Imation Corp. 2005 Stock Incentive Plan Amendment to Stock Option Agreement
EXHIBIT 10.5
Imation Corp. 2005 Stock Incentive Plan
Amendment to Stock Option Agreement
This Amendment to Stock Option Agreement (the “Amendment”), effective as of ,
2006, between Imation Corp., a Delaware corporation (the “Company”) and , an
employee of the Company or one of its Affiliates (the “Participant”).
WHEREAS, pursuant to a Stock Option Agreement effective as of (the
“Agreement”), the Company granted the Participant an option for shares of the Company’s
common stock, par value $.01 per share, subject to the terms and conditions set forth in the
Agreement and in accordance with the terms and conditions of the Imation Corp. 2005 Stock Incentive
Plan (the “Plan”).
WHEREAS, Section 3 of the Plan provides that the Committee administering the Plan (the
“Committee”) has full power and authority, subject to the express provisions of the Plan and
applicable law, to amend the terms and conditions of any award granted under the Plan.
WHEREAS, pursuant to Section 3 of the Plan, the Committee has determined to amend the
Agreement in the manner set forth below.
NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the Company and the Participant hereby agree to amend the Agreement as
follows:
1. Section 6 of the Agreement is hereby amended in its entirety to read as follows:
Section 6. Effect of Termination of Employment.
(a) In the event the Participant shall cease to be employed by the Company and all
subsidiaries of the Company for any reason other than (i) Termination for Cause, (ii) Retirement,
(iii) death or Disability or (iv) termination by the Company or a subsidiary of the Participant’s
employment with the Company and its subsidiaries within two (2) years following a Change of
Control, the Participant may exercise the Option to the extent of (but only to the extent of) the
number of vested shares the Participant was entitled to purchase under the Option on the date of
such termination of employment, and the exercise of the Option to that limited extent may be
effected at any time within thirty (30) days after the date of such termination of employment but
not thereafter; provided, however, that the Option may not be exercised after the Expiration Date.
(b) In the event the Participant shall cease to be employed by the Company and its
subsidiaries upon Termination for Cause, the Option shall be terminated as of the date of such
termination.
(c) Except as otherwise provided in Sections 6(b), 6(d) and 6(e), in the event the Participant
shall cease to be employed by the Company and all subsidiaries of the Company because of
Retirement, the Option, to the extent not previously exercised or forfeited, shall be exercisable
to the extent of (but only to the extent of) the number of vested shares the Participant was
entitled to purchase under the Option on the date of the Participant’s Retirement, and the exercise
of the Option to that limited extent may be effected at any time within three (3) years after the
date of the Participant’s Retirement but not thereafter; provided, however, that the Option may not
be exercised after the Expiration Date. If a Participant who has thus retired dies within three (3)
years after the date of the Participant’s Retirement and prior to the Expiration Date, the exercise
of the Option to the limited extent provided for in the first sentence of this Section 6(c) may be
effected by the Participant’s estate or by any Person or Persons to whom the Option has been
transferred by will or the applicable laws of descent and distribution at any time within two (2)
years after the date of the Participant’s death, but not after the Expiration Date.
(d) In the event the Participant dies or is deemed to suffer a Disability while employed by
the Company or a subsidiary, the Option, to the extent not previously exercised or forfeited, shall
be exercisable to the extent of (but only to the extent of) the number of vested shares the
Participant was entitled to purchase under the Option on the date of the Participant’s death or
Disability. In the event of Participant’s death, the exercise of the Option to the limited extent
provided for in the first sentence of this Section 6(d) may be effected by the Participant’s estate
or by any Person or Persons to whom the Option has been transferred by will or the applicable laws
of descent and distribution at any time within two (2) years after the date of the Participant’s
death, but not after the Expiration Date. In the event of the Participant’s Disability, the
exercise of the Option to the limited extent provided for in the first sentence of this Section
6(d) may be effected by the Participant at any time within two (2) years after the date of the
Participant’s Disability, but not after the Expiration Date.
(e) In the event the Company or a subsidiary terminates the Participant’s employment with the
Company and all subsidiaries of the Company for any reason other than death, Disability or
Termination for Cause within two (2) years following a Change of Control, the Option shall become
immediately exercisable in full on the date of such termination of employment, and the exercise of
the Option may be effected at any time within six (6) months (if the Change of Control would have
constituted a Change of Control under this Agreement prior to the amendment to this Agreement dated
, 2006 (the “2006 Amendment”), which definition prior to the 2006 Amendment is set forth
in Exhibit A to the 2006 Amendment), or thirty (30) days (if the Change of Control would not have
constituted a Change of Control under this Agreement prior to the 2006 Amendment) after the date of
the Participant’s termination of employment, but not after the Expiration Date. In the event that
the provisions of this Section 6(e) result in “payments” that are finally and conclusively
determined by a court or Internal Revenue Service proceeding to be subject to the excise tax
imposed by Section 4999 of the Code, and the Participant has not received any additional cash
payment from the Company relating thereto under the provisions of Section 6 of the Severance
Agreement between the
Company and the Participant (the “Severance Agreement”), the Company shall pay to the Participant
an additional amount such that the net amount retained by the Participant following realization of
all compensation under the Plan that resulted in such “payments,” after allowing for the amount of
such excise tax and any additional federal, state and local income and
employment taxes paid on the
additional amount, shall
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be equal to the net amount that would otherwise have been retained by the
Participant if there were no excise tax imposed by Section 4999 of the Code. If the Participant
receives any additional cash payment from the Company under Section 6 of the Severance Agreement,
the foregoing sentence shall be of no force or effect and the provisions of the Severance Agreement
shall be deemed to supersede the foregoing sentence in its entirety.
2. Section 7 of the Agreement is hereby amended in its entirety to read as follows:
Section 7. Anti-Dilution and Fundamental Change Adjustments.
(a) In the event that the Committee shall determine that any dividend or other distribution
(whether in the form of cash, shares of Common Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger, consolidation,
split-up, spin-off, combination, repurchase or exchange of shares or other securities of the
Company, issuance of warrants or other rights to purchase shares of Common Stock or other
securities of the Company or other similar corporate transaction or event affects the shares of
Common Stock covered by the Option such that an adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under this Agreement, then the Committee shall, in such manner as it
may deem equitable, in its sole discretion, adjust any or all of the number and type of the shares
covered by the Option and the exercise price of the Option.
(b) In the event of a proposed Fundamental Change, the Committee may, but shall not be
obligated to:
(i) with respect to a Fundamental Change that involves a merger or
consolidation, make appropriate provision for the protection of the Option by the
substitution of options and appropriate voting common stock of the corporation
surviving any such merger or consolidation or, if appropriate, the “parent
corporation” (as defined in Section 424(e) of the Code, or any successor provision)
of the Company or such surviving corporation, in lieu of the Option and shares of
Common Stock of the Company, or
(ii) with respect to any Fundamental Change, including, without limitation, a
merger or consolidation, declare, prior to the occurrence of the Fundamental Change,
and provide written notice to the holder of the Option of the declaration, that the
Option, whether or not then exercisable, shall be canceled at the time of, or
immediately prior to the occurrence of, the Fundamental Change in exchange for
payment to the holder of the Option, within 20 days after the Fundamental Change, of
cash (or, if the Committee so elects in lieu of solely cash, of such form(s) of
consideration, including cash and/or property, singly or in such
combination as the Committee shall determine, that the holder of the Option would
have received as a result of the Fundamental Change if the holder of the Option had
exercised the Option immediately prior to the Fundamental Change) equal to, for each
share of Common Stock covered by the canceled Option, the amount, if any, by which
the Fair Market Value (as defined in this Section 7(b)) per share of Common
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Stock
exceeds the exercise
price per share of Common Stock covered by the Option. At the
time of the declaration provided for in the immediately preceding sentence, the
Option shall immediately become exercisable in full and the holder of the Option
shall have the right, during the period preceding the time of cancellation of the
Option, to exercise the Option as to all or any part of the shares of Common Stock
covered thereby in whole or in part, as the case may be. In the event of a
declaration pursuant to this Section 7(b), the Option, to the extent that it shall
not have been exercised prior to the Fundamental Change, shall be canceled at the
time of, or immediately prior to, the Fundamental Change, as provided in the
declaration. Notwithstanding the foregoing, the holder of the Option shall not be
entitled to the payment provided for in this Section 7(b) if such Option shall have
expired or been forfeited. For purposes of this Section 7(b) only, “Fair Market
Value” per share of Common Stock means the fair market value, as determined in good
faith by the Committee, of the consideration to be received per share of Common
Stock by the shareholders of the Company upon the occurrence of the Fundamental
Change, notwithstanding anything to the contrary provided in this Agreement.
3. Section 11 of the Agreement is hereby amended in its entirety to read as follows:
Section 11. Definitions. Terms not defined in this Agreement shall have the meanings
given to them in the Plan, and the following terms shall have the following meanings when used in
this Agreement:
(a) “Change of Control” means any one of the following events:
(i) the consummation of a transaction or series of related transactions in
which a person, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than
the Company or a subsidiary of the Company, or any employee benefit plan of the
Company or a subsidiary of the Company, acquires beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 35% or more of the
Company’s then outstanding shares of Common Stock or the combined voting power of
the Company’s then outstanding voting securities (other than in connection with a
Business Combination in which clauses (1), (2) and (3) of paragraph (a)(iii) apply);
or
(ii) individuals who, as of the Effective Date hereof, constitute the Board of
Directors of the Company (the “Incumbent Board”) cease for any reason to constitute
at least a majority of the Board of Directors of the Company; provided, however,
that any individual becoming a director subsequent to the
Effective Date hereof whose election, or nomination for election by the Company’s
stockholders, was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than a nomination of an individual whose
initial assumption of office is in connection with a solicitation
with respect to
the election or
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removal of directors of the Company in opposition to the
solicitation by the Board of Directors of the Company) shall be deemed to be a
member of the Incumbent Board; or
(iii) the consummation of a reorganization, merger, statutory share exchange,
consolidation or similar transaction involving the Company, a sale or other
disposition in a transaction or series of related transactions of all or
substantially all of the Company’s assets or the issuance by the Company of its
stock in connection with the acquisition of assets or stock of another entity (each,
a “Business Combination”) in each case unless, following such Business Combination,
(1) all or substantially all of the individuals and entities that were the
beneficial owners of the Company’s outstanding Common Stock and the Company’s
outstanding voting securities immediately prior to such Business Combination
beneficially own immediately after the transaction or transactions, directly or
indirectly, more than 50% of the then outstanding shares of common stock and more
than 50% of the combined voting power of the then outstanding voting securities (or
comparable equity interests) of the entity resulting from such Business Combination
(including an entity that, as a result of such transaction, owns the Company or all
or substantially all of the Company’s assets either directly or through one of more
subsidiaries) in substantially the same proportions as their ownership of the
Company’s Common Stock and voting securities immediately prior to such Business
Combination, (2) no person, entity or group (other than a direct or indirect parent
entity of the Company that, after giving effect to the Business Combination,
beneficially owns 100% of the outstanding voting securities (or comparable equity
interests) of the entity resulting from the Business Combination) beneficially owns,
directly or indirectly, 35% or more of the outstanding shares of common stock or the
combined voting power of the then outstanding voting securities (or comparable
equity interests) of the entity resulting from such Business Combination and (3) at
least a majority of the members of the board of directors (or similar governing
body) of the entity resulting from such Business Combination were members of the
Incumbent Board at the time of the execution of the initial agreement or of the
action of the Board of Directors of the Company providing for such Business
Combination; or
(iv) approval by the stockholders of the dissolution of the Company.
(b) “Fundamental Change” means a dissolution or liquidation of the Company, a sale of
substantially all of the assets of the Company, or a merger or consolidation of the Company with or
into any other corporation, regardless of whether the Company is the surviving corporation.
(c) “Disability” shall be as defined under the Imation Corp. Long Term Disability Income
Protection Plan.
(d) “Retirement” means retirement as defined under the Imation Corp. Cash Balance Pension
Plan.
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(e) “Stock Plan Administrator” means the Committee or any Director, officer or agent of the
Company designated by the Committee from time to time.
(f) “Termination for Cause” means termination of Participant’s employment with the Company or
an Affiliate for the following acts: (i) the Participant’s gross incompetence or substantial
failure to perform his or her duties, (ii) misconduct by the Participant that causes or is likely
to cause harm to the Company or that causes or is likely to cause harm to the Company’s reputation,
as determined by the Company’s Board of Directors in its sole and absolute discretion (such
misconduct may include, without limitation, insobriety at the workplace during working hours or the
use of illegal drugs), (iii) failure to follow directions of the Company’s Board of Directors that
are consistent with the Participant’s duties, (iv) the Participant’s conviction of, or entry of a
pleading of guilty or nolo contendre to, any crime involving moral turpitude, or the entry of an
order duly issued by any federal or state regulatory agency having jurisdiction in the matter
permanently prohibiting the Participant from participating in the conduct of the affairs of the
Company or (v) any breach of this Agreement that is not remedied within thirty (30) days after
receipt of written notice from the Company specifying such breach in reasonable detail.
No other terms or conditions of the Agreement are amended hereby, and all such terms and
conditions of the Agreement shall remain in full force and effect. The terms, provisions and
agreements that are contained in this Amendment shall apply to, be binding upon and inure to the
benefit of the parties and their respective heirs, executors, administrators, legal representatives
and permitted successors and assigns, subject to the limitation on assignment expressly set forth
in the Agreement. This Amendment shall have no force or effect unless it is duly executed and
delivered by the Company and the Participant.
The Company and the Participant have caused this Amendment to be signed and delivered as of
the date set forth above.
| IMATION CORP. | ||||
| By: | ||||
| Name: | ||||
| Title: | ||||
| PARTICIPANT | ||||
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Exhibit A
Definition of Change of Control in Agreement Prior to the 2006 Amendment
(This definition has been replaced by the 2006 Amendment)
(This definition has been replaced by the 2006 Amendment)
Under the Agreement prior to the 2006 Amendment, “Change of Control” meant any one of the following
events:
(i) the acquisition by any person, entity or “group,” within the meaning of Section 13(d)(3)
or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than the
Company or an Affiliate, or any employee benefit plan of the Company or an Affiliate, of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent
(30%) or more of either the then outstanding Common Stock or the combined voting power of the
Company’s then outstanding voting securities in a transaction or series of transactions not
approved in advance by a vote of a majority of the Continuing Directors (as hereinafter defined);
or
(ii) individuals who, as of the Effective Date, constitute the Board of Directors of the
Company (generally the “Directors” and as of the Effective Date the “Continuing Directors”) cease
for any reason to constitute at least a majority thereof, provided that any person becoming a
Director subsequent to the Effective Date whose nomination for election was approved in advance by
a vote of a majority of the Continuing Directors (other than a nomination of an individual whose
initial assumption of office is in connection with an actual or threatened solicitation with
respect to the election or removal of the Directors of the Company, as such terms are used in
Regulation 14A under the Exchange Act) shall be deemed to be a Continuing Director; or
(iii) the approval by the shareholders of the Company of a reorganization, merger,
consolidation, liquidation or dissolution of the Company or of the sale (in one transaction or a
series of related transactions) of all or substantially all of the assets of the Company other than
a reorganization, merger, consolidation, liquidation, dissolution or sale approved in advance by a
vote of a majority of the Continuing Directors; or
(iv) the first purchase under any tender offer or exchange offer (other than an offer by the
Company or an Affiliate) pursuant to which Common Stock is purchased.
