<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: March 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from
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Commission file number 1-10233
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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 CORPORATE ISSUERS:
The number of shares outstanding of Registrant's Common Stock, as of
May 8th, 1997: 25,990,744 shares.
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PART I. FINANCIAL INFORMATION
In the opinion of management, the accompanying condensed consolidated financial
statements contain all adjustments, consisting only of normal, recurring
adjustments, necessary to fairly present the financial position as of March 31,
1997 and the results of operations and cash flows for the three-month and nine-
month periods ended March 31, 1997 and 1996. 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 nine months ended
March 31, 1997 are not necessarily indicative of results which may be
experienced for the full fiscal year.
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ITEM 1
MAGNETEK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, 1997 and JUNE 30, 1996
(amounts in thousands)
ASSETS March 31 June 30
- ------ ----------- -----------
(unaudited)
Current assets:
Cash $ 5,007 $ 871
Accounts receivable 190,051 201,814
Inventories 182,793 203,265
Prepaid expenses and other 28,328 26,902
----------- -----------
Total current assets 406,179 432,852
----------- -----------
Property, plant and equipment 404,042 383,498
Less-accumulated depreciation
and amortization 226,324 207,079
----------- -----------
177,718 176,419
----------- -----------
Net assets of discontinued operations - 1,174
Goodwill 31,086 30,668
Deferred financing costs,
intangible and other assets 38,196 37,661
----------- -----------
Total Assets $ 653,179 $ 678,774
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 91,549 $ 104,273
Accrued liabilities 132,798 126,399
Current portion of long-term debt 2,935 2,895
----------- -----------
Total current liabilities 227,282 233,567
----------- -----------
Long-term debt, net of current portion 281,152 319,128
Other long-term obligations 72,146 71,633
Deferred income taxes 11,985 12,888
Commitments and contingencies
Stockholders' equity
Common stock 258 255
Other 60,356 41,303
----------- -----------
Total stockholder's equity 60,614 41,558
----------- -----------
Total Liabilities and
Stockholders' Equity $ 653,179 $ 678,774
----------- -----------
----------- -----------
See accompanying notes
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ITEM 1 (Continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 and 1996
(amounts in thousands except per share data)
(unaudited)
1997 1996
---- ----
Net sales $ 301,391 $ 301,628
Cost of sales 236,719 249,116
-------- --------
Gross profit 64,672 52,512
Selling, general and administrative 41,048 40,677
-------- --------
Income from operations 23,624 11,835
Interest expense 6,953 7,545
Other expense, net 1,077 1,198
-------- --------
Income before provision for
income taxes and extraordinary item 15,594 3,092
Income taxes 6,396 1,668
-------- --------
Income before extraordinary item 9,198 1,424
Extraordinary item (net of taxes) ( 170) -
-------- --------
Net income $ 9,028 $ 1,424
-------- --------
-------- --------
EARNINGS PER COMMON SHARE
Primary:
Income before extraordinary item $ 0.34 $ 0.06
Extraordinary item (0.01) -
-------- --------
Net income $ 0.33 $ 0.06
-------- --------
-------- --------
Fully diluted:
Income before extraordinary item $ 0.32 *
Extraordinary item (0.01)
-------- --------
Net Income $ 0.31 *
-------- --------
-------- --------
* Per share amounts on a fully diluted basis have been omitted as such
amounts are anti-dilutive in relation to primary per share amounts.
See accompanying notes
<PAGE>
ITEM 1 (Continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE NINE MONTHS ENDED
MARCH 31, 1997 and 1996
(amounts in thousands except per share data)
(unaudited)
1997 1996
-------- --------
Net sales $ 886,508 $ 856,460
Cost of sales 711,454 714,245
-------- --------
Gross profit 175,054 142,215
Selling, general and administrative 117,661 117,600
-------- --------
Income from operations 57,393 24,615
Interest expense 21,682 24,097
Other expense, net 3,211 3,589
-------- --------
Income (loss) before provision for
income taxes and extraordinary item 32,500 ( 3,071)
Income taxes 13,231 573
-------- --------
Income (loss)before extraordinary item 19,269 ( 3,644)
Extraordinary item (net of taxes) ( 170) -
-------- --------
Net income (loss) $ 19,099 $ ( 3,644)
-------- --------
-------- --------
EARNINGS (LOSS) PER COMMON SHARE
Primary:
Income (loss) before extraordinary item $ 0.74 ( 0.15)
Extraordinary item (net of taxes) (0.01) -
-------- --------
Net income (loss) $ 0.73 $ ( 0.15)
-------- --------
-------- --------
Fully diluted:
Income before extraordinary item $ 0.71 *
Extraordinary item (0.01) -
-------- --------
Net income (loss) $ 0.70 *
-------- --------
-------- --------
* Per share amounts on a fully diluted basis have been omitted as such
amounts are anti-dilutive in relation to primary per share amounts.
See accompanying notes
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(amounts in thousands)
(unaudited)
1997 1996
------- -------
Cash flows from operating activities:
Net income (loss) $ 19,099 $ ( 3,644)
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 28,987 29,645
Changes in operating assets and liabilities
of continuing operations 15,384 19,377
---------
Total adjustments 44,371 49,022
--------- ----------
Net cash provided by operating activities: 63,470 45,378
--------- ----------
Cash flows from investing activities:
Proceeds from sale of businesses and assets 2,017 75,883
Capital expenditures (25,111) (28,265)
Other investments ( 1,329) ( 17)
--------- ----------
Net cash provided by (used in) investing activities (24,423) 47,601
--------- ----------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,250 352
Repayment of bank and other long-term obligations (37,936) (88,578)
Increase in deferred financing costs ( 225) ( 276)
--------- ----------
Net cash used in financing activities (34,911) (88,502)
--------- ----------
(continued on next page)
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ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(amounts in thousands)
(unaudited)
1997 1996
---- ----
Net cash used in discontinued operations - (2,785)
-------- --------
Net increase in cash 4,136 1,692
Cash at the beginning of period 871 311
-------- --------
Cash at the end of period $ 5,007 $ 2,003
-------- --------
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 17,594 $ 22,434
Income Taxes $ 1,552 $ 4,051
(see accompanying notes)
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ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(All dollar amounts are in the 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 nine month periods ended March
31, 1997 and 1996 each contained thirteen weeks and thirty nine weeks
respectively.
REVENUE RECOGNITION - The Company's policy is to record and recognize sales
only upon shipment.
ACCOUNTING FOR STOCK OPTIONS - As permitted under statement of Financial
Accounting standards No 123 (SFAS 123), "Accounting for Stock-Based
Compensation", the Company has elected to follow Accounting Principles
Board Opinion No 25 "Accounting for Stock Issued to Employees" (APB25), and
related interpretations, in accounting for stock based awards to employees.
Under APB 25, the Company recognizes no compensation expense with respect
to such awards. The Company has adopted the disclosure-only option under
SFAS No. 123.
2. INVENTORIES
Inventories at March 31, 1997 and June 30, 1996 consist of the following:
March 31 June 30
--------- ---------
Raw materials and stock parts $ 61,459 $ 60,018
Work-in-process 40,786 46,354
Finished goods 80,548 96,893
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$ 182,793 $ 203,265
--------- ---------
--------- ---------
3. REPOSITIONING COSTS AND DISCONTINUED OPERATIONS
As a result of significant declines in sales and profit margins in both
electronic and magnetic ballast product lines during fiscal 1996, the
Company conducted a review and analysis of actions required to reduce costs
and improve future flexibility and profitability, largely focused on the
lighting products business. Upon completion of the review and approval by
the Company's Board of Directors, certain reserves were established and
charges recorded in the year ended June 30, 1996 to reflect costs
associated with repositioning operations, primarily for severance,
termination benefits and asset write-downs related to facility closures.
Reserves were also established for estimated increases in warranty
(primarily related to the electronic ballast product line) and other costs.
During the third quarter of fiscal year 1997, approximately $2.8 million of
cash outlays were made in connection with the repositioning reserves, for
which approximately $1.8 million represented warranty costs and the balance
of $1.0 million in severance and other costs. Through the first nine
months of fiscal 1997, approximately $5.8 million of net cash outlays have
been made against these reserves. Cash outlays for warranty costs through
nine months were approximately $3.0 million with severance and other
related costs representing the balance of the expenditures. The net cash
outlays through March, 1997, include approximately $.8 million of
recoveries associated with vendor settlements on certain warranty matters
included in the repositioning reserves.
In January 1994, the Company's Board of Directors adopted a formal plan of
disposal for certain businesses in connection with an overall restructuring
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program designed to focus the Company's resources on the core product lines
and reduce debt. During the year ended June 30, 1996, the Company had
completed the sale of substantially all remaining discontinued operations
with the total net proceeds aggregating over $200 million, which was used
to repay debt. The Company retains certain indemifications related to
these businesses which through the first nine months of fiscal 1997
resulted in minimal cash outlays.
4. LONG TERM DEBT AND BANK BORROWING ARRANGEMENTS
Due to the positive operating cash performance in the first quarter of
fiscal 1997, the Company's borrowing rates were reduced in the second
quarter of fiscal 1997 by fifty basis points from the rates in effect at
the end of fiscal 1996. Rates on borrowings under the Bank Loan Agreement
previously quoted as LIBOR plus two and one quarter percent or prime rate
plus one percent were reduced to LIBOR plus one and three quarters percent
or prime plus one half percent. Based upon improvements made during the
Company's second fiscal quarter, an additional twenty five basis point
reduction in the borrowing rates was effective as of January, 1997.
Continued positive performance through the Company's third fiscal quarter
has resulted in further interest rate reductions. Effective at the end of
April, 1997, borrowings under the LIBOR option will have a one and a
quarter percent adder and prime rate borrowings will have no premium added
to the base rate.
During the quarter ended March 31, 1997, the Company repurchased $5 million
of its 10 3/4 percent Senior Subordinated Notes (Notes) in open market
transactions at a price of 105 percent of face value. The premium paid
together with the remaining unamortized portion of issue costs associated
with the repurchased Notes is included as an extraordinary item (net of tax
benefits) in the accompanying Condensed Consolidated Income Statements.
Subsequent to quarter end, the Company repurchased in open market
transactions an additional $10.8 million of Notes at prices of 104.5 and
104.75 percent of face value, which will result in an extraordinary fourth
quarter charge of $.3 million (net of tax benefits) related to this
transaction.
5. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries have been named as
defendants in a suit filed by Cooper Industries, Inc. ("Cooper"),
alleging breach of the 1986 agreement by which the Company acquired
certain businesses from Cooper. At issue in the Cooper litigation is
the question of which party has responsibility in connection with
pending lawsuits (the "lawsuits") involving numerous plaintiffs who
allege injurious exposure to asbestos contained in products manufactured
by current or former subsidiaries and divisions of Cooper. Cooper
claims that the Company is obligated to defend and indemnify Cooper in
connection with the lawsuits. The Company has denied that it is
obligated under the agreement to defend and indemnify Cooper in
connection with the lawsuits, and has filed a counterclaim asserting
that Cooper is obligated under the agreement to defend and indemnify the
Company in connection with the lawsuits and that certain insurance
coverage available to Cooper should be applied to the lawsuits. The Company
intends to litigate its position vigorously.
In 1994, the Company sold the assets of one of its subsidiaries to Patriot
Sensors and Controls ("Patriot") pursuant to an agreement which provides
that the parties will share responsibility for most of the lawsuits over a
five year period, with Patriot bearing full responsibility for such
lawsuits thereafter. Patriot has stated that it may be financially unable
to perform its indemnification obligations with respect to such lawsuits.
The Company and Patriot are not currently in litigation.
<PAGE>
Due to (i) the early stage of the Cooper litigation, (ii) the potential
that Patriot may or may not perform some or all of its indemnification
obligations to the Company, and (iii) the ongoing review of strategies
and defenses available to the Company in the lawsuits, it is difficult
to predict the outcome of the foregoing legal proceedings. However,
management of the Company does not believe that the financial impact of
the foregoing legal proceedings will be material.
6. STOCKHOLDER RIGHTS PLAN
In March 1997, MagneTek adopted a "Stockholder Rights Plan," structured as
follows: ten business days after anyone becomes the beneficial owner of
at least 15% of MagneTek's outstanding common stock, every Preferred Stock
Purchase Right (a "Right") could be exercised to purchase the number of
MagneTek shares whose total market value equals twice the exercise price
of the Right (except those held by the 15% stockholder). Initially, the
exercise price of each Right is $60, so each holder exercising a Right
for $60 would be entitled to receive $120 worth of MagneTek stock.
Furthermore, if MagneTek is merged into another corporation, or at least
half of its assets or earning power are sold (in either case, after someone
has acquired at least 15% of MagneTek's stock), every Right (except those
held by the 15% stockholder) could be exercised for $60 to receive $120
worth of the acquiring corporation's stock.
<PAGE>
ITEM 2
MANAGEMENT DISCUSSION
RESULTS OF OPERATIONS:
THREE MONTHS ENDED MARCH 31, 1997 VS 1996
Net Sales and Gross Profit.
MagneTek's net sales for the third quarter of fiscal 1997 were $301.4
million, compared to the third quarter of fiscal 1996 results of $301.6
million. Results for the third quarter of fiscal 1996 include
approximately $3 million of sales for businesses which were subsequently
sold. Adjusting for businesses sold, third quarter fiscal 1997 revenues
slightly exceeded revenues for the comparable prior year period. Motors
and Controls sales increased 2.8% in the third quarter due primarily to
stronger generator and commercial fractional product revenues. Sales for
the Lighting Products segment increased 1.7% due largely to increased
electronic and compact fluorescent sales partially offset by reduced
magnetic ballast sales. Power Supplies sales declined 7.4% after adjusting
for the sales of divested businesses. Custom power supplies sales in Europe
declined as the Company consciously reduced lower margin personal computer
related revenues to improve profitability.
The Company's gross profits increased to $64.7 million (21.5% of net sales)
in the third quarter of fiscal 1997 from $52.5 million (17.4% of net sales)
in fiscal 1996. Improvement in gross profits was reflected in each of the
segment results, however, Lighting Products performance was the predominant
factor affecting over-all results. Electronic, magnetic and compact
fluorescent ballasts benefited from stable production coupled with lower
manufacturing costs. Higher generator sales volume improved gross profits
within Motors and Controls while Power Supplies benefited from a favorable
mix of product and lower cost for component parts.
Operating Expenses.
Selling, general and administrative (SG&A) expense was $41.0 million (13.6%
of net sales) in the third quarter of fiscal 1997 versus $40.7 million
(13.5% of net sales) in the third quarter of fiscal 1996. The increase in
spending reflected primarily higher expenses associated with stock price
based compensation agreements. Personnel procurement and relocation costs
were higher as the Company continued to upgrade the capabilities of it's
workforce. These costs were partially offset by lower consulting and
health and welfare costs.
Interest and Other Expense.
Interest expense for the third quarter of fiscal 1997 was $7.0 million
compared to $7.5 million in the third quarter of fiscal 1996. Debt levels
continued to be reduced as improved working capital performance and
profitability provided positive cash flows. In January of 1997, interest
rates applicable to the Company's LIBOR and prime rate borrowings were
reduced under the Bank Loan Agreement based upon achievement of specified
performance levels.
Net Income.
The Company recorded an after-tax profit of $9.0 million in the third
quarter of fiscal 1997 compared to an after-tax profit of $1.4 million in
the third quarter of fiscal 1996. Included in the third quarter fiscal
1997 results was a $.2 million extraordinary charge (net of tax benefits)
associated with the early extinguishment of debt (see Note 4).
<PAGE>
NINE MONTHS ENDED MARCH 31, 1997 VS 1996
Net Sales and Gross Profit.
Net sales for MagneTek in the first nine months of fiscal 1997 were $886.5
million, a 3.5% increase over the $856.5 million in the initial nine months
of fiscal 1996. Sales for the Lighting Products segment increased 5.2%
with the largest increase in compact fluorescent product sales. Magnetic
and electronic ballast sales also improved domestically but softened in
Europe due to weaker economic conditions. Motors and Controls revenues
increased 3.8% primarily due to improved sales for residential and
commercial horsepower motor products and generators. Drives sales were
consistent with the prior year nine-month results with stronger power
conversion (fuel cell) sales offset by lower sales of drives products.
Sales for the Power Supplies segment (adjusted for the sales of divested
businesses) increased 4.4% due to increased sales of custom power supplies
and trade magnetics over the earlier nine-month period, partially offset by
reduced sales of converters to the recreational vehicle market.
The Company's gross profits grew to $175.1 million (19.8% of net sales) for
the first nine months of fiscal 1997 as compared to $142.2 million (16.6%
of net sales) in the prior year nine-month period. Domestic Lighting
Products improved gross profit levels by approximately fifty percent.
Stable prices and production levels as well as the successful transition to
lower cost manufacturing sites were contributing factors. European
Lighting ballast gross profits improved significantly from the year earlier
period as prices stabilized. Motors and Controls continued penetration of
niche markets in residential and commercial fractional applications and
generator sales volume increases also contributed to higher gross profits.
Custom drives products incurred higher research and development costs
associated with development of new products for the elevator market
resulting in slightly reduced gross profits from the prior year period.
Gross profit levels increased for the Power Supplies segment due to a
favorable mix of product and lower costs of components.
Operating Expenses.
Selling, general and administrative (SG&A) expense was $117.8 million
(13.3% of net sales) in the first nine months of fiscal 1997 versus $117.6
million (13.7% of net sales) in the first nine months of fiscal 1996.
Lower marketing and sales costs were offset by higher general and
administrative costs. Administrative costs were adversely affected by
stock-performance based compensation agreements. Health and welfare costs
were favorable to the year earlier period.
Interest and Other Expense.
Interest expense in the first nine months of fiscal 1997 was $21.7 million
versus $24.6 million in the first nine months of fiscal 1996. Lower
interest rates on the Company's variable debt and the achievement of lower
working capital balances in the areas of accounts receivable and inventory
contributed to decreased debt levels.
Net Income.
After-tax net income in the first nine months of fiscal 1997 was $19.1
million compared to an after-tax loss of $3.6 million for the same period
in 1996. Increased profitability resulted from enhanced gross profit
performance, largely attributable to the Lighting Products segment. Lower
interest expense also contributed to the improvement, reflecting the
results of the Company's continuing focus on debt reduction. As a result
of the foregoing improvements, the Company's tax provision for the initial
nine months of fiscal 1997 was $13.2 million compared to a provision of $.6
million in fiscal 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 1997, long term borrowings (including the current portion)
were $284 million as compared to $322 million as of June 30, 1996. The
reduction of approximately $38 million is due to the Company's improved
profit performance and working capital reductions. In February, the
Company purchased $5 million in principal amount of its 10 3/4 percent
Senior Subordinated Notes, financed by lower interest borrowings under its
Bank Loan Agreement (see Note 4). In April, an additional $10.8 million of
the Senior Subordinated Notes were purchased to further reduce interest
expense. As of March 31, 1997, the Company had approximately $84 million
of borrowing capacity under its Bank Loan Agreement. Net cash outflows
through the first nine months of fiscal 1997, specific to the Company's
repositioning reserves were $5.8 million (see Note 3).
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company and certain of its subsidiaries have been named as
defendants in a suit filed by Cooper Industries, Inc. ("Cooper"),
alleging breach of the 1986 agreement by which the Company acquired
certain businesses from Cooper. At issue in the Cooper litigation is
the question of which party has responsibility in connection with
pending lawsuits (the "lawsuits") involving numerous plaintiffs who
allege injurious exposure to asbestos contained in products
manufactured by current or former subsidiaries and divisions of
Cooper. Cooper claims that the Company is obligated to defend and
indemnify Cooper in connection with the lawsuits. The Company has
denied that it is obligated under the agreement to defend and
indemnify Cooper in connection with the lawsuits, and has filed a
counterclaim asserting that Cooper is obligated under the agreement
to defend and indemnify the Company in connection with the lawsuits
and that certain insurance coverage available to Cooper should be
applied to the lawsuits. The Company intends to litigate its
position vigorously.
In 1994, the Company sold the assets of one of its subsidiaries to
Patriot Sensors and Controls ("Patriot") pursuant to an agreement
which provides that the parties will share responsibility for most of
the lawsuits over a five year period, with Patriot bearing full
responsibility for such lawsuits thereafter. Patriot has stated that
it may be financially unable to perform its indemnification
obligations with respect to such lawsuits. The Company and Patriot
are not currently in litigation.
Due to (i) the early stage of the Cooper litigation, (ii) the
potential that Patriot may or may not perform some or all of its
indemnification obligations to the Company, and (iii) the ongoing
review of strategies and defenses available to the Company in the
lawsuits, it is difficult to predict the outcome of the foregoing
legal proceedings. However, management of the Company does not
believe that the financial impact of the foregoing legal
proceedings will be material.
ITEM 2. CHANGES IN SECURITIES
In March 1997 MagneTek adopted a "Stockholder Rights Plan" as
described in the Current Report on Form 8-K referred to in Item 6
below.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 MagneTek, Inc. Directors' Deferral Investment Plan
10.2 Unsecured Promissory Note dated March 19, 1997 of Ronald N. Hoge
10.3 Non-Qualified Stock Option Agreement between MagneTek, Inc. and
Ronald N. Hoge
10.4 Non-Qualified Stock Option Agreement between MagneTek, Inc. and
Brian R. Dundon
10.5 Non-Qualified Stock Option Agreement between MagneTek, Inc. and
David P. Reiland
10.6 Non-Qualified Stock Option Agreement between MagneTek, Inc. and
John E. Steiner
<PAGE>
10.7 Non-Qualified Stock Option Agreement between MagneTek, Inc. and
Antonio Canova
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on March 14, 1997
(dated March 3, 1997) reporting the adoption of a Stockholder Rights
Plan and containing a brief description of the preferred stock
purchase rights issued thereunder.
<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: May 8, 1997
--------------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
<PAGE>
MAGNETEK, INC.
DIRECTORS' DEFERRAL INVESTMENT PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT. MagneTek, Inc., a Delaware corporation (the
"Company"), hereby establishes, effective as of January 28, 1997, a deferred
compensation plan, which shall be known as the "MagneTek, Inc. Directors'
Deferral Investment Plan" (the "Plan"), for present and future members of the
Board of Directors who are not employees or officers of the Company.
1.2 PURPOSE. The primary purpose of the Plan is to provide members of
the Board of Directors who are not employees or officers of the Company with
the opportunity to defer voluntarily a portion of their Director's Fees,
subject to the terms of the Plan. By adopting the Plan, the Company desires
to enhance its ability to attract and retain Directors of outstanding
competence.
ARTICLE 2. DEFINITIONS
Whenever used herein, the following terms shall have the meanings set
forth below, and, when the defined meaning is intended, the term is
capitalized:
(a) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(b) "Board Meeting" means any meeting of the Board of Directors or of
any committee thereof on which the Director serves and for which the Director
is entitled to receive Meeting Fees.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Company" means MagneTek, Inc., a Delaware corporation.
(e) "Director" means a member of the Board of Directors of the Company
who is neither an employee nor an officer of the Company.
(f) "Director's Fees" means a Director's Retainer Fees and Meeting
Fees, whether payable in cash or stock or any combination thereof.
(g) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(h) "Meeting Fees" means the fees paid to a Director on a per meeting
basis for attending a meeting of the Board of Directors or a committee
thereof.
(i) "Participant" means a Director who is actively participating in
the Plan.
<PAGE>
(j) "Plan" means this MagneTek, Inc. Directors' Deferral Investment
Plan, as it may be amended from time to time.
(k) "Retainer Fees" means annual retainer fees paid to a Director for
serving as a member of the Board of Directors or as a Chairman of a committee
thereof.
(l) "Stock" means common stock of the Company, par value $.01 per
share.
(m) "Value" means the fair market value of the cash or Stock a
Director receives (or, absent deferrals hereunder, is entitled to receive) as
Director's Fees.
(n) "Year" means a calendar year.
ARTICLE 3. ADMINISTRATION
3.1 AUTHORITY OF THE BOARD. The Plan shall be administered by the
full Board of Directors of the Company. Subject to the terms of the Plan,
and to the extent permissible under Section 16 of the Securities Exchange Act
of 1934, as amended, the Board may delegate ministerial duties to the Chief
Human Resources Officer or any other executive or executives of the Company.
Subject to the provisions herein, the Board shall have full power and
discretion to select Directors for participation in the Plan; to determine
the terms and conditions of each Director's participation in the Plan; to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; to amend (subject to the provisions of Article 9
herein) the terms and conditions of the Plan and any agreement entered into
under the Plan; and to make other determinations which may be necessary or
advisable for the administration of the Plan.
3.2 DECISIONS BINDING. All determinations and decisions of the Board
as to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, conclusive, and binding on
all parties and shall be given the maximum possible deference allowed by law.
3.3 ARBITRATION. Any individual making a claim for benefits under
this Plan may contest the Board's decision to deny such claim or appeal
therefrom only by submitting the matter to binding arbitration before a
single arbitrator. Any arbitration shall be held in Nashville, Tennessee,
unless otherwise agreed to by the Board. The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.
The arbitrator's authority shall be limited to the affirmance or
reversal of the Board's denial of the claim or appeal, and the arbitrator
shall have no power to alter, add to, or subtract from any provision of this
Plan. The arbitrator's decision shall be final and binding on all parties,
if warranted on the record and reasonably based on applicable law and the
provisions of this Plan. The arbitrator shall have no power to award any
punitive, exemplary, consequential, or special damages, and under no
circumstances shall an award contain any amount that in any way
2
<PAGE>
reflects any of such types of damages. Each party shall bear its own
attorney's fees and costs of arbitration. Judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.
3.4 INDEMNIFICATION. Each person who is or shall have been a member
of the Board shall be indemnified and held harmless by the Company against
and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a defendant, or
in which he or she may be a party by reason of any act or omission by such
Board member in his or her capacity as an administrator of the Plan, and
against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction
of any judgment in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Persons eligible to participate in the Plan shall be
those members of the Board of Directors who are not employees or officers of
the Company, as selected by the Board in its sole and absolute discretion.
In the event a Participant no longer meets the requirements for
participation in the Plan, such Participant shall become an inactive
Participant, retaining all the rights described under the Plan, except the
right to make any further deferrals, until such time that the Participant
again becomes an active Participant.
4.2 PARTICIPATION. Participation in the Plan shall be determined by
the Board based upon the criteria set forth in Section 4.1 herein annually or
at such other time selected by the Board.
4.3 PARTIAL YEAR ELIGIBILITY. In the event that a Participant first
becomes eligible to participate in the Plan during a Year, such Participant
shall, within thirty (30) calendar days of becoming eligible, be notified by
the Company of his or her eligibility to participate, and the Company shall
provide each such Participant with "Election to Defer Forms," which must be
completed by the Participant as provided in Sections 5.2 and 5.3 herein;
provided, however, that such Participant may only make an election to defer
with respect to that portion of his or her Director's Fees for such Year
which are to be earned after the filing of the deferral election.
3
<PAGE>
ARTICLE 5. DEFERRAL OPPORTUNITY
5.1 AMOUNT WHICH MAY BE DEFERRED. A Participant may elect to defer up
to one hundred percent (100%) of his or her Retainer Fees for any Year and up
to one hundred percent (100%) of his or her Meeting Fees for each Board
Meeting during any Year. The amount of Retainer Fees and Meeting Fees to be
deferred shall be expressed as a percentage of the Value of the fees
otherwise payable (in cash or Stock) for the Participant's service as a
Director of the Company.
5.2 DEFERRAL ELECTION FOR RETAINER FEES. Participants shall make
their elections under the Plan to defer their Retainer Fees no later than
December 20 prior to the beginning of each Year, or not later than thirty
(30) calendar days following notification of initial eligibility to
participate herein (with respect to Retainer Fees not yet earned or paid).
All elections to defer Retainer Fees shall be made on an "Election to Defer
Form," as described herein and shall be delivered by the Participant to the
Board (or its delegate) as described in Section 10.1 herein. The deferral
election with respect to Retainer Fees shall automatically remain in effect
for the Year in question (for which it shall be irrevocable) and for all
subsequent periods the Participant participates in the Plan until revoked or
changed by the Participant. The deferral may be revoked or changed with
respect future Years only by delivering a new election on an "Election to
Defer Form" no later than December 20 prior to the beginning of the Year.
Participants shall make the following elections on an "Election to
Defer Form":
(a) The amount to be deferred with respect to his or her Retainer Fees
for the Year, pursuant to the terms of Section 5.1 herein; and
(b) The form of payment to be made to the Participant at the end of
the deferral period, pursuant to the terms of Section 5.5 herein.
5.3 DEFERRAL ELECTION FOR MEETING FEES. Participants shall make their
elections to defer their Meeting Fees under the Plan no later than the date
immediately prior to the date of the Board Meeting to which such Meeting Fees
relate. Notwithstanding the foregoing, the initial election of the
Participants' deferral of Meeting Fees shall be made no later than December
20 prior to the beginning of the Year or no later than thirty (30) calendar
days following notification of initial eligibility to participate in the Plan
(with respect to Meeting Fees not yet earned or paid). All elections to defer
Meeting Fees shall be made on an "Election to Defer Form," as described in
Section 5.2 herein and shall be delivered by the Participant to the Board (or
its delegate) as described in Section 10.1 herein. On the "Election to Defer
Form" described in Section 5.2, the Participant shall elect (in addition to
any other relevant elections described in Section 5.2 herein) the amount to
be deferred with respect to his or her Meeting Fees for each Board Meeting,
pursuant to the terms of Section 5.1 herein. The deferral election with
respect to Meeting Fees shall automatically remain in effect for all periods
the Participant participates in the Plan until revoked or changed by the
Participant.
The deferral may be revoked or changed with respect to future Board
Meetings by filing with the Board (or its delegate) a new election on an
"Election to Defer Form" no later than the
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<PAGE>
day immediately prior to the date of the next Board Meeting for which the
Participant shall receive Meeting Fees.
5.4 LENGTH OF DEFERRAL. Except as otherwise provided in Section 5.7,
the amounts deferred by each Participant and the accumulated earnings thereon
shall be paid (or commence to be paid) to the Participant as provided in
Sections 5.5 and 5.6 herein in January following the Year in which the
termination of the Participant's service as a Director of the Company occurs
for any reason other than death. In the event of the Participant's death,
the payment of the amounts deferred and the accumulated earnings thereon (or,
in the event of death following commencement of installment payments, the
remaining unpaid balance thereof) shall be made in a single lump sum payment
in the form provided in Section 5.6 herein as soon as administratively
practical after the Participant's death.
5.5 FORM OF PAYMENT OF DEFERRED AMOUNTS. Subject to Section 5.7,
Participants shall be entitled to elect to receive payment of deferred
amounts, together with earnings accrued thereon, at the end of the deferral
period in a single lump sum payment or by means of installments. All
deferred amounts, together with earnings accrued thereon, shall be paid in
the same form. If no election is made, the Participant will be paid in a
single lump sum.
(a) LUMP SUM PAYMENT. Such payment of deferred amounts and earnings
accrued thereon shall be made to the Participant in January following
the Year in which he ceases to serve as a Director, as described in
Section 5.4 herein.
(b) INSTALLMENT PAYMENTS. Participants may elect to receive the payout
of deferred amounts and earnings accrued thereon in annual
installments, with a minimum number of installments of two (2), and
a maximum number of installments of ten (10). The initial payment
shall be made in January following the Year in which he ceases to
serve as a Director, as described in Section 5.4 herein. The
remaining installment payments shall be made in January of each Year
thereafter, until the Participant's entire deferred account has been
paid in full. Earnings shall continue to accrue on the deferred
amounts in the Participant's deferred account, as provided in
Section 6.2 of this Plan. The amount of each installment payment
shall be equal to the balance remaining in the Participant's deferred
account immediately prior to each such payment, multiplied by a
fraction, the numerator of which is one (1), and the denominator of
which is the number of installment payments remaining.
Subject to the following rules, the Participant may elect to change a
form of benefit elected pursuant to this Section 5.5 by filing a revised
election form on an "Election to Defer Form," as described in Section 5.2
herein, specifying the new form of distribution:
(1) An election to change the form of distribution must be made no later
than December 31 at least one (1) full Year prior to the payout
commencement date as described in Section 5.4 herein. If a new
election is submitted after this date, the election shall be null and
void, and the form of distribution shall be determined under the
Participant's original election.
5
<PAGE>
(2) Any election to change the form of distribution from installments
to a lump sum is subject in all cases to the approval of the Board.
(3) No further election to change a form of distribution shall be
permitted with respect to amounts already subject to a revised
election submitted pursuant to this Section 5.5.
Notwithstanding anything to the contrary herein, the Board may elect at
any time, in its sole and absolute discretion, to make payment of deferred
amounts and accumulated earnings thereon (or the remaining amount thereof) to
the Participant in a single lump sum, notwithstanding the Participant's
election to receive such amounts in the form of installments.
5.6 TYPE OF PAYMENT OF DEFERRED AMOUNTS. All payments hereunder shall
be made in cash or shares of Stock, or any combination thereof, as directed
by the Board in its sole and absolute discretion.
The Company shall reserve a sufficient number of shares of Stock for
purposes of the Plan, as determined by the Board. If the Company shall at
any time increase or decrease the number of outstanding shares of Stock or
change in any way the rights and privileges of such shares by means of the
payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification, or recapitalization involving the Stock, then
the Board may increase, decrease, or change in like manner the number, rights
and privileges of the shares issuable under the Plan as if such shares had
been issued and outstanding, fully paid, and nonassessable at the time of
such occurrence.
5.7 FINANCIAL HARDSHIP. The Board shall have the authority to alter
the timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Board, severe financial
hardship. In such event, the Board may, in its sole discretion:
(a) Authorize the cessation of deferrals by such Participant under the
Plan; or
(b) Provide that all, or a portion, of the amount previously deferred
by the Participant shall immediately be paid in a lump sum cash
payment; or
(c) Provide that all, or a portion, of the installments payable over a
period of time shall immediately be paid in a lump sum cash payment;
or
(4) Provide for such other installment payment schedule as deemed
appropriate by the Board under the circumstances.
For purposes of this Section 5.7, "severe financial hardship" shall mean
any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant. In any event, payment may not be made to the
extent such emergency is or may be relieved: (i) through reimbursement or
6
<PAGE>
compensation by insurance or otherwise; (ii) by liquidation of the
Participant's assets, to the extent the liquidation of such assets would not
itself cause severe financial hardship; and (iii) by cessation of deferrals
under the Plan. Withdrawals of amounts because of a severe financial
hardship may only be permitted to the extent reasonably necessary to satisfy
the hardship, plus to pay taxes on the withdrawal. Examples of what are not
considered to be severe financial hardships include the need to send a
Participant's child to college or the desire to purchase a home. The
Participant's account will be credited with earnings in accordance with the
Plan up to the date of distribution.
The severity of the financial hardship shall be judged by the Board.
The Board's decision with respect to the severity of financial hardship and
the manner in which, if at all, the Participant's future deferral
opportunities shall be ceased, and/or the manner in which, if at all, the
payment of deferred amounts to the Participant shall be altered or modified,
shall be final, conclusive, and not subject to appeal.
ARTICLE 6. DEFERRED COMPENSATION ACCOUNTS
6.1 PARTICIPANTS' ACCOUNTS. The Company shall establish and maintain
an individual bookkeeping account for deferrals made by each Participant
under Article 5 herein. Each account shall be credited as of the date the
amount deferred otherwise would have become due and payable to the
Participant and as provided in Section 6.2. Each Participant's account shall
be one hundred percent (100%) vested at all times.
6.2 GAINS AND LOSSES ON DEFERRED AMOUNTS. Each Participant's account
will be deemed to be invested in Stock, including any dividends paid thereon
(which will be deemed to be reinvested in such Stock). Each Participant's
account will thus be adjusted and increased or decreased by the results of
such deemed investment from the time Plan deferrals are credited under
Section 6.1 until distributed pursuant to Article 5 hereof.
6.3 CHARGES AGAINST ACCOUNTS. There shall be charged against each
Participant's deferred account any payments made to the Participant or to his
or her beneficiary.
6.4 DESIGNATION OF BENEFICIARY. Each Participant shall designate a
beneficiary or beneficiaries who, upon the Participant's death, will receive
the amounts that otherwise would have been paid to the Participant under the
Plan. All designations shall be signed by the Participant, and shall be in
such form as prescribed by the Board. Each designation shall be effective as
of the date delivered to the Chief Human Resources Officer of the Company by
the Participant.
Participants may change their designations of beneficiary on such form
as prescribed by the Board. The payment of amounts deferred under the Plan
shall be in accordance with the last unrevoked written designation of
beneficiary that has been signed by the Participant and delivered by the
Participant to the Chief Human Resources Officer of the Company prior to the
Participant's death.
7
<PAGE>
In the event that all the beneficiaries named by a Participant pursuant
to this Section 6.5 predecease the Participant, the deferred amounts that
would have been paid to the Participant or the Participant's beneficiaries
shall be paid to the Participant's estate.
In the event a Participant does not designate a beneficiary, or for any
reason such designation is ineffective, in whole or in part, the amounts that
otherwise would have been paid to the Participant or the Participant's
beneficiaries under the Plan shall be paid to the Participant's estate.
ARTICLE 7. RIGHTS OF PARTICIPANTS
7.1 CONTRACTUAL OBLIGATION. The Plan shall create a contractual
obligation on the part of the Company to make payments from the Participants'
accounts when due. Payment of account balances shall be made out of the
general funds of the Company.
7.2 UNSECURED INTEREST. No Participant or party claiming an interest
in deferred amounts of a Participant shall have any interest whatsoever in
any specific asset of the Company. To the extent that any party acquires a
right to receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company. The Company shall have
no duty to set aside or invest any amounts credited to Participants' accounts
under this Plan.
Nothing contained in this Plan shall create a trust of any kind or a
fiduciary relationship between the Company and any Participant.
Nevertheless, the Company may establish one or more trusts, with such trustee
as the Board may approve, for the purpose of providing for the payment of
deferred amounts and earnings thereon. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Company's general creditors in the event of the Company's bankruptcy or
insolvency. To the extent any deferred amounts and earnings thereon under
the Plan are actually paid from any such trust, the Company shall have no
further obligation with respect thereto, but to the extent not so paid, such
deferred amounts and earnings thereon shall remain the obligation of, and
shall be paid by, the Company.
7.3 NO GUARANTEE OF PRINCIPAL OR EARNINGS. Nothing contained in the
Plan shall constitute a guarantee by the Company or any other person or
entity that the amounts deferred hereunder will increase or shall not
decrease in value due to the deemed investment of such amounts in Stock. The
Stock may be a volatile investment and decreases in the value thereof may
result in a loss of some or all of the principal amounts deferred hereunder.
Thus, it is possible for the value of a Participant's account to decrease as
a result of its deemed investment in Stock, if the value of the Stock
decreases.
ARTICLE 8. WITHHOLDING AT TAXES
The Company shall have the right to require Participants to remit to
the Company an amount sufficient to satisfy any Federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan amounts sufficient to satisfy any withholding tax requirements.
8
<PAGE>
Article 9. AMENDMENT AND TERMINATION
The Company hereby reserves the right to amend, modify, or terminate
the Plan at any time by action of the Board, with or without prior notice.
Except as described below in this Article 9, no such amendment or termination
shall in any material manner adversely affect any Participant's rights to
amounts already deferred or earnings thereon up to the point of amendment or
termination, without the consent of the Participant.
ARTICLE 10. MISCELLANEOUS
10.1 NOTICE. Unless otherwise prescribed by the Board, any notice or
filing required or permitted to be given to the Company under the Plan shall
be sufficient if in writing and hand delivered, or sent by registered or
certified mail to the Chief Human Resources Officer of the Company. Notice
to the Chief Human Resources of the Company, if mailed, shall be addressed to
the principal executive offices of the Company. Notice mailed to a
Participant shall be at such address as is given in the records of the
Company. Notices shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
10.2 NONTRANSFERABILITY. Except as provided below, Participants'
rights to deferred amounts, contributions, and earnings accrued thereon under
the Plan may not be sold, transferred, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution,
nor shall the Company make any payment under the Plan to any assignee or
creditor of a Participant.
Notwithstanding the foregoing, the Board shall provide for
distributions from a Participant's deferred compensation account to the
extent required by a court order that the Board determines to satisfy the
requirements of a qualified domestic relations order within the meaning of
Section 206(d)(3) of ERISA. The amounts assigned to an alternate payee under
such an order shall be paid in a lump sum distribution as soon as
administratively practical after the Board determines that the order meets
the requirements of a qualified domestic relations order. All payments made
pursuant to any such order shall be charged against the Participant's
deferred compensation account.
10.3 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
10.4 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
10.5 COSTS OF THE PLAN. All costs of implementing and administering
the Plan shall be borne by the Company.
9
<PAGE>
10.6 SUCCESSORS. All obligations of the Company under the Plan shall
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company
10.7 APPLICABLE LAW. Except to the extent preempted by applicable
federal law, the Plan shall be governed by and construed in accordance with
the laws of the state of Tennessee.
10
<PAGE>
UNSECURED
PROMISSORY NOTE
$117,800 March 19, 1997
Nashville, Tennessee
FOR VALUE RECEIVED, subject to the terms and conditions set forth
below, RONALD N. HOGE, an individual, (the "Executive"), whose address is 420
Elmington Avenue, Apartment 1406, Nashville, Tennessee 37215, hereby promises
to pay to the order of MAGNETEK, INC. (the "Holder"), whose address is 26
Century Boulevard, P.O. Box 290159, Nashville, Tennessee 37229-0159, the
principal sum of One Hundred Eleven Thousand Eight Hundred Dollars
($117,800), together with interest thereon at the rate of 6.32% per annum or,
if less, the maximum rate allowable under applicable law, compounded
semi-annually, and payable in cash as set forth below. Payment of principal
and interest shall be made in lawful money of the United States of America.
Payment of principal and interest shall be made to the address of the Holder
set forth above, or at such other place as the Holder may from time to time
designate in writing to the Executive.
1. RESTRICTED STOCK. The Executive and the Holder acknowledge and
agree that the purpose of the advance to the Executive evidenced by this Note
is to enable the Executive to make certain tax payments related to the grant,
on the date hereof, of 25,000 shares of common stock of Holder ("Common
Stock").
2. MATURITY DATE. The Executive shall repay the outstanding
principal balance of this Note on the earliest of (i) the date, after the
date hereof, on which the Executive has sold more than 12,500 shares of
Common Stock (such amount to be adjusted in the case of any stock dividend,
stock split, recapitalization or similar event), (ii) 90 days after the date
of termination of the Executive's employment with the Holder, for any reason,
and (iii) the fifth anniversary of the date hereof (the earliest of each of
the dates set forth in subsections (i), (ii), and (iii) above is referred to
as the "Maturity Date"). Subject to the provisions of Section 3 below, all
interest shall accrue and be payable on the Maturity Date.
3. PREPAYMENT. The Executive may prepay all or part of the
outstanding principal balance of this Note, with accrued interest but without
premium or penalty, at any time.
4. EVENTS OF DEFAULT; ACCELERATION. The term "Event of Default"
shall consist of (i) a default in payment of interest or principal, when due,
or (ii) the Executive's filing of a petition for bankruptcy relief under
title 11 of the United States Code (the "Bankruptcy Code"). Upon and after
the occurrence of any Event of Default (whether such occurrence shall be
voluntary or involuntary or come about or be effected by operation of law or
otherwise) and at any time so long as such Event of Default shall be
continuing, the Holder may, by notice to the Executive, declare this Note,
all interest hereon and all other amounts payable hereunder, to be
immediately due and payable, whereupon this Note, all such interest and all
such amounts shall become and be immediately due and payable, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Executive. Unpaid principal and overdue
interest on this Note shall continue to bear interest after an Event of
Default until all principal and interest due hereunder has been paid in full.
The Holder may enforce its rights hereunder by an action at law, suit in
equity or other appropriate proceeding.
<PAGE>
5. CANCELLATION. Upon payment in full of all principal and interest
payable hereunder this Note shall be surrendered to the Executive for
cancellation.
6. AMENDMENT AND WAIVER. Any provision of this Note may be amended
or waived by a written instrument signed by the Executive and by the Holder,
such amendment or waiver to be effective but only in the specific instance
and for the specific purpose for which the amendment or waiver is made or
given. No delay on the part of the Holder in exercising any right thereunder
shall operate as a waiver of such right.
7. ATTORNEYS' FEES. The Executive shall reimburse Holder for any
reasonable attorneys' fees and expenses incurred by the Holder in connection
with the enforcement of its rights under this Note.
8. NOTICES. Any notice required or permitted hereunder shall be
given in writing and shall be deemed given upon personal delivery or five
days after deposit in the United States mail, by registered or certified
mail, postage prepaid, addressed (i) if to the Executive at the address set
forth above and (ii) if to the Holder at such Holder's address set forth
above, or at such other address as the Executive or the Holder may designate
by notice as provided herein.
9. SEVERABILITY. If one or more provision of this Note shall be
unenforceable, the remaining provisions of this Note shall not in any way be
effected or impaired thereby and shall continue in full force and effect.
10. GOVERNING LAW. This Note and the obligations of the Executive
hereunder shall be governed by and construed in accordance with the laws of
the State of Tennessee.
________________________________
RONALD N. HOGE
<PAGE>
SPECIAL OWNERSHIP OPTION PROGRAM
RON HOGE
TERM: 10 year non-qualified stock option.
VESTING: Dependent on meeting individual ownership target.
Option vests 100% between 24 and 36 months after grant
when target is met.
If 36 months pass without target being achieved, the
option doesn't vest until 7 years after grant date.
OWNERSHIP: Shares counted as ownership include:
Restricted shares not yet vested
- 401K purchases
- Deferral Investment Plan and Deposits in Stock
- Outright market purchases
Note: Shares acquired through option exercise of
grants made after 1989 do not count.
OWNERSHIP TARGET: Ownership target equals 90% of shares derived from table
below:
------------------------------------------------------------
Years as
an Officer Target Ownership as a Multiple of Base Salary
------------------------------------------------------------
10+ 2.0 2.5 3.0 3.5
5 to 9 1.0 1.5 2.0 2.5
0-4 0.5 1.0 1.5 2.0
--- --- --- ---
LESS THAN $150,000 $151,000 to $201,000 to GREATER THAN
$200,000 $250,000 $250,000
If current ownership shortfall has a value less than .9X
base salary, then the target is raised so that the Delta
is .9X base salary.
At least 1/4 of shares acquired to meet the goal must come
from outright market purchases.
INDIVIDUAL TARGET: Your individual target summary:
Total Target Current Shortfall Outright Purchase
Ownership Ownership to Acquire Requirement
------------ --------- ---------- -----------------
152,335 121,300 31,035 7,759
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive
Stock Compensation Plan of MagneTek, Inc.
Name of Optionee: Ronald N. Hoge
Social Security Number: ###-##-####
Number of Shares covered by
Option (subject to lapse
provisions and other limitations
on exercisability in accordance
with the terms of the Plan): 30,000
Purchase Price Per Share: $13.8125
Minimum Number of Shares Per
Partial Exercise: 100 Shares
The Option shall become
exercisable as follows: Except as provided in the following
paragraph, the Option shall become fully
exercisable as of January 27, 2004.
In the event the Ownership Target in the
Special Ownership Option Program provided to
Optionee by letter is satisfied prior to
January 27, 2000, the Option shall become
fully exercisable on the later of (i) January
27, 1999 and (ii) the date, prior to January
27, 2000, on which such Ownership Target is
so satisfied.
Date of this Agreement (grant
date): January 27, 1997
MAGNETEK, INC. ____________________________________________
Optionee Signature
Address (please print):
By ___________________________ ____________________________________________
By ___________________________ ____________________________________________
____________________________________________
<PAGE>
SPECIAL OWNERSHIP OPTION PROGRAM
BRIAN DUNDON
TERM: 10 year non-qualified stock option.
VESTING: Dependent on meeting individual ownership target.
Option vests 100% between 24 and 36 months after grant
when target is met.
If 36 months pass without target being achieved, the
option doesn't vest until 7 years after grant date.
OWNERSHIP: Shares counted as ownership include:
Restricted shares not yet vested
- 401K purchases
- Deferral Investment Plan and Deposits in Stock
- Outright market purchases
Note: Shares acquired through option exercise of
grants made after 1989 do not count.
OWNERSHIP TARGET: Ownership target equals 90% of shares derived from
table below:
-----------------------------------------------------------
Years as
an Officer Target Ownership as a Multiple of Base Salary
-----------------------------------------------------------
10+ 2.0 2.5 3.0 3.5
5 to 9 1.0 1.5 2.0 2.5
0-4 0.5 1.0 1.5 2.0
--- --- --- ---
LESS THAN $150,000 $151,000 to $201,000 to GREATER THAN
$200,000 $250,000 $250,000
If current ownership shortfall has a value less than .9X
base salary, then the target is raised so that the Delta
is .9X base salary.
At least 1/4 of shares acquired to meet the goal must come
from outright market purchases.
INDIVIDUAL TARGET: Your individual target summary:
Total Target Current Shortfall Outright Purchase
Ownership Ownership to Acquire Requirement
------------ --------- ---------- -----------------
152,608 133,987 18,621 4,655
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
Name of Optionee: Brian R. Dundon
Social Security Number: ###-##-####
Number of Shares covered
by Option (subject to
lapse provisions and
other limitations on
exercisability in
accordance with the
terms of the Plan): 15,000
Purchase Price Per Share: $13.8125
Minimum Number of Shares
Per Partial Exercise: 100 Shares
The Option shall become Except as provided in the following paragraph, the
exercisable as follows: Option shall become fully exercisable
as of January 27, 2004.
In the event the Ownership Target in the Special
Ownership Option Program provided to Optionee by
letter is satisfied prior to January 27, 2000,
the Option shall become fully exercisable on the
later of (i) January 27, 1999 and (ii) the date,
prior to January 27, 2000, on which such Ownership
Target is so satisfied.
Date of this Agreement (grant date): January 27, 1997
MAGNETEK, INC. ________________________________________
Optionee Signature
Address (please print):
By ____________________________ ________________________________________
By ____________________________ ________________________________________
________________________________________
<PAGE>
SPECIAL OWNERSHIP OPTION PROGRAM
DAVE REILAND
TERM: 10 year non-qualified stock option.
VESTING: Dependent on meeting individual ownership target.
Option vests 100% between 24 and 36 months after grant when
target is met.
If 36 months pass without target being achieved, the
option doesn't vest until 7 years after grant date.
OWNERSHIP: Shares counted as ownership include:
Restricted shares not yet vested
- 401K purchases
- Deferral Investment Plan and Deposits in Stock
- Outright market purchases
Note: Shares acquired through option exercise of
grants made after 1989 do not count.
OWNERSHIP TARGET: Ownership target equals 90% of shares derived from table
below:
-----------------------------------------------------------
Years as an
Officer Target Ownership as a Multiple of Base Salary
-----------------------------------------------------------
10+ 2.0 2.5 3.0 3.5
5 to 9 1.0 1.5 2.0 2.5
0-4 0.5 1.0 1.5 2.0
--- --- --- ---
LESS THAN $150,000 $151,000 to $201,000 to GREATER
$200,000 $250,000 THAN $250,000
-----------------------------------------------------------
If current ownership shortfall has a value less than
.9X base salary, then the target is raised so that the
Delta is .9X base salary.
At least 1/4 of shares acquired to meet the goal must come
from outright market purchases.
INDIVIDUAL TARGET: Your individual target summary:
Total Target Current Shortfall Outright Purchase
Ownership Ownership to Acquire Requirement
------------ --------- ----------- -----------------
75,484 48,807 26,677 6,669
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
Name of Optionee: David P. Reiland
Social Security Number: ###-##-####
Number of Shares
covered by Option
(subject to lapse
provisions and other
limitations on
exercisability in
accordance with the
terms of the Plan): 15,000
Purchase Price Per Share: $13.8125
Minimum Number of Shares
Per Partial Exercise: 100 Shares
The Option shall become
exercisable as follows: Except as provided in the following paragraph, the
Option shall become fully exercisable as
of January 27, 2004.
In the event the Ownership Target in the Special
Ownership Option Program provided to
Optionee by letter is satisfied prior to
January 27, 2000, the Option shall become fully
exercisable on the later of (i) January 27, 1999
and (ii) the date, prior to January 27, 2000, on
which such Ownership Target is so satisfied.
Date of this Agreement (grant date): January 27, 1997
MAGNETEK, INC. __________________________________
Optionee Signature
Address (please print):
By ________________________________ __________________________________
By ________________________________ __________________________________
__________________________________
<PAGE>
SPECIAL OWNERSHIP OPTION PROGRAM
JOHN STEINER
TERM: 10 year non-qualified stock option.
VESTING: Dependent on meeting individual ownership target.
Option vests 100% between 24 and 36 months after grant
when target is met.
If 36 months pass without target being achieved, the
option doesn't vest until 7 years after grant date.
OWNERSHIP: Shares counted as ownership include:
Restricted shares not yet vested
- 401K purchases
- Deferral Investment Plan and Deposits in Stock
- Outright market purchases
Note: Shares acquired through option exercise of
grants made after 1989 do not count.
OWNERSHIP TARGET: Ownership target equals 90% of shares derived from
table below:
-----------------------------------------------------------
Years as an
Officer Target Ownership as a Multiple of Base Salary
-----------------------------------------------------------
10+ 2.0 2.5 3.0 3.5
5 to 9 1.0 1.5 2.0 2.5
0-4 0.5 1.0 1.5 2.0
--- --- --- ---
LESS THAN $150,000 $151,000 to $201,000 to GREATER
$200,000 $250,000 THAN $250,000
-----------------------------------------------------------
If current ownership shortfall has a value less than
.9X base salary, then the target is
raised so that the Delta is .9X base salary.
At least 1/4 of shares acquired to meet the goal must come
from outright market purchases.
INDIVIDUAL TARGET: Your individual target summary:
Total Target Current Shortfall Outright Purchase
Ownership Ownership to Acquire Requirement
------------ ---------- ----------- ----------------
29,822 293 29,529 7,382
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
Name of Optionee: John E. Steiner
Social Security Number: ###-##-####
Number of Shares
covered by Option
(subject to lapse
provisions and other
limitations on
exercisability in
accordance with the
terms of the Plan): 15,000
Purchase Price Per Share: $13.8125
Minimum Number of Shares
Per Partial Exercise: 100 Shares
The Option shall become
exercisable as follows: Except as provided in the following paragraph,
the Option shall become fully exercisable
as of January 27, 2004.
In the event the Ownership Target in the Special
Ownership Option Program provided to
Optionee by letter is satisfied prior to
January 27, 2000, the Option shall become fully
exercisable on the later of (i) January 27,1999
and (ii) the date, prior to January 27, 2000,
on which such Ownership Target is so satisfied.
Date of this Agreement (grant date): January 27, 1997
MAGNETEK, INC. __________________________________
Optionee Signature
Address (please print):
By ________________________________ __________________________________
By ________________________________ __________________________________
__________________________________
<PAGE>
SPECIAL OWNERSHIP OPTION PROGRAM
ANTONIO CANOVA
TERM: 10 year non-qualified stock option.
VESTING: Dependent on meeting individual ownership target.
Option vests 100% between 24 and 36 months after grant
when target is met.
If 36 months pass without target being achieved, the
option doesn't vest until 7 years after grant date.
OWNERSHIP: Shares counted as ownership include:
Restricted shares not yet vested
- 401K purchases
- Deferral Investment Plan and Deposits in Stock
- Outright market purchases
Note: Shares acquired through option exercise of
grants made after 1989 do not count.
OWNERSHIP TARGET: Ownership target equals 90% of shares derived from
table below:
-----------------------------------------------------------
Years as an
Officer Target Ownership as a Multiple of Base Salary
-----------------------------------------------------------
10+ 2.0 2.5 3.0 3.5
5 to 9 1.0 1.5 2.0 2.5
0-4 0.5 1.0 1.5 2.0
--- --- --- ---
LESS THAN $150,000 $151,000 to $201,000 to GREATER
$200,000 $250,000 THAN $250,000
-----------------------------------------------------------
If current ownership shortfall has a value less than
.9X base salary, then the target is
raised so that the Delta is .9X base salary.
At least 1/4 of shares acquired to meet the goal must
come from outright market purchases.
INDIVIDUAL TARGET: Your individual target summary:
Total Target Current Shortfall Outright Purchase
Ownership Ownership to Acquire Requirement
------------ ---------- ----------- ----------------
26,689 26,689 6,672
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc.
Name of Optionee: Antonio Canova
Social Security Number: N/A
Number of Shares
covered by Option
(subject to lapse
provisions and other
limitations on
exercisability in
accordance with the
terms of the Plan): 15,000
Purchase Price Per Share: $13.8125
Minimum Number of Shares
Per Partial Exercise: 100 Shares
The Option shall become
exercisable as follows: Except as provided in the following paragraph, the
Option shall become fully exercisable
as of January 27, 2004.
In the event the Ownership Target in the Special
Ownership Option Program provided to
Optionee by letter is satisfied prior to
January 27, 2000, the Option shall become fully
exercisable on the later of (i) January 27, 1999
and (ii) the date, prior to January 27, 2000, on
which such Ownership Target is so satisfied.
Date of this Agreement (grant date): January 27, 1997
MAGNETEK, INC. __________________________________
Optionee Signature
Address (please print):
By ________________________________ __________________________________
By ________________________________ __________________________________
__________________________________
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 5,007
<SECURITIES> 0
<RECEIVABLES> 195,316
<ALLOWANCES> 5,265
<INVENTORY> 182,793
<CURRENT-ASSETS> 406,179
<PP&E> 404,042
<DEPRECIATION> 226,324
<TOTAL-ASSETS> 653,179
<CURRENT-LIABILITIES> 227,282
<BONDS> 281,152
0
0
<COMMON> 258
<OTHER-SE> 60,356
<TOTAL-LIABILITY-AND-EQUITY> 653,179
<SALES> 886,508
<TOTAL-REVENUES> 886,508
<CGS> 711,454
<TOTAL-COSTS> 711,454
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,682
<INCOME-PRETAX> 32,500
<INCOME-TAX> 13,231
<INCOME-CONTINUING> 19,269
<DISCONTINUED> 0
<EXTRAORDINARY> 170
<CHANGES> 0
<NET-INCOME> 19,099
<EPS-PRIMARY> .73
<EPS-DILUTED> .70
</TABLE>
