IMATION CORP. INVESTOR RIGHTS AGREEMENT

Exhibit 10.1

IMATION CORP.

INVESTOR RIGHTS AGREEMENT

     This INVESTOR RIGHTS AGREEMENT (this “Agreement”) is made as of July 31, 2007, by and between Imation Corp., a Delaware corporation (the “Company”), and TDK Corporation, a Japanese corporation (the “Investor”).

RECITALS

     WHEREAS, the Investor and the Company are parties to an Acquisition Agreement, dated as of April 19, 2007 (the “Acquisition Agreement”), providing for the issuance and sale of certain shares of common stock of the Company, par value $.01 per share (“Common Stock”), in consideration of the Investor’s transfer to the Company of certain assets relating to the sale, service and support of optical, magnetic tape and flash memory recordable media products, as more fully described in the Acquisition Agreement;

     WHEREAS, the obligations of the Company and the Investor under the Acquisition Agreement are conditioned, among other things, upon the execution and delivery of this Agreement by the Investor and the Company;

     NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the parties hereto agree as follows:

ARTICLE I

BOARD REPRESENTATION

     1.1 Investor Nominee Appointment Right. Until such time as ninety (90) days have elapsed after the occurrence of a Nomination Forfeiture Event without cure by the Investor of such event (the “Forfeiture Date”), the Investor shall have the right to designate one employee or director of TDK or any Affiliate of TDK as a nominee to stand for election as a director of the Company (the “Investor Nominee”). Promptly after TDK has designated an Investor Nominee and the Investor Nominee has been approved by the Company’s board of directors (the “Board”) as provided below, the Company shall increase the size of the Board by one member and fill the resulting vacancy in accordance with the Company’s bylaws by designating the Investor Nominee as a director of the Class whose term will expire at the next annual meeting of stockholders. Thereafter, the Board shall recommend to the Company’s stockholders to vote to elect the Investor Nominee at the next stockholders’ meeting and at each subsequent stockholders’ meeting at which directors of that Class are elected. The foregoing nomination right will be subject to the Company’s generally applicable policies with respect to the qualification of Board nominees under the Company’s Corporate Governance Guidelines, as may be amended from time to time (the “Board Qualifications”); provided, that (i) in the event that a proposed Investor Nominee is rejected by the Board’s Nominating and Governance Committee, (A) the Board will not nominate any person not designated by the Investor to stand for election in place of the rejected Investor Nominee and (B) the Investor shall have the right to nominate a replacement candidate, until such time as an Investor Nominee that meets the Board Qualifications is put forward by the Investor, and (ii) the Company shall not revise or amend the Board Qualifications or the qualifications and procedures set forth in the Company’s Corporate Governance Guidelines in a manner that has the intent or effect of materially adversely affecting the Investor’s ability to designate the Investor Nominee (by for instance, adding requirements that all directors meet citizenship or independence requirements that would disqualify the Investor’s most probable nominees). Any Investor Nominee included within the slate of director nominees presented to the stockholders for election shall remain subject to the required affirmative vote of the Company’s stockholders in accordance with the Company’s bylaws, as may be amended from time to time.

     1.2 Responsibilities of Investor Nominee. Any Investor Nominee duly elected to the Board shall be subject to the Company’s bylaws, charters, guidelines, codes of conduct, policies and procedures and the laws of the State of Delaware governing the fiduciary responsibilities of directors to the same degree as other members of the Board, and may be removed for cause under applicable law. Any Investor Nominee duly elected to the Board shall be treated the same as an “employee director” for purposes of director compensation.

     1.3 Vacancies. At any time prior to a Nomination Forfeiture Event, if an Investor Nominee who has been duly elected to the Board resigns from the Board, is removed for cause under applicable law, dies or otherwise cannot or is not willing to stand for reelection or to continue to serve as a member of the Board, the remaining members of the Board shall take all commercially reasonable actions to cause the vacancy to be filled, prior to or concurrent with any further meeting or action by the Board, by a new Investor Nominee.

     1.4 Nomination Forfeiture Event. A “Nomination Forfeiture Event” shall occur when:

          (a) as a result of voluntary sales of Common Stock by the Investor, the number of shares of Common Stock held by the Investor drops below seventy-five percent (75%) of the Initial Share Number;

          (b) as a result of the Investor’s failure to exercise its Preemptive Rights and any voluntary sales by the Investor of Common Stock, the number of Issued Shares held by the Investor drops below ten percent (10%) of the total number of issued and outstanding shares of Common Stock;

          (c) that certain Trademark License Agreement, dated as of the date hereof between the Company and the Investor (the “Trademark License”), is terminated for any reason; or

          (d) as a result of a breach by Investor of Section 4.3 or 4.4 of this Agreement; provided, that a breach of Section 4.3 of this Agreement shall not constitute a Nomination Forfeiture Event unless either (i) the Investor shall have affirmatively voted its voting Securities in contravention of the provisions of that Section or (ii) the Investor, having been given express written notice by the Company in the form of attached Exhibit B (an “Express Notice”) and in accordance with the applicable terms of Section 6.19, shall have failed to vote its voting Securities with respect to a proposal as to which it is required to vote under Section 4.3 and, in the case of a proposal described in Section 4.3(a) but not otherwise, such failure to vote shall have adversely affected the outcome of the stockholder vote on such proposal from the Company’s perspective (i.e., caused a proposal as to which the Board recommended a vote “against” to succeed, or a proposal as to which the Board recommended a vote “for” to fail).

Notwithstanding anything to the contrary in Section 1.1, if a Nomination Forfeiture Event occurs as a result of clause (c) or (d) above, Investor’s right to nominate an Investor Nominee shall terminate immediately, and Investor shall cause any Investor Nominee who has been duly elected and is then serving as a director of the Company to submit his resignation as a director of the Company with immediate effect. For purposes of this Section 1.4, the number of Shares of Common Stock held by the Investor shall include all shares of Common Stock issued to the Investor and its Affiliates at Closing.

     1.5 Information Rights.

          (a) For so long as the Investor has a duly elected representative serving on the Board, the Company shall be required to provide such director with all information made available to other Board members, as and when it is made available to other Board members; provided, however, the Company shall not be obligated to provide such director with information that is only made available to members of a duly constituted committee of the Board of which such director is not a member.

          (b) Notwithstanding the occurrence of an uncured Nomination Forfeiture Event other than pursuant to Section 1.4(d), for so long as the Trademark License remains in effect, and subject to the provisions of Section 6.3 of this Agreement, the Company shall provide the Investor (i) reasonable notice of, and reasonably detailed information regarding, any discussions, negotiations, or correspondence regarding any proposed transaction that could be expected to result in a Change of Control of the Company (a “Proposed Transaction”), including any material changes to terms previously notified to Investor, and (ii) a reasonable opportunity to propose alternatives thereto to the Board for the Board’s consideration. In addition, in the event that the Company or its advisors conducts (i) any form of “market check” process in connection with exploration of or discussion, negotiations or correspondence regarding a Proposed Transaction, or (ii) any form of formal or informal auction process, then, in either case, the Company agrees that the Investor will be one of the parties contacted in the first instance. The rights of the Investor under this Section 1.5(b) shall terminate immediately in the event of a Nomination Forfeiture Event described in Section 1.4(d).

          (c) For the purposes of Section 1.5(b), a “Change of Control” with respect to the Company means any of the following transactions as a result of which the Company is under the direct or indirect control of any Person, whether singly or as a part of a 13D Group:

               (i) the acquisition by any Person, as a result of one transaction or a series of transactions over time, of voting Securities representing, directly or indirectly, more than fifty percent (50%) of the aggregate voting rights of the Company; or

               (ii) the Company’s consolidation with or merger with or into another Person, whether or not the Company is the surviving entity in such transaction, unless, immediately after such consolidation or merger, shareholders of the Company prior to the transaction continue to own voting securities representing, directly or indirectly, more than fifty percent (50%) of the aggregate voting rights of such new or surviving entity.

ARTICLE II

PREEMPTIVE RIGHTS

     2.1 Preemptive Rights.

          (a) If the Company proposes to sell any Common Stock or any other Securities, however described or whether voting or non-voting, other than Exempted Securities (“Additional Securities”), whether in a private placement, a public offering, or as part of an acquisition, share exchange or otherwise, the Company shall, at least thirty (30) days prior to issuing such Additional Securities, notify the Investor in writing of such proposed issuance specifying, to the extent practicable, the purchase price or a range for the purchase price, if any, for, and the terms and conditions of, such Additional Securities and shall offer to sell such Additional Securities to the Investor in the amounts set forth in Section 2.1(c), upon the terms and conditions set forth in the notice and at the Purchase Price as provided in Section 2.1(d) (the “Preemptive Rights”); provided, that, if the purchase price for, or any of the other material terms and conditions of, the proposed issuance are not known at the time of the initial written notice, the Company shall provide such notice without specifying the price or other such terms and conditions, and shall provide a supplemental notice, adding the missing terms, to the Investor as soon as they are known to the Company, and in no event later than ten (10) Business Days prior to such issuance. For purposes of calculating the number of Additional Securities issued pursuant to this Section 2.1(a), such calculation shall include the maximum number of shares of Common Stock and other Securities issuable upon the conversion or exercise of any convertible or exchangeable Securities.

          (b) If the Investor wishes to subscribe for a number of Additional Securities less than the number to which it is entitled under this Section 2.1, the Investor may do so and shall, in the notice of exercise of the offer, specify the number of Additional Securities that it wishes to purchase.

          (c) The Company shall offer the Investor all, or any portion specified by the Investor in accordance with Section 2.1(b), of an amount of such Additional Securities such that, after giving effect to the proposed issuance (including the issuance to the Investor pursuant to the Preemptive Rights and including any related issuance resulting from the exercise of preemptive or similar rights by any unrelated Person with respect to the same issuance that gave rise to the exercise of the Preemptive Rights by the Investor), the Investor’s Equity Interest after such issuance would equal the Investor’s Equity Interest immediately prior to such issuance, such number of Additional Securities to constitute the “Preemptive Share Amount”. If, at the time of the determination of any Preemptive Share Amount under this Section 2.1(c), any other Person has preemptive or other equity purchase rights similar to the Preemptive Rights, such Preemptive Share Amount shall be recalculated to take into account the amount of Additional Securities such Persons have committed to purchase, rounding up such Preemptive Share Amount to the nearest whole Additional Security.

          (d) The “Purchase Price” for the Additional Securities to be issued pursuant to the exercise of Preemptive Rights shall be payable only in cash (unless otherwise agreed by the Company and the Investor) and, except as otherwise set forth below, shall equal per Additional Security the per Security issuance price for the Additional Securities giving rise to such Preemptive Right. In the case of any issuance of Additional Securities other than solely for cash, the Company and the Investor shall in good faith seek to agree upon the value of the non-cash consideration; provided, that the value of any publicly traded securities shall be deemed to be the closing price of such securities on the applicable national securities exchange as of the trading date immediately prior to the consummation of such issuance. If the Company and the Investor fail to agree on such value during the period contemplated by the first sentence of Section 2.2, then the Company will refer the items in dispute to a nationally recognized investment banking firm that is selected by the Board and reasonably acceptable to the Investor and that shall be instructed to make a final and binding determination of the fair market value of such items within ten (10) Business Days. If such a determination is required, the deadline for the Investor’s exercise of its Preemptive Rights with respect to such issuance pursuant to Section 2.1(b) shall be extended until the fifth (5th) Business Day following the date of such determination. Whichever of the Company or the Investor whose last estimate differed the most from that finally determined by the investment banking firm shall be responsible for and pay all of the fees and expenses of such investment banking firm. All determinations made by such investment banking firm shall be final and binding on the Company and the Investor.

     2.2 Exercise Period. The Preemptive Rights set forth in Section 2.1 must be exercised by acceptance in writing of an offer referred to in Section 2.1(a), (i) if not in connection with a registered offering, within thirty (30) days of receiving notice from the Company of its intention to sell Additional Securities, or (ii) in connection with any registered offering, at least five (5) Business Days prior to the printing of the preliminary prospectus in connection with such offering. The closing of any purchase of Additional Securities pursuant to the exercise by the Investor of Preemptive Rights hereunder shall occur on the later of (i) the closing of the transaction triggering such Preemptive Rights, subject to the receipt of any necessary Governmental Approvals to which the issuance of Additional Securities is subject, and (ii) should either the Company or the Investor so elect, an agreed date within thirty (30) days after such closing.

     2.3 Survival of Rights. The Investor’s rights set forth in Section 2.1 shall terminate when:

          (a) as a result of voluntary sales of Common Stock by the Investor, the number of shares of Common Stock held by the Investor drops below seventy-five percent (75%) of the Initial Share Number;

          (b) as a result of the Investor’s failure to exercise its Preemptive Rights and any voluntary sales by the Investor of Common Stock, the number of Issued Shares held by the Investor drops below ten percent (10%) of the total number of issued and outstanding shares of Common Stock; or

          (c) the Trademark License is terminated for any reason.

ARTICLE III

REGISTRATION RIGHTS

     3.1 Registration Rights.

          (a) Demand Rights.

               (i) At any time after the end of the Lock-Up Period, the Investor shall have the right to request the Company to file a registration statement under the Securities Act for a public offering of all or part of the Issued Shares and any additional shares of Common Stock issued or distributed by way of a dividend, stock split or other distribution, or acquired by way of any rights offering or similar offering made, in respect of the Issued Shares (the “Registrable Securities”), by delivering written notice thereof to the Company specifying (x) the number of Registrable Securities to be included in such registration, and (y) the intended method of distribution thereof (the “Demand Registration Request”). Thereupon the Company shall, as expeditiously as possible, use its commercially reasonable efforts to effect the registration under the Securities Act of the Registrable Securities which the Company has been so requested to register in the Demand Registration Request. The Investor may require the Company to file such registration statement with the SEC in accordance with and pursuant to Rule 415 promulgated under the Securities Act (or any successor rule then in effect) (a “Shelf Registration”). The demand registration rights granted in this Section 3.1(a)(i) are subject to the following limitations:

                    (1) The aggregate offering price (net of known or estimated underwriting discounts and commissions) for the shares of Registrable Securities to be included in such registration shall be at least ten million Dollars ($10,000,000) based on the current market price of the Common Stock at the time of such initial filing;

                    (2) The Company shall not be obligated to effect any registrations pursuant to this Section 3.1(a)(i) within nine (9) months of the effective date of any other registration under the Securities Act, other than a registration on Form S-8 under the Securities Act;

                    (3) The Company shall not, under any circumstances, be obligated to effect more than two (2) registrations pursuant to this Section 3.1(a), no more than one of which may be exercised in any twelve (12)-month period; and

                    (4) The Company may postpone for up to ninety (90) days the filing or the effectiveness of a registration statement for a Demand Registration Request if the Company furnishes to the Investor a certificate signed by the Chief Financial Officer of the Company stating that the disclosures that would be required in such registration statement would reasonably be expected to have a material adverse effect on, or require the public disclosure of, any proposal or plan by the Company to engage in a significant financing or acquisition of assets (other than in the ordinary course of business), or any merger, consolidation, tender offer, or reorganization; provided, that, in such event, the Investor shall be entitled to withdraw such Demand Registration Request and, if such request is withdrawn, such request shall not count as one of the permitted Demand Registration Requests hereunder.

          (ii) If the Investor intends to distribute the Registrable Securities covered by the Demand Registration Request by means of an underwriting, the Investor shall so advise the Company in the Demand Registration Request, and in such event, the Investor shall negotiate in good faith with an underwriter or underwriters selected by the Company to act as the managing underwriter in connection with such underwriting; provided, however, that if the Investor has not agreed with such underwriter or underwriters as to the terms and conditions of such underwriting within twenty (20) days following commencement of such negotiations, then the Company may select an underwriter or underwriters of its choice to be the managing underwriter, which choice shall be subject to the approval of the Investor (such approval not to be unreasonably withheld or delayed). The Company and the Investor shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting (it being understood that all indemnification obligations which are customarily those of the issuer of securities under such underwriting agreement shall be the obligations of the Company).

          (iii) If the Investor intends to distribute the Registrable Securities covered by the Demand Registration Request by means of an underwriting and the managing underwriters advise the Company in writing, with a copy to be delivered to the Investor, that, in their opinion, the number of Registrable Securities requested to be included in such offering exceeds the number of securities which can be sold therein without materially adversely affecting the marketability of the offering and within a price range acceptable to the Investor, the Company shall include in such registration the Registrable Securities requested to be included which in the opinion of such underwriters can be sold without materially adversely affecting the marketability of the offering; provided, that, in the event that the number of Registrable Securities included in such registration is so reduced, such registration shall not count as one of the permitted Demand Registration Requests hereunder.

     (b) Piggyback Rights.

          (i) If at any time and from time to time after the end of the Lock-Up Period the Company proposes to effect a registration of any of its securities under the Securities Act (other than any registration of Securities on Forms S-4 or S-8 or any successor forms), for its own account, or for the account of one or more shareholders (other than pursuant to a Demand Registration Request) (the “Proposed Registration”), the Company shall give prompt written notice to the Investor of the Company’s intention to do so. If the Investor’s Registrable Securities have not been included in the Proposed Registration, and within thirty (30) days of the receipt of any such notice, Investor delivers to the Company a written notice requesting to have any or all of the Registrable Securities included in the Proposed Registration (such notice to include the number of Registrable Securities that the Investor wishes to be included in the Proposed Registration), the Company will use its commercially reasonable efforts to cause such shares to be registered as requested in such notice. Notwithstanding any other provision of this Section 3.1(b), if the Proposed Registration is an underwritten registration and the managing underwriter determines that marketing factors require a limitation of the number of shares to be underwritten, the Company may limit the number of shares of Registrable Securities to be included in the Proposed Registration without requiring any limitation in the number of shares to be registered on behalf of the Company; provided, however, that the number of Registrable Securities included in the Proposed Registration pursuant to this Section 3.1(b) may not be reduced to less than thirty percent (30%) of the total amount of shares subject to the offering; provided, further, that nothing herein shall prevent the Company from canceling or withdrawing any Proposed Registration prior to the filing or effectiveness thereof.

          (ii) If underwriters are appointed to conduct an offering of the Company’s securities, including Registrable Securities, with respect to the Proposed Registration, no Registrable Securities shall be registered unless the Investor accepts the terms of the underwriting as approved by the Company for the offering; provided, that the Investor may independently negotiate with the underwriters for the offering any representations and warranties that the Investor will give to such underwriters in connection with the offering. In the event that the Investor is unable to agree with such underwriters on such representations and warranties or does not accept the terms of such underwriting, then the Company may proceed with the Proposed Registration without the participation of the Investor or the inclusion of any Registrable Securities; provided, further, that such non-participation of the Investor shall not in any way affect its rights under this Section 3.1 with respect to subsequent demands for registration of any Registrable Securities.

     3.2 Holdback Agreements. Investor shall not effect any public sale or distribution (including sales pursuant to Rule 144) of Securities of the Company or engage in any hedging transactions relating to the same, during the thirty (30) days prior to and the 90-day period beginning on the effective date of any underwritten registration pursuant to a Demand Registration Request or any underwritten Proposed Registration, in each case pursuant to which Investor’s Registrable Securities are included, unless the underwriters managing the registered public offering agree otherwise.

     3.3 Effectiveness of Registration Statement. The Company shall notify Investor of the effectiveness of each registration statement filed hereunder and prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective for a period of not less than one hundred twenty (120) days (or until the distribution described in the registration statement has been completed) (or, in the case of a Shelf Registration, a period ending on the earlier of (i) the date on which all Registrable Securities have been sold pursuant to the Shelf Registration or have otherwise ceased to be Registrable Securities, and (ii) the 24-month anniversary of the effective date of such Shelf Registration) and comply with the provisions of the Securities Act with respect to the disposition of securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; provided, however, that at any time, upon written notice to Investor and for a period not to exceed sixty (60) days thereafter (the “Suspension Period”), the Company may suspend the use or effectiveness of any registration statement (and the Investor agrees not to offer or sell any Registrable Securities pursuant to such registration statement during the Suspension Period) if the Company reasonably believes that the Company may, in the absence of such suspension hereunder, be required under state or federal securities laws to disclose any corporate development the disclosure of which could reasonably be expected to have a material adverse effect upon the Company, its stockholders, a potentially significant transaction or event involving the Company, or any negotiations, discussions, or proposals directly relating thereto. No more than two (2) such Suspension Periods shall occur in any twelve (12) month period. In the event that the Company shall exercise its rights hereunder, the applicable time period during which the registration statement is to remain effective shall be extended by a period of time equal to the duration of the Suspension Period. The Company may extend the Suspension Period for an additional consecutive thirty (30) days with the written consent of the Investor. If so directed by the Company, Investor shall use its commercially reasonable efforts to deliver to the Company (at the Company’s expense) all copies, other than permanent file copies then in Investor’s possession, of the prospectus relating to such Registrable Securities current at the time of receipt of such notice. Investor agrees to comply with any prospectus delivery and/or notice requirements under the Securities Act then in effect, and agrees to not use any “free-writing” prospectus in connection with the sale of any Registrable Securities.

     3.4 Registration Expenses. The Company shall pay the expenses associated with registrations pursuant to this Article III (including all registration, filing, qualification fees, printing expenses, fees and expenses of the Company’s counsel and of one counsel to the Investor and auditing expenses) and all related offering expenses (including printing expenses, road show costs and other marketing expenses). The Investor shall bear the cost of any underwriting discounts or commissions for the offering and sale of the Investor’s Registrable Securities.

     3.5 Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the SEC which may at times permit the sale of Registrable Securities to the public in the United States without registration after the Lock-Up Period, the Company agrees to use its commercially reasonable efforts to:

          (a) Make and keep public information available, as those terms are understood and defined in Rule 144 under the Securities Act;

          (b) File, as and when applicable, with the SEC in a timely manner all reports and other documents required of the Company under the Exchange Act; and

          (c) Furnish to the Investor forthwith upon request a written statement by the Company as to its compliance with the reporting requirements of Rule 144 and the Exchange Act, a copy of the most recent annual or quarterly (or other periodic) report of the Company, and such other reports of the Company as the Investor may reasonably request in availing itself of any rule or regulation of the SEC allowing the Investor to sell any such securities without registration.

ARTICLE IV

OTHER AGREEMENTS

     4.1 Standstill.

          (a) From the date hereof through the date when (i) as a result of voluntary sales of Common Stock by the Investor, the number of shares of Common Stock held by the Investor drops below seventy-five percent (75%) of the Initial Share Number or (ii) as a result of the Investor’s failure to exercise its Preemptive Rights and any voluntary sales by the Investor of Common Stock, the number of Issued Shares held by the Investor drops below ten percent (10%) of the total number of issued and outstanding shares of Common Stock (the “Standstill Period”), the Investor agrees that it will not, without the prior written consent of the Company, directly or indirectly, alone or in concert with any other Person, acquire, offer to acquire, or agree to acquire, by purchase, gift, business combination or otherwise, beneficial ownership of any Common Stock in excess of twenty-one percent (21%) (the “Standstill Threshold”) of the Common Stock then outstanding; provided, however, that the Company shall, as soon as reasonably practicable, inform the Investor of any change in the number of outstanding shares of Common Stock since the last Public Disclosure of the total issued and outstanding Common Stock of the Company in excess of one quarter of one percent (0.25%). .

          (b) Notwithstanding any provision of Section 4.1(a), the Investor shall not be in breach of that section if, solely as a result of repurchases by the Company of its outstanding Common Stock, the Investor becomes the Beneficial Owner of shares of Common Stock in excess of the Standstill Threshold, provided that it does not retain beneficial ownership of shares representing in the aggregate more than twenty-two percent (22%) of the Common Stock then outstanding (the “Investor Threshold”).

          (c) If Investor should become the Beneficial Owner of Common Stock in violation of either Section 4.1(a) or Section 4.1(b), Investor shall, as soon as it becomes aware of any such violation, give prompt notice to the Company of such violation. Immediately upon its giving of any such notice, or upon its receipt of any notice of such violation from the Company, the Investor shall, and shall cause its Affiliates to, refrain from acquiring beneficial ownership of any additional shares of Common Stock and within ten (10) Business Days after its giving or receipt of such notice shall, and shall cause its Affiliates to, dispose of Common Stock such that Investor shall not beneficially own Common Stock in excess of the Standstill Threshold; provided, however, that any sales required hereunder will not be taken into account for a period of five (5) years thereafter in determining whether a Nomination Forfeiture Event shall have occurred.

          (d) Prior to the Closing of the transactions contemplated by the Acquisition Agreement, the Company has amended Section 1(a) of the Rights Agreement dated June 21, 2006 (the “ Share Rights Plan”) to read in its entirety as set out in the First Amendment to Rights Agreement annexed as Schedule 3 hereto (the “Rights Plan Amendment”). The Company agrees that changes effected by the Rights Plan Amendment will be maintained in effect, and the Share Rights Plan shall not without the prior written consent of the Investor be further amended or revised to change the Standstill Threshold or the Investor Threshold or affect the ability of the Investor to maintain its level of investment in the Company until the end of the Standstill Period.

     4.2 Lock-Up.

          (a) The Investor shall not sell, transfer, pledge, encumber or otherwise dispose of any Issued Shares for three (3) years following the Effective Date (the “Lock-Up Period”), excluding any sale or other transfer (i) to an Affiliate (by the Investor or another Affiliate of the Investor) that agrees in writing to be bound by the terms of this Agreement, including without limitation this Section 4.2, or (ii) for the purposes of complying with the terms of this Agreement, unless (x) such transaction is approved in advance by a majority of the Company’s independent directors and (y) such third Person agrees in writing to be bound by the terms of this Agreement, including without limitation this Section 4.2; provided, that, subject to the Investor’s compliance with the terms of Section 4.1, the foregoing shall not apply to any direct or indirect transfer of Issued Shares to the Investor by an Affiliate of the Investor. Any stock certificates representing the Issued Shares shall bear a legend substantially in the form below:

“The securities represented by this certificate may only be transferred pursuant to the provisions of an Investor Rights Agreement, dated as of July 31, 2007, as amended from time to time, between the issuer and TDK, copies of which are on file at the principal office of the issuer.”

          (b) Prior to any sale by the Investor of any of Issued Shares during the Standstill Period, Investor shall give the Company at least ten (10) days’ advance notice in writing, and the Investor and the Company shall negotiate in good faith and agree on limitations on the volume of any such sales on the open market; provided, however, that such limitations shall be no greater than is necessary to maintain an orderly market for the Company’s Common Stock; provided, further, that any limitation shall not apply in the case of Investor’s exercise of any of the Investor’s registration rights set forth in Article III.

          (c) Any sale, transfer or other disposition made in violation of Section 4.2(a) shall be null and void, and the Company shall not register any such sale, transfer or other disposition in its books and records.

     4.3 Agreement to Vote.

          (a) At each annual or special stockholders’ meeting held or otherwise conducted at any time prior to the end of the Standstill Period, Investor shall vote (or cause to be voted), in person or by proxy, all voting Securities that Investor or any of its Affiliates owns or has the right to vote:

               (i) in favor of the election of each director nominee included on the slate of director nominees proposed, recommended or otherwise supported by the Board;

               (ii) against any slate of directors or nominees for director that shall be proposed in opposition or as an alternative to the slate of director nominees proposed, recommended or otherwise supported by the Board;

               (iii) in favor of any equity compensation plan or amendment thereof proposed or recommended by the Board;

               (iv) in favor of any recapitalization of the Company for the purpose of forming a holding company or to effect a change in the Company’s state of incorporation if proposed or recommended by the Board; and

               (v) in accordance with the recommendation of the Board as to proposals submitted to the vote of stockholders of the Company with respect to the compensation or benefits of directors, officers or employees of the Company, concerning federal or state statutes relating to business combinations, fair price or control share acquisitions, or concerning the adoption, amendment or termination of a share rights plan.

          (b) The Investor may vote (or cause to be voted), in person or by proxy, any voting Securities owned by it or any of its Affiliates (or that any of them have the right to vote) as it determines in its sole discretion with respect to any of the following matters which are presented at a meeting of stockholders of the Company for approval: (i) any transaction which could result in a Change of Control with respect to the Company; (ii) any disposition by the Company of all or substantially all of its assets; (iii) any matters relating to or concerning the continued publicly traded nature of the Company; (iv) any recapitalization of the Company (other than a recapitalization for the purpose of forming a holding company or to effect a change in the Company’s state of incorporation proposed or recommended by the Board); (v) any liquidation of, or consolidation involving, the Company; (vi) any increase in the Company’s authorized shares or other amendment to the Certificate of Incorporation or Bylaws of the Company; or (vii) any transaction not otherwise provided for in this paragraph (b) that could reasonably be expected to have a material effect on Investor’s investment in the Company. Notwithstanding the foregoing, the Investor shall vote (or cause to be voted), in person or by proxy, all such voting Securities owned by it or any of its Affiliates (or that any of them have the right to vote) against any matters submitted to the stockholders of the Company (A) which relate to the matters set forth in items (i) through (vii) above, and (B) with respect to which the Board has recommended against approval.

          (c) The Investor shall be present, in person or by proxy, and without further action hereby agrees that it shall be deemed to be present, at all meetings of stockholders of the Company so that all voting Securities beneficially owned by Investor shall be counted for purposes of determining the presence of a quorum at such meetings.

     4.4 No Instigation or Support of Proxy Contest or Stockholder Proposals. During the Standstill Period, and prior to receiving notice of