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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
PLY GEM INDUSTRIES, INC.
(Name of Subject Company)
PLY GEM INDUSTRIES, INC.
(Name of Person Filing Statement)
COMMON STOCK, PAR VALUE $0.25 PER SHARE
(Title of Class of Securities)
CUSIP NO. 729416 10 7
(CUSIP Number of Class of Securities)
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JEFFREY S. SILVERMAN
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PLY GEM INDUSTRIES, INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
(212) 832-1550
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person filing statement)
With copies to:
<TABLE>
<S> <C> <C>
VICTOR I. LEWKOW, ESQ. CHARLES M. MODLIN, ESQ.
CLEARY, GOTTLIEB, STEEN & HAMILTON EAB PLAZA
ONE LIBERTY PLAZA and 12TH FLOOR, WEST TOWER
NEW YORK, NEW YORK 10006 UNIONDALE, NEW YORK 11556
(212) 225-2000 (516) 794-4600
</TABLE>
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Ply Gem Industries, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 777 Third Avenue, New York, New York 10017. The title of the
class of equity securities to which this Schedule relates is the Company's
Common Stock, par value $0.25 per share (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule relates to the tender offer by NTK Sub, Inc., a Delaware
corporation (the "Offeror"), and a wholly owned subsidiary of Nortek, Inc., a
Delaware corporation ("Nortek"), to purchase all outstanding shares of Common
Stock at the purchase price of $19.50 per share of Common Stock, net to the
tendering holder, in cash (without interest thereon), on the terms and subject
to the conditions set forth in the Offer to Purchase dated July 29, 1997 (the
"Offer to Purchase") and the related Letter of Transmittal (which together
constitute the "Offer"). The Offer is disclosed in a Tender Offer Statement on
Schedule 14D-1 dated July 29, 1997. According to the Offer to Purchase, the
principal executive offices of the Offeror and Nortek are located at 50 Kennedy
Plaza, Providence, Rhode Island 02903.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 24, 1997 (the "Merger Agreement"), among the Company, Nortek and the
Offeror. A copy of the Merger Agreement is filed as Exhibit 1 to this Schedule
and is incorporated herein by reference in its entirety. The Merger Agreement
provides that following the completion of the Offer, the Offeror will be merged
into the Company, with the Company continuing as a wholly owned subsidiary of
Nortek (the "Merger"). In the Merger, all remaining shares of Common Stock not
purchased in the tender offer (other than shares of Common Stock owned by the
Company or any subsidiary of the Company and shares of Common Stock held by
stockholders who perfect any available appraisal rights under Delaware General
Corporation Law) will be converted into the right to receive $19.50 per share in
cash or such higher price, if any, as is paid in the Offer.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Identity.
The name and business address of the Company, which is the person filing
this Schedule, are set forth in Item 1 above.
(b) Contracts
Except as otherwise described in this Schedule or in the exhibits or
annexes hereto, to the knowledge of the Company, as of the date hereof, there
are no material contracts, agreements, arrangements or understandings, or any
actual or potential conflicts of interest, between the Company or its affiliates
and (i) the Company or its executive officers, directors or affiliates, or (ii)
the Offeror, Nortek or their executive officers, directors or affiliates.
Information with respect to certain contracts, agreements, arrangements or
understandings between the Company and certain of its directors, executive
officers and affiliates is set forth in the Company's Proxy Statement, dated
April 11, 1997, for its 1997 Annual Meeting of Stockholders (the "Proxy
Statement"). A copy of the Proxy Statement is attached hereto as Exhibit 2, and
the relevant portions thereof are incorporated herein by reference.
AGREEMENTS WITH NORTEK
The Merger Agreement
The following is a summary of the Merger Agreement, a copy of which is
attached hereto as Exhibit 1 and incorporated by reference herein. All
references to and summaries of the Merger Agreement herein are qualified in
their entirety by reference to the Merger Agreement. Capitalized terms used and
not otherwise defined herein shall have the meanings assigned to them in the
Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days from the date of the Merger Agreement, subject to the Merger Agreement not
having been terminated prior thereto in accordance with its terms. The
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obligation of Offeror to accept for payment Shares tendered pursuant to the
Offer is subject to (i) the condition (the "Minimum Condition") that the number
of Shares validly tendered and not withdrawn, when added to the Shares then
beneficially owned by Nortek, shall constitute a majority of the then
outstanding Shares on a fully diluted basis, and (ii) the satisfaction and
waiver of the other conditions described below under "-- Conditions to the
Offer" (collectively, the "Conditions"). Offeror and the Company have agreed
that without the consent of the Company, no amendment to the Offer may be made
which (a) decreases the price per Share or changes the form of consideration
payable in the Offer, (b) reduces the maximum number of Shares sought, (c)
changes any of the Conditions or imposes conditions in addition to the
Conditions or amends any other term of the Offer in either case in any manner
adverse to the holders of Shares, or (d) waives the Minimum Condition. The
Merger Agreement provides that the Offer may only be extended with the prior
written consent of the Company or as provided by Law; provided, however, that
Nortek and Offeror may extend the Offer without the consent of the Company (i)
if at the scheduled expiration date of the Offer any of the Conditions shall not
have been satisfied or waived, or (ii) for any period required by any Laws
applicable to the Offer; and provided, further, that if the Conditions are not
satisfied or, to the extent permitted by the Merger Agreement, waived as of any
scheduled expiration date, Nortek and Offeror shall extend the Offer from time
to time for up to five business days at a time (or such longer period as shall
be approved by the Company) until the earlier of the consummation of the Offer
or sixty (60) calendar days after the date of the Merger Agreement, provided
that such extension shall not be required if in the reasonable judgment of
Nortek and Offeror, any Condition is incapable of being satisfied prior to the
expiration of the sixty (60) calendar days. Upon the terms of the Merger
Agreement and subject to the Conditions, Offeror will accept for payment and
purchase all Shares validly tendered and not withdrawn prior to the expiration
of the Offer.
Conditions to the Offer. The Merger Agreement provides that,
notwithstanding any other provision of the Offer, the Offeror shall not be
required to pay for, or may delay the acceptance for payment of or payment for,
any tendered shares, if (i) any applicable waiting period under the HSR Act
shall not have expired or been terminated, (ii) the Minimum Condition shall not
have been satisfied, (iii) Nortek and Offeror shall not have received the debt
financing for the transactions contemplated by the Merger Agreement on terms
substantially as outlined in the financing commitment letter received from WP
Bridge Finance, Inc. (the "Financing Commitment"), or (iv) on or after the date
of the Merger Agreement and at or before the time of payment for the Shares, any
of the following events shall occur and be continuing:
(a) there shall have occurred and be continuing (1) any general suspension
of trading in, or general limitation on prices for, securities on the New York
Stock Exchange, Inc. (other than suspensions of not more than one business day),
(2) the declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States (whether or not mandatory), (3) the
commencement of a war, armed hostilities or other international or national
calamity involving the United States and having had or being reasonably likely
to have a Material Adverse Effect or materially adversely affecting (or
materially delaying) the consummation of the Offer, (4) any material limitation
or proposed material limitation (whether or not mandatory) by any Governmental
Entity, or any other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions or (5) in the case
of any of the situations described in clauses (1) through (4) inclusive existing
at the date of the Merger Agreement, a material acceleration, escalation or
worsening thereof;
(b) the representations and warranties of the Company set forth in the
Merger Agreement shall not have been true and correct in all respects (provided
that any representation or warranty of the Company contained in the Merger
Agreement that is subject to a materiality, Material Adverse Effect or similar
qualification shall not be so qualified for purposes of determining the
existence of any breach thereof on the part of the Company) as of the date of
the Merger Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the scheduled expiration date of
the Offer as though made on and as of such scheduled expiration date, except for
such breaches that would neither, individually or in the aggregate with any
other breaches on the part of the Company, (i) have a Material Adverse Effect on
the Company nor (ii) materially adversely affect the ability of the parties to
the Agreement to consummate the transactions contemplated by the Merger
Agreement; or the Company shall not have performed in all material respects
(provided that any obligation the performance of which is subject to a
materiality, Material Adverse Effect or similar qualification shall not be so
qualified for purposes of determining the existence of any nonperformance
thereof) all obligations required to be performed by it under the Merger
Agreement;
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(c) there shall be any action or proceeding commenced by any Governmental
Entity, which has a reasonable likelihood of success and which, if decided
adversely to the Company, would have a Material Adverse Effect or would
restrain, prohibit or materially delay the consummation of the Offer, and if
decided adversely to Nortek, would have the effect of (i) making the purchase
of, or payment for, some or all of the Shares pursuant to the Offer or the
Merger or otherwise illegal, or resulting in a material delay in the ability of
Nortek or Offeror to accept for payment or pay for some or all of the Shares,
(ii) compelling Nortek or Offeror to dispose of or hold separately all or any
material portion of the Company's or Nortek's business or assets, (iii) making
illegal, or otherwise directly or indirectly restraining or prohibiting or
imposing material financial burdens, penalties or fines requiring the payment of
material damages in connection with the making of, the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some of or all
the Shares by Nortek or Offeror, the consummation of the Offer or the Merger,
(iv) otherwise preventing consummation of the Offer or the Merger, or (v)
imposing material limitations on the ability of Nortek or Offeror effectively
(A) to acquire, hold or operate the business of the Company and its Subsidiaries
taken as a whole or (B) to exercise full rights of ownership of the Shares
acquired by it, including, but not limited to, the right to vote the Shares
purchased by it on all matters properly presented to the stockholders of the
Company, which, in either case, would effect a material diminution in the value
of the Company or the Shares;
(d) there shall have been any Law enacted, promulgated, entered or deemed
applicable to the Offer or the Agreement or any other action shall have been
taken by any Governmental Entity on or after the date of the Offer that would
result in any of the consequences referred to in clauses (i) through (v) of
paragraph (c) above (other than with respect to clause (i) of paragraph (c), if
there shall have been a material delay in the ability of Nortek or Offeror to
accept for payment or pay for some or all of the Shares due to a request for
additional information under the HSR Act);
(e) the Board of Directors of the Company shall have publicly (including by
amendment of this Schedule 14D-9) withdrawn or adversely modified its
recommendation of acceptance of the Offer;
(f) since the date of the Merger Agreement, there shall have occurred any
event or events that, singly or in the aggregate, have had or would have a
Material Adverse Effect; or
(g) the Merger Agreement shall have been terminated in accordance with its
terms, or Nortek or Offeror shall have reached an agreement or understanding in
writing with the Company providing for termination or amendment of the Offer;
which, in any such case, and regardless of the circumstances (including any
action or inaction by Nortek or Offeror other than a breach by Nortek or Offeror
of the Merger Agreement) giving rise to any such conditions, makes it in the
reasonable judgment of Nortek inadvisable to proceed with the Offer and/or with
such acceptance for payment of the Shares.
The Merger Agreement provides that the foregoing conditions are for the
sole benefit of Nortek and Offeror and may be asserted by Nortek or Offeror
regardless of the circumstances giving rise to any such condition (other than a
breach by Nortek or Offeror of the Merger Agreement) and may be waived by Nortek
or Offeror, in whole or in part, at any time and from time to time, in the sole
discretion of Nortek or Offeror; provided, that the Minimum Condition is also
for the benefit of the Company and may not be waived without the Company's
consent. The failure by Nortek or Offeror at any time to exercise any of the
foregoing rights would not be deemed a waiver of any right and each right will
be deemed an ongoing right which may be asserted at any time and from time to
time.
The Merger
The Merger Agreement provides that following consummation of the Offer,
subject to the approval and adoption of the Merger Agreement and the Merger by
the affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote thereon (if then required by the Delaware General
Corporation Law), approval by certain regulatory authorities and compliance with
certain other covenants and conditions, Offeror will be merged with and into the
Company, at which time the separate corporate existence of Offeror will cease
and the Company will continue as the Surviving Corporation. Following
consummation of the Merger, the Company, as the Surviving Corporation, will be a
wholly owned subsidiary of Nortek.
Conversion of Securities. At the Effective Time, (i) each outstanding
share of Common Stock that is owned by the Company will be automatically
canceled and retired and will cease to exist, and no consideration
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will be delivered or deliverable in exchange therefor, (ii) each issued and
outstanding share of Common Stock (other than shares to be canceled in
accordance with the immediately preceding clause and other than Dissenting
Shares) will be converted into the right to receive $19.50 or such higher price,
if any, as is paid in the Offer, in cash (the "Merger Consideration") from the
Surviving Corporation, without interest thereon, upon surrender of the
certificates representing shares of Common Stock, and (iii) each share of
capital stock of Offeror will be converted into and become a number of fully
paid and nonassessable shares of common stock of the Surviving Corporation equal
to the quotient realized by dividing, immediately prior to the Effective Time,
(A) the sum of (1) the aggregate number of shares of Common Stock issued and
outstanding, (2) the aggregate number of shares of Common Stock that are owned
by the Company and (3) the aggregate number of shares of Common Stock issuable
in respect of all then outstanding Options (as defined in " -- Stock Option
Plans" below), by (B) the aggregate number of shares of capital stock of Offeror
issued and outstanding.
Stock Option Plans. At the Effective Time, each then outstanding option
(including stock purchase rights and unrestricted stock awards) to purchase or
acquire shares of Common Stock under the Company's Stock Option Plans, whether
or not then exercisable or vested (the "Options"), and each share of not yet
vested restricted stock granted under any such Stock Option Plan ("Unvested
Stock") will immediately (except under certain circumstances relating to persons
subject to Section 16(a) of the Exchange Act) be canceled and represent the
right to receive consideration in settlement thereof as described below. Holders
of Options will receive, for each share of Common Stock subject to such Option,
including any additional shares subject thereto by reason of their terms upon
consummation of the "change of control" resulting from the Offer or the Merger
as described below, an amount (subject to any applicable withholding tax) in
cash equal to the difference between the per share Merger Consideration and the
per share exercise price of such Option to the extent such difference is a
positive number (the "Option Consideration"). Among the Options held by Jeffrey
Silverman, Chairman and Chief Executive Officer, and Herbert Dooskin, Executive
Vice President, are Options with respect to 600,000 shares and 150,000 shares,
respectively (with half of each of such Options held by each of them having an
exercise price of $10.75 and the remainder an exercise price of $12.25) which
Options provide that upon a "change of control" the number of shares covered by
such Options shall double. Upon consummation of the Offer, all Options will
immediately vest and become exercisable. Holders of Unvested Stock will receive
for each share of Unvested Stock, cash equal to the per share Merger
Consideration (the "Unvested Stock Consideration").
The surrender of an Option to the Company in exchange for the Option
Consideration will be deemed a release of any and all rights the holder had or
may have had in respect of such Option. The Stock Option Plans will terminate as
of the Effective Time, and the provisions in any other plan, program or
arrangement providing for the issuance or grant of any other interest in respect
of the capital stock of the Company or any Subsidiary will be canceled. Prior to
the Closing, the Company will use its best efforts to take all action necessary
to ensure that, following the Effective Time, no participant in the Stock Option
Plans or any other plan, program or arrangement will have any right thereunder
to acquire equity securities of the Company, the Surviving Corporation or any
Subsidiary thereof and terminate all such plans, programs and arrangements as of
the Effective Time.
Upon the later of the consummation of the Offer or the delivery of a duly
executed Option Release Agreement (as defined below) by a holder of Options to
be canceled or Unvested Stock, such holder shall be entitled to receive in
respect thereof the Option Consideration or the Unvested Stock Consideration,
without interest thereon.
Directors and Officers; Governing Documents. At the Effective Time, the
directors and officers of Offeror will become the directors and officers of
Surviving Corporation until the earlier of their death, resignation or removal
or until their respective successors are duly elected or appointed and
qualified, as the case may be. The Certificate of Incorporation of the Company,
as in effect immediately prior to the Effective Time, shall be amended to
increase the number of authorized shares of Common Stock to an aggregate amount
of 460,000,000 as of the Effective Time, by operation of the Merger Agreement
and by virtue of the Merger without any further action by the stockholders or
directors of the Surviving Corporation and, as so amended, the Certificate of
Incorporation shall be the certificate of incorporation of the Surviving
Corporation, until duly amended in accordance with the terms thereof and the
DGCL. The Bylaws of the Company will be the bylaws of the Surviving Corporation
until thereafter amended as provided therein, by the Certificate of
Incorporation or by applicable law.
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Stockholders' Meeting. Pursuant to the Merger Agreement, if required by
applicable Laws, the Company, acting through the Board, shall, in accordance
with applicable Laws and the Company's Certificate of Incorporation and Bylaws,
duly call, give notice of, and convene and hold a special meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on the Merger Agreement (the
"Stockholders' Meeting"). Notwithstanding the foregoing sentence, if Nortek and
Offeror shall collectively own, following consummation of the Offer, at least
90% of the outstanding Shares, each of Nortek, Offeror and the Company shall
take all necessary and appropriate action to cause the Merger to become
effective, as soon as practicable after consummation of the Offer (but in no
event later than ten (10) business days thereafter) without a meeting of the
stockholders of the Company, in accordance with the "short-form" merger
provisions of Section 253 of the DGCL.
Designation of Directors. The Merger Agreement provides that, provided
that Offeror acquires at least a majority of the Shares outstanding pursuant to
the Offer, Nortek shall be entitled to designate up to such number of directors,
rounded up to the next whole number, of the Board so that the designees of
Nortek constitute the same percentage of the Board (but in no event less than a
majority) as the percentage of Shares acquired pursuant to the Offer, and the
Company shall increase the size of the Board or obtain the resignations of
incumbent directors as is necessary to enable such number of Nortek designees to
be elected; provided, that at all times prior to the Effective Time at least two
of the members of the Board shall be Continuing Directors (as defined below).
Following the election or appointment of Nortek's designees pursuant to the
foregoing and prior to the Effective Time, such designees shall abstain from
acting upon, and the approval of a majority of the Continuing Directors shall be
required to and shall be sufficient to authorize, any resolution with respect to
the termination of the Merger Agreement by the Company, any amendment of the
Merger Agreement requiring action by the Board, any extension of time for the
performance of any of the obligations or other acts of Nortek or Offeror under
the Merger Agreement, any waiver of compliance with any of the agreements or
conditions under the Merger Agreement for the benefit of the Company and any
action to seek to enforce any obligation of Nortek or Offeror under the Merger
Agreement. Under the Merger Agreement, "Continuing Director" means (i) any
member of the Board as of July 24, 1997 or (ii) any successor to a Continuing
Director who is (A) unaffiliated with, and not a designee or nominee, of Nortek
as Offeror, and (B) recommended to succeed a Continuing Director by a majority
of the Continuing Directors then on the Board, and in each case under clause
(ii), who is not an employee of the Company.
Access to Information. The Company has agreed to (and to cause each of its
Subsidiaries to) afford, upon reasonable notice, the officers, employees,
accountants, counsel and other representatives of Nortek and Offeror, including
potential financing sources and their employees, accountants, counsel and other
representatives access, during normal business hours during the period prior to
the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company will (and will cause each of its
Subsidiaries to) furnish promptly to Nortek and Offeror (i) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to SEC requirements, and (ii) all other
information concerning its business, properties and personnel as Nortek and
Offeror may reasonably request.
No Solicitation. The Company has agreed that: (i) from and after July 24,
1997, until the termination of the Merger Agreement, neither the Company nor any
of its Subsidiaries will, nor will any of their respective officers, directors,
representatives, agents or affiliates (including, without limitation, any
investment banker, attorney or accountant retained by the Company or its
Subsidiaries) (collectively, the "Representatives"), and the Company will cause
the employees of the Company and its Subsidiaries not to, directly or indirectly
initiate, solicit or encourage (including by way of furnishing information or
assistance), or take any action to facilitate, any inquiries or the making of
any proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as defined below) or enter into or maintain or continue
discussions or negotiate with any person or entity in furtherance of such
inquiries or for the purpose of obtaining an Acquisition Proposal, or agree to
or endorse any Acquisition Proposal, or authorize or permit any of the
Representatives to take any such action; and (ii) it will in each case notify
Nortek orally (within one business day) and in writing (as promptly as
practicable) of all the relevant details relating to, and all material aspects
of, all inquiries and proposals which it or any of its Subsidiaries or any of
their respective Representatives may receive relating to any of such matters,
including providing a copy of such inquiry or proposal if such inquiry or
proposal is in
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writing; provided that, prior to the receipt of Company Stockholder Approval,
the Board of Directors of the Company may:
(i) following the receipt of an unsolicited written, bona fide
Acquisition Proposal, (A) furnish information to, or enter into discussions
or negotiations with, the person or entity that makes such Acquisition
Proposal; or (B) (1) withdraw, modify or not make a recommendation to
holders of Common Stock to approve the execution, delivery and performance
of the Transaction Documents and the adoption of the Merger Agreement
pursuant to the DGCL, or (2) terminate the Merger Agreement pursuant to the
provisions of the Merger Agreement (provided that, in the case of this
subclause (B), the person or entity making the Acquisition Proposal has the
necessary funds or has obtained customary commitments to provide the funds
to effect such Acquisition Proposal); if, and only to the extent that (x)
in the case of either clause (A) or (B) above, the Board of Directors,
after consultation with its independent legal counsel (who may be the
Company's regularly engaged legal counsel), determines in good faith that
such action is advisable for the Board of Directors to comply with its
fiduciary duties to stockholders under applicable law, (y) prior to taking
such action, the Company (I) in the case of either clause (A) or (B) above,
provides reasonable prior notice to Nortek to the effect that it is taking
such action, which notice shall (to the extent consistent with the
fiduciary duties of the Board of Directors to stockholders under applicable
law) include the identity of the person or entity engaging in such
discussions or negotiations, requesting such information or making such
Acquisition Proposal, and the material terms and conditions of any
Acquisition Proposal, (II) in the case of clause (A) above, receives from
such person or entity an executed confidentiality agreement in reasonably
customary form on terms no less favorable to the Company than those
contained in the Confidentiality Agreement (as defined below) (except that
such confidentiality agreement need not require approval of the Board of
Directors of the Company prior to the making of such offer or proposal),
and (III) in the case of clause (A) above, the Company will, to the extent
consistent with the fiduciary duties of the Board of Directors of the
Company to stockholders under applicable law, promptly and continuously
advise Nortek as to all of the relevant details relating to, and all
material aspects of, any such discussions or negotiations; or
(ii) take or disclose to the stockholders of the Company a position
contemplated by Rule 14e-2 of the Exchange Act if the Board of Directors of
the Company, after consultation with its independent legal counsel (who may
be the Company's regularly engaged independent counsel), determines in good
faith that such action is advisable for the Board of Directors of the
Company to comply with its fiduciary duties to holders of Shares under
applicable law.
Except for a confidentiality agreement referred to above and subject to
applicable termination provisions of the Merger Agreement, nothing in the Merger
Agreement will permit the Company to enter into any agreement with respect to
any Acquisition Proposal during the term of the Merger Agreement (it being
agreed that during the term of the Merger Agreement, the Company will not enter
into any agreement with any person that provides for, or in any way facilitates,
any Acquisition Proposal other than a confidentiality agreement in reasonably
customary form following receipt from a third party of an unsolicited written,
bona fide Acquisition Proposal). In the Merger Agreement, the Company agreed to
immediately cease and cause to be terminated any existing solicitation,
initiation, encouragement, activity, discussion or negotiation with any parties
conducted by the Company or any Representatives with respect to any Acquisition
Proposal existing on July 24, 1997.
"Acquisition Proposal" is defined in the Merger Agreement to mean any
proposal or offer (other than the transactions among the Company, Nortek and
Offeror contemplated by the Merger Agreement) involving the Company or any of
its Subsidiaries for, or an inquiry or indication of interest that reasonably
could be expected to lead to: (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of a
material portion of the assets of the Company and its Subsidiaries, taken as a
whole in a single transaction or series of transactions; or (iii) any tender
offer or exchange offer for all or any portion of the outstanding shares of
capital stock of the Company or any of its Subsidiaries or the filing of a
registration statement under the Securities Act in connection therewith.
Indemnification and Insurance. The Merger Agreement provides that, for a
period of six years after the Effective Time, the Surviving Corporation shall
cause to be maintained in effect the current policies of directors' and
officers' liability insurance and fiduciary liability insurance (or any
substitute policies of at least
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the same coverage and amounts, and containing terms and conditions no less
advantageous to the persons covered thereby, than the coverage currently
provided by the Company) with respect to matters arising before and acts or
omissions occurring or existing at or prior to the Effective Time, provided,
however, that Nortek shall not be required to pay an annual premium for any such
insurance in excess of 125%, in the case of the directors' and officers'
liability insurance policy, and 200%, in the case of the fiduciary liability
insurance policy, of the last annual premium paid by the Company in respect of
such insurance prior to July 24, 1997, but in each such case shall purchase as
much coverage as possible for such amount.
The Merger Agreement provides that, from and after the Effective Time,
Nortek and the Surviving Corporation will indemnify, defend and hold harmless,
to the fullest extent permitted by applicable law, each current and former
officer, director, employee or agent of the Company or any of its Subsidiaries
against all losses, claims, damages, costs, expenses (including attorneys' fees
and expenses), liabilities or judgments or amounts that are paid in settlement
of, with the approval of the indemnifying party (which approval shall not be
unreasonably withheld), or otherwise paid in connection with any threatened or
actual claim, action, suit, proceeding or investigation based in whole or in
part on or arising in whole or in part out of the fact that such person is or
was such an officer, director, employee or agent of the Company, or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, employee benefit plan, trust or
other enterprise at or prior to the Effective Time.
In addition, the Merger Agreement provides that the Company will honor
individual indemnification agreements between the Company and individual members
of the Board of Directors of the Company (whether pre-existing the Merger
Agreement or entered into thereafter on the same terms), except for the
provisions relating to the establishment of trusts, as to which the relevant
directors have waived their rights. Such indemnification agreements are
described in "Other Agreements -- Indemnification Agreements" below.
Further Action; Reasonable Efforts. In the Merger Agreement, the Company,
Nortek and Offeror have agreed to use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations or otherwise to
consummate and make effective the transactions contemplated by the Merger
Agreement, the Option Release Agreements, the Non-Compete and Termination
Agreement (as defined below) and the Termination and Release Agreement (as
defined below) (together, the "Transaction Documents"), subject, as applicable,
to the Company Stockholder Approval, including cooperating fully with the other
party, including by providing information and making all necessary filings in
connection with, among other things, approvals under the HSR Act. The Company
will use all reasonable efforts to obtain any consent from third parties
necessary to allow the Company to continue operating its business as presently
conducted as a result of the transactions contemplated by the Merger Agreement.
The Company has further agreed that it will make all reasonable efforts to
comply with all obligations imposed by the New Jersey Industrial Site Recovery
Act ("ISRA") with respect to the transactions contemplated by the Merger
Agreement. These obligations shall include, as appropriate, (i) timely
submission of notice to the New Jersey Department of Environmental Protection
and Energy (the "NJDEPE") and (ii) preparation and filing with NJDEPE of a
proposed negative declaration, a proposed remedial action workplan, appropriate
documents for a remediation agreement, a deferral of the remedial action
workplan, or an area of concern waiver; provided that the Company shall obtain
the approval and consent of Nortek and Offeror prior to entering into any
remediation agreement or other enforceable commitment with NJDEPE to satisfy the
requirements of ISRA. Nortek and Offeror have agreed to use their reasonable
best efforts to assist and cooperate with the Company and its representatives in
connection with the preparation and filing of all necessary documents under
ISRA.
The Company has agreed that, at Nortek's request, it will cooperate, and
will cause its accountants to cooperate, in all reasonable respects with any
financing efforts of Nortek or its affiliates, including the efforts of Nortek
and Offeror to secure the financing contemplated by the Financing Commitment and
any filings that may be made by Nortek or its affiliates with the SEC, at the
sole expense of Nortek. The Company (i) will furnish to its or to Nortek's
independent accountants customary management representation letters as such
accountants may require as a condition to the execution of any required
accountants' consents necessary in connection with the delivery of any "comfort"
letters requested by financing sources of Nortek or its affiliates,
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and (ii) will furnish to Nortek all financial statement and other information in
the possession of the Company or its Representatives.
Conduct of Business Pending the Merger. During the period from July 24,
1997 until the Effective Time, the Company has agreed as to itself and its
Subsidiaries that, except as expressly contemplated or permitted by the
Transaction Documents or as consented to in writing by Nortek, the Company and
its Subsidiaries will carry on their respective businesses in the ordinary
course in substantially the same manner as conducted prior to July 24, 1997.
Except as expressly contemplated or permitted by the Merger Agreement or as
consented to in writing by Nortek, the Company also has agreed that it will not,
nor shall it permit any of its Subsidiaries to: (i)(A) declare or pay any
dividends on or make any other distributions in respect of any of its capital
stock, other than (1) regular quarterly dividends not in excess of $.03 per
share with customary record and payment dates, and (2) cash dividends paid to
the Company by a wholly owned Subsidiary on or with respect to the capital stock
of a wholly owned Subsidiary, (B) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or (C) repurchase or otherwise acquire, or permit any Subsidiary
to purchase or otherwise acquire, any shares of its capital stock except as
required by the terms of its securities outstanding as of July 24, 1997, or as
contemplated by the Merger Agreement or by any employee benefit plan in effect
on July 24, 1997; or (ii) except as described above under "-- Stock Option
Plans" or as contemplated by the Stock Purchase Agreement dated July 24, 1997,
between the Company and Nortek, (A) grant any options, warrants or rights to
purchase shares of capital stock of the Company, (B) amend or reprice any option
or amend the terms of any of the Stock Option Plans, or (C) issue, deliver or
sell, or authorize or propose to issue, deliver or sell any shares of its
capital stock, any Company Voting Debt or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, Company Voting Debt
or convertible securities, other than (1) the issuance of shares upon the
exercise of Options, Unvested Stock and rights outstanding on July 24, 1997, and
(2) issuances of the capital stock of the Company's Subsidiaries to the Company
or to one of its wholly owned Subsidiaries.
The Company has also agreed that it will not, and in the case of clauses
(ii), (iii), (v), (vi), (viii), (ix) and (x) below, that its Subsidiaries will
not, or that the Company will not permit any of its Subsidiaries to: (i) amend
or propose to amend its Certificate of Incorporation or Bylaws; (ii) (A) merge
or consolidate with, or acquire any entity interest in, any corporation,
partnership, association or other business organization, or enter into an
agreement with respect thereto, or (B) acquire or agree to acquire any assets of
any corporation, partnership, association or other business organization or
division thereof, except for the purchase of inventory and supplies in the
ordinary course of business or the acquisition by the Company or any Subsidiary
of equity interests in any customer or supplier of the Company in satisfaction
of outstanding claims against such party in bankruptcy proceedings consistent
with past practice; (iii) sell, lease, encumber or otherwise dispose of, or
agree to do the same with, any of its material assets, other than sales of
inventory or sales or returns of obsolete or surplus equipment in the ordinary
course of business consistent with past practice; (iv) authorize, recommend,
propose or announce an intention to adopt a plan of complete or partial
liquidation or dissolution of the Company or any of its Subsidiaries; (v)
without the prior written consent of Nortek, which consent shall not be
unreasonably withheld, (A) grant any increases in the compensation of any of its
directors, officers, management employees or key employees, except as may be
required pursuant to any of the existing Benefit Plans or Employee Arrangements
disclosed in the Merger Agreement, (B) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or contemplated to
be paid prior to the Effective Time by any of the existing Benefit Plans or
Employee Arrangements as in effect on July 24, 1997 to any such director,
officer, management employee or key employee, whether past or present, (C) enter
into any new, or materially amend any existing, employment or severance or
termination agreement with any such director, officer, management employee or
key employee, (D) except as may be required to comply with applicable law,
become obligated under any Benefit Plan or Employee Arrangement which was not in
existence on July 24, 1997, or amend any such plan or arrangement in existence
on July 24, 1997 if such amendment would have the effect of enhancing any
benefits thereunder, or (E) extend any loans or advances to any of its
directors, officers, management employees or key employees, except as expressly
permitted under the Transaction Documents; (vi) without the prior written
consent of Nortek, which consent shall not be unreasonably withheld, (A) assume
or incur any indebtedness for borrowed money (except for drawdowns by the
Company under its revolving credit facility or its accounts receivable facility)
or guarantee any such indebtedness or issue or sell any debt securities or
warrants or rights to acquire any debt securities of the Company or any of its
Subsidiaries or guarantee any debt securities of any other person except wholly
owned
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Subsidiaries or enter into any lease or create any mortgages, liens, security
interests or other encumbrances on the property of the Company or any of its
Subsidiaries in connection with any indebtedness thereof, or enter into any
"keep well" or other agreement or arrangement to maintain the financial
condition of another person except wholly owned Subsidiaries of the Company, or
(B) except as otherwise disclosed in the Merger Agreement (1) enter into any
contracts involving aggregate annual payments in excess of $250,000, or (2)
modify, rescind, terminate, waive, release or otherwise amend in any material
respect any of the terms or provisions of any Material Contract in any manner
that is material and adverse to the Company or the respective Subsidiary of the
Company party thereto; (vii) take any action, other than in the ordinary course
of business, consistent with past practice or as required by the SEC, by law or
by changes in GAAP, with respect to accounting policies, procedures and
practices; (viii) except as otherwise disclosed in the Merger Agreement, incur
capital expenditures in excess of $100,000; (ix) take or agree or commit to take
any action that is reasonably likely to result in any of the Company's
representations or warranties under the Merger Agreement being untrue in any
material respect or any of the conditions to the Merger not being satisfied in
all material respects (see "-- Conditions to the Merger" above); (x) take any
action that would cause the transactions contemplated by the Merger Agreements
to fail to qualify for certain exceptions to taxation; or (xi) settle or
compromise any claim for appraisal rights in respect of the Merger without the
prior written consent of Nortek and Offeror.
The Company has further agreed to provide Nortek (or its counsel) with
copies of all filings made by the Company with the SEC or any state or federal
governmental entity in connection with the Merger Agreement and the transactions
contemplated thereby.
Employee Benefit Plans. In the Merger Agreement, the parties have agreed
that from and after the Effective Time, directors, officers and employees of the
Company and its Subsidiaries will be provided employee benefits, plans and
programs (including but not limited to incentive compensation, deferred
compensation, pension, life insurance, medical, profit sharing (including
401(k), severance salary continuation and fringe benefits) which are no less
favorable in the aggregate than those generally available to similarly situated
directors, officers and employees of Nortek and its significant Subsidiaries.
For purposes of eligibility to participate and vesting in all such benefits, the
directors, officers and employees of the Company and its Subsidiaries will be
credited with their years of service with the Company and its Subsidiaries and
prior employers to the extent service with the Company and its Subsidiaries and
prior employers is taken into account under plans of the Company and its
Subsidiaries. Nothing contained in the Merger Agreement creates any third party
beneficiary rights in any director, officer or employee (including any
beneficiary or dependent thereof) of the Company, any of its Subsidiaries or the
Surviving Corporation in respect of continued employment for any specified
period of any nature or kind whatsoever, and nothing contained in Merger
Agreement creates such third party rights in any such person in respect of any
benefits that may be provided, directly or indirectly, under any employee
benefit plan or arrangement.
Representations and Warranties. The Merger Agreement contains
representations and warranties of the Company regarding: the due organization,
good standing and authority to conduct business and own, lease and operate its
properties for each of the Company and its Subsidiaries; the capitalization of
the Company and its Subsidiaries; the authority of the Company to enter into the
Merger Agreement and the other Transaction Documents and to consummate the
transactions contemplated thereby, subject to the Company Stockholder Approval,
unless the Merger may be effected pursuant to Section 253 of the DGCL; the
absence of conflict between transactions contemplated by the Transaction
Documents and other agreements, documents and permits and absence of violations
of laws applicable to the Company; consents and approvals; the adequacy of
filings with the SEC; the accuracy, truthfulness and adequacy of documents filed
with or sent to the SEC or any other regulatory authority; the absence of
violations of certain agreements, documents and permits of the Company;
compliance with applicable law regarding permits; the absence of litigation;
certain matters relating to taxes; the full disclosure by the Company of certain
management, employment, consulting or other agreements, contracts or
commitments; certain matters relating to ERISA; the conduct of business in the
ordinary course and the absence of certain material adverse changes since March
31, 1997; the absence of undisclosed material liabilities; the Company's receipt
of the opinion of Furman Selz LLC as to the fairness, from a financial point of
view, of the cash consideration to be received by the stockholders of the
Company in the Offer and the Merger; the stockholder vote required to approve
the Merger Agreement and the Merger; certain labor matters; the ownership or the
right to use of the Company and its Subsidiaries of the Company Intangible
Property; certain environmental matters; the ownership of real property in fee,
and the holding of
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leasehold interests, by the Company and its Subsidiaries free and clear of all
mortgages, pledges, liens, encumbrances and security interests; the holding of
good title by the Company and its Subsidiaries to tangible property and assets;
the recommendation by the Board of Directors of the Company of the Merger
Agreement, the Offer and the Merger; the disclosure of material contracts to
which the Company or any Subsidiary are parties or by which the Company or any
Subsidiary are bound; the disclosure of certain related party transactions; the
compliance of this Schedule 14D-9 in all material respects with the Exchange
Act; the engagement of brokers and financial advisors; and the disclosure of the
Atrium Agreements. "Material Adverse Effect" is defined in the Merger Agreement
to mean, with respect to any party, any events, changes or effects which,
individually or in the aggregate, would have a material adverse effect on the
business, operations, assets, condition (financial or otherwise) or results of
operations of such party and its Subsidiaries, taken as a whole.
The Merger Agreement also includes representations and warranties by Nortek
and Offeror regarding: the due organization, good standing and authority to
conduct business and own, lease and operate its properties; the authority of
Nortek and Offeror to enter into the Merger Agreement and the other Transaction
Documents to which each is a party; the absence of conflict with other
agreements and documents and the absence of violation of laws applicable to
Nortek and Offeror, respectively; consents and approvals; the accuracy,
truthfulness and adequacy of documents filed with or sent to the SEC or any
other regulatory authority; the approval of the Board of Directors of Nortek of
the Transaction Documents; the receipt by Nortek of certain financing
commitments for the Merger; and the engagement of brokers and financial
advisors.
Conditions to the Merger. Pursuant to the Merger Agreement, the respective
obligations of each party to the Merger Agreement to effect the Merger are
subject to the satisfaction or waiver of the following conditions prior to the
Closing Date: (i) approval and adoption of the Merger Agreement and the Merger
by the holders of a majority of the outstanding shares of Common Stock entitled
to vote thereon, if required; (ii) termination or expiration of the waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
with no restrictive order having been placed on the Company, Nortek, Offeror or
the Surviving Corporation in connection therewith; (iii) no temporary
restraining order, preliminary or permanent injunction or other order or decree
issued by any court of competent jurisdiction preventing the consummation of the
Merger being in effect; (iv) no statute, rule, order, decree or regulation
having been enacted or promulgated by any government or governmental agency or
authority which prohibits consummation of the Merger; and (v) Nortek and Offeror
having accepted for purchase and paid for the Shares tendered pursuant to the
Offer (provided, however, that this condition will be deemed satisfied with
respect to Nortek and Offeror if Offeror shall have failed to purchase Shares
pursuant to the Offer in violation of the terms of the Offer or the Merger
Agreement.)
Termination. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time (whether before or after the
approval of the Merger Agreement and the Merger by Nortek or by the stockholders
of the Company) by mutual written consent of Nortek and the Company or their
respective Boards of Directors, or under the following circumstances:
Nortek or the Company. The Merger Agreement provides that either
Nortek or the Company may terminate the Merger Agreement and abandon the
Merger if: (i) any permanent injunction or other order of a court or other
competent authority preventing the consummation of the Merger shall have
become final and non-appealable; (ii) the Company Stockholder Approval is
not obtained by reason of the failure to obtain the required vote upon a
vote held at the Stockholders' Meeting or any adjournment thereof; (iii)
the Offer shall not have been consummated by October 31, 1997 or the Merger
shall not have been consummated by December 31, 1997, except that the right
to terminate the Merger Agreement under this clause (iii) is not available
to any party whose breach of the Merger Agreement has been the cause of or
resulted in the failure of the Offer to be consummated or the Merger to
occur on or before such date, or (iv) if the terminating party is not then
in material breach of its obligations under the Merger Agreement, if no
Shares shall have been purchased in connection with the Offer upon the
expiration of the Offer.
Nortek. The Merger Agreement provides that Nortek may terminate the
Merger Agreement and abandon the Merger prior to the consummation of the
Offer: (i) so long as Nortek is not in material breach of its obligations
under the Merger Agreement, (A) if the Company has breached any of its
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representations or warranties under the Merger Agreement, which breach has
not been cured within ten calendar days following receipt by the Company of
notice of such breach and is existing at the time of termination of the
Merger Agreement, except for breaches that would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or materially
adversely affect the ability of the parties to the Merger Agreement to
consummate the transactions contemplated thereby, or (B) if (1) the Company
has breached its covenants regarding the solicitation of Acquisition
Proposals (see "-- No Solicitation" above), or (2) the Company is in
material breach of any other covenant or agreement set forth in the Merger
Agreement, which material breach has not been cured within ten calendar
days following receipt by the Company of notice of such breach and is
existing at the time of termination by the Merger Agreement; (ii) if the
Board of Directors of the Company fails to make or withdraws or modifies
its recommendation or approval of the Offer, the Merger or the Merger
Agreement and the transactions contemplated thereby or recommends to the
Stockholders an Acquisition Proposal, or if the Board of Directors of the
Company resolves to do any of the foregoing; or (iii) if a tender offer or
exchange offer for 50% or more of the outstanding shares of capital stock
of the Company is commenced (other than by the Company or its affiliates)
and the Board of Directors of the Company fails to timely recommend against
the stockholders of the Company tendering their shares into such tender
offer or exchange offer.
The Company. The Merger Agreement provides that the Company may
terminate the Merger Agreement and abandon the Merger prior to the
consummation of the Offer: (i) so long as the Company is not in material
breach of its obligations under the Merger Agreement, (A) if Nortek or
Offeror has breached any of its representations or warranties under the
Merger Agreement, which breach has not been cured within ten calendar days
following receipt by Nortek or Offeror of notice of such breach and is
existing at the time of termination of the Merger Agreement, except for
breaches that would not, individually or in the aggregate, have a Material
Adverse Effect on Nortek or Offeror or materially adversely affect the
ability of the parties to the Merger Agreement to consummate the
transactions contemplated thereby, and (B) if Nortek or Offeror is in
material breach of any covenant or agreement set forth in the Merger
Agreement, which breach has not been cured within ten calendar days
following receipt by Nortek or Offeror of notice of such breach and is
existing at the time of termination of the Merger Agreement; or (ii) prior
to the receipt of the Company Stockholder Approval pursuant to the right of
termination described above under "-- No Solicitation," provided that (A)
Nortek receives at least five days prior written notice from the Company of
its intention to effect such termination pursuant to such section, (B)
during such five-day period, the Company will, and will cause its financial
and legal advisors to, consider any adjustment in the terms and conditions
of the Merger Agreement that Nortek may propose, and (C) the Company may
not effect termination pursuant to such section unless the Company has
contemporaneously tendered to Nortek or its designee the amounts described
below under "-- Termination Fees and Expenses."
Termination Fees and Expenses. The Merger Agreement provides that all
costs and expenses incurred in connection with the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
expenses, except (i) as otherwise described below, and (ii) with respect to
claims for damages incurred as a result of a material breach of the Merger
Agreement.
If the Merger Agreement is terminated: (i) by either Nortek or the Company
because the Stockholders of the Company did not approve the Merger Agreement by
reason of the failure to obtain the required vote upon a vote held at the
Stockholders' Meeting, or at any adjournment thereof, and if, at the time of
such termination or after July 24, 1997 and prior to the Stockholders' Meeting,
there is a public announcement of an Acquisition Proposal (other than an
Acquisition Proposal that is publicly withdrawn at least 15 days prior to the
taking of the vote at the Stockholders' Meeting); (ii) by Nortek if, prior to
the consummation of the Offer, (A) the Board of Directors failed to make or
withdrew or modified its recommendation or approval of the Merger Agreement or
the Merger or the transactions contemplated thereby, or recommended to the
Stockholders an Acquisition Proposal, or the Board resolved to do any of the
foregoing, or (B) a tender offer or exchange offer for 50% or more of the
outstanding shares of capital stock of the Company was commenced (other than by
the Company or its affiliates) and the Board failed to timely recommend against
the stockholders of the Company tendering their shares into such tender offer or
exchange offer; or (iii) by the Company prior to the consummation of the Offer
because it shall have received an unsolicited written, bona fide Acquisition
Proposal in accordance with the provisions described above under "-- No
Solicitation"; then
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in any such case (other than in the case of clause (i) above, in which case
amounts payable hereunder shall be payable only if the Company consummates an
Acquisition Proposal within 12 months of termination of the Merger Agreement)
the Company shall pay to Nortek or Nortek's designee, contemporaneously with
termination of the Merger Agreement, the following amounts in immediately
available funds: (1) an amount equal to $9,500,000 and (2) an amount, not to
exceed $2,500,000, to reimburse Nortek and its affiliates for all reasonable
out-of-pocket fees, costs and expenses incurred by any of them in connection
with their due diligence efforts or the transactions contemplated in the
Transaction Documents or in the Financing Commitment, including, without
limitation, (x) fees, costs and expenses of accountants, escrow agents, counsel,
financial advisors and other similar advisors, (y) fees paid to any governmental
entity, and (z) fees, costs and expenses paid or payable to third parties under
the Financing Commitment or in connection with the transactions contemplated
therein, including, without limitation, any purchaser or underwriter's discounts
relating to the sale of the subordinated debt financing contemplated therein or
(except for the principal amount payable in connection therewith, but including
all accrued interest payable in connection therewith) the making of any
repurchase offer in respect of such subordinated debt financing.
Other Agreements. Nortek and Offeror have agreed to pay the full amount of
any and all transfer, capital gains and other taxes, fees or costs incurred or
assessed by any New York City or New York State (or other state or local) taxing
authority for which Nortek, Offeror, the Company or the holders of Common Stock
of the Company are liable in connection with the sale or transfer of real estate
pursuant to the Offer or the Merger, and such amounts will not be deducted from
the consideration otherwise payable to a holder of shares of Common Stock
pursuant to the Offer or the Merger. Subject to the foregoing, Nortek and
Offeror, as applicable, will be entitled to deduct and withhold from the
consideration otherwise payable under the Merger Agreement (including pursuant
to the Offer) to holders of shares of Common Stock, Options or Unvested Stock,
such amounts as Nortek and Offeror are required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local or foreign tax law, and such withheld amounts will be treated as having
been paid to such holders.
Nortek has agreed to deliver to the Board of Directors of the Company any
solvency letter from any third party appraisal or similar firm that Nortek
provides to the providers of financing under the Financing Commitment.
Amendment; Waiver. The Merger Agreement provides that it may be amended,
modified or supplemented only by written agreement of each of the Company,
Nortek and Offeror at any time prior to the Effective Time, provided that after
the Company Stockholder Approval, no such amendment or modification will be
permitted to reduce the amount or change the form of the Merger Consideration.
The Merger Agreement further provides that, at any time prior to the Effective
Time, the parties to the Merger Agreement, by action taken or authorized by
their respective Boards of Directors, subject to the provisions of the Merger
Agreement with respect to Continuing Directors, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties
thereto, (ii) waive any inaccuracies in the representations and warranties
contained in the Merger Agreement or in any document delivered pursuant to the
Merger Agreement, or (iii) waive compliance with any of the conditions and
agreements contained in the Merger Agreement. See "-- Designation of Directors."
CONFIDENTIALITY AGREEMENT
The Company and Nortek entered into a confidentiality agreement dated
September 27, 1995, amended and modified by letters dated June 18, 1997, June
23, 1997 and July 17, 1997 (as so amended and modified, the "Confidentiality
Agreement"), pursuant to which the Company provided Nortek and its
representatives certain information and material concerning the Company on a
confidential basis. Nortek also agreed on behalf of itself and its affiliates to
certain standstill provisions for a period of two years with respect to certain
actions involving or leading to a transaction with the Company without the prior
consent of the Company, which standstill provisions were extended in an
amendment to the Confidentiality Agreement dated June 18, 1997 for a period of
one year from the date of amendment. On June 23, 1997, the Company executed and
sent to Nortek a waiver of the provisions of the Confidentiality Agreement
requiring Nortek to obtain the written consent of the Company Board prior to
making a proposal to acquire the Company, solely for the purpose of permitting
Nortek to make one or more proposals to the Company Board to acquire the entire
equity interest of the Company. The foregoing summary of the Confidentiality
Agreement is qualified in its entirety by
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reference to the text of the Confidentiality Agreement, a copy of which is filed
as Exhibit 4 to this Schedule and is incorporated herein by reference.
STOCK PURCHASE AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement, the
Company and Nortek entered into a Stock Purchase Agreement (the "Stock Purchase
Agreement") pursuant to which the Company issued and sold to Nortek, and Nortek
purchased from the Company, 640,000 shares of Common Stock at a per share price
equal to $18.75, for an aggregate purchase price of $12,000,000. In accordance
with the terms of the Stock Purchase Agreement, the Company used the proceeds
from such sale to satisfy its obligations under the Agreement and Plan of
Merger, dated June 24, 1997 among Atrium Acquisition Holdings Corp., Atrium/PG
Acquisition Corp. and the Company (the "Atrium Merger Agreement") resulting from
the Company's termination of the Atrium Merger Agreement, to pay Atrium a fee of
$9,500,000 and to reimburse Atrium for expenses incurred by Atrium in connection
with the Atrium Merger Agreement in an amount of $2,500,000. The foregoing
summary of the Stock Purchase Agreement is qualified in its entirety by
reference to the text of the Stock Purchase Agreement, a copy of which is filed
as Exhibit 5 to this Schedule and is incorporated herein by reference. The
Atrium Merger Agreement is described in Item 4(b) -- "The Solicitation or
Recommendation -- Background and Reasons for the Recommendation" below.
REGISTRATION RIGHTS AGREEMENT
As contemplated by the Stock Purchase Agreement, the Company and Nortek
entered into a Registration Rights Agreement, dated as of July 24, 1997, between
Nortek and the Company (the "Registration Rights Agreement"). The Registration
Rights Agreement contains customary provisions pursuant to which, among other
things, if, following the earlier of (i) the consummation of a merger,
consolidation, tender offer, sale of assets or other disposition of the Company
other than pursuant to the Merger Agreement, and (ii) ninety (90) days after the
termination of the Merger Agreement or the failure to consummate the
transactions contemplated thereby regardless of the reasons therefor, Nortek
requests to effect the registration under the Securities Act of the Shares
purchased pursuant to the Stock Purchase Agreement, then the Company will
promptly use its best efforts to effect such registration under the Securities
Act of such Shares that the Company has been so requested to register. In
addition, if at any time following the date of the Registration Rights
Agreement, the Company proposes to register either authorized but unissued
shares of Common Stock or any other shares of its Common Stock, (with certain
exceptions) then Nortek may include in such registration its Shares purchased
pursuant to the Stock Purchase Agreement and the Company shall use its best
efforts to cause all such Shares to be included in such registration on the same
terms and conditions as the Shares otherwise being sold in such registration.
All of the foregoing requests are subject to customary cutbacks and lockup
provisions. The foregoing summary is qualified in its entirety by reference to
the Registration Rights Agreement, a copy of which is filed as Exhibit 6 to this
Schedule and which is incorporated herein by reference.
OPTION RELEASE AGREEMENTS
Prior to the Closing Date of the Merger, each director and executive
officer of the Company is expected to enter into an Option Surrender Agreement,
Release and Waiver substantially in the form of Exhibit B to the Merger
Agreement filed as Exhibit 1 to this Schedule (each, an "Option Release
Agreement") pursuant to which such director or executive officer (in such
context, an "Optionholder") agrees to surrender Options held by him for
cancellation. For each share of Common Stock subject to such Option, the
Optionholder will receive an amount (subject to applicable withholding tax) in
cash equal to the Option Consideration.
Jeffrey S. Silverman, Chairman and Chief Executive Officer and a Director
of the Company, is expected to enter into an Option Release Agreement with
respect to the 100,000 shares of Unvested Stock held by him, as well as with
respect to all Options held by him. Pursuant to certain of the outstanding
Options held by Mr. Silverman (with respect to 600,000 shares of Common Stock),
the number of shares subject to such Options doubles upon a "change of control,"
and Mr. Silverman will be entitled to receive the Option Consideration with
respect to such additional shares. For each share of Unvested Stock, Mr.
Silverman will receive cash in the amount of the per share Unvested Stock
Consideration. The aggregate amount of Option Consideration and Unvested Stock
Consideration to be received by Mr. Silverman in connection with the
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Option Release Agreement he is expected to enter into would be $22,070,875.
However, by reason of the Stockholders Agreement, $1,854,844 of such amount will
be paid to Atrium. See "-- Agreement with Atrium -- Stockholders Agreement."
Dana R. Snyder, President and Chief Operating Officer and a Director of the
Company is expected to enter into an Option Release Agreement with respect to
the Options held by him. The aggregate amount of Option Consideration to be
received by Mr. Snyder in connection with the Option Release Agreement he is
expected to enter into would be $3,625,526. However, by reason of the
Stockholders Agreement, $515,723 of such amount will be paid to Atrium. See
"-- Agreement with Atrium -- Stockholders Agreement."
Pursuant to certain of the outstanding Options held by Herbert P. Dooskin,
Executive Vice President and a Director of the Company (with respect to 150,000
shares of Common Stock), the number of shares subject to such Options doubles
upon a "change of control," and Mr. Dooskin will be entitled to receive the
Option Consideration with respect to such additional Option Shares. The
aggregate amount of Option Consideration to be received by Mr. Dooskin in
connection with the Option Release Agreement he is expected to enter into would
be $3,982,625. However, by reason of the Stockholders Agreement, $291,563 of
such amount will be paid to Atrium. See "-- Agreement with
Atrium -- Stockholders Agreement."
Messrs. Joseph M. Goldenberg, Albert Hersh, William Lilley III and Elihu H.
Modlin are Directors of the Company, and hold Options for 52,200, 26,700, 17,700
and 36,450 shares, respectively. Each of such Directors is expected to enter
into an Option Release Agreement prior to the Closing Date. The aggregate amount
of Option Consideration to be received by such Directors is $392,700 for Mr.
Goldenberg, $171,575 for Mr. Hersh, $89,450 for Mr. Lilley and $261,763 for Mr.
Modlin. In addition, Charles M. Modlin, son of Elihu H. Modlin and Secretary of
the Company, holds Options for 17,500 shares. He is expected to enter into an
Option Release Agreement prior to the Closing Date, pursuant to which he will
receive Option Consideration in an aggregate amount of $89,375.
Messrs. Donald Kruse and Michael Vagedes are, respectively, Chairman of
Sagebrush Sales, Inc., and President of Richwood Building Products, Inc., each
of which is a wholly owned subsidiary of the Company. Messrs. Kruse and Vagedes
hold Options for 40,000 and 9,000 shares, respectively. Each of such persons is
expected to enter into an Option Release Agreement prior to the Closing Date.
The aggregate amount of Option Consideration to be received by such persons is
$259,375 for Mr. Kruse and $61,188 for Mr. Vagedes.
Messrs. J. Adam Lipsitz and Paul H. Bogutsky are Vice President, Corporate
Development and Vice President, Treasurer, respectively, of the Company. Messrs.
Lipsitz and Bogutsky hold Options for 38,500 and 85,013 shares, respectively.
The aggregate amount of Option Consideration to be received by such persons is
$196,938 and $523,508, respectively. In addition, upon a "change of control,"
the grants of Options to Mr. Lipsitz (40,000 shares) and Mr. Bogutsky (30,000
shares) will be accelerated pursuant to their respective employment agreements
(see "-- Other Agreements -- Certain Employment Agreements").
NON-COMPETE AND TERMINATION AGREEMENT
Concurrently with the execution and delivery of the Merger Agreement,
Jeffrey S. Silverman entered into a Non-Compete and Termination Agreement with
Nortek and the Company (the "Non-Compete and Termination Agreement"). Pursuant
to the Non-Compete and Termination Agreement, as of the consummation of the
Offer, Mr. Silverman will resign as an officer and director of the Company and
each of its subsidiaries, and his employment agreement with the Company will be
terminated in full. The terms of the employment agreement, which has a current
term through April 30, 2007, are summarized in the Proxy Statement filed as
Exhibit 2 to this Schedule, the relevant portions of which are incorporated
herein by reference. As liquidated damages for the termination of Mr.
Silverman's employment agreement, the Company will make a payment to Mr.
Silverman in the amount of $22,592,150, reduced by any amounts advanced (except
for certain amounts specified in the Non-Compete and Termination Agreement) to
Mr. Silverman as bonus for 1997 under the terms of his employment agreement with
the Company prior to such termination.
Pursuant to the Non-Compete and Termination Agreement, effective as of the
termination of Mr. Silverman's employment agreement, the Company will also
forgive certain indebtedness of Mr. Silverman to the Company of an aggregate
principal amount of $17,407,850 plus accrued interest, if any, a portion of
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which shall represent liquidated damages for the termination of Mr. Silverman's
employment agreement and the remainder of which shall be in consideration of Mr.
Silverman's noncompetition agreement.
In the Non-Compete and Termination Agreement, Mr. Silverman has agreed, for
a period of two years from the consummation of the Offer, to not, among other
things, directly or indirectly compete with the Company or its subsidiaries in
the United States, engage in certain activities that may interfere with the
operations of the Company or its subsidiaries or aid competitors of the Company.
In the Non-Compete and Termination Agreement, Mr. Silverman has agreed to
release and discharge the Company and its subsidiaries from all claims and
damages, including those related to his employment with, and membership on the
Boards of Directors for, the Company and its subsidiaries and resignations
therefrom, his employment agreement, and all other acts or omissions related to
any matter at any time prior to and including the date of termination of his
employment agreement; except that such release does not include, among other
things, Mr. Silverman's entitlement to certain statutory rights to continued
group medical coverage and vested accrued benefits in certain of the Company's
qualified employee benefit plans and rights of indemnification.
In addition, in the event that the Company gives Nortek notice of an
Acquisition Proposal (as defined in the Merger Agreement) that would permit the
Company to terminate the Merger Agreement as provided therein, the Company and
Mr. Silverman, pursuant to the Non-Compete and Termination Agreement, will
extend to Nortek, in connection with any adjustments in the terms and conditions
of the Merger Agreement that Nortek may propose in response to such Acquisition
Proposal, an opportunity to enter into any agreements or arrangements with
respect to Mr. Silverman as may be specified in such notice on terms and
conditions no less favorable to Nortek than those specified in such notice. The
foregoing summary of the Non-Compete and Termination Agreement is qualified in
its entirety by reference to the text of the Non-Compete and Termination
Agreement, a copy of which is filed as Exhibit 7 to this Schedule and is
incorporated herein by reference.
TERMINATION AND RELEASE AGREEMENT
Contemporaneously with the execution and delivery of the Merger Agreement,
Herbert P. Dooskin entered into a Termination and Release Agreement (the
"Termination Agreement"). Pursuant to the Termination Agreement, as of the
consummation of the Offer, Mr. Dooskin will resign as an officer and director of
the Company and each of its subsidiaries, and his employment agreement with the
Company will be terminated in full. In consideration of the termination of Mr.
Dooskin's employment agreement, the Company will pay Mr. Dooskin a sum in the
amount of $1,900,000. In addition, effective as of the termination of Mr.
Dooskin's employment agreement, the Company will forgive certain indebtedness of
Mr. Dooskin to the Company in an aggregate principal amount of $49,500.
Pursuant to the Termination Agreement, Mr. Dooskin will release and
discharge the Company and its subsidiaries from all claims and damages,
including those related to his employment with, and membership on the Boards of
Directors for the Company and its subsidiaries and resignations therefrom, his
employment agreement, and all other acts or omissions related to any matter at
any time prior to and including the date of termination of his employment
agreement; provided, however, that such release shall not include, among other
things, Mr. Dooskin's entitlement to certain statutory rights to continued group
medical coverage and vested accrued benefits in certain of the Company's
qualified employee benefit plans and rights of indemnification. The foregoing
summary of the Termination and Release Agreement is qualified in its entirety by
reference to the text of the Termination and Release Agreement, a copy of which
is filed as Exhibit 8 to this Schedule and is incorporated herein by reference.
AGREEMENT WITH ATRIUM
Stockholders Agreement
Contemporaneously with the execution of the Atrium Merger Agreement (see
Item 4(b) -- "Background and Reasons for the Recommendations"), Messrs. Jeffrey
S. Silverman, Dana R. Snyder and Herbert P. Dooskin (each, a "Relevant
Stockholder") entered into a Stockholders Agreement with Atrium. Such agreement
was amended and restated as of July 24, 1997, with Nortek and Offeror becoming
parties thereto (as amended and restated, the "Stockholders Agreement").
Pursuant to the Stockholders Agreement,
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each Relevant Stockholder has agreed to tender all Shares owned by him pursuant
to the Offer, with 75% of the excess of the Offer Price over $18.75 per Share
(the price per Share payable pursuant to the Atrium Merger Agreement) to be paid
to Atrium and the remainder of the Offer Price to be paid to the Relevant
Stockholder. Similarly, Atrium will be entitled to 75% of the excess of the
Offer Price over $18.75 per Share with respect to the Unvested Stock owned by
Mr. Silverman. Upon cancellation of the Options owned by the Relevant
Stockholders (as described above under "-- Agreements with Nortek -- Option
Release Agreements"), Atrium will be entitled to receive 75% of the excess of
the Offer Price over $18.75, multiplied by the number of shares of Common Stock
issuable pursuant to such Options (including the additional shares of Common
Stock issuable by reason of a "change of control"), and the Relevant Stockholder
will be entitled to receive the remainder of the Option Consideration. With
respect to the Options held by Messrs. Silverman and Dooskin with an exercise
price of $19.125 per share of Common Stock, however, Atrium shall be entitled to
receive the entire amount of the Option Consideration. In addition, pursuant to
the Stockholders Agreement, each Relevant Stockholder granted Atrium an
irrevocable option to purchase (collectively, the "Purchase Options") all
outstanding shares of Common Stock owned by him, together with all shares of
Common Stock (including any additional shares that may be issuable as a result
of a "change of control") owned by the Relevant Stockholder as a result of his
exercise of any Options held by him (collectively, the "Option Shares") at a
purchase price per share equal to $18.75, which may be exercised if the Offer is
not consummated or under certain other circumstances. In the event that Atrium
purchases the Option Shares pursuant to the Purchase Options and, within 180
days after the closing of such purchase, sells, transfers or disposes of any of
the Option Shares in a transaction with an unaffiliated third party, Atrium
Acquisition shall pay to each Relevant Stockholder his respective pro rata share
of 25% of the net profit (as defined) realized by Atrium in connection with such
disposition. In the Stockholders Agreement, Nortek and the Company have also
agreed to release, as of the consummation of the Offer, all claims they may have
with respect to the $12 million payment made by the Company in connection with
the termination of the Atrium Agreement as described in Item 4(b). The foregoing
summary of the Stockholders Agreement is qualified in its entirety by reference
to the text of the Stockholders Agreement, a copy of which is filed as Exhibit
11 to this Schedule and is incorporated herein by reference.
OTHER AGREEMENTS
Certain Employment Agreements
The terms of the employment agreements between the Company and Messrs.
Silverman, Dooskin, Snyder, Kruse and Vagedes are summarized in the Proxy
Statement filed as Exhibit 2 to this Schedule, the relevant portions of which
are incorporated herein by reference. Under the employment agreement with Mr.
Snyder, if Mr. Snyder resigns or his employment is terminated without cause
following a "change in control" (as defined in such employment agreement), he
would be entitled to continuation of his base salary, bonuses and certain fringe
benefits through June 12, 1999, the termination date of such employment
agreement. In addition, if he elects to be subject to a two-year non-compete
agreement, he will be entitled to 50% of his base salary for the non-compete
period.
Messrs. J. Adam Lipsitz and Paul H. Bogutsky, Vice President, Corporate
Development and Vice President, Treasurer, respectively, of the Company, have
employment agreements with the Company providing for a rolling three-year term
of employment unless earlier terminated by the executive or the Company. The
initial base salaries for Mr. Lipsitz and Mr. Bogutsky are respectively set at
$169,000 and $206,000 (increasing to $275,000 and $288,000 upon a "change of
control" (as defined) or certain other events) with bonuses targeted at 50% and
40% of such base salary. Mr. Lipsitz is entitled to the grant of 40,000 stock
options spread over 1997 and 1998 (or immediately upon a "change of control")
and Mr. Bogutsky is entitled to a grant of 30,000 stock options spread over the
two years following a relocation of the Company's headquarters (or immediately
upon a "change of control") in each case at fair market value on the date of
grant and subject to the executive's continued employment (and the approval of
the Compensation Committee of the Board of Directors). In the event of a
termination of employment by reason of "disability" (as defined in the
employment agreements), Mr. Lipsitz and Mr. Bogutsky will each be entitled to
receive 50% of his base salary for three years following such termination. In
the event of a termination by reason of death, Mr. Lipsitz and Mr. Bogutsky will
each be entitled to receive a pro rata bonus for the year of such termination.
In the event of a termination of employment by the Company without "cause" or by
the executive for "good reason" (each as defined), Mr. Lipsitz and Mr. Bogutsky
will be entitled to receive his
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base salary and target bonus for three years following such termination as well
as continued life, medical and dental insurance. If such a termination occurs
prior to a "change in control", starting eighteen months after such termination,
Mr. Lipsitz and Mr. Bogutsky will each be required to seek other employment and
any amounts received from such employment will be offset against the amount due
to him under his employment agreement. Mr. Lipsitz and Mr. Bogutsky will be
subject to non-competition and non-solicitation covenants for three years
following any termination of employment.
The foregoing summaries of the employment agreements of Messrs. Bogutsky
and Lipsitz are qualified in its entirety by reference to the respective texts
of those employment agreements, copies of which are filed as Exhibits 12 and 13,
respectively, to this Schedule and are incorporated herein by reference.
CHANGE IN CONTROL SEVERANCE PLANS
On June 17, 1997, the Board of Directors adopted resolutions providing
severance payments to certain management employees of the Company and its
subsidiaries not having employment agreements, in the event of a "change in
control" (as defined in such resolutions) of the Company prior to December 31,
1997. Pursuant to these resolutions, each eligible employee will receive a
severance payment in the event that his employment is terminated involuntarily
within two years after a change in control without "cause" (as defined in the
resolutions) or if the employee resigns within two years after a change in
control for "good reason" (as defined in the resolutions). Such severance
payment will be a lump sum equal to the sum of (i) either one year's salary or
the weeks of salary as set forth on a schedule to the resolutions, computed on
the basis of age and years of service with the Company (depending on the
position of the individual), (ii) any bonus earned but not paid for any year
preceding the year of such termination or resignation, (iii) a pro rata bonus
for the year of such termination or resignation and (iv) an additional bonus
amount equal either to one year's bonus or equal to bonus payments for the same
number of weeks as the weeks of salary which such employee will receive
(depending on the position of the individual). Certain of such management
employees would be entitled to certain similar benefits in the event of a
termination of employment as a result of a relocation of the Company's
headquarters outside of the New York City metropolitan area prior to December
31, 1997. The foregoing summary of these severance plans is qualified in its
entirety by reference to the text of the resolutions, copies of which are filed
as Exhibit 14 to this Schedule and are incorporated herein by reference.
INDEMNIFICATION AGREEMENTS
The Company has entered into indemnification agreements with all of its
directors. The indemnification agreements generally provide (i) for the prompt
indemnification to the fullest extent permitted by law against (a) any and all
expenses (including attorneys' fees) and all other costs paid or incurred in
connection with investigating, preparing to defend, defending or otherwise
participating in any threatened, pending or completed action, suit or proceeding
related to the fact that such indemnitee is or was a director, officer,
employee, agent or fiduciary of the Company or is or was serving at the
Company's request as a director, officer, employee, agent or fiduciary of the
Company or is or was serving at the Company's request as a director, officer,
employee, agent or fiduciary of another entity, or by reason of anything done or
not done by such indemnitee in any such capacity and (b) any and all judgments,
fines, penalties and amounts paid in settlement of any claim, unless the
"Reviewing Party" (defined as one or more members of the Board or appointee(s)
of the Board who are not parties to the particular claim, or independent legal
counsel) determines that such indemnification is not permitted under applicable
law and (ii) for the prompt advancement of expenses to an indemnitee as well as
the reimbursement by such indemnitee of such advancement to the Company if the
Reviewing Party determines that the indemnitee is not entitled to such
indemnification under applicable law. In addition, the indemnification
agreements provide (i) a mechanism through which an indemnitee may seek court
relief in the event the Reviewing Party determines that the indemnitee would not
be permitted to be indemnified under applicable law (and would therefore not be
entitled to indemnification or expense advancement under the indemnification
agreement) and (ii) indemnification against all expenses (including attorneys'
fees), and the advancement thereof, if requested, incurred by the indemnitee in
any action brought by the indemnitee to enforce an indemnity claim or to collect
an advancement of expenses or to recover under a directors' and officers'
liability insurance policy, regardless of whether such action is ultimately
successful or not. Furthermore, the indemnification agreements provide that
after there has been a "change in control" in the Company (as defined in the
indemnification agreements), then, with respect to all determinations regarding
rights to indemnification and the advancement
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of expenses, the Company will seek legal advice as to the right of the
indemnitee to indemnification under applicable law only from independent legal
counsel selected by the Company and approved by the indemnitee. The
indemnification agreements with certain members of the Board provide for the
establishment of a trust by the Company under certain circumstances to assure
the funding of amounts payable to the indemnitee. The relevant directors have
waived their rights to require the establishment of any such trust.
Indemnitees' rights under the indemnification agreements are not exclusive
of any other rights they may have under Delaware law, the Company's Certificate
of Incorporation, its By-laws or otherwise. The foregoing summary of the
indemnification agreements is qualified in its entirety by reference to the text
of the form of indemnification agreement, a copy of which is filed as Exhibit 9
to this Schedule and is incorporated herein by reference.
The Merger Agreement provides that the Company will honor such
indemnification agreements following the Merger Agreement. See "Agreements with
Nortek -- The Merger Agreement -- Indemnification and Insurance."
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD" OR THE "COMPANY BOARD"),
BY THE UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, HAS DETERMINED THAT THE OFFER
AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF
THE COMPANY. THE BOARD RECOMMENDS THAT ALL HOLDERS OF COMMON STOCK ACCEPT THE
OFFER AND TENDER ALL THEIR SHARES OF COMMON STOCK PURSUANT TO THE OFFER. The
Board's determination and recommendation were made at the Board's July 23, 1997
meeting at which all the Company's directors (other than Dana R. Snyder) were
present in person or by conference telephone. Mr. Snyder, President and Chief
Operating Officer of the Company, did not participate in any meetings of the
Board on or after June 17, 1997, at which the proposed acquisition of the
Company by Nortek or Atrium was discussed, on the advice of counsel to the
Company in view of Mr. Snyder's potential conflict of interest in light of his
understanding with Atrium that he would become Chief Executive Officer of, and
have equity in, Atrium following an acquisition of the Company by Atrium.
The Board's recommendation is based in part on the oral opinion delivered
by Furman Selz LLC ("Furman Selz"), financial advisor to the Company, on July
23, 1997, that, as of such date, the consideration to be received by the
stockholders of the Company in the Offer and the Merger was fair from a
financial point of view to the stockholders of the Company. Furman Selz
subsequently confirmed its opinion in a written opinion dated July 23, 1997
following the Board meeting. The full text of such opinion, which sets forth the
assumptions made, the matters considered and the limitations on the review
undertaken by Furman Selz, is attached as Annex I (and filed as Exhibit 10) to
this Schedule and is incorporated herein by reference.
A copy of the letter to the Company's stockholders communicating the
Board's recommendation is filed as Exhibit 3 to this Schedule and is
incorporated herein by reference.
(b) Background and Reasons for the Recommendation.
On August 2, 1995, the Company announced that it had retained an investment
banking firm (the "1995 Investment Banking Firm"), to explore various strategic
alternatives to accelerate the maximization of value for the Company's
stockholders, including the possible sale of the Company. During the next seven
months, the 1995 Investment Banking Firm contacted, or was contacted by, a total
of approximately 100 parties about their potential interest in an acquisition of
the Company. More than 30 of such parties executed confidentiality agreements,
which agreements, among other things, included standstill provisions prohibiting
such parties from acquiring or offering to acquire the Company or its
subsidiaries for a specified period (generally two years), and were furnished
with a limited amount of non-public information.
In February, 1996, a non-binding indication of interest for an acquisition
of the Company at $17.00 per share was received, which was the only proposal
received. At a meeting of the Board in early March 1996, the Board determined
not to pursue discussions with respect to such proposal and discussed the
possibility of terminating efforts to explore the sale of the Company. However,
the day before such Board meeting, the Company was advised by the 1995
Investment Banking Firm that Nortek, which had originally been contacted by the
1995 Investment Banking Firm in September 1995 (and which had at that time
executed the
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Confidentiality Agreement), had expressed an interest in exploring a possible
merger with the Company. In view of Nortek's expressed interest, at its March
1996 meeting, the Board took no action to terminate the exploration of a
possible sale.
Over the next several months, Richard L. Bready, Nortek's chief executive
officer, and other representatives of Nortek held a number of meetings with
Messrs. Silverman and Snyder and other representatives of the Company to discuss
a possible stock-for-stock merger. These meetings did not result in any specific
proposal being made by Nortek to the Company. Although Nortek never specifically
terminated discussions, in view of the lack of progress, on July 16, 1996, the
Board determined that stockholder value could best be maximized through internal
growth and without the sale of the Company. Consequently, the Company made an
announcement to that effect and terminated the engagement of the 1995 Investment
Banking Firm.
During the period from October, 1996 through January, 1997, Messrs.
Silverman and Snyder discussed the possibility of a variety of possible
transactions, including a recapitalization of the Company, pursuant to which,
among other things, Mr. Silverman's employment agreement would have been
terminated in consideration of certain payments and Mr. Snyder would have become
Chief Executive Officer of the Company, but decided not to pursue any such
transactions at that time.
In March, 1997, during a conversation between Mr. Silverman and an
executive of another investment banking firm there was a discussion of a
possible leveraged buyout of the Company with a view toward substantially
increasing shareholder value, with Messrs. Silverman and Snyder having an equity
position in the acquiring entity but Mr. Silverman selling most of his equity
interest in the Company as part of such a transaction. Subsequently, Mr.
Silverman engaged such other investment banking firm to assist him in exploring
such a transaction and to identify one or more potential financial partners to
join with Mr. Silverman if he decided to pursue such a transaction involving the
Company.
In consultation with Messrs. Silverman and Snyder, beginning in April,
1997, such investment banking firm contacted six leveraged buyout firms
(including firms as to which there had been previous discussions with Company
officers) that such investment banking firm believed might be interested in a
leveraged buyout of the Company. Each of such leveraged buyout firms entered
into confidentiality agreements (which agreements contained "standstill"
provisions prohibiting for two years any acquisition of, or offer to acquire,
the Company, except with the prior approval of Mr. Silverman or the prior
approval of the Company's Board of Directors), pursuant to which such firms were
furnished certain limited non-public information. Such leveraged buyout firms
were invited to indicate a preliminary price range at which they might be
interested in joining with Messrs. Silverman and Snyder in proposing such an
acquisition transaction. As Mr. Silverman did not wish to become chief executive
officer of a privately-held company and believed that Mr. Snyder would want to
serve as chief executive officer, each of such firms were advised to assume that
Mr. Silverman's employment agreement would be terminated as part of any such
transaction and, in analyzing such transaction, to assume also that Mr.
Silverman would receive a total of $25 million in connection with such
termination and $2 million per year for five years in consideration of certain
non-competition agreements entered into by Mr. Silverman, and that the Company
would forgive all of Mr. Silverman's indebtedness to the Company.
In response to such inquiries, during May 1997, Hicks, Muse, Tate & Furst
Incorporated ("Hicks Muse") and two other leveraged buyout firms (the "Second
LBO Firm" and the "Third LBO Firm" and, together, the "Other LBO Firms")
expressed interest in such a transaction. Hicks Muse expressed interest in such
a transaction at a price of $17 to $19 per share of Common Stock. The Second LBO
Firm expressed interest in a transaction at a price range of $18 to $20 per
share of Common Stock and the Third LBO Firm expressed interest in a transaction
at a price of $18 per share of Common Stock. The investment banking firm
advising Mr. Silverman expressed the view that any of the three leveraged buyout
firms would proceed with diligence only on an exclusive basis. After considering
such expressions of interest, the track record of the three interested parties,
potential business synergies that Hicks Muse (through its affiliate, Atrium) and
the Second LBO Firm might have with the Company, and the status of other
transactions on which the Second LBO Firm was working at that time which might
have led to delays with respect to an acquisition of the Company, Messrs.
Silverman and Snyder, in consultation with such investment banking firm,
concluded that further discussions with, and detailed diligence by, Hicks Muse
would be more likely to lead promptly to a transaction than would discussions
with the Other LBO Firms, and determined to pursue such discussions with Hicks
Muse.
Meanwhile, during late 1996 and the first half of 1997, Messrs. Silverman
and Snyder had met informally on several occasions with Richard L. Bready, the
chief executive of Nortek, as well as with the investment
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banking executive who had previously represented the Company at the 1995
Investment Banking Firm and was, by early 1997, employed by Wasserstein Perella
& Co., Inc. ("Wasserstein Perella"), which firm was subsequently retained by
Nortek as its financial advisor, on which occasions Nortek indicated a general
interest in resuming discussions concerning an acquisition of the Company.
During these meetings, the participants discussed potential acquisition terms,
the diligence process, and the role of Messrs. Silverman and Snyder following
such an acquisition, including the treatment of Mr. Silverman's employment
agreement in connection therewith. During such a meeting on May 6, 1997, Nortek
indicated interest in a possible acquisition of the Company at a price of $17
per share of Common Stock, payable in a combination of cash and Nortek common
stock. However, none of these contacts resulted in any negotiations or offers
relating to any such transaction.
Beginning in early May 1997, representatives of Hicks Muse and Atrium
(together, "Hicks Muse/Atrium") held discussions with Messrs. Silverman and
Snyder, and conducted limited diligence with respect to the Company and visited
several of the Company's operating locations. During May 1997, Hicks Muse/Atrium
indicated that, subject to completion of diligence and negotiation and execution
of definitive agreements (including agreements pursuant to which Mr. Silverman
would receive a payment of $30 million in consideration of the termination of
his employment agreement and in consideration of certain non-competition
agreements and pursuant to which Mr. Silverman's indebtedness to the Company
would be forgiven, and provisions in the merger agreement for the Company to pay
a $15 million "breakup" fee to Hicks Muse/Atrium if the transaction was not
consummated under certain circumstances), and arrangements for Mr. Snyder to
become chief executive officer and for Mr. Snyder and Mr. Silverman to maintain
an equity interest in the Company or Atrium, it expected that Atrium would be
prepared to acquire the Company at a price of $18 per share of Common Stock.
Subsequently, Mr. Silverman advised Hicks Muse that, in order to eliminate the
conflict of interest created by his retention of such an equity interest in the
Company or Atrium, he would be willing to not retain any such equity interest,
but to sell his shares of Common Stock and surrender his Options on the same
terms as other stockholders and Optionholders, and Hicks Muse/Atrium so agreed.
In mid-May, 1997, in a meeting between Messrs. Silverman and Bready and
Wasserstein Perella, Mr. Bready expressed interest in an acquisition of the
Company by Nortek at a price of $18 per share of Common Stock, payable in a
combination of cash and Nortek common stock. As part of such indication of
interest, Nortek indicated that in connection with such an acquisition it
contemplated that Mr. Silverman's employment agreement would be terminated and
he would receive approximately $20 million for such termination and for a
consulting agreement, and that Mr. Silverman's indebtedness to the Company would
be forgiven.
In late May and early June there were further discussions between the
Company and its representatives and Nortek and its representatives. Nortek was
advised that a leveraged buyout firm (i.e., Hicks Muse, although its name was
not disclosed) was exploring with certain members of Company management a
potential acquisition of the Company, and Nortek was encouraged to move quickly.
On June 6, 1997, counsel for Hicks Muse/Atrium furnished counsel for the
Company with a draft of a merger agreement (the "Atrium Merger Agreement"). Also
on June 6, 1997, Hicks Muse/Atrium requested, as a condition to its further
exploration of a possible transaction, that the Company enter into a "no shop"
agreement that would give Hicks Muse/Atrium exclusivity and would prohibit the
Company, until June 27, 1997, from soliciting other acquisition proposals or,
with certain exceptions, from holding discussions with any other party with
respect to a possible acquisition of the Company, and would require the Company
to reimburse Hicks Muse/Atrium and its affiliates for all their expenses
theretofore or thereafter incurred.
Shortly thereafter, Nortek requested a period of exclusivity, expressing
concern that it would otherwise be at a competitive disadvantage compared with a
firm cooperating with Mr. Snyder and other members of Company management. Nortek
was advised that the Company was not prepared to give any party an exclusivity
period, but that if the Company were to be sold the goal would be to obtain the
highest price, and that Nortek needed to move quickly in view of the more
advanced state of discussions with, and diligence by, the leveraged buyout firm
(Hicks Muse). Counsel for the Company furnished Nortek a form of confidentiality
agreement with the same two year "standstill" provision as the provision
contained in the confidentiality agreement executed by Hicks Muse. (At that
point, neither the Company nor Nortek had been able to locate
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the existing Confidentiality Agreement entered into in September 1995, and thus
neither party knew if that agreement remained in effect.) On June 9, 1997
counsel for the Company urged Nortek's counsel to arrange for Nortek to execute
such confidentiality agreement and commence diligence on June 11, and counsel
for Nortek stated that he expected that Nortek would commence diligence on June
12.
At a meeting of the Company's Board of Directors on June 10, 1997 (with all
directors present), Mr. Silverman summarized the foregoing background and the
status of negotiations with both parties. The Board, after consulting with
counsel, decided to continue discussions with both Hicks Muse/Atrium and Nortek
and to seek to have Nortek accelerate its consideration of a transaction in a
manner that would not be likely to jeopardize the possibility of a transaction
with Hicks Muse/Atrium. The Board also requested that Mr. Silverman and Mr.
William Lilley III (a non-management director) and counsel meet with two
investment banking firms identified by Mr. Silverman (one of which was Furman
Selz) and, if they believed appropriate, other investment banking firms, and
that Mr. Lilley make a recommendation to the Board as to the selection of a firm
to advise the Board. The Board also authorized execution of an agreement with
Hicks Muse/Atrium pursuant to which (i) the Company would not, prior to June 27,
1997, solicit third party bids, but would be free to negotiate with (and furnish
information to) any party with which the Company was then in discussions (i.e.,
Nortek) or any other party whose interest was unsolicited, and (ii) the Company
would be obligated under certain circumstances to reimburse Hicks Muse/Atrium
for up to $250,000 of its expenses incurred on or after June 9, 1997. Such an
agreement was executed on June 20, 1997, and, pursuant to its terms, terminated
upon execution of the Atrium Merger Agreement.
On June 11, Messrs. Silverman and Lilley, together with counsel, met with
representatives of Furman Selz and representatives of another investment banking
firm. At a telephonic meeting later that day, the Board authorized the retention
of Furman Selz as the Company's financial advisor as recommended by Mr. Lilley.
On June 11, Nortek informed the Company that it was not prepared to execute
the requested new confidentiality agreement in view of the two year "standstill"
provision contained therein that would prohibit any acquisition or any proposal
without prior Board approval, and thus that it would not commence diligence at
that time.
During the weeks of June 9 and June 16 Hicks Muse/Atrium conducted further
detailed diligence and respective counsel for Hicks Muse/Atrium and the Company
held negotiations with respect to the Atrium Merger Agreement. At the same time,
negotiations took place with respect to the terms of the Stockholders Agreement
to be entered into with Messrs. Silverman, Snyder and Dooskin (see Item
3(b) -- "Agreement with Atrium -- Stockholders Agreement"), the non-compete and
termination agreement to be entered into between Atrium and Mr. Silverman (the
"Atrium Non-Compete and Termination Agreement"), and the termination and release
agreement to be entered into between Atrium and Mr. Dooskin (the "Atrium
Termination and Release Agreement").
On June 16, Mr. Bready informed Mr. Silverman that Nortek would be prepared
to offer $20 per share of Common Stock in cash to acquire the Company, subject
to limited due diligence, negotiation of definitive agreements, and termination
of Mr. Silverman's employment on substantially the same terms as had previously
been discussed between Nortek and Mr. Silverman (as described above). Mr. Bready
also stated that Nortek would be prepared to execute the proposed new
confidentiality agreement if the standstill period were reduced from two years
to one year, and if the scope of the standstill provision were narrowed so as
not to prohibit offers or proposals to the Company or its stockholders without
the Company Board's prior approval (although an actual acquisition by Nortek
would be subject to Board approval).
At a meeting of the Company Board on June 17, 1997, the Board was updated
on the status of discussions with Hicks Muse/Atrium and Nortek. (In view of Mr.
Snyder's potential conflict of interest in connection with the Atrium Merger
Agreement, by reason of his understanding with Hicks Muse/Atrium that he would
become Chief Executive Officer of, and have equity in, Atrium after the Atrium
Transaction, on the advice of the Company's counsel, Mr. Snyder did not attend
the June 17 Board meeting or any of the subsequent Board meetings described
below.) In particular, the Board was advised that Hicks Muse/Atrium had
indicated its expectation that Atrium would be in a position to execute
definitive agreements by June 20 or 21 and would want to execute such agreements
at that time. The Board was also advised of Nortek's oral acquisition proposal
of $20 per share of Common Stock, the conditions to that proposal, and Nortek's
proposed changes to the new proposed confidentiality agreement. The Board was
informed that the Company had located a copy of the September 1995
Confidentiality Agreement with Nortek and that such Confidentiality Agreement's
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<PAGE> 23
standstill provisions remained in effect (and thus prohibited an offer or
proposal by Nortek without the Company Board's prior approval) through September
1997.
The Board determined to attempt to obtain a one year extension of the
Confidentiality Agreement but, whether or not such agreement was extended, to
permit Nortek to conduct diligence. The Board also requested that Nortek be
encouraged to move quickly, and expressed concern that a delay in reaching
agreement with Hicks Muse/Atrium due to extended discussions with Nortek might
cause Hicks Muse/Atrium to withdraw. The Board also acknowledged the
possibility, however, that such discussions (and Nortek's interest more
generally) might help the Company obtain a higher price per share of Common
Stock from Hicks Muse/Atrium. At that meeting the Board also approved certain
employment agreements and change of control arrangements for certain
non-director officers and other management employees. (See Item 3, "Other
Agreements" above.)
Also on June 17, Nortek delivered a letter addressed to the Company Board
confirming the terms and conditions of the $20 per share of Common Stock
proposal made orally on the previous day and discussed at the Board meeting
earlier that day. The June 17 letter indicated that Nortek's proposal was
subject to the completion of limited due diligence, which Nortek believed could
be completed by July 3, and approval by Nortek's Board of Directors. The letter
was accompanied by a draft of an acquisition agreement. Later on June 17, after
being advised of the continuing effectiveness of the Confidentiality Agreement,
Nortek agreed to extend such Confidentiality Agreement's standstill provisions
for one year. Nortek commenced its due diligence the next day and executed such
an extension of the standstill provisions. Such extension specified that by
considering Nortek's June 17 proposal, the Company was not waiving the
standstill provisions, and specified that any future proposal (or amended or
revised proposal) would be subject to such provisions.
At a June 20, 1997 Board meeting, Mr. Silverman reported that he had been
advised that Nortek would probably not be in a position to enter into a
definitive acquisition agreement until June 27, although it might be able to
move faster. The Board also discussed the principal issues then open with
respect to the proposed Atrium Merger Agreement. Mr. Silverman also reported
that Hicks Muse/Atrium had stated that it would not be prepared to increase its
proposed merger price above $18 per share of Common Stock.
At the June 20 Board meeting, Furman Selz made a preliminary presentation
to the Board, and indicated that it expected to be prepared to opine that the
proposed $18 per share merger price to be paid pursuant to the proposed Atrium
Merger Agreement was fair, from a financial point of view, to the Company's
stockholders. Furman Selz also made a preliminary presentation to the Board
(with Mr. Silverman not in attendance) with respect to the estimated present
value of the consideration that would be payable over the remaining term of Mr.
Silverman's existing employment agreement. The Board noted that the $30 million
in cash that Mr. Silverman would receive plus the approximately $17 million of
Mr. Silverman's indebtedness that would be forgiven, pursuant to the proposed
Atrium Non-Compete and Termination Agreement, would be less than the estimated
present value of the consideration payable to Mr. Silverman over the remaining
term of his employment agreement as calculated by Furman Selz (after making
certain assumptions, including assumptions based in part on information provided
by the Company with respect to the interpretation of the employment agreement).
The Board determined to ask Mr. Silverman to agree to reduce the amount he would
be entitled to receive under the proposed Atrium Non-Compete and Termination
Agreement, and to have Furman Selz attempt to negotiate (i) a higher per share
merger price with Hicks Muse/Atrium (a portion of which would effectively be
paid for by the reduced amount to be received by Mr. Silverman in connection
with termination of his employment agreement), (ii) a lower "break-up" fee and a
lower cap on expense reimbursement than the $10 million termination fee and the
$5 million expense cap then being requested by Hicks Muse/Atrium, and (iii) to
have Atrium or another creditworthy entity be obligated to perform under the
Atrium Merger Agreement (instead of having agreements solely with "shell"
companies that were subsidiaries of Atrium, it being Hicks Muse's usual policy
to utilize only "shell" companies as parties to acquisition agreements).
Following discussions with certain of the non-management directors and with
Furman Selz, Mr. Silverman agreed to reduce by $7 million the aggregate amount
he would receive from Atrium under the Atrium Non-Compete and Termination
Agreement in connection with the termination of Mr. Silverman's existing
employment agreement if such reduction would result in improved terms for the
stockholders of the Company.
Between Friday, June 20 and Sunday, June 22, Furman Selz held numerous
conversations with Hicks Muse/Atrium as a result of which Hicks Muse/Atrium
agreed to raise the proposed Merger price to $18.75
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<PAGE> 24
per share of Common Stock, to reduce its termination fee to $9.5 million and
reduce the cap on the Company's obligation to reimburse its expenses to $2.5
million, and to cause Atrium Corporation to guaranty $5 million of the
obligations by its shell company subsidiaries under the Atrium Merger Agreement.
Furman Selz informed the Company Board on June 23, 1997 that, based on its
discussions with Hicks Muse, it did not believe Hicks Muse/Atrium would further
improve its offer in any of these respects.
Also on Friday, June 20, the Company made arrangements for Nortek to visit
several of the Company's principal operating sites on June 23 and 24 as
requested by Nortek. In view, however, of the progress of negotiations with
Hicks Muse/Atrium, on Saturday, June 21, Mr. Silverman urged Mr. Bready to come,
with Nortek's advisors, to New York on Sunday, June 22 to meet and negotiate a
potential transaction, and to make all the site visits on June 23. On June 22,
Mr. Bready declined the proposal to meet that day but agreed to accelerate the
schedule of site visits. Later on June 22, counsel for the Company furnished
counsel for Nortek proposed revisions to the draft acquisition agreement
previously provided by Nortek.
At a Board meeting commencing late in the afternoon of June 23, the Board
was advised of the foregoing developments, and was advised that Hicks
Muse/Atrium desired and expected to execute the Atrium Merger Agreement before
the stock market opened the next morning. At that meeting, Furman Selz advised
the Board that it would be prepared to render its opinion that the proposed
$18.75 per share of Common Stock merger consideration under the Atrium Merger
Agreement was fair, from a financial point of view, to the Company's
stockholders. Furman Selz also made an updated presentation confirming its
computation of the estimated present value of the consideration Mr. Silverman
would be entitled to receive over the remaining term of his existing employment
agreement.
The Board discussed the proposed $20 per share price from Nortek and noted
that, in addition to being at a higher price than the proposed merger
consideration under the Atrium Merger Agreement, certain of the other terms then
proposed by Nortek (including the absence of a financing or funding condition,
the plan to consummate the acquisition through a tender offer, which would be
faster than the one-step merger contemplated by the Atrium Merger Agreement, and
the existence of a financially substantive entity (rather than a "shell") as the
counterparty), were superior to the proposed Atrium merger terms. Accordingly,
the Company Board believed that it would be in the best interests of
stockholders if a binding agreement with Nortek could be entered into. However,
the Board was concerned that a binding agreement with Nortek might not be
obtained or that Nortek might lower its proposed price if Hicks Muse/Atrium
withdrew its offer and Nortek learned of such withdrawal. The Board also
discussed whether Hicks Muse/Atrium would withdraw its merger offer if the Board
delayed approving the Atrium Merger Agreement while discussions continued with
Nortek. The Board also discussed the circumstances under which Nortek could
pursue an acquisition of the Company even if the Company entered into the Atrium
Merger Agreement, including the Board's ability under the proposed Atrium Merger
Agreement to terminate the Atrium Merger Agreement (after five days notice to
Atrium) in order to accept a proposal from Nortek on payment to Atrium of the
$9.5 million fee and the reimbursement of up to $2.5 million of expenses. Furman
Selz advised the Board that, in its view, such amounts were not so large as to
be likely to preclude a new proposal from Nortek, although they would likely
affect the price of any such new proposal. Among other things, the Board
considered that upon execution of the Atrium Merger Agreement, Nortek might
withdraw entirely or might reduce its proposed price per share of Common Stock
to reflect the amount of (or by more or less than the amount of) the cost per
share of the $12 million potentially payable to Atrium as a breakup fee and as
reimbursement of expenses under the proposed Atrium Merger Agreement. Counsel
also summarized, and the Board discussed, the terms of the proposed Atrium
Merger Agreement, the Stockholders Agreement, Atrium Non-Compete and Termination
Agreement and the Atrium Termination and Release Agreement (together, the
"Atrium Documents").
After discussion, the Board determined to adjourn until 8:00 a.m. on June
24 before making a decision. Prior to adjourning, however, the Board also
discussed, and adopted a resolution approving, a limited waiver of the
"standstill" provisions contained in the amended Confidentiality Agreement with
Nortek so that Nortek would be able to make one or more offers to the Company
Board with respect to a potential acquisition by Nortek of all of the
outstanding capital stock of the Company (both at that time and even after the
Company entered into the Atrium Merger Agreement, if it did enter into the
Atrium Merger Agreement). A letter containing such waiver was delivered to
Nortek and its counsel that evening.
Also, late that night, after Mr. Bready returned from his visit to Company
sites and expressed to Mr. Silverman continuing interest in a transaction at a
price of $20.00 per share of Common Stock or possibly
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<PAGE> 25
higher. Mr. Silverman informed him that Hicks Muse/Atrium (which was not
identified by name) was likely to be in a position to execute (and would likely
insist that the Company execute) an agreement by 10:00 a.m. the next morning.
Mr. Silverman told Mr. Bready that the Company Board would like to enter into a
definitive agreement with Nortek, but if that were not possible by 10:00 a.m.
the next morning, the Company Board might determine to approve an alternative
transaction to avoid the risk of losing the opportunity of entering into either
transaction. Accordingly, Mr. Silverman said that the Company was arranging to
deliver to Nortek and its counsel proposed definitive agreements by 6:00 a.m.
the next morning. Shortly after 6:00 a.m. on June 24, proposed agreements
(including a proposed acquisition agreement containing further revisions to the
draft previously furnished to the Company by Nortek, and agreements similar to
the Stockholders Agreement, the Atrium Non-Compete and Termination Agreement
(with the amounts to be received by Mr. Silverman the same as under such
agreement) and the Atrium Termination and Release Agreement) and related
schedules were delivered to Nortek's counsel and thereafter to Nortek.
The Board reconvened at 8:00 a.m. on June 24. After being updated on the
status of discussions with Hicks Muse/Atrium and Nortek, the Board recessed
until 12:00 noon.
Later in the morning of June 24 Nortek raised questions about certain
information included in the draft schedules furnished to it that morning of
which it indicated it had not previously been aware. At the reconvened 12:00
noon meeting, and at another reconvened meeting at 1:15 p.m., the Board was
updated on developments and recessed.
The Board reconvened again at 2:15 p.m. and counsel advised that the Atrium
Documents had been finalized. Mr. Silverman advised the Board that Mr. Bready
had indicated to him orally that Nortek might be prepared to pay up to $21 per
share of Common Stock and expected to be in a position to execute definitive
agreements if they had until 9:00 p.m. the following night. Mr. Silverman
reported that he had explained that the Board would not be able to wait until
the next day without risking the loss of an alternative transaction that was
attractive, although less attractive than a possible $21 per share offer from
Nortek would be. He indicated that the Board was reluctant to risk having the
Atrium offer be withdrawn and again urged Nortek to execute definitive
agreements. He also suggested the alternative possibility of Nortek making a
significant non-refundable cash deposit to reduce the risk to the Company and
its stockholders that Nortek would not make a binding offer. When Nortek
indicated that the information it had received that morning raised questions
concerning the amount of one-time expenses payable to certain non-director
managers in connection with a change of control, Mr. Silverman suggested that,
in view of the time constraints, Nortek should consider offering to execute a
binding agreement at $20.50 per share of Common Stock (rather than waiting to
determine if Nortek would be prepared to pay $21.00 per share) before 3:15 p.m.
Before recessing again, the Board instructed Furman Selz to contact Wasserstein
Perella and reiterate such proposal, which it did.
At approximately 3:00 p.m. Mr. Silverman was advised by a senior Hicks Muse
officer that he had become aware that the Company was in negotiations with
another party and that he was instructing his colleagues and Hicks Muse/Atrium's
counsel to terminate discussions with the Company and leave the offices of the
Company's counsel (where the negotiations were taking place). Mr. Silverman
assured the Hicks Muse officer that the Board was scheduled to reconvene at 3:30
p.m., and the Hicks Muse officer agreed to have his colleagues and counsel
remain until 3:45 p.m., but stated that if definitive agreements were not
executed by that time Hicks Muse/Atrium would terminate discussions. Shortly
thereafter Hicks Muse/Atrium's counsel delivered the final Atrium Documents to
Mr. Silverman and requested that they be executed by 3:45 p.m.
The Board meeting reconvened at approximately 3:30 p.m. During the course
of that meeting Furman Selz was advised by Wasserstein Perella, and informed the
Board, that Nortek was sending a document to the Board by telecopy. What was
received and read to the Board at approximately 3:30 p.m. was a letter from
Nortek "confirming" that Nortek was prepared to acquire the Company at a price
of not less than $20 per share of Common Stock subject to the conditions
previously indicated and stating that Nortek expected its final proposal to be a
merger price of $21 per share. The letter, stated that Nortek was "commit[ted]
to completing our due diligence review, negotiating the various contracts and
signing the acquisition agreements today, subject to approval by [Nortek's]
board. Upon signing, a meeting of [Nortek's] board will be called to consider
the proposal which will be recommended to the board by [Nortek's] chief
executive officer."
The Board discussed the letter, including the prices mentioned therein and
the uncertainties with respect to Nortek's proposal, including that such
proposal remained subject to due diligence, agreement on definitive
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<PAGE> 26
documentation and approval by Nortek's board of directors. After such discussion
and after receiving Furman Selz's oral opinion (subsequently confirmed in
writing) that the consideration of $18.75 per share of Common Stock to be
received by the Company's stockholders in a merger with Atrium (the "Atrium
Transaction") was fair, from a financial point of view, to such stockholders,
the Board, by the unanimous vote of all directors present (constituting the
entire Board other than Mr. Snyder), approved the Atrium Transaction at
approximately 3:45 p.m. The Atrium Documents were executed shortly thereafter.
Later that evening, at approximately 6:20 p.m., a letter from Nortek was
received by facsimile at the offices of the Company's counsel which stated that
Nortek "hereby agree[s] to acquire all of the outstanding [shares of Common
Stock] for $20.25 per share. . . ." The letter stated further that "[t]his
Agreement is not subject to financing and will have the terms of the agreement
attached as Exhibit A, subject only to approval of our board," although no form
of agreement was attached to the letter. Subsequently on the night of June 24,
at approximately 10:20 p.m., a copy of the proposed agreements sent by the
Company and its counsel to Nortek and its counsel early that morning, marked to
indicate a number of proposed changes, comments and questions, was received by
facsimile at the offices of the Company's counsel.
On the morning of June 25, 1997, the Atrium Transaction was announced, and
counsel for Nortek confirmed to counsel for the Company that, in view of the
Company's execution of the Atrium Merger Agreement, the proposals contained in
the letters delivered by Nortek the prior evening without knowledge of that fact
were no longer in effect.
Later on June 25, 1997 the Company filed a Form 8-K with the Commission to
which were attached the Atrium Documents.
Early in the evening of July 14, 1997, the Company Board received a letter
from Nortek informing the Board that Nortek would be prepared to offer $19.50
per share of Common Stock in cash to acquire the Company. The letter stated that
the acquisition proposal was not subject to arranging financing. Enclosed with
the proposal letter received by the Company were a draft of the Merger Agreement
which contemplated a cash tender offer for all outstanding shares of Common
Stock at $19.50 per share and forms of a Non-Compete and Termination Agreement
and a Termination and Release Agreement to be entered into with Messrs.
Silverman and Dooskin, respectively (together, the "Termination Agreements").
These draft agreements were substantially similar to the Atrium Documents,
except for certain changes reflecting a tender offer structure.
The letter said that Nortek's board of directors had approved the proposed
agreements, and that the proposal was conditioned on the non-disclosure of
Nortek's identity. The proposal stated that it would expire at the close of
business on July 16, if by that time the Company had not confirmed to Nortek
that the terms of its proposal had been accepted and notice had not been given
to Atrium of the Company's intent to terminate the Atrium Merger Agreement.
Early on July 15, the Board convened to discuss the Nortek proposal. The
Board, with the advice of counsel, discussed the terms of the Nortek proposal
and the relevant provisions of the Atrium Merger Agreement regarding the
furnishing of information to and discussions with third parties in connection
with acquisition proposals. In light of, among other things, the higher price of
the Nortek proposal, the Company Board, after consultation with counsel,
determined that it was advisable for the Board to furnish information to, and
enter into discussions or negotiations with, Nortek in order for the Board to
comply with its fiduciary duties to the stockholders of the Company under
applicable law.
Subsequently on July 15, the Company notified Atrium pursuant to the Atrium
Merger Agreement of the acquisition proposal received from Nortek (without
disclosing Nortek's identity) and of the Board's determination regarding the
furnishing of information to, and the entering into discussions with, Nortek,
and the Company publicly disclosed such action and the terms of the Nortek
proposal (but not Nortek's name).
Nortek conducted certain additional diligence with regard to the Company,
and the Company and Nortek and their respective counsel began negotiating
certain aspects of the definitive agreements that would be entered into in the
event the Company were to accept Nortek's proposal.
Late in the afternoon of July 18, Nortek formally made an offer to the
Company (the "Nortek Offer") to enter into the Merger Agreement, the Stock
Purchase Agreement and the Termination Agreements (together, the "Nortek
Agreements") and delivered a copy of a financing commitment letter (which had
been executed
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<PAGE> 27
and placed in escrow, pending the execution by the parties of the Nortek
Agreements). The Nortek Offer was irrevocable, subject to, inter alia, the
termination by the Company of the Atrium Merger Agreement in accordance with its
terms and the execution and delivery of the Nortek Agreements by the Company and
Messrs. Silverman and Dooskin not later than 8:00 a.m. on July 24, 1997.
At 5:00 p.m. on July 18, the Board convened to consider the Nortek Offer.
The Board discussed the terms of the Nortek Offer and compared it to the terms
of the Atrium Merger Agreement. In particular, the Board noted the higher price
of the Nortek Offer and, although the Nortek Offer was also subject to the
funding of a financing commitment, the portion of the offer that was subject to
financing was smaller than the portion of the Atrium Transaction that was to be
financed. In addition, the Board noted, that a transaction with Nortek presented
the advantage of having a financially substantive entity (rather than a "shell")
as the counterparty, that the acquisition was to be accomplished by means of a
tender offer (which meant that stockholders would receive payment for their
shares sooner than under the transaction structure contemplated by the Atrium
Merger Agreement), and that Nortek would agree to purchase Common Stock in an
amount needed to fund the "break-up fee" and expense reimbursement payable to
Atrium in connection with the termination of the Atrium Merger Agreement. The
Board also noted, that if the Board determined to give notice to Atrium of the
Company's intention to terminate the Atrium Merger Agreement in accordance with
such terms, such notice would be revocable, and would not commit the Company to
terminate the Atrium Merger Agreement. The Board, after consultation with its
independent legal counsel, determined that, in light of the Nortek Offer, it was
advisable for the Board to give Atrium notice of the Company's intention to
terminate the Atrium Merger Agreement in order for the Board to comply with its
fiduciary duties to the stockholders of the Company under applicable law.
Later on July 18, the Company transmitted to Atrium, pursuant to the Atrium
Merger Agreement, a revocable notice of its intention to terminate the Atrium
Merger Agreement at 12:01 a.m. on July 24, 1997 (or at such later time as the
Board would determine), in order to be able to accept the Nortek Offer. In
addition, the Company indicated in the notice that, pursuant to the Atrium
Merger Agreement, through July 23 it would consider any adjustment in the terms
and conditions of the Atrium Merger Agreement that Atrium may propose.
On the evening of July 23, 1997, the Company was informed by Hicks
Muse/Atrium that it was not willing to increase the consideration of $18.75 per
share of Common Stock set forth in the Atrium Merger Agreement, and the Company
Board approved, and early on July 24, 1997 the Company executed and delivered a
notice terminating the Atrium Merger Agreement and paid Atrium the $9.5 million
fee and $2.5 million of expenses. Also early on July 24, 1997, Nortek, the
Company and the other parties thereto executed and delivered the Nortek
Agreements, and the Company sold Nortek 640,000 shares of Common Stock pursuant
to the Stock Purchase Agreement. Subsequently, the parties to the amended and
restated Stockholders Agreement executed and delivered that agreement. (See Item
3(b) -- "Agreements with Nortek" and --"Agreement with Atrium" above.)
(c) Factors Considered by the Board.
In determining to approve the Nortek Agreements and recommend to the
Company's stockholders that they accept the Offer and tender their Common Stock
pursuant thereto, the Board considered the background described above and a
number of factors, including, without limitation, the following:
(i) The familiarity of the Board with the Company's business,
operations, financial conditions and prospects and the competitive
environment for building products companies generally and the trend toward
consolidation in the building products industry.
(ii) The fact that the cash consideration per share to be received by
the Company's stockholders in the Offer and the Merger is higher than the
per share consideration that would have been received by the Company's
stockholders in the proposed Atrium Transaction (as described in Item 4(b)
above).
(iii) The structuring of the transaction with Nortek as a tender offer
to be followed by a merger would enable stockholders to receive their cash
consideration sooner than they would pursuant to the one-step merger
contemplated in the Atrium Transaction.
(iv) The presentation of Furman Selz to the Board on June 24, 1997 in
connection with the Atrium Transaction and oral opinion of Furman Selz
rendered to the Board on July 23, 1997 (which opinion was
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<PAGE> 28
subsequently confirmed by delivery of a written opinion dated July 23,
1997) to the effect that, as of such date and based upon and subject to
certain matters stated in such opinion, the $19.50 per share cash
consideration to be received by the Company's stockholders in the Offer and
the Merger was fair, from a financial point of view, to such stockholders.
The full text of the Furman Selz Opinion, which sets forth the assumptions
made, the matters considered and limitations on the review undertaken by
Furman Selz, is attached as Annex I (and filed as Exhibit 10) to this
Schedule, and is incorporated herein by reference. The Furman Selz Opinion
is directed only to the fairness, from a financial point of view, of the
cash consideration to be received by the Company's stockholders in the
Offer and the Merger and is not intended to constitute, and does not
constitute, a recommendation as to whether any stockholder should tender
shares of Common Stock pursuant to the Offer. Holders of Common Stock are
urged to read the Furman Selz Opinion in its entirety.
(v) The Company's efforts from August 1995 through July 1996 to
explore the possible sale of the Company and the fact that those efforts
did not result in a sale transaction (see Item 4(b) -- "Background and
Reasons for the Recommendation").
(vi) The description by Messrs. Silverman and Snyder to the Board of
the efforts in April and May 1997, to solicit leveraged buyout firms
potentially to join with management in a proposal to effect an acquisition
of the Company (see Item 4(b) -- "Background and Reasons for the
Recommendation").
(vii) The fact that subsequent to the June 25, 1997 announcement of
the execution of the Atrium Merger Agreement and the July 15, 1997
announcement that another proposal had been received, no other person or
entity made a proposal for the acquisition of the Company.
(viii) The terms and conditions of the Merger Agreement , including
(A) the provision permitting the Board under certain circumstances to
furnish information to, and negotiate with, a third party making an
unsolicited bona fide Acquisition Proposal (see Item 3(b) -- "The Merger
Agreement -- No Solicitation"), (B) the provision permitting the Board
under certain circumstances to terminate the Merger Agreement in order to
accept an Acquisition Proposal from a third party on five days' prior
notice to Nortek and upon paying Nortek a fee of $9.5 million and
reimbursing Nortek and its affiliates for up to $2.5 million of their
expenses, which amounts would not, in the Board's view after consulting
with Furman Selz, preclude the possibility of such an Acquisition Proposal
although it might deter some potential Acquisition Proposals and/or reduce
the price per share of Common Stock payable by a Third Party in an
Acquisition Proposal (see Item 3(b) -- "The Merger Agreement -- No
Solicitation," "-- Termination," and "-- Termination Fees and Expenses" and
Item 4(b) -- "Background and Reasons for the Recommendation"), (C) the fact
that Nortek, a financially substantive entity (rather than a "shell"
company), is a counterparty to the Merger Agreement, and (D) the conditions
to the Offer and the Merger, including the condition relating to the
availability of the required financing (see Item 3(b) -- "The Merger
Agreement -- Conditions to the Offer").
(ix) The terms and conditions of the financing commitment for the
Offer and the Merger arranged by Nortek.
(x) The terms and conditions of the Stock Purchase Agreement pursuant
to which Nortek would purchase 640,000 shares of Common Stock for $12
million, which would provide the funds necessary to pay Atrium the fee, and
reimburse it for its expenses, pursuant to the Atrium Merger Agreement.
(xi) The Board's belief that the aggregate of the amounts to be paid
to Mr. Silverman and the amount of indebtedness of Mr. Silverman to be
forgiven by the Company pursuant to the Non-Compete and Termination
Agreement were less than the estimated present value of the consideration,
as calculated by Furman Selz, that would be payable by the Company to Mr.
Silverman over the remaining term of his existing employment agreement, and
the Board's resulting belief that the Non-Compete and Termination Agreement
did not represent additional payments with respect to Mr. Silverman's
shares of Common Stock and Options, and the fact that the amounts to be
paid to Mr. Silverman, and the amount of indebtedness of Mr. Silverman to
be forgiven, was the same as under the Atrium Agreements (see Item
4(b) -- "Background and Reasons for the Recommendation").
The foregoing discussion of the information and factors discussed by the
Board of Directors is not meant to be exhaustive but includes all material
factors considered by the Board. The Board did not quantify or
28
<PAGE> 29
attach any particular weight to the various factors that it considered in
reaching its determination that the Offer and the Merger is in the best interest
of the stockholders.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an engagement letter dated June 20, 1997, as supplemented by a
letter dated July 15, 1997 (the "Engagement Letter"), the Company has retained
Furman Selz to render financial advisory and investment banking services to the
Company in connection with a possible merger, consolidation, sale of stock or
sale of substantially all the assets of the Company (a "Transaction"). For such
financial advisory and investment banking services, the Company agreed to pay
Furman Selz (i) $750,000 upon delivery of its opinion to the Board of Directors
of the Company in connection with a Transaction (which fee became payable upon
the delivery by Furman Selz of its opinion in connection with the Atrium Merger
Agreement), plus (ii) $250,000 upon the consummation of a Transaction, plus
(iii) an additional fee of (x) $150,000, if the financial terms of the
Transaction are such that the per share price to be received by stockholders of
the Company is between $18.76 and $19.50, (y) $500,000, if the per share price
to be received is between $19.51 and $19.99 or (z) $700,000, if the per share
price to be received is $20.00 or more. In addition, the Company has agreed to
reimburse Furman Selz for its reasonable out-of-pocket expenses (including
reasonable legal fees and disbursements) and to indemnify Furman Selz against
certain liabilities relating to or arising out of services performed by it as
financial advisor to the Board of Directors of the Company in connection with a
Transaction.
Neither the Company nor any person acting on its behalf currently intends
to employ, retain or compensate any other person to make solicitations or
recommendations to security holders on their behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Transactions in Securities.
To the knowledge of the Company, with the exception of the issuance and
sale of 640,000 shares of Common Stock to Nortek pursuant to the Stock Purchase
Agreement, the granting of the Purchase Options by the Relevant Stockholders to
Atrium pursuant to the Stockholders Agreement (see Item 3(b) -- "Agreements with
Nortek -- Stock Purchase Agreement" and Item 3(b) -- "Agreements with Atrium --
Stockholders Agreement"), purchases of shares of Common Stock made in accordance
with past practice pursuant to the Company's Employee Stock Purchase Plan on
behalf of its participants and contributions in shares of Common Stock made to
participants' accounts by the Company pursuant to the Ply Gem Industries, Inc.
Group Profit-Sharing/401(k) Plan, no transactions in the Common Stock have been
effected during the past 60 days by the Company or by any executive officer,
director, affiliate or subsidiary of the Company.
(b) Intent to Tender.
To the knowledge of the Company, all of its executive officers, directors,
affiliates or subsidiaries currently intend to tender pursuant to the Offer all
shares of Common Stock that are held of record or beneficially owned by such
persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Negotiations.
Except as set forth in this Schedule, no negotiation is being undertaken or
is underway by the Company in response to the Offer which relates to or would
result in: (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary thereof; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary
thereof; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
29
<PAGE> 30
(b) Transactions and Other Matters.
Except as set forth in this Schedule, there are no transactions, Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to in
Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
On June 25, 1997, Herbert Smilow and Adele Brody, purported stockholders of
the Company, filed a complaint in Delaware Chancey Court against Herbert
Dooskin, Joseph Goldenberg, Albert Hersh, William Lilley, III, Elihu Modlin,
Dana Snyder, Jeffrey Silverman (collectively, the "Individual Defendants") and
the Company (with the Individual Defendants, collectively the "Defendants"). The
complaint purports to be brought on behalf of a class consisting (with certain
exceptions) of all stockholders of the Company, and challenges as inadequate to
such stockholders the consideration to be paid in connection with the proposed
Atrium Transaction. The complaint alleges, among other things, that the proposed
price is inadequate, and that the Individual Defendants breached their fiduciary
duties in agreeing to it. The Defendants believe the complaint to be without
merit.
Effective July 29, 1997, Fleet Bank, N.A. was appointed as trustee to the
trusts under the Ply Gem Group Pension Plan, Ply Gem Industries, Inc. Group
Profit-Sharing/401(k) Plan, and the SNE Enterprises, Inc. 401(k) Plan (the
"Trusts") with the power to vote the shares of Common Stock held by such Trusts
in connection with any proposal of merger, consolidation or similar transaction
and to decide whether to tender or exchange such shares in any tender or
exchange offer (or otherwise to dispose of such shares during the pendency of
any such tender or exchange offer).
On July 17, 1997, the Board declared a regular quarterly dividend of $0.03
per share payable September 5, 1997 to record holders of Common Stock as of
August 7, 1997 (the "Dividend Record Date"). Stockholders as of the Dividend
Record Date will be entitled to receive such dividend even if they have tendered
their Shares in the Offer prior to the Dividend Record Date.
30
<PAGE> 31
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- - ----------- --------------------------------------------------------------------------------
<C> <S> <C>
1 -- Agreement and Plan of Merger, dated as of July 24, 1997, among the Company,
Nortek and the Offeror.
2 -- The Company's Proxy Statement on Schedule 14A, filed on April 11, 1997.
3 -- Letter to stockholders of the Company dated July 29, 1997.*
4 -- Confidentiality Agreement, dated as of September 27, 1995, between the Company
and Nortek, as amended and modified by letters dated June 18, 1997, June 23,
1997 and July 17, 1997.
5 -- Stock Purchase Agreement, dated as of July 24, 1997, between Nortek and the
Company.
6 -- Registration Rights Agreement, dated as of July 24, 1997, between Nortek and the
Company.
7 -- Non-Compete and Termination Agreement, dated as of July 24, 1997, between
Nortek, the Company and Jeffrey S. Silverman, as amended on July 25, 1997.
8 -- Termination and Release Agreement, dated as of July 24, 1997, between Nortek,
the Company and Herbert P. Dooskin, as amended on July 25, 1997.
9 -- Form of Indemnification Agreement between the Company and its directors.
10 -- Opinion of Furman Selz LLC dated July 23, 1997.*
11 -- First Amended and Restated Stockholders Agreement, dated as of July 24, 1997,
among Atrium Acquisition Holdings Corp., Atrium/PG Acquisition Corp., Jeffrey S.
Silverman, Dana R. Snyder and Herbert P. Dooskin, the Company, Nortek and
Offeror.
12 -- Employment Agreement, dated June 17, 1997, between Paul H. Bogutsky and the
Company, as amended on June 23, 1997.
13 -- Employment Agreement, dated June 17, 1997, between J. Adam Lipsitz and the
Company, as amended on June 23, 1997.
14 -- Corporate Management Change in Control Resolution and Senior Subsidiary/Division
Executives Change in Control Resolution.
</TABLE>
- - ---------------
* Copy attached to, or enclosed with, copies of this Schedule mailed to
stockholders.
31
<PAGE> 32
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
PLY GEM INDUSTRIES, INC.
By: /s/ JEFFREY S. SILVERMAN
------------------------------------
Jeffrey S. Silverman
Chairman and Chief Executive Officer
Dated: July 29, 1997
32
<PAGE> 33
ANNEX I
[FURMAN SELZ LLC LOGO] 230 PARK AVENUE - NEW YORK 10169 - 212-309-8200
July 23, 1997
The Board of Directors
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Gentlemen:
We understand that Ply Gem Industries, Inc. ("Ply Gem" or the "Company"),
NTK Sub ("NTK Sub") and Nortek, Inc. ("Nortek") propose to enter into an
Agreement and Plan of Merger (the "Agreement"), substantially in the form of the
draft included with the offer letter from Nortek dated July 18, 1997 (the "Offer
Letter"), whereby, among other things, NTK Sub, a subsidiary of Nortek, has
agreed to purchase all of the issued and outstanding shares of common stock of
the Company (the "Common Stock") at $19.50 per share in cash (the
"Consideration") pursuant to a tender offer (the "Tender Offer"). Following the
completion of the Tender Offer, NTK Sub will be merged into the Company, with
the Company continuing as a wholly-owned subsidiary of Nortek. The terms of the
proposed transaction (the "Proposed Transaction") are set forth in more detail
in the Agreement.
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, of the Consideration to be received by the
stockholders of the Company in the Proposed Transaction. It is our understanding
that the Proposed Transaction is subject to approval by the Board of Directors
of Ply Gem.
In conducting our analysis and arriving at our opinion as expressed herein,
we have reviewed and analyzed, among other things, the following:
(i) the Agreement and the financial terms of the Proposed Transaction
set forth therein;
(ii) the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1994, 1995 and 1996, Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996 and 1997 and certain other filings with
the Securities and Exchange Commission made by the Company, including proxy
statements;
(iii) selected other publicly available information concerning the
Company and the trading market for the Common Stock;
(iv) selected non-public information relating to the Company,
including financial forecasts and projections, furnished to us by the
Company;
(v) the draft, included with the Offer Letter, of the Non-Compete and
Termination Agreement between the Company and the Company's Chief Executive
Officer, Mr. Jeffrey S. Silverman;
(vi) selected publicly available information, including research
reports, concerning certain other companies engaged in businesses which we
believe to be comparable to the Company and the trading markets for certain
of such companies' securities; and
(vii) the financial terms and conditions of selected recent mergers
and acquisitions which we believe to be relevant.
MEMBERS: NEW YORK, AMERICAN, OTHER PRINCIPAL STOCK EXCHANGES & REGULATED BY SFA
I-1
<PAGE> 34
[FURMAN SELZ LLC LOGO]
Ply Gem Industries, Inc.
July 23, 1997
Page 2
In addition, we have performed and conducted the following:
(i) discussions with selected members of senior management of the
Company concerning its respective businesses and operations, assets,
present condition and future prospects;
(ii) site visits to selected properties and facilities of the Company,
although we have not conducted a physical inspection of the properties and
facilities of the Company, nor have we made or obtained any independent
evaluation or appraisal of such properties and facilities nor undertaken
any obligation to do so; and
(iii) such other analyses, examinations and procedures, and reviewed
such other agreements and documents, and considered such other factors, as
we have deemed, in our sole judgment, to be necessary, appropriate or
relevant to render an opinion.
In addition, we have taken into account our assessment of general economic,
market and financial conditions and our experience in similar transactions, as
well as our experience in securities valuation in general. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof, and does not represent an opinion as to the value of the Common
Stock or the impact of the Proposed Transaction or its announcement on the
trading price of the Common Stock.
We have assumed and relied, without independent verification, upon the
accuracy and completeness of the financial and other information obtained from
public sources or provided to us by the Company and reviewed by us for purposes
of arriving at our opinion, and we have not assumed any responsibility for
independent verification of such information or undertaken any obligation to
verify such information. In addition, with respect to the financial forecasts
and projections of the Company used in our analysis, the management of the
Company has informed us that such forecasts and projections are reasonable and
we have assumed that they represent the best current judgment of the management
of the Company as to the future financial condition and operating results of the
Company, and have assumed that such forecasts and projections have been
reasonably prepared based on such current judgment. We assume no responsibility
for and express no view as to such forecasts and projections or the assumptions
on which they are based.
Furman Selz will receive a fee for its services to the Board of Directors
in connection with this opinion pursuant to an engagement letter, dated June 20,
1997 as amended on July 15, 1997, entered into between Furman Selz and the
Company. Furman Selz will receive an additional fee upon consummation of the
Proposed Transaction. In addition, the Company has agreed to reimburse Furman
Selz for certain out-of-pocket expenses and to indemnify Furman Selz for certain
liabilities arising from the delivery of this opinion. As you may know, in the
ordinary course of our business, we may actively trade in the equity securities
of the Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
We are aware of the fact that, in connection with the execution of the
Agreement, the Company will terminate its Agreement and Plan of Merger, dated
June 24, 1997, with Atrium Holdings, Corp. This opinion does not constitute a
recommendation of the Proposed Transaction over any other alternative
transactions which may be available to the Company. Our opinion as expressed
herein deals only with whether the Consideration to be received by the
stockholders of the Company in the Proposed Transaction is fair from a financial
point of view.
This opinion is for the use and benefit of the Board of Directors in its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to or whether to accept the Consideration
to be received
I-2
<PAGE> 35
LOGO
Ply Gem Industries, Inc.
July 23, 1997
Page 3
by such stockholder in connection with the Proposed Transaction. We were not
requested to opine as to, and this opinion does not in any manner address, the
underlying business decision of the Board of Directors to proceed with or effect
the Proposed Transaction. This opinion may be included in its entirety in any
proxy statement or Schedule 14D-9 with respect to the Proposed Transaction, but
it may not be summarized, excerpted from or otherwise publicly referred to
without our prior written consent (except in such proxy statement or Schedule
14D-9, provided Furman Selz has been given a reasonable opportunity to review
such summary, excerpt or reference).
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the Consideration to be received by the stockholders of the Company
in the Proposed Transaction is fair, from a financial point of view, to such
holders.
Very truly yours,
FURMAN SELZ LLC
/s/ William Shutzer
--------------------------------------
William Shutzer
President
I-3
<PAGE> 36
ANNEX II
PLY GEM INDUSTRIES, INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1
------------------------
NO VOTE OR OTHER ACTION OF STOCKHOLDERS OF PLY GEM INDUSTRIES, INC.
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND YOU ARE
REQUESTED NOT TO SEND A PROXY TO PLY GEM INDUSTRIES, INC.
------------------------
This Information Statement is being mailed on or about July 29, 1997 as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of shares of the Common Stock, par value
$0.25 per share (the "Common Stock"), of Ply Gem Industries, Inc., a Delaware
corporation (the "Company"). Capitalized terms used and not otherwise defined
herein shall have the meanings set forth in the Schedule 14D-9. This Information
Statement is being furnished in connection with the possible designation by
Nortek, Inc., a Delaware corporation ("Nortek"), and the direct parent of NTK
Sub, Inc., a Delaware corporation ("Offeror") of persons (the "Offeror
Designees") to the Board of Directors of the Company (the "Board"). Such
designation is to be made pursuant to an Agreement and Plan of Merger dated July
24, 1997 (the "Merger Agreement") among the Company, Nortek and Offeror.
The Merger Agreement provides that, promptly upon the purchase by Offeror
of Shares pursuant to the Offer, and from time to time thereafter, Offeror shall
be entitled to designate up to such number of directors, rounded up to the next
whole number, on the Board as shall give Offeror representation on the Board
equal to the product of the total number of directors on the Board (giving
effect to the directors elected pursuant to this sentence), multiplied by the
percentage that the aggregate number of Shares beneficially owned by Offeror or
any affiliate of Offeror at such time bears to the total number of Shares then
outstanding, and the Company shall, at such time, promptly take all actions
necessary to cause Offeror's designees to be elected as directors of the
Company, including increasing the size of the Board or securing the resignations
of incumbent directors, or both.
Designation of Directors. The Merger Agreement provides that, provided
that Offeror acquires at least a majority of the Shares outstanding pursuant to
the Offer, Nortek shall be entitled to designate up to such number of directors,
rounded up to the next whole number, of the Board so that the designees of
Nortek constitute the same percentage of the Board (but in no event less than a
majority) as the percentage of shares of Common Stock acquired pursuant to the
Offer, and the Company shall increase the size of the Board or obtain the
resignations of incumbent directors as is necessary to enable such number of
Nortek designees to be elected, provided, that, at all times prior to the
Effective Time, at least two of the members of the Board shall be Continuing
Directors (as defined below). Following the election or appointment of Nortek's
designees pursuant to the foregoing and prior to the Effective Time, such
designees shall abstain from acting upon, and the approval of a majority of the
Continuing Directors shall be required to and shall be sufficient to authorize,
any resolution with respect to the termination of the Merger Agreement by the
Company, any amendment of the Merger Agreement requiring action by the Board,
any extension of time for the performance of any of the obligations or other
acts of Nortek or Offeror under the Merger Agreement, any waiver of compliance
with any of the agreements or conditions under the Merger Agreement for the
benefit of the Company and any action to seek to enforce any obligation of
Nortek or Offeror under the Merger Agreement. Under the Merger
II-1
<PAGE> 37
Agreement, "Continuing Director" means (i) any member of the Board as of July
24, 1997 or (ii) any successor to a Continuing Director who is (A) unaffiliated
with, and not a designee or nominee, of Nortek as Offeror, and (B) recommended
to succeed a Continuing Director by a majority of the Continuing Directors then
on the Board, and in each case under clause (ii), who is not an employee of the
Company.
The information contained in this Information Statement concerning Nortek
and the Offeror Designees has been furnished to the Company by such persons, and
the Company assumes no responsibility for the accuracy or completeness of such
information.
SECURITY OWNERSHIP OF MANAGEMENT
AND CERTAIN BENEFICIAL OWNERS
GENERAL
The issued and outstanding voting securities of the Company as of June 30,
1997 consisted of 13,983,679 shares of Common Stock. The holders of the Common
Stock of the Company are entitled to one vote for each share of such stock held
of record by them. On July 24, 1997, the Company issued 640,000 shares of Common
Stock out of treasury to Nortek under the Stock Purchase Agreement.
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth information regarding beneficial ownership,
as of June 30, 1997, and within the meaning of Rule 13d-3 under the Exchange
Act, of Common Stock by directors of the Company, the Company's Chief Executive
Officer (the "CEO") and each of the four most highly compensated officers (other
than the CEO) (based on salary and bonus amounts paid during the 12-month period
ended December 31, 1996) and the directors and executive officers as a group.
Since the table reflects beneficial ownership determined pursuant to the
applicable rules of the SEC, the information is not necessarily indicative of
beneficial ownership for any other purpose.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1)(2) CLASS
- - ------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Jeffrey S. Silverman (3)........................................... 4,195,275 24.8%
Jeffrey S. Silverman and Herbert P. Dooskin as trustees of certain
of the trusts under the Ply Gem Group Pension Plan, Ply Gem
Industries, Inc. Group Profit-Sharing/401(k) Plan, and the SNE
Enterprises, Inc. 401(k) Plan (the "Trusts") (4)................. 1,099,890 7.9
Dana R. Snyder (3)................................................. 920,589 6.2
Herbert P. Dooskin (3)............................................. 484,495 3.4
Joseph M. Goldenberg............................................... 132,199 *
Albert Hersh....................................................... 73,010 *
Donald Kruse....................................................... 70,648 *
William Lilley III................................................. 21,000 *
Elihu H. Modlin.................................................... 42,000 *
Michael Vagedes.................................................... 15,893 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP (11 persons)
(3)(4)........................................................... 7,196,600 38.8
</TABLE>
- - ---------------
* Indicates holdings of less than 1%.
(1) Directly and indirectly. The inclusion of securities owned by others as
beneficially owned by the respective nominees and officers does not
constitute an admission that such securities are beneficially owned by
them. All of the named individuals have, except for unexercised options,
voting powers with respect to the aforesaid shares.
II-2
<PAGE> 38
(2) Includes shares that may be acquired upon the exercise of outstanding
options pursuant to the Company's stock option plans as follows: 2,947,500
shares for Mr. Silverman, 916,842 shares for Mr. Snyder, 385,000 shares for
Mr. Dooskin, 52,200 shares for Mr. Goldenberg, 26,700 shares for Mr. Hersh,
40,000 shares for Mr. Kruse, 17,700 shares for Mr. Lilley, 36,450 shares
for Mr. Modlin, 9,000 shares for Mr. Vagedes and 4,554,905 shares for the
group. Each executive officer and director, named or otherwise, has
disclaimed beneficial ownership of all such shares underlying presently
exercisable stock options held by him. Pursuant to outstanding options held
by Mr. Silverman with respect to 600,000 shares and Mr. Dooskin with
respect to 150,000 shares, the number of such shares subject to such
Options double upon a "change of control" such as consummation of the Offer
or the Merger, which additional shares are not included in the table above.
(3) The shares of Common Stock beneficially owned by Jeffrey S. Silverman, Dana
R. Snyder and Herbert P. Dooskin (the "Relevant Stockholders") are subject
to the Purchase Options and terms and conditions of an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement"), dated as of July 24,
1997, between certain Atrium affiliates, the Relevant Stockholders, Nortek
and Offeror.
(4) Includes shares owned of record by the Trusts. The address for the Trusts is
c/o Ply Gem Industries, Inc., 777 Third Avenue, New York, New York 10017.
With respect to the Trusts, data in the table is as of March 31, 1997. With
respect to the Ply Gem Group Pension Plan and the Ply Gem Industries, Inc.
Group Profit-Sharing/401(k) Plan, Messrs. Silverman and Dooskin
beneficially own 1,081,399 shares as trustees. With respect to the SNE
Enterprises, Inc. 401(k) Plan, Mr. Dooskin beneficially owns 18,491 shares
as trustee. With respect to the shares of Common Stock beneficially owned
by Messrs. Silverman and Dooskin as trustees of the Trusts, effective July
29, 1997, Fleet Bank, N.A. was appointed as trustee of the Trusts with the
power to vote such shares in connection with any proposal of merger,
consolidation or similar transaction and to decide whether to tender or
exchange such shares in any tender or exchange offer (or otherwise to
dispose of such shares during the pendency of any such tender or exchange
offer).
OTHER OWNERSHIP OF COMMON STOCK
The following table sets forth information concerning the persons known to
the Company to be the beneficial owners of more than 5% of the outstanding
shares of Common Stock.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER OWNED CLASS
- - --------------------------------------------------------------------- ------------ ----------
<S> <C> <C>
Dimensional Fund Advisors, Inc. (1).................................. 736,300 5.3%
Pioneering Management Corporation (2)................................ 818,000 5.9
Atrium Corporation (3)............................................... 1,235,261 8.8
Fleet Bank, N.A., as trustee of the Trusts (4)....................... 1,099,890 7.9
</TABLE>
- - ---------------
(1) The address for Dimensional Fund Advisors, Inc. ("Dimensional") is 1299
Ocean Avenue, 11th floor, Santa Monica, California 90401. All of the shares
of which Dimensional, a registered investment advisor, is deemed to have
beneficial ownership of, are held in portfolios of DFA Investment
Dimensions Group, Inc. (the "DFA Fund"), a registered open-end investment
company, in series of the DFA Investment Trust Company (the "DFA Trust"), a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, for each
of which Dimensional serves as investment manager. Dimensional has sole
voting power for 496,700 shares. In addition, officers of Dimensional are
also officers of the DFA Fund and the DFA Trust, and in such capacities,
these persons have sole voting power to 85,800 and 153,800 additional
shares, respectively. Dimensional has sole dispositive power for 736,300
shares. Dimensional disclaims beneficial ownership of all such shares. The
information in this table relating to Dimensional's beneficial ownership of
Common Stock is as of December 31, 1996.
(2) The address for Pioneering Management Corporation ("Pioneering") is 60 State
Street, Boston, Massachusetts 02109. Pioneering has sole voting power for
818,000 shares, sole dispositive power for
II-3
<PAGE> 39
27,000 shares, and shared dispositive power for 791,000 shares. The
information in this table relating to Pioneering's beneficial ownership of
Common Stock is as of March 20, 1997.
(3) The address for Atrium is 1341 West Mockingbird Lane, Suite 1200 West,
Dallas, Texas 75247. Atrium and certain of its affiliates filed a Schedule
13D on July 8, 1997, stating that pursuant to the terms of the Stockholders
Agreement, dated as of July 24, 1997, between certain Atrium affiliates
(the "Atrium Entities") and the Relevant Stockholders, Atrium and its
affiliates listed in the Schedule 13D may be deemed to beneficially own
6,234,603 shares of Common Stock. Pursuant to the Stockholders Agreement,
the Relevant Stockholders granted the Atrium Affiliates the option to
purchase 1,235,261 shares of Common Stock currently held by the Relevant
Stockholders plus an option to purchase 4,999,342 shares of Common Stock
that may be acquired upon the exercise of options currently held by the
Relevant Stockholders. Pursuant to an amendment to the Stockholders
Agreement, the Relevant Stockholders have agreed to tender their shares
pursuant to the Offer, with the Offer Price to be divided between the
Relevant Stockholders and Atrium. Similarly, a portion of the Option
Consideration payable to the Relevant Stockholders pursuant to the Merger
Agreement will be payable to Atrium. Such options are currently
exerciseable, subject to certain conditions, but will not be exercised
unless the Offer is terminated without the purchase of such shares
thereunder.
(4) The address for Fleet Bank, N.A. is One Federal Street, Boston,
Massachusetts 02211. Effective July 29, 1997, Fleet Bank, N.A. ("Fleet")
was appointed as trustee of the Trusts with the power to vote shares of
Common Stock held in the Trusts in connection with any proposal of merger,
consolidation or similar transaction and to decide whether to tender or
exchange such shares in any tender or exchange offer (or otherwise to
dispose of such shares during the pendency of any such tender or exchange
offer). The number of shares indicated in the table as beneficially owned
by Fleet as trustee of the Trusts is as of March 31, 1997.
II-4
<PAGE> 40
THE BOARD OF DIRECTORS
OFFEROR DESIGNEES
Nortek has informed the Company that each of the Offeror Designees listed
below has consented to act as a director. To the best knowledge of the Company,
none of the Offeror Designees or their associates beneficially owns any equity
securities of the Company or has been involved in any transaction with the
Company or any of its directors or executive officers that is required to be
disclosed pursuant to the rules and regulations of the SEC.
It is expected that, upon assuming office, the Offeror Designees will
thereafter constitute at least a majority of the Board of the Company.
Nortek may designate the following individuals to the Board of the Company.
Each such individual's name, age as of the date hereof, current principal
occupation or employment and five-year employment history is set forth below.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AGE FIVE-YEAR EMPLOYMENT HISTORY
- - ------------------------------ --- --------------------------------------------------------
<S> <C> <C>
Richard L. Bready............. 52 Mr. Bready has been Chairman and Chief Executive Officer
of Nortek for more than the past five years.
Almon C. Hall................. 50 Mr. Hall has been Vice President, Controller and Chief
Accounting Officer of Nortek for more than the past five
years.
Richard J. Harris............. 60 Mr. Harris has been employed by Nortek as Vice President
and Treasurer for more than the past five years. He is
also a director of Lehigh Group, Inc. and Initial
Acquisition Corp.
Kevin W. Donnelly............. 42 Mr. Donnelly has been Vice President, General Counsel
and Secretary of Nortek for more than the past five
years.
</TABLE>
II-5
<PAGE> 41
CURRENT DIRECTORS
The following table sets forth the name, age as of the date hereof, term
and current principal occupation or employment and five-year employment history
for the seven members currently serving on the Company's Board of Directors. The
Company's Certificate of Incorporation and By-laws provide that the directors of
the Company are elected at each annual meeting of stockholders to serve until
the next annual meeting of stockholders and until their successors are elected.
Unless otherwise noted, each director has maintained the same principal
occupation during the past five years.
<TABLE>
<CAPTION>
DIRECTOR PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AGE SINCE FIVE-YEAR EMPLOYMENT HISTORY
- - ------------------------------ --- -------- -------------------------------------------------
<S> <C> <C> <C>
Jeffrey S. Silverman.......... 51 1981 Mr. Silverman joined the Company and became a
Director in 1981. He has served as Chief
Executive Officer of the Company since 1984 and
Chairman of the Board since 1985.
Dana R. Snyder................ 50 1995 Mr. Snyder has been President, Chief Operating
Officer and a Director since joining the Company
in June, 1995. Prior thereto, Mr. Snyder was
President of Alcoa Construction Products Group, a
division of Stolle Corporation, a subsidiary of
Aluminum Company of America.
Herbert P. Dooskin............ 55 1986 Mr. Dooskin joined the Company in 1986 as
Executive Vice President at which time he also
became a Director.
Joseph M. Goldenberg.......... 71 1983 Mr. Goldenberg, a co-founder of Goldenberg Group,
Inc., a wholly owned subsidiary of the Company,
served as its Chairman from 1983 through 1994 and
currently serves as a consultant.
Albert Hersh.................. 81 1954 Mr. Hersh is a co-founder of the Company. He
presently provides consulting services to the
Company.
William Lilley III............ 59 1994 Mr. Lilley is President of Policy Communications,
Inc., a business consulting firm based in
Washington, D.C.
Elihu H. Modlin............... 69 1992 Mr. Modlin has been general counsel to the
Company since 1960. He is a partner in the law
firm of Messrs. Elihu H. Modlin and Charles M.
Modlin.
</TABLE>
OTHER EXECUTIVE OFFICERS
The following table sets forth the name, position and office held with the
Company for the following persons who may be deemed executive officers of the
Company and who are not also serving on the Company's Board of Directors. Unless
otherwise noted, each executive officer has maintained the same position and
office with the Company during the past five years.
<TABLE>
<CAPTION>
NAME PRESENT POSITION AND OFFICE WITH THE COMPANY
- - ------------------------------ -------------------------------------------------------------
<S> <C>
Paul H. Bogutsky.............. Mr. Bogutsky has been Vice President of the Company since
1989. In 1994 he assumed the additional responsibility of
Treasurer of the Company.
J. Adam Lipsitz............... Mr. Lipsitz has been Vice President, Corporate Development of
the Company since September 1996. From 1994 through August
1996 he was Director, Corporate Development of the Company
and, prior thereto, Manager, Corporate Development.
Donald Kruse.................. Mr. Kruse, formerly President and Chief Executive Officer of
Sagebrush Sales, Inc., a wholly owned subsidiary of the
Company, became Chairman of that subsidiary in January 1997.
Michael Vagedes............... Mr. Vagedes is President of Richwood Building Products, Inc.,
a wholly owned subsidiary of the Company.
</TABLE>
II-6
<PAGE> 42
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 1994,
1995 and 1996, the cash compensation paid by the Company and its subsidiaries,
to the Company's Chief Executive Officer and each of the four most highly
compensated executive officers of the Company and its subsidiaries at the end of
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(2)
ANNUAL ------------
COMPENSATION(1) SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) COMPENSATION($)(3)
- - -------------------------------- ---- --------- -------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman(4)......... 1996 2,493,795 2,105,510 750,000 22,963
Chairman of the Board and 1995 2,267,087 1,478,017 -- 6,917
Chief Executive Officer 1994 1,295,741 1,488,543 750,000 14,088
of the Company
Dana R. Snyder(5)............... 1996 446,250 899,000 366,842 6,654
President and Chief Operating 1995 237,019 150,000 550,000 4,374
Officer of the Company
Herbert P. Dooskin.............. 1996 424,750 212,500 -- 6,624
Executive Vice President 1995 404,750 87,500 -- 9,594
of the Company 1994 404,750 262,500 50,000 13,536
Donald Kruse(6)................. 1996 176,000 227,238 4,000 7,757
Chairman, Sagebrush 1995 171,000 29,040 4,000 5,377
Sales, Inc., a wholly owned 1994 171,000 272,375 6,000 9,681
subsidiary of the Company
Michael Vagedes................. 1996 90,000 252,111 1,500 9,281
President, Richwood 1995 85,000 139,928 1,500 4,015
Building Products, Inc., 1994 80,000 139,440 1,000 8,350
a wholly owned subsidiary
of the Company
</TABLE>
- - ---------------
(1) Includes salary and bonus payable pursuant to employment agreements with the
named executives. See "Employment Contracts and Termination of Employment
and Change in Control Arrangements" below. For Mr. Silverman, bonus also
reflects $1,113,017 in 1995 and $1,488,543 in 1994 for principal and
accrued interest waived for 1994 and 1993, respectively, in accordance with
the terms of interest bearing promissory notes delivered by Mr. Silverman
to the Company.
(2) As of December 31, 1996, Mr. Silverman's aggregate restricted stock holdings
totaled 150,000 shares with a value, based on the market price of the
Company's Common Stock on December 31, 1996 ($12.375), of $1,856,250. These
shares of restricted stock vest in installments of 25,000 shares per year
subject to the Company achieving performance-based goals. Dividends are
paid by the Company on restricted stock holdings.
(3) "All Other Compensation" includes for the named executives, the following:
(i) a contribution in the amount of $8,100 in 1994, $3,750 in 1995 and
$6,000 in 1996 ($9,000 in 1996 for Mr. Vagedes) made by the Company to the
Ply Gem Industries Group Profit Sharing Plan; (ii) the following life
insurance premiums or economic benefit calculated pursuant to P.S. -58 in
1994: Mr. Silverman -- $5,988; Mr. Dooskin -- $5,436; Mr. Kruse -- $1,581;
and, Mr. Vagedes -- $250; (iii) the following life insurance premiums or
economic benefit calculated pursuant to P.S. -58 in 1995: Mr.
Silverman -- $3,167; Mr. Dooskin -- $5,844; Mr. Kruse -- $1,627; Mr.
Snyder -- $624; and, Mr. Vagedes -- $265; and (iv) the following life
insurance premiums or economic benefit calculated pursuant to P.S. -58 or
P.S.-38
II-7
<PAGE> 43
in 1996: Mr. Silverman -- $16,963; Mr. Dooskin -- $624; Mr.
Kruse -- $1,757; Mr. Snyder -- $654; and, Mr. Vagedes -- $281.
(4) Mr. Silverman's compensation is determined in accordance with the provisions
of an employment agreement entered into with the Company in 1986 and
amended from time to time thereafter. In a continuing effort to enhance
shareholder value, Mr. Silverman voluntarily initiated a modification to
his compensation arrangement for 1997 by providing that 25% of the salary
and bonus due to him during 1997 under his employment agreement shall be
deferred until the price of the Common Stock equals 150% of the closing
price of the Common Stock on the New York Stock Exchange on December 31,
1996. In addition, any options granted to Mr. Silverman in 1997 pursuant to
his employment agreement shall not be exercisable until the market price of
the Common Stock equals 150% of the closing price of the Common Stock on
the New York Stock Exchange on December 31, 1996.
(5) Mr. Snyder became President, Chief Operating Officer and a Director of the
Company in June 1995. See "Employment Contracts and Termination of
Employment and Change in Control Arrangements" below.
(6) Mr. Kruse, formerly President and Chief Executive Officer of Sagebrush
Sales, Inc., became Chairman of that company effective January 1, 1997. See
"Employment Contracts and Termination of Employment and Change in Control
Arrangements" below.
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during 1996 under the Company's 1989 Employee Incentive Stock Plan and
1994 Employee Incentive Stock Plan to the Company's executives listed in the
Summary Compensation Table above.
The table also illustrates the Grant Date Present Value of those stock
options based upon the Black-Scholes Model of Valuation, without giving effect
to the non-transferability of the options.
Irrespective of the theoretical value placed on a stock option on the date
of grant, its ultimate value will depend on the market value of the Company's
Common Stock at a future date. If the price of the Company's Common Stock
increases, all stockholders will benefit commensurately with the optionees.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (#)(1) YEAR(%) ($/SH)(2) DATE VALUE($)(3)
- - ----------------------------- --------------- ----------------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman......... 750,000 54.8% 12.50 8/20/06 2,962,500
Dana R. Snyder(4)............ 216,842 15.9 16.50 1/02/01 1,088,547
150,000 11.0 12.50 8/20/06 592,500
Donald Kruse................. 4,000 0.3 12.50 8/20/06 15,800
Michael Vagedes.............. 1,500 0.1 12.50 8/20/06 5,925
</TABLE>
- - ---------------
(1) All options were granted at market value at the date of grant and are
subject to earlier termination in certain instances related to termination
of employment. The options granted to Mr. Snyder and Mr. Silverman are
fully exercisable; all other options are exercisable one year subsequent to
grant.
(2) The required tax withholding obligations related to exercise of certain
options may be paid by delivery of already owned shares or by offset of the
underlying shares, subject to certain conditions.
(3) The amounts shown assume a rate of return based on the Black-Scholes Model
of Valuation. The assumptions used were as follows: volatility -- 35%;
risk-free rate of return (semi-annual basis) -- 5.38% as of January 2, 1996
for the options granted on such date, and 6.41% as of August 20, 1996 for
the options granted on such date; dividend rate -- $.12 per annum; and,
assumed time of exercise -- 6 years,
II-8
<PAGE> 44
except for the options granted on January 2, 1996, 5 years. No adjustments
were made for non-transferability. There can be no assurance that the rate
of appreciation assumed for purposes of this table will be achieved. The
stock options will have no value to the executives named above or other
optionees if the price of the Company's Common Stock does not increase
above the exercise price of the option.
(4) Mr. Snyder received two option grants in 1996, each of which is set forth in
the table above.
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Company's
executives listed in the Summary Compensation Table above, concerning the
exercise of options during the last fiscal year and unexercised options held as
of the end of the fiscal year:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR-END(#) AT FISCAL YEAR-END($)
SHARES --------------------- ---------------------
ACQUIRED ON VALUE EXERCISABLE/ EXERCISABLE/
NAME EXERCISE(#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- - ------------------------------- ----------- ----------- --------------------- ---------------------
<S> <C> <C> <C> <C>
Jeffrey S. Silverman........... 101,626 736,789 2,947,500/0(1) 1,426,187/0
Dana R. Snyder................. 0 0 910,782/6,060 0/0
Herbert P. Dooskin............. 65,000 326,875 385,000/0(1) 377,000/0
Donald Kruse................... 0 0 36,000/4,000 31,375/0
Michael Vagedes................ 0 0 2,500/1,500 0/0
</TABLE>
- - ---------------
(1) These numbers do not include the additional 600,000 shares of Common Stock
that become subject to Mr. Silverman's options, or the additional 150,000
shares of Common Stock that become subject to Mr. Dooskin's options, upon a
"change of control" of the Company.
PENSION PLANS
The officers named above are covered by the Company's tax qualified Group
Pension Plan which provides pension benefits to certain employees not covered by
collective bargaining agreements.
Eligible employees retiring at age 65 with twenty or more years of service
are entitled to an annual pension benefit in an amount equal to their highest 5
year average compensation earned during the last 10 years of employment times
(a) 15% of said amount up to a social security integration level and (b) 30% of
said amount in excess of that level to a maximum of $100,000. The Group Pension
Plan recognizes total compensation to a maximum of $100,000 for each calendar
year for each employee. The benefits listed are not subject to any deduction for
Social Security or other offset amounts. All employees are fully vested after 5
years of service.
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under the Company's qualified Group
Pension Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------------------------------
ANNUAL REMUNERATION 15 20 25 30 35
- - --------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 or more....................... $17,910 $23,880 $23,880 $23,880 $23,880
</TABLE>
II-9
<PAGE> 45
Presently credited years of service, if any, for the officers named in the
Summary Compensation Table above are as follows: Herbert P. Dooskin -- ten
years; Jeffrey S. Silverman -- fourteen years; Dana R. Snyder -- one year;
Donald Kruse -- eight years; and, Michael Vagedes -- four years. Messrs. Dooskin
and Silverman have minimum benefits in excess of those shown in the table
attributable to their prior participation in the Company's pension plan and a
minimum benefit provision contained in the Group Pension Plan which grandfathers
the level of benefits in effect under the terms of the plan on September 30,
1987. The annual excess for Messrs. Dooskin and Silverman is $12,830 and
$58,330, respectively.
DIRECTOR COMPENSATION
Each nonemployee Director receives compensation of $25,000 per year in
addition to $500 for each committee meeting attended. No fees are payable to
officers and employees of the Company who serve as Directors. During 1996,
Messrs. Hersh, Lilley and Modlin each were granted 12,500 options at an exercise
price of $12.50 per share, the market price of the Common Stock of the Company
on the date of grant. The options are exercisable commencing one year from the
date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hersh, a Director of the Company and a member of its Compensation
Committee in 1996, is a co-founder and former president of the Company and
currently serves as a consultant. Mr. Goldenberg, a Director of the Company, is
a co-founder of Goldenberg Group, Inc., a wholly owned subsidiary of the
Company, and currently serves as a consultant. During 1996, the Company paid
$91,000 to Mr. Hersh for consulting services and Goldenberg Group, Inc. paid
$287,397 to Mr. Goldenberg for consulting services. During 1996, the Company
paid $25,000 to Policy Communications, Inc., a Washington, D.C.-based consulting
firm, of which Mr. Lilley, a Director of the Company and a member of its
Compensation Committee in 1996, is President. The Company also paid $975,000 for
professional services rendered in 1996 by the law firm in which Mr. Modlin, a
Director of the Company and a member of its Compensation Committee in 1996, is a
partner. Mr. Charles Modlin, Secretary of the Company, is also a partner of said
law firm.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has employment agreements with Messrs. Dooskin, Snyder,
Silverman, Kruse and Vagedes. These agreements provide for continued service in
their present positions until April 15, 2000 with respect to Mr. Dooskin, until
June 5, 1999 with respect to Mr. Snyder, until April 30, 2007 with respect to
Mr. Silverman, until January 1, 2000 with respect to Mr. Kruse, and until
December 31, 1998 with respect to Mr. Vagedes. The agreements with Messrs.
Dooskin and Silverman are automatically renewed on an annual basis unless
otherwise terminated. The agreement with Mr. Snyder is automatically extended
for an additional one year, unless either party provides six months prior
written notice. Mr. Kruse, formerly President and Chief Executive Officer of
Sagebrush Sales, Inc., a wholly owned subsidiary of the Company, became Chairman
effective January 1, 1997.
In the cases of Mr. Kruse and Mr. Vagedes, annual compensation is
determined by contractual arrangement with a bonus based upon an established
performance criteria. In the case of Mr. Snyder, increases in salary are
determined by the Compensation Committee of the Board of Directors, subject to
minimum increases of 5%, and bonuses are awarded in accordance with his
employment agreement and pursuant to the Company's Incentive Compensation Plan.
Upon a change of control and if his employment is terminated, Mr. Snyder is
entitled to payments in lieu of future performance benefits. In the case of Mr.
Dooskin, increases in salary and bonus are determined annually by the Board of
Directors. Mr. Silverman's compensation is determined in accordance with the
provisions of his employment agreement entered into with the Company in 1986. A
modification of Mr. Silverman's employment agreement originally entered into in
1986 became effective January 1, 1991. Based upon the provisions of the 1986
employment agreement, Mr. Silverman would have been entitled to additional
payments of salary and bonus during the years 1986-1990 of approximately
$5,000,000 in excess of the salary and bonus actually paid to him. In light of
Mr. Silverman's substantial contributions to the Company and its stockholders
since joining the Company in
II-10
<PAGE> 46
1982, and in consideration for the modification of his employment agreement, the
Company in 1991 extended a loan to Mr. Silverman in the amount of $5,900,000,
bearing interest at 7% per annum repayable in annual installments of $590,000.
The amendment to his employment agreement provides for increases in base salary
each year of 10% or increases in the cost of living, whichever is greater.
Future cash bonus payments are determined in accordance with certain criteria
related to the performance of the Company during the prior year. A further
modification of Mr. Silverman's employment agreement effective December 23, 1992
provided for, among other things, an extension of the term of the agreement and
an increase in base salary. In consideration for the modification and the
additional contributions made to the Company by Mr. Silverman, the Company
extended a loan to Mr. Silverman of $3,500,000 bearing interest at the rate of
7.3% per annum, repayable in annual installments of $350,000. Repayment of
principal and interest for the above referred to loans may be waived at the
discretion of the Board of Directors and waiver is mandated in the event net
income standards, as defined, are met. The present principal balances of the
aforesaid loans are $2,950,000 and $2,450,000, respectively. In further
consideration for the 1991 modification to his 1986 employment agreement, Mr.
Silverman is entitled to receive an additional annual $495,000 bonus as an
incentive compensation payment. These payments are subject to Mr. Silverman's
continued employment and to the Company having net income as defined therein. To
reemphasize his commitment to the Company's future growth, Mr. Silverman
initiated a reduction of 30% of his salary for 1994. Additionally, Mr. Silverman
agreed that his 1994 bonus of $1,331,000 and incentive compensation payment of
$495,000 would not be paid. In consideration thereof, the Company agreed to
provide additional incentive compensation to enable him to increase his
compensation by $913,000 (50% of the 1994 bonus and incentive compensation not
paid) in each of two of the next four years if the Company's net income exceeds
its historical high or if the price of the Company's Common Stock exceeds its
historic high and extended an interest bearing loan in the amount of $3,500,000.
Principal payments of $250,000 and interest are due on December 31st of each
year. The entire remaining principal balance and accrued interest thereon are
due and payable on December 31, 1998. The present principal balance of said loan
is $3,000,000. Based upon Mr. Silverman's employment agreement, he would have
been entitled to a grant of 750,000 stock options in 1995. In consideration of
Mr. Silverman's agreement to waive receipt of such options, the Company, in
December 1995, extended a loan to Mr. Silverman in the amount of $5,000,000.
Principal payments of $250,000 are due on April 30 of each year. Accrued
interest is payable on December 31 of each year. The entire remaining principal
balance and accrued interest are due and payable on April 30, 2001. Mr.
Silverman secured the loan with certain employee stock options held by him. For
each of the 1994 and 1995 notes, interest is calculated annually at the higher
of a floating rate adjusted annually based upon the average rate paid by the
Company pursuant to its principal bank credit agreement, or the applicable
Federal rate (as defined in the note) in effect for the subject period.
Certain of the agreements provide for continued payments in the event of
physical or mental incapacity. In the case of Mr. Silverman, these payments
continue for the balance of the employment term and thereafter for an
indeterminate period at a rate equal to 50% of salary and bonus received during
the last year prior to mental or physical incapacity, plus increases based upon
increases in the cost of living. The payments continue so long as such mental or
physical disability continues. In the case of Mr. Dooskin, payments of salary
and bonus continue for a period of one year. With respect to Mr. Kruse, payments
amounting to one-half of his base salary continue for six months.
In the event of Mr. Silverman's death during the term of the agreement, his
estate would continue to receive salary and bonus payments during the balance of
the term. In the event of Mr. Dooskin's death, his estate would continue to
receive payments for one year.
The Company maintains key man life insurance policies on the lives of Mr.
Silverman and Mr. Snyder having aggregate death benefits payable to the Company
of $34,500,000 and $10,000,000 respectively. Life insurance policies in the
principal amount of $800,000 are maintained with respect to Mr. Kruse, of which
$500,000 of the proceeds are payable to the Company.
The Company has entered into split-dollar life insurance agreements with
certain of its principal executive officers. Pursuant to each of the agreements,
the Company pays the annual premiums on specified life insurance policies owned
by each, net of the amount of the "economic benefit" attributable to them. The
II-11
<PAGE> 47
amount of the premiums paid by the Company constitutes indebtedness to the
Company and is secured by collateral assignments of each of the insurance
policies.
The agreements with each of the aforementioned individuals provide for
non-competitive commitments during the term of the agreement and for periods
subsequent thereto. The employee stock options granted to each of the aforesaid
individuals provide for a "cash out" (as defined) in the event of a change in
control.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
its Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, directors and
greater than ten percent stockholders are required by the Commission to furnish
the Company with copies of all Section 16(a) forms they file.
The Company believes that, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no reports on Form 5 were required for those persons, during 1996 all
filing requirements applicable to its officers, directors and greater than ten
percent stockholders were complied with.
II-12
<PAGE> 48
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
- - ------- ------------------------------------------------------------------------- ------------
<C> <S> <C> <C>
1 -- Agreement and Plan of Merger, dated as of July 24, 1997, among the
Company, Nortek and the Offeror. ........................................
2 -- The Company's Proxy Statement on Schedule 14A, filed on April 11,
1997. ...................................................................
3 -- Letter to stockholders of the Company dated July 29, 1997.*..............
4 -- Confidentiality Agreement, dated as of September 27, 1995, between the
Company and Nortek, as amended and modified by letters dated June 18,
1997, June 23, 1997 and July 17, 1997. ..................................
5 -- Stock Purchase Agreement, dated as of July 24, 1997, between Nortek and
the Company. ............................................................
6 -- Registration Rights Agreement, dated as of July 24, 1997, between Nortek
and the Company. ........................................................
7 -- Non-Compete and Termination Agreement, dated as of July 24, 1997, between
Nortek, the Company and Jeffrey S. Silverman, as amended on July 25,
1997. ...................................................................
8 -- Termination and Release Agreement, dated as of July 24, 1997, between
Nortek, the Company and Herbert P. Dooskin, as amended on July 25,
1997. ...................................................................
9 -- Form of Indemnification Agreement between the Company and its
directors. ..............................................................
10 -- Opinion of Furman Selz LLC dated July 23, 1997.* ........................
11 -- First Amended and Restated Stockholders Agreement, dated as of July 24,
1997, among Atrium Acquisition Holdings Corp., Atrium/PG Acquisition
Corp., Jeffrey S. Silverman, Dana R. Snyder and Herbert P. Dooskin, the
Company, Nortek and Offeror. ............................................
12 -- Employment Agreement, dated June 17, 1997, between Paul H. Bogutsky and
the Company, as amended on June 23, 1997. ...............................
13 -- Employment Agreement, dated June 17, 1997, between J. Adam Lipsitz and
the Company, as amended on June 23, 1997. ...............................
14 -- Corporate Management Change in Control Resolution and Senior
Subsidiary/Division Executives Change in Control Resolution. ............
</TABLE>
- - ---------------
* Copy attached to, or enclosed with, copies of this Schedule mailed to
stockholders.
<PAGE> 1
Exhibit 1
================================================================================
AGREEMENT AND PLAN OF MERGER
among
NORTEK, INC.,
NTK SUB, INC.
and
PLY GEM INDUSTRIES, INC.
dated as of July 24, 1997
================================================================================
<PAGE> 2
<TABLE>
TABLE OF CONTENTS
<CAPTION>
Page
----
<S> <C>
ARTICLE 1
THE OFFER................................................................................................2
1.1. THE OFFER................................................................................2
1.2. COMPANY ACTIONS..........................................................................3
1.3. STOCKHOLDER LISTS........................................................................4
1.4. SUB STOCKHOLDER APPROVAL.................................................................5
1.5. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(f).....................................5
1.6. ACTION BY CONTINUING DIRECTORS...........................................................5
ARTICLE 2
THE MERGER...............................................................................................6
2.1. THE MERGER...............................................................................6
2.2. CLOSING..................................................................................6
2.3. EFFECTIVE TIME OF THE MERGER.............................................................6
2.4. EFFECTS OF THE MERGER....................................................................6
2.5. STOCKHOLDERS' MEETING....................................................................7
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF THE CERTIFICATES...............................................8
3.1. EFFECT ON CAPITAL STOCK..................................................................8
3.2. CONVERSION OF SHARES.....................................................................8
3.3. PAYMENT FOR SHARES.......................................................................9
3.4. STOCK TRANSFER BOOKS....................................................................11
3.5. STOCK OPTION PLANS......................................................................11
3.6. DISSENTING SHARES.......................................................................12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES..........................................................................13
4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................13
4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB........................................35
</TABLE>
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<TABLE>
<S> <C>
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS...............................................................38
5.1. Covenants of the Company................................................................38
ARTICLE 6
ADDITIONAL AGREEMENTS...................................................................................43
6.1. ACCESS TO INFORMATION...................................................................43
6.2. ASSISTANCE..............................................................................43
6.3. COMPLIANCE WITH NEW JERSEY ISRA.........................................................44
6.4. FEES AND EXPENSES.......................................................................44
6.5. BROKERS OR FINDERS......................................................................45
6.6. INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.....................................46
6.7. REASONABLE EFFORTS......................................................................49
6.8. PUBLICITY...............................................................................49
6.9. WITHHOLDING RIGHTS......................................................................49
6.10. REAL ESTATE TAXES......................................................................50
6.11. HSR AND OTHER GOVERNMENTAL APPROVALS...................................................50
6.12. NOTIFICATION OF CERTAIN MATTERS........................................................51
6.13. SOLVENCY LETTER. ......................................................................51
6.14. CONTINUATION OF EMPLOYEE BENEFITS......................................................51
6.15. TRUSTEES...............................................................................52
6.16. WITHDRAWAL LIABILITY...................................................................52
ARTICLE 7
CONDITIONS PRECEDENT....................................................................................52
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER..............................52
ARTICLE 8
TERMINATION AND AMENDMENT...............................................................................53
8.1. TERMINATION.............................................................................53
8.2. EFFECT OF TERMINATION...................................................................56
8.3. AMENDMENT...............................................................................56
8.4. EXTENSION; WAIVER.......................................................................56
ARTICLE 9
GENERAL PROVISIONS......................................................................................56
9.1. NONSURVIVAL OF COVENANTS AND AGREEMENTS.................................................56
9.2. CONFIDENTIALITY AGREEMENT...............................................................56
</TABLE>
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<TABLE>
<S> <C>
9.3. NOTICES.................................................................................57
9.4. INTERPRETATION..........................................................................57
9.5. COUNTERPARTS............................................................................58
9.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF OWNERSHIP.....................58
9.7. GOVERNING LAW...........................................................................58
9.8. ASSIGNMENT..............................................................................58
9.9. DIRECTOR AND OFFICER LIABILITY..........................................................59
9.10. SPECIFIC PERFORMANCE....................................................................59
</TABLE>
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<PAGE> 5
Schedules
Schedule 3.5(a) -- Cancellation of Stock Options
Schedule 4.1(a) -- Subsidiaries
Schedule 4.1(b) -- Capital Structure
Schedule 4.1(c) -- Violations (Transaction Documents)
Schedule 4.1(f) -- Violations (General)
Schedule 4.1(g) -- Permits
Schedule 4.1(h) -- Litigation
Schedule 4.1(i) -- Taxes
Schedule 4.1(j) -- Employment Agreements
Schedule 4.1(k) -- Benefit Plans and Employee Arrangements
Schedule 4.1(l) -- Absence of Certain Changes or Events
Schedule 4.1(m) -- Material Liabilities
Schedule 4.1(n) -- Agreements with Financial Advisor
Schedule 4.1(p) -- Labor Matters
Schedule 4.1(r) -- Environmental Matters
Schedule 4.1(s) -- Real Property
Schedule 4.1(v) -- Material Contracts
Schedule 4.1(w) -- Related Party Transactions
Schedule 4.2(e) -- Financing Commitments
Schedule 5.1(n) -- Capital Expenditures
Schedule 6.5(a) -- Brokers or Finders
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<PAGE> 6
Schedule 9.4--Atrium Agreements
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<PAGE> 7
Exhibits
Exhibit A -- Conditions to the Offer
Exhibit B -- Option Surrender Agreement, Release and Waiver
Exhibit C -- Non-Compete and Termination Agreement
Exhibit D -- Termination and Release Agreement
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<PAGE> 8
LIST OF DEFINED TERMS
A
Acquisition Proposal............................ 40
Agreement....................................... 1
Antitrust Division.............................. 50
Atrium Agreements............................... 58
B
Benefit Liabilities............................. 24
Benefit Plans................................... 22
Board........................................... 3
Board of Directors.............................. 3
Bylaws.......................................... 7
C
Capitalization Date............................. 13
CERCLA.......................................... 30
Certificate of Merger........................... 6
Certificates.................................... 10
Closing......................................... 6
Closing Date.................................... 6
Code............................................ 21
Company......................................... 1
Company Common Stock............................ 2
Company Intangible Property..................... 30
Company Litigation.............................. 19
Company Order................................... 19
Company Permits................................. 18
Company SEC Documents........................... 17
Company Stockholder Approval.................... 16
Company Voting Debt............................. 14
Conditions...................................... 2
Confidentiality Agreement....................... 43
Constituent Corporations........................ 6
Continuing Directors............................ 5
D
DGCL............................................ 4
Dissenting Shares............................... 12
E
Effective Time.................................. 6
Employee Arrangements........................... 22
Environmental Costs and
Liabilities................................... 30
Environmental Law............................... 30
ERISA Affiliate................................. 22
Exchange Act.................................... 4
F
Fairness Opinion................................ 4
Financial Advisor............................... 4
Financing Commitment............................ 37
FTC............................................. 50
G
GAAP............................................ 17
Gains and Transfer Taxes........................ 16
Governmental Entity............................. 16
H
Hazardous Material.............................. 31
HSR Act......................................... 16
I
Indemnified Liabilities......................... 46
Indemnified Parties............................. 46
Injunction...................................... 53
IRS............................................. 20
ISRA............................................ 16
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<PAGE> 9
L
Laws............................................ 16
M
Material Adverse Effect......................... 13
Material Contracts.............................. 34
Meeting Date.................................... 17
Merger.......................................... 6
Merger Consideration............................ 8
Multiemployer Plan.............................. 26
N
NJDEPE.......................................... 44
Non-Compete and Termination Agreement........... 1
O
Offer........................................... 2
Offer Documents................................. 3
Offer Price..................................... 2
Options......................................... 11
Option Consideration............................ 11
Option Release Agreement........................ 1
OSHA............................................ 30
P
Parent.......................................... 1
Paying Agent.................................... 9
Payment Fund.................................... 9
PBGC............................................ 24
Person.......................................... 3
Preferred Stock................................. 13
Proxy Statement................................. 7
R
Real Property Leases............................ 33
Release......................................... 31
Remedial Action................................. 31
Representatives................................. 39
S
Schedule 14D-1.................................. 4
Schedule 14D-9.................................. 4
SEC............................................. 3
Securities Act.................................. 17
Shares.......................................... 2
Stock Option Plans.............................. 11
Stockholders' Meeting........................... 7
Sub............................................. 1
Subsidiary...................................... 3
Surviving Corporation........................... 6
T
Tax............................................. 21
Tax Return...................................... 21
Taxes........................................... 21
Termination and Release Agreement............... 1
Transaction Documents........................... 3
U
Unvested Stock.................................. 11
Unvested Stock Consideration.................... 11
V
Violation....................................... 15
W
Withdrawal Liability............................ 52
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<PAGE> 10
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of July 24, 1997 (the
"Agreement"), is made and entered into by and among NORTEK, INC., a Delaware
corporation ("Parent"), NTK SUB, INC., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and PLY GEM INDUSTRIES, INC., a Delaware
corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Sub and the
Company deem it advisable and in the best interests of their respective
stockholders that Parent acquire the Company pursuant to the terms and subject
to the conditions set forth in this Agreement;
WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and
effect the transactions contemplated hereby) unless certain beneficial and
record holders of Options or Unvested Stock enter into an Option Surrender
Agreement, Release and Waiver substantially in the form of Exhibit B hereto (an
"Option Release Agreement");
WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and
effect the transactions contemplated hereby) unless, contemporaneously with the
execution and delivery hereof, Jeffrey S. Silverman enters into a Non-Compete
and Termination Agreement substantially in the form of Exhibit C hereto (the
"Non-Compete and Termination Agreement"), which shall establish (i) the terms
and provisions under which such individual's employment contract with the
Company shall terminate and (ii) the terms and provisions of a non-competition
agreement between the Company and such individual and, in order to induce Parent
and Sub to enter into this Agreement, the Company and such individual are
executing and delivering concurrently herewith the Non-Compete and Termination
Agreement;
WHEREAS, Parent and Sub are unwilling to enter into this Agreement (and
effect the transactions contemplated hereby) unless, contemporaneously with the
execution and delivery hereof, Herbert P. Dooskin enters into a Termination and
Release Agreement substantially in the form of Exhibit D hereto (the
"Termination and Release Agreement"), which shall establish the terms and
provisions under which such individual's employment contract with the Company
shall terminate and, in order to induce Parent and Sub to enter into this
Agreement, the Company and such individual are executing and delivering
concurrently herewith the Termination and Release Agreement;
WHEREAS, the Company is unwilling to enter into this Agreement (and
effect the transactions contemplated hereby) unless, contemporaneously with the
execution and delivery hereof, the Company has received true and complete copies
of the financing commitment described in Section 4.2(e); and
<PAGE> 11
WHEREAS, Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement and the transactions contemplated hereby and also to prescribe various
conditions to the consummation thereof.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, hereby agree as follows:
ARTICLE 1
THE OFFER
1.1. The Offer.
---------
(a) Subject to this Agreement not having theretofore been
terminated in accordance with the provisions of Section 8.1 hereof, Sub shall,
and Parent shall cause Sub to, as promptly as practicable after, but in no event
later than five business days from, the date of this Agreement, commence an
offer to purchase for cash (as it may be amended in accordance with the terms of
this Agreement, the "Offer") all shares of common stock, par value $0.25 per
share (the "Company Common Stock"), of the Company outstanding immediately prior
to the consummation of the Offer (the "Shares"), subject only to the conditions
set forth in Exhibit A hereto (the "Conditions"), at a price of $19.50 (the
"Offer Price") per Share, net to the seller in cash. Subject only to the
Conditions, Sub shall, and Parent shall cause Sub to, accept for payment and pay
for all Shares validly tendered pursuant to the Offer and not withdrawn prior to
the expiration date of the Offer as promptly as practicable following the
expiration date of the Offer. Sub expressly reserves the right to amend the
terms and conditions of the Offer, PROVIDED that without the consent of the
Company, no amendment may be made which (i) decreases the price per Share or
changes the form of consideration payable in the Offer, (ii) decreases the
number of Shares sought, or (iii) changes any of the Conditions or imposes
additional conditions to the Offer or amends any other term of the Offer in
either case in any manner adverse to the holders of Shares (it being understood
that extensions of the Offer as contemplated by this Section 1.1(a) are not
adverse to the holders of Shares); and PROVIDED, FURTHER, that the Minimum
Condition (as defined in Exhibit A hereto) is for the benefit of the Company and
may not be waived without the Company's consent. The Offer may only be extended
with the prior written consent of the Company or as required by law; PROVIDED,
HOWEVER, Parent and Sub may extend the Offer without the consent of the Company
(A) if at the scheduled expiration date of the Offer any of the Conditions shall
not have been satisfied or waived or (B) for any period required by any Laws (as
hereinafter defined) applicable to the Offer and PROVIDED, FURTHER, that if the
Conditions are not satisfied or, to the extent permitted by this Agreement,
waived as of any scheduled expiration date, Parent and Sub shall extend the
Offer from time to time for up to five (5) business days at a time (or such
longer period as shall be approved by the Company) until the earlier of the
consummation of the Offer or sixty (60) calendar days after the date hereof,
provided that such extension shall
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<PAGE> 12
not be required if in the reasonable judgment of Parent or Sub, any Condition is
incapable of being satisfied prior to the expiration of the sixty (60) calendar
days. Upon the terms hereof and subject to the Conditions, Sub will accept for
payment and purchase all Shares validly tendered and not withdrawn prior to the
expiration of the Offer.
(b) The Company will not, nor will it permit any of its
Subsidiaries (as defined below) to, tender into the Offer any Shares
beneficially owned by it. For purposes of this Agreement, "Subsidiary" means, as
to any Person (as defined below), any corporation, limited liability company,
partnership or joint venture, whether now existing or hereafter organized or
acquired: (i) in the case of a corporation, of which at least a majority of the
outstanding shares of stock having by the terms thereof ordinary voting power to
elect a majority of the board of directors of such corporation (other than stock
having such voting power solely by reason of the happening of any contingency)
is at the time directly or indirectly owned or controlled by such Person and/or
one or more of its Subsidiaries or (ii) in the case of a limited liability
company, partnership or joint venture, in which such Person or Subsidiary of
such Person is a managing member, general partner or joint venturer or of which
a majority of the partnership or other ownership interests are at the time owned
by such Person and/or one or more of its Subsidiaries. For purposes of this
Agreement, "Person" means any individual, corporation, company, voluntary
association, limited liability company, partnership, joint venture, trust,
unincorporated organization or other entity.
(c) On the date of the commencement of the Offer, Sub shall
file with the Securities and Exchange Commission (the "SEC") a Tender Offer
Statement on Schedule 14D-1 with respect to the Offer which will contain an
offer to purchase and form of the related letter of transmittal (together with
any supplements or amendments thereto, the "Offer Documents"). The Company and
its counsel shall be given a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of such Offer Documents with the SEC. Sub
agrees to provide the Company and its counsel copies of any written comments Sub
and its counsel may receive from the SEC or its staff with respect to the Offer
Documents and a summary of any such comments received orally promptly after the
receipt thereof. Parent, Sub and the Company each agree promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that any such information shall have become false or misleading in any material
respect and Parent and Sub further agree to take all steps necessary to cause
the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to the stockholders of the Company, in each case as and to the
extent required by applicable securities laws.
1.2. COMPANY ACTIONS. The Company hereby consents to the Offer and
represents that (a) its Board of Directors (the "Board" or "Board of Directors")
(at a meeting duly called and held) has (i) determined that this Agreement, the
Option Release Agreement, the Non-Compete and Termination Agreement and the
Termination and Release Agreement (collectively, the "Transaction Documents")
and the transactions contemplated hereby or thereby, including the Offer and the
Merger (as defined in Section 2.1 hereof), are fair to and
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<PAGE> 13
in the best interests of the stockholders of the Company, (ii) approved the
execution, delivery and performance of the Transaction Documents by the Company
and the consummation of the transactions contemplated thereby, including the
Offer and the Merger, and such approval constitutes approval for purposes of
Section 203 of the Delaware General Corporation Law, as amended (the "DGCL"),
(iii) resolved to recommend acceptance of the Offer and approval and adoption of
this Agreement by the holders of Company Common Stock; and (b) Furman Selz LLC
(the "Financial Advisor") has delivered to the Board its opinion to the effect
that, as of the date of this Agreement and based upon and subject to the matters
set forth therein, the cash consideration to be received by the holders of
Company Common Stock in the Offer and the Merger is fair to such holders from a
financial point of view (the "Fairness Opinion"). Subject to its fiduciary
duties under applicable Laws (as defined in Section 4.1(c)(ii)) after
consultation with independent counsel, the Company hereby agrees to file with
the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") containing the recommendation referred to in clause (iii) above (and the
information required by Section 14(f) of the Securities Exchange Act of 1934, as
amended (together with all rules and regulations thereunder, the "Exchange
Act"), so long as Parent shall have furnished such information to the Company in
a timely manner) and to mail such Schedule 14D-9 to the stockholders of the
Company. The Company will use its best efforts to cause the Schedule 14D-9 to be
filed on the same date as Sub's Tender Offer Statement on Schedule 14D-1 (the
"Schedule 14D-1") is filed and mailed together with the Offer Documents;
PROVIDED that in any event the Schedule 14D-9 shall be filed and mailed no later
than 10 business days following the commencement of the Offer. Parent and its
counsel shall be given a reasonable opportunity to review and comment on the
Schedule 14D-9 prior to the Company's filing of the Schedule 14D-9 with the SEC.
The Company agrees to provide Parent and its counsel copies of any written
comments the Company or its counsel may receive from the SEC or its staff with
respect to the Schedule 14D-9 and a summary of any such comments received orally
promptly after the receipt thereof. Parent, Sub and the Company each agree
promptly to correct any information provided by it for use in the Schedule 14D-9
if and to the extent that any such information shall have become false or
misleading in any material respect and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and to be disseminated to the stockholders of the Company, in each case as
and to the extent required by applicable securities laws.
1.3. STOCKHOLDER LISTS. In connection with the Offer, at the request of
Parent or Sub, from time to time after the date hereof, the Company will
promptly furnish Sub with mailing labels, security position listings and any
available listing or computer file maintained for or by the Company containing
the names and addresses of the record holders of the Shares as of a recent date
and shall furnish Sub with such additional information reasonably available to
the Company and assistance as Sub or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of Shares. Subject
to the requirements of applicable Laws, and except for such steps as are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Merger, Sub and its affiliates and associates shall hold in
confidence the information contained in any such labels, listings and files,
will
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<PAGE> 14
use such information only in connection with the Offer and the Merger and, if
this Agreement shall be terminated, will deliver to the Company all copies of
such information in their possession.
1.4. SUB STOCKHOLDER APPROVAL. Parent, in its capacity as the sole
stockholder of Sub, by its execution hereof, approves and adopts this Agreement
and the transactions contemplated hereby.
1.5. COMPOSITION OF THE BOARD OF DIRECTORS; SECTION 14(f). In the event
that Sub acquires at least a majority of the Shares outstanding pursuant to the
Offer, Parent shall be entitled to designate for appointment or election to the
Board, upon written notice to the Company, such number of persons so that the
designees of Parent constitute the same percentage (but in no event less than a
majority) of the Board (rounded up to the next whole number) as the percentage
of Shares acquired pursuant to the Offer. Effective upon such purchase of at
least a majority of the Shares pursuant to the Offer (sometimes referred to
herein as the "consummation" of the Offer), the Company will increase the size
of the Board or obtain the resignation of such number of directors as is
necessary to enable such number of Parent designees to be so elected. In
connection therewith, the Company will mail to the stockholders of the Company
the information required by Section 14(f) of the Exchange Act and Rule 14f-1
thereunder unless such information has previously been provided to such
stockholders in the Schedule 14D-9. Parent and Sub shall provide to the Company
in writing, and will be solely responsible for, any information with respect to
such companies and their nominees, officers, directors and affiliates required
by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. Notwithstanding
the provisions of this Section 1.5, at least two of the members of the Board
shall, at all times prior to the Effective Time (as defined in Section 2.3
hereof) be, Continuing Directors (as defined below). For purposes hereof, the
term "Continuing Director" shall mean (i) any member of the Board as of the date
hereof or (ii) any successor of a Continuing Director who is (A) unaffiliated
with, and not a designee or nominee, of Parent or Sub, and (B) recommended to
succeed a Continuing Director by a majority of the Continuing Directors then on
the Board, and in each case under clause (ii), who is not an employee of the
Company.
1.6. ACTION BY CONTINUING DIRECTORS. Following the election or
appointment of Parent's designees pursuant to Section 1.5 and prior to the
Effective Time, such designees shall abstain from acting upon, and the approval
of a majority of the Continuing Directors shall be required to authorize and
shall be sufficient to authorize, any resolution with respect to any termination
of this Agreement by the Company, any amendment of this Agreement requiring
action by the Board of Directors of the Company, any extension of time for the
performance of any of the obligations or other acts of Parent or Sub under this
Agreement, any waiver of compliance with any of the agreements or conditions
under this Agreement for the benefit of the Company, and any action to seek to
enforce any obligation of Parent or Sub under this Agreement. If at any time the
Continuing Directors reasonably deem it necessary to consult independent counsel
in connection with their duties as Continuing Directors or actions
-5-
<PAGE> 15
to be taken by Company, the Continuing Directors may retain counsel for such
purpose and Parent or Sub shall pay the reasonable fees and expenses incurred in
connection therewith.
ARTICLE 2
THE MERGER
2.1. THE MERGER. Upon the terms and subject to the conditions set
forth in this Agreement, and in accordance with the DGCL, Sub shall be merged
(the "Merger") with and into the Company at the Effective Time (as defined in
Section 2.3). At the Effective Time the separate corporate existence of Sub
shall cease, and the Company shall continue as the surviving corporation and a
direct wholly owned subsidiary of Parent or its successor (Sub and the Company
are sometimes hereinafter referred to as "Constituent Corporations" and, as the
context requires, the Company is sometimes hereinafter referred to as the
"Surviving Corporation") and shall continue under the name "Ply Gem Industries,
Inc."
2.2. CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
Section 8.1, and subject to the satisfaction or waiver of the conditions set
forth in Article 7, the closing of the Merger (the "Closing") shall take place
at 10:00 a.m., New York time, on the second business day after satisfaction
and/or waiver of all of the conditions set forth in Section 7.1 (the "Closing
Date"), at the offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza,
New York, New York 10006, unless another date, time or place is agreed to in
writing by the parties hereto.
2.3. EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, as provided in the DGCL, as soon as
practicable on or after the Closing Date. The Merger shall become effective upon
such filing or at such time thereafter as is provided in the Certificate of
Merger as the Company and Sub shall agree (the "Effective Time").
2.4. Effects of the Merger.
---------------------
(a) The Merger shall have the effects as set forth in the
applicable provisions of the DGCL.
(b) The directors and officers of Sub immediately prior to the
Effective Time shall, from and after the Effective Time, be the initial
directors and officers of the Surviving Corporation until their successors have
been duly elected or appointed and qualified, or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(c) At the Effective Time, Article IV of the Certificate of
Incorporation of the
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<PAGE> 16
Company, as in effect immediately prior to the Effective Time, shall be amended
to increase the number of authorized shares of Company Common Stock to an
aggregate amount of Four Hundred Sixty Million (460,000,000) as of the Effective
Time, by operation of this Agreement and by virtue of the Merger without any
further action by the stockholders or directors of the Surviving Corporation
and, as so amended, such Certificate of Incorporation shall be the Certificate
of Incorporation of the Surviving Corporation, until duly amended in accordance
with the terms thereof and the DGCL.
(d) The By-Laws of the Company shall be the bylaws (the
"Bylaws") of the Surviving Corporation until thereafter amended as provided by
applicable law, the Certificate of Incorporation or the Bylaws.
2.5. Stockholders' Meeting.
---------------------
(a) If required by applicable Laws in order to consummate the
Merger, the Company, acting through the Board shall, in accordance with
applicable Laws, its Certificate of Incorporation and its Bylaws, as soon as
practicable following the consummation of the Offer:
(i) duly call, give notice of, convene and hold a
special meeting of its stockholders as soon as practicable following
the consummation of the Offer for the purpose of considering and taking
action upon this Agreement (the "Stockholders' Meeting");
(ii) subject to its fiduciary duties under applicable
Laws after consultation with independent counsel, include in the proxy
statement or information statement prepared by the Company for
distribution to stockholders of the Company in advance of the
Stockholders' Meeting in accordance with Regulation 14A or Regulation
14C promulgated under the Exchange Act (the "Proxy Statement") the
recommendation of the Board referred to in Section 1.2 hereof; and
(iii) use its reasonable efforts to (A) obtain and
furnish the information required to be included by it in the Proxy
Statement and, after consultation with Parent, respond promptly to any
comments made by the SEC with respect to the Proxy Statement and any
preliminary version thereof and cause the Proxy Statement to be mailed
to its stockholders following the consummation of the Offer and (B)
obtain the necessary approvals of this Agreement and the Merger by its
stockholders.
Parent will provide the Company with the information concerning Parent and Sub
required to be included in the Proxy Statement and will vote, or cause to be
voted, all Shares owned by it or its Subsidiaries in favor of approval and
adoption of this Agreement and the transactions contemplated hereby.
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<PAGE> 17
(b) Notwithstanding Section 2.5(a), if Parent and Sub and
their affiliates shall collectively own, following consummation of the Offer, at
least 90 percent of the outstanding Shares, each of Parent, Sub and the Company
shall take all necessary and appropriate action to cause the Merger to become
effective, as soon as practicable after the consummation of the Offer (but in no
event later than ten (10) business days thereafter), without a meeting of
stockholders of the Company, in accordance with Section 253 of the DGCL.
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF THE CERTIFICATES
3.1. EFFECT ON CAPITAL STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder of shares of Company
Common Stock or any holder of shares of capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of
Sub issued and outstanding immediately prior to the Effective Time shall be
converted into and become a number of fully paid and nonassessable shares of
common stock, par value $0.25 per share, of the Surviving Corporation equal to
the quotient realized by dividing (i) the sum of (A) the aggregate number of
shares of Company Common Stock issued and outstanding immediately prior to the
Effective Time, (B) the aggregate number of shares of Company Common Stock that
are owned by and held in the treasury of the Company immediately prior to the
Effective Time and (C) the aggregate number of shares of Company Common Stock
issuable, immediately prior to the Effective Time, in respect of all then
outstanding Options, by (ii) the aggregate number of shares of capital stock of
Sub issued and outstanding immediately prior to the Effective Time.
(b) Cancellation of Treasury Stock. Each share of Company
Common Stock and all other shares of capital stock of the Company that are owned
by the Company shall be canceled and retired and shall cease to exist, and no
consideration shall be delivered or deliverable in exchange therefor.
3.2. CONVERSION OF SHARES. At the Effective Time, by virtue of the
Merger and without any action on the part of Sub, the Company or the holders of
the Company Common Stock:
(a) Subject to the other provisions of this Section 3.2, each
share of Company Common Stock issued and outstanding immediately prior to the
Effective Time (excluding shares owned, directly or indirectly, by the Company
and Dissenting Shares (as defined in Section 3.6) shall be converted into the
right to receive the Offer Price or such higher price, if any, as is paid in the
Offer (the "Merger Consideration"), payable to the holder thereof in
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<PAGE> 18
cash, without any interest thereon, upon surrender and exchange of the
Certificate (as defined in Section 3.3) representing such share of Company
Common Stock.
(b) All such shares of Company Common Stock, when converted as
provided in Section 3.2(a), no longer shall be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each
Certificate previously evidencing such Company Common Stock shall thereafter
represent only the right to receive the Merger Consideration. The holders of
Certificates previously evidencing Company Common Stock outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to the
Company Common Stock except as otherwise provided herein or by law and, upon the
surrender of Certificates in accordance with the provisions of Section 3.3,
shall only have the right to receive for their Company Common Stock, the Merger
Consideration, without any interest thereon. Notwithstanding the foregoing, if
between the date of this Agreement and the Effective Time the outstanding shares
of Company Common Stock shall have been changed into a different number of
shares or a different class by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Merger Consideration shall be correspondingly adjusted to reflect such stock
dividend, subdivision, reclassification, recapitalization, split, combination or
exchange of shares, with the aggregate Merger Consideration payable to each
stockholder in such case being rounded to the nearest penny.
3.3. Payment for Shares.
------------------
(a) Paying Agent. Prior to the Effective Time, Parent shall
appoint a United States bank or trust company reasonably acceptable to the
Company to act as paying agent (the "Paying Agent") for the payment of the
Merger Consideration, and Parent shall contribute the Merger Consideration to
the Surviving Corporation and shall cause the Surviving Corporation to deposit
the Merger Consideration so contributed with the Paying Agent in a separate fund
established for the benefit of the holders of shares of Company Common Stock,
for payment in accordance with this Article 3, through the Paying Agent (the
"Payment Fund"), and such contribution by Parent and payment by the Surviving
Corporation shall be in immediately available funds in amounts necessary to make
the payments pursuant to Section 3.2 and this Section 3.3 to holders (other than
the Company or holders of Dissenting Shares). The Paying Agent shall, pursuant
to irrevocable instructions, pay the Merger Consideration out of the Payment
Fund.
If for any reason (including losses) the Payment Fund is inadequate to
pay the amounts to which holders of shares of Company Common Stock shall be
entitled under this Section 3.3, Parent shall take all steps necessary to enable
or cause the Surviving Corporation promptly to deposit in trust additional cash
with the Paying Agent sufficient to make all payments required under this
Agreement, and Parent and the Surviving Corporation shall in any event be liable
for payment thereof. The Payment Fund shall not be used for any purpose except
as expressly provided in this Agreement.
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<PAGE> 19
(b) Payment Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall instruct the Paying
Agent to mail to each holder of record (other than the Company) of a certificate
or certificates which, immediately prior to the Effective Time, evidenced
outstanding shares of Company Common Stock (the "Certificates"), (i) a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon proper delivery
of the Certificates to the Paying Agent, and shall be in such form and have such
other provisions as the Surviving Corporation reasonably may specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for payment of the Merger Consideration. Upon surrender of a Certificate for
cancellation to the Paying Agent together with such letter of transmittal, duly
executed, and such other customary documents as may be required pursuant to such
instructions, the holder of such Certificate shall be entitled to receive in
respect thereof cash in an amount equal to the product of (x) the number of
shares of Company Common Stock represented by such Certificate and (y) the per
share Merger Consideration, and the Certificate so surrendered shall forthwith
be canceled. No interest shall be paid or accrued on the Merger Consideration
payable upon the surrender of any Certificate. If any holder of Shares shall be
unable to surrender such holder's Certificates because such Certificates have
been lost, mutilated or destroyed, such holder may deliver in lieu thereof an
affidavit and indemnity bond in form and substance and with surety reasonably
satisfactory to the Surviving Corporation. If payment is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or otherwise in proper form for transfer and that the person
requesting such payment shall pay any transfer or other taxes required by reason
of the payment to a person other than the registered holder of the surrendered
Certificate or establish to the satisfaction of the Surviving Corporation that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 3.3(b), each Certificate (other than
Certificates representing Shares owned by the Company or holders of Dissenting
Shares) shall be deemed at any time after the Effective Time to represent for
all purposes only the right to receive the Merger Consideration.
(c) Termination of Payment Fund; Interest. Any portion of the
Payment Fund which remains undistributed to the holders of Company Common Stock
for 180 days after the Effective Time shall be delivered to the Surviving
Corporation, upon demand, and any holders of Company Common Stock who have not
theretofore complied with this Article 3 and the instructions set forth in the
letter of transmittal mailed to such holder after the Effective Time shall
thereafter look only to the Surviving Corporation for payment of the Merger
Consideration to which they are entitled. All interest accrued in respect of the
Payment Fund shall inure to the benefit of and be paid to the Surviving
Corporation.
(d) No Liability. None of Parent, the Company or the Surviving
Corporation shall be liable to any holder of shares of Company Common Stock for
any cash from the Payment Fund delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
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<PAGE> 20
3.4. STOCK TRANSFER BOOKS. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company. On or after the Effective Time, any Certificates
presented to the Paying Agent or Parent for any reason, except notation thereon
that a stockholder has elected to exercise his rights to appraisal pursuant to
the DGCL, shall be converted into the Merger Consideration as provided in this
Article 3.
3.5. Stock Option Plans.
------------------
(a) Cancellation of Options and Unvested Stock. At the
Effective Time, each then outstanding option (including stock purchase rights
and unrestricted stock awards) to purchase or acquire shares of Company Common
Stock under the Company's 1989 Senior Executive Stock Option Plan, 1989 Employee
Incentive Stock Plan, Executive Incentive Stock Option Plan, 1994 Employee
Incentive Stock Plan and 1994 Incentive Compensation Plan (collectively, the
"Stock Option Plans"), or otherwise as set forth on Schedule 4.1(b), whether or
not then exercisable or vested (collectively, the "Options"), and each share of
not yet vested restricted stock granted under any such Stock Option Plan
("Unvested Stock") shall be canceled and shall represent the right to receive
the following consideration in settlement thereof as follows: (i) as to all
Options, for each share of Company Common Stock subject to such Option,
including any additional shares subject thereto by reason of their terms upon
consummation of the "change of control" resulting from the Merger, such holder
shall receive an amount (subject to any applicable withholding tax) in cash
equal to the difference between the per share Merger Consideration and the per
share exercise price of such Option to the extent such difference is a positive
number (such amount in cash being hereinafter referred to as the "Option
Consideration"), and (ii) as to the holders of Unvested Stock identified in
Schedule 3.5(a), for each share of Unvested Stock, cash in an amount equal to
the product of (x) the number of shares of Unvested Stock and (y) the per share
Merger Consideration (such amount in cash being hereinafter referred to as the
"Unvested Stock Consideration"); provided, however, that with respect to any
person subject to Section 16(a) of the Exchange Act, any such Option
Consideration or Unvested Stock Consideration shall not be payable until the
first date payment can be made without liability to such person under Section
16(b) of the Exchange Act, but shall be paid as soon as practicable thereafter.
Upon consummation of the Offer, all Options shall immediately vest and become
exercisable.
(b) Termination of Rights. The surrender of an Option to the
Company in exchange for the Option Consideration shall be deemed a release of
any and all rights the holder had or may have had in respect of such Option. The
Stock Option Plans shall terminate as of the Effective Time, and the provisions
in any other plan, program or arrangement providing for the issuance or grant of
any other interest in respect of the capital stock of the Company or any
Subsidiary thereof shall be canceled as of the Effective Time. Prior to the
Closing, the Company shall use its best efforts to take all action necessary
(including causing the Board of Directors of the Company (or any committees
thereof) to take such actions as are
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<PAGE> 21
allowed by the Stock Option Plans) to (i) ensure that, following the Effective
Time, no participant in the Stock Option Plans or any other plans, programs or
arrangements shall have any right thereunder to acquire equity securities of the
Company, the Surviving Corporation or any Subsidiary thereof and (ii) terminate
all such plans, programs and arrangements as of the Effective Time.
(c) Payment Procedures. Upon the later of the Effective Time
or the delivery of a duly executed Option Release Agreement by a holder of
Options to be canceled or Unvested Stock, such holder shall be entitled to
receive in respect thereof the Option Consideration or the Unvested Stock
Consideration, as applicable. No interest shall be paid or accrued on the cash
portion of the Option Consideration or the Unvested Stock Consideration, as
applicable. Until settled in accordance with the provisions of this Section
3.5(c), each Option or share of Unvested Stock shall be deemed at any time after
the Effective Time to represent for all purposes only the right to receive the
Option Consideration or the Unvested Stock Consideration, as applicable.
(d) The Company shall use its best efforts to obtain, within
30 days from the date of this Agreement, from each beneficial and record holder
of Options as identified by Parent to the Company, an Option Release Agreement
duly executed and delivered by each such holder.
3.6. DISSENTING SHARES. Notwithstanding any other provisions of
this Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and which are held by
stockholders who shall have not voted in favor of the Merger or consented
thereto in writing and who properly shall have demanded appraisal for such
shares in accordance with Section 262 of the DGCL (collectively, the "Dissenting
Shares") shall not be converted into or represent the right to receive the
Merger Consideration. Such stockholders instead shall be entitled to receive
payment of the appraised value of such shares of Company Common Stock held by
them in accordance with the provisions of such Section 262 of the DGCL, except
that all Dissenting Shares held by stockholders who shall have failed to perfect
or who effectively shall have withdrawn or otherwise lost their rights to
appraisal of such shares of Company Common Stock under such Section 262 of the
DGCL shall thereupon be deemed to have been converted into and to have become
exchangeable, as of the Effective Time, for the right to receive, without any
interest thereon, the Merger Consideration upon surrender in the manner provided
in Section 3.3 of the Certificate or Certificates that, immediately prior to the
Effective Time, evidenced such shares of Company Common Stock.
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<PAGE> 22
ARTICLE 4
REPRESENTATIONS AND WARRANTIES
4.1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Power. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation, has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, and is duly qualified to do
business as a foreign corporation and in good standing to conduct business in
each jurisdiction in which the business it is conducting, or the operation,
ownership or leasing of its properties, makes such qualification necessary,
other than in such jurisdictions where the failure so to qualify would not (i)
have a Material Adverse Effect (as defined below) with respect to the Company or
(ii) materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement. The Company has heretofore made available to
Parent complete and correct copies of its Certificate of Incorporation and
Bylaws and its Subsidiaries' respective certificates of incorporation (or
comparable charter or organizational documents) and bylaws. All Subsidiaries of
the Company, their respective jurisdictions of incorporation or organization,
and their respective jurisdictions of qualification to do business are
identified on Schedule 4.1(a). As used in this Agreement, a "Material Adverse
Effect" shall mean, with respect to any party, any events, changes or effects
which, individually or in the aggregate, would have a material adverse effect on
the business, operations, assets, condition (financial or otherwise) or results
of operations of such party and its Subsidiaries, taken as a whole.
(b) Capital Structure. As of the date hereof, the authorized
capital stock of the Company consists of 60,000,000 shares of common stock, par
value $0.25 per share, and 5,000,000 shares of preferred stock, par value $0.01
per share (the "Preferred Stock"). As of June 23, 1997 (the "Capitalization
Date"), (i) 13,983,679 Shares were issued and outstanding, (ii) no shares of
Preferred Stock were issued and outstanding, (iii) no Shares were issuable in
respect of outstanding Unvested Stock, (iv) no Shares were issuable in respect
of outstanding securities convertible into, or exchangeable or exercisable for
Shares of Company Common Stock, other than Options or Unvested Stock issued
pursuant to a Stock Option Plan and Company Common Stock issuable pursuant to
the Stock Purchase Agreement dated the date hereof between the Company and
Parent and (v) 5,513,695 Shares (or 6,263,695 Shares after a "change of
control") were issuable in respect of outstanding Options, of which (A)
1,136,415 Shares were issuable pursuant to Options outstanding under the 1989
Senior Executive Stock Option Plan, (B) 1,625,276 Shares (or 2,000,276 Shares
after a "change of control") were issuable pursuant to Options outstanding under
the 1989 Employee Incentive Stock Plan, (C) 511,842 Shares (or 886,842 after a
"change in control") were issuable
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<PAGE> 23
pursuant to Options outstanding under the Executive Incentive Stock Option Plan,
(D) 2,240,162 Shares were issuable pursuant to Options outstanding under the
1994 Employee Incentive Stock Plan, (E) 100,000 Shares of Unvested Stock were
outstanding under the 1989 Employee Incentive Stock Plan, (F) no Shares of
Unvested Stock were outstanding under the 1994 Employee Incentive Stock Plan and
(G) no Shares were issuable in respect of outstanding rights under the 1994
Incentive Compensation Plan. Except for the issuance of Company Common Stock
pursuant to the exercise of outstanding Options and except as provided in
Schedule 4.1(b), there are no employment, executive termination or similar
agreements providing for the issuance of Company Common Stock. As of the date
hereof, 3,764,278 shares of Company Common Stock are held by the Company and no
Shares are held by Subsidiaries of the Company. Since the Capitalization Date,
no shares of preferred stock have been issued and no shares of Company Common
Stock have been issued, except Shares issued pursuant to the exercise of options
outstanding on such date as set forth in clauses (iii), (iv) and (v) above. No
bonds, debentures, notes or other instruments or evidence of indebtedness having
the right to vote (or convertible into, or exercisable or exchangeable for,
securities having the right to vote) on any matters on which the Company
stockholders may vote ("Company Voting Debt") are issued or outstanding. All
outstanding Shares are validly issued, fully paid and nonassessable and are not
subject to preemptive or other similar rights. Except as set forth on Schedule
4.1(b), all outstanding shares of capital stock of the Subsidiaries of the
Company are owned by the Company or a direct or indirect Subsidiary of the
Company, free and clear of all liens, charges, encumbrances, claims and options
of any nature. Except as set forth in this Section 4.1(b), there are
outstanding: (A) no shares of capital stock, Company Voting Debt or other voting
securities of the Company; (B) no securities of the Company or any Subsidiary of
the Company convertible into, or exchangeable or exercisable for, shares of
capital stock, Company Voting Debt or other voting securities of the Company or
any Subsidiary of the Company; and (C) no options, warrants, calls, rights
(including preemptive rights), commitments or agreements to which the Company or
any Subsidiary of the Company is a party or by which it is bound, in any case
obligating the Company or any Subsidiary of the Company to issue, deliver, sell,
purchase, redeem or acquire, or cause to be issued, delivered, sold, purchased,
redeemed or acquired, additional shares of capital stock or any Company Voting
Debt or other voting securities of the Company or of any Subsidiary of the
Company, or obligating the Company or any Subsidiary of the Company to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement. Except as set forth on Schedule 4.1(b), since December 31, 1996, the
Company has not (1) granted any options, warrants or rights to purchase shares
of Company Common Stock or (2) amended or repriced any Option or any of the
Stock Option Plans. Set forth on Schedule 4.1(b) is a list of all outstanding
options, warrants and rights to purchase shares of Company Common Stock and the
exercise prices relating thereto. Except as set forth on Schedule 4.1(b) and in
the Transaction Documents, there are not as of the date hereof and there will
not be at the Effective Time any stockholder agreements, voting trusts or other
agreements or understandings to which the Company is a party or by which it is
bound relating to the voting of any shares of the capital stock of the Company
which will limit in any way the solicitation of proxies by or on behalf of the
Company from, or the casting of votes by, the stockholders
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<PAGE> 24
of the Company with respect to the Merger. Except as set forth on Schedule
4.1(b), there are no restrictions on the Company to vote the stock of any of its
Subsidiaries.
(c) Authority; No Violations; Consents and Approvals.
(i) The Company has all requisite corporate power and
authority to enter into the Transaction Documents and, subject to the
Company Stockholder Approval (as defined in Section 4.1(c)(iii)), to
consummate the transactions contemplated in the Transaction Documents.
The execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby have been duly
authorized by all necessary corporate action on the part of the
Company, subject, if required with respect to the consummation of the
Merger, to the Company Stockholder Approval, unless the Merger may be
effected pursuant to Section 253 of the DGCL. The Transaction Documents
have been duly executed and delivered by the Company and, subject, with
respect to the consummation of the Merger, to the Company Stockholder
Approval unless the Merger may be effected pursuant to Section 253 of
the DGCL, and assuming that each of the Transaction Documents to which
Parent or Sub is a party constitutes the valid and binding agreement of
Parent or Sub, constitute valid and binding obligations of the Company
enforceable in accordance with their respective terms and conditions
except that the enforcement thereof may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b) general principles of equity
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(ii) Except as set forth on Schedule 4.1(c), the
execution and delivery of the Transaction Documents and the
consummation of the transactions contemplated thereby by the Company
will not (A) conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration (including
pursuant to any put right) of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security interest or
other encumbrance on assets or property, or right of first refusal with
respect to any asset or property (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss,
creation or right of first refusal, a "Violation"), pursuant to any
provision of the Certificate of Incorporation or By-Laws of the Company
or any comparable charter or organizational documents of its
Subsidiaries or (B) except as to which requisite waivers or consents
have been obtained and assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in paragraph (iii)
of this Section 4.1(c) are duly and timely obtained or made and, if
required, the Company Stockholder Approval has been obtained, result in
any Violation of (1) any loan or credit agreement, note, mortgage, deed
of trust, indenture, lease, Benefit Plan (as defined in Section
4.1(k)), Company
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<PAGE> 25
Permit (as defined in Section 4.1(g)), or any other agreement,
obligation, instrument, concession, franchise or license or (2) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its Subsidiaries or their
respective properties or assets (collectively, "Laws"), except in the
case of clauses (1) and (2) for any Violations that, individually or in
the aggregate, would not have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations
under any of the Transaction Documents or prevent the consummation of
any of the transactions contemplated thereby. The Board of Directors of
the Company has taken all actions necessary under the DGCL, including
approving the transactions contemplated by the Transaction Documents,
to ensure that Section 203 of the DGCL does not, and will not, apply to
the transactions contemplated thereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to, or permit
from any court, administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign (a
"Governmental Entity"), is required by or with respect to the Company
or any of its Subsidiaries in connection with the execution and
delivery of any of the Transaction Documents by the Company or the
consummation by the Company of the transactions contemplated thereby,
except for (A) the filing of a pre-merger notification and report form
by the Company under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act"), and the expiration or termination
of the applicable waiting period thereunder; (B) the filing with the
SEC of (1) the Proxy Statement in definitive form relating to the
Stockholders' Meeting, (2) the Schedule 14D-9 and (3) such reports
under and such other compliance with the Exchange Act and the rules and
regulations thereunder as may be required in connection with this
Agreement and the transactions contemplated hereby; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of
other states in which the Company does business; (D) such filings and
approvals as may be required by any applicable state securities, "blue
sky" or takeover laws; (E) such filings in connection with any state or
local tax which is attributable to the beneficial ownership of the
Company's or its Subsidiaries' real property, if any (collectively, the
"Gains and Transfer Taxes"); (F) such other filings and consents as may
be required under any environmental, health or safety law or regulation
pertaining to any notification, disclosure or required approval
necessitated by the Merger or the transactions contemplated by this
Agreement; (G) the approval of this Agreement by the holders of a
majority of the outstanding Shares ("Company Stockholder Approval");
(H) such filings, consents, approvals and authorizations under the New
Jersey Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA")
and (I) such other consents, approvals, orders, authorizations,
registrations, declarations, filings, notices or permits the failure of
which to be obtained or made would not have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform
its obligations under any of the Transaction Documents or prevent the
consummation of any of the transactions contemplated thereby.
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<PAGE> 26
(d) SEC Documents. The Company has made available to Parent a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by the Company with the SEC since January 1,
1995 and prior to the date of this Agreement (the "Company SEC Documents"),
which are all the documents (other than preliminary material) that the Company
was required to file with the SEC since such date. As of their respective dates,
the Company SEC Documents complied in all material respects with the
requirements of the Securities Act of 1933 (the "Securities Act"), or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Company SEC Documents, and none of the
Company SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Company SEC Documents complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with generally accepted accounting principles ("GAAP") applied on
a consistent basis during the periods involved (except as may be indicated in
the notes thereto or, in the case of the unaudited statements, as permitted by
Rule 10-01 of Regulation S-X of the SEC) and fairly present in accordance with
applicable requirements of GAAP (subject, in the case of the unaudited
statements, to year-end audit adjustments, as permitted by Rule 10-01, and any
other adjustments described therein) the consolidated financial position of the
Company and its consolidated Subsidiaries as of their respective dates and the
consolidated results of operations and the consolidated cash flows of the
Company and its consolidated Subsidiaries for the periods presented therein.
(e) Information Supplied. None of the information supplied or
to be supplied by the Company specifically for inclusion or incorporation by
reference in the Proxy Statement will, on the date it is first mailed to the
holders of the Company Common Stock or at the date of the related stockholder
meeting (the "Meeting Date"), contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. If, at any time prior to the Meeting Date, any
event with respect to the Company or any of its Subsidiaries, or with respect to
other information supplied by the Company specifically for inclusion in the
Proxy Statement, shall occur which is required to be described in an amendment
of, or a supplement to, the Proxy Statement, such event shall be so described,
and such amendment or supplement shall be promptly filed with the SEC and, as
required by law, disseminated to the stockholders of the Company. All documents
that the Company is responsible for filing with the SEC in connection with the
transactions contemplated herein, including the Schedule 14D-9 or the Proxy
Statement, insofar as it relates to the Company or its Subsidiaries or other
information supplied by the Company specifically for inclusion therein, will
comply as to form, in all material respects, with the provisions of the
Securities Act, the Exchange Act or the rules and regulations thereunder, and
each such document required to be filed with any Governmental Entity other than
the SEC will comply
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<PAGE> 27
in all material respects with the provisions of applicable law as to the
information required to be contained therein. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to the information
supplied or to be supplied by Parent or Sub for inclusion in the Proxy
Statement.
(f) No Default. Except as may result from the execution and
delivery of the Transaction Documents and the consummation of the transactions
contemplated thereby (which is subject to Section 4.1(c)(ii)) and except as set
forth on Schedule 4.1(f), no Violation exists (and no event has occurred which,
with notice or the lapse of time or both, would constitute a Violation) of any
term, condition or provision of (i) the Certificate of Incorporation or By-Laws
of the Company or the comparable charter or organizational documents of any of
its Subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license to which the Company or any of its Subsidiaries is now a party or by
which the Company or any of its Subsidiaries or any of their respective
properties or assets is bound or (iii) any law, order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or any of its
Subsidiaries, except in the case of (ii) and (iii) for Violations which, in the
aggregate, would not have a Material Adverse Effect on the Company, materially
impair the ability of the Company to perform its obligations under any of the
Transaction Documents or prevent the consummation of any of the transactions
contemplated thereby.
(g) Compliance with Applicable Laws. Except as set forth on
Schedule 4.1(g), the Company and its Subsidiaries hold all permits, licenses,
variances, exemptions, orders, franchises and approvals of all Governmental
Entities necessary for the lawful conduct of their respective businesses (the
"Company Permits"), except where the failure to hold any such Company Permits
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company, materially impair the ability of the Company to perform its
obligations under any of the Transaction Documents or prevent the consummation
of any of the transactions contemplated thereby. Except as set forth on Schedule
4.1(g), the Company and its Subsidiaries are in compliance with the terms of the
Company Permits, except where the failure to be in compliance would not,
individually or in the aggregate, have a Material Adverse Effect on the Company,
materially impair the ability of the Company to perform its obligations under
any of the Transaction Documents or prevent the consummation of any of the
transactions contemplated thereby. As of the date of this Agreement, except as
set forth on Schedule 4.1(g), no investigation or review by any Governmental
Entity with respect to the Company or any of its Subsidiaries is pending or, to
the knowledge of the Company, has been threatened which would have a Material
Adverse Effect on the Company, materially impair the ability of the Company to
perform its obligations under any of the Transaction Documents or prevent the
consummation of any of the transactions contemplated thereby.
(h) Litigation. Except as set forth on Schedule 4.1(h) or
disclosed in the Company SEC Documents, there is no suit, action or proceeding
pending or, to the knowledge of the Company, threatened against the Company or
any Subsidiary of the Company
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<PAGE> 28
("Company Litigation") the loss of which would have a Material Adverse Effect on
the Company, nor is there any material judgment, decree, unfunded settlement,
conciliation agreement, letter of deficiency, award, temporary restraining
order, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against the Company or any Subsidiary of the Company ("Company
Order") that would have a Material Adverse Effect on the Company. In addition,
except as expressly set forth on Schedule 4.1(h) as having such effect, none of
the claims and judgments pending or, to the knowledge of the Company, threatened
pursuant to all Company Litigation and Company Orders, would, individually or in
the aggregate, have a Material Adverse Effect on the Company, materially impair
the ability of the Company to perform its obligations under any of the
Transaction Documents or prevent the consummation of any of the transactions
contemplated thereby.
(i) Taxes. Except as set forth on Schedule 4.1(i) hereto:
(i) All material Tax Returns required to be filed by
or with respect to the Company, each of its Subsidiaries, and any
affiliated, consolidated, combined, unitary or similar group of which
the Company or any of its Subsidiaries is or was a member, have been
duly and timely filed (taking into account all valid extensions of
filing dates), and all such Tax Returns are true, correct and complete
in all material respects. The Company, each of its Subsidiaries, and
any affiliated, consolidated, combined, unitary or similar group of
which the Company or any of its Subsidiaries is or was a member, has
duly and timely paid (or there has been paid on its behalf) all
material Taxes that are due, except for Taxes being contested in good
faith by appropriate proceedings and for which adequate reserves have
been established in the Company's unaudited financial statements for
the quarter ended March 31, 1997 in accordance with GAAP. With respect
to any period for which Taxes are not yet due with respect to the
Company, any Subsidiary, and any affiliated, consolidated, combined,
unitary or similar group of which the Company or any of its
Subsidiaries is or was a member, the Company and each of its
Subsidiaries has made due and sufficient current accruals for such
Taxes in accordance with GAAP in the most recent financial statements
contained in the Company SEC Documents. The Company and each of its
Subsidiaries has withheld and paid all material Taxes required by all
applicable laws to be withheld or paid in connection with any amounts
paid or owing to any employee, creditor, independent contractor,
stockholder or other third party.
(ii) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection assessment of, material
Taxes due from or with respect to or the Company, any of its
Subsidiaries, or any affiliated, consolidated, combined, unitary or
similar group of which the Company or any of its Subsidiaries is or was
a member, for any taxable period. No audit or other proceeding by any
court, governmental or regulatory authority, or similar person is
pending in regard to any material Taxes due from or with respect to the
Company or any of its Subsidiaries or any material Tax
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<PAGE> 29
Return filed by or with respect to the Company, any Subsidiary, or any
affiliated, consolidated, combined, unitary or similar group of which
the Company or any of its Subsidiaries is or was a member, other than
normal and routine audits by nonfederal governmental authorities. All
material deficiencies of Taxes assessed by any applicable taxing
authority have been paid, fully settled or adequately provided for in
the financial statements contained in the Company SEC Documents.
Neither the Company nor any Subsidiary of the Company has received
written notice that any assessment of material Taxes is proposed
against the Company or any of its Subsidiaries or any of their assets.
(iii) No consent to the application of Section
341(f)(2) of the Code (or any predecessor provision) has been made or
filed by or with respect to the Company or any of its Subsidiaries or
any of their assets. None of the Company or any of its Subsidiaries has
agreed to make any material adjustment pursuant to Section 481(a) of
the Code (or any predecessor provision) by reason of any change in any
accounting method, and there is no application pending with any taxing
authority requesting permission for any changes in any accounting
method of the Company or any of its Subsidiaries which, in each
respective case, will or would reasonably cause the Company or any of
its Subsidiaries to include any material adjustment in taxable income
for any taxable period (or portion thereof) ending after the Closing
Date.
(iv) Except as set forth in the Company SEC
Documents, neither the Company nor any of its Subsidiaries is a party
to, is bound by, or has any obligation under, any Tax sharing
agreement, Tax allocation agreement or similar contract, agreement or
arrangement.
(v) Neither the Company nor any of its Subsidiaries
has executed or entered into with the Internal Revenue Service ("IRS"),
or any taxing authority, a closing agreement pursuant to Section 7121
of the Code or any similar provision of state, local, foreign or other
income tax law, which will require any increase in taxable income or
alternative minimum taxable income, or any reduction in tax credits
for, the Company or any of its Subsidiaries for any taxable period
ending after the Closing Date.
(vi) There are no requests for rulings from any
taxing authority for information with respect to Taxes of the Company
or any of its Subsidiaries and, to the knowledge of the Company, no
material reassessments (for property or ad valorem Tax purposes) of any
assets or any property owned or leased by the Company or any of its
Subsidiaries have been proposed in written form.
(vii) None of the property of the Company or any
Subsidiary is subject to a safe-harbor lease (pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954 as in effect after the
Economic Recovery Tax Act of 1981 and before the Tax Reform Act of
1986) or is "tax-exempt use property" (within the meaning of Section
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<PAGE> 30
168(h) of the Code) or "tax-exempt bond financed property" (within the
meaning of Section 168(g)(5) of the Code).
(viii) The term "Code" shall mean the Internal
Revenue Code of 1986, as amended. The term "Tax" (and, with correlative
meaning, "Taxes") shall mean (i) any net income, alternative or add-on
minimum, gross income, gross receipts, sales, use, ad valorem, value
added, transfer, franchise, profits, license, withholding on amounts
paid by the Company or any of its Subsidiaries, payroll, employment,
excise, production, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest and/or any penalty, addition to
tax or additional amount imposed by any taxing authority, (ii) any
liability of the Company or any of its Subsidiaries for the payment of
any amounts of the type described in (i) as a result of being a member
of an affiliated or consolidated group or arrangement whereby liability
of the Company or any of its Subsidiaries for the payment of such
amounts was determined or taken into account with reference to the
liability of any other person for any period and (iii) liability of the
Company or any of its Subsidiaries with respect to the payment of any
amounts of the type described in (i) or (ii) as a result of any express
or implied obligation to indemnify any other Person. The term "Tax
Return" shall mean all returns, declarations, reports, estimates,
information returns and statements required to be filed by or with
respect to the Company or any of its Subsidiaries in respect of any
Taxes, including, without limitation, (i) any consolidated federal
income Tax return in which the Company or any of its Subsidiaries is
included and (ii) any state, local or foreign income Tax returns filed
on a consolidated, combined or unitary basis (for purposes of
determining tax liability) in which the Company or any of its
Subsidiaries is included.
(j) Employment Agreements. Schedule 4.1(j) contains a complete
list of each management, employment, consulting or other agreement, contract or
commitment, in each case, in writing, between the Company or any of its
Subsidiaries and any employee, officer or director thereof (A) providing for the
employment of any person or providing for retention of management, executive or
consulting services and providing for an obligation to pay or accrue
compensation of $50,000 or more per annum, or (B) except for severance
agreements or arrangements with an employee or officer of only a Subsidiary of
the Company and which do not provide for any severance agreement or arrangement
in excess of $75,000, providing for the payment or accrual of any compensation
or severance upon (i) a change in control of the Company or any of its
Subsidiaries or (ii) any termination of such management, employment, consulting
or other relationship.
(k) Pension and Benefit Plans; ERISA.
(i) Schedule 4.1(k) sets forth a complete and
correct list of:
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(A) all "employee benefit plans," as defined
in Section 3(3) of ERISA, maintained by the Company
or any trade or business (whether or not
incorporated) which is under common control, or which
is treated as a single employer, with the Company
under Section 414(b), (c), (m) or (o) of the Code
("ERISA Affiliate"), or to which the Company or any
of its ERISA Affiliates has any obligation or
liability, contingent or otherwise, other than any
multiemployer plan as defined in either Section 3(37)
or Section 4001(a)(3) of ERISA ("Benefit Plans"); and
(B) all stock award, stock option or stock
purchase benefit policies or arrangements and all
material bonus or other incentive compensation,
deferred compensation, salary continuation,
disability, or other material employee benefit
policies or arrangements which the Company or any of
its ERISA Affiliates maintains or to which the
Company or any of its ERISA Affiliates has any
material obligation or liability (contingent or
otherwise) (together with the agreements disclosed on
Schedule 4.1(j), the "Employee Arrangements").
(ii) With respect to each Benefit Plan for which a
Form 5500 is required to be filed, the Company or one of its
Subsidiaries has timely filed such form with the Department of Labor
for the last three years, and except as otherwise noted in Schedule
4.1(k), with respect to each Benefit Plan and Employee Arrangement, a
complete and correct copy of each of the following documents (if
applicable) has been made available to Sub: (A) the most recent plan
and related trust documents, and all amendments thereto; (B) the most
recent summary plan description, and all related summaries of material
modifications thereto; (C) Form 5500 (including schedules and
attachments) for the last three years; (D) the most recent IRS
determination letter; and (E) actuarial reports for the last three
years.
(iii) Except as disclosed on Schedule 4.1(k), the
Benefit Plans and their related trusts intended to qualify under
Sections 401(a) and 501(a) of the Code, respectively, have received
favorable determination letters from the IRS regarding the Tax Reform
Act of 1986 with respect to such qualified status and nothing, to the
best knowledge of the Company or any of its Subsidiaries, has occurred
that could reasonably be expected to cause any such qualified status to
change, which change would be material.
(iv) All material contributions or other material
payments required to have been made by the Company or any of its ERISA
Affiliates to or under any Benefit Plan or Employee Arrangement by
applicable law or the terms of such Benefit Plan or Employee
Arrangement (or any agreement relating thereto) have been timely and
properly made or are properly accrued on the Company's unaudited
financial statements in accordance with generally accepted accounting
principles.
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<PAGE> 32
(v) The Benefit Plans and Employee Arrangements have
been maintained and administered in all material respects in accordance
with their terms and applicable laws, and all filings of applicable
reports, documents and notices, the non-filing of which would have a
Material Adverse Effect, have been timely made with the appropriate
governmental agencies and plan participants and beneficiaries.
(vi) Except as disclosed on Schedule 4.1(k), there
are no pending or, to the best knowledge of the Company or any of its
Subsidiaries, threatened actions, claims or proceedings against or
relating to any Benefit Plan or Employee Arrangement (other than
routine benefit claims by persons entitled to benefits thereunder) that
would have a Material Adverse Effect.
(vii) Except for the Employee Arrangements and as
disclosed on Schedule 4.1(k), the Company and its ERISA Affiliates do
not maintain or have an obligation to contribute to retiree life or
retiree health plans which provide for continuing benefits or coverage,
for 18 months or more, for current or former officers, directors,
nonemployees or employees of the Company or any of its ERISA Affiliates
except (A) as may be required under Part 6 of Title I of ERISA and at
the sole expense of the participant or the participant's beneficiary or
(B) a medical expense reimbursement account plan pursuant to Section
125 of the Code.
(viii) Except as disclosed on Schedule 4.1(k) or
specifically provided for herein, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated
hereby will (A) result in any material payment becoming due to any
employee or group of employees of the Company or any of its
Subsidiaries; (B) increase materially any benefits otherwise payable
under any Benefit Plan or Employee Arrangement; or (C) result in the
acceleration of the time of payment or vesting of any such material
benefits.
(ix) Except as disclosed on Schedule 4.1(k), no stock
or other security issued by the Company or any ERISA Affiliate forms a
part of the assets of any Benefit Plan.
(x) The Company and its Subsidiaries have maintained
workers' compensation coverage as required by applicable state law
through purchase of insurance and not by self-insurance or otherwise,
except as disclosed on Schedule 4.1(k).
(xi) As to each Benefit Plan subject to Title IV of
ERISA, since January 1, 1990, to the best knowledge of the Company and
each of its Subsidiaries, no notice of intent to terminate has been
given under Section 4041 of ERISA and no proceeding has been instituted
under Section 4042 of ERISA to terminate, such that
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<PAGE> 33
would result in a material liability to the Company or any ERISA
Affiliates; no material unsatisfied liability to the Pension Benefit
Guaranty Corporation ("PBGC") has been incurred; no material
unsatisfied accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code
has been incurred; and the most recent financial statements and
actuarial valuations including information regarding the assets and
liabilities of each such Benefit Plan have been supplied to Parent.
(xii) The provisions of this Section 4.1(k)(xii)
shall only apply to Benefit Plans subject to Title IV of ERISA and
Benefit Plans subject to Section 412 of the Code; concerning each
Benefit Plan that is or has been subject to the funding requirements of
Title I, Subtitle B, Part 3 of ERISA, the funding method used in
connection with such plan is, and at all times has been, acceptable
under ERISA, the actuarial assumptions employed in connection with
determining the funding of each such plan are, and at all times have
been, reasonable and satisfy the requirements of Section 412(c)(3) of
the Code and Section 302(c)(3) of ERISA; Schedule 4.1(k) sets forth as
of December 31, 1996, any premiums due to the PBGC for the most
recently completed year; Schedule 4.1(k) sets forth a reasonable good
faith estimate of material changes between December 31, 1996 and the
date hereof in the actuarially determined present value of all benefit
liabilities within the meaning of Section 4001(a)(16) of ERISA
(determined on the basis of the assumptions used for funding purposes
in the most recent actuarial reports for such Benefit Plans) ("Benefit
Liabilities") or plan assets with respect to such Benefit Plans; the
sum of the amount of unfunded Benefit Liabilities under all Benefit
Plans (excluding each such plan with an amount of unfunded Benefit
Liabilities of zero or less) is not more than $1,300,000, with respect
to any such Benefit Plan, no such plan has been terminated or subject
to a "spin-off" or "spin-off termination" or partial termination and no
assets of any such plan have been used or employed in a manner so as to
subject them to a material excise tax imposed under Section 4980 of the
Code; each such Benefit Plan permits termination thereof, and any
assets in excess of those required to pay Benefit Liabilities may be
distributed to or for the benefit of the Company or its ERISA
Affiliates, and Section 4044(d) of ERISA would not prevent such
reversion; with respect to any such Benefit Plan, any significant
reduction in the rate of future benefit accrual was preceded by an
adequate and appropriate notice to the parties described in and as
required by Section 204(h) of ERISA.
(xiii) Neither the Company nor any of its ERISA
Affiliates has, or will have, incurred by reason of the transactions
contemplated by this Agreement any material liability under Section
4062(e) of ERISA. Except as disclosed on Schedule 4.1(k), neither the
Company nor any of its ERISA Affiliates is a participant in any plan to
which Sections 4063 or 4064 of ERISA apply.
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<PAGE> 34
(xiv) Neither the Company nor any of its ERISA
Affiliates has engaged in any transaction described under Section 4069
of ERISA nor has any lien been imposed with respect to a material
amount on any of the Company, any ERISA Affiliate or any of their
respective assets under Section 4068 of ERISA.
(xv) The Company and its ERISA Affiliates have
complied in all material respects with all requirements for premium
payments, including any interest and penalty charges for late payment,
due the PBGC with respect to each Benefit Plan and each separate plan
year for which any premiums are required. Except as set forth in
Schedule 4.1(k), and except for transactions required by this
Agreement, since January 1, 1990, there has been no "reportable event"
(within the meaning of Section 4043(b) or (c) of ERISA and regulations
promulgated by the PBGC thereunder) with respect to any Benefit Plan
subject to Title IV of ERISA for which notice to the PBGC has not, by
rule or regulations, been waived which would have a Material Adverse
Effect. Concerning both the Company and any ERISA Affiliate (A) since
January 1, 1990, there has been no cessation of operations at a
facility so as to become subject to the provisions of Section 4062(e)
of ERISA which would have a Material Adverse Effect, (B) since January
1, 1990, there has been no withdrawal of a substantial employer from
any Benefit Plan so as to become subject to the provisions of Section
4063 of ERISA which would have a Material Adverse Effect, (C) since
January 1, 1990, there has been no cessation of contributions to any
Benefit Plan subject to Section 4064(a) of ERISA which would have a
Material Adverse Effect, (D) there is not now any material liability
under Section 4064 of ERISA to any of Parent, Sub or any affiliates of
Parent or Sub or the Company by reason of the termination of any
Benefit Plan, (E) since January 1, 1990, there has been no amendment to
any Benefit Plan that would require the furnishing of security under
Section 401(a)(29) of the Code, and (F) there has been no event or
circumstance, and, to the best knowledge of the Company or any of its
Subsidiaries, there exists no event or circumstance which could
reasonably be expected to result in any material liability being
asserted by any Benefit Plan, the PBGC or any other person or entity
under Title IV of ERISA against the Company or any ERISA Affiliate.
With respect to any Benefit Plan, no lien has been imposed under
Section 412(n) of the Code or Section 302(f) of ERISA with respect to a
material amount nor is there any material liability for excise taxes
imposed under Section 4971 of the Code; any notices to the PBGC
delivered since January 1, 1990, under Section 412(n) of the Code or
Section 302(f) of ERISA have heretofore been delivered to Parent; and
copies of any notices required to be given to participants since
January 1, 1990, under either Section 101(d) or Section 4011 of ERISA
have previously been delivered to Parent. Except as described in
Schedule 4.1(k), the PBGC has not communicated with the Company, its
ERISA Affiliates or any of its agents or representatives concerning the
transactions contemplated by the Agreement, nor any other transactions
implemented by the Company or any of its ERISA Affiliates within the
preceding five calendar years.
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<PAGE> 35
(xvi) Since January 1, 1990, neither the Company nor
any of its Subsidiaries has taken any action to vest participants in
any overfunding in any Benefit Plans subject to Title IV of ERISA.
(xvii) No act, omission or transaction has occurred
which would result in imposition on the Company or an ERISA Affiliate
of (A) material liability under Section 409 of ERISA for breach of
fiduciary duty , (B) a material civil penalty assessed pursuant to
subsections (c), (i) or (l) of Section 502 of ERISA or (C) a material
tax imposed pursuant to Chapter 43 of Subtitle D of the Code.
(xviii) (A) Except as disclosed on Schedule 4.1(k),
neither the Company nor any ERISA Affiliate contributes to, or has an
obligation to contribute to, and has not within the preceding five
years contributed to, or had an obligation to contribute to, a
multiemployer plan subject to Title IV of ERISA as defined in Section
4001(a)(3) of ERISA (each such disclosed plan, a "Multiemployer Plan"),
(B) all material contributions or other material payments required to
have been made by the Company or any of its ERISA Affiliates to or
under any Multiemployer Plan by applicable law or the terms of such
Multiemployer Plan (or any agreement relating thereto) have been timely
and properly made or are properly accrued on the Company's unaudited
financial statements in accordance with GAAP, (C) there has been no
complete or partial withdrawal from a Multiemployer Plan by the Company
or any ERISA Affiliate so as to incur any material withdrawal liability
as defined in Section 4201 of ERISA (without regard to any subsequent
reduction or waiver of such liability under Section 4207 or 4208 of
ERISA), (D) if prior to the Effective Time any Multiemployer Plan were
in "reorganization" (as defined in Section 4241 of ERISA) or
"insolvent" as defined in Section 4245 of ERISA, the estimated present
value of the aggregate increase in contributions to such Multiemployer
Plan by the Company and its ERISA Affiliates over the estimated present
value of contributions to such Multiemployer Plan by the Company and
its ERISA Affiliates without regard to such reorganization or
insolvency would not exceed $6,000,000 and would not have a Material
Adverse Effect, (E) Schedule 4.1(k) sets forth the dollar amount of
contributions made by the Company and its ERISA Affiliates with respect
to each Multiemployer Plan for the current year and preceding five
years, and (F) the aggregate dollar amount of withdrawal liability as
defined in Section 4201 of ERISA (without regard to any subsequent
reduction or waiver of such liability under Section 4207 or 4208 of
ERISA) which would be owed by the Company and its ERISA Affiliates to
all Multiemployer Plans if the Company and its ERISA Affiliates ceased
contributing to all such Multiemployer Plans immediately before the
consummation of the transactions contemplated by this Agreement would
not exceed $6,000,000, with respect to each multiemployer plan as
defined in Section 3(37) of ERISA that is not a "Multiemployer Plan",
as defined above, all material contributions or other material
payments, required to have been made by the Company or any of the ERISA
Affiliates to or under any such multiemployer plan by applicable law or
the terms of such
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<PAGE> 36
multiemployer plan (or any agreement relating thereto) have been, to
the best knowledge of the Company of any of its Subsidiaries, timely
and properly made or are properly accrued on the Company's unaudited
financial statements in accordance with GAAP.
(l) Absence of Certain Changes or Events. Since March 31,
1997, except as disclosed in Schedule 4.1(l), the Company and the Subsidiaries
have conducted their business, in all material respects, only in the ordinary
course and in a manner consistent with past practice (except in connection with
the negotiation and execution and delivery of this Agreement and the other
Transaction Documents and the Atrium Agreements (as hereinafter defined) in
connection with discussions with other parties regarding possible Acquisition
Proposals) and since March 31, 1997, except as disclosed in Schedule 4.1(l),
there has not been (i) any event or events (whether or not covered by
insurance), individually or in the aggregate, having a Material Adverse Effect
on the Company, (ii) any material change by the Company in its accounting
methods, principles or practices, (iii) any entry by the Company or any
Subsidiary into any commitment or transaction material to the Company, except in
the ordinary course of business and consistent with past practice or except in
connection with the negotiation and execution and delivery of this Agreement and
the other Transaction Documents and the Atrium Agreements (as hereinafter
defined), (iv) any declaration, setting aside or payment of any dividend or
distribution in respect of any capital stock of the Company or any redemption,
purchase or other acquisition of any of the Company's or its Subsidiaries'
securities (except for cash dividends paid to the Company by its wholly owned
Subsidiaries with regard to its capital stock, and the declaration and payment
to the holders of Shares regular quarterly dividends to stockholders of record
with such record dates and payment dates as are consistent with past practice),
(v) other than pursuant to the Benefit Plans and the Employee Arrangements or as
required by law, any increase in, amendment to, or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option, stock purchase or other employee benefit plan, (vi)
granted any general increase in compensation, bonus or other benefits payable to
the employees of the Company or its Subsidiaries, except for increases occurring
in the ordinary course of business in accordance with its customary practice,
(vii) paid any bonus to the employees of the Company or its Subsidiaries except
for bonuses accrued on the Company's unaudited balance sheet for the quarter
ending March 31, 1997, (viii) any incurrence of indebtedness for borrowed money
or assumption or guarantee of indebtedness for borrowed money by the Company or
any of its Subsidiaries (other than loans from the Company to any wholly owned
Subsidiary or from any wholly owned Subsidiary to the Company or any other
wholly owned Subsidiary), or the grant of any lien on the material assets of the
Company or its Subsidiaries to secure indebtedness for borrowed money except, in
any such case, any drawdowns by the Company under its revolving credit facility
or its accounts receivable facility, (ix) any sale or transfer of any material
assets of the Company or its Subsidiaries other than in the ordinary course of
business and consistent with past practice, or (x) any loan, advance or capital
contribution to or investment in any person in an aggregate amount in excess of
$100,000 by the Company or any Subsidiary (excluding any loan, advance or
capital contribution to, or
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<PAGE> 37
investment in, the Company or any wholly owned Subsidiary and except for
drawdowns by the Company under its revolving credit facility or its accounts
receivable facility).
(m) No Undisclosed Material Liabilities. Except as set forth
on Schedule 4.1(m), there are no liabilities of the Company or any Subsidiary of
any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, that are material to the Company and its Subsidiaries
considered as a whole and that are required to be disclosed in an audited
balance sheet (or in the notes thereto) prepared in accordance with GAAP, other
than (i) liabilities reflected on the Company's unaudited financial statements
(together with the related notes thereto) filed with the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1997 (as filed with the
SEC), (ii) liabilities under this Agreement, (iii) any liabilities that have
occurred in the ordinary course of business since March 31, 1997, (iv)
liabilities, individually or in the aggregate, not having a Material Adverse
Effect on the Company and (v) liabilities for professional fees and expenses in
connection with the transactions contemplated hereby and by the Atrium
Agreements.
(n) Opinion of Financial Advisor. The Company has received the
opinion of the Financial Advisor to the effect that, as of the date thereof, the
cash consideration to be received by the holders of Company Common Stock in the
Offer and the Merger is fair from a financial point of view to such holders. The
Company has been authorized by the Financial Advisor to include the Fairness
Opinion in the Offer Documents and the Proxy Statement and such opinion has not
been withdrawn or modified. True and complete copies of all agreements and
understandings between the Company or any of its affiliates and the Financial
Advisor relating to the transactions contemplated by this Agreement are attached
hereto as Schedule 4.1(n).
(o) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock is the only vote of
the holders of any class or series of the Company's capital stock necessary
(under applicable law or otherwise) to approve the Merger and this Agreement and
the transactions contemplated hereby.
(p) Labor Matters. Except to the extent as such would not have
a Material Adverse Effect on the Company or as set forth on Schedule 4.1(p) or
in the Company SEC Documents:
(i) Neither the Company nor any of its Subsidiaries
is a party to any labor or collective bargaining agreement, and no
employees of the Company or any of its Subsidiaries are represented by
any labor organization. Within the preceding three years, there have
been no representation or certification proceedings, or petitions
seeking a representation proceeding, pending or, to the knowledge of
the Company, threatened to be brought or filed with the National Labor
Relations Board or any other labor relations tribunal or authority.
Within the preceding three years, to the best knowledge of the Company,
there have been no organizing activities involving the
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<PAGE> 38
Company or any of its Subsidiaries with respect to any group of
employees of the Company or any of its Subsidiaries.
(ii) There are no strikes, work stoppages, slowdowns,
lockouts, material arbitrations or material grievances or other
material labor disputes pending or, to the knowledge of the Company,
threatened against or involving the Company or any of its Subsidiaries.
There are no unfair labor practice charges or complaints pending or, to
the best knowledge of the Company, threatened by or on behalf of any
employee or group of employees of the Company or any of its
Subsidiaries.
(iii) There are no complaints, charges or claims
against the Company or any of its Subsidiaries pending or, to the best
knowledge of the Company, threatened to be brought or filed, with any
Governmental Entity or arbitrator(s) based on, arising out of, in
connection with, or otherwise relating to the employment or termination
of employment of any individual by the Company or any of its
Subsidiaries.
(iv) To the best knowledge of the Company, each of
the Company and its Subsidiaries is in compliance in all material
respects with all laws, regulations and orders relating to employment
and labor, including but not limited to all such laws, regulations and
orders relating to wages and hours, collective bargaining, equal
employment opportunity, affirmative action, discrimination, civil
rights, employee benefits, plant closing and mass layoff, immigration,
medical and family leave, safety and health, workers' compensation and
the collection and payment of withholding and/or social security taxes
and any similar tax.
(v) As of the date hereof, there is no proceeding,
claim, suit, action or governmental investigation pending or, to the
best knowledge of the Company or any of its Subsidiaries, threatened,
with respect to which any current or former director, officer, employee
or agent of the Company or any of its Subsidiaries is entitled, or has
asserted he is entitled, to claim indemnification from the Company or
any of its Subsidiaries pursuant to the Certificate of Incorporation or
By-Laws of the Company or any provision of the comparable charter or
organizational documents of any of its Subsidiaries, as provided in any
indemnification agreement to which the Company or any Subsidiary of the
Company is a party or pursuant to applicable law, that has a Material
Adverse Effect on the Company, materially impairs the ability of the
Company to perform its obligations under any of the Transaction
Documents or prevents the consummation of any of the transactions
contemplated thereby.
(q) Intangible Property. Each of the Company and its
Subsidiaries owns or has a right to use each trademark, trade name, patent,
service mark, brand mark, brand name, computer program, database, industrial
design and copyright required, owned or used in connection with the operation of
its businesses, including any registrations thereof and pending
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applications therefor, and each license or other contract relating thereto that
is material to the conduct of its business (collectively, the "Company
Intangible Property"), free and clear of any and all liens, claims or
encumbrances, except where the failure to own or have a right to use such
property or such lien, claim or encumbrance would not have a Material Adverse
Effect on the Company. Except to the extent that such would not have a Material
Adverse Effect on the Company, the use of the Company Intangible Property by the
Company or its Subsidiaries does not conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest or
goodwill, including, without limitation, any intellectual property right,
trademark, trade name, patent, service mark, brand mark, brand name, computer
program, database, industrial design, copyright or any pending application
therefor of any other person.
(r) Environmental Matters.
(i) For purposes of this Agreement:
(A) "Environmental Costs and Liabilities"
means any and all losses, liabilities, obligations,
damages, fines, penalties, judgments, actions,
claims, costs and expenses (including, without
limitation, fees, disbursements and expenses of legal
counsel, experts, engineers and consultants and the
reasonable costs of investigation and feasibility
studies and the reasonable costs to clean up, remove,
treat, or in any other way address any Hazardous
Materials) arising with respect to any violation of
or liability arising pursuant to or under any
Environmental Law or as the result of any exposure or
alleged exposure of any person or property to any
Hazardous Material.
(B) "Environmental Law" means any applicable
law regulating or prohibiting Releases of Hazardous
Materials into any part of the natural environment,
or pertaining to the protection of natural resources,
the environment and public and employee health and
safety from Hazardous Materials including, without
limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C.
ss. 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. ss. 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. ss.
6901 et seq.), the Clean Water Act (33 U.S.C. ss.
1251 et seq.), the Clean Air Act (33 U.S.C. ss. 7401
et seq.), the Toxic Substances Control Act (15 U.S.C.
ss. 7401 et seq.), the Federal Insecticide,
Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 et
seq.), and the Occupational Safety and Health Act (29
U.S.C. ss. 651 et seq.) ("OSHA") and the regulations
promulgated pursuant thereto, and any such applicable
state or local statutes, including, without
limitation, ISRA, and the regulations promulgated
pursuant
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thereto, as such laws have been and may be amended or
supplemented through the Closing Date;
(C) "Hazardous Material" means any
substance, material or waste which is regulated with
respect to its toxic or otherwise hazardous character
or the potential deleterious effects arising from its
improper management by any public or governmental
authority in the jurisdictions in which the
applicable party or its Subsidiaries conducts
business, or the United States, including, without
limitation, any material or substance which is
defined as a "hazardous waste," "hazardous material,"
"hazardous substance," "extremely hazardous waste" or
"restricted hazardous waste," "contaminant," "solid
waste," "toxic waste" or "toxic substance" under any
provision of Environmental Law and shall also
include, without limitation, petroleum, petroleum
products, asbestos, polychlorinated biphenyls and
radioactive materials;
(D) "Release" means any release, spill,
effluent, emission, leaking, pumping, injection,
deposit, disposal, discharge, dispersal, leaching, or
migration into the environment; and
(E) "Remedial Action" means all actions,
including, without limitation, any capital
expenditures, required by a governmental entity or
required under any Environmental Law, or voluntarily
undertaken to (1) clean up, remove, treat, or in any
other way ameliorate or address any Hazardous
Materials or other substance in the environment; (2)
prevent the Release or threat of Release, or minimize
the further Release of any Hazardous Material so it
does not endanger or threaten to endanger the public
health or welfare or the environment; (3) perform
pre-remedial studies and investigations or
post-remedial monitoring and care pertaining or
relating to a Release; or (4) bring the applicable
party into compliance with any Environmental Law.
(ii) Except as set forth on Schedule 4.1(r) hereto:
(A) The operations of the Company and its
Subsidiaries have been and, as of the Closing Date,
will be, in compliance in all respects with all
Environmental Laws except for any such noncompliance
which would not result in a Material Adverse Effect
on the Company;
(B) The Company and its Subsidiaries have
obtained and will, as of the Closing Date, maintain
all permits required under applicable Environmental
Laws for the continued operations of their respective
businesses, except such permits the lack of which
would not materially
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impair the ability of the Company and its
Subsidiaries to continue operations;
(C) The Company and its Subsidiaries are not
subject to any outstanding written orders from, or
written agreements with, any Governmental Entity
respecting (A) violations or liability pursuant to
Environmental Laws, (B) Remedial Action or (C) any
Release or threatened Release of a Hazardous
Material;
(D) The Company and its Subsidiaries have
not received any written communication alleging, with
respect to any such party, the violation of or
liability under any Environmental Law, which
violation or liability is outstanding, except for any
such violation or liability which would not result in
a Material Adverse Effect on the Company;
(E) Neither the Company nor any of its
Subsidiaries has any contingent liability in
connection with the Release of any Hazardous Material
into the environment (whether on-site or off-site)
which would result in the Company and its
Subsidiaries incurring Environmental Costs and
Liabilities which would result in a Material Adverse
Effect on the Company;
(F) The Company or its Subsidiaries do not
engage in the transportation, treatment, storage or
disposal of hazardous waste, as defined and regulated
under permit requirements set forth in 40 C.F.R.
Parts 260-270 (in effect as of the date of this
Agreement) or any state equivalent;
(G) Except as would not have a Material
Adverse Effect on the Company, here is not now nor
has there been in the past, on or in any property of
the Company or its Subsidiaries any of the following:
(A) any underground storage tanks or surface
impoundments containing Hazardous Materials, (B) any
asbestos-containing materials, or (C) any
polychlorinated biphenyls in regulated quantities;
and
(H) No judicial or administrative
proceedings or governmental investigations are
pending or, to the knowledge of the Company,
threatened against the Company or any of its
Subsidiaries alleging the violation of or seeking to
impose liability pursuant to any Environmental Law or
as the result of the Release or alleged Release of a
Hazardous Material, except for any such proceedings
or investigations that would not result in a Material
Adverse Effect on the Company.
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(iii) This Section 4.1(r) sets forth the sole and
exclusive representations and warranties of the Company relating to
Environmental Matters, including, without limitation, any matters
arising under Environmental Laws.
(s) Real Property.
(i) Schedule 4.1(s) sets forth all of the real
property owned in fee by the Company and its Subsidiaries that are
material to the conduct of the businesses of the Company and its
Subsidiaries, taken as a whole. Each of the Company and its
Subsidiaries has good and marketable title to each parcel of real
property owned by it free and clear of all mortgages, pledges, liens,
encumbrances and security interests, except (1) those described in the
Company SEC Documents or listed on Schedule 4.1(s), (2) those reflected
or reserved against in the unaudited balance sheet of the Company dated
as of March 31, 1997, and (3) mortgages, pledges, liens, encumbrances
and security interests that would not have a Material Adverse Effect on
the Company.
(ii) Schedule 4.1(s) sets forth each lease, sublease
or other agreement (collectively, the "Real Property Leases") under
which the Company or any of its Subsidiaries uses or occupies or has
the right to use or occupy, now or in the future, any real property
material to the conduct of the businesses of the Company and its
Subsidiaries, taken as a whole. Except to the extent that it would not
have a Material Adverse Effect on the Company, each Real Property Lease
is valid, binding and in full force and effect, all rent and other sums
and charges payable by the Company and its Subsidiaries as tenants
thereunder are current, no termination event or condition or uncured
default on the part of the Company or any Subsidiary of the Company
exists under any Real Property Lease. Each of the Company and its
Subsidiaries has a good and valid leasehold interest in each parcel of
real property leased by it free and clear of all mortgages, pledges,
liens, encumbrances and security interests, except (A) those disclosed
in the Company SEC Documents, (B) those reflected or reserved against
in the unaudited balance sheet of the Company dated as of March 31,
1997, (C) taxes and general and special assessments not in default and
payable without penalty and interest and (D) those which would not,
individually or in the aggregate, have a Material Adverse Effect on the
Company.
(t) Tangible Property. With respect to the tangible properties
and assets of the Company and its Subsidiaries (excluding real property) that
are material to the conduct of the businesses of the Company and its
Subsidiaries, the Company and its Subsidiaries have good title to, or hold
pursuant to valid and enforceable leases, all such properties and assets, with
only such exceptions as, individually or in the aggregate, would not have a
Material Adverse Effect on the Company. All of the assets of the Company and its
Subsidiaries have been maintained and repaired for their continued operation and
are in good operating condition, reasonable wear and tear excepted, and usable
in the ordinary course of business, except
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where the failure to be in such repair or condition or so usable would not
individually or in the aggregate have a Material Adverse Effect on the Company.
(u) Board Recommendation. As of the date hereof, the Board of
Directors of the Company, at a meeting duly called and held, has by the vote of
those directors present (i) determined that the Transaction Documents and the
transactions contemplated thereby, including the Offer and the Merger, taken
together, are fair to and in the best interests of the stockholders of the
Company and has approved the same and (ii) resolved to recommend that the
holders of the shares of Company Common Stock accept the Offer and approve this
Agreement and the transactions contemplated herein, including the Merger.
(v) Material Contracts. The Company has made available to
Parent (i) true and complete copies of all written contracts, agreements,
commitments, arrangements, leases (including with respect to personal property),
policies and other instruments to which it or any of its Subsidiaries is a party
or by which it or any such Subsidiary is bound which (A) require payments to be
made in excess of $250,000 per year for goods and/or services, (B) require
payments to be made in excess of $100,000 with respect to any licenses granted
to the Company or any of its Subsidiaries, or (C) require payments to be made in
excess of $100,000 per year for goods and/or services and do not by their terms
expire and are not subject to termination within 60 days from the date of the
execution and delivery thereof (collectively, "Material Contracts"), and (ii) a
written description of each Material Contract of which the Company is aware that
has not been reduced to writing; provided, however, that blanket purchase orders
or similar arrangements shall not be considered Material Contracts for purposes
of this Agreement. Each of the Material Contracts is listed on Schedule 4.1(v).
Neither the Company nor any of its Subsidiaries is, or has received any written
notice that any other party is, in default in any respect under any such
Material Contract, except as listed on Schedule 4.1(v) and except for those
defaults which would not, either individually or in the aggregate, have a
Material Adverse Effect with respect to the Company; and, to the Company's
knowledge, there has not occurred any event or events that with the lapse of
time or the giving of notice or both would constitute such a material default,
except as listed on Schedule 4.1(v) and except for those defaults which would
not, either individually or in the aggregate, have a Material Adverse Effect
with respect to the Company.
(w) Related Party Transactions. Except as set forth on
Schedule 4.1(w) and except for the Transaction Documents, the Employee
Arrangements or the Benefit Plans or as otherwise disclosed hereunder, no
director, officer, "affiliate" or "associate" (as such terms are defined in Rule
12b-2 under the Exchange Act) of the Company or any of its Subsidiaries (i) has
borrowed any monies from or has outstanding any indebtedness or other similar
obligations to the Company or any of its Subsidiaries or (ii) is otherwise a
party to any contract, arrangement or understanding with the Company or any of
its Subsidiaries.
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(x) Schedule 14D-9, Offer Documents and Schedule 14D-1. The
Schedule 14D-9 and any amendments and supplements thereto will, when filed with
the SEC and when published, sent or given to holders of Company Common Stock,
comply as to form in all material respects with the Exchange Act and will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by the Company with respect to
information supplied by Parent or Sub in writing for inclusion therein. None of
the information supplied by the Company for inclusion in the Offer Documents or
the Schedule 14D-1, and any amendments thereof, or supplements thereto, will,
when such materials are filed with the SEC and when published, sent or given to
holders of Company Common Stock, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
4.2. REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB. Parent and Sub
represent and warrant to the Company as follows:
(a) Organization, Standing and Power. Each of Parent and Sub
is a corporation duly organized, validly existing and in good standing under the
laws of its respective jurisdiction of incorporation and has all requisite power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted. All of the issued and outstanding capital stock
of Sub is owned directly by Parent free and clear of any lien, mortgage, pledge,
charge or encumbrance of any kind. Parent and Sub have heretofore made available
to the Company complete and correct copies of their respective Certificates of
Incorporation and Bylaws.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent and Sub has all requisite
corporate power and authority to enter into each of the Transaction
Documents to which it is a party and to consummate the transactions
contemplated thereby. The execution and delivery of each of the
Transaction Documents to which Parent or Sub is a party and the
consummation of the transactions contemplated thereby have been
respectively duly authorized by all necessary corporate action on the
part of Parent and Sub. Each of the Transaction Documents to which
Parent or Sub is a party have been respectively duly executed and
delivered by each of Parent and Sub and, assuming that such constitute
the valid and binding agreements of the other parties thereto
respectively constitute valid and binding obligations of Parent and Sub
enforceable in accordance with their terms and conditions except that
the enforcement hereof or thereof may be limited by (a) applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance or other similar laws now or hereafter in effect relating to
creditors' rights generally and (b)
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<PAGE> 45
general principles of equity (regardless of whether enforceability is
considered in a proceeding at law or in equity).
(ii) The execution and delivery of each of the
Transaction Documents to which the Parent or Sub is a party and the
consummation of the transactions contemplated thereby by each of Parent
and Sub will not (A) result in any Violation pursuant to any provision
of the respective Certificates of Incorporation or Bylaws of Parent or
Sub or (B) except as to which requisite waivers or consents have been
obtained and assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in paragraph (iii) of
this Section 4.2(b) are duly and timely obtained or made and, if
required, the Company Stockholder Approval has been obtained, result in
any Violation of (1) any loan or credit agreement, note, mortgage,
indenture, lease, or other agreement, obligation, instrument,
concession, franchise or license or (2) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to Parent or Sub
or their respective properties or assets, except in the case of clauses
(1) and (2), for any Violations that, individually or in the aggregate,
would not have a Material Adverse Effect on Parent, materially impair
the ability of either Parent or Sub to perform its obligations
hereunder or under any of the Transaction Documents or prevent the
consummation of any of the transactions contemplated hereby or thereby.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, notice to, or permit
from any Governmental Entity is required by or with respect to Parent
or Sub in connection with their respective execution and delivery of
each of the Transaction Documents to which it is a party or the
consummation by each of Parent and Sub of the transactions contemplated
thereby, except for: (A) filings under the HSR Act; (B) the filing with
the SEC of such reports under and such other compliance with the
Exchange Act and the rules and regulations thereunder as may be
required in connection with this Agreement and the transactions
contemplated hereby, including the Schedule 14D-1; (C) the filing of
the Certificate of Merger with the Secretary of State of the State of
Delaware; (D) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws; (E) such
filings in connection with any Gains and Transfer Taxes; (F) such
filings and consents as may be required under any environmental, health
or safety law or regulation pertaining to any notification, disclosure
or required approval necessitated by the Merger or the transactions
contemplated by this Agreement; and (G) filings, consents, approvals
and authorizations under ISRA.
(c) Information Supplied for Proxy Statement. None of the
information supplied or to be supplied by Parent or Sub specifically for
inclusion or incorporation by reference in the Proxy Statement will, on the date
it is first mailed to the holders of Company Common Stock or at the Meeting
Date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
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statements therein, in light of the circumstances under which they are made, not
misleading. If, at any time prior to the Meeting Date, any event with respect to
Parent or Sub, or with respect to information supplied by Parent or Sub
specifically for inclusion in the Proxy Statement, shall occur which is required
to be described in an amendment of, or a supplement to, such document, such
event shall be so described to the Company. All documents that Parent or Sub is
responsible for filing with the SEC in connection with the transactions
contemplated herein will comply as to form, in all material respects, with the
provisions of the Securities Act, the Exchange Act or the rules and regulations
thereunder, and each such document required to be filed with any Governmental
Entity other than the SEC will comply in all material respects with the
provisions of applicable law as to the information required to be contained
therein. Notwithstanding the foregoing, Parent and Sub make no representation or
warranty with respect to the information supplied or to be supplied by the
Company for inclusion in the Proxy Statement.
(d) Board Recommendation. As of the date hereof, the Board of
Directors of Parent has determined that each of the Transaction Documents to
which it is a party and the transactions contemplated thereby, including the
Offer and the Merger, taken together, are fair to and in the best interests of
Parent and has approved the same.
(e) Financing. Parent and Sub have delivered to the Company a
true and complete copy of a letter of commitment obtained by Parent from
Wasserstein Perella & Co., Inc. with respect to the debt financing for the
transactions contemplated hereby (the "Financing Commitment"). An executed copy
of the Financing Commitment is attached hereto as Schedule 4.2(e). Assuming that
the financing contemplated by the Financing Commitment is consummated in
accordance with the terms thereof, the funds to be borrowed and/or provided
thereunder, together with Parent's available cash, will provide sufficient funds
to pay the Offer Price upon consummation of the Offer, the Merger Consideration,
the refinancing of all indebtedness for borrowed money of the Company which is
required to be refinanced pursuant to the terms of such indebtedness in
connection with the Offer or the Merger, and all related fees and expenses. As
of the date of this Agreement, Parent is not aware of any facts or circumstances
that create a reasonable basis for Parent to believe that Parent will not be
able to obtain financing in accordance with the terms of the Financing
Commitment. Parent agrees to promptly notify the Company if the statements in
the immediately preceding sentence are no longer true and correct.
(f) Schedule 14D-1, Offer Documents and Schedule 14D-9. The
Offer Documents and the Schedule 14D-1 and all amendments and supplements
thereto, will, when filed with the SEC and when published, sent or given to
holders of Company Common Stock, comply as to form in all material respects with
the Exchange Act and will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, except that no representation is made by Parent
or Sub with respect to information supplied by or on behalf of the Company for
inclusion
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therein. None of the information supplied by Parent or Sub for inclusion in the
Schedule 14D-9 and any amendments thereof or supplements thereto will, when such
materials are filed with the SEC and when published, sent or given to holders of
Company Common Stock contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
ARTICLE 5
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1. COVENANTS OF THE COMPANY. During the period from the date of this
Agreement and continuing until the Effective Time, the Company agrees as to the
Company and its Subsidiaries that (except as expressly contemplated or permitted
by the Transaction Documents, or to the extent that Parent shall otherwise
consent in writing):
(a) Ordinary Course. Subject to the other terms and provisions
of this Agreement, each of the Company and its Subsidiaries shall carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and shall use all reasonable efforts to preserve
intact its present business organization, keep available the services of its
current officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it, in each case in all
material respects.
(b) Dividends; Changes in Stock. The Company shall not, nor
shall it permit any of its Subsidiaries to (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock (except for
cash dividends paid to the Company by its wholly-owned Subsidiaries with regard
to its capital stock); provided, however, that the Company may declare and pay
to holders of Shares regular quarterly dividends to stockholders of record with
such record dates as are consistent with past practice, which payments in no
event shall exceed $0.03 per share per quarter; (ii) split, combine or
reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock; or (iii) repurchase or otherwise acquire, or
permit any Subsidiary to purchase or otherwise acquire, any shares of its
capital stock, except (A) as contemplated by Section 3.5 of this Agreement and
(B) as required by the terms of its securities outstanding or any employee
benefit plan in effect on the date hereof.
(c) Issuance of Securities. Except as contemplated by Section
3.5 of this Agreement and except for Shares issuable pursuant to outstanding
Options, Unvested Stock and rights as described in Section 4.1(b) and except as
contemplated by the Stock Purchase Agreement dated the date hereof between the
Company and Parent, the Company shall not, nor shall it permit any of its
Subsidiaries to, (i) grant any options, warrants or rights, to purchase shares
of capital stock of the Company, (ii) amend the terms of or reprice any Option
or amend the terms of any of the Stock Option Plans, or (iii) issue, deliver or
sell, or authorize
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or propose to issue, deliver or sell, any shares of its capital stock of any
class or series (except for issuances of capital stock of the Company's
Subsidiaries to the Company or to a wholly-owned Subsidiary of the Company), any
Company Voting Debt or any securities convertible into, or any rights, warrants
or options to acquire, any such shares, Company Voting Debt or convertible
securities, other than the issuance of Shares upon the exercise of Options that
are outstanding on the date hereof.
(d) Governing Documents. The Company shall not amend or
propose to amend its Certificate of Incorporation or By-Laws.
(e) No Solicitation. From and after the date hereof until the
termination of this Agreement, neither the Company nor any of its Subsidiaries,
nor any of their respective officers, directors, representatives, agents or
affiliates (including, without limitation, any investment banker, attorney or
accountant retained by the Company or any of its Subsidiaries) (such officers,
directors, employees, representatives, agents, affiliates, investment bankers,
attorneys and accountants being referred to herein, collectively, as
"Representatives") will, and the Company will cause the employees of the Company
and its Subsidiaries not to, directly or indirectly, initiate, solicit or
encourage (including by way of furnishing information or assistance), or take
any other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Acquisition Proposal
(as defined below), or enter into or maintain or continue discussions or
negotiate with any person or entity in furtherance of such inquiries or for the
purpose of obtaining an Acquisition Proposal, or agree to or endorse any
Acquisition Proposal, and neither the Company nor any of its Subsidiaries will
authorize or permit any of its Representatives to take any such action, and the
Company shall (except with respect to any inquiry or proposal covered by the
proviso to this sentence) notify Parent orally (within one business day) and in
writing (as promptly as practicable) of all of the relevant details relating to,
and all material aspects of, all inquiries and proposals which it or any of its
Subsidiaries or any of their respective Representatives may receive relating to
any of such matters and, if such inquiry or proposal is in writing, the Company
shall deliver to Parent a copy of such inquiry or proposal as promptly as
practicable; provided, however, that, prior to the receipt of the Company
Stockholder Approval, nothing contained in this Section 5.1(e) shall prohibit
the Board of Directors of the Company from:
(i) following the receipt of an unsolicited written,
bona fide Acquisition Proposal from any person or entity, (x)
furnishing information to, or entering into discussions or negotiations
with, the person or entity that makes such Acquisition Proposal, or (y)
withdrawing, modifying or not making its recommendations referred to in
Section 1.2 or terminating this Agreement pursuant to Section 8.1(i)
(provided that, in the case of clause (y) above, such person or entity
has the necessary funds or shall have obtained customary commitments to
provide the funds to effect such Acquisition Proposal) if, and only to
the extent that, (A) in the case of either clause (x) or (y) above, the
Board of Directors of the Company, after consultation with its
independent legal counsel (who may be the Company's regularly engaged
independent
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legal counsel), determines in good faith that such action is advisable
for the Board of Directors of the Company to comply with its fiduciary
duties to stockholders under applicable law, (B) prior to taking such
action, the Company (1) in the case of either clause (x) or (y) above,
provides reasonable prior notice to Parent to the effect that it is
taking such action, which notice shall (to the extent consistent with
the fiduciary duties of the Board of Directors to stockholders under
applicable law) include the identity of the person or entity engaging
in such discussions or negotiations, requesting such information or
making such Acquisition Proposal, and the material terms and conditions
of any Acquisition Proposal and (2) in the case of clause (x) above,
receives from such person or entity an executed confidentiality
agreement in reasonably customary form on terms no less favorable to
the Company than those contained in the Confidentiality Agreement (as
defined in Section 6.1) (except that such confidentiality agreement
need not require approval of the Board of Directors of the Company
prior to the making of an offer or a proposal to such Board of
Directors), and (C) in the case of clause (x) above, the Company shall,
to the extent consistent with the fiduciary duties of the Board of
Directors to stockholders under applicable law, promptly and
continuously advise Parent as to all of the relevant details relating
to, and all material aspects, of any such discussions or negotiations;
or
(ii) taking and disclosing to the stockholders of the
Company a position contemplated by Rule 14e-2 under the Exchange Act
if, after the receipt of an unsolicited written, bona fide Acquisition
Proposal, the Board of Directors of the Company, after consultation
with its independent legal counsel (who may be the Company's regularly
engaged independent counsel), determines in good faith that such action
is advisable for the Board of Directors of the Company to comply with
its fiduciary duties to holders of Shares under applicable law.
Except for the confidentiality agreement referred to
in clause (i) above and subject to Section 8.1(i), nothing in this
Section 5.1(e) shall permit the Company to enter into any agreement
with respect to any Acquisition Proposal during the term of this
Agreement (it being agreed that during the term of this Agreement, the
Company shall not enter into any agreement with any person that
provides for, or in any way facilitates, any Acquisition Proposal other
than a confidentiality agreement in reasonably customary form following
receipt from a third party of an unsolicited written, bona fide
Acquisition Proposal). The Company shall immediately cease and cause to
be terminated any existing solicitation, initiation, encouragement,
activity, discussion or negotiation with any parties conducted
heretofore by the Company or any Representatives with respect to any
Acquisition Proposal existing on the date hereof.
For purposes of this Agreement, "Acquisition
Proposal" shall mean any proposal or offer (other than the transactions
among the Company, Parent and Sub contemplated hereunder) involving the
Company or any of its Subsidiaries for, or an inquiry or indication of
interest that reasonably could be expected to lead to: (A) any
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merger, consolidation, share exchange, recapitalization, business
combination, or other similar transaction; (B) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of a material
portion of the assets of the Company and its Subsidiaries, taken as a
whole, in a single transaction or series of transactions; or (C) any
tender offer or exchange offer for all or any portion of the
outstanding shares of capital stock of the Company or any of its
Subsidiaries or the filing of a registration statement under the
Securities Act in connection therewith.
(f) No Acquisitions. The Company shall not, nor shall it
permit any of its Subsidiaries to, (i) merge or consolidate with, or acquire any
equity interest in, any corporation, partnership, association or other business
organization, or enter into an agreement with respect thereto or (ii) acquire or
agree to acquire any assets of any corporation, partnership, association or
other business organization or division thereof, except for the purchase of
inventory and supplies in the ordinary course of business or the acquisition by
the Company or any Subsidiary of equity interests in any customer or supplier of
the Company in satisfaction of outstanding claims against such party in
bankruptcy proceedings consistent with past practice.
(g) No Dispositions. Other than sales of inventory or sales or
returns of obsolete or surplus equipment in the ordinary course of business
consistent with past practice, the Company shall not, nor shall it permit any of
its Subsidiaries to, sell, lease, encumber or otherwise dispose of, or agree to
sell, lease (whether such lease is an operating or capital lease), encumber or
otherwise dispose of, any of its material assets (including, without limitation,
any capital stock or other ownership interest of any Subsidiary of the Company).
(h) Governmental Filings. The Company shall promptly provide
Parent (or its counsel) with copies of all filings made by the Company with the
SEC or any other state or federal Governmental Entity in connection with this
Agreement and the transactions contemplated hereby.
(i) Termination of Affiliate Agreements. Effective as of the
Closing, the Company shall cause each of the agreements described on Schedule
4.1(w) (and that are indicated thereon as being subject to this Section 5.1(i))
to be terminated without any liability to the Company or any of its
Subsidiaries.
(j) No Dissolution, Etc. The Company shall not authorize,
recommend, propose or announce an intention to adopt a plan of complete or
partial liquidation or dissolution of the Company or any of its Subsidiaries.
(k) Certain Employee Matters. The Company and its Subsidiaries
shall not (without the prior written consent of Parent, which consent will not
be unreasonably withheld) (i) grant any increases in the compensation of any of
its directors, officers, management employees or key employees, except as may be
required pursuant to any of the existing Benefit
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Plans or Employee Arrangements as disclosed in a Schedule hereto; (ii) pay or
agree to pay any pension, retirement allowance or other employee benefit not
required or contemplated to be paid prior to the Effective Time by any of the
existing Benefit Plans or Employee Arrangements as in effect on the date hereof
to any such director, officer, management employee or key employee, whether past
or present; (iii) enter into any new, or materially amend any existing,
employment or severance or termination agreement with any such director,
officer, management employee or key employee; (iv) except as may be required to
comply with applicable law, become obligated under any new Benefit Plan or
Employee Arrangement, which was not in existence on the date hereof, or amend
any such plan or arrangement in existence on the date hereof if such amendment
would have the effect of materially enhancing any benefits thereunder; or (v)
extend any loans or advances to any of its directors, officers, management
employees or key employees, except as expressly permitted under the Transaction
Documents.
(l) Indebtedness; Agreements.
(i) The Company shall not, nor shall the Company
permit any of its Subsidiaries to, without the prior written consent of
Parent (which shall not be unreasonably withheld), assume or incur any
indebtedness for borrowed money (except for drawdowns by the Company
under its revolving credit facility or its accounts receivable
facility) or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the
Company or any of its Subsidiaries or guarantee any debt securities of
any other person except wholly-owned Subsidiaries of the Company or
enter into any lease (whether such lease is an operating or capital
lease) or create any mortgages, liens, security interests or other
encumbrances on the property of the Company or any of its Subsidiaries
in connection with any indebtedness thereof, or enter into any "keep
well" or other agreement or arrangement to maintain the financial
condition of any other person except wholly-owned Subsidiaries of the
Company.
(ii) Except as set forth in Schedule 5.1(n), without
the prior written consent of Parent (which shall not be unreasonably
withheld), the Company shall not, nor shall the Company permit any of
its Subsidiaries to, (A) enter into any contracts involving aggregate
annual payments in excess of $250,000 or (B) modify, rescind,
terminate, waive, release or otherwise amend in any material respect
any of the terms or provisions of any Material Contract in any manner
that is material and adverse to the Company or the respective
Subsidiary of the Company party thereto.
(m) Accounting. The Company shall not take any action, other
than in the ordinary course of business, consistent with past practice or as
required by the SEC, by law or by changes in GAAP, with respect to accounting
policies, procedures and practices.
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(n) Capital Expenditures. Except for the capital expenditures
set forth on Schedule 5.1(n), the Company and its Subsidiaries shall not incur
any capital expenditures in excess of $100,000.
(o) Other Actions. Except as expressly permitted by the terms
of this Agreement, the Company will not knowingly or intentionally take or agree
or commit to take, nor will it permit any of its Subsidiaries to take or agree
or commit to take, any action that is reasonably likely to result in any of the
Company's representations or warranties hereunder being untrue in any material
respect or any of the conditions to the Merger not being satisfied in all
material respects.
(p) Tax Matters. Neither the Company nor any of its
Subsidiaries will take any action that would cause the transactions contemplated
by this Agreement to fail to qualify for the exceptions described in former
Treas. Regs. ss. 1.1502-13(f)(2)(i), Treas. Regs. ss. 1. 1502- 13(f)(5), former
Treas. Regs. ss. 1.1502-19(g)(1) and Treas. Regs. ss. 1.1502-19(c)(3).
(q) Appraisal Rights. The Company shall not settle or
compromise any claim for appraisal rights in respect of the Merger without the
prior written consent of Parent or Sub.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1. ACCESS TO INFORMATION. Upon reasonable notice, the Company shall
(and shall cause each of its Subsidiaries to) afford to the officers, employees,
accountants, counsel and other representatives of Parent and Sub (including
potential financing sources and their employees, accountants, counsel and other
representatives), access, during normal business hours during the period prior
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, the Company shall (and shall cause each of its
Subsidiaries to) furnish promptly to Parent and Sub, (a) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to SEC requirements and (b) all other information
concerning its business, properties and personnel as Parent and Sub may
reasonably request. Subject to Section 9.2, the Confidentiality Agreement, dated
as of September 27, 1995, as amended to date, between Parent and the Company
(the "Confidentiality Agreement") shall apply with respect to information
furnished thereunder or hereunder and any other activities contemplated thereby
or hereby.
6.2. ASSISTANCE. If Parent requests, the Company will cooperate, and
will cause its accountants to cooperate, in all reasonable respects with any
financing efforts of Parent or its affiliates (including providing assistance in
the preparation of one or more registration statements or other offering
documents relating to debt and/or equity financing) and any other
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filings that may be made by Parent or its affiliates with the SEC, all at the
sole expense of Parent. The Company (a) shall furnish to its independent
accountants (or, if requested by Parent to Parent's independent public
accountants), such customary management representation letters as its
accountants may require of the Company as a condition to its execution of any
required accountants' consents necessary in connection with the delivery of any
"comfort" letters requested by financing sources of Parent or its affiliates and
(b) shall furnish to Parent all financial statements (audited and unaudited) and
other information in the possession of the Company or its representatives or
agents as Parent shall reasonably determine is necessary or appropriate in
connection with such financing. Without limiting the generality of the
foregoing, the Company agrees to cooperate with Parent's and Sub's efforts to
secure the financing contemplated by the Financing Commitment, such cooperation
to include providing such information to Parent's and Sub's financing sources as
Parent or Sub may reasonably request and making available to such financing
sources senior officers and such other employees of the Company as Parent and
Sub may reasonably request to assist in the preparation of one or more offering
documents and other appropriate marketing materials and to otherwise participate
in such marketing and sales efforts relating to the Financing Commitment as
Parent and Sub may reasonably request upon reasonable notice and consistent with
such officers' and employees' other business responsibilities to the Company.
6.3. Compliance with New Jersey ISRA.
-------------------------------
(a) The Company shall make all reasonable efforts to comply
with all obligations imposed by ISRA with respect to the transactions
contemplated by this Agreement. The Company's obligations shall include, as
appropriate: (i) timely submission of notice to the New Jersey Department of
Environmental Protection and Energy (the "NJDEPE") and (ii) preparation and
filing with NJDEPE of a proposed negative declaration, a proposed remedial
action workplan, appropriate documents for a remediation agreement, a deferral
of the remedial action workplan, or an area of concern waiver; provided that the
Company shall obtain the approval and consent of Parent and Sub, which approval
and consent shall not be unreasonably withheld, prior to entering into any
remediation agreement with, or making any other enforceable commitment to,
NJDEPE to satisfy the requirements of ISRA.
(b) Parent and the Sub shall use their reasonable efforts to
assist and cooperate with the Company and its representatives, in a prompt and
timely manner, in connection with the preparation and filing of all necessary
documents under ISRA.
6.4. Fees and Expenses.
-----------------
(a) Except as otherwise provided in this Section 6.4 and
except with respect to claims for damages incurred as a result of the material
breach of this Agreement, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such expense.
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(b) In the event of the termination of this Agreement under
(i) Section 8.1(b)(ii) (with respect to the Company's stockholder vote) if, at
the time of such termination or after the date hereof and prior to the
Stockholders' Meeting, there shall have been any public announcement of an
Acquisition Proposal (other than an Acquisition Proposal that shall have been
publicly withdrawn at least 15 days prior to the taking of the vote at the
Stockholders' Meeting), (ii) Section 8.1(h) or (iii) Section 8.1(i), then,
except as provided in Section 6.4(c), the Company shall pay to Parent or
Parent's designee, contemporaneously with the termination of this Agreement, the
following amounts in immediately available funds:
(x) a fee in the amount of $9,500,000, and
(y) such amount, not to exceed $2,500,000, as may be
required to reimburse Parent and its affiliates for all
reasonable out-of-pocket fees, costs and expenses incurred by
any of them in connection with their due diligence efforts or
the transactions contemplated in the Transaction Documents or
in the Financing Commitment, including, without limitation,
(A) fees, costs and expenses of accountants, escrow agents,
counsel, financial advisors and other similar advisors, (B)
fees paid to any Governmental Entity, (C) fees, costs and
expenses paid or payable to third parties under the Financing
Commitment or in connection with the transactions contemplated
therein, including, without limitation, any purchaser or
underwriter's discounts relating to the sale of the
subordinated debt financing contemplated therein or (except
for the principal amount payable in connection therewith, but
including all accrued interest payable in connection
therewith) the making of any repurchase offer in respect of
such subordinated debt financing.
(c) Any amounts that may be due and payable under this Section
6.4 as a result of the event described in Section 6.4(b)(i) shall be due and
payable only if, within 12 months after such termination, the Company
consummates an Acquisition Proposal and in such case such amounts shall be due
and payable at the closing or other consummation of such Acquisition Proposal.
(d) Any amounts due under this Section 6.4 that are not paid
when due shall bear interest at the prime rate of interest as announced from
time to time by The Chase Manhattan Bank plus 1% from the date due through and
including the date paid.
6.5. Brokers or Finders.
------------------
(a) The Company represents, as to itself, its Subsidiaries and
its affiliates, that, except as set forth in Schedule 6.5(a), no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any broker's or finders fee or any other commission or similar fee
in connection with any of the transactions contemplated by this
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Agreement, except the Financial Advisor, whose fees and expenses will be paid by
the Company in accordance with the Company's agreements with such firm (copies
of which have been delivered by the Company to Parent prior to the date of this
Agreement).
(b) Parent represents, as to itself, its Subsidiaries and its
affiliates, that no agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement, except for Wasserstein Perella & Co., Inc.,
whose fees and expenses will be paid by Parent in accordance with the Parent's
agreements with such firm.
6.6. Indemnification; Directors' and Officers' Insurance.
---------------------------------------------------
(a) The Company shall, and from and after the Effective Time,
the Surviving Corporation and Parent shall, indemnify, defend and hold harmless
each person who is now, or has been at any time prior to the date hereof or who
becomes prior to the Effective Time, an officer, director, employee or agent of
the Company or any of its Subsidiaries (the "Indemnified Parties") against all
losses, claims, damages, costs, expenses (including attorneys' fees and
expenses), liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer, employee
or agent of the Company or any of its Subsidiaries or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise or by reason of anything done or not done by such person in any such
capacity whether pertaining to any matter existing or occurring at or prior to
the Effective Time or any acts or omissions occurring or existing at or prior to
the Effective Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities"), including all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part out of,
or pertaining to this Agreement or the transactions contemplated hereby, in each
case to the full extent permitted by applicable law (and the Company, the
Surviving Corporation, and Parent, as the case may be, shall pay expenses in
advance of the final disposition of any such action or proceeding to each
Indemnified Party to the full extent permitted by law). In determining whether
an Indemnified Party is entitled to indemnification under this Section 6.6, if
requested by such Indemnified Party, such determination shall be made by
special, independent counsel selected by the Surviving Corporation and Parent
and approved by the Indemnified Party (which approval shall not be unreasonably
withheld), and who has not otherwise performed services for the Surviving
Corporation, Parent or their respective affiliates within the last three years
(other than in connection with such matters). Without limiting the foregoing, in
the event any such claim, action, suit, proceeding or investigation is brought
against any Indemnified Parties (whether arising before or after the Effective
Time), (i) the Indemnified Parties may retain the Company's regularly engaged
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independent legal counsel or counsel satisfactory to them and reasonably
satisfactory to the Company (or satisfactory to them and reasonably satisfactory
to the Surviving Corporation and Parent after the Effective Time), and the
Company (or after the Effective Time, the Surviving Corporation and Parent)
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties as promptly as statements therefor are received; and (ii) the Company
(or after the Effective Time, the Surviving Corporation and Parent) will use all
reasonable best efforts to assist in the vigorous defense of any such matter,
provided that none of the Company, the Surviving Corporation or Parent shall be
liable for any settlement effected without its prior written consent which
consent shall not unreasonably be withheld. Any Indemnified Party wishing to
claim indemnification under this Section 6.6, upon learning of any such claim,
action, suit, proceeding or investigation, shall notify the Company (or after
the Effective Time, the Surviving Corporation and Parent) (but the failure so to
notify shall not relieve a party from any liability which it may have under this
Section 6.6 except to the extent such failure materially prejudices such party's
position with respect to such claims) and shall deliver to the Company (or after
the Effective Time, the Surviving Corporation and Parent) the undertaking
contemplated by Section 145(e) of the DGCL, but without any requirement for the
posting of a bond. The Indemnified Parties as a group may retain only one law
firm (plus one local counsel, if necessary) to represent them with respect to
each such matter unless the use of counsel chosen to represent the Indemnified
Parties would present such counsel with a conflict of interest, or the
representation of all of the Indemnified Parties by the same counsel would be
inappropriate due to actual or potential differing interests between them, in
which case such additional counsel as may be required (as shall be reasonably
determined by the Indemnified Parties and the Company, the Surviving Corporation
or Parent, as the case may be) may be retained by the Indemnified Parties at the
cost and expense of the Company, Surviving Corporation or Parent, as the case
may be. The Company and Sub agree that the foregoing rights to indemnification,
including provisions relating to advances of expenses incurred in defense of any
action or suit, existing in favor of the Indemnified Parties with respect to
matters occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time; provided, however, that all rights to indemnification
(including rights relating to advances of expenses) in respect of any
Indemnified Liabilities asserted or made within such period shall continue until
the disposition of such Indemnified Liabilities. Furthermore, the provisions
with respect to indemnification set forth in the Certificate of Incorporation or
Bylaws of the Surviving Corporation shall not be amended for a period of six
years following the Effective Time if such amendment would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors, officers, employees or agents of the Company in respect of
actions or omissions occurring at or prior to the Effective Time.
(b) The Company (or after the Effective Time, the Surviving
Corporation and Parent) shall indemnify any Indemnified Party against all
reasonable costs and expenses (including attorney's fees and expenses), such
amounts to be payable in advance upon request as provided in Section 6.6(a),
relating to the enforcement of such Indemnified Party's rights
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under this Section 6.6 or under the documents referred to in this Section 6.6
regardless of whether or not such Indemnified Party is ultimately determined to
be entitled to indemnification hereunder or thereunder. Any amounts due pursuant
to the preceding sentence shall be payable upon request by the Indemnified Party
and shall bear interest from the date that such were originally due and payable
at a rate equal to the prime rate of interest as announced by The Chase
Manhattan Bank plus 1% as in effect on the date of such initial request.
(c) For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officers' liability insurance maintained by the
Company and its Subsidiaries (provided that Parent may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous to the Indemnified Parties) with
respect to matters arising before and acts or omissions occurring or existing at
or prior to the Effective Time including the transactions contemplated by this
Agreement, provided that Parent shall not be required to pay an annual premium
for such insurance in excess of 125% of the last annual premium paid by the
Company prior to the date hereof, but in such case shall purchase as much
coverage as possible for such amount. The last annual premium paid by the
Company was $523,720.
(d) For a period of 6 years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect the current
policies of fiduciary liability insurance maintained by the Company and its
Subsidiaries (provided that Parent may substitute therefor policies of at least
the same coverage and amounts containing terms and conditions which are no less
advantageous to the Indemnified Parties who are covered thereby) with respect to
matters arising before and acts or omissions occurring or existing at or prior
to the Effective Time, provided that Parent shall not be required to pay an
annual premium for such insurance in excess of 200% of the last annual premium
paid by the Company prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount. The last annual premium paid by the
Company was $13,500. Furthermore, the provisions with respect to indemnification
provided for under any Benefit Plan or Employee Arrangement shall not be amended
for a period of six years following the Effective Time if such amendment would
adversely affect the rights thereunder of individuals who at any time prior to
the Effective Time were directors, officers, employees or agents of the Company
in respect of actions or omissions occurring at or prior to the Effective Time.
(e) The provisions of this Section 6.6 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his heirs
and his personal representatives and shall be binding on all successors and
assigns of Sub, the Company and the Surviving Corporation.
(f) The Company will honor the indemnification agreements
identified in Schedule 4.1(w), except for the provisions relating to the
establishment of trusts. The
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Company may enter into substantially similar indemnification agreements with
other directors of the Company, provided that such agreements shall not contain
any provisions for the establishment of trusts.
(g) Nothing in this Section 6.6 shall be interpreted as
obligating the Company (or from and after the Effective Time, the Surviving
Corporation), Parent, Sub or any of their respective successors or assigns, to
pay, make reimbursement for or otherwise assume responsibility for any Taxes or
penalties imposed on any officer, director, employee or agent or for any other
amount relating to any of such Person's Tax obligations or liabilities.
6.7. REASONABLE EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, under applicable laws and regulations or
otherwise, to consummate and make effective the transactions contemplated by the
Transaction Documents, subject, as applicable, to the Company Stockholder
Approval, including cooperating fully with the other party, including by
provision of information and making of all necessary filings in connection with,
among other things, approvals under the HSR Act. The Company will use all
reasonable efforts to obtain any consent from third parties necessary to allow
the Company to continue operating its business as presently conducted as a
result of the consummation of the transactions contemplated hereby. In case at
any time after the Effective Time, any further action is necessary or desirable
to carry out the purposes of this Agreement or to vest the Surviving Corporation
with full title to all properties, assets, rights, approvals, immunities and
franchises of either of the Constituent Corporations, the proper officers and
directors of each party to this Agreement shall take all such necessary action.
6.8. PUBLICITY. The parties will consult with each other and will
mutually agree upon any press release or public announcement pertaining to the
Merger and shall not issue any such press release or make any such public
announcement prior to such consultation and agreement, except as may be required
by applicable law (or stock exchange rules), in which case the party proposing
to issue such press release or make such public announcement shall use
reasonable efforts to consult in good faith with the other party before issuing
any such press release or making any such public announcement.
6.9. WITHHOLDING RIGHTS. Subject to Section 6.10, Parent and Sub, as
applicable, shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement (including pursuant to the Offer)
to any holder of shares of Company Common Stock, Options or Unvested Stock such
amounts as Parent or Sub, as applicable, is required to deduct and withhold with
respect to the making of such payment under the Code or any provision of state,
local or foreign tax law. To the extent that amounts are so withheld by Parent
or Sub, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company Common
Stock, Options or Unvested Stock in respect of which such deduction and
withholding was made by Parent or Sub.
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6.10. REAL ESTATE TAXES. Parent and Sub shall pay the full amount (on
behalf of themselves, the Company and the shareholders of the Company) of any
and all transfer, capital gains and other taxes, fees or costs incurred or
assessed by any New York City or New York State (or other state or local) taxing
authority for which Parent, Sub, the Company or the shareholders of the Company
are liable in connection with the sale or transfer of real estate pursuant to
the Offer or the Merger. Parent and Sub shall not be entitled to and shall not
deduct from the consideration otherwise payable to a holder of Shares pursuant
to the Offer or the Merger any amounts required to be paid by Parent and Sub
pursuant to the immediately preceding sentence.
6.11. HSR and Other Governmental Approvals.
------------------------------------
(a) HSR Act. Each party hereto shall file or cause to be filed
with the Federal Trade Commission (the "FTC") and the Antitrust Division of the
Department of Justice (the "Antitrust Division") any notification required to be
filed by their respective "ultimate parent" companies under the HSR Act and the
rules and regulations promulgated thereunder with respect to the transactions
contemplated hereby. Such parties will use all reasonable efforts to make such
filings promptly and to respond on a timely basis to any requests for additional
information made by either of such agencies. Each of the parties hereto agrees
to furnish the other with copies of all correspondence, filings and
communications (and memoranda setting forth the substance thereof) between it
and its affiliates and their respective representatives, on the one hand, and
the FTC, the Antitrust Division or any other Governmental Entity or members or
their respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby, other than personal financial information
filed therewith. Each party hereto agrees to furnish the others with such
necessary information and reasonable assistance as such other parties and their
respective affiliates may reasonably request in connection with their
preparation of necessary filings, registrations or submissions of information to
any Governmental Entities, including without limitation any filings necessary
under the provisions of the HSR Act.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its reasonable best efforts to promptly prepare and file all
necessary documentation to effect all necessary applications, notices,
petitions, filings and other documents, and use all reasonable efforts to obtain
(and will cooperate with each other in obtaining) any consent, acquiescence,
authorization, order or approval of, or any exemption or nonopposition by, any
Governmental Entity required to be obtained or made by Parent or the Company or
any of their respective Subsidiaries in connection with the Offer and the Merger
or the taking of any other action contemplated by this Agreement.
6.12. NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt
written notice to the other of (a) the occurrence, or failure to occur, of any
event of which it becomes aware that has caused or that would be likely to cause
any representation or warranty of such party
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contained in this Agreement to be untrue or inaccurate (in any material respect
for any representation or warranty not already qualified for materiality) at any
time from the date hereof to the Closing Date, (b) the failure of such party to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it hereunder and (c) in the case
of the Company, the occurrence of any threat by any executive officer or senior
management employee of the Company or any of its Subsidiaries to resign or
otherwise terminate their employment relationship with the Company or any of its
Subsidiaries.
6.13. SOLVENCY LETTER. Parent shall deliver to the Board of Directors
of the Company any solvency letter from any third party appraisal or similar
firm that Parent provides to the providers of the financing under the Financing
Commitment.
6.14. Continuation of Employee Benefits.
---------------------------------
(a) On and after the Effective Time, directors, officers and
employees of the Company and its Subsidiaries shall be provided employee
benefits, plans and programs (including but not limited to incentive
compensation, deferred compensation, pension, life insurance, medical (which
eligibility shall not be subject to any exclusions for any pre-existing
conditions if such individual has met the participation requirements of such
benefits, plans or programs of the Company or its Subsidiaries), profit sharing
(including 401(k)), severance salary continuation and fringe benefits) which are
no less favorable in the aggregate than those generally available to similarly
situated directors, officers and employees of Parent and its significant
Subsidiaries. For purposes of eligibility to participate and vesting in all
benefits provided to directors, officers and employees, the directors, officers
and employees of the Company and its Subsidiaries will be credited with their
years of service with the Company and its Subsidiaries and prior employers to
the extent service with the Company and its Subsidiaries and prior employers is
taken into account under plans of the Company and its Subsidiaries. Upon
termination of any medical plan of the Company or any of its Subsidiaries,
individuals who were directors, officers or employees of the Company or its
Subsidiaries at the Effective Time shall become eligible to participate in the
medical plan of Parent. Amounts paid before the Effective Time by directors,
officers and employees of the Company and its Subsidiaries under any medical
plans of the Company shall after the Effective Time be taken into account in
applying deductible and out-of-pocket limits applicable under the medical plan
of Parent provided as of the Effective Time to the same extent as if such
amounts had been paid under such medical plan of Parent.
(b) This Section 6.14, which shall survive the Effective Time
and shall continue without limit, is intended to benefit and bind the Company
and the Surviving Corporation, each of whom may enforce the provisions of this
Section 6.14. Nothing contained in this Section 6.14 shall create any third
party beneficiary rights in any director, officer or employee or former
director, officer or employee (including any beneficiary or dependent thereof)
of the Company, any of its Subsidiaries or the Surviving Corporation in
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respect of continued employment for any specified period of any nature or kind
whatsoever, and nothing contained in this Section 6.14 shall create such third
party rights in any such person in respect of any benefits that may be provided,
directly or indirectly, under any employee benefit plan or arrangement.
6.15. TRUSTEES. The Company will use its reasonable efforts to obtain
from each officer or director of the Company or any of its Subsidiaries who is
serving as a trustee of any Benefit Plan a duly executed resignation letter
resigning from such position effective as of the Effective Time. On or prior to
the Effective Time, the Company and its Subsidiaries may appoint a fiduciary or
advisor independent of the Company to vote, or advise on the vote of, as the
case may be, the Shares held by Benefit Plans, other than those required under
the Code to pass through voting rights to participants, in connection with the
solicitation of approval by the stockholders of this Agreement and the
transactions contemplated hereby.
6.16. WITHDRAWAL LIABILITY. The Company will cooperate with Parent and
use its best efforts to obtain from each Multiemployer Plan as soon as possible
following the execution of this Agreement (i) a copy of each Multiemployer Plan
and all amendments thereto and (ii) an estimate of the withdrawal liability as
defined in Section 4201 of ERISA (without regard to any subsequent reduction or
waiver of such liability under Section 4207 or 4208 of ERISA) which would be
owed by the Company or its ERISA Affiliates to such Multiemployer Plan if the
Company or its ERISA Affiliates ceased contributing to such Multiemployer Plan
immediately before the consummation of the transactions contemplated by this
Agreement (the "Withdrawal Liability"); the Company will cooperate with Parent
and use reasonable efforts to obtain (and provide to Parent) from each
Multiemployer Plan as soon as possible following the execution of this Agreement
all information necessary for the Company to compute the Withdrawal Liability;
the Company will provide all such documents, information and estimates requested
in this Section 6.16 to Parent upon receipt.
ARTICLE 7
CONDITIONS PRECEDENT
7.1. CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction prior to the Closing Date of the following conditions:
(a) Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote
thereon if such vote is required by applicable law.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and no restrictive
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order or other requirements shall have been placed on the Company, Parent, Sub
or the Surviving Corporation in connection therewith.
(c) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an "Injunction")
preventing the consummation of the Merger shall be in effect; provided, however,
that prior to invoking this condition, each party shall use all commercially
reasonable efforts to have any such decree, ruling, injunction or order vacated.
(d) Statutes. No statute, rule, order, decree or regulation
shall have been enacted or promulgated by any government or governmental agency
or authority which prohibits the consummation of the Merger.
(e) Consummation of the Tender Offer. Parent and Sub shall
have accepted for purchase and paid for Shares tendered pursuant to the Offer
(PROVIDED, HOWEVER, that this condition will be deemed satisfied with respect to
Parent and Sub if Sub shall have failed to purchase Shares pursuant to the Offer
in violation of the terms of the Offer or this Agreement).
ARTICLE 8
TERMINATION AND AMENDMENT
8.1. TERMINATION. This Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time, whether before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company or by Parent:
(a) by mutual written consent of the Company and Parent, or by
mutual action of their respective Boards of Directors;
(b) by either the Company or Parent (i) if any permanent
injunction or other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and non-appealable or (ii) if
the Company Stockholder Approval shall not have been obtained by reason of the
failure to obtain the required vote upon a vote held at the Stockholders'
Meeting, or at any adjournment thereof;
(c) by either the Company or Parent if the Offer shall not
have been consummated by October 31, 1997 or the Merger has not been consummated
by December 31, 1997; provided, however, that the right to terminate this
Agreement under this Section 8.1(c) shall not be available to any party whose
breach of any representation or warranty or failure to
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fulfill any covenant or agreement under this Agreement has been the cause of or
resulted in the failure of the Offer to be consummated or the Merger to occur on
or before such date;
(d) by Parent prior to the consummation of the Offer, so long
as Parent is not then in material breach of its obligations hereunder, if there
has been a breach of any representation or warranty (when made on or at the time
of termination as if made on such date of termination, except to the extent it
relates to a particular date) on the part of the Company (provided that any
representation or warranty of the Company contained herein that is subject to a
"materiality," "Material Adverse Effect" or similar qualification shall not be
so qualified for purposes of determining the existence of any breach thereof on
the part of the Company), and which breach has not been cured within ten
calendar days following receipt by the Company of notice of such breach and is
existing at the time of the termination of this Agreement, except for such
breaches that would not, individually or in the aggregate with any other
breaches on the part of the Company, (A) have a Material Adverse Effect on the
Company or (B) materially adversely affect the ability of the parties hereto to
consummate the transactions contemplated hereby;
(e) by Parent prior to the consummation of the Offer, so long
as Parent is not then in material breach of its obligations hereunder, if there
has been a breach of Section 5.1(e) or a material breach of any other covenant
or agreement on the part of the Company set forth in this Agreement (provided
that any covenant or agreement of the Company contained herein the performance
of which is subject to a "materiality," "Material Adverse Effect" or similar
qualification shall not be so qualified for purposes of determining the
existence of any nonperformance thereof on the part of the Company), and which
breach (other than a breach of any covenant or agreement set forth in Section
5.1(e)) has not been cured within ten calendar days following receipt by the
Company of notice of such breach and is existing at the time of the termination
of this Agreement;
(f) by the Company prior to the consummation of the Offer, so
long as the Company is not then in material breach of its obligations hereunder,
if there has been a breach of any representation or warranty (when made on or at
the time of termination as if made on such date of termination, except to the
extent it relates to a particular date) on the part of Parent or Sub (provided
that any representation or warranty of Parent or Sub contained herein that is
subject to a "materiality," "Material Adverse Effect" or similar qualification
shall not be so qualified for purposes of determining the existence of any
breach thereof on the part of Parent or Sub), and which breach has not been
cured within ten calendar days following receipt by Parent or Sub of notice of
such breach and is existing at the time of the termination of this Agreement,
except for such breaches that would not, individually or in the aggregate with
any other breaches on the part of Parent or Sub, (A) have a Material Adverse
Effect on Parent or Sub or (B) materially adversely affect the ability of the
parties hereto to consummate the transactions contemplated hereby;
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(g) by the Company prior to the consummation of the Offer, so
long as the Company is not then in material breach of its obligations hereunder,
if there has been a material breach of any covenant or agreement on the part of
Parent or Sub set forth in this Agreement (provided that any covenant or
agreement of Parent or Sub contained herein the performance of which is subject
to a "materiality," "Material Adverse Effect" or similar qualification shall not
be so qualified for purposes of determining the existence of any nonperformance
thereof on the part of Parent or Sub), and which breach has not been cured
within ten calendar days following receipt by Parent or Sub of notice of such
breach and is existing at the time of the termination of this Agreement;
(h) by Parent prior to the consummation of the Offer if (i)
the Board of Directors of the Company (whether or not under circumstances
permitted by this Agreement) shall have failed to make the recommendation
contemplated by Section 1.2 in the Schedule 14D-9 or shall have withdrawn or
modified, in any manner which is adverse to Parent, its recommendation or
approval of the Offer, the Merger or this Agreement and the transactions
contemplated hereby, or shall have resolved to do so, (ii) the Board of
Directors of the Company shall have recommended to the stockholders of the
Company any Acquisition Proposal, or shall have resolved to do so, or (iii) a
tender offer or exchange offer for 50% or more of the outstanding shares of
capital stock of the Company is commenced (other than by the Company or its
affiliates) and the Board of Directors of the Company fails to timely recommend
against the stockholders of the Company tendering their shares into such tender
offer or exchange offer; or
(i) by the Company prior to the consummation of the Offer,
pursuant to the termination right permitted by clause (y) of Section 5.1(e)(i)
of this Agreement; provided that the Company may not effect such termination
pursuant to this Section 8.1(i) unless and until (i) Parent receives at least
five days prior written notice (which notice shall include the identity of the
person or entity making the relevant Acquisition Proposal, the material terms
and conditions of such Acquisition Proposal and the material terms and
conditions of any agreements or arrangements to be entered into in connection
with such Acquisition Proposal with Jeffrey S. Silverman with respect to his
then existing agreements and arrangements with the Company) from the Company of
its intention to effect such termination pursuant to this Section 8.1(i), and
(ii) during such five-day period, the Company shall, and shall cause its
respective financial and legal advisors to, consider any adjustment in the terms
and conditions of this Agreement that Parent may propose; provided further that
the Company may not effect such termination pursuant to this Section 8.1(i)
unless the Company has contemporaneously with such termination tendered payment
to Parent or Parent's designee of the amounts that are due Parent or Parent's
designee under Section 6.4; or
(j) by either the Company or Parent if such party is not then
in material breach of its obligations hereunder, if upon the expiration of the
Offer, no Shares shall have been purchased in connection with the Offer.
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8.2. EFFECT OF TERMINATION. In the event of termination of this
Agreement by either the Company or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Sub or the Company or their respective
affiliates, officers, directors or shareholders except (a) with respect to this
Section 8.2, the second sentence of Section 6.1, and Sections 6.4 and 9.2 and
(b) that no such termination shall relieve any party from liability for a breach
hereof.
8.3. AMENDMENT. Subject to applicable law and the provisions of Section
1.6 hereof, this Agreement may be amended, modified or supplemented only by
written agreement of Parent, Sub and the Company at any time prior to the
Effective Time with respect to any of the terms contained herein; provided,
however, that, after the Company Stockholder Approval, no term or condition
contained in this Agreement shall be amended or modified in any manner that
would reduce the amount of or change the form of the Merger Consideration.
8.4. EXTENSION; WAIVER. Subject to the provisions of Section 1.6
hereof, at any time prior to the Effective Time, the parties hereto, by action
taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto, and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party
hereto to assert any of its rights hereunder shall not constitute a waiver of
such rights.
ARTICLE 9
GENERAL PROVISIONS
9.1. NONSURVIVAL OF COVENANTS AND AGREEMENTS. None of the
representations, warranties, covenants and agreements in this Agreement or in
any instrument delivered pursuant to this Agreement shall survive the Effective
Time, except for the covenants and agreements contained in Article 3 and
Sections 6.4, 6.6, 6.10 and 6.14 hereof and any other covenant or agreement that
contemplates performance after the Effective Time.
9.2. CONFIDENTIALITY AGREEMENT. The Confidentiality Agreement shall
survive the execution and delivery of this Agreement or any termination of this
Agreement, and the provisions of the Confidentiality Agreement shall apply to
all information and material delivered by any party hereunder; provided,
however, that the terms and provisions of the Confidentiality Agreement are
hereby waived, amended or modified to the extent necessary to permit the
consummation of the transactions contemplated by this Agreement. Upon the
Closing, the terms and provisions of the Confidentiality Agreement shall
terminate in full.
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9.3. NOTICES. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally, telegraphed or
telecopied or sent by certified or registered mail, postage prepaid, and shall
be deemed to be given, dated and received when so delivered personally,
telegraphed or telecopied or, if mailed, five business days after the date of
mailing to the following address or telecopy number, or to such other address or
addresses as such person may subsequently designate by notice given hereunder:
(a) if to Parent or Sub, to:
Nortek, Inc. and
NTK Sub, Inc.
50 Kennedy Plaza
Providence, RI 02903
Attn: Richard L. Bready
Telecopy: (401) 751-4610
with copies to:
Ropes & Gray
One International Place
Boston, MA 02110
Attn: David C. Chapin, Esq.
Telecopy: (617) 951-7050
(b) if to the Company, to:
Ply Gem Industries, Inc.
777 Third Avenue
New York, New York 10017
Attn: Jeffrey S. Silverman
Telecopy: (212) 888-0472
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Victor I. Lewkow, Esq.
Telecopy: (212) 225-3999
9.4. INTERPRETATION. When a reference is made in this Agreement to
Articles or Sections, such reference shall be to an Article or Section of this
Agreement unless otherwise indicated. The table of contents, list of defined
terms and headings contained in this
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Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the word "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrase "made available" in this
Agreement shall mean that the information referred to has been made available if
requested by the party to whom such information is to be made available. The
inclusion by the Company of any information or matter on a Schedule hereto is
not an admission on the part of the Company that such information or matter is
either required by the terms of this Agreement to be listed on such Schedule or
is otherwise material. Schedule 9.4 sets forth a list of all agreements or
understandings under which the Company or any of its subsidiaries has an
obligation pursuant to or in connection with the Agreement and Plan of Merger,
dated as of June 24, 1997 by and among Atrium Acquisition Holdings Corp.,
Atrium/PG Acquisition Corp. and the Company and the agreements and transactions
contemplated thereby (collectively, the "Atrium Agreements"). All obligations of
the Company or its subsidiaries contained in any document set forth on Schedule
9.4 shall be deemed disclosed for purposes of Schedules 4.1(a)-(x).
9.5. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when two or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
9.6. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; RIGHTS OF
OWNERSHIP. This Agreement (together with the Confidentiality Agreement (as
amended by Section 9.2), the other Transaction Documents, the schedules and
exhibits thereto, and any other documents and instruments referred to herein)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and, except as provided in Section 6.6, is not intended to
confer upon any person other than the parties hereto any rights or remedies
hereunder.
9.7. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
9.8. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Sub may assign, in its sole
discretion, any or all of its rights, interests and obligations hereunder (a) to
any newly-formed direct wholly-owned Subsidiary of Parent or Sub or (b) in the
form of a collateral assignment to any institutional lender who provides funds
to Sub for the consummation of the transactions contemplated hereby. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
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9.9. DIRECTOR AND OFFICER LIABILITY. The directors, officers, and
stockholders of each of the parties and their affiliates acting in such capacity
shall not in such capacity have any personal liability or obligation arising
under this Agreement (including any claims that the other parties may assert)
other than as an assignee of this Agreement.
9.10. SPECIFIC PERFORMANCE. The parties recognize that in the event the
Company should refuse to perform under the provisions of this Agreement,
monetary damages alone will not be adequate. Parent and Sub shall therefore be
entitled, in addition to any other remedies which may be available, including
money damages, to obtain specific performance of the terms of this Agreement. In
the event of any action to enforce this Agreement specifically, the Company
hereby waives the defense that there is an adequate remedy at law.
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<PAGE> 69
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective officers thereunto duly authorized, all as of the
date first written above.
PARENT:
NORTEK, INC.
By: /s/ Kevin W. Donnelly
----------------------------------------
Name: Kevin W. Donnelly
Title: Vice President and General Counsel
SUB:
NTK SUB, INC.
By: /s/ Kevin W. Donnelly
----------------------------------------
Name: Kevin W. Donnelly
Title: Vice President
COMPANY:
PLY GEM INDUSTRIES, INC.
By: /s/ Jeffrey S. Silverman
----------------------------------------
Name: Jeffrey S. Silverman
Title: Chairman
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Exhibit A
CONDITIONS OF THE OFFER
Reference is made to the Agreement and Plan of Merger, dated as of July
24, 1997 (the "Agreement"), by and among Nortek, Inc., a Delaware corporation
("Parent"), NTK Sub, Inc., a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and Ply Gem Industries, Inc., a Delaware corporation (the
"Company"). Capitalized terms defined in the Agreement and not otherwise defined
herein are used herein with the meanings so defined.
Notwithstanding any other provision of the Offer, Sub shall not be
required to accept for payment or, subject to any applicable rules and
regulations of the SEC, including without limitation, Rule 14e-1(c) under the
Exchange Act (relating to Sub's obligation to pay for or return Shares promptly
after termination or withdrawal of the Offer), pay for, or may delay the
acceptance for payment of or payment for, any tendered shares, if (i) any
applicable waiting period under the HSR Act shall not have expired or been
terminated, (ii) the number of Shares validly tendered and not withdrawn does
not constitute a majority of the shares of Company Common Stock then outstanding
on a fully diluted basis (the "Minimum Condition"), (iii) Parent and Sub shall
not have received the debt financing for the transactions contemplated by the
Agreement on terms substantially as outlined in the Financing Commitment, or
(iv) on or after the date of the Agreement and at or before the time of payment
for the Shares, any of the following events shall occur and be continuing:
(a) there shall have occurred and be continuing (1) any general
suspension of trading in, or general limitation on prices for, securities on the
New York Stock Exchange, Inc. (other than suspensions of not more than one
business day), (2) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States (whether or not mandatory),
(3) the commencement of a war, armed hostilities or other international or
national calamity involving the United States and having had or being reasonably
likely to have a Material Adverse Effect or materially adversely affecting (or
materially delaying) the consummation of the Offer, (4) any material limitation
or proposed material limitation (whether or not mandatory) by any Governmental
Entity, or any other event, that materially adversely affects generally the
extension of credit by banks or other financial institutions or (5) in the case
of any of the situations described in clauses (1) through (4) inclusive,
existing at the date of the Agreement, a material acceleration, escalation or
worsening thereof;
(b) the representations and warranties of the Company set forth in the
Agreement shall not have been true and correct in all respects (provided that
any representation or warranty of the Company contained in the Agreement that is
subject to a materiality, Material Adverse Effect or similar qualification shall
not be so qualified for purposes of determining the existence of any breach
thereof on the part of the Company) as of the date of the Agreement
<PAGE> 71
and (except to the extent such representations and warranties speak as of an
earlier date) as of the scheduled expiration date of the Offer as though made on
and as of such scheduled expiration date, except for such breaches that would
neither, individually or in the aggregate with any other breaches on the part of
the Company, (i) have a Material Adverse Effect on the Company nor (ii)
materially adversely affect the ability of the parties to the Agreement to
consummate the transactions contemplated by the Agreement; or the Company shall
not have performed in all material respects (provided that any obligation the
performance of which is subject to a materiality, Material Adverse Effect or
similar qualification shall not be so qualified for purposes of determining the
existence of any nonperformance thereof) all obligations required to be
performed by it under the Agreement;
(c) there shall be any action or proceeding commenced by any
Governmental Entity, which has a reasonable likelihood of success and which, if
decided adversely to the Company, would have a Material Adverse Effect or would
restrain, prohibit or materially delay the consummation of the Offer, and if
decided adversely to Parent, would have the effect of (i) making the purchase
of, or payment for, some or all of the Shares pursuant to the Offer or the
Merger or otherwise illegal, or resulting in a material delay in the ability of
Parent or Sub to accept for payment or pay for some or all of the Shares, (ii)
compelling Parent or Sub to dispose of or hold separately all or any material
portion of the Company's or Parent's business or assets, (iii) making illegal,
or otherwise directly or indirectly restraining or prohibiting or imposing
material financial burdens, penalties or, fines or requiring the payment of
material damages in connection with the making of, the Offer, the acceptance for
payment of, payment for, or ownership, directly or indirectly, of some of or all
the Shares by Parent or Sub, the consummation of the Offer or the Merger, (iv)
otherwise preventing consummation of the Offer or the Merger, or (v) imposing
material limitations on the ability of Parent or Sub effectively (A) to acquire,
hold or operate the business of the Company and its Subsidiaries taken as a
whole or (B) to exercise full rights of ownership of the Shares acquired by it,
including, but not limited to, the right to vote the Shares purchased by it on
all matters properly presented to the stockholders of the Company, which, in
either case, would effect a material diminution in the value of the Company or
the Shares;
(d) there shall have been any Law enacted, promulgated, entered or
deemed applicable to the Offer or the Agreement or any other action shall have
been taken by any Governmental Entity on or after the date of the Offer that
would result in any of the consequences referred to in clauses (i) through (v)
of paragraph (c) above (other than with respect to clause (i) of paragraph (c),
if there shall have been a material delay in the ability of Parent or Sub to
accept for payment or pay for some or all of the Shares due to a request for
additional information under the HSR Act);
(e) the Board of Directors of the Company shall have publicly
(including by amendment of its Schedule 14D-9) withdrawn or adversely modified
its recommendation of acceptance of the Offer;
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(f) since the date of the Agreement, there shall have occurred any
event or events that, singly or in the aggregate, have had or would have a
Material Adverse Effect; or
(g) the Agreement shall have been terminated in accordance with its
terms, or Parent or Sub shall have reached an agreement or understanding in
writing with the Company providing for termination or amendment of the Offer;
which, in any such case, and regardless of the circumstances (including any
action or inaction by Parent or Sub other than a breach by Parent or Sub of the
Agreement) giving rise to any such conditions, makes it in the reasonable
judgment of Parent inadvisable to proceed with the Offer and/or with such
acceptance for payment of the Shares.
The foregoing conditions are for the sole benefit of Parent and Sub and
may be asserted by Parent or Sub regardless of the circumstances giving rise to
any such condition (other than a breach by Parent or Sub of the Agreement) and
may be waived by Parent or Sub, in whole or in part, at any time and from time
to time, in the sole discretion of Parent or Sub; provided, that the Minimum
Condition is also for the benefit of the Company and may not be waived without
the Company's consent. The failure by Parent or Sub at any time to exercise any
of the foregoing rights will not be deemed a waiver of any right and each right
will be deemed an ongoing right which may be asserted at any time and from time
to time.
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Exhibit B
OPTION SURRENDER AGREEMENT,
RELEASE AND WAIVER
NOTE: SIGNATURE MUST BE PROVIDED BELOW AND ON
THE SCHEDULE OF OWNERSHIP.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
To Ply Gem Industries, Inc., a Delaware corporation (the "Company"):
The undersigned acknowledges that pursuant to Section 3.5(a)(i) of the
Agreement and Plan of Merger among Nortek, Inc., NTK Sub, Inc. ("NTK Sub") and
the Company, dated as of July 24, 1997 (the "Merger Agreement"), the Company
will be canceling Options (as defined below) in return for cash consideration
effective at the time the proposed merger of NTK Sub with and into the Company
(the "Merger") becomes effective (the "Effective Time"). Receipt of such
consideration by the undersigned will be subject to the receipt by the Company
of this Option Surrender Agreement, Release and Waiver (the "Surrender
Agreement") surrendering Options for such cancellation.
Subject to, and effective upon, acceptance of the surrender of the Options
surrendered herewith, the undersigned hereby surrenders for cancellation to the
Company all of his rights, title and interest in and to all options (whether
vested or unvested) to purchase shares of common stock, $.25 par value per share
(the "Shares"), of the Company pursuant to the Company's Executive Incentive
Stock Option Plan, 1989 Employee Incentive Stock Plan, 1989 Senior Executive
Stock Option Plan and 1994 Employee Incentive Stock Plan (such options, the
"Options" and such plans, the "Option Plans"), listed on the attached Schedule
of Ownership (the "Ownership Schedule"), for a per Share amount equal to the
Merger Consideration (as defined in the Merger Agreement), minus the exercise
price per Share, multiplied by the number of Shares subject to such Options,
upon the terms and subject to the conditions set forth in this Surrender
Agreement.
The undersigned hereby represents and warrants that the undersigned holds
the Options surrendered hereby free and clear of all claims, liens,
restrictions, charges, encumbrances, security interests, voting agreements and
commitments of any kind and has full power and authority to surrender for
cancellation such Options, subject to other agreements involving the Merger
being executed simultaneously herewith.
This surrender is irrevocable by the undersigned but will not be effective
if the Merger is not consummated on or before December 31, 1997.
The undersigned, on behalf of himself or herself, and on behalf of all
spouses, heirs, predecessors, successors, assigns, representatives or agents of
the undersigned (including
<PAGE> 74
without limitation any trust of which the undersigned is the trustee or which is
for the benefit of the undersigned or a member of his or her family), to the
greatest extent permitted by law, hereby acknowledges that the payments made
pursuant to the Surrender Agreement are in full satisfaction of any and all
rights the undersigned may have under the Option Plans with respect to Options
being surrendered hereby.
The undersigned hereby acknowledges that the Ownership Schedule enclosed
herewith correctly and completely sets forth the Options held by the undersigned
being surrendered hereunder, and that except as set forth therein the
undersigned does not have the right to acquire any stock in the Company or any
options, warrants or other rights to acquire shares of capital stock of or
equity interests in the Company, or similar securities or contractual
obligations the value of which is derived from the value of an equity interest
in the Company, or securities convertible into or exchangeable for capital stock
of or equity interests in, or similar securities or contractual obligations of,
the Company.
The undersigned also acknowledges that all payments to be made pursuant to
the Surrender Agreement are expected to be paid by check at the Effective Time.
The undersigned also acknowledges that the Company is not required to make any
payments to the undersigned pursuant to the Surrender Agreement unless his or
her Options are outstanding at the Effective Time.
The undersigned also acknowledges that all payments to be made pursuant to
the Surrender Agreement may be subject to applicable withholding taxes and other
similar charges.
The undersigned, upon request, will execute and deliver any additional
documents deemed by the Company to be reasonably necessary or desirable to
complete the surrender of the Options surrendered hereby.
The undersigned recognizes that the Merger is subject to various conditions
and the Company may not be required to accept the surrender of any of the
Options surrendered hereby.
INSTRUCTIONS
1. EXECUTION OF THE SURRENDER AGREEMENT AND THE OWNERSHIP SCHEDULE. This
Surrender Agreement is to be completed by the optionholder. In order to validly
surrender such Options, an optionholder must complete and sign this Surrender
Agreement and the Ownership Schedule in accordance with the instructions herein
and mail or deliver them in the enclosed envelope to the Company prior to [ ].
THE OWNERSHIP SCHEDULE MUST BE SIGNED BY THE OPTIONHOLDER AS EVIDENCE OF
SUCH ACKNOWLEDGMENT AND RETURNED TOGETHER WITH
2
<PAGE> 75
THIS SURRENDER AGREEMENT. A second copy of the Ownership Schedule for the
optionholder's records has also been included herewith.
2. DELIVERY. This Surrender Agreement and the enclosed Ownership Schedule,
when executed, should be mailed or delivered to: [ ].
THE METHOD OF DELIVERY OF THE SURRENDER AGREEMENT AND THE OWNERSHIP
SCHEDULE IS AT THE OPTION AND RISK OF THE SURRENDERING OPTIONHOLDER. DELIVERY BY
EXPEDITED MAIL, COURIER OR OTHER SIMILAR SERVICE IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. OPTIONHOLDERS ARE
ALSO ADVISED TO RETAIN A COPY OF ALL DOCUMENTS DELIVERED.
3. SIGNATURE ON THE SURRENDER AGREEMENT. The signature on this Surrender
Agreement must correspond exactly with the optionholder's name in the records of
the Company.
4. REQUESTS FOR ASSISTANCE. If you have questions or need assistance please
call [ ].
3
<PAGE> 76
IMPORTANT:
OPTIONHOLDER: (1) SIGN HERE; AND (2) CONFIRM AND SIGN THE ENCLOSED
OWNERSHIP SCHEDULE.
- - --------------------------------------------------------------------------------
(Signature of Optionholder)
Dated:
--------------------------
Name:
---------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Please Type or Print)
Address:
------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number:
-----------------------------------------------
(Home)
-----------------------------------------------
(Business)
Taxpayer Identification or Social Security No.:
--------------------------------
- - --------------------------------------------------------------------------------
, 1997
- - ---------------------------
4
<PAGE> 1
Exhibit 2
[PLY GEM MASTHEAD]
April 11, 1997
To our Stockholders:
It is our pleasure to invite you to the 1997 Annual Meeting of
Stockholders, which will be held on Friday, May 9, 1997, at 9:00 a.m., at the
One Valley Bank, 148 South Queen Street, Martinsburg, West Virginia. Our meeting
has been scheduled to coincide with our plan to celebrate the purchase by
Variform, Inc., one of our subsidiaries, of their Martinsburg, West Virginia
manufacturing facility.
I look forward to greeting you at the meeting at which time I plan to
report on the Company's current operations and its future prospects. At the
meeting, stockholders will be asked to consider and vote upon the election of
Directors.
The formal Notice of Annual Meeting and the Proxy Statement follow. It is
important that your shares be represented and voted at the meeting, regardless
of the size of your holdings. Accordingly, please promptly mark, sign and date
the enclosed proxy and return it in the enclosed envelope to assure that your
shares will be represented. I would appreciate a response from you in order to
avoid repeat solicitations which involve additional avoidable expenses to the
Company.
I appreciate your interest in our Company.
Sincerely yours,
/s/ JEFFREY S. SILVERMAN
JEFFREY S. SILVERMAN
[LOGO]
<PAGE> 2
PLY GEM INDUSTRIES, INC.
------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
------------------
New York, New York
April 11, 1997
To the Stockholders of
PLY GEM INDUSTRIES, INC.:
The Annual Meeting of Stockholders of Ply Gem Industries, Inc. will be held
at the One Valley Bank, 148 South Queen Street, Martinsburg, West Virginia on
May 9, 1997 at 9:00 o'clock in the morning for the following purposes:
(1) To elect directors to serve until the next annual meeting of
stockholders or until their successors are duly elected and qualified;
and
(2) To transact such other business as may properly come before the meeting
and any adjournment or adjournments thereof.
Only stockholders of record at the close of business on March 24, 1997 are
entitled to notice of and to vote at the meeting or any adjournment or
adjournments thereof.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON, BUT WISH THEIR STOCK TO
BE VOTED ON MATTERS TO BE PRESENTED TO THE MEETING, ARE URGED TO SIGN, DATE AND
RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE TO WHICH NO POSTAGE NEED
BE AFFIXED IF MAILED WITHIN THE UNITED STATES.
By Order of the Board of Directors,
CHARLES M. MODLIN
Secretary
<PAGE> 3
PLY GEM INDUSTRIES, INC.
777 THIRD AVENUE
NEW YORK, NEW YORK 10017
------------------------
PROXY STATEMENT
------------------------
This statement is furnished with respect to the solicitation of proxies by
the Board of Directors for the Annual Meeting of Stockholders of Ply Gem
Industries, Inc. (the "Company") to be held at 9:00 A.M. on May 9, 1997 or at
any adjournment or adjournments thereof, at the One Valley Bank, 148 South Queen
Street, Martinsburg, West Virginia. The approximate date on which the proxy
statement and form of proxy was first sent or given to stockholders was April
11, 1997.
Proxies in the accompanying form which are properly executed and duly
returned to the Board of Directors will be voted at the meeting. Any proxy may
be revoked by the stockholder at any time prior to its being voted. Such
revocation shall be effective upon receipt of a written notice by the Secretary
of the Company at the address specified above.
The expense of the solicitation of proxies for the meeting, including the
cost of mailing, will be borne by the Company. In addition to mailing copies of
this material to stockholders, the Company may request persons, and reimburse
them for their expenses with respect thereto, who hold stock in their names or
custody or in the names of nominees for others to forward copies of such
material to those persons for whom they hold stock of the Company and to request
authority for the execution of the proxies. In addition to the solicitation of
proxies by mail, it is expected that some of the officers, directors, and
regular employees of the Company, without additional compensation, may solicit
proxies on behalf of the Board of Directors by telephone, telefax, and personal
interview. The Company has retained D.F. King & Co., Inc. to aid in the
solicitation of proxies, at an estimated cost of $8,000 plus reimbursement of
reasonable out-of-pocket expenses.
As of the close of business March 24, 1997, the date for determining the
stockholders of record entitled to notice of and to vote at the meeting or any
adjournment or adjournments thereof, there were issued and outstanding
13,952,928 shares of the Company's Common Stock, the holders thereof being
entitled to one vote per share. The presence at the Annual Meeting of a majority
of such shares, in person or by proxy, are required for a quorum.
ELECTION OF DIRECTORS
The persons named in the accompanying proxy intend to vote for the election
as directors the nominees listed herein. All of the nominees have consented to
serve if elected. All directors will be elected to hold office until the next
annual meeting of stockholders, and, in each case, each director will serve
until his successor is elected and qualified or until his earlier resignation or
removal. If a nominee should be unable to act as a director, the persons named
in the proxy will vote for any nominee who shall be designated by the present
Board of Directors to fill the vacancy. Each of the nominees presently serves as
a director.
Set forth below is biographical information for each of the nominees.
Unless otherwise indicated, each has served in the stated capacity with the
Company for the last five years.
<PAGE> 4
Herbert P. Dooskin, age 55, joined the Company in 1986 as Executive Vice
President at which time he also became a Director.
Joseph M. Goldenberg, age 71, a co-founder of Goldenberg Group, Inc., a
wholly owned subsidiary of the Company, served as its Chairman from 1983 through
1994 and currently serves as a consultant. He has been a Director of the Company
since 1983.
Albert Hersh, age 81, a co-founder of the Company, has been a Director of
the Company since 1954. He presently provides consulting services to the
Company.
William Lilley III, age 59, became a Director in October 1994. He is
President of Policy Communications, Inc., a business consulting firm based in
Washington, D.C.
Elihu H. Modlin, age 69, has been a Director of the Company since 1992 and
general counsel to the Company since 1960. He is a partner in the law firm of
Messrs. Elihu H. Modlin and Charles M. Modlin.
Dana R. Snyder, age 50, has been President, Chief Operating Officer and a
Director since joining the Company in June, 1995. Prior thereto, Mr. Snyder was
President of Alcoa Construction Products Group, a division of Stolle
Corporation, a subsidiary of Aluminum Company of America.
Jeffrey S. Silverman, age 51, joined the Company and became a Director in
1981. He has served as Chief Executive Officer of the Company since 1984 and
Chairman of the Board since 1985.
Shares represented by proxies solicited by the Board of Directors will,
unless contrary instructions are given, be voted in favor of the election as
Directors of the nominees named above. If a stockholder wishes to withhold
authority to vote for any nominee, such stockholder can do so by following the
directions set forth on the form of proxy solicited by the Board of Directors or
on the ballot distributed at the Annual Meeting if such stockholder wishes to
vote in person. Directors shall be elected by an affirmative vote of the votes
of the shares of Common Stock present in person or represented by proxy at the
meeting.
During 1996, the Board of Directors held eight meetings. Members of the
Compensation Committee of the Board of Directors during 1996 included Messrs.
Hersh, Lilley and Modlin. The Compensation Committee makes recommendations to
the Board of Directors with respect to compensation to be paid to the Company's
principal executive officers. Messrs. Hersh, Lilley and Modlin served as members
of the Audit Committee of the Board of Directors during 1996. The Audit
Committee reviews the audit plan with the Company's independent accountants, the
scope and results of their audit and other related audit and accounting issues.
During 1996, the Audit Committee and the Compensation Committee each held two
meetings. The Executive Committee of the Board of Directors, which is comprised
of Messrs. Dooskin, Goldenberg, Modlin and Silverman, held four meetings during
1996. The Board of Directors as a whole functions as a nominating committee to
propose nominees for director to the Board of Directors.
2
<PAGE> 5
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 20, 1997 (December 31, 1996 with
respect to Dimensional Fund Advisors, Inc.) by all stockholders known to the
Company to have been beneficial owners of more than five percent of its Common
Stock, by each nominee for Director, by each of the executive officers included
in the Summary Compensation Table below, and by all directors and executive
officers as a group.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT OF
NAME OF BENEFICIAL OWNER(1) OWNED(2)(3) CLASS
- - ------------------------------------------------------------- ----------- ----------
<S> <C> <C>
Jeffrey S. Silverman......................................... 4,203,488 24.9%
Jeffrey S. Silverman, Herbert P. Dooskin, and Stanford Zeisel
as trustees of the Ply Gem Industries, Inc. Group Pension
and Profit Sharing Trusts (the "Trusts")(4)................ 1,050,423 7.5
Dana R. Snyder............................................... 919,711 6.2
Herbert P. Dooskin........................................... 488,468 3.4
Joseph M. Goldenberg......................................... 119,699 *
Albert Hersh................................................. 35,291 *
Donald Kruse................................................. 60,000 *
William Lilley II............................................ 8,500 *
Elihu H. Modlin.............................................. 29,500 *
Michael Vagedes.............................................. 7,500 *
ALL DIRECTORS AND EXECUTIVE OFFICERS AS A GROUP(4)........... 6,922,580 37.8
Dimensional Fund Advisors, Inc.(5)........................... 736,300 5.3
Pioneering Management Corporation(6)......................... 818,000 5.9
</TABLE>
- - ----------
* Indicates holdings of less than 1%.
(1) The ages for each of the executive officers named above are as follows:
Jeffrey S. Silverman -- 51; Dana R. Snyder -- 50; Herbert P. Dooskin -- 55;
Donald Kruse -- 61; and, Michael Vagedes -- 40. The address for each of such
executive officers, the other individuals named above and the Trusts is c/o
Ply Gem Industries, Inc., 777 Third Avenue, New York, New York 10017.
(2) Directly and indirectly. The inclusion of securities owned by others as
beneficially owned by the respective nominees and officers does not
constitute an admission that such securities are beneficially owned by them.
All of the named individuals have, except for unexercised options, voting
powers with respect to the aforesaid shares.
(3) Includes shares which may be acquired pursuant to existing stock options
which are exercisable through May 23, 1997 and restricted stock holdings.
(4) Includes shares owned of record by the Trusts.
(5) The address for Dimensional Fund Advisors, Inc. ("Dimensional") is 1299
Ocean Avenue, 11th floor, Santa Monica, California 90401. All of the shares
of which Dimensional, a registered investment advisor, is deemed to have
beneficial ownership of, are held in portfolios of DFA Investment Dimensions
Group, Inc. (the "Fund"), a registered open-end investment company, in
series of the DFA Investment Trust Company (the "Trust"), a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust,
investment vehicles for qualified employee benefit plans, for each of which
Dimensional
3
<PAGE> 6
serves as investment manager. Dimensional has sole voting power for 496,700
shares. In addition, officers of Dimensional are also officers of the Fund
and the Trust, and in such capacities, these persons have sole voting power
to 85,800 and 153,800 additional shares, respectively. Dimensional has sole
dispositive power for 736,300 shares. Dimensional disclaims beneficial
ownership of all such shares.
(6) The address for Pioneering Management Corporation ("Pioneering") is 60 State
Street, Boston, Massachusetts 02109. Pioneering has sole voting power for
818,000 shares, sole dispositive power for 27,000 shares, and shared
dispositive power for 791,000 shares.
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table shows, for the fiscal years ending December 31, 1994,
1995 and 1996, the cash compensation paid by the Company and its subsidiaries,
to the Company s Chief Executive Officer and each of the four most highly
compensated executive officers of the Company and its subsidiaries at the end of
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS(3)
------------
ANNUAL COMPENSATION(2) SECURITIES ALL OTHER
-------------------------- UNDERLYING COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) TION($)(4)
--------------------------- ---- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman(1)................... 1996 2,493,795 2,105,510 750,000 22,963
Chairman of the Board and Chief 1995 2,267,087 1,478,017 -- 6,917
Executive Officer of the Company 1994 1,295,741 1,488,543 750,000 14,088
Dana R. Snyder(5)......................... 1996 446,250 899,000 366,842 6,654
President and Chief Operating Officer 1995 237,019 150,000 550,000 4,374
of the Company
Herbert P. Dooskin........................ 1996 424,750 212,500 -- 6,624
Executive Vice President of the Company 1995 404,750 87,500 -- 9,594
1994 404,750 262,500 50,000 13,536
Donald Kruse(6)........................... 1996 176,000 227,238 4,000 7,757
Chairman, Sagebrush Sales, Inc., a 1995 171,000 29,040 4,000 5,377
wholly-owned subsidiary of the Company 1994 171,000 272,375 6,000 9,681
Michael Vagedes........................... 1996 90,000 252,111 1,500 9,281
President, Richwood Building Products, 1995 85,000 139,928 1,500 4,015
Inc., a wholly-owned subsidiary of 1994 80,000 139,440 1,000 8,350
the Company
</TABLE>
4
<PAGE> 7
- - ----------
(1) Mr. Silverman's compensation is determined in accordance with the provisions
of an employment agreement entered into with the Company in 1986. In a
continuing effort to enhance shareholder value, Mr. Silverman voluntarily
initiated a modification to his compensation arrangement for 1997 by
providing that 25% of the salary and bonus due to him during 1997 under his
employment agreement shall be deferred until the price of Ply Gem's shares
equals 150% of the closing price of Ply Gem's shares on the New York Stock
Exchange on December 31, 1996. In addition, any options granted to Mr.
Silverman in 1997 pursuant to his employment agreement shall not be
exercisable until the market price of Ply Gem's shares equals 150% of the
closing price of Ply Gem's shares on the New York Stock Exchange on December
31, 1996.
(2) Includes salary and bonus payable pursuant to employment agreements with the
named executives. See "Employment Contracts and Termination of Employment
and Change in Control Arrangements" below. For Mr. Silverman, bonus also
reflects $1,113,017 in 1995 and $1,488,543 in 1994 for principal and accrued
interest waived for 1994 and 1993, respectively, in accordance with the
terms of interest bearing promissory notes delivered by Mr. Silverman to the
Company.
(3) As of December 31, 1996, Mr. Silverman's aggregate restricted stock holdings
totaled 150,000 shares with a value, based on the market price of the
Company's Common Stock on December 31, 1996 ($12.375), of $1,856,250. These
shares of restricted stock vest in installments of 25,000 shares per year
subject to the Company achieving performance-based goals. Dividends are paid
by the Company on restricted stock holdings.
(4) "All Other Compensation" includes for the named executives, the following:
(i) a contribution in the amount of $8,100 in 1994, $3,750 in 1995 and
$6,000 in 1996 ($9,000 in 1996 for Mr. Vagedes) made by the Company to the
Ply Gem Industries Group Profit Sharing Plan; (ii) the following life
insurance premiums or economic benefit calculated pursuant to P.S.-58 in
1994: Mr. Silverman -- $5,988; Mr. Dooskin -- $5,436; Mr. Kruse -- $1,581;
and, Mr. Vagedes -- $250; (iii) the following life insurance premiums or
economic benefit calculated pursuant to P.S.-58 in 1995: Mr. Silverman --
$3,167; Mr. Dooskin -- $5,844; Mr. Kruse -- $1,627; Mr. Snyder -- $624; and,
Mr. Vagedes -- $265; and (iv) the following life insurance premiums or
economic benefit calculated pursuant to P.S.-58 or P.S.-38 in 1996: Mr.
Silverman -- $16,963; Mr.Dooskin -- $624; Mr. Kruse -- $1,757; Mr. Snyder --
$654; and, Mr. Vagedes -- $281.
(5) Mr. Snyder became President, Chief Operating Officer and a Director of the
Company in June 1995. See "Employment Contracts and Termination of
Employment and Change in Control Arrangements" below.
(6) Mr. Kruse, formerly President and Chief Executive Officer of Sagebrush
Sales, Inc., became Chairman effective January 1, 1997. See "Employment
Contracts and Termination of Employment and Change in Control Arrangements"
below.
5
<PAGE> 8
STOCK OPTIONS
The following table contains information concerning the grant of stock
options during 1996 under the Company's 1989 Employee Incentive Stock Plan and
1994 Employee Incentive Stock Plan to the Company's executives listed in the
Summary Compensation Table above.
The table also illustrates the Grant Date Present Value of those stock
options based upon the Black-Scholes Model of Valuation, without giving effect
to the non-transferability of the options.
Irrespective of the theoretical value placed on a stock option on the date
of grant, its ultimate value will depend on the market value of the Company's
Common Stock at a future date. If the price of the Company's Common Stock
increases, all stockholders will benefit commensurately with the optionees.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR GRANT DATE
OPTIONS GRANTED IN FISCAL BASE PRICE EXPIRATION PRESENT
NAME (#)(1) YEAR(%) ($/SH)(2) DATE VALUE ($)(3)
- - --------------------------- ------------- ------- --------- ---- ------------
<S> <C> <C> <C> <C> <C>
Jeffrey S. Silverman....... 750,000 54.8 12.50 8/20/06 2,962,500
Dana R. Snyder............. 216,842 15.9 16.50 1/02/01 1,088,547
150,000 11.0 12.50 8/20/06 592,500
Donald Kruse............... 4,000 0.3 12.50 8/20/06 15,800
Michael Vagedes............ 1,500 0.1 12.50 8/20/06 5,925
</TABLE>
- - ----------
(1) All options were granted at market value at the date of grant and are
subject to earlier termination in certain instances related to termination
of employment. The options granted to Mr. Snyder and Mr. Silverman are fully
exercisable; all other options are exercisable one year subsequent to grant.
(2) The required tax withholding obligations related to exercise of certain
options may be paid by delivery of already owned shares or by offset of the
underlying shares, subject to certain conditions.
(3) The amounts shown assume a rate of return based on the Black-Scholes Model
of Valuation. The assumptions used were as follows: volatility -- 35%;
risk-free rate of return (semi-annual basis) -- 5.38% as of January 2, 1996
for the options granted on such date, and 6.41% as of August 20, 1996 for
the options granted on such date; dividend rate -- $.12 per annum; and,
assumed time of exercise -- 6 years, except for the options granted on
January 2, 1996, 5 years. No adjustments were made for non-transferability.
There can be no assurance that the rate of appreciation assumed for purposes
of this table will be achieved. The stock options will have no value to the
executives named above or other optionees if the price of the Company's
Common Stock does not increase above the exercise price of the option.
6
<PAGE> 9
OPTION EXERCISES AND HOLDINGS
The following table sets forth information with respect to the Company's
executives listed in the Summary Compensation Table above, concerning the
exercise of options during the last fiscal year and unexercised options held as
of the end of the fiscal year:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT FY-END(#) AT FY-END($)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - ------------------------------ ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Jeffrey S. Silverman.......... 101,626 736,789 2,947,500/0 1,426,187/0
Dana R. Snyder................ 0 0 910,782/6,060 0/0
Herbert P. Dooskin............ 65,000 326,875 385,000/0 377,000/0
Donald Kruse.................. 0 0 36,000/4,000 31,375/0
Michael Vagedes............... 0 0 2,500/1,500 0/0
</TABLE>
PENSION PLANS
The officers named above are covered by the Company's tax qualified Group
Pension Plan which provides pension benefits to certain employees not covered by
collective bargaining agreements.
Eligible employees retiring at age 65 with twenty or more years of service
are entitled to an annual pension benefit in an amount equal to their highest 5
year average compensation earned during the last 10 years of employment times
(1) 15% of said amount up to a social security integration level and (2) 30% of
said amount in excess of that level to a maximum of $100,000. The Group Pension
Plan recognizes total compensation to a maximum of $100,000 for each calendar
year for each employee. The benefits listed are not subject to any deduction for
Social Security or other offset amounts. All employees are fully vested after 5
years of service.
The following table shows the estimated pension benefits payable to a
covered participant at normal retirement age under the Company's qualified Group
Pension Plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------
ANNUAL REMUNERATION 15 20 25 30 35
- - --------------------------------------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$100,000 or more....................... $17,910 $23,880 $23,880 $23,880 $23,880
</TABLE>
Presently credited years of service, if any, for the officers named in the
Summary Compensation Table above are as follows: Herbert P. Dooskin -- ten
years; Jeffrey S. Silverman -- fourteen years; Dana R. Snyder -- one year;
Donald Kruse -- eight years; and, Michael Vagedes -- four years. Messrs. Dooskin
and Silverman have minimum benefits in excess of those shown in the table
attributable to their prior participation in the Company's pension plan and a
minimum benefit provision contained in the Group Pension Plan which
7
<PAGE> 10
grandfathers the level of benefits in effect under the terms of the plan on
September 30, 1987. The annual excess for Messrs. Dooskin and Silverman is
$12,830 and $58,330, respectively.
DIRECTOR COMPENSATION
Each nonemployee Director receives compensation of $25,000 per year in
addition to $500 for each committee meeting attended. No fees are payable to
officers and employees of the Company who serve as Directors. During 1996,
Messrs. Hersh, Lilley and Modlin each were granted 12,500 options at an exercise
price of $12.50 per share, the market price of the Common Stock of the Company
on the date of grant. The options are exercisable commencing one year from the
date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Hersh, a Director of the Company and a member of its Compensation
Committee in 1996, is a co-founder and former president of the Company and
currently serves as a consultant. Mr. Goldenberg, a Director of the Company, is
a co-founder of Goldenberg Group, Inc., a wholly owned subsidiary of the
Company, and currently serves as a consultant. During 1996, the Company paid
$91,000 to Mr. Hersh for consulting services and Goldenberg Group, Inc. paid
$287,397 to Mr. Goldenberg for consulting services. During 1996, the Company
paid $25,000 to Policy Communications, Inc., a Washington, D.C.-based consulting
firm, of which Mr. Lilley, a Director of the Company and a member of its
Compensation Committee in 1996, is President. The Company also paid $975,000 for
professional services rendered in 1996 by the law firm in which Mr. Modlin, a
Director of the Company and a member of its Compensation Committee in 1996, is a
partner. Mr. Charles Modlin, Secretary of the Company, is also a partner of said
law firm.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL
ARRANGEMENTS
The Company has employment agreements with Messrs. Dooskin, Snyder,
Silverman, Kruse and Vagedes. These agreements provide for continued service in
their present positions until April 15, 2000 with respect to Mr. Dooskin, until
June 5, 1999 with respect to Mr. Snyder, until April 30, 2007 with respect to
Mr. Silverman, until January 1, 2000 with respect to Mr. Kruse, and until
December 31, 1998 with respect to Mr. Vagedes. The agreements with Messrs.
Dooskin and Silverman are automatically renewed on an annual basis unless
otherwise terminated. The agreement with Mr. Snyder is automatically extended
for an additional one year, unless either party provides six months prior
written notice. Mr. Kruse, formerly President and Chief Executive Officer of
Sagebrush Sales, Inc., a wholly owned subsidiary of the Company, became Chairman
effective January 1, 1997.
In the case of Mr. Kruse and Mr. Vagedes, annual compensation is determined
by contractual arrangement with a bonus based upon an established performance
criteria. In the case of Mr. Snyder, increases in salary are determined by the
Compensation Committee of the Board of Directors, subject to minimum increases
of 5%, and bonuses are awarded in accordance with his employment agreement and
pursuant to the Company's Incentive Compensation Plan. Upon a change of control
and if his employment is terminated, Mr. Snyder is entitled to payments in lieu
of future performance benefits. In the case of Mr. Dooskin, increases in salary
and bonus are determined annually by the Board of Directors. Reference is
8
<PAGE> 11
made to "Executive Compensation Committee Report" below for a description of the
terms and conditions of Mr. Silverman's employment agreement, as amended, not
otherwise described herein.
Certain of the agreements provide for continued payments in the event of
physical or mental incapacity. In the case of Mr. Silverman, these payments
continue for the balance of the employment term and thereafter for an
indeterminate period at a rate equal to 50% of salary and bonus received during
the last year prior to mental or physical incapacity, plus increases based upon
increases in the cost of living. The payments continue so long as such mental or
physical disability continues. In the case of Mr. Dooskin, payments of salary
and bonus continue for a period of one year. With respect to Mr. Kruse, payments
amounting to one-half of his base salary continue for six months.
In the event of Mr. Silverman's death during the term of the agreement, his
estate would continue to receive salary and bonus payments during the balance of
the term. In the event of Mr. Dooskin's death, his estate would continue to
receive payments for one year.
The Company maintains key man life insurance policies on the life of Mr.
Silverman and Mr. Snyder having aggregate death benefits payable to the Company
of $34,500,000 and $10,000,000 respectively. Life insurance policies in the
principal amount of $800,000 are maintained with respect to Mr. Kruse, $500,000
of the proceeds of which are payable to the Company.
The Company has entered into split-dollar life insurance agreements with
certain of its principal executive officers. Pursuant to each of the agreements,
the Company pays the annual premiums on specified life insurance policies owned
by each, net of the amount of the "economic benefit" attributable to them. The
amount of the premiums paid by the Company constitutes indebtedness to the
Company and is secured by collateral assignments of each of the insurance
policies.
The agreements with each of the aforementioned individuals provide for
non-competitive commitments during the term of the agreement and for periods
subsequent thereto. The employee stock options granted to each of the aforesaid
individuals provide for a "cash out" (as defined) in the event of a change in
control.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten percent of
its Common Stock to file reports of ownership and changes in ownership with the
Securities and Exchange Commission (the "Commission"). Officers, directors and
greater than ten percent stockholders are required by the Commission to furnish
the Company with copies of all Section 16(a) forms they file.
The Company believes that, based solely on its review of the copies of such
forms received by it, or written representations from certain reporting persons
that no reports on Form 5 were required for those persons, during 1996 all
filing requirements applicable to its officers, directors and greater than ten
percent stockholders were complied with.
9
<PAGE> 12
PERFORMANCE GRAPH
The following performance graph assumes $100 invested in Ply Gem
Industries, Inc. Common Stock, the American Stock Exchange Market Index and Dow
Jones Building Materials Index on December 31, 1991 and provides for a
comparison of five year cumulative total return. It also assumes reinvestment of
dividends.
<TABLE>
<CAPTION>
American Stock Dow Jones
Measurement Period Ply Gem Exchange Market Building
(Fiscal Year Covered) Industries, Inc. Index Materials Index
--------------------- ---------------- --------------- ---------------
<S> <C> <C> <C>
12/91 100 100 100
12/92 140 101 127
12/93 193 121 158
12/94 209 110 125
12/95 179 139 170
12/96 140 148 203
</TABLE>
EXECUTIVE COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
during 1996 was comprised of William Lilley III, Albert Hersh and Elihu H.
Modlin. The Committee is charged with reviewing and approving compensation of
the Company's senior executives. The Company's executive compensation program
consists of three main components: base salary, potential for an annual bonus
based on performance, and the opportunity to earn stock-based incentives
designed to encourage the achievement of superior results over time and
ownership of Common Stock of the Company. The Stock Option Committee ("Stock
Option Committee") of the Board of Directors is charged with the responsibility
of granting stock options and restricted stock awards to executive employees.
The Stock Option Committee during 1996 was comprised of Messrs. Hersh and
Lilley.
The Company has previously entered into employment agreements with each of
the named executives covered in the Summary Compensation Table above. The
employment agreements with Michael Vagedes and Donald Kruse were initially
entered into at the time of the acquisition of the businesses owned and operated
by such executives. In general, executives receive a base salary with fixed
annual increases according to the terms of their respective employment
agreements and are eligible to receive a bonus in accordance with such contracts
based on the performance of the Company or the subsidiary employing the senior
executive. Accordingly, the amount of such bonuses vary for each executive
depending on the performance of the Company or their respective subsidiary. In
the case of Mr. Dooskin, salary and bonus are determined annually by the Board
of Directors. In the case of Mr. Snyder, increases in salary are determined by
the Committee,
10
<PAGE> 13
subject to minimum increases of 5% and bonuses are awarded in accordance with
his employment agreement and pursuant to the Company's Incentive Compensation
Plan. The Committee adopted a policy effective January 1, 1994 with respect to
all new executive employment arrangements to maintain executive compensation
within the deduction cap of Section 162(m) of the Internal Revenue Code of 1986,
as amended (the "Code"). Reference is made to "Employment Contracts and
Termination of Employment and Change in Control Arrangements" for a discussion
of the Company's employment and other agreements with its senior executives.
The Company's senior executives are eligible to receive stock options
and/or restricted stock in accordance with the Company's stock plans. The
objectives of such participation are to align executive and stockholder
long-term interests and to enable executives to develop and maintain a
significant, long-term stock ownership position in the Company. The Company's
Stock Option Committee has the responsibility for granting stock options and
restricted stock awards to executive and management employees. In granting stock
options, the Stock Option Committee takes into account Company performance,
subsidiary performance and individual performance. Company and subsidiary
performance is measured by increases in earnings and, to a lesser extent,
increases in sales. Individual performance is measured by the individual's
contributions to such enhanced performance. In the case of Mr. Silverman, the
non-qualified stock option grants awarded to him are based upon provisions of
his employment agreement which provides for increases or decreases in the number
of options to be granted each year in proportion to the increases or decreases
in net income. All of the stock options granted to senior executives in 1996
were exempt from the deduction cap of Section 162(m) of the Code in accordance
with the regulations promulgated thereunder.
The Chairman of the Board and Chief Executive Officer of the Company is
Jeffrey S. Silverman. Mr Silverman has expressed to the Committee his personal
disappointment with the Company's stock price performance in recent years and
his ongoing commitment to take positive steps to enhance shareholder value. As
evidence of this commitment and at the request of Mr. Silverman, the Committee
and Mr. Silverman have modified Mr. Silverman's compensation arrangement for
1997 by providing that 25% of the salary and bonus due to him during 1997 under
his employment agreement shall be deferred until the price of Ply Gem's shares
equals 150% of the closing price of Ply Gem's shares on the New York Stock
Exchange on December 31, 1996. In addition, any options granted to Mr. Silverman
in 1997 pursuant to his employment agreement shall not be exercisable until the
market price of Ply Gem's shares equals 150% of the closing price of Ply Gem's
shares on the New York Stock Exchange on December 31, 1996. At Mr. Silverman's
request, he and the Committee are exploring additional modifications to Mr.
Silverman's compensation arrangements to further contribute to the enhancement
of shareholder value.
Mr. Silverman's 1996 compensation was determined in accordance with the
provisions of his employment agreement entered into with the Company in 1986.
The base salary paid to him was paid in accordance with the provisions of his
employment agreement. From the time Mr. Silverman joined the Company, the
Company's market capitalization increased from approximately $10 million to
approximately $173 million as of December 31, 1996. A modification of Mr.
Silverman's employment agreement originally entered into in 1986 became
effective January 1, 1991. Based upon the provisions of the 1986 employment
agreement, Mr. Silverman would have been entitled to additional payments of
salary and bonus during the years 1986-1990 of approximately $5,000,000 in
excess of the salary and bonus actually paid to him. In light of Mr. Silverman's
substantial contributions to the Company and its stockholders since joining the
Company in 1982, and in consideration for the modification of his employment
agreement, the Company in 1991 extended
11
<PAGE> 14
a loan to Mr. Silverman in the amount of $5,900,000, bearing interest at 7% per
annum repayable in annual installments of $590,000. The amendment to his
employment agreement provides for increases in base salary each year of 10% or
increases in the cost of living, whichever is greater. Future cash bonus
payments are determined in accordance with certain criteria related to the
performance of the Company during the prior year. A further modification of Mr.
Silverman's employment agreement effective December 23, 1992 provided for, among
other things, an extension of the term of the agreement and an increase in base
salary. In consideration for the modification and the additional contributions
made to the Company by Mr. Silverman, the Company extended a loan to Mr.
Silverman of $3,500,000 bearing interest at the rate of 7.3% per annum,
repayable in annual installments of $350,000. Repayment of principal and
interest for the above referred to loans may be waived at the discretion of the
Board of Directors and waiver is mandated in the event net income standards, as
defined, are met. The present principal balances of the aforesaid loans are
$2,950,000 and $2,450,000, respectively. In further consideration for the 1991
modification to his 1986 employment agreement, Mr. Silverman is entitled to
receive an additional annual $495,000 bonus as an incentive compensation
payment. These payments are subject to Mr. Silverman's continued employment and
to the Company having net income as defined therein. To reemphasize his
commitment to the Company's future growth, Mr. Silverman initiated a reduction
of 30% of his salary for 1994. Additionally, Mr. Silverman agreed that his 1994
bonus of $1,331,000 and incentive compensation payment of $495,000 would not be
paid. In consideration thereof, the Company agreed to provide additional
incentive compensation to enable him to increase his compensation by $913,000
(50% of the 1994 bonus and incentive compensation not paid) in each of two of
the next four years if the Company's net income exceeds its historical high or
if the price of the Company's Common Stock exceeds its historic high and
extended an interest bearing loan in the amount of $3,500,000. Principal
payments of $250,000 and interest are due on December 31st of each year. The
entire remaining principal balance and accrued interest thereon are due and
payable on December 31, 1998. The present principal balance of said loan is
$3,000,000. Based upon Mr. Silverman's employment agreement, he would have been
entitled to a grant of 750,000 stock options in 1995. In consideration of Mr.
Silverman's agreement to waive receipt of such options, the Company, in December
1995, extended a loan to Mr. Silverman in the amount of $5,000,000. Principal
payments of $250,000 are due on April 30 of each year. Accrued interest is
payable on December 31 of each year. The entire remaining principal balance and
accrued interest are due and payable on April 30, 2001. Mr. Silverman secured
the loan with certain employee stock options held by him. For each of the 1994
and 1995 notes, interest is calculated annually at the higher of a floating rate
adjusted annually based upon the average rate paid by the Company pursuant to
its principal bank credit agreement, or the applicable Federal rate (as defined
in the note) in effect for the subject period.
<TABLE>
<CAPTION>
COMPENSATION COMMITTEE STOCK OPTION COMMITTEE
- - ------------------------------------ ----------------------
<S> <C>
Albert Hersh Albert Hersh
William Lilley III William Lilley III
Elihu H. Modlin
</TABLE>
APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Grant Thornton LLP as the independent
public accountants who will make an examination of the financial statements of
the Company for the year ending December 31, 1997. A
12
<PAGE> 15
representative from Grant Thornton LLP is expected to be present at the annual
meeting to respond to appropriate questions and to make a statement if that
representative so desires.
PROPOSALS BY STOCKHOLDERS -- 1998 ANNUAL MEETING
All proposals by stockholders intended to be presented at the next annual
meeting of stockholders (to be held in May 1998) must be received by the Company
at its office 777 Third Avenue, New York, New York 10017, no later than November
30, 1997 in order to be included in the proxy statement and form of proxy
relating to such meeting. All such proposals must comply with applicable
Securities and Exchange Commission rules and regulations.
OTHER BUSINESS
Management is not aware of any matters to be presented at the meeting other
than those set forth in this Proxy Statement. However, should any other business
properly come before the meeting, or any adjournment or adjournments thereof,
the enclosed Proxy confers upon the persons entitled to vote the shares
represented by such Proxies, discretionary authority to vote the same in respect
to any such other business in accordance with their best judgment in the
interest of the Company.
MANAGEMENT UNDERTAKES TO PROVIDE ITS STOCKHOLDERS WITHOUT CHARGE, UPON
WRITTEN OR ORAL REQUEST BY ANY SUCH STOCKHOLDER, BY FIRST CLASS MAIL WITHIN ONE
BUSINESS DAY OF RECEIPT OF SUCH REQUEST, A COPY OF THE COMPANY'S ANNUAL REPORT
ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS AND SCHEDULES FILED THEREWITH.
WRITTEN REQUEST FOR SUCH REPORT SHOULD BE ADDRESSED TO PAUL BOGUTSKY, TREASURER,
PLY GEM INDUSTRIES, INC., 777 THIRD AVENUE, NEW YORK, NEW YORK 10017. ORAL
REQUESTS SHOULD BE MADE BY TELEPHONE TO SUCH PERSON AT (212) 832-1550.
The form of proxy solicited by the Board of Directors affords stockholders
the ability to specify a choice among approval of, disapproval of, or abstention
with respect to each matter to be acted upon at the Annual Meeting. Shares
represented by the proxy will be voted and, where the solicited stockholder
indicates a choice on the form of proxy with respect to any matter to be acted
upon, the shares will be voted as specified. Abstentions and broker non-votes
will not have the effect of votes in opposition to a Director.
Stockholders are urged to sign the enclosed proxy, solicited on behalf of
the Board of Directors, and return it at once in the envelope enclosed for that
purpose. Unless a contrary direction is indicated, Proxies will be voted for the
election as directors of the nominees listed in this Proxy Statement. The Proxy
does not affect the right to vote in person at the meeting and may be revoked by
the stockholder who executed it any time prior to its being voted.
By Order of the Board of Directors
CHARLES M. MODLIN
Secretary
13
<PAGE> 16
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PLY
GEM INDUSTRIES, INC.
PROXY-ANNUAL MEETING OF STOCKHOLDERS, MAY 10, 1996
THE UNDERSIGNED HEREBY APPOINTS JEFFREY S. SILVERMAN, HERBERT P. DOOSKIN AND
ELIHU H. MODLIN, AND EACH OF THEM, PROXIES AND ATTORNEYS-IN-FACT OF THE
UNDERSIGNED, WITH THE POWER TO APPOINT HIS SUBSTITUTE, AND HEREBY AUTHORIZES
THEM TO REPRESENT AND TO VOTE, AS DESIGNATED BELOW, ALL THE SHARES OF COMMON
STOCK OF PLY GEM INDUSTRIES, INC. HELD OF RECORD BY THE UNDERSIGNED ON APRIL 5,
1996 AT THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 10, 1996 OR ANY
ADJOURNMENT THEREOF.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE)
PLY GEM INDUSTRIES, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
FOR ALL
Except as
FOR WITHHELD listed at left
1. Election of Directors--
Herbert P. Dooskin, Joseph Goldenberg, [ ] [ ] [ ]
P Albert Hersh, William Lilley III,
Elihu H. Modlin, Jeffrey S. Silverman
R and Dana R. Snyder.
O
X INSTRUCTION: To withhold authority to vote for any individual nominee write
that nominees name in the blank space below.
Y
_____________________________________________________________________________
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL "1" ABOVE.
Date _________________________________, 1996
____________________________________________
____________________________________________
Signature of Stockholder(s)
Please sign exactly as your name or names appear to the left hereof. When shares
are held by joint tenants, both should sign. When signing as attorney, as
executor, administrator, trustee or guardian, please give full title as such. If
a corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
authorized person.
<PAGE> 1
Exhibit 3
---------
[PLY GEM Logo]
777 Third Avenue, New York, N.Y.10017-1401 / (212) 832-1550 / FAX (212) 888-0472
July 29, 1997
To Our Stockholders:
On behalf of the Board of Directors of Ply Gem Industries, Inc. (the
"Company"), I am pleased to inform you that on July 24, 1997, the Company
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Nortek, Inc. and its subsidiary, NTK Sub, Inc. (the "Purchaser"). Pursuant to
the Merger Agreement, the Purchaser has today commenced a cash tender offer (the
"Offer") to purchase all of the outstanding shares of the Common Stock of the
Company at $19.50 per share, net to the seller in cash, subject to the terms and
conditions in the Offer to Purchase accompanying this letter.
The Offer will be followed by a merger (the "Merger") in which any
remaining shares of the Common Stock of the Company (except for any shares as to
which the holder has properly exercised dissenter's rights of appraisal) will be
converted into the right to receive $19.50 in cash, without interest.
Your Board of Directors (by the unanimous vote of all directors present)
has determined that the Offer and Merger are fair to, and in the best interests
of, the Company and its stockholders and has approved the Offer and Merger. The
Board of Directors recommends that the stockholders of the Company accept the
Offer and tender their shares pursuant to the Offer.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the attached Schedule 14D-9 that is
being filed today with the Securities and Exchange Commission, including the
opinion of Furman Selz LLC, the Company's financial advisor, that the
consideration to be received by the stockholders in the Offer and the Merger is
fair, from a financial point of view, to such stockholders.
In addition to the attached Schedule 14D-9, also enclosed is the Offer to
Purchase together with related materials, including a Letter of Transmittal to
be used for tendering your shares in the Offer. These documents state the terms
and conditions of the Offer and the Merger and provide instructions as to how to
tender your shares. We urge you to read these documents carefully in making your
decision with respect to tendering your shares pursuant to the Offer.
On behalf of the Board of Directors,
/s/ Jeffrey S. Silverman
Jeffrey S. Silverman
Chairman and Chief Executive Officer
<PAGE> 1
Exhibit 4
BEAR STEARNS
September 27, 1995
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Attn: Mr. Hiley
- - ----
Confidentiality Agreement (the "Agreement")
-------------------------------------------
Mr. Hiley:
In connection with your consideration of a possible transaction (the
"Transaction") with Ply Gem Industries, Inc. (the "Company"), you have requested
the right to review certain non-public information regarding the Company. In
consideration of, and as a condition to, furnishing you with such information
and any other information (whether communicated in writing or communicated
orally) delivered to you by us or our affiliates, directors, officers,
employees, advisors, agents or "controlling persons" (within the meaning of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) (such affiliates
and other persons being herein referred to collectively as our
"Representatives") in connection with your consideration of a Transaction (such
information being herein referred to as "Evaluation Material"), the Company and
you hereby agree as follows:
1. The Evaluation Material will be used solely for the purpose of
evaluating a possible Transaction with the Company involving you or your
affiliates, and unless and until you have completed such Transaction pursuant to
a definitive agreement between you or any such affiliate and the Company, such
Evaluation Material will be kept strictly confidential by you and your
affiliates, directors, officers, employees, advisors, agents or controlling
persons (such affiliates and other persons being herein referred to collectively
as "your Representatives"), except that the Evaluation Material or portions
thereof may be disclosed to those of your Representatives who need to know such
information for the purpose of evaluating a possible Transaction with the
Company (it being understood that prior to such disclosure your Representatives
will be informed of the confidential nature of the Evaluation Material and shall
agree to be bound by this Agreement). You agree to be responsible for any breach
of this Agreement by your Representatives.
<PAGE> 2
2. The term "Evaluation Material" does not include any information which
(i) at the time of disclosure or thereafter is generally known by the public
(other than as a result of its disclosure by you or your Representatives) or
(ii) was or becomes available to you on a nonconfidential basis from a person
not otherwise bound by a confidentiality agreement with the Company or its
Representatives or is not otherwise prohibited from transmitting the information
to you. As used in this Agreement, the term "person" shall be broadly
interpreted to include, without limitation, any corporation, company, joint
venture, partnership or individual.
3. In the event that you or any of your Representatives receive a request
to disclose all or any part of the information contained in the Evaluation
Material under the terms of a valid and effective subpoena or order issued by a
court of competent jurisdiction, you or such Representative, as the case may be,
agree to (i) immediately notify the Company of the existence, terms and
circumstances surrounding such a request, (ii) consult with the Company on the
advisability of taking legally available steps to resist or narrow such request,
and (iii) if disclosure of such information is required, furnish only that
portion of the Evaluation Material, which in the written opinion of counsel, you
or such Representative are legally compelled to disclose and exercise best
efforts to obtain an order or other reliable assurance that confidential
treatment will be accorded to such information.
4. Unless otherwise required by law in the opinion of your counsel, neither
you nor your Representatives will, without our prior written consent, disclose
to any person either the fact that discussions or negotiations are taking place
concerning a possible Transaction between the Company and you or your
affiliates, or any of the terms, conditions or other facts with respect to any
such possible Transaction, including the status thereof and the fact that the
Evaluation Material has been made available to you.
5. Until the earliest of (i) the consummation by you of a Transaction (ii)
two years from the date of this Agreement, you agree not to initiate or maintain
contact (except for those contacts made in the ordinary course of business)
with any officer, director or employee of the Company regarding the business,
operations, prospects or finances of the Company or the employment of any such
officer, director or employee, except with the express written permission of the
Company. Unless otherwise agreed to by the Company in writing, all (i)
communications regarding any possible Transaction, (ii) requests for additional
information, (iii) requests for facility tours or management meetings, and (iv)
discussions or questions regarding procedures, will be submitted or directed to
Bear, Stearns & Co. Inc. ("Bear Stearns").
6. For a period of two years from the date of this Agreement, you and your
Representatives shall not, directly or indirectly, and you shall cause any
person or entity controlled by you not to, without the prior written consent of
the Board of Directors of the Company, (i) in any manner acquire, agree to
acquire or make any proposal to acquire, directly or indirectly, any securities
or property of the Company or any of its affiliates, (ii) propose to enter into,
directly or indirectly, any merger, consolidation, recapitalization, business
combination or other similar transaction involving the Company or any of its
<PAGE> 3
affiliates, (iii) make, or in any way participate in any "solicitation" of
"proxies" (as such terms are used in the proxy rules of the Securities and
Exchange Commission) to vote, or seek to advise or influence any person with
respect to the voting of any voting securities of the Company or any of its
affiliates, (iv) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the 1934 Act with respect to any voting
securities of the Company or any of its affiliates, (v) otherwise act, alone or
in concert with others, to seek to control or influence the management, Board of
Directors or policies of the Company, (vi) disclose any intention, plan or
arrangement inconsistent with the foregoing, or (vii) advise, assist or
encourage any other persons in connection with any of the foregoing. You also
agree during such period not to (x) request the Company (or its
Representatives), directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence), (y) take any action which might
require the Company or any of its affiliates to make a public announcement
regarding this Agreement or the possibility of a merger, consolidation, business
combination or other similar transaction, including, without limitation, the
Transaction, or (z) communicate with the Company's shareholders regarding the
subject matter of this Agreement.
7. In addition, you hereby acknowledge that you are aware, and that you
will advise your Representatives who receive the Evaluation Material, that the
United States securities laws prohibit any person who has material, non-public
information concerning the matters which are the subject of this Agreement from
purchasing or selling securities of the Company (and options, warrants and
rights relating thereto) from communicating such information to any other person
under circumstances in which it is reasonably foreseeable that such person,
including, without limitation any of your Representatives) is likely to purchase
or sell such securities.
8. You understand and acknowledge that neither the Company nor Bear Stearns
is making any representation or warranty, expressed or implied, as to the
accuracy or completeness of the Evaluation Material or any other information
provided to you by the Company or Bear Stearns. Neither the Company nor Bear
Stearns nor our respective affiliates or Representatives, nor any of our
respective officers, directors, employees, agents or controlling persons (within
the meaning of the 1934 Act) shall have any liability to you or any other person
(including, without limitation, any of your Representatives) resulting from your
use of the Evaluation Material.
9. You agree that unless and until a definitive agreement between the
Company and you with respect to any Transaction has been executed and delivered,
the Company will not be under any legal obligation of any kind whatsoever with
respect to such a Transaction by virtue of (i) this Agreement or (ii) any
written or oral expression with respect to such a Transaction by any of the
Company's directors, officers, employees, agents, advisors or Representatives
except, in the case of this letter, for the matters specifically agreed to
herein.
10. You agree that the Company has not granted you any license, copyright,
or similar right with respect to any of the Evaluation Material or any other
information provided to you by the Company or Bear Stearns.
<PAGE> 4
11. If you determine that you do not wish to proceed with a Transaction,
you will promptly advise the Company and Bear Stearns in writing of that
decision. In that case, or in the event that (i) a Transaction is not
consummated by you or (ii) at any time, the Company requests, you will promptly
destroy or deliver to us all of the Evaluation Material, including all copies,
reproductions, summaries, analyses or extracts thereof or based thereon in your
possession or in the possession of any of your Representatives.
12. You hereby agree to indemnify and hold harmless the Company from any
damage, loss, cost or liability (including legal fees and the cost of enforcing
this indemnity) arising out of or resulting from any unauthorized use or
disclosure by you or your Representatives of the Evaluation Material. You also
acknowledge that money damages would be both incalculable and an insufficient
remedy for any breach of this Agreement by you or your Representatives and that
any such breach would cause the Company irreparable harm. Accordingly, without
prejudice to the rights and remedies otherwise available to the Company, the
Company shall be entitled to equitable relief by way of injunction if you or any
of your Representatives breach or threaten to breach any of the provisions of
this Agreement. You agree to waive, and to cause your Representatives to waive,
any requirement for the securing or posting of any bond in connection with such
remedy.
13. The validity and interpretation of this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of New York
applicable to agreements made and to be fully performed therein (excluding the
conflicts of laws rules). You irrevocably submit to the jurisdiction of any
court of the State of New York or the United States District Court for the
Southern District of the State of New York for the purpose of any suit, action,
or other proceeding arising out of this Agreement, or any of the agreements or
transactions contemplated hereby, which is brought by or against you and (i)
hereby irrevocably agree that all claims in respect of any such suit, action or
proceeding may be heard and determined in any such court, (ii) to the extent
that you have acquired, or hereafter may acquire, any immunity from jurisdiction
of any such court or from any legal process therein, you hereby waive, to the
fullest extent permitted by law, such immunity and (iii) agree not to commence
any action, suit or proceeding relating to this Agreement or any Transaction
except in such court. You hereby waive, and agree not to assert in any such
suit, action or proceeding, in each case, to the fullest extent permitted by
applicable law, any claim that (a) you are not personally subject to the
jurisdiction of any such court, (b) you are immune from any legal process
(whether through service or notice, attachment prior to judgment attachment in
aid of execution, execution or otherwise) with respect to you or your property
or (c) any such suit, action or proceeding is brought in an inconvenient forum.
14. The benefits of this Agreement shall inure to the respective successors
and assigns of the parties hereto and of the indemnified parties hereunder and
their successors and assigns and representatives, and the obligations and
liabilities assumed in this Agreement by the parties hereto shall be binding
upon the parties and their respective successors and assigns and
representatives.
<PAGE> 5
15. If it is found in a final judgment by a court of competent jurisdiction
(not subject to further appeal) that any term or provision hereof is invalid or
unenforceable, (i) the remaining terms and provision hereof shall be unimpaired
and shall remain in full force and effect and (ii) the invalid or unenforceable
provision or term shall be replaced by a term or provision that is valid and
enforceable and that comes closest to expressing the intention of such invalid
or unenforceable term or provision.
16. This Agreement embodies the entire agreement and understanding of the
parties hereto and supersedes any and all prior agreements, arrangements and
understandings relating to the matters provided for herein. No alteration,
waiver, amendment, change or supplement hereto shall be binding or effective
unless the same is set forth in writing signed by a duly authorized
representative of each party and may be modified or waived only by a separate
letter executed by the Company and you expressly so modifying or waiving such
Agreement.
17. For the convenience of the parties, any number of counterparts of this
Agreement may be executed by the parties hereto. Each such counterpart shall be,
and shall be deemed to be, an original instrument, but all such counterparts
taken together shall constitute one and the same Agreement.
This Agreement is being delivered to you in duplicate. Kindly execute and
return one copy of this letter which will constitute our Agreement with respect
to the subject matter of this letter.
Very truly yours,
BEARS, STEARNS & CO. INC.
for itself and on behalf of
Ply Gem Industries, Inc.
By: ___________________________
Managing Director
Confirmed and Agreed to
this 27th day of September 1995
Nortek Inc.
/s/ Kevin W. Donnelly
By: ________________________
An authorized officer
Name: Kevin W. Donnelly
Title: Vice President
Date: 9/27/95
<PAGE> 6
June 18, 1997
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Attention: Mr. Richard L. Bready
Dear Sirs:
We are in receipt of your proposal letter and draft Merger
Agreement dated June 17, 1997 with respect to a possible acquisition of Ply Gem
Industries, Inc. (the "Company") by Nortek, Inc. ("Nortek"). In connection with
these documents, we draw your attention to paragraph 6 of the Confidentiality
Agreement (the "Agreement") entered into by Nortek, the Company and Bear
Stearns & Co. Inc. dated September 27, 1995 which states in reference to
Nortek that, "For a period of two years from the date of this Agreement, you
and your Representatives shall not . . . without the written consent of the
Board of Directors of the Company . . . make any proposal to acquire . . . any
securities or property of the Company or any of its affiliates . . ." Pursuant
to the foregoing provision, your current proposal, which has not been approved
by the Board of Directors (the "Board") of the Company, is in violation of the
Agreement. You have advised us that you had not been able to locate the
Agreement and believed that the relevant provision had expired and therefore
that you were not aware of its violation in making your proposal.
Please countersign a copy of this letter to confirm your agreement
that (a) paragraph 6 of the Agreement shall remain in effect for a period of
one year from the date hereof, (b) the Company's execution of this letter
agreement so extending such period, as well as any decision by the Board to
review your proposal letter or any discussions by the Company or its
representatives with respect thereto, shall not constitute a waiver of any of
the rights of the Company under the Agreement, and (c) any further proposal by
you, including any amendment
<PAGE> 7
to the current proposal, will not be made except with the written consent of
the Board in compliance with the provisions of the Agreement.
Sincerely,
PLY GEM INDUSTRIES, INC.
By: /s/ Jeffrey S. Silverman
-----------------------------------
Jeffrey S. Silverman, Chairman
Accepted and Agreed:
NORTEK, INC.
By: /s/ Ken W. Donnelly
----------------------------
Vice President
<PAGE> 8
June 23, 1997
Via Facsimile
- - -------------
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Attention: Mr. Richard L. Bready
- - ---------
Dear Sirs:
We are returning to you for your records a copy of the letter dated June
18, 1997 from Ply Gem Industries, Inc. (the "Company") to Nortek, Inc.
("Nortek"), signed by the Company, relating to, and extending certain provisions
of, the Confidentiality Agreement (the "Agreement") entered into by Nortek, the
Company and Bear Stearns & Co. Inc. dated September 27, 1995.
We are also writing to inform you that the Board of Directors of the
Company has authorized the Company to enter into a limited waiver, and the
Company hereby waives, pursuant to paragraph 16 of the Agreement, the provisions
of paragraph 6 of the Agreement solely during the effective period of this
waiver and solely for the purpose and to the extent of permitting Nortek,
notwithstanding the provisions of paragraph 6, to make one or more proposals to
the Board of Directors of the Company to acquire the entire equity interest in
the Company pursuant to a merger, consolidation or other business combination or
similar transaction involving the Company.
This waiver shall be effective from the date hereof until such time as the
Company shall notify Nortek in writing that it has terminated this waiver,
whereupon the provisions of paragraph 6 of the Agreement shall once again be in
full force and effect.
Sincerely,
PLY GEM INDUSTRIES, INC.
By: /s/ Jeffrey S. Silverman
------------------------
Jeffrey S. Silverman, Chairman
cc: David Chapin, Esq.
<PAGE> 9
PLY GEM INDUSTRIES, INC.
July 17, 1997
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Dear Sirs:
Reference is made to the confidentiality agreement between you and Bear
Stearns & Co., Inc. for itself and on our behalf, as heretofore amended and
modified (the "Confidentiality Agreement"). This is to confirm that the
Confidentiality Agreement is hereby amended to provide that the term
"Representatives" as used therein shall include "bona fide potential financing
sources." In all other respects the Confidentiality Agreement shall remain in
full force and effect.
Please execute and return a copy of this letter to confirm your agreement
to the foregoing.
PLY GEM INDUSTRIES, INC.
/s/ Jeffrey S. Silverman
By: _____________________________
Title: Chairman
Accepted and Agreed as of
the date first above written:
NORTEK, INC.
/s/ Kevin W. Donnelly
By: ________________________
Title: Vice President
<PAGE> 1
Exhibit 5
- - --------------------------------------------------------------------------------
STOCK PURCHASE AGREEMENT
dated as of July 24, 1997
among
PLY GEM INDUSTRIES, INC.
(the "Company"),
and
NORTEK, INC.
(the "Investor")
- - --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION.................................1
1.1. DEFINED TERMS...............................................1
1.2. RULES OF CONSTRUCTION.......................................3
ARTICLE II
PURCHASE AND SALE OF SHARES..........................................3
2.1. CLOSING.....................................................3
2.2. USE OF PROCEEDS.............................................4
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR.......................4
4.1. INVESTMENT REPRESENTATIONS..................................4
4.2. OTHER REPRESENTATIONS AND WARRANTIES........................5
ARTICLE V
COMPANY DELIVERIES AT THE CLOSING....................................5
5.1. SUPPORTING DOCUMENTS........................................5
5.2. REGISTRATION RIGHTS AGREEMENT...............................6
ARTICLE VI
MISCELLANEOUS........................................................6
6.1. FEES........................................................6
6.2. FURTHER ASSURANCES..........................................7
6.3. SUCCESSORS AND ASSIGNS......................................7
6.4. ENTIRE AGREEMENT............................................7
6.5. NOTICES.....................................................7
6.6. AMENDMENTS, MODIFICATIONS AND WAIVERS.......................8
6.7. GOVERNING LAW...............................................8
6.8. COUNTERPARTS; FACSIMILE SIGNATURES..........................9
<PAGE> 3
STOCK PURCHASE AGREEMENT dated as of July 24, 1997, among PLY GEM
INDUSTRIES, INC., a Delaware corporation (the "COMPANY") and NORTEK, INC., a
Delaware corporation (the "INVESTOR").
The Company desires to obtain equity financing, and the Investor is
willing to purchase certain shares of the Company's common stock in connection
therewith, all on the terms and subject to the conditions set forth herein.
ACCORDINGLY, in consideration of the foregoing and the covenants,
agreements, representations and warranties contained in this Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties, the parties hereto hereby agree as follows:
ARTICLE I
DEFINED TERMS; RULES OF CONSTRUCTION
1.1. Defined Terms.
-------------
Capitalized terms used and not otherwise defined in this Agreement have
the meanings ascribed to them below or in the other locations of this Agreement
specified below:
"ATRIUM AGREEMENT" means the Agreement and Plan of Merger dated as of
June 24, 1997 among Atrium Acquisition Holding Corp., Atrium/PG Acquisition
Corp. and the Company, and, solely for the purposes of Section 4.3 and Articles
9 and 10, Atrium Corporation, a Delaware corporation and the sole stockholder of
Atrium Acquisition Holding Corp.
"BUSINESS DAY" means any day that is not a Saturday, Sunday, legal
holiday or other day on which banks are required to be closed in New York, New
York.
"BY-LAWS" means the by-laws of the Company, as amended and in effect at
the time in question.
"CERTIFICATE OF INCORPORATION" means the certificate of incorporation
of the Company as amended and restated and in effect at the time in question.
"Closing" has the meaning given to it in Section 2.1(b).
-------
"Closing Date" has the meaning given to it in Section 2.1(b).
-------
"COMMISSION" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, $0.25 par value, of the Company.
------------
<PAGE> 4
"COMPANY" has the meaning given to it in the preamble to this
Agreement.
"Documents" means this Agreement and the Registration Rights Agreement.
---------
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar Federal Statute then in force, and the rules and regulations
promulgated thereunder, all as the same may from time to time be in effect.
"INVESTOR" has the meaning given to it in the preamble to this
Agreement.
"MERGER AGREEMENT" means the Agreement and Plan of Merger dated the
date hereof by and among the Investor, NTK and the Company.
"NON-COMPETE AND TERMINATION AGREEMENT" means the Non-Compete and
Termination Agreement among the Investor, the Company and Jeffrey S. Silverman
substantially in the form of Exhibit C to the Merger Agreement.
"NTK" means NTK Sub, Inc., a Delaware corporation and a wholly owned
subsidiary of the Investor.
"OPTION SURRENDER AGREEMENT, RELEASE AND WAIVER" means the Option
Surrender Agreement, Release and Waiver between the Company and certain
beneficial and record holders of options or unvested stock substantially in the
form of Exhibit B to the Merger Agreement.
"PERSON" shall be construed as broadly as possible and shall include an
individual or natural person, a partnership (including a limited liability
partnership), a corporation, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated organization and
a governmental authority.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
to be entered into among the Company and the Investor substantially in the form
attached hereto as Exhibit A.
"SECURITIES" means, with respect to any Person, such Person's
"securities" as defined in Section 2(1) of the Securities Act of 1933, as
amended, and includes such Person's capital stock or other equity interests or
any options, warrants or other securities or rights that are directly or
indirectly convertible into, or exercisable or exchangeable for, such Person's
capital stock or other equity interests.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the Commission
promulgated thereunder, all as the same may from time to time be in effect.
"Shares" has the meaning given to it in Section 2.1(a).
------
-2-
<PAGE> 5
"TERMINATION AND RELEASE AGREEMENT" means the Termination and Release
Agreement among the Investor, Herbert P. Dooskin and the Company substantially
in the form of Exhibit D to the Merger Agreement.
1.2. Rules of Construction.
---------------------
The term "this Agreement" means this agreement together with all
schedules and exhibits attached hereto, as the same may from time to time be
amended, modified, supplemented or restated in accordance with the terms hereof.
The use in this Agreement of the term "including" means "including, without
limitation." The words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole, including the schedules and
exhibits, as the same may from time to time be amended, modified, supplemented
or restated, and not to any particular section, subsection, paragraph,
subparagraph or clause contained in this Agreement. All references to sections,
schedules and exhibits mean the sections of this Agreement and the schedules and
exhibits attached to this Agreement, except where otherwise stated. The title of
and the section and paragraph headings in this Agreement are for convenience of
reference only and shall not govern or affect the interpretation of any of the
terms or provisions of this Agreement. The use herein of the masculine, feminine
or neuter forms shall also denote the other forms, as in each case the context
may require or permit. Where specific language is used to clarify by example a
general statement contained herein, such specific language shall not be deemed
to modify, limit or restrict in any manner the construction of the general
statement to which it relates. The language used in this Agreement has been
chosen by the parties to express their mutual intent, and no rule of strict
construction shall be applied against any party.
ARTICLE II
PURCHASE AND SALE OF SHARES
2.1. Closing.
-------
(a) At the Closing (as defined below), subject to the satisfaction or
waiver of the conditions in Articles V, (i) the Company shall issue and sell to
the Investor, and the Investor shall purchase from the Company, 640,000 shares
of Common Stock at a per share purchase price equal to $18.75 (or the aggregate
purchase price of $12,000,000 for all 640,000 shares (collectively, the
"SHARES") to be sold to the Investor at the Closing).
(b) The closing (the "CLOSING") hereunder with respect to the issuance
and sale of the Shares and the consummation of the related transactions
contemplated hereby shall take place on the date hereof (such date being called
the "CLOSING DATE" herein) at the offices of Cleary, Gottlieb, Steen & Hamilton,
New York, New York, or such other location agreed upon by the Company and the
Investor. At the Closing, the Company shall deliver to the Investor one or more
certificates representing the Shares being purchased by the Investor at the
Closing, registered in the name of the Investor, against receipt by the Company
of the aggregate purchase
-3-
<PAGE> 6
price therefor, payable in its entirety by wire transfer of immediately
available funds to an account specified in writing by the Company at least one
Business Day prior to the Closing Date.
2.2. Use of Proceeds.
---------------
The proceeds received by the Company from the sale of the Shares shall
be used first by the Company to satisfy its obligations to Atrium Acquisition
Holding Corp. under Section 6.4(b) of the Atrium Agreement and, if there remain
any proceeds after such obligations are fully satisfied, for general corporate
purposes.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The representations and warranties of the Company contained in the
Merger Agreement are incorporated into this Agreement by reference. The Company
represents and warrants to the Investor that each of the representations and
warranties of the Company contained in the Merger Agreement are true, correct
and complete on and as of the Closing Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE INVESTOR
4.1. Investment Representations.
--------------------------
(a) The Investor is acquiring the Shares to be purchased by the
Investor hereunder for its own account, for investment and not with a view to
the distribution thereof in violation of the Securities Act or applicable state
securities laws.
(b) The Investor understands that (i) the Shares have not been
registered under the Securities Act or applicable state securities laws by
reason of their issuance by the Company in a transaction exempt from the
registration requirements of the Securities Act and applicable state securities
laws and (ii) the Shares must be held by the Investor indefinitely unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities laws or is exempt from registration.
(c) The Investor further understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to the
Investor) promulgated under the Securities Act depends on the satisfaction of
various conditions, and that, if applicable, Rule 144 may only afford the basis
for sales of Securities acquired hereunder only in limited amounts.
(d) The Investor is an "accredited investor" (as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act). The Company has made
available to the Investor or its representatives all agreements, documents,
records and books that the Investor has requested relating to an investment in
the Securities which may be acquired by the Investor hereunder. The
-4-
<PAGE> 7
Investor has had an opportunity to ask questions of, and receive answers from, a
person or persons acting on behalf of the Company, concerning the terms and
conditions of this investment, and answers have been provided to all of such
questions to the full satisfaction of the Investor. The Investor has such
knowledge and experience in financial and business matters that it is capable of
evaluating the risks and merits of this investment.
4.2. Other Representations and Warranties.
------------------------------------
The representations and warranties of the Investor and NTK contained in
the Merger Agreement are incorporated into this Agreement by reference. The
Investor and NTK represent and warrant to the Company that each of the
representations and warranties of the Investor and NTK contained in the Merger
Agreement are true, correct and complete on and as of the Closing Date.
ARTICLE V
COMPANY DELIVERIES AT THE CLOSING
The Investor's obligation to purchase the Shares is subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions, unless expressly waived by the Investor at or prior to Closing:
5.1. Supporting Documents.
--------------------
The Investor shall have received copies of the following supporting
documents (in form and substance satisfactory to the Investor):
(a) certificates of the Secretary of State of the State of
Delaware, dated as of a recent date as to the due incorporation or formation and
good standing of the Company and listing all documents of the Company on file
with said Secretary;
(b) a telegram, telex or other acceptable method of confirmation
from said Secretary as of the close of business on the next Business Day
preceding the Closing Date as to the continued good standing of the Company;
(c) a certificate of the Secretary or an Assistant Secretary of
the Company, dated as of the Closing Date and certifying:
(i) that attached thereto is a true, correct and complete copy
of the Certificate of Incorporation of the Company as in effect on and
as of the Closing Date (which shall be in form and substance
satisfactory to the Investor) and that no action has been taken or is
proposed to be taken by or on the part of the Company to amend or
modify the same in any respect or to liquidate, dissolve or wind up the
affairs of the Company;
-5-
<PAGE> 8
(ii) that attached thereto is a true, correct and complete
copy of the By-laws of the Company as in effect on and as of the
Closing Date (which shall be in form and substance satisfactory to the
Investor) and that no action has been taken or is proposed to be taken
by or on the part of the Company to amend or modify the same in any
respect;
(iii) that attached thereto are true, correct and complete
copies of all resolutions adopted by the Board of Directors (and any
committees thereof) and the stockholders of the Company authorizing the
execution, delivery and performance of the Documents to which the
Company is or will be a party and the issuance, sale, and delivery of
the Shares (which resolutions shall be in form and substance
satisfactory to the Investor), and that all such resolutions are still
in full force and effect and that no action has been taken or is
proposed to be taken by or on the part of the Company to amend, modify
or rescind the same in any respect; and
(iv) the incumbency and specimen signature of all officers
of the Company executing the Documents, the stock certificates
representing the Shares and any certificate or instrument furnished
pursuant hereto, and a certification by another officer of the Company
as to the incumbency and signature of the officer signing the
certificate referred to in this clause (iv); and
(d) such additional supporting documents as the Investor may
reasonably request.
5.2. Registration Rights Agreement.
-----------------------------
The Company shall have executed and delivered the Registration Rights
Agreement in substantially the form of Exhibit A hereto.
ARTICLE VI
MISCELLANEOUS
6.1. Fees.
----
(a) Each party hereto shall bear all fees, costs and expenses
incurred by it in connection with the preparation, execution and performance of
the Documents, except as otherwise expressly provided herein.
(b) The Company agrees that it will pay, and will save the
Investor harmless from, any and all liability with respect to any stamp or
similar taxes which may be determined to be payable in connection with the
execution and delivery and performance of the Documents or any modification,
amendment or alteration of the terms or provisions of the Documents, and that it
will similarly pay and hold the Investor harmless from all issue taxes in
respect of the issuance of the Shares to the Investor.
-6-
<PAGE> 9
6.2. Further Assurances.
------------------
The Company shall duly execute and deliver, or cause to be duly
executed and delivered, at its own cost and expense, such further instruments
and documents and to take all such action, in each case as may be necessary or
proper in the reasonable judgment of the Investor to carry out the provisions
and purposes of the Agreement and the other Documents.
6.3. Successors and Assigns.
----------------------
This Agreement shall bind and inure to the benefit of the Company and
the Investor and their respective successors, assigns, heirs and personal
representatives.
6.4. Entire Agreement.
----------------
This Agreement and the other writings referred to herein or delivered
pursuant hereto which form a part hereof contain the entire agreement among the
parties with respect to the subject matter hereof and thereof and supersede all
prior and contemporaneous arrangements or understandings with respect thereto.
6.5. Notices.
-------
All notices and other communications delivered hereunder (whether or
not required to be delivered hereunder) shall be deemed to be sufficient and
duly given if contained in a written instrument (a) personally delivered, (b)
sent by telecopier, (c) sent by nationally-recognized overnight courier
guaranteeing next Business Day delivery or (d) sent by first class registered or
certified mail, postage prepaid, return receipt requested, in each case
addressed as follows:
(i) if to the Company, to:
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Telephone: (212) 832-1550
Telecopier: (212) 888-0472
Attention: Jeffrey S. Silverman
with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Telephone: (212) 225-2000
Telecopier: (212) 225-3999
-7-
<PAGE> 10
Attention: Victor I. Lewkow, Esq.
(ii) if to the Investor, to:
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Telephone: (401) 751-1600
Telecopier: (401) 751-4610
Attention: Richard L. Bready
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110
Telephone: (617) 951-7000
Telecopier: (617) 951-7050
Attention: David C. Chapin, Esq.
or to such other address as the party to whom such notice or other communication
is to be given may have furnished to each other party in writing in accordance
herewith. Any such notice or communication shall be deemed to have been received
(i) when delivered, if personally delivered, (ii) when sent, if sent by telecopy
on a Business Day (or, if not sent on a Business Day, on the next Business Day
after the date sent by telecopy), (iii) on the next Business Day after dispatch,
if sent by nationally recognized, overnight courier guaranteeing next Business
Day delivery, and (iv) on the fifth Business Day following the date on which the
piece of mail containing such communication is posted, if sent by mail.
6.6. Amendments, Modifications and Waivers.
-------------------------------------
The terms and provisions of this Agreement may not be modified or
amended, nor may any of the provisions hereof be waived, temporarily or
permanently, except pursuant to a written instrument executed by the Company and
the Investor.
6.7. Governing Law.
-------------
All questions concerning the construction, interpretation and validity
of this Agreement shall be governed by and construed and enforced in accordance
with the domestic laws of the State of Delaware, without giving effect to any
choice or conflict of law provision or rule (whether in the State of Delaware or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of Delaware. In furtherance of the foregoing,
the internal law of the State of Delaware will control the interpretation and
construction of this
-8-
<PAGE> 11
Agreement, even if under such jurisdiction's choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily or
necessarily apply.
6.8. Counterparts; Facsimile Signatures.
----------------------------------
This Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original instrument, but all
such counterparts together shall constitute but one agreement. Facsimile
counterpart signatures to this Agreement shall be acceptable an binding.
* * * *
-9-
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have duly executed this Stock
Purchase Agreement in one or more counterparts as of the date first above
written.
PLY GEM INDUSTRIES, INC.
By: /s/ Jeffrey S. Silverman
-----------------------------------------
Name: Jeffrey S. Silverman
Title: President
NORTEK, INC.
By: /s/ Kevin W. Donnelly
-----------------------------------------
Name: Kevin W. Donnelly
Title: Vice President and General Counsel
-10-
<PAGE> 1
Exhibit 6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT dated as of July 24, 1997, between PLY
GEM INDUSTRIES, INC., a Delaware corporation (the "Company"), and NORTEK, INC.,
a Delaware corporation (the "Investor").
The Investor owns 640,000 shares of common stock, $0.25 par value per
share (the "Common Stock"), of the Company pursuant to the Stock Purchase
Agreement dated July 24, 1997 between the Company and the Investor. The Company
and the Investor deem it to be in their respective best interests to set forth
the rights of the Investor in connection with public offerings and sales of the
capital stock of the Company.
ACCORDINGLY, in consideration of the premises and mutual
covenants and obligations hereinafter set forth, the Company and the Investor
hereby agree as follows:
SECTION 1. DEFINITIONS. As used in this Agreement, the
following terms shall have the following meanings:
"COMMISSION" shall mean the Securities and Exchange Commission
or any other governmental authority at the time administering the Securities
Act.
"COMMON STOCK" shall have the meaning given to it in the
preamble to this agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934
or any successor federal statute, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect from time
to time.
"INFORMATION" shall have the meaning given to it in
Section 5(i).
"INSPECTORS" shall have the meaning given to it in
Section 5(i).
"INVESTOR" shall have the meaning given to it in the preamble
to this agreement, and includes any successor to, or assignee or transferee of
the Investor who or which agrees in writing to be treated as an Investor
hereunder and to be bound by and comply with all of the applicable terms and
provisions hereof.
"MATERIAL TRANSACTION" means any material transaction in which
the Company or any of its subsidiaries proposes to engage or is engaged,
including a purchase or sale of assets or securities, financing, merger,
consolidation, tender offer or any other transactions that would
<PAGE> 2
require disclosure pursuant to the Exchange Act, and with respect to which the
Board of Directors of the Company reasonably has determined in good faith that
compliance with this Agreement may reasonably be expected to either materially
interfere with the Company's or such subsidiary's ability to consummate such
transaction in a timely fashion or require the Company to disclose material,
non-public information prior to such time as it would otherwise be required to
be disclosed.
"MERGER AGREEMENT" means the Agreement and Plan of Merger
dated the date hereof among the Investor, NTK Sub, Inc., a Delaware corporation
and a wholly owned subsidiary of the Investor, and the Company.
"NASD" shall have the meaning given to it in Section 5(n).
"OTHER SHARES" shall mean at any time those shares of Common
Stock which do not constitute Primary Shares or Registrable Shares.
"PERSON" shall be construed as broadly as possible and shall
include an individual or natural person, a partnership (including a limited
liability partnership), a corporation, an association, a joint stock company, a
limited liability company, a trust, a joint venture, an unincorporated
organization and a governmental authority.
"PRIMARY SHARES" shall mean at any time the authorized but
unissued shares of Common Stock or shares of Common Stock held by the Company in
its treasury.
"RECORDS" shall have the meaning given to it in Section 5(i).
"REGISTRABLE SHARES" shall mean, at any time, with respect to
the Investor, the shares of Common Stock held by the Investor which constitute
Restricted Shares. As to any particular Registrable Shares, once issued, such
Registrable Shares shall cease to be Registrable Shares when (A) they have been
registered under the Securities Act, the Registration Statement in connection
therewith has been declared effective and they have been disposed of pursuant to
and in the manner described in such effective Registration Statement, (B) they
(1) are sold or distributed pursuant to Rule 144 or (2) may be sold or
distributed by the holder thereof under Rule 144(k), (C) they have been
otherwise transferred and new certificates or other evidences of ownership for
them not bearing a restrictive legend and not subject to any stop transfer order
or other restriction on transfer shall have been delivered by the Corporation or
the issuer of other securities issued in exchange for the Registrable Shares, or
(D) they have ceased to be outstanding.
"RESTRICTED SECURITIES" shall mean, at any time and with
respect to the Investor, the Restricted Shares and any securities received on or
with respect to any Restricted Shares, which are held by the Investor and which
theretofore have not been sold to the public pursuant to a registration
statement under the Securities Act or pursuant to Rule 144.
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"RESTRICTED SHARES" shall mean, at any time and with respect
to the Investor, the shares of Common Stock and any other securities which by
their terms are exercisable or exchangeable for or convertible into Common
Stock, and any securities received on or with respect to any such Common Stock,
acquired by the Investor pursuant to this Agreement and which theretofore have
not been sold to the public pursuant to a registration statement under the
Securities Act or pursuant to Rule 144 or may be sold under Rule 144(k).
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary rule thereto
(such as Rule 144A).
"SECURITIES ACT" shall mean the Securities Act of 1933 or any
successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.
"SELLING INVESTOR'S COUNSEL" shall have the meaning given to
it in Section 5(b).
SECTION 2. Demand Registration.
------------------------------
(a) If, following the earlier of (i) the
consummation of a merger, consolidation, tender offer, sale of assets
or other disposition of the Company other than pursuant to the Merger
Agreement, and (ii) ninety (90) days after the termination of the
Merger Agreement or the failure to consummate the transactions
contemplated thereby regardless of the reasons therefore, the Company
shall be requested by the Investor to effect the registration under the
Securities Act of Registrable Shares, then, upon the written request,
delivered to the Company (which request shall specify the number of
Registrable Shares proposed to be included in such registration), the
Company shall, subject to Section 2(c) below, promptly use its best
efforts to effect such registration under the Securities Act of the
Registrable Shares which the Company has been so requested to register.
(b) Anything contained in Section 2(a) to the
contrary notwithstanding, the Company shall not be obligated to effect
pursuant to Section 2(a) any registration under the Securities Act
except in accordance with the following provisions:
(i) the Company shall not be obligated to
use its best efforts to file and cause to become effective (A)
more than two registration statements initiated pursuant to
Section 2(a), or (B) any registration statement during any
period in which any other registration statement (other than
on Form S-4 or Form S-8 promulgated under the Securities Act
or any successor forms thereto) pursuant to which Primary
Shares are to be or were sold has been filed and not withdrawn
or has been declared effective within the prior 90 days;
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(ii) the Company may delay the filing or
effectiveness of any registration statement for a period of up
to 90 days after the date of a request for registration
pursuant to Section 2(a) if at the time of such request (A)
the Company is engaged, or has bona fide plans to file within
60 days of the time of such request, a registration statement
in respect of a firm commitment underwritten public offering
of Primary Shares in which the holders of Restricted Shares
may include Registrable Shares pursuant to Section 3 or (B) a
Material Transaction exists at such time, provided that the
company may only so delay the filing or effectiveness of a
particular Registration Statement once pursuant to clause (A)
above and once pursuant to this clause (B) in any 18-month
period; and
(iii) with respect to any registration
pursuant to Section 2(a), the Company may include in such
registration any Primary Shares or Other Shares; PROVIDED,
HOWEVER, that if the managing underwriter advises the Company
that the inclusion of all Registrable Shares, Primary Shares
and Other Shares proposed to be included in such registration
would interfere with the successful marketing (including
pricing) of all such securities, then the number of
Registrable Shares, Primary Shares and Other Shares proposed
to be included in such registration shall be included in the
following order:
(A) first, the Registrable Shares
held by the Investor requesting that its Registrable
Shares be included in such registration pursuant to
Section 2(a);
(B) second, the Primary Shares; and
(C) third, the Other Shares.
A requested registration under this Section 2 may be rescinded prior to such
registration being declared effective by the Commission by written notice to the
Company from the Investor; PROVIDED, HOWEVER, that such rescinded registration
shall not count as a registration statement initiated pursuant to this Section 2
for purposes of clause (i) above if the Company shall have been reimbursed for
all out-of-pocket expenses incurred by the Company in connection with such
rescinded registration and provided further that no request to register
Registrable Securities may be made pursuant to this Section 2(a) for a period of
180 days from the date of such recession.
SECTION 3. PIGGYBACK REGISTRATION. If at any time following
the date hereof, the Company at any time proposes for any reason to register
Primary Shares or Other Shares under the Securities Act (other than on Form S-4
or Form S-8 promulgated under the Securities Act or any successor forms thereto
and other than pursuant to a registration statement covered by Rule 462
promulgated under the Securities Act), it shall promptly give written notice to
the
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<PAGE> 5
Investor of its intention so to register the Primary Shares or Other Shares and,
upon the written request, given within 20 days after delivery of any such notice
by the Company, of the Investor to include in such registration Registrable
Shares (which request shall specify the number of Registrable Shares proposed to
be included in such registration), the Company shall use its best efforts to
cause all such Registrable Shares to be included in such registration on the
same terms and conditions as the securities otherwise being sold in such
registration; PROVIDED, HOWEVER, that if the managing underwriter advises the
Company that the inclusion of all Registrable Shares or Other Shares proposed to
be included in such registration would interfere with the successful marketing
(including pricing) of Primary Shares proposed to be registered by the Company,
then the number of Primary Shares, Registrable Shares and Other Shares proposed
to be included in such registration shall be included in the following order:
(a) first, the Primary Shares;
(b) second, the Registrable Shares held by the
Investor; and
(c) third, the Other Shares.
SECTION 4. HOLDBACK AGREEMENT. If the Company at any time
shall register shares of Common Stock under the Securities Act (including any
registration pursuant to Section 2) for sale to the public, the Investor shall
not sell, make any short sale of, grant any option for the purchase of, seek
registration under the Securities Act of, or otherwise dispose of any Restricted
Shares (other than those shares of Common Stock included in such registration
pursuant to Section 2 or 3) without the prior written consent of the Company for
a period designated by the Company in writing to the Investor, which period
cannot begin more than 10 days prior to the effectiveness of the registration
statement pursuant to which such public offering shall be made and cannot last
more than 180 days after the effective date of such registration statement and,
in any subsequent public offering, more than 120 days after the effective date
of such registration statement.
SECTION 5. PREPARATION AND FILING. If and whenever the Company
is under an obligation pursuant to the provisions of this Agreement to use its
best efforts to effect the registration of any Registrable Shares, the Company
shall, as expeditiously as practicable:
(a) use its best efforts to cause a registration
statement that registers such Registrable Shares to become and remain
effective for a period of 90 days or until all of such Registrable
Shares have been disposed of (if earlier);
(b) furnish, at least five business days before
filing a registration statement that registers such Registrable Shares,
a prospectus relating thereto or any amendments or supplements relating
to such a registration statement or prospectus, to one counsel selected
by the Investor (the "Selling Investor's Counsel"), copies of all such
documents proposed to be filed (it being understood that such
five-business-day period
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<PAGE> 6
need not apply to successive drafts of the same document proposed to be
filed so long as such successive drafts are supplied to such counsel in
advance of the proposed filing by a period of time that is customary
and reasonable under the circumstances);
(c) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for at least a period of 90 days
or until all of such Registrable Shares have been disposed of (if
earlier) and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of such Registrable Shares,
provided that the Company may delay (and such period of delay shall
extend such 90-day period by the same duration) for up to 45 days the
effectiveness or filing of such registration statement, or elect not to
amend such registration statement or supplement the Prospectus used in
connection therewith so that sales may not be made thereon for up to 45
days (and such period of delay shall extend such 90-day period by the
same duration), if the making of disclosures required by such
registration statement would have a material adverse affect upon the
Company or its securities and such disclosures are not otherwise
required to be made;
(d) notify in writing the Selling Investor's Counsel
promptly (i) of any comments by the Commission with respect to such
registration statement or prospectus, or any request by the Commission
for the amending or supplementing thereof or for additional information
with respect thereto, (ii) of the issuance by the Commission of any
stop order suspending the effectiveness of such registration statement
or prospectus or any amendment or supplement thereto or the initiation
of any proceedings for that purpose and (iii) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of such Registrable Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Shares reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller of Registrable Shares to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such seller; PROVIDED, HOWEVER, that the Company will
not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any
jurisdiction where it would not otherwise be required so to do but for
this paragraph (e);
(f) furnish to each seller of such Registrable Shares
such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such seller of
Registrable Shares may reasonably request in order to facilitate the
public sale or other disposition of such Registrable Shares;
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<PAGE> 7
(g) use its best efforts to cause such Registrable
Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Shares;
(h) notify on a timely basis each seller of such
Registrable Shares at any time when a prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act
within the appropriate period mentioned in subparagraph (a) of this
Section 5, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing and, at the request of such seller, prepare and furnish to
such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(i) make available for inspection by any seller of
such Registrable Shares, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter
(collectively, the "Inspectors"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration
statement (and any of the Information which the Company determines in
good faith to be confidential, and of which determination the
Inspectors are so notified, shall not be disclosed by the Inspectors
unless (i) the disclosure of such Information is necessary to avoid or
correct a misstatement or omission in the registration statement, (ii)
the release of such Information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public, and (iv)
the seller of Registrable Shares agrees that it will, upon learning
that disclosure of such Information is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company, at the
Company's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential);
(j) use its best efforts to obtain, from its
independent certified public accountants, a "cold comfort" letter in
customary form and covering such matters of the type customarily
covered by cold comfort letters;
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<PAGE> 8
(k) use its best efforts to obtain, from its counsel,
an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which may
be the same entity and which may be the Company) for such Registrable
Shares;
(m) issue to any underwriter to which any seller of
Registrable Shares may sell shares in such offering, certificates
evidencing such Registrable Shares;
(n) list such Registrable Shares on any national
securities exchange on which any shares of the Common Stock are listed
or, if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable Shares for
inclusion on the automated quotation system of the National Association
of Securities Dealers, Inc. (the "NASD") or such other national
securities exchange as the holders of a majority of such Registrable
Shares shall request;
(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its securityholders, as soon as reasonably practicable, earnings
statements which need not be audited covering a period of 12 months
beginning within three months after the effective date of the
registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps
necessary to effect the registration of such Registrable Shares
contemplated hereby.
Each holder of the Registrable Shares, upon receipt of any
notice from the Company of any event of the kind described in Section 5(h)
hereof, shall forthwith discontinue disposition of the Registrable Shares
pursuant to the registration statement covering such Registrable Shares until
such holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 5(h) hereof, and, if so directed by the Corporation,
such holder shall deliver to the Corporation all copies, other than permanent
file copies then in such holder's possession, of the most recent Prospectus
covering such Registrable Shares at the time of receipt of such notice.
SECTION 6. EXPENSES. All expenses incurred by the Company in
complying with Section 5, including, without limitation, all registration and
filing fees (including all expenses incident to filing with the NASD), fees and
expenses of complying with securities and blue sky laws, printing expenses, fees
and expenses of the Company's counsel and accountants and fees and expenses of
the Selling Investor's Counsel, shall be paid by the Company; PROVIDED, HOWEVER,
that all underwriting discounts and selling commissions applicable to the
Registrable
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<PAGE> 9
Shares shall not be borne by the Company but shall be borne by the seller or
sellers thereof, in proportion to the number of Registrable Shares sold by such
seller or sellers.
SECTION 7. Indemnification.
---------------
(a) In connection with any registration of any
Registrable Shares under the Securities Act pursuant to this Agreement,
the Company shall indemnify and hold harmless the seller of such
Registrable Shares, each underwriter, broker or any other Person acting
on behalf of such seller and each other Person, if any, who controls
any of the foregoing Persons within the meaning of the Securities Act
against any losses, claims, damages or liabilities, joint or several,
to which any of the foregoing Persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based
upon an untrue statement or alleged untrue statement of a material fact
contained in the registration statement under which such Registrable
Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, any amendment or
supplement thereto or any document incident to registration or
qualification of any Registrable Shares, or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading or, with respect to any prospectus, necessary to
make the statements therein in light of the circumstances under which
they were made not misleading, or any violation by the Company of the
Securities Act or state securities or blue sky laws applicable to the
Company and relating to action or inaction required of the Company in
connection with such registration or qualification under such state
securities or blue sky laws; and shall reimburse such seller, such
underwriter, such broker or such other Person acting on behalf of such
seller and each such controlling Person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement,
preliminary prospectus, amendment, supplement or document incident to
registration or qualification of any Registrable Shares in reliance
upon and in conformity with written information furnished to the
Company through an instrument duly executed by such seller or
underwriter, or a Person duly acting on their behalf, specifically for
use in the preparation thereof.
(b) In connection with any registration of
Registrable Shares under the Securities Act pursuant to this Agreement,
each seller of Registrable Shares shall indemnify and hold harmless (in
the same manner and to the same extent as set forth in the preceding
paragraph of this Section 7) the Company, each director of the Company,
each officer of the Company, each underwriter, broker or other Person
acting on behalf of such seller, each Person who controls any of the
foregoing Persons within the meaning of
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the Securities Act and each other seller of Registrable Shares under
such registration statement with respect to any statement or omission
from such registration statement, any preliminary prospectus or final
prospectus contained therein, any amendment or supplement thereto or
any document incident to registration or qualification of any
Registrable Shares, if such statement or omission was made in reliance
upon and in conformity with written information furnished to the
Company or such underwriter through an instrument duly executed by such
seller or a Person duly acting on their behalf specifically for use in
connection with the preparation of such registration statement,
preliminary prospectus, final prospectus, amendment or supplement;
provided, however, that the maximum amount of liability in respect of
such indemnification shall be, limited, in the case of each seller of
Registrable Shares, to an amount equal to the net proceeds actually
received by such seller from the sale of Registrable Shares effected
pursuant to such registration unless the Seller had actual knowledge
that the information furnished was materially inaccurate.
(c) Promptly after receipt by an indemnified party of
notice of the commencement of any action involving a claim referred to
in the preceding paragraphs of this Section 7, such indemnified party
will, if a claim in respect thereof is made against an indemnifying
party, give written notice to the latter of the commencement of such
action. In case any such action is brought against an indemnified
party, the indemnifying party will be entitled to participate in and to
assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall not be
responsible for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof; provided,
however, that if any indemnified party shall have reasonably concluded
that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those
available to the indemnifying party, or that such claim or litigation
involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 7, the indemnifying party
shall not have the right to assume the defense of such action on behalf
of such indemnified party and such indemnifying party shall reimburse
such indemnified party and, any Person controlling such indemnified
party for that portion of the fees and expenses of any one counsel
retained by the indemnified party which are reasonably related to the
matters covered by the indemnity agreement provided in this Section 7.
(d) If the indemnification provided for in this
Section 8 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, claim,
damage or liability referred to herein, then the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute
to the amounts paid or payable by such indemnified party as a result of
such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on
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<PAGE> 11
the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim,
damage or liability as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material
fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the
parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
SECTION 8. UNDERWRITING AGREEMENT. Notwithstanding the
provisions of Sections 4, 5, 6 and 7, to the extent that the Investor selling
Registrable Shares in a proposed registration shall enter into an underwriting
or similar agreement, which agreement contains provisions covering one or more
issues addressed in such Sections, the provisions contained in such Sections
addressing such issue or issues shall be of no force or effect with respect to
such registration, but this provision shall not apply to the Company if the
Company is not a party to the underwriting or similar agreement.
SECTION 9. INFORMATION BY HOLDER. Each holder of Registrable
Shares to be included in any registration shall furnish to the Company and the
managing underwriter such written information regarding such holder and the
distribution proposed by such holder as the Company or the managing underwriter
may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Agreement.
SECTION 10. EXCHANGE ACT COMPLIANCE. The Company shall use its
reasonable efforts to comply with all of the reporting requirements of the
Exchange Act (whether or not it shall be required to do so) and shall use its
reasonable efforts to comply with all other public information reporting
requirements of the Commission which are conditions to the availability of Rule
144 for the sale of the Common Stock. The Company shall cooperate with the
Investor in supplying such information as may be necessary for the Investor to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of Rule 144.
SECTION 11. NO CONFLICT OF RIGHTS. The Company represents and
warrants to the Investor that the registration rights granted to the Investor
hereby do not conflict with any other registration rights granted by the
Company. The Company shall not, after the date hereof, grant any registration
rights which conflict with or impair, or have any priority over, the
registration rights granted hereby. In any Public Offering, the managing
underwriter shall be a nationally recognized investment banking firm selected by
the Company and reasonably acceptable to the Investor for so long as it holds
Registrable Shares.
SECTION 12. TERMINATION. This Agreement shall terminate and be
of no further force or effect when there shall not be any Restricted Shares;
PROVIDED, HOWEVER, that the
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Investor's rights under Sections 2 and 3 hereof shall cease to be in effect at
any time when (i) the Registrable Shares held by the Investor may be sold by the
Investor under Rule 144 and such Registrable Shares constitute less than 1% of
the class of the Company's Securities to which the Registrable Shares are a part
or (ii) all of the Registrable Shares held by the Investor may be sold under
Rule 144(k).
SECTION 13. SUCCESSORS AND ASSIGNS. This Agreement shall bind
and inure to the benefit of the Company and the Investor and, subject to Section
14, their respective successors and assigns.
SECTION 14. ASSIGNMENT. The Investor may assign its rights
hereunder to any purchaser from the Investor of Restricted Shares; PROVIDED,
HOWEVER, that such purchaser shall, as a condition to the effectiveness of such
assignment, be required to execute a counterpart to this Agreement agreeing to
be treated as the Investor whereupon such purchaser shall have the benefits of,
and shall be subject to the restrictions contained in, this Agreement.
SECTION 15. ENTIRE AGREEMENT. This Agreement contains the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior arrangements or understandings with respect hereto.
SECTION 16. NOTICES. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument and shall be deemed to have been duly given
when delivered in Person, by telex, telegram or telecopy, by overnight courier,
or by first class registered or certified mail, postage prepaid, addressed to
such party at the address set forth below or such other address as may hereafter
be designated in writing by the addressee to the sender:
(i) if to the Company, to:
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Telephone: (212) 832-1550
Telecopier: (212) 888-0472
Attention: Jeffrey S. Silverman
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with a copy to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Telephone: (212) 225-2000
Telecopier: (212) 225-3999
Attention: Victor I. Lewkow, Esq.
(ii) if to the Investor, to:
Nortek, Inc.
50 Kennedy Plaza
Providence, RI 02903
Telephone: (401) 751-1600
Telecopier: (401) 751-4610
Attention: Richard L. Bready
with a copy to:
Ropes & Gray
One International Place
Boston, MA 02110-2824
Telephone: (617)951-7000
Telecopier: (617) 951-7050
Attention: David C. Chapin, Esq.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery, telex, telegram or
telecopy, on the date of such delivery, (b) in the, case of overnight courier,
on the next business day, and (c) in the case of mailing, on the third business
day following such mailing.
SECTION 17. MODIFICATIONS; AMENDMENTS; WAIVERS. The terms and
provisions of this Agreement may not be modified or amended, nor may any
provision applicable to the Investor be waived, except pursuant to a writing
signed by (i) the Company and (ii) the Investor.
SECTION 18. HEADINGS. The headings of the various sections of
this Agreement have been inserted for convenience of reference only and shall
not be deemed to be a part of this Agreement.
SECTION 19. SEVERABILITY. It is the desire and intent of the
parties that the provisions of this Agreement be enforced to the fullest extent
permissible under the law and
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public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 20. GOVERNING LAW. All questions concerning the
construction, interpretation and validity of this Agreement shall be governed by
and construed and enforced in accordance with the domestic laws of the State of
Delaware, without giving effect to any choice or conflict of law provision or
rule (whether in the State of Delaware or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State of
Delaware. In furtherance of the foregoing, the internal law of the State of
Delaware will control the interpretation and construction of this Agreement,
even if under such jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
SECTION 21. LEGEND ON CERTIFICATES. Any certificate
representing securities subject to this Agreement shall bear a legend in
substantially the following form:
"The securities represented by this certificate are
subject to a Registration Rights Agreement dated as
of July 24, 1997, as amended from time to time. A
copy thereof is available for inspection from the
Company."
SECTION 22. COUNTERPARTS; VALIDITY. This Agreement may be
executed in any number of counterparts, and each such counterpart hereof shall
be deemed to be an original instrument, but all such counterparts together shall
constitute but one agreement and telecopied signatures are effective.
SECTION 23. ENTIRE AGREEMENT. This Agreement and the other
documents, certificates, instruments, writings and agreements referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and supersede in their entirety any
and all prior agreements and understandings between any of the parties hereto
all of which are hereby terminated in their entirety and of no further force or
effect.
-14-
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have executed this Registration
Rights Agreement on the date first written above.
PLY GEM INDUSTRIES, INC.
By: /s/ Jeffrey S. Silverman
-------------------------------------------
Name: Jeffrey S. Silverman
Title: President
NORTEK, INC.
By: /s/ Kevin W. Donnelly
-------------------------------------------
Name: Kevin W. Donnelly
Title: Vice President and General Counsel
-15-
<PAGE> 1
Exhibit 7
NON-COMPETE AND TERMINATION AGREEMENT
THIS NON-COMPETE AND TERMINATION AGREEMENT (this "Agreement"), dated as of
July 24, 1997, is made and entered into by Nortek, Inc., a Delaware corporation
("Parent"), Ply Gem Industries, Inc., a Delaware corporation (the "Company") and
Jeffrey S. Silverman (the "Executive").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, NTK Sub, Inc. ("Sub") and the
Company are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"; capitalized
terms used and not defined herein have the respective meanings ascribed to them
in the Merger Agreement), pursuant to which Sub will be merged with and into the
Company (the "Merger");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that Executive agree, and Executive has agreed,
to enter into this Agreement;
WHEREAS, but for his obligations under this Agreement, subsequent to the
closing of the Merger, Executive would not otherwise be bound by any contractual
obligations restricting his ability to compete with the Company;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT AGREEMENT. Executive hereby represents and warrants that his
employment relationship with the Company is pursuant to and governed by the
Employment Agreement dated July 17, 1986, between Executive and the Company, as
amended on October 15, 1987; June 2, 1990; February 19, 1991; November 3, 1992;
December 23, 1992; December 31, 1994; June 10, 1995; August 1, 1995; April 30,
1996; December 27, 1996; and April 11, 1997, a true and correct copy of which
has been furnished to Parent (the "Employment Agreement").
2. TERMINATION OF EMPLOYMENT AGREEMENT. Effective as of the Effective Time
(a) Executive hereby tenders his resignation as an officer and director of the
Company and each of its Subsidiaries, and (b) the Employment Agreement shall be
terminated in full without any further action on the part of the Company or
Executive. Except as expressly provided in this Agreement (including the
exceptions set forth in Section 4(a)), from and after the date of termination of
the Employment Agreement, Executive shall not be entitled to receive any further
wages, compensation or benefits arising pursuant to the Employment Agreement or
his
<PAGE> 2
employment relationship with the Company or any of its Subsidiaries (including,
without limitation, compensation previously deferred by the Executive under the
terms of the Employment Agreement or otherwise and which become due on or after
the date hereof) and Executive shall not be entitled to any post termination
wages, compensation or benefits (including, without limitation, severance pay,
deferred compensation payments, nonqualified supplemental executive retirement
plan payments, vacation pay or sick pay). As liquidated damages for the
termination of the Employment Agreement, the Company hereby agrees to pay
Executive immediately after the Effective Time, by means of wire transfer of
immediately available funds, a sum in the amount of $22,592,150; PROVIDED,
HOWEVER, that the amount of $22,592,150 shall be reduced by any amounts advanced
(except for the amounts on Annex II) to the Executive as bonus for 1997 under
the terms of his Employment Agreement prior to the Effective Time. Except as
provided in paragraph 5 hereof and as described in Annex II, the Executive
hereby waives any and all rights to recover amounts of salary or bonus deferred
by him in accordance with the April 11, 1997 amendment to the Employment
Agreement.
3. FORGIVENESS OF INDEBTEDNESS. Effective as of the termination of the
Employment Agreement, the Company hereby forgives in its entirety and hereby
releases all of its rights in respect of the indebtedness described on Annex II
attached hereto including, without limitation all principal and interest that
may be due and owing or that may become due and owing thereunder. An amount
equal to $11,407,850 of the indebtedness forgiven hereunder shall be in
consideration of the termination of the Employment Agreement as provided in
Section 2. The remainder of the indebtedness forgiven hereunder shall be in
consideration of the noncompetition agreement provided in Section 7.
Notwithstanding the foregoing, any indebtedness owed to the Company or any of
its Subsidiaries by Executive and which is not described on Annex II shall not
be released pursuant to this Section 3 and shall remain in full force and effect
notwithstanding the terms of any other agreement or arrangement between the
Company or any of its Subsidiaries and Executive to the contrary. Except with
respect to interest that may hereafter accrue on the indebtedness described on
Annex II, from and after the date of this Agreement, if Executive should after
the date of this Agreement borrow any additional funds from, or incur any
additional indebtedness to, the Company or any of its Subsidiaries, then the
cash payment to be paid to Executive pursuant to Section 1 shall be reduced on a
dollar for dollar basis by the amount of such additional borrowing or
indebtedness; PROVIDED that, in no event shall Executive incur such additional
borrowing or indebtedness in excess of $1,000,000.
4. RELEASE OF CLAIMS.
(a) RELEASE BY EXECUTIVE. Effective as of the Effective Time, Executive
hereby releases and discharges the Released Parties from all Claims and Damages,
including those related to, arising from, or attributed to (i) his employment
with, and membership on the Boards of Directors for, the Company and its
Subsidiaries and resignations therefrom, (ii) the Employment Agreement, and
(iii) all other acts or omissions related to any matter at any time prior to and
including the date of termination of the Employment Agreement; except that this
2
<PAGE> 3
release shall not include Executive's (A) entitlement to continued group medical
coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"), (B) vested accrued Benefits in the Company's qualified
employee benefit plans described in Annex III attached hereto, (C) rights
arising under the Merger Agreement, (D) rights of Executive arising under this
Agreement, and (E) his right to be reimbursed for reasonable out-of-pocket costs
and expenses incurred after the date of this Agreement and prior to the
Effective Time in connection with services rendered by Executive to, or on
behalf of, the Company. Executive understands and expressly agrees that, unless
specifically excluded from this release, this release extends to all Claims and
Damages of every nature and kind, known or unknown, suspected or unsuspected,
past or present, whether or not these Claims and Damages were set forth in any
writing, and that all such Claims and Damages are hereby expressly settled or
waived.
(b) LIMITATION. Nothing herein shall be interpreted as obligating the
Company, Purchaser or Parent to pay, make reimbursement for or otherwise assume
responsibility for any Taxes imposed on Executive or for any other amount
relating to any of Executive's Tax obligations or liabilities.
(c) DEFINITIONS. As used in this Section 4, the following terms shall have
meanings set forth below:
(i) "Claims" means all theories of recovery of whatever nature,
whether known or unknown, and now recognized by the law or equity of any
jurisdiction, based on acts, omissions or other matters occurring on or
before the date the parties sign this Agreement. This term includes,
without limitation, lawsuits, petitions, complaints, causes of action,
charges, indebtedness, losses, claims, liabilities, and demands, whether
arising in equity or under the common law or under any contract (including,
without limitation, the Employment Agreement), statute, regulation or
ordinance. This term also includes, without limitation, any Claim of
discrimination (based on age or any other factor) under any statute or law
(including, without limitation, the Age Discrimination in Employment Act,
29 U.S.C. ss. 621, et seq.; Title VII of the Civil Rights Act of 1964, 42
U.S.C. ss. 2000e, et seq.; and the Americans with Disabilities Act, 42
U.S.C. ss. 12101, et seq.), and all Claims asserted by Executive, in
writing or otherwise, or which could be asserted, by Executive.
(ii) "Damages" means all elements of relief or recovery of whatever
nature, whether known or unknown, which are recognized by the law or equity
of any jurisdiction. This term includes, without limitation, actual,
incidental, indirect, consequential, compensatory, liquidated, exemplary,
and punitive damages; rescission, attorneys' fees; interest; costs;
equitable relief; and expenses.
(iii) "Released Parties" means and includes the Company and its
Subsidiaries, and all of the foregoing entities' past, present and future
shareholders,
3
<PAGE> 4
directors, officers, employees, agents, insurance carriers, employee
benefit plans (and such plans' fiduciaries, trustees, administrators and
representatives), predecessors, successors, assigns, executors,
administrators, attorneys and representatives, in both their corporate and
individual capacities.
5. SALARY. Executive shall be paid his regular salary of $228,598 per
month, less lawful taxes and withholdings, to and through the date of
termination of the Employment Agreement in accordance with the Company's
customary payroll practices.
6. CONFIDENTIALITY.
(a) PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE SECRETS.
Executive acknowledges that the business of the Company and its Subsidiaries is
highly competitive and that certain confidential contracts, books, records, and
documents, confidential technical information concerning their services, pricing
techniques, and computer system and software, and other confidential information
(such as credit and financial data) concerning their customers and business
affiliates, all comprise confidential business information and trade secrets
which are valuable, special, and unique assets which the Company and its
Subsidiaries use in their business to obtain a competitive advantage over their
competitors. (All such information belonging to the Company and its Subsidiaries
and not publicly available is jointly referred to herein as "Confidential
Information and Trade Secrets.") Effective as of the Effective Time, Executive
agrees that all Confidential Information and Trade Secrets are the exclusive,
confidential, and proprietary information and property of the Company and,
except as necessary to perform the consulting services to be provided hereunder,
will not be used by Executive for any other purpose or in any other manner.
Executive further acknowledges that protection of such Confidential Information
and Trade Secrets against unauthorized disclosure and use is of critical
importance to the Company and its Subsidiaries in maintaining their competitive
position. Executive hereby agrees that he will not make any unauthorized
disclosure of any such Confidential Information and Trade Secrets, or make any
unauthorized use thereof. In the event that Executive is requested pursuant to,
or required by, applicable law or regulation or by legal process to disclose any
Confidential Information and Trade Secrets, Executive agrees to use his
reasonable efforts to provide the Company with prompt notice of such request(s)
to enable the Company to seek an appropriate protective order; provided,
however, that Executive shall not be prohibited from complying with any such
request unless an appropriate protective order is in place.
(b) Scope of Prohibited Activities; Remedies. Executive acknowledges
that the scope of prohibited activities, and time of duration of the provisions
of this Section 6 are reasonable and are no broader than are necessary to
protect the goodwill and legitimate business interests of the Company and its
Subsidiaries. Executive also acknowledges that the provisions of this Section 6
do not and will not impose any unreasonable burden on Executive. Executive
further acknowledges that a violation of this Section 6 will cause irreparable
damage to the Company and its Subsidiaries, entitling them to an injunction and
other equitable relief
4
<PAGE> 5
in a court of competent jurisdiction against Executive. In addition, the Company
and its Subsidiaries shall be entitled to whatever other remedies they may have
at law, including, without limitation, reasonable attorneys fees and costs
incurred by the Company and its Subsidiaries in enforcing the terms of this
Section 6.
7. NON-COMPETITION AGREEMENT.
(a) NON-COMPETITION. Except as expressly permitted herein, effective
as of the Effective Time Executive agrees that he shall not, until 11:59 p.m. on
the second anniversary of the Effective time:
(i) directly or indirectly own, engage in, manage, operate, join,
control, or participate in the ownership, management, operation, or control
of, or be connected as a stockholder, director, officer, employee, agent,
partner, joint venturer, member, beneficiary, or otherwise with, any
corporation, limited liability company, partnership, sole proprietorship,
association, business, trust, or other organization, entity or individual
which in any way competes with the Company or any of its Subsidiaries in
the business of manufacturing, marketing or distributing wood or vinyl
windows or doors or vinyl siding or in any other material business activity
that the Company or any of its Subsidiaries is conducting as of the date of
this Agreement (a "Competing Business") in the United States; PROVIDED,
HOWEVER, that the Executive may own, directly or indirectly, securities of
any entity traded on any national securities exchange or listed on the
National Association of Securities Dealers Automated Quotation System that
is a Competing Business if Executive does not, directly or indirectly, own
10% or more of any class of equity securities, or securities convertible
into or exercisable or exchangeable for 10% or more of any class of equity
securities, of such entity;
(ii) during the term of non-competition, use Executive's access
to, knowledge of, or application of Confidential Information and Trade
Secrets to perform any material duty for any Competing Business; it being
understood and agreed to that this clause (ii) shall be in addition to and
not be construed as a limitation upon the covenants in clause (i) hereof;
(iii) directly or indirectly aid, abet, or otherwise assist in a
material way any individual, business, or other organization or entity that
is a Competing Business in the United States;
(iv) directly or indirectly request or advise any present or
future customers or suppliers of the Company or any of its Subsidiaries to
cancel any contracts with the Company or any of its Subsidiaries or curtail
their dealings with the Company or any of its Subsidiaries;
5
<PAGE> 6
(v) directly or indirectly request or advise any present or
future service provider or financial resource of the Company or any of its
Subsidiaries to withdraw, curtail, or cancel the furnishing of such service
or resource to the Company or any of its Subsidiaries; or
(vi) directly or indirectly hire, attempt to hire, or contact or
solicit with respect to hiring any then significant employee of the Company
or any of its Subsidiaries, or otherwise induce or attempt to influence any
employee of the Company to terminate his or her employment.
(b) NON-COMPETITION FEE. In consideration of the non-competition
agreement described in this Section 7, the Company hereby agrees to forgive the
portion of the indebtedness (as reduced by the amount thereof allocated to the
termination of Executive's Employment Agreement as described in Section 2) owed
to the Company by Executive as described in Section 3.
(c) SCOPE OF PROHIBITED ACTIVITIES; REMEDIES. Executive acknowledges
that the geographic boundaries, scope of prohibited activities, and time
duration of this Section 7 are reasonable in nature and are no broader than are
necessary to maintain the confidentiality and the goodwill of the Company's
proprietary information, plans and services and to protect the other legitimate
business interests of the Company. Executive also acknowledges that the
provisions of this Section 7 do not and will not impose any unreasonable burden
on Executive. Executive further acknowledges that violation of this Section 7
will cause irreparable damage to the Company and its Subsidiaries, entitling
them to an injunction and other equitable relief in a court of competent
jurisdiction against Executive. In addition, the Company and its Subsidiaries
shall be entitled to whatever other remedies they may have at law, including,
without limitation, reasonable attorneys fees and costs incurred by the Company
and its Subsidiaries in enforcing the terms of this Section 7.
8. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Executive agrees that this Agreement and he
obligations hereunder shall be binding upon his heirs, guardians, administrators
or successors.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party.
(c) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
6
<PAGE> 7
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Executive: At the addresses set forth on signature pages hereto
copy to: Squadron, Ellenoff, Plesent & Sheinfeld, LLP
551 Fifth Avenue
New York, New York 10176
Attn: Joel I. Papernik
Telecopy: (212) 697-6686
If to Parent: Nortek, Inc.
50 Kennedy Plaza
Providence, Rhode Island 02903
Attn: Richard L. Bready
Telecopy: (401) 751-4724
copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: Douglass N. Ellis, Jr., Esq.
Telecopy: (617) 951-7050
If to the Company: Ply Gem Industries, Inc.
777 Third Avenue
New York, New York 10017
Attn: Jeffrey S. Silverman
Telecopy: (212) 888-0472
copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Victor Lewkow
Telecopy: (212) 225-3999
or to such other address as the person to whom notice is given may have
previously furnished
7
<PAGE> 8
to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto; PROVIDED that in the event of Executive's death
then, the benefits to be received by Executive hereunder shall inure to his
successors and heirs.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding
8
<PAGE> 9
shall be brought only in such court (and waives any objection based on forum non
conveniens or any other objection to venue therein); PROVIDED, HOWEVER, that
such consent to jurisdiction is solely for the purpose referred to in this
paragraph (l) and shall not be deemed to be a general submission to the
jurisdiction of said Court or in the State of Delaware other than for such
purposes. Each party hereto hereby waives any right to a trial by jury in
connection with any such action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(o) TAX REPORTING. As may be appropriate, the Company shall report
the payments made hereunder by filing the appropriate 1099 or other appropriate
forms for these amounts.
9. TERMINATION. This Agreement shall terminate upon the termination of
the Merger Agreement without any further action on the part of any party hereto.
10. NEW AGREEMENTS. In the event the Company gives Parent the notice
contemplated by Section 8.1(i) of the Merger Agreement, then the Company and
Executive shall, within the time period specified in clause (ii) of such Section
8.1(i), extend to Parent, in connection with any adjustments in the terms and
conditions of the Merger Agreement that Parent may propose pursuant to clause
(ii) of such Section 8.1(i), an opportunity to enter into such agreements or
arrangements (with respect to Executive and his then existing agreements and
arrangements with the Company) as specified in such notice on terms and
conditions no less favorable to Parent as those specified in such notice.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/s/ Jeffrey S. Silverman
-----------------------------------------
Jeffrey S. Silverman
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------
9
<PAGE> 10
Nortek, Inc.
/s/ Kevin W. Donnelly
By: ______________________________________
Kevin W. Donnelly
Name: ____________________________________
Vice President, General Counsel
Title: ___________________________________
Ply Gem Industries, Inc.
/s/ Herbert P. Dooskin
By: ______________________________________
Herbert P. Dooskin
Name: ____________________________________
Executive Vice President
Title: ___________________________________
<PAGE> 11
NORTEK
July 28, 1997
By Facsimile
- - ------------
Mr. Jeffrey S. Silverman
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Dear Mr. Silverman:
Reference is hereby made to the Non-Compete and Termination Agreement
dated as of July 24, 1997 (the "Silverman Agreement") among you, Nortek, Inc., a
Delaware corporation ("Nortek"), and Ply Gem Industries, Inc., a Delaware
corporation ("Ply Gem").
In the Silverman Agreement, paragraph (i) 2 included three references, (ii)
4(a) included two references, (iii) 6(a) included one reference, and (iv) 7(a)
included two references to the term "Effective Time". We hereby confirm the term
"Effective Time" in such eight places shall be deemed deleted and replaced with
the term "consummation of the Offer." All other terms and conditions of the
Silverman Agreement are hereby confirmed.
Very truly yours,
NORTEK, INC.
By:/s/ Kevin W. Donnelly
-----------------------------
Kevin W. Donnelly
Vice President/General Counsel
[NORTEK LETTERHEAD]
<PAGE> 12
Agreed to and Accepted by:
PLY GEM INDUSTRIES, INC.
BY:/s/ Jeffrey S. Silverman
----------------------------
Jeffrey S. Silverman
Chairman
/s/ Jeffrey S. Silverman
----------------------------
Jeffrey S. Silverman
<PAGE> 1
Exhibit 8
TERMINATION AND RELEASE AGREEMENT
THIS TERMINATION AND RELEASE AGREEMENT (this "Agreement"), dated as of July
24, 1997, is made and entered into by Nortek, Inc., a Delaware corporation
("Parent"), Ply Gem Industries, Inc., a Delaware corporation (the "Company") and
Herbert P. Dooskin (the "Executive").
W I T N E S S E T H:
WHEREAS, concurrently herewith, Parent, NTK Sub, Inc. ("Sub") and the
Company are entering into an Agreement and Plan of Merger (as such agreement may
hereafter be amended from time to time, the "Merger Agreement"; capitalized
terms used and not defined herein have the respective meanings ascribed to them
in the Merger Agreement), pursuant to which Sub will be merged with and into the
Company (the "Merger");
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that Executive agree, and Executive has agreed,
to enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. EMPLOYMENT AGREEMENT. Executive hereby represents and warrants that
his employment relationship with the Company is pursuant to and governed by the
Employment Agreement dated March 7, 1986 between Executive and the Company, as
amended on May 4, 1987, March 1, 1988, and January 26, 1989, a true and correct
copy of which has been furnished to Parent (the "Employment Agreement").
2. TERMINATION OF EMPLOYMENT AGREEMENT. Effective as of the Effective
Time (a) Executive hereby tenders his resignation as an officer and director of
the Company and each of its Subsidiaries, and (b) the Employment Agreement shall
be terminated in full without any further action on the part of the Company or
Executive. Except as expressly provided in this Agreement (including the
exceptions set forth in Section 4(a)), from and after the date of termination of
the Employment Agreement, Executive shall not be entitled to receive any further
wages, compensation or benefits arising pursuant to the Employment Agreement or
his employment relationship with the Company or any of its Subsidiaries, and
Executive shall not be entitled to any post termination wages, compensation or
benefits (including, without limitation, severance pay, nonqualified
supplemental executive retirement plan payments, vacation pay or sick pay).
3. FORGIVENESS OF INDEBTEDNESS. Effective as of the termination of the
Employment
<PAGE> 2
Agreement, the Company hereby forgives in its entirety and hereby releases all
of its rights in respect of the indebtedness described on Annex II attached
hereto including, without limitation, all principal and interest that may be due
and owing or that may become due and owing thereunder. Notwithstanding the
foregoing, any indebtedness owed to the Company or any of its Subsidiaries by
Executive and which is not described on Annex II shall not be released pursuant
to this Section 3 and shall remain in full force and effect notwithstanding the
terms of any other agreement or arrangement between the Company or any of its
Subsidiaries and Executive to the contrary. Except with respect to interest that
may hereafter accrue on the indebtedness described on Annex II, from and after
the date of this Agreement, Executive shall not borrow any additional
indebtedness from the Company or any of its Subsidiaries.
4. RELEASE OF CLAIMS.
(a RELEASE BY EXECUTIVE. Effective as of the Effective Time,
Executive hereby releases and discharges the Released Parties from all Claims
and Damages, including those related to, arising from, or attributed to (i) his
employment with, and membership on the Boards of Directors for, the Company and
its Subsidiaries and resignations therefrom, (ii) the Employment Agreement, and
(iii) all other acts or omissions related to any matter at any time prior to and
including the date of termination of the Employment Agreement; except that this
release shall not include Executive's (A) entitlement to continued group medical
coverage in accordance with the Consolidated Omnibus Budget Reconciliation Act
of 1985 ("COBRA"), (B) vested accrued benefits in the Company's qualified
employee benefit plans described in Annex III attached hereto, (C) rights
arising under the Merger Agreement, (D) rights of Executive arising under this
Agreement, (E) his right to be reimbursed for reasonable out-of-pocket costs and
expenses incurred after the date of this Agreement and prior to the Effective
Time in connection with services rendered by Executive to, or on behalf of, the
Company and (F) his rights under that certain Agreement, dated January 2, 1991,
pertaining to certain life insurance policies. Executive understands and
expressly agrees that, unless specifically excluded from this release, this
release extends to all Claims and Damages of every nature and kind, known or
unknown, suspected or unsuspected, past or present, whether or not these Claims
and Damages were set forth in any writing, and that all such Claims and Damages
are hereby expressly settled or waived.
(b) LIMITATION. Nothing herein shall be interpreted as obligating the
Company, Purchaser or Parent to pay, make reimbursement for or otherwise assume
responsibility for any Taxes imposed on Executive or for any other amount
relating to any of Executive's Tax obligations or liabilities.
(c) DEFINITIONS. As used in this Section 4, the following terms shall
have meanings set forth below:
(i) "Claims" means all theories of recovery of whatever nature,
whether known or unknown, and now recognized by the law or equity of any
2
<PAGE> 3
jurisdiction, based on acts, omissions or other matters occurring on or
before the date the parties sign this Agreement. This term includes,
without limitation, lawsuits, petitions, complaints, causes of action,
charges, indebtedness, losses, claims, liabilities, and demands, whether
arising in equity or under the common law or under any contract (including,
without limitation, the Employment Agreement), statute, regulation or
ordinance. This term also includes, without limitation, any Claim of
discrimination (based on age or any other factor) under any statute or law
(including, without limitation, the Age Discrimination in Employment Act,
29 U.S.C. ss. 621, et seq.; Title VII of the Civil Rights Act of 1964, 42
U.S.C. ss. 2000e, et seq.; and the Americans with Disabilities Act, 42
U.S.C. ss. 12101, et seq.), and all Claims asserted by Executive, in
writing or otherwise, or which could be asserted, by Executive.
(ii) "Damages" means all elements of relief or recovery of
whatever nature, whether known or unknown, which are recognized by the law
or equity of any jurisdiction. This term includes, without limitation,
actual, incidental, indirect, consequential, compensatory, liquidated,
exemplary, and punitive damages; rescission, attorneys' fees; interest;
costs; equitable relief; and expenses.
(iii) "Released Parties" means and includes the Company and its
Subsidiaries, and all of the foregoing entities' past, present and future
shareholders, directors, officers, employees, agents, insurance carriers,
employee benefit plans (and such plans' fiduciaries, trustees,
administrators and representatives), predecessors, successors, assigns,
executors, administrators, attorneys and representatives, in both their
corporate and individual capacities.
5. SETTLEMENT AMOUNT. In consideration of the termination of Executive's
Employment Agreement and Executive's release and discharge of the Released
Parties from all Claims and Damages, the Company shall tender and pay to
Executive immediately after the Effective Time, by means of wire transfer of
immediately available funds, an amount equal to $1,900,000, and shall forgive
and release all of its rights in respect of the indebtedness owed the Company by
Executive. Executive shall be paid his regular salary of $47,103 per month, less
lawful taxes and withholdings, to and through the date of termination of the
Employment Agreement in accordance with the Company's customary payroll
practices.
6. CONFIDENTIALITY.
(a) PROTECTION OF CONFIDENTIAL INFORMATION AND TRADE SECRETS.
Executive acknowledges that the business of the Company and its Subsidiaries is
highly competitive and that certain confidential contracts, books, records, and
documents, confidential technical information concerning their services, pricing
techniques, and computer system and software, and other confidential information
(such as credit and financial data) concerning their customers and business
affiliates, all comprise confidential business information and trade secrets
which are valuable, special, and unique assets which the Company and its
Subsidiaries
3
<PAGE> 4
use in their business to obtain a competitive advantage over their competitors.
(All such information belonging to the Company and its Subsidiaries and not
publicly available is jointly referred to herein as "Confidential Information
and Trade Secrets.") Effective as of the Effective Time, Executive agrees that
all Confidential Information and Trade Secrets are the exclusive, confidential,
and proprietary information and property of the Company and, except as necessary
to perform the consulting services to be provided hereunder, will not be used by
Executive for any other purpose or in any other manner. Executive further
acknowledges that protection of such Confidential Information and Trade Secrets
against unauthorized disclosure and use is of critical importance to the Company
and its Subsidiaries in maintaining their competitive position. Executive hereby
agrees that he will not make any unauthorized disclosure of any such
Confidential Information and Trade Secrets, or make any unauthorized use
thereof. In the event that Executive is requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any Confidential
Information and Trade Secrets, Executive agrees to use his reasonable efforts to
provide the Company with prompt notice of such request(s) to enable the Company
to seek an appropriate protective order; provided, however, that Executive shall
not be prohibited from complying with any such request unless an appropriate
protective order is in place.
(b) SCOPE OF PROHIBITED ACTIVITIES; REMEDIES. Executive acknowledges
that the scope of prohibited activities, and time of duration of the provisions
of this Section 6 are reasonable and are no broader than are necessary to
protect the goodwill and legitimate business interests of the Company and its
Subsidiaries. Executive also acknowledges that the provisions of this Section 6
do not and will not impose any unreasonable burden on Executive. Executive
further acknowledges that a violation of this Section 6 will cause irreparable
damage to the Company and its Subsidiaries, entitling them to an injunction and
other equitable relief in a court of competent jurisdiction against Executive.
In addition, the Company and its Subsidiaries shall be entitled to whatever
other remedies they may have at law, including, without limitation, reasonable
attorneys' fees and costs incurred by the Company and its Subsidiaries in
enforcing the terms of this Section 6.
7. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Executive agrees that this Agreement and the
obligations hereunder shall be binding upon his heirs, guardians, administrators
or successors.
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other party.
4
<PAGE> 5
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses:
If to Executive: At the addresses set forth on signature pages hereto
copy to: Squadron, Ellenoff, Plesent & Sheinfeld, L.L.P.
551 Fifth Avenue
New York, New York 10176
Attn: Joel I. Papernik
Telecopy: (212) 697-6686
If to Parent: Nortek, Inc.
50 Kennedy Plaza
Providence, Rhode Island 02903
Attn: Richard L. Bready
Telecopy: (401) 751-4724
copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: Douglass N. Ellis, Jr., Esq.
Telecopy: (617) 951-7050
If to the Company: Ply Gem Industries, Inc.
777 Third Avenue
New York, New York 10017
Attn: Jeffrey S. Silverman
Telecopy: (212) 888-0472
copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Victor Lewkow
Telecopy: (212) 225-3999
5
<PAGE> 6
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to
be for the benefit of, and shall not be enforceable by, any person or entity who
or which is not a party hereto; PROVIDED that, in the event of Executive's
death, the benefits to be received by Executive hereunder shall inure to his
successors and heirs.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding
6
<PAGE> 7
arising in connection with this Agreement, and agrees that any such action, suit
or proceeding shall be brought only in such court (and waives any objection
based on forum non conveniens or any other objection to venue therein);
PROVIDED, HOWEVER, that such consent to jurisdiction is solely for the purpose
referred to in this paragraph (l) and shall not be deemed to be a general
submission to the jurisdiction of said Court or in the State of Delaware other
than for such purposes. Each party hereto hereby waives any right to a trial by
jury in connection with any such action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which, taken
together, shall constitute one and the same Agreement.
(o) TAX REPORTING. As may be appropriate, the Company shall report
the payments made hereunder by filing the appropriate 1099 or other appropriate
forms for these amounts.
8. TERMINATION. This Agreement shall terminate upon the termination of
the Merger Agreement without any further action on the part of any party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
Herbert P. Dooskin
/s/ Herbert P. Dooskin
---------------------------------------
Address:
26 Maywood Court
---------------------------------------
N. Caldwell NJ 07006
---------------------------------------
---------------------------------------
---------------------------------------
7
<PAGE> 8
Nortek, Inc.
/s/ Kevin W. Donnelly
By: ___________________________________
Kevin W. Donnelly
Name: _________________________________
Vice President, General Counsel
Title: ________________________________
Ply Gem Industries, Inc.
/s/ Jeffrey S. Silverman
By: ___________________________________
Jeffrey S. Silverman
Name: _________________________________
Chairman & CEO
Title: ________________________________
<PAGE> 9
NORTEK
July 28, 1997
By Facsimile
- - ------------
Mr. Herbert P. Dooskin
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Dear Mr. Dooskin:
Reference is hereby made to the Termination and Release Agreement
dated as of July 24, 1997 (the "Dooskin Agreement") among you, Nortek, Inc., a
Delaware corporation ("Nortek"), and Ply Gem Industries, Inc., a Delaware
corporation ("Ply Gem").
In the Dooskin Agreement, paragraph (i) 2 included one reference, (ii)
4(a) included two references, (iii) 5 included one reference, and (iv) 6(a)
included one reference, to the term "Effective Time." We hereby confirm the
term "Effective Time" in such five places shall be deemed deleted and replaced
with the term "consummation of the Offer." All other terms and conditions of
the Dooskin Agreement are hereby confirmed.
Very truly yours,
NORTEK, INC.
BY /s/ Kevin W. Donnelly
-------------------------
Kevin W. Donnelly
Vice President/General Counsel
[NORTEK LETTERHEAD]
<PAGE> 10
Agreed to and Accepted by:
PLY GEM INDUSTRIES, INC.
BY /s/ Jeffrey S. Silverman
-------------------------
Jeffrey S. Silverman
Chairman
/s/ Herbert P. Dooskin
- - -----------------------
Herbert P. Dooskin
<PAGE> 1
Exhibit 9
AGREEMENT, effective as of June 23, 1997, between Ply Gem
Industries, Inc., a Delaware corporation (the "Company" or "Ply Gem"), and
[ ] (the "Director").
WHEREAS, the Company has deemed it necessary that in order to
retain its existing directors and to attract as new directors the most capable
persons available; and
WHEREAS, Director is presently a director of the Company; and
WHEREAS, both the Company and Director recognize the increased
risk of claims of all types and description being asserted against directors of
public companies; and
WHEREAS, the Certificate of Incorporation and By-laws of the
Company require the Company to indemnify its directors to the full extent
permitted by law and the Director has been serving and continues to serve as a
director of the Company in part in reliance on those provisions of the
Certificate of Incorporation and the By-Laws; and
WHEREAS, in recognition of Director's need for significant and
substantial protection against personal liability in order to enhance Director's
continued service to the Company in an effective manner and Director's reliance
on the aforesaid provisions of the Certificate of Incorporation and the By-Laws,
and in part to provide Director with specific contractual assurance that the
protection promised by such Certificate of Incorporation and By-Laws will be
available to Director, regardless of, among other things, any amendment to or
revocation of such provisions of the Certificate of Incorporation or By-Laws or
any change in the composition of the Company's Board of Directors or acquisition
transaction relating to the Company, the Company wishes to provide in this
Agreement for the indemnification of and the advancing of expenses to Director
to the full extent permitted by law and as set forth in this Agreement, and, to
the extent insurance is maintained, for the continued coverage of Director under
the Company's directors' and officers' liability insurance policies.
NOW, THEREFORE, the Company and the Director agree between them
as follows:
1. Certain Definitions:
--------------------
(a) CHANGE OF CONTROL EVENT: means the happening of any one of
the following: (a) any "person", as defined in Section 3(a)(9) of the Securities
Exchange Act of 1934 (the "Exchange Act") and as used in Sections 13(d) and
14(d) thereof, including a "group" as defined in Section 13(d) of the Securities
Exchange Act of 1934 (the "Exchange Act") but excluding Ply Gem and any employee
benefit plan sponsored or maintained by Ply Gem (including any trustee of such
plan acting as trustee), directly or indirectly, becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act, as amended from time to time),
of securities of Ply Gem representing 20 percent or more of the combined voting
power of Ply Gem's then outstanding securities; or (b) during any period of 24
consecutive months during the existence of this Indemnity Agreement, the
individuals who, at the beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than death to constitute at
least a majority thereof, provided, however, that a director who was not a
director at
<PAGE> 2
the beginning of such 24-month period shall be deemed to have satisfied such
24-month requirement (and be an Incumbent Director) if such director was elected
by, or on the recommendation of or with the approval of, at least two-thirds of
the directors who then qualified as Incumbent Directors either actually (because
they were directors at the beginning of such 24-month period) or by prior
operation of this subsection; or (c) the occurrence of a transaction requiring
shareholder approval for the acquisition of Ply Gem by an entity other than Ply
Gem or a subsidiary or affiliated company through purchase of assets, or by
merger, or otherwise.
(b) CLAIM: any threatened, pending or completed action, suit
or proceeding, or any inquiry or investigation, whether conducted by the Company
or any other party, that Director in good faith believes might lead to the
institution of any such action, suit or proceeding, whether civil, criminal,
administrative, investigative or other.
(c) EXPENSES: include attorneys' fees and all other costs,
expenses and obligations paid or incurred with respect to the investigation,
defense, being a witness in or participating in (including on appeal), or
preparing to defend, be a witness in or participate in any Claim relating to any
Indemnifiable Event.
(d) INDEMNIFIABLE EVENT: any event or occurrence related to or
based upon the fact that Director is or was a director, officer, employee, agent
or fiduciary of the Company, or is or was serving at the request of the Company
as a director, officer, employee, trustee, agent or fiduciary of another
corporation, partnership, joint venture, employee benefit plan, trust or other
enterprise, or by reason of anything done or not done by Director in any such
capacity.
(e) REVIEWING PARTY: any appropriate person or body consisting
of a member or members of the Company's Board of Directors or any other person
or body appointed by the Board (including the special, independent counsel
referred to in Section 3) who is not a party to the particular Claim for which
Director is seeking indemnification.
(f) VOTING SECURITIES: any securities of the Company which
vote generally in the election of directors.
2. BASIC INDEMNIFICATION ARRANGEMENT. (a) In the event Director was, is
or becomes a party to or witness or other participant in, or is threatened to be
made a party to or witness or other participant in, a Claim by reason of (or
arising in part out of) an Indemnifiable Event, the Company shall indemnify
Director to the fullest extent authorized by the Certificate of Incorporation
and/or the By-Laws of the Company as in effect on the date hereof
notwithstanding that such Certificate of Incorporation and/or By-Laws may
subsequently be amended, repealed or otherwise changed in any respect, as soon
as practicable but in any event no later than thirty days after written demand
is presented to the Company, against any and all expenses, judgments, fines,
penalties and amounts paid in settlement (including all interest, assessments
and other charges paid or payable in connection with or in respect of such
expenses, judgments, fines, penalties or amounts paid in settlement) of such
Claim. Notwithstanding anything in this Agreement to the contrary, prior to a
Change in Control Director shall not be entitled to indemnification pursuant to
this Agreement in connection with any Claim initiated by
2
<PAGE> 3
Director against the Company or any director or officer of the Company unless
the Company has joined in or consented to the initiation of such Claim. If so
requested by Director, the Company shall advance (within two business days of
such request) any and all Expenses to Director (an "Expense Advance").
(b) Notwithstanding the foregoing, (i) the obligations of the
Company under Section 2(a) shall be subject to the condition that the Reviewing
Party shall not have determined (in a written opinion, in any case in which the
special, independent counsel referred to in Section 3 hereof is involved) that
Director would not be permitted to be indemnified under applicable law, and (ii)
the obligation of the Company to make an Expense Advance pursuant to Section
2(a) shall be subject to the condition that, if, when and to the extent that the
Reviewing Party determines that Director would not be permitted to be so
indemnified under applicable law, the Company shall be entitled to be reimbursed
by Director (who hereby agrees to reimburse the Company) for all such amounts
theretofore paid; provided, however, that if Director has commenced legal
proceedings in a court of competent jurisdiction to secure a determination that
Director should be indemnified under applicable law, any determination made by
the Reviewing Party that Director would not be permitted to be indemnified under
applicable law shall not be binding and Director shall not be required to
reimburse the Company for any Expense Advance until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Board of Directors, and if
there has been such a Change in Control, the Reviewing Party shall be the
special, independent counsel referred to in Section 3 hereof. If there has been
no determination by the Reviewing Party or if the Reviewing Party determined
that Director substantively would not be permitted to be indemnified in whole or
in part under applicable law, Director shall have the right to commence
litigation in any court in the State of New York or Delaware having subject
matter jurisdiction thereof and in which venue is proper seeking an initial
determination by the court or challenging any such determination by the
Reviewing Party or any aspect thereof, and the Company hereby consents to
service of process and to appear in any such proceeding. Any determination by
the reviewing Party otherwise shall be conclusive and binding on the Company and
Director.
3. CHANGE IN CONTROL. The Company agrees that if there is a
Change in Control of the Company (other than a Change in Control which has been
approved by a majority of the Company's Board of Directors who were directors
immediately prior to such Change in Control) then with respect to all matters
thereafter arising concerning the rights of Director to indemnity payments and
Expense Advances under this Agreement or any other agreement or the Certificate
of Incorporation of the Company and/or its By-Laws now or hereafter in effect
relating to Claims for Indemnifiable Events, the Company shall seek legal advice
only from special, independent counsel selected by Director and approved by the
Company (which approval shall not be unreasonably withheld), and who has not
otherwise performed services for the Company within the last 5 years (other than
in connection with such matters) or Director. Such counsel, among other things
shall render its written opinion to the Company and Director as to whether and
to what extent the Director would be permitted to be indemnified under
applicable law. The Company agrees to pay the reasonable fees of the special,
independent counsel referred to above and to indemnify fully such counsel
against any and all expenses (including attorneys'
3
<PAGE> 4
fees), claims, liabilities and damages arising out of or relating to this
Agreement or its engagement pursuant hereto.
4. INDEMNIFICATION FOR ADDITIONAL EXPENSES. The Company shall
indemnify Director against any and all expenses (including attorneys' fees) and,
if requested by Director, shall (within two business days of such request)
advance such expenses to Director, which are incurred by Director in connection
with any claim asserted against or action brought by Director for (i)
indemnification or advance payment of Expenses by the Company under this
agreement or any other agreement or the Certificate of Incorporation of the
Company and/or its By-Laws now or hereafter in effect relating to Claims for
Indemnifiable Events and/or (ii) recovery under any directors' and officers'
liability insurance policies maintained by the Company, regardless of whether
Director ultimately is determined to be entitled to such indemnification,
advance expense payment or insurance recovery, as the case may be.
5. PARTIAL INDEMNITY ETC. If Director is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines, penalties and amounts paid in
settlement or a Claim but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Director for the portion thereof to which
Director is entitled. Moreover, notwithstanding any other provision of this
Agreement, to the extent that Director has been successful on the merits or
otherwise in defense of any or all Claims relating in whole or in part to an
Indemnifiable Event or in defense of any issue or matter therein, including
dismissal without prejudice, Director shall be indemnified against all Expenses
incurred in connection therewith. With respect to any determination by the
Reviewing Party or otherwise as to whether Director is entitled to be
indemnified hereunder the burden of proof shall be on the Company to establish
that Director is not so entitled.
6. NO PRESUMPTION. For purposes of this Agreement, the
termination of any claim, action, suit or proceeding by judgment, order,
settlement whether with or without court approval) or conviction, or upon a plea
of nolo contendere, or its equivalent, shall not create a presumption that
Director did not meet any particular standard of conduct or have any particular
belief or that a court has determined that indemnification is not permitted by
applicable law.
7. NON-EXCLUSIVITY, ETC. The rights of the Director hereunder
shall be in addition to any other rights Director may have under the Company's
By-Laws or the Delaware General Corporation Law or otherwise. To the extent that
a change in the Delaware General Corporation Law (whether by statute or judicial
decision) permits greater indemnification by agreement than would be afforded
currently under the Company's Certificate of Incorporation and/or its By-Laws
and this Agreement, it is the intent of the parties hereto that Director shall
enjoy by this Agreement the greater benefits so afforded by such change.
8. LIABILITY INSURANCE. To the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Director shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage available for any
Company director or officer.
4
<PAGE> 5
9. PERIOD OF LIMITATIONS. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
affiliate of the Company against Director, Director's spouse, heirs, executors
or personal or legal representatives after the expiration of one year from the
date of accrual of such cause of action, and any claim or cause of action of the
Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such one year period;
provided, however, that if any shorter period of limitations is otherwise
applicable to any such cause of action such shorter period shall govern.
10. AMENDMENTS, ETC. No supplement, modification or amendment of
this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
11. SUBROGATION. In the event of payment under this Agreement,
the Company shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all papers required and shall
do everything that may be necessary to secure such rights, including the
execution of such documents necessary to enable the Company effectively to bring
suit to enforce such rights.
12. NO DUPLICATION OF PAYMENTS. The Company shall not be liable
under this Agreement to make any payment in connection with any claim made
against Director to the extent Director has otherwise actually received payment
(under any insurance policy, the Certificate of Incorporation or By-Laws or
otherwise) of the amounts otherwise indemnifiable hereunder.
13. BINDING EFFECT, ETC. This Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns, including any direct or indirect successor by
purchase, merger, consolidation or otherwise to all or substantially all of the
business and/or assets of the Company, spouses, heirs, and personal and legal
representatives. The Company shall require and cause any successor (whether
direct or indirect by purchase, merger, consolidation or otherwise) to all,
substantially all, or a substantial part, of the business and/or assets of the
Company, by written agreement in form and substance satisfactory to the
Director, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the company would be required to perform if
no such succession had taken place. This Agreement shall continue in effect
regardless of whether Director continues to serve as a director of the Company
or of any other enterprise at the Company's request with respect to the period
of service thereof.
14. SEVERABILITY. The provisions of this Agreement shall be
severable in the event that any of the provisions hereof (including any
provision within a single section, paragraph or sentence) are held by a court of
competent jurisdiction to be invalid, void or otherwise unenforceable, and the
remaining provisions shall remain enforceable to the fullest extent permitted by
law.
5
<PAGE> 6
15. GOVERNING LAW. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in such State without giving
effect to the principles of conflicts of laws.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the 23d day of June, 1997.
PLY GEM INDUSTRIES, INC.
By:____________________________
Name: JEFFREY S. SILVERMAN
Title: Chairman
_______________________________
Director:
6
<PAGE> 1
EXHIBIT 10
[FURMAN SELZ LLC LOGO] 230 PARK AVENUE - NEW YORK 10169 - 212-309-8200
July 23, 1997
The Board of Directors
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Gentlemen:
We understand that Ply Gem Industries, Inc. ("Ply Gem" or the "Company"),
NTK Sub ("NTK Sub") and Nortek, Inc. ("Nortek") propose to enter into an
Agreement and Plan of Merger (the "Agreement"), substantially in the form of the
draft included with the offer letter from Nortek dated July 18, 1997 (the "Offer
Letter"), whereby, among other things, NTK Sub, a subsidiary of Nortek, has
agreed to purchase all of the issued and outstanding shares of common stock of
the Company (the "Common Stock") at $19.50 per share in cash (the
"Consideration") pursuant to a tender offer (the "Tender Offer"). Following the
completion of the Tender Offer, NTK Sub will be merged into the Company, with
the Company continuing as a wholly-owned subsidiary of Nortek. The terms of the
proposed transaction (the "Proposed Transaction") are set forth in more detail
in the Agreement.
You have requested our opinion, as investment bankers, as to the fairness,
from a financial point of view, of the Consideration to be received by the
stockholders of the Company in the Proposed Transaction. It is our understanding
that the Proposed Transaction is subject to approval by the Board of Directors
of Ply Gem.
In conducting our analysis and arriving at our opinion as expressed herein,
we have reviewed and analyzed, among other things, the following:
(i) the Agreement and the financial terms of the Proposed Transaction
set forth therein;
(ii) the Company's Annual Reports on Form 10-K for the fiscal years
ended December 31, 1994, 1995 and 1996, Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996 and 1997 and certain other filings with
the Securities and Exchange Commission made by the Company, including proxy
statements;
(iii) selected other publicly available information concerning the
Company and the trading market for the Common Stock;
(iv) selected non-public information relating to the Company,
including financial forecasts and projections, furnished to us by the
Company;
(v) the draft, included with the Offer Letter, of the Non-Compete and
Termination Agreement between the Company and the Company's Chief Executive
Officer, Mr. Jeffrey S. Silverman;
(vi) selected publicly available information, including research
reports, concerning certain other companies engaged in businesses which we
believe to be comparable to the Company and the trading markets for certain
of such companies' securities; and
(vii) the financial terms and conditions of selected recent mergers
and acquisitions which we believe to be relevant.
MEMBERS: NEW YORK, AMERICAN, OTHER PRINCIPAL STOCK EXCHANGES & REGULATED BY SFA
<PAGE> 2
[FURMAN SELZ LLC LOGO]
Ply Gem Industries, Inc.
July 23, 1997
Page 2
In addition, we have performed and conducted the following:
(i) discussions with selected members of senior management of the
Company concerning its respective businesses and operations, assets,
present condition and future prospects;
(ii) site visits to selected properties and facilities of the Company,
although we have not conducted a physical inspection of the properties and
facilities of the Company, nor have we made or obtained any independent
evaluation or appraisal of such properties and facilities nor undertaken
any obligation to do so; and
(iii) such other analyses, examinations and procedures, and reviewed
such other agreements and documents, and considered such other factors, as
we have deemed, in our sole judgment, to be necessary, appropriate or
relevant to render an opinion.
In addition, we have taken into account our assessment of general economic,
market and financial conditions and our experience in similar transactions, as
well as our experience in securities valuation in general. Our opinion
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof, and does not represent an opinion as to the value of the Common
Stock or the impact of the Proposed Transaction or its announcement on the
trading price of the Common Stock.
We have assumed and relied, without independent verification, upon the
accuracy and completeness of the financial and other information obtained from
public sources or provided to us by the Company and reviewed by us for purposes
of arriving at our opinion, and we have not assumed any responsibility for
independent verification of such information or undertaken any obligation to
verify such information. In addition, with respect to the financial forecasts
and projections of the Company used in our analysis, the management of the
Company has informed us that such forecasts and projections are reasonable and
we have assumed that they represent the best current judgment of the management
of the Company as to the future financial condition and operating results of the
Company, and have assumed that such forecasts and projections have been
reasonably prepared based on such current judgment. We assume no responsibility
for and express no view as to such forecasts and projections or the assumptions
on which they are based.
Furman Selz will receive a fee for its services to the Board of Directors
in connection with this opinion pursuant to an engagement letter, dated June 20,
1997 as amended on July 15, 1997, entered into between Furman Selz and the
Company. Furman Selz will receive an additional fee upon consummation of the
Proposed Transaction. In addition, the Company has agreed to reimburse Furman
Selz for certain out-of-pocket expenses and to indemnify Furman Selz for certain
liabilities arising from the delivery of this opinion. As you may know, in the
ordinary course of our business, we may actively trade in the equity securities
of the Company for our own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in such securities.
We are aware of the fact that, in connection with the execution of the
Agreement, the Company will terminate its Agreement and Plan of Merger, dated
June 24, 1997, with Atrium Holdings, Corp. This opinion does not constitute a
recommendation of the Proposed Transaction over any other alternative
transactions which may be available to the Company. Our opinion as expressed
herein deals only with whether the Consideration to be received by the
stockholders of the Company in the Proposed Transaction is fair from a financial
point of view.
This opinion is for the use and benefit of the Board of Directors in its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder as to how such
stockholder should vote with respect to or whether to accept the Consideration
to be received
<PAGE> 3
LOGO
Ply Gem Industries, Inc.
July 23, 1997
Page 3
by such stockholder in connection with the Proposed Transaction. We were not
requested to opine as to, and this opinion does not in any manner address, the
underlying business decision of the Board of Directors to proceed with or effect
the Proposed Transaction. This opinion may be included in its entirety in any
proxy statement or Schedule 14D-9 with respect to the Proposed Transaction, but
it may not be summarized, excerpted from or otherwise publicly referred to
without our prior written consent (except in such proxy statement or Schedule
14D-9, provided Furman Selz has been given a reasonable opportunity to review
such summary, excerpt or reference).
Based upon and subject to the foregoing, it is our opinion as investment
bankers that the Consideration to be received by the stockholders of the Company
in the Proposed Transaction is fair, from a financial point of view, to such
holders.
Very truly yours,
FURMAN SELZ LLC
/s/ William Shutzer
--------------------------------------
William Shutzer
President
<PAGE> 1
Exhibit 11
FIRST AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
THIS FIRST AMENDED AND RESTATED STOCKHOLDERS AGREEMENT, dated as of July
24, 1997 (the "Agreement"), is made and entered into by Atrium Acquisition
Holdings Corp., a Delaware corporation ("Parent"), Atrium/PG Acquisition Corp.,
a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), Jeffrey
S. Silverman, Dana R. Snyder and Herbert P. Dooskin (collectively, the
"Stockholders" and individually a "Stockholder"), Ply Gem Industries, Inc., a
Delaware corporation (the "Company"), Nortek, Inc., a Delaware corporation
("Nortek") and NTK Sub, Inc., a Delaware corporation and a wholly-owned
subsidiary of Nortek ("NTK").
WITNESSETH:
-----------
WHEREAS, prior to the date hereof Parent, Sub, the Company and, for limited
purposes, Atrium Corporation, entered into that certain Agreement and Plan of
Merger dated as of June 24, 1997 (the "Merger Agreement");
WHEREAS, on July 24, 1997 the Merger Agreement was terminated in accordance
with its terms;
WHEREAS, on July 24, 1997 Nortek, NTK and the Company entered into an
Agreement and Plan of Merger (as such agreement may hereafter be amended,
restated or renewed from time to time, the "Nortek Agreement"), pursuant to
which NTK will commence a tender offer for Shares (as defined below) of the
Company and NTK will be merged with and into the Company;
WHEREAS, as a result of the termination of the Merger Agreement and Nortek,
NTK and the Company entering into the Nortek Agreement, the parties desire to
amend and restate that certain Stockholders Agreement between certain of the
parties hereto dated as of June 24, 1997 in accordance with the terms and
provisions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. DEFINITIONS. For purposes of this Agreement:
(a) "Acquisition Proposal" shall mean any proposal or offer (other
than the transactions among the Company, Parent and Sub previously contemplated
in the Merger Agreement) involving the Company or any of its subsidiaries for,
or an inquiry or indication of interest that reasonably could be expected to
lead to: (i) any merger, consolidation, share exchange, recapitalization,
business combination, or other similar transaction, (ii) any sale, lease,
exchange,
<PAGE> 2
mortgage, pledge, transfer or other disposition of a material portion of the
assets of the Company and its subsidiaries, taken as a whole, in a single
transaction or series of transactions, or (iii) any tender offer or exchange
offer for all or any portion of the outstanding shares of capital stock of the
Company or any of its subsidiaries or the filing of a registration statement
under the Securities Act of 1933 in connection therewith. The term "Acquisition
Proposal" shall include the Offer and the Merger.
(b) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), including pursuant to any agreement, arrangement
or understanding, whether or not in writing. Without duplicative counting of the
same securities by the same holder, securities Beneficially Owned by a Person
shall include securities Beneficially Owned by all other Persons with whom such
Person would constitute a "group" within the meanings of Section 13(d)(3) of
the Exchange Act.
(c) "Merger" shall mean the merger contemplated by the Nortek
Agreement.
(d) "Offer" shall mean the cash tender offer contemplated by the
Nortek Agreement for all of the outstanding Shares.
(e) "Offer Price" shall mean the greater of $19.50 or the highest per
share price paid in the Offer.
(f) "Options" shall mean all outstanding options or warrants
(including stock purchase rights and stock awards) to purchase or acquire Shares
and shall include the right under the Options to acquire additional Shares upon
a "change of control" with respect to the Company.
(g) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(h) "Purchase Price" shall mean a per share purchase price equal to
$18.75.
(i) "Shares" shall mean shares of common stock, par value $0.25 per
share, of the Company. The term "Shares" shall include, without limitation,
shares of Unvested Stock and any restricted Shares.
(j) "Termination Event" shall mean the first to occur of (i) the
termination of the Nortek Agreement by any party thereto, (ii) the termination,
withdrawal, abandonment or expiration of the Offer without the Shares of each
Stockholder as set forth on Schedule I hereto being accepted for purchase
thereunder (collectively an "Offer Termination Event") or (iii) the material
breach on the part of any party of any of their respective obligations under
Section 2.
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<PAGE> 3
In addition to the terms otherwise defined herein, the following terms
shall have the meaning set forth in Nortek Agreement:
"Company Stockholder Approval";
"Offer Documents";
"Proxy Statement";
"SEC"; and
"Unvested Stock".
2. THE NORTEK OFFER.
(a) Each Stockholder hereby severally and not jointly and severally,
agrees to validly tender (and not to withdraw) pursuant to and in accordance
with the terms of the Offer, not later than one business day prior to the
expiration date of the Offer pursuant to the Nortek Agreement and Rule 14d-2
under the Exchange Act, the number of Shares set forth opposite such
Stockholder's name on Schedule I hereto. Each party hereto acknowledges and
agrees that NTK's obligation to accept for payment Shares purchased pursuant to
the Offer, including the Shares tendered pursuant to the Agreement by the
Stockholders, is subject to the terms and conditions of the Offer. The
obligations of the Stockholders under this Section 2(a) shall terminate upon a
Termination Event (except a Termination Event resulting from a breach by a
Stockholder).
(b) Each Stockholder hereby agrees to permit Nortek and NTK to publish
and disclose in the Offer Documents and, if Company Stockholder Approval is
required under applicable law, the Proxy Statement (including all documents and
schedules filed with the SEC) such Stockholder's identity and ownership of
Shares and the nature of such Stockholder's commitments, arrangements and
understandings under this Agreement.
(c) Immediately after the acceptance of any Shares for payment
pursuant to the Offer, Nortek and NTK shall take such actions as may be
necessary (including, without limitation, the giving to the "Depositary " such
instructions as may be necessary) to cause payment of the aggregate Offer Price
due in respect of the Shares properly tendered hereunder by each Stockholder to
be paid, no later than on the first business day following the date that any
Shares have been accepted for purchase pursuant to the Offer (the "Purchase
Date"), as follows:
(i) The Sub, or its permitted assign, in respect of the Shares
that have been so tendered by each Stockholder and not withdrawn,
shall receive an amount equal to 75% of the excess of (A) the
aggregate Offer Price payable in respect of such Stockholder's Shares
so tendered over (B) the product of (1) the number of Shares so
tendered, multiplied by (2) the Purchase Price; and
(ii) Each Stockholder (or his designee), in respect of the
Shares that have been so tendered by such Stockholder, shall receive
the amount of the aggregate Offer Price payable in respect of the
Shares so tendered after deducting therefrom the amount payable
pursuant to clause (i) above.
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<PAGE> 4
(d) On the Purchase Date, the Company, Nortek, NTK and each of the
Stockholders, severally and not jointly severally, shall take such actions as
may be necessary for each of the Options set forth next to each Stockholder's
name on Schedule II hereto to be cancelled in consideration of an amount in cash
(subject to any applicable withholding tax), in respect of each of the Shares
subject to each of such Options (including any additional Shares subject thereto
by the reason of the occurrence of a "change of control" in the Company, and
Unvested Stock to the extent not tendered in the Offer) equal to the difference
between the per share Offer Price and the per Share exercise price of each such
Option to the extent such difference is a positive number (such amount as to the
Options of each Stockholder being collectively referred to herein as the "Option
Consideration"). On the Purchase Date, Nortek, NTK and the Company shall pay or
shall cause to be paid the Option Consideration due in respect of each
Stockholder's Options as follows:
(i) The Sub, or its permitted assign, in respect of the Options
of each Stockholder, shall receive from the Option Consideration (A) in
respect of Options having a per Share exercise price equal to or less than
the Purchase Price, an amount equal to 75% of the excess of (x) the product
of (1) the Offer Price, multiplied by (2) the number of Shares subject to
such Options, including any "change of control" Shares, over (y) the
product of (1) the number of Shares subject to such Options, including any
"change of control" Shares, multiplied by (2) the Purchase Price and (B) in
respect of Options having a per Share exercise price greater than the
Purchase Price (as set forth on Schedule II hereto) an amount equal to 100%
of the excess of (x) the product of (1) the Offer Price, multiplied by (2)
the number of Shares subject to such Options, including any "change of
control" Shares, over (y) the product of (1) the number of Shares subject
to such Options, including any "change of control" Shares multiplied by (2)
the applicable per Share exercise price of such Options; and
(ii) Each Stockholder (or his designee), in respect of the
Options of such Stockholder, shall receive the amount of the Option
Consideration payable in respect of the Options of such Stockholder after
deducting therefrom the amount payable pursuant to clause (i) above,
provided, that as to any Stockholder (excluding Mr. Snyder) subject to
Section 16(a) of the Exchange Act, payment to such Stockholder of any
portion of the Option Consideration payable under this clause (ii) will be
deferred (if necessary to avoid Section 16(b) liability) until the first
date such payment can be made without liability to such Stockholder under
Section 16(b) of the Exchange Act, but shall be paid as soon as practicable
thereafter.
The Company, Nortek and NTK hereby agree to extend to each holder of
Options who is not a party to this Agreement the opportunity to cash out such
Options on the Purchase Date in the manner contemplated in this Section 2(d).
3. OPTIONS.
(a) Each of the Stockholders hereby grants to Sub an irrevocable
option (each, a "Purchase Option" and collectively, the "Purchase Options") to
purchase the number of Shares set forth opposite such Stockholder's name on
Schedule I hereto together with all of the Shares (including any additional
Shares that may be issuable as a result of a "change of control") Beneficially
Owned by such Stockholder as a result of the Stockholder's exercise of the
Options set forth opposite such Stockholder's name on Schedule II hereto
(collectively, with the Shares described on Schedule I, the "Option Shares") at
a purchase price per share equal to the Purchase Price. Subject to the last
sentence of this Section 3(a), each Purchase Option is currently exercisable in
whole but not in part, and shall remain exercisable in whole but not in part
until 5:00 p.m. (Dallas, Texas time) on the date which is 120 days after a
Termination Event (the "Option Period"), so long as: (i) all waiting periods
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), required for the purchase by Sub of the Option Shares upon such
exercise shall have expired or been waived, and (ii) there shall not be in
effect any preliminary or final injunction or other order issued by any court
or governmental, administrative or regulatory agency or authority prohibiting
the exercise of the
4
<PAGE> 5
Purchase Options pursuant to this Agreement. The Option Period shall be extended
for the time period that any such preliminary injunction or order shall be in
effect that otherwise prohibits the exercise of a Purchase Option. To exercise
the Purchase Options, Sub shall send a written notice (the "Notice") to the
Stockholders identifying the place and date (not less than one nor more than 20
business days from the date of the Notice) for the closing of such purchase. The
Sub shall not exercise the Purchase Options prior to the occurrence of a
Termination Event.
(b) Upon receipt of the Notice to the extent not previously exercised,
contemporaneously with the closing of the purchase of the Option Shares, each
Stockholder shall exercise in full the Options set forth opposite such
Stockholder's name on Schedule II hereto. Subject to Section 2(d), for
convenience purposes, in connection with such exercise of the Options, each
Stockholder hereby gives the Company irrevocable notice of the exercise of his
Options effective contemporaneously with the closing of the purchase of the
Option Shares pursuant to the Purchase Option and the Company hereby
acknowledges the effectiveness of such exercise. Each Stockholder also hereby
irrevocably instructs the Company to issue (and the Company hereby agrees to
issue) the Shares issuable upon such exercise in the name of Sub or its
permitted assignee (and Sub or its permitted assignee shall be deemed the record
owner thereof as of the date of such exercise so long as Sub or its permitted
assignee timely tenders payment of the Purchase Price as provided herein) and
Sub hereby agrees, on behalf of each Stockholder, to pay directly to the Company
(by means of wire transfer or official bank check) such amount as may be
necessary to fund the payment of the exercise price (without regard to any
applicable withholding taxes) due and payable to the Company as a result of such
exercise (with the aggregate amount of the Purchase Price due and payable to
each Stockholder (or his designee) being reduced by the amount of any such
payment made by Sub on behalf of such Stockholder and with the remaining amount
of the Purchase Price otherwise due and payable to each Stockholder being paid
directly to such Stockholder, as may be requested by the Company, net of any
applicable withholding taxes required to be paid to the Company, by means of
wire transfer or official bank check). Such payments to the Company (including
such requested withholding taxes) and the Stockholders shall be made
contemporaneously with the exercise of the Purchase Options and the delivery of
the Option Shares thereunder, provided, that as to any Stockholder subject to
Section 16(a) of the Exchange Act, payment to such Stockholder of any portion of
the Purchase Price will be deferred (if necessary to avoid Section 16(b)
liability) until the first date such payment can be made without liability to
such Stockholder under Section 16(b) of the Exchange Act, but shall be paid as
soon as practicable thereafter.
(c) In the event that Sub has purchased the Option Shares pursuant to
the Purchase Options, and, within one year after the date of such purchase, the
Sub or any affiliate thereof sells, transfers, exchanges or disposes of any of
the Option Shares in a transaction with a non-affiliate of Sub (a
"Disposition") then, within two business days after the closing of such
Disposition, Sub shall tender and pay to each Stockholder, in immediately
available funds, their respective pro-rata share (calculated based on the
respective amount of the Option Shares purchased from each Stockholder pursuant
to the Purchase Options) of 25% of the Net Profit realized by Sub in connection
with such Disposition. As used in this Section 3(c), Net Profit shall mean an
amount equal to (i) the excess, if any, of the gross amount realized by Sub
from a Disposition over (ii) the aggregate Purchase Price paid with respect to
the Option Shares subject to such Disposition, with such excess being reduced
by the sum of (A) all reasonable out-of-pocket fees, costs and expenses
incurred by Sub and its affiliates in connection
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<PAGE> 6
with such Disposition, (including, without limitation, all fees, costs and
expenses of counsel) which in no event shall exceed 1% of such Net Profit, and
(B) all customary brokerage fees and commissions, if any, incurred in connection
with such Disposition.
(d) In the event that within the Option Period a Stockholder sells,
transfers, exchanges, cancels or disposes of any of his Option Shares or Options
in connection with or as a result of an Acquisition Proposal (an "Alternative
Disposition") other than pursuant to Section 2 then, within two business days
after the closing of such Alternative Disposition, such Stockholder shall tender
and pay to Sub, in immediately available funds, its pro-rata share of 75% of the
Net Profit realized by such Stockholder in connection with such Alternative
Disposition. As used in this Section 3(d), Net Profit shall mean (i) in the case
of outstanding Option Shares, an amount equal to the excess, if any, of (A) the
gross amount realized by such Stockholder from an Alternative Disposition of
outstanding Option Shares, over (B) the product of (x) the number of such Option
Shares subject to such Alternative Disposition, multiplied by (y) the Purchase
Price and (ii) in the case of Options, an amount equal to the excess, if any, of
(A) the product of (x) the gross underlying per Share price otherwise paid in
the Alternative Disposition and used in calculating the amount so realized by
such Stockholder with respect to such Options in connection with such
Alternative Disposition, multiplied by (y) the number of Option Shares subject
to such Options, over (B) the product of (x) the number of Option Shares subject
to such Options, multiplied by (y) the Purchase Price, with the aggregate of
such excesses being reduced by the sum of (1) all reasonable out-of-pocket fees,
costs and expenses incurred by such Stockholder in connection with such
Alternative Disposition, (including, without limitation, all fees, costs and
expenses of counsel, but excluding any withholding taxes) which in no event
shall exceed 1% of such Net Profit, and (2) all customary brokerage fees and
commissions, if any, incurred in connection with such Alternative Disposition.
(e) As may be requested by Sub subsequent to a Termination Event but
prior to the expiration of the Option Period each Stockholder shall tender his
Shares as set forth on Schedule I hereto pursuant to any tender offer being made
(at a per Share price greater than the Purchase Price) in connection with an
Acquisition Proposal.
(f) The Purchase Options shall terminate in full upon the consummation
of the transactions (including, the tendering of all payments to be made
thereunder) contemplated by Section 2.
4. COVENANTS, REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER.
(a) Each Stockholder hereby, severally and not jointly and severally,
represents and warrants to the other parties hereto as follows:
(i) OWNERSHIP BY SHARES. Such Stockholder is either (A) the
record and Beneficial Owner of, or (B) the Beneficial Owner but not
the record holder of, the number of Shares and Options respectively
set forth opposite the Stockholder's name on Schedule I and II hereto.
As of June 24, 1997, the Shares and Options respectively set forth
opposite such Stockholder's name on Schedules I and II hereto
constitute all of the Shares and Options owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole
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<PAGE> 7
power to issue instructions with respect to the matters set forth in
Sections 2 and 3 hereof, sole power of disposition, sole power of
conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case
with respect to all of the Shares set forth opposite such
Stockholder's name on Schedule I hereto and all of the Options set
forth opposite such Stockholder's name on Schedule II hereto, with no
material limitations, qualifications or restrictions on such rights,
subject to applicable securities laws and the terms of this Agreement.
(ii) POWER; BINDING AGREEMENT. Such Stockholder has the legal
capacity, power and authority to enter into and perform all of such
Stockholder's obligations under this Agreement. This Agreement has
been duly and validly executed and delivered by such Stockholder and
constitutes a valid and binding agreement of such Stockholder,
enforceable against such Stockholder in accordance with its terms.
There is no beneficiary or holder of a voting trust certificate or
other interest of any trust of which such Stockholder is trustee whose
consent is required for the execution and delivery of this Agreement
or the consummation by such Stockholder of the transactions
contemplated hereby. If such Stockholder is married and such
Stockholder's Shares or Options constitute community property, this
Agreement has been duly authorized, executed and delivered by, and
constitutes a valid and binding agreement of, such Stockholder's
spouse, enforceable against such person in accordance with its terms.
(iii) NO CONFLICTS. Except for filings under the Exchange Act or
if applicable the HSR Act (as to which, to the extent necessary, each
Stockholder shall promptly make all such filings and use all
reasonable efforts to respond to any requests for additional
information) (A) no filing with, and no permit, authorization, consent
or approval of, any state or federal public body or authority is
necessary for the execution of this Agreement by such Stockholder and
the consummation by such Stockholder of the transactions contemplated
hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with such
Stockholder's ability to perform its obligations hereunder, and (B)
none of the execution and delivery of this Agreement by such
Stockholder, the consummation by such Stockholder of the transactions
contemplated hereby or compliance by such Stockholder with any of the
provisions hereof shall (1) conflict with or result in any breach of
any applicable organizational documents applicable to such
Stockholder, (2) result in a violation or breach of, or constitute
(with or without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation, material
modification or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, contract,
commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which such Stockholder is a party or by
which such Stockholder or any of such Stockholder's properties or
assets may be bound, or (3) violate any order, writ, injunction,
decree, judgment, order, statute, rule or regulation applicable to
such Stockholder or any of such Stockholder's properties or assets, in
each such case except to the extent that any conflict, breach, default
or violation would not interfere with the ability of such Stockholder
to perform its obligations hereunder.
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<PAGE> 8
(iv) NO ENCUMBRANCES. Except as required by Sections 2 and 3 and
liens or security interests that will be released at the closing, if
any, of a purchase under the Purchase Options or a closing under
Section 2 as may be applicable, such Stockholder's Shares and the
certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a
nominee or custodian for the benefit of such Stockholder, free and
clear of all liens, claims, security interests, proxies, voting
trusts or agreements, understandings or arrangements or any other
encumbrances whatsoever.
(v) NO FINDER'S FEES. No broker, investment banker, financial
adviser or other person is entitled to any broker's, finder's,
financial adviser's or other similar fee or commission in connection
with the transactions contemplated hereby based upon arrangements made
by or on behalf of such Stockholder.
(vi) NO SOLICITATION. Each Stockholder shall, in its capacity as
such, comply with the terms of Section 5.1(e) of the Nortek Agreement.
(vii) RESTRICTION ON TRANSFER, PROXIES AND NON-INTERFERENCE.
During the Option Period, except as required by this Agreement, such
Stockholder shall not, directly or indirectly without the
consent of Sub: (A) offer for sale, sell, transfer, tender, pledge,
encumber, assign or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to or
consent to the offer for sale, sale, transfer, tender, pledge,
encumbrance, assignment or other disposition of, any or all of such
Stockholder's Shares, Options or any interest therein, (B) grant any
proxies of powers of attorney, deposit any Shares into a voting trust
or enter into a voting agreement with respect to any Shares, or (C)
exercise any of his Options (except to prevent the impending
expiration thereof), or (D) take any action that could reasonably be
expected to have the effect of preventing or disabling such
Stockholder from performing such Stockholder's obligations under this
Agreement, except in the case of clause (A) or (D) any transfer of
Shares that occurs by operation of law.
(viii) WAIVER OF APPRAISAL RIGHTS. Such Stockholder hereby waives
any rights of appraisal or rights to dissent from the Merger that the
Stockholder may have.
(ix) FURTHER ASSURANCES. From time to time, at the other party's
request and without further consideration, each party hereto shall
execute and deliver such additional documents as may be necessary or
desirable to consummate and make effective, in the most expeditious
manner practicable, the transactions contemplated by this Agreement.
(b) Parent and Sub hereby represents and warrants to each of the other
parties hereto as follows:
(i) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Parent
and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with adequate
corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Parent and Sub has the
corporate power
8
<PAGE> 9
and authority to enter into and perform all of its obligations under
this Agreement and to consummate the transactions contemplated hereby.
(ii) NO CONFLICTS. Except, if applicable, for filings under the
HSR Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal pubic body or authority is necessary
for the execution of this Agreement by either Parent or Sub and the
consummation by Parent and Sub of the transactions contemplated
hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with its ability
to perform its obligations hereunder, and (B) none of the execution
and delivery of this Agreement by Parent or Sub, the consummation by
Parent or Sub of the transactions contemplated hereby or compliance by
Parent and Sub with any of the provisions hereof shall (1) conflict
with or result in any breach of any applicable organizational
documents applicable to Parent or Sub, (2) result in a violation or
breach of, or constitute (with or without notice or lapse of time or
both) a default (or give rise to any third party right of termination,
cancellation, material modification or acceleration) under any of the
terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which
Parent or Sub is a party or by which Parent or Sub or any of Parent's
or Sub's properties or assets may be bound, or (3) violate any order,
writ, injunction, decree, judgment, order, statute, rule or regulation
applicable to Parent or Sub or any of Parent's or Sub's properties or
assets, in each such case except to the extent that any conflict,
breach, default or violation would not interfere with the ability of
Parent or Sub to perform its obligations hereunder.
(iii) EXECUTION, DELIVERY AND PERFORMANCE BY PARENT AND SUB. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Parent and Sub, and each of
Parent and Sub has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws in order to consummate the
transactions contemplated by this Agreement. This Agreement
constitutes the valid and binding obligations of Parent and Sub and is
enforceable in accordance with its terms, except as enforceability may
be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally.
(c) Nortek and NTK hereby represents and warrants to each of the other
parties hereto as follows:
(i) ORGANIZATION, STANDING AND CORPORATE POWER. Each of Nortek
and NTK is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with adequate
corporate power and authority to own its properties and carry on its
business as presently conducted. Each of Nortek and NTK has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
9
<PAGE> 10
(ii) NO CONFLICTS. Except, if applicable, for filings under the
Exchange Act and the HSR Act, (A) no filing with, and no permit,
authorization, consent or approval of, any state or federal pubic body
or authority is necessary for the execution of this Agreement by
either Nortek or NTK and the consummation by Nortek and NTK of the
transactions contemplated hereby, except where the failure to obtain
such consent, permit, authorization, approval or filing would not
interfere with its ability to perform its obligations hereunder, and
(B) none of the execution and delivery of this Agreement by Nortek or
NTK, the consummation by Nortek or NTK of the transactions
contemplated hereby or compliance by Nortek and NTK with any of the
provisions hereof shall (1) conflict with or result in any breach of
any applicable organizational documents applicable to Nortek or NTK,
(2) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third
party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or
obligation of any kind to which Nortek or NTK is a party or by which
Nortek or NTK or any of Nortek's or NTK's properties or assets may be
bound, or (3) violate any order, writ, injunction, decree, judgment,
order, statute, rule or regulation applicable to Nortek or NTK or any
of Nortek's or NTK's properties or assets, in each such case except to
the extent that any conflict, breach, default or violation would not
interfere with the ability of Nortek or NTK to perform its obligations
hereunder.
(iii) EXECUTION, DELIVERY AND PERFORMANCE BY NORTEK AND NTK. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of Nortek and NTK, and each of
Nortek and NTK has taken all other actions required by law, its
Certificate of Incorporation and its Bylaws in order to consummate the
transactions contemplated by this Agreement. This Agreement
constitutes the valid and binding obligations of Nortek and NTK and is
enforceable in accordance with its terms, except as enforceability may
be subject to bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally.
(d) The Company hereby represents and warrants to each of the other
parties hereto as follows:
(i) ORGANIZATION, STANDING AND CORPORATE POWER. The Company is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with adequate corporate power
and authority to own its properties and carry on its business as
presently conducted. The Company has the corporate power and authority
to enter into and perform all of its obligations under this Agreement
and to consummate the transactions contemplated hereby.
(ii) NO CONFLICTS. Except, if applicable, for filings under the
HSR Act, (A) no filing with, and no permit, authorization, consent or
approval of, any state or federal pubic body or authority is necessary
for the execution of this Agreement by the Company
10
<PAGE> 11
and the consummation by the Company of the transactions contemplated
hereby, except where the failure to obtain such consent, permit,
authorization, approval or filing would not interfere with its ability
to perform its obligations hereunder, and (B) none of the execution
and delivery of this Agreement by the Company, the consummation by the
Company of the transactions contemplated hereby or compliance by the
Company with any of the provisions hereof shall (1) conflict with or
result in any breach of any applicable organizational documents
applicable to the Company, (2) result in a violation or breach of, or
constitute (with or without notice or lapse of time or both) a default
(or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture,
license, contract, commitment, arrangement, understanding, agreement
or other instrument or obligation of any kind to which the Company is
a party or by which the Company or any of the Company's properties or
assets may be bound, or (3) violate any order, writ, injunction,
decree, judgment, order, statute, rule or regulation applicable to the
Company or any of the Company's properties or assets, in each such
case except to the extent that any conflict, breach, default or
violation would not interfere with the ability of the Company to
perform its obligations hereunder.
(iii) EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY. The
execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company, and the Company
has taken all other actions required by law, its Certificate of
Incorporation and its Bylaws in order to consummate the transactions
contemplated by this Agreement. This Agreement constitutes the valid
and binding obligations of the Company and is enforceable in
accordance with its terms, except as enforceability may be subject to
bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting creditors' rights generally.
5. STOP TRANSFER. Each Stockholder agrees with, and covenants to, Sub that
during the Option Period such Stockholder shall not request that the Company
register (and the Company agrees not to register) the transfer (book-entry or
otherwise) of any certificate or uncertificated interest representing any of
such Stockholder's Shares, unless such transfer is made in compliance with
this Agreement.
6. RECAPITALIZATION. In the event of a stock dividend or distribution, or
any change in the Shares by reason of any stock dividend, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any shares into which or for which any or all of
the Shares may be changed or exchanged and the Purchase Price shall be amended
as may be appropriate to reflect such event.
7. MERGER AGREEMENT. Parent, Sub and the Company hereby agree that the
provisions of Section 6.11 (insofar as it relates to the transactions
contemplated by this Agreement) and Section 9.2 of the Merger Agreement remain
in full force and effect notwithstanding the termination of the Merger Agreement
and that such Sections of the Merger Agreement are by reference
11
<PAGE> 12
incorporated herein and made a part hereof. In addition, the Company hereby
acknowledges that the transactions contemplated herein have been previously
approved by its Board of Directors for purposes of Section 203 of the Delaware
General Corporation Law, as amended. Atrium Corporation, Parent and Sub
hereby acknowledge that the Merger Agreement has been properly terminated by the
Company in accordance with its terms.
8. STOCKHOLDER CAPACITY. No person executing this Agreement who is or
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer and nothing herein shall limit or affect any action taken by such person
in his or her capacity as a director or officer. Each Stockholder signs solely
in his or her capacity as the record and beneficial owner of, or the trustee of
a trust whose beneficiaries are the beneficial owners of, such Stockholder's
Shares or Options.
9. OTHER ACTIONS. Except as contemplated by Section 2 or by operation of
law, during the Option Period no Stockholder may take any action (including,
without limitation, any cashless exercise of any Option except with respect to
an Option that would otherwise expire unless so exercised) or enter into any
agreement or waiver, which would adversely affect Sub's rights under the
Purchase Options or the benefits to be derived by Sub from an exercise of the
Purchase Options.
10. RELEASE. Effective as of an Acquisition Event, each of the Company,
Nortek and NTK hereby releases and discharges Parent, Sub and Atrium
Corporation, together with their respective officers, directors, employees,
representatives and agents (collectively the "Released Parties") from any and
all liabilities, claims, causes of actions or demands of any nature whatsoever
(including, without limitation, arising under the Merger Agreement) that any of
them may have or claim to have (including, without limitation, the reservation
made in that certain letter of July 24, 1997 from the Company to Parent, Sub
and Atrium Corporation giving notice of the Company's termination of the Merger
Agreement) which are directly or indirectly attributable to or otherwise
related to the payment of $12,000,000 made by the Company on July 24, 1997
pursuant to that certain letter of July 24, 1997 from the Parent to the
Company, regardless of whether any such liabilities, claim, cause of action or
demand is known or unknown, matured or contingent or liquidated or
unliquidated. Prior to the occurrence of an Offer Termination Event, the
Company agrees not to initiate any proceedings against any of the Released
Parties with respect to any of the liabilities, claims, causes of actions or
demands described in the foregoing release. Notwithstanding any provision
contained herein to the contrary, the provisions of this Section 10 shall
remain in full force and effect and shall survive any termination or expiration
of this Agreement and the consummation of any of the transactions contemplated
herein. As used in this Section 10, an "Acquisition Event" shall mean the first
to occur of (i) the acceptance of any Shares for payment pursuant to the Offer,
(ii) the consummation of the Merger or (iii) the consummation of any
Acquisition Proposal with Nortek or any of its affiliates.
11. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, both written and oral, between the
parties with respect to the subject matter hereof.
(b) CERTAIN EVENTS. Each Stockholder agrees that this Agreement and
the obligations hereunder shall attach to such Stockholder's Shares and Options
and shall be binding upon any person or entity to which legal or beneficial
ownership of such Shares or Options shall pass, whether by operation of law or
otherwise, including, without limitation, such Stockholder's heirs, guardians,
administrators or successors. Notwithstanding any transfer of Shares or Options,
the transferor shall remain liable for the performance of all obligations under
this Agreement of the transferor.
12
<PAGE> 13
(c) ASSIGNMENT. This Agreement shall not be assigned by operation of
law or otherwise without the prior written consent of the other parties,
provided that Parent may assign, in its sole discretion, its rights and
obligations hereunder to any affiliate of Parent or, after a Termination Event,
to any person making an Acquisition Proposal, but no such assignment shall
relieve Parent of its obligations hereunder if such assignee does not perform
such obligations.
(d) AMENDMENTS, WAIVERS, ETC. This Agreement may not be amended,
changed, supplemented, waived or otherwise modified or terminated, except upon
the execution and delivery of a written agreement executed by the parties
hereto; provided that either Schedule I or II hereto may be supplemented by
Parent by adding the name and other relevant information concerning any
stockholder of the Company who agrees to be bound by the terms of this Agreement
without the agreement of any other party hereto, and thereafter such added
stockholder shall be treated as a "Stockholder" for all purposes of this
Agreement; provided further that after a Termination Event, this Agreement may
be amended, changed, supplemented, waived or otherwise modified or terminated
without the consent of, or the execution of any written agreement on the part
of, Nortek and NTK, so long as such amendment, change, supplement, waiver or
modification does not increase the obligations of either Nortek or NTK
hereunder.
(e) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by hand delivery, telegram, telex
or telecopy, or by mail (registered or certified mail, postage prepaid, return
receipt requested) or by any courier service, such as Federal Express, providing
proof of delivery. All communications hereunder shall be delivered to the
respective parties at the following addresses or the addresses set forth on the
signature pages hereto:
If to Mr. Silverman: Jeffrey S. Silverman
At his home address as supplementally provided
to the parties hereto.
copy to: Squadron Ellenoff Plesent & Sheinfeld
551 5th Avenue
New York, New York 10176
Attn: Joel I. Papernik
Telecopy: (212) 697-6686
If to Mr. Dooskin: Herbert P. Dooskin
At his home address as supplementally provided
to the parties hereto.
copy to: Squadron Ellenoff Plesent & Sheinfeld
551 5th Avenue
New York, New York 10176
13
<PAGE> 14
Attn: Joel I. Papernik
Telecopy: (212) 697-6686
If to Mr. Snyder: Dana R. Snyder
At his home address as supplementally provided
to the parties hereto.
copy to: Debevoise & Plimpton
875 Third Avenue
New York, New York 10022
Attn: Richard D. Bohm
Telecopy: (212) 909-6836
If to Parent or Sub: Atrium Acquisition Holdings Corp.
and
Atrium/PG Acquisition Corp.
1341 West Mockingbird Lane
Suite 1200 West
Dallas, Texas 75247
Attn: Randall Fojtasek
Telecopy: (214) 630-5013
copies to: Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Jeffrey S. Fronterhouse
Telecopy: (214) 740-7313
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart, Jr.
Telecopy: (214) 740-7313
Vinson & Elkins L.L.P.
3700 Trammell Crow Center
2001 Ross Avenue
Dallas, Texas 75201-2975
Attn: A. Winston Oxley
Telecopy: (214) 999-7891
14
<PAGE> 15
If to the Company: Ply Gem Industries, Inc.
777 Third Avenue
New York, New York 10017
Attn: Jeffrey S. Silverman
Telecopy: (212) 888-0472
copy to: Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Victor Lewkow
Telecopy: (212) 225-3999
If to Nortek or NTK: Nortek, Inc. and NTK Sub, Inc.
50 Kennedy Plaza
Providence, RI 02903
Attn: Richard L. Bready
Telecopy: (401) 751-4610
copy to: Ropes & Gray
One International Place
Boston, Massachusetts 02110
Attn: David C. Chapin, Esq.
Telecopy: (617) 951-7050
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) SEVERABILITY. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or portion of any provision in such jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision or portion of any provision had never been
contained herein.
(g) SPECIFIC PERFORMANCE. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it would
not have an adequate remedy at law for money damages, and therefore each of the
parties hereto agrees that in the event of any such breach the aggrieved party
shall be entitled to the remedy of specific performance of such covenants and
agreements and injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
15
<PAGE> 16
(h) REMEDIES CUMULATIVE. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise of any thereof
by any party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party.
(i) NO WAIVER. The failure of any party hereto to exercise any right,
power or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the parties
at variance with the terms hereof, shall not constitute a waiver by such party
of its right to exercise any such or other right, power or remedy or to demand
such compliance.
(j) NO THIRD PARTY BENEFICIARIES. This Agreement is not intended to be
for the benefit of, and shall not be enforceable by, any person or entity who or
which is not a party hereto; provided that, in the event of a Stockholder's
death, the benefits to be received by the Stockholder hereunder shall inure to
his successors and heirs.
(k) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(l) JURISDICTION. Each party hereby irrevocably submits to the
exclusive jurisdiction of the Court of Chancery in the State of Delaware in any
action, suit or proceeding arising in connection with this Agreement, and agrees
that any such action, suit or proceeding shall be brought only in such court
(and waives any objection based on forum non conveniens or any other objection
to venue therein); provided, however, that such consent to jurisdiction is
solely for the purpose referred to in this paragraph (l) and shall not be deemed
to be a general submission to the jurisdiction of said Court or in the State of
Delaware other than for such purposes. Each party hereto hereby waives any right
to a trial by jury in connection with any such action, suit or proceeding.
(m) DESCRIPTIVE HEADINGS. The descriptive headings used herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
(n) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement. This Agreement shall not be
effective as to any party hereto until such time as this Agreement or a
counterpart thereof has been executed and delivered by each party hereto.
(o) PRIOR AGREEMENT. This agreement is executed and delivered as an
Amendment and Restatement of that certain Stockholders Agreement dated as of
June 24, 1997, between the parties hereto and this Agreement shall supersede
such prior agreement in its entirety.
16
<PAGE> 17
(p) TRUST FUNDS. In the event that any party hereto should
receive any funds that are to be paid to another party pursuant to the terms of
this Agreement, then the receiving party shall hold such funds in trust for the
benefit of the party entitled to receive such funds and shall promptly pay such
funds to the party entitled to receive such funds in accordance with this
Agreement.
12. ACKNOWLEDGMENT BY COMPANY. The parties hereby acknowledge and
agree that the acceptance of any Shares for payment pursuant to the Offer or
other tender offer for a majority of the outstanding Shares will constitute a
"change of control" under the terms of the various agreements governing the
Options set forth on Schedule II hereto and that for purposes of the
transactions contemplated by this Agreement all restrictions on transferability
and vesting applicable to any of the Unvested Stock or restricted Shares on
Schedule I hereto shall be terminated.
17
<PAGE> 18
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on this 24th day of July, 1997.
/s/ Jeffrey S. Silverman
-----------------------------------
Jeffrey S. Silverman
/s/ Dana R. Snyder
-----------------------------------
Dana R. Snyder
/s/ Herbert P. Dooskin
-----------------------------------
Herbert P. Dooskin
Atrium Acquisition Holdings Corp.
By: /s/ Jeffrey Fronterhouse
--------------------------------
Name: Jeffrey Fronterhouse
------------------------------
Title: Executive Vice President
-----------------------------
Atrium/PG Acquisition Corp.
By: /s/ Jeffrey Fronterhouse
----------------------------------
Name: Jeffrey Fronterhouse
--------------------------------
Title: Executive Vice President
-------------------------------
Ply Gem Industries, Inc.
By: /s/ Jeffrey S. Silverman
----------------------------------
Name: Jeffrey S. Silverman
--------------------------------
Title: Chairman
-------------------------------
18
<PAGE> 19
Nortek, Inc.
By: /s/ Kevin W. Donnelly
--------------------------------------
Name: Kevin W. Donnelly
------------------------------------
Title: Vice President and General Counsel
-----------------------------------
NTK Sub, Inc.
By: /s/ Kevin W. Donnelly
--------------------------------------
Name: Kevin W. Donnelly
------------------------------------
Title: Vice President
-----------------------------------
19
<PAGE> 20
<TABLE>
SCHEDULE I TO
STOCKHOLDERS AGREEMENT
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES OWNED
------------------- ----------------------
<S> <C>
Herbert P. Dooskin 1,337
Dana R. Snyder 3,747
Jeffrey S. Silverman 1,130,177
Jeffrey S. Silverman, Restricted Stock 100,000
</TABLE>
Excludes shares owned by pension/profit share/401(K)/TRA Plans.
<PAGE> 21
<TABLE>
SCHEDULE II TO
STOCKHOLDERS AGREEMENT
<CAPTION>
OPTION NUMBER OF OPTION
NAME DATE SHARES PRICE TYPE
- - ------------------------------------ -------- --------- -------- --------
<S> <C> <C> <C> <C>
Herbert P. Dooskin 01/28/88 8,000 $10.750 ISO
01/28/88 75,000 10.750 NQSO
01/28/88 75,000 10.750 Note 1
01/26/89 75,000 12.250 NQSO
01/26/89 75,000 12.250 Note 1
01/26/89 8,000 12.250 ISO
01/23/92 10,000 9.750 ISO
11/24/92 75,000 10.250 NQSO
01/29/93 75,000 12.000 NQSO
05/20/93 9,000 10.375 ISO
11/07/94 50,000 19.125 NQSO
Jeffrey S. Silverman 01/28/88 300,000 10.750 NQSO
01/28/88 300,000 10.750 Note 1
01/26/89 300,000 12.250 NQSO
01/26/89 300,000 12.250 Note 1
11/24/92 325,000 10.250 NQSO
01/29/93 513,500 12.000 NQSO
05/20/93 9,000 10.375 ISO
11/07/94 750,000 19.125 NQSO
08/20/96 750,000 12.500 NQSO
Note 1. Options on Change of Control
Dana R. Snyder 06/02/95 6,250 16.000 ISO
06/02/95 293,750 16.000 NQSO
10/27/95 250,000 16.000 NQSO
01/02/96 6,060 16.500 ISO
01/02/96 210,782 16.500 NQSO
08/20/96 33,158 12.500 NQSO
08/20/96 116,842 12.500 NQSO
</TABLE>
<PAGE> 1
Exhibit 12
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of this 17th day of June, 1997,
by and between J. Adam Lipsitz, residing at 15 High Meadows, Mt. Kisco, NY
10549, and Ply Gem Industries, Inc., a corporation organized under the laws of
the State of Delaware.
WITNESSETH
WHEREAS, the Employer (as hereinafter defined) wishes to
employ the Employee (as hereinafter defined) as Vice President, Corporate
Development of the Employer and the Employee wishes to serve the Employer in
such capacity.
WHEREAS, upon the earlier of a Relocation (as hereinafter
defined) or a Change in Control (as hereinafter defined), the Employer and the
Employee agree that the Employer shall employ the Employee, and the Employee
shall serve the Employer, as Executive Vice President of the Employer.
NOW, THEREFORE, in consideration of the conditions and
covenants set forth herein, it is agreed as follows:
1. Definitions.
(a) Agreement. This "Agreement" shall mean this employment
agreement between Ply Gem Industries, Inc. and J. Adam Lipsitz.
(b) Balance of the Term. "Balance of the Term," as of any
date, shall mean the period of time commencing on such date and ending on the
date the Term would have expired pursuant to Subparagraph (v) of Paragraph (r)
of this Section, assuming, if such notice of non-renewal has not already been
given by such date, that each party would have given notice of non-renewal on
such date.
(c) Base Salary. "Base Salary" shall mean the base salary
payable to the Employee determined pursuant to Section 5.
(d) Beneficiary. "Beneficiary" shall mean the person or
persons designated by the Employee to receive payments hereunder due upon the
Employee's death or, in the absence of such a designation, the Employee's
estate.
(e) Board of Directors. "Board of Directors" shall mean the
Board of Directors of Ply Gem Industries, Inc. and any committees organized to
implement the policies of the Board of Directors.
(f) Bonus. "Bonus" shall mean the bonus available to the
Employee pursuant to Section 6.
<PAGE> 2
(g) Cause. "Cause" shall mean:
(i) any willful violation by the Employee of this
Agreement that has a material adverse effect on the Employer;
(ii) any willful failure by the Employee
substantially to perform his duties hereunder, other than a failure resulting
from the Employee's illness;
(iii) any repeated and willful refusal by the
Employee to obey the lawful orders of the Board of Directors or any other person
or committee to whom the Employee reports;
(iv) any willful engaging by the Employee, in the
Employee's capacity as an employee of the Employer, in gross misconduct
materially injurious to the Employer;
(v) any willful and unauthorized disclosure by the
Employee of any information described in Section 12 to any person other than the
Employer or its officers, directors, employees or its agents, except to the
extent that such disclosure is required in order for the Employee to perform the
duties contemplated hereunder; or
(vi) any conviction of the Employee of a felony or
other serious crime involving moral turpitude.
For purposes of this Paragraph, any act or failure to act of
the Employee shall not be considered "willful" unless done or omitted to be done
by the Employee not in good faith and without reasonable belief that the
Employee's action or omission was in the best interest of the Employer.
If, subsequent to the termination of the Employee's employment
for reasons other than for Cause, it is determined that the Employee's
employment could have been terminated for Cause, such termination shall be
deemed to have been a termination for Cause.
(h) Change in Control. "Change in Control" shall mean the
occurrence of any of the following during the Term:
(i) When any "person" as defined in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as
used in Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act, but excluding the Employer or any subsidiary
or any affiliate of the Employer or any employee benefit plan sponsored or
maintained by the Employer or any subsidiary of the Employer (including any
trustee of such plan acting as trustee), becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of securities of the Employer
representing
2
<PAGE> 3
20% or more of the combined voting power of the Employer's then outstanding
securities; or
(ii) When, during any period of 24 consecutive
months, the individuals who, at the beginning of such period, constitute the
Board of Directors (the "Incumbent Directors") cease for any reason other than
death to constitute at least a majority thereof, provided, however, that a
director who was not a director at the beginning of such 24-month period shall
be deemed to have satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the recommendation of or with
the approval of, at least two-thirds of the directors who then qualified as
Incumbent Directors either actually (because they were directors at the
beginning of such 24-month period) or through the operation of this proviso; or
(iii) The occurrence of a transaction requiring
stockholder approval for the acquisition of the Employer by an entity other than
the Employer or a subsidiary or an affiliated company of the Employer through
purchase of assets, or by merger, or otherwise; or
(iv) A Potential Change in Control.
(i) Common Stock. "Common Stock" shall mean common stock of
the Employer, par value $.25.
(j) Disability. "Disability" shall mean a physical or mental
incapacity of the Employee that entitles the Employee to benefits under the
Employer's long-term disability plan.
(k) Employee. "Employee" shall mean J. Adam Lipsitz.
(l) Employer. "Employer" shall mean Ply Gem Industries, Inc.
(m) Effective Date. "Effective Date" shall mean the date
that this Agreement is approved by the Board of Directors.
(n) Good Reason. "Good Reason," when used with reference to
the voluntary termination by the Employee of his employment with the Employer,
shall mean:
(i) the assignment to the Employee of any duties
inconsistent with his positions, duties, responsibilities and status with the
Employer as contemplated hereunder, or any removal of the Employee from any
positions or offices the Employee held as contemplated hereunder, except in
connection with the termination of the Employee's employment by the Employer for
Cause or on account of Disability pursuant to the requirements of this
Agreement;
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(ii) a reduction by the Employer of the Employee's
Base Salary as in effect as contemplated hereunder, except in connection with
the termination of the Employee's employment by the Employer for Cause or on
account of Disability pursuant to the requirements of this Agreement;
(iii) any termination of the Employee's employment
by the Employer during the Term that is not effected pursuant to the
requirements of this Agreement;
(iv) any material breach by the Employer of the
terms of this Agreement; or
(v) the relocation of the Employee's principal work
location from New York, NY to anywhere other than West Palm Beach, Fl.
(o) Potential Change in Control. "Potential Change in Control"
shall mean the occurrence of any of the following:
(i) The approval by stockholders of an agreement by
the Employer, the consummation of which would result in a Change in Control
(within the meaning of Subparagraphs (i), (ii) and (iii) of Paragraph (h) of
this Section) of the Employer and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change in Control of the Employer has
occurred for purposes of this Agreement; or
(ii) The acquisition of beneficial ownership,
directly or indirectly, by any entity, person or group (other than the Employer
or a subsidiary or an affiliate of the Employer or any employee benefit plan
sponsored or maintained by the Employer or any subsidiary of the Employer
(including any trustee of such plan acting as trustee)) of securities of the
Employer representing 5% or more of the combined voting power of the Employer's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change in Control has occurred for
purposes of this Agreement; or
(iii) The commencement by any person, entity or
group of a tender offer and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change in Control has occurred for
purposes of this Agreement.
(p) Relocation. "Relocation" shall mean the occurrence during
the Term of the later of (i) an announcement of the relocation of the Employer's
corporate headquarters to a location other than the New York City metropolitan
area and (ii) an agreement by the Employee to relocate his principal work
location from New York, NY to a location other than the New York City
metropolitan area.
(q) Stock Options. "Stock Options" shall mean the options to
purchase stock of the Employer as described in Section 7.
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<PAGE> 5
(r) Term. "Term" shall mean the period commencing on the
Effective Date and ending on the earliest to occur of:
(i) the death of the Employee;
(ii) the termination of the Employee's employment by
reason of his Disability;
(iii) the termination of the Employee's employment
by the Employer for Cause or without Cause;
(iv) the voluntary termination of the Employee's
employment by the Employee with Good Reason or without Good Reason; or
(v) the third anniversary of the Effective Date,
provided that the Term shall be extended automatically by one day each day of
the Term, unless written notice of an election not to renew is given by either
party to the other.
2. Employment. The Employer hereby employs the Employee, and
the Employee hereby agrees to be employed by the Employer, as the Vice
President, Corporate Development of the Employer on the terms and conditions set
forth herein. The Employer and the Employer hereby further agree that upon the
earlier of a Relocation or a Change in Control, the Employer shall employ, and
the Employee shall agree to be employed by the Employer, as the Executive Vice
President of the Employer on the terms and conditions set forth herein.
3. Responsibilities and Duties. The Employee shall have such
responsibilities and duties as the Chairman of the Board of Directors, the Chief
Executive Officer, the President and/or the Chief Operating Officer of the
Employer (together, the "Senior Executives") may from time to time determine
consistent with the Employee's position as Vice President, Corporate Development
of the Employer (or, after the earlier of a Relocation or a Change in Control,
as Executive Vice President of the Employer). The Employee shall devote the
Employee's full working time to the performance of the Employee's
responsibilities and duties hereunder. The Employee will not, without the prior
written consent of the Senior Executives, render services, whether or not
compensated, to any other person or entity as an employee, independent
contractor or otherwise, provided, however, that nothing herein shall restrict
the Employee from rendering services to charitable organizations or managing the
Employee's personal investments during the Employee's non-working time.
The Employee, without the prior written consent of the Senior
Executives, which consent will not be unreasonably withheld, will not: (a) enter
into any other business affiliation, including, without limitation, the
establishment of a proprietorship or the participation in a partnership or joint
venture or (b) acquire any equity or other interest in any entity other than the
Employer, except equity or other interests that are publicly
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<PAGE> 6
syndicated or publicly traded and that are issued by entities which are not in
direct competition with the Employer. The Employee represents and warrants that,
except as set forth on Schedule A hereto, as of the Effective Date, the Employee
is not engaged in any such business affiliation and does not own any such equity
or other interests.
4. Principal Work Location. The Employee's principal work
location shall be New York, NY (or such other place to which the Employer has
relocated its corporate headquarters), but in any case the Employee will be
required to do such traveling as the Board of Directors and/or Senior Executives
may from time to time determine.
5. Base Salary. During the Term prior to the earlier of a
Relocation or a Change in Control, the Employer shall pay the Employee a Base
Salary at the rate of $169,000 per annum. During the Term after the earlier of a
Relocation or a Change in Control, the Employer shall pay the Employee a Base
Salary at the rate of $275,000 per annum. In each case, Base Salary shall be
payable in accordance with the Employer's customary payroll practices applicable
to senior executives of the Employer and the Senior Executives shall review the
Employee's performance and compensation at least annually and may, in their sole
discretion, increase his Base Salary based on such factors as the Senior
Executives deem appropriate.
6. Bonus. During the Term, the Employee shall be paid an
annual Bonus, the amount of which shall be determined in accordance with a
reasonable formula established in advance of the applicable year by the Chief
Executive Officer or President of the Employer, after consultation with the
Employee, based upon a target level of 50% of Base Salary. Any such Bonus shall
be paid to the Employee not later than April 10 of the calendar year following
the calendar year for which it is earned. The amount of a Bonus for any calendar
year may be $0.
7. Stock Options.
(a) Grant of Stock Options. The Employer shall grant to the
Employee non-qualified stock options to purchase 20,000 shares of Common Stock
at the time general grants are made to the employees of the Employer in calendar
year 1997, or if no such general grants are made in calendar year 1997, on
December 31, 1997, subject to the approval of the Compensation Committee of the
Board of Directors (the "Compensation Committee") and the continued employment
of the Employee by the Employer upon the applicable grant date. The Employer
shall grant to the Employee non-qualified stock options to purchase 20,000
shares of Common Stock at the time general grants are made to the employees of
the Employer in calendar year 1998, or if no such general grants are made in
calendar year 1998, on December 31, 1998, subject to the approval of the
Compensation Committee and the continued employment of the Employee by the
Employer upon the applicable grant date. Such Stock Options shall be granted at
the fair market value of the Common Stock on each date of grant and are in
addition to any stock options which the
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<PAGE> 7
Employee may be granted by the Employer as part of a general grant made to
employees of the Employer in accordance with the directions of the Compensation
Committee.
(b) Change in Control. Subject to the approval of the
Compensation Committee, the grants of the Stock Options shall be made
immediately upon a Change in Control, to the extent such grants have not already
been made pursuant to Section 7(a) above.
(c) Stock Option Plan. The Stock Options are subject to the
terms and conditions of the stock option plan of the Employer under which the
Stock Options are granted and, to the extent there is any inconsistency between
the terms of such plan and the terms of this Agreement, the terms of such plan
shall control.
8. Vacation. During the Term, the Employee shall be entitled
to 4 weeks of paid vacation during each year of the Employee's employment
hereunder, but shall not take more than 2 consecutive weeks of vacation without
the prior consent of the Board of Directors and/or Senior Executives. The
Employee shall take vacations only at such times as are consistent with the
reasonable business needs of the Employer. Any vacation not taken during the
year in which the Employee is entitled to the vacation shall be forfeited at the
end of such year, unless otherwise approved in writing by the Senior Executives.
Upon termination of the Employee's employment, any vacation earned by the
Employee but not taken shall be forfeited, subject to applicable law.
9. Reimbursement of Expenses. The Employer shall reimburse the
Employee for all reasonable, ordinary and necessary expenses incurred by the
Employee in the performance of the Employee's duties hereunder, provided that
the Employee accounts to the Employer for such expenses in a manner prescribed
by the Employer.
10. Other Fringe Benefits. During the Term, the Employee shall
be entitled to such benefits and perquisites as he was entitled to immediately
prior to the Effective Date or such other benefits and perquisites as may
generally be made available to senior executives of the Employer. After the
earlier of a Relocation or a Change in Control, the Employer shall also provide
the Employee with the following benefits during the Term:
(a) Life Insurance. The Employer shall provide the Employee
with split dollar life insurance with a death benefit of $1,000,000. The life
insurance cost payable by the Employee shall be determined under the appropriate
provisions of the Internal Revenue Code of 1986. The Employer shall be entitled
to reimbursement of any cash contributions made by the Employer toward the
policy. The Employer's obligation to provide such insurance shall be subject to
(i) the condition that the Employee provide the Employer (or the insurance
company selected by the Employer) with evidence acceptable to the Employer (or
insurance company) of the Employee's insurability at standard rates and (ii) the
Employee's execution of a split dollar life insurance agreement and collateral
assignment in form and substance satisfactory to the Employer.
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<PAGE> 8
(b) Country Club Dues. In respect of a country club selected
by the Employee, the Employer shall pay up to $15,000 in initiation fees and any
reasonable periodic membership fees incurred by the Employee and approved by the
Board of Directors and/or Senior Executives within a reasonable time after
presentation by the Employee of an invoice specifying the amount of such
initiation fees and periodic membership fees.
(c) Automobile. The Employer shall make available to the
Employee an automobile approved by the Employer. In addition, the Employer shall
reimburse the Employee for the reasonable costs of operation and maintenance
with respect to such automobile, provided the Employee accounts to the Employer
for such expenses in a manner prescribed by the Employer. The Employee shall be
required to reimburse the Employer for personal use of such car in accordance
with procedures established by the Employer from time to time.
(d) Relocation. In connection with a Relocation, the Employee
shall be entitled to the benefits of the Ply Gem Industries, Inc. Executive
Relocation Program.
11. Termination of Employment.
(a) Disability. During the Term, the Employer shall have the
right to terminate the Employee's employment by reason of Disability, effective
upon written notice to the Employee by the Employer specifying Disability as the
basis for such termination. In respect of such termination, the Employer shall
pay to the Employee the Employee's earned but unpaid Base Salary, and any Bonus
earned or awarded but unpaid for the year preceding such termination. In
addition, the Employer shall continue to pay to the Employee 50% of the
Employee's Base Salary for the Balance of the Term, provided however, that any
such payments shall be reduced by any amounts received by the Employee pursuant
to the Employer's long-term disability plan during the Balance of the Term. The
amounts required to be paid to the Employee under this Paragraph will be paid in
lieu of any other severance payments from the Employer or its affiliates to
which the Employee may otherwise have been entitled.
(b) Cause. During the Term, the Employer shall have the right
to terminate the Employee's employment for Cause.
(i) Procedure for Termination. The Employer shall
give the Employee ten (10) days' prior written notice of the Employer's intent
to terminate the Employee's employment for Cause. Such notice shall set forth in
reasonable detail the proposed basis giving rise to Cause. The Employee shall
have the right, if the basis for such Cause is curable, to cure the same within
a reasonable period of time not to exceed fifteen (15) days after the date of
such written notice, provided that the Employee begins such cure within five (5)
days of the date of such written notice and diligently prosecutes such efforts
thereafter. The Employee's termination for Cause shall be effective ten (10)
days after the date of such written notice, or, if the Employee timely begins
but does not complete a cure, fifteen (15) days after the date of such written
notice.
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(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee, within thirty (30) days
after such termination, the Employee's earned but unpaid Base Salary as of the
date of such termination and any Bonus earned or awarded but unpaid for the year
preceding such termination. The Employee shall not be entitled to any other
amounts hereunder in the event of a termination for Cause.
(c) Death. Upon the termination of the Employee's employment
by reason of the Employee's death, the Employer shall pay to the Employee's
Beneficiary (i) the Employee's earned but unpaid Base Salary, (ii) any Bonus
earned or awarded but unpaid for the year preceding the Employee's death and
(iii) a pro rata portion of any Bonus (at the target level) which the Employee
would otherwise have earned or been awarded for the year in which the Employee's
death occurs. (Such Bonus shall be prorated by multiplying the amount of such
Bonus (at the target level) by a fraction, the numerator of which is the number
of days during such year prior to the Employee's death and the denominator of
which is 365.) The amounts required to be paid to the Employee under this
Paragraph will be paid in lieu of any other severance payments from the Employer
or its affiliates to which the Employee may otherwise have been entitled.
(d) Without Cause or for Good Reason. During the Term, the
Employer shall have the right to terminate the Employee's employment hereunder
without Cause and the Employee shall have the right to voluntarily terminate his
employment hereunder for Good Reason.
(i) Procedure for Termination. The Employee's
termination of employment by the Employer without Cause shall be effective upon
written notice to the Employee from the Employer of such termination. The
Employee's voluntary termination of his employment for Good Reason shall be
effective only if the Employer receives thirty (30) days' prior written notice
from the Employee of such termination specifying in reasonable detail the act or
omission of the Employer alleged to constitute Good Reason, and the Employer
does not cure such act or omission within such 30-day period.
(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee the Employee's earned but
unpaid Base Salary and any Bonus earned or awarded but unpaid for the year
preceding the termination. In addition, the Employer shall continue to pay to
the Employee the Employee's Base Salary for the Balance of the Term, provided,
however, that if the Employee voluntarily terminates his employment for Good
Reason within the meaning of Subparagraph (v) of Paragraph (n) of Section 1
after a Change in Control, the Base Salary to be so continued shall be the
Employee's Base Salary in effect immediately prior to such Change in Control.
The Employer shall also pay to the Employee the Bonuses (at the target level) to
which the Employee would have been entitled for the Balance of the Term,
provided, however, that if the Employee voluntarily terminates his employment
for Good Reason within the meaning of Subparagraph (v) of Paragraph (n) of
Section 1 after a Change in Control, the amount of each Bonus to be so paid to
the Employee shall be based upon the Employee's Base Salary
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<PAGE> 10
in effect immediately prior to such Change in Control. Such Bonuses shall be
paid at the time that such Bonuses would otherwise have been paid had the Term
continued. In addition, the Employer shall maintain in full force and effect for
the Employee's continued benefit until the earlier of (x) the end of the Balance
of the Term or (y) the Employee's commencement of full time employment with a
new employer, all life, medical and dental insurance plans, programs or
arrangements (but excluding any short- or long-term disability plans, programs
or arrangements) in which the Employee was entitled to participate immediately
prior to his termination of employment without Cause or for Good Reason,
provided that the Employee's continued participation is possible under the
general terms and provisions of such plans, programs or arrangements, and
further provided that continued coverage under any such life insurance plan,
program or arrangement shall be at the expense of the Employee. In the event
that the Employee's participation in any such plan, program or arrangement is
prohibited, the Employer shall arrange to provide the Employee with benefits
substantially similar to those which the Employee is entitled to received under
such plans, programs or arrangements for such period. The Employee's damages as
a result of such termination shall be limited to the amounts required to be paid
to the Employee under this Paragraph and such amounts will be paid in lieu of
any other severance payments from the Employer or its affiliates to which the
Employee may otherwise have been entitled.
(iii) Mitigation. Prior to a Change in Control, the
Employee shall not be required to mitigate the amount of any damages that the
Employee may incur as a result of such termination of employment for the lesser
of (x) eighteen (18) months after the date of such termination or (y) the
Balance of the Term. After such 18-month period, the Employee shall be required
to mitigate any damages that the Employee may incur as a result of such
termination and the amount of payments due hereunder for the remaining Balance
of the Term, if any, by seeking employment comparable in terms of compensation,
position and location to the Employee's employment hereunder (other than such
employment as would result in a breach of Section 13 hereof). After a Change in
Control, the Employee shall not be required to mitigate the amount of any
damages that the Employee may incur as a result of such termination of
employment.
(iv) Offset. If, following such termination prior
to a Change in Control, the Employee obtains any other employment, then any
amounts that the Employee earns from such other employment during the Balance of
the Term remaining after the 18-month anniversary of the date of such
termination, if any, shall offset and reduce the amounts payable to the Employee
as a result of the termination of the Employee's employment without Cause or for
Good Reason. The Employee shall be required to notify the Employer immediately
in the event he obtains such other employment and shall provide such evidence as
the Employer may reasonably request regarding the amount of such earnings with
respect to such period. For purposes of this Paragraph, employment shall mean
any activity for which the Employee is compensated as a result of the rendering
of services, whether such services are rendered as an employee, a partner, sole
proprietor, independent contractor or otherwise.
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(e) Without Good Reason. In the event that the Employee
voluntarily terminates his employment without Good Reason, the Employee shall
adopt the following procedure and shall receive the following payments:
(i) Procedure for Termination. The Employee's
voluntary termination of his employment without Good Reason shall be effective
upon the expiration of thirty (30) days after the Employer's receipt of a
written notice from the Employee specifying his intent to terminate his
employment without Good Reason.
(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee the Employee's earned but
unpaid Base Salary and any Bonus earned or awarded but unpaid for the year
preceding the termination. The Employee shall not be entitled to any other
amounts or benefits hereunder in the event of his voluntary termination without
Good Reason.
12. Non-Disclosure Agreement.
(a) Non-Disclosure. The Employee agrees that all information
pertaining to the prior, current or contemplated business of the Employer and
its affiliates, and their officers, directors, employees, agents, shareholders
and customers (excluding (a) publicly available information (in substantially
the form in which it is publicly available) unless such information is publicly
available by reason of unauthorized disclosure and (b) information of a general
nature not pertaining exclusively to the Employer that generally would be
acquired in similar employment with another company) constitutes a valuable and
confidential asset of the Employer. Such information includes, without
limitation, information related to trade secrets, customer lists, production
financing techniques and financial information of the Employer. The Employee
shall hold all such information in trust and confidence for the Employer and its
affiliates, and shall not use or disclose any such information to any person,
firm, corporation or other entity, except as may be required pursuant to the
order of a court of competent jurisdiction, and shall be liable for damages
incurred by the Employer as a result of disclosure of such information by the
Employee for any purpose other than the Employer's business, either during the
Employee's employment or after the Employee's employment terminates for whatever
reason, other than as a result of disclosure required pursuant to the order of a
court of competent jurisdiction.
13. Non-Competition Agreement. During the Term and continuing
for the longer of (x) a period ending twelve (12) months after the Employee's
employment terminates for any reason whatsoever or (y) the Balance of the Term,
the Employee agrees that the Employee will not, directly or indirectly, own,
manage, operate, control, be employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation) or
render services to any person, firm, corporation or other entity, in whatever
form, engaged in any business that is competitive with any business in which the
Employer was engaged at the time the Employee's employment terminated and with
which the Employee was involved while employed by the Employer. This Section
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shall not prevent the Employee from owning not more than one percent of the
total shares of all classes of stock outstanding of any publicly held
corporation engaged in such business, nor will it restrict the Employee from
rendering services to charitable organizations.
14. Non-Solicitation. During the Term and continuing for the
longer of (x) a period ending twelve (12) months after the Employee's employment
terminates for any reason whatsoever or (y) the Balance of the Term, the
Employee agrees that the Employee will not, directly or indirectly, individually
or on behalf of other persons, solicit, aid or induce (a) then remaining
employees of the Employer or its affiliates to leave their employment with the
Employer or its affiliates in order to accept employment with or render services
to or with another person, firm, corporation or other entity, or assist or aid
any other person, firm, corporation or other entity in identifying or hiring
such employees or (b) any customer of the Employer or its affiliates who was a
customer of the Employer or its affiliates at any time during which the Employee
was actively employed by the Employer to purchase services then sold by the
Employer or its affiliates from another person, firm, corporation or other
entity, or assist or aid any other person or entity in identifying or soliciting
any such customer.
15. Employee Disclosure. Prior to agreeing to, or commencing
to, act as an employee, officer, director, trustee, principal, agent or other
representative of any type of business service other than as an employee of the
Employer during the period in which the non-competition agreement, as described
in Section 13, applies, the Employee shall (a) disclose such agreement in
writing to the Employer and (b) disclose to the other entity with which he
proposes to act in such capacity, or to the other principal together with whom
he proposes to act as a principal, the existence of the non-disclosure agreement
contained in Section 12, the non-competition agreement contained in Section 13,
and the non-solicitation agreement contained in Section 14.
16. Acknowledgments Respecting Restrictive Covenants. With
respect to the restrictive covenants set forth in Section 12, Section 13, and
Section 14, the Employee acknowledges and agrees as follows.
(a) Extension of Covenants. The specified duration of a
restrictive covenant shall be extended by and for the term of any period during
which the Employee is in violation of such covenant.
(b) Covenants Not Exclusive. The restrictive covenants are in
addition to any rights the Employer may have in law or at equity.
(c) No Adequate Remedy at Law. It is impossible to measure in
money the damages which will accrue to the Employer in the event that the
Employee breaches any of the restrictive covenants. Therefore, if the Employee
breaches any restrictive covenant, the Employer and its affiliates shall have a
right to seek an injunction restraining the Employee from violating such
restrictive covenants. If the Employer or any of its affiliates shall institute
any action or proceeding to enforce a restrictive covenant, the Employee hereby
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waives the claim or defense that the Employer or any of its affiliates has an
adequate remedy at law and the Employee agrees not to assert in any such action
or proceeding the claim or defense that the Employer or any of its affiliates
has an adequate remedy at law. The foregoing shall not prejudice the Employer's
or its affiliates' right to require the Employee to account for and pay over to
the Employer or its affiliates, and the Employee hereby agrees to account for
and pay over, the compensation, profits, monies, accruals or other benefits
derived or received by the Employee as a result of any transaction constituting
a breach of the restrictive covenants.
17. Severability. Each provision hereof is severable from this
Agreement, and if one or more provisions hereof are declared invalid the
remaining provisions shall nevertheless remain in full force and effect. If any
provision of this Agreement is so broad, in scope or duration or otherwise, as
to be unenforceable, such provision shall be interpreted to be only so broad as
is enforceable.
18. Employee's Right to Contract. The Employee represents and
warrants to the Employer that the Employee is legally free to make and perform
this Agreement, that he has no obligation (including, without limitation, an
obligation under any non-competition, non-solicitation, non-disclosure or
similar agreement) to any other person or entity that would affect or conflict
with any of the Employee's obligations hereunder, or otherwise hinder the
Employee's ability to perform the services contemplated hereunder and that the
complete performance of the Employee's obligations hereunder will not violate
any law, regulation, order or decree of any governmental or judicial body or
contract by which he is bound. The Employee agrees not to use in the course of
the Employee's employment hereunder any information obtained in the Employee's
employment with any previous employer to the extent that such use would violate
any contract by which he is bound or decision, law, regulation, order or decree
of any governmental or judicial body.
19. Notice. Any notice to be given hereunder shall be given in
writing. Notice shall be deemed to be given when delivered by hand to the party
to whom notice is being given, or ten (10) days after being mailed, postage
prepaid, registered with return receipt requested, or sent by facsimile
transmission with a confirmation by registered or certified mail, postage
prepaid.
Notices to the Employee should be addressed to the Employee as follows:
J. Adam Lipsitz
15 High Meadows
Mt. Kisco, NY 10549
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Notices to the Employer should be sent as follows:
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Attn: Dana R. Snyder, President
with copies sent to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: A. Richard Susko, Esq.
Either party may change the address or person to whom notices
should be sent to by notifying the other party in accordance with this Section
19.
20. No Waiver. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect the validity of this Agreement, or any
part hereof, or the right of either party thereafter to enforce each and every
such provision in accordance with the terms of this Agreement.
21. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the employment of Employee by the
Employer and supersedes any and all prior understandings, agreements or
correspondence between the parties. It may not be amended or extended in any
respect except by a writing signed by both parties hereto.
22. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
reference to its principles of conflicts of law.
23. Assignment. This Agreement shall not be assignable by
either party hereto without the written consent of the other, provided, however,
that the Employer may, without the written consent of the Employee, assign this
Agreement to (a) any entity into which the Employer is merged or to which the
Employer transfers substantially all of its assets or (b) any entity
controlling, under common control with or controlled by the Employer.
24. Approval. This Agreement shall be submitted for approval
of the Board of Directors at a meeting of the Board of Directors occurring
within 90 days after the date hereof.
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In the event that this Agreement is not approved at such meeting of the Board of
Directors, this Agreement shall be null and void.
IN WITNESS WHEREOF, the Employer has caused this Agreement to
be signed by its duly authorized representative and the Employee has hereunto
set his hand as of the day and year first above written.
PLY GEM INDUSTRIES, INC.
By: /s/ Dana R. Snyder
----------------------
Name: Dana R. Snyder
Title: President and COO
/s/ J. Adam Lipsitz
----------------------
J. Adam Lipsitz
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AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement, dated as of June 17,
1997 (the "Employment Agreement"), between J. Adam Lipsitz and Ply Gem
Industries, Inc.("Ply Gem") is entered into as of June 23, 1997.
The undersigned hereby agrees, notwithstanding any provisions
contained in the Employment Agreement, that the transactions contemplated by
(i) that certain Merger Agreement, to be dated as of June 24, 1997 (the
"Merger Agreement"), by and among Atrium Acquisition Holdings Corp.
("Parent"), Atrium/PG Acquisition Corp. ("Sub"), Atrium Corporation ("Atrium")
and Ply Gem; (ii) the Stockholders Agreements, to be dated as of June 24,
1997, by and among certain beneficial owners of Ply Gem common stock and
options; and (iii) the other Transaction Documents (as defined in the Merger
Agreement) shall not constitute a "change of control" or transaction of
similar import pursuant to the terms of the Employment Agreement until such
time as the merger of Sub with and into Ply Gem has been consummated.
IN WITNESS WHEREOF, the undersigned has affixed his signature
hereto as of the 23rd day of June, 1997.
/s/ J. Adam Lipsitz
------------------------
J. Adam Lipsitz
Accepted and Agreed as of
the 23rd day of June, 1997
PLY GEM INDUSTRIES, INC.
By: /s/ Herbert P. Dooskin
----------------------------
Name: Herbert P. Dooskin
Executive Vice President
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Exhibit 13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, made as of this 17th day of June, 1997,
by and between Paul H. Bogutsky, residing at 422 East 72nd Street, New York, NY
10021, and Ply Gem Industries, Inc., a corporation organized under the laws of
the State of Delaware.
WITNESSETH
WHEREAS, the Employer (as hereinafter defined) wishes to
employ the Employee (as hereinafter defined) as Vice President, Treasurer of the
Employer and the Employee wishes to serve the Employer in such capacity.
WHEREAS, upon the earlier of a Relocation (as hereinafter
defined) or a Change in Control (as hereinafter defined), the Employer and the
Employee agree that the Employer shall employ the Employee, and the Employee
shall serve the Employer, as Chief Financial Officer of the Employer.
NOW, THEREFORE, in consideration of the conditions and
covenants set forth herein, it is agreed as follows:
1. Definitions.
(a) Agreement. This "Agreement" shall mean this employment
agreement between Ply Gem Industries, Inc. and Paul H. Bogutsky.
(b) Balance of the Term. "Balance of the Term," as of any
date, shall mean the period of time commencing on such date and ending on the
date the Term would have expired pursuant to Subparagraph (v) of Paragraph (r)
of this Section, assuming, if such notice of non-renewal has not already been
given by such date, that each party would have given notice of non-renewal on
such date.
(c) Base Salary. "Base Salary" shall mean the base salary
payable to the Employee determined pursuant to Section 5.
(d) Beneficiary. "Beneficiary" shall mean the person or
persons designated by the Employee to receive payments hereunder due upon the
Employee's death or, in the absence of such a designation, the Employee's
estate.
(e) Board of Directors. "Board of Directors" shall mean the
Board of Directors of Ply Gem Industries, Inc. and any committees organized to
implement the policies of the Board of Directors.
(f) Bonus. "Bonus" shall mean the bonus available to the
Employee pursuant to Section 6.
<PAGE> 2
(g) Cause. "Cause" shall mean:
(i) any willful violation by the Employee of this
Agreement that has a material adverse effect on the Employer;
(ii) any willful failure by the Employee substantially
to perform his duties hereunder, other than a failure resulting from the
Employee's illness;
(iii) any repeated and willful refusal by the Employee
to obey the lawful orders of the Board of Directors or any other person or
committee to whom the Employee reports;
(iv) any willful engaging by the Employee, in the
Employee's capacity as an employee of the Employer, in gross misconduct
materially injurious to the Employer;
(v) any willful and unauthorized disclosure by the
Employee of any information described in Section 12 to any person other than the
Employer or its officers, directors, employees or its agents, except to the
extent that such disclosure is required in order for the Employee to perform the
duties contemplated hereunder; or
(vi) any conviction of the Employee of a felony or
other serious crime involving moral turpitude.
For purposes of this Paragraph, any act or failure to act of
the Employee shall not be considered "willful" unless done or omitted to be done
by the Employee not in good faith and without reasonable belief that the
Employee's action or omission was in the best interest of the Employer.
If, subsequent to the termination of the Employee's employment
for reasons other than for Cause, it is determined that the Employee's
employment could have been terminated for Cause, such termination shall be
deemed to have been a termination for Cause.
(h) Change in Control. "Change in Control" shall mean the
occurrence of any of the following during the Term:
(i) When any "person" as defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as
used in Sections 13(d) and 14(d) thereof, including a "group" as defined in
Section 13(d) of the Exchange Act, but excluding the Employer or any subsidiary
or any affiliate of the Employer or any employee benefit plan sponsored or
maintained by the Employer or any subsidiary of the Employer (including any
trustee of such plan acting as trustee), becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of securities of the Employer
representing
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20% or more of the combined voting power of the Employer's then outstanding
securities; or
(ii) When, during any period of 24 consecutive months,
the individuals who, at the beginning of such period, constitute the Board of
Directors (the "Incumbent Directors") cease for any reason other than death to
constitute at least a majority thereof, provided, however, that a director who
was not a director at the beginning of such 24-month period shall be deemed to
have satisfied such 24-month requirement (and be an Incumbent Director) if such
director was elected by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning of such 24-month
period) or through the operation of this proviso; or
(iii) The occurrence of a transaction requiring
stockholder approval for the acquisition of the Employer by an entity other than
the Employer or a subsidiary or an affiliated company of the Employer through
purchase of assets, or by merger, or otherwise; or
(iv) A Potential Change in Control.
(i) Common Stock. "Common Stock" shall mean common stock of
the Employer, par value $.25.
(j) Disability. "Disability" shall mean a physical or mental
incapacity of the Employee that entitles the Employee to benefits under the
Employer's long-term disability plan.
(k) Employee. "Employee" shall mean Paul H. Bogutsky.
(l) Employer. "Employer" shall mean Ply Gem Industries, Inc.
(m) Effective Date. "Effective Date" shall mean the date that
this Agreement is approved by the Board of Directors.
(n) Good Reason. "Good Reason," when used with reference to
the voluntary termination by the Employee of his employment with the Employer,
shall mean:
(i) the assignment to the Employee of any duties
inconsistent with his positions, duties, responsibilities and status with the
Employer as contemplated hereunder, or any removal of the Employee from any
positions or offices the Employee held as contemplated hereunder, except in
connection with the termination of the Employee's employment by the Employer for
Cause or on account of Disability pursuant to the requirements of this
Agreement;
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<PAGE> 4
(ii) a reduction by the Employer of the Employee's Base
Salary as in effect as contemplated hereunder, except in connection with the
termination of the Employee's employment by the Employer for Cause or on account
of Disability pursuant to the requirements of this Agreement;
(iii) any termination of the Employee's employment by
the Employer during the Term that is not effected pursuant to the requirements
of this Agreement;
(iv) any material breach by the Employer of the terms
of this Agreement; or
(v) the relocation of the Employee's principal work
location from New York, NY to anywhere other than West Palm Beach, Fl.
(o) Potential Change in Control. "Potential Change in Control"
shall mean the occurrence of any of the following:
(i) The approval by stockholders of an agreement by the
Employer, the consummation of which would result in a Change in Control (within
the meaning of Subparagraphs (i), (ii) and (iii) of Paragraph (h) of this
Section) of the Employer and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change in Control of the Employer has
occurred for purposes of this Agreement; or
(ii) The acquisition of beneficial ownership, directly
or indirectly, by any entity, person or group (other than the Employer or a
subsidiary or an affiliate of the Employer or any employee benefit plan
sponsored or maintained by the Employer or any subsidiary of the Employer
(including any trustee of such plan acting as trustee)) of securities of the
Employer representing 5% or more of the combined voting power of the Employer's
outstanding securities and the adoption by the Board of Directors of a
resolution to the effect that a Potential Change in Control has occurred for
purposes of this Agreement; or
(iii) The commencement by any person, entity or group
of a tender offer and the adoption by the Board of Directors of a resolution to
the effect that a Potential Change in Control has occurred for purposes of this
Agreement.
(p) Relocation. "Relocation" shall mean the occurrence during
the Term of the later of (i) an announcement of the relocation of the Employer's
corporate headquarters to a location other than the New York City metropolitan
area and (ii) an agreement by the Employee to relocate his principal work
location from New York, NY to a location other than the New York City
metropolitan area.
(q) Stock Options. "Stock Options" shall mean the options to
purchase stock of the Employer as described in Section 7.
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<PAGE> 5
(r) Term. "Term" shall mean the period commencing on the
Effective Date and ending on the earliest to occur of:
(i) the death of the Employee;
(ii) the termination of the Employee's employment by
reason of his Disability;
(iii) the termination of the Employee's employment by
the Employer for Cause or without Cause;
(iv) the voluntary termination of the Employee's
employment by the Employee with Good Reason or without Good Reason; or
(v) the third anniversary of the Effective Date,
provided that the Term shall be extended automatically by one day each day of
the Term, unless written notice of an election not to renew is given by either
party to the other.
2. Employment. The Employer hereby employs the Employee, and
the Employee hereby agrees to be employed by the Employer, as the Vice
President, Treasurer of the Employer on the terms and conditions set forth
herein. The Employer and the Employer hereby further agree that upon the earlier
of a Relocation or a Change in Control, the Employer shall employ, and the
Employee shall agree to be employed by the Employer, as the Chief Financial
Officer of the Employer on the terms and conditions set forth herein.
3. Responsibilities and Duties. The Employee shall have such
responsibilities and duties as the Chairman of the Board of Directors, the Chief
Executive Officer, the President and/or the Chief Operating Officer of the
Employer (together, the "Senior Executives") may from time to time determine
consistent with the Employee's position as Vice President, Treasurer of the
Employer (or, after the earlier of a Relocation or a Change in Control, as Chief
Financial Officer of the Employer). The Employee shall devote the Employee's
full working time to the performance of the Employee's responsibilities and
duties hereunder. The Employee will not, without the prior written consent of
the Senior Executives, render services, whether or not compensated, to any other
person or entity as an employee, independent contractor or otherwise, provided,
however, that nothing herein shall restrict the Employee from rendering services
to charitable organizations or managing the Employee's personal investments
during the Employee's non-working time.
The Employee, without the prior written consent of the Senior
Executives, which consent will not be unreasonably withheld, will not: (a) enter
into any other business affiliation, including, without limitation, the
establishment of a proprietorship or the participation in a partnership or joint
venture or (b) acquire any equity or other interest in any entity other than the
Employer, except equity or other interests that are publicly syndicated or
publicly traded and that are issued by entities which are not in direct
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<PAGE> 6
competition with the Employer. The Employee represents and warrants that, except
as set forth on Schedule A hereto, as of the Effective Date, the Employee is not
engaged in any such business affiliation and does not own any such equity or
other interests.
4. Principal Work Location. The Employee's principal work
location shall be New York, NY (or such other place to which the Employer has
relocated its corporate headquarters), but in any case the Employee will be
required to do such traveling as the Board of Directors and/or Senior Executives
may from time to time determine.
5. Base Salary. During the Term prior to the earlier of a
Relocation or a Change in Control, the Employer shall pay the Employee a Base
Salary at the rate of $206,000 per annum. During the Term after the earlier of a
Relocation or a Change in Control, the Employer shall pay the Employee a Base
Salary at the rate of $288,000 per annum. In each case, Base Salary shall be
payable in accordance with the Employer's customary payroll practices applicable
to senior executives of the Employer and the Senior Executives shall review the
Employee's performance and compensation at least annually and may, in their sole
discretion, increase his Base Salary based on such factors as the Senior
Executives deem appropriate.
6. Bonus. During the Term, the Employee shall be paid an
annual Bonus, the amount of which shall be determined in accordance with a
reasonable formula established in advance of the applicable year by the Chief
Executive Officer or President of the Employer, after consultation with the
Employee, based upon a target level of 40% of Base Salary. Any such Bonus shall
be paid to the Employee not later than April 10 of the calendar year following
the calendar year for which it is earned. The amount of a Bonus for any calendar
year may be $0.
7. Stock Options.
(a) Grant of Stock Options. Upon a Relocation, subject to the
approval of the Compensation Committee of the Board of Directors (the
"Compensation Committee"), the Employer shall grant to the Employee
non-qualified stock options to purchase 10,000 shares of Common Stock. Upon the
first anniversary of such initial grant, subject to the approval of the
Compensation Committee and the continued employment of the Employee by the
Employer upon such anniversary, the Employer shall grant to the Employee
non-qualified stock options to purchase 10,000 shares of Common Stock. Upon the
second anniversary of such initial grant, subject to the approval of the
Compensation Committee and the continued employment of the Employee by the
Employer upon such anniversary, the Employer shall grant to the Employee
non-qualified stock options to purchase 10,000 shares of Common Stock. Such
Stock Options shall be granted at the fair market value of the Common Stock on
each date of grant and are in addition to any stock options which the Employee
may be granted by the Employer as part of a general grant made to employees of
the Employer in accordance with the directions of the Compensation Committee.
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<PAGE> 7
(b) Change in Control. Subject to the approval of the
Compensation Committee, the grants of the Stock Options shall be made
immediately upon a Change in Control, to the extent such grants have not already
been made pursuant to Section 7(a) above.
(c) Stock Option Plan. The Stock Options are subject to the
terms and conditions of the stock option plan of the Employer under which the
Stock Options are granted and, to the extent there is any inconsistency between
the terms of such plan and the terms of this Agreement, the terms of such plan
shall control.
8. Vacation. During the Term, the Employee shall be entitled
to 4 weeks of paid vacation during each year of the Employee's employment
hereunder, but shall not take more than 2 consecutive weeks of vacation without
the prior consent of the Board of Directors and/or Senior Executives. The
Employee shall take vacations only at such times as are consistent with the
reasonable business needs of the Employer. Any vacation not taken during the
year in which the Employee is entitled to the vacation shall be forfeited at the
end of such year, unless otherwise approved in writing by the Senior Executives.
Upon termination of the Employee's employment, any vacation earned by the
Employee but not taken shall be forfeited, subject to applicable law.
9. Reimbursement of Expenses. The Employer shall reimburse the
Employee for all reasonable, ordinary and necessary expenses incurred by the
Employee in the performance of the Employee's duties hereunder, provided that
the Employee accounts to the Employer for such expenses in a manner prescribed
by the Employer.
10. Other Fringe Benefits. During the Term, the Employee shall
be entitled to such benefits and perquisites as he was entitled to immediately
prior to the Effective Date or such other benefits and perquisites as may
generally be made available to senior executives of the Employer. After the
earlier of a Relocation or a Change in Control, the Employer shall also provide
the Employee with the following benefits during the Term:
(a) Life Insurance. The Employer shall provide the Employee
with split dollar life insurance with a death benefit of $1,000,000. The life
insurance cost payable by the Employee shall be determined under the appropriate
provisions of the Internal Revenue Code of 1986. The Employer shall be entitled
to reimbursement of any cash contributions made by the Employer toward the
policy. The Employer's obligation to provide such insurance shall be subject to
(i) the condition that the Employee provide the Employer (or the insurance
company selected by the Employer) with evidence acceptable to the Employer (or
insurance company) of the Employee's insurability at standard rates and (ii) the
Employee's execution of a split dollar life insurance agreement and collateral
assignment in form and substance satisfactory to the Employer.
(b) Country Club Dues. In respect of a country club selected
by the Employee, the Employer shall pay up to $15,000 in initiation fees and any
reasonable periodic membership fees incurred by the Employee and approved by the
Board of Directors
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and/or Senior Executives within a reasonable time after presentation by the
Employee of an invoice specifying the amount of such initiation fees and
periodic membership fees.
(c) Automobile. The Employer shall make available to the
Employee an automobile approved by the Employer. In addition, the Employer shall
reimburse the Employee for the reasonable costs of operation and maintenance
with respect to such automobile, provided the Employee accounts to the Employer
for such expenses in a manner prescribed by the Employer. The Employee shall be
required to reimburse the Employer for personal use of such car in accordance
with procedures established by the Employer from time to time.
(d) Relocation. In connection with a Relocation, the Employee
shall be entitled to the benefits of the Ply Gem Industries, Inc. Executive
Relocation Program. In addition, if necessary, in connection with a Relocation,
the Employer shall reimburse the Employee for reasonable and necessary expenses
in respect of the relocation of the Employee's mother to the near vicinity of
the Employee, in accordance with a budget to be developed by the Employee and
approved in advance by the Board of Directors and/or Senior Executives.
11. Termination of Employment.
(a) Disability. During the Term, the Employer shall have the
right to terminate the Employee's employment by reason of Disability, effective
upon written notice to the Employee by the Employer specifying Disability as the
basis for such termination. In respect of such termination, the Employer shall
pay to the Employee the Employee's earned but unpaid Base Salary, and any Bonus
earned or awarded but unpaid for the year preceding such termination. In
addition, the Employer shall continue to pay to the Employee 50% of the
Employee's Base Salary for the Balance of the Term, provided however, that any
such payments shall be reduced by any amounts received by the Employee pursuant
to the Employer's long-term disability plan during the Balance of the Term. The
amounts required to be paid to the Employee under this Paragraph will be paid in
lieu of any other severance payments from the Employer or its affiliates to
which the Employee may otherwise have been entitled.
(b) Cause. During the Term, the Employer shall have the right
to terminate the Employee's employment for Cause.
(i) Procedure for Termination. The Employer shall give
the Employee ten (10) days' prior written notice of the Employer's intent to
terminate the Employee's employment for Cause. Such notice shall set forth in
reasonable detail the proposed basis giving rise to Cause. The Employee shall
have the right, if the basis for such Cause is curable, to cure the same within
a reasonable period of time not to exceed fifteen (15) days after the date of
such written notice, provided that the Employee begins such cure within five (5)
days of the date of such written notice and diligently prosecutes such efforts
thereafter. The Employee's termination for Cause shall be effective ten (10)
days after the
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<PAGE> 9
date of such written notice, or, if the Employee timely begins but does not
complete a cure, fifteen (15) days after the date of such written notice.
(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee, within thirty (30) days
after such termination, the Employee's earned but unpaid Base Salary as of the
date of such termination and any Bonus earned or awarded but unpaid for the year
preceding such termination. The Employee shall not be entitled to any other
amounts hereunder in the event of a termination for Cause.
(c) Death. Upon the termination of the Employee's employment
by reason of the Employee's death, the Employer shall pay to the Employee's
Beneficiary (i) the Employee's earned but unpaid Base Salary, (ii) any Bonus
earned or awarded but unpaid for the year preceding the Employee's death and
(iii) a pro rata portion of any Bonus (at the target level) which the Employee
would otherwise have earned or been awarded for the year in which the Employee's
death occurs. (Such Bonus shall be prorated by multiplying the amount of such
Bonus (at the target level) by a fraction, the numerator of which is the number
of days during such year prior to the Employee's death and the denominator of
which is 365.) The amounts required to be paid to the Employee under this
Paragraph will be paid in lieu of any other severance payments from the Employer
or its affiliates to which the Employee may otherwise have been entitled.
(d) Without Cause or for Good Reason. During the Term, the
Employer shall have the right to terminate the Employee's employment hereunder
without Cause and the Employee shall have the right to voluntarily terminate his
employment hereunder for Good Reason.
(i) Procedure for Termination. The Employee's
termination of employment by the Employer without Cause shall be effective upon
written notice to the Employee from the Employer of such termination. The
Employee's voluntary termination of his employment for Good Reason shall be
effective only if the Employer receives thirty (30) days' prior written notice
from the Employee of such termination specifying in reasonable detail the act or
omission of the Employer alleged to constitute Good Reason, and the Employer
does not cure such act or omission within such 30-day period.
(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee the Employee's earned but
unpaid Base Salary and any Bonus earned or awarded but unpaid for the year
preceding the termination. In addition, the Employer shall continue to pay to
the Employee the Employee's Base Salary for the Balance of the Term, provided,
however, that if the Employee voluntarily terminates his employment for Good
Reason within the meaning of Subparagraph (v) of Paragraph (n) of Section 1
after a Change in Control, the Base Salary to be so continued shall be the
Employee's Base Salary in effect immediately prior to such Change in Control.
The Employer shall also pay to the Employee the Bonuses (at the target level) to
which the Employee would have been entitled for the Balance of the Term,
provided, however, that if
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the Employee voluntarily terminates his employment for Good Reason within the
meaning of Subparagraph (v) of Paragraph (n) of Section 1 after a Change in
Control, the amount of each Bonus to be so paid to the Employee shall be based
upon the Employee's Base Salary in effect immediately prior to such Change in
Control. Such Bonuses shall be paid at the time that such Bonuses would
otherwise have been paid had the Term continued. In addition, the Employer shall
maintain in full force and effect for the Employee's continued benefit until the
earlier of (x) the end of the Balance of the Term or (y) the Employee's
commencement of full time employment with a new employer, all life, medical and
dental insurance plans, programs or arrangements (but excluding any short- or
long-term disability plans, programs or arrangements) in which the Employee was
entitled to participate immediately prior to his termination of employment
without Cause or for Good Reason, provided that the Employee's continued
participation is possible under the general terms and provisions of such plans,
programs or arrangements, and further provided that continued coverage under any
such life insurance plan, program or arrangement shall be at the expense of the
Employee. In the event that the Employee's participation in any such plan,
program or arrangement is prohibited, the Employer shall arrange to provide the
Employee with benefits substantially similar to those which the Employee is
entitled to received under such plans, programs or arrangements for such period.
The Employee's damages as a result of such termination shall be limited to the
amounts required to be paid to the Employee under this Paragraph and such
amounts will be paid in lieu of any other severance payments from the Employer
or its affiliates to which the Employee may otherwise have been entitled.
(iii) Mitigation. Prior to a Change in Control, the Employee
shall not be required to mitigate the amount of any damages that the Employee
may incur as a result of such termination of employment for the lesser of (x)
eighteen (18) months after the date of such termination or (y) the Balance of
the Term. After such 18-month period, the Employee shall be required to mitigate
any damages that the Employee may incur as a result of such termination and the
amount of payments due hereunder for the remaining Balance of the Term, if any,
by seeking employment comparable in terms of compensation, position and location
to the Employee's employment hereunder (other than such employment as would
result in a breach of Section 13 hereof). After a Change in Control, the
Employee shall not be required to mitigate the amount of any damages that the
Employee may incur as a result of such termination of employment.
(iv) Offset. If, following such termination prior to a Change
in Control, the Employee obtains any other employment, then any amounts that the
Employee earns from such other employment during the Balance of the Term
remaining after the 18-month anniversary of the date of such termination, if
any, shall offset and reduce the amounts payable to the Employee as a result of
the termination of the Employee's employment without Cause or for Good Reason.
The Employee shall be required to notify the Employer immediately in the event
he obtains such other employment and shall provide such evidence as the Employer
may reasonably request regarding the amount of such earnings with respect to
such period. For purposes of this Paragraph, employment shall mean any activity
for which the Employee is compensated as a result of the rendering of
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services, whether such services are rendered as an employee, a partner, sole
proprietor, independent contractor or otherwise.
(e) Without Good Reason. In the event that the Employee
voluntarily terminates his employment without Good Reason, the Employee shall
adopt the following procedure and shall receive the following payments:
(i) Procedure for Termination. The Employee's voluntary
termination of his employment without Good Reason shall be effective upon the
expiration of thirty (30) days after the Employer's receipt of a written notice
from the Employee specifying his intent to terminate his employment without Good
Reason.
(ii) Amount of Payments. In respect of such
termination, the Employer shall pay to the Employee the Employee's earned but
unpaid Base Salary and any Bonus earned or awarded but unpaid for the year
preceding the termination. The Employee shall not be entitled to any other
amounts or benefits hereunder in the event of his voluntary termination without
Good Reason.
12. Non-Disclosure Agreement.
(a) Non-Disclosure. The Employee agrees that all information
pertaining to the prior, current or contemplated business of the Employer and
its affiliates, and their officers, directors, employees, agents, shareholders
and customers (excluding (a) publicly available information (in substantially
the form in which it is publicly available) unless such information is publicly
available by reason of unauthorized disclosure and (b) information of a general
nature not pertaining exclusively to the Employer that generally would be
acquired in similar employment with another company) constitutes a valuable and
confidential asset of the Employer. Such information includes, without
limitation, information related to trade secrets, customer lists, production
financing techniques and financial information of the Employer. The Employee
shall hold all such information in trust and confidence for the Employer and its
affiliates, and shall not use or disclose any such information to any person,
firm, corporation or other entity, except as may be required pursuant to the
order of a court of competent jurisdiction, and shall be liable for damages
incurred by the Employer as a result of disclosure of such information by the
Employee for any purpose other than the Employer's business, either during the
Employee's employment or after the Employee's employment terminates for whatever
reason, other than as a result of disclosure required pursuant to the order of a
court of competent jurisdiction.
13. Non-Competition Agreement. During the Term and continuing
for the longer of (x) a period ending twelve (12) months after the Employee's
employment terminates for any reason whatsoever or (y) the Balance of the Term,
the Employee agrees that the Employee will not, directly or indirectly, own,
manage, operate, control, be employed by (whether as an employee, consultant,
independent contractor or otherwise, and whether or not for compensation) or
render services to any person, firm, corporation or other entity, in whatever
form, engaged in any business that is competitive with any business in
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which the Employer was engaged at the time the Employee's employment terminated
and with which the Employee was involved while employed by the Employer. This
Section shall not prevent the Employee from owning not more than one percent of
the total shares of all classes of stock outstanding of any publicly held
corporation engaged in such business, nor will it restrict the Employee from
rendering services to charitable organizations.
14. Non-Solicitation. During the Term and continuing for the
longer of (x) a period ending twelve (12) months after the Employee's employment
terminates for any reason whatsoever or (y) the Balance of the Term, the
Employee agrees that the Employee will not, directly or indirectly, individually
or on behalf of other persons, solicit, aid or induce (a) then remaining
employees of the Employer or its affiliates to leave their employment with the
Employer or its affiliates in order to accept employment with or render services
to or with another person, firm, corporation or other entity, or assist or aid
any other person, firm, corporation or other entity in identifying or hiring
such employees or (b) any customer of the Employer or its affiliates who was a
customer of the Employer or its affiliates at any time during which the Employee
was actively employed by the Employer to purchase services then sold by the
Employer or its affiliates from another person, firm, corporation or other
entity, or assist or aid any other person or entity in identifying or soliciting
any such customer.
15. Employee Disclosure. Prior to agreeing to, or commencing
to, act as an employee, officer, director, trustee, principal, agent or other
representative of any type of business service other than as an employee of the
Employer during the period in which the non-competition agreement, as described
in Section 13, applies, the Employee shall (a) disclose such agreement in
writing to the Employer and (b) disclose to the other entity with which he
proposes to act in such capacity, or to the other principal together with whom
he proposes to act as a principal, the existence of the non-disclosure agreement
contained in Section 12, the non-competition agreement contained in Section 13,
and the non-solicitation agreement contained in Section 14.
16. Acknowledgments Respecting Restrictive Covenants. With
respect to the restrictive covenants set forth in Section 12, Section 13, and
Section 14, the Employee acknowledges and agrees as follows.
(a) Extension of Covenants. The specified duration of a
restrictive covenant shall be extended by and for the term of any period during
which the Employee is in violation of such covenant.
(b) Covenants Not Exclusive. The restrictive covenants are in
addition to any rights the Employer may have in law or at equity.
(c) No Adequate Remedy at Law. It is impossible to measure in
money the damages which will accrue to the Employer in the event that the
Employee breaches any of the restrictive covenants. Therefore, if the Employee
breaches any restrictive covenant, the Employer and its affiliates shall have a
right to seek an injunction restraining the Employee
12
<PAGE> 13
from violating such restrictive covenants. If the Employer or any of its
affiliates shall institute any action or proceeding to enforce a restrictive
covenant, the Employee hereby waives the claim or defense that the Employer or
any of its affiliates has an adequate remedy at law and the Employee agrees not
to assert in any such action or proceeding the claim or defense that the
Employer or any of its affiliates has an adequate remedy at law. The foregoing
shall not prejudice the Employer's or its affiliates' right to require the
Employee to account for and pay over to the Employer or its affiliates, and the
Employee hereby agrees to account for and pay over, the compensation, profits,
monies, accruals or other benefits derived or received by the Employee as a
result of any transaction constituting a breach of the restrictive covenants.
17. Severability. Each provision hereof is severable from this
Agreement, and if one or more provisions hereof are declared invalid the
remaining provisions shall nevertheless remain in full force and effect. If any
provision of this Agreement is so broad, in scope or duration or otherwise, as
to be unenforceable, such provision shall be interpreted to be only so broad as
is enforceable.
18. Employee's Right to Contract. The Employee represents and
warrants to the Employer that the Employee is legally free to make and perform
this Agreement, that he has no obligation (including, without limitation, an
obligation under any non-competition, non-solicitation, non-disclosure or
similar agreement) to any other person or entity that would affect or conflict
with any of the Employee's obligations hereunder, or otherwise hinder the
Employee's ability to perform the services contemplated hereunder and that the
complete performance of the Employee's obligations hereunder will not violate
any law, regulation, order or decree of any governmental or judicial body or
contract by which he is bound. The Employee agrees not to use in the course of
the Employee's employment hereunder any information obtained in the Employee's
employment with any previous employer to the extent that such use would violate
any contract by which he is bound or decision, law, regulation, order or decree
of any governmental or judicial body.
19. Notice. Any notice to be given hereunder shall be given in
writing. Notice shall be deemed to be given when delivered by hand to the party
to whom notice is being given, or ten (10) days after being mailed, postage
prepaid, registered with return receipt requested, or sent by facsimile
transmission with a confirmation by registered or certified mail, postage
prepaid.
Notices to the Employee should be addressed to the Employee as follows:
Paul H. Bogutsky
422 East 72nd Street
New York, NY 10021
13
<PAGE> 14
Notices to the Employer should be sent as follows:
Ply Gem Industries, Inc.
777 Third Avenue
New York, NY 10017
Attn: Dana R. Snyder, President
with copies sent to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: A. Richard Susko, Esq.
Either party may change the address or person to whom notices
should be sent to by notifying the other party in accordance with this Section
19.
20. No Waiver. The failure to enforce at any time any of the
provisions of this Agreement or to require at any time performance by the other
party of any of the provisions hereof shall in no way be construed to be a
waiver of such provisions or to affect the validity of this Agreement, or any
part hereof, or the right of either party thereafter to enforce each and every
such provision in accordance with the terms of this Agreement.
21. Entire Agreement. This Agreement contains the entire
agreement between the parties with respect to the employment of Employee by the
Employer and supersedes any and all prior understandings, agreements or
correspondence between the parties. It may not be amended or extended in any
respect except by a writing signed by both parties hereto.
22. Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of New York, without
reference to its principles of conflicts of law.
23. Assignment. This Agreement shall not be assignable by
either party hereto without the written consent of the other, provided, however,
that the Employer may, without the written consent of the Employee, assign this
Agreement to (a) any entity into which the Employer is merged or to which the
Employer transfers substantially all of its assets or (b) any entity
controlling, under common control with or controlled by the Employer.
24. Approval. This Agreement shall be submitted for approval
of the Board of Directors at a meeting of the Board of Directors occurring
within 90 days after the date hereof.
14
<PAGE> 15
In the event that this Agreement is not approved at such meeting of the Board of
Directors, this Agreement shall be null and void.
IN WITNESS WHEREOF, the Employer has caused this
Agreement to be signed by its duly authorized representative and the Employee
has hereunto set his hand as of the day and year first above written.
PLY GEM INDUSTRIES, INC.
By: /s/ Dana R. Snyder
--------------------------
Name: Dana R. Snyder
Title: President and COO
/s/ Paul H. Bogutsky
--------------------------
Paul H. Bogutsky
15
<PAGE> 16
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to the Employment Agreement, dated June 17,
1997 (the "Employment Agreement"), between Paul H. Bogutsky and Ply Gem
Industries, Inc. ("Ply Gem") is entered into as of June 23, 1997.
The undersigned hereby agrees, notwithstanding any provisions
contained in the Employment Agreement, that the transactions contemplated by
(i) that certain Merger Agreement, to be dated as of June 24, 1997 (the
"Merger Agreement"), by and among Atrium Acquisition Holdings Corp.
("Parent"), Atrium/PG Acquisition Corp. ("Sub"), Atrium Corporation
("Atrium") and Ply Gem; (ii) the Stockholders Agreements, to be dated as of
June 24, 1997, by and among certain beneficial owners of Ply Gem common stock
and options; and (iii) the other Transaction Documents (as defined in the
Merger Agreement) shall not constitute a "change of control" or transaction
of similar import pursuant to the terms of the Employment Agreement until
such time as the merger of Sub with and into Ply Gem has been consummated.
IN WITNESS WHEREOF, the undersigned has affixed his signature
hereto as of the 23rd day of June, 1997.
/s/ Paul H. Bogutsky
------------------------
Paul H. Bogutsky
Accepted and Agreed as of
the 23rd day of June, 1997
PLY GEM INDUSTRIES, INC.
By: /s/ Herbert P. Dooskin
-------------------------
Name: Herbert P. Dooskin
Executive Vice President
16
<PAGE> 1
Exhibit 14
PLY GEM INDUSTRIES, INC.
SUMMARY
CORPORATE MANAGEMENT CHANGE IN CONTROL RESOLUTION
On June 17, 1997, Ply Gem's Board of Directors adopted a resolution to
provide severance payments to certain management employees in the Company's
headquarters in the event of an acquisition of Ply Gem (a "Change in Control")
and you resign or your employment is terminated under certain circumstances. The
following is a summary of the Resolution, a copy of which is attached. You are
only able to participate if you are listed in Schedule A to the Resolution.
CHANGE IN CONTROL
For you to receive a severance payment a "Change in Control" must occur.
Generally this happens when another company or group of individuals acquires
control of Ply Gem through a stock tender offer, merger or by other methods.
These methods are described in the Resolution.
SEVERANCE PAYMENTS
If there is a "Change in Control", you are eligible for a severance
payment upon your separation from Ply Gem or a subsidiary (together, the
"Company") under one of the two following circumstances:
(i) If within two years after a Change in Control you are terminated
without "cause;" or
(ii) If within two years after a Change in Control you resign for
"good reason."
If you are terminated for "cause" (conviction of a felony or any crime
involving moral turpitude, or fraudulent or illegal acts made against the
Company) or resign voluntarily without "good reason" (adverse change in the
terms and conditions of employment) you will not be eligible for the severance
payment.
DUPLICATION OF BENEFITS
You will never be entitled to receive benefits under both the Resolution
and the Company's Corporate Relocation Severance Pay Plan for Management
Employees (the "Relocation Severance Plan"). If, as a result of your resignation
or termination of employment, you would be entitled to benefits under both the
Resolution and the Relocation Severance Plan, you will receive benefits only
under the Resolution and will not receive any benefits under the Relocation
Severance Plan.
<PAGE> 2
HOW MUCH WILL I RECEIVE?
Subject to certain caps, the severance payment will be the number of weeks
of salary as shown on the attached Schedule B computed on the basis of your
years of service with the Company, your age and the higher of your annual salary
on the date of the Resolution or your annual salary on the date of your
resignation or termination of employment. Your service with the Company means
the number of full consecutive years of employment with the Company. Any unused
or accumulated vacation shall not be taken into account in determining service.
Service is counted beginning on your most recent hire date through the date of
your resignation or termination of employment. Your age is determined on the
date of your resignation or termination of employment.
You will also receive as a severance payment a pro rata bonus for the year
in which you are terminated or resign and an additional bonus each as described
in the Resolution.
WHEN WILL I RECEIVE THE PAYMENT?
The payment is payable within 30 days of your separation. The Resolution
is effective for Changes in Control that occur prior to December 31, 1997 and is
in lieu of any other severance payment or arrangement pursuant to a plan,
contract or otherwise.
***********************************
This program is designed to protect you only if your employment is
terminated or you resign in the case of a "Change in Control".
This a summary of the Resolution, a copy of which is attached. Any
conflict between this summary and the Resolution shall be resolved in favor of
the Resolution.
2
<PAGE> 3
WHEREAS, on August 18, 1995, the Board of Directors adopted certain
resolutions with respect to the rights of certain Executives to receive
severance pay under certain circumstances; and
WHEREAS, the rights set forth in such resolutions expired in accordance
with their terms; and
WHEREAS, the Board of Directors deems it advisable to modify, update and
amend the aforementioned resolutions in their entirety; and be it therefore
RESOLVED, that the Board of Directors has hereby designated certain
management employees of the Company and/or its subsidiaries (collectively "the
Company") as "Designated Management Corporate Employees." The names of such
Designated Management Corporate Employees have been presented to this meeting
and a schedule identifying such individuals is attached hereto as Schedule A.
1. Designated Management Corporate Employees shall have the right to
receive severance pay under certain circumstances upon the occurrence of a
Change in Control (a "Change in Control"):
(a) In the event that their employment is terminated involuntarily
within two years after a Change in Control without cause (cause shall mean
conviction of a felony or any crime involving moral turpitude, or fraudulent or
illegal acts made against the Company); or
(b) In the event they resign their position for good reason (adverse
change in the terms and conditions of employment) within two years after a
Change in Control.
2. Within 30 days of his or her resignation or the termination of his or
her employment as aforesaid, each Designated Management Corporate Employee shall
receive severance pay in a lump sum equal to the sum of the following:
(a) WEEKS OF SALARY. The number of weeks (as set forth on Schedule B) of
such Designated Management Corporate Employee's annual base salary, computed by
taking into account the higher of annual salary on the date of this Resolution
or annual salary on the date of resignation or termination of employment, years
of service with the Company and age (Service with the Company means the number
of full consecutive years of employment with the Company. Any unused or
accumulated vacation shall not be taken into account in determining service.
Service is counted beginning on the most recent hire date of a Designated
Management Corporate Employee through the date of such Designated Management
Corporate Employee's resignation or termination of employment. Age is determined
on the date of such Designated Management Corporate Employee's resignation or
termination of employment.);
(b) PRIOR BONUS. Any bonus earned but not paid for any year preceding
the date of termination or resignation;
<PAGE> 4
(c) PRO RATA BONUS FOR YEAR OF RESIGNATION OR TERMINATION. An amount equal
to (x) the greater of (i) the bonus such Designated Management Corporate
Employee would have received for the year of his or her resignation or
termination of employment based upon the Company's good faith estimate, as of
the date of such resignation or termination of employment, of the bonus to which
such Designated Management Corporate Employee would have been entitled had he or
she remained employed for such year under the Company's bonus plan or
arrangement in effect at the time of such resignation or termination of
employment or (ii) the bonus such Designated Management Corporate Employee would
have received for the year of his or her resignation or termination of
employment based upon the Company's good faith estimate, as of the date of such
resignation or termination of employment, of the bonus to which such Designated
Management Corporate Employee would have been entitled had he or she remained
employed for such year under the Company's bonus plan or arrangement in effect
immediately prior to the Change in Control, multiplied by (y) a fraction the
numerator of which is equal to the number of days in the calendar year of such
Designated Management Corporate Employee's resignation or termination of
employment prior to the date of such resignation or termination of employment
and the denominator of which is 365; and
(d) ADDITIONAL BONUS. An amount equal to (x) the greater of (i) the bonus
such Designated Management Corporate Employee would have received for the year
of his or her resignation or termination of employment based upon the Company's
good faith estimate, as of the date of such resignation or termination of
employment, of the bonus to which such Designated Management Corporate Employee
would have been entitled had he or she remained employed for such year or (ii)
an amount equal to such Designated Management Corporate Employee's 1997 target
bonus percentage multiplied by the higher of his or her annual salary on the
date of this Resolution or annual salary on the date of resignation or
termination of employment, multiplied by (y) a fraction the numerator of which
is equal to the number of weeks of annual base salary to which such employee is
entitled (as set forth on Schedule B) and the denominator of which is 52.
3. A severance payment, as aforesaid, shall be in lieu of any other
payments for severance under any other severance plan, contract or otherwise
(including any payments following resignation or termination of employment under
an employment agreement based upon salary or bonus continuation for a period of
time). The receipt of such severance payment shall constitute a waiver of any
other claim for severance or similar payments which the employee has against the
Company. A Designated Management Corporate Employee shall have no obligation to
mitigate or offset any amount received.
Notwithstanding the foregoing paragraph, with respect to a resignation or
termination of employment, if a Designated Management Corporate Employee is
entitled to receive benefits under both this Resolution and the Company's
Corporate Relocation Severance Pay Plan for Management Employees (the
"Relocation Severance Plan"), such Designated Management Corporate Employee will
receive benefits only under this Resolution and will not receive any benefits
under the Relocation Severance Plan.
<PAGE> 5
4. For purposes of the above, the following definitions shall apply:
(i) "Change in Control" shall mean the occurrence of any of the
following:
(a) When any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the
Exchange Act, but excluding the Company or any subsidiary or
any affiliate of the Company or any employee benefit plan
sponsored or maintained by the Company or any subsidiary of
the Company (including any trustee of such plan acting as
trustee) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of securities of the Company
representing 30 percent or more of the combined voting power
of the Company's then outstanding securities; or
(b) When, during any period of 24 consecutive months, the
individuals who, at the beginning of such period, constitute
the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof,
provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds
of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning
of such 24-month period) or through the operation of this
proviso; or
(c) The consummation of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other
than the Company or a subsidiary or an affiliated company of
the Company through purchase of assets, or by merger, or
otherwise; or
(d) A Potential Change in Control.
(ii) "Potential Change in Control" shall mean the occurrence of any of
the following:
(a) The approval by stockholders of an agreement by the Company,
the consummation of which would result in a Change in Control
(within the meaning of subparagraphs (a), (b) and (c) of
paragraph (i) of this Section 4) of the Company and the
adoption by the Board of Directors of a resolution to the
effect that a Potential Change in Control of the Company has
occurred for purposes of this Resolution; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Company or a subsidiary or an
<PAGE> 6
affiliate of the Company or any employee benefit plan
sponsored or maintained by the Company or any subsidiary of
the Company (including any trustee of such plan acting as such
trustee)) of securities of the Company representing five
percent or more of the combined voting power of the Company's
outstanding securities and the adoption by the Board of
Directors of a resolution to the effect that a Potential
Change in Control of the Company has occurred for purposes of
this Resolution; or
(c) The commencement by any person, entity or group of a tender
offer and the adoption by the Board of a resolution to the
effect that a Potential Change in Control has occurred for
purposes of this Resolution.
5. Schedule "A" may be amended at any time to add additional Designated
Management Corporate Employees. This Resolution shall be effective with respect
to any Change in Control that occurs from the date hereof until December 31,
1997.
<PAGE> 7
PLY GEM INDUSTRIES, INC.
SUMMARY
SENIOR SUBSIDIARY/DIVISION EXECUTIVES CHANGE IN CONTROL RESOLUTION
On June 17, 1997, Ply Gem's Board of Directors adopted a resolution to
provide severance payments to certain employees of Ply Gem's subsidiaries and
the Ply Gem Manufacturing Division in the event of an acquisition of Ply Gem (a
"Change in Control") and you resign or your employment is terminated under
certain circumstances. The following is a summary of the Resolution, a copy of
which is attached. You are only able to participate if you are listed in
Schedule A to the Resolution.
CHANGE IN CONTROL
For you to receive a severance payment a "Change in Control" must occur.
Generally this happens when another company or group of individuals acquires
control of Ply Gem through a stock tender offer, merger or by other methods.
These methods are described in the Resolution.
SEVERANCE PAYMENTS
If there is a "Change in Control", you are eligible for a severance
payment upon your separation from Ply Gem or a subsidiary or division of Ply Gem
(together, the "Company") under one of the two following circumstances:
(i) If within two years after a Change in Control you are terminated
without "cause;" or
(ii) If within two years after a Change in Control you resign for
"good reason."
If you are terminated for "cause" (conviction of a felony or any crime
involving moral turpitude, or fraudulent or illegal acts made against the
Company) or resign voluntarily without "good reason" (adverse change in the
terms and conditions of employment) you will not be eligible for the severance
payment.
HOW MUCH WILL I RECEIVE?
The severance payment will be 52 weeks of salary, computed on the basis of
the higher of your annual salary on the date of the Resolution or your annual
salary on the date of your resignation or termination of employment.
You will also receive as a severance payment a pro rata bonus for the year
in which you are terminated or resign and an additional year's bonus as
described in the Resolution.
<PAGE> 8
WHEN WILL I RECEIVE THE PAYMENT?
The payment is payable within 30 days of your separation. The Resolution
is effective for Changes in Control that occur prior to December 31, 1997 and is
in lieu of any other severance payment or arrangement pursuant to a plan,
contract or otherwise.
***********************************
This program is designed to protect you only if your employment is
terminated or you resign in the case of a "Change in Control".
This a summary of the Resolution, a copy of which is attached. Any
conflict between this summary and the Resolution shall be resolved in favor of
the Resolution.
2
<PAGE> 9
WHEREAS, on August 18, 1995, the Board of Directors adopted certain
resolutions with respect to the rights of certain Executives to receive
severance pay under certain circumstances; and
WHEREAS, the rights set forth in such resolutions expired in accordance
with their terms; and
WHEREAS, the Board of Directors deems it advisable to modify, update and
amend the aforementioned resolutions in their entirety; and be it therefore
RESOLVED, that the Board of Directors has hereby designated certain
employees of the Ply Gem Manufacturing Division and the subsidiaries of the
Company (the Company, the Ply Gem Manufacturing Division and subsidiaries of the
Company, collectively, "the Company") as "Designated Subsidiary/Division
Employees." The names of such Designated Subsidiary/Division Employees have been
presented to this meeting and a schedule identifying such individuals is
attached hereto as Schedule A.
1. Designated Subsidiary/Division Employees shall have the right to
receive severance pay under certain circumstances upon the occurrence of a
Change in Control (a "Change in Control"):
(a) In the event that their employment is terminated involuntarily
within two years after a Change in Control without cause (cause shall mean
conviction of a felony or any crime involving moral turpitude, or fraudulent or
illegal acts made against the Company); or
(b) In the event they resign their position for good reason (adverse
change in the terms and conditions of employment) within two years after a
Change in Control.
2. Within 30 days of his or her resignation or the termination of his or
her employment as aforesaid, each Designated Subsidiary/Division Employee shall
receive severance pay in a lump sum equal to the sum of the following:
(a) ONE YEAR'S SALARY. An amount equal to the higher of such
Designated Subsidiary/Division Employee's annual salary on the date of this
Resolution or annual salary on the date of resignation or termination of
employment;
(b) PRIOR BONUS. Any bonus earned but not paid for any year preceding
the date of termination or resignation;
(c) PRO RATA BONUS FOR YEAR OF RESIGNATION OR TERMINATION. An amount equal
to (x) the greater of (i) the bonus such Designated Subsidiary/Division Employee
would have received for the year of his or her resignation or termination of
employment based upon the Company's good faith estimate, as of the date of such
resignation or termination of employment, of the bonus to which such Designated
Subsidiary/Division Employee would have been entitled had he or she remained
employed for such year under the Company's bonus plan or arrangement in
<PAGE> 10
effect at the time of such resignation or termination of employment or (ii) the
bonus such Designated Subsidiary/Division Employee would have received for the
year of his or her resignation or termination of employment based upon the
Company's good faith estimate, as of the date of such resignation or termination
of employment, of the bonus to which such Designated Subsidiary/Division
Employee would have been entitled had he or she remained employed for such year
under the Company's bonus plan or arrangement in effect immediately prior to the
Change in Control, multiplied by (y) a fraction the numerator of which is equal
to the number of days in the calendar year of such Designated
Subsidiary/Division Employee's resignation or termination of employment prior to
the date of such resignation or termination of employment and the denominator of
which is 365; and
(d) ADDITIONAL ONE YEAR BONUS. An amount equal to the greater of (x) the
bonus such Designated Subsidiary/Division Employee would have received for the
year of his or her resignation or termination of employment based upon the
Company's good faith estimate, as of the date of such resignation or termination
of employment, of the bonus to which such Designated Subsidiary/Division
Employee would have been entitled had he or she remained employed for such year
or (y) an amount equal to such Designated Subsidiary/Division Employee's 1997
target bonus percentage multiplied by the higher of his or her annual salary on
the date of this Resolution or annual salary on the date of resignation or
termination of employment.
3. A severance payment, as aforesaid, shall be in lieu of any other
payments for severance under any other severance plan, contract or otherwise
(including any payments following resignation or termination of employment under
an employment agreement based upon salary or bonus continuation for a period of
time). The receipt of such severance payment shall constitute a waiver of any
other claim for severance or similar payments which the employee has against the
Company. A Designated Subsidiary/Division Employee shall have no obligation to
mitigate or offset any amount received.
4. For purposes of the above, the following definitions shall apply:
(i) "Change in Control" shall mean the occurrence of any of the
following:
(a) When any "person" as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and as used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) of the
Exchange Act, but excluding the Company or any subsidiary or
any affiliate of the Company or any employee benefit plan
sponsored or maintained by the Company or any subsidiary of
the Company (including any trustee of such plan acting as
trustee) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act) of securities of the Company
representing 30 percent or more of the combined voting power
of the Company's then outstanding securities; or
<PAGE> 11
(b) When, during any period of 24 consecutive months, the
individuals who, at the beginning of such period, constitute
the Board (the "Incumbent Directors") cease for any reason
other than death to constitute at least a majority thereof,
provided, however, that a director who was not a director at
the beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-thirds
of the directors who then qualified as Incumbent Directors
either actually (because they were directors at the beginning
of such 24-month period) or through the operation of this
proviso; or
(c) The consummation of a transaction requiring stockholder
approval for the acquisition of the Company by an entity other
than the Company or a subsidiary or an affiliated company of
the Company through purchase of assets, or by merger, or
otherwise; or
(d) A Potential Change in Control.
(ii) "Potential Change in Control" shall mean the occurrence of any of
the following:
(a) The approval by stockholders of an agreement by the Company,
the consummation of which would result in a Change in Control
(within the meaning of subparagraphs (a), (b) and (c) of
paragraph (i) of this Section 4) of the Company and the
adoption by the Board of Directors of a resolution to the
effect that a Potential Change in Control of the Company has
occurred for purposes of this Resolution; or
(b) The acquisition of beneficial ownership, directly or
indirectly, by any entity, person or group (other than the
Company or a subsidiary or an affiliate of the Company or any
employee benefit plan sponsored or maintained by the Company
or any subsidiary of the Company (including any trustee of
such plan acting as such trustee)) of securities of the
Company representing five percent or more of the combined
voting power of the Company's outstanding securities and the
adoption by the Board of Directors of a resolution to the
effect that a Potential Change in Control of the Company has
occurred for purposes of this Resolution; or
(c) The commencement by any person, entity or group of a tender
offer and the adoption by the Board of a resolution to the
effect that a Potential Change in Control has occurred for
purposes of this Resolution.
5. Schedule "A" may be amended at any time to add additional Designated
Subsidiary/Division Employees. This Resolution shall be effective with respect
to any Change in Control that occurs from the date hereof until December 31,
1997.
