<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
-------------------
Commission file number 1-10233
___________________
MAGNETEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3917584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
26 Century Blvd.
P.O. Box 290159
Nashville, Tennessee 37229-0159
(Address of principal executive offices)
(Zip Code)
(615) 316-5100
(Registrant's telephone number, including area code)
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of February
14, 1994: 24,322,084 shares.
<PAGE>
PART I. FINANCIAL INFORMATION
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments necessary to fairly present
the financial position as of December 31, 1994 and the results of
operations and cash flows for the three-month and six-month periods ended
December 31, 1994 and 1993. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
consolidated financial statements and notes included in the Company's
latest annual report on Form 10-K. Results for the three months and six
months ended December 31, 1994 are not necessarily indicative of results
which may be experienced for the full fiscal year.
<PAGE>
ITEM 1 MAGNETEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1994 and JUNE 30, 1994
(amounts in thousands)
<TABLE>
<CAPTION>
DECEMBER 31 JUNE 30
----------- -------
ASSETS (unaudited)
<S> <C> <C>
Current assets:
Cash $ 11,007 $ 7,013
Accounts receivable 205,786 217,106
Inventories 207,950 196,527
Prepaid expenses and other 33,152 32,970
---------- ----------
Total current assets 457,895 453,616
---------- ----------
Property, plant and equipment 371,602 379,208
Less-accumulated depreciation
and amortization 185,422 172,163
---------- ----------
186,180 207,045
---------- ----------
Net assets of discontinued
operations 119,347 197,217
Goodwill 33,518 35,391
Deferred financing costs,
intangible and other assets 37,068 38,089
---------- ----------
$ 834,008 $ 931,358
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 108,233 $ 117,884
Accrued liabilities 75,467 80,287
Current portion of long-
term debt 47,699 49,998
---------- ----------
Total current liabilities 231,399 248,169
---------- ----------
Long-term debt, net
of current portion 389,360 473,781
Other long-term obligations 76,335 77,316
Deferred income taxes 13,640 19,010
Commitments and contingencies
Stockholders' equity:
Common stock 243 242
Other 123,031 112,840
---------- ----------
Total stockholders' equity 123,274 113,082
---------- ----------
$ 834,008 $ 931,358
---------- ----------
---------- ----------
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1994 AND 1993
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net sales $ 290,627 $ 259,296
Cost of sales 231,940 233,187
--------- ---------
Gross profit 58,687 26,109
Selling, general and administrative 41,292 51,444
--------- ---------
Income (loss) from operations 17,395 (25,335)
Interest expense 8,478 7,791
Other (income) expense, net 1,191 ( 1,233)
--------- ---------
Income (loss) from continuing
operations before provision for
income taxes 7,726 (31,893)
Income taxes 3,246 (10,093)
--------- ---------
Income (loss) from continuing
operations 4,480 (21,800)
Discontinued operations --
Income (loss) from operations
(net of taxes) -- ( 210)
Gain (loss) on disposal
(net of taxes) -- (20,492)
--------- ---------
Net income (loss) $ 4,480 $ (42,502)
--------- ---------
--------- ---------
Earnings per common share
Primary:
Income (loss) from continuing
operations $ 0.18 $ ( 0.88)
Income (loss) from discontinued
operations -- ( 0.84)
--------- ---------
Net income (loss) $ 0.18 $ ( 1.72)
--------- ---------
--------- ---------
Fully diluted:
Income (loss) from continuing
operations $ 0.18 *
Income (loss) from discontinued
operations -- *
--------- ---------
Net income (loss) $ 0.18 *
--------- ---------
--------- ---------
<FN>
* Per share amounts on a fully diluted basis have been omitted as such
amounts are anti-dilutive in relation to the primary per share amounts.
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1994 AND 1993
(amounts in thousands except per share data)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net sales $ 565,382 $ 539,657
Cost of sales 454,975 456,026
--------- ---------
Gross profit 110,407 83,631
Selling, general and administrative 79,667 97,193
--------- ---------
Income (loss) from operations 30,740 ( 13,562)
Interest expense 16,194 15,928
Other (income) expense, net 2,238 ( 298)
--------- ---------
Income (loss) from continuing
operations before provision for
income taxes 12,308 ( 29,192)
Income taxes 5,170 ( 8,959)
--------- ---------
Income (loss) from continuing
operations 7,138 ( 20,233)
Discontinued operations --
Income (loss) from operations
(net of taxes) -- ( 371)
Gain (loss) on disposal
(net of taxes) 3,100 ( 20,492)
--------- ---------
Net income (loss) $ 10,238 $( 41,096)
--------- ---------
--------- ---------
Earnings per common share
Primary:
Income (loss) from continuing
operations $ 0.29 $( 0.82)
Income (loss) from discontinued
operations 0.12 ( 0.84)
--------- ---------
Net income (loss) $ 0.41 $( 1.66)
--------- ---------
--------- ---------
Fully diluted:
Income (loss) from continuing
operations $ 0.29 *
Income (loss) from discontinued
operations 0.12 *
--------- ---------
Net income (loss) $ 0.41 *
--------- ---------
--------- ---------
<FN>
* Per share amounts on a fully diluted basis have been omitted as such
amounts are anti-dilutive in relation to the primary per share amounts.
</TABLE>
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ 7,138 $( 20,233)
--------- ---------
Adjustments to reconcile income (loss) from
continuing operations to net cash provided by
operating activities:
Depreciation and amortization 18,955 18,754
Provision for restructuring and other
charges -- 31,221
Changes in operating assets and
liabilities of continuing operations ( 21,736) ( 26,122)
--------- ---------
Total adjustments ( 2,781) 23,853
--------- ---------
Net cash provided by
operating activities 4,357 3,620
--------- ---------
Cash flows from investing activities:
Proceeds from sale of businesses and assets 93,064 --
Capital expenditures ( 17,774) ( 26,417)
Annuity contract and other investments 412 ( 249)
--------- ---------
Net cash provided by (used in)
investing activities 75,702 ( 26,666)
--------- ---------
Cash flows from financing activities:
Borrowings under bank and other
long-term obligations 7,902 13,064
Proceeds from issuance of common stock 1,001 201
Repayment of bank and other
long-term obligations ( 94,622) ( 10,952)
Increase in deferred financing costs ( 593) ( 188)
--------- ---------
Net cash provided by (used in)
financing activities ( 86,312) 2,125
--------- ---------
Net cash used in continuing operations ( 6,253) ( 20,921)
--------- ---------
</TABLE>
(continued on next page)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE SIX MONTHS ENDED DECEMBER 31, 1994 AND 1993
(amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Cash flows from discontinued operations:
Income (loss) from discontinued
operations $ 3,100 $( 20,863)
Adjustments to reconcile income (loss) to
net cash provided by
discontinued operations:
Depreciation and amortization 4,192 4,988
Provision for loss on disposal -- 27,341
Gain on sale of businesses ( 3,100) --
Changes in operating assets and
liabilities of discontinued
operations 6,839 10,603
Capital expenditures ( 784) ( 2,596)
--------- ---------
Net cash provided by
discontinued operations 10,247 19,473
--------- ---------
Net increase (decrease) in cash 3,994 ( 1,448)
Cash at the beginning of period 7,013 7,606
--------- ---------
Cash at the end of period $ 11,007 $ 6,158
--------- ---------
--------- ---------
Supplemental disclosure of cash
flow information:
Cash paid during the period for:
Interest $ 14,205 $ 31,246
Income taxes $ 11,327 $ 5,684
</TABLE>
(see accompanying notes)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
(All dollar amounts are in thousands)
(unaudited)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FISCAL PERIOD - The Company uses a fifty-two, fifty-three week fiscal
year. Fiscal periods end on the Sunday nearest the end of the month. For
clarity of presentation, all periods are presented as if they ended on the
last day of the calendar period. The three-month and six-month periods
ended December 31, 1994 and 1993 contained thirteen weeks and twenty-six
weeks and thirteen weeks and twenty-seven weeks, respectively.
2. INVENTORIES
Inventories at December 31, 1994 and June 30, 1994 consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31 June 30
----------- -------
<S> <C> <C>
Raw materials and stock parts $ 67,326 $ 59,943
Work-in-process 45,717 43,198
Finished goods 94,907 93,386
--------- ---------
$ 207,950 $ 196,527
--------- ---------
--------- ---------
</TABLE>
3. DISCONTINUED OPERATIONS
During the first quarter of fiscal 1995, the Company's Board of Directors
adopted a formal plan of disposal for certain businesses in connection with
a restructuring program approved by the Board during fiscal 1994. As a
result, the Company's consolidated financial statements for the year ended
June 30, 1994 reflected continuing and discontinued operations, as do the
condensed consolidated financial statements included herein.
During the first six-months of fiscal 1995, the Company sold all of the
assets, subject to certain liabilities of its Controls business, Traction
Motor Repair business and Power Technology Systems (PTS) business,
including all of the capital stock of certain subsidiaries included in the
PTS business. The cash proceeds from the sales of these businesses
aggregated approximately $93 million and are subject to certain post-
closing adjustments. The Company expects to complete the remainder of the
divestiture program during fiscal 1995.
During the three-month and six-month periods ending December 31, 1994,
operating results of the discontinued operations reflected net sales of
approximately $60,700 and $141,400 and a net loss of approximately $1,800
and $4,700 respectively. Losses have been charged to reserves provided for
estimated losses on disposal which were established in the prior fiscal
year.
<PAGE>
Total cash outflow associated with other restructuring actions, including
the consolidation and relocation of certain administrative facilities, is
estimated at $13,700 and will occur primarily during fiscal 1995. Of this
amount, approximately $3,800 and $7,300, was incurred during the
three-month and six-month periods ending December 31, 1994, respectively.
4. LONG-TERM DEBT AND BANK BORROWING ARRANGEMENTS
During the first six months of fiscal 1995, in connection with certain
amendments to the Company's Revolving Credit Agreement, the banks' lending
commitment was reduced from $150,000 to approximately $122,500. The
reduction occured upon required repayment of outstanding balances with
proceeds received from the sale of discontinued operations.
During the second quarter of fiscal 1995, the Company repaid all amounts
outstanding on term and revolving loans under its European Loan Agreement.
The Company currently has borrowing arrangements with certain banks which
provide for revolving credit of up to Lira 8,600,000 (approximately $5,300)
in Italy. The European Loan Agreement was amended to provide aggregate
borrowings of DM 5,000 (approximately $3,300) in Germany. Lending rates
and terms under these arrangements are substantially similar to those under
the prior European Loan Agreement.
Primarily as a result of the reduced lending commitment under the Revolving
Loan Agreement, repayment of amounts outstanding under the European Loan
Agreement and a January 2, 1995 scheduled amortization payment of $22,500
under the Company's Senior Notes, the Company entered into an agreement
dated December 30, 1994, with one of the banks included in its Revolving
Loan Agreement to provide temporary, unsecured financing of up to $35,000,
incremental to the commitment under the Revolving Loan Agreement.
Borrowings under this agreement are due March 31, 1995 and bear interest at
the bank's prime lending rate plus two and one-quarter percent or, at the
Company's option, the London Interbank Offered Rate plus three and one-half
percent. The Company expects to repay any borrowings outstanding under
this arrangement as of March 31, 1995 with proceeds from sales of
discontinued operations, or a refinancing of its senior debt during the
third quarter of fiscal 1995.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION
RESULTS OF OPERATIONS:
THREE MONTHS ENDED DECEMBER 31, 1994 VS. 1993
Net sales and gross profit.
MagneTek's net sales in the second quarter of fiscal 1995 were $290.6
million, a 12% increase over the second quarter of fiscal 1994 at $259.3
million. Sales in the Ballasts and Transformers segment increased 8% due
primarily to increased sales of electronic ballasts partially offset by
lower sales of transformer products in Europe. Sales in the Motors and
Controls segment increased 19% due to increased sales of fractional
horsepower motors and AC electronic adjustable speed drives.
Gross profit increased to $58.7 million (20.2% of net sales) in the second
quarter of fiscal 1995, from $26.1 million (10.1% of net sales) in the
second quarter of fiscal 1994. The fiscal 1994 period included charges to
income of $19.1 million relating primarily to inventory and other write-
downs in the electronic ballast product line. Excluding the effect of
these charges, gross profit in the second quarter of fiscal 1994 was $45.2
million (17.4% of net sales). The increase in gross profit was due
primarily to the increase in sales discussed above together with the
increase in gross margin (as a percentage of net sales). The increase in
the gross margin percentage was due to price increases in magnetic
ballasts; improved profitability of electronic ballasts, reflecting
increased sales and the impact of cost reductions enacted during the
current and prior fiscal year; and improved profitability of certain
fractional horsepower motor products. The gross margin improvement was
dampened by continuing escalation in material costs, most notably copper
and aluminum.
Operating expenses.
Selling, general and administrative (SG&A) expense was $41.3 million (14.2%
of net sales) in the second quarter of fiscal 1995, down from $51.4 million
(19.8% of net sales) in the second quarter of fiscal 1994. SG&A expense in
the second quarter of fiscal 1994 included charges to income of $12.1
million relating primarily to administrative consolidations, including
severance and relocation costs. Excluding the effect of these charges,
SG&A expense in the second quarter of fiscal 1994 was $39.3 million, (15.2%
of net sales). The decrease in SG&A as a percentage of net sales results
from the administrative reorganization and consolidation actions undertaken
during the current and prior fiscal year.
Interest and other expense.
Interest expense increased 9% to $8.5 million in the second quarter of
fiscal 1995 from $7.8 million in the corresponding quarter of the prior
fiscal year due primarily to higher interest rates. Although overall
borrowings are lower than in the prior year due to proceeds from the sale
of certain discontinued operations, continuing operations reflect
<PAGE>
ITEM 2 (continued)
higher levels of working capital due to higher sales volumes and increased
pressure for accelerated payments from certain suppliers of key materials
and components. Other expense in the second quarter of fiscal 1994
includes a $2.1 million gain from the sale of an investment resulting in
$1.2 million of other income (net of other expense) compared to $1.2
million of expense in the current fiscal year quarter.
Net income.
The Company recorded income from continuing operations of $4.5 million in
the second quarter of fiscal 1995 compared to a loss of $21.8 million in
the second quarter of fiscal 1994. As indicated above, the fiscal 1994
quarter included charges to income aggregating $31.2 million on a pretax
basis, reflecting costs associated with the Company's restructuring and
reorganization. Excluding the effect of these charges, income from
continuing operations reflected a small loss. Net income was $4.5 million
in the second quarter of fiscal 1995 compared to a net loss of $42.5
million in the second quarter of fiscal 1994. The net loss in the fiscal
1994 quarter includes the loss from continuing operations discussed above,
as well as $20.7 million in losses from discontinued operations, reflecting
$20.5 million in estimated losses on disposal of discontinued operations.
SIX MONTHS ENDED DECEMBER 31, 1994 VS. 1993
Net sales and gross profit.
MagneTek's net sales in the first six months of fiscal 1995 were $565.4
million, a 5% increase over the first six months of fiscal 1994 at $539.7
million. Due to the Company's use of a fifty-two, fifty-three week fiscal
year, the first six months of fiscal 1995 contained twenty-six weeks
compared to twenty-seven weeks in the first six months of fiscal 1994. On
a pro forma basis, determined as if both periods contained twenty-six
weeks, sales increased 9%. Sales in the Ballasts and Transformers segment
increased 1% (4% on a pro forma basis) due to increased sales of electronic
ballasts partially offset by lower sales of transformer products in Europe.
Sales in the Motors and Controls segment increased 11% (15% on a pro forma
basis) due to increased sales of fractional horsepower motors and AC
electronic adjustable speed drives.
Gross profit increased to $110.4 million (19.5% of net sales) in the first
six months of fiscal 1995, from $83.6 million (15.4% of net sales) in the
first six months of fiscal 1994. The fiscal 1994 period included charges
to income of $19.1 million relating primarily to inventory and other write-
downs in the electronic ballast product line. Excluding the effect of
these charges, gross profit in the first six months of fiscal 1994 was
$102.7 million (19% of net sales). The increase in gross profit was due
primarily to the increase in sales discussed above together with the
increase in gross margin (as a percentage of net sales). The increase in
the gross margin percentage was due to price increases in magnetic
ballasts; improved profitability of electronic ballasts, reflecting
increased sales and the impact of cost reductions enacted during the
current
<PAGE>
ITEM 2 (continued)
and prior fiscal year; and improved profitability of certain fractional
horsepower motor products. The gross margin improvement was dampened by
continuing escalation in material costs, most notably copper and aluminum.
Operating expenses.
Selling, general and administrative (SG&A) expense was $79.7 million (14.1%
of net sales) in the first six months of fiscal 1995, down from $97.2
million (18% of net sales) in the first six months of fiscal 1994. SG&A
expense in the first six months of fiscal 1994 included charges to income
of $12.1 million relating primarily to administrative consolidations,
including severance and relocation costs. Excluding the effect of these
charges, SG&A expense in the first six months of fiscal 1994 was $85.1
million, (15.8% of net sales). The decrease in SG&A overall and as a
percentage of net sales results from the administrative reorganization and
consolidation actions undertaken during the current and prior fiscal year.
Interest and other expense.
Interest expense of $16.2 million in the first six months of fiscal 1995
was comparable to interest expense in the corresponding period of the prior
fiscal year at $15.9 million. Although overall borrowings are lower than
in the prior year due to the sale of certain discontinued operations,
continuing operations reflect higher levels of working capital due to
higher sales volumes and increased pressure for accelerated payments from
certain suppliers of key materials and components. Other expense in the
first six months of fiscal 1994 includes a $2.1 million gain from the sale
of an investment resulting in $0.3 million of other income (net of other
expense) compared to $2.2 million of expense in the current fiscal year
period.
Net income.
The Company recorded income from continuing operations of $7.1 million in
the first six months of fiscal 1995 compared to a loss of $20.2 million in
the first six months of fiscal 1994. As indicated above, the fiscal 1994
period included charges to income aggregating $31.2 million on a pretax
basis, reflecting costs associated with the Company's restructuring and
reorganization. Excluding the effect of these charges, income from
continuing operations reflected income of approximately $1.4 million. Net
income was $10.2 million, including a $3.1 million gain on the sale of the
Company's Controls business, in the first six months of fiscal 1995
compared to a net loss of $41.1 million in the first six months of fiscal
1994. The net loss in the fiscal 1994 period includes the loss from
continuing operations discussed above, as well as $20.9 million in losses
from discontinued operations, reflecting $20.5 million in estimated losses
on disposal of discontinued operations.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
During the first six months of fiscal 1995, the Company sold certain of its
discontinued operations in cash transactions. Aggregate proceeds, subject
to certain post-closing adjustments, were approximately $93 million and
were used to repay debt primarily under the Company's Revolving Loan
Agreement. In accordance with the terms of certain amendments, the lending
commitment under the Revolving Loan Agreement was reduced to approximately
$122.5 million as of the end of the second quarter of fiscal 1995, from
$150 million at the start of the fiscal year.
As a result of increased sales volumes and pressure from certain suppliers
of key materials to accelerate payments, the Company's level of working
capital increased during the second quarter of fiscal 1995. Also during
this quarter, the Company repaid substantially all amounts outstanding
under its European Loan Agreement with borrowings under its Revolving Loan
Agreement. As a result of the reduced lending commitment discussed above,
the increased working capital and European debt repayment, and a January
2, 1995 scheduled amortization payment on the Company's Senior Notes, the
Company entered into an agreement with one of the banks included in the
Revolving Credit Agreement to provide additional temporary, unsecured
financing (see Note 4 of Notes to Condensed Consolidated Financial
Statements).
The Company expects continued reductions in long-term debt during the
course of the fiscal year through the use of net proceeds from future
divestitures as well as a return to positive net cash flow from continuing
operations.
Total cash outflow associated with certain restructuring actions is
estimated at $13,700, of which approximately $7,300 has been incurred.
The remaining cash outflow is expected to occur primarily during the
remainder of fiscal 1995 (see Note 3 of Notes to Condensed Consolidated
Financial Statements).
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.1 $35 million Revolving Credit agreement dated December 30,1994,
between MagneTek, Inc. and Nations Bank of Texas
10.2 Amended and Restated 1989 Incentive Stock Compensation Plan of
MagneTek, and all amendments thereto.
27.1 Financial Data Schedules
(b) REPORTS ON FORM 8-K
none
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MAGNETEK, INC.
(Registrant)
Date: February 14, 1995 /s/ David P. Reiland
------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
<PAGE>
Exhibit 10.1
REVOLVING CREDIT AGREEMENT
Dated as of December 30, 1994
MAGNETEK, INC., a Delaware corporation (the "BORROWER"), and
NATIONSBANK OF TEXAS, N.A., a national banking association (the "BANK"), agree
as follows:
PRELIMINARY STATEMENTS
(a) The Borrower has applied to the Bank for a revolving line of
credit in the amount of $35,000,000.
(b) The Bank is willing to provide such line of credit to the
Borrower on the terms and conditions set forth herein.
(c) Capitalized terms used herein and not otherwise defined are used
with the meanings set forth in Exhibit C hereto.
ARTICLE I
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 1.01. THE ADVANCES. The Bank agrees, on the terms and
conditions hereinafter set forth, to make advances (the "ADVANCES") to the
Borrower from time to time on any Business Day during the period from the date
hereof until March 31, 1995 (such date, or the earlier date of termination of
the Commitment (as defined below) pursuant to Section 1.04 or 5.01, being the
"TERMINATION DATE") in an aggregate amount not to exceed at any time outstanding
$35,000,000, as such amount may be reduced pursuant to Section 1.04 (the
"COMMITMENT"). Each Advance shall be in an amount not less than $1,000,000 or
an integral multiple of $100,000 in excess thereof, EXCEPT that an Advance may
be in an amount equal to the entire unused Commitment. Within the limits of the
Commitment, the Borrower may borrow, prepay pursuant to Section 1.07(a) and
reborrow under this Section 1.01.
SECTION 1.02. MAKING THE ADVANCES. (a) Each Advance shall be made
on notice, given not later than 12:00 noon (Dallas, Texas time) on (or, if such
Advance is to be a Eurodollar Rate Advance, the third Business Day prior to) the
date of the proposed Advance, by the Borrower to the Bank, specifying the date
and amount thereof and selecting the Type thereof and, if such Advance is to be
a Eurodollar Rate Advance, the initial Interest Period for such Advance. Not
later than 12:00 noon (Dallas, Texas time) on the date of such Advance (or 3:00
p.m. (Dallas, Texas time) if such Advance is to be a Base Rate Advance) and upon
fulfillment of the applicable conditions set forth in Article II, the Bank will
make such Advance available to the Borrower in same day funds at the Bank's
address referred to in Section 6.02.
(b) Each notice from the Borrower to the Bank requesting an Advance
shall be irrevocable and binding on the Borrower. In the case of any request
for a Eurodollar Rate Advance, the Borrower shall indemnify the Bank against any
loss, cost or expense incurred by the Bank as a result of any failure to fulfill
on or before the date specified in such notice for such Advance the applicable
conditions set forth in Article II,
<PAGE>
including, without limitation, any loss (including loss of anticipated profits),
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by the Bank to fund the Advance when the
Advance, as a result of such failure, is not made on such date.
SECTION 1.03. COMMITMENT FEE. The Borrower agrees to pay to the
Bank a commitment fee on the average daily unused portion of the Commitment from
the date hereof until the Termination Date at the rate of one-half of 1% per
annum, payable on the Termination Date.
SECTION 1.04. MANDATORY REDUCTION OF THE COMMITMENT. The Commitment
shall be automatically reduced on each date on which any prepayment of principal
is required to be made pursuant to Section 1.07(b), in each such case by an
amount equal to the amount of the required principal prepayment.
SECTION 1.05. REPAYMENT. The Borrower shall repay the aggregate
unpaid principal amount of all Advances in accordance with a promissory note of
the Borrower, in substantially the form of Exhibit A hereto (the "NOTE"),
evidencing the indebtedness resulting from such Advances and delivered to the
Bank pursuant to Article II.
SECTION 1.06. INTEREST. (a) ORDINARY INTEREST. Subject to
Section 1.06(b), the Borrower shall pay interest on the unpaid principal amount
of each Advance from the date of such Advance until such principal amount shall
be paid in full, at the following rates per annum:
(i) BASE RATE ADVANCES. During such periods as (and to the
extent that) such Advance is a Base Rate Advance, 2.25% per annum above the Base
Rate in effect from time to time, payable on the first day of each month, on the
Termination Date and on the date such Base Rate Advance shall be Converted into
a Eurodollar Rate Advance or paid in full.
(ii) EURODOLLAR RATE ADVANCES. During such periods as (and to
the extent that) such Advance is a Eurodollar Rate Advance for any Interest
Period, a rate per annum equal at all times during such Interest Period to the
sum of the Eurodollar Rate for such Interest Period plus 3.50% per annum,
payable on the last day of such Interest Period.
(b) DEFAULT INTEREST. The interest payable under Section 1.06(a)
shall be increased (i) effective immediately in the case of any Event of Default
under Section 5.01(a) with respect to the payment of principal, interest or
commitment fees, and (ii) effective upon notice from the Bank in the case of any
other Event of Default, and in each case for so long as such Event of Default is
continuing, by 2.00% per annum. Any interest, fees or other amounts (other than
principal) not paid to the Bank when due shall bear interest at the rate
applicable to Base Rate Advances as set forth in Section 1.06(a)(i) plus 2.00%
per annum.
SECTION 1.07. PREPAYMENTS. (a) The Borrower may, upon notice to the
Bank at least one Business Day in advance stating the proposed date and
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amounts of the Advances in whole or in
part; PROVIDED, HOWEVER, that (i) each partial prepayment pursuant to this
Section 1.07(a) shall be in an aggregate principal
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amount not less than $1,000,000, and (ii) upon prepayment of any Eurodollar Rate
Advance, the Borrower shall be obligated to reimburse the Bank in respect
thereof pursuant to Section 6.05(c).
(b) As soon as practicable and in any event within five Business Days
after receipt by the Borrower of any cash consideration from any Divestiture
Assets, the Borrower shall prepay the outstanding principal amounts of the
Advances by an amount equal to 50% of such cash consideration. In the event
that (i) the indebtedness of the Borrower under the Existing Loan Agreement or
the Senior Notes shall be refinanced or otherwise repaid in full, or (ii) the
Borrower or any subsidiary of the Borrower shall, at any time after the date of
this Agreement, pledge or grant a lien or security interest in any assets of the
Borrower or any such subsidiary (other than "Pledged Collateral" as defined in
the Existing Loan Agreement or the capital stock of any "Restricted Subsidiary"
as defined in the Existing Loan Agreement) as security for any obligations of
the Borrower or any subsidiary of the Borrower under or in connection with the
Existing Loan Agreement (as supplemented, modified or amended from time to
time), the Borrower shall immediately (in the case of clause (i)), or within 10
Business Days thereafter (in the case of clause (ii)), prepay in full the
outstanding principal amounts of the Advances. In the event of any prepayment
of Eurodollar Rate Advances pursuant to this Section 1.07(b), the Borrower shall
be obligated to reimburse the Bank in respect thereof pursuant to Section
6.05(c).
(c) Any prepayment of Advances shall be applied first to Base Rate
Advances and then to Eurodollar Rate Advances designated by the Borrower.
SECTION 1.08. INCREASED COSTS ETC.
(a) INCREASED COSTS. If, due to either (i) the introduction of or
any change (other than any change by way of imposition or increase of reserve
requirements referred to in subsection (b) below) in or in the interpretation of
any law or regulation or (ii) the compliance with any guideline or request from
any central bank or other governmental authority (whether or not having the
force of law), there shall be any increase in the cost to the Bank of agreeing
to make or making, funding or maintaining Eurodollar Rate Advances, then the
Borrower shall from time to time, within five Business Days after demand by the
Bank, pay to the Bank additional amounts sufficient to compensate the Bank for
such increased cost. A certificate as to the amount of such increased cost,
submitted to the Borrower by the Bank, shall be conclusive and binding for all
purposes, absent manifest error.
(b) ADDITIONAL INTEREST. The Borrower shall pay to the Bank
additional interest on the unpaid principal amount of each Eurodollar Rate
Advance, from the date of such Eurodollar Rate Advance until such principal
amount is paid in full or such Eurodollar Rate Advance is Converted to a Base
Rate Advance, at an interest rate per annum equal at all times to the remainder
obtained by subtracting (i) the Eurodollar Rate for the Interest Period for such
Eurodollar Rate Advance from (ii) the rate obtained by dividing such Eurodollar
Rate by a percentage equal to 100% minus the reserve percentage applicable
during such Interest Period (or if more than one such percentage shall be so
applicable, the daily average of such percentages for those days in such
Interest Period during which any such percentage shall be so applicable) under
regulations issued from time to time by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum reserve
requirement (including, without limitation, any emergency, supplemental or other
marginal reserve requirement) for the Bank with respect
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to liabilities or assets consisting of or including Eurocurrency liabilities
having a term equal to such Interest Period, payable on each date on which
interest is payable on such Eurodollar Rate Advance. Such additional interest
shall be determined by the Bank and notice of the amount thereof shall be given
by the Bank to the Borrower.
(c) INCREASED CAPITAL. If the Bank determines that compliance with
any law or regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by the Bank
or any corporation controlling the Bank and that the amount of such capital is
increased by or based upon the existence of the Bank's commitment to lend
hereunder and other commitments of this type, then, upon demand by the Bank, the
Borrower shall, within five Business Days after demand by the Bank, pay to the
Bank, from time to time as specified by the Bank, additional amounts sufficient
to compensate the Bank or such corporation in the light of such circumstances,
to the extent that the Bank reasonably determines such increase in capital to be
allocable to the existence of the Bank's commitment to lend hereunder. A
certificate as to such amounts shall be submitted to the Borrower by the Bank
and shall be conclusive and binding for all purposes, absent manifest error.
SECTION 1.09. INTEREST RATE PROTECTION. If and to the extent that
the Borrower shall fail to select (or shall be prohibited from selecting) the
duration of any Interest Period for any Eurodollar Rate Advance in accordance
with the provisions contained in the definition of "Interest Period" in Exhibit
C, the Bank will forthwith so notify the Borrower and such Advance (to such
extent) will automatically, on the last day of the then existing Interest Period
therefor, Convert into a Base Rate Advance.
SECTION 1.10. VOLUNTARY CONVERSION OF ADVANCE. The Borrower may on
any Business Day, upon notice given to the Bank not later than 12:00 noon
(Dallas, Texas time) on the third Business Day prior to the date of the proposed
Conversion and subject to the provisions of Sections 1.06 and 1.11, Convert an
Advance (or portion thereof) of one Type into an Advance of another Type;
PROVIDED, HOWEVER, that (a) any Conversion of any Eurodollar Rate Advance into a
Base Rate Advance shall be made on, and only on, the last day of an Interest
Period for such Eurodollar Rate Advance (except in the case of any Conversion
pursuant to Section 1.11, in which case the Borrower shall pay to the Bank any
amounts payable pursuant to Section 6.05(c)), and (b) the Borrower may not
Convert a Base Rate Advance into a Eurodollar Rate Advance if any Event of
Default has occurred and is continuing. Each such notice of a Conversion shall,
within the restrictions specified above, specify (i) the date of such
Conversion, (ii) the Advance (or portion thereof) to be Converted, and (iii) if
such Conversion is into a Eurodollar Rate Advance, the duration of the Interest
Period for such Advance.
SECTION 1.11. ILLEGALITY, ETC. (a) Notwithstanding any other
provision of this Agreement, if the Bank shall notify the Borrower that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or any central bank or other governmental
authority asserts that it is unlawful, for the Bank to perform its obligations
hereunder to make Eurodollar Rate Advances or to fund or maintain Eurodollar
Rate Advances hereunder, (i) the obligation of the Bank to make, or to Convert
Advances into, Eurodollar Rate Advances shall be suspended until the Bank shall
notify the Borrower that the circumstances causing such suspension no longer
exist and (ii) the Borrower shall forthwith prepay in full all Eurodollar Rate
Advances of the Bank then outstanding, together with interest accrued thereon,
unless the Borrower, within five Business Days of
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notice from the Bank, Converts all Eurodollar Rate Advances of the Bank then
outstanding into Base Rate Advances in accordance with Section 1.10.
(b) If, with respect to any Eurodollar Rate Advance, the Bank
notifies the Borrower that (i) the Bank is unable to determine the Eurodollar
Rate, or (ii) the Eurodollar Rate for any Interest Period for such Advance
(after taking into account any additional interest payable in respect thereof
pursuant to Section 1.08(b)), will not adequately reflect the cost to the Bank
of making, funding or maintaining such Eurodollar Rate Advance for such Interest
Period, such Eurodollar Rate Advance will automatically, on the last day of the
then existing Interest Period therefor, Convert into a Base Rate Advance, and
the obligation of the Bank to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended until the Bank shall notify the Borrower that the
circumstances causing such suspension no longer exist.
SECTION 1.12. PAYMENTS AND COMPUTATIONS. (a) The Borrower shall make
each payment hereunder and under the Note not later than 12:00 noon (Dallas,
Texas time) on the day when due in U.S. dollars to the Bank at its address
referred to in Section 6.02 in same day funds.
(b) The Borrower hereby authorizes the Bank, if and to the extent
payment is not made when due hereunder or under the Note, to charge from time to
time against any or all of the Borrower's accounts with the Bank any amount so
due.
(c) All computations of interest based on the Base Rate and of
commitment fees shall be made by the Bank on the basis of a year of 365 days,
and all computations of interest based on the Eurodollar Rate shall be made by
the Bank on the basis of a year of 360 days, in each case for the actual number
of days (including the first day but excluding the last day) occurring in the
period for which such interest or commitment fees are payable. Each
determination by the Bank of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(d) Whenever any payment hereunder or under the Note shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or commitment fees, as the
case may be; PROVIDED, HOWEVER, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advance to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day.
ARTICLE II
CONDITIONS OF LENDING
SECTION 2.01. CONDITION PRECEDENT TO INITIAL ADVANCE. The obligation
of the Bank to make its initial Advance is subject to the condition precedent
that the Bank shall have received on or before the day of such Advance the
following, each dated such day, in form and substance satisfactory to the Bank:
(a) The Note.
(b) Certified copies of the resolutions of the Board of Directors of
the Borrower approving this Agreement and the Note, and of all documents
evidencing other
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necessary corporate action and governmental approvals, if any, with respect to
this Agreement and the Note.
(c) A certificate of the Secretary or an Assistant Secretary of the
Borrower certifying the names and true signatures of the officers of the
Borrower authorized to sign this Agreement and the Note and any other documents
to be delivered hereunder.
(d) Favorable opinions of Samuel A. Miley, General Counsel of the
Borrower, and Gibson, Dunn & Crutcher, counsel for the Borrower, substantially
in the form of Exhibits B-1 and B-2 hereto and as to such other matters as the
Bank may reasonably request.
(e) Evidence satisfactory to the Bank to confirm that the Borrower
has completed all actions required of it under the Existing Loan Agreement to
redesignate MagneTek Europe N.V. and the subsidiaries set forth on Schedule I to
the Third Amendment to the Existing Loan Agreement as "Restricted Subsidiaries"
as defined in the Existing Loan Agreement.
SECTION 2.02. CONDITIONS PRECEDENT TO ALL ADVANCES. The obligation
of the Bank to make each Advance (including the initial Advance) shall be
subject to the further conditions precedent that on the date of such Advance the
following statements shall be true (and each of the giving of the applicable
notice requesting such Advance and the acceptance by the Borrower of the
proceeds of such Advance shall constitute a representation and warranty by the
Borrower that on the date of such Advance such statements are true):
(a) The representations and warranties contained in Section 3.01 are
correct on and as of the date of such Advance, before and after giving effect to
such Advance and to the application of the proceeds therefrom, as though made on
and as of such date, and
(b) No event has occurred and is continuing, or would result from
such Advance or from the application of the proceeds therefrom, which
constitutes an Event of Default or would constitute an Event of Default but for
the requirement that notice be given or time elapse or both.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the jurisdiction indicated at the
beginning of this Agreement.
(b) The execution, delivery and performance by the Borrower of this
Agreement and the Note are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, and do not (i) contravene the
Borrower's charter or by-laws or any applicable laws, or (ii) contravene or
constitute a default under,
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or require any consent, waiver or approval that has not been obtained pursuant
to, the Existing Loan Agreement, the Senior Notes, the Subordinated Indentures
or any other material contractual restriction binding on or affecting the
Borrower.
(c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by the Borrower of this Agreement or
the Note.
(d) This Agreement is, and the Note when delivered hereunder will be,
legal, valid and binding obligations of the Borrower enforceable against the
Borrower in accordance with their respective terms.
(e) The obligations of the Borrower under this Agreement and the Note
constitute, and are entitled to the benefits of, "Senior Indebtedness" as
defined in the Subordinated Indentures.
(f) The balance sheets of the Borrower and its subsidiaries as at
June 30, 1994, and the related statements of income and retained earnings of the
Borrower and its subsidiaries for the fiscal year then ended, copies of which
have been furnished to the Bank, fairly present, in all material respects, the
financial condition of the Borrower and its subsidiaries as at such date and the
results of the operations of the Borrower and its subsidiaries for the period
ended on such date, all in accordance with generally accepted accounting
principles consistently applied, and since June 30, 1994, there has been no
material adverse change in such condition or operations or in the business,
properties or prospects of the Borrower and its subsidiaries, taken as a whole.
(g) Except as disclosed in reports filed by the Borrower pursuant to
the reporting requirements under the Securities Exchange Act of 1934, as
amended, there is no pending or, to the Borrower's knowledge, threatened action
or proceeding affecting the Borrower or any of its subsidiaries before any
court, governmental agency or arbitrator, which may materially adversely affect
the financial condition or operations of the Borrower and its subsidiaries,
taken as a whole, or which purports to affect the legality, validity or
enforceability of this Agreement or the Note.
(h) No proceeds of any Advance will be used to acquire any equity
security of a class which is registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
(i) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying margin stock (within the meaning of
Regulation U issued by the Board of Governors of the Federal Reserve System),
and no proceeds of any Advance will be used to purchase or carry any margin
stock or to extend credit to others for the purpose of purchasing or carrying
any margin stock.
(j) Neither the Borrower nor any of its subsidiaries is or is
required to be registered as an "investment company" under the Investment
Company Act of 1940.
(k) The representations and warranties of the Borrower contained in
Section 4.1 (with the State of Tennessee substituted for the State of
California), the last clause of Section 4.2 and Sections 4.8, 4.9, 4.13, 4.16,
4.18 and the first sentence of Section 4.20 of the Existing Loan Agreement are
true and correct as of the date hereof as though made on and as of the date
hereof.
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ARTICLE IV
COVENANTS OF THE BORROWER
SECTION 4.01. AFFIRMATIVE COVENANTS. So long as the Note shall
remain unpaid or the Bank shall have any Commitment hereunder, the Borrower
will, unless the Bank shall otherwise consent in writing:
(a) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
paying before the same become delinquent all taxes, assessments and governmental
charges imposed upon it or upon its property except to the extent contested in
good faith.
(b) LOAN AGREEMENT COVENANTS. Comply with all covenants and
obligations of the Borrower under the Existing Loan Agreement, including,
without limitation, Sections 6.14, 6.15, 6.16 and 6.17 thereof.
(c) REPORTING REQUIREMENTS. Furnish to the Bank:
(i) as soon as available and in any event within 45 days
after the end of each of the first three quarters of each fiscal year
of the Borrower, balance sheets of the Borrower and its subsidiaries
as of the end of such quarter and statements of income and retained
earnings of the Borrower and its subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the
end of such quarter, certified by the chief financial officer of the
Borrower;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, a copy of the
annual report for such year for the Borrower and its subsidiaries,
containing financial statements for such year certified in a manner
acceptable to the Bank by Ernst & Young or other independent public
accountants reasonably acceptable to the Bank;
(iii) as soon as possible and in any event within five days
after the occurrence of each Event of Default and each event which,
with the giving of notice or lapse of time, or both, would constitute
an Event of Default, continuing on the date of such statement, a
statement of the chief financial officer of the Borrower setting
forth details of such Event of Default or event and the action which
the Borrower has taken and proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof, copies of
all reports which the Borrower sends to any of its securityholders,
and copies of all reports and registration statements (other than in
respect of employee stock plans) which the Borrower or any subsidiary
files with the Securities and Exchange Commission or any national
securities exchange; and
(v) such other information respecting the condition or
operations, financial or otherwise, of the Borrower or any of its
subsidiaries as the Bank may from time to time reasonably request.
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SECTION 4.02. NEGATIVE COVENANTS. So long as the Note shall remain
unpaid or the Bank shall have any Commitment hereunder, the Borrower will not,
without the written consent of the Bank:
(a) LIENS, ETC. Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any lien, security interest or other
charge or encumbrance, or any other type of preferential arrangement in the
nature of a lien, security interest or encumbrance, upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its subsidiaries to assign, any right to receive income, in each case to
secure or provide for the payment of any Debt of the Borrower or any other
person or entity, other than liens, security interests and other charges,
encumbrances or preferential arrangements that are not prohibited by the
Existing Loan Agreement or that secure the obligations of the Borrower or any
subsidiary of the Borrower thereunder or in connection therewith.
(b) DEBT. Create or suffer to exist, or permit any of its
subsidiaries to create or suffer to exist, any Debt, other than Debt that is not
prohibited under the Existing Loan Agreement.
(c) LEASE OBLIGATIONS. Create or suffer to exist, or permit any of
its subsidiaries to create or suffer to exist, any obligations for the payment
of rental for any property under leases or agreements to lease, other than those
that are not prohibited by the Existing Loan Agreement.
(d) DIVIDENDS, ETC. Declare or make any dividend payment or other
distribution of assets, properties, cash, rights, obligations or securities on
account of any shares of any class of capital stock of the Borrower, or
purchase, redeem or otherwise acquire for value (or permit any of its
subsidiaries to do so) any shares of any class of capital stock of the Borrower
or any warrants, rights or options to acquire any such shares, now or hereafter
outstanding, except that, so long as no Event of Default has occurred and is
continuing, the Borrower may (i) declare and make any dividend payment or other
distribution payable in common stock of the Borrower, and (ii) purchase, redeem
or otherwise acquire shares of its common stock or warrants, rights or options
to acquire any such shares with the proceeds received from the substantially
concurrent issue of new shares of its common stock, in each case to the extent
that the same is not prohibited by the Existing Loan Agreement.
(e) MERGERS, ETC. Merge or consolidate with or into, or convey,
transfer, lease or otherwise dispose of (whether in one transaction or in a
series of transactions) all or substantially all of its assets (whether now
owned or hereafter acquired) to, or acquire all or substantially all of the
assets of, any person or entity, or permit any of its subsidiaries to do so,
except to the extent not prohibited by the Existing Loan Agreement.
(f) PREPAYMENT OF SENIOR NOTES AND SUBORDINATED OBLIGATIONS. Pay,
prepay, redeem, repurchase or defease, or make any sinking fund or other
payments in respect of, the principal of the Senior Notes or any Subordinated
Obligations (other than the principal payment in an aggregate amount not to
exceed $22,500,000 due in January 1995 under the Senior Notes), or permit any of
its subsidiaries to do so.
(g) USE OF PROCEEDS. Use the proceeds of any Advance for any purpose
other than working capital and other general corporate purposes of the Borrower.
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(h) AMENDMENT, ETC. OF EXISTING LOAN AGREEMENT AND RELATED DOCUMENTS.
Supplement, modify, amend or refinance the Existing Loan Agreement or any of the
other "Loan Documents" as defined therein.
ARTICLE V
EVENTS OF DEFAULT
SECTION 5.01. EVENTS OF DEFAULT. If any of the following events
("EVENTS OF DEFAULT") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of the Note when the
same becomes due payable; or shall fail to pay any interest on the Note within
two Business Days after the same becomes due and payable; or shall fail to pay
any other amount payable hereunder within five Business Days after the same
becomes due and payable; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with this Agreement shall
prove to have been incorrect in any material respect when made; or
(c) The Borrower shall fail to perform or observe (i) any term,
covenant or agreement contained in Section 4.01(c)(iii) or 4.02, or (ii) any
other term, covenant or agreement contained in this Agreement on its part to be
performed or observed if such failure shall remain unremedied for 30 days after
written notice thereof shall have been given to the Borrower by the Bank; or
(d) Any Loan Agreement Event of Default shall have occurred; or
(e) The Bank shall have determined that any set of events or
circumstances has occurred and continues to exist which (i) has or could
reasonably be expected to have any material adverse effect whatsoever upon the
validity or enforceability of this Agreement or the Note, or (ii) materially
impairs or could reasonably be expected to materially impair the ability of the
Borrower to perform its obligations under this Agreement and the Note;
then, and in any such event, the Bank (i) may, by notice to the Borrower,
declare its obligation to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) may, by notice to the Borrower, declare the
Note, all interest thereon and all other amounts payable under this Agreement to
be forthwith due and payable, whereupon the Note, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; PROVIDED, HOWEVER, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of the Bank to make Advances shall
automatically be terminated and (B) the Advances, the Note, all such interest
and all such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.01. AMENDMENTS, ETC. No amendment or waiver of any
provision of this Agreement or the Note, nor consent to any departure by the
Borrower therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
SECTION 6.02. NOTICES, ETC. All notices, consents and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered, if to the Borrower, at its address at 26 Century
Boulevard, Nashville, Tennessee 37229-0159, Attention: Treasurer; and if to the
Bank, at its address at 901 Main Street, Dallas, Texas 75202, Attention: Kay
Hibbs, Corporate Banking Officer, with a copy to 444 South Flower Street, Suite
1500, Los Angeles, California 90071, Attention: Andrea Collias, Vice President;
or, as to each party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and communications
shall, when mailed, telecopied, telegraphed, telexed or cabled, be effective
when deposited in the mails, telecopied, delivered to the telegraph company,
confirmed by telex answerback or delivered to the cable company, respectively,
except that notices to the Bank pursuant to the provisions of Article I shall
not be effective until received by the Bank.
SECTION 6.03. NO WAIVER; REMEDIES. No failure on the part of the
Bank to exercise, and no delay in exercising, any right hereunder or under the
Note shall operate as a waiver thereof; nor shall any single or partial exercise
of any such right preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 6.04. ACCOUNTING TERMS. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 3.01(f).
SECTION 6.05. COSTS EXPENSES AND TAXES. (a) The Borrower agrees to
pay, within five Business Days after demand, all reasonable costs and expenses
in connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Note and the other documents
to be delivered hereunder (including, without limitation, Section 6.08 hereof),
including, without limitation, the reasonable fees and out-of-pocket expenses of
counsel for the Bank with respect thereto and with respect to advising the Bank
as to its rights and responsibilities under this Agreement. The Borrower
further agrees to pay on demand all costs and expenses, if any (including
reasonable counsel fees and expenses), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Note and the other documents to be delivered hereunder,
including, without limitation, reasonable counsel fees and expenses in
connection with the enforcement of rights under this Section 6.05(a). In
addition, the Borrower shall pay any and all stamp and other taxes payable or
determined to be payable in connection with the execution and delivery of this
Agreement, the Note and the other documents to be delivered hereunder, and
agrees to
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save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes.
(b) The Borrower agrees to indemnify and hold harmless the Bank and
its affiliates (including, without limitation, NationsBanc Capital Markets,
Inc.) and their officers, directors, employees, agents and advisors (each an
"INDEMNIFIED PARTY") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any claim,
investigation, litigation or proceeding arising out of, related to or in
connection with this Agreement, the Note, the Advances, or any of the
transactions contemplated hereby or thereby, or any action or inaction by the
Bank in connection therewith, in each case whether or not such claim,
investigation, litigation or proceeding is brought or asserted by the Borrower,
its directors, shareholders or creditors or an Indemnified Party or any
Indemnified Party is otherwise a party thereto and whether or not the
transactions contemplated hereby are consummated, except to the extent such
claim, damage, loss, liability or expense is found in a final, non-appealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. Each of the
Borrower and the Bank also agrees not to assert any claim against the other, any
of its affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to any of
the transactions contemplated herein or the actual or proposed use of the
proceeds of the Advances.
(c) If any payment of principal of any Eurodollar Rate Advance is
made other than on the last day of the Interest Period for such Advance, as a
result of a payment pursuant to Section 1.11 or acceleration of the maturity of
the Advances and the Note pursuant to Section 5.01 or for any other reason, the
Borrower shall, within five Business Days after demand, pay to the Bank any
amounts required to compensate the Bank for additional losses, costs or expenses
which it may reasonably incur as a result of such payment, including, without
limitation, any loss (including loss of anticipated profits), cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund or maintain such Advance.
SECTION 6.06. RIGHT OF SET-OFF. Upon the occurrence and during the
continuance of any Event of Default, the Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the Bank to
or for the credit or the account of the Borrower against any and all of the
obligations of the Borrower now or hereafter existing under this Agreement and
the Note, whether or not the Bank shall have made any demand under this
Agreement or the Note and although such obligations may be unmatured. The Bank
agrees promptly to notify the Borrower after any such set-off and application,
PROVIDED that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.
SECTION 6.07. BINDING EFFECT. (a) This Agreement and the Note shall
be binding upon and inure to the benefit of the Borrower and the Bank and their
respective successors and assigns, except that the Borrower shall not have the
right to assign its rights hereunder or any interest herein without the prior
written consent of the Bank. Without
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limitation on the foregoing, the Bank may at any time and from time to time
(i) assign its rights and obligations hereunder and under the Note, in whole or
in part, to NationsBanc Capital Markets, Inc. or any other affiliate of the
Bank, and (ii) sell participations in its rights and obligations hereunder and
under the Note.
(b) Notwithstanding any other provision set forth in this Agreement,
the Bank may at any time create a security interest in all or any portion of its
rights under this Agreement (including, without limitation, the Advances owing
to it and the Note held by it) in favor of any Federal Reserve Bank in
accordance with Regulation A of the Board of Governors of the Federal Reserve
System.
SECTION 6.08. CERTAIN ASSIGNMENTS. In the event that the Bank shall
at any time hereafter elect to assign portions of the Commitment and the
Advances made by it hereunder to one or more other banks, financial institutions
or other parties, the Borrower shall execute and deliver such instruments,
documents and agreements as the Bank may reasonably request in order to amend
this Agreement and the Note (in whole or in part) to provide, and/or to replace
this Agreement and the Note (in whole or in part) with, a multi-lender revolving
credit and term loan agreement and/or a note purchase agreement or similar
arrangement (in each case including promissory notes issued thereunder)
containing terms similar to those set forth in this Agreement and the Note, with
such additions thereto and changes therein as the Bank may reasonably deem
necessary or appropriate in order to reflect the structure of the financing.
SECTION 6.09. GOVERNING LAW. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 6.10. COUNTERPARTS. This Agreement may be executed by each
of the parties hereto in separate counterparts, and shall become effective when
each party shall have executed and delivered to the other parry at least one
such counterpart hereof.
SECTION 6. 11. WAIVER OF JURY TRIAL. Each of the Borrower and the
Bank hereby irrevocably waives all right to trial by jury in any action,
proceeding or counterclairn (whether based on contract, tort or otherwise)
arising out of or relating to this Agreement, the Notes, the Advances or the
actions of the Bank in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
MAGNETEK, INC.
By: [SIGNED]
Title: Vice President & Treasurer
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NATIONSBANK OF TEXAS, N.A.
By: [SIGNED]
Vice President
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AMENDED AND RESTATED
1989 INCENTIVE STOCK COMPENSATION PLAN
OF
MAGNETEK, INC.
MAGNETEK, INC., a corporation organized under the laws of the State of
Delaware hereby adopts this 1989 Incentive Stock Compensation Plan of MagneTek,
Inc. The purposes of this Plan are as follows:
(1) To further the growth, development and financial success of the
Company by providing additional incentives to certain of its executive and
other key Employees who have been or will be given responsibility for the
management or administration of the Company's business affairs, by
assisting them to become owners of capital stock of the Company and thus to
benefit directly from its growth, development and financial success.
(2) To enable the Company to obtain and retain the services of the
type of professional, technical and managerial employees considered
essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of capital stock of the
Company under awards of restricted and unrestricted stock, performance
units, stock appreciation rights, restricted stock rights and options,
including options that are intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended.
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1 RULES OF CONSTRUCTION
As used herein, the masculine pronoun shall include the feminine and
neuter and the singular shall include the plural, where the context so
indicates. Titles are provided herein for convenience only and are not to serve
as a basis for interpretation or construction of the Plan.
SECTION 1.2 DEFINITIONS
As used herein:
BOARD shall mean the Board of Directors of the Company.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMMITTEE shall mean the Compensation Committee of the Board,
appointed as provided in Section 11.1.
COMPANY shall mean MagneTek, Inc. In addition, COMPANY shall mean any
corporation assuming, or issuing new employee stock options in substitution for,
Incentive Stock Options, outstanding under the Plan, in a transaction to which
Section 424(a) of the Code applies.
DIRECTOR shall mean a member of the Board.
EMPLOYEE shall mean any employee (as defined in accordance with the
Regulations then applicable under Section 3401(c) of the Code) of the Company,
or of any corporation which is then a Parent
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Corporation or a Subsidiary, whether such employee is so employed at the time
this Plan is adopted or becomes so employed subsequent to the adoption of this
Plan.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934, as
amended.
FAIR MARKET VALUE of a share of the Company's stock on a given
determination date shall be: (i) the mean between the highest and lowest sales
prices of a share of the Company's stock on the principal exchange on which
shares of the Company's stock are then trading, if any, on such determination
date, or, if shares were not traded on such date, then on the next preceding
trading day during which a sale occurred, as such prices are quoted in THE WALL
STREET JOURNAL; or (ii) if such stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, (1) the mean between the highest and
lowest sales prices (if the stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on such
determination date as reported by NASDAQ or such successor quotation system; or
(iii) if such stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the mean between the closing bid and
asked prices for the stock, on such determination date, as determined in good
faith by the Committee; or (iv) if the Company's stock is not publicly traded,
the fair market value established by the Committee acting in good faith.
INCENTIVE STOCK OPTION shall mean an Option which qualifies under
Section 422 of the Code and which is designated as an Incentive Stock Option by
the Committee.
NON-QUALIFIED OPTION shall mean an Option other than an Incentive
Stock Option.
OFFICER shall mean an officer of the Company, any Parent Corporation
or any Subsidiary.
OPTION shall mean an option to purchase capital stock of the Company,
granted under the Plan. OPTIONS includes both Incentive Stock Options and Non-
Qualified Options.
OPTIONEE shall mean an Employee to whom an Option is granted under the
Plan.
PARENT CORPORATION shall mean any corporation that is a "parent" of
the Company within the meaning of Rule 405 under the Securities Act; provided,
that with respect to the provisions of the Plan relating to Incentive Stock
Options, such term shall have the meaning ascribed to it in the applicable
provisions of the Code and the Regulations promulgated thereunder.
PARTICIPANT shall mean an Employee or Director who shall have been
granted an Option, a Stock Appreciation Right, Restricted Stock, a Stock Award
or a Performance Unit under the Plan.
PERFORMANCE PERIOD shall mean a period of time determined by the
Committee over which the performance goals associated with a Performance Unit
are to be achieved.
PLAN shall mean this 1989 Incentive Stock Compensation Plan of
MagneTek, Inc.
RESTRICTED PERIOD shall mean the period of time for which Restricted
Stock or a Restricted Stock Right is subject to forfeiture or other Restrictions
pursuant to the Plan.
RESTRICTED STOCK shall mean capital stock of the Company issued
pursuant to Articles VII and VIII of the Plan.
RESTRICTED STOCKHOLDER shall mean a person to whom Restricted Stock
has been issued under the Plan.
RESTRICTED STOCK RIGHT shall mean a right to be issued shares of the
Company's capital stock, granted pursuant to Articles VII and VIII of the Plan.
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RESTRICTIONS shall mean the restrictions on Restricted Stock or
Restricted Stock Rights imposed by the Committee by the terms of an individual
Restricted Stock Agreement or Restricted Stock Right Agreement and shall include
the requirement that such Restricted Stock or Restricted Stock Rights be
forfeited back to, or subject to mandatory repurchase by, the Company upon a
Termination of Employment for the reasons specified in such Restricted Stock
Agreement or Restricted Stock Right Agreement.
SECRETARY shall mean the Secretary of the Company.
SECURITIES ACT shall mean the Securities Act of 1933, as amended.
SUB-COMMITTEE shall mean any Sub-Committee, comprised of one or more
individuals, of the Committee appointed as provided in Section 11.1.
STOCK APPRECIATION RIGHT shall mean a stock appreciation right granted
under the Plan.
STOCK AWARD shall mean an award of capital stock of the Company
pursuant to Article IX of the Plan.
SUBSIDIARY shall mean any corporation of which the Company has
"control" within the meaning of Rule 405 under the Securities Act; provided,
that with respect to the provisions of the Plan relating to Incentive Stock
Options, such term shall have the meaning ascribed to it in the applicable
provisions of the Code and the Regulations promulgated thereunder.
TERMINATION OF EMPLOYMENT shall mean the time when the employee-
employer relationship between the Participant and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary
and, except with respect to Incentive Stock Options, terminations where
immediately thereafter the former Employee is a Director. In the case of a
Director who is not an Employee, Termination of Employment shall mean the time
when the Director ceases to be a Director for any reason, including, but not by
way of limitation, a cessation by resignation, discharge, death or retirement,
but excluding cessations where there is a simultaneous or prior and continuing
employment of the former Director by the Company, a Parent Corporation or a
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Employment,
including, but not by way of limitation, the question of whether a Termination
of Employment resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Employment;
PROVIDED, HOWEVER, that, with respect to Incentive Stock Options, a leave of
absence shall constitute a Termination of Employment if, and to the extent that,
such leave of absence interrupts employment for the purposes of
Section 422(a)(2) of the Code and the then applicable Regulations under said
Section.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 SHARES SUBJECT TO PLAN
The shares of stock subject to Options shall be shares of the
Company's $.01 par value Common Stock. The aggregate number of such shares
which may be issued upon exercise of Options and Stock Appreciation Rights or as
Restricted Stock or Stock Awards or at the end of the term of Restricted
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Stock Rights shall not exceed the sum of (i) the 1,250,000 shares originally
authorized and reserved for issuance under the Plan; plus (ii) annual amounts
equal to 1.5% (one and one-half percent) of the total issued and outstanding
Common Stock as of the last day of fiscal years 1991, 1992 and 1993; plus
(iii) annual amounts equal to 3% (three percent) of the total issued and
outstanding Common Stock as of the last day of fiscal year 1994 and each full or
partial fiscal year thereafter that the Plan is in effect. Any unused portion
of the respective foregoing percentage limits in any fiscal year, together with
any shares which remain available under clause (i) or become available under
Sections 2.2, 2.3, 2.4, or 2.5 hereof, shall be carried forward and available
for grant in succeeding fiscal years. Notwithstanding the foregoing, the
maximum number of shares of stock which may be issued upon exercise of Incentive
Stock Options under the Plan shall not exceed the 1,250,000 shares originally
authorized and reserved for issuance under the Plan.
SECTION 2.2 UNEXERCISED OPTIONS
If any Option expires or is cancelled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned or issued upon exercise of Stock Appreciation Rights or as Restricted
Stock or Stock Awards or issued at the end of the term of Restricted Stock
Rights hereunder, subject to the limitations of Section 2.l.
SECTION 2.3 EXERCISED STOCK APPRECIATION RIGHTS
To the extent that a Stock Appreciation Right shall have been
exercised, the number of shares subject to any related Option, or portion
thereof, may again be optioned hereunder, subject to the limitations of Section
2.1.
SECTION 2.4 FORFEITED RESTRICTED STOCK
Any shares of Restricted Stock forfeited to the Company pursuant to
Restrictions may again be optioned or issued upon exercise of Stock Appreciation
Rights or as Restricted Stock or Stock Awards or issued at the end of the term
of Restricted Stock Rights hereunder, subject to the limitations of Section 2.1.
SECTION 2.5 FORFEITED RESTRICTED STOCK RIGHTS
Any shares of the Company's capital stock relating to Restricted Stock
Rights forfeited to the Company pursuant to Restrictions may again be optioned
or issued upon exercise Stock Appreciation Rights or as Restricted Stock or
Stock Awards or issued at the end of the term of Restricted Stock Rights
hereunder, subject to the limitations of Section 2.1.
SECTION 2.6 CHANGES IN COMPANY'S SHARES
In the event that the outstanding shares of Common Stock of the
Company are hereafter changed into or exchanged for a different number or kind
of shares or other securities of the Company, or of another corporation, by
reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, stock dividend or combination of shares,
appropriate adjustments shall be made by the Committee in the number and kind of
shares to which Options, Stock Appreciation Rights, Restricted Stock, Stock
Awards and Restricted Stock Rights thereafter to be granted or issued under this
Plan shall relate, including adjustments of the limitations in Section 2.1 on
the maximum number and kind of shares which may be issued on exercise of
Options, as Restricted Stock or Stock Awards or at the end of the term of
Restricted Stock Rights.
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ARTICLE III
GRANT OF OPTIONS
SECTION 3.1 ELIGIBILITY
Any executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary and any Director
of the Company shall be eligible to be granted Options, except as provided in
Section 3.2 and 11.1(a).
SECTION 3.2 QUALIFICATION OF INCENTIVE STOCK OPTIONS
No Incentive Stock Option shall be granted unless such Option, when
granted, qualifies as an "incentive stock option" under Section 422 of the Code.
SECTION 3.3 GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Employees are executive or other key
Employees and select from among the executive or other key Employees
or Directors (including those to whom Options, Stock Appreciation
Rights and/or Restricted Stock Rights have been previously granted
and/or Restricted Stock, Stock Awards and/or Performance Units have
previously been issued under the Plan) such of them as in its opinion
should be granted Options; and
(ii) Determine the number of shares to be subject to such Options
granted to such selected executive or other key Employees or
Directors, and determine whether such Options are to be Incentive
Stock Options or Non-Qualified Options; and
(iii) Determine the terms and conditions of such Options,
consistent with the Plan.
(b) Upon the selection of an executive or other key Employee or
Director to be granted an Option, the Committee shall instruct the Secretary to
issue such Option and may impose such conditions on the grant of such Option as
it deems appropriate. Without limiting the generality of the preceding
sentence, the Committee may, in its discretion and on such terms as it deems
appropriate, require as a condition on the grant of an Option that the Optionee
surrender for cancellation some or all of the unexercised Options which have
been previously granted to him. An Option the grant of which is conditioned
upon such surrender may have an Option price lower (or higher) than the Option
price of the surrendered Option, may cover the same (or a lesser or greater)
number of shares as the surrendered Option, may contain such other terms as the
Committee deems appropriate and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, Option period or any other
term or condition of the surrendered Option.
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ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option Agreement,
which shall be executed by the Optionee and an authorized Officer of the Company
and which shall contain such terms and conditions as the Committee shall
determine, consistent with the Plan. Stock Option Agreements evidencing
Incentive Stock Options shall contain such terms and conditions as may be
necessary to qualify such Options as "incentive stock options" under Section 422
of the Code.
SECTION 4.2 OPTION PRICE
The price of the shares subject to each Option shall be set by the
Committee; PROVIDED, HOWEVER, that (i) the price per share for Non-Qualified
Options shall be not less than 100% of the Fair Market Value of such shares
determined as of the date such Option is granted; (ii) the price per share for
Incentive Stock Options other than those described in clause (iii) shall be not
less than 100% of the Fair Market Value of such shares determined as of the date
such Option is granted; and (iii) in the case of an Incentive Stock Option, the
price per share shall not be less than 110% of the Fair Market Value of such
shares determined as of the date such Option is granted in the case of an
individual then owning (within the meaning of Section 424(d) of the Code) more
than 10% of the total combined voting power of all classes of stock of the
Company, any Subsidiary or any Parent Corporation.
SECTION 4.3 COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide, no Option may be
exercised in whole or in part during the first year after such Option is
granted.
(b) Subject to the provisions of Sections 4.3(a), 4.3(c) and 12.3,
Options shall become exercisable at such times and in such installments (which
may be cumulative) as the Committee shall provide in the terms of each Stock
Option Agreement; PROVIDED, HOWEVER, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Sections 4.3(c) and 12.3, accelerate
the time at which such Option or any portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at Termination of
Employment shall thereafter become exercisable.
(d) To the extent that the aggregate fair market value of stock with
respect to which "incentive stock options" (within the meaning of Section 422 of
the Code, but without regard to Section 422(d) of the Code) are exercisable for
the first time by an Optionee during any calendar year (under the Plan and all
other incentive stock option plans of the Company, any Subsidiary and any Parent
Corporation) exceeds $100,000, such options shall be treated as Non-Qualified
Options. The rule set forth in the preceding sentence shall be applied by
taking options into account in the order in which they were granted. For
purposes of this Section 4.3(d), the fair market value of stock shall be
determined as of the time the option with respect to such stock is granted.
SECTION 4.4 EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after the
first to occur of the following events:
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(i) The expiration of ten years from the date the Option was
granted; or
(ii) In the case of an Incentive Stock Option granted to an
Optionee owning (within the meaning of Section 424(d) of the Code), at
the time the Incentive Stock Option was granted, more than 10% of the
total combined voting power of all classes of stock of the Company,
any Subsidiary or any Parent Corporation, the expiration of five years
from the date the Incentive Stock Option was granted; or
(iii) Except in the case of any Optionee who is disabled (within
the meaning of Section 22(e)(3) of the Code), the expiration of three
months from the date of the Optionee's Termination of Employment for
any reason other than such Optionee's death unless the Optionee dies
within said three-month period; or
(iv) In the case of an Optionee who is disabled (within the
meaning of Section 22(e)(3) of the Code), the expiration of one year
from the date of the Optionee's Termination of Employment for any
reason other than such Optionee's death unless the Optionee dies
within said one-year period; or
(v) The expiration of one year from the date of the Optionee's
death.
(b) Subject to the provisions of Section 4.4(a), the Committee shall
provide, in the terms of each Stock Option Agreement, when such Option expires
and becomes unexercisable. Notwithstanding the foregoing, the Committee may
provide in the terms of Stock Option Agreements that Options expire immediately
upon a Termination of Employment for any reason.
SECTION 4.5 CONSIDERATION
In consideration of the granting of the Option, the Optionee shall
agree, in the written Stock Option Agreement, to remain in the employ of the
Company, a Parent Corporation or a Subsidiary for a period of at least one year
after the Option is granted, or in the case of an Optionee who is a non-employee
Director, to remain a Director for such period. Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of the Company, any Parent Corporation or any Subsidiary
or to remain a Director or shall interfere with or restrict in any way the
rights of the Company, its Parent Corporations and its Subsidiaries, which are
hereby expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without cause.
SECTION 4.6 ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding shares of the stock subject to
Options are changed into or exchanged for a different number or kind of shares
of the Company or other securities of the Company by reason of merger,
consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, the Committee shall make an appropriate and
equitable adjustment in the number and kind of shares as to which all
outstanding Options, or portions thereof then unexercised, shall be exercisable,
to the end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in an
outstanding Option shall be made without change in the total price applicable to
the Option or the unexercised portion of the Option (except for any change in
the aggregate price resulting from rounding-off of share quantities or prices)
and with any necessary corresponding adjustment in Option price per share;
PROVIDED, HOWEVER, that, in the case of Incentive Stock Options, each such
adjustment shall be made in such manner as not to constitute a "modification"
within the meaning of Section 424(h)(3) of the Code. Any such adjustment made
by the Committee shall be final and binding upon all Optionees, the Company and
all other interested persons.
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SECTION 4.7 MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION
(a) The Committee shall provide by the terms of each Option that,
upon or in connection with the merger or consolidation of the Company with or
into another corporation, the acquisition by another corporation person or group
of all or substantially all of the Company's assets or 40% or more of the
Company's then outstanding voting stock or the liquidation or dissolution of the
Company:
(i) If so provided in the relevant agreement relating to a
merger, consolidation, acquisition of assets, liquidation or
dissolution, such Option shall be either assumed or replaced by a
substitute option, as applicable, issued by the successor or Parent
Corporation resulting from such transaction, without any further
action on the part of the Committee or the Optionee.
(ii) If no provision is made as set forth in (i), or in the event
of an acquisition of 40% or more of the Company's then outstanding
voting stock to which subsection (iii) is inapplicable, such Option
shall become fully exercisable from and after the date which is thirty
days prior to the effective date of the transaction and until the
normal expiration thereof.
(iii) In the event of an acquisition of 40% or more the Company's
then outstanding voting stock (other than pursuant to a merger
resulting in the ownership of all of the Company's outstanding Common
Stock by another corporation), if as a result of the transaction the
Company's Common Stock will cease to be traded on a national stock
exchange, listed as a National Market Issue on the National Market
System or quoted on the NASDAQ quotation system, each Option which has
not been exercised prior to the consummation of the transaction shall
be converted automatically into the right to receive, within thirty
days of such consummation, an amount in cash equal to the difference
between the aggregate exercise price for all shares subject to the
Option (whether or not then subject to exercise) and the Fair Market
Value of such shares on the date which is the last trading date
preceding the consummation of such transaction.
(iv) The foregoing provisions shall have no application to a
merger in which (A) the Company is the surviving corporation, (B) no
person or group acquires 40% or more of the Company's outstanding
voting stock and (C) the shares of the Company's Common Stock
outstanding prior to the merger remain outstanding thereafter.
(b) The Committee may make such determinations and adopt such rules
and conditions as it, in its absolute discretion, deems appropriate in
connection with (i) any acceleration of exercisability pursuant to subsection
(a)(ii), including, but not by way of limitation, provisions to ensure that any
such acceleration shall be conditioned upon the consummation of the contemplated
corporate transaction, and (ii) determinations regarding whether provisions for
assumption or substitution have been made as defined in subsection (a)(i).
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 PERSON ELIGIBLE TO EXERCISE
During the lifetime of Optionee, only he may exercise an Option
granted to him, or any portion thereof. After the death of the Optionee, any
exercisable portion of an Option may, prior to the time
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when such portion becomes unexercisable under Section 4.4 or Section 4.7, be
exercised by his personal representative or by any person empowered to do so
under the deceased Optionee's will or under the then applicable laws of descent
and distribution.
SECTION 5.2 PARTIAL EXERCISE; NO FRACTIONAL SHARES
The Committee may, by the terms of a Stock Option Agreement, require
any partial exercise to be with respect to a specified minimum number of shares.
The Company shall not be required to issue fractional shares upon the exercise
of Options.
SECTION 5.3 MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under Section 4.4 or Section 4.7:
(a) Notice in writing by the Optionee or other person then entitled
to exercise such Option or portion, stating that such Option or portion is
exercised, such notice complying with all applicable rules established by the
Committee; and
(b) Full payment:
(i) By delivery of cash or a check for the shares with respect
to which such Option or portion is thereby exercised; or
(ii) To the extent provided by the terms of the Option or
otherwise with the consent of the Committee, by delivery to the
Company of shares of the Company's Common Stock owned by the Optionee,
duly endorsed for transfer to the Company by the Optionee or other
person then entitled to exercise the Option or portion thereof, with
Fair Market Value determined as of the date of delivery equal to the
aggregate Option price of the shares with respect to such Option or
portion is thereby exercised; or
(iii) To the extent provided by the terms of the Option or
otherwise with the consent of the Committee, by retention by the
Company of shares of the Company's Common Stock to be issued with a
Fair Market Value determined as of the date of issuance equal to the
aggregate Option price of the shares with respect to which such Option
or portion is thereby exercised; or
(iv) By means of any combination of the consideration provided in
the foregoing subsections (i), (ii) or (iii); and
(c) On or prior to the date the same is required to be withheld:
(i) Full payment (in cash or by check) of any amount that must
be withheld by the Company, any Parent Corporation or any Subsidiary
for federal, state and/or local tax purposes in connection with the
exercise of the Option; or
(ii) To the extent provided by the terms of the Option or
otherwise with the consent of the Committee, full payment by delivery
to the Company of shares of the Company's Common Stock owned by the
Optionee, duly endorsed for transfer to the Company by the Optionee or
other person then entitled to exercise the Option or portion thereof,
with a Fair Market Value determined as of the date of delivery equal
to the amount
9
<PAGE>
that must be withheld by the Company, any Parent Corporation or any
Subsidiary for federal, state and/or local tax purposes in connection
with the exercise of the Option; or
(iii) To the extent provided by the terms of the Option or
otherwise with the consent of the Committee, full payment by retention
by the Company of shares of the Company's Common Stock to be issued
with a Fair Market Value determined as of the date of issuance equal
to the amount that must be withheld by the Company, any Parent
Corporation or any Subsidiary for federal, state and/or local tax
purposes in connection with the exercise of the Option; or
(iv) Any combination of payments provided for in the foregoing
subsections (i), (ii) or (iii);
PROVIDED, HOWEVER, that if the Optionee is an Officer or Director of the Company
required to file reporting forms pursuant to Section 16 of the Exchange Act,
then if and to the extent required by Rule 16b-3 thereunder, an election to make
full payment by the means described in Section 5(b)(iii) or Section 5(c)(iii)
shall be subject to the discretion of, and may be rejected by, the Committee,
and shall be made more than six months after the grant of the Option and either
(x) made and the Option exercised only during the period beginning on the third
business day following the date of release of the Company's quarterly or annual
summary statements of sales and earnings and ending on the twelfth business day
following such date or (y) irrevocably made more than six months prior to the
exercise of the Option in the case of Section 5(b)(iii) and more than six months
prior to the date the amount of tax to be withheld is determined in the case of
Section and 5(c)(iii); and
(d) Such representations and documents as the Committee, in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on shares certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The shares of stock issuable and deliverable upon the exercise of any
Option, or any portion thereof, may be either previously authorized but unissued
shares or issued shares which have been reacquired by the Company. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock exchanges on
which such class of stock is then listed; and
(b) The completion of any registration or other qualification of such
shares under any state or federal law or under the rulings or regulations of the
Securities and Exchange Commission or any other governmental regulatory body,
which the Committee shall, in its absolute discretion, deem necessary or
advisable; and
10
<PAGE>
(c) The obtaining of any approval or other clearance from any state
or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.5 RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the rights or
privileges of, shareholders of the Company in respect of any shares purchasable
upon the exercise of any part of an Option unless and until certificates
representing such shares have been issued by the Company to such holders.
SECTION 5.6 TRANSFER RESTRICTIONS
The Committee, in its absolute discretion, may impose such
restrictions on the transferability of the shares purchasable upon the exercise
of an Option as it deems appropriate. Any such restriction shall be set forth
in the respective Stock Option Agreement and may be referred to on the
certificates evidencing such shares. The Committee may require the Employee to
give the Company prompt notice of any disposition of shares of stock, acquired
by exercise of an Incentive Stock Option, within two years from the date of
granting such Option or one year after the transfer of such shares to such
Employee. The Committee may direct that the certificates evidencing shares
acquired by exercise of an Option refer to such requirement to give prompt
notice of disposition.
ARTICLE VI
STOCK APPRECIATION RIGHTS
SECTION 6.1 ELIGIBILITY
Any executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary and any Director
of the Company (except as provided in Section 11.1) shall be eligible to be
issued Stock Appreciation Rights.
SECTION 6.2 GRANTING OF STOCK APPRECIATION RIGHTS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Employees are executive or key Employees and
select from among the executive or key Employees or Directors
(including those to whom Options, Stock Appreciation Rights and/or
Restricted Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been previously
issued) such of them as in its opinion should be granted Stock
Appreciation Rights; and
(ii) Determine the amount of Stock Appreciation Rights to be
granted to such selected executive or key Employees or Directors; and
(iii) Determine the terms and conditions applicable to such Stock
Appreciation Rights, consistent with the Plan.
11
<PAGE>
(b) Stock Appreciation Rights may be granted (i) in connection and
simultaneously with the grant of Options, (ii) with respect to previously
granted Options or (iii) not in connection with Options.
SECTION 6.3 TERMS AND CONDITIONS
A Stock Appreciation Right shall be subject to such terms and
conditions not inconsistent with the Plan as the Committee shall impose,
including the following:
(a) A Stock Appreciation Right granted in connection with a
particular Option shall be exercisable only to the extent the related Option is
exercisable.
(b) A Stock Appreciation Right granted in connection with a
particular Option shall be granted to the Optionee to the maximum extent of 100%
of the number of shares subject to the Option.
(c) A Stock Appreciation Right granted in connection with a
particular Option shall entitle the Optionee (or other person entitled to
exercise the Option pursuant to Section 5.1) to surrender unexercised a portion
of the Option to which the Stock Appreciation Right relates to the Company and
to receive from the Company in exchange therefor an amount, payable in cash or,
in the discretion of the Committee, shares of the Company's Common Stock,
determined by multiplying the lesser of (i) the difference obtained by
subtracting the Option exercise price per share of the Company's Common Stock
subject to the related Option from the Fair Market Value of a share of the
Company's Common Stock determined as of the date of exercise of the Stock
Appreciation Right or (ii) two times the Option exercise price per share of the
Company's Common Stock subject to the related Option, by the number of shares of
stock subject to the related Option with respect to which the Stock Appreciation
Right shall have been exercised.
(d) A Stock Appreciation Right not granted in connection with a
simultaneously or previously granted Option shall entitle the Participant to
receive from the Company an amount, payable in cash or, in the discretion of the
Committee, shares of the Company's Common Stock, measured by reference to the
increase, if any, in the Fair Market Value of the Company's Common Stock
determined over the period from the date the Stock Appreciation Right was
granted through and including the date the Stock Appreciation Right is
exercised.
SECTION 6.4 EXERCISE OF STOCK APPRECIATION RIGHTS
(a) No Stock Appreciation Right granted in connection with a
particular Option shall be exercisable during the first six months after grant.
(b) A Stock Appreciation Right may only be exercised during the
period beginning on the third business day following the date of the release of
the Company's quarterly or annual summary statements of sales and earnings and
ending on the twelfth business day following such date.
ARTICLE VII
ISSUANCE OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
SECTION 7.1 ELIGIBILITY
Any executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary and any Director
of the Company (except as provided in Section 11.1) shall be eligible to be
issued Restricted Stock and Restricted Stock Rights.
12
<PAGE>
SECTION 7.2 ISSUANCE OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Employees are executive or key Employees and
select from among the executive and key Employees or Directors
(including those to whom Options, Stock Appreciation Rights and/or
Restricted Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been previously
issued) such of them as in its opinion should be issued Restricted
Stock and/or granted Restricted Stock Rights; and
(ii) Determine the number of shares of Restricted Stock to be
issued and the amount of Restricted Stock Rights to be granted to such
selected executive or key Employees or Directors; and
(iii) Determine the terms, conditions and Restrictions applicable
to such Restricted Stock and Restricted Stock Rights, consistent with
the Plan.
(b) Shares Of the Company's capital stock issued as Restricted Stock
may be either previously authorized but unissued shares or issued shares which
have been acquired by the Company. The Committee shall establish the price to
be paid by a Restricted Stockholder for the issuance of Restricted Stock, which
price shall not be less than the minimum consideration required by applicable
law.
(c) Shares of the Company's capital stock to be issued at the end of
the term of a Restricted Stock Right may be either previously authorized but
unissued shares or issued shares which have been acquired by the Company. The
Committee shall establish the consideration to be furnished by the Participant
in exchange for the grant of Restricted Stock Rights and the issuance of shares
of the Company's capital stock pursuant thereto, which consideration may include
services to be rendered to the Company prior to the issuance of such shares.
(d) Upon the selection of an executive or key Employee or other
eligible person to be issued Restricted Stock or granted Restricted Stock
Rights, the Committee shall instruct the Secretary to issue such Restricted
Stock or grant such Restricted Stock Rights and may impose such conditions on
the issuance of such Restricted Stock or grant of such Restricted Stock Rights
as it deems appropriate.
ARTICLE VIII
TERMS OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
SECTION 8.1 RESTRICTED STOCK AGREEMENT
Restricted Stock shall be issued only pursuant to a written Restricted
Stock Agreement, which shall be executed by the Restricted Stockholder and an
authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with the Plan.
SECTION 8.2 RESTRICTED STOCK RIGHT AGREEMENT
Restricted Stock Rights shall be issued only pursuant to a written
Restricted Stock Right Agreement, which shall be executed by the Participant and
an authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with the Plan.
13
<PAGE>
SECTION 8.3 CONSIDERATION
As partial consideration for the issuance of Restricted Stock or the
grant of Restricted Stock Rights, the Participant shall agree, in the written
Restricted Stock Agreement or Restricted Stock Right Agreement, to remain in the
employ of the Company, a Parent Corporation or a Subsidiary for a period of at
least one year after the Restricted Stock is issued or the Restricted Stock
Rights are granted, or in the case of a Participant who is a non-employee
Director, to remain a Director for such period. Nothing in this Plan or in any
Restricted Stock Agreement or Restricted Stock Right Agreement hereunder shall
confer upon any Participant any right to continue in the employ of the Company,
any Parent Corporation or any Subsidiary or to remain a Director or shall
interfere with or restrict in any way the rights of the Company, its Parent
Corporations and its Subsidiaries, which are hereby expressly reserved, to
terminate or discharge any Participant at any time for any reason whatsoever,
with or without cause.
SECTION 8.4 RIGHTS AS SHAREHOLDERS
(a) Upon delivery of the shares of Restricted Stock to the escrow
holder pursuant to Section 8.8, the Restricted Stockholder shall have all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Restricted Stock Agreement, including the right to vote the shares and to
receive all dividends or other distributions paid or made with respect to the
shares.
(b) The holder of a Restricted Stock Right shall not be, nor have any
of the rights or privileges of, a shareholder of the Company in respect of any
shares of the Company's capital stock issuable upon the end of the term of a
Restricted Stock Right unless and until a certificate representing such shares
Has been issued by the Company to such holder.
SECTION 8.5 RESTRICTIONS
All shares of Restricted Stock issued (including any shares received
by holders thereof as a result of stock dividends, stock splits or any other
forms of recapitalization) and all Restricted Stock Rights granted under this
Plan shall be subject to such Restrictions as the Committee shall provide in the
terms of each individual Restricted Stock Agreement or Restricted Stock Right
Agreement; PROVIDED, HOWEVER, that by a resolution adopted after the Restricted
Stock is issued or the Restricted Stock Rights are granted, the Committee may,
on such terms and conditions as it may determine to be appropriate and subject
to Section 12.3, remove any or all of the Restrictions imposed by the terms of
the Restricted Stock Agreement or Restricted Stock Right Agreement. All
Restrictions shall expire within ten years of the date of issuance. Restricted
Stock may not be sold or encumbered until all Restrictions are terminated or
expire.
SECTION 8.6 FORFEITURE
The Committee shall provide in the terms of each individual Restricted
Stock Agreement or Restricted Stock Right Agreement that the Restricted Stock or
Restricted Stock Rights then subject to Restrictions be forfeited by the
Participant back to the Company immediately upon a Termination of Employment for
any reason during the Restricted Period; PROVIDED, HOWEVER, that provision may
be made that no such forfeiture shall occur in the event of a Termination of
Employment because of Employee's or Director's normal retirement, death, total
disability or early retirement with the consent of the Committee.
SECTION 8.7 MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION
The Committee may provide, in the terms of the individual Restricted
Stock Agreement or Restricted Stock Right Agreement, that upon the merger or
consolidation of the Company with or into another corporation, the acquisition
by another corporation or person of all or substantially all of the
14
<PAGE>
Company's assets or 40% or more of the Company's then outstanding voting stock
or the liquidation of the Company, the Restrictions relating to some or all
shares of Restricted Stock or Restricted Stock Rights then outstanding shall
immediately expire and/or that some or all of such shares or Restricted Stock
Rights shall cease to be subject to forfeiture under Section 8.6.
SECTION 8.8 ESCROW
The Secretary or such other escrow holder as the Committee may appoint
shall retain physical custody of the certificates representing Restricted Stock
until all of the restrictions imposed under the Restricted Stock Agreement
expire or shall have been removed; PROVIDED, HOWEVER, that in no event shall any
Restricted Stockholder retain physical custody of any certificates representing
Restricted Stock issued to him.
SECTION 8.9 LEGEND
In order to enforce the restrictions imposed upon shares of Restricted
Stock hereunder, the Committee shall cause a legend or legends to be placed on
certificates representing all shares of Restricted Stock that are still subject
to Restrictions under Restricted Stock Agreements, which legend or legends shall
make appropriate reference to the conditions imposed thereby.
ARTICLE IX
ISSUANCE OF STOCK AWARDS
SECTION 9.1 ELIGIBILITY
Any executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary and any Director
of the Company (except as provided in Section 11.1) shall be eligible to be
issued Stock Awards.
SECTION 9.2 ISSUANCE OF STOCK AWARDS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Determine which Employees are executive or key Employees and
select from among the executive or key Employees or Directors
(including those to whom Options, Stock Appreciation Rights and/or
Restricted Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been previously
issued) such of them as in its opinion should be issued Stock Awards;
and
(ii) Determine the number of shares of Common Stock to be issued
to such selected executive or key Employees or Directors.
(b) Shares of the Company's capital stock issued as Stock Awards may
be either previously authorized but unissued shares or issued shares which have
been acquired by the Company.
(c) Stock Awards shall be issued for legal consideration (which may
include previous or future services, as permitted by law) but no other payment.
Capital stock issued pursuant to a Stock Award shall not be subject to
Restrictions or forfeiture by the terms of the Plan.
15
<PAGE>
ARTICLE X
ISSUANCE OF PERFORMANCE UNITS
SECTION 10.1 ELIGIBILITY
Any executive or other key Employee of the Company or of any
corporation which is then a Parent Corporation or a Subsidiary and any Director
of the Company (except as provided in Section 11.1) shall be eligible to be
issued Performance Units.
SECTION 10.2 ISSUANCE OF PERFORMANCE UNITS
The Committee shall from time to time, in its absolute discretion:
(i) Determine which Employees are executive or key Employees and
select from among the executive or key Employees or Directors
(including those to whom Options, Stock Appreciation Rights and/or
Restricted Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been previously
issued) such of them as in its opinion should be issued Performance
Units; and
(ii) Determine the terms and conditions applicable to such
Performance Units, consistent with the Plan.
SECTION 10.3 TERMS OF PERFORMANCE UNITS
(a) At the time that Performance Units are issued, the Committee
shall designate certain goals for the financial and other business performance
of the Company, its Parent Corporations and its Subsidiaries and the Performance
Period over which such goals are to be achieved. Such designated goals must be
achieved in order for a Participant to receive the full value of the Performance
Units following the end of the Performance Period. To the extent earned upon
the achievement of such designated goals during the Performance Period, all
Performance Units shall be payable in cash as soon as practicable following the
end of the Performance Period.
(b) The Committee shall determine the terms and conditions of the
Performance Units, consistent with the Plan. The Committee shall provide by the
terms of each individual Performance Unit that the Performance Unit be forfeited
by the Participant back to the Company immediately upon a Termination of
Employment for any reason during the Performance Period; PROVIDED, HOWEVER, that
provision may be made that no such forfeiture shall occur in the event of a
Termination of Employment because of the Participant's normal retirement, death,
total disability or early retirement with the consent of the Committee.
ARTICLE XI
ADMINISTRATION
SECTION 11.1 COMMITTEE
(a) The Committee shall consist of at least three Directors,
appointed by and holding office during the pleasure of the Board, none of whom
shall be Officers. Notwithstanding any other provision in the Plan, no Options
or Stock Appreciation Rights may be granted and no Restricted Stock, Stock
Awards or Performance Units may be issued to any member of the Committee during
the term of his membership on the Committee. No person shall be eligible to
serve on the Committee unless he is then a
16
<PAGE>
"disinterested person" within the meaning of Rule 16b-3 under the Exchange Act,
if and as such Rule is then in effect.
(b) Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee shall be
filled by the Board.
(c) The Board or the Committee may from time to time appoint one or
more Sub-Committees comprised of one or more Officers, Directors or others,
which Sub-Committee shall have the powers of the Committee described in
Articles III and IV of the Plan solely with respect to the grant of Options to
Employees who are not then Directors or Officers of the Company within the
meaning of Rule 16a-1(f) promulgated under the Exchange Act, if and as such Rule
is then in effect except for those powers described in Sections 3.3(b), 4.3, 4.6
and 4.7. Each such sub-Committee may be subject to any such additional
restrictions or limitations as the Board or the Committee may impose at any
time. Each Sub-Committee so appointed may be disbanded by the Board or the
Committee at any time, provided that no such termination shall affect the
validity of any Option theretofore approved by any such Sub-Committee.
SECTION 11.2 DUTIES AND POWER OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of the Plan in accordance with its provisions. The Committee
shall have the power to interpret the Plan, Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Rights, Stock Awards and Performance Units
and to adopt such rules for the administration, interpretation and application
of the Plan as are consistent therewith and to interpret, amend or revoke any
such rules. Any such interpretations and rules in regard to Incentive Stock
Options shall be consistent with the basic purpose of the Plan to grant
"incentive stock options" within the meaning of Section 422 of the Code. In its
absolute discretion, the Board may at any time and from time to time exercise
any and all rights and duties of the Committee under the Plan.
SECTION 11.3 MAJORITY RULE
The Committee shall act by a majority of its members in office. The
Committee may act either by vote at a meeting or by a memorandum or other
written instrument signed by a majority of the Committee.
SECTION 11.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for their
services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of the Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to the Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
17
<PAGE>
ARTICLE XII
OTHER PROVISIONS
SECTION 12.1 RIGHTS NOT TRANSFERABLE
No Option, Stock Appreciation Right, Restricted Stock, Restricted
Stock Right or Performance Unit or interest or right therein or part thereof
shall be liable for the debts, contracts or engagements of the Participant or
successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and any attempted disposition thereof shall
be null and void and of no effect; PROVIDED, HOWEVER, that nothing in this
Section 12.1 shall prevent transfers by will or by the applicable laws of the
descent and distribution. The provisions of this Section 12.1 shall not apply
to the capital stock of the Company issued pursuant to a Stock Award under the
Plan.
SECTION 12.2 AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Plan may be wholly or partially amended or otherwise modified,
suspended or terminated at any time or from time to time by the Board or the
Committee. However, without approval of the Company's shareholders given within
12 months before or after the action by the Board or the Committee, no action of
the Board or the Committee may, except as provided in Section 2.4, amend or
modify the Plan to:
(a) increase any limit imposed in Section 2.1 on the maximum number
of shares which may be issued on exercise of Options or Stock Appreciation
Rights, as Restricted Stock or Stock Awards or at the end of the term of
Restricted Stock Rights;
(b) modify the eligibility requirements of Section 3.1, Section 6.1,
Section 7.1, Section 9.1 or Section 10.1;
(c) reduce the minimum Option price requirements of Section 4.2(a);
or
(d) extend the limit imposed in this Section 12.2 on the period
during which Options, Stock Appreciation Rights or Restricted Stock Rights may
be granted or Restricted Stock, Stock Awards or Performance Units may be issued.
Neither the amendment, suspension nor termination of the Plan shall, without the
consent of the holder of the Option, Stock Appreciation Right, Restricted Stock,
Stock Award, Restricted Stock Right or Performance Unit, alter or impair any
rights or obligations under any Option, Stock Appreciation Right or Restricted
Stock Right theretofore granted or Restricted Stock, Stock Award or Performance
Unit theretofore issued. No Option, Stock Appreciation Right or Restricted
Stock Right may be granted and no Restricted Stock, Stock Award or Performance
Unit may be issued during any period of suspension nor after termination of the
Plan, and in no event may any Option, Stock Appreciation Right or Restricted
Stock Right be granted or any Restricted Stock, Stock Award or Performance Unit
be issued under this Plan after the first to occur of the following events:
(i) The expiration of ten years from the date the Plan is
adopted by the Board; or
18
<PAGE>
(ii) The expiration of ten years from the date the Plan is approved by
the Company's shareholders under Section 12.3.
SECTION 12.3 APPROVAL OF PLAN BY SHAREHOLDERS
This Plan will be submitted for the approval of the Company's
shareholders within 12 months after the date of the Board's initial adoption of
the Plan. Options, Stock Appreciation Rights and Restricted Stock Rights may be
granted and Restricted Stock and Performance Units (but not Stock Awards) may be
issued prior to such shareholder approval; PROVIDED, HOWEVER, that such Options
and Stock Appreciation Rights shall not be exercisable, and shares of the
Company's capital stock shall not be issuable under Restricted Stock Rights,
prior to the time when the Plan is approved by the shareholders; PROVIDED,
FURTHER, that if such approval has not been obtained at the end of said 12-month
period, all Options, Stock Appreciation Rights and Restricted Stock Rights
previously granted and all Restricted Stock and Performance Units previously
issued under the Plan shall thereupon be cancelled and become null and void.
SECTION 12.4 EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other compensation or
incentive plans in effect for the Company, any Parent Corporation or any
Subsidiary. Nothing in this Plan shall be construed to limit the right of the
Company, any Parent Corporation or any Subsidiary (a) to establish any other
forms of incentives or compensation for employees of the Company, and Parent
Corporation or any Subsidiary or (b) to grant or assume options, stock
appreciation rights or restricted stock rights or to issue or award restricted
or unrestricted stock or performance units otherwise than under this Plan in
connection with any proper corporate purpose, including, but not by way of
limitation, the grant or assumption of options, stock appreciation rights or
restricted stock rights or the issuance or award of restricted or unrestricted
stock or performance units in connection with the acquisition by purchase,
lease, merger, consolidation or otherwise, of the business, stock or assets of
any corporation, firm or association.
19
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0
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