<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, 1996
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
February 3, 1997: 25,622,324 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, 1996 and the results of operations and
cash flows for the three-month and six-month periods ended December 31, 1996
and 1995. 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, 1996 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, 1996 and JUNE 30, 1996
(amounts in thousands)
ASSETS December 31 June 30
- ------ ----------- --------
(unaudited)
Current assets:
Cash $ 5,917 $ 871
Accounts receivable 179,056 201,814
Inventories 189,917 203,265
Prepaid expenses and other 23,629 26,902
-------- --------
Total current assets 398,519 432,852
-------- --------
Property, plant and equipment 404,109 383,498
Less-accumulated depreciation
and amortization 222,617 207,079
-------- --------
181,492 176,419
-------- --------
Net assets of discontinued operations -- 1,174
Goodwill 32,818 30,668
Deferred financing costs,
intangible and other assets 38,105 37,661
-------- --------
Total Assets $650,934 $678,774
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 87,952 $104,273
Accrued liabilities 128,178 126,399
Current portion of long-term debt 3,054 2,895
-------- --------
Total current liabilities 219,184 233,567
-------- --------
Long-term debt, net of current portion 294,238 319,128
Other long-term obligations 73,170 71,633
Deferred income taxes 12,807 12,888
Commitments and contingencies
Stockholders' equity
Common stock 255 255
Other 51,280 41,303
-------- --------
Total stockholder's equity 51,535 41,558
-------- --------
Total Liabilities and
Stockholders' Equity $650,934 $678,774
-------- --------
-------- --------
See accompanying notes
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ITEM 1 (Continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE THREE MONTHS ENDED
DECEMBER 31, 1996 and 1995
(amounts in thousands except per share data)
(unaudited)
1996 1995
---- ----
Net sales $293,707 $282,162
Cost of sales 238,167 235,550
-------- --------
Gross profit 55,540 46,612
Selling, general and administrative 37,690 39,078
-------- --------
Income from operations 17,850 7,534
Interest expense 7,197 7,994
Other expense, net 1,058 1,281
-------- --------
Income (loss) before provision (benefit)
for income taxes 9,595 (1,741)
Income taxes 3,839 (211)
-------- --------
Net income (loss) $ 5,756 $ (1,530)
-------- --------
-------- --------
Earnings (loss) per common share
- --------------------------------
Primary:
Net income (loss) $ 0.22 $ (0.06)
-------- --------
-------- --------
Fully diluted:
Net income (loss) $ 0.22 *
-------- --------
-------- --------
* 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
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ITEM 1 (Continued)
MAGNETEK, INC.
CONDENSED CONSOLIDATED INCOME STATEMENTS
FOR THE SIX MONTHS ENDED
DECEMBER 31, 1996 and 1995
(amounts in thousands except per share data)
(unaudited)
1996 1995
---- ----
Net sales $585,117 $554,832
Cost of sales 474,735 465,129
-------- --------
Gross profit 110,382 89,703
Selling, general and administrative 76,613 76,923
-------- --------
Income from operations 33,769 12,780
Interest expense 14,729 16,552
Other expense, net 2,134 2,391
-------- --------
Income (loss) before provision (benefit)
for income taxes 16,906 (6,163)
Income taxes 6,835 (1,095)
-------- --------
Net income (loss) $ 10,071 $ (5,068)
-------- --------
-------- --------
Earnings (loss) per common share
- --------------------------------
Primary:
Net income (loss) $ 0.39 $ (0.20)
-------- --------
-------- --------
Fully diluted:
Net income (loss) $ 0.39 *
-------- --------
-------- --------
* 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 SIX MONTHS ENDED DECEMBER 31, 1996 AND 1995
(amounts in thousands)
(unaudited)
1996 1995
---- ----
Cash flows from operating activities:
Income (loss) from continuing operations $ 10,071 $ (5,068)
Adjustments to reconcile income from
continuing operations to net cash provided
by operating activities:
Depreciation and amortization 19,573 19,891
Changes in operating assets and liabilities
of continuing operations 17,106 12,991
-------- --------
Total adjustments 36,679 32,882
-------- --------
Net cash provided by operating activities: 46,750 27,814
-------- --------
Cash flows from investing activities:
Proceeds from sale of businesses and assets 2,191 74,907
Capital expenditures (17,357) (17,461)
Other investments (1,757) 566
-------- --------
Net cash provided by (used in) investing
activities (16,923) 58,012
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 193 360
Repayment of bank and other long-term
obligations (24,731) (79,846)
Increase in deferred financing costs (243) (241)
-------- --------
Net cash used in financing activities (24,781) (79,727)
-------- --------
(continued on next page)
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ITEM 1 (continued)
MAGNETEK, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE SIX MONTHS ENDED December 31, 1996 AND 1995
(amounts in thousands)
(unaudited)
1996 1995
---- ----
Net cash used in discontinued operations -- (982)
-------- --------
Net increase in cash 5,046 5,117
Cash at the beginning of period 871 311
-------- --------
Cash at the end of period $ 5,917 $ 5,428
-------- --------
-------- --------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 12,930 $ 16,744
Income Taxes $ (172) $ 1,289
(see accompanying notes)
<PAGE>
ITEM 1 (continued)
MAGNETEK, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(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 six month
periods ended December 31, 1996 and 1995 each contained thirteen weeks
and twenty six weeks respectively.
2. INVENTORIES
Inventories at December 31, 1996 and June 30, 1996 consist of the
following:
December 31 June 30
----------- ---------
Raw materials and stock parts $ 62,460 $ 60,018
Work-in-process 44,114 46,354
Finished goods 83,343 96,893
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$ 189,917 $ 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 second quarter of fiscal year
1997, approximately $1.1 million of cash outlays were made in connection
with the repositioning reserves, primarily for severance and warranty.
Through the first six months of fiscal 1997 approximately $3.0 million
of net cash outlays have been expended against these reserves. The net
cash results through December include approximately $.8 million of
recoveries associated with vendor settlements on certain warranty
matters included in the repositioning reserves.
In July 1994, the Company's Board of Directors adopted a formal plan of
disposal for certain businesses in connection with an overall
restructuring 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.
<PAGE>
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.
<PAGE>
ITEM 2
MANAGEMENT DISCUSSION
RESULTS OF OPERATIONS:
THREE MONTHS ENDED DECEMBER 31, 1996 VS 1995
Net Sales and Gross Profit.
MagneTek's net sales for the second quarter of fiscal 1997 were $293.7
million, a 4.1% increase from the second quarter of fiscal year 1996 at
$282.2 million. Revenues in the Lighting Products segment increased
3.0% due to stronger domestic sales of ballast products. Sales levels
in the Power Supplies segment increased 1.1% over the prior year.
Adjusting performance in the Power Supplies segment for the sale of the
domestic transformer business in the first quarter of fiscal 1997,
revenues increased 7.6% due to the strong sales growth in the custom
power supplies (both foreign and domestic). Motors and Controls
revenues increased 6.2% with standard drives sales significantly
stronger than the year earlier period and both residential and
commercial fractional horsepower products bolstered by continued
economic strength.
The Company's gross profit increased to $55.5 million in the second
quarter of fiscal 1997 from $46.6 million in the second quarter of
fiscal 1996. The gross profit expressed as a percent of sales improved
to 18.9% in the second quarter of fiscal 1997 from 16.5% in the second
quarter of fiscal 1996. Gross profit improvement in the second quarter
was a function of significantly improved performance in the Lighting
Products electronic and magnetic ballast results. Performance within
Lighting Products reflected increased domestic production and improved
fixed cost coverage with continued benefits from prior moves to lower
cost production locations. Performance in standard drives (Motors &
Controls segment) increased due to sales volume performance and the
Power Supplies segment also contributed positively to the comparisons
with the year earlier period.
Operating Expenses.
Selling, general and administrative (SG&A) expense was $37.7 million
(12.8% of net sales) in the second quarter of fiscal 1997 versus $39.1
million (13.8% of net sales) in the second quarter of fiscal 1996.
Reduced spending included lower health and welfare expenses due to plan
design changes and favorable cost trends. Lighting Products results
reflected lower marketing costs due to reduced warehousing costs and
commission expenses. Motors and Controls costs were higher, reflecting
the variable marketing costs associated with the higher levels of sales.
Interest and Other Expense.
Interest expense of $7.2 million in the second quarter of fiscal 1997
was reduced from the $8.0 million incurred in the second quarter of
fiscal 1996. Overall debt levels were responsible for the improvement
as increased profitability and lower investments in accounts receivable
and inventory supported reductions in bank debt. Interest rates
applicable to both LIBOR and prime rate borrowing declined consistent
with improved performance as defined under the Bank Loan Agreement.
Other expense of $1.1 million in the current quarter improved modestly
from the $1.3 million in the second quarter of fiscal 1996.
Net Income.
The Company recorded an after tax profit of $5.8 million in the second
quarter of fiscal year 1997 compared to a loss of $1.5 million in the
second quarter of fiscal 1996. The tax provision in the second quarter
of fiscal 1997 was $3.8 million compared to a $.2 million benefit in the
second quarter of fiscal 1996.
<PAGE>
SIX MONTHS ENDED DECEMBER 31, 1996 VS 1995
Net Sales and Gross Profit.
Net sales for MagneTek in the first six months of fiscal 1997 were
$585.1 million, a 5.5% increase over the $554.8 million in the first six
months of fiscal 1996. Sales in the Lighting Products segment increased
7.1%. Stronger domestic ballast sales and the introduction of compact
fluorescent ballasts in Europe were the significant positive factors.
The first six months of sales in the Power Supplies segment increased
4.3% due to continued growth in the European custom power supplies
products and favorable revenue increases of domestic product as well.
Sales in the Motors and Controls segment also rose by 4.3% due to growth
in the fractional (residential and commercial) horsepower products
offsetting slightly reduced revenues in generator products. Sales of
standard adjustable speed controls (drives) and power conversion (fuel
cells) products also contributed to the growth in Motors and Controls.
Gross profits increased to $110.4 million (18.9% of net sales) in the
first six months of fiscal 1997, from $89.7 million (16.2% of net sales)
in the first six months of fiscal 1996. Improvement to the gross profit
results was heavily influenced by the performance in the Lighting
Products segment. A return to normal production levels and higher sales
volumes aided domestic results. European (Germany) ballast gross
profits more than doubled on slightly lower sales volume but remained at
levels which cannot yet absorb selling, general and administrative costs
to achieve operating profitability. Power Supplies results were
bolstered by favorable volume and mix of custom power supplies both in
Europe and domestically and more than offset diminished levels of gross
profits associated with special purpose (recreational vehicle) power
supplies sales. Motors and Controls results were positively impacted by
residential fractional horsepower results which benefited from continued
strength in housing and related sectors. Generator results were slightly
diminished from the first six months of fiscal 1996 due to lower sales
and production.
Operating Expenses.
Selling, general and administrative (SG&A) expense was $76.6 million
(13.1% of net sales) in the first six months of fiscal 1997 versus $76.9
million (13.9% of net sales) in the first six months of fiscal 1996.
Lower marketing costs in Lighting Products resulted from lower inventory
levels which reduced warehousing and related costs and reduced expenses
associated with sales costs. Offsetting these reductions, Lighting
Products saw increased consulting expenses aimed at reducing
manufacturing inefficiencies. The Company's modification of its health
plan design also reduced costs from the prior six months.
Interest and Other Expense.
Interest expense of $14.7 million in the first six months of fiscal 1997
was reduced from the $16.6 million incurred in the first six months of
fiscal 1996. Significant working capital improvements and improved
profitability have reduced debt levels. Interest rates are slightly
lower and have also contributed to the reduced interest expense. Other
expense of $2.1 million is favorable to the $2.4 million of expense in
the first six months of fiscal 1996.
Net Income.
The Company recorded an after tax income of $10.1 million in the first
six months of fiscal 1997 versus an after tax loss of $5.1 million in
fiscal 1996. The improvement was primarily driven by the expanded
operating profit results. The tax provision for the initial six months
in fiscal 1997 was $6.8 million versus a tax benefit of $1.1 million in
fiscal 1996.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES:
Long term borrowings outstanding as of December 31, 1996 (including the
current portion) totaled $297.3 million decreased from the $322 million as of
June 30, 1996. The decrease in long term borrowings resulted primarily from
the improved working capital levels in accounts receivable and inventory and
profit performance through the first six months of fiscal year 1997. In
September of 1996, the Company sold the assets and liabilities of its
Jefferson Transformer business for cash and a note receivable aggregating
$3.5 million. The cash proceeds from the transaction were used to reduce
borrowings under the Company's Bank Loan Agreement. As of December 31, 1996
the Company had approximately $73 million of borrowing capacity under its
Bank Loan Agreement. Year to date cash outflows associated with the
Company's repositioning reserves approximate $3 million. The Company's total
cash outflows for fiscal year 1997 for the repositioning program is not
expected to exceed $15 million.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Employment Agreement dated as of June 1, 1996 between the
Company and Ronald N. Hoge
10.2 MagneTek, Inc. Deferral Investment Plan
10.3 MagneTek, Inc. Performance-Based Pension Restoration Plan
(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 6, 1997
--------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
<PAGE>
EXHIBIT 99.1
EMPLOYMENT AGREEMENT
This AGREEMENT ("Agreement") is entered into as of June 1, 1996, between
MagneTek, Inc., a corporation (the "Company"), and Ronald N. Hoge (the
"Executive").
RECITALS
--------
WHEREAS, the Company and the Executive desire that the Executive be
employed by the Company on the terms and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto agree as follows:
AGREEMENT
---------
1. CAPITALIZED TERMS. Capitalized terms shall have the meanings set
forth in Section 13.
2. EMPLOYMENT. The Company hereby employs the Executive and the
Executive hereby accepts employment with the Company upon the terms and
conditions hereinafter set forth.
3. TERM. The term of this Agreement shall commence on June 1, 1996 and
shall end on June 30, 1999; PROVIDED, HOWEVER, that as of June 30, 1998 and each
anniversary thereof such term shall be extended for an additional period of one
year unless either the Executive or the Company shall provide written notice of
termination to the other party at least 30 days prior to such date and PROVIDED
FURTHER, that this Agreement shall automatically terminate on the date of the
Company's annual shareholders' meeting that first follows the Executive's
65th birthday. The term during which the Executive is employed by the Company
under this Agreement is hereinafter referred to as the "Term."
4. DUTIES, TITLE.
(a) CHIEF EXECUTIVE OFFICER. The Executive shall be employed by the
Company as Chief Executive Officer of the Company through the Term. In such
capacity, the Executive shall perform such duties as are reasonably and
typically required by such office and as may be assigned from time to time by
the Board of Directors of the Company, to whom the Executive shall report.
Subject to the powers, authorities and responsibilities vested in the Board
under the General Corporation Law of the State of Delaware, the Executive's
responsibilities shall include the management, direction and development of all
Company's operations and activities. Each of the Company's departments (except
for internal audit, which reports to the Audit Committee of the Board of
Directors) will report directly to the Executive, but may also report to the
Chairman of the Board of Directors.
<PAGE>
(b) EXCLUSIVITY. The Executive shall devote his full business time,
attention and energies to the business and affairs of the Company (which may
include civic, professional and charitable activities), and shall not, without
the prior approval of the Board of Directors of the Company, engage in any other
business or render services of a business, professional or commercial nature to
any other entity or person. The Board of Directors approves the Executive's
continuing to act as a member of the Board of Directors of Merrill Corporation,
a publicly-traded company located in St. Paul, Minnesota, and Executive agrees
not to serve on the Board of Directors of any other public company without the
prior approval of the Board of Directors.
5. COMPENSATION.
(a) BASE SALARY. For all services rendered by the Executive under
this Agreement, the Company shall pay the Executive a minimum salary of five
hundred thousand dollars ($500,000) per year, payable in accordance with the
Company's standard payroll policy (hereinafter, as in effect from time to time,
the "Base Salary"). The Executive's Base Salary shall be reviewed annually by
the Compensation Committee of the Company's Board of Directors (or by the Board
of Directors if there is no such Committee). Such review will include an
analysis of data on comparable compensation and a review of the Executive's
performance during the prior year.
(b) ANNUAL BONUS. In addition, the Executive shall be eligible to
earn an annual bonus based upon formulae at least as favorable, on a percentage
of Base Salary basis, as are available to other executive officers under the
Company's individual bonus plan, as such plan is now in effect or is hereinafter
adopted or amended, PROVIDED that the applicable criteria for earning such bonus
under the plan are satisfied.
6. STOCK OPTIONS AND STOCK GRANTS.
(a) INITIAL STOCK GRANT. As of April 25, 1996 the Company has
granted one hundred fifteen thousand and eight hundred (115,800) shares of
Common Stock at no cost (except the par value of such shares) to the Executive
(the "Initial Shares"). The Initial Shares shall be "Restricted Stock" pursuant
to, and as defined in, the 1989 Plan. The Restricted Stock Agreement under
which the Initial Shares were granted is in the form of Exhibit A hereto and
provides for the termination of all restrictions upon the underlying Common
Stock no later than August 31, 1997.
(b) OPTIONS. As of April 25, 1996, the Executive also was granted
nonqualified options under the 1989 Plan to purchase up to four hundred thousand
(400,000) Company Shares. Such options shall be exercisable at the following
prices, and the dates for the commencement of vesting shall be as follows:
2
<PAGE>
NUMBER OF SHARES PRICE COMMENCEMENT OF VESTING PERIOD
---------------- ----- ------------------------------
100,000 $9.3125/share April 25, 1996
100,000 $12/share June 30, 1997
100,000 $16/share June 30, 1998
100,000 $20/share June 30, 1999
These options shall vest ratably on an annual basis, over three (3) years
on the first, second and third anniversaries of the dates set forth above. The
Agreements pursuant to which the aforesaid options are granted are set forth as
Exhibit B hereto.
(c) ADDITIONAL STOCK GRANTS. If during any Performance Period (as
defined below) the Average Fair Market Value (as defined below) of the Common
Stock equals or exceeds a Target Price set forth in the table below for such
Performance Period, then, subject to the terms and conditions set forth in this
Section 6(c), Executive shall be granted a number of shares of Common Stock
equal to the number of shares set forth next to such Target Price in the table
below, less the number of shares of Common Stock (if any) previously granted to
Executive for that particular Performance Period. For purposes of this Section
6(c), the term "Performance Period" shall mean the period of time commencing on
June 1, 1996 and ending on the date set forth in the table below (such that
initially five Performance Periods shall run concurrently, and between December
31, 1997 and December 31, 1998 four Performance Periods shall run concurrently,
and so on), and the term "Average Fair Market Value" shall mean the average Fair
Market Value (as defined in the 1989 Plan) of the Common Stock over any 60
consecutive trading days during a Performance Period.
Performance Period Ending 12/31/97 Performance Period Ending 12/31/00
- ---------------------------------- ----------------------------------
Target Price Number of Shares Target Price Number of Shares
- ------------ ---------------- ------------ ----------------
$15.00 25,000 $34.00 25,000
$16.50 37,500 $37.40 37,500
$18.00 50,000 $40.80 50,000
Performance Period Ending 12/31/98 Performance Period Ending 12/31/01
- ---------------------------------- ----------------------------------
Target Price Number of Shares Target Price Number of Shares
- ------------ ---------------- ------------ ----------------
$20.00 25,000 $44.00 25,000
$22.00 37,500 $48.40 37,500
$24.00 50,000 $52.80 50,000
Performance Period Ending 12/31/99
- ----------------------------------
Target Price Number of Shares
- ------------ ----------------
$27.00 25,000
$29.70 37,500
$32.40 50,000
No Common Stock shall be awarded under this Section 6(c) if the Executive
is not at the time employed by the Company. Each Common Stock award provided
for in this Section 6(c) shall be without restriction, and shall be resaleable
by Executive substantially as freely as would
3
<PAGE>
be a Stock Award under the 1989 Plan. Each Common Stock award provided for
in this Section 6(c) shall be granted as of the first business day after the
Average Fair Market Value has equal or exceeded a Target Price for the
applicable Performance Period.
(d) SPECIAL BONUS. No later than September 30, 1997, the Company
shall pay to the Executive a cash bonus equal to (x) the amount, if any, by
which (i) the Value of the incremental restricted stock awards and stock
options of Allied Signal Corporation ("Allied Signal") outstanding to the
Executive on the last day of his employment with Allied Signal that would
have vested on or before August 31, 1997 had the Executive remained employed
by Allied Signal but were not vested on such termination date exceeds (ii)
the Value of the Initial Shares and the vested portion of the stock options
granted to the Executive by the Company pursuant to this Section 6 PLUS (y)
an amount equal to the excess, if any, of the positive spread over exercise
price the Executive WOULD HAVE obtained had he simultaneously exercised and
sold those Allied Signal stock options described on Exhibit C that were
vested at the time his employment with Allied Signal terminated and were in
fact exercised (and the underlying Allied Signal Stock been sold) by him
promptly thereafter, had such options not expired and INSTEAD been exercised
by the Executive on August 31, 1997, less any negative amount (i.e., amount
by which the Value of the Executive's Company stock exceeded the putative
Value of his Allied Signal Stock) resulting from the calculation described in
clause (x) preceding. For purposes of this Section 6(d), "Value" shall mean,
as applicable, the average closing price of Allied Signal's stock or the
Common Stock on the ten trading days of which August 31, 1997 is the fifth
trading day. As to restricted stock, such Value shall be the difference
between the average trading price so derived and any purchase price paid or
payable by the Executive for such stock, and as to stock options, such Value
shall be the difference between the average trading price so derived and the
applicable exercise price of the options. Exhibit C hereto sets forth the
incremental Allied Signal restricted stock awards and stock options, and the
purchase or exercise prices thereof, to be used for purposes of calculating
the special bonus payable hereunder. To the extent the Executive exercised
any Allied Signal stock options described on Exhibit C and did not sell the
Underlying Allied Signal Stock, the Executive shall be entitled to an amount
equal to 10% per annum interest in respect of the purchase price actually
paid by him so to exercise the stock options for the period from exercise to
August 31, 1997, but not to any bonus pursuant to clause (y) preceding.
(e) TAX PAYMENTS. At such time as the Executive is required to pay
income tax in respect of the foregoing Common Stock awards, the Company shall
loan the Executive upon request on an unsecured basis, an amount equal to his
Income Tax liability in respect thereof. Such loans shall be due in full upon
the earlier of (i) the sale by the Executive of more than 50% of the related
shares of Restricted Stock and (ii) the fifth anniversary of the date the loan
is made. Such loans shall bear interest at a rate sufficient to avoid imputed
income to the Company, with full recourse but unsecured, and otherwise upon
customary terms and provisions. All amounts due under such loans shall be due
and payable in full within 90 days of the termination of the Executive's
employment with the Company, for any reason. In the alternative, at the
Executive's sole option, the Company hereby grants Executive the right to elect
to have the Company withhold from any such grant of Common Stock shares with an
aggregate Fair Market Value on the grant date equal to the amount the Company is
required to withhold for income tax purposes. In such event, no loan shall be
made to the Executive.
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7. BENEFITS. The Executive shall be eligible to receive all benefits
generally made available to executive officers of the Company, including
(without limitation) the benefits of medical, supplemental medical, dental and
hospitalization coverage for the Executive and his eligible dependents,
disability coverage, financial planning services, and pension and profit sharing
plans (including, but not limited to, 401(k) plans) and group-term life
insurance coverage, all as and to the extent in effect from time to time. The
Company may, in its sole discretion, elect to purchase other life insurance
covering the Executive's life for the benefit of the Company or any other
beneficiary designated by the Company. The Executive shall cooperate in any
reasonable manner requested by the Company to assist in obtaining such life
insurance, including submitting to medical examination. If any such "key man"
life insurance policy remains in force at the time of termination of the
Executive's employment by the Company, for any reason other than death or
disability, the Executive shall have the right to elect to purchase such policy
from the Company for an amount equal to the cash value (if any) of such policy.
The Executive shall be entitled to vacation benefits in accordance with Company
policies to the extent in effect from time to time, and if no such policy is in
effect, with the approval of the Board of Directors. The Executive shall be
entitled to membership in one country club and shall be provided with a company
car equivalent to a top-of-the-line Lexus.
8. REIMBURSEMENT FOR EXPENSES.
(a) BUSINESS EXPENSES. The Executive is authorized to incur expenses
in connection with the business of the Company, including expenses for
entertainment, travel and similar items, as long as such expenses are reasonable
and necessary and are consistent with budgets established from time to time by
the Company. The Company shall reimburse the Executive for such reasonable and
necessary expenses, and the Executive shall provide documentation to the Company
for such expenses, which shall be submitted for approval to the Chairman of the
Board or his designee or, in the event the Executive is the Chairman of the
Board, to the Chairman of the Audit Committee of the Board or his designee.
(b) OUT-OF-POCKET MOVING COSTS. The Company shall reimburse the
Executive for his reasonable out-of-pocket costs of moving his family from Los
Angeles to the Nashville area. The Executive is likewise entitled to a living
allowance in respect of his and his family's housing and transportation expenses
incurred in connection with his temporary living arrangements and commuting to
and from Los Angeles prior to such move to the Nashville area, which is expected
to occur not later than August 31, 1997. All costs for which the Executive is
entitled to be reimbursed under this Paragraph shall be documented in accordance
with the Company's expense reimbursement policies.
(c) INTEREST-FREE LOAN. In view of the likelihood that the Executive
may not sell his California home until after he has acquired a new home in the
Nashville area, the Executive shall be entitled to an interest-free loan from
the Company in an amount up to one million dollars ($1,000,000) for a period of
two (2) years or until the Executive consummates the sale of his home in Los
Angeles, whichever first occurs. Such loan will be made at the time the
Executive purchases a home in the Nashville area and, if reasonably possible,
will be structured so as to comply with the provisions of Treasury Regulation
Section 1.7872-5T(b)(6). Such loan will be secured by a mortgage, deed of trust
or other appropriate lien, on customary terms
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and provisions, on, at the Executive's option (i) the Nashville residence,
(ii) the Executive's Los Angeles residence or (iii) other collateral
reasonably acceptable to the Company, in favor of the Company.
9. TERMINATION OF EMPLOYMENT BY THE COMPANY. The Company shall have the
right to terminate the Executive's employment under the following circumstances:
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
upon the death of the Executive or upon notice from the Company to the Executive
in the event an illness or other disability has rendered the Executive unable to
perform his duties for either (i) six (6) consecutive months or (ii) nine (9)
months of any 12 consecutive months as determined in good faith by the Company
(taking into account reasonable accommodation of the Executive's disability by
the Company to the extent such reasonable accommodation is legally required
under the Americans With Disabilities Act or other applicable law). In the
event of termination of his employment pursuant to this Section 9(a), the
Executive (or his estate or heirs) shall continue to receive the compensation
and benefits provided for in this Agreement through the end of the calendar
month in which termination because of death or disability occurs. The Executive
(or his estate or heirs) shall also be entitled to receive the Base Termination
Payment.
(b) FOR CAUSE TERMINATION. The Company may terminate the Executive's
employment for cause if and only if the Board of Directors, exercising good
faith, determines that the Executive (i) has been convicted of a felony or a
misdemeanor involving moral turpitude; (ii) has willfully violated any material
policies or directives of the Board of Directors; (iii) has committed fraud or
any material act of dishonesty in connection with his employment hereunder or
(iv) fails to perform adequately his responsibilities under this Agreement as
demonstrated by objective and verifiable evidence showing that the Company's
performance is materially deteriorating for reasons that can fairly be
attributed to decisions, or failures to act, by the Executive; PROVIDED,
HOWEVER, that the Board of Directors shall have notified the Executive of such
deterioration and Executive shall not, within a sixty-day period following such
notification, taken actions that have either remedied such deterioration or
satisfied the Board of Directors, in its good faith judgment, that such
deterioration will be remedied. In the event of termination of his employment
pursuant to this Section 9(b), the Executive shall receive accrued and unpaid
Base Salary and wages for accrued and unused vacation time calculated as of the
effective date of termination based on this Executive's Base Salary in effect on
the date thereof.
10. TERMINATION BY THE EXECUTIVE.
(a) FOR GOOD REASON. The Executive may terminate his employment
under this Agreement for good reason if the Company breaches any material term
of this Agreement and fails to cure such breach within sixty (60) days following
written notice of the alleged breach setting forth with reasonable specificity
the action(s) necessary to cure.
(b) WITHOUT REASON. The Executive may terminate his employment under
this Agreement without reason by giving the Company ninety (90) days' prior
written notice.
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(c) CONSTRUCTIVE TERMINATION. In the event of a Constructive
Termination, the Executive may terminate his employment under this Agreement by
giving the Company sixty (60) days' prior written notice if the Company fails to
cure such Constructive Termination within sixty (60) days following such written
notice.
11. RIGHTS OF THE EXECUTIVE UPON TERMINATION OF HIS EMPLOYMENT. In the
event the Executive's employment is terminated by the Company pursuant to
Section 9, the Executive shall have the rights set forth in Section 9(a) or
9(b), as applicable. Subject to Section 12 below, if the Company terminates the
Executive's employment without Cause, or the Executive terminates his employment
pursuant to Sections 10(a) or (c), the Executive shall be entitled to receive
(i) accelerated vesting of all outstanding stock options and of all previously
granted Restricted Stock awards, (ii) the Base Termination Payment and
(iii) cash in an amount equal to the product of his monthly Base Salary in
effect on the date his employment is terminated multiplied by the number of
months remaining in the Term, as then in effect. If the Executive terminates
his employment pursuant to Section 10(b), he shall have only the rights set
forth in Section 9(a).
12. TERMINATION OF THE EXECUTIVE'S EMPLOYMENT WITHIN ONE YEAR AFTER A
CHANGE OF CONTROL. In the event the Executive's employment is terminated by the
Company (or its successor-in-interest) within one year after a Change of Control
other than pursuant to Section 9, or within such one-year period pursuant to
Section 10(a) or 10(c), the Executive shall be entitled to receive:
(a) the Base Termination Payment;
(b) a lump-sum cash payment in an amount equal to the lesser of
(i) 2.99 times the sum of (x) the Executive's Base Salary in effect on such date
of termination plus (y) the bonus for the most recent fiscal year in which the
Executive received a bonus, and (ii) the maximum amount that the Company shall
be allowed to deduct as a compensation expense on its federal income tax return
for the fiscal year in which the payment is made, but without regard to the
application of Section 162(m) of the Code as determined by the Company's
independent accountants; PROVIDED, HOWEVER, that any amount paid pursuant to
this Section 12 shall be paid in lieu of any other amount of severance relating
to salary or bonus continuation to be received by Executive upon termination of
employment of Executive under any severance plan, policy or arrangement of the
Company; and
(c) accelerated vesting of all outstanding stock options and of all
previously granted Restricted Stock awards.
The Executive acknowledges that the Base Termination Payment may be considered a
"parachute payment" within the meaning of Section 280G of the Code and
accordingly, may result in a reduction of amounts payable pursuant to
Section 12(b).
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13. DEFINED TERMS. The following terms shall be defined as follows:
(a) BASE TERMINATION PAYMENT. "Base Termination Payment" shall
include all accrued and unpaid Base Salary and wages for accrued and unused
vacation time (calculated as of the effective date of termination based on the
Executive's Base Salary in effect on the date thereof). As part of the Base
Termination Payment, the Executive shall also receive the lesser of (i) a
PRORATA portion of any bonus and other incentive-based compensation for the
fiscal year in which termination occurs based on the amount the Executive
received in the Company's prior fiscal year and (ii) the portion of the accrued
bonus accounted for in the fiscal year in which termination occurs that is
attributable to the Executive. The Executive's PRORATA amount shall be
calculated based on the number of days elapsed in the Company's fiscal year at
the time the termination becomes effective. Notwithstanding the foregoing, if
termination occurs prior to the end of the first fiscal year under the Term of
this Agreement, the payment to the Executive shall be an equitable PRORATA
amount of bonuses and other incentive-based compensation the Executive could
reasonably have expected for the first fiscal year. In addition, the Company
agrees to purchase, at the Executive's election, the Executive's primary
residence in the Nashville area for the fair market value of the residence as
determined by an appraisal (conducted by an appraiser which Company and the
Executive shall mutually agree upon) and to pay all closing costs associated
with such purchase. Any unpaid amount loaned to the Executive pursuant to
Section 8(c) shall be offset against the purchase price of the residence, but
the Executive shall be responsible for any additional unpaid amount under the
loan. Except as otherwise expressly set forth in this Agreement, all employee
benefits shall terminate as of the effective date of termination of the
Executive's employment; PROVIDED, HOWEVER, that if the terms of any Company plan
governing such employee benefits provide for an extended termination date, the
terms of such written plan shall govern for purposes of such benefits.
Termination of employee benefits shall also be subject to any rights the
Executive may have under applicable law to continue to receive benefits,
including but not limited to, the right to elect continuation of medical
insurance coverage. The Base Termination Payment shall include the right to
receive any continued employee benefits available under Company plans or
applicable law. All cash payments required to be made pursuant to the Base
Termination Payment shall be paid in a lump sum, subject to applicable
withholding, no more than 60 days after the date of termination of the
Executive's employment.
(b) CAUSE. "Cause" has the meaning set forth in Section 9(b).
(c) CHANGE IN CONTROL. "Change in Control" shall mean (i) any event
described under Section 4.7(a) of the 1989 Plan, unless such event occurs in
connection with a "Distress Sale," and (ii) any event which results in the
Board of Directors ceasing to have at least a majority of its members be
"continuing directors." For this purpose, a "continuing director" shall mean a
director of the Company who held such position on June 1, 1996 or who thereafter
was appointed or nominated to the Board of Directors by a majority of continuing
directors.
(d) CODE. "Code" shall mean the Internal Revenue Code of 1986, as
amended.
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(e) COMMON STOCK. "Common Stock" shall mean the Company's common
stock, par value $.01 per share.
(f) CONSTRUCTIVE TERMINATION. "Constructive Termination" shall mean
either (i) the Executive's title, Base Salary or responsibilities have been
materially diminished or reduced without his consent; or (ii) the Executive's
work location has been relocated to any area that is not the metropolitan
Nashville area without his consent.
(g) DISTRESS SALE. A "Distress Sale" shall mean a Change of Control
occurring within 18 months of any of the following: (i) the Company's
independent public accountants shall have made a "going concern" qualification
in their audit report (other than by reason of extraordinary occurrences, such
as material litigation, not attributable to poor management practices); (ii) the
Company shall lack sufficient capital for its operations by reason of
termination of its existing credit lines or the Company's inability to secure
credit facilities upon acceptable terms; or (iii) the Company shall have
voluntarily sought relief under, consented to or acquiesced in the benefit of
application to it of the Bankruptcy Code of the United States of America or any
other liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments or similar
laws, or shall have been the subject of proceedings under such laws (unless the
applicable involuntary petition is dismissed within 60 days after its filing).
(h) FAIR MARKET VALUE. "Fair Market Value" has the meaning set forth
in the 1989 Plan or any successor Company stock plan.
(i) 1989 PLAN. "1989 Plan" shall mean the Amended and Restated 1989
Incentive Compensation Plan of MagneTek, Inc., as in effect from time to time.
(j) SECTION 83(b) ELECTION. "Section 83(b) Election" shall mean an
election under Section 83(b) of the Code, or any successor provision.
14. INCOMPATIBLE ACTIVITIES. During the Term, the Executive:
(a) shall not engage in any activities, whether as employer,
proprietor, partner, stockholder (other than the holder of less than 5% of the
stock of a corporation the securities of which are traded on a national
securities exchange or the NASDAQ National Market System), director, officer,
employee or otherwise, in competition with (i) the businesses conducted at the
date hereof by the Company or (ii) any business in which the Company is
substantially engaged at any time during the Term;
(b) shall not solicit, in competition with the Company, any person
who is a customer of any business conducted by the Company at the date hereof or
of any business in which the Company is substantially engaged at any time during
the Term; and
(c) shall not induce or attempt to persuade any employee of the
Company to terminate his or her employment relationship.
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In the event the Executive terminates his employment pursuant to Section 10(b),
the foregoing provisions shall remain effective until the first anniversary of
the date of such termination.
15. TRADE SECRETS. The Executive shall not, at any time during the Term
or thereafter, make use of or divulge any trade secrets or other confidential
information of the Company, except to the extent that such information becomes a
matter of public record other than through the actions of Executive, is
published in a newspaper, magazine or other periodical available to the general
public, or as the Board may so authorize in writing; and when the Executive
shall cease to be employed by the Company, the Executive shall surrender to the
Company all equipment, property, records and other documents obtained by him or
entrusted to him during the course of his employment hereunder (together with
all copies thereof) which pertain specifically to any of the businesses covered
by the covenants in Section 14 or which were paid for by the Company.
16. SCOPE OF COVENANTS; REMEDIES. The following provisions shall apply to
the covenants of the Executive contained in Sections 14 and 15:
(a) the covenants contained in subparagraphs (a) and (b) of
Section 14 shall apply within all the territories in which the Company is
actively engaged in the conduct of business during the Term, including, without
limitation, the territories in which customers are then being solicited;
(b) without limiting the right of the Company to pursue all other
legal and equitable remedies available for violation by the Executive of the
covenants contained in Sections 14 and 15, it is expressly agreed by the
Executive and the Company that such other remedies cannot fully compensate the
Company for any such violation and that the Company shall be entitled to
injunctive relief to prevent any such violation or any continuing violation
thereof;
(c) each party intends and agrees that if in any action before any
court or agency legally empowered to enforce the covenants contained in
Sections 14 and 15 any term, restriction, covenant or promise contained therein
is found to be unreasonable and accordingly unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the extent
necessary to make it enforceable by such court or agency; and
(d) the covenants contained in Sections 14 and 15 shall survive the
conclusion of the Executive's employment by the Company.
17. GENERAL.
(a) WITHHOLDING. All cash compensation payable to the Executive
under this Agreement shall be subject to any applicable federal, state and local
tax withholding. To the extent that the Company is legally required to withhold
on the value of non-cash compensation received by the Executive under this
Agreement, the Company shall be entitled to withhold such amounts from cash
compensation due hereunder.
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(b) MITIGATION OF DAMAGES. The Executive shall not be required to
mitigate his damages by seeking alternative employment in the event that the
Company breaches this Agreement, nor shall the Base Termination Payment nor the
payments due under Sections 11 or 12 be reduced by any earnings that the
Executive may receive from any other source.
(c) BINDING AGREEMENT. This Agreement shall be binding upon and
inure to the benefit of the Executive and his heirs, and the Company and its
successors and assigns. Neither the Company nor the Executive may, without the
express written consent of the other, assign any rights or obligations hereunder
to any person, firm or corporation.
(d) AMENDMENT; WAIVER. This instrument contains the entire agreement
of the parties and shall supersede any and all other agreements among the
parties. No amendment or modification of this Agreement shall be valid unless
evidenced by a written instrument executed by the parties hereto. No waiver by
either party hereto of any breach by the other party of any provision or
condition of this Agreement shall be deemed a waiver of any similar or
dissimilar provision or condition at the same or any prior or subsequent time.
(e) GOVERNING LAW. This agreement shall be governed by and construed
in accordance with the laws of the State of Tennessee.
(f) NOTICES. All notices which a party is required or may desire to
give to another party under or in connection with this Agreement shall be given
in writing by addressing the same to the, other party as follows:
If to the Executive, to:
Ronald N. Hoge
420 Elmington Avenue
Apartment 1406
Nashville, Tennessee 37215
If to the Company, to:
MagneTek, Inc.
Attention: Andrew Galef, Chairman
26 Century Boulevard
P.O. Box 290159
Nashville, Tennessee 37229-0159
or at such other place as may be designated in writing by like notice. Any
notice shall be deemed to have been given (a) three (3) business days after
being addressed as required herein and deposited by certified or registered
mail, return receipt request, postage prepaid, in the United States mail; or (b)
twenty four (24) hours after being addressed as required herein and delivered to
a nationally recognized overnight courier service; or (c) upon personal
delivery.
(g) SEVERABILITY. Each provision of this Agreement constitutes a
separate and distinct undertaking, covenant or provision hereof. Should any
provision of this Agreement finally be determined to be unlawful, such provision
shall be deemed severed from this
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Agreement, but every other provision of this Agreement shall remain in full
force and effect, and in substitution for any such provision held unlawful,
there shall be substituted a provision of similar import reflecting the
original intent of the parties hereto to the extent permissible under law.
(h) ARBITRATION.
(i) Any dispute between the Executive and the Company arising
out of this Agreement, the termination of this Agreement, or otherwise related
to Executive's employment with the Company, shall be resolved by reference to a
law firm in Nashville or Memphis, Tennessee, as follows: such law firm shall be
selected by mutual agreement of the parties to the dispute. The law firm so
selected shall conduct the arbitration on the basis of such procedures as it, in
its sole judgment, deems appropriate and expeditious, taking into account the
nature of the issues, the amount in dispute and the positions asserted by the
parties. The parties intend to create a flexible, practical and expeditious
method of resolving any disagreements hereunder. Accordingly, the law firm
shall not be required to follow any particular rules or procedure, except that
it shall render a written decision resolving each and every dispute submitted to
it by the parties.
(ii) If the parties are unable to agree upon a law firm to
resolve the dispute within 30 days of the date on which any party has made a
written request to all other parties to select a law firm to arbitrate the
dispute, the dispute shall be subject to mandatory arbitration in Nashville,
Tennessee under the rules of the American Arbitration Association (the "AAA").
The matter shall be heard by a single arbitrator, who shall be a lawyer with
significant experience in corporate and executive benefit matters. The
arbitrator shall have no authority to award punitive damages under any
circumstances to any party unless repudiating the arbitrator's authority to do
so would cause this arbitration clause to be ruled ineffective under applicable
state or federal law. The parties, however, expressly grant the arbitrator the
authority to issue an award for injunctive or other equitable relief. Nothing
stated herein, however, shall prevent or limit any party from applying to a
court of competent jurisdiction for provisional relief, pursuant to applicable
state or federal law, on the ground that the arbitration award to which the
applicant may be entitled may be rendered ineffectual without provisional
relief. The parties shall be entitled to take discovery pursuant to the
procedural laws of Tennessee governing civil litigation; PROVIDED, HOWEVER, that
no party shall be entitled to take more than five depositions without leave of
the arbitrator. The hearing shall be completed within 180 days of the earliest
submission to the law firm or AAA. The arbitrator or law firm shall be required
to submit a written award, in a form to be mutually agreed upon by the parties,
within 45 days of the close of the hearing if post-arbitration briefs are
submitted, or within 30 days of the close of the hearing if post-arbitration
briefs are not submitted.
(iii) The parties intend this arbitration provision to be
valid, enforceable, irrevocable and construed as broadly as possible. The
parties further intend that the arbitration hereunder be conducted in as
confidential a manner as is practicable under the circumstances, and intend for
the award to be confidential unless that confidentiality would frustrate the
purpose of the arbitration or render the remedy awarded ineffective. The
decision of the arbitrator or law firm, as the case may be, shall be final and
binding and, unless otherwise
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expressly permitted by law, shall not be subject to review or challenge of
any kind. The law firm or arbitrator shall have the discretion to assess
interest on amounts found to be owing hereunder, at a rate not to exceed the
applicable rate in effect for the relevant period charged by the Company's
lead lending bank. The Company shall pay all reasonable legal fees and
related expenses incurred by the Executive in connection with any proceeding
pursuant to this Section 17(h) to enforce the provisions of this Agreement in
which the Executive is successful as to material issues, resulting in an
award of at least $100,000. The Company and the Executive consent to enter
any determination pursuant to this Section 17(h) as a judgment in any court
of competent jurisdiction.
(iv) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each one of which will be considered an original and all of which
together will be considered one and the same agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the ____
day of December, 1996.
--------------
RONALD N. HOGE
MAGNETEK, INC.
By:
---------------------------
Name:
-------------------------
Title:
------------------------
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EXHIBIT A
RESTRICTED STOCK AGREEMENT
PURSUANT TO THE
SECOND AMENDED AND RESTATED
1989 INCENTIVE STOCK COMPENSATION PLAN
OF MAGNETEK, INC.
This Restricted Stock Agreement (this "Agreement") is made and entered into
as of the Date of Award indicated below by and between MagneTek, Inc., a
Delaware corporation (the "Company"), and Ronald N. Hoge (the "Executive").
WHEREAS, the Company's principal executive offices are located in
Nashville, Tennessee;
WHEREAS, the Executive currently is President of the Aerospace Equipment
Systems Division of Allied Signal, Inc., whose principal executive offices are
located in Torrance, California;
WHEREAS, the Company and the Executive desire that the Executive be
employed by the Company as its President and Chief Executive Officer on such
terms and conditions as shall be mutually agreed upon in writing by the Company
and the Executive;
WHEREAS, as an inducement to the Executive to accept the Company's offer of
employment in Nashville, Tennessee, the Company desires to grant the Executive
the right to purchase shares of the Common Stock, par value $.01 per share, of
the Company (the "Common Stock");
WHEREAS, pursuant to the Company's second Amended and Restated 1989
Incentive Stock Compensation Plan (the "Plan"), the committee of the Board of
Directors of the Company administering the Plan (the "Committee") has approved
the award to Executive of the right to purchase shares of Common Stock, on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. AWARD; CERTAIN TERMS AND CONDITIONS. The Company hereby awards to
Executive, and Executive hereby accepts, as of the Date of Award, the right to
purchase the number of shares of Common Stock indicated below (the "Restricted
Shares") for the Cash Purchase Price per share indicated below (which shall be
equal to at least $.01). The aggregate Cash Purchase Price shall be paid to the
Company promptly following the Date of Award. The Restricted Shares shall be
subject to all of the terms and conditions set forth in this Agreement,
including the restrictions imposed pursuant to Section 3 hereof; provided,
however, that on
<PAGE>
August 31, 1997, such restrictions shall terminate in all respects (the
termination of such restrictions with respect to any Restricted Share, for
any reason, shall be referred to herein as the "vesting" of such share).
Date of Award: April 25, 1996
Number of shares purchasable: 115,800
Cash Purchase Price per share: $.01
2. CONSIDERATION FOR SHARES; METHOD OF PAYMENT.
(a) The consideration for the issuance and sale of Restricted Shares
contemplated hereby may include, in addition to the Cash Purchase Price per
share indicated in Section 1 hereof, consideration in the form of past services
to the Company and/or one or more of its subsidiaries.
(b) The aggregate Cash Purchase Price shall be paid to the Company in
cash or by check payable to the Company. Upon payment to the Company in full of
the aggregate Cash Purchase Price as provided herein, Executive shall be deemed
to have purchased the Restricted Shares effective as of the Date of Award, and
shall be the holder of record.
3. RESTRICTIONS. Until a Restricted Share vests, it shall not be liable
for the debts, contracts or engagements of Executive or successors in interest
nor 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.
4. ACCELERATION OF VESTING.
(a) ACCELERATION OF VESTING BY COMMITTEE. The Committee, in its sole
discretion, may accelerate the vesting of any or all of the Restricted Shares at
any time and for any reason.
(b) CERTAIN EVENTS CAUSING ACCELERATION OF VESTING. Notwithstanding
anything to the contrary in this Agreement, the Restricted Shares shall become
fully vested immediately prior to the consummation of any of the following
events:
(i) the liquidation of the Company;
(ii) a merger or consolidation of the Company with or into
another corporation not effected solely to reincorporate the Company in a
different state;
(iii) the acquisition by another corporation or person of 40% or
more of the Company's then outstanding voting stock not effected solely to
reincorporate the Company in a different state; or
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(iv) the acquisition by another corporation or person of all or
substantially all of the Company's assets.
(c) ACCELERATION UPON NORMAL RETIREMENT, ETC. Notwithstanding
anything to the contrary in this Agreement, the Restricted Shares shall become
fully vested immediately upon the Executive's normal retirement, death, total
disability or (with the consent of the Committee) early retirement.
5. REPURCHASE OF RESTRICTED SHARES. Notwithstanding anything to the
contrary in this Agreement, if Executive shall cease to be employed by the
Company, a Parent Corporation or a Subsidiary for any reason other than
Executive's normal retirement, death, total disability or (with the consent of
the Committee) early retirement, then, unless the Committee shall determine
otherwise, the Company shall repurchase each then unvested Restricted Share at a
purchase price equal to the Cash Purchase Price per share.
6. PAYMENT OF WITHHOLDING TAXES. If the Company becomes obligated to
withhold an amount on account of any federal, state or local tax imposed as a
result of the sale of the Restricted Shares to Executive pursuant to this
Agreement or the termination of the restrictions imposed upon the Restricted
Shares hereunder, including, without limitation, any federal, state or other
income tax, or any F.I.C.A., state disability insurance tax or other employment
tax (the date upon which the Company becomes so obligated shall be referred to
herein as the "Withholding Date"), then Executive shall pay such amount (the
"Withholding Liability") to the Company on the Withholding Date in cash or by
check payable to the Company. Executive hereby consents to the Company
withholding the full amount of the Withholding Liability from any compensation
or other amounts otherwise payable to Executive if Executive does not pay the
Withholding Liability to the Company on the Withholding Date, and Executive
agrees that the withholding and payment of any such amount by the Company to the
relevant taxing authority shall constitute full satisfaction of the Company's
obligation to pay such compensation or other amounts to Executive.
7. TAXABLE INCOME AND SECTION 83(B) ELECTION. Executive understands that
the taxable income recognized by Executive as a result of the award of
Restricted Shares hereunder, and the Withholding Liability and Withholding Date
with respect thereto, would be affected by a decision by Executive to make an
election under Section 83(b) of the Internal Revenue Code (an "83(b) Election")
with respect to the Restricted Shares within 30 days of the Date of Award.
Executive understands and agrees that he or she will have the sole
responsibility for determining whether to make an 83(b) Election with respect to
the Restricted Shares, and for properly making such election and filing the
election with the relevant taxing authorities on a timely basis. Executive will
not rely on the Company for any advice in connection with the decision whether
to make, or procedures for making, the 83(b) Election, and acknowledges that the
Company has urged Executive to consult Executive's own tax advisor with respect
to the desirability of and procedures for making an 83(b) Election with respect
to the Restricted Shares. Executive agrees to submit to the Company a copy of
any 83(b) Election with respect to the Restricted Shares immediately upon filing
such election with the relevant taxing authority.
3
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8. ESCROW.
(a) Until a Restricted Share vests, (i) the record address of the
holder of record of such Restricted Share shall be c/o the Secretary of the
Company at the address of the Company's principal executive office, (ii) the
stock certificate representing such Restricted Share shall be held in escrow in
the custody of the Secretary of the Company, duly endorsed in blank or
accompanied by a duly executed stock power, and (iii) such stock certificate
shall contain the following legend:
"THE TRANSFER AND REGISTRATION OF TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AS
PROVIDED IN A RESTRICTED STOCK AGREEMENT DATED AS OF APRIL 25, 1996 BY
AND BETWEEN THE CORPORATION AND RONALD N. HOGE."
(b) From and after the date upon which a Restricted Share vests, the
holder of record of such Restricted Share shall be entitled (provided that
Executive shall have paid the Withholding Liability to the Company pursuant to
Section 6 hereof) to receive the stock certificate representing such Restricted
Share, which stock certificate shall not contain the legend set forth in
subsection (a)(iii) above.
9. VOTING: DIVIDENDS. The holder of record of any Restricted Share shall
be entitled to exercise all voting rights with respect to such share and to
receive all dividends or distributions paid or made with respect thereto.
10. PLAN. The Restricted Shares are being sold pursuant to the Plan, as
in effect on the Date of Award, and are subject to all the terms and conditions
of the Plan, as the same may be amended from time to time; provided, however,
that no such amendment shall deprive Executive, without his or her consent, of
the Restricted Shares or of any of Executive's rights under this Agreement.
Capitalized terms used without definition herein have the meanings ascribed to
them in the Plan. The interpretation and construction by the Committee of the
Plan, this Agreement and such rules and regulations as may be adopted by the
Committee for the purpose of administering the Plan shall be final and binding
upon Executive. Until the Restricted Shares shall vest or be forfeited, the
Company shall, upon written request therefor, send a copy of the Plan, in its
then current form, to the holder of record of the Restricted Shares.
11. EMPLOYMENT RIGHTS. No provision of this Agreement shall (a) confer
upon Executive any right to continue in the employ of the Company or any of its
affiliates, (b) affect the right of the Company or any of its affiliates to
terminate the employment of Executive, with or without cause, or (c) confer upon
Executive any right to participate in any employee welfare or benefit plan or
other program of the Company or any of its affiliates other than the Plan.
12. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Tennessee.
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IN WITNESS WHEREOF, the Company and Executive have duly executed this
Agreement as of the Date of Award.
MAGNETEK, INC.
By:
----------------
RONALD N. HOGE
-------------------
Signature
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<PAGE>
EXHIBIT B
STOCK OPTION
GRANT NO. 1
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. This 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): 100,000
Purchase Price Per Share: $9.3125
Minimum Number of Shares Per
Partial Exercise: 100 Shares
The Option shall become exercisable in installments as follows:
Until April 25, 1997, the Option shall not be exercisable to any degree.
Until April 25, 1997, the Option shall become exercisable as to 33 1/3%
of the Shares covered by the Option.
As of April 25, 1998, the Option shall become exercisable as to an
additional 33 1/3% of the Shares covered by the Option.
As of April 25, 1999, the Option shall become exercisable as to the
remaining 33 1/3% of the Shares covered by the Option.
Date of this Agreement (grant date): April 25, 1996.
-----------------------------------
Optionee Signature
MAGNETEK, INC.
Address (please print):
By:
------------------------------- ------------------------------------
By:
------------------------------- ------------------------------------
<PAGE>
STOCK OPTION
GRANT NO. 2
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. This 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): 100,000
Purchase Price Per Share: $12.00
Minimum Number of Shares Per
Partial Exercise: 100 Shares
The Option shall become exercisable in installments as follows:
Until June 30, 1998, the Option shall not be exercisable to any degree.
As of June 30, 1998, the Option shall become exercisable as to 33 1/3%
of the Shares covered by the Option.
As of June 30, 1999, the Option shall become exercisable as to an
additional 33 1/3% of the Shares covered by the Option.
As of June 30, 2000, the Option shall become exercisable as to the
remaining 33 1/3% of the Shares covered by the Option.
Date of this Agreement (grant date): April 25, 1996.
-----------------------------------
Optionee Signature
MAGNETEK, INC.
Address (please print):
By:
------------------------------- ------------------------------------
By:
------------------------------- ------------------------------------
<PAGE>
STOCK OPTION
GRANT NO. 3
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. This 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): 100,000
Purchase Price Per Share: $16.00
Minimum Number of Shares Per
Partial Exercise: 100 Shares
The Option shall become exercisable in installments as follows:
Until June 30, 1999, the Option shall not be exercisable to any degree.
As of June 30, 1999, the Option shall become exercisable as to 33 1/3%
of the Shares covered by the Option.
As of June 30, 2000, the Option shall become exercisable as to an
additional 33 1/3% of the Shares covered by the Option.
As of June 30, 2001, the Option shall become exercisable as to the
remaining 33 1/3% of the Shares covered by the Option.
Date of this Agreement (grant date): April 25, 1996.
-----------------------------------
Optionee Signature
MAGNETEK, INC.
Address (please print):
By:
------------------------------- ------------------------------------
By:
------------------------------- ------------------------------------
<PAGE>
STOCK OPTION
GRANT NO. 4
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. This 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): 100,000
Purchase Price Per Share: $20.00
Minimum Number of Shares Per
Partial Exercise: 100 Shares
The Option shall become exercisable in installments as follows:
Until June 30, 2000, the Option shall not be exercisable to any degree.
As of June 30, 2000, the Option shall become exercisable as to 33 1/3%
of the Shares covered by the Option.
As of June 30, 2001, the Option shall become exercisable as to an
additional 33 1/3% of the Shares covered by the Option.
As of June 30, 2002, the Option shall become exercisable as to the
remaining 33 1/3% of the Shares covered by the Option.
Date of this Agreement (grant date): April 25, 1996.
-----------------------------------
Optionee Signature
MAGNETEK, INC.
Address (please print):
By:
------------------------------- ------------------------------------
By:
------------------------------- ------------------------------------
<PAGE>
EXHIBIT C
Options (units)/ Exercise Units Already Exercised & Sold/
- ---------------- -------- -------------------------------
% Vested by 8/31/97 Price Exercise Price
- ------------------- ----- --------------
20,000 / 100% $ 35.41 20,000 / $54.94 per share
36,000 / 100% $ 38.75 25,200 / $57.56 per share
38,000 / 70% $ 35.57 15,200 / $61.81 per share
35,000 / 40% $ 50.63 0 / N/A
RESTRICTED GRANTS
- -----------------
10,000 / 100% $ 0 0 / N/A
NOTES:
- -----
- - A 10,000 UNIT restricted grant vested on 8/1/96, after AS employment was
terminated.
- - 60,400 VESTED OPTIONS were exercised at/around termination of employment at
an average (weighted) price of $57.76 per share.
- - An additional 36,200 OPTIONS would have vested by 8/31/97 at a weighted
average exercise price of $42.30 per share.
<PAGE>
MAGNETEK, INC.
DEFERRAL INVESTMENT PLAN
(Effective as of January 1, 1997)
<PAGE>
MAGNETEK, INC.
DEFERRAL INVESTMENT PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT. MagneTek, Inc., a Delaware corporation (the
"Company"), hereby establishes, effective as of January 1, 1997, a deferred
compensation plan for key employees as described herein, which shall be known
as the "MagneTek, Inc. Deferral Investment Plan" (the "Plan").
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly compensated employees" within the meaning of Sections 201, 301, and
401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3,
and 4 of Title I of ERISA.
1.2 PURPOSE. The primary purpose of the Plan is to provide certain key
employees of the Company with the opportunity to defer voluntarily a portion
of their compensation, subject to the terms of the Plan. By adopting the
Plan, the Company desires to enhance its ability to attract and retain
employees 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) "Bonus" means an incentive award payable by the Company to a
Participant with respect to the Participant's services under the
MagneTek Incentive Compensation Plan, and shall be deemed earned only
upon award by the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(d) "Committee" means the Compensation Committee of the Board or such
other committee of two (2) or more non-employee Directors appointed by
the Board to administer the Plan pursuant to Article 3.
(e) "Company" means MagneTek, Inc., a Delaware corporation.
(f) "Compensation" means an Employee's gross Salary and Bonus.
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(g) "Director" means a member of the Board of Directors of the Company.
(h) "Employee" means a non-union, full-time, salaried employee of the
Company.
(i) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
(j) "Participant" means an Employee who is actively participating in the
Plan.
(k) "Plan" means this MagneTek, Inc. Deferral Investment Plan, as it may be
amended from time to time.
(l) "Retirement" shall have the meaning ascribed to such term in the
MagneTek, Inc. FlexCare Plus Retirement Pension Plan.
(m) "Salary" means all regular, basic wages, before reduction for amounts
deferred pursuant to the Plan or any other plan of the Company,
payable in cash to a Participant for services to be rendered during
the Year, exclusive of any Bonus, other special fees, awards, or
incentive compensation, allowances, or amounts designated by the
Company as payment toward or reimbursement of expenses.
(n) "Year" means a calendar year.
ARTICLE 3. ADMINISTRATION
3.1 AUTHORITY OF THE COMMITTEE. The Plan shall initially be
administered by the Compensation Committee of the Board. Subject to the terms
of this Plan, the Board may appoint a successor Committee to administer the
Plan, provided that such Committee consists solely of two (2) or more
non-employee Directors within the meaning of Section 16(b) of the Securities
Exchange Act of 1934. The members of the Committee shall be appointed by and
shall serve at the discretion of the Board.
Subject to the provisions herein, the Committee shall have full power and
discretion to select Employees for participation in the Plan; to determine
the terms and conditions of each Employee'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
2
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Plan. Subject to the terms of the Plan, the Committee may delegate any or all
of its authority granted under the Plan to the Chief Human Resources Officer
or any other executive or executives of the Company.
3.2 DECISIONS BINDING. All determinations and decisions of the
Committee 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 Committee'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 Committee. 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 Committee'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.
Except as otherwise required by ERISA, 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 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 Committee, or 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 party, or in which he or she may be involved by reason of any action
taken or failure to act under 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
3
<PAGE>
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 Employees in Incentive Groups I, II and III under the MagneTek
Incentive Compensation Plan and any other key policy- and decision-makers of
the Company, as selected by the Committee 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
Committee based upon the criteria set forth in Section 4.1 herein annually or
at such other time selected by the Committee.
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 an "Election to Defer Form," which must be
completed by the Participant as provided in Section 5.2 herein; provided,
however, that such Participant may only make an election to defer with
respect to that portion of his or her Compensation for such Year which is to
be earned after the filing of the deferral election.
ARTICLE 5. DEFERRAL OPPORTUNITY
5.1 AMOUNT WHICH MAY BE DEFERRED. A Participant may elect to defer up
to twenty-five percent (25%) of Salary and up to one hundred percent (100%)
of Bonus in any Year. The minimum amount of any single eligible component of
Compensation which may be deferred in any Year is the greater of five percent
(5%) of such component or one thousand dollars ($1,000). In addition, an
election to defer Compensation in any Year shall be expressed by each
Participant in minimum increments of either five percent (5%) of the
applicable component of Compensation or one thousand dollars ($1,000).
5.2 DEFERRAL ELECTION. Participants shall make their elections to defer
Compensation under the Plan no later than December 20 prior to the beginning
of each Year (December 27 for the initial Year of the Plan), or not later
than thirty (30) calendar days following notification of eligibility to
participate for a partial
4
<PAGE>
Year. All deferral elections shall be irrevocable, and shall be made on an
"Election to Defer Form," as described herein.
Participants shall make the following elections on each "Election to
Defer Form":
(a) The amount to be deferred with respect to each eligible component of
Compensation for the Year, pursuant to the terms of Section 5.1
herein;
(b) The length of the deferral period with respect to each eligible
component of Compensation, pursuant to the terms of Section 5.3
herein;
(c) The form of payment to be made to the Participant at the end of the
deferral period(s), pursuant to the terms of Section 5.4 herein; and
(d) The earnings rate(s) applicable to deferred amounts, pursuant to the
terms of Sections 6.2 and 6.3 herein.
5.3 LENGTH OF DEFERRAL. Each Participant may elect up to two (2)
different deferral periods in addition to the Participant's Retirement date;
provided, however, that no more than two (2) such periods in addition to the
Participant's Retirement date may be outstanding at any one time for each
Participant. The deferral period(s) elected by each Participant with respect
to deferrals of Compensation earned in any Year shall be to any Year ending
with a zero (0) or a five (5) or until the Participant's Retirement provided
that the deferral period elected shall be at least equal to one (1) year
following the end of the Year in which the Compensation is earned. Elections
under this Section 5.3 are irrevocable, except as permitted by the Company.
A Participant may elect to extend or shorten a deferral period previously
elected pursuant to this Section 5.3 by filing a revised election form, as
prescribed by the Committee, specifying the later or earlier Year in which
the deferral election will expire, subject to the following rules:
(a) Any extended deferral period elected by a Participant shall be to any
later Year ending with a zero (0) or a five (5) or to Retirement,
provided that any such election must be made no later than December 31
at least one (1) full Year prior to the payout date originally
elected.
(b) Any earlier payout date elected by a Participant may be to any Year
ending with a zero (0) or a five (5) beginning at least one (1) full
Year after the end of the Year in which the Participant submits the
revised election form, but subject in all cases to the approval of the
Committee.
5
<PAGE>
(c) No further election to extend or shorten a deferral period shall be
permitted with respect to amounts already subject to a revised
election submitted pursuant to this Section 5.3.
(d) The revised election period shall apply to all amounts deferred to the
payout date originally elected by the Participant.
Notwithstanding the deferral period(s) elected by a Participant, payment
of deferred amounts and accumulated earnings thereon shall be made to the
Participant in a single lump sum in the event the Participant's employment or
service with the Company is terminated for any reason other than by
Retirement prior to full payment of deferred amounts and earnings thereon. In
the event of termination of employment or service due to a Participant's
Retirement, the Committee may elect, in its sole and absolute discretion, to
make payment of deferred amounts and accumulated earnings thereon to the
Participant in a single lump sum notwithstanding the Participant's election
to receive such amounts in the form of installments.
Any lump sum payment made pursuant to this Section 5.3 following the
Participant's Retirement or other termination of employment or service for
any reason other than death shall be made in January following the Year in
which the Retirement or termination of employment or service occurs. Any lump
sum payment made pursuant to this Section 5.3 following termination of
employment or service due to death shall be made as soon as administratively
practical after the Participant's death.
Any payment pursuant to this Section 5.3 shall be made in cash or shares
of Company common stock, or any combination thereof, as directed by the
Company in its sole and absolute discretion.
5.4 PAYMENT OF DEFERRED AMOUNTS. Subject to Section 5.3, Participants
shall be entitled to elect to receive payment of deferred amounts, together
with earnings accrued thereon, at the end of each specified deferral period
in a single lump sum payment or by means of installments. All deferrals to
each specified payout date 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 shall be made during the first week of
January of the Year specified by the Participant as the date for
payment of deferred Compensation and earnings thereon, as described in
Sections 5.2 and 5.3 herein. In the case of a payment made upon the
Participant's Retirement or termination of employment or service, the
lump sum shall be paid in January of the Year following such
Retirement or termination.
6
<PAGE>
(b) INSTALLMENT PAYMENTS. Participants may elect to receive payout in
installments, with a minimum number of installments of two (2), and
a maximum of ten (10). The initial payment shall be made during the
first week of January of the Year selected by the Participant
pursuant to Sections 5.2 and 5.3 herein or, in the case of
installments payable after a Participant's Retirement, during the
first week of January in the Year following such Retirement. The
remaining installment payments shall be made in January of each Year
thereafter, until the Participant's entire deferred compensation
account has been paid in full. Earnings shall accrue on the deferred
amounts in the Participant's deferred compensation 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 compensation 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.
Notwithstanding the foregoing, in the event a Participant's employment
or service with the Company is terminated for any reason at a time
when there is a balance in the Participant's deferred compensation
account, the balance shall be paid out to the Participant as set forth
in Section 5.3 herein.
A Participant may elect to change a form of benefit elected pursuant to
this Section 5.4 by filing a revised election form, as prescribed by the
Committee, specifying the new form of distribution, subject to the following
rules:
(1) In the case of a distribution made at an elected payout date other
than Retirement, 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 date (or, if applicable, payment commencement date). In the
case of a distribution made upon the Participant's Retirement, any
such election must be made prior to Retirement and no later than
December 31 at least one (1) full Year prior to the payout date (or,
if applicable, payment commencement date). If a new election is
submitted after these dates, the election shall be null and void, and
the form of distribution shall be determined under the Participant's
original election.
(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 Committee.
(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 5.4.
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<PAGE>
(4) The revised election shall apply to all amounts payable at the same
payout date.
Payment shall be made in cash or shares of Company common stock, or any
combination thereof, as directed by the Committee in its sole and absolute
discretion.
5.5 FINANCIAL HARDSHIP. The Committee 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 Committee, severe
financial hardship. In such event, the Committee 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
(d) Provide for such other installment payment schedule as deemed
appropriate by the Committee under the circumstances.
For purposes of this Section 5.5, "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
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.
8
<PAGE>
The severity of the financial hardship shall be judged by the Committee.
The Committee'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.
5.6 ROLLOVER OF NONVESTED RESTRICTED STOCK. Participants who hold
nonvested restricted stock of the Company granted under the Amended and
Restated 1989 Incentive Stock Compensation Plan of MagneTek, Inc. (the "Stock
Plan") may elect to surrender such nonvested restricted stock in exchange for
an amount of equal value credited to his or her account under this Plan,
provided that such amount shall be credited under this Plan only if and when
the Participant would have vested in his or her restricted stock under the
Stock Plan had the prior surrender of such stock not occurred.
Any Participant who surrenders such nonvested restricted stock shall also
elect, on a form and at a time prescribed by the Committee, the following
with respect to the amount to be credited under this Plan:
(a) The length of the deferral period, pursuant to the terms of
Section 5.3 herein;
(b) The form of payment to be made to the Participant at the end of the
deferral period, pursuant to the terms of Section 5.4 herein; and
(c) The earnings rate, pursuant to the terms of Section 6.2 herein.
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. Any rollovers of restricted stock from
the Stock Plan under Section 5.6 shall also be credited to the Participant's
account to the extent and at the time specified in Section 5.6.
6.2 EARNINGS ON DEFERRED AMOUNTS. Compensation deferred and rollovers
credited under Article 5 shall accrue earnings based on an interest rate or a
Company common stock growth rate as elected by a Participant pursuant to this
Section 6.2, subject to Section 6.3 herein. All deferrals to a specified
payout date shall accrue earnings based on the same rate.
9
<PAGE>
(a) PRIME RATE ACCOUNT. A Participant may elect to accrue interest on
amounts deferred to a specified payout date compounded on a
quarterly basis at a rate equal to the prime lending rate of
interest in effect as of January 1 of each year, as quoted in the
WALL STREET JOURNAL for commercial borrowings. Each Participant's
prime rate account shall be credited as of the last day of each
calendar quarter with interest computed on the average balance in
the account during such quarter.
(b) MAGNETEK STOCK ACCOUNT. A Participant may elect to accrue earnings
on amounts deferred to a specified payout date at a rate equal to
the sum of (i) the value of one share of Company common stock as of
the end of the calendar quarter, and (ii) dividends paid during the
calendar quarter, divided by the value of one share of Company
common stock at the beginning of the calendar quarter. Each
Participant's MagneTek stock account shall be credited on the last
day of each calendar quarter, with earnings computed on the average
balance in the account during such quarter.
Elections pursuant to this Section 6.2 shall be made on a form prescribed
by the Committee. Earnings on deferred amounts shall be paid out to
Participants at the same time and in the same manner as the underlying
deferred amounts.
6.3 ELECTIONS TO CHANGE RATES. A Participant may elect to have the
amounts deferred to a specified payout date accrue earnings based on either
the prime interest rate or the MagneTek stock rate, as described in Section
6.2 hereof, at such times as permitted by the Committee. Elections shall be
made on such form as prescribed by the Committee and shall be effective on
the January 1 or July 1 following receipt of such form by the Chief Human
Resources Officer, subject to the following restrictions:
(a) Any election to change the rate used in calculating earnings on
amounts deferred to a specified payout date shall apply to all amounts
deferred to that payout date.
(b) No election to change rates for amounts deferred to a payout date
shall take effect until at least one (1) year after the effective date
of any prior election under this Section 6.3 with respect to the same
payout date.
(c) No election under this Section 6.3 shall be available to a
Participant if such election would cause the transfer to be a
"nonexempt" transaction which is matchable to a transaction creating
short-swing profit liability under Section 16 of the Securities
Exchange Act of 1934, as amended from time to time, as determined by
the Company.
10
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6.4 CHARGES AGAINST ACCOUNTS. There shall be charged against each
Participant's deferred compensation account any payments made to the
Participant or to his or her beneficiary.
11
<PAGE>
6.5 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 Committee. 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 Committee. 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.
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. Each Participant, by
participating hereunder, agrees to waive any priority creditor status for
wage payments with respect to any amounts due hereunder. 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
Committee 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
12
<PAGE>
thereof shall be subject to the claims of the Company's general creditors. 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 EMPLOYMENT. Nothing in the Plan shall interfere with or limit in
any way the right of the Company to terminate a Participant's employment at
any time, or confer upon any Participant any right to continue in the employ
of the Company.
ARTICLE 8. WITHHOLDING OF TAXES
The Company shall have the right to require Participants to remit to the
Company an amount sufficient to satisfy Federal, state, and local withholding
tax requirements, or to deduct from all payments made pursuant to the Plan
amounts sufficient to satisfy withholding tax requirements.
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 Committee, 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.
The Board may terminate the Plan and commence termination payout for all
or certain Participants, or remove certain Employees as Participants, if it
is determined by the United States Department of Labor or a court of
competent jurisdiction that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA which is not exempt from the
provisions of Parts 2, 3, and 4 of Title I of ERISA. If payout is commenced
pursuant to the operation of this Article 9, the payment of such amounts
shall be made in the manner selected by each Participant under Section 5.4
herein, as applicable (other than commencement date).
ARTICLE 10. MISCELLANEOUS
10.1 NOTICE. 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
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<PAGE>
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 Committee shall provide for
distributions from a Participant's deferred compensation account to the
extent required by a court order that the Committee 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 Committee 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.
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.
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<PAGE>
IN WITNESS WHEREOF, MagneTek, Inc. has caused this document to be executed by
its duly authorized officer on January ___, 1997, effective as of the date
set forth above.
MAGNETEK, INC.
ATTEST:
By:
-------------------------
Its
----------------------
By:
-------------------------
Its (Corporate Seal)
----------------------
15
<PAGE>
CONTENTS
- -------------------------------------------------------------------------------
PAGE
Article 1. Establishment and Purposes 1
Article 2. Definitions 1
Article 3. Administration 2
Article 4. Eligibility and Participation 4
Article 5. Deferral Opportunity 4
Article 6. Deferred Compensation Accounts 9
Article 7. Rights of Participants 11
Article 8. Withholding of Taxes 12
Article 9. Amendment and Termination 12
Article 10. Miscellaneous 12
<PAGE>
MAGNETEK, INC.
PERFORMANCE-BASED
PENSION RESTORATION PLAN
(Effective as of January 1, 1997)
<PAGE>
MAGNETEK, INC.
PERFORMANCE-BASED PENSION RESTORATION PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT. MagneTek, Inc., a Delaware corporation (the
"Company"), hereby establishes, effective as of January 1, 1997, a deferred
compensation plan for key employees as described herein, which shall be known
as the "MagneTek, Inc. Performance-Based Pension Restoration Plan" (the
"Plan").
The Plan is intended to be an unfunded plan maintained primarily to
provide deferred compensation benefits for a select group of "management or
highly compensated employees" within the meaning of Sections 201, 301, and
401 of ERISA, and therefore to be exempt from the provisions of Parts 2, 3,
and 4 of Title I of ERISA.
1.2 PURPOSE. The primary purpose of the Plan is to supplement the
benefits payable to certain key employees of the Company under the MagneTek,
Inc. FlexCare Plus Retirement Pension Plan. By adopting the Plan, the Company
desires to enhance its ability to attract and retain employees 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) "Bonus" means any incentive award based on an assessment of
performance, payable by the Company to a Participant with respect to
the Participant's services, including incentive amounts deferred
pursuant to the MagneTek, Inc. Deferral Investment Plan. A Bonus shall
be deemed earned only upon award by the Company. For purposes of the
Plan, "Bonus" shall not include incentive awards which relate to a
period exceeding one (1) year.
(c) "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
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<PAGE>
(d) "Committee" means the Compensation Committee of the Board or such
other committee of two (2) or more non-employee directors appointed by
the Board to administer the Plan pursuant to Article 3.
(e) "Company" means MagneTek, Inc., a Delaware corporation.
(f) "Compensation" means an Employee's gross Salary and Bonus.
(g) "Employee" means a non-union, full-time, salaried employee of the
Company.
(h) "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
(i) "Participant" means an Employee who has met and continues to meet the
eligibility requirements described in Section 4.1.
(j) "Plan" means this MagneTek, Inc. Performance-Based Pension Restoration
Plan, as it may be amended from time to time.
(k) "Retirement" shall have the meaning ascribed to such term in the
MagneTek, Inc. FlexCare Plus Retirement Pension Plan.
(l) "Salary" means all regular, basic wages, before reduction for amounts
deferred pursuant to any other plan of the Company, payable in cash to
a Participant for services to be rendered during the Year, exclusive
of any Bonus, other special fees, awards, or incentive compensation,
allowances, or amounts designated by the Company as payment toward or
reimbursement of expenses.
(m) "Year" means a calendar year.
ARTICLE 3. ADMINISTRATION
3.1 AUTHORITY OF THE COMMITTEE. The Plan shall initially be
administered by the Compensation Committee of the Board. Subject to the terms
of this Plan, the Board may appoint a successor Committee to administer the
Plan, provided that such Committee consists solely of two (2) or more
non-employee Directors within the meaning of Section 16(b) of the Securities
Exchange Act of 1934. The members of the Committee shall be appointed by and
shall serve at the discretion of the Board.
Subject to the provisions herein, the Committee shall have full power and
discretion to determine the terms and conditions of each Employee's
2
<PAGE>
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 to make other determinations which may be necessary or advisable for the
administration of the Plan. Subject to the terms of the Plan, the Committee
may delegate any or all of its authority granted under the Plan to the Chief
Human Resources Director or any other executive or executives of the Company.
3.2 DECISIONS BINDING. All determinations and decisions of the
Committee 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 Committee'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 Committee. 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 Committee'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.
Except as otherwise required by ERISA, 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 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
<PAGE>
3.4 INDEMNIFICATION. Each person who is or shall have been a member of
the Committee, or 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 party, or in which he or she may be involved by reason of any action
taken or failure to act under 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 Employees whose Compensation for a Year exceeds the compensation limit
in effect under Code Section 401(a)(17) for that Year, and who constitute a
select group of management or highly compensated employees under ERISA, as
determined by the Committee.
4.2 PARTICIPATION. An Employee who has satisfied the eligibility
requirements of Section 4.1 shall become a Participant effective as of the
first day of any Year in which those requirements are satisfied.
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 with respect
to the vested benefits, if any, accrued as of the last day of his or her
active participation.
ARTICLE 5. CONTRIBUTIONS
5.1 ALLOCATION TO ACCOUNT. Each Participant shall be credited with
contributions from the Company for a Year equal to the amount determined by
multiplying the portion of his or her Compensation in excess of the
compensation limit in effect under Code Section 401(a)(17) for that Year by
an amount equal to--
4
<PAGE>
(a) Eight percent (8%); times
(b) The amount determined from the following table, based on the Company's
achievement of the primary corporate financial measure used under its
annual management short-term incentive program, as determined by the
Committee in its sole and absolute discretion:
----------------------------------------
Rating in Multiple of
Incentive Program Plan Contribution
----------------------------------------
1.5 200%
1.4 180%
1.3 160%
1.2 140%
1.1 120%
1.0 100%
.9 90%
.8 80%
.7 70%
.6 60%
.5 or below 50%
----------------------------------------
5.2 VESTING IN ACCOUNT. A Participant shall have a nonforfeitable
interest in his or her account upon completing at least five (5) years of
continuous participation in the Plan or attaining age 65. Except as provided
below, if a Participant terminates employment for any reason before either
completing five (5) years of continuous participation or attaining age 65,
the entire balance of his or her account shall be forfeited.
Notwithstanding the foregoing, a Participant shall also have a
nonforfeitable interest in his or her account upon the occurrence of any of
the following events prior to (or concurrent with) the Participant's
termination of employment:
(a) The merger or consolidation of the Company with or into another
corporation, other than a merger or consolidation in which (i) the
Company is the surviving corporation, (ii) no person or group
acquires 40 percent (40%) or more of the Company's outstanding
voting stock, and (iii) the shares of the Company's common stock
outstanding prior to the merger or consolidation remain outstanding
thereafter;
5
<PAGE>
(b) The acquisition by another corporation or person of all or
substantially all of the Company's assets or 40 percent (40%) or
more of the Company's then outstanding voting stock; or
(c) The liquidation or dissolution of the Company.
5.3 PAYMENT OF ACCOUNT. If a Participant is vested in his or her
account pursuant to Section 5.2, the Participant shall be paid the amounts
allocated to this account, together with earnings accrued thereon. Payment
shall be made in cash or shares of Company common stock, or any combination
thereof, as directed by the Committee in its sole and absolute discretion.
In the event that any such Participant's employment with the Company is
terminated for any reason other than by Retirement, the Participant shall be
paid his or her account in a single lump sum payment in January following the
Year in which the Participant's termination of employment occurs.
Except as provided below, in the event that any such Participant's
employment with the Company is terminated by reason of Retirement, the
Participant shall be paid his or her account in a single lump sum payment or
by means of installments, as elected by the Participant within 30 days of
initial Plan participation (or at such other times permitted by the
Committee) and in a manner prescribed by the Committee. If no election is
made, the Participant will be paid in a single lump sum.
(a) LUMP SUM PAYMENT. Such payment shall be made in January following the
Year in which the Participant's Retirement occurs.
(b) INSTALLMENT PAYMENTS. Participants may elect to receive payout in
installments, with a minimum number of installments of two (2), and
a maximum of ten (10). The initial payment shall be made in January
following the Year in which the Participant's Retirement occurs, and
the remaining installment payments shall be made in January of each
Year thereafter, until the Participant's entire account has been
paid in full. Earnings shall accrue on the unpaid balance in the
Participant's 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 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.
6
<PAGE>
A Participant may elect to change a form of benefit elected pursuant to
this Section 5.3 by filing a revised election form, as prescribed by the
Committee, specifying the new form of distribution, subject to the following
rules:
(1) Any election to change the form of distribution must be made prior to
the Participant's Retirement and no later than December 31 at least
one (1) full Year prior to the payout date (or payment commencement
date). 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.
(2) Only one election to change a form of distribution shall be permitted
for each Participant.
(3) Any election to change the form of distribution from installments to a
lump sum is subject in all cases to the approval of the Committee.
Notwithstanding the foregoing, in the event of termination of employment
due to a Participant's Retirement, the Committee may elect, in its sole and
absolute discretion, to make payment of the Participant's account in a single
lump sum in January following the Year in which Retirement occurs,
notwithstanding the Participant's election to receive such amounts in the
form of installments.
ARTICLE 6. DEFERRED COMPENSATION ACCOUNTS
6.1 PARTICIPANTS' ACCOUNTS. The Company shall establish and maintain an
individual bookkeeping account for contributions allocated each Participant
under Article 5 herein. Each account shall be credited with additional
allocations as of the last day of the Year.
6.2 EARNINGS ON AMOUNTS. Amounts allocated under Article 5 shall accrue
earnings based on a phantom stock growth rate determined as the sum of (a)
the value of one share of Company common stock as of the end of the calendar
quarter, and (b) dividends paid during the calendar quarter, divided by the
value of one share of Company common stock at the beginning of the calendar
quarter. Each Participant's account shall be credited on the last day of each
calendar quarter with earnings computed on the average balance in the account
during such quarter.
6.3 CHARGES AGAINST ACCOUNTS. There shall be charged against each
Participant's account any payments made to the Participant or to his or her
beneficiary.
7
<PAGE>
6.4 PAYMENT TO BENEFICIARY. If a Participant dies before his or her
account has been distributed, but after becoming vested in the account
pursuant to Section 5.2, the account shall be paid to the beneficiary or
beneficiaries designated by the Participant. This payment shall be made in a
single lump sum as soon as administratively practical after the Participant's
death. Payments shall be made in cash or shares of Company common stock, or
any combination thereof, as directed by the Committee in its sole and
absolute discretion.
All designations shall be signed by the Participant, and shall be in such
form as prescribed by the Committee. 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 Committee. The payment of amounts 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.
In the event that all the beneficiaries named by a Participant pursuant
to this Section 6.4 predecease the Participant, the 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.
8
<PAGE>
7.2 UNSECURED INTEREST. No Participant or party claiming an interest in
a Participant's account 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. Each Participant, by participating
hereunder, agrees to waive any priority creditor status for wage payments
with respect to benefits due hereunder. 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
Committee may approve, for the purpose of providing for the payment of
accounts. Such trust or trusts may be irrevocable, but the assets thereof
shall be subject to the claims of the Company's general creditors. To the
extent any amounts 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 amounts shall remain the obligation of, and shall be
paid by, the Company.
7.3 EMPLOYMENT OR SERVICE. Nothing in the Plan shall interfere with or
limit in any way the right of the Company to terminate a Participant's
employment or service at any time, or confer upon any Participant any right
to continue in the employ or service of the Company.
ARTICLE 8. WITHHOLDING OF TAXES
The Company shall have the right to require Participants to remit to the
Company an amount sufficient to satisfy Federal, state, and local withholding
tax requirements, or to deduct from all payments made pursuant to the Plan
amounts sufficient to satisfy withholding tax requirements.
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 Committee, 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
contributions already made or earnings thereon up to the point of amendment
or termination, without the consent of the Participant.
9
<PAGE>
The Board may terminate the Plan and commence termination payout for all
or certain Participants, or remove certain Employees as Participants, if it
is determined by the United States Department of Labor or a court of
competent jurisdiction that the Plan constitutes an employee pension benefit
plan within the meaning of Section 3(2) of ERISA which is not exempt from the
provisions of Parts 2, 3, and 4 of Title I of ERISA. If payout is commenced
pursuant to the operation of this Article 9, the payment of such amounts
shall be made in a single lump sum payment.
ARTICLE 10. MISCELLANEOUS
10.1 NOTICE. 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 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 Committee shall provide for
distributions from a Participant's account to the extent required by a court
order that the Committee 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 Committee 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 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
<PAGE>
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.
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.
IN WITNESS WHEREOF, MagneTek, Inc. has caused this document to be executed by
its duly authorized officer on January ___, 1997, effective as of the date
set forth above.
MAGNETEK, INC.
ATTEST:
By:
------------------------
Its
---------------------
By:
------------------------
Its (Corporate Seal)
---------------------
11
<PAGE>
CONTENTS
- -------------------------------------------------------------------------------
PAGE
Article 1. Establishment and Purposes 1
Article 2. Definitions 1
Article 3. Administration 2
Article 4. Eligibility and Participation 4
Article 5. Contributions 4
Article 6. Accounts 6
Article 7. Rights of Participants 7
Article 8. Withholding of Taxes 8
Article 9. Amendment and Termination 8
Article 10. Miscellaneous 9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-1-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,917
<SECURITIES> 0
<RECEIVABLES> 184,402
<ALLOWANCES> 5,346
<INVENTORY> 189,917
<CURRENT-ASSETS> 398,519
<PP&E> 404,109
<DEPRECIATION> 222,617
<TOTAL-ASSETS> 650,934
<CURRENT-LIABILITIES> 219,184
<BONDS> 297,292
0
0
<COMMON> 255
<OTHER-SE> 51,280
<TOTAL-LIABILITY-AND-EQUITY> 650,934
<SALES> 585,117
<TOTAL-REVENUES> 585,117
<CGS> 474,735
<TOTAL-COSTS> 474,735
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,729
<INCOME-PRETAX> 16,906
<INCOME-TAX> 6,835
<INCOME-CONTINUING> 10,071
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,071
<EPS-PRIMARY> .39
<EPS-DILUTED> .39
</TABLE>
