross-Up Payment is required and the amount of such
Gross-Up Payment, shall be made by an independent accounting firm retained
by the Company (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and you within a reasonable
period of time as requested by the Company. If the Accounting Firm
determines that no Excise Tax is payable by you, it shall furnish you with
an opinion that you have substantial authority not to report any Excise
Tax on your federal income tax return.
Any uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder
shall be resolved in favor of you. As a result of the uncertainty in the
application of
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Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that at a later time there will
be a determination that the Gross-Up Payments made by the Company were
less than the Gross-Up Payments that should have been made by the Company
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that you are required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment, if any, that has occurred and any such Underpayment shall be
promptly paid by the Company to you or for your benefit. As a result of
the uncertainty in the application of Section 4999 of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is
possible that at a later time there will be a determination that the
Gross-Up Payments made by the Company were more than the Gross-Up Payments
that should have been made by the Company ("Overpayment"), consistent with
the calculations required to be made hereunder. You agree to refund to the
Company the amount of any Overpayment that the Accounting Firm shall
determine has occurred hereunder. Any determination by the Accounting Firm
as to the amount of any Gross-Up Payment, including the amount of any
Underpayment or Overpayment, shall be binding upon the Company and you.
7. Successors.
(i) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees, and legatees. If you should die
while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement, to your
devisee, legatee or other designee or, if there is no such designee, to
your estate or, if no estate, in accordance with applicable law.
(iii) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise to all or
substantially all of the business and/or assets of the Company), by
agreement in form and substance satisfactory to you, to expressly assume
and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such
succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to compensation from the
Company in the same amount and on the same terms as you would be entitled
hereunder if you terminated your employment for Good Reason, except that
for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company and any successor
to its business and/or assets which executes and delivers the agreement
provided for in this Section 10(c) or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of law.
8. Notice. All notices, requests, demands and all other
communications required or permitted by either party to the other party by
this Agreement (including, without limitation, any Notice of Termination)
shall be in writing and shall be deemed to have been duly given when
delivered personally or received by certified or registered mail, return
receipt requested, postage prepaid, at the address of the other party as
follows:
If to the Company: Imation Corp.
Attention:
One Imation Place
Oakdale, Minnesota
If to you: _____________________
_____________________
_____________________
_____________________
Either party to this Agreement may change its address for purposes of this
Section 9 by giving fifteen (15) days' prior written notice to the other
party hereto.
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9. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and the Company. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Minnesota without regard to its
conflicts of law principles.
10. Effect of Agreement; Entire Agreement. This agreement supersedes
any and all other oral or written agreements or policies made relating to
the subject matter hereof and constitutes the entire agreement of the
parties relating to the subject matter hereof.
11. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
12. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
13. Employment. This Agreement does not constitute a contract of
employment or impose on the Company any obligation to retain you as an
employee, to continue your current employment status or to change any
employment policies of the Company, including but not limited to the
Company's Employee Agreement.
If this letter sets forth our agreement on the subject matter hereof, please
sign and return to the Company the enclosed copy of this letter which will then
constitute our agreement on this subject.
IMATION CORP.:
By:_________________________________
William T. Monahan
Its: Chairman, President and
Chief Executive Officer
EXECUTIVE:
____________________________________
(EXECUTIVE NAME)
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