CHANGE OF CONTROL AGREEMENT
EXHIBIT 10.1
This Change of Control Agreement ("Agreement") is entered into on this ____ day of ________________, 20__ by and between __________________________________ (Name), an individual (the "Officer"), and Magnetek, Inc., a Delaware corporation (the "Company").
(i) A single lump sum payment, payable in cash within five days of the Termination Date (or if later, the Change of Control Date), equal to the sum of:
(A) the accrued portion of any of the Officer's unpaid base salary and vacation through the Termination Date and any unpaid portion of the Officer's bonus for the prior fiscal year; plus
(B) a portion of the Officer's bonus for the fiscal year in progress, prorated based upon the number of days elapsed since the commencement of the fiscal year and calculated assuming that 100% of the target under the bonus plan is achieved; plus
(C) an amount equal to the Officer's Base Compensation times the Compensation Multiplier.
(ii) Continuation, on the same basis as if the Officer continued to be employed by the Company, of Benefits for the Benefit Period commencing on the Termination Date. The Company's obligation hereunder with respect to the foregoing Benefits shall be limited to the extent that the Officer obtains any such benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce the coverage of any Benefits it is required to provide the Officer hereunder as long as the aggregate coverage and benefits of the combined benefit plans is no less favorable to the Officer than the Benefits required to be provided hereunder.
(iii) Outplacement services to be provided by an outplacement organization of national repute for a period of up to twelve months following the Termination Date, which shall include the provision of office space and equipment (including telephone and personal computer) but in no event shall the Company be required to provide such services for a value exceeding 17% of the Officer’s Base Compensation.
(iv) Accelerated vesting of all outstanding stock options and of all previously granted restricted stock awards.
(c) Notwithstanding anything to the contrary in this Agreement, if the Company determines (i) that on the date the Executive’s employment with the Company terminates, or at such other time that the Company determines to be relevant, the Executive is a
“specified employee” (as such term is defined under Section 409A of the Code) of the Company and (b) that any payments to be provided to the Executive pursuant to this Agreement are or may become subject to the additional tax under Section 409A(a)(1)(B) of the Code or any other taxes or penalties imposed under Section 409A of the Code (“Section 409A Taxes”) if provided at the time otherwise required under this Agreement, then such payments shall be delayed until the date that is six months after date of the Executive’s “separation from service” (as such term is defined under Section 409A of the Code) with the Company, or such shorter period that, as determined by the Company, is sufficient to avoid the imposition of Section 409A Taxes. The provisions of this Section 2(c) shall only apply to the minimum extent required to avoid the Executive’s incurrence of any Section 409A Taxes.
"Base Compensation" means the sum of (i) the Officer's annual salary in effect on the earlier of the Change of Control Date and the Termination Date and (ii) 100% of the target under the bonus plan for the fiscal year during which the Change of Control Date occurs.
"Benefits" means benefits that would be available under any health and welfare plan of the Company on the Termination Date.
"Benefit Period" means 18 months.
"Cause" means: (A) conviction of a felony or misdemeanor involving moral turpitude, or (B) willful gross neglect or willful gross misconduct in carrying out the Officer's duties, resulting in material economic harm to the Company or any Successor.
"Change of Control" means (i) any event described in Section 13.2 of the 2004 Stock Incentive Plan of the Company or any event so defined in any stock incentive or similar plan adopted by the Company in the future unless, in either case, such event occurs in connection with a Distress Sale and (ii) any event which results in the Board ceasing to have at least a majority of its members be "continuing directors." For this purpose, a "continuing director" means a director of the Company who held such position on September 29, 2005 or who thereafter was appointed or nominated to the Board by a majority of continuing directors.
"Change of Control Date" means the date on which a Change of Control is consummated.
"Change of Control Period" means the period commencing on the earlier of (i) 180 days prior to the Change of Control Date and (ii) the announcement of a transaction expected to result in a Change of Control, and ending on the second anniversary of the Change of Control Date.
"Code" means the Internal Revenue Code of 1986, as amended. References herein to a specific section of the Code shall be deemed to include comparable or analogous provisions of state, local and foreign law.
"Compensation Multiplier" means 1.5.
"Disability" means the inability of the Officer due to illness (mental or physical), accident, or otherwise, to perform his or her duties for any period of 180 consecutive days, as determined by a qualified physician.
"Distress Sale" means a Change of Control occurring within 18 months of any of the following: (i) the Company's independent public accountants shall have made a "going concern" qualification in their audit report (other than by reason of extraordinary occurrences, such as material litigation, not attributable to poor management practices); (ii) the Company shall lack sufficient capital for its operations by reason of termination of its existing credit lines or the Company's inability to secure credit facilities upon acceptable terms; or (iii) the Company shall have voluntarily sought relief under, consented to or acquiesced in the benefit of application to it of the Bankruptcy Code of the United States of America or any other liquidation, conservatorship, bankruptcy, moratorium, rearrangement, receivership, insolvency, reorganization, suspension of payments or similar laws, or shall have been the subject of proceedings under such laws (unless the applicable involuntary petition is dismissed within 60 days after its filing).
"Good Reason" means (A) without the Officer's prior written consent, assignment to the Officer of duties materially inconsistent in any respect with his or her position immediately prior to the Change of Control Date or any other action by a Successor that results in a material diminution in the Officer's position, authority, duties, responsibilities, annual base salary or target bonus when compared with the same immediately prior to the Change of Control Date; or (B) assignment of the Officer, without his or her prior written consent, to a place of business that is not within the metropolitan area of the Officer's current place of business.
"Stay and Pay Agreement" means a "stay and pay" or retention agreement entered into in contemplation of a sale by the Company of a division or business unit.
"Successor" means any acquiror of all or substantially all of the stock, assets or business of the Company.
“Termination Date” means the last day of the Officer's employment. For the purposes of this Agreement, the terms “termination of employment,” “terminates employment” and “Termination Date” mean a “separation from service” as such term is defined in Section 409A of the Code.
(a) In the event the Officer is also a party to a Stay and Pay Agreement or severance agreement and becomes entitled to any payment thereunder, this Agreement shall be null and void and the Officer shall not be entitled to any payment or benefit hereunder. Nothing in this Agreement shall prevent or limit the Officer's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company and for which the Officer may qualify, nor shall anything herein limit or reduce such rights as the Officer may have under any other agreements with the Company. Amounts that are vested benefits or that the Officer is otherwise entitled to receive under any plan or program of the Company shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement.
(a) In the event that the Value (as hereinafter defined) attributable to the payments and benefits provided in Section 2 above (“Agreement Payments”), in combination with the Value attributable to other payments or benefits in the nature of compensation to or for the benefit of the Executive (including but not limited to the value attributable to accelerated vesting of options or other equity or non-equity incentive compensation awards and, collectively with Agreement Payments, “Payments”), would constitute an “excess parachute payment” (within the meaning of Section 280G of the Code) such that the excise tax of Section 4999 of the Code (the “Excise Tax”) is imposed on the Executive, the Company shall provide to the Executive (either directly or through payment of taxes via required withholding), in cash, an additional payment (the “Gross-up Payment”) such that the net amount retained by the Executive from the Payments and the Gross-up Payment, after reduction for any Excise Tax upon the Payments and any federal, state and local income and employment taxes and Excise Tax on the Gross-up Payment, and any interest, penalties or additions to tax payable by Executive with respect thereto, shall be equal to the Payments at the time such Payments are to be made. Any Gross-Up Payment or other payment payable under this Section 5 shall be paid to the Executive promptly and in no event later than the end of the calendar year next following the calendar year in which the related tax is paid by the Executive.
(b) For purposes of this Section 5, the Company and the Executive hereby irrevocably appoint the persons who constituted the Compensation Committee of the Board immediately prior to a Change of Control, or a three person panel named by a majority of them, as arbitrators (the “Arbitrators”) to make all determinations required under this Section 5, including but not limited to the Value of all Payments (and the components thereof). For purposes of this Section 5, “Value” shall mean value as determined by the Arbitrators applying the valuation procedures and methodologies established pursuant to the Code section or sections applicable to “excess parachute payments,” including any interpretive guidance (whether or not binding) as the Arbitrators determine appropriate. The determinations of the Arbitrators shall be final and binding on both the Company and the Executive, and their successors, assignees, heirs and beneficiaries, for purposes of determining the amount payable under this Section 5. All fees and expenses of the Arbitrators (including attorneys’ and accountants’ fees) shall be borne by the Company. The arbitrators will be compensated, to the extent they are not then members of the Board’s Compensation Committee, at the rates at which they would have been compensated for their work as Committee members in effect immediately prior to the Change of Control Date.
by the Officer or by the Company at any time, for any reason, with or without cause, without liability except with respect to the payments provided hereunder or as required by law or any other contract or employee benefit plan.
(g) Choice of Law. All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of Delaware without giving effect to principles of conflicts of law.
(a) Except as provided in Section 5 hereof, any disputes or claims arising out of or concerning the Officer's employment or termination by the Company, whether arising under theories of liability or damages based upon contract, tort or statute, will be determined exclusively by arbitration before a single arbitrator in accordance with the employment arbitration rules of the American Arbitration Association, except as modified by this Agreement. The arbitrator's decision will be final and binding on both parties. Judgment upon the award rendered by the arbitrator may be entered in any court of competent jurisdiction. In recognition of the fact that resolution of any disputes or claims in the courts is rarely timely or cost effective for either party, the Company and the Officer enter this mutual agreement to arbitrate in order to gain the benefits of a speedy, impartial and cost-effective dispute resolution procedure. The parties further intend that the arbitration hereunder be conducted in as confidential a manner as is practicable under the circumstances, and intend for the award to be confidential unless that confidentiality would frustrate the purpose of the arbitration or render the remedy awarded ineffective.
(b) Any arbitration will be held in Menomonee Falls, Wisconsin. The arbitrator must be an attorney with substantial experience in employment matters, selected by the parties alternately striking names from a list of five such persons provided by the American Arbitration Association (AAA) office located nearest to the place of employment, following a request by the party seeking arbitration for a list of five such attorneys with substantial professional experience in employment matters. If either party fails to strike names from the list, the arbitrator will be selected from the list by the other party.
(c) Each party will have the right to take the deposition of one individual and any expert witness designated by the other party. Each party will also have the right to propound requests for production of documents to any party and the right to subpoena documents and witnesses for the arbitration. Additional discovery may be made only where the arbitrator selected so orders upon a showing of substantial need. The arbitrator will have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and will apply the standards governing such motions under the Federal Rules of Civil Procedure.
(d) The Company and the Officer agree that they will attempt, and they intend that they and the arbitrator should use their best efforts in that attempt, to conclude the arbitration proceeding and have a final decision from the arbitrator within 120 days from the date of selection of the arbitrator; provided, however, that the arbitrator will be entitled to extend such 120-day period for one additional 120-day period. The arbitrator will deliver a written award with respect to the dispute to each of the parties, who must promptly act in accordance therewith.
(e) The Company will pay any and all reasonable fees and expenses incurred by the Officer in seeking to obtain or enforce any rights or benefits provided by this Agreement, including all reasonable attorneys' and experts' fees and expenses, accountants' fees and expenses, and court costs (if any) that may be incurred by the Officer in pursuing a claim for payment of compensation or benefits or other right or entitlement under this Agreement, provided that the Officer is successful as to material issues, resulting in an award of at least $50,000. In addition, the Company will pay without regard to the results of the arbitration all costs and fees not normally associated with a civil proceeding, such as any fees charged by the arbitrator or any room rental charges.
(f) In a contractual claim under this Agreement, the arbitrator must act in accordance with the terms and provisions of this Agreement and applicable legal principles and will have no authority to add, delete or modify any term or provision of this Agreement. In addition, the arbitrator will have no authority to award punitive damages under any circumstances unless repudiating the arbitrator's authority to do so would cause this arbitration clause to be ruled ineffective under applicable law.
[Officer Name]
By: ________________________________
Name:
Title: