MAGNETEK, INC.
DIRECTORS' DEFERRAL INVESTMENT PLAN
ARTICLE 1. ESTABLISHMENT AND PURPOSES
1.1 ESTABLISHMENT. MagneTek, Inc., a Delaware corporation (the
"Company"), hereby establishes, effective as of January 28, 1997, a deferred
compensation plan, which shall be known as the "MagneTek, Inc. Directors'
Deferral Investment Plan" (the "Plan"), for present and future members of the
Board of Directors who are not employees or officers of the Company.
1.2 PURPOSE. The primary purpose of the Plan is to provide members of
the Board of Directors who are not employees or officers of the Company with
the opportunity to defer voluntarily a portion of their Director's Fees,
subject to the terms of the Plan. By adopting the Plan, the Company desires
to enhance its ability to attract and retain Directors of outstanding
competence.
ARTICLE 2. DEFINITIONS
Whenever used herein, the following terms shall have the meanings set
forth below, and, when the defined meaning is intended, the term is
capitalized:
(a) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(b) "Board Meeting" means any meeting of the Board of Directors or of
any committee thereof on which the Director serves and for which the Director
is entitled to receive Meeting Fees.
(c) "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
(d) "Company" means MagneTek, Inc., a Delaware corporation.
(e) "Director" means a member of the Board of Directors of the Company
who is neither an employee nor an officer of the Company.
(f) "Director's Fees" means a Director's Retainer Fees and Meeting
Fees, whether payable in cash or stock or any combination thereof.
(g) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(h) "Meeting Fees" means the fees paid to a Director on a per meeting
basis for attending a meeting of the Board of Directors or a committee
thereof.
(i) "Participant" means a Director who is actively participating in
the Plan.
(j) "Plan" means this MagneTek, Inc. Directors' Deferral Investment
Plan, as it may be amended from time to time.
(k) "Retainer Fees" means annual retainer fees paid to a Director for
serving as a member of the Board of Directors or as a Chairman of a committee
thereof.
(l) "Stock" means common stock of the Company, par value $.01 per
share.
(m) "Value" means the fair market value of the cash or Stock a
Director receives (or, absent deferrals hereunder, is entitled to receive) as
Director's Fees.
(n) "Year" means a calendar year.
ARTICLE 3. ADMINISTRATION
3.1 AUTHORITY OF THE BOARD. The Plan shall be administered by the
full Board of Directors of the Company. Subject to the terms of the Plan,
and to the extent permissible under Section 16 of the Securities Exchange Act
of 1934, as amended, the Board may delegate ministerial duties to the Chief
Human Resources Officer or any other executive or executives of the Company.
Subject to the provisions herein, the Board shall have full power and
discretion to select Directors for participation in the Plan; to determine
the terms and conditions of each Director's participation in the Plan; to
construe and interpret the Plan and any agreement or instrument entered into
under the Plan; to establish, amend, or waive rules and regulations for the
Plan's administration; to amend (subject to the provisions of Article 9
herein) the terms and conditions of the Plan and any agreement entered into
under the Plan; and to make other determinations which may be necessary or
advisable for the administration of the Plan.
3.2 DECISIONS BINDING. All determinations and decisions of the Board
as to any disputed question arising under the Plan, including questions of
construction and interpretation, shall be final, conclusive, and binding on
all parties and shall be given the maximum possible deference allowed by law.
3.3 ARBITRATION. Any individual making a claim for benefits under
this Plan may contest the Board's decision to deny such claim or appeal
therefrom only by submitting the matter to binding arbitration before a
single arbitrator. Any arbitration shall be held in Nashville, Tennessee,
unless otherwise agreed to by the Board. The arbitration shall be conducted
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association.
The arbitrator's authority shall be limited to the affirmance or
reversal of the Board's denial of the claim or appeal, and the arbitrator
shall have no power to alter, add to, or subtract from any provision of this
Plan. The arbitrator's decision shall be final and binding on all parties,
if warranted on the record and reasonably based on applicable law and the
provisions of this Plan. The arbitrator shall have no power to award any
punitive, exemplary, consequential, or special damages, and under no
circumstances shall an award contain any amount that in any way
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reflects any of such types of damages. Each party shall bear its own
attorney's fees and costs of arbitration. Judgment on the award rendered by
the arbitrator may be entered in any court having jurisdiction thereof.
3.4 INDEMNIFICATION. Each person who is or shall have been a member
of the Board shall be indemnified and held harmless by the Company against
and from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a defendant, or
in which he or she may be a party by reason of any act or omission by such
Board member in his or her capacity as an administrator of the Plan, and
against and from any and all amounts paid by him or her in settlement
thereof, with the Company's approval, or paid by him or her in satisfaction
of any judgment in any such action, suit, or proceeding against him or her,
provided he or she shall give the Company an opportunity, at its own expense,
to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf.
The foregoing right of indemnification shall not be exclusive of any
other rights of indemnification to which such persons may be entitled under
the Company's Certificate of Incorporation or Bylaws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold
them harmless.
ARTICLE 4. ELIGIBILITY AND PARTICIPATION
4.1 ELIGIBILITY. Persons eligible to participate in the Plan shall be
those members of the Board of Directors who are not employees or officers of
the Company, as selected by the Board in its sole and absolute discretion.
In the event a Participant no longer meets the requirements for
participation in the Plan, such Participant shall become an inactive
Participant, retaining all the rights described under the Plan, except the
right to make any further deferrals, until such time that the Participant
again becomes an active Participant.
4.2 PARTICIPATION. Participation in the Plan shall be determined by
the Board based upon the criteria set forth in Section 4.1 herein annually or
at such other time selected by the Board.
4.3 PARTIAL YEAR ELIGIBILITY. In the event that a Participant first
becomes eligible to participate in the Plan during a Year, such Participant
shall, within thirty (30) calendar days of becoming eligible, be notified by
the Company of his or her eligibility to participate, and the Company shall
provide each such Participant with "Election to Defer Forms," which must be
completed by the Participant as provided in Sections 5.2 and 5.3 herein;
provided, however, that such Participant may only make an election to defer
with respect to that portion of his or her Director's Fees for such Year
which are to be earned after the filing of the deferral election.
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ARTICLE 5. DEFERRAL OPPORTUNITY
5.1 AMOUNT WHICH MAY BE DEFERRED. A Participant may elect to defer up
to one hundred percent (100%) of his or her Retainer Fees for any Year and up
to one hundred percent (100%) of his or her Meeting Fees for each Board
Meeting during any Year. The amount of Retainer Fees and Meeting Fees to be
deferred shall be expressed as a percentage of the Value of the fees
otherwise payable (in cash or Stock) for the Participant's service as a
Director of the Company.
5.2 DEFERRAL ELECTION FOR RETAINER FEES. Participants shall make
their elections under the Plan to defer their Retainer Fees no later than
December 20 prior to the beginning of each Year, or not later than thirty
(30) calendar days following notification of initial eligibility to
participate herein (with respect to Retainer Fees not yet earned or paid).
All elections to defer Retainer Fees shall be made on an "Election to Defer
Form," as described herein and shall be delivered by the Participant to the
Board (or its delegate) as described in Section 10.1 herein. The deferral
election with respect to Retainer Fees shall automatically remain in effect
for the Year in question (for which it shall be irrevocable) and for all
subsequent periods the Participant participates in the Plan until revoked or
changed by the Participant. The deferral may be revoked or changed with
respect future Years only by delivering a new election on an "Election to
Defer Form" no later than December 20 prior to the beginning of the Year.
Participants shall make the following elections on an "Election to
Defer Form":
(a) The amount to be deferred with respect to his or her Retainer Fees
for the Year, pursuant to the terms of Section 5.1 herein; and
(b) The form of payment to be made to the Participant at the end of
the deferral period, pursuant to the terms of Section 5.5 herein.
5.3 DEFERRAL ELECTION FOR MEETING FEES. Participants shall make their
elections to defer their Meeting Fees under the Plan no later than the date
immediately prior to the date of the Board Meeting to which such Meeting Fees
relate. Notwithstanding the foregoing, the initial election of the
Participants' deferral of Meeting Fees shall be made no later than December
20 prior to the beginning of the Year or no later than thirty (30) calendar
days following notification of initial eligibility to participate in the Plan
(with respect to Meeting Fees not yet earned or paid). All elections to defer
Meeting Fees shall be made on an "Election to Defer Form," as described in
Section 5.2 herein and shall be delivered by the Participant to the Board (or
its delegate) as described in Section 10.1 herein. On the "Election to Defer
Form" described in Section 5.2, the Participant shall elect (in addition to
any other relevant elections described in Section 5.2 herein) the amount to
be deferred with respect to his or her Meeting Fees for each Board Meeting,
pursuant to the terms of Section 5.1 herein. The deferral election with
respect to Meeting Fees shall automatically remain in effect for all periods
the Participant participates in the Plan until revoked or changed by the
Participant.
The deferral may be revoked or changed with respect to future Board
Meetings by filing with the Board (or its delegate) a new election on an
"Election to Defer Form" no later than the
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day immediately prior to the date of the next Board Meeting for which the
Participant shall receive Meeting Fees.
5.4 LENGTH OF DEFERRAL. Except as otherwise provided in Section 5.7,
the amounts deferred by each Participant and the accumulated earnings thereon
shall be paid (or commence to be paid) to the Participant as provided in
Sections 5.5 and 5.6 herein in January following the Year in which the
termination of the Participant's service as a Director of the Company occurs
for any reason other than death. In the event of the Participant's death,
the payment of the amounts deferred and the accumulated earnings thereon (or,
in the event of death following commencement of installment payments, the
remaining unpaid balance thereof) shall be made in a single lump sum payment
in the form provided in Section 5.6 herein as soon as administratively
practical after the Participant's death.
5.5 FORM OF PAYMENT OF DEFERRED AMOUNTS. Subject to Section 5.7,
Participants shall be entitled to elect to receive payment of deferred
amounts, together with earnings accrued thereon, at the end of the deferral
period in a single lump sum payment or by means of installments. All
deferred amounts, together with earnings accrued thereon, shall be paid in
the same form. If no election is made, the Participant will be paid in a
single lump sum.
(a) LUMP SUM PAYMENT. Such payment of deferred amounts and earnings
accrued thereon shall be made to the Participant in January following
the Year in which he ceases to serve as a Director, as described in
Section 5.4 herein.
(b) INSTALLMENT PAYMENTS. Participants may elect to receive the payout
of deferred amounts and earnings accrued thereon in annual
installments, with a minimum number of installments of two (2), and
a maximum number of installments of ten (10). The initial payment
shall be made in January following the Year in which he ceases to
serve as a Director, as described in Section 5.4 herein. The
remaining installment payments shall be made in January of each Year
thereafter, until the Participant's entire deferred account has been
paid in full. Earnings shall continue to accrue on the deferred
amounts in the Participant's deferred account, as provided in
Section 6.2 of this Plan. The amount of each installment payment
shall be equal to the balance remaining in the Participant's deferred
account immediately prior to each such payment, multiplied by a
fraction, the numerator of which is one (1), and the denominator of
which is the number of installment payments remaining.
Subject to the following rules, the Participant may elect to change a
form of benefit elected pursuant to this Section 5.5 by filing a revised
election form on an "Election to Defer Form," as described in Section 5.2
herein, specifying the new form of distribution:
(1) An election to change the form of distribution must be made no later
than December 31 at least one (1) full Year prior to the payout
commencement date as described in Section 5.4 herein. If a new
election is submitted after this date, the election shall be null and
void, and the form of distribution shall be determined under the
Participant's original election.
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(2) Any election to change the form of distribution from installments
to a lump sum is subject in all cases to the approval of the Board.
(3) No further election to change a form of distribution shall be
permitted with respect to amounts already subject to a revised
election submitted pursuant to this Section 5.5.
Notwithstanding anything to the contrary herein, the Board may elect at
any time, in its sole and absolute discretion, to make payment of deferred
amounts and accumulated earnings thereon (or the remaining amount thereof) to
the Participant in a single lump sum, notwithstanding the Participant's
election to receive such amounts in the form of installments.
5.6 TYPE OF PAYMENT OF DEFERRED AMOUNTS. All payments hereunder shall
be made in cash or shares of Stock, or any combination thereof, as directed
by the Board in its sole and absolute discretion.
The Company shall reserve a sufficient number of shares of Stock for
purposes of the Plan, as determined by the Board. If the Company shall at
any time increase or decrease the number of outstanding shares of Stock or
change in any way the rights and privileges of such shares by means of the
payment of a stock dividend or any other distribution upon such shares
payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification, or recapitalization involving the Stock, then
the Board may increase, decrease, or change in like manner the number, rights
and privileges of the shares issuable under the Plan as if such shares had
been issued and outstanding, fully paid, and nonassessable at the time of
such occurrence.
5.7 FINANCIAL HARDSHIP. The Board shall have the authority to alter
the timing or manner of payment of deferred amounts in the event that the
Participant establishes, to the satisfaction of the Board, severe financial
hardship. In such event, the Board may, in its sole discretion:
(a) Authorize the cessation of deferrals by such Participant under the
Plan; or
(b) Provide that all, or a portion, of the amount previously deferred
by the Participant shall immediately be paid in a lump sum cash
payment; or
(c) Provide that all, or a portion, of the installments payable over a
period of time shall immediately be paid in a lump sum cash payment;
or
(4) Provide for such other installment payment schedule as deemed
appropriate by the Board under the circumstances.
For purposes of this Section 5.7, "severe financial hardship" shall mean
any financial hardship resulting from extraordinary and unforeseeable
circumstances arising as a result of one or more recent events beyond the
control of the Participant. In any event, payment may not be made to the
extent such emergency is or may be relieved: (i) through reimbursement or
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compensation by insurance or otherwise; (ii) by liquidation of the
Participant's assets, to the extent the liquidation of such assets would not
itself cause severe financial hardship; and (iii) by cessation of deferrals
under the Plan. Withdrawals of amounts because of a severe financial
hardship may only be permitted to the extent reasonably necessary to satisfy
the hardship, plus to pay taxes on the withdrawal. Examples of what are not
considered to be severe financial hardships include the need to send a
Participant's child to college or the desire to purchase a home. The
Participant's account will be credited with earnings in accordance with the
Plan up to the date of distribution.
The severity of the financial hardship shall be judged by the Board.
The Board's decision with respect to the severity of financial hardship and
the manner in which, if at all, the Participant's future deferral
opportunities shall be ceased, and/or the manner in which, if at all, the
payment of deferred amounts to the Participant shall be altered or modified,
shall be final, conclusive, and not subject to appeal.
ARTICLE 6. DEFERRED COMPENSATION ACCOUNTS
6.1 PARTICIPANTS' ACCOUNTS. The Company shall establish and maintain
an individual bookkeeping account for deferrals made by each Participant
under Article 5 herein. Each account shall be credited as of the date the
amount deferred otherwise would have become due and payable to the
Participant and as provided in Section 6.2. Each Participant's account shall
be one hundred percent (100%) vested at all times.
6.2 GAINS AND LOSSES ON DEFERRED AMOUNTS. Each Participant's account
will be deemed to be invested in Stock, including any dividends paid thereon
(which will be deemed to be reinvested in such Stock). Each Participant's
account will thus be adjusted and increased or decreased by the results of
such deemed investment from the time Plan deferrals are credited under
Section 6.1 until distributed pursuant to Article 5 hereof.
6.3 CHARGES AGAINST ACCOUNTS. There shall be charged against each
Participant's deferred account any payments made to the Participant or to his
or her beneficiary.
6.4 DESIGNATION OF BENEFICIARY. Each Participant shall designate a
beneficiary or beneficiaries who, upon the Participant's death, will receive
the amounts that otherwise would have been paid to the Participant under the
Plan. All designations shall be signed by the Participant, and shall be in
such form as prescribed by the Board. Each designation shall be effective as
of the date delivered to the Chief Human Resources Officer of the Company by
the Participant.
Participants may change their designations of beneficiary on such form
as prescribed by the Board. The payment of amounts deferred under the Plan
shall be in accordance with the last unrevoked written designation of
beneficiary that has been signed by the Participant and delivered by the
Participant to the Chief Human Resources Officer of the Company prior to the
Participant's death.
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In the event that all the beneficiaries named by a Participant pursuant
to this Section 6.5 predecease the Participant, the deferred amounts that
would have been paid to the Participant or the Participant's beneficiaries
shall be paid to the Participant's estate.
In the event a Participant does not designate a beneficiary, or for any
reason such designation is ineffective, in whole or in part, the amounts that
otherwise would have been paid to the Participant or the Participant's
beneficiaries under the Plan shall be paid to the Participant's estate.
ARTICLE 7. RIGHTS OF PARTICIPANTS
7.1 CONTRACTUAL OBLIGATION. The Plan shall create a contractual
obligation on the part of the Company to make payments from the Participants'
accounts when due. Payment of account balances shall be made out of the
general funds of the Company.
7.2 UNSECURED INTEREST. No Participant or party claiming an interest
in deferred amounts of a Participant shall have any interest whatsoever in
any specific asset of the Company. To the extent that any party acquires a
right to receive payments under the Plan, such right shall be equivalent to
that of an unsecured general creditor of the Company. The Company shall have
no duty to set aside or invest any amounts credited to Participants' accounts
under this Plan.
Nothing contained in this Plan shall create a trust of any kind or a
fiduciary relationship between the Company and any Participant.
Nevertheless, the Company may establish one or more trusts, with such trustee
as the Board may approve, for the purpose of providing for the payment of
deferred amounts and earnings thereon. Such trust or trusts may be
irrevocable, but the assets thereof shall be subject to the claims of the
Company's general creditors in the event of the Company's bankruptcy or
insolvency. To the extent any deferred amounts and earnings thereon under
the Plan are actually paid from any such trust, the Company shall have no
further obligation with respect thereto, but to the extent not so paid, such
deferred amounts and earnings thereon shall remain the obligation of, and
shall be paid by, the Company.
7.3 NO GUARANTEE OF PRINCIPAL OR EARNINGS. Nothing contained in the
Plan shall constitute a guarantee by the Company or any other person or
entity that the amounts deferred hereunder will increase or shall not
decrease in value due to the deemed investment of such amounts in Stock. The
Stock may be a volatile investment and decreases in the value thereof may
result in a loss of some or all of the principal amounts deferred hereunder.
Thus, it is possible for the value of a Participant's account to decrease as
a result of its deemed investment in Stock, if the value of the Stock
decreases.
ARTICLE 8. WITHHOLDING AT TAXES
The Company shall have the right to require Participants to remit to
the Company an amount sufficient to satisfy any Federal, state, and local
withholding tax requirements, or to deduct from all payments made pursuant to
the Plan amounts sufficient to satisfy any withholding tax requirements.
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Article 9. AMENDMENT AND TERMINATION
The Company hereby reserves the right to amend, modify, or terminate
the Plan at any time by action of the Board, with or without prior notice.
Except as described below in this Article 9, no such amendment or termination
shall in any material manner adversely affect any Participant's rights to
amounts already deferred or earnings thereon up to the point of amendment or
termination, without the consent of the Participant.
ARTICLE 10. MISCELLANEOUS
10.1 NOTICE. Unless otherwise prescribed by the Board, any notice or
filing required or permitted to be given to the Company under the Plan shall
be sufficient if in writing and hand delivered, or sent by registered or
certified mail to the Chief Human Resources Officer of the Company. Notice
to the Chief Human Resources of the Company, if mailed, shall be addressed to
the principal executive offices of the Company. Notice mailed to a
Participant shall be at such address as is given in the records of the
Company. Notices shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the receipt
for registration or certification.
10.2 NONTRANSFERABILITY. Except as provided below, Participants'
rights to deferred amounts, contributions, and earnings accrued thereon under
the Plan may not be sold, transferred, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and distribution,
nor shall the Company make any payment under the Plan to any assignee or
creditor of a Participant.
Notwithstanding the foregoing, the Board shall provide for
distributions from a Participant's deferred compensation account to the
extent required by a court order that the Board determines to satisfy the
requirements of a qualified domestic relations order within the meaning of
Section 206(d)(3) of ERISA. The amounts assigned to an alternate payee under
such an order shall be paid in a lump sum distribution as soon as
administratively practical after the Board determines that the order meets
the requirements of a qualified domestic relations order. All payments made
pursuant to any such order shall be charged against the Participant's
deferred compensation account.
10.3 SEVERABILITY. In the event any provision of the Plan shall be
held illegal or invalid for any reason, the illegality or invalidity shall
not affect the remaining parts of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had not been included.
10.4 GENDER AND NUMBER. Except where otherwise indicated by the
context, any masculine term used herein also shall include the feminine; the
plural shall include the singular, and the singular shall include the plural.
10.5 COSTS OF THE PLAN. All costs of implementing and administering
the Plan shall be borne by the Company.
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10.6 SUCCESSORS. All obligations of the Company under the Plan shall
be binding on any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger,
consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company
10.7 APPLICABLE LAW. Except to the extent preempted by applicable
federal law, the Plan shall be governed by and construed in accordance with
the laws of the state of Tennessee.
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