FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1997
------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-6112
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NORTEK, INC.
- ------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 05-0314991
- ------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
50 Kennedy Plaza, Providence, RI 02903-2360
- ------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(401) 751-1600
- ------------------------------------------------------------
(Registrant's telephone number, including area code)
N/A
- ------------------------------------------------------------
(Former name, former address and former fiscal year
if changed since last year)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
---------- -----------
The number of shares of Common Stock outstanding as of
October 31, 1997 was 9,035,080. The number of shares of
Special Common Stock outstanding as of October 31, 1997 was
484,900.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollar Amounts in Thousands)
Sept. 27, Dec. 31,
1997 1996
---- ----
(Unaudited)
ASSETS
Current Assets:
Unrestricted--
Cash and cash equivalents $ 49,075 $ 41,042
Marketable securities available
for sale 104,620 51,051
Restricted--
Cash and marketable securities
at cost which approximates market 6,952 5,681
Accounts receivable, less allowances
of $11,105 and $4,356 222,132 122,176
Inventories:
Raw materials 69,771 36,765
Work in process 25,010 12,717
Finished goods 96,620 48,176
--------- -------
191,401 97,658
--------- -------
Prepaid expenses 10,308 5,031
Other current assets 12,164 9,909
Prepaid income taxes 49,500 20,000
--------- -------
Total Current Assets 646,152 352,548
--------- -------
Property and Equipment, at cost:
Land 11,710 7,046
Buildings and improvements 96,322 72,954
Machinery and equipment 263,998 174,064
372,030 254,064
Less--Accumulated depreciation 114,485 112,645
--------- -------
Total Property and Equipment,
net 257,545 141,419
--------- -------
Other Assets:
Goodwill, less accumulated amortiza-
tion of $29,827 and $26,948 361,498 91,578
Intangible assets 9,072 4,263
Notes receivable and other
Investments 11,605 1,633
Deferred debt expense 20,771 6,647
Other 25,785 11,028
--------- -------
428,731 115,149
--------- -------
$1,332,428 $609,116
========= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Continued)
(Dollar Amounts in Thousands)
Sept. 27, Dec. 31,
1997 1996
---- ----
(Unaudited)
LIABILITIES AND STOCKHOLDERS' INVESTMENT
- ----------------------------------------
Current Liabilities:
Notes payable and other short-
term obligations $ 12,038 $ 25,334
Current maturities of long-term debt 9,441 11,230
Accounts payable 112,497 74,945
Accrued expenses and taxes, net 181,051 97,565
--------- -------
Total Current Liabilities 315,027 209,074
--------- -------
Other Liabilities:
Deferred income taxes 9,845 17,637
Other 40,179 19,649
--------- -------
50,024 37,286
--------- -------
Notes, Mortgage Notes and
Obligations Payable, less current
maturities 839,639 243,961
--------- -------
Stockholders' Investment:
Preference stock, $1 par value;
authorized 7,000,000 shares,
none issued --- ---
Common Stock, $1 par value;
authorized 40,000,000 shares,
16,040,905 shares and 15,965,585
shares issued 16,041 15,966
Special Common Stock, $1 par value;
authorized 5,000,000 shares,
770,876 shares and 784,169
shares issued 771 784
Additional paid-in capital 135,333 135,028
Retained earnings 55,866 37,766
Cumulative translation, pension and
other adjustments (3,912) (3,212)
Less - treasury common stock at
cost, 6,973,997 shares and
6,599,645 shares (74,426) (65,805)
- treasury special common stock
at cost, 285,304 shares and
276,910 shares (1,935) (1,732)
--------- -------
Total Stockholders' Investment 127,738 118,795
--------- -------
$1,332,428 $609,116
========= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Three Months Ended
------------------
Sept. 27, Sept. 28,
1997 1996
---- ----
(Unaudited)
Net Sales $327,756 $248,227
------- -------
Costs and Expenses:
Cost of products sold 245,196 181,808
Selling, general and
administrative expense 59,687 49,414
------- -------
304,883 231,222
------- -------
Operating earnings 22,873 17,005
Interest expense (13,998) (7,261)
Investment income 3,125 1,256
------- -------
Earnings before provision for
income taxes 12,000 11,000
Provision for income taxes 4,300 4,500
------- -------
Net Earnings $ 7,700 $ 6,500
======= =======
Net Earnings Per Share:
Primary $ .78 $ .64
======= =======
Fully diluted $ .78 $ .64
======= =======
Weighted Average Number of Shares:
Primary 9,841 10,162
======= =======
Fully diluted 9,841 10,169
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(In Thousands Except Per Share Amounts)
For The
Nine Months Ended
----------------
Sept. 27, Sept. 28,
1997 1996
---- ----
(Unaudited)
Net Sales $796,974 $729,447
------- -------
Costs and Expenses:
Cost of products sold 587,640 539,018
Selling, general and
administrative expense 156,517 147,657
------- -------
744,157 686,675
------- -------
Operating earnings 52,817 42,772
Interest expense (32,521) (22,747)
Investment income 7,704 4,075
------- -------
Earnings before provision for
income taxes 28,000 24,100
Provision for income taxes 9,900 9,400
------- -------
Net Earnings $ 18,100 $ 14,700
======= =======
Net Earnings Per Share:
Primary $ 1.83 $ 1.35
======= =======
Fully diluted $ 1.83 $ 1.35
======= =======
Weighted Average Number of Shares:
Primary 9,878 10,845
======= ======
Fully diluted 9,912 10,859
======= ======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
For the
Nine Months Ended
-----------------
Sept. 27, Sept. 28,
1997 1996
---- ----
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $18,100 $14,700
------ ------
Adjustments to reconcile net earnings
to cash:
Depreciation and amortization 19,495 16,579
Non-cash interest expense, net 1,046 979
Net gain on investments and
marketable securities (250) ---
Deferred federal income tax credit (3,100) (875)
Changes in certain assets and liabilities,
net of effects from acquisitions
and dispositions:
Accounts receivable, net (15,436) (22,084)
Prepaids and other current assets 3,605 1,322
Inventories (1,484) 3,702
Accounts payable (4,097) 19,051
Accrued expenses and taxes 21,597 (914)
Long-term assets, liabilities and
other, net (3,587) (1,945)
------ ------
Total adjustments to net earnings 17,789 15,815
------ ------
Net Cash Provided by
Operating Activities 35,889 30,515
------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (14,861) (13,576)
Net cash paid for a business acquired (386,952) ---
Purchase of investments and marketable
securities (238,199) (45,903)
Proceeds from sale of investments and
marketable securities 183,329 37,905
Other, net (2,740) 146
-------- ------
Net Cash Used in Investing
Activities (459,423) (21,428)
-------- -------
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Amounts in Thousands)
(Continued)
For the
Nine Months Ended
-----------------
Sept. 27, Sept. 28,
1997 1996
---- ----
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of notes $467,663 $ ---
Principal payments, net (27,667) (655)
Purchase of Nortek Common
and Special Common Stock (8,824) (31,738)
Other, net 395 75
------- -------
Net Cash Provided by (Used in)
Financing Activities 431,567 (32,318)
------- -------
Net increase(decrease) in
unrestricted cash and investments 8,033 (23,231)
Unrestricted cash and investments at
the beginning of the period 41,042 60,079
------- -------
Unrestricted cash and investments at the
end of the period $ 49,075 $ 36,848
======= =======
Interest paid $ 32,724 $ 27,670
======= =======
Income taxes paid, net $ 8,203 $ 13,490
======= =======
The accompanying notes are an integral part of these unaudited
condensed consolidated financial statements.
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Three Months Ended September 27, 1997 and September 28, 1996
(Dollar Amounts in Thousands)
Cumulative
Translation,
Addi- Pension
Special tional and Other
Common Common Paid-in Retained Adjust- Treasury
Stock Stock Capital Earnings ments Stock
----- ----- ------- -------- -------- -----
(Unaudited)
Balance, June 29,
1996 $15,916 $758 $134,746 $23,966 $(3,193) $(64,454)
5,319 shares of
special common stock
converted into
5,319 shares of
common stock 5 (5) --- --- --- ---
Translation adjust-
ment --- --- --- --- 335 ---
Unrealized apprecia-
tion in the value of
marketable securities --- --- --- --- 97 ---
Net earnings --- --- --- 6,500 --- ---
------ --- ------- ------ ------ -------
Balance, September
28, 1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454)
====== === ======= ====== ====== =======
Balance, June 28,
1997 $16,026 $774 $135,311 $48,166 $(3,948) $(75,232)
3,463 shares of
special common stock
converted into
3,463 shares of
common stock 3 (3) --- --- --- ---
11,900 shares of common
stock issued upon
exercise of stock
options 12 --- 22 --- --- ---
44,841 shares of
treasury stock
acquired --- --- --- --- --- (1,129)
Translation adjust-
ment --- --- --- --- (87) ---
Unrealized appreciation
in the value of mar-
ketable securities --- --- --- --- 123 ---
Net earnings --- --- --- 7,700 --- ---
------ --- ------- ------ ------ -------
Balance, September
27, 1997 $16,041 $771 $135,333 $55,866 $(3,912) $(76,361)
====== === ======= ====== ====== =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
Nortek, Inc. and Subsidiaries
Condensed Consolidated Statement of Stockholders' Investment
For the Nine Months Ended September 27, 1997 and September 28, 1996
(Dollar Amounts in Thousands)
Cumulative
Translation,
Addi- Pension
Special tional and Other
Common Common Paid-in Retained Adjust- Treasury
Stock Stock Capital Earnings ments Stock
----- ----- ------- -------- -------- -----
(Unaudited)
Balance, December 31,
1995 $15,883 $774 $134,690 $15,766 $(2,742) $(33,080)
21,025 shares of
special common stock
converted into
21,025 shares of
common stock 21 (21) --- --- --- ---
16,843 shares of
common stock issued
upon exercise of
stock options 17 --- 56 --- --- ---
2,117,314 shares of
treasury stock
acquired --- --- --- --- --- (31,374)
Translation adjustment --- --- --- --- 396 ---
Unrealized decline
in marketable
securities --- --- --- --- (415) ---
Net earnings --- --- --- 14,700 --- ---
------ --- ------- ------ ------ -------
Balance, September
28, 1996 $15,921 $753 $134,746 $30,466 $(2,761) $(64,454)
====== ==== ======= ======= ======= =======
Balance, December 31,
1996 $15,966 $784 $135,028 $37,766 $(3,212) $(67,537)
19,101 shares of
special common stock
converted into
19,101 shares of
common stock 19 (19) --- --- --- ---
56,219 shares of
common stock and
5,808 shares of
special common stock
issued upon exercise
of stock options 56 6 305 --- --- ---
382,746 shares of
treasury stock acquired --- --- --- --- --- (8,824)
Translation adjustment --- --- --- --- (1,192) ---
Unrealized appreciation
In the value of
marketable securities --- --- --- --- 492 ---
Net earnings --- --- --- 18,100 --- ---
------ --- ------- ------ ------ -------
Balance, September
27, 1997 $16,041 $771 $135,333 $55,866 $(3,912) $(76,361)
====== === ======= ====== ====== =======
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(A) The unaudited condensed consolidated financial statements presented
("Unaudited Financial Statements") have been prepared by Nortek,
Inc. and include all of its wholly-owned subsidiaries (the
"Company") after elimination of intercompany accounts and
transactions, without audit and, in the opinion of management,
reflect all adjustments of a normal recurring nature necessary for
a fair statement of the interim periods presented. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted
accounting principles have been omitted, although, the Company
believes that the disclosures included are adequate to make the
information presented not misleading. Certain amounts in the
Unaudited Financial Statements for the prior periods have been
reclassified to conform to the presentation at September 27, 1997.
It is suggested that these Unaudited Financial Statements be read
in conjunction with the financial statements and the notes included
in the Company's latest Annual Report on Form 10-K.
(B) Acquisitions are accounted for as purchases and, accordingly, have
been included in the Company's consolidated results of operations
since the acquisition date. Purchase price allocations are subject
to refinement until all pertinent information regarding the
acquisitions is obtained.
On August 26, 1997, a wholly owned subsidiary of the Company
completed the acquisition of Ply Gem Industries, Inc. ("Ply Gem")
in a tender offer for a cash price of $19.50 per outstanding share
of common stock. The aggregate purchase price, including expenses
and settlement of stock options, was approximately $420,000,000.
Prior to accepting for payment the tendered shares of Ply Gem on
August 26, 1997, the Company sold $310,000,000 principal amount of
9 1/8% Senior Notes due September 2007 (the "9 1/8% Notes") at a
slight discount. The Company used a portion of these net proceeds,
together with available cash, to purchase the shares of Ply Gem,
fund an approximate $45,000,000 payment to terminate Ply Gem's
existing accounts receivable securitization program and pay certain
fees and expense. Also on August 26, 1997, prior to the
acquisition, Ply Gem refinanced approximately $108,900,000 of
existing Ply Gem indebtedness.
On March 17, 1997, the Company sold $175,000,000 principal amount
of 9 1/4% Senior Notes due March 2007 (the "9 1/4% Notes") at a
slight discount. The net proceeds were used to refinance certain
outstanding indebtedness of the Company's subsidiaries and for
acquisitions and other general corporate purposes.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Continued)
Nortek expects to realize cost savings as a result of the
acquisition. These savings are expected to result from several
actions, including: (i) the elimination of expenses associated with
Ply Gem's New York headquarters; (ii) the consolidation into Nortek
of certain of Ply Gem's corporate functions such as legal,
accounting and risk management; and (iii) the identification and
rationalization of underperforming product lines. Pro Forma
earnings results (see below) have been adjusted for only those
estimated cost reductions directly attributable to the acquisition.
These expected pre-tax savings total $262,000 and $3,983,000 for
the third quarter and nine months ended September 27, 1997 and
$2,729,000 and $6,358,000 for the third quarter and nine months
ended September 28, 1996. As Adjusted pro forma earnings results
(see below) have been adjusted to include cost reductions directly
attributable to the acquisition and additional estimated cost
savings and operating efficiencies which management expects will
result from the acquisition. This additional pre-tax cost savings
total $4,997,000 and $12,661,000 for the third quarter and nine
months ended September 27, 1997 and $3,530,000 and $9,231,000 for
the third quarter and nine months ended September 28, 1996.
The following presents the approximate unaudited Pro Forma and As
Adjusted net sales, operating earnings, net earnings and fully
diluted net earnings per share of the Company for all periods
presented and gives pro forma effect to the acquisition of Ply Gem,
the sale of $310,000,000 principal amount of 9 1/8% Notes, the
extension of credit under the Ply Gem credit facility to refinance
certain existing indebtedness and the termination of Ply Gem's
accounts receivable securitization program, the sale of
$175,000,000 principal amount of 9 1/4% Notes and the refinancing
of certain subsidiary indebtedness, and reflects the estimated cost
reductions as described above as if such transactions and
adjustments had occurred on January 1, 1996 to the date of
acquisition. The Pro Forma and As Adjusted results below include
the actual results of Ply Gem since August 26, 1997 in accordance
with the purchase method of accounting for acquisitions.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Continued)
Pro Forma Three Months Ended Nine Months Ended
------------------ ----------------
Sept. 27, Sept.28, Sept. 27, Sept. 28,
1997 1996 1997 1996
------- ------- -------- --------
(Amounts in Thousands except per share amounts)
Net Sales $461,951 $478,370 $1,312,897 $1,313,687
Operating Earnings 21,037 33,755 63,349 67,880
Net Earnings 2,000 7,350 4,100 3,830
Fully Diluted Net
Earnings Per Share $ .20 $ .72 $ .41 $ .35
As Adjusted Three Months Ended Nine Months Ended
------------------ ----------------
Sept. 27, Sept.28, Sept. 27, Sept. 28,
1997 1996 1997 1996
------- ------- -------- --------
(Amounts in Thousands except per share amounts)
Net Sales $458,891 $472,341 $1,297,780 $1,295,044
Operating Earnings 26,034 37,288 76,018 77,125
Net Earnings 5,175 9,600 12,200 9,700
Fully Diluted Net
Earnings Per Share $ .53 $ .94 $ 1.23 $ .89
In computing the pro forma net earnings, earnings have been reduced
by the net interest income on the aggregate cash portion of the
purchase price of the acquisition at the historical rate earned by
the Company and interest expense on indebtedness incurred in
connection with the refinancing and repayment of certain
indebtedness of Ply Gem. Net earnings have been reduced by
amortization of goodwill and reflect net adjustments to
depreciation expense as a result of an increase in the estimated
fair market value of property and equipment. Interest expense on
the subsidiary indebtedness refinanced with funds from the
9 1/4% Notes offering was excluded at an average interest rate of
approximately 9.6% for all periods presented, net of the tax
effect. Interest expense was included on the 9 1/4% Notes at a
rate of approximately 9 1/4%, plus amortization of deferred debt
expense and debt discount, and on the 9 1/8% Notes at a rate
of approximately 9 1/8%, plus amortization of deferred debt expense
and debt discount for the periods presented, net of tax effect.
The pro forma information presented does not purport to be
indicative of the results which would have been reported if these
transactions had occurred on January 1, 1996, or which may be
reported in the future.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Continued)
(C) The Company's Board of Directors has authorized a number of
programs to purchase shares of the Company's Common and Special
Common Stock since November 16, 1995. The most recent of these
programs was announced on April 30, 1997, to purchase up to 500,000
shares of the Company's Common and Special Common Stock in open
market or negotiated transactions, subject to market conditions,
cash availability and provisions of the Company's outstanding debt
instruments. As of October 31, 1997, the Company has purchased
approximately 86,833 shares of its Common and Special Common Stock
for approximately $2,100,000 under this latest program. For the
period from November 16, 1995 to October 31, 1997, the Company
purchased approximately 2,900,000 shares of its Common and Special
Common Stock for approximately $45,900,000 and accounted for such
share purchases as Treasury Stock.
The following presents the approximate unaudited pro forma net
earnings and fully diluted earnings per share of the Company, as
adjusted for the pro forma effect of the Treasury Stock purchases,
assuming these transactions occurred at January 1, 1996:
Three Months Ended Nine Months Ended
Sept. 27, Sept.28, Sept. 27, Sept.28,
1997 1996 1997 1996
-------- ------- ------- --------
Net earnings $7,700 $6,400 $18,050 $14,100
===== ====== ====== ======
Fully diluted
net earnings per
share $ .78 $ .67 $ 1.84 $ 1.46
===== ===== ====== ======
(D) At September 27, 1997 and December 31, 1996, the reduction in the
Company's stockholders' investment for gross unrealized losses on
marketable securities was approximately $399,000 and $891,000,
respectively.
(E) The tax effect of temporary differences which gave rise to
significant portions of deferred income tax assets and liabilities
as of September 27, 1997 and December 31, 1996 is as follows:
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Continued)
Sept. 27, Dec. 31,
1997 1996
---- ----
(Amounts in Thousands)
U. S. Federal Prepaid (Deferred)
Income Tax Assets Arising From:
Net operating losses of Ply Gem $12,400 $ ---
Accounts receivable 3,478 1,246
Inventory 2,004 (610)
Insurance reserves 5,947 4,985
Other reserves, liabilities
and assets, net 25,671 14,379
------ ------
$49,500 $20,000
====== ======
Deferred (Prepaid) Income Tax
Liabilities Arising From:
Property and equipment, net $31,938 $15,400
Prepaid pension assets 520 841
Other reserves, liabilities and
assets, net (766) (608)
Capital loss carryforward (6,400) (6,462)
Other, net (11,720) (1,772)
Net operating losses of Ply Gem (14,000) ---
Valuation allowances 10,273 10,238
------ ------
$ 9,845 $17,637
====== ======
At September 27, 1997, the Company's wholly owned subsidiary, Ply Gem,
has a net operating loss carryforward of approximately $75,400,000.
This net operating loss carryforward expires in 2012 and is subject to
certain limitations. Also, at September 27, 1997, the Company has a
capital loss carryforward of approximately $18,300,000, of which
approximately $16,400,000 expires in 1997. The Company has provided a
valuation allowance equal to the tax effect of capital loss
carryforwards and certain other tax assets, since realization of these
tax assets cannot be reasonably assured.
The following reconciles the federal statutory income tax rate to the
effective tax rate from continuing operations of approximately 35.8%
and 40.9% in the third quarter of 1997 and 1996, respectively, and
35.4% and 39.0% in the first nine months of 1997 and 1996,
respectively.
NORTEK, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
(Continued)
Three Months Ended Nine Months Ended
Sept. 27, Sept. 28, Sept. 27,Sept. 28,
1997 1996 1997 1996
-------- ------- -------- -------
(Amounts in Thousands)
Income tax provision at the
Federal statutory rate $4,200 $3,850 $9,800 $8,435
Net Change from Statutory Rate:
Change in tax reserves, net (907) 199 (1,734) (549)
State taxes, net of federal
tax effect 422 293 877 780
Amortization not deductible
for tax purposes 376 278 911 800
Other nondeductible items 129 81 312 200
Product development tax credit
from foreign operations (111) (90) (318) (314)
Tax effect on foreign income 191 (111) 52 48
===== ===== ===== =====
$4,300 $4,500 $9,900 $9,400
===== ===== ===== =====
(F) At October 31, 1997, approximately $6,924,000 was available for the
payment of cash dividends or stock purchases under the terms of the
Company's most restrictive Indenture.
(G) Net earnings per share ("EPS") amounts have been computed using the
weighted average number of common and common equivalent shares
outstanding during each year. Special common stock is treated as the
equivalent of common stock in determining earnings per share.
In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share,"
which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates primary
and fully diluted earnings per share and requires presentation of
basic and diluted earnings per share together with disclosure of how
the per share amounts were computed. Adoption of the new standard
would not have had a material effect on earnings per share for the
three months and nine months ended September 27, 1997 and September
26, 1996.
(H) The following table summarizes the unaudited activity of a business
acquired in a purchase transaction included in the accompanying
consolidated statement of cash flows for the nine months ended
September 27, 1997:
(Amounts in Thousands)
Fair value of assets acquired $ 616,864
Liabilities assumed or created (229,912)
----------
Cash paid for acquisition $ 386,952
=========
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
The Company is a diversified manufacturer of residential and commercial
building products, operating within five principal product groups: the
Residential Building Products Group; the Air Conditioning and Heating
Products Group; the Windows, Doors and Siding Group; the Specialty
Products & Distribution Group; and the Plumbing Products Group. Through
these product groups, the Company manufactures and sells, primarily in the
United States, Canada and Europe, a wide variety of products for the
residential and commercial construction, manufactured housing, and the do-
it-yourself and professional remodeling and renovation markets.
On August 26, 1997, the Company acquired Ply Gem, which is accounted for
under the purchase method of accounting. Accordingly, the results of Ply
Gem are included in the Company's consolidated results since that date.
Results of Operations
The tables below and on the next page set forth, for the periods presented,
(a) certain consolidated operating results, (b) the change in the amount
and the percentage change of such results as compared to the prior
comparable period, (c) the percentage which such results bears to net sales
and (d) the change of such percentages as compared to the prior comparable
period. The results of operations for the third quarter ended September
27, 1997 are not necessarily indicative of the results of operations to be
expected for any other interim period or the full year.
Change in
Third Quarter Ended Third Quarter 1997
-------------------
Sept. 27, Sept. 28, as Compared to 1996
-------------------
1997 1996 $ %
---- ---- ------ ------
(Dollar amounts in millions)
Net sales $327.8 $248.2 79.6 32.1
Cost of products sold 245.2 181.8 (63.4) (34.9)
Selling, general and
administrative expense 59.7 49.4 (10.3) (20.9)
Operating earnings 22.9 17.0 5.9 34.7
Interest expense (14.0) (7.3) (6.7) (91.8)
Investment income 3.1 1.3 1.8 138.5
Earnings before provision
for income taxes 12.0 11.0 1.0 9.1
Provision for income taxes 4.3 4.5 .2 4.4
----- ----- ---- -----
Net earnings $ 7.7 $ 6.5 1.2 18.5
===== ===== ==== =====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
Change in
Percentage of Net Sales Percentage
Third Quarter Ended for the Third
-------------------
Sept. 27, Sept. 28, Quarter 1997
1997 1996 as compared to 1996
---- ---- -------------------
Net sales 100.0% 100.0% ---%
Cost of products sold 74.8 73.3 (1.5)
Selling, general and
administrative expense 18.2 19.9 1.7
Operating earnings 7.0 6.8 .2
Interest expense (4.3) (2.9) (1.4)
Investment income 1.0 .5 .5
Earnings before provision
for income taxes 3.7 4.4 (.7)
Provision for income taxes 1.3 1.8 .5
---- ---- ----
Net earnings 2.4% 2.6% (.2)%
==== ==== ====
The tables below and on the next page set forth, for the periods presented,
(a) certain consolidated operating results, (b) the change in the amount
and the percentage change of such results as compared to the prior
comparable period, (c) the percentage which such results bears to net sales
and (d) the change of such percentages as compared to the prior comparable
period. The results of operations for the nine months ended September 27,
1997 are not necessarily indicative of the results of operations to be
expected for any other interim period or the full year.
Change in
Nine Months Ended Nine Months 1997
-----------------
Sept. 27, Sept. 28, as Compared to 1996
1997 1996 $ %
---- ---- ----- -----
(Dollar amounts in millions)
Net sales $797.0 $729.4 67.6 9.3
Cost of products sold 587.7 539.0 (48.7) (9.0)
Selling, general and
administrative expense 156.5 147.6 (8.9) (6.0)
Operating earnings 52.8 42.8 10.0 23.4
Interest expense (32.5) (22.8) (9.7) (42.5)
Investment income 7.7 4.1 3.6 87.8
Earnings before provision
for income taxes 28.0 24.1 3.9 16.2
Provision for income taxes 9.9 9.4 (.5) (5.3)
---- ----- ---- -----
Net earnings $18.1 $ 14.7 3.4 23.1
==== ===== ==== =====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
Change in
Percentage of Net Sales Percentage
Nine Months Ended for the Nine
----------------
Sept. 27, Sept. 28, Months 1997 as
1997 1996 Compared to 1996
---- ---- ----------------
Net sales 100.0% 100.0% ---%
Cost of products sold 73.8 73.9 .1
Selling, general and
administrative expense 19.6 20.2 .6
Operating earnings 6.6 5.9 .7
Interest expense (4.1) (3.1) (1.0)
Investment income 1.0 .6 .4
Earnings before provision
for income taxes 3.5 3.4 .1
Provision for income taxes 1.2 1.3 .1
---- ----- ---
Net earnings 2.3% 2.1% .2%
==== ===== ===
The following table presents the net sales for the Company's principal
product groups for the third quarter and nine months ended September 27,
1997 as compared to the third quarter and nine months ended September 28,
1996 and the amount and the percentage change of such results as compared
to the prior comparable period. Certain amounts in the table for the prior
periods have been reclassified to conform to the classifications for 1997.
Third Quarter Ended
---------------------------------------
Sept. 27, Sept. 28, Increase (Decrease)
-------------------
1997 1996 $ %
---- ---- ----- ------
(000's omitted)
Net Sales:
Residential Building
Products Group $102,618 $ 99,572 $ 3,046 3.1
Air Conditioning and
Heating Products Group 111,656 113,370 (1,714) (1.5)
Plumbing Products Group 30,290 35,285 (4,995) (14.2)
------- ------- ------ ----
Total, excluding
acquisition 244,564 248,227 (3,663) (1.5)
Windows, Doors and Siding
Group 55,343 --- 55,343 ---
Specialty Products &
Distribution Group 27,849 --- 27,849 ---
-------- -------- ------- ----
$327,756 $248,227 $79,529 32.0
======= ======= ====== ====
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
Nine Months Ended
---------------------------------------
Sept. 27, Sept. 28, Increase (Decrease)
-------------------
1997 1996 $ %
---- ---- ----- -----
(000's omitted)
Net Sales:
Residential Building
Products Group $308,268 $302,622 $ 5,646 1.9
Air Conditioning and
Heating Products Group 318,254 321,151 (2,897) (.9)
Plumbing Products Group 87,260 105,674 (18,414) (17.4)
------- ------- ------- -----
Total, excluding
acquisition 713,782 729,447 (15,665) (2.1)
Windows, Doors and Siding
Group 55,343 --- 55,343 ---
Specialty Products &
Distribution Group 27,849 --- 27,849 ---
------- ------- ------ ----
$796,974 $729,447 $67,527 9.3%
======= ======= ====== ====
Operating Results
Net sales increased approximately $79,600,000, or approximately 32.1%, (or
increased approximately $81,000,000, or approximately 32.6% excluding the
effect of foreign exchange) and increased approximately $67,500,000, or
approximately 9.3% (or increased approximately $72,300,000, or
approximately 9.9% excluding the effect of foreign exchange), for the third
quarter and the first nine months of 1997, respectively, as compared to
1996. Net sales increased principally as a result of the acquisition of
Ply Gem on August 26, 1997, which contributed approximately $83,200,000 in
the third quarter and first nine months. Excluding sales from the
acquisition, net sales decreased approximately $3,700,000, or 1.5% and
approximately $15,700,000, or 2.1%, for the third quarter and first nine
months of 1997, respectively, as compared to 1996. These decreases in both
periods are principally as a result of lower sales volume, including the
reduction of certain product line offerings (approximately $1,900,000 and
$5,800,000 of the decrease for the third quarter and first nine months,
respectively), within the Plumbing Products Group and to a lesser extent,
lower sales levels of commercial products by the Air Conditioning and
Heating Products Group's Canadian operations. These decreases were
partially offset by increased sales volume in the Residential Building
Products Group.
Cost of products sold as a percentage of net sales increased from
approximately 73.3% in the third quarter of 1996 to approximately 74.8% in
the third quarter of 1997, and decreased slightly from approximately 73.9%
in the first nine months of 1996 to approximately 73.8% in the first nine
months of 1997. Excluding the third quarter 1997 acquisitions, which have
a higher level of cost of sales than the overall group of businesses owned
prior to the acquisition, cost of products sold as a percentage of net
sales
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
decreased from approximately 73.3% to approximately 72.6% in the third
quarter of 1997 compared to 1996 and from approximately 73.9% to 73.0% in
the first nine months of 1997. These decreases in the percentages
principally resulted from a reduction in cost in the third quarter and
first nine months of 1997 of certain raw materials and components compared
to the third quarter and first nine months of 1996 and decreased labor as a
percentage of net sales in the Residential Building Products and Air
Conditioning and Heating Products Groups due to the increased volume of
higher margin products and improved efficiency. These decreases were
partially offset by increased overhead costs in the Plumbing Products Group
and the Company's European subsidiary, in part, reflecting lower sales
levels. Overall, changes in the cost of products sold as a percentage of
net sales for one period as compared to another period may reflect a number
of factors, including changes in the relative mix of products sold, the
effect of changes in sales prices, the unit cost of products sold and
changes in productivity levels. The overall increase in segment earnings
was due principally the factors noted above.
Selling, general and administrative expense as a percentage of net sales
decreased from approximately 19.9% in the third quarter of 1996 to
approximately 18.2% in the third quarter of 1997 and decreased from
approximately 20.2% in the first nine months of 1996 to approximately 19.6%
in the first nine months of 1997. Excluding the third quarter 1997
acquisitions, which have a lower level of selling, general and
administrative expense to net sales than the overall group of businesses
owned prior to the acquisition, selling, general and administrative expense
as a percentage of net sales increased from approximately 19.9% to
approximately 20.2% and from approximately 20.2% to approximately 20.6% in
the third quarter and first nine months of 1997, respectively, as compared
to 1996. The increase in the percentage in the third quarter and first
nine months of 1997 was primarily the result of higher unallocated expense
and lower sales in the Company's Plumbing Products Group, without a
proportionate decrease in expense in both periods.
Segment earnings were approximately $27,000,000 for the third quarter of
1997, as compared to approximately $18,800,000 for the third quarter of
1996, and approximately $63,600,000 for the first nine months of 1997 as
compared to approximately $51,700,000 for the first nine months of 1996.
The Ply Gem acquisition in late August 1997 contributed approximately
$5,200,000 to segment earnings for the third quarter and first nine months
of 1997. Segment earnings have been reduced by depreciation and amortization
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
expense of approximately $7,700,000 and approximately $5,400,000 for the
third quarter of 1997 and 1996, respectively, and approximately $19,400,000
and approximately $16,500,000 for the first nine months of 1997 and 1996,
respectively. The acquisition of Ply Gem contributed approximately
$2,000,000 of the increase in depreciation and amortization expense in
1997.
Earnings of foreign operations, consisting primarily of the results of
operations of the Company's Canadian and European subsidiaries, which
manufacture built-in ventilating products, increased to approximately 11.9%
of segment earnings in the third quarter of 1997 from approximately 3.7% of
such earnings in the third quarter of 1996 and to approximately 10.7% of
segment earnings in the first nine months of 1997 from approximately 10.2%
of such earnings in the first nine months of 1996. Sales and earnings
derived from the international market are subject to the risks of currency
fluctuations.
Operating earnings in the third quarter of 1997 increased approximately
$5,900,000, or approximately 34.7%, as compared to the third quarter of
1996 and increased approximately $10,000,000, or approximately 23.4%, for
the first nine months of 1997 as compared to 1996, primarily due to the
factors previously discussed.
Interest expense in the third quarter of 1997 increased approximately
$6,700,000, or approximately 91.8%, as compared to the third quarter of
1996, and increased approximately $9,700,000, or approximately 42.5% for
the first nine months of 1997, as compared to the first nine months of
1996, primarily as a result of the sale of $175,000,000 principal amount of
9 1/4% Notes in March 1997 and the sale of $310,000,000 principal amount of
9 1/8% Notes in August 1997. This increase was partially offset by the
refinancing of certain outstanding indebtedness of the Company's
subsidiaries primarily in the second quarter of 1997. (See Note B of the
Notes to the Unaudited Financial Statements included elsewhere herein.)
Investment income in the third quarter of 1997 increased approximately
$1,800,000, or approximately 138.5%, as compared to the third quarter of
1996, and increased approximately $3,600,000 or approximately 87.8% for the
first nine months of 1997, as compared to the first nine months of 1996,
principally due to higher average invested balances of short-term
investments and marketable securities, principally as a result of the
investment of a portion of the proceeds from the sale in March 1997 of the
9 1/4% Notes.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
The provision for income taxes was approximately $4,300,000 for the third
quarter of 1997, as compared to approximately $4,500,000 for the third
quarter of 1996 and was approximately $9,900,000 for the first nine months
of 1997, as compared to approximately $9,400,000 for the first nine months
of 1996. The income tax rates principally differed from the United States
Federal statutory rate of 35%, as a result of state income tax provisions,
nondeductible amortization expense (for tax purposes), changes in tax
tax reserves, the effect of foreign income tax on foreign source
income and the effect of product development tax credits from foreign
operations in both periods. (See Note E of the Notes to the Unaudited
Financial Statements included elsewhere herein.)
Liquidity and Capital Resources
- -------------------------------
On August 26, 1997, a wholly-owned subsidiary of the Company, completed the
acquisition of Ply Gem Industries, Inc. ("Ply Gem") in a tender offer for a
cash price of $19.50 per outstanding share of common stock. Net cash paid
for the acquisition of Ply Gem, including expenses and settlement of stock
options, was approximately $387,000,000 at September 27, 1997. Accrued
payments in connection with this acquisition are estimated to be
approximately $33,000,000, including approximately $19,400,000 of amounts
due to former shareholders of Ply Gem included in accrued expenses in the
accompanying unaudited condensed consolidated balance sheet at September
27, 1997. On August 26, 1997, prior to the acquisition, Ply Gem refinanced
approximately $108,900,000 of its existing indebtedness.
On August 26, 1997, the Company sold approximately $310,000,000 principal
amount of 9 1/8% Notes due 2007 for approximately $298,269,000, net of a
discount of approximately $2,505,000 and approximately $9,226,000 of
expenses incurred in connection with the sale. The Company used a portion
of these net proceeds, together with available cash, to purchase the shares
of Ply Gem, to fund an approximate $45,000,000 payment to terminate Ply
Gem's existing accounts receivable securitization program and to pay
certain fees and expenses.
In March 1997, the Company sold $175,000,000 principal amount of 9 1/4%
Notes due 2007 for approximately $169,395,000, net of a discount of
approximately $1,011,000 and approximately $4,594,000 of expenses incurred
in connection with the sale. The net proceeds of this offering were used
to refinance certain outstanding indebtedness of the Company's subsidiaries
and for acquisitions and other general corporate purposes. (See Note B of
the Notes to the Unaudited Condensed Consolidated Financial Statements
included elsewhere herein).
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
Unrestricted cash, investments and marketable securities increased
approximately $61,602,000 from December 31, 1996 to September 27, 1997,
primarily as the result of the investment of the net proceeds from the sale
of the 9 1/4% and the 9 1/8% Notes, net of cash paid in connection with the
acquisition of Ply Gem as described above, and an increase of approximately
$12,111,000 from the operations of Ply Gem.
The Company's investment in marketable securities at September 27, 1997
consisted primarily of investments in bank issued money market instruments,
commercial paper and United States Treasury securities. At September 27,
1997, approximately $6,952,000 of the Company's cash and investments were
pledged as collateral for insurance and other requirements and were
classified as restricted in current assets in the Company's accompanying
unaudited condensed consolidated balance sheet.
The Company's Board of Directors has authorized a number of programs to
purchase shares of the Company's Common and Special Common Stock since
November 16, 1995. The most recent of these programs was announced on April
30, 1997, to purchase up to 500,000 shares of the Company's Common and
Special Common Stock in open-market or negotiated transactions subject to
market conditions, cash availability and provisions of the Company's
outstanding debt instruments. As of October 31, 1997, the Company has
purchased approximately 86,833 shares of the Company's Common Stock and
Special Common Stock for approximately $2,100,000 under this latest
program. From November 16, 1995 to October 31, 1997, the Company purchased
approximately 2,900,000 shares of its Common and Special Common Stock for
approximately $45,900,000 and accounted for such share purchases as
Treasury Stock. (See below and Note C of the Notes to the Unaudited
Condensed Consolidated Financial Statements included elsewhere herein.)
At October 31, 1997, approximately $6,924,000 was available for the payment
of cash dividends or stock payments under the terms of the Company's most
restrictive Indenture.
The Company's working capital and current ratio increased from
approximately $143,474,000 and 1.7:1, respectively, to approximately
$331,125,000 and 2.1:1, respectively, between December 31, 1996 and
September 27, 1997. The increase was principally the result of the
acquisition of Ply Gem, which contributed approximately $205,909,000 of
current assets and approximately $113,598,000 of current liabilities and an
increase in unrestricted cash, investments and marketable securities from
approximately $92,093,000 at December 31, 1996 to approximately
$153,695,000 at September 27, 1997, arising in part from the sales of Notes
in 1997.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
Accounts receivable increased approximately $99,956,000, or approximately
81.8%, between December 31, 1996 and September 27, 1997, while net sales
increased approximately 36.4% in the third quarter of 1997 as compared to
the fourth quarter of 1996. The increase in accounts receivable and net
sales was principally due to approximately $84,665,000 and $83,192,000,
respectively, from the acquisition of Ply Gem. The rate of change in
accounts receivable in certain periods may be different than the rate of
change in sales in such periods principally due to the timing of net sales.
Increases or decreases in net sales near the end of any period generally
result in significant changes in the amount of accounts receivable on the
date of the balance sheet at the end of such period, as was the situation
on September 27, 1997 as compared to December 31, 1996. The Company has
not experienced any changes in credit terms, collection efforts, credit
utilization or delinquency in accounts receivable in 1996 or 1997.
Inventories increased approximately $93,743,000 or approximately 96.0%,
between December 31, 1996 and September 27, 1997, including approximately
$92,234,000 from the acquisition of Ply Gem.
Accounts payable increased approximately $37,552,000 or approximately 50.1%
between December 31, 1996 and September 27, 1997, including approximately
$33,668,000 from the acquisition of Ply Gem.
Unrestricted cash and cash equivalents increased approximately $8,033,000
from December 31, 1996 to September 27, 1997, principally as a result of
the following:
Condensed
Consolidated
Cash Flows
----------
Operating Activities--
Cash flow from operations, net $ 35,291,000
Increase in accounts receivable, net (15,436,000)
Increase in inventories (1,484,000)
Decrease in prepaids and other current assets 3,605,000
Decrease in trade accounts payable (4,097,000)
Increase in accrued expenses and taxes 21,597,000
Investing Activities--
Net cash paid for a business acquired (386,952,000)
Purchase of marketable securities (238,199,000)
Proceeds from the sale of marketable securities 183,329,000
Capital expenditures (14,861,000)
Financing Activities--
Sale of notes 467,663,000
Increase in borrowing 4,967,000
Payment of borrowings (32,634,000)
Purchase of Nortek Common and Special
Common Stock (8,824,000)
Other, net (5,932,000)
-----------
$ 8,033,000
===========
The net non-cash impact of changes in foreign currency exchange rates was
not material and has been included in other, net.
The Company's debt-to-equity ratio increased from approximately 2.4:1 at
December 31, 1996 to 6.7:1 at September 27, 1997, primarily as a result of
the sale of the 9 1/4% and the 9 1/8% Notes , increased indebtedness of
approximately $128,529,000 from the acquisition of Ply Gem and the effect
of the purchase of the Company's Common and Special Common Stock (see Note
C of the Notes to Unaudited Condensed Consolidated Financial Statements),
partially offset by the payment of certain subsidiary indebtedness and by
net earnings for the first nine months of 1997. (See the Company's
Unaudited Condensed Consolidated Statement of Stockholders' Investment
included elsewhere herein.)
The Company believes that its growth will be generated largely by internal
growth, augmented by strategic acquisitions. The Company regularly
evaluates potential acquisitions which would increase or expand the market
penetration of, or otherwise complement, its current product lines.
NORTEK, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 27, 1997
AND THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 28, 1996
(Continued)
When used in this discussion, the words "believes," "anticipates," and
"expects" and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and
uncertainties, over which the Company has no control, which could cause
actual results to differ materially from those presented. These risks and
uncertainties include increases in raw material costs (including, among
others, steel, copper, packaging material, plastics, resins, glass, wood
and aluminum) and purchased component costs, the level of domestic and
foreign construction and remodeling activity affecting residential and
commercial markets, interest rates, inflation, consumer spending levels,
operating in international economies, the rate of sales growth, price and
product competition, new product introduction, material shortages and
product liability claims. Readers are cautioned not to place undue
reliance on these forward-looking statements which speak only as of the
date hereof. The Company undertakes no obligation to republish revised
forward-looking statements to reflect events or circumstances after the
date thereof or to reflect the occurrence of unanticipated events. Readers
are also urged to carefully review and consider the various disclosures
made by the Company, in this report, as well as the Company's periodic
reports on Forms 10-K, 10-Q and 8-K filed with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10.1 Amended and Restated Credit Agreement dated as of
August 26, 1997 among Ply Gem Industries, Inc.,
certain Designated Subsidiaries, certain banks and
Fleet National Bank as Agent (filed herewith).
11.1 Calculation of shares used in determining earnings
per share (filed herewith).
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K
The following reports on Form 8-K were filed by the
Registrant during the period:
July 29, 1997, Item 5. Other Events and Item 7.
Financial Statements, Pro Forma Financial
Information and Exhibits.
August 27, 1997, Item 5. Other Events and Item 7.
Exhibits.
September 10, 1997, Item 2, Acquisition or
Disposition of Assets and Item 7. Financial
Statements, Pro Forma Financial Information and
Exhibits.
September 12, 1997 (8-K/A), Item 7. Financial
Statements.
SIGNATURE
Pursuant to the requirements 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.
NORTEK, INC.
(Registrant)
/s/ Almon C. Hall
---------------------------------
Almon C. Hall, Vice President and
Controller and Chief Accounting Officer
November 12, 1997
- -------------------------
(Date)
<TABLE>
<CAPTION>
EXHIBIT 11.1
(Page 1 of 2)
NORTEK, INC. AND SUBSIDIARIES
CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE
<S> <C> <C>
For the Three Months Ended
--------------------------
Sept. 27, Sept. 28,
1997 1996
---- ----
Calculation of the number of shares to be
used in computing primary earnings per share:
Weighted average common and special common
shares issued during the period 16,802,856 16,674,636
Less average common and special common shares
held in the Treasury (7,233,568) (6,700,804)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 9,569,288 9,973,832
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 271,662 188,061
--------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 9,840,950 10,161,893
========= ==========
Calculation of the number of shares to be used
in computing fully diluted earnings per share:
Weighted average number of common and special
common shares outstanding during the period 9,569,288 9,973,832
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the greater of
the price at the end of the period or the
average price during the period 271,662 195,067
--------- ----------
9,840,950 10,168,899
========= ==========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 11.1
(Page 2 of 2)
NORTEK, INC. AND SUBSIDIARIES
CALCULATION OF SHARES USED IN DETERMINING EARNINGS PER SHARE
<S> <C> <C>
For the Nine Months Ended
--------------------------
Sept. 27, Sept. 28,
1997 1996
---- ----
Calculation of the number of shares to be
used in computing primary earnings per share:
Weighted average common and special common
shares issued during the period 16,791,580 17,362,207
Less average common and special common shares
held in the Treasury (7,159,983) (6,700,804)
---------- ----------
Weighted average number of common and special
common shares outstanding during the period 9,631,597 10,661,403
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the average
price during the period 246,254 183,172
--------- ----------
Weighted average number of common and common
equivalent shares outstanding during the
period 9,877,851 10,844,575
========= ==========
Calculation of the number of shares to be used
in computing fully diluted earnings per share:
Weighted average number of common and special
common shares outstanding during the period 9,631,597 10,661,403
Dilutive effect of stock options considered
common stock equivalents computed under the
treasury stock method using the greater of
the price at the end of the period or the
average price during the period 280,093 198,046
--------- ----------
9,911,690 10,859,449
========= ==========
</TABLE>
<PAGE>
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0
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</TABLE>
AMENDED AND RESTATED CREDIT AGREEMENT, dated as of
August 26, 1997, among PLY GEM INDUSTRIES, INC., a Delaware
corporation (the "Company");
the Designated Subsidiaries from time to time
party hereto;
the Banks from time to time party hereto; and
FLEET NATIONAL BANK ("Fleet"), as agent for the
Banks (in such capacity, together with its successors in
such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Company and certain of the Designated
Subsidiaries (the "Existing Designated Subsidiaries") are
borrowers under a Credit Agreement, dated February 24, 1994
(as heretofore amended, the "Existing Credit Agreement"),
with the lenders party thereto (the "Existing Banks"), the
Co-Agents named therein and Fleet, as successor to National
Westminster Bank USA, as agent for the Existing Banks, which
provides, among other things, for the making of revolving
credit loans to the Company and the Existing Designated
Subsidiaries in an aggregate principal amount not to exceed
$200,000,000 at any time outstanding;
WHEREAS, Nortek, Inc., a Delaware corporation
("Nortek"), has organized a single-purpose, wholly-owned
subsidiary (the "Purchaser") that, pursuant to a merger
agreement entered into with the Company (as amended,
supplemented or otherwise modified from time to time in
accordance with its terms, to the extent permitted in
accordance with the Loan Documents, 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;
WHEREAS, the Company has requested that the
Existing Credit Agreement be amended and restated in
connection with the closing of the Tender Offer to provide,
among other things, for a term loan and letters of credit;
WHEREAS, the proceeds of the term loan will be
used to refinance certain existing debt of the Company and
the Existing Designated Subsidiaries under the Existing
Credit Agreement;
WHEREAS, the Banks have agreed to amend and
restate the Existing Credit Agreement and to make the
requested term loan and to maintain certain letters of
credit, in each case on the terms and conditions of this
Agreement;
WHEREAS, this Agreement shall constitute the "Ply
Gem Credit Facility" for purposes of that certain Nortek
Indenture described in clause (c) of the definition thereof
in subsection 1.1;
WHEREAS, simultaneously with the execution hereof
the Existing Banks have entered into an Assignment and
Agreement in the form of Exhibit B attached hereto dated as
of the date hereof (the "Assignment Agreement"), with the
Agent and the Banks hereunder pursuant to which such
Existing Banks have agreed to sell and assign to the Banks
and the Banks have agreed to purchase and assume, as of the
Closing Date, all of the Existing Banks' rights and
obligations under the Existing Credit Agreement as of the
Closing Date on the terms set forth in the Assignment
Agreement; and
WHEREAS, after giving effect to the Assignment
Agreement, the Commitments and Commitment Percentages of,
and the amount of Loans owing to, each of the Banks will be
as set forth on Schedule I.
NOW, THEREFORE, in consideration of the premises
and the mutual covenants herein contained, the parties to
this Agreement hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement,
the following terms shall have the following respective
meanings (such definitions to be equally applicable to the
singular and plural forms thereof):
"Additional Subsidiary Grantors" shall mean each
of (a) Continental Wood Preservers, Inc., a Michigan
corporation, (b) SNE Enterprises Texas, Inc., a Delaware
corporation, (c) SNE Special Services, Inc., a Delaware
corporation, and (d) SNE Transportation Company, Inc., a
Wisconsin corporation.
"Account Party" shall mean with respect to each
L/C, the Company or any Designated Subsidiary, as the case
may be, in its capacity as the Person for the account of
which such L/C is issued or deemed issued.
"Affiliate" of any Person shall mean (a) any other
Person (other than a Subsidiary) which, directly or
indirectly, is in control of, is controlled by, or is under
common control with such Person, or (b) any other Person who
is a director or officer (i) of such Person, (ii) of any
Subsidiary of such Person or (iii) of any Person described
in clause (a) above. For purposes of this definition,
control of a Person shall mean the power, direct or
indirect, (i) to vote 10% or more of the securities having
ordinary voting power for the election of directors of such
Person, or (ii) to direct or cause the direction of the
management and policies of such Person, whether by contract
or otherwise.
"Agent" shall have the meaning ascribed thereto in
the preamble hereto.
"Agreement" shall mean this Amended and Restated
Credit Agreement, as amended, supplemented or otherwise
modified from time to time.
"Applicable Margin" shall mean, for any day for
any Type of Loan, the relevant rate per annum for such Type
of Loan as determined by reference to the applicable ratio
of Senior Funded Debt to Consolidated EBITDA set forth in
the table below:
Ratio Prime Rate Loans Eurodollar Loans
Level I 3.25:1.00 or greater 0.0% 0.950%
Level II 3.00:1.00 or greater
but less than
3.25:1.00 0.0% 0.725%
Level III 2.50:1.00 or greater
but less than
3.00:1.00 0.0% 0.625%
Level IV 2.00:1.00 or greater
but less than
2.50:1.00 0.0% 0.525%
Level V 1.50:1.00 or greater
but less than
2.00:1.00 0.0% 0.400%
Level VI less than 1.50:1.00 0.0% 0.300%
The determination of the Applicable Margin
pursuant to the table set forth above shall be made on
a quarterly basis based on an examination of the
consolidated financial statements of the Company and
its Subsidiaries delivered pursuant to and in
compliance with subsection 5.1; provided, however, that
the initial Applicable Margin shall be at Level II in
such table from the date hereof until such time as
audited annual consolidated financial statements of the
Company and its Subsidiaries indicating an Applicable
Margin at a different Level in such table are first
delivered to the Agent and the Banks pursuant to and in
compliance with subsection 5.1. Each change in the
Applicable Margin shall be effective as of the first
day of the calendar month following the date of the
Company's financial statements reflecting any change in
the ratio of Senior Funded Debt to Consolidated EBITDA.
In the event that financial statements for the four
fiscal quarters most recently completed prior to such
date of determination either: (a) have not been
delivered to the Agent in compliance with subsection
5.1, or (b) if delivered, do not comply in form or
substance with subsection 5.1, then the Agent may
determine, in its reasonable judgment, the ratio of
Senior Funded Debt to Consolidated EBITDA referred to
above that would have been in effect as at such date,
and, consequently, the Applicable Margin in effect for
the period commencing on such date.
"Application" shall mean any agreement in
form and substance satisfactory to Fleet between Fleet,
as issuing bank, and any Account Party in respect of
the issuance of an L/C.
"Asset Sale" shall mean any sale or other
disposition by the Company or any of the Subsidiaries
(whether in one sale or a series of related sales) of
any business unit or units (including, without
limitation, any Non-Core Subsidiary) or any product
line or group of product lines (whether pursuant to a
sale of stock or sale of assets).
"Assignment Agreement" shall have the meaning
ascribed thereto in the preamble hereto.
"Assignment and Acceptance" shall mean an
agreement in the form of Exhibit E hereto.
"Available Commitment" shall mean, as to each
Bank, at a particular time, an amount equal to the
difference between (a) the amount of such Bank's
Commitment at such time and (b) the aggregate unpaid
principal amount at such time of (i) all Loans made by
such Bank pursuant to subsection and (ii) such Bank's
Commitment Percentage of Bank L/C Obligations.
"Available L/C Commitment" at any date shall
mean the lesser of (a) the difference between the L/C
Sublimit and the Specified L/C Obligations at such date
and (b) the Available Commitments.
"Banks" shall mean the Initial Banks and each
Person that shall become a Bank hereunder pursuant to
subsection 9.7.
"Bank L/C Obligations" at any date shall mean
the sum of (a) the aggregate undrawn amount at such
date of all L/Cs issued or deemed issued by Fleet
pursuant to this Agreement, plus (b) the amount of all
Unpaid Drawings relating to such L/Cs.
"Business Day" shall mean a day other than a
Saturday, Sunday or other day on which commercial banks
in Boston, Massachusetts are authorized or required by
law to close.
"Business of the Company" shall mean (a) the
businesses described in the Company's Form 10-K for the
year ended December 31, 1996 and the Company's 1996
Annual Report to Stockholders and (b) other businesses
related to, or growing out of, such businesses.
"Capital Expenditures" shall mean, during any
period, the amount of additions to property, plant and
equipment for such period as shown on the consolidated
financial statements of the Company and its
Subsidiaries for such period prepared in accordance
with GAAP, net of Financing Leases.
"Cash Equivalents" shall mean (a) securities
with maturities of one year or less from the date of
acquisition issued or directly and fully guaranteed or
insured by the United States Government or any agency
or instrumentality thereof, (b) certificates of
deposit, acceptances and Eurodollar time deposits with
maturities of one year or less from the date of
acquisition and overnight or demand bank deposits of
any Bank and certificates of deposit with maturities of
one year or less from the date of acquisition and
overnight or demand bank deposits of any other
commercial bank having capital and surplus in excess of
$500,000,000, the holding company of which has a
commercial paper rating meeting the requirements
specified in clause (d) below, (c) repurchase
obligations with a term of not more than 7 days for
underlying securities of the types described in clauses
(a) and (b) entered into with any bank meeting the
qualifications specified in clause (b) above, and (d)
commercial paper of a domestic issuer rated at least A-
2 or the equivalent thereof by Standard & Poor's, a
division of The McGraw-Hill Companies, Inc. or P-2 or
the equivalent thereof by Moody's Investors Service,
Inc.
"CERCLA" shall mean the Comprehensive
Environmental Response, Compensation and Liability Act
of 1980, 42 U.S.C. 9601, et seq., as amended from time
to time.
"Change of Control" shall occur when (a) any
person or group of related persons, excluding Permitted
Shareholders, gains beneficial ownership of a majority
in voting interest of the outstanding voting stock of
the Company or has caused to be elected a majority of
the Board of Directors of the Company against the
wishes of a majority of the voting interest held by
Permitted Shareholders; or (b) all or substantially all
of the assets of the Company are sold or liquidated.
"Closing Date" shall mean the date on which
each of the conditions precedent in Section 4 shall
have been satisfied or duly waived.
"Code" shall mean the Internal Revenue Code
of 1986, as amended from time to time.
"Collateral Grantor" shall have the meaning
ascribed thereto in subsection 2.21.
"Commitment" shall mean, as to any Bank, its
obligation to make Loans pursuant to subsection 2.1 and
participate in L/Cs in an aggregate amount not to exceed at any
one time outstanding the amount set forth on Schedule I under
the heading "Commitment", as such amount may be
adjusted from time to time pursuant to subsection 2.6,
2.8 or 9.7; and, as to Fleet in its capacity as issuing
bank, its obligation to maintain L/Cs in an aggregate
amount not to exceed at any time outstanding the L/C
Sublimit, as such amount may be reduced from time to
time pursuant to subsection 2.6.
"Commitment Percentage" as to any Bank, shall
mean the percentage set forth on Schedule I under the
heading "Commitment Percentage" as such percentage may
increase or decrease from time to time pursuant to
subsection 9.7.
"Commonly Controlled Entity" shall mean an
entity, whether or not incorporated, which is under
common control with the Company or any Subsidiary
within the meaning of Section 4001(a)(14) of ERISA or
Code Section 414(m) or 414(o).
"Company" shall have the meaning ascribed
thereto in the preamble hereto.
"Consolidated Current Assets" shall mean, at
any date, the amount which, in conformity with GAAP,
would be set forth opposite the caption "total current
assets" (or any like caption) on a consolidated balance
sheet of the Company and its consolidated Subsidiaries
as at such date.
"Consolidated Current Liabilities" shall
mean, at any date, the amount which, in conformity with
GAAP, would be set forth opposite the caption "total
current liabilities" (or any like caption) on a
consolidated balance sheet of the Company and its
consolidated Subsidiaries as at such date; provided,
however, that the Loans, the L/Cs and any current
liabilities resulting from the transactions
contemplated by the Merger Agreement shall at all times
be excluded from the definition of Consolidated Current
Liabilities.
"Consolidated EBIT" shall mean, for any
period, the sum of (a) Consolidated Net Income for such
period, plus (b) all taxes based upon income deducted
in calculating such Consolidated Net Income plus (c),
to the extent deducted in calculating Consolidated Net
Income, Consolidated Interest Expense and consolidated
amortization of Debt Discount and of expenses incurred
in connection with the incurrence of Indebtedness for
such period, plus (d) all extraordinary losses and the
unusual losses set forth in clauses (i) through (ix)
below in each case to the extent deducted in
calculating Consolidated Net Income, minus (e) all
extraordinary gains and the unusual gains set forth in
clauses (i) through (ix) below in each case to the
extent included in calculating Consolidated Net Income:
(i) gain or loss arising from the sale, abandonment or
other disposition of any property or asset outside of
the ordinary course of business or realized on the
disposition of a segment of a business; (ii) gain or
loss resulting from any extinguishments of debt; (iii)
gain or loss resulting from a casualty, including but
not limited to fire, earthquake or hurricane; (iv) loss
resulting from write-off of intangible assets; (v) gain
arising from the write-up in the book value of any
asset; (vi) provisions for plant closings and
realignment of operations or restructuring costs; (vii)
cumulative effects of changes in accounting principles;
(viii) losses from expropriation or condemnation; and
(ix) gain or loss arising from a change from FIFO to
LIFO inventory accounting.
"Consolidated EBITDA" shall mean, for any
period, the sum of (a) Consolidated EBIT, plus (b)
depreciation expense plus (c)
amortization expense, in each case of the Company and
its Subsidiaries determined on a consolidated basis in
accordance with GAAP for such period.
"Consolidated Interest Expense" shall mean,
for any period, (a) the aggregate amount of all
interest charges paid or accrued during such period
(including imputed interest on obligations consisting
of Financing Leases and all amounts accrued or paid
pursuant to Hedge Agreements but excluding amortization
of Debt Discount and of expenses incurred in connection
with the incurrence of Indebtedness) on Indebtedness of
the Company and its consolidated Subsidiaries, minus
(b) the sum of (i) interest income and (ii) all amounts
received or receivable pursuant to Hedge Agreements, in
each case of the Company and its Subsidiaries
determined on a consolidated basis.
"Consolidated Net Income" shall mean, for any
period, the amount which, in conformity with GAAP,
would be set opposite the caption "net income" (or any
like caption) on a consolidated statement of income of
the Company and its consolidated Subsidiaries for such
period.
"Consolidated Net Worth" shall mean, at a
particular date, (a) all amounts which would, in
conformity with GAAP, be included under stockholders'
equity on a consolidated balance sheet of the Company
and its consolidated Subsidiaries at such date, plus
(b) any unrealized losses to the extent reflected in
the calculation of stockholders' equity, minus (c) the
sum of (i) any unrealized gains to the extent reflected
in the calculation of shareholders' equity, and (ii)
any investments made by the Company or any of its
Subsidiaries in Nortek or any of its Subsidiaries
(other than Subsidiaries consisting of the Company or
any of its Subsidiaries).
"Contingent Obligation" as to any Person
shall mean any obligation of such Person guaranteeing
or in effect guaranteeing any Indebtedness, leases,
dividends or other contractual obligations ("primary
obligations") of any other Person (the "primary
obligor") in any manner, whether directly or
indirectly, including, without limitation, any
obligation of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any
property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the
purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net
worth or solvency of the primary obligor, (c) to
purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to
make payment of such primary obligation or (d)
otherwise to assure or hold harmless the owner of such
primary obligation against loss in respect thereof;
provided, however, that the term Contingent Obligation
shall not include endorsements of instruments for
deposit or collection in the ordinary course of
business. The amount of any Contingent Obligation
shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in
respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined
by such Person in good faith.
"Contractual Obligation" of any Person shall
mean any provision of any security issued by such
Person or of any agreement, instrument or undertaking
to which such Person is a party or by which it or any
of its property is bound (including, without
limitation, in the case of each of the Loan Parties and
their respective Subsidiaries, the Nortek Indentures).
"Debt Discount" shall mean debt discount with
respect to Subordinated Indebtedness permitted by the
provisions hereof.
"Default" shall mean any of the events
specified in Section 7, whether or not any requirement
for the giving of notice, the lapse of time, or both,
or any other condition, has been satisfied.
"Designated Subsidiary" shall mean,
initially, each of the following Subsidiaries:
Sagebrush Sales, Inc., a New Mexico corporation; SNE
Enterprises, Inc., a Delaware corporation; Variform,
Inc., a Missouri corporation; and Great Lakes Window,
Inc., an Ohio corporation. Subject to the reasonable
approval of the Agent and all of the Banks with respect
to the financial condition and maximum borrowing limit
of a Subsidiary, the Company may at any time designate
as a Designated Subsidiary any whollyowned Material
Operating Subsidiary which is not then a Designated
Subsidiary by notice to the Agent, provided that the
Company contemporaneously delivers to the Agent a
Solvency Certificate with respect to such Subsidiary
and causes such Subsidiary to deliver to the Agent duly
executed Notes payable to the order of the Banks, a
duly executed Guaranty and a duly executed Security
Agreement supplement, each in form and substance
satisfactory to the Agent, and provided further that
each Designated Subsidiary shall be a wholly-owned
Subsidiary of the Company so long as it is a Designated
Subsidiary. The Company may at any time remove any
Subsidiary from the list of Designated Subsidiaries by
notice to the Agent, effective, however, only upon (a)
payment in full of any Obligations owed to the Agent
and the Banks hereunder by such Designated Subsidiary
and the expiration or other termination of any L/C with
respect to which such Designated Subsidiary is the
Account Party or (b) subject to the consent of the
Agent and the Required Banks (such consent not to be
unreasonably withheld), the assumption, in a writing
satisfactory in form and substance to the Agent, by the
Company or another Designated Subsidiary of any
obligations not so paid, so long as such assumption
shall not violate any provision of the Nortek
Indentures or any other indenture or agreement binding
upon the Company or any of its Subsidiaries, provided
that, concurrently with such assumption, the Company
shall certify, and shall furnish an opinion of counsel,
in each case to the Agent and the Banks, to the effect
that such assumption does not violate the Nortek
Indentures or any other indenture or agreement binding
on the Company or any of its Subsidiaries and otherwise
in form and substance satisfactory to the Agent. Any
representation, warranty or covenant in this Agreement
applicable at any time to the Designated Subsidiaries
shall be deemed applicable to those Subsidiaries which,
at such time, are Designated Subsidiaries as defined
herein.
"Designated Subsidiary Borrowing Limit" shall
mean, initially, the following amounts for the
indicated Subsidiaries:
Designated Subsidiaries Borrowing Limit
Sagebrush Sales, Inc. $ 6,000,000
SNE Enterprises, Inc. $ 45,000,000
Variform, Inc. $ 49,000,000
Great Lakes Window, Inc. $ 30,000,000
The Designated Subsidiary Borrowing Limit for any
Designated Subsidiary may be increased from time to
time up to an amount not to exceed the aggregate
amount of the Commitments at such time, subject to the
consent of the Company and the Agent and so long as
such increase shall not violate any provision of the
Nortek Indentures or any other indenture or agreement
binding upon the
Company or any of its Subsidiaries, provided that,
concurrently with such increase, the Company shall
certify, and shall furnish an opinion of counsel, in
each case to the Agent and the Banks, to the effect
that such increase does not violate the Nortek
Indentures or any other indenture or agreement binding
on the Company or any of its Subsidiaries and otherwise
in form and substance satisfactory to the Agent.
"Disposal" shall mean the discharge, deposit,
injection, dumping, spilling, leaking or placing of any
hazardous materials into or on any land or water so
that such hazardous materials or constituent thereof
may enter the environment or be emitted into the air or
discharged into any waters, including ground waters.
"Dollars" and "$" shall mean dollars in
lawful currency of the United States of America.
"Domestic Lending Office," shall mean,
initially, the office of each Bank designated as such
on Schedule I under the heading "Domestic Lending
Office and Address for Notices"; thereafter, such other
office of such Bank, if any, which shall be making or
maintaining Loans.
"Drawing Fee" shall have the meaning ascribed
thereto in subsection 2.1(c)(v).
"Eligible Assignee" shall mean (a) any Bank
and any entity controlled by or under common control
with such Bank and (b) a commercial bank having a
combined capital and surplus of at least $500,000,000,
in either case which does not, either directly or
indirectly, engage in business competitive with the
business of the Company or any of its Subsidiaries and
to which the Company and the Agent shall have
consented, such consent not to be unreasonably
withheld.
"Eligible Participant" shall mean (a) any
entity controlled by or under common control with any
Bank and (b) a commercial bank having a combined
capital and surplus of at least $200,000,000, in either
case, which does not, either directly or indirectly,
engage in business competitive with the business of the
Company or any of its Subsidiaries.
"Environmental Laws and Regulations" shall
mean all federal, state and local, environmental,
health and safety laws, regulations, ordinances,
orders, judgments and decrees applicable to the Company
or any Subsidiary, or any of their respective assets or
properties.
"Environmental Liability" shall mean any
liability under any applicable Environmental Laws and
Regulations for any Disposal, Release or threatened
Release of a Hazardous Substance, pollutant or
contaminant as those terms are defined under CERCLA and
any liability which would require a removal, remedial
or response action, as those terms are defined under
CERCLA, by any Person or any environmental regulatory
body having jurisdiction over the Company or any other
Subsidiary, and/or any liability arising under any
Environmental Laws and Regulations for the Company's or
any other Subsidiary's failure to comply with such laws
and regulations including, without limitation, the
failure to comply with or obtain any applicable
environmental permit.
"Environmental Proceeding" shall mean any
judgment, action or proceeding pending before any court
or other Governmental Authority or any notice, demand
or order, with respect to the Company or any Subsidiary
and arising under or relating to any Environmental Laws
and Regulations.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Eurocurrency Reserve Requirements" for any
day after the Closing Date as applied to a Eurodollar
Loan shall mean the aggregate (without duplication) of
the rates (expressed as a decimal) of reserve
requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency
reserves under any regulations of the Board of
Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect
thereto), dealing with reserve requirements prescribed
for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D) maintained
by a member bank of such System. The Banks confirm to
the Company and the Designated Subsidiaries that no
Eurocurrency Reserve Requirements exist as of the date
hereof.
"Eurodollar Rate" shall mean, for any day
during the Interest Period for any Eurodollar Loan, an
interest rate per annum equal to the rate per annum
(rounded upward, if necessary, to the nearest l/100 of
one percent) obtained by dividing (a) the rate per
annum at which deposits in U.S. dollars are offered in
London, England to prime banks in the London interbank
market, as set forth on the "LIBO" page on the Reuters
Monitor Money Rates Service screen, at 11:00 A.M.
(London time) two Business Days before the first day of
such Interest Period in an amount substantially equal
to Fleet's Eurodollar Loan to be outstanding during
such Interest Period (or, if Fleet shall not have such
a Eurodollar Loan, $1,000,000) and for a period equal
to such Interest Period by (b) a percentage equal to
one minus the Eurocurrency Reserve Requirements for
such day.
"Eurodollar Lending Office" shall mean, with
respect to each Bank, initially, the office of such
Bank designated as such on Schedule I under the heading
"Eurodollar Lending Office"; thereafter, such other
office of such Bank, if any, which shall be making or
maintaining Eurodollar Loans.
"Eurodollar Loans" shall mean Loans hereunder
at such time as they bear interest based upon the
Eurodollar Rate.
"Event of Default" shall mean any of the
events specified in Section 7, provided that any
requirement for the giving of notice, the lapse of
time, or both, or any other condition, has been
satisfied.
"Existing Banks" shall have the meaning
ascribed thereto in the preamble hereto.
"Existing Designated Subsidiaries" shall have
the meaning ascribed thereto in the preamble hereto.
"Facility Fee" shall mean at any time of
determination a fee equal to the relevant annual fee
percentage determined by reference to the applicable
ratio of Senior Funded Debt to Consolidated EBITDA set
forth in the table below multiplied by the aggregate
amount of the Commitments at such time (whether used or
unused):
Ratio Annual Percentage Fee
Level I 3.25:1.00 or greater 0.300%
Level II 3.00:1.00 or greater but less
than 3.25:1.00 0.275%
Level III 2.50:1.00 or greater but less
than 3.00:1.00 0.250%
Level IV 2.00:1.00 or greater but less
than 2.50:1.00 0.225%
Level V 1.50:1.00 or greater but less
than 2.00:1.00 0.225%
Level VI less than 1.50:1.00 0.200%
The determination of the applicable fee
pursuant to the table set forth above shall be made on
a quarterly basis based on an examination of the
consolidated financial statements of the Company and
its Subsidiaries delivered pursuant to and in
compliance with subsection 5.1; provided, however, that
the initial Facility Fee shall be at Level II in such
table until such time as audited annual consolidated
financial statements of the Company and its
Subsidiaries indicating a Facility Fee at a different
Level in such table are first delivered to the Agent
and the Banks pursuant to and in compliance with
subsection 5.1. Each change in the Facility Fee shall
be effective as of the first day of the calendar month
following the date of the Company's financial
statements reflecting any change in the ratio of Senior
Funded Debt to Consolidated EBITDA. In the event that
financial statements for the four fiscal quarters most
recently completed prior to such date of determination
either: (a) have not been delivered to the Agent in
compliance with subsection 5.1, or (b) if delivered, do
not comply in form or substance with subsection 5.1,
then the Agent may determine, in its reasonable
judgment, the ratio of Senior Funded Debt to
Consolidated EBITDA referred to above that would have
been in effect as at such date, and, consequently, the
Facility Fee in effect for the period commencing on
such date.
"Federal Funds Rate" means, for any period, a
fluctuating interest rate per annum equal for each day
during such period to the weighted average of the rates
on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business
Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a
Business Day, the average of the quotations for such
day for such transactions received by the Agent from
three Federal funds brokers of recognized standing
selected by it.
"Fee Letter" shall mean the letter agreement
between the Agent and Nortek (on its behalf and on
behalf of the Company) dated August 14, 1997.
"Fifth Third Letters of Credit" shall mean
the existing letters of credit issued by Fifth Third
Bank as to which the Company or Great Lakes Window,
Inc. is the account party.
"Financing Lease" shall mean (a) any lease of
property, real or personal, the then present value of
the minimum rental commitment of which should, in
accordance with GAAP, be capitalized on a balance sheet
of the lessee, and (b) any other such lease the
obligations under which are capitalized on a
consolidated balance sheet of the Company and its
Subsidiaries.
"First American Letter of Credit" shall mean
the existing letter of credit issued by M&I First
American Bank as to which SNE Transportation Company,
Inc. is the account party.
"Fleet" shall have the meaning ascribed
thereto in the preamble hereto.
"GAAP" shall mean generally accepted
accounting principles in the United States of America
as in effect and applied in the Company's certified
financial statements as at December 31, 1996.
"Governmental Authority" shall mean any
nation or government, any state or other political
subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or
administrative functions of or pertaining to
government.
"Guarantor" shall have the meaning ascribed
thereto in subsection 2.20 hereof.
"Guaranty" shall have the meaning ascribed
thereto in subsection 2.20 hereof.
"Hazardous Materials" shall mean any Toxic
Chemical, Hazardous Substances, contaminants or
pollutants, medical wastes, infectious wastes or
Hazardous Wastes.
"Hazardous Substance" shall have the same
meaning as set forth in Section 101(14) of the
Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. 9601(14) or state or local
law.
"Hazardous Waste" shall have the same meaning
as set forth by the Resource Conservation and Recovery
Act, 42 U.S.C. 6903(5), and the Environmental
Protection Agency's implementing regulations, or state
or local law.
"Hedge Agreement" shall mean any interest
rate swap, cap or collar agreement, interest rate
future or option contract and any or other similar
agreement.
"Hedge Bank" shall mean any Bank or any of
its Affiliates or any other financial institution
acceptable to the Required Banks that has become a
party to the Security Agreement and has appointed Fleet
as its custodian thereunder, in each case, in its
capacity as a party to a Hedge Agreement with a Loan
Party.
"Indebtedness" of a Person, at a particular
date, shall mean the sum (without duplication) at such
date of (a) indebtedness of such Person for borrowed
money or evidenced by notes, bonds, debentures or like
instruments, (b) indebtedness of such Person for the
deferred purchase price of property or services, except
(i) accounts payable and accrued expenses arising in
the ordinary course of business, (ii) obligations
incurred in connection with additions to property,
plant or equipment which are deferred for no more than
100 days after the later of the acquisition or
completion of installation of such additions, (iii)
other obligations (not including taxes) which are
deferred for no more than 100 days after the date on
which they would first be reflected as liabilities on a
balance sheet of such Person and (iv) obligations to
pay for services of officers, directors or employees of
the Company or any Subsidiary, (c) obligations of such
Person under any Financing Lease and (d) indebtedness
of such Person arising under acceptance facilities.
Without limitation, Indebtedness shall include undrawn
letters of credit and unreimbursed draws on letters of
credit.
"Initial Banks" shall mean the financial
institutions that have executed the signature pages
hereto.
"Insolvency" or "Insolvent", as to any
Multiemployer
Plan, shall have the respective meanings assigned to
such terms in Section 4245 of ERISA.
"Interest Payment Date" shall mean (a) as to
any Prime Rate Loan, each of (i) the date on which such
Loan is paid, refinanced or converted and (ii) the last
day of each March, June, September and December after
the date such Prime Rate Loan is made and (b) as to any
Eurodollar Loan, each of (i) the date on which such
Loan is paid, refinanced or converted and (ii) in the
case of any Eurodollar Loan in respect of which the
Company or any Designated Subsidiary (as applicable)
has selected an Interest Period of one, two or three
months, the last day of such Interest Period, and, in
the case of any Eurodollar Loan in respect of which the
Company or any Designated Subsidiary (as applicable)
has selected an Interest Period of duration of more
than three months, each date which is three months from
the first day of such Interest Period.
"Interest Period" shall mean, with respect to
any Eurodollar Loan, the period commencing on the date
of the making of such Eurodollar Loan or the date of
the conversion of any Prime Rate Loan into such
Eurodollar Loan, and ending one, two, three or six
months (or, to the extent permitted by subsection
2.3(c), one week) thereafter as selected by the Company
or a Designated Subsidiary, as applicable, in its
notice of borrowing as provided in subsection 2.3 and,
thereafter, each subsequent period commencing on the
last day of the immediately preceding Interest Period
and ending on the last day of the period selected by
the Company or a Designated Subsidiary, as applicable,
in its notice of conversion as provided in subsection
2.3; provided, however, that the foregoing provision
relating to Interest Periods is subject to the
following:
(a) if the Interest Period in respect of any
Eurodollar Loan would otherwise end on a day which is
not a Working Day, that Interest Period shall be
extended to the next succeeding Working Day unless the
result of such extension would be to carry such
Interest Period into another calendar month in which
event such Interest Period shall end on the immediately
preceding Working Day;
(b) any Interest Period pertaining to a
Eurodollar Loan that would otherwise extend beyond the
Termination Date shall end on the Termination Date;
(c) any Interest Period in respect of a
Eurodollar Loan that begins on the last Working Day of
a calendar month (or on a day for which there is no
numerically corresponding day in the succeeding
calendar month at the end of such Interest Period)
shall end on the last Working Day of such succeeding
calendar month; and
(d) the number of Eurodollar Loan Tranches
in effect at the same time shall not be in excess of
the Tranche Limit.
In the event that the Company or the Designated
Subsidiary, as applicable, fails to select the duration
of an Interest Period for any Eurodollar Loan within
the time period and otherwise as provided in subsection
2.3, such Eurodollar Loan will be automatically
converted into a Prime Rate Loan on the last day of the
current Interest Period for such Eurodollar Loan.
"investments" shall have the meaning
ascribed thereto in subsection 6.7.
"Issuance Fee" shall mean at any time of
determination a fee at an annual rate determined by
reference to the applicable ratio of Senior Funded Debt
to Consolidated EBITDA set forth in the
table below payable on the undrawn amount of each stand-
by L/C issued or deemed issued by Fleet:
Ratio Annual Fee
Level I 3.25:1.00 or greater 0.950%
Level II 3.00:1.00 or greater but less
than 3.25:1.00 0.725%
Level III 2.50:1.00 or greater but less
than 3.00:1.00 0.625%
Level IV 2.00:1.00 or greater but less
than 2.50:1.00 0.525%
Level V 1.50:1.00 or greater but less
than 2.00:1.00 0.400%
Level VI less than 1.50:1.00 0.300%
The determination of the applicable fee pursuant to the
table set forth above shall be made on a quarterly
basis based on an examination of the consolidated
financial statements of the Company and its
Subsidiaries delivered pursuant to and in compliance
with subsection 5.1; provided, however, that the
initial Issuance Fee shall be at Level II in such table
until such time as audited annual consolidated
financial statements of the Company and its
Subsidiaries indicating an Issuance Fee at a different
Level in such table are first delivered to the Agent
and the Banks pursuant to and in compliance with
subsection 5.1. Each change in the Issuance Fee shall
be effective as of the first day of the calendar month
following the date of the Company's financial
statements reflecting any change in the ratio of Senior
Funded Debt to Consolidated EBITDA. In the event that
financial statements for the four fiscal quarters most
recently completed prior to such date of determination
either: (a) have not been delivered to the Agent in
compliance with subsection 5.1 or (b) if delivered, do
not comply in form or substance with subsection 5.1,
then the Agent may determine, in its reasonable
judgment, the ratio of Senior Funded Debt to
Consolidated EBITDA referred to above that would have
been in effect as at such date, and, consequently, the
Issuance Fee in effect for the period commencing on
such date.
"L/C Participant" shall have the meaning
ascribed thereto in subsection 2.19(c).
"L/C Sublimit" shall mean initially the
aggregate face amount of all L/Cs outstanding on the
Closing Date, as such amount may be permanently reduced
from time to time pursuant to subsection 2.6.
"L/Cs" shall have the meaning ascribed thereto in
subsection 2.1(c)(i).
"Leverage Ratio" shall have the meaning
ascribed thereto in subsection 6.10.
"Lien" shall mean any mortgage, deed of
trust, pledge, hypothecation, assignment or deposit by
way of security, encumbrance, lien (statutory or
other), or preference, priority or other security
interest or security agreement or preferential
arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or
other title retention agreement, any Financing Lease
and the filing of any financing statement under the
Uniform Commercial Code or comparable law of
any jurisdiction).
"Loan Documents" shall mean (a) for purposes
of this Agreement and the Notes and any amendment,
supplement or modification hereof or thereof and for
all other purposes (other than for purposes of the
Guaranties and the Security Documents), (i) this
Agreement, (ii) the Notes, (iii) the Guaranties, (iv)
the Security Documents and (v) each Application and (b)
for purposes of the Guaranties and the Security
Documents, (i) this Agreement, (ii) the Notes, (iii)
the Guaranties, (iv) the Security Documents, (v) each
Application and (vi) each Hedge Agreement to which a
Hedge Bank is a party, in each case as amended,
supplemented or otherwise modified from time to time.
"Loan Parties" means the Company, the Designated
Subsidiaries, the Guarantors and the Collateral
Grantors.
"Loans" shall have the meaning ascribed
thereto in subsection 2.1(a)(i) hereof.
"Material Adverse Effect" shall mean a
material adverse effect on (i) the business, condition
(financial or otherwise), operations, performance or
properties of Company and its Subsidiaries, taken as a
whole, (ii) the ability of the Company, individually,
or the Company and the other Loan Parties, taken as a
whole, to perform its or their respective obligations
in any material respect under any Loan Document or
Related Document to which the Company or such other
Loan Party is a party or (iii) the rights and remedies
of the Agent and the Banks under any Loan Document or
Related Document.
"Material Operating Subsidiaries" shall mean
(a) each Designated Subsidiary; (b) any Subsidiary of
the Company which conducts business operations and is
material to the operations of the business of the
Company and its Subsidiaries, taken as a whole; and (c)
each Subsidiary of the Company which the Company
designates as a Material Operating Subsidiary.
"Merger" and "Merger Agreement" shall have
the respective meanings ascribed thereto in the
preamble hereto.
"Multiemployer Plan" shall mean a Plan which
is a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Net Proceeds" shall mean the aggregate cash
proceeds received from time to time (whether as initial
consideration or through payment or disposition of any
deferred payment obligation) by the Company or any
Subsidiary in respect of any sale or other disposition
of its assets (whether at the time of any such sale or
disposition or at any time thereafter), in each case
net of (a) the reasonable expenses (including legal
fees and brokers' and underwriters' commissions paid to
third parties) incurred in effecting such asset sale or
other disposition, (b) any taxes reasonably
attributable to such asset sale or other disposition,
(c) the amount of any Indebtedness (other than the
Obligations) secured by a Lien on any such asset that,
by the terms of the instrument evidencing such
Indebtedness, is required to be repaid upon such sale
or other disposition and (d) to the extent the Company
or such Subsidiary is required to maintain reserves for
liabilities resulting from such asset sale or other
disposition, reasonable reserves so long as such
reserves are required to be so maintained; provided,
however, that (i) the amount of any liabilities
existing at the time of an asset sale or disposition
which relate to the assets sold, which are not assumed
by the purchaser and which the seller remains obligated
to pay, shall be deducted from the aggregate cash
proceeds of such sale or
disposition; (ii) if any deferred payment obligation is
evidenced by any note or other obligation of the
purchaser or any third party, then any document or
instrument evidencing such obligation shall be pledged
by the Company or the Subsidiary involved to the Agent
for the benefit of the Banks pursuant to the Security
Agreement or a security agreement similar to the
Security Agreement but only as collateral for the
obligation to prepay pursuant to subsection 2.8(d) with
respect to the asset sale or disposition to which such
document or instrument relates (but subject to release
if any such document is sold by the Company or the
Subsidiary involved so long as the proceeds are applied
in accordance with such subsection 2.8(d)); and
provided that the Company will be entitled, except
after the occurrence and during the continuance of an
Event of Default, to receive all payments with respect
to such instruments, subject to the prepayment
obligations in subsection 2.8(d); and (iii) Net
Proceeds shall not include cash proceeds of (A) asset
sales permitted by subsections 6.4(a), (c) and (g) and
(B) mergers permitted by subsections 6.4(b) and (f).
"Non-Core Subsidiaries" shall mean each
Subsidiary of the Company identified as such on
Schedule 3.12.
"Nortek" shall have the meaning ascribed
thereto in the preamble hereto.
"Nortek Indentures" shall mean (a) the
Indenture dated as of February 14, 1994 between Nortek
and State Street Bank and Trust Company (the "Trustee")
pursuant to which Nortek's 9-7/8% Senior Subordinated
Notes due March 1, 2004 were issued, (b) the Indenture
dated as of March 17, 1997 between Nortek and the
Trustee pursuant to which Nortek's 9-1/4% Senior Notes
due March 15, 2007 were issued and (c) the Indenture
dated as of August 26, 1997 between Nortek and the
Trustee pursuant to which Nortek's 9-1/8% Senior Notes
due September 1, 2007 will be issued, in each case as
amended, supplemented or otherwise modified from time
to time in accordance with its terms.
"Notes" shall have the meaning ascribed to
such term in subsection 2.2.
"Notice of Borrowing/Conversion" shall have
the meaning ascribed to such term in subsection 2.3.
"Obligations" shall mean the unpaid principal
of and interest on the Notes and all other obligations
and liabilities of the Company and the other Loan
Parties to the Agent or to the Banks, whether direct or
indirect, absolute or contingent, due or to become due,
or now existing or hereafter incurred, which may arise
under, out of, or in connection with, the Credit
Agreement, the other Loan Documents and any other
document made, delivered or given in connection
therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities,
costs, expenses (including, without limitation: (a)
any interest accruing thereon after the date of filing
any petition by or against the Company or any
Subsidiary in connection with any bankruptcy or other
proceeding, whether or not a claim by the Agent or any
of the Banks is enforceable in such proceeding; and (b)
all fees and disbursements of counsel to the Agent or
to the Banks that are required to be paid by the
Company pursuant to the terms of the Credit Agreement)
or otherwise.
"Participant" shall have the meaning ascribed
thereto in subsection 9.7(d).
"Participating Interest" shall have the
meaning ascribed thereto in subsection 9.7(d).
"Patent Rights" shall have the meaning
ascribed thereto in subsection 3.17.
"PBGC" shall mean the Pension Benefit
Guaranty Corporation (or any successor) established
pursuant to Subtitle A of Title IV of ERISA.
"Permitted Shareholders" means Nortek and the
Purchaser, so long as it is a wholly-owned Subsidiary
of Nortek.
"Person" shall mean an individual, a
partnership, a corporation, a limited liability
company, a business trust, a joint stock company, a
trust, an unincorporated association, a joint venture,
a Governmental Authority or any other entity of
whatever nature.
"Plan" shall mean at any particular time, any
employee benefit plan which is covered by ERISA and in
respect of which the Company, any Subsidiary or a
Commonly Controlled Entity is (or, if such Plan were
terminated at such time, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
"Post-Default Rate" shall have the meaning
ascribed thereto in subsection 2.10(d).
"Pre-Commitment Information" shall mean all
of the information relating to Nortek, the Company or
any of their respective Subsidiaries furnished to the
Agent by Nortek or the Company on or before August 14,
1997.
"Prime Rate" shall mean a fluctuating
interest rate per annum in effect from time to time,
which rate shall at all times be equal to the higher of
(a) the rate of interest publicly announced by Fleet in
Boston, Massachusetts from time to time as its prime
rate and (b) one half of one percent (1/2%) per annum
above the Federal Funds Rate. The Prime Rate is not
intended to be the lowest rate of interest charged by
Fleet in connection with extensions of credit to
debtors. Each change in any interest rate provided for
herein based upon the Prime Rate shall take effect at
the time of such change in the Prime Rate.
"Prime Rate Loans" shall mean Loans hereunder
at such time as they bear interest based upon the Prime
Rate.
"Purchaser" shall have the meaning ascribed
thereto in the preamble hereto.
"Regulation A", "Regulation D", "Regulation
G", "Regulation U" and "Regulation X" shall mean,
respectively, Regulation A, Regulation D, Regulation G,
Regulation U and Regulation X of the Board of Governors
of the Federal Reserve System, as from time to time in
effect.
"Regulatory Change" shall mean the
introduction of, or any change in, United States
federal, state or local laws or regulations (including
Regulation D) or treaties or foreign laws or
regulations after the date of this Agreement or the
adoption or making after such date of any
interpretations, directives, guidelines or requests
applying generally to a class of banks of or under any
United States federal, state or local laws or
regulations or any treaties or foreign laws or
regulations (whether or not having the force of law) by
any court or governmental or monetary authority charged
with the interpretation or administration thereof.
"Related Documents" shall mean the Merger
Agreement and each of the documents evidencing
Subordinated Indebtedness.
"Release" shall have the same meaning as set
forth in Section 101(22) of the Comprehensive
Environmental Response, Compensation and Liability Act,
42 U.S.C. 9601(22), or state or local law.
"Reorganization", as to any Multiemployer
Plan, shall have the meaning assigned to such term in
Section 4241 of ERISA.
"Reportable Event" shall mean any of the
events set forth in Section 4043(c) of ERISA other than
those events as to which the 30-day notice period is
waived.
"Required Banks" shall mean, at any date,
Banks having at least 51% of the aggregate amount of
the Commitments, and, if the Commitments are terminated
and Loans and/or Bank L/C Obligations are outstanding,
Banks holding at least 51% of the aggregate principal
amount of outstanding Loans and/or Commitment
Percentages relating to Bank L/C Obligations, as the
case may be.
"Requirement of Law" for any Person shall
mean the Certificate of Incorporation and By-Laws or
other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or
guideline, or determination of an arbitrator or a court
or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its
property or to which such Person or any of its property
is subject.
"Responsible Officer" shall mean the chief
executive officer, president, chief financial officer
or treasurer, or any executive vice president, of the
Company.
"SEC Reports" shall mean the Company's annual
report on Form 10-K for the fiscal year ended December
31, 1996 and other documents filed by the Company with
the Securities and Exchange Commission during 1996.
"Secured Parties" shall mean the Agent, the
Banks, Fleet in its capacity as issuer of L/Cs
hereunder and the Hedge Banks.
"Security Agreement" shall have the meaning
ascribed thereto in subsection 2.21.
"Security Documents" shall mean,
collectively, the Security Agreement and any other
agreement that creates or purports to create a Lien in
favor of the Agent for the benefit of the Secured
Parties.
"Senior Funded Debt" shall mean, at any time
of determination, the average (calculated for the two
most recent consecutive full fiscal quarters of the
Company for which consolidated financial statements of
the Company and its Subsidiaries have been delivered to
the Agent and the Banks pursuant to and in compliance
with subsection 5.1) (a) aggregate Indebtedness of the
Company and its Subsidiaries less (b) the aggregate
Subordinated Indebtedness of the Company and its
Subsidiaries, in each case calculated on a consolidated
basis in accordance with GAAP.
"Single Employer Plan" shall mean any Plan
which is covered by Title IV of ERISA, but which is not
a Multiemployer Plan.
"Solvency Certificate" shall mean a certificate
substantially in the form of Exhibit G hereto.
"Solvent" and "Solvency" shall mean with
respect to any Person at the time of determination:
(a) the then fair market value of its assets
is greater than its probable liability on its existing
debts (including contingent debts) as such debts become
absolute and matured;
(b) the then present fair saleable value of
its assets is not less than the amount that will be
required to pay its probable liability on its existing
debts (including contingent debts) as such debts become
absolute and matured;
(c) it is then able and expects to be able
to pay its debts (including, without limitation,
contingent debts and other commitments) as they mature;
and
(d) it has capital sufficient to carry on
its business as conducted and as proposed to be
conducted.
The amount of contingent debts and other commitments at
any time shall be computed as that amount that
represents the maximum reasonably anticipated liability
in respect thereof as determined by such Person in good
faith.
"Special Subsidiary Loans" shall mean loans
by the Company and/or any of its Subsidiaries to
Subsidiaries which are not, directly or indirectly,
wholly-owned Subsidiaries.
"Specified L/C Obligations" at any date shall
mean the sum of (a) the aggregate undrawn amount of all
L/Cs as to which the Company or any Subsidiary is an
account party at such date (excluding (i) the Fifth
Third Letters of Credit and the First American Letter
of Credit and (ii) any renewals, extensions and
replacements of any of the Fifth Third Letters of
Credit or the First American Letter of Credit), plus
(b) the amount of all Unpaid Drawings.
"Subordinated Indebtedness" shall mean the
Indebtedness permitted pursuant to subsection 6.1(f).
"Subsidiary" of any Person shall mean a
corporation or other entity of which shares of stock or
other ownership interests having ordinary voting power
(other than stock or other ownership interests having
such power only by reason of the happening of a
contingency) to elect a majority of the directors of
such corporation, or other Persons performing similar
functions for such entity, are owned, directly or
indirectly, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to
"Subsidiaries", in this Agreement shall refer to a
Subsidiary or Subsidiaries of the Company.
"Taxes" shall have the meaning ascribed
thereto in subsection 2.13.
"Tender Offer" shall have the meaning
ascribed thereto in the preamble hereto.
"Termination Date" shall mean August 26, 2002
or, if such day is not a Business Day, the Business Day
next preceding such day.
"Toxic Chemical" shall mean any substance on
the list described in Section 313(c) of the Emergency
Planning and Community
Right-to-Know Act, 42 U.S.C. 11023(c).
"Tranche" shall mean all Eurodollar Loans of
the same borrower with the same Interest Period, which
Interest Period ends on the same day.
"Tranche Limit" at any time shall mean a
number equal to the sum of the number of Designated
Subsidiaries at such time plus six; provided that the
Tranche Limit shall not be less than 10.
"Type" shall mean, as to any Loan, its nature
as a Prime Rate Loan or Eurodollar Loan, as the case
may be.
"Unpaid Drawings" shall have the meaning
ascribed thereto in subsection 2.1(c)(i) hereof.
"Working Day" shall mean any Business Day on
which dealings in foreign currency and exchange between
banks may be carried on in London, England and Boston,
Massachusetts.
1.2 Other Definitional Provisions. (a) All
terms defined in this Agreement shall have such defined
meanings when used in the Loan Documents or any
certificate or other document made or delivered
pursuant hereto unless otherwise defined therein.
(b) As used herein, in the Loan Documents
and in any certificate or other document made or
delivered pursuant hereto, accounting terms not defined
in subsection 1.1, and accounting terms partly defined
in subsection 1.1 to the extent not defined, shall have
the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and
"hereunder" and words of similar import when used in
this Agreement, shall refer to this Agreement as a
whole and not to any particular provision of this
Agreement; and Section, subsection, Schedule and
Exhibit references contained in this Agreement are
references to Sections, subsections, Schedules and
Exhibits in or to this Agreement unless otherwise
specified.
(d) In this Agreement in the computation of
periods of time from a specified date to a later
specified date, the word "from" means "from and
including" and the words "to" and "until" each mean "to
but excluding".
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS
2.1 Commitments. (a) (i) Subject to the
terms and conditions of this Agreement, each Bank
severally agrees to make a single term loan
(individually, a "Loan", collectively, the "Loans") to
each of the Company and the Designated Subsidiaries on
the Closing Date in an aggregate principal amount
which, when added to such Bank's Commitment Percentage
of the Bank L/C Obligations which are to be outstanding
immediately after giving effect to the borrowing and
application of such Loans, will not exceed the amount
of its Commitment set forth on Schedule I, as such
amount may be reduced from time to time as provided
herein. Amounts borrowed under this subsection 2.1(a)
and repaid or prepaid may not be reborrowed.
(ii) Intentionally omitted.
(b) The Loans may be made as (i) Eurodollar
Loans, (ii) Prime Rate Loans or (iii) subject to the
other provisions hereof, any combination thereof, as
determined by the Company and notified to the Agent in
accordance with subsection 2.3, provided that Loans
made on the Closing Date shall be made as Prime Rate
Loans and shall be made in an amount not to exceed the amount by
which the Commitments on the Closing Date exceed the
L/C Sublimit on the Closing Date.
(c) (i) Effective as of the Closing Date,
(A) the "L/Cs" issued for the account of any Account
Party by Fleet pursuant to the Existing Credit
Agreement (such "L/Cs" as are outstanding thereunder on
the date hereof and set forth on Schedule 2.1 being,
collectively, the "L/Cs", and individually, an "L/C"),
will be deemed to be L/Cs hereunder for the account of
such Account Party, (B) the L/Cs will no longer be
Obligations outstanding under the Existing Credit
Agreement and (C) Fleet will be deemed to have sold and
transferred an undivided interest and participation in
respect of each L/C issued by it and each Bank
hereunder will be deemed to have purchased and
received, without further action on the part of any
party, an undivided interest and participation in such
L/C, based on such Bank's Commitment Percentage of such
L/C. Fleet shall notify the Company of any payment or
disbursement made by Fleet under any L/C in accordance
with its customary practice. The applicable Account
Party shall reimburse Fleet in immediately available
funds at its office indicated on its Schedule I on the
same day as any draw is paid by Fleet under the L/Cs
(all such amounts so paid or disbursed until paid, are
hereinafter referred to as "Unpaid Drawings").
(ii) Intentionally omitted.
(iii) If, notwithstanding the other
provisions of this subsection 2.1(c), on the
Termination Date there are outstanding any L/Cs which
have not expired or been terminated with the consent of
the Company and the respective beneficiaries thereof,
then this Agreement (including, without limitation,
this subsection 2.1(c) and subsection 2.22) and the
respective rights, obligations and covenants of the
Company, and the Desig-nated Subsidiaries, Fleet and
the Banks under this Agreement shall remain in full
force and effect until the date on which the last of
the L/Cs expire or is terminated with the consent of
the Company and the respective beneficiaries thereof
and all payments made by Fleet under the L/Cs are
reimbursed in full by the Company or one or more of the
Designated Subsidiaries, except that the Commitment
shall terminate on the Termination Date.
(iv) Intentionally omitted.
(v) Upon the presentation for payment of any
draft drawn under a trade L/C, the Company shall pay to
Fleet for the ratable benefit of the Banks a payment
commission or fee (each a "Drawing Fee") equal to one
quarter of one percent (1/4%) of the face amount of the
draft.
(vi) The Company shall pay to the Agent for
the ratable benefit of the Banks an Issuance Fee for
each stand-by L/C, on the undrawn amount of such L/C,
at an annual rate equal to the percentage set forth in
the definition of Issuance Fee, and payable on the date
of issuance and thereafter in advance on the first day
of each January, April, July and October so long as
such L/C is outstanding; provided, however, that such
Issuance Fee shall be pro rated for the portion of any
quarter during which the undrawn amount of such L/C is
reduced or the L/C is terminated and the Agent and the
Banks shall refund to the Company any unearned portion
of such Issuance Fee.
(vii) In the event that at any time when
a draft is drawn under an L/C, there are not sufficient
funds in any account of the Account Party with Fleet or
sufficient Available Commitments to permit creation of
a Loan sufficient to fund payment of such
draft, any funds advanced by Fleet, in payment thereof
shall be due and payable immediately and shall bear
interest until paid in full at the Post-Default Rate.
In the event of any conflict, discrepancy or any
omission of terms provided herein between the terms
established by Fleet in its Application or otherwise
and this Agreement, the terms provided herein shall
prevail.
(viii) The obligations of each Account
Party under this subsection 2.1(c) to reimburse Fleet
with respect to Unpaid Drawings (including interest
thereon) shall, subject to the other provisions of this
Agreement, including without limitation subsection
2.22, be absolute and unconditional under any and all
circumstances and (but as so subject) irrespective of
any setoff, counterclaim or defense to payment which
the Company or any Designated Subsidiary may have or
have had against Fleet, including (without limitation,
but as so subject) any defense based on the failure of
any drawing under the L/C to conform to the terms of
such L/C or any non-application or misapplication by
the beneficiary of the L/C of the proceeds of such
drawing.
2.2 Notes. The Loans made by each Bank
shall be evidenced by promissory notes, substantially
in the form of Exhibit A with appropriate insertions as
to date, name of Bank and principal amount
(individually, a "Note" and, collectively, the
"Notes"), payable to the order of such Bank and
evidencing the obligation of the Company or the
applicable Designated Subsidiary, as the case may be,
to pay the outstanding principal amount thereof with
interest on the unpaid principal amount from time to
time outstanding of such Note as prescribed in
subsection 2.10. Each Bank is hereby authorized to
record the date, Type and amount of each Loan, the
maturity date therefor and the date and amount of each
repayment of principal thereof, and, in the case of
Eurodollar Loans, the interest rate with respect
thereto, either on its own books and records or on the
schedule (or any continuations thereof) annexed to and
constituting a part of its Note, and any such
recordation shall constitute prima facie evidence of
the accuracy of the information so recorded; provided
that the failure to make any such recordation shall not
in any way affect the obligation of the Company and the
Designated Subsidiaries to repay the Loans. Each Note
shall (a) be dated the date hereof, (b) be payable with
respect to principal as set forth in subsection 2.9,
and (c) bear interest on the unpaid principal amount
thereof from time to time outstanding until payment in
full of the principal amount thereof at the applicable
interest rate per annum determined as provided in
subsection 2.10. Interest on the Notes shall be payable
on the dates specified in subsection 2.10.
2.3 Procedure for Loan Borrowings. (a) The
Company may request for itself or any Designated
Subsidiary a borrowing under the Commitments on the
Closing Date, by giving irrevocable notice to the Agent
(which notice must be received by the Agent prior to
2:00 p.m., Boston, Massachusetts time) one Business Day
prior to the Closing Date; provided, however, that from
time to time the Company may request for itself or on
behalf of any Designated Subsidiary that all or any
portion of the Loans of one Type be converted into
Loans of the other Type by giving irrevocable notice to
the Agent, three Working Days prior to the requested
conversion date, in the case of Eurodollar Loans, and
one Business Day prior to the requested conversion
date, in the case of Prime Rate Loans, provided that
(i) in the case of any conversion from a Prime Rate
Loan to a Eurodollar Loan, (A) the Interest Period
available for such Eurodollar Loan shall be subject to
subsection 2.3(c), (B) the obligation of the Banks to
make Eurodollar Loans shall not then be suspended
pursuant to subsection 2.12 or 2.14 and (C) the number
of Eurodollar Loan Tranches in effect after giving
effect to such conversion shall not exceed the Tranche
Limit then in effect and
(ii) in the case of any conversion from a Eurodollar
Loan to a Prime Rate Loan, (A) such conversion shall
only be made on the last day of an Interest Period for
such Eurodollar Loan and (B) after giving effect to
such conversion, the aggregate amount of all Eurodollar
Loans having the same Interest Period ending on the
same date is at least $1,000,000. Each such notice of
borrowing or conversion (a "Notice of
Borrowing/Conversion") shall specify: (1) the borrower
and the amount to be borrowed or converted, (2) the
requested borrowing or conversion date, (3) whether the
Type of Loan to be borrowed, or into which a Loan shall
be converted, is to be a Eurodollar Loan, Prime Rate
Loan or a combination thereof and, if a combination,
the respective amount of each Type of borrowing and (4)
in the case of Eurodollar Loans, the length of the
Interest Period with respect thereto. The aggregate
borrowings under the Commitments on the Closing Date
shall be in an aggregate principal amount of not more
than the then Available Commitments. The aggregate
amount of Loans to any Designated Subsidiary at any
time outstanding shall not exceed the Designated
Subsidiary Borrowing Limit for such Designated
Subsidiary in effect at such time. Each Bank will make
the amount of its pro rata share of each borrowing
available to the Agent for the account of the Company
at the office of the Agent in Boston, Massachusetts as
set forth in subsection 9.2 by 11:00 a.m., Boston,
Massachusetts time, on the Closing Date in funds
immediately available to the Agent. The proceeds of
all such Loans will then be made available to the
Company or the applicable Designated Subsidiary, as the
case may be, by the Agent at such office of the Agent
by crediting the account of the Company or such
Designated Subsidiary on the books of such office with
the aggregate of the amounts made available to the
Agent by the Banks and in like funds as received by the
Agent.
(b) The provisions of subsection 2.3(a)
notwithstanding, if the Company shall not have given a
timely notice of the next Interest Period for any
outstanding Eurodollar Loan, then unless the Agent
shall have received notice that the Company elects not
to continue such Loan on the last day of such Interest
Period as a Eurodollar Loan (such notice to have been
received at least one Business Day prior to the last
day of such Interest Period) the Company shall be
deemed irrevocably to have requested that Prime Rate
Loans be made by the Banks on the last day of such
Interest Period in the same aggregate amount as the
Eurodollar Loans the last day of the Interest Period of
which is on such day (subject, however, to the
requirement that the aggregate amount of the Loans
outstanding at any time pursuant to subsection 2.1 may
not exceed the amounts of the Available Commitments
then in effect).
(c) Anything in subsection 2.3 (a) above to
the contrary notwithstanding, (i) during the period
from the Closing Date to the date that is the earlier
of 30 days after the Closing Date and the date on which
the Agent notifies the Company and the Banks that the
Commitments are fully syndicated, the Company may
request for itself or any Designated Subsidiary that
(A) any Prime Rate Loan hereunder be converted into a
Eurodollar Loan having an initial Interest Period of
one week or (B) the next Interest Period for any
outstanding Eurodollar Loan be one week, and (ii)
thereafter, the Company may, in accordance with the
provisions in the definition of "Interest Period,"
request Interest Periods for any Eurodollar Loan if the
aggregate amount of all Eurodollar Loans having the
same Interest Period is at least $1,000,000 and if the
obligation of the Banks to make Eurodollar Loans shall
not then be suspended pursuant to subsection 2.12 or
subsection 2.14.
(d) The proceeds of the Loans hereunder
shall be applied to the payment in full of the
principal and interest payable with respect to the
Indebtedness under the Existing Credit Agreement.
2.4 Intentionally Omitted.
2.5 Intentionally Omitted.
2.6 Termination or Reduction of Commitments.
(a) Optional. The Company shall have the right, upon
not less than three Business Days' notice to the Agent,
to terminate the Commitments or, from time to time, to
reduce the amount of the Commitments, provided that no
such reduction or termination shall be permitted if,
after giving effect thereto, and to any prepayments of
the Loans made on the effective date thereof, the then
outstanding principal amount of the Loans and Bank L/C
Obligations would exceed the amount of the Commitments
then in effect. Any such reduction shall be in an
amount of $5,000,000 or a whole multiple of $1,000,000
in excess thereof and shall reduce permanently the
amount of the Commitments then in effect. The
Commitments once terminated or reduced may not be
reinstated.
(b) Mandatory. After giving effect to the
Loans made on the Closing Date and the L/Cs outstanding
on the Closing Date, upon each repayment or prepayment
of the Loans or of Unpaid Drawings and upon each
expiration or termination of an L/C (without any
drawing in connection therewith), (i) the aggregate
Commitments of the Banks shall be automatically and
permanently reduced, on a pro rata basis, by an amount
equal to the amount by which the aggregate Commitments
immediately prior to such reduction exceed the
aggregate unpaid principal amount or face amount, as
the case may be, of the Loans, Unpaid Drawings and L/Cs
then outstanding and (ii) the L/C Sublimit shall be
automatically and permanently reduced to an amount
equal to the principal amount or face amount of the
Unpaid Drawings and L/Cs outstanding immediately after
such repayment, expiration or termination. The
Commitments once terminated or reduced may not be
reinstated.
2.7 Fees. (a) The Company agrees to pay to
the Agent for the account of each Bank the Facility Fee
for the period commencing on the date hereof extending
to but not including the earlier of (i) the date the
Commitments are terminated or (ii) the Termination
Date. The accrued Facility Fee shall be payable on the
last day of each March, June, September or December and
on the Termination Date or such earlier date as the
Commitments shall terminate as provided herein,
commencing on the first of such dates to occur after
the date hereof.
(b) The Company agrees to pay to the Agent
the additional fees in the amounts and upon the terms
set forth in the Fee Letter.
2.8 Optional and Mandatory Prepayments. (a)
The Company and each Designated Subsidiary may at any
time and from time to time prepay the Loans then
outstanding, in whole or in part, without premium or
penalty, provided, however, that if the Company or any
Designated Subsidi-ary prepays any Eurodollar Loans on
any day other than the last day the Interest Period
therefor, the Company or such Designated Subsidiary
shall concurrently pay any amounts due under subsection
2.16 incurred in connection therewith. Optional
prepayments pursuant to this subsec-tion 2.8(a) shall
be made upon at least three Working Days' prior
irrevocable notice to the Agent in the case of
Eurodollar Loans, and one Business Day's prior
irrevocable notice to the Agent in the case of Prime
Rate Loans, specifying (i) the date and amount of such
prepayment, (ii) whether the prepayment is of
Eurodollar Loans, Prime Rate Loans or a combination
thereof, and, if of a combination thereof, the amount
of prepayment allocable to each Type and (iii) in the
case of Eurodollar Loans, the Interest Periods
affected. If any such notice is given, the Company or
the Designated Subsidiary involved will make the prepayment
spe-cified therein, and such prepayment shall be due
and payable on the date specified therein, together
with accrued interest to such date on the amount
prepaid. Each prepayment of the Loans pursuant to this
paragraph (a) shall be in an amount equal to
$5,000,0000 or any whole multiple of $1,000,000 in
excess thereof or the amount of all Loans then
outstanding, provided that prepayments of Eurodollar
Loans pursuant to this paragraph (a) shall be made in
such a manner that, after giving effect to such
prepayments, no Eurodollar Loans having the same
Interest Period shall be maintained in an amount less
than $1,000,000.
(b) Intentionally omitted.
(c) Intentionally omitted.
(d) The Company shall prepay the Loans then
outstanding and reduce the Commitments as set forth in
subsection 2.6(b) upon the receipt by the Company or
any Subsidiary of Net Proceeds of any sale or other
disposition of any of its assets to the extent set
forth below:
(i) during such time as the Leverage Ratio
(calculated based on the financial statements most
recently delivered to the Agent and the Banks pursuant
to and in compliance with subsection 5.1) is greater
than or equal to 2.50:1.00, 75% of all such Net
Proceeds shall be applied to prepay the installments
required to be made on the Loans pursuant to subsection
2.9 in direct order of the maturity thereof; and
(ii) during such time as the Leverage Ratio
(calculated based on the financial statements most
recently delivered to the Agent and the Banks pursuant
to and in compliance with subsection 5.1) is less than
2.50:1.00, 50% of all such Net Proceeds shall be
applied to prepay the installments required to be made
on the Loans pursuant to subsection 2.9 in direct order
of the maturity thereof.
(e) Any payment of the Loans pursuant to
this subsection 2.8 or to subsection 2.9 shall be
applied first to the Prime Rate Loans then outstanding,
and the balance of any payment shall be applied to the
Eurodollar Loans in chronological order of the
respective maturities thereof (or as the Company may
otherwise specify in writing to the Agent), together
with any payments required by subsection 2.16.
2.9 Repayment of Loans. The Company shall,
and shall cause each Designated Subsidiary to, repay to
the Agent for the ratable account of the Banks the
aggregate outstanding principal amount of the Loans
owing by the Company or such Designated Subsidiary, as
the case may be, on the following dates in the
aggregate amounts indicated for all such Loans being
repaid on such date (which amounts shall be reduced as
a result of the application of prepayments in
accordance with the order of priority set forth in
subsection 2.8(d)):
Date Amount
March 31, 1998
$1,000,000
June 30, 1998 $1,000,000
September 30, 1998 $1,000,000
December 31, 1998 $1,000,000
March 31, 1999 $1,000,000
June 30, 1999 $1,000,000
September 30, 1999 $1,000,000
December 31, 1999 $1,000,000
March 31, 2000 $1,250,000
June 30, 2000
$1,250,000
September 30, 2000
$1,250,000
December 31, 2000
$1,250,000
March 31, 2001
$1,500,000
June 30, 2001
$1,500,000
September 30, 2001
$1,500,000
December 31, 2001
$1,500,000
March 31, 2002
$3,000,000
June 30, 2002
$3,000,000
August 26, 2002
$96,728,225
provided, however, that the final principal installment
shall be
repaid on the earlier of the Termination Date and the
date of the termination in full of the Commitments
pursuant to subsection 2.6 or Section 7 and in any
event shall be in an amount equal to the aggregate
principal amount of the Loans, Unpaid Drawings and L/Cs
outstanding on such date.
2.10 Interest Rates and Payment Dates. (a) Each
Eurodollar Loan shall bear interest for the Interest
Period with respect thereto on the unpaid principal
amount thereof at a rate per annum equal to the
Eurodollar Rate for such Interest Period plus the
Applicable Margin in effect from time to time.
(b) The Unpaid Drawings and each Prime Rate
Loan shall bear interest on the aggregate unpaid
principal amount thereof at a rate per annum equal to
the Prime Rate in effect from time to time plus the
Applicable Margin in effect from time to time.
(c) Intentionally omitted.
(d) If all or a portion of the principal
amount of any of the Loans or Unpaid Drawings shall not
be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue principal
amount shall, without limiting the rights of the Banks
under Section 7, bear interest at a rate per annum
which is two percent (2%) above the otherwise
applicable rate (the "Post-Default Rate"), from the
date of such non-payment until paid in full (before, as
well as after, judgment); provided that if such overdue
principal amount is of Eurodollar Loans, then, at the
end of the Interest Period relating thereto, such
Eurodollar Loans may be continued only as Prime Rate
Loans and shall bear interest at a rate per annum which
is two percent (2%) above the rate required to be paid
on Prime Rate Loans pursuant to subsection 2.10(b)
until paid in full (before as well as after judgment).
(e) Interest on each Loan shall be payable
in arrears on each Interest Payment Date applicable
thereto.
(f) Anything herein to the contrary
notwithstanding, the obligation of the Company and each
Designated Subsidiary to make payments of interest
shall be subject to the limitation that payments of
interest shall not be required to be made to any Bank
to the extent that such Bank's receipt thereof would
not be permissible under the law or laws applicable to
such Bank limi-ting rates of interest which may be
charged or collected by such Bank; provided that
nothing in this subsection 2.10(f) shall release the
Company or any Designated Subsidiary, as applicable,
from paying any portion of interest then payable to the
extent that such Bank's receipt thereof would be
permissible under such law or laws. Any such payments
of interest which are not made to any Bank as a result
of the limitation referred to in the preceding sentence
shall be made by the Company and each Designated
Subsidiary to such Bank on the earliest Interest
Payment Date or Dates on which the receipt thereof
would be permissible under the laws applicable to such
Bank limiting rates of interest which may be charged or
collected by the Agent.
2.11 Computation of Interest and Fees. (a)
The Facility Fee and interest in respect of Prime Rate
Loans shall be calculated on the basis of a 365 (or
366, as the case may be) day year for the actual days
elapsed. Interest on all Eurodollar Loans and Issuance
Fees and the fees payable pursuant to subsection 2.7(b)
shall be calculated on the basis of a 360-day year for
the actual days elapsed. The Agent shall as soon as
practicable, but not later than the close of business
on the date of determination, notify the Company and
the Designated Subsidiaries and the Banks of each
determination of a Eurodollar Rate. Any change in the
interest rate on the Loans resulting from a change in
the Prime Rate or the Eurocurrency Reserve Requirements
shall become effective as of the opening of business on
the day on which such change in the Prime Rate is
announced, or such change in the Eurocurrency Reserve
Requirements shall become effective, as the case may
be. The Agent shall as soon as practicable, but not
later than three Business Days before the close of
business on the effective date, notify the Company and
the Designated Subsidiaries and the Banks of the
effective date and the amount of each such change.
(b) Each determination of an interest rate
by the Agent pursuant to any provision of this
Agreement shall be prima facie evidence of the accuracy
of the facts so determined.
2.12 Inability to Determine Interest Rate.
Notwithstanding any other provision of this Agreement,
in the event that the Required Banks shall reasonably
have determined (which determination shall be prima
facie evidence of the facts so deter-mined) that the
rates quoted by Fleet for the purpose of compu-ting the
Eurodollar Rate do not adequately and fairly reflect
the cost to the Banks of funding any Loans that the
Company or any Designated Subsidiary has requested be
converted into Eurodollar Loans, such Banks shall
notify the Agent thereof and the Agent shall promptly
give telecopier or telephonic notice of such
determination, confirmed in writing to the Company or
such Designated Subsidiary and the Banks at least one
Business Day prior to the requested conversion date for
such Eurodollar Loans. Unless the Company or such
Designated Subsidiary shall have notified the Agent
promptly after receipt of such telecopier or telephonic
notice that it wishes to rescind or modify its request
regarding such Eurodollar Loans, any requested
Eurodollar Loans shall be made as Prime Rate Loans.
Until any such notice has been withdrawn by the Agent,
no further Eurodollar Loans shall be made. The Agent
shall withdraw such notice promptly after it determines
that the circumstances giving rise to the delivery of
such notice no longer exist.
2.13 Taxes. (a) All payments made by the
Company and each Designated Subsidiary under this
Agreement shall be made free and clear of, and without
reduction for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties,
charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority excluding, in
the case of the Agent and each Bank, net income and
franchise taxes imposed on the Agent and such Bank by
the jurisdiction under the laws of which such Agent or
such Bank is organized or any political subdivision or
taxing authority thereof or therein or by any
jurisdiction in which such Bank's Domestic Lending
Office or Eurodollar Lending Office, as the case may
be, is located or any political subdivision or taxing
authority thereof or therein (all such non-excluded
taxes, levies, imposts, deductions, charges or
withholdings being hereinafter called "Taxes"). If any
Taxes are required to be withheld from any amounts
payable to any Bank hereunder or under the Notes, the
amounts so payable to such Bank shall be increased to
the extent
necessary to yield to such Bank (after payment of all
Taxes, including Taxes on such increased amount)
interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Agreement
and the Notes. Whenever any Taxes are payable by the
Company or any Designated Subsidiary, as promptly as
possible thereafter, the Company or such Designated
Subsidiary shall send to the Agent for the account of
such Bank a certified copy of an original official
receipt received by the Company or such Designated
Subsidiary showing payment thereof. If the Company or
any Designated Subsidiary fails to pay any Taxes when
due to the appropriate taxing authority or fails to
remit to the Agent the required receipts or other
required documentary evidence, the Company or such
Designated Subsidiary shall indemnify the Agent and the
Banks for any incremental taxes, interest or penalties
that may become payable by the Agent or any Bank as a
result of any such failure. Each Bank confirms to the
Company and the Designated Subsidiaries that tax
withholding requirements do not currently apply to
payments to be made to it hereunder.
(b) If the Company or any Designated
Subsidiary shall at any time be required to withhold
any Taxes in respect of any amount payable to any Bank
hereunder or under the Notes, the Company or such
Designated Subsidiary shall be entitled to prepay the
Loans allocable to such Bank, and the Company or such
Designated Subsidiary shall be entitled to terminate
the Commit-ment of such Bank (such prepayment to be
made together with all other amounts due to such Bank
hereunder and under the Notes, including, without
limitation, interest, fees and any amounts payable
pursuant to subsection 2.16).
(c) Each Bank agrees to use reasonable
efforts (including reasonable efforts to change its
Domestic Lending Office or Eurodollar Lending Office,
as the case may be) to avoid the imposition of any
Taxes on payments hereunder or to minimize any amounts
which might otherwise be payable pursuant to this
subsection 2.13; provided, however, that such efforts
shall not cause the imposition on such Bank of any
additional costs or legal or regulatory burden deemed
by such Bank to be material.
(d) If the Company or any Designated
Subsidiary makes any additional payment to the Agent or
any Bank pursuant to this subsection 2.13 in respect of
any Taxes, and the Agent or such Bank determines that
it has received (i) a refund of such Taxes or (ii) a
credit against or relief or remission for, or a
reduction in the amount of, any tax or other
governmental charge solely as a result of any deduction
or credit for any Taxes with respect to which it has
received payments under this subsection 2.13, the Agent
and such Bank shall, to the extent that they can do so
without prejudice to the retention of such refund,
credit, relief, remission or reduction, pay to the
Company or such Designated Subsidiary such amount as
the Agent and such Bank shall have determined to be
attributable to the deduction or withholding of such
Taxes. If the Agent or such Bank later determines that
it was not entitled to such refund, credit, relief,
remission or reduction to the full extent of any
payment made pursuant to the first sentence of this
subsection 2.13(d), the Company or such Designated
Subsidiary shall upon demand of the Agent or such Bank
promptly repay the amount of such overpayment. Any
determination made by the Agent or such Bank pursuant
to this subsection 2.13(d) shall constitute prima facie
evidence of the accuracy thereof, and nothing in this
subsection 2.13(d) shall be construed as requiring the
Agent or any Bank to conduct its respective business or
to arrange or alter in any respect its respective tax
or financial affairs so that it is entitled to receive
such a refund, credit or reduction or as allowing any
person to inspect any records, including tax returns,
of the Agent or any Bank.
2.14 Illegality. Notwithstanding any other
provision herein, if any Regulatory Change shall make
it unlawful for any Bank to make or maintain Eurodollar
Loans as contemplated by this Agreement or to accept
deposits in order to make or maintain such Eurodollar
Loans, (a) the agreements of such Bank hereunder to
make Eurodollar Loans shall forthwith be suspended for
the duration of such illegality and (b) each Eurodollar
Loan then outstanding, if any, shall be converted into
a Prime Rate Loan on the last day of the Interest
Period therefor or within such earlier period as
required by law for the duration of such illegality.
If any such conversion of a Eurodollar Loan is made on
a day which is not the last day of the Interest Period
therefor, the Company and each Designated Subsidiary
hereby agrees to pay promptly to any Bank, upon its
demand, any amounts required to be paid by the Company
and each Designated Subsidiary pursuant to subsection
2.16 (such Bank's reasonable notice of such costs and
the manner in which they were calculated, as certified
to the Company, shall constitute prima facie evidence
of the accuracy of the amounts set forth therein). This
agreement shall survive termination of this Agreement
and the payment of the outstanding Notes. Each Bank
shall use its reasonable efforts to promptly notify the
Company as soon as practicable as to any Regulatory
Change described in this subsection 2.14.
2.15 Increased Costs. (a) In the event that any
Regulatory Change:
(i) subjects any Bank to any tax of any kind
whatso-ever with respect to this Agreement, its Notes
or any Loans made by it, or changes the basis of
taxation of payments to such Bank of principal,
interest, fees or any other amount pay-able hereunder
(except for changes in Taxes and except for taxes
measured by the net income of such Bank);
(ii) imposes, modifies or holds applicable to
such Bank any reserve, Federal Deposit Insurance
Corporation premium or assessment, special deposit,
compulsory loan or similar requirement against any
Eurodollar Loans made, or assets held by, or credit
extended by, or deposits or other liabilities in or for
the account of, or acquisition of funds by or for the
account of, any office of such Bank (or any Person
controlling such Bank) (but only to the extent not
otherwise included in the determination of the
Eurodollar Rate); or
(iii) imposes on such Bank any other
condition affecting this Agreement or any Loans made
hereunder;
and the result of any of the foregoing is to increase
the cost to such Bank of making or maintaining Loans or
Commitments or to reduce any amount receivable by it in
respect of Loans or Commitments, then, in any such
case, the Company or the applicable Designated
Subsidiary shall promptly pay the Bank, upon its demand
pursuant to subsection 2.15(c), any additional amounts
necessary to compensate such Bank (or any Person
controlling such Bank) for such additional cost or
reduced amount receivable plus interest thereon at the
Prime Rate, for five (5) Business Days from the date
demanded and thereafter, at the Post-Default Rate, in
each case until payment in full thereof.
(b) In the event that any Bank (or any
Person controlling such Bank) shall have reasonably
determined that any Regulatory Change does or shall
have the effect of reducing the rate of return on such
Bank's (or such Person's) capital as a consequence of
its obligations hereunder to a level below that which
such Bank (or such Person) could have achieved on the
date
hereof but for such Regulatory Change (taking into
consideration such Bank's policies with respect to
capital adequacy) by any amount reasonably deemed by
such Bank to be material, then from time to time,
within 15 days after demand by such Bank pursuant to
subsection 2.15(c), the Company or the applicable
Designated Subsidiary shall promptly pay the Bank such
additional amount or amounts as will compensate such
Bank (or such Person) for such reduction.
(c) If any Bank (or any Person controlling
such Bank) becomes entitled to claim any additional
amounts pursuant to this subsection 2.15, it shall
promptly after becoming aware thereof notify the
Company of the event by reason of which it has become
so entitled. Any such claim for additional amounts by
such Bank shall be accompanied by a certificate setting
forth in reasonable detail the calculation thereof
(provided, however, that such Bank shall not be
required to disclose proprietary or confidential
information in such certificate), submitted by such
Bank to the Company, and such certificate shall
constitute prima facie evidence of the accuracy of the
amount of such claim. This agreement shall survive
termination of the Commitments and the payment in full
of the outstanding Notes for 180 days (but not longer).
(d) If the Company or any Designated
Subsidiary shall at any time be required to pay amounts
pursuant to this subsection 2.15 to any Bank (or any
Person controlling such Bank), the Company or such
Designated Subsidiary shall be entitled to prepay the
Loans allocable to such Bank, and thereupon the Company
or such Designated Subsidiary shall be entitled to
terminate the Commitment of such Bank (such prepayment
to be made together with all other amounts due to such
Bank hereunder and under the Notes, including, without
limitation, interest, fees and any amounts payable
pursuant to subsection 2.16).
2.16 Indemnity. Each of the Company and each
Designated Subsidiary agrees to indemnify each Bank
for, and to hold such Bank harmless from, any loss or
expense (but not including loss of Applicable Margin)
which such Bank may sustain or incur as a consequence
of (a) any default by the Company or any Designated
Subsidiary in borrowing or failure to borrow for any
reason such Eurodollar Loans after the Company or such
Designated Subsidiary has given a notice in respect
thereof in accordance with subsection 2.3, (b) receipt
by such Bank of any prepayment (whether optional or
mandatory) of any Eurodollar Loan on a day which is not
the last day of an Interest Period applicable to such
Eurodollar Loan, (c) default by the Company or any
Designated Subsidiary in making any prepayment of a
Eurodollar Loan after it has given a notice in
accordance with subsection 2.8(a) or (d) acceleration
of any Eurodollar Loans, and each Bank shall use
reasonable efforts to minimize any amounts due to such
Bank pursuant to this subsection 2.16. The Company and
each Designated Subsidiary shall promptly pay to each
Bank, upon its demand (accompanied by the certificate
described below), any amounts necessary to compensate
such Bank for such losses or expenses incurred by such
Bank in making or maintaining any Loans in accordance
with this subsection 2.16, including, without
limitation, any interest or fees payable by such Bank
to lenders of funds obtained by it in order to make or
maintain its Eurodollar Loans. Any claim for
additional amounts pursuant to the foregoing sentence
by such Bank shall be accompanied by a certificate
setting forth in reasonable detail the calculation
thereof (provided, however, that such Bank shall not be
required to disclose proprietary or confidential
information in such certificate), submitted by such
Bank to the Company or such Designated Subsidiary, and
such certificate shall constitute prima facie evidence
of the accuracy of the amount of such claim, provided
that the determination of such amount is made on a
reasonable basis. This subsection 2.16 shall survive
termination of the Commitments and the payment in full
of the outstanding Notes for 180 days (but not longer).
2.17 Maximum Number of Tranches.
Notwithstanding any other provision hereof, there shall
not at any time be outstand-ing hereunder Tranches in
excess of the Tranche Limit.
2.18 Use of Proceeds. The proceeds of the
Loans may only be used to refinance existing
Indebtedness of the Company and/or its Subsidiaries
under the Existing Credit Agreement.
2.19 Pro Rata Treatment and Payments; L/C
Participation. (a) Each borrowing of Loans by the
Company or any Designated Subsidiary from the Banks,
each payment by the Company on account of any fees
hereunder (including, without limitation, any Issuance
Fees and Drawing Fees in respect of L/Cs (but excluding
fees payable pursuant to subsection 2.7(b))), and any
reduction of the Commitments of the Banks hereunder
shall be made pro rata according to the respective
Commitment Percentages of the Banks. Each payment
(including each prepayment) by the Company or any
Designated Subsidiary on account of principal of and
interest on the Loans and other amounts due hereunder
(other than payments made pursuant to subsection 2.13,
2.14, 2.15 or 2.16) shall be made pro rata according to
the respective outstanding principal amounts of the
Loans held by each Bank. All payments (including
prepayments) to be made by the Company or any
Designated Subsidiary on account of principal and
interest on the Notes or on account of any fees or
other amounts due hereunder shall be made without set-
off or counterclaim and shall be made to the Agent, for
the account of the Banks, at the Agent's office in
Boston, Massachusetts as set forth in subsection 9.2,
in lawful money of the United States of America and in
immediately available funds not later than 11:00 a.m.
Boston, Massachusetts time, on the date on which such
payment shall become due. The Agent shall distribute
such payments to the Banks promptly upon receipt in
like funds as received. If any payment hereunder
(other than payments on Eurodollar Loans) becomes due
and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding
Business Day, and, with respect to payments of
principal, interest thereon shall be payable at the
then applicable rate during such extension. If any
payment on a Eurodollar Loan becomes due and payable on
a day other than a Working Day, the maturity thereof
shall be extended to the next succeeding Working Day
unless the result of such extension would be to extend
such payment into another calendar month in which event
such payment shall be made on the immediately preceding
Working Day and with respect to payments of principal
interest thereon shall be payable at the then
applicable rate during such extension.
(b) Unless the Agent shall have been
notified in writing by any Bank prior to a borrowing
date that such Bank will not make the amount which
would constitute its Commitment Percentage of the Loans
on such date available to the Agent, the Agent may
assume that such Bank has made such amount available to
the Agent on such borrowing date, and the Agent may, in
reliance upon such assumption, make available to the
Company or a Designated Subsidiary, as applicable, a
corresponding amount. If such amount is made available
to the Agent on a date after such borrowing date, such
Bank shall pay to the Agent on demand an amount equal
to the product of (i) the daily Federal Funds Rate
during such period, times (ii) the amount of such
Bank's Commitment Percentage of such borrowing, times
(iii) a fraction the numerator of which is the number
of days that elapse from and including such borrowing
date to the date on which such Bank's Commitment
Percentage of such borrowing shall have become
immediately available to the Agent and the denominator
of which is 365. A certificate of the Agent
submitted to any Bank with respect to any amounts owing
under this subsection 2.19(b) shall be conclusive,
absent manifest error. If such Bank's Commitment
Percentage of such borrowing is not in fact made
available to the Agent by such Bank within three
Business Days of such borrowing date, the Agent shall
be entitled to recover such amount with interest
thereon at the rate per annum applicable to the Loans
hereunder, on demand, from the Company or a Designated
Subsidiary, as applicable. Except as set forth in the
immediately preceding sentence, neither the Company nor
the Subsidiaries shall have any liability to any Person
under this subsection 2.19(b).
(c) (i) Fleet, as the issuing bank with
respect to each L/C, irrevocably agrees to grant and
hereby grants to each Bank (each Bank, in such
capacity, an "L/C Participant") and, to induce Fleet to
maintain L/Cs hereunder, each L/C Participant
irrevocably agrees to accept and purchase and hereby
accepts and purchases from Fleet, on the terms and
conditions hereinafter stated, for such L/C
Participant's own account and risk an undivided
interest equal to such L/C Participant's Commitment
Percentage in Fleet's obligations and rights under each
L/C issued or deemed issued by it hereunder and the
amount of Unpaid Drawings with respect to any draft
paid by Fleet thereunder, effective on the Closing
Date. Each L/C Participant unconditionally and
irrevocably agrees with Fleet with respect to any L/C
that, if a draft is paid under such L/C for which Fleet
is not reimbursed in full by the relevant Account Party
on the date required by subsection 2.1(c)(vii), such
L/C Participant shall pay to Fleet upon notification or
demand at Fleet's address for notices specified herein
an amount equal to such L/C Participant's Commitment
Percentage of the amount of such draft, or any part
thereof, which is not so reimbursed.
(ii) If any amount required to be paid by any
L/C Participant to Fleet with respect to any L/C
pursuant to subsection 2.19(c)(i) in respect of any
unreimbursed portion of any payment made by Fleet under
such L/C is paid to Fleet within three Business Days
after the date such payment is due by such L/C
Participant, such L/C Participant shall pay to Fleet on
demand an amount equal to the product of (A) such
amount, times (B) the daily average Federal Funds Rate
during the period from and including the date such
payment is required to the date on which such payment
is immediately available to Fleet, times (C) a fraction
the numerator of which is the number of days that
elapse during such period and the denominator of which
is 365. If any such amount required to be paid by any
L/C Participant pursuant to subsection 2.19(c)(i) is
not in fact made available to Fleet by such L/C
Participant within three Business Days after the date
such payment is due by such L/C Participant, Fleet
shall be entitled to recover from such L/C Participant,
on demand, such amount with interest thereon calculated
from such due date at the rate per annum applicable to
Prime Rate Loans hereunder. A certificate of Fleet
submitted to any L/C Participant with respect to any
amounts owing under this subsection shall be conclusive
in the absence of manifest error.
(iii) Whenever, at any time after Fleet
has made payment under any L/C and has received from
any L/C Participant its pro rata share of such payment
in accordance with subsection 2.19(c)(i), Fleet
receives any payment related to such L/C (whether
directly from the Company, a Designated Subsidiary or
otherwise, including by means of set-off or the
proceeds of collateral applied thereto by Fleet), or
any payment of interest on account thereof, Fleet will
distribute to such L/C Participant its pro rata share
thereof; provided, however, that in the event that any
such payment received by Fleet shall be required to be
returned by it, such L/C Participant shall return to
Fleet the portion thereof previously distributed by
Fleet to it. Neither the Company nor any Subsidiary
shall have any liability or obligation to any person
under this
subsection 2.19(c).
2.20 Guaranties. The due payment and
performance of the Obligations shall be guaranteed to
the Banks and the Agent by the Company and each of the
Material Operating Subsidiaries listed on Schedule
2.20 hereto (hereinafter, together with any other
Material
Operating Subsidiary that executes and delivers a
Guaranty, referred to, individually, as a "Guarantor"
and, collectively, as the "Guarantors"), by the
execution and delivery to the Agent, simul-taneously
with the execution and delivery of this Agreement, by
each Guarantor of a Guaranty in form and substance
satisfactory to the Agent(as amended, supplemented or
otherwise modified from time to time with its terms,
individually, a "Guaranty" and, collectively, as to all
the Guarantors, the "Guaranties"). In addition, each
Material Operating Subsidiary that becomes a Material
Operating Subsidiary after the date hereof shall,
concurrently with becoming a Material Operating
Subsidiary, execute and deliver to the Agent a
Guaranty, in form and substance satisfactory to the
Agent, and upon such execution and delivery, such
Material Operating Subsidiary shall become a Guarantor
under the Loan Documents.
2.21 Security. In order to secure the due
payment and performance by the Company and each
Designated Subsidiary of its respective Obligations,
simultaneously with the execution and delivery of this
Agreement, each of the Company, each other Guarantor
and each Additional Subsidiary Grantor (collectively,
together with any other Subsidiary that executes and
delivers a Security Agreement or otherwise becomes a
party to a Security Agreement, being referred to herein
as "Collateral Grantors" and, individually, a
"Collateral Grantor") shall, pursuant to an amended and
restated security agreement in form and substance
satisfactory to the Agent and the Banks dated as of the
Closing Date (as amended, supplemented or otherwise
modified from time to time in accordance with its
terms, the "Security Agreement"), grant to the Agent
for the ratable benefit of the Secured Parties a first
priority lien on and security interest in the
following:
(a) all of the issued and outstanding shares
of capital stock of each Guarantor (other than the
Company);
(b) all present and future accounts
receivable and inventory of such Collateral Grantor;
and
(c) all proceeds and products of the
property and assets described in clauses (a) and (b)
above.
Each Collateral Grantor shall execute and deliver or
cause to be executed and delivered such other
agreements, instruments and documents as the Agent may
reasonably require in order to effect the purposes of
the Security Agreement, this subsection 2.21 and this
Agreement. In addition, each Material Operating
Subsidiary that becomes a Material Operating Subsidiary
after the date hereof shall, concurrently with becoming
a Material Operating Subsidiary, execute and deliver a
Security Agreement supplement, in form and substance
satisfactory to the Agent, pursuant to which such
Material Operating Subsidiary will grant to the Agent
for the ratable benefit of the Secured Parties a first
priority lien on and security interest in the assets
described in clauses (b) and (c) above, and upon such
execution and delivery, such Material Operating
Subsidiary shall become a Collateral Grantor under the
Loan Documents.
2.22 Additional L/C Provisions. (a) Without
limiting the generality of subsection 2.15, if:
(i) any Regulatory Change shall (A) impose,
modify or deem applicable any reserve, special deposit,
capital mainten-ance, deposit insurance premium or
assessment, or similar requirement against letters of
credit issued or deemed issued by, or assets held by,
or deposits made with or for the account of, Fleet, (B)
impose on Fleet any other condition regarding the L/Cs
or (C) subject Fleet to any tax, charge, fee, deduction
or withholding of any kind whatsoever (except for
changes in Taxes and except for taxes measured by the
net income of Fleet); and
(ii) the result of any such event shall be to
increase the cost to Fleet of the issuance or
maintenance of the L/Cs, or reduce the amount of
principal, interest, or any fee or compensation
receivable by Fleet in respect of the L/Cs;
then, upon demand of Fleet, the Company or the
applicable Designated Subsidiary shall pay to Fleet,
from time to time as specified by Fleet, all additional
amounts which are necessary to compensate Fleet for
such increased cost or reduction incurred by Fleet,
accruing from and after the date initially demanded by
Fleet. All payments of compensation for such increased
cost or reduction shall be accompanied by interest
thereon, at the Prime Rate from the date demanded for
five (5) Business Days, and thereafter, at the Post-
Default Rate, in each case until payment in full
thereof. A certificate as to such increased cost
incurred by Fleet showing in reasonable detail the
calculation thereof shall be submitted by Fleet to the
Company and shall constitute prima facie evidence of
the accuracy of the amounts set forth therein. For
purposes of this subsection 2.22, all references to
L/Cs shall be deemed to refer to participations in
L/Cs, and all references to "Fleet" shall be deemed to
include any L/C Participant, except that amounts
payable by the Company and the Designated Subsidiaries
shall only be paid to Fleet and then delivered to any
L/C Participant having such cost. In the event of any
inconsistency between the terms of this subsection 2.22
and subsection 2.15, the provisions of subsection 2.15
shall govern. This Agreement shall survive termination
of the Commitment and payment of the outstanding Notes
for 180 days (but not longer).
(b) The obligations of the Company and each
Designated Subsidiary under this Agreement with respect
to the L/Cs shall, absent gross negligence or willful
misconduct by Fleet, (x) be absolute, unconditional and
irrevocable and (y) be per-formed strictly in
accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without
limitation, the following circumstances:
(i) the L/Cs, the Notes, this Agreement or
any other Loan Documents or agreements, instruments or
documents relating thereto proving to be forged,
fraudulent, invalid, unenforceable or insufficient in
any respect;
(ii) any amendment or waiver of, or any
consent to the departure from, all or any of the
Security Documents and any subsequent such agreements;
(iii) the existence of any claim, setoff,
defense or other rights which the Company or any
Designated Subsidiary may have at any time against any
beneficiary or any transferee of any beneficiary (or
any Persons or entities for whom any beneficiary or any
such transferee may be acting);
(iv) any demand presented under any L/C (or
any endorsement thereon) proving to be forged,
fraudulent, invalid, unenforceable or insufficient in
any respect or any statement therein being inaccurate
in any respect whatsoever;
(v) the failure of any document to bear
reference, or to bear adequate reference, to the
applicable L/C;
(vi) the use to which the L/Cs may be put or
any acts or omissions of the Company or any Designated
Subsidiary or beneficiaries in connection therewith; or
(vii) any other similar circumstances,
provided that such circumstances or happening shall not
have constituted gross negligence or willful misconduct
of Fleet.
(c) Fleet shall not be responsible: (i) for the
validity or insufficiency of any instrument
transferring or assigning or purporting to transfer or
assign the L/Cs or the rights or benefits thereunder or
proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any rea-son; (ii) for
errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail,
cable tele-graph, telex or otherwise, whether or not
they be in cipher; (iii) for any loss or delay in the
transmission or otherwise of any document or draft
required in order to make a draw under the L/Cs or of
proceeds thereof; and (iv) for any consequence arising
from causes beyond the control of Fleet provided that
this para-graph (c) shall not apply to the gross
negligence or willful mis-conduct of Fleet.
None of the above shall affect, impair or prevent the
vesting of any of Fleet's rights or powers hereunder.
(d) In furtherance and extension and not in
limitation of the specific provisions hereinabove set
forth, any action taken or omitted by Fleet under or in
connection with the L/Cs or the related drafts or
documents, unless constituting gross negligence or
willful misconduct, shall be binding upon the Company
and the Designated Subsidiaries and shall not put Fleet
under any resulting liability to the Company and the
Designated Subsidiaries.
(e) The Company and each Designated
Subsidiary shall at all times protect, indemnify and
save harmless Fleet and each Bank from and against any
and all claims, actions, suits and other legal
proceedings, and from and against any and all losses,
claims, demands, liabilities, damages, costs, charges,
counsel fees and other expenses which Fleet or any Bank
may, at any time, sustain or incur by reason of or in
consequence of or arising out of the issuance of the
L/Cs; it being the intention of the parties that this
Agreement shall be construed and applied to protect and
indemnify Fleet and each Bank against any and all risk
involved in the issuance of the L/Cs, all of which
risks are hereby assumed by the Company and each
Designated Subsidiary, including, without limitation,
any and all risks of the acts or omissions, whether
rightful or wrongful, of any present or future
Governmental Authority (all such acts and omissions,
herein called the "Governmental Acts"); provided,
however, that the Company and each Designated
Subsidiary shall not be required to indemnify Fleet or
any Bank for (i) any claims, damages, losses,
liabilities, costs or expenses to the extent, but only
to the extent, caused by the willful misconduct or
gross negligence of Fleet (with respect to which,
however, Fleet shall be liable to the other Banks) or
(ii) any breach of obligations of Fleet to other Banks.
Notwithstanding any other provision contained in this
Agreement, the obligations of the Company and each
Designated Subsidiary under this subsection 2.22 shall
survive the termination of this Agreement.
(f) In the event that the credit rating of
Fleet is downgraded to less than "A-" by Standard &
Poor's, a division of The McGraw-Hill Companies, Inc.
or any successor to the rating
agency business thereof and such down-grading will
cause the Company or any Designated Subsidiary to incur
any additional expense or otherwise be adversely
affected, the Company or any Designated Subsidiary may
replace any L/C issued or deemed issued by Fleet with
an L/C issued by any Bank or any other bank, in each
case with a credit rating of "A-" or better, provided
that any such letter of credit shall not be entitled to
the benefits of this Agreement, and shall constitute
Specified L/C Obligations (to the extent provided in
the definition thereof) with the effect of reducing the
Available L/C Commitment (in accordance with the
definition thereof).
2.23 Several Obligations. The failure of any
Bank to make any Loan or fund the L/C participation to
be made or funded by it on the date specified therefor
shall not relieve the other Banks of their respective
obligations to make their Loans or fund their L/C
participations on such date, but no Bank shall be
responsible for the failure of the other Banks to make
the Loans or fund the L/C participations to be made by
such other Banks.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce (a) each Bank to enter into this
Agreement and to make the Loans and (b) Fleet to
maintain L/Cs hereunder, the Company and each
Designated Subsidiary, as applicable, hereby represents
and warrants to such Bank that, except as disclosed in
the SEC Reports:
3.1 Financial Condition. The consolidated
balance sheet of the Company and its consolidated
Subsidiaries as at December 31, 1996 and the related
consolidated statements of income, stockholders' equity
and cash flows for the fiscal year ended on such date,
certified by Grant Thornton, copies of which have
heretofore been furnished to each Bank, and the
unaudited consolidated balance sheet and related
consolidated statements of income, stockholders equity
and cash flow of the Company and its consolidated
Subsidiaries for the ending quarter June 30, 1997
present fairly, in conformity with GAAP, the
consolidated financial condition of the Company and its
consolidated Subsidiaries as at such date, and the
consolidated results of their operations and cash flows
for the period then ended (subject to normal year-end
adjustments as to such June 30, 1997 financial
statements). All such financial statements have been
prepared in accordance with GAAP applied consistently
throughout the periods involved (except as approved by
such accountants and as disclosed therein). Neither
the Company nor any of its consolidated Subsidiaries
had, at the dates of the balance sheets referred to
above, any Contingent Obligation, con-tingent liability
or liability for taxes, long-term lease or unusual
forward or long-term commitment, required to be
reflected under GAAP which is not reflected in the
foregoing statements or in the notes thereto and which
was material to the Company and its consolidated
Subsidiaries taken as a whole (including, without
limitation, any Environmental Liability).
3.2 No Change. Since December 31, 1996
there has been no material adverse change in the
business, operations, property, performance or
condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole.
3.3 Corporate Existence; Compliance with the
Law. Each of the Company and its Subsidiaries (a) is
duly organized, validly existing and in good standing
under the laws of the jurisdiction of its
incorporation, (b) has the corporate power and
authority and the legal right to own and operate its
prop-erty, to lease the property it operates as lessee
and to conduct the business in which it is currently
engaged, (c) is duly quali-fied as a foreign
corporation and in good standing under the laws of each
jurisdiction where qualification is required by the
nature of its business or the character and location of
its property or business and in which the failure to so
qualify could have a Material Adverse Effect and (d) is
in compliance with all Requirements of Law, including,
without limitation, all applicable Environmental Laws
and Regulations, except to the extent that the failure
to comply therewith could not, in the aggregate,
reasonably be expected to have a Material Adverse
Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. Each of the Company and its Subsidiaries
has the corporate power and authority to make, deliver
and perform each of this Agreement, the Notes, the
other Loan Documents, the Related Documents and the
other documents contemplated hereby to which it is a
party and to consummate (a) the transactions
contemplated by the Loan Documents and Related
Documents to which it is a party and (b) in the case of
the Company, the Merger and the other transactions
contemplated thereby. Each of the Company and its
Subsidiaries has taken all necessary corporate action
to authorize the execution, delivery and performance of
each of this Agreement, the Notes, the other Loan
Documents and the other docu-ments contemplated hereby
to which it is a party. No consent or authorization
of, or filing with, any Person (including, without
limitation, any Governmental Authority), is required in
connection with the execution, delivery, performance,
validity or enforceability of this Agreement, the
Notes, the other Loan Documents or the other documents
contemplated hereby or with the consummation of the
Tender Offer or Merger or the other transactions
contemplated hereby or thereby, other than (i) the
Certificate of Ownership and Merger merging the
Purchaser with and into the Company and (ii) those
consents, authorizations and filings which the failure
to obtain, take, give or make could not, either
individually or in the aggregate, be reasonably likely
to (A) have a Material Adverse Effect, (B) affect the
enforceability, validity or binding effect of any of
the Loan Documents or (C) expose the Agent or any Bank
to personal liability. This Agreement has been duly
executed and delivered on behalf of the Company and
each Designated Subsidiary, and this Agreement, the
Notes, the other Loan Documents, the Related Documents
and the other documents contemplated hereby constitute,
legal, valid and binding obligations of the Company and
each Subsidiary party thereto, enforceable against the
Company and each Subsidiary party thereto in accordance
with their respective terms, except as enforceability
may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by
general principles of equity (regardless of whether
enforcement is sought in a proceeding in equity or at
law).
3.5 No Legal Bar. The execution, delivery
and performance of this Agreement, the Notes, the other
Loan Documents, the Related Documents and the other
documents contemplated hereby, the borrowings hereunder
and the use of the proceeds thereof, and the
consummation of the Merger and the other transactions
contemplated hereby and thereby, will not violate any
Requirement of Law or any Contractual Obligation of the
Company or any of its Subsidiaries, and will not result
in or require the creation or imposition of any Lien on
any of its or their respective properties pursuant to
any Requirement of Law or any Contractual Obligation,
except, with respect to the foregoing other than with
respect to the Loan Documents, such violations as could
not, either individually or in the aggregate, be
reasonably likely to (i) have a Material Adverse
Effect, (ii) subject any Loan Party or any of its
Subsidiaries to any criminal penalties or (iii) subject
the Agent or any Bank to any civil or criminal
penalties.
3.6 No Litigation. No action, suit,
litigation,
investigation or proceeding, including, without
limitation, any Environmental Proceeding, of or before
any arbitrator or Governmental Authority is pending or,
to the knowledge of the Company, threatened, by or
against the Company or any of its Subsidiaries or
against any of their respective properties or revenues
that could reasonably be expected to have a Material
Adverse Effect.
3.7 Federal Regulations. No part of the
proceeds of any
Loans hereunder will be used in violation of the
provisions of the Regulations of the Board of Governors
of the Federal Reserve System, including, without
limitation, Regulations G, U and X.
3.8 Investment Company Act. Neither the
Company nor any
Subsidiary is an "investment company", or a company
"con-trolled" by an "investment company", within the
meaning of the Investment Company Act of 1940, as
amended.
3.9 Disclosure. The financial statements,
certifi-cates,
opinions, and other statements furnished in writing to
the Agent or the Banks by or on behalf of the Company
or any Subsidiary in connection with this Agreement or
the transactions contemplated hereby do not, taken as a
whole, contain any untrue statement of a fact, or omit
to state any fact necessary in order to make the
statements contained therein or herein not mislead-ing,
except for matters that could not reasonably be
expected to have a Material Adverse Effect.
3.10 No Default. Neither the Company nor any
of its
Subsidiaries is in default under or with respect to any
Contractual Obligation in any respect which could
reasonably be expected to have a Material Adverse
Effect. After giving effect to the amendment and
restatement of the Existing Credit Agreement as this
Agreement, no Default or Event of Default has occurred
and is continuing.
3.11 Taxes. Except as set forth on Schedule
3.11 hereto,
each of the Company and its Subsidiaries has filed or
caused to be filed all material tax returns which to
its knowledge are required to be filed, and has paid
all taxes shown to be due and payable on said returns
or on any assessments made against it or any of its
property and all other material taxes, fees or other
charges which to its knowledge have been imposed on it
or any of its property by any Governmental Authority
(other than those the amount or validity of which is
currently being contested in good faith by appropriate
proceedings diligently pursued and with respect to
which reserves in conformity with GAAP have been
provided in its books); no material tax liens have been
filed and, to the knowledge of the Company, no claims
are being asserted with respect to any such taxes, fees
or other charges, except for claims not material to the
Company and its Subsidiaries taken as a whole.
3.12 Subsidiaries. At the date of this
Agreement, the
Company has no Subsidiaries except those listed on
Schedule 3.12, and the Company owns directly or
indirectly 100% of the outstanding voting shares of
each such Subsidiary except as disclosed therein.
3.13 Ownership of Property; Liens. Except as
permitted
in subsection 6.2, each of the Company and its
Subsidiaries has good title in fee simple to, or valid
leasehold interest in, all its real property, and good
title to all its other property, and none of such owned
property is subject to any Lien, except for the
security interest granted pursuant to the Security
Documents.
3.14 ERISA. Except as described on Schedule
3.14, as it may be updated from time to time by the
Company pursuant to subsection 5.8(c), neither the
Company, nor any Commonly Controlled Entity, is a
participating employer in any Plan in which more than
one employer makes contributions as described in
Sections 4063 and 4064 of ERISA, which, together with
all other liabilities described in this subsection,
could give rise to a liability which is material. For
purposes of this subsection, a liability is material if
it, together with all other liabilities described in
this subsection, could subject the Company or any of
its Subsidiaries to any tax, penalty, or other
liabilities that could reasonably be expected to have a
Material Adverse Effect. Except as described on
Schedule 3.14, as it may be updated from time to time,
neither the Company or any Subsidiary nor any Commonly
Controlled Entity has any contingent liability with
respect to any post-retirement benefit under any
employee welfare benefit plan (as defined in Section
3(l) of ERISA) other than (a) liability for health plan
continuation coverage as described in Part 6 of Title 1
of ERISA, (b) liability under any severance plan, (c)
liability under plans or programs required by law, and
(d) disability benefits under any tax-qualified pension
plans in an amount which together with all other
liabilities described in this subsection, could give
rise to a liability which is material. Neither the
Company or any Subsidiary nor any Commonly Controlled
Entity has received any notice from the PBGC that any
of the Single Employer Plans is being involuntary
terminated and no event shall have occurred, and there
exists no condition or set of circumstances, which
present a material risk of the distress termination
(within the meaning of Section 4041(c) of ERISA) or the
involuntary termination of any of the Single Employer
Plans. Neither the Company or any Subsidiary nor any
Commonly Controlled Entity has incurred any liability
to the PBGC which remains outstanding other than the
payment of premiums, and there are no premiums which
have become due which are unpaid. Each Single Employer
Plan that is intended to be qualified under Section
401(a) of the Code has been determined by the Internal
Revenue Service to be so qualified and each trust
related to such plan has been determined to be exempt
under Section 501(a) of the Code, or the period for
obtaining such a determination letter has not expired;
and no event has occurred and no condition currently
exists which might reasonably be expected to give rise
to a liability that is material as a result of the
failure of any plan that is intended to be qualified
under Section 401(a) of the Code to be so qualified.
No Plan is being audited or investigated by any
government agency or subject to any pending or
threatened claim or suit, which audit, investigation,
pending claim or suit could reasonably be expected to
give rise to a liability, which together with all other
liabilities described in this subsection would be
material. Each Single Employer Plan currently meets
and during the preceding six years has met the minimum
funding standard of Section 302 of ERISA and Section
412 of the Code (without regard to any funding waiver).
With respect to each Multiemployer Plan, the Company,
each Subsidiary and each Commonly Controlled Entity
have paid or accrued to the extent required by GAAP all
contributions pursuant to the terms of each applicable
collective bargaining agreement. No Reportable Event
has occurred during the six-year period prior to the
date on which this representa-tion is made or deemed
made with respect to any Single Employer Plan which
Reportable Event, together with all other liabilities
described in this subsection, could give rise to a
liability which is material, and each Single Employer
Plan has complied in all material respects with the
applicable provisions of ERISA and the Code. The
present value of all benefit liabilities (within the
meaning of Title IV of ERISA) under each Single
Employer Plan maintained by the Company, any Subsidiary
or any Commonly Controlled Entity (based on those
assumptions used to fund the respective Single Employer
Plans) did not, as of the last annual valuation date,
exceed the value of the
assets of such Single Employer Plan allocable to such
benefit liabilities by more than $2,500,000. Except as
described on Schedule 3.14, neither the Company or any
Subsidiary nor any Commonly Controlled Entity has any
unsatisfied liability with respect to a complete or
partial withdrawal from any Multiemployer Plan, which
together with all other liabilities described in this
subsection would be material, and, to the best of the
Company's knowledge, the liability to which the
Company, any Subsidiary or any Commonly Controlled
Entity would become subject under ERISA if the Company,
any Subsidiary or any such Commonly Con-trolled Entity
were to withdraw completely from all Multiemployer
Plans as of the valuation date most closely preceding
the date hereof would not, together with all other
liabilities described in this subsection, be material.
Neither the Company or any Subsidiary nor any Commonly
Controlled Entity has failed to make any payment when
due with respect to any complete or partial withdrawal
from any Multiemployer Plan. No such Multiemployer
Plan is in Reorganization or Insolvent, where the
liability which could reasonably be expected to result
is in an amount which, taken together with all the
liabilities described in this subsection, is material.
Neither the Company or any Subsidiary nor any Commonly
Controlled Entity is required to provide security to a
Single Employer Plan pursuant to Section 307 of ERISA
or Section 401(a)(29) of the Code. Neither the Company
or any Subsidiary nor any Commonly Controlled Entity
has engaged in a transaction which could reasonably be
expected to subject it to liability under Section 4069
or 4212(c) of ERISA which liability together with all
other liabilities described in this subsection is
material. Except as disclosed in Schedule 3.14, as it
may be updated from time to time there are no
agreements which will provide payments to any officer,
employee, shareholder or highly compensated individual
which will be parachute payments under Section 280G of
the Code that are nondeductible to the Company or any
Subsidiary and which will be subject to the tax under
Section 4999 of the Code for which the Company or any
Subsidiary would have a material withholding liability.
3.15 Nortek Indentures. There have been
delivered to the Agent and each Bank a true and correct
copy of each of the Nortek Indentures, including all
amendments, waivers and supplements thereto. To the
knowledge of the Company, the Nortek Indentures and all
such other documents have been duly executed and
delivered by the parties thereto and are in full force
and effect at the date hereof.
3.16 SEC Reports. The Company has furnished
the Agent with true copies of the SEC Reports.
3.17 Intangible Assets. Each of the Company
and the Subsidiaries possesses all patents, trademarks,
service marks, trade names, and copyrights and rights
with respect to the foregoing (collectively, "Patent
Rights"), necessary to conduct its business as now
conducted and as proposed to be conducted, except for
technology not material to the operations of the
Company and its Subsidiaries taken as a whole. To the
best knowledge of the Company, the Patent Rights do not
conflict with the patents, trademarks, service marks,
trade names, copy-rights and other rights with respect
to the foregoing of any other Person, except for
conflicts which are not material to the operations of
the Company and its Subsidiaries taken as a whole.
3.18 Name Changes, Mergers, Acquisitions.
Except for the Merger and except as set forth on
Schedule 3.18, neither the Company nor any of the
Material Operating Subsidiaries has within the six-year
period immediately preceding the date of this Agreement
changed its name, been the surviving entity of a merger
or consolidation, or acquired all or substantially all
of the assets of any Person.
3.19 Licenses and Approvals. The Company and
each of the Subsidiaries has all necessary licenses,
permits and govern-mental authorizations, including,
without limitation, licenses, permits and
authorizations required to comply with all Environ-
mental Laws and Regulations, to own and operate its
properties and to carry on its business as now
conducted, except for licenses, permits and
authorizations, which the failure to have does not
materially adversely affect the operations of the
Company and its Subsidiaries taken as a whole.
3.20 Labor Disputes; Collective Bargaining
Agreements; Employee Grievances. Except as set forth
on Schedule 3.20, there is no pending strike, work
stoppage, material unfair labor practice claim or
charge, arbitration or other material labor dispute
against or affecting the Company or any Subsidiary or
their representative employees.
3.21 Solvency. To the best of the knowledge
of the Company, each Loan Party is Solvent,
individually and together with its Subsidiaries and,
after giving effect to the receipt and application of
the Loans and the issuance or deemed issuance of L/Cs
in accordance with the terms of this Agreement, each
Loan Party, individually and together with its
Subsidiaries, shall continue to be Solvent.
3.22 Outstanding Indebtedness for Borrowed Money.
Schedule 3.22 sets forth a complete and accurate list
of all
Indebtedness of the Company and its Subsidiaries for
borrowed money, and all available committed credit
lines, outstanding on the date hereof.
3.23 Hazardous Materials. Except as
described in the Phase I Environmental Assessments &
Transaction Screens of Ply Gem Industries, Inc. and its
Subsidiaries across the United States draft dated June
20, 1997 prepared by Dames & Moore, Hazardous Materials
have not been released, discharged or disposed of at,
or transported to or from, any of the real property
currently owned, leased or occupied by the Company or
its Subsidiaries so as to give rise to any liability
under Environmental Laws and Regulations, except in
such case where the liability would not have a Material
Adverse Effect.
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans and L/Cs.
The agreement of each Bank to make its initial Loan
hereunder and of Fleet to maintain L/Cs on the Closing
Date shall be subject to the satisfaction, immediately
prior to or concurrently with the making of such Loan
or the issuance or deemed issuance of any such L/C, of
each of the following conditions precedent:
(a) Tender Offer and Merger. 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
Banks and in compliance with all applicable laws and
necessary approvals. The Banks 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) Corporate Structure. The Agent and the
Banks shall
be satisfied with the corporate and legal structure and
capitalization of the Company and each of the other
Loan Parties, including, without limitation, the terms
and conditions of the charter, bylaws and each class of
capital stock of the Company and each other Loan Party
and each agreement or instrument relating to such
structure or capitalization.
(c) No Material Adverse Change. Since
December 31, 1996, 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.
(d) Pre-Commitment Information. 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 Agent or any of the
Banks that is inconsistent in any material respect with
the Pre-Commitment Information or that could reasonably
be expected to have a Material Adverse Effect.
(e) Capital Structure. The Banks shall be
satisfied with the terms and conditions of (i) the
$310,000,000 of senior notes issued by Nortek pursuant
to that certain Nortek Indenture described in clause
(c) of the definition thereof and (ii) the at least
$400,000,000 of equity to be contributed by Nortek to
the Company in connection with the Merger, including,
without limitation, the payment terms, covenants and
events of default thereof. The Company shall have
received at least $400,000,000 in gross cash proceeds
from the sale of its common stock to Nortek and all
such proceeds shall have been used or shall be used
simultaneously with the occurrence of the Closing Date
under this Agreement in accordance with the terms of
the Merger Agreement.
(f) Compliance; No Litigation. The Agent
and the Banks shall be satisfied that the Company and
its Subsidiaries are, and will be after giving effect
to the occurrence of the Closing Date, in compliance
with all applicable laws, including, without
limitation, ERISA and all Environmental Laws and
Regulations, except where the failure to so comply
could not reasonably be expected to have a Material
Adverse Effect. There shall exist no action, suit,
investigation, litigation or proceeding affecting the
Company or any of its Subsidiaries pending or
threatened before any court, governmental agency or
arbitrator that (i) could be reasonably expected to
have a Material Adverse Effect or (ii) purports to
affect the legality, validity or enforceability of the
Tender Offer, the Merger, this Agreement, any Note, any
other Loan Document, any Related Document or the
consummation of the transactions contemplated hereby or
thereby.
(g) Insurance. The Agent and the Banks shall be
satisfied with the amount, types and terms and
conditions of all insurance maintained by the Company
and its Subsidiaries.
(h) Fees and Expenses. All accrued fees and
expenses of the Agent and the Banks (including the fees
and expenses of counsel for the Agent and the Banks)
for which statements have been rendered on or prior to
the Closing Date shall have been paid.
(i) Consents and Approvals. All
governmental and third party consents and approvals
necessary in connection with this Agreement, the other
Loan Documents, the Related Documents and the Nortek
Indentures and the Tender Offer, the Merger and the
other transactions contemplated hereby and thereby
shall have been obtained (without the imposition of any
conditions that are not acceptable to the Banks) and
shall remain in full force and effect; all applicable
waiting periods in connection with the Tender Offer,
the Merger, and the other transactions contemplated
hereby shall have expired without any action having
been taken by any competent authority restraining,
preventing or imposing materially adverse conditions
upon the Tender Offer, the Merger or the rights of the
Company or its Subsidiaries freely to transfer or
otherwise dispose of, or to create any Lien on, any
properties now owned or hereafter acquired by any of
them.
(j) Agreement. The Agent and each Bank
shall have received this Agreement, duly executed and
delivered by the Company and each Designated
Subsidiary.
(k) Notes. The Agent shall have received,
for the account of each Bank, a Note conforming to the
requirements hereof and executed and delivered by a
duly authorized officer of the Company and each
Designated Subsidiary.
(l) Guaranty. The Agent and each Bank shall
have received a Guaranty, executed and delivered by a
duly authorized officer of the Company and each other
Guarantor.
(m) Collateral. The Agent and each Bank
shall have received the Security Agreement, duly
executed and delivered by the Collateral Grantors shall
have received each of the following:
(i) certificates representing the Pledged
Shares (as defined in the Security Agreement)
accompanied by undated stock powers executed in blank
and instruments evidencing the Pledged Debt referred to
therein indorsed in blank;
(ii) duly executed copies of proper financing
statements, to be filed under the Uniform Commercial
Code of all jurisdictions that the Agent may deem
necessary or desirable in order to perfect and protect
the first priority liens and security interests created
under the Security Agreement, covering the Collateral
(as defined in the Security Agreement);
(iii) completed requests for information
to the extent the same shall be available, dated on or
before the Closing Date, listing all effective
financing statements filed in the jurisdictions
referred to in clause (B) above that name the Company
or any other Collateral Grantor as debtor, together
with copies of such financing statements;
(iv) evidence of the completion of all other
recordings and filings of or with respect to the
Security Agreement that the Agent may deem necessary or
desirable in order to perfect and protect the Liens
created thereby;
(v) evidence of the insurance required by
the terms of the Security Agreement; and
(vi) evidence that all other action (other
than those actions required to be taken under
subsection 5.16) that the Agent may deem necessary or
desirable in order to perfect and protect the first
priority liens and security interests created under the
Security Agreement has been taken (including, without
limitation, evidence satisfactory to the Agent that all
Liens on the Collateral in favor of any Person (other
than the Agent for the benefit of the Secured Parties)
shall have been terminated).
(n) Borrowing Certificates. The Agent and
each Bank shall have received (i) a certificate of the
Company in substantially the form of Exhibit D-1 dated
the Closing Date and executed and delivered by a duly
authorized officer of the Company and (ii) a
certificate of each other Loan Party in substantially
the form of Exhibit D-2 dated the Closing Date and
executed and delivered by a duly authorized officer of
each other Loan Party.
(o) Notice of Borrowing. The Agent shall
have received a notice of requested borrowing in
accordance with subsection 2.3(a).
(p) Legal Opinions. (i) The Agent and each
Bank shall have received the executed legal opinion of
(A) Charles M. Modlin, Esq., counsel to the Company and
each Subsidiary, dated the Closing Date, in
substantially the form of Exhibit F-1, and (B) Ropes &
Gray, counsel to Nortek, dated the Closing Date, in
substantially the form of Exhibit F-2, in each case
together with copies of the legal opinions, if any,
upon which such counsel relies, with such changes
thereto as may be approved by, and otherwise in form
and substance satisfactory to the Agent and its counsel
and covering such matters incident to the transactions
contemplated by this Agreement, the Notes, the other
Loan Documents, the Related Documents and the Nortek
Indentures and by the Tender Offer and Merger as the
Agent may reasonably require.
(ii) The Agent and each Bank shall have
received the executed legal opinion of Shearman &
Sterling, counsel to the Agent, dated the Closing Date,
in form and substance satisfactory to the Agent.
(q) Related Agreements. The Agent and each
Bank shall have received true and correct copies,
certified as to authenticity by the Company and each
Subsidiary, of the Certificate of Incorporation and By-
laws of the Company and each such Subsidiary and such
other documents or instruments to which the Company or
any of its Subsidiaries is a party or by which any of
them is bound as may be reasonably requested by the
Agent.
(r) Corporate Proceedings. The Agent and
each Bank shall have received a copy of the
resolutions, in form and substance reasonably
satisfactory to the Agent, of the Board of Directors of
the Company, each other Loan Party and each Subsidiary
authorizing the execution, delivery and performance of
this Agreement, the Notes, the other Loan Documents,
the Related Documents and all documents and instruments
to be delivered in connection herewith, in each case to
which it is a party, and the consummation of the Merger
and the other transactions contemplated hereby and
thereby, certified by the Secretary or an Assistant
Secretary of the Company or such other Loan Party (as
applicable), as of the Closing Date; and each such
certificate shall state that the resolutions thereby
certified have not been amended, modified, revoked or
rescinded as of the date of such certificate.
(s) Related Documents and Nortek Indentures.
The Agent shall have received, with a copy for each
Bank, a certified copy of each Related Document and
each Nortek Indenture, together with all amendments,
waivers or supplements thereto.
(t) Consents. The Agent, with a copy for
each Bank, shall have received true copies (in each
case certified as to authenticity on such date by a
duly authorized officer of the Company or by such other
Person as may be appropriate or may be required by the
Agent) of all documents and instruments, including all
consents, authorizations, filings and orders, required
under any Requirement of Law or by Contractual
Obligations of the Company or any Subsidiary, in
connection with the execution, delivery, performance,
validity and enforceability of this Agreement, the
Notes, the other Loan Documents and the Related
Documents and such consents, authorizations, filings
and orders shall be satisfactory in form and substance
to the Agent and shall be in full force and
effect.
(u) Other Fees. The Agent shall have received for
itself or for the account of each Bank, as appropriate,
the fees payable on the Closing Date pursuant to
subsection 2.7.
(v) Good Standings. The Agent and each Bank
shall have received good standing certificates as of
dates not more than fortyfive (45) days prior to the
Closing Date, with respect to each of the Company and
each other Loan Party from the Secretaries of State of
their respective states of incorporation and each state
in which each of them is qualified to do business.
(w) Incumbency Certificates. The Agent and
each Bank shall have received an incumbency certificate
(with specimen signatures) with respect to the Company
and each other Loan Party.
(x) Solvency Certificate. The Agent and each
Bank shall have received from the Company and each other
Loan Party a Solvency Certificate, in form and substance
satisfactory to the Banks, attesting to the Solvency of
the Company or such other Loan Party, 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 Tender Offer and
the Loan Documents,
from the treasurer of the Company or an authorized
officer of each other Loan Party, as the case may be.
(y) Ownership, Liens. A majority of the
capital stock of the Company and the Company's
Subsidiaries shall be directly or indirectly owned by
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 interests created under the Loan Documents.
(z) Projections. The Agent and the Banks
shall have received a copy of the Company's five year
projections (including, without limitation, a balance
sheet, an income statement and a 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
reasonably satisfactory to the Agent.
(aa) Other Documentation. Such other
documentation as the Agent or the Banks shall
reasonably request, including, without limitation, the
Assignment and Agreement, duly executed by each party
thereto.
4.2 Conditions to All Loans. The agreement
of each Bank to make any Loan (including the initial
Loans) and of Fleet to issue or maintain any L/Cs
requested to be made or issued or deemed issued
hereunder is subject to the satisfaction, immediately
prior to or concurrently with the making of such Loan
or issuance of such L/C, of the following additional
conditions precedent:
(a) Representations and Warranties. Each of the
representations and warranties made by the Company and
each other Loan Party in or pursuant to this Agreement
(other than subsections 3.21 and 3.22) and the other
Loan Documents shall be true and
correct in all material respects on and as of such date
as if made on and as of such date (except any such
representations and warranties that, by their terms,
refer to a specific date other than the date of the
relevant Loan, in which case as of such specific date).
(b) No Default or Event of Default. No
Default or Event of Default shall have occurred and be
continuing on such date or
after giving effect to the Loans or L/Cs requested to
be made or issued or deemed issued on such date.
(c) No Violations of Law. Such Loan or L/C
and the use of proceeds thereof or any drawing thereon
shall not contravene, violate or conflict with, nor
involve any Bank in a violation of, any law, rule,
injunction, or regulation, or determination of any
court of law or other Governmental Authority
(including, without limitation, Regulation U).
(d) Other. All corporate or other
proceedings, and all documents, instruments and other
legal matters in connection with the transactions
contemplated by this Agreement, the Notes and the other
Loan Documents shall be reasonably satisfactory in form
and substance to the Agent and its counsel. Each
borrowing by the Company and each Designated Subsidiary
hereunder or issuance or deemed issuance of an L/C
hereunder shall constitute a representation and
warranty by the Company and each borrowing Designated
Subsidiary as of the date of such borrowing or issuance
or deemed issuance that the conditions to such or
issuance or deemed issuance contained in subsections
4.2(a), (b) and (c) have been satisfied.
4.3 Conditions to Loans to New Designated
Subsidiaries. The agreement of each Bank to make any
Loan to any new Designated Subsidiary shall be subject
to the receipt by each Bank, as appropriate, of (a) a
Note issued by such Designated Subsidiary, (b)
corporate documents of such new Designated Subsidiary,
(c) a copy of an opinion of counsel to the Company in
substantially the form provided with respect to
Designated Subsidiaries on the Closing Date (including,
without limitation, an opinion to the effect that the
execution, delivery and performance of the Loan
Documents by such Designated Subsidiary, including
without limitation any borrowing made by it thereunder,
do not violate the requirements of the Nortek
Indentures or any indentures or other agreements
binding upon such Designated Subsidiary) and (d) any
other documents reasonably requested by the Agent or
any of the Banks in connection therewith.
SECTION 5. AFFIRMATIVE COVENANTS
The Company and each Designated Subsidiary hereby
covenant and agree with the Agent and the Banks that,
from and after the date of this Agreement until the
Obligations are paid in full and the Commitments are
terminated and all L/Cs have expired or been duly
terminated, the Company shall, and, in the case of the
agreements set forth in subsections 5.3, 5.5, 5.6, 5.7,
5.11, 5.13, and 5.16, such Designated Subsidiary shall
(and each of the Company and such Designated Subsidiary
shall cause each of its respective Subsidiaries to):
5.1 Financial Statements. Furnish to the
Agent and each Bank:
(a) as soon as available, but in any event
within 90 days after the end of each fiscal year of the
Company, copies of (i) the consolidated balance sheets
of the Company and its consolidated Subsidiaries as at
the end of such fiscal year and the related
consolidated statements of income, stockholders' equity
and cash flows for such fiscal year, in each case
setting forth in comparative form the figures for the
previous year, certified, without qualification, by
Arthur Andersen, L.L.P. or another independent
certified public accountant of recognized standing
reasonably acceptable to the Banks, and (ii) the
consolidating balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal
year and the related consolidating
statement of income for such fiscal year, in each case
showing intercompany eliminations, certified by the
chief financial officer of the Company as being, to the
best of such officer's knowledge, fairly stated in all
material respects when considered in relation to the
consolidated financial statements of the Company and
its consolidated Subsidiaries; and
(b) as soon as available, but in any event
within 45 days after the end of each of the first three
fiscal quarters of the Company, copies of (i) the
unaudited consolidated balance sheets of the Company
and its consolidated Subsidiaries as at the end of such
fiscal quarter and the related unaudited consolidated
statements of income and cash flows for such fiscal
quarter and for the portion of the fiscal year through
such fiscal quarter, certified by the chief financial
officer of the Company as presenting fairly, to the
best of such officer's knowledge, the financial
condition and results of operations of the Company and
its consolidated Subsidiaries (subject to normal year-
end audit adjustments) and (ii) the unaudited
consolidating balance sheet of the Company and its
consolidated Subsidiaries as at the end of such fiscal
quarter and the related unaudited consolidating state-
ment of income for the portion of the fiscal year
through such fiscal quarter, in each case showing
intercompany eliminations, certified by the chief
financial officer of the Company as being, to the best
of such officer's knowledge, fairly stated in all
material respects when considered in relation to the
consolidated financial statements of the Company and
its consolidated Subsidiaries; all such financial
statements to be prepared in reasonable detail and (in
the case of such consolidated financial statements) in
accordance with GAAP applied consistently throughout
the periods reflected therein (except as approved by
the Company's accoun-tants or such financial officer,
as the case may be, and disclosed therein and subject
to year-end adjustments).
5.2 Certificates; Other Information.
Furnish to the Agent and each Bank:
(a) concurrently with the delivery of each
set of the financial statements referred to in clause
(i) of paragraph (a) of subsection 5.1, a certificate
of the independent certified public accountants
reporting on such financial statements stating that in
making the examination necessary therefor no knowledge
was obtained of any Default or Event of Default, except
as specified in such certificate;
(b) concurrently with the delivery of each
set of the financial statements referred to in
paragraphs (a) and (b) of subsection 5.1, a certificate
of the chief financial officer of the Company (i)
stating that, to the best of such officer's knowledge,
during such fiscal quarter the Company has observed or
performed in all material respects all of its covenants
and other agreements, and satisfied every condition
contained in this Agree-ment to be observed, performed
or satisfied by it, and that such officer has obtained
no knowledge of any Default or Event of Default except
as specified in such certificate, and (ii) showing in
reasonable detail the calculations supporting such
statement in respect of subsections 6.9, 6.10, 6.11,
6.12 and 6.18;
(c) within five days after the same are
filed, copies of all financial statements and reports
which the Company may make to, or file with, the
Securities and Exchange Commission or any successor or
analogous Governmental Authority;
(d) not later than 90 days after the end of
each fiscal year of the Company, a copy of the
projections by the Com-pany of the operating budget and
cash flow of the Company and its
Subsidiaries for the next succeeding fiscal year, such
projec-tions to be accompanied by a certificate of a
Responsible Officer to the effect that such projections
have been prepared on a basis consistent with the
Company's past practice (or otherwise stating the basis
on which such projections have been prepared); and
(e) promptly, such additional financial and
other information as the Agent or any Bank may from
time to time reasonably request.
5.3 Payment of Obligations. Pay, discharge
or otherwise satisfy at or before maturity or before
they become delinquent, as the case may be, all (a)
lawful taxes, assessments and governmental charges or
levies upon it or its property or assets, and (b)
claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other like Persons which,
in any such case, if unpaid would by law give rise to a
Lien upon any of its property or assets, except when
the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto
have been provided on the books of the Company or its
Subsidiaries, as the case may be.
5.4 Material Operating Subsidiaries. Give
notice to the Agent (which upon receipt shall give a
copy thereof to the Banks) of the occurrence of any
Subsidiary becoming a Material Operating Subsidiary
concurrently with such occurrence.
5.5 Conduct of Business and Maintenance of
Existence. Except as permitted by subsection 6.4,
continue to engage in the Business of the Company, and
preserve, renew and keep in full force and effect its
corporate existence and take all reasonable action to
maintain all rights, privileges and franchises neces-
sary or desirable in the normal conduct of its
business; and comply with all Contractual Obligations
and Requirements of Law including, without limitation,
ERISA and all Environmental Laws and Regulations except
to the extent that the failure to comply therewith
would not, in the aggregate, have a Material Adverse
Effect.
5.6 Maintenance of Property; Insurance.
Keep all property useful and reasonably necessary in
its business in good working order and condition except
to the extent that breach of this clause would not
materially adversely affect the operations of the
Company and its Subsidiaries taken as a whole; maintain
with reputable insurance companies believed by the
Company to be financially sound insurance on all its
property in at least such amounts and with only such
deductibles and self insurance as are usually
maintained by, and against at least such risks (but
including in any event product liability) as are
usually insured against in the same general area by,
companies engaged in the same or a similar business;
and, furnish to the Agent and each Bank, upon written
request, full information as to the insurance carried.
5.7 Inspection of Property; Books and Records;
Discussions. Keep proper books of record and account
in which full, true and correct entries in conformity
with GAAP and all material Requirements of Law shall be
made of all dealings and transactions in relation to
its business and activities; and permit representatives
of the Agent or any Bank as the representative of the
Agent to visit and inspect any of its properties and
examine and make abstracts from such of its books and
records as the Agent or such Bank may reasonably
request at any reasonable time and as often as may
reasonably be desired, and to discuss the aspects of
the business, operations, properties and financial and
other condition of the Company and its Subsidiaries as
the Agent or such Bank may reasonably request with
officers and employees of the
Company and its Subsidiaries and with its independent
certified public accountants, provided that mutually
satisfactory advance arrangements for any such visit or
inspection shall be made with appropriate
representatives of the Company.
5.8 Notices. Give notice to the Agent
(which upon receipt shall give a copy thereof to each
of the Banks) promptly after a Responsible Officer has
actual knowledge thereof, but in any event within five
(or 30, in the case of any event described in clause
(c)(i) below) Business Days after such officer shall
have obtained such actual knowledge:
(a) of the occurrence of any Default or Event of
Default;
(b) of any (i) default or event of default
under any Contractual Obligation of the Company or any
of its Subsidiaries or (ii) litigation, investigation
or proceeding which may exist at any time between the
Company or any of its Subsidiaries and any Governmental
Authority, which, in either case, if not cured or if
adversely determined, would have a Material Adverse
Effect;
(c) of the following events: (i) the
occurrence of any Reportable Event with respect to any
Single Employer Plan, which Reportable Event, together
with all other Reportable Events, if any, could subject
the Company or any of its Subsidiaries to any tax,
penalty or other liabilities that in the aggregate
could reasonably be expected to have a Material Adverse
Effect, or any withdrawal from, or the receipt by the
Company, any Subsidiary or any Commonly Controlled
Entity of any notice regarding the termination, Reor-
ganization or Insolvency of, any Multiemployer Plan;
(ii) the receipt or filing by the Company, any
Subsidiary or any Commonly Controlled Entity of any
notice regarding the institution of proceedings or the
taking of any other action by PBGC, the Company, any
Subsidiary or any Commonly Controlled Entity or
Multiemployer Plan with respect to the withdrawal from,
or the termination, Reorganization or Insolvency of,
any Plan subject to Title IV of ERISA; or (iii) that a
prohibited transac-tion has occurred (as defined in
Section 406 of ERISA or Section 4975 of the Code),
which could subject the Company or any Sub-sidiary to
tax or penalty which could reasonably be expected to
have a Material Adverse Effect; and the Company shall
update the schedules referred to in subsection 3.14 as
of the date any representations set forth therein is
deemed to be made;
(d) of any litigation or proceeding
affecting the Company or any of its Subsidiaries in
which the amount involved is $10,000,000 or more and
not covered by insurance or in which material
injunctive or similar relief is sought;
(e) of a material adverse change in the
business, operations, property, performance or
condition (financial or otherwise) of the Company and
its Subsidiaries taken as a whole from that reflected
in the financial statements most recently delivered to
the Banks pursuant to subsection 5.1; and
(f) (i) any notice of any violation or
administrative or judicial complaint or order having
been filed against the Company or such other Subsidiary
alleging violations of any Environmental Laws and
Regulations, or (ii) any notice from any governmental
body alleging that the Company or such other Subsidiary
is or may be subject to any Environmental Liability;
and promptly upon receipt thereof, provide the Agent
with a copy of such notice.
Upon the request of the Agent or any Bank,
the Company will reasonably consult with the Agent as
to the subject matter of
notices pursuant to this subsection 5.8.
5.9 Copies of Corporate Documents. Promptly
deliver to the Agent copies of any amendments or
modifications to the certificate of incorporation or by-
laws of the Company or any Subsidiary, certi-fied with
respect to the certificate of incorporation by the
Secretary of State of the state of incorporation of
such Person and, with respect to the by-laws, by the
secretary or assistant secretary of such Person.
5.10 Conditions Subsequent. Deliver to the
Agent, in form and substance satisfactory to the Agent
and in sufficient copies for the Agent and each Bank,
as soon as possible and in any event within 45 days
after the Closing Date (or such later date as may be
agreed by the Company and the Agent):
(a) acknowledgment copies of proper
financing statements, duly filed under the Uniform
Commercial Code of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect and
protect the first priority liens and security interests
created under the Security Agreement, covering the
Collateral;
(b) completed requests for information,
listing the financing statements referred to in clause
(a) above and all other effective financing statements
filed in the jurisdictions referred to in clause (a)
above that name the Company or any of the other
Collateral Grantors as debtor, together with copies of
such financing statements; and
(c) evidence that all other action as the
Agent may deem necessary or desirable in order to
perfect and protect the first priority liens and
security interests created under the Security Documents
has been taken.
5.11 Hazardous Material. Operate all
property owned, operated or leased by it in such a
manner that (a) no Hazardous Material shall be placed,
held, located or disposed of, on, under or at the real
property owned, operated or leased by the Company or
any Subsidiary or any part thereof, except for such
Hazardous Materials which are necessary for the
Company's operation of its business thereon and which
shall be used, stored, treated and disposed of in
compliance with all applicable Environmental Laws and
Regulations or (b) such real property owned, operated
or leased by the Company or any Subsidiary or any part
thereof shall not be used as a collection, storage,
treatment or disposal site for any Hazardous Material,
except, (i) in the case of clause (b) above, in
compliance with all Environmental Laws or Regula-tions
and (ii) in each case to the extent failure to comply
with this subsection 5.11, in the aggregate, would not
have a material adverse effect on the business,
operations, property or financial condition of the
Company and its Subsidiaries taken as a whole.
5.12 Further Assurances. (a) Promptly upon
request by the Agent, or any Bank through the Agent,
correct, and cause each of its Subsidiaries promptly to
correct, any material defect or error that may be
discovered in any Loan Document or in the execution,
acknowledgment, filing or recordation thereof.
(b) Promptly upon request by the Agent, or
any Bank through the Agent, do, execute, acknowledge,
deliver, record, rerecord, file, re-file, register and
re-register, and cause each of its Subsidiaries
promptly to do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register, any
and all such further acts, pledge agreements,
assignments, financing statements and continuations
thereof, termination statements,
notices of assignment, transfers, certificates,
assurances and other instruments as the Agent, or any
Bank through the Agent, may reasonably require from
time to time in order to (i) carry out more effectively
the purposes of this Agreement, the Notes or any other
Loan Document, (ii) to the fullest extent permitted by
applicable law, subject any of the Company's or any of
its Subsidiaries' properties, assets, rights or
interests to the Liens now or hereafter intended to be
covered by any of the Security Documents, (iii) perfect
and maintain the validity, effectiveness and priority
of any of the Security Documents and any of the Liens
intended to be created thereunder and (iv) assure,
convey, grant, assign, transfer, preserve, protect and
confirm more effectively unto the Agent and the Banks
the rights granted or now or hereafter intended to be
granted to the Agent and the Banks under any Loan
Document or under any other instrument executed in
connection with any Loan Document to which the Company
or any of its Subsidiaries is or is to be a party;
provided, however, that in any event this subsection
5.12 shall not require Liens on, and the execution and
delivery of Security Documents covering, any property
to the extent not otherwise required by the terms of
the Loan Documents.
5.13 Compliance with Terms of Leaseholds.
Make all payments and otherwise perform all obligations
in respect of all leases of real property to which the
Company or any of its Subsidiaries is a party, keep
such leases in full force and effect and not allow such
leases to lapse or be terminated or any rights to renew
such leases to be forfeited or cancelled, notify the
Agent of any default by any party with respect to such
leases and cooperate with the Agent in all respects to
cure any such default, except, in any case, where the
failure to do so, either individually or in the
aggregate, would not be reasonably likely to have a
Material Adverse Effect.
5.14 Performance of Related Documents.
Perform and observe all of the terms and provisions of
each Related Document to be performed or observed by
it, maintain each such Related Document in full force
and effect, enforce such Related Document in accordance
with its terms, take all such action to such end as may
be from time to time reasonably requested by the Agent
and, upon request of the Agent, make to each other
party to each such Related Document such demands and
requests for information and reports or for action as
the Company or other Loan Party (as applicable) is
entitled to make under such Related Document, except,
in any case, where the failure to do so, either
individually or in the aggregate, could not be
reasonably expected to have a Material Adverse Effect.
5.15 Hedge Agreements. Maintain at all
times Hedge Agreements with Persons acceptable to the
Agent, covering a notional amount of not less than 40%
of the Commitments and providing for such Persons to
make payments thereunder for a period of no less than
two years to the extent of increases in interest rates
greater than 3% above the weighted average Eurodollar
Rate on the date hereof.
5.16 Conditions Subsequent to Closing Date.
Use its best efforts to deliver to the Agent, in form
and substance satisfactory to the Agent and in
sufficient copies for each Bank, as soon as possible
and in any event within 45 days after the Closing Date
(or such later date as may be agreed by the Company and
the Agent):
(a) acknowledgment copies of proper
financing statements (including, without limitation,
all UCC-1 financing statements and all UCC-3
termination statements), duly filed under the Uniform
Commercial Code of all jurisdictions that the Agent may
deem necessary or desirable in order to perfect and
protect the first
priority liens and security interests created under the
Security Agreement, covering the Collateral described
in the Security Agreement,
(b) completed requests for information,
listing the financing statements referred to in clause
(a) above and all other effective financing statements
filed in the jurisdictions referred to in clause (a)
above that name any Loan Party as debtor, together with
copies of such financing statements,
(c) evidence that all other action as the
Agent may deem necessary or desirable in order to
perfect and protect the first priority liens and
security interests created under the Security Agreement
has been taken (including, without limitation,
obtaining landlord's letters, bailee's letters or
warehouseman's letters, each in form and substance
reasonably satisfactory to the Agent), and
(d) certificates representing the reissued
Pledged Shares (as defined in the Security Agreement)
of Allied Plywood Corporation, Goldenberg Group, Inc.,
Richwood Building Products, Inc. and Great Lakes
Windows, Inc., respectively, together with undated
stock powers executed in blank.
SECTION 6. NEGATIVE COVENANTS
Each of the Company and each Designated
Subsidiary hereby covenants and agrees with the Agent
and the Banks that, from and after the date of this
Agreement until the Obligations are paid in full and
the Commitments are terminated and all L/Cs have
expired or been duly terminated, neither the Company
nor any Designated Subsidiary shall, or shall permit
any of its Subsidiaries to, directly or indirectly:
6.1 Limitation on Indebtedness. Create,
incur, assume or suffer to exist any Indebtedness,
except:
(a) the Loans and the L/Cs;
(b) Indebtedness of the Company to any
Subsidiary, and of any Subsidiary to the Company, any
other Subsidiary, so long as such Indebtedness remains
subordinated to the Obligations under the Loan
Documents on terms and conditions satisfactory to the
Banks;
(c) Indebtedness of the Company and any of
its Subsidiaries under Financing Leases, or
Indebtedness incurred upon refinancing or replacement
of such Financing Leases, or Indebtedness incurred in
connection with (and not later than 180 days following,
in the case of the acquisition of land or improvements;
or 45 days following, in the case of the acquisition of
other property) the acquisition of property, or
Indebtedness incurred to renew, extend, refund,
refinance or replace the foregoing, in an aggregate
principal amount not exceeding as to the Company and
its Subsidiaries $35,000,000 at any one time
outstanding;
(d) certain Indebtedness outstanding on the
date hereof and listed on Schedule 3.22, and
extensions, renewals, refundings, refinancings and
replacements thereof, provided that Indebtedness under
the Existing Credit Agreement may not be outstanding
after August 26, 1997; and Indebtedness incurred to
finance property currently subject to existing
operating leases existing on the date hereof, to the
extent that (i) the corresponding operating lease is
terminated, and (ii) the aggregate debt service under
such Indebtedness does not exceed the aggregate rental
payments saved as a consequence of the termination of
such lease;
(e) Indebtedness of a corporation which
becomes a Subsidiary after the date hereof, provided
that such Indebtedness existed at the time such
corporation became a Subsidiary and was not created in
anticipation thereof;
(f) unsecured subordinated Indebtedness of
the Company, provided that such Indebtedness is on such
terms and pursuant to such documentation as the
Required Banks shall approve, which approval shall not
be unreasonably withheld;
(g) Indebtedness of the Company and its
Subsidiaries evidenced by promissory notes or other
contractual obligations of the Company given to the
sellers as part of the consideration for acquisitions
permitted by subsection 6.7; and
(h) other Indebtedness of the Company and
its Subsidiaries not to exceed $10,000,000 in the
aggregate at any one time outstanding; provided,
however, that the aggregate Indebtedness of the Company
under this clause (i), when added to the Indebtedness
under clauses (e) and (g) of this subsection 6.1, shall
not exceed, in the years indicated, the amounts set
forth below:
Year Amount
1997 $20,000,000
1998 $25,000,000
1999 $30,000,000
2000 $35,000,000
2001 (and each year
thereafter) $40,000,000
provided, however, in each case that such Indebtedness
shall not be owed to Nortek or any of its Subsidiaries
(other than Subsidiaries consisting of the Company or
any of its Subsidiaries, to the extent permitted
above).
6.2 Limitation on Liens. Create, incur,
assume or suffer to exist any Lien upon any of its
property, assets or revenues, whether now owned or
hereafter acquired, other than:
(a) Liens for taxes, assessments, fees or other
governmental charges not yet due or which are being
contested in good faith by appropriate proceedings or
other appropriate actions, provided that adequate
reserves with respect thereto are maintained on the
books of the Company or its Subsidiaries, as the case
may be, in conformity with GAAP;
(b) statutory liens of landlords, carriers',
warehouseman's, mechanics', materialmen's, repairmen's,
or other like Liens arising in the ordinary course of
business and not overdue for a period of more than 60
days or which are being contested in good faith by
appropriate proceedings or other appropriate actions;
(c) pledges or deposits in connection with
workers' compensation, unemployment insurance and other
social security legislation;
(d) deposits to secure the performance of
tenders, bids, trade contracts (other than for borrowed
money), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations
of a like nature incurred in the ordinary course of
business or deposits incurred in connection with other
obligations to the extent such other obligations are
covered by insurance;
(e) easements, (including, without
limitation, reciprocal easement agreements and utility
agreements), rights-ofway, covenants, consents,
reservations, encroachments, minor defects or
irregularities in title, variations and other
restrictions, charges or encumbrances (whether or not
recorded) affecting real or personal property, which
individually or in the aggregate do not or are not
reasonably likely to have a material adverse effect on
the conduct by the Company and its Subsidiaries of
their businesses taken as a whole;
(f) Liens in existence on the date hereof listed on
Schedule 6.2 securing Indebtedness permitted by
subsection 6.1,
provided that no such Lien is spread to cover any
additional property (other than the proceeds thereof)
after the date hereof and that the principal amount of
Indebtedness secured thereby is not increased;
(g) Liens securing Indebtedness of the
Company and its Subsidiaries permitted by subsection
6.1(c) in respect of the deferred acquisition price of
property, provided that (i) such Liens shall be created
not later than (A) 180 days after the acquisition of
such property in the case of land or improvements, and
(B) 45 days after the acquisition of other property,
(ii) such Liens do not at any time encumber any
property other than the property financed by such
Indebtedness and the proceeds of such property so
financed, (iii) the principal amount of Indebtedness
secured thereby is not increased and (iv) the principal
amount of Indebtedness secured by any such Lien shall
at no time exceed the original acquisition price of
such property;
(h) Liens on the property or assets of a
corporation which becomes a Subsidiary after the date
hereof securing Indebtedness permitted by subsection
6.1(e), provided that (i) such Liens existed at the
time such corporation became a Subsidiary and were not
created in anticipation thereof, (ii) no such Lien is
spread to cover any property or assets of such
corporation after the time such corporation becomes a
Subsidiary (other than proceeds of the property or
assets which were the original subjects of such Lien),
and (iii) the principal amount of Indebted-ness secured
thereby is not increased after such time;
(i) Liens existing on property or assets
prior to the acquisition thereof by the Company or any
Subsidiary, provided that (i) such Liens were not
created in anticipation thereof, (ii) no such Lien is
spread to cover any additional property (other than the
proceeds of the property or assets which were the
original subject of such Lien) and (iii) the principal
amount of Indebtedness secured thereby is not
increased;
(j) Liens arising out of the refinancing,
extension, renewal, refunding or replacement of any
Indebtedness secured by any Lien permitted by any of
the other clauses of this subsection, provided that (i)
no such Lien is spread to cover any additional property
(other than the proceeds of the property which was the
original subject of such Lien) and (ii) the principal
amount of Indebtedness secured thereby is not
increased;
(k) Liens arising pursuant to any order of
attachment, distraint or similar legal process arising
in connection with court proceedings so long as the
execution or other enforcement thereof is effectively
stayed and the claims secured thereby are being
contested in good faith by appropriate proceedings or
other appropriate action;
(1) Liens securing reimbursement obligations in
connection with trade letters of credit issued on
behalf of the Company or any Subsidiary in the ordinary
course of its business, provided that such Liens attach
solely to the goods the acquisition of which is
financed by such letter of credit and to the proceeds
thereof;
(m) Intentionally omitted;
(n) Liens arising under the Security Documents;
(o) Financing Leases permitted under
subsection 6.1; and (p) Other Liens securing
obligations which do not
constitute Indebtedness, the aggregate amount of which
obligations does not exceed $2,500,000 at any time
outstanding.
6.3 Limitation on Contingent Obligations.
Create, incur, assume or suffer to exist any Contingent
Obligation, except (a) Contingent Obligations in
existence on the date hereof listed on Schedule 6.3,
(b) Contingent Obligations of the Company in respect of
obligations of any Material Operating Subsidiary or of
any Subsidiary in respect of Obligations of the Company
or any Material Operating Subsidiary and (c) Contingent
Obligations of the Company and its Subsidiaries
supporting primary obligations of other Persons the
aggregate amount of which does not exceed $4,000,000 at
any time.
6.4 Limitation on Fundamental Changes.
Enter into any merger or consolidation or amalgamation,
or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or convey, sell, lease,
assign, transfer or otherwise dispose of its property,
business or assets except the following:
(a) The Company and any of its Subsidiaries
may sell or otherwise dispose of (i) inventory and Cash
Equivalents in the ordinary course of business, (ii)
tangible assets to be replaced in the ordinary course
of business within 12 months by other tangible assets
of equal or greater value and (iii) tangible assets
that are no longer used or useful in the business of
the Company or the applicable Subsidiary, the fair
market value of which shall not exceed $2,000,000 in
any fiscal year of the Company.
(b) Mergers constituting investments
permitted by subsection 6.7.
(c) Licensing of products and intangible
assets for fair value in the ordinary course of
business.
(d) So long as immediately before and after
giving effect thereto no Default or Event of Default
exists, the Company and its Subsidiaries may sell
assets having a fair market value not exceeding
$25,000,000 in any fiscal year of the Company so long
as the Net Proceeds thereof are applied to repay the
Loans as required by subsection 2.8(d).
(e) Asset Sales; provided, however, that
(i) the Net Proceeds from all such
sales or dispositions shall not exceed $150,000,000 in
the aggregate during the term of this Agreement;
(ii) the consideration received by the
Company or its Subsidiaries from each such sale or
disposition is at least equal to the fair market value
of the assets sold or disposed of in such sale or
disposition;
(iii) the Net Proceeds from such
sale or disposition in each case shall be applied in
accordance with subsection 2.8(d); and
(iv) any evidence of indebtedness
referred to in the definition of Net Proceeds shall be
pledged in accordance with the provisions of such
definition.
(f) Any Subsidiaries of the Company may be
merged or consolidated with or into the Company
(provided that the continuing or surviving corporation
shall be the Company) or with or into any one or more
wholly-owned Subsidiaries of the Company (provided that
a wholly-owned Subsidiary shall be the continuing or
surviving corporation and that any such wholly-owned
Subsidiary shall be organized under a state of the
United States).
(g) Any wholly-owned Subsidiary may sell, lease,
transfer or otherwise dispose of any or all of its
assets (upon voluntary liquidation or otherwise) to the
Company or a whollyowned Subsidiary of the Company.
(h) The Company may merge with the Purchaser
pursuant to, and in accordance with, the Merger
Agreement.
6.5 Distributions. During such time as a
Default or an Event of Default shall have occurred and
be continuing, or if a Default or Event of Default
would result therefrom, (a) declare or pay any
dividends, (b) purchase, redeem, retire, defease or
otherwise acquire for value any of its capital stock or
any warrants, rights or options to acquire such capital
stock, now or hereafter outstanding, (c) return any
capital to its stockholders as such, (d) make any
distribution of assets, capital stock, warrants,
rights, options, obligations or securities to its
stockholders as such, (e) issue or sell any capital
stock or any warrants, rights or options to acquire
such capital stock or (f) permit any of its
Subsidiaries to purchase, redeem, retire, defease or
otherwise acquire for value any capital stock of the
Company or any warrants, rights or options to acquire
such capital stock or to issue or sell any capital
stock or any warrants, rights or options to acquire
such capital stock; provided, however, that
notwithstanding the foregoing provisions of this
subsection 6.5, but in any event subject to the other
provisions of this Agreement, during such time as a
Default or an Event of Default shall have occurred and
be continuing, or if a Default or Event of Default
would result therefrom, the Company (i) may make any
dividend payable solely in shares of its common stock
and (ii) may pay dividends in an aggregate amount
during any calendar year not to exceed the lesser of:
(x) twenty ($.20) cents per share of outstanding common
stock and (y) $4,000,000.
6.6 Limitation on Dividend Restrictions
Regarding Subsidiaries. Except for any limitation or
restriction pursuant to any applicable law or pursuant
to this Agreement, permit any limitation or restriction
to exist upon the ability of any Subsidiary to declare
or pay dividends in respect of the capital stock of
such Subsidiary, whether such limitation or restriction
is imposed through a covenant limiting dividends,
through financial covenants or otherwise.
6.7 Prohibition on Investments,
Acquisitions, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to,
or purchase any stock, bonds, notes, debentures or
other securities of, or make any other investment in,
or purchase any assets constituting a going concern
business from, any Persons (all of the foregoing being
herein called "investments"), except:
(a) extensions of trade credit in the
ordinary course of business;
(b) investments in Cash Equivalents;
(c) loans and advances to employees of the
Company or its Subsidiaries for travel, entertainment,
relocation and similar expenses or otherwise, in the
ordinary course of business;
(d) investments by the Company in its
Subsidiaries and investments by such Subsidiaries in
the Company and in other Subsidiaries; provided that
there shall not be outstanding at any time Special
Subsidiary Loans in an aggregate principal amount in
excess of $15,000,000;
(e) investments not to exceed (i)
$50,000,000 in the aggregate during any fiscal year of
the Company and (ii) $100,000,000 in the aggregate
during the term of this Agreement (the amount of any
such investment to be determined at cost, which cost
shall include the aggregate amount of any Indebtedness
assumed or given in connection therewith) in connection
with the acquisition of the stock of any corporation or
of the assets of any Person, provided that (w) such
acquisition shall have been approved or otherwise
endorsed by the board of directors of such Person or
not contested (if no board approval is required), (x)
such corporation or assets are, prior to such
acquisition, engaged or used, as the case may be, in a
business of the type described in subsection 5.5, (y)
the Company shall be in pro forma compliance with the
covenants contained in subsections 6.9, 6.10, 6.11 and
6.12, calculated based on the most recent financial
statements delivered to the Agent and the Bank pursuant
to subsection 5.1, as though such acquisition had
occurred at the beginning of the fourquarter period
ending on the last day of the most recently completed
fiscal quarter of the Company, and (z) immediately
before and after giving effect to such acquisition, no
Default shall have occurred and be continuing or would
result therefrom;
(f) investments made with capital stock of
the Company in connection with the acquisition of the
stock of any corporation which becomes a Subsidiary,
which thereupon shall be deemed to be a Material
Operating Subsidiary, or of the assets of any Person,
provided that (i) such acquisition shall have been
approved or otherwise endorsed by the board of
directors of such Person or not contested (if no board
approval is required) and (ii) such corporation or
assets are, prior to such acquisition, engaged or used,
as the case may be, in a business of the type described
in subsection 5.5;
(g) investments made with common stock of
the Company in connection with the acquisition of the
stock of any corpora-tion which does not become a
Subsidiary as a result of such acquisition, provided
that the aggregate amount of such invest-ments shall
not exceed $10,000,000 during the term of this Agree-
ment (the amount of the investment, in the case of each
such acquisition, being the market value, on the date
of such acquisition, of the common stock of the Company
delivered as consideration in such acquisition);
(h) other investments (but not a Special
Subsidiary Loan) not to exceed $20,000,000 in the
aggregate (valued at cost) at any one time outstanding
and (except in the case of United States government
securities) not to exceed $4,000,000 in the securities
of any one issuer; and
(i) so long as no Default or Event of
Default has occurred and is continuing and so long as
no Default or Event of Default would result therefrom,
investments by the Company and its
Subsidiaries in Nortek; provided that, notwithstanding
the foregoing, during the occurrence and continuance of
a Default or Event of Default, or if a Default or Event
of Default would result therefrom, the Company and its
Subsidiaries may make investments in Nortek to the
extent that the Company and its Subsidiaries are
otherwise permitted to make investments under this
subsection 6.7.
6.8 Prohibition on Optional Prepayments.
Prepay, purchase, redeem, retire, defease or otherwise
acquire, or make any optional payment on account of any
principal of, interest on, or premium payable in
connection with the optional prepayment, redemption or
retirement of any of its Subordinated Indebtedness,
provided, however, that in each other case nothing in
this subsection 6.8 shall be deemed to prevent the Company from:
(a) making a commitment to prepay, redeem or
otherwise acquire or pay any Subordinated Indebtedness
which by its terms is convertible into common stock of
the Company for the purpose of inducing the holders of
such Indebtedness to so convert such Indebtedness; and
(b) in connection with any induced
conversions of convertible subordinated Indebtedness,
acquiring or paying any such Indebtedness which is not
converted into common stock of the Company as a result
of such inducement, provided that the aggregate amount
of money expended by the Company and its Subsidiaries
in connection with such acquisition and payment does
not exceed the sum of (i) the net cash proceeds to the
Company of any substantially contemporaneous sale of
its common stock, (ii) an amount equal to 2% of the
aggregate principal amount of the issue of convertible
subordinated Indebtedness being so acquired or paid
outstanding immediately prior to the public
announcement by the Company of such acquisition or
payment and (iii) the fees and expenses incurred in
connection with such acquisition or payment.
6.9 Consolidated Net Worth. Permit
Consolidated Net Worth, at any time, to be less than an
amount equal to the amount by which $375,000,000
exceeds the lesser of (a) losses on the sale of Non-
Core Subsidiaries after the date hereof and (b)
$25,000,000.
6.10 Leverage Ratio. Permit the ratio (the
"Leverage Ratio") of (a) consolidated Indebtedness of
the Company and its Subsidiaries to (b) Consolidated
EBITDA for the four most recent consecutive full fiscal
quarters of the Company at any time within any period
set forth below to exceed the ratio set forth below for
such period:
Quarter Ending On Maximum Leverage Ratio
September 30, 1997 3.25:1.00
December 31, 1997 3.00:1.00
March 31, 1998 3.00:1.00
June 30, 1998 3.00:1.00
September 30, 1998 3.00:1.00
December 31, 1998 2.75:1.00
March 31, 1999 2.75:1.00
June 30, 1999 2.50:1.00
September 30, 1999 2.50:1.00
December 31, 1999 2.50:1.00
March 31, 2000 2.50:1.00
June 30, 2000
and thereafter 2.00:1.00
6.11 Interest Coverage Ratio. Permit the
ratio of (a) Consolidated EBITDA to (b) Interest
Expense for the four most recent consecutive full fiscal quarters
of the Company at any time to be less than 3.50:1.00.
6.12 Current Ratio. Permit the ratio of
Consolidated Current Assets to Consolidated Current Liabilities at
any time to be less than 2.0 to 1.0.
6.13 Intentionally Omitted.
6.14 Amendment, Etc. of Related Documents.
Cancel or terminate any Related Document or consent to or accept
any cancellation or termination thereof, amend, modify
or change in any manner any term or condition of any
Related Document or give any consent, waiver or
approval thereunder, waive any default under or any
breach of any term or condition of any Related
Document, agree in any manner to any other amendment,
modification or change of any term or condition of any
Related Document or take any other action in connection
with any Related Document, in each case, that would
materially adversely affect the interest or rights of
the Company or any Subsidiary thereunder or that would
materially adversely affect the rights or interests of
the Agent or any Bank under the Loan Documents.
6.15 Fiscal Year. Change its fiscal year,
except (a) to
conform to the fiscal year of Nortek following the
Merger or (b) with the consent of the Agent, which will
not be unreasonably withheld.
6.16 Transactions with Affiliates. Except as
otherwise permitted by this Agreement, directly or indirectly:
(a) make any investment in an Affiliate except that any
investments permitted under subsection 6.7 shall be
permitted hereunder; (b) transfer, sell, lease, assign
or otherwise dispose of any assets to an Affiliate; (c)
merge into or consolidate with or purchase or acquire
assets from an Affiliate; or (d) enter into any other
transaction directly or indirectly with any Affiliate;
provided, however, that: (i) payments on investments
permitted by subsection 6.7 shall be permitted
hereunder, (ii) any Affiliate who is a natural person
may serve as an employee or director of the Company,
any Subsidiary, Nortek or any of its Subsidiaries and
receive such compensation and benefits for his services
in such capacity as the Board of Directors of the
Company or such Subsidiary shall in good faith
determine, (iii) any merger permitted under subsection
6.4 shall be permitted hereunder, (iv) any dividend or
other distribution permitted under subsection 6.5 shall
be permitted hereunder and (v) the Company or any
Subsidiary may enter into any transaction with an
Affiliate if the monetary or business consideration
arising therefrom would be substantially as
advantageous to the Company or a Subsidiary as the
monetary or business consideration that would
reasonably be expected by the Company or such
Subsidiary to be obtained in a comparable arm's length
transaction with a Person not an Affiliate.
6.17 Ownership of Designated Subsidiaries.
Cease to own all of the issued and outstanding capital stock of any
Designated Subsidiary so long as any such Subsidiary
continues to be a Designated Subsidiary.
6.18 Limitation on Capital Expenditures.
Make 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.
6.19 Financing Leases. Create, incur, assume
or suffer to exist any Financing Leases obligations that would
cause the direct and contingent liabilities of the
Company and its Subsidiaries, on a consolidated basis,
in respect of all such Financing Leases to exceed
$35,000,000 at any time outstanding.
6.20 Change in Nature of Business. Engage in any
business other than the Business of the Company.
6.21 Charter Amendments. Amend its
certificate of incorporation or bylaws in any manner
that would materially adversely affect the rights of
the Agent and the Banks under the Loan Documents.
6.22 Accounting Changes. Make or permit any
change in accounting policies or reporting practices,
except as required by generally accepted accounting
principles and except for the purpose of conforming
such policies and practices of the Company with those
of Nortek following the Merger.
6.23 Intentionally Omitted.
6.24 Negative Pledge. Enter into or suffer
to exist any agreement prohibiting or conditioning the
creation or assumption of any Lien upon any of its
property or assets other than (i) in favor of the
Secured Parties or (ii) in connection with the Nortek
Indentures.
6.25 Formation of Subsidiaries. Organize or
invest in any new Material Operating Subsidiary or
permit any existing Subsidiary to become a Material
Operating Subsidiary unless such Subsidiary shall have
executed and delivered a Guaranty and a Security
Agreement supplement, each in form and substance
satisfactory to the Agent, and shall have become a
Guarantor and a Collateral Grantor under the Loan
Documents.
SECTION 7. EVENTS OF DEFAULT
Upon the occurrence and during the
continuance of any of the following events:
(a) The Company or any Designated Subsidiary
shall fail to pay any principal of any Note or any
Unpaid Drawing when due in accordance with the terms of
the Loan Documents or the Company or any other Loan
Party shall fail to pay any interest, any fee or any
other payment under any Loan Document, the amount of
which is provided for herein, in the Fee Letter or in
such Loan Document, within five (5) Business Days after
any such amount becomes due in accordance with the
terms hereof or thereof; or
(b) Any representation or warranty made or
deemed made by the Company or any of its Subsidiaries
in this Agreement, any other Loan Document or in any
certificate, document or financial or other statement
furnished at any time under or in connection herewith
or therewith shall prove to have been incorrect in any
material respect on or as of the date made, deemed made
or confirmed; or
(c) The Company or any of its Subsidiaries
shall default in the observance or performance of any
covenant or agreement contained in subsection 5.8(a) or
Section 6 of this Agreement; or
(d) The Company or any of its Subsidiaries
shall default in the observance or performance of any
other covenant or agreement contained in this
Agreement, or contained in any of the other Loan
Documents (other than as set forth in clauses (a)
through (c) of this Section 7) and such default shall
continue unremedied for a period of 30 days after the earlier of
the date on which (A) a Responsible Officer becomes aware of such
failure or (B) written notice thereof shall have been
given to the Company by the Agent or any Bank; or
(e) The Company or any of its Subsidiaries
shall (i) default in the payment of principal of or
interest on any Indebtedness (other than the Notes)
which Indebtedness is in an aggregate principal amount
equal to or greater than $10,000,000 or in the payment
of any Contingent Obligation (other than any Guaranty)
relating to any primary obligation the aggregate
principal amount of which is equal to or greater than
$10,000,000, beyond the period of grace, if any,
provided in the instrument or agreement under which
such Indebtedness or Contingent Obligation was created
or (ii) default in the observance or performance of any
other agreement or condition relating to any such
Indebtedness (other than the Notes) or Contingent
Obligation (other than any Guaranty) or contained in
any instrument or agreement evidencing, securing or
relating thereto, or contained in any Nortek Indenture,
or any other event shall occur or condition exist, the
effect of which default or other event or condition
described in either clause (i) or (ii) of this
paragraph is to cause, or to permit the holder or
holders of such Indebtedness or beneficiary or
beneficiaries of such Contingent Obligation (or a
trustee or agent on behalf of such holder or holders or
beneficiary or beneficiaries) to cause such
Indebtedness to become due prior to its stated maturity
or such Contingent Obligation to become payable; or
(f) (i) The Company or any of its
Subsidiaries shall commence any case, proceeding or
other action (A) under any existing or future law of
any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of
debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it as
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, wind-up, liquidation,
dissolution, composition or other relief with respect
to it or its debts, or (B) seeking appointment of a
receiver, trus-tee, custodian or other similar official
for it or for all or any substantial part of its
assets, or the Company or any of its Subsidiaries shall
make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the
Company or any of its Subsidiaries any such case,
proceeding or other action referred to in clause (i)
which (A) results in the entry of an order for relief
or any such adjudication or appoint-ment or (B) remains
undismissed, unstayed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced
against the Company or any of its Subsidiaries any
case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar
process against all or any substantial part of its
assets which results in the entry of an order for any
such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within
60 days from the entry thereof; or (iv) the Company or
any of its Subsidiaries shall take any action
authorizing, or in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the
acts set forth above in clause (i), (ii) or (iii)
above; or (v) the Company or any of its Subsidiaries
shall generally not, or shall be unable to, or shall
admit in writing its inability to, pay its debts as
they become due; or
(g) One or more judgments or decrees shall
be entered against the Company or any of its
Subsidiaries involving in the aggregate a liability (to
the extent not paid or fully covered by insurance) of
$5,000,000 or more and all such judgments or decrees
shall not have been vacated, satisfied, discharged,
stayed or bonded pending appeal within 60 days from the entry
thereof; or
(h) (i) Any Person shall engage in any
"prohibited transaction" (as defined in Section 406 of
ERISA or Section 4975 of the Code) involving any Plan
or engage in a transaction which could subject such
person to liability under Section 502(l) of ERISA, (ii)
any "accumulated funding deficiency" (as defined in
Section 302 of ERISA), whether or not waived, shall
exist with respect to any Single Employer Plan, (iii) a
Reportable Event shall occur with respect to, or
proceedings shall commence to have a trustee appointed,
or a trustee shall be appointed, to administer or to
terminate, any Single Employer Plan, which Reportable
Event or institution of proceedings or appointment of a
trustee is, in the reasonable opinion of the Agent,
likely to result in the termination of any Single
Employer Plan for purposes of Title IV of ERISA, (iv)
any Single Employer Plan shall, other than in a
standard termination, terminate for purposes of Title
IV of ERISA, or the Company, any Subsidiary or any
Commonly Controlled Entity shall file a notice of
intent to terminate a Single Employer Plan in a
distress termination under Section 4041(c) of ERISA, or
(v) the Company or any Commonly Controlled Entity
shall, or is, in the reasonable opinion of the Agent,
likely to, incur any liability in connection with its
failure to meet any obligation arising out of a
withdrawal from, or the Insolvency or Reorganization
of, a Multiemployer Plan and in each case in clauses
(i) through (v) above, such event or condition,
together with all other such events or conditions, if
any, which have occurred or exist could reasonably be
expected to subject the Company or any of its
Subsidiaries to any tax, penalty or other liabilities
that in the aggregate could reasonably be expected to
have a Material Adverse Effect; or
(i) A Change of Control shall occur; or
(j) any non-monetary judgment or decree
shall be rendered against the Company or any of its
Subsidiaries that could reasonably be likely to have a
Material Adverse Effect, and such judgment or decree
shall not have been vacated, satisfied, discharged,
stayed or bonded pending appeal within 60 days from the
entry thereof; or
(k) (i) any provision of any Loan Document after
delivery thereof pursuant to subsection 4.1 shall for
any reason (other than pursuant to the terms thereof)
cease to be valid and binding on, or enforceable
against, any of the Company or its Subsidiaries which
are party thereto; or (ii) any Security Document after
delivery thereof pursuant to subsection 4.1 shall for
any reason (other than pursuant to the terms thereof)
cease to create a valid and perfected first priority
(subject, during the first 45 days after the Closing
Date (or such later date as agreed by the Agent and the
Company as specified in subsection 5.16) only to the
completion of the actions required under subsection
5.16) lien on and security interest in the Collateral
purported to be covered thereby; or (iii) in the case
of clause (i) or (ii) above, the Company or any
Subsidiary shall so state in writing;
then, and in any such event, (x) if such event is an
Event of Default specified in paragraph (f) above with
respect to the Company, automatically the Commitments
shall immediately termin-ate and the Loans hereunder
(with accrued interest thereon) and all other amounts
owing under this Agreement and the Notes shall
immediately become due and payable, and (y) if such
event is any other Event of Default, either or both of
the following actions may be taken: (1) with the
consent of the Required Banks, the Agent may, or upon
the request of the Required Banks, the Agent shall, by
notice to the Company, declare the Commitments to be
terminated forthwith, whereupon the Commitments shall immediately
terminate; and (2) with the consent of the Required
Banks, the Agent may, or upon the request of the
Required Banks, the Agent shall, declare the Loans
(with accrued interest thereon) and all other amounts
owing under this Agreement and the Notes to be due and
payable forthwith, whereupon the same shall immediately
become due and payable. In addition, after the
occurrence and during the continuance of an Event of
Default, the Company and each Subsidiary shall,
promptly upon demand by the Agent, deliver to the Agent
cash collateral in such form as reasonably requested by
the Agent, for deposit in a cash collateral account, in
a maximum amount equal to the undrawn amount of all
L/Cs then outstanding, to be maintained by the Agent as
an interest-bearing deposit account under the sole
dominion and control of the Agent as pledgee, and shall
execute and deliver such documents and instruments
(including a pledge agreement) as the Agent may
reasonably request in order to perfect or protect the
Agent's lien and security interest in such collateral
account to secure payment of the Reimbursement
Obligations with respect to L/Cs then outstanding.
Such deposit shall be held by the Agent as such
security for the ratable benefit of the Banks. Upon
cure of the Event of Default, all such cash collateral
(and interest accrued thereon) shall promptly be
returned to the Company and its Subsidiaries). Except
as expressly provided above in this Section 7,
presentment, demand, protest and all other notices of
any kind are hereby expressly waived.
SECTION 8. THE AGENT
8.1 Appointment. Each Bank (in its capacity
as a Bank and a potential Hedge Bank) hereby
irrevocably designates and appoints Fleet as the Agent
for such Bank under this Agreement and the other Loan
Documents and each such Bank irrevocably authorizes
Fleet, as Agent for such Bank, to take such action on
its behalf under the provisions of this Agreement and
the other Loan Documents and to exercise such powers
and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and the other
Loan Documents, together with such other powers as are
reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement,
the Agent shall not have any duties or
responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities,
duties, obligations or liabilities shall be read into
this Agreement or otherwise exist against the Agent.
8.2 Delegation of Duties. The Agent may
execute any of its duties under this Agreement and the
other Loan Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The
Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected
by it with reasonable care.
8.3 Exculpatory Provisions. Neither the
Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or Affiliates shall be (a)
liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with
this Agreement or any of the other Loan Documents
(except for its or such Person's own gross negligence
or willful misconduct), or (b) responsible in any
manner to any of the Banks for any recitals,
statements, repre-sentations or warranties made by the
Company, or any Subsidiary or any officer thereof
contained in this Agreement or any of the other Loan
Documents or in any certificate, report, statement or
other document referred to or provided for in, or
received by the Agent under or in connection with, this
Agreement or any of the other Loan Documents or for the
value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any of the other Loan
Documents or for any failure of the Company or any
Subsidiary to perform its obligations hereunder or
thereunder. The Agent shall be under no obligation to
any Bank to ascertain or to inquire as to the
observance or performance of any of the agreements
contained in, or conditions of, this Agreement or any
of the other Loan Documents, or to inspect the
properties, books or records of the Company or any
Subsidiary.
8.4 Reliance by Agent. The Agent shall be
entitled to rely, and shall be fully protected in
relying, upon any Note, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram,
telecopy, or teletype message, statement, order or
other document or conversation believed by it to be
genuine and correct and to have been signed, sent or
made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without
limitation, counsel to the Company and any Subsidiary),
independent accountants and other experts selected by
the Agent. The Agent may deem and treat the payee of
any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer
thereof shall have been filed with the Agent. The
Agent shall be fully justified in failing or refusing
to take any action under this Agreement and the other
Loan Documents unless it shall first receive such
advice or concurrence of the Required Banks as it deems
appropriate or it shall first be indemnified to its
satisfaction by the Banks against any and all liability
and expense which may be incurred by it by reason of
taking or continuing to take any such action. The
Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and
the other Loan Documents in accordance with a request
of the Required Banks, and such request and any action
taken or failure to act pursuant thereto shall be
binding upon all the Banks and all future holders of
the Notes.
8.5 Notice of Default. The Agent shall not
be deemed to have knowledge or notice of the occurrence
of any Default or Event of Default hereunder unless the
Agent has received notice from a Bank, the Company or
any Subsidiary referring to this Agreement, describing
such Default or Event of Default and sta-ting that the
notice is a "notice of default". In the event that the
Agent receives such a notice, the Agent shall give
prompt notice thereof to the Banks. The Agent shall
take such action with respect to such Default or Event
of Default as shall be reasonably directed by the
Required Banks; provided that unless and until the
Agent shall have received such directions, the Agent
may (but shall not be obligated to) take such action,
or refrain from taking such action, with respect to
such Default or Event of Default as it shall deem
advisable in the best interests of the Banks.
8.6 Non-Reliance on Agent and Other Banks.
Each Bank expressly acknowledges that neither the Agent
nor any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by
the Agent hereinafter taken, including any review of
the affairs of the Company or any Subsidiary, shall be
deemed to constitute any representation or warranty by
the Agent to any Bank. Each Bank represents to the
Agent that it has, indepen-dently and without reliance
upon the Agent or any other Bank, and based on such
documents and information as it has deemed appropriate,
made its own appraisal of and investigation into the
business, operations, property, performance and other
condition (financial or otherwise) and creditworthiness
of the Company and each Subsidiary and made its own
decision to make its Loans hereunder and enter into
this Agreement. Each Bank also represents that it
will, independently and without reliance upon the Agent
or any other Bank, and based on such documents and information as it
shall deem appropriate at the time, continue to make
its own credit analysis, appraisals and decisions in
taking or not taking action under this Agree-ment, and
to make such investigation as it deems necessary to
inform itself as to the business, operations, property,
performance and other condition (financial or
otherwise) and creditworthiness of the Company and each
Subsidiary. Except for notices, reports and other
documents expressly required to be furnished to the
Banks by the Agent hereunder, the Agent shall have no
duty or responsibility to provide any Bank with any
credit or other information concerning the business,
operations, property, performance and other condition
(financial or otherwise) or creditworthiness of the
Company and its Subsidiaries which may come into the
possession of the Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or
Affiliates.
8.7 Indemnification. The Banks agree to
indemnify the Agent in its capacity as such (to the
extent not reimbursed by the Company and without
limiting the obligation of the Company to do so),
ratably according to the respective amounts of their
Commitments, from and against any and all liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of
any kind whatsoever which may at any time (including
without limitation at any time following the payment of
the Notes) be imposed on, incurred by or asserted
against the Agent in any way relating to or arising out
of this Agreement or any of the other Loan Documents or
any documents contemplated by or referred to herein or
the transactions contemplated hereby or any action
taken or omitted by the Agent under or in connection
with any of the foregoing; provided that no Bank shall
be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or
disbursements resulting solely from the Agent's gross
negligence or willful misconduct. The agreements in
this subsection shall survive the payment of the Notes
and all other amounts payable hereunder.
8.8 Agent in Its Individual Capacity. The
Agent and its Affiliates may make loans to, accept
deposits from, issue or maintain L/Cs on account of and
generally engage in any kind of business with the
Company and its Subsidiaries as though the Agent were
not the Agent hereunder. With respect to its Loans
made or renewed by it and any Note issued to it, the
Agent shall have the same rights and powers under this
Agreement as any Bank and may exercise the same as
though it were not the Agent, and the terms "Bank" and
"Banks" shall include the Agent in its individual
capacity.
8.9 Successor Agent. The Agent may resign
as an Agent upon 20 days' notice to the Banks. If the
Agent shall resign as the Agent under this Agreement,
then the Required Banks shall appoint from among the
Banks a successor agent for the Banks which successor
agent shall be approved by the Company, whereupon such
successor agent shall succeed to the rights, powers and
duties of the Agent which resigned, and the term
"Agent", shall mean such successor agent effective upon
its appointment, and the former Agent's rights, powers
and duties as the Agent shall be terminated, without
any other or further act or deed on the part of such
former Agent or any of the parties to this Agreement or
any holders of the Notes; provided, however, that upon
the occurrence and during the continuance of an Event
of Default the approval of the Company of the successor
agent shall not be required hereunder. Upon its
resignation hereunder, each Agent shall execute and
deliver any documents relating to its actions as Agent
which may be necessary to permit the successor agent to
act as Agent hereunder. After any retiring Agent's
resignation hereunder as the Agent, the provisions
of this subsection 8.9 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it
was the Agent under this Agreement.
8.10 Failure to Act. Except for action expressly
required of the Agent hereunder, the Agent shall in all
cases be fully justified in failing or refusing to act
hereunder unless it shall be indemnified to its
satisfaction by the Banks against any and all liability
and expense that may be incurred by it by reason of
taking or continuing to take any such action.
SECTION 9. MISCELLANEOUS
9.1 Amendments and Waivers. With the
written consent of the Required Banks, the Agent, the
Company and the Designated Subsidiaries may, from time
to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any
provisions to this Agreement or the other Loan
Documents or changing in any manner the rights of the
Banks or the Company and the Designated Subsidiaries
hereunder, and the Agent may execute and deliver to the
Company and the Designated Subsidiaries a written
instrument waiving, on such terms and conditions as the
Agent may specify in such instrument, any of the
requirements of this Agreement or the other Loan
Documents or any Default or Event of Default and its
consequences; provided, however, that no such waiver
and no such amendment, supplement or modification shall
(a) extend the maturity of any Loan, or reduce the
principal amount thereof, or change the amount or
termination date of any Bank's Commitment, or release,
amend or modify any Guaranty or any collateral covered
by any of the Security Documents, or reduce the
interest rate or Facility Fee, Issuance Fee or Drawing
Fee payable hereunder or extend the time of payment of
interest and any fees hereunder or the time of
reimbursement of any draws under L/Cs or amend the
definition of "Required Banks" or increase the L/C
Sublimit, or amend, modify or waive any provision of
subsection 4.1, 4.2 or 5.16 or this subsection 9.1, or
consent to the assignment or transfer by the Company
and each Designated Subsidiary of any of its rights and
obligations under this Agreement, in each case without
the written consent of all of the Banks, or (b) amend,
modify or waive any provision of Section 8 or otherwise
affect the rights and obligations of the Agent under
the Loan Documents without the written consent of the
then Agent (with any such change in any provision of
Section 8 to be effective prospectively only). Any
such waiver and any such amendment, supplement or
modification shall be binding upon the parties to this
Agreement and all holders of the Notes. In the case of
any waiver, the parties to this Agreement shall be
restored to their former position and rights hereunder
and under the outstanding Notes, and any Default or
Event of Default waived shall be deemed to be cured and
not continuing; but no such waiver shall extend to any
subsequent or other Default or Event of Default, or
impair any right consequent thereon.
9.2 Notices. All notices, consents, requests
and demands to or upon the respective parties hereto to
be effective shall be in writing or by telegraph or
telecopy and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made
when delivered by hand, or four (4) Business Days after
deposit in the mail, registered mail, return receipt
requested, postage prepaid, or, in the case of
telegraphic or telecopy notice, when received,
addressed as follows in the case of the Company and the
Designated Subsidiaries and the Agent, and as set forth
on Schedule I in the case of the other parties hereto,
or to such address or other address as may be hereafter
notified by any of the respective parties hereto or any
future holders of the Notes:
The Company
or any
Designated
Subsidiary: Ply Gem Industries, Inc.
777 Third Avenue
New York, New York
10017 Attention:
Treasurer
Telephone: (212) 832-1550
Telecopy: (212) 888-0472
With copies to: Charles M. Modlin, Esq.
EAB Plaza
12th Floor
West Tower
Uniondale, New York
11556-0132
Telephone: (516) 794-4600
Telecopy: (516) 794-4604
and
Nortek, Inc.
50 Kennedy Plaza
Providence, Rhode Island
Attention: Richard J. Harris
Vice President
Telephone: (401) 751-1600
Telecopy: (401) 751-4724
and
Ropes & Gray
One International Place
Boston, Massachusetts
02110
Attention: Douglas N. Ellis, Jr., Esq.
Telephone: (617) 951-7000
Telecopy: (617) 951-7050
The Agent: Fleet National Bank
One Federal Street
Boston, Massachusetts
02211 Attention: John Mann, Agency Services
Telephone: (617) 346-0429
Telecopy: (617) 346-4682
and
Fleet NationalBank
111 Westminster
Street Providence,
Rhode Island 02903
Attention: Stephen Craven Vice President
Telephone: 401-278-5913
Telecopy: 401-278-5726
with a copy to: Shearman & Sterling
599 Lexington Avenue
New York, New York
10022
Attention: Pamela Borgeson, Esq.
Telephone: (212) 848-7649
Telecopy: (212) 848-7179
provided that any notice, request or demand to or upon
the Agent or the Banks pursuant to subsection 2.3, 2.6
or 2.8 shall not be effective until received.
9.3 No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of the
Agent or any Bank, any right, remedy, power or
privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any
other right, remedy, power or privilege. The rights,
reme-dies, powers and privileges herein provided are
cumulative and not exclusive of any rights, remedies,
powers and privileges provided by law.
9.4 Survival of Representations and
Warranties. All representations and warranties made
hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith
shall survive the execution and delivery of this
Agreement and the Notes and the making of the Loans and
the issuance of L/Cs.
9.5 Payment of Expenses, Etc. The Company
agrees (a) to pay or reimburse the Agent for all its
reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, execution and delivery
of, and any amendment, supplement or modification to,
this Agreement, the other Loan Documents and any other
documents prepared in connection herewith, and the
consummation of the transactions contemplated hereby
and thereby, including, without limitation, the
reasonable fees and disbursements of counsel to the
Agent in connection therewith, all reasonable and
customary syndication expenses, including without
limitation travel expenses incurred by the Agent in
connection with due diligence and syndication member
and prospective member meetings and typeset-ting
duplication and binding expenses with respect to
materials for syndicate members, (b) to pay or
reimburse each Bank and the Agent for all its
reasonable out-of-pocket costs and expenses incurred in
connection with the enforcement or preservation of any
rights against the Company or any of its Subsidiaries
under this Agreement, the other Loan Documents and any
such other documents, (c) to pay, indemnify, and to
hold each Bank and the Agent and each of their
Affiliates and their officers, directors, employees,
agents and advisors (each an "Indemnified Party")
harmless from, any and all recording and filing fees
and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and
other taxes, if any, if legal, which may be payable or
reasonably determined to be payable in connection with
the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment,
supplement or modification of, or any waiver or consent
under or in respect of, this Agreement, the other Loan
Documents and any such other documents, and (d) to pay,
indemnify, and hold each Indemnified Party harmless
from and against any and all other liabilities,
obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of
any kind or nature whatsoever with respect to, or
arising out of, the Commitments, Loans and L/Cs, the
actual or proposed use of proceeds thereof, the
execution, delivery, enforcement and performance of
this Agreement, the other Loan Documents or the
consummation of the transactions contemplated thereby
(including without limitation; the Tender Offer and the
Merger) or related to any Environmental Liability or
Environmental Proceeding (other than costs, expenses
and disbursements incurred by Banks other than the
Agent in negotiating and closing the transactions
contemplated hereby) (all the foregoing, collectively,
the "indemnified liabilities"); provided that the
Company shall have no obligation hereunder to any
Indemnified Party with respect to indemnified
liabilities arising from (i) the gross negligence or
willful misconduct of such Indemnified Party, (ii)
legal proceedings commenced against such Indemnified
Party by any security holder or creditor of such
Indemnified Party arising out of and based upon rights
afforded any such security holder or creditor solely in
its capacity as such,
(iii) any breach of obligations of any Bank (including,
without limitation, the Agent in its capacity as such)
to any other Bank or (iv) a successful claim by the
Company or any of its Subsidiaries against such
Indemnified Party as determined in a final, non
appealable judgment by a court of competent
jurisdiction. The Company acknowledges that the Agent
and the Banks shall, prior to foreclosure of, or
exercise by them of proxy rights with respect to, any
of the shares of Subsidiaries securing the Loans, have
no liability or responsibility for either:
(A) damage, loss or injury to human health,
the environment or natural resources caused by the
presence, disposal, release or threatened release of
Hazardous Materials on any part of the real property
owned, operated or leased by the Company or its
Subsidiaries; or
(B) abatement and/or clean-up required under any
applicable Environmental Laws and Regulations for a
release, threatened release or disposal of any
Hazardous Materials located at the real property owned,
operated or leased by the Company or its Subsidiaries
or used by or in connection with the Company's or any
Subsidiary's business.
The agreements in this subsection shall survive
repayment of the Notes and all other amounts payable
hereunder; provided, however, that nothing herein shall
affect the provisions relating to 180-day periods
contained in subsections 2.15, 2.16 and 2.22.
9.6 Binding Effect; No Assignment or
Delegation by Company or any Designated Subsidiary.
This Agreement shall be binding upon and inure to the
benefit of the Company and each Designated Subsidiary
and their successors and to the benefit of the Banks
and the Agent and their respective successors and
assigns. The rights and obligations of the Company and
each Designated Subsidiary under this Agreement shall
not be assigned or delegated without the prior written
consent of the Agent, and each Bank, and any purported
assignment or delegation without such consent shall be
void.
9.7 Assignments and Participations by Banks;
Pledge to Federal Reserve Bank. (a) Each Bank may
assign to one or more banks or other entities all or a
portion of its rights and obligations under this
Agreement (including, without limitation, all or a
portion of its Commitment, the Loans owing to it, and
the Note or Notes held by it); provided, however, that:
(i) each such assignment shall be of a constant, and
not a varying, percentage of all of the assigning
Bank's rights and obligations under this Agreement,
(ii) except in connection with the assignment by any
Bank of its entire Commitment, the amount of the
Commitment of the assigning Bank being assigned
pursuant to each such assignment (determined as of the
date of the Assignment and Acceptance with respect to
such assignment) shall in no event be less than
$5,000,000 and shall be an integral multiple of
$1,000,000, and (iii) each such assignment shall be to
an Eligible Assignee. Upon the execution, delivery,
acceptance and recording, from and after the effective
date specified in each Assignment and Acceptance, which
effective date shall be at least three Business Days
after the execution thereof: (x) the assignee
thereunder shall be a party hereto and, to the extent
that rights and obligations hereunder have been
assigned to it pursuant to such Assignment and Accep-
tance, have the rights and obligations of a Bank
hereunder, and (y) the Bank assignor thereunder shall,
to the extent that rights and obligations hereunder
have been assigned by it pursuant to such Assignment
and Acceptance, relinquish its rights and be released
from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or
the remaining portion of an assigning Bank's rights and obligations
under this Agreement, such Bank shall cease to be a
party hereto); and provided further, that the Company
shall not be required to pay any amount under this
Agreement that is greater than the amount which it
would otherwise have been required to pay had such
assignment not been made.
(b) By executing and delivering an
Assignment and Acceptance, the Bank assignor thereunder
and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows:
(i) other than as provided in such Assignment and
Acceptance, such assigning Bank makes no representation
or warranty and assumes no responsibility with respect
to any statements, warranties or representations made
in or in connection with this Agreement or the
execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or
any other instrument or document furnished pursuant
hereto; (ii) such assigning Bank makes no
representation or warranty and assumes no
responsibility with respect to the financial condition
of the Company and each Designated Subsidiary or the
performance or observance by the Company and each
Designated Subsidiary of any of their respective
obligations under this Agreement or any other
instrument or document furnished pursuant hereto; (iii)
such assignee confirms that it has received a copy of
this Agreement, together with copies of such financial
state-ments and such other documents and information as
it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and
Acceptance; (iv) such assignee will, independently and
without reliance upon the Agent, such assigning Bank or
any other Bank and based on such documents and informa-
tion as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not
taking action under this Agreement; (v) such assignee
confirms that it is an Eligible Assignee; (vi) such
assignee appoints and authorizes the Agent to take such
action as agent on its behalf and to exercise such
powers under this Agreement as are delegated to the
Agent by the terms hereof, together with such powers as
are reasonably incidental thereto; and (vii) such
assignee agrees that it will perform in accordance with
their terms all of the obligations which by the terms
of this Agreement are required to be performed by it as
a Bank. Neither the Company nor any Subsidiary shall
have any liability or obligation under this subsection
9.7(b).
(c) Upon its receipt of an Assignment and
Acceptance executed by an assigning Bank and an
assignee representing that it is an Eligible Assignee,
together with any original Note subject to such
assignment, the Agent shall accept such Assignment and
Acceptance, and give prompt notice thereof to the
Company. Within five Business Days after its receipt
of such notice, each of the Company and each Designated
Subsidiary, at its own expense, shall execute and
deliver to the Agent in exchange for the surrendered
Note a new Note to the order of such Eligible Assignee
in an amount equal to the Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the
assign-ing Bank has retained a Commitment hereunder, a
new Note to the order of the assigning Bank in an
amount equal to the Commitment retained by it
hereunder. Such new Note(s) shall be in an aggregate principal
amount equal to the aggregate principal amount of such
surrendered Note, shall be dated the effective date of
such Assignment and Acceptance and shall otherwise be
in substantially in the form of Exhibit A.
(d) The Company and each Designated Subsidiary
acknowledges that any Bank may, in the ordinary course
of its commercial banking business and in accordance
with applicable law, at any time: (i) sell to one or
more Eligible Participants participating interests in
any Loan owing to such Bank, any Note
held by such Bank, any Commitment of such Bank or any
other interest of such Bank hereunder (each a
"Participating Interest"), without in any such case the
need for any approval by the Company, and (ii) subject
to the Company's prior approval in each instance (but
only when no Event of Default shall have occurred and
is continuing), which approval shall not be
unreasonably withheld, sell to one or more banks or
other entities that do not, directly or indirectly,
engage in business competitive with the business of the
Company and its Subsidiaries (each such participant and
each Eligible Participant is hereinafter referred to
individually as a "Participant" and collectively as the
"Participants") a Participating Interest provided that
no Participant (other than an Affiliate of such Bank
which is a Subsidiary of such Bank or the parent
holding company of such Bank or a Subsidiary of such
holding company) shall be entitled under the relevant
participation agreement or any associated agreement to
require such Bank to take or omit to take any action
hereunder, except, to the extent that any Participant
has any interest directly affected thereby, action that
extends the final maturity of any Loan, reduces the
rate or extends the time of payment of interest on any
Loan, extends the time for payment or reduces any fee
payable to such Bank hereunder, reduces the principal
amount of any Loan or releases all or substantially all
of the Collateral described in the Security Agreement.
In the event of any such sale by such Bank of
participating interests to a Participant, such Bank's
obligations under this Agreement shall remain
unchanged, such Bank shall remain solely responsible
for the performance thereof, such Bank shall remain the
holder of any such Note for all purposes under this
Agreement, and the Company shall continue to deal
solely and directly with such Bank in connection with
such Bank's rights and obligations under this
Agreement. The Company and each Designated Subsidiary
also agrees that each Participant shall be entitled to
the benefits of subsections 2.13, 2.15, 2.16 and 2.22
with respect to its participation in the Commitments,
and the Eurodollar Loans outstanding from time to time;
provided that no Participant shall be entitled to
receive any greater amount pursuant to such subsections
than the transferor Bank would have been entitled to
receive in respect of the amount of the participation
transferred by such transferor Bank to such Participant
had no such transfer occurred.
(e) The Company and each Designated Subsidiary
authorizes each Bank to disclose to any Eligible
Assignee or Participant or potential Eligible Assignee
or Participant any and all financial information in its
possession concerning the Company and each Designated
Subsidiary which has been delivered to it by the
Company and each Designated Subsidiary pursuant to this
Agreement or which has been delivered to it by the
Company and each Designated Subsidiary in connection
with its credit evaluation of the Company prior to
entering into this Agreement; provided that the
intended recipient first delivers confidentiality
undertakings for the benefit of the Company to the
effect of subsection 9.11 with respect to non-public
information.
(f) If, pursuant to subsection 9.7(a) or
(b), any interest in this Agreement, a participation
agreement or any Note is transferred to any Participant
or Eligible Assignee which is organized under the laws
of any jurisdiction other than the United States or any
State thereof, the transferor Bank shall cause such
Participant or Eligible Assignee concurrently with the
effectiveness of such transfer, (i) to represent to the
transferor Bank for the benefit of the Company and its
Subsidiaries that under applicable law and treaties no
taxes will be required to be withheld by the transferor
Bank or the Company or each Designated Subsidiary with
respect to any Loans, (ii) to furnish to the Bank and
the Company either U.S. Internal Revenue Service Form
4224 or U.S. Internal Revenue Service Form 1001 (wherein such
Participant claims entitlement to complete exemption
from U.S. federal withholding tax on all interest
payments hereunder) and (iii) to agree to provide the
transferor Bank a new Form 4224 or Form 1001 upon the
obsolescence of any previously delivered form and
comparable statements in accordance with applicable
U.S. laws and regulations and amendments duly executed
and completed by such Participant, and to comply from
time to time with all applicable U.S. laws and
regulations with regard to such withholding tax
exemption.
(g) No person to whom a participation has
been granted or who has received an assignment
hereunder may grant any participation or make any
assignment unless such participation or assignment
would be permitted under this subsection 9.7 if made by
a Bank.
(h) Notwithstanding anything to the contrary
herein, no assignment or participation will be
permitted if, after giving effect thereto, the
aggregate Commitment of the transferee (if other than
the Agent in its capacity as a Bank), together with
such transferee's participating interest in the
Commitments, would exceed 25% of the aggregate
Commitments.
(i) Notwithstanding any other provision set
forth in this Agreement, any Bank may at any time
create a security interest in all or any portion of its
rights under this Agreement (including, without
limitation, the Loans owing to it and the Notes held by
it) in favor of any Federal Reserve Bank in accordance
with Regulation A. No such assignment shall release
the transferor Bank from its obligations hereunder.
9.8 Further Assurances. At any time and
from time to time, upon the request of the Agent, the
Company and each Designated Subsidiary shall execute,
deliver and acknowledge or cause to be executed,
delivered and acknowledged, such further documents and
instruments and do such other acts and things as the
Agent may reasonably request in order to fully effect
the purposes of this Agreement and the other Loan
Documents and any other agreements, instruments and
documents delivered pursuant hereto or in connection
with the Loans or the L/Cs.
9.9 Adjustments; Set-off. (a) If any Bank
(a "Benefited Bank") shall at any time receive any
payment of all or part of any of its Loans or interest
thereon, or receive any collateral in respect thereof
or any payment under any Guaranty (whether voluntarily
or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in paragraph (f)
of Section 7, or otherwise) in a greater proportion
than any such payment to and collateral received by any
other Bank, if any, in respect of such other Bank's
Loans, or interest on any of the foregoing, such
Benefited Bank shall purchase for cash from each other
Bank such portion of each such other Bank's Loans, or
shall provide each such other Bank with the benefits of
any such collateral, or the proceeds thereof, as shall
be necessary to cause such Benefited Bank to share the
excess payment or benefits of such collateral or
proceeds ratably with the other Banks; provided,
however, that if all or any portion of such excess
payment or benefits is hereafter recovered from such
Benefited Bank, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent
of such recovery, but without interest. The Company
and each Designated Subsidiary agrees that each Bank so
purchasing a portion of any other Bank's Loans may
exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such
portion as fully as if such Bank were the direct holder
of such portion. Any payments received after the Banks
have taken action pursuant to this subsection 9.9 shall be
allocated ratably among the Loans and participations
in L/Cs of all the Banks.
(b) In addition to any rights and remedies
of each Bank provided by law, upon the occurrence and
during the continuation of an Event of Default, each
Bank shall have the right, without prior notice to the
Company or any Designated Subsidiary, any such notice
being expressly waived to the extent permitted by
applicable law, to set off and apply against any
indebtedness, whether matured or unmatured, of the
Company or any of its Subsidiaries to such Bank under
this Agreement or any of the other Loan Documents, any
amount owing from such Bank to the Company or any such
Subsidiary at, or at any time after, the happening of
any of the above-mentioned events, and such right of
set-off may be exercised by such Bank against the
Company or any such Subsidiary or against any trustee
in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, custodian or execution,
judgment or attachment creditor of the Company or any
such Subsidiary or against anyone else claiming through
or against the Company or any such Subsidiary or such
trustee in bankruptcy, debtor in possession, assignee
for the benefit of creditors, receivers, or execution,
judgment or attachment creditor, notwithstanding the
fact that such right of set-off shall not have been
exercised by such Bank prior to the making, filing or
issuance, or service upon such Bank of, or of notice
of, any such petition, assignment for the benefit of
creditors, appointment or application for the
appointment of a receiver, or issuance of execution,
subpoena, order or warrant. Each Bank agrees promptly
to notify the Company, any such Subsidiary, the Agent
and each other Bank after any such set-off and
application made by such Bank, provided that the
failure to give such notice shall not affect the
validity of such set-off and application.
9.10 Severability. Any provision of this
Agreement which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or
unenforceability without invalidating the remain-ing
provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in
any other jurisdiction.
9.11 Confidentiality. Each Bank agrees to
maintain the confidentiality of information designated
as confidential and provided to it by the Company, or
any Subsidiary in connection with this Agreement or the
other Loan Documents; provided, however, that any Bank
may disclose such information (a) at the request of any
bank regulatory authority or in connection with an
examination of such Bank by any such authority, (b)
pursuant to subpoena or other court process, (c) when
required to do so in accordance with the provisions of
any applicable law, (d) as required by any other
Governmental Authority, (e) to such Bank's independent
auditors, attorneys or other professional advisors upon
receipt of a confidentiality undertaking for the
benefit of the Company in conformity with this
subsection 9.11 as to non-public information or (f) to
any Eligible Assignee or Participant or potential
Eligible Assignee or Participant; provided that such
Eligible Assignee or Participant, as the case may be,
agrees in writing to maintain the confidentiality of
such information in conformity with this subsection
9.11.
9.12 Counterparts. This Agreement may be
executed by one or more of the parties to this
Agreement on any number of separate counterparts and
all of said counterparts taken together shall be deemed
to constitute one and the same instrument. A set of
the copies of this Agreement signed by all the parties
shall be lodged
with the Company, the Designated Subsidiaries and the
Agent.
9.13 GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF TRIAL BY JURY.
(a) THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
AND ALL OTHER DOCUMENTS AND INSTRUMENTS EXECUTED AND
DELIVERED IN CONNECTION HEREWITH AND THEREWITH, SHALL
BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
(b) EACH OF THE COMPANY AND EACH DESIGNATED
SUBSIDIARY IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION
OR PROCEEDING AGAINST IT UNDER, ARISING OUT OF OR IN
ANY MANNER RELATING TO THIS AGREEMENT, AND THE OTHER
LOAN DOCUMENTS MAY BE BROUGHT IN ANY COURT OF THE STATE
OF NEW YORK, COUNTY OF NEW YORK, OR IN THE UNITED
STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW
YORK. THE COMPANY AND EACH DESIGNATED SUBSIDIARY, BY
THE EXECUTION AND DELIVERY OF THIS AGREEMENT, EXPRESSLY
AND IRREVOCABLY ASSENTS AND SUBMITS TO THE PERSONAL NON-
EXCLUSIVE JURISDICTION OF ANY OF SUCH COURTS IN ANY
SUCH ACTION OR PROCEEDING. EACH OF THE COMPANY AND
EACH DESIGNATED SUBSIDIARY FURTHER IRREVOCABLY CONSENTS
TO THE SERVICE OF ANY COMPLAINT, SUMMONS, NOTICE OR
OTHER PROCESS RELATING TO ANY SUCH ACTION OR PROCEEDING
BY DELIVERY THEREOF IN ACCORDANCE WITH APPLICABLE LAW.
EACH OF THE COMPANY AND EACH DESIGNATED SUBSIDIARY
HEREBY EXPRESSLY AND IRREVOCABLY WAIVES ANY CLAIM OR
DEFENSE IN ANY SUCH ACTION OR PROCEEDING BASED ON ANY
ALLEGED LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS OR ANY SIMILAR BASIS. EACH OF
THE COMPANY AND EACH DESIGNATED SUBSIDIARY SHALL NOT BE
ENTITLED IN ANY SUCH ACTION OR PROCEEDING TO ASSERT ANY
DEFENSE GIVEN OR ALLOWED UNDER THE LAWS OF ANY STATE
OTHER THAN THE STATE OF NEW YORK UNLESS SUCH DEFENSE IS
ALSO GIVEN OR ALLOWED BY THE LAWS OF THE STATE OF NEW
YORK. NOTHING IN THIS SUBSECTION SHALL AFFECT OR
IMPAIR IN ANY MANNER OR TO ANY EXTENT THE RIGHT OF ANY
BANK TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE COMPANY OR ANY DESIGNATED SUBSIDIARY IN ANY
JURISDICTION OR TO SERVE PROCESS IN ANY MANNER
PERMITTED BY LAW.
[THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK]
(c) EACH OF THE COMPANY, THE DESIGNATED
SUBSIDIARIES, THE BANKS AND THE AGENT WAIVES TRIAL BY
JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN
CONNECTION WITH, OR ARISING OUT OF, THIS AGREEMENT, THE
OTHER LOAN DOCUMENTS OR ANY INSTRUMENT OR DOCUMENT
DELIVERED PURSUANT TO THIS AGREEMENT, OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT
THEREOF.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered
by their proper and duly authorized officers as of the
day and year first above written.
PLY GEM INDUSTRIES, INC.
By
Title:
ACKNOWLEDGED AND AGREED AS TO EACH PROVISION
RELATING TO ANY DESIGNATED SUBSIDIARY:
SAGEBRUSH SALES, INC.
By
Title:
SNE ENTERPRISES, INC.
By
Title:
VARIFORM, INC.
By
Title:
GREAT LAKES WINDOW, INC.
By
Title:
FLEET NATIONAL BANK,
as Agent and as a Bank
By_____________________
Title
EUROPEAN AMERICAN BANK
By_____________________
Title
BANK OF MONTREAL
By______________________
Title
THE YASUDA TRUST AND BANKING
COMPANY, LIMITED NEW YORK BRANCH
By___________________
Title
EXECUTION COPY
PLY GEM INDUSTRIES, INC.
____________________________________
____________ AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of August 26, 1997
________________________________________________
FLEET NATIONAL BANK, as Agent,
and
THE BANKS SIGNATORY HERETO
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS 2
1.1 Defined Terms 2
1.2 Other Definitional Provisions 24
SECTION 2. AMOUNTS AND TERMS OF COMMITMENTS 24
2.1 Commitments 24
2.2 Notes 26
2.3 Procedure for Loan Borrowings 26
2.4 Intentionally Omitted 28
2.5 Intentionally Omitted 28
2.6 Termination or Reduction of
Commitments 28
2.7 Fees 29
2.8 Optional and Mandatory Prepayments 29
2.9 Repayment of Loans 30
2.10 Interest Rates and Payment Dates 31
2.11 Computation of Interest and Fees 32
2.12 Inability to Determine Interest Rate 32
2.13 Taxes 33
2.14 Illegality 34
2.15 Increased Costs 35
2.16 Indemnity 36
2.17 Maximum Number of Tranches 37
2.18 Use of Proceeds 37
2.19 Pro Rata Treatment and Payments; L/C
Participation 37
2.20 Guaranties 39
2.21 Security 39
2.22 Additional L/C Provisions 40
2.23 Several Obligations 43
SECTION 3. REPRESENTATIONS AND WARRANTIES 43
3.1 Financial Condition 43
3.2 No Change 44
3.3 Corporate Existence; Compliance with
the Law 44
3.4 Corporate Power; Authorization;
Enforceable Obligations 44
3.5 No Legal Bar 45
3.6 No Litigation 45
3.7 Federal Regulations 45
3.8 Investment Company Act 45
3.9 Disclosure 45
3.10 No Default 46
3.11 Taxes 46
3.12 Subsidiaries 46
3.13 Ownership of Property; Liens 46
3.14 ERISA 46
3.15 Nortek Indentures 48
3.16 SEC Reports 48
3.17 Intangible Assets 48
3.18 Name Changes, Mergers, Acquisitions 48
3.19 Licenses and Approvals 49
3.20 Labor Disputes; Collective Bargaining
Agreements; Employee Grievances 49
3.21 Solvency 49
3.22 Outstanding Indebtedness for Borrowed
Money 49
3.23 Hazardous Materials 49
SECTION 4. CONDITIONS PRECEDENT 49
4.1 Conditions to Initial Loans and L/Cs 49
(a) Tender Offer and Merger 50
(b) Corporate Structure 50
(c) No Material Adverse Change 50
(d) Pre-Commitment Information 50
(e) Capital Structure 50
(f) Compliance; No Litigation 50
(g) Insurance 51
(h) Fees and Expenses 51
(i) Consents and Approvals 51
(j) Agreement 51
(k) Notes 51
(l) Guaranty 51
(m) Collateral 51
(n) Borrowing Certificates 52
(o) Notice of Borrowing 52
(p) Legal Opinions 52
(q) Related Agreements 53
(r) Corporate Proceedings 53
(s) Related Documents and Nortek
Indentures 53
(t) Consents 53
(u) Other Fees 54
(v) Good Standings 54
(w) Incumbency Certificates 54
(x) Solvency Certificate 54
(y) Ownership, Liens 54
(z) Projections 54
(aa) Other Documentation 54
4.2 Conditions to All Loans 54
(a) Representations and Warranties 55
(b) No Default or Event of Default 55
(c) No Violations of Law 55
(d) Other 55
4.3 Conditions to Loans to New Designated
Subsidiaries 55
SECTION 5. AFFIRMATIVE COVENANTS 56
5.1 Financial Statements 56
5.2 Certificates; Other Information 57
5.3 Payment of Obligations 57
5.4 Material Operating Subsidiaries 58
5.5 Conduct of Business and Maintenance of
Existence 58
5.6 Maintenance of Property; Insurance 58
5.7 Inspection of Property; Books and Records;
Discussions 58
5.8 Notices 59
5.9 Copies of Corporate Documents 60
5.10 Conditions Subsequent 60
5.11 Hazardous Material 60
5.12 Further Assurances 61
5.13 Compliance with Terms of Leaseholds 61
5.14 Performance of Related Documents 62
5.15 Hedge Agreements 62
5.16 Conditions Subsequent to Closing Date 62
SECTION 6. NEGATIVE COVENANTS 63
6.1 Limitation on Indebtedness 63
6.2 Limitation on Liens 64
6.3 Limitation on Contingent Obligations 66
6.4 Limitation on Fundamental Changes 67
6.5 Distributions 68
6.6 Limitation on Dividend Restrictions
Regarding Subsidiaries 68
6.7 Prohibition on Investments, Acquisitions,
Loans and Advances 68
6.8 Prohibition on Optional Prepayments 70
6.9 Consolidated Net Worth 71
6.10 Leverage Ratio 71
6.11 Interest Coverage Ratio 71
6.12 Current Ratio 71
6.13 Intentionally Omitted 71
6.14 Amendment, Etc. of Related Documents 71
6.15 Fiscal Year 72
6.16 Transactions with Affiliates 72
6.17 Ownership of Designated Subsidiaries 72
6.18 Limitation on Capital Expenditures 72
6.19 Financing Leases 72
6.20 Change in Nature of Business 73
6.21 Charter Amendments 73
6.22 Accounting Changes 73
6.23 Intentionally Omitted 73
6.24 Negative Pledge 73
6.25 Formation of Subsidiaries 73
SECTION 7. EVENTS OF DEFAULT 73
SECTION 8. THE AGENT 77
8.1 Appointment 77
8.2 Delegation of Duties 77
8.3 Exculpatory Provisions 77
8.4 Reliance by Agent 78
8.5 Notice of Default 78
8.6 Non-Reliance on Agent and Other Banks 78
8.7 Indemnification 79
8.8 Agent in Its Individual Capacity 79
8.9 Successor Agent 79
8.10 Failure to Act 80
SECTION 9. MISCELLANEOUS 80
9.1 Amendments and Waivers 80
9.2 Notices 81
9.3 No Waiver; Cumulative Remedies 83
9.4 Survival of Representations
and Warranties 83
9.5 Payment of Expenses, Etc. 83
9.6 Binding Effect; No Assignment or
Delegation by Company or
any Designated Subsidiary 84
9.7 Assignments and Participations by Banks;
Pledge to Federal Reserve Bank 85
9.8 Further Assurances 88
9.9 Adjustments; Set-off 88
9.10 Severability 89
9.11 Confidentiality 89
9.12 Counterparts 90
9.13 GOVERNING LAW; CONSENT TO JURISDICTION;
WAIVER OF TRIAL BY JURY 90
SCHEDULES
I Initial Commitments and Loans
2.1 Existing Letters of Credit
2.20 Material Operating Subsidiaries
3.11 Taxes
3.12 Subsidiaries, including Non-Core
Subsidiaries
3.14 Contingent Liability relating to Post-
Retirement Benefit 3.18 Name Changes, Mergers,
Acquisitions
3.20 Labor Disputes; Collective Bargaining Agreements;
Employee Grievances
3.22 Indebtedness
6.2 Liens
6.3 Contingent Obligations
EXHIBITS
A Form of Note
B Form of Assignment and Agreement
C Form of Notice of Borrowing/Conversion
D-1 Form of Borrowing Certificate for the
Company
D-2 Form of Borrowing Certificate for
Subsidiaries
E Form of Assignment and Acceptance
F-1 Form of Legal Opinion of Charles M. Modlin
F-2 Form of Legal Opinion of Ropes & Gray
G Forms of Solvency Certificate
COPY AS EXECUTED, TOGETHER WITH EXHIBIT B THERETO AND
THE SECURITY AGREEMENT AND GUARANTY REFERRED THEREIN,
EACH AS SEPARATELY EXECUTED
PLY GEM INDUSTRIES, INC.
________________________________________________
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of August 26, 1997
________________________________________________
FLEET NATIONAL BANK, as Agent,
and
THE BANKS SIGNATORY HERETO
