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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000912057-96-021511.txt : 19961001
<SEC-HEADER>0000912057-96-021511.hdr.sgml : 19961001
ACCESSION NUMBER: 0000912057-96-021511
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 19
CONFORMED PERIOD OF REPORT: 19960630
FILED AS OF DATE: 19960930
SROS: NYSE
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: MAGNETEK INC
CENTRAL INDEX KEY: 0000751085
STANDARD INDUSTRIAL CLASSIFICATION: POWER, DISTRIBUTION & SPECIALTY TRANSFORMERS [3612]
IRS NUMBER: 953917584
STATE OF INCORPORATION: DE
FISCAL YEAR END: 0630
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 001-10233
FILM NUMBER: 96636867
BUSINESS ADDRESS:
STREET 1: 26 CENTURY BOULEVARD
STREET 2: P O BOX 290159
CITY: NASHVILLE
STATE: TN
ZIP: 37229-0159
BUSINESS PHONE: 6153165100
MAIL ADDRESS:
STREET 1: 26 CENTURY BOULEVARD
STREET 2: P O BOX 290159
CITY: NASHVILLE
STATE: TN
ZIP: 37229-0159
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<DESCRIPTION>FORM 10-K
<TEXT>
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
FORM 10-K
(MARK ONE)
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 No.)
26 CENTURY BOULEVARD
P.O. BOX 290159
NASHVILLE, TENNESSEE 37229-0159
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (615) 316-5100
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, $.01 par value New York Stock Exchange
8% Convertible Subordinated Notes Due 2001 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
The aggregate market value of the voting stock held by non-affiliates of
the Registrant (based on the closing price of such stock, as reported by the New
York Stock Exchange, on September 13, 1996) was $263,290,054.
The number of shares outstanding of the Registrant's Common Stock, as of
September 13, 1996, was 25,515,147 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the MagneTek, Inc. 1996 Annual Report to Shareholders for the
year ended June 30, 1996 are incorporated by reference into Part II of this
Form 10-K. With the exception of those portions which are expressly incorporated
by reference in the Annual Report on Form 10-K, the MagneTek, Inc. 1996 Annual
Report to Shareholders is not deemed filed as part of this Report.
Portions of the MagneTek, Inc. definitive Proxy Statement to be filed with
the Securities and Exchange Commission within 120 days after the close of the
fiscal year ended June 30, 1996 are incorporated by reference into Part III
hereof.
<PAGE>
MAGNETEK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 1996(1)
Page
----
ITEM 1. BUSINESS.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 2. PROPERTIES.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
ITEM 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. . . . . . . . 9
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . . 10
ITEM 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . . . . . . . . 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . . . . . . . . 11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE. . . . . . . . . . . . . . . . . . . . . . . 11
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. . . . . . . . 12
ITEM 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . . . . . . . . 15
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. . 15
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . . . 15
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
- -----------------
(1) The Company uses a 52-53 week fiscal year which ends on the Sunday
nearest June 30. Accordingly, the Company's 1996 fiscal year ended on
June 30, 1996 and contained 52 weeks. The year ended July 2, 1995
contained 52 weeks and the year ended July 3, 1994 contained 53 weeks.
i
<PAGE>
PART I
ITEM 1. BUSINESS.
GENERAL
The electrical equipment industry is characterized by diverse markets,
global competition and relatively high barriers to entry, including substantial
capital requirements and market channel needs. From its inception in 1984,
MagneTek has pursued a growth strategy designed to achieve the size necessary to
compete in domestic and foreign electrical equipment markets. During the late
1980s and early 1990s, the Company grew rapidly, primarily through acquisitions
of electrical equipment businesses supplemented by internal growth. This growth
enabled MagneTek to capture significant shares of a number of electrical product
and service markets, while reducing manufacturing costs through economies of
scale and vertical integration. However, the debt incurred to finance most of
the Company's acquisitions left it with relatively high financial leverage.
During the fiscal year ended June 30, 1994, MagneTek's Board of
Directors approved a restructuring plan to reduce debt by divesting product
lines peripheral to the Company's primary electrical equipment manufacturing
businesses. The restructuring program entailed the discontinuation and sale of
operations related primarily to utility, military and heavy industrial markets
(see Note 2 to Consolidated Financial Statements). As of June 30, 1996, the
Company had completed the sale of all discontinued operations, and the proceeds
have been applied to reduce debt as contemplated by the restructuring plan.
In June, 1996, under a newly elected President and Chief Executive
Officer, MagneTek initiated a company-wide operational review, resulting in
Board approval of a program to reposition its continuing operations for renewed
growth and profitability (see Note 2 to Consolidated Financial Statements).
Accordingly, the Company now operates in three business segments: MOTORS AND
CONTROLS, which includes fractional- and integral-horsepower electric motors,
medium-voltage generators and electronic variable-speed drives; LIGHTING
PRODUCTS, including magnetic and electronic ballasts; and POWER SUPPLIES,
including electronic power supplies and small transformers.
MOTORS AND CONTROLS SEGMENT
GENERAL. The Motors and Controls segment, which accounted for 46% of
the Company's net sales in fiscal 1996, is comprised of two closely related
product groups: Motors and Generators, including fractional- and integral-
horsepower motors and medium-voltage generators; and Drives and Systems,
including electronic variable-speed drives and drive systems. While overseas
operations accounted for less than 3% of the segment's total net sales in fiscal
1996, MagneTek is expanding its existing motor and generator operations in the
United Kingdom and Hungary and has acquired 55% ownership of a joint venture in
China to build generators for Asian markets. Caterpillar Inc. accounted for 16%
of the segment's total net sales in fiscal 1996.
MOTORS AND GENERATORS. During fiscal 1996, sales of motor and
generator products accounted for 83% of Motors and Controls segment revenues.
MagneTek electric motors, most of which use alternating-current (AC) power,
range from 1/8 to 500 horsepower. Based on frame sizes established by the
National Electric Manufacturers Association (NEMA), motors from 1/8 to 5
horsepower are designated fractional-
1
<PAGE>
horsepower (FHP) motors. MagneTek FHP motors are used primarily in residential
applications such as home furnaces, air conditioners, ventilators and
dehumidifiers, as well as pool and spa pumps. They also are used in commercial
applications such as office building heating, ventilating and air conditioning
(HVAC), food service and agribusiness. MagneTek integral-horsepower (IHP) motors
ranging up to 500 horsepower are used primarily in commercial HVAC and laundry
equipment, as well as in industrial applications such as food processing,
papermaking and petrochemical plants.
MagneTek also makes direct-current (DC) motors ranging in size from
1/6 to 3 horsepower used in variable-speed applications, including material
handling and packaging equipment, exercise machines and machine tools.
About 65% of MagneTek's motors are sold to original equipment
manufacturers (OEMs), primarily through the Company's direct sales force. The
rest are marketed through a network of some 2,700 independent distributors,
primarily for maintenance and replacement purposes.
Generators manufactured by the Company range in size from 50 kilowatts
("KW") to 2,250 KW. Over 90% of generator sales are to Caterpillar, Inc., which
builds and sells engine-generator sets for primary and standby power
applications.
DRIVES AND SYSTEMS. Sales of drives and drive systems accounted for
17% of the segment's total net sales in fiscal 1996. The Company's electronic
variable-speed drives and drive systems adjust and control the speed and torque
of electric motors. They are used in HVAC applications, film, foil and paper
converting, wire drawing, extrusion and other processing lines, elevators,
mining machinery, machine tools and material handling equipment. MagneTek drives
and drive systems are sold to OEMs and end-users through a specialized,
engineering-oriented sales force and through distributors for industrial plant
operation and replacement purposes.
BACKLOG*. Backlog in the Company's Motors and Controls segment as of
June 30, 1996 was $85.3 million compared to $97.5 million at the end of fiscal
1995. Rather than a result of reduced demand, the backlog decline was primarily
a function of shorter lead-times for commercial FHP motors. Increases in
capacity and manufacturing flexibility, gained through MagneTek plant expansions
and production line changes, enabled customers to place orders nearer to desired
delivery dates.
COMPETITION. MagneTek's primary competitors in the electric motor
business are Emerson Electric, GE, Baldor, Reliance, A.O. Smith, Leeson,
Marathon, FASCO and Pacific Scientific. Its primary generator competitors are
Emerson, Onan, Kohler and Generac. Principal competitors in drives and drive
systems include Emerson Electric, Allen Bradley, Asea Brown Bovari, Toshiba and
Eaton Corporation. Some of these companies have substantially greater resources
than MagneTek, which competes principally on the basis of customer service,
engineering capability, product quality and price.
LIGHTING PRODUCTS SEGMENT
GENERAL. The Lighting Products segment accounted for 39% of MagneTek's
net revenues in fiscal 1996. This segment manufactures lighting ballasts, which
supply power to start and operate gas-filled electric lamps, in the United
States, Mexico and Europe. Ballasts manufactured by the Company include
fluorescent and high-intensity-discharge ("HID") types, both magnetic and
electronic. European operations
2
<PAGE>
accounted for 19% of the segment's total net sales in fiscal 1996; and Lithonia
Lighting, a domestic lighting fixture OEM, accounted for 11%. In connection with
the operational repositioning program referenced above, certain specialty
lighting product lines previously manufactured in Germany will be manufactured
at existing MagneTek sites in Hungary and possibly Mexico to reduce costs.
MAGNETIC AND HID BALLASTS. Sales of magnetic ballasts (including HID)
accounted for 59% (46% in the U.S. and 13% in Europe) of the segment's net sales
in fiscal 1996. Magnetic fluorescent ballasts are used primarily in standard
fluorescent lighting fixtures in office, commercial and residential
applications, as well as in various types of specialty lighting applications,
including both indoor and outdoor displays and signs. HID ballasts are used in
lighting fixtures in industrial and municipal applications, such as street
lighting, outdoor security and parking lot lighting, indoor factory and
warehouse illumination and sports venue lighting. In the U.S., approximately 60%
of the Company's magnetic fluorescent and HID ballasts are sold directly to
lighting fixture OEMs. The rest are sold through independent manufacturers'
representatives to more than 2,900 independent distributors nationwide. In
Europe, sales are made through a combination of the Company's direct sales force
and sales agents, primarily to OEMs.
ELECTRONIC BALLASTS. While they cost more initially, electronic
fluorescent ballasts can provide savings compared to magnetic ballasts through
reduced energy consumption. Sales of electronic ballasts, primarily in the U.S.,
accounted for 37% of the segment's total net sales in fiscal 1996. The Company
anticipates a continuing shift in demand toward electronic ballasts from
magnetic products as more end-users focus on long-term operating efficiency and
as the cost of electronic ballasts declines. MagneTek's repositioning program is
intended to accommodate this shift. Electronic ballasts are sold through
essentially the same channels as magnetic ballasts.
BACKLOG*. Lighting Products segment backlog as of June 30, l996, was
$31.5 million compared to $70.3 million at the end of fiscal 1995. The backlog
decline resulted primarily from reduced demand for electronic ballasts in the
U.S. On June 30, 1996, domestic electronic ballast backlog was $9.9 million,
versus $42.9 million on June 30, 1995.
Historically, the ballast business has not been characterized by large
backlogs, since sales of ballasts for new construction and replacement purposes
have been fairly predictable. In recent years, however, lighting retrofit
projects driven by energy-efficiency regulations and utility rebates have led to
speculative ordering and backlog building throughout the industry. During fiscal
1996, MagneTek reduced its ballast inventories and backlogs substantially,
reflecting a conservative view of future demand growth. However, the Company
believes that end-user demand for energy-efficient electronic ballasts will
stabilize and continue to grow as rebates give way to longer-term energy savings
incentives and voluntary energy conservation programs.
COMPETITION. MagneTek's primary competitors in the lighting ballast
business in the U.S. are Advance Transformer (a division of North American
Philips), Motorola and Valmont Industries, and in Europe, Schwabe, Helvar and
Zumtobel. Some of these companies have substantially greater resources than
MagneTek, which competes principally on the basis of customer service,
engineering capability, product quality and price.
3
<PAGE>
POWER SUPPLIES SEGMENT
GENERAL. The Power Supplies segment accounted for 15% of the Company's
net revenues in fiscal 1996. This segment manufactures electronic power supplies
and various small component and specialty transformers. A power distribution
transformer product line, which accounted for 6% of segment sales in fiscal
1996, was divested in August of 1996. European operations accounted for 62% of
the Power Supplies segment net revenues in fiscal 1996. Two customers, IBM (27%
of the segment's net sales in fiscal year 1996), and Siemens (17% of the
segment's net sales in fiscal year 1996) are important to the revenue base for
the segment. Electronic power supplies manufactured by MagneTek are used
primarily in business machines, data processing and telecommunications
equipment. The Company also manufactures power converters for recreational
vehicles and boats, as well as component and specialty transformers incorporated
into in a wide range of electronic equipment.
BACKLOG*. Power Supplies segment backlog as of June 30, 1996 was $62.2
million compared to $56.2 million as of the end of fiscal 1995. The increase in
backlog was a function of increases in both U.S. and foreign orders for
electronic power supplies, related in part to penetration of new industrial
power supply markets.
COMPETITION. The Company's principal competitors in the electronic
power supplies business are Astec and Zytec. Its major power converter
competitor is Todd Engineering, and its primary competitors in the small
transformer business are Basler, SNC and Signal. Some of these companies have
substantially greater resources than MagneTek, which competes principally on the
basis of customer service, engineering capability, product quality and price.
* Backlog represents purchase orders received by the Company, which
may be subject to cancellation.
INTERNATIONAL OPERATIONS
MagneTek conducts the majority of its international activities through
its operations in Western Europe. The Company's European operations include
ballast and power supply production in Italy, ballast production in Germany and
motor manufacturing in the United Kingdom and Hungary. International sales,
including exports from U.S. operations, accounted for 23% of net revenues in
fiscal 1996.
During fiscal 1996, MagneTek acted to increase its participation in
European and Asian markets through the expansion of its operations in Hungary
and the formation of a joint venture in the People's Republic of China. In
January 1996, the Company announced the formation of a majority-owned joint
venture with Fujian Fufa Company Limited in Fuzhou, People's Republic of China,
to build and market electric generators in the Far East. It also is initiating
manufacture of generators, electronic power supply components and certain
lighting products at existing facilities in Budapest, Hungary, and intends to
further expand its motor operations based in Eastern Europe.
SUPPLIERS AND RAW MATERIALS
The Company manufactures many of the materials and components used in
its products, including ballast and motor laminations and capacitors. It also
draws magnet wire primarily for products produced by its Lighting Products
segment.
4
<PAGE>
Virtually all materials and components purchased by MagneTek are
available from multiple suppliers. During fiscal 1996, raw materials represented
approximately 56% of the Company's cost of sales. Production requirements depend
heavily on steel, copper and aluminum, as well as certain electronic components.
Generally, the Company purchases materials in the following manner. Steel prices
are negotiated with vendors on an annual basis. Copper is purchased in rod form
and drawn into magnet wire for lighting products, while finished magnet wire is
purchased directly from outside vendors for motors and generators; the Company
seeks to mitigate its exposure to fluctuations in copper prices through short-
term hedging programs as well as through forward-contracting arrangements with
magnet wire suppliers. Aluminum purchases are based upon the spot prices at
delivery. Electronic components are purchased under contract based on quality,
price and delivery.
RESEARCH AND DEVELOPMENT
Product development activities conducted by MagneTek operating units
are directed toward enhancing existing products and developing new products for
given applications. Advanced technologies are developed at three development
centers in the U.S. and one in Europe. In addition, MagneTek sponsors product-
focused research projects at a number of leading Universities. Total research
and development expenditures were approximately $21.5 million, $23.6 million and
$17.5 million, respectively, in fiscal years 1996, 1995 and 1994.
TRADEMARKS AND PATENTS
MagneTek holds numerous patents which, although of value, are not
considered by management to be essential to the Company's business. The Company
obtains appropriate protection for its inventions as a matter of course, and
believes that it holds all the patent, trademark and other intellectual property
rights necessary to conduct its business.
From time to time, MagneTek has been notified of claims that it may be
infringing patents owned by others. If it appears necessary or desirable, the
Company may seek licenses under patents which it is allegedly infringing.
Although patent holders commonly offer such licenses, no assurance can be given
that licenses will be offered or that the terms of licenses will be acceptable
to the Company. The failure to obtain a key patent license from a third party
could cause the Company to incur substantial liabilities and to suspend the
manufacture of the products utilizing the patented invention.
EMPLOYEES
At the end of fiscal 1996, the Company had approximately 1,700
salaried employees and approximately 11,300 hourly employees, of whom
approximately 4,700 were covered by collective bargaining agreements with
various unions. The Company believes that its relationships with its employees
are favorable.
ENVIRONMENTAL MATTERS
GENERAL. The Company has from time to time discovered contamination
by hazardous substances at certain of its facilities. In response to such a
discovery, the Company conducts remediation activities to bring the facility
into compliance with applicable laws and regulations. Except as described
below, the Company's remediation activities for fiscal 1996 did not entail
material expenditures, and its remediation activities
5
<PAGE>
for fiscal 1997 are not expected to entail material expenditures. Future
discoveries of contaminated areas could entail material expenditures,
depending upon the extent and nature of the contamination.
CENTURY ELECTRIC (MCMINNVILLE, TENNESSEE). Prior to its purchase by
the Company in 1986, Century Electric, Inc. ("Century Electric") acquired a
business from Gould Inc. ("Gould") in May 1983 which included a leasehold
interest in a fractional-horsepower electric motor manufacturing facility
located in McMinnville, Tennessee. In connection with this acquisition, Gould
agreed to indemnify Century Electric from and against liabilities and expenses
arising out of the handling and cleanup of hazardous waste, including but not
limited to cleaning up any PCBs at the McMinnville facility (the "1983
Indemnity"). Investigation has revealed the presence of PCBs and other
substances, including solvents, in portions of the soil and in the groundwater
underlying the facility and in certain offsite soil, sediment and biota samples.
Century Electric has kept the Tennessee Department of Environment and
Conservation, Division of Superfund, apprised of test results from the
investigation. The McMinnville plant has been listed as a Tennessee Superfund
Site, a report on that site has been presented to the Tennessee legislature, and
community officials and plant employees have been notified of the presence of
contaminants as above described. In 1995, Gould completed an interim remedial
measure of excavating and disposing onsite soil containing PCBs. Gould also
conducted preliminary investigation and cleanup of certain offsite
contamination. The cost of any further investigation and cleanup of onsite and
offsite contamination cannot presently be determined. The Company believes that
the costs for further onsite and offsite cleanup (including ancillary costs) are
covered by the 1983 Indemnity. While the Company believes that Gould will
continue to perform under its indemnity obligations, Gould's failure to perform
such obligations could have a material adverse effect on the Company.
OFFSITE LOCATIONS. The Company has been identified by the United
States Environmental Protection Agency and certain state agencies as a
potentially responsible party for cleanup costs associated with alleged past
waste disposal practices at several offsite locations. Due, in part, to the
existence of indemnification from the former owners of certain acquired
businesses for cleanup costs at certain of these sites, and except as described
below, the Company's estimated share in liability (if any) at the offsite
facilities is not expected to be material. It is possible that the Company will
be named as a potentially responsible party in the future with respect to other
sites.
CROWN INDUSTRIES SITE (PIKE COUNTY, PENNSYLVANIA). In March 1992, the
Company was informed by the Pennsylvania Department of Environmental Resources
("DER") that its Universal Manufacturing division is one of a number of
potentially responsible parties with respect to a planned environmental
investigation and cleanup at the Crown Industries site in Pike County,
Pennsylvania. The DER provided a non-binding preliminary allocation of liability
in connection with the site that assigned the Company a 30 percent share. The
aggregate expense of cleaning up the site is not currently known, but some
preliminary indications suggested a range of $5 million to $15 million. To date,
the DER has sought reimbursement of approximately $500,000 in the aggregate from
the Company and the other potentially responsible parties. In connection with
the February 1986 acquisition of Universal Manufacturing, the Company and the
seller, Farley Northwest Industries, Inc. (the predecessor to Fruit of the Loom,
Inc., hereinafter collectively with such successor referred to as "FOL")
executed an environmental agreement. The Company has informed FOL that it
believes at least 90 percent of any liability it may incur relating to this site
is covered by the indemnification provisions of its environmental agreement with
FOL, and allocation negotiations between the Company and
6
<PAGE>
FOL are continuing. FOL has acknowledged its indemnity obligation and is
currently defending its own and the Company's interest in this site. FOL's
failure to perform its obligations with respect to the Crown Industries site
under the environmental agreement could have a material adverse effect on the
Company.
INDEMNIFICATION OBLIGATIONS FROM RESTRUCTURING. In selling certain
business operations, the Company from time to time has agreed, subject to
various conditions and limitations, to indemnify buyers with respect to
environmental liabilities associated with the acquired operations. The Company's
indemnification obligations pursuant to such agreements did not entail material
expenditures for fiscal 1996, and its indemnification obligations for fiscal
1997 are not expected to entail material expenditures. Future expenditures
pursuant to such agreements could be material, depending upon the nature of
asserted claims subject to indemnification.
ITEM 2. PROPERTIES.
The Company's headquarters and each of its principal facilities for
the continuing operations of the Company are listed below, each of which is
owned by the Company unless indicated as being leased.
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Altavista, Virginia -- 108,000 Motor manufacturing
Blytheville, Arkansas 1998 plus options 114,000 Ballast manufacturing
to 2008
Bridgeport, 1999 100,000 Capacitor manufacturing
Connecticut
Budapest, Hungary 2002 154,000 Motor manufacturing
Fuzhou, People's 2016 100,000 Generator manufacturing
Republic of China
Gainsborough -- 44,000 Motor manufacturing
Lincolnshire,
England
Gallman, Mississippi 1999 plus options 130,000 Wire mill
to 2073
Goodland, Indiana -- 75,000 Component transformer
manufacturing
Huntington, Indiana -- 211,000 Converter, power supply and
specialty ballast
manufacturing
Huntington, Indiana -- 54,000 Technology center
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Approximate
Location Lease Term Size (Sq. Ft.) Principal Use
-------- ---------- -------------- -------------
<S> <C> <C> <C>
Huntsville, Alabama -- 75,000 Electronic ballast
manufacturing
Juarez, Mexico Various 220,000 Motor manufacturing
LaVergne, Tennessee 1999 188,000 Distribution center
Lexington, Tennessee -- 449,000 Motor and generator
manufacturing
Mainaschaff, Germany Various 209,257 Ballast, ignition coil and
transformer manufacturing
Matamoros, Mexico Various 320,000 Ballast, wiring harness and
transformer manufacturing
McMinnville, Tennessee Options to 2021 275,000 Motor manufacturing
Mendenhall, Mississippi 1997 251,600 Fluorescent ballast assembly
and distribution center
Milan, Italy -- 53,000 Ballast manufacturing
Nashville, Tennessee 2005 60,000 Corporate headquarters
New Berlin, Wisconsin 2008 122,400 Drives and systems manufacturing
Owosso, Michigan -- 198,000 Motor manufacturing
Ripley, Tennessee -- 84,000 Motor manufacturing
St. Louis, Missouri 2000 plus option 51,000 Administration, marketing
to 2005 and accounting personnel
Terranuova Bracciolini, -- 149,000 Power supply manufacturing
Italy
</TABLE>
The Company believes its facilities are in satisfactory condition and
are adequate for its present operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is a party to a number of product liability lawsuits, many
of which involve fires allegedly caused by defective ballasts. All of these
cases are being defended by the Company's insurers, and management believes that
its insurers will bear all legal costs and liability, except for applicable
deductibles, and that none of these proceedings individually or in the aggregate
will have a material adverse effect on the
8
<PAGE>
Company. In addition, the Company is frequently named in asbestos-related
lawsuits which do not involve material amounts individually or in the aggregate.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to the stockholders of the Company during
the quarter ended June 30, 1996.
9
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The following table sets forth the high and low sales prices of the
Company's Common Stock during each quarter of fiscal 1995 and 1996:
Quarter Ending High Low
---------------------------------------------------
September 30, 1995 13-3/4 12
December 31, 1995 12-3/8 7-7/8
March 31, 1996 8-3/8 6-7/8
June 30, 1996 10-3/4 7-3/4
September 30, 1994 14-7/8 12-5/8
December 31, 1994 15-1/8 12-3/8
March 31, 1995 14-7/8 12-5/8
June 30, 1995 16-1/2 12-3/8
The Company's Common Stock is traded on the New York Stock Exchange
under the ticker symbol "MAG." As of September 13, 1996, there were
approximately 330 record holders of its Common Stock. No cash dividends have
been paid on the Common Stock.
The Company has not paid any cash dividends on its Common Stock and
does not anticipate paying cash dividends in the near future. The ability of the
Company to pay dividends on its Common Stock is restricted by provisions in the
Company's loan agreements. Under the Company's 1995 bank loan agreement, the
Company may not declare or pay any dividend or make any distribution with
respect to its capital stock (i) unless no event of default exists or would
result from such declaration and payment, and (ii) the ratio of the Company and
certain subsidiaries' Funded Debt to Capitalization (as such terms are defined
in the bank loan agreement) is not more than 0.55 to 1.00. Under the Indenture
relating to the Company's 10-3/4% Senior Subordinated Debentures due 1998, the
Company may not declare or pay any dividend or make any distribution with
respect to its Common Stock (other than through the issuance of Qualified
Capital Stock (as defined in the 10-3/4% Indenture and which includes Common
Stock)), unless after giving effect to such dividend or distribution, (i) the
Company is in compliance with the covenants contained in the 10-3/4% Indenture
and (ii) the aggregate amount of all Restricted Payments (as defined in the 10-
3/4% Indenture) declared or made after September 30, 1991 would not exceed
(a) 50% of the aggregate Consolidated Net Income (as defined in the 10-3/4%
Indenture) of the Company subsequent to September 30, 1991 minus 100% of the
amount of any write-downs, write-offs, other negative revaluations and other
negative extraordinary charges not otherwise reflected in such Consolidated Net
Income, plus (b) the aggregate Net Proceeds (as defined in the 10-3/4%
Indenture) to the Company from the sale of Qualified Capital Stock subsequent to
September 30, 1991 (excluding any such Net Proceeds from the sale of Qualified
Capital Stock by a Company subsidiary and excluding Qualified Capital Stock paid
as a dividend on, or issued upon or in exchange for other Capital Stock (as
defined in the 10-3/4% Indenture) or as a payment of interest on indebtedness of
the Company), plus (c) $25 million.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information called for by Part II, Items 5, 6, 7 and 8, except for
information regarding the Company's dividend policy and related matters, which
is provided in response to Item 5, above, is hereby incorporated by reference to
the Financial Statements and the Report of Ernst & Young LLP, Independent
Auditors of the Company's 1996 Annual Report to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
11
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
current executive officers of the Company.
Name Age Position
---- --- --------
Andrew G. Galef 63 Chairman of the Board of Directors
Ronald N. Hoge 51 President, Chief Executive Officer and
Director
Antonio Canova 54 Executive Vice President
Brian R. Dundon 50 Executive Vice President
John E. Steiner 52 Executive Vice President
Daryl D. David 42 Senior Vice President, Human Resources and
Administration
Alexander Levran, Ph.D. 46 Senior Vice President, Technology
David P. Reiland 42 Senior Vice President and
Chief Financial Officer
James E. Schuster 43 Senior Vice President, Operations
John P. Colling, Jr. 40 Vice President and Treasurer
Thomas R. Kmak 46 Vice President and Controller
Samuel A. Miley 39 Vice President, General Counsel and
Secretary
Robert W. Murray 57 Vice President, Communications and Investor
Relations
Dennis L. Hatfield 48 Assistant Vice President, Facilities and
Environmental Affairs
Mr. Galef has been the Chairman of the Board of Directors since July
1984. He also is the Chairman of the Nominating Committee. Mr. Galef was the
Chief Executive Officer of the Company from September 1993 until June 1996. He
has been President of The Spectrum Group, Inc. ("Spectrum"), a private
investment and management firm, since its incorporation in California in 1978
and its Chairman and Chief Executive Officer since 1987. Prior to the formation
of Spectrum, Mr. Galef was engaged in providing professional interim management
services to companies with serious operating and financial problems. Mr. Galef
is presently a director of Warnaco, Inc., a diversified apparel manufacturer,
and its parent, The Warnaco Group, Inc., and was formerly Chairman of Aviall,
Inc., a company providing aircraft engine refurbishment and related products and
services, and Exide Corporation, a manufacturer of automotive and industrial
batteries. Mr. Galef also currently serves as a director, and was formerly the
Chairman,
12
<PAGE>
of Petco Animal Supplies, Inc. In addition, Mr. Galef serves as chairman or a
director of other privately held Spectrum portfolio companies.
Mr. Hoge was elected as the President and Chief Executive Officer of
the Company in June 1996. He became a Director of the Company in July 1996. From
1993 until May 1996, Mr. Hoge was President of the Aerospace Equipment Systems
Division of Allied Signal, Inc. From 1986 to 1993, he was President and Chief
Executive Officer of Onan Corporation, the generator subsidiary of Cummins
Engine Company. He also served as President of Cummins Brasil S.A. for five
years. From 1971, when he first joined Cummins, until 1978, he served in
progressive staff positions, including Manager of Corporate Responsibilities,
and managed the start-up of Cummins' diesel engine factory in Daventry, England.
Mr. Hoge earned a Bachelor's degree in Mathematics from Amherst College in 1967.
He received his MBA in Marketing from Stanford University in 1970, completing
graduate studies in Public Administration at the University of California,
Berkeley, the same year. Mr. Hoge has been serving as a director of Merrill
Corporation since June 1989. He was also a director of Graco Corporation from
1990 to 1993.
Mr. Canova has been Executive Vice President, with responsibility for
the Company's Power Supplies business, since October 1993. He has served as
managing director of MagneTek S.p.A. in Italy since March 1991. He held the same
position with Plessey S.p.A. from 1988 until March 1991 when Plessey S.p.A. was
acquired by the Company. From 1969 to 1988, Mr. Canova served as general manager
of Plessey S.p.A.
Mr. Dundon has been Executive Vice President, with responsibility for
the Company's Motors and Controls business, since November 1986 when Century
Electric, Inc. was acquired by the Company. Prior to the acquisition Mr. Dundon
had been with Gould Inc. and Century Electric since 1971, serving in various
capacities.
Mr. Steiner has been Executive Vice President, with responsibility for
the Company's Lighting Products business, since November 1995. He served as
Senior Vice President, Strategic Planning and Business Development from January
1995 until November 1995, and as Vice President, Strategic Planning and Business
Development from July 1994 until January 1995. Mr. Steiner has also served as
vice president of the Company's Drives and Magnetics business since November
1993, as vice president and general manager of the Company's Drive Systems
business from October 1990 to November 1993 and as vice president, marketing of
the Company's Systems and Technology business from September 1987 to October
1990. Prior to joining the Company in 1987, Mr. Steiner had been with
Westinghouse Electric Corporation, an electrical products manufacturing company,
where he served in various capacities since 1967.
Mr. David was elected to the Company's new position of Senior Vice
President of Human Resources and Administration in July 1996. From 1994 until
July 1996, Mr. David was Vice President of Human Resources of the Aerospace
Equipment Systems Division of AlliedSignal Inc. From 1992 to 1994, Mr. David was
Avionics Group Director of Human Resources and Section Director of Labor
Relations for AlliedSignal Aerospace. From 1981 to 1992, Mr. David held several
domestic and international human resource posts with General Mills Inc.,
including the position of General Mills' Chief Human Resource Officer for
Operations. Prior to that, Mr. David also served in several human resource
positions with Weyerhaeuser Company.
Dr. Levran has been Senior Vice President, Technology since January
1995. He served as Vice President, Technology from July 1993 until January 1995.
From 1991
13
<PAGE>
to June 1993, Dr. Levran was employed by EPE Technologies, Inc., a subsidiary of
Groupe Schneider, as Vice President of Engineering and Technology with worldwide
engineering responsibilities. From 1981 to 1991, he held various engineering
management positions with Teledyne Inet, a subsidiary of Teledyne, Inc., most
recently as Vice President of Engineering. Dr. Levran received his Ph.D. in
electrical engineering from the Polytechnic Institute of New York in 1981.
Mr. Reiland has been Senior Vice President since July 1996 and Chief
Financial Officer of the Company since July 1988. Mr. Reiland was also an
Executive Vice President of the Company from July 1993 until July 1996 and
Senior Vice President from July 1989 until July 1993. He was Controller of the
Company from August 1986 to October 1993, and was Vice President, Finance from
July 1987 to July 1989. Prior to joining the Company, Mr. Reiland was an Audit
Manager with Arthur Andersen & Co. where he served in various capacities since
1980.
Mr. Schuster was elected to the Company's new position of Senior Vice
President of Operations in July 1996. From October 1995 to July 1996,
Mr. Schuster was Vice President of Operations of the Aerospace Equipment Systems
Division at AlliedSignal Inc. where he was responsible for 11 sites and
approximately 6,000 employees. Before joining AlliedSignal, Mr. Schuster spent
15 years working for the Naval Systems Division of Westinghouse Electric
Corporation in various positions, including his position as Manager of
Operations from July 1988 to July 1995. He was also appointed to Westinghouse
Electric's Corporate Engineering and Manufacturing Advisory Council in 1992.
Mr. Colling has been Vice President of the Company since July 1990,
Treasurer of the Company since June 1989 and was assistant treasurer of the
Company from July 1987 to June 1989. Prior to that, Mr. Colling was the
assistant treasurer of Century Electric, where he served in various capacities
since August 1981.
Mr. Kmak has been Vice President of the Company since October 1993,
Controller since November 1994 and Operations Controller from October 1993 to
November 1994. Mr. Kmak was the vice president, finance of the Company's Motors
and Controls business from November 1986 when Century Electric was acquired by
the Company until July 1992 and served as vice president, operational finance of
the Company's Motors and Controls business from July 1992 until October 1993.
Prior to the acquisition Mr. Kmak had been with Century Electric since 1976,
serving in various capacities.
Mr. Miley joined the Company in February 1990 as Vice President,
General Counsel and Secretary. Prior to that time, he was an attorney with the
law firms of Sheppard, Mullin, Richter & Hampton in Los Angeles, California
(March 1986 to January 1990) and Sidley & Austin in Chicago, Illinois (May 1982
to March 1986).
Mr. Murray joined the Company in April 1987 and currently serves as
the Vice President, Communications and Investor Relations. From 1976 until April
1987 he held various positions with Whittaker Corporation, a diversified
aerospace manufacturing company, most recently as Vice President, Corporate
Communications.
Mr. Hatfield joined the Company in August 1992 as Assistant Vice
President, Facilities and Environmental Affairs. Prior to that he was a
principal in the industrial environmental consulting firms of Patterson Schafer,
Inc. (February 1989 to December 1990) and Schafer Environmental Associates, Inc.
(March 1991 to July 1992).
14
<PAGE>
From July 1985 to February 1989, Mr. Hatfield served as Director of
Environmental Affairs of the Specialty Chemicals Group at Morton Thiokol, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS.
The information called for by Part III, Items 10, 11, 12 and 13, is
hereby incorporated by reference to the Company's definitive Proxy Statement to
be mailed to Stockholders in September 1996, except for information regarding
the Executive Officers of the Company, which is provided in response to Item 10,
above.
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a) Index to Consolidated Financial Statements, Consolidated
Financial Statement Schedules and Exhibits:
Annual
Report To
Form 10-K Stockholders
Page Page
--------- ------------
1. Consolidated Financial Statements
Consolidated Statements of Income for
Years Ended June 30, 1996, 1995 and 1994 17
Consolidated Balance Sheets at June 30,
1996 and 1995 18
Consolidated Statements of Stockholders'
Equity for Years Ended June 30, 1996,
1995 and 1994 20
Consolidated Statements of Cash Flows
for Years Ended June 30, 1996, 1995
and 1994 21
Notes to Consolidated Financial Statements 22
Report of Ernst & Young LLP, Independent
Auditors 39
2. Consolidated Financial Statement Schedules
Report of Ernst & Young, LLP, Independent
Auditors S-1
II -- Valuation and Qualifying Accounts S-2
All other schedules have been omitted since the required information
is not present or is not present in amounts sufficient to require submission of
the schedule, or because the information required is included in the
Consolidated Financial Statements and related notes.
3. Exhibit Index E-1 - E-6
16
<PAGE>
The following exhibits are filed as part of this Annual Report Form 10-K,
or are incorporated herein by reference. Where an exhibit is incorporated by
reference, the number which precedes the description of the exhibit indicates
the documents to which the cross-reference is made.
EXHIBIT NUMBERS DESCRIPTION OF EXHIBIT
- --------------- ----------------------
3.1 (1) Restated Certificate of Incorporation of the Company, as filed
with the Delaware Secretary of State on November 21, 1989.
3.2 (2) By-laws of the Company, as amended and restated.
4.1 (3) Indenture between MagneTek, Inc. and The Bank of New York, as
Trustee, dated as of September 15, 1991 for $75,000,000 in
principal amount of 8% Convertible Subordinated Notes due 2001
including form of Note.
4.2 (4) Form of Indenture between MagneTek, Inc. and Union Bank, as
Trustee, dated as of November 15, 1991 for $125,000,000 Senior
Subordinated Debentures Due 1998 including form of Debenture.
4.3 (5) Specimen Common Stock Certificate.
10.1 (6) 1987 Stock Option Plan of MagneTek, Inc. ("1987 Plan").
10.2 (7) Amendments No. 1 and 2 to 1987 Plan.
10.3 (8) Amendments No. 3 and 4 to 1987 Plan.
10.4 (9) Amendment No. 5 to 1987 Plan.
10.5 (10) Second Amended and Restated 1989 Incentive Stock Compensation
Plan of MagneTek, Inc. ("1989 Plan").
10.6 (9) Amendment No. 1 to 1989 Plan.
10.7 (9) Standard Terms and Conditions Relating to Non-Qualified Stock
Options, revised as of July 24, 1996, pertaining to the 1987
Plan and the 1989 Plan.
10.8 (9) Form of Non-Qualified Stock Option Agreement Pursuant to the
Second Amended and Restated 1989 Incentive Stock Compensation
Plan of the Company.
10.9 (9) Form of Restricted Stock Agreement Pursuant to the Second
Amended and Restated 1989 Incentive Stock Compensation Plan of
the Company.
10.10 (11) MagneTek, Inc. Non-Employee Director Stock Option Plan.
10.11 (6) Senior Executive Medical Expense Reimbursement Plan for the
Company.
17
<PAGE>
10.12 (7) 1991 Director Incentive Compensation Plan of the Company.
10.13 (12) First Amendment to the 1991 Director Incentive Compensation
Plan of the Company.
10.14 (8) 1991 Discretionary Director Incentive Compensation Plan of the
Company.
10.15 (7) Registration Rights Agreement dated as of April 29, 1991 among
the Company, Andrew G. Galef, Frank Perna, Jr. and the other
entities named therein.
10.16 (9) Registration Rights Agreement dated as of June 28, 1996 by and
between MagneTek, Inc. and U.S. Trust Company of California,
N.A.
10.17 (12) Executive Management Agreement dated as of July 1, 1994, by
and between the Company and The Spectrum Group, Inc.
10.18 (13) Amendment dated as of January 25, 1995 to the Executive
Management Agreement between the Company and The Spectrum
Group, Inc.
10.19 (14) Security Agreement dated March 1, 1993 between the Industrial
Development Board of the City of Huntsville (the "Huntsville
IDB") and the Company ("Huntsville Security Agreement").
10.20 (15) First Supplemental Security Agreement dated as of August 1,
1993 by and between the Huntsville IDB and The CIT
Group/Equipment Financing, Inc. ("CIT").
10.21 (15) Second Supplemental Security Agreement dated as of October 1,
1993 by and between the Huntsville IDB and CIT.
10.22 (14) Equipment Lease Agreement of even date with the Huntsville
Security Agreement among the parties thereto.
10.23 (15) Amendment to Equipment Lease Agreement dated as of August 1,
1993 between the Huntsville IDB and the Company.
10.24 (15) Second Amendment to Equipment Lease Agreement dated as of
October 1, 1993 between the Huntsville IDB and the Company.
10.25 (16) Lease Agreement dated as of November 1, 1988 between the
Huntsville IDB and Burnett-Nickelson Investments ("Lease
Agreement") as to which the Company succeeded to the lessee's
obligations.
10.26 (17) First, Second and Third Amendments to Lease Agreement.
10.27 (18) Fourth Amendment to Lease Agreement.
18
<PAGE>
10.28 (17) Bond Guaranty Agreement between MagneTek, Inc., as Guarantor
and First Alabama Bank dated as of February 1, 1993 relating
to the Lease Agreement.
10.29 (17) Indenture dated as of November 1, 1988 relating to First
Mortgage Industrial Revenue Bonds (Burnett-Nickelson Project
Series 1988) between Huntsville IDB and First Alabama Bank, as
Trustee, relating to the Huntsville facility (the
"Indenture").
10.30 (17) First, Second and Third Supplemental Indentures to the
Indenture.
10.31 (18) Fourth Supplemental Indenture to the Indenture.
10.32 (19) Environmental Agreement among the Company, Universal
Manufacturing Corporation and Farley Northwest Industries,
Inc., as amended.
10.33 (19) Letter Agreement dated as of January 9, 1986, between the
Company and Farley Northwest Industries, Inc., pursuant to
Stock Purchase Agreement.
10.34 (19) Tax Agreement dated as of February 12, 1986, between the
Company and Farley Northwest Industries, Inc.
10.35 (19) Agreement dated as of January 9, 1986, between the Company and
Farley/Northwest Industries, Inc. relating to the Totowa
facility.
10.36 (13) Credit Agreement dated as of March 31, 1995 between the
Company, Lenders, NationsBank of Texas, N.A., CIBC Inc., The
First National Bank of Chicago and LTCB Trust Company.
10.37 (20) First Amendment to Credit Agreement dated as of November 13,
1995 between the Company, Lenders, NationsBank of Texas, N.A.,
CIBC Inc., The First National Bank of Chicago and LTCB Trust
Company.
10.38 (9) Second Amendment to Credit Agreement dated as of March 31,
1996 between the Company, Lenders, NationsBank of Texas, N.A.,
CIBC Inc., The First National Bank of Chicago and LTCB Trust
Company.
10.39 (9) Third Amendment to Credit Agreement dated as of May 15, 1996
between the Company, Lenders, NationsBank of Texas, N.A., CIBC
Inc., The First National Bank of Chicago and LTCB Trust
Company.
10.40 (9) Fourth Amendment to Credit Agreement dated as of June 30, 1996
between the Company, Lenders, NationsBank of Texas, N.A., CIBC
Inc., The First National Bank of Chicago and LTCB Trust
Company.
10.41 (21) Lease and Agreement between the City of Blytheville, Arkansas
and the Company, dated as of November 1, 1988.
19
<PAGE>
10.42 (7) First Supplemental Lease and Agreement between City of
Blytheville, Arkansas and the Company dated as of December 1,
1989, for the Blytheville, Arkansas facility.
10.43 (19) Lease on Bridgeport, Connecticut facility of Universal
Manufacturing.
10.44 (9) Lease Agreement dated March 18, 1996 between Fujian Fufa
Company Limited and MagneTek Fuzhou Generator Company Limited.
10.45 (19) Lease on Gallman, Mississippi facility of Universal
Manufacturing.
10.46 (22) Lease of LaVergne, Tennessee facility.
10.47 (18) First Amendment dated August 28, 1991 and Second Amendment
dated February 5, 1993 to Lease on Lavergne, Tennessee
facility.
10.48 (23) Lease of Matamoros, Mexico fluorescent ballast manufacturing
facility dated January 1, 1988.
10.49 (24) Lease on McMinnville, Tennessee facility of Century Electric.
10.50 (19) Lease on Mendenhall, Mississippi facility of Universal
Manufacturing.
10.51 (2) Lease on Nashville, Tennessee headquarters facility dated as
of June 30, 1995.
10.52 (25) Lease of facility in New Berlin, Wisconsin.
10.53 (7) Third Modification of Lease dated as of December 31, 1990, for
the New Berlin, Wisconsin facility.
10.54 (18) Fourth Modification of Lease dated as of February 12, 1993 for
the New Berlin, Wisconsin facility.
10.55 (23) Lease of St. Louis, Missouri administration, marketing and
engineering personnel facility dated January 1, 1988.
10.56 (26) Stock Purchase Agreement dated as of January 9, 1986, between
the Company and Farley/Northwest Industries, Inc., with list
of omitted exhibits and schedules.
10.57 (26) Stock Purchase Agreement dated as of June 20, 1986, between
the Company and Better Coil and Transformer Corporation, with
list of omitted exhibits.
10.58 (27) Purchase Agreement dated as of October 22, 1986, by and among
the Company, Century and certain Securityholders.
10.59 (28) Purchase Agreement dated as of December 15, 1986, between the
Company and all the remaining Securityholders of Century.
20
<PAGE>
10.60 (28) Asset Purchase Agreement dated as of December 30, 1986,
between the Company and Universal Electric.
10.61 (28) Agreement for the Sale of Stock dated as of December 30, 1986,
between the Company and Cooper.
10.62 (2) Asset Purchase Agreement dated as of May 27, 1994, between the
Company and The Louis Allis Company.
10.63 (2) Asset Purchase Agreement dated as of June 17, 1994, among the
Company, MagneTek Controls, Inc. and Controls Acquisition
Corporation.
10.64 (2) Asset Purchase Agreement dated as of October 31, 1994, among
the Company, MagneTek National Electric Coil, Inc. and Rail
Products International, Inc.
10.65 (2) Asset Purchase Agreement dated as of November 8, 1994, between
the Company and MAS Acquiring Corp.
10.66 (2) Purchase and Sale Agreement dated November 18, 1994, by and
among the Company, MagneTek Tempe, Inc., MagneTek Deutschland
Holding GmbH and PTS, Inc.
10.67 (2) Asset Purchase Agreement dated as of March 6, 1995, by and
between the Company and GN Acquisition Partners, L.P.
10.68 (2) Asset Purchase Agreement dated as of March 13, 1995, among the
Company, MagneTek National Electric Coil, Inc. and 800 King
Avenue Acquisition Corp.
10.69 (2) Asset Purchase Agreement dated as of May 31, 1995, between
MagneTek National Electric Coil, Inc. and The Guardian Resin
Corporation.
10.70 (2) Agreement of Sale dated as of June 23, 1995, between General
Signal Corporation and the Company.
10.71 (2) Asset and Stock Purchase Agreement dated as of September 14,
1995, among the Company, MagneTek National Electric Coil, Inc.
and National Electric Coil Company, L.P.
10.72 (9) Sino-American Equity Joint Venture Contract dated December 17,
1995 between Fujian Fufa Company Limited and the Company for
the Establishment of MagneTek Fuzhou Generator Company
Limited.
10.73 (9) Amended and Restated Asset Purchase Agreement dated as of
February 27, 1996 among MagneTek National Electric Coil, Inc.,
the Company, Eastern Electric Apparatus Repair Company, Inc.
and Grand Eagle Companies Inc.
21
<PAGE>
10.74 (9) Stock Purchase Agreement dated as of June 28, 1996 among
MagneTek National Electric Coil, Inc., the Company, Grand
Eagle Companies North America, Inc. and Grand Eagle Companies,
Inc.
10.75 (9) Amendment No. 1 dated as of June 28, 1996 to Amended and
Restated Asset Purchase Agreement among MagneTek National
Electric Coil, Inc., the Company, Eastern Electric Apparatus
Repair Company, Inc. and Grand Eagle Companies Inc. dated as
of February 27, 1996.
10.76 (9) Asset Purchase Agreement dated as of August 30, 1996 between
the Company and Jefferson Electric, Inc.
13 (9) 1996 Annual Report to Stockholders (pp.12-39).
23 (9) Consent of Ernst & Young LLP, independent auditors.
27 (9) Financial Data Schedule.
___________________
(1) Previously filed with the Registration Statement on Form S-3 filed on
August 1, 1991, Commission File No. 33-41854, and incorporated herein by
this reference.
(2) Previously filed with Form 10-K for Fiscal Year ended July 2, 1995 and
incorporated herein by this reference.
(3) Previously filed with Form 10-Q for quarter ended September 30, 1991 and
incorporated herein by this reference.
(4) Previously filed with Amendment No. 1 to Registration Statement filed on
November 8, 1991, Commission File No. 43-43856, and incorporated herein
by this reference.
(5) Previously filed with Amendment No. 1 to Registration Statement filed on
May 10, 1989 and incorporated herein by this reference.
(6) Previously filed with Form 10-K for Fiscal Year ended June 30, 1987 and
incorporated herein by this reference.
(7) Previously filed with Form 10-K for Fiscal Year ended June 30, 1991 and
incorporated herein by this reference.
(8) Previously filed with Form 10-K for Fiscal Year ended June 30, 1992 and
incorporated herein by this reference.
(9) Filed herewith.
(10) Previously filed with Form 10-Q for quarter ended December 31, 1994 and
incorporated herein by this reference.
(11) Previously filed with the Registration Statement on Form S-8 filed on May
17, 1996, Commission File No. 333-04021, and incorporated herein by this
reference.
22
<PAGE>
(12) Previously filed with Form 10-Q for quarter ended March 31, 1994 and
incorporated herein by this reference.
(13) Previously filed with Form 10-Q for quarter ended March 31, 1995 and
incorporated herein by this reference.
(14) Previously filed with Form 10-Q for quarter ended March 31, 1993 and
incorporated herein by this reference.
(15) Previously filed with Form 10-Q for quarter ended September 30, 1993 and
incorporated herein by this reference.
(16) Previously filed with Form 8-K dated January 5, 1990 and incorporated
herein by this reference.
(17) Previously filed with Form 10-K for fiscal year ended June 27, 1993 and
incorporated herein by this reference.
(18) Previously filed with Form 10-K for Fiscal Year ended July 3, 1994 and
incorporated herein by this reference.
(19) Previously filed with Amendment No. 1 to Registration Statement filed on
February 14, 1986 and incorporated herein by this reference.
(20) Previously filed with Form 10-Q for quarter ended December 31, 1995 and
incorporated herein by this reference.
(21) Previously filed with the Registration Statement filed on April 18, 1989
and incorporated herein by this reference.
(22) Previously filed with Form 10-K for Fiscal Year ended July 2, 1989 and
incorporated herein by this reference.
(23) Previously filed with Form 10-K for Fiscal Year ended July 3, 1988 and
incorporated herein by this reference.
(24) Previously filed with Post-Effective Amendment No. 1 to Registration
Statement, filed on August 3, 1987 and incorporated herein by this
reference.
(25) Previously filed with the Registration Statement filed on May 3, 1985 and
incorporated herein by this reference.
(26) Previously filed with Form 10-K for Fiscal Year ended June 30, 1986 and
incorporated herein by this reference.
(27) Previously filed with Form 10-Q for quarter ended September 30, 1986 and
incorporated herein by this reference.
(28) Previously filed with Form 8-K dated December 30, 1986 and incorporated
herein by this reference.
23
<PAGE>
(b) Reports on Form 8-K:
The Company filed no Reports on Form 8-K during the last quarter of the
1996 fiscal year.
(c) Refer to (a) 3 above.
(d) Refer to (a) 2 above.
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 in the City of
Nashville, State of Tennessee, on the 30th day of September, 1996.
MagneTek, Inc.
(Registrant)
/s/ RONALD N. HOGE
-------------------------------------
Ronald N. Hoge
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ ANDREW G. GALEF Chairman of the Board September 30, 1996
- ----------------------------
Andrew G. Galef
/s/ RONALD N. HOGE Chief Executive Officer and September 30, 1996
- ---------------------------- Director (Principal
Ronald N. Hoge Executive Officer)
/s/ DEWAIN K. CROSS Director September 30, 1996
- ----------------------------
Dewain K. Cross
/s/ PAUL J. KOFMEHL Director September 30, 1996
- ----------------------------
Paul J. Kofmehl
/s/ A. CARL KOTCHIAN Director September 30, 1996
- ----------------------------
A. Carl Kotchian
/s/ CROCKER NEVIN Director September 30, 1996
- ----------------------------
Crocker Nevin
/s/ KENNETH A. RUCK Director September 30, 1996
- ----------------------------
Kenneth A. Ruck
/s/ MARGUERITE W. SALLEE Director September 30, 1996
- ----------------------------
Marguerite W. Sallee
/s/ ROBERT E. WYCOFF Director September 30, 1996
- ----------------------------
Robert E. Wycoff
/s/ DAVID P. REILAND Chief Financial Officer September 30, 1996
- ---------------------------- (Principal Financial Officer)
David P. Reiland
/s/ THOMAS R. KMAK Vice President and Controller September 30, 1996
- ---------------------------- (Principal Accounting
Thomas R. Kmak Officer)
25
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We have audited the consolidated financial statements of MagneTek, Inc. as of
June 30, 1996 and 1995, and for each of the three years in the period ended
June 30, 1996, and have issued our report thereon dated August 20, 1996, except
for the second paragraph of Note 4, as to which the date is September 16, 1996
(incorporated by reference elsewhere in this Annual Report on Form 10-K). Our
audits also included the financial statement schedule listed in Item 14(a) of
this Annual Report on Form 10-K. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
St. Louis, Missouri
August 20, 1996, except for the second paragraph of Note 4,
as to which the date is September 16, 1996
S-1
<PAGE>
SCHEDULE II
MAGNETEK INC.
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Additions Deductions Balance
beginning charged to from at end
June 30, 1994 of year earnings Allowance Other(a) of year
- --------------- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for
doubtful $3,986 $2,878 $(2,980) $861 $4,745
receivables
June 30, 1995
- ---------------
Allowance for
doubtful $4,745 $4,099 $(4,249) $(174) $4,421
receivables
June 30, 1996
- ---------------
Allowance for
doubtful $4,421 $5,422 $(4,450) $35 $5,428
receivables
</TABLE>
(a) Represents primarily opening allowances for doubtful accounts balances of
acquired companies and Foreign Translation Adjustments.
S-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>2
<DESCRIPTION>EXHIBIT 10.4 FIFTH AMEND. TO 1987 STOCK OP. PLAN
<TEXT>
<PAGE>
FIFTH AMENDMENT
TO THE
1987 STOCK OPTION PLAN
OF
MAGNETEK, INC.
MAGNETEK, INC., a corporation organized under the laws of the State of
Delaware, hereby adopts this amendment to the 1987 Stock Option Plan of
MagneTek, Inc. (the "Plan") pursuant to Section 7.2 of the Plan, as of the 24th
day of July, 1996.
1. Section 5.3 of the Plan is hereby amended to delete the proviso that
appears between paragraph (c)(iv) and paragraph (d).
2. Section 6.1 of the Plan is hereby amended to provide that the
Committee (as defined in the Plan) shall consist of at least two (2)
Directors.
3. Section 7.1 of the Plan is hereby amended to permit options to be
transferable pursuant to a "domestic relations order," as defined in
the Internal Revenue Code.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.6
<SEQUENCE>3
<DESCRIPTION>EXHIBIT 10.6 FIRST AMEND. TO 1989 STOCK OP. PLAN
<TEXT>
<PAGE>
FIRST AMENDMENT
TO THE
AMENDED AND RESTATED
1989 INCENTIVE STOCK COMPENSATION PLAN
OF
MAGNETEK, INC.
MAGNETEK, INC., a corporation organized under the laws of the State
of Delaware, hereby adopts this amendment to the Amended and Restated 1989
Incentive Stock Compensation Plan of MagneTek, Inc. (the "Plan") pursuant to
Section 12.2 of the Plan, as of the 24th day of July, 1996.
1. The Plan is hereby amended to delete Section 6.4(b).
2. Section 11.1 of the Plan is hereby amended to provide that the
Committee (as defined in the Plan) shall consist of at least two (2)
Directors.
3. Section 12.1 of the Plan is hereby amended to permit options and other
awards that may be granted thereunder to be transferable pursuant to a
"domestic relations order," as defined in the Internal Revenue Code.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.7
<SEQUENCE>4
<DESCRIPTION>EXHIBIT 10.7 1987 STOCK OPTION PLAN OF MAGNETK
<TEXT>
<PAGE>
Exhibit 10.7
1987 STOCK OPTION PLAN
OF
MAGNETEK, INC.
AND
SECOND AMENDED AND RESTATED
1989 INCENTIVE STOCK COMPENSATION PLAN
OF
MAGNETEK, INC.
STANDARD TERMS AND CONDITIONS RELATING TO NON-QUALIFIED OPTIONS
revised as of July 24, 1996
The following standard terms and conditions apply to the Non-Qualified
Options granted under either the 1987 Stock Option Plan of MagneTek, Inc. (the
"1987 Plan") or the Second Amended and Restated 1989 Incentive Stock
Compensation Plan of MagneTek, Inc. (the "1989 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 "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 1987 Plan or the 1989 Plan
relating to the Option as indicated in the Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" shall mean MagneTek, Inc., a Delaware corporation.
"Fair Market Value" of a share of the Company's stock on a given
determination date shall mean: (i) the mean between the highest and lowest sales
prices of a share of the Company's stock on the principal exchange on which
shares of the Company's stock are then trading, if any, on such determination
date, or, if shares were not traded on such date, then on the next preceding
trading day during which a sale occurred, as such prices are quoted in THE WALL
STREET JOURNAL, or (ii) if such stock is not traded on an exchange but is quoted
on NASDAQ or a successor quotation system, (1) the mean between the highest and
lowest sales prices (if the stock is then listed as a National Market Issue
under the NASD National Market System) or (2) the mean between the closing
representative bid and asked prices (in all other cases) for the stock on such
determination date as reported by NASDAQ or such successor quotation system; or
(iii) if such stock is not publicly traded on an exchange and not quoted on
NASDAQ or a successor quotation system, the mean between the closing bid and
asked prices for the stock, on such determination date, as determined in good
faith by
<PAGE>
the Committee; or (iv) if the Company's stock is not publicly traded, the fair
market value established by the Committee acting in good faith.
"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.
"Optionee" shall mean the Employee or Director to whom the Option is
granted under the Applicable Plan.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"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.
In the case of a Director who is not an Employee, Termination of Employment
shall mean the time when the Director ceases to be a Director for any reason,
including, but not by way of limitation, a cessation by resignation, removal,
discharge, death or retirement, but excluding cessations where there is a
simultaneous or prior and continuing employment of the former Director 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 of the stock 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.
2
<PAGE>
SECTION 2.2 - MERGER, ACQUISITION, ETC. OF THE COMPANY*
In the event of the merger or consolidation of the Company with or
into another corporation, or the acquisition by another corporation, person or
group of all or substantially all of the Company's assets or forty percent (40%)
or more of the Company's then outstanding voting stock, or the liquidation or
dissolution of the Company:
(a) If so provided in the relevant agreement relating to a
merger, consolidation, acquisition of assets, liquidation or dissolution,
the Option shall be assumed or an equivalent option substituted by any
successor corporation to the Company.
(b) If no provision is made as set forth in paragraph (a), or in
the event of an acquisition of 40% or more of the Company's then
outstanding voting stock to which paragraph (c) is inapplicable, the Option
will become fully exercisable from and after the date which is (30) days
prior to such event and until the normal expiration of the Option, as to
all the shares covered by the Option.
(c) In the event of an acquisition of 40% or more of the
Company's then outstanding voting stock (other than pursuant to a merger
resulting in the ownership of all of the Company's outstanding Common Stock
by another corporation), if as a result of the transaction the Company's
Common Stock will cease to be traded on a national stock exchange, listed
as a National Market Issue on the National Market System or quoted on the
NASDAQ quotation system, each Option which has not been exercised prior to
the consummation of the transaction shall be converted automatically into
the right to receive, within thirty days of such consummation, 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 transaction.
The foregoing provisions (a) through (c) shall have no application to a merger
in which (A) the Company is the surviving corporation, (B) no person or group
acquires 40% or more of the Company's outstanding voting stock and (C) the
shares of the Company's Common Stock outstanding prior to the merger remain
outstanding thereafter.
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 Agreement.
- -------------------------
* The provisions of this Section 2.2 are effective retroactively and govern
all options to which these terms and conditions apply.
3
<PAGE>
(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 ten (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
(c) The expiration of three (3) 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
(d) The expiration of one (1) year 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 one-year
period; or
(e) The expiration of one (1) year from the date of the Optionee's
death; or
(f) 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 one (1) year
from the date the Option is granted, or in the case of an Optionee who is a non-
employee Director, the Optionee agrees to remain a Director for such one year
period. 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. Further, nothing in these standard terms and conditions, in the Option
Agreement, or in the Applicable Plan shall confer upon any Director any right to
remain a Director.
4
<PAGE>
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 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 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:
(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 of the Company's Common Stock 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 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 of the Company's Common Stock 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
5
<PAGE>
(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 of the Company's Common Stock 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 of the Company's Common Stock 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.
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 of stock 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 of stock 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
6
<PAGE>
(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 SHAREHOLDER
The holder of the Option shall not be, nor have any of the rights or
privileges of, a shareholder 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.
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
7
<PAGE>
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 of stock 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
8
<PAGE>
be given to the Optionee shall be addressed to him at the address given beneath
his name on the 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 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 - AMENDMENT
The Company and the Committee expressly reserve the right to amend,
modify, suspend or terminate these standard terms and conditions; PROVIDED,
HOWEVER, that no such amendment, modification, suspension or termination shall
impair or diminish any rights or increase any obligations of the holder of the
Option without such holder's consent.
9
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.8
<SEQUENCE>5
<DESCRIPTION>EXHIBIT 10.8 NON-QUALIFIED STOCK OP. AGREEMENT
<TEXT>
<PAGE>
MAGNETEK, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
FOR GOOD AND VALUABLE CONSIDERATION, MAGNETEK, INC., a Delaware
corporation, hereby irrevocably grants to the Optionee named below the
non-qualified stock option (the "Option") to purchase any part or all of the
specified number of shares of its $0.01 par value Common Stock upon the terms
and subject to the conditions set forth in this Agreement, at the specified
purchase price per share without commission or other charge. The Option is
granted pursuant to the plan specified below (the "Plan") and the Standard
Terms and Conditions promulgated under such Plan. The terms of the Plan and
such Standard Terms and Conditions are hereby incorporated herein by
reference and made a part of this Agreement. The Committee shall have the
power to interpret this Agreement.
The Plan: Second Amended and Restated 1989 Incentive
Stock Compensation Plan of MagneTek, Inc.
Name of Optionee:
Social Security Number:
Number of Shares covered by Option (subject to lapse
provisions and other limitations on exercisability in
accordance with the terms of the Plan): #_______
Purchase Price Per Share: $_______
Minimum Number of Shares Per Partial Exercise: 100 Shares
The Option shall become exercisable in installments as follows:
Until __________, the Option shall not be exercisable to any degree.
As of ___________, the Option shall become exercisable as to 33 1/3% of the
Shares covered by the Option.
As of __________, the Option shall become exercisable as to an additional
33 1/3% of the Shares covered by the Option.
As of ___________, the Option shall become exercisable as to the remaining
33 1/3% of the Shares covered by the Option.
Date of this Agreement (grant date): ____________
___________________________________
Optionee Signature
MAGNETEK, INC.
Address (please print):
By______________________________ ___________________________________
By______________________________ ___________________________________
___________________________________
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.9
<SEQUENCE>6
<DESCRIPTION>EXHIBIT 10.9 RESTRICTED STOCK AGREEMENT
<TEXT>
<PAGE>
RESTRICTED STOCK AGREEMENT
PURSUANT TO THE
SECOND AMENDED AND RESTATED
1989 INCENTIVE STOCK COMPENSATION PLAN
OF MAGNETEK, INC.
This Restricted Stock Agreement (this "Agreement") is made and
entered into as of the Date of Award indicated below by and between MagneTek,
Inc., a Delaware corporation (the "Company"), and the person named below as
Employee.
WHEREAS, Employee is an employee of the Company and/or one or more
of its subsidiaries; and
WHEREAS, pursuant to the Company's second Amended and Restated 1989
Incentive Stock Compensation Plan (the "Plan"), the committee of the Board of
Directors of the Company administering the Plan (the "Committee") has
approved the award to Employee of the right to purchase shares of the Common
Stock, par value $.01 per share, of the Company (the "Common Stock"), on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
covenants set forth herein, the parties hereto hereby agree as follows:
1. AWARD; CERTAIN TERMS AND CONDITIONS. The Company hereby
awards to Employee, and Employee hereby accepts, as of the Date of Award, the
right to purchase the number of shares of Common Stock indicated below (the
"Restricted Shares") for the Cash Purchase Price per share indicated below
(which shall be equal to at least $.01). The aggregate Cash Purchase Price
shall be paid to the Company promptly following the Date of Award. The
Restricted Shares shall be subject to all of the terms and conditions set
forth in this Agreement, including the restrictions imposed pursuant to
Section 3 hereof; provided, however, that on the first anniversary of the
Date of Award, such restrictions shall terminate in all respects (the
termination of such restrictions with respect to any Restricted Share, for
any reason, shall be referred to herein as the "vesting" of such share).
Employee: [NAME]
Date of Award: [DATE]
Number of shares purchasable: [QUANTITY]
Cash Purchase Price per share: $.01
<PAGE>
2. CONSIDERATION FOR SHARES; METHOD OF PAYMENT.
(a) The consideration for the issuance and sale of Restricted
Shares contemplated hereby may include, in addition to the Cash Purchase
Price per share indicated in Section 1 hereof, consideration in the form of
past services to the Company and/or one or more of its subsidiaries.
(b) The aggregate Cash Purchase Price shall be paid to the Company
in cash or by check payable to the Company. Upon payment to the Company in
full of the aggregate Cash Purchase Price as provided herein, Employee shall
be deemed to have purchased the Restricted Shares effective as of the Date of
Award, and shall be the holder of record.
3. RESTRICTIONS. Until a Restricted Share vests, it shall not be
liable for the debts, contracts or engagements of Employee or successors in
interest nor subject to disposition by transfer, alienation, anticipation,
pledge, encumbrance, assignment or any other means whether such disposition
be voluntary or involuntary or by operation of law by judgment, levy,
attachment, garnishment or any other legal or equitable proceedings
(including bankruptcy), and any attempted disposition thereof shall be null
and void and of no effect.
4. ACCELERATION OF VESTING.
(a) ACCELERATION OF VESTING BY COMMITTEE. The Committee, in its
sole discretion, may accelerate the vesting of any or all of the Restricted
Shares at any time and for any reason.
(b) CERTAIN EVENTS CAUSING ACCELERATION OF VESTING.
Notwithstanding anything to the contrary in this Agreement, the Restricted
Shares shall become fully vested immediately prior to the consummation of any
of the following events:
(i) the liquidation of the Company;
(ii) a merger or consolidation of the Company with or into
another corporation not effected solely to reincorporate the Company in a
different state;
(iii) the acquisition by another corporation or person of 40%
or more of the Company's then outstanding voting stock not effected solely to
reincorporate the Company in a different state; or
(iv) the acquisition by another corporation or person of all
or substantially all of the Company's assets.
2
<PAGE>
(c) ACCELERATION UPON NORMAL RETIREMENT, ETC. Notwithstanding
anything to the contrary in this Agreement, the Restricted Shares shall
become fully vested immediately upon the Employee's normal retirement, death,
total disability or (with the consent of the Committee) early retirement.
5. REPURCHASE OF RESTRICTED SHARES. Notwithstanding anything to
the contrary in this Agreement, if Employee shall cease to be employed by the
Company, a Parent Corporation or a Subsidiary for any reason other than
Employee's normal retirement, death, total disability or (with the consent of
the Committee) early retirement, then, unless the Committee shall determine
otherwise, the Company shall repurchase each then unvested Restricted Share
at a purchase price equal to the Cash Purchase Price per share.
6. PAYMENT OF WITHHOLDING TAXES. If the Company becomes
obligated to withhold an amount on account of any federal, state or local tax
imposed as a result of the sale of the Restricted Shares to Employee pursuant
to this Agreement or the termination of the restrictions imposed upon the
Restricted Shares hereunder, including, without limitation, any federal,
state or other income tax, or any F.I.C.A., state disability insurance tax or
other employment tax (the date upon which the Company becomes so obligated
shall be referred to herein as the "Withholding Date"), then Employee shall
pay such amount (the "Withholding Liability") to the Company on the
Withholding Date in cash or by check payable to the Company. Employee hereby
consents to the Company withholding the full amount of the Withholding
Liability from any compensation or other amounts otherwise payable to
Employee if Employee does not pay the Withholding Liability to the Company on
the Withholding Date, and Employee agrees that the withholding and payment of
any such amount by the Company to the relevant taxing authority shall
constitute full satisfaction of the Company's obligation to pay such
compensation or other amounts to Employee.
7. TAXABLE INCOME AND SECTION 83(b) ELECTION. Employee
understands that the taxable income recognized by Employee as a result of the
award of Restricted Shares hereunder, and the Withholding Liability and
Withholding Date with respect thereto, would be affected by a decision by
Employee to make an election under Section 83(b) of the Internal Revenue Code
(an "83(b) Election") with respect to the Restricted Shares within 30 days of
the Date of Award. Employee understands and agrees that he or she will have
the sole responsibility for determining whether to make an 83(b) Election
with respect to the Restricted Shares, and for properly making such election
and filing the election with the relevant taxing authorities on a timely
basis. Employee will not rely on the Company for any advice in connection
with the decision whether to make, or procedures for making, the 83(b)
Election, and acknowledges that the Company has urged Employee to consult
Employee's own tax advisor with respect to the desirability of and procedures
for making an 83(b) Election with respect to the Restricted Shares. Employee
agrees
3
<PAGE>
to submit to the Company a copy of any 83(b) Election with respect to the
Restricted Shares immediately upon filing such election with the relevant
taxing authority.
8. ESCROW.
(a) Until a Restricted Share vests, (i) the record address of the
holder of record of such Restricted Share shall be c/o the Secretary of the
Company at the address of the Company's principal executive office, (ii) the
stock certificate representing such Restricted Share shall be held in escrow
in the custody of the Secretary of the Company, duly endorsed in blank or
accompanied by a duly executed stock powers, and (iii) such stock certificate
shall contain the following legend:
"THE TRANSFER AND REGISTRATION OF TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN RESTRICTIONS AS PROVIDED IN A
RESTRICTED STOCK AGREEMENT DATED AS OF [DATE]
BY AND BETWEEN THE CORPORATION AND [NAME]."
(b) From and after the date upon which a Restricted Share vests,
the holder of record of such Restricted Share shall be entitled (provided
that Employee shall have paid the Withholding Liability to the Company
pursuant to Section 6 hereof) to receive the stock certificate representing
such Restricted Share, which stock certificate shall not contain the legend
set forth in subsection (a)(iii) above.
9. VOTING: DIVIDENDS. The holder of record of any Restricted
Share shall be entitled to exercise all voting rights with respect to such
share and to receive all dividends or distributions paid or made with respect
thereto.
10. PLAN. The Restricted Shares are being sold pursuant to the
Plan, as in effect on the Date of Award, and are subject to all the terms and
conditions of the Plan, as the same may be amended from time to time;
provided, however, that no such amendment shall deprive Employee, without his
or her consent, of the Restricted Shares or of any of Employee's rights under
this Agreement. Capitalized terms used without definition herein have the
meanings ascribed to them in the Plan. The interpretation and construction
by the Committee of the Plan, this Agreement and such rules and regulations
as may be adopted by the Committee for the purpose of administering the Plan
shall be final and binding upon Employee. Until the Restricted Shares shall
vest or be forfeited, the Company shall, upon written request therefor, send
a copy of the Plan, in its then current form, to the holder of record of the
Restricted Shares.
11. EMPLOYMENT RIGHTS. No provision of this Agreement shall (a)
confer upon Employee any right to continue in the employ of the Company or
any of its affiliates, (b) affect the
4
<PAGE>
right of the Company or any of its affiliates to terminate the employment of
Employee, with or without cause, or (c) confer upon Employee any right to
participate in any employee welfare or benefit plan or other program of the
Company or any of its affiliates other than the Plan. EMPLOYEE HEREBY
ACKNOWLEDGES AND AGREES THAT THE COMPANY OR ANY OF ITS AFFILIATES MAY
TERMINATE THE EMPLOYMENT OF EMPLOYEE AT ANY TIME AND FOR ANY REASON, OR FOR
NO REASON, UNLESS EMPLOYEE AND THE COMPANY OR ANY OF ITS AFFILIATES ARE
PARTIES TO A WRITTEN EMPLOYMENT AGREEMENT OR LETTER THAT EXPRESSLY PROVIDES
OTHERWISE.
12. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Tennessee.
IN WITNESS WHEREOF, the Company and Employee have duly executed
this Agreement as of the Date of Award.
MAGNETEK, INC.
By:
--------------------------------------
[NAME]
-----------------------------------------
Signature
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.16
<SEQUENCE>7
<DESCRIPTION>EXHIBIT 10.16 REGISTRATION RIGHTS AGREEMENT
<TEXT>
<PAGE>
[EXECUTION COPY]
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
BY AND BETWEEN
MAGNETEK, INC.
AND
U.S. TRUST COMPANY OF CALIFORNIA, N.A.
Dated as of June 28, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS.................................................... 1
SECTION 2. REQUIRED REGISTRATION.......................................... 3
(a) Shelf Registration Rights .......................................... 3
(b) Piggyback Registration.............................................. 3
(c) Duration of Registration............................................ 4
SECTION 3. LIMITATIONS ON TRANSFERS....................................... 4
SECTION 4. INTERRUPTIONS OF CONTINUOUS REGISTRATION....................... 5
(a) Permitted Interruptions ............................................ 5
(b) Holdback Agreements ................................................ 6
(c) Cessation of Offers ................................................ 6
SECTION 5. REGISTRATION PROCEDURES ....................................... 7
(a) State Law Compliance................................................ 7
(b) Underwritten Offering .............................................. 7
(c) Confidentiality .................................................... 8
(e) Information Regarding Pension Plan.................................. 8
SECTION 6. NEGOTIATED TRANSFERS........................................... 8
SECTION 7. EXPENSES OF REGISTRATION....................................... 9
SECTION 8. INDEMNIFICATION ............................................... 9
(a) Indemnification by the Company...................................... 9
(b) Indemnification by Holders of Registrable Securities................ 10
REGISTRATION RIGHTS AGREEMENT
i
<PAGE>
(c) Delivery of Prospectus.............................................. 10
(d) Conduct of Indemnification Proceedings.............................. 10
(e) Contribution........................................................ 11
SECTION 9. GENERAL PROVISIONS............................................. 12
(a) Succession.......................................................... 12
(b) Termination......................................................... 12
(c) Amendments and Waivers ............................................. 12
(d) Notice.............................................................. 12
(e) Governing Law....................................................... 13
(f) Counterparts......................................................... 14
(g) Complete Agreement .................................................. 14
(h) Headings; Interpretation............................................. 14
(i) Gender and Number.................................................... 14
(j) No Third Party Beneficiaries......................................... 14
(k) Cooperation.......................................................... 14
(l) Binding Effect, Assignment........................................... 14
REGISTRATION RIGHTS AGREEMENT
ii
<PAGE>
This REGISTRATION RIGHTS AGREEMENT is entered into as of June 28, 1996,
by and between MagneTek, Inc., a Delaware corporation (the "COMPANY"), and
U.S. Trust Company of California, N.A., a national banking association, in
its capacity as duly appointed and acting investment manager (the "MANAGER")
of a segregated account held in the trust (the "TRUST") created under the
MagneTek, Inc. FlexCare Plus Retirement Pension Plan (the "PENSION PLAN,"
which term, as used herein, shall include the Manager acting on behalf of the
Pension Plan and the Trust), for the account and on behalf of the Pension
Plan (which shall thereby be deemed a party to this Agreement). Capitalized
terms used and not otherwise defined herein shall have the respective
meanings set forth in SECTION 1.
RECITALS:
WHEREAS, the Company has agreed, subject to the satisfaction of certain
regulatory and other conditions, to contribute 750,000 shares of Common Stock
to the Trust; and
WHEREAS, such shares of Common Stock immediately following such
contribution will be held in a single segregated account in the Trust (the
"SEGREGATED ACCOUNT"); and
WHEREAS, the Manager has been appointed as a "fiduciary" of the Pension
Plan, as defined in Section 3(21) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), with the authority to act on behalf of the
Pension Plan with respect to all assets held in the Segregated Account; and
WHEREAS, the Company has agreed to grant the Manager certain
registration rights with respect to shares of Common Stock held in the
Segregated Account, on the terms and subject to the conditions herein set
forth; and
WHEREAS, the Manager has full power and authority to execute and deliver
this Agreement for the account and on behalf of the Pension Plan and to bind
the Pension Plan;
NOW, THEREFORE, in consideration of the mutual covenants and obligations
set forth in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
AGREEMENT:
Section 1. DEFINITIONS.
In addition to those terms that are defined in the preamble hereto, the
following terms shall have the following meanings as used in this Agreement:
"AFFILIATE" means with respect to any Person, any other Person (i)
controlling, controlled by or under common control with such Person or (ii)
who is a director, officer or employee or a former director, officer or
employee of such Person.
REGISTRATION RIGHTS AGREEMENT
1
<PAGE>
"AGREEMENT" means this Registration Rights Agreement.
"BLACKOUT PERIOD" means (i) any holdback period during which Transfers
are not permitted by operation of SECTION 4(b) and (ii) the period of time
during which Transfers are not permitted by operation of SECTION 3(a).
"BOARD OF DIRECTORS" means the Board of Directors of the Company and any
authorized committee thereof.
"BUSINESS DAY" means any day on which the New York Stock Exchange is
open for trading.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" means the Company's Common Stock, par value $.01 per
share.
"COMPANY" is defined in the preamble.
"ERISA" is defined in the recitals.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FORM S-3" means Form S-3 as promulgated by the SEC or any successor
form that is substantially similar thereto.
"INTERRUPTION NOTICE" is defined in SECTION 4(a).
"ISSUER" means, initially, the Company, and thereafter, each successor
issuer as described in SECTION 9(a).
"NEGOTIATED TRANSFER" is defined in SECTION 6(a).
"PERMITTED INTERRUPTION" is defined in SECTION 4(a).
"PERSON" means an individual, partnership, corporation, trust or
unincorporated organization, or a government, or agency or political
subdivision thereof.
"PROSPECTUS" means the prospectus included in any Registration
Statement, as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and all other amendments
and supplements to the Prospectus, including post-effective amendments and
all material incorporated by reference in such Prospectus.
"REGISTERED TRANSFER" is defined in SECTION 6(b).
"REGISTRABLE SECURITIES" means all of the shares of Common Stock
contributed by the Company to the Pension Plan as described in the recitals
hereto and any Common Stock of the Company issued in respect thereof or in
exchange or replacement for the Common Stock so
REGISTRATION RIGHTS AGREEMENT
2
<PAGE>
contributed; PROVIDED, HOWEVER, that a security ceases to be a Registrable
Security upon its Transfer pursuant to Sections 3 or 6 hereof.
"REGISTRATION" means the registration contemplated by SECTION 2 hereof,
as the same may be delayed, interrupted or resumed.
"REGISTRATION STATEMENT" means any registration statement of the Company
in a Registration which covers any of the Registrable Securities pursuant to
the provisions of SECTION 2 of this Agreement, including the Prospectus,
amendments and supplements to such Registration Statement, post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.
"RULE 144" means Rule 144 under the Securities Act, or any successor or
similar rule.
"RULE 415" means Rule 415 under the Securities Act, or any successor or
similar rule.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"SHELF REGISTRATION STATEMENT" is defined in SECTION 2(a).
"TRANSFER" means any sale, transfer or other disposition (including any
pledge and any disposition upon the foreclosure of any pledge) or any
agreement to do any of the foregoing.
Section 2. REQUIRED REGISTRATION.
(a) SHELF REGISTRATION RIGHTS. Subject to SECTION 4(b), as promptly as
reasonably practicable after the date hereof, the Company shall use
reasonable efforts to effect the Registration of all of the Registrable
Securities on a continuous basis under Rule 415 by preparing and filing with
the SEC a Registration Statement on Form S-3 (the "SHELF REGISTRATION
STATEMENT"); provided, however, that if, prior to the effective date of such
Registration, circumstances arise which would, after such date, constitute a
Permitted Interruption, the Company shall be entitled to delay the
Registration for the period of such Permitted Interruption. The Company
shall use reasonable efforts to remain eligible to register its securities on
Form S-3, including, without limitation, remaining current in any required
filings under the Exchange Act.
(b) PIGGYBACK REGISTRATION. In the event the Company proposes to make
an underwritten offering of newly-issued Common Stock, the Company shall
provide the Manager with reasonable notice thereof and an opportunity to
include therein Registrable Securities, PROVIDED, HOWEVER, that (i) no
Registrable Securities shall be included therein if, in the opinion of the
underwriters, their inclusion would impede the consummation of the primary
shares proposed to be included therein by the Company, and (ii) no greater
number shall be included than so approved by the underwriters as not impeding
such primary offering. The Company shall not grant registration rights after
the date hereof and before the expiration of the aforesaid piggyback rights
that are equal or superior in priority to those granted herein. The
piggyback registration
REGISTRATION RIGHTS AGREEMENT
3
<PAGE>
rights in this Section 3(b) shall expire on the date that is thirty-six (36)
months after the date of this Agreement.
(c) DURATION OF REGISTRATION. The Company shall use reasonable efforts
(subject to any Permitted Interruption) to cause the Registration to remain
in effect until the date that is thirty-six months from the date of this
Agreement.
(d) Under the circumstances set forth in Section 4(a)(i), in the event
the Company is required to invoke such Section for a period longer than
ninety (90) days, then after the expiration of such 90-day period, the
Company shall use its reasonable efforts to effect the registration of the
portion (but no less than 50% of the Registrable Securities outstanding on
the date hereof, as adjusted to reflect any recapitalization or stock split)
of the Registrable Securities indicated in a request from the manager
submitted prior to thirty-three (33) months from the date hereof. The
Company shall use reasonable efforts to effect such registration within
thirty (30) days of receipt of such request and to maintain such registration
effective for the period, not to exceed 90 days, indicated in the plan of
distribution.
Section 3. LIMITATIONS ON TRANSFERS.
(a) The Pension Plan shall not make any Transfer of any Registrable
Securities other than pursuant to (i) the Shelf Registration Statement in
accordance with the plan of distribution described therein, (ii) Rule 144,
(iii) a Transfer to the Company or a wholly-owned direct or indirect
subsidiary of the Company pursuant to a self-tender offer or otherwise, (iv)
a Transfer in response to a tender offer permitted under SECTION 3(c) below,
(v) a Negotiated Transfer permitted under SECTION 6 below or (vi) a Transfer
pursuant to a merger or consolidation in which the Company is a constituent
corporation. All such Transfers shall in addition be subject to the
provisions of this Section 3 and all other applicable provisions of this
Agreement.
(b) The Manager shall provide the Company with a notice of a proposed
Transfer within a reasonable period of time before such proposed Transfer.
Such notice shall state (i) the section of this Agreement pursuant to which
the Pension Plan proposes to Transfer Registrable Securities, (ii) the
maximum number of shares that the Pension Plan proposes to Transfer and (iii)
whether the Transfer or Transfers will occur on a date specified in such
notice or during a period of time specified in the notice. Each notice of a
proposed Transfer pursuant to this SECTION 3(b) shall be delivered a
reasonable period of time before such proposed Transfer and, in any event, as
to (x) Transfers under the Shelf Registration Statement or Rule 144, not less
than two Business Days before such proposed Transfer, and (y) Transfers under
SECTION 6, not less than 10 Business Days before such proposed Transfer. The
Manager shall establish, to the reasonable satisfaction of the Company, that
such proposed Transfer is in compliance with ERISA, federal and state
securities laws and regulations and other applicable laws and regulations.
Notwithstanding the foregoing, the Manager shall not effect any such Transfer
if the Company's legal counsel advises the Company and the Manager in writing
that such Transfer would constitute a "prohibited transaction" (as described
in Section 4975 of the Code), unless the Pension Plan establishes to the
reasonable satisfaction of the Company that an exemption from such Section is
available.
REGISTRATION RIGHTS AGREEMENT
4
<PAGE>
(c) Notwithstanding the provisions of this Agreement to the contrary,
the Manager may effect a Transfer by tendering all or any portion of the
Registrable Securities into a BONA FIDE exchange offer, a tender offer or a
request or invitation for tenders (as such terms are used in Sections 14(d)
or 14(e) of the Exchange Act and the rules and regulations of the SEC
thereunder) for Common Stock.
(d) No Transfer of Registrable Securities in violation of this
Agreement shall be made or recorded on the books of the Company, and any such
attempted Transfer shall be void and of no effect. Subject to SECTION 3(e)
below, each certificate representing the Registrable Securities shall
conspicuously bear legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW AND, UNLESS SO
REGISTERED, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
REGISTRATION RIGHTS AGREEMENT, DATED AS OF JUNE 28, 1996 BY AND
BETWEEN THE ISSUER OF SUCH SECURITIES (THE "COMPANY") AND U.S.
TRUST COMPANY OF CALIFORNIA, N.A. THAT CONTAINS, AMONG OTHER
THINGS, CERTAIN RESTRICTIONS ON THE TRANSFER OF SUCH SECURITIES. A
COPY OF SUCH REGISTRATION RIGHTS AGREEMENT WILL BE FURNISHED
WITHOUT CHARGE BY THE COMPANY TO THE HOLDER HEREOF UPON WRITTEN
REQUEST.
(e) The Company will instruct its transfer agent that the legends set
forth in SECTION 3(d) shall be removed upon the Pension Plan's Transfer of
shares of Common Stock if such Transfer is made in accordance with all
applicable provisions of this Agreement; PROVIDED, HOWEVER, that if such
Transfer is a Negotiated Transfer that is not registered under the Securities
Act, the first legend shall remain on the certificates representing such
shares until such time as the restrictions set forth in such legend cease to
be applicable.
Section 4. INTERRUPTIONS OF CONTINUOUS REGISTRATION.
(a) PERMITTED INTERRUPTIONS. The Company shall be entitled, effective
immediately upon notice given in conformity with SECTION 9(d) (an
"INTERRUPTION NOTICE"), to require the Pension Plan to cease to make any
offers or sales of the Registrable Securities under any Registration
Statement then in effect in the event that:
REGISTRATION RIGHTS AGREEMENT
5
<PAGE>
(i) the Company is no longer entitled to maintain a Registration
on Form S-3 under Rule 415;
(ii) the Company determines, as evidenced by a certificate of two
of the Company's executive officers, in its good faith and reasonable
judgment, that the offering of any Registrable Securities would (x)
materially impede, delay or interfere with any proposed financing, offer or
sale of securities, acquisition, corporate reorganization or other
significant transaction involving the Company, (y) require disclosure of
material, nonpublic information not otherwise proposed to be disclosed or (z)
conflict with material business plans of the Company in a manner not in the
best interests of the Company. In each such case the interruption shall not
exceed 90 days from the date the Company makes such determination;
(iii) the Company has initiated bona fide discussions with an
underwriter regarding the sale of its securities in a registered primary
public offering and in such underwriter's opinion, the continuation of offers
and/or sales in the Registration would have a material adverse effect on such
offering under discussion (in which case the interruption may not exceed 90
days from the Interruption Notice); or
(iv) at any time the Company would be required, in order to
maintain the effectiveness of the Registration Statement, to obtain audited
financial statements not being prepared independently of the Registration,
unless the Pension Plan undertakes to pay the Company's expenses in obtaining
the requisite financial statements (in which case the interruption shall
terminate when the requisite financial statements are available).
Each of the
foregoing events or any combination thereof shall be hereinafter referred to
as a "PERMITTED INTERRUPTION." In no event (other than pursuant to clause
4(a)(i)) shall the Manager be required to cease offers and sales under the
Registration Statement for more than an aggregate of six months in any
consecutive twelve-month period pursuant to Permitted Interruptions.
(b) HOLDBACK AGREEMENTS. In the event the managing underwriter in any
registration effected by the Company that gives rise to a Permitted
Interruption so requests, the Manager will agree not to effect any public
sale or distribution of the shares of Registrable Securities held by them
(including a sale pursuant to Rule 144) for a period up to 180 days following
the effective date of such registration that so gives rise to a Permitted
Interruption.
(c) CESSATION OF OFFERS. The Manager hereby agrees that, upon receipt
of any notice (including any Interruption Notice) from the Company of:
(i) any Permitted Interruption;
(ii) any request by the SEC for amendments or supplements to a
Registration Statement or Prospectus or for additional information;
(iii) the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose;
REGISTRATION RIGHTS AGREEMENT
6
<PAGE>
(iv) the representations and warranties of the Company made in
any underwriting agreement relating to the Registration ceasing to be true
and correct in any material respect;
(v) the receipt by the Company of any notification with respect
to the suspension of the qualification of any Registrable Securities
registered in such Registration for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose (in which case
the cessation of sales shall pertain only to the applicable jurisdiction);
(vi) the happening of any event which makes any statement made in
a Registration Statement, Prospectus or any document incorporated therein by
reference untrue in any material respect or which requires the making of any
changes in any such Registration Statement or Prospectus so that they will
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading; or
(vii) the Company's reasonable determination that a post-effective
amendment to a registration statement would be appropriate;
that the Manager will forthwith discontinue disposition of any Registrable
Securities covered by such Registration Statement until such Pension Plan's
receipt of any required supplemental or amended materials or of advice in
writing that use of the applicable Prospectus may be resumed. In such event,
the Company will use its reasonable efforts promptly to correct or supplement
the Registration Statement, to obtain the lifting of any stop order or
otherwise to remove the circumstances preventing the Manager from continuing
to make offers and sales under the Registration Statement, subject to the
duration provided in SECTION 4 of any Permitted Interruption.
Section 5. REGISTRATION PROCEDURES.
(a) STATE LAW COMPLIANCE. The Company shall use reasonable efforts to
cause the Registrable Securities covered by such Registration to be
registered in a reasonable number of jurisdictions as requested by the
Manager, provided that the Company shall not be obligated to file a general
consent to service of process or to qualify to do business as a foreign
corporation or otherwise to subject itself to taxation in connection with any
such registration.
(b) UNDERWRITTEN OFFERING. If any of the Registrable Securities
covered by the Registration are to be sold in an underwritten offering, the
investment banker or investment bankers and manager or managers that will
administer the offering will be selected by the Manager; PROVIDED, HOWEVER,
that such investment bankers and managers must be reasonably satisfactory to
the Company. The Company will enter into such agreements (including an
underwriting agreement) and take all such other actions reasonably necessary
in connection therewith in order to expedite or facilitate the disposition of
such Registrable Securities, and in such connection:
REGISTRATION RIGHTS AGREEMENT
7
<PAGE>
(i) make such representations and warranties to the underwriters
in form, substance and scope as are customarily made by stockholders to
underwriters in underwritten offerings and confirm the same if and when
requested;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance) shall be
reason ably satisfactory to the managing underwriter and the Pension Plan)
addressed to the Pension Plan and the underwriters, if any, covering the
matters customarily covered in opinions requested in underwritten offerings
and such other matters as may be reasonably requested by such holders and
underwriters;
(iii) enter into an indemnity agreement in form, scope and
substance as is customary in underwritten offerings;
(iv) obtain "cold comfort" letters and updates thereof as
appropriate from the Company's independent certified public accountants
addressed to the underwriters, if any, such letters to be in customary form
and covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with underwritten offerings (provided
that no more than one such cold comfort letter (and updates thereof) shall be
required to be provided at Company expense); and
(v) deliver such documents and certificates as may be reasonably
requested by the Pension Plan and the managing underwriter, if any.
(c) CONFIDENTIALITY. Each of the parties will treat all notices of
proposed Transfers and all notices pursuant to SECTION 4(c) received from the
other party with the strictest confidence and will not disseminate such
information. Nothing herein shall be construed to require Company or any of
its Affiliates to make any public disclosure of information at any time.
(d) INFORMATION REGARDING PENSION PLAN. The Manager shall furnish to
the Company such information regarding the Pension Plan's holdings of Common
Stock and the proposed manner of distribution thereof and such other
information as the Company may reasonably request and as shall be required in
connection with the Registration and with any qualification under state law
referred to in SECTION 5(a). The Company agrees that it will furnish to the
Manager the number of prospectuses, offering circulars or other documents, or
any amendments or supplements thereto, incident to such qualification under
state law referred to in this SECTION 5 as the Pension Plan from time to time
may reasonably request.
Section 6. NEGOTIATED TRANSFERS.
(a) The Manager shall deliver to Company a written notice that the
Manager proposes to make a Transfer of Registrable Securities pursuant to a
negotiated transaction or series of related transactions with one or more
transferees (each such transaction or series of related transactions, whether
registered or not, being referred to herein collectively as a "NEGOTIATED
TRANSFER"). Each notice of a proposed Negotiated Transfer shall be delivered
a reasonable period of time before the proposed Transfer and, in any event,
not less than 10 Business Days before the proposed commencement of such
proposed Transfer. Each notice of a proposed Negotiated
REGISTRATION RIGHTS AGREEMENT
8
<PAGE>
Transfer shall specify the approximate number of Registrable Securities
proposed to be Transferred, the proposed timetable for the transaction,
whether the transfer will be made pursuant to the Shelf Registration
Statement, and the anticipated per share price for such Transfer. If the
Registrable Securities subject to any Negotiated Transfer are not registered
under the Securities Act, the Pension Plan shall, prior to effecting such
Negotiated Transfer, cause each transferee in such Negotiated Transfer to
represent and warrant to the Pension Plan and Company in writing that (i)
such transferee is acquiring such Registrable Securities for its own account,
or for one or more accounts, as to each of which such transferee exercises
sole investment discretion, for investment purposes only and not with a view
to, or for resale in connection with, any distribution (within the meaning of
the Securities Act), (ii) such transferee has such knowledge and experience
in financial and business matters as to be capable of evaluating the merits
and risks of an investment in the Registrable Securities, and (iii) such
transferee acknowledges that such Transfer has not been and will not be
registered under the Securities Act or any state securities law and such
Registrable Securities may not be resold unless registered under the
Securities Act or unless such resale is exempt therefrom.
(b) Unless approved in advance in writing by the Company, which may
withhold such approval in its discretion, the Manager shall not make a
Negotiated Transfer to any one Person (or group of related Persons) if such
Person (or group of related Persons) is, or as a result of such Negotiated
Transfer will be (to the knowledge of the Pension Plan after reasonable
inquiry), the beneficial owner, as defined for purposes of Section 13(d) of
the Exchange Act (or any successor thereto), of more than 5% of Company's
outstanding Common Stock.
(c) The Company shall make available members of the management of the
Company and its Affiliates for such assistance as is reasonably requested by
the Manager and its counsel in selling efforts relating to any Negotiated
Transfer.
Section 7. EXPENSES OF REGISTRATION.
The Company will bear all expenses of the Registration (other than
underwriting discounts and commissions and brokerage commissions and fees, if
any), including, without limitation, registration fees and legal and
accounting fees (subject to SECTION 4 regarding audited financial statements
and SECTION 5 regarding comfort letters) incurred by the Company in
connection with any such Registration and amendments or supplements in
connection therewith; PROVIDED, HOWEVER, that the Company will not be
required to reimburse the Manager for attorneys' fees incurred hereunder
exceeding $25,000 (plus any reasonably incurred out-of-pocket expenses
incurred by such counsel) incurred in any calendar year or after 36 months
from the date hereof.
Section 8. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless, to the full extent permitted by law, each of the Pension
Plan, the Trust, the Manager and its agents against all losses, claims,
damages, liabilities and expenses caused by any untrue or alleged untrue
statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except
REGISTRATION RIGHTS AGREEMENT
9
<PAGE>
insofar as the same are caused by or contained in any information furnished
in writing to the Company by such Person or its agents or any underwriter
thereof expressly for use therein. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of
the Securities Act) to the same extent as provided above with respect to the
indemnification of the Pension Plan, the Trust, the Manager and its agents,
if requested. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution to the same extent
as provided above with respect to information so furnished in writing by such
Persons specifically for inclusion in any Prospectus or Registration
Statement.
(b) INDEMNIFICATION BY HOLDERS OF REGISTRABLE SECURITIES. Each of the
Pension Plan, the Trust and the Manager severally agrees to indemnify, to the
full extent permitted by law, the Company, its directors and officers and
each Person who controls the Company (within the meaning of the Securities
Act) against any losses, claims, damages, liabilities and expenses caused by
any untrue statement of a material fact or any omission of a material fact
required to be stated in any Registration Statement or Prospectus or
preliminary prospectus or necessary to make the statements therein (in the
case of a Prospectus, in the light of the circumstances under which they were
made) not misleading, to the extent, but only to the extent, that such untrue
statement or omission is contained in any information or affidavit so
furnished in writing by such Person specifically for inclusion in such
Registration Statement or Prospectus. In no event shall the liability of (i)
the Pension Plan or the Trust hereunder be greater in amount than the dollar
amount of the proceeds received by the Pension Plan upon the sale of the
Registrable Securities giving rise to such indemnification obligation or (ii)
of the manager hereunder be greater in amount than the aggregate fees
received by the Manager to date in connection with the Trust.
(c) DELIVERY OF PROSPECTUS. The indemnification provisions in SECTIONS
8(A) and (B) above are subject to the condition that, insofar as they relate
to any untrue statement (or alleged untrue statement) or omission (or alleged
omission) made in a preliminary prospectus or prospectus but eliminated or
remedied in the amended prospectus on file with the SEC at the time the
registration statement becomes effective or in any amended prospectus filed
with the SEC pursuant to Rule 424(b) or 424(c) (the "Final Prospectus"), such
indemnity provisions shall not inure to the benefit of any underwriter, the
Pension Plan, the Trust, the Manager or its agents, if the Company has
previously delivered copies of such Final Prospectus to such underwriter, the
Pension Plan, the Trust, the Manager or its agents and if a copy of the Final
Prospectus was not furnished by such underwriter, the Pension Plan, the
Trust, the Manager or its agents, as the case may be, to the Person asserting
the loss, liability, claim or damage prior to or concurrently with the sale
of a Registrable Security to such Person.
(d) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the indemnifying
party of any claim with respect to which it seeks indemnification and (ii)
permit such indemnifying party to assume the defense of such claim with
counsel reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER,
that any Person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim, but
the fees and expenses of counsel shall be at the
REGISTRATION RIGHTS AGREEMENT
10
<PAGE>
expense of such Person unless (a) the indemnifying party has agreed to pay
such fees or expenses, or (b) the indemnifying party shall have failed to
assume the defense of such claims and employ counsel reasonably satisfactory
to such Person or (c) in the reasonable judgment of any such Person, based
upon advice of such Person's counsel, a conflict of interest may exist
between such Person and the indemnifying party with respect to such claims
(in which case, if the Person notifies the indemnifying party in writing that
such Person elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim on behalf of such Person). If such defense is not
assumed by the indemnifying party, the indemnifying party will not be subject
to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld or delayed). No indemnifying party
will consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to the indemnified party of a release from all liability in respect
to such claim or litigation. An indemnifying party who is not entitled to,
or elects not to, assume the defense of a claim will not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified by
such indemnifying party with respect to such claim, unless in the opinion of
counsel to such Person a conflict of interest exists between such Person and
another indemnified Person with respect to such claim.
(e) CONTRIBUTION. If the indemnification provided for in this SECTION
8 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified party in connection
with the actions which resulted in such losses, claims, damages, liabilities
or expenses, as well as any other relevant equitable considerations. The
relative fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been made by,
or relates to information supplied by, such indemnifying party or indemnified
party, and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action. The amount paid or payable by
a party as a result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include, subject to the limitations set
forth in SECTION 8(D) hereof, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this SECTION 8(e) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this SECTION 8(e), in no event
shall (i) the Pension Plan be required to contribute any amount in excess of
the amount by which the total price at which the Registrable Securities sold
by the Pension Plan and distributed to the public were offered to the public
exceeds the amount of damages which such holder has otherwise been required
to pay by reason of such untrue or alleged untrue statement or omission or
alleged omission or (ii) the Manager hereunder be required to contribute any
amount in excess of the
REGISTRATION RIGHTS AGREEMENT
11
<PAGE>
aggregate fees received to date by the Manager in connection with the Trust.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
Section 9. GENERAL PROVISIONS.
(a) SUCCESSION. In the event that the Registrable Securities are to be
converted into or exchanged for (or become the right to receive) securities
of an issuer other than the Person who is then Issuer hereunder in connection
with any transaction to which such Issuer is a party, such Issuer shall cause
the issuer of such securities to agree, effective as of such conversion or
exchange, that all rights, obligations and restrictions of Issuer set forth
in this Agreement shall continue to apply to such securities. As of the time
of such conversion or exchange, subject to any Blackout Period, such issuer
shall be bound by this Agreement and shall succeed to all rights,
restrictions and obligations of Issuer set forth in this Agreement, all
references to Issuer herein shall thereafter be deemed to be references to
such issuer, and the predecessor Issuer shall be released from all
obligations under this Agreement except for any obligations under SECTION 8
with respect to any registration of securities issued by such Issuer. To
evidence the foregoing, prior to the time of such conversion or exchange, the
Issuer may execute, and cause such issuer to execute, a Succession Agreement
setting forth such issuer's obligations pursuant to this SECTION 9. Upon
request, the Manager shall acknowledge and agree to any such Succession
Agreement as set forth therein. To the extent required and permissible under
applicable law, as soon as reasonably practicable after such conversion or
exchange, such issuer shall file with the SEC an amendment to the Shelf
Registration Statement, if any, then in effect to ensure that such Shelf
Registration Statement shall continue to apply to such securities.
(b) TERMINATION. All rights, restrictions and obligations of Company
and the Pension Plan, except with respect to any rights and obligations under
SECTION 8, shall terminate and this Agreement shall have no further force and
effect on the earlier of the date set forth in SECTION 3(b) and the date the
Pension Plan no longer holds any Registrable Securities.
(c) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented
except by a writing signed by Company and the Manager.
(d) NOTICE. Each notice relating to this Agreement shall be in writing
and shall be delivered in person, by overnight air carrier, by registered or
certified mail, by facsimile transmission or by telex, to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice, provided that notices of a change of address shall
be effective only upon receipt thereof):
REGISTRATION RIGHTS AGREEMENT
12
<PAGE>
IF TO COMPANY:
MagneTek, Inc.
P.O. Box 290159
26 Century Boulevard
Nashville, Tennessee 37229-0159
Attention: John P. Colling, Jr.
Telecopy No.: (615) 316-5192
WITH A COPY TO:
Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, California 90071-3197
Attention: Jennifer Bellah, Esq.
Telecopy No.: (213) 229-7520
IF TO MANAGER:
U.S. Trust Company of California, N.A.
515 South Flower Street, Suite 2700
Los Angeles, California 90071-2291
Attention: Charles E. Wert
Telecopy No.: (213) 488-1366
WITH A COPY TO:
Jones, Day, Reavis & Pogue
77 West Wacker Drive
Chicago, Illinois 60601-1692
Attention: Ronald S. Rizzo, Esq.
Telecopy No.: (312) 782-8585.
Unless otherwise specifically provided in this Agreement, a notice shall
be deemed to have been effectively given if mailed by registered or certified
mail to the proper address (with such notice to be effective upon the earlier
of actual receipt or five days after deposit in the mail), if given in person
or by overnight air carrier when delivered in person or by overnight air
carrier, if given by telex or telecopy upon receipt if confirmed by return
telecopy, telex or telephonic confirmation or otherwise; provided, however,
that no notice shall be deemed received on a day that is not a Business Day
in the jurisdiction in which notices are to be addressed to such party. Any
such notice shall not be effective until the next Business Day in such
jurisdiction.
(e) GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the internal law, and not the law pertaining
to conflicts or choice of law, of the State of Delaware.
REGISTRATION RIGHTS AGREEMENT
13
<PAGE>
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute one and the same instrument.
(g) COMPLETE AGREEMENT. This Agreement contains the entire agreement
between the parties hereto with respect to the transactions contemplated
herein and supersedes all previous oral and written and all contemporaneous
oral negotiations, commitments and understandings.
(h) HEADINGS; INTERPRETATION. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. No party hereto, nor its respective
counsel, shall be deemed the drafter of this Agreement for purposes of
construing the provisions hereof. The language in all parts of this
Agreement shall in all cases be construed according to its fair meaning, and
not strictly for or against any party hereto.
(i) GENDER AND NUMBER. In this Agreement, unless the context otherwise
requires, the masculine, feminine and neuter genders and the singular and the
plural include one another.
(j) NO THIRD PARTY-BENEFICIARIES. This Agreement shall be for the sole
and exclusive benefit of the Company, the Pension Plan, the Trust, the
Manager and any other-investment manager or managers acting on behalf of the
Pension Plan with respect to the Registrable Securities, and their respective
successors, and directors, trustees, officers, employees, agents and
controlling Persons indemnified hereunder. Nothing in this agreement shall
be construed to give any other Person any legal or equitable right, remedy or
claim under this Agreement.
(k) COOPERATION. Each party hereto shall take such further action, and
execute such additional documents, as may be reasonably required by any other
party hereto in order to carry out the purposes of this Agreement.
(l) BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and shall inure to the benefit of and be enforceable by each of the parties
and their successors and the directors, trustees (including, without
limitation, any successor trustee for the Pension Plan), officers, employees,
agents and controlling Persons of the parties. Except for an assignment to a
successor trustee or to an investment manager as stated herein, and except as
contemplated in SECTION 9(a), none of the rights or obligations under this
Agreement shall be assigned by the Pension Plan without the consent of the
Company.
REGISTRATION RIGHTS AGREEMENT
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers hereunto duly authorized, as of the
date first above written.
MAGNETEK, INC.
By:
--------------------------------------
Title:
-----------------------------------
U.S. TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association, in its capacity as
duly appointed and acting investment manager of
a segregated account held in the trust created
under the MagneTek, Inc. FlexCare Plus Retirement
Pension Plan
By:
--------------------------------------
Title:
-----------------------------------
REGISTRATION RIGHTS AGREEMENT
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>8
<DESCRIPTION>EXHIBIT 10.38 SECOND AMEND TO CREDIT AGMNT
<TEXT>
<PAGE>
EXHIBIT 10.38
SECOND AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS AMENDMENT is entered into effective as of March 31, 1996, between
MAGNETEK, INC., a Delaware corporation ("BORROWER"), certain Lenders,
NATIONSBANK OF TEXAS, N.A. ("AGENT"), as Agent for Lenders, and CIBC INC., THE
FIRST NATIONAL BANK OF CHICAGO, and LTCB TRUST COMPANY as Co-Agents for Lenders.
Borrower, Agent, Co-Agents, and certain Lenders are party to the Credit
Agreement (as renewed, extended, and amended, the "CREDIT AGREEMENT") dated as
of March 31, 1995, providing for a $225,000,000 revolving credit facility and a
$75,000,000 term loan, which term loan has been repaid. Borrower, Agent, and
Lenders have agreed, upon the following terms and conditions, to amend the
Credit Agreement to provide for, among other things, (a) the reduction of the
Commitments for the Revolving Facility to $200,000,000, (b) the removal of
provisions providing for the release of collateral, (c) a reduction in the
amount of Permitted-Capital Expenditures, and (d) changes to certain financial
covenants. Accordingly, for adequate and sufficient consideration, Borrower,
Agent, and Determining Lenders agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a)
terms defined in the Credit Agreement have the same meanings when used in this
amendment and (b) references to "SECTIONS," "SCHEDULES," and "EXHIBITS" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is amended as
follows effective as of EITHER (a) May 15, 1996, in respect of (i) the amendment
to SCHEDULE 2, (ii) the reduction of the Commitments, and (iii) PARAGRAPH 2(c)
and PARAGRAPH 2(d) (to the extent relating to definitions used in PARAGRAPH
2(c)) below, OR (b) for all other purposes, the date of the amendment.
(a) The recital paragraph of the Credit Agreement is entirely amended
as follows:
BORROWER ORIGINALLY REQUESTED THAT LENDERS EXTEND CREDIT TO
BORROWER NOT TO EXCEED A TOTAL OUTSTANDING PRINCIPAL AMOUNT OF
$300,000,000 (AS THAT AMOUNT MAY BE REDUCED BY CERTAIN BORROWING BASE
RESTRICTIONS) TO BE USED BY BORROWER AS PROVIDED IN SECTION 7.1 AND
ALLOCATED AS (A) A TERM LOAN OF $75,000,000 (THE "TERM LOAN") TO BE
FUNDED BY LENDERS ON THE CLOSING DATE, WHICH HAS BEEN REPAID, AND (B)
A REVOLVING-CREDIT FACILITY OF $225,000,000, WHICH HAS BEEN REDUCED TO
$200,000,000 (THE "REVOLVING FACILITY"), TO BE FUNDED BY LENDERS FROM
TIME TO TIME IN A COMBINATION OF ADVANCES AND LETTERS OF CREDIT.
LENDERS ARE WILLING TO EXTEND THE REQUESTED CREDIT ON THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
<PAGE>
(b) SECTION 1.1 is amended by deleting the terms "BORROWING-BASE
CONDITION" and "EBIT."
(c) The table in the definition of "APPLICABLE MARGIN" in SECTION 1.1
is entirely amended as follows:
------------------------------------------------------------------
------------------------------------------------------------------
RATIO OF FUNDED DEBT TO EBITDA APPLICABLE APPLICABLE
MARGIN FOR MARGIN FOR
BASE-RATE LIBOR-RATE
BORROWINGS BORROWINGS
------------------------------------------------------------------
------------------------------------------------------------------
GREATER THAN 4.25 TO 1.00 1.00% 2.25%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 4.25 TO 1.00,
BUT GREATER THAN 4.00 TO 1.00 0.75% 2.00%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 4.00 TO 1.00,
BUT GREATER THAN 3.50 TO 1.00 0.50% 1.75%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.50 TO 1.00,
BUT GREATER THAN 3.00 TO 1.00 0.25% 1.50%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 3.00 TO 1.00,
BUT GREATER THAN 2.50 TO 1.00 0.00% 1.25%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 2.50 TO 1.00,
BUT GREATER THAN 2.00 TO 1.00 0.00% 1.00%
------------------------------------------------------------------
LESS THAN OR EQUAL TO 2.00 TO 1.00 0.00% 0.75%
------------------------------------------------------------------
------------------------------------------------------------------
(d) SECTION 1.1 IS AMENDED BY ADDING OR ENTIRELY AMENDING THE
FOLLOWING TERMS:
BORROWING-BASE DEFICIENCY MEANS ANY AMOUNT BY WHICH THE
LIMITATION IN SECTION 2.2(c) IS EXCEEDED, WHETHER BECAUSE THE
COMMITMENTS FOR THE REVOLVING FACILITY HAVE BEEN FULLY OR PARTIALLY
TERMINATED OR CANCELLED OR FOR ANY OTHER REASON.
CAPITALIZATION MEANS -- FOR ANY PERSON, AT ANY TIME, AND WITHOUT
DUPLICATION-- THE SUM OF (a) ITS STOCKHOLDERS' EQUITY PLUS (b) ITS
FUNDED DEBT. HOWEVER, SOLELY FOR PURPOSES OF SECTION 10.3, THE EFFECT
OF EXCLUDED CHARGES SHALL NOT BE INCLUDED IN THE CALCULATION OF
CAPITALIZATION UNLESS THE TOTAL OF EXCLUDED CHARGES EXCEEDS
$33,000,000, IN WHICH CASE THAT EXCESS AMOUNT SHALL BE INCLUDED IN
THAT CALCULATION.
EBITDA MEANS -- FOR ANY PERSON, FOR ANY PERIOD, AND WITHOUT
DUPLICATION -- THE SUM OF (a) NET INCOME (WITHOUT REGARD TO
EXTRAORDINARY ITEMS), PLUS (b) TO THE EXTENT ACTUALLY DEDUCTED IN
CALCULATING NET INCOME, INTEREST
2
<PAGE>
EXPENSE, INCOME TAXES, AND DEPRECIATION AND AMORTIZATION FROM
CONTINUING OPERATIONS, AND (c) MINUS OR PLUS, RESPECTIVELY, ANY NET
GAINS OR LOSSES FROM DISCONTINUED OPERATIONS THAT ARE NOT
EXTRAORDINARY ITEMS. HOWEVER, SOLELY FOR PURPOSES OF SECTIONS 10.4
AND 10.5, EXCLUDED CHARGES SHALL NOT BE INCLUDED IN THE CALCULATION OF
EBITDA UNLESS THE TOTAL OF EXCLUDED CHARGES EXCEEDS $42,000,000, IN
WHICH CASE THAT EXCESS AMOUNT SHALL BE INCLUDED IN THAT CALCULATION.
EXCLUDED CHARGES MEANS, WITH RESPECT TO THE DETERMINATION OF
CAPITALIZATION, EBITDA, OR TANGIBLE-NET WORTH, AS THE CASE MAY BE, THE
PRE-TAX CHARGES TAKEN IN THE FISCAL QUARTERS OF BORROWER ENDING ON
JUNE 30, 1996, OR SEPTEMBER 30, 1996, AND INCURRED IN CONNECTION WITH
THE DIVESTITURE OF MAGNETEK MAY AND CHRISTE GMBH, A GERMAN
CORPORATION, THE REMAINING DISCONTINUED OPERATIONS, FAS 121 CHARGES,
AND THE WRITE-DOWN OF THE DEFERRED TAX ASSET.
LC SUBFACILITY MEANS A SUBFACILITY OF THE REVOLVING FACILITY FOR
THE ISSUANCE OF LCS, AS DESCRIBED IN SECTION 2.4, UNDER WHICH THE LC
EXPOSURE MAY NEVER (a) EXCEED $30,000,000 AND (b) TOGETHER WITH
PRINCIPAL DEBT UNDER THE REVOLVING FACILITY MAY NEVER EXCEED THE
LESSER OF EITHER (i) THE TOTAL COMMITMENTS FOR THE REVOLVING FACILITY
OR (ii) THE BORROWING BASE .
PERMITTED-CAPITAL EXPENDITURES MEANS -- FOR ANY FISCAL YEAR OF
BORROWER BEGINNING AFTER JUNE 30, 1994 -- A TOTAL AMOUNT THAT DOES NOT
EXCEED THE SUM OF (a) $54,000,000 FOR ALL RESTRICTED COMPANIES , PLUS
(b) 50% OF AMOUNTS FOR THE IMMEDIATELY PRECEDING FISCAL YEAR UNDER
CLAUSE (a) ABOVE THAT WERE NOT UTILIZED FOR "PERMITTED-CAPITAL
EXPENDITURES."
TANGIBLE-NET WORTH MEANS -- AT ANY TIME AND FOR ANY PERSON -- THE
SUM OF (i)ITS STOCKHOLDERS' EQUITY, PLUS (ii) AMOUNTS EXCLUDED FROM
STOCKHOLDERS' EQUITY UNDER GAAP RELATING TO THE ESTABLISHMENT OF AN
EMPLOYEE STOCK OWNERSHIP PLAN, MINUS (iii) THE TOTAL (WITHOUT
DUPLICATION OF DEDUCTIONS ALREADY MADE IN ARRIVING AT STOCKHOLDERS'
EQUITY) OF THE BOOK VALUE OF ALL ASSETS ACQUIRED AFTER THE CLOSING
DATE THAT WOULD BE TREATED AS INTANGIBLE ASSETS UNDER GAAP, INCLUDING,
WITHOUT LIMITATION, GOODWILL, TRADEMARKS, TRADE NAMES, COPYRIGHTS,
PATENTS, AND UNAMORTIZED DEBT DISCOUNT AND EXPENSE. HOWEVER, SOLELY
FOR PURPOSES OF SECTION 10.1, THE EFFECT OF THE EXCLUDED CHARGES SHALL
NOT BE INCLUDED IN THE CALCULATION OF TANGIBLE-NET WORTH UNLESS THE
TOTAL OF EXCLUDED CHARGES EXCEEDS $33,000,000, IN WHICH CASE THAT
EXCESS AMOUNT SHALL BE INCLUDED IN THAT CALCULATION.
(e) CLAUSE (d) IN THE DEFINITION OF "PERMITTED ACQUISITION" IN
SECTION 1.1 IS ENTIRELY AMENDED AS FOLLOWS:
(d) THE TOTAL OF ALL INVESTMENTS AND PURCHASE PRICE INVOLVED IN
ALL OF THOSE FORMATIONS AND ACQUISITIONS -- INCLUDING, WITHOUT
LIMITATION OR DUPLICATION, ANY FUNDED DEBT TO BE GUARANTEED, ASSUMED,
OR PAID BY ANY RESTRICTED COMPANY
3
<PAGE>
OTHER THAN DEBT OWED BY THE RESTRICTED COMPANY BEING FORMED FOR WHICH
NO OTHER RESTRICTED COMPANY HAS ANY OBLIGATION WHATSOEVER BUT
EXCLUDING ANY PORTION OF ANY PURCHASE PRICE PAID THROUGH the issuance
of Borrower's equity that is not mandatorily redeemable -- during any
fiscal year of Borrower does not exceed the SUM of (i) $12,500,000, or
if the ratio calculated under SECTION 10.4 as of the end of the
immediately preceding fiscal quarter is equal to or less than 4.25 to
1.00, then $25,000,000, PLUS (ii) the net cash proceeds received
during that fiscal year for the issuance of equity or Subordinated
Debt, PLUS (iii) the SUM of (A) 25% of the cumulative Net Income of
the Companies after the date of this agreement MINUS (B) any amount
under CLAUSE (A) preceding utilized during any prior fiscal year for
purposes of the calculation under this CLAUSE (d);
(f) SECTION 2.2(c) IS ENTIRELY AMENDED AS FOLLOWS:
(c) THE COMMITMENT USAGE MAY NEVER EXCEED THE LESSER OF EITHER
THE TOTAL COMMITMENTS FOR THE REVOLVING FACILITY OR THE BORROWING
BASE; AND
(g) SECTION 5.5 IS AMENDED BY DELETING SECTIONS 5.5(c) AND (d) AND BY
ENTIRELY AMENDING SECTION 5.5(b) AS FOLLOWS:
(b) IN CONNECTION WITH ANY SALE OR OTHER DISPOSITION OF STOCK
OR ASSETS PERMITTED BY SECTION 9.11 (OTHER THAN SECTION 9.11(d)),
AGENT SHALL, UPON BORROWER'S REQUEST AND AT BORROWER'S COST AND
EXPENSE, RELEASE THE LENDER LIENS ON THE ASSETS SOLD OR DISPOSED OF,
AND, IN THE CASE OF A SALE OF ALL OF THE STOCK OF any Subsidiary party
to a Guaranty, release such Subsidiary from that Guaranty.
(h) SECTION 8.1(c) IS ENTIRELY AMENDED AS FOLLOWS:
(c) BORROWING-BASE REPORT. PROMPTLY AFTER PREPARATION BUT NO
LATER THAN 30 DAYS AFTER THE LAST DAY OF EACH CALENDAR MONTH, A
BORROWING-BASE REPORT.
(i) SECTION 10.3 IS ENTIRELY AMENDED AS FOLLOWS:
10.3 FUNDED DEBT/CAPITALIZATION. THE RATIO -- DETERMINED AS OF
THE LAST DAY OF EACH FISCAL QUARTER OF BORROWER -- OF THE COMPANIES'
FUNDED DEBT TO CAPITALIZATION TO EXCEED:
--------------------------------------------------------------
--------------------------------------------------------------
QUARTERS ENDING RATIO
--------------------------------------------------------------
--------------------------------------------------------------
3/31/95 THROUGH 3/31/96 0.80 TO 1.00
--------------------------------------------------------------
6/30/96 THROUGH 6/30/97 0.78 TO 1.00
--------------------------------------------------------------
9/30/97 AND EACH FISCAL QUARTER AFTER THAT 0.75 TO 1.00
--------------------------------------------------------------
--------------------------------------------------------------
4
<PAGE>
(j) SECTION 10.4(a) IS ENTIRELY AMENDED AS FOLLOWS:
(a) THE RATIO OF THE COMPANIES' FUNDED DEBT AS OF THE LAST DAY
OF EACH FISCAL QUARTER (COMMENCING WITH THE QUARTER OF BORROWER ENDING
JUNE 30, 1995) 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:
--------------------------------------------------------------
--------------------------------------------------------------
QUARTERS ENDING RATIO
--------------------------------------------------------------
--------------------------------------------------------------
6/30/95 THROUGH 3/31/96 4.60 TO 1.00
--------------------------------------------------------------
6/30/96 5.10 TO 1.00
--------------------------------------------------------------
9/30/96 4.70 TO 1.00
--------------------------------------------------------------
12/31/96 4.50 TO 1.00
--------------------------------------------------------------
3/31/97 4.40 TO 1.00
--------------------------------------------------------------
6/30/97 THROUGH 9/30/97 4.30 TO 1.00
--------------------------------------------------------------
12/31/97 AND EACH FISCAL QUARTER AFTER THAT 4.25 TO 1.00
--------------------------------------------------------------
--------------------------------------------------------------
(k) SECTION 10.5(a) IS ENTIRELY AMENDED AS FOLLOWS, AND SECTION
10.5(b) IS ENTIRELY DELETED:
10.5 INTEREST COVERAGE.
(a) THE RATIO -- DETERMINED AS OF THE LAST DAY OF EACH
FISCAL QUARTER (COMMENCING JUNE 30, 1995) OF BORROWER FOR THE
FOUR QUARTERS THEN ENDED -- OF THE COMPANIES' EBITDA TO INTEREST
EXPENSE TO BE LESS THAN:
--------------------------------------------------------------
--------------------------------------------------------------
QUARTER(S) ENDING RATIO
--------------------------------------------------------------
--------------------------------------------------------------
6/30/95 THROUGH 3/31/96 2.25 TO 1.00
--------------------------------------------------------------
6/30/96 2.00 TO 1.00
--------------------------------------------------------------
9/30/96 2.25 TO 1.00
--------------------------------------------------------------
12/31/96 THROUGH 3/31/97 2.40 TO 1.00
--------------------------------------------------------------
6/30/97 THROUGH 12/31/97 2.50 TO 1.00
--------------------------------------------------------------
3/31/98 AND EACH FISCAL QUARTER AFTER THAT 2.75 TO 1.00
--------------------------------------------------------------
--------------------------------------------------------------
5
<PAGE>
(l) SCHEDULE 2 AND EXHIBITS A-2 AND D-5 ARE ENTIRELY AMENDED IN THE
RESPECTIVE FORMS OF -- AND ALL REFERENCES IN THE CREDIT AGREEMENT TO
SCHEDULE 2 AND EXHIBITS A-2 AND D-5 ARE RESPECTIVELY CHANGED TO -- THE
ATTACHED AMENDED SCHEDULE 2 AND AMENDED EXHIBITS A-2 AND D-5.
3. CONDITIONS PRECEDENT. PARAGRAPH 2 above is not effective until Agent
receives (a) counterparts of this amendment executed by Borrower, each
Restricted Company, and Determining Lenders, (b) each document and other item
listed on the attached ANNEX A, each in form and substance satisfactory to Agent
and its special counsel, (c) a prepayment of the Principal Debt of the Revolving
Facility equal to the amount, if any, by which the outstanding Principal Debt
exceeds the lesser of EITHER (i) the Borrowing Base, OR (ii) $200,000,000, and
(d) an amendment fee for Lenders according to each Lender's Commitment
Percentage in an amount equal to 0.10% of the total Commitments described on the
attached AMENDED SCHEDULE 2. Each Lender hereby severally agrees to return to
Borrower the Revolving Note and Term Note issued to it prior to the date hereof
promptly upon receipt by it of the Revolving Note referred to on ANNEX A.
4. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of
the Loan Documents as amended by this amendment, (b) ratifies and confirms that
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 amendment 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.
5. REPRESENTATIONS. Borrower represents and warrants to Agent and
Lenders that as of the date of this amendment (a) all representations and
warranties in the Loan Documents are true and correct in all material respects
EXCEPT to the extent that (i) any of them speak to a different specific date or
(ii) 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.
6. MISCELLANEOUS. All references in the Loan Documents to the "CREDIT
AGREEMENT" refer to the Credit Agreement as amended by this amendment. This
amendment 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 amendment by reference. Except as
specifically amended and modified in this amendment, the Credit Agreement is
unchanged and continues in full force and effect. This amendment 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 amendment binds and
inures to each of the undersigned and their respective successors and permitted
assigns, subject to the terms of the Credit Agreement. THIS AMENDMENT AND THE
OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
6
<PAGE>
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.
7
<PAGE>
EXECUTED as of the date first stated above.
MAGNETEK, INC., NATIONSBANK OF TEXAS, N.A.,
as BORROWER as AGENT and a LENDER
By By
------------------------------------ -------------------------
John P. Colling, Jr. Vice President Michele M. Shafroth, Senior
Vice President and Treasurer
THE FIRST NATIONAL BANK OF CIBC INC.,
CHICAGO, as a CO-AGENT and a LENDER
as a CO-AGENT and a LENDER
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
LTCB TRUST COMPANY, FIRST UNION NATIONAL BANK OF
as a CO-AGENT and a LENDER TENNESSEE, as a LENDER
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
CREDIT LYONNAIS - CAYMAN ISLAND FLEET BANK OF MASSACHUSETTS, N.A.,
BRANCH, as a LENDER as a LENDER
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
SOCIETE GENERALE, SOUTHWEST UNION BANK OF CALIFORNIA, N.A.
AGENCY, as a LENDER successor from the merger of Union
Bank and The Bank of California,
By N.A., as a LENDER
------------------------------------
Name: By
------------------------------- ------------------------------
Title: Name:
------------------------------- -------------------------
Title:
-------------------------
ARAB BANKING CORPORATION
as a LENDER
By
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
Second Amendment Signature Page One of Two Pages
<PAGE>
BANQUE FRANCAISE DU COMMERCE THE BOATMEN'S NATIONAL BANK OF ST.
EXTERIEUR, as a LENDER LOUIS, as a LENDER
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
By
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
COMMERZBANK AG, ATLANTA AGENCY, CREDITANSTALT CORPORATE FINANCE
as a LENDER INC., as a LENDER
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
By By
------------------------------------ ------------------------------
Name: Name:
------------------------------- -------------------------
Title: Title:
------------------------------- -------------------------
FIRST AMERICAN NATIONAL BANK,
as a LENDER
By
------------------------------------
Name:
-------------------------------
Title:
-------------------------------
To induce Agent to enter into this amendment, the undersigned consent and
agree (a) to its execution and delivery, (b) that this amendment in no way
releases, diminishes, impairs, reduces, or otherwise adversely affects any
Liens, guaranties, assurances, or other obligations or undertakings of any of
the undersigned under any Loan Documents, and (c) waive notice of acceptance of
this consent and agreement, which consent and agreement binds the undersigned
and their successors and permitted assigns and inures to Agent and their
respective successors and permitted assigns.
MAGNETEK CENTURY ELECTRIC, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.,
AND MAGNETEK OHIO TRANSFORMER, INC.,
as GUARANTORS
By
----------------------------------------
John Colling, Jr., Vice President and
Treasurer of all of the foregoing companies
Second Amendment Signature Page Two of Two Pages
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.39
<SEQUENCE>9
<DESCRIPTION>EXHIBIT 10.39 THIRD AMENDMENT TO AGMNT
<TEXT>
<PAGE>
EXHIBIT 10.39
THIRD AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS AMENDMENT is entered into effective as of May 15, 1996, between
MAGNETEK, INC., a Delaware corporation ("BORROWER"), certain Lenders,
NATIONSBANK OF TEXAS, N.A. ("AGENT"), as Agent for Lenders, and CIBC INC., THE
FIRST NATIONAL BANK OF CHICAGO, and LTCB TRUST COMPANY as Co-Agents for Lenders.
Borrower, Agent, Co-Agents, and certain Lenders are party to the Credit
Agreement (as renewed, extended, and amended, the "CREDIT AGREEMENT") dated as
of March 31, 1995, providing for a $200,000,000 revolving credit facility and a
$75,000,000 term loan that has been repaid. Borrower, Agent, and Lenders have
agreed, upon the following terms and conditions, to amend the Credit Agreement
to provide for, among other things, a change to the calculation of the Borrowing
Base. Accordingly, for adequate and sufficient consideration, Borrower, Agent,
and Lenders agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a)
terms defined in the Credit Agreement have the same meanings when used in this
amendment and (b) references to "SECTIONS," "SCHEDULES," and "EXHIBITS" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is amended as
follows effective as of the date of this amendment.
(a) SECTION 1 is amended by deleting the terms "RELEASE RATINGS" and
"RELEASE RATIO" and by entirely amending the following term:
BORROWING BASE MEANS, AT ANY TIME, THE SUM OF (a) 80% OF ELIGIBLE
ACCOUNTS PLUS (b) THE LESSER OF (i) 40% OF ELIGIBLE INVENTORY OR
(ii) $100,000,000.
(b) SECTION 14.8(b) is entirely amended as follows:
(b) ALL LENDERS. EXCEPT AS SPECIFICALLY OTHERWISE PROVIDED IN
THIS SECTION 14.8, ANY AMENDMENT TO OR CONSENT OR WAIVER UNDER THIS
AGREEMENT OR ANY LOAN DOCUMENT THAT PURPORTS TO ACCOMPLISH ANY OF THE
FOLLOWING MUST BE BY AN INSTRUMENT IN WRITING EXECUTED BY BORROWER AND
AGENT AND EXECUTED (OR APPROVED, AS THE CASE MAY BE) BY EACH LENDER:
(i) EXTENDS THE DUE DATE OR DECREASES THE AMOUNT OF ANY SCHEDULED
PAYMENT OR AMORTIZATION OF THE OBLIGATION BEYOND THE DATE SPECIFIED IN
THE LOAN DOCUMENTS; (ii) DECREASES ANY RATE OR AMOUNT OF INTEREST,
FEES, OR OTHER SUMS PAYABLE TO AGENT OR LENDERS UNDER THIS AGREEMENT
(EXCEPT SUCH REDUCTIONS AS ARE CONTEMPLATED BY THIS AGREEMENT); (iii)
CHANGES THE DEFINITION OF "COMMITMENT," "COMMITMENT PERCENTAGE,"
"DETERMINING LENDERS," OR "PRO RATA PART," OR INCREASES IN THE
PERCENTAGES IN THE DEFINITION OF "BORROWING BASE;" (iv) INCREASES ANY
ONE OR MORE LENDERS' COMMITMENT; (v) WAIVES COMPLIANCE WITH, AMENDS,
OR FULLY OR PARTIALLY
<PAGE>
RELEASES -- EXCEPT AS EXPRESSLY PROVIDED BY SECTION 5.5 OR ANY OTHER
LOAN DOCUMENTS OR FOR WHEN A COMPANY MERGES INTO ANOTHER PERSON OR
DISSOLVES WHEN SPECIFICALLY PERMITTED IN THE LOAN DOCUMENTS -- ANY
GUARANTY OR COLLATERAL; OR (vi) CHANGES THIS CLAUSE (b) OR ANY OTHER
MATTER SPECIFICALLY REQUIRING THE CONSENT OF ALL LENDERS UNDER THIS
AGREEMENT.
(c) EXHIBIT D-4 IS ENTIRELY AMENDED IN THE FORM OF -- AND ALL
REFERENCES IN THE CREDIT AGREEMENT TO EXHIBIT D-4 ARE CHANGED TO -- THE ATTACHED
AMENDED EXHIBIT D-4.
3. CONDITIONS PRECEDENT. PARAGRAPH 2 above is not effective until Agent
receives counterparts of this amendment executed by Borrower, each Restricted
Company, and each Lender.
4. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of
the Loan Documents as amended by this amendment, (b) ratifies and confirms that
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 amendment 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.
5. REPRESENTATIONS. Borrower represents and warrants to Agent and
Lenders that as of the date of this amendment (a) all representations and
warranties in the Loan Documents are true and correct in all material respects
EXCEPT to the extent that (i) any of them speak to a different specific date or
(ii) 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.
6. MISCELLANEOUS. All references in the Loan Documents to the "CREDIT
AGREEMENT" refer to the Credit Agreement as amended by this amendment. This
amendment 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 amendment by reference. Except as
specifically amended and modified in this amendment, the Credit Agreement is
unchanged and continues in full force and effect. This amendment 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 amendment binds and
inures to each of the undersigned and their respective successors and permitted
assigns, subject to the terms of the Credit Agreement. THIS AMENDMENT 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.
2
<PAGE>
EXECUTED as of the date first stated above.
MAGNETEK, INC., NATIONSBANK OF TEXAS, N.A.,
as BORROWER as AGENT and a LENDER
By By
--------------------------------- -------------------------------------
John P. Colling, Jr., Vice President Michele M. Shafroth, Senior Vice
President and Treasurer
THE FIRST NATIONAL BANK OF CHICAGO, CIBC INC.,
as a CO-AGENT and a LENDER as a CO-AGENT and a LENDER
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
LTCB TRUST COMPANY,, FIRST UNION NATIONAL BANK OF
as a CO-AGENT and a LENDER TENNESSEE, as a LENDER
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
CREDIT LYONNAIS - CAYMAN ISLAND N.A., FLEET BANK OF MASSACHUSETTS,
BRANCH, as a LENDER as a LENDER
By By
--------------------------------- ------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
SOCIETE GENERALE, SOUTHWEST, UNION BANK OF CALIFORNIA, N.A.,
AGENCY, as a LENDER successor from the merger of Union Bank
and The Bank of California, N.A., as a
LENDER
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
ARAB BANKING CORPORATION,
as a LENDER
By
---------------------------------
Name:
---------------------------
Title:
---------------------------
Third Amendment Signature Page One of Two Pages
<PAGE>
BANQUE FRANCAISE DU COMMERCE, THE BOATMEN'S NATIONAL BANK OF
EXTERIEUR, as a LENDER ST. LOUIS, as a LENDER
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
COMMERZBANK AG, ATLANTA AGENCY, CREDITANSTALT CORPORATE INC.,
FINANCE, as a LENDER as a LENDER
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
By By
--------------------------------- -------------------------------------
Name: Name:
--------------------------- ------------------------------
Title: Title:
--------------------------- ------------------------------
FIRST AMERICAN NATIONAL BANK,
as a LENDER
By
---------------------------------
Name:
---------------------------
Title:
---------------------------
To induce Agent to enter into this amendment, the undersigned consent and
agree (a) to its execution and delivery, (b) that this amendment in no way
releases, diminishes, impairs, reduces, or otherwise adversely affects any
Liens, guaranties, assurances, or other obligations or undertakings of any of
the undersigned under any Loan Documents, and (c) waive notice of acceptance of
this consent and agreement, which consent and agreement binds the undersigned
and their successors and permitted assigns and inures to Agent and their
respective successors and permitted assigns.
MAGNETEK CENTURY ELECTRIC, INC.,
MAGNETEK NATIONAL ELECTRIC COIL, INC.,
and MAGNETEK OHIO TRANSFORMER, INC.,
as GUARANTORS
By
-------------------------------------
John Colling, Jr., Vice President and
Treasurer of all of the foregoing
companies
Third Amendment Signature Page Two of Two Pages
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.40
<SEQUENCE>10
<DESCRIPTION>EXHIBIT 10.40 FOURTH AMENDMENT TO CREDIT AGMNT
<TEXT>
<PAGE>
FOURTH AMENDMENT TO CREDIT AGREEMENT
------------------------------------
THIS AMENDMENT is entered into effective as of June 30, 1996, between
MAGNETEK, INC., a Delaware corporation ("BORROWER"), certain Lenders,
NATIONSBANK OF TEXAS, N.A. ("AGENT"), as Agent for Lenders, and CIBC INC., THE
FIRST NATIONAL BANK OF CHICAGO, and LTCB TRUST COMPANY as Co-Agents for Lenders.
Borrower, Agent, Co-Agents, and certain Lenders are party to the Credit
Agreement (as renewed, extended, and amended, the "CREDIT AGREEMENT") dated as
of March 31, 1995, providing for a $225,000,000 revolving credit facility, which
facility has been reduced to $200,000,000, and a $75,000,000 term loan, which
term loan has been repaid. Borrower, Agent, and Lenders have agreed, upon the
following terms and conditions, to amend the Credit Agreement to provide for,
among other things, (a) the reduction of the Commitments for the Revolving
Facility to $170,000,000, and (b) changes to certain pricing terms and financial
covenants.
Accordingly, for adequate and sufficient consideration, Borrower, Agent,
and Determining Lenders agree as follows:
1. TERMS AND REFERENCES. Unless otherwise stated in this amendment (a)
terms defined in the Credit Agreement have the same meanings when used in this
amendment and (b) references to "SECTIONS," "SCHEDULES," and "EXHIBITS" are to
the Credit Agreement's sections, schedules, and exhibits.
2. AMENDMENT TO CREDIT AGREEMENT. The Credit Agreement is amended
effective as of June 30, 1996, as follows:
(a) The recital paragraph of the Credit Agreement is entirely amended
as follows:
BORROWER ORIGINALLY REQUESTED THAT LENDERS EXTEND CREDIT TO
BORROWER NOT TO EXCEED A TOTAL OUTSTANDING PRINCIPAL AMOUNT OF
$300,000,000 (AS THAT AMOUNT MAY BE REDUCED BY CERTAIN BORROWING BASE
RESTRICTIONS) TO BE USED BY BORROWER AS PROVIDED IN SECTION 7.1 AND
ALLOCATED AS (A) A TERM LOAN OF $75,000,000 (THE "TERM LOAN") TO BE
FUNDED BY LENDERS ON THE CLOSING DATE, WHICH HAS BEEN REPAID, AND (B)A
REVOLVING-CREDIT FACILITY OF $225,000,000, WHICH HAS BEEN REDUCED TO
$170,000,000 (THE "REVOLVING FACILITY"), TO BE FUNDED BY LENDERS FROM
TIME TO TIME IN A COMBINATION OF ADVANCES AND LETTERS OF CREDIT.
LENDERS ARE WILLING TO EXTEND THE REQUESTED CREDIT ON THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
<PAGE>
(b) SECTION 1.1 is amended by adding a new PARAGRAPH (F) to the
definition of APPLICABLE MARGIN:
(f) FROM JULY 1, 1996, THROUGH THE DATE THAT AGENT RECEIVES THE
CURRENT FINANCIALS AND COMPLIANCE CERTIFICATE FOR THE FISCAL QUARTER
OF BORROWER ENDING SEPTEMBER 30, 1996, THE APPLICABLE MARGIN IS DEEMED
TO BE 2.25% FOR LIBOR-RATE BORROWINGS AND 1.00% FOR BASE-RATE
BORROWINGS, AND THE APPLICABLE PERCENTAGE IS DEEMED TO BE 0.375%.
(c) SECTION 1.1 is amended by adding or entirely amending the
following terms:
CAPITALIZATION MEANS -- FOR ANY PERSON, AT ANY TIME, AND WITHOUT
DUPLICATION -- THE SUM OF (a) ITS STOCKHOLDERS' EQUITY PLUS (B) ITS
FUNDED DEBT.
EBITDA MEANS -- FOR ANY PERSON, FOR ANY PERIOD, AND WITHOUT
DUPLICATION -- THE SUM OF (a) NET INCOME (WITHOUT REGARD TO
EXTRAORDINARY ITEMS), PLUS (b) TO THE EXTENT ACTUALLY DEDUCTED IN
CALCULATING NET INCOME, INTEREST EXPENSE, INCOME TAXES, AND
DEPRECIATION AND AMORTIZATION FROM CONTINUING OPERATIONS, AND (c)
MINUS OR PLUS, RESPECTIVELY, ANY NET GAINS OR LOSSES FROM DISCONTINUED
OPERATIONS THAT ARE NOT EXTRAORDINARY ITEMS. HOWEVER, SOLELY FOR
PURPOSES OF SECTIONS 10.4 AND 10.5, EXCLUDED CHARGES SHALL NOT BE
INCLUDED IN THE CALCULATION OF EBITDA.
EXCLUDED CHARGES MEANS, WITH RESPECT TO THE DETERMINATION OF
EBITDA, THE $79,177,000 IN PRE-TAX CHARGES TAKEN IN THE FISCAL QUARTER
OF BORROWER ENDING ON JUNE 30, 1996, AND SET FORTH ON SCHEDULE 1.1.
TANGIBLE-NET WORTH MEANS -- AT ANY TIME AND FOR ANY PERSON - THE
SUM OF (i) ITS STOCKHOLDERS' EQUITY, PLUS (ii) AMOUNTS EXCLUDED FROM
STOCKHOLDERS' EQUITY UNDER GAAP RELATING TO THE ESTABLISHMENT OF AN
EMPLOYEE STOCK OWNERSHIP PLAN, MINUS (iii) THE TOTAL (WITHOUT
DUPLICATION OF DEDUCTIONS ALREADY MADE IN ARRIVING AT STOCKHOLDERS'
EQUITY) OF THE BOOK VALUE OF ALL ASSETS ACQUIRED AFTER THE CLOSING
DATE THAT WOULD BE TREATED AS INTANGIBLE ASSETS UNDER GAAP, INCLUDING,
WITHOUT LIMITATION, GOODWILL, TRADEMARKS, TRADE NAMES, COPYRIGHTS,
PATENTS, AND UNAMORTIZED DEBT DISCOUNT AND EXPENSE.
(d) SECTION 10.1 is entirely amended as follows:
10.1 TANGIBLE-NET WORTH. THE COMPANIES' TANGIBLE-NET WORTH --
DETERMINED AS OF THE LAST DAY OF EACH FISCAL QUARTER OF BORROWER -- TO
BE LESS THAN THE SUM OF (a) $30,000,000, PLUS (b) 50% OF THE
COMPANIES' CUMULATIVE NET INCOME (WITHOUT DEDUCTION FOR LOSSES)
2
<PAGE>
AFTER JUNE 30, 1996, 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.
(e) SECTION 10.3 is entirely amended as follows:
10.3 FUNDED DEBT/CAPITALIZATION. THE RATIO -- DETERMINED AS OF
THE LAST DAY OF EACH FISCAL QUARTER OF BORROWER -- OF THE COMPANIES'
FUNDED DEBT TO CAPITALIZATION TO EXCEED:
-------------------------------------------------------------
-------------------------------------------------------------
QUARTERS ENDING RATIO
-------------------------------------------------------------
-------------------------------------------------------------
3/31/95 THROUGH 3/31/96 0.80 TO 1.00
-------------------------------------------------------------
6/30/96 THROUGH 6/30/97 0.90 TO 1.00
-------------------------------------------------------------
9/30/97 THROUGH 3/31/98 0.87 TO 1.00
-------------------------------------------------------------
6/30/98 AND EACH FISCAL QUARTER AFTER THAT 0.85 TO 1.00
-------------------------------------------------------------
-------------------------------------------------------------
(f) SCHEDULE 2 and EXHIBITS A-2 and D-5 are entirely amended in the
respective forms of -- and all references in the Credit Agreement to
SCHEDULE 2 and EXHIBITS A-2 and D-5 are respectively changed to -- the
attached AMENDED SCHEDULE 2 and AMENDED EXHIBITS A-2 and D-5.
(g) A new SCHEDULE 1.1 is added to the Credit Agreement in the form
of the attached SCHEDULE 1.1.
3. CONDITIONS PRECEDENT. PARAGRAPH 2 above is not effective until Agent
receives (a) counterparts of this amendment executed by Borrower, each
Restricted Company, and Determining Lenders, (b) each document and other item
listed on the attached ANNEX A, each in form and substance satisfactory to Agent
and its special counsel, (c) a prepayment of the Principal Debt of the Revolving
Facility equal to the amount, if any, by which the outstanding Principal Debt
exceeds the lesser of EITHER (i) the Borrowing Base, OR (ii) $170,000,000, and
(d) an amendment fee for Lenders according to each Lender's Commitment
Percentage in an amount equal to 0.10% of the total Commitments described on the
attached AMENDED SCHEDULE 2. Each Lender hereby severally agrees to return to
Borrower the Revolving Note issued to it prior to the date of this amendment
promptly upon receipt by such Lender of the Revolving Note referred to on ANNEX
A.
4. RATIFICATIONS. Borrower (a) ratifies and confirms all provisions of
the Loan Documents as amended by this amendment, (b) ratifies and confirms that
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 amendment and continue to guarantee, assure, and secure full
payment and performance of the present and future Obligation, and (c)
3
<PAGE>
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.
5. REPRESENTATIONS. Borrower represents and warrants to Agent and
Lenders that as of the date of this amendment (a) all representations and
warranties in the Loan Documents are true and correct in all material respects
EXCEPT to the extent that (i) any of them speak to a different specific date or
(ii) 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.
6. MISCELLANEOUS. All references in the Loan Documents to the "CREDIT
AGREEMENT" refer to the Credit Agreement as amended by this amendment. This
amendment 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 amendment by reference. Except as
specifically amended and modified in this amendment, the Credit Agreement is
unchanged and continues in full force and effect. This amendment 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 amendment binds and
inures to each of the undersigned and their respective successors and permitted
assigns, subject to the terms of the Credit Agreement. THIS AMENDMENT 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.
4
<PAGE>
EXECUTED as of the date first stated above.
MAGNETEK, INC., NATIONSBANK OF TEXAS, N.A.,
as BORROWER as AGENT and a LENDER
By By
----------------------------------- -------------------------------
John P. Colling, Jr., Michele M. Shafroth,
Vice President and Treasurer Senior Vice President and
Treasurer
CIBC INC., as a CO-AGENT and a LENDER THE FIRST NATIONAL BANK OF CHICAGO,
as a CO-AGENT and a LENDER
By By
---------------------------------- --------------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- -------------------------
FIRST UNION NATIONAL BANK OF LTCB TRUST COMPANY,
TENNESSEE, as a LENDER as a CO-AGENT and a LENDER
By By
---------------------------------- --------------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- -------------------------
FLEET BANK OF MASSACHUSETTS, N.A., CREDIT LYONNAIS - CAYMAN ISLAND
as a LENDER BRANCH, as a LENDER
By By
---------------------------------- --------------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- -------------------------
UNION BANK OF CALIFORNIA, N.A., SOCIETE GENERALE, SOUTHWEST AGENCY,
successor from the merger of Union Bank and as a LENDER
The Bank of California, N.A., as a LENDER
By By
---------------------------------- --------------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- -------------------------
ARAB BANKING CORPORATION,
as a LENDER
By
-------------------------------
Name:
-------------------------
Title:
-------------------------
Fourth Amendment Signature Page One of Two Pages
<PAGE>
BANQUE FRANCAISE DU COMMERCE THE BOATMEN'S NATIONAL BANK OF
EXTERIEUR, as a LENDER ST. LOUIS, as a LENDER
By By
---------------------------------- --------------------------------
Name: Name:
---------------------------- -------------------------
Title: Title:
---------------------------- -------------------------
By
---------------------------------- CREDITANSTALT CORPORATE FINANCE,
Name: INC., as a LENDER
----------------------------
Title: By
---------------------------- --------------------------------
Name:
COMMERZBANK AG, ATLANTA -------------------------
AGENCY, as a LENDER Title:
By -------------------------
----------------------------------
Name: By
---------------------------- --------------------------------
Title Name:
---------------------------- -------------------------
Title:
By -------------------------
----------------------------------
Name: FIRST AMERICAN NATIONAL BANK,
---------------------------- as a LENDER
Title:
---------------------------- By
-------------------------------
Name:
-------------------------
Title:
-------------------------
To induce Agent and Lenders to enter into this amendment, the undersigned
consents and agrees (a) to its execution and delivery, (b) that this
amendment in no way releases, diminishes, impairs, reduces, or otherwise
adversely affects any Liens, guaranties, assurances, or other obligations
or undertakings of any of the undersigned under any Loan Documents, and (c)
waives notice of acceptance of this consent and agreement, which consent
and agreement binds the undersigned and its successors and permitted
assigns and inures to Agent and Lenders and their respective successors and
permitted assigns.
MAGNETEK NATIONAL ELECTRIC COIL,
INC.,
as GUARANTOR
By
-------------------------------------
John Colling, Jr., Vice President and
Treasurer
Fourth Amendment Signature Page Two of Two Pages
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.44
<SEQUENCE>11
<DESCRIPTION>EXHIBIT 10.44 LEASE AGREEMENT
<TEXT>
<PAGE>
LEASE AGREEMENT
between
FUJIAN FUFA COMPANY LIMITED
and
MAGNETEK FUZHOU GENERATOR COMPANY LIMITED
<PAGE>
TABLE OF CONTENTS
CLAUSE NUMBER AND HEADING PAGE NO.
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 2
2. LEASE OF PREMISES . . . . . . . . . . . . . . . . . . . . 3
3. USES OF THE LEASED PREMISES . . . . . . . . . . . . . . . 4
4. TERM OF LEASE . . . . . . . . . . . . . . . . . . . . . . 4
5. PAYMENT OF RENT AND CHARGES . . . . . . . . . . . . . . . 5
6. SUBLEASE. . . . . . . . . . . . . . . . . . . . . . . . . 7
7. MAINTENANCE AND REPAIR. . . . . . . . . . . . . . . . . . 7
8. REPRESENTATIONS, WARRANTIES, AND UNDERTAKINGS . . . . . . 9
9. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . 12
10. EFFECTIVENESS . . . . . . . . . . . . . . . . . . . . . . 12
11. TERMINATION OF LEASE. . . . . . . . . . . . . . . . . . . 12
12. EFFECT OF EXPIRATION OR TERMINATION . . . . . . . . . . . 13
13. APPLICABLE LAW. . . . . . . . . . . . . . . . . . . . . . 14
14. SETTLEMENT OF DISPUTE . . . . . . . . . . . . . . . . . . 14
15. QUIET POSSESSION. . . . . . . . . . . . . . . . . . . . . 14
16. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . 14
17. LANGUAGES . . . . . . . . . . . . . . . . . . . . . . . . 15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . 15
___________________________________________________________________________
Exhibit I
<PAGE>
LEASE AGREEMENT
This Lease Agreement (the "Agreement") is made and entered into on this
Monday, March 18, 1996 by and between:
(1) Fujian Fufa Company Limited, a company duly registered and established
under the laws of the People's Republic of China (hereinafter referred to
as "PRC"), having its legal address at 223 Gong Ye Road, Fuzhou, Fujian,
PRC (hereinafter referred to as "Party A"), and;
(2) MagneTek Fuzhou Generator Company Limited, a Company duly registered and
established under the laws of PRC and having its address at 223 Gong Ye
Road, Fuzhou, Fujian, PRC (hereinafter referred to as the "Company").
RECITALS
WHEREAS, the Company is a Sino-foreign equity joint venture limited liability
company established in accordance with the terms and conditions of the
Sino-American Equity Joint Venture Contract (hereinafter referred to as the
"Contract") between Party A and MagneTek, Inc. of the United States of
America (hereinafter referred to as "Party B").
WHEREAS, in accordance with the Contract, Party A shall lease to the Company
the site and facilities to be used by the Company for its manufacturing
operations.
WHEREAS, this Agreement sets out the terms and conditions subject to which
Party A will lease to the Company the production site and office space (as
defined in Clause 1 of this Agreement).
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, Party A and the Company, intending to
be legally bound, hereby agree as follows:
CLAUSE 1. DEFINITIONS
All terms used in this Agreement, unless otherwise defined herein, shall have
the same meanings as set forth in the Contract. In addition to other terms
defined elsewhere in this Agreement, the following words and expressions
shall have the meanings given to them below:
1.1 "Effective Date" means the date on which this Agreement becomes effective
in accordance with Clause 10 of this Agreement.
2
<PAGE>
1.2 "Large Workshop" means the new workshop of Party A located at 223 Gong Ye
Road, Fuzhou. Fujian, PRC as shown on Exhibit I attached hereto.
1.3 "Leased Office Space" means the office space to be constructed on the roof
of the Large Workshop, with an area of approximately 1461 square meters, as
shown on Exhibit I attached hereto, which is leased to the Company pursuant
to this Agreement.
1.4 "Open Grounds" means the common roadways and entrance used by both parties,
and shown on Exhibit I attached hereto.
1.5 "Leased Premises" means the Leased Workshop, Leased Office Space, and
parking as negotiated by the parties, and shown on Exhibit I attached
hereto.
1.6 "Leased Workshop" means the part of the Large Workshop, with an area of
approximately 8316 square meters, as shown on Exhibit I attached hereto,
which is leased to the Company pursuant to this Agreement.
1.7 "Attached Greenbelts" means the greenbelts with an area of 712 square
meters which are affiliated with the Leased Workshop and Leased Office
Space, as shown on Exhibit I attached hereto.
1.8 "Registration of Lease" means the registration and filing with the Fuzhou
Real Estate Administration Bureau in connection with the execution,
modifications, and termination of this Agreement in accordance with the
relevant laws and regulations of the PRC.
1.9 "Rent" means the rent payable by the Company to Party A for the lease of
the Leased Premises, as specified in Clause 5 of this Agreement.
1.10 "Commencement Date" means the date the Company formally accepts possession
of the Leased Premises as the tenant and Party A becomes the landlord and
relinquishes possession of the Leased Premises to the Company. Rent due to
Party A by the Company shall begin accruing as of the Commencement Date.
1.11 The table of contents and headings to clauses and exhibits are inserted for
convenience of reference only, and shall not be definitive in the
interpretation of this Agreement.
CLAUSE 2. LEASE OF PREMISES
2.1 Party A agrees to lease to the Company, and the Company agrees to lease
from Party A, the Leased Premises for a term as specified in Clause 4
hereof and at the
3
<PAGE>
Rents specified in Clause 5 and subject to other provisions of this
Agreement. The location and area of the Leased Premises are as shown in
Exhibit I attached hereto.
CLAUSE 3. USES OF THE LEASED PREMISES
3.1 The Company shall use the Leased Premises for its business operations,
including any associated research, development, warehousing, logistics,
distribution, or other related uses.
3.2 The Company shall use the Open Grounds as it sees necessary for conducting
activities relating to the use of the Leased Premises. However, the Company
shall not construct any structures on the Open Grounds without the prior
written approval of Party A.
3.3 The Company and Party A shall have reasonable access and use of each
other's roadways, gates, facilities and Open Grounds at all times, and at
no cost to the Company or Party A. Such facilities shall be used for
access, egress, and movement of people, goods, production-related
machinery, and vehicles, and such reasonable access shall exclude parking
or storage. Specific guidelines for this access shall be agreed upon
between Party A and the Company.
3.4 In the event of emergency which threatens or may threaten people, property,
or equipment, the party needing assistance (the "Requesting Party") shall
have free access and use of any and all facilities and equipment of the
other party (the "Responding Party") and the Responding Party shall render
all reasonable assistance to the Requesting Party in responding to the
emergency. The Requesting Party shall promptly reimburse the Responding
Party for all of the Responding Party' s direct expenses for the facilities
and/or equipment so rendered. For purposes of this Clause 3.4 the
Requesting Party or the Responding Party may be either Party A or the
Company, as the case may be.
CLAUSE 4. TERM OF LEASE
4.1 Beginning from the Effective Date, the term of this Agreement is for a
period of 20 years, with termination provisions as described in Clause 11
hereof. In addition, provided that the Company is current in regard to rent
and other payments provided in this Agreement, the Company may, at its
option, renew this Agreement for up to six additional periods of five years
each, following the end of the initial term of this Agreement.
4
<PAGE>
CLAUSE 5. PAYMENT OF RENT AND CHARGES
5.1 As herein defined, the Commencement Date of this Agreement shall be
Tuesday, October 1, 1996. Beginning from the Commencement Date, the Company
shall pay monthly Rent to Party A on or before the last day of each and
every calendar month (rent in arrears) at the monthly rates noted in the
following Rental Escalation Table:
---------------------------------------------
RENTAL ESCALATION TABLE
---------------------------------------------
(RMB/Sq Mtr/Month) 10/1/96 1/1/97 7/1/97 10/1/99
- ----------------------------------------------------------------------
Leased Workshop 7.50 11.25 15.00 18.00
- ----------------------------------------------------------------------
Leased Office Space 3.75 5.63 7.50 9.00
- ----------------------------------------------------------------------
The final rates noted in the Rental Escalation Table will then remain
unchanging through September 30, 2001. Rental rates for subsequent five
year periods, beyond September 30, 2001, will be re-negotiated, at that
time, between the parties to this Agreement and be based upon a combination
of market rates at that time and the mutual agreement of Party A and the
Company.
5.2 By March 31, 1996, the Company shall provide Party A with the drawings and
specifications for the Leased Office Space to be constructed upon the roof
of the Leased Workshop.
5.3 Subject to Clause 5.2, herein, Party A shall pay for the cost of
constructing the Leased Office Space. The finished Leased Office Space
provided by Party A shall include plumbing, electric outlets, windows,
interior and exterior walls and doors and painting of the interior and
exterior surfaces, all as agreed upon between the Parties. The Company will
bear the costs of finishing the flooring and installing any heating,
venting, and air conditioning (HVAC) system. With the exception of the HVAC
system, permanent elements of the Leased Office Space shall become part of
the Leased Premises. Providing the Company provides Party A with the
drawings and specifications, as specified in Clause 5.2 herein, Party A
hereby agrees to complete construction of the Leased Office Space no later
than September 30, 1996 and allow the Company and its representatives free
access to the Leased Office Space during construction for the completion of
any necessary modifications and installations by the Company.
5.4 In the event Party A has not completed the Leased Office Space
construction as agreed upon between the Company and Party A, by the date
noted in Clause 5.3 hereof, the Commencement Date for the Leased Office
Space noted in Clause 5.1 hereof shall be delayed until the first day of
the month following completion of the Leased Office Space as agreed upon
between the Company and Party A. All subsequent escalation periods for the
Leased Office Space shall be delayed the same amount of time as the
construction delay.
5
<PAGE>
5.5 The Company shall pay for its actual water and sewer consumption. Party A
shall send an invoice to the Company by no later than the 15th day of the
month for the Company's water and sewer consumption for the previous
calendar month. On or before the last day of the month in which the invoice
is received by the Company, the Company shall reimburse Party A for the
actual charge rate charged by the Fuzhou Water Company, for the Company's
water and sewer consumption for the period. Maintenance and administration
of the water supply and sewer facilities utilized by the Company will be
the responsibility of the Company and the Company shall bear all the costs
related thereto. In addition, the Company shall share the costs for the
administration and maintenance of the water supply and sewer facilities
commonly utilized by the Company and Party A. Detailed agreement in
connection with such share of costs will be agreed upon between the Company
and Party A.
5.6 The Company shall pay for its actual electricity consumption. Party A shall
send an invoice to the Company by no later than the 15th of the month for
the Company's electricity consumption for the previous calendar month. On
or before the last day of the month in which the invoice is received by the
Company, the Company shall reimburse Party A for the actual charge rate
charged by the Fuzhou Electricity Bureau, for the Company's electricity
consumption for the period. Maintenance, repair, administration (including
depreciation) and overhault of the electricity supply facilities provided
by Party A pursuant to Clause 5.7 and utilized by the Company will be the
responsibility of the Company and the Company shall bear all the costs
related thereto.
5.7 Party A agrees to provide the Company with a set of electricity
transmission facilities available for the electricity supply of l000KVA.
The Company, with the assistance from Party A, will apply to the Fuzhou
Electricity Bureau for this 1000KVA electricity supply provided by Party A,
and Party A will pay all costs associated with approvals_exended_ by the
Fuzhou Electricity Bureau. Ownership of this 1000KVA electricity supply
will remain with Party A. In the event that the Company requires any
electricity transmission facilities available for the electricity supply of
over 1000KVA, it shall apply to the Fuzhou Electricity Bureau for such
extra requirement at its own cost. Party A may provide assistance.
ownership of any electricity supply facilities provided by the company will
remain with the Company.
5.8 All the charges payable to the Fuzhou Real Estate Administration Bureau for
the registration of the lease shall be equally borne by the Company and
Party A. Such charges shall be strictly limited to the handling fee for
registration of this Agreement.
5.9 Subject to the provisions of Clause 7.5 hereof, taxes, charges and fees
listed as follows shall be paid by Party A:
6
<PAGE>
(a) Fee for the use of the land occupied by the Leased Premises;
(b) Real estate and rental income tax for the Leased Premises;
(c) All maintenance and cleaning expenses for the Open Grounds;
(d) All electricity expenses for the lighting of the Open Grounds;
(e) All landscape expenses for the maintenance of the Attached Greenbelts;
(f) Any other taxes, charges, or fees required or imposed by the local,
municipal, provincial, or national government, which apply to the
Leased Premises.
5.10 Telecommunications and Datalines
(a) Party A and the Company shall mutually agree on necessary and
appropriate interplant telecommunication facilities and
infrastructure. Party A, at its sole expense, shall promptly install
such facilities and infrastructure. Party A and the Company agree to
discuss annually the quantity and quality of such telecommunications
facilities and infrastructure, and Party A will provide reasonable
upgrades, at its cost, as mutually agreed. If agreement cannot be
reached, the Company reserves the right to install facilities and
infrastructure it deems necessary, which facilities and infrastructure
may then, at the option of the Company, be designated either as the
sole property of the Company or as part of the Leased Premises.
(b) Party A will install, at its sole cost, telecommunication and data
lines throughout the Leased Premises, as agreed upon between the
Company and Party A.
(c) The Company will install, at its sole cost, telephone systems,
facsimile machines, computers, and other similar items that serve as
tertiary elements of the telecommunication system. All such items
shall remain the sole property of the Company.
5.11 All payments in this Lease shall be made in RMB.
CLAUSE 6. SUBLEASE AND ASSIGNMENT
6.1 The Company shall not sublease all or any part of the Leased Premises,
except to subsidiaries or affiliates of the Company, without the consent of
Party A, which consent shall not be unreasonably withheld or delayed. If
Party A has not responded within thirty (30) days following a request by
the Company, the request will be regarded as granted and the Company may
proceed with the sublease.
CLAUSE 7. MAINTENANCE AND REPAIR
7.1 Party A warrants that the Leased Premises are suitable for the leased
purposes defined in Clause 3 herein. As such, Party A agrees to undertake
any necessary
7
<PAGE>
repairs to maintain the Leased Premises which are the property of Party A
in a safe, habitable. and fully operable condition. Said repairs include,
but are not limited to, foundations, exterior walls, windows, doors, roofs,
plumbing, electrical systems, drainage systems, floors, and all other
physical conditions other than routine maintenance. Because such repair
may be crucial to the Company's operation, and in order to protect the
Company's interest, the Company hereby retains the right to perform such
repairs itself if Party A has not performed such repairs within a period
of ten (10) calendar days following notice to Party A by the Company. The
Company shall deduct the cost of such repairs from the rent otherwise owed
to Party A at the next rental month. In the event of an emergency, as
determined by the General Manager or Deputy General Manager of the Company,
the Company may effect such repairs, and deduct the cost from rent
otherwise due to Party A, if Party A has not executed such repairs within
24 hours following written notification of the emergency situation. If the
cost of any such repairs paid by the Company exceeds the rent amount due to
Party A for the next 12 month period, Party A shall reimburse the Company
for such additional expenses no later than the end of 12 months following
the expenditure by the Company. Notwithstanding the above, if repairs are
necessitated by the negligence of the Company, the Company is solely
responsible for the direct costs of needed repairs.
7.2 Routine maintenance (but not repair or replacement) of the Leased Premises
is the responsibility of the Company, and the Company agrees to maintain
the Leased Premises in a clean and orderly condition.
7.3 Any repairs or modifications necessitated by changes in the law, building
codes, national, provincial, or local requirements, or any other similar
reasons shall be solely the responsibility of Party A. Party A shall take
action to promptly comply with all such new or modified requirements. If
Party A does not so comply, the Company reserves the right, but not the
obligation, to make such changes or modifications, and to deduct the cost
thereof from the rent otherwise owed to Party A. If the cost of any such
changes or modifications paid by the Company exceeds the rent amount due to
Party A for the next 12 month period, Party A shall reimburse the Company
for such additional expenses no later than the end of 12 months following
the expenditure by the Company.
7.4 The Company will cooperate in all reasonable ways with Party A in effecting
the provisions of this Clause.
7.5 The Company agrees to share the costs of maintaining the open Grounds and
Attached Greenbelts (referred to in 5.9(c) through 5.9(e)). As such, within
thirty days of receipt of notice by Party A, the Company shall reimburse
Party A for fifty percent of all invoiced expenses Party A pays for the
maintenance of the Open Grounds and Greenbelt Areas, providing the invoiced
amount does not exceed 10000 RMB per month. If the proposed maintenance or
expense is to
8
<PAGE>
exceed 10000 RMB per month, both Party A and the Company must agree on the
maintenance or expense prior to incurrence thereof by Party A.
CLAUSE 8. REPRESENTATIONS, WARRANTIES, AND UNDERTAKINGS
8.1 Party A hereby covenants, represents and warrants to and undertakes with
the Company as follows:
(a) Party A is the owner of the Leased Premises and has the lawful right
to Lease the Leased Premises to the Company.
(b) The Leased Premises are suitable for the Company to carry out its
business activities as specified in the Contract and Clause 3 of this
Agreement.
(c) The Company is entitled to use the Leased Premises for carrying out
its business activities as specified in the Contract.
(d) The land use rights leased by Party A were originally injected by the
State for its subscription of shares of Party A, for which Party A is
not required to pay land use premiums, and which may be used by the
Company without any further payments to Fuzhou Real Estate
Administration Bureau or any other relevant land authorities in the
PRC, except for the charges for the registration of the lease as set
forth in Clause 5.8 of this Agreement. The Company shall not assume
any liability or obligation in connection with the lease of the land
use right from Party A, including, without limitation, the obligation
to pay any premium or fees to the Fuzhou Real Estate Administration
Bureau for the land use rights. Party A hereby indemnifies and holds
the Company and Party B harmless for any and all claims or demands for
payment of any premium or fees by any land authority.
(e) Party A represents and warrants to the Company that the Leased
Premises are environmentally acceptable, contamination free, and are
in full compliance with the relevant government authorities for land
administration, environmental protection, water and soil conservation
construction standards, fire prevention, and worker safety. Party A
hereby indemnifies and holds the Company and Party B harmless for any
and all claims, demands, liabilities, damages, costs and expenses that
arise out of, or in connection with, the lease and use of or
activities on the Leased Premises, or failure to meet the
representation and warranty or compliance standards set forth in this
provision. Party A further represents and warrants that to the best
of its knowledge no hazardous or toxic substances, contaminants, or
materials are or have been spilled, deposited, disposed, accumulated,
or released in, on, or under the Leased Premises. Further, Party A has
not received any notification from any party, and has no other
information, which indicates that there is environmental contamination
at the Leased Premises. Party A agrees to indemnify, defend and hold
harmless the liabilities or damages relating to the presence or
release, at, from, or to the Leased Premises, of any hazardous
substances or other environmental contamination other than any
contaminants that Party A demonstrates were
9
<PAGE>
used and initially released at the Leased Premises by the Company.
The obligations of Party A under this indemnity shall not be affected
by any assignment of this Agreement or sale of the Leased Premises,
and shall survive the expiration or earlier termination of this
Agreement, unless Party A demonstrates that specific contamination
was caused by the Company, in which event the Company shall bear
responsibility for the specific contamination and indemnify Party A
regarding the specific contamination.
(f) After Party A has finalized the registration of ownership of the
Leased Premises, Party A shall, within 30 calendar days, together with
the Company, register the lease of the Leased Premises with Fuzhou
Real Estate Administration Bureau.
(g) Party A shall pay the fees, taxes and charges as set forth in Clause
5.9 herein.
(h) If Party A wishes to transfer, sell or lease all or any portion of the
land use rights or facilities that are in the 223 Gong Ye Road
industrial complex but are outside of the Leased Premises, during the
term of this Agreement, Party A shall first notify the Company of its
intention to do so sixty (60) calendar days prior to Party A entering
into any transfer, sale, or lease agreement of its interest in the
said portion of the land use rights or facilities. If the Company
determines that the offered transfer, sale or lease of the said
premises may be harmful to the Company's operations, the Company
reserves the right, at its sole discretion, for a period of 180 days
following the transfer, sale, or lease of the said land use rights or
facilities to declare this Agreement null and void and effect early
termination of this Agreement following the terms of Clause 12 hereof.
(i) If Party A wishes to sell or transfer its interest in the Leased
Premises, during the term of this Agreement, Party A shall first
provide written notice to the Company of its intention to do so at
least sixty (60) calendar days prior to said offer to sell or transfer
its interest and shall grant to the Company a right of first refusal
to purchase the Leased Premises at essentially the same price and
terms to be offered. The Company shall have sixty (60) calendar days
to notify Party A of its acceptance of the offer to purchase the
Leased Premises. Only in the event that the Company declines to
purchase the Leased Premises, upon the terms and during the time frame
specified above, will Party A be entitled to sell or transfer its
interest in the Leased Premises to a third party, provided that the
price and other conditions of sale are not more favorable to such
third party than those offered to the Company and provided further
that such third party shall assume all the rights and obligations of
Party A under this Agreement. Because the operation and success of the
Company depend to a large extent upon the performance of Party A,
the Company is entitled to review and comment upon the viability of
the proposed buyer, and of its ability to meet the obligations of this
Agreement. However, Party A is not to be bound by the review and
comments of the Company.
10
<PAGE>
8.2 The Company hereby covenants to Party A as follows:
(a) The Company shall rent and use the Leased Premises in accordance with
the provisions of this Agreement and for the purpose of the Company as
set forth in the Contract;
(b) The Company shall pay Rent to Party A in accordance with Clause 5 of
this Agreement;
(c) Without prejudice to Clause 5.2 hereof, the Company shall obtain Party
A' s written consent, which consent shall not be unreasonably withheld
or delayed, for any major renovation or refurbishment of the Leased
Premises. "Major" in this section means costing more than US $75,000.
If Party A has not replied within 30 days following the Company's
submission of its request, the request may be deemed granted by Party
A, and the Company may proceed as it sees fit. Notwithstanding the
above, in its renovation or refurbishment of the Leased Premises the
Company shall not change or in any way endanger the structure of the
Leased Premises and shall not change the purposes of the Leased
Premises;
(d) The Company shall not intentionally use its machinery and equipment in
a manner which will intentionally damage the utilities affiliated to
the Leased Premises.
(e) During the term of this Agreement the production and business
activities of the Company shall comply with relevant and promulgated
laws and regulations of Fuzhou City and the PRC.
8.3 Each Party hereto acknowledges and agrees that it shall be responsible for
dealing with all actions, claims, suits and demands relating to
environmental pollution (including ground, water and air pollution) caused
at any time by that party in the Leased Premises regardless of when such
actions, claims, suits or demands are made or brought, and further
regardless of when the cause giving rise to any of such actions, claims,
suits or demands arose. Under no circumstances will one party be
responsible for any environmental pollution or breach of PRC laws and
regulations relating to environmental pollution caused by the other party,
or by third parties, in the Leased Premises. Each party hereto further
agrees to indemnify the other party hereto against all losses, liabilities,
claims, costs and expenses which may be suffered by the other party as a
direct or indirect result of any pollution of the environment (including
ground, water and air pollution) caused by the first mentioned party in the
Leased Premises at any time. Notwithstanding the above, the Company's
liability is limited to the requirements in effect only during the
Company's tenancy, and the Company's liability in any respect shall
expire upon cessation of this Agreement or cessation of the Company's
occupancy of the Leased Premises.
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<PAGE>
CLAUSE 9. INSURANCE
9.1 Throughout the entire term of this Agreement, the Company shall have in
effect insurance for the Leased Premises and for its own property and
assets installed or stored at the Leased Premises and pay the relevant
premiums for such insurance.
9.2 Throughout the entire term of this Agreement, Party A shall have in effect
liability insurance for the Leased Premises, of a type and in a quantity
satisfactory to the Company, for itself and its invitees, agents, and
activities.
CLAUSE 10. EFFECTIVENESS
10.1 This Agreement shall become effective on the date when it is signed and
dated by the representatives of Party A and the Company.
10.2 Party A shall deliver to the Company a copy of the certificate of lease
issued by the Fuzhou Real Estate Administration Bureau as soon as such
certificate is issued.
CLAUSE 11. TERMINATION OF LEASE
11.1 Either party to this Agreement may, by serving a written notice on the
other party, terminate this Agreement if any of the following events
happens:
(a) The other party ("Defaulting Party") fails to perform, observe, or
comply with any of the substantive terms and conditions in this
Agreement and the first mentioned party serves on the Defaulting Party
a written notice of default and after 60 days from the date of such
written notice the Defaulting Party has not rectified its non-
performance, non-observance or non-compliance to the satisfaction of
the first mentioned party or is not otherwise pursuing in good faith
resolution of the dispute.
(b) The other party becomes bankrupt or insolvent, or is dissolved or
liquidated.
(c) Should either of the parties be prevented from performing under this
Agreement by force majeure, including earthquake, typhoon, flood,
fire, war, civil unrest, labor disturbance, strikes, disruption of
transportation, disruption of communication systems or other
unforeseen events, and their happening and consequences are
unavoidable and beyond the control of the prevented party, such party
shall so notify the other party as soon as possible by the best means
reasonably available, and within 15 days thereafter provide detailed
information of the events. If requested by the other party, the
prevented party shall also provide verified documentary evidence
explaining the reason of its inability to execute, or of the delay in
execution of its performance. Both parties shall, through
consultations, decide whether
12
<PAGE>
to terminate this Agreement, or to waive partial performance of the
Agreement, or to delay the execution of performance of the Agreement
according to the effects of the events on the performance of the
Agreement.
(d) Upon occurrence of the early termination of the Contract, as defined
in Chapter XIV of the Contract.
11.2 If either party serves a written notice on the other party informing the
other party of its intention to terminate this Agreement as a result of the
happening of any of the events described in Clause 11.1 above, the Company
and Party A shall, as soon as practicable, enter into friendly discussions
in order to agree on an equitable and satisfactory solution. If no such
solution is agreed within a period of 60 days from the date of the written
notice served pursuant to Clause 11.1, then this Agreement shall be
terminated forthwith, but without prejudice to the rights and obligations
of the parties which have accrued prior to such termination. Except as
provided in Clause 8.1(e) hereof, the Company's environmental obligations
shall be terminated.
11.3 The Company may terminate this Agreement at any time after two years
following the Effective Date of this Agreement by providing 180 days
written notice to Party A. If the Company so terminates this Agreement
within the first three years from the Effective Date, the Company agrees to
continue to pay to Party A the rent effective as of the date of such
termination for a period of six months following the actual date of
termination. If the Company terminates this Agreement in the period from
the end of the third year of the Effective Date through the end of the
fifth year after the Effective Date, the Company agrees to continue to pay
to Party A the rent effective as of the date of termination for a period of
three months following the actual termination date. If the Company elects
to terminate this Agreement following the end of the fifth year from the
Effective Date, there will be no further payments to Party A following the
actual termination date.
CLAUSE 12. EFFECT OF EXPIRATION OR TERMINATION
12.1 Upon the expiration of the term of this Agreement or upon early termination
of this Agreement, the Company shall deliver vacant possession of the
Leased Premises to Party A and shall remove from the Leased Premises all
moveable machinery, equipment, materials, goods and facilities belonging to
the Company, unless the Company agrees to sell the same to Party A at a
price to be agreed, based upon independent valuation and/or negotiation.
The Leased Premises shall be returned to Party A in the same condition as
at the Commencement Date, except for reasonable wear and tear.
12.2 The expiration of this Agreement at the end of its term, or the termination
of this Agreement by either party for whatever reason, shall not prejudice
any of the
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<PAGE>
preexisting rights and obligations of the Company and Party A hereunder.
In such event, the Company's environmental obligations shall be
terminated, except as provided in Clause 8.1 (e) hereof.
12.3 Without prejudice to each party's right to terminate this Agreement in
accordance with Clause 11.1 hereof, each party shall also indemnify the
other party against losses, damages, costs and liabilities which the other
party may suffer as a direct consequence of any breach of such party's
representations, warranties and undertakings under Clause 8 hereof, or as a
direct consequence of the failure of such party to duly perform, observe or
comply with any of the terms and conditions of this Agreement.
CLAUSE 13. APPLICABLE LAW
13.1 The formation of this Agreement, its validity, interpretation and
performance, and settlement of the disputes shall be governed by the
relevant promulgated and publicly available laws and regulations of the
PRC.
CLAUSE 14. SETTLEMENT OF DISPUTES
14.1 The parties shall initially attempt to settle any disputes arising from the
execution of, or in connection with, this Agreement, through friendly
consultations between the parties.
14.2 Any disputes arising from this Agreement or in connection herewith which
have not been resolved within sixty days from the date of first issuance of
a letter by either party indicating the nature of the disputed matter, and
in accordance with Clause 14.1 herein, shall be settled through the
Arbitration Commission based in the PRC cities of Beijing, Shanghai, or
Fuzhou at the choice of the party initiating the arbitration, in accordance
with and bound by the explicit provisions of this Agreement as well as the
relevant laws and regulations of the PRC.
14.3 During any arbitration proceeding, this Agreement shall be performed
continuously by both parties except for the matters in dispute.
CLAUSE 15. QUIET POSSESSION
15.1 So long as the Company pays the rent and abides by the other provisions of
this Agreement, the Company shall enjoy quiet possession of the Leased
Premises.
CLAUSE 16. NOTICES
16.1 All notices shall be sent by written notice or facsimile transmission.
Notices and correspondence between Party A and the Company shall be sent to
the appropriate address of each party specified below.
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<PAGE>
if to Party A: Fujian Fufa Company Limited
Attn.: General Manager
223 Gong Ye Road
Fuzhou, Fujian 350004
PRC
Fax No: 0591-3713706
if to the Company: MagneTek Fuzhou Generator Company, Limited
Attn.: General Manager
223 Gong Ye Road
Fuzhou, Fujian 350004
PRC
Fax No: 0591-3713706
16.2 Each party may, by written notice or facsimile notification to the other
party, change its address for the purposes of correspondence at any time.
16.3 Every notice or correspondence shall be deemed to have been received, in
the case of facsimile transmission, at the time of transmission and, in the
case of a written notice, when delivered personally or 5 days after the
same has been put into the post.
CLAUSE 17. LANGUAGES
17.1 This Agreement is written in an English version and in a Chinese version.
Both language versions are of equal validity and effect.
Executed in Fuzhou, Fujian, PRC by the legal or duly authorized representatives
of Party A and the Company on this Monday, March 18, 1996.
PARTY A THE COMPANY
Fujian Fufa Company Limited MagneTek Fuzhou Generator Company Limited
/s/ Chan Guo Xiang /s/ Gary Wolfe
- ------------------------- -----------------------------
Chen Guo Xiang Gary Wolfe
Legal Representative Legal Representative
15
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.72
<SEQUENCE>12
<DESCRIPTION>EXHIBIT 10.72 SINO-AMERICAN EQUITY JOINT VENTURE
<TEXT>
<PAGE>
SINO-AMERICAN
EQUITY JOINT VENTURE CONTRACT
BETWEEN
FUJIAN FUFA COMPANY LIMITED
AND
MAGNETEK, INC.
FOR THE ESTABLISHMENT OF
MAGNETEK FUZHOU GENERATOR
COMPANY LIMITED
<PAGE>
CONTENTS
CHAPTER I GENERAL PROVISIONS 1
CHAPTER II PARTIES TO THE CONTRACT 1
CHAPTER III ESTABLISHMENT OF THE EQUITY JOINT VENTURE COMPANY 2
CHAPTER IV PURPOSE, SCOPE AND SCALE OF PRODUCTION AND BUSINESS 4
CHAPTER V TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL 5
CHAPTER VI RESPONSIBILITIES OF EACH PARTY TO THE COMPANY 9
CHAPTER VII PROVISIONS OF TECHNOLOGY 12
CHAPTER VIII SELLING OF PRODUCTS 16
CHAPTER IX THE BOARD OF DIRECTORS 17
CHAPTER X BUSINESS MANAGEMENT STAFF 18
CHAPTER XI PURCHASE OF EQUIPMENT 20
CHAPTER XII LABOR MANAGEMENT 20
CHAPTER XIII ACCOUNTING, AUDITING AND TAXATION 21
CHAPTER XIV DURATION AND TERMINATION OF THE CONTRACT 22
CHAPTER XV INSURANCE 26
CHAPTER XVI THE AMENDMENT OF THE CONTRACT 27
CHAPTER XVII LIABILITIES FOR BREACH OF CONTRACT 27
CHAPTER XVIII FORCE MAJEURE 28
CHAPTER XIX APPLICABLE LAW 28
CHAPTER XX SETTLEMENT OF DISPUTES 28
CHAPTER XXI LANGUAGE 30
CHAPTER XXII EFFECTIVENESS OF THE CONTRACT AND MISCELLANY 30
1
<PAGE>
SINO-AMERICAN
EQUITY JOINT VENTURE CONTRACT
BETWEEN
FUJIAN FUFA COMPANY LIMITED
AND
MAGNETEK, INC.
FOR THE ESTABLISHMENT OF
MAGNETEK FUZHOU GENERATOR COMPANY LIMITED
This Contract (hereinafter referred to as the "Contract") for the
Establishment of MAGNETEK FUZHOU GENERATOR COMPANY LIMITED (hereinafter
referred to as the "Company") is entered into by and between FUJIAN FUFA
COMPANY LIMITED (hereinafter referred to as "Party A"), and MAGNETEK, INC.
(hereinafter referred to as "Party B", and together with Party A, the
"Parties" or "Party" if the context so requires) and shall be effective as of
the date that the Contract, including its Schedules attached hereto, receives
approval by the Fuzhou Foreign Trade and Economic Cooperation Bureau of the
People's Republic of China ("PRC") or its relevant examination and approval
authority having due authority to approve this Contract (the "Approving
Authorities"). Such date is hereinafter referred to as the "Effective Date".
References to the PRC in this Contract shall not be applicable to Hong Kong,
Macau or Taiwan.
CHAPTER I GENERAL PROVISIONS
In accordance with "The Company Law of the People's Republic of China"
and "The Law of the People's Republic of China on Joint Ventures Using
Chinese and Foreign Investment", as well as other relevant promulgated and
publicly available Chinese laws and regulations, Party A and Party B,
adhering to the principle of equality and mutual benefit and through friendly
consultations, agree to jointly invest in, and to set up the Company, as an
equity joint venture limited liability enterprise in Fuzhou, Fujian, PRC, in
accordance with the following terms and conditions:
CHAPTER II PARTIES TO THE CONTRACT
Article 1
The Parties to this Contract are as follows:
1
<PAGE>
1.1 Party A: FUJIAN FUFA COMPANY LIMITED, a duly established and registered
Company under the laws of the PRC, whose legal address is at 223 Gong Ye
Road, Fuzhou, Fujian, PRC 350004. The designated legal representative for
Party A is :
Name: Chen Guo Xiang
Position: Chairman of the Board and General Manager
Nationality: Chinese Citizen
1.2 Party B: MAGNETEK, INC., a duly established and registered corporation
under the laws of the State of Delaware in the United States of America,
whose legal address is at 26 Century Blvd., P.O. Box 290159, Nashville,
Tennessee 37229-0159. The designated authorized representative for
Party B is:
Name: Gary R.Wolfe
Position: Vice-president of the Generator Business
Nationality: USA Citizen
1.3 The Parties reserve the right to change their respective legal or
authorized representatives from time-to-time upon prior written notice to
the other Party.
CHAPTER III ESTABLISHMENT OF THE EQUITY JOINT VENTURE COMPANY
ARTICLE 2
2.1 In accordance with "The Company Law of the People's Republic of China"
and "The Law of the People's Republic of China on Joint Ventures Using
Chinese and Foreign Investment" as well as other relevant promulgated and
publicly available Chinese laws and regulations, both Parties to this
Contract agree to establish MagneTek Fuzhou Generator Company Limited, a
Sino-American equity joint venture limited liability enterprise.
2.2 Contemporaneously with the execution of this Contract, the Parties have
approved and adopted the "Articles of Association" for the Company, which
shall come into effect together with the Contract upon the grant of
approvals by the Approving Authorities.
ARTICLE 3
3.1 The name of the Company in English is MagneTek Fuzhou Generator Company
Limited.
2
<PAGE>
3.2 The name of the Company in Chinese is "______________________________".
3.3 The name of the Company shall be used to identify the Company in
connection with any and all of its activities. The legal address of the
Company is at 223 Gong Ye Road, Fuzhou, Fujian, PRC 350004.
ARTICLE 4
4.1 The activities of the Company shall be governed, where applicable, by
this Contract and the relevant promulgated and publicly available laws,
decrees, rules and regulations of the PRC.
ARTICLE 5
5.1 The organization form of the Company is a limited liability company.
5.2 The Company shall be responsible for all its liabilities up to the
amount of its assets. Each Party's individual liability to the Company is
limited to and shall not exceed its respective capital contribution to the
Company's registered capital, such capital contribution hereinafter
sometimes being referred to as a Party's "Equity Interest" in the Company.
5.3 Neither Party A nor Party B shall be individually liable for any other
debt or obligation of any nature whatsoever of the Company, or of the other
Party, unless otherwise stated in writing and signed by a designated legal
representative (in the case of Party A) or a designated authorized
representative (in the case of Party B) of the Party to be charged with
such liability.
5.4 The Company shall not, and does not have the authority to bind or
obligate either Party A or Party B in their individual capacities, unless
otherwise provided in the Contract.
5.5 The profits of the Company shall be shared by the Parties in proportion
to their respective contributions to the registered capital of the Company.
5.6 The risks and losses of the Company shall be shared by the Parties in
proportion, but not to exceed their respective subscribed contribution to
the Company's registered capital.
3
<PAGE>
CHAPTER IV PURPOSE, SCOPE AND SCALE OF PRODUCTION AND BUSINESS
ARTICLE 6
6.1 The purpose of the Parties in entering into this Contract and
forming the Company is to enhance economic cooperation and technical
exchange, to elevate the product posture in the market, elevate the
process and management technology of the Company, improve the product
quality, develop new products, and gain and maintain a competitive
position in its world marketplace and enhance overall business
capabilities, quality, service and price, by adopting internationally
advanced and appropriate technology and scientific management methods, so
as to generate satisfactory economic returns to the Company and achieve
satisfactory economic profits for the Parties.
ARTICLE 7
7.1 The production and business scope of the Company shall include the
production of the generator products set forth in Schedule A of the
Contract, as may be amended from time-to-time by the Board of Directors,
and to include all related accessories and attachments for such generator
products (hereinafter referred to as the "Products").
7.2 The production and business scope of the Company will also include
aftermarket maintenance service and replacement parts sales for the
Products. Party A, including its direct and indirect subsidiaries and
affiliates, shall discontinue generator aftermarket maintenance service
and replacement parts sales within the PRC on a time schedule to be
agreed upon by the Company's Board of Directors, and upon authorization
by the Company, Party A may conduct replacement parts sales for the Party
A Products set forth in Section 2.1 of Schedule A sold outside the PRC,
exclusive of the Nippon Sharyo Generators, defined in Schedules A and D.
ARTICLE 8
8.1 The present estimated scale of production is approximately 7,000 units by
the end of calendar year 1998. Actual production levels are to be
determined by the Board of Directors based upon market demand and
conditions.
8.2 Within five (5) years from the Effective Date of this Contract, the
Parties shall review the production capacity and determine whether the
capacity of Products should be expanded or adjusted to match market
demand or other circumstances.
4
<PAGE>
CHAPTER V TOTAL AMOUNT OF INVESTMENT AND REGISTERED CAPITAL
ARTICLE 9
9.1 The total amount of investment of the Company will be 13,700,000.00
U.S. Dollars ("USD").
ARTICLE 10
10.1 The registered capital of the Company will be 10,548,332.00 USD.
ARTICLE 11
11.1 Each Party's cash and non-cash contribution to the registered capital of
the Company, shall be:
(a) Party A shall inject cash and non-cash contributions of 4,746,749.00
USD to the Company which shall constitute 45% of the registered
capital of the Company;
(b) Party B shall inject cash and non-cash contributions of 5,801,583.00
USD to the Company which shall constitute 55% of the registered
capital of the Company.
11.2 The Parties shall make their respective contributions to the registered
capital of the Company in the following manner:
PARTY A'S CAPITAL CONTRIBUTION
AND METHOD OF MAKING CONTRIBUTION
Party A's contribution of non-cash assets shall be in accordance with the
terms of the form of Capital Contribution Schedule set forth in Schedule
B, (hereinafter the "Contribution Schedule" or "Schedule B") and the form
of Deed of Generator Business Transfer and Technology License, a form of
which is attached hereto as Schedule D (the "Deed of Generator Business
Transfer and Technology License")
(i) Existing generator business ("Party A's Generator Business"), as
described in Schedule D
(ii) Rights to use the existing technology of Party A's Generator
Business
(iii) Rights to use the "Fufa" trademark on the Products
5
<PAGE>
equivalent in value to 424,000 USD
(iv) Cash 4,322,749 USD
PARTY B'S CAPITAL CONTRIBUTION
AND METHOD OF MAKING CONTRIBUTION
(i) Rights to use generator and automatic voltage regulator technology
(ii) Rights to use the "MagneTek" trademark on the Products
equivalent in value to 1,613,000 USD
(iii) Cash 4,188,583 USD
TOTAL REGISTERED CAPITAL 10,548,332 USD
The terms and conditions in accordance with which Parties A and B shall
make their respective contributions to the Company's registered capital
are set forth in Schedule B.
11.3 Immediately after the Business License Date (as hereinafter defined),
Party A shall enter into the Generator Business Transfer and Technology
License and Party B shall enter into the Deed of Technology License in
order to effect their respective contributions to the registered capital
of the Company as provided in Articles 11.1 and 11.2 herein. For purpose
of this Contract, the Business License Date shall be the date of the
initial business license for the establishment of the Company, as issued
by the relevant government authority.
11.4 Party A may use Renminbi of the PRC (RMB) as its cash contribution. The
exchange rate of RMB for USD will be the mid-rate of exchange for buying
and selling USD quoted by the People's Bank of China for the day when the
contribution of cash is received by the Company.
ARTICLE 12
12.1 Total contribution by the Parties to the registered capital of the
Company shall be made in predetermined installments on a timely basis
in accordance with Schedule B.
12.2 As soon as each Party has contributed an installment of its subscribed
capital, a PRC registered accountancy firm appointed by the Company shall
verify the actual contribution and issue an interim investment
verification report for such
6
<PAGE>
installment. A formal investment verification report shall be issued by
such registered accountancy firm when all the registered capital has been
fully paid-up. According to this investment verification report, the
Company shall issue to such relevant Party a certificate of capital
contribution which shall include the following items:
(i) name of the Company;
(ii) date of establishment of the Company;
(iii) name of the Party and total amount of registered capital subscribed
by that Party;
(iv) amount of capital contribution made by the Party to-date, and the
date of making the same;
(v) date of issuance of the certificate of capital contribution.
12.3 Within 90 days of signing the Contract by the respective, duly
authorized representatives of the Parties, Party A shall enter into the
form of Lease Contract. Pursuant to the terms of the Lease Contract,
Party A shall lease to the Company the Site and facilities (the "Site")
to be used by the Company for its manufacturing business, all as
indicated in the red line drawings and improvement descriptions contained
in the Lease Contract. At the time of the execution of the Lease
Contract, Party A shall hold a land use certificate evidencing Party A's
land use grant right in the Site being leased to the Company. Party A
shall have paid all premiums required under the land use grant between
Party A and the Fuzhou Land Administration Bureau covering the Site
thereby enabling Party A to legally lease the Site with improvements
thereon to the Company. Party A represents and warrants to Party B that
the Site is environmentally acceptable, contamination free and is in full
compliance with the relevant government authority for land
administration, environmental protection, water and soil conservation,
construction standards, fire prevention and worker safety. Party A hereby
indemnifies and holds harmless Party B and the Company for any and all
claims, demands, liabilities, damages, costs and expenses that arise out
of, or in connection with, any use of or activities on the Site, or
failure of the Site to meet compliance standards indicated in the
preceding sentence prior to the date of the Lease Contract.
12.4 Each Party shall cooperate and deal fairly and in good faith with the
other in the performance of this Contract and in the operation of the
Company.
12.5 In the event that the Company's Board of Directors approves an increase
of the registered capital of the Company, then each Party shall pay into
the Company, on such terms and at such times as shall have been approved
by the Company's Board of Directors, its respective portion of the
registered capital so increased, as
7
<PAGE>
determined by its Equity Interest immediately prior to the making of the
decision by the Board of Directors for the increase of the registered
capital.
12.6 If a Party fails to pay its portion of the Company's registered capital
when due (the "Non-performing Party"), whether the initial registered
capital approved in Chapter V of this Contract or increased registered
capital approved by the Board of Directors, and if the other Party (the
"Performing Party") makes its full capital contribution within the time
limit, then, subject to the provisions of Article 38, the Performing
Party shall have the right to subscribe to the portion of the
Non-performing Party, and consequently the Performing Party's Equity
Interest shall be increased and the Non-performing Party's Equity
Interest shall be decreased to reflect their actual payment into the
Company's registered capital.
ARTICLE 13
13.1 In case a Party wishes to assign all or part of its Equity Interest to a
third party, consent to such assignment must be obtained from the other
Party and approval thereof obtained from the Board of Directors. In
addition, approval must also be granted by the original Approving
Authorities. The assignee is required to assume all the assignor's rights
and obligations under this Contract in respect to the assigned portion of
the investment.
13.2 When one Party wishes to assign all or part of its Equity Interest to a
third party, the other Party shall have a right of first refusal to
purchase that portion of that Party's Equity Interest in the Company's
registered capital which that Party wishes to assign in accordance with
the following provision:
(a) A Party who wishes to assign all or part of its Equity Interest in
the Company (the "Transferring Party") shall notify the other Party
of its desire to do so, and the other Party shall have the
preferential right within 60 days following the receipt of such
notice to agree to purchase all of the offered Equity Interest upon
the terms offered by the Transferring Party.
(b) If at the end of such 60 day period, the other Party has not agreed
to purchase all the Equity Interest offered by the Transferring
Party upon terms which the Transferring Party is willing to accept,
the Transferring Party shall be free to assign all or part of its
Equity Interest to any third party, provided that the conditions of
such sale cannot be more favorable to the third party, and provided
further that the approvals referred to in Article 13.1 herein are
granted.
13.3 Notwithstanding anything contained in Articles 13.1 and 13.2 herein to
the contrary, if one Party wishes to assign or transfer all or a part of
its Equity Interest (the "Assigning Party") to an affiliate of the
Assigning Party or, in the event of a
8
<PAGE>
sale, merger, or assignment of the generator business of the Assigning
Party, to a third party which is at least as financially viable as the
Assigning Party (such affiliate or third party referred to as the
"Permitted Assignee"), provided that the Assigning Party has entered into
all necessary instruments and agreements with the Permitted Assignee for
the transfer of the title or right to use and sublicense the respective
technology previously licensed to the Company by the Assigning Party as
part of its contribution to the Company and further provided that in the
case where Party A is the Assigning Party, such Permitted Assignee is not
a company or entity that is a competitor of Party B, the other Party does
hereby give consent to such proposed assignment or transfer and shall
cause the Directors appointed by it to approve such assignment or
transfer. Approval must also be granted by the original Approving
Authorities. Such transfer or assignment will become effective upon the
grant of approval by the original Approving Authorities. The Permitted
Assignee is required to assume the Assigning Party's rights and
obligations under this Contract arising from ownership of the portion of
the Equity Interests being transferred. In the case where Party B is the
Assigning Party, Party B shall not use the technology it has licensed to
the Company to produce separately the Products in the PRC for the term of
this Contract. For purposes of this Article 13.3, and as used elsewhere
in this Contract, "affiliate" shall mean: (i) any company or entity that
directly or indirectly holds a controlling interest of the issued and
outstanding voting shares or equity interests in the Assigning Party (a
"Parent Company"); (ii) any company or entity in which the Assigning
Party directly or indirectly holds a controlling interest of the issued
and outstanding voting shares or equity interests; or (iii) any company
or entity in which a Parent Company directly or indirectly holds a
controlling interest of the issued and outstanding voting shares.
CHAPTER VI RESPONSIBILITIES OF EACH PARTY TO THE COMPANY
ARTICLE 14
Party A and Party B shall be respectively responsible for the following matters
in addition to other obligations under this Contract:
14.1 Responsibilities of Party A:
(A) Handling of applications and obtaining approval, registration and
business license for the establishment of the Company, assisting the
Company in being designated "technologically advanced enterprise" and/or
"export-oriented enterprise", and obtaining all the tax incentives
available in connection with such designation and assisting in other
matters concerning the establishment and operation of the Company from
relevant departments in charge in the PRC;
9
<PAGE>
(B) Assisting the Company with the organization, design and construction of
the premises and other facilities of the Company;
(C) Making cash and non-cash contributions, in accordance with the
stipulations in Article 11 of this Contract, Schedule B and Schedule D;
(D) Assisting the Company to make necessary installation, start up,
calibration and final acceptance of normal operation of machinery and
equipment provided to the Company by either Party A or B or acquired by
the Company;
(E) Assisting the Company and Party B in the importation of equipment,
machinery and raw materials; in handling customs procedures and
obtaining all necessary import licenses or permits relating to the
aforesaid imports and arranging the domestic transportation of the
aforesaid imports after they are shipped to a designated port of the PRC;
(F) Assisting the Company in purchasing or leasing equipment, components,
raw materials, articles for office use, means of transportation and
communication, etc.;
(G) Assisting the Company in ensuring adequate supplies of all necessary
utilities including water, electricity, transportation, and
telecommunications;
(H) For properties leased to the Company, assisting the Company to obtain all
adequate fire protection and other insurance to protect the interests
of the Company;
(I) Assisting the Company in recruiting and employing qualified Chinese
management personnel, technical personnel, workers and other personnel
needed;
(J) Assisting foreign workers and staff in applying for entry visas and work
licenses, and in processing their traveling matters; and providing
personnel records for all former employees of Party A who become
employees of the Company ;
(K) Recommending the needed technical personnel to support and use product
process and management technologies contributed to the Company by
Party B;
(L) Recommending the necessary English speaking technical and management
personnel, to enable timely and efficient training to be contributed by
Party B to the Company;
(M) Assisting the Company in obtaining adequate housing for its expatriate
employees and otherwise obtaining other welfare and recreational
facilities for its employees;
(N) Assisting the Company in applying to authorized banks approved by the
PRC State Administration of Exchange Control for the opening of foreign
currency
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and Renminbi accounts and assisting the Company in obtaining local
financing in Renminbi when necessary;
(O) Assisting the Company with applying to the relevant exchange control
agencies for the necessary foreign exchange registration in order to
obtain foreign currency and to use foreign currency in the conduct of
the Company's business;
(P) Assisting the Company with obtaining, and providing to the Company
copies of, all PRC, provincial or local laws and regulations or similar
information enacted or occurring which affect the operation of the
Company with the English translations to the extent available;
(Q) Executing the Deed of Generator Business Transfer and Technology License
immediately after the Business License Date, executing the Lease
Contract within ninety (90) days of the Effective Date; executing a
Trademark License with the Company covering the Party A trademark (the
"Party A Trademark License"); and a technical assistance agreement, more
particularly described in Article 15.4 hereof (the "Technical Assistance
Agreement").
(R) Such other matters as may be entrusted to Party A by the Company which
Party A agrees to accept.
14.2 Responsibilities of Party B:
(A) Contributing the right to use the technologies and trademarks and
contributing cash in accordance with the stipulations in Article 11 of
this Contract, Schedule B and Schedule C;
(B) Assisting the Company in selecting and purchasing machinery and
equipment;
(C) Assisting the Company in purchasing or leasing equipment, components,
raw materials, articles for office use, means of transportation and
communication, etc.;
(D) Execute the Deed of Technology and execute a Trademark License with the
Company covering the MagneTek trademark (the Party B Deed of Trademark
License") and an engineering assistance agreement more particularly
described in Articles 15.2 and 15.3 hereof (the "Engineering Assistance
Agreement");
(E) Assisting the Company with sales of its products in the PRC and for
export of its products in accordance with Schedule A;
(F) Providing information about sales conditions and sales channels for the
Company's products in the relevant export markets;
(G) Training the Company's management staff; and
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(H) Such other matters as may be entrusted to Party B by the Company which
Party B agrees to accept.
14.3 The reasonable, documented out of pocket expenses incurred by Party A or
Party B in their performance of their responsibilities in this Article
14 shall be reimbursed by the Company provided, however, said expenses
will be approved by the general manager prior to incurrence thereof.
CHAPTER VII PROVISIONS OF TECHNOLOGY
ARTICLE 15
15.1 Party B agrees that as part of its contribution to the Company's
registered capital, it will enter into the Deed of Technology License
and the Party B Deed of Trademark License with the Company pursuant to
which it shall license the Company rights to use the advanced technology
for the manufacture and sale of the MagneTek Products (as defined in
Schedule A) as well as rights to use its trademark on the MagneTek
Products, to enhance the capability of the Company in achieving its
purpose, scope and scale of production as defined in this Contract.
Detailed terms and conditions in respect of the technology license is
set forth in Schedule C. Upon the expiration or earlier termination of
this Contract or transfer of Party A's or Party B's Equity Interest
arising under Articles 32 or 33 of this Contract, the Deed of Technology
License, Deed of Trademark License and Engineering Assistance Agreement
shall terminate and all rights of the Company to use the technology and
other proprietary information and processes set forth therein shall
immediately terminate and such rights shall revert to Party B, except,
if applicable, such limited license rights set forth in Article 35.2
herein.
15.2 Party B shall provide to the Company ongoing engineering design and
technical assistance for the Products, including new product
development, technology improvements, competitive benchmarking and cost
reductions, advanced commercially feasible process definition and
improvement, and drawing control and other engineering document
maintenance pursuant to the terms of the Engineering Assistance
Agreement to be entered into between Party B and the Company.
15.3 In consideration for Party B's ongoing engineering design and technical
assistance as set forth in the Engineering Assistance Agreement, the
Company shall pay Party B a monthly fee in USD of 2.3% of net invoice
sales (defined as gross sales less sales returns, discounts and
allowances), hereinafter referred to as "Net Sales", of the Company, of
those Party B Products defined and specifically designated in Section
2.1(b) of Schedule A. The monthly fees shall be payable for the period
starting with the date on which the Company begins the initial
production to satisfy
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customer orders (the "Production Date") of the Party B Products through
the fifth year following said Production Date; thereafter, the fee shall
be reduced to 1.5% of such Net Sales of Party B Products for the
remaining term of this Contract, all as particularly set forth in the
Engineering Assistance Agreement. The dollar value of this monthly fee
shall be computed on the average of the mid-rate of exchange for buying
and selling USD as quoted by the People's Bank of China for the 20 days
preceding the last business day of each month. The fee shall be paid to
Party B within 30 days of the end of each month in USD and shall be
remitted by wire transfer to the account designated in writing by Party
B in its bank outside the PRC. The Company's obligation to pay this
monthly fee shall remain in effect for the term of the Engineering
Assistance Agreement or its earlier termination.
15.4 Party A shall provide ongoing engineering assistance and design
capability to the Company for the Party A Products specifically defined
in Schedule A above 500KW. All technology in connection with such
engineering assistance and design shall be licensed by Party A
exclusively to the Company. In consideration for Party A's ongoing
engineering design and technical assistance, the Company shall pay Party
A a monthly fee in RMB of 2.3% of net sales from the Party A Products
above 500KW. The monthly fees shall be payable for the period starting
with the Production Date of the Products as defined in Schedule A
through the fifth year following said Production Date; thereafter, the
fee shall be reduced to 1.5% of such net sales of Party A Products for
the remaining term of this Contract, all as particularly set forth in
the Technical Assistance Agreement to be entered into between Party A
and the Company. The fee shall be paid to Party A within 30 days of the
end of each month in RMB and shall be remitted by wire transfer to the
account designated in writing by Party A in its bank. The Company's
obligation to pay this monthly fee shall remain in effect for the term
of the Technical Assistance Agreement or its earlier termination.
ARTICLE 16
16.1 Party B commits that the product designs provided by Party B to the
Company in accordance with this Contract and Schedules A, B and C shall
be complete, precise, correct, effective, applicable and reliable and
will enable the Company to produce the Products as described in Schedule
A without further enhancement, if properly employed for the uses
stipulated in this Contract and Schedule C.
16.2 Party B commits that the technologies to be licensed by Party B to the
Company pursuant to this Contract and Schedules A, B and C have been
selected on the premise that such technologies are complete, precise,
correct, effective, applicable and reliable, are truly advanced and are
the same or similar to those currently employed by Party B on its own
behalf. These technologies will enhance the Company's operation and help
the Company achieve globally competitive
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standards of product quality and production capability, if properly
employed, for the uses stipulated in this Contract.
16.3 Party B is making application in the PRC to register its trademark to be
licensed to the Company in the PRC; upon taking all steps legally
required to enable Party B to license the right to use such trademarks
to the Company, Party B shall enter into the Party B Deed of Trademark
License with the Company.
ARTICLE 17
17.1 The Deed of Technology License and the Party A Generator Business
Transfer and Technology License shall have a term of ten years as set
forth in such agreements. The Party A Deed of Trademark License and
Party B Deed of Trademark License, and the Engineering Assistance
Agreement shall have a term of same duration as the term of this
Contract, including extensions to the term of such approved deeds
approved in writing by Party A, Party B and the Company, as the case may
be, and shall terminate concurrently with the expiration or earlier
termination of this Contract or a transfer of either Party A's or Party
B's Equity Interest pursuant to Article 32 or 33 hereof.
ARTICLE 18
18.1 Information relating to this Contract, its Schedules and the Articles of
Association, the Company's business and management, technology and
manufacturing processes and licensed intangible assets, customer lists,
sales, prices, financial affairs, and product development strategies
shall be kept confidential by Party A and Party B and the Company and
their employees and shall not be disclosed to any third party (except as
required by applicable law or regulation governing the Company and the
Parties), unless such information has previously been disclosed
generally to the public or the Board has authorized the disclosure of
such information. All information provided by Party A or Party B, or
their respective affiliates, under this Contract, its Schedules, the
Articles of Association of the Company and other related agreements
shall be kept confidential and shall not be disclosed by the Company,
Party A, Party B or any of their employees to any third party without
the prior written consent of the other Party and the Company, unless
such information has previously been disclosed generally to the public.
If Party A or Party B is in breach of this confidentiality provision it
shall pay to the non-breaching Party its actual damages and commercial
losses arising directly or indirectly from such breach and shall give
rise to termination of this Contract and dissolution to the Company, if
so elected, by the non-breaching Party pursuant to Article 33. The
obligations set forth in this Article 18.1 shall survive the termination
of this Contract for a period of three years.
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18.2 With respect to proprietary information and material to be furnished by
Party B under this Contract, which includes, but is not limited to, the
technology licensed pursuant to the Deed of Technology License to be
used for the production of the Products, Party A hereby covenants and
agrees that during the term of this Contract, and for a period of three
years following earlier termination thereof commencing from the date the
Contract is terminated, it will not directly or indirectly on its own
account or through any of its affiliates or otherwise, utilize such
technology or other proprietary information to produce generator
products or automatic voltage regulator products, except where Party A
has acquired the Equity Interest of Party B pursuant to Articles 31, 32
and 33 and subject to the limitations set forth in Article 35.2.
18.3 Party B hereby covenants and agrees that during the term of this
Contract and for a period of three years following earlier termination
thereof commencing from the date the Contract is terminated, neither it,
nor any of its direct or indirect affiliates, except for the Company,
shall utilize product designs contributed by Party A to the Company, or
use such product design information to produce the Party A Products or
other equivalent products.
18.4 During the term of this Contract or the duration of the Company,
whichever is shorter, the technology to be licensed by Party B to the
Company pursuant to Schedule C shall not be licensed by Party B to any
third party with the intent to use or sublicense the technology for the
manufacture and sale of such technology within the PRC. The Parties
shall manufacture and conduct direct marketing and sales of the Products
in the PRC exclusively through the Company. Party B retains its right
to use the technology it licenses to the Company to manufacture,
distribute and sell the Products outside the PRC; provided however,
Party B shall sell such Products manufactured outside the PRC into the
PRC exclusively through the Company, except in the following situations
in which Party B shall have the right to sell such Products directly:
(i) the Company cannot meet the specific production demands as required
by the market, and through a sales agreement between the Company and
Party B to be approved by a special majority of the Board, which special
majority of the Board shall be as defined in Article 4.14 of the
Articles of Association, or (ii) to Caterpillar to meet its requirements
during the initial period of the Company. Although the Company will
strive to achieve planned production capacity within 24 months after the
Business License is issued to the Company, the initial period referred
to herein shall be approximately 36 months after the business license is
issued to the Company but before the Company has started full production
and thus cannot satisfy Caterpillar's requirements for the Products.
This provision is not intended to prohibit or limit Party B's right to
participate in other ventures or business arrangements in the PRC which
do not engage in the production or sales of generator products or
provision of services in connection with generator products which are
not the Company's Products defined in Schedule A.
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18.5 Upon contribution of Party A's Generator Business to the Company in
accordance with Article 11.2 herein and Schedule D, Party A and its
affiliates shall not manufacture any generator products during the term
of this Contract and shall not develop or manufacture any new generator
products utilizing technologies listed in this Contract and the
Schedules attached hereto during the term of this Contract. In the case
of earlier termination of this Contract, such obligations shall survive
for another three years commencing from the date the Contract is
terminated.
CHAPTER VIII SELLING OF PRODUCTS
ARTICLE 19
19.1 The Company will use reasonable, commercial efforts to achieve and
maintain foreign exchange balance.
19.2 The Company may sell the Products, materials and components to Party A
or B for their own use.
ARTICLE 20
20.1 The Products sold by the Company, shall be sold into the Chinese
domestic and export market under the sales terms and conditions, and
through direct or independent channels, as determined by the Company in
accordance with Schedule A.
20.2 For Party A Products defined as Fufa Generators in Schedule A, when
those products exceed 500KW, the said products shall be sold through
Party A in accordance with an agreement to be established between Party
A and the Company.
ARTICLE 21
21.1 Party A shall not purchase products competitive with the Products unless
the Company is unable to meet Party A's reasonable requirements for
price, quality, service and commercial terms.
ARTICLE 22
22.1 The Company may set up sales branches which may, among other things,
provide maintenance or parts service for the Products in accordance with
the terms set forth in Schedule A.
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ARTICLE 23
23.1 The use of Party B's trademark by the Company shall be in accordance
with the provisions of the Party B Deed of Trademark License, provided,
however, the Company may use other labeling or trademarks not in
violation of the provisions of this Contract or the Party B Deed of
Trademark License.
CHAPTER IX THE BOARD OF DIRECTORS
ARTICLE 24
24.1 The Company shall establish a board of directors (hereinafter referred
to as the "Board", its members being the "Directors"), which shall be
the highest governing authority of the Company. The Board shall be
established on the Business License Date and such Board shall commence
its activities as from the date of its establishment.
24.2 The Board shall decide all issues concerning the Company that are not
delegated by it to the management staff of the Company, as provided for
hereinafter. The unanimous approval of the Directors attending in
person or by proxy a Board meeting at which a quorum is present shall be
required with respect to any "Major Issues", as defined in Article 4.13
of the Articles of Association of the Company. All other matters
required to be approved by the Board, including those matters set forth
in Articles 4.14 and 4.15 of the Articles of Association, shall require
approval by a majority of the Directors attending in person or by proxy
a Board meeting at which a quorum is present.
24.3 The Board shall be composed of a total of five Directors, of which two
shall be appointed by Party A and three by Party B, such appointments to
be made by written notice to the other party and to any Directors then
in office.
Each Party may, at any time, remove any Director appointed by such Party
by giving to the Company not less than 15 days prior written notice.
If a seat on the Board is vacated by the retirement, removal,
resignation, illness, disability or death of a Director, the Party which
originally appointed such Director shall appoint a successor to serve
out the remainder of such Director's term.
24.4 The Board shall have one Chairman (the "Chairman") to be appointed by
Party B and one Vice Chairman (the "Vice Chairman") to be appointed by
Party A.
The Chairman is the legal representative of the Company, but his actions
will only bind the Company if they are taken in accordance with the
authorization given to him by the Board. Whenever the Chairman is unable
to perform his duties for any
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reason, he shall authorize in advance the Vice Chairman to act as the
legal representative of the Company.
24.5 The term of office for the Directors, Chairman and Vice Chairman, shall
be four years or until such Director's earlier death, resignation or
removal, and any person serving in any such office may serve one or more
terms, consecutively or otherwise, if appointed or reappointed to such
office or offices by the relevant Party.
24.6 Matters requiring unanimous approvals of Directors and approvals of the
majority of the Directors are set forth in the Articles of Association.
24.7 Other matters regarding the Board shall be as set forth in the Articles
of Association.
CHAPTER X BUSINESS MANAGEMENT STAFF
ARTICLE 25
25.1 The Company shall establish a management staff which shall be
responsible for the Company's daily management, to include
responsibility for such matters as manufacturing and production
planning, engineering and technology, product development, marketing,
finance, human resources, total quality management, materials purchasing
and planning, supplier management, and other administrative tasks.
25.2 The management staff shall have a general manager nominated by Party B
and deputy general manager nominated by Party A which shall be approved
by the Board. The general manager and deputy general manager may
participate as Directors of the Board during the term of their
employment as general manager or deputy general manager if so appointed
by the appointing Party. The general manager may also be appointed as
the Chairman, if Party B so desires.
25.3 The general manager shall report to and be under the leadership of the
Board. The responsibility of the general manager is to carry out all
decisions of the Board , and organize and conduct the daily management
of the Company, which shall include, but not be limited to, the
following:
(a) Manage and direct the activities of management staff and all
employees.
(b) Determine business strategies and plans relative to markets, sales
and service channels, product pricing, costs and margins, new
product development, capital expenditures, competitive market
posture, annual sales plan and proposing an annual budget to the
Board. The general manager shall use his best efforts to consider
the interests of the Company when establishing price
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agreements for Company product sales to Caterpillar, Inc. and all other
markets.
(c) Responsibility for the Company's annual profitability and cash
flows.
(d) Implementation of appropriate hiring, firing and manpower staffing
decisions.
(e) Establishing hourly and salaried pay rates and any rate changes.
(f) Formulating and implementing the rules and regulations described
in the these Articles of Association.
(g) Recommending to the Board allocations and proportions of reserve,
expansion, bonus and welfare fund payments.
In handling the issues mentioned above, the general manager shall
consult with the deputy general manager. The general manager shall
authorize the deputy general manager, in writing, to act on his behalf
in his absence pursuant to the terms of such authorization.
The deputy general manager and the Company management staff shall be
supervised by and be responsible to the general manager.
25.4 The term of office and employment agreements for the general manager,
deputy general manager, manager of finance and other expatriate
employees, shall be approved by a majority of the Board.
Party B's international service employee policies shall be taken into
consideration by the Board for determination of the general manager's
compensation and terms of employment.
25.5 The general manager or deputy general manager shall not hold posts
concurrently in other economic organizations without prior approval from
a majority of the Board.
The general manager and deputy general manager shall not, in exercising
their powers, vary the resolutions of the Board or exceed the scope of
their authorities. The Directors, general manager and deputy general
manager owe a duty in exercising their powers, to exercise honesty,
loyalty and diligence pursuant to the PRC laws and regulations and the
Company's Contract and Articles of Association
ARTICLE 26
26.1 The Company shall have a manager of finance, who shall be part of the
management staff. The manager of finance shall be nominated by Party A
and shall be appointed by the general manager.
The manager of finance shall be responsible for the financial, treasury,
audit, and accounting affairs of the Company, and shall organize the
Company's business accounting department, provide for the adoption and
implementation of accounting
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practices acceptable to the Board, and implement the necessary financial
systems and internal controls.
26.2 The Company shall establish an engineering function for the purpose of
implementing ongoing benchmarking of competitive products in the PRC and
assisting other departments with the development of new products and
product improvements suitable for the Chinese market as determined by
the Board from time to time.
CHAPTER XI PURCHASE OF EQUIPMENT
ARTICLE 27
27.1 In its purchase of required raw materials, fuel, parts, means of
transportation, and articles for office use, etc., the Company shall
purchase from the suppliers who are able to provide the greatest
commercial value to the Company in terms of quality, cost, service,
transportation, logistics expense, expediency, responsiveness,
flexibility, etc.
ARTICLE 28
28.1 Final purchase decisions will be made by the Company. In case the
Company entrusts Party A or Party B to assist with the purchase of
equipment, the entrusted party shall ensure that such purchase is
carried out on such terms and conditions and at such costs, expenses and
prices as are acceptable to the Company. If the other Party believes it
is necessary to participate in such assistance, such Party may do so at
its own expense. If Party A or Party B is requested by the Company to
participate in the purchasing assistance, related expenses of such party
shall be reimbursed by the Company.
CHAPTER XII LABOR MANAGEMENT
ARTICLE 29
29.1 A form of uniform labor contract covering recruitment, employment,
dismissal, resignation, wages, benefits, incentives, unemployment,
welfare, penalties, and other matters concerning the staff and workers
of the Company (hereinafter referred to as the "Labor Contract"), shall
be developed by the general manager in accordance with the relevant
promulgated and publicly available laws and regulations of the PRC, and
then approved by the Board for the Company, in accordance with and
pursuant to the Articles of Association.
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29.2 The Company shall give first consideration to employees of Party A and
Party B in employing its staff.
CHAPTER XIII ACCOUNTING, AUDITING AND TAXATION
ARTICLE 30 ACCOUNTING AND AUDITING
30.1 The Company's accounting and auditing systems shall be provided for in
the Articles of Association.
30.2 Taxation
30.2.1 The Company shall pay out of its taxable income the applicable
PRC state and local income taxes according to the "PRC Income
Tax Law on Enterprises with Foreign Investment and Foreign
Enterprises" promulgated on April 9, 1991 and its Implementing
Regulations (collectively, the "FIE Tax Law"), and other
applicable taxes according to the relevant promulgated and
publicly available laws and regulations of the PRC.
30.2.2 The Company shall apply to relevant tax authorities for its
entitlement to the most favorable tax treatment permitted by PRC
law which, as of the date of this Contract, permits
production-oriented foreign investment enterprises with terms of
operation of ten (10) years or more (i) an exemption from income
tax in the first and second years commencing with the first
profit-making year, and (ii) a 50% reduction from the third year
to the fifth year. With the assistance of Party A, the Company
shall make all efforts necessary or advisable to obtain all
possible PRC or local tax exemptions, preferences, or reductions
to which it may now be, or hereinafter become, entitled. All
PRC taxes, duties, late charges, penalties and related tax
liabilities of the Company shall be calculated and paid in RMB.
Party A shall assist the Company in applying for designation of
the Company, if applicable, as a "technologically advanced
enterprise" or an "export-oriented enterprise" and shall assist
the Company in applying for all appropriate tax preferences
permitted on the date of this Contract.
30.3 The employees of the Company shall pay personal income tax in accordance
with "The Individual Income Tax Law of the PRC" as amended on October 31,
1993.
30.4 The Company shall obtain, within the permission of the relevant PRC laws
and regulations existing on the date of this Contract, all PRC import
licenses and approvals for duty-free clearance from the PRC Customs for
the import of equipment, machinery and raw materials purchased by the
Company.
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CHAPTER XIV DURATION AND TERMINATION OF THE CONTRACT
ARTICLE 31
31.1 This Contract and the Company shall continue for a term of 50 years
commencing on the Business License Date, unless earlier terminated in
accordance with the provisions of this Chapter.
31.2 Notwithstanding Article 31.1, either Party to this Contract may propose
an extension to the term of the Company not later than twelve (12)
months before expiry of the Company term. If such proposal is accepted
by the other Party and approved by the Board of Directors, then an
application for approval to extend the term of the Company shall be
submitted to the Approving Authorities not later than 180 days prior to
the expiry date of the Company term. Upon such approval being granted
the Company shall proceed with registration formalities to extend the
Company term.
ARTICLE 32
32.1 This Contract and the Company may be terminated before the expiration of
the 50 year term, in the event both Party A and Party B agree that an
earlier termination of this Contract and the Company is in the best
interest of both Parties, and only upon the unanimous approval of the
Board. Notwithstanding any other provisions in this Contract, upon any
expiration or earlier termination of this Contract or transfer of Party
A's or Party B's Equity Interest to each other within five years of the
Business License Date arising under Article 32 or Article 33 hereof, the
Deed of Technology License (Schedule C), Deed of Trademark License and
the Engineering Assistance Agreement entered into between the Company
and the Parties or their affiliates and any other agreements regarding
the license of technology or intellectual property from the Parties or
their affiliates to the Company shall immediately terminate and all
rights licensed pursuant to such deeds, contracts and agreements shall
revert to the Parties or their affiliates.
32.2 After consultation between the Parties, either Party to this Contract
may instruct the Directors appointed by it to request the Chairman of
the Board to convene a board meeting for the purpose of deciding on
whether or not to terminate this Contract prior to the expiry of the
joint venture term if, subject to the relevant provisions of the PRC
laws and regulations, any of the following events occurs:
(a) The other Party becomes insolvent or bankrupt, or is the subject
of proceedings for liquidation or dissolution, or ceases to carry
on its business.
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(b) The conditions or consequences of any force majeure described in
Article 40 hereof prevail with respect to either Party, or prevail
mutatis mutandis with respect to the Company, for a period in
excess of 180 days, and the Parties are unable to agree to an
equitable solution to resolve the problem.
(c) Change in the relevant PRC policies, laws or regulations which
materially affect the economic benefits and interests of the
Company or the Parties including without limitation the duty free
treatment on the import of machinery and equipment submitted in
1995 and income tax exemptions and reductions as set forth in
Article 30.2.2 hereof, or prevent Party B from participating in
the Company in the manner defined in this Contract or the Articles
of Association.
(d) The cumulative losses of the Company exceed fifty per cent (50%)
of the Company's total assets.
(e) The Company is unable to achieve its purpose and/or scope of
operation as set forth in this Contract.
32.3 If due to happening of any of the events described in Article 32.2
above, one Party (the "First Party") requests a termination of this
Contract and the dissolution of the Company at a meeting of the
Board of Directors, and if the other Party (the "Second Party") for
whatever reason does not agree to such request, then the First
Party shall have the right to require the Second Party to acquire
the First Party's entire Equity Interest in the Company. The price
for such acquisition shall be equal to the First Party's percentage
share in the Company's paid-up registered capital multiplied by the
net asset value of the Company as determined in accordance with
Article 33.4 and the Company's balance sheet as adjusted by the
Company's independent auditor as at the end of the most recent
accounting month immediately preceding the date when the First
Party's request for termination is made.
32.4 If the Second Party agrees to the First Party's request for terminating
this Contract and dissolving the Company, then both Parties shall
instruct their Directors to pass the appropriate Board resolution for
approving the termination of this Contract and dissolution of the
Company, and to take all other necessary actions and comply with all
legal formalities for effecting the dissolution of the Company.
32.5 If the Second Party does not agree to the First Party's request for
terminating this Contract, and if the First Party then exercises its
right to require the Second Party to acquire the First Party's entire
Equity Interest in the Company pursuant to Article 32.3, the Second
Party shall purchase the entire Equity Interest of the First Party at
the price stipulated in Article 32.3, and ensure that all loans and
debts owing by the Company to the First Party are repaid, and
liabilities issued or
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incurred by the First Party on behalf of, or for the account of, the
Company are released in full.
ARTICLE 33
33.1 In the circumstances set out below, this Contract may be terminated and
the Company may be dissolved or, if elected by the non-defaulting
Party, the non-defaulting Party may acquire the entire Equity Interest
of the defaulting Party in the Company:
(a) One Party commits a material breach of this Contract (the
"defaulting Party"), and does not remedy such breach within 90
days (or within such longer period as may be agreed by the
other Party (the "non-defaulting Party") from the date of
receipt by the defaulting Party of written notice of default
issued by the non-defaulting Party, and if such breach and
failure to adopt remedial measures is admitted by the
defaulting Party, then the non-defaulting Party shall have the
option of either acquiring the defaulting Party's entire Equity
Interest in the Company at the price stipulated in Article 33.2
hereof, or dissolving the Company, in addition to its right to
claim damages for breach of contract from the defaulting Party.
The defaulting Party shall consent to the dissolution of the
Company (if the non-defaulting Party requests dissolution), or
shall sell the defaulting Party's entire Equity Interest in the
Company to the non-defaulting Party at the price stipulated in
Article 33.2 (if the non-defaulting Party chooses to purchase
the defaulting Party's entire Equity Interest in the Company),
as the case may be.
(b) If the Party alleged by the non-defaulting Party to be in
default does not admit that it has committed a material breach
of this Contract, or if a dispute arises as to whether such
breach has been remedied within 90 days (or such longer period
as may be agreed by the non-defaulting Party) from the date of
receipt by the defaulting Party of written notice of default
issued by the non-defaulting Party, then the dispute shall be
settled by arbitration in accordance with Articles 42 and 43
hereof. If the arbitrators decision confirms that a serious
breach under this Contract has in fact occurred, or that such
breach was not satisfactorily remedied by the defaulting Party,
then the non-defaulting Party shall have the option of either
acquiring the defaulting Party's entire Equity Interest in the
Company at the price stipulated in Article 33.2 hereof, or
dissolving the Company, in addition to its right to claim
damages for breach of contract from the defaulting Party. The
defaulting Party shall consent to the dissolution of the
Company (if the non-defaulting Party requests dissolution) or
shall sell the defaulting Party's entire Equity Interest in the
Company to the non-defaulting Party at the price stipulated in
Article 33.2
24
<PAGE>
hereof (if the non-defaulting Party chooses to purchase the
defaulting Party's entire Equity Interest in the Company), as
the case may be.
33.2 The price at which the non-defaulting Party shall purchase (and at
which the defaulting Party shall sell) the defaulting Party's entire
Equity Interest in the Company pursuant to Articles 33.1(a) or 33.1(b)
hereof shall be equal to the defaulting Party's percentage share in the
Company's paid up registered capital multiplied by the net asset value
of the Company. Such net asset value shall be determined in accordance
with Article 33.4 and the Company's Balance Sheet as at the end of the
calendar month immediately preceding the date of issuance of notice by
the non-defaulting Party of its option of purchase.
33.3 If the non-defaulting Party chooses to purchase the defaulting Party's
entire Equity Interest in the Company pursuant to Articles 33.1(a) or
33.1(b) hereof, then the non-defaulting Party shall ensure that all
loans and debts owing by the Company to the defaulting Party are
repaid, and further ensure that the defaulting Party be released from
all existing guarantees and liabilities issued or incurred by the
defaulting Party on behalf of or for the account of the Company.
33.4 The "net asset value" referred to in Articles 32 and 33 hereof shall
mean the value of the Company's total assets minus the Company's total
liabilities and, to the extent that this is not considered as
liabilities, also the Company's bonus and welfare fund for staff and
workers. For the purposes of this Article, the value of the Company's
total assets shall mean whichever shall be the lower of :
(i) the total assets of the Company as valued at cost, but minus
depreciation and amortization (but without giving any value to
any technology licensed to the Company by Party A or Party B,
except the unamortized value of any technology for which the
Company retains a limited license pursuant to Article 35.2) as
determined by an independent qualified appraiser appointed by
the First Party in the case of Article 32 hereof, and appointed
by the non-breaching Party in the case of Article 33 hereof.
(ii) the market value of the total assets of the Company at the
relevant time as determined by an independent qualified
appraiser appointed by the First Party in the case of Article
32 hereof, and appointed by the non-breaching Party in the case
of Article 33 hereof.
ARTICLE 34
34.1 If the Company is to be dissolved for reasons other than due to the
expiry of the Contract term, the Board of Directors shall submit to the
Approving Authorities an application for dissolution of the Company.
25
<PAGE>
34.2 Upon expiry of the Contract term, or if the Company is to be dissolved
upon early termination of this Contract, the Company shall undergo
liquidation in accordance with the pertinent laws and regulations of
the PRC.
34.3 If, at the time the Company is to be dissolved, the Company's assets
are sufficient to settle all its debts and the Board of Directors is
able to organize the liquidation, then the Company shall undergo
ordinary liquidation and a liquidation committee shall be formed
consisting of at least three members of which two shall be Directors,
each representing the interests of their respective Party A and Party B,
and the third shall be an independent member mutually acceptable to
both Party A and Party B.
34.4 If at the time the Company is to be dissolved, the Company is insolvent
or the Board of Directors is unable to organize the liquidation
committee, then the Company shall undergo special liquidation in
accordance with the relevant laws and regulations of the PRC.
ARTICLE 35
35.1 Upon expiration of the term or upon earlier termination of this
Contract and the Company, the Parties shall enjoy the rights set forth
in this Chapter XIV and in Chapter X of the Articles of Association.
35.2 Upon the expiration or early termination of this Contract, Party A
shall have no right to the technology contributed by Party B in
accordance with this Contract, except that if Party A purchases Party
B's Equity Interest in the Company, pursuant to the provisions of
Articles 32 and 33 hereof (a "Party A Purchase"), then the Company
shall retain a limited license right from Party B to use the
technologies but not the Party B trademark used by the Company up to
the time of the termination or expiration as the case may be. In the
event of a Party A Purchase, Party B will retain all rights of
ownership or otherwise to the technology licensed, except for the
limited license provided in the preceding sentence.
CHAPTER XV INSURANCE
ARTICLE 36
36.1 Insurance policies of the Company for various kinds of risks shall be
underwritten in the PRC. Types, value and duration of insurance shall
be decided by the Board of Directors in accordance with the
stipulations of the PRC.
26
<PAGE>
36.2 At the discretion of the Board, the Company shall also carry such other
insurance underwritten within or outside the PRC for coverage of
product liability claims in connection with sales of the Products.
CHAPTER XVI THE AMENDMENT OF THE CONTRACT
ARTICLE 37
37.1 The amendment of this Contract, including any of its Schedules, shall
be effected through friendly negotiations and subject to the written
unanimous approval of the Parties, as well as, approval by the
Approving Authorities or other relevant governmental agencies.
CHAPTER XVII LIABILITIES FOR BREACH OF CONTRACT
ARTICLE 38
38.1 Both Party A and Party B shall make their respective contributions on
schedule as stipulated in Schedule B of this Contract. The defaulting
party shall pay to the other Party 5% of the scheduled contribution as
a penalty for its non-performance exceeding 30 days from the scheduled
date such contribution is due and an additional 10% of the scheduled
contribution shall be paid to the other party if the non-performance
exceeds the prescribed time limits by 60 days. Such payments shall be
in USD, and shall be computed on terms consistent with the provisions
of Article 11.4 hereof. Additionally, the non-defaulting Party may
suspend its performance under this Contract until such time as the
defaulting Party has cured its breach. If the defaulting Party's
default continues for 60 days or more, the other Party may terminate
this Contract and the Company in accordance with Chapter XIV of this
Contract and relevant and promulgated PRC laws.
ARTICLE 39
39.1 Should all or part of this Contract, including its Schedules, be unable
to be fulfilled owing to the fault of one Party, the defaulting Party
shall be liable to the non-defaulting Party for all losses arising from
such breach including lost profits of the Company and shall include the
reasonable attorney's fees and expenses incurred by the non-defaulting
Party in connection with such breach; provided however, in no event
shall either party be liable to the other for any damages in excess of
such Party's actual cash contribution to the Company. Should all or
part of this Contract including its Schedules be unable to be
fulfilled owing to the fault of both Parties, they shall bear liability
in proportion to the amount of losses caused by each Party's respective
breach.
27
<PAGE>
CHAPTER XVIII FORCE MAJEURE
ARTICLE 40
40.1 Should either of the Parties be prevented from performing under this
Contract by force majeure, including earthquake, typhoon, flood, fire,
war, civil unrest, labor disturbance, strikes, disruption of
transportation, disruption of communication systems or other unforeseen
events, and their happening and consequences are unavoidable and beyond
the control of the prevented Party, such Party shall so notify the
other Party as soon as possible by the best means reasonably available,
and within 15 days thereafter provide detailed information of the
events. If requested by the other Party, the prevented Party shall also
provide verified documentary evidence explaining the reason of its
inability to execute, or of the delay in execution of its performance.
Both Parties shall, through consultations, decide whether to terminate
this Contract and dissolve the Company, or to waive partial performance
of the Contract, or to delay the execution of performance of the
Contract according to the effects of the events on the performance of
the Contract.
CHAPTER XIX APPLICABLE LAW
ARTICLE 41
41.1 The formation of this Contract, its validity, interpretation and
performance, and settlement of the disputes shall be governed by the
relevant promulgated and publicly available laws of the PRC.
CHAPTER XX SETTLEMENT OF DISPUTES
ARTICLE 42
42.1 The Parties shall initially attempt to settle any disputes arising from
the execution of, or in connection with, this Contract, through
friendly consultations between the Parties.
42.2 In case no settlement can be reached within sixty days, then disputes
shall be settled through arbitration by the arbitration tribunal of the
International Chamber of Commerce situated in Geneva, Switzerland, in
accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce. The site of such arbitration
proceedings shall be Geneva, Switzerland, or such other site as
28
<PAGE>
the Parties may mutually agree. The arbitration proceedings shall be
conducted in English. Party A and Party B agree further:
(A) Arbitration may be initiated by either Party by giving thirty
days notice in writing to the other Party.
(B) Each Party may select one arbitrator and the arbitrators so
selected shall select an additional arbitrator, to compose an
arbitration panel of three members.
(C) If the arbitrators selected by Parties A and B are unable to
select a third arbitrator, then the Chairman of the
International Chamber of Commerce will select the third
arbitrator.
(D) The third arbitrator shall have technical knowledge or
experience relevant to the subject matter of the dispute to be
arbitrated.
(E) In making their decisions, the arbitrators shall be bound by
the explicit provisions of this Contract, its Schedules and the
Articles of Association of the Company, as well as the laws and
regulations of the PRC governing Chinese-Foreign equity
ventures.
(F) Decisions of the majority of arbitrators shall be final and
binding upon the parties and judgment on the award may be
entered in any court having jurisdiction and the Parties agree
to exclude any right of application or appeal to the courts of
Geneva or elsewhere in connection with any question of law
arising in the course of the arbitration or with respect to any
award made, except for appeals involving bad faith performance
of an arbitrator.
(G) The costs of arbitration, including reasonable attorney fees,
shall be borne by the losing Party or as otherwise specified in
the ruling of the arbitration tribunal.
(H) The award is to be considered as a settlement of the dispute
between the Parties and both Parties shall accept this
settlement as the true expression of their own determination in
connection therewith.
(I) All sums ordered by the arbitrators to be paid by one Party to
the other Party shall be paid in USD within sixty (60) days of
the arbitrators final decision.
29
<PAGE>
ARTICLE 43
43.1 During any arbitration proceeding, the Contract shall be performed
continuously by both Parties except for matters in dispute.
CHAPTER XXI LANGUAGE
ARTICLE 44
44.1 This Contract is written in both the Chinese language and the English
language. Both language versions shall be equally authentic, valid and
binding. In no event shall this Contract be construed or interpreted
for or against the position of either Party A or Party B in reliance
upon principles of construction of agreements that would penalize the
draftsman of an agreement. In the event of any ambiguity, both Parties
hereto having negotiated the terms, having participated in the
drafting, and having had the advice of all such advisors as they may
have deemed necessary or advisable in the preparation of this Contract
and the Articles of Association.
CHAPTER XXII EFFECTIVENESS OF THE CONTRACT AND MISCELLANY
ARTICLE 45
45.1 Schedules A and B of this Contract are hereby incorporated by reference
into the Contract and are to be considered an integral part of this
Contract and shall be effective upon approval by the Approving
Authorities. Schedules C, D, and E shall respectively be effective
upon the later to occur of full execution and delivery or relevant
approval of the Approving Authorities.
ARTICLE 46
46.1 Notices required or permitted in connection with any Party's
rights and obligations under this Contract shall be in writing and may
be sent to the other Party by (a) telegram of facsimile, the receiving
day of record shall be the next business day following the sending day;
or (b) by mail, the receiving day of record for mailed notices shall be
the 12th business day after the air postage seal date.
46.2 All such notices shall be given to the respective parties as follows:
30
<PAGE>
(A) If to Party A: Mr. Chen Guo Xiang
Chairman of the Board and General Manager
Fufa Company Limited
223 Gong Ye Road
Fuzhou, Fujian, PRC 350004
with a copy to: Mr. Lin Zhao Ping
Chief Engineer & Vice President
Fufa Company Limited
223 Gong Ye Road
Fuzhou, Fujian, PRC 350004
(B) If to Party B: Mr. Samuel Miley
Vice President and Secretary
MagneTek,Inc
26 Century Blvd
P.O.Box 290159
Nashville, TN, USA 37229-0159
with a copy to: Mr. Kyle Hale
VP & General Manager, Motors & Generators
MagneTek, Inc.
669 Natchez Trace Drive
Lexington, TN 38351, USA
46.3 Changes in the posting address of either Party A or Party B shall be
given by written notices as specified in this Article 46.
ARTICLE 47
47.1 All provisions, clauses and covenants contained in this Contract are
severable and in the event any of them shall be held to be invalid,
illegal or unenforceable, the remainder of this Contract shall be
interpreted as if such invalid, illegal or unenforceable provisions,
clause or covenants were not contained herein.
47.2 In consideration of the mutual covenants and undertaking of the Parties
as stated herein, the Parties have caused their duly authorized
representatives to execute this Contract on this 17th day of December,
1995 in Fuzhou, Fujian Province, the PRC.
31
<PAGE>
Fujian Fufa Company Limited MagneTek,Inc.
------------------------ ----------------------
Chen Gou Xiang Gary Wolfe
Legal Representative Authorized Representative
32
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.73
<SEQUENCE>13
<DESCRIPTION>EXHIBIT 10.73 AMENDED & RESTATED ASSET PUR. AGMT.
<TEXT>
<PAGE>
AMENDED AND RESTATED
ASSET PURCHASE AGREEMENT
among
MAGNETEK NATIONAL ELECTRIC COIL, INC.
MAGNETEK, INC.
EASTERN ELECTRIC APPARATUS REPAIR COMPANY, INC.
and
GRAND EAGLE COMPANIES INC.
- -------------------------------------------------------------------------------
Dated as of February 27, 1996
- -------------------------------------------------------------------------------
Sale of Assets
of
Field Service Center and Fairfield Supply Businesses
of
MagneTek National Electric Coil, Inc.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS
1.1 Certain Defined Terms................................................ 1
1.2 Other Definitional Provisions........................................ 8
ARTICLE 2
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 Purchase and Sale of the Assets...................................... 9
2.2 Limited Assumption of Liabilities.................................... 12
2.3 Closing.............................................................. 14
2.4 Purchase Price Adjustment............................................ 15
2.5 Allocation of Purchase Price......................................... 18
ARTICLE 3
CONDITIONS TO CLOSING
3.1 Buyer's Obligation................................................... 18
3.2 Seller's Obligation.................................................. 22
3.3 Certain Costs........................................................ 23
3.4 Co-operation as to Surveys........................................... 24
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND MAGNETEK
4.1 Authority; No Conflicts; Governmental Consents....................... 24
4.2 The Assets........................................................... 26
4.3 Organization and Standing of Canada Sub.............................. 26
4.4 Capital Stock of Canada Sub.......................................... 26
4.5 Equity Interests; Subsidiaries....................................... 27
4.6 Financial Statements................................................. 27
4.7 Absence of Changes or Events......................................... 28
4.8 Taxes................................................................ 28
4.9 Assets Other than Real Property Interests............................ 30
4.10 Real Property........................................................ 30
4.11 Intellectual Property................................................ 30
4.12 Furniture, Fixtures, Machinery and Equipment......................... 31
4.13 Contracts............................................................ 31
4.14 Litigation; Decrees.................................................. 33
4.15 Employee Benefit Plans............................................... 33
4.16 Compliance with Applicable Laws...................................... 36
4.17 Environmental Matters................................................ 36
4.18 Employee and Labor Relations......................................... 36
4.19 Corporate Names...................................................... 37
4.20 Licenses and Permits................................................. 37
4.21 Directors, Officers and Employees of the Company..................... 37
4.22 Customers............................................................ 37
i
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND GRAND EAGLE
5.1 Authority; No Conflicts; Governmental Consents....................... 38
5.2 Actions and Proceedings, etc......................................... 39
5.3 Availability of Funds................................................ 39
5.4 Buyer's and Grand Eagle's Acknowledgment............................. 39
5.5 Exon-Florio.......................................................... 40
ARTICLE 6
COVENANTS OF SELLER AND MAGNETEK
6.1 Access............................................................... 40
6.2 Ordinary Conduct..................................................... 40
6.3 Insurance............................................................ 42
6.4 Accounts Receivable.................................................. 42
6.5 Confidentiality Agreements........................................... 43
6.6 No Solicitation...................................................... 43
6.7 Lien Searches........................................................ 43
6.8 Third Party Consents................................................. 43
6.9 Environmental Matters................................................ 44
6.10 Rancho Dominguez Lease Assignment.................................... 45
6.11 Rancho Dominguez Facility Project.................................... 46
6.12 Delivery of Schedules................................................ 46
ARTICLE 7
COVENANTS OF BUYER
7.1 Confidentiality...................................................... 46
7.2 Accounts Receivable.................................................. 47
7.3 Insurance............................................................ 47
7.4 Assets Remaining on Buyer's Property................................. 47
7.5 Change of Name of Canada Sub......................................... 48
ARTICLE 8
MUTUAL COVENANTS
8.1 Cooperation.......................................................... 48
8.2 Publicity............................................................ 48
8.3 Antitrust Notification............................................... 48
8.4 Records.............................................................. 49
8.5 Consents............................................................. 50
ARTICLE 9
EMPLOYEE BENEFIT MATTERS
9.1 Employee Benefit Matters............................................. 50
ARTICLE 10
ii
<PAGE>
INDEMNIFICATION
10.1 Tax Indemnification.................................................. 53
10.2 Other Indemnification by Seller...................................... 54
10.3 Other Indemnification by Buyer....................................... 55
10.4 Indemnification for Environmental Matters............................ 55
10.5 Indemnification for Canada Sub....................................... 56
10.6 Losses Net of Insurance, Etc......................................... 57
10.7 Termination of Indemnification....................................... 58
10.8 Procedures Relating to Indemnification (Other than
Under Section 10-1)................................................ 58
10.9 Procedures Relating to Indemnification of Tax Claims................. 59
10.10 Survival of Representations.......................................... 60
10.11 Mandatory Setoff of Seller Note...................................... 61
ARTICLE 11
POST CLOSING MATTERS
11.1 Tax Matters.......................................................... 61
11.2 Access to Former Business Records.................................... 62
11.3 Use of Trademark and Trade Names..................................... 63
11.4 Further Assurances................................................... 63
ARTICLE 12
GENERAL PROVISIONS
12.1 Assignment........................................................... 64
12.2 No Third-Party Beneficiaries......................................... 64
12.3 Termination.......................................................... 64
12.4 Expenses............................................................. 65
12.5 Attorneys' Fees...................................................... 65
12.6 Amendments........................................................... 66
12.7 Notices.............................................................. 66
12.8 Interpretation; Exhibits and Schedules............................... 67
12.9 Counterparts......................................................... 68
12.10 Entire Agreement..................................................... 68
12.11 Fees................................................................. 68
12.12 Severability......................................................... 68
12.13 Governing Law........................................................ 68
iii
<PAGE>
LIST OF EXHIBITS
Exhibit A Financial Statements
SCHEDULES
Schedule 2.1(d) (xiii) Excluded Agreements
Schedule 2.1(d) (xiv) Excluded Claims
Schedule 3.1(b) (ii) Title Commitment Amounts
Schedule 4.3 Jurisdictions
Schedule 4.6 Historical Financials
Schedule 4.4 Capital Stock of Canada Sub
Schedule 4.7 Changes of Events Since Balance Sheet Date
Schedule 4.8 Tax Exceptions
Schedule 4.9 Liens
Schedule 4.10 Company Properties
Schedule 4.11 Intellectual Property
Schedule 4.13 Certain Contracts
Schedule 4.14 Litigation
Schedule 4.15 Exceptions re Employee Plans
Schedule 4.15(a) Employee Plans
Schedule 4.16 Compliance with Laws
Schedule 4.17 Environmental Matters
Schedule 4.18 Labor Matters
Schedule 4.19 Corporate Names
Schedule 4.20 License and Permits
Schedule 4.21 Directors and Officers
Schedule 4.22 Customers
Schedule 6.2 Exceptions to Ordinary Course
Schedule 6.8 Third Party Consents
Schedule 6.9 Environmental Matters
Schedule 6.11 Facility Project
Schedule 7.4 Certain Excluded Assets Remaining on Premises
iv
<PAGE>
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT
AMENDED AND RESTATED ASSET PURCHASE AGREEMENT dated as of February 27,
1996 (this "Agreement"), among MAGNETEK NATIONAL ELECTRIC COIL, INC., a
Delaware corporation ("Seller"), MAGNETEK, INC., a Delaware corporation
("MagneTek"), EASTERN ELECTRIC APPARATUS REPAIR COMPANY, INC., a Georgia
corporation ("Buyer"), and GRAND EAGLE COMPANIES INC., a Delaware corporation
("Grand Eagle").
Seller desires to sell to Buyer, and Buyer desires to purchase, all of
the Assets (as defined below).
Accordingly, the parties hereto hereby agree as follows:
Seller, MagneTek, Buyer and Grand Eagle hereby amend and restate their
agreement executed as of February 27, 1996, as set forth in this Agreement,
and supersede it entirely with this Agreement.
ARTICLE 1
DEFINITIONS
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, the following
terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Affiliate" shall have the meaning set forth in Rule 12b-2 promulgated
under the Exchange Act by the SEC, as in effect on the date hereof.
"Affiliated Group" means an affiliated group as defined in Section
1504(a) of the Code (or any analogous combined, consolidated or unitary group
defined under state, local or foreign income tax law) of which Seller or any
Subsidiary is or has been a member.
"Ancillary Agreement" means the Seller Note, the Non-Competition
Agreement, and the Bill of Sale and Assignment and Assumption Agreement.
"Assets" has the meaning set forth in Section 2.1(b).
"Assumed Liabilities" has the meaning set forth in Section 2.2 (a)
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<PAGE>
"Bill of Sale and Assignment and Assumption Agreement" means such
document in Seller's customary form and reasonably satisfactory to Buyer.
"Business" means each of (a) MagneTek's field service business conducted
through Seller at Tucson, Arizona, Orlando, Florida, Joliet, Illinois, Rancho
Dominguez, California, New Orleans, Louisiana, Akron, Ohio, Pittsburgh,
Pennsylvania, Alcoa, Tennessee, Houston, Texas, and Spokane, Washington, and
through Canada Sub at St. Jean, Quebec, and (b) MagneTek's Fairfield Supply
business conducted through Seller at Fairfield, New Jersey.
"Business Day" means a day other than a Saturday or a Sunday or other
day on which commercial banks in New York or Chicago are authorized or
required by law to close.
"Canada Sub" means MagneTek National Electric Coil Limited, an Ontario
corporation.
"Canada Sub Plan" means any Employee Plan maintained or sponsored by the
Canada Sub or any of its ERISA Affiliates or to which Canada Sub or any of
its ERISA Affiliates has an obligation to contribute immediately prior to the
Closing Date which covers employees, former employees, or the dependents or
beneficiaries thereof of the Canada Sub.
"Canada Sub Shares" means the issued and outstanding capital stock of
Canada Sub.
"Cash Purchase Price" has the meaning set forth in section 2.1(a).
"Claim" means any claim, cause of action, chose in action, right of
recovery, right of set off, or right of recoupment (including any such item
relating to the payment of Taxes).
"Closing" has the meaning set forth in Section 2.3.
"Closing Balance Sheet" has the meaning set forth in Section 2.4(a).
"Closing Date" has the meaning set forth in Section 2.3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Company Employee" means any person employed by MagneTek or an Affiliate
of MagneTek's other than Canada Sub on the Closing Date whose
responsibilities relate primarily to the Business, including, without
limitation, any person on lay-off, leave of
Page 2
<PAGE>
absence, sick or short-term disability leave, but excluding any person on
long-term disability leave.
"Company Plan" means any Employee Plan maintained or sponsored by
MagneTek or Seller or any ERISA Affiliate of either of them or to which
MagneTek, Seller or any ERISA Affiliate of either of them has an obligation
to contribute immediately prior to the Closing Date which covers any Company
Employees, former employees, or the dependents or beneficiaries thereof.
"Company Property" has the meaning set forth in Section 4.10.
"Confidentiality Agreement" has the meaning set forth in Section 7.1.
"Contract" means any contract, agreement, license, lease, sales or
purchase order or other legally binding commitment, whether written or oral,
to which Seller or MagneTek is a party and relating primarily to the
Business, or to which Canada Sub is a party.
"Contractual Obligation" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture,
deed of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or by which it or any of its
property or assets is subject.
"Employee Plan" means any employment, collective bargaining agreement,
consulting, severance or other similar contract, arrangement or policy and
each plan, arrangement, program, agreement or commitment providing for fringe
benefits, vacation benefits, retirement benefits, life, health, disability or
accident benefits or other welfare benefits or for deferred compensation,
profit-sharing, bonuses, stock options, restricted stock, stock appreciation
rights, stock purchases or other forms of incentive compensation.
"Environmental Laws" means all currently applicable federal, state and
local and, with respect to Canada Sub, federal and provincial Canadian, laws,
rules, regulations, orders and ordinances relating to pollution or protection
of the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C.
Section 9601 ET SEQ., the Resource Conservation and Recovery Act of 1976
("RCRA"), 42 U.S.C. Section 6901 ET SEQ., the Emergency Planning and
Community Right-to-Know Act ("Right-to Know Act"), 42 U.S.C. Section 11001 et
SEQ., the Clean Air Act ("CAA"), 42 U.S.C. Section 7401 ET seq., the Federal
Water Pollution Control Act ("Clean Water Act"), 33 U.S.C. Section 1251 ET
SEQ., the Toxic Substances Control Act ("TSCA"), 15 U.S.C. Section 2601 ET
SEQ., and
Page 3
<PAGE>
the Safe Drinking Water Act, 42 U.S.C. Section 300f ET SEQ., each as amended,
and any regulations or rules adopted or promulgated pursuant thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" means, with respect to any Person ("First Person"),
any other Person with whom the First Person constitutes all or part of a
controlled group, which would be treated with the First Person as under
common control or whose employees would be treated as employed by the First
Person, under Section 414 of the Code and any regulations, administrative
rulings and case law interpreting the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations of the SEC promulgated from
time to time thereunder.
"Estimated Adjustment" has the meaning set forth in Section 2.3.
"Excluded Assets" has the meaning set forth in Section 2.1(d).
"Excluded Liabilities" has the meaning set forth in Section 2.2(b).
"Financial Statements" has the meaning set forth in Section 4.6(a).
"GAAP" means generally accepted accounting principles in the United
States of America.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Materials" means: hazardous substances, extremely hazardous
substances, Toxic Substances, as defined in TSCA, or hazardous wastes as
defined under any Environmental Laws and, for purposes of Canada Sub,
"contaminants" as defined in currently applicable federal and provincial
Canadian law.
"Historical Financials" has the meaning set forth in Section 4.6(a).
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended from time to time.
Page 4
<PAGE>
"Indemnified Buyer Affiliates" means Buyer, Grand Eagle, Canada Sub,
each Affiliate of each of the foregoing, and each of their respective
officers, directors, stockholders, employees and agents.
"Indemnified Seller Affiliates" means Seller, MagneTek, each Affiliate
of each of them, and each of their respective officers, directors,
stockholders, employees and agents.
"Indemnified Person" means any Indemnified Buyer Affiliate and any
Indemnified Seller Affiliate.
"Indemnifying Person" means any Person from whom indemnification is
being sought hereunder.
"Intellectual Property" has the meaning set forth in Section 4.11.
"IRS" means the Internal Revenue Service.
"Knowledge" with reference to any of the representations and warranties
of Seller or MagneTek means the actual knowledge of any "officer", as such
term is defined in 17 C.F.R. Section 240.16a1(f), of Seller or MagneTek, as
the case may be, and of any other employee of Seller or MagneTek, as the case
may be, who had, on the date of this Agreement, responsibility on a
company-wide level for matters that are the subject of such representation
and warranty.
"Larsen-Hogue Plan" means the MagneTek, Inc. Utilities and Power
Products Division Larsen-Hogue Electrical Service Repair Pension Plan, a
defined benefit pension plan maintained by MagneTek pursuant to a collective
bargaining agreement for certain Company Employees.
"Leased Property" has the meaning set forth in Section 4.10.
"Lien" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other) or other security agreement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement or any financing lease having
substantially the same economic effect as any of the foregoing).
"Loss" means any loss, liability, claim, damage or expense (including
reasonable attorneys' fees and disbursements and the costs of investigation).
Loss recoverable hereunder is subject to the limitations set forth in
Section 10.6.
"Material Adverse Effect" means, with respect to either or both of
Seller and Canada Sub, a material adverse effect on either
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(i) the business, operations, property or condition (financial or other) of
the Business, taken as a whole, or (ii) the ability of Seller or MagneTek to
consummate the transactions contemplated by this Agreement.
"Material Contracts" has the meaning set forth in Section 4.13.
"Non-Competition Agreement" has the meaning set forth in Section 3.1(p).
"Ordinary Course" means the ordinary course of business substantially in
the same manner as now conducted and consistent with past custom and practice
(including with respect to quantity and frequency).
"Other Agreement" means the Asset Purchase Agreement of even date
herewith among MagneTek, Grand Eagle, MagneTek Ohio Transformer, Inc. and OT
Acquisition Corp.
"Owned Property" has the meaning set forth in Section 4.10.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permitted Lien" has the meaning set forth in Section 4.9).
"Permitted Title Exceptions" means, with respect to each Company
Property, (i) exceptions to title disclosed in a preliminary title report
delivered to Buyer and in any such preliminary title report previously
obtained by Buyer or delivered by Seller to Buyer, (ii) all leases, occupancy
agreements and other similar agreements to which Seller or Canada Sub, as
applicable, is a party, together with all modifications, extensions and
renewals thereof and any guarantees of any of the foregoing with respect to
or demising any part of the applicable Company Property, (iii) all matters
which would be disclosed in the Surveys that are referenced in Section 3.4 of
this Agreement, (iv) any matters created by or through Buyer or Grand Eagle,
their lenders or any of the affiliates or agents of any of the foregoing, (v)
general and special property taxes and assessments not yet delinquent as of
the Closing, and (vi) all matters of record in the official records of the
county in which the Company Property is located.
"Person" means an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Purchase Price" has the meaning set forth in Section 2.1(a).
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"Records" has the meaning set forth in Section 2.1(b)(xi).
"Requirement of Law" means, as to any Person, the Certificate or
Articles of Incorporation and By-Laws or other organization or governing
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject, including, but not
limited to any law, treaty, rule, regulation or determination with respect to
public health and safety or worker health and safety, including, without
limitation, the Occupational Safety and Health Act, 42 U.S.C. Section 651 ET
SEQ.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended from time
to time, and the rules and regulations of the SEC promulgated from time to
time thereunder.
"Seller Facility" means any property owned, leased, used or occupied by
Seller or Canada Sub or any Affiliate of either of them at any time on or
before Closing.
"Seller Note" means a promissory note issued by Grand Eagle in customary
form and reasonably satisfactory to MagneTek and Grand Eagle.
"September Balance Sheet" has the meaning set forth in section 4.6(a).
"Stay and Pay Agreements" means any agreement, whether written or oral,
between MagneTek, Seller or Canada Sub, on the one hand, and any Company
Employee or employee of Canada Sub, on the other hand, to pay any amount upon
the termination of employment of the Company Employee or employee of Canada
Sub that is triggered by the transactions contemplated by this Agreement.
"Subsidiary" means, collectively, each corporation, limited liability
company, partnership, association and other business entity of which (i) if a
corporation, a majority of the total voting power of shares of stock entitled
to vote in the election of directors is at the time owned or controlled,
directly or indirectly, by Seller or one or more Subsidiaries, or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or other
similar ownership interest thereof is at the time owned or controlled (as
defined in Rule 405 under the Securities Act), directly or indirectly, by
Seller or one or more Subsidiaries or a combination thereof. For purposes
hereof, Seller or a Subsidiary shall be deemed to have a majority
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ownership interest in a limited liability company, partnership, association
or other business entity if Seller or one or more Subsidiaries or any
combination thereof shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Tax" or "Taxes" means with respect to any Person (a) all federal,
state, local, foreign or other taxes, including net income, gross income,
unitary, gross receipts, sales, use, intangible, ad valorem, franchise,
profits, license, withholding, payroll, employment, excise, severance, stamp,
transfer, occupation, premium, property or windfall profit tax, custom, duty
or other tax, governmental fee (similar to a tax) or other like assessment or
charge of any kind whatsoever, together with any interest or penalty or
addition to tax imposed by any jurisdiction or other Governmental Authority
(federal, state, local or foreign), on such Person, and (b) any transferee or
secondary liability of such Person for a Tax and any Tax liability assumed by
agreement or arising as a result of being (or ceasing to be) a member of any
Affiliated Group, or being included or required to be included in any Tax
Return relating thereto.
"Tax Returns" means all returns or material reports or forms required to
be filed with a Governmental Authority with respect to Taxes.
"Third Party Consents" has the meaning set forth in Section 6.8.
"WARN Act" means the Worker Adjustment and Retraining Act of 1986, as
amended from time to time.
"Warranty Claims" has the meaning set forth in Section 2.2 (a)(ii).
1.2 OTHER DEFINITIONAL PROVISIONS. (a) Terms defined in this Agreement
in Sections other than Section 1.1 shall have the meanings as so defined when
used in this Agreement.
(b) As used herein, accounting terms relating to Seller or Canada
Sub not defined or to the extent not defined, shall have the respective
meanings given to them under GAAP.
(c) Unless express reference is made to Business Days, references
to days shall be to calendar days.
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ARTICLE 2
CLOSING; PURCHASE PRICE ADJUSTMENT
2.1 PURCHASE AND SALE OF THE ASSETS. (a) On the terms and subject to
the conditions of this Agreement, Seller will sell, transfer and deliver to
Buyer free and clear of any Liens (other than Permitted Liens), and Buyer
will purchase from Seller, all of Seller's right, title and interest in the
Assets, for the aggregate consideration of (i) Twelve Million Two Hundred
Seventy-Five Thousand Dollars ($12,275,000.00) subject to adjustment as set
forth in Section 2.4 (the "Cash Purchase Price"), and (ii) a Seller Note in
the principal amount of Two Million Seventy-Five Thousand Dollars
($2,075,000.00) (collectively, the "Purchase Price").
(b) In this Agreement, "Assets" means (A) the Canada Sub Shares
and (B) the assets of Seller used primarily in or arising primarily out of
the Business, other than the Excluded Assets, wherever located and whether or
not reflected in Seller's books, records or financial statements, including,
without limitation, all of Seller's:
(i) tangible personal property (such as machinery,
equipment, inventories of raw materials and supplies, manufactured and
purchased parts, goods in process and finished goods, furniture,
automobiles, trucks, tractors, trailers, test equipment, tools, jigs, and
dies), and rights as a lessee or conditional purchaser of any of the
foregoing; and
(ii) real property, improvements, fixtures and fittings
thereon, easements, rights-of-way, and other appurtenances thereto (such
as appurtenant rights in and to public streets), and leaseholds and
subleaseholds in any of the foregoing; and
(iii) leases, subleases, and rights thereunder; and
(iv) accounts, notes, and other receivables, and
(v) rights under Contracts; and
(vi) engineering, quality control, technical, and other
data, in whatever form maintained; and
(vii) the Business's Intellectual Property, logos, trade
dress, corporate names, trade secrets and other confidential business
information, and the goodwill
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associated therewith, licenses and sublicenses granted and obtained with
respect thereto, and rights thereunder, remedies against infringement
thereof, and rights to protection of interests therein under the laws of
all jurisdictions; and
(viii) non exclusive royalty-free licenses to any MagneTek
proprietary computer programs or other software used primarily in
connection with data and records included in the Assets; and
(ix) lists and records of Seller's customers and suppliers; and
(x) engineering plans, drawings, specifications, studies and
reports; and
(xi) the Business's books and records (including copies, to
the extent segregatable from other MagneTek records, of historical
accounting and financial records and the Tax records pertaining to Canada
Sub, but not other Tax records), files, studies, reports, catalogs,
documents, correspondence and other printed or written materials, and
copies of the employment records pertaining to the employees of the
Business (all of the foregoing being "Records"); and
(xii) copies of financial books and records and other books
and records maintained by MagneTek or other Affiliates of MagneTek other
than Seller and Canada Sub that pertain to the Business and its
employees; and
(xiii) franchises, approvals, authorizations, permits, licenses,
orders, registrations, certificates, variances, and similar rights
obtained from Governmental Authorities or other Persons; and
(xiv) Claims, deposits, prepayments, refunds, and warranties;
and
(xv) the right to continued custody of all assets owned by a
customer of Seller and held by Seller on behalf of such customer; and
(xvi) any and all assets related to the Larsen-Hogue Plan.
(c) To the extent any equipment, agreements, rights, or other
personal property, tangible or intangible, owned by MagneTek or any Affiliate
of MagneTek other than Seller or Canada Sub are used primarily in or arise
primarily out of the Business, they are included within the meaning of the
term "Assets" to the
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same extent as they would have been so included had they been owned by
Seller, and MagneTek agrees to convey, and cause each such Affiliate to
convey, all of its right, title and interest in and to such assets and
property to Buyer, or to Seller for conveyance to Buyer, on or prior to the
Closing, all without separate consideration from Buyer and otherwise in
accordance with the terms of this Agreement.
(d) Notwithstanding any contrary provision of this Agreement,
"Assets" shall not include, and Buyer does not purchase from Seller, any of
the following (collectively, the "Excluded Assets"):
(i) Seller's corporate charter, qualifications to conduct
business, arrangements with registered agents relating to qualifications
to conduct business, taxpayer and other identification numbers, seals,
minute books, stock transfer books, blank stock certificates, and other
documents relating solely to the organization, maintenance and existence
of Seller as a corporation; or
(ii) any of Seller's rights under this Agreement or any
other agreement between Seller, on the one hand, and Buyer or Grand
Eagle, on the other hand, entered into on or after the date of this
Agreement; or
(iii) any of Seller's assets, including rights under
agreements with buyers of business units of Seller, primarily arising
from or relating to business units of Seller other than the Business; or
(iv) financial books and records, other than Tax records of
Canada Sub, and other books and records maintained by MagneTek or other
Affiliates of MagneTek other than Seller or Canada Sub other than those
that pertain to the Business and its employees; or
(v) any interest in any Subsidiary other than Canada Sub; or
(vi) any cash, lockbox, bank or lockbox account of Seller; or
(vii) except as expressly provided herein, any interest in
the use of the name "MagneTek", the phrase "NEC" or the phrase "National
Electric Coil" in any trademark, service mark, trade name, slogan or
corporate name; or
(viii) any interest in the use of trademarks, service marks,
trade names, slogans or other like property in general
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use among Seller and MagneTek or other Affiliates of MagneTek in
connection with businesses other than the Business; or
(ix) rights to claims for refunds or rebates of Taxes and
other governmental charges and the benefit of net operating loss
carryforwards, carrybacks or other credits of Seller, whether or not
attributable to the Business; or
(x) all insurance policies and rights thereunder, including,
but not limited to, any rights to cancellation value as of the Closing
Date; or
(xi) proprietary or confidential business or technical
information, records and policies that relate generally to MagneTek and
its Affiliates and are not used primarily in the Business, including,
without limitation, organization manuals and strategic plans; or
(xii) MagneTek's proprietary computer programs or other
software, including but not limited to MagneTek's proprietary data bases,
accounting and reporting format, systems and procedures; or
(xiii) agreements, contracts, indentures, mortgages,
instruments, security interests, or guarantees listed on
Schedule 2.1(d)(xiii) to this Agreement; or
(xiv) any of the Claims listed on Schedule 2.1(d)(xiv) to this
Agreement; or
(xv) any assets associated with, or any of Seller's rights in
connection with, any Company Plan (other than the Larsen-Hogue Plan).
2.2 LIMITED ASSUMPTION OF LIABILITIES. (a) As of the close of
business on the Closing Date, Buyer will execute and deliver the Bill of Sale
and Assignment and Assumption Agreement and thereby assume and become
responsible for, pay and discharge when due, all of the liabilities and
obligations of Seller and MagneTek arising out of the Business of any kind or
nature, whether absolute, contingent, accrued or otherwise, excluding each
Excluded Liability (collectively, the "Assumed Liabilities"), including
without limitation, all of the following:
(i) accounts payable of the Business at Closing; and
(ii) all liabilities for warranty claims, whether made before
or after the Closing Date, for service, repair, replacement or similar
work pursuant to Seller's written
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warranties with respect to products sold or services provided by Seller
on or before the Closing Date ("Warranty Claims"), excluding Warranty
Claims described in Section 2.2(b)(i) of this Agreement; and
(iii) all other accrued liabilities reflected as "other short
term liabilities" on the Closing Balance Sheet; and
(iv) all obligations of Seller and MagneTek under the
Contracts.
(b) In this Agreement, "Excluded Liabilities" means:
(i) Warranty Claims of which Buyer has given Seller written
notice within the two-year period following the Closing Date and for
which Buyer's shop-level expenses (direct materials plus labor plus
variable overhead), together with such expenses of Buyer for Warranty
Claims previously assumed by Buyer, exceed the reserve for warranty claims
reflected on the Closing Balance Sheet; and
(ii) all Claims for product liability or workers' compensation
which arose or were incurred on or before the Closing Date or which are
based on events occurring on or before the Closing Date notwithstanding
that the Claim is asserted after the Closing Date; and
(iii) all Claims for personal injury, property damage and auto
physical damage which Claims arose or were incurred on or before the
Closing Date or which are based on events occurring on or before the
Closing Date notwithstanding that the Claim is asserted after the Closing
Date to the extent such Claims are covered by MagneTek's or Seller's
insurance policies in place on or before the Closing; and
(iv) all claims under health, dental, vision and disability
plans of Seller or MagneTek (or under any theory of recovery applicable
against MagneTek or Seller) for Company Employees or other covered
individuals with respect to services rendered on or prior to the Closing
Date (but not in respect of any sick leave or short-term disability
benefits pertaining to any period after the Closing Date regardless of
when the relevant illness or condition arose); and
(v) any claims for health, dental or vision coverage arising
at any time, including after the Closing Date, for services rendered at
any time, including after the Closing Date, with respect to Persons
entitled on or before the Closing Date to COBRA benefits and coverage
from Seller or
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MagneTek or any liabilities arising from the failure of Seller or
MagneTek to comply with COBRA; and
(vi) any liability for Taxes (excluding the tax items covered
by Section 3.3) as to which indemnification is provided pursuant to
clause (i) of Section 10.1(a); and
(vii) any liability under (A) any litigation pertaining to
the Business as to which a complaint has been filed in state or federal
court, or an administrative charge or complaint has been filed with a
governmental agency, in each case prior to the Closing (including,
without limitation, all litigation set forth on Schedule 4.14), or (B) any
threatened litigation with respect to any matter or claim set forth on
Schedule 4.14 as to which a complaint is filed in state or federal court,
or an administrative charge or complaint is filed with a governmental
agency after the Closing; and
(viii) any liability of MagneTek or Seller under or arising in
connection with any Employee Plan except to the extent assumed by Buyer
pursuant to Article 9 hereunder; and
(ix) any and all other debts, liabilities and obligations of
MagneTek or any Affiliate of MagneTek, including Seller and its
Subsidiaries, with respect to any bank credit facility or letter of
credit, and all documents in connection therewith; and
(x) any and all liabilities arising from any Stay and Pay
Agreement in existence at or prior to Closing; and
(xi) any and all liabilities in connection with the Excluded
Assets or any real estate previously owned, leased, used or occupied by
MagneTek or any of its Affiliates in connection with the Business which
are not owned, leased, used or occupied by the Business at the Closing;
and
(xii) any liability arising from any business owned or operated
by Seller other than the Business.
(c) Under no circumstances herein or in any of the Ancillary
Agreements or any agreement, document, certificate or instrument being
delivered pursuant to this Agreement or any Ancillary Agreement, or any
schedule or exhibit hereto or thereto shall the term "Assumed Liabilities" be
interpreted to include any Excluded Liabilities, nor shall Buyer be deemed to
have assumed any Excluded Liabilities.
2.3 CLOSING.
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(a) The closing (the "Closing") of the transactions contemplated
by this Agreement shall be held at the offices of Sidley & Austin, One First
National Plaza, 55th Floor, Chicago, Illinois, at 10:00 a.m. on March 27,
1996, or if the conditions to Closing set forth in Article 3 shall not have
been satisfied or waived by such date, subject to Section 12.3, as soon as
practicable after such conditions shall have been satisfied or waived. The
date on which the Closing shall occur is hereinafter referred to as the
"Closing Date" and the Closing shall be deemed to have occurred at the close
of business, Central time, on the Closing Date. Events occurring after the
Closing shall be deemed to have occurred after the Closing Date.
(b) At the Closing, Buyer shall deliver to Seller (a) by wire
transfer (to a bank account designated at least two Business Days prior to
the Closing Date in writing by Seller) immediately available funds in an
amount equal to the sum of (i) the Cash Purchase Price plus or minus an
estimate, to the extent mutually agreed to by Seller and Buyer prior to the
Closing Date (the "Estimated Adjustment"), of any adjustments to the Purchase
Price under Section 2.4 and (ii) the payment in the amount of One Hundred
Fifty Thousand Dollars ($150,000.00) required under the Non-Competition
Agreement and (b) a duly executed Seller Note in the original principal
amount of Two Million Seventy-Five Thousand Dollars ($2,075,000.00).
(c) At the Closing, Seller and MagneTek shall deliver or cause to
be delivered to Buyer the executed and, as appropriate, acknowledged
assignments and other instruments of transfer referred to in Section 3.1 of
this Agreement.
2.4 PURCHASE PRICE ADJUSTMENT. (a) Within 60 days after the Closing
Date, Buyer at its own expense shall prepare and deliver to MagneTek a
consolidated pro forma balance sheet of the Business as of the close of
business on the Closing Date (the "Closing Balance Sheet"). For purposes of
preparing the Closing Balance Sheet, Buyer shall have access to Seller's and
MagneTek's Records relating to the Business or otherwise relevant to the
preparation of the Closing Balance Sheet, and Seller and MagneTek shall make
the appropriate personnel reasonably available to Buyer. During the 30 days
immediately following MagneTek's receipt of the Closing Balance Sheet, Seller
shall be entitled to review the Closing Balance Sheet and Buyer's working
papers relating to the Closing Balance Sheet, and Buyer shall provide
MagneTek access at all reasonable times to its personnel, properties and
Records to the extent comprising Assets for such purpose. The Closing
Balance Sheet shall become final and binding upon the parties on the
thirtieth day following delivery thereof unless MagneTek gives written notice
to Buyer of its disagreement with the method of
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presentation thereof or with the determination of any amount thereon (a
"Notice of Disagreement") prior to such date. Any Notice of Disagreement
shall specify in reasonable detail the nature of any disagreement so
asserted. If a timely Notice of Disagreement is received by Buyer with
respect to the Closing Balance Sheet, then such Closing Balance Sheet (as
revised in accordance with clause (x) or (y) below), shall become final and
binding upon the parties on the earlier of (x) the date the parties resolve
in writing any differences they have with respect to any matter specified in
a Notice of Disagreement or (y) the date any matters properly in dispute are
finally resolved in writing by the Accounting Firm (as defined below).
During the 30 days immediately following the delivery of any Notice of
Disagreement, MagneTek and Buyer shall seek in good faith to resolve in
writing any differences which they may have with respect to any matter
specified in such Notice of Disagreement. During such period and during any
subsequent period of arbitration by the Accounting Firm, MagneTek shall have
access to Buyer's working papers relating to the Closing Balance Sheet and to
Buyer's Records to the extent comprising Assets, and Buyer shall have access
to Seller's working papers relating to the Notice of Disagreement and to
Seller's and MagneTek's Records related to the Business or otherwise relevant
to the preparation of the Closing Balance Sheet. At the end of such 30-day
period (or such longer period on which Seller and Buyer may from time to time
agree in writing), Seller and Buyer shall submit to an independent accounting
firm (the "Accounting Firm") for review and resolution any and all matters
that remain in dispute and which were properly included in any Notice of
Disagreement, an the Accounting Firm shall reach a final, binding resolution
of all matters which remain in dispute. The Closing Balance Sheet, adjusted
in accordance with the parties' mutual written agreement, and with such
adjustments necessary to reflect the Accounting Firm's resolution of the
matters in dispute, shall become final and binding on the parties on the date
the Accounting Firm delivers its final resolution to the parties. The
Accounting Firm shall be KPMG Peat Marwick, or if such firm is unable or
unwilling to act, such other nationally recognized independent public
accounting firm as shall be mutually agreed upon by the parties hereto in
writing. The cost of any arbitration (including the fees and expenses of the
Accounting Firm) pursuant to this Section 2.4 shall be borne 50% by Buyer and
50% by MagneTek.
(b) The Purchase Price will be adjusted as follows:
(i) If:
(A) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the final and
binding Closing Balance Sheet, minus
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the Estimated Adjustment (if the Estimated Adjustment increased the
Cash Purchase Price paid at Closing) or plus the Estimated Adjustment
(if the Estimated Adjustment reduced the Cash Purchase Price paid at
Closing),
exceeds:
(B) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the September
Balance Sheet,
Buyer will pay to Seller an amount equal to such excess (plus interest
thereon from the Closing Date at a rate equal to the prime rate announced
from time to time by NationsBank, N.A. (Carolinas)) by wire transfer or
delivery of other immediately available funds within three Business Days
after the date on which the Closing Balance Sheet becomes final and
binding on the parties.
(ii) If:
(A) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the final and
binding Closing Balance Sheet, minus the Estimated Adjustment (if
the Estimated Adjustment increased the Cash Purchase Price paid at
Closing) or plus the Estimated Adjustment (if the Estimated
Adjustment reduced the Cash Purchase Price paid at Closing),
is less than:
(B) the excess of total tangible assets over the sum
of payables and other short term liabilities shown on the September
Balance Sheet,
MagneTek will pay to Buyer an amount equal to such deficiency (plus
interest thereon from the Closing Date at a rate equal to the prime rate
announced from time to time by NationsBank, N.A.(Carolinas)) by wire
transfer or delivery of other immediately available funds within three
Business Days after the date on which the Closing Balance Sheet becomes
final and binding on the parties.
(c) The Closing Balance Sheet shall be prepared in accordance with
GAAP, applied in a manner consistent with that followed in the preparation of
the Financial Statements (as defined in Section 4.6).
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(d) Notwithstanding the foregoing provisions of this Section 2.4,
no adjustment to the Purchase Price pursuant to this Section 2.4 shall be
made unless such adjustment would exceed $100,000, and if the adjustment
would exceed $100,000, then the full amount of the adjustment shall be made.
(e) Buyer agrees that it will not take any actions with respect to
its accounting books, Records, policies and procedures of the Business which
would impede the preparation of the Closing Balance Sheet on the basis
provided in this Agreement.
2.5 ALLOCATION OF PURCHASE PRICE. The parties shall endeavor to
allocate the Purchase Price, and any adjustment thereto, among the Assets in
the manner required by Section 1060 of the Code. Buyer and Seller agree to be
bound by any such agreed-upon fair market value determination and allocation
and to complete and attach Internal Revenue Service Form 8594 to their
respective tax returns accordingly. Buyer and Seller agree that in all
events Five Hundred Thousand Dollars ($500,000.00) shall be allocated to the
Canada Sub Shares.
ARTICLE 3
CONDITIONS TO CLOSING
3.1 BUYER'S OBLIGATION. The obligations of Buyer to consummate the
transactions contemplated by this Agreement are subject to the satisfaction
(or waiver by Buyer) as of the Closing of the following conditions:
(a) TRANSFER DOCUMENTS. Buyer shall have received instruments,
including the Bill of Sale and Assignment and Assumption Agreement, with
respect to Seller's ownership of Assets, assignments, endorsements and other
documents of title and other good and sufficient instruments of conveyance
and transfer, as shall be effective to vest Buyer with all of Seller's right,
title and interest in and to the Assets, in form and substance reasonably
satisfactory to Buyer.
(b) TITLE DOCUMENTS - SELLER. With respect to each Owned Property
of Seller, Buyer shall have received:
(i) An executed, acknowledged and recordable deed to such
Owned Property in form and substance reasonably satisfactory to Buyer.
(ii) A commitment for an ALTA (1970 Form B) Owner's Policy
of Title Insurance issued by First American or another title insurer
selected by Buyer and approved by Seller in an amount set forth on
Schedule 3.1(b)(ii), insuring fee simple
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title to such Owned Property to be in Buyer. Each commitment delivered
under this Section 3.1(b)(ii) shall (A) insure title to the Owned Property
and all recorded appurtenant easements benefiting such Owned Property to
be vested in Buyer subject only to (x) Permitted Title Exceptions and (y)
such other limitations and exceptions as shall not unreasonably interfere
with the use of the respective Owned Property in the Ordinary Course.
This condition shall be deemed satisfied as to each Owned Property unless
Buyer notifies Seller to the contrary within five Business Days after
Buyer shall have received a current title commitment for such Owned
Property.
(iii) All other documentation (including and trust
declarations) which Buyer may reasonably request in connection with the
transfer of title to the Owned Property.
(c) TITLE DOCUMENTS - CANADA SUB. With respect to each Owned
Property of Canada Sub, Buyer shall have received, at its expense, customary
assurances under local practice and reasonably satisfactory to Buyer that fee
title to such Owned Property is vested in Canada Sub as of the Closing Date.
(d) LEASE DOCUMENTS. With respect to each Leased Property as to
which a consent to assignment or sublease is a Third Party Consent as defined
in Section 6.8, Buyer shall have received an assignment (and novation if
feasible) of the lease, or a sublease, in either case in form and substance
reasonably satisfactory to Seller and Buyer, and in a recordable form,
together with:
(i) the written consent of the landlord to such assignment
or sublease, if required, and
(ii) an estoppel certificate from the landlord in form and
substance reasonably satisfactory to Seller and Buyer.
(e) TRADEMARK ASSIGNMENTS. Buyer shall have received trademark
assignments, in form and substance satisfactory to Buyer, conveying to the
Buyer all of Seller's right, title and interest in and to any trademarks of
Seller included among the Assets.
(f) LIEN SEARCHES. Buyer shall have received copies of the
searches required by Section 6.7 of this Agreement, in form and substance
satisfactory to Buyer.
(g) STOCK OF CANADA SUB. Buyer shall have received stock
certificates representing all of the shares of stock of
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Canada Sub, endorsed in blank or accompanied by duly executed assignment
documents.
(h) RESIGNATIONS - CANADA SUB. Buyer shall have received duly
signed resignations, effective as of the Closing, of all directors and
officers of Canada Sub, and duly signed mutual releases between Canada Sub
and its officers and directors in customary form reasonably satisfactory to
Buyer.
(i) OFFICER'S CERTIFICATES. The representations and warranties of
Seller and MagneTek made in this Agreement shall be true and correct in all
material respects as of the date hereof and, except as specifically
contemplated by this Agreement, on and as of the Closing Date, as though made
on and as of the Closing Date, and Seller and MagneTek shall have performed
or complied in all material respects with all obligations and covenants
required by this Agreement to be performed or complied with by them by the
time of the Closing; and Seller and MagneTek shall have delivered to Buyer
and Grand Eagle a certificate dated the Closing Date and signed by an
authorized officer of each of them confirming the foregoing.
(j) OPINIONS. Buyer and Grand Eagle shall have received an
opinion dated the Closing Date of Gibson, Dunn & Crutcher, counsel to Seller,
of Samuel A. Miley, Esq., General Counsel of Seller, and of Seller's Canadian
counsel, in each case as to matters customary in transactions of this kind
and which opinions shall be reasonably satisfactory to Buyer.
(k) NO INJUNCTION. No injunction or order shall have been granted
by any Governmental Authority of competent jurisdiction that would restrain
or prohibit the purchase and sale of the Assets or that would impose damages
as a result of the purchase and sale of the Assets, and no action or
proceeding shall be pending before any Governmental Authority of competent
jurisdiction in which any Person seeks such a remedy (if in the opinion of
counsel to Buyer there exists a reasonable risk of a materially adverse
result in such pending action or proceeding).
(l) HART-SCOTT-RODINO. The waiting period under the HSR Act, if
applicable to the purchase and sale of the Assets, shall have expired or been
terminated, and all requirements of Canadian and provincial law with respect
to the transfer of the stock of Canada Sub shall have been satisfied.
(m) CERTIFICATE OF INCORPORATION. At the Closing, Seller shall
have delivered to Buyer a copy of the certificate of incorporation of Seller,
certified by the Secretary of State of Delaware as of a date not more than
five days prior to the Closing Date.
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(n) SECRETARY'S CERTIFICATES. At the Closing, Seller shall have
delivered to Buyer copies of each of the following for each of Seller and
Canada Sub, in each case certified to be in full force and effect on the date
of the Closing by the Secretary of Seller or Canada Sub, as the case may be:
(i) the by-laws, code of regulations, or similar document of such
Person; and
(ii) in the case of Seller, resolutions of the Board of Directors
and stockholders of Seller authorizing the execution and delivery of this
Agreement and any related agreements and the transactions contemplated
under this Agreement, and, in the case of Canada Sub, resolutions of the
directors and shareholder of Canada Sub approving the transfer of the
Canada Sub Shares to Buyer.
(o) GOOD STANDING CERTIFICATES. At the Closing, Seller shall have
delivered to Buyer a certificate of good standing with respect to Seller from
the Secretary of State of Delaware, and the closest equivalent document with
respect to Canada Sub from the appropriate officials of the Provinces of
Ontario and Quebec, in each case as of a date not more than five days prior
to the Closing.
(p) NON-COMPETITION AGREEMENT. Seller and MagneTek shall have
executed and delivered to Buyer a non-competition agreement in Seller's
customary form (the "Non-Competition Agreement").
(q) CONSENTS. All Third Party Consents shall have been obtained,
and Buyer shall have received copies of them.
(r) TRANSITION AGREEMENT. Buyer shall have received agreements,
reasonably satisfactory to it, permitting it to occupy at no cost to Buyer
the office space in Columbus, Ohio, used as of the date of this Agreement by
Company Employees, for a period not longer than ninety days.
(s) TAX AFFIDAVITS. Seller shall have executed and deliver to
Buyer at the Closing an affidavit in form and substance satisfactory to Buyer
certifying that Seller is not a foreign person within the meaning of Section
1445(f)(3) of the Code, and evidence of an application for a certificate
under Section 116 of the Income Tax Act (Canada) in respect of the sale of
the Canada Sub Shares containing a "certificate limit" at least equal to the
portion of the purchase price allocated to the Canada Sub Shares under
Section 2.5 of this Agreement.
(t) OTHER CLOSING. The closing shall have occurred under the
Other Agreement.
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(u) SUBORDINATION. Grand Eagle's obligations under the Seller
Note shall be subordinated to Grand Eagle's and Buyer's obligations to their
senior bank lender on customary terms reasonably satisfactory to MagneTek and
to Grand Eagle's senior bank lender.
3.2 SELLER'S OBLIGATION. The obligations of Seller to consummate the
transactions contemplated by this Agreement are subject to the satisfaction
(or waiver by Seller) as of the Closing of the following conditions:
(a) BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT. Seller
and MagneTek shall have received such instruments, including the Bill of Sale
and Assignment and Assumption Agreement, with respect to Seller's assumption
of the Assumed Liabilities and the acquisition of the Assets, as to
effectively assume such liabilities and acquire such assets, in form and
substance reasonably satisfactory to Seller and MagneTek.
(b) OFFICER'S CERTIFICATE. The representations and warranties of
Buyer and Grand Eagle made in this Agreement shall be true and correct in all
material respects as of the date hereof and on and as of the Closing Date, as
though made on and as of the Closing Date, and Buyer and Grand Eagle shall
have performed or complied in all material respects with all obligations and
covenants required by this Agreement to be performed or complied with by them
by the time of the Closing; and Buyer and Grand Eagle shall have delivered to
Seller a certificate dated the Closing Date and signed by an authorized
officer of each of them confirming the foregoing.
(c) OPINION. Seller shall have received an opinion dated the
Closing Date of Fitzpatrick Eilenberg & Zivian, counsel to Buyer, as to
matters customary in transactions of this kind and which opinion shall be
reasonably satisfactory to Seller.
(d) NO INJUNCTION. No injunction or order shall have been granted
by any Governmental Authority of competent jurisdiction that would restrain
or prohibit the purchase and sale of the Assets or that would impose damages
as a result of the purchase and sale of the Assets, and no action or
proceeding shall be pending before any Governmental Authority of competent
jurisdiction in which any Person seeks such a remedy (if in the opinion of
counsel to Seller there exists a reasonable risk of a materially adverse
result in such pending action or proceeding).
(e) HART-SCOTT-RODINO. The waiting period under the HSR Act, if
applicable to the purchase and sale of the Assets, shall have expired or been
terminated, and all requirements of
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Canadian and provincial law with respect to the transfer of the stock of
Canada Sub shall have been satisfied.
(f) CERTIFICATE OF INCORPORATION. At the Closing, Buyer shall
have delivered to Seller copies of the certificates of incorporation of Buyer
and Grand Eagle, certified by the Secretaries of State of Georgia and
Delaware, respectively, as of a date not more than five days prior to the
Closing Date.
(g) SECRETARY'S CERTIFICATES. At the Closing, Buyer shall have
delivered to Seller copies of each of the following for each of Buyer and
Grand Eagle, in each case certified to be in full force and effect on the
date of the Closing by the Secretary of Buyer or Grand Eagle, as the case may
be:
(i) the by-laws of Buyer or Grand Eagle, as the case may be; and
(ii) resolutions of the Boards of Directors of Buyer and Grand
Eagle authorizing the execution and delivery of this Agreement and any
related agreements and the transactions contemplated under this Agreement.
(h) GOOD STANDING CERTIFICATES. At the Closing, Buyer shall have
delivered to Seller certificates of good standing with respect to Buyer and
Grand Eagle from the Secretaries of State of the states of Georgia and
Delaware, respectively, as of a date not more than five days prior to the
Closing.
(i) CONSENTS. All Third Party Consents shall have been obtained.
(j) PERFORMANCE BONDS. Seller shall have been replaced or
released from any obligation or liability in respect of any performance bond,
letter of credit or similar instrument pertaining to the Business.
(k) INSURANCE CERTIFICATES. Seller shall have received insurance
certificates reflecting Buyer's compliance with Section 7.3.
3.3 CERTAIN COSTS. Seller shall pay, or reimburse Buyer for, (a)
one-half of the premium for the standard form of the title insurance policies
described in Section 3.1, (b) the cost of the searches described in Section
3.1(f), and (c) one-half the cost of any real estate transfer or sales Taxes
due in respect of the conveyance of the Assets. Buyer shall pay the
remaining one-half of such transfer Taxes, and for any additional title
insurance it elects to acquire.
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3.4 CO-OPERATION AS TO SURVEYS. Seller shall provide to Buyer and
its employees, agents and representatives access, at all reasonable times
requested by Buyer prior to the Closing, to each Company Property for
purposes of permitting Buyer to perform, at its own expense, any surveys of
such properties as it deems desirable.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLER AND MAGNETEK
Each of Seller and MagneTek hereby jointly and severally represents and
warrants to each of Buyer and Grand Eagle as follows:
4.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS. (a) Seller is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. Seller has all requisite corporate power and
authority to enter into this Agreement and those Ancillary Agreements to
which Seller is a party and to consummate the transactions contemplated
hereby and thereby. All corporate acts and other proceedings required to be
taken by Seller to authorize the execution, delivery and performance of this
Agreement and those Ancillary Agreements to which Seller is a party and the
consummation of the transactions contemplated hereby and thereby have been
duly taken. Without limiting the generality of the foregoing, the board of
directors and the stockholder of Seller have each duly authorized the
execution, delivery and performance by Seller of this Agreement and of those
Ancillary Agreement to which Seller is a party. This Agreement has been duly
executed and delivered by Seller and constitutes, and when executed and
delivered by Seller at the Closing each of the Ancillary Agreements to which
Seller is a party will constitute, a valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors' rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(b) MagneTek is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. MagneTek has all
requisite corporate power and authority to enter into this Agreement and
those Ancillary Agreements to which MagneTek is a party and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by MagneTek to
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authorize the execution, delivery and performance of this Agreement and those
Ancillary Agreements to which MagneTek is a party and the consummation of the
transactions contemplated hereby and thereby have been duly taken. This
Agreement has been duly executed and delivered by MagneTek and constitutes, and
when executed and delivered by MagneTek at the Closing each of the Ancillary
Agreements (if any) to which MagneTek is a party will constitute, a valid and
binding obligation of MagneTek, enforceable against MagneTek in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors, rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
(c) The execution and delivery of this Agreement does not, and the
execution and delivery of those Ancillary Agreements to which Seller or
MagneTek is a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and
thereof will not conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a benefit under, or result in the creation of any Lien upon any of
the properties or assets of Seller or Canada Sub under, any provision of (i)
the Certificate of Incorporation or By-Laws or similar organizational
documents of MagneTek or Seller or Canada Sub, (ii) subject to the matters
disclosed in Schedule 6.8, any Contractual Obligation to which MagneTek or
Seller or Canada Sub is a party or by which any of their respective
properties or assets are bound or (iii) any judgment, order or decree or,
subject to the matters described in clauses (A) - (E) below, Requirement of
Law applicable to MagneTek or Seller or Canada Sub or the property or assets
of any of them, other than, in the case of clauses (ii) and (iii) above, any
such conflicts, violations, defaults, rights or Liens that, individually or
in the aggregate, would not have a Material Adverse Effect. No consent,
approval, license, permit, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by or with respect to MagneTek, Seller or Canada Sub in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, other than (A)
compliance with and filings under the HSR Act, (B) compliance with and
filings under Section 13(a) or 15(d), as the case may be, of the Exchange
Act, (C) compliance with and filings and notifications under applicable
Environmental Laws, (D) those that may be required solely by reason of
Buyer's participation in the transactions contemplated hereby, (E) filings
and notifications required to be made by Buyer under the Investment Canada
Act, and
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(F) those that, if not made or obtained, individually or in the aggregate, would
not have a Material Adverse Effect.
4.2 THE ASSETS. Except for the Excluded Assets, the Assets constitute
all of the property and assets which are used by Seller, MagneTek and its
other Affiliates to conduct the Business as conducted on the Closing Date.
4.3 ORGANIZATION AND STANDING OF CANADA SUB. Canada Sub is a
corporation duly organized and validly existing under the laws of the
province of Ontario. Canada Sub has all requisite corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to carry on its business
as now conducted other than such franchises, licenses, permits,
authorizations and approvals the lack of which, individually or in the
aggregate, would not have a Material Adverse Effect. Canada Sub is duly
qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership, leasing or holding of its
properties makes such qualification necessary, except such jurisdictions
where the failure to be so qualified or in good standing, individually or in
the aggregate, would not have a Material Adverse Effect. All such
jurisdictions are listed on Schedule 4.3 hereto. Seller has made available to
Buyer (i) the Certificate of Incorporation or similar charter document, as
amended to date, and the By-Laws or similar document, as in effect on the
date hereof, of Canada Sub, and (ii) the share certificate and transfer books
and the minute books of Canada Sub. Immediately following the consummation
of the transactions contemplated by this Agreement, Buyer or Canada Sub will
own all of the assets used prior to the Closing in the conduct of the
Business on the Closing Date other than the Excluded Assets.
4.4 CAPITAL STOCK OF CANADA SUB. The authorized, issued and
outstanding capital stock of Canada Sub is as set forth on Schedule 4.4. The
Canada Sub Shares are duly authorized and validly issued and outstanding,
fully paid and nonassessable. MagneTek is the record owner of the Canada Sub
Shares. Except for the Canada Sub Shares, there are no shares of capital
stock or other equity securities of Canada Sub outstanding. The Canada Sub
Shares have not been issued in violation of, and none of the Canada Sub
Shares is subject to, preemptive or subscription rights. There are no
outstanding warrants, options, "phantom" stock rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) pursuant to which Canada Sub is or may become obligated to issue,
sell, purchase, return or redeem any shares of capital stock or other
securities of Canada Sub, and no equity securities of Canada Sub are reserved
for issuance for any purpose. Other than this Agreement, the Canada Sub
Shares are not subject to any voting
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trust agreement or other Contractual Obligation restricting or otherwise
relating to the voting, dividend rights or disposition of the Canada Sub
Shares.
4.5 EQUITY INTERESTS; SUBSIDIARIES. Canada Sub does not own directly
or indirectly any capital stock of or other equity interests in any Person.
4.6 FINANCIAL STATEMENTS. (a) Attached to this Agreement as Exhibit A
is the unaudited Field Service & Fairfield Supply Consolidated Balance Sheet
Excluding Division Allocations of Seller as of September 30, 1995. Schedule
4.6 contains the unaudited Field Service & Fairfield Supply Consolidated
Income Statement Excluding Division Allocations of Seller for the years ended
June 30, 1993, 1994, 1995, and the three months ended September 30, 1994 and
1995 (the "Historical Financials" and, together with the September Balance
Sheet, the "Financial Statements").
(b) The Financial Statements have been prepared in accordance with
GAAP applied on a consistent basis throughout the periods covered thereby and
fairly present in all material respects, on a pro forma basis, the combined
financial condition and results of operations of Seller and Canada Sub as of
the respective dates thereof and for the respective periods covered thereby,
except for the absence of footnotes and except that:
(i) Excluded Assets and Excluded Liabilities are excluded; and
(ii) intercompany advances and receivables (other than those
resulting from the sale of products or services) are excluded from the
assets; and
(iii) intercompany liabilities (other than those resulting from
the sale of products or services) are excluded from liabilities; and
(iv) accruals for retiree health and welfare benefits are
excluded from the liabilities; and
(v) long-term liabilities, current maturities of long-term
liabilities, and accrued Taxes are excluded from the liabilities; and
(vi) the exclusion of division allocations from the Historical
Financials.
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4.7 ABSENCE OF CHANGES OR EVENTS. Except as set forth on Schedule 4.7
and the elimination of Excluded Assets, since September 30, 1995, there has
not been a material adverse change in the business, financial condition or
results of operations of Seller or Canada Sub other than changes relating to
the economy in general. Except as disclosed on Schedule 4.7 or as
contemplated by this Agreement, since September 30, 1995, Seller has
conducted the Business, and has caused Canada Sub to conduct its Business, in
the Ordinary Course, and neither Seller nor Canada Sub has taken any action
that, if taken after the date hereof, would constitute a breach of any of the
covenants set forth in Section 6.2.
4.8 TAXES. Except as set forth on Schedule 4.8:
(a) PAYMENT OF TAXES. Each of Seller and Canada Sub has filed all
material Tax Returns that it is required to have filed on or prior to the
date hereof and such Tax Returns are materially true and correct. All Tax
Returns required to be filed on or prior to the Closing Date by Seller or
Canada Sub shall be filed on or prior to Closing and such Tax Returns shall
be materially true and correct. All material amounts of Taxes imposed on
Seller or Canada Sub or for which Seller or Canada Sub is or could be liable
have been (or, as of the Closing, will be) paid or have been accrued for or
fully reserved against on the consolidated books of MagneTek.
(b) AUDIT HISTORY. To the Knowledge of each of Seller and
MagneTek, no material issues have been raised and are currently pending by
any Governmental Authority in connection with any of the Tax Returns of
Seller or Canada Sub. No currently valid waivers of statutes of limitations
with respect to the Tax Returns of Seller or Canada Sub have been given by
Seller or Canada Sub. No Tax Returns of Seller or Canada Sub are or have
been the subject of an examination for any year for which the applicable
statute of limitations with respect to Taxes remains open. All deficiencies
asserted or assessments made as a result of any such examination have been
fully paid. There are no Liens for Taxes (other than for current Taxes not
yet due and payable) on the Assets or the assets of Canada Sub.
(c) TAX-SHARING OR ALLOCATION AGREEMENTS; TAX ELECTIONS. Any
tax-indemnity, tax-sharing, tax allocation or similar agreements between
Canada Sub, on one hand, and Seller, MagneTek or their Affiliates ( on the
other hand) and any liability or obligation of Canada Sub under such
agreements will terminate as of the Closing Date and be of no further force
or effect. All tax-indemnity, tax-sharing, tax-allocation or similar
agreements to which Canada Sub is a party and which are now in effect (other
than any such agreement with a customer,
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supplier or lessor of property to Canada Sub entered into in the ordinary
Course) are listed on Schedule 4.8.
(d) SECTION 341(f) CONSENT. Canada Sub has not filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the
Code (or any corresponding provision of any state, local or foreign income
Tax law) and has not agreed to have Section 341(f)(2) of the Code (or any
corresponding provision of any state, local or foreign income Tax law) apply
to any disposition of any asset owned by Canada Sub.
(e) SAFE HARBOR LEASE PROPERTY. None of the assets of Canada Sub
is property that Canada Sub is required to treat as being owned by any other
Person pursuant to the "safe harbor lease" provisions of former Section
168(f)(8) of the Code.
(f) TAX-EXEMPT PROVISIONS. None of the Assets or the assets of
Canada Sub (i) directly or indirectly secures any debt the interest on which
is tax-exempt under Section 103(a) of the Code or (ii) is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(g) DEEMED DIVIDEND AND CONSENT DIVIDEND ELECTIONS. Canada Sub
has not made and will not make as of the Closing a consent dividend election
under Section 565 of the Code.
(h) ADJUSTMENTS UNDER SECTION 481. Canada Sub has not agreed to
make and is not required to make any adjustment under Section 481(a) of the
Code by reason of a change in accounting method or otherwise.
(i) MISCELLANEOUS. Canada Sub (i) has not participated in and
will not participate as of the Closing in an international boycott within the
meaning of Section 999 of the Code, (ii) is not a party to any Contractual
Obligation that has resulted or will result as of the Closing, separately or
in the aggregate, in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code, or (iii) except as set forth on
Schedule 4.8, is not a party to any joint venture, partnership, or other
arrangement or contract that could be treated as a partnership for federal
income tax purposes.
(j) CONSOLIDATION. Canada Sub has never been a member of an
Affiliated Group.
(k) COPIES OF TAX RETURNS. Canada Sub has true, correct and
complete copies of all income Tax Returns filed by it or any other Person on
behalf of it for the years beginning July 1, 1991, and thereafter.
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4.9 ASSETS OTHER THAN REAL PROPERTY INTERESTS. Either Seller or Canada
Sub has good and marketable title to all assets reflected on the September
Balance Sheet, except those sold or otherwise disposed of since the date of
the September Balance Sheet in the Ordinary Course, in each case free and
clear of all Liens except (a) such as are disclosed on Schedule 4.9, (b)
mechanics', carriers', workmen's, repairmen's or other like Liens arising or
incurred in the Ordinary Course, (c) Liens arising under original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the Ordinary Course, (d) Liens for Taxes and other
governmental charges which are not due and payable or which may thereafter be
paid without penalty, and (e) other imperfections of title, restrictions or
encumbrances, if any, which Liens, imperfections of title, restrictions or
other encumbrances do not, individually or in the aggregate, materially
impair the continued use and operation of the specific assets to which they
relate (the Liens hereinabove described are hereinafter referred to
collectively as "Permitted Liens").
This Section 4.9 does not relate to real property or interests in real
property, such items being the subject of Section 4.10. This Section 4.9
does not relate to intellectual property, which is the subject of Section 4.11.
4.10 REAL PROPERTY. Schedule 4.10 sets forth a complete list of all
real property and interests in real property owned in fee by either Seller or
Canada Sub and in each case used primarily in the Business (individually, an
"Owned Property"), and a complete list of all real property and interests in
real property leased by either Seller or Canada Sub and in each case used
primarily in the Business (individually, a "Leased Property" and, together
with the owned Properties, individually as a "Company Property" and
collectively as "Company Properties"), and as to Leased Property, identifies
any leases relating thereto. True and complete copies of all such leases
have been made available to Buyer.
4.11 INTELLECTUAL PROPERTY. Schedule 4.11 sets forth a list of all
patents, trademarks (registered or unregistered), trade names, service marks
and copyrights and applications for any of the foregoing, other than those
relating to generally commercially available computer software (collectively,
"Intellectual Property"), owned, used, filed by or licensed to Seller or
Canada Sub. With respect to trademarks, Schedule 4.11 contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers. Except as disclosed on Schedule 4.11,
either Seller or Canada Sub owns or has the right to use, without payment to
any other party, the Intellectual Property listed on such Schedule 4.11, and
the consummation of the transactions contemplated
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hereby will not alter or impair any such Intellectual Property. Except as
disclosed on Schedule 4.11, neither Seller nor Canada Sub has licensed to any
third party, on an exclusive basis or otherwise, the right to use or exploit
any Intellectual Property in any jurisdiction or otherwise transferred or
assigned any Intellectual Property to any third party in any jurisdiction.
Except as set forth on Schedule 4.11, neither Seller nor MagneTek has
received written notice of any claims which are pending or, to the Knowledge
of either Seller or MagneTek, threatened against either Seller or Canada Sub
by any person with respect to the ownership, validity, enforceability or use
of any Intellectual Property listed on Schedule 4.11 or otherwise challenging
or questioning the validity or effectiveness of any such Intellectual
Property and, to the Knowledge of each of Seller and MagneTek, no basis in
fact exists to support any such claim.
4.12 FURNITURE, FIXTURES, MACHINERY AND EQUIPMENT. All material
furniture, fixtures, machinery and equipment used by Seller and Canada Sub in
their businesses is in the possession or under the control of Seller or
Canada Sub and is, with the exception of automobiles, trucks and other
highway vehicles in transit and items that are offsite for repairs, located
at one of the places of business of Seller or Canada Sub. All items of such
furniture, fixtures, machinery and equipment are in good operating condition,
subject to normal wear and tear, and adequate for the present uses thereof.
4.13 CONTRACTS. Schedule 4.13 sets forth a list of each of the
following Contracts to which either Seller or Canada Sub is a party (the
"Material Contracts"):
(a) any written employment contract that is not terminable by
notice of not more than 30 days for a cost of less than $25,000;
(b) any Stay and Pay Agreements;
(c) any employee collective bargaining agreement or other Contract
with any labor union;
(d) any Contractual Obligation that restricts the ability of
either Seller or Canada Sub to compete in any line of business in any place
in the world;
(e) any Contractual Obligation between (i) either Seller or Canada
Sub, on the one hand, and MagneTek or any Affiliate of MagneTek, on the other
hand, or (ii) Seller, Canada Sub or MagneTek and any officer or director of
Seller or Canada sub (other than agreements covered by paragraph (a) above)
involving consideration to either party with a value of at least $25,000;
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(f) any lease or similar agreement under which either Seller or
Canada Sub is a lessor or sublessor of, or makes available for use by any
third party, any real property owned or leased by Seller or Canada Sub or any
portion of premises otherwise occupied by Seller or Canada Sub;
(g) any Contractual Obligation under which either Seller or Canada
Sub has borrowed or loaned any money or issued any note, bond, indenture or
other evidence of indebtedness or directly or Indirectly guaranteed
indebtedness, liabilities or obligations of others (other than endorsements
for the purpose of collection in the Ordinary Course);
(h) any mortgage, pledge, conditional sales contract (for a value
in excess of $25,000), security agreement (with respect to property in excess
of $25,000), factoring agreement or other similar agreement with respect to
any property or assets of either Seller or Canada Sub;
(i) any Contract (other than agreements covered by paragraph (a)
above) that provides for the payment of any severance compensation to any
Company Employee or employee of Canada Sub, or for the provision, vesting
and/or acceleration of any employee benefits following a change of ownership
or control of either Seller or Canada Sub;
(j) any license, royalty, franchise, service (other than with
respect to services provided by Seller or Canada Sub in the Ordinary Course),
sales agency or representative or distribution Contractual Obligation (which
Contractual Obligation is not cancelable without penalty on not more than 30
days' notice or has an aggregate annual payment obligation of more than
$25,000);
(k) any Contract for the sale of any asset other than in the
Ordinary Course or for the grant of any right of first refusal or similar
preferential right to purchase any asset of either Seller or Canada Sub;
(l) any executory Contract or commitment for capital expenditures
over $25,000;
(m) any Contract between either Seller or Canada Sub and any
person which has previously purchased any business from Seller or Canada Sub;
or
(n) any other Contract which has an aggregate future payment
obligation in excess of $25,000 and is not terminable by notice of not more
than 60 days for a cost of less than $50,000 (other than purchase contracts
and orders for inventory in the Ordinary Course).
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Except as disclosed on Schedule 4.13, each Contract listed thereon is
valid, binding and in full force and effect and is enforceable by Seller or
Canada Sub, as the case may be, in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors, rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law). Except as
disclosed in Schedule 4.13, and with respect to the contracts listed or
described under "Intellectual Property Agreements" in Schedule 4.11, except
as disclosed on Schedule 4.11, Seller and Canada Sub have performed all
material obligations required to be performed by them to date under the
Contracts and are not (with or without the lapse of time or the giving of
notice, or both) in breach or default in any material respect thereunder and,
to the Knowledge of either Seller or MagneTek, no other party to any of the
Contracts is (with or without the lapse of time or the giving of notice or
both) in breach or default in any material respect thereunder.
4.14 LITIGATION; DECREES. Schedule 4.14 sets forth a list, as of the
date of this Agreement, of all pending or, to the Knowledge of MagneTek,
threatened actions, suits, claims or legal, administrative or arbitration
proceedings or investigations with respect to which either Seller or Canada
Sub has been contacted in writing by the claimant or by counsel for the
claimant against Seller or Canada Sub or any of their respective properties,
assets, operations or businesses or against any Canada Sub Plan or any
Company Plan which (a) involves a claim by or against Seller or Canada Sub or
against any Canada Sub Plan or any Company Plan of more than $50,000, (b)
seeks any injunctive relief pertaining to the Assets or the Business or any
Canada Sub Plan or any Company Plan, or (c) relates to the transactions
contemplated by this Agreement. To the Knowledge of MagneTek's General
Counsel, Schedule 4.14 also lists all pending actions, suits, claims or legal
or administrative or arbitration proceedings to which Seller is a party in
respect of the Business, or to which Canada Sub is a party, in each case
involving claims by such Person against a third party. To the Knowledge of
either Seller or MagneTek, except as disclosed on Schedule 4.14, neither
Seller nor Canada Sub is in default under any judgment, order or decree of
any court, administrative agency or commission or other Governmental
Authority applicable to it or any of its properties, assets, operations or
businesses. This Section 4.14 does not relate to environmental matters,
which are the subject of Section 4.17.
4.15 EMPLOYEE BENEFIT PLANS. Except as set forth on Schedule 4.15:
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(a) Schedule 4.15(a) contains a listing of each material Company
Plan and material Canada Sub Plan.
(b) A complete copy of each material written Canada Sub Plan and
the Larsen-Hogue Plan as amended to the Closing, together with audited
financial statements and/or actuarial reports for the three (3) most recent
plan years, if any; a copy of each trust agreement, insurance contract, if
any, or any other funding vehicle with respect to each such plan; a copy of
any and all determination letters, rulings or notices issued by any
Governmental Authority with respect to such plan; a copy of the Form 5500
Annual Report and any PBGC Form 1 for the three (3) most recent plan years or
any comparable form, if any, under Canadian or provincial law; any summary
plan description and/or summary of material modifications; and a copy of each
and any general explanation or communication which was required to be
distributed or otherwise provided to participants and which modifies or
amends any material provisions of such plan, will, within five Business Days
after the date of this Agreement, have been made available to Buyer. A
description of the material terms of any unwritten material Canada Sub Plan
and any unwritten material Company Plan will, no later than the date
schedules are required to be delivered to Buyer pursuant to Section 6.12 of
this Agreement, have been made available to Buyer and such plan will be
listed on Schedule 4.15(a).
(c) The Larsen-Hogue Plan and each Canada Sub Plan (i) has been
and currently is in material compliance in form (other than any amendments
due to changes in the Code for which the period for adopting such amendments
has not expired) and in operation in all respects with all applicable laws;
(ii) has been and is operated and administered in material compliance with
its terms (except as otherwise required by law); (iii) where applicable, has
been and is operated, administered, maintained and funded in material
compliance with the applicable requirements of the Code and ERISA (or
comparable Canadian or provincial laws) in such a manner as to qualify, where
appropriate, for both Federal and state purposes (or where applicable,
Canadian federal and provincial), for income tax exclusions to its
participants, tax-exempt income for its funding vehicle, and the allowance of
deductions and credits with respect to contributions thereto; and (iv) where
applicable, has received a favorable determination letter from the IRS.
(d) As of the Closing Date and with respect to the Larsen Hogue
Plan and each Canada Sub Plan, none of the Buyer, Seller or Canada Sub could
have any liability for: (i) any "prohibited transaction," as such terms are
defined under ERISA or the Code (or comparable Canadian or provincial laws);
(ii) any fiduciary breach; (iii) any failure to act or comply in connection
with the administration or investment of the assets of
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such plans; or (iv) a civil penalty assessed pursuant to Section 502(i) of
ERISA (or comparable Canadian or provincial laws).
(e) Each Canada Sub Plan, if any, which provides post-retirement
welfare benefits, may be terminated by Canada Sub, on and after the Closing
without further liability for benefit claims incurred after such termination.
(f) To the Knowledge of either Seller or MagneTek, no person has
made any statements, whether oral or in writing, regarding any Canada Sub
Plan or the Larsen-Hogue Plan which will result in any liability under such
Canada Sub Plan or the Larsen-Hogue Plan in excess of any current or
potential liability under such Canada Sub Plan or the Larsen-Hogue Plan
previously disclosed to Buyer pursuant to this Section 4.15.
(g) Neither Seller nor Canada Sub nor any of their ERISA
Affiliates has any liability (including any potential liability) with respect
to any "multiemployer plan" as defined in Section 4001 or Section 3(37) of
ERISA, "multiple employer plan" within the meaning of Code Section 413(c) or
"multiple employer welfare arrangement" within the meaning of Section 3(40)
of ERISA.
(h) The Larsen-Hogue Plan has not incurred any "accumulated
funding deficiency" as such term is defined in Section 302 of ERISA or
Section 412 of the Code, whether or not waived. No liability to the PBGC
(except for payment of premiums) has been incurred with respect to the
Larsen-Hogue Plan, no reportable event within the meaning of Section 4043 of
ERISA (excluding any event described in Section 4043(c)(9) thereof) has
occurred with respect to the Larsen Hogue Plan, the PBGC has not threatened
or instituted the termination of the Larsen-Hogue Plan and the Larsen-Hogue
Plan has not been completely or partially terminated.
(i) With respect to the Larsen-Hogue Plan and each Canada Sub
Plan, all material payments, premiums, contributions, reimbursements and
expenses, calculated in the ordinary Course (as determined by MagneTek's
independent actuary, where applicable), required to be paid for all periods
ending on or prior to December 31, 1995, have been paid or shall be accrued
on the Closing Balance Sheet.
(j) None of Seller, Canada Sub nor any of their ERISA Affiliates
has incurred any liability to the PBGC, the IRS, the Department of Labor (or
any comparable Canadian or provincial Governmental Authority) or otherwise
with respect to any Company Plan that has not been satisfied in full, or with
respect to which, to the Knowledge of either Seller or MagneTek, a condition
exists that presents a material risk to Buyer or Canada Sub.
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4.16 COMPLIANCE WITH APPLICABLE LAWS. Except as set forth in Schedule
4.16 attached hereto, each of Seller and Canada Sub is in compliance with all
applicable Requirements of Law, except for such incidents of noncompliance
which, individually and in the aggregate, would not have a Material Adverse
Effect. Except as set forth in Schedule 4.16 hereto, since July 1, 1994, to
the Knowledge of either Seller or MagneTek, neither Seller nor Canada Sub nor
MagneTek has received any written communication from a Governmental Authority
that alleges that either Seller or Canada Sub is not in compliance with any
Requirement of Law, except where noncompliance would not have a Material
Adverse Effect. This Section 4.16 does not relate to Environmental Laws,
which are the subject of Section 4.17, or matters with respect to Taxes, which
are the subject of Section 4.8.
4.17 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 4.17
attached hereto:
(a) Seller is in compliance with all Environmental Laws, except
any non-compliance which would not have a Material Adverse Effect on Seller.
Without limiting the generality of the preceding sentence, Seller has
obtained and is in material compliance with all of the terms and conditions
of all permits, licenses, certificates and other authorizations which are
required under all Environmental Laws.
(b) Seller has not received any written or, to the Knowledge of
Seller or MagneTek, oral notice of, any private, administrative or judicial
action, or written or, to the Knowledge of Seller or MagneTek, oral notice of
any intended private, administrative, or judicial action relating to the
presence or alleged presence of Hazardous Materials in, at, under or upon any
Company Property; and there are no pending or, to the Knowledge of Seller or
MagneTek, threatened actions or proceedings (or, to the Knowledge of Seller
or MagneTek, notices of threatened actions or proceedings) against Seller
from any Governmental Authority regarding any matter relating to any
Environmental Laws.
4.18 EMPLOYEE AND LABOR RELATIONS. Except as set forth on Schedule 4.18:
(a) there is no labor strike, dispute, or work stoppage or lockout
pending, or to the Knowledge of either Seller or MagneTek, threatened,
against Seller or Canada Sub;
(b) to the Knowledge of either Seller or MagneTek, no union
organization campaign is in progress with respect to any Company Employees or
employees of Canada Sub, and no question concerning representation exists
respecting such Company Employees or employees of Canada Sub;
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(c) there is no unfair labor practice charge or complaint against
Seller or Canada Sub pending, or to the Knowledge of either Seller or
MagneTek, threatened, before the National Labor Relations Board;
(d) there is no pending, or to the Knowledge of either Seller or
MagneTek, threatened, grievance that, if adversely decided, would have a
Material Adverse Effect; and
(e) no charges with respect to or relating to Seller or Canada Sub
are pending before the Equal Employment Opportunity Commission or any other
Governmental Authority responsible for the prevention of unlawful employment
practices as to which there is a reasonable likelihood of adverse
determination, other than those which, if so determined would not have a
Material Adverse Effect.
4.19 CORPORATE NAMES. Neither Seller nor Canada Sub has used in the
past six years or is currently using any corporate or fictitious name, other
than the names listed in Schedule 4.19.
4.20 LICENSES AND PERMITS. Attached hereto as Schedule 4.20 is a
complete and accurate list and description of all material licenses, permits
and other authorizations of governmental authorities, domestic and foreign,
and other third Persons used or required, and held by Seller or any Canada
Sub, in the conduct of its business. To the Knowledge of MagneTek, Seller,
or Canada Sub, none of Seller, Canada Sub or MagneTek has received any notice
that revocation is being considered with respect to any of such licenses,
permits or authorizations. This Section 4.20 does not relate to permits
required under any Environmental Laws which are addressed in Section 4.17.
4.21 DIRECTORS, OFFICERS AND EMPLOYEES OF THE COMPANY.
Schedule 4.21 contains a true, correct and complete list of all
directors and officers of Canada Sub showing each office held by each such
Person. Concurrently with the delivery of Schedules, Seller will deliver to
Buyer a substantially complete list of all current employees of Seller and
Canada Sub, and the salary or hourly compensation each such employee receives.
4.22 CUSTOMERS. Schedule 4.22 sets forth a complete list of Seller's
and Canada Sub's ten largest customers (measured by revenue to Seller and
Canada Sub) for the 1995 fiscal year, and for the first two fiscal quarters
of the 1996 fiscal year.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER AND GRAND EAGLE
Each of Buyer and Grand Eagle hereby jointly and severally represents
and warrants to each of Seller and MagneTek as follows:
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5.1 AUTHORITY; NO CONFLICTS; GOVERNMENTAL CONSENTS. (a) Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Georgia. Grand Eagle is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware. Each of Buyer and Grand Eagle has all requisite corporate power
and authority to enter into this Agreement and those Ancillary Agreements to
which it is a party and to consummate the transactions contemplated hereby
and thereby. All corporate acts and other proceedings required to be taken
by each of Buyer and Grand Eagle to authorize the execution, delivery and
performance of this Agreement and those Ancillary Agreements to which each of
them is a party and the consummation of the transactions contemplated hereby
and thereby have been duly taken. This Agreement has been duly executed and
delivered by Buyer and Grand Eagle and constitutes, and when executed and
delivered by Buyer or Grand Eagle, as the case may be, at the Closing each of
the Ancillary Agreements to which Buyer or Grand Eagle is a party will
constitute, a valid and binding obligation of each of Buyer and Grand Eagle,
as the case may be, enforceable against it in accordance with its terms,
except as enforceability may be limited by Bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law).
(b) The execution and delivery of this Agreement does not, and the
execution and delivery of those Ancillary Agreements to which Buyer or Grand
Eagle is a party will not, and the consummation of the transactions
contemplated hereby and thereby and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of any Lien upon
any of the properties or assets of Buyer or Grand Eagle under, any provision
of (i) the Certificate of Incorporation or By-laws of Buyer or Grand Eagle,
(ii) any Contractual Obligation to which Buyer or Grand Eagle is a party or
by which any of its properties or assets are bound, or (iii) any judgment,
order or decree or, subject to the matters described in clauses (A)-(D)
below, Requirement of Law applicable to Buyer or Grand Eagle or their
respective property or assets, other than, in the case of clauses (ii) and
(iii) above, any such conflicts, violations, defaults, rights or Liens that,
individually or in the aggregate, would not have a material adverse effect on
the ability of Buyer or Grand Eagle to consummate the transactions
contemplated hereby. No material
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consent, approval, license, permit, order or authorization of, or
registration, declaration or filing with any Governmental Authority is
required to be obtained or made by or with respect to Buyer or Grand Eagle in
connection with the execution and delivery of this Agreement or the
consummation by Buyer and Grand Eagle of the transactions contemplated
hereby, other than (A) compliance with and filings under the HSR Act, (B)
compliance with and filings and notifications under applicable Environmental
Laws, (C) filings and notifications required to be made by Buyer under the
Investment Canada Act, and (D) those that may be required solely by reason of
Seller's or MagneTek's (as opposed to any other third party's) participation
in the transactions contemplated hereby.
5.2 ACTIONS AND PROCEEDINGS, ETC. There are no (a) outstanding
judgments, orders, writs, injunctions or decrees of any Governmental
Authority against Buyer or Grand Eagle which have a material adverse effect
on the ability of Buyer and Grand Eagle to consummate the transactions
contemplated hereby or (b) actions, suits, claims or legal, administrative or
arbitration proceedings or investigations pending or, to the knowledge of
Buyer or Grand Eagle, threatened against Buyer or Grand Eagle, which have or
could have a material adverse effect on the ability of Buyer and Grand Eagle
to consummate the transactions contemplated hereby.
5.3 AVAILABILITY OF FUNDS. Buyer and Grand Eagle have, or shall as of
the Closing have, all funds required to consummate the transactions
contemplated hereby and by the Other Agreement.
5.4 BUYER'S AND GRAND EAGLE'S ACKNOWLEDGMENT. Each of Buyer and Grand
Eagle acknowledges and agrees that, (a) other than the representations and
warranties of Seller and MagneTek specifically contained in this Agreement,
there are no representations or warranties of Seller or MagneTek either
expressed or implied with respect to Seller, Canada Sub, MagneTek, or the
transactions contemplated hereby and (b) it shall have a right to
indemnification solely as provided in Article 10 hereof and, except as
provided in this Agreement, it shall have no claim or right to
indemnification with respect to any information, documents or materials
furnished by or on behalf of Seller or MagneTek or any of its officers,
directors, employees, agents or advisors to Buyer or Grand Eagle, including,
without limitation, the Confidential Offering Memorandum, March 1994,
prepared by Lehman Brothers or any information, documents or material made
available to Buyer in certain "data rooms,"
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management presentations or any other form in expectation of the transactions
contemplated by this Agreement.
5.5 EXON-FLORIO. Buyer is not a "foreign person" for purposes of the
Exon-Florio Amendment to the Defense Production Act of 1950.
ARTICLE 6
COVENANTS OF SELLER AND MAGNETEK
Each of Seller and MagneTek covenants and agrees as follows:
6.1 ACCESS. Subject to the provisions of Section 7.1 hereof, prior to
the Closing, Seller and MagneTek will, and will cause Canada Sub to, give
Buyer and its representatives, employees, counsel and accountants reasonable
access, during normal business hours and upon reasonable notice, to the
personnel, customers, suppliers, properties and Records of Seller and Canada
Sub; PROVIDED, HOWEVER, that such access does not unreasonably disrupt the
normal operations of Seller and Canada Sub.
6.2 ORDINARY CONDUCT. Except as contemplated by this Agreement or as
set forth in Schedule 6.2, from the date hereof to the Closing, Seller and
MagneTek will, and will cause Canada Sub to, conduct the Business in the
Ordinary Course and will make all reasonable efforts consistent with past
practices to preserve relationships with customers, suppliers and others with
whom Seller or Canada Sub deals. Except as contemplated by this Agreement,
Seller will not, in respect of the Business, and MagneTek will not permit
Seller to, and Seller and MagneTek will not permit Canada Sub to, do any of
the following without the prior written consent of Buyer, which consent will
not be unreasonably withheld or delayed:
(a) with respect only to Canada Sub, amend its constitutive
documents;
(b) with respect only to Canada Sub, redeem or otherwise acquire any
shares of its capital stock or issue any capital stock or any option, warrant
or right relating thereto or any securities convertible into or exchangeable
for any share of capital stock;
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(c) with respect only to Canada Sub, sell or otherwise dispose of
any treasury shares;
(d) terminate, adopt or amend in any material respect any Company
Plan or Canada Sub Plan or collective bargaining agreement, except as required
by law or insofar as a collective bargaining agreement is then subject to
negotiation in advance of its expiration in the Ordinary Course;
(e) enter into or amend any Contract or Contractual Obligation with
a value or commitment exceeding $50,000;
(f) incur or assume any liabilities, obligations or indebtedness for
borrowed money or guarantee any such liabilities, obligations or indebtedness,
other than in the Ordinary Course; PROVIDED that in no event shall Seller or
Canada Sub incur, assume or guarantee any long-term indebtedness for borrowed
money;
(g) encumber any of its assets or grant any security interests or
increase or expand the collateral in connection with any of its existing
secured liabilities or obligations other than in the Ordinary Course;
(h) make any change in any method of accounting or accounting
practice or policy other than those required by GAAP;
(i) acquire or agree to acquire by merging or consolidating with, or
by purchasing the stock of, or a substantial portion of the assets of, or by
any other manner, any Person;
(j) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets (other than the Excluded Assets),
except in the Ordinary Course and except for sales, leases or dispositions of
assets that, individually, have a value of less than $25,000 and, in the
aggregate, have a value of less than $100,000;
(k) enter into any lease of real property, except any renewals of
existing leases and a lease in respect of its Tucson facility;
(l) grant any increase in the compensation of officers or employees,
whether now or hereafter payable, including any such increase pursuant to any
bonus, pension, profit sharing,
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incentive compensation, expense reimbursement, deferred compensation,
retirement or similar plan or agreement or employ any additional executive or
management personnel or enter into or amend any severance agreement or grant
any general increase in wage or salary rates or in employee benefits (except
in the Ordinary Course or as required by existing agreements, plans or
arrangements) or enter into any employment contract which Buyer, Seller or
Canada Sub do not have the right to terminate without liability or adopt (or
amend in any manner which would increase the benefits under) any bonus, profit
sharing, compensation, employment or other employee benefit plan, agreement,
contract, commitment or arrangement for the benefit or welfare of any employee
or employees of Seller or Canada Sub;
(m) organize any Subsidiary or acquire any equity or other interest
in any Person; or
(n) agree, whether in writing or otherwise, to do any of the
foregoing.
6.3 INSURANCE. Seller shall keep, or cause to be kept, all insurance
policies presently maintained relating to Seller, Canada Sub and their
respective properties, or replacements therefor, in full force and effect
through the close of business on the Closing Date. None of Buyer, Seller or
Canada Sub will have any rights under any such insurance policies from and
after the Closing Date.
6.4 ACCOUNTS RECEIVABLE. Each of MagneTek and Seller agrees to forward
to Buyer, within three business days after receipt thereof, any and all
proceeds from accounts receivable of Seller or Canada Sub that are received by
Seller, MagneTek or any other Affiliate of MagneTek after the Closing Date.
If, after the Closing Date, Seller or MagneTek or any other Affiliate of
MagneTek receives any payment from any person who at the time of such payment
has outstanding accounts payable to MagneTek, on the one hand (for the
purposes of this Section, "MagneTek Accounts Receivable"), and to Buyer,
Seller or Canada Sub, on the other hand (for purposes of this Section, "Buyer
Accounts Receivable"), and the payment (a) does not indicate whether it is in
respect of MagneTek Accounts Receivable or Buyer Accounts Receivable or (b)
indicates that it is in payment of both MagneTek Accounts Receivable and Buyer
Accounts Receivable without specifying the portion to be allocated to each,
then MagneTek and Buyer shall consult with one another to determine the proper
allocation of such payment; and, if they are unable to reach agreement on the
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proper allocation, such payment shall be applied so as to retire MagneTek
Accounts Receivable and Buyer Accounts Receivable in chronological order based
upon the period of time such accounts receivable have existed on the books of
MagneTek, Seller, Buyer or Canada Sub, as applicable.
6.5 CONFIDENTIALITY AGREEMENTS. After the date of this Agreement, each
of Seller and MagneTek shall take all actions and do all things reasonably
necessary (but not including the commencement of litigation) to preserve and
enforce its rights under the terms of any confidentiality agreements entered
into between Seller, MagneTek and third parties who were provided information
relating to Seller and Canada Sub in connection with MagneTek's efforts to
sell the business, assets or stock of Seller or Canada Sub; PROVIDED, HOWEVER,
that upon Buyer's request and at its expense in the event of a dispute, Seller
or MagneTek will either (a) assign to Buyer its rights under any such specific
agreement or (b) serve as the named party in any legal action for Buyer's
benefit under such an agreement.
6.6 NO SOLICITATION. None of MagneTek, Seller, Canada Sub or their
respective Affiliates shall, and none of them shall permit any of their
respective directors, officers, employees, agents or representatives to,
solicit, initiate, encourage, entertain or consider any inquiries or proposals
concerning any merger, consolidation or acquisition or purchase of all or any
substantial portion of the assets or capital stock of Seller or Canada Sub
(other than the Excluded Assets), whether separately or as part of a larger
transaction, or any other transaction which could reasonably be expected to
preclude the consummation of any or all of the transactions contemplated by
this Agreement.
6.7 LIEN SEARCHES. Prior to the Closing, Seller shall obtain at its
expense and deliver to Buyer Uniform Commercial Code, tax lien and judgment
searches (or, in the case of foreign jurisdictions, comparable searches) for
Seller and Canada Sub at the state and county level (or, in the case of
foreign jurisdictions, the appropriate filing offices) for each location at
which Seller or Canada Sub presently conducts business or has conducted
business during the past five years. Such searches shall be conducted under
the present names of Seller and Canada Sub and such other names as they used
during the past five years.
6.8 THIRD PARTY CONSENTS. Prior to the Closing, Seller shall use
commercially reasonable efforts to procure all consents, approvals or
authorizations from third Persons
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necessary to consummate the transactions contemplated by this Agreement and all
consents, approvals or authorizations from third Persons required under
Contracts for any reason as a result of the transactions contemplated herein the
failure to obtain of which may reasonably expected to have a Material Adverse
Effect (all of which are referred to herein as "Third Party Consents"). Each of
Seller and MagneTek hereby represents and warrants to Buyer that Schedule 6.8 is
a true, correct and complete list of all Third Party Consents. Each of Buyer
and Seller and MagneTek shall, and Seller shall cause Canada Sub to, cooperate
with the other parties in any reasonable manner in connection with obtaining any
consents; provided, however, that such cooperation shall not include any
requirement of any party to commence any litigation or offer or grant any
accommodation (financial or otherwise) to any third party.
6.9 ENVIRONMENTAL MATTERS.
(a) As to the Seller Facilities located in Orlando, Florida, New
Orleans, Louisiana, and Houston, Texas, after the Closing Date Seller shall
conduct, at its sole cost, such response (investigation and cleanup) or
containment activities as are required by regulatory authorities pursuant to
applicable Environmental Laws concerning such soil and/or groundwater
contamination as has been determined prior to the Closing Date to exist at
such Facilities as specified on Schedule 6.9 hereto ("Existing
Contamination"), and, in the case of the Houston Facility (defined below),
such response (investigation and cleanup) and containment activities as will
be set forth as recommendations in the Houston Phase II Report. Seller's
responsibility for Existing Contamination shall be concluded with respect to a
Facility when either of the following events occurs: (i) Seller obtains from
the lead regulatory agency written confirmation that all necessary response
actions have been completed at the Facility with respect to the Existing
Contamination; or (ii) Seller demonstrates to the reasonable satisfaction of
Buyer through test data that Existing Contamination levels do not exceed
applicable state or federal standards requiring remediation.
(b) Buyer shall cooperate fully with Seller's efforts to conduct
response activities pursuant to this Agreement. Seller and its contractors
shall be afforded access to the Facilities at all reasonable times for the
purpose of conducting necessary response activities. Seller and MagneTek
shall cause their contractors to supply Buyer with certificates of insurance
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reflecting such coverage, and in such amounts, as Buyer shall reasonably
require, consistent with the customs in the industry. Seller shall be
responsible for managing all communications with Governmental Authorities
concerning response activities taken pursuant to this Section 6.9, and Buyer
shall not initiate any communications with Governmental Authorities or other
third parties concerning such response activities. Seller and MagneTek shall
inform Buyer from time to time at Buyer's request of the status of Seller's
response activities taken pursuant to this Section 6.9 and, at Buyer's
request, will supply Buyer with copies of material communications from
governmental authorities concerning response activities taken pursuant to this
Section 6.9.
(c) Contemporaneously with the completion of the tank farm
relocation project currently under way at the Seller Facility at 10010 Gulf
Freeway, Houston, Texas (the "Houston Facility"), Seller agrees to retain, at
its expense, Dames & Moore, or another reputable environmental consulting firm
selected by Seller and reasonably satisfactory to Buyer, to perform a
comprehensive Phase II environmental study of the soils and groundwater at the
Houston Facility and to obtain the resulting Phase II report (the "Houston
Phase II Report") from such consulting firm as promptly as practicable.
Seller will deliver to Buyer a copy of the Houston Phase II Report. Promptly
after it receives the Houston Phase II Report, if required to do so under
applicable law, Seller will report to the Texas Natural Resource Conservation
Commission in writing the impact to soils and groundwater reflected in the
Houston Phase II Report. Upon completion of the Houston Phase II Report,
Seller will comply with the requirements of Section 6.9(a) above as to the
Houston Facility.
(d) Seller will use reasonable efforts to obtain and deliver to
Buyer at Closing the consent of Dames & Moore (or such other consultant as
shall have prepared the Houston Phase II Report) to reliance by Buyer and
Grand Eagle upon the Phase II Report prepared in respect of the Seller
Facilities listed in Section 6.9.
6.10 RANCHO DOMINGUEZ LEASE ASSIGNMENT. In the event Seller is unable to
obtain from Westinghouse Electric Corporation either a complete novation or an
assignment of its leasehold interest (the "Westinghouse Lease") in the Company
Property at 18020 South Santa Fe Avenue, Rancho Dominguez, California, Seller
agrees to enter into a sublease or similar arrangement in which Seller will
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undertake to convey to Buyer its benefits under the environmental protections
and indemnifications Seller has under the Westinghouse Lease, provided that
Seller shall be required only to use commercially reasonable efforts to
enforce such rights on Buyer's behalf, and that all actions pertaining to such
enforcement shall be at Buyer's sole expense.
6.11 RANCHO DOMINGUEZ FACILITY PROJECT. Promptly after the date hereof,
Seller shall obtain an estimate for the work described on Schedule 6.11 hereto
and shall commence such work. If the Closing occurs, Buyer shall reimburse
Seller for one-half of the expense of such work.
6.12 DELIVERY OF SCHEDULES. Buyer shall, by March 15, 1996, deliver to
Seller Schedule 3.1 and any schedules referred to in Buyer's representations
and warranties in Article 5 hereof. By March 15, 1996, Seller and MagneTek
shall deliver to Buyer and Grand Eagle all remaining Schedules described in
this Agreement.
ARTICLE 7
COVENANTS OF BUYER
Buyer covenants and agrees as follows:
7.1 CONFIDENTIALITY. Buyer acknowledges that the information regarding
the Business heretofore and hereafter provided to it by MagneTek or Seller is
subject to the terms of a confidentiality agreement between MagneTek and an
Affiliate of Buyer dated as of March 21, 1994 (the "Confidentiality
Agreement"), the terms of which are incorporated herein by reference except
that the expiration is extended by 18 months from the date hereof. Effective
upon, and only upon, the Closing, the Confidentiality Agreement will
terminate; provided, however, that Buyer acknowledges that the Confidentiality
Agreement will terminate only with respect to information relating solely to
the Business and Canada Sub; and provided, further, however, that Buyer
acknowledges that any and all other provisions shall remain in effect, and all
information provided to it by MagneTek or its representatives concerning
MagneTek shall remain subject to the terms and conditions of the
Confidentiality Agreement after the date of the Closing.
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7.2 ACCOUNTS RECEIVABLE. Buyer agrees to forward or cause to be
forwarded to MagneTek, within three business days after the receipt thereof,
any and all proceeds from accounts receivable of MagneTek that are received by
Buyer or Canada Sub after the Closing Date. If, after the Closing Date, Buyer
or Canada Sub receives any payment from any Person who at the time of such
MagneTek Accounts Receivable and Buyer Accounts Receivable, and the payment
(a) does not indicate whether it is in respect of MagneTek Accounts Receivable
or Buyer Accounts Receivable or (b) indicates that it is in payment of both
MagneTek Accounts Receivable and Buyer Accounts Receivable without specifying
the portion to be allocated to each, then MagneTek and Buyer shall consult
with one another to determine the proper allocation of such payment; and, if
they are unable to reach agreement on the proper allocation, such payment
shall be applied so as to retire MagneTek Accounts Receivable and Buyer
Accounts Receivable in chronological order based upon the period of time such
accounts receivable have existed on the books of MagneTek, Buyer, Seller or
Canada Sub, as applicable.
7.3 INSURANCE. Buyer shall secure insurance with respect to the Assets
and shall cause Canada Sub to secure insurance with respect to its assets from
the Closing Date covering general liability and products liability in amounts
customary for the industry in which Buyer and Canada Sub operate.
7.4 ASSETS REMAINING ON BUYER'S PROPERTY. If, after the Closing Date,
the Excluded Assets listed on Schedule 7.4 remain on the premises utilized or
controlled by Buyer or Canada Sub, then Buyer shall take reasonable steps at
the expense of MagneTek to deliver such Excluded Assets to MagneTek, and so
long as such assets remain in Buyer's control, shall exercise reasonable care
with respect thereto, and in no event less care than with respect to its own
properties or than MagneTek or Seller is contractually required to exercise
(but only to the extent set forth on Schedule 7.4). MagneTek shall take
reasonable steps to remove all such assets from premises utilized or
controlled by Buyer and Canada Sub promptly after Closing, and in any case not
later than ninety days after the Closing Date. After such date, Buyer and
Canada Sub may move and store any such assets, at the expense of MagneTek, to
and at locations off the premises utilized or controlled by Buyer and Canada
Sub, and thereafter shall have no further responsibility to MagneTek with
respect to such assets.
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7.5 CHANGE OF NAME OF CANADA SUB. On the Closing Date, Buyer shall
cause the name of Canada Sub to be changed so as to eliminate the name
"MagneTek".
ARTICLE 8
MUTUAL COVENANTS
Each of Seller and MagneTek covenants and agrees with Buyer and Grand
Eagle, and each of Buyer and Grand Eagle covenants and agrees with Seller and
MagneTek as follows:
8.1 COOPERATION. MagneTek, Buyer, Seller and Grand Eagle shall
cooperate with each other and shall cause their officers, employees, agents,
auditors and representatives to cooperate with each other after the Closing to
ensure the orderly transition of the Business to Buyer and to minimize any
disruption to the respective businesses of MagneTek, Buyer and Canada Sub that
might result from the transactions contemplated hereby. No party shall be
required by this Section 8.1 to take any action that would unreasonably
interfere with the conduct of its business. Subject to the terms and
conditions of this Agreement, each party will use all reasonable efforts to
cause the Closing to occur.
8.2 PUBLICITY. MagneTek, Seller, Buyer and Grand Eagle agree that, from
the date hereof through the Closing Date, no public release or announcement
concerning the transactions contemplated hereby shall be issued by any party
without the prior consent of the other parties (which consent shall not be
unreasonably withheld or delayed), except as such release or announcement may
be required by law or the rules or regulations of any United States or foreign
securities exchange, in which case the party required to make the release or
announcement shall allow the other party reasonable time to comment on such
release or announcement in advance of such issuance.
8.3 ANTITRUST NOTIFICATION. Each of MagneTek and Grand Eagle will as
promptly as practicable, but in no event later than ten Business Days
following the execution and delivery of this Agreement, file with the United
States Federal Trade Commission (the "FTC") and the United States Department
of Justice (the "DOJ") the notification and report form, if any, required for
the transactions contemplated hereby and any supplemental information
requested in connection therewith pursuant to the HSR Act. Any such
notification and report form and supplemental information
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will be in substantial compliance with the requirements of the HSR Act. Each
of MagneTek and Grand Eagle shall furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submission which is necessary under the
HSR Act. MagneTek and Grand Eagle shall keep each other apprised of the status
of any communication with, and inquiries or requests for additional
information from the FTC and the DOJ and shall comply promptly with any such
inquiry or request. Each of MagneTek and Grand Eagle will use its best efforts
to obtain any clearance required under the HSR Act for the purchase and sale
of the Assets.
8.4 RECORDS. (a) On the Closing Date, MagneTek and Seller shall deliver
or cause to be delivered to Buyer all Records not in the possession or control
of Canada Sub and all corporate records pertaining to the business and
operations of Canada Sub, subject to the following exceptions:
(i) Buyer recognizes that certain Records may contain incidental
information relating to Seller or Canada Sub or may relate primarily to
subsidiaries or divisions of MagneTek other than Seller or Canada Sub or
businesses of MagneTek or Seller previously sold, and that MagneTek and
Seller may retain such Records and shall provide copies of the relevant
portions thereof to Buyer;
(ii) MagneTek and Seller may retain all Records prepared in
connection with the sale of the Assets, including bids received from
other parties and analyses relating to Seller and Canada Sub;
(iii) MagneTek and Seller may retain any Tax Returns and supporting
documents and work papers, and upon reasonable request Buyer shall be
provided with copies of such Tax Returns and supporting documents and
work papers for the three Tax years prior to the Closing Date, and any
other Tax Returns and supporting documents and work papers only to the
extent that they relate (A) to Seller's or Canada Sub's separate Tax
Returns or separate Tax liability or (B) to the computation of Seller's
or Canada Sub's potential Tax liability for (I) any period ending on or
after the Closing, (II) any period for which Buyer is responsible for
filing Tax Returns, or (III) any period to which Canada Sub may
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carryback any net operating loss, capital loss or other Tax item; and
(iv) MagneTek may deliver within a reasonable time after the Closing
(in no event more than five (5) Business Days) such Records as to which
it desires to retain copies and requires additional time in which to make
such copies.
(b) After the Closing, upon reasonable written notice, MagneTek,
Buyer, Seller and Grand Eagle agree to furnish or cause to be furnished to
each other and their representatives, employees, counsel and accountants
access, during normal business hours, to such information (including Records
pertinent to Seller or Canada Sub) and assistance relating to Seller or Canada
Sub as is reasonably necessary for financial reporting and accounting matters,
the preparation and filing of any Tax Returns, reports or forms or the defense
of any Tax claim or assessment; PROVIDED, HOWEVER, that such access does not
unreasonably disrupt the normal operations of MagneTek, Seller, Buyer or
Canada Sub.
8.5 CONSENTS. With respect to each Contract not assigned on the Closing
Date, after the Closing Date Seller shall, if necessary, continue to deal with
the other contracting party as the prime contracting party, and Buyer and
Seller shall continue to use reasonable efforts to obtain the consent of the
required parties to the assignment of such Contract to Buyer. Notwithstanding
the absence of any such consent, Buyer shall be entitled to the benefits of
such Contract accruing after the Closing Date to the extent that Seller may
provide Buyer with such benefits without violating the terms of such Contract,
and to the extent benefits are so provided, Buyer agrees to perform at its
sole expense all of the obligations of Seller to be performed under such
Contract after the Closing Date, and such obligations and Contracts shall
comprise Assumed Liabilities.
ARTICLE 9
EMPLOYEE BENEFIT MATTERS
9.1 EMPLOYEE BENEFIT MATTERS.
(a) On or prior the Closing Date Buyer shall offer employment to
commence on the Closing Date to all Company Employees and shall set initial
salaries, wages and material employee benefits that, in the aggregate, are
generally
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comparable to those provided to the Company Employees by Seller immediately
prior to the Closing Date as disclosed to Buyer. Notwithstanding the
foregoing, Buyer shall not be obligated to provide to the Company Employees
benefits comparable to those provided under the MagneTek Flexcare Retirement
Pension Plan or the MagneTek Flexcare Savings (401(k)) Plan. Buyer assumes
all obligations and liabilities, if any, under the WARN Act (and any similar
state or foreign law) arising out of the transactions contemplated by this
Agreement. Buyer also agrees to comply with the terms of the WARN Act and any
comparable state laws with respect to any action that under any such laws
would require any notice or filing prior to the Closing Date, or would give
rise to any liability of Seller or MagneTek thereafter.
(b) On the Closing Date, Buyer shall establish a group health plan
for Company Employees which shall waive any exclusion or limitation with
respect to pre-existing conditions and actively-at-work exclusions and shall
provide that any out-of-pocket health expenses incurred by a Company Employee
or his covered dependents during 1996 prior to the Closing Date shall be taken
into account under Buyer's group health plan for the remainder of 1996 for
purposes of satisfying applicable deductible, coinsurance and maximum covered
health benefit claims by Company Employees and their covered dependents for
services rendered on or after the Closing Date. Neither Buyer nor its group
health plan for Company Employees shall be liable for any claims for health
benefits for services rendered on or prior to the Closing Date regardless of
when such claim is reported.
(c) As soon as practicable, but effective as of the Closing Date,
Buyer shall, or shall cause an Affiliate to, accept sponsorship of the
Larsen-Hogue Plan, and MagneTek and Seller shall take or cause to be taken all
such action as may be necessary to effect said change in sponsorship.
MagneTek will transfer to or at the direction of Buyer or such Affiliate any
related contracts, insurance policies or other agreements or documentation as
are necessary or appropriate for the customary operation of the Larsen-Hogue
Plan. As of the Closing Date, Buyer shall assume all of MagneTek's and
Seller's liability with respect to the Larsen-Hogue Plan. Neither MagneTek,
Seller nor any of their ERISA Affiliates shall have any liability with respect
to the Larsen-Hogue Plan after the Closing Date.
(d) Effective as of the Closing Date, Canada Sub shall cease to be a
participating employer under each Company Plan, the Company Employees shall
cease accruing any additional benefits
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under all Company Plans (other than the Larsen-Hogue Plan), and MagneTek and
Seller shall take or cause to be taken, all such action as may be necessary to
effect such cessation of participation. To the extent permitted by law, as of
the Closing Date MagneTek and Seller will vest the Company Employees in their
accrued benefits under all Company Plans that are qualified under Section
401(a) of the Code as if each such employee had remained employed by MagneTek
or an ERISA Affiliate of MagneTek through the vesting periods applicable to
all of such employee's benefits accrued through the Closing Date.
(e) With respect to all Company Plans other than the Larsen-Hogue
Plan and except as provided in Sections 9.1(f) and 9.1(g), MagneTek shall
remain responsible and be liable for, and none of Grand Eagle, Buyer or Canada
Sub shall assume or be responsible for, any obligations or liabilities
thereunder.
(f) VACATION, HOLIDAY, SICK, SHORT-TERM DISABILITY AND SEVERANCE
PAY. On the Closing Date, Buyer shall assume Seller's liability for vacation,
holiday, sick, short-term disability and severance pay with respect to all
Company Employees (other than any such benefits arising under any Stay and Pay
Agreements in effect at or prior to the Closing) to the extent such
obligations are reflected on the Closing Balance Sheet.
(g) With respect to the Buyer's Employee Plans, Buyer shall, and
shall cause Canada Sub to, grant all Company Employees credit, effective as of
the Closing Date, for all service with MagneTek and its ERISA Affiliates
(including Seller and Canada Sub) and their respective predecessors prior to
the Closing Date for all purposes (other than service for benefit accrual
purposes under a defined benefit pension plan; however, this shall not
preclude Buyer from granting such credit) for which such service was
recognized by MagneTek and its ERISA Affiliates (including Seller and Canada
Sub) under any corresponding Company Plan.
(h) CANADA SUB PLANS. Canada Sub shall remain responsible and be
liable for all Canada Sub Plans. Neither MagneTek nor Seller shall have any
liability with respect to a Canada Sub Plan after the Closing Date.
(i) COMPANY EMPLOYEES COVERED BY A COLLECTIVE BARGAINING AGREEMENT.
On, and effective as of, the Closing Date Buyer shall expressly recognize any
collective bargaining representative recognized by MagneTek or Seller as of
the Closing Date for any collective bargaining units that include Company
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Employees ("Bargaining Employees") and shall either (i) assume such collective
bargaining agreements existing on the Closing Date with respect to such
Bargaining Employees, or (ii) negotiate with any such collective bargaining
representative a new collective bargaining agreement covering such Bargaining
Employees; provided, however, in either case, Buyer shall assume and discharge
all of MagneTek's and Seller's obligations (except for obligations for payroll
wages earned for periods prior to the Closing Date) with respect to the
Bargaining Employees under any such collective bargaining agreement on or
after the Closing Date. Notwithstanding anything in this Section 9.1 to the
contrary, effective on the Closing Date, Buyer shall adopt or establish for
the benefit of the Bargaining Employees all such employee benefit plans,
programs and policies as are required by such collective bargaining agreements.
(j) NO THIRD-PARTY BENEFICIARIES. No provision of this Section 9.1
shall create third-party beneficiary rights in any Company Employee (or Canada
Sub employee), including, without limitation, any right to continued
employment or employment in any particular position with Buyer (or Canada Sub)
for any specified period of time after the Closing Date.
ARTICLE 10
INDEMNIFICATION
10.1 TAX INDEMNIFICATION.
(a) Subject to all of the terms and conditions of this Article 10,
Seller and MagneTek shall jointly and severally indemnify and hold harmless
each Indemnified Buyer Affiliate from (i) all liability for Taxes of Seller or
Canada Sub for Pre-Closing Tax Periods (as defined below) other than any
liability for Taxes (a) included as a payable or other short-term liability
for purposes of preparing the Closing Balance Sheet, (b) that is an Assumed
Liability, or (c) with respect only to Canada Sub, arising on, or as a result
of events occurring on, the Closing Date as a result of actions taken by or at
the direction of Buyer or any Affiliate of Buyer, and (ii) all liability for
reasonable legal fees and expenses incurred with respect to any item
indemnified pursuant to clause (i) of this Section 10.1(a) other than the cost
of preparing Tax Returns described in Section 11.1. "Pre-Closing Tax Period"
shall mean any taxable period
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ending on or before the Closing Date and the portion ending at the close of
business on the Closing Date of any taxable period that includes (but does not
end on) the closing Date.
(b) Buyer shall, and shall cause Canada Sub to, jointly and
severally indemnify and hold harmless each Indemnified Seller Affiliate from
(i) all liability for Taxes of Buyer and, with respect to Taxes attributable
to periods or portions thereof following the Pre-Closing Tax Period, Canada
Sub, (ii) all liability for Taxes that are included as a payable or other
short-term liability for purposes of preparing the Closing Balance Sheet or
that are Assumed Liabilities, (iii) all liabilities of Canada Sub arising on,
or as a result of events occurring on, the Closing Date as a result of actions
taken by or at the direction of Buyer or any Affiliate of Buyer, and (iv) all
liability for reasonable legal fees and expenses incurred with respect to any
item indemnified pursuant to clauses (i) through (iii) of this Section 10.1(b)
other than the cost of preparing Tax Returns described in Section 11.1.
10.2 OTHER INDEMNIFICATION BY SELLER. Subject to all of the terms and
conditions of this Article 10, each of Seller and MagneTek shall jointly and
severally indemnify and hold harmless each Indemnified Buyer Affiliate from
any Losses suffered or incurred by such Indemnified Buyer Affiliate (other
than any relating to (i) liabilities for Taxes, and (ii) the specified
liabilities and obligations identified and described in Sections 10.4 and
10.5) to the extent arising from, (a) if the Closing occurs, any breach of any
representation or warranty of Seller or MagneTek contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto, (b) any breach of any covenant of Seller or
MagneTek contained in this Agreement requiring performance after the Closing
Date or (c) any Excluded Liability. Seller and MagneTek shall not have any
liability under clause 10.2(a) or 10.2(b) above unless the aggregate of all
Losses for which Seller and MagneTek would, but for this proviso, be liable
pursuant to this Section 10.2(a) and 10.2(b), together with the aggregate of
all Losses for which Seller and MagneTek are liable pursuant to Sections
10.2(a) and (b) of the Other Agreement, exceeds $220,000 on a cumulative basis
(and then only to the extent of any such excess). Seller's and MagneTek's
aggregate liability under Sections 10.2(a) and (b) of this Agreement and
Sections 10.2(a) and (b) of the Other Agreement shall in no event exceed
$5,500,000. MagneTek's liability under Section 10.2(c) is only limited as set
forth in Section 10.6. The foregoing
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provisions notwithstanding, nothing in this Agreement shall in any manner
amend, modify or limit any obligation of Seller or MagneTek existing at the
Closing Date to indemnify or hold harmless any officer, director, employee or
agent of Canada Sub.
10.3 OTHER INDEMNIFICATION BY BUYER. Subject to all of the terms and
conditions of this Article 10, Buyer shall, and shall cause Canada Sub to,
indemnify and hold harmless each Indemnified Seller Affiliate from any Losses
suffered or incurred by such Indemnified Seller Affiliate (other than any
relating to Tax matters, for which indemnification is provided in Section 10.1
or environmental matters, for which indemnification is provided in Section
10.4) to the extent arising from, (a) if the Closing occurs, any breach of any
representation or warranty of Buyer or Grand Eagle contained in this Agreement
which survives the Closing or in any certificate, instrument or other document
delivered pursuant hereto or in connection herewith, (b) any breach of any
covenant of Buyer or Grand Eagle contained in this Agreement requiring
performance after the Closing Date, (c) any Assumed Liability or (d) the
ongoing operations of Buyer and the Assets after the Closing occurs. Buyer
and Canada Sub shall not have any liability under clause (a) or (b) above
unless the aggregate liability of Buyer and Canada Sub under such clauses (a)
and (b), together with the aggregate liability of the buyer pursuant to
Section 10.3(a) and (b) of the Other Agreement, shall exceed $220,000 on a
cumulative basis (and then only to the extent of any such excess). Buyer's
and Canada Sub's aggregate liability under Section 10.3(a) and (b), together
with the aggregate liability of Buyer (as defined in the other Agreement)
under Section 10.3(a) and (b) of the Other Agreement, shall in no event exceed
$5,500,000.
10.4 INDEMNIFICATION FOR ENVIRONMENTAL MATTERS.
(a) Subject to all the terms and conditions of this Article 10.4,
Seller and MagneTek shall jointly and severally indemnify and hold harmless
each Indemnified Buyer Affiliate from and against all Losses resulting from
claims or demands by any Governmental Authority or any third party which is
unrelated to Buyer or its Affiliates arising under any Environmental Law to
the extent such claims or demands relate to:
(i) Seller's failure to perform any of its obligations as provided
in Section 6.9 herein;
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(ii) Seller's arrangement for treatment, storage, recycling or
disposal, prior to the Closing Date, of any Hazardous Materials at any
offsite disposal facility; or
(iii) conditions as of the Closing Date at any Seller Facility.
Seller and MagneTek shall not have any liability under clause (ii)
or (iii) above unless the aggregate of all Losses for which Seller and
MagneTek would, but for this proviso, be liable under such clauses (ii) and
(iii) and under Sections 10.4(a)(ii) and (iv) of the Other Agreement shall
exceed $100,000 on a cumulative basis (and then only to the extent of any such
excess). Seller's and MagneTek's aggregate liability under Sections
10.4(a)(ii)and (iii) and under Sections 10.4(a)(ii) and (iv) of the Other
Agreement shall in no event exceed $1,500,000. Such $100,000 deductible and
$1,500,000 maximum indemnification shall be unrelated to the $220,000
deductible and $5,500,000 maximum indemnification provided under Sections 10.2
of this and the Other Agreement. Except as provided in Section 10.6(f), there
shall be no limitation on the maximum amount of indemnification provided under
Section 10.4(a)(i) of this Agreement. The indemnification provided by Section
10.4(a)(ii) and Section 10.4(a)(iii) will expire on the third anniversary of
the Closing Date.
Notwithstanding anything in this Agreement to the contrary, Seller's
and MagneTek's indemnification liability hereunder shall in no event be
construed to extend to or include any remediation or other liability arising
as the result of the presence of asbestos in or upon the improvements located
on any Seller Facility at any time.
(b) Buyer shall indemnify and hold harmless each Indemnified Seller
Affiliate from and against all Losses resulting from claims or demands by any
Governmental Authority or third party arising under any Environmental Law to
the extent such Losses are attributable to Buyer's use or occupancy of any
Seller Facility after the Closing Date.
10.5 INDEMNIFICATION FOR CANADA SUB. Subject to all of the terms and
conditions of this Article 10, Seller and MagneTek shall jointly and severally
indemnify and hold harmless the Indemnified Buyer Affiliates from any Losses
suffered or incurred by any of the Indemnified Buyer Affiliates (a) to the
extent arising from any matter involving Canada Sub which would, if such
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matter involved Seller or Buyer, be an Excluded Liability, and (b) arising
from Canada Sub's status as an ERISA Affiliate of MagneTek or of any Affiliate
of MagneTek. Such indemnification is limited as provided in Section 10.6.
10.6 LOSSES NET OF INSURANCE, ETC.
(a) The amount of any Loss for which indemnification is provided
under this Article 10 shall be net of all amounts recovered by the Indemnified
Person under insurance policies with respect to such Loss and shall be net of
any reserve in respect thereof reflected on the Closing Balance Sheet.
(b) If the Indemnifying Person makes any payment under this Article
10 in respect of any Losses, the Indemnifying Person shall be subrogated, to
the extent of such payment and except to the extent that such subrogation is
not permitted by the terms of any insurance policy, to the rights of the
Indemnified Person against any insurer or third party with respect to such
Losses.
(c) Notwithstanding anything to the contrary elsewhere in this
Agreement, no party shall, in any event, be liable to any Indemnified Person
for any consequential damages, including, but not limited to, loss of revenue
or income, cost of capital, diminution in value or loss of business reputation
or opportunity relating to the breach or alleged breach of this Agreement.
Each party agrees that it will not seek punitive damages from any Indemnified
Person as to any matter under, relating to or arising out of the transactions
contemplated by this Agreement.
(d) The parties hereto agree that the indemnification provisions of
this Article 10 are intended to provide the exclusive remedy as to all Losses
each may incur arising from, or relating to the transactions contemplated
hereby and each party hereby waives, to the extent it may do so, any other
rights or remedies that may arise under any applicable statute, rule or
regulation. Notwithstanding the foregoing, (i) Buyer may exercise any rights
or remedies it may have under or with respect to the Non-Competition Agreement
and (ii) the rights of any party under this Article 10 are not exclusive with
respect to fraudulent representations, actions or omissions by another party.
(e) Any indemnification payment for Taxes required under this
Article 10 shall for purposes of federal, state and local income Taxes, be
treated as a purchase price adjustment.
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(f) The parties agree that the aggregate liability of Seller and
MagneTek under all provisions of this Agreement, including all indemnification
provisions of this Article 10, shall in no event exceed the sum of the Cash
Purchase Price and all amounts paid or otherwise due under the Seller Note (in
cash or by offset under Section 10.11) prior to the date of the claim for
indemnification hereunder.
10.7 TERMINATION OF INDEMNIFICATION. The obligations to indemnify and
hold harmless a party hereto, (w) pursuant to Sections 10.1, 10.2(c), 10.3(c)
and (d) and 10.5 shall not terminate, (x) pursuant to Sections 10.2(a) and
10.3(a), shall terminate when the applicable representation or warranty
terminates pursuant to Section 10.10, (y) pursuant to Section 10.4, shall
terminate as set forth therein and (z) pursuant to clauses 10.2(b) and
10.3(b), shall terminate on the third anniversary of the Closing Date;
PROVIDED, HOWEVER, that as to clauses (w), (x), (y) and (z) above, such
obligations to indemnify and hold harmless shall not terminate with respect to
any item as to which the Person to be indemnified shall have, before the
expiration of the applicable period, previously made a claim by delivering a
notice (stating in reasonable detail the basis of such claim) to the
Indemnifying Person.
10.8 PROCEDURES RELATING TO INDEMNIFICATION (OTHER THAN UNDER SECTION
10.1). In order for an Indemnified Person to be entitled to any
indemnification provided for under this Agreement (other than under Section
10.1) in respect of, arising out of or involving a claim or demand made by any
Person against the indemnified Person (a "Third Party Claim"), such
Indemnified Person must notify the Indemnifying Person in writing, and in
reasonable detail, of the Third Party Claim within 10 Business Days (30
calendar days in respect of claims under Section 10.4) after receipt by such
Indemnified Person of written notice of the Third Party Claim; PROVIDED,
HOWEVER, that failure to give such notification shall not affect the
indemnification provided hereunder except to the extent the Indemnifying
Person shall have been actually prejudiced as a result of such failure (except
that the Indemnifying Person shall not be liable for any Losses incurred
during the period in which the Indemnified Person failed to give such notice).
Thereafter, the Indemnified Person shall deliver to the Indemnifying Person,
within five Business Days after the Indemnified Person's receipt thereof,
copies of all notices and documents (including court papers) received by the
Indemnified Person relating to the Third Party Claim.
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If a Third Party Claim is made against an Indemnified Person, the
Indemnifying Person will be entitled to participate in the defense thereof
and, if it so chooses, to assume the defense thereof with counsel selected by
the Indemnifying Person and reasonably satisfactory to the Indemnified Person.
Should the Indemnifying Person so elect to assume the defense of a Third
Party Claim, the Indemnifying Person will not be liable to the Indemnified
Person for legal fees and expenses subsequently incurred by the Indemnified
Person in connection with the defense thereof. If the Indemnifying Person
assumes such defense, the Indemnified Person shall have the right to
participate in the defense thereof and to employ counsel, at its own expense,
separate from the counsel employed by the Indemnifying Person, it being
understood that the Indemnifying Person shall control such defense. The
Indemnifying Person shall be liable for the fees and expenses of counsel
employed by the Indemnified Person for any period during which the
Indemnifying Person has not assumed the defense thereof (other than during any
period in which the Indemnified Person shall have failed to give notice of the
Third Party Claim as provided above). If the Indemnifying Person chooses to
defend or prosecute any Third Party Claim, all the parties hereto shall
cooperate in the defense or prosecution thereof. Such cooperation shall
include the retention and (upon the Indemnifying Person's request) the
provision to the Indemnifying Person of Records and information which are
reasonably relevant to such Third Party Claim, and employees available on
mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Whether or not the Indemnifying Person shall
have assumed the defense of a Third Party Claim, the Indemnified Person shall
not admit any liability with respect to, or settle, compromise or discharge,
such Third Party Claim without the Indemnifying Person's prior written consent
(which consent shall not be unreasonably withheld or delayed). All Tax Claims
(as defined in Section 10.9) shall be governed by Section 10.9.
10.9 PROCEDURES RELATING TO INDEMNIFICATION OF TAX CLAIMS.
(a) If a claim shall be made by any Governmental Authority, which,
if successful, might result in an indemnity payment to any Person hereunder
pursuant to Section 10.1 (a "Tax Indemnitee"), the Tax Indemnitee shall
promptly notify the party against whom indemnification is sought (the "Tax
Indemnitor") in writing of such claim (a "Tax Claim"). If notice of a Tax
Claim is not given to the Tax Indemnitor within a sufficient period of time to
allow the Tax Indemnitor to effectively contest such Tax
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Claim, or in reasonable detail to apprise the Tax Indemnitor of the nature of
the Tax Claim, in each case taking into account the facts and circumstances
with respect to such Tax Claim, the Tax Indemnitor shall not be liable to the
Tax Indemnitee to the extent that the Tax Indemnitor's ability to effectively
contest such Tax Claim is actually prejudiced as a result thereof.
(b) With respect to any Tax Claim for which a Tax Indemnitee seeks
indemnification hereunder, the Tax Indemnitor shall control all proceedings
taken in connection with such Tax Claim (including, without limitation,
selection of counsel) and, without limiting the foregoing, may in its sole
discretion (and at its sole cost and expense) pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any
Governmental Authority with respect thereto and may, in its sole discretion,
either pay the Tax claimed and sue for a refund where applicable law permits
such refund suits or contest the Tax Claim in any permissible manner;
PROVIDED, HOWEVER, that the Tax Indemnitor shall not settle or compromise a
Tax Claim without giving prior notice to the Tax Indemnitee and without the
Tax Indemnitee's consent, which shall not be unreasonably withheld or delayed,
if such settlement or compromise would have an adverse effect on the Tax
liabilities of the Tax Indemnitee, its Affiliates or any member of its
Affiliated Group. The Tax Indemnitee, and each of its Affiliates, shall
cooperate with the Tax Indemnitor in contesting any Tax Claim, which
cooperation shall include, without limitation, the retention and (upon the Tax
Indemnitor's request) the provision to the Tax Indemnitor of Records and
information which are reasonably relevant to such Tax Claim, and making
employees available on a mutually convenient basis to provide additional
information or explanation of any material provided hereunder or to testify at
proceedings relating to such Tax Claim.
(c) In no case shall Buyer or Canada Sub settle or otherwise
compromise any Tax Claim for which indemnification is sought hereunder without
MagneTek's prior written consent, which consent shall not be unreasonably
withheld.
10.10 SURVIVAL OF REPRESENTATIONS. The representations and warranties
in this Agreement and in any other document delivered in connection herewith
shall survive the Closing solely for purposes of Sections 10.2(a) and 10.3(a)
and shall terminate at the close of business three years following the Closing
Date, except that the representations and warranties in Sections 4.8, 4.15 and
4.17 shall not survive the Closing.
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10.11 MANDATORY SETOFF OF SELLER NOTE. (a) Each of the parties agrees,
on its own behalf and (with respect to MagneTek and Seller) on that of any
permitted transferee of the Seller Note, that to the extent any amount is due
in respect of indemnification to an Indemnified Buyer Affiliate under this
Agreement or the Other Agreement, such amount shall be offset against the
interest and principal due under the Seller Note and the similar note issued
under the Other Agreement, with offsets applied first to interest payments
then due in the order of their maturity and then to principal payments in the
order of their maturity, before any amount shall be payable by Seller or
MagneTek. In the event any such offset is contested by MagneTek, the matter
shall be resolved in the same fashion as any other dispute under this
Agreement.
ARTICLE 11
POST CLOSING MATTERS
11.1 TAX MATTERS.
(a) For any taxable period of Canada Sub ending after the Closing
Date, Buyer shall timely prepare and file, or cause to be timely prepared and
filed, with the appropriate Governmental Authorities all Tax Returns required
to be filed by Canada Sub and will pay all Taxes due with respect to such
Returns; PROVIDED that Seller will reimburse Buyer, within thirty (30) days of
such paym