<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
SCHEDULE 14D-1/A
(Amendment No. 1)
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
----------------------------
PLY GEM INDUSTRIES, INC.
(Name of Subject Company)
NTK SUB, INC.
NORTEK, INC.
(Bidders)
----------------------------
COMMON STOCK, $0.25 PAR VALUE
(Title of Class of Securities)
729416107
(CUSIP Number of Class of Securities)
RICHARD L. BREADY
NORTEK, INC.
50 KENNEDY PLAZA
PROVIDENCE, RHODE ISLAND 02903
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on behalf of Bidder)
----------------------------
COPY TO:
DAVID C. CHAPIN, ESQ.
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(617) 951-7000
AUGUST 21, 1997
----------------------------
CALCULATION OF FILING FEE
TRANSACTION VALUATION* $394,047,615
AMOUNT OF FILING FEE $78,809
- -------------
* Estimated for purposes of calculating the amount of the filing fee only.
The amount assumes the purchase of 20,207,570 shares of common stock, $0.25
par value, of Ply Gem Industries, Inc. (the "Company") (collectively, the
"Shares") at a price per Share of $19.50 in cash (the "Offer Price"). Such
number of shares represents all of the Shares outstanding as of July 28,
1997 (other than the 640,000 Shares held by Nortek, Inc.) and assumes the
exercise of all outstanding options and the vesting of all unvested stock.
[X] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid,
identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount previously paid: $78,809
Form or registration no: Schedule 14D-1
Filing party: NTK Sub, Inc. and Nortek, Inc.
Date filed: July 29, 1997
(Exhibit Index is located on Page II-3)
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This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") of NTK Sub, Inc., a Delaware corporation,
and Nortek, Inc., a Delaware corporation, filed pursuant to Section 14(d)(1) of
the Securities and Exchange Act of 1934 on July 29, 1997 with the Securities and
Exchange Commission.
Capitalized terms used herein and not defined herein shall have the
meanings ascribed to them in the Schedule 14D-1.
ITEM 10. ADDITIONAL INFORMATION
Item 10(b)-(c) is amended to add the following sentence:
10(b)-(c) The waiting period under the HSR Act expired without extension on
August 14, 1997.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
Item 11 is amended to add the following Exhibits (a)(10) and (b)(1):
(a)(10) Text of Press Release, dated August 11, 1997.
(b)(1) Commitment Letter, dated August 14, 1997 between Fleet
National Bank and Nortek, Inc.
II-1
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, the
undersigned certify that the information set forth in this statement is true,
complete and correct.
Dated: August 21, 1997
NORTEK, INC.
By: /s/ Richard L. Bready
-------------------------------------
Name: Richard L. Bready
Title: President
NTK SUB, INC.
By: /s/ Richard L. Bready
-------------------------------------
Name: Richard L. Bready
Title: President
II-2
<PAGE> 4
EXHIBIT INDEX
Exhibit Description
- ------- -----------
(a)(10) Text of Press Release, dated August 11, 1997.
(b)(1) Commitment Letter, dated August 14, 1997 between Fleet National Bank and
Nortek, Inc.
II-3
<PAGE> 1
EXHIBIT (a)(10)
NORTEK NEWS
----
CONTACT: Richard L. Bready, Chairman and CEO or
Richard J. Harris, Vice President and Treasurer
(401) 751-1600
Richard E. Nicolazzo
Nicolazzo & Associates, Investor Relations Counsel
(617) 951-0000
RELEASE: IMMEDIATE
NORTEK OFFERS $275,000,000
OF SENIOR NOTES
PROVIDENCE, RI, August 11,1997--Nortek, Inc. today announced a $275,000,000 Rule
144A Senior Notes offering. Gross proceeds from the Senior Notes offering,
scheduled for completion in August 1997, together with approximately
$142,700,000 of Company cash and approximately $121,700,000 of indebtedness and
other obligations assumed or refinanced, are expected to be used to complete the
recently commenced cash tender offer to purchase all outstanding shares of
Common Stock of Ply Gem Industries, Inc. at a price of $19.50 per share as well
as fees and expenses of the transaction.
The Senior Notes have not been registered under the Securities Act of 1933, as
amended, or under the securities law of any state and may not be offered or sold
in the United States or in any such state absent an applicable exemption from
registration under the Securities Act and any such law.
- MORE -
<PAGE> 2
NORTEK, INC. (NYSE:NTK) manufactures and markets residential, commercial and
industrial building products.
# # #
This release contains forward-looking statements relating to future financial
results. Actual results may differ as a result of factors over which the Company
has no control, including the strength of domestic and foreign economies, slower
than anticipated sales growth, price and product competition and increases in
raw material costs. Additional information which could affect the Company's
financial results is included in the Company's annual report and on Forms 10-K
and 10-Q, on file with the Securities and Exchange Commission.
<PAGE> 1
EXHIBIT (b)(1)
FLEET NATIONAL BANK
111 Westminster Street
Providence, Rhode Island 02903
August 14, 1997
Nortek, Inc.
50 Kennedy Plaza
Providence, Rhode Island 02903-2360
Ply Gem Industries, Inc. Refinancing
------------------------------------
Ladies and Gentlemen:
Based on our discussions concerning your proposed acquisition of Ply Gem
Industries, Inc., a Delaware corporation (the "COMPANY") and the related
refinancing of the Credit Agreement dated February 24, 1994 (the "ORIGINAL
CREDIT AGREEMENT") among the Company and Fleet National Bank ("FLEET"), as
successor to National Westminster Bank USA, as Agent, Continental Bank, N.A.,
European American Bank, LTCB Trust Company and NationsBank of North Carolina,
National Association, as Co-Agents and the banks signatory thereto, as amended,
Fleet is pleased to provide you with a financing commitment for, and to agree to
act as administrative and collateral agent (the "ADMINISTRATIVE AGENT") in
connection with the Credit Facility (as hereinafter defined) described in this
letter and in the attached summary of terms and conditions (the "ANNEX" and,
together with this letter, the "COMMITMENT LETTER").
As we understand the transaction, you will organize a single-purpose,
wholly owned subsidiary (the "PURCHASER") that, pursuant to a merger agreement
entered into with the Company (the "MERGER AGREEMENT"), will purchase, pursuant
to a tender offer (the "TENDER OFFER"), a majority of the outstanding common
stock of the Company for $19.50 per share, and subsequently will be merged (the
"MERGER") with and into the Company, with the Company being the surviving
corporation. In the Merger, each of the issued and outstanding shares of common
stock of the Company, par value $.25 per share (the "COMPANY STOCK"), will be
converted into a right to receive $19.50 in cash per share. The Tender Offer,
the Merger, the refinancing of the existing debt of the Company described above
and the equity and debt financings contemplated by the foregoing are
collectively referred to as the "TRANSACTION".
You have asked Fleet to provide you with commitments for the senior secured
debt facility in the amount of up to $130,000,000 (the "CREDIT FACILITY").
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Subject to the satisfaction of the conditions contained in this Commitment
Letters and your acceptance hereof, Fleet commits to lend the entire amount of
the Credit Facility, on the terms and conditions referred to in this Commitment
Letter, pursuant to an amendment and restatement of the Original Credit
Agreement.
Please note, however, that the terms and conditions of this commitment are
not limited to those set forth in this Commitment Letter. Those matters that are
not covered or made clear herein or in the attached Annex are subject to mutual
agreement of the parties. The terms and conditions of this commitment may be
modified only in writing. In addition, this commitment is subject to (a) the
preparation, execution and delivery of mutually acceptable loan documentation,
including a credit agreement incorporating substantially the terms and
conditions outlined herein and in the Annex, (b) the absence of (i) a material
adverse change in the business, condition (financial or otherwise), operations,
performance or properties of (A) you and your subsidiaries, taken as a whole
since December 31, 1996 or (B) the Company and its subsidiaries, taken as a
whole, since December 31, 1996, and (ii) any material adverse change in loan
syndication or financial or capital market conditions generally from those
currently in effect and (c) the accuracy and completeness of all representations
that you make to us and all information that you furnish to us in connection
with this commitment and your compliance with the terms of this Commitment
Letter. Fleet's commitment set forth in this Commitment Letter will terminate on
September 25, 1997, unless the Tender Offer and the Credit Facility close on or
before such date.
Fleet intends to syndicate the Credit Facility to additional Lenders and,
to the extent that commitments are received from other Lenders, the initial
commitment of Fleet shall be reduced. Fleet will manage all aspects of the
syndication, including the timing of all offers to potential Lenders and the
acceptance of commitments, the amounts offered and the compensation provided. By
acceptance of this Commitment Letter, you agree to take all actions that Fleet
may reasonably request to assist it in forming a syndicate acceptable to Fleet.
Your assistance in forming such a syndicate shall include but not be limited to:
(a) making your senior management and representatives and senior management and
representatives of the Company and its subsidiaries available to participate in
information meetings with potential Lenders at such times and places as Fleet
may reasonably request; (b) using your best efforts to ensure that the
syndication efforts of Fleet benefit from your lending relationships; and (c)
providing Fleet with all information reasonably deemed necessary by them to
complete a successful syndication, including, without limitation, a summary of
the operating prospects (including financial projections) of the Company.
To ensure an orderly and effective syndication of the Credit Facility, you
agree that until the termination of the syndication by written notification
received by you from Fleet, you will not, and will not permit any of your
affiliates to, syndicate or issue, attempt to syndicate or issue, announce or
authorize the announcement of the syndication or issuance of, or engage in
discussions concerning the syndication or issuance of, any debt facility or debt
security (including any renewals thereof) in the commercial bank market, without
the prior written consent of Fleet.
You agree that Fleet will act as the sole administrative and collateral
agent and sole arranger for the Credit Facility and that no additional agents,
co-agents or arrangers will be appointed, or other titles conferred, except as
designated by Fleet acting in consultation with you. You agree that
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3
no Lender will receive any compensation of any kind for its participation in the
Credit Facility, except as expressly provided for in the Fee Letter (as
hereinafter defined) or in the Annex.
In addition to the fees described in the Annex, you hereby confirm your
agreement to pay the nonrefundable fees set forth in the fee letter dated the
date hereof (the "FEE LETTER") with Fleet (the "AGREED FEES").
You agree to indemnify and hold harmless the Administrative Agent, each
Lender and each of their affiliates and their officers, directors, employees,
agents, advisors and other representatives (each an "INDEMNIFIED PARTY") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel) that
may be incurred by or asserted or awarded against any Indemnified Party, in each
case arising out of or in connection with or by reason of (including, without
limitation, in connection with any investigation, litigation or proceeding or
preparation of a defense in connection therewith) (a) the Transaction or any
similar transaction and any of the other transactions contemplated hereby or
thereby, (b) any acquisition or proposed acquisition or similar business
combination or proposed business combination (including, without limitation, the
Tender Offer or the Merger and any of the other transactions contemplated
hereby) by you or any of your subsidiaries or affiliates of all or any portion
of the capital stock or substantially all of the assets of the Company or any of
its subsidiaries or (c) the Credit Facility and any other financings, or any use
made or proposed to be made with the proceeds thereof, except to the extent such
claim, damage, loss, liability or expense is found in a final, nonappealable
judgment by a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or proceeding to which the indemnity in this paragraph
applies, such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by you, your shareholders or creditors or an
Indemnified Party or an Indemnified Party is otherwise a party thereto and
whether or not the Transaction is consummated. You also agree that no
Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to you or your subsidiaries or affiliates or to
your or their respective security holders or creditors arising out of, related
to or in connection with the Transaction, except for direct, as opposed to
consequential, damages determined in a final nonappealable judgment by a court
of competent jurisdiction to have resulted from such Indemnified Party's gross
negligence or willful misconduct.
In further consideration of the commitment of Fleet hereunder, and
recognizing that in connection herewith Fleet is incurring substantial costs and
expenses, including, without limitation, fees and expenses of counsel and due
diligence, syndication (including printing, distribution and bank meetings),
transportation, computer, duplication, appraisal, audit, insurance, consultant,
search, filing and recording fees, you agree to pay, from time to time on
request, such costs and expenses (whether incurred before or after the date
hereof), regardless of whether the Transaction (or any part thereof) is
consummated or any loan documentation is entered into. You also agree to pay all
costs and expenses of Fleet (including, without limitation, fees and expenses of
counsel) incurred in connection with the enforcement of this Commitment Letter.
You agree that this Commitment Letter is for your confidential use only and
neither its existence nor the terms hereof will be disclosed by you to any
person or entity other than your officers, directors, accountants, attorneys and
other advisors, and then only on a "need to know" basis in
<PAGE> 4
4
connection with the Transaction and on a confidential basis, except that,
following your return of an executed counterpart hereof to Fleet and the payment
to Fleet of the fees required hereunder, you may (a) make public disclosure of
the existence and amount of Fleet's commitment hereunder, (b) file a copy of
this Commitment Letter in any public record in which it is required by law to be
filed, (c) provide a copy of this Commitment Letter on a confidential basis to
the Company and its accountants, attorneys and other advisors, (d) make such
public disclosures as are necessary in connection with the issuance of
indebtedness in connection with the Transaction and (e) make such other public
disclosures of the terms and conditions hereof as you are required by law, in
the opinion of your counsel, to make. You agree that you will permit Fleet to
review and approve any reference to Fleet or to any of its affiliates or any
other agent or arranger under the Credit Facility contained in any press release
or similar public disclosure prior to public release.
You represent and warrant that (a) all information that has been or will
hereafter be made available by or on behalf of you or by any of your
representatives in connection with the Transaction and the other transactions
contemplated hereby to Fleet or any of its affiliates or representatives or to
any Lender or any potential Lender is and will be complete and correct in all
material respects and does not and will not contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances under
which such statements were or are made and (b) all financial projections, if
any, that have been or will be prepared by you or on your behalf or by any of
your representatives and made available to Fleet or any of its affiliates or
representatives or to any Lender or any potential Lender in connection with the
Transaction and the other transactions contemplated hereby have been or will be
prepared in good faith based upon reasonable assumptions (it being understood
that the reasonableness of such assumptions is to be determined as of the time
such projections were made and that such projections are subject to significant
uncertainties and contingencies, many of which are beyond your control, and that
no assurance can be given that any particular projections will be realized). You
agree to supplement the information and projections from time to time so that
the representations and warranties contained in this paragraph remain complete
and correct.
In issuing this commitment, Fleet is relying on the accuracy of the
information furnished to it by you or by the Company (collectively, the
"PRE-COMMITMENT INFORMATION"). The obligations of Fleet under this Commitment
Letter are made solely for your benefit and may not be relied upon or enforced
by any other person or entity.
This Commitment Letter shall be governed by, and construed in accordance
with, the laws of the State of New York. Delivery of an executed counterpart of
this Commitment Letter by telecopier shall be effective as delivery of a
manually executed counterpart of this Commitment Letter. You and Fleet each
hereby irrevocably waives all right to trial by jury in any action, proceeding
or counterclaim (whether based on contract, tort or otherwise) arising out of or
relating to this Commitment Letter, the transactions contemplated hereby or the
actions of Fleet in the negotiation, performance or enforcement hereof.
<PAGE> 5
Please evidence your acceptance (on behalf of yourself and your future
subsidiary, the Company) of the provisions of this Commitment Letter (including,
without limitation, the attached Annex) and the other matters referred to above
by signing the enclosed copy of this Commitment Letter and returning it to the
undersigned, together with payment of the portion of the Agreed Fees then
payable, on or before August 14, 1997, the date on which Fleet's commitment set
forth above (if not so accepted on or before such date) will expire.
Very truly yours,
FLEET NATIONAL BANK
By /s/ Virginia C. Roberts
--------------------------------------
Name: Virginia C. Roberts
Title: Senior Vice President
ACCEPTED this 14th day
of August, 1997
NORTEK, INC. (on behalf of itself
and its future subsidiary,
Ply Gem Industries, Inc.)
By /s/ Bruce E. Flemming
-----------------------------------
Name: Bruce E. Flemming
Title: Vice President -- Corporate Development
<PAGE> 6
ANNEX
-----
SUMMARY OF TERMS AND CONDITIONS
-------------------------------
CAPITALIZED TERMS USED HEREIN AND NOT OTHERWISE DEFINED HEREIN OR IN THE
ATTACHED LETTER (THE "COMMITMENT LETTER") SHALL BE DEFINED IN THE FINAL LOAN
DOCUMENTATION
BORROWERS: Ply Gem Industries, Inc. (the "COMPANY") and any Designated
Subsidiary as described below (each, a "DESIGNATED
SUBSIDIARY" and together with the Company, the "BORROWERS").
DESIGNATED SUBSIDIARY: Initially, each of the following subsidiaries:
Sagebrush Sales, Inc.; SNE Enterprises, Inc.; Variform,
Inc.; Great Lakes Window, Inc.; Studley Products, Inc.; and
Goldenberg Group, Inc. Subject to reasonable approval of the
Administrative Agent and all the Lenders, the Company may
designate as a Designated Subsidiary any wholly-owned
subsidiary by notice to the Administrative Agent subject to
receipt by the Administrative Agent of certain required
documentation (in a form to be attached to the Amended and
Restated Credit Agreement), satisfactory to the
Administrative Agent and its counsel. The Company may at any
time remove any subsidiary from the list of Designated
Subsidiaries by notice to the Administrative Agent, however,
only (a) upon payment in full for any obligations owed to
the Administrative Agent and Lenders under the Credit
Facility by such Designated Subsidiary or (b) subject to the
reasonable approval of the Administrative Agent and the
Required Lenders (as hereinafter defined) and to the
requirements of any indentures or agreements binding upon
the Company and its subsidiaries, the assumption by the
Company or another Designated Subsidiary of any such
obligations not so paid. Subject to the overall amount of
the Credit Facility and the borrowing limits established as
set forth below, each Designated Subsidiary may borrow an
amount not to exceed the amount outstanding at the time of
the Closing under the Original Credit Agreement.
The borrowing limits for each Designated Subsidiary
(including any additional Designated Subsidiaries) will,
subject to the requirements of any indentures or agreements
binding upon the Company and its subsidiaries, be determined
by the Company and the Administrative Agent.
ADMINISTRATIVE AND
COLLATERAL AGENT: Fleet National Bank ("FLEET").
LENDERS: Fleet and other banks, financial institutions and
institutional lenders acceptable to Fleet and the Company.
<PAGE> 7
2
CREDIT FACILITY: A senior secured bank credit facility constituting an
amendment and restatement of the Company's existing bank
credit facility evidenced by the Original Credit Agreement
in the principal amount of up to $130,000,000. The Credit
Facility will have a maturity of five years from the Closing
Date.
PURPOSE: To refinance certain existing debt of the Company and its
subsidiaries, to pay transaction fees and expenses and to
provide working capital from time to time for the Borrowers
and their subsidiaries.
CLOSING DATE: On or before September 25, 1997.
TERMINATION DATE: Five years from the Closing Date.
SECURITY: The Borrowers and each of the Guarantors (as defined below)
shall grant the Administrative Agent and the Lenders a valid
and perfected first priority (subject to certain exceptions
to be set forth in the loan documentation) lien and security
interest in all of the following:
(a) All shares of capital stock of each of its present
subsidiaries.
(b) All present and future accounts receivable and
inventory of the Company or such Guarantor.
(c) All proceeds and products of the property and assets
described in clauses (a) and (b) above.
AVAILABILITY: In one or more drawings on the Closing Date. Amounts prepaid
or repaid may not be reborrowed.
AMORTIZATION: All amounts outstanding under the Credit Facility will be
paid no later than the Termination Date, with quarterly
amortization as follows: (i) commencing with the quarter
ended March 31, 1998 and ending with the quarter ended
December 31, 1999, $1,000,000 per quarter; (ii) commencing
with the quarter ended March 31, 2000 and ending with the
quarter ended December 31, 2000, $1,250,000 per quarter;
(iii) commencing with the quarter ended March 31, 2001 and
ending with the quarter ended December 31, 2001, $1,500,000
per quarter; and (iv) commencing with the quarter ended
March 31, 2002 and ending with the quarter ended June 30,
2002, $3,000,000 per quarter.
OPTIONAL
PREPAYMENT: The Company may, upon at least one business day's notice in
the case of Base Rate advances and three business days'
notice in the case of Eurodollar Rate advances, prepay, in
full or in part, the Credit Facility without premium or
penalty; provided, however, that each partial prepayment
shall be in an amount of $5,000,000 or an integral multiple
<PAGE> 8
3
of $1,000,000 in excess thereof; and provided further that
any such prepayment of Eurodollar Rate advances shall be
made together with reimbursement for any funding losses of
the Lenders resulting therefrom.
MANDATORY
PREPAYMENT: So long as the Leverage Ratio (as defined below) is: (a)
greater than or equal to 2.5x, 75% of the Net Proceeds of
all asset sales shall be applied to prepay the Credit
Facility in direct order of maturity; and (b) less than
2.5x, 50% of such Net Proceeds shall be so applied.
INTEREST RATES AND
INTEREST PERIODS: At the option of the relevant Borrower, any advance made to
it will be available at the rates and for the Interest
Periods stated below:
(a) BASE RATE - a fluctuating rate equal to the greater of
(i) Fleet's "PRIME RATE" (360 day basis) plus the
Applicable Margin (as hereinafter defined) or (ii) the
Federal Funds Rate in effect that day as announced by
the Federal Reserve Bank of New York, plus 0.5%.
Fleet's "PRIME RATE" is a fluctuating interest rate
equal to the rate of interest announced publicly from
time to time by (Fleet Bank) in Boston, Massachusetts.
Interest based on the Base Rate shall be payable
quarterly in arrears.
(b) EURODOLLAR RATE is defined as the average London
InterBank Offered Rate for 1,2,3 or 6 month
Euro-deposits as offered by the Administrative Agent
and rounded upwards to the nearest 1/100, subject at
all time to availability of funds, applicable reserve
requirements and similar yield protection requirements.
Interest Periods for Eurodollar Rate borrowings shall
be 1, 2, 3 or 6 months, as selected by the relevant
Borrower. Interest based on the Eurodollar Rate shall
be payable in arrears on the earlier of (A) the last
day of the applicable Interest Period and (B)
quarterly.
The "APPLICABLE MARGIN" will be adjusted, based upon the
financial statements delivered periodically to the
Administrative Agent and the Lenders pursuant to the Credit
Agreement, in accordance with the step-ups and step-downs
reflected on the pricing grid attached hereto (Exhibit A);
PROVIDED, HOWEVER, that the Applicable Margin shall be at
Level II (as set forth on such pricing grid) until such time
as audited consolidated financial statements of the Company
and its subsidiaries
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indicating a different Level are delivered to the
Administrative Agent and the Lenders.
During the continuance of any monetary Default (as per
Section 2.10(d) of the Original Credit Agreement) or Event
of Default under the loan documentation, the amount in
default will bear interest at 2% above the otherwise
applicable rate, provided, however, that if such overdue
principal amount is a LIBOR Rate advance, such advance may,
at the end of the interest period relating thereto, be
continued only as Base Rate advance and shall bear interest
at a rate per annum which is two percent (2%) above the Base
Rate until paid in full.
FACILITY FEE: The Facility Fee shall be determined in accordance with the
pricing grid attached hereto based on each Lender's
commitment, payable irrespective of usage, quarterly in
arrears and on the termination of the Credit Facility. The
facility fee will be adjusted in accordance with step-ups
and step-downs reflected on the pricing grid attached
hereto; PROVIDED, HOWEVER, that the Facility Fee shall be at
Level II until such time as audited consolidated financial
statements of the Company and its subsidiaries indicating a
different Level are delivered to the Administrative Agent
and the Lenders.
COST AND YIELD PROTECTION:Standard for transactions and facilities of this
type, including, without limitation, in respect of certain
prepayments and funding or breakage losses, changes in law
(including capital adequacy and capital requirements or
their interpretation), illegality, unavailability of
funding, withholding taxes and increased costs.
GUARANTEES: The indebtedness, liabilities and obligations of each
Borrower to the Administrative Agent and the Lenders under
the Credit Facility (the "OBLIGATIONS") will be guaranteed
by the existing material operating subsidiaries (each a
"GUARANTOR") of the Company (provided that if the sale of
any such subsidiary shall otherwise be permitted under the
loan documentation to the Credit Facility, the guaranty of
such subsidiary shall be released upon consummation of such
sale), and, in the case of loans to Designated Subsidiaries,
will be guaranteed by the Company and each other existing
material operating subsidiary.
ANNUAL
ADMINISTRATIVE
AGENCY FEE: As agreed between the Administrative Agent and the Company.
CONDITIONS PRECEDENT
TO INITIAL
EXTENSION
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5
OF CREDIT: Those customarily found in Fleet's credit agreements for
similar secured financings and others appropriate in the
judgment of Fleet for the Transaction, including, without
limitation, the following:
(a) The final terms and conditions of the Transaction,
including, without limitation, all legal and tax
aspects thereof, shall be (i) as described in the
Commitment Letter and otherwise consistent with the
description thereof received in writing as part of the
Pre-Commitment Information and (ii) otherwise
satisfactory to the Lenders. The Tender Offer shall
have been consummated in accordance with the Merger
Agreement without any waiver or amendment of any term
or condition therein not consented to by the Lenders
and in compliance with all applicable laws and
necessary approvals. The Lenders shall be satisfied
that the restrictions in Section 203 of the Delaware
General Corporation Law, any other applicable state
takeover law and any supermajority charter provisions
are not applicable to the Merger or that any conditions
for avoiding the restrictions set forth therein have
been satisfied.
(b) All documentation relating to the Credit Facility,
including a credit agreement incorporating
substantially the terms and conditions outlined herein,
shall be in form and substance satisfactory to the
Lenders.
(c) The Administrative Agent and the Lenders shall be
satisfied with the corporate and legal structure and
capitalization of the Company and each of the
Guarantors, including, without limitation, the charter
and bylaws of the Company and each such Guarantor and
each agreement or instrument relating thereto.
(d) A majority of the capital stock of the Company and the
Company's subsidiaries shall be owned by Nortek, Inc.,
a Delaware corporation ("NORTEK"), the Company or one
or more of the Company's subsidiaries, in each case
free and clear of any lien, charge or encumbrance,
other than the liens and security interest created
under the loan documentation; the Lenders shall have a
valid and perfected first priority (subject to certain
exceptions to be set forth in the loan documentation)
lien and security interest in such capital stock and in
the other collateral referred to under the section
"SECURITY" above; all filings, recordations and
searches necessary or desirable in connection with such
liens and security interests shall have been duly made;
and all filing and recording fees and taxes shall have
been duly paid.
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(e) There shall have occurred no material adverse change in
the business, condition (financial or otherwise),
operations, performance or properties of the Company
and its subsidiaries, taken as a whole.
(f) There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any
court or before any arbitrator or governmental or
regulatory agency or authority that (i) could
reasonably be expected to (A) have a material adverse
effect on the business, condition (financial or
otherwise), operations, performance or properties of
Company and its subsidiaries, taken as a whole, (B)
adversely affect the ability of the Company or any
Guarantor to perform its obligations under the loan
documentation or (C) adversely affect the rights and
remedies of the Administrative Agent and the Lenders
under the loan documentation or (ii) purports to
adversely affect the Transaction or the Credit Facility
(collectively, a "MATERIAL ADVERSE EFFECT").
(g) All governmental and third party consents and approvals
necessary in connection with the Transaction and the
Credit Facility shall have been obtained (without the
imposition of any conditions that are not reasonably
acceptable to the Lenders) and shall remain in effect;
all applicable waiting periods shall have expired
without any adverse action being taken by any competent
authority; and no law or regulation shall be applicable
in the judgment of the Lenders that restrains, prevents
or imposes materially adverse conditions upon the
Transaction or the Credit Facility.
(h) All of the Pre-Commitment Information shall be true and
correct in all material aspects; and no additional
information shall have come to the attention of the
Administrative Agent or the Lenders that is
inconsistent in any material respect with the
Pre-Commitment Information or that could reasonably be
expected to have a Material Adverse Effect.
(i) The Lenders shall be satisfied with the terms and
conditions of (i) the $250,000,000 - $275,000,000 of
senior notes due 2007 sold by Nortek, (ii) the
$375,000,000 of equity financing to be consummated in
connection with the Merger and (iii) the $25,000,000 of
Subordinated Notes to be issued by the Company to
Nortek in connection with the Merger (the "SUBORDINATED
NOTES"), including, without limitation, the payment
terms, subordination provisions, covenants and events
of default thereof. The Company shall have received (A)
at
<PAGE> 12
7
least $375,000,000 in gross cash proceeds from the sale
of its common stock and (B) at least $25,000,000 in
gross cash proceeds from the sale of the Subordinated
Notes and all such proceeds shall have been used or
shall be used simultaneously with the initial extension
of credit under the loan documentation in connection
with the Transaction.
(j) All loans made by the Lenders to the Company or any of
its affiliates shall be in full compliance with the
Federal Reserve's Margin Regulations.
(k) The Company and each of the Guarantors shall have
delivered certificates, in form and substance
satisfactory to the Lenders, attesting to the Solvency
of the Company or such Guarantor, as the case may be,
in each case individually and together with its
subsidiaries, taken as a whole, immediately before and
immediately after giving effect to the Transaction,
from their respective chief financial officers.
(l) The Administrative Agent and the Lenders shall be
satisfied that (i) the Company and its subsidiaries
will be able to meet their obligations under all
employee and retiree welfare plans, (ii) the employee
benefit plans of the Company and its subsidiaries are,
in all material respects, funded in accordance with the
minimum statutory requirements, (iii) no material
"reportable event" (as defined in ERISA, but excluding
events for which reporting has been waived) has
occurred as to any such employee benefit plan and (iv)
no termination of, or withdrawal from, any such
employee benefit plan has occurred or is contemplated
that could reasonably be expected to result in a
material liability.
(m) The Administrative Agent and the Lenders shall be
satisfied with the amount, types and terms and
conditions of all insurance maintained by the Company
and its subsidiaries, and shall have received
endorsements naming the Administrative Agent, on behalf
of the Lenders, as an additional insured under all
insurance policies to be maintained with respect to the
collateral consisting of inventory.
(n) The Administrative Agent and the Lenders shall have
received (i) satisfactory opinions of counsel for
Nortek, the Company and the Guarantors, of counsel for
the Administrative Agent and of local counsel for the
Lenders as to the transactions contemplated hereby
(including, without limitation, compliance with all
applicable securities laws) and (ii) such corporate
<PAGE> 13
8
resolutions, certificates and other documents as the
Lenders shall reasonably request.
(o) There shall exist no default under any of the loan
documentation, and the representations and warranties
of the Company, each of the Guarantors and each of
their respective subsidiaries therein shall be true and
correct immediately prior to, and after giving effect
to, the initial extension of credit under the loan
documentation. (p) All accrued fees and expenses of the
Administrative Agent and the Lenders (including the
fees and expenses of counsel and local counsel for the
Administrative Agent and the Lenders) shall have been
paid.
(q) The Administrative Agent and the Lenders shall have
received a copy of the Company's five year projections
(to include balance sheet, income statement and
statement of cash flows, as well as management
assumptions with respect thereto) on a consolidated
basis with respect to the Company and its subsidiaries,
all in form and substance satisfactory to the
Administrative Agent.
(r) Such other documentation as the Administrative Agent or
the Lenders shall reasonably request.
CONDITIONS PRECEDENT
TO SUBSEQUENT
EXTENSIONS
OF CREDIT: There shall exist no default or Event of Default under any
of the loan documentation, and the representations and
warranties of the Company, each of the Guarantors and each
of their respective subsidiaries therein shall be true and
correct in all material respects immediately prior to, and
after giving effect to, such extension of credit.
REPRESENTATIONS AND
WARRANTIES: Those customarily found in Fleet's credit agreements for
similar secured financings and others appropriate in the
judgment of Fleet for the Transaction, including, without
limitation, absence of any material adverse change in the
business, condition (financial or otherwise), operations,
performance or properties of the Company or any of its
subsidiaries, taken as a whole.
COVENANTS: Those affirmative, negative and financial covenants
customarily found in Fleet's credit agreements for similar
secured financings and others appropriate in the judgment of
Fleet for the Transaction (except that there shall be no
restriction on the payment of dividends other than
<PAGE> 14
9
upon the occurrence and during the continuance of any
default, or if any default would result therefrom, as set
forth below), including, without limitation, the following:
(a) AFFIRMATIVE COVENANTS - (i) Compliance with laws and
regulations (including, without limitation, ERISA and
environmental laws); (ii) payment of taxes and other
obligations; (iii) maintenance of appropriate and
adequate insurance; (iv) preservation of corporate
existence, rights (charter and statutory), franchises,
permits, licenses and approvals; (v) visitation and
inspection rights; (vi) keeping of proper books in
accordance with generally accepted accounting
principles; (vii) maintenance of properties and
continuing to engage in the same Business of the
Company; (viii) performance of leases, related
documents and other material agreements; (ix)
conducting transactions with affiliates on terms
equivalent to those obtainable on an arm's-length
basis; (x) further assurances as to perfection and
priority of security interests; and (xi) customary
financial and other reporting requirements (including,
without limitation, audited annual financial statements
no later than 90 days after the end of each fiscal year
and quarterly unaudited financial statements 45 days
after the end of the Company's first three fiscal
quarters, in each case prepared on a consolidated and a
consolidating basis, notices of defaults, compliance
certificates, annual business plans and forecasts,
reports to shareholders and other creditors and other
business and financial information as any Lender shall
reasonably request).
(b) NEGATIVE COVENANTS - Restrictions on (i) liens (other
than liens securing the Credit Facility); (ii) debt,
guaranties or other contingent obligations (including,
without limitation, the subordination of all
intercompany indebtedness on terms satisfactory to the
Lenders); (iii) financing lease obligations in excess
of an amount to be agreed between the Company and the
Lenders during any consecutive 12-month period; (iv)
mergers and consolidations; (v) sales, transfers and
other dispositions of assets (other than sales of
inventory in the ordinary course of business) which
will be permitted only to the extent that (A) the
consideration received by the Company or its wholly
owned subsidiaries in such transactions is at least
equal to the fair market value of the assets sold,
transferred or disposed of, and (B) the aggregate net
proceeds of such transactions does not exceed
$150,000,000 during the term of the Credit Facility);
(vi) loans, joint ventures and other investments; (vii)
acquisitions exceeding (a) $50,000,000
<PAGE> 15
10
during any fiscal year and (b) $100,000,000 in the
aggregate during the term of the Credit Facility,
provided, however, the Borrowers, each a Guarantor and
their respective subsidiaries remain in pro forma
compliance with all terms and conditions of the loan
documentation and such acquisition is consistent with
the Company's existing lines of business; (viii)
creating new material operating subsidiaries which do
not become guarantors of the Credit Facility; (ix)
capital expenditures; (x) granting negative pledges
other than to the Administrative Agent and the Lenders;
(xi) changing the nature of its business; (xii)
amending organizational documents, or amending or
otherwise modifying any debt in any manner that would
materially adversely affect the Company's or any
Guarantor's ability to perform its obligations under
the Credit Facility, any related document or any other
material agreement; (xiii) changing accounting policies
or reporting practices (except for the purpose of
conforming the policies and practices of the Company
with those of Nortek); and (xiv) upon the occurrence
and during the continuance of any default, or if any
default would result therefrom, dividends or other
restricted payments to any person except for dividends
payable by any subsidiary of the Company to the Company
or any of its other subsidiaries; in each of the
foregoing cases, with such exceptions as may be agreed
upon in the loan documentation.
(c) FINANCIAL COVENANTS - The Company will be required not
to:
(i) NET WORTH - At any time, permit Consolidated Net
Worth to be less than $350,000,000 less losses
on the sale of Non-Core Subsidiaries in an
aggregate amount not to exceed $25,000,000.
"CONSOLIDATED NET WORTH" shall mean as at any
date, in conformity with GAAP, consolidated
stockholders' equity of the Company and its
subsidiaries plus any unrealized losses, less
any unrealized gains to the extent reflected in
the calculation of stockholders' equity and less
any loans and other forms of indebtedness
extended by the Company or any of its
subsidiaries to third parties (to the extent
permitted by the loan documentation).
(ii) LEVERAGE RATIO - Permit the ratio of (a) Total
Funded Debt to (b) EBITDA (the "LEVERAGE RATIO")
for the four most recent consecutive full fiscal
quarters as of any date of determination within
any period set forth
<PAGE> 16
11
below to exceed the ratio set forth below for
such period:
PERIOD ENDING AS OF THE MAXIMUM
LAST DAY OF FISCAL LEVERAGE RATIO
QUARTER ENDED ON
September 30, 1997 3.75 : 1.00
December 31, 1997 3.50 : 1.00
December 31, 1998 3.00 : 1.00
June 30, 1999 2.50 : 1.00
June 30, 2000 and
thereafter 2.00 : 1.00
"TOTAL FUNDED DEBT" shall mean the sum (without
duplication) of (a) indebtedness for borrowed
money; (b) the deferred purchase price of
property or services (except for accounts
payable and accrued expenses arising in the
ordinary course of business and other
appropriate exceptions and materiality standards
contained in the Original Credit Agreement);
(c) obligations under financing leases; and (d)
indebtedness arising under acceptance
facilities. Total Funded Debt shall include
undrawn letters of credit and unreimbursed draws
on letters of credit.
"EBITDA" shall mean, for any period, the sum of
(a) consolidated EBIT, plus, (b) depreciation
and amortization of tangible and intangible
assets determined on a consolidated basis in
accordance with GAAP.
"EBIT" shall mean, for any period, the sum of
(a) Consolidated Net Income, plus, (b) Interest
Expense, tax expense, other non-cash charges or
non-cash losses out of the ordinary course of
business and extraordinary or unusual losses
deducted in calculating Consolidated Net Income,
in each case, determined on a consolidated basis
in accordance with GAAP, minus, (c) to the
extent included in Consolidated Net Income,
interest income, any non-cash income or non-cash
gains out of the ordinary course of business and
extraordinary or unusual gains, in each case,
determined on a consolidated basis in accordance
with GAAP or as otherwise provided in the
Original Credit Agreement.
<PAGE> 17
12
(iii) INTEREST COVERAGE RATIO - Permit the ratio of
EBITDA to Interest Expense for the four most
recent consecutive full fiscal quarters ending
as of any date of determination to be less than
3.50 to 1.00.
"INTEREST EXPENSE" shall mean, for any period,
the gross amount of consolidated interest
expense, paid or accrued, plus, (a) any imputed
interest on obligations consisting of financing
leases; and (b) all amounts accrued or paid
pursuant to interest rate protection agreements;
less (c) amortization of Debt Discount and of
expenses and charges incurred in connection with
the incurrence of Indebtedness and (d) all
amounts received or receivable pursuant to
interest rate protection agreements.
(iv) CURRENT RATIO - Permit the ratio of consolidated
Current Assets to consolidated Current
Liabilities to be less than 2.00 to 1.00 at any
date of determination.
"CURRENT ASSETS AND CURRENT LIABILITIES" shall
have the meaning ascribed in accordance with
GAAP; provided, however, that advances under the
Credit Facility will be excluded from the
definition of Current Liabilities.
(v) CAPITAL EXPENDITURES - Permit Capital
Expenditures (i) in excess of $125,000,000
during the five-year period ending with the
Termination Date, (ii) in excess of $37,500,000
during any fiscal year which follows the 1996
fiscal year, or (iii) in excess of $56,250,000
during any period of two consecutive fiscal
years following the 1996 fiscal year.
EVENTS OF DEFAULT:
Those customarily found in Fleet's credit agreements for
similar secured financings and others appropriate in the
judgment of Fleet for the Transaction, including, without
limitation: (a) failure to pay principal when due, or to pay
other amounts within five business days after the same
becomes due, under the loan documentation; (b) any
representation or warranty proving to have been materially
incorrect when made or confirmed; (c) failure to perform or
observe covenants set forth in the loan documentation within
a specified period of time, where customary and appropriate,
after notice or knowledge of such failure;
(d) cross-defaults to other indebtedness of at least
$10,000,000 in the aggregate; (e) bankruptcy and
insolvency defaults (with grace period for involuntary
proceedings); (f) monetary judgment defaults of
<PAGE> 18
13
at least $5,000,000 in the aggregate and nonmonetary
judgment defaults that could reasonably be expected to have
a Material Adverse Effect; (g) impairment of loan
documentation or security; (h) change of ownership or
operating control; and (i) standard ERISA defaults.
INTEREST RATE
PROTECTION: The Company shall maintain existing interest rate protection
for periods to be agreed and otherwise in form and with
parties acceptable to the Lenders for a notional amount to
be agreed in the final loan documentation, but in no event
less than 40% of the Credit Facility, and the obligations
owing to any such party in connection with the Company's
maintenance of interest rate protection (including interest
rate protection up to the full notional amount of the Credit
Facility) shall be secured on a pari passu basis with the
obligations of the Lenders hereunder.
EXPENSES: The Borrower shall pay all of the Administrative Agent's due
diligence, syndication (including printing, distribution and
bank meetings), transportation, computer, duplication,
appraisal, audit, insurance, consultant, search, filing and
recording fees and all other out-of-pocket expenses incurred
by the Administrative Agent (including the fees and expenses
of counsel for the Administrative Agent), whether or not any
of the transactions contemplated hereby are consummated, as
well as all expenses of the Administrative Agent in
connection with the administration of the loan
documentation. The Company shall also pay the expenses of
the Administrative Agent and the Lenders in connection with
the enforcement of any of the loan documentation.
INDEMNITY: The Company will indemnify and hold harmless the
Administrative Agent, each Lender and each of their
affiliates and their officers, directors, employees, agents
and advisors.
REQUIRED LENDERS: Greater than 51%.
ASSIGNMENTS AND
PARTICIPATIONS: Assignments may be non-pro rata and must be to Eligible
Assignees and, in each case other than an assignment to a
Lender or an assignment of the entirety of a Lender's
interest in the Credit Facility, in a minimum amount of
$5,000,000 or any integral multiple of $1,000,000 in excess
thereof. Each Lender will also have the right, without
consent of the Company or the Administrative Agent, to
assign (i) as security all or part of its rights under the
loan documentation to any Federal Reserve Bank and (ii) all
or part of its rights or obligations under the loan
documentation to any of its affiliates. No participation
shall include voting rights, other than for reductions or
postponements
<PAGE> 19
14
of amounts payable or releases of all or substantially all
of the collateral.
TAXES:
All payments to be free and clear of any present or future
taxes, withholdings or other deductions whatsoever (other
than income taxes in the jurisdiction of the Lender's
applicable lending office). The Lenders will use reasonable
efforts (consistent with their respective internal policies
and legal and regulatory restrictions and so long as such
efforts would not otherwise be disadvantageous to such
Lenders) to minimize to the extent possible any applicable
taxes and the Company will indemnify the Lenders and the
Administrative Agent for such taxes paid by the Lenders or
the Administrative Agent.
MISCELLANEOUS: Standard yield protection (including compliance with
risk-based capital guidelines, increased costs, payments
free and clear of withholding taxes and interest period
breakage indemnities), eurodollar illegality and similar
provisions, defaulting lender provisions, waiver of jury
trial and submission to jurisdiction.
GOVERNING LAW: New York.
COUNSEL FOR THE
ADMINISTRATIVE
AGENT: Shearman & Sterling.
OTHER: This Term Sheet is intended to be an outline only and does
not purport to summarize all the terms and conditions,
covenants or representations and warranties that would be
contained in the final loan documentation.
<PAGE> 20
EXHIBIT A
PLY GEM INDUSTRIES, INC.
Pricing Grid
<TABLE>
<CAPTION>
=================================================================================================================
SENIOR FUNDED APPLICABLE MARGINS REVOLVER
DEBT(1)/ BASE RATE LIBOR RATE FACILITY ALL-IN
LEVEL EBITDA RATIO ADVANCES ADVANCES FEE (2) DRAWN PRICING
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
I [greater
than or
equal to] 3.25 0.0 95.0 30.0 125.0
- -----------------------------------------------------------------------------------------------------------------
II [greater
than or
equal to] 3.0x, [less than] 3.25x 0.0 72.5 27.5 100.0
- -----------------------------------------------------------------------------------------------------------------
III [greater
than or
equal to] 2.5x, [less than] 3.0x 0.0 62.5 25.0 87.5
- -----------------------------------------------------------------------------------------------------------------
IV [greater
than or
equal to] 2.0x, [less than] 2.5x 0.0 52.5 22.5 75.0
- -----------------------------------------------------------------------------------------------------------------
V [greater
than or
equal to] 1.5x, [less than] 2.0x 0.0 40.0 22.5 62.5
- -----------------------------------------------------------------------------------------------------------------
VI [less than] 1.5x 0.0 30.0 20.0 50.0
=================================================================================================================
</TABLE>
(1) For the purposes of computation of Senior Funded Debt in connection with the
pricing grid, "Senior Funded Debt" shall be calculated as the average for the
two most recent consecutive full fiscal quarters of Total Funded Debt less
subordinated debt.
(2) Based on total outstanding commitments.
