10-K

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended June 30, 2003

OR

o 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 incorporation or organization)	(I.R.S. Employer Identification No.)
10900 Wilshire Boulevard, Suite 850 Los Angeles, California	90024
(Address of Principal Executive Offices)	(Zip Code)

Registrant's telephone number, including area code:    (310) 208-1980

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $.01 par value	New York Stock Exchange
Preferred Stock Purchase Rights	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 ý    No o

        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. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).Yes ý    No o

        The aggregate market value of the voting stock held by non-affiliates of the Registrant, based on the closing price of $4.44, per share as reported by the New York Stock Exchange, on December 31, 2002 (the last business day of the Company's most recently completed second fiscal quarter), was $100,081,618. Shares of common stock held by each executive officer and director have been excluded since such persons may be deemed affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

        The number of shares outstanding of the Registrant's Common Stock, as of September 5, 2003 was 23,541,147 shares.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Magnetek, Inc. 2003 Annual Report for the year ended June 30, 2003 are incorporated by reference into Part II of this Form 10-K. With the exception of those portions which are expressly incorporated by reference into this Form 10-K, the Magnetek, Inc. 2003 Annual Report is not deemed filed as part of this Form 10-K.

        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, 2003 are incorporated by reference into Part III of this Form 10-K.

MAGNETEK, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED JUNE 30, 2003

		Page
ITEM 1.	DESCRIPTION OF BUSINESS	1
ITEM 2.	PROPERTIES	6
ITEM 3.	LEGAL PROCEEDINGS	7
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	7
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	8
ITEM 6.	SELECTED FINANCIAL DATA	8
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	8
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	9
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	9
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	9
ITEM 9A.	CONTROLS AND PROCEDURES	9
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	10
ITEM 11.	EXECUTIVE COMPENSATION	11
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	11
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	12
ITEM 14.	PRINCIPAL ACCOUNTANT, FEES AND SERVICES	12
ITEM 15	EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K	13

        The Company uses a 52-53 week fiscal year which ends on the Sunday nearest June 30. For clarity of presentation, all periods are presented as if the fiscal year ended on June 30. Fiscal years 2003, 2002 and 2001 contained 52 weeks.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

General

        Magnetek, Inc. ("Magnetek" or "the Company") supplies digital power-electronic products used in information technology, industrial, communications, alternative energy, consumer and other markets. These products usually take the form of sub-systems. They are sold directly or through agents to original equipment manufacturers (OEMs) for incorporation into their products, to system integrators and value-added resellers for assembly and installation in end-user systems, and to distributors for resale to OEMs, contractors and end users for repair and replacement purposes. Founded in July 1984 and listed on the New York Stock Exchange in July 1989 (NYSE: MAG), Magnetek operates six factories in North America, two in Europe and one in China, together employing approximately 1,700 people worldwide. The Company operates in a single segment called Digital Power Products, which includes two broad product lines, Components and Systems.

Digital Power Products

        General.    According to MicroTech Consultants, a power industry research firm, Magnetek ranks among the world's 15 largest independent makers of OEM power supplies. The Company is an acknowledged innovator in power-electronic sub-systems design, thermal management technology and the application of microprocessors and software in digital power-electronic products. International sales accounted for approximately 48% of the Company's net sales. One single customer, Merloni Elettrodomestici, accounted for 11% of the Company's net revenues in fiscal 2003.

        Components.    Embedded power products (components) accounted for approximately 60% of Magnetek's net sales in fiscal 2003. The Company's power components, which are sold to original equipment manufacturers for installation in their products, include: Ac-to-Dc switching power supplies, Ac-to-Dc rectifiers/battery chargers, Dc-to-Dc power converters, Dc-to-Ac power inverters and peripheral component interconnects (PCIs). These products are used primarily in telecommunications, data-processing and storage, digital imaging, semiconductor processing and testing equipment, medical instrumentation and home appliances. Principal customers include Merloni, IBM, Siemens, Motorola, Alcatel and Ericsson.

        Systems.    Integrated power products (systems) accounted for approximately 40% of the Company's net sales in fiscal 2003. Magnetek's systems consist primarily of programmable motion control and power conditioning systems. They include alternating current (Ac) and direct current (Dc) variable-frequency motor drives (VFDs), fuel cell power inverters and telecom power plants. The Company is North America's largest supplier of VFDs and related software and accessories for controlling overhead cranes, hoists and elevators. Principal customers include the world's leading elevator and mining machinery builders and most of the industrial crane and hoist companies in North America. Magnetek is the world's largest builder of power conditioners for stationary fuel cells. The Company's principal customer for these products is United Technologies. The Company's power systems also include complete Dc power systems for telecom and networking applications. Principal customers for these systems include Verizon, Nortel, U.S. Cellular and T-Mobile.

        Backlog.    Backlog as of June 30, 2003 was $58.3 million versus $53.4 million at the end of fiscal 2002. The Increase in backlog reflects improvement in overall economic activity and specific growth in consumer markets. Magnetek expects that all of the $58.3 million backlog will be filled during fiscal 2004.

        Competition.    Magnetek's primary competitors include Delta Electronics, Emerson/Astec/APS, Artesyn Technologies, Invensys/Lambda, Power-One, Celestica, C&D Technologies, SL Industries, Tyco,

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Marconi/Lorain, Yaskawa, KCI/Konecranes, OMRON, KEB, Peco II, Vicor, and Basler. Some of these companies have substantially greater financial, marketing and other resources, larger product portfolios and greater brand recognition than Magnetek.

Competitive Strengths

        Management believes that Magnetek benefits most from competitive advantages in the following areas:

        Technological Capabilities.    Magnetek emphasizes and leverages its ability to provide custom-designed and customized solutions for power and motion control applications through digital power-electronic technology. The Company recruits top talent from universities that stress power electronics in their curricula, and its technical personnel possess substantial expertise in disciplines central to digital power systems. These include analog-to-digital circuit design, thermal management technology, and the application of microprocessors, digital signal processors and software algorithms in the development of "smart" power products.

        Customer Relationships.    Magnetek has established long-term relationships with major manufacturers of data-processing and telecommunications equipment and systems, business machines, medical electronics, fuel cells, cranes and hoists, mining equipment and elevators, among others. The Company believes that these relationships have resulted from its responsiveness, its readiness to meet special customer requirements based on innovative technology, the quality and cost-effectiveness of its products, its commitment to stand behind its products, and its after-sale service. As a supplier of custom and customized products and systems, maintenance and development of customer relationships are important strategic priorities of the Company.

        Manufacturing and Systems Integration.    Magnetek competes as a high-quality, cost-effective supplier of digital power subsystems that are incorporated into customers' products, systems and operations. The Company has taken steps to enhance its competitive position by locating new production facilities in low-cost labor areas, implementing demand-flow and cellular manufacturing techniques, and investing in state-of-the-art manufacturing capabilities, such as surface-mount machinery and advanced electronic test equipment, to enhance its product quality and reliability. The Company also integrates its power-electronic sub-systems into complete systems for providing power and control for certain end-use markets and customers, and believes that its system-integration capability represents an advantage, especially in the industrial, alternative energy and telecommunications markets in which it competes.

        Product Breadth and Market Diversity.    Magnetek provides a broad diversity of products in each of its product lines. Since product breadth is an important consideration for many customers and distributors in their selection of suppliers, the Company's breadth of product offerings has been an advantage in penetrating and maintaining OEM relationships and in establishing channel partnerships. Magnetek also addresses a variety of end-markets and a wide range of customers in the belief that reduction of dependence on a limited number of markets or customers both reduces the Company's susceptibility to economic cycles and increases its prospects for profitable growth.

Competitive Weaknesses

        Management considers the following to be Magnetek's primary competitive weaknesses:

        Brand Recognition.    As noted above, Magnetek ranks among the world's 15 largest independent manufacturers of OEM power supplies. However, the power products industry is very fragmented, the Company's power components business is European-based, and its primary power systems businesses were acquired relatively recently. Consequently, the "Magnetek" brand name is not as well known in the important North American market as some of the Company's competitors' brands. The Company

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conducted a marketing communications effort to familiarize North American power product customers with the Magnetek brand in fiscal 2003, and is continuing to rely on the established brand names of its recently acquired systems businesses until such time as the Magnetek name is better known among power systems users.

        Marketing Channels.    Historically, Magnetek has been primarily a manufacturer of custom power supplies and has not had a broad offering of "standard" products, wherein certain basic features and form factors are dictated by industry codes. Therefore, while the Company is well known among users of custom power supplies, it is not as well known among users of standard power products. However, Magnetek has expanded its product offering in an effort to make product-line breadth a competitive strength. Armed with this expanded product offering, the Company has been able to retain proven sales managers, enlist leading sales representative firms, and sign up leading distributors in North America, Europe and Asia to reach users of industry-standard and modified-standard power products.

        Financial Resources.    Based on current plans and business conditions, management believes that Magnetek's borrowing capacity, together with internally generated cash flows, will be sufficient to fund the Company's operations and other commitments. However, some of the Company's competitors have substantially greater financial resources than Magnetek.

Restructuring and Current Strategy

        Since the mid-1990s, Magnetek has undertaken a series of strategic initiatives to strengthen its financial position, tighten its business focus and improve its competitiveness. From 1998 through 2001, a number of electrical commodity product businesses, representing more than three quarters of the Company's revenue, were divested (Motors and Generators in 1999 and Standard Drives, Lighting Ballasts and Component Transformers in 2001). Proceeds from these divestitures were applied to eliminate the Company's long-term debt, repurchase Company stock, and make selective product-line acquisitions.

        Magnetek's strategy is centered on power component innovation, forward integration into systems, and market diversity. The Company intends to continue to build on its competitive strengths and strategy by expanding its portfolio of digital power-electronic products through research and development and expanding its geographic markets. Management believes that attractive growth opportunities exist in North American and Asian markets for Magnetek embedded power products that have achieved substantial market positions in Europe, and that attractive growth opportunities may exist in Europe and Asia for Magnetek integrated power systems that have achieved substantial market positions in North America.

International Operations

        International sales accounted for 48% of Magnetek's net revenues in fiscal 2003. The Company defines international sales as sales of products manufactured by its facilities outside the U.S. that are sold outside of the U.S., as well as sales of products manufactured in the U.S. to purchasers outside of the U.S. In Europe the Company operates two manufacturing facilities, one in Italy and one in Hungary, and employs approximately 900 people. The Company also operates a manufacturing facility in Shen-Zhen, China which employs approximately 200 people.

        For the Company's 2003, 2002, and 2001 fiscal years, revenues derived from domestic sales were $105.5 million, $123.7 million, and $205.9 million, respectively, and revenues derived from international sales were $96.3 million, $64.5 million, and $92.3 million, respectively.

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Seasonality

        Historically, Magnetek's business has tended to be seasonal, with the first two quarters of the fiscal year being somewhat weaker than the last two due primarily to customer plant closures during holidays and traditional vacation periods. The first fiscal quarter (July-September) includes plant closures typically lasting up to two weeks in July in North America and throughout the month of August in Europe. The second fiscal quarter (September-December) includes religious and year-end holidays in both North America and Europe. Also, customers who budget on a calendar-year basis typically begin spending on new programs in January with many programs scheduled for completion prior to the summer vacation period, making the January-June period (the second half of Magnetek's fiscal year) stronger than the July-December period. Management estimates that, all else being equal, seasonality may create a 10-20% differential between the Company's fiscal first- and second-half revenues.

Suppliers and Raw Materials

        Virtually all materials and components purchased by the Company are available from multiple suppliers. During fiscal 2003, raw materials purchases accounted for approximately 62% of the Company's cost of sales. Production of digital power products depends heavily on various electronic components. The Company seeks to obtain competitive pricing on these raw materials by utilizing multiple suppliers available to its North American, European and Asian operations, leveraging its combined purchasing requirements, and utilizing internet sources when appropriate.

        Based on analyses of the costs and benefits of its level of vertical integration, Magnetek is continuing to increase its outsourcing of certain materials and component parts that previously have been produced internally.

Research and Development

        Magnetek's research and development activities, which are conducted primarily at advanced development centers in Valdarno, Italy, Chatsworth, California and Menomonee Falls, Wisconsin, are directed toward developing new products, improving existing products and customizing or modifying products to meet customers' specific needs. Total research and development expenditures were approximately $11.1 million, $9.8 million and $9.4 million respectively, for the Company's 2003, 2002 and 2001 fiscal years.

Intellectual Property

        Magnetek holds numerous patents, trademarks and copyrights, and believes that it holds or licenses all of the patent, trademark, copyright and other intellectual property rights necessary to conduct its business. The Company generally relies upon patents, copyrights, trademarks and trade secret laws to establish and maintain its proprietary rights in its technology and products. There can be no assurance that any of its patents, trademarks or other intellectual property rights will not be challenged, invalidated or circumvented, or that any rights granted thereunder will provide competitive advantages to the Company. In addition, there can be no assurance that patents will be issued from pending patent applications filed by the Company, or that claims allowed on any future patents will be sufficiently broad to protect Magnetek's technology. Further, the laws of some foreign countries may not permit the protection of Magnetek's proprietary rights to the same extent as do the laws of the United States. Although the Company believes the protection afforded by its patents, patent applications, trademarks and copyrights has value, the rapidly changing technology in the digital power products industry and shortened product life cycles make Magnetek's future success dependent primarily on the innovative skills, technological expertise, research and development and management abilities of its employees rather than on patent, copyright, and trademark protection.

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Employees

        As of September 1, 2003, the Company had approximately 700 salaried employees and approximately 1,000 hourly employees, of whom approximately 200 were covered by collective bargaining agreements with various unions. The Company believes that its relationships with its employees are favorable.

Available Information

        The Company's Internet address is www.magnetek.com. The Company's annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to these reports that are filed by the Company with the Securities and Exchange Commission (SEC) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available free of charge at or through the Company's website.

Environmental Matters – General

        From time to time, the Company discovered the existence of hazardous substances at certain facilities associated with previously owned businesses and responded as necessary to bring the facilities into compliance with applicable laws and regulations. Upon sale of the businesses, the Company agreed, in some cases, to indemnify the buyers against environmental claims associated with the divested operations, subject to various conditions and limitations. Remediation activities, including those related to the Company's indemnification obligations, did not involve material expenditures during the fiscal year 2003.

        The Company has also 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 previously owned facilities and offsite locations. Its remediation activities as a potentially responsible party were not material in the fiscal year 2003. Although the materiality of future expenditures for environmental activities may be affected by the level and type of contamination, the extent and nature of cleanup activities required by governmental authorities, the nature of the Company's alleged connection to the contaminated sites, the number and financial resources of other potentially responsible parties, the availability of indemnification rights against third parties and the identification of additional contaminated sites, the Company's estimated share of liability, if any, for environmental remediation, including its indemnification obligations, is not expected to be material.

Century Electric (McMinnville, Tennessee)

        Prior to the Company's purchase of Century Electric, Inc. ("Century Electric") in 1986, Century Electric acquired a business from Gould Inc. ("Gould") in May 1983 that included a leasehold interest in a fractional horsepower electric motor manufacturing facility located in McMinnville, Tennessee. Gould agreed to indemnify Century Electric from and against liabilities and expenses arising out of the handling and cleanup of certain waste materials, including but not limited to cleaning up any polychlorinated biphenyls ("PCBs") at the McMinnville facility (the "1983 Indemnity"). The presence of PCBs and other substances, including solvents, in the soil and in the groundwater underlying the facility and in certain offsite soil, sediment and biota samples has been identified. The McMinnville plant is listed as a Tennessee Inactive Hazardous Waste Substance Site and plant employees were notified of the presence of contaminants at the facility. Gould has completed an interim remedial excavation and disposal of onsite soil containing PCBs and a preliminary investigation and cleanup of certain onsite and offsite contamination. The Company believes the cost of further investigation and remediation (including ancillary costs) are covered by the 1983 Indemnity. The Company sold its leasehold interest in the McMinnville plant in August 1999 and while the Company believes that Gould

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will continue to perform substantially under its indemnity obligations, Gould's substantial failure to perform such obligations could have a material adverse effect on the Company's financial position, cash flows or results of operations.

Effect of Fruit of the Loom Bankruptcy

        The Company acquired the stock of Universal Manufacturing Company ("Universal") from a predecessor of Fruit of the Loom ("FOL"), and the predecessor agreed to indemnify the Company against certain environmental liabilities arising from pre-acquisition activities. Environmental liabilities covered by the indemnification agreement include completion of additional cleanup activities, if any, at the Bridgeport, Connecticut facility (sold in connection with the sale of the transformer business in June 2001) and defense and indemnification against liability related to offsite disposal locations where Magnetek may have a share of potential response costs. In 1999 FOL filed a petition for Reorganization under Chapter 11 of the Bankruptcy Code and the Company filed a proof of claim in the proceeding for obligations related to the environmental indemnification agreement. In November 2001, the Company and FOL entered into an agreement involving the allocation of certain potential tax credits and Magnetek withdrew its claims in the bankruptcy proceeding. Although the Company believes that FOL has substantially completed the obligations required by the indemnification agreement, its ability to set aside any remaining obligations to the states of Connecticut and New Jersey through bankruptcy, or the discovery of additional environmental contamination at the Bridgeport facility could have a material adverse effect on the Company's financial position or results of operations.

ITEM 2. PROPERTIES

        Magnetek's headquarters and each of its manufacturing facilities for the continuing operations of the Company are listed below, each of which is leased, except for Valdarno, Italy. The Valdarno facility is owned by the Company's Italian subsidiary, Magnetek SpA.

Location	Lease Term	Approximate Size (Sq.Ft.)	Principal Use
Chatsworth, California	2004	48,000	Power supply manufacturing
Dallas, Texas	2005	101,000	Telecom systems manufacturing
Greenville, Ohio	2003	16,000	Telecom systems manufacturing
Los Angeles, California	2005	5,000	Corporate headquarters
Menomonee Falls, Wisconsin	2004	74,000	Industrial controls manufacturing
Pittsburgh, Pennsylvania	2003	8,911	Industrial controls manufacturing
Pomaz, Hungary	2004	44,000	Power supply manufacturing
Salgotarjan, Hungary	2006	118,000	Power supply manufacturing
Valdarno, Italy	—	183,000	Power supply manufacturing
Mississauga, Canada	2006	17,600	Industrial controls manufacturing
Shenzhen, China	2008	65,000	Power supply manufacturing
Glendale Heights, Illinois	2006	50,000	Industrial controls manufacturing

        In July 2003, the Company divested its Telecom Service business, which included the leased property in Greenville, Ohio. The Company believes its facilities are in satisfactory condition and are adequate for its present operations. See Note 6 of Notes to Consolidated Financial Statements with respect to facility equipment subject to encumbrances.

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ITEM 3. LEGAL PROCEEDINGS

Litigation—Product Liability

        The Company is a party to a number of product liability lawsuits, all of which have arisen in connection with discontinued business operations of Magnetek. When the Company sold off these business operations, it agreed to defend and indemnify the different purchasers of these operations in respect of certain product liability claims. We are presently defending a number or product liability claims in connection with these indemnification obligations. After December 15, 2003, none of these purchasers will be entitled to make any further claims against the Company under these indemnification obligations. We will, however, remain liable for valid claims made before that date. All of the pending product liability cases are being aggressively defended by the Company, and management believes that its insurers will bear all liability, if any, that exceeds applicable deductibles, and that none of these proceedings individually or in the aggregate will have a material adverse effect on the Company's results of operations or financial position.

        Magnetek has been named, along with numerous other defendants, in asbestos-related lawsuits. The Company has never produced asbestos-containing products and is either contractually indemnified against liability for asbestos-related claims or believes that it has no liability for such claims, all of which arise from business operations the Company acquired but no longer owns. While the outcome of these cases cannot be predicted with certainty, the Company is aggressively seeking to be dismissed from the proceedings and does not believe the proceedings, individually or in the aggregate, will have a material adverse effect on its financial position or results of operations.

Litigation—Patent Infringement

        In April 1998, Ole K. Nilssen filed a lawsuit in the U.S. District Court for the Northern District of Illinois alleging infringement by Magnetek of seven of his patents pertaining to electronic ballast technology, and seeking unspecified damages and injunctive relief to preclude the Company from making, using or selling products allegedly infringing his patents. The Company denied that its products infringed any valid patent and filed a response asserting affirmative defenses, as well as a counterclaim for a judicial declaration that its products do not infringe the patents asserted by Mr. Nilssen and also that the asserted patents are invalid. In April 2003, the lawsuit and counterclaims were dismissed with prejudice and both parties agreed to submit limited issues in dispute to binding arbitration before an arbitrator with a relevant technical background. Settlement discussions have occurred from time to time, and although the Company will continue to assert what it believes are strong defenses at arbitration, an unfavorable decision could have a material adverse effect on the Company's financial position and results of operations.

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, 2003.

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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 2002 and 2003:

Quarter Ending	High	Low
September 30, 2002	10.05	2.65
December 31, 2002	6.09	3.28
March 31, 2003	5.35	2.32
June 30, 2003	3.20	1.90
September 30, 2001	12.69	8.81
December 31, 2001	10.49	7.80
March 31, 2002	12.00	8.91
June 30, 2002	12.73	9.42

        The Company's Common Stock is listed for trading on the New York Stock Exchange under the ticker symbol "MAG." As of September 5, 2003 there were 221 record holders of Magnetek's Common Stock.

        Magnetek 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 2003 bank loan agreement, which provides that the Company may not declare or pay any dividend or make any distribution with respect to its capital stock. The Company did not repurchase any of its Common Stock during fiscal year 2003.

        On March 2, 2001, the Company issued an aggregate of 597,691 shares of Common Stock to the shareholders of ADS Power Resource, Inc., in a privately negotiated transaction involving fewer than 35 persons as part of the merger consideration paid by Magnetek in connection with its acquisition of ADS Power Resources, Inc. The shares were issued at a deemed issue price of $11.16 per share; approximately $6.7 million in the aggregate. The shares are "restricted securities" for purposes of Rule 144 of the Securities Act and each certificate representing any of such shares states on its face that it represents stock that has not been registered under the Securities Act and is not freely transferable.

        On June 27, 2002 the Company contributed 900,000 shares of its Common Stock into the Magnetek, Inc. Flexcare Plus Retirement Pension Plan. The value of that contribution was $9.89 per share and totaled approximately $8.9 million in the aggregate.

ITEM 6. SELECTED FINANCIAL DATA

        The information called for by this Item 6 is hereby incorporated by reference to the section of the Company's 2003 Annual Report entitled "Selected Financial Data."

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        The information called for by this Item 7 is hereby incorporated by reference to the section of the Company's 2003 Annual Report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations."

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The information called for by this Item 7A is hereby incorporated by reference to the section of the Company's 2003 Annual Report entitled "Quantitative and Qualitative Disclosures About Market Risk."

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The information called for by this Item 8 is hereby incorporated by reference to the Company's Financial Statements and the corresponding Report of Ernst & Young LLP, Independent Auditors in the Company's 2003 Annual Report.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        Magnetek had no disagreements with its independent accountants in fiscal 2003 with respect to accounting and financial disclosure, and has not changed its independent accountants during the two most recent fiscal years.

ITEM 9A. CONTROLS AND PROCEDURES

        Magnetek has evaluated, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, the effectiveness of the design and operation of the Company's disclosure controls and procedures (as that term is defined under Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934) and the Company's internal control over financial reporting (as that term is defined under Rule 13a-15(f) and Rule 15d-15(f) under the Securities Exchange Act of 1934). The controls and procedures are designed to ensure that material information relating to the Company, including its subsidiaries, is made known to the Company. Procedures related to internal control over financial reporting are designed to provide reasonable assurances regarding the reliability of the Company's reporting and preparation of financial statements in accordance with generally accepted accounting principles. Based upon its evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of fiscal year ended June 30, 2003, the Company's disclosure controls and procedures are effective in timely alerting them to material information relating to the Company and required to be included in its periodic SEC filings.

        There were no changes in the Company's internal control over financial reporting during the Company's fiscal fourth quarter ended June 30, 2003 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information regarding the Company's directors called for by this Item 10 is hereby incorporated by reference to the sections of the Company's 2003 Proxy Statement entitled "The Board of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance".

Supplemental Information—Executive Officers of the Company

        The following table sets forth certain information regarding the current executive officers of the Company.

Name	Age	Position
Andrew G. Galef	70	Chairman of the Board of Directors, President and Chief Executive Officer
Antonio Canova, Ph.D	61	Executive Vice President, Power Electronics
Alexander Levran, Ph.D	53	Executive Vice President, Technology
Peter M. McCormick	43	Executive Vice President, Industrial Controls
David P. Reiland	49	Executive Vice President and Chief Financial Officer
Paul Schwartzbaum	41	Executive Vice President, Telecom Power
John P. Colling, Jr.	47	Vice President and Treasurer
Tina D. McKnight	45	Vice President, General Counsel and Secretary

        Mr. Galef has been the Chairman of the Board of Directors since July 1984 and the President and Chief Executive Officer since May 4, 1999. Mr. Galef previously served as Chief Executive Officer of the Company from September 1993 until June 1996. He is the sole shareholder of The Spectrum Group, Inc., a private investment and management firm, and has served as its President since its incorporation in California in 1978, and as its Chairman and Chief Executive Officer since 1987.

        Dr. Canova has been Executive Vice President, with responsibility for the Company's power electronics business since October 1993. He has served as Managing Director of Magnetek S.p.A. in Italy since March 1991. Prior to that, Dr. Canova was the Managing Director of Plessey S.p.A. from 1988 until March 1991 when Plessey S.p.A. was acquired by Magnetek. From 1969 to 1988, Dr. Canova served as General Manager of Plessey S.p.A.

        Dr. Levran has been Executive Vice President, Technology since January 1995 and was Vice President, Technology from July 1993 until January 1995. Prior to joining the Company, Dr. Levran was Vice President of Engineering and Technology for EPE Technologies, Inc., a subsidiary of Groupe Schneider, from 1991 to June 1993. From 1981 to 1991, Dr. Levran held various engineering management positions with Teledyne Inet, a subsidiary of Teledyne, Inc., most recently as Vice President of Engineering.

        Mr. McCormick has been responsible for the Company's Industrial Controls business division since July 2002, first as Vice President and later as an Executive Vice President. From November 1999 until July 2002, Mr. McCormick was President of Industrial Controls. Prior to that, he was Vice President of Operations for the drives group from September 1998 until November 1999 and Vice President of the Custom Products business group from June 1996 until September 1998.

        Mr. Reiland has been Executive Vice President since July 1993 and Chief Financial Officer of the Company since July 1988. Mr. Reiland assumed temporary responsibility for the telecom business

10

division from January 2003, following Mr. Pratt's departure, until April 2003 when Mr. Schwarzbaum joined the Company. Mr. Reiland was 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. Schwarzbaum joined the Company as Executive Vice President and as President of the Telecom Power Group in April 2003. He joined Magnetek after three years with Corning Precision Lens, Inc., most recently serving as its Vice President and General Manager of the Consumer Video Optics business. Prior to that, Mr. Schwarzbaum held key management assignments with Zebra Technologies Corporation, a leading supplier of bar code printing systems, as well as product and marketing leadership positions with Mettler-Toledo, Inc. Mr. Schwarzbaum was also a principal of a boutique strategy and management consultancy based in Taipei Taiwan, where he lived and worked for three years. He began his career as a financial analyst with Charterhouse Japhet plc.

        Mr. Colling served as Vice President of the Company from July 1990 until he resigned as an officer in April 2003. Mr. Colling was the Treasurer of the Company from June 1989 until termination of his employment in August 2003 due to relocation of his responsibilities to the Corporate offices in Los Angeles, California. From July 1987 to June 1989, Mr. Colling was Assistant Treasurer. Prior to joining Magnetek, Mr. Colling was the Assistant Treasurer of Century Electric, where he served in various capacities from August 1981 until its acquisition by Magnetek in July 1987.

        Ms. McKnight joined the Company in September 2000 as Vice President, General Counsel and Secretary. Prior to joining the Magnetek, Ms. McKnight was Vice President and Assistant General Counsel of creditcards.com from 1999 to 2000 and Vice President, Senior Counsel and Assistant Secretary of Great Western Bank from 1990 to 1999. Ms. McKnight was an attorney with the law firms of Brobeck, Phleger & Harrison in Los Angeles, California from 1987 until 1990 and with Peterson, Ross, Schloerb & Seidel in Los Angeles, California from 1985 until 1987.

ITEM 11. EXECUTIVE COMPENSATION

        The information called for by this Item 11 is hereby incorporated by reference to the section of the Company's 2003 Proxy Statement entitled "Executive Compensation".

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Security Ownership of Certain Beneficial Owners and Management

        The information called for by this Item 12 regarding beneficial ownership by certain persons of more than five percent of any class of the Company's voting securities and by the Company's directors and executive officers is hereby incorporated by reference to the section of the Company's 2003 Proxy Statement entitled "Beneficial Ownership".

Securities Authorized For Issuance Under Equity Compensation Plans

        The Company has no equity compensation plans or individual compensation arrangements under which equity securities of the Company are issuable that have not been approved by its shareholders. The following table reflects information as of the end of fiscal year 2003 with respect to securities

11

issuable under the Company's equity compensation plans (including individual compensation arrangements), all of which securities are shares of the Company's common stock.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity Compensation Plans Approved By Security Holders	6,517,361	$	10.27	13,838,772	(1)
Equity Compensation Plans Not Approved by Security Holders	0		0	0
Total	6,517,361	$	10.27	13,838,772

(1)

Excluding the 6,517,361 noted in column (a).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this Item 13 is hereby incorporated by reference to the sections of the Company's 2003 Proxy Statement entitled "Transactions With Management and Others" and "Compensation Committee Interlocks and Insider Participation".

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information called for by this Item 14 is hereby incorporated by reference to the section of the Company's 2003 Proxy Statement entitled "Independent Public Accountants".

12

PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   Index to Consolidated Financial Statements, Consolidated Financial Statement Schedules and Exhibits:

		EDGARized Form 10-K Page	Annual Report to Stockholders Page
1.	Consolidated Financial Statements
	Consolidated Statements of Operations for Years Ended June 30, 2003, 2002 and 2001	—	11
	Consolidated Balance Sheets at June 30, 2003 and 2002	—	12
	Consolidated Statements of Stockholders' Equity for Years Ended June 30, 2003, 2002 and 2001	—	13
	Consolidated Statements of Cash Flows for Years Ended June 30, 2003, 2002 and 2001	—	14
	Notes to Consolidated Financial Statements	—	15
	Report of Ernst & Young LLP, Independent Auditors	—	32
2.	Consolidated Financial Statement Schedule
	Report of Ernst & Young LLP, Independent Auditors	19
	Schedule II—Valuation and Qualifying Accounts	20

        All other financial statement schedules have been omitted because of the absence of conditions under which they are required or applicable, or because the information required is included in the Consolidated Financial Statements and related notes.

3.     Exhibit Index

        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 No.	Note		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	(5	)	Registration Rights Agreement dated as of April 29, 1991 among the Company, Andrew G. Galef, Frank Perna, Jr. and the other entities named therein.
4.2	(7	)	Registration Rights Agreement dated as of June 28, 1996 by and between the Company and U.S. Trust Company of California, N.A.
4.3	(25	)	Registration Rights Agreement dated as of March 2, 2001 by and between the Company and each ADS Shareholder.
4.4	(12	)	Rights Agreement dated as of April 30, 2003 between the Company and The Bank of New York, as Rights Agent.

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10.1	(8	)	Second Amended and Restated 1989 Incentive Stock Compensation Plan of Magnetek, Inc. ("1989 Plan").
10.2	(7	)	Amendment No. 1 to 1989 Plan.
10.3	(7	)	Standard Terms and Conditions Relating to Non-Qualified Stock Options, revised as of July 24, 1996, pertaining to the 1989 Plan.
10.4	(7	)	Form of Non-Qualified Stock Option Agreement Pursuant to the Second Amended and Restated 1989 Incentive Stock Compensation Plan of the Company.
10.5	(9	)	Magnetek, Inc. 1997 Non-Employee Director Stock Option Plan (the "DSOP").
10.6	(10	)	First Amendment to the DSOP dated as of July 26, 2000.
10.7	(6	)	1991 Discretionary Director Incentive Compensation Plan of the Company.
10.8	(11	)	1999 Stock Incentive Plan of the Company (the "1999 Plan").
10.9	(11	)	2000 Employee Stock Plan of the Company (the "2000 Plan").
10.10	(11	)	Standard Terms and Conditions Relating to Non-Qualified Stock Options, effective as of October 19, 1999, pertaining to the 1999 Plan and the 2000 Plan.
10.11	(13	)	Magnetek, Inc. Amended and Restated Director Compensation and Deferral Investment Plan (the "DDIP").
10.12	(28	)	Amendment to the DDIP dated April 17, 2002.
10.13	(29	)	2002 Magnetek, Inc. Employee Stock Purchase Plan.
10.14	(14	)	Non-Qualified Stock Option Agreement between the Company and David P. Reiland.
10.15	(15	)	Executive Management Agreement dated as of July 1, 1994, by and between the Company and The Spectrum Group, Inc.
10.16	(16	)	Amendment dated as of January 25, 1995 to the Executive Management Agreement between the Company and The Spectrum Group, Inc.
10.17	(17	)	Amendment No. 1 to the Executive Management Agreement dated as of June 30, 2000 between the Company and The Spectrum Group, Inc.
10.18	**		Amendment No. 2 to the Executive Management Agreement dated as of December 12, 2002 between the Company and The Spectrum Group, Inc.
10.19	(18	)	Change of Control Agreement dated October 20, 1998 between Antonio Canova and the Company.
10.20	(18	)	Change of Control Agreement dated October 20, 1998 between Alexander Levran and the Company.
10.21	(18	)	Change of Control Agreement dated October 20, 1998 between David P. Reiland and the Company.
10.22	(19	)	Change of Control Agreement dated November 1, 2000 between Tina McKnight and the Company.
10.23	**		Amendment to Change of Control Agreement dated April 30, 2003 between Tina McKnight and the Company.
10.24	(21	)	Change of Control Agreement dated December 11, 2002, between Pete McCormick and the Company.

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10.25	**		Change of Control Agreement dated April 30, 2003 between Paul Schwarzbaum and the Company.
10.26	(20	)	Tax Agreement dated as of February 12, 1986 between the Company and Farley Northwest Industries, Inc.
10.27	(23	)	Credit Agreement dated as of June 17, 2002 among the Company, Banc One Capital Markets, Inc., Bank One, Kentucky, NA, Wachovia Bank, NA and The Provident Bank.
10.28	(23	)	Stock Pledge Agreement dated as of June 17, 2002 by the Company in favor of Bank One Kentucky, NA.
10.29	(23	)	Subsidiary Guaranty dated as of June 17, 2002 by Magnetek ADS Power, Inc., Magnetek Leasing Corporation, Magnetek Mondel Holding, Inc. and J-TEC, Inc. in favor of Bank One Kentucky, NA.
10.30	(23	)	Security Agreement dated as of June 17, 2002 between the Company and Bank One Kentucky, NA.
10.31	(23	)	Security Agreement dated as of June 17, 2002 between Magnetek Leasing Corporation and Bank One Kentucky, NA.
10.32	(23	)	Security Agreement dated as of June 17, 2002 between Magnetek ADS Power, Inc. and Bank One Kentucky, NA.
10.33	(23	)	Security Agreement dated as of June 17, 2002 between Magnetek Mondel Holding, Inc. and Bank One Kentucky, NA.
10.34	(23	)	Security Agreement dated as of June 17, 2002 between J-TEC, Inc. and Bank One Kentucky, NA.
10.35	(17	)	Lease of Pomaz, Hungary facility.
10.36	(24	)	Lease of Menomonee Falls, Wisconsin facility dated as of July 23, 1999.
10.37	(27	)	Asset Purchase Agreement dated as of June 15, 2001 between the Company and Universal Lighting Technologies, Inc.
10.38	**		Stock Purchase Agreement dated as of December 30, 2002 by and among the Company and MXT Holdings, Inc.
13.1	**		2003 Annual Report.
23.1	**		Consent of Ernst & Young LLP, independent auditors.
31.1	**		Certification Pursuant to 18 U.S.C. Section 1350.
31.2	**		Certification Pursuant to 18 U.S.C. Section 1350.
32.1	**		Certification Pursuant to 15 U.S.C. Section 7241.
32.2	**		Certification Pursuant to 15 U.S.C. Section 7241.

**

Filed with this Form 10-K.

(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-Q for quarter ended March 31, 2003.

(5)

Previously filed with Form 10-K for Fiscal Year ended June 30, 1991 and incorporated herein by this reference.

15

(6)

Previously filed with Form 10-K for Fiscal Year ended June 30, 1992 and incorporated herein by this reference.

(7)

Previously filed with Form 10-K for Fiscal Year ended June 30, 1996 and incorporated herein by this reference.

(8)

Previously filed with Form 10-Q for quarter ended December 31, 1994 and incorporated herein by this reference.

(9)

Previously filed with the Registration Statement on Form S-8 filed on February 10, 1998, Commission File No. 333-45935, and incorporated herein by this reference.

(10)

Previously filed with Form 10-Q for quarter ended September 30, 2000 and incorporated herein by this reference.

(11)

Previously filed with Form 10-Q/A for quarter ended September 30, 1999 and incorporated herein by this reference.

(12)

Previously filed with Form 8-K filed May 12, 2003 and incorporated herein by this reference.

(13)

Previously filed with the Registration Statement on Form S-8 filed on February 10, 1998, Commission File No. 333-45939, and incorporated herein by this reference.

(14)

Previously filed with Form 10-Q for quarter ended March 31, 1997 and incorporated herein by this reference.

(15)

Previously filed with Form 10-Q for quarter ended March 31, 1994 and incorporated herein by this reference.

(16)

Previously filed with Form 10-Q for quarter ended March 31, 1995 and incorporated herein by this reference.

(17)

Previously filed with Form 10-K for fiscal year ended July 2, 2000 and incorporated herein by this reference.

(18)

Previously filed with Form 10-Q for quarter ended December 31, 1998 and incorporated herein by this reference.

(19)

Previously filed with Form 10-Q for quarter ended December 31, 2000 and incorporated herein by this reference.

(20)

Previously filed with Amendment No. 1 to Registration Statement filed on February 14, 1986 and incorporated herein by this reference.

(21)

Previously filed with Form 10-Q for Quarter ended December 31, 2002, and incorporated herein by this reference.

(23)

Previously filed with Form 10-K for Fiscal Year ended June 30, 2002 and incorporated herein by this reference.

(24)

Previously filed with Form 10-K for Fiscal Year ended June 27, 1999 and incorporated herein by this reference.

(27)

Previously filed with Form 8-K dated July 2, 2001 and incorporated herein by this reference.

(28)

Previously filed with Form 10-Q for quarter ended March 31, 2002 and incorporated herein by this reference.

(29)

Previously filed with Form 10-Q for quarter ended September 30, 2001 and incorporated herein by this reference.

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(b)   Reports on Form 8-K

        During the last quarter of fiscal year 2003, the Company filed the following reports on Form 8-K:

Form 8-K filed April 2, 2003 announcing an amendment to the Company's credit agreement and a loss to be recorded in connection with a previously disclosed dispute with Bank of America.

Form 8-K filed April 25, 2003 announcing the Company's earnings for the quarter ended March 31, 2003 as Regulation FD disclosure (including attached financial statements).

Form 8-K filed May 12, 2003 announcing the adoption of a stockholder rights plan by the Company's Board of Directors.

17

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 Los Angeles, State of California, on the 29th day of September, 2003.

MAGNETEK, INC.
(Registrant)

/s/  ANDREW G. GALEF Andrew G. Galef
Chairman of the Board of Directors,
President and 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 Andrew G. Galef	Chairman of the Board of Directors, President and Chief Executive Officer (Principal Executive Officer)	September 29, 2003
/s/  THOMAS G. BOREN Thomas G. Boren	Director	September 29, 2003
/s/  DEWAIN K. CROSS Dewain K. Cross	Director	September 29, 2003
/s/  PAUL J. KOFMEHL Paul J. Kofmehl	Director	September 29, 2003
/s/  MITCHELL I. QUAIN Mitchell I. Quain	Director	September 29, 2003
/s/  ROBERT E. WYCOFF Robert E. Wycoff	Director	September 29, 2003
/s/  DAVID P. REILAND David P. Reiland	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	September 29, 2003

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REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

        We have audited the consolidated financial statements of Magnetek, Inc. as of June 30, 2003 and 2002, and for each of the three years in the period ended June 30, 2003, and have issued our report thereon dated August 20, 2003 (incorporated by reference elsewhere in this Annual Report on Form 10-K). Our audits also included the financial statement schedule listed in Item 15(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

Woodland Hills, California
August 20, 2003

19

SCHEDULE II

MAGNETEK, INC.

VALUATION AND QUALIFYING ACCOUNTS

Years ended June 30, 2001, 2002 and 2003

(amounts in thousands)

	Balance at Beginning of year		Additions charged to earnings		Deductions from Allowance			Other(a)			Balance at end of year
June 30, 2001
Allowance for doubtful receivables	$	3,299	$	5,088	$	(2,172	)	$	(980	)	$	5,235
June 30, 2002
Allowance for doubtful receivables	$	5,235	$	946	$	(3,816	)	$	67		$	2,432
June 30, 2003
Allowance for doubtful receivables	$	2,432	$	248	$	(452	)	$	199		$	2,427

(a)

Represents primarily opening allowances for doubtful accounts balances of acquired/divested companies and foreign translation adjustments for the Company's foreign subsidiaries.

20

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MAGNETEK, INC. ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2003
PART I

ITEM 1. DESCRIPTION OF BUSINESS
ITEM 2. PROPERTIES
ITEM 3. LEGAL PROCEEDINGS
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
ITEM 6. SELECTED FINANCIAL DATA
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
ITEM 9A. CONTROLS AND PROCEDURES

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

SIGNATURES
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
SCHEDULE II
MAGNETEK, INC. VALUATION AND QUALIFYING ACCOUNTS Years ended June 30, 2001, 2002 and 2003 (amounts in thousands)

EX-10.18

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Exhibit 10.18

AMENDMENT NO. 2 TO
EXECUTIVE MANAGEMENT AGREEMENT

        This Amendment No. 2 to Executive Management Agreement (this "Amendment") is made and entered into as of November 14, 2002, by and between Magnetek, Inc. (the "Company"), a Delaware corporation, and The Spectrum Group, Inc. ("Spectrum"), a California corporation.

WITNESSETH

        WHEREAS, the Company and Spectrum entered into a five-year Executive Management Agreement dated as of July 1, 1994 (the "Agreement") which would have expired by its terms on July 1, 1999; and

        WHEREAS, the Board of Directors of the Company adopted certain resolutions as of May 5, 1999 extending the Agreement through June 30, 2000; and

        WHEREAS, the Company and Spectrum previously amended the Agreement extending the Agreement through December 31, 2002; and

        WHEREAS, the Company and Spectrum at this time desire to amend the Agreement so as to extend it through December 31, 2005.

AGREEMENT

        NOW, THEREFORE, for good and valuable consideration, the sufficiency and receipt of which are hereby acknowledged, the Company and Spectrum agree as follows:

1.

Section 1.A of the Amended Agreement (?) is hereby amended by deleting the words "December 31, 2002" and replacing them with the words "December 31, 2005".



2.

Section 3 of the Agreement is hereby amended by deleting the words "July 1, 1999" and replacing them with the words "December 31, 2005". (Should this again reference the amendment that extended the term to 2002?)



3.

Except as amended hereby, the Agreement remains in full force and effect.

        IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 2 to Executive Management Agreement as of the date first above written.

MAGNETEK, INC.

By:

THE SPECTRUM GROUP, INC.

By:

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Exhibit 10.18

AMENDMENT NO. 2 TO EXECUTIVE MANAGEMENT AGREEMENT

EX-10.23

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Exhibit 10.23

AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT

        This Amended and Restated Change of Control Agreement ("Agreement") is entered into on April 30, 2003 by and between Tina D. McKnight, an individual (the "Officer"), and MagneTek, Inc., a Delaware corporation (the "Company").

RECITALS

        WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the possibility of a Change of Control (as hereinafter defined) exists and that the threat or the occurrence of a Change of Control can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation;

        WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Officer in the event of a threat or occurrence of a Change of Control and to ensure the Officer's continued dedication and efforts in such event without undue concern for personal financial and employment security; and

        WHEREAS, in order to induce the Officer to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change of Control, the Company desires to enter into this Agreement with the Officer to provide the Officer with certain benefits in the event his or her employment is terminated as a result of, or in connection with, a Change of Control.

AGREEMENT

        NOW THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows:

        1.    Term of Agreement.    This Agreement shall commence as of the date hereof and shall continue in effect until December 31, 2005; provided, however, that on December 31, 2005 and on each anniversary thereof, the term of this Agreement shall automatically be extended for one year unless either the Company or the Officer shall have given written notice to the other prior thereto that the term of this Agreement shall not be so extended; provided, further, however, that notwithstanding any such notice by the Company or the Officer not to extend, the term of this Agreement shall not expire prior to the second anniversary of a Change of Control Date. The benefits payable pursuant to Section 2 hereof shall be due in all events if a Change of Control occurs during the term of this Agreement, and a Change of Control will be deemed to have occurred during the term hereof if an agreement for a transaction resulting in a Change of Control is entered into during the term hereof, notwithstanding that the Change of Control Date occurs after the expiration of the term of this Agreement.

        2.    Benefits Upon Change of Control.

        (a)    Events Giving Rise to Benefits.    The Company agrees to pay or cause to be paid to the Executive the benefits specified in this Section 2 if (i) there is a Change of Control, and (ii) within the Change of Control Period, (a) the Company or the Successor terminates the employment of the Executive for any reason other than Cause, death or Disability or (b) the Executive voluntarily terminates employment for Good Reason.

        (b)    Benefits Upon Termination of Employment.    If the Executive is entitled to benefits pursuant to this Section 2, the Company agrees to pay or provide to the Executive as severance payment, the following:

        (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 Executive's unpaid base salary and vacation through the Termination Date and any unpaid portion of the Executive's bonus for the prior fiscal year; plus

        (B)  a portion of the Executive'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 Executive's Base Compensation times the Compensation Multiplier.

        (ii)   Continuation, on the same basis as if the Executive 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 Executive 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 Executive hereunder as long as the aggregate coverage and benefits of the combined benefit plans is no less favorable to the Executive than the Benefits required to be provided hereunder.

        (iii)  Outplacement services to be provided by an outplacement organization of national repute, 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 Executive's Base Compensation.

        (iv)  Accelerated vesting of all outstanding stock options and of all previously granted restricted stock awards.

        3.    Definitions.    When used in this Agreement, the following terms have the meanings set forth below:

        "Base Compensation" means the sum of (i) the Executive'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 Executive's duties, resulting in material economic harm to the Company or any Successor.

        "Change of Control" means (i) any event described in Section 11.2 of the 1999 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 June 1, 2000 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 Executive 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 Executive's prior written consent, assignment to the Executive 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 Executive'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 Executive, without his or her prior written consent, to a place of business that is not within the metropolitan area of the Executive'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 acquirer of all or substantially all of the stock, assets or business of the Company.

        "Termination Date" means the last day of the Executive's employment.

        4.    Eligibility; Effect on Other Agreements and Plans.

        (a)   In the event the Executive 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 Executive shall not be entitled to any payment or benefit hereunder. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company. Amounts that are vested benefits or that the Executive 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.

        (b)    Plan Amendments.    The Company shall adopt such amendments to its employee benefit plans and insurance policies, including, without limitation, the Plans, as are necessary to effectuate the provisions of this Agreement. If and to the extent any benefits under Section 2 are not paid or payable or otherwise provided to the Executive or his or her dependents or beneficiaries under any such plan or policy (whether due to the terms of the plan or policy, the termination thereof, applicable law, or otherwise), then the Company itself shall pay or provide for such benefits (including any gross-up needed to account for the less favorable tax treatment if the payments are made from the Company and not from the Plans or other employee benefit plans).

        5.    Golden Parachute Tax.

        (a)   If the Value (as hereinafter defined) attributable to the payments and benefits provided in Section 2 above, without regard to this Section 5 ("Agreement Payments"), in combination with the Value attributable to other payments or benefits in the nature of compensation to or for the benefit of Executive (including but not limited to the value attributable to accelerated vesting of options and, collectively with Agreement Payments, "Payments") would, but for this Section 5, constitute an "excess parachute payment" under Code Section 280G, then Agreement Payments will be made to the Executive under Section 2 hereof only to the extent provided in this Section 5. If (i) the excess of the Value of all Payments over the sum of all taxes (including but not limited to income and excise taxes under Code Section 4999) that would be payable by the Executive with respect to such Payments, is equal to or greater than 110% of (ii) the excess of the greatest Value of all such Payments that could be paid to or for the benefit of the Executive and not result in an "excess parachute payment" (the "Cap"), over the amount of taxes that would be payable by Executive thereon, then the full amount of Agreement Payments shall be paid to the Executive. Otherwise, Agreement Payments shall be made only to the extent that such payments cause the Value of all Payments to equal the Cap.

        (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 the 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) and the amount and nature of any reduction of Agreement Payments required by this Section 5. For purposes of this Section 5, "Value" shall mean value as determined by the Arbitrators applying the valuation procedures and methodologies established pursuant to Code Section 280G, including any non-binding interpretive guidance as the Arbitrators determine appropriate. The determinations of the Arbitrators shall be final and binding on both the Company and Executive, and their successors, assignees, heirs and beneficiaries, for purposes of determining the amount payable under Section 2. 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.

        6.    Employment At-Will.    Notwithstanding anything to the contrary contained herein, the Executive's employment with the Company is not for any specified term and may be terminated by the Executive 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.

        7.    General.

        (a)    Entire Agreement.    This document constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the

subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral.

        (b)    Successors and Assigns.    This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company, and their respective successors and assigns, except that the Executive may not assign any of his or her duties hereunder and he or she may not assign any of his or her rights hereunder without the prior written consent of the Company.

        (c)    Amendments.    No amendments or other modifications to this Agreement may be made except by a writing signed by both parties. No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.

        (d)    No Amounts Due.    The Executive acknowledges that no payments or benefits whatsoever shall become due hereunder in the absence of a Change of Control.

        (e)    No Mitigation Obligation.    The parties hereto expressly agree that the payment of the benefits by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise except as expressly provided in Sections 2(b)(ii) and 4(a).

        (f)    Changes to Benefits.    In the event that, within 90 days of the execution of this Agreement, the Company enters into an agreement for a Change of Control in connection with a merger to be accounted for as a "pooling of interests," the Board will be entitled to modify or reduce the payments or benefits due hereunder, or to abrogate this Agreement entirely, if and to the extent that Ernst & Young opines to the Board such measures are necessary in order to ensure that the proposed merger will be accounted for as a "pooling of interests." The Board will have no such authority after such 90-day period and, in the event such merger does not eventuate or is ultimately not accounted for as a "pooling of interests," this Agreement, with or without any action by the Board or the Executive, shall be automatically reinstated.

        (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 Tennessee without giving effect to principles of conflicts of law.

        (h)    ERISA.    This Agreement is pursuant to the Company's severance plan for Executives (the "Plan") which is unfunded and maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan constitutes an employee welfare benefit plan ("Welfare Plan") within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Any payments pursuant to this Agreement which could cause the Plan not to constitute a Welfare Plan shall be deemed instead to be made pursuant to a separate "employee pension benefit plan" within the meaning of Section 3(2) of ERISA as to which the applicable portions of the document constituting the Plan shall be deemed to be incorporated by reference. None of the benefits hereunder may be assigned in any way.

        (i)    Representation.    The Executive acknowledges that Gibson, Dunn & Crutcher LLP has not represented the Executive in connection with this Agreement and that she has had the opportunity to consult with counsel before executing this Agreement.

        (j)    Mutual Non-Disparagement.    The Company and subsidiaries agree, and the Company shall use its best efforts to cause its respective executive officers and directors to agree, that

they will not make or publish any statement critical of the Executive, or in any way adversely affecting or otherwise maligning the Executive's reputation. The Executive agrees that he or she will not make or publish any statement critical of the Company, its affiliates and their respective executive officers and directors, or in any way adversely affecting or otherwise maligning the business or reputation of the Company, its affiliates and subsidiaries and their respective officers, directors and employees.

        8.    Arbitration.

        (a)   Except as provided in Section 5 hereof, any disputes or claims arising out of or concerning the Executive'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 Executive 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 Los Angeles, California. 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 Executive 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 Executive 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 Executive in pursuing a claim for payment of compensation or benefits or other right or entitlement under this Agreement, provided that the Executive 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.

        IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date it is last executed below by either party.

Tina McKnight
MAGNETEK, INC.
By:
	Name: Andrew G. Galef Title: Chairman and Chief Executive Officer

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Exhibit 10.23

AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT

EX-10.25

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Exhibit 10.25

CHANGE OF CONTROL AGREEMENT

        This Change of Control Agreement ("Agreement") is entered into on April 30, 2003 by and between Paul Schwarzbaum, an individual (the "Officer"), and MagneTek, Inc., a Delaware corporation (the "Company").

RECITALS

        WHEREAS, the Board of Directors of the Company (the "Board") recognizes that the possibility of a Change of Control (as hereinafter defined) exists and that the threat or the occurrence of a Change of Control can result in significant distractions of its key management personnel because of the uncertainties inherent in such a situation;

        WHEREAS, the Board has determined that it is essential and in the best interest of the Company and its stockholders to retain the services of the Officer in the event of a threat or occurrence of a Change of Control and to ensure the Officer's continued dedication and efforts in such event without undue concern for personal financial and employment security; and

        WHEREAS, in order to induce the Officer to remain in the employ of the Company, particularly in the event of a threat or the occurrence of a Change of Control, the Company desires to enter into this Agreement with the Officer to provide the Officer with certain benefits in the event his or her employment is terminated as a result of, or in connection with, a Change of Control.

AGREEMENT

        NOW THEREFORE, in consideration of the mutual covenants set forth herein, and for other good and valuable consideration, receipt of which is hereby acknowledged, the parties do hereby agree as follows:

        1.    Term of Agreement.    This Agreement shall commence as of the date hereof and shall continue in effect until December 31, 2005; provided, however, that on December 31, 2005 and on each anniversary thereof, the term of this Agreement shall automatically be extended for one year unless either the Company or the Officer shall have given written notice to the other prior thereto that the term of this Agreement shall not be so extended; provided, further, however, that notwithstanding any such notice by the Company or the Officer not to extend, the term of this Agreement shall not expire prior to the second anniversary of a Change of Control Date. The benefits payable pursuant to Section 2 hereof shall be due in all events if a Change of Control occurs during the term of this Agreement, and a Change of Control will be deemed to have occurred during the term hereof if an agreement for a transaction resulting in a Change of Control is entered into during the term hereof, notwithstanding that the Change of Control Date occurs after the expiration of the term of this Agreement.

        2.    Benefits Upon Change of Control.

        (a)    Events Giving Rise to Benefits.    The Company agrees to pay or cause to be paid to the Executive the benefits specified in this Section 2 if (i) there is a Change of Control, and (ii) within the Change of Control Period, (a) the Company or the Successor terminates the employment of the Executive for any reason other than Cause, death or Disability or (b) the Executive voluntarily terminates employment for Good Reason.

        (b)    Benefits Upon Termination of Employment.    If the Executive is entitled to benefits pursuant to this Section 2, the Company agrees to pay or provide to the Executive as severance payment, the following:

        (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 Executive's unpaid base salary and vacation through the Termination Date and any unpaid portion of the Executive's bonus for the prior fiscal year; plus

        (B)  a portion of the Executive'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 Executive's Base Compensation times the Compensation Multiplier.

        (ii)   Continuation, on the same basis as if the Executive 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 Executive 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 Executive hereunder as long as the aggregate coverage and benefits of the combined benefit plans is no less favorable to the Executive than the Benefits required to be provided hereunder.

        (iii)  Outplacement services to be provided by an outplacement organization of national repute, 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 Executive's Base Compensation.

        (iv)  Accelerated vesting of all outstanding stock options and of all previously granted restricted stock awards.

        3.    Definitions.    When used in this Agreement, the following terms have the meanings set forth below:

        "Base Compensation" means the sum of (i) the Executive'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 Executive's duties, resulting in material economic harm to the Company or any Successor.

        "Change of Control" means (i) any event described in Section 11.2 of the 1999 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 June 1, 2000 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 Executive 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 Executive's prior written consent, assignment to the Executive 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 Executive'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 Executive, without his or her prior written consent, to a place of business that is not within the metropolitan area of the Executive'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 Executive's employment.

        4.    Eligibility; Effect on Other Agreements and Plans.

        (a)   In the event the Executive 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 Executive shall not be entitled to any payment or benefit hereunder. Nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company and for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company. Amounts that are vested benefits or that the Executive 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.

        (b)    Plan Amendments.    The Company shall adopt such amendments to its employee benefit plans and insurance policies, including, without limitation, the Plans, as are necessary to effectuate the provisions of this Agreement. If and to the extent any benefits under Section 2 are not paid or payable or otherwise provided to the Executive or his or her dependents or beneficiaries under any such plan or policy (whether due to the terms of the plan or policy, the termination thereof, applicable law, or otherwise), then the Company itself shall pay or provide for such benefits (including any gross-up needed to account for the less favorable tax treatment if the payments are made from the Company and not from the Plans or other employee benefit plans).

        5.    Golden Parachute Tax.

        (a)   If the Value (as hereinafter defined) attributable to the payments and benefits provided in Section 2 above, without regard to this Section 5 ("Agreement Payments"), in combination with the Value attributable to other payments or benefits in the nature of compensation to or for the benefit of Executive (including but not limited to the value attributable to accelerated vesting of options and, collectively with Agreement Payments, "Payments") would, but for this Section 5, constitute an "excess parachute payment" under Code Section 280G, then Agreement Payments will be made to the Executive under Section 2 hereof only to the extent provided in this Section 5. If (i) the excess of the Value of all Payments over the sum of all taxes (including but not limited to income and excise taxes under Code Section 4999) that would be payable by the Executive with respect to such Payments, is equal to or greater than 110% of (ii) the excess of the greatest Value of all such Payments that could be paid to or for the benefit of the Executive and not result in an "excess parachute payment" (the "Cap"), over the amount of taxes that would be payable by Executive thereon, then the full amount of Agreement Payments shall be paid to the Executive. Otherwise, Agreement Payments shall be made only to the extent that such payments cause the Value of all Payments to equal the Cap.

        (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 the 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) and the amount and nature of any reduction of Agreement Payments required by this Section 5. For purposes of this Section 5, "Value" shall mean value as determined by the Arbitrators applying the valuation procedures and methodologies established pursuant to Code Section 280G, including any non-binding interpretive guidance as the Arbitrators determine appropriate. The determinations of the Arbitrators shall be final and binding on both the Company and Executive, and their successors, assignees, heirs and beneficiaries, for purposes of determining the amount payable under Section 2. 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.

        6.    Employment At-Will.    Notwithstanding anything to the contrary contained herein, the Executive's employment with the Company is not for any specified term and may be terminated by the Executive 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.

        7.    General.

        (a)    Entire Agreement.    This document constitutes the final, complete, and exclusive embodiment of the entire agreement and understanding between the parties related to the

subject matter hereof and supersedes and preempts any prior or contemporaneous understandings, agreements, or representations by or between the parties, written or oral.

        (b)    Successors and Assigns.    This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive and the Company, and their respective successors and assigns, except that the Executive may not assign any of his or her duties hereunder and he or she may not assign any of his or her rights hereunder without the prior written consent of the Company.

        (c)    Amendments.    No amendments or other modifications to this Agreement may be made except by a writing signed by both parties. No amendment or waiver of this Agreement requires the consent of any individual, partnership, corporation or other entity not a party to this Agreement. Nothing in this Agreement, express or implied, is intended to confer upon any third person any rights or remedies under or by reason of this Agreement.

        (d)    No Amounts Due.    The Executive acknowledges that no payments or benefits whatsoever shall become due hereunder in the absence of a Change of Control.

        (e)    No Mitigation Obligation.    The parties hereto expressly agree that the payment of the benefits by the Company to the Executive in accordance with the terms of this Agreement will be liquidated damages, and that the Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive hereunder or otherwise except as expressly provided in Sections 2(b)(ii) and 4(a).

        (f)    Changes to Benefits.    In the event that, within 90 days of the execution of this Agreement, the Company enters into an agreement for a Change of Control in connection with a merger to be accounted for as a "pooling of interests," the Board will be entitled to modify or reduce the payments or benefits due hereunder, or to abrogate this Agreement entirely, if and to the extent that Ernst & Young opines to the Board such measures are necessary in order to ensure that the proposed merger will be accounted for as a "pooling of interests." The Board will have no such authority after such 90-day period and, in the event such merger does not eventuate or is ultimately not accounted for as a "pooling of interests," this Agreement, with or without any action by the Board or the Executive, shall be automatically reinstated.

        (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 Tennessee without giving effect to principles of conflicts of law.

        (h)    ERISA.    This Agreement is pursuant to the Company's severance plan for Executives (the "Plan") which is unfunded and maintained by the Company primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The Plan constitutes an employee welfare benefit plan ("Welfare Plan") within the meaning of Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). Any payments pursuant to this Agreement which could cause the Plan not to constitute a Welfare Plan shall be deemed instead to be made pursuant to a separate "employee pension benefit plan" within the meaning of Section 3(2) of ERISA as to which the applicable portions of the document constituting the Plan shall be deemed to be incorporated by reference. None of the benefits hereunder may be assigned in any way.

        (i)    Representation.    The Executive acknowledges that Gibson, Dunn & Crutcher LLP has not represented the Executive in connection with this Agreement and that she has had the opportunity to consult with counsel before executing this Agreement.

        (j)    Mutual Non-Disparagement.    The Company and subsidiaries agree, and the Company shall use its best efforts to cause its respective executive officers and directors to agree, that

they will not make or publish any statement critical of the Executive, or in any way adversely affecting or otherwise maligning the Executive's reputation. The Executive agrees that he or she will not make or publish any statement critical of the Company, its affiliates and their respective executive officers and directors, or in any way adversely affecting or otherwise maligning the business or reputation of the Company, its affiliates and subsidiaries and their respective officers, directors and employees.

        8.    Arbitration.

        (a)   Except as provided in Section 5 hereof, any disputes or claims arising out of or concerning the Executive'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 Executive 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 Los Angeles, California. 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 Executive 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 Executive 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 Executive in pursuing a claim for payment of compensation or benefits or other right or entitlement under this Agreement, provided that the Executive 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.

        IN WITNESS WHEREOF, the parties have executed this Agreement effective as of the date it is last executed below by either party.

/s/  PAUL SCHWARZBAUM Paul Schwarzbaum
MAGNETEK, INC.
By:
	/s/  ANDREW G. GALEF Name: Andrew G. Galef Title: Chairman and Chief Executive Officer

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Exhibit 10.25

CHANGE OF CONTROL AGREEMENT

EX-10.38

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Exhibit 10.38

STOCK PURCHASE AGREEMENT

        THIS AGREEMENT is made as of December 30, 2002, among each of the stockholders of MXT Holdings, Inc., an Illinois corporation (the "Company"), each and all of whom are listed on the Stockholders List attached hereto as Exhibit A (collectively "Sellers" and individually a "Seller") and Magnetek, Inc., a Delaware corporation ("Purchaser").

R E C I T A L S

        A.    Sellers own all of the outstanding shares of Class A Common Stock, $.001 par value, and Class B Common Stock, $.001 par value (collectively, "Shares") of the Company, which Shares constitute all of the issued and outstanding shares of capital stock of the Company. The Company is a holding company whose wholly owned subsidiary, Maxtec International Corp., a Delaware corporation (the "Subsidiary") is engaged in the development, production, manufacture, marketing and sale of, and the provision of post-sale services with respect to, radio-frequency remote controls for cranes, hoist/monorail systems, conveyors, locomotives and other material handling applications (the "Business") under the name "Telemotive Industrial Controls".

        B.    Purchaser desires to purchase all the outstanding Shares from Sellers and Sellers desire to sell such Shares to Purchaser, on the terms herein contained.

A G R E E M E N T S

        Therefore, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:

        1.    Agreement to Purchase and Sell Shares.    On the terms contained in this Agreement, Purchaser shall purchase from Sellers, and Sellers shall sell to Purchaser, all right, title and interest in and to the outstanding Shares, free and clear of any and all options, proxies, voting trusts, voting agreements, judgments, pledges, charges, escrows, rights of first refusal or first offer, mortgages, indentures, claims, transfer restrictions, liens, equities, security interests and other encumbrances of every kind and nature whatsoever, whether arising by agreement, operation of law or otherwise (collectively, "Claims").

        2.    Purchase Price.    Subject to Section 3 hereof, the aggregate purchase price of all of the Shares (the "Purchase Price") shall be equal to:

        (a)   four million seven hundred thousand dollars ($4,700,000); plus

        (b)   the aggregate consolidated amount of cash on hand and in banks, cash-equivalents and marketable securities of the Company and the Subsidiary as reflected on the Closing Balance Sheet (as herein defined) (collectively, "Cash Equivalents"); plus

        (c)   to the extent realized by the Company and the Subsidiary, the income Tax (as herein defined) savings to the Company and the Subsidiary (the "Tax Savings") resulting from (v) the exercise of the Options (as herein defined), (w) the Decker Amount (as herein defined), and (x) the Dealy Amount (as herein defined), after deduction of the portion thereof which is payable to Decker (as herein defined) under clause (y) of section 3 of the Termination Agreement dated December 30, 2002, between T.D. Decker ("Decker") and Subsidiary (the "Decker Agreement"); minus

        (d)   the aggregate consolidated principal amount of, and accrued interest and prepayment penalties or breakage fees with respect to, all indebtedness of the Company and the Subsidiaries for borrowed money, as reflected on the Closing Balance Sheet ("Indebtedness"); minus

        (e)   the aggregate amount (the "Decker Amount") payable by the Subsidiary to Decker (before applicable withholdings) pursuant to the Decker Agreement; provided, however, that the Decker Amount shall not include salary, bonus or vacation pay which are accrued as of that date and will be reflected on the Closing Balance Sheet (as herein defined) and taken into account in the determination of Working Capital (as herein defined); minus

        (f)    the aggregate amount (the "Dealy Amount") payable by the Subsidiary to John Dealy ("Dealy") (before applicable withholdings) pursuant to that certain Termination Agreement between the Subsidiary and Dealy, dated December 30, 2002; provided, however, that the Dealy Amount shall not include salary, bonus or vacation pay which are accrued as of that date and will be reflected on the Closing Balance Sheet (as herein defined) and taken into account in the determination of Working Capital (as herein defined).

The Purchase Price shall be allocated among Sellers as set forth in Exhibit B attached hereto, and shall be payable in the manner provided in Section 6. The amounts of Indebtedness, the Decker Amount, and the Dealy Amount shall be payable as provided in Section 14(d).

        3.    Working Capital Adjustment.    The Purchase Price will be (x) increased by an amount equal to the amount by which the Working Capital of the Company and the Subsidiary and set forth in the Closing Balance Sheet is greater than $2,817,000, or (y) reduced by the amount by which $2,817,000 exceeds the Working Capital, as the case may be. "Working Capital" shall mean the excess of the consolidated assets of the Company and the Subsidiary which are treated under those generally accepted accounting principles which were applied by the Company and the Subsidiary in the preparation of the Financial Statements, as herein defined ("GAAP") as current assets (exclusive of Cash Equivalents) over the consolidated liabilities of the Company and the Subsidiary which are treated under GAAP as current liabilities (exclusive of Indebtedness) determined in the manner set forth below. Exhibit C hereto reflects the methods which the parties intend will be employed in the computation of Working Capital, based upon the consolidated balance sheet of the Company and the Subsidiary as of September 30, 2002. The "Working Capital Adjustment" will be the amount by which the Purchase Price is increased or decreased pursuant to this Section 3.

        4.    Determination of Cash Equivalents, Indebtedness and Working Capital.    The amounts of Cash Equivalents, Indebtedness, Working Capital, and the Working Capital Adjustment, shall each be determined from a consolidated balance sheet of the Company and the Subsidiary as of 11:59 p.m. on the Business Day, as herein defined, immediately preceding the Closing Date (the "Closing Balance Sheet"). As used herein, "Business Day" shall mean any day other than a Saturday, Sunday or other day on which banks in Chicago Illinois or Los Angeles, California are required or authorized by law to close. The Closing Balance Sheet and the corresponding determination of Working Capital shall each be prepared by the Stockholders' Committee (as herein defined). The Closing Balance Sheet shall be prepared in accordance with the provisions of this Section 4, and otherwise in accordance with GAAP. Notwithstanding, or without limitation, as the case may be, of the foregoing: (i) reserves and accruals shall be determined as if the date of the Closing Balance Sheet was the last day of the Company's fiscal year; (ii) inventories shall be valued, using the first in, first out method of accounting, at the lower of cost or net realizable value; provided, however, that the Wenglor laser heads ("Wenglor Heads") shall be valued at cost; (iii) proceeds from the exercise of Options (as herein defined), to the extent not paid in cash by the holders of Options to the Company as of the date of the Closing Balance Sheet, shall be reflected on the Closing Balance Sheet as a Cash Equivalent; (iv) the accrual for Taxes shall exclude the effect of the Tax Savings; (v) Tax refund receivables in existence on the Closing Date (which shall not include the Tax Savings) shall be treated as current assets; (vi) the current portion of, and accrued interest in respect of Indebtedness shall be excluded; (vii) there shall be no accruals in respect of (v) the Options, (w) the Dealy Amount, or (x) the Decker Amount; (viii) capitalized software development costs shall be accounted for consistent with the Financial Statements; and (ix) the Working Capital calculation shall include (w) as a current liability, any amount payable on or after the Closing Date in respect of goods or services supplied to the

Company before the Closing Date (even if no invoice for such amount has been received by the Company or the Subsidiary before the Closing Date), (x) as a current asset, any inventory in transit to the Company or the Subsidiary, and any inventory in their possession on the Closing Date for which the Company or the Subsidiary has not received an invoice as of the Closing Date, and (y) as an account receivable, any sale of inventory which has been shipped by the Company or the Subsidiary before the Closing Date but not invoiced until on or after the Closing Date. Subject to Purchaser's compliance with the following sentence, the Stockholders' Committee shall cause the Closing Balance Sheet to be delivered to Purchaser not more than sixty (60) days following the Closing Date (the date on which the Closing Balance Sheet has been delivered, the "Delivery Date"). Purchaser shall make available to the Stockholders' Committee, during normal business hours, the books, records and personnel of the Company and the Subsidiary which the Stockholders' Committee reasonably requires in order to prepare and deliver the Closing Balance Sheet.

        5.    Disputes Regarding Closing Balance Sheet.    Disputes with respect to the Closing Balance Sheet shall be resolved as follows:

        (a)   Purchaser shall have thirty (30) days after the Delivery Date (the "Dispute Period") to dispute (i) any of the elements of or amounts reflected on the Closing Balance Sheet and affecting the calculation of the Purchase Price and/or (ii) the calculation of the Purchase Price (a "Dispute"). If Purchaser does not give written notice of a Dispute within the Dispute Period to Seller (a "Dispute Notice"), the Closing Balance Sheet shall be deemed to have been accepted and agreed to by Purchaser in the form in which it was delivered to Purchaser, and shall be final and binding upon the parties hereto. If Purchaser has a Dispute, Purchaser shall give the Stockholders' Committee a Dispute Notice within the Dispute Period, setting forth in reasonable detail the elements and amounts with which it disagrees. Within thirty (30) days after delivery of such Dispute Notice, the parties hereto shall attempt to resolve such Dispute and agree in writing upon the final content of the disputed Closing Balance Sheet.

        (b)   If Purchaser and the Stockholders' Committee are unable to resolve any Dispute within the thirty (30) day period after the Stockholders' Committee's receipt of a Dispute Notice, the Stockholders' Committee and Purchaser shall jointly engage as arbitrator (the "Arbitrating Accountant") a public accounting firm of national reputation, other than Deloitte & Touche LLP. If Purchaser and the Stockholders' Committee are unable to agree on the appointment of the Arbitrating Accountant, the Arbitrating Accountant shall be selected by agreement of the Stockholders' Committee's and Purchaser's respective accountants. In connection with the resolution of any Dispute, the Arbitrating Accountant shall have access to all documents, records, work papers, facilities and personnel necessary to perform its function as arbitrator. The Arbitrating Accountant's function shall be to conform the disputed elements or amounts set forth on the Closing Balance Sheet to the requirements of Sections 3 and 4 (as applicable).

        (c)   The Arbitrating Accountant shall allow Purchaser and the Stockholders' Committee to present their respective positions regarding the Dispute and shall thereafter as promptly as possible provide Purchaser and the Stockholders' Committee with a written determination of the Dispute, which shall be final and binding upon the parties hereto. In this regard, for each particular Dispute, the Arbitrating Accountant shall select either Purchaser's or the Stockholders' Committee's determination of the amount that is the subject of the Dispute based on its own assessment of whichever of the two parties' determinations more closely approximates the Arbitrating Accountant's own determination of such amount, and the Arbitrating Accountant may not substitute its own determination of the amount in dispute as the final determination of such amount. Upon the resolution of all Disputes, the Closing Balance Sheet shall be revised to reflect such resolution. The Arbitrating Accountant shall promptly, and in any event within sixty (60) calendar days after the date of its appointment, render its decision on the question in writing and finalize the Closing Balance Sheet. The

Arbitrating Accountant may, at its, discretion, conduct a conference concerning the Dispute, at which conference each party shall have the right to present additional documents, materials and other information and to have present its advisors, counsel and accountants. In connection with such process, there shall be no other hearings or any oral examinations, testimony, depositions, discovery or other similar proceedings.

        (d)   The party whose position in any Dispute is not accepted by the Arbitrating Accountant (in favor of the other party's position) shall bear all of the fees and expenses of the arbitration proceeding. Where more than one Dispute is considered in such arbitration proceeding and the Arbitrating Accountant finds in favor of each party on separate Disputes, the party which, in aggregating all of such Disputes, has the largest dollar amount determined against it by the Arbitrating Accountant (in favor of the other party) shall bear all of the fees and expenses of the arbitration proceeding. The Arbitrating Accountant may, in its discretion, also award to the party obligated to pay the fees and expenses of the arbitration proceeding in accordance with the preceding sentence the reasonable fees and expenses of the other party's legal, accounting and other professional advisors incurred in connection with such Dispute if it determines that such party's positions in connection with the Dispute were not taken in good faith.

        6.    Manner of Payment of Purchase Price.    The Purchase Price shall be paid or satisfied as follows:

        (a)   For purposes of the Closing, the parties have made a good-faith estimate of the Purchase Price, exclusive of the Tax Savings (the "Closing Estimate"), in the amount of $2,624,555.86, based upon the most recent ascertainable financial information of the Company and the Subsidiary. At the Closing:

        (i)    Purchaser shall pay to Bank One Trust Company, N.A., as escrowee (the "Escrowee"), for the account of the Stockholders' Committee, the sum of $1,000,000 (the "Escrow Deposit"), to be held by the Escrowee pursuant to, and in accordance with the terms of, an Escrow Agreement with Escrowee, in the form attached hereto as Exhibit D (the "Escrow Agreement"); and

        (ii)   Purchaser shall pay the balance of the Closing Estimate to or as directed by the Stockholders' Committee, for the benefit of Sellers, by wire transfer of immediately available funds to the Stockholders' Committee, made to such bank account as the Stockholders' Committee shall specify by written notice to Purchaser delivered before the Closing Date.

        (b)   Any increase in the Purchase Price over the Closing Estimate resulting from the finalization of the Closing Balance Sheet and the final determinations of the components of the Purchase Price (exclusive of the Tax Savings) shall be paid by wire transfer of immediately available funds by Purchaser within two Business Days following the final determination of the Purchase Price. Any decrease in the Purchase Price below the Closing Estimate resulting from the finalization of the Closing Balance Sheet and the final determinations of the components of the Purchase Price (exclusive of the Tax Savings) shall be paid by wire transfer of immediately available funds by the Stockholders' Committee within two Business Days following the final determination of the Purchase Price.

        (c)   Within five Business Days following the receipt of a federal income Tax refund which reflects the effects of the Tax Savings as a result of the filing of a federal income Tax return for the taxable period ending on the Closing Date in accordance with Section 14(e), Purchaser shall pay to the Stockholders' Committee 95% of the aggregate Tax Savings and to Decker 5% of the aggregate Tax Savings; provided, however, that if for any reason the Company is not allowed by the Internal Revenue Service ("IRS") to carry back the deductions resulting in the Tax Savings, there shall be no adjustment to the Purchase Price on account of the Tax Savings.

        (d)   Section 14(d) hereof deals with the manner of payment of the Decker Amount, the Dealy Amount and Indebtedness.

        7.    Time and Place of Closing.    The transaction contemplated by this Agreement shall be consummated (the "Closing") at 10:00 a.m., at the offices of Altheimer & Gray, 10 South Wacker, Suite 4000, Chicago, Illinois 60606 on the date hereof (the "Closing Date").

        8.    Representations and Warranties of Purchaser.    Purchaser represents and warrants to Sellers as follows:

        (a)    Corporate.    Purchaser is a corporation duly organized, existing and in good standing, under the laws of its state of incorporation.

        (b)    Power and Authority.    Purchaser has full corporate power and authority to enter into and perform this Agreement. The execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transaction contemplated hereby has been duly and validly approved by the board of directors of Purchaser; and no other corporate proceedings are necessary on the part of Purchaser to authorize the execution, delivery and performance of this Agreement by Purchaser and the consummation by Purchaser of the transaction contemplated hereby. This Agreement has been duly executed and delivered by Purchaser and constitutes a legal, valid and binding agreement of Purchaser, enforceable against Purchaser in accordance with its terms.

        (c)    Consents.    No consent, authorization, order or approval of, or filing or registration with, any governmental authority is required for or in connection with the consummation by Purchaser of the transaction contemplated hereby.

        (d)    Absence of Conflicts.    Neither the execution and delivery of this Agreement by Purchaser, nor the consummation by Purchaser of the transaction contemplated hereby, will conflict with or result in a breach of any of the terms, conditions or provisions of its Certificate of Incorporation or by-laws, or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or governmental authority or of any arbitration award. Purchaser is not a party to any unexpired, undischarged or unsatisfied written or oral contract, agreement, indenture, mortgage, debenture, note or other instrument under the terms of which performance by Purchaser according to the terms of this Agreement will be a default or an event of acceleration, or grounds for termination, or whereby timely performance by Purchaser according to the terms of this Agreement may be prohibited, prevented or delayed.

        (e)    Brokers.    Neither Purchaser, nor any of its Affiliates (as herein defined) has dealt with any Person (as herein defined) who is entitled to a broker's commission, finder's fee, investment banker's fee or similar payment from Sellers, the Company or the Subsidiary for arranging the transaction contemplated hereby or introducing the parties to each other. As used herein: (i) a "Person" means an individual, any type of business entity (including a corporation, joint-stock company, partnership or limited liability company), any other type of legal entity (including a trust), or any governmental agency or instrumentality; (ii) an "Affiliate" is any Person which controls another Person, which another Person controls, or which is under common control with another Person; and (iii) "Control" means the power, direct or indirect, to direct or cause the direction of the management and policies of a Person through voting securities, contract or otherwise.

        9.    Joint and Several Representations and Warranties of Sellers.    Sellers jointly and severally represent and warrant to Purchaser that, except as set forth in the schedule delivered by Sellers to Purchaser concurrently herewith and identified as the "Disclosure Schedule":

        (a)    Corporate.    The Company is a corporation duly organized, existing and in good standing under the laws of Illinois. The Company has qualified as a foreign corporation, and is in good standing, under the laws of all jurisdictions where the nature of its business or the

nature or location of its assets requires such qualification and where the failure to so qualify would have a Material Adverse Effect (as herein defined). For the purposes of this Agreement, "Material Adverse Effect" means a change in, or effect on, the operations, affairs, financial condition, results of operations, assets, or liabilities of the Company or the Subsidiary that results or would reasonably be expected to result in a material adverse effect on or a material adverse change in (i) the Business, or the Company and the Subsidiary (taken as a whole), (ii) the ability of Purchaser or any Seller to consummate the transactions contemplated in this Agreement, or (iii) Purchaser's ownership of the Shares and conduct of the Business after the Closing.

        (b)    Power and Authority.    The Company has all necessary corporate power and authority to own or lease all of its properties and assets and to carry on its business as such business is now being conducted.

        (c)    Consents.    No consent, authorization, order or approval of, or filing or registration with, any governmental authority is required for or in connection with the consummation by Sellers of the transaction contemplated hereby.

        (d)    Absence of Conflicts.    Neither the execution and delivery of this Agreement by Sellers, nor the consummation by Sellers of the transaction contemplated hereby, will conflict with or result in a breach of any of the terms, conditions or provisions of the Company's or the Subsidiary's Certificate of Incorporation or by-laws, or of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or governmental authority or of any arbitration award to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary is bound. Neither the Company nor the Subsidiary is a party to, or bound by, any unexpired, undischarged or unsatisfied Material Contract (as herein defined) under the terms of which performance by Sellers according to the terms of this Agreement will be a default or an event of acceleration, or grounds for termination, or whereby timely performance by Sellers of this Agreement may be prohibited, prevented or delayed.

        (e)    The Subsidiary.    The Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of Delaware, has all necessary corporate power and authority to own or lease all of its properties and assets and to carry on its business as such business is now being conducted, and is qualified as a foreign corporation and is in good standing in all jurisdictions where the nature of its business or the nature and location of its assets requires such qualification, and where the failure to so qualify would have a Material Adverse Effect. Other than the Subsidiary, the Company does not hold or beneficially own, and has never held or beneficially owned, any other direct or indirect interest (whether it be common or preferred stock or any comparable ownership interest in any Person that is not a corporation), or any subscriptions, options, warrants, rights, calls, convertible securities or other agreements or commitments for any interest, in any Person.

        (f)    Corporate Records.    True and complete copies of the Certificate of Incorporation and all amendments thereto, the by-laws as amended and currently in force, all stock records, and corporate minute books and records, of the Company and the Subsidiary, have been made available for inspection by Purchaser. Said stock records accurately reflect all Share transactions and the current stock ownership of the Company and the Subsidiary. The corporate minute books and records of the Company and the Subsidiary contain true and complete copies of all resolutions adopted by the stockholders or the board of directors of the Company and the Subsidiary.

        (g)    Capitalization

        (i)    The authorized capital stock of the Company consists of 1,000,000 shares of Class A common stock, $.001 par value, and 1,000,000 shares of Class B Common Stock, $.001 par value. The outstanding capital stock of the Company consists of 255,208 shares

of Class A common stock and 426,715 shares of Class B common stock. There are no shares of capital stock of the Company of any other class authorized, issued or outstanding. All of the issued and outstanding Shares have been validly issued, are fully paid and nonassessable, and are owned beneficially and of record by Sellers, free and clear of all Claims. The previously outstanding (x) options to purchase 28,783 shares of Class A common stock outstanding under the Company's 2001 Stock Option Plan and (y) Nonqualified Option to purchase 8,769 Shares of Class A Common Stock granted to Dealy, have been cancelled and are no longer outstanding. The warrants held by the Mass Mutual Entities (as herein defined) to purchase a total of 135,108 Shares have all been exercised in full, the former optionees and warrant holders are among the Sellers, and the underlying Shares are included in the Shares being sold to Purchaser pursuant to Section 1. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of the Company obligating the Company to issue any securities of any kind. As used herein, the "Mass Mutual Entities" consist of Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors and MassMutual Corporate Value Partners Limited.

        (ii)   The authorized capital stock of the Subsidary consists of 120,000 shares of Class A Common Stock, $.01 par value, of which 2,084 shares are issued and outstanding, and 12,999 shares of Class B Common Stock, $.01 par value, none of which are issued or outstanding. There are no shares of capital stock of the Subsidiary of any other class authorized, issued or outstanding. All of the issued and outstanding shares of capital stock of the Subsidiary have been validly issued, are fully paid and nonassessable, and are owned beneficially and of record by the Company, free and clear of any Claims. There are no outstanding subscriptions, options, warrants, rights (including preemptive rights), calls, convertible securities or other agreements or commitments of any character relating to the issued or unissued capital stock or other securities of the Subsidiary obligating the Subsidiary to issue any securities of any kind.

        (h)    Financial Statements.    Copies of the consolidated balance sheets, consolidated statements of income and retained earnings, consolidated statements of cash flows and notes to financial statements (together with any supplementary information thereto) of the Company and the Subsidiary as of and for the years ended June 30, 2002 and June 30, 2001, as audited by Altschuler, Melvoin & Glasser LLP, are contained in the Disclosure Schedule. Such financial statements described in the preceding sentence are referred to herein as the "Financial Statements". Copies of the consolidated balance sheet and consolidated statements of income and cash flows of the Company and the Subsidiary as of and for the four month period ended October 31, 2002 are also contained in the Disclosure Schedule. The financial statements described in the preceding sentence are referred to herein as the "Interim Financial Statements", and October 31, 2002 is referred to herein as the "Interim Financial Statement Date". The Financial Statements and the Interim Financial Statements present fairly, in all material respects, the consolidated financial position of the Company and the Subsidiary as of the dates thereof and the consolidated results of operations and cash flows of the Company and the Subsidiary for the periods covered by said statements, in accordance with GAAP consistently applied, except as disclosed therein, and, in the case of the Interim Financial Statements, except for (x) normal year-end adjustments and (y) the omission of footnote disclosures required by GAAP.

        (i)    Liabilities.    Neither the Company nor the Subsidiary has any obligation or liability of any nature whatsoever (direct or indirect, matured or unmatured, absolute, accrued, contingent or otherwise) (collectively, "Liabilities") except for: (i) Liabilities provided for or reserved against in the Financial Statements or the Interim Financial Statements and not discharged subsequent to the dates of the Financial Statements or the Interim Financial

Statement Date, all of which, to the extent not discharged as of the date immediately preceding the Closing Date, shall be provided for or reserved against in the Closing Balance Sheet to the extent required by GAAP; (ii) Liabilities which have been incurred by the Company and the Subsidiary subsequent to the Interim Financial Statement Date in the ordinary course of the Company's and the Subsidiary's respective businesses and not discharged since the Interim Financial Statement Date; (iii) Liabilities under the executory portion of any Material Contract by which the Company or the Subsidiary is bound and which was entered into in the ordinary course of the Company's and the Subsidiary's respective businesses; and (iv) Liabilities under the executory portion of Permits (as herein defined) and Environmental Permits (as herein defined) issued to, or entered into by, the Company or the Subsidiary in the ordinary course of business.

        (j)    Title to Assets.    The Company and the Subsidiary have good title to their respective assets, free and clear of any Claims, except for the following: (i) statutory liens for Taxes not yet due, (ii) statutory liens of landlords, carriers, warehousemen, mechanics and materialmen incurred in the ordinary course of business for sums not yet due; (iii) liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security or to secure the performance of tenders, statutory obligations, surety and appeal bonds, bids, leases, government contracts, performance and return of money bonds and similar obligations; (iv) minor irregularities of title which do not in the aggregate materially detract from the value or use of the Company's or the Subsidiary's respective assets, and (v) security interests securing the Indebtedness. The foregoing representation and warranty shall not apply to the Intellectual Property (as herein defined), which is dealt with exclusively in paragraph (w).

        (k)    Insurance.

        (i)    The Disclosure Schedule contains a true and correct list and description (including coverages, deductibles and expiration dates), and Sellers have made available to Purchaser copies, of all insurance policies which are owned by the Company or the Subsidiary or which name the Company or the Subsidiary as an insured (or loss payee), including without limitation those which pertain to the Company's and the Subsidiary's respective assets, business, employees and/or operations. All such insurance policies are in full force and effect and all premiums on such policies have been paid in full as and when due. Since December 31, 2000, neither the Company nor the Subsidiary has received from any insurance company (or other representative thereof) notice of (A) cancellation of any insurance policy (other than a cancellation requested by the Company or the Subsidiary), (B) any failure to comply with the terms of any policy, (C) any refusal of coverage (either in effect or applied for), or (D) a policy's issuer being unwilling or unable to perform its obligations under such policy. There have been no material changes in the Company's or the Subsidiary's insurance coverage since December 31, 2000. The Company's and the Subsidiary's insurance coverage is sufficient for compliance with all laws applicable to the Company, the Subsidiary, the Business and any insurance-related requirements under any Material Contract.

        (ii)   The Disclosure Schedule contains a description of (A) any self-insurance arrangement by or affecting the Company or the Subsidiary, including any reserves established thereunder, (B) any contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary is bound, or which involves the Business, and (C) each obligation of the Company or the Subsidiary to provide insurance coverage to any other Person, either directly or as an additional insured or loss payee under a Company or Subsidiary insurance policy, and identifies the policy under which such coverage is provided.

        (iii)  For each insurance policy insuring the Company or the Subsidiary that either is currently in effect or was in effect at any time since December 31, 2000, the Disclosure Schedule contains, for the current policy year and each of the five (5) preceding policy years, (A) a summary of the loss experience under each such policy, (B) a statement describing each claim under each such policy for an amount in excess of $10,000, which sets forth the name of the claimant, a description of the policy by insurer, type of insurance and period of coverage and the amount and a brief description of the claim, and (C) a statement describing the loss experience for all claims that were self-insured, including the number and aggregate cost of such claims.

        (iv)  Sellers have made available to Purchaser copies of any and all reports, correspondence and other documents containing statements by the auditor of the Company's or the Subsidiary's financial statements or by any consultant or risk management advisor since December 31, 2000 with regard to the adequacy of the Company's and the Subsidiary's insurance coverage and reserves for claims.

        (l)    Banking.    The Disclosure Schedule contains a list showing: (i) the name of each bank, safe deposit company or other financial institution in which the Company or the Subsidiary has an account, lock box or safe deposit box; (ii) the names of all Persons authorized to draw thereon or to have access thereto and the names of all Persons, if any, holding powers of attorney from the Company or the Subsidiary; and (iii) all instruments or agreements to which the Company or the Subsidiary is a party as an endorser, surety or guarantor, other than checks endorsed for collection or deposit in the ordinary course of business.

        (m)    Taxes.

        (i)    As used in this Agreement, the following terms shall have the following meanings: (A) "Taxes" means all federal, state, local, foreign and other income, sales, use, ad valorem, employment, transfer or other taxes, fees, assessments or charges of any kind, together with any interest and any penalties, with respect thereto, and the term "Tax" means any one of the foregoing Taxes; (B) "Returns" means all returns, declarations, reports, statements and other documents required to be filed in respect of Taxes, and the term "Return" means any one of the foregoing Returns; (C) "Code" means the Internal Revenue Code of 1986, as amended; and (D) "Taxing Authority" means all federal, state, local, foreign and other governmental authorities and agencies charged with collecting Taxes or administering Tax laws.

        (ii)   There have been filed on a timely basis all Returns required to be filed by the Company and the Subsidiary. No extension of time within which to file any such Return has been requested or granted. With respect to all amounts in respect of Taxes imposed upon the Company or the Subsidiary, or for which the Company or the Subsidiary is liable to taxing authorities, with respect to all taxable periods or portions of periods ending on or before the Closing Date, all applicable Tax laws have been complied with, and all amounts required to be paid by the Company or the Subsidiary (as the case may be) to Taxing Authorities on or before the date hereof have been paid. No issues have been raised (and are currently pending) by any Taxing Authority in connection with any of the Returns. No waivers of statutes of limitation with respect to the Returns have been given by or requested from the Company or the Subsidiary. All deficiencies asserted or assessments made as a result of any examinations of Returns previously filed by the Company or the Subsidiary have been fully paid, or are fully reflected as a liability in the Financial Statements and the Interim Financial Statements, or are being contested and an adequate reserve therefor has been established and is fully reflected as a liability in the Financial Statements and the Interim Financial Statements. The Disclosure Schedule lists each Return that has been audited or is currently the subject of an audit or reassessment by a Taxing Authority or is currently being contested by any Taxing Authority.

        (iii)  Neither the Company nor the Subsidiary is a party to or bound by any Tax indemnity, Tax sharing or Tax allocation agreement.

        (iv)  Neither the Company nor the Subsidiary: (A) has filed a consent pursuant to the collapsible corporation provisions of section 341(f) of the Code (or any corresponding provision of state, local or foreign income Tax law) or agreed to have section 341(f)(2) of the Code (or any corresponding provision of state, local or foreign income Tax law) apply to any disposition of any asset owned by it; (B) has agreed to make, nor is either of them required to make, any adjustment under section 481(a) of the Code by reason of a change in accounting method or otherwise; (C) is a party to any agreement, contract, arrangement or plan that has resulted or would result, separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of section 280G of the Code; (D) has made a deemed dividend election under Regulations Section 1.1502-32(f)(2) or a consent dividend election under section 565 of the Code; (E) has been a United States real property holding corporation (as defined in section 897(c)(2) of the Code) during the applicable period specified in section 897(c)(1)(A)(ii) of the Code; (F) has had a permanent establishment in any foreign country, as defined in any applicable Tax treaty or convention between the United States and such foreign country; or (G) has entered into any agreement that would result in an amount that will not be deductible as a result of section 162(m) of the Code.

        (v)   None of the assets of the Company or the Subsidiary (A) is "tax-exempt use property" within the meaning of Section 168(h) of the Code, or (B) secures any debt the interest on which is tax-exempt under section 103(a) of the Code.

        (vi)  None of Sellers is a Person other than a United States person within the meaning of the Code and the transaction contemplated hereby is not subject to the withholding provisions of section 3406 or subchapter A of Chapter 3 of the Code.

        (vii) The Company and the Subsidiary have each withheld and paid over all Taxes required to have been withheld and paid over in connection with amounts paid or owing to any director, officer, employee, independent contractor, creditor, stockholder or other Person.

        (viii) Neither the Company nor the Subsidiary will be required to include any item of income in, or exclude any item of deduction from, taxable income for any taxable period (or portion thereof) ending on or after the Closing Date as a result of any: (A) change in method of accounting for a taxable period ending prior to the Closing Date; (B) "closing agreement" as described in section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law) executed prior to the Closing Date; (C) inter-company transaction or any excess loss account described in Treasury Regulations under section 1502 of the Code (or any corresponding or similar provision of state, local or foreign income Tax law); (D) installment sale or open transaction disposition made prior to the Closing Date; or (E) prepaid amount received prior to the Closing Date.

        (n)    Conduct of Business.    Since the Interim Financial Statement Date, neither the Company nor the Subsidiary has: (i) sold or transferred any portion of its assets or property having a value in excess of $10,000 individually or $25,000 in the aggregate, except for sales of its inventory and transfers of cash in payment of trade payables, all in the usual and ordinary course of business, and except as permitted by this Agreement; (ii) suffered any material loss, or any material interruption in use, of any material assets or property (whether or not covered by insurance), on account of fire, flood, riot, strike, theft, willful misconduct, accident or other hazard or Act of God; (iii) suffered any material adverse change to its business, other than changes affecting the Company's and the Subsidiary's industry generally; (iv) waived any material right; (v) paid or declared any dividends or other distributions on its securities of any class or purchased or redeemed any of its securities of any class; (vi) increased the

compensation payable to any officer or employee, other than in the ordinary course of business consistent with past practices; (vii) made any change in accounting principles, methods or practices or in the manner in which it keeps its books and records, or any change in its practices with regard to sales, receivables, payables or accrued expenses; (viii) without limitation by the enumeration of any of the foregoing, entered into any material transaction other than in the usual and ordinary course of business (the foregoing representation and warranty shall not be deemed to be breached by virtue of the entry by Sellers into this Agreement or their consummation of the transaction contemplated hereby); or (ix) entered into any negotiation, commitment or agreement to do any of the foregoing.

        (o)    Contracts.

        (i)    The Disclosure Schedule lists and describes all Material Contracts to which the Company or the Subsidiary is a party or is bound. All Material Contracts are in full force and binding upon the Company or the Subsidiary (as the case may be), and, to Sellers' knowledge, the other parties thereto. No material default by the Company or the Subsidiary has occurred thereunder, and, to Sellers' knowledge, no material default by the other contracting parties has occurred thereunder. To Sellers' knowledge, no event, occurrence or condition exists which, with the lapse of time, the giving of notice, or both, or the happening of any further event or condition, would become a default by the Company or the Subsidiary thereunder. Complete and accurate copies of all Material Contracts (including any amendments or supplements thereto) have previously been made available to Purchaser.

        (ii)   For purposes of this Agreement, "Material Contracts" shall mean the following oral or written instruments with respect to the Company, the Subsidiary or the Business which, as of the Closing Date, have not been fully performed or which otherwise contain terms (including, without limitation, warranty (other than normal product warranty) and indemnification terms): (A) customer and/or vendor purchase orders and purchase contracts in excess of $25,000 each; (B) contracts for capital expenditures in excess of $25,000 each; (C) agreements or arrangements regarding confidentiality, non-competition (exclusive of confidentiality agreements related to the proposed sale of the Company), (D) loan agreements; notes and security agreements; (E) employment and employment-related agreements, consulting agreements and nonsolicitation of employees agreements; (F) collective bargaining agreements; (G) leases and subleases of the Leased Real Property (as herein defined), and any other agreements relating to the Leased Real Property; (H) leases and subleases of personal property and installment purchase agreements with respect to personal property, where the annual payments thereunder exceed $25,000 or which cannot be canceled by the Company or the Subsidiary without payment or penalty upon notice of sixty (60) days or less; (I) license agreements; (J) warranties and service plans for major equipment (including all vehicles); (K) performance bonds, completion bonds, bid bonds, suretyship agreements and similar instruments and agreements; (L) any stockholder agreement between the Company and Sellers (or any of them), whether or not such agreement terminates at the Closing; and (M) and all other agreements or arrangements (oral or written) to which the Company or the Subsidiary is a party or by which the Company or the Subsidiary or any of its respective assets is bound and which have a notice for termination period of more than six (6) months or obligate any party thereto to make an annual payment of more than $25,000 or total payments of more than $100,000 during the term of such agreement or arrangement.

        (iii)  The management services letter agreement dated March 10, 2001 between Crowe, Chizek & Co., LLP, (the "Accountants") and the Subsidiary has been terminated. The Subsidiary has fully performed all of its covenants and obligations thereunder, except for its obligation to pay for current services which will be due and owing and which will be accrued on the Closing Balance Sheet and taken into account in the Working Capital

calculation. There are no disputes pending, or to Sellers' knowledge, threatened with respect to or in connection with such agreement.

        (p)    Permits.    The Company and the Subsidiary possess all licenses, permits, registrations and government approvals (the "Permits") (other than Environmental Permits (as defined herein), which are exclusively provided for in Section 9(u)) which are required in order for the Company and the Subsidiary to conduct their respective business as presently conducted, except for permits of immaterial significance which can be obtained for nominal filing fees. All Permits issued to the Company or the Subsidiary are described in the Disclosure Schedule, and copies thereof have been made available to Purchaser. No Permit will be terminated, cancelled or revoked or become terminable, cancelable or revocable or otherwise impaired in any respect as a result of the consummation of the transaction contemplated hereby. Any notice, other filing or other registration required to be made by the Company, either Subsidiary or Purchaser with any governmental authority in connection with Purchaser's acquisition of the Shares in order to protect and maintain the effectiveness of any Permit is described in the Disclosure Schedule.

        (q)    Benefit Plans

        (i)    Neither the Company nor any affiliate of the Company as determined under Code section 414(b), (c), (m) or (o) ("ERISA Affiliate") maintains, administers or contributes to any: (A) employee pension benefit plan (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) ("Plan"); (B) employee welfare benefit plan (as defined in Section 3(1) of ERISA) ("Welfare Plan"); or (C) bonus, deferred compensation, stock purchase, stock option, severance, salary continuation, vacation, sick leave, fringe benefit, incentive, insurance, welfare or similar plan or arrangement ("Employee Benefit Plan") other than those Plans, Welfare Plans and Employee Benefit Plans described in the Disclosure Schedule (collectively, the "Benefit Plans"). Except as required by section 4980B of the Code, Part 6 of Subtitle B of Title I of ERISA or applicable state law, neither the Company nor any ERISA Affiliate has promised any former employee or other individual not employed by the Company or any ERISA Affiliate medical or life insurance coverage and neither the Company nor any ERISA Affiliate maintains or contributes to any plan or arrangement providing medical or life insurance benefits to former employees or their dependents, other than benefits provided in the event of disability and conversion privileges. None of the Benefit Plans is subject to Title IV of ERISA ("Title IV Plan") and since January 1, 1995 neither the Company nor the Subsidiary nor any of their respective ERISA Affiliates has ever had any obligation (contingent or otherwise) with respect to any Title IV Plan.

        (ii)   With respect to each Benefit Plan: (A) it complies, in form and operation, in all material respects, with all applicable statutes, laws and regulations, including ERISA and the Code; (B) if it is intended to be a funded Benefit Plan, the funds available thereunder equal or exceed the amounts required to be paid, or which would be required to be paid, if such Benefit Plan were terminated as of the Closing Date; (C) if it is intended to qualify under section 401(a) of the Code, (i) it meets in all material respects all requirements for qualification under that section and the regulations thereunder, and (ii) a favorable determination as to its qualification under the Code has been made by the IRS, and Sellers have made available to Purchaser a copy of the most recent favorable determination letter issued by the IRS concerning its qualification; (D) it has been administered in all material respects in accordance with its terms and the applicable provisions of ERISA and the Code and the regulations thereunder and, to Sellers' knowledge, no matter exists which would adversely affect its qualified tax-exempt status and that of any related trust; (E) all material reports and information (i) required to be filed with any governmental entity have been timely filed and are accurate in all material respects, or (ii) required to be disclosed or provided to participants or their beneficiaries have been timely disclosed or provided; (F) to Sellers' knowledge, no fiduciary thereof

has committed a breach of any responsibility or obligation imposed upon fiduciaries under Title I of ERISA; (G) there has been made available to Purchaser, copies of the following: (i) the annual report (if required under ERISA) for the last three years (including all schedules and attachments); (ii) the summary plan description, together with each summary of material modifications, required under ERISA; (iii) such Benefit Plan (including any amendments thereto), and all trust agreements, insurance contracts, accounts or other documents which establish the funding vehicle for it, (iv) the latest financial statements thereof; (v) any investment management agreements, administrative services contracts, or other agreements and documents relating to its ongoing administration and investment activities; and (vi) all correspondence with the IRS or the Pension Benefit Guaranty Corporation with respect thereto.

        (iii)  There are no actions, suits, proceedings, investigations or hearings pending with respect to any Benefit Plan, or to Sellers' knowledge any claims (other than claims for benefits arising in the ordinary course of any Benefit Plan) threatened against or with respect to any Benefit Plan or any fiduciary or assets thereof.

        (iv)  Each Welfare Plan which is a group health plan (within the meaning of section 5000(b)(1) of the Code) complies in all material respects with and has been maintained and operated in all material respects in accordance with each of the requirements of section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA.

        (v)   Neither any Benefit Plan fiduciary nor any Benefit Plan has engaged in any transaction in violation of Section 406 of ERISA or any "prohibited transaction" (as defined in section 4975(c)(l) of the Code) and there has been no "reportable event" (as defined in Section 4043 of ERISA), "nondeductible contribution" (as such term is defined in Section 4972 of the Code) or "accumulated funding deficiency" (as such term is used in section 412 or 4971 of the Code) with respect to any Benefit Plan. Neither the Company nor any ERISA Affiliate has failed to make any contributions or to pay any amounts (including employee deferrals) due and owing as required by the terms of any Benefit Plan, collective bargaining agreement, or ERISA or any other applicable law. Full payment has been made of all amounts which the Company or any ERISA Affiliate is required or committed to pay to the Benefit Plans as of the Interim Financial Statement Date, and all such contributions have been and are deductible for federal income Tax purposes, and no such contributions or deductions have been challenged or disallowed by the IRS or any other governmental authority.

        (vi)  Neither the Company nor the Subsidiary has any announced plan or legally binding commitment to create any additional Benefit Plan or to amend or modify any existing Benefit Plan.

        (vii) Neither the execution, delivery or performance of this Agreement nor the consummation of the transaction contemplated hereby will (either alone or in combination with another event): (A) result in any payment becoming due, or increase the amount of compensation due, to any current or former employee of the Company or the Subsidiary; (B) increase any benefits payable under any Benefit Plan, or (iii) result in any acceleration of the time of payment or vesting of any such compensation or benefits, other than acceleration of vesting of the Options.

        (viii) Neither the Company nor the Subsidiary has participated in or contributed to any multiemployer plan (as defined in Section 3(37) of ERISA).

        (ix)  If any obligation or liability incurred with respect to any Welfare Plan is fully insured by an insurance policy, (A) there will be no material liability of the Company, the Subsidiary or the Purchaser in the nature of a retroactive or retrospective rate adjustment, loss sharing arrangement, or other actual or contingent liability as of the Closing Date, nor would there be any such liability if such insurance policy were

terminated on the Closing Date, (B) each such insurance policy may be terminated by the Company or the Subsidiary without penalty upon no more than thirty (30) days' notice and without causing the Company or the Subsidiary to incur any additional liability, and (C) no insurance company issuing any such policy is in receivership, conservatorship, liquidation, or similar proceeding and, to the knowledge of Sellers, no such proceedings with respect to any insurer pending or threatened.

        (r)    Employees.    With respect to employees of the Company or the Subsidiary:

        (i)    Neither the Company nor the Subsidiary is a party to a collective bargaining agreement. There has not been, there is not presently pending or existing, and, to Sellers' knowledge, there is not threatened: (A) any strike, slowdown, picketing, work stoppage or employee grievance process; (B) any material charge, grievance proceeding or other claim against or affecting the Company or the Subsidiary (or any director, officer or employee thereof) relating to the alleged violation of any law pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission or any comparable governmental authority; (C) any union or other employee association organizational activity or other labor or employment dispute against or affecting the Company or the Subsidiary; or (D) any application for certification of a collective bargaining agent.

        (ii)   To Sellers' knowledge, no event has occurred or circumstances exist that could provide the basis for any work stoppage or other labor dispute with respect to the Company or the Subsidiary. There is no lockout of any employees of the Company or the Subsidiary currently in effect and no such action is contemplated by the Company or the Subsidiary.

        (iii)  Sellers have provided to Purchaser a detailed list of the employees of the Company and the Subsidiary as of a date no less recent than December 20, 2002 containing at least the following details for each such employee: (A) name; (B) part-time or full-time status, (C) title and/or job description, (D) employment commencement date, (E) salary or wage, (F) available bonus or other contingent compensation; (G) accrued and unused vacation days; (H) accrued and unused sick days, (I) Benefit Plan participation details, (J) if on leave, the status of such leave (including reason for leave and expected return date), and (K) details of any disciplinary problems.

        (iv)  Each employee's employment can be terminated by the Company or the Subsidiary upon not more than thirty (30) days' notice without severance, penalty or premium, other than (x) severance provided for in the Company's or the Subsidiary's personnel policies, and (y) accrued salaries, wages and vacation benefits.

        (v)   All salaries, wages and other compensation and benefits payable to each employee have been paid by the Company or the Subsidiary when due for all periods through the date hereof, and, as of the Closing Date, will have been paid by the Company or the Subsidiary when due for all periods through the Closing Date, other than with respect to any stub period existing between the Closing Date and the last scheduled payday immediately preceding the Closing Date.

        (s)    Litigation and Claims.    There is no claim, action, litigation or proceeding (whether in mediation, arbitration or before any court of competent jurisdiction), in law or in equity, underway, pending or, to the knowledge of Sellers, threatened, against or by or with respect to the Company, the Subsidiary, the Business, any assets of the Company or the Subsidiary or any of the Shares or which seeks to enjoin or rescind any part of the transaction contemplated by this Agreement. There are no proceedings or governmental investigations before any commission or other administrative authority, pending or, to the Sellers' knowledge, overtly threatened against the Company, the Subsidiary or any of the Company's or the Subsidiary's

officers, directors or Affiliates, with respect to or affecting the Company's or the Subsidiary's assets, operations, business, products sales practices or financial condition, or with respect to the consummation of the transaction contemplated hereby. Neither the Company nor the Subsidiary is a party to, or bound by, any decree, order, injunction, settlement agreement or arbitration decision or award (or agreement entered into in any administrative, judicial or arbitration proceeding with any governmental authority) with respect to or affecting the properties, assets, personnel or business activities of the Company or the Subsidiary.

        (t)    Compliance with Law.    Except for laws, rules and regulations relating to the environment (which are exclusively provided for in Section 9(u) hereof), neither the Company nor the Subsidiary is in violation in any material respect of, or delinquent in any material respect in respect to, any decree, order or arbitration award or law, statute, or regulation of or agreement with, or any Permit from, any Federal, state or local governmental authority to which the property, assets, personnel or business activities of the Company or the Subsidiary are subject, including, without limitation, federal, state or local laws, statutes and regulations relating to equal employment opportunities, fair employment practices, occupational health and safety, wages and hours, and discrimination.

        (u)    Environmental Matters.

        (i)    The Company and the Subsidiary are in full compliance with all applicable Environmental Laws (as herein defined) and Environmental Permits (as herein defined). The Company and the Subsidiary possess all Environmental Permits which are required for the operation of their respective businesses. The Disclosure Schedule contains a complete list of all Environmental Permits issued to the Company or the Subsidiary. Neither the Company nor the Subsidiary has received any written communication alleging that the Company or the Subsidiary currently is not or was not since January 1, 1995, in compliance with applicable Environmental Laws or Environmental Permits. There is no Environmental Claim (as herein defined) pending or, to Sellers' knowledge, threatened, against the Company or the Subsidiary. No Facility (as herein defined) that is or has been owned, leased, occupied or used by the Company or the Subsidiary is currently listed on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA") or any comparable state list. Neither the Company nor the Subsidiary has received any written notice from any Person with respect to any Off-Site Facility (as herein defined), of potential or actual liability or a written request for information from any Person under or relating to CERCLA or any comparable state or local law. There are no and has not been any Hazardous Substances used, generated, treated, stored, transported, disposed of, handled or otherwise existing on, under or about any Facility owned, leased, operated or used by the Company or the Subsidiary as a result of the operations of the Company or the Subsidiary, or otherwise as permitted by or known to the Company or the Subsidiary, in any such case in violation of Environmental Laws. There are no above-ground storage tanks or, to Sellers' knowledge, underground storage tanks, located on any real property presently owned, leased, operated or used by the Company or the Subsidiary.

        (ii)   For the purposes of this Agreement: (A) "Environmental Claim" shall mean any and all civil, administrative, regulatory or judicial or quasi-judicial actions, suits, demands, demand letters, directives, claims, liens, investigations, proceedings or notices of noncompliance or violation (written or oral) by any Person alleging potential liability (including potential liability for enforcement, investigatory costs, cleanup costs, governmental response costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries or penalties) arising out of, based on or resulting from: (i) the presence, or release into the environment, of any Hazardous Substance at any location, whether or not owned by the Company or the Subsidiary; or

(ii) circumstances forming the basis of any violation or alleged violation, of any Environmental Law; or (iii) any and all claims by any Person seeking damages, contribution, indemnification, cost recovery, compensation or injunctive relief resulting from the presence or Release of any Hazardous Substances; (B) "Environmental Laws" shall mean all federal, state or local statutes, laws, rules, ordinances, codes, rule of common law, regulations, judgments and orders in effect on the Closing Date and relating to protection of human health or the environment (including ambient air, surface water, ground water, drinking water, wildlife, plants, land surface or subsurface strata), including laws and regulations relating to Releases or threatened Releases of Hazardous Substances, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances; (C) "Environmental Permits" shall mean all environmental, health and safety permits, licenses, registrations, and governmental approvals and authorizations; (D) "Facility" means any facility as defined in CERCLA; (E) "Hazardous Substances" shall mean: (i) any petroleum or petroleum products, radioactive materials, asbestos in any form, urea formaldehyde foam insulation, transformers or other equipment that contain dielectric fluid containing regulated levels of polychlorinated biphenyls (PCBs) and radon gas; and (ii) any chemicals, materials or substances which are now or ever have been defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or other words of similar import, under any Environmental Law; (E) "Offsite Facility" shall mean any Facility which is not presently, and never has been, owned, leased or occupied by the Company or the Subsidiary; and (F) "Release" shall mean any release, spill, emission, emptying, leaking, injection, deposit, disposal, discharge, dispersal, leaching, pumping, pouring, or migration into the atmosphere, soil, surface water, groundwater or property.

        (iii)  Sellers have made available to Purchaser all environmental documents, studies and reports relating to (x) the Leased Real Property and any other real property leased, operated, occupied or used by the Company or either Subsidiary, either presently or in the past, or (y) any liability of the Company or the Subsidiary under any Environmental Laws.

        (v)    Real Property.    Neither the Company nor the Subsidiary owns or has ever owned any real property, and neither of them occupies any real property other than the leased real property identified in the Disclosure Schedule (the "Leased Real Property"). The Disclosure Schedule accurately sets forth the street address and legal description of the Leased Real Property. The Leased Real Property: (i) constitutes all real property and improvements leased or used by the Company or the Subsidiary in the conduct of the Business; (ii) to Sellers' knowledge, is not in possession of any adverse possessors; (iii) is not subject to any leases or tenancies of any kind (except for the Subsidiary's lease); and (iv) is, and has been since the date of possession thereof by the Subsidiary, in the peaceful possession of the Subsidiary. There are no challenges or appeals pending regarding the amount of the real estate Taxes on, or the assessed valuation of, the Leased Real Property brought by the Company or the Subsidiary, and no special arrangements or agreements entered into by the Company or the Subsidiary exist with any governmental authority with respect thereto (the representations and warranties contained in this sentence shall not be deemed to be breached by any prospective general increase in real estate Tax rates). There are no condemnation proceedings pending or, to Sellers' knowledge, threatened with respect to any portion of the Leased Real Property. There is no tax assessment (in addition to the normal, annual general real estate Tax assessment) pending or, to Sellers' knowledge, threatened with respect to any portion of the Leased Real Property. The Company's and/or the Subsidiary's use of the Leased Real Property for the various purposes for which it is used is permitted as of right under all applicable zoning requirements and is not subject to permitted nonconforming use or structure classifications.

        (w)    Personal Property.    The machinery and equipment of the Company and the Subsidiary are, in the aggregate, in good working order and condition, ordinary wear and tear excepted.

        (x)    Intellectual Property.

        (i)    The Company or the Subsidiary (as indicated in the Disclosure Schedule) is the owner of or has exclusive rights to use all of the Intellectual Property (as herein defined). The Disclosure Schedule: (A) sets forth a complete and accurate list of all U.S. and foreign copyright registrations, copyright applications, patents and patent applications, trademark and service mark registrations (including Internet domain name registrations), trademark and service mark applications and material unregistered trademarks and service marks included within the Intellectual Property (noting jurisdiction of registration or application, and registration or application numbers); (B) lists all Software (as herein defined) which is owned ("Proprietary Software") or licensed, leased or otherwise used by the Company or the Subsidiary (other than "off-the-shelf" Software), and identifies which Software is owned, licensed, leased or otherwise used, as the case may be; and (C) sets forth a complete and accurate list of all agreements (other than agreements with respect to "off-the-shelf" Software) between the Company or the Subsidiary, on the one hand, and any Person, on the other hand, granting any right to use or practice any rights under any of the Intellectual Property owned either by the Company or the Subsidiary or by any other Person (collectively, "Intellectual Property Licenses").

        (ii)   The Company or the Subsidiary (as the case may be) have a practice of requiring all employees who have access to confidential information, or who may be involved in the invention or development of Intellectual Property, to execute agreements requiring such employees to agree to preserve the confidentiality of such confidential information and to assign to the Company or the Subsidiary their rights, if any, in such Intellectual Property. All present and former employees who, in the course of performance of their duties have access to confidential information or who may be involved in the invention or development of Intellectual Property, and, to Sellers' knowledge, substantially all of the other present and former employees of the Company or the Subsidiary, have executed such agreements.

        (iii)  To Sellers' knowledge: (A) the conduct of the Company's and the Subsidiary's respective businesses and the exercise of their respective rights relating to their Intellectual Property does not infringe upon or otherwise violate, Intellectual Property rights of any Person; and (B) no Person is infringing upon or otherwise violating any of the Intellectual Property. Neither the Company nor the Subsidiary has received notice of any threatened claims, and, to Sellers' knowledge, there are no pending claims, of any Persons relating to the scope, ownership or use of any of the Intellectual Property.

        (iv)  Neither the Company nor the Subsidiary has licensed or sublicensed its rights in any of their Intellectual Property or received or granted any such rights, other than pursuant to Intellectual Property Licenses.

        (v)   All Proprietary Software set forth in the Disclosure Schedule was either developed: (A) by employees of the Company or the Subsidiary within the scope of their employment; or (B) by independent contractors who have assigned their right to the Company or the Subsidiary pursuant to written agreements.

        (vi)  All patents, trademarks and copyrights (registered and unregistered) included in the Company's and the Subsidiary's Intellectual Property are currently in material compliance with formal legal requirements (including, in respect of patents, payment of filing, examination and maintenance fees and proofs of working or use, and, in respect of trademarks, the timely post-registration filing of affidavits of use and incontestability and renewal applications), and are not subject to any maintenance fees or Taxes or actions

falling due within ninety (90) days after the Closing Date. To Sellers' knowledge, all patents, trademarks and copyrights included in the Company's and the Subsidiary's Intellectual Property are valid and enforceable. No patent included in such Intellectual Property has been or is now involved in, or has been or is the subject of, any interference, reissue, reexamination or opposition proceeding, and, to Sellers' knowledge, (i) no such proceeding is pending or threatened, and (ii) there is no potentially interfering patent or patent application of any Person. No trademark included in such Intellectual Property has been or is now involved in, or has been or is the subject of, any opposition, invalidation, or cancellation proceeding and, to Sellers' knowledge, (i) no such proceeding is pending or threatened, and (ii) there is no potentially interfering trademark or trademark application of any Person. All products made, used or sold under any patent included in the Intellectual Property of the Company and the Subsidiary have been marked with the proper patent notice. All products made, used or sold that contain a trademark included in the Company's or the Subsidiary' s Intellectual Property bear the proper federal registration notice with respect to such trademark where permitted by law. All products or other works encompassed by any copyright included in the Company's or the Subsidiary's Intellectual Property have been marked with the proper copyright notice.

        (vii) With respect to each trade secret included in the Intellectual Property, the Company and the Subsidiary have taken reasonable precautions to protect the secrecy, confidentiality and value of all trade secrets included in the Intellectual Property. No trade secret included in the Intellectual Property is subject to any adverse claim or has been challenged or threatened in any way.

        (viii) With respect to Internet web sites and domain names used by the Company or the Subsidiary, (i) all such sites and domain names have been registered in the name of the Company or the Subsidiary and are in compliance with all formal legal requirements, (ii) no such site or domain name has been or is now involved in, or has been or is the subject of, any dispute, opposition, invalidation or cancellation proceeding and, to Sellers' knowledge, no such proceeding is pending or threatened, (iii) to Sellers' knowledge, there is no domain name application pending of any Person which would or could potentially interfere with or infringe any Company or Subsidiary domain name, and (iv) no Company or Subsidiary web site or domain name has been challenged, interfered with or threatened in any way or, to Sellers' knowledge, infringes, interferes with or is alleged to interfere with or infringe the trademark, copyright or domain name of any other Person.

        (ix)  As used herein: (A) "Intellectual Property" means all intellectual property rights, including, without limitation, all patents, trademarks, designs, service marks, copyrights, Internet domain names and web sites, trade or business names, trade dress and slogans (and all registrations of any of the foregoing, and all applications for registration thereof), discoveries, inventions, ideas, concepts, technology, know-how, trade secrets, processes, formulas, drawings, designs, Proprietary Software, license rights and all goodwill associated-with such intellectual property rights; and (B) "Software" means any and all (i) computer programs, including any and all software implementation of algorithms, models and methodologies whether in source code or object code, (ii) databases and computations, including any and all data and collections of data, (iii) all documentation, including user manuals and training materials, relating to any of the foregoing, and (iv) the content and information contained in any Internet web site.

        (y)    Inventories.    The inventories of the Company and the Subsidiary consist of items of merchantable quality and quantity usable or salable in the ordinary course of business, and are salable at prevailing market prices for not less than the book value amounts thereof, and are not obsolete, damaged, slow-moving or defective, except, in each case to the extent such inventories have been written down to their net realizable value on the Financial Statements or the Interim Financial Statements. The Company's and the Subsidiary's current inventories have been purchased and maintained in amounts and of types and characters consistent with

past practices and the reasonable requirements of the Business and the operations of the Company and the Subsidiary. As of November 30, 2002 the Company and the Subsidiary had a combined backlog of customer product orders, the aggregate value of which was not less than $871,000.

        (z)    Accounts Receivable.    All accounts receivable of the Company and the Subsidiary are reflected properly in the books and records of the Company or the Subsidiary and represent valid and enforceable obligations arising from bona fide transactions in the ordinary course of business. Such accounts receivable are subject to no defenses, claims or rights of setoff, and are fully collectible in the ordinary course of business without cost in collection efforts therefor, except to the extent of the reserve for uncollectible accounts reflected in the Financial Statements and the Interim Financial Statements. The Disclosure Schedule contains all details of (i) any account debtor that is delinquent in its payment by more than sixty (60) days, (ii) any account debtor that has refused or threatened to refuse to pay its obligations for any reason, (iii) any account debtor that is, to the knowledge of Sellers', insolvent or bankrupt, and (iv) any account receivable that has been factored to any Person.

        (aa)    Accounts Payable.    The Company and the Subsidiary have satisfied, paid and discharged their accounts payable and other current liabilities and obligations in a timely manner, except when in bona fide dispute. Any and all such bona fide disputes that are currently unresolved are described in the Disclosure Schedule.

        (bb)    Sufficiency of Assets.    The real property, plants, equipment and intangible personal property of the Company and the Subsidiary constitute all of the assets necessary for the continued conduct of the Business after the Closing in substantially the same manner as presently being conducted.

        (cc)    Transactions With Related Parties.    No director, officer or employee of the Company or the Subsidiary, nor any stockholder of the Company (or any family member of any such director, officer, employee or stockholder) (collectively, "Related Parties") now has or at any time since January 1, 1998, either directly or indirectly, had any ownership or other interest in (i) any Person which furnishes or sells or during such period furnished or sold services or products to the Company or the Subsidiary, or purchases or during such period purchased from the Company or the Subsidiary any goods or services, or otherwise does or during such period did business with the Company or the Subsidiary, or (ii) any contract, commitment or agreement to which the Company or the Subsidiary is or during such period was a party or under which it is or during such period was obligated or bound or to which any of its assets may be or during such period may have been subject. No Related Party owns any asset (including, without limitation, any Intellectual Property), which is used in the conduct of the Business.

        (dd)    Product Liability.

        (i)    There has not been, and there is not presently, any action, suit, inquiry, proceeding or, to the knowledge of Sellers', investigation by or before any court of competent jurisdiction or governmental authority pending or, to the knowledge of Sellers, threatened against or involving the Company, the Subsidiary or the Business relating to any product alleged to have been manufactured, procured, marketed or sold by the Company or the Subsidiary and alleged to have been defective, unsafe or improperly designed or manufactured.

        (ii)   There has not been any product recall, or post-sale warning or similar action conducted with respect to any product manufactured, procured, marketed or sold by the Company or the Subsidiary, or, to the knowledge of Sellers, any investigation or consideration of whether or not to undertake or give any such recall, warning or notice. Neither the Company nor the Subsidiary has received any written notice of any statement, citation or decision by any governmental authority stating that any product manufactured, procured, marketed or sold by the Company or the Subsidiary is defective or unsafe or fails to meet any standards promulgated by such governmental authority, or has received written notice of any recall, warning or notice ordered by any such governmental authority, nor, to Sellers' knowledge, is there any valid basis for notice of any such action.

        (ee)    Compliance With Foreign Corrupt Practices Act and Export Control and Anti-Boycott Laws.

        (i)    Neither the Company nor the Subsidiary has, and no Seller has on the Company's or the Subsidiary's behalf, to obtain, facilitate or retain business, directly or indirectly, offered, paid or promised to pay, or authorized the payment of, any money or other thing of value (including any fee, gift, sample, travel expense or entertainment with a value in excess of $100 in the aggregate to any one Person in any year) or any commission payment in excess of ten percent (10%) of any amount payable, to (i) any Person who is an official, officer, agent, employee or representative of any domestic or foreign governmental authority or of any existing or prospective customer (whether government or non-government owned), (ii) any political party or official thereof, (iii) any candidate for political or political party office, or (iv) any other Person, while knowing or having reason to believe that all or any portion of such money or thing of value would be offered, given, or promised, directly or indirectly, to any such official, officer, agent, employee, representative, political party, political party official, candidate, individual, or any entity affiliated with such customer, political party or official or political office.

        (ii)   To Sellers' knowledge, neither the Company nor the Subsidiary, nor any director, officer, employee, consultant, agent or other Person acting on behalf of the Company or the Subsidiary has accepted or received any unlawful contribution, payment, gift or expenditure in connection with the conduct of the Business or any other affairs of the Company or the Subsidiary.

        (iii)  The Company and the Subsidiary have at all times been and acted in compliance with all applicable laws relating to export control and trade embargoes. No product or service sold or provided by the Company or the Subsidiary since January 1, 1998 has been, directly or indirectly, sold to or performed on behalf of any country identified by the Office of Foreign Assets Control of the United States Department of the Treasury during such period as being subject to trade sanctions or embargoes, including, without limitation, Cuba, Iraq, Iran, Libya or North Korea.

        (iv)  Neither the Company nor the Subsidiary has violated the anti-boycott prohibitions contained in 50 U.S.C. sect. 2401 et seq. or taken any action that can be penalized under Section 999 of the Code. Since January 1, 1998, neither the Company nor the Subsidiary has been a party to, or a beneficiary under, any agreement with, or sold or delivered any product or service to, any customer in Bahrain, Iraq, Jordan, Kuwait, Lebanon, Libya, Oman, Qatar, Saudi Arabia, Sudan, Syria, United Arab Emirates or the Republic of Yemen.

        (ff)    Brokers.    With the exception of BMO Nesbitt Burns, Inc., neither Sellers, nor any of their Affiliates, nor the Company nor the Subsidiary, have dealt with any Person who is entitled to a broker's commission, finder's fee, investment banker's fee, expense reimbursement or similar payment from Purchaser, the Company or the Subsidiary for arranging the transaction contemplated hereby or introducing the parties to each other.

        (gg)    Telemotive Brazil.    The representations and warranties set forth in paragraphs (b) through (ff) and paragraph (hh) of this Section 9 are true and correct in all respects with regard to Telemotive Industrial Controls do Brasil Llda. ("TIC Brazil"), as if each applicable reference (express or implied) to the Company and/or the Subsidiary in each such paragraph included an additional reference to TIC Brazil, except to the extent of any particular representation and warranty that provides information specific only to the Company or the Subsidiary (e.g., the provisions of paragraph (g) regarding the Company's outstanding capital stock). TIC Brazil was officially formed on December 20, 2002, and has only commenced to engage in business since that date, and none of TIC Brazil, the Subsidiary or the Company has any liability or obligation with respect to any action or circumstance or on behalf of any other Person arising, accruing or existing before the date of TIC Brazil's formation.

        (hh)    Accuracy of Representations.    No representation, warranty, statement, schedule or information furnished by Sellers to Purchaser in this Agreement contains any untrue statement of material fact or omits to state any material fact necessary to make the statements contained herein or therein not misleading.

        10.    Individual Representations and Warranties of Sellers.    Each of the Sellers, individually, represents and warrants to Purchaser as follows:

        (a)    Power and Authority.    Such Seller has full power and authority to execute and perform this Agreement.

        (b)    Seller Entities.    If such Seller is a corporation, limited partnership, limited liability company, trust or entity (a "Seller Entity"), such Seller Entity is duly organized, existing and in good standing under the laws of its jurisdiction of incorporation or formation. The execution and delivery of this Agreement by such Seller Entity and the performance by it of all of its obligations under this Agreement have been duly authorized prior to the date of this Agreement by all requisite action of its board of directors, general partners, managers, trustees or the like, as the case may be. The approval of such Seller Entity's shareholders, limited partners, members, beneficiaries or the like (as the case may be), for it to execute this Agreement and consummate the transaction contemplated hereby is either not required or has been duly given. This Agreement has been duly executed and delivered by it. Neither the execution and delivery of this Agreement by such Seller Entity, nor the consummation by such Seller Entity of the transaction contemplated hereby will conflict with or constitute a breach of any of the terms, conditions or provisions of its Certificate or Articles of Incorporation, by-laws, Agreement of Limited Partnership, operating agreement, trust agreement or declaration of trust, or other organizational documents, as the case may be.

        (c)    Conflicts.    Neither the execution and delivery of this Agreement by such Seller, nor the consummation by him or it of the transaction contemplated hereby will conflict with or constitute a breach of any of the terms, conditions or provisions of any statute or administrative regulation, or of any order, writ, injunction, judgment or decree of any court or governmental authority or of any arbitration award, to which such Seller is a party or by which such Seller is bound. Such Seller is not a party to, or bound by, any unexpired, undischarged or unsatisfied Contract, under the terms of which the execution, delivery and performance by such Seller of this Agreement and the consummation of the transaction contemplated hereby by such Seller will require a consent, approval, or notice or will result in a breach, lapse, cancellation, right to terminate, default or acceleration of any right or obligation or result in a lien on the Shares owned by such Seller.

        (d)    Solvency.    Such Seller is not insolvent, nor has such Seller proposed a compromise or arrangement to his or its creditors generally, filed a petition in bankruptcy, had any petition in bankruptcy filed against him or it, or filed a petition or undertaken any other action or proceeding to be declared bankrupt. The transaction contemplated by this Agreement will not cause such Seller to become insolvent or to be unable to satisfy and pay his or its debts and obligations generally as they come due.

        (e)    Enforceability.    This Agreement has been duly executed and delivered by such Seller and constitutes a legal, valid and binding agreement of such Seller, enforceable against such Seller in accordance with its terms.

        (f)    Ownership.    Such Seller owns full legal and beneficial title to the number of Shares listed opposite such Seller's name on Exhibit A, free and clear of all Claims, other than agreements between the Company and such Seller which will be terminated as of the Closing.

        11.    Limitation on Warranties.    Except as expressly set forth in Sections 9 and 10, Sellers make no express or implied warranty of any kind whatsoever, including, without limitation, any representation as to physical condition or value of any of the assets of the Company or the Subsidiary or the future profitability or future earnings performance of the Company or the

Subsidiary. ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE EXPRESSLY EXCLUDED.

        12.    Definition of Knowledge.    For the purposes of this Agreement, the knowledge of Sellers shall be deemed to be limited to the knowledge as of the Closing Date which any of Sellers and/or Decker, Mark Ecton, Fernando Bello, Robert Beckmann, Dealy, John Downey, Robert Patterson and Charles M. Allen, actually have or should reasonably be expected to have after conducting the sort of reasonable investigations and inquires into the financial, operational, business, legal and other affairs of the Company and the Subsidiary that a reasonable and prudent person would conduct in support of giving the representations and warranties set forth in Section 9 hereof.

        13.    Closing.    At the Closing:

        (a)   Sellers shall deliver, either directly or through the Stockholders' Committee:

        (i)    to Purchaser:

        (A)  certificates representing all outstanding Shares (including all Shares issued upon exercise of outstanding Options and Warrants), duly endorsed for transfer to Purchaser or with duly executed stock powers attached;

        (B)  evidence that all outstanding and unexercised Options and Warrants, if any, have been validly cancelled;

        (C)  written resignations of each director of the Company and the Subsidiary and each officer of the Company and/or the Subsidiary of which Purchaser notifies the Stockholders' Committee prior to the Closing Date;

        (D)  payout statements, current as of the closing date, from all holders of Indebtedness;

        (E)  with respect to any Seller for which its Shares represent all or substantially all of the assets of such Seller, (1) a copy, certified by a senior officer (or equivalent) of such Seller, of the resolution of such Seller's board of directors or similar governing body authorizing the sale of such Shares to Purchaser, and (2) if the approval by the shareholders, limited partners, members, beneficiaries or the like (as the case may be) of such sale of the Shares is required by applicable law, the Certificate or Articles of Incorporation, by-laws, Agreement of Limited Partnership, operating agreement, trust agreement or declaration of trust, or other organizational documents, a copy, certified by a senior officer (or equivalent) of such Seller, of the resolution of the shareholders, limited partners, members, beneficiaries or the like (as the case may be) giving such approval;

        (F)  the releases required to be delivered by Decker and Dealy under the Decker Employment Agreement and the Dealy Employment Agreement;

        (G)  the Escrow Agreement, duly executed by the Stockholders' Committee on Sellers' behalf and the Escrowee; and

        (ii)   to the Escrowee, the Escrow Agreement, duly executed by Sellers.

        (b)   Purchaser shall deliver:

        (i)    to the Stockholders' Committee, (A) payment of the portion of the Closing Estimate referred to in Section 6(a)(ii), and (B) the Escrow Agreement, duly executed by Purchaser; and

        (ii)   to the Escrowee, (A) the Escrow Deposit, and (B) the Escrow Agreement, duly executed by Purchaser; and

        (iii)  to the Company, funds in an amount sufficient to pay the amounts which are payable by the Company on the Closing Date pursuant to Section 14(d).

        (c)   Sellers, either directly or through the Stockholders' Committee, on the one hand, and Purchaser, on the other hand, shall deliver such incumbency certificates and other documents and instruments, and do such other acts and things, as are reasonably necessary to effectuate the consummation of the transaction contemplated hereby.

        14.    Post-Closing Agreements.    From and after the Closing:

        (a)    Inspection of Records.    Purchaser shall make the books and records (including work papers in the possession of their respective accountants, if permitted by such accountants) of the Company and the Subsidiary available for inspection by the Stockholders' Committee, or by its duly accredited representatives, at reasonable times during normal business hours, for a seven (7) year period after the Closing Date, with respect to all transactions of the Company and the Subsidiary occurring prior to and/or relating to the Closing, and the historical (i.e., pre-Closing) financial condition, assets, liabilities, operations and cash flows of the Company and the Subsidiary, provided that the Stockholders' Committee (or its representatives) may only have such access and may only use such books and records for (i) accounting and Tax reporting matters (including responding to inquiries or audits of any Taxing Authority), or (ii) defending or prosecuting litigation relating to the Company, the Subsidiary or the Business to which one or more Sellers is a party. As used in this Section 14(a), the right of inspection includes the right to make extracts or copies.

        (b)    Agreement to Defend and Indemnify.

        (i)    Purchaser shall cause the Company and the Subsidiary to indemnify and hold harmless each present and former director, officer, employee and agent of the Company and each present or former director, officer, employee, agent or trustee of any Benefit Plan (individually, an "Indemnified Employee," and collectively, the "Indemnified Employees") against any losses, claims, damages, liabilities, costs, expenses (including, without limitation, reasonable attorneys' fees), judgments, fines and amounts paid in settlement in connection with any threatened, pending or completed claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative (any of which, an "Indemnified Employee Liability"), arising out of or pertaining to any action or omission occurring prior to the Closing Date (including, without limitation, any which arise out of or relate to the transaction contemplated by this Agreement), whether asserted or commenced prior to or after the Closing Date, to the full extent permitted under the Delaware General Corporation Law (in the case of indemnification by the Subsidiary) and the Illinois Business Corporation Act of 1983 (in the case of indemnification by the Company), as such rights to indemnification may be expanded subsequent to the Closing Date under said laws, but subject to the terms of, and limitations set forth in, the Company's and the Subsidiary's respective Certificate or Articles of Incorporation and by-laws as currently in effect on the date hereof. Purchaser acknowledges and accepts as contract rights (and agrees to cause the Company and the Subsidiary to honor in accordance with their terms) the provisions of the Company's and the Subsidiary's respective Certificate or Articles of Incorporation and/or by-laws as in effect on the date hereof with respect to indemnification of Indemnified Employees (including provisions relating to contributions, advancement of expenses and the like) and agrees that such provisions shall not be modified or amended except as required by law, unless such modification or amendment expands the rights of the Indemnified Employees to indemnification (including with respect to contribution, advancement of expenses and the like). Purchaser shall cause the Company or the Subsidiary to advance expenses (including attorneys' fees) to each such Indemnified Employee to the full extent permitted by law in effect from time to time, subject to the terms of, and limitations set forth in, the Company's and the Subsidiary's respective Certificate or Articles of Incorporation and/or by-laws as in effect on the date hereof.

        (ii)   Notwithstanding anything set forth in subparagraph (b)(i) above, Purchaser shall not be required to cause the Company or the Subsidiary, and neither the Company nor the Subsidiary shall be required, to indemnify or hold harmless any Indemnified Employee in respect of any Indemnified Employee Liability where the act or omission of the applicable Indemnified Employee in respect of which such Indemnified Employee Liability arose would be direct grounds, or could reasonably lead to an event constituting grounds, for indemnification by Sellers pursuant to any provision of Section 15, notwithstanding the expiration of any applicable time period for the making of a claim for such indemnification.

        (iii)  Each Seller, for itself, its Affiliates and its and their respective heirs, executors, personal representatives, successors and assigns (as applicable), hereby waives, releases, remises and forever discharges the Company, the Subsidiary and each Indemnified Employee (collectively, the "Seller Releasees") from and against any and all claims, demands, proceedings, causes of action, obligations, contracts, agreements, debts and liabilities whatsoever, whether known or unknown, suspected or unsuspected, both at law and in equity, which such Seller or any Affiliate thereof or any heir, executor, personal representative, successor or assign thereof now has, has ever had or may hereafter have against the respective Seller Releasees (or any of them) arising prior to the Closing Date or on account of or arising out of any matter, cause, event or circumstance occurring prior to the Closing Date; provided, however, that such release shall have no effect with respect to any right of such Seller to indemnification or reimbursement from the Company or the Subsidiary, whether pursuant to the respective organizational documents of the Company or the Subsidiary, any contract or otherwise and whether or not relating to claims pending on or before, or asserted after, the Closing Date.

        (c)    Non-Competition; Non-Solicitation; Confidentiality.    In consideration of the benefits of this Agreement to Sellers and in order to induce Purchaser to enter into this Agreement, each of the Sellers, other than the Mass Mutual Entities, hereby individually covenants and agrees as follows:

        (i)    from and after the Closing and until the third anniversary of the Closing Date (except that (A) if such time period is determined or declared by a court of competent jurisdiction to be illegal, unenforceable, invalid, contrary to public policy, void or voidable under any applicable law, and (B) if required by such court of competent jurisdiction in order for this subparagraph (i) to remain valid and enforceable against such Seller, such time period shall be reduced to expire on the second anniversary of the Closing Date, or if required by such court of competent jurisdiction in order for this subparagraph (i) to remain valid and enforceable against such Seller, such time period shall be reduced to expire on the first anniversary of the Closing Date), such Seller shall not, nor shall it cause any Person (including, without limitation, any Affiliate or any director, officer, employee or agent of such Seller or any such Affiliate) to, directly or indirectly, as a partner, stockholder, proprietor, director, officer, manager, member, consultant, joint venturer, investor or in any other capacity:

        (A)  engage in, own, manage, operate or control, provide consulting services to, or participate in the ownership, management, operation or control of or provision of consulting services to, any business or entity which engages anywhere in North America (except that (1) if such geographic scope is determined or declared by a court of competent jurisdiction to be illegal, unenforceable, invalid, contrary to public policy, void or voidable under any applicable law, and (2) if required by such court of competent jurisdiction in order for this subparagraph (A) to remain valid and enforceable against such Seller, such geographic scope shall be reduced to the United States of America, or if required by such court of competent jurisdiction in order for this subparagraph (A) to remain valid and enforceable against such Seller, such geographic scope shall be reduced to the State of Illinois, or if required by such

court of competent jurisdiction or arbitrator in order for this subparagraph (A) to remain valid and enforceable against such Seller, such geographic scope shall be reduced to a range of fifty (50) miles around the city limits of Glendale Heights, Illinois, in any business which competes with the Business; provided, however, that nothing herein shall prohibit such Seller and its Affiliates from owning, in the aggregate, not more than five percent (5%) of any class of securities of a publicly traded entity in any of the foregoing lines of business so long as neither such Seller nor any of its Affiliates participates in any way in the management, operation or control of such entity; and

        (B)  hire or solicit to perform services (as an officer, employee, consultant or otherwise) any Persons who are or, within the six (6) month period immediately preceding such Seller's or such Affiliates action were, employees of the Company or either Subsidiary or take any actions which are intended to persuade any employee of the Company or either Subsidiary to terminate his or her association with the Company or either Subsidiary; provided, however, that (x) general solicitations of employment published in a journal, newspaper or other publication of general circulation or listed on any internet job site and not specifically directed towards such employees shall not be deemed to constitute solicitation for purposes of this subparagraph (B) and (y) this subparagraph shall not apply with respect to the hiring or solicitation of employment of Decker or Dealy by any such Seller (but, in such event, subject to the noncompetition provisions of paragraph (A) above and the Dealy Agreement (in the case of Dealy) and the noncompetition provisions of the Decker Agreement (in the case of Decker); or

        (C)  call on or solicit for purposes of diverting or taking away from the Company or the Subsidiary any Person that is a customer of or material supplier to the Company or the Subsidiary, or who was actively solicited as a potential customer of the Company or the Subsidiary during the one year period ending on the Closing Date, for the sale or purchase of products or services of the type then supplied by the Business, or induce or attempt to induce any customer, supplier, licensor, licensee or other Person to cease conducting business with the Company or the Subsidiary or in any way intentionally interfere with the relationship between any such customer, supplier, licensor, licensee or other Person and the Company or the Subsidiary; and

        (ii)   from and after the Closing, such Seller shall, and shall cause its Affiliates and its and their directors, officers, employees and agents to, keep confidential and not disclose to any other Person or use for their own benefit or the benefit of any other Person (other than as permitted by paragraph (a)), any information regarding the Company, the Subsidiary or the Business. The obligation of such Seller under this subparagraph (ii) shall not apply to information which (i) such Seller can demonstrate is generally known to the public other than as a result of the breach of this Agreement or any other agreement pursuant to which such Seller or any other Person owes any duty of confidentiality to the Company, the Subsidiary or Purchaser; or (ii) is required to be disclosed by law, order or regulation of a court or tribunal or government authority; provided, however, that in any such case, such Seller shall notify Purchaser as early as reasonably practicable prior to disclosure to allow Purchaser to take appropriate measures to preserve the confidentiality of such information.

        (iii)  Such Seller hereby acknowledges and agrees that (A) the provisions of subparagraphs (i) and (ii) of this Section 14(c) are reasonable and necessary to protect the legitimate business interests of Purchaser, (B) Purchaser would not have entered into this Agreement without such Seller providing the covenants contained in subparagraphs (i) and (ii) of this Section 14(c), (C) the violation of any covenant contained in such subparagraphs would result in irreparable injury to Purchaser (direct or indirect), the

exact amount of which would be difficult to ascertain or estimate, and (D) the remedies at law for any such violation would not be reasonable or adequate compensation to Purchaser for such a violation. Accordingly, notwithstanding any other provision of this Agreement, such Seller agrees that if it violates any covenant or agreement given or made by it under subparagraph (i) or (ii) of this Section 14(c), then, in addition to any other remedy which may be available to Purchaser at law or in equity (including, without limitation, indemnification under Section 15), Purchaser will be entitled to specific performance and injunctive relief in addition to all other legal and equitable rights and remedies, which Purchaser may seek to obtain through any court of competent jurisdiction.

        (d)    Payment of Decker Amount, Dealy Amount and Indebtedness.    Purchaser shall cause the Subsidiary to pay the Decker Amount and the Dealy Amount at the time set forth, and in the manner provided, in the Decker Agreement and the Dealy Agreement, respectively. The Decker Amount and the Dealy Amount shall each be subject to Tax withholding as required by law. Purchaser shall cause the Subsidiary to pay the Indebtedness in full on the Closing Date.

        (e)    Income Tax Matters.    This paragraph(e) shall apply for the purposes of United States federal income Tax law. To the extent permitted by law, the principles of this paragraph (e) shall also apply for the purposes of state, local, foreign and other income Tax laws. The parties shall take all steps, and do all acts and things, as are or may be necessary or appropriate to implement the provisions and effectuate the purposes and intents of this paragraph (e): Accordingly, the parties agree as follows:

        (i)    the taxable year of the Company and the Subsidiary shall end on the Closing Date at the end thereof. Pursuant to 26 C.F.R. ("Reg.") §1.1502-76(b)(1)(ii)(B)(4), Reg. §1.1502-76(b)(1)(ii)(B) (the next day rule) shall not be applicable to the payment of the estimated Decker Amount, the payment of the Dealy Amount and the exercise of the Options, all of which the parties agree are prearranged transactions; rather, the deductions therefor shall be reported, to the extent allowable, in the taxable year of the Company and the Subsidiary ending on the Closing Date;

        (ii)   except as contemplated by this Agreement, there shall be no transactions on the Closing Date after the Closing, except in the ordinary course of business;

        (iii)  the items in the taxable year of the Company and/or the Subsidiary ending on the Closing Date shall be determined under a closing-of-the-books method, and no ratable or other yearly, monthly or other elective allocation method under Reg. §1.1502-76(b)(2) or otherwise straddling the close of such taxable year shall apply;

        (iv)  for all taxable years of the Company and the Subsidiary ending on or before, or including, the Closing Date, the Company and the Subsidiary shall file all Returns (which have not been filed on or prior to the Closing Date) and pay all income Taxes (which have not been paid on or prior to the Closing Date) as required by and in accordance with law. Purchaser shall cause the Company and the Subsidiary to vest in the Stockholders' Committee the primary authority to act on behalf of the Company and the Subsidiary with respect to the filing of such Returns, the payment of such Taxes, and the dealing with taxing authorities with respect thereto and with respect to all matters relating to such taxable years (including Tax refunds) and shall provide to the Stockholders' Committee such resources, and such use of the services of personnel, as are required or reasonably appropriate with respect to the foregoing and shall so provide the same in a timely manner and in sufficient amounts; provided, however, that Purchaser's independent public accountants shall be kept fully informed with respect to all matters relating to the preparing and filing of such Returns and such dealings with Taxing Authorities, and the Stockholders' Committee shall not take any action that, in the reasonable opinion of Purchaser's accountants, shall be contrary to any Laws or that is reasonably likely to

adversely affect the Company and the Subsidiary (taken as a whole) without the prior consent of Purchaser (which shall not unreasonably be withheld).

        (f)    Edson Partners II, L.P.    For a period of two years following the Closing Date, Edson Partners II, L.P. ("Edson II"), one of the Sellers, individually agrees that (x) it will not dissolve, and (y) that it will retain funds which (when taken together with its share of the Escrow Deposit and the holdback by the Stockholders' Committee referred to in Section 20(d)) will be sufficient to enable it to satisfy any liability it may have to Purchaser and the other Purchaser Indemnitees hereunder.

        (g)    Wenglor Heads.    To the extent the Wenglor Heads shall not have been sold in their entirety, or all or some shall have been sold for less than the cost thereof, during the period running from the date hereof through the date which is eighteen months following the Closing Date, Sellers shall pay to Purchaser (x) with respect to Wenglor Heads which have been sold, the aggregate amount (if any) by which the cost of such Wenglor Heads exceeds the sales proceeds thereof; plus (y) the aggregate cost of all then unsold Wenglor Heads.

        (h)    Further Assurances.    The parties shall execute such further documents, and perform such further acts, as may be necessary to transfer and convey the Shares to Purchaser, on the terms herein contained, and to otherwise comply with the terms of this Agreement and consummate the transaction contemplated hereby.

        15.    Sellers' Indemnification Obligations.    Subject to the provisions of Section 16, Sellers shall indemnify, save and keep Purchaser, its Affiliates, and its and their officers, directors, managers, employees, agents, successors and assigns (each a "Purchaser Indemnitee" and collectively, the "Purchaser Indemnitees") harmless against and from all Damages (as herein defined) sustained or incurred by any Purchaser Indemnitee (whether or not involving a Third Party Claim, as herein defined), as a result of or arising out of or by virtue of:

        (a)   any inaccuracy in or breach of any representation and warranty made by Sellers to Purchaser herein or in any closing document delivered to Purchaser in connection herewith; provided, however, that in the case of an inaccuracy or breach of any of the representations and warranties contained in Section 10, only the Seller whose representation and warranty was inaccurate or breached shall have an obligation of indemnification under this Section 15(a);

        (b)   the breach by any Seller or the Stockholders' Committee of, or failure of any Seller or the Stockholders' Committee to comply with any of the covenants or obligations under this Agreement to be performed by Sellers or the Stockholders' Committee; provided, however, that in the case of a breach of Section 14(c), only the Seller in breach of such section shall have an obligation of indemnification under this Section 15(b);

        (c)   any liability of Purchaser, the Company or either Subsidiary for the payment of any Tax accrued and unpaid for any period up to and including the date immediately preceding the Closing Date, regardless of whether or not there has been any inaccuracy in or breach of any representation or warranty made by Sellers in this Agreement (including the Disclosure Schedule) with respect to such matters;

        (d)   any liability with respect to environmental health and safety arising (before, on or after the Closing Date) out of or relating to (i) the ownership or operation by the Company or the Subsidiary at any time prior to the Closing Date of any property (whether real, personal, or mixed and whether tangible or intangible) or of any business of the Company or the Subsidiary, or (ii) any Hazardous Substances that were, or allegedly were, at any time before the Closing Date, present on, at or in any such property of the Company or the Subsidiary by reason of the acts or omissions of the Company or the Subsidiary, or otherwise handled by the Company or the Subsidiary or any other Person for whose conduct the Company or the Subsidiary are or may be held responsible, regardless of whether or not there has been any inaccuracy in or breach of any representation or warranty made by Sellers in this Agreement (including the Disclosure Schedule) with respect to such matters;

        (e)   any bodily injury (including illness, disability or death, and regardless of when any such bodily injury occurred, was incurred or manifested itself), personal injury, property damage (including trespass, nuisance, wrongful eviction, and deprivation of the use of real property) or other damage of or to any Person, including any employee or former employee of the Company or the Subsidiary or any other Person for whose conduct the Company or either Subsidiary are or may be held responsible, in any way arising from or allegedly arising from any Hazardous Activity (as herein defined) conducted by any Person with respect to the business of the Company or either Subsidiary prior to the Closing Date or from any Hazardous Substance that was (i) present on or before the Closing Date on, at or in any property (whether real or personal) owned, leased, occupied or used by the Company or either Subsidiary prior to the Closing Date by reason of the acts or omissions of the Company or the Subsidiary, or (ii) Released or allegedly Released by the Company or the Subsidiary from any such property at any time prior to the Closing Date, in any such case regardless of whether or not there has been any inaccuracy in or breach of any representation or warranty made by Sellers in this Agreement (including the Disclosure Schedule) with respect to such matters. As used herein, "Hazardous Activity" shall mean the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, Release, storage, transfer, transportation, treatment or use (including any withdrawal or other use of groundwater) of any Hazardous Substance in, on, under, about or from any of the real properties owned, leased, occupied or used by the Company or the Subsidiary into the environment;

        (f)    any indemnification claim either made or pending against the Company or the Subsidiary by any Indemnified Employee on or after the Closing Date in respect of an Indemnified Employee Liability where the act or omission of such Indemnified Employee in respect of which such Indemnified Employee Liability arose would be direct grounds, or could reasonably lead to an event constituting grounds, for indemnification by Sellers pursuant to any other provision of this Section 15, notwithstanding the expiration of any applicable time period for the making of a claim for such indemnification;

        (g)   any liability in respect of or in connection with (i) the business, assets, liabilities or operations of the Subsidiary's former B + K Precision Products division, or (ii) the 1996 sale by the Subsidiary to G.E.M. Illinois, Inc. of the assets and business of such division, including, without limitation, any indemnity given by the Subsidiary to G.E.M. Illinois, Inc. in connection with such sale;

        (h)   any product or component thereof manufactured by or shipped, or any service provided by, the Company or the Subsidiary, in whole or in part, prior to the Closing Date, including, without limitation the direct costs (i.e., material, labor and freight out) incurred by the Company in honoring any warranty claim with respect thereto that is not covered by the warranty reserve taken by the Company or the Subsidiary in the Closing Balance Sheet and taken into account in the computation of Working Capital and further including, without limitation, any claim or action referred to in Section 9(dd) of the Disclosure Schedule where the Damages arising therefrom or related thereto exceed the reserve (if any) taken by the Company or the Subsidiary on the Closing Balance Sheet and taken into account in the Computation of Working Capital, in any such case, regardless of whether or not there has been any inaccuracy in or breach of any representation or warranty made by Sellers in this Agreement (including the Disclosure Schedule) with respect to such matters; and/or

        (i)    any liability for Company or Subsidiary employee-related claims arising out of the wrongful or unlawful conduct of the Company or the Subsidiary, where such liability arose or accrued prior to the Closing Date or, in any case where a claim is first made or a liability first accrues on or after the Closing Date, where the factual circumstances giving rise to such claim or liability occurred prior to the Closing Date, regardless of whether or not there has been any inaccuracy in or breach of any representation or warranty made by Sellers in this Agreement (including the Disclosure Schedule) with respect to such matters.

As used in this Agreement, (x) the term "Damages" shall mean all liabilities, demands, claims, actions or causes of action, regulatory, legislative or judicial proceedings or investigations, assessments, levies, losses, fines, penalties, damages, amounts paid in settlement of Third Party Claims, costs and expenses, including reasonable attorneys', accountants', investigators', and experts' fees and expenses, sustained or incurred in connection with the defense or investigation of any claim, and (y) "Third-Party Claim" shall mean any claim, complaint, action or proceeding made or undertaken against the Company, the Subsidiary, any Purchaser Indemnitee or Seller Indemnitee by a Person that is not a Purchaser Indemnitee or Seller Indemnitee.

        16.    Limitation on Sellers' Indemnification Obligations.    Sellers' obligations pursuant to the provisions of Section 15 are subject to the following limitations:

        (a)   the Purchaser Indemnitees shall not be entitled to recover under Sections 15(a), (c), (d), (e), (g), or (i) until the total amount which the Purchaser Indemnitees would recover under such Sections, but for this Section 16(a), exceeds $50,000 (the "Deductible"), and then the Purchaser Indemnitees shall be entitled to recover only for the excess over the Deductible. Notwithstanding the foregoing, for the sole purpose of determining whether the Deductible has been satisfied, all references in Section 9 to materiality or Material Adverse Effect shall be disregarded;

        (b)   the Purchaser Indemnitees shall not be entitled to recover pursuant to Sections 15(a) with respect to a breach of or inaccuracy in any of Sections 9(h), (i), (y), (z), (aa) or (ee) unless a claim has been asserted by written notice, specifying the details of the alleged misrepresentation or breach of warranty or claim for indemnification under such section, delivered to the Stockholders' Committee on or prior to the expiration of 18 full calendar months following the Closing Date. The Purchaser Indemnitees shall not be entitled to recover (x) pursuant to Section 15(a) with respect to the remaining paragraphs of Section 9 (other than with respect to a breach of any of Sections 9(a), (b), (c), (d), (e), (g), (j), (m) or (u)) or (y) pursuant to Section 15 (g), (h) or (i) unless a claim has been asserted by written notice, specifying the details of the alleged misrepresentation or breach of warranty or claim for indemnification under such section, delivered to the Stockholders' Committee on or prior to the second anniversary of the Closing Date. The Purchaser Indemnitees shall not be entitled to recover pursuant to Sections 15(a) with respect to a breach of Section 9(m) or pursuant to Section 15(c) unless a claim has been asserted by written notice, specifying the details of the alleged misrepresentation or breach of warranty or claim for indemnification under such section, delivered to the Stockholders' Committee on or prior to the expiration of the applicable statute of limitations with respect to Taxes. The Purchaser Indemnitees shall not be entitled to recover pursuant to Sections 15(a) with respect to a breach of Section 9(u) or pursuant to Section 15(d) or (e) unless a claim has been asserted by written notice, specifying the details of the alleged misrepresentation or breach of warranty or claim for indemnification under such sections, is delivered to the Stockholders' Committee on or prior to the expiration of the fourth anniversary of the Closing Date;

        (c)   the Purchaser Indemnitees shall not be entitled to recover under Section 15:

        (i)    with respect to: (A) consequential damages of any kind, damages consisting of business interruption or lost profits (regardless of the characterization thereof), damages for diminution in value of the Company and/or the Subsidiary, damages computed or a multiple of earnings or similar basis, and punitive damages;

        (ii)   to the extent: (A) the aggregate claims under Section 15(a), (c), (d), (e), (g), (h) and (i) of the Purchaser Indemnitees and paid by Sellers exceed $1,500,000; or (B) the matter in question, taken together with all similar matters, does not exceed the amount of any reserves or accruals established with respect thereto which are reflected in the Closing Balance Sheet and taken into account in the calculation of Working Capital;

        (d)   no Seller shall be liable to Purchaser for indemnification with respect to any claim of Purchaser which is indemnifiable hereunder in an amount which exceeds such Seller's pro rata portion of the aggregate amount of such claim (such pro rata portion being computed on the basis of the ratio of the total number of Shares owned by such Seller immediately prior to the Closing to the total number of Shares then outstanding). Notwithstanding the preceding sentence, (x) in the event a representation and warranty of a Seller pursuant to Section 10 shall be incorrect, or in the event a Seller shall violate Section 14(c), only that Seller shall have an obligation of indemnification pursuant to Section 15, and (y) Edson II agrees that it will not dissolve except (i) in accordance with Section 14(f) and (ii) unless, in connection with such dissolution, its partners agree to be jointly and severally liable for any remaining obligations of Edson II under this Agreement;

        (e)   Sellers shall have no obligation of indemnification under Section 15(h) to the extent the Damages which are the substance of such indemnification claim (x) are covered by insurance presently or heretofore maintained by the Company or the Subsidiary (excluding deductibles), and (y) the insurer under such insurance policy shall have assumed the defense of such matter. Purchaser's remedy for a breach of an inaccuracy in the representations and warranty contained in Section 9(dd)(i) shall be indemnification pursuant to Section 15(h).

        17.    Purchaser's Indemnification Covenants.    Subject to the provisions of Section 18, Purchaser shall indemnity, save and keep Sellers and their respective officers, directors, managers, employees, agents, successors and assigns ("Seller Indemnitees"), harmless against and from all Damages sustained or incurred by any Seller Indemnitee, whether or not involving a Third Party Claim against such Seller Indemnitee, as a result of or arising out of or by virtue of:

        (a)   any inaccuracy in or breach of any representation and warranty made by Purchaser to Sellers herein or in any closing document delivered to Sellers in connection herewith; and/or

        (b)   any breach by Purchaser of, or failure by Purchaser to comply with, any of the covenants or obligations under this Agreement to be performed by Purchaser.

        18.    Limitation on Purchaser's Indemnification Obligations.    Purchaser's obligations pursuant to the provisions of Section 18 are subject to the following limitations:

        (a)   the Seller Indemnitees shall not be entitled to recover under Section 17(a) until the total amount which the Seller Indemnitees would recover under such Sections, but for this Section 18(a), exceeds the Deductible, and then the Seller Indemnitees shall be entitled to recover only for the excess over the Deductible;

        (b)   no Seller Indemnitee may make any claim for indirect, special or consequential damages, damages consisting of business interruption or lost profits or punitive damages; and

        (c)   Purchaser's aggregate liability for indemnification claims made under Section 17(a) shall not exceed $1,500,000 (with such aggregate liability being based on amounts actually paid by Purchaser pursuant to Section 17(a)).

        19.    Third-Party Claim Procedures.

        (a)   Promptly after receipt by a Seller Indemnitee or a Purchaser Indemnitee, as the case may be (an "Indemnitee") of notice of the assertion of a Third-Party Claim against it, such Indemnitee shall give prompt notice to the Person(s) obligated to indemnify such Indemnitee under Section 15 or 17, as the case may be (each, an "Indemnitor") of the assertion of such Third-Party Claim, provided that the failure to so notify the Indemnitor will not relieve the Indemnitor of any liability that it may have to such Indemnitee, except to the extent that the Indemnitor demonstrates that the defense of such Third-Party Claim was prejudiced by the Indemnitee's failure to give such prompt notice.

        (b)   If an Indemnitee gives notice to an Indemnitor pursuant to paragraph (a) of the assertion of a Third-Party Claim, the Indemnitor shall be entitled to participate in the defense

of such Third-Party Claim (at its sole cost) and, subject to paragraph (c) below, to assume control of the defense of such Third-Party Claim with counsel reasonably satisfactory to the Indemnitee. After notice from the Indemnitor to the Indemnitee of its election to assume the defense of such Third-Party Claim, the Indemnitor shall not, so long as it diligently conducts such defense, be liable to the Indemnitee under Section 15 or 17 (as applicable) for any fees of other counsel or any other expenses with respect to the defense of such Third-Party Claim, in each case subsequently incurred by the Indemnitee in connection with the defense of such Third-Party Claim, other than reasonable costs of investigation. If the Indemnitor assumes the defense of a Third-Party Claim, (i) such assumption will conclusively establish for purposes of this Agreement that the claims made in that Third-Party Claim are within the scope of, and subject to, indemnification as provided herein, and (ii) no compromise or settlement of such Third-Party Claims may be effected by the Indemnitor or shall be binding on the Indemnitee without the Indemnitee's consent (not to be unreasonably withheld), unless (A) there is no finding or admission of any violation of law or of the rights of any Person, and (B) the sole relief provided is monetary damages that are paid in full by the Indemnitor. If notice is given to an Indemnitor of the assertion of any Third-Party Claim and the Indemnitor does not, within ten (10) Business Days after the Indemnitee's notice is given, give notice to the Indemnitee of its election to assume the defense of such Third-Party Claim, the Indemnitee will be entitled, to the Indemnitor's exclusion and at the Indemnitor's cost, to fully assume the defense of such Third-Party Claim, and the Indemnitor will be bound by any determination made in such Third-Party Claim or any compromise or settlement effected by the Indemnitee in respect thereof.

        (c)   Notwithstanding the foregoing, the Indemnitee may require that the Indemnitor not assume or maintain control of, or actively participate in (in which case, the Indemnitor shall not assume, maintain control of or actively participate in) the defense, of a Third Party Claim against the Indemnitee if (i) the Indemnitor is also a Person against whom the Third-Party Claim is made and the Indemnitee determines in good faith that joint representation of the Indemnitor and Indemnitee would be inappropriate, (ii) the Indemnitee requests, and the Indemnitor fails to provide, reasonable assurance to the Indemnitee of the Indemnitor's financial capacity to defend such Third-Party Claim and to provide indemnification with respect thereto, or (iii) the Indemnitee determines in good faith that there is a reasonable probability that the Third-Party Claim may adversely affect it or its Affiliates other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement. In any of these events, the Indemnitee may, by written notice to the Indemnitor, assume the exclusive right to defend, compromise or settle such Third-Party Claim, but the Indemnitor will not be bound by any compromise or settlement of such Third-Party Claim for the purposes of this Agreement without its consent (not to be unreasonably withheld) to such compromise or settlement.

        (d)   Sellers and Purchaser hereby consent to the nonexclusive jurisdiction of any court in which an action or proceeding in respect of a Third-Party Claim is brought against any Indemnitee for purposes of any claim that an Indemnitee may have under this Agreement with respect to such action or proceeding or the matters alleged therein, and agree that process may be served on any Indemnitor with respect to such a claim anywhere in the world.

        (e)   With respect to any Third-Party Claim subject to indemnification under Section 15 or 17, (i) the Indemnitee(s) and the Indemnitor(s), as the case may be, shall keep the other(s) fully informed of the status of such Third-Party Claim and any related actions or proceedings at all stages thereof, and (ii) the parties agree (each at its own expense) to render to each other such assistance as they may reasonably require of each other and to cooperate in good faith with each other in order to ensure the proper and adequate defense of any Third-Party Claim.

        (f)    With respect to any Third-Party Claim subject to indemnification under Section 15 or 17, the parties agree to cooperate in such a manner as to preserve to the greatest extent possible the confidentiality of all confidential and proprietary information of the parties and the attorney-client and work-product privileges as between the parties and their respective legal advisors. In connection therewith, each Party agrees that: (i) it will use all reasonable efforts in respect of any Third-Party Claim in which it assumes or participates in the defense to avoid production of confidential and proprietary information (consistent with applicable law and rules of procedure), and (ii) all communications between any party hereto and counsel responsible for or participating in the defense of any Third-Party Claim shall, to the greatest extent possible, be made so as to preserve any applicable attorney-client or work-product privilege.

        20.    Set-Off and Recovery from Escrow.

        (a)   Sellers may set off the amount of any valid claim for indemnification made by any Seller Indemnified Party under Section 17 against any amounts payable by Sellers to Purchaser under Section 3 and/or Section 15.

        (b)   Purchaser may set off the amount of any valid claim for indemnification made by any Purchaser Indemnified Party under Section 15, against any amount payable by Purchaser to Sellers under Section 3 and/or Section 17. Purchaser may also set off the amount of any valid claim for indemnification made by any Purchaser Indemnified Party against a particular Seller under Section 15 (with respect to such Seller's breach of either Section 10 or Section 14(c)) against any amount payable by Purchaser to the same Seller (or its successors or assigns) under Section 3 or Section 17.

        (c)   The indemnification obligations of Sellers pursuant to Section 15 shall first be satisfied from the Escrow Deposit until the Escrow Deposit has been exhausted in accordance with the terms of the Escrow Agreement. The amount of any such recovery by Purchaser from the Escrow Deposit will correspondingly reduce by the same amount Sellers' liability under Section 15 for the indemnification claim in respect of which such recovery is made.

        (d)   Sellers shall have direct liability for indemnification under Section 15 only to the extent that the amount of any indemnification claim made under Section 15 exceeds the balance of the Escrow Deposit. To provide a fund for the payment of any such liability, Sellers shall cause the Stockholders' Committee to retain, on behalf of the Sellers, a fund of not less than $500,000. In the event no claim for indemnification by the Purchaser Indemnitees shall be pending on the second anniversary of the Closing Date, the Stockholders' Committee may disburse such sum thereafter to Sellers. If a claim for indemnification shall then be pending, and such claim (taken together with the amount of the Escrow Deposit then on deposit with the Escrowee) is less than the amount being held back by the Stockholders' Committee, the Stockholders' Committee may distribute the surplus to the Sellers.

        21.    Indemnification Exclusive Remedy.    Except for fraudulent misrepresentations, indemnification pursuant to the provisions of Section 15 or 17 shall be the exclusive remedy of the parties for any misrepresentation or breach of any warranty or covenant contained herein or in any closing document executed and delivered pursuant to the provisions hereof. Without limiting the generality of the preceding sentence, except for any claim of fraudulent misrepresentation, no legal action sounding in tort or strict liability may be maintained by any party.

        22.    Appointment of Stockholders' Committee.    Each of Sellers hereby irrevocably constitutes and appoints the Accountants (represented by Charles M. Allen) and David L. Babson & Company Inc. (represented by Michael Klofas) (collectively, the "Stockholders' Committee"), as such Seller's attorneys-in-fact and agents in connection with the execution and performance of this Agreement. This power is irrevocable and coupled with an interest, and shall not be affected by the death, incapacity, illness, dissolution or other inability to act of any of Sellers. The rights, powers and duties of the Stockholders' Committee are as follows:

        (a)    Authority.    Each of Sellers hereby irrevocably grants the Stockholders' Committee full power and authority to: (i) execute and deliver, on behalf of such Seller, and to accept delivery of, on behalf of such Seller, such documents as may be deemed by the Stockholders' Committee, in their sole discretion, to be appropriate to consummate this Agreement; (ii) endorse and to deliver on behalf of such Seller, certificates representing the Shares to be sold by such Seller at the Closing; (iii) acknowledge receipt at the Closing of the Purchase Price for each Share sold by such Seller at the Closing, as payment in full for such Shares, and to designate the manner of payment of such Purchase Price; (iv) dispute or refrain from disputing, on behalf of such Seller, any claim made by Purchaser under this Agreement; (v) negotiate and compromise, on behalf of such Seller, any dispute that may arise under, and to exercise or refrain from exercising any remedies available under, this Agreement;

(vi) execute, on behalf of such Seller, any settlement agreement, release or other document with respect to such dispute or remedy; (vii) give or agree to, on behalf of such Seller, any and all consents, waivers, amendments or modifications, deemed by the Stockholders' Committee, in their sole discretion, to be necessary or appropriate, under this Agreement, and, in each case, to execute and deliver any documents that may be necessary or appropriate in connection therewith; (viii) enforce, on behalf of such Seller, any claim against Purchaser arising under this Agreement; (ix) engage attorneys, accountants and agents at the expense of Sellers; (x) retain a portion of the Purchase Price as a fund for the payment of expenses payable by the Sellers pursuant to the provisions hereof, adjustments to the Purchase Price, and potential claims for indemnification by Purchaser, and to invest such retained portion for the benefit of the Sellers; (xi) amend this Agreement (other than this Section 22) or any of the instruments to be delivered to Purchaser by such Seller pursuant to this Agreement; and (xii) give such instructions and to take such action or refrain from taking such action, on behalf of such Seller, as the Stockholders' Committee deems, in their sole discretion, necessary or appropriate to carry out the provisions of this Agreement. Purchaser shall at all times be entitled to treat the statements and actions (including non-actions) of the Stockholders' Committee (including any representative thereof), to the extent falling within its authority under this paragraph (a)), as the statements and actions of any and all Sellers, and Purchaser shall have no duty or obligation to independently verify or confirm with any Seller, any member of the Stockholders' Committee or any other Person the accuracy, truthfulness or validity of any statement or action (including non-action) of the Stockholders' Committee or the authority of the Stockholders' Committee (or any representative thereof) to make or take such statement or action (or non-action).

        (b)    Reliance.    Each Seller hereby agrees that: (i) in all matters in which action by the Stockholders' Committee is required or permitted, a majority of the members of the Stockholders' Committee is authorized to act on behalf of such Seller, notwithstanding any dispute or disagreement among the Sellers, among the members of the Stockholders' Committee, or between any Seller and the Stockholders' Committee, and Purchaser shall be entitled to rely on any and all action taken by the Stockholders' Committee, or a majority of the members thereof, under this Agreement without any liability to, or obligation to inquire of, any of the Sellers or the other members of the Stockholders' Committee, notwithstanding any knowledge on the part of the Purchaser of any such dispute or disagreement; (ii) notice to any member of the Stockholders' Committee, delivered in the manner provided in Section 23(c), shall be deemed to be notice to all of the members of the Stockholders' Committee and to all Sellers for the purposes of this Agreement; (iii) the power and authority of the Stockholders' Committee, as described in this Agreement, shall continue in force until all rights and obligations of Sellers under this Agreement shall have terminated, expired or been fully performed; (iv) a majority in interest of Sellers shall have the right, exercisable from time to time upon written notice delivered to the Stockholders' Committee and Purchaser: (A) to remove any member or members of the Stockholders' Committee, with or without cause; (B) to appoint a Seller (or, in the case of a Seller Entity, an officer, employee, partner, accountant or attorney of such Seller Entity) to fill a vacancy caused by the death, resignation or removal of a member of the Stockholders' Committee; and (C) subject to paragraph (c), to expand the number of members of the Stockholders' Committee and to appoint Sellers (or officers, employees, partners, accountants or attorneys as aforesaid) to fill the vacancies created thereby;

        (c)    Replacement.    If any member of the Stockholders' Committee resigns or is removed or otherwise ceases to function in his capacity as such for any reason whatsoever, and no successor is appointed pursuant to paragraph (b) within thirty (30) days, the Stockholders' Committee shall consist solely of the remaining member of the Stockholders' Committee. If, as a result of such resignation, removal or cessation, there are no remaining members of the Stockholders' Committee and no successor is appointed by a majority in interest of the Sellers within thirty (30) days, then Purchaser shall have the right to appoint a Seller or an officer,

employee, partner, accountant or attorney as aforesaid, to act as the sole member of the Stockholders' Committee, to serve as described in this Agreement. Notwithstanding anything to the contrary contained in this Section 22, there shall at no time be more than two members of the Stockholders' Committee.

        (d)    Actions by Sellers.    Each Seller agrees that, notwithstanding the foregoing, at the request of Purchaser, such Seller shall take all actions necessary or appropriate to consummate the transaction contemplated hereby (including, without limitation, delivery of such Seller's Shares and acceptance of the Purchase Price therefor) individually on such Seller's own behalf, and delivery of any other documents required of Sellers pursuant to the terms hereof.

        (e)    Indemnification of Purchaser Indemnitees.    Sellers, jointly and severally, shall indemnify the Purchaser Indemnitees against, and agree to hold the Purchaser Indemnitees harmless from, any and all Damages incurred or suffered by any Purchaser Indemnitee arising out of, with respect to or incident to the operation of, or any breach of any covenant or agreement pursuant to, this Section 22, or the designation, appointment and actions of the Stockholders' Committee pursuant to the provisions hereof, including without limitation, with respect to (x) actions taken by the Stockholders' Committee or any member thereof, and (y) reliance by any Purchaser Indemnitee on, and actions taken by any Purchaser Indemnitee in response to or in reliance on, the instructions of, notice given by or any other action taken by the Stockholders' Committee.

        (f)    Indemnification of Stockholders' Committee.    Each Seller shall severally indemnify each member of the Stockholders' Committee against any Damages (except such Damages as result from such member's gross negligence or willful misconduct) that such member may suffer or incur in connection with any action or omission of such member as a member of the Stockholders' Committee. Each Seller shall bear its pro-rata portion of such Damages. No member of the Stockholders' Committee shall be liable to any Seller with respect to any action or omission taken or omitted to be taken by the Stockholders' Committee pursuant to this Section 22, except for such member's gross negligence or willful misconduct.

        23.    Miscellaneous

        (a)    Fees.    Sellers shall pay all fees and expenses charged by BMO Nesbitt Burns, Inc.

        (b)    Publicity.    Except as otherwise required by law (including without limitation the Securities Exchange Act of 1934, as amended) or applicable New York Stock Exchange rules, press releases and other publicity concerning this transaction shall be made only with the prior agreement of the Stockholders' Committee and Purchaser (and in any event, the Stockholders' Committee and Purchaser shall use all reasonable efforts to consult and agree with each other with respect to the content of any such required press release or other publicity). Except as otherwise required by law or New York Stock Exchange rules, no such press releases or other publicity shall state the amount of the Purchase Price.

        (c)    Notices.    All notices required or permitted to be given hereunder shall be in writing and delivered by hand, by facsimile, by nationally recognized private courier, or by United States mail, registered or certified mail, return receipt requested, postage prepaid. Notices delivered by mail shall be deemed given three (3) Business Days after being deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested. Notices delivered by hand by facsimile, or by nationally recognized private courier shall be deemed given on the first Business Day following receipt; provided, however, that a notice delivered by facsimile shall only be effective if such notice is also delivered by hand, or

deposited in the United States mail, postage prepaid, registered or certified mail, on or before two (2) Business Days after its delivery by facsimile. All notices shall be addressed as follows:

If to Sellers or the Stockholders' Committee:

c/o Crowe, Chizek & Company, LLP
One Mid America Plaza
Suite 700
Oak Brook, Illinois 60101
Attention: Charles M. Allen
Fax: (630) 574-1609

with a copy to:

Altheimer & Gray
10 South Wacker Drive
Suite 4000
Chicago, Illinois 60606
Attention: David W. Schoenberg
Fax: (312) 715-4800

If to Purchaser:

Magnetek, Inc.
26 Century Boulevard
Suite 600
Nashville, TN 37214
Attention: John P. Colling, Jr.
Fax: (615) 316-5192

and to

Magnetek, Inc.
10900 Wilshire Boulevard
Suite 850
Los Angeles, CA 90024
Attention: Tina McKnight
Fax:(310) 208-6133

with a copy to:

Snell & Wilmer, LLP
One Arizona Center
400 E. Van Buren
Phoenix, AZ 85004
Attention: Matthew P. Feeney
Fax: (602) 382-6070

and/or to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 23(c).

        (d)    Expenses; Transfer Taxes.    Except as otherwise provided herein, each party hereto shall bear all fees and expenses incurred by such party in connection with, relating to or arising out of the negotiation, preparation, execution, delivery and performance of this Agreement and the consummation of the transaction contemplated hereby, including, without limitation, financial advisors', attorneys', accountants' and other professional fees and expenses. Without limiting the generality of the immediately preceding sentence, any of such fees and expenses incurred by Sellers, whether before or after the date hereof, may not be paid by, or out of the assets of, the Company or the Subsidiary. Each party hereto will be liable for, and will timely pay, any and all

Taxes to which it is subject under applicable federal, state, local and foreign laws in connection with the transaction contemplated hereby.

        (e)    Entire Agreement.    This Agreement and the instruments to be delivered by the parties pursuant to the provisions hereof constitute the entire agreement between the parties and shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors and permitted assigns. Each Exhibit, schedule and the Disclosure Schedule, shall be considered incorporated into and made a part of this Agreement. Any amendments, or alternative or supplementary provisions, to this Agreement, must be made in writing and duly executed by an authorized representative or agent of each of the parties hereto. Each item of disclosure in the Disclosure Schedule shall correspond only to the particular paragraph or subparagraph of Section 9 hereof to which such item of disclosure is expressly stated to refer. The inclusion in any part of the Disclosure Schedule of any item of disclosure in respect of a particular paragraph or subparagraph of Section 9 hereof shall not, nor shall it be deemed to, constitute disclosure for purposes of any other part of the Disclosure Schedule unless specific reference to such item of disclosure is made in each applicable portion of the Disclosure Schedule. The inclusion of any item in the Disclosure Schedule is not evidence of the materiality of such item for the purposes of this Agreement. The parties make no representations or warranties to each other, except as contained in this Agreement, and any and all prior representations and warranties made by any party or its representatives, whether verbally or in writing, are deemed to have been merged into this Agreement, it being intended that no such prior representations or warranties shall survive the execution and delivery of this Agreement. Subject to the limitations on indemnification set forth in Sections 16 and 18, the representations, warranties, covenants and obligations of the parties hereto in this Agreement will survive the Closing and continue in full force and effect, regardless of any investigation conducted by the party to which such representation, warranty, covenant or obligation was given (including such party's representatives) or any knowledge acquired (or capable of being acquired) by such party (or its representatives) at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy or inaccuracy of, or compliance with, any such representation, warranty, covenant or obligation. Purchaser acknowledges that any estimates, forecasts, or projections furnished or made available to it concerning the Company or the Subsidiary (including, without limitation, the contents of the confidential offering memorandum circulated by BMO Nesbitt Burns, Inc.) on their properties, business or assets have not been prepared in accordance with GAAP or standards applicable under the Securities Act of 1933, as amended, and such estimates, and the estimates reflected in the Financial Statements and the Interim Financial Statements, reflect numerous assumptions, and are subject to material risks and uncertainties.

        (f)    Non-Waiver.    The failure in any one or more instances of a party to insist upon performance of any of the terms, covenants or conditions of this Agreement, to exercise any right or privilege in this Agreement conferred, or the waiver by said party of any breach of any of the terms, covenants or conditions of this Agreement, shall not be construed as a subsequent waiver of any such terms, covenants, conditions, rights or privileges, but the same shall continue and remain in full force and effect as if no such forbearance or waiver had occurred. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

        (g)    Counterparts.    This Agreement may be executed in multiple counterparts and delivered in original form or by electronic facsimile, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. This Agreement will become effective when each party hereto, or its counsel, has received a counterpart hereof signed by each other party hereto.

        (h)    Severability.    If any provision of this Agreement, or the application of any such provision to any Person or circumstance, is held to be unenforceable or invalid by any court of competent jurisdiction or arbitrator or under any applicable law, the parties hereto will negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement. If any provision of Section 14(c)

hereof is found by any court of competent jurisdiction or arbitrator to exceed the temporal, geographic or occupational limits permitted by any applicable law, such provision shall be, and is hereby, reformed to the maximum temporal, geographic and/or occupational limitations permitted by such applicable law. In any event, the invalidity of any provision of this Agreement or portion of a provision shall not affect the validity of any other provision of this Agreement or the remaining portion of the applicable provision.

        (i)    Applicable Law.    The provisions of Section 14(c) shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Illinois, without reference to choice or conflicts of law rules. All other provisions of this Agreement and any other agreement, instrument or document delivered at Closing in connection with the transaction contemplated hereby shall be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Delaware, without reference to choice or conflicts of law rules.

        (j)    Binding Effect; Benefit.    This Agreement shall inure to the benefit of and be binding upon the parties hereto, and their successors and permitted assigns. Nothing in this Agreement, express or implied, shall confer on any Person other than the parties hereto, and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, including, without limitation, third party beneficiary rights, except that the Indemnified Employees shall be third party beneficiaries of Section 14(b), the Stockholders' Committee shall be third party beneficiaries of Section 22(f), the Purchaser Indemnitees (other than Purchaser) shall be third party beneficiaries of Sections 15, and 22(e), and the Seller Indemnitees (other than Sellers) shall be third party beneficiaries of Section 17.

        (k)    Assignability.    This Agreement shall not be assignable by any Seller without the prior written consent of Purchaser, or by Purchaser without the prior written consent of the Stockholders' Committee; provided, however, that Purchaser may assign this Agreement to a wholly-owned subsidiary without such consent if Purchaser remains liable for its covenants and obligations hereunder.

        (l)    Governmental Reporting.    Anything to the contrary in this Agreement notwithstanding, nothing in this Agreement shall be construed to mean that a party hereto or other Person must make or file, or cooperate in the making or filing of, any return or report to any governmental authority in any manner that such Person or such party reasonably believes or reasonably is advised is not in accordance with law.

        (m)    Waiver of Trial by Jury.    Each of the parties hereto waives the right to a jury trial in connection with any suit, action or proceeding seeking enforcement of such party's rights under this Agreement.

        (n)    Consent to Jurisdiction.    This Agreement has been executed and delivered in and shall be deemed to have been made in Chicago, Illinois. Sellers and Purchaser each agree to the nonexclusive jurisdiction of any state or Federal court within the City of Chicago, Illinois or the City of Los Angeles, California, with respect to any claim or cause of action arising under or relating to this Agreement, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 23(c), and service so made shall be deemed to be completed when received. Sellers and Purchaser each waive any objection based on forum non conveniens and waive any objection to venue of any action instituted hereunder. Nothing in this paragraph shall affect the right of Sellers or Purchaser to serve legal process in any other manner permitted by law.

        (o)    Amendments.    This Agreement shall not be modified or amended except pursuant to an instrument in writing executed and delivered on behalf of each of the parties hereto.

        (p)    Dates and Times.    Dates and times set forth in this Agreement for the performance of the parties' respective duties and obligations will be strictly construed, time being of the essence of this Agreement.

        (q)    Headings; Section References; Interpretation.    The headings contained in this Agreement are for convenience of reference only and, shall not affect the meaning or interpretation of this Agreement. Unless otherwise expressly indicated, any reference in this Agreement (including any Schedule hereto) to a "Section", "paragraph" or "subparagraph" followed by a number or letter or combination of the two shall be a reference to the particular Section, paragraph or subparagraph of this Agreement bearing such number, letter or combination thereof. The terms "hereof," "herein," "hereunder" and comparable terms refer, unless otherwise expressly indicated, to this Agreement as a whole and not to any particular Section, paragraph, subparagraph or other subdivision hereof or any Schedule, Exhibit or other attachment hereto. The terms "include", "includes" and "including" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. Whenever the context so requires, the singular number will include the plural and the plural will include the singular, and the gender of any pronoun will include the other gender or neuter, as applicable.

        (r)    Table of Definitions.    The following Capitalized terms are defined in the following sections of this Agreement:

DEFINED TERM	SECTION LOCATION
Accountants	9(o)(iii)
Affiliate	8(e)(ii)
Arbitrating Accountant	5(b)
Benefit Plans	9(q)(i)(c)
Business	Recital A
Business Day	4
Cash Equivalents	2(b)
CERCLA	9(u)(i)
Claims	1
Closing	7
Closing Balance Sheet	4
Closing Date	7
Closing Estimate	6(a)
Code	9(m)(i)(C)
Company	Preamble
Control	8(e)(iii)
Damages	15(x)
Dealy	2(f)
Dealy Amount	2(f)
Decker Agreement	2(c)
Decker Amount	2(e)
Deductible	16(a)
Delivery Date	4
Disclosure Schedule	9
Dispute	5(a)
Dispute Notice	5(a)
Dispute Period	5(a)
Edson II	14(f)
Employee Benefit Plan	9(q)(i)(c)
Environmental Claim	9(u)(ii)
Environmental Laws	9(u)(ii)(B)
Environmental Permits	9(u)(ii)(C)
ERISA	9(q)(i)(A)
ERISA Affiliate	9(q)(i)
Escrow Agreement	6(a)(i)

Escrow Deposit	6(a)(i)
Escrowee	6(a)(i)
Facility	9(u)(ii)(D)
Financial Statements	9(h)
GAAP	3
Hazardous Activity	15(e)
Hazardous Substances	9(u)(ii)(D)
Indebtedness	2(d)
Indemnified Employee	14(b)(i)
Indemnified Employee Liability	14(b)(i)
Indemnified Employees	14(b)(i)
Indemnitee	19(a)
Indemnitor	19(a)
Intellectual Property	9(x)(ix)(A)
Intellectual Property Licenses	9(x)(i)(C)
Interim Financial Statement Date	9(h)
Interim Financial Statements	9(h)
IRS	6(c)
Leased Real Property	9(v)
Liabilities	9(i)
Mass Mutual Entities	9(g)(i)
Material Adverse Effect	9(a)
Material Contracts	9(o)(ii)
Offsite Facility	9(u)(ii)(E)
Permits	9(p)
Person	8(e)(i)
Plan	9(q)(i)(A)
Proprietary Software	9(x)(i)(B)
Purchase Price	2
Purchaser	Preamble
Purchaser Indemnitee	15
Purchaser Indemnitees	15
Related Parties	9(cc)
Release	9(u)(ii)(F)
Return	9(m)(i)(B)
Returns	9(m)(i)(B)
Seller	Preamble
Seller Entity	10(b)
Seller Indemnitees	17
Seller Releases	14(b)(iii)
Sellers	Preamble
Shares	Recital A
Software	9(x)(ix)(B)
Stockholders' Committee	22
Subsidiary	Recital A
Tax	9(m)(i)(A)
Tax Savings	2(c)
Taxes	9(m)(i)(A)
Taxing Authority	9(m)(i)(D)
Telemotive Industrial Controls	Recital A
TIC Brazil	9(gg)
Third-Party Claim	15(y)
Title IV Plan	9(q)(i)(c)
Welfare Plan	9(q)(i)(B)
Wenglor Heads	4
Working Capital	3
Working Capital Adjustment	3

        IN WITNESS WHEREOF, the parties have executed this Agreement on the date first above written.

SELLERS:
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
By: David L. Babson & Company, Inc., its investment adviser
By:	/s/  MICHAEL L. KLOFAS
Name:	Michael L. Klofas
Title:	Managing Director
MASSMUTUAL CORPORATE INVESTORS
By:	/s/  MICHAEL L. KLOFAS
Name:	Michael L. Klofas
Title:	Vice President
The foregoing is executed on behalf of MassMutual Corporate Investors, organized under a Declaration of Trust, dated September 13, 1985, as amended from time to time. The obligations of such Trust are not personally binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust, but the Trust's property only shall be bound.
MASSMUTUAL PARTICIPATION INVESTORS
By:	/s/  MICHAEL L. KLOFAS
Name:	Michael L. Klofas
Title:	Vice President
The foregoing is executed on behalf of MassMutual Participation Investors, organized under a Declaration of Trust, dated April 7, 1988, as amended from time to time. The obligations of such Trust are not binding upon, nor shall resort be had to the property of, any of the Trustees, shareholders, officers, employees or agents of such Trust individually, but the Trust's assets and property only shall be bound.
MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED
By: David L. Babson & Company, Inc., under delegated authority from Massachusetts Mutual Life Insurance Company, its investment Manager
By:	/s/  MICHAEL L. KLOFAS
Name:	Michael L. Klofas
Title:	Managing Director

EDSON PARTNERS II, L.P.
By: EHE, Inc., sole general partner
By	/s/  CHARLES M. ALLEN Charles M. Allen, President

PURCHASER:

MAGNETEK, INC.

By:	/s/  JOHN P. COLLING, JR.
Its:	V.P. & TREASURER

EXHIBIT A

STOCKHOLDERS LIST
OF MXT HOLDINGS, INC.

Name of Shareholder	Class of Common Stock	Cert. #	Number of Shares	Date of Issuance	Disposition	Reason for Issuance
Edson Partners II, L.P.	A	A-1	255,208	06/28/95	Outstanding	Original Issue
Massachusetts Mutual Life Insurance Company	B	B-1	49,679.5	06/28/95	Outstanding	Original Issue
Massachusetts Mutual Life Insurance Company	B	B-2	49,679.5	06/28/95	Outstanding	Original Issue
MassMutual Corporate Investors	B	B-3	76,923	06/28/95	Outstanding	Original Issue
MassMutual Participation Investors	B	B-4	38,462	06/28/95	Outstanding	Original Issue
MassMutual Corporate Value Partners Limited (registered in the name of Webell & Co.)	B	B-5	76,923	06/28/95	Cancelled—transferred to Certificate B-6	Original Issue
Gerlach & Co.	B	B-6	76,923	02/15/96	Outstanding	Transferred from Certificate B-5
Massachusetts Mutual Life Insurance Company	B	B-7	23,013	12/02	Outstanding	Exercise of Warrant RW-1
Massachusetts Mutual Life Insurance Company	B	B-8	23,013	12/02	Outstanding	Exercise of Warrant RW-2
MassMutual Corporate Investors	B	B-9	35,633	12/02	Outstanding	Exercise of Warrant RW-3
MassMutual Participation Investors	B	B-10	17,816	12/02	Outstanding	Exercise of Warrant RW-4
Gerlach & Co.	B	B-11	35,633	12/02	Outstanding	Exercise of Warrant RW-5

EXHIBIT B

ALLOCATION OF PURCHASE PRICE

NAME	ALLOCATION
Edson Partners II, L.P.	$	607,746.34
Massachusetts Mutual Life Insurance Company	$	346,680.22
MassMutual Corporate Investors	$	268,051.72
MassMutual Participation Investors	$	134,025.86
Gerlach & Co.	$	268,051.72
TOTAL	$	1,624,555.86

Exhibit C

Working Capital Calculation—September 30, 2002
Dollars in Thousands

CURRENT ASSETS
Accounts Receivable, net		$	1,711.5
Inventory, net			1,866.9
Prepaid Expenses			112.7
	Total Current Assets	$	3,691.2
CURRENT LIABILITIES
Accounts Payable		$	437.8
Current Portion of HP Lease			9.9
Accrued Liabilities			426.1
		$	873.8
Working Capital(1)		$	2,817.4

(1)

Equal to non-cash Current Assets less non-debt (except HP Lease) Current Liabilities.

Exhibit D to the Stock Purchase Agreement
Escrow Agreement

EXHIBIT D

ESCROW AGREEMENT

        This ESCROW AGREEMENT (this "Agreement") is made this 30th day of December, 2002 by and among Magnetek, Inc., a Delaware corporation ("Magnetek"), the MXT Holdings, Inc. Stockholders' Committee, represented by Crowe, Chizek & Co. LLP and David L. Babson & Company Inc. (collectively, the "Stockholders' Committee") and Bank One Trust Company, N.A. ("Bank One") as escrow agent. Magnetek, the Stockholders' Committee and Bank One are sometimes referred to herein collectively as the "Parties" and individually as a "Party". All initially capitalized words or terms not otherwise defined in this Agreement have the respective meanings ascribed to them in the Stock Purchase Agreement (as defined below).

R E C I T A L S

        Pursuant to that certain Stock Purchase Agreement made by and among Magnetek and the Sellers dated as of December 30th, 2002 (the "Stock Purchase Agreement"), Magnetek purchased and acquired from the Sellers all of the issued and outstanding stock of MXT Holdings, Inc., an Illinois corporation.

        Pursuant to Section 15 of the Stock Purchase Agreement, the Sellers have agreed to indemnify Magnetek for damages, losses and other liabilities arising from, among other things, breaches of covenants, agreements, representations and warranties set forth in the Stock Purchase Agreement.

        This Agreement is entered into pursuant to Section 6(a)(i) of the Stock Purchase Agreement to establish an escrow of a portion of the Purchase Price, which escrow, pursuant to Section 20(c) of the Stock Purchase Agreement, may be accessed in respect of a claim for indemnification by Magnetek under Section 15 of the Stock Purchase Agreement against the Sellers, or any of them.

        The Sellers have authorized the Stockholders' Committee to represent them with respect to all matters contemplated in this Agreement, as more fully described in Section 5.1.

        NOW, THEREFORE, in consideration of the premises, and the mutual representations, warranties, covenants and agreements hereinafter set forth, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

ARTICLE I

ESCROW AGENT: ESCROW OF FUNDS

        1.1    Appointment of Escrow Agent.    The Stockholders' Committee and Magnetek hereby appoint Bank One as escrow agent hereunder, and Bank One hereby accepts such appointment. For purposes of this Agreement, the term "Escrow Agent" will mean Bank One acting in the capacity of escrow agent hereunder or any other Person that replaces Bank One as escrow agent following Bank One's resignation or removal as escrow agent pursuant to the provisions hereof.

        1.2    Delivery of Escrow Amount.    Simultaneously with the execution of this Agreement, pursuant to the provisions of the Stock Purchase Agreement, Magnetek has delivered to the Escrow Agent, by wire transfer of immediately available funds, One Million Dollars ($1,000,000) (the "Escrow Amount"), and the Escrow Agent hereby acknowledges receipt of the Escrow Amount and agrees to hold, safeguard and disburse the Escrow Amount only in accordance with the provisions hereof.

        1.3    Investment of Funds Held by Escrow Agent: Interest and Income.    Pending distribution in accordance with the provisions hereof, the Escrow Amount held by the Escrow Agent pursuant to this Agreement will be invested in The One Group U.S. Treasury Money Market Fund or, if directed in writing by the Stockholders' Committee and Magnetek, in short term, liquid U.S. Government securities. The Parties hereby acknowledge and agree that unless the Escrow Amount and any such written instructions are delivered to the Escrow Agent by 11:00 a.m. Central Time on a Business Day, the Escrow Amount will remain uninvested until the next Business Day. All interest or other income earned on the Escrow Amount will be the exclusive property of Sellers and will not form part of the

Escrow Amount. Unless otherwise required by applicable law, the Stockholders' Committee and Magnetek agree, for United States federal income tax purposes, to treat all interest and other income earned on the Escrow Amount as income to the Sellers, and the Stockholders' Committee agrees to cause each Seller to file all tax returns on a basis consistent with such treatment. The Stockholders' Committee may request at any time, and in which event the Escrow Agent will promptly release from escrow and pay to the Stockholders' Committee on behalf of the Sellers, by wire transfer of immediately available funds, any and all interest or other income earned on the Escrow Amount. The Escrow Agent shall have no responsibility or liability for any diminution in value of any asset held hereunder which may result from any investment or reinvestment made in accordance with any provision of this Agreement.

        1.4    Availability of Funds/Delivery of Property.    The release and payment of the Escrow Amount, or any portion thereof, as provided herein will be subject to the sale and final settlement of the permitted investments referred to in Section 1.3. Delivery by Magnetek and/or the Stockholders' Committee to the Escrow Agent of any Payout Direction (as defined in Section 2.1(a)) or other notice or direction for the release and payment of the Escrow Amount, or any portion thereof, when the Escrow Amount is invested in The One Group U.S. Treasury Money Market Fund, must be made to the Escrow Agent by 11:00 a.m. Central Time if the Escrow Amount is required under such notice or direction to be delivered by the close of that Business Day. Otherwise, the Escrow Amount will be delivered on the next Business Day. With respect to the sale of any other permitted investment, if the final settlement of that sale has not occurred by 1:00 p.m. Central Time on the day such notice or direction for release and payment is delivered to the Escrow Agent, then the portion of the Escrow Amount to be released and paid by the Escrow Agent will be released and paid on the next Business Day following the day on which such Payout Direction or other notice or direction is delivered to the Escrow Agent.

ARTICLE II

DISTRIBUTION OF ESCROW AMOUNT

        2.1    Distribution of Escrow Amount.    Subject to the provisions of Sections 2.2 and 2.3, the Escrow Agent will distribute the Escrow Amount only as follows:

        (a)   If Magnetek is entitled to any payment for Damages for any valid indemnification claim pursuant to Section 15 of the Stock Purchase Agreement, Magnetek will execute and deliver to the Escrow Agent, with a copy simultaneously sent to the Stockholders' Committee in accordance with Section 5.2, an originally executed direction (a "Payout Direction") directing the Escrow Agent to pay to Magnetek that portion of the Escrow Amount which is equal to the amount of such Damages claim, up to the full amount of the Escrow Amount, less any unpaid portion of Magnetek's share of the Escrow Agent's fees and expenses contemplated in Section 3.1(g).

        (b)   At any time after the second (2nd) anniversary of the Closing Date, the Stockholders' Committee may execute and deliver to the Escrow Agent, with a copy simultaneously sent to Magnetek in accordance with Section 5.2, a Payout Direction directing the Escrow Agent to pay to release from escrow and pay to the Stockholders' Committee any and all remaining Escrow Amount, less any unpaid portion of the Escrow Agent's fees and expenses contemplated in Section 3.1(g).

        2.2    Treatment of Payout Directions and Escrow Release.    The Escrow Agent will act on any Payout Direction that it receives pursuant to Sections 2.1(a) or (b) as follows:

        (a)   The Escrow Agent may not act on a Payout Direction delivered to it by Magnetek pursuant to Section 2.1(a) or by the Stockholders' Committee pursuant to Section 2.1(b) unless such Payout Direction contains (i) a reference to the specific provisions of the Stock Purchase Agreement and/or this Agreement pursuant to which such Payout Direction is delivered, (ii) the amount of the Escrow Amount requested for payment, and (iii) a certification that a copy of such Payout Direction has been sent to the Party (the "Opposing Party") that would be entitled to

deliver an Objection Notice (as defined below) with respect thereto in accordance with the provisions of Section 2.1.

        (b)   The Escrow Agent will hold any Payout Direction that it receives pursuant to Section 2.1(a) or (b), without taking any action, for ten (10) Business Days, during which time the applicable Opposing Party may deliver to the Escrow Agent, with a copy sent to the Party that delivered the Payout Direction in accordance with Section 5.2, written notice of its good faith objection to such Payout Direction or the amount sought therein, which notice must contain reasonable details as to the reason for such objection (an "Objection Notice"). For purposes of this Section 2.2(b), Magnetek may only give an Objection Notice on the basis that it has made a claim against the Sellers, or any of them, for indemnification under Section 15 of the Stock Purchase Agreement, and in connection therewith, Magnetek intends to claim any part of the remaining Escrow Amount in full or partial satisfaction of such indemnification claim. If the Escrow Agent does not receive an Objection Notice from the Stockholders' Committee in respect of a Magnetek Payout Direction or from Magnetek in respect of a Stockholders' Committee Payout Direction within the time period specified above, the Party that would have the right to give such Objection Notice will be irrevocably deemed to have agreed with and consented to the Payout Direction, in which event the Escrow Agent will be, without further notice, authorized and directed to promptly deliver to the Party that delivered the Payout Direction payment of the amount of the Escrow Amount referred to in such Payout Direction (less any applicable withholdings of the Escrow Agent's fees and expenses, as contemplated in Section 2.1) by wire transfer of immediately available funds.

        (c)   If the Stockholders' Committee or Magnetek delivers an Objection Notice within the ten (10) Business Day period specified in Section 2.2(b), the Escrow Agent will continue to hold the amount of the Escrow Amount sought in the Payout Direction that triggered such Objection Notice pending the resolution between Magnetek and the Stockholders' Committee of the disagreement or dispute forming the basis of the Objection Notice.

        (d)   Within ten (10) Business Days following delivery of an Objection Notice, Magnetek and the Stockholders' Committee will commence discussions with a view to resolving the disagreement or dispute forming the basis of the Objection Notice. If Magnetek and the Stockholders' Committee resolve such disagreement or dispute through such discussions, they will deliver a joint written notice to the Escrow Agent of such resolution, including the details of any payment to be made out of the Escrow Amount. Following its receipt of such notice, the Escrow Agent will promptly deliver to the applicable Party payment of the specified amount of the Escrow Amount referred to in such notice (less any applicable withholdings of the Escrow Agent's fees and expenses, as contemplated in Section 2.1) by wire transfer of immediately available funds. If, within sixty (60) calendar days after the date of delivery of an Objection Notice, the disagreement or dispute on which such Objection Notice is based is not resolved through discussions, Magnetek or the Stockholders' Committee will be entitled to undertake formal proceedings to resolve such dispute, subject to the provisions of Sections 5.9 and 5.10. If either Party prevails in such proceedings so as to entitle such Party to receive some or all of the Escrow Amount, the Escrow Agent will be authorized to immediately release from escrow and pay such amount to such Party (less any applicable withholdings of the Escrow Agent's fees and expenses, as contemplated in Section 2.1) upon receipt from such Party of (i) an executed Payout Direction indicating the amount of such payment to be made, and (ii) a copy of the court order or finding in favor of such Party stating an amount being awarded in favor of such Party that is equal to or greater than the amount referred to in such Payout Direction.

        2.3    Joint Payout Direction.    Notwithstanding any provision of Section 2.1 or 2.2, Magnetek and the Stockholders' Committee may, at any time, jointly execute and deliver to the Escrow Agent one or more Payout Directions directing the Escrow Agent to pay to Magnetek and/or the Stockholders' Committee such amounts of the Escrow Amount as may be provided in such Payout Direction(s), less any unpaid portion of the Escrow Agent's fees and expenses contemplated in Section 3.1(g).

ARTICLE III

ESCROW AGENT

        3.1    Concerning the Escrow Agent.

        (a)   The Parties acknowledge and agree that the Escrow Agent is acting solely and exclusively as a depository hereunder, and will have only those duties as are specifically provided herein, which will be deemed purely ministerial in nature. The Escrow Agent will under no circumstances be deemed a fiduciary for any of the other Parties. The Escrow Agent will neither be responsible for, nor chargeable with, knowledge of the terms and conditions of any other agreement, instrument or document between the other Parties in connection herewith, including, without limitation, the Stock Purchase Agreement (except that the Escrow Agent has been provided with a copy of the Stock Purchase Agreement for the sole purpose of understanding certain terms used herein that are defined in the Stock Purchase Agreement, and the Escrow Agent acknowledges that it has reviewed and understands such definitions). The Escrow Agent will have no liability to any Person in acting upon any written notice, request, waiver, consent, certificate, receipt, authorization, or other paper or document which the Escrow Agent believes in good faith to be genuine and what it purports to be.

        (b)   The Escrow Agent may confer with legal counsel in the event of any dispute or question as to the construction of any of the provisions hereof, or its duties hereunder, and it will incur no liability and it will be fully protected in acting in accordance with the opinions of such counsel. The Escrow Agent may perform any of its duties hereunder through agents, attorneys, custodians or nominees; provided, however, that (i) the Escrow Agent will remain solely liable for the performance of its duties and obligations hereunder (and for any nonperformance by any such delegate), and (ii) if the Escrow Agent seeks to delegate all or substantially all of its duties and obligations hereunder, it will resign as Escrow Agent in accordance with Section 3.1(f).

        (c)   In the event of any conflicting or inconsistent claims or demands being made in connection with the subject matter of this Agreement, or in the event that the Escrow Agent is in doubt as to what action it should take hereunder, the Escrow Agent may, at its option, refuse to comply with any claim, direction or demand made against or on it, or refuse to take any other action hereunder so long as such disagreement continues or such doubt exists. If the Escrow Agent has any doubt as to the course of action it should take under this Agreement, the Escrow Agent is hereby authorized to petition any state or federal court of Illinois for instructions or to interplead the Escrow Amount into such court. For purposes of the immediately preceding sentence only, the Parties agree to the jurisdiction of any of said courts over their persons as well as the Escrow Amount, waive personal service of process, and agree that service of process by certified or registered mail, return receipt requested, to the address set forth below each Party's signature to this Agreement will constitute adequate service. The Escrow Agent will not be or become liable in any way or to any Person for its failure or refusal to act hereunder, and the Escrow Agent will be entitled to continue to refrain from acting hereunder until (i) the rights of all Parties have been fully and finally adjudicated pursuant to the provisions of this Section 3.1(c) or Section 5.9, as applicable, or (ii) all differences have been settled and all doubt resolved by agreement among all of the interested Parties, and the Escrow Agent is notified thereof in writing signed by Magnetek and the Stockholders' Committee. the Stockholders' Committee and Magnetek hereby agree to indemnify and hold the Escrow Agent harmless from any liability or losses occasioned thereby and to pay any and all of its fees, costs, expenses, and counsel fees and expenses incurred in any such action and agree that, on such petition or interpleader action, the Escrow Agent, its servants, agents, employees and officers will be relieved of further liability. The Escrow Agent is hereby given a lien upon, and security interest in, the Escrow Amount to secure the Escrow Agent's rights to payment or reimbursement (or both) under this Agreement.

        (d)   THE ESCROW AGENT WILL NOT BE LIABLE TO MAGNETEK, THE STOCKHOLDERS' COMMITTEE, ANY SELLER OR ANY OTHER PERSON FOR ANYTHING WHICH THE ESCROW AGENT MAY DO OR REFRAIN FROM DOING

PURSUANT TO THE EXPRESS PROVISIONS OF THIS AGREEMENT, INCLUDING ANY ACTION OR FAILURE TO ACT WHICH MAY CONSTITUTE THE ESCROW AGENT'S OWN NEGLIGENCE, BUT EXCLUDING THE ESCROW AGENT'S OWN GROSS NEGLIGENCE, FRAUD OR WILLFUL MALFEASANCE. IN NO EVENT WILL THE ESCROW AGENT BE LIABLE TO MAGNETEK, THE STOCKHOLDERS' COMMITTEE, ANY SELLER OR ANY OTHER PERSON FOR SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES, OR LOST PROFITS OR LOSS OF BUSINESS, ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT.

        (e)   MAGNETEK AND THE STOCKHOLDERS COMMITTEE HEREBY AGREE JOINTLY AND SEVERALLY TO PROTECT, DEFEND, INDEMNIFY AND HOLD HARMLESS THE ESCROW AGENT AGAINST ANY AND ALL COSTS, LOSSES, DAMAGES, LIABILITIES, CLAIMS AND EXPENSES (INCLUDING REASONABLE LEGAL COUNSEL FEES AND EXPENSES) INCURRED BY IT ARISING OUT OF OR IN CONNECTION WITH ITS ENTERING INTO THIS AGREEMENT AND THE CARRYING OUT OF ITS DUTIES HEREUNDER, INCLUDING THE COSTS AND EXPENSES OF DEFENDING ITSELF AGAINST ANY CLAIM OF LIABILITY RELATING TO THIS AGREEMENT; PROVIDED, HOWEVER, THAT SUCH INDEMNITY WILL NOT APPLY TO ANY COSTS, LOSSES, DAMAGES, LIABILITIES, CLAIMS OR EXPENSES ARISING OUT OF OR IN CONNECTION WITH ANY GROSS NEGLIGENCE, FRAUD OR WILLFUL MALFEASANCE ON THE ESCROW AGENT'S PART. THE ABOVE INDEMNIFICATION SHALL SURVIVE THE RESIGNATION OR REMOVAL OF THE ESCROW AGENT AND/OR THE TERMINATION OF THIS AGREEMENT.

        (f)    The Escrow Agent may resign as escrow agent hereunder for any reason upon at least thirty (30) days' prior written notice to the Stockholders' Committee and Magnetek. Forthwith upon expiration of such notice period, the Escrow Agent will deliver the Escrow Amount, after the payment to itself of all fees and expenses of the Escrow Agent due and payable hereunder, to any successor escrow agent appointed jointly by the Stockholders' Committee and Magnetek (and of which the Escrow Agent is notified), or if no successor escrow agent has been so appointed, to any court of competent jurisdiction referred to in Section 3.1(c). Upon either such delivery, the Escrow Agent will be released from its obligations and liabilities hereunder, other than any liability for gross negligence, fraud or willful malfeasance of the Escrow Agent occurring before or in connection with such delivery. Release of the Escrow Agent under this Section 3.1(f) will in no way discharge the Stockholders' Committee or Magnetek of their obligations under this Section 3.1 regarding reimbursement of expenses, indemnity and fees.

        (g)   In consideration for its services hereunder, the Escrow Agent will be entitled only to the fees set forth in Schedule A to this Agreement. The Escrow Agent acknowledges and agrees that it will provide the services described herein in consideration of such fees and that, subject to the express provisions of this Section 3.1, the Escrow Agent will not be entitled to receive, and no other Party will be obligated to pay the Escrow Agent, any other fees or expenses for its services hereunder. Simultaneously with the execution and delivery of this Agreement by the Parties, Magnetek will pay to the Escrow Agent the aggregate Two Thousand Dollar ($2,000) Acceptance Fee and Annual Administrative Fee referred to in Schedule A. All other fees and expenses owing to the Escrow Agent under Schedule A will be paid by Magnetek as and when due.

        (h)   It is strictly understood that the Escrow Agent has no duty to disburse the Escrow Amount (or any portion thereof) to any Person until the Escrow Amount has been collected by the Escrow Agent and the Escrow Amount is available in accordance with normal banking procedures and/or policies.

        (i)    No assignment of the rights and interests herein and hereunder of either Magnetek or the Stockholders' Committee will be binding upon the Escrow Agent unless and until written evidence of such assignment, in form and substance satisfactory to the Escrow Agent, is delivered to and accepted by the Escrow Agent.

        (j)    Any Person into which the Escrow Agent is converted or merged, or with which it is consolidated, or to which it may sell or transfer its corporate trust business and assets as a whole or in part, or any Person resulting from any such conversion, sale, merger, consolidation or transfer to which it is a party, will be and become the successor Escrow Agent hereunder and will be vested with all of the title to the whole property or trust estate and all the trust, powers, immunities, privileges, protections and all other matters as was its predecessor, without the execution or filing of any instrument or any further act, deed or conveyance on the part of any of the Parties, anything herein to the contrary notwithstanding.

        3.2    Removal of the Escrow Agent.    the Stockholders' Committee and Magnetek may terminate, discharge and relieve the Escrow Agent of its duties hereunder at any time upon delivery of written notice thereof, jointly executed by the Stockholders' Committee and Magnetek. Forthwith, after its receipt of such notice, the Escrow Agent will make all necessary arrangements to promptly and securely transfer the Escrow Amount into the possession of whichever Person or Persons as the Stockholders' Committee and Magnetek may specify in such written notice or in any other jointly executed notice to the Escrow Agent. Upon delivery by the Escrow Agent of the Escrow Amount to such specified Person or persons in the manner provided in such notice, the Escrow Agent will be released from its obligations and liabilities under this Agreement, other than any liability for gross negligence, fraud or willful malfeasance of the Escrow Agent occurring before or in connection with such delivery. Release of the Escrow Agent under this Section 3.2 will in no way discharge the Stockholders' Committee and Magnetek of their obligations under Section 3.1 regarding reimbursement of expenses, indemnity and fees. The Escrow Agent will have the right to deduct from the Escrow Amount to be transferred to the Person or Persons referred to in the Stockholders' Committee's and Magnetek's notice an amount equal to any unpaid fees and expenses due and payable hereunder.

        3.3    Successor Escrow Agent.    Any successor Escrow Agent appointed by the Stockholders' Committee and Magnetek in connection with the Escrow Agent's resignation or removal will be required to execute and deliver to each of the Stockholders' Committee and Magnetek an instrument accepting such appointment and all duties and obligations provided hereunder, in which event such successor Escrow Agent will become vested in all rights, powers, duties and obligations of its predecessor for execution of the mandate provided herein, with like effect as if originally named as the Escrow Agent hereunder.

ARTICLE IV

TERM OF AGREEMENT

        4.1    Term of Escrow.    This Agreement will take effect as of the date hereof. Notwithstanding any other provision hereof, the term of this Agreement, other than the Stockholders' Committee's and Magnetek's joint and several indemnities hereunder, will terminate on the date which is the earlier of:

        (a)   the date on which all of the Escrow Amount has been properly disbursed by the Escrow Agent in accordance with the provisions of Article II; and

        (b)   the effective date of termination of this Agreement, as specified in a written notice of termination jointly executed by the Stockholders' Committee, Magnetek and the Escrow Agent, provided that such termination is not contrary to any order, judgment or decree of a court of competent jurisdiction.

ARTICLE V

MISCELLANEOUS

        5.1    Authority of Stockholders' Committee.    The Stockholders' Committee hereby represents and warrants to Magnetek and the Escrow Agent that, pursuant to Section 22 of the Stock Purchase Agreement, the Stockholders' Committee has been appointed by each Seller as such Seller's agent and attorney-in-fact for all purposes of this Agreement, and in such regard, the Stockholders' Committee has all necessary authority to act for and on behalf of, and to bind, the Sellers with respect to all

matters contemplated herein, and that any action (including any inaction) of the Stockholders' Committee hereunder or in connection herewith will be binding upon the Sellers as if such action (or inaction) was undertaken directly by each Seller. Each of Magnetek and the Escrow Agent will at all times be entitled to treat the statements and actions (including non-actions) of the Stockholders' Committee (including any representative thereof) in connection with this Agreement as the statements and actions of any and all of the Sellers, and neither Magnetek nor the Escrow Agent will have any duty or obligation to independently verify or confirm with any Seller, any member of the Stockholders' Committee or any other Person the accuracy, truthfulness or validity of any such statement or action (including non-action) of the Stockholders' Committee or the authority of the Stockholders' Committee (or any representative thereof) to make or take such statement or action (or non-action).

        5.2    Notices.    All notices required or permitted to be given hereunder shall be in writing and delivered by hand, by facsimile, by nationally recognized private courier, or by United States registered or certified mail, return receipt requested, postage prepaid. Notices delivered by mail shall be deemed given three (3) Business Days after being deposited in the United States registered or certified mail, return receipt requested, postage prepaid. Notices delivered by hand by facsimile, or by nationally recognized private courier shall be deemed given on the first Business Day following receipt; provided, however, that a notice delivered by facsimile shall only be effective if such notice is also delivered by hand, or deposited in the United States mail, postage prepaid, registered or certified mail, on or before two (2) Business Days after its delivery by facsimile. All notices shall be addressed as follows:

        (a)   If to Magnetek, to

10900 Wilshire Boulevard, Suite 850
Los Angeles, California
90024-6501
Attention: Tina McKnight
Fax No: 310-208-1322


and to:

26 Century Boulevard, Suite 600
Nashville, Tennessee 37214
Attention: John P. Colling, Jr.
Fax No: 615-316-5192

with a copy (which will not constitute notice) to:

Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004
Attention: Matthew P. Feeney
Fax No: (602) 382-6070

        (b)   If to the Stockholders' Committee, to:

Crowe, Chizek & Company, LLP
One Mid America Plaza
Suite 700
Oak Brook, Illinois 60101
Attention: Charles M. Allen
Fax No: (630) 574-1609

with a copy (which will not constitute notice) to:

Altheimer & Gray
10 South Wacker Drive
Suite 400
Attention: David W. Schoenberg
Fax No: (312) 715-4800

        (c)   If to the Escrow Agent, to:

Bank One Trust Company, N.A.
416 West Jefferson Street, Third Floor
Louisville, Kentucky 40202
Attention: Deborah Killebrew
Telephone: (502) 566-2069
Fax: (502) 566-1760

and/or to such other respective addresses and/or addressees as may be designated by notice given in accordance with the provisions of this Section 5.1.

        5.3    Amendments; No Waiver.

        (a)   Any provision of this Agreement may be amended or waived if, and only if, such, amendment or waiver is in writing and signed, in the case of an amendment, by all Parties, or in the case of a waiver, by the Party against whom the waiver is to be effective.

        (b)   No waiver by a Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent occurrence. No failure or delay by a Party in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided will be cumulative and not exclusive of any rights or remedies provided by law.

        5.4    Successors and Assigns.    This Agreement will be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns. Except as expressly set forth herein, no Party may assign its rights or delegate its covenants and obligations hereunder without the prior written approval of the other Parties; provided, however, that Magnetek may assign this Agreement to a wholly-owned subsidiary without such consent if Magnetek remains liable for its covenants and obligations hereunder.

        5.5    Applicable law.    This Agreement will be governed and controlled as to validity, enforcement, interpretation, construction, effect and in all other respects by the internal laws of the State of Delaware, without reference to choice or conflicts of law rules.

        5.6    Counterparts.    This Agreement may be executed in multiple counterparts and delivered in original form or by electronic facsimile, each of which shall be deemed to be an original, and all such counterparts shall constitute but one instrument. This Agreement will become effective when each party hereto has received a counterpart hereof signed by each other party hereto.

        5.7    Entire Agreement.    This Agreement and, as between Magnetek and the Stockholders' Committee, the provisions of the Stock Purchase Agreement applicable to this Agreement, constitutes the entire, final and complete agreement among the Parties with respect to the subject matter hereof and supersede all prior agreements, promises, understandings, negotiations, representations and commitments, both written and oral, among the Parties with respect to the subject matter hereof.

        5.8    Third Party Beneficiaries.    Nothing in this Agreement, express or implied, will confer on any Person other than the Parties and their respective successors and permitted assigns, any right, remedy, obligation or liability under or by reason of this Agreement.

        5.9    Waiver of Trial by Jury.    Each Party hereby waives the right to a jury trial in connection with any suit, action or proceeding seeking enforcement of such Party's rights under this Agreement.

        5.10    Consent to Jurisdiction.    This Agreement has been executed and delivered in, and shall be deemed to have been made in, Chicago, Illinois. Subject to the provisions of Section 3.1(c) regarding the Escrow Agent's right to take certain actions through the state or federal courts of Illinois, each Party agrees to the nonexclusive jurisdiction of any state or federal court within the City of Chicago, Illinois or the City of Los Angeles, California, with respect to any claim or cause of action arising under or relating to this Agreement, and waives personal service of any and all process upon it, and consents that all services of process be made by registered or certified mail, return receipt requested, directed to it at its address as set forth in Section 5.2 hereof, and service so made shall be deemed to be completed when received. Each Party hereby waives any objection based on forum non conveniens and waives any objection to venue of any action instituted hereunder. Nothing in this paragraph shall affect the right of any Party to serve legal process in any other manner permitted by law.

        5.11    Severability.    If any provision of this Agreement, or the application of any such provision to any Person or circumstance, is held to be unenforceable or invalid by any court of competent jurisdiction or arbitrator or under any applicable law, the Parties will negotiate an equitable adjustment to the provisions of this Agreement with the view to effecting, to the greatest extent possible, the original purpose and intent of this Agreement. In any event, the invalidity of any provision of this Agreement or portion of a provision shall not affect the validity of any other provision of this Agreement or the remaining portion of the applicable provision.

        5.12    Headings; Section References; Interpretation.    The headings contained in this Agreement are for convenience of reference only and shall not affect the meaning or interpretation of this Agreement. Unless otherwise expressly indicated, any reference in this Agreement (including any Schedule hereto) to a "Section", "subsection", "paragraph" or "subparagraph" followed by a number or letter or combination of the two shall be a reference to the particular Section, subsection, paragraph or subparagraph of this Agreement bearing such number, letter or combination thereof. The terms "hereof," "herein," "hereunder" and comparable terms refer, unless otherwise expressly indicated, to this Agreement as a whole and not to any particular Section, paragraph, subparagraph or other subdivision hereof or any Schedule or other attachment hereto. The terms "include", "includes" and "including" shall be deemed to be followed by "without limitation" whether or not they are in fact followed by such words or words of like import. Whenever the context so requires, the singular number will include the plural and the plural will include the singular, and the gender of any pronoun will include the other gender or neuter, as applicable.

        5.13    Dates and Times.    Dates and times set forth in this Agreement for the performance of the Parties' respective obligations will be strictly construed, time being of the essence of this Agreement. All provisions in this Agreement which specify or provide a method to compute a number of days for the performance, delivery, completion or observance by a Party of any action, covenant, agreement, obligation or notice hereunder will mean and refer to calendar days, unless otherwise expressly provided. If the date specified or computed under this Agreement for the performance, delivery, completion or observance of a covenant, agreement, obligation or notice by any Party, or for the occurrence of any event provided for herein, is a day other than a Business Day, then the date for such performance, delivery, completion, observance or occurrence will automatically be extended to the next Business Day following such date.

(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)

IN WITNESS WHEREOF, the Parties have duly executed or caused this Agreement to be duly executed as of the day and year first above written.

MAGNETEK, INC.		BANK ONE TRUST COMPANY, N.A.
By:		By:
	John P. Colling, Jr.	Name:
	Vice President & Treasurer
		Title:
MXT HOLDINGS, INC. STOCKHOLDERS COMMITTEE, by its duly authorized representatives:
CROWE, CHIZEK & CO. LLP
By:
Name:
Title:
DAVID L. BABSON & COMPANY, INC.
By:
Name:
Title:

SCHEDULE A

ESCROW FEE SCHEDULE

Acceptance Fee:	$1,000
Annual Administrative Fee:	$1,000
Transaction Fees:	$10 per check issued $25 per outgoing wire
Tax Reporting fee:	$300 per year (if applicable)
Extraordinary Fee:	$250 per hour; minimum increments of one hour.

        The fees quoted in this schedule apply to services ordinarily rendered in administering an escrow account and are subject to reasonable adjustment when the Escrow Agent is called upon to undertake unusual duties or as changes in the law, procedures or the cost of doing business demand. The extraordinary fee rate in effect ($250/hour) will apply at the time services are provided.

        Unless otherwise agreed upon, the Acceptance Fee and the first year Administration Fee are payable upon the execution of the Escrow Agreement to which this Schedule A is attached whether or not the escrow account is funded. In the event the escrow is not funded, the Acceptance Fee and all related expenses will not be refunded. Annual Administration fees cover a full year in advance, or any part thereof, and thus are not pro-rated in the year of termination.

        Upon a client's direction, cash balances will be invested in any one of the following:

        (a)   Cash balances may be invested on a daily basis in a time deposit account with a BANC ONE affiliate bank in which event Bank One will waive its cash management fee.

        (b)   Cash balances may be invested in The One Group Money Market Funds in which event Bank One will charge a 25 basis point (.0025) cash management fee. The One Group will pay Banc One Investment Advisors Corporation, an affiliate of BANC ONE, an investment advisory fee as described in the prospectuses.

        (c)   Cash balances may be invested in an alternative short-term investment fund in which event Bank One will charge a 25 basis point (.0025) cash management fee.

        In determining the general schedule of fees, Bank One takes into consideration the various incidental benefits accruing to it from the operation of the accounts. Collected funds must be on deposit prior to disbursement of payments. In addition, Bank One has the use of funds deposited to pay checks that have not yet been presented for payment. No interest will be paid to the client on these funds, it being understood that the float on these funds is considered in the calculation of our fees.

DISCLOSURE SCHEDULE

TO

STOCK PURCHASE AGREEMENT

DATED DECEMBER 30, 2002

BY AND AMONG

EACH OF THE STOCKHOLDERS
OF MXT HOLDINGS, INC.,

AS SELLERS,

MAGNETEK, INC.,

AS PURCHASER

        This Disclosure Schedule (the "Disclosure Schedule") is part of, and is incorporated by reference into, Section 9 and is subject to the limitations contained in Section 23(e), of the Stock Purchase Agreement dated December 30, 2002 by and among the Sellers and the Purchaser (the "Agreement").

        The inclusion of any item in any section of the Disclosure Schedule shall not constitute evidence of the materiality of such item, evidence that such item is required to be disclosed in the Disclosure Schedule or an admission of any pending or threatened charge, claim or proceeding or any breach of or event of default under any contract. No general disclosure in any section herein shall be limited by any more specific disclosure in either that section or any other section herein. The fact that any item is disclosed in any section of the Disclosure Schedule shall not give rise to any implication that the failure to disclose it would result in any breach of any representation or warranty contained in the Agreement. Capitalized terms not otherwise defined herein shall have the same meanings ascribed to them in the Agreement. The attachments to any section of this Disclosure Schedule form an integral part of the Disclosure Schedule and are incorporated by reference for all purposes as if set forth fully herein.

SELLERS: MXT Holdings, Inc.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY By: David L. Babson & Company, Inc., its investment adviser
By:	/s/  MICHAEL L. KLOFAS
Its:	Managing Director
MASSMUTUAL CORPORATE INVESTORS
By:	/s/  MICHAEL L. KLOFAS
Its:	Vice President
MASSMUTUAL PARTICIPATION INVESTORS
By:	/s/  MICHAEL L. KLOFAS
Its:	Vice President

MASSMUTUAL CORPORATE VALUE PARTNERS LIMITED By: David L. Babson & Company, Inc., under delegated authority from Massachusetts Mutual Life Insurance Company, its Investment Manager
By:	/s/  MICHAEL L. KLOFAS
Its:	Managing Director
EDSON PARTNERS II, L.P. By: EHE, Inc., sole general partner
By	/s/  CHARLES M. ALLEN Charles M. Allen, President
PURCHASERS Magnetek, Inc.
By:	/s/  JOHN P. COLLING JR.
Its:	V.P. & TREASURER

Schedule	Subject
9(a)	Corporate
9(b)	Power and Authority
9(c)	Consents
9(d)	Absence of Conflicts
9(e)	The Subsidiary
9(f)	Corporate Records
9(g)	Capitalization
9(h)	Financial Statements
9(i)	Liabilities
9(j)	Title to Assets
9(k)	Insurance
9(l)	Banking
9(m)	Taxes
9(n)	Conduct of Business
9(o)	Contracts
9(p)	Permits
9(q)	Benefit Plans
9(r)	Employees
9(s)	Litigation and Claims
9(t)	Compliance with Law
9(u)	Environmental Matters
9(v)	Real Property
9(w)	Personal Property
9(x)	Intellectual Property
9(y)	Inventories
9(z)	Accounts Receivable
9(aa)	Accounts Payable
9(bb)	Sufficiency of Assets
9(cc)	Transactions with Related Parties
9(dd)	Product Liability
9(ee)	Compliance with Foreign Corrupt Practices Act and Export Control and Anti-Boycott Laws
9(ff)	Brokers
9(gg)	Accuracy of Representations

SCHEDULE 9(a)

CORPORATE

        No exceptions.

SCHEDULE 9(b)

POWER AND AUTHORITY

        No exceptions.

SCHEDULE 9(c)

CONSENTS

1.

Subsidiary owns various equipment authorizations from the FCC (see attached list). Per 63 FR 36598, Section 2.929(d) (July 7, 1998), Buyer will be required to send a written notification to the FCC of the change in control within 60 days after the consummation of the transaction.

SCHEDULE 9(d)

ABSENCE OF CONFLICTS

        No exceptions.

SCHEDULE 9(e)

The Subsidiary

        See Schedule 9(n)

SCHEDULE 9(f)

CORPORATE RECORDS

        No exceptions.

SCHEDULE 9(g)

CAPITALIZATION

1.

Options to purchase 37,552 shares of Class A common stock were previously outstanding under the Company's 2001 Stock Option Plan and a Non-Qualified Plan, and warrants to purchase 135,108 shares of Class A common stock or Class B common stock were previously outstanding under the Company's Securities Purchase Agreement, dated June 28, 1995:

	1995 Warrants		2001 Options
Robert Beckmann			6,059	*
John Downey			5,681	*
Robert Patterson			5,681	*
Fernando Bello			5,681	*
John Dealy			8,769	*
Massachusetts Mutual Life Insurance Company	23,013	**
Massachusetts Mutual Life Insurance Company	23,013	**
MassMutual Corporate Investors	35,633	**
MassMutual Participation Investors	17,816	**
Gerlach & Co.	35,633	**
Totals	135,108		331,871		172,660

*

See paragraph 2.

**

All warrants have been exercised in full.

2.

All the options described in paragraph 1 were cancelled in exchange for the following payments to the optionee (see list bellow) and warrants stated above have been exercised and the underlying shares are included in the shares to be sold.

•	John Dealy	$20,332
•	Robert Beckmann	$7,500
•	Fernando Bello	$7,500
•	John Dwney	$5,000
•	Robert Patterson	$5,000

SCHEDULE 9(h)

FINANCIAL STATEMENTS

1.

See Attached Financial Statements.

2.

See Schedule 9(y)

3.

Capitalized software costs are recorded in the "salesmen's demos" ledger account; however, such costs have been capitalized in accordance with GAAP.

SCHEDULE 9(i)

LIABILITIES

        See Schedule 9(dd)

SCHEDULE 9(j)

TITLE TO ASSETS

1.	MXT Holdings, Inc.
	a.	Filing:	UCC-1 Financing Statement #3418423
			i)	Date:	06/28/95
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Blanket Lien
			iv)	Jurisdiction:	IL Secretary of State
	b.	Filing:	UCC-3 Financing Statement #4215298
			i)	Date:	05/18/00
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	[Amended Debtor's address on UCC-1 Financing Statement #3418423]
			iv)	Jurisdiction:	IL Secretary of State
	c.	Filing:	UCC-3 Financing Statement #4215299
			i)	Date:	05/18/00
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iv)	Collateral:	[Continuation of UCC-1 Financing Statement #3418423]
			v)	Jurisdiction:	IL Secretary of State
	d.	Filing:	UCC-1 Financing Statement #3732771
			i)	Date:	08/27/97
			ii)	Creditors:	LaSalle National Bank
			iii)	Collateral:	Blanket Lien
			iv)	Jurisdiction:	IL Secretary of State
	e.	Filing:	UCC-1 Financing Statement #00U1181 and #00U1183
			i)	Date:	06/27/00
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Fixtures
			iv)	Jurisdiction:	DuPage County, IL

2.	Telemotive Industrial Controls, Inc. ("Maxtec International Corp.")
	a.	Filing:	UCC-1 Financing Statement #3418422
			i)	Date:	06/28/95
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Blanket Lien
			iv)	Jurisdiction:	IL Secretary of State
	b.	Filing:	UCC-3 Financing Statement #3617802
			i)	Date:	11/27/96
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Partial Release to UCC-1 Financing Statement 3418422
			iv)	Jurisdiction:	IL Secretary of State
	c.	Filing:	UCC-3 Financing Statement #4220329
			i)	Date:	05/31/00
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Amendment to UCC-1 Financing Statement #3418422 with additional Debtors' names
			iv)	Jurisdiction:	IL Secretary of State
	d.	Filing:	UCC-3 Financing Statement #4232817
			i)	Date:	06/22/00
			ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
			iii)	Collateral:	Continuation of Blanket Lien UCC 3418422
			iv)	Jurisdiction:	IL Secretary of State
	e.	Filing:	UCC-1 Financing Statement #3732772
			i)	Date:	08/72/97
			ii)	Creditors:	LaSalle National Bank
			iii)	Collateral:	Blanket Lien
			iv)	Jurisdiction:	IL Secretary of State
	f.	Filing:	UCC-1 Financing Statement #4092658
			i)	Date:	09/13/99
			ii)	Creditors:	Orix Credit Alliance, Inc.
			iii)	Collateral:	Specific Equipment

		iv)	Jurisdiction:	IL Secretary of State
g.	Filing:	UCC-1 Financing Statement #3829001
		i)	Date:	04/06/98
		ii)	Creditors:	IBM Credit Corporation
		iii)	Collateral:	Specific Computer Equipment
		iv)	Jurisdiction:	IL Secretary of State
h.	Filing:	UCC-1 Financing Statement #00U1180
		i)	Date:	06/27/00
		ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
		iii)	Collateral:	Fixtures
		iv)	Jurisdiction:	DuPage County, IL
i.	Filing:	UCC-1 Financing Statement #00U1182
		i)	Date:	06/27/00
		ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
		iii)	Collateral:	Fixtures
		iv)	Jurisdiction:	DuPage County, IL
j.	Filing:	Trademark Lien
		i)	Date:	06/28/95
		ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
		iii)	Collateral:	"GATEMATE"
		iv)	Jurisdiction:	US Patent and Trademark Office
k.	Filing:	Trademark Lien
		i)	Date:	06/28/95
		ii)	Creditors:	Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners Limited
		iii)	Collateral:	"TELEMOTIVE"
		iv)	Jurisdiction:	US Patent and Trademark Office
l.	Filing:	Trademark Lien
		i)	Date:	(NO INFORMATION)
		ii)	Creditors:	(NO INFORMATION)
		iii)	Collateral:	"10-K"
		iv)	Jurisdiction:	Canada

m.	Filing:	Trademark Lien
		i)	Date:	(NO INFORMATION)
		ii)	Creditors:	(NO INFORMATION)
		iii)	Collateral:	"TELEMOTIVE"
		iv)	Jurisdiction:	Canada
n.	Filing:	Trademark Lien
		i)	Date:	(NO INFORMATION)
		ii)	Creditors:	(NO INFORMATION)
		iii)	Collateral:	"TELTEC"
		iv)	Jurisdiction:	Canada

SCHEDULE 9 (k)

INSURANCE

(i)
1.	General Liability
	a.	Insurer:	Westchester Surplus Lines
	b.	Policy No.:	OGL065525
	c.	Date:	03/01/02 - 03/01/03
	d.	Deductible:	$25,000 per claim
	e.	Limits:

i)	Each Occurrence:	$1,000,000
ii)	Fire Damage:	$50,000
iii)	Personal & Adv Injury:	$1,000,000
iv)	General Aggregate:	$2,000,000
v)	Products—Comp/Op Agg:	$1,000,000

2.	Automobile Liability (Property, Business Auto & Transportation)
	a.	Insurer:	Cincinnati Insurance Co.
	b.	Policy No.:	CAP5060882AWR
	c.	Date:	10/01/02 - 10/01/03
	d.	Limits:

i) Combined Single Limit: $1,000,000

3.	Excess Liability (Umbrella)
	a.	Insurer:	First Specialty Ins. Corp.
	b.	Policy No.:	UMF1041601
	c.	Date:	03/01/02 - 03/01/03
	d.	Limits:

i)	Each Occurrence:	$10,000,000
ii)	Aggregate:	$10,000,000

4.	Workers' compensation insurance is provided through Synergy, Inc. See Schedule 9(o)(E)(10). Synergy, Inc. may adjust the rate if the average wage for the Subsidiary increases or decreases by 10%.
5.	Wrap (Directors and Officers, Fiduciary Liability, IPLI and Crime)
	a.	Insurer:	Travelers Casualty & Surety Co.
	b.	Policy No.:	08LB103357204BCM
	c.	Date:	10/01/02 - 10/01/03
	d.	Coverage:

		i)	Liability Coverage Parts:
			a)	Directors and Officers Liability: aggregate limit of liability
			b)	Employment Practices Liability aggregate limit of liability
			c)	Fiduciary Liability: aggregate limit of liability
		ii)	Crime Coverage Parts
			a)	Fidelity
			b)	Kidnap and Ransom/Extortion: single loss limit of liability
	e.	Limits:
		i)	Aggregate Limit of Liability for all purchased Liability Coverage Parts combined: $2,000,000
		ii)	Aggregate Limit of Liability for all purchased Crime Coverage Parts combined: N/A
(ii)	No exceptions.
(iii)	See attached Loss Summary list.

SCHEDULE 9(l)

BANKING

Financial Institution:	LaSalle Bank
Persons authorized to draw upon the accounts:	T.D. Decker, Mark Ecton, John Downey and Robert Patterson

SCHEDULE 9(m)

TAXES

No exceptions.

SCHEDULE 9(n)

CONDUCT OF BUSINESS

(i)

No exceptions.



(ii)

No exceptions.



(iii)

No exceptions.



(iv)

No exceptions.



(v)

No exceptions.



(vi)

No exceptions.



(vii)

No exceptions.



(viii)

The Subsidiary and Jose Alfredo Machado de Assis ("Machdo") have executed and filed an Articles of Incorporation for the formation of a Brazilian limited liability company named "Telemotive Industrial Controls do Brasil Ltda." (Telemotive Brasil"). The Subsidiary is to own 90% of the equity of Telemotive Brasil and Machado is toown the balance. The Company and Machado have also entered into a Partnership and Service Agreement, dated October 15, 2002. In connection with the formation of Telemotive Brasil, the Company has executed a power of attorney in favor of its Brazilian counsel. Copies of these documents have been made available to Purchaser.



(ix)

No exceptions.

SCHEDULE 9(o)

CONTRACTS

A.

Customer and/or Vendor Purchase Orders

1.

Customer Purchase Order

a.	Western Iowa Coop	$	33,690
b.	Misissippi Line Co.	$	35,018
c.	Champion & Associates	$	50,954
d.	DOT Rail Service	$	28,044
e.	General Conveyor	$	25,400
f.	Double Eagle Steel	$	48,498
g.	International Steel Group	$	24,712
h.	Craneveyor	$	21,960

2.

Vendor Purchase Orders

a.	Suncoast Digital	$	26,256	PO# 10161
b.	Tadiran Batteries	$	68,180	PO# 8892
c.	Tadairan Batteries	$	228,000	PO# 9287

B.

Capital Expenditures: No exceptions.

C.

Confidentiality, Non-Competition Agreements

1.

Confidentiality and Non-Disclosure Agreement between Telemotive Industrial Controls, Inc. and Tension Robotics, LLC dated June 10, 2002.

2.

Confidentiality and Non-Disclosure Agreement between Telemotive Industrial Controls, Inc. and Canac, Inc. dated October 10, 2002.

2.

Following employees have signed a confidentiality agreement:

a.	Frank Adrovel	09/30/02
b.	Timothy Baker	09/30/02
c.	Victor Bartholowmew	09/30/02
d.	Alecia Bauler	09/30/02
e.	Gigi Benitez	09/30/02
f.	Mark Berger	09/30/02
g.	Martha Campos	09/30/02
h.	Ramon Carrasco	09/30/02
i.	Eugene Dahlbacka	09/30/02
j.	Rudy Deguzman	09/30/02
k.	Ruperto Delgado	09/30/02
l.	Abraham Fanco	09/30/02
m.	Lupe Gomez	09/30/02
n.	Duc Khong	09/30/02
o.	Dan Koziel	09/30/02
p.	Angie Mora	09/30/02
q.	Sandy Morgan	10/01/02

3.

The following have signed an Employee Agreement, which includes confidentiality, non-competition and assignment of invention provisions:

a.	Abdul Ahmad	10/31/02
b.	Robert Beckmann	12/05/01

c.	Fernando Bello	09/27/02
d.	James Bringer	10/01/02
e.	Mervin Berthrong	10/01/02
f.	Nancy Burrell	09/30/02
g.	Richard Choy	09/30/02
h.	Chris Cline	09/30/02
i.	John Dealy*	10/04/02
j.	John Downey	09/24/02
k.	Mark Ecton	10/04/02
l.	Mitch Gordon	09/30/02
m.	Jerry Grimm	10/01/02
n.	Cynthia Hilton	10/08/02
o.	Christine Kearns	09/30/02
p.	Michael Lee	09/30/02
q.	Ken Loar	09/24/02
r.	Jerry McCarver	10/04/02
s.	Jim McGuire	09/30/02
t.	Sandy Morgan	10/01/02
u.	Chan Patel	10/01/02
v.	Robert Patterson	10/02/02
w.	Marco Salas	09/24/02
x.	Ken Shults	10/02/02
y.	Matt Smith	09/24/02
z.	Len Stella	09/24/02
aa.	Ben Stoller	09/27/02
bb.	Talmage Wesley	05/12/99
cc.	Jay Whitaker	09/30/02
dd.	T.D. Decker*	(See E.1 of this section)

D.

Loan Agreements, Note, and Security Agreements

1.

Stock Purchase Agreement dated June 28, 1995, as amended by the First Amendment to Stock Purchase Agreement dated October 20, 1999, the Second Amendment to Stock Purchase Agreement dated May 15, 2001, the Third Amendment to Stock Purchase Agreement dated September 15, 2001 and the Fourth Amendment to Stock Purchase Agreement dated October 4, 2002 between MXT Holdings, Inc., Maxtec International Corp., and MassMutual Life Insurance Company, MassMutual Corporate Investors, MassMutual Participation Investors, and MassMutual Corporate Value Partners, expiring on April 15, 2003.

2.

See 9(j) Title to Assets section.

E.

Employment Agreements

1.

Employment Agreement dated May 11, 2000 between T.D. Decker and Maxtec International Corp. for the position of President and Chief Executive Officer. Contract expiration date is June 30, 2005, with automatic year to year extension unless notice of termination provided. Said Employment Agreement amended three times subsequently: First Amendment executed on February 23, 2001; Second Amendment executed on July 2001; Third Amendment executed on June 7, 2002.

2.

Employment Agreement dated July 17, 2000 between John Dealy and Maxtec International Corp. for the position of Vice President of Marketing and Business Development. Contract expiration date is June 30, 2005, with automatic year to year extension unless notice of termination provided.

3.

Employment Agreement dated September 1, 2002 between Mark Ecton and Maxtec International Corp. for the position of Vice President of Finance. No fixed employment term is included in the contract.



4.

MXT Holdings, Inc. 2001 Stock Option Plan:



a.

Stock Option Grant to Robert Beckmann dated October 17, 2001, for 6,059 shares of Class A common stock at $5.49 per share, expiring on October 16, 2011. Robert Beckmann will waive his right to exercise options granted to him by executing a Waiver of Stock Options in exchange for a lump sum. (See Schedule 9(g))



b.

Stock Option Grant to John Downey dated October 17, 2001, for 5,681 shares of Class A common stock at $5.49 per share, expiring on October 16, 2011. John Downey will waive his right to exercise options granted to him by executing a Waiver of Stock Options in exchange for a lump sum. (See Schedule 9(g))



c.

Stock Option Grant to Fernando Bello dated October 17, 2001, for 5,681 shares of Class A common stock at $5.49 per share, expiring on October 16, 2011. Fernando Bello will waive his right to exercise options granted to him by executing a Waiver of Stock Options in exchange for a lump sum. (See Schedule 9(g))



d.

Stock Option Grant to Robert Patterson dated October 17, 2001, for 5,681 shares of Class A common stock at $5.49 per share, expiring on October 16, 2011. Robert Patterson will waive his right to exercise options granted to him by executing a Waiver of Stock Options in exchange for a lump sum. (See Schedule 9(g))



5.

Nonqualified Stock Option Agreement between MXT Holdings, Inc. and John Dealy dated July 17, 2000, for 8,769 shares of Common Stock at $1.00 per share, expiring on July 17, 2010. The agreement will be waived before closing date by John Dealy's execution of a Letter of Agreement and Release in which in exchange for a lump sum, Dealy waives his right to exercise options entitled to him under said agreement. (See Schedule 9(g))



6.

Also see C.2 of this section.



7.

Consultation Agreement dated August 18, 1988, between Maxtec International Corp. and Apton Corporation, as independent contractor. Apton Corporation agrees to solicit business, hire, direct and pay assistants, maintain an office, own such equipment and materials as are necessary to conduct its business, hold a business or trade license, and advertise its services in newspapers, trade journals, magazines, etc. Agreement does not have a definitive term and each party may terminate by sending written notice. Same agreement also contains a confidentiality clause.



8.

Consultation Agreement dated September 27, 2002, between Subsidiary, the Corporation, and Solutions, Inc. Webcom is an independent contractor. Agreement does not have a definitive term and each party may terminate by sending written notice. Same agreement contains a confidentiality clause. $42,636 is due at the completion and final acceptance of the website. (Total Project cost is $51,996)



9.

Services Agreement between MXT Holdings, Inc., Maxtec International Corp., and Crowe, Chizek and Company, LLP dated March 10, 2001, for the specific services of Charles M. Allen to serve as Interim Chairman of the Board of MXT Holdings, Inc. Agreement may be terminated upon a thirty day written notice by either party without cause.



10.

Client Service Agreement between Telemotive Industrial Controls, Inc. and Synergy, Inc. whereby Telemotive remains the worksite employer and Synergy is the administrative employer of record. As such, Synergy pays all employee wages and provides employee benefits (except for the 401(k) plan) including the following: health and dental insurance, life and AD&D insurance, long term disability, Section 125 and 129 pre-tax Benefit Plans, Secton 132(f) Qualified Transportation Fringe Plan, Workers' Compensation, Employee Assistance Program,

and Synergy Partners Credit Union. Contract became effective on September 1, 2002, and continues for a one year period, with automatic annual renewal periods unless terminated according to the contract term.

11.

Exclusive Listing Agreement between Telemotive Industrial Controls, Inc. and Cushman & Wakefield of Illinois, Inc. ("C&W"). From October 11, 2002, to October 10, 2003, C&W has the exclusive right to sublease the premises located at 175 S. Wall Street, Glendale Heights.

F.

Collective Bargaining Agreements: No exceptions.

G.

Leases and Subleases of Real Property

1.

Assignment of Lease and Consent dated August 11, 1997 between California Microwave, Inc. (Assignor) and Maxtec International Corp. (Assignee). Effective from November 1, 1997 to April 30, 2006.

H.

Leases and Subleases of Personal Property (>$25,000)

1.

Office printer lease with Imagetec, L.P. dated June 27, 2001. Terms are $668 per month for 48 months.

2.

Equipment Lease (C4923953) for ESG Series RF Signal Generator, billing by GE Capital.

3.

Equipment Lease (C49218548) for Spectrum Analyzer and RF Signal Generator by GE Capital (formerly Orix Credit Alliance, Inc.)

I.

License Agreements

1.

Amended and Restated License Agreement dated September 1, 1999, between Maxtec International Corp. ("Maxtec") and Berlet Electronics Limited ("Berlet"). Berlet has an exclusive right and license to manufacture, use, sell, lease and repair in Canada certain products from patents owned by Maxtec. Agreement continues from year to year, and either party may terminate by providing written notice three months before desired termination date.. Agreement contains both confidentiality and non-compete provisions binding on Berlet.

J.

Warranties and Service Plans for Major Equipment

2.

Lease for office equipment with Imagetec, LP, (Toshiba E-Studio 45 and Toshiba 6560) beginning on June 27, 2001, for a 48-month lease period (with a purchase option at the end of term for fair market value), including a service plan. Includes an additional agreement for maintenance of printers and fax machines that has less than a year remaining and will not be renewed. Maintenance is $1,440 annually for each printer, and has been paid through July 10, 2003.

3.

Production equipment: GE Capital lease (formerly Orix Credit Alliance lease) on a) HP Spectrum Analyzer Synthesized Tuning includes a 3-year return-to-HP repair service option and b) HP ESG Series RF Signal Generator with a 5-year return-to-HP repair service option. Said lease will be paid off at closing in the amount of $20,470.89.

4.

Lease agreement with Minolta for a CRS Pro 5000 copier and a Minolta Fax 2600, dated July 9, 1999 for a term of 60 months. Monthly payment is $585,000. Includes maintenance of the copier for term of the lease.

5.

Agreement to provide scheduled inspections on equipment with Edwards Engineering, Inc. Agreement renewed on an annual basis from November 20 to November 19^th of the following year, unless terminated by either party in writing at least 30 days prior to the anniversary date. Annual cost is $7,620.

K.

Bonds, Suretyship Agreements, Etc.: No exceptions.

L.

Stockholders Agreement

1.

Stockholders Agreement dated June 28, 1995 among Edson Partners II, LP, Massachusetts Mutual Life Insurance Company, MassMutual Corporate Investors, MassMututal Participation Investors and MassMutual Corporate Value Partners Limited, Bob M. Tyler, and MXT Holdings, Inc.

M.

[Termination Period > 6 Months or Annual Payment Obligation > $25,000 or Total Payments > $100,000]

1.

Consignment Agreement dated August 7, 2002, between Maxtec International Corp. (Supplier) and Galaxy Circuits (Consignee). Agreement expires on August 7, 2003, or until all components have been sold, which ever occurs first.

N.

See Schedule 9(n)(viii)

SCHEDULE 9(p)

PERMITS

1.

See Schedule 9(c)

2.

Retail License from the Illinois Department of Revenue for Maxtec International Corp. Current license expired September 2002, renewed license forthcoming by mail.

SCHEDULE 9(q)

BENEFIT PLANS

(i)

List of Benefit Plans

1.

Maxtec International Corp. Retirement Savings Plan (401(k)) through Minnesota Life. (No formal written policies concerning contributions. Past practice is for Subsidiary to contribute $0.33 for every $1.00 employee contributes up to 6% of employee's salary.)

2.

Synergy, Inc. Commuter's Expense Reimbursement Plan including pre-tax salary reduction commuter spending account and parking spending account.

3.

Synergy, Inc. Flexible Benefits Plan including pre-tax salary reduction dependent care reimbursement flexible spending account, health care reimbursement flexible spending account, and insurance premium payment features.

4.

Synergy, Inc. Group Life and Accidental Death and Dismemberment Plan providing insured long term disability benefits and life insurance through AIG Life Insurance Company.

5.

Synergy, Inc. Group Health Plan providing insured medical benefits through American Medical Security. Synergy, Inc. may adjust the rate charged for health insurance if the average wage for the Subsidiary increases or decreases by 10%.

6.

Synergy, Inc. Group Dental Plan providing insured dental benefits through American Medical Security.

7.

See Schedule 9(o), E.1-5.

8.

Discretionary Bonus Program: Such plan is based on achieving overall Company Performance Objectives and on individuals achieving Individual Objectives, subject to the approval of the Board of Directors on an annual basis. (Unwritten, but understood to exist.)

9.

Overtime Policy: See "Telemotive Industrial Controls, Inc., Teammate Handbook" date July 1, 2001, page 18.

10.

Workers Compensation Policy: See Telemotive Industrial Controls, Inc. Teammate Handbook" date July 1, 2001, page 31.

11.

Time-Off Benefits (including holidays, vacation, sick/personal absences, jury duty, military leave, bereavement pay, school visitation, and leaves of absence): See Telemotive Industrial Controls Teammate Handbook, dated July 1, 2001, pages 21-25.

12.

Tuition Assistance Program: See Telemotive Industrial Controls, Inc. Teammate Handbook" date July 1, 2001, page 31.

        Some of the policies have been listed above in the interest of full disclosure and may not actually constitute a Benefit Plan or may merely relate to another listed Benefit Plan. No conclusions regarding the meaning of the term Benefit Plan should be made from the items listed above.

(ii)

No exceptions. Copies previously made available to the Purchaser.

(iii)

No exceptions.

(iv)

No exceptions.

(v)

No exceptions.

(vi)

No exceptions.

(vii)

Obligations triggered by this Agreement

1.

See Schedule 9(o), E.1-5

2.

Letter dated April 30, 2002, from T.D. Decker to John Downey, outlining payments and benefits in the event of a sale of the Subsidiary.

3.

Letter dated April 30, 2002, from T.D. Decker to Bob Patterson, outlining payments and benefits in the event of a sale of the Subsidiary.

4.

Letter dated April 30, 2002, from T.D. Decker to Bob Beckmann, outlining payments and benefits in the event of a sale of the Subsidiary.

5.

Letter dated April 30, 2002, from T.D. Decker to Fernando Bello, outlining payments and benefits in the event of a sale of the Subsidiary.

(viii)

No exceptions.

SCHEDULE 9(r)

EMPLOYEES

(i)

No exceptions.

(ii)

No exceptions.

(iii)

Employee list, as of December 2002, made available to Buyer.

(iv)

See Schedule 9(o), E.1 and 2 and Schedule 9(q) (vii)

(v)

No exceptions.

See Schedule 9(o)(E)(10)

SCHEDULE 9(s)

LITIGATION AND CLAIMS

See Schedule 9(dd)

SCHEDULE 9(t)

COMPLIANCE WITH LAW

No exceptions.

SCHEDULE 9(u)

ENVIRONMENTAL MATTERS

See matters disclosed in Buyer's Environmental Discovery Audit performed by Brown and Caldwell.

SCHEDULE 9(v)

REAL PROPERTY

1.

175 West Wall Street, Glendale Heights, IL 60139 (commercial property)

        Legal Description:

Lot 9 in Highgrove Center of DuPage—West Campus resubdivision number 1, being a resubdivision of all of Lots 3 and 4 in Highgrove Center of DuPage West Campus Unit 1, in the Southeast quarter of Section 21, Township 40 North, Range 10 East of the third principal meridian, in the village of Glendale Heights, DuPage County, Illinois.

        Subject to Covenants, Conditions, Restrictions, and Easements of Record.

SCHEDULE 9(w)

PERSONAL PROPERTY

No exceptions.

SCHEDULE 9(x)

INTELLECTUAL PROPERTY

(i)

1.

The Company and its Subsidiary have the following United States and foreign registered trademarks:

MARK	APPLICATION NO./FILING DATE	REGISTRATION NO./DATE	STATUS	COUNTRY
10-K	817762728 03/21/94	817762728 04/16/96	REGISTERED	Brazil
10-K	663786 08/08/90	TMA424878 03/11/94	REGISTERED	Canada
10-K	190045 02/04/94	465747 07/06/94	REGISTERED	Mexico
10-K	74/074749 07/02/90	1795622 09/28/93	REGISTERED	US
BOOMMATE	74/142680 02/27/91	1704173 07/28/92	EXPIRED	US
CONTROLMATE	75/003434 10/10/95		ABANDONED	US
GATEMATE	789260 08/03 95	TMA466455 11/27/96	REGISTERED	Canada
GATEMATE	74/658899 04/10/95	2042358 03/04/97	REGISTERED	US
INSTACON	74/688835 06/15/95		ABANDONED	US
LASER GUARD	75/077998 03/25/96	2092195 08/26/97	REGISTERED	US
MAXTEC	2105555 03/27/95	2105555 05/16/97	REGISTERED	UK
MAXTED	2056277 02/09/96	2056277 02/21/97	REGISTERED	UK
MAXTEC	73/754245	1605327 07/10/90	EXPIRED	US
MAXTEC 10-K	09/26/88		ABANDONED	UK
MODULAR SOLUTIONS	2016358 04/03/95		ABANDONED	US
TELEC	729246 01/25/85	1297064 01/25/85	REGISTERED	France
TELEDRIVE	75/259386 03/18/97	2281955 09/28/99	REGISTERED	US
TELEMOTIVE	2065790 08/24/76	1765964 02/13/87	REGISTERED	Argentina
TELEMOTIVE	01/24/75	A284672 06/23/76	EXPIRED	Australia
TELEMOTIVE	01/23/75	330395 03/05/75	REGISTERED	Benelux
TELEMOTIVE		6312594 05/10/76	REGISTERED	Brazil
TELEMOTIVE	408330 03/15/77	TMA230731 10/20/78	REGISTERED	Canada
TELEMOTIVE	70616 05/31/76	462061 06/14/76	REGISTERED	Chile

TELEMOTIVE		1297065 01/25/75	REGISTERED	France
TELEMOTIVE	01/22/75	940296 01/22/75	REGISTERED	Germany
TELEMOTIVE	7516905 01/28/75	684924 04/03/79	REGISTERED	Italy
TELEMOTIVE	59140 03/17/89	368167 10/09/92	REGISTERED	Mexico
TELEMOTIVE	05/21/79	89/2351 10/16/91	REGISTERED	South Africa
TELEMOTIVE	1315186 06/30/87	778035 05/21/79	EXPIRED	Spain
TELEMOTIVE	72/393761 06/02/71	1315186 07/27/90	REGISTERED	UK
TELEMOTIVE	73/041813	939664 08/01/72	REGISTERED	US
TELEMOTIVE	01/15/75	1023673 10/28/1975	REGISTERED	US
TELEMOTIVE		83589 12/03/76	REGISTERED	Venezuela
TELEMOTIVE SERIES 10-K	1561484 02/07/94		ABANDONED	UK
TELTEC		330394 01/23/75	REGISTERED	Benelux
TELTEC	408331 03/15/77	228235 06/02/78	REGISTERED	Canada
TELTEC	7516906 01/28/75	684918 04/03/79	CANCELLED	Italy

2.

The Company and the Subsidiary have the following United States and foreign patents:

TITLE	PATENT/APPLN. # ISSUE/FILING DATE	COUNTRY	STATUS	OWNER
Improved Optical Switch	6201905 03/13/01	US	GRANTED	Subsidiary
Optical Switch	6157026 12/05/00	US	GRANTED	Subsidiary
Laser Optical Path Degradation Detecting Device	5852410 12/22/98	US	GRANTED	Subsidiary
Fail Safe Vehicle Proximity Sensing and Control System	1080334 06/24/80	Canada	EXPIRED	Subsidiary
Hand Held Remote Control	64764 11/14/89	Canada	LAPSED	Subsidiary Unit

3.

The Subsidiary uses the following software packages under license: JD Edwards, miscellaneous Microsoft Products (shrink-wrap licenses), and miscellaneous engineering tools.

a.

JD Edwards: "Silver Service Package" with concurrent support (Maintenance Agreement dated February 25, 1998, and runs concurrently with the period of use of the program, renewed annually unless 30 day notice of termination.) which started from March 1, 2002, and ends on February 28, 2003. (Agreement made available to Buyer.)

•

$10,500 annually for 30 Licensed Users

•

Customer Number: 5856941



•

Batch: 75633



•

Vendor: 140056



•

G/L No.: 100.1630

        b Miscellaneous Engineering Tools: Subsidiary owns 5 licenses (seats) for AutoCAD (various versions such as 12, 13, 2000), and EE and ME development tools such as Electronic Workbench and Micrographx. No engineering software tools are valued in excess of $1,000.

4.

The Company and Subsidiary are parties to the following agreements regarding grants of right to use or practice any rights under any of the Intellectual Property:

        See Schedule 9(o), I

(ii)

See Schedule 9(o), C.3



(iii)

No exceptions



(iv)

See Schedule 9(o), C.3



(v)

No exceptions.



(vi)

No exceptions.



(vii)

No exceptions.



(viii)

No exceptions.

SCHEDULE 9 (y)

INVENTORIES

        The inventory of Wenglor laser heads is slow-moving.

SCHEDULE 9(z)

ACCOUNTS RECEIVABLE

(i)

See attached Accounts Receivable Aging List. (Previously made available to the Purchaser.)



(ii)

No exceptions.



(iii)

No exceptions.



(iv)

No exceptions.

SCHEDULE 9(aa)

ACCOUNTS PAYABLE

        No exceptions.

SCHEDULE 9(bb)

SUFFICIENCY OF ASSETS

        No exceptions.

SCHEDULE 9(cc)

TRANSACTIONS WITH RELATED PARTIES

        See Schedule 9(o), E.9

        Transaction with Genrich Corp., where Fernando Bello's brother is an employee, for brochure printings. (Mr. Bello is the Subsidiary's Vice President of World Sales) No formal agreement exists between the parties and transactions occur on an ad hoc basis.

        Transaction with Tom Decker and Associates, owned by father of T. D. Decker, President and CEO of Subsidiary, for clothing supplies. No formal agreement exists between the parties and transactions occur on an ad hoc basis.

SCHEDULE 9(dd)

PRODUCT LIABILITY

        Pending Claims: (information as of 09/17/02)

1.

Stonewall Lay v. Telemotive Industrial, Inc.: Accident claim filed on March 1, 2002. No further information since date. (COURT: Cook County, IL)



2.

John A. Desieno v. Crane Manufacturing and Service Corp. and Telemotive Industrial Controls, Inc.: Plaintiff is part of a "crane pool" at General Electric and claims to suffer pain in his lower and upper arms due to the use of crane controls over the years. Liability and exposure is questionable as the case is still in discovery stages. Relationship must be formed between the time of employment and length of time using the remote. The Plaintiff has not yet roved the remote was manufactured by the Subsidiary. (COURT: Supreme Court, Schenectady County, NY)

Pending Reserve:	$	25,000
Expense Reserve:	$	25,000
Exposure:		50% to 75%

3.

Robert Redmand Sr. v. CPH Company, Telemotive Industrial Controls, et al.: Motion for summary judgment has been filed and has yet to be ruled upon.. Plaintiff has presented no evidence indicating that the remote malfunctioned therefore, no liability upon Telemotive can be had. (COURT: Circuit Court, Cook County, IL)

ii.

1.

Safety memo on 10K9, 10K12 and Telemotion 3.2 Transmitters equipped with tactile, two-speed membrane switch. No personal injuries or property damages associated with these products have been reported. (See attached Safety Memo dated September 20, 2000.)

2.

NBB, a German switch manufacturer, supplied defective switches for use in the JLTX transmitter. The Subsidiary has replace substantially all of the defective switch. (Internal memo made available to the Buyer.)

SCHEDULE 9(ee)

COMPLIANCE WITH FOREIGN CORRUPT PRACTICES ACT AND EXPORT CONTROL AND ANTI-BOYCOTT LAWS

        No exceptions.

SCHEDULE 9(ff)

BROKERS

        No exceptions.

SCHEDULE 9(gg)

ACCURACY OF REPRESENTATIONS

        No exceptions.

QuickLinks

Exhibit 10.38

STOCK PURCHASE AGREEMENT
EXHIBIT A STOCKHOLDERS LIST OF MXT HOLDINGS, INC.
EXHIBIT B ALLOCATION OF PURCHASE PRICE
Exhibit C Working Capital Calculation—September 30, 2002 Dollars in Thousands
EXHIBIT D ESCROW AGREEMENT
SCHEDULE A ESCROW FEE SCHEDULE
SCHEDULE 9(a) CORPORATE
SCHEDULE 9(b) POWER AND AUTHORITY
SCHEDULE 9(c) CONSENTS
SCHEDULE 9(d) ABSENCE OF CONFLICTS
SCHEDULE 9(e) The Subsidiary
SCHEDULE 9(f) CORPORATE RECORDS
SCHEDULE 9(g) CAPITALIZATION
SCHEDULE 9(h) FINANCIAL STATEMENTS
SCHEDULE 9(i) LIABILITIES
SCHEDULE 9(j) TITLE TO ASSETS
SCHEDULE 9 (k) INSURANCE
SCHEDULE 9(l) BANKING
SCHEDULE 9(m) TAXES
SCHEDULE 9(n) CONDUCT OF BUSINESS
SCHEDULE 9(o) CONTRACTS
SCHEDULE 9(p) PERMITS
SCHEDULE 9(q) BENEFIT PLANS
SCHEDULE 9(r) EMPLOYEES
SCHEDULE 9(s) LITIGATION AND CLAIMS
SCHEDULE 9(t) COMPLIANCE WITH LAW
SCHEDULE 9(u) ENVIRONMENTAL MATTERS
SCHEDULE 9(v) REAL PROPERTY
SCHEDULE 9(w) PERSONAL PROPERTY
SCHEDULE 9(x) INTELLECTUAL PROPERTY
SCHEDULE 9 (y) INVENTORIES
SCHEDULE 9(z) ACCOUNTS RECEIVABLE
SCHEDULE 9(aa) ACCOUNTS PAYABLE
SCHEDULE 9(bb) SUFFICIENCY OF ASSETS
SCHEDULE 9(cc) TRANSACTIONS WITH RELATED PARTIES
SCHEDULE 9(dd) PRODUCT LIABILITY
SCHEDULE 9(ee) COMPLIANCE WITH FOREIGN CORRUPT PRACTICES ACT AND EXPORT CONTROL AND ANTI-BOYCOTT LAWS
SCHEDULE 9(ff) BROKERS
SCHEDULE 9(gg) ACCURACY OF REPRESENTATIONS

EX-13.1

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About Magnetek

 Headquartered in Los Angeles, Magnetek, Inc. is a New York Stock Exchange listed company (NYSE: MAG) specializing in the application of advanced power-electronic technology to meet the "uncommon power" needs of the global digital economy.

 Magnetek was formed in 1984 through the acquisition of Litton Industries' Magnetics Group. During the 1980s the Company acquired a number of other electrical equipment companies, and in 1991 joined forces with Plessey S.p.A., Europe's largest independent manufacturer of electronic power supplies for computers. During the 1990s, Magnetek divested its electrical equipment operations in order to focus exclusively on digital power-electronic products.

 Today, Magnetek provides custom and industry-standard power components and systems for applications ranging from the Power Grid to the Internet. With annual revenues exceeding $200 million, it ranks among the world's leading manufacturers of digital electronic power supplies, converters, inverters, rectifiers, regulators and controls. The Company also builds programmable power and control systems based on these components, and is a leading provider of power conditioners for fuel cells and other alternative energy sources.

 Magnetek's power products are used in data processing and data storage, telecom and datacom, medical and commercial imaging, semiconductor processing and testing, materials handling, people moving, "smart" appliances, distributed power generation and other applications requiring controllable, reliable, energy-efficient power. Magnetek operates ISO-certified research and manufacturing facilities and markets its products through leading distributors in North America, Europe and China.

 For more information about Magnetek, visit the Company's website: http://www.magnetek.com.

Table of Contents	Chairman's Letter	1
	Management's Discussion and Analysis	5
	Consolidated Financial Statements	11
	Notes to Consolidated Financial Statements	15
	Annual Report on Form 10K	33

Caution Regarding Forward-Looking Statements

 This Annual Report and Form 10-K, including documents incorporated herein by reference, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The words "believe", "expect", "estimate", "anticipate", "intend", "may", "might", "will", "would", "could", "project" and "predict", or similar words and phrases generally identify forward-looking statements. Forward-looking statements contained or incorporated by reference in this document, including those set forth in the Chairman's Letter, the section of this Annual Report entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations", and the section of the Form 10-K entitled "Description of Business" include, but are not limited to, statements regarding projections of revenues, income or loss, capital expenditures, plans for future operations, products or services and financing needs or expectations, as well as assumptions relating to the foregoing.

 Forward-looking statements are inherently subject to risks and uncertainties which in many cases are beyond the control of the Company and which cannot be predicted or quantified. As a result, future events and actual results could differ materially from those set forth in, contemplated by, or underlying forward-looking statements. Such risks and uncertainties include, but are not limited to, economic conditions in general, sensitivity to industry conditions, competitive factors such as technology and pricing pressures, business conditions in the telecommunications and electronic equipment markets, international sales and operations, dependence on significant customers, increased materials costs, risks and costs associated with acquisitions, environmental matters and the risk that the Company's ultimate costs of doing business exceed present estimates. A discussion of these and other specific risks is included in the Management's Discussion and Analysis of Financial Condition and Results of Operations section of the Annual Report under the heading "Risk Factors Affecting the Company's Financial Outlook".

 Forward-looking statements contained in this Annual Report and Form 10-K speak only as of the date of this document or, in the case of any document incorporated by reference, the date of that document. The Company does not have an obligation to publicly update or revise any forward-looking statement contained or incorporated by reference in these documents to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time.

Dear Fellow Stockholder:

 Fiscal 2003 was an extremely challenging period for everyone in the electronic power industry. Magnetek's results reflect that fact. While our revenues grew throughout the year, profits suffered due primarily to product mix issues, the U.S. dollar's decline against the euro, losses incurred in the telecom power business, and higher selling, general and administrative (SG&A) costs.

 Revenue in fiscal 2003 totaled $201.8 million, up 7% from $188.2 million in 2002. However, the Company lost $1.48 per share, including a gain on the termination of a retiree medical plan, increased pension costs, and losses related to the settlement of a lawsuit with a former lender, the divestiture of our telecom service business and non-cash asset impairment charges. This compares with net income of $.06 per share in fiscal 2002.

 Working capital increased toward the end of 2003 as we carried duplicate inventories while consolidating two plants in Hungary and expanding our factory in China from 15,000 to 65,000 square feet. Debt also rose as a result of the working capital increase and capital spending related to our China expansion, as well as our acquisition of Telemotive Industrial Controls in January and the bank settlement referenced above.

 Our balance sheet also reflects the fairly dramatic effects of certain adjustments associated with pension accounting. Due to declines in equity values and interest rates, many pension plans, including Magnetek's, became under-funded from an accounting standpoint during 2002 and 2003. In such cases a minimum pension liability must be added to long-term obligations with a corresponding reduction in stockholders' equity. Although history suggests that equity markets will recover and interest rates will rise over time, the impact on equity in the interim can be dramatic.

 This does not mean that our pension funding is inadequate or that the pension plan poses a near-term liquidity problem. Plan assets exceeded $120 million at fiscal year-end, and after a September contribution of approximately $2.6 million in Company stock, no mandatory contributions will be required through fiscal 2008 under current regulations.

Factors Affecting Fiscal 2003 Performance

 Clearly, Magnetek did not perform up to our expectations in fiscal 2003. From an operating standpoint the year became progressively tougher for us because our telecom service business—acquired as a possible pull-through for power system sales—lost more and more money as the year went on. Telecom service cost us $.10 a share at the bottom line.

 The year also became progressively tougher for Magnetek compared to most U.S.-based competitors because of the dollar's decline against the euro. This reduced gross margins by 17 percentage points on products manufactured in Europe and sold in dollars. Of course, we recognize that currency issues are part of doing business internationally. However, while others benefited from the weak dollar, it cost us approximately $.17 a share because of our large manufacturing presence in Europe.

 Planned increases in research and development (R&D) and selling costs also affected fiscal 2003 results. Much of the increase was associated with investments to establish global distribution channels. While we needed to make those investments, they penalized fiscal 2003 earnings by about $.09 a share.

 Finally, asset impairment and other one-time items cut earnings by $1.11 per share, net.

 Add them up, and you see the roots of our fiscal 2003 profit problem. We believe that fiscal 2004 will be less challenging, at least in these respects, for the following reasons.

 Subsequent to fiscal 2003, we divested the service portion of our telecom power business, eliminating its losses while actually increasing the pull-through potential for hardware sales by outsourcing installation services, when required, from various contractors.

 Regarding currency, we are selectively taking actions to reduce the impact of exchange-rate fluctuations, and we are producing more of the products that will be sold for dollars in dollar-equivalent jurisdictions, such as China.

1

 As for SG&A, we have certain expenses, such as pension costs, that have risen. But we fully expect our investments in marketing and development to result in at least a breakeven in 2004, and to provide positive returns from then on.

 Finally, we do not anticipate any more asset impairment charges.

Actions Affecting Liquidity, Profitability and Cash Flow

 Though many of the factors that undermined Magnetek's performance are behind us or should abate during fiscal 2004, decisive actions have been taken to strengthen the balance sheet and get back into the black.

 Since the beginning of the new fiscal year, we have completed our China expansion, reduced our working capital and cut our debt.

 We have replaced our former $16-million domestic bank line with a new $19-million facility backed by our domestic assets. This bank line will remain in effect through fiscal 2006, unless replaced or extended. We also recently negotiated a new European credit line providing nearly $10 million of additional availability on top of approximately $20 million in European credit already in place.

 Based on current plans and business conditions, we believe that our borrowing capacity under the new domestic bank line, together with our separate European credit lines and internally generated cash flows, affords a good foundation for financing Magnetek's future operations and other commitments.

 Regarding profitability, we believe we will be operating above breakeven before fiscal year-end. To do so, however, we must continue to grow revenues and increase gross margins.

 As of mid-September, Magnetek's order backlog stood at approximately $54 million, and fiscal 2004 bookings exceeded billings by 10%.

 The divestiture of the Telecom service business could add as much as two percentage points to our fiscal 2004 consolidated gross margin. Based on its expected sales and cost savings, our expanded China factory could add two more percentage points to gross margins. These actions alone should push gross margins into the mid 20% range.

 Additional margin improvement should come from product mix as we shift toward more systems sales, expansion of sales through distribution—a new channel for Magnetek that carries attractive margins—and actions to lessen the impact of currency fluctuations on our European margins.

 Although we may not see the full impact for a couple of quarters, I believe we are taking the actions necessary to improve gross margins and get back into the black. With our return to profitability, our China expansion completed and stronger working capital management, cash flow should turn positive as well.

Plans for Future Growth and Profitability

 I am convinced that we have the right strategy not only to return to profitability, but also to lead the power technology industry.

 Magnetek's strategy calls for power component innovation, forward integration into systems, and market diversity. Technologically, our custom product R&D enables us to push the envelope of power density, reliability and on-board "intelligence". Forward integration allows us to incorporate our power components into power systems commanding higher margins. Market diversity keeps us from being overly dependent on any single market, and it provides us with the greatest array of growth opportunities.

 We now have the physical facilities in place to implement our strategy on a worldwide scale, and I am confident we have a management team capable of executing it. But that does not imply perpetuating the status quo.

 To take full advantage of this Company's potential we will continue to redeploy our physical and human resources. We will market our products, both components and systems, on a continental basis, reflecting differences in geographic markets. But we will utilize our manufacturing facilities for all products on a global

2

scale for maximum efficiency. The unfavorable impact of currency fluctuations in fiscal 2003 underlines the importance of this redeployment, and our rapid expansion in China demonstrates our commitment to it.

 We must also stand by our commitment to diversity — in emerging markets especially — because market diversity is what most distinguishes Magnetek from other "power supply" companies.

 Let me conclude with a timely example. Recently, a number of blackouts have occurred in North America and Europe due to inadequate utility generating capacity and problems with the electric power transmission grid. These events should serve to accelerate the move to distributed power generation and monitoring, in which we have major stakes.

 Magnetek is already the world's leading provider of power conditioning systems for commercial fuel cells with over 32 Megawatts in the field, and we have engineering contracts underway with a number of leading solar and wind generator companies. In fiscal 2003, we also introduced our own micro-turbine power plant for use on rail and subway cars. The first units are now being tested on the Italian railroad and are performing very well.

 We also have the technology — in fact the products, called "HiQgrid" and "Alba" (dawn) — capable of monitoring power distribution networks and changing the direct current produced by most alternative energy sources into the alternating current needed by electricity users.

 Sooner than many imagined, the Utility market and others that we serve, including Transportation and Consumer Products, may equal or exceed Telecom and Information Technology in terms of demand for highly reliable, digital power components and systems such as ours. And we will be the first in line to meet the demand.

 I believe fiscal 2004 will be the year of recovery for Magnetek. Beyond that, we have the strategy and the plan in place to achieve your Company's full potential.

Andrew G. Galef
Chairman, President & Chief Executive Officer

3

SELECTED FINANCIAL DATA

Statement of Operations Data

For the years ended June 30, (Amounts in thousands, except per share data)		2003			2002		2001			2000		1999
Net Sales		$	201,782		$	188,224	$	298,260		$	293,575	$	231,339
Income (loss):
	Continuing operations	$	(34,844	)	$	1,408	$	9,083		$	1,282	$	(24,318	)
	Discontinued operations		–			–		(3,350	)		41,170		62,791
	Net income (loss)	$	(34,844	)	$	1,408	$	5,733		$	42,452	$	38,473
	Per common share – basic:
Income (loss) from continuing operations		$	(1.48	)	$	0.06	$	0.40		$	0.05	$	(0.79	)
	Net income (loss)	$	(1.48	)	$	0.06	$	0.25		$	1.71	$	1.25
Per common shares – diluted:
	Income (loss) from continuing operations	$	(1.48	)	$	0.06	$	0.39		$	0.05	$	(0.79	)
	Net income (loss)	$	(1.48	)	$	0.06	$	0.25		$	1.70	$	1.25

Net loss for the fiscal year ended June 30, 2003 includes after-tax charges of $39,037 for asset impairment, a $3,275 after-tax charge for settlement of litigation, a $997 after-tax loss on the sale of the Company's telecom service business and a $17,218 after-tax gain from termination of the Company's retiree medical plan.

Net income for the fiscal year ended June 30, 2001 includes a $4,114 after-tax loss on the sale of the Company's Lighting and Transformer business included in discontinued operations.

Net income for the fiscal year ended June 30, 2000 includes a $35,125 after-tax gain on the sale of the Company's Motor and European Lighting business included in discontinued operations.

Net income for the fiscal year ended June 30, 1999 includes a $50,988 after-tax gain on the sale of the Company's Generator business included in discontinued operations. Continuing and discontinued operations results in fiscal 1999 include charges aggregating $21,564 and $12,836 respectively, relating to downsizing, inventory adjustments, severance costs and other asset write-downs.

Balance Sheet Data

As of June 30, (Amounts in thousands)	2003		2002		2001		2000		1999
Total assets	$	280,651	$	304,891	$	321,754	$	400,673	$	576,220
Long-term debt, including current portion		26,702		4,124		10,134		64,040		179,181
Common stockholders' equity		79,671		142,819		183,707		184,206		204,885

4

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DESCRIPTION OF BUSINESS

 Magnetek, Inc. ("Magnetek" or "the Company") is a global provider of digital power-electronic products, including electronic converters, inverters, rectifiers and systems. These products are used primarily in industrial, telecommunications, data processing, consumer, imaging, alternative energy, power generation and other applications requiring precise, efficient, reliable power. We believe that with our technical and productive resources Magnetek is well positioned to respond to increasing demand for such power. Magnetek operates in a single business segment, Digital Power Products, which includes two broad product categories, Components and Systems.

 During fiscal 2003, Magnetek's operating results were adversely impacted by continued weakness in key end markets, primarily telecommunications and, to a lesser extent, information technology. We were able to post a 7% sales increase as a result of broader market diversification and strong growth in products with consumer applications, as well as the acquisition of Telemotive Industrial Controls in the third fiscal quarter. Magnetek's strategy will continue to emphasize diversity in both our product offerings and our targeted markets. Despite the sales gain, we experienced margin pressure in our European operation as the U.S. dollar weakened versus the Euro during the fiscal year, thereby compressing margins on U.S. dollar-denominated sales made by that operation. Our telecom power business suffered substantial operating losses due to continued sales declines and market price pressures. Subsequent to fiscal year-end, we divested the service portion of this business to focus on hardware and systems with an emphasis on wireless applications.

 Increased operating expenses also impacted results in fiscal 2003. Research and development expense was up 14% compared to the prior year as we continued to invest in developing new products and systems for both existing and new markets. We will continue to invest in R&D going forward, although we do not anticipate a continued increase in overall R&D expense. Selling, general and administrative expense was up 29% compared to fiscal 2002 with continued investment in sales and marketing programs and capabilities as well as the addition of Telemotive operating expense and increased employee benefit costs, primarily pension expense. As a result of lower interest rates and a lower than expected return on assets held in the pension trust (see Note 13 of Notes to Consolidated Financial Statements) pension expense increased by approximately $2.6 million in fiscal 2003. While we will continue our efforts to control general and administrative expense, we will see an additional increase in annual pension expense of approximately $2.3 million in fiscal 2004 as compared to fiscal 2003. The change in annual pension expense going forward will depend on future interest rate levels and values in equity and fixed income markets.

 Our efforts to improve margins include manufacturing cost reduction programs, most notably an expansion of our manufacturing operation in China and selected outsourcing. We are also focusing our development and marketing capabilities on higher margin systems applications and markets, such as alternative energy, with reduced emphasis or elimination of lower margin component products and less profitable segments, such as the telecom service and consumer markets. We will continue to pursue opportunities to consolidate administrative operations and functions, however future profitability is highly dependent upon improvement in revenues and gross margins. Although conditions may continue to be challenging, we believe that the strategy we are pursuing will provide future opportunities for growth and improved operating performance.

RESULTS OF OPERATIONS

Net Sales and Gross Profit

 Net sales for the Company increased 7.2% to $201.8 million in fiscal 2003 from $188.2 million in fiscal 2002. Net sales in fiscal 2002 declined 36.9% from $298.3 million in fiscal 2001. The increase in fiscal 2003 was due to higher sales of products with consumer applications, the acquisition of Telemotive and the effect of currency translation. The decrease in fiscal 2002 reflects a substantial slow-down in product demand in the telecommunications sector. Excluding the impact of a standard drives product line that was divested in January 2001, net sales in fiscal 2002 decreased 25.6% from fiscal 2001. Gross profit in fiscal 2003 declined to $37.0 million (18.3% of sales) compared to $43.6 million (23.1% of sales) in fiscal 2002 and $76.8 million (25.7% of sales) in fiscal 2001. Fiscal 2003 gross profit includes a $4.7 million charge for the write-down of telecom related inventory. Gross profit was also impacted by depressed results in the telecom products and services area, as well as the weaker U.S. dollar versus the Euro with respect to the Company's European operation. Gross profit in fiscal 2002 declined due to the sale of standard drives ($10 million) and reduced demand in the telecommunications sector.

Operating Expenses

 Selling, general and administrative expense (including research and development expenditures) was $51.7 million (25.6% of sales) in fiscal 2003 compared to $41.3 million (21.9% of net sales) in fiscal 2002 and $55.8 million (18.7% of net sales) in

5

fiscal 2001. The increase in operating expenses from fiscal 2002 reflects continued investment in research and development and expanding marketing and sales capabilities, higher employee benefit costs and the acquisition of Telemotive. The decline in operating expenses in fiscal 2002 from fiscal 2001 included the elimination of $8.1 million of expenses associated with the standard drives product line, with the balance of the reduction due to reduced support costs on the lower revenue base in fiscal 2002.

Gain from Termination of Retiree Medical Plan

 Fiscal 2003 results include a non-recurring pretax gain of $27.8 million ($17.2 million after tax) related to the termination of the Company's retiree medical plan (see Note 13 of Notes to Consolidated Financial Statements).

Goodwill and Fixed Asset Impairment

 During the second quarter of fiscal 2003, management determined that there were indicators of impairment in the carrying value of goodwill based on the decline in our market capitalization and continued depressed conditions in the telecommunications industry. We performed an interim impairment test in accordance with Statement of Financial Accounting Standard (SFAS) No. 142 based on updated forecasts of operating results and cash flows, and recorded a $33.4 million charge for goodwill impairment (see Note 1 and Note 4 of Notes to Consolidated Financial Statements). We also recorded a $0.9 million charge for impairment of other assets, mainly fixed assets. The charges related exclusively to the Company's telecommunications business and eliminated the carrying value of goodwill for that business.

Interest and Other Expenses

 Interest expense was $1.5 million in fiscal 2003 compared to $0.2 million in fiscal 2002 and $4.3 million in fiscal 2001. The increase in fiscal 2003 was due to higher debt levels as a result of cash operating losses, the Telemotive acquisition and a litigation settlement payment. In fiscal 2002, the Company repaid all of its domestic bank debt with the proceeds from divestitures of discontinued operations. Interest expense in fiscal 2001 was recorded in accordance with accounting principles that require the allocation of interest expense between continuing and discontinued operations based upon the amount of debt that can be attributed to these operations. Other expense of $4.3 million in fiscal 2003 included a $3.3 million charge related to the settlement of litigation and a $1.0 million charge related to the sale of the telecom service business. The decline in other expense in 2002 from 2001 reflects the adoption of SFAS No. 142 in the first quarter of fiscal 2002. As a result, there was no goodwill amortization recorded in fiscal 2002, compared to expense of $2.2 million in fiscal 2001.

Net Income (Loss)

 In fiscal 2003, the Company recorded a net loss of $34.8 million, or $1.48 per share on both a basic and diluted basis, compared to fiscal 2002 net income of $1.4 million or $0.06 per share, basic and diluted. The Company recorded net income of $5.7 million or $0.25 per share on both a basic and diluted basis in fiscal 2001. Fiscal 2003 results reflect the impact of the gain on termination of the retiree medical plan, and charges related to goodwill and asset impairment, litigation settlement and the sale of the telecom service business as described above. In spite of the pretax loss, the Company recorded tax expense. The tax expense (non-cash) relates to the gain on the termination of the retiree medical plan partially offset by tax benefit on a portion of the pretax loss. Due to the net deferred tax position on the balance sheet, we were unable to record a tax benefit on the majority of the fiscal 2003 pretax loss. Our net deferred tax position consists of $4.8 million of domestic net deferred tax assets offset by $4.5 million in foreign net deferred tax liabilities. We believe the deferred tax assets are realizable through global tax planning strategies that provide an ability to offset existing domestic tax assets with the foreign tax liabilities as well as through future taxable income. We anticipate that no tax benefit will be recorded in future periods until results reflect pretax income. Fiscal 2001 results reflect net income of $9.1 million from continuing operations and a $3.4 million loss from discontinued operations (including a $4.1 million loss on the sale of the Company's Lighting and Transformer businesses). Continuing operations earned $0.39 per diluted share in 2001 with discontinued operations accounting for a loss of $0.14 per diluted share.

Liquidity and Capital Resources

 As of June 30, 2003, long-term borrowings (including current portion) were $26.7 million compared to $4.1 million as of June 30, 2002. The increase in long-term borrowings was due to funding the Company's operating losses, the $4.3 million acquisition of Telemotive (see Note 2 of Notes to Consolidated Financial Statements) in the third fiscal quarter and a $3.3 million litigation settlement payment to Bank of America in the fourth fiscal quarter. Net cash used in operating activities (prior to capital expenditures and excluding the settlement with Bank of America) was $9.1 million primarily due

6

to cash operating losses. Capital expenditures in fiscal 2003 were $9.0 million, mainly related to upgrading our existing capital infrastructure and expansion of capacity in our China operation.

 There are no current requirements or plans for additional major capacity expansion and we currently anticipate capital expenditures in fiscal 2004 to be less than $10 million. The expected amount of capital expenditures could change depending upon changes in revenue levels, our financial condition and the general economy.

 Subsequent to fiscal year-end, the Company replaced its existing credit facility with an asset based Credit Agreement with Bank One. The Credit Agreement provides for an aggregate lending commitment of up to $19 million. Available borrowings are determined by a borrowing base as defined in the agreement, supported mainly by levels of domestic accounts receivable and inventory (see Note 6 of Notes to Consolidated Financial Statements). Subsequent to fiscal year-end the Company's European subsidiary entered into an agreement with a European bank to provide Euro 7 million in borrowings secured by the subsidiary's land and building. The Company's European subsidiary also maintains other borrowing arrangements with local banks to support working capital needs.

 Primarily as a result of declines in interest rates and stock market equity values during the fiscal year, as of June 30, 2003 the accumulated benefit obligation for the Company's defined benefit pension plan exceeded plan assets by approximately $51.4 million. No contributions to the plan were made during fiscal 2003. During the two years ended June 30, 2002, the Company made aggregate contributions to the plan of $24.4 million (approximately $15.5 million in cash and the remainder in the Company's common stock). During fiscal 2004, the Company intends to make a contribution to the plan approximating $2.6 million of the Company's common stock. Based upon this contribution and current contribution credits available to the Company under pension funding regulations, actuarial projections indicate no mandatory contributions to the plan would be required through fiscal year 2008. Depending upon changes in asset values and interest rates, as well as any discretionary contributions by the Company in the interim period, required contributions in periods subsequent to fiscal year 2008 could be significant.

 The Company is subject to certain potential environmental and legal liabilities associated primarily with the past divestiture of discontinued operations (see Note 11 of Notes to Consolidated Financial Statements).

 The Company does not have any off-balance sheet arrangements as of June 30, 2003.

 Based upon current plans and business conditions, management believes that global borrowing capacity under its various credit facilities and internally generated cash flows will be sufficient to fund anticipated operational needs, capital expenditures and other near-term commitments.

Critical Accounting Policies

 The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires estimates and judgments by management that affect the reported amount of assets and liabilities, revenues, expenses, and related disclosures. Such estimates are based upon historical experience and other assumptions believed to be reasonable given known circumstances. Actual results could differ from those estimates. On an ongoing basis, the Company evaluates and updates its estimates, including those related to accounting for inventories, goodwill, pension benefits and reserves for litigation and environmental issues. Management considers the following policies critical to understanding the Company's financial position and results of operations.

Inventories

 The Company's inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material, labor and factory overhead. The Company identifies potentially obsolete and excess inventory by evaluating overall inventory levels in relation to expected future requirements and market conditions, and provisions for excess and obsolete inventory and inventory valuation are recorded accordingly. In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare those with the current or committed inventory levels. If future demand requirements are less favorable than those projected by management, additional inventory write-downs may be required.

Long-Lived Assets and Goodwill

 The Company periodically evaluates the recoverability of its long-lived assets, including property, plant and equipment. Impairment charges are recorded in operating results when the undiscounted future expected cash flows derived from an asset are less than the carrying value of the asset.

7

 The Company periodically evaluates the carrying value of goodwill for impairment. The Company has identified its Telecom Power, Power Electronics and Industrial Controls groups as reporting units under SFAS No. 142. In assessing potential impairment, management makes significant estimates and assumptions regarding the discounted future cash flows of the Company's reporting units to determine the fair value of those reporting units.    Such estimates include, but are not limited to, projected future operating results, working capital ratios, cash flow, market discount rates and tax rates. If these estimates change in the future, or if actual circumstances vary significantly from these assumptions, this could result in additional goodwill impairment charges.

Pension Benefits

 The valuation of the Company's pension plan requires the use of assumptions and estimates to develop actuarial valuations of expenses and assets/liabilities. These assumptions include discount rates, investment returns and mortality rates. Changes in assumptions, or significant differences between actual future discount rates, investments returns and mortality rates from those assumptions, could potentially have a material impact on the Company's expenses and related funding requirements.

Reserves for Litigation and Environmental Issues

 The Company periodically records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. The accounting for such events is prescribed under SFAS No. 5, "Accounting for Contingencies." SFAS No. 5 defines a contingency as "an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur."

 SFAS No. 5 does not permit the accrual of gain contingencies under any circumstances. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that the loss has been incurred, given the likelihood of uncertain events; and (2) that the amount of the loss can be reasonably estimated.

 The accrual of a contingency involves considerable judgment on the part of management. The Company uses its internal expertise, and outside experts, as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

Risk Factors Affecting the Company's Financial Outlook

 A continuing low level of demand for power products in the telecommunications and information technologies industries had an adverse effect on the Company's operating results in fiscal 2003. If demand in one or both of these industries deteriorates further in subsequent periods, the adverse effect on Magnetek's results of operations could continue. In addition, the Company is subject to all of the business risks facing public companies, including business cycles and trends in the general economy, financial market conditions, changes in interest rates, demand variations and volatility, potential loss of key personnel, supply chain disruptions, government legislation and regulation, and natural causes.

 In addition to variations in demand for power products in the markets Magnetek serves, management believes that the most significant potential risk factors faced by the Company, not necessarily in order of priority, are the following:

Dependence on Customers

 Magnetek's sales to its top five customers represented approximately 30% of its net sales in fiscal 2003. The loss of any such customers or significant decreases in any such customers' levels of purchases from Magnetek could have an adverse effect on the Company's business.

Competitive Size

 The power supplies industry includes more than 1,000 enterprises, according to MicroTech Consultants, an industry research organization. Of these, Magnetek competes directly only with manufacturers of complex, non-commodity power products, which management estimates constitute less than 5% of the industry. However, certain of Magnetek's competitors are significantly larger and have substantially greater resources than the Company. Further, given the current excess capacity and the decline in valuations of companies within the industry, the risk of consolidation in the industry could result in larger competitors than exist today.

 In power systems, Magnetek competes with crane and hoist drive manufacturers and drive system integrators, elevator drive manufacturers and control system integrators, mining machinery drive builders, power inverter builders and telecom power systems builders. The total number of such enterprises with whom Magnetek competes directly is considered to be fewer than 100. However, certain of Magnetek's competitors are significantly larger and have substantially greater resources than

8

the Company, and some are global in scope, whereas Magnetek currently competes primarily in the North American market.

International Business

 Magnetek's international operations are subject to risks associated with changes in local economic and political conditions, codes and standards, currency exchange rates and restrictions, regulatory requirements and taxes.

 Since international sales currently account for nearly half of Magnetek's revenue, currency exchange rates impact the Company's results. This is partially a currency translation issue with no economic impact on actual results. However, a fluctuation in exchange rates between a foreign currency and the U.S. dollar can have an economic impact on revenue and profit. During fiscal 2003, Magnetek was impacted by such currency fluctuations, primarily the weakening of the U.S. dollar against the Euro. Additional weakening in the value of the dollar against other currencies, primarily the Euro, could have an adverse effect on the Company's financial results.

Intellectual Property

 Management believes that Magnetek's intellectual property in the area of digital power-electronics is equal or superior to its competitors' and does not know of any new technologies that could cause a shift away from digital power-electronic solutions. However, as a technology-based company in an industry characterized by short product life cycles, Magnetek is highly dependent on both patented and proprietary intellectual property. Therefore, major advancements in digital power-electronic technology by competitors or the advent of technologies obviating digital power-electronic solutions could have an adverse effect on the Company's business.

 Likewise, the Company could be adversely affected financially should it be judged to have infringed upon the intellectual property of others. Magnetek is currently defending against one such claim alleging infringement of electronic ballast patents (see Note 11 of Notes to Consolidated Financial Statements). The Company was engaged in no other patent infringement litigation at June 30, 2003.

Environmental Issues

 Magnetek has agreed to provide indemnification against environmental liabilities and potential liabilities associated with operations that it has divested, including certain motor, generator, lighting ballast, transformer and drive manufacturing operations. Such liabilities, if any, could have an adverse effect on the Company's financial position. Further, Magnetek has been indemnified against potential environmental liabilities and potential liabilities associated with operations that it has acquired, including lighting ballast, transformer, capacitor and crane brake manufacturing operations that were subsequently divested. If not borne by the indemnifiers such liabilities, if any, could have an adverse effect on the Company's financial position (see Note 11 of Notes to Consolidated Financial Statements).

Acquisitions

 Magnetek's business strategy has historically called for growth and diversification in the digital power-electronic products business. Pursuing acquisition opportunities and attempting to integrate and manage acquired businesses requires significant resources, including management time and skill, and these efforts may detract from the management or operation of these and the Company's other businesses. Additionally, acquired businesses may not perform as anticipated, thereby causing Magnetek's operating results to suffer.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

 The Company is exposed to market risks in the areas of foreign exchange and interest rates. To mitigate the effect of such risks, the Company selectively uses specific financial instruments. Hedging transactions can be entered into under Company policies and procedures and are monitored monthly. Company policy clearly prohibits the use of such financial instruments for trading or speculative purposes. A discussion of the Company's accounting policies for derivative financial instruments is included in the Summary of Significant Accounting Policies under Note 1 in the Notes to the Consolidated Financial Statements.

Interest Rates

 The fair value of the Company's debt was $26.7 million and $4.1 million at June 30, 2003 and June 30, 2002, respectively. The fair value of the Company's debt is equal to the borrowings outstanding from domestic and foreign banks and small amounts owed under capital lease arrangements. Prospectively, the Company does not consider there to be material risk

9

due to changes in the interest rate structure of borrowing rates applicable to such debt. For the Company's debt outstanding at June 30, 2003 and 2002, a hypothetical 10% adverse change in interest rates would not have had a material impact on the Company's pre-tax earnings and cash flow due to relatively low variable interest rates.

Foreign Currency Exchange Rates

 The Company may selectively enter into foreign exchange contracts to hedge certain balance sheet exposures in Europe. The Company had no foreign currency contracts outstanding at June 30, 2003 and 2002.

 In relation to its overall manufacturing capability, the Company's manufacturing base in Europe is substantial, with plants in Italy and Hungary. Exchange rates between the U.S. dollar and the Euro can have an impact of the Company's operating results for products produced in Europe whose sales are denominated in U.S dollars. The Company is taking actions to lessen this impact by more closely matching costs and revenues in common currencies through purchasing and manufacturing strategies. However, future movement in currency exchange rates, primarily between the U.S. dollar and the Euro, could have a material impact on future operating results.

10

CONSOLIDATED STATEMENTS OF OPERATIONS

For the years ended June 30, (Amounts in thousands, except per share data)		2003			2002			2001
Net sales		$	201,782		$	188,224		$	298,260
Cost of sales			164,799			144,663			221,494
Gross profit			36,983			43,561			76,766
Research and development			11,145			9,770			9,417
Sales, general and administrative			40,588			31,513			46,359
Gain from termination of retiree medical plan			(27,771	)		–			–
Asset impairment			34,358			–			–
Income (loss) from operations			(21,337	)		2,278			20,990
Interest expense			1,545			194			4,335
Other expense (income), net			4,342			(224	)		1,972
Income (loss) from continuing operations before provision for income taxes			(27,224	)		2,308			14,683
Provision for income taxes			7,620			900			5,600
Income (loss) from continuing operations			(34,844	)		1,408			9,083
Discontinued operations -
	Income from operations (net of taxes)		–			–			764
	Loss from discontinued operations		–			–			(4,114	)
Net income (loss)		$	(34,844	)	$	1,408		$	5,733
Per common share basic:
Income (loss) from continuing operations		$	(1.48	)	$	0.06		$	0.40
Loss from discontinued operations			–			–			(0.15	)
Net income (loss)		$	(1.48	)	$	0.06		$	0.25
Per common share diluted:
Income (loss) from continuing operations		$	(1.48	)	$	0.06		$	0.39
Loss from discontinued operations			–			–			(0.14	)
Net income (loss)		$	(1.48	)	$	0.06		$	0.25

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED BALANCE SHEETS

As of June 30, (Amounts in thousands)		2003			2002
Assets
Current assets:
	Cash	$	1,680		$	4,816
	Accounts receivable, less allowance for doubtful accounts of $2,427 in 2003 and $2,432 in 2002		46,745			41,532
	Inventories		48,843			45,338
	Deferred income taxes		6,734			6,348
	Prepaids and other assets		6,174			2,419
Total current assets			110,176			100,453
Property, plant and equipment:
	Land		1,185			1,060
	Buildings and improvements		12,862			10,894
	Machinery and equipment		97,676			81,213
Less accumulated depreciation and amortization			77,929			61,194
Net property, plant and equipment			33,794			31,973
Goodwill, less accumulated amortization of $9,720 in 2003 and 2002			63,067			95,533
Prepaid pension			58,325			59,986
Other assets			15,289			16,946
		$	280,651		$	304,891
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable	$	35,496		$	25,386
	Accrued liabilities		13,452			18,559
	Current portion of long-term debt		805			407
Total current liabilities			49,753			44,352
Long-term debt, net of current portion			25,897			3,717
Other long-term obligations			9,180			39,640
Pension benefit obligations			109,681			74,363
Deferred income taxes			6,469			–
Commitments and contingencies
Stockholders' Equity:
Common stock, $0.01 par value, 100,000 shares authorized 23,535 and 23,511 shares issued and outstanding in 2003 and 2002			237			236
Additional paid-in capital			106,541			106,216
Retained earnings			80,959			115,803
Accumulated other comprehensive loss			(108,066	)		(79,436	)
Total stockholders' equity			79,671			142,819
		$	280,651		$	304,891

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

	Common Stock
(Amounts in thousands)
	Shares		Amount			Additional paid-in capital			Retained Earnings			Accumulated Other Comprehensive Loss			Total
Balance, June 30, 2000	23,073		$	231		$	100,399		$	108,662		$	(25,086	)	$	184,206
Exercise of stock options	301			3			2,589			–			–			2,592
Shares retired from trust	(180	)		(2	)		–			–			–			(2	)
Shares sold from trust	–			–			216			–			–			216
Shares issued for acquisition	598			6			6,658			–			–			6,664
Share repurchase / retirement	(1,075	)		(11	)		(12,342	)		–			–			(12,353	)
Tax benefit for options exercised	–			–			431			–			–			431
Net income	–			–			–			5,733			–			5,733
Translation adjustments	–			–			–			–			(3,780	)		(3,780	)
Comprehensive income - 2001	–			–			–			–			–			1,953
Balance, June 30, 2001	22,717		$	227		$	97,951		$	114,395		$	(28,866	)	$	183,707
Exercise of stock options	252			3			2,172			–			–			2,175
Share repurchase / retirement	(264	)		(3	)		(3,030	)		–			–			(3,033	)
Employee stock purchase plan	2			–			17			–			–			17
Pension plan contribution	900			9			8,892			–			–			8,901
Deferred compensation plan	–			1			883			–			–			884
Share value trust	(96	)		(1	)		(883	)		–			–			(884	)
Tax benefit for options exercised	–			–			214			–			–			214
Net income	–			–			–			1,408			–			1,408
Translation adjustments	–			–			–			–			6,394			6,394
Minimum pension liability	–			–			–			–			(56,964	)		(56,964	)
Comprehensive loss - 2002	–			–			–			–			–			(49,162	)
Balance, June 30, 2002	23,511		$	236		$	106,216		$	115,803		$	(79,436	)	$	142,819
Employee stock purchase plan	24			–			75			–			–			75
Shares issued to trust	65			1			250			–			–			251
Deferred compensation plan	–			1			250			–			–			251
Share value trust	(65	)		(1	)		(250	)		–			–			(251	)
Net loss	–			–			–			(34,844	)		–			(34,844	)
Translation adjustments	–			–			–			–			7,087			7,087
Minimum pension liability	–			–			–			–			(35,717	)		(35,717	)
Comprehensive loss - 2003	–			–			–			–			–			(63,474	)
Balance, June 30, 2003	23,535		$	237		$	106,541		$	80,959		$	(108,066	)	$	79,671

The accompanying notes are an integral part of these consolidated financial statements.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended June 30, (Amounts in thousands)		2003			2002			2001
Cash flows from operating activities:
	Income (loss) from continuing operations	$	(34,844	)	$	1,408		$	9,083
Adjustments to reconcile income (loss) from continuing operations to net cash used in operating activities:
	Depreciation		8,861			9,369			9,442
	Amortization		275			17			2,958
	Gain from termination of retiree medical plan		(27,771	)		–			–
	Goodwill and other asset impairment		39,037			–			–
	Changes in operating assets and liabilities of continuing operations		2,092			(18,232	)		(41,610	)
Total adjustments			22,494			(8,846	)		(29,210	)
Net cash used in operating activities			(12,350	)		(7,438	)		(20,127	)
Cash flows from investing activities:
	Purchase and investment in companies, net of cash acquired		(4,306	)		(1,691	)		(33,348	)
	Proceeds from sale of businesses and other assets		–			24,264			133,995
	Capital expenditures		(8,957	)		(7,626	)		(9,006	)
Net cash provided by (used in) investing activities			(13,263	)		14,947			91,641
Cash flows from financing activities:
	Proceeds from sale of trust shares		–			–			214
	Proceeds from issuance of common stock		251			2,175			2,592
	Proceeds from employee stock purchase plan		75			17			–
	Repurchase of common stock		–			(3,917	)		(12,353	)
	Borrowing under (repayment of) bank and other long-term obligations		22,578			(6,010	)		(53,906	)
	Increase in deferred financing costs		(427	)		(268	)		–
Net cash provided by (used in) financing activities			22,477			(8,003	)		(63,453	)
Net cash provided by (used in) continuing operations			(3,136	)		(494	)		8,061
Cash flows from discontinued operations:
	Income from discontinued operations		–			–			764
Adjustments to reconcile income to net cash used in discontinued operations:
	Depreciation and amortization		–			–			10,608
	Changes in operating assets and liabilities of discontinued operations		–			–			(5,701	)
	Capital expenditures		–			–			(8,765	)
Net cash used in discontinued operations		$	–		$	–		$	(3,094	)
Net increase (decrease) in cash			(3,136	)		(494	)		4,967
Cash at the beginning of the year			4,816			5,310			343
Cash at the end of the year		$	1,680		$	4,816		$	5,310

The accompanying notes are an integral part of these consolidated financial statements.

14

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(All amounts in the notes to consolidated financial statements are expressed in thousands except share and per share data)

1. Summary of Significant Accounting Policies

Principles of Consolidation

 The consolidated financial statements include the accounts of Magnetek, Inc. and its subsidiaries (the "Company" or "Magnetek"). All significant inter-company accounts and transactions have been eliminated.

Use of Estimates

 The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant areas requiring management estimates include the following key financial areas:

Accounts Receivable

Accounts receivable represent receivables from customers in the ordinary course of business. The Company is subject to losses from uncollectible receivables in excess of its allowances. The Company maintains allowances for doubtful accounts for estimated losses from customers' inability to make required payments. In order to estimate the appropriate level of this allowance, the Company analyzes historical bad debts, customer concentrations, current customer creditworthiness, current economic trends and changes in customer payment patterns. If the financial conditions of the Company's customers were to deteriorate and to impair their ability to make payments, additional allowances may be required in future periods. The Company's management believes that all appropriate allowances have been provided.

Inventories

The Company's inventories are stated at the lower of cost or market. Cost is determined by the first-in, first-out (FIFO) method, including material, labor and factory overhead. Inventory on hand may exceed future demand either because the product is obsolete, or the amount on hand is more than can be used to meet future needs. The Company identifies potentially obsolete and excess inventory by evaluating overall inventory levels. In assessing the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements and compare those with the current or committed inventory levels. If future demand requirements are less favorable than those projected by management, additional inventory write-downs may be required.

Reserves for Litigation and Environmental Issues

The Company periodically records the estimated impacts of various conditions, situations or circumstances involving uncertain outcomes. The accounting for such events is prescribed under Statement of Financial Accounting Standard (SFAS) No. 5, "Accounting for Contingencies." SFAS No. 5 defines a contingency as "an existing condition, situation, or set of circumstances involving uncertainty as to possible gain or loss to an enterprise that will ultimately be resolved when one or more future events occur or fail to occur."

SFAS No. 5 does not permit the accrual of gain contingencies under any circumstances. For loss contingencies, the loss must be accrued if (1) information is available that indicates it is probable that the loss has been incurred, given the likelihood of uncertain events; and (2) that the amount of the loss can be reasonably estimated.

The accrual of a contingency involves considerable judgment on the part of management. The Company uses its internal expertise, and outside experts, as necessary, to help estimate the probability that a loss has been incurred and the amount (or range) of the loss.

Income Taxes

The Company uses the liability method to account for income taxes. The preparation of consolidated financial statements involves estimating the Company's current tax exposure together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheets. An assessment of the recoverability of the deferred tax assets is made, and a valuation allowance is established based upon this assessment.

15

Federal income taxes are not provided currently on undistributed earnings of foreign subsidiaries since the Company presently intends to reinvest any earnings overseas indefinitely.

Pension Benefits

The valuation of the Company's pension plan requires the use of assumptions and estimates to develop actuarial valuations of expenses and assets/liabilities. These assumptions include discount rates, investment returns and mortality rates. Changes in assumptions and future investments returns could potentially have a material impact on the Company's expenses and related funding requirements.

Revenue Recognition

 The Company's policy is to record and recognize sales only upon shipment. Amounts billed to customers for shipping costs are reflected in net sales; shipping costs incurred are reflected in cost of sales.

Property, Plant and Equipment

 Additions and improvements are capitalized at cost, whereas expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided over the estimated useful lives of the respective assets principally on the straight-line method (machinery and equipment normally five to ten years, buildings and improvements normally ten to forty years).

Goodwill

 The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets", effective July 1, 2001. Under SFAS No. 142, goodwill and other intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests, or interim impairment tests if certain indicators arise.

 Based upon the Company's adoption of SFAS No. 142, no goodwill amortization was recorded in the fiscal years ended June 30, 2003 and 2002. Amortization expense relating to goodwill was $2,183 for the year ended June 30, 2001.    Management reviews the valuation of goodwill at least annually, using discounted future cash flow analysis of each of the Company's reporting units.

Accounting For Stock Options

 As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to follow Accounting Principles Board Opinion (APB) No. 25 "Accounting for Stock Issued to Employees" and related interpretations in accounting for stock based awards to employees. Under APB No. 25, the Company recognizes no compensation expense with respect to such awards when the exercise price is equal to or greater than the market price at the date of grant.

Recent Accounting Pronouncements

 In July 2002, the Financial Accounting Standards Board (FASB) issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which nullified Emerging Issues Task Force (EITF) Issue 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." SFAS No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred, with the exception of termination of certain leases and contracts. Under EITF 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan. The provisions of this Statement are effective for exit or disposal activities that are initiated after December 31, 2002. The Company does not expect the adoption of SFAS No. 146 to have a material impact on its results of operations or financial position.

 In November 2002, the FASB issued interpretation No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires certain guarantees to be measured at fair value upon issuance and recorded as a liability. The measurement and recognition requirements of FIN 45 are effective for guarantees issued or modified after December 31, 2002. In addition, the interpretation expands disclosure requirements regarding guarantees issued by an entity, including tabular presentation of the changes in the entity's recorded product warranty liability. The disclosure requirements are effective for the Company in its annual financial statements for the fiscal year ended June 30, 2003 (see Note 15 of Notes to Consolidated Financial Statements).

16

 In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure", which amends Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation and requires more prominent and more frequent disclosures in the financial statements of the effects of stock-based compensation. The provisions of SFAS No. 148 are effective for fiscal years ending after December 15, 2002 and the interim disclosure provisions are effective for interim periods beginning after December 15, 2002. The Company has provided the required disclosures for interim periods beginning with the fiscal quarter ended March 31, 2003.

 In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities (VIE)." FIN 46 requires that if a company holds a controlling financial interest in a VIE, the assets, liabilities and results of the VIE's activities should be consolidated in the entity's financial statements. The Company does not expect FIN 46 to have a material impact on its results of operations or financial position.

 In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on Derivatives and Hedging", which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is generally effective for derivative instruments, including derivative instruments embedded in certain contracts, entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The Company does not expect the adoption of SFAS No. 149 to have a material impact on its results of operations or financial position.

 In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristic of Both Liabilities and Equity". This statement establishes standards for how an issuer classifies and measures in its statement of financial position certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within the scope of SFAS No. 150 as a liability (or an asset in some circumstances) because that financial instrument embodies an obligation of the issuer. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim periods beginning after June 15, 2003. The Company does not expect the adoption of SFAS No. 150 to have a material impact on its results of operations or financial position.

Research and Development

 Expenditures for research and development are charged to expense as incurred and aggregated $11,145, $9,770 and $9,417 for the years ended June 30, 2003, 2002, and 2001, respectively.

Foreign Currency Translation

 The Company's foreign entities' accounts are measured using local currency as the functional currency. Assets and liabilities are translated at the exchange rate in effect at year-end. Revenues and expenses are translated at the rates of exchange prevailing during the year. Unrealized translation gains and losses arising from differences in exchange rates from period to period are included as a component of accumulated other comprehensive loss in stockholders' equity.

Derivative Financial Instruments

 The Company uses derivative financial instruments to reduce financial market risks. These instruments are used to hedge foreign currency and interest rate market exposures. The Company does not use derivative financial instruments for speculative or trading purposes. The accounting policies for these instruments are based on the Company's designation of such instruments as hedging transactions. The criteria the Company uses for designating an instrument as a hedge include the instrument's effectiveness in risk reduction and the matching of the derivative to the underlying transaction. The resulting gains or losses are accounted for as part of the transactions being hedged, except that losses not expected to be recovered upon the completion of the hedge transaction are expensed.

Deferred Financing Costs

 Costs incurred to obtain financing are deferred and included in the other assets in the consolidated balance sheet. Deferred financing costs are amortized over the term of the financing facility, and related amortization expense was $275, $17 and $683 for the years ended June 30, 2003, 2002 and 2001, respectively.

17

Earnings Per Share

 In accordance with SFAS No. 128, "Earnings Per Share," basic earnings per share are computed using the weighted average number of common shares outstanding during the period. Diluted earnings per common share incorporate the incremental shares issuable upon the assumed exercise of stock options as if all exercises had occurred at the beginning of the fiscal year.

Fiscal Year

 The Company uses a fifty-two, fifty-three week fiscal year ending on the Sunday nearest June 30. For consistency of presentation, all periods are presented as if the year ended on June 30. Fiscal years 2003, 2002 and 2001 contained 52 weeks.

2. Acquisitions/Divestitures

 During the fourth quarter of the fiscal year ended June 30, 2003, the Company committed to a plan to divest its telecom service business. Management determined that the assets and liabilities to be sold constituted a disposal group under SFAS No. 144 and that all of the "assets held for sale" criteria outlined in SFAS No. 144 were met as of the end of June 2003. As of June 30, 2003, the net book value of the disposal group was $2.1 million, comprised of $2.7 million in assets and $0.6 million in liabilities. The expected proceeds from the sale were $1.2 million, and as a result, an estimated loss on the sale of $0.9 million plus an additional amount of $0.1 million in closing costs, were recorded in fiscal year 2003 within other expense in the consolidated statement of operations. The assets held for sale were reflected in the consolidated balance sheet as of June 30, 2003 in prepaid expenses in an amount of $1.8 million, representing the net of the $2.7 million in assets and the estimated loss of $0.9 million. The liabilities held for sale of $0.6 million and the estimated closing costs of $0.1 million were classified as other accrued liabilities in the consolidated balance sheet as of June 30, 2003. Subsequent to June 30, 2003, the Company finalized the sale and received proceeds of approximately $1.2 million for its telecom service business.

 On December 30, 2002, the Company purchased all of the outstanding shares of MXT Holding, Inc. for approximately $4.3 million in cash. MXT Holdings, Inc, is a holding company whose wholly owned subsidiary, Maxtec International Corp. is engaged in the development, manufacture and sale of wireless remote controls and anti-collision systems for overhead cranes, hoists, monorail systems, conveyors, locomotives, and other material handling applications under the name Telemotive Industrial Controls ("Telemotive"). Telemotive reported revenue of approximately $10.0 million in its most recently completed fiscal year. Acquisition costs in excess of net assets acquired, approximately $2.2 million, were recorded as goodwill. The acquisition was financed from the Company's revolving credit facility.

 On May 24, 2002, the Company purchased the net assets of LAB Communications, Inc. for cash of approximately $1.7 million (net of cash acquired of approximately $0.2 million). The Company acquired assets of approximately $1.7 million and assumed liabilities of $1.3 million. The purchase price has been allocated to the net assets acquired based upon their estimated fair market values. The acquisition was financed from the Company's available cash balances.

 On March 2, 2001, the Company acquired ADS Power Resource, Inc., for approximately $8.8 million in cash and 597,691 shares of the Company's stock, valued at approximately $6.7 million. The Company acquired assets of approximately $4.7 million (including cash balances approximating $0.4 million) and assumed liabilities of $0.9 million. Costs in excess of net assets acquired, approximately $11.8 million, were recorded as goodwill. The cash portion of the purchase price was financed from the Company's revolving credit facility.

 On January 29, 2001, the Company sold its Standard Drives business to Yaskawa Electric of America for approximately $27.6 million in cash. The business was part of the Company's Drives and Industrial Controls business and was responsible for assembling, marketing, selling, servicing and repairing Yaskawa general purpose AC drives and related products. Proceeds from the sale were used for debt repayment.

 On November 13, 2000, the Company purchased all of the outstanding shares of J-Tec, Inc. for approximately $24.0 million. The Company acquired assets of approximately $13.1 million (including cash balances approximating $2.9 million) and assumed liabilities of $4.6 million. Post closing adjustments were completed in the third quarter of fiscal 2001 based upon the change in net assets acquired at closing versus a contractually agreed upon level of transferred net assets. Subsequent to post closing adjustments, total acquisition costs in excess of net assets acquired, approximately $19.2 million, were recorded as goodwill. J-Tec, Inc. is a power systems integrator serving the domestic telecommunications industry. The acquisition was financed from the Company's revolving credit facility.

 All of the above acquisitions were accounted for under the purchase method of accounting and accordingly the purchase price has been allocated to the net assets acquired based upon their estimated fair market values.

18

 Operating results were included, or excluded, for all of the acquisitions, or divestitures in the Company's consolidated results effective as of the acquisition or divestiture dates. The following pro forma information includes the operations of the acquired/divested entities for fiscal year 2001 as if the respective transactions had occurred on the first day of the fiscal year immediately preceding the year of acquisition or divestiture. Pro forma information has not been presented for fiscal years 2003 and 2002, as results would not differ materially from historical results.

For the years ended June 30, (Amounts in thousands, except per share data)							(pro forma)
		2003			2002		2001
Net sales	$	201,782		$	188,224	$	273,241
Income (loss) from continuing operations		(34,844	)		1,408		10,198
Net income (loss)	$	(34,844	)	$	1,408	$	6,848
Continuing operations
Basic EPS	$	(1.48	)	$	0.06	$	0.45
Diluted EPS	$	(1.48	)	$	0.06	$	0.44
Net income (loss)
Basic EPS	$	(1.48	)	$	0.06	$	0.30
Diluted EPS	$	(1.48	)	$	0.06	$	0.30

 The pro forma results of operations do not purport to represent what the Company's results would have been had such transactions occurred at the beginning of the periods presented or to project the Company's results of operations in any future period.

3. Discontinued Operations

 For the years ended June 30, 2003 and 2002 there were no results from discontinued operations. The results of the Company's electrical products businesses (Generators, Motors, Lighting and Transformers) are included within discontinued operations for the fiscal year ended June 30, 2001.

 On June 15, 2001 the Company sold its Lighting business to Universal Lighting Technologies, Inc., a subsidiary of Littlejohn Fund II, L.P., and on June 29, 2001 sold its Transformer business to American Circuit Breaker Corporation. Pre-tax proceeds received from the sale of the Lighting business were $105 million and were used to repay bank obligations and repurchase shares of the Company's common stock in fiscal year 2001.

 The operating results of discontinued operations are as follows:

Year ended June 30	2003		2002		2001
Net sales	$	–	$	–	$	353,803
Income before provision for income taxes		–		–		1,164
Provision for income taxes		–		–		400
Income from discontinued operations	$	–	$	–	$	764

 Interest expense of $3.5 million was allocated to discontinued operations in fiscal year 2001, in accordance with EITF 87-24, "Allocation of Interest to Discontinued Operations". Taxes for fiscal year 2001 were allocated using the same overall rate for the Company for that fiscal year.

 Net income for the year ended June 30, 2001 includes a $4,114 (including a tax benefit of $2,600) loss on the sale of the Company's Lighting and Transformer businesses, resulting in a net loss of $3,350 in discontinued operations for fiscal year 2001.

4. Goodwill

 The Company adopted SFAS No. 142, "Goodwill and Other Intangible Assets", effective July 1, 2001. Under SFAS No. 142, goodwill is no longer amortized but rather reviewed for impairment annually, or more frequently if certain indicators arise.

19

If the Company had accounted for goodwill under SFAS No. 142 for all periods presented, net income (loss) and earnings (loss) per share would have been as follows:

	2003			2002		2001
Reported net income (loss)	$	(34,844	)	$	1,408	$	5,733
Add back goodwill amortization net of tax		–			–		1,340
Adjusted net income (loss)	$	(34,844	)	$	1,408	$	7,073
Basic and diluted earnings (loss) per share:
Reported net income (loss)	$	(1.48	)	$	0.06	$	0.25
Goodwill amortization net of tax		–			–		0.06
Adjusted net income (loss)	$	(1.48	)	$	0.06	$	0.31

 As a result of the decline in the Company's market capitalization in the first quarter of fiscal year 2003, the continuing decline in the telecommunications market, and anticipated reduced demand of telecom power systems in the future, the Company determined that there were indicators of impairment in the carrying value of goodwill related to acquisitions made within the past two fiscal years in the telecom industry. Accordingly, during the second quarter of fiscal 2003, the Company performed an interim test for goodwill impairment in accordance with SFAS No. 142. Upon completing the interim impairment tests, the Company recorded a goodwill impairment charge of $33.4 million related to the telecom acquisitions.

 The Company's impairment tests, which consist primarily of discounted cash flow analyses, indicated no impairment in the other reporting units. Assumptions used in the analyses are based upon projected results that the Company considers reasonable and appropriate in light of historical performance and anticipated future conditions.

 The changes in the carrying value of goodwill by reporting unit, net of accumulated amortization of $9,720, are as follows:

	Telecom Power			Power Electronics		Industrial Controls		Total
Balance at June 30, 2002	$	36,301		$	33,509	$	25,723	$	95,533
Purchase price adjustments and reclassifications		(2,859	)		–		2,246		(613	)
Currency translation		–			1,549		40		1,589
Impairment charge		(33,442	)		–		–		(33,442	)
Balance at June 30, 2003	$	–		$	35,058	$	28,009	$	63,067

5. Inventories

 Inventories at June 30, consist of the following:

	2003		2002
Raw materials	$	26,994	$	29,201
Work-in-process		15,217		10,747
Finished goods		6,632		5,390
	$	48,843	$	45,338

6. Long-Term Debt and Bank Borrowing Arrangements

 Long-term debt at June 30, consists of the following:

	2003		2002
Revolving bank loans	$	21,384	$	–
Miscellaneous installment notes, capital leases and other obligations at rates ranging from 1.8 percent to 8.0 percent, due through 2009		5,318		4,124
		26,702		4,124
Less current portion		805		407
	$	25,897	$	3,717

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Bank Borrowing Arrangements

 At June 30, 2003, the Company had an agreement with a group of banks to lend up to $16,000 under a revolving loan facility through December 17, 2003. Amounts outstanding at June 30, 2003 under this agreement were $9,250 and bore interest at the banks' prime lending rate plus one and three-quarters percent (5.75% at June 30, 2003). Subsequent to fiscal year end, the Company replaced this facility with an asset based credit agreement ("Credit Agreement") with Bank One. The aggregate lending commitment under the Credit Agreement is $19,000 with available borrowings determined by a borrowing base as defined in the agreement, supported primarily by levels of domestic accounts receivable and inventory. Borrowings under the Credit Agreement bear interest at the bank's prime lending rate plus one percent or, at the Company's option, the London Interbank Offered Rate (LIBOR) plus three and one-quarter percent. These rates may be reduced or increased annually based on the level of a defined fixed charge coverage ratio. The Company is required to pay a commitment fee of 0.5 percent on the unused available commitment.

 Borrowings under the Credit Agreement are secured by substantially all of the Company's North American assets. The Credit Agreement contains certain provisions and covenants which, among other things, prohibits the payment of cash dividends and repurchases of common stock, limit the amount of future indebtedness and capital expenditures and require the Company to maintain specified levels of EBITDA and fixed charge coverage.

 The Company's European subsidiary has revolving credit arrangements with various banks primarily to finance working capital needs. Available borrowings under these arrangements aggregate approximately Euro 20,000 depending in part upon levels of accounts receivable. Borrowings outstanding under these arrangements were $17,452 at June 30, 2003 and bore interest at various rates, generally tied to LIBOR or EURIBOR (ranging from 2% to 8% at June 30, 2003).

 Subsequent to fiscal year-end the Company's European subsidiary entered into an agreement with a European bank to provide borrowings secured by the subsidiary's land and building over a ten year period. Borrowings under the agreement bear interest at EURIBOR plus one and one-half percent. The initial commitment to lend under this agreement is Euro 7,000, with the commitment amount reduced ratably on a quarterly basis beginning March 31, 2004 and ending September 30, 2013.

 Aggregate principal maturities on long-term debt outstanding at June 30, 2003 are as follows:

Year ended June 30
2004	$	805
2005		1,651
2006		10,148
2007		892
2008		720
Thereafter		12,486
	$	26,702

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7. Earnings (Loss) Per Share

 The following table sets forth the computation of basic and diluted earnings (loss) per share.

		2003			2002		2001
Basic earnings (loss) per share:
	Income (loss) from continuing operations	$	(34,844	)	$	1,408	$	9,083
	Income from discontinued operations		–			–		764
	Loss on sale of discontinued businesses (net of taxes)		–			–		(4,114	)
Net income (loss)		$	(34,844	)	$	1,408	$	5,733
	Weighted average shares for basic earnings per share		23,522			22,517		22,548
Basic earnings (loss) per share
	Income (loss) from continuing operations	$	(1.48	)	$	0.06	$	0.40
	Income from discontinued operations		–			–		0.03
	Loss on sale of discontinued businesses (net of taxes)		–			–		(0.18	)
Basic earnings (loss) per share		$	(1.48	)	$	0.06	$	0.25
Diluted earnings (loss) per share:
	Income (loss) from continuing operations	$	(34,844	)	$	1,408	$	9,083
	Income from discontinued operations		–			–		764
	Loss on sale of discontinued businesses (net of taxes)		–			–		(4,114	)
Net income (loss)		$	(34,844	)	$	1,408	$	5,733
Weighted average shares for diluted earnings per share			23,522			22,517		22,548
	Effect of dilutive stock options		–			471		605
	Weighted average shares for diluted earnings per share		23,522			22,988		23,153
Diluted earnings (loss) per share:
	Income (loss) from continuing operations	$	(1.48	)	$	0.06	$	0.39
	Income from discontinued operations		–			–		0.03
	Loss on sale of discontinued businesses (net of taxes)		–			–		(0.17	)
Diluted earnings (loss) per share:		$	(1.48	)	$	0.06	$	0.25

 Shares issuable under stock option agreements have been excluded from the computation of diluted earnings per share for fiscal year 2003 because the effect would be anti-dilutive.

8. Fair Values of Financial Instruments

 The carrying amounts of certain financial instruments such as cash, annuity contracts and borrowings under revolving credit agreements approximate their fair values.

9. Asset Impairment Charges

 The Company recorded asset impairment charges related to its telecom business aggregating $39,037 in the second quarter of fiscal 2003. The charges consisted of the following: $33,442 for goodwill; $4,679 for inventory; $577 for fixed assets and $339 for accounts receivable. The inventory charge is included in cost of sales and the remaining charges are included in asset impairment in the accompanying Consolidated Statements of Operations.

10. Income Taxes

 Income tax expense (benefit) is allocated in the financial statements as follows:

Year ended June 30	2003		2002		2001
Income tax expense (benefit) attributable to continuing operations	$	7,620	$	900	$	5,600
Discontinued operations		–		–		(2,200	)
Total	$	7,620	$	900	$	3,400

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 The expense (benefit) for income taxes applicable to continuing operations is as follows:

Year ended June 30		2003		2002			2001
Current:
	Federal	$	–	$	(89	)	$	–
	State		319		472			1,429
	Foreign		326		4,121			7,351
Deferred:
	Federal		6,727		(816	)		(1,739	)
	State and Foreign		248		(2,788	)		(1,441	)
		$	7,620	$	900		$	5,600

 A reconciliation of the Company's effective tax rate to the statutory Federal tax rate for income (loss) from continuing operations is as follows:

	2003					2002					2001
Year ended June 30		Amount		%			Amount		%			Amount		%
Provision (benefit) computed at the statutory rate	$	(9,528	)	35.0		$	808		35.0		$	5,139		35.0
State income taxes, net of federal benefit		207		(0.8	)		289		12.5			873		5.9
Foreign tax rates in excess of federal statutory rate		63		(0.2	)		145		6.3			1,077		7.3
Nondeductible goodwill impairment		11,705		(43.0	)		–		–			–		–
Benefit due to federal tax law change		–		–			(1,154	)	(50.0	)		–		–
Losses not benefited		5,109		(18.8	)		794		34.4			(3,063	)	(20.9	)
Other – net		64		(0.2	)		18		0.8			1,574		10.7
	$	7,620		(28.0	)	$	900		39.0		$	5,600		38.0

 Income (loss) before provision for income taxes of the Company's foreign subsidiaries was approximately $(24), $3,655 and $14,632 for the years ended June 30, 2003, 2002 and 2001.

 Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets for continuing operations as of June 30, 2003 and 2002 are as follows:

Year ended June 30		2003			2002
Deferred tax liabilities:
	Depreciation and amortization (including differences in the basis of acquired assets)	$	(6,469	)	$	(4,704	)
Total deferred tax liabilities			(6,469	)		(4,704	)
Deferred tax assets:
	Inventory and other reserves		7,089			6,564
	Postretirement medical benefit obligation		–			11,617
	Net operating loss carryforward		49,232			42,781
Total gross deferred tax assets			56,321			60,962
Less: valuation allowance			(49,587	)		(49,910	)
Net deferred tax asset		$	265		$	6,348

 Due to the uncertainty surrounding the timing of realizing the benefits of its deferred tax assets in future tax returns, the Company has recorded a valuation allowance against its otherwise recognizable deferred tax assets. The net deferred tax asset position consists of $4.8 million of domestic net deferred tax assets offset by $4.5 million in foreign net deferred tax liabilities. The Company believes the deferred tax assets are realizable through global tax planning strategies that provide an ability to offset existing domestic tax assets with the foreign tax liabilities as well as through future taxable income.

 The Company has operating loss carryforwards for tax purposes of $141,000 and $121,000 as of June 30, 2003 and 2002 respectively, expiring between fiscal years 2013 and 2023.

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11. Commitments and Contingencies

Leases

 The Company leases certain facilities and machinery and equipment primarily under operating lease arrangements. Future minimum rental payments under noncancelable operating leases as of June 30, 2003 total $30,256 and are payable in future fiscal years as follows: $5,858 in 2004; $4,715 in 2005; $2,627 in 2006; $1,915 in 2007, $1,860 in 2008, and $13,281 thereafter.

 Aggregate future minimum rentals to be received under noncancelable subleases as of June 30, 2003 total $15,645.

 For the years ended June 30, 2003, 2002 and 2001, rent expense was $6,994, $7,325 and $4,994 respectively, while sublease rental income was $3,058, $2,878 and $1,939 respectively.

Litigation – Product Liability

 The Company is a party to a number of product liability lawsuits, all of which have arisen in connection with discontinued business operations of Magnetek. When the Company sold off these business operations, it agreed to defend and indemnify the different purchasers of these operations in respect of certain product liability claims. The Company is presently defending a number of product liability claims in connection with these indemnification obligations. After December 15, 2003, none of these purchasers will be entitled to make any further claims against the Company under these indemnification obligations. The Company will, however, remain liable for valid claims made before that date. All of the pending product liability cases are being aggressively defended by the Company, and management believes that its insurers will bear all liability, if any, that exceeds applicable deductibles, and that none of these proceedings individually or in the aggregate will have a material effect on the Company's results of operations or financial position.

 The Company has been named, along with numerous other defendants, in asbestos-related lawsuits. The Company has never produced asbestos-containing products and is either contractually indemnified against liability for asbestos-related claims or believes that it has no liability for such claims, all of which arise from business operations the Company acquired but no longer owns. While the outcome of these cases cannot be predicted with certainty, the Company is aggressively seeking to be dismissed from the proceedings and does not believe the proceedings, individually or in the aggregate, will have a material adverse effect on its results of operations or financial position.

Litigation – Patent Infringement

 In April 1998, Ole K. Nilssen filed a lawsuit in the U.S. District Court for the Northern District of Illinois alleging infringement by the Company of seven of his patents pertaining to electronic ballast technology, and seeking unspecified damages and injunctive relief to preclude the Company from making, using or selling products allegedly infringing his patents. The Company denied that its products infringed any valid patent and filed a response asserting affirmative defenses, as well as a counterclaim for a judicial declaration that its products do not infringe the patents asserted by Mr. Nilssen and also that the asserted patents are invalid. In April 2003, the lawsuit and counterclaims were dismissed with prejudice and both parties agreed to submit limited issues in dispute to binding arbitration before an arbitrator with a relevant technical background. Settlement discussions have occurred from time to time, and although the Company will continue to assert what it believes are strong defenses at arbitration, an unfavorable decision could have a material adverse effect on the Company's financial position, cash flows or results of operations.

Environmental Matters – General

 From time to time, the Company discovered the existence of hazardous substances at certain facilities associated with previously owned businesses and responded as necessary to bring the facilities into compliance with applicable laws and regulations. Upon sale of the businesses, the Company agreed, in some cases, to indemnify the buyers against environmental claims associated with the divested operations, subject to various conditions and limitations. Remediation activities, including those related to the Company's indemnification obligations, did not involve material expenditures during the fiscal year 2003.

 The Company has also 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 previously owned facilities and offsite locations. Its remediation activities as a potentially responsible party were not material in the fiscal year 2003. Although the materiality of future expenditures for environmental activities may be affected by the level and type of contamination, the extent and nature of cleanup activities required by governmental authorities, the nature of the Company's alleged connection to the contaminated sites, the number and financial resources of other potentially responsible parties, the availability of indemnification rights against third parties and the identification of additional

24

contaminated sites, the Company's estimated share of liability, if any, for environmental remediation, including its indemnification obligations, is not expected to be material.

Century Electric (McMinnville, Tennessee)

 Prior to the Company's purchase of Century Electric, Inc. ("Century Electric") in 1986, Century Electric acquired a business from Gould Inc. ("Gould") in May 1983 that included a leasehold interest in a fractional horsepower electric motor manufacturing facility located in McMinnville, Tennessee. Gould agreed to indemnify Century Electric from and against liabilities and expenses arising out of the handling and cleanup of certain waste materials, including but not limited to cleaning up any polychlorinated biphenyls ("PCBs") at the McMinnville facility (the "1983 Indemnity"). The presence of PCBs and other substances, including solvents, in the soil and in the groundwater underlying the facility and in certain offsite soil, sediment and biota samples has been identified. The McMinnville plant is listed as a Tennessee Inactive Hazardous Waste Substance Site and plant employees were notified of the presence of contaminants at the facility. Gould has completed an interim remedial excavation and disposal of onsite soil containing PCBs and a preliminary investigation and cleanup of certain onsite and offsite contamination. The Company believes the cost of further investigation and remediation (including ancillary costs) are covered by the 1983 Indemnity. The Company sold its leasehold interest in the McMinnville plant in August 1999 and while the Company believes that Gould will continue to perform substantially under its indemnity obligations, Gould's substantial failure to perform such obligations could have a material adverse effect on the Company's financial position, cash flows or results of operations.

Effect of Fruit of the Loom Bankruptcy

 The Company acquired the stock of Universal Manufacturing Company ("Universal") from a predecessor of Fruit of the Loom ("FOL"), and the predecessor agreed to indemnify the Company against certain environmental liabilities arising from pre-acquisition activities. Environmental liabilities covered by the indemnification agreement include completion of additional cleanup activities, if any, at the Bridgeport, Connecticut facility (sold in connection with the sale of the transformer business in June 2001) and defense and indemnification against liability related to offsite disposal locations where Magnetek may have a share of potential response costs. In 1999 FOL filed a petition for Reorganization under Chapter 11 of the Bankruptcy Code and the Company filed a proof of claim in the proceeding for obligations related to the environmental indemnification agreement. In November 2001, the Company and FOL entered into an agreement involving the allocation of certain potential tax credits and Magnetek withdrew its claims in the bankruptcy proceeding. Although the Company believes that FOL has substantially completed the obligations required by the indemnification agreement, its ability to set aside any remaining obligations to the states of Connecticut and New Jersey through bankruptcy, or the discovery of additional environmental contamination at the Bridgeport facility could have a material adverse effect on the Company's financial position or results of operations.

Letters of Credit

 The Company had approximately $3,768 of outstanding letters of credit as of June 30, 2003. The Company is permitted to issue up to $10,000 of letters of credit under its Credit Agreement.

12. Stock Option Agreements

 The Company has three active stock option plans (the "Plans"), two of which provide for the issuance of both incentive stock options (under Section 422A of the Internal Revenue Code of 1986) and non-qualified stock options at exercise prices not less than the fair market value at the date of grant, and one of which only provides for the issuance of non-qualified stock options at exercise prices not less than the fair market value at the date of grant. One of the Plans also provides for the issuance of stock appreciation rights, restricted stock, unrestricted stock, restricted stock rights and performance units, and one of the Plans also provides for the issuance of incentive bonuses and incentive stock. The total number of shares of the Company's common stock authorized to be issued upon exercise of the stock options and other stock rights under the Plans is 4,750,000. Options granted under two of the Plans vest in three or four equal annual installments, and options under the third Plan vest in two equal annual installments. The Company also has options outstanding under prior plans from which grants are no longer made.

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 A summary of certain information with respect to options under the Plans and prior plans follows:

Year ended June 30	2003			2002			2001
Options outstanding, beginning of year		5,812,845			4,983,265			4,638,909
Options granted		1,558,400			1,645,569			1,191,500
Options exercised		–			(252,041	)		(301,488	)
Weighted average exercise price	$	–		$	8.63		$	8.60
Options cancelled		(853,884	)		(563,948	)		(545,656	)
Options outstanding, end of year		6,517,361			5,812,845			4,983,265
Weighted average price	$	10.27		$	11.27		$	11.59
Exercisable options		4,288,653			3,449,229			2,848,374

 The following table provides information regarding exercisable and outstanding options as of June 30, 2003.

	Exercisable			Outstanding
Range of exercise price per share	Options exercisable		Weighted average exercise price per share	Options outstanding		Weighted average exercise price per share	Weighted average remaining contractual life (years)
Under $10.00	2,003,695	$	8.64	3,594,031	$	7.51	7.48
$10.00 – $12.50	685,406		10.91	1,323,778		10.87	7.33
$12.51 – $15.00	495,445		13.32	495,445		13.32	3.64
Over $15.00	1,104,107		17.15	1,104,107		17.15	4.15
Total	4,288,653	$	11.73	6,517,361	$	10.27	6.59

 As permitted under SFAS No. 123, "Accounting for Stock-Based Compensation," the Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB No. 25) in accounting for stock-based awards to employees. Under APB No. 25, the Company generally recognizes no compensation expense with respect to such awards.

 Pro forma information regarding net income (loss) and net income (loss) per share is required by SFAS No. 123 for awards granted in fiscal years after December 31, 1994 as if the Company had accounted for its stock-based awards to employees under the fair value method of SFAS No. 123. The fair value of the Company's stock-based awards to employees was estimated using a Black-Scholes option pricing model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, the Black-Scholes model requires the input of highly subjective assumptions, including expected stock price volatility. Because the Company's stock-based awards to employees have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock-based awards to employees. The fair value of the Company's stock-based awards to employees was estimated assuming no dividends, using the following assumptions:

	Options
	2003		2002		2001
Expected life (years)	6.1		6.1		5.9
Expected stock price volatility	48.3	%	46.4	%	39.1	%
Risk-free interest rate	3.6	%	4.8	%	5.9	%

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 For pro forma purposes, the estimated fair value of the Company's stock-based awards to employees is amortized over the options' vesting period. The Company's pro forma information follows:

(Thousands except per share amounts)	2003			2002			2001
Net income (loss) – as reported	$	(34,844	)	$	1,408		$	5,733
Net income (loss) – pro forma	$	(37,222	)	$	(3,255	)	$	2,802
Basic and diluted net income (loss) per share – as reported	$	(1.48	)	$	0.06		$	0.25
Basic and diluted net income (loss) per share – pro forma	$	(1.58	)	$	(0.14	)	$	0.12

 In fiscal year 2003, a total of 1,558,400 options were granted with exercise prices equal to the market price of the stock on the grant date. The weighted average exercise price was $6.02 and the average fair value of the options was $2.86.

 In fiscal year 2002, a total of 1,645,569 options were granted with exercise prices equal to the market price of the stock on the grant date. The weighted average exercise price was $10.60 and the average fair value of the options was $5.46. In fiscal year 2001, a total of 1,191,500 options were granted with exercise prices equal to the market price of the stock on the grant date. The weighted average exercise price was $8.65 and the average fair value of the options was $4.11.

13. Employee Benefit Plans

 Benefit obligations at year-end, fair value of plan assets and prepaid (accrued) benefit costs for the years ended June 30, 2003 and 2002 were as follows:

	Pension Benefits						Other Benefits
		2003			2002			2003			2002
Change in Benefit Obligation
Benefit obligation at beginning of year	$	150,961		$	148,065		$	13,720		$	13,172
Service cost		669			674			1			2
Interest cost		10,877			10,965			233			952
Plan participants' contributions		10			22			270			1,454
Amendments / termination		–			–			(13,174	)		–
Actuarial (gain) loss		19,697			5,446			(203	)		333
Curtailment gain		(610	)		–			–			–
Benefits paid		(9,897	)		(14,211	)		(847	)		(2,193	)
Benefit obligation at end of year	$	171,707		$	150,961		$	–		$	13,720
Change in Plan Assets
Fair value of plan assets at beginning of year	$	135,913		$	148,464		$	–		$	–
Actual return on plan assets		(5,695	)		(9,288	)		–			–
Employer contributions		20			10,926			577			739
Plan participants' contributions		10			22			270			1,454
Benefits paid		(9,897	)		(14,211	)		(847	)		(2,193	)
Fair value of plan assets at end of year	$	120,351		$	135,913		$	–		$	–
Funded Status	$	(51,356	)	$	(15,048	)	$	–		$	(13,720	)
Unrecognized net actuarial (gain) loss		109,681			74,635			–			(11,352	)
Unrecognized prior service cost		–			399			–			(4,793	)
Prepaid (accrued) benefit cost	$	58,325		$	59,986		$	–		$	(29,865	)
Amounts Recognized in Statement of Financial Position
Prepaid benefit cost	$	58,325		$	59,986		$	–		$	–
Accrued benefit liability		(109,681	)		(74,363	)		–			(29,865	)
Intangible asset		–			399			–			–
Accumulated other comprehensive income		109,681			73,964			–
Net amount recognized	$	58,325		$	59,986		$	–		$	(29,865	)
Weighted-Average Assumptions as of June 30
Discount rate		6.125	%		7.375	%		N/A			7.375	%
Expected return on plan assets		9.50	%		9.50	%		N/A			N/A
Rate of compensation increase		4.50	%		4.50	%		N/A			N/A

27

 Under SFAS No. 87, "Employers' Accounting for Pensions," when the accumulated benefit obligation ("ABO") exceeds the fair value of the plan assets, a minimum liability (net of related income tax benefit) must be established on the balance sheet with a corresponding amount in other comprehensive income (loss) in shareholders' equity. The minimum pension liability must also include any prepaid pension asset balance (the amount by which contributions to a plan have exceeded expense recorded under SFAS No. 87) as of the measurement date. Pursuant to SFAS No. 87, the Company recorded a minimum pension liability of $109,681 and $74,363 at June 30, 2003 and 2002 respectively. These amounts, net of tax benefits of $17,000, have been recorded as a reduction to equity in "Accumulated Other Comprehensive Loss" on the Company's balance sheet as of June 30, 2003 and 2002. Effective June 30, 2003, the pension plan was frozen and no future compensation credits will be accrued to participants' individual accounts. Participant accounts will continue to be credited with interest.

 Pension plan assets include 1,226,900 shares of Company common stock valued at $3,218 as of June 30, 2003.

 Net periodic postretirement benefit costs (income) for pension and other benefits for the years ended June 30, 2003, 2002 and 2001 were as follows:

	Pension Benefits									Other Benefits
		2003			2002			2001			2003			2002			2001
Components of Net Periodic Benefit Cost (Income)
Service cost	$	669		$	674		$	1,438		$	1		$	2		$	6
Interest cost		10,877			10,965			10,952			233			952			916
Expected return on plan assets		(12,500	)		(13,587	)		(13,703	)		–			–			–
Amortization of transition amount		–			(263	)		(263	)		–			–			–
Amortization of prior service cost		51			53			161			(156	)		(624	)		(624	)
Recognized net actuarial (gain) loss		2,235			1,212			1,003			(535	)		(2,388	)		(1,143	)
Net periodic benefit cost (income)	$	1,332		$	(946	)	$	(412	)	$	(457	)	$	(2,058	)	$	(845	)
Curtailment/settlement (gain) loss		349			–			1,098			–			–			(43	)
Net benefit cost (income)	$	1,681		$	(946	)	$	686		$	(457	)	$	(2,058	)	$	(888	)

 The curtailment/settlement gain or loss resulted from the following:

 Fiscal 2003: The freezing of benefit accruals under the pension plan program.

 Fiscal 2001: The sale of the Standard Drives, Lighting and Transformer businesses.

 Effective September 30, 2002, the Company terminated its retiree medical and life insurance programs, resulting in a pretax gain of $27,771 in fiscal year 2003.

 In addition to the defined benefit retirement plans, the Company contributes to a defined contribution (401k) savings plan. Contributions made by the Company from July 1, 2002 to June 30, 2003 were $435. In December of 2001, the Company changed its third party administrator for its defined contribution plan and modified the plan year to end on December 31, from the previous March 31 ending date. Contributions made by the Company from April 1, 2001 through June 30, 2002, totaled $573. Company contributions for the plan year ending March 2001 were $926.

14. Related Party Transactions

 The Company has an agreement with the Spectrum Group, Inc. whereby Spectrum will provide management services to the Company through December 2005 at an annual fee plus certain allocated and out of pocket expenses. The Company's chairman is also the chairman, president and sole shareholder of Spectrum. Services provided include consultation and direct management assistance with respect to operations, strategic planning and other aspects of the business of the Company. Fees and expenses paid to Spectrum for these services under the agreement amounted to $795, $764 and $968 for the years ended June 30, 2003, 2002 and 2001, respectively. In fiscal 2001, a performance bonus was awarded in the amount of $408 and paid to Spectrum in July of 2001.

 During fiscal 2000, the Company engaged ABN AMRO (formerly ING Barings) to assist in the divestiture of its Lighting business. Upon the completion of the sale of this business (see Note 3) in June of fiscal year 2001, fees of $1,020 were paid to ABN AMRO. One of the Company's directors was a principal at ABN AMRO Inc. during fiscal year 2001.

 The Company leases two buildings owned by a former executive's wife. This executive was in charge of one of the Company's divisions until January 2003, when his employment with Magnetek was terminated. The Company paid $314 in lease payments for the buildings during fiscal 2003.

28

15. Accrued Liabilities

 Accrued liabilities consisted of the following at June 30:

	2003		2002
Salaries, wages and related items	$	3,572	$	6,309
Insurance		2,941		4,148
Warranty		503		368
Income taxes		31		141
Other		6,405		7,593
	$	13,452	$	18,559

 The Company offers warranties for certain products that it manufactures, with the warranty term generally ranging from one to two years.

 Warranty reserves are established for costs expected to be incurred after the sale and delivery of products under warranty, based mainly on known product failures and historical experience. Changes in the warranty reserve for fiscal 2003 were as follows:

	Warranty Reserve
Balance at June 30, 2002	$	368
Additions charged to earnings		208
Use of reserve		(283	)
Other – acquisition of Telemotive		210
Balance at June 30, 2003	$	503

16. Supplemental Cash Flow Information

 Changes in operating assets and liabilities of continuing operations were as follows:

Year ended June 30	2003			2002			2001
(Increase) decrease in accounts receivable	$	(3,976	)	$	11,079		$	(1,077	)
(Increase) decrease in inventories		(7,220	)		5,240			(8,632	)
(Increase) decrease in prepaids and other current assets		(940	)		2,370			6,284
(Increase) decrease in other operating assets		4,338			(4,749	)		(13,020	)
Increase (decrease) in accounts payable		9,345			(9,595	)		(8,120	)
Decrease in accrued liabilities		(6,640	)		(15,193	)		(6,400	)
Increase (decrease) in deferred income taxes		6,083			(5,309	)		(10,683	)
Increase (decrease) in other operating liabilities		1,102			(2,075	)		38
	$	2,092		$	(18,232	)	$	(41,610	)
Cash paid for interest and income taxes:
Interest	$	1,022		$	661		$	8,348
Income taxes	$	3,903		$	5,168		$	695

17. Accumulated Other Comprehensive Loss

 Accumulated other comprehensive loss consisted of the following at June 30:

	2003			2002
Minimum pension liability	$	(92,681	)	$	(56,964	)
Foreign curreny translation adjustments		(15,385	)		(22,472	)
	$	(108,066	)	$	(79,436	)

 The accumulated other comprehensive loss related to the minimum pension liability is net of tax benefits of $17,000.

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18. Business Segment and Geographic Information

 The Company currently operates within a single business segment, Digital Power Products. Within the segment there exists two product categories, components and systems. The Company sells its products primarily to large original equipment manufacturers and distributors. The Company performs ongoing credit evaluations of its customers' financial conditions and generally requires no collateral. The Company has a single customer, Merloni, whose purchases represented 11% of the Company's total revenue in fiscal year 2003. In addition, the Company has another customer, IBM, whose purchases represented 8%, 9%, and 13% of the Company's total revenues in fiscal years 2003, 2002 and 2001, respectively. Outstanding receivables with these two largest customers were 31%, 8% and 6% of the total receivables of the Company as of fiscal year-end 2003, 2002 and 2001, respectively. With the exception of these accounts, management believes that there is no significant concentration of credit risk.

 During the year ended June 30, 2003, sales of components were $117,138 and sales of systems were $84,644. Sales of components were $96,509 and sales of systems were $91,715 for the year ended June 30, 2002. During the year ended June 30, 2001, sales of components were $157,377 and sales of systems were $140,883 (including $45,516 related to a divested business).

 Information with respect to the Company's foreign subsidiaries follows:

For the year ended June 30	2003		2002		2001
Sales	$	87,388	$	57,535	$	81,690
Operating income		642		2,112		9,764
Identifiable assets		116,103		83,085		89,782
Capital expenditures		7,264		4,694		6,208
Depreciation and amortization		6,352		7,152		7,029

 Operating income for foreign subsidiaries does not include any allocation of corporate costs incurred in the United States. Sales by foreign subsidiaries include only sales of products to customers outside of the U.S.

 Export sales from the United States were $8,889, $6,948 and $10,655 in 2003, 2002 and 2001, respectively.

19. Quarterly Results (unaudited)

2003 quarter ended			Sept. 30		Dec. 31			Mar. 31			June 30
Net sales			$	42,826	$	51,268		$	53,223		$	54,465
Gross profit				9,784		6,242			10,330			10,627
Provision (benefit) for income taxes				9,649		(721	)		(1,308	)		–
Net income (loss)			$	15,743	$	(40,185	)	$	(5,410	)	$	(4,992	)
Per common share:
	Basic:
		Net income (loss)	$	0.67	$	(1.71	)	$	(0.23	)	$	(0.21	)
	Diluted:
		Net income (loss)	$	0.67	$	(1.71	)	$	(0.23	)	$	(0.21	)

2002 quarter ended			Sept. 30		Dec. 31		Mar. 31		June 30
Net sales			$	52,546	$	47,087	$	44,444	$	44,237
Gross profit				11,840		10,931		10,527		10,263
Provision (benefit) for income taxes				664		284		186		(234	)
Net income (loss)			$	1,082	$	464	$	302	$	(440	)
Per common share:
	Basic:
		Net income (loss)	$	0.05	$	0.02	$	0.01	$	(0.02	)
	Diluted:
		Net income (loss)	$	0.05	$	0.02	$	0.01	$	(0.02	)

 The quarter ended September 30 fiscal year 2003 includes a $27,771 ($17,218 after-tax) gain from termination of the Company's retiree medical plan.

30

 The quarter ended December 31 fiscal year 2003 includes after-tax inventory write-down charges of $4,679 and goodwill and other asset impairment charges of $34,358. All of these charges related to the Company's telecom business.

 The quarter ended March 31 fiscal year 2003 includes a $3,275 after-tax charge for settlement of litigation.

 The quarter ended June 30 fiscal year 2003 includes a $997 after tax loss on the sale of the Company's telecom service business. The sale was completed subsequent to June 30, 2003 and the actual loss incurred approximated the recorded loss.

31

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

 The Board of Directors and Stockholders
Magnetek, Inc.

 We have audited the accompanying consolidated balance sheets of Magnetek, Inc. as of June 30, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended June 30, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Magnetek, Inc. at June 30, 2003 and 2002 and the consolidated results of its operations and its cash flows for each of the three years in the period ended June 30, 2003, in conformity with accounting principles generally accepted in the United States.

Ernst & Young LLP

 Woodland Hills, California
August 20, 2003

32

Board of Directors
Andrew G. Galef	Chairman of the Board, President & Chief Executive Officer
Thomas G. Boren	Retired Executive Vice President, PG&E Corporation
Dewain K. Cross	Retired Senior Vice President, Finance, Cooper Industries, Inc.
Paul J. Kofmehl	Retired Vice President & Group Executive, IBM.
Mitchell I. Quain	Principal at Charter House Group International, Inc.
Robert E. Wycoff	Retired President, Atlantic Richfield Company
Corporate Officers
Andrew G. Galef	Chairman of the Board, President & Chief Executive Officer
Antonio Canova	Executive Vice President
Alexander Levran, Ph.D.	Executive Vice President, Technology
Peter M. McCormick	Executive Vice President
David P. Reiland	Executive Vice President & Chief Financial Officer
Paul Schwarzbaum	Executive Vice President
Tina D. McKnight	Vice President, General Counsel & Secretary

Stockholder Information

10-K Report

Magnetek's Annual Report on Form 10-K for the fiscal year ended June 30, 2003, including the Company's financial statements and related schedules for the fiscal year ended June 30, 2003, is included herein beginning on page 33. Exhibits to Magnetek's Form 10-K have been filed with the Securities and Exchange Commission. Most of these exhibits are available for viewing through the SEC's Edgar website at http://www.sec.gov/cgi-bin/browse-edgar?action-getcurrent . Other exhibits are available upon request to Magnetek, subject to payment of a reasonable fee to cover the Company's cost of furnishing such exhibits. To request an exhibit from the Company, please contact:

Investor Relations Department

 Magnetek, Inc.
10900 Wilshire Boulevard
Suite 850
Los Angeles, CA 90024
Telephone: 1-310-689-1610
Web Site Address: http://www.magnetek.com

Annual Stockholders' Meeting

 Magnetek's fiscal 2003 stockholders' meeting will be held on Wednesday, October 29th at 10:00 a.m. Pacific time at 10900 Wilshire Boulevard, Los Angeles, CA 90024.

Stockholders' Information

 The following table sets forth the high and low sales prices of the Company's Common Stock on the New York Stock Exchange during each quarter of fiscal 2003.

Quarter Ending	High	Low
September 30, 2002	10.05	2.65
December 31, 2002	6.09	3.28
March 31, 2003	5.35	2.32
June 30, 2003	3.20	1.90

 Magnetek's Common Stock is listed on the New York Stock Exchange under the ticker symbol "MAG". As of September 5, 2003 there were 221 holders of record of the Company's Common Stock. No dividends have been paid on the Common Stock. The Registrar and Transfer Agent for the Common Stock is The Bank of New York. Telephone Inquiries: 1-800-524-4458.

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SELECTED FINANCIAL DATA
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

EX-23.1

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EXHIBIT 23.1

CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

        We consent to the incorporation by reference in the Registration Statements (Form S-3 Nos. 33-31932, 33-40222, 33-41854, 33-43856, 33-58766, 333-15933, 333-24187 and 333-28415) and in the related Prospectuses, and in the Registration Statements (Form S-8 Nos. 33-31439, 33-33887, 33-34112, 33-34834, 33-44519, 33-58929, 333-04021, 333-17889, 333-45935, 333-45939, 333-90645, 333-90647 and 333-75418) pertaining to the 1987 Stock Option Plan of Magnetek, Inc., the Magnetek, Inc. FlexCare Plus Retirement Savings Plan, the 1989 Incentive Stock Compensation Plan of Magnetek, Inc., the Magnetek Unionized Employee Savings Plan, the Amended and Restated 1989 Incentive Stock Compensation Plan of Magnetek, Inc., the Second Amended and Restated 1989 Incentive Stock Compensation Plan of Magnetek, Inc., the Magnetek, Inc. Non-Employee Director Stock Option Plan, the Magnetek, Inc. Deferred Investment Plan, the Magnetek, Inc. 1997 Non-Employee Director Stock Option Plan, the Magnetek, Inc. Amended and Restated Director Compensation and Deferral Investment Plan, the 1999 Stock Incentive Plan of Magnetek, Inc., the 2000 Employee Stock Plan of Magnetek, Inc. and the 2002 Employee Stock Purchase Plan of Magnetek, Inc., of our reports dated August 20, 2003, with respect to the consolidated financial statements and schedule of Magnetek, Inc. included or incorporated by reference in this Annual Report (Form 10-K) for the year ended June 30, 2003.

	ERNST & YOUNG LLP
Woodland Hills, California September 26, 2003

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EXHIBIT 23.1

EX-31.1

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, Andrew G. Galef, Chairman of the Board, President and Chief Executive Officer of Magnetek, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Magnetek, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability regarding financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 29, 2003

/s/ Andrew G. Galef Andrew G. Galef
Chairman of the Board, President and Chief Executive Officer

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EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-31.2

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a),
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002

I, David P. Reiland, Executive Vice President and Chief Financial Officer of Magnetek, Inc., certify that:

1.

I have reviewed this annual report on Form 10-K of Magnetek, Inc.;

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.

Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.

The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and we have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability regarding financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth quarter in the case of an annual report) that has materially affected or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.

The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: September 29, 2003

/s/ David P. Reiland David P. Reiland
Executive Vice President and Chief Financial Officer

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EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) or RULE 15d-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.1

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Magnetek, Inc. (the "Company") on Form 10-K for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Andrew G. Galef, Chairman of the Board, President and Chief Executive Officer of the Company, certify, pursuant to U.S.C. Section 1350 and Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Andrew G. Galef Andrew G. Galef
Chairman of the Board, President and Chief Executive Officer

Dated September 29, 2003

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EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Magnetek, Inc. (the "Company") on Form 10-K for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David P. Reiland, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to U.S.C. Section 1350 and Rule 13a-14(b) or Rule 15d-14(b) of the Securities Exchange Act of 1934, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ David P. Reiland David P. Reiland
Executive Vice President and Chief Financial Officer

Dated September 29, 2003

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EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002