<PAGE> 1
AMENDMENT NO. 1 TO
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: September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from
-------------------------
Commission file number 1-10233
-------------------------
MAGNETEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 95-3917584
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
26 Century Blvd.
Nashville, Tennessee 37214
(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 November 5,
1999, 24,101,133 shares.
<PAGE> 2
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Fourth Amendment dated as of September 27, 1999, to
the Restated Credit Agreement dated as of June 20,
1997.
10.2 1999 Stock Incentive Plan of MagneTek, Inc. (the
"1999 Plan").
10.3 2000 Employee Stock Plan of MagneTek, Inc. (the "2000
Plan").
10.4 Standard Terms and Conditions Relating to
Non-Qualified Stock Options, effective as of October
19, 1999, pertaining to the 1999 Plan and the 2000
Plan.
27 Financial Data Schedule (Previously filed with Form
10-Q for Quarter Ended September 30, 1999 filed on
November 10, 1999 and incorporated herein by this
reference)
(b) Reports on Form 8-K
The Company filed a Form 8-K dated August 2, 1999, reporting
the sale of its Motors business to A.O. Smith Corporation.
<PAGE> 3
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: November 15, 1999 /s/ David P. Reiland
-------------------------------
David P. Reiland
Executive Vice President
and Chief Financial Officer
(Duly authorized officer of the
registrant and principal
financial officer)
<PAGE> 1
FOURTH AMENDMENT TO RESTATED CREDIT AGREEMENT
(and Security Agreement)
THIS DOCUMENT is entered into as of September 27, 1999, between
MAGNETEK, INC., a Delaware corporation ("BORROWER"), certain Lenders, BANK OF
AMERICA, N.A. (formerly NationsBank, N.A., and formerly NationsBank of Texas,
N.A., "AGENT"), as Agent for Lenders, and BANKERS TRUST COMPANY, CIBC INC.,
CREDIT LYONNAIS NEW YORK BRANCH, BANK ONE, N.A. (formerly The First National
Bank of Chicago), GENERAL ELECTRIC CAPITAL CORPORATION (assignee of The
Long-Term Credit Bank of Japan, Ltd.), and UNION BANK OF CALIFORNIA, N.A., as
Co-Agents for Lenders.
Borrower, Agent, Co-Agents, and Lenders are party to the Restated
Credit Agreement (as renewed, extended, and amended, the "CREDIT AGREEMENT")
dated as of June 20, 1997, providing for a $200,000,000 revolving credit
facility. Borrower, Agent, and Determining Lenders have agreed, upon the
following terms and conditions, to amend the Credit Agreement as described in
PARAGRAPH 2 below. Accordingly, for adequate and sufficient consideration,
Borrower, Agent, and Determining Lenders agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this document (A) terms
defined in the Credit Agreement have the same meanings when used in this
document and (B) references to "SECTIONS," "SCHEDULES," and "EXHIBITS" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is amended as follows:
(A) The following definitions in SECTION 1.1 are entirely amended
as follows:
APPLICABLE MARGIN means, for any day, the margin of
interest over the Base Rate, or the Eurodollar Rate, as the
case may be, that is applicable when the Base Rate or
Eurodollar Rate, as applicable, is determined under this
agreement.
(a) The Applicable Margin is subject to
adjustment (upwards or downwards, as appropriate)
based on the ratio of the Companies' Funded Debt to
EBITDA as stated in the table below.
(b) From September 27, 1999, through the
date that Agent receives the Current Financials and
Compliance Certificate for the fiscal quarter ending
October 3, 1999, the Applicable Margin is deemed to
be 1.500% for Eurodollar Rate Borrowings and 0.00%
for Base-Rate Borrowings, and the Applicable
Percentage is deemed to be 0.350%.
(c) From the date that Agent receives the
Current Financials and Compliance Certificate for
each of the fiscal quarters ending October 3, 1999,
January 2, 2000, and March 26, 2000, the Applicable
Margin may not be LESS THAN 1.500% for Eurodollar
Rate Borrowings and 0.00% for Base-Rate Borrowings,
and the Applicable Percentage may not be LESS THAN
0.350%;
FOURTH AMENDMENT
<PAGE> 2
PROVIDED, HOWEVER, that the Applicable Margin and
Applicable Percentage are subject to adjustment in
accordance with the tables below.
(d) After receipt of the Current Financials
and Compliance Certificate for the fiscal quarter
ending March 26, 2000, the Applicable Margin and
Applicable Percentage in effect at any time (whether
in the middle of an Interest Period or otherwise) are
based upon the ratio of the Companies' Funded Debt to
EBITDA as determined from the Current Financials and
related Compliance Certificate then most recently
received by Agent, effective as of the date received
by Agent.
(e) For purposes of the definitions of
APPLICABLE MARGIN and APPLICABLE PERCENTAGE, EBITDA
is calculated for the Companies' most
recently-completed-four-fiscal quarters, and Funded
Debt is determined as of the last day of that
four-fiscal-quarter period.
(f) If Borrower fails to timely furnish to
Agent any Financials and related Compliance
Certificate as required by this agreement, then the
maximum Applicable Margin and Applicable Percentage
apply from the date those Financials and related
Compliance Certificate are required to be delivered
and remain in effect until Borrower furnishes them to
Agent.
<TABLE>
<CAPTION>
RATIO OF FUNDED DEBT TO EBITDA APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
EURODOLLAR RATE BASE-RATE
BORROWINGS BORROWINGS
<S> <C> <C>
Less than or equal to 3.00 to 1.00, but greater 2.000% 0.500%
than 2.50 to 1.00
Less than or equal to 2.50 to 1.00, but greater 1.750% 0.250%
than 2.00 to 1.00
Less than or equal to 2.00 to 1.00, but greater 1.500% 0.00%
than 1.50 to 1.00
Less than or equal to 1.50 to 1.00, but greater 1.250% 0.00%
than 1.00 to 1.00
Less than or equal to 1.00 to 1.00 0.875% 0.00%
</TABLE>
APPLICABLE PERCENTAGE means, subject to any
adjustment pursuant to the definition of Applicable Margin,
for any day, a commitment-fee percentage applicable under
SECTION 4.4, subject to adjustment (upwards or downwards, as
appropriate), based on the ratio of the Companies' Funded Debt
to EBITDA, as follows:
FOURTH AMENDMENT
<PAGE> 3
<TABLE>
<CAPTION>
APPLICABLE
RATIO OF FUNDED DEBT TO EBITDA PERCENTAGE
<S> <C>
Less than or equal to 3.00 to 1.00, but greater than 2.50 0.450%
to 1.00
Less than or equal to 2.50 to 1.00, but greater than 2.00 0.400%
to 1.00
Less than or equal to 2.00 to 1.00, but greater than 1.50 0.350%
to 1.00
Less than or equal to 1.50 to 1.00, but greater than 1.00 0.300%
to 1.00
Less than or equal to 1.00 to 1.00 0.200%
</TABLE>
EBITDA means:
(a) for any Person, for any period, and
without duplication, the SUM of (i) Net Income
(without regard to extraordinary items), PLUS (ii) to
the extent actually deducted in calculating Net
Income, Interest Expense, income Taxes, and
depreciation and amortization from continuing
operations, and (iii) MINUS or PLUS, respectively,
any net gains or losses from discontinued operations
that are not extraordinary items; and
(b) for purposes of calculating the
Companies' EBITDA for any four-quarter period, the
Companies' EBITDA for that period shall, to the
extent reflected in Financials acceptable to Agent,
include the EBITDA of any Person that became a
Subsidiary of Borrower or was merged with or
consolidated into Borrower during that period as if
it had been acquired, merged, or consolidated at the
beginning of that period.
LC means a commercial or standby letter of credit
issued for the account of Borrower by an Issuing Lender under
this agreement and under an LC Agreement.
(B) The clause "...on its face does not comply with the terms
of..." in SECTION 2.3(D) is changed to "...on its face does not substantially
comply with the terms of...".
(C) The penultimate sentence of SECTION 2.3(D) is amended by
adding the following clause at the end of that sentence:
as determined by a court of competent jurisdiction.
(D) The last sentence of SECTION 2.3(F) is entirely amended as
follows:
3
FOURTH AMENDMENT
<PAGE> 4
Any action taken or omitted or to be taken by Agent, any
Co-Agent, or any Issuing Lender in connection with any LC if
taken or omitted in the absence of gross negligence or willful
misconduct (as determined by a court of competent
jurisdiction) shall not create for Agent, any Co-Agent, or
such Issuing Lender any resulting liability to any other
Lender or any Company.
(E) SECTION 5.5(C) is entirely amended as follows:
(c) Agent shall, upon Borrower's written request and
at Borrower's cost and expense, cause the Lender Liens on all
Collateral under SECTION 5.2 and 5.3 to be released upon
satisfaction of all of the following conditions precedent: (i)
The Release Event has occurred; (ii) for at least two
consecutive fiscal quarters ending immediately before the
requested release, the ratio of the Companies' Funded Debt (as
of the last day of those fiscal quarters) to EBITDA
(calculated only in respect of assets owned by the Companies
at the end of the applicable period) for the 12-month period
ending on those last days was LESS THAN 2.25 to 1.00; (iii)
Borrower has delivered its audited Financials and related
Compliance Certificate in accordance with SECTION 8.1(A) for
the fiscal year ending June 25, 2000; and (iv) no Default or
Potential Default then exists.
(F) SECTION 9.10 is entirely amended as follows:
9.10 DISTRIBUTIONS. No Restricted Company may
declare, make, or pay any Distribution EXCEPT (a)
Distributions paid in the form of additional equity that is
not mandatorily redeemable, (b) Distributions to any other
Restricted Company, and (iii) other Distributions by Borrower
SO LONG as immediately after giving effect to any such other
Distribution (i) no Default or Potential Default exists and
(ii) the total amount of all such other Distributions paid
during the period (A) beginning June 28, 1999, and ending upon
delivery of the Financials and Compliance Certificate for the
fiscal quarter ending January 2, 2000, as required by SECTION
8.1(B), does not exceed $60,000,000 and (B) beginning June 28,
1999, never exceeds $90,000,000.
(G) A new SECTION 9.18 is added as follows:
9.18 CAPITAL EXPENDITURES. No Company may make
expenditures for the acquisition, improvement, or replacement
of land, buildings, equipment, or other fixed or capital
assets or leaseholds (excluding expenditures properly
chargeable to repairs or maintenance) that total for all of
the Companies MORE THAN $10,000,000 during any of the three
fiscal quarters ending October 3, 1999, January 2, 2000, and
March 26, 2000; PROVIDED that allowable expenditures under
this section not utilized during the respective fiscal quarter
may be carried forward and utilized during the next succeeding
fiscal quarters.
(H) SECTION 10.1 is entirely amended as follows:
10.1 NET WORTH. The Companies' Net Worth, determined
as of the last day of each fiscal quarter of Borrower, to be
LESS than the SUM of (a) $175,000,000, PLUS (b) 50% of the
Companies' cumulative Net Income (without deduction for
losses) after
4
FOURTH AMENDMENT
<PAGE> 5
June 25, 2000, PLUS (c) 75% of the net (I.E., gross less usual
and customary underwriting, placement, and other related costs
and expenses) proceeds of the issuance of any equity
securities by Borrower after the date of this agreement.
(I) SECTION 10.2 is entirely amended as follows:
10.2 DEBT/EBITDA. The RATIO of the Companies' Funded
Debt as of the last day of each fiscal quarter (commencing
with the quarter of Borrower ending October 3, 1999) TO EBITDA
(calculated only in respect of assets owned by the Companies
at the end of the applicable period) for the 12-month period
ending on that last day to EXCEED (i) after the Release Event
has occurred, the other conditions for the release of
Collateral have been satisfied, and Agent has released the
Collateral, 2.50 to 1.00 and (ii) otherwise, 3.00 to 1.00. For
purposes of this section, EBITDA shall exclude the $34,400,000
restructuring charge recorded in the fiscal quarter ending
June 28, 1999.
(J) SECTION 10.3 is entirely amended as follows:
10.3 INTEREST COVERAGE. The RATIO, determined as of
the last day of each fiscal quarter (commencing June 25, 2000)
of Borrower for the four quarters then ended of (a) the
DIFFERENCE of the Companies' EBITDA MINUS Capital Expenditures
TO (b) Interest Expense to be LESS THAN 3.50 to 1.00. For
purposes of calculating the Companies' Capital Expenditures
and Interest Expense for any four-quarter period, the
Companies' Capital Expenditures and Interest Expense for that
period shall, to the extent reflected in Financials acceptable
to Agent, include the Capital Expenditures and Interest of any
Person that became a Subsidiary of Borrower or was merged with
or consolidated into Borrower during that period as if it had
been acquired, merged, or consolidated at the beginning of
that period.
(K) A new SECTION 10.4 is added as follows:
10.4 CONSOLIDATED EBITDA. The Companies' EBITDA to be
LESS THAN (a) for the fiscal quarter ending October 3, 1999,
$11,500,000, (b) for the six-month period ending January 2,
2000, $24,000,000, and (c) for the nine-month period ending
March 26, 2000, $41,000,000.
(L) SCHEDULE 2.1 and EXHIBIT B-4 are amended in the forms of, and
all references in the Loan Documents to that schedule and exhibit are changed
to, the attached SECOND AMENDED SCHEDULE 2.1 and AMENDED EXHIBIT B-4,
respectively.
3. AMENDMENT TO SECURITY AGREEMENT. ANNEX 1 to the Security Agreement dated as
of March 31, 1995, between Borrower, certain of its Subsidiaries, and Agent, is
entirely amended in the form of, and all references to that annex in that
Security Agreement are changed to, the attached AMENDED ANNEX 1.
4. CONDITIONS PRECEDENT. PARAGRAPHS 2 and 3 above are not effective until Agent
receives (A) counterparts of this document executed by Borrower and Determining
Lenders, (B) an amendment fee to be paid to each Lender who has executed and
delivered to Agent a counterpart of this
5
FOURTH AMENDMENT
<PAGE> 6
document by 5:00 p.m. Atlanta time on September 24, 1999, equal to 0.15% of that
Lender's Commitment, and (C) all other fees and expenses due and payable to
Agent under all Loan Documents.
5. RATIFICATIONS. Borrower (A) ratifies and confirms all provisions of the Loan
Documents as amended by this document, (B) ratifies and confirms that (except as
permitted by SECTION 5.5) all guaranties, assurances, and Liens granted,
conveyed, or assigned to Agent under the Loan Documents are not released,
reduced, or otherwise adversely affected by this document and continue to
guarantee, assure, and secure full payment and performance of the present and
future Obligation, and (C) agrees to perform such acts and duly authorize,
execute, acknowledge, deliver, file, and record such additional documents and
certificates as Agent may request in order to create, perfect, preserve, and
protect those guaranties, assurances, and Liens.
6. REPRESENTATIONS. To induce Agent, Co-Agents, and Determining Lenders to enter
into this document, Borrower represents and warrants to Agent, Co-Agents, and
Determining Lenders that as of the date of this document (A) all representations
and warranties in the Loan Documents are true and correct in all material
respects except to the extent that any of them speak to a different specific
date or the facts on which any of them were based have been changed by
transactions contemplated or permitted by the Credit Agreement, and (B) no
Material Adverse Event, Default, or Potential Default exists.
7. EXPENSES. Borrower shall pay all costs, fees, and expenses paid or incurred
by Agent incident to this document, including, without limitation, the
reasonable fees and expenses of Agent's counsel in connection with the
negotiation, preparation, delivery, and execution of this document and any
release or other related documents.
8. MISCELLANEOUS. All references in the Loan Documents to the "Credit
Agreement" refer to the Credit Agreement as amended by this document. This
document is a "Loan Document" referred to in the Credit Agreement, and the
provisions relating to Loan Documents in SECTIONS 1 and 14 of the Credit
Agreement are incorporated in this document by reference. Except as specifically
amended by this document, the Credit Agreement is unchanged and continues in
full force and effect. This document may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document. All counterparts must be construed together to constitute one and the
same instrument. This document binds and inures to each of the undersigned and
their respective successors and permitted assigns, subject to the terms of the
Credit Agreement. THIS DOCUMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.
6
FOURTH AMENDMENT
<PAGE> 7
EXECUTED as of the date first stated in this Fourth Amendment to
Restated Credit Agreement.
MAGNETEK, INC., as Borrower
By
---------------------------------------
John P. Colling, Jr., Vice President
and Treasurer
BANK OF AMERICA, N.A. (formerly NationsBank,
N.A., and formerly NationsBank of Texas, N.A.),
as Agent and a Lender
By
---------------------------------------
Nancy S. Goldman, Principal
BANKERS TRUST COMPANY, as a Co-Agent
and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
CIBC INC., as a Co-Agent and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
CREDIT LYONNAIS NEW YORK BRANCH, as a Co-Agent
and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
BANK ONE, N.A. (formerly the First National
Bank of Chicago), as a Co-Agent and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
GENERAL ELECTRIC CAPITAL CORPORATION
(assignee of The Long-Term Credit Bank of
Japan, Ltd.), as a Co-Agent and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
UNION BANK OF CALIFORNIA, N.A., as a Co-Agent
and a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
ARAB BANKING CORPORATION (B.S.C.), as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
BANK AUSTRIA CREDITANSTALT CORPORATE FINANCE, INC.,
as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
SIGNATURE PAGE
PAGE 1 OF 2
<PAGE> 8
FIRST UNION NATIONAL BANK, as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
FUJI BANK, LIMITED, ATLANTA AGENCY, as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
NATEXIS BANQUE (formerly Banque Francaise
du Commerce Exterieur), as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
SOCIETE GENERALE, SOUTHWEST AGENCY, as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE SUMITOMO BANK, LIMITED, as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
BANK HAPOALIM, (assignee, in part, of Societe
Generale, Southwest Agency), as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
CREDIT AGRICOLE INDOSUEZ (formerly Caisse
Nationale de Credit Agricole), as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
THE TOKAI BANK, LTD. NEW YORK BRANCH,
as a Lender
By
---------------------------------------
Name:
--------------------------------
Title:
--------------------------------
SIGNATURE PAGE
PAGE 2 OF 2
<PAGE> 1
1999 STOCK INCENTIVE PLAN
OF
MAGNETEK, INC.
SECTION 1. PURPOSE OF PLAN
The purpose of this 1999 Stock Incentive Plan of MagneTek, Inc. (this
"Plan") is to enable MagneTek, Inc., a Delaware corporation (the "Company"), to
attract, retain and motivate its officers and other key employees, and to
further align the interests of such persons with those of the stockholders of
the Company by providing for or increasing the proprietary interest of such
persons in the Company.
SECTION 2. ADMINISTRATION OF PLAN
2.1 COMPOSITION OF COMMITTEE. Subject to Section 2.4, this Plan shall
be administered by the Compensation Committee of the Board of Directors (the
"Committee"), as appointed from time to time by the Board of Directors,
provided, however, that (a) with respect to any Award (as defined in Section
5.1) that is intended to satisfy the conditions of Rule 16b-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") the term
"Committee" shall refer to a committee of two or more "non-employee directors"
as determined for purposes of applying Exchange Act Rule 16b-3; and (b) with
respect to any Award that is intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended (the "Code"), the term "Committee" shall refer to a
committee of two or more "outside directors" as determined for purposes of
applying Code Section 162(m). The Board of Directors shall fill vacancies on and
from time to time may remove or add members to the Committee. The Committee
shall act pursuant to a majority vote or unanimous written consent. The
Committee may designate the Secretary of the Company or other Company employees
to assist the Committee in the administration of this Plan, and may grant
authority to such persons to execute agreements or other documents evidencing
Awards made under this Plan or other documents entered into under this Plan on
behalf of the Committee or the Company.
2.2 POWERS OF THE COMMITTEE. Subject to the express provisions of this
Plan, the Committee shall be authorized and empowered to do all things necessary
or desirable, in its sole discretion, in connection with the administration of
this Plan, including, without limitation, the following:
(a) to prescribe, amend and rescind rules and regulations
relating to this Plan and to define terms not otherwise defined herein;
provided that, unless the Committee shall specify otherwise, for
purposes of this Plan (i) the term "fair market value" shall mean, as
of any date, the closing price for a Share (as defined in Section 3.1)
reported for that date by the New York Stock Exchange (or such other
stock exchange or quotation system on which Shares are then listed or
quoted) or, if no Shares are traded on the New York Stock Exchange (or
such other stock exchange or quotation system) on the date in question,
then for the next preceding date for which Shares traded on the New
York Stock Exchange (or such other stock exchange or quotation system);
and (ii) the term "Company" shall mean the Company and its subsidiaries
and affiliates, unless the context otherwise requires;
(b) to determine which persons are Eligible Persons (as
defined in Section 4), to which of such Eligible Persons, if any,
Awards shall be granted hereunder and the timing of any such Awards,
and to grant Awards;
(c) to determine the number of Shares subject to Awards and
the exercise or purchase price of such Shares;
(d) to establish and verify the extent of satisfaction of any
performance goals applicable to Awards;
<PAGE> 2
(e) to prescribe and amend the terms of the agreements or
other documents evidencing Awards made under this Plan (which need not
be identical);
(f) to determine whether, and the extent to which, adjustments
are required pursuant to Section 10;
(g) to interpret and construe this Plan, any rules and
regulations under this Plan and the terms and conditions of any Award
granted hereunder, and to make exceptions to any such provisions in
good faith and for the benefit of the Company; and
(h) to make all other determinations deemed necessary or
advisable for the administration of this Plan.
2.3 DETERMINATIONS OF THE COMMITTEE. All decisions, determinations and
interpretations by the Committee regarding this Plan shall be final and binding
on all Eligible Persons and Participants. The Committee shall consider such
factors as it deems relevant to making such decisions, determinations and
interpretations including, without limitation, the recommendations or advice of
any director, officer or employee of the Company and such attorneys, consultants
and accountants as it may select.
2.4. AUTHORITY OF THE BOARD OF DIRECTORS. The Board of Directors, in
its sole discretion, may exercise any authority of the Committee under this Plan
in lieu of the Committee's exercise thereof.
SECTION 3. STOCK SUBJECT TO PLAN
3.1 AGGREGATE LIMITS. At any time, the aggregate number of shares of
the Company's Common Stock, $.01 par value ("Shares"), issued and issuable
pursuant to all Awards (including all ISOs (as defined in Section 5.1(a)))
granted under this Plan shall not exceed 1,500,000, plus the number of shares
subject to options granted under the second Amended and Restated 1989 Incentive
Stock Compensation Plan of MagneTek, Inc. but which shares are not issued as of
the cancellation, expiration or forfeiture of such options; provided that no
more than 350,000 of such Shares may be issued pursuant to all Incentive Bonuses
and Incentive Stock Awards granted under this Plan, and provided further that,
notwithstanding Section 3.3, the aggregate number of Shares that may be issued
pursuant to the exercise of ISOs granted under this Plan shall not exceed
1,500,000. Such limits shall be subject to adjustment as provided in Section 10.
The Shares subject to this Plan may be either reacquired by the Company,
including Shares purchased in the open market, or authorized but unissued
Shares.
3.2 CODE SECTION 162(M) LIMITS. The aggregate number of Shares subject
to Options granted under this Plan during any calendar year to any one Employee
shall not exceed 500,000. The aggregate number of Shares issued or issuable
under all Awards granted under this Plan, other than Options, during any
calendar year to any one Employee shall not exceed 100,000. Notwithstanding
anything to the contrary in this Plan, the foregoing limitations shall be
subject to adjustment under Section 10 only to the extent that such adjustment
will not affect the status of any Award intended to qualify as "performance
based compensation" under Code Section 162(m). The foregoing limitations shall
not apply to the extent that they are no longer required in order for
compensation in connection with grants under this Plan to be treated as
"performance-based compensation" under Code Section 162(m).
3.3 ISSUANCE OF SHARES. For purposes of Section 3.1, the aggregate
number of Shares issued under this Plan at any time shall equal only the number
of Shares actually issued upon exercise or settlement of an Award and shall not
include Shares subject to Awards that have been canceled, expired or forfeited
or Shares subject to Awards that have been used in payment or satisfaction of
the purchase price, exercise price or tax withholding obligation of an Award.
SECTION 4. PERSONS ELIGIBLE UNDER PLAN
Any person who is an officer or other key employee of the Company as
determined, in its discretion and for purposes only of this Plan, by the
Committee (an "Eligible Person"), shall be eligible to be considered for the
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grant of Awards hereunder. A "Participant" is any current or former Eligible
Person to whom an Award has been made and any person (including any estate) to
whom an Award has been assigned or transferred pursuant to Section 9.1.
SECTION 5. PLAN AWARDS
5.1 AWARD TYPES. The Committee, on behalf of the Company, is authorized
under this Plan to enter into certain types of arrangements with Employees and
to confer certain benefits on them. The following arrangements or benefits are
authorized under this Plan if their terms and conditions are not inconsistent
with the provisions of this Plan: Options, Incentive Bonuses and Incentive
Stock. Such arrangements and benefits are sometimes referred to herein as
"Awards." The authorized types of arrangements and benefits for which Awards may
be granted are defined as follows:
(a) Options: An Option is a right granted under Section 6 to
purchase a number of Shares at such exercise price, at such times, and
on such other terms and conditions as are specified in the agreement or
terms and conditions or other document evidencing the Award (the
"Option Document "). Options intended to qualify as Incentive Stock
Options ("ISOs") pursuant to Code Section 422 and Options not intended
to qualify as ISOs ("Nonqualified Options") may be granted under
Section 6.
(b) Incentive Bonus: An Incentive Bonus is a bonus opportunity
awarded under Section 7 pursuant to which a Participant may become
entitled to receive an amount based on satisfaction of such performance
criteria as are specified in the agreement or other document evidencing
the Award (the "Incentive Bonus Document").
(c) Incentive Stock: Incentive Stock is an award or issuance
of Shares made under Section 8, the grant, issuance, retention, vesting
and/or transferability of which is subject during specified periods of
time to such conditions (including continued employment or performance
conditions) and terms as are expressed in the agreement or other
document evidencing the Award (the "Incentive Stock Document").
5.2 GRANTS OF AWARDS. An Award may consist of one such arrangement or
benefit or two or more of them in tandem or in the alternative.
SECTION 6. OPTIONS
The Committee may grant an Option or provide for the grant of an
Option, either from time to time in the discretion of the Committee or
automatically upon the occurrence of specified events, including, without
limitation, the achievement of performance goals, the satisfaction of an event
or condition within the control of the recipient of the Award or within the
control of others.
6.1 OPTION DOCUMENT. Each Option Document shall contain provisions
regarding (a) the number of Shares that may be issued upon exercise of the
Option, (b) the purchase price of the Shares and the means of payment for the
Shares, (c) the term of the Option, (d) such terms and conditions of
exercisability as may be determined from time to time by the Committee, (e)
restrictions on the transfer of the Option and forfeiture provisions and (f)
such further terms and conditions, in each case not inconsistent with this Plan
as may be determined from time to time by the Committee. Option Documents
evidencing ISOs shall contain such terms and conditions as may be necessary to
qualify, to the extent determined desirable by the Committee, with the
applicable provisions of Section 422 of the Code.
6.2 OPTION PRICE. The purchase price per share of the Shares subject to
each Option granted under this Plan shall equal or exceed 100% of the fair
market value of such Stock on the date the Option is granted, except that (a)
the exercise price of an Option may be higher or lower in the case of Options
granted to an employee of a company acquired by the Company in assumption and
substitution of options held by such employee at the time such company is
acquired, and (b) in the event an Employee is required to pay or forego the
receipt of any cash
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amount in consideration of receipt of an Option, the exercise price plus such
cash amount shall equal or exceed 100% of the fair market value of such Stock on
the date the Option is granted.
6.3 OPTION TERM. The "Term" of each Option granted under this Plan,
including any ISOs, shall be 10 years from the date of its grant, unless the
Committee provides otherwise.
6.4 OPTION VESTING. Options granted under this Plan shall be
exercisable at such time and in such installments during the period prior to the
expiration of the Option's Term as determined by the Committee. The Committee
shall have the right to make the timing of the ability to exercise any Option
granted under this Plan subject to such performance requirements as deemed
appropriate by the Committee. At any time after the grant of an Option the
Committee may reduce or eliminate any restrictions surrounding any Participant's
right to exercise all or part of the Option.
6.5 TERMINATION OF EMPLOYMENT. Subject to Section 11, upon a
termination of employment by a Participant prior to the full exercise of an
Option, the unexercised portion of the Option shall be subject to such
procedures as the Committee may establish.
6.6 PAYMENT OF EXERCISE PRICE. The exercise price of an Option shall be
paid in the form of one of more of the following, as the Committee shall
specify, either through the terms of the Option Document or at the time of
exercise of an Option: (a) cash or certified or cashiers' check, (b) shares of
capital stock of the Company that have been held by the Participant for such
period of time as the Committee may specify, (c) other property deemed
acceptable by the Committee, (d) a reduction in the number of Shares or other
property otherwise issuable pursuant to such Option or (e) any combination of
(a) through (d).
6.7 NO OPTION REPRICING; NO RELOAD OPTIONS. Without the approval of
stockholders, the Company shall not (a) reprice any Options or (b) provide for
"reload options," which means that unless approved by stockholders the Company
shall not provide for Options to be granted automatically in connection with and
to the extent of the exercise of other Options. For purposes of this Plan, the
term "reprice" means amending, canceling or replacing Options within the meaning
of Item 402(i) under Securities and Exchange Commission Regulation S-K including
by (i) reducing the exercise price of outstanding Options and (ii) canceling
outstanding Options and granting new Options to the holders of canceled Options.
SECTION 7. INCENTIVE BONUSES
Each Incentive Bonus Award will confer upon the Employee the
opportunity to earn a future payment tied to the level of achievement with
respect to one or more performance criteria established for a performance period
of not less than one year.
7.1 INCENTIVE BONUS DOCUMENT. Each Incentive Bonus Document shall
contain provisions regarding (a) the target and maximum amount payable to the
Participant as an Incentive Bonus, (b) the performance criteria and level of
achievement versus these criteria that shall determine the amount of such
payment, (c) the term of the performance period as to which performance shall be
measured for determining the amount of any payment, (d) the timing of any
payment earned by virtue of performance, (e) restrictions on the alienation or
transfer of the Incentive Bonus prior to actual payment, (f) forfeiture
provisions and (g) such further terms and conditions, in each case not
inconsistent with this Plan as may be determined from time to time by the
Committee. The maximum amount payable as an Incentive Bonus may be a multiple of
the target amount payable, but the maximum amount payable pursuant to that
portion of an Incentive Bonus Award granted under this Plan for any fiscal year
to any Participant that is intended to satisfy the requirements for "performance
based compensation" under Code Section 162(m) shall not exceed $1,000,000.
7.2 PERFORMANCE CRITERIA. The Committee shall establish the performance
criteria and level of achievement versus these criteria that shall determine the
target and maximum amount payable under an Incentive Bonus Award, which criteria
may be based on financial performance and/or personal performance evaluations.
The Committee may specify the percentage of the target Incentive Bonus that is
intended to satisfy the requirements for
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"performance-based compensation" under Code Section 162(m). Notwithstanding
anything to the contrary herein, the performance criteria for any portion of an
Incentive Bonus that is intended by the Committee to satisfy the requirements
for "performance-based compensation" under Code Section 162(m) shall be a
measure based on one or more Qualifying Performance Criteria (as defined in
Section 9.2) selected by the Committee and specified at the time the Incentive
Bonus Award is granted. The Committee shall certify the extent to which any
Qualifying Performance Criteria has been satisfied, and the amount payable as a
result thereof, prior to payment of any Incentive Bonus that is intended to
satisfy the requirements for "performance-based compensation" under Code Section
162(m).
7.3 TIMING AND FORM OF PAYMENT. The Committee shall determine the
timing of payment of any Incentive Bonus. The Committee may provide for or,
subject to such terms and conditions as the Committee may specify, may permit a
Participant to elect for the payment of any Incentive Bonus to be deferred to a
specified date or event.
7.4 DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any
performance goals, the amount paid under an Incentive Bonus Award on account of
either financial performance or personal performance evaluations may be reduced
by the Committee on the basis of such further considerations as the Committee
shall determine.
SECTION 8. INCENTIVE STOCK
Incentive Stock is an award or issuance of Shares the grant, issuance,
retention, vesting and/or transferability of which is subject during specified
periods of time to such conditions (including continued employment or
performance conditions) and terms as the Committee deems appropriate.
8.1 INCENTIVE STOCK DOCUMENT. Each Incentive Stock Document shall
contain provisions regarding (a) the number of Shares subject to such Award or a
formula for determining such, (b) the performance criteria, if any, and level of
achievement versus these criteria that shall determine the number of Shares
granted, issued, retainable and/or vested, (c) the period, if any, as to which
performance shall be measured for determining achievement of performance or, if
not subject to performance criteria, the period of continued employment upon
which vesting of the Shares is subject, which period in any case (except in the
event of death or disability of the Participant or upon a Change of Control (as
defined in Section 11.2)) shall be not less than one year, (d) forfeiture, (e)
transferability and (f) such further terms and conditions not inconsistent with
this Plan as may be determined from time to time by the Committee.
8.2 SALE PRICE. Subject to the requirements of applicable law, the
Committee shall determine the price, if any, at which Shares of Incentive Stock
shall be sold or awarded to an Eligible Person, which may vary from time to time
and among Eligible Persons and which may be below the fair market value of such
Shares at the date of grant or issuance.
8.3 PERFORMANCE CRITERIA. The grant, issuance, retention and/or vesting
of each Incentive Share may but need not be subject to such performance criteria
and level of achievement versus these criteria as the Committee shall determine,
which criteria may be based on financial performance and/or personal performance
evaluations. Notwithstanding anything to the contrary herein, the performance
criteria for any Incentive Stock that is intended to satisfy the requirements
for "performance-based compensation" under Code Section 162(m) shall be a
measure based on one or more Qualifying Performance Criteria selected by the
Committee and specified at the time the Incentive Stock Award is granted.
8.4 DISCRETIONARY ADJUSTMENTS. Notwithstanding satisfaction of any
performance goals, the number of Shares granted, issued, retainable and/or
vested under an Incentive Stock Award on account of either financial performance
or personal performance evaluations may be reduced by the Committee on the basis
of such further considerations as the Committee shall determine.
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8.5 TERMINATION OF EMPLOYMENT. Subject to Section 11, upon a
termination of employment by a Participant prior to the vesting of or the
lapsing of restrictions on Incentive Stock, the Incentive Stock Awards granted
to such Participant shall be subject to such procedures as determined by the
Committee.
SECTION 9. OTHER PROVISIONS APPLICABLE TO AWARDS
9.1 TRANSFERABILITY. Unless the agreement or other document evidencing
an Award (or an amendment thereto authorized by the Committee) expressly states
that the Award is transferable as provided hereunder, no Award granted under
this Plan, nor any interest in such Award, may be sold, assigned, conveyed,
gifted, pledged, hypothecated or otherwise transferred in any manner prior to
the vesting or lapse of any and all restrictions applicable thereto, other than
by will or the laws of descent and distribution or pursuant to a "domestic
relations order," as defined in the Code. The Committee may grant an Award or
amend an outstanding Award to provide that the Award is transferable or
assignable to a member or members of the Participant's "immediate family," as
such term is defined in Rule 16a-1(e) under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), or to a trust for the benefit solely of a
member or members of the Participant's immediate family, or to a partnership or
other entity whose only owners are members of the Participant's immediate
family, provided that following any such transfer or assignment the Award will
remain subject to substantially the same terms applicable to the Award while
held by the Participant, as modified as the Committee shall determine
appropriate, and the transferee shall execute an agreement agreeing to be bound
by such terms.
9.2 QUALIFYING PERFORMANCE CRITERIA. For purposes of this Plan, the
term "Qualifying Performance Criteria" shall mean any one or more of the
following performance criteria, either individually, alternatively or in any
combination, applied to either the Company as a whole or to a business unit or
subsidiary, either individually, alternatively or in any combination, and
measured either annually or cumulatively over a period of years, on an absolute
basis or relative to a pre-established target, to previous years' results or to
a designated comparison group, in each case as specified by the Committee in the
Award: (a) cash flow, (b) earnings per share, (c) earnings before interest,
taxes and amortization), (d) return on equity, (e) total stockholder return, (f)
return on capital, (g) return on assets or net assets, (h) revenue, (i) income
or net income, (j) operating income or net operating income, (k) operating
profit or net operating profit, (l) operating margin, (m) return on operating
revenue, (n) market share and (o) overhead or other expense reduction. The
Committee shall appropriately adjust any evaluation of performance under a
Qualifying Performance Criteria to exclude any of the following events that
occurs during a performance period: (i) asset write-downs, (ii) litigation or
claim judgments or settlements, (iii) the effect of changes in tax law,
accounting principles or other such laws or provisions affecting reported
results, (iv) accruals for reorganization and restructuring programs and (v) any
extraordinary non-recurring items as described in Accounting Principles Board
Opinion No. 30 and/or in management's discussion and analysis of financial
condition and results of operations appearing in the Company's annual report to
stockholders for the applicable year.
9.3 DIVIDENDS. Unless otherwise provided by the Committee, no
adjustment shall be made in Shares issuable under Awards on account of cash
dividends that may be paid or other rights that may be issued to the holders of
Shares prior to their issuance under any Award. The Committee shall specify
whether dividends or dividend equivalent amounts shall be paid to any
Participant with respect to the Shares subject to any Award that have not vested
or been issued or that are subject to any restrictions or conditions on the
record date for dividends.
9.4 DOCUMENTS EVIDENCING AWARDS. The Committee shall, subject to
applicable law, determine the date an Award is deemed to be granted, which for
purposes of this Plan shall not be affected by the fact that an Award is
contingent on subsequent stockholder approval of this Plan. The Committee or,
except to the extent prohibited under applicable law, its delegate(s) may
establish the terms of agreements or other documents evidencing Awards under
this Plan and may, but need not, require as a condition to any such agreement's
or document's effectiveness that such agreement or document be executed by the
Participant and that such Participant agree to such further terms and conditions
as specified in such agreement or document. The grant of an Award under this
Plan shall not confer any rights upon the Participant holding such Award other
than such terms, and subject to such conditions, as are specified in this Plan
as being applicable to such type of Award (or to all Awards) or as are expressly
set forth in the agreement or other document evidencing such Award.
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9.5 TANDEM STOCK OR CASH RIGHTS. Either at the time an Award is granted
or by subsequent action, the Committee may, but need not, provide that an Award
shall contain as a term thereof, a right, either in tandem with the other rights
under the Award or as an alternative thereto, of the Participant to receive,
without payment to the Company, a number of Shares, cash or a combination
thereof, the amount of which is determined by reference to the value of the
Award.
9.6 FINANCING. The Committee may not provide financing to a Participant
to pay the purchase price of any Award or to pay the amount of taxes required by
law to be withheld with respect to any Award.
9.7 SUB-COMMITTEES. The Board of Directors or the Committee may from
time to time appoint one or more Sub-Committees (as defined below) comprised of
one or more officers, directors or others, which Sub-Committee shall have the
powers of the Committee described in Section 6 of this Plan solely with respect
to the grant of Options (as defined in Section 5.1(a)) to employees who are not
then officers of the Company within the meaning of Rule 16a-1(f) promulgated
under the Exchange Act, if and as such Rule is then in effect. Each such
Sub-Committee may be subject to any such additional restrictions or limitation
as the Board of Directors or the Committee may impose at any time. Each
Sub-Committee so appointed may be disbanded by the Board of Directors or the
Committee at any time, provided that no such termination shall affect the
validity of any Option theretofore approved by any such Sub-Committee.
"Sub-Committee" shall mean any Sub-Committee, comprised of one or more
individuals, of the Committee appointed as provided in Section 2.1. The
aggregate number of Shares subject to Options granted by a Sub-Committee
hereunder during any calendar year to any one Employee shall not exceed 15,000.
SECTION 10. CHANGES IN CAPITAL STRUCTURE
If the outstanding securities of the class then subject to this Plan
are increased, decreased or exchanged for or converted into cash, property or a
different number or kind of shares or securities, or if cash, property or shares
or securities are distributed in respect of such outstanding securities, in
either case as a result of a reorganization, merger, consolidation,
recapitalization, restructuring, reclassification, dividend (other than a
regular, quarterly cash dividend) or other distribution, stock split, reverse
stock split, spin-off or the like, or if substantially all of the property and
assets of the Company are sold, then, unless the terms of such transaction shall
provide otherwise, the Committee shall make appropriate and proportionate
adjustments in (a) the number and type of shares or other securities or cash or
other property that may be acquired pursuant to Awards theretofore granted under
this Plan and the exercise or settlement price of such Awards, provided,
however, that such adjustment shall be made in such a manner that will not
affect the status of any Award intended to qualify as an ISO under Code Section
422 or as "performance based compensation" under Code Section 162(m) and (b) the
maximum number and type of shares or other securities that may be issued
pursuant to such Awards thereafter granted under this Plan.
SECTION 11. CHANGE OF CONTROL
11.1 EFFECT OF CHANGE OF CONTROL. The Committee may, through the terms
of the Award or otherwise, provide that any or all of the following shall occur,
in connection with a Change of Control or a Change of Control Transaction (as
defined in Section 11.2), or upon termination of the Participant's employment
following a Change of Control or a Change of Control Transaction: (a) in the
case of an Option, the acceleration of the Participant's ability to exercise any
portion of the Option not previously exercisable or the payment to the
Participant of cash equal to the difference between the exercise price and the
price being paid to the holders of Shares, (b) in the case of an Incentive
Bonus, the acceleration of the Participant's right to receive a payment equal to
the target amount payable or, if greater, a payment based on performance through
a date determined by the Committee prior to the Change of Control and (c) in the
case of Shares issued in payment of any Incentive Bonus, and/or in the case of
Incentive Stock, the lapse and expiration of any conditions to the grant,
issuance, retention, vesting or transferability of, or any other restrictions
applicable to, such Award. The Committee also may, through the terms of the
Award or otherwise, provide for an absolute or conditional exercise, payment or
lapse of conditions or restrictions on an Award that shall only be effective if,
upon the announcement of a Change of Control Transaction, no provision is made
in such Change of Control Transaction for the exercise, payment or lapse of
conditions or restrictions on the Award, or other procedure whereby the
Participant may realize the full benefit of the Award.
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11.2 DEFINITIONS. Unless the Committee provides otherwise,
"Change of Control" means the first to occur of the following:
(a) the merger or consolidation of the Company with or into
another corporation;
(b) the acquisition by another corporation person or group of
all or substantially all of the Company's assets or 40% or more of the
Company's then outstanding voting stock;
(c) the liquidation or dissolution of the Company; or
(d) during any period of 12 consecutive months, individuals
who at the beginning of such 12-month period constituted the Board of
Directors (together with any new directors whose election by the Board
of Directors or whose nomination for election by the stockholders of
the Company was approved by a vote of a majority of the directors then
still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors then in office,
provided, however, that a Change of Control will not be deemed to have occurred
in respect of a merger in which (x) the Company is the surviving corporation,
(y) no person or group acquires 40% or more of the Company's outstanding voting
stock and (z) the Shares outstanding prior to the merger remain outstanding
thereafter; and provided further, that a merger or consolidation will not be
considered a Change of Control if such transaction results only in the
reincorporation of the Company in another jurisdiction or its restructuring into
holding company form.
"Change of Control Transaction" shall mean any tender offer, offer,
exchange offer, solicitation, merger, consolidation, reorganization or other
transaction that is intended to or reasonably expected to result in a Change of
Control.
SECTION 12. TAXES
12.1 WITHHOLDING REQUIREMENTS. The Committee may make such provisions
or impose such conditions as it may deem appropriate for the withholding or
payment by a Participant of any taxes that the Committee determines are required
in connection with any Award granted under this Plan, and a Participant's rights
in any Award are subject to satisfaction of such conditions.
12.2 PAYMENT OF WITHHOLDING TAXES. Notwithstanding the terms of Section
12.1, the Committee may provide in the agreement or other document evidencing an
Award or otherwise that all or any portion of the taxes required to be withheld
by the Company or, if permitted by the Committee, desired to be paid by the
Participant, in connection with the exercise of a Nonqualified Option or the
exercise, vesting, settlement or transfer of any other Award shall be paid or,
at the election of the Participant, may be paid by the Company by withholding
shares of the Company's capital stock otherwise issuable or subject to such
Award, or by the Participant delivering previously owned shares of the Company's
capital stock, in each case having a fair market value equal to the amount
required or elected to be withheld or paid. Any such election is subject to such
conditions or procedures as may be established by the Committee and may be
subject to disapproval by the Committee.
SECTION 13. AMENDMENTS OR TERMINATION
The Board may amend, alter or discontinue this Plan or any agreement or
other document evidencing an Award made under this Plan, but no such amendment
shall, without the approval of the stockholders of the Company:
(a) increase the maximum number of shares of Common Stock for
which Awards may be granted under this Plan;
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(b) reduce the price at which Options may be granted below the
price provided for in Section 6.2;
(c) reduce the exercise price of outstanding Options;
(d) after any Change of Control, impair the rights of any
Award holder without such holder's consent;
(e) extend the term of this Plan;
(f) change the class of persons eligible to be Participants;
(g) provide for the automatic grant of Options based upon the
exercise of Options by holders of Options; or
(h) increase the number of shares that are eligible for
non-Option Awards.
SECTION 14. COMPLIANCE WITH OTHER LAWS AND REGULATIONS.
This Plan, the grant and exercise of Awards thereunder, and the
obligation of the Company to sell, issue or deliver Shares under such Awards,
shall be subject to all applicable federal, state and foreign laws, rules and
regulations and to such approvals by any governmental or regulatory agency as
may be required. The Company shall not be required to register in a
Participant's name or deliver any Shares prior to the completion of any
registration or qualification of such Shares under any federal, state or foreign
law or any ruling or regulation of any government body which the Committee shall
determine to be necessary or advisable. This Plan is intended to constitute an
unfunded arrangement for a select group of management or other key employees,
directors and consultants.
No Option shall be exercisable unless a registration statement with
respect to the Option is effective or the Company has determined that such
registration is unnecessary. Unless the Awards and Shares covered by this Plan
have been registered under the Securities Act of 1933, as amended, or the
Company has determined that such registration is unnecessary, each person
receiving an Award and/or Shares pursuant to any Award may be required by the
Company to give a representation in writing that such person is acquiring such
Shares for his or her own account for investment and not with a view to, or for
sale in connection with, the distribution of any part thereof.
SECTION 15. NO RIGHT TO COMPANY EMPLOYMENT
Nothing in this Plan or as a result of any Award granted pursuant to
this Plan shall confer on any individual any right to continue in the employ of
the Company or interfere in any way with the right of the Company to terminate
an individual's employment at any time. The agreements or other documents
evidencing Awards may contain such provisions as the Committee may approve with
reference to the effect of approved leaves of absence.
SECTION 16. EFFECTIVENESS AND EXPIRATION OF PLAN
This Plan shall be effective on the date the Company's stockholders
adopt this Plan. All Awards granted under this Plan are subject to, and may not
be exercised before, the approval of this Plan by the stockholders prior to the
first anniversary date of the effective date of this Plan, by the affirmative
vote of the holders of a majority of the outstanding shares of the Company
present, or represented by proxy, and entitled to vote, at a meeting of the
Company's stockholders or by written consent in accordance with the laws of the
State of Delaware; provided that if such approval by the stockholders of the
Company is not forthcoming, all Awards previously granted under this Plan shall
be void. No Awards shall be granted pursuant to this Plan more than 10 years
after the effective date of this Plan.
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SECTION 17. NON-EXCLUSIVITY OF PLAN
Neither the adoption of this Plan by the Board nor the submission of
this Plan to the stockholders of the Company for approval shall be construed as
creating any limitations on the power of the Board or the Committee to adopt
such other incentive arrangements as either may deem desirable, including
without limitation, the granting of restricted stock or stock options otherwise
than under this Plan, and such arrangements may be either generally applicable
or applicable only in specific cases.
SECTION 18. GOVERNING LAW
This Plan and any agreements or other documents hereunder shall be
interpreted and construed in accordance with the laws of the State of Delaware
and applicable federal law. The Committee may provide that any dispute as to any
Award shall be presented and determined in such forum as the Committee may
specify, including through binding arbitration. Any reference in this Plan or in
the agreement or other document evidencing any Award to a provision of law or to
a rule or regulation shall be deemed to include any successor law, rule or
regulation of similar effect or applicability.
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2000 EMPLOYEE STOCK PLAN
OF
MAGNETEK, INC.
MAGNETEK, INC., a corporation organized under the laws of the
State of Delaware hereby adopts this 2000 Employee Stock Plan of MagneTek, Inc.
The purposes of this Plan are as follows:
(1) To further the growth, development and financial success
of the Company by providing additional incentives to its Employees by
assisting them to become owners of capital stock of the Company and
thus to benefit directly from its growth, development and financial
success.
(2) To enable the Company to obtain and retain the services of
the type of professional, technical and managerial employees considered
essential to the long-range success of the Company by providing and
offering them an opportunity to become owners of capital stock of the
Company under awards of restricted and unrestricted stock, performance
units, stock appreciation rights, restricted stock rights and options,
including non-qualified stock options.
ARTICLE I
DEFINITIONS AND RULES OF CONSTRUCTION
SECTION 1.1 RULES OF CONSTRUCTION
As used herein, the masculine pronoun shall include the
feminine and neuter and the singular shall include the plural, where the context
so indicates. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of this Plan.
SECTION 1.2 DEFINITIONS
As used herein:
AWARD shall mean any Options, Stock Appreciation Rights and/or
Restricted Stock Rights granted under this Plan and/or Restricted Stock, Stock
Awards and/or Performance Units issued under this Plan.
BOARD shall mean the Board of Directors of the Company.
CODE shall mean the Internal Revenue Code of 1986, as amended.
COMMITTEE shall mean the Compensation Committee of the Board,
appointed as provided in Section 11.1.
COMPANY shall mean MagneTek, Inc. In addition, Company shall
mean any corporation assuming, or issuing new employee stock options in
substitution for, options outstanding under this Plan.
DIRECTOR shall mean a member of the Board.
EMPLOYEE shall mean any employee (as defined in accordance
with the Regulations then applicable under Section 3401(c) of the Code) of the
Company, or of any corporation which is then a Parent Corporation or a
Subsidiary, whether such employee is so employed at the time this Plan is
adopted or becomes so employed subsequent to the adoption of this Plan.
EXCHANGE ACT shall mean the Securities Exchange Act of 1934,
as amended.
<PAGE> 2
FAIR MARKET VALUE of a Share on a given determination date
shall be: the closing price for a Share reported for that date by the New York
Stock Exchange (or such other stock exchange or quotation system on which Shares
are then listed or quoted) or, if no Shares are traded on the New York Stock
Exchange (or such other stock exchange or quotation system) on the date in
question, then for the next preceding date for which Shares traded on the New
York Stock Exchange (or such other stock exchange or quotation system).
NON-QUALIFIED OPTION shall mean an Option that is not subject
to the tax treatment provided for under Section 422 of the Code.
OFFICER shall mean an officer of the Company, any Parent
Corporation or any Subsidiary.
OPTION shall mean an option to purchase capital stock of the
Company granted under this Plan.
OPTIONEE shall mean an Employee to whom an Option is granted
under this Plan.
PARENT CORPORATION shall mean any corporation that is a
"parent" of the Company within the meaning of Rule 405 under the Securities Act.
PARTICIPANT shall mean an Employee who shall have been granted
an Award.
PERFORMANCE PERIOD shall mean a period of time determined by
the Committee over which the performance goals associated with a Performance
Unit are to be achieved.
PLAN shall mean this 2000 Employee Stock Plan of MagneTek,
Inc.
RESTRICTED PERIOD shall mean the period of time for which
Restricted Stock or a Restricted Stock Right is subject to forfeiture or other
Restrictions pursuant to this Plan.
RESTRICTED STOCK shall mean capital stock of the Company
issued pursuant to Articles VII and VIII of this Plan.
RESTRICTED STOCKHOLDER shall mean a person to whom Restricted
Stock has been issued under this Plan.
RESTRICTED STOCK RIGHT shall mean a right to be issued Shares,
granted pursuant to Articles VII and VIII of this Plan.
RESTRICTIONS shall mean the restrictions on Restricted Stock
or Restricted Stock Rights imposed by the Committee by the terms of an
individual Restricted Stock Agreement or Restricted Stock Right Agreement and
shall include the requirement that such Restricted Stock or Restricted Stock
Rights be forfeited back to, or subject to mandatory repurchase by, the Company
upon a Termination of Employment for the reasons specified in such Restricted
Stock Agreement or Restricted Stock Right Agreement.
SECRETARY shall mean the Secretary of the Company.
SECURITIES ACT shall mean the Securities Act of 1933, as
amended.
SHARES shall mean shares of the Company's Common Stock, $.01
par value.
SUB-COMMITTEE shall mean any Sub-Committee, comprised of one
or more individuals, of the Committee appointed as provided in Section 11.1.
STOCK APPRECIATION RIGHT shall mean a stock appreciation right
granted under this Plan.
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STOCK AWARD shall mean an award of capital stock of the
Company pursuant to Article IX of this Plan.
SUBSIDIARY shall mean any corporation of which the Company has
"control" within the meaning of Rule 405 under the Securities Act.
TERMINATION OF EMPLOYMENT shall mean the time when the
employee-employer relationship between the Participant and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
ARTICLE II
SHARES SUBJECT TO PLAN
SECTION 2.1 SHARES SUBJECT TO PLAN
The aggregate number of Shares which may be issued upon
exercise of Options and Stock Appreciation Rights or as Restricted Stock or
Stock Awards or at the end of the term of Restricted Stock Rights shall not
exceed 1,500,000 Shares.
SECTION 2.2 UNEXERCISED OPTIONS
If any Option expires or is canceled without having been fully
exercised, the number of shares subject to such Option but as to which such
Option was not exercised prior to its expiration or cancellation may again be
optioned or issued upon exercise of Stock Appreciation Rights or as Restricted
Stock or Stock Awards or issued at the end of the term of Restricted Stock
Rights hereunder, subject to the limitations of Section 2.l.
SECTION 2.3 EXERCISED STOCK APPRECIATION RIGHTS
To the extent that a Stock Appreciation Right shall have been
exercised, the number of shares subject to any related Option, or portion
thereof, may again be optioned hereunder, subject to the limitations of Section
2.1.
SECTION 2.4 FORFEITED RESTRICTED STOCK
Any shares of Restricted Stock forfeited to the Company
pursuant to Restrictions may again be optioned or issued upon exercise of Stock
Appreciation Rights or as Restricted Stock or Stock Awards or issued at the end
of the term of Restricted Stock Rights hereunder, subject to the limitations of
Section 2.1.
SECTION 2.5 FORFEITED RESTRICTED STOCK RIGHTS
Any Shares relating to Restricted Stock Rights forfeited to
the Company pursuant to Restrictions may again be optioned or issued upon
exercise Stock Appreciation Rights or as Restricted Stock or Stock Awards or
issued at the end of the term of Restricted Stock Rights hereunder, subject to
the limitations of Section 2.1.
SECTION 2.6 CHANGES IN COMPANY'S SHARES
In the event that the outstanding Shares are hereafter changed
into or exchanged for a different number or kind of shares or other securities
of the Company, or of another corporation, by reason of reorganization,
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merger, consolidation, recapitalization, reclassification, stock split-up, stock
dividend or combination of shares, appropriate adjustments shall be made by the
Committee in the number and kind of shares to which Options, Stock Appreciation
Rights, Restricted Stock, Stock Awards and Restricted Stock Rights thereafter to
be granted or issued under this Plan shall relate, including adjustments of the
limitations in Section 2.1 on the maximum number and kind of shares which may be
issued on exercise of Options, as Restricted Stock or Stock Awards or at the end
of the term of Restricted Stock Rights.
ARTICLE III
GRANT OF OPTIONS
SECTION 3.1 ELIGIBILITY
Any Employee of the Company or of any corporation which is
then a Parent Corporation or a Subsidiary shall be eligible to be granted
Options, except an Officer or Director of the Company required to file reporting
forms pursuant to Section 16 of the Exchange Act, and except as provided in
Section 11.1(a).
SECTION 3.2 GRANTING OF OPTIONS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the Employees (including those
to whom Options, Stock Appreciation Rights and/or Restricted
Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have previously
been issued under this Plan) such of them as in its opinion
should be granted Options; and
(ii) Determine the number of Shares to be subject to
such Options granted to such Employees; and
(iii) Determine the terms and conditions of such
Options, consistent with this Plan.
(b) Upon the selection of an Employee to be granted an Option,
the Committee shall instruct the Secretary to issue such Option and may impose
such conditions on the grant of such Option as it deems appropriate. Without
limiting the generality of the preceding sentence, the Committee may, in its
discretion and on such terms as it deems appropriate, require as a condition on
the grant of an Option that the Optionee surrender for cancellation some or all
of the unexercised Options which have been previously granted to him. An Option
the grant of which is conditioned upon such surrender may have an Option price
lower (or higher) than the Option price of the surrendered Option, may cover the
same (or a lesser or greater) number of Shares as the surrendered Option, may
contain such other terms as the Committee deems appropriate and shall be
exercisable in accordance with its terms, without regard to the number of
shares, price, Option period or any other term or condition of the surrendered
Option.
ARTICLE IV
TERMS OF OPTIONS
SECTION 4.1 OPTION AGREEMENT
Each Option shall be evidenced by a written Stock Option
Agreement, which shall be executed by the Optionee and an authorized Officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.
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SECTION 4.2 OPTION PRICE
The purchase price per share of the Shares subject to each
Option granted under this Plan shall equal or exceed 100% of the fair market
value of such Stock on the date the Option is granted, except that (a) the
exercise price of an Option may be higher or lower in the case of Options
granted to an employee of a company acquired by the Company in assumption and
substitution of options held by such employee at the time such company is
acquired, and (b) in the event an Employee is required to pay or forego the
receipt of any cash amount in consideration of receipt of an Option, the
exercise price plus such cash amount shall equal or exceed 100% of the fair
market value of such Stock on the date the Option is granted.
SECTION 4.3 COMMENCEMENT OF EXERCISABILITY
(a) Except as the Committee may otherwise provide, no Option
may be exercised in whole or in part during the first year after such Option is
granted.
(b) Subject to the provisions of Sections 4.3(a) and 4.3(c),
Options shall become exercisable at such times and in such installments (which
may be cumulative) as the Committee shall provide in the terms of each Stock
Option Agreement; provided, however, that by a resolution adopted after an
Option is granted the Committee may, on such terms and conditions as it may
determine to be appropriate and subject to Section 4.3(c), accelerate the time
at which such Option or any portion thereof may be exercised.
(c) No portion of an Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
SECTION 4.4 EXPIRATION OF OPTIONS
(a) No Option may be exercised to any extent by anyone after
the first to occur of the following events:
(i) The expiration of ten years from the date the
Option was granted; or
(ii) Except in the case of any Optionee who is
disabled (within the meaning of Section 22(e)(3) of the Code),
the expiration of three months from the date of the Optionee's
Termination of Employment for any reason other than such
Optionee's death unless the Optionee dies within said
three-month period; or
(iii) In the case of an Optionee who is disabled
(within the meaning of Section 22(e)(3) of the Code), the
expiration of one year from the date of the Optionee's
Termination of Employment for any reason other than such
Optionee's death unless the Optionee dies within said one-year
period; or
(iv) The expiration of one year from the date of the
Optionee's death.
(b) Subject to the provisions of Section 4.4(a), the Committee
shall provide, in the terms of each Stock Option Agreement, when such Option
expires and becomes unexercisable. Notwithstanding the foregoing, the Committee
may provide in the terms of Stock Option Agreements that Options expire
immediately upon a Termination of Employment for any reason.
SECTION 4.5 CONSIDERATION
In consideration of the granting of the Option, the Optionee
shall agree, in the written Stock Option Agreement, to remain in the employ of
the Company, a Parent Corporation or a Subsidiary for a period of at least one
year after the Option is granted. Nothing in this Plan or in any Stock Option
Agreement hereunder shall confer upon any Optionee any right to continue in the
employ of the Company, any Parent Corporation or any
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Subsidiary or shall interfere with or restrict in any way the rights of the
Company, its Parent Corporations and its Subsidiaries, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without cause.
SECTION 4.6 ADJUSTMENTS IN OUTSTANDING OPTIONS
In the event that the outstanding Shares subject to Options
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company by reason of merger, consolidation,
recapitalization, reclassification, stock split-up, stock dividend or
combination of shares, the Committee shall make an appropriate and equitable
adjustment in the number and kind of shares as to which all outstanding Options,
or portions thereof then unexercised, shall be exercisable, to the end that
after such event the Optionee's proportionate interest shall be maintained as
before the occurrence of such event. Such adjustment in an outstanding Option
shall be made without change in the total price applicable to the Option or the
unexercised portion of the Option (except for any change in the aggregate price
resulting from rounding-off of share quantities or prices) and with any
necessary corresponding adjustment in Option price per share. Any such
adjustment made by the Committee shall be final and binding upon all Optionees,
the Company and all other interested persons.
SECTION 4.7 CHANGE OF CONTROL
(a) The Committee shall provide by the terms of each Option
that, upon or in connection with a Change of Control or a Change of Control
Transaction (each as defined in Section 4.7(c)):
(i) If so provided in the relevant agreement relating
to a Change of Control, such Option shall be either assumed or
replaced by a substitute option, as applicable, issued by the
successor or Parent Corporation resulting from such Change of
Control Transaction, without any further action on the part of
the Committee or the Optionee.
(ii) If no provision is made as set forth in (i),
such Option shall either (A) become fully exercisable from and
after the date which is thirty days prior to the effective
date of the Change of Control Transaction and until the normal
expiration thereof or (B) be converted automatically into the
right to receive, within 30 days of the effective date of the
Change of Control Transaction, an amount in cash equal to the
difference between the aggregate exercise price for all Shares
subject to the Option (whether or not then subject to
exercise) and the Fair Market Value of such Shares on the date
which is the last trading date preceding the consummation of
such Change of Control Transaction.
(b) The Committee may make such determinations and adopt such
rules and conditions as it, in its absolute discretion, deems appropriate in
connection with (i) any acceleration of exercisability pursuant to subsection
(a)(ii), including, but not by way of limitation, provisions to ensure that any
such acceleration shall be conditioned upon the consummation of the contemplated
Change of Control Transaction, and (ii) determinations regarding whether
provisions for assumption or substitution have been made as defined in
subsection (a)(i).
(c) Unless the Committee provides otherwise, "Change of
Control" means the first to occur of the following:
(i) the merger or consolidation of the Company with
or into another corporation;
(ii) the acquisition by another corporation person or
group of all or substantially all of the Company's assets or
40% or more of the Company's then outstanding voting stock;
(iii) the liquidation or dissolution of the Company;
or
(iv) during any period of 12 consecutive months,
individuals who at the beginning of such 12-month period
constituted the Board (together with any new directors whose
election by
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the Board or whose nomination for election by the stockholders
of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at
the beginning of such period or whose election or nomination
for election was previously so approved) cease for any reason
to constitute a majority of the Board then in office,
provided, however, that a Change of Control will not be deemed to have occurred
in respect of a merger in which (x) the Company is the surviving corporation,
(y) no person or group acquires 40% or more of the Company's outstanding voting
stock and (z) the Shares outstanding prior to the merger remain outstanding
thereafter; and provided further, that a merger or consolidation will not be
considered a Change of Control if such transaction results only in the
reincorporation of the Company in another jurisdiction or its restructuring into
holding company form.
"Change of Control Transaction" shall mean any tender offer,
offer, exchange offer, solicitation, merger, consolidation, reorganization or
other transaction that is intended to or reasonably expected to result in a
Change of Control.
ARTICLE V
EXERCISE OF OPTIONS
SECTION 5.1 PERSON ELIGIBLE TO EXERCISE
During the lifetime of Optionee, only he may exercise an
Option granted to him, or any portion thereof. After the death of the Optionee,
any exercisable portion of an Option may, prior to the time when such portion
becomes unexercisable under Section 4.4 or Section 4.7, be exercised by his
personal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
SECTION 5.2 PARTIAL EXERCISE; NO FRACTIONAL SHARES
The Committee may, by the terms of a Stock Option Agreement,
require any partial exercise to be with respect to a specified minimum number of
shares. The Company shall not be required to issue fractional Shares upon the
exercise of Options.
SECTION 5.3 MANNER OF EXERCISE
An exercisable Option, or any exercisable portion thereof, may
be exercised solely by delivery to the Secretary or his office of all of the
following prior to the time when such Option or such portion becomes
unexercisable under Section 4.4 or Section 4.7:
(a) Notice in writing by the Optionee or other person then
entitled to exercise such Option or portion, stating that such Option or portion
is exercised, such notice complying with all applicable rules established by the
Committee; and
(b) Full payment:
(i) By delivery of cash or a check for the Shares
with respect to which such Option or portion is thereby
exercised; or
(ii) To the extent provided by the terms of the
Option or otherwise with the consent of the Committee, by
delivery to the Company of Shares owned by the Optionee, duly
endorsed for transfer to the Company by the Optionee or other
person then entitled to exercise the Option or portion
thereof, with Fair Market Value determined as of the date of
delivery equal to the
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aggregate Option price of the Shares with respect to such
Option or portion is thereby exercised; or
(iii) To the extent provided by the terms of the
Option or otherwise with the consent of the Committee, by
retention by the Company of Shares to be issued with a Fair
Market Value determined as of the date of issuance equal to
the aggregate Option price of the Shares with respect to which
such Option or portion is thereby exercised; or
(iv) By means of any combination of the consideration
provided in the foregoing subsections (i), (ii) or (iii); and
(c) On or prior to the date the same is required to be
withheld:
(i) Full payment (in cash or by check) of any amount
that must be withheld by the Company, any Parent Corporation
or any Subsidiary for federal, state and/or local tax purposes
in connection with the exercise of the Option; or
(ii) To the extent provided by the terms of the
Option or otherwise with the consent of the Committee, full
payment by delivery to the Company of Shares owned by the
Optionee, duly endorsed for transfer to the Company by the
Optionee or other person then entitled to exercise the Option
or portion thereof, with a Fair Market Value determined as of
the date of delivery equal to the amount that must be withheld
by the Company, any Parent Corporation or any Subsidiary for
federal, state and/or local tax purposes in connection with
the exercise of the Option; or
(iii) To the extent provided by the terms of the
Option or otherwise with the consent of the Committee, full
payment by retention by the Company of Shares to be issued
with a Fair Market Value determined as of the date of issuance
equal to the amount that must be withheld by the Company, any
Parent Corporation or any Subsidiary for federal, state and/or
local tax purposes in connection with the exercise of the
Option; or
(iv) Any combination of payments provided for in the
foregoing subsections (i), (ii) or (iii); and
(d) Such representations and documents as the Committee, in
its absolute discretion, deems necessary or advisable to effect compliance with
all applicable provisions of the Securities Act and any other federal or state
securities laws or regulations. The Committee may, in its absolute discretion,
also take whatever additional actions it deems appropriate to effect such
compliance including, without limitation, placing legends on Shares certificates
and issuing stop-transfer orders to transfer agents and registrars; and
(e) In the event that the Option or portion thereof shall be
exercised pursuant to Section 5.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
SECTION 5.4 CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The Shares issuable and deliverable upon the exercise of any
Option, or any portion thereof, may be either previously authorized but unissued
Shares or issued Shares which have been reacquired by the Company. The Company
shall not be required to issue or deliver any certificate or certificates for
Shares purchased upon the exercise of any Option or portion thereof prior to
fulfillment of all of the following conditions:
(a) The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed; and
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(b) The completion of any registration or other qualification
of such Shares under any state or federal law or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body, which the Committee shall, in its absolute discretion, deem
necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee shall, in its absolute
discretion, determine to be necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may establish from time to time for
reasons of administrative convenience.
SECTION 5.5 RIGHTS AS SHAREHOLDERS
The holders of Options shall not be, nor have any of the
rights or privileges of, shareholders of the Company in respect of any Shares
purchasable upon the exercise of any part of an Option unless and until
certificates representing such Shares have been issued by the Company to such
holders.
SECTION 5.6 NO OPTION REPRICING; NO RELOAD OPTIONS
Without the approval of stockholders, the Company shall not
(a) reprice any Options or (b) provide for "reload options," which means that
unless approved by stockholders the Company shall not provide for Options to be
granted automatically in connection with and to the extent of the exercise of
other Options. For purposes of this Plan, the term "reprice" means amending,
canceling or replacing Options within the meaning of Item 402(i) under
Securities and Exchange Commission Regulation S-K including by (i) reducing the
exercise price of outstanding Options and (ii) canceling outstanding Options and
granting new Options to the holders of canceled Options.
ARTICLE VI
STOCK APPRECIATION RIGHTS
SECTION 6.1 ELIGIBILITY
Any Employee of the Company or of any corporation which is
then a Parent Corporation or a Subsidiary (except as provided in Section 11.1)
shall be eligible to be issued Stock Appreciation Rights, except an Officer or
Director of the Company required to file reporting forms pursuant to Section 16
of the Exchange Act.
SECTION 6.2 GRANTING OF STOCK APPRECIATION RIGHTS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the Employees (including those
to whom Options, Stock Appreciation Rights and/or Restricted
Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been
previously issued) such of them as in its opinion should be
granted Stock Appreciation Rights; and
(ii) Determine the amount of Stock Appreciation
Rights to be granted to such selected Employees; and
(iii) Determine the terms and conditions applicable to
such Stock Appreciation Rights, consistent with this Plan.
(b) Stock Appreciation Rights may be granted (i) in connection
and simultaneously with the grant of Options, (ii) with respect to previously
granted Options or (iii) not in connection with Options.
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SECTION 6.3 TERMS AND CONDITIONS
A Stock Appreciation Right shall be subject to such terms and
conditions not inconsistent with this Plan as the Committee shall impose,
including the following:
(a) A Stock Appreciation Right granted in connection with a
particular Option shall be exercisable only to the extent the related Option is
exercisable.
(b) A Stock Appreciation Right granted in connection with a
particular Option shall be granted to the Optionee to the maximum extent of 100%
of the number of Shares subject to the Option.
(c) A Stock Appreciation Right granted in connection with a
particular Option shall entitle the Optionee (or other person entitled to
exercise the Option pursuant to Section 5.1) to surrender unexercised a portion
of the Option to which the Stock Appreciation Right relates to the Company and
to receive from the Company in exchange therefor an amount, payable in cash or,
in the discretion of the Committee, Shares, determined by multiplying the lesser
of (i) the difference obtained by subtracting the Option exercise price per
share of the Company's Common Stock subject to the related Option from the Fair
Market Value of a share of the Company's Common Stock determined as of the date
of exercise of the Stock Appreciation Right or (ii) two times the Option
exercise price per share of the Company's Common Stock subject to the related
Option, by the number of Shares subject to the related Option with respect to
which the Stock Appreciation Right shall have been exercised.
(d) A Stock Appreciation Right not granted in connection with
a simultaneously or previously granted Option shall entitle the Participant to
receive from the Company an amount, payable in cash or, in the discretion of the
Committee, Shares, measured by reference to the increase, if any, in the Fair
Market Value of the Company's Common Stock determined over the period from the
date the Stock Appreciation Right was granted through and including the date the
Stock Appreciation Right is exercised.
SECTION 6.4 EXERCISE OF STOCK APPRECIATION RIGHTS
No Stock Appreciation Right granted in connection with a
particular Option shall be exercisable during the first six months after grant.
ARTICLE VII
ISSUANCE OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
SECTION 7.1 ELIGIBILITY
Any Employee of the Company or of any corporation which is
then a Parent Corporation or a Subsidiary (except as provided in Section 11.1)
shall be eligible to be issued Restricted Stock and Restricted Stock Rights,
except an Officer or Director of the Company required to file reporting forms
pursuant to Section 16 of the Exchange Act.
SECTION 7.2 ISSUANCE OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the Employees (including those
to whom Options, Stock Appreciation Rights and/or Restricted
Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been
previously issued) such of them as in its opinion should be
issued Restricted Stock and/or granted Restricted Stock
Rights; and
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(ii) Determine the number of shares of Restricted
Stock to be issued and the amount of Restricted Stock Rights
to be granted to such selected Employees; and
(iii) Determine the terms, conditions and Restrictions
applicable to such Restricted Stock and Restricted Stock
Rights, consistent with this Plan.
(b) Shares issued as Restricted Stock may be either previously
authorized but unissued Shares or issued Shares which have been acquired by the
Company. The Committee shall establish the price to be paid by a Restricted
Stockholder for the issuance of Restricted Stock, which price shall not be less
than the minimum consideration required by applicable law.
(c) Shares to be issued at the end of the term of a Restricted
Stock Right may be either previously authorized but unissued Shares or issued
Shares which have been acquired by the Company. The Committee shall establish
the consideration to be furnished by the Participant in exchange for the grant
of Restricted Stock Rights and the issuance of Shares pursuant thereto, which
consideration may include services to be rendered to the Company prior to the
issuance of such shares.
(d) Upon the selection of an Employee to be issued Restricted
Stock or granted Restricted Stock Rights, the Committee shall instruct the
Secretary to issue such Restricted Stock or grant such Restricted Stock Rights
and may impose such conditions on the issuance of such Restricted Stock or grant
of such Restricted Stock Rights as it deems appropriate.
ARTICLE VIII
TERMS OF RESTRICTED STOCK AND RESTRICTED STOCK RIGHTS
SECTION 8.1 RESTRICTED STOCK AGREEMENT
Restricted Stock shall be issued only pursuant to a written
Restricted Stock Agreement, which shall be executed by the Restricted
Stockholder and an authorized Officer of the Company and which shall contain
such terms and conditions as the Committee shall determine, consistent with this
Plan.
SECTION 8.2 RESTRICTED STOCK RIGHT AGREEMENT
Restricted Stock Rights shall be issued only pursuant to a
written Restricted Stock Right Agreement, which shall be executed by the
Participant and an authorized Officer of the Company and which shall contain
such terms and conditions as the Committee shall determine, consistent with this
Plan.
SECTION 8.3 CONSIDERATION
As partial consideration for the issuance of Restricted Stock
or the grant of Restricted Stock Rights, the Participant shall agree, in the
written Restricted Stock Agreement or Restricted Stock Right Agreement, to
remain in the employ of the Company, a Parent Corporation or a Subsidiary for a
period of at least one year after the Restricted Stock is issued or the
Restricted Stock Rights are granted. Nothing in this Plan or in any Restricted
Stock Agreement or Restricted Stock Right Agreement hereunder shall confer upon
any Participant any right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company, its Parent Corporations and its Subsidiaries, which are
hereby expressly reserved, to terminate or discharge any Participant at any time
for any reason whatsoever, with or without cause.
SECTION 8.4 RIGHTS AS SHAREHOLDERS
(a) Upon delivery of the shares of Restricted Stock to the
escrow holder pursuant to Section 8.8, the Restricted Stockholder shall have all
the rights of a stockholder with respect to said shares, subject to the
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restrictions in his Restricted Stock Agreement, including the right to vote the
shares and to receive all dividends or other distributions paid or made with
respect to the shares.
(b) The holder of a Restricted Stock Right shall not be, nor
have any of the rights or privileges of, a shareholder of the Company in respect
of any Shares issuable upon the end of the term of a Restricted Stock Right
unless and until a certificate representing such Shares has been issued by the
Company to such holder.
SECTION 8.5 RESTRICTIONS
All shares of Restricted Stock issued (including any shares
received by holders thereof as a result of stock dividends, stock splits or any
other forms of recapitalization) and all Restricted Stock Rights granted under
this Plan shall be subject to such Restrictions as the Committee shall provide
in the terms of each individual Restricted Stock Agreement or Restricted Stock
Right Agreement; provided, however, that by a resolution adopted after the
Restricted Stock is issued or the Restricted Stock Rights are granted, the
Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the Restrictions imposed by the terms of the
Restricted Stock Agreement or Restricted Stock Right Agreement. All Restrictions
shall expire within ten years of the date of issuance. Restricted Stock may not
be sold or encumbered until all Restrictions are terminated or expire.
SECTION 8.6 FORFEITURE
The Committee shall provide in the terms of each individual
Restricted Stock Agreement or Restricted Stock Right Agreement that the
Restricted Stock or Restricted Stock Rights then subject to Restrictions be
forfeited by the Participant back to the Company immediately upon a Termination
of Employment for any reason during the Restricted Period; provided, however,
that provision may be made that no such forfeiture shall occur in the event of a
Termination of Employment because of the Employee's normal retirement, death,
total disability or early retirement with the consent of the Committee.
SECTION 8.7 MERGER, CONSOLIDATION, ACQUISITION, LIQUIDATION OR DISSOLUTION
The Committee may provide, in the terms of the individual
Restricted Stock Agreement or Restricted Stock Right Agreement, that upon the
merger or consolidation of the Company with or into another corporation, the
acquisition by another corporation or person of all or substantially all of the
Company's assets or 40% or more of the Company's then outstanding voting stock
or the liquidation of the Company, the Restrictions relating to some or all
shares of Restricted Stock or Restricted Stock Rights then outstanding shall
immediately expire and/or that some or all of such shares or Restricted Stock
Rights shall cease to be subject to forfeiture under Section 8.6.
SECTION 8.8 ESCROW
The Secretary or such other escrow holder as the Committee may
appoint shall retain physical custody of the certificates representing
Restricted Stock until all of the restrictions imposed under the Restricted
Stock Agreement expire or shall have been removed; provided, however, that in no
event shall any Restricted Stockholder retain physical custody of any
certificates representing Restricted Stock issued to him.
SECTION 8.9 LEGEND
In order to enforce the restrictions imposed upon shares of
Restricted Stock hereunder, the Committee shall cause a legend or legends to be
placed on certificates representing all shares of Restricted Stock that are
still subject to Restrictions under Restricted Stock Agreements, which legend or
legends shall make appropriate reference to the conditions imposed thereby.
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ARTICLE IX
ISSUANCE OF STOCK AWARDS
SECTION 9.1 ELIGIBILITY
Any Employee of the Company or of any corporation which is
then a Parent Corporation or a Subsidiary (except as provided in Section 11.1)
shall be eligible to be issued Stock Awards, except an Officer or Director of
the Company required to file reporting forms pursuant to Section 16 of the
Exchange Act.
SECTION 9.2 ISSUANCE OF STOCK AWARDS
(a) The Committee shall from time to time, in its absolute
discretion:
(i) Select from among the Employees (including those
to whom Options, Stock Appreciation Rights and/or Restricted
Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been
previously issued) such of them as in its opinion should be
issued Stock Awards; and
(ii) Determine the number of Shares to be issued to
such selected Employees.
(b) Shares issued as Stock Awards may be either previously
authorized but unissued Shares or issued Shares which have been acquired by the
Company.
(c) Stock Awards shall be issued for legal consideration
(which may include previous or future services, as permitted by law) but no
other payment. Capital stock issued pursuant to a Stock Award shall not be
subject to Restrictions or forfeiture by the terms of this Plan.
ARTICLE X
ISSUANCE OF PERFORMANCE UNITS
SECTION 10.1 ELIGIBILITY
Any Employee of the Company or of any corporation which is
then a Parent Corporation or a Subsidiary (except as provided in Section 11.1)
shall be eligible to be issued Performance Units, except an Officer or Director
of the Company required to file reporting forms pursuant to Section 16 of the
Exchange Act.
SECTION 10.2 ISSUANCE OF PERFORMANCE UNITS
The Committee shall from time to time, in its absolute
discretion:
(a) Select from among the Employees (including those
to whom Options, Stock Appreciation Rights and/or Restricted
Stock Rights have been previously granted and/or Restricted
Stock, Stock Awards and/or Performance Units have been
previously issued) such of them as in its opinion should be
issued Performance Units; and
(b) Determine the terms and conditions applicable to
such Performance Units, consistent with this Plan.
SECTION 10.3 TERMS OF PERFORMANCE UNITS
(a) At the time that Performance Units are issued, the
Committee shall designate certain goals for the financial and other business
performance of the Company, its Parent Corporations and its Subsidiaries
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<PAGE> 14
and the Performance Period over which such goals are to be achieved. Such
designated goals must be achieved in order for a Participant to receive the full
value of the Performance Units following the end of the Performance Period. To
the extent earned upon the achievement of such designated goals during the
Performance Period, all Performance Units shall be payable in cash as soon as
practicable following the end of the Performance Period.
(b) The Committee shall determine the terms and conditions of
the Performance Units, consistent with this Plan. The Committee shall provide by
the terms of each individual Performance Unit that the Performance Unit be
forfeited by the Participant back to the Company immediately upon a Termination
of Employment for any reason during the Performance Period; provided, however,
that provision may be made that no such forfeiture shall occur in the event of a
Termination of Employment because of the Participant's normal retirement, death,
total disability or early retirement with the consent of the Committee.
ARTICLE XI
ADMINISTRATION
SECTION 11.1 COMMITTEE
(a) This Plan shall be administered by the Compensation
Committee of the Board, as appointed from time to time by the Board, provided,
however, that (i) with respect to any Award that is intended to satisfy the
conditions of Rule 16b-3 under the Exchange Act, the term "Committee" shall
refer to a committee of two or more "non-employee directors" as determined for
purposes of applying Exchange Act Rule 16b-3; and (ii) with respect to any Award
that is intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the term "Committee" shall refer to a
committee of two or more "outside directors" as determined for purposes of
applying Code Section 162(m). Notwithstanding any other provision in this Plan,
no Options or Stock Appreciation Rights may be granted and no Restricted Stock,
Stock Awards or Performance Units may be issued to any member of the Committee
during the term of his membership on the Committee. No person shall be eligible
to serve on the Committee unless he is then a "disinterested person" within the
meaning of Rule 16b-3 under the Exchange Act, if and as such Rule is then in
effect.
(b) Appointment of Committee members shall be effective upon
acceptance of appointment. Committee members may resign at any time by
delivering written notice to the Board. Vacancies in the Committee shall be
filled by the Board.
(c) The Board or the Committee may from time to time appoint
one or more Sub-Committees comprised of one or more Directors, which
Sub-Committee shall have the powers of the Committee described in Articles III
and IV of this Plan except for those powers described in Sections 3.2(b), 4.3,
4.6 and 4.7. Each such sub-Committee may be subject to any such additional
restrictions or limitations as the Board or the Committee may impose at any
time. Each Sub-Committee so appointed may be disbanded by the Board or the
Committee at any time, provided that no such termination shall affect the
validity of any Option theretofore approved by any such Sub-Committee. The
Committee may designate the Secretary of the Company or other Company employees
to assist the Committee in the administration of this Plan, and may grant
authority to such persons to execute agreements evidencing Awards made under
this Plan or other documents entered into under this Plan on behalf of the
Committee or the Company.
SECTION 11.2 DUTIES AND POWER OF COMMITTEE
It shall be the duty of the Committee to conduct the general
administration of this Plan in accordance with its provisions. The Committee
shall have the power to interpret this Plan, Options, Stock Appreciation Rights,
Restricted Stock, Restricted Stock Rights, Stock Awards and Performance Units
and to adopt such rules for the administration, interpretation and application
of this Plan as are consistent therewith and to interpret, amend or revoke any
such rules. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under this Plan.
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<PAGE> 15
SECTION 11.3 MAJORITY RULE
The Committee shall act by a majority of its members in
office. The Committee may act either by vote at a meeting or by a memorandum or
other written instrument signed by a majority of the Committee.
SECTION 11.4 COMPENSATION; PROFESSIONAL ASSISTANCE; GOOD FAITH ACTIONS
Members of the Committee shall receive such compensation for
their services as members as may be determined by the Board. All expenses and
liabilities incurred by members of the Committee in connection with the
administration of this Plan shall be borne by the Company. The Committee may,
with the approval of the Board, employ attorneys, consultants, accountants,
appraisers, brokers or other persons. The Committee, the Company and its
Officers and Directors shall be entitled to rely upon the advice, opinions or
valuations of any such persons. All actions taken and all interpretations and
determinations made by the Committee in good faith shall be final and binding
upon all Optionees, the Company and all other interested persons. No member of
the Committee shall be personally liable for any action, determination or
interpretation made in good faith with respect to this Plan or the Options, and
all members of the Committee shall be fully protected by the Company in respect
to any such action, determination or interpretation.
ARTICLE XII
OTHER PROVISIONS
SECTION 12.1 RIGHTS NOT TRANSFERABLE
Unless the agreement or other document evidencing an Award (or
an amendment thereto authorized by the Committee) expressly states that the
Award is transferable as provided hereunder, no Award granted under this Plan,
nor any interest in such Award, may be sold, assigned, conveyed, gifted,
pledged, hypothecated or otherwise transferred in any manner prior to the
vesting or lapse of any and all restrictions applicable thereto, other than by
will or the laws of descent and distribution or pursuant to a "domestic
relations order," as defined in the Code. The Committee may grant an Award or
amend an outstanding Award to provide that the Award is transferable or
assignable to a member or members of the Participant's "immediate family," as
such term is defined in Rule 16a-1(e) under the Exchange Act, or to a trust for
the benefit solely of a member or members of the Participant's immediate family,
or to a partnership or other entity whose only owners are members of the
Participant's immediate family, provided that following any such transfer or
assignment the Award will remain subject to substantially the same terms
applicable to the Award while held by the Participant, as modified as the
Committee shall determine appropriate, and the transferee shall execute an
agreement agreeing to be bound by such terms.
SECTION 12.2 FINANCING
The Committee may not provide financing to a Participant to
pay the purchase price of any Award or to pay the amount of taxes required by
law to be withheld with respect to any Award.
SECTION 12.3 AMENDMENT, SUSPENSION OR TERMINATION OF THIS PLAN
This Plan shall become effective upon its approval by the
Board. Unless earlier suspended or terminated by the Board, or extended as
provided below, no options may be granted after the tenth anniversary of the
effective date of this Plan. The Board or the Committee may from time to time
extend the effective term of this Plan and otherwise amend this Plan as
determined appropriate, without action by the Company's stockholders except to
the extent required by applicable law. References in this Plan and in writings
evidencing and setting the terms of option grants which refer to the Code or
other applicable law shall also be deemed to refer to any applicable successor
provisions thereof unless otherwise determined by the Committee. This Plan may
be earlier terminated at such earlier time as the Board may determine.
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<PAGE> 16
SECTION 12.4 EFFECT OF PLAN UPON OTHER OPTION AND COMPENSATION PLANS
The adoption of this Plan shall not affect any other
compensation or incentive plans in effect for the Company, any Parent
Corporation or any Subsidiary. Nothing in this Plan shall be construed to limit
the right of the Company, any Parent Corporation or any Subsidiary (a) to
establish any other forms of incentives or compensation for employees of the
Company, and Parent Corporation or any Subsidiary or (b) to grant or assume
options, stock appreciation rights or restricted stock rights or to issue or
award restricted or unrestricted stock or performance units otherwise than under
this Plan in connection with any proper corporate purpose, including, but not by
way of limitation, the grant or assumption of options, stock appreciation rights
or restricted stock rights or the issuance or award of restricted or
unrestricted stock or performance units in connection with the acquisition by
purchase, lease, merger, consolidation or otherwise, of the business, stock or
assets of any corporation, firm or association.
16
<PAGE> 1
Effective as of October 19, 1999
2000 EMPLOYEE STOCK PLAN
OF
MAGNETEK, INC.
AND
1999 STOCK INCENTIVE PLAN
OF
MAGNETEK, INC.
STANDARD TERMS AND CONDITIONS RELATING TO NON-QUALIFIED OPTIONS
The following standard terms and conditions apply to the
non-qualified option to purchase $0.01 par value Common Stock of MagneTek, Inc.
granted under either the 2000 Employee Stock Plan of MagneTek, Inc. (the
"Employee Plan") or the 1999 Stock Incentive Plan of MagneTek, Inc. (the
"Executive Plan") (the applicable terms of which are hereby incorporated by
reference and made a part of these standard terms and conditions). In turn,
these standard terms and conditions are incorporated by reference into each such
option.
ARTICLE I
DEFINITIONS
Whenever capitalized terms are used in these standard terms
and conditions, they shall have the meaning specified (i) in the Applicable Plan
(as defined below), (ii) in the MagneTek, Inc. Non-Qualified Stock Option
Agreement (the "Option Agreement") into which these standard terms and
conditions are incorporated by reference or (iii) below, unless the context
clearly indicates to the contrary. The masculine pronoun shall include the
feminine and neuter, and the singular the plural, where the context so
indicates.
"Applicable Plan" shall mean either the Employee Plan or the
Executive Plan relating to the Option as indicated in the Option Agreement.
"Board" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" shall mean MagneTek, Inc., a Delaware corporation.
"Employee" shall mean any employee (as defined in accordance
with the Regulations then applicable under Section 3401(c) of the Code) of the
Company, or of any corporation which is then a Parent Corporation or a
Subsidiary, whether such employee is so employed at the time the Applicable Plan
is adopted or becomes so employed subsequent to the adoption of the Applicable
Plan.
"Fair Market Value" of a share of the Company's stock on a
given determination date shall mean: the closing price for a share of the
Company's stock reported for that date by the New York Stock Exchange (or such
other stock exchange or quotation system on which shares of the Company's Stock
are then listed or quoted) or, if no shares of the Company's stock are traded on
the New York Stock Exchange (or such other stock exchange or quotation system)
on the date in question, then for the next preceding date for which shares of
the Company's stock traded on the New York Stock Exchange (or such other stock
exchange or quotation system).
"Option" shall mean the non-qualified option to purchase $0.01
par value Common Stock of the Company granted under the Applicable Plan and to
which these standard terms and conditions apply.
<PAGE> 2
"Optionee" shall mean the Employee to whom the Option is
granted under the Applicable Plan.
"Parent Corporation" shall mean any corporation that is a
"parent" of the Company within the meaning of Rule 405 under the Securities Act.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Shares" shall mean shares of the Company's Common Stock, $.01
par value.
"Subsidiary" shall mean any corporation of which the Company
has "control" within the meaning of Rule 405 under the Securities Act.
"Termination of Employment" shall mean the time when the
employee-employer relationship between the Optionee and the Company, a Parent
Corporation or a Subsidiary is terminated for any reason, with or without cause,
including, but not by way of limitation, a termination by resignation,
discharge, death or retirement, but excluding terminations where there is a
simultaneous reemployment by the Company, a Parent Corporation or a Subsidiary.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment.
ARTICLE II
ADJUSTMENTS TO OPTION
SECTION 2.1 - ADJUSTMENTS IN OPTION
In the event that the outstanding Shares subject to the Option
are changed into or exchanged for a different number or kind of shares of the
Company or other securities of the Company, or of another corporation, by reason
of reorganization, merger, consolidation, recapitalization, reclassification,
stock split up, stock dividend or combination of shares, an appropriate and
equitable adjustment shall be made in the number and kind of Shares as to which
the Option, or portions thereof then unexercised, shall be exercisable, to the
end that after such event the Optionee's proportionate interest shall be
maintained as before the occurrence of such event. Such adjustment in the Option
shall be made without change in the total price applicable to the unexercised
portion of the Option (except for any change in the aggregate price resulting
from rounding-off of share quantities or prices) and with any necessary
corresponding adjustment in the Option price per Share. Any such adjustment made
by the Committee shall be final and binding upon the Optionee, the Company and
all other interested persons.
SECTION 2.2 - CHANGE OF CONTROL
(a) Upon or in connection with a Change of Control or a Change
of Control Transaction (each as defined in Section 2.2(b)):
(i) If so provided in the relevant agreement
relating to a Change of Control, the Option shall be either
assumed or replaced by a substitute option, as applicable,
issued by the successor or Parent Corporation resulting from
such Change of Control Transaction, without any further action
on the part of the Committee or the Optionee.
(ii) If no provision is made as set forth in (i), the
Option shall either (A) become fully exercisable from and
after the date which is thirty days prior to the effective
date of the Change of Control Transaction and until the normal
expiration thereof or (B) be converted automatically into the
right to receive, within 30 days of the effective date of the
Change of Control Transaction, an amount in cash equal to the
difference between the aggregate exercise price for all Shares
subject to the Option (whether or not then subject to
exercise) and the Fair
2
<PAGE> 3
Market Value of such Shares on the date which is the last
trading date preceding the consummation of such Change of
Control Transaction.
(b) "Change of Control" shall mean the first to occur of the
following:
(i) the merger or consolidation of the Company with
or into another corporation;
(ii) the acquisition by another corporation person or
group of all or substantially all of the Company's assets or
40% or more of the Company's then outstanding voting stock;
(iii) the liquidation or dissolution of the Company;
or
(iv) during any period of 12 consecutive months,
individuals who at the beginning of such 12-month period
constituted the Board (together with any new directors whose
election by the Board or whose nomination for election by the
stockholders of the Company was approved by a vote of a
majority of the directors then still in office who were either
directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board then in
office,
provided, however, that a Change of Control will not be deemed to have occurred
in respect of a merger in which (x) the Company is the surviving corporation,
(y) no person or group acquires 40% or more of the Company's outstanding voting
stock and (z) the Shares outstanding prior to the merger remain outstanding
thereafter; and provided further, that a merger or consolidation will not be
considered a Change of Control if such transaction results only in the
reincorporation of the Company in another jurisdiction or its restructuring into
holding company form.
"Change of Control Transaction" shall mean any tender offer,
offer, exchange offer, solicitation, merger, consolidation, reorganization or
other transaction that is intended to or reasonably expected to result in a
Change of Control.
ARTICLE III
PERIOD OF EXERCISABILITY
SECTION 3.1 - COMMENCEMENT OF EXERCISABILITY
(a) Subject to Section 3.1(b), the Option shall become
exercisable as set forth in the Option Agreement.
(b) No portion of the Option which is unexercisable at
Termination of Employment shall thereafter become exercisable.
SECTION 3.2 - EXPIRATION OF OPTION
The Option may not be exercised to any extent by anyone after
the first to occur of the following events:
(a) The expiration of 10 years after the date the Option was
granted; or
(b) The time of the Optionee's Termination of Employment
unless such Termination of Employment results from his death, his disability
(within the meaning of Section 22(e)(3) of the Code), his retirement or his
voluntary or involuntary discharge other than for cause; or
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<PAGE> 4
(c) In the case of an Optionee who was an executive officer on
the date the Option was granted, the expiration of 12 months from the date of
the Optionee's Termination of Employment by reason of the Optionee's retirement
or the Optionee's voluntary or involuntary discharge other than for cause; or
(d) In the case of an Optionee who was not an executive
officer on the date the Option was granted, the expiration of three months from
the date of the Optionee's Termination of Employment by reason of the Optionee's
retirement or the Optionee's voluntary or involuntary discharge other than for
cause, unless the Optionee dies within said three-month period; or
(e) The expiration of 12 months from the date of the
Optionee's Termination of Employment by reason of his disability (within the
meaning of Section 22(e)(3) of the Code) unless the Optionee dies within said
12-month period; or
(f) The expiration of 12 months from the date of the
Optionee's death; or
(g) The circumstances referred to in Section 2.2(c) in which
the Option will automatically be converted into the right to receive a cash
payment.
SECTION 3.3 - CONSIDERATION TO THE COMPANY
In consideration of the granting of the Option by the Company,
the Employee agrees to render faithful and efficient services to the Company, a
Parent Corporation or a Subsidiary, with such duties and responsibilities as the
Company shall from time to time prescribe, for a period of at least 12 months
from the date the Option is granted. Nothing in these standard terms and
conditions, in the Option Agreement or in the Applicable Plan shall confer upon
the Employee any right to continue in the employ of the Company, any Parent
Corporation or any Subsidiary or shall interfere with or restrict in any way the
rights of the Company, its Parent Corporations and its Subsidiaries, which are
hereby expressly reserved, to discharge the Employee at any time for any reason
whatsoever, with or without cause.
ARTICLE IV
EXERCISE OF OPTION
SECTION 4.1 - PERSON ELIGIBLE TO EXERCISE
During the lifetime of the Optionee, only he may exercise the
Option or any portion thereof. After the death of the Optionee, any exercisable
portion of the Option may, prior to the time when the Option becomes
unexercisable under Section 2.2 or 3.2, be exercised by his personal
representative or by any person empowered to do so under the Optionee's will or
under the then applicable laws of descent and distribution.
SECTION 4.2 - PARTIAL EXERCISE
Any exercisable portion of the Option or the entire Option, if
then wholly exercisable, may be exercised in whole or in part at any time prior
to the time when the Option or any portion thereof becomes unexercisable under
Section 3.2; provided, however, that each partial exercise shall be for not less
than the minimum number of Shares specified in the Option Agreement and shall be
for whole Shares only.
SECTION 4.3 - MANNER OF EXERCISE
The Option, or any exercisable portion thereof, may be
exercised solely by delivery to the Secretary of the Company or his office of
all of the following prior to the time when the Option or such portion becomes
unexercisable under Section 2.2 or 3.2:
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<PAGE> 5
(a) Notice in writing signed by the Optionee or the other
person then entitled to exercise the Option or any portion thereof, stating that
the Option or portion thereof is thereby exercised, such notice complying with
all applicable rules established by the Committee; and
(b) Full payment:
(1) By delivery of cash or a check for the Shares with
respect to which such Option or portion thereof is thereby exercised;
or
(2) To the extent provided by the terms of the Option
or otherwise with the consent of the Committee, by delivery to the
Company of Shares that have been held by the Optionee for a period of
not less than 12 months unless otherwise specified by the Committee,
duly endorsed for transfer to the Company by the Optionee or other
person then entitled to exercise the Option or portion thereof, with a
Fair Market Value determined as of the date of delivery equal to the
aggregate Option price of the Share with respect to which such Option
or portion thereof is thereby exercised; or
(3) To the extent provided by the terms of the Option
or otherwise with the consent of the Committee, by retention by the
Company of Shares to be issued with a Fair Market Value determined as
of the date of issuance equal to the aggregate Option price of the
Shares with respect to which such Option or portion thereof is thereby
exercised; or
(4) By means of any combination of the consideration
provided in the foregoing subsections (1), (2) or (3); and
(c) On or prior to the date the same is required to be
withheld:
(1) Full payment (in cash or by check) of any amount
that must be withheld by the Company, any Parent Corporation or any
Subsidiary for federal, state and/or local tax purposes in connection
with the exercise of the Option; or
(2) To the extent provided by the terms of the Option
or otherwise with the consent of the Committee, full payment by
delivery to the Company of Shares owned by the Optionee, duly endorsed
for transfer to the Company by the Optionee or other person then
entitled to exercise the Option or portion thereof, with a Fair Market
Value determined as of the date of delivery equal to the amount that
must be withheld by the Company, any Parent Corporation or any
Subsidiary for federal, state and/or local tax purposes in connection
with the exercise of the Option; or
(3) To the extent provided by the terms of the Option
or otherwise with the consent of the Committee, full payment by
retention by the Company of Shares to be issued with a Fair Market
Value determined as of the date of issuance equal to the amount that
must be withheld by the Company, any Parent Corporation or any
Subsidiary for federal, state and/or local tax purposes in connection
with the exercise of the Option; or
(4) Any combination of payments provided in the
foregoing subsections (1), (2) or (3); and
(d) In the event the Option or portion thereof shall be
exercised pursuant to Section 4.1 by any person or persons other than the
Optionee, appropriate proof of the right of such person or persons to exercise
the Option or portion thereof.
5
<PAGE> 6
The Committee may, in its absolute discretion, take whatever additional actions
it deems appropriate in connection with the exercise of the Option and the
issuance of Shares pursuant thereto to insure compliance with the Securities Act
and any other federal or state securities laws or regulations.
SECTION 4.4 - CONDITIONS TO ISSUANCE OF STOCK CERTIFICATES
The Shares deliverable upon the exercise of the Option, or any
portion thereof, may be either previously authorized but unissued Shares or
issued Shares which have then been reacquired by the Company. Such Shares shall
be fully paid and nonassessable. The Company shall not be required to issue or
deliver any certificate or certificates for Shares purchased upon the exercise
of the Option or any portion thereof prior to fulfillment of all of the
following conditions:
(a) The admission of such Shares to listing on all stock
exchanges on which such class of stock is then listed; and
(b) The completion of any registration or other qualification
of such Shares under any state or federal law or under rulings or regulations of
the Securities and Exchange Commission or of any other governmental regulatory
body, which the Company shall deem necessary or advisable; and
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Company shall determine to be
necessary or advisable; and
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee may from time to time establish for
reasons of administrative convenience.
SECTION 4.5 - RIGHTS AS STOCKHOLDER
The holder of the Option shall not be, nor have any of the
rights or privileges of, a stockholder of the Company in respect of any Shares
purchasable upon the exercise of any part of the Option unless and until
certificates representing such Shares shall have been issued by the Company to
such holder.
ARTICLE V
OTHER PROVISIONS
SECTION 5.1 - ADMINISTRATION
The Committee shall have the power to interpret the Applicable
Plan, these standard terms and conditions and the Option Agreements, and to
adopt such rules for the administration, interpretation and application of the
Applicable Plan as are consistent therewith and to interpret or revoke any such
rules. Without limiting the generality of the foregoing, in connection with
mergers, consolidations and other corporate transactions referred to in Section
2.2 hereof, the Committee may make such determinations and adopt such rules and
conditions as it, in its absolute discretion, deems appropriate in connection
with (a) the acceleration of exercisability of options (including conditioning
such acceleration upon consummation of the contemplated corporate transaction)
and (b) determinations as to whether the relevant agreement for the corporate
transaction provides for the assumption or substitution of options. All actions
taken and all interpretations and determinations made by the Committee in good
faith shall be final and binding upon the Optionee, the Company and all other
interested persons. No member of the Committee shall be personally liable for
any action, determination or interpretation made in good faith with respect to
the Applicable Plan or the Option. In its absolute discretion, the Board may at
any time and from time to time exercise any and all rights and duties of the
Committee under the Applicable Plan and these standard terms and conditions.
6
<PAGE> 7
SECTION 5.2 - OPTION NOT TRANSFERABLE
Neither the Option nor any interest or right therein or part
thereof shall be liable for the debts, contracts or engagements of the Optionee
or his successors in interest or shall be subject to disposition by transfer,
alienation, anticipation, pledge, encumbrance, assignment or any other means
whether such disposition be voluntary or involuntary or by operation of law by
judgment, levy, attachment, garnishment or any other legal or equitable
proceedings (including bankruptcy), and an attempted disposition thereof shall
be null and void and of no effect; provided, however, that this Section 5.2
shall not prevent transfers by will or by the applicable laws of descent and
distribution.
SECTION 5.3 - CONFIDENTIALITY AND NON-DISPARAGEMENT
Each Optionee hereby agrees to maintain in confidence and not
disclose or use, either during or after the term of his or her employment
without the prior express written consent of the Company, any proprietary or
confidential information or know-how belonging to the Company ("Proprietary
Information"), whether or not it is in written or permanent form, except to the
extent required to perform duties on behalf of the Company in his or her
capacity as an employee. Proprietary Information refers to any information, not
generally known in the relevant trade or industry, which was obtained from the
Company or which was learned, discovered, developed, conceived, originated, or
prepared by the Optionee in the scope of employment. Such Proprietary
Information includes, but is not limited to, software, technical and business
information relating to the Company's inventions or products, research and
development, production processes, manufacturing and engineering processes,
machines and equipment, finances, customers, marketing, production, future
business plans, personnel information, and any other information which is
identified as confidential by the Company. The Company considers all such
Proprietary Information to be its trade secrets. Upon Termination of Employment
or at the request of Optionee's supervisor before termination, Optionee agrees
to deliver to the Company all written and tangible material in his or her
possession incorporating the Proprietary Information or otherwise relating to
the Company's business. These obligations with respect to Proprietary
Information extend to information belonging to customers and suppliers of the
Company who may have disclosed such information to the Optionee.
The Optionee further agrees not, either orally or in writing,
to speak critically or negatively about the Company, or its past, present, or
future officers, directors, or employees, whether by expressing his or any other
person's opinion, or by speaking in any other manner whatsoever that would
reasonably be expected to result in the Company, or its past, present, or future
officers, directors, or employees being viewed by another person in a false or
negative light. The Optionee also agrees not to make any comments of a
denigrating or disparaging nature about any of the Company's products, goods, or
services.
SECTION 5.4 - AGREEMENT NOT TO SOLICIT EMPLOYEES
In order to remain eligible for the Option, Optionee agrees
that during Employment and for a period of two years after Termination of
Employment he or she will not solicit any employees of the Company or any
Subsidiary for purposes of providing services to or employment with any business
organization competitive with the Company or any Subsidiary.
SECTION 5.5 - SHARES TO BE RESERVED
The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
SECTION 5.6 - NOTICES
Any notice to be given under the terms of these standard terms
and conditions to the Company shall be addressed to the Company in care of its
Secretary, and any notice to be given to the Optionee shall be addressed to him
at the address given beneath his name on the Option Agreement. By notice given
pursuant to this Section 5.6, either party may hereafter designate a different
address for notices to be given to him. Any notice
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which is required to be given to the Optionee shall, if the Optionee is then
deceased, be given to the Optionee's personal representative if such
representative has previously informed the Company of his status and address by
written notice under this Section 5.6. Any notice shall be deemed duly given
when enclosed in a properly sealed envelope or wrapper addressed as aforesaid,
deposited (with postage prepaid) in a post office or branch post office
regularly maintained by the United States Postal Service.
SECTION 5.7 - TITLES
Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Option or these
standard terms and conditions.
SECTION 5.8 - CONSTRUCTION
The Option and these standard terms and conditions shall be
administered, interpreted and enforced under the laws of the State of Tennessee.
SECTION 5.9 - PLAN; OPTION DOCUMENT; AMENDMENT
(a) The Option is granted pursuant to the Applicable
Plan and is subject to all the terms and conditions of the Applicable
Plan, as the same may be amended from time to time by the Committee in
its sole discretion, and these standard terms and conditions, as they
may be amended from time to time by the Committee in its sole
discretion.
(b) The terms of the Applicable Plan, these standard
terms and conditions and the Option Agreement together constitute the
"Option Document" contemplated by the Applicable Plan, and the
interpretation and construction of the Option Document by the Committee
shall be final and binding upon the Optionee.
(c) The Committee may amend the Option Document
without the consent of the Optionee; provided, however, that the Option
Document may not be amended following a Change of Control except for
any amendment (i) consented to in writing by the Optionee or (ii)
necessary to comply with applicable tax or securities laws or
regulations.
SECTION 5.10 - ARBITRATION
Any claim, dispute or other matter in question of any kind
relating to the Applicable Plan, this Option grant or any interpretation or
action or breach relating to the foregoing shall be settled by arbitration
conducted in the English language in Nashville, Tennessee, administered by the
American Arbitration Association in accordance with the Commercial Rules of the
American Arbitration Association. Notice of demand for arbitration shall be made
in writing to the opposing party and to the American Arbitration Association
within a reasonable time after the claim, dispute or other matter in question
has arisen. In no event shall a demand for arbitration be made after the date
when the applicable statute of limitations would bar the institution of a legal
or equitable proceeding based on such claim, dispute or other matter in
question. The award rendered by the arbitrator shall be final and may be entered
and enforced in any court having jurisdiction thereof. In his award, the
arbitrator will allocate, in his discretion, among the parties to the
arbitration all costs of arbitration, including the fees of the arbitrator and
reasonable attorneys' fees, costs and expert witness expenses of the parties. In
rendering the award, the arbitrator shall determine the rights and obligations
of the parties according to the substantive and procedural law of Tennessee.
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