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.
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
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
3
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:
4
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
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
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
7
8
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.
8